More Con, less stress?

Want less stress test? Vote Tory.

Crave a return of 30-year mortgages? Yep. Go Con.

Federal Conservative leader Andrew Scheer has revealed at least two planks of his party’s platform for the October federal election and there they be. He told  a room full of mortgage dudes that, if elected, his government’s likely to alter B-20 so it exempts people renewing their home loans.

And, actually, that’s a good thing. The stress test now requires newbies to prove they can handle mortgage payments 2% higher than what they’re actually obliged to pay. That’s the Darwinian natural selection process, marking for extinction those snowflakes who’d fold if the cost of money spiked in the next half-decade. No harm there. More protection for the lenders, and the market.

But the test also applies to renewers wanting to switch banks. Anyone shopping the market when their term is up, looking for a better rate or more flexible prepayment, must also pass the test – currently set at 5.34%. That makes little sense. By limiting choice (and competition) it locks people into one lender who’s no longer motivated to give the best deal. Not good. So Scheer would (correctly) exempt renewers.

As for those three-decade-long amortizations which the last Conservative government punted, they’d probably return. “The 30-year amortization is something we’re absolutely looking at,” he said pointedly. But this may be more about pandering to our real estate hormones than good small-c policy. The longer you take to pay off a loan, the lower the monthly payments, the more you can borrow and the greater the overall interest bill. But this also boosts house prices, as loan amounts increase. Since none of us apparently have any fiscal self-discipline left, long ams mean properties get dearer. Debt increases. Inflation’s pumped. More rate pressure.

Let’s hope young Andy is not just saying this stuff to get elected.

Wow. That would be a first.

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When the boffo job numbers were published a few days ago, and reported here, most people didn’t believe them. No way, they cried, that over 100,000 paycheques were added in a single month. The economy’s circling the drain. It’s fake news!

Time will tell. But there are some interesting harbingers to note. Like RVs.

This is the time of year many Canadians lose their minds and start shopping for 18,000-pound road tanks with toilets, beds and the carbon footprint of a brontosaurus. They get excited, take one trip to Cape Breton or Utah, then park the beast in the driveway, annoying the neighbours until the rubber disintegrates and they sell for a dime on the dollar. It’s great fun. Anyway, blog dog Michael is involved in the industry, and sends along this note:

Year-over-year Canadian motorhome sales tumbled 53% for the first three months of 2019, according to the latest report from Statistical Surveys Inc. Class A registrations fell 37.3% for the three months. In the Class C segment, sales declined 58.5% through March.

An indication of economic health? Or just a reflection of the die-off of Boomers who love to buy these things, then drive them at 40 km/hour in eighty-click zones? In any case, the employment numbers are a head-scratcher. “While we are not going to complain about the jobs numbers of late,” say the economists at TD, “their strength is a bit of a mystery when other economic indicators paint a more modest picture of the Canadian economy.”

Others swear Ottawa’s numbers are as entirely reliable as those from the real estate board.

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Hamid writes:

My question to you is what advice would you give someone in their early 20’s, completed a diploma in computing systems and plans to do the bachelors degree part time while working.  Vancouver is an unattainable, unattractive market for the average person. I grew up thinking it’s the best place in the world but now I wonder if I can continue to live here. What real estate tips would you offer to someone in my generation? Is a not so nice but affordable condo a good investment opportunity? Our economy right now is pretty sluggish and it doesn’t matter who becomes the next PM it looks like we’re going to see at best something in the 1.1-1.3% economic growth range. Do you think this will cause a major housing collapse in the next 3-5 years? Even in my suburb of Port Coquitlam townhouses cost 600-700k with a detached home practically 850k and above and more likely above 1 million? I would love to hear your thoughts on these matters and any other real estate and investment tips and tricks that you may have for people in their early 20’s.

None. Give it up. Don’t buy a crappy PoCo condo just to be in real estate, as there’s no guarantee of profit and a great potential for loss. The Vancouver market is hurtling towards earth for all the reasons spelled out here, and the bottom is far off. Stay away, Hamid.

If you want cheap property with a chance of appreciation, go to Calgary. Get a hat. Big belt buckle. Learn to swagger. Eat beef. Buy downtown. Hurry.