Quote:
Originally Posted by Yoho
We’re also at a place where those that are in the market are highly levered and are very susceptible to interest rate hikes and job loses. It’s not just low income earners who lose jobs.
Investors will be no where to be found when *%#! hits the fan.
Investors will have a tough enough time getting rent once layoffs start
Before every recession you hear the same thing “we are in a bubble” this time is different.
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It's a lot more complicated than that:
1. We have a massive housing shortage and record numbers of new Canadians. It's not just immigrants as the Babyboomers' kids, who are the largest cohort ever, are having their own kids. There's all sorts of pent up demand as people, now into their 30s and 40s, have been waiting for an opportunity to jump in. The effect of the housing shortage is evident in rental rates too. Increased rent also means increased tolerance for higher mortgage payments.
2. Increased interest rates are a worry, but people have options. Most people who bought 5 years ago, and are now coming up for renewal, have lots of equity in their home and aren't simply going to walk away from a home, as people did during the last big crashes. For example, people can refinance and start over again on a new 30 year term. Not ideal, but better than missing payments or being forced into a lowball sale.
3. The investors will likely never go away. At least not in the biggest markets. For example, if detached housing in Toronto or Vancouver dropped to even $1.4 million, you'd see investors falling over themselves to buy them. That's already happened 3 times in the last 15 years during the "adjustments". These cities are growing so rapidly and there's no way to create more detached housing there. In fact, detached housing in these cities is quickly disappearing as density increases.
4. Have housing prices increased all that much in the last five years? Or is our dollar just worth 30% or so less?
5. The generational wealth gap is massive, and, thereby, so is the gap between haves and have nots. Many of these highly leveraged properties were bought with the help of wealthy parents. These parents can continue to bail out their children. Housing payments up by $2k? Guess how can step in and close that gap.