The Market Pulse from Genworth
Those rule changes also eliminated high-ratio refinances and contributed to a 15% drop in housing sales last quarter versus Q1 2012.
Genworth CEO Brian Hurley spoke today on BNN about the pulse of the market. Here are some of his insights of note (our comments in italics):
- As an insurer, "We make money by getting the risk right." That means "We've got to get the properties right," he told BNN.
(If one is to read into this, and if history is a guide, we can expect more scrutiny on appraisals and property types as the market slows. This is especially true in richly valued markets like the Greater Toronto Area and Vancouver.) "Our two factors that drive our business performance are delinquencies, driven by unemployment (a very high correlation), and the size of our claims…(as) driven by home price declines."
(As a result, Hurley hinted that Genworth is now focusing more on employment quality in its underwriting.)- Genworth has been extra careful about insuring condos with a large investment component—typically those with small unit sizes.
- For the next few years "the mortgage market is going to be flat," he predicted. It will be "a couple of years until we see [the mortgage market] back to the 5-6% growth rate.”
- Genworth is seeing 24-25% average gross debt ratios (GDS) for first-time buyers
(That may seem surprisingly low and well below the normal maximum of 32-39%. ButCAAMP found that the average GDS of an insured fixed-rate borrower was 22.5% in 2010—the latest marketwide GDS data we know of.)
