Polling Results of where average Vancouver, Calgary and Toronto single family detached prices will be 1 year from now.

Feb 28/14 Poll based on January sales and pricing data: If you ignore the “No Change” and calculate the difference between the total “Ups” and the total “Downs” as a percentage of the totals then the opinions are:

• Vancouver 82% bearish
• Calgary 30% bearish
• Toronto 65% bearish 

….much much more HERE

Short Version

The latest CMHC news impacts new home buyers only – not current mortgage holders

The increase takes effect May 1, 2014

The net impact to the average BC Family purchasing with a 5% down payment is a $5.75 per month payment increase.

Based on the median BC Mortgage of ~$287,700 (assuming a 5% down-payment) the CMHC Premium built into the mortgage increases from $7,700.00 to $8,882.00

$1,182.00 is a meaningful amount of money for sure.  However most will view it through the lens of the monthly payment impact which is nil.

This news will have neither a negative nor a positive impact on the market.

There remains one other insurer option (Canada Guaranty) for clients that, as yet, has not increased their mortgage insurance premiums…not yet anyways.  The third and only other option, Genworth, chose to follow CMHC’s lead the same day.

This Broker will be requesting Canada Guaranty as insurer of choice for his clients as long as this price disparity exists.  

Long Version

This is just too small of an issue to write a long story about.

$5.75 per month does not even qualify as a speed bump on the road to success for 99.99% of purchase transactions.

Will this news play a role in boosting the Spring Market with a rush to complete prior to May 1st?  Unlikely.

Will it increase CMHC profits making them an even more stable Corporation than they already are?  Perhaps, but most likely this news is in response to a December 2013 announcement regarding the Federal Government applying slightly higher costs to CMHC.  Albeit with a wider profit margin based on original calculations.

And so we see consumer impacted by the trickledown effect as the increased cost is passed onto them….and then some.

Will Canada Guaranty increase their premiums to match those of CMHC and Genwroth?  Or will they remain lower in an effort to win more mortgage volume?

Time will tell.

Until the third of the three insurers makes a move there is in fact an option of a $0.00 per mo. increase to purchases with less than 20% down.

Thank you.

@dustanwoodhouse

“Before issuing blanket statements regarding risk, one must define what risk means. Risk to capital? Risk to income? Total return risk? When we scan the “5+%” equity universe, we see a multitude of security types including some C-corps, REITs, MLPs, BDCs, as well as pooled securities like fixed- and option-income CEFs and leveraged ETF vehicles. As I’ve frequently stated in past articles, risk is really in the eye of the beholder for the income investor, with a predication on capital and yield goal attainment.”

….read the entire article HERE

In an exclusive excerpt from his upcoming shareholder letter, Warren Buffett looks back at a pair of real estate purchases and the lessons they offer for equity investors.

“Investment is most intelligent when it is most businesslike.” –Benjamin Graham, The Intelligent Investor

It is fitting to have a Ben Graham quote open this essay because I owe so much of what I know about investing to him. I will talk more about Ben a bit later, and I will even sooner talk about common stocks. But let me first tell you about two small nonstock investments that I made long ago. Though neither changed my net worth by much, they are instructive.

This tale begins in Nebraska. From 1973 to 1981, the Midwest experienced an explosion in farm prices, caused by a widespread belief that runaway inflation was coming and fueled by the lending policies of small rural banks. Then the bubble burst, bringing price declines of 50% or more that devastated both leveraged farmers and their lenders. Five times as many Iowa and Nebraska banks failed in that bubble’s aftermath as in our recent Great Recession.

In 1986, I purchased a 400-acre farm, located 50 miles north of Omaha, from the FDIC. It cost me $280,000, considerably less than what a failed bank had lent against the farm a few years earlier. I knew nothing about operating a farm. But I have a son who loves farming, and I learned from him both how many bushels of corn and soybeans the farm would produce and what the operating expenses would be. From these estimates, I calculated the normalized return from the farm to then be about 10%. I also thought it was likely that productivity would improve over time and that crop prices would move higher as well. Both expectations proved out.

….continue reading HERE