Daily Market Update

Could a housing crash actually be good news for homeowners?… Getting a mortgage is increasingly tough for self employed buyers… Younger buyers proving cautious about entering the market… And banks look to assess their risk to a housing crisis…

Daily Market Update
Would a market crash actually be a good thing for homeowners?
It’s a phrase that fills Canadians and those of us involved in the housing market with dread, but could a market crash actually create benefits? Portfolio manager David Kaufman suggests that, with the exception of older homeowners looking to downsize, most people would be better off following a correction of the market. The reasoning; assuming a 20 per cent drop in prices across the board; is that young first-timers would need a smaller down-payment and a smaller mortgage and those in their 30s looking to upgrade would find their dream home drops in value more than their existing one, making it more affordable. Empty nesters looking to downsize would of course be facing the reverse situation. In reality there would not be a flat rate decrease and Mr Kaufman draws the conclusion that the best scenario is for a housing market that is in line with inflation. Read the full story.

Tight regulations making mortgages harder to get
Tighter rules on lending in recent years mean that getting a mortgage is tough for some Canadians. Real estate experts say that for the self-employed, those living in rural areas or those with poor credit history, mortgages are available but at a high price. The main issue for the self employed surround lack of history with lenders often asking for a decade or more of accounts. Higher down payments are also usually required and there will inevitably be higher repayments. There is also an issue with tax breaks not being considered by lenders, so income may appear too low for the mortgage payments but savings on income tax covering the shortfall. Read the full story.

Young Americans less interested in home ownership
It’s been the dream for generations of North Americans; grow up, get married, buy that dream home; but times are changing. A new risk-averse generation is growing. They’ve seen the banking crisis and what can happen when things go wrong and they’re choosing to wait before taking that leap into home ownership. Even the daughter of the Mortgage Bankers Association in Washington is reluctant to jump in too soon and says that despite growing up with her dad’s influence, she believes the world has changed. Sarah Stevens says that owning a home is a “five to ten year commitment” and despite being able to afford the repayments and having a down payment, she’s still holding off. This is certainly not an unusual stance; figures show that first-timers in the US are down to 27 per cent of the market, where it has historically been around 40 per cent. Read the full story.

Advisory firm working with banks on real estate concerns
Real estate advisory firm Altus say they are working with two major banks to help them assess their risk from real estate following concerns by regulators of the frothy market. The firm’s CEO Bob Courteau says that recent announcements by the Bank of Canada and the CMHC reflect the vulnerability of the economy to the housing market. He says that although both organisations are predicting a soft landing, the banks are keen to have clear information about their exposure. Read the full story.