Thursday, February 19, 2009

Something stinks

I think it may be this lender's bottom, line.


Alternative lending, the class of lending that added to the mess in the US, and the class of lending that was only supposed to make up 5 per cent of the Canadian mortgage market, which according to Home Capital Group actually makes up 20 per cent, is shoring up the price drops.

No that wasn't an earthquake. It's just me shaking my head.
Confident that buyers are returning, Home Capital has begun tearing down the tighter restrictions it erected in the fall of 2007, as the credit crunch gathered force. "We have cautiously begun lending again," the CEO said.

A price decline in the order of between 12% and 15% year-over-year is Home Capital's tipping point. If the price has fallen within that range, the lender offers mortgages of up to 75% on uninsured mortgages.

Folks, we've heard it all. In January, the talking heads were telling us that activity was picking up. Then the sales numbers didn't support their talking points. Now we've got an alternative lender telling us their relaxed lending rules will build a new floor. Um, OK then.

What happens when you ask a lender who requires proof of income about what's happening out there on the street?

"Our sense is that the Canadian housing market will remain under pressure for most of this year," said Sal Guatieri, a senior economist at BMO Capital Markets.

"It's not just a question of affordability any longer because of lower prices [and] lower mortgage rates. That's not the issue.

"What is the issue is the recession, which appears to be deepening."

20 comments:

HouseHuntVictoria said...

When you use Home Capital's math, you can see that they have calculated a 42% to 45% overall price drop before they're risking their own money.

That actually makes them look conservative. I'm guessing they've built in a 10% cushion.

Anonymous said...

Let 'em lend... the surest way to self-destruction.

For them, and their victims.

Reid said...

California Housing Stats
Dec 08 Sales Volume 544,580 units
Dec 07 Sales Volume 294,520 units
Increase in Sales 85%

Dec 08 Medium Price $281,100
Dec 07 Medium Price $480,820
Price Reduction -41.5%

Message here is that house sales are actually picking up strong momentum in California, but it only occurred once prices finally took a steep drop. For the period between late 2006 and the end of 2007, prices did not drop off as bad, but sales volumes were dismal.

Victoria is currently in the same state as California was in 2007. But further time and job losses will be required to drive to steep price reductions, but it should happen (may have to wait until 2010).

People in California also felt they lived in paradise, that everyone wanted to live there and that home prices would never drop.

Anonymous said...

Alberta slips into recession


EDMONTON — Falling stock prices and energy revenues have hit Alberta hard, and the debt-free province is now expected to post a $1-billion deficit – its first budget shortfall in 15 years.

Anonymous said...

Alberta is facing a recession and 15,000 lost jobs, Finance Minister Iris Evans announced Thursday in her latest economic update

Anonymous said...

Albertans will come to Victoria to buy houses now that they have the time to open houses, and activity will be picking up quickly.

Realtors, morgage brokers be prepared, your office soon will be flooded by these buyers, your phone will ring to the ceiling, you will smile to fall your teeth off.

Anonymous said...

I agree about Alberta. This downturn will mean brisk business for Victoria realtors as Albertans flee economic turmoil for the stability provided by this isolated island. That combined with the olympics and the shortage of land will lead Victoria's real estate market to new heights. Always use a professional realtard when buying or selling a home.

Anonymous said...

Oh, i forgot about the Ontorans, they lost their manufacture and auto jobs, they don't want to stay in the cold, they will fly to Victoria to buy a big house and enjoy life.

So that means activity will pick up more quickly for realtos and brokers. We may will have a shortage of realtors and brokers.

Am i dreaming? daylight dreaming?

Anonymous said...

New poll from $%#@! shows that 99.99% of people living outside of Victoria who lost their job are planing to move to Victoria and buy a house within 6 months, 99.99% of those coming want to spend about 1.0099 million; the whole North America RE will go down except for Victoria becuase of a shortage of "education and knowledge" in the city.

Anonymous said...

I think I've found the best real estate deal ever. Check it out here :
http://www.usedvictoria.com/classified-ad/7997666. Now you can buy housing options! I wonder if other derivatives realtors will dream up over the comning months!

omc said...

When is a good time to buy?

I have been very fortunate to have knowledgable people to get opinions from on the market in the past. One of the people who made sure I steered clear of the market 2 years ago gave me a bit of an eye opener yesterday. He made a quip of"your not thinking of buying in the next 2 years are you". His opinion is that the government will run a massive deficit on the olympics and after the cameras all go away, our right wing governement will hack and slash our civil servants. He also doesn't have warm and fuzzies on the bailouts having traction, so coupled with some bigger long term job loses this could be the bottom.

I should add, he isn't just a guy with an opinion he has an MBA from queens and he is correct more than 50% of the time. :)

what do you think?

Anonymous said...

I too think we need to be cautious about how this downturn will affect our province, cities and communities. Southern California already is seeing empty houses, empty strip malls, tax increases etc. Much is from homeowners no longer/unable to pay their property and income taxes. Unable to pay teacher, policemen, firemen salaries. Could it happen in little ol' Victoria??

Yet in spite of all this activity south of us, people here refuse to believe that we'll see nothing more than a minor downturn. LOL

Muriel said...

For those still interested in how the rental market is doing, here's an update on a suite in a very nice Fairfield neighbourhood.

Executive suite in Fairfield

This landlord has been trying to rent his renovated "luxury" 3bdm since mid-December, with no takers so far. His initial asking price was $2,200 and he's now down to $1,750. I think that March, April and May are the worst times to find good tenants in Victoria as so many students leave and free up their spaces.

roger said...

Dow ends at lowest close in more than 6 years

omc said...


What we knew was coming

Dumb Canuck said...

Reid - a foreclosure actually counts as a sale in California...

patriotz said...

Much is from homeowners no longer/unable to pay their property and income taxes. Unable to pay teacher, policemen, firemen salaries. Could it happen in little ol' Victoria??

No. Property taxes in California are a fixed % of assessment. If the assessment falls, taxes fall.

In BC, taxes are what the municipality decides to spend. Regardless of assessments.

Victoria will keep paying its policeman and firemen and levy property taxes to do so. If you are unable or unwilling to pay your property taxes, the city will sell the property for back taxes. End of story.

Mr.4AM said...

Let the record show that we've officially broken 7500 on the Dow downwards (I've been stating 7500 wasn't the bottom) and Gold has gone up about 30% since I announced it was a buy ~Sept 08.

These 'predictions' do not prove that I'm a good analyst. It proves that the analysts I read know what they are talking about. Just like many on here trust Roger's charts & JJ's commentaries. I'm just an amateur.

Cheers,
Mr.4AM

Mr.4AM said...

Anon 4:19PM,

You know this is a scam when you read this part:

On "options" to buy a house.
"The Advantage:
During this three year option-to-buy period:
1. If the house price goes down: You don’t have to exercise the option-to-buy at the predetermined price and you can buy any other available house in the complex of your choice at the lower price.
"


So it's not like you have the option to truly walk away, you MUST buy a house within the complex where THEY control the prices of the houses. So they could offer the other houses in the complex $1 lower than the house you purchased the 'option' to buy, and they would be fulfilling their obligation to give you the option to buy any other available house in the complex of your choice at the lower (-$1) price.

Good deal! NOT.

Mr.4AM

Anonymous said...

Let the record show that when I was in Vegas and bet black I won at roulette. Not that I'm a good gambler, it's just that I had my lucky coin to flip!