The Sky Is Falling!

If you’re like me, your newsfeed has been filled with doom and gloom for the Canadian housing market with articles following Finance Minister Bill Morneau's speech on Monday. I’ve been in real estate for sometime now and in that time I’ve noticed a trend: the Finance Minister announces some changes, the media takes a hold of it, and the next thing you know the sky is falling and the housing market is about to crash.

But here are a few little things that the media didn’t mention yesterday (likely because it doesn’t make for “flashy headlines”).

The Finance Minister's speech was a just speech. It articulated the high level changes, but these changes need to be supported by formal written guidance to banks. Both the Canada Mortgage and Housing Corporation (CMHC) and the banking regulator (the Office of the Superintendent of Financial Institutions (OSFI)) will be working with Banks over the next month the iron out all the details. Many of the changes announced are very technical and specific and there needs to be discussion of the details.

It's important to take a step back and remember that despite the changes, good borrowers buying reasonable properties will still be able to qualify for mortgages. Like many changes we’ve seen over the years (i.e. reduction in maximum amortizations from 40 years, increased down payment requirements, etc.) the anxiety created by the announcement is usually worse than the actual impact.

The government does not want to crash our housing market. What the government is trying to do is prevent Canadians from becoming over leveraged in real estate debt and ensure that homeowners can afford to stay in their homes when market conditions change. We are in a very unusual economic environment with extremely low interest rates and rapidly increasing property values, but also a somewhat fragile economy with low income growth.

So while Chicken Little (aka the Media) is running around shouting that the sky is falling, just remember that flashy doomsday headlines are created to sell papers and drive website traffic and since when did we start believing everything we read on the internet?

The opinions expressed in this blog are solely those of Jacqueline Pennington and do not represent those of the Northumberland Hills Association of Realtors or RE/MAX Rouge River Realty Ltd., Copyright © 2016 Jacqueline Pennington. All rights reserved.