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.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.
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.
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."