tag:blogger.com,1999:blog-6234866741387164003.post1887839396362894553..comments2023-10-19T04:44:25.725-07:00Comments on World Housing Bubble - China, Australia, Vancouver Real Estate News: The Great Indebted Households of CanadaGGhttp://www.blogger.com/profile/14963284253203737587noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-6234866741387164003.post-74809323907630703132011-06-16T04:15:34.413-07:002011-06-16T04:15:34.413-07:00>Doesn't this just mean home equity ratio?
...>Doesn't this just mean home equity ratio?<br /><br />Still not sure. I asked around my colleagues with no luck. I supposed I could email the report author . . .<br /><br />Equity as it is usually measured (such as by CMHC or CAAMP) has not been deteriorating, unless this report is far more intelligent and does not use bubble valuations when determining equity. Maybe that is it, the reverse of equity if one uses the real economic value of the property as the valuation. If so, 65% is a very bad number indeed and not far from worst case estimates.<br /><br />The idea that lower carrying costs make increased debt more manageable is a sales pitch only. One I find frightening that the banks will even claim to be true, not just a marketing ploy. It simply encourages increasing misdirected capital, which households will notice when their job gets downsized due to a decade-long lack of business investment.<br /><br />As you say here, the appetite for debt is directly related to interest rates. Clearly the credit industry has no other brakes to apply to control total credit issued. If the regulatory environment were set up properly they would not be so tied. As always, it's a credit bubble first and a housing bubble (and a commodities bubble and a stock bubble . . . etc) second.GGhttps://www.blogger.com/profile/14963284253203737587noreply@blogger.comtag:blogger.com,1999:blog-6234866741387164003.post-3109954353534494232011-06-14T11:49:53.044-07:002011-06-14T11:49:53.044-07:00"The extent to which residential mortgages we...<i>"The extent to which residential mortgages were backed by residential assets continued to deteriorate over 2010"</i><br /><br />Doesn't this just mean home equity ratio? Though I'm not sure if it means amortizing mortgages or also includes non-amortizing home equity lines of credit.<br /><br />One question to ask is whether or not Canadians can carry a higher DTI ratio than Americans. That is, is this the right measure or are there other factors that provide an apples-to-apples measure of indebtedness? <br /><br />Thinking about it a bit, the high ratio may be a product of a more variable rate structure than US debts that often are fixed over long terms and would carry a higher rate. IOW, Canadians are willing and able to take on more debt because interest rates are low and renegotiated as a matter of course every 5 years or less (which means rates are lower than 30 year fixed terms). If true, that's extremely concerning.<br /><br />On a related note, Carney speaks publicly at a dinner tonight. Will be interesting to hear his comments.jessehttps://www.blogger.com/profile/02155122147972263497noreply@blogger.com