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Federal government will never let housing become affordable in Canada.
@CMHC_ca is on the hook for around a trillion dollars worth of insurance contracts and loan guarantees. CMHC has about $12 billion in the bank to cover those contracts and guarantees.
#cdnpoli #vanre
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@CMHC_ca is on the hook for around a trillion dollars worth of insurance contracts and loan guarantees. CMHC has about $12 billion in the bank to cover those contracts and guarantees.
#cdnpoli #vanre
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$12 billion is enough to cover a trillion dollars worth of mortgages and loans when the default rate is at 0.29% as it is right now.
But even a default rate of 2% will send CMHC under water, leaving taxpayers like you and me on the hook for defaults.
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But even a default rate of 2% will send CMHC under water, leaving taxpayers like you and me on the hook for defaults.
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Now, as long as home prices keep going up and up and up, banks will be able to recover the loan amount through a foreclosure sale and CMHC will be safe.
But if home prices fall by even 5% in some cases, banks may not be able to recover the loan amount.
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But if home prices fall by even 5% in some cases, banks may not be able to recover the loan amount.
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For housing to become affordable, home prices would need to go down a long way in places like Vancouver and Toronto.
But making housing affordable will expose CMHC, and in then the taxpayer, to risk.
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But making housing affordable will expose CMHC, and in then the taxpayer, to risk.
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We got into this mess because successive governments allowed transnational criminals to launder their illicit gains to their heart's desire using our homes as washing machines.
All levels of government allowed homes in Canada to be used as safety deposit boxes.
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All levels of government allowed homes in Canada to be used as safety deposit boxes.
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What's really perverse is that the working taxpayer who's being hurt by unaffordable home prices will end up footing the banks' bill if the home prices go down.
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A housing bubble backstopped by taxpayers is a quagmire easy to get into but well nigh impossible to get out of.
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@ewsiddall did some good work trying to bring outstanding insurance contract number down by introducing tighter lending rules.
But #COVID19-related measures like IMPP have pushed this number up again.
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But #COVID19-related measures like IMPP have pushed this number up again.
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As @ewsiddall said:
"Over the past 20 years, the average Canadian homeowner has had a tax-free gain of $340,000 in the value of their home. That sounds great, until we add in the fact that $300,000 of that gain has been created by increased borrowing."
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"Over the past 20 years, the average Canadian homeowner has had a tax-free gain of $340,000 in the value of their home. That sounds great, until we add in the fact that $300,000 of that gain has been created by increased borrowing."
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" These house prices and debt levels are increasingly out of reach for young people. Homeownership actually tends to be lower in countries with higher incomes."
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I believe @ewsiddall's exit strategy is the least painful solution to the crisis.
"In addition to restraining our underwriting practices to limit excessive borrowing, we must also take decisive, urgent action to accelerate the supply of rental housing."
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"In addition to restraining our underwriting practices to limit excessive borrowing, we must also take decisive, urgent action to accelerate the supply of rental housing."
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