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Mortgage Broker News | 23 Oct 2014, 06:52 AM Agree 0
In its monetary policy report released yesterday the Bank of Canada admitted that some of our markets are far from a soft landing.
  • Kent Farnsworth | 23 Oct 2014, 10:21 AM Agree 0
    That is exactly why the regulations for mortgage lending needs to be sectioned off in regions. Would it be too much to ask for OSFI to do just a few hours researching so the most of the country isn't penalized for what is happening in 3 or 4 cities?
  • Kent Farnsworth | 23 Oct 2014, 11:30 AM Agree 0
    In some months in 2013 there were more foreclosures in New Brunswick than any other province in the country. Considering the population of this province, those are some pretty scary statistics. I would chalk up a significant percentage of those repo's to the change of LTV with regard to refinances. In a boom/bust type of economy it's was commonplace for people to use the equity in their homes to help get by the rough economic periods. This time when that bust happened there was no refuge from it. Property values decreased due to the mix of economic downturn and the inability to refinance to get over the hump. It was a big mess down here for awhile.
  • DeJong | 23 Oct 2014, 12:07 PM Agree 0
    Kent, where did you get the foreclosure stats from?
  • Teague Brinkworth | 23 Oct 2014, 12:20 PM Agree 0
    Kent, you have to keep regulations Canada wide. Certain provinces boom due to their production of a resource or product. The bust is for the same reason. It happens to different provinces at different times and the only way to minimize the impact of the "crisis'" or to stop a bubble is to keep a National View of Conservative lending. ie. The same person in BC, AB, ON, or NFL will still have the same covenant. If they are doing well, they have the ability to choose to save or spend. Spending and saving has to be balanced. Allowing more financing (spending) does not stop the behaviour or help the result.
  • Kent Farnsworth | 23 Oct 2014, 12:53 PM Agree 0
    From one of the realtors that I work with frequently. I believe they pulled the info from CREA.
  • Kent Farnsworth | 23 Oct 2014, 12:58 PM Agree 0
    Teague, maybe I should be more specific. No City on the East Coast has before and is unlikely to ever be the same economically as Toronto, Vancouver or Calgary. What I see as a problem is that OSFI bases all of their major decisions on what is happening in those three cities. I do agree with your position. At any rate, I still do not think it makes sense on having regulations based on an economy of 3 cities when everything is so completely different everywhere else.
  • Ron Butler | 23 Oct 2014, 01:36 PM Agree 0
    Same reason 87 year old grandmothers have to occasionally, randomly go through the full body scan at the airport. In Canada, every person and every mortgage has to be treated the same. Common sense is no longer part of the process. That being said, GTA, Lower Mainland and Greater Calgary make up a really big percentage of Canada's real estate transactions every year.

    I get what Kent is saying: for the Maritimes some of these mortgage rule changes must be very draconian.

    One thing I do know, there has never been a "soft landing" after this kind of value run up in the history of western countries. USA, Netherlands, Ireland, Briton, all the Scandinavian countries, never a soft landing. I realize there were local stories attached to all these countries property value problems, different issues, different policies than Canada. Still, there has never been a soft landing. I am not Garth Turner, I don't think the sky is falling, but still, something will have to give someday.
  • Jane | 24 Oct 2014, 01:29 PM Agree 0
    Your affiliation with the mortgage industry makes interpretation of Bank of Canada's report and where this all is heading non credible. Canadian real estate and banking industry is in trouble for some time and using fouls reports to motivate borrowers to early mortgage pay out to to increase shock buffer and minimize their exposure. There is no question if this is going to collapse, but when. Institutions such as CMHC will get hit hardest since they hold the bag through their collective insurance, while applying pressure on banks to tighten policies and to produce fouls reports only to stimulate market. You should ask yourself, where would everyday, middle class Canadian come up with lump sum payment or the money to decrease the balance of the mortgage at 160% household debt ratio and when Canadian economy is based on immigrant buying houses and strip malls and reselling back through their own community for profit. Besides oil sands and farming, Canada has very little to offer as the economy goes and Oil Sands are struggling these days too. You don't have to be in Alberta to know, just look at the price of gas. The cost of getting crude out of dirt in Canada is probably 10 times higher than to bring the same from middle east and all these Fort McMurry companies are working and surviving based on oil prices at about $95-$100/barrel and not $82/barrel. Canadians who bought in to real estate in past 3 years will become a casualties of Canadian Real Estate circus.
  • Kent Farnsworth | 24 Oct 2014, 01:46 PM Agree 0
    @Jane Once again, not all cities and provinces in Canada are afflicted with the same economic conditions of the cities that you are not mentioning by name but are very specific about.

    Secondly, it is confusing that the federal government is so very concerned with Canadian household debt, but yet have done the equivalent of nothing to tackle the unsecured lending practices that are completely out of control. Credit card companies continue to increase limits on cards and issue an endless amount of credit cards with no ceiling that I know of. Nothing has been done to regulate the auto financing industry either. Credit is incredibly easy to acquire for vehicles. "Got a job, get a car" is pretty much the standard of lending in this industry, not matter how bad an applicants credit is. On the AAA lending side of things, if an applicant has good credit, all they need to do is walk in to a dealership with a paystub (real or fabricated) and essentially walk out with a new e-class or maybe an Escalade.. Yet mortgage lending has been pounded every year for 6 years now. Why is it only real estate lending that is getting clamped down on so hard? At least for the most part people are borrowing against hard assets. What would the percentage that a vehicle loses in value the day that it is driven off of the lot by a proud new owner?
  • Jane | 27 Oct 2014, 01:07 AM Agree 0
    Smoke, Mirrors And Home Sales: Why Some Experts Don't Trust Canada's Housing Numbers
    Posted: 09/25/2014 8:57 am EDT Updated: 09/25/2014 9:59 am EDT

    Why do househunters in Nova Scotia have such a distinct advantage over those in Ontario or B.C. or Alberta? Soon the Toronto Real Estate Board, the country’s largest, will be called before Canada’s Competition Tribunal to answer that question.
    The push for more real estate boards to embrace the information age isn’t just about consumer convenience — the Canadian economy is shaped by data controlled by these realtor organizations.
    The Canadian Real Estate Association is the lobby group representing the interests of the country’s 100,000 realtors. Its monthly sales and prices report is one of the most widely used sources of housing data in Canada. Statistics Canada, the Canadian Mortgage Housing Corporation and the Bank of Canada use CREA’s data as a basis for their own calculations, reports and policy decisions.
    But unlike most data used in government reports, these housing numbers are prepared for and by the industry in question. The data is unregulated and unaudited. CREA aggregates sales totals from the country’s real estate boards and trusts that they are reporting correctly. Researchers’ access to the raw data is limited, making it difficult to verify or to conduct second-level analysis.
    The lack of industry data available to analysts, economists and researchers leaves them in the dark about the actual health of Canada’s housing market.
    ViewPoint Realty founder Bill McMullin told HuffPost he believes those who head up the industry fear that putting more information into consumers’ hands could leave realtors in the same fix as travel agents, whose importance has diminished because of technology.
    “They’re trying to keep the system, the structure, the policies in place … that prevent members from providing services on the web that are more efficient, consumer-friendly, allow people to learn on their own,” McMullin said.
    But it’s hard to know exactly what CREA is thinking. The organization’s president, realtor Beth Crosbie, rarely speaks publicly and the association refused requests to interview her for this story.
    The real estate industry has been taken to task by Canada’s competition watchdog. The Competition Bureau reached a deal in 2010 with CREA over restrictions that prevented brokers with alternative models from posting home listings on their monopolistic Multiple Listing Service, where 90 per cent of the country’s real estate deals takes place.
    That has opened the door for websites specializing in a la carte services for a flat fee for those who opt to sell their home privately rather than pay the typical five per cent commission. “CREA represents Blockbuster, while we’re a Netflix,” is how Walter Melanson at characterizes the divergent business models.
    This time the fight is over access to information that would allow traditional agents to adapt and compete with alternative models.
    After a years-long legal battle over technicalities, the Competition Bureau will square off against the Toronto Real Estate Board in December over its prohibition against realtors building online databases like ViewPoint’s to give their clients direct access to more information. Currently, realtors must provide that information by email, fax, phone or in person.
    Although the ban on such sites is widespread at boards across the country, the Competition Bureau targeted the Toronto board because it will have the greatest impact on consumers. The outcome of the case could shake up the entire industry, the way a similar case against CREA’s U.S. counterpart opened the information floodgates in that country.
    After years of fighting over real estate agents’ right to post in-depth MLS information on their own websites, the U.S. National Association of Realtors and the Department of Justice reached a settlement in 2008.
    It paved the way for a new era of buying and selling homes in the United States. Now sites such as Zillow and its recently acquired competitor Trulia allow consumers to do much of the initial searching by themselves.
    Although the services benefit buyers most — those who aren’t paying anything for an agent anyway — they also allow homeowners to get an estimate of their home value simply by typing in some key information. Some argue that access to data — such as what neighbours’ homes have sold for — actually helps to stimulate the market because it gets homeowners thinking of selling.
    The sites haven’t destroyed the market for realtors, as some feared. In fact, many now advertise their services on Zillow to find new clients.
    Canada’s Competition Bureau believes the Toronto Real Estate Board’s current rules prevent realtors from using technology to do their jobs more efficiently and give consumers more choice, said Richard Bilodeau, assistant deputy commissioner at the bureau.
    “We continue to have concerns about the restrictions they impose on agents wanting to innovate, and that’s why we’re continuing with this case,” he said.
    The Toronto board declined comment for the story, but it maintains that it opposes online databases to protect sellers’ personal information. The board has set up a website,, that warns if the bureau wins, sellers’ information will be made “publicly available to anyone on the internet.”
    The competition watchdog rejects that assertion, saying it is calling for password-protected sites that would be available to customers working with an agent. is password-protected but open to anyone who registers for a free acount, not just realtor customers. But it hasn’t changed the dynamic of the real estate industry, said McMullin, who wants to bring his ViewPoint service to Ontario and is a witness for the Competition Bureau.
    Nova Scotia has more realtors now than it did in 2009 before the province opened up its data, and ViewPoint’s sales are booming, with its agents just as busy as before.
    “It’s totally baffling to me that we’re in the dark,” he said. “If the competition commissioner does not win that case, or something doesn’t happen outside of that case, we’re going to be in the dark in Canada.
    “The lights will be on in Nova Scotia, but out everywhere else, because people cannot make a well-informed decision if they don’t have the data.”
    There are also questions about the accuracy of the real estate boards’ data. McMullin says he did a comparison of MLS sales data for Nova Scotia and the province’s land registry data. That research has led him to conclude that as much as 20 per cent of the housing stock in Nova Scotia is not sold over the MLS.
    “It’s important because most of the decisions related to policy in lending decisions are in some way based around what the MLS data says,” said McMullin.
    Not only are some houses potentially left out of the count, but CREA has faced allegations that it may be overcounting the number of sold houses.
    Last year, a former real estate agent, Ross Kay, pointed out that some homes sold were being counted as two or three sales in CREA’s monthly numbers because they were listed for sale at several real estate boards, such as Toronto, Burlington and Oakville. When CREA aggregates the monthly numbers from local boards, one sold house listed on three boards is counted as three sales.
    CREA acknowledged that this is sometimes the case, but said the effect is insignificant and accounts for only about 0.8 per cent of home sales.
    But Kay warns this double-counting could also be distorting CREA’s average national selling price, which informs the CMHC’s reports on the Canadian housing market, which in turn are used by Statistics Canada and other government departments.
    Kay owns a real estate consulting firm which has launched its own index of home values in Canada. His index relies on unfiltered data straight from the local boards rather than CREA’s aggregated number and strips out some of the issues with CREA data. He pegs the average year-to-date value for a Canadian home at $350,410 —about 15 per cent lower than CREA’s comparable year-to-date estimate of $406,145.
    The monthly numbers have also come under scrutiny from analysts because the national organization does not immediately factor in revisions made at the local level. Some boards revise their estimates downwards after passing along data to CREA. Reporting initial numbers without revisions give the impression of a strengthening home market each month, Kay said.
    CREA’s figures are also skewed because of when boards take a snapshot of their listings — at the end of the month when inventory is at a peak, Kay said. Generally, the highest volume of listings expire on the last two or first two days of the month. For August 2014, he said, his calculations indicate that that meant more than 18,500 listings, or seven per cent of total listings, on July 31 were included in active listings and months of inventory estimates but were no longer for sale by Aug. 3.
    Month after month, CREA reaches the same conclusion in press releases that pronounce the “Canadian housing market remains in balanced territory,” but Kay contends that the public is led to believe there are more houses available than there are, and that the market is not balanced but actually favours sellers.
    Many industry watchers are acutely aware of the issues with CREA’s data, especially in an era of inflated activity that continues to defy predictions of a market cooling.
    Economists take CREA data with a grain of salt because numbers from an industry group are different from the vast majority of economic indicators analyzed in Canada, BMO economist Doug Porter said.
    “The fact that the data are produced by CREA is simply a fact all parties should keep in mind when analyzing the figures, and more importantly, when reading their commentary,” he said, adding that overall he is not worried about the quality of the data.
    “There may be some upward bias to the figures due to the double-counting issue, but we are ultimately looking at trends — is the market heating or cooling — and the decimal places don't matter.”
    Still, researchers want to crunch the numbers for themselves just as much as some consumers want to conduct the research themselves.
    “Economists have accepted data points by MLS as de facto ways of measuring the real estate market, but really they are only half-measures,” Kay said.
    “We need more data to analyze because CREA gives the good news only.”
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