Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Sunday, April 13, 2014

Canadian Housing Market Data So Poor Everyone Is 'Flying Blind': CIBC

Ever notice how everyone seems to be wrong about Canada’s housing market? The pessimists predicting a housing bubble collapse have been wrong so far, but so have the optimists, who have been calling for a “soft landing” that hasn’t materialized.

Take, for instance, TD Bank’s prediction two years ago that Toronto and Vancouver house prices would fall by 15 per cent over the next few years. Or Scotiabank’s prediction last year that the housing market would “correct into mid-decade.” House prices have jumped significantly since then.

CIBC economist Benjamin Tal has an idea why no one can get it right.

The problem, he says in a new report, is that nobody actually has the necessary data to know what’s really going on. And that poses a risk to the health of the housing market.

“The gap between the importance of the real-estate market to the economy and the lack of publicly available information on it is mind-boggling,” he writes in the report titled "Flying Blind."

“What was the dollar value of new mortgages originated in Canada in the last quarter? What is the credit score distribution of mortgage credit in Canada? … The short answer to those and many other questions is that we simply don’t know.”

With a new finance minister and a relatively new Bank of Canada governor in place, Canada has an opportunity to reform housing market data collection and “reduce any potential risk of a real estate bubble by making data availability a top priority,” Tal says.

Data of this sort — details on mortgage loans, the credit-worthiness of borrowers, the share of foreign investors in the market — is available in the U.S. and U.K., but lacking in Canada.

Tal notes that banks have very detailed data on their own mortgage borrowers, but can’t share it for “competitive reasons.” Canada Mortgage and Housing Corp., the government-run mortgage insurer, credit rating agencies and the federal bank regulator, OSFI, could all step up to the plate and provide better information, Tal says.

“Granted, having all that information is not a sufficient condition for preventing a collapse (see the U.S. example), but it could be a necessary condition,” Tal says.

Tal is no believer in the housing bubble — he has written some of the strongest reports out there arguing against it. He does agree that the housing market is “overshooting,” but without more detailed data, it’s hard to say by how much.

This isn’t the first time this problem has been brought up. Economists pressed then-Finance Minister Jim Flaherty on the issue in a closed-door meeting last fall, according to the Globe and Mail.

Getting better information on the housing market was even the subject of a petition sent to Flaherty last year.

Flaherty told to the Globe in 2012 that his information on foreign investment in the housing market is “mainly anecdotal, so I don’t have a statistical grasp of it.”

And yet, that year, he tightened mortgage rules to cool off the housing market, pricing some fraction of first-time home buyers out of the market.

Was it the right move? Did it prevent a housing bubble? Until better data becomes available, any answer would just be guesswork.

Original Article
Source: huffingtonpost.ca/
Author: The Huffington Post Canada  |  By Daniel Tencer

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