Midway into the Spring Market

And the numbers will be telling. Has the sales slump affected prices or are the big purchases propping up them up?

Will the weakness from the periphery move inwards. We have already seen from Larry's numbers that in Coquitlam higher inventory and lower sales are cracking prices.

It was the OK, then it was the Sunshine Coast, Whistler and Victoria...then the Fraser Valley and now we are into the GVREB area.

The best we (bears) could hope for is a small steady decline in prices and activity. What we DO NOT want is a sudden drop. We had that in 2008/2009 and the Captain Flaherty and Bosun Carney swung the ship right round to prevent any correction.

Well these two jolly fools are still at the helm, and any sign of signficant weakness and you can be suure the pressure from the RE lobby and their own fear of what may come will make them change course again. They will drag the CMHC out again and put an even more pro-RE board in, increase the cap, throw out tax-credits like life vests and try and keep the bloated ship afloat.

Better a small leak which they think is the result of their jaw-boning rather than the result of lack of affordability and the tendency of bubble to burst if left alone.

A small drop would make me a happy fish.

Garth takes it to Flaherty- for the record.

The Flaherty and Carney circus act keeps going. They pump and pump and then hope a few stern words will dampen the animal enthusiasm that has driven the biggest Housing bubble in Canada's history.


You remember Canada, the country with the world's second largest land mass.


Well Flaherty is trying to shift the CMHC monster to the OFSI and hope that any bust fall-out falls on them. Here's what Garth had to say: (I agree with him 100% BTW)


It might have been F’s finest hour to date. The man who brought us government-insured 0%-down mortgages. The guy who invented lifetime amortizations. The dude who, for three long years, refused to let the B-word depart his lips. The elfin protector of the real estate industrial complex. Amen, brother Flaherty. Have you finally repented? Does it matter anymore?
...............

Of course, what could be more unfavourable, unforeseen or shocking than F?

So, here’s what he did. As I told you a month ago just before the federal budget was unveiled, the little pecker knows the real estate market is on borrowed time and our debt binge must be corralled, but he doesn’t want the spray. That’s why the plan was always to shove the blame on the bureaucrats and regulators. And it’s happened.

The budget implementation bill tabled this week will make mortgages more expensive and harder to get. It slaps CMHC around and puts the whole home lending business under the thumb of OSFI – the bank cop regulator with the Tommy Lee Jones swagger. No longer will CMHC slop around as a thinly-controlled quasi-department of the government, with a board of directors that might as well be running HGTV. As befits the stature of a financial behemoth with a balance sheet the size of the national debt, this agency will now be stress tested, microscoped and regularly reamed.

Gone is government-backed insurance for mortgages the banks use to back their covered bonds. That means their borrowing costs will rise, and so will mortgages – by about .15% very soon. More later. This is deliberate – a way for F to bump lending costs and cool housing without jacking up interest rates in general and knifing the economy.

This tightening in mortgage funding for the banks will likely make it harder for people without money, the self-employed or misguided property virgins to get financing. As one risk-management guy said after hearing the news:  “It will have the beneficial effect of preventing the most vulnerable borrowers from getting access to mortgages, so these people will have to wait longer to get into the game.”

See the irony? Here’s the father of the 0%-down, 40-year am, government-backed mortgage. The chief money guy of a government which brought in a home-buying tax credit and bloated the RSP Home Buyer’s Plan for first-timers. Now scrambling to chill the market through the back door.

Nobody is more responsible for houses in Toronto, Vancouver, Saskatoon, Calgary or Winnipeg that people can no longer afford, than F.  He’s the architect of the family debt he decries. Now that detached homes cost a million, while incomes trail inflation, he lectures us. How weak and disappointing.

One sale for every two realtors?

Sales, like a tramp steamer running of gas is sputtering, and slowing down..


In March we had .."a decline of 29.6 per cent compared to the 4,080 sales in March 2011 and an 8.4 per cent decline compared to the 3,137 home sales in March 2010." REBGV


We are on course to have 2900 sales for the REBGV for April.


That would be 10% less than last year and 20% less than April 2010.


That cannot be a pleasant situation for the 10,000 Realtors in the  region (give or take a few hundred as these are 2010 numbers)


Now of course every sales has two parts a listing Realtor and a selling Realtor, so 2900 sales become 5800 transactions.


Rounding the numbers that comes to one transaction for every two Realtors in April. Even with our sky-high prices, that leaves a lot of agents with little or no income in April and on-going expenses.


Of course like many other fields, the top 10-20% are probably accounting for the lion's share of the transactions.

What do you think?

Are these two guys....

Geniuses?

Or........................Fools?

Here is your answer...

Kudos to the Economic Analyst for the first two charts.

Interesting BNN spot

The Media has been in a frenzy (finally) about Mainland Chinese buyers. We are reading that 13/15 high priced British property homes recently sold went to them, and about the megahomes on the westside- fixed, flipped and left empty.

Well Andrew Bell of BNN interviewed David Choi a well-known realtor who deals in the Mainland Chinese market.

What was interesting was the absolute lack of any remarks from the interviewer or interviewee about the ethics of allowing people, on occasion wealthy fugitives from China, to buy these properties with untaxed (maybe illegal) money and then leave them empty. Even while saying that China itself had restricted people to buying ONE home only.

It was like they had a right to do it, and 'Oh no' What would happen it they quit.

Andrew Bell did try and (gently) ask at the end about locals who maybe getting resentful about the huge prices being paid for homes which are then left empty and what did his guest think about that. It didn't even seem to register with him! He went on about how the Chinese investors were running out of good properties to buy and may have to buy homes to renovate.

Clearly no one is in the least concerned about home prices shooting out of the reach of those working and living here and EVEN WORSE that homes are being left empty in an area of tight housing and high homelessness. Not the Federal Government, and definitely not our good-as-useless Premier who has no real platform of ideas as far as I can see.

This is the free-market taken to the level of lunacy. Even Singapore has property restrictions. Why not just sell of the whole city to these 'investors' and the rest of us can be bused in from Abbotsford to clean the streets, protect their property, treat their illnesses if they visit and mow the lawn.

Yes, offshore buyers are just a part of the problem, however this is a curse no city wants, especially one that needs tax-paying, consuming people to stay vibrant (forget the arts which have died in this town) and which has pressure to house those who have chosen to make their lives here (from all back-grounds).

Start with below-inflation-interest rates, mix in the CMHC insurance, lengthen mortgages, have banks with no skin-in-the-game and finally top off with endless off-shore tax-unpaid, hot dough and voila....you have an almighty bubble.

The myth of Canada's strong financial sector.

Carney and Flaherty have made a lot of hay boasting about how strong our banks are. They have been lecturing the poor Europeans and Americans. Of course the truth is very far from this fantasyland. The only reason we have 'strong banks' is because the risk of high leverage mortgages has already been pre-transferred to the tax-payer, via the CMHC.

These three graphs will show you how different things are in reality and how potentially dire:

Kudos to the Economic Analyst for the first two charts.

We should be cheering

Shouldn't we...?

Maybe things are moving quicker than we thought.

UPDATE 1-Canada home prices fall in March, sales up-CREA

Reuters

Mon Apr 16, 2012 11:18am EDT

* Home prices fall 0.5 pct in March from year earlier     * Vancouver-area price declines impact national avg     * Prices in Toronto rise 10.5 pct     * Home sales up 2.5 pct in March from Feb       By Jon Cook      TORONTO, April 16 (Reuters) - Canadian home prices fell in March from year-ago levels even as existing home sales activity picked up, with a cooling of the once-hot Vancouver market offsetting big price gains in Toronto and steady increases elsewhere. 

    A report on Monday from the Canadian Real Estate Association showed the average residential home price in March was C$369,677 ($370,600), down 0.5 percent from the same period last year. The figures are not seasonally adjusted.      But the broad number masked big differences between cities and regions. 

    The average selling price in Vancouver, Canada's most expensive major market, fell 3.1 percent from a year earlier to C$761,742. Prices in the nearby Fraser Valley area tumbled nearly 10 percent. 

    But prices in Toronto, which has seen a boom in condominium construction, jumped 10.5 percent in March from a year earlier.      "The slight decline in the national average price points to a tug of war between Toronto and Vancouver," Gregory Klump, the industry group's chief economist, said in a statement.      Klump added that national prices in 2011 had been pushed higher by "record level high-end home sales in some of Vancouver's priciest neighborhoods."

      The report also showed existing home sales climbed 2.5 percent in March from February on a seasonally adjusted basis. But the increase, unadjusted, was up just 1.6 percent from year-earlier levels. This represented the lowest yearly growth rate since April 2011. 

    "While it is difficult to see in the monthly data, there is a sense that the housing market is gradually slowing," David Tulk, chief Canada macro strategist at TD Securities wrote in a research note. 

    "The dynamics of this report show a maturation of the housing market cycle in Vancouver which is likely to be repeated in Toronto over the coming year. Outside of these two markets, the rest of the national market is still holding in reasonably well." 

    Tulk added that gradually rising Canadian interest rates over the next two years should help slow the market further.      The news should provide some relief to the Bank of Canada, which has warned that rising household debt levels, in many cases the result of large mortgages, are the biggest domestic threat to the economy. 

    Canada's housing sector never experienced the subprime mortgage boom and bust that drove the United States into recession. And a post-crisis housing market rally, triggered by record low borrowing costs, played a key role in driving the recovery. 

    But Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty have both expressed concern about the housing boom, with Flaherty tightening mortgage rules several times to try to cool the market.

The Bank of Canada fumbles again

Carney and Co came out today with much fanfare, saying that higher interest rates may needed.

They up-graded their growth forecasts and are of course fearful of the huge amount of debt Canadian have taken on and the Real Estate bubble - so they are moving into rate hiking mode.

The only thing holding them back is the high Canadian Dollar which is damaging Ontario's manufacturing sector.

So when will they do this?

Probably not until late 2012 or 2013 and even then it will be a tiny move up from the current 1%. (with inflation running at 2-3x that)

Huh? So why all the hullabaloo now. Just do it! The result of these words is that the CAD has soared again, but rates for borrowers have remained rock solid.

This is the exact opposite of what they say they want. Now manufacturing gets hit but debtors have a free pass.

Why do we keep doing things that are the opposite of our intentions? The CMHC of course being the prime example. Say one thing but do the opposite.

Just shut down the CMHC

The clamour to clip the horns of the CMHC are getting louder.

The IMF, Bloomberg, Nomura, OFSI, even the Canadian Banks (the recipients of CMHC largesse) and the media have jumped aboard too, never mind those foolish bloggers who have been sounding the alarm for several years now.

I am sorry to have to link the National Post, which IMVHO is only one small step above Macleans but there is an article worth perusing, though it would have been better written...say two years ago than now. It talks about foreign speculative buying (which occurs alongside Canadian speculative buying) but also about the CMHC which seems to insure just about everything and anything.

Why exactly? And why do they insure rental or investment property? Isn't it obvious to even the most feeble brained, that if your mandate is to encourage Canadians to own their own home, by facilitating others to buy more for investment- you are taking homes out of the pool for sale and making it more expensive for first time buyers...no?

It used to be this bad:

They have tightened up the rules but it still exists.

From the CMHC site:

5. Does CMHC Mortgage Loan Insurance only apply to traditional single-family residential properties?

No, CMHC offers mortgage loan insurance products on various property types including duplexes, condominiums, owner-occupied properties, manufactured or mobile homes, properties requiring renovations and much more, including rental and nursing homes. Please check with your lender for more details.

I would have no problem for those building NEW rental stock to get insurance, but not for those just buying what's already built. It would be dumb beyond words.

The article says that a housing bust could hurt us a lot via the CMHC. Duh....We have been saying that in the bear blogs for several years now, ever since this Government doubled their capacity.

SFH stats

Last 30 days Active/Sold

Please work out the MOI yourselves

1) Maple Ridge

651/45

2) Pitt Meadows

49/12

3) Sunshine Coast

589/31

4) Richmond

990/80

5) Vancouver West

875/110

6) West Vancouver

440/60

7) Burnaby

455/71

8) Squamish

192/11

9)Port Moody

123/13

10)Surrey

2165/218

11)Abbotsford

747/49

12)Mission

515/26

13)Cloverdale

299/33

14)Langley

830/96

15) North Van

292/96

........

Van West Attached:

2313/303

Richmond Attached

1415/135

Surrey

1750/150

Interesting article form Andrew Coyne

Here. Lets call it the baby bear case. He says we will see weakness but not a collapse in RE and pokes fun at the 'forever-in-crisis reporting' of Macleans. It is a valid view-point which we need to consider.

It also fills me with dread that a crappy biased tabloid like Macleans which sensationalizes 'news' in between the fawning pieces about convicted criminals, like Conrad Black, written by their wives.. is now on our side (again). Oh no! the kiss of death.

Did they complain about the doubling of the CMHC or ZIRP or lax bank lending for the last 4 years like we did? have they admonished Flaherty for lack of CMHC or bank oversight? Hmmm

HARBINGERS OF DOOM

Andrew Coyne Apr 10, 2012 – 6:00 AM ET | Last Updated: Apr 10, 2012 11:55 AM ET

Even by Maclean’s standards, the cover was alarming. “You’re about to get burned,” screamed the headline, over a picture of a house that was literally on fire. “Canada looks like the us before its devastating housing crash — maybe even worse.” And the kicker, for those still hesitating: “Why it’s officially time to panic.”

This last was doubtless something of a little in-joke. For my old colleagues at Canada’s newsweekly, it is always time to panic, especially about house prices. The magazine’s editors inhabit a world beset by all manner of hitherto undetected demons, from more expensive groceries (“sudden shortages, riots over prices, the world food crisis is about to hit home”) to insomnia (“the truth about a modern epidemic”) to, well, “The Return of Hitler.”

But nothing, nothing frightens the magazine or, it is hoped, its readers, more than real estate. For years Maclean’s has been shuddering in terror of the imminent collapse of the Canadian housing market. From the relative calm of its late 2007 cover story (“Buy? Sell? Panic?”), the magazine soon picked up signals of the coming apocalypse. “House prices start to fall,” the magazine announced the following summer. By autumn, with the world financial crisis in full swing, so was Maclean’s. “Canada’s Looming Real Estate Crisis,” the cover shouted: “Why house prices may soon fall through the floor.”

As the months wore on, and the cataclysm failed to arrive, Maclean’s remained ever hopeful of a real collapse. But durned if prices, after a brief dip, resumed rising. By June 2008, a grumpy Maclean’s was warning readers “Don’t believe the housing hype,” insisting there are “plenty of signs that the Canadian housing market is still on some very shaky ground,” even if “average home prices are up more than 16 per cent this year.”

Fast forward through several more stories in the same vein and by this year the magazine and others were in even less doubt: Canada was in a housing bubble. Why, just look at the numbers. For starters, there’s the oft-repeated fact that Canadians are carrying debts worth 153% of their annual income. That’s true: but other countries’ citizens manage much heavier debt loads, from the spendthrift Swiss (200%) to the feckless Dutch (260%) to the profligate Danes (320%). We may be carrying almost as much debt as the Americans before the crash, but with nothing like the same risk factors, from subprime mortgages to small regional banks, that made their economy such a firetrap. And if we’re mentioning how Canadians’ debts have grown, we should surely also mention that their assets have as well: still five times as large as their debts.

Mortgage costs, interests and principal combined, are currently running at about 30% of disposable income — again, higher than a few years ago, but barely half what they were in the early 1990s. Yes, house prices were still rising as of year-end, but more slowly than before, as even the Maclean’s piece acknowledges — though somehow it cites this as evidence for its doomsday thesis. But then, what doesn’t? If prices were rising quickly, that would be proof of housing “mania.” If they fell a little, that would be the bubble starting to burst. And if they fell a lot? Look out below!

The truth is the real estate market is cooling slightly, helped by a modest tightening of lending regulations. It’s true that a rise in interest rates from current, historically low levels would put some homeowners in distress, but they’d have to spike a long way before the damage grew widespread — a concern, sure, but nowhere near as frightening as, say, the return of Hitler.

Posted in: Financial Post Magazine Tags: Canadian Housing Bubble, Maclean's, Real Estate

You do it...no you do it...no..

It would almost be farcical if the stakes were not so high.

The banks are begging to be regulated. "stop us from lending so irresponsibly" they are pleading to Flaherty. "We can't stop ourselves. While the other guy is pushing debt, we have to do so too, or our bonuses will suffer".

Flaherty says he won't have anything to do with it. He is a free-marketeer after all, see what they did to the Wheat Marketing Board. Unless of course you are the CMHC.

Carney witnessing the catastrophe of debt he has helped unleash is begging both sides to - please show more restraint.

Now consumers have their say. Don't lend us so much! They have this sweet naive notion that the banks who are lending them the money are somehow working in their best interests.

How cute!

Will no-one accept responsibility??

Carney says he will be forced to raise rates if Canadians do not moderate their HOUSING debt

Yeah- right! >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Had an interesting Conversation with a Westside Real Estate agent at an open house today. It was near the end and he was in a chatty mood. His listing was priced rather high I thought and told him so. He admitted it was priced for the "mainland" buyer.

I always thought Vancouver was on the mainland but obviously it means something else. His open house visitors were 50:50 'Mainland ' and Local.

Said, even though the listing was a few months old, no anxiety from the sellers (who obviously did not live in the place) to sell. "Interest rates are key. While rates are so low, the opportunity cost of not selling is low . Carrying costs are low and if you do sell you will only get 1% in a GIC on the money you make . So no one is too rushed.

If rates move up to the normal 4-5%. Then things will change very quickly."

Don't hold your breath waiting for Carney to go there. His idea of raising rates to temper this speculative mess, is a 0.25% rise.

Finally he said, "it isn't really prices that have risen so much, it is money that has become worthless."

I guess that depends who you are. If you have a high income in Vancouver and can access low rates or can get your hands on HAM then times are very good. If you are a Greek or Spanish or even a US worker, then money is getting more scarce.

Finally!

Someone does something

The OSFI has started to get more involved in the financing of the housing market. It has also told the Big Bank bank board of directors to actually do something more than pick up their monthly cheques and monitor the risk in the institutions they are supposed to direct.

Bloomberg- long a critique of the cosy relationship between banks, government and the CMHC has the best report on this today.

Canada Boosts Housing Oversight as Banks Warn on Economy

By Andrew Mayeda and Greg Quinn - Apr 4, 2012 7:14 AM PT

Canadian authorities are stepping up oversight of the nation’s housing market even as lenders such as Bank of Nova Scotia warn that tougher rules could threaten the economic recovery.

The country’s banking regulator, known as OSFI, said yesterday it will boost supervision of private mortgage insurers while examining “emerging” risks to the financial system in several areas, including residential mortgages.

Policy makers, including Finance Minister Jim Flaherty, have said that parts of Canada’s housing market have become overvalued as consumers add to record debt levels, encouraged by some of the lowest mortgage rates in decades. Flaherty said in his budget last week the government will enhance supervision of Canada Mortgage & Housing Corp., a federal agency that insures some mortgages.

Scotiabank (BNS) chief executive officer Richard Waugh warned about making reforms to CMHC that could have “unintended consequences” and cause the market to slow too much. “Canada’s model, which has been so successful, is let the banks manage and let the policy makers set macroeconomic policy, monetary policy, and good strong regulatory supervision,” Waugh said yesterday in an interview in Saskatoon, Saskatchewan.

Bank of Canada Governor Mark Carney said in an April 2 speech that households relying on debt financing represents “the biggest domestic risk” to the economy. Some Canadians would be vulnerable to a sharp decline in housing prices, the central bank said in its latest Financial System Review.

Home Prices Rising

Home resale prices rose 6.5 percent in January from a year earlier, according to the Teranet-National Bank Composite House Price Index (TNBHICY%). The S&P/Case-Shiller index of property values in 20 U.S. cities fell 3.8 percent in January from a year earlier after dropping 4.1 percent in December, a March 27 report from the group showed.

The country’s resale housing market is overvalued by 10 percent to 15 percent and there is an oversupply of new homes, Toronto-Dominion Bank economist Sonya Gulati said in a March 22report. “These excesses should be gradually unwound over 2013 and 2014, with higher interest rates the impetus for the adjustment,” she said.

The Ottawa-based Office of the Superintendent of Financial Institutions said yesterday it will produce a report for Flaherty on government guarantees on mortgage insurance. An OSFI spokeswoman, Leonie Roux, said the report would apply to private insurance providers such asGenworth MI Canada Inc. (MIC) and not CMHC.

Government Guarantees

The federal government guarantees the full value of mortgage insurance offered by CMHC, which had C$541 billion ($546 billion) in insurance in force at the end of September. The government guarantees 90 percent of insurance offered by private-sector companies.

“Elevated household debt levels not only make households vulnerable to adverse shocks but continued low interest rates could encourage even higher household indebtedness,” OSFI said in a planning document released on its website yesterday.

Consumers “could become a source of negative domestic influence if they take action to rein in spending to address their indebtedness,” OSFI added.

Consumer spending has led economic growth since taking the country out of recession in 2009. The Bank of Canada projects households will be responsible for more than half of the country’s 2 percent economic growth this year.

The government said in the budget it will enhance the governance and oversight of CMHC to “ensure its commercial activities are managed in a manner that promotes the stability of the financial system.”

Strengthening Oversight

The government is considering whether OSFI can play a role in “strengthening the oversight of CMHC’s commercial operations,” Chisholm Pothier, Flaherty’s chief spokesman, said yesterday in an e-mail. OSFI doesn’t currently regulate CMHC, instead, it reports to the country’s parliament through Human Resources and Skills Development Minister Diane Finley.

“Someone is going to have to safeguard CMHC, and I would assume that falls under OSFI,” said Ian Pollick, senior fixed- income strategist at RBC Capital Markets in Toronto. “There is no other real national regulator.”

The budget also said the government will introduce legislation on covered bonds under a system to be administered by CMHC.

Covered Bonds

Most covered bonds issued in Canada are secured by mortgages insured by CMHC. A government consultation paper in May asked for input on whether the law should encourage banks to secure covered bonds with uninsured mortgages, a move that may lead banks to rely less on CMHC insurance. The budget didn’t specify how the government will proceed on that issue.

The government also didn’t say whether it will raise CMHC’s C$600-billion limit for insuring mortgages. CMHC said Jan. 31 it has been rationing bulk insurance offered to lenders as the corporation approaches its legal limit.

Flaherty has tightened rules on mortgage insurance three times since October 2008. He appears to be taking a “wait-and- see” approach to determine if the market is headed for a soft landing before he acts again, said Finn Poschmann, vice president of research at Toronto-based think tank C.D. Howe Institute. “If the growth in mortgage credit and home-equity lines of credit doesn’t tame itself, we can expect the finance minister to respond,” he said.

‘Greater Security’

Ron Olson, president of the Canadian Home Builders’ Association, said he was pleased that Flaherty opted to leave mortgage insurance rules unchanged in the budget. The plan to enhance supervision of CMHC “brings greater security to housing markets,” Olson said by telephone last week.

The government should “hit the pause button” to take stock of the new rules put in place since the financial crisis, and whether such changes may have “unintended consequences,” Terry Campbell, president of the Canadian Bankers’ Association, said yesterday in a speech in Ottawa.

Canada’s banks have been ranked the soundest in the globe by the World Economic Forum in part because they avoided the subprime loans that crippled many U.S. lenders during the financial crisis.

To contact the reporters on this story: Andrew Mayeda in Ottawa at amayeda@bloomberg.net; Greg Quinn in Ottawa at gquinn1@bloomberg.net

To contact the editor responsible for this story: David Scanlan at dscanlan@bloomberg.ne

In other bank related news..share-holder activists are complaining that Bank CEO pay is too high. The 'going rate' seems to be $7M for a small bank and $10-15M for a big bank. The response is that they are many other CEO's being paid a lot more.

HERE os the list FWIW. You will have to scroll across to get to the total. No one's starving, that's for sure.