Quote:
Originally Posted by Cowboy89
My point was that the CMHC insures mortgages that FI's wouldn't underwrite naked. That's additional credit risk that's pooling up and is ultimately the risk of the tax payers. It also does the perverse effect of making homes less affordable, unless of course affordability is only measured by one's means of obtaining a 5% down mortgage.
Also vis-a-vis bubble, I think the comment applies more to places like Vancouver and Toronto where prices for homes are 9-14 times average income. That isn't sustainable, and there's nothing economically that can bring real incomes up to support those price levels in those cities.
In Calgary we hit our peak in 2007 and haven't seen it since. The boom itself was a bubble that corrected but got glossed over by the fact that things were worse in the US and everyone took a similar hit on their equity holdings. Meaning if you bought a home at a highly leveraged amount and did not make any extra payments all you accomplished is negative equity and lining the banks pockets with interest payments. Hardly a great move with your money. Houses don't always go up and in real terms do not always outperform every other asset class.
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It seems that housing prices are like wages and EXTREMELY sticky; no one is willing to take a hit on thier house unless something drastic changes in thier life (i.e: moving to another city). I believe firmly in the sustainability of the 3-4times income ratio for mortgage affordability, however, most people in Calgary tend to stay in this ratio, not by making more money themselves, but by having more incomes in the house (aka two people working or having a roommate).
Moving to Brisbane I see the same thing here that you guys chat about in this thread except it's too the extreme. Wages are lower on average here and housing prices are 2-2.5 times as expensive, but people make due by having more incomes in the house. A two bedroom in my building goes for $600k+ and it will have 4 people living and earning in it, so total house hold income is $200k/yr.
Maybe that's what will happen in Cowtown...you'll be 40yrs old living with a wife and a roommate college style.
