On July 1, Canada Mortgage and Housing Corporation (CMHC) tightened its underwriting policies for high ratio borrowers, including increasing credit score requirements and lowering debt servicing limits.
CMHC is, of course, a Crown Corporation, but there are private mortgage insurers, Canada Guaranty and Genworth Canada, that did not follow CMHC’s lead.
The result is CMHC has lost market share to the private companies as lenders send more business their way.
Last week, Evan Siddall, outgoing CEO of CMHC (he leaves at the end of the year) called on lenders to tighten their underwriting policies, for “the sake of the economy.”
Siddall sent a letter to CMHC-approved lenders and the country’s other two mortgage insurers, which reads, in part, “There is no doubt that we have willingly chosen to forego some profitable business that our competitors would find appealing.
“(CMHC) is approaching a level of minimum market share required to be able to protect the market in times of crisis.
“Please put our country’s long-term outlook ahead of short-term profitability.”
Industry executives were quick to respond, particularly to Siddall referring to a “dark economic underbelly to this business that I do not want to expose.”
“I think the type of language that is used in this letter is really only serving to drive fear in some instances,” Paul Taylor, president and CEO of Mortgage Professionals Canada, told BNN Bloomberg. “We should be thinking about the long-term economic prospects of Canadians here.”
Rob McLister, founder of
, also told BNN insurers and lenders are “extremely conservative” in their underwriting practices.
“Nobody wants to take a house back,” said McLister. “No lender or insurer wants to lend such that their arrears rate is noticeably above average, because then they stick out and bad things happen. The cost of capital goes up (and) regulators clamp down. There are so many incentives that people don’t understand in this business to keep lenders doing the right thing.”
Phil Soper, president and CEO of Royal LePage, has his own take.
“It was one of the more bizarre things I’ve heard a senior executive or the head of a Crown Corporation ever say,” says Soper. “Metaphors pop into my head. First of all I thought of the CBC. Say the CBC decides it’s going to cut programs, which essentially is what CMHC did — they cut service levels to a significant part of the market, that being young people, first-time home buyers without a credit history. So when CBC cuts programming, CTV bumps up its programming and advertisers move their business over to CTV. Then, CBC writes a letter to advertisers and says ‘you know, there is a dark underbelly in Canadian broadcasting and really, for the good of the nation, you need to move your advertising business back to us.
“That’s basically what Siddall wrote, but, he didn’t (mention) CMHC’s drop in service levels, the fact they abandoned bank customers, that they’re going to make things better in the future.
“No, they use some bizarre language to try to convince banks randomly that they need to move this business back from the private sector to the public sector after they materially dropped them. I know there’s a collective raising of eyebrows of bank executives saying ‘thanks for your bizarre letter but sorry, we’re busy, and we’re moving on with our lives.’ ”
Prudence guides the private insurers, who have no back-up to failure.
“If CMHC gets into financial trouble, the Canadian taxpayer bails them out. Not that that has happened, because Canadian housing has been strong for decades, but if CMHC has problems, that’s what happens,” says Soper. “If a private company gets into trouble, they go out of business or their shareholders abandon them. There is no bailout for private companies, so the underwriting rigour in the private sector is very, very good, because they don’t want to write bad policies.”
Another Soper metaphor.
“Take Canada Post, which delivers mail to Coronach, Saskatchewan, or Balzac, Alberta, for the same price as they do between Calgary and Edmonton and it’s a public service,” he says. “CMHC, in this bizarre approach to the market, said ‘we want to write the low-risk, high-margin business and get out of the service-to-Canadian-homeowners business,’ which is why the agency was created in the first place, and they got surprised, because the private sector said, ‘no that can be done safely and profitably’ and the banks, in return, gave the private insurers the higher-risk business that CMHC walked away from and more of the regular lower-risk, higher-margin business as well.”
CMHC wants the lower-risk, higher-margin business back because, without it, it is in a tenuous situation.
“What they did backfired completely and they are in the process of losing material market share and they’ve got a bunch of staff and they’ve got all these premises and all this management,” says Soper. “Suddenly their budgets, their forecasts, their commitments to their owners, the federal government, they’re all thrown out the window because they’re losing market share. So, it’s a very, very bizarre situation and my guess is the new head of CMHC will turn things around and it will become more client-centric and more focused on high-service levels, rather than preaching these bizarre, anti-housing sentiments from Canada’s housing agency.”
One last thought from Soper.
“Siddall’s a strange guy and CMHC is suffering as a result of it.”
Copyright Postmedia Network Inc., 2020
The state of multi-family real estate in Canada – Mortgage Broker News
If any readers are friendly with commercial real estate junkies, they’ll already have heard an earful about how industrial and multi-family properties are where the smart money is being spent by CRE investors. But with unemployment still over 10 percent in August, and rents in some of Canada’s tightest markets showing signs of softening, investors eyeing the multi-family space for the first time may feel there’s reason for worry.
Not so, says Geoff McTait, executive director of origination for Timbercreek in Canada.
“The underlying fundamentals of this market are exceptionally strong here in Canada,” he says. “We continue to see a significant shortfall in terms of new supply meeting demand. That remains true, even once things normalize post-COVID.”
McTait does, however, acknowledge that the pandemic has thrown the tiniest of wrenches into the gears of the multi-family space in the form of increased vacancies and falling rents.
He says the rise in vacancies that Timbercreek has been tracking could be tied to several issues: a significant drop in immigration, an increase in the number of renters taking on roommates to cover their expenses, or unemployed apartment dwellers returning home.
“I think a lot of people are moving home,” he says.
The same factors are contributing to an overall softening in rents, which has made for some tasty headline fodder in Toronto and Vancouver. But McTait feels rents, like housing prices, could see significant growth once the economy levels out, immigration returns to normal levels and those renters who moved home temporarily are ready to get back out on their own.
“Normalization will occur,” he says. “Demand will return, which will put pressure back on pricing. And I think you’ll continue to see a shortage on the new supply side of things coming to the market.”
Where’s the demand? Follow the jobs
With densification being the order of the day in most space-starved metropolitan areas and smaller buildings being economically unfeasible for most developers, McTait says much of the future demand will be for mid- to high rises, even outside major urban areas.
But he is less convinced by the concept of the urban exodus many market hounds have been touting since the beginning of COVID-19. He says most people will still want to live within an hour or so of their employers in case they need to commute part-time or access their offices.
“The suggestion that people will go to rural locations is a nice idea at this point in time – certainly it’s more affordable – but I don’t think it’s necessarily a solution nor practical in the long-term,” he says. “Employment opportunities will continue to dictate where people live and how they live, and that will continue despite the fact that we have this new potential to work from home.”
It’s little surprise, then, that McTait identifies areas like the GTA, Greater Vancouver, and Greater Montreal as markets poised for strong growth in the multi-family sector. But surging secondary markets like Hamilton, Quebec City, and Kitchener-Waterloo will also attract attention thanks to their affordability, strong employment environments and continued population growth.
Even multi-family markets in Canada’s more problematic economies, like Calgary and Edmonton, have “pleasantly surprised” McTait. There may not be a slew of demand for new properties in these cities, but current demand levels are strong enough to support the existing inventory.
“Multi-family, more broadly, is really the one asset class that we’ve seen over time, from primary, secondary, even into tertiary markets, where you do, in general, see strong demand, even in the tougher markets,” where vacancy ranges from three to seven percent, he says.
And Timbercreek isn’t the only company bullish on the future of multi-family real estate in Canada. In its recent Multi-Family Market Update for Victoria, BC, Colliers International said multi-family properties continue to outperform many other asset types.
“This sustained performance leads many to believe that the asset class will weather the storm of the crisis and thrive in the recovery,” reads the report.
Calgary real estate sales improve despite ongoing pandemic – CTV Toronto
Calgary realtor Shaukat Hayat had his busiest summer ever, during the COVID-19 pandemic.
“During the pandemic people realize the value of a property, value of a house while they were staying inside,” said Hayat, who has been in the industry since 2006.
Hayat said homes in the $300,000 to $500,000 price range are the ones moving, with homes selling within 30 to 45 days.
“Whoever is going out, they are a very determined buyer, and whoever has listed the property, very determined seller,” said Hayat.
“Summer 2019 and summer 2020, there is an increase in the price and increase in the number of the units sold all over the city.”
Hayat points to a number of factors, including inventory levels and low interest rates on monthly mortgage payments.
The Canada Mortgage and Housing Corporation says sales started to pick up toward the end of June, but were soft in April, May and June.
CMHC released its latest Housing Market Assessment on Monday, looking at the health of the market during the second quarter of 2020.
“We had a huge economic shock in labor markets, in the oil markets which Calgary is a centre of,” said Michael Mak, senior analyst, economics with CMHC.
“This shock basically gave consumers a level of uncertainty and both sellers and buyers didn’t really have a certain outlook on the future. It may be that they decided to wait and see how the government responded how the pandemic responded before making any sales or buys.”
April to June 2020, Mak said approximately 3,400 homes sold in Calgary, compared to 5,200 during the same time period in 2019.
“The MLS average price was $423,311, in the second quarter of 2020, down four per cent from the same period in 2019,” reads the report.
Mak said the report also found there is increased supply in new homes being built in the city compared to demand.
Final sales numbers for the summer aren’t available yet, but Mak says sales are slightly higher and prices are about 10 per cent higher also.
Don’t be a stranger! Sooke real estate agent won’t shy away from your questions – Sooke News Mirror
When you’re buying your first house, you’re likely to have a thousand questions. You may even ask the same questions more than once. The same goes for selling — whether it’s your first sale or your fifth, you’ll likely ask the same questions over and over.
Most real estate agents can answer your questions the first time you ask, but it takes a special kind of ‘people person’ to treat you with genuine compassion the fourth time you ask.
“I want my clients to feel comfortable reaching out to me for anything, even if they’ve asked me before,” says Paula Wensley, a real estate agent with Macdonald Realty Ltd. “My goal is to reduce stress for my clients so they don’t lose sleep — they’ll probably lose sleep anyway, but I can do my best to make the process easier.”
Find the right fit
Paula is relatively new to Sooke but she’s no stranger to southern Vancouver Island, having lived in many Island communities over the years. That local knowledge comes in handy when helping clients find their forever-home.
“I’ve had some amazing experiences with clients who weren’t happy with where they lived, but didn’t know where to move,” she says.
They’d describe their personalities, lifestyles and goals, and ask Paula ‘Where can you see us? What community would suit us?’ Using her knowledge of local communities and her talents for connecting with clients, she’d make a recommendation.
“One client reached out a year after they’d moved in just to say thanks. She said ‘we wouldn’t have found this community without you.’ It’s amazing to have that kind of impact.”
3rd generation in real estate
Paula comes from a family of real estate agents including her grandpa, dad, uncles and cousins, so she draws from a wealth of experience beyond her years. Before real estate she worked as a property manager and commercial sales assistant, so she’s seen the industry from all sides.
“I try to offer a fresh approach — I’m up to date on new negotiating techniques and other strategies,” she says.
Paula finds she connects well with clients who prefer a bit more time and attention to their individual needs. If you have a unique situation or just want a little extra help with your listing, Paula will give you her full attention.
“I don’t see myself in sales, I see it as a service. It’s not just a conveyor belt of clients.”
Follow Paula Wensley on Facebook for her latest insights on the tight real estate market, and visit paulawensley.com to browse current listings from Mill Bay to Sidney to Sooke. Get in touch by calling 250-388-5882 or at email@example.com.
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