It looks like our neighbours south of the border will get something “special” this holiday season; like an interest rate hike. After almost nine years the U.S Federal Reserve rate is about to be increased.  Chairwoman, Janet Yellen, has been itching to raise rates for a while now, and the latest economic data from the U.S. gives her an opportunity scratch that itch. A rate hike is a signal to Americans, and the global economy, that worst is behind them, and the need for government to stimulate the economy is in the rear view mirror.

Or is it? The U.S. November job report indicated that over 200k jobs were added to the work force, their dollar is soaring, the unemployment rate has been cut almost in half to where it stood in 2008, so what’s not to be giddy about? Well, there is data to support that consumer spending, housing starts, and job creation have flattened. So the question is what happens if their economy has flattened, while at the same time the overnight lending rate is going up? Some pundits are actually suggesting that raising the rates now gives the Fed some wiggle room if they have to lower rate, yet again, to stimulate the economy. It’s not as if this hasn’t happened before.  Like back in 1930′s, a rate hike, followed by a quick rate drop, all the while knee deep in the Great Depression. Yeah – that little historical nuisance.

So what does the Fed’s move to increase rates mean for us here in Canada? For the time being, not much. We normally walk in lockstep with the U.S. Fed, but we’re about to decouple from that standard practice, and continue on the path we are on today. The reality is that our economy is still too fragile to mimic the Fed’s move. The oil sector in this country has been hammered, and the fallout has been far reaching. Some are suggesting (more…)

When I received a call from the soon to be former CEO of CAAMP, Jim Murphy, to tell me personally that he is tendering his resignation, I was and wasn’t surprised. As he shared with me his rationale for wanting to pursue other opportunities, my mind was racing. Candidly speaking, images and the silent questions I started asking myself impeded my ability to truly comprehend and absorb every word spoken during that conversation. I think there’s a simple explanation as to why my mind started bombarding me with questions: it’s because Jim mattered, a lot. Now he’s leaving.

They say that timing is everything, and as cliché as that is, it holds  true in Jim Murphy’s case.  When Jim first joined CAAMP, it was raining mortgage applications. Hubris ruled; this was how it was going to be forever.  Then WAM!; 2008 comes along and forever changes our landscape. Jim’s knowledge and skill at navigating the hallways of Parliament ensured our voices would be heard. Prior to Jim joining CAAMP, we would be lucky to get a phone call returned from the Finance Department in Ottawa. Not long after Jim’s arrival, not only were our calls returned by the Finance Department, they began reaching out to CAAMP for data and input on mortgage related issues. Jim Murphy is invited to Ottawa every year for the reading of the new federal budget. (more…)

It’s been a few weeks since my last post and I thought it might be time to at least check in.  It has been rather hectic over the last few weeks.  Upon arriving home from our vacation, we were back on another plane in less than 24 hours for business purposes.  There’s been a lot of hotels, managing dirty laundry on the road and embedding really bad eating habits.  If I’m not careful, I’ll have to change the spelling of my name from Boris, to Borises. 

I headed back to my old stomping grounds this week – Vancouver.  DLC, Dominion Lending Centres, asked me to speak at their Owner’s Conference.  When asked if I would participate, the answer was quick – absolutely!  It’s a wonderful opportunity for me to meet with our customers and garner some insight into the cool and innovative things that DLC is doing.  Gary Mauris, Chris Kayat and Jay Seabrook of DLC have been very supportive of Merix, and if I can make even a small contribution to the success of their conference, I do so with pleasure. 

While in Vancouver, I was also pleased to be able to attend the 25th Anniversary Celebration of TMG, The Mortgage Group.  Wow!  I can’t believe how quickly time flies!  This is a homecoming of sorts for me.  Many, many moons ago, Grant and Debbie Thomas, Principal Owners of TMG, asked me to join their organization. I worked for Grant and Debbie for a number of years and upon reflection,  my time with TMG played a very important role in my career development and career path. I will be forever grateful for the opportunity they gave me and even more grateful for the enduring friendship which ensued.  Congratulations on your 25th Anniversary milestone!

Until next time.

Cheers,

I wonder if purchasers who went through the bidding process would do it over again?   We’ve all made bad business decisions, it happens.
But if the purchaser feels like they were played, well, that’s not good for any of us.  The integrity of the real estate sales process is sacrosanct.

I assumed that real estate bidding wars was specific to pockets in the Vancouver and Toronto market place.  You know? Big home values, big incomes – the bigger-better syndrome.  Alas, my assumptions were incorrect.  I made a stop in Winnipeg a few weeks ago to meet with some of our broker supporters, and I was surprised to hear how prevalent bidding wars are in the Winnipeg market place.  I guess I shouldn’t be surprised, given the Globe ran article recently about what to do if you find yourself in a bidding war.  People on the front lines are talking about it, and Canada’s self-proclaimed National newspaper is providing advice on what to do if you find yourself in real estate auction.  I’ll assume that real estate bidding wars are no longer a one off or the exclusive domain of larger urban centers.

Should we care? I think we should.

Some would describe real estate bidding wars as the free market economy at work- a willing seller and a willing buyer.  The flip side of the definition is; the manipulation of the real estate process, predicated on an unsuspecting and uniformed buyer.  An argument can be made for both definitions.  Here’s where I stand -

I think it’s an unseemly practice, and should be stopped or at the very least an attempt should be made to curtail it.  Here’s how it works, the real estate agent convinces the vendor to list their property for slightly less than market value.  The listing states that no offers will be entertained for a period of time, somewhere between five to seven days.  Enough time is given to view the property, and hope that perspective purchasers, especially those who are frustrated and disillusioned because they’ve done this a number of times and have no home to show for it, will submit an offer on the prescribed date.  The hope is the offer will be based on emotion, excuse me…market reality, and over pay.  And that’s what’s happening with greater frequency today.  I often wonder if purchasers who went through this process could do it over again, would they?  We’ve all made bad business decisions, it happens.  But if the purchaser feels like they were played, well, that’s not good for any of us.  The integrity of the real estate sales process is sacrosanct.

The best way to ensure that the integrity of the real estate sales process is not questioned is by way of transparency.  The Competition Bureau’s attempt to have CREA (Canadian Real Estate Association) publish the historical sale price for the listed property, is a step in the right direction.  CREA is fighting this because of “privacy” legislation. I find that interesting given that the information is already public, and one can find it if they have the time, and know where to look.  Finding historical sales data shouldn’t be laborious or treated as tradecraft.  We live in an age of instant information, and there’s no conceivable reason not provide this information to purchasers, and existing home owners.  If you want an example of how this can work, go to Zillow.com.  On this website is the listing of every property there is for sale in the U.S. It also provides estimated property evaluation, and historical sales activity for all properties.  It would be a valuable tool for anyone finding themselves in a bidding war.  If a realtor councils perspective purchasers to go in at “x” dollars, the council can be judged and validated as quickly as the purchaser can tap his/her tablet.  Transparency and information assists the purchaser to make a better decision.  A home is shelter, it’s also the biggest single investment decision that most people will make in their lifetime. 

There’s a self-serving reason why I would like to see theses bidding wars come to an end.  If the purchase price of the home is over market value, the appraisal is not going to come in.  That’s the point when everyone who was party to the over inflated purchase price runs for the hills, and start blaming those who are left to try and fix it, the mortgage broker and lender.  Rather unjust.

Oh yeah, my quick-fix solution is this, the mortgage amount is based on the purchase price or appraised value, whichever is lower.  We should add the listing to that as well.  That would pretty much end the gaming of perspective purchasers.

Until next time,

Cheers.

Dorothy, Am I in Kansas? I ask because of the headline I came across this week in the Globe “A word to the doomsayers: Bank of Canada sees no housing crash”.  Seriously, where’s Glenda, the good witch of the North and the munchkins? It is pure fantasy to suggest the market is not going to crash.  Who would dare predict the “impending” crash will not result in the total decimation of our economy?  What snake oil salesmen would utter “soft landing” to describe the risk associated with the housing market in this country? Stand up and be counted.  Surely it cannot be someone in the know – unless of course you consider the Bank of Canada Governor, Stephen Poloz, as someone not in the know.

I get it, a mayor smoking crack, partying with escorts and hanging out with gang bangers is far more salacious, and garners eye popping headlines.  Throw in Rogers Communication paying in excess of $5 billion for the exclusive rights to televise Canada’s religious pastime, hockey, and it is understandable why something boring like an okay economy, and housing market not on the precipitous would get such little ink.  Frankly, as far as press coverage regarding the housing industry, this is the best we can hope for.  So when we hear the Governor of The Bank of Canada say, “The housing sector has been stronger than expected but is consistent with updated demographic data and a pulling forward of home purchases in light of favorable financing conditions”.  Excellent – a statement that elicits a yawn.  Or how about, “The Bank continues to expect a soft landing in the housing market”. Almost makes you sleepy.  I guess I could rant against the notion that the Bank of Canada “continues” to predict a soft landing but that would require energy, and I would need to take a nap first. 

As exciting as it is, the press may become bored with our industry, trust me, other words will be found to sell papers; words such as ‘bust’ and ‘bubble’ may be replaced by ‘disinflation’.  According to Investopidia, “Disinflation is commonly used by the Federal Reserve to describe situations of slowing inflation. Instances of disinflation are not uncommon and are viewed as normal during healthy economic times. Although sometimes confused with deflation, disinflation is not considered to be as problematic because prices do not actually drop and disinflation does not usually signal the onset of a slowing economy“.  By all accounts the Bank of Canada will be speaking to this issue going forward.  One way to combat disinflation would be if the Bank of Canada lowered the overnight lending rate.  Alex, I’ll take irony for $200, please.  But let’s not start that again.  Here’s to boredom.

Until next time,

Cheers.