Jon Sowerby is a respected mortgage expert. And he's not without a good sense of humour and not above pointing out the silliness that goes in newsprint these days about the housing market! Read on... 1. Market Update - So we keep on hearing about the pending collapse of the housing market, what should we believe? So I keep on hearing about the pending collapse of the housing market. Clearly it's quite a concern. I know it's getting bad when my parents start getting asked at various family functions if my business is still afloat. So I decided to do a little decidedly very unscientific research about the pending collapse that everyone knows is coming. With keyboard at my finger tips I pulled up the Toronto Star's website going back over the last 14 days to see what the papers had to say about our pending housing market collapse and this is what I found: The first article I thought would be a good one, titled Coping With the Ever Shrinking Condo. Clearly if the condo market is getting smaller it must be because no one wants them. But when I read the article I had made a faulty assumption. It wasn't about a declining condo market it was about the declining square footage of condos. Apparently, this decline in square footage was as a direct result of the condo becoming more popular. In order to cope with this increased popularity that saw demand outstripping supply which was then leading to rising prices condos were actually getting smaller to try and keep them affordable. As this didn't exactly hold with the pending collapse I thought I would move on. Luckily I felt my luck improved when I found my next headline - Toronto Housing Market Softening. Now we're getting somewhere! When I read through the article it talked about price increases proceeding at a slower pace and I thought this is it. Then it occurred to me, prices increasing at a slower pace are still increasing prices. So if price increases are still the norm then obviously this isn't quite the proof that the market has fallen apart. Again, increasing prices isn't really what I wanted to hear about. I needed some proof that the market was in trouble. I had to keep looking! Three's the charm as the say so next article will be the one. When I saw the title - Immigration, Low Rates to Save Toronto Condo Market, I knew I had it. Obviously the Toronto condo market was in distress hence the reason immigration and low rates were needed to save it from decline! But again, disappointment. When I read through the article the gist of it was prices in the condo market have done really well in the last year. The "decline" in sales was a stunning 1% from the all time high (it didn't mention year over year or month over month), but again, I guess with a decline of 1% the market was still pretty strong was . Prices, when mentioned, were again rising but at least not as quickly. By this time, my confidence at getting my mother any sympathy at her next cocktail party had been severely shaken. The final nail in the coffin was when I saw the next article - Condo Prices Set to Rise in 2013 as Demand Continues to Grow. And I thought the condo market was the one that was supposed to be in the most trouble. I won't even get into the articles talking about the severe shortage of single family dwellings in the city and what that would mean to prices. Clearly none of this made any sense - didn't these journalists read the papers? There was an opinion for every side, every market, every angle. Condos will go up in price but single family houses will go down. Condo's are oversold but semi's and detached still experience bidding wars, etc etc etc. What's a person to believe? My Opinion? Newspapers don't exist to sell houses, they exist to sell newspapers. If you can look at some of those headlines and not feel that they are at least somewhat misleading, likely in an effort to grab your attention and get you to pick up the paper then I would say we will have to agree to disagree. But newspapers also report the news and a lot of these reports are coming out of banks or other groups with interests such as increasing a corporate profile, building a brand, selling houses or otherwise. So when I think of how to answer the question "will the housing market go up or go down" I can't help but think we might be asking the wrong questions. I think the questions should be more personal and more about you as a possible consumer. Something that touches your situation personally and frankly, housing markets may or may not do that. In many ways it may not matter to you. If you're renting and you want to own a home because you are tired of giving that money away in rent then you know you want to buy. It might be tougher in a stronger market to purchase but the decision is still to purchase. If you own a place and you're not really thinking about moving or refinancing anytime soon then what the market does doesn't really impact your situation. If you find the perfect place that is right for you and it works for you financially, then I think what the market may or may not do is at least somewhat inconsequential. I think the point I am trying to make is sometimes it doesn't matter what everyone else or everything else is doing. You do something because it makes sense for you at a certain time and place or you don't do something because it doesn't. Trying to predict, guess, hope or understand what the market is going to do is often times a surefire way to drive yourself nuts. Still confused? Not sure if you should be worried? Email or call. I'm always happy to discuss. For those who would like to review some of the articles I found please feel free to click on the links! • Toronto housing market softening http://www.moneyville.ca/article/1248888--toronto-housing-market-has-seen-considerable-softening-just-since-may • Coping with the ever-shrinking condo http://www.thestar.com/yourhome/real%20estate/article/1246310--coping-with-the-ever-shrinking-condo • Condo prices set to rise in 2013 as demand continues to grow, report says http://www.thestar.com/business/article/1249028--condo-prices-set-to-rise-in-2013-as-demand-continues-to-grow-report-says • Immigration, low rates to save Toronto condo market http://www.moneyville.ca/article/1249346--immigration-baby-boomers-and-low-interest-rates-will-save-toronto-condo-market-from-major-downturn-conference-board-predicts • Canada’s home price rise continues to slow in July http://www.thestar.com/business/article/1248589--canada-s-home-price-rise-continues-to-slow-in-july • Toronto housing market softening http://www.moneyville.ca/article/1248888--toronto-housing-market-has-seen-considerable-softening-just-since-may • Fears of steep home price decline ‘much ado about nothing,’ CIBC says http://www.thestar.com/business/article/1245856--continuing-demand-will-cushion-home-price-decline-cibc-economist-says 2. Mortgage Penalties - want to be part of a class action lawsuit? Now, although I have often used this newsletter to criticize the government for their involvement in mortgage regulation one area where I think Mr. Flaherty could actually do some good is in relation to how break penalties are applied for those leaving a mortgage early. In my experience banks are for a variety of reasons generally lax on explaining how prepayment penalties work when issuing a mortgage. The simple fact is that while the ideology behind how a penalty should be charged is fairly consistent the application of that ideology often varies significantly from lender to lender. Accordingly, the government could actually do a little to try and improve transparency on this front. With that in mind, I thought I might share the following: A client of mine was recently charged a large penalty for prepaying his mortgage prior to the end of a 5 year fixed term. His argument was the method the bank used to calculate the penalty was unfair; it maximized the banks advantage while putting him at a disadvantage. He consulted a legal expert for an opinion and it was recommended that it might make sense to pursue a class action lawsuit. Now normally, I try to dissuade people from breaking a mortgage when the penalty is going to be egregious. That said, sometimes people have no choice. If this is something that has happened to you in the last 2 years and you would be interested in the opportunity to be heard and possibly recoup some of your costs this might be a worthwhile endeavour. Needless to say if this might be applicable to you feel free to touch base with me and we can discuss. If it makes sense I will then put you in touch with the appropriate people. 3. Working with professionals: One of my goals as a financial professional over and above my goals as your mortgage professional is to provide you with a support network that will help you manage your complete financial and real estate situation in the way we have managed your mortgage situation – by putting you in touch with ethical, principled and knowledgeable specialists from a variety of fields. If you have questions or needs in any of the following areas: • TVH Mortgages run by yours truly, Jon Sowerby as Mortgage Broker and Broker of Record • TVH Financial, dealing with Investments and Insurance is headed by Jim Lao , Financial Advisor • TVH Legal, dealing with Real Estate and Estate law in addition to civil litigation is headed by Sonia Kociper, Lawyer • Finally, TVH Accounting is a work in progress and we hope to be able to provide you with more details very soon!