rat race

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ZT FP Housing’s bottom is in sight,,房市的曙光

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Housing’s bottom is in sight: lender Home Capital; But economists say the market is still falling

Jamie Sturgeon, Financial Post Published: Wednesday, February 18, 2009 Canada’s big banks may be hurting from the reduced demand for new mortgages, but at least one alternative lender says it sees a bottoming in the housing market and is benefitting enormously from it.

“Demand has begun to surface,” said Gerald Soloway, chief executive of Torontobased Home Capital Group Inc., one of a handful of alternative mortgage lenders that remain after the U. S. sub-prime meltdown sideswiped more than a dozen competitors in Canada over the past year.

“We’re starting to see it across the country.”

Led by the western provinces, home prices have dropped by double-digits in many major markets year over year.

Such sharp price declines have brought buyers back into the alternative market and a degree of “stability,” Mr. Soloway said in an interview yesterday after Home Capital reported a 20% increase in fourth-quarter net earnings, to $29-million.

The lender has backed up its optimism with action.

Confident that buyers are returning, Home Capital has begun tearing down the tighter restrictions it erected in the fall of 2007, as the credit crunch gathered force. “We have cautiously begun lending again,” the CEO said.

A price decline in the order of between 12% and 15% year-over-year is Home Capital’s tipping point. If the price has fallen within that range, the lender offers mortgages of up to 75% on uninsured mortgages.

That stands in contrast to the company’s position a few months ago, when Home Capital — like other alternative lenders caught in the throes of the financial crisis — would barely budge for borrowers who possessed as much as a 40% down payment.

Still, while Home Capital says it is seeing a re-emergence among borrowers in the alternative market, which amounts to about 20% of all outstanding mortgages in Canada at present, there’s almost universal acceptance among economists that the overall housing market is still falling.

“Our sense is that the Canadian housing market will remain under pressure for most of this year,” said Sal Guatieri, a senior economist at BMO Capital Markets.

“It’s not just a question of affordability any longer because of lower prices [and] lower mortgage rates. That’s not the issue.

“What is the issue is the recession, which appears to be deepening.”

At least another 150,000 jobs could be purged from payrolls this year, Mr. Guatieri said. “It’s not the type of environment that encourages the purchase of big-ticket items, especially homes.”