Kvetching Turds

Murray Dobin has a report on the federal government’s position as a subprime lender via their position as guarantor of CMHC-insured mortgages.

Dobin takes issue with securitization as if its a bad thing in itself, and maybe it is, but more definitely it’s bad if the mortgages being mushed together are crap, which apparently they are:

In an effort to prop up the real estate market in 2008 (when affordability nosedived), the Harper government directed the CMHC to approve as many high-risk borrowers as possible and to keep credit flowing. The approval rate for these risky loans went from 33% in 2007 to 42% in 2008. By mid-2007, average equity as a share of home value was down to 6% — from 48% in 2003. At the peak of the U.S. housing bubble, just before it burst, house prices were five times the average American income; in Canada today that ratio is 7.4:1, almost 50% higher.

I’ve always had a problem easily locating interesting information on Canadian debt and housing markets, as the statcan site is kind of a mess and seems to charge for a lot of reports. I’d like there to be a blog like Calculated Risk in the States.

Apparently we’re also at record debt levels:

Canadians are putting themselves and the financial system at a risk by taking on too much debt, the Bank of Canada warns, even as signs point to an economy on the mend.

The central bank expressed the worry – not for the first time – in its semi-annual financial sector review Thursday, stressing that Canadians continue to take on record-high levels of debt.

It says the amount of debt Canadians have taken on is now 142 per cent more than income, a record high.

And

The central bank says the percentage of households where interest payments exceed 40 per cent of income – making them vulnerable to default – could increase to near 10 per cent by 2012 under certain interest rate assumptions. That’s well above the 6.1 per cent average of the last 10 years.

In my dream world I was hoping for a somewhat isolated housing bust where the values of homes tank and the rest of the economy feels very little shock from that, but if that were ever a possibility it’s probably not now. Some years ago I was saying that the stock market had to either fall off a cliff or move sideways for a few years, and I was hoping for sideways. I’ll hope the same thing for the housing market. And expect the cliff.