cdr108
Senior Member
wow, daveto ... those are scary numbers.
it really surprises me that people think current RE values in Canada nationwide (and TO) at 5x are reasonable and sustainable.
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Baby, we got a bubble!?
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wow, daveto ... those are scary numbers.
it really surprises me that people think current RE values in Canada nationwide (and TO) at 5x are reasonable and sustainable.
safeashouses
Banned
Strong market- 'honey, I just got a raise and now we can afford that house you love!'
Bubble market- 'honey, they just laid off 20% of the people in my office, I'm safe, for now, but the Prime lending rate is only 2.25% instead of 4.5% and my bank will give us a 95% loan instead of 85% so NOW we can afford that house you love!
urbandreamer
recession proof
^No need to say that.
Just watch the coming double bottom of the $INDU and $TSX to see how it affects Toronto real estate sentiment.
Just watch the coming double bottom of the $INDU and $TSX to see how it affects Toronto real estate sentiment.
cdr108
Senior Member
a little OT but along the same thoughts
Foreclosures hitting more people with prime loans
Delinquencies and foreclosures set 9th straight record in 3rd quarter as layoffs keep rising
By Alan Zibel, AP Real Estate Writer
http://finance.yahoo.com/news/Foreclosures-hitting-more-apf-24626172.html?x=0&sec=topStories&@#$%&!=2&asset=&ccode=
WASHINGTON (AP) -- A rising proportion of fixed-rate home loans made to people with good credit are sinking into foreclosure, adding to concerns about the strength of the economic recovery.
Driven by rising unemployment, such loans accounted for nearly 33 percent of new foreclosures last quarter. That compares with just 21 percent a year ago, when high-risk subprime loans made during the housing boom were the main reason for default.
At the same time, the proportion of homeowners with a mortgage who were either behind on their payments or in foreclosure hit a record-high for the ninth straight quarter.
The Mortgage Bankers Association's report Thursday suggests the housing market and broader recovery could be thwarted by the continuing surge in home loan defaults, especially as the unemployment rate keeps rising. Lost jobs, rather than the shady loans made during the housing boom, are now the main reason homeowners fall behind on their mortgages.
After three years of plunging prices, the housing market started to rebound this summer. While optimists hope the worst is over, pessimists say there are simply too many foreclosed properties that have yet to be dumped on the market and expect further price declines.
About 4 million homeowners were either in foreclosure or at least three months behind on their mortgage payments as of September, according to the mortgage bankers group. Even if a quarter of those borrowers are able to stay in their homes, "there's a lot of potential inventory coming into the market next year," said Jay Brinkmann, chief economist with the Mortgage Bankers Association.
Those foreclosures will push home prices downward, especially in the hardest-hit California and Florida cities, places that are also coping with soaring unemployment, he said.
The record-high foreclosure numbers are being driven by borrowers with traditional fixed-rate mortgages, rather than the high-risk subprime loans with adjustable rates that triggered the mortgage crisis.
Subprime loans with adjustable rates have fallen to 16 percent of new foreclosures from 35 percent a year earlier.
Loans backed by the Federal Housing Administration also show increasing signs of trouble. More than 18 percent of FHA borrowers are at least one payment behind or in foreclosure.
Among states, the worst of the trouble is still concentrated in California, Nevada, Arizona and Florida, which accounted for 44 percent of new foreclosures in the country. Nearly 13 percent of all loans in Florida were in foreclosure, the highest in the U.S., followed by Nevada at more than 9 percent.
Foreclosures hitting more people with prime loans
Delinquencies and foreclosures set 9th straight record in 3rd quarter as layoffs keep rising
By Alan Zibel, AP Real Estate Writer
http://finance.yahoo.com/news/Foreclosures-hitting-more-apf-24626172.html?x=0&sec=topStories&@#$%&!=2&asset=&ccode=
WASHINGTON (AP) -- A rising proportion of fixed-rate home loans made to people with good credit are sinking into foreclosure, adding to concerns about the strength of the economic recovery.
Driven by rising unemployment, such loans accounted for nearly 33 percent of new foreclosures last quarter. That compares with just 21 percent a year ago, when high-risk subprime loans made during the housing boom were the main reason for default.
At the same time, the proportion of homeowners with a mortgage who were either behind on their payments or in foreclosure hit a record-high for the ninth straight quarter.
The Mortgage Bankers Association's report Thursday suggests the housing market and broader recovery could be thwarted by the continuing surge in home loan defaults, especially as the unemployment rate keeps rising. Lost jobs, rather than the shady loans made during the housing boom, are now the main reason homeowners fall behind on their mortgages.
After three years of plunging prices, the housing market started to rebound this summer. While optimists hope the worst is over, pessimists say there are simply too many foreclosed properties that have yet to be dumped on the market and expect further price declines.
About 4 million homeowners were either in foreclosure or at least three months behind on their mortgage payments as of September, according to the mortgage bankers group. Even if a quarter of those borrowers are able to stay in their homes, "there's a lot of potential inventory coming into the market next year," said Jay Brinkmann, chief economist with the Mortgage Bankers Association.
Those foreclosures will push home prices downward, especially in the hardest-hit California and Florida cities, places that are also coping with soaring unemployment, he said.
The record-high foreclosure numbers are being driven by borrowers with traditional fixed-rate mortgages, rather than the high-risk subprime loans with adjustable rates that triggered the mortgage crisis.
Subprime loans with adjustable rates have fallen to 16 percent of new foreclosures from 35 percent a year earlier.
Loans backed by the Federal Housing Administration also show increasing signs of trouble. More than 18 percent of FHA borrowers are at least one payment behind or in foreclosure.
Among states, the worst of the trouble is still concentrated in California, Nevada, Arizona and Florida, which accounted for 44 percent of new foreclosures in the country. Nearly 13 percent of all loans in Florida were in foreclosure, the highest in the U.S., followed by Nevada at more than 9 percent.
daveto
Active Member
FP article today about CMHC/sub-prime
http://network.nationalpost.com/np/...t-causing-concern-for-the-bank-of-canada.aspx
For most of this year, the markets have been discounting an economic recovery. That is, they have been in rally mode in anticipation that the worst is over. While that is likely, all that is left for debate is how meaningful the recovery will be and if it is sustainable. The G20countries have committed to not let their collective foot off the gas pedal until they are confident that the economy is on a sustainable trajectory.
As has been expressed before in this space, the distortions being caused in the markets by a weak US dollar are numerous. The floundering US currency has in turn lit a fire under the Canadian dollar. It is up almost 17% for the year and 24% since its lows last March. That has created a conundrum for the Bank of Canada. It was widely expected that the Bank of Canada would have begun raising interest rates by now.
However, some economic data has come in weaker than expected and even more so, the high Canadian dollar has kept the Bank of Canada on the sidelines. The central bank is well aware that if it chooses to raise rates now and thereby further strengthen the loonie, it might just end up choking off the budding economic recovery.
However, there may be yet another concern that might be leaving the Bank of Canada in a quandary. It seems that Canada is gaining a new reputation as perhaps the new kid on the block when it comes to the excesses of overheated real estate markets that are being fueled by a wave of mortgage financing that some consider to be sub- prime in quality. In part, this is starting to resemble what we have seen in the US. While it is highly unlikely that we would see anything remotely resembling the experience of the US banks, the story does have some similarities that are disconcerting.
Part of the responsibility for this trend is being put at the feet of the Canadian Mortgage and Housing Corp. (CMHC).The government entity is considered by critics to be the Canadian version of Fannie Mae in that its practices are thought to be provoke a rise in lending that could spell trouble for the Canadian real estate market in the future. This practice was brought about in part by the directive of the federal government to CMHC to effectively "hit the gas" and ensure that mortgage credit was accessible. The theory goes something like this: banks can keep making extended amortization loans to provide prospective homeowners the ability to get into an overheated Canadian housing market because the default risk is being transferred to the CMHC (taxpayers) since it acts as a guarantor for the mortgage market.
According to data from the CMHC, the amount of mortgage credit on the books of the banks has been almost unchanged since 2007 even though they have issued an explosive amount of mortgage credit. The reason is that the banks are offloading the mortgages from their balance sheet through the securitization process. Essentially, this allows them to move the risk of default to the broader financial markets.
Recently, the president and CEO of ING Direct Canada stated that he is seeing Canadian habits resemble those of US and European nations during their housing booms. The level of equity in Canadian homes is surprisingly low as more than 50% of all mortgages issued this year are longer than the 25 year range that has been the usual option for borrowers.
Taking this altogether, should rates rise over time, many Canadian might just wonder what they have gotten themselves into. The chart above shows that Canadian income growth has not kept pace with the level of mortgage credit and now exceeds Canadian income. This also raises the question about whether or not the federal government can reverse its directives to the CMHC to open the credit spiggot.
It seems that rather than just expressing concern about this issue, the Bank of Canada might be tempted to follow its words with actions to send a shot across the bow of a surging Canadian housing market.
http://network.nationalpost.com/np/...t-causing-concern-for-the-bank-of-canada.aspx
For most of this year, the markets have been discounting an economic recovery. That is, they have been in rally mode in anticipation that the worst is over. While that is likely, all that is left for debate is how meaningful the recovery will be and if it is sustainable. The G20countries have committed to not let their collective foot off the gas pedal until they are confident that the economy is on a sustainable trajectory.
As has been expressed before in this space, the distortions being caused in the markets by a weak US dollar are numerous. The floundering US currency has in turn lit a fire under the Canadian dollar. It is up almost 17% for the year and 24% since its lows last March. That has created a conundrum for the Bank of Canada. It was widely expected that the Bank of Canada would have begun raising interest rates by now.
However, some economic data has come in weaker than expected and even more so, the high Canadian dollar has kept the Bank of Canada on the sidelines. The central bank is well aware that if it chooses to raise rates now and thereby further strengthen the loonie, it might just end up choking off the budding economic recovery.
However, there may be yet another concern that might be leaving the Bank of Canada in a quandary. It seems that Canada is gaining a new reputation as perhaps the new kid on the block when it comes to the excesses of overheated real estate markets that are being fueled by a wave of mortgage financing that some consider to be sub- prime in quality. In part, this is starting to resemble what we have seen in the US. While it is highly unlikely that we would see anything remotely resembling the experience of the US banks, the story does have some similarities that are disconcerting.
Part of the responsibility for this trend is being put at the feet of the Canadian Mortgage and Housing Corp. (CMHC).The government entity is considered by critics to be the Canadian version of Fannie Mae in that its practices are thought to be provoke a rise in lending that could spell trouble for the Canadian real estate market in the future. This practice was brought about in part by the directive of the federal government to CMHC to effectively "hit the gas" and ensure that mortgage credit was accessible. The theory goes something like this: banks can keep making extended amortization loans to provide prospective homeowners the ability to get into an overheated Canadian housing market because the default risk is being transferred to the CMHC (taxpayers) since it acts as a guarantor for the mortgage market.
According to data from the CMHC, the amount of mortgage credit on the books of the banks has been almost unchanged since 2007 even though they have issued an explosive amount of mortgage credit. The reason is that the banks are offloading the mortgages from their balance sheet through the securitization process. Essentially, this allows them to move the risk of default to the broader financial markets.
Recently, the president and CEO of ING Direct Canada stated that he is seeing Canadian habits resemble those of US and European nations during their housing booms. The level of equity in Canadian homes is surprisingly low as more than 50% of all mortgages issued this year are longer than the 25 year range that has been the usual option for borrowers.
Taking this altogether, should rates rise over time, many Canadian might just wonder what they have gotten themselves into. The chart above shows that Canadian income growth has not kept pace with the level of mortgage credit and now exceeds Canadian income. This also raises the question about whether or not the federal government can reverse its directives to the CMHC to open the credit spiggot.
It seems that rather than just expressing concern about this issue, the Bank of Canada might be tempted to follow its words with actions to send a shot across the bow of a surging Canadian housing market.
safeashouses
Banned
^No need to say that.
Just watch the coming double bottom of the $INDU and $TSX to see how it affects Toronto real estate sentiment.
We would have to experience one hell of crash for the TSX to lose 4,000 points U-Dream!
What makes you think that's going to occur? It's not that I believe in the rally and the recovery, but I know that with both governments printing so much cash that the equity markets are being hugely propped up and I'm not sure why the feds would do anything to remove that crutch.
urbandreamer
recession proof
^Volume. Take a look at the volume on the major markets. It's going down while the market was going higher. That tells me smart money isn't buying the rally. As well, insider selling began to gain momentum into August/Sept/Oct/November. Tells me they are expecting a crash.
cdr108
Senior Member
MadMax
Active Member
ssshhh ... now keep on drinking the kool-aid !
A little tasteless don't you think...quoting a phrase from the Jonestown massacre where so many were killed.
urbandreamer
recession proof
^Not at all. Ppl in the stock promo biz (stockhouse, ihub etc) always use the kool-aid joke to stop fools from losing money. Sadly, it rarely works...
cdr108
Senior Member
sorry if it offended you or anyone else ... wasn't meant to reference Jonestown, although maybe that's where the saying came from as it is somewhat appropriate as no one should follow others word blindly.
the same phrase, as mentioned by UD, is actively used by people who follow equity markets, especially in the current environment of 50%+ appreciation since March 2009 without any substantial impetus except 'hope' and carry trade risk taking.
Eug
Senior Member
Personally I think the rise is about as justified as the crash.
TrickyRicky
Senior Member
"Just watch the coming double bottom of the $INDU and $TSX to see how it affects Toronto real estate sentiment"
My question is though does the average Canadian buyer care? What I mean is does the average Canadian buying into this present residential real estate surge have any appreciable equity holdings, or any appreciable savings of any kind for that matter?
My question is though does the average Canadian buyer care? What I mean is does the average Canadian buying into this present residential real estate surge have any appreciable equity holdings, or any appreciable savings of any kind for that matter?
safeashouses
Banned
Most new buyers have only hopes and dreams; likely to be shattered by the predictable pullback in prices sucking their purchases underwater and their variable rates loans above their ability to service them.
Coming soon: Bailout 2012- CHMC's Revenge!
BrianPersaud
Active Member
Couple more differences is the US has non-recourse mortgages and Canada doesn't. This allows someone to walk away from their properties without lenders coming after the homeowners other assets
Another point is the US you can deduct mortgage interest payments against your income. Because of this, Americans were using their homes a debt card. In Canada, housing is our last tax shelter we have (all the gains on our primary residence we get are tax free) and interest is not deductible; as a result Canadians aggressively pay down their mortgages.
Hard to believe but true, most Canadians have substantial equity in their homes, while they have been taking advantage of low rates, our balances are low (thus payments low). In addition, when people are selling their homes, because of this equity, most are not putting 5% down as a mortgage. They are putting gigantic downpayments.
I've also read that people fear there is speculation in the market and that real estate should not be traded like stocks. Well, because of technology, it is. Back in the day, you had to call up a stock broker to buy and sell, much like a real estate agent. Today you can do it with a click of a button. What this has caused stocks to become more liquid as more people can trade faster...this is the natural progression of the real estate market.
Another I've been reading is that people feel their is an oversupply. I had Ben Myers from Urbanation and George Carras from realnet on my show. They track the new home market in Toronto.
They found two interesting things
1) Developers are producing fewer units as a whole today than in the past 5 years. Yes Developers are producing more condos, but there are much much fewer low rises. So when you see construction cranes all over downtown, you're not taking into account how much less subdivisions are going up.
2) The Toronto development community is fairly well capitalized and strong. Since they're are few banks to syndicate $200 million construction project they have tough criteria for releasing financing for construction to begin. They need to see a significant pre-sales with high deposits or the project wont go up. When this happens, supply goes down drastically and they are able to survive a period of very low sales.
When supply goes down drastically, builders maintain every effort to keep prices the same, again for financing and because the land costs in Toronto are high (greenbelt, brownfields and lake keep supply of buildable down).