tag:blogger.com,1999:blog-7123542260692860177.post3663479961311044308..comments2023-12-02T00:38:46.467-08:00Comments on House Hunt Victoria: Your home: the investment you think it is?HouseHuntVictoriahttp://www.blogger.com/profile/07456914359088891317noreply@blogger.comBlogger69125tag:blogger.com,1999:blog-7123542260692860177.post-6971383138845678842009-06-22T13:55:48.077-07:002009-06-22T13:55:48.077-07:00Ah MetalDwarf -
If only the evidence of what has h...Ah MetalDwarf -<br />If only the evidence of what has happend didn't contradict you oh so badly....<br />If the market is not to be free completely (and there are good reasons why Banks have rules - see Great Depression), then they must be governed with prudent policy. The policy in place is not prudent, and unfortunately somebody else's bad decisions get paid for in some way, and unfortunately it seems to be indirectly by the public at large.Just Janicehttps://www.blogger.com/profile/06002680972898096266noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-26256528107715978382009-06-22T13:48:07.049-07:002009-06-22T13:48:07.049-07:00HouseHuntVictoria said...
MD,
So should ...<i>HouseHuntVictoria said...<br /><br /> MD,<br /><br /> So should we eliminate CMHC altogether? That would force banks to be responsible for own decisions and would likely end up in 20% (or higher) minimum downs and higher interest rates to compensate for added risk.<br /><br /> You'd see markets react very negatively to this, both stock and housing, and further wealth erosion. Do you think there is any realistic chance that any government of any party would actually implement something like this?</i><br /><br />As you said the effects would be devastating. But man housing would get really cheap really fast!<br /><br />Which is what we all want right? <br /><br />Of course only those with excellent credit and the ability to save a large down-payment would be able to buy regardless of how cheap things got. <br /><br />As Reid said above the banks would regulate themselves. 25% down-payments would be the norm, total debt service ratios would be imposed by the lender. the pool of potential buyers would dry up, there would be frantic sellers trying to unload before they lose all their equity as prices plummet. It would be easily as bad as the last 3 years in the states, but would happen overnight, probably worse. <br /><br />Which just goes to show how out of whack we are. If we have that far to fall, I think something must be very wrong.<br /><br />And no, I don't expect it will ever happen.Robert Reynolds - HMR Insurancehttps://www.blogger.com/profile/10939128478955272061noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-27993880028855470532009-06-22T13:37:23.108-07:002009-06-22T13:37:23.108-07:00lets look at the opposite scenario
Policies that ...lets look at the opposite scenario<br /><br />Policies that would bring long-run stability to the housing market:<br /><br /><br />1. Tenure rules, if you own a home and flip it within 2 or 3 years face a substantial tax hit on your capital gains. <i> No tenure rules means more developers more competition, lower margins and lower prices. People paying less taxes on productive work is always a good thing.</i><br /><br /><br />2. Increased down-payment requirements (10% at a minimum).:<br /><i> No down-payment, riskier loans, higher interest charged, higher monthly payments, lower purchasing power, results in lower prices.</i><br /><br /><br />3. Multiple-of-income maximum rule for CMHC insurance (no more than 4X household income).:<i> Banks will only loan so much, a natural equilibrium will be found, it might even be 4x income, the equilibrium will benefit the most possible people</i><br /><br /><br />4. Banks don't get an automatic bailout when mortgagees default, there should be some penalty to an institution making what is likely to become a 'bad loan'. Perhaps they should lose 10-20% of the amount as an 'insurance deductible'.:<i> With no CHMC, banks will flee from risk, only very credit worthy people with will secure loans at all, only those people with large down-payments will get the best rates. Fewer buyers, less demand, lower prices. This instantly negates points 2&3</i><br /><br /><br />5. Maximum 30 year terms.:<br /><i> So the bank becomes your landlord, 99 year mortgages are born, you never actually own your home, eventually an equilibrium will be reached where more interest payments negates the benefit of the longer amortization. This will probably also help the developers to create more housing, reducing their costs, and thereby margins, so housing should be cheaper since it costs developers less in financing. Point 4 also reduces the number of people that might qualify for this type of loan.</i><br /><br /><br />6. Increased incentives to build purpose built rental units. This would increase competition from reasonable substitutes to owning.<br />:<i> If no one is building rental units there must be a reason for it. Interest only mortgages will make rental units more attractive to build, see point 5. If condos still make more financial sense then rents either need to go up, or condo prices down. Rents are tied to wages, and wages aren't going to change dramatically. If condos become completely unaffordable, more people are forced to rent, increasing demand and prices of rentals, eventually it will start to make sense to build rentals as condos are not selling. Rental prices will find an equilibrium as demand and supply equalize. If rents get high enough to equal buying a condo, what benefit would there be to renting? rental prices have to stay substantially below the cost of buying or no one would rent. </i><br /><br />In all circumstances it looks like the opposite of what you suggest provides more options, more creativity, and more benefits to more people. If I am not one of the segments of society that directly benefits the most, so be it. It just means I obviously need to work harder to get to a level where I can benefit. Maybe I am too risk adverse, maybe I don't have good enough credit, maybe my income is too low.<br /><br /><br />Don't get me wrong, I want to buy a house, but I refuse to mortgage myself to death. I also refuse to use a 35 year mortgage, the market as a whole seems happy to take those risks, good for them, because I don't want to play their game I have to settle for either renting, buying a cheaper property, or earning more money.Robert Reynolds - HMR Insurancehttps://www.blogger.com/profile/10939128478955272061noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-70690295611798854902009-06-22T13:33:31.860-07:002009-06-22T13:33:31.860-07:00Reid:
If history is to be any guide, the answer i...Reid:<br /><br />If history is to be any guide, the answer is the previous generation: except they're broke too and worse spenders/savers than their parents, or so it would seem.HouseHuntVictoriahttps://www.blogger.com/profile/07456914359088891317noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-75028209587772916992009-06-22T13:29:56.725-07:002009-06-22T13:29:56.725-07:00There has been lots of intervention by governments...There has been lots of intervention by governments over the past twenty years, but when it comes to housing it has all been to increase affordability. Not that many years ago when I first bought a house you needed 20% down and most banks demanded 25% down. You could not extend amortizations beyond 25 years and those were the rules we all lived with. Most buyers were forced to save up front and this was a very important lesson which is missing today. It is really hard to save money and it takes a change in behaviour to do accomplish it.<br /><br />Now our regulations allow you to basically buy with nothing down and borrow six times your income. Then you say the individual can decide, but lets face it most individuals are financially illiterate. The LONG term cost of these policies on Canadian society will be huge. Forget about the whining when mortgage rates rise, what about the retired who forgot to put anything aside during their working years, who will bail them out.Reidhttps://www.blogger.com/profile/07973559884255280736noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-65721357082571529422009-06-22T13:07:12.958-07:002009-06-22T13:07:12.958-07:00MD,
So should we eliminate CMHC altogether? That ...MD,<br /><br />So should we eliminate CMHC altogether? That would force banks to be responsible for own decisions and would likely end up in 20% (or higher) minimum downs and higher interest rates to compensate for added risk. <br /><br />You'd see markets react very negatively to this, both stock and housing, and further wealth erosion. Do you think there is any realistic chance that any government of any party would actually implement something like this?HouseHuntVictoriahttps://www.blogger.com/profile/07456914359088891317noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-74786733810007898762009-06-22T12:58:57.006-07:002009-06-22T12:58:57.006-07:00HHV
Proactive intervention is better than reactio...HHV<br /><br />Proactive intervention is better than reactionary for sure. <br /><br />Many of the suggested regulations put forward would limit consumer choice, I don't like being told what I can and cannot do, especially by the Govt. <br /><br />As Bubble N' Fizzle suggested, I don't want my rights curtailed by someone else who thinks it is in my best interest. Feel free to make your own choices, just please don't make mine for me.Robert Reynolds - HMR Insurancehttps://www.blogger.com/profile/10939128478955272061noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-88926057433873673072009-06-22T12:43:26.172-07:002009-06-22T12:43:26.172-07:00MD,
Works in theory but not in practice. Not a si...MD,<br /><br />Works in theory but not in practice. Not a single "conservative" government has acted in this way ever. The public pressure to protect people from the consequences of their poor decisions has proved overwhelming. <br /><br />I'm all for free markets and limited intervention in practice, but when the intervention occurs as a reaction I'd rather see a shift to proactive intervention--usually results in better decisions no?HouseHuntVictoriahttps://www.blogger.com/profile/07456914359088891317noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-20116367357043899402009-06-22T12:38:14.338-07:002009-06-22T12:38:14.338-07:00Holy crap, I agree with Bubble N' Fizzle! uncl...Holy crap, I agree with Bubble N' Fizzle! unclean unclean<br /><br />I am against regulation for the sake of regulation. Though I am also against bailouts and get out of jail free cards. <br /><br />If I am a banker and I want to loan money to risky individuals so be it. If I loose money because the risky loans default, I go out of business. No bailouts. If my neighbor is more conservative and makes only good loans he stays in business.<br /><br />If I am a 5/35/5.5 and I can find a bank which will give me a NINJA loan wicked! When I spend 70% of my income on my mortgage and I can only afford to eat cat food, sucks to be me. No tax breaks, incentives or emergency financing.<br /><br />A free market economy is self regulating. It will blow some bubbles, some people will get burned, some businesses will die. All of those who get burned made poor decisions. The vast majority will enjoy more competition, better service, better products and lower prices. By introducing a bunch of regulation we add the Greenspan Effect, one change causes another, and another and another... the ultimate effect we cannot see or predict. <br /><br />Long rant short, if people want to make poor decisions let them. We are all grown ups and can make our own decisions. Also, being grown ups we should have to live with the consequences of our actions.Robert Reynolds - HMR Insurancehttps://www.blogger.com/profile/10939128478955272061noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-15762016554943394622009-06-22T12:31:15.604-07:002009-06-22T12:31:15.604-07:00Reid totally agreed. I understand the need for som...Reid totally agreed. I understand the need for some kind of intervention in the housing market, but the push back that you'd get in the capital markets as a result would be incredible. <br /><br />The soft integration of the housing market with the capital and equities market is a phenomenon that i don't think anyone has a complete understanding of either the effects or the solution to the negative effects. <br /><br />I think policy makers are looking at it as the benefits outweigh the risks. Until we see a drastic correction in Canada, one that causes the gov't to have to bailout CMHC, we won't see a substantial policy shift. I'm not sure I see that kind of crash happening here in this cycle.HouseHuntVictoriahttps://www.blogger.com/profile/07456914359088891317noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-12002005926772125812009-06-22T12:22:10.166-07:002009-06-22T12:22:10.166-07:00HHV, I realize the liberalization was started unde...HHV, I realize the liberalization was started under the Liberals, but what these politicans typcially say when it comes to legislation is that "no one could have ever envisioned this current environment" when we drafted the legislation. I hear it all the time with pension legislation in particular.<br /><br />So the fact that these extraordinarily low interest rates would allow average Canadian's to borrow upwards of six times their income in mortgage debt I am sure was never "envisioned" when they went to 35 and 40 year mortgages, but here we are. My issue with Flaherty is that he helped pushed the interest rates down and should have recognized the problem this created with respect to borrowing capacity and subsequently limited family borrowing to some reasonable level. Things just get way out of control once you get too close to 0% interest rates and he should understand this. But in placing such limits, it would have stalled the current mini housing boom.Reidhttps://www.blogger.com/profile/07973559884255280736noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-78286845505790735972009-06-22T11:45:02.098-07:002009-06-22T11:45:02.098-07:00B & F -
You're statements cause me to chuc...B & F -<br />You're statements cause me to chuckle. The current structure of the market has turned Real Estate into a Ponzi scheme at a system level. The only source of RE growth in value is as a direct result of finding and enabling ever greater numbers of people to assume a suffocating amount of debt, so that the last person can make out like a bandit, even without having added any true value to the property. It works great for those who got in early, (the minority) perhaps at a time when the market had a more 'balanced' structure, but ultimately it hurst those at the base. So you are essentially advocating that the Ponzi scheme be allowed to continue, so those at the bottom of the pyramid can be crushed while giving everything to those in the middle and top end of the pyramid.<br /><br />We need policies that preserve houses as homes first and reinforce sound personal finances and encourage real economic growth. Imagine if a person could buy a home, and have enough money left over, to save for retirement (perhaps by making real investments that actually create value), and enjoy the brief time they are on this planet by consuming things other than housing (vacations, entertainment, food, education, etc.).<br /><br />If anything the monthly cost of a mortgage should be (in a 'balanced' and appropriately functioning market), slightly less than rent to compensate for the risk of owning property.<br /><br />The market is broken, it needs to be fixed, the status quo is unsustainable and harming the rest of the economy.Just Janicehttps://www.blogger.com/profile/06002680972898096266noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-30583488558939722322009-06-22T10:56:32.759-07:002009-06-22T10:56:32.759-07:00I thought readers might enjoy a good laugh this mo...I thought readers might enjoy a good laugh this morning. We often think buyers and agents in Victoria are delusional with statements like "everyone in the world wants to live here". <br /><br />I was raised in Saskatoon which the Tragically Hip called the "Paris of the Prairies" in their song Wheat Kings. Looks like the good folks of Wakaw, a small town north of Saskatoon, have been listening to this song and drinking KoolAid. The Star Phoenix reports <a href="http://www.thestarphoenix.com/news/todays-paper/Canal+project+Wakaw+delayed/1719550/story.html" rel="nofollow">Canal project in Wakaw delayed</a>..<br /><br /><i>The $200-million canal development that was to transform Wakaw into a resort community <b>comparable to Banff</b> is still on hold due to the struggling national economy, the town's mayor said Friday.<br /><br />The proposal would see a one-kilometre canal to link the town to nearby Wakaw Lake and the subsequent development of housing, a hotel-spa-convention centre, marina and golf course<br /><br />The resort development will be able to draw on a substantial part of the provincial population and is also expected to attract visitors and buyers from out of province.</i>Rogerhttps://www.blogger.com/profile/08266466833259484873noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-57546396555178878142009-06-22T10:19:52.702-07:002009-06-22T10:19:52.702-07:00I wouldn't bother with B&F, he/she has bee...I wouldn't bother with B&F, he/she has been shown to be a liar and a loony. I doubt that he/she (to be referred to as "it" to avoid confusion due to multiple personalities) can even separate the lies it has told from the truth.<br /><br />I would call what we are up to is ensuring our families future and ignoring the propaganda. I offered before to you as a challenge you slunk away from; I am sure my family out earns yours by at least a factor of 2 and we can afford to buy a house easilly in any neighbourhood. We won't because it is a terrible time to buy.omchttps://www.blogger.com/profile/11570216584047858772noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-67148293009077723012009-06-22T09:35:50.540-07:002009-06-22T09:35:50.540-07:00B&F,
How do you reconcile making sweeping gen...B&F,<br /><br />How do you reconcile making sweeping generalized statements about "bitter renters" (who I can only assume is directed at anyone on this blog who doesn't own) based on the commentary of a single participant? <br /><br />There is a wide variety of opinion to be found here. If you can't engage without baseless smearing perhaps it's because you have nothing relevant to offer?HouseHuntVictoriahttps://www.blogger.com/profile/07456914359088891317noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-46504613335526907662009-06-22T09:34:42.561-07:002009-06-22T09:34:42.561-07:00BubbleNFizz(le):
I think you just made the bear...BubbleNFizz(le):<br />I think you just made the bear's case even more obvious... you shouldn't have to be rich to own a house; however, you should have significant savings and not be loaded with debt up to your eyeballs.<br /><br />Your retorts are a tad immature. How about sticking to making remarks backed up by logic and investigative analysis?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-22288344589220610882009-06-22T09:28:45.853-07:002009-06-22T09:28:45.853-07:00Month-to-date Victoria Real Estate Board Stats: Ne...Month-to-date Victoria Real Estate Board Stats: New sales: 648, new listings: 1049, total active listings: 3792 (via <a href="http://www.twitter.com/timayres" rel="nofollow">Tim Ayres</a>)HouseHuntVictoriahttps://www.blogger.com/profile/07456914359088891317noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-87810906680344872612009-06-22T08:25:33.706-07:002009-06-22T08:25:33.706-07:00Policies that would bring long-run stability to th...<i>Policies that would bring long-run stability to the housing market:<br><br><br />1. Tenure rules, if you own a home and flip it within 2 or 3 years face a substantial tax hit on your capital gains.:<br><br><br />2. Increased down-payment requirements (10% at a minimum).:<br><br><br />3. Multiple-of-income maximum rule for CMHC insurance (no more than 4X household income).:<br><br><br />4. Banks don't get an automatic bailout when mortgagees default, there should be some penalty to an institution making what is likely to become a 'bad loan'. Perhaps they should lose 10-20% of the amount as an 'insurance deductible'.:<br><br><br />5. Maximum 30 year terms.:<br><br><br />6. Increased incentives to build purpose built rental units. This would increase competition from reasonable substitutes to owning.<br />:<br><br></i><br />It's not surprising that the bitter renters eventually arrive at mean-spirited policy proposals along the lines of <i>"I can't afford to buy a house so the government should make it more difficult for anyone else."</i> Let me address your socialist suggestions individually.<br><br>1. So if working class Joe has to relocate after a year you'll punish him? Oh, I forgot, only rich bastards buy houses so screw them!<br><br>2. Suppose the buyer has other collateral or income that makes the loan sound at a lower down payment? Oh, I forgot, only rich bastards buy houses so screw them! Also, why stop at minimum 10% down? Get rid of the RRSP down payment while you're at it.<br><br>3. Suppose the buyer has other collateral that makes the loan sound at a lower ratio? Oh, I forgot, only rich bastards buy houses so screw them!<br><br>4. Banks (and their shareholders) are already penalized for taking excessive risk. If the market requires a 20% deductible on insurance losses, the market will take it. Oh, I forgot, the banks are rich so screw them!<br><br>5. See (2) and (3)<br><br>6. Here we get to the crux of the conundrum for bitter renters. You want state controls over market forces AND cheap, plentiful rental accomodation. Yeah, rent controls sure did the trick everywhere they were applied. Not.Bubble 'n Fizz(le)https://www.blogger.com/profile/15071478437153577622noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-12909243662265185352009-06-21T23:36:04.019-07:002009-06-21T23:36:04.019-07:00Reid, the first round of liberalization of mortgag...Reid, the first round of liberalization of mortgage products began under the Liberal government of Paul Martin. CHMC is operated at arms length of government and they'd been lobbying the Fed's to loosen the restrictions it placed on CMHC so as to allow CMHC to respond to what it called "consumer pressure." This isn't meant to be a defense of Flaherty, who goodness knows has shown a capacity to only do the wrong thing. <br /><br />IMHO, it really wouldn't matter who is/was in power; the pressure to be seen to be "doing something" to increase home ownership through manufactured affordability was too strong. Home ownership is the single biggest driving force of north american consumerism. Without it, the conditions to create credit wouldn't exist.HouseHuntVictoriahttps://www.blogger.com/profile/07456914359088891317noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-32464607028596468382009-06-21T22:57:44.233-07:002009-06-21T22:57:44.233-07:00Great comments over the weekend. You are now getti...Great comments over the weekend. You are now getting to the core of what is driving prices so high:<br />- legislation and policy (35yr amortization, 5% down, no cap on borrowing and 3.65% 5 yr mortgage rates) that has allowed/encourgaged people to borrow far too much<br />- buyers who do not possess the knowledge to fully understand the risks they are taking in securing 5.5x mortgage debt loans relative to income levels <br />- buyer who actually believe real estate today is a good investment<br /><br />When I buy a stock I typically base my decision on whether I think the company will generate higher future cash flows as cash flow and cash flow expectations drive stock prices. You would think a buyer puting down $500k plus on a house would try to understand what will drive the value of their investment.<br /><br />So what drives house prices in Victoria. It is called affordabilty (as the market is driven from the bottom) and we have seen a classic case of increased affordability over the past three months as five year mortgage rates hit their lowest level ever. Outside of price what drives affordability:<br />- income growth<br />- lower mortgage rates (i.e. higher borrowing capacities)<br />- longer amortization periods<br /><br />So if you really think houses will increase over the next five years you have to believe that income levels will rise and/or the governments will extend amortization periods again as five year mortgage rates are not going to get below 3.65% again unless we really enter a depression. <br /><br />In my opinion Jim Flaherty will go down as the worst Finance Minister in Canadian history because he has allowed Canadian lending practices to mimic those offered in the US five years ago. Although we do not offer "sub-prime" mortgages, they are in essence the same; low teaser rates and high borrowing levels relative to borrowers capacity. We all know rates will rise and the resets are going to kill people. Problem is that although Greenspan was able to claim he could never have foreseen the impact of his policies, Flaherty will not be able to make this claim.<br /><br />If this government was prudent they would have capped mortgage borrowing to 4.0 or 4.5 times family income levels, but they did not as they wanted to stimulate the economy.<br /><br />Once the Liberals get back in power they will blame the mess on Flaherty.Reidhttps://www.blogger.com/profile/07973559884255280736noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-43998514840964356302009-06-21T12:06:40.920-07:002009-06-21T12:06:40.920-07:00Let's take a further look at what happens to t...Let's take a further look at what happens to today's buyer in 5 years.<br /><br />Today - Household income of 100K and a mortgage of 560K as detailed in example above. (35 year amortization, five year fixed @3.7%, $2371 monthly payments)<br /><a href="http://img199.imageshack.us/img199/1597/loser1.png" rel="nofollow">GDS @ .32 and TDS @.40</a> which are maximum CMHC levels.<br /><br />Now five years later inflation has taken hold. Let's assume salaries expenses and debts have increased by 15%. Interest rates are back at historical levels and are 6.2% for a five year fixed term. After 5 years the homeowner's principal has been reduced and the outstanding balance is now 517K. The new monthly payment for a five year fixed with 30 year term is $3139. <a href="http://img199.imageshack.us/img199/1948/loser2.png" rel="nofollow"> The GDS is now .365 and the TDS is .445</a>.. <br /><br />This means that nearly 45 cents out of every pre-tax dollar is going to property taxes heat, mortgage and debt payments. If the 115K household income is split evenly between spouses (best case assumption) 23 cents of income is also going to income taxes, CPP and EI. What is left of the 115K income for all other expenses and savings is 37K.<br /><br />Whether that is enough to cover expenses, savings and plan for retirement will be discussed in other posts.Rogerhttps://www.blogger.com/profile/08266466833259484873noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-36217733924965791842009-06-21T11:33:38.717-07:002009-06-21T11:33:38.717-07:00Accountability and Responsibility
It comes down ...Accountability and Responsibility<br /><br /><br />It comes down to the originators of the loans - the mortgage brokers.<br /><br />These are the people that should be in the gunsights of consumer protectionism.<br /><br />However, when you have CMHC encouraging eroneous business practises by the lack of enforcement of their own regulations then you have a market that rewards the corrupt and penalizes honest people. <br /><br /><br />When honest families are out bid on houses by those people, with the aid of broker have falsified their income and debts and by this very fact have driven the prices of homes upwards.<br /><br />When due dilegence has been illiminated for the sake of speed and commissions. As the case of CMHC when it developed its own computer programme to access a properties worth, rather than an independent appraisal, and then CMHC gives this programme to the brokers to input the data to have the loan approved in minutes. A practise, that again pushes house prices upwards.<br /><br />This has lead to a mortgage market that is dependent on a steady stream of new mortgages. If the market slows and begins to retract, then the system fails. As those people who have over bought can no longer use their home as an ATM machine. This was the case in the USA and this is route Canada will follow. The only difference is that Canadian politicians will have been able to give themselves time to liquidate their holdings at a high price.Johnny-Dollarhttps://www.blogger.com/profile/12950799399842707067noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-54170742370715333262009-06-21T11:31:38.820-07:002009-06-21T11:31:38.820-07:00"Tenure rules, if you own a home and flip it ..."Tenure rules, if you own a home and flip it within 2 or 3 years face a substantial tax hit on your capital gains..." <br />Excellent concept and a good solution. I wonder how many 'investors' are currently seeking the next capital gains loop hole in case this one is plugged.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-59071253333018746462009-06-21T11:27:48.878-07:002009-06-21T11:27:48.878-07:00Let me play devil's advocate for a second. Why...Let me play devil's advocate for a second. Why would anyone accept a government placing limits on criteria for home ownership? Wouldn't eliminating the CMHC all together provide a more rigid structure than what's been proposed here? Why not force the banks to underwrite their own loans to would-be homeowners? That will have more "natural" effect on the market than a tenure tax or a minimum down payment scheme.<br /><br />Don't get me wrong, I'm not suggesting this is the way to go, but if there is so much faith in our banks to do the right thing, then we should get out of the way and let them. They can use their math skills to determine what is fair value and worthy credit risk. <br /><br />As long as we continue to protect the banks with tax payer cash, I don't think there will be any public pressure to do anything other than make it easier for more people to buy a home. <br /><br />Economists at the banks have been "worried" about affordability for years, but the loan givers there have the fall back of knowing that CMHC insured loans are limited in their risk, so there is no market incentive for banks to refuse them.HouseHuntVictoriahttps://www.blogger.com/profile/07456914359088891317noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-25164446532684408072009-06-21T11:13:47.435-07:002009-06-21T11:13:47.435-07:00Just Janice,
You made a number of sound, common s...Just Janice,<br /><br />You made a number of sound, common sense proposals. Unfortunately there is no common sense at CMHC or in the Federal government when it comes to housing policy.Rogerhttps://www.blogger.com/profile/08266466833259484873noreply@blogger.com