Forget reading the newspapers – just reading the headlines over the past couple weeks should give you a bit of insight into how the Canadian Mortgage & Housing Corporation and the Organization for Economic Co-Operation & Development feel about Canada’s housing market, and what CIBC head economist, Benjamin Tal, thinks about their sentiments.
Mr. Tal is on fire right now! His name is in three headlines in the past two weeks!
But is he a bull, or a cheerleader?
There’s that old adage, “The only two constants in life are death and taxes.”
Well the only ONE constant in the Toronto real estate market: people will always predict its impending doom…
I don’t need to expand on that last comment, do I?
That “people are always predicting the impending doom of the Toronto real estate market?”
Whether you’re a bull, a bear, or are neutral, you simply must admit that the amount of people, incorrectly, calling for the demise of the Toronto real estate market since 2002 or 2003 is absolutely astounding.
It’s a bandwagon of sorts. Sooner or later, the market will go down. All markets do. And it seems like there are a LOT of people who want to be able to say, “See, I told you!”
As I’ve often lamented, however, somebody who started predicting the demise in 2006 cannot be credited with “being right” if the market starts to drop in 2017, and prices increased 80% since his or her first prediction.
And I suppose at some point, we should define “market correction” or discuss whether a “drop” is significant if it’s only 1% or 5%.
Today though, I wanted to look at several articles related to CIBC head economist, Benjamin Tal, who has made multiple headlines over the past two weeks, each time critiquing bear-market sentiments. He’s not necessarily a “raging bull,” but rather he seems to have a serious problem with the integrity of the data being used by CMHC and, the conclusions they’re drawing about the market.
On October 26th, this headline rang out:
“Canada’s Real Estate Boom Will Come To An End In 2016, CMHC Says”
Now first of all, what does “…..boom will come to an end” really mean?
It doesn’t scream “The market is going to drop 20%.”
In fact, the CMHC forecasted that “2016 prices will only gain 1.3%.”
Is that the “end of a boom?” When prices go UP?
Perhaps, by definition, if prices are up 7.2% in 2015, according to CMHC in this article.
But the article doesn’t talk about the “impending demise” of the Toronto market like so many other articles do.
This was the first of several articles where CIBC head economist Benjamin Tal came out and questioned the reports by CMHC, among others.
From the article:
Canadian Imperial Bank of Commerce deputy chief economist Benjamin Tal said he seriously questions the claim of excess inventory. He suggested in a report that the warnings about a glut resulted from data using just four Toronto condominium developers, and questionable statistical reporting.
–
That same day, October 26th, another headline rang out:
This article was less about the CMHC’s predictions, and more about Tal’s criticism of the data they used.
From the article:
Tal says towards the end of 2014 and early 2015 there was a notable increase in the number of completed condominiums in the greater Toronto area. In a record housing year in 2012, the GTA saw just under 50,000 housing starts, 30,000 of them condos.
So what happened? Canada Mortgage and Housing Corp. decided to register 10,000 condos in the month of January. Tal says that according to CMHC, the GTA has seen no less than 26,000 condo completions in the first half of this year — three times more than the level seen in previous years.
“Registering a completion is more art than science, as different data providers use different criteria,” said Tal, noting other data providers such as RealNet have chosen to distribute their completion count more evenly — a fact that resulted in a less volatile count of unabsorbed units.
What happened using the CMHC data is that between December 2014 and May of this year, the number of unabsorbed units rose in Toronto from less than 1,000 to close to 3,000 — a level that is even higher than those seen in the early 1990s.
“This meteoric ascent was not only highlighted by the Bank of Canada as a sign of vulnerability but also by various short-Canada investors — using that surge as the ultimate illustration of the bubbly Toronto condo market,” said Tal, noting that since the numbers first came out completed and unabsorbed units fell over 800 in a month.
Now that the CMHC’s completed units have leveled off, it says there about 2,000 unabsorbed units in the GTA which is the same numbers that RealNet is now reporting— still a high level but not nearly as dramatic as 3,000.
So where did CMHC’s original numbers go awry? About half of the completed and unabsorbed units are in city of Toronto, but more importantly one third of all unabsorbed units, were constructed by four developers. And five projects coming on at once accounts for about one quarter of the unabsorbed units on the market today.
–
The saying, “You can make numbers say anything you want” rings true here.
You can use one month’s data, or a year’s. You can use a moving-average, or a single number.
And because of how condos are “registered” in Ontario, the numbers can be severely skewed.
When a condo is “completed,” it still has to be registered as a condominium corporation, and the registration of the building (and accompanying “occupancy period” where unit owners pay a fee to the developer) can take anywhere from a week to two years.
No exaggeration here, folks.
Some condos, like The Berczy, were registered on the day they gave out the keys to unit owners.
Some condos, like West Side Lofts and Couture, took twenty-four months to be registered.
As Mr. Tal commented, “Registration is an art, not a science.”
Registration can depend on the city of Toronto, the developer, or both.
So I agree with Mr. Tal when he suggests that to take the “number of unabsorbed units” from one month, when that month saw a massive increase in units being registered, is a bit misleading.
On Monday, a third article, all by Garry Marr from the National Post, by the way, appeared with this headline:
“OECD’s Warning Of ‘Sharp’ Toronto Housing Correction Condemned By Leading Canadian Economist.”
The word “sharp” made the headline, but here’s the whole quote from the Organization of Economic Co-Operation & Development:
“At the national level, housing starts are running at the higher end of demographic requirements and housing investment is robust,” the OECD wrote. “In Ontario, Toronto economic activity has been relatively buoyant and demand by foreigners has been boosted by the falling Canadian dollar. That said, newly completed but unoccupied housing units have soared in Toronto, increasing the risk of a sharp market correction.”
–
In response to the OECD’s comments, Mr. Tal said:
“I’m not surprised at all, they are looking at headline numbers,” said Tal, referring to the OECD’s statement on housing. “They are not going into the annoying details, but looking into the big numbers.”
(both comments sourced from the National Post article above)
–
So if you’ve read all three articles, which you should have if you’re going to engage in a debate below, let me ask the question again: Is Benjamin Tal a real estate bull or a real estate cheerleader?
I think many of us question Garth Turner’s motives on a daily basis.
He’s a noted real estate bear, but he’s also the owner of “Turner Investments,” which is a financial services firm who, as you might guess, makes money by selling financial instruments, and not real estate.
If everybody were buying real estate, they wouldn’t have money left over to invest in mutual funds, ETF’s, stocks, and bonds.
But Mr. Turner has also written several books on the impending demise of the Canadian real estate market, gaining him fame, notoriety, and one might suggest, more clients for his investment firm.
When it comes to Benjamin Tal, I don’t know if we can draw a parallel conclusion.
Does Mr. Tal have a vested interest in the continued success of the Toronto real estate market?
Well, I guess the true opposite of Garth Turner would be somebody predicting a stock market crash, who owns a real estate investment trust.
In any event, the three successive National Post articles that showed Mr. Tal questioning CMHC and OECD’s statistical integrity caused many to ask why he’s on such on tear.
This is from Mr. Tal’s bio:
“Mr. Tal is responsible for analyzing economic developments and their implications for North American fixed income, equity, foreign exchange and commodities markets. He also acts in an advisory capacity to bank officers on issues related to wealth management, household/corporate credit and risk.”
–
Sooooo………he doesn’t sell real estate for a living?
Call me crazy, but perhaps his motives are truly unbiased.
Perhaps he’s just an economist who is calling it like he sees it, right or wrong.
And on the latter, time will certainly tell…
Kyle
at 9:14 am
First let’s talk about track record, Benjamin Tal has been calling it right for years and supporting his calls with data, evidence and well reasoned logic, contrast that to the bears, who have been calling it dead wrong for near a decade, and supporting their arguments with emotional arguments, cherry picked data, irrelevant examples, outlier anecdotes and mined historic relationships.
I think when reality consistently validates what someone predicts year after year, then that person’s prediction should not be considered cheerleading, it should be considered incredible analysis.
To me, cheer leading is when someone keep rooting for the same losing team, even when that team has never one a game…and their best player is an amputee, and their coach is on the side lines, still trying to learn the rules, their starting line up has never scored a point in their entire career, in fact their starting line up all came from some completely different sport played only on a completely different Continent, but decided one day that they would become a pro in something they have no clue about. In this sense i think cheer leading is a far more appropriate descriptor for what real estate bears do than for what Benjamin Tal does.
Ed
at 9:19 am
Hey Kal. Stop dissing my Leafs!
Kyle
at 5:11 pm
LOL, how’d you know?
Ed
at 9:17 am
As Mr. Turner would say, Tal is spot on when he says something bearish and obviously biased when he says anything bullish.
Noel
at 9:35 am
My favourite saying about economists is one I heard many years ago:
“Economists have predicted 19 of the last 4 recessions”
’nuff said.
All I know is that with interest rates at a historic 100-year low for quite some time and house prices having doubled in Toronto in the last 8 years we are closer to a market high than a market low.
Appraiser
at 9:46 am
Mr. Tal works for a bank.
Banks sell mortgages.
Rightly or wrongly, Tal will NEVER be considered unbiased by some people for that reason alone, regardless of how accurate or impartial his analysis may be.
Joe Q.
at 9:49 am
Benjamin Tal doesn’t sell real estate for a living, but he does work for a bank that has a multi-billion dollar mortgage lending business. That may be immaterial in the end, but it is something to consider.
As for the CMHC — given the role they play in the Canadian housing market and the resources they have at their disposal, it’s pretty shocking how haphazard their data collection and survey methodologies are. I think their rental vacancy reports are the classic example of this.
Kyle
at 11:58 am
Haha, I pity the stupid short sellers that traded on the CMHC numbers.
“Unsold inventory numbers have been a major concern in the industry and CMHC set off alarm bells last spring when it released data for May showing a shocking 41 per cent jump in unabsorbed condos in one month.
Urbanation tracked the jump to the Regent Park area, where CMHC said some 785 units remained unsold. In fact, almost all had been, and some time ago. CMHC corrected the numbers the next month. Senagama attributed it to a paperwork problem.”
Kyle
at 11:58 am
http://www.thestar.com/business/2015/08/05/unsold-condo-inventory-drops-in-face-of-strong-demand.html
Chris
at 9:55 am
“people are always predicting the impending doom of the Toronto real estate market…”
I don’t remember much of that through the 90’s or early 2000’s…. The market was essentially flat for most of that time – and most people were more interested in the stock market…. Garth Turner’s book wasn’t published until March of 2008.
“Sooooo………he doesn’t sell real estate for a living?
Call me crazy, but perhaps his motives are truly unbiased.”
This seems not well thought out David – Benjamin Tal works for CIBC – one of the largest residential mortgage product vendors in the country. The company he works for doesn’t sell real estate – they sell the money used to buy real estate.
Most businesses keep their R&D to themselves – it gives them an edge in their marketplace that their competition doesn’t have. “Economists” for the banks, mortgage brokers, and real estate boards are in the media constantly…. The message is always the same.
Craig H.
at 9:55 am
Not to impugn Mr. Tal’s character (nor, in fact, do I particularly disagree with his analysis) but he does work for a Canadian bank. They have a vested interest in the real estate market. I have no knowledge of the internal dynamics at CIBC, but a profoundly negative call on the real estate market might not be taken well by his bosses. When US hedge funds try to capitalize on a short call on the Canadian real estate market, the instrument of choice is Canadian bank stocks. So assuming he is completely unbiased/not conflicted is a little misleading. You don’t have to sell real estate to have a bias, you could work for a firm that lends to people who buy real estate…
Craig H.
at 9:56 am
As I very s l o w l y typed my post, I see others have made the same point.
Kyle
at 10:35 am
Is anyone really unbiased when it comes to real estate? If we wanted, we could manufacture an angle to make anyone seem biased. More often than not i see people (bears mainly) focusing so much effort on pointing out these biases than on ever challenging the substance.
1. The argument that someone working for a bank will be pro-real estate is contradicted by the many Bank Economists who are not bullish on residential real estate.
2. If the substance of someone’s argument is sound and the actual results over time continue to validate their analysis, as is the case with Benjamin Tal, then does where he work make him any less right?
Appraiser
at 10:53 am
@Kyle Of course you are absolutely correct, however the bears are not really interested in facts or statistics. They have an axe to grind and they are damn well ‘gonna grind it. Year after year after year ad nauseum.
What’s absolutely appalling is the track records for these guys. Where to begin. Garth Turner has been out to lunch for 8 solid years, Ben Rabidoux’s been eating crow for six years and David Madani has been repeating himself for five years straight…and the list goes on and on.
Yet all three of them have been quoted in the media recently offering up some of the worst real estate analysis possible, yet the media never calls them out for it. Apparently for the sake of offering balanced coverage.
Go figure.
Kyle
at 11:14 am
Calling for a housing crash is the Economist equivalent of showing your boobs. If you’re a young actress and don’t have any acting chops whatsoever then show your boobs and you will get far more media attention than your talent ever warranted. Similarly if you have abosolutely no clue about economics (ahem: Turner, Madani, Rabidoux, Carrick, Macbeth, Kirby, McMahon,….) then call for a crash and again you will get far more media coverage than you deserve.
Chris
at 12:40 pm
…so the OECD, the IMF, Goldman Sachs, Deutsche Bank, The Economist, JP Morgan, and the Bank of Canada have all issued reports regarding house prices in Canada that are by most measures “bearish” – in your opinion, are they all as you say Kyle “showing their boobs”? Do you think they are all “out to lunch” or “grinding an axe” Appraiser? I assume there must be some point at which you yourselves might have concerns over house prices being dangerously high (though obviously you are comfortable with current valuations it seems) – at what level/under what conditions would your concern kick in? Were you both attuned to the real estate market in Toronto during the last real estate correction? What were your feelings prior to prices falling then? When the topic of real estate came up, what were you saying in late 1988 for example?
Kyle
at 2:38 pm
With the exception of the Bank of Canada, they are all indeed in my opinion “showing their boobs”. Or perhaps, “showing they’re boobs” is more accurate, LOL. And you’ve missed a few other boob-showers such as Moody’s and Fitch. Quick questions – for how many of them is analyzing residential real estate a core function? How many of these organizations are even based in Canada? How many of them have core businesses in Canada? Answer none of them. They are all completely out of their element making pronouncements on something they don’t even cover. Have you read the garbage these people put out? They all rehash the same useless debunked, re,re,re,regurgitated disproven stuff over and over again. Why?…. media attention (i.e. their showing their boobs).
I have no concerns whatsoever about house prices being “dangerously high”, because “dangerously high” is nothing more than a construct based on one’s expectations. My concerns would be driven only by data – not constructs, personal beliefs or opinions. And the data that would cause me to be concerned has nothing to do with the price level. The price is the result of supply and demand factors…not the driver. The data of concern to me is the data that drives supply and demand for housing: immigration, population growth, inventory, income levels (but only the incomes that are relevant to home buying – i.e. not the median or mean) interest rates, arrears, employment (but only the employment that is relevant to home buying – i.e. when people get laid off at Target and Future Shop that does not really concern me).
I was 14 years old in 1988. But as has been wisely said before, housing will correct when there is a major recession, just like every other housing correction before. And not before then. Unfortunately recessions/depressions don’t exactly announce themselves. Obviously if i or anyone else could tell exactly when that recession comes we’d already be the richest people on earth.
Chris
at 3:27 pm
“I was 14 years old in 1988. But as has been wisely said before, housing will correct when there is a major recession, just like every other housing correction before. ”
interesting. Here’s a quote from The Globe and Mail June 8, 1989 when housing prices in Toronto were just starting to fall significantly… Canadian GDP in 1989 was 2.4:
“The median housing price – the mid-point in the scale of prices – fell from $240,000 in April to $231,000 in May. Terry Martel, president of Terry Martel Real Estate Ltd., said people have been reluctant to buy because of recent reports predicting a large drop in prices. “It’s a bit of a Mexican stand-off,” Mr. Martel said. “Buyers can afford to buy, but they are waiting for the prices to fall. Sellers are saying they’ve lowered their prices as much as possible. Whoever blinks first will start a snowball rolling one way or the other”…. Last week, a report by investment dealer Wood Gundy predicted an imminent crash in Toronto house prices. but the real estate board said the report was “hype”.
Doesn’t sound to me like a recession caused prices to normalize – sounds to me like people just chose to stop buying….
Jim B
at 4:50 pm
And it must be borne in mind that prior to the last Toronto real estate correction, the average resale price in the GTA had increased by a staggering 151% in just four years (from $109,094 in 1985 to $273,698 in 1989) an average annual increase of 25.85%. Things have certainly been rather frothy in recent years, but the highest annual figure since 1989 was 9.43% in 2002 (likely when many of the RE bears began to take notice).
Kyle
at 4:52 pm
“The Canadian economy entered a recession
in the second quarter of 1990, following a period
of slowing real growth over the previous
year. ”
Nominal GDP may still have been positive in 1989 (i.e. 2.4%), but inflation was 5%, so real GDP was -2.6%. Sure it wasn’t 2 consecutive quarters of negative nominal GDP growth (technical definition of a recession), but in real terms GDP was contracting. All of this obviously is measured and published on a lagged basis, so like i said it’s not like recessions announce their arrival until you’re well into it.
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.201.7369&rep=rep1&type=pdf
Kyle
at 5:09 pm
@ Chris
You can see this playing out in Alberta right now. Their house prices are falling because that province is in a recession caused by falling oil prices NOT because prices there were too high. Anyone who thinks high house prices will cause prices to fall, does not understand how economics works.
condodweller
at 6:25 am
@Kyle @Chris. You are right in that housing prices are a lagging indicator. This is what makes predictions so difficult. Human psychology is the same when it comes to housing as it is for stock markets. When prices are going up, the higher they go the most likely people will buy because they think they will continue to go higher and they feel they are going to miss out. This is further exacerbated by the fact that people get priced out of the market if they don’t buy. This doesn’t happen in the stock market as you can always buy less for the same amount. Sure, you can move downmarket to a certain extent but you are not going to find anything under $300k.
We increasingly hear from RE bulls, mostly RE agents, that you better buy now because it will be more expensive later and you will be priced out of the market or the price increase will outpace your savings rate. I’m hearing this reasoning now from people to justify their purchases.
I agree that you have to use DATA to make a call on when the market is going to turn; I am interested to see going forward when you think the RE market will turn based on your DATA.
I also believe that DATA is what will predict the downturn, the problem is the timing of the downturn will depend on the interpretation of that DATA. I also happen to think that while prices are not an indicator by themselves, it is part of the DATA. Since the DATA you are referring to is plural, each with its own challenge to predict, I propose that at both extremes of the price scale price actually becomes a pretty reliable indicator. Given that inflation adjusted prices are at an all time record high, I suggest that if one sold all their RE holdings today, they may not be “leaving much on the table”. The complication of course is that if one’s RE is income generating and prices remain high for a number of years, however, I suggest going forward one can get similar returns or higher in the stock market as the potential RE price increases unless one bought near the bottom getting 15-25% returns (ROI). I’m watching with interest how it is going to play out.
Kyle
at 9:22 am
@Chris and condodweller
Another Economist who seriously knows his sh1t, explains this much better than i did.
http://news.buzzbuzzhome.com/2015/11/toronto-vancouver-learn-from-calgarys-housing-market.html
jeff316
at 3:20 pm
“Calling for a housing crash is the Economist equivalent of showing your boobs.”
Awesome. Very funny!
Joel
at 3:49 pm
What I find interesting about their angles is that by spouting out against the real estate market most people are not going to in turn run to the guy preaching from the top of the building to invest their money.
Most people that believe the garbage these guys say are going to walk into their bank branch and buy their investments from them. It doesn’t hurt the banks and doesn’t benefit Turner and gang to continually predict the market improperly in the public.
They are seemingly making their money off of the few people that blindly follow them, or purchase their books as entertainment.
Kyle
at 4:57 pm
The other obvious irony is, who the hell in their right mind would want an opinion from someone who isn’t biased (i.e. has nothing to do with real estate)? That would be like taking Joe Shmoe’s advice over your Doctors, because the Doctor obviously earns more if you see him, whereas Joe Shmoe doesn’t making him unbiased.
condodweller
at 6:35 am
Woah, are you saying after all this discussion you want the person you listen to, to be biased? That’s quite the double standard. I think bias wasn’t the word you were looking for here. Perhaps knowledgeable?
Kyle
at 9:07 am
You’re right, bad wording on my part. My point is that, the pros closest to the action, will be the most experienced, most knowledgeable, most attuned and will have the most valuable information, but will also be perceived to be the most biased. Conversely those furthest from the action, will be perceived as the least biased, but will also be the least knowledgeable and will have the least valuable information.
Not sure why anyone would want unbiased useless informtaion, but seems there are people who do. Personally, i would take potentially biased good information (e.g. Benjamin Tal, David Fleming, Ben Myers, Are Mamourian, CMHC, CAAMP, TREB, CREA, CBA, Bank of Canada, Don Campbell, REIN, Doug Porter, Will Dunning, RealNet, Urbanation, Diana Petramala, RBC, Sal Guateri, etc), then make sure the information passes my sniff test before accepting it.
Kyle
at 5:44 pm
@ Joel
Turner doesn’t do the hard sell on his blog. Not sure if he still does them, but my understanding is he would save the hard sell for those that came out to his “free” speaking engagements. Such as the one pictured on his company’s website.
http://www.turnerinvestments.ca/OurApproach.htm
Fro Jo
at 12:06 pm
We get it. But just because the bears are wrong, it doesn’t make you geniuses.
If the boom continues after (if) interest rates rise somewhat :-), then, yeah, you’re all Wile E. Coyote Super Geniuses. Expect parades, statues, biopics etc.
Appraiser
at 5:49 pm
@ Fro Jo:
There are some very smart people who have been very wrong about real estate for quite some time. Many, like Garth Turner have their own agenda that renders them just as biased as any real estate humper out there. It doesn’t make them stupid. It just makes them wrong.
At the same time, being right doesn’t make you a genius either. It just makes you right.
Fro Jo
at 10:58 am
@ Appraiser, thank you for a great response. You are right on multiple counts, and I particularly liked your point about distinguishing bias/agenda and stupidity (and, if I may add, ignorance).
Andrei
at 1:23 pm
A Deputy Chief Economist at a Big 5 bank is about as unbiased as a realtor. Banks are the biggest beneficiaries of the rise in consumer credit.
condodweller
at 2:40 pm
I don’t have time to read the linked articles, however, I did catch Tal’s interview on BNN yesterday (see link below). Is he a bull or a cheerleader? I say neither, he seems like a level-headed guy who does his research and doesn’t make bold predictions. I really liked his comment at the end where he states that as people direct more and more of their cash flow towards their mortgages it will eventually impact our economy due to lower consumer spending, which in turn will impact jobs. What’s one factor that most people do agree will impact the RE market? Right.
WRT biases, sighting biases for discrediting someone is a cop out by people who don’t do their own research and can’t come up with a reasonable counter-argument backed up by their own analysis. Just because someone may have a bias doesn’t make them wrong.
http://www.bnn.ca/Video/player.aspx?vid=745945
Izzy_Bedibida
at 8:49 pm
I couldn’t agree more. This ties in with the comment I made last week concerning friends that don’t have the luxury of meeting for a $ 6.00 pint because all of their after tax income is tied to mortgage payments.
Appraiser
at 7:13 pm
Oh I think that I found myself a cheerleader
She is always right there when I need her
https://www.youtube.com/watch?v=jGflUbPQfW8
Sorry, couldn’t resist.
Can’t you just picture Benny Tal on the trumpet?
Chris
at 6:10 am
CIBC often promotes talks by Scott McGilvray https://www.youtube.com/watch?v=-YrnaglkU3Q. When he speaks at the CIBC sponsored events he explains to people his system – buy a house (with a mortgage), wait until there is equity in the house, borrow against that equity, buy a second house, repeat. He claims to have owned hundreds of houses himself by this method. Obviously the bank likes the message as it garners them mortgage customers – this is why they sponsor the event. The bank is not going to pay Benjamin Tal to tell people not to buy houses, at the same time they’re paying Scott McGilvray to tell them they ought to buy as many as they can. In the end they’re both part of the bank’s marketing strategy – just with different hair….
condodweller
at 2:24 pm
As has been discussed here it’s difficult to find totally unbiased commentary. BcGivray’s story is sound, but you have to bear in mind when he started. I don’t know exactly when but I assume it was near the bottom and he was able to use equity to buy new properties because his equity was growing. It’s easy to continue buying houses when you can take equity from an existing house without haveing to put up cash for the downpayment. The key is timing. It’s unlikely you can do this in today’s market.
Brad Lamb started out doing the same thing but it’s interesting to note the reason he became a RE agent was that when he was buying/selling properties he noted his RE agent was making more money than he was!
Jeff
at 8:18 am
This is just anacdotal but it feels banks are tighter in terms of lending – the amount of documentation/backup I needed for my renewel was more than my initial mortgage.
Just speaking to the rep at the bank just feels like the bank is tighter than few years ago.
Chris
at 10:27 am
It seems not every lender was all that tight to begin with:
http://www.cbc.ca/news/business/home-capital-mortgage-1.3305242
I guess it’s logical moving forward that some lenders will respond with tighter checks….
condodweller
at 2:07 pm
Absolutely. If it’s your first renewal your loan to value ratio is probably still high. This is a good thing that will prevent a US style collapse. Of course, it wouldn’t have been necessary if your original lender gave you a competitive renewal rate.
daniel
at 2:57 pm
Academic study of the real estate cycle suggests that RE values can diverge substantially from intrinsic or underlying value, and that these divergences can persist for reasonably extended periods of time. Previous thought on this was that the cyclical nature of the market was tied to the credit cycle (because, you know, RE tends to be levered). Newer thinking and research suggests there are other market distortions specific to RE that at least contribute to the credit related cycle and may in and of themselves generate market distortions.
As to the data, you do certainly get a much different picture when you parse the data than when you look at headline numbers. By way of example, “units under construction” is a particularly difficult one to understand. When construction was primarily houses, 50,000 units under construction meant that 50,000 units would be delivered within the year. With the proliferation of tall buildings with 3+ year construction cycles, 50,000 units under construction represents some units that will be delivered this year, and some units that will be delivered over the coming 3-4 years.
One easy stat to monitor and understand is the vacancy rate. Although it’s somewhat of a lagging indicator it at least gives you a pretty solid read state of the supply/demand cycle for housing at this moment, independent of the price. As of spring it was clocking in at 1.6%, which is low.