Canadian Mortgage, Real Estate Markets not "Red-hot" but not "Ash-grey" Either

An article in Thursday's Globe & Mail drew some considerable attention to the state of the Canadian mortgages and real estate markets with its headline stating, "Red-hot housing market loses its heat." The principal observation in the Globe article, written by Lori McLean, one of The Globe's top business reporters, is that buyers remain on the sidelines as a recent bulge in home listings coincides with a dropoff in sales over the same period in 2007 - a period, remember, in which Canadian home sales were at an all-time high.

Wondering what this portends for consumers considering their home purchasing and home refinancing options, I pulled up the press release for the recently issued Canadian Association of Mortgage Professionals Spring 2008 Report which was cited in the .  Interesting reading. . . . More on which will follow once I've had the opportunity to digest the CAAMP's full report which was released on May 14th.

The CAAMP press release notes that, "Canadians overall have not changed their opinions about the housing market.  They are knowledgable, but not influenced by the speculation that the Canadian economy will be negatively affected by the U.S. Economic downturn."  This is a view that is widely held, by federal Finance Minister, Jim Flaherty amongst others. 

Most interesting, in the view of this commentator, are the CAAMP's survey numbers on Canadians knowledge of and attitude towards the housing market problems in the U.S. brought about by the collapse of the American's sub-prime mortgage market.  The CAAMP found that in April only 11% of survey respondents were unaware of the U.S. sup-prime mortrgage mess, down from the nearly 22% of respondents who were unaware of this issue in the Fall of 2007.

The CAAMP's analysis of how savvy we are when it comes to differentiating our analyses of U.S. and Canadian markets is positive.  Mr. Flaherty should find this cautious, Canadian discernment reassuring. Overall, "Canadians are aware of the strength of the economy and remain confident in our housing and mortgage markets," according to the CAAMP.  Canadian mortgage consumers "are educated, informed, and attuned to local market conditions," says CAAMP President and CEO, Jim  Murphy.

This is good news for all Canadians, particularly in light of naysayers and doomsday prognosticators, who have repeatedly said that the moderate loosening of Canadian mortgage markets brought about the CMHC's decision to extend CMHC insurance for mortgages with more than 25 years has been tantamount to creating conditions for a U.S. style housing meltdown. This definetly does not appear to be the case.  According to the CAAMP's Spring 2008 Report numbers (and similar numbers have been bandied about by the banks' best analysts), "Alternative mortgage products, including longer amortization periods, no-down payment mortgages, and interest-only mortgages, continue to grow in popularity in Canada." 

While in Canada 37 percent of recent home purchases have been funded with some variant of extended amortization mortgage product, Canadians - particularly young Canadians, who make up the bulk of first-time homebuyers - continue to have an attitude with respect to amortization and mortgage risk which remains both realistic and conservatively,yet guardedly optimistic. "Younger Canadians looking to become first-time home owners, " the CAAMP reports, "are more interested in alternative mortgage products and while cautious and conservative, they are optimistic about the overall future of these options."

So they should be. . . . Canada is not the U.S., as Mr. Flaherty was at pains to point out in his speech to Toronto's Economic Club. . . .  One very significant statistic the CAAMP points out - and they are not alone - is that "the arrears rate for residential mortgages remains close to the very low levels that have held since mid-decade, about one quarter of a per cent."  Contrast this with the U.S. numbers, where one in ten home mortgages have reportedly been in some stage of foreclosure during the past 12 months. . . . 1-in-250 versus 1-in-10. . . .Thank God, "I am Canadian!" - as Joe Canadian of Molsons' fame would rant.