IMF wakes up: Canadians shouldn't socialize mortgages

Is this a case of stupid housing policy begets stoopid housing valuations?

The IMF, big bureaucracy accountable to no one that it is, in its infinite wisdom points out that Canadian home prices *may* be out of whack with reality given that people who pay taxes to the government of Canada just also happen to be on the hook for a lot of the day to day mortgage lending decisions of the mortgage industry in Canada (give or take a lot here or a lot there depending on the government oversight of the day, or not).

The IMF, of course, says Canada's home prices are the most over-valued anywhere in the world.

Cheap mortgage rates and banks' tendency to give money to folks they otherwise wouldn't because Joe Public will bail them out regardless has a way to do that to a market.

Perhaps the most salient observation in the IMF's pontification: “We suspect the fact that banks may benefit from government-backed insurance on mortgages (…) it sort of makes it easier for banks to do mortgages than other kinds of lending which presumably, we think, is going to be more useful for the real economy.”

It's not like Canada wasn't warned before... like in 2008 by an anonymous schlep living in his parent's basement in Victoria because, despite an above average household income, he and his wife couldn't afford much more than a crack shack in a shady Vic West 'hood. 

Nov 18 Market Update

MLS numbers update courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

	November 2013				November  2012
	Wk 1	Wk 2	Wk 3	Wk 4
Unconditional Sales	140	224			366
New Listings	276	408			706
Active Listings	4118	4077			4488
Sales to New Listings	51%	55%			52%
Sales Projection	490	428
Months of Inventory					12.3

It's interesting to keep on eye on the mortgage industry insiders, and they're getting nervous again.  According to Rob McLister at CMT, "We’d submit, however, that there is no need to wonder if we’ll get new mortgage restrictions. It’s a given that more regulations are coming. The only questions are what rules to expect and when."  These possible upcoming limitations might be more obtuse to the average consumer, but the effect is the same: reduced access to credit.

Nov 13 Market Update

MLS numbers update courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

	November 2013				November  2012
	Wk 1	Wk 2	Wk 3	Wk 4
Unconditional Sales	140				366
New Listings	276				706
Active Listings	4118				4488
Sales to New Listings	51%				52%
Sales Projection	490
Months of Inventory					12.3

Teranet out and it is turning negative again.  With the strong growth in the Alberta housing market we are no longer just almost the weakest market in the country over the last 5 years.

Up in Rupert right now where you can buy this beauty for $39,500,  and the most expensive house currently for sale costs $459,000.  It sure rains a lot, but the place has it's charms, with a mix of Cowichan Bay, Victoria, and east coast..   Time to invest before they put in the pipeline?

The VREB discovers price skewing

You may have noticed that the VREB has a new trick up it's sleeve.  It's the MLS Home Price Index (it's a home silly, not a house like that heartless Teranet index says).

The MLS HPI is a repeat-sales index quite similar to the Teranet index.  However unlike the Teranet, they separate it out into "benchmark" single family homes, townhouses, and condos.  They also have separate data for the various regions, not just greater Victoria as a whole.

With this new information, the VREB has come to accept the skewing of medians and averages that we've talked about here for a few months already.  “Past reporting of averages and medians showed flat pricing across the Board’s trading area but MLS® HPI indicates a moderate decline in prices in many markets over the last year,” says VREB's Shelley Mann.   
So prices continue their slide at a rate of 3-5% a year depending on where you live.

Overall the HPI tells us nothing we don't already know.  Prices on a slow downward slide since 2010.  Victoria the weakest market in the country.  Over 5 years, prices are down 5.6%.

Update:   So how does the new MLS HPI compare to our existing measures of the market?   Pretty similar, but surprisingly the MLS HPI is the most pessimistic of the bunch.  Note that this is the SFH median, while the two indices are comprised of all properties.

Based on the SFH median we are down about 8% from peak.  According to the Teranet we are down 5%, and the MLS HPI says we are down 8% as well.