1) The lowest interest rates since WW2 leading to a speculative bonanza
2) The actions of the CMHC. The irresponsible doubling of the CMHC lending capacity and allowing lower DP, longer amortizations and allowing insurance coverage for investments, helicopter buyers, and second homes. The mandate of helping Canadians AFFORD a home was expanded to help everyone get a mortgage, regardless of the future ability to pay.
3) Aggressive lending by banks. Not too far off from the actions of their US brethren. Cheap money and tax-payer insurance are the troughs. How can you expect to take a piggy to the trough and expect them not to have a feeding frenzy?? By asking them nicely Like Carney and Flaherty and hoping they will forgo the huge pay running into 8 figures a year, every year, and be responsible?
4) Off-shore buying in certain markets, like Vancouver and Toronto, mainly from Mainland China. But not in other markets like Victoria and the OK which have already dropped a good chunk.
What has changed.
We have had a blip up in interest rates, but I don't read much into this yet. One day rates will explode up, I don't think we are there yet. We will probably meander around the 2.8-3.3% best five year rate for some time.
Off-shore buying waxes and wanes and despite occasional noise about taxing empty homes, or a surtax for non-resident owners, it is not going to happen.
The banks have stuffed just about as much debt down the throats of Canadians as they possible could with their gimmicky low interest mortgages, their ads of people pulling money out of their homes to buy toys or go on exotic holidays, or not-so-subliminal messages of 'How rich they are!'
Left to their own devices they will keep lending until no one can sustain their debt with their anemic income growth, just like they did in the US. But just as all good things come to an end, so do bad, and the growth of consumer debt is slowing of it's own weight.
However we have one big piece on our side to try and re-estbalish sanity. The ultimate pig, which has put nearly $600 Billion of liabilities on the back of tax-payers is finally being reined in.
Not only have the senior management been shaken up, with departures announced every few weeks. Now the CEO says she is leaving:
Kinsley announced the move in what she described as her 10th and final message for CMHC’s annual report and at a time that Ottawa has been moving to reduce taxpayer exposure to housing market debt.
“CMHC has been my home away from home for 25 years and I cannot adequately express how proud I am of our achievements,” Kinsley wrote.
........
Well Ms Kinsley, I hope you are right, but it is a little early to write your own 'proud' legacy, when we are all time highs in RE and all times highs in tax-payer insured $$. Lets review this in a year or two and see how great the achievements are. I am willing to write a mea culpa if in two years the CMHC is NOT looking at significant losses and agree with you.
Finally it looks like this pig is finally being yanked away from the trough (but can anyone please tell me why they insure multi-residential and retirement homes? These are investments, why not let the private sector insure them?)
CMHC contracts business on cues from Ottawa
Canada Mortgage and Housing Corp. (CMHC) is continuing to shrink its business, as the government seeks to reduce its exposure to the housing market.
The amount of insurance that the Crown corporation had in force ticked down by $3.5 billion, to $562.6 billion, during the first three months of the year. The figure falls as consumers pay down insured mortgages and rises when CMHC sells new insurance.
CMHC wrote only $8.2 billion worth of insurance during the first quarter, compared to nearly $19 billion in the same period a year ago. The number of units of housing that it insured fell 54 percent, from 114,045 in the first quarter of 2012 to 52,078 in this latest quarter.
The decline comes as the government has forced the Crown corporation to dramatically reduce the amount of bulk, or portfolio, insurance it was selling to banks. Banks can buy bulk insurance to cover large swaths, or portfolios, of mortgages with low loan-to-value ratios (high downpayments) that weren't previously insured.
Mortgage insurance is mandatory when a consumer has a down payment of less than 20 percent, and sales of that core product have also fallen since Finance Minister Jim Flaherty tightened the mortgage insurance rules last July. The changes that he made, which included cutting the maximum length of an insured mortgage to 25 years from 30, were designed to take some steam out of what he feared might have been an overheating housing market. His changes also effectively eliminated the ability of consumers to refinance high loan-to-value mortgages.
CMHC said that insurance volumes to cover new mortgages fell by about 23 percent, while refinance volumes were down by 69 percent. Bulk or portfolio volumes sunk by about 98 percent.
Meanwhile, the volume of insurance that CMHC sells to cover multi-unit residential buildings (including nursing homes, retirement homes and apartments) rose 5 percent.
CMHC wrote only $8.2 billion worth of insurance during the first quarter, compared to nearly $19 billion in the same period a year ago. The number of units of housing that it insured fell 54 percent, from 114,045 in the first quarter of 2012 to 52,078 in this latest quarter.
The decline comes as the government has forced the Crown corporation to dramatically reduce the amount of bulk, or portfolio, insurance it was selling to banks. Banks can buy bulk insurance to cover large swaths, or portfolios, of mortgages with low loan-to-value ratios (high downpayments) that weren't previously insured.
Mortgage insurance is mandatory when a consumer has a down payment of less than 20 percent, and sales of that core product have also fallen since Finance Minister Jim Flaherty tightened the mortgage insurance rules last July. The changes that he made, which included cutting the maximum length of an insured mortgage to 25 years from 30, were designed to take some steam out of what he feared might have been an overheating housing market. His changes also effectively eliminated the ability of consumers to refinance high loan-to-value mortgages.
CMHC said that insurance volumes to cover new mortgages fell by about 23 percent, while refinance volumes were down by 69 percent. Bulk or portfolio volumes sunk by about 98 percent.
Meanwhile, the volume of insurance that CMHC sells to cover multi-unit residential buildings (including nursing homes, retirement homes and apartments) rose 5 percent.
