Thanks to Andrew Kyle and his blog for this video, I couldn’t agree more that this sums up my current feelings on our market here in Calgary.  When the oil shock comes again and we boom again within the next say 12 months, we will look back at this post and let out a collective sigh, I wish people would stop following the herd.

Much has been said lately about Alberta’s rise in delinquencies.  This story suggests it is related to falling house prices.  I doubt that, but what I can say is that as usual this story from the media lacks perspective!  They always do this, PLEASE tell us the full story.For instance why not tell us that the current arrears is only SLIGHTLY higher then the 18 year average.  The stats show us that approx. 4 out of a 1000 mortgages are in arrears, compared with 3 out of a 1,000 last year.Let’s also remember that we are comparing delinquency rates now to a period when there was almost 100,000 less mortgages.Sadly, all this will likely lead to tighter credit guidelines from lenders as they overreact to this data.   Sigh.

CMHC on Friday tried to buy up to $7 billion of variable rate mortgages from the banks as part of the federal governments efforts to provide liquidity to the market.  The shocker was they were only offered $2.3 Billion!This means of course that the banks are saying that they did not need the liquidity and preferred to hold on to their mortgages.Just FOUR short weeks ago that same iniative sold $8 Billion.  The banks either are preferring to hold the mortgages on their balance sheets OR they are able to sell them into the open market “like the olden days”, either way this is a good sign of things to come.Final note on this was also the price that variable rates were sold at were also better then in the past which would suggest that the cost of funds for the lenders on variable rates are improving.As a caution here I don’t anticipate that this will result in the lenders giving a break right away to consumers by passing on this additional savings to you.

I really enjoy reading this blog and this particular post is highlighting something I have heard more then once.  We are headed for another oil shock.  I know most of you would probably cheer and maybe you should. However please tell me or more importantly yourself that you will be more careful in the next boom.  Remember the downturn that often follows an oil shock.

Some good news to report from the international credit markets.  First the 30 day bankers acceptance has dropped to it’s lowest point EVER at .90%.  Given that historic yields for variable rates over bankers acceptance is 1.69% and the current spread is 2.10% it would suggest that there will be room for lenders to absorb an expected .50% drop in the overnight rate by the Bank of Canada on March 3. So this is good news for all those people who held on to their variable rate mortgages, as well as of course for those considering to jump into the housing market.

Five year bond yileds also jumped up to 2.14% whcih would also suggest that fixed rates could head lower.

Finally, maybe the best news of all is that the TED spread (this is the most telling statistic for forecasting the amount of liquidity risk global lenders have priced into their activities, which means the lower this drops the more money available in the system to lend and keep the economy going).  The TED spread continues to fal, this is great news.

CMHC just made it official and that for the first time in a very long time it is cheaper to buy a new home this year then it was in the previous year.

Of course all of us who are in the market knew for a while that builders have been dropping their price.  I can tell you from experience that in fact many spec homes were sold off the MLS for unbelievable below cost prices which would make the numbers even bigger.

The industry is getting healthier and pointed in the right direction.  This time last year for instance 15% of new home construction was in spec. homes, and right now that number is less then 5%. As well as we have reported often starts are way down, over 60% down.  These two statistics suggest that builders are doing all the right things with regard to keeping supply down, which will eventually stabilize prices.

As well builders are streamlining their costs so that they can get the prices down to be competitive and get sales. Most builders are now working with maybe a 10-13% margin.  A “normal” margin would be around 18%.  At the height of the boom builders were sometimes getting 28%-35% margin.

Things are going in te right direction.  Buyers would do well to snap up homes now because once they stabilize prices will go back up to give builders there comfortable margin of 18%.

This is a great article about how great Canada has weathered the global crisis.  This really says it all, and best of all it was written by an American.

Obama, you should lengthen your visit to Canada and get a lesson on how it’s done.

These are the only two things it turns out that are handcuffed to a security guards wrist.  While the KFC world headquarters were being renovated the famous recipe was hand cuffed to the wrist of a security consultant.

Where is it now? Under a strict veil of infra red sensors, lasers, vault and the like that James Bond would be impressed with…oh brother

Easily the number one thing is they are concerned that prices will continue to fall so they wait.  If they do put in an offer it often has the condition of selling there existing home, which of course is still a big fear.  Realtors, you need to find a way to give confidence to your buyers.  Ask me about my price guarantee scenario some time.

I get that everyone is saying prices will fall at least 9% (CREA) across Canada, or 11% (Royal Lepage Canada), 0r 15% (Greg Williamson)  but most of that has already come out of the market since mid 2008.  There is likely not as much to come out.

Maybe 5%.

But what if you wait?  How much will that cost? Competition for the best houses, prices going back up rapidly for the best houses (which could negate the 5% you waited for) and mortgage rates going back up which will negate your real cash outlay per month.

(source)

Well with all the articles lately from the Bank of Canada governor which are leaning to more optimism for 2010 many economists are now predicting on March 3, Carney will only drop rates by .25%.  This guy can’t win really.  If he is too negative people will roast him, and if he is too positive people say he is not doing enough.

The truth is, he has done great things, with being the first to drop rates, and be at already an unprecedented negative interest rates (interest rates are currently lower then inflation) and most importantly injecting real usable money into the system by purchasing good mortgages from the banks, he is part of the solution.

As to predictions, I like to go against conventional wisdom sometimes and agree with the lone economist Derek Holt at Scotia Capital that we will still see a .50% cut as there are still real problems for 2009, and the bank has said repeatedly they do not fear inflation until at least 2011.