How the real estate industry is killing its only remaining advantage

By James Cowan, Canadian Business - Thursday, May 2, 2013 at 8:24 AM - 0 Comments

Steve Helber/AP Photo

My family and I are thinking about buying a new house. The idea is closer to “strong notion” than “airtight plan” on the thinking-about-stuff spectrum, but we’ve looked at a few listed homes and will do some repairs this summer in preparation for eventual sale. When the moment arrives, I will happily pay a real estate agent. We need someone who knows our area, exerts no pressure and, most important, someone who we trust.

Like stockbrokers and travel agents, real estate agents no longer hold a monopoly over their fields, with online services now making it easy to look for houses, buy stocks or book a trip to Cuba. Agents in these fields once sold market access; now they sell wise counsel. So it is baffling that real estate associations have wasted years fighting inevitable industry shifts with tactics making them appear neither trustworthy nor credible. They are killing their only remaining advantage.

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For sale: Pristine wilderness property, just mind the mines

By Darryl Greer - Thursday, May 2, 2013 at 8:00 AM - 0 Comments

Michael Wheatley/All Canada Photos/Corbis

The pristine wilderness around Kalamalka Lake near the city of Vernon, B.C., is a prime example of why the region is loved by tourists and residents alike. And, this being B.C., it was only a matter of time before property developers took note, too.

In 2005, Vancouver-based K & L Land Partnership began snapping up lots overlooking the lake, eventually acquiring 546 hectares and pouring more than $28.5 million into a planned residential subdivision. But what the developer insists it didn’t know at the time, and what it claims in a pair of lawsuits winding their way through B.C. courts, is that the land it bought is, quite literally, a minefield.

During the Second World War, areas around Vernon were used in military training operations, which included a mortar-practice range nearby Cosens Bay. After the war ended, though, many still-lethal munitions were left behind. Between 1944 and 1973, at least nine people were killed in the Vernon area after coming in contact with explosives.

But a lawsuit filed by the developer in B.C. Supreme Court against the attorney general of Canada alleges it wasn’t until 2011 that the Department of National Defence (DND) revealed to K & L that the land it had bought was also riddled with an unknown number of bombs, mortar shells and grenades, making it worthless for development. In seeking compensation from Ottawa for its losses, K & L claims the government committed an “ongoing unlawful act” by abandoning the explosives and failing to warn of the danger. K & L’s lawyer, Howard Shapray, says it’s not “rocket science” that the government should be held liable if its property—the unexploded bombs—is creating hazards.

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Housing prices up in most Canadian markets in early 2013: Royal LePage

By The Canadian Press - Thursday, April 4, 2013 at 7:58 AM - 0 Comments

TORONTO – Average prices for three common types of housing were up year-over-year in most Canadian markets in the first quarter, national real estate company Royal LePage said Thursday.

Royal LePage said the average price for a standard two-storey detached house was up 2.2 per cent in the January-March period compared with a year ago, while the national average price for detached bungalows rose 2.4 per cent.

The average price for condominiums rose 1.2 per cent from first quarter of 2012.

Some local markets didn’t fit the national pattern, however.

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Return of the housing bubble

By Tamsin McMahon - Monday, March 4, 2013 at 7:00 AM - 0 Comments

Lucy Nicholson/Reuters

For the past decade American economists Karl Case and Robert Shiller, whose Case-Shiller indices are considered the official barometer of the U.S. housing sector, have regularly polled recent home buyers on where they think house prices are headed. The 5,000 buyers in their survey have proved remarkably perceptive, consistently predicting how far prices would rise or fall a year into the future.

But when they asked buyers where they thought prices would be in a decade, a different picture emerged. Buyers have regularly predicted large and steady long-term increases in home prices. Even in 2009, during the depths of the financial crisis as prices fell more than 30 per cent, buyers were still predicting their homes would likely double in value over the next 10 years.

With this enduring faith in the infallibility of house prices, America’s housing market suddenly seems to be springing to life once more. Nationally, prices jumped more than 12 per cent in January over the previous year, the largest increase since 2006. Prices are up in more than 100 cities, according to real estate data firm Zillow, with increases above 10 per cent in more than 47 major centres.

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Book Review: Ann Leary’s ‘The Good House’

By Sarah Murdoch - Friday, March 1, 2013 at 11:00 AM - 0 Comments

Hildy Good has gone through rehab following an intervention (an “inquisition,” she calls the shameful event) staged by her two adult daughters. Now she arrives at parties after cocktails and departs right after dinner, returns home and knocks back a few glasses of the delicious red wine she has purchased online.

Yes, Hildy, the top real estate agent in Wendover, Mass., is a secret drinker, but she questions whether she is really and truly an alcoholic. She is smart and funny and functions well. Even the reader wonders what’s so terrible about Hildy winding down with a glass or two at day’s end.

Alcoholism may seem like a dire theme for what is essentially a light and bright women’s entertainment, but it works. There is no lecturing, no finger-waggling, and indeed author Leary recently said she, like Hildy, loves drinking and would certainly still be doing so were it not for the blackouts.

But this engaging novel has more going on than a 60-year-old divorcee’s drinking issues. Hildy’s town—she is the descendant of Sarah Good, one of the first women hanged for witchcraft in nearby Salem—teems with characters. There are the McAllisters, Brian, a wealthy hedge-fund founder, and Rebecca, his beautiful, idle young wife. And psychiatrist Peter Newbold, whom Hildy used to babysit and who now rents space above her office. Patch and Cassie Dwight, the young parents of Jake, a disabled boy of 9, have been trying to sell their house for a year. And Frankie Getchell, Hildy’s teenaged sweetheart, who now picks up the town’s garbage, is on hand to help with whatever needs doing.

There is love, sex, real estate, a disappearance and a death. And, predictably, a “jackpot,” which is what people in rehab call those shameful, life-wrecking events that occur when alcohol dilutes good sense.

At its heart, The Good House is a vehicle to write about that wavy, indistinct line that separates the social drinker from the alcoholic (a person who is “born three drinks short of comfortable,” as one character puts it), and it does so more effectively than any public-service campaign ever could, without sacrificing good humour, insight and intelligence.

Visit the Maclean’s Bookmarked blog for news and reviews on all things literary

Arcade Fire recording studio on the market

By Jonathon Gatehouse - Friday, January 25, 2013 at 1:35 PM - 0 Comments

Danaï Papadomanolakis

For sale: one crumbling piece of Canadian music history. Montreal indie rockers Arcade Fire have put their recording studio, a converted 160-year-old church in Farnham, Que., up on the block. The listing, posted via the band’s Twitter account last week, asks $325,000 for the red brick structure located on a quiet village side street, “walking distance to main road, shops and schools.” The group has sunk considerable money into the building since acquiring it in 2005, upgrading plumbing and wiring, renovating bedrooms and a kitchen, and adding a full recording studio in the basement. And the cozy set-up is where they laid down the bulk of their acclaimed 2007 offering Neon Bible and its hit 2010 follow-up, The Suburbs, winner of a Grammy as best album of the year.

But potential buyers should beware. The listing notes a couple of problems: minor water infiltration after heavy rain, and a roof that needs to be replaced at an estimated cost of between $23,000 and $44,000.

According to reports in the music press last fall, structural issues with the church became so bad that the group was forced to stop working on its next disc—due later this year—and find new recording space. “The roof is collapsing. It’s completely falling apart,” Jeremy Gara, the band’s drummer, told an Ottawa radio station.

For all its critical success—appearances on Saturday Night Live, opening for U2 and jamming on stage with Bruce Springsteen—it seems the seven-member band remains something less than rock-star rich. So faced with a repair bill that outstrips the $30,000 they received as winners of the 2011 Polaris Prize for best Canadian album, they’re moving on. Maybe Rush or Carly Rae Jepsen are in the market.

Mark Carney on the price of your house (and the value of his privacy)

By John Geddes - Wednesday, January 23, 2013 at 3:42 PM - 0 Comments

Far be it from me to suggest that Mark Carney’s career trajectory and choices of vacation spots aren’t fascinating—and both topics got a decent share of attention at his news conference today—but the Bank of Canada governor’s latest message on the Canadian housing market strikes me as even more interesting.

Here at Maclean’s—as you might have noticed if you watch our cover stories, including this recent one—we are quite intrigued by the housing market. And I don’t think we’re alone, based on the evidence of the many dinner conversations I’ve heard turn, inexorably it seems, to real estate prices. Carney’s message today, as he discussed the bank’s quarterly monetary policy report, is that the heat is out of the market.

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Dec. home sales down 17.4 per cent from year ago, average price up

By The Canadian Press - Tuesday, January 15, 2013 at 9:51 AM - 0 Comments

OTTAWA – The correction in Canada’s housing market gather momentum in December as the number of new listings slipped, prices moderated and the number of homes sold fell 17.4 per cent from a year earlier, the biggest drop-off in six months.

The Canadian Real Estate Association said Tuesday that 20,538 homes were sold across the country through its MLS system last month, down from 24,850 in December 2011, and 0.5 per cent lower than in November.

The increase in prices also continued to slow, tipping in at only 1.6 per cent from a year ago to $352,800 — about the level of overall inflation.

“The housing market is clearly in correction mode,” said Derek Holt, vice-president of economics at Scotia Capital. “But this is certainly nothing even close to the U.S. and European experience and I don’t think we’re headed in that direction, but it’s still sizable.” Continue…

New house price index up 0.1 per cent in November: StatsCan

By The Canadian Press - Thursday, January 10, 2013 at 9:32 AM - 0 Comments

OTTAWA – Statistics Canada says its new-house price index rose 0.1 per cent in November, following a 0.2 per cent increase in October.

The agency says the combined metropolitan region of Toronto and Oshawa was the top contributor to the advance.

The largest monthly price advance in November occurred in London, where prices were up 0.6 per cent, followed by Halifax and St. Catharines–Niagara, which recorded a 0.5 per cent increase.

Prices were down 0.5 per cent in Victoria and 0.4 per cent in Vancouver.

On a year-over-year basis, the index rose 2.2 per cent in the 12 months to November, following a 2.4 per cent increase the previous month.

Again, the main contributor to the advance was the combined metropolitan region of Toronto and Oshawa, where the year-over-year-increase in was 4.1 per cent.

Construction intentions in November off 17.9 per cent: StatsCan

By The Canadian Press - Thursday, January 10, 2013 at 9:16 AM - 0 Comments

OTTAWA – Statistics Canada says municipalities issued building permits worth $6.2 billion in November, down 17.9 per cent from October and the lowest number since January 2012.

The agency says the drop follows a 15.9 per cent increase in October.

Analysts had been expecting a smaller month-to-month decline of 7.6 per cent. Continue…

Pace of housing starts slowed in December: CMHC

By The Canadian Press - Wednesday, January 9, 2013 at 9:01 AM - 0 Comments

OTTAWA – Canada Mortgage and Housing Corp. says the pace of housing starts slowed slightly in December, compared with the previous month.

The agency says there were 16,352 actual starts in December, which put the country on a pace to build 197,976 housing units on an annual basis.

That was down slightly from 201,376 in November but still higher than the 195,000 that economists had expected.

The seasonally adjusted annual rate of urban starts slipped 0.1 per cent in December to 178,870 units, with single starts up 8.6 per cent to 67,419 units and multiple starts down 4.7 per cent to 111,451 units.

Urban starts fell in the Prairies, Quebec and British Columbia, increased in Ontario and were relatively unchanged in Atlantic Canada.

Rural starts were estimated at a seasonally adjusted annual rate of 19,106 units.

When Canadian snowbirds attack

By Tamsin McMahon - Wednesday, October 3, 2012 at 11:00 PM - 0 Comments

Photograph by Mark Peterman/Getty Images

Last year, Edmonton investor Jeff Lastiwka was on the hunt for bargain basement development properties in the scorched real estate landscape of California’s Palm Desert when his brother-in-law, a real estate agent in Scottsdale, pitched him on buying 100 houses to flip in Arizona.

At the time, Lastiwka, who runs JayCap Financial, a private commercial lending firm in Alberta, balked at the idea. But after watching property values in Phoenix soar over the past year, Lastiwka headed back to the Scottsdale area this spring armed with $10 million to spend on foreclosed properties. He left disappointed, finding much of the market for distressed homes in Phoenix had already been picked over and snapped up by either investors or local real estate agents. “I kick myself about it now because the properties I was looking at a year and a half ago have doubled in value,” he says.

Phoenix was the epicentre of America’s subprime real estate bust, with property values plunging more than 50 per cent during the depths of the recession. Then came the Canadians, enticed by year-round sun and the prospect of brand new bungalows with backyard pools that could be had for less than the average Canadian household income—about $60,000 at the bottom of the market.

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Real estate: today’s bidding wars are for farmland

By Tamsin McMahon - Tuesday, September 25, 2012 at 11:44 AM - 0 Comments

Photo by Peter Power/The Globe and Mail

The hottest real estate investments aren’t in big cities. Today’s bidding wars are in the breadbasket.

Much like the frenzy that has swept Canada’s urban housing market, real estate prices are soaring in the hinterlands. Prices of farmland have shot up as much as 25 per cent across Canada this year. Fruit growers in B.C.’s Fraser Valley command $60,000 an acre. Bidding wars are breaking out for farms in Saskatchewan, while grain land in Alberta “can sell virtually overnight,” says a report this September from Re/Max. In some areas of southwestern Ontario, prices jumped 70 per cent in the past two years to $15,000 an acre.

Much of the enthusiasm for farmland has been driven by farmers enticed to expand their operations by low interest rates and record-high prices for corn, barley and wheat, thanks to the worst drought in a half-century that’s swept the U.S.

But it’s not only farmers that see a gold mine in cropland. Central Alberta’s oil sector has helped fuel a 25 per cent jump in farm prices. Nearly three-quarters of farms have oil and gas wells that are leased to oil companies for added income. Where once sellers could add three times the rental income of a well to the price of their property, they can now command five or six times, says Don MacDonald, a Re/Max realtor in central Alberta.

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Charbonneau commission: ‘Donnie Brasco’ a living reminder of how bad things remain in Quebec

By Martin Patriquin - Monday, September 24, 2012 at 6:27 PM - 0 Comments

This artist drawing shows undercover FBI agent Joseph Pistone, at federal court in Manhattan, New York City on Tuesday, August 3, 1982. (Ida Libby Dengrove/CP/AP, WNBC TV)

It’s impossible not to listen to Joe Pistone. From the moment he took the stand today at the so-called Charbonneau commission, the man better known as Donnie Brasco waxed nostalgic about the days where he stuck a stake in the heart of the American Mafia. Pistone, you’ll recall, was an FBI agent who between 1973 and 1981 masqueraded as a jewel thief in New York and ingratiated himself with what was then one of the biggest crime syndicates in North America. It is an incredible story, one committed to celluloid by the likes of Johnny Depp in 1997’s Donnie Brasco, and the simple act of hearing him spill what he has already written about in numerous books and one screenplay—in Montreal, behind an identity-shielding barrier, in his Jersey-inflected English—was something to behold.

The question is: beyond the obvious pomp and star power, what does Donnie Brasco’s life story bring to Quebec’s hearings on corruption in its construction industry? After all, impressive as it is, Pistone is an American who investigated an American phenomenon for an American law enforcement agency. He didn’t need to know anything about the Canadian mafia equation—if only because he had other things to worry about, like keeping himself among the living. Montreal’s Rizzuto Clan gets no more than a walk-on role in Donnie Brasco: Unfinished Business, Pistone’s third book. This, even though Brasco was undercover when the once-formidable Rizzuto Clan was at its height, and was a major source of drugs (mostly heroin) for New York City.

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Tighter mortgage rules are cooling the housing market across Canada, Conference Board finds

By Julian Beltrame, The Canadian Press - Monday, September 24, 2012 at 1:15 PM - 0 Comments

OTTAWA – Canada’s housing market appears to be cooling across the board in the face of tighter mortgage rules that affect many first-time buyers of modest means, a new analysis from the Conference Board shows.

The think-tank’s snapshot of resales for August shows a widespread decline in sales of existing homes, with 21 of 28 metropolitan markets registering a drop from July, and 16 of the markets showing a falloff of five per cent or more.

As well, listings fell in 17 of the 28 markets, an indication that owners were reluctant to place their homes for sale due to soft conditions.

Senior economist Robin Wiebe of the Conference Board said there was evidence of cooling in some markets — particularly Vancouver and Victoria — before the new rules went into effect July 9. But the new data shows the slowdown has spread to most markets and from coast to coast.

“When you see sales down in three-quarters of the market, that means it’s pretty widespread,” he said. “It’s knocked down previously high-flying markets like Regina and Saskatoon down a peg. Vancouver had been showing signs of cooling, now it’s spread out into the Fraser Valley.”

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Why Canadian homeowners are likely just as vulnerable as Americans were

By Ben Rabidoux - Wednesday, August 22, 2012 at 3:20 PM - 0 Comments

Ben Rabidoux is is an analyst at M Hanson Advisors, a market research firm, where he focuses on Canadian mortgage and credit trends and their implications for the broader economy. He blogs regularly about the housing market at The Economic Analyst. Follow Ben on Twitter @BenRabidoux. 

If you listen to our banks, Canadian homeowners have nothing to worry about. According to Scotia’s latest housing outlook, for example: “Canadian household balance sheets remain in reasonably good shape, with homeowners’ equity in real estate assets averaging 67% compared with 41% in the United States.” In other words, if the average Canadian family were to sell their house at current market prices and pay off their mortgage, they’d be left with an amount equal to 67 per cent of the value of the house. An American household, by contrast, would be left with a mere 41 per cent. Sounds reassuring, no?

It certainly does. But how useful is it to compare Canadians’ equity in an overheated housing market to Americans’ equity in a post-bust real estate wasteland, where homeowners are paying off mortgages on houses whose value has collapsed?

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Canadian housing market continues to lose steam

By The Canadian Press - Wednesday, August 15, 2012 at 12:45 PM - 0 Comments

TORONTO – Home sales across the country declined marginally last month, continuing a recent trend toward a gradual cooling in what had been a red hot market, according to the Canadian Real Estate Association.

Overall, CREA said Wednesday resale housing numbers were down just 0.01 per cent in July compared with June, although non-seasonally adjusted sales were up 3.3 per cent last month compared with July 2011.

And, although prices were above year-ago levels in about seven of every 10 local markets, falling sales in Greater Vancouver drove the national average lower.

The Canadian average price for homes sold in July 2012 was $353,147, down two per cent from the same month last year. Excluding Greater Vancouver from the calculation, the average was up 1.1 per cent from a year ago.

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The Canadian housing market: Icarus complex?

By Chris Sorensen - Wednesday, July 18, 2012 at 10:34 AM - 0 Comments

Flickr

There’s a theory that whenever someone plans the world’s tallest skyscraper—whether it’s the Empire State Building in the late 1920s or the Burj Dubai in the mid-2000s—a financial disaster can’t be far behind. But could the same be true when it comes to over-the-top condo projects in Canada, a country many believe is in the grips of a massive real-estate bubble?

Barely a month ago, the developers behind the proposed E Condos in Toronto released a set of stylized renderings of the project, scheduled to be completed in 2017. They depicted two slender towers with glass-walled swimming pools that will partly overhang the sidewalk a dozen-or-so floors up, granting bathing-suit-clad residents “amazing underwater views of the city.”

It may just be a coincidence, but the eye candy appeared around the same time Toronto’s blazing real estate market finally began to lose steam. Sales in Toronto slumped 13 per cent during the month of June, with the biggest decline—18 per cent—coming in the city’s frothy condo sector, which Finance Minister Jim Flaherty has identified as a key source of concern.

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Housing sales down, but prices still up in Toronto

By macleans.ca - Tuesday, July 17, 2012 at 10:32 AM - 0 Comments

Housing sales have dipped across Canada, but prices keep rising in the red-hot Toronto market, the Star reports.

Sales in June decreased 4.4% relative to June 2011, and are down 1.3% from this May.

Vancouver’s bubble appears to be bursting, or at least deflating. Sales in June dropped 28% relative to figures from June 2011, and housing prices dropped over 13% in the same period. Sales in Toronto have also dropped—down 8% relative to last year. But prices are still up 6.8% in the last year, putting the price of the average house in the GTA at $508,622.

The Globe and Mail notes tighter mortgage rules announced by the federal government went into force in early July. Observers expect them to further cool the housing market.

The cheapest detached houses in Canada’s 7 biggest cities

By Blog of Lists - Friday, July 13, 2012 at 4:09 PM - 0 Comments

photo: realestate.canada.oodle.com

2. Montreal: $170,000
11750 Ave. Bellevois—2 bedrooms, 1 bathroom, mostly hardwood flooring

3. Vancouver: $538,000
1862 Marine Dr.—2 bedrooms, 2 bathrooms

4. Calgary: $169,000
23 Doverdale Mews SE—“Brand new carpet”

5. Edmonton: $114,900
12231 93 St.—No details given, you’re buying it for the land

6. Ottawa: $151,500
38 Boyce Ave.—Unfortunately, no access to existing house due to flood plain

7. Quebec City: $159,000
176 Ave. Bélanger, Les Rivières—3 bedrooms, “needs some repair”

Listings as of mid-May 2012.

See also Most expensive houses

Have you ever wondered which cities have the most bars, smokers, absentee workers and people searching for love? What about how Canada compares to the world in terms of the size of its military, the size of our houses and the number of cars we own? The answers to all those questions, and many more, can be found in the first ever Maclean’s Book of Lists.

Buy your copy of the Maclean’s Book of Lists at the newsstand or order online now.s

Most expensive houses in the 7 biggest cities in Canada

By Blog of Lists - Thursday, July 12, 2012 at 5:30 PM - 0 Comments

1. Toronto: $28 million
1400—155 Cumberland St., Toronto—A Yorkville condo with 5,000 sq. ft. of terraces

2. Montreal: $12.7 million
3956 Ch. de la Côte-des-Neiges—An Edwardian manor with stunning views of the city

3. Vancouver: $34 million
5365 Seaside Place, West Vancouver—A waterfront property with indoor parking for your 10-m boat

4. Calgary: $12 million
44 Aspen Ridge Heights St.—It’s a castle, with 14,500 sq. ft. of living space

5. Edmonton: $15 million
5620 Whitemud Rd—A three-hectare backyard right on the North Saskatchewan River

6. Ottawa: $6.9 million
390 Buena Vista Rd.—An English country manor with vast landscaped garden

7. Quebec City: $2.9 million
650 Ave. Wilfrid-Laurier—A penthouse apartment with seven-metre-high windows

See also: Cheapest houses

Have you ever wondered which cities have the most bars, smokers, absentee workers and people searching for love? What about how Canada compares to the world in terms of the size of its military, the size of our houses and the number of cars we own? The answers to all those questions, and many more, can be found in the first ever Maclean’s Book of Lists.

Buy your copy of the Maclean’s Book of Lists at the newsstand or order online now.

One Detroit neighbourhood gets the ultimate reno

By Nicholas Köhler - Thursday, July 5, 2012 at 10:30 AM - 0 Comments

Brent Foster

For much of the last century, the home Henry Ford built in Detroit’s genteel Boston-Edison district was occupied by the Rev. Florence B. Crews, long-time pastor of the Temple of Light, a church whose teachings fused Christianity and astrology. Rev. Crews began living in the house in 1941, when she and her husband, O. James Crews, known on local radio broadcasts as the “Voice of the Planets,” walled in the fireplace, hung heavy curtains in the windows and filled Ford’s parlour with enough folding chairs to accommodate the dozens of worshippers who gathered there on Thursday and Sunday nights.

Apart from these religious services, the couple used the house as a place to practise what the Rev. Crews referred to in court testimony—residents had brought an action against her for running a church out of the home—as “the business or vocation of reading horoscopes for pay.” These sessions could cost as much as US$150—equivalent to US$2,000 today—and made use of “charts, tables of the solar system and the zodiacal heavens, time of birth, blackboards, a book of ephemeral places and the sidereal time as calculated at Greenwich at noon.”

It was a long way from the business Ford conducted while living there. Back in 1908, the same year he built the house, Ford put the Model T into production, and he lived there when he implemented his revolutionary assembly-line manufacturing process and doubled the wages he paid his factory hands to $5 a day—high enough that they could buy automobiles of their own, a significant step in the development of a powerful American working class.

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Jim Flaherty vs. Mortgage amortization

By Aaron Wherry - Thursday, June 21, 2012 at 11:46 AM - 0 Comments

In October 2008, the Harper government reduced the maximum mortgage amortization from 40 years to 35 years. In January 2011, Jim Flaherty reduced it to 30 years. Today, the Finance Minister reduced it to 25 years.

Nearly four years ago, the Globe traced the introduction of 40-year mortgages to the Harper government’s 2006 budget.

Just yesterday, Finance Minister Jim Flaherty repeated the mantra that the government acted early to get rid of risky mortgages. What he and Prime Minister Stephen Harper do not explain, however, is that the expansion of zero-down, 40-year mortgages began with measures contained in the first Conservative budget in May of 2006. At the time, Mr. Flaherty announced that the government was opening up the market to more private insurers. ”These changes will result in greater choice and innovation in the market for mortgage insurance, benefiting consumers and promoting home ownership,” Mr. Flaherty said.

The new rules encouraged the entry of such U.S. players as American International Group – the world’s largest insurance company – and Triad Guarantee Inc. of Winston-Salem, N.C. Former Triad chief executive officer Mark Tonnesen, who spearheaded his company’s aborted push into Canada, said the proliferation of high-risk mortgages could have been mitigated if Ottawa had been more watchful. ”There was a lack of regulation around the expansion of increased risk,” he said.

What bubble? CMHC dismisses fears of a housing market bust

By Gustavo Vieira - Wednesday, May 9, 2012 at 9:24 AM - 0 Comments

The Canada Mortgage and Housing Corporation issued its annual report on Tuesday, dismissing fears of a housing bubble in the country.

Contrary to the opinion of the Finance Minister, Jim Flaherty, the CMHC’s conclusion on the state of the current housing market is that “clear evidence of a bubble is lacking.” The report also showed housing starts— new housing units under construction— rose 14 per cent in April to 244,900, beating market expectations by 10 per cent.

Leaders of some of Canada’s biggest financial institutions gathered for an economic summit hosted by Bloomberg in Toronto seemed to corroborate the findings in the CMHC report.

From Bloomberg:

“When we look at the overall marketplace, there might be pockets of vulnerability but we remain quite comfortable,” said Gordon Nixon, chief executive officer of Royal Bank of Canada “Frankly, I’d like to see the rhetoric come down a little bit.”

A residential real-estate boom in the world’s 10th-largest economy has prompted senior policy makers such as Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty to warn that Canadians may be taking on too much debt.

Carney told lawmakers April 24 that high levels of household debt remain the greatest domestic risk to Canada’s economy. In an appearance before a parliamentary committee, he reiterated that a rate increase “may become appropriate,” and warned Canadian families to exercise “caution” with their debt levels.

Carney has kept his key lending rate unchanged at 1 percent since September 2010 in the longest pause since the 1950s.

Housing prices in Canada are probably about 10 percent overvalued, economist Paul Fenton said at the Bloomberg summit.

There doesn’t seem to be a sense that there’s been overbuilding, and housing doesn’t pose a systemic threat to the function of the nation’s financial system, said Fenton, senior vice-president and chief economist at Caisse de Depot et Placement du Quebec.