U.S. investment bank Goldman Sachs says there’s an almost one in three chance of Canada’s housing market going bust in the near future.
“The end of Canada’s housing boom?”, so said The Economist.
Sounds like it because …
Although concerns about Canada’s record level of household debt have intensified recently. And a recent poll conducted for Bloomberg News suggests it is also negatively impacting Canadians’ sentiments towards their country’s housing market — BUT this is not the case for National Bank.
“Underwriting standards for mortgage debt in Canada has become an issue for many investors following the troubles of an alternative mortgage lender at a time when home price inflation in Ontario is ahead of fundamentals,” National Bank Chief Economist Stefane Marion explains.
And here comes the politically correct statements (anticipated – What else to expect from the power-that-be?):-
Apparently, the National Bank believes there is big a difference between the pre-bust US housing market and Canada’s current boom. Parallels are being drawn and the outcome won’t be the same, according Stefane Marion.
“We take solace from the fact that lending standards for first-time homeowners in Canada have remained strict in recent years”. So much so that “Underwriting standards for mortgage debt in Canada have become an issue for many investors following the troubles of an alternative-mortgage lender at a time when home price inflation in Ontario is ahead of fundamentals”.
In 2006 — before the housing market crashed stateside — more than a quarter of first-time US homebuyers had low credit scores. National Bank considers borrowers with a FICO score under 620 and a Beacon score of less than 660 to have low credit ratings.
In Canada, these higher-risk borrowers represent a 4-per-cent share of first-time homebuyers, a “multi-year” low according to Marion: “That is a far cry from the peak of 28 per cent observed in the US at the height of its housing bubble”.
Last month, the Ontario Securities Commission, the provincial agency that regulates the lending industry, said Home Capital had knowledge of broker fraud earlier than it had let on. The development compromised investor confidence in the subprime lender and shares tumbled.
“For perspective, [Home Capital Group] has a sub-$20 billion mortgage book, which translates to minnow status relative to the $1.1 trillion of residential real estate credit on Big-Six balance sheets,” a National Bank analyst tells the Financial Post.
Guess you may trust Stefane Marion because the following home sales confirms everything remains fine and dandy, things are still very rosy …
For example, someone just bought this house for a cool $7 millions:-
90 Roxborough Street East – ROSEDALE
4 bedroom, 5 bathroom house on a 64.17 x 125.42 foot lot in South Rosedale.
Great house. Posh location.
In 2014, the asking price was $5,560,000. In October 2014, the price was dropped to $5,450,000. A few weeks later, it was down to $5,250,000. It sold in January 2015 for $5,060,000.
Almost three years later, it was listed at $6,995,000.
It sold last week for $7,000,000
So, What Housing Bubble, What Mortgage Trouble?
Still not convinced times are still good?
Here is an example that home prices is still hotter than hot …
50 Lippincott Street – KENSINGTON
1 bedroom, 1 bathroom bungalow row house on a 16 x 125 foot lot with 2 parking spots at 50 Lippincott Street in Kensington (near the Dundas Chinatown on the west side).
An absolute Fixer Upper babe because it could be renovated to be like the neighbour at 52 Lippincott Street that was listed in 2014 for $549,000, or become a 3 storey house like the one located a few doors down from this house…
This house was listed at $699,000.
It hasn’t sold but the price already increased – The new asking price for this fixer upper row house bungalow is now …
See, What Housing Bubble, What Mortgage Trouble?
For this reason, and if you are looking to buy a property in downtown Toronto, you may want to consider this newly listed home seriously and very quickly … Located in the other Chinatown* (on the east side): –
* There are two Chinatowns in downtown Toronto. The original one is on Dundas (tourist spot), the other one is on the east side at Gerrard/Broadview. Actually, there is hardly any Chinese there nowadays. The real Chinatown or should I say the “China City” is located up north in Markham, where the biggest Chinese shopping mall in North America is located – The Pacific Mall.
72 First Avenue – RIVERSIDE
3 bedroom, 4 bathroom semi with 2 parking spots on a 16.60 x 126.00 foot lot
But to make it work, you gotta be mentally prepared to compromise a little – Beaside there is a jail and mental hospital nearby. The look is like … Well, this the first thing you will see – the main door of the house!
This is what this house used to look like before it was gutted and renovated
And considering they renovated the whole house, I wonder why wouldn’t they replace the entrance door like this house … ?
Or paint it so that .. you know the original industrial looking brown … Well, how much does a door cost that they wouldn’t even consider replacing it? Even a simple question like this has become a science of late?
Otherwise, this is not a bad buy.
This is a semi detached with 2 bathrooms, and 2 parking spots and it is listed at $999,000.
Prediction: It will sell fast and probably closer to $1,225,000… maybe a bit more.
So, hurry up before it’s gone!
Declaration: We have no hidden interest in this property.