Revolutionary Moderation

It's been a while...

... not only since I posted, but particularly since I posted bearish predictions about the real estate market.  However, with Jim Flaherty's announcement yesterday, I think the moment has arrived.  Home Equity Lines of Credit are no longer insurable by the CMHC.  The CMHC won't insure 35 year amortizations.  HELoCs have been reduced to 85% of the total equity in your home.

Last year, Flaherty also made mortgage rule changes, tightening qualification rules, and it pushed demand forward enough that the last half of the year has been very slow for the real estate business (forget the news stories from the last couple of weeks spun out by the real estate and banking industries, because even a cursory examination of year-over-year numbers from the last few months will show the supply of buyers drying up).  The same effect might happen again, once again creating the appearance of a boom, but don't be fooled.  Once these rules take effect, the path down will be clear to anyone who can see it.  The only question is whether the Tories can sneak in an election before the housing market, the consumer debt market, and as a result the retail reno market, dries up and slows the entire economy with it.  This is going to hurt.