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Effects of Government Mortgage Meddling

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Posted by Kyle Green

on Tuesday, 16 January 2018 18:08

kylegreen

Jan 1st has come and gone, and wow was it a busy December. Most in the industry reported Jan 1st when the new stress test arrived  (you can read more about the stress test by reading the previous article here). So, now that the new rules are in effect, how may you be impacted?

First off, its important to note that Credit Unions are NOT affected by the new guidelines as they are provincially regulated, not federally regulated. The Credit Unions have confirmed that they will not be following suit with the movement to change qualification criteria. Mortgage Brokers have never before been so important, being able to shop banks but also non-banks and Credit Unions to source loans.

Borrowing power with the bank is now reduced by about 20% for those choosing to take a 5 year fixed rate mortgage. All other terms were already stress tested, but previously choosing a 5 year fixed was a way to get around to tighter qualification guidelines and now that option has disappeared.

Some banks have confirmed that anyone with a contract dated prior to Jan 1, 2018 will be grandfathered under the old rules. This is important for those of you who have presales completing in the next few years. There was no clarity on this rule for many banks until very close to the deadline. In some cases, as late as Dec 29th!

One item that is interesting here is that shorter term rates like variable and 1-3 year fixed terms will now qualify at a lower interest rate, which will incentivize some borrowers to take shorter term rates. This is something that is likely an unintended consequence of the new rules and likely something that the government didn’t quite think through when introducing the new rules. One of the last things the government wants is for borrowers to be assuming short term debts in an environment where interest rates are so low and rates rising too quickly will have many of these borrowers seeing increases to their payments in just 1-2 years instead of ~ 5 years (as many borrowers were previously to maximize borrowing power).

All in all, these rules are intended to make it harder to qualify, yes, but are also here to protect the value of your real estate assets from a collapse like what was seen down in the US in the subprime crisis. If you are seeking financing, it may be wise to jump in sooner rather than later as the Credit Unions may see more volume than they can handle and start to taper their guidelines as well.



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Real Estate

Canada's 6 City Housing Prices & The Plunge-o-Meter

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Posted by Brian Ripley - Canadian Housing Price Charts

on Friday, 12 January 2018 06:46

chart-canada 13 orig
CLICK CHART TO ENLARGE

The chart above shows the average detached housing prices for Vancouver*, Calgary, Edmonton, Toronto*, Ottawa* and Montréal* (the six Canadian cities with over a million people each) as well as the average of the sum of VancouverCalgary and Toronto condo (apartment) prices on the left axis. ​On the right axis is the seasonally adjusted annualized rate (SAAR) of MLS® Residential Sales across Canada (one month lag).​
  • *Toronto GTA SFD prices began March 2009. Prior data are Combined Residential +24.5%. 
  • *Ottawa SFD prices began January 2009. Prior data are Combined Residential +6.9%.
  • *Montreal SFD DATA changed from Average to Median in March 2007
  • *Vancouver SFD data are HPI®, not Average.

In December 2017 Toronto metro SFD prices continued slipping and 9 months since the March 2017 spike and peak price, they have lost $217,895 or 18% ​(Plunge-O-Meter). Vancouver prices are still defying gravity; FOMO and speculative pricing is still on.



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Real Estate

Housing Begins to Crash – Australia – New Zealand – London

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Posted by Martin Armstrong - Armstrong Economics Armstrong - Armstrong Economics

on Thursday, 04 January 2018 06:52

HOUSE-Money-768x768Property values are starting to crash hard in Sydney Australia, New Zealand, and London. Politicians are simply idiots. They all targeted foreigners buying property as the leading cause for the rise in housing prices. What they failed to grasp is that people spend more money when they THINK they have equity in their home. Whenever housing starts to decline, so does consumer spending and guess what – you get the economic downturn. Dah!

....also from Martin:

Bitcoin Still in Trouble



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Real Estate

Home Prices In 80% Of US Cities Grow Twice Faster Than Wages... And Then There's Seattle

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Posted by ZeroHedge

on Wednesday, 27 December 2017 06:59

According to the latest BLS data, average hourly wages for all US workers in November rose at a stubbornly low 2.5% relative to the previous year, well below the Fed's "target" of 3.5-4.5%, as countless economists are unable to explain how 4.1% unemployment, and "no slack" in the economy fails to boost wage growth. Another problem with tepid wage growth, in addition to crush the Fed's credibility, is that it keeps a lid on how much general price levels can rise by. With record debt, it has been the Fed's imperative to boost inflation at any cost (or rather at a cost of $4.5 trillion) to inflate away the debt overhang, however weak wages have made this impossible.

Well, not really. Because a quick look at US housing shows that while wages may be growing at roughly 2.5%, according to the latest Case Shiller dataevery single metro area in the US saw home prices grow at a higher rate, while 16 of 20 major U.S. cities experienced home price growth of 5% or higherdouble the average wage growth, and something which even the NAR has been complaining about with its chief economist Larry Yun warning that as the disconnect between prices and wages become wider, homes become increasingly unaffordable.

And while this should not come as a surprise - considering we have pointed it out on numerous occasions in the past - one look at the chart below suggests that something strange is taking place in Seattle, which has either become "Vancouver South" when it comes to Chinese hot money laundering, or there is an unprecedented mini housing bubble in the hipster capital of the world. Also worth keeping an eye on: price appreciation in Sin City has quietly surged in recent months, and in September home prices surged 10.2% Y/Y, the only other double digit price increase in the US after Seattle. Considering that Las Vegas was the epicenter of the last housing bubble when prices exploded higher only to crash, it may be a good idea to keep a close eye on price tendencies in this metro area. 

case sept oct 0

....continue reading HERE

...also from ZeroHedge:

Charles Hugh Smith Explains "Why I'm Hopeful"



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Real Estate

Coming Housing Boom Could Mean It's Time to Add Raw Materials

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Posted by Frank Holmes - US Global Investors

on Thursday, 21 December 2017 06:40

another-housing-bubble-12202017

In its November report, mortgage security firm Freddie Mac called 2017 the “best year in a decade” for the housing market by a variety of measures. These include low inflation, strong job growth and historically-low mortgage rates. This assessment is very encouraging, not just for homebuyers and builders and the U.S. economy in general, but also for commodities, resources and raw materials as we head into 2018.

Although past performance is no guarantee of future results, it’s still instructive to look back at how materials performed the last time the U.S. was ramping up housing starts and mortgages. The last housing boom, which peaked in 2006, was accompanied by elevated commodity prices. We could see a return to these valuations over the next couple of years on higher demand, a stronger macroeconomic backdrop and cyclical fundamentals, as shown in the following chart courtesy of DoubleLine Capital:

equities versus commodities
click here to enlarge

Speaking on CNBC’s “Halftime Report” last week, DoubleLine founder Jeffrey Gundlach said he thought "investors should add commodities to their portfolios” for 2018, pointing out that they are just as cheap relative to stocks as they were at historical turning points.

“We’re at that level where in the past you would have wanted commodities” in your portfolio, Gundlach said. “The repetition of this is almost eerie. And so if you look at that chart, the value in commodities is, historically, exactly where you want it to be a buy.”

A Wealth of Positive Housing Data



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