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TagHousing affordability

Why are We Being Poorly Advised Against Homeownership?

Blog Image, Wrongly Advised Against Homeownership, March 2019

Something strange has been going on over the past decade. We’re often being told – and, in many cases, convinced – that it’s better to rent than to own.

I firmly believe everyone should own their home. In fact, I think we should own at least one investment property… and, in many cases, more than one, but I’ll get to that in a minute…

I can understand why many people, particularly Millennials, are believing it’s better to rent than own. After all, it’s easier to rent. Just look online for a condo or house for rent. Apply, sign the lease and you’re done. We’ll call this the Convenience factor.

Continue reading “Why are We Being Poorly Advised Against Homeownership?”

Real Estate Rebounds in June as Expected!

Blog Image, Housing Outlook, June 19Earlier this year, I voiced my disagreement with the real estate pessimists who said a real estate crash or bubble was forming. Click here to read more.

This same more positive outlook is backed up by CMHC’s latest Housing Market Insight report for Ontario courtesy of regional economist Ted Tsiakopoulos.

Below are some key highlights from CMHC’s report:

Continue reading “Real Estate Rebounds in June as Expected!”

REAL facts on Housing Prices… they’re not dropping like you may think!

House Prices Blog Image, April 2018

In recent months, we’ve seen the mainstream media publish several stats and articles about Canada’s declining real estate market.

The popular stories go something like this: Home sales fall by 22%; or Home prices drop by 10%. Does that sound familiar? Bad news grabs our attention. It’s human nature.

Now, for a dose of reality…

It’s true, there are fewer home sales when compared to last year’s crazy red-hot housing market. In 2017, home sales and home prices were up 20% and 25% in the first four months of the year. That pace is unsustainable. We don’t ever want to match that pace. Continue reading “REAL facts on Housing Prices… they’re not dropping like you may think!”

Shhh…Interest rates are still at record lows… and Canadians are making huge prepayments.

 IT’S OKAY TO FEEL GOOD ABOUT LOW INTEREST RATES

I’m sure this isn’t what our Federal govt wants you to hear.   But it’s true… Fixed rates are in the low 3.00%s….  So why aren’t we feeling good about this?   Why isn’t everyone happy?   Record low interest rates means less interest cost to you… it means low housing costs…It means you are saving money.

A mortgage is the biggest debt most of us will ever have…  We all talk about mortgage rates with our friends, co-workers and family…. It’s a popular subject… But for some reason, we aren’t feeling good about these low rates…  It’s almost like we should be feeling a little guilty, like the cat that swallowed the canary… do you feel like that?

Could it be that we have been beaten to death with negative messages by the Federal Minister of Finance?   Housing Bubble coming!!!…. personal debt levels rising!!… higher interest rates coming…!!   Maple Leafs win Stanley cup (oops, had to throw that one in)… we’ve been talking about these same things for years… yet they haven’t happened!  I’m not saying these aren’t concerns but I think some of these have been overstated without providing enough proof or evidence.

The govt doesn’t want you to borrow at these rates…   They are afraid you would be too irresponsible and would borrow more than you could afford… (never mind the fact that you must qualify at BANK POSTED rates which are 2.00% higher than these wholesale mortgage rates…)

NEW STATISTICS SHOW WE ARE RESPONSIBLE AND NOT SHOWING ANY SIGNS OF TROUBLE

By the way… the strange part about all this “boy that cried wolf” noise from the govt, is that there really isn’t any proof that we are in trouble….  That’s right..  Mortgage Arrears are low and have been low for over a decade… Affordability is better than it was 20 years ago!   (low rates have helped but increases in income have also factored in)…

And how about this stat that just came out….Around 23% of Canadian mortgage borrowers have increased their regular mortgage payments by $400 to $500 per month.  19% are making lump sum payments of around $12,500 per year.   That works out to over $20billion in extra payments towards their mortgages.  Or put another way, over 1 million mortgage holders out of the estimated 5.85million mortgage holders in Canada are paying far more than the minimum payment.   Does this sound like a country of irresponsible borrowers? … (source Financial Post).

Either the govt’s message has sunk in, or there really wasn’t as big a problem as we were led to believe…. I’ll let you be the judge…

But we could be facing a ‘Made in Canada’ problem as this article states… .  With the govt planning to make the biggest changes in history with  mortgage and HELOC lending, they will be affecting a large segment of new borrowers but even more EXISTING borrowers… they will force a large percentage of Canadians to sell their homes, close their businesses or seek higher interest debt….  And why?  What purpose does it serve?  The stats tell us we are fine…

House prices are hot in Toronto but they are cold in the rest of Canada…  The govt is providing a solution to problem that doesn’t exist.

If you aren’t sure if you could benefit from today’s low rates,  or how these proposed new lending changes will affect you, give me a call or send me an email…  I’d be happy to discuss your options.

Steve Garganis

A complete overhaul of Mortgage Lending in Canada?

  FED GOVT KEEPS TALKING ABOUT TIGHTENING MORTGAGE LENDING POLICIES

But why?  Why does the govt believe there is a need for all this change?  That’s the question most industry insiders are asking.  Here are some facts with my thoughts mixed in….  tell me if you see some contradiction between the different branches of the govt or a lack of consistency:

  • Surprise…we don’t have a mortgage default problem… Mortgage arrears in Canada are 0.38% as of January 2012.   In Ontario, the housing hot spot, arrears are only 0.28%.   These figures are very low by anyone’s standards.
  • The average resale price dropped 0.5% nationally.  But resale prices in Toronto, are up around 7.3% in a year-over-year comparison.  But that trend is cooling according to The Canadian Real Estate Association.
  • Inflation isn’t a problem… it’s hovering at 1.9%, well within acceptable levels.
  • Housing affordability hasn’t really changed in 10 yrs according to the RBC housing affordability index and it actually improved in Q4 of 2011 (it’s probably even better this year as interest rates are even lower).
  • Personal household debt is around 153% of income.  That’s a record high number, it’s true, but what are Canadians borrowing for?  Studies tell us it’s not for big screen TVs or trips to Bahamas…  We’re actually investing… in stocks, mutual funds, real estate here and in the U.S.  In fact, we are the biggest foreign buyers in Florida and we are also buying in Phoenix, Arizona in record numbers…. Is buying a second home a bad investment?
  • Did you know that 1/3rd of Personal Debt is non-mortgage debt including high interest credit cards, loans and unsecured lines of credit…. yet, there is little to no regulation for these products…
  • Speaking of credit cards… the arrears rate is just over 1.00%... that’s around triple what mortgage arrears are!  Why isn’t the govt clamping down on these credit products?
  • Record-low interest rates were brought in to stimulate the economy.  Haven’t Canadians played their role to kick-start the economy?  Why does the govt want to punish homeowners now with tougher qualifying rules?  OSFI has even proposed you re-qualify for your mortgage at renewal time!!   How absurd is that?
  • The Bank of Canada wants to raise rates to slow our personal debt growth…   but can’t for fear of slowing the economy…
  • The Federal Minister of Finance, Flaherty, wants to tighten mortgage lending to slow the housing market and reduce the amount of mortgage debt we take on.
  • The housing market accounts for up to 40% of this country’s GDP… all these changes will affect our economy.
  • Business for Self mortgage programs have been eliminated by some banks and other Lenders… making borrowing more expensive for this segment of our population…. by the way, they are paying their mortgages just fine.. there is no evidence suggesting Business for Self borrowers have repayment problems…
  • CMHC opted out of rental property mortgages last year in an attempt to slow real estate investment… so you must come up with 20% down or use equity from other sources for the down payment..

FED GOVT’S LATEST MOVE IS TO PUSH CMHC UNDER OSFI CONTROL

  • OSFI will assume control over CMHC, the country’s national housing agency…. You will have an audit dept overseeing a social program… hmm, I wonder what will happen to CMHC??  The possibilities frighten me and should frighten most Canadians… (more on this later).
  • Minister Flaherty made a comment that maybe the govt should consider selling CMHC…  say goodbye to a business that nets over $1billion a year.. $16billion since 2002.   Here’s an idea…why not split CMHC into 2 business… bulk insurance business and the traditional low down payment business… wouldn’t that keep the Canadian dream of home ownership alive and also satisfy the auditors, like OSFI??
  • OSFI wants to limit Secured Lines of Credit to 65% loan to value from today’s 80% loan to value…  This one makes no sense and has received harsh criticism from Financial Experts…. scares me to think that it’s even gone from thought to paper to print… what other changes were they considering that didn’t make it to print??

MY SUMMARY OF IT ALL…

In short, the govt wants to keep the economy stable but they are going to make it harder for you and I to qualify for a mortgage….  Yet, there are no changes coming for the most expensive of debts… Credit cards, loans and unsecured lines of credit rules either don’t exist or will not change…  For some reason, the govt thinks it’s okay to borrow at 7% , 8% for unsecured lines of credit and pay 18% to 20% on credit cards, but please don’t borrow for a home, at 3% and 4%??

If we continue to make it harder for Canadians to get a mortgage, then we will have fewer home sales.. Fewer home sales will affect ALL HOME VALUES and slow the economy.  It’s really that simple…  this affects the biggest asset that most of us will own… our home!

Let’s hope the govt thinks like a carpenter… measure twice and cut once… !

If you’re a homeowner and aren’t sure how these and other changes might affect you, feel free to contact me anytime.   I’d be happy to help.

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