Let’s start this last full autumnal October week with a few follow-up items.
First, that election. Never before have two more deeply flawed people sought the world’s most important job. Somehow the contest between a racist, misogynist buffoon and an untrustworthy career political hack has become epically aggrandized. Now it’s a struggle between nationalism and globalism, between the 99% and the 1%, between workers and corps, between web expression and the MSM, between war and accommodation, between democracy and elitism – and no longer just left vs right.
Sadly, neither candidate’s worthy of embodying anything other than their own narcissistic ambition, but with a few days remaining, tough. The outcome of this vote will be significant, and the one night involved, historic. So let’s make the most of it.
The suggestion was put forward that the comment section of this pathetic blog go live and unfiltered on election night. I agree. Almost.
Blog dog Ted offers this thought: “Throw the comments open, no holds barred, maybe a disclaimer that opinions expressed are not necessarily…etc. let the loons spew and then without warning, remove the comment column once and for all.
“Sadly, what was the short tattered lunatic fringe pre-internet and antisocial media has grown into a long and elaborate lunatic theatre curtain flowing across and off the stage into the audience. What was once a lone wild eyed nutter handing out tracts in the supermarket parking lot has become mainstream. Every guy or gal pumping up his ego life raft, every cockamamie response and link to reactionary loon sites has to have been received in the comments section at least a hundred times. Reading the same ca-ca daily must seem like groundhog day or a prof reading freshman essays for the 30th straight year or…you get the drill.”
I do. Without fail, after I moderate comments for an hour or two in the evening, Dorothy looks at me and says, “You know you’ll never get that time back, right? You could have been spending it with me.” I feel so cheap.
Well, on the night of the 8th, no moderation, only deserving deletions. Bandit has been tasked to man the D button. I’ll be in the bunker with my wife.
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As you now know, the feds on Friday unleashed a ‘consultation’ process which will end more than six decades of government mismanagement of mortgages. No longer will taxpayers backstop all of the risk involved in lending to people without money to buy houses can’t afford. Ottawa intends on imposing a deductible on lenders, so they’re responsible for some of the damage – just like when you drive your car into the garage door while texting.
It’s a huge deal in the mortgage business, where lenders already feel unloved after Wild Bill Morneau brought in a stiff stress test for moisters and diddled with insurance regs disqualifying many existing clients. Now, horrors, they’ll be asked to eat some losses.
The industry bible, ‘Canadian Mortgage Trends’ waxed long on the topic during the weekend. Thought you might be interested in the conclusions reached as to how this will impact borrowers, and the market:
How might consumers fare: Here’s what we expect:
Mortgage rates will shoot up as lenders try to offset this new cost, and as bank challengers become less able to undercut the banks.
Lending will partially dry up, or incur material surcharges, in rural, remote, high-unemployment or economically undiversified areas.
Insurance premiums may drop (one potential bright spot in all of this).
How much could rates jump: In short, meaningfully.
The DoF (Department of Finance) writes, “Preliminary analysis suggests the average increase in lender costs over a five-year period could be 20 to 30 basis points1 (That’s over five years)
Preliminary estimates from four lenders we spoke with are that the DoF’s estimates are laughably low, that the rate increase required to offset these changes is at least 15-20 basis each year.
The DoF suggests rates could rise more for “loans with lower credit scores in a region with historically higher loan losses.”
The changes are likely to be law by the end of 2017, or shortly thereafter. Govern yourself accordingly.
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So what will all this mean for the value of your house? Last week I estimated about a 15% correction in prices over a year or so, and after that a long period of erratic melt. Nobody knows for sure, as this depends on the path of interest rates, commodity prices, GDP growth and whether or not we have a rabid protectionist and free trade-ripper in the White House.
Meanwhile the National Bank has published its own predictions. Vancouver detached houses will fall 20% in value over the next 12 months, taking the average house from about $1,579,400 million to $1.263 million – a decline of more than $315,000, it says. Attached houses will drop less (-9%) as will condos (-5%). The bank says Toronto will be largely spared (overall prices -3%) because of an historic lack of supply (down 37% year/year).
Finally, on Wednesday CMHC will be issuing its first-ever Code Red alert for Canadian residential real estate, covering the entire national market. This means the agency sees overheating of demand, price acceleration, house price overvaluation and overbuilding.
No locusts, but close. Still time to bail.