Michael Hapke, CEO of the Advanced Group of Companies, provides a detailed update on the performance of the company during the third month of the COVID-19 pandemic.
Mike discusses the latest unemployment figures for Ottawa, the regional real estate market, current portfolio performance and qualitative data, and what he thinks is coming in the weeks and months ahead.
Good Day Everyone, this is Michael Hapke, President and CEO of Advanced Mortgage Investment Corporation.
Today is Tuesday June 9th 2020. My last update was on Friday May 8th 2020.
These monthly updates seem to be very well received by our existing investors. I also know some of you have shared the link with friends and family as well which is greatly appreciated. A number of those referrals have resulted in new investors for AMIC, so thank you!
We continue to see good [download] rates on these updates so I will continue to do them for the next few months as we deal with changing market conditions. Please feel free to share any feedback good or bad if you prefer something different.
The first topic I would like to discuss today is the CMHC prediction that came out on May 19th suggesting house prices could drop between 9 to 18% in Canada.
The prediction was followed by a CMHC rule change on June 4th making it more difficult for people looking to put less then 20% down on a home purchase to qualify for a mortgage. This change would have impacted first time home buyers the most with a drop in purchasing power of about 12%.
Many industry professionals, including myself didn’t put much weight in CMHC’s predictions and it’s now clear that at least one of the other two large private mortgage Insurers don’t agree with CMHC either.
Yesterday Genworth Canada has announced that it would not be following CMHC’s rule changes and believes that its processes and monitoring of the conditions and market developments “allow it to prudently adjudicate and manage its mortgage insurance exposure“ without making it more difficult for Canadians to qualify for mortgage financing.
This great news for first time home buyers and the market as a whole. The housing market is one of the few sectors that has continued to show strength and, in my opinion, it was irresponsible for CMHC to come out with such announcement when much of the data was subjective and certainly not applicable to all real estate markets across the country.
The Ottawa real estate market is doing great and the demand remains strong. It is still common to see multiple offers and homes selling over list price and in many cases within days or hours of being listed. Higher valued homes will take longer to sell but as a whole, prices and demand remain strong.
In May the home price of a single-family home were up from the same time last year by 11.2% for an average sale price of $548,140.
[While it is] not a segment of the market we focus on, [it is] still important to note [that] the condo market … continues to do well with an increase of 15.5% for an average sale price of $343,589 compared to last May.
The unemployment numbers were also released last Friday. Ottawa continues to have one of the lowest unemployment rates in the country at 7.7%.
Given that as of this Friday Ottawa and Eastern Ontario have now been given the green light to move onto stage two of re-opening, I expect this number to be lower next month. Many feel we have seen the bottom but I will remain cautiously optimistic on that point. Ottawa is however showing a great deal of resilience but the news of more business opening at the end of this week is welcome news.
Let’s move on to the AMIC portfolio and performance,
Truth be told I was pretty excited to share some new personal bests and share the fact that yet again we have had no NSF payments this month and we have had no requests for deferrals. All mortgages continue to perform as agreed and we’ve had no issues with any mortgages.
We are also very excited to announce that we have a new high–water mark for share issuance in one month’s time. Our previous best month was April of 2019 with a total share issuance of $1.7 million. For June [2020] we have surpassed our previous best with right around $2 million in new shares being issued—which is great news as we go into a very busy mortgage lending season.
Just out of interest: since the start of the pandemic (and for April, May, and June) we have grown our portfolio by 15% and if we look at our growth since Sept 1st 2019 – which is the start of our fiscal year we have grown in assets under management by 39% , so a big thank you to our investors for showing us continued support.
With respect to new mortgages booked in the month of May we only funded $556,000 in new mortgages. That is simply due to timing as approximately $1.1 million dollars in mortgage fundings got pushed into June because of delays. Everything we do just takes more time right now so this will not be uncommon.
77% of the mortgages funded this month were 1st mortgages and 23% were seconds. As mentioned last month, all mortgages funded have been registered for at least 115% of the mortgage amount for extra added security. Our portfolio balance of first and seconds is nearly the same at 76.72% in firsts and 23.28% in seconds.
Our weighted average credit score at the end of May was 703.
With respect to our annual targeted rate of return, based on what we are seeing I’m still confident projecting a compounded rate of return of mid 7’s.
As you may recall we continually raise funds but only accept the funds at the beginning of each month so we are just wrapping up our June raise now and then the next one starts on July 1st.
We continue to see lots of good quality business so if you are interested in looking at adding to your current holdings we’d be happy to review that possibility with you over the phone, via video conferencing or by appointment at our office. We have all of the necessary social distancing protocols in place and clean all contact points before and after all meetings.
Please remember to visit us online at advancedmic.com or follow us on Facebook or LinkedIn at Advanced Capital Corporation.
As always, I’m just a phone call away at 613-656-0866 or by email at mikeh@advancedmic.com.
Keep well and I will speak with you soon.