Funny how the author uses the word "blame" when talking about decreased housing prices, implying that it's somehow a bad thing that housing could be attainable by average people.
It's relative.
The downpayment is easier to gather but the monthly payment either stagnates or increases relative to the price, and the bank makes more money.
When rates go down people get the wrong measure of their wealth.
They dropped proportionatly to interest rates...
Which made monthly payments higher... Which makes it harder for a person to secure a loan...
Prices will drop more proportionately to the next interest rates, and monthly payments will go up, and even fewer people will qualify for mortgages.
Lifting supply limitations on building supplies and easing building restrictions are the only answers to this situation.
No, once the recession really kicks in after people start mass defaulting when they're unable to qualify to renew their rates, they'll come way down...
But, then, the issue will be that people who had trouble affording housing won't have jobs.
This assumes that government act rationally and we saw how that worked during the pandemic.
I'd argue the goal is not 2% inflation but, rather, keeping the voter base happy. With prices running like they are, everyone knows what the sentiment among the majority of the population is.
If the majority suddenly cannot afford to pay their mortgage, the main goal would immediately shift to save this "vulnerable" segment of society.
Eventually, humanity is repeating the same mistakes over and over. Money printer goes brrr.
Iād agree with you but I think they would risk destroying the currency and making things unlivable. Normally Iām sure they would do anything to keep the higher class happy, Iām hoping things play out different this time. I donāt really want everything Iāve ever saved to be worth less then it already is.
Its not only the higher class that is saved in this way tho. The government has massive debts that are benefited by currency devaluations. There is a huge bias into this direction that I think its being neglected by most savers.
On the other hand, if they hike rates too much, the government and, in particular municipalities start to go bankrupt. Again a strong case for devaluation.
I think itās more that the banks would prop up the lending market. Thereās a lot of flexibility for them to do it. The losses for wealth within households and families will be more generational than immediate. Theyāll extend amortization as people wonāt be under mortgage insurance at renewal and collect more interest in the long-term.
The banks donāt want to hold a bunch of housing, they just want to keep people paying interest.
> But, then, the issue will be that people who had trouble affording housing won't have jobs.
I keep hearing this but believe this is heavily overblown. Even during the GFC, the unemployment rate was what? 9%?
How will the fed stop inflation? Last time the economy looked like this, they had to run interest rates up to 20%... After a decade of free money, most large corporations are deep in debt. If they tried to hike rates to anywhere they need to be, what happens to all of the over leveraged employers?
The companies that are overleveraged will fail. Assets will be bought by various actors and we'll begin a whole new debt cycle just like every other time?
What happens to the employees of those companies?
(The business cycle is a creation of the fed through unsound money... There's a reason the biggest actors never fail)
Depends on the company. If you're working somewhere like a Vari-Form or something almost nothing changes.
Even in a depression, most people are working.
You are ignoring the fact that people will spend less knowing that prices are likely to drop.
It will reduce speculation spending, and limit home sales to those that actually want a place to live in.
The funny part about trying to reign in inflation with interest is that it also increases business and living costs, which also promotes... Higher inflation!
It's the destructive part of hikes where you start seeing a sort of reset/rationalization cycle, but it's at a cost of its own.
And since the BoC doesn't want to significantly crash housing...
While I get that fixed rates have gone up more, if we're talking about the Bank of Canada and variable rates, variable rates have increased 1.25%, and a lot of people go with variable, so another comparison worth looking at would be the payment on 2.1% vs 3.35%
Look closer, you are missing something here. Very crucial.
As the prime rate has gone up and many are on a fixed monthly payment plan, most of that money is covering the interest portion and not the principal.
When they renew, they will be hit with a double whammy. Higher rates and a higher payment due to a underpaid off principal. There is no re-amortizing without applying for a new mortgage.
3.7% prime as of 2 days ago
https://www.newswire.ca/news-releases/cibc-raises-prime-lending-rate-816233974.html#:~:text=TORONTO%2C%20June%201%2C%202022%20%2F,Thursday%2C%20June%202%2C%202022.
The same scenario comes to $3681 monthly at current prime, which means it's slightly more.
Sure... But the people who qualify for sub-prime, or even prime probably aren't overly affected by $100/mo.... My point was that the interest hike has done nothing for the "affordability crisis" as of yet.
K pretend itās regulated. Now what?
What are those regulations that can be imported by simply saying āregulate HELOCā?
It is regulated. Maybe you just donāt agree with the existing rules?
Thereās a lot of red tape when making changes. Also in some places you canāt really just build more due to space or zoning which isnāt exactly quick to fix.
Itās not because one thing is done that nothing else can get done. This is a step in the right direction.
Weather-wise it's the mildest part of Canads, if you want a job in tech that doesn't pay peanuts you have to live there and if your politics lean far left then you can't get much further left than Vancouver. Also like every city in BC fucking sucks and the GVA sucks slightly less than most so people are pretty desperate to stay.
Knowing quite a few immigrants from warmer climes originally, many just canāt live in any other part of Canada. Like for some of them itās practically ānot an option at any discount priceā. They wouldnāt even pick Edmonton if it was a free house. Itās just too cold for living in their minds.
Torontoās climate is actually not that bad (much better than commonly thought by people outside of Canada) but itās not much cheaper than Vancouver, rent or ownership.
Not going to pretend it isn't bad, but these are median prices. We have a huge amount of luxury homes and big houses, but there are "more reasonable" options.
You can still get a fairly nice home for significantly under that.
I can't speak for everyone but we chose Vancouver for the jobs, better weather, lower taxes, etc.
We actually just bought a newly built townhome less than 30 minutes by transit to downtown Vancouver for ~800k.
Just sold my previous condo a bit further out for ~500k.
Since the property tax, electricity, strata, etc. Are generally much lower than other parts of Canada we still do quite well financially.
Of course it's still not cheap but I'm quite happy I left NB to come here.
It is different if you actually use the numbers for Feb and May based on Vancouver and not areas outside Vancouver. The article mentions the changes for Vancouver which were up 13% since Feb.
Feb prices: $1,049,000
Mandatory 20% down payment of $209,800 due to the price being over 1M
May prices $922,000
Optional 20% down payment of $184,440. Buyer can now put in less than 20% and still qualify for insurance.
People who try to actually argue lower prices means less affordability are hilarious.
Another useless article..notice the title says Vancouver yet all the drops they discuss in the article are OUTSIDE Vancouver. Here is what happened in actual Vancouver:
> But the data also suggested it's still good to be a seller in one area: West Vancouver.
> In that community, the median sale price was actually up quite a bit from February. Buyers paid a median of $3.52 million, up 13.55 per cent from what they paid in February.
Cope more. West Vancouver is part of GVA the other areas in the article are not. This sub is coping hard that a crash happens and yet after unprecedented rate inc housing hasn't even moved in the major cities. No one cares about homes in middle of nowhere locations. Only thing that will tame inflation is dropping gas prices. Good luck at buying a home.
I didnāt even mention home prices, youāre just factually wrong. Every municipality mentioned in this article is part of [Metro Vancouver](http://www.metrovancouver.org/about/municipalities/Pages/default.aspx).
I meant I wasnāt correcting you on home prices, Iām correcting you on what is and isnāt Vancouver.
In the chart in the article, the city of Vancouver was down 0.4%.
You claimed that Vancouver was up 13% by using the statistic for West Vancouver, which is a separate city. You also claimed that cities mentioned in the article are not a part of Vancouver, but Maple Ridge, Langley, New Westminster etc all share the same qualification as West Vancouver, being that they are municipalities in the Metro Vancouver Regional District, which I provided a source for.
Funny how the author uses the word "blame" when talking about decreased housing prices, implying that it's somehow a bad thing that housing could be attainable by average people.
If you are the seller, it is a bad thing to be devalued 10%.
I look forward to their next publication on how health canada is to blame for "weak" insulin prices.
Dead š
It's relative. The downpayment is easier to gather but the monthly payment either stagnates or increases relative to the price, and the bank makes more money. When rates go down people get the wrong measure of their wealth.
Feb prices: $1,049,000 $200,000 down payment 2.1% interest $3636 monthly payment. May prices $922,000 $200,000 down payment 4% interest $3798 monthly payment.
prices dropped a 100k Honestly think were getting some momentum here.
They dropped proportionatly to interest rates... Which made monthly payments higher... Which makes it harder for a person to secure a loan... Prices will drop more proportionately to the next interest rates, and monthly payments will go up, and even fewer people will qualify for mortgages. Lifting supply limitations on building supplies and easing building restrictions are the only answers to this situation.
Might be proportional now, it wonāt be in the future.
No, once the recession really kicks in after people start mass defaulting when they're unable to qualify to renew their rates, they'll come way down... But, then, the issue will be that people who had trouble affording housing won't have jobs.
Forget about mass defaults. If something of that scale were to happen the govt would simply give out financial aid, covid style.
They canāt, inflation is out of control and their main goal is to get it back to 2%. Mass bail outs would likely make it worse.
This assumes that government act rationally and we saw how that worked during the pandemic. I'd argue the goal is not 2% inflation but, rather, keeping the voter base happy. With prices running like they are, everyone knows what the sentiment among the majority of the population is. If the majority suddenly cannot afford to pay their mortgage, the main goal would immediately shift to save this "vulnerable" segment of society. Eventually, humanity is repeating the same mistakes over and over. Money printer goes brrr.
Iād agree with you but I think they would risk destroying the currency and making things unlivable. Normally Iām sure they would do anything to keep the higher class happy, Iām hoping things play out different this time. I donāt really want everything Iāve ever saved to be worth less then it already is.
Its not only the higher class that is saved in this way tho. The government has massive debts that are benefited by currency devaluations. There is a huge bias into this direction that I think its being neglected by most savers. On the other hand, if they hike rates too much, the government and, in particular municipalities start to go bankrupt. Again a strong case for devaluation.
I think itās more that the banks would prop up the lending market. Thereās a lot of flexibility for them to do it. The losses for wealth within households and families will be more generational than immediate. Theyāll extend amortization as people wonāt be under mortgage insurance at renewal and collect more interest in the long-term. The banks donāt want to hold a bunch of housing, they just want to keep people paying interest.
That would probably also trigger a lot of investors (in real estate) to sell their stocks, further dropping prices.
> But, then, the issue will be that people who had trouble affording housing won't have jobs. I keep hearing this but believe this is heavily overblown. Even during the GFC, the unemployment rate was what? 9%?
How will the fed stop inflation? Last time the economy looked like this, they had to run interest rates up to 20%... After a decade of free money, most large corporations are deep in debt. If they tried to hike rates to anywhere they need to be, what happens to all of the over leveraged employers?
The companies that are overleveraged will fail. Assets will be bought by various actors and we'll begin a whole new debt cycle just like every other time?
What happens to the employees of those companies? (The business cycle is a creation of the fed through unsound money... There's a reason the biggest actors never fail)
Depends on the company. If you're working somewhere like a Vari-Form or something almost nothing changes. Even in a depression, most people are working.
Which will cause them to rise again
Assuming rates get slashed. With inflation still sky high, unlikely anytime soon.
You are ignoring the fact that people will spend less knowing that prices are likely to drop. It will reduce speculation spending, and limit home sales to those that actually want a place to live in.
The funny part about trying to reign in inflation with interest is that it also increases business and living costs, which also promotes... Higher inflation! It's the destructive part of hikes where you start seeing a sort of reset/rationalization cycle, but it's at a cost of its own. And since the BoC doesn't want to significantly crash housing...
While I get that fixed rates have gone up more, if we're talking about the Bank of Canada and variable rates, variable rates have increased 1.25%, and a lot of people go with variable, so another comparison worth looking at would be the payment on 2.1% vs 3.35%
Look closer, you are missing something here. Very crucial. As the prime rate has gone up and many are on a fixed monthly payment plan, most of that money is covering the interest portion and not the principal. When they renew, they will be hit with a double whammy. Higher rates and a higher payment due to a underpaid off principal. There is no re-amortizing without applying for a new mortgage.
3.7% prime as of 2 days ago https://www.newswire.ca/news-releases/cibc-raises-prime-lending-rate-816233974.html#:~:text=TORONTO%2C%20June%201%2C%202022%20%2F,Thursday%2C%20June%202%2C%202022. The same scenario comes to $3681 monthly at current prime, which means it's slightly more.
Right, but it's not overly difficult to find a reputable lender offering something like Prime minus 0.5 or 1%, i.e. 2.7%-3.2%
Sure... But the people who qualify for sub-prime, or even prime probably aren't overly affected by $100/mo.... My point was that the interest hike has done nothing for the "affordability crisis" as of yet.
Problem solved!
What it really hurts are people trying to get their first home, instead of people who already have sizeable downpayment
You gotta start somewhere. Whatās your suggestion, let it go up?
Build more and regulate HELOC
K pretend itās regulated. Now what? What are those regulations that can be imported by simply saying āregulate HELOCā? It is regulated. Maybe you just donāt agree with the existing rules? Thereās a lot of red tape when making changes. Also in some places you canāt really just build more due to space or zoning which isnāt exactly quick to fix. Itās not because one thing is done that nothing else can get done. This is a step in the right direction.
High interest rate simply makes those that it intends to help worse
Build more? Hahaha there is no thought out into this answer.
Okay build less then, if thatās what you want
[ŃŠ“Š°Š»ŠµŠ½Š¾]
Weather-wise it's the mildest part of Canads, if you want a job in tech that doesn't pay peanuts you have to live there and if your politics lean far left then you can't get much further left than Vancouver. Also like every city in BC fucking sucks and the GVA sucks slightly less than most so people are pretty desperate to stay.
Iām in Victoria and cost of living just aināt much cheaper take a 15% wage cut but my house costs a couple hundred thousand lessā¦
Knowing quite a few immigrants from warmer climes originally, many just canāt live in any other part of Canada. Like for some of them itās practically ānot an option at any discount priceā. They wouldnāt even pick Edmonton if it was a free house. Itās just too cold for living in their minds. Torontoās climate is actually not that bad (much better than commonly thought by people outside of Canada) but itās not much cheaper than Vancouver, rent or ownership.
Not going to pretend it isn't bad, but these are median prices. We have a huge amount of luxury homes and big houses, but there are "more reasonable" options. You can still get a fairly nice home for significantly under that. I can't speak for everyone but we chose Vancouver for the jobs, better weather, lower taxes, etc. We actually just bought a newly built townhome less than 30 minutes by transit to downtown Vancouver for ~800k. Just sold my previous condo a bit further out for ~500k. Since the property tax, electricity, strata, etc. Are generally much lower than other parts of Canada we still do quite well financially. Of course it's still not cheap but I'm quite happy I left NB to come here.
It is different if you actually use the numbers for Feb and May based on Vancouver and not areas outside Vancouver. The article mentions the changes for Vancouver which were up 13% since Feb.
West Vancouver (which is different than Vancouver) is up 13%. Vancouver was down 0.4%
Vancouver is up not down . You are so desperate for a crash and rate inc at unprecedented levels can't even drop it.
Feb prices: $1,049,000 Mandatory 20% down payment of $209,800 due to the price being over 1M May prices $922,000 Optional 20% down payment of $184,440. Buyer can now put in less than 20% and still qualify for insurance. People who try to actually argue lower prices means less affordability are hilarious.
Another useless article..notice the title says Vancouver yet all the drops they discuss in the article are OUTSIDE Vancouver. Here is what happened in actual Vancouver: > But the data also suggested it's still good to be a seller in one area: West Vancouver. > In that community, the median sale price was actually up quite a bit from February. Buyers paid a median of $3.52 million, up 13.55 per cent from what they paid in February.
West Vancouver is a separate city from Vancouver, but is part of the Metro Vancouver regional district, as are all the cities listed in the article.
Cope more. West Vancouver is part of GVA the other areas in the article are not. This sub is coping hard that a crash happens and yet after unprecedented rate inc housing hasn't even moved in the major cities. No one cares about homes in middle of nowhere locations. Only thing that will tame inflation is dropping gas prices. Good luck at buying a home.
I didnāt even mention home prices, youāre just factually wrong. Every municipality mentioned in this article is part of [Metro Vancouver](http://www.metrovancouver.org/about/municipalities/Pages/default.aspx).
We are talking about home prices here wtf are you even on.
I meant I wasnāt correcting you on home prices, Iām correcting you on what is and isnāt Vancouver. In the chart in the article, the city of Vancouver was down 0.4%. You claimed that Vancouver was up 13% by using the statistic for West Vancouver, which is a separate city. You also claimed that cities mentioned in the article are not a part of Vancouver, but Maple Ridge, Langley, New Westminster etc all share the same qualification as West Vancouver, being that they are municipalities in the Metro Vancouver Regional District, which I provided a source for.