How to Identify When an Area is Headed in the Wrong Direction

When it comes to avoiding lending too richly on an asset that could lose value, identifying problem areas in real estate is a key aspect of risk management that large FIs continue to monitor and that smaller FIs and private lenders are catching onto.

Sometimes an area can present a problem and sometimes a particular property in an area can present a problem. There are many things that you can do to forecast the performance of assets in different areas.

·         On the macro level, many lenders turn to House Price Indices like the Teranet National Bank House Price Index to measure the rate of change of single-family home prices across Canada, on a monthly basis. This report is particularly handy for lenders who lend nationally.

·         For lenders who want to look at data provincially, the Ontario Mortgage Insight Report provides information on sales, mortgages and home equity in Ontario – by location and transaction. Lenders lending in Ontario may consider using both the Teranet National Bank House Price Index and the Ontario Mortgage Insight Report.

·         Drilling down to local levels and individual properties, you can use Automated Valuation Models and other searches to generate information about property types and sales in different neighbourhoods.

·         Don’t forget the news! Sign up for the Financial Post and other publications to receive daily updates on the status of the economy! Stories that talk about changes in a particular area that could present risk or opportunity are great for garnering insight.

·         Talk to your colleagues. Find out from colleagues that work in other FIs, even competing ones, what tools that they rely on.  

Yes – this blog started with a negative tone, focussing on watching the housing market to mitigate risk – but how about the upside? Hot neighbourhoods present opportunities to you and the very same trends that help you mitigate risk can help you identify when and where to shift the marketing budget and your sales efforts to target those areas that have a strong and healthy market.

There is a reason that these reports and tools exist and why lenders continue to use them. Committing to being more in the know makes you more agile and competitive. In the land of the rate war and a housing market that continues to appreciate - despite some economists’ predictions – any extra tool that you can deploy to compete is a win!

Hopefully we have helped bring you into the loop on some of the tools available to you as it relates to identifying when an area is going in the wrong direction. 

For more information about tools you can use to identify upsell opportunities and mitigate risk please visit lenders.purview.ca or call us at 1.855.787.8439.