Real Estate: Gov’t Delaying the Inevitable CRASH with extra $50 Billion ?!?

Real Estate: Gov’t Delaying the Inevitable CRASH  with extra $50 Billion ?!? 

 

http://www.greaterfool.ca/2012/12/26/the-soft-landing/

When government announces something on the Friday before Christmas, it’s a safe bet they hope nobody notices. Few did. So you probably didn’t hear that Ottawa – shortly after trying to blow up the housing market and choke off new mortgage borrowing – may be relenting. Or at least starting.

For the last few months realtors and builders, developers and lenders have been bombarding MPs and the munchkin minister known as F to throttle back on the market-murdering actions taken last summer. Real estate boards have been shocked to see sales in almost all major markets dive in the period since 30-year mortgages were snuffed, cash-back loans outlawed and CHMC insurance throttled back.

Across Canada resales have dipped below year-ago sales levels for eight consecutive months. New home construction has tanked, and everywhere new project financing is drying up. Mortgage broker ranks have thinned dramatically, and suddenly it seems letting residential real estate suck up a third of the national economy was, er, a bad idea. At least if you’re going to purposefully deflate it.

So what’s this?

While making a big deal of capping CMHC mortgage insurance as it nears $600 billion – theoretically putting the brakes on high-ratio, high-risk 5%-down deals – F has now thrown a new $50 billion into the marketplace, but this time to the private sector. Companies like Genworth have just received a massive 20% hike in their allowable coverage, which means the federal government will guarantee $300 billion worth of that company’s debt, up from $250 billion.

In fact so quiet was this announcement, it wasn’t announced at all. Genworth revealed F’s little Yuletide yummy in a media release that helped its stock soar last week, jumping 3% in a single day. And why not? It’s a gift. New legislation about to take effect lets Genworth provide bulk insurance coverage at the same time CMHC is being pushed out of that market. It also allows Genworth to take money previously earmarked for a guarantee fund and use it, presumably for more high-ratio lending.

Already taxpayers are on the hook for over half the $1.2 trillion in residential mortgages outstanding in Canada. It’s been this ocean of money which banks can hand out without risk – knowing any default will be covered by fed-backed insurance – which helped push prices skyward. Should the housing market stall and crash back to earth, Ottawa would suddenly have a liability the size of the entire national debt to deal with.

Of course, F says this will never happen.

“The housing market has softened somewhat in part because of steps that I’ve taken and I’m happy about that. Less demand, lower prices, modestly, in the housing market are much better for Canadians than a boom followed by a bust. So I’m all for a soft landing.”

Is the Genworth deal an admission real estate’s actually crumbling faster than the peckerettes expected? If this all-important Spring market stagnates into a swamp of listings with weak buyer demand and plunging prices, will it backfire on the whole economy? Is F losing his nerve in the face of rapidly-deteriorating sales numbers, a 30% dive in Vancouver and a condo implosion in the GTA? Have the realtors’ furious behind-the-scenes lobbying efforts worked? But is it too late?

Well, soon we’ll know. In Toronto and Vancouver the spring market begins in less than thirty days. Meanwhile the meme of a sick market spreads. For example, “Trump Tower Woes signal Top of Toronto Condo Market,” was the headline Bloomberg stuck on the top of its story detailed the plight of investors suing to get out of Canada’s tallest residential building. And the Globe and Mail days ago broke ground with this: “Shaky foundations: How Ottawa’s computers get Canadian home prices wrong,” showing billions in mortgage loans may have been made on sloppy appraisals. Or this.

This year brought the frothiest, weirdest, most delusional moments in Canadian real estate history. They were followed by hasty and dramatic restrictions which changed rules overnight. And 2012 ends in a funk market, realtor panic and policy disarray.

Six years ago F gave us 40-year mortgages and zero down. Four years ago the amount of government mortgage insurance was doubled. Three years ago came the cheapest mortgage rates in history. In between were new tax credits for first-time buyers and free money for renovations – all designed to goose housing. Then he pulled back hard last summer, sending the market into a dive. Now, desperate, he lays on more gas.

Soft landing? Stand back.

=====================================================================================

COMMENT:

Another excellent post from Garth Turner blog.

The details lay out what has been going on behind the scenes.

We recall what happened in the US, where in essence , lending practices were liberalized and cheap credit created inflated housing prices. The corrupt Banksters had repackaged and resold these debt vehicles several times in what  amounted to massive Ponzi schemes, and it was a matter of WHEN, not IF,  they would collapse. If you want a rough estimate, the debt incurred by these scams is over 10 X’s the amount of money that exists on earth.

Effectively, these Banksters clearly knew waht they were doing, and wanted to rack up such debt to astronomical levels that they could literally use this  as  ” fiscal nuke ” and hold to the US Gov’ts head  aka Bail us out or ELSE the US will literally and figuratively die. 

 

Of course, by then it was too late and the Gov’t had no choice, as the corrupt politicians had amended legislation almost 10 years prior to remove the restrictions that had for decades prevented such a “gambling”situation.

Now, we see waves of foreclosures,  a shrinking middle class and a Totalitarian Gov’t being created. The banks insurer of last resort was the US Gov’t, even though they claimed via the derivates etc. that the rsik was low and spread out

Here in Canada……??? a slightly different situation. The Taxpayer/Gov’t owned CMHC is the main insurer, right at the start.

What had happened is that major US Financial institutions had lobbied the CANADIAN Gov’t to, in essence allow a literal carbon copy of the US Housing bubble….even at a time that all the signs were there the US Bubble was imploding at the time we were just getting started…the deadly brainwashing of ” WE are DIFFERENT here in CANADA “….the usual Bullshit

As Garth Turner notes….

QUOTE:

While making a big deal of capping CMHC mortgage insurance as it nears $600 billion – theoretically putting the brakes on high-ratio, high-risk 5%-down deals – F has now thrown a new $50 billion into the marketplace, but this time to the private sector. Companies like Genworth have just received a massive 20% hike in their allowable coverage, which means the federal government will guarantee $300 billion worth of that company’s debt, up from $250 billion.

Call it debt ceiling or whatever,….and in simpler terms…the Canadian Taxpayer is on the hook for another $50 BILLION should things go south, which they will..

QUOTE:

Six years ago F gave us 40-year mortgages and zero down. Four years ago the amount of government mortgage insurance was doubled. Three years ago came the cheapest mortgage rates in history. In between were new tax credits for first-time buyers and free money for renovations – all designed to goose housing. Then he pulled back hard last summer, sending the market into a dive. Now, desperate, he lays on more gas

More a sign of buying time delaying the inevitable….and catering to special interest groups and lobbies.

It was already reported that Canadian banks were bailed out Hundreds of Billions of dollars. Why???

If this was already a  bad idea at the start, which they have already acknowledge, at least now by their ass -covering actions…it is time to cut the losses ASAP.  The Gov’t is US …..We are the Gov’t…but this does not imply we are in charge, but we are ALL on the hook.

QUOTE:

Already taxpayers are on the hook for over half the $1.2 trillion in residential mortgages outstanding in Canada. It’s been this ocean of money which banks can hand out without risk – knowing any default will be covered by fed-backed insurance – which helped push prices skyward. Should the housing market stall and crash back to earth, Ottawa would suddenly have a liability the size of the entire national debt to deal with.

The recent housing market was a mirage….it cannot be saved. The banking  realtor and developer lobbies have had their pockets lined…off our backs. This $50 Billion may as well be burned. All I can foresee is that the Feds are buying time, but that time will run out, and Bankers etc can now plan strategically on how THEY can maximize profit from this.  What happens to the rest of us who “wisely”did not take part in this ? We will be doubly screwed ….we will see our property values collapse as the market will be flooded with listings….., and also paying for these massive bailouts aka paying for the irresponsible bankers and buyers. (As you may be aware, Mark Carney, the Head of our Central Bank of Canada,has bailed and is now in London…leaving a sinking ship?).

Again, my premise is this was intentional, the ponzi schemes collapse  is simply delayed….but to ultimately effectivley WIPE OUT the middle class.

Or,  conversely ,   could you think of any more expeditious,  effective and  devastating   plan to achieve a massive transfer of wealth and wipe out the middle class that what we see unfolding NOW ? They will literally and figuratively get away with murder in the most sanitized method, …..they are simply planning their getaway as we speak.

Advertisements
Gallery | This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s