Is the Canadian Housing Market in trouble 2014?
Toronto housing prices continue to amaze all of us. Million dollar homes and condos are becoming the norm and because mortgage backed securities are backed by Canadian Tax payers, investors are buying up more and more of Canadian debt. When I see this I see trouble looming. The Canadian government is backing itself into a corner and as investors watch this situation unravel the American housing market crash is starting to look like it’s coming to Canada in a different form.
BANK BAIL OUT!
Over valued homes and easy money Canada’s Minister of Finance Jim Flaherty has already intervened in the Canadian housing market. If Canada’s Minister of Finance intervenes on something the questions most people should ask is why? However because Canadians have so much faith in their government they haven’t bothered to ask this question.
In basic terms the Canadian Mortgage backed security program is backed by the Canadian Government and we the people support the Canadian government by paying our taxes! Now the Banks keep wanting to lower interest rates trying to attract more and more new or existing home buyers into homes they wouldn’t or couldn’t afford if interest rates were higher!
As Banks lower interest rates housing prices go up you can see this happening in Toronto especially in 2013. What’s fueling housing prices in Toronto is low interest rates and the fact that CMHC insured homes are basically backed by the Canadian government! It’s important to understand that CMHC and Canadian mortgage backed securities are backed by the Canadian government. So if anything happens to the fragile Canadian economy tax payers are going to have to pay the bill. Which will cause the Canadian dollar and the Canadian economy to do things I don’t think any of us have ever seen before!
Time to Re-evaluate the CMHC and it’s role
Canada has embraced the debt fueled economy model, recently it was revealed that Toronto mayor Rob Ford was caught on camera smoking crack. Some of us have predicted that this event symbolizes the downturn in the Canadian economy because as everyone around the globe knows the Toronto and Canadian housing market don’t make much sense any more, it seems to be fueled by emotion and being that government has already intervened in the Canadian housing market it will only be a matter of time before they intervene again.
I agree that government has a responsibility to protect it’s citizens and also create an atmosphere that promotes growth and prosperity however I disagree with our current Mortgage backed security model. I do like the CMHC but guaranteeing money to investors or BANKS that doesn’t sit well with me.
I think the Canadian government should limit monetary guarantees of Mortgage Backed Security to investors and eventually pull out of them altogether.Furthermore I believe CMHC needs to re-evaluate their appraisals on properties and base their insurance model on any properties value in a down economy prior to insuring any person or entity. I also believe property appraisers hired by the CMHC should adhere to strict guidelines and should be fined for over valuing any area in Canada.
Government should only be in business for the CANADIAN TAX PAYERS THAT PAY TAXES AT THE HIGHEST Federal tax rate PERCENTAGE! When Canadian government does this it will cause a cooling effect on the entire housing market.
Personally I think my proposal would fix our Canadian housing market almost instantly however the question is what will Government do in 2014!