Montreal Real Estate Blog » credit-crunch

En bref – Crédit immobilier au plus bas (U.S.A)

Deya Bautista — Mon, 30 Mar 2009 14:26:11 +0000

Washington — Le taux moyen pour un crédit immobilier à taux fixe sur 30 ans aux États-Unis est à son plus bas depuis 1971, à 4,85 %, conséquence logique de la politique monétaire de la Réserve fédérale, selon l’organisme de refinancement hypothécaire Freddie Mac.

L’immobilier a montré des signes de stabilisation en février, avec des ventes de logements anciens comme neufs qui ont connu une légère reprise par rapport à un mois de janvier catastrophique. Mais les prix continuent pour leur part de baisser. Selon l’enquête hebdomadaire publiée mercredi par l’Association des banquiers hypothécaires (MBA), si les taux sont à leur plus bas, les Américains en profitent surtout pour renégocier leurs prêts, et moins pour en souscrire un nouveau. Sur la semaine achevée le 13 mars, les refinancements représentaient ainsi 78,5 % du nombre des dossiers de prêts, a indiqué la MBA.

(Thank you Patrice for this informative article)

Posted By: Deya Bautista - Real Estate Broker working as part of the McGill Immobilier team. Specializing in high end condos in downtown and Old Montreal. For buying or selling contact Deya at: 514.917.7889 http://montrealrealestateblog.com/

8 Sources of the U.S Financial Crisis – How it all began.

Deya Bautista — Thu, 11 Dec 2008 15:48:23 +0000

How this economic crisis that began in the United States, and how did it happened? Between all the information being distribute around, on the easy to find among all the information gleaned on the left and right on the subject. Yet, as a real estate professional, you certainly raise questions about this, as we pose to ourselves.

Peter Langlois, senior economist at The Federation of Chambers of Quebec real estate (FCIQ) focused on the subject, and wrote in late October, an explanatory document, simple and easy to understand, in order to educate ourselves on the importance of this financial crisis. You will find below the summary.

“What is spectacular with the current crisis is the extent of penetration of mortgage tools in the financial system,” he wrote. The sources of U.S. financial troubles are many, but “can be grouped under eight chapters, eight arms of a “financial octopus” eventually stifled some of the jewels of Wall Street”.

To understand what is happening now, it is important to consider other financial crises in the past:
American Savings and Loans (1989-91)
Swedish crisis (1992)
Asian crisis (1997)
Argentine crisis (2001-02).
Desjardins has also published an analysis on the crises of the past 30 years.

For P. Langlois, reflected common signs of these crises, including: real estate speculation, deregulation, debt of the public sector and the drop in local currency … All symptoms showed by the U.S. economy before the current financial crisis.

8 Sources of the U.S Financial Crisis

1. Real estate speculation and deflation of the bubble

Several U.S. real estate markets have experienced dizzying price increases between 1998 and 2005, including Florida, Nevada, New York, Arizona and California. Manufacturers have increased housing starts … until there was a surplus of inventory. It followed a downward spiral on prices, higher interest rates and defaulting owners tied to variable mortgages.

When we talk about real estate speculation, we believe, among others, about Flipping. Nearly 40% of residential transactions in the United States did not acquire a main property (residence). This has been encouraged by several authors and TV shows such as “Flip this House”, for example.

2. Subprime mortgages and mortgage brokerage

The proliferation of subprime mortgages is at the heart of the crash of the U.S. financial sector. From 1994 to 2006, the share of these “tools” increased from 5% to 20%. One of the subprime instruments was the most popular ARM (interest-only adjustable rate mortgage). A formula which allowed to pay only interest, and no capital … for a while!

U.S. mortgage brokers are also covered in the study of sources of the current financial crisis. How? It is suggested that the products to customers were in some cases depending on the premium payment received by the broker.

3. Credit Ratings

The rating agencies credit the 3rd source of this mortgage crisis. Giving ratings to inappropriate financial structures backed by pools of mortgages as collateral, the agencies have fooled many institutional investors.

4. A complex financial science and incompetent government

The structure of financial instruments has become very complex. The leaders of institutions and boards are currently suspected of incompetence, by their ignorance of the risk factors involved in their investment process. The structure of the remuneration of such leaders would also be a source of the current crisis.

5. Monetary policy and government policy

Both policies are identified: the monetary policy of Alan Greenspan and the policy of Housing and Urban Development Department (HUD).

6. The behavior of the American consumer

The U.S. consumer is also a source of the crisis, because of its lack of vision, responsibility and the use of credit feverish. In 2004, the U.S. Fed estimated the total debt of U.S. consumers more than 2 trillion (2000 billion) dollars, excluding mortgages. Simply by debts of credit cards, the average American was (before the crisis!) an estimated $ 9,000 and $13,000 in debt.

7. The Absence of Financial regulations

According to estimates made in 2004 by a former Fed governor of the U.S., over 50% of subprime loans were made without any guidance from the federal government. These loans were also accompanied by heavy financial penalties linking consumers … and they addressed to those who were less equipped to understand the impacts of such financial arrangements.

8. Financial Lobbying

How the U.S. Congress he could leave the financial sector without a regulatory framework? Part of the answer could be the links between the industry and finance electoral campaigns of U.S. legislators.

And in Canada?

An analysis on the sources of the American crisis would be complete without a parallel with what is happening in Canada.

First mention that according to Peter Langlois, 3 of 8 sources of the crisis are minimally on Canadian soil.

Canada has a stricter professional supervision with regard to real estate brokerage and mortgage brokerage.

The mortage options are less exotic in Canada. The subprimes are marked by CMHC and other mortgage insurers.

Regarding the funding of political parties, Canadian regulations prohibit payments from the private sector (since the sponsorship scandal in 2004).

However, the listing of credit in Canada is done by the same players as in the USA and the governance of financial institutions is not very different from our southern neighbors. The Bank of Canada, by its size and volatility of a small currency like the Canadian dollar continues to lose its independence from major central banks. Finally the discussion launched by Ottawa on possible centralization of regulatory powers could be positive in a context where the financial framework, shared between the provinces and the federal government increases the risk of regulatory vacuum on certain financial products or distribution of those thereof.

“Canada must learn from the U.S. troubles and carefully revise its financial regulation, both in the banking industry, securities as well as their distribution,” the report concludes with this analysis of Peter Langlois, an economist, Federation of Chambers of real estate Quebec.

To view the original document, a link on the Blog of College Immobilier du Quebec can be found here

Feel free to leave your comments and thoughts on this subject.
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Canadian Interest Rates Morning Recap

Deya Bautista — Thu, 24 Apr 2008 11:26:43 +0000

Interest rates drop half a point – The Star.com
“Bank of Canada governor Mark Carney has signalled the need for lower consumer borrowing costs and hinted further interest rate cuts may be required to shield Canada from a worse-than-expected slowdown in the United States. For the second time in eight weeks, the Bank of Canada slashed its policy-setting overnight interest rate by half a percentage point, to 3 per cent.”
Read the complete article

Big banks slow to react to Bank of Canada rate cut – The Vancouver sun.
“The Bank of Canada slashed its key interest rate a further half point, and hinted at more rate relief to come in an effort to keep Canada from being dragged into recession by a deeper and more protracted than expected downturn in the United States.”
Read the complete article

Canadian Mortgages Getting Cheaper, Variable Rates Gaining Popularity - CEP News
“With the Bank of Canada’s easing of interest rates over the last several months, including the most recent half-point reduction Tuesday, variable rate mortgages are gaining in popularity as Canadians try to take advantage of lower credit.”
Read the complete article

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Morning Interest Rates Headlines

Deya Bautista — Thu, 03 Apr 2008 12:00:00 +0000

Requirements loosened for rental investors [Montreal Gazette]
No money down if lender satisfied. Tight market in some regions prompt CMHC changes.
“Budding real-estate moguls will welcome the news that Canada Mortgage and Housing Corp. has relaxed the rules for would-be Donald Trumps to purchase investment properties with no money down.The changes apply to rental properties with a maximum of four units, but even The Donald had to start somewhere. CMHC has made the changes with the intention of easing the squeeze in the rental housing market.”
Read the complete article
More rate cuts likely says Bank of Canada [Financial Post]
“More interest rates cuts may be necessary to buffer Canada from the impact of the U.S. economic slowdown, according to the senior deputy governor of the Bank of Canada.”
Paul Jenkins said “the risks surrounding the Canadian economy have shifted to the downside, resulting in our decision to lower our policy interest rate by 50 basis points to 3.5%.”
Read the complete article
Canadian Home Prices to Moderate, but No Danger of Meltdown, Economist Says [CEP News]
“Declining Canadian home sales and moderating home prices could sap domestic demand, a Canadian economist is warning.
“Canada isn’t in danger of the same sort of real estate meltdown as experienced in the U.S. or the sudden hikes in interest rates associated with subprime mortgages, he said, but Canadians still need to be careful. The disappearance of strong domestic demand would have a negative impact on the economy, he added.”
Read the complete article

Longer payback loan fuels housing market [The Star.com]
“There’s a revolution going on in Canada’s housing market, one that is propping up prices and extending the boom. More buyers are choosing mortgages with longer payback periods.
By stretching payments over 30 to 40 years (instead of the usual 25), they can enter the market sooner or buy a better property. Mortgages with longer amortizations have caught on like a house on fire (pardon the pun).”
Read the complete article
Interest rates head south – but how far? [Times Colonist]
“Canada’s mortgage rates are heading down. At a time when stock markets are volatile and with the economy and income growth slowing, the positive news for those planning to get into the housing market or whose loans are up for renewal is that it’s going to cost less to finance a mortgage.”
Read the complete article

Subprime mortgage news update

Deya Bautista — Tue, 26 Feb 2008 15:30:03 +0000

Canada economy to slow, risks to downside – IMF (Reuters)
Canadian economic growth will slow to 1.8 percent this year and there is a risk of an even sharper downturn as weakness in the U.S. economy spreads beyond the housing sector, the International Monetary Fund said in a report on Monday.
After growing about 2.5 percent in 2007, Canada’s healthy economy and fiscal standing will help it withstand the global turbulence but external risks will pose a challenge. >> read more
…….
Canadian institutions expected to make writedowns (Exec Canada)
Some of Canada’s five biggest banks are expected to report headline-catching writedowns when they announce first-quarter earnings. The banks have so far escaped with remarkably little damage from the credit market turmoil. >> read more
…….
Storm clouds threaten to rain on bank profits (Globe and Mail)
Canadian Imperial Bank of Commerce said in January that it will take $2.46-billion (U.S.) in pretax writedowns for the two months ended Dec. 31 because of its exposure to the U.S. subprime mortgage market. >> read more

…….
UPDATE IMF lowers growth projections for Canada on back of US economic downturn (Forbes)
Canada’s growth will likely decelerate further in 2008 and 2009 as a result of the sharp downturn in the US economy, the International Monetary Fund (IMF) reported. >> read more