Sent to me from Craig Kamman, realtor extraordinaire. In short Canadian housing permits. My question to my Canadian friends is how did these permits recover so quickly?
My first suspicion is immigration. For the past 20 years or so, Canada has been bringing in about 250,000 immigrants per year. Since everyone requires somewhere to live, I suspect the steady influx has been pushing the demand for new housing. Of course, I may be wrong.
My dad used to do mortgages - he says it's because the Canadian banks didn't throw common sense out the window. You have to prove you can make the monthly payments (or don't live on a reserve where they can't repossess the property) or you don't get any money. Simple.
Scotth has it right. We never passed any laws requiring banks to give loans to people that didnt have a job and means to pay it back.
We also didnt flirt with 0 down laws very much and anyone that put less than %25 down to start had to carry insurance on the loan that would pay out to the bank in the event of default. (Hmm, why are the banks not taking out life insurance policies on us defaulters and then asking the president to have them assassinated? Yet...)
Additionally, you cant walk away from a house up here and leave the mess to the bank to clean up. You clean it up yourself, and face far more real financial consequences then you do in the states these days.
Canadian housing market is based more on sound lending practices. Sure there are some 5% down barley make the payment loans, but not nearly like what you had in the US.
Canadian official unemployment is 2% lower than the US and the official number is much closer to reality, where in the US everyone knows the official number is a joke.
Last month Canada created 61,000 jobs while the US created 103,000 (45k of which where striking Verizon workers going back to work) Canada has a population 1/10th that of the US. Canada is creating jobs at 6 times the rate of the US on a per capita basis.
We elected an economist conservative as our PM, you elected a community organizer as president...
Thanks Captain. I am really curious on what they did right. I suspect it has to do with the regulations and "bailouts" we did where I suspect Canada let the market correct itself.
Your missing a big difference in the two markets. In the US mortgage interest is tax deductible. This encourages people not to keep any equity in their home. A lot of people also take out second mortgages to pay for various consumer products. In Canada people actually try to pay off their mortgage, as soon as possible. The US tax policy added a lot of hot money to the housing market. The policy also changed people`s attitude towards the housing market in the US. People started to look towards their own house as an ATM cash machine, instead of a stable long term investment. Home prices always go up, and great all the mortgage interest is tax deductible, you can`t loose.I guess it was a great party, but the hangover is rather severe. In Canada both bankers and house consumers, maintained a much more prudent approach to the housing market. That being said, check out the Vancouver BC market. They are in a housing boom, fueled mainly by rich Asians buying Vancouver real estate.
Canada has the Canada Housing and Mortgage Corporation, but the government controls it much more the Freddie/Franny- when CMHC went with lower downpayments and longer mortgages, the government reined them in after a while.
Various provincial governments have first time home buyer programs, but the money is not all that great - it comes as a non-refundable tax credit meaning that it only amounts to about $1,000 at the top payout - i helps but it is not a determining factor in the amount you are willing to pay for a house.
As well, banks tended not to give out huge lines of credit on homes, so while there are many people that have maxed out their line of credit, it is again not a big impact on their net worth.
Canada didn't need to bail out our banks because they were not exposed to the debt problems that other banks were.
My first suspicion is immigration. For the past 20 years or so, Canada has been bringing in about 250,000 immigrants per year. Since everyone requires somewhere to live, I suspect the steady influx has been pushing the demand for new housing. Of course, I may be wrong.
ReplyDeleteMy dad used to do mortgages - he says it's because the Canadian banks didn't throw common sense out the window. You have to prove you can make the monthly payments (or don't live on a reserve where they can't repossess the property) or you don't get any money. Simple.
ReplyDeleteScotth has it right. We never passed any laws requiring banks to give loans to people that didnt have a job and means to pay it back.
ReplyDeleteWe also didnt flirt with 0 down laws very much and anyone that put less than %25 down to start had to carry insurance on the loan that would pay out to the bank in the event of default. (Hmm, why are the banks not taking out life insurance policies on us defaulters and then asking the president to have them assassinated? Yet...)
Additionally, you cant walk away from a house up here and leave the mess to the bank to clean up. You clean it up yourself, and face far more real financial consequences then you do in the states these days.
Canadian housing market is based more on sound lending practices. Sure there are some 5% down barley make the payment loans, but not nearly like what you had in the US.
ReplyDeleteCanadian official unemployment is 2% lower than the US and the official number is much closer to reality, where in the US everyone knows the official number is a joke.
Last month Canada created 61,000 jobs while the US created 103,000 (45k of which where striking Verizon workers going back to work) Canada has a population 1/10th that of the US. Canada is creating jobs at 6 times the rate of the US on a per capita basis.
We elected an economist conservative as our PM, you elected a community organizer as president...
Thanks Captain. I am really curious on what they did right.
ReplyDeleteI suspect it has to do with the regulations and "bailouts" we did where I suspect Canada let the market correct itself.
Your missing a big difference in the two markets. In the US mortgage interest is tax deductible. This encourages people not to keep any equity in their home. A lot of people also take out second mortgages to pay for various consumer products. In Canada people actually try to pay off their mortgage, as soon as possible. The US tax policy added a lot of hot money to the housing market. The policy also changed people`s attitude towards the housing market in the US. People started to look towards their own house as an ATM cash machine, instead of a stable long term investment. Home prices always go up, and great all the mortgage interest is tax deductible, you can`t loose.I guess it was a great party, but the hangover is rather severe. In Canada both bankers and house consumers, maintained a much more prudent approach to the housing market.
ReplyDeleteThat being said, check out the Vancouver BC market. They are in a housing boom, fueled mainly by rich Asians buying Vancouver real estate.
maybe canadian banks don't have shitty low capital requirements
ReplyDeleteHi Cappy:
ReplyDeleteMy guess? Dumb luck!
"God protects fools and little children."
In reply to Pete Collins:
ReplyDeleteThe Dumb luck that the U.S. used to have?
Do the Canucks have an equivelant gaurantee like FannieMae and FreddieMac for their banks? or are the banks taking the risk when lending?
ReplyDeleteDid the Canucks do a "first time homebuyer tax credit"?
Did the Canucks bailout their banks on what wasn't covered by Fannie and Freddie?
Canada has the Canada Housing and Mortgage Corporation, but the government controls it much more the Freddie/Franny- when CMHC went with lower downpayments and longer mortgages, the government reined them in after a while.
ReplyDeleteVarious provincial governments have first time home buyer programs, but the money is not all that great - it comes as a non-refundable tax credit meaning that it only amounts to about $1,000 at the top payout - i helps but it is not a determining factor in the amount you are willing to pay for a house.
As well, banks tended not to give out huge lines of credit on homes, so while there are many people that have maxed out their line of credit, it is again not a big impact on their net worth.
Canada didn't need to bail out our banks because they were not exposed to the debt problems that other banks were.