Housing Bubble Forming Says Jarislowsky

I’m not sure that I completely agree with the housing bubble thesis of Jarislowky but as I have already stated previously in my blog the pace at which housing prices are increasing the Greater Montreal area is of concern and cannot in all likelihood be sustained over an extended period of time.

http://bit.ly/jarislowskyhousingbubble

We will shortly be experiencing more stable market conditions in 6-12 months, as interest rates on mortgages go up and approval criteria for mortgages by financial institutions are further tightened we should see less of a speculative market and a relative slowdown in the pace of growth in the real estate market.

I do don’t believe that the real estate market is going to crash, the context in Canada is very different than it is in the states and I just don’t see it happening anytime soon.

There was another article also in the Gazette

“Should the government make it harder for Canadians to achieve the dream of home ownership? The answer seems to be obvious: of course not. But the more you study the question, the more you see that a wiser answer would be: pretty soon, maybe.”

http://bit.ly/housepricestoohigh

I think that yes it is indeed time for the government to step in and make some changes to some of the legislation with regards to insured mortgages, amortizations should be brought back down to 30 yr amortization which is the legal norm in the province of Quebec.

“Ottawa is being urged to raise the down payment minimum from five per cent, or to limit mortgages to 30 years, instead of 35. Ottawa can do this easily because it controls Canada Mortgage and Housing Corp., which insures residential mortgages.

Tighter mortgage terms would cool off prices, now at or near record levels due to low interest rates. The concern is that when interest rates go up, marginal mortgage-holders might be unable to meet their higher payments.”

Finally, Jay Brian of the Gazette had a piece in Saturday feb 13th 2010 on the housing bubble also and I find myself agreeing with a lot of what he’s saying. He’s a much better writer than I am so I will let you read is piece on the following link.

http://bit.ly/bubblefearsoverblown

We are therefore in a very particular situation where the real estate market is of concern and is being watched very closely by economists, politicians and consumers.

If there is one final piece of advice that I can give it would be to lock up your mortgage rates now while rates are still at historic lows. We are not going to see rates around 3.8% fixed for a 5 year term again for a long, long, a very long time. For those of you that are looking to buy, that are contemplating refinancing their mortgage, or that have a mortgage that is coming up for renewal soon lock up your rate now.

If you have any questions on this topic or on anything related to personal finances or mortgages please don't hesitate to contact me.

I can be reached at:

Joey Perugino
Conseiller en financement hypothécaire
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