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Baby, we got a bubble!?

drewp said:
On the new sales condo front, I will be interested to see how 1000 Bay sells this weekend. It has its official launch this Saturday. I received specs for this place and they are averaging 750sqft, with an additional $65000 for parking.QUOTE]

Parking included, it comes to around $ 800psf.

I would appreciate if you could post the sales numbers here, whenever you come to know about them.
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KA1 said:
drewp said:
On the new sales condo front, I will be interested to see how 1000 Bay sells this weekend. It has its official launch this Saturday. I received specs for this place and they are averaging 750sqft, with an additional $65000 for parking.QUOTE]

Parking included, it comes to around $ 800psf.

I would appreciate if you could post the sales numbers here, whenever you come to know about them.
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How much are units at U? That's the best comp.

I like the future of this stretch between Bloor and Wellesley. Hopefully developers and other property owners can improve the streetscape as well. It needs more Bistro 990's and less Pizza Pizza!
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marsh said:
Mortgage lending tightens for self-employed, immigrants
February 01, 2012
Susan Pigg
It’s going to be tougher for the self employed, new immigrants and higher-risk borrowers to get a mortgage as concerns continue to mount over the state of Canada’s housing market.
CIBC’s wholesale mortgage arm, FirstLine, quietly announced Tuesday that it will no longer accept new applications from “stated income” homebuyers who can’t prove they have the annual net income to qualify for home loans.
FirstLine also set a $1 million cap on what it will lend for a home purchase.
The major change in policy, which is bound to pique the interest of other major lenders, came on the same day it was revealed that the Canada Mortgage and Housing Corp. could be forced to cut back on the mortgages it insures.
The moves are seen as among the clearest indications yet that Canada’s hot housing market and record levels of household debt are a concern far beyond just the Ottawa offices of Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney.
That’s despite a Bank of Montreal report this week that says Canada’s housing market is more balloon than bubble and more likely to deflate than pop.
“The signs are there that everyone is worried, with the exception of BMO. It’s not like there is just one person saying there is a problem with the housing market,” said Jason Friesen, a mortgage consultant with the Callum Ross Team.
“It’s impossible to know, given all the doom and gloom in the rest of the world, what will happen over the next three months or the next six months, but lending institutions are looking for ways to protect themselves.”
The CIBC was unable to comment last night on the changes, other than to say FirstLine’s decision “reflects the normal course of business.”
But that, coupled with CMHC’s predicament, is sure to raise concerns.
CMHC has traditionally backstopped loans, especially to first-time homebuyers who can’t raise the traditional 20 per cent downpayment for a home.
But the housing corporation has recently received “an unexpected level of requests for large amounts of CMHC portfolio insurance” that has pushed it close to the $600-billion cap on insurance set by the federal government.
Those requests have come from financial institutions looking for, in essence, taxpayer backing on pools of previously uninsured low-ratio mortgages.
While a CMHC spokesperson insisted this “does not affect the availability of CMHC’s mortgage insurance for qualified home buyers and will not impact the cost of buying a home,” the federal housing company may inevitably be forced to take a harder look at who it insures down the road, housing experts say.
That’s led to speculation that CMHC, too, could back away from self-employed home buyers who often need insurance to get a mortgage.
CMHC declined to comment on those suggestions Tuesday, other than to say “CMHC continues to manage its mortgage loan insurance business in accordance with the $600 billion insurance in force limit.”
FirstLine’s announcement is “a pretty substantial change in thinking” from the second-biggest mortgage lender in the country, said Friesen.
The question is whether other institutional lenders will follow suit.
CMHC’s situation is equally worrisome in that the federal limit could see a tightening of lending conditions that leads to a cooling of a market many housing experts consider “overheated.”
As of Sept. 30, CMHC had insured $541 billion in loans, up from $501 billion a year earlier. Just three years ago, CMHC was insuring $450 billion in loans and asked Ottawa for approval for the $600 billion cap.
The increase in insurance-backed loans is not only evidence that increased prices are pushing houses further out of reach of many homebuyers, but that people are still so keen to get into the market, they’re willing to pay for mortgage default insurance, said TD Bank economist Sonya Gulati.
Maintaining the cap could have a dampening effect on demand for hosuing, but would be “an indirect way of making it tougher to get a mortgage,” she said.
Ottawa has raised concerns about record levels of household debt, fuelled by high-spending baby boomers and historically low interest rates.
But restricting CMHC “is a bit trickier,” said Gulati, than having Ottawa tighten up mortgage rules yet again by insisting on higher downpayments and shorter amortization periods.
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Am I the only one who thinks the bolded section is worrisome and frankly unbelievable. Who doing reasonable due diligence would take at face value with no verification what I say my income is rather than asking for at least the last 2 years of income tax returns. This sure sounds similar to the NINJA loans in the US and clearly encourages those on the margin or looking for better rates to lie about their income. And who would be the wiser if no one was double checking income unless the person defaulted.
The other question has to be about the banks and the loan portfolio increase at CMHC. Part of that would logically be the increase in price since higher average prices means more loans to be given by CMHC. But this seems like it is more than the price increase and one has to wonder if the Banks are in the process of asking more borderline people to get CMHC insurance and ridding their balance sheets to the tax payer of loans they suspect to be shaky. I have no proof of this but if BMO is in the position of lowering rates to new lows followed by the other banks since they appear to be "chasing business", does it not follow that they may be relaxing their standards and just dumping the questionable loans onto CMHC, ie. the Government or taxpayer. Effectively what occurred in the US to Fannie May/Mac.
 
interested said:
Am I the only one who thinks the bolded section is worrisome and frankly unbelievable. Who doing reasonable due diligence would take at face value with no verification what I say my income is rather than asking for at least the last 2 years of income tax returns.
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Strange. When I got my mortgages, they always demanded documentation of my income. Because I have two sources of income now, one of which that doesn't generate a T4 (but which does show up on my income tax of course), for my last mortgages they've also demanded further documentation of the second source of income.

The $1 million cap is interesting though. That poses problems for high income earners in places like Vancouver and Toronto, where $2 million plus homes are common in certain neighbourhoods. What some banks had done to protect themselves is to require higher minimum downpayments. eg. Even if you had 20% down, they wouldn't lend to you, unless you got it insured. However, if you had say 30% down, they'd lend you the other 70%.

However, with Firstline's new policy, even if you had 40% down on a $2 million house, they wouldn't lend you the full $1.2 million amount, even if you made $400000 a year.
 
Yes, the higher mortgages on very high properties is a sensible thing for them to do.

If there is a 20% correction say on a $5 mill home; that is $1 million dollars. We know that if someone had put 30% down or $1.5million. That person would now have $500K of equity on a $4 million dollar home or 12.5% down payment if having to refinance. As well, since the high end tends to go up more in good times and down more in bad times, this is eminently sensible in my view to protect the lender. After all, it is exactly for the "bad times" that this becomes important. Also, in bad times, more expensive properties become more difficult and take longer to sell. Much smaller pool of individuals capable of buying at that price range.

That said, as you point out, in Toronto; and in Vancouver especially, $1.25million is not uncommon at all especially for detached homes in good neighbourhoods. Personally, I don't get someone buying a $1.25 million home with $250K down except in very exceptional circumstances. As the taxpayer, I don't want to be funding this type of lifestyle for someone who if they defaults leaves me the bill for their stupidity or brash desires. I have more sympathy however for someone buying at $600K an average home who is trying to put a descent if not totally extravagant roof over their head to live.
 
interested said:
Yes, the higher mortgages on very high properties is a sensible thing for them to do.

If there is a 20% correction say on a $5 mill home; that is $1 million dollars. We know that if someone had put 30% down or $1.5million. That person would now have $500K of equity on a $4 million dollar home or 12.5% down payment if having to refinance. As well, since the high end tends to go up more in good times and down more in bad times, this is eminently sensible in my view to protect the lender. After all, it is exactly for the "bad times" that this becomes important. Also, in bad times, more expensive properties become more difficult and take longer to sell. Much smaller pool of individuals capable of buying at that price range.
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The point here though is that they've put in a hard cap, which they haven't implemented for CIBC, just Firstline.

So, even if you have 50% down, you can't get a mortgage on a $2.2 million home with Firstline. That's odd IMO.
 
I expect the others will follow suit Eug.

In the US I recall the so called "jumbo mortgages" (over $700K as I recall) were impossible to get in the crisis. Presumably this is what they are trying to mimic.
 
Eug said:
The point here though is that they've put in a hard cap, which they haven't implemented for CIBC, just Firstline.

So, even if you have 50% down, you can't get a mortgage on a $2.2 million home with Firstline. That's odd IMO.
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I can understand FirstLine's rationale as they are simply looking at absolute values irrespective of loan-to-value ratios or other percentage factors. While this does affect some buyers who can put down a very healthy down payment yet still be shut out of that $2M+ home, it creates a more level lending market and, at the end of day, reduces the risk for many buyers who would've otherwise accepted the inherent risks of that particular real estate transaction.
 
interested said:
I expect the others will follow suit Eug.
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I would expect most won't. Even CIBC didn't do that, just Firstline. Well, I will say I would expect banks to be more strict with bigger mortgages, and some may indeed implement hard caps, but I wouldn't necessarily expect that cap to be $1 million in a market like Toronto's.

Lower hard caps become problematic in a rising market... or in this case, a market that has already risen. For example, $2.2 million is the norm in Rosedale, not the exception. It makes more sense to do your proper diligence on a case by case basis. A two-income professional family (doctor and lawyer for example) making $400000 for the last 5 years may be a safer bet then someone who made $150000 a year and then $250000 in bonuses for the last 2.5 years (finance dude for example).

Mind you, given that Firstline didn't seem to be following up on clients properly in the first place, perhaps this is to partially compensate for their strangely poor business practices.
 
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Eug said:
Strange. When I got my mortgages, they always demanded documentation of my income. Because I have two sources of income now, one of which that doesn't generate a T4 (but which does show up on my income tax of course), for my last mortgages they've also demanded further documentation of the second source of income.
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A few notes from personal experience.

In November 2001, when I signed for the unit that I currently live in, Scotia Bank mortgage representative was right in the sales office. Upon enquiry I was told that BNS will take my word that I am self employed. As long as the purchase is for personal residence and not for investment, I do not have to provide any document in support of my statement. All I have to do is to provide a copy of Notice of Assessment of my last tax return to prove that I do not owe any money to CRA. I was told that Scotia Bank is bending backwards to help self employed individuals -- with fluctuating income year to year --buy a residential unit.

I distinctly recall that it was on a Wednesday I had signed the purchase documents. Upon reaching home, I faxed a copy of Notice of Assessment of my last tax return. On Friday morning, mortgage approval was faxed to me. It was as simple as that.

In March 2008, I signed for a unit in AURA. I had wanted a mortgage for $ 500,000. At that time BMO hasd wanted access to my personal tax returns for the last 2/3 years. I refused to do that. Despite that, my mortgage application was approved with insurance from a private company (Gen...?).

I guess it depends as to how eager banks are to give a mortgage at the time an individuals applies for one.
 
I am surprised that they approved a mortgage without providing tax returns given that they asked for it. This must be the reason that OFSI has expressed concern about the lending practices and is tightening their requirements. It would appear from your experience at least that things have become more lax since 2001 to 2008.
 
and some of you kept insisting that Canadian banks didn't have ninja or sub-prime loans ... lol

i can tell you that canadian banks securitized sub-prime loans as AAA credit worthy income trusts.


the only thing saving Canada from a complete bust like the US is that we don't have 'jingle' mortgages and just walk away.
that however, doesn't mean we can't / won't experience larger price declines than 10% (25% imo) ... we just won't see a flood of foreclosures / power of sales as many will continue to pay their mortgages as long as they can before they succumb to the debt.
 
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TREB: Strong Sales/Price Growth Continue in 2012

Greater Toronto REALTORS® reported 4,567 sales through the TorontoMLS® system in January 2012. This number was 8.8 per cent higher than the 4,199 sales reported in January 2011. Sales growth was strongest for low-rise home types in the regions surrounding the City of Toronto.

The average selling price for January 2012 transactions was $463,534 – up by almost nine per cent compared to January 2011.

416 detached: $743993 (+15%)
905 detached: $530129 (+5%)
GTA detached: $586098 (+8%)

416 condo: $343835 (+5%)
905 condo: $272103 (+7%)
GTA condo: $321475 (+5%)

Yes folks, it's nearly 3/4 of a million bux for an average detached home in the 416 now.
 
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