Better late than never...

The announcement from Flaherty on home mortgages:

• Mortgage amortization periods will be reduced from 35 years to 30 years.
• The maximum amount Canadians can borrow to refinance their mortgages will be lowered from 90 per cent to 85 per cent of the value of their homes.
• The government will withdraw its insurance backing on lines of credit secured on homes, such as home equity lines of credit

You have to wonder why in God's name the government (ie us suckers) even got into insuring HELOCs (number 3)

These will not take effect until March 18th so bank loan officers can squeeze a few more people over the line.

BTW the last changes in lowered max amortization from 40 to 35 and max refinance to 90 from 95%. It really didn't have much of an effect on housing prices, so I don't have much hope for this either. Now shuttering the CMHC or taxing 'empty homes' would have a bigger effect, but I wont hold out hope for that.

Anyway it is a start- but of course it is always better NOT to start a fire than to try and put it out. Remember that for next time Mr F.

Few quick things

1) Things have really ground to a halt in Whistler. How's 350 weeks of inventory...OK so it's only based on one week's sales, but we bears rarely get to gloat.

2) Egghead..how about reading about how Saint Reagan set the stage for the S and L debacle, and how he blew a huge hole in the US debt.

As to the current situation here's a well known well money manager who clearly states how current policies are helping the wealthy (stock-holders, CEO's, Wall Street types) get richer, while the Middle Class is getting squeezed by commodity speculation (probably Goldman again) and will soon face reduced services and less jobs due to municipal bankruptcies. You know all those unnecessary jobs like firemen and cops and garbage collectors..I am sure we will see it come here too.

Ok folks we should see listings start rising as we head into Feb. The list/sales will be our first hint that the trend is chnaging here as it has in the Ok and Whistler.

Going to be out of town for a couple of weeks.

Larry Yatter has the December average prices, which are skewed by the low volume.

See you for some dissection of numbers in mid-January.

BTW- I am really getting to like Ben's site. We share the same economic outlook- and of course we could both be very wrong :)

Meanwhile wan't to read some good old angst and anger?

Have a Great one, lots of good food and good booze

End of month numbers for December will probably be pretty meaningless, since the listings and sales are so low -unless they are bearish in which case I will take my trumpet out :)

We will watch the list/sales in the new year and the price deductions.

I may start my regional scans again like I did late 2008, however that's only if it looks like we are starting the move down.

The one good thing we have in our favour, is that every Marc Carney and his dog is talking about the huge RE-driven debt load. That means the bozos probably WANT to see a RE correction and not try and derail it asap this time, like they did last time.

Was it not ever so that the worst catastrophes grow from the seeds of good intentions. We had a crisis in 2008/9 and the quickes,t easiest thing to do, was re-inflate RE. Hence they did it and now they regret it (though they wont admit it- just wag a finger at the borrowers).

The result is that Canadians, once a conservative bunch, have more debt now than the US. The architects of this calamity-in-making may have had good intentions, however they should also have the decency to admit a little mea culpa into the egg-nog.

See you all on the other side of 2011...

A quick post on the Canadian banks..

Firstly I am going to say something about them, I never thought I would- I am impressed. They are all barking at the Federal Government telling Flaherty to do something about the huge consumer debt and have suggested dropping mortgage durations or increasing down-payments.

Now it is a bit late. The horse of debt has already bolted, the bubble of housing is already super-inflated..but at least they have come to their senses. Can you imagine the hyenas on Wall Street ever asking for the gravy train to be stopped?? Of course not.

Anyway it is a start. The Federal Government has now heard from Carney (our own mini-bubble meister) and the Bank bosses to make them reign in lending. They cannot ignore it for much longer.

BTW- anyone notice that the Royal Bank has lost it's pristine rating. Why? Because of the Royal banks involvement in World-wide capital markets AKA gambling. What is it with bankers. A bunch of boring conservative folks who make great money from mortgage clipping and bank fees suddenly want to go to Vegas and blow the whole stack on the craps table.

They all do it.

They all hire these whiz kid traders, who are really just professional gamblers, playing with our money and when they lose, they lose big.

Like the Bank of Montreal did on gas!

When they take these huge losses I wonder if they ever go back to the heads of trading operations ($5 Million + a year) and say- " We want the bonuses back for the last ten years'. Of course not.

Anyway my purpose was not to knock our banks, but to offer them a little praise..NOW perhaps they will stop making those STUPID ads with a middle-aged couple taking equity out of their homes to travel around the world or buy a sail-boat. Maybe they can keep that equity so they (we) don't become even a bigger burden on the next (totally screwed) generation.

I am worried..

Lets put housing aside for a minute and lets look around us.

Everyone from the B of C to Bank economists have been sounding the alarm over the huge level of household debt. This debt is mostly related to inflated RE, either directly to purchase it, or to extract equity out of it for other expenditures.

Things could go sour very quickly.. and when they do it is VERY difficult to get out of the debt-death spiral. The US is dealing with a catastrophic situation, and if it gets any worse I worry about their civil society.

Alarmist talk?

How about 15 Million unemployed, and another 11 under-employed (ie moved from full-time to part-time).

How about 43 Million on food stamps - in the wealthiest economy in the world!

Hopefully we have seen some sort of bottom, but that bottom is a long way down from where we are.

Are we so insulated from our largest trading partner's fate? We were, we had solid banking practices, higher savings rate and lower debt. But the last few years were like Canada-gone-wild. We did exactly what the US did.

The best way to prevent a calamitous RE bubble bursting is to prevent it from happening in the first place! Forget Vancouver, even places like Saskatoon and Calgary had huge price rises even though there is huge swaths of flat land around them. Kinda reminds me of Vegas.

in case we think we are immune, here's what Stephen Jarislowsky said in a Globe and Mail interview, and he is a very wise head in the investing world:

Canada’s banks got high marks from the International Monetary Fund for escaping much of the carnage that ravaged U.S. and European financial institutions in the wake of the global financial crisis. Have they done enough to leverage that position?

Yes and no, but here’s the thing: In Canada the hardship still lies ahead. Our houses are still 20 to 30 per cent above normal levels, salaries are shrinking and a lot of Canadians are heavily indebted. There’s a lurking disaster, to the extent that you have reduction of purchasing power and we are just not saving hardly anything as a nation.

That’s pretty bearish.

I think things are going to get a hell of a lot worse. We still have a trade deficit today despite the fact that commodity prices are incredibly high.

I hope I’m wrong but I think Canada is on the edge of a lot of trouble.

....................

BTW- hat tip to this site which I am adding to my blog list.

When the BOC talks we should listen

I have never read such an anxious piece from them as their latest review. Even in the midst of the crisis they were not sounding such dire alarm bells.

Here's a few clips:

'The Bank judges that the risk of this environment jeopardizing financial stability in Canada in the near term is moderate; however, careful monitoring of risk-taking is essential so that any buildup of financial imbalances can be identified early '

'In Canada, with the growth rate of debt outpacing that of disposable income in recent years, the proportion of households with stretched financial positions that leave them vulnerable to an adverse shock has grown significantly. The risk is that a shock to economic conditions could be transmitted to the broader financial system through a deterioration in the credit quality of loans to households, which would prompt a tightening of credit conditions that could trigger a mutually reinforcing deterioration of real activity and financial stability. '

'The Bank judges that, overall, the risk of a system-wide disturbance arising from financial stress in the household sector is elevated and has edged higher since June. This vulnerability is unlikely to decline quickly, given projections of subdued growth in income '

'However, the vulnerability of the household sector has deepened, with the rate of growth of household debt continuing to exceed that of income.'

'The main domestic source of risk arises from the increasingly stretched financial position of Canadian households, which leaves them more vulnerable to adverse events '

'In Canada, the deteriorating financial position of the household sector requires vigilance. When taking on debt, households bear ultimate responsibility for ensuring that they will be able to service it in the future. It is also essential that financial institutions actively evaluate the risk sur- rounding households’ ability to service their debt over time. Authorities are co-operating closely and will continue to monitor the financial situation of the household sector.'

My comments:

So the are saying the same thing in several different ways, in a very short document. Consumers and households you are over-debted..damn over-debted. Your debt growth has no relation to your income growth (or lack of) and your ability to pay it!

Wouldn't have anything to do with your ZERO interest rate policy would it now??

Where is this huge debt coming from?= OVER-PRICED HOUSING.

Most of it is housing-related debt and equity withdrawal (you know all those radio ads for people wanting to lend you money on the last cent of equity you have in your house)

So what are they going to do about it??

Nada. Nothing. Zilch. We will just wring our hands and hope consumers do the right thing even though no-one but economists read our reports and actions are louder than words, but we ain't going to do a thing. Just worry about.

IDIOTS!