Crappy Market: Is It "Housing Bubble" or "The Rules"?

 Amid all of the  doom and gloom scenarios posed by every expert and commentator concerning our current market situation, I thought it might be a good idea to ask "what conditions caused our market to falter in the first place"?
Is it the effect of a change in mortgage rates? ... Hmmm, rates have actually gone down! ... I don't think so.
Is it because Vancouver's market has been over heated and was about to collapse? ... Well, sales volumes are slower than last year and there is certainly a small correction in prices but I don't see anyone leaping from bridges yet.
Is it investor confidence in Vancouver's market? ... Well, maybe. ... Everyone is looking for a good deal and it doesn't make sense to pay too much, but people still need a home to live in, don't they?
If it's a question of "Confidence", is the issue "Confidence" in our market? ... Perhaps it's just me but, the more people that I speak to, the more people I find who are losing "Confidence" about their prospects of ever becoming home owners.
But why is this? ... Aren't mortgage rates at record low levels?
If it's not the rates, and people still need homes for their families, wherein is the problem? ...
Well, perhaps it's the Rules!
Here is an interesting article that comments on Mortgage Insurance and sheds some light on the Effects that the Mortgage Rule Changes are having on Canada's Real Estate Market. (Canadian Mortgage Trends)

Insured Buyers are the Majority

Mortgage insurance is typically mandatory for homebuyers without 20% equity.

Putting down 10% on the average $350,152 home, for example, means you’ll cough up a $6,302 insurance premium (given fully documented income and decent credit). Since insurance premiums are tacked on to your mortgage, that adds up to $9,000+ if you amortize it over 25 years.

Of course, you can avoid insurance altogether by plopping down 20% or more. The challenge is, only a minority of buyers have that sort of equity.


According to the latest data from Will Dunning, Chief Economist of CAAMP, less than 4 in 10 buyers have 20% down payments.

For those purchasing from 2010 through spring 2012:

41% had less than a 10% down-payment
21% had a 10-19.99% down-payment
Only 39% put down 20% or more.
(This survey included both first-time and repeat buyers. First-time buyers accounted for 56% of the dataset. Totals don’t add to 100% due to rounding.)

Given the widespread use of mortgage insurance, it’s easy to see how regulator’s insurance rule changes can rapidly alter home buying trends. In another few months, we’ll get a good sense for how the most recent rule tightening has impacted nationwide mortgage volumes.