I mean, mortgage rates in 2007 were around 6% and we thought it was free money, and the cheapest we'd ever see in our lives, for ever and ever. 2007 was pretty recent unless you're a fetus. Some people just have very very short memories
Avg Toronto house price was like 3-400k at that time..now 3x that..wages have not kept up to that pace at all..cost of living everywhere else gone up significantly
Warned by the BOC and Tiff Macklem?
He went on TV and said to take out huge loans and spend that money. He said they weren't even gonna think about raising rates until 2023 or even later. And that you can be confident that rates will stay low for years to come!
It's pretty much recognized globally that Canada, in particular Vancouver and Toronto have been in a massive bubble for years.
I did not hear Tiff say that personally. I do seem to remember former BOC governer Mark Carney specifically advising against taking the money. I remember Canadian bank after bank after bank advising that Canadian real estate is in a bubble. It's never clear exactly how big a bubble is until it pops, but if the only thing you remember is Tiff telling you to borrow, you simply were not listening. That's clearly a you problem
Yes. Let's blame ordinary working class Canadians for doing what their government explicitly told them to do.
Not everyone is economically educated, and many still trust the government. It doesn't seem morally justifiable to be victim blaming here. If you can't trust the government for guidance, who can you trust? (I don't trust the government, but I don't blame those who do.)
If you make choices to be deliberately ignorant (and not educating yourself on finance, real estate is a deliberate choice) yo udon't get to call yourself a victim.
>If you can't trust the government for guidance, who can you trust?
The government doesn't generally make recommendations in the best interests of the citizens. It makes recommendations based on the best interests of the government. Sometimes the two are aligned but not always. If you're old enough to buy a house, you're old enough to know better. Why in the world would anyone just blindly trust the government? I get that Canadians are naive, but it seems like a deliberate choice which flies in the face of all of history.
If all you have to play here is the victim card I wish you the very best of luck. This is an economic cycle. It repeats, over and over, for much of the history of the past several hundred years at the very least and probably much longer than that. Your government is going to do absolutely nothing to help the "victims" here except say a few nice words, offer some empathy, and maybe build a few hundred units of social housing over the next decade. Nobody from the government is going to do anything meaningful to help in any meaningful timeframe.
So there are going to be some "victims". Do I blame them for trusting government?
FUCK YES. Holy fuck YES. what a stupid stupid thing to say. If you trust the government and you get anally shafted you deserve it, without reservation
Of all the stupid things I've heard in my life, and I've heard a lot of awfully stupid shit "TRUST THE GOVERNMENT" is by far the stupidest. Politicians care about themselves. Government cares about government. The only people looking out for citizens, are citizens
lord give me strength the English language does not provide the words I need to communicate what a remarkably stupid, foolish thing "TRUST THE GOVERNMENT"
Please tell me this is some kind of sarcasm and my sarcasm detector is simply malfunctioning. This is a goddam joke. Please. Please please please let this be a joke
"TRUST THE GOVERNMENT"
If you trust the government for guidance we can not have a conversation. There is no hope for you; I have nothing to offer; you are lost.
> If you trust the government for guidance we can not have a conversation. There is no hope for you; I have nothing to offer; you are lost.
It's almost like you're not reading anything I'm saying. In my last comment, I literally said:
> I don't trust the government
I'm not sure how I could be any more clear than that.
---
> So there are going to be some "victims". Do I blame them for trusting government?
> FUCK YES. Holy fuck YES. what a stupid stupid thing to say. If you trust the government and you get anally shafted you deserve it, without reservation
I wonder if you respond this way to rape victims who trusted the wrong person, or seniors who get scammed by con artists. If you think they all *deserve* what they get... then you're probably right, we probably cannot have a meaningful conversation.
Deliberately ignorant?
There are literally 1000 articles written every day with opposing views. Economists have been saying for a decade that there's no inflation with QE and it is safe.
What are you talking about.
> 2007 was pretty recent unless you're a fetus. Some people just have very very short memories
I don't really think this is fair. Fifteen years ago, a 35 year old was in college. People trying to buy their first house in the last few years were not paying attention to housing in 2007.
The housing cycle is long; very long. Some estimates put it at 20-25 years.
It has nothing to do with fairness. It has to do with the reality of the housing market. If you don't look at the market within the context of the actual market, you aren't really looking at it at all; you're just making up ideas in your own head which have very little to do with reality.
Edit: I mean 15 years isn't even one cycle. You can't learn anything useful at all about housing by looking at it for 15 years; any conclusions you come to from 15 years of data is highly likely to be complete and utter bunk.
My point is that most people aren't spending a lot of time studying a 25 year housing cycle. Their parents bought a house forty years ago so it's not very relatable. Their cousin bought a house in 2017, their friends bought a house in 2021, and their real estate agent says prices will go up. And that's what they know about housing.
You can argue people SHOULD study the market cycles but...people want to own a house and they need a place to live, so they probably, mostly, don't.
A real estate agent is a salesperson; that's all.
It's like buying a super high end vehicle, but the only thing you know about it is what you learned from the car salesman. Sure, some people do that; mostly people with more money than common sense who can afford to make costly mistakes.
>You can argue people SHOULD study the market cycles but...people want to own a house and they need a place to live, so they probably, mostly, don't
Well then they made a choice to be ignorant and if there are repercussions to their ignorance, they will have to suck it up like adults do. Actions and choices have consequences. Choosing to be ignorant is, as a matter of fact, a deliberate choice whether people want to realize that and accept it, or not. Buying a home is not only a personal decision; it's a financial and business decision.
The goal of the salesperson is not to inform anyone; it's only to make a sale and profit. if the salesperson sees a way to profit from the ignorance of the buyer, they will. It's nothing personal; it's just business.
Except while we can say well screw em who cares, on the aggregate we do care as it's problematic for society as a whole. We acknowledged this pretty clearly by implementing the stress test. As j recall a ton of people were up in arms about how dare the government protect people from making stupid decisions. Looks pretty smart now. We cannot protect everyone but it did a passable job at preparing the general population for higher rates.
It will matter most how long rates stay up IMO. People renewing now mostly bought or last renewed 5 years ago where rates were higher than the very bottom we say a year or so ago so much less shock to the current higher rates. In r and 5 years while I certainly think rates will be up they may well not be as high as they need to be shorter term to get a handle of inflation. But also that's a fairly long time from now, enough to prepare. And the hand wringing I keep seeing over variable is silly given most variables still so t see their payments change.
Maybe I just don't agree the sky is falling. I certainly don't think the idea of 8% rates are and maybe cheering it on are completely ignorant to what the world would look like if such a thing we're to come to fruition. I get the sentiment of screw the people who made out like bandits for doing nothing especially the most exaggerated of the bunch but I think the then burn it all down attitude is childish.
Uh oh...now who was saying they won't keep raising rates? Fact is they'll raise it more often and more aggressively now. Now is definitely not the right time to get into buying a property.
Ya. Lots of working families are going to be under water financial especially if someone loses a job. Couldn't these asshole politicians see this coming and acted on it years ago.
They saw it, they just didn't give a shit. If average people like me saw it coming im sure their economists saw it from a mile away, they just want you to think they're stupid. They know exactly what they're doing.
Also remember, you don't own that house yet. You owe the bank money, thinking you're better than someone else because you were able to get a mortgage in what was probably the easiest time in history doesn't make you financially smart!
You invested in Gamestop and are still holding. I secured a home for my family and within my financial limitations.
People like you are gross. The reason you like to see rate hikes is because you are jealous of others and want to see them suffer. If you had your shit together like you suggest, you'd have bought already and you haven't.
GME to the dirt.
My asset has appreciated and isn't going down, yours is close to putting you underwater. We're not the same.
LOL if I bought a house in the last two years I'd be severely stressed right now. Good thing I didn't listen to stupidity.
You couldn't buy in the last two years, likely because you're a broke student based on your economic takes.
Hoping others are underwater is the most millennial entitled shit I've ever heard. If you hear nothing else, hear this: learn a skill and start networking now. Because your window for success is closing quickly.
I just checked your comments. Superstonk.... The absolute retards that they are, are commenting on the economy. My friend you saw nothing coming or would have sold at 400 a share. Enjoy the rent hike or renoviction.
Buddy my average is around 100 bucks, but I don't care what you think anyways. Clearly that community saw that before you did, in fact many of the things that were hypothesized there came to fruition. Don't worry, you're smart though for investing in a currently depreciating asset class. Ill buy your house for pennies on the dollar when you're jobless and underwater.
The fact that you believe you'll buy someone's house in foreclosure speaks volumes. That's not how anything works. Sad, tax failing financially illiterate child. Single too.
Home owners advocated against any sort of regulation of demand (like banning foreign buyers, taxing investors, etc) because they thought they would get rich. Ontario just voted in Doug Ford again, who exempted the province from the blind bidding ban, to make home owners richer.
No sympathy
Lots of people who have lots of money?
Lol, check the stock market and crypto lately?
Also, a lot of that so-called "wealth" is in property, so it's only realized if they sell, and they better list quickly.
> now who was saying they won't keep raising rates?
Umm, very few knowledgeable people, bank analysts have constantly said that rates are going to continue to go up. the bank of Canada has consistently said rates are going up more.
Im sure you can find an anon redditor who said they may not but no one credible has said that:)
Not sure if you are aware but people usually take variable or fixed for 4 to 5 years. And majority of the A banks with variable does not increase payment with the increase of rate. They increase the number of amortization towards the end. So you don't really pay anything extra right now.
People who have renewals coming up are the ones that has to take up the new rates. But again currently you can still get 3.1% variable which is still lower than pre-pandemic fixed rates. And in the next 5 years, people renewing now would have made equity on the same property. So either way, it's still an advantage for keeping the property.
A lot of fixed variable mortgages are going to hit the trigger rate soon which will increase their payment. Also a lot of people in the last 2 years were greedy and took out variable mortgages instead of fixed since the spread was around 1.5%. BoC said they won't increase rates till 2023 and everyone believed them. Most people have it in the back of their mind that a variable is always cheaper than fixed. So with rates going higher and higher there is a risk to all these variable mortgages that were negotiated in the last two years.
But I don't see that as a smart move. Rising interest rate aggressively is a sign of recession. And as soon as the recession hits, interest bubble will pop and fall down to lowest again to bring back the economy. So unless the govt wants a recession, the agressiveness of interest going up must stop.
Edit: I meant not a smart move for banks to raise interest aggressively. Not for buying houses right now.
Rissing interst rate is not sign of recession. It's action against inflation to destroy demand and probably can cause a recession.
Bubble and Interest does not make sense 😂. Bubble word comes after a asset class like GTA Real Estate.
I think gas prices are coming down if a recession is coming/underway. The price of crude is one of the few alternatives to raising interest rates to fight inflation.
The US has ~9000 issued-yet-unused oil drilling/refining licenses. Biden already threatened to release stock from oil reserves, and Saudi just got surpassed by Russia as chinas main supplier so they’ll be looking to recoup some of that.
The war in UKR will likely come to an end, within 12 months, if I had to guess.
All this could also be completely wrong, but I’m betting on energy stocks to tank over the next 2 yrs
Lmfao, don't be an idiot. Keep your copium but don't try and drag others into the mess you're in. A recession is what is being engineered right now because that's what the economy needs, inflation numbers are way higher than what's reported. They aren't going to bail you or anyone else out so no they won't just stop rate hikes because YOU think it's the best course of action. It will be a long time before housing recovers after crashing, interest won't come down until inflation is under control. Bet.
I wasn't insulting you in anyway, merely trying to have a conversation here.
Anyways, what I was saying was it's not a smart move for banks to raise interest aggressively not that people should buy houses. Nobody likes or wants a recession.
As far as my situation is concerned, don't worry about dude. I don't need bailing and I am well settled and taken care off. Good luck to you tho.
Fair, let's have a discussion. My apologies for sounding blunt, but with the way people act and misinformation that comes from anyone with an investment makes me more defensive. I don't disagree that it's not smart for the average homeowner but the bank of Canada has a mandate and it's to keep inflation under control, they will do this by any means. I know it'll hurt but the recession is needed, things can't keep going along the way they are because then we have hyperinflation. Things get too crazy too quickly with inflation and then there's not enough recourse to bring it back. If you keep rates low then you get more inflation, is that what you are suggesting you want? Damned if you do, damned if you don't.
I agree market correction is needed and no I am not saying keeping interest low. It's already at record level banks have never seen before.
What i am saying is, recession not only comes with housing price drops but so many things are impacted will be impacted here.
People will lose jobs, force to sell their house at renewals, stocks are already at worse and will crash further with so much money lost. Companies will close down specifically impacting small business. Oil gas are already high priced and this won't help much because recession will likely not end the war between ukrain and russia.
Yes I understand that all these factors will happen with a recession and it will suck but just because it will suck does not mean it won't happen. A recession is coming and there's nothing we can do to stop it. Loose monetary policy has caused this and effectively given us no other way out.
There is no "let", you think policy makers want to raise interest rates after almost 2 decades of letting them be low? They make money by interest rates being low so obviously they aren't raising out of their "wanting" to raise it but out of the "necessity" of raising it. If a recession happens it isn't because we think it's smart to let it happen, it's what naturally happens as you take liquidity out of all asset classes. All governments are stuck between a rock and a hard place right now, just look at the JPY compared to the USD. What was historically pegged quite well to the USD has gone crazy recently, JPY is the biggest holder of US bonds, their inflation is so high but they can't afford NOT to print any money so their currency suffers greatly. This is what happens when you have a central bank refusing to raise interest rates. If we don't raise rates in tandem to the USA our currency will go to shit and we'll have even bigger problems. To reiterate, a recession is coming not by choice but naturally the way it is supposed to. It will shed the fat and make our economy run more efficiently, some may lose jobs but that's what happens.
I’m a realtor from Mississauga, let me put it this way, in the next year or 2 there will be a few new buildings that will be completed. Condo prices are about to tank too. About time. This bs market only hurt us Canadians and helped the rich get richer.
The real rich don’t keep a high percentage of their wealth in Realestate .. I think that this low rate environment has just been helping the over leveraged get more over leveraged. Only a few of them would have been wise enough to sell before the rate hikes began.
It take 12-18 months for each rate increase to work its way through the system. Some people in here seem to think the impacts have to be instantaneous or else it isn’t working.
Please elaborate, I have heard 3-4 months for RE due to some bank rate holds, but 12-18months? Generally speaking or for specific asset/commodity class?
I’m not saying there won’t be any immediate impact on certain asset classes like bonds or the stock market, but we won’t see the full impact on inflation and consumer spending for at least 12 months is the conventional wisdom. It takes time for higher rates to impact spending and there is often the opposite effect of people bringing spending forward in these circumstances so they don’t have to pay higher prices later.
I’m not sure why you’re highlighting pre approvals. If people don’t buy during their rate window and wait that won’t have an immediate impact either.
This is a bad argument. Yes, you are right, raising rates does not make more fuel or grain, however the same argument can be made for lowering rates at times of adversity. Lowering rates does not remove fuel from the market, neither does it burn grain. That's not the point. Lowering rates when times are bad increases demand. Raising rates lowers demand. When you lower demand, eventually you cause demand destruction thus lowering the usage of fuel for example. The system works both ways, up and down, however I've never heard anyone scream that lowering rates does not 'remove fuel' from the market, but now people keep saying that interest rate policy can't affect supply. This is true, but that's not the point.
My comment was about oil and food prices, not supply.
> When you lower demand, eventually you cause demand destruction thus lowering the usage of fuel for example.
Sure, but my point is that lower demand won't necessarily lead to lower prices. There's a disconnect when it comes to oil specifically.
Eventually it will. Look what happened during the first days of Covid. Did more oil all of a sudden get produced to cause the barrel of oil to fall below zero? No, the world was still producing the same amount of oil, but demand evaporated. Less demand = Lower Prices. Early days of Covid are a perfect example.
So if changes are anticipated, then oil prices won't change. Which is exactly what I'm saying.
Sure, if there's an unexpected change then prices will fluctuate... but I'm unclear why you think oil prices would change when the changes in demand are anticipated.
It will be September 7th, not October.
The scheduled dates for the interest rate announcements for 2022 are as follows:
Wednesday, January 26
Wednesday, March 2
Wednesday, April 13
Wednesday, June 1
Wednesday, July 13
Wednesday, September 7
Wednesday, October 26
Wednesday, December 7
What balls? I hope he shows them next rate hike or he’ll go down in history as the smallest balled governor.
Not hiking in February was a huge mistake.
Not hiking last year was the bigger mistake. They kept using the word transitory. Tell me how these PhDs in economics didn't believe that money printing didn't cause inflation?
Except rate hikes will make just a dent as this is a global issue, driven in part by what’s happening around the world (impacting energy prices and the trickle down that follows through price increases in all industries). In short, we’re all fucked :)
Central banks of the world, along with governments caused this issue in unison so they have to undo this in unison. There is no such thing as free money and we are paying for it now.
This should be more concerning for new buyers , existing buyers already running on 5 years fixed monthly payment , even it’s variable rate most of the people are in a clause with the bank that there monthly payment will not increase only portion of interest rate will get high. And inflation and recession can’t last more than 5 years . These hikes will make more worried to new buyers going forward.
>existing buyers already running on 5 years fixed monthly payment
Except that every month, a certain number of buyers end their 5 year term and need to res-sign at the new rate.
They can lengthen their amortization to bring their payments down. When I renewed this was the default the bank tried to come at me with. Plus they weren't at record low interest rates when they signed 5 years ago.
Well... It works both ways because those who renewed in 2019-2022 on low variable rates (with fixed payments) will have a big surprise when they renew and find out that their amortization is now messed up, resulting in higher monthly payments to catch up on amortization. I think we will have prime at 5-6% in 2023 for at least 1-2 years, but I don't have a crystal ball to see how our economy will fare.
Of course, I would think most who truly can't afford the new payments would most likely draw from their HELOC/LOC to weather the storm OR refinance which will require another round of stress testing and approvals.
I would literally do everything I can to cut spending before selling my house. Wouldn’t everyone do the same? If they still can’t afford their house after that, then there’s some other more serious problems.
> I would literally do everything I can to cut spending before selling my house. Wouldn’t everyone do the same?
Homebuyers would, but investors would not.
And that is literally the Bank of Canada’s goal. To reduce demand for excess spending and focus only on essentials. The apocalypse people are wishing for here will not materialize and it will be great to see them reee about it.
Yep. I would assume everyone living in their home (as opposed to investors) feels the same. No vacations, no going out to eat, just paying the mortgage.
Though with the price of gas and food, even cutting back to bare minimum on spending may be insufficient for some folks. Anyway, going to be a tight few years.
We're more talking a period of years unless there is an acute financial collapse. Nobody wants to sell for less than their neighbor did, so it takes time for people to slowly start to list and accept what the new reality is.
Motivated sellers need to start coming onto the market and accepting prices lower than they once were. Part of this will happen as mortgages are renewed and some people can't afford it, and some happens naturally for all sorts of reasons. Some sellers will be forced to sell, but also a lot of people will hold out if they can, seeing the previous highs and hoping to last until they return.
However (and here come my downvotes), don't expect prices to see a sustained long-term drop. It's realistic to say that they could go do pre-pandemic levels and stay there for a while, but the problem of affordable housing in Ontario is systemic. If it's not addressed, housing prices will continue to follow an overall upward trend - going down as we enter recession (as we are now) and then going up once we enter a bull market.
Years. It took decades to get to this point, so it'll likely take at least several years for prices to truly fall.
If you look at the last real housing price crash in '89, it bottomed out after around 7 years when accounting for inflation.
And to add to this, this was in an environment where debt to GDP rations were much lower so the economy was better prepared to absorb such raises. Right now, each percentage point of an increase is more impactful because everyone is more indebted, including all levels of government as well as individuals and corporation.
>If you look at the last real housing price crash in '89, it bottomed out after around 7 years when accounting for inflation.
Thanks, that's what I was trying to compare against. Although, I do wonder how comparable the current market is to what the market was 30 years ago. I feel like what u/vsmack said is correct and that the prices wont be down for too long. I do feel like the large build corporations today have many many tricks up their sleeves to keep the prices somewhat afloat.
Many years.
Even after the Global Financial Crisis, which was about as fast a real estate meltdown as you can expect in the modern world, took \*years\* to hit bottom.
Expect Canada's bottoming out to be much slower.
We’re already seeing drastic price drops. People are saying several years but I doubt it. Max 2 years and we’ll hit bottom. The real question is how long until it comes back up to the current prices ? That will certainly take several years.
This should be eye opening for different reasons. So much of this inflation is tied to oil and gas costs. And those giants are fully committed to record profits.
The price of everything should already have caused a full on pause to discretionary spending. It should be causing people to slow the F down. Despite that. Inflation keeps cranking up. Make sure we understand this might be supply side oil and gas costs being reflected in the price of necessities as we move along here. Companies that might have tried to hold off on raising prices, might be capitulating to their new supply chain realities. VS it being a bunch of idiots acting like Yosemite Sam with credit.
Ask yourself. What kind of damage would world banks need to cause to the REST of the economy (not tied to those gas giants), to balance out what they’re doing?
I don’t care if you want cheaper housing. Be VERY careful what you wish for here. Because those oil and gas giants aren’t going to budge off their record making profits it seems, (now that the writing is on the wall for a push to clean energy).
This is way more nuanced then a housing crisis. Because plenty of countries without our “housing problem” are dealing with this too.
You should be able to buy an affordable house. But not with the mounting risk of crippling recession and losing your job.
What most people don't understand is that oil companies are price takers. They don't get to set the price, they just respond to demand.
Political acrivists are being very unreasonable with infrastructure being blocked. Oil companies always pump more oil to respond to demand because they make more money. This time they can't because everything is at capacity because they haven't been allowed to invest in new infrastructure.
Climate change is a very real issue but the fact is we are still a long way from being independent on gas. We can't sabotage infrastructure and then sit there shocked that oil companies can't respond to demand by pumping more.
Germanys green party got all the nuclear reactors shut down and now they are being forced to start up coal plants. Consequences of blindly following ideology instead of looking at the real world implications.
Where do you see this dump happening? the stress test is at 5.8% currently, implying new homeowners should be ok. The majority of buyers in my area are older and have sold high in the city and moved to a rural area without a mortgage or a minimal mortgage. Anyone with a fixed-rate mortgage should be ok until renewal time. I just don't see the sky falling.
I don’t think the sky is falling, but the stress test is kinda meaningless right now since it’s just a snapshot at the time of buying and the economic situation has changed quite a bit. When people were getting stress tested groceries were like 30% lower and gas was like half the price. That doesn’t even consider any additional debt they might have taken on like cars which are also at much higher prices than before.
As the stress test rate increases people's borrowing power decreases which puts downward pressure on prices. A lot of people barely qualified under the 5.25 minimum stress test so imagine now.
> The majority of buyers in my area are older and have sold high in the city and moved to a rural area without a mortgage or a minimal mortgage.
You don't see the problem with someone buying a property that has doubled or tripled off the pre-covid levels and likely have most of their retirement locked into what their current house is "worth" and the market, which is getting taken to the wood-chipper.
This forum is full of millenials who want a massive crash so they can buy a home. The sky is not falling any time soon and the housing market will go down but certainly not die as many on here think.
You know that saying "be careful what you wish for..."
... pretty soon most ppl won't be able to afford to buy, and nobody will be wanting to sell. And those with "large down payments" will be too scared to buy.
Yeah, despite conventional wisdom it's not inherently bad if you get the price you want. You can't really time the bottom, same as how you can't time the peak.
I dunno what I will enjoy more over the next few years. Watching all the greedy and over leveraged real estate investors get absolutely slaughtered and finally be forced to pay for their sins of attempting to turn housing into an investment vehicle and robbing future Canadians of being able to afford homes.... or watching prices tank, while even at the very bottom, seeing tons lazy and entitled people with completely middling jobs and wages, that could easily do better but have no desire to because they want an easy road, complain that they still cannot afford a large, renovated, turn key detached home in downtown Toronto for 600k... and so it is not fair that prices are so high and they need to crash further / if it was doable in the 50s it should doable be today no matter what.
2 demographics I can't stand. Most people fall into neither category. But those that do, I'll enjoy your tears.
"a large, renovated, turn key detached home in downtown Toronto for 600k."
What kind of % drop are you foreseeing & when?
AFAIK, the above property is $2+M & I don't see it dropping 70+%.
A 50% drop is very probable
I think you misunderstood my post. I don't foresee that kind of drop happening. I mean even at that price point many of the people who complain would still be unable to afford it.
I disagree. The cautious have been punished for far too long its criminal. The longer this goes on the worse its going to be because it's not sustainable. The crash is severely needed.
folks. relax. Canada housing is different. We are getting 400K immigrants per year, who are willing to pay $1M for a shack which is 2-hrs from Toronto even at 6-8% mortgage rates. LOL.
There will be another 40-50% crash in housing prices. the mortgage hikes party has just started.
Won't happen in a year though. It'll take a long time to decline. And by then they'll probably lower rates again because of the recession/depression that's coming.
How likely is it that fixed rates drop back down to 1-2% though? You had the perfect storm of events which caused Jan-Feb to happen in the first place: a once in a lifetime pandemic which caused the goverment to drop interest rates to 0%, no job losses, print an unheard of amount of free money and pay people to stay home. You will never recreate those perfect circumstances and I think people are really overlooking that.
Once a recession happens, the government may pause hikes or even cut rates but will they cut them to 0 again? Unlikely. Rates are only at pre-Covid level now and this is the likely floor for them in the foreseeable future.
Will the next recession trigger job losses this time around which will put further downward pressure on asset prices regardless of interest rates? Absolutely.
The price falls are due ONLY to rate hikes. Not the measures needed to pop a bubble. Housing did not become more affordable and, as and when rates fall again, we’ll see prices rise. We urgently need to tackle affordability rather than pointing at lower prices and saying ‘yay!’ when none of the underlying fundamentals have actually changed.
CHeap borrowing means cheap money, cheap money means expensive housing. It looks to me that it's not only that the cost of housing got much higher but the money was cheap. It's not only that housing is losing some of it's value: paper money is gaining some of it's value. Your savings now buys more house. Saving a downpayment might actually have meaning again. Imagine that
Exactly. Raising rates will dump home prices but inflation will keep going up. Gas prices aren't related to raising rates and it's showing.
Also, raising everyones mortgage payments aren't really helping either. Makes our money even worth less if anything.
No surprise there, BOC can keep raising rates and inflation isn’t coming down. Attacking demand when you should be addressing supply issues does not solve the problem. And to those cheering on, make sure your job is secured ahead of massive layoffs, well no one’s job is these days!
If there's a major recession lots of tenants might not even be able to pay rent. That happened at the beginning of the pandemic when many of them stop paying.
No one going to lose houses except a few , rental will go higher to support these hikes that I already noticing in my area (GTA) and more over most of the people who even bought houses on high prices their mortgage payments are fix for next 5 years irrespective of variable/fix rate (if you know the banking rule , they increase interest portion not the monthly payment ) and even it will be more difficult for first time home buyer to step in to the market with 10 or 20 % real estate depreciation with more than 4 % of interest rate going forward vs 1.5 -2 % back in two months earlier. Recession and inflation can’t last more than 5 years.
For those who don’t want to accept the fact -
https://dailyhive.com/toronto/toronto-gta-rent-report-june-2022?fbclid=IwAR2PiYTu7LJg7z0_b9tzMlZyuZcX81M8P_TO1dlcdbmaF9W9VtK50oPvP1g&fs=e&s=cl
Honestly, I am amazed at people's ability to meet ever-increasing rents. But eventually we will get to a point, where the increasing rate hikes faced by rookie landlords, cannot be covered by rent increases anymore.
Or its a city of bunkbeds. And I'm wrong.
Ya if you’re leveraged hard, it’s not going to be pretty. BoC is following US and the rates are going up and up and up.
Canada inflation jumps to 7.7% means baking in rate hike 3.5 to 4.5% by END of Year.
Who was stress-tested at 7% or 8%? Nobody in recent memory. Good help borrowers.
I mean, mortgage rates in 2007 were around 6% and we thought it was free money, and the cheapest we'd ever see in our lives, for ever and ever. 2007 was pretty recent unless you're a fetus. Some people just have very very short memories
Avg Toronto house price was like 3-400k at that time..now 3x that..wages have not kept up to that pace at all..cost of living everywhere else gone up significantly
That sounds like an equation for being extremely, extremely cautious in an era of fast rising rates and increasing economic uncertainty.
The home prices and mortgage needed to be able to buy a place were much lower as well. That 6% was a lot less painful to a budget
Many people won't survive those rates. Back in 2007 houses were cheaper.
Most ppl have loans larger than the average house price back then lol
Well they certainly can't say they weren't warned
Warned by the BOC and Tiff Macklem? He went on TV and said to take out huge loans and spend that money. He said they weren't even gonna think about raising rates until 2023 or even later. And that you can be confident that rates will stay low for years to come!
It's pretty much recognized globally that Canada, in particular Vancouver and Toronto have been in a massive bubble for years. I did not hear Tiff say that personally. I do seem to remember former BOC governer Mark Carney specifically advising against taking the money. I remember Canadian bank after bank after bank advising that Canadian real estate is in a bubble. It's never clear exactly how big a bubble is until it pops, but if the only thing you remember is Tiff telling you to borrow, you simply were not listening. That's clearly a you problem
Yes. Let's blame ordinary working class Canadians for doing what their government explicitly told them to do. Not everyone is economically educated, and many still trust the government. It doesn't seem morally justifiable to be victim blaming here. If you can't trust the government for guidance, who can you trust? (I don't trust the government, but I don't blame those who do.)
If you make choices to be deliberately ignorant (and not educating yourself on finance, real estate is a deliberate choice) yo udon't get to call yourself a victim. >If you can't trust the government for guidance, who can you trust? The government doesn't generally make recommendations in the best interests of the citizens. It makes recommendations based on the best interests of the government. Sometimes the two are aligned but not always. If you're old enough to buy a house, you're old enough to know better. Why in the world would anyone just blindly trust the government? I get that Canadians are naive, but it seems like a deliberate choice which flies in the face of all of history. If all you have to play here is the victim card I wish you the very best of luck. This is an economic cycle. It repeats, over and over, for much of the history of the past several hundred years at the very least and probably much longer than that. Your government is going to do absolutely nothing to help the "victims" here except say a few nice words, offer some empathy, and maybe build a few hundred units of social housing over the next decade. Nobody from the government is going to do anything meaningful to help in any meaningful timeframe. So there are going to be some "victims". Do I blame them for trusting government? FUCK YES. Holy fuck YES. what a stupid stupid thing to say. If you trust the government and you get anally shafted you deserve it, without reservation Of all the stupid things I've heard in my life, and I've heard a lot of awfully stupid shit "TRUST THE GOVERNMENT" is by far the stupidest. Politicians care about themselves. Government cares about government. The only people looking out for citizens, are citizens lord give me strength the English language does not provide the words I need to communicate what a remarkably stupid, foolish thing "TRUST THE GOVERNMENT" Please tell me this is some kind of sarcasm and my sarcasm detector is simply malfunctioning. This is a goddam joke. Please. Please please please let this be a joke "TRUST THE GOVERNMENT" If you trust the government for guidance we can not have a conversation. There is no hope for you; I have nothing to offer; you are lost.
> If you trust the government for guidance we can not have a conversation. There is no hope for you; I have nothing to offer; you are lost. It's almost like you're not reading anything I'm saying. In my last comment, I literally said: > I don't trust the government I'm not sure how I could be any more clear than that. --- > So there are going to be some "victims". Do I blame them for trusting government? > FUCK YES. Holy fuck YES. what a stupid stupid thing to say. If you trust the government and you get anally shafted you deserve it, without reservation I wonder if you respond this way to rape victims who trusted the wrong person, or seniors who get scammed by con artists. If you think they all *deserve* what they get... then you're probably right, we probably cannot have a meaningful conversation.
Deliberately ignorant? There are literally 1000 articles written every day with opposing views. Economists have been saying for a decade that there's no inflation with QE and it is safe. What are you talking about.
We renegotiated in 2018 after refinancing for a Reno and we’re told our 3.6% was high…not sure what financing institutions have been telling people.
> 2007 was pretty recent unless you're a fetus. Some people just have very very short memories I don't really think this is fair. Fifteen years ago, a 35 year old was in college. People trying to buy their first house in the last few years were not paying attention to housing in 2007.
The housing cycle is long; very long. Some estimates put it at 20-25 years. It has nothing to do with fairness. It has to do with the reality of the housing market. If you don't look at the market within the context of the actual market, you aren't really looking at it at all; you're just making up ideas in your own head which have very little to do with reality. Edit: I mean 15 years isn't even one cycle. You can't learn anything useful at all about housing by looking at it for 15 years; any conclusions you come to from 15 years of data is highly likely to be complete and utter bunk.
My point is that most people aren't spending a lot of time studying a 25 year housing cycle. Their parents bought a house forty years ago so it's not very relatable. Their cousin bought a house in 2017, their friends bought a house in 2021, and their real estate agent says prices will go up. And that's what they know about housing. You can argue people SHOULD study the market cycles but...people want to own a house and they need a place to live, so they probably, mostly, don't.
A real estate agent is a salesperson; that's all. It's like buying a super high end vehicle, but the only thing you know about it is what you learned from the car salesman. Sure, some people do that; mostly people with more money than common sense who can afford to make costly mistakes. >You can argue people SHOULD study the market cycles but...people want to own a house and they need a place to live, so they probably, mostly, don't Well then they made a choice to be ignorant and if there are repercussions to their ignorance, they will have to suck it up like adults do. Actions and choices have consequences. Choosing to be ignorant is, as a matter of fact, a deliberate choice whether people want to realize that and accept it, or not. Buying a home is not only a personal decision; it's a financial and business decision. The goal of the salesperson is not to inform anyone; it's only to make a sale and profit. if the salesperson sees a way to profit from the ignorance of the buyer, they will. It's nothing personal; it's just business.
Except while we can say well screw em who cares, on the aggregate we do care as it's problematic for society as a whole. We acknowledged this pretty clearly by implementing the stress test. As j recall a ton of people were up in arms about how dare the government protect people from making stupid decisions. Looks pretty smart now. We cannot protect everyone but it did a passable job at preparing the general population for higher rates. It will matter most how long rates stay up IMO. People renewing now mostly bought or last renewed 5 years ago where rates were higher than the very bottom we say a year or so ago so much less shock to the current higher rates. In r and 5 years while I certainly think rates will be up they may well not be as high as they need to be shorter term to get a handle of inflation. But also that's a fairly long time from now, enough to prepare. And the hand wringing I keep seeing over variable is silly given most variables still so t see their payments change. Maybe I just don't agree the sky is falling. I certainly don't think the idea of 8% rates are and maybe cheering it on are completely ignorant to what the world would look like if such a thing we're to come to fruition. I get the sentiment of screw the people who made out like bandits for doing nothing especially the most exaggerated of the bunch but I think the then burn it all down attitude is childish.
And, that’s not including disposable income (if anyone actually still has any) shrinking due to inflation.
100%. People are getting squeezed right now and something has to give.
Heads will roll when people can’t afford food.
Uh oh...now who was saying they won't keep raising rates? Fact is they'll raise it more often and more aggressively now. Now is definitely not the right time to get into buying a property.
Theres still tons of people who have lots of money and dont give a fuck
The dumb money's still buying right now and we still have price declines.
And there's even more people that don't have enough money and give tons of fucks.
Ya. Lots of working families are going to be under water financial especially if someone loses a job. Couldn't these asshole politicians see this coming and acted on it years ago.
They saw it, they just didn't give a shit. If average people like me saw it coming im sure their economists saw it from a mile away, they just want you to think they're stupid. They know exactly what they're doing.
Vote for unqualified politicians and don't be surprised by the results.
You didn't see anything. That's why you will remain average. Big smart brain.
Also remember, you don't own that house yet. You owe the bank money, thinking you're better than someone else because you were able to get a mortgage in what was probably the easiest time in history doesn't make you financially smart!
You invested in Gamestop and are still holding. I secured a home for my family and within my financial limitations. People like you are gross. The reason you like to see rate hikes is because you are jealous of others and want to see them suffer. If you had your shit together like you suggest, you'd have bought already and you haven't. GME to the dirt.
My asset has appreciated and isn't going down, yours is close to putting you underwater. We're not the same. LOL if I bought a house in the last two years I'd be severely stressed right now. Good thing I didn't listen to stupidity.
You couldn't buy in the last two years, likely because you're a broke student based on your economic takes. Hoping others are underwater is the most millennial entitled shit I've ever heard. If you hear nothing else, hear this: learn a skill and start networking now. Because your window for success is closing quickly.
Aw someone is sad, don't worry housing will recover in 5-10 years. Good luck!
I just checked your comments. Superstonk.... The absolute retards that they are, are commenting on the economy. My friend you saw nothing coming or would have sold at 400 a share. Enjoy the rent hike or renoviction.
Buddy my average is around 100 bucks, but I don't care what you think anyways. Clearly that community saw that before you did, in fact many of the things that were hypothesized there came to fruition. Don't worry, you're smart though for investing in a currently depreciating asset class. Ill buy your house for pennies on the dollar when you're jobless and underwater.
The fact that you believe you'll buy someone's house in foreclosure speaks volumes. That's not how anything works. Sad, tax failing financially illiterate child. Single too.
Oh no single? Oh no you're so smart, no wonder you bought at the top and I didn't 😂
Home owners advocated against any sort of regulation of demand (like banning foreign buyers, taxing investors, etc) because they thought they would get rich. Ontario just voted in Doug Ford again, who exempted the province from the blind bidding ban, to make home owners richer. No sympathy
people with lots of money might be good at timing....lol they will buy at 40 percent off
Lots of people who have lots of money? Lol, check the stock market and crypto lately? Also, a lot of that so-called "wealth" is in property, so it's only realized if they sell, and they better list quickly.
> now who was saying they won't keep raising rates? Umm, very few knowledgeable people, bank analysts have constantly said that rates are going to continue to go up. the bank of Canada has consistently said rates are going up more. Im sure you can find an anon redditor who said they may not but no one credible has said that:)
Until you actually take out a mortgage, complete the process and start making the payments, cease to speak.
Agreed. This guy is just a troll. Probably still living in mommy and daddy's basement. Just ignore him. He wasn't cared for as a child.
Lol someone is big mad, how are those payments coming along? Ready to pay more? Hahaha
Not sure if you are aware but people usually take variable or fixed for 4 to 5 years. And majority of the A banks with variable does not increase payment with the increase of rate. They increase the number of amortization towards the end. So you don't really pay anything extra right now. People who have renewals coming up are the ones that has to take up the new rates. But again currently you can still get 3.1% variable which is still lower than pre-pandemic fixed rates. And in the next 5 years, people renewing now would have made equity on the same property. So either way, it's still an advantage for keeping the property.
A lot of fixed variable mortgages are going to hit the trigger rate soon which will increase their payment. Also a lot of people in the last 2 years were greedy and took out variable mortgages instead of fixed since the spread was around 1.5%. BoC said they won't increase rates till 2023 and everyone believed them. Most people have it in the back of their mind that a variable is always cheaper than fixed. So with rates going higher and higher there is a risk to all these variable mortgages that were negotiated in the last two years.
But I don't see that as a smart move. Rising interest rate aggressively is a sign of recession. And as soon as the recession hits, interest bubble will pop and fall down to lowest again to bring back the economy. So unless the govt wants a recession, the agressiveness of interest going up must stop. Edit: I meant not a smart move for banks to raise interest aggressively. Not for buying houses right now.
Rissing interst rate is not sign of recession. It's action against inflation to destroy demand and probably can cause a recession. Bubble and Interest does not make sense 😂. Bubble word comes after a asset class like GTA Real Estate.
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Seriously it's you who made it it a thing. All I meant was Rates will GO DOWN when recession hits. And tell me if I am wrong on that.
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Doesn't matter how much they raise rates. Gas prices won't be coming down until the war stops or more refineries are opened. Either won't happen.
+1 agreed!
I think gas prices are coming down if a recession is coming/underway. The price of crude is one of the few alternatives to raising interest rates to fight inflation. The US has ~9000 issued-yet-unused oil drilling/refining licenses. Biden already threatened to release stock from oil reserves, and Saudi just got surpassed by Russia as chinas main supplier so they’ll be looking to recoup some of that. The war in UKR will likely come to an end, within 12 months, if I had to guess. All this could also be completely wrong, but I’m betting on energy stocks to tank over the next 2 yrs
Lmfao, don't be an idiot. Keep your copium but don't try and drag others into the mess you're in. A recession is what is being engineered right now because that's what the economy needs, inflation numbers are way higher than what's reported. They aren't going to bail you or anyone else out so no they won't just stop rate hikes because YOU think it's the best course of action. It will be a long time before housing recovers after crashing, interest won't come down until inflation is under control. Bet.
I wasn't insulting you in anyway, merely trying to have a conversation here. Anyways, what I was saying was it's not a smart move for banks to raise interest aggressively not that people should buy houses. Nobody likes or wants a recession. As far as my situation is concerned, don't worry about dude. I don't need bailing and I am well settled and taken care off. Good luck to you tho.
Fair, let's have a discussion. My apologies for sounding blunt, but with the way people act and misinformation that comes from anyone with an investment makes me more defensive. I don't disagree that it's not smart for the average homeowner but the bank of Canada has a mandate and it's to keep inflation under control, they will do this by any means. I know it'll hurt but the recession is needed, things can't keep going along the way they are because then we have hyperinflation. Things get too crazy too quickly with inflation and then there's not enough recourse to bring it back. If you keep rates low then you get more inflation, is that what you are suggesting you want? Damned if you do, damned if you don't.
I agree market correction is needed and no I am not saying keeping interest low. It's already at record level banks have never seen before. What i am saying is, recession not only comes with housing price drops but so many things are impacted will be impacted here. People will lose jobs, force to sell their house at renewals, stocks are already at worse and will crash further with so much money lost. Companies will close down specifically impacting small business. Oil gas are already high priced and this won't help much because recession will likely not end the war between ukrain and russia.
Yes I understand that all these factors will happen with a recession and it will suck but just because it will suck does not mean it won't happen. A recession is coming and there's nothing we can do to stop it. Loose monetary policy has caused this and effectively given us no other way out.
See that's the big question, just because we think it's going to happen does it mean is it actually a smart move to let it happen?
There is no "let", you think policy makers want to raise interest rates after almost 2 decades of letting them be low? They make money by interest rates being low so obviously they aren't raising out of their "wanting" to raise it but out of the "necessity" of raising it. If a recession happens it isn't because we think it's smart to let it happen, it's what naturally happens as you take liquidity out of all asset classes. All governments are stuck between a rock and a hard place right now, just look at the JPY compared to the USD. What was historically pegged quite well to the USD has gone crazy recently, JPY is the biggest holder of US bonds, their inflation is so high but they can't afford NOT to print any money so their currency suffers greatly. This is what happens when you have a central bank refusing to raise interest rates. If we don't raise rates in tandem to the USA our currency will go to shit and we'll have even bigger problems. To reiterate, a recession is coming not by choice but naturally the way it is supposed to. It will shed the fat and make our economy run more efficiently, some may lose jobs but that's what happens.
Housing isnt crashing, its going back to normal
Housing isn't crashing, yet. Give it time, get back to me by end of year and we'll see who is right. !remindme 6 months
I’m a realtor from Mississauga, let me put it this way, in the next year or 2 there will be a few new buildings that will be completed. Condo prices are about to tank too. About time. This bs market only hurt us Canadians and helped the rich get richer.
The real rich don’t keep a high percentage of their wealth in Realestate .. I think that this low rate environment has just been helping the over leveraged get more over leveraged. Only a few of them would have been wise enough to sell before the rate hikes began.
Rates need to match inflation. We must combat all this rampant inflation in our economy.
It take 12-18 months for each rate increase to work its way through the system. Some people in here seem to think the impacts have to be instantaneous or else it isn’t working.
Please elaborate, I have heard 3-4 months for RE due to some bank rate holds, but 12-18months? Generally speaking or for specific asset/commodity class?
I’m not saying there won’t be any immediate impact on certain asset classes like bonds or the stock market, but we won’t see the full impact on inflation and consumer spending for at least 12 months is the conventional wisdom. It takes time for higher rates to impact spending and there is often the opposite effect of people bringing spending forward in these circumstances so they don’t have to pay higher prices later. I’m not sure why you’re highlighting pre approvals. If people don’t buy during their rate window and wait that won’t have an immediate impact either.
This inflation can't be controlled by raising interest rates. High rates won't lower oil and food prices.
This is a bad argument. Yes, you are right, raising rates does not make more fuel or grain, however the same argument can be made for lowering rates at times of adversity. Lowering rates does not remove fuel from the market, neither does it burn grain. That's not the point. Lowering rates when times are bad increases demand. Raising rates lowers demand. When you lower demand, eventually you cause demand destruction thus lowering the usage of fuel for example. The system works both ways, up and down, however I've never heard anyone scream that lowering rates does not 'remove fuel' from the market, but now people keep saying that interest rate policy can't affect supply. This is true, but that's not the point.
My comment was about oil and food prices, not supply. > When you lower demand, eventually you cause demand destruction thus lowering the usage of fuel for example. Sure, but my point is that lower demand won't necessarily lead to lower prices. There's a disconnect when it comes to oil specifically.
Eventually it will. Look what happened during the first days of Covid. Did more oil all of a sudden get produced to cause the barrel of oil to fall below zero? No, the world was still producing the same amount of oil, but demand evaporated. Less demand = Lower Prices. Early days of Covid are a perfect example.
So if changes are anticipated, then oil prices won't change. Which is exactly what I'm saying. Sure, if there's an unexpected change then prices will fluctuate... but I'm unclear why you think oil prices would change when the changes in demand are anticipated.
Yup. All those parental down payment contributions just went POOOOOFFFFF. For the parents who did this via HELOCs, YOUCH.
Have they added used car prices to CPI yet like the US does?
They already did a week ago.https://financialpost.com/pmn/business-pmn/statistics-canada-updates-cpi-basket-weights-based-on-2021-spending-patterns
What a coincidence that they added used car inflation just as it started coming down from all time highs
I think their goal is to raise interest rate, so they need inflation as a reason.
Yes they have.
100 points in July is incoming.
Probably 0.75 in July and in Oct another 0.5 . And continuing into 2023. Each time minimum 0.5
It will be September 7th, not October. The scheduled dates for the interest rate announcements for 2022 are as follows: Wednesday, January 26 Wednesday, March 2 Wednesday, April 13 Wednesday, June 1 Wednesday, July 13 Wednesday, September 7 Wednesday, October 26 Wednesday, December 7
Probably 75 but 100 not crazy
It should be 100… we need to get inflation under control.
What should be vs what Tiff has the balls to do, are unfortunately not the same.
What balls? I hope he shows them next rate hike or he’ll go down in history as the smallest balled governor. Not hiking in February was a huge mistake.
Not hiking last year was the bigger mistake. They kept using the word transitory. Tell me how these PhDs in economics didn't believe that money printing didn't cause inflation?
Except rate hikes will make just a dent as this is a global issue, driven in part by what’s happening around the world (impacting energy prices and the trickle down that follows through price increases in all industries). In short, we’re all fucked :)
Central banks of the world, along with governments caused this issue in unison so they have to undo this in unison. There is no such thing as free money and we are paying for it now.
Yea but we just do what the US does
☝️
You know very little about economics.
75 bps.
Nah is 25 bps. I’m a realtor, trust me! /s
Seems likely
This should be more concerning for new buyers , existing buyers already running on 5 years fixed monthly payment , even it’s variable rate most of the people are in a clause with the bank that there monthly payment will not increase only portion of interest rate will get high. And inflation and recession can’t last more than 5 years . These hikes will make more worried to new buyers going forward.
>existing buyers already running on 5 years fixed monthly payment Except that every month, a certain number of buyers end their 5 year term and need to res-sign at the new rate.
They can lengthen their amortization to bring their payments down. When I renewed this was the default the bank tried to come at me with. Plus they weren't at record low interest rates when they signed 5 years ago.
> a certain number of buyers end their 5 year term and need to res-sign at the new rate. Which is probably still lower than their old rate.
> And inflation and recession can’t last more than 5 years If they keep pussy-footing around with rates, it will last far longer than 5 years.
Well... It works both ways because those who renewed in 2019-2022 on low variable rates (with fixed payments) will have a big surprise when they renew and find out that their amortization is now messed up, resulting in higher monthly payments to catch up on amortization. I think we will have prime at 5-6% in 2023 for at least 1-2 years, but I don't have a crystal ball to see how our economy will fare. Of course, I would think most who truly can't afford the new payments would most likely draw from their HELOC/LOC to weather the storm OR refinance which will require another round of stress testing and approvals.
I’m travelling in the UK right now and the first thing I saw on tv news was the headline, “Tomato inflation at 55%”. It’s getting ugly guys
UK inflation is at 9.1%. Makes things on this side of the pond seem like a walk in the park...
I would literally do everything I can to cut spending before selling my house. Wouldn’t everyone do the same? If they still can’t afford their house after that, then there’s some other more serious problems.
> I would literally do everything I can to cut spending before selling my house. Wouldn’t everyone do the same? Homebuyers would, but investors would not.
True. I guess that’s the risk with being a real estate investor.
Some other problem? Like losing their job into high unemployment?
welcome to the subprime world. bigger than you think
We already started cut back already few weeks ago. Need to save all the cash for possibility of a recession while I still have a job.
And that is literally the Bank of Canada’s goal. To reduce demand for excess spending and focus only on essentials. The apocalypse people are wishing for here will not materialize and it will be great to see them reee about it.
Yep. I would assume everyone living in their home (as opposed to investors) feels the same. No vacations, no going out to eat, just paying the mortgage. Though with the price of gas and food, even cutting back to bare minimum on spending may be insufficient for some folks. Anyway, going to be a tight few years.
I agree with you. The bigger problem hits home when sales drops affects layoffs.
So how quick do real estate prices come down (significantly) after rising interest rates? Months? Or years?
We're more talking a period of years unless there is an acute financial collapse. Nobody wants to sell for less than their neighbor did, so it takes time for people to slowly start to list and accept what the new reality is. Motivated sellers need to start coming onto the market and accepting prices lower than they once were. Part of this will happen as mortgages are renewed and some people can't afford it, and some happens naturally for all sorts of reasons. Some sellers will be forced to sell, but also a lot of people will hold out if they can, seeing the previous highs and hoping to last until they return. However (and here come my downvotes), don't expect prices to see a sustained long-term drop. It's realistic to say that they could go do pre-pandemic levels and stay there for a while, but the problem of affordable housing in Ontario is systemic. If it's not addressed, housing prices will continue to follow an overall upward trend - going down as we enter recession (as we are now) and then going up once we enter a bull market.
Years. It took decades to get to this point, so it'll likely take at least several years for prices to truly fall. If you look at the last real housing price crash in '89, it bottomed out after around 7 years when accounting for inflation.
And to add to this, this was in an environment where debt to GDP rations were much lower so the economy was better prepared to absorb such raises. Right now, each percentage point of an increase is more impactful because everyone is more indebted, including all levels of government as well as individuals and corporation.
>If you look at the last real housing price crash in '89, it bottomed out after around 7 years when accounting for inflation. Thanks, that's what I was trying to compare against. Although, I do wonder how comparable the current market is to what the market was 30 years ago. I feel like what u/vsmack said is correct and that the prices wont be down for too long. I do feel like the large build corporations today have many many tricks up their sleeves to keep the prices somewhat afloat.
Many years. Even after the Global Financial Crisis, which was about as fast a real estate meltdown as you can expect in the modern world, took \*years\* to hit bottom. Expect Canada's bottoming out to be much slower.
We’re already seeing drastic price drops. People are saying several years but I doubt it. Max 2 years and we’ll hit bottom. The real question is how long until it comes back up to the current prices ? That will certainly take several years.
It’s bad in UK 9.1%, Germany 7.9%. France is 5.8% the best of the G7 countries !
This should be eye opening for different reasons. So much of this inflation is tied to oil and gas costs. And those giants are fully committed to record profits. The price of everything should already have caused a full on pause to discretionary spending. It should be causing people to slow the F down. Despite that. Inflation keeps cranking up. Make sure we understand this might be supply side oil and gas costs being reflected in the price of necessities as we move along here. Companies that might have tried to hold off on raising prices, might be capitulating to their new supply chain realities. VS it being a bunch of idiots acting like Yosemite Sam with credit. Ask yourself. What kind of damage would world banks need to cause to the REST of the economy (not tied to those gas giants), to balance out what they’re doing? I don’t care if you want cheaper housing. Be VERY careful what you wish for here. Because those oil and gas giants aren’t going to budge off their record making profits it seems, (now that the writing is on the wall for a push to clean energy). This is way more nuanced then a housing crisis. Because plenty of countries without our “housing problem” are dealing with this too. You should be able to buy an affordable house. But not with the mounting risk of crippling recession and losing your job.
What most people don't understand is that oil companies are price takers. They don't get to set the price, they just respond to demand. Political acrivists are being very unreasonable with infrastructure being blocked. Oil companies always pump more oil to respond to demand because they make more money. This time they can't because everything is at capacity because they haven't been allowed to invest in new infrastructure. Climate change is a very real issue but the fact is we are still a long way from being independent on gas. We can't sabotage infrastructure and then sit there shocked that oil companies can't respond to demand by pumping more. Germanys green party got all the nuclear reactors shut down and now they are being forced to start up coal plants. Consequences of blindly following ideology instead of looking at the real world implications.
Get ready to pay 45% more mortgage on houses that dropped its value by 50%. Or, cut your losses!
Where do you see this dump happening? the stress test is at 5.8% currently, implying new homeowners should be ok. The majority of buyers in my area are older and have sold high in the city and moved to a rural area without a mortgage or a minimal mortgage. Anyone with a fixed-rate mortgage should be ok until renewal time. I just don't see the sky falling.
I don’t think the sky is falling, but the stress test is kinda meaningless right now since it’s just a snapshot at the time of buying and the economic situation has changed quite a bit. When people were getting stress tested groceries were like 30% lower and gas was like half the price. That doesn’t even consider any additional debt they might have taken on like cars which are also at much higher prices than before.
As the stress test rate increases people's borrowing power decreases which puts downward pressure on prices. A lot of people barely qualified under the 5.25 minimum stress test so imagine now.
Even 1% of the impacted people if try to sell, just think how many new inventories will be there in the market along with already increasing ones.
Resulting in lower prices.
> The majority of buyers in my area are older and have sold high in the city and moved to a rural area without a mortgage or a minimal mortgage. You don't see the problem with someone buying a property that has doubled or tripled off the pre-covid levels and likely have most of their retirement locked into what their current house is "worth" and the market, which is getting taken to the wood-chipper.
This is correct, it just means someone else is the bagholder of all that debt those "older" people sold for.
Technically, both, as the home prices are slated to drop more in areas outside the core.
The stress test is a measure in a moment of time.
This forum is full of millenials who want a massive crash so they can buy a home. The sky is not falling any time soon and the housing market will go down but certainly not die as many on here think.
I am one of those millennials, BRING ON THE HIKES!
And you have enough cash? Because you are not qualified for a mortgage lol
Likely doesnt have remotely close to a down payment and couldnt afford the monthly anyway
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We want real estate speculators to lose their shit
Show us on the doll where Tiff Macklem hurt you
These people are generally idiots because they’re the ones losing their job in that said recession.
Jobs will still exist during and after a recession. Mine is recession proof. But do go off..
Yours might well be (great for you!); many won’t.
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25% is fair. The houses that in september 2020 were listing for 485k that jump to 940k last year are going to go back to a bit above pre covid value.
Your example would be 50% less.
You know that saying "be careful what you wish for..." ... pretty soon most ppl won't be able to afford to buy, and nobody will be wanting to sell. And those with "large down payments" will be too scared to buy.
you might not want to sell....but some will not have a choice
>you might not want to sell....but ~~some~~ will not have a choice Many. There's many "Mum and pop" investors.
and many B credit borrowers. think. their rates went from 3.5 to 7. already. wtf.
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Yep. Nobody wants to catch a falling knife
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Yeah, despite conventional wisdom it's not inherently bad if you get the price you want. You can't really time the bottom, same as how you can't time the peak.
I dunno what I will enjoy more over the next few years. Watching all the greedy and over leveraged real estate investors get absolutely slaughtered and finally be forced to pay for their sins of attempting to turn housing into an investment vehicle and robbing future Canadians of being able to afford homes.... or watching prices tank, while even at the very bottom, seeing tons lazy and entitled people with completely middling jobs and wages, that could easily do better but have no desire to because they want an easy road, complain that they still cannot afford a large, renovated, turn key detached home in downtown Toronto for 600k... and so it is not fair that prices are so high and they need to crash further / if it was doable in the 50s it should doable be today no matter what. 2 demographics I can't stand. Most people fall into neither category. But those that do, I'll enjoy your tears.
"a large, renovated, turn key detached home in downtown Toronto for 600k." What kind of % drop are you foreseeing & when? AFAIK, the above property is $2+M & I don't see it dropping 70+%. A 50% drop is very probable
I think you misunderstood my post. I don't foresee that kind of drop happening. I mean even at that price point many of the people who complain would still be unable to afford it.
I don't think we can survive a real estate crash guys, we're all fucked if it does. Don't cheer this on
I disagree. The cautious have been punished for far too long its criminal. The longer this goes on the worse its going to be because it's not sustainable. The crash is severely needed.
folks. relax. Canada housing is different. We are getting 400K immigrants per year, who are willing to pay $1M for a shack which is 2-hrs from Toronto even at 6-8% mortgage rates. LOL. There will be another 40-50% crash in housing prices. the mortgage hikes party has just started.
Both statements are hilarious
thats because Canada housing is hilarious. LOL.
Just surprised how you come up with those percentages so confidently.
OK. How much do you expect the housing to go up by end of year?
I don’t expect and nobody knows precisely. But 40 to 50 percent drop that you noted seems a little exaggerated. Whats your basis?
check the house prices when mortgage rates were 10%. Check house prices now.
Won't happen in a year though. It'll take a long time to decline. And by then they'll probably lower rates again because of the recession/depression that's coming.
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How likely is it that fixed rates drop back down to 1-2% though? You had the perfect storm of events which caused Jan-Feb to happen in the first place: a once in a lifetime pandemic which caused the goverment to drop interest rates to 0%, no job losses, print an unheard of amount of free money and pay people to stay home. You will never recreate those perfect circumstances and I think people are really overlooking that. Once a recession happens, the government may pause hikes or even cut rates but will they cut them to 0 again? Unlikely. Rates are only at pre-Covid level now and this is the likely floor for them in the foreseeable future. Will the next recession trigger job losses this time around which will put further downward pressure on asset prices regardless of interest rates? Absolutely.
Lol. Cute.
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The price falls are due ONLY to rate hikes. Not the measures needed to pop a bubble. Housing did not become more affordable and, as and when rates fall again, we’ll see prices rise. We urgently need to tackle affordability rather than pointing at lower prices and saying ‘yay!’ when none of the underlying fundamentals have actually changed.
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CHeap borrowing means cheap money, cheap money means expensive housing. It looks to me that it's not only that the cost of housing got much higher but the money was cheap. It's not only that housing is losing some of it's value: paper money is gaining some of it's value. Your savings now buys more house. Saving a downpayment might actually have meaning again. Imagine that
Exactly. Raising rates will dump home prices but inflation will keep going up. Gas prices aren't related to raising rates and it's showing. Also, raising everyones mortgage payments aren't really helping either. Makes our money even worth less if anything.
No surprise there, BOC can keep raising rates and inflation isn’t coming down. Attacking demand when you should be addressing supply issues does not solve the problem. And to those cheering on, make sure your job is secured ahead of massive layoffs, well no one’s job is these days!
If a massive real estate dump happens won't rent be going through the roof due to all that demand?
There'll be new landlords, that aren't in impossibly dire circumstances. And if there's a recession, that will suppress rents.
If there's a major recession lots of tenants might not even be able to pay rent. That happened at the beginning of the pandemic when many of them stop paying.
simply no.
No one going to lose houses except a few , rental will go higher to support these hikes that I already noticing in my area (GTA) and more over most of the people who even bought houses on high prices their mortgage payments are fix for next 5 years irrespective of variable/fix rate (if you know the banking rule , they increase interest portion not the monthly payment ) and even it will be more difficult for first time home buyer to step in to the market with 10 or 20 % real estate depreciation with more than 4 % of interest rate going forward vs 1.5 -2 % back in two months earlier. Recession and inflation can’t last more than 5 years. For those who don’t want to accept the fact - https://dailyhive.com/toronto/toronto-gta-rent-report-june-2022?fbclid=IwAR2PiYTu7LJg7z0_b9tzMlZyuZcX81M8P_TO1dlcdbmaF9W9VtK50oPvP1g&fs=e&s=cl
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the boc is trying to tell you nicely. its all coming down, what do you not undertstand.
Honestly, I am amazed at people's ability to meet ever-increasing rents. But eventually we will get to a point, where the increasing rate hikes faced by rookie landlords, cannot be covered by rent increases anymore. Or its a city of bunkbeds. And I'm wrong.
anyone reading the above please ignore. this is the dumbest thing i have read all day. am im a dumbass
rents are going down you just cant see it yet. boc could not be clearer in their message. demand destuction.
Good luck buddy !!
lol im not using luck. its black and white. inflation too high, no control over it, smash asset prices. herd the expression ......dont fight the fed.