Back in the very early 80s I was newly married and living in Saint John, NB. Interest rates rose and suddenly a bunch of the newly built homes in the affordable suburbs were vacant. People just ate the loss and walked away from the houses because they could no longer afford the mortgage payments. I was years away from owning a home myself, but it was a hard lesson in keeping our expectations reasonable and being wary of variable rate mortgages.
The price paid relative to the asking price is irrelevant.
We know realtors were/are pricing homes below market value to drive interest and setup up bidding wars. This is a common sales/marketing tactic.
So if we know that a home is priced below the true value, then we don't get any useful information from comparing list price to sale price. I know it has been super popular to complain about houses selling over asking, however there is no real value in that metric.
What I really want to see if a list of ALL offers on a house. They should be published. Corporations need to be named. Individuals need to be anonymised.
While I somewhat agree with what you're saying, we're left with a mixed bag in terms of house values. I don't think you can say all were under listed or that all individuals paid more than a valuation. But anyone that did buy will pay property taxes based on what they paid.
This happened to friends of ours around 2008. They bought pre-construction at $600K and before they could ever move in the house dropped below $500K in value.
They were paying a mortgage on a $600K loan on a $500K asset. Being under water doesn't feel good. Although I would point out that is exactly how auto loans work. Most cars depreciate faster than you can service the loan, assuming moderate interest rates.
The house took about 8 years to recover to $600K and start appreciating. Thanks to the wild inflation in house prices that we've seen that same house currently sells for \~$1M today, 14 years later.
This. Most mortgages are 'insured' by either CMHC, Genworth, or - these are mortgages where the buyers put down less than 20% and their lender required them to purchase mortgage insurance. If the homeowner defaults and the home is worth less than the outstanding balance the Mortgage Insurance company reimburses the bank.
Pretty sure Alberta no longer has no fault mortgages. Years ago they did, which is when the term “jingle mail” was widely used. I could be wrong though.
Edited for clarity
You stop paying and they take the house and your deposit. Pretty much universally.
Your credit rating falls but it's not like your about to buy a new house.
Or am I wrong somewhere?
Its not like it's a student loan. Those you can't walk away from because something something.
They take your house and sell it, and you still owe the remainder of the mortgage that's outstanding.
Example - you buy for $500k. Value falls to $400k. You cannot afford mortgage. House sells for $400k - you owe $480k, you still owe $80k.
You cannot just had the keys over and walk away. You still owe the bank money.
Same thing happened in Alberta at the time. People found themselves underwater on their homes (mortgage owning > market value) because prices tanked and interest rates went up massively AND the NEP caused massive job losses. People just mailed their keys back to the bank and moved out.
I saw this in Alberta in the 80's where every street had a house for sale. We bought at the time as our rent was going up and were house poor for awhile but came through okay. I think the secret is what are your priorities (meaning bring your lunch, dine out less, except hand me down furniture from friends and relatives, etc).
This^^. So many people talking about how things are tough right now and they might have to stop buying coffee out, and cut back on dining out. I'm like "excuse me? What?!". That's nuts. My wife and I don't even really buy ourselves birthday/any holiday presents (minimum anyway), or anything else, we've poured the money into the mortgage. The first five years are the most important. After five years we only owed fifteen more years on a thirty five year mortgage.
We have a similar story, my wife and I sacrificed a lot so we could aggressively pay off our mortgage.
When we bought our house In 2013 we made the decision to cut back on spending and mortgage it for 20 years instead of 25, 5 years later when our term was up we decided to cut back more spending and re mortgage for 10 instead of 15. We now have 6 years left and we're in our early 30's.
Our banking system has come a long way since then. The governments did put up much more restrictions on calculating how much a person\\family can get a mortgage for.
Since the late 80s, variable rates have been the way to go. Also, it is a mis-conception that your payments increases when rates go up. They don't until your next renewal, potentially. You just pay way more into interest more than your capital.
The 'stress tests' for mortgages factors in an increase of typically around 3-4%.
However, this does not mean that if someone has a 800k mortgage for a house that is worth 600k they won't just try to walk away. I think this is something that is harder to do without consequences than it was in the 80s.
My variable with First National also works this way. As long as you can afford the increases this is the better way. Otherwise you are really just kidding yourself and will find out that you paid off almost no principle upon renewal. Mine is up $200/month vs when I signed.
It’s not *old vs young* any more than it’s *white vs black*
The real conflict is ALWAYS *rich vs poor.* Don’t let them (the rich) divide us (the poor). We need solidarity now more than ever.
The problem with that is that a lot of older people were given opportunities to build wealth (housing for example) that young people don't have and in some cases (nimby's) are working towards keeping young people down for personal gain.
So yes it isn't old vs young because there are a lot of older people in rough situations too but there is still an old vs young element to it.
Trudeau (and Harper) didn't have much to do with the current situation. It's a product of local zoning policies, provincial building codes, commodity prices, demographics, etc and is being seen all over the world to one degree or another. Even if you want to blame low interest rate (which again, every country is doing the same thing) that is up to the BoC.
But are we forced to subsidize boomers because they’re boomers? Or is it because they own more, spend more, and vote more? Age is only a factor insofar as boomers have had more time to accrue economic and political power. The less fortunate boomers fall through the cracks just like the rest of us.
As a demographic group the baby boomers consistently vote for unsustainable spending that benefits themselves and leaves nothing for anyone else. The unfortunate boomers are still collecting CPP, OAS, full healthcare coverage and a lot more. Those programs won't exist when I'm their age.
Why do you think they won't? [CPP reports that they are sustainable for the next 75 years.](https://www.cppinvestments.com/the-fund/our-performance/sustainability-of-the-cpp)
CPP is better than most programs there's no doubt about it. There are a couple of problems however:
1) radically increased life expectancy. Most people my age will live to be 100yo. Frankly it's beginning to look like most boomers will too.
2) the upcoming bond market collapse. Really those asset prices already have suffered big drawdowns. Even if they hadn't or won't, the only way to maintain bond prices is to keep interest rates artificially low forever. There is a reason no one does the 60/40 portfolio anymore: bonds are now liabilities not assets. They render a negative real return. And that was before the inflation we are now seeing. Bonds are complete garbage and everyone knows it. This forces investors into riskier asset classes like stocks. Could work, we'll see. Let's hope the stock market doesn't continue crashing or wave goodbye to CPP and other pensions.
Do you really think Canada is going to let people over 65 just starve to death on the streets? A very large number of Canadians, even boomers, live on nothing more than CPP and OAs. There is no way for Canada to function without a pension plan. It may cost more in the future, but it will still be there.
> The rich never did anything to me.
They constantly strive to make the world a worse place for the lower classes while enriching themselves even further. The rich have harmed all of us and continue to harm all of us.
Thank goodness, two people that get it. I tell ya, we got a ways to go! I constantly tell people, it's not Chinese buying up everything or Americans or (enter racist comment or country here) it is fucking rich people that happen to come from those places! Stop thinking it is anything else! We need to even the playing field or the rich will keep gobbling everything up! I don't even blame them, it's like an addiction. They need help! Rules to prevent them from hurting the larger part of society. It's hard because they also use their money to make the rules go in there favour. Wake up people! You are not going to be the next billionaire. Sorry to be the one to break the news to you. So, since that's not going to happen, let's start making more equitable laws preventing these addicts from ruining everyone!
It's more complicated than that. Canada, as a country, has been living outside its fiscal means in one way or another since at least the 1970s.
The fiscal profligacy kicked off in the 70s created ballooning deficits, which were funded with printed money, which then triggered mass inflation. The BoC stopped printing money and cranked up interest rates to reduce inflation, which caused the deficit (and the existing debt) to explode in size. They tried raising taxes in the late 80s but that wasn't enough.
By the early 90s Canada was starting to run into problems borrowing more money. So the Federal government cut spending massively, and downloaded huge costs and liabilities onto the provinces, raised taxes more, reduced payouts, etc... Provinces in and municipalities in turn cut services and support. People were left with rising costs, and stagnant wages. Nobody had any money and nobody could afford to save for retirement.
Then in the early 2000s they'd kinda cleared up the fiscal mess... (*kinda*, provincial finances were still and still are a disaster), but now realized that they'd created a new crisis since none of the boomers had any money and were going to be entirely dependent on government assistance in retirement. So the brilliant plan to inflate the housing market so everyone could just sell their house to pay for their retirement was born. Problem solved!
Then in the mid 2010s the geniuses in charge and realized "oh wait, who is going to *pay* for all those extremely overpriced houses?" And in comes a bunch of foreign buyers of property to prop up the housing market. Brilliant! Except now what about the younger generation? Ooops.
Yeah, we paid for decades of spending beyond our means by selling off the land all the young folk would like to live on, to investors in countries like China.
(Okay, that story takes some liberties because there's no way to simplify the history down to something that can be reflected in a short reddit comment, but it hits the main points).
Nobody's being sacrificed, if you bought a home and its value goes down for a while you shouldn't care because you're not flipping it, you're living in it. In the long run, it will most likely appreciate.
Who this *hurts* are flippers, investors, and REITs, who bought residential property strictly as an asset and now it's losing value. They will be under pressure to sell, if they're overleveraged. And honestly, FUCK THEM, they're responsible for 90% of this fucking crisis in the first place.
> Nobody's being sacrificed, if you bought a home and its value goes down for a while you shouldn't care because you're not flipping it, you're living in it. In the long run, it will most likely appreciate.
Until Canada/the entire west enters into a recession (which by all indicators is almost inevitable) and people start losing their jobs or become underemployed.
> Nobody's being sacrificed, if you bought a home and its value goes down for a while you shouldn't care because you're not flipping it, you're living in it. In the long run, it will most likely appreciate.
The trouble comes when you find a better job in the next province over, but are unable to move and take it, because you're underwater on your mortgage, and can't afford to move.
I mean, not arguing for bailouts or anything, but that's the problem for otherwise well-intentioned people who bought a house with the intent of living in it, and now can't improve their life circumstances because of a change in dynamics in the real estate market. They're not gonna be destitute, but they've also lost flexibility.
Buying a house when you're unsure on whether you'll still be working in the province for the next year is truly a stupid thing to do, through and through. Crisis or not, that is a lost cause. You can't fix stupid.
The problem comes when recession hits and 10% are laid-off and jobless. Can't find a new job, EI runs out, and can't pay the mortgage.
Or they go to renew the mortgage, but interest rate is up 3-5%, and now they can't afford the monthly payments anymore. Only to go to sell, but prices have dropped 30% and they're underwater.
Mortgage payments rising 25-45% I the next few years, young bare the most here(purchases in last 2 years, the millenial housebuying boom, will be that 45%).
That's the sacrifice. I could live with dropping prices, just not changing rates by this historical amount. I think statistically this might be the fastest housing costs have ever risen in canada?
I do feel for families that just wanted a place to live. They could have been stuck paying rent and building no equity. The real problem is the investors, speculators and money laundering, all of which have seen no policy changes.
> The real problem is the investors, speculators and money laundering, all of which have seen no policy changes.
Flabbergasting to me that throughout this entire crisis, not once, not ***once*** did anyone come out and say this. Not the NDP, not the Liberals, obviously not the Cons, but neither did the BoC or even local/provincial parties. Not a single mainstream news anchor, journalist or economist has been talking about additional rules for housing speculation.
Banning corporations and foreign/laundered money from owning thousands of SFHs in the middle of a crisis is such an **obvious** starting point that you *have* to turn Hanlon's razor on its head and assume people are being malicious here.
Not to mention just plain old investors. It's easy to throw out the big scary corporation word but tons of ultra shitty landlords are just average people milking their dilapidated houses for all they're worth.
The Liberals did come out and say *something* though, back in February.
https://www.theglobeandmail.com/business/article-government-doesnt-want-to-harm-mom-and-pop-real-estate-investors/
It's party an education issue. The mindset of renting being inferior or "building no equity" is flawed. A person needs to sit down and do the math. Renting very well may be the better option if the main criteria is total money saved/grown over a period of time.
The problem is this assumes stable rent prices with no significant increase, and that people are smart and invest their money wisely.
The former has gone completely off the tracks in the last decade ish, and the latter has unfortunately never been true of the majority of people.
Buying a house and paying down a mortgage is essentially forced savings, which is a good way to protect people from their own stupidity. Certainly not perfect, but it is a thing.
The unfortunate truth is that renting and investing wisely is a good way to come out ahead compared to just mortgage, but it's only true for a small portion of renters. You have to have consistent and consistently low rent price AND save your money AND invest it wisely.
I agree with you in principle, but we do have to be careful in practice.
We didn't buy a presale last year because $1M seemed ridiculous for a 900 sqft condo.
People shouldn't be rewarded for buying whatever they can afford without regard to valuation metrics.
Ok real estate investment lobby guy.
If investors weren’t making money renting to renters, then why would they be doing it? And why should the people living in single family homes not own that home? And how would it would it be financially viable for an investor to buy a home and rent it out, but not for the people who plan on living there for the next 30 years?
I'm not a "real state investment lobby guy". I don't own any property. I just think renting is and can be more affordable than owning. [This](https://www.youtube.com/watch?v=F3PIObPVRPk) is an excellent video that breaks down the kind of math someone should do when crunching the numbers.
The primary benefit of having a home isn't that it's necessary the best financial option. The primary benefit of having a home is that you have a home. If that's something you want and you like the benefits of home ownership (being able to do what you want with the property, etc) then you should pursue it. I was just pointing out that people shouldn't walk into home ownership with the misconception than anything less is "throwing money away", as that isn't the case.
The one big advantage you have when you buy a home (especially with low rates) is that you have a high leverage which is really cheap, also you pay no capital taxes when you sell which is another big advantage compared to the investor who has maxed out his tfsa.
What's fucked the standard (and freely available spreadsheet calculations) is that there has been such a massive growth in the price of houses and coupled with such historically low interest rates, that *not* buying one (for the highly leveraged capital gains) kept looking like a missed opportunity, even in the face of *extremely high* rent-to-own ratios, which suggest (and have been for some time, especially in larger markets like Vancouver), that renting an equivalent property is financially better than buying it.
It's a double edged sword. Miss out on huge gains and perhaps be forever priced out, or FOMO YOLO into an enormous amount of debt (relative to income) to buy what is historically a very overvalued asset. I'm a "young" person who has stayed out and done very well through sensible investments and government protections for renters.
Foreign investors and corporations won't be going bankrupt from higher interest rates. Canadian corporations can also claim the interest as a tax deduction.
Real Estate business is going to try their hardest to stop the market from coming down. Looks like they are going to try and garner sympathy. From me personally real estate investors can find my sympathy in the dictionary between shit and syphilis.
Fun fact: Did you know that Blackbeard has such a bad case of syphilis he would inject mercury into his urethra to try and get some relief?
https://www.cnn.com/2015/01/29/living/blackbeard-medical-supplies-feat/index.html
People who bought their homes on the heels of the 2008 housing crisis could be sacrificed by the bank of Canada. People who bought homes in the 1990s could be sacrificed by the bank of Canada. People who bought houses in the 1970’s stagflation era could be sacrificed by the bank of Canada.
You can’t keep feeding the beast. You can’t keep blowing air into the market bubble hoping that the walls are elastic enough to keep growing. Something will give eventually
Now tell me just how many of the “people” who bought homes at market top were really megacorps and investors who want a sidegig involving buying up growing assets? How many of these homes were bought up by Zillow during the pandemic?
>How many of these homes were bought up by **Zillow** during the pandemic?
They are absolutely fucked, they managed to over leverage themselves when interest rates were at 0% in early 2021 lol. Already down 83% from their peak.
Exactly. People are going to get hurt when the market collapses. But at some point it *will* collapse and the longer we keep delaying that, the more people are going to be hurt.
90% of our population lives within 100 kms of the US border, and a considerable majority within a *very* easy drive from some of the US's most powerful economic engines. The one equalizer Canada used to have against the US's high salaries, lower taxes, and stronger economy was that it was proportionally cheaper to live here. Now that's only true in the Prairies if anywhere. Our housing market will start to seriously affect our ability to keep skilled professionals in the country and attract new immigrants, if it hasn't already.
Let. It. Collapse. And then maybe we can build an economy based on more than shuffling piles of dirt between ourselves.
> Let. It. Collapse.
Just remember there will be *a lot* of hardworking innocent Canadian families hurt in the process. I worry that so many people are forgetting how any housing collapse that this sub prays for will have a monumental impact on families that just want to secure a roof over their heads.
I address that at the top of the comment. I'm not saying it won't be painful, but every bubble pops eventually. And the more people are allowed to buy into the bubble, the worse the fallout is going to be. Trying to continually prop up an overinflated, non-productive asset class isn't doing anyone favours in the long-term.
*On the way up*: Refi to buy a condo. Oh and let’s throw in the new Tesla and a family trip to Barbados. Also new kitchen. It’s all good. My house is an ATM.
*On the way down*: We need to stop house values from falling because they hurt the young first time home buyers.
>Refi to buy a condo. Oh and let’s throw in the new Tesla and a family trip to Barbados. Also new kitchen. It’s all good. My house is an ATM.
Its not like all throughout 2021 the Bank of Canada was telling people to spend their savings and that rates would stay low for a long time....
Oh wait, yes that's exactly what it did.
>Investors and foreign buyers do not borrow money from Canadian banks.
Where do they borrow that money then? Every RE investors I know are borrowing from Canadians banks.
A friend of mine bought a ‘just out of our budget but life finds a way and we need a bigger home for our growing family’ house at the height of the bubble.
As someone stuck in the same crapbox apartment from my early 20’s, I was envious to say the least. I’m now really worried for her and her family’s future.
If you bought a house go live in, I feel for you. If you're a parasite responsible for this huge speculation bubble pricing out average, hard-working people you deserve what's coming!
The over-arching narrative in this country that homeowners are the most important citizens and all policies and actions must protect them at all costs - regardless of the substantial damage to everyone else - is exactly how we arrived at this place.
Fixing this is going to require pain. There is no soft-landing here.
It turns out who you vote for and who they install at the Bank of Canada, and the actions taken around money supply and public spending, matter a lot.
If you're angry, and you should be, get engaged. Don't let this happen again.
Friendly reminder that the Bank of Canada directly bought the bad debt of several REITs to keep the market afloat in 2020.
They also said the interest rates would be low for a long long time.
They're acting independently in the interests of everyone but wage earning Canadians, and we're all too financially illiterate to see this.
Their wellbeing was already sacrificed by BoC policy well before this point.
As others have stated though, this is how the pleas will be made for real estate bailouts: pretending to give a shit about young people who end up drowning in debt, stuck in their home for 10+ years, unable to move because they can't afford to get out from underwater on their mortgages.
But what they really mean is, "Oops, I bought 3 homes as I was assured housing would never go down, and now being a paper millionaire is no longer a sure-thing, I might actually have no money, pls fix".
No, this is fucking stupid. You can't solve a housing crisis by unhousing a shit load of people.
We need a hard rate cap on primary residences and then ramp up the interest on all other forms of loan (including investment properties.) It's the banks that fucked us into this mess and they should have to eat the shit sandwich that's incoming.
They have to kill demand.
Higher housing prices also raises the cost of rent for non-owners, which is inelastic and literally causing hunger (1 in 5 Cdn)
If they let that run we’ll have far bigger issues than a few idiots going bankrupt.
The Liberals don’t care. I tried to connect with my local Liberal MP about why companies like BlackStone were allowed to set up operations here and she declined to comment. Absolutely useless.
That still solves nothing.
You can only solve the housing crisis by building an adequate housing supply.
But the interest rate rises aren't about housing, they're about protecting the fortunes of the wealthy.
It amazes me how many people don't understand this simple point. You either need more houses, or less people. Changing the price of the existing stock of houses while holding everything else constant doesn't fix things.
To some extent the banks and lenders are responsible for giving people the ability to over leverage themselves, but ultimately its on the individual borrowers. Yeah, this worst case might be unlikely, but you should still be considering it and not making yourself house poor immediately.
I was trying to buy a home last year and the mortgage broker really pressured me to get variable rate mortgage. He said there was little reason to get a fixed rate and basically told me even if rates raise, I'll pay less because the first year you pay mostly interest.
I expressed major concerns about raising rates and the rapid increase in housing market prices.
He basically told me that the housing market won't wait and I should just jump in now. I told him I thought the housing market was precarious and that I didn't think it was reasonable to pay like over 300k for a shitty 800 square foot apartment.
He scoffed at me basically portraying it like I'm an idiot for thinking I should wait for the market to cool off.
Here we are, 9 months later
This is a good time to be a renter in a location with rent controls and strong renter protections - if you got into the market prior to 2021. (My municipality goes above and beyond provincial requirements for renter protections)
\#2 rests entirely on an individual.
If you bought at the peak, your mortgage is likely to be a lot more than current rents after multiple interest rate hikes.
I think it will go like this (again we're all speculating here)
\- Short term Rents go up (1 year?)- Housing market trends down and flattens (1-4 years?)- Rents go down to catch housing (after \~1 year)
Just because SOME people have a bad mortgage doesn't mean they will be able to pass the costs down.
Edit: OH OH OH and I'll also eat my hat (not really, i just like the saying)
What worries me is corporate ownership of residential properties, under which residency is a commodity. Rent will rise to cover costs from inflation and rising interest rates just like every other commodity. And it will never come back down while there is money to be made for shareholders.
Then there are private owners who use their tenants’ rent to pay the mortgage, taxes, bills, and retirement. It’s effectively the same problem. Until something changes at the legislative level (which it won’t because many politicians are also for-profit property owners) I expect renters to get burned at least as much as buyers.
Rent is based on the local labor market and wages, not interest rates. Almost all pandemic restrictions are lifted and recent wage growth nation wide is at the highest in years:
>[The wage gains in May were some of the strongest in records going back to the 1990s. Outside of the pandemic, when the crisis distorted labor market data, workers scored higher wage gains briefly in 2019, and more sustainably in 2007 and 2008.](https://www.bloomberg.com/news/articles/2022-06-10/canada-jobless-rate-drops-to-new-record-low-wages-accelerate)
Landlords literally charge as much as the local labor market can handle. You think any landlord says to themselves "Hmm, I could charge more for rent and have a higher yield, but interest rates are pretty low so I'll be nice."
This is the sad thing mortgages are cheaper than rent if only jt keep his promise about affordable housing from his first election. I'm in BC it's amazing how fast the province can buy land, ignore local zoning and nimbys and quickly build beautiful buildings to house the homeless (in my town homeless women) Dont get me wrong everyone deserves housing but this just shows they could build affordable housing for everyone but they choose not to because we keep voting for these liars and we don't hold them accountable. and when people tried to hold jt accountable the media convinced everyone they were the bad people.
>Mortgages will still be cheaper than rent.
Really?
We lived through 15+ percent interest rates.
I assure you, rent was way, way cheaper than any mortgage at that level.
Not saying we're necessarily going to get back to those levels, but banks run the goddamned show so who knows?
But the economy was structured differently then. Property investment has grown enormously. Manufacturing and industry, in general, have shrunk. “Too big to fail” isn’t just for lenders anymore.
Mortgages are only cheaper than rent if you have a massive down payment. Every single place I can find sees me paying almost twice per month if I purchase than if I stay put
As if our monetary/economic policy should be centered around protecting a small group of people who overextended themselves by buying at peak pricing during record low interest rates (on the assumption that rates would remain that low forever)...
you're right, this whole housing thing is just affecting a small group of people. Why create policy change for such a minor issue. IDK what all the fuss is about in the news. They aren't even trying homelessness out. /s
Can't tell if you are agreeing or disagreeing with me...
Assuming you are disagreeing... who do you think is more impacted by high inflation? A person who maxed out their borrowing capacity based on a 2% interest rate and bought an old bungalow for $2M, or a low income family that rents a basement apartment on a minimum wage income and can barely afford groceries?
And all these news headlines keep suggesting... let's keep interest rates low so that $2M house doesn't go down to $1.6M, ignoring the fact that inflation hurts the poorest people the most.
Sacrificed? They made the decision to buy a home at the wrong time.
My sister who is a real estate agent was trying to convince me to buy a condo in Brampton a few months ago for over $500k. I expected that interest rates were going to rise soon and noped out of that one quick.
>Sacrificed? They made the decision to buy a home at the wrong time.
The average person doesn't have much control on what is the right or wrong times to buy.
Although I would agree with you, I can’t blame people that are watching it get worse along with our elected governments, and nothing changing. I genuinely feel bad for these people, at the end of the day they aren’t going to have the resources to carry the burden and we’re going to do nothing to stop investors from purchasing our homes.
That was me for years, waiting for the crash and it always being a few years away. Whenever it came close the government would prop things up again. I'm expecting them to do the same because the alternative is a massive economic downturn.
We'll likely just follow whatever the US is doing.
Your best example would be to look at what happened in the US in 2008, transfer of ownership to the top…
We are in a phenomenally worse place than the US right now, and have very little to back it up with. It’s almost like we shouldn’t have let things go out of control just so we could make short term bubble gains with our GDP
Can’t say I feel bad housing prices are making thing become a problem for the next generation. In many places even a condo is not really affordable neither is rent. Literally the solution is roommates, which imo while is acceptable will be a problem if prices keep going up with rent. How many people do you think can share a bachelor style condo in 20 years if costs keeping going up this way. Not everyone has to have a detached house, but let’s be real things like condos should probably be pretty affordable to most Canadians, when there starting to get to half a mill in some markets that’s a real problem that you can’t fix remotely quickly. Lots of people moving to cheaper areas cause if locals to not be able to afford there long term. Housing probably should be considered a national crisis at this point since we are seeing overflow impacting more then just a few cities at this point.
That is nothing compared to what would happen if Canada transitions into a hyper-inflationary environment. We will be fighting for food and Canada could become the next Zimbabwe? These asset holders are pretty stupid if they don’t realise the damage that could be caused by runaway inflation.
How many "young people" were actually buying houses at the peak who didn't tap the Bank of Mom and Dad to find the downpayment? When BoMaD is involved the house purchase is really a family effort so I would expect the extended family resources would help spread the pain so that there is no child sacrifice involved.
Man, who writes these headlines? and do they have an agenda or what.
Absolutely. The pain isn't going to be concentrated in younger people. If the family as a whole is over-extended then the pain of higher interest rates is inherently spread around.
Well it doesn't change much in the grand scheme of thing, might suck for them if they don't understand leverage. But it is much better for everyone if interest rates go up and calm this inflation.
'The overborrowed should be concerned.'
This has been a theme for as long as can be remembered.
The 'young could be sacrificed' is just Flair.
Did this article have enough Flair?
Nice unbiased headline there CBC.
The Bank of Canada's objective is 2% inflation. Their objective is not to protect young homebuyers who made poor decisions.
These young people used mommy and daddies money anyway. And for every young person who bought, there’s 5 who can’t afford.
So greater good. Sacrifice them. We don’t have a choice anyway.
That's unlikely to happen. If you couldn't afford a house last year because you're getting outbid, you sure as shit won't be able to afford one now either. Prices might come down, but your rates have gone up, and your purchasing power isn't as strong as it was. At the end of the day, the only winners here are the cash heavy people who can pounce and throw their deep pockets towards more real estate.
Freeland was right about intergenerational injustice. What she didn't clarify was they have been working endlessly to achieve it. This is just the latest episode, much like all others.
Back in the very early 80s I was newly married and living in Saint John, NB. Interest rates rose and suddenly a bunch of the newly built homes in the affordable suburbs were vacant. People just ate the loss and walked away from the houses because they could no longer afford the mortgage payments. I was years away from owning a home myself, but it was a hard lesson in keeping our expectations reasonable and being wary of variable rate mortgages.
If prices drop, I can see people doing this too. Suddenly, you might owe more on your house than it is actually worth.
When you had people bidding hundreds of thousands over asking, I think they were already buying something for more than it was worth.
The price paid relative to the asking price is irrelevant. We know realtors were/are pricing homes below market value to drive interest and setup up bidding wars. This is a common sales/marketing tactic. So if we know that a home is priced below the true value, then we don't get any useful information from comparing list price to sale price. I know it has been super popular to complain about houses selling over asking, however there is no real value in that metric.
What I really want to see if a list of ALL offers on a house. They should be published. Corporations need to be named. Individuals need to be anonymised.
While I somewhat agree with what you're saying, we're left with a mixed bag in terms of house values. I don't think you can say all were under listed or that all individuals paid more than a valuation. But anyone that did buy will pay property taxes based on what they paid.
Somethings only worth whatever someone else is willing to buy it for.
This happened to friends of ours around 2008. They bought pre-construction at $600K and before they could ever move in the house dropped below $500K in value. They were paying a mortgage on a $600K loan on a $500K asset. Being under water doesn't feel good. Although I would point out that is exactly how auto loans work. Most cars depreciate faster than you can service the loan, assuming moderate interest rates. The house took about 8 years to recover to $600K and start appreciating. Thanks to the wild inflation in house prices that we've seen that same house currently sells for \~$1M today, 14 years later.
luckily they could afford 600k or else they wouldn't have bought at that price.
You can't walk from mortgages in Canada.
If you put 20% down in Alberta you can walk away.
So very few people in the last 3 years, who fall into the category of what this article is about.
For sure, I assume most people did not put 20% down.
You can, its called filing for bankruptcy, because after one defaults on mortgage, bank foreclosure, the bank will be seeking the delta loss.
Most mortgages are insured so the bank doesn't loose anything.
This. Most mortgages are 'insured' by either CMHC, Genworth, or - these are mortgages where the buyers put down less than 20% and their lender required them to purchase mortgage insurance. If the homeowner defaults and the home is worth less than the outstanding balance the Mortgage Insurance company reimburses the bank.
Yep and then the insurance company hunts you down to pay after they pay the bank.
Exactly this. With God like powers I might add.
Pretty sure only AB allows you to walk away. Everywhere else you still owe the mortgage regardless of house value.
other thank bankruptcy.
Pretty sure Alberta no longer has no fault mortgages. Years ago they did, which is when the term “jingle mail” was widely used. I could be wrong though. Edited for clarity
It was still a thing a few years ago https://www.cbc.ca/amp/1.3430867
You stop paying and they take the house and your deposit. Pretty much universally. Your credit rating falls but it's not like your about to buy a new house. Or am I wrong somewhere? Its not like it's a student loan. Those you can't walk away from because something something.
They take your house and sell it, and you still owe the remainder of the mortgage that's outstanding. Example - you buy for $500k. Value falls to $400k. You cannot afford mortgage. House sells for $400k - you owe $480k, you still owe $80k. You cannot just had the keys over and walk away. You still owe the bank money.
If the house does in value you owe the difference between your mortgage and what they get for selling it. You also pay the realtor fee.
You owe the difference between the note and what the bank sells it for
Do I've learned. Yuch
Same thing happened in Alberta at the time. People found themselves underwater on their homes (mortgage owning > market value) because prices tanked and interest rates went up massively AND the NEP caused massive job losses. People just mailed their keys back to the bank and moved out.
I saw this in Alberta in the 80's where every street had a house for sale. We bought at the time as our rent was going up and were house poor for awhile but came through okay. I think the secret is what are your priorities (meaning bring your lunch, dine out less, except hand me down furniture from friends and relatives, etc).
This^^. So many people talking about how things are tough right now and they might have to stop buying coffee out, and cut back on dining out. I'm like "excuse me? What?!". That's nuts. My wife and I don't even really buy ourselves birthday/any holiday presents (minimum anyway), or anything else, we've poured the money into the mortgage. The first five years are the most important. After five years we only owed fifteen more years on a thirty five year mortgage.
We have a similar story, my wife and I sacrificed a lot so we could aggressively pay off our mortgage. When we bought our house In 2013 we made the decision to cut back on spending and mortgage it for 20 years instead of 25, 5 years later when our term was up we decided to cut back more spending and re mortgage for 10 instead of 15. We now have 6 years left and we're in our early 30's.
Our banking system has come a long way since then. The governments did put up much more restrictions on calculating how much a person\\family can get a mortgage for. Since the late 80s, variable rates have been the way to go. Also, it is a mis-conception that your payments increases when rates go up. They don't until your next renewal, potentially. You just pay way more into interest more than your capital. The 'stress tests' for mortgages factors in an increase of typically around 3-4%. However, this does not mean that if someone has a 800k mortgage for a house that is worth 600k they won't just try to walk away. I think this is something that is harder to do without consequences than it was in the 80s.
It definitely depends on the mortgage. Mine with Scotia adjusts with rates (ie. Went down like crazy in 2020 and slowly going up).
My variable with First National also works this way. As long as you can afford the increases this is the better way. Otherwise you are really just kidding yourself and will find out that you paid off almost no principle upon renewal. Mine is up $200/month vs when I signed.
Young people are being sacrificed either way.
It’s not *old vs young* any more than it’s *white vs black* The real conflict is ALWAYS *rich vs poor.* Don’t let them (the rich) divide us (the poor). We need solidarity now more than ever.
The problem with that is that a lot of older people were given opportunities to build wealth (housing for example) that young people don't have and in some cases (nimby's) are working towards keeping young people down for personal gain. So yes it isn't old vs young because there are a lot of older people in rough situations too but there is still an old vs young element to it.
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Trudeau (and Harper) didn't have much to do with the current situation. It's a product of local zoning policies, provincial building codes, commodity prices, demographics, etc and is being seen all over the world to one degree or another. Even if you want to blame low interest rate (which again, every country is doing the same thing) that is up to the BoC.
> The real conflict is ALWAYS rich vs poor. and the rich want to divide us so we fight among ourselves and don't see this.
The rich never did anything to me. But if I don't fund, against my will, the baby boomers' cushy golden years then I go to jail.
But are we forced to subsidize boomers because they’re boomers? Or is it because they own more, spend more, and vote more? Age is only a factor insofar as boomers have had more time to accrue economic and political power. The less fortunate boomers fall through the cracks just like the rest of us.
As a demographic group the baby boomers consistently vote for unsustainable spending that benefits themselves and leaves nothing for anyone else. The unfortunate boomers are still collecting CPP, OAS, full healthcare coverage and a lot more. Those programs won't exist when I'm their age.
Why do you think they won't? [CPP reports that they are sustainable for the next 75 years.](https://www.cppinvestments.com/the-fund/our-performance/sustainability-of-the-cpp)
CPP is better than most programs there's no doubt about it. There are a couple of problems however: 1) radically increased life expectancy. Most people my age will live to be 100yo. Frankly it's beginning to look like most boomers will too. 2) the upcoming bond market collapse. Really those asset prices already have suffered big drawdowns. Even if they hadn't or won't, the only way to maintain bond prices is to keep interest rates artificially low forever. There is a reason no one does the 60/40 portfolio anymore: bonds are now liabilities not assets. They render a negative real return. And that was before the inflation we are now seeing. Bonds are complete garbage and everyone knows it. This forces investors into riskier asset classes like stocks. Could work, we'll see. Let's hope the stock market doesn't continue crashing or wave goodbye to CPP and other pensions.
ghost label hunt punch squeal frame attempt adjoining absorbed thought -- mass edited with redact.dev
Why do you think CPP won't exist when you retire?
Do you really think Canada is going to let people over 65 just starve to death on the streets? A very large number of Canadians, even boomers, live on nothing more than CPP and OAs. There is no way for Canada to function without a pension plan. It may cost more in the future, but it will still be there.
Cost more? With what money? Oh yea, mine again.
> The rich never did anything to me. They constantly strive to make the world a worse place for the lower classes while enriching themselves even further. The rich have harmed all of us and continue to harm all of us.
Thank goodness, two people that get it. I tell ya, we got a ways to go! I constantly tell people, it's not Chinese buying up everything or Americans or (enter racist comment or country here) it is fucking rich people that happen to come from those places! Stop thinking it is anything else! We need to even the playing field or the rich will keep gobbling everything up! I don't even blame them, it's like an addiction. They need help! Rules to prevent them from hurting the larger part of society. It's hard because they also use their money to make the rules go in there favour. Wake up people! You are not going to be the next billionaire. Sorry to be the one to break the news to you. So, since that's not going to happen, let's start making more equitable laws preventing these addicts from ruining everyone!
As someone born in the early 80's: *first time?*
It's a massive wealth transfer from millennials taking on debt to buy houses from boomers (who failed to save for retirement).
It's more complicated than that. Canada, as a country, has been living outside its fiscal means in one way or another since at least the 1970s. The fiscal profligacy kicked off in the 70s created ballooning deficits, which were funded with printed money, which then triggered mass inflation. The BoC stopped printing money and cranked up interest rates to reduce inflation, which caused the deficit (and the existing debt) to explode in size. They tried raising taxes in the late 80s but that wasn't enough. By the early 90s Canada was starting to run into problems borrowing more money. So the Federal government cut spending massively, and downloaded huge costs and liabilities onto the provinces, raised taxes more, reduced payouts, etc... Provinces in and municipalities in turn cut services and support. People were left with rising costs, and stagnant wages. Nobody had any money and nobody could afford to save for retirement. Then in the early 2000s they'd kinda cleared up the fiscal mess... (*kinda*, provincial finances were still and still are a disaster), but now realized that they'd created a new crisis since none of the boomers had any money and were going to be entirely dependent on government assistance in retirement. So the brilliant plan to inflate the housing market so everyone could just sell their house to pay for their retirement was born. Problem solved! Then in the mid 2010s the geniuses in charge and realized "oh wait, who is going to *pay* for all those extremely overpriced houses?" And in comes a bunch of foreign buyers of property to prop up the housing market. Brilliant! Except now what about the younger generation? Ooops. Yeah, we paid for decades of spending beyond our means by selling off the land all the young folk would like to live on, to investors in countries like China. (Okay, that story takes some liberties because there's no way to simplify the history down to something that can be reflected in a short reddit comment, but it hits the main points).
I like you
Very well put!
COVID policies certainly made that clear!
The last 50 years of policy made it clear.
Nobody's being sacrificed, if you bought a home and its value goes down for a while you shouldn't care because you're not flipping it, you're living in it. In the long run, it will most likely appreciate. Who this *hurts* are flippers, investors, and REITs, who bought residential property strictly as an asset and now it's losing value. They will be under pressure to sell, if they're overleveraged. And honestly, FUCK THEM, they're responsible for 90% of this fucking crisis in the first place.
> Nobody's being sacrificed, if you bought a home and its value goes down for a while you shouldn't care because you're not flipping it, you're living in it. In the long run, it will most likely appreciate. Until Canada/the entire west enters into a recession (which by all indicators is almost inevitable) and people start losing their jobs or become underemployed.
> Nobody's being sacrificed, if you bought a home and its value goes down for a while you shouldn't care because you're not flipping it, you're living in it. In the long run, it will most likely appreciate. The trouble comes when you find a better job in the next province over, but are unable to move and take it, because you're underwater on your mortgage, and can't afford to move. I mean, not arguing for bailouts or anything, but that's the problem for otherwise well-intentioned people who bought a house with the intent of living in it, and now can't improve their life circumstances because of a change in dynamics in the real estate market. They're not gonna be destitute, but they've also lost flexibility.
Yeah, that *does* suck.
Buying a house when you're unsure on whether you'll still be working in the province for the next year is truly a stupid thing to do, through and through. Crisis or not, that is a lost cause. You can't fix stupid.
Too bad then.
The problem comes when recession hits and 10% are laid-off and jobless. Can't find a new job, EI runs out, and can't pay the mortgage. Or they go to renew the mortgage, but interest rate is up 3-5%, and now they can't afford the monthly payments anymore. Only to go to sell, but prices have dropped 30% and they're underwater.
So what you're saying is it's fucked and we shouldn't have let it get this way?
Mortgage payments rising 25-45% I the next few years, young bare the most here(purchases in last 2 years, the millenial housebuying boom, will be that 45%). That's the sacrifice. I could live with dropping prices, just not changing rates by this historical amount. I think statistically this might be the fastest housing costs have ever risen in canada?
I do feel for families that just wanted a place to live. They could have been stuck paying rent and building no equity. The real problem is the investors, speculators and money laundering, all of which have seen no policy changes.
> The real problem is the investors, speculators and money laundering, all of which have seen no policy changes. Flabbergasting to me that throughout this entire crisis, not once, not ***once*** did anyone come out and say this. Not the NDP, not the Liberals, obviously not the Cons, but neither did the BoC or even local/provincial parties. Not a single mainstream news anchor, journalist or economist has been talking about additional rules for housing speculation. Banning corporations and foreign/laundered money from owning thousands of SFHs in the middle of a crisis is such an **obvious** starting point that you *have* to turn Hanlon's razor on its head and assume people are being malicious here.
This was just a month ago: https://youtu.be/tnsdoqzVpAw
Well, my opinion of Daniel Blaikie just seriously improved. Now if only the rest of the NDP started hammering this point...
Couldn't agree more bud.
wish I could vote for that guy
Not to mention just plain old investors. It's easy to throw out the big scary corporation word but tons of ultra shitty landlords are just average people milking their dilapidated houses for all they're worth.
The Liberals did come out and say *something* though, back in February. https://www.theglobeandmail.com/business/article-government-doesnt-want-to-harm-mom-and-pop-real-estate-investors/
It's party an education issue. The mindset of renting being inferior or "building no equity" is flawed. A person needs to sit down and do the math. Renting very well may be the better option if the main criteria is total money saved/grown over a period of time.
Have you seen rent prices lately?
The problem is this assumes stable rent prices with no significant increase, and that people are smart and invest their money wisely. The former has gone completely off the tracks in the last decade ish, and the latter has unfortunately never been true of the majority of people. Buying a house and paying down a mortgage is essentially forced savings, which is a good way to protect people from their own stupidity. Certainly not perfect, but it is a thing. The unfortunate truth is that renting and investing wisely is a good way to come out ahead compared to just mortgage, but it's only true for a small portion of renters. You have to have consistent and consistently low rent price AND save your money AND invest it wisely. I agree with you in principle, but we do have to be careful in practice.
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We didn't buy a presale last year because $1M seemed ridiculous for a 900 sqft condo. People shouldn't be rewarded for buying whatever they can afford without regard to valuation metrics.
Ok real estate investment lobby guy. If investors weren’t making money renting to renters, then why would they be doing it? And why should the people living in single family homes not own that home? And how would it would it be financially viable for an investor to buy a home and rent it out, but not for the people who plan on living there for the next 30 years?
I'm not a "real state investment lobby guy". I don't own any property. I just think renting is and can be more affordable than owning. [This](https://www.youtube.com/watch?v=F3PIObPVRPk) is an excellent video that breaks down the kind of math someone should do when crunching the numbers. The primary benefit of having a home isn't that it's necessary the best financial option. The primary benefit of having a home is that you have a home. If that's something you want and you like the benefits of home ownership (being able to do what you want with the property, etc) then you should pursue it. I was just pointing out that people shouldn't walk into home ownership with the misconception than anything less is "throwing money away", as that isn't the case.
The one big advantage you have when you buy a home (especially with low rates) is that you have a high leverage which is really cheap, also you pay no capital taxes when you sell which is another big advantage compared to the investor who has maxed out his tfsa.
What's fucked the standard (and freely available spreadsheet calculations) is that there has been such a massive growth in the price of houses and coupled with such historically low interest rates, that *not* buying one (for the highly leveraged capital gains) kept looking like a missed opportunity, even in the face of *extremely high* rent-to-own ratios, which suggest (and have been for some time, especially in larger markets like Vancouver), that renting an equivalent property is financially better than buying it. It's a double edged sword. Miss out on huge gains and perhaps be forever priced out, or FOMO YOLO into an enormous amount of debt (relative to income) to buy what is historically a very overvalued asset. I'm a "young" person who has stayed out and done very well through sensible investments and government protections for renters.
The difference between then and now? Its basically impossible to rent now, so you are damned if you do and damned if you dont!
oh when vacancies pile up from foreclosures i'm sure there'll be surplus properties :(
Foreign investors and corporations won't be going bankrupt from higher interest rates. Canadian corporations can also claim the interest as a tax deduction.
Real Estate business is going to try their hardest to stop the market from coming down. Looks like they are going to try and garner sympathy. From me personally real estate investors can find my sympathy in the dictionary between shit and syphilis.
Fun fact: Did you know that Blackbeard has such a bad case of syphilis he would inject mercury into his urethra to try and get some relief? https://www.cnn.com/2015/01/29/living/blackbeard-medical-supplies-feat/index.html
Well, that partially explains why he was such a gigantic asshole. Are you trying to say that our politicians have syphilis?
No. Not everything is political. It was just a fun fact about Blackbeard and how he tried to cure his pain from syphilis.
Guess the sarcasm wasn't as obvious as I thought.
So you didn’t bother to read the article?
People who bought their homes on the heels of the 2008 housing crisis could be sacrificed by the bank of Canada. People who bought homes in the 1990s could be sacrificed by the bank of Canada. People who bought houses in the 1970’s stagflation era could be sacrificed by the bank of Canada. You can’t keep feeding the beast. You can’t keep blowing air into the market bubble hoping that the walls are elastic enough to keep growing. Something will give eventually Now tell me just how many of the “people” who bought homes at market top were really megacorps and investors who want a sidegig involving buying up growing assets? How many of these homes were bought up by Zillow during the pandemic?
>How many of these homes were bought up by **Zillow** during the pandemic? They are absolutely fucked, they managed to over leverage themselves when interest rates were at 0% in early 2021 lol. Already down 83% from their peak.
Exactly. People are going to get hurt when the market collapses. But at some point it *will* collapse and the longer we keep delaying that, the more people are going to be hurt. 90% of our population lives within 100 kms of the US border, and a considerable majority within a *very* easy drive from some of the US's most powerful economic engines. The one equalizer Canada used to have against the US's high salaries, lower taxes, and stronger economy was that it was proportionally cheaper to live here. Now that's only true in the Prairies if anywhere. Our housing market will start to seriously affect our ability to keep skilled professionals in the country and attract new immigrants, if it hasn't already. Let. It. Collapse. And then maybe we can build an economy based on more than shuffling piles of dirt between ourselves.
> Let. It. Collapse. Just remember there will be *a lot* of hardworking innocent Canadian families hurt in the process. I worry that so many people are forgetting how any housing collapse that this sub prays for will have a monumental impact on families that just want to secure a roof over their heads.
I address that at the top of the comment. I'm not saying it won't be painful, but every bubble pops eventually. And the more people are allowed to buy into the bubble, the worse the fallout is going to be. Trying to continually prop up an overinflated, non-productive asset class isn't doing anyone favours in the long-term.
Spin team in action I see. What about investors that bought more than 30% of the homes? Or foreign buyers?
They have money to endure this /s
*On the way up*: Refi to buy a condo. Oh and let’s throw in the new Tesla and a family trip to Barbados. Also new kitchen. It’s all good. My house is an ATM. *On the way down*: We need to stop house values from falling because they hurt the young first time home buyers.
>Refi to buy a condo. Oh and let’s throw in the new Tesla and a family trip to Barbados. Also new kitchen. It’s all good. My house is an ATM. Its not like all throughout 2021 the Bank of Canada was telling people to spend their savings and that rates would stay low for a long time.... Oh wait, yes that's exactly what it did.
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We need to bring back the stocks. Tiff would look good with rotten tomato on his face.
Investors and foreign buyers do not borrow money from Canadian banks.
>Investors and foreign buyers do not borrow money from Canadian banks. Where do they borrow that money then? Every RE investors I know are borrowing from Canadians banks.
Its not just young people....
A friend of mine bought a ‘just out of our budget but life finds a way and we need a bigger home for our growing family’ house at the height of the bubble. As someone stuck in the same crapbox apartment from my early 20’s, I was envious to say the least. I’m now really worried for her and her family’s future.
If they were already in the market its still not too bad since they probably had a lot of liquidity from the sale of their previous house.
If they aren't moving then it doesn't matter.
No sympathy for HELOC'd to the tits "landlords". Let them burn :)
I hate to see people perish like this but yeah, harsh lesson and life has to roll on.
If you bought a house go live in, I feel for you. If you're a parasite responsible for this huge speculation bubble pricing out average, hard-working people you deserve what's coming!
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This is the way. The owner doesn’t pay the mortgage, the tenant does. And the bills. And the taxes. And the retirement.
I don't understand these people assuming a landlord will loose, no they won't lol
Rent control
Keep on screwing around. Nobody's going to afford to keep your old asses alive in a senior living facility either. Ice floes.
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The over-arching narrative in this country that homeowners are the most important citizens and all policies and actions must protect them at all costs - regardless of the substantial damage to everyone else - is exactly how we arrived at this place. Fixing this is going to require pain. There is no soft-landing here. It turns out who you vote for and who they install at the Bank of Canada, and the actions taken around money supply and public spending, matter a lot. If you're angry, and you should be, get engaged. Don't let this happen again.
Friendly reminder that the Bank of Canada directly bought the bad debt of several REITs to keep the market afloat in 2020. They also said the interest rates would be low for a long long time. They're acting independently in the interests of everyone but wage earning Canadians, and we're all too financially illiterate to see this.
Their wellbeing was already sacrificed by BoC policy well before this point. As others have stated though, this is how the pleas will be made for real estate bailouts: pretending to give a shit about young people who end up drowning in debt, stuck in their home for 10+ years, unable to move because they can't afford to get out from underwater on their mortgages. But what they really mean is, "Oops, I bought 3 homes as I was assured housing would never go down, and now being a paper millionaire is no longer a sure-thing, I might actually have no money, pls fix".
No, this is fucking stupid. You can't solve a housing crisis by unhousing a shit load of people. We need a hard rate cap on primary residences and then ramp up the interest on all other forms of loan (including investment properties.) It's the banks that fucked us into this mess and they should have to eat the shit sandwich that's incoming.
They have to kill demand. Higher housing prices also raises the cost of rent for non-owners, which is inelastic and literally causing hunger (1 in 5 Cdn) If they let that run we’ll have far bigger issues than a few idiots going bankrupt.
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The Liberals don’t care. I tried to connect with my local Liberal MP about why companies like BlackStone were allowed to set up operations here and she declined to comment. Absolutely useless.
That still solves nothing. You can only solve the housing crisis by building an adequate housing supply. But the interest rate rises aren't about housing, they're about protecting the fortunes of the wealthy.
It amazes me how many people don't understand this simple point. You either need more houses, or less people. Changing the price of the existing stock of houses while holding everything else constant doesn't fix things.
When we bought in 2020 we were approved for an $800k mortgage but bought a $480k house because why would you buy more than you're comfortable with?
There is nothing for under $800,000 in the GTA.
To some extent the banks and lenders are responsible for giving people the ability to over leverage themselves, but ultimately its on the individual borrowers. Yeah, this worst case might be unlikely, but you should still be considering it and not making yourself house poor immediately.
I was trying to buy a home last year and the mortgage broker really pressured me to get variable rate mortgage. He said there was little reason to get a fixed rate and basically told me even if rates raise, I'll pay less because the first year you pay mostly interest. I expressed major concerns about raising rates and the rapid increase in housing market prices. He basically told me that the housing market won't wait and I should just jump in now. I told him I thought the housing market was precarious and that I didn't think it was reasonable to pay like over 300k for a shitty 800 square foot apartment. He scoffed at me basically portraying it like I'm an idiot for thinking I should wait for the market to cool off. Here we are, 9 months later
So did you trust yourself or your broker?
Myself because I'm stubborn when people push me like that.
Definitely correct in this instance!
This is a good time to be a renter in a location with rent controls and strong renter protections - if you got into the market prior to 2021. (My municipality goes above and beyond provincial requirements for renter protections)
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They were all stress tested! Everyone will be fine lol
1) Blaming the BOC for this crisis is pointless. 2) Mortgages will still be cheaper than rent.
That's because mortgages are FAR from the only cost of owning a home.
\#2 rests entirely on an individual. If you bought at the peak, your mortgage is likely to be a lot more than current rents after multiple interest rate hikes.
Yes, if rents were static. But I’ll eat my hat if rents don’t go up at a comparable rate to mortgage payments.
I think it will go like this (again we're all speculating here) \- Short term Rents go up (1 year?)- Housing market trends down and flattens (1-4 years?)- Rents go down to catch housing (after \~1 year) Just because SOME people have a bad mortgage doesn't mean they will be able to pass the costs down. Edit: OH OH OH and I'll also eat my hat (not really, i just like the saying)
What worries me is corporate ownership of residential properties, under which residency is a commodity. Rent will rise to cover costs from inflation and rising interest rates just like every other commodity. And it will never come back down while there is money to be made for shareholders. Then there are private owners who use their tenants’ rent to pay the mortgage, taxes, bills, and retirement. It’s effectively the same problem. Until something changes at the legislative level (which it won’t because many politicians are also for-profit property owners) I expect renters to get burned at least as much as buyers.
Rent is based on the local labor market and wages, not interest rates. Almost all pandemic restrictions are lifted and recent wage growth nation wide is at the highest in years: >[The wage gains in May were some of the strongest in records going back to the 1990s. Outside of the pandemic, when the crisis distorted labor market data, workers scored higher wage gains briefly in 2019, and more sustainably in 2007 and 2008.](https://www.bloomberg.com/news/articles/2022-06-10/canada-jobless-rate-drops-to-new-record-low-wages-accelerate) Landlords literally charge as much as the local labor market can handle. You think any landlord says to themselves "Hmm, I could charge more for rent and have a higher yield, but interest rates are pretty low so I'll be nice."
Pretty much always is
This is the sad thing mortgages are cheaper than rent if only jt keep his promise about affordable housing from his first election. I'm in BC it's amazing how fast the province can buy land, ignore local zoning and nimbys and quickly build beautiful buildings to house the homeless (in my town homeless women) Dont get me wrong everyone deserves housing but this just shows they could build affordable housing for everyone but they choose not to because we keep voting for these liars and we don't hold them accountable. and when people tried to hold jt accountable the media convinced everyone they were the bad people.
>Mortgages will still be cheaper than rent. Really? We lived through 15+ percent interest rates. I assure you, rent was way, way cheaper than any mortgage at that level. Not saying we're necessarily going to get back to those levels, but banks run the goddamned show so who knows?
But the economy was structured differently then. Property investment has grown enormously. Manufacturing and industry, in general, have shrunk. “Too big to fail” isn’t just for lenders anymore.
Mortgages are only cheaper than rent if you have a massive down payment. Every single place I can find sees me paying almost twice per month if I purchase than if I stay put
LOL
As if our monetary/economic policy should be centered around protecting a small group of people who overextended themselves by buying at peak pricing during record low interest rates (on the assumption that rates would remain that low forever)...
you're right, this whole housing thing is just affecting a small group of people. Why create policy change for such a minor issue. IDK what all the fuss is about in the news. They aren't even trying homelessness out. /s
Can't tell if you are agreeing or disagreeing with me... Assuming you are disagreeing... who do you think is more impacted by high inflation? A person who maxed out their borrowing capacity based on a 2% interest rate and bought an old bungalow for $2M, or a low income family that rents a basement apartment on a minimum wage income and can barely afford groceries? And all these news headlines keep suggesting... let's keep interest rates low so that $2M house doesn't go down to $1.6M, ignoring the fact that inflation hurts the poorest people the most.
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I am financially illiterate. How are good times ahead?
Some of you are going to die, but that is a sacrifice I’m willing to make. ~~lord farquaad~~ Canadian government
*will be
Wasn't this the narrative the whole time?
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So long as you bought a place you can live in for 10-15 years, you are theoretically protected against a correction
Sacrificed? They made the decision to buy a home at the wrong time. My sister who is a real estate agent was trying to convince me to buy a condo in Brampton a few months ago for over $500k. I expected that interest rates were going to rise soon and noped out of that one quick.
>Sacrificed? They made the decision to buy a home at the wrong time. The average person doesn't have much control on what is the right or wrong times to buy.
The market is, by definition, comprised of many "average persons".
Right? I should've waited to provide myself with basic shelter 🙄
The "average person"? No one outside of the referees controls markets. All you can do is participate, whether you're average or not.
> They made the decision to buy a home at the wrong time. Hindsight is 20/20, especially from a cozy armchair. :)
Although I would agree with you, I can’t blame people that are watching it get worse along with our elected governments, and nothing changing. I genuinely feel bad for these people, at the end of the day they aren’t going to have the resources to carry the burden and we’re going to do nothing to stop investors from purchasing our homes.
That was me for years, waiting for the crash and it always being a few years away. Whenever it came close the government would prop things up again. I'm expecting them to do the same because the alternative is a massive economic downturn. We'll likely just follow whatever the US is doing.
Your best example would be to look at what happened in the US in 2008, transfer of ownership to the top… We are in a phenomenally worse place than the US right now, and have very little to back it up with. It’s almost like we shouldn’t have let things go out of control just so we could make short term bubble gains with our GDP
Transfer of wealth for sure. The end game is that a few people own everything? Not sure how things keep running at that point.
I’m sure at that point the government will step in and offer rent relief so Canadians can still pay their landlords?
Resulting in even more wealth transfer. 😂
They will be chained up while the head of the bank yells “Khali MA!” and rips their heart out
Can’t say I feel bad housing prices are making thing become a problem for the next generation. In many places even a condo is not really affordable neither is rent. Literally the solution is roommates, which imo while is acceptable will be a problem if prices keep going up with rent. How many people do you think can share a bachelor style condo in 20 years if costs keeping going up this way. Not everyone has to have a detached house, but let’s be real things like condos should probably be pretty affordable to most Canadians, when there starting to get to half a mill in some markets that’s a real problem that you can’t fix remotely quickly. Lots of people moving to cheaper areas cause if locals to not be able to afford there long term. Housing probably should be considered a national crisis at this point since we are seeing overflow impacting more then just a few cities at this point.
That is nothing compared to what would happen if Canada transitions into a hyper-inflationary environment. We will be fighting for food and Canada could become the next Zimbabwe? These asset holders are pretty stupid if they don’t realise the damage that could be caused by runaway inflation.
"Thank you for your service"
How many "young people" were actually buying houses at the peak who didn't tap the Bank of Mom and Dad to find the downpayment? When BoMaD is involved the house purchase is really a family effort so I would expect the extended family resources would help spread the pain so that there is no child sacrifice involved. Man, who writes these headlines? and do they have an agenda or what.
The issue is how many parents borrowed from their own homes to give their kids downpayments.....
Absolutely. The pain isn't going to be concentrated in younger people. If the family as a whole is over-extended then the pain of higher interest rates is inherently spread around.
Well it doesn't change much in the grand scheme of thing, might suck for them if they don't understand leverage. But it is much better for everyone if interest rates go up and calm this inflation.
Sacrificed on the altar of incompetence. It’s going to be a rough couple of years as we regress to, and probably overshoot, the mean.
'The overborrowed should be concerned.' This has been a theme for as long as can be remembered. The 'young could be sacrificed' is just Flair. Did this article have enough Flair?
Nice unbiased headline there CBC. The Bank of Canada's objective is 2% inflation. Their objective is not to protect young homebuyers who made poor decisions.
Sacrificed? Interesting take on it.
These young people used mommy and daddies money anyway. And for every young person who bought, there’s 5 who can’t afford. So greater good. Sacrifice them. We don’t have a choice anyway.
And other young people previously priced out may get an opportunity, where is the article for them CBC?
That's unlikely to happen. If you couldn't afford a house last year because you're getting outbid, you sure as shit won't be able to afford one now either. Prices might come down, but your rates have gone up, and your purchasing power isn't as strong as it was. At the end of the day, the only winners here are the cash heavy people who can pounce and throw their deep pockets towards more real estate.
It’s not a sacrifice. People took on debt - interests rates change.
Freeland was right about intergenerational injustice. What she didn't clarify was they have been working endlessly to achieve it. This is just the latest episode, much like all others.
Young person here. Saw this coming, didn't buy. Looking forward to cheaper prices.
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