Tag Archive for "Vancouver Mortgage Broker" - – Bruce Coleman, Senior Vancouver Mortgage Broker

31 Jul

2014

Alycia

Freedom 58? How Canadians are shaving thousands off the cost of their mortgage

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TORONTO — A new survey says Canadians, on average, expect to be mortgage-free by age 58, one year later than in a similar poll a year ago.

How this man plans to be mortgage free by age 31

This 29-year-old pension analyst is $130,000 away from paying off his $425,000 home in Toronto, without money from parents or the lotto. Find out how But the survey, conducted for CIBC by Angus Reid, found some big discrepancies across the country.

For example, homeowners in British Columbia thought they wouldn’t be able to pay off their mortgages until they hit 66, while those in Alberta expected to be mortgage-free more than a decade earlier at 55. The survey also found that just over half of those polled were taking advantage of the current low interest rate environment to pay down their mortgages faster.

Fifty-five percent said they were putting in extra effort into repaying their mortgages, although that was down from 68% last year.

Related Canadians’ household debt worries ease as mortgage borrowing slows in May: RBC Savings crippled by kids’ illnesses, parents in their late 50s struggle to find a way to retire and pay off $287,000 mortgage How to pay $67,000 of debt in 3 years and save for a house and retirement CIBC says even small efforts can lead to big savings for homeowners in the long run.

For example, someone paying 4.99% interest on a $250,000 mortgage with 25-year amortization can expect to save nearly $35,000 of interest if they add $147 to their $1,453 monthly payments.

The same homeowner can save as much as $30,000 on interest if they make $726 payments every two weeks, instead of waiting until the end of the month to make a payment.

The bank pointed out that even making a lump sum payment every year — for instance, putting the average $1,600 tax refund towards the mortgage — would shave off $33,103 of interest.

“Employing one or more of these strategies does take some planning and discipline,” said Barry Gollom, vice-president of secured lending and product policy at CIBC.

“If becoming mortgage-free sooner is something you want to achieve, it’s important to look at your mortgage as part of your overall financial picture and to balance your mortgage payment plan against your other goals.”

Of those paying off their mortgages quicker than necessary, 32% said they were making payments more often, 28% were increasing the amount they pay while 18% said they had made either an additional prepayment or a lump sump payment.

Beyond Alberta and British Columbia, the survey found the average age respondents expected to be mortgage-free ranged from 56 years in Quebec to 57 years in Atlantic Canada and Ontario and 58 years in Manitoba and Saskatchewan.

The online poll was conducted by Angus Reid Forum with 1,509 Canadian adults between May 21 and May 22.

The polling industry’s professional body, the Marketing Research and Intelligence Association, says online surveys cannot be assigned a margin of error as they are not a random sample and therefore are not necessarily representative of the whole population.

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30 Jul

2014

Alycia

Canada’s top court declines to hear Toronto realtor case appeal

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Canada’s top court said it won’t hear an appeal of a case on whether Toronto’s main realtor group must give wider access to their historical price data.

The Ottawa-based Supreme Court published the decision on its website Thursday.

The Toronto Real Estate Board blocks its 35,000 members from publishing sale prices on their internal websites, according to a summary of the case from the court’s website, a policy challenged by the federal Competition Commissioner.

The realtor group won its first case at a tribunal before a federal appeals court ordered a second hearing. TREB then asked the Supreme Court to review the case. Bloomberg.com

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29 Jul

2014

Alycia

Sharp rebound in buyer confidence fuels Toronto condo recovery, says Urbanation

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The country’s largest condominium market has fully recovered and is breaking new ground, according to a Toronto research firm.

Urbanation Inc. says during the second quarter Toronto passed a new milestone with more than 100,000 condo dwellings in active development in the census metropolitan area. Of the 105,027 units in the pre-construction, under construction and occupancy phases, 18,744 remain unsold.

The firm notes in a release out Friday that’s “above historical averages but down 3% from a year earlier.”

The new condo market has performed well above expectations in the first half of the year Shaun Hildebrand, Urbanation’s senior vice-president, says there have been plenty of incentives in the marketplace for existing inventory and some new condo openings are proving more attractive to buyers.

“The new condo market has performed well above expectations in the first half of the year, reflecting a sharp rebound in buyer confidence,” said Mr. Hildebrand.

The 5,992 condo apartments sold in the second quarter were the third highest volume for that time of the year with only 2007 and 2011 having a better record for sales for the period. Sales were up 56% from the post-recession low reached in 2013.

Related Housing market skewed by handful of hot cities, Canada Guaranty CEO says Canadian home sales rise 0.8% to highest level in four years Ratings agency Fitch calls for more government action in ‘overvalued’ Canadian housing market The 12-month total for new condo sales was 18,463 and Urbanation says that is in line with the 10-year annual average.

Despite the boost in sales, prices have only moved up 2.8% from a year ago with Urbanation’ index showing an average sale price of $554 per square foot in the second quarter. Prices of unsold inventory climbed 1% to an average of $570 per square foot.

While sales have heated up, prices have remained in check due to competitive supply pressures “While sales have heated up, prices have remained in check due to competitive supply pressures and an absence of short-term speculation on the part of buyers,” said Mr. Hildebrand.

The market for existing condominiums has been hotter with resale sales hitting a record of 5,238 in the second quarter, up 12% from a year ago. New listings also hit a new high with 11,246 offered for sale in the second quarter, down 10% from a year ago.

Fewer new listings than sales led to tighter market conditions with the sales-to-listings ratio rising to 47% — a level Urbanation says is below the 50% characterized as a balanced market.

Prices for existing condo apartments jumped 3.4% in second quarter form a year ago but that was still good enough to set a record high of $427 per square foot for an existing condo.

Twitter.com/dustywallet

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28 Jul

2014

Alycia

CMHC turns up scrutiny of condo investors as concerns of overheated market grow

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Canada’s housing agency is set to publish results of a Toronto and Vancouver condominium-owner survey as it seeks to address economist and policy maker concern that not enough is known about what’s driving price gains, documents show.

Canada Mortgage & Housing Corp. surveyed condo investors — those who purchased at least one condo that isn’t the owner’s primary residence — in August and September 2013, according to documents obtained by Bloomberg through an Access to Information request. Most of the content, including the number of people Ottawa-based CMHC contacted, the survey questions and the results, was redacted.

Calls are growing louder for more detail about who’s investing in the nation’s condo market, including how much is owned by foreigners, and what the risks are. Policy makers have warned for the past half decade a bubble may be forming in Canadian real estate, and some analysts have said prices are as much as 20% overvalued.

Related Sharp rebound in buyer confidence fuels Toronto condo recovery, says Urbanation Housing market skewed by handful of hot cities, Canada Guaranty CEO says Homebuilding rebounds quicker than expected with 35% jump in condos and apartments The lack of condo-ownership data in Canada “is a shortcoming,” Sal Guatieri, senior economist in Toronto for Bank of Montreal, said by phone July 22. “The more data, the better the quality of the data, the better the policy making.”

CMHC’s Condominium Owners Survey will be “factual and provides a descriptive profile of condominium investors,” the documents show. The agency expects to release the results of its survey, which doesn’t give an estimate of the share of foreign and corporate investors, in early August, according to a July 25 e-mail from spokesman Charles Sauriol.

Lowest Rates

National home sales reached the highest level in four years in June and prices in Toronto and Vancouver are up 12% and 29% on the year, a realtor report this month showed. Historically-low mortgage rates are adding momentum, and the Bank of Canada has kept its benchmark policy rate at 1% since 2010.

The survey to be released in August is CMHC’s second attempt. The agency conducted a telephone survey of Toronto and Vancouver condo investors in August 2012 in response to “industry concerns about the extent and nature of condominium investment and its sustainability,” according to a mostly- redacted August 2012 CMHC board presentation. The survey intended to determine what investors planned to do with their units, how long they intended to hold them, what would motivate them to sell, how much they put down and the source of the downpayment.

That survey wasn’t publicly released because it “didn’t produce results that were reliable enough,” CMHC’s Sauriol said in his July 25 e-mail.

Foreign Investment

The housing agency is monitoring foreign investment in real estate by tracking land registry data, hosting investor round tables and conducting surveys into vacancy rates and rents, according to the 2012 board presentation.

“There is no comprehensive data source of foreign investors in the Canadian housing market,” CMHC Interim Chief Executive Officer Douglas Stewart said in an Aug. 21, 2013 memo to Canada’s Employment Minister Jason Kenney. “Although some estimates can be gleaned from some municipal land registries, those estimates are not reliable.”

Stewart’s memo was in response to Kenney’s questions from a CMHC briefing about foreign investment in the Canadian housing market, the documents show. Kenney also asked about the impacts of changes to the Immigrant Investor Program in Vancouver and Australia’s foreign investment policy.

Investor Roundtable

Participants at a Toronto condo investor roundtable that CMHC hosted in March 2012 cited unidentified brokers who estimated foreigners with no ties to Toronto account for about 2% to 3% of total condo purchases in the city, according to meeting minutes that don’t include participant names or affiliations. The minutes, included with the other documents obtained by Bloomberg, had already been made public.

Fifteen percent of the stock managed by rental management companies is owned by foreigners, based on filings of non-resident tax forms, according to the roundtable minutes.

Demand for Toronto condominiums pushed prices to new highs in the second quarter. The average price rose 2.8% from a year earlier to a record $554 per square foot, even as the number of high-rise homes in the pre-construction, under construction and occupancy phases reached a high of 105,027 units in the city, Urbanation Inc., a Toronto-based consulting company, reported July 25.

Condominiums account for more than 1.6 million Canadian households, or about 12%, and more than half of those are located in the three largest markets Toronto, Vancouver and Montreal, according to Statistics Canada data.

“The gap between the importance of the real-estate market to the economy and the lack of publicly available information on it is mind-boggling,” Benjamin Tal, deputy chief economist at Canadian Imperial Bank of Commerce, wrote in an April note to clients. “What is the share of foreign investors in the condominium market?”

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24 Jul

2014

Alycia

Lenders Worries – Consult with a Vancouver Mortgage Broker

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Not many lenders go on record forecasting a housing bubble, but what they say in private surveys is another matter.

FICO, a consumer analytics firm, released poll results on Tuesday that show just how concerned lenders are about housing overvaluation. But its data, which was picked up by multiple media outlets, featured responses primarily from U.S. respondents. The opinions of Canadian lenders, alone, haven’t been fully reported.

Today, however, we got our hands on Canadian-specific data, and it revealed some surprising expectations.

FICO surveyed 54 risk managers in the Canadian lending industry, and asked the following questions:

1) “Looking at the industry as a whole, over the next six months, do you expect the supply of credit for residential mortgages to”

Fall short of demand: 35% (said yes)
Exceed demand: 5.5% (said yes)
Meet demand: 59% (said yes)

Most lenders expect credit to simply meet consumer demand. But among those risk managers who didn’t, 19 out of 22 said credit availability would be insufficient for the remainder of this year. Over the next six months, the implications are that we could see a further growing real estate market, regulatory or mortgage liquidity constraints, and/or the possibility of smaller mortgage discounts.

2) “Looking at the industry as a whole, over the next six months, do you expect the level of residential mortgage delinquencies (of 90 days or more) to”

Increase: 37%
Decrease: 5.5%
Stay about the same: 55%

Of those expecting a change, 20 out of 23 risk managers said delinquencies would increase. According to FICO, 60% said that a high debt-to-income ratio is its biggest concern when underwriting a mortgage/loan.

The questions are, is this concern warranted and, if so, will lenders be proactive and keep lending criteria tighter than normal?

3) “Looking at the industry as a whole, over the next six months, do you expect the level of home equity line delinquencies to”

Increase: 38.8%
Decrease: 11%
Stay about the same: 50%

***********

FICO also asked, “If you are involved with residential mortgage lending, are you concerned that an unsustainable real estate bubble is inflating?”

A wide majority (more than 2 out of 3, or 68%) said that, yes, they were concerned about a growing bubble, versus 32% who expressed no such worries. Canadians’ degree of unease was notably higher than that of American respondents, 48% of whom expressed concern about overvaluation in the U.S.

This poll comes as home prices sit at or near record highs in most big metro areas. That’s despite the Finance Department applying the brakes with mortgage rule after mortgage rule.

Rob McLister, CMT (email)

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23 Jul

2014

Alycia

Condo glass panels may look great, but you’ll pay more for heat and AC

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Printed with permission from Dan Barnabic, author of the Condo Bible for Canadians.

“What does the future hold for condos and how long will they last?” These are by far the questions I am asked most often by condo buyers and owners alike.

Life Span of Condo Building Components

Condo buildings consist of thousands of individual components. Over time, due to wear and tear, those components need repairs and replacements. Knowing how old the complex is and when certain components were last repaired or replaced will give you an idea of when they’ll likely need maintenance and replacements again.

The chart at the bottom of this article shows operational life expectancies of major mechanical components of a condo complex over the years. From the sea of available data and through consultation with building experts, I created this chart which I believe provides a fair reflection of maintenance and replacement costs over time to an average high-rise condo building.

The first major component that will need maintenance and replacement is the roof of the complex. It will usually last up to about 10 years, after which it will require maintenance and replacement by the time it reaches 15 to 18 years.

Plumbing/piping will probably be the last as quality and durability has improved over the years, so you can expect it to remain operational for about 50 years. From thereon, it will require maintenance and eventual replacement as well. Standard size windows may also last about 50 years, requiring occasional maintenance such as replacement of screens and sealant. Complexes built of all glass windows need to be addressed in more detail.

Bear in mind that maintenance and repairs to the inside of the individual unit are the direct responsibility of the unit owner. Monthly maintenance fees do not cover anything inside the condo unit. Appliances, heating, air-conditioning, and electrical fixtures inside the unit have to be maintained and eventually replaced by the unit owner.

All Glass Windows

Because of their appeal, facades of new condo buildings lately have been transforming into glass, often extending from floor to ceiling of each condo unit. It gives condos a more attractive look and is a great selling feature, but building experts have known for quite some time that today’s glass-walled structures are less energy efficient than the stone and concrete buildings that were put up 40 or 50 years ago.

Indeed, as energy costs climb, glass towers may become the “pariah” buildings of the future. University of Waterloo Professor John Straub (who wrote a noteworthy paper called Can highly glazed building facades be green, was quoted as saying that “With these buildings, both skin and the mechanical systems are going to have to be redone in a 25-year time frame. The concrete structure will be there for a long time but in 20, 25 years time, we are going to see a lot of scaffolding on the outside of the buildings to replace the glazing, sealants and the glass itself.”

Another scientist, Ted Kesik at the John H. Daniels Faculty of Architecture at the University of Toronto, warns that as energy costs climb, the costs of heating and cooling glass towers will increase monthly fees. He wrote a paper called The Glass Condo Conundrum, on the potential liabilities of glass towers. These experts suggest that the maintenance costs of glass skinned towers will skyrocket in 25 years time as the buildings age. With no insulation values, apart from a half inch of glass between two panels, windows will begin to fog up and the costs of replacing entire walls of glass will be prohibitive on high-rise structures that can only be accessed from swing states.

Some experts go so far as to predict that replacing the all-glass outer layers of buildings may become necessary as early as 15 to 20 years from the day that the condo is built, and cost as much as $80,000 per unit. In short, what seems very attractive and appealing to condo buyers today may come to haunt them in the not-so-distant future.

Need for Cyclical Repairs and Replacements

As seen from the chart at the bottom of the article, for the condo building to remain functional, it requires cyclical maintenance and replacement of its major components over time. By the time a condo building reaches 40 to 50 years of age it will have gone through several partial or complete retrofits, likely in stages. Properly governed and managed condo complexes maintain amortization funds – the necessary accumulation of monies over time for replacements of the common elements without undue financial hardships.

Looking into a more distant future, more frequent and repetitive replacements of the vital common elements will give rise to higher maintenance fees in older complexes. In some cases, they will rise to the point of becoming unaffordable to a majority of the unit owners. In extreme circumstances, some condo buildings may end up being wound down either voluntarily, by the unit owners, or through insolvency proceedings commenced by creditors.

The problem of not being able to maintain adequate amortization replacement funds may arise during times of economic slowdowns. Unit owners may experience employment losses rendering them incapable of contributing to necessary fiscal obligations of their condo complex.

This problem may escalate dramatically in poorly governed and/or mismanaged complexes. History shows that buying a condo unit with a small or no down payment presents a huge risk to financially weak unit owners who may lose their units during economic hardships. If the complex is composed of many such unit owners, the whole complex may become underfunded and unable to carry on with the repairs and replacements of its vital elements.

It is for these reasons that every condo unit owner should be fully apprised of their condo complexes’ financial well-being. The take-it-for-granted assumption that, when you buy into a condo complex, others will take (good) care of its governance and property management, is dead wrong. Every condo unit owner is strongly advised to actively participate in the day-to-day running of their condo complex by closely monitoring and contributing their time when necessary, to all the facets of its operation.

As condos have a finite life span, at least as economic factors relative to their maintenance costs are concerned, the idea is to buy into newer complexes, where their near future expenses and therefore maintenance fees are prognosticated more accurately.

The same logic applies when selling a unit. Don’t wait until maintenance fees become too high. If you do, chances are you are not going to get your unit sold.

The physical life-span

When it comes to physical longevity, the same formula applies to condos as to other high rises, including apartment buildings. The properly-funded and prudently-managed buildings may have a life-span of over a hundred years, or even more. The poorly run, neglected and mismanaged buildings usually end up going down sooner.

Their physical life span depends on quality of governance, prudence of management policies, and the ability of owners to regularly look after their expenses.

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20 Jul

2014

Alycia

Household debt worries ease as pace of mortgage borrowing slows in May

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Royal Bank says Canadians have been slowing down the amount of debt they are taking on to buy real estate, easing concerns about household vulnerability.

The RBC paper notes that overall household debt accumulation remained flat-lined at 4.2 per cent growth in May, about the same level as the previous three months.

Outstanding mortgage debt stood at $1.23-trillion as the annualized growth slowed slightly to five per cent from 5.1 per cent in April.

But households increased their pace of non-mortgage borrowing, the bank says, to 2.2 per cent from two per cent in April.

RBC says the steady pace of debt accumulation overall should give some comfort to the Bank of Canada, which has called household debt the No. 1 risk to the financial system and economy.

With the housing market expected to moderate further, the vulnerability posed by overly indebted households is easing, RBC says, clearing the way for the Bank of Canada to move toward higher interest rates by mid-2015.

Meanwhile, business borrowing continued to strengthen in May, with short-term debt rising to 10.6 per cent from 9.6 in April.

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20 Jul

2014

Alycia

Fitch calls for more government action in ‘overvalued’ Canadian housing market

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The Canadian housing market is 20% overvalued and needs another round of government regulations to cool it, credit agency Fitch Ratings said Monday.

The statement is sure to add more fuel to the fire about what’s next for the next Canadian housing market which has seen a rebound in sales after a slow winter and new records for price set every month.

Fitch points to numbers from Canadian Real Estate Association which show home prices grew 7.1% in May on a year over year basis.

“According to Fitch’s sustainable home price model, which measures home prices relative to long-term fundamentals, Canadian home prices remain approximately 20% overvalued in real terms,” the Chicago-based company said in its statement.

It noted building permits have picked up in recent months along with sales, supported by historically low interest rates and those factors are driving up affordability.

Canadian home prices remain approximately 20% overvalued in real terms

Fitch also said household debt to disposable income, which reached a record high of 164.1% in the third quarter of 2013 before declining the next two quarters, is making the market “more susceptible” to shocks from higher unemployment or interest rate increases.

The federal government has intervened four times to slow the housing market, among the measures being shortening amortization lengths from 40 years to 25 years. It also tightened the rules around eligibility for government-backed mortgage insurance.

Fitch wants more regulation. “The long-term impacts remain unclear, and policy makers may be required to take additional steps over the short term to engineer a soft landing,” the agency said.

But the company’s statement comes as new data suggests the pace of house price gains are slowing on a national basis despite the fact there are still cities that continue to show price growth.

“With the housing market having now shaken off the winter blues, price are continuing to rise at a solid pace. That said, the continued deceleration in price growth on a year-over-year basis may be an indication that the Canadian housing market is becoming more balanced,” said Toronto-Dominion Bank economist Randall Bartlett.

Canadian consumers appear equally unconcerned about a major correction happening in the market, based on a new survey.

A poll released by Bloomberg and Nanos Research Group shows Canadians have not been this optimistic about the housing market since 2008. The survey found 47% of Canadians predict home prices will rise over the next six months versus 11.6% who said they would drop — the widest gap between the two numbers since 2009.

Long-time housing bear David Madani, an economist with Capital Economics, said those hopes may be unfounded.
He said prices typically move up over the summer season and low interest rates could support further short-term growth in the market.

“The recent declines in existing home sales-to-listings ratios in these markets suggest that further moderation, or outright declines, in the annual rate are likely in the coming months,” said Mr. Madani. “Given the recent drop in mortgage costs, a pick-up in home sales over the next few months might delay this price weakness until next year. But we still believe that the housing market is headed for a major correction over the longer term.”

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19 Jul

2014

Alycia

Housing market skewed by handful of hot cities, Canada Guaranty CEO says – Consult with a Vancouver Mortgage Broker

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Balanced. That’s the way the head of one of Canada’s two private mortgage default insurers sees the housing market today.

A day doesn’t go buy without some commentator or some media outlet suggesting the housing market is going to crash. But Andy Charles, the chief executive of Canada Guaranty, says much of that view is based on a national average skewed by a handful of hot markets.

“I think we need to keep in mind what is driving house price increases in Canada right now. It’s largely three cities, Toronto, Calgary and Vancouver,” said Mr. Charles. “If you look to eastern Canada, we are seeing price decreases. I hesitate to look at Canada in one national framework when it’s three cities driving the increase.”

Statistics released by the Canadian Real Estate Association bear that out. Nationally, prices rose 6.9% in June from a year ago to $413,215 but if you look at the $21.2-billion in activity for the month, almost half can be attributed to the big three cities he’s talking about. Those cities are driving up the national average.

The steps the Department of Finance has taken over the years have been prudent and resulted in a much stronger marketplace

Mr. Charles agreed to sit down with the Financial Post and discuss the state of the market in the face of ongoing changes at his major rival, Canada Mortgage and Housing Corp. Mortgage default insurance, which protects the bank in the event you can’t pay, is something every Canadian homeowner with less than a 20% down payment must have.

This week, Chicago-based credit agency Fitch Ratings jumped into the fray, saying the Canadian housing market was 20% overvalued and needed even more government regulation despite four previous moves by Ottawa to cool housing off.

Mr. Charles doesn’t believe the federal government needs to do any more at this point. “The steps the Department of Finance has taken over the years have been prudent and resulted in a much stronger marketplace,” he says.

The chief executive says mortgage insurers are keeping a close eye on the market and people they are insuring to make sure they can stay in their homes in a rising interest rate environment, should that play out.

“Our business is driven by the unemployment rate. People are generally going to stay in their homes, if they are working,” says Mr. Charles. “The unemployment rate is what we monitor carefully and is the significant indicator for our business.”

Some analysts suggest Canada Guaranty has secured as much as 13% of the mortgage default insurance market in the country in the four years since the Ontario Teachers’ Pension Plan Board took it over in 2010 and rebranded it. The share could jump with the federal government signalling it plans to scale back the role of CMHC in the marketplace.

“The changes at CMHC to date have been relatively modest, however the direction of CMHC that is evolving around reducing its exposure to the housing market is obviously a net positive for the private sector competitors,” said Mr. Charles. “CMHC has been a very positive contributor to our industry over the the last 60 years. It just doesn’t need to be the dominate player going forward, particularly when you have well-capitalized private players willing to prudently take on the housing market risk.”

Q. At one point there were as many as six mortgage default insurers either in the Canadian market or planning to enter. Your company was originally owned by American International Group, Inc. before the group led by Teachers’ bought the company out. There are now only three players. Could we see more competition in the future?

A. When the financial crisis hit in the U.S., there was a lot of pressure to repatriate the capital from the Canadian marketplace. I’m not aware of any new competitors entering the marketplace.

Q. You are controlled by one of Canada’s largest pension funds. What has that meant to you in terms of market share?

A. We’ve been able to grow being 100% Canadian-owned with the sponsorship of the Ontario Teachers’ Pension Plan and our ownership team, overall we have been well-received by the marketplace. It is a key consideration, having well-known, well regarded ownership.

Q. How much competition is there really in the market? There are some things you insure that CMHC doesn’t, like second homes. But some might point to the fact CMHC increased premiums in May and private competitors were pretty quick to pass on the exact same increase.

A. It’s a fair comment. But you will always see nuances. If you think about it, the government of Canada, through a sandbox, really dictates the type of product offerings in the marketplace. You won’t see a lot of differentiation. You will continue to see some differentiation on some on the peripheral products. The larger question is how does CMHC move from being a dominant player to just a player in the space?

Q. The government backs CMHC insured mortgages 100% but only 90% for the two private companies, how important is that 10 percentage point gap?

A. I believe it’s less of a factor today. There are a number of reasons. One of them is the strength of the ownership team at Canada Guaranty. But the level of capital required [for insured mortgages] continues to increase, so there’s that buffer which is healthy for the housing market. All three mortgage insurers are now regulated by [Office of the Superintendent of Financial Institutions].

Q. Can you ever see a world where the government gets completely out of backing mortgage default insurance for companies like yours?

A. It would be difficult to fathom (as long as the CMHC is still in the marketplace with its government backing). The point I would emphasize is if the private sector competitors take on more of the risk, you are putting private capital in play before the government backstop can be triggered. That’s the important nuance to emphasize, it’s putting private capital at risk instead of public capital.

Q. Can you see mortgage insurance evolving into a more risk-based system where your premium is based more on individual risk factors like your credit score?

A. I don’t anticipate any movement in that direction in the short run. With CMHC being the dominant player, it becomes difficult to have price differentiation in the marketplace.

Illustration by National Post Graphics

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17 Jul

2014

Alycia

Price surge fuels Canadians’ optimism about housing market to highest since before financial crisis – Consult with a Vancouver Mortgage Broker

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Canadians are the most optimistic about the country’s real estate market in a more than six years as prices reignite.

Secret path revealed for China billions buying pricey homes in Vancouver, N.Y., Sydney

Allegations of Bank of China money-laundering has uncovered a scheme to sidestep currency restrictions that is fuelling property booms in Canada, U.S. and Australia. Find out more

The share of Canadians predicting higher home prices over the next six months rose to 47% last week, according to polling by Bloomberg and Nanos Research Group, the highest level since the survey began in 2008. That figure has risen 10 percentage points since April.

Get the latest data on Canada’s housing market

The data suggest Canadians are brushing off forecasts of a slowdown in a market some analysts have warned is unsustainable. Home prices rose 8.1% through the first five months of the year, according to the Canadian Real Estate Association, compared with a 1.3% gain over the same period in 2013, and prices may be poised for further gains if expectations for rising home values continue to whet demand.

The behavior of buyers today would be “completely ridiculous, unless there’s an implicit assumption that there’s going to be capital gains involved, and that’s a mentality that you see in these long upswings in prices,” Ben Rabidoux, president of North Cove Advisors Inc., a research firm that specializes in housing, said in a phone interview last week.

The survey, part of polling for the Bloomberg Nanos Canadian Confidence Index, is based on phone interviews with 1,000 people, using a four-week rolling average of 250 respondents. The results are accurate to within 3.1 percentage points, 19 times out of 20. The share of Canadians who expect a drop in real estate prices was 11.6%. At 35.4 percentage points, the difference between optimists and pessimists is the widest since 2009.

The housing market is rebounding from a lull this winter that saw colder-than-usual temperatures put a temporary chill on construction activity and home sales. Buyers are also taking advantage of historically low borrowing costs, with the Bank of Canada over the past year downplaying the likelihood of interest rate increases and lenders this spring lowering five-year fixed mortgage rates to below three%.

Bank Stocks

Regulatory efforts, meanwhile, to keep overly indebted borrowers out of the market have failed to quell gains. A government decision in 2012 to tighten qualification requirements for mortgages led to a temporary slowdown later that year, only to see the market recover in 2013.

Investors have noticed. Canadian lenders, which hold more than C$1 trillion worth of mortgages, have been among the world’s best performers since the middle of 2013. The Standard & Poor’s/TSX Composite Banks Industry Group Index has gained about 22% in U.S.-dollar terms since June 3, 2013, compared with about 5% for the Bloomberg World Banks Index.

Canada’s six largest banks are among the top 10 stock performers among North American banks over the past year, led by Toronto-Dominion Bank’s 30% gain.

The surge in prices, coupled with household debt levels near record highs, has prompted analysts including Dan Werner, an equity analyst at Morningstar Inc., to warn of a retreat.

Within the next five years a correction in Canada is “almost inevitable,” Werner said in a note to investors this month. Prices could fall 25% to 30%, he said.

Biggest Risk

Even at the Bank of Canada, where policy makers have said they see signs that household debt is stabilizing, the issue is still seen as the biggest risk to the Canadian economy.

Outside of a few small corrections, Canadian home prices have been on a steady ascent more than 15 years. They are up 77% over the past 10 years, according to the Teranet-National Bank Home Price Index, roughly 10 times the pace of U.S. housing, according to the seasonally adjusted S&P/Case- Shiller composite-20 home price index.
Bloomberg.com

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