Canadian Mortgage Trends

source:Canadianmortgagetrends.com

CAAMP has released its annual mortgage report and it's chock full of mortgage stats. Here's a rundown on the more notable ones:

5,250,000: The number of Canadian home owners with mortgages.
29%: The percentage of Canadian homeowners who got a new mortgage in the last 12 months.
86%: The percentage of people renewing or refinancing that stayed with their existing lender.
$136,000: The average mortgagor's equity. This equity equals 51.7% of their home value on average.
22%: The percentage of mortgagors who took equity out of their homes in the past 12 months. People are spending more because last year it was 17%.
$41,000: The average equity that borrowers took out of their homes this year. That's up 16% from last year. The most common reason for borrowing this equity? Debt consolidation.
50%: The ratio of new mortgages taken out in the last year with amortizations greater than 25 years.
5.41%: The average Canadian's mortgage rate. Last year it was 5.56%.
0.40%: The average interest rate improvement realized by people who refinanced in the past year.
1.59%: The average discount off of bank-posted rates.
1.96: The average number of quotes people get when shopping for a mortgage.
0.28%: The percentage of Canadians who are 90 days or more past due on their mortgage. That's up just slightly from last year.
10%: The approximate decline in mortgage approvals that CAAMP foresees in 2009.
36%: The percentage of Canadians who are aware that insured 40-year and 100% LTV mortgages have disappeared.
Peoples' favourite mortgage terms:

1-3 years: 29% of borrowers
4-5 year: 61% of borrowers
Over 5 years: 10% of borrowers
CAAMP says there's a noticeable trend in borrowers taking shorter terms when compared to last year.

There's also a big trend towards variable rates. 40% of mortgages were variable in the past year. In CAAMP's 2007 report the number was just 21%. CAAMP says that's because "consumers may be expecting interest rate reductions." We'd also like to think they're becoming more educated about the long-term advantage of variable rates.

Where did people get their new mortgages this year?

Major banks: 47%
Mortgage brokers: 35%
Credit Unions: 11%
Other: 6%
Thanks to CAAMP economist Will Dunning for putting together this wealth of data.

Baltic Dry Index

The leading economic indicators—which serve as the foundation of massively important political and economic decisions—can frustrate even the wisest economists. They quibble over whether the payroll or establishment employment numbers make more sense and wonder whether consumer confidence figures measure anything more than sentiment. The figures of the gross national product are consistently revised. Pay attention Baltic Dry Index




Article from Investment U:

Forget unemployment. Inflation. Consumer confidence. Personal Incomes...

You can even ignore the ever-popular gross domestic product (GDP).

Most of the indicators that the market relies on to forecast the future are worthless in this type of environment. The truth is the data coming out of the traditional economic indicators isn't current. By the time it's being reported, the information is already weeks or even months old.

If you want to know when the global slowdown that's erased $28 trillion in wealth (so far) will finally reverse course, pay attention to the obscure Baltic Dry Index (BDI). And nothing else. Here's why...

To Build it, You Need Raw Materials

Despite the name, the index has nothing to do with markets in Lithuania, Latvia or Estonia. Instead, it's all about the cost of shipping major raw materials. Like iron ore, coal, grain, cement, copper, sand and gravel, fertilizer, even plastic granules.

The value for the index is determined by the London-based Baltic Exchange, which traces its origins back to 1744. Each day, the exchange canvasses hundreds of brokers around the world for price quotes on moving goods. For instance: Shipping 100,000 tons of coal from South Africa to Japan, or 50,000 tons of iron ore from Australia to China. It then aggregates the quotes to form the BDI.

Basic economic principles of supply and demand explain the significance of the index...

The supply of cargo ships is tight and inelastic. It takes roughly two years to build a new cargo ship. And the high cost of each prohibits docking ships during slow periods. In other words, a change in cargo rates does not change the number of ships in operation. So even the slightest changes in demand for shipping raw materials results in a change in the index.

And because the index tracks the cost of shipping raw materials - the precursors of economic output - instead of intermediate or finished goods, it provides a precise and rare measurement of the volume of global trade at the earliest possible stage.

A sharp move up, means global trade is increasing. Conversely, a sharp move down, means it's decreasing. Since global economic activity ultimately influences the equity markets, sharp moves in the BDI often predict and precede similar moves in the equity markets.

Of course, there are other reasons to favor the BDI over other leading indicators, including:

No room for speculation. The index is not tradable, which means the only people booking cargo ships are those with actual cargo to ship. That makes the BDI, as economist Howard Simons put it, "totally devoid of speculative content."
Not subject to revisions. Unlike almost every other piece of economic data, the BDI is not revised on a monthly or quarterly basis. The price is the price. And it's completely reliable.
An inability to be manipulated. Governments, both here and abroad, love to "massage" economic data, especially inflation figures. Obviously, it's difficult to base investment decisions off incomplete or "mostly" accurate data. But because of the way the BDI is measured, that's simply not possible. Again, the price is the price. And it's completely reliable.
Real-time, daily updates. We all know markets shift fast. And in turn, we need indicators able to reflect those sudden movements. At best, we only get weekly updates for other leading indicators. And all are backward looking. The BDI represents the only indicator with "real-time" updates. And such frequency dramatically increases its relevancy and value.

In light of the above, it doesn't take a market maven to predict what direction the BDI's been heading lately - practically straight down. Here's the thing. The BDI started plummeting in early June, before the global equity markets went into a tailspin, proving its predictive abilities.

So if you're looking for a clear indication of a market bottom, forget about any other leading indicator or popular convention. Just look for the BDI to start trending noticeably higher.

Good investing,

Lou Basenese

Show me the light not Heat!!

As predicted the market did tumble right as election polls started closing. This in my mind was traders feeding on election rally.

So what are in for next. My fear is mutual fund liquidations, 401k sales to cover seller's positions may drive this market even lower. Tax loss selling compounded drop in US exports due to strong dollar will keep the Richter scale shaking.

This market is beyond many analyst. The looming currency crisis, unproductive government intervention. It's all a big mess and is going take time to wane out.

It is still best to stay on sidelines and not get tricked by short lived rallies.