The government keeps stressing there should be no reason for immediate or overdue concern about any sort of ‘housing bubble’ existing here in Canada. However, based on the latest moves by the feds I wouldn’t be surprised if you’re a little intrigued about the latest changes – all designed to be a ‘better safe than sorry’ approach.

The article notes these changes, which are set to take effect as of April 19/10:

In order to qualify for an insured mortgage, borrowers will have to meet the standards for a five-year fixed-rate mortgage even if the interest they are paying is less.

The government will also limit the amount Canadians can borrow on their homes from the current 95 per cent of the value to 90 per cent.

Housing speculators will now have to put down a 20 per cent down payment on properties they will not be living in, to qualify for a government-backed mortgage.

And surprisingly, these changes may have something to do with the fact that,  “the heads of our country’s six largest banks privately told Bank of Canada governor Mark Carney, in November, that they fear a potential collapse in house prices and the ensuing potential for economic damage,” as reported in The Globe and Mail, just days ago.

That article goes onto say, “The banks reportedly want Ottawa to mandate tighter rules on mortgages so that buyers will need a larger down payment – as much as 10 per cent. They also want Ottawa to reduce the maximum amortization period of a mortgage to 30 years from 35.”

So far, the latter hasn’t happened. But it’s interesting that we’re suddenly seeing some ‘preventative measures’ put into place – even though the feds still seem to insist we’re not in any sort of housing-bubble, and won’t be in the foreseeable future.

I’ll leave you to decide how much this latest information is, or is not, a contradiction of sorts. And somewhere in the middle, the consumer will be directly affected and will be making future buying decisions in the wake of these changes.

Certainly, it could be argued that we will see buyers and activity (depending on each market) either pick-up or alter as consumers decide whether to take advantage of current rates, prices and mortgage options – versus waiting until after the proposed April 19th deadline, which could certainly make it harder for many to qualify and hold with regards to investment properties, debt-ratios, and refinancing.

Overall, I certainly don’t think any of us should have been expecting things to stay status-quo for much longer. As we re-group and the Canadian economy continues to try and rebound, the dollar stays at or near parity with the U.S., housing markets stay strong, or perhaps they soften a bit, and as we move forward and inflation and interest rates eventually do begin rising – don’t expect it to truly get any easier to afford a home, in just about every market.

The next 6-8 months will definitely be interesting. Stay tuned.

Basically, Tal reminds us that the Bank of Canada (BOC) likely won’t be raising rates until June of 2010 at the earliest. And if growth numbers, for our country, are slower than expected that rate hike might stall for a bit longer. Tal says CIBC World Markets is, “roughly in line with the Bank of Canada’s growth projection for the balance of this year,  (but) we’re not as optimistic about Canada’s ability to shrug off a likely slowing in US growth in 2010. If we’re right, it will take even longer than the Bank’s forecast to get back to full employment and target inflation. Therefore, if the US keeps rates on hold throughout 2010, it’ll be difficult for the Bank of Canada to move first, as long as the Canadian dollar is near parity.”

Interesting as this prediction comes just days before the Feds announced (Feb 16/10) several significant changes to the mortgage market – aimed at stabilizing the future mortage & housing market and off-setting or limiting any repurcussions of increased debt-loads owned by Canadians.

Well Done Gord, you can see you put a ton of effort into this one.

Give it a read here

For instance, kind of like the way Jupiter or the Sun massively influence what’s around them, thanks to their size and gravitational pull, there are several centres that are doing their share of affecting the greater-whole. Thus, while national home prices rose by nearly 3%, from Nov ‘08 – Nov ‘09, the majority of that growth (year-over-year) was due to growth in major centres like Vancouver, Toronto & Montreal.

By conrast, Calgary home prices remained negative, year-over-year, with home prices down just over 2% from the period of Nov ‘08 to Nov ‘09. And while this statistic may suprise some of you (and make others yawn) it’s important to remember just how high home prices were – as recently of Aug ‘08, before tumbling dramatically during the economic downturn.

Now, this article in particular doesn’t address the Nov ‘08/’09 numbers for other larger centres like Edmonton, Winnipeg, Ottawa, Halifax, Hamilton etc. And as is typical with media, the article leaves a general impression that because of noticeable gains in only Vancouver, Toronto & Montreal we can assume that all of Canada can expect sustainable growth in the housing market. Well this kind of blanket statement can, as always, be a forecast at best – simply because each market is unique.

If you really think about it, the state of our national housing market is still calculated on a case-by-case basis. And while the news is definitely positive, it’s important to remember how influential (or hindering) certain markets can be when it comes to evaluating the greater whole.

And here’s more food for thought: “The Teranet-National Bank index is based on prices in land registries of homes that have been sold at least twice.” So in this case, we’re comparing data that is based on certain, specific, criteria as well. Another study may use different data altogether.

Regardless, the overall feeling is one of renewed optimism for most. And I think this will continue into the spring and summer months of 2010.

What do you think? Send me your comments.

But if your city ranks, say, 23rd out of 28 with regards to national affordability – or on a broader scale, if it ranks 188th out of 272 internationally, I wouldn’t blame you for being a little less willing to celebrate. A little less willing to shout it from the roof-tops. You get the picture.

And that’s the case in a recent study ranking the most affordable and least affordable cities in Canada, and the world, to live in right now. And this Calgary Herald article gives a quick synopsis of where Calgary ranks, in relation to other cities in this category.

Have a read through the article and it’s not surprising to find Windsor and Thunder Bay as the front-runners, ie. the most affordable cities to live, in Canada, right now. They and several other centres, in the more populace areas of Ontario and Quebec, took a significant hit when manufacturing markets sagged during the recent major economic downturn.

But perhaps what’s more startling is that Vancouver, Toronto, Victoria and (for the first time in decades) Montreal are either flirting with or considered full-blown, “severely unaffordable.” And Calgary isn’t that far behind, considering the latest number-crunching as an indicator.

Ironically, our city actually inched-up on the affordability scale, up 0.2 over 2008. So perhaps any positive news (be it even slight) is good news. But it will be very interesting to see where we end up, say, at the end of 2010 or in Q1 of 2011 if the housing market keeps it’s steady rebound pace.

Further hazing the crystal-ball, so to speak, will be how we react to any and all rising interest rates, changes to amortization periods (should the feds choose to change the rules), continued price increases in various metro-markets, employment rate changes and income rates in these centres, and the typical cycle of supply & demand for real estate. Many or all of these factors will affect future affordability with regards to home ownership.

If there is a silver-lining here for Calgarians, it’s most likely the fact that we’re still affordable compared to Vancouver – which ranked #1 out of 272 international cities as the least affordable, in case you were wondering.

Thoughts? Tell me if you’re surprised by these results.

- Calgary remains tied to a global economic recovery.
- Emerging economies will lead economic upturn
- India and China will power ahead.
- Rising demand for commodities will be a boon for resource-rich Canada.
- A measure of volatility will persist.
- A lagging US economy and a rising loonie will temper growth in the first half of 2010.
- Calgary employment will depend on energy sector investment.
- Affordability and low interest rates will support a balanced housing market.
- 2010 housing demand will build momentum as the year progresses.
- Single family homes will show modest price increases – condo price growth will lag.
- Smaller homes and lower priced segments will lead in sales and price growth.
- Low interest rates will offset price increases & ensure affordability in the short term.

So, have a read and send me your thoughts.

Take the face-rate of what any given financial institution is offering for a particular mortgage product. Then peel away the layers of the onion (so to speak) and often times that face-rate is significantly different than the actual best rate that can be obtained – especially on a renewal.

So when I came across this online article, it reminded me about the need to be aware of whether or not your best interests are truly being served by your lender…

Some great tips and basic insights in this article, worth noting:

1) Don’t be so quick to ‘bite’ on the rate ‘carrot’ that some lenders offer in their renewal letters. In fact, continue to do your homework, check out what they’re also offering online, or at their branch (if possible) and simply cut to the chase. Ask them to provide you with, “their very best terms up front, with no games.”

2) Knowledge is power. More and more of us now use online websites, blog sites, social media, etc to access current information on rates, products, and to compare and shop around. This is profoundly effective when it comes to assessing whether your lender actually has your best interests in mind. If they do – they should be more than willing to compete with the best rates you can find out there. Period.

3) Don’t be afraid to use a mortgage specialist to help you find the best rate. Remember – it’s their job to shop around for the best rate and product to meet your needs. And by doing so, they can also often provide a more personal level of service, because they’re usually more accessible and less biased when it comes to the competition.

Of course, the final decision is up to you. And surely there are some traditional lenders which do an excellent job of giving their customers the best rate, terms and service possible (depending on who you talk to). But I’ve also heard from countless consumers who admit they’re downright angry when, for instance, after 20 years of being with the same bank or financial institution – their calls are ignored, communication is terrible, and they realize they actually weren’t given the best rate, like they were told they got.

Something to chew on, the next time your lender tries to get you to ‘bite’ on their supposed best rate.

Comments?

A recent RISMedia article points out that below average prices (or at least below what was considered the norm just several years ago), coupled with the Obama government’s buyer tax-credit incentive, led to a surge in home sales in areas like Nevada, Ohio, the Midwest and upstate New York.

Perhaps one of the most interesting stats worth noting is the actual number of registered foreclosures in some areas. Take Las Vegas for example – as Sin City was one of several markets hit hard by the latest recession.  While the market drop took it’s toll, Vegas is in it’s 5th month (and counting) of steadily declining numbers of foreclosures.

Head east to Ohio and the Midwest, and there’s suddenly a feeling of cautious optimism, thanks to above average gains in sales and average home price, as buyers made a mad dash to beat the federally legislated tax-credit deadline. Collectively, home sales are up nearly 60% over November of ‘08 (when the ripple-effect from the economic meltdown was beginning to fully take shape).

Then all of a sudden the rumor-mill begins to churn. The media-machine drums up the latest ‘what-if’ scenario, and starts making us fear anything seemingly too good to be true (which is ironic considering how often too good to be true is, in fact, actually just life being what it is).

And now, after threats of a pre-emptive strike by the feds, to kybosh any sort of building real estate bubble, now the talk seems to have shifted to government and financial officials thinking twice about cracking the whip, when it comes to imposing measures aimed at putting the squeeze on any further positive real estate gains.

A recent CBC News article hints the Bank of Canada (BOC) is now, quote, “backing away from recent warnings about a housing bubble in Canada.” And, in turn, that means that a knee-jerk by the central bank would be premature as it would quite likely mean muffling the momentum currently being experienced by the Canadian economy.

So the debate continues. There are still many who feel housing prices are still over-inflated and and they’re waiting for the other shoe to fall when it comes to the market. And there’s the other side of the equation which includes those whom are insistent that factors like pent-up demand, record-low mortgage rates, and a steadily declining inventory of homes to choose from (in most markets) are what is actually creating the sales activity and consumer spending (on real estate) that we’re currently experiencing.

Who’s right? Well, as usual, we won’t know until we get there. What’s more interesting to me is the idea that Canadians need to think about other factors which might affect them – in the not too distant future. For example, we will most certainly see a change in market conditions, sales activity, and prices if the feds decide to raise the downpayment requirement to something above the current 5% minimum, or if they decide to change the maximum amortization period to 25 years, down from the current 35 year maximum.

And as I mentioned in an earlier post, combine the two above proposed changes, with inflation and with predicted rise in interest rates in Q3 or Q4 of this year and suddenly the warning-bells for some Canadians should be going off regarding how much these measures could increase their already tight ability to service and qualify for their debt.

“The bank’s worry is that homeowners with large mortgages that are manageable now with interest rates at record lows won’t be able to afford their monthly payments once interest rates start rising, as is expected later this year.”

A legitimate concern but one that shouldn’t instill widespread panic, remembering that the fate of Canada’s recovery shouldn’t rely (and historically has never relied) on the housing market alone.

“On the economy as a whole … recovery is still dependent on government support and that growth driven by the private sector has yet to materialize.”

So we shouldn’t be surprised that the answer isn’t a simple one. And we also shouldn’t be surprised we can’t come up with the answer right away, today, this minute.  Hindsight is 20-20, so hopefully we’ll know what to watch out for this time. But even still, a lot of other factors will have to play out, organically, before we’ll know for certain whether any sort of bubble builds or bursts.

Thoughts Bubbling? Bursting? Send me your comments.

At a time when many (including myself) are predicting interest rates to rise by the coming spring or summer, talk is suddenly shifting to whether or not many Canadians will be stuck servicing debt loads they can’t handle – due to rising rates. Sure many can handle it now – but what about the future? And does this suddenly mean we can expect an influx of mortgage defaults on the market in the next 8-12 months?

Well, whether your glance toward the horizon involves a primarily pessimistic peer, or more optomistic ogling, a posting on canadianmortgagetrends.com is worth checking out, with regards to highlighting some of the more probable outcomes related to rising interest rates, and the effect this rise will have on the number of mortgage defaults in our country.

I think the most important point to consider (and both the website and Tal allude to this) is the idea that ‘biting off more than you can chew’ when it comes to debt-servicing your mortgage, and other debt, will hit a lot closer to home when inflation kicks-in and interest rates rise. I think a lot of us have grown very comfortable with the current, historically low, rates. And that’s dangerous if you’re relying on those rates to stay where they are – since it will surely cost you more to service that debt if you’re suddenly required to pay multiple basis-points above what you’re used to.

Perhaps the best thing many of us can do right now is, in fact, pay down as much debt as possible – instead of taking too much on. A calculated risk to be sure, as I’ve often also said sitting on the fence and refraining from actually getting into the market (for fear of rising rates, and increased expenses) isn’t necessarily helpful either.

Keep your eye on the prize, watch where you’re spending, and remember to seek out expert advice when you need it. That way it should be easier to weather any future storm, and also reap the benefits when times are good.

Comments?