For sale signs are seen outside homes for sale in the Kitsilano neighborhood in Vancouver, B.C., on Tuesday September 18, 2012.DARRYL DYCK/The Globe and Mail
If you need a housing market optimist, look no further than Gerald Soloway, chief executive officer of Canada's largest non-traditional mortgage lender.
With new housing data indicating a rise in house prices and sales in January, the Home Capital Group Inc. executive chalks up another point against the naysayers.
Ottawa has expressed concern over lofty home prices and has made it harder for new home buyers to enter the market, which poses a challenge to mortgage lenders. But Mr. Soloway said other buyers are still eager to purchase homes in a time of low interest rates.
"We think that the Canadian economy and the housing market will perform better than many of the pundits are now predicting," he said in an interview.
But few are as enthusiastic. While Canadian home sales posted a 1.3 per cent gain in January over December, sales were still 5.2 per cent below the same period last year, according to the Canadian Real Estate Association's figures out Friday.
One analyst on a Thursday conference call pressed Mr. Soloway on why his bullish outlook didn't reflect the general market consensus that the housing market is cooling. "We'll see who's right when we talk again in a few months," Mr. Soloway said after the release of Home Capital's strong fourth-quarter results.
The Toronto-based lender and its subsidiary of Home Trust Co. offer a number of services, including alternative mortgage lending to people who would have trouble getting a loan at a bank. The big banks may reject applicants because they are recent immigrants without enough credit history, or because they have their finances tied up in their businesses, for example. Home Capital also takes deposits and issues credit cards.
The firm collects anecdotal data from real estate brokers, which gives it confidence that the Canadian economy and housing market are healthier than many others predict.
Home Capital issued mortgages worth $1.47-billion in the fourth quarter, up from $1.25-billion in the year-ago period last year. For the whole year, sales hit $6.01-billion from $5.12-billion last year. The company says it has generally seen credit quality improve for the people that seek them.
The other measure Home Capital uses to gauge market health is how long it takes the company to sell a house it has foreclosed on. With 60,000 active mortgages across the country, Home Capital closed out January with about 30 unsold homes on its books – the lowest figure in five years.
It's a trend Mr. Soloway sees continuing through next year. "We're only six weeks into the quarter, but again we're seeing quite a nice increase in level of activity, quality of mortgages, and across the country that there's good activity in every area," he said in an interview. "We are still predicting that we will see another growth in total loans this year of another 10 to 15 per cent."
One exception to Home Capital's sunny outlook is activity among non-first time home buyers, where buying activity has changed. This group of would-be buyers got squeezed in July when, among other changes, Finance Minister Jim Flaherty tightened the amortization periods for government-insured mortgages to 25 years from 30. He had previously expressed concerns over swift price increases.
That had an immediate impact on the housing market in the country. The Canadian Real Estate Association, a realtor organization, noted that the sharp drop in home sales seen in the second half of 2012 to the changes to regulations.
Home Capital hasn't been immune to that. "That market clearly has slowed. There's no doubt," Mr. Soloway said. Still, he maintains that overall, "the outlook is for really quite a good year."
(Jacqueline Nelson is a Globe and Mail Financial Services Reporter.)
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