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Old 12-10-2010, 01:20 PM   #1441
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No Bubble, No Bust

Not much of an article; but it's been a while since some here predicted the "inevitable" burst.
How much longer do we have to wait? Pepper24? Chemgear?
Heh, actually I thought that this article was an interesting/substantial read today:

http://www.financialpost.com/persona...536/story.html

I found it interesting that it was actually the banks themselves that poked the government to tighten lending restrictions earlier this year. It'll be interesting to see what they do in the next little while.

SFH average/median prices are down ~10% since June with inventory still nicely above the "balanced ratio band of 1.5-3ish." Should be interesting to see the effect of homes being put back on the market in the new year after failing to sell this year.

Personally/anecdotally we've seen some places we keyed on having had prices cut by $100-350K before finally selling (or still not sold to this point.) I've never had a problem being patient.
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Old 12-10-2010, 01:40 PM   #1442
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I would say by the middle of next year things could start to get very interesting again as BOC will start hiking rates and even a gradual increase that over time takes us up 1- 1.25% could cause housing issues similar to the US. Logically things have to correct more substantially at some point as from 2006-2009 US prices corrected 30% and Canadian only 9%. Right now incomes are good and rates are low so no need to think about next year I guess...The real estate market is not the only market that could see a significant correction in 2011-2012. Governments can't/won't hold rates down forever...at some point it becomes an affordability issue.
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Old 12-10-2010, 02:39 PM   #1443
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Does it have to correct to 30%? Isnt the reason for the large correction in the US because of the artificial demand created when they loosened mortgage rules?

The US and Canada have similar enough interest rates you would think that whatever happened down there would happen up here if it was going to.
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Old 12-10-2010, 03:33 PM   #1444
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Right now incomes are good and rates are low so no need to think about next year I guess...The real estate market is not the only market that could see a significant correction in 2011-2012. Governments can't/won't hold rates down forever...at some point it becomes an affordability issue.
Plenty of reason to think about next year, it's only a month away.
But what about other factors that will come into play next year, and their effects?
If rates creep up: but unemployment decreases, rental vacancies decrease, incomes go up, oil prices go up & immigration to the province goes up what effect does that have on housing demand and prices?
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Old 12-10-2010, 03:42 PM   #1445
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Originally Posted by chemgear View Post
Heh, actually I thought that this article was an interesting/substantial read today:

http://www.financialpost.com/persona...536/story.html

I found it interesting that it was actually the banks themselves that poked the government to tighten lending restrictions earlier this year. It'll be interesting to see what they do in the next little while.
I think you'll see an end to 35 yr mortgages pretty soon, but is it stopping them before they become an issue; or trying to correct what will already become a major issue?
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SFH average/median prices are down ~10% since June with inventory still nicely above the "balanced ratio band of 1.5-3ish." Should be interesting to see the effect of homes being put back on the market in the new year after failing to sell this year.
Only down about 2% from last year; and 10% from June is a good thing as June was to high and gradual decreases are evidence we're not heading for a bubble.
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Personally/anecdotally we've seen some places we keyed on having had prices cut by $100-350K before finally selling (or still not sold to this point.) I've never had a problem being patient.
It is a virtue
I just helped some friends get a place for around $250,000 in the same building they've rented in for many years. Nothing has been available in their price range there for years, and when they started house hunting they didn't think their building would even be an option.
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Old 12-10-2010, 09:37 PM   #1446
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I think you'll see an end to 35 yr mortgages pretty soon, but is it stopping them before they become an issue; or trying to correct what will already become a major issue?

Only down about 2% from last year; and 10% from June is a good thing as June was to high and gradual decreases are evidence we're not heading for a bubble.
Well, given that household debt to income ratios are at record levels and it's the banks themselves asking for government help again, I would suggest it's less of a pre-emptive strike than it is fixing a significant issue.

To be fair, I understand the banks having to ask the government for help. It's obviously enough of a concern for them to want to do something but they can't act individually or they would lose market share to each other. With the government changing the rules for them all, they can try to rein in the ridiculous borrowing without losing their share of the pie.

Well, even if things stay totally flat for another 6 months, that'll still be 10% down year over year. With average downpayments supposedly around 6%ish, kinda scary for new home buyers to essentially have it wiped out so quickly as mentioned previously.

Still seems to be more downsides than upsides for the next while imo.
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Old 12-13-2010, 09:14 AM   #1447
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http://www.theglobeandmail.com/repor...rticle1835268/

If Canadians aren't handling debt well when rates are at 40 year lows how are things going to look when rates go back up. BOC isn't sure either.....A lot of GDS, TDS, LTV ratios are very stretched. Carney keeps warning to pay down debt and people keep piling it up. Something/someone has got to give here. At least he is giving plenty of warnings....http://www.theglobeandmail.com/repor...rticle1833774/

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Old 12-13-2010, 09:30 AM   #1448
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Plenty of reason to think about next year, it's only a month away.
But what about other factors that will come into play next year, and their effects?
If rates creep up: but unemployment decreases, rental vacancies decrease, incomes go up, oil prices go up & immigration to the province goes up what effect does that have on housing demand and prices?
I have a feeling we're on the brink of that happening. Nothing concrete, but everyone I talk to in the oilpatch is forecasting a very busy 2011, especially in the drilling/service end. I've heard a lot of talk about a shortage of service companies because half of them either went under, or took off to Saskatchewan the last 2 years. These are the bigger companies I talk to, mind you. No idea what the juniors are doing. Again, all word of mouth.

I also travel a lot in the US and overseas, and it feels like the US is picking up. A lot of the roadbuilders are forecasting an increase in production in 2011, which means higher construction. Any increase over 2009 is a welcome one here, because the last 24 months were TERRIBLE in the areas I frequent (California, Idaho, Arizona, The Carolinas and Georgia).

I was in China last week and the news I was hearing was that banks are trying to slow down inflation. Housing prices are going crazy in Beijing and Shanghai, construction is going off, and their economy is starting to pick up some serious momentum. I'm in the steel business, and everyone I talk to is forecasting an increase in global raw material prices due to Chinese demand.

The general feeling I'm getting is that China's demand is ramping up, and the USA is showing slight recovery from 2009-2010 levels. For a resource based economy like Alberta's, that's probably a good thing, especially for the housing market.

Again, no concrete "studies", just a general feeling I'm getting based on my travels.
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Old 12-13-2010, 12:04 PM   #1449
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http://www.cbc.ca/canada/story/2010/...s-warning.html

"But when rates do begin to rise again, Carney said, the increase may be swift and fierce and has the potential to catch many with debt loads they can no longer afford."



"Cheap money is not a long-term growth strategy," he warned.

"Experience suggests that prolonged periods of unusually low rates can cloud assessments of financial risks."
The Bank of Canada will set interest rates based on inflation, not on whether a large swath of Canadians have taken on too much debt, he added.
He suggested the bank may raise interest rates even in a low-inflation environment to discourage risky borrowing.
"While the bar for further changes remains high," he said, "the bank has the responsibility to draw the appropriate lessons from the experience of others who, in an environment of price stability, reaped financial disaster."



'The crisis is not over, but has merely entered a new phase.'—Mark Carney, governor, Bank of Canada







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Old 12-13-2010, 12:28 PM   #1450
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I have a feeling we're on the brink of that happening. Nothing concrete, but everyone I talk to in the oilpatch is forecasting a very busy 2011, especially in the drilling/service end. I've heard a lot of talk about a shortage of service companies because half of them either went under, or took off to Saskatchewan the last 2 years. These are the bigger companies I talk to, mind you. No idea what the juniors are doing. Again, all word of mouth.
Things are definitely picking up in the ‘patch. Drilling rigs and completion crews are desperate for manpower. One of my contractors had eight guys quit two weeks ago because a rig foreman came by and offered them more money. He had to give everybody a couple dollar raise to try and prevent any more poaching.

It will be interesting to hear about raises and bonuses this Christmas. Should be a good indication of how companies are feeling going into 2011.
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Old 12-13-2010, 02:00 PM   #1451
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I think you'll see an end to 35 yr mortgages pretty soon, but is it stopping them before they become an issue; or trying to correct what will already become a major issue?
Wouldn't that in of itself destory prices? If the government goes back to requiring 10% down with a maximum 25 yrs it would price many exisiting homeowners out of the market by diminishing their ability to re-fi. Not only with people who bought on 0/40's and 5/35's have higher interest rates to contend with they will also have to qualify with shorter terms and higher equity requirements.
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Old 12-13-2010, 02:08 PM   #1452
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Are people spread so thin that say a $300 increase in mortgage a month will basically make or break them? If so then they really shouldn't have been approved for the mortgage in the first place. Or cancel your cable. That'll save you probably $100 right there.
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Old 12-13-2010, 02:34 PM   #1453
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Quote:
Originally Posted by Winsor_Pilates View Post
No Bubble, No Bust

Not much of an article; but it's been a while since some here predicted the "inevitable" burst.
How much longer do we have to wait? Pepper24? Chemgear?
Low interest rates are just delaying a collapse in housing prices and are the only thing holding up housing prices. The longer rates stay this low the greater chance that they'll rise that more quickly to keep pace with inflation. I am still in the bubble camp.
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Old 12-13-2010, 02:43 PM   #1454
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Are people spread so thin that say a $300 increase in mortgage a month will basically make or break them? If so then they really shouldn't have been approved for the mortgage in the first place. Or cancel your cable. That'll save you probably $100 right there.
Pretty pathetic isn't it?

Frankly, one couple I know in particular is barely getting by (+/- about 100 bucks each month?), but they followed a slightly different path.

They bought a home that was a little more cash intensive than ideal, but still reasonably affordable. Then they picked up a second car, raising their monthly cash needs even more.

This would have all been livable, but they bought in the "Your home is a piggybank" fantasy, and racked up a (shockingly) large amount of consumer credit over the past few years (Assuming they'd borrow against the house later on.....)

I actually suspect that this is a much more common/frequent chain of events than banks approving people who shouldn't get mortgages in the first place.
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Old 12-13-2010, 03:08 PM   #1455
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Still floors me the amount of Range/Land Rovers on the streets. All I can see when I see one is a horrific investment that would be comparable to picking up a cocaine habit.
The hilarious thing about that is you know they aren't taking those Range Rovers out into the bush every weekend either. Just used to tackle the mean streets of Crowchild, Glenmore, and Deerfoot before being housed in a climate controlled garage.
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Old 12-13-2010, 03:10 PM   #1456
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Wouldn't that in of itself destory prices? If the government goes back to requiring 10% down with a maximum 25 yrs it would price many exisiting homeowners out of the market by diminishing their ability to re-fi. Not only with people who bought on 0/40's and 5/35's have higher interest rates to contend with they will also have to qualify with shorter terms and higher equity requirements.
Hard to say. Did a lot of (0 down/40 yr) people come up unable to refinance, and this destroy prices?
We also had changes to qualifying this year and you now have to qualify for a 5 year regardless of what you're doing. That hasn't destroyed prices and refinancing either.
Not every mortgage restriction causes major decreases in affordability and pricing, so hard to say this would be different. In both of those other 2 changes, they seemed to have been made early enough to support healthier mortgage situations and the health of the overall mortgage market.

Not sure how much different this would be; really depends how many people are on 35 yr amortization's, and of them how many are in over their heads if they need to change to 25.
Lots of people might be able to handle the extra payments, and most people taking on 35 years have been young buyers who's incomes tend to be growing as they move forward as well.

Also, most people pay off their mortgages in 1/2 - 2/3 the actual amortization anyway which indicates a lot of Canadians do have extra money and throw it into extra payments when they can.
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Old 12-13-2010, 03:10 PM   #1457
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Pretty pathetic isn't it?

Frankly, one couple I know in particular is barely getting by (+/- about 100 bucks each month?), but they followed a slightly different path.

They bought a home that was a little more cash intensive than ideal, but still reasonably affordable. Then they picked up a second car, raising their monthly cash needs even more.

This would have all been livable, but they bought in the "Your home is a piggybank" fantasy, and racked up a (shockingly) large amount of consumer credit over the past few years (Assuming they'd borrow against the house later on.....)

I actually suspect that this is a much more common/frequent chain of events than banks approving people who shouldn't get mortgages in the first place.
Its the sad truth, lots of people bought into "housing never depreciates" and racked up their HELOCs or bought homes at the very top fringe of their affordability.

Many are just getting by with two full time income earners...a layoff, injury, family emergency or even a major repair bill away from serious cash flow issues. Lots of divorcing couples in the past little while with negative equity, essentially splitting up the debt. Now that is depressing.
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Old 12-13-2010, 03:12 PM   #1458
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Is using 'home equity' a fancy, less embarassing, socially acceptable way of 'having a second mortgage'? In the old days you had to take out a second mortgage when things went sour. Do they have those anymore?
I think the damning thing about it is that people are using HELOCs intentially for consumer consumption goods in times when things aren't sour.
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Old 12-13-2010, 03:13 PM   #1459
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Low interest rates are just delaying a collapse in housing prices and are the only thing holding up housing prices. The longer rates stay this low the greater chance that they'll rise that more quickly to keep pace with inflation. I am still in the bubble camp.
I see your point of view, but that's not a bubble; that's a lending and debt crises.
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Old 12-13-2010, 03:15 PM   #1460
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Hard to say. Did a lot of (0 down/40 yr) people come up unable to refinance, and this destroy prices?
We also had changes to qualifying this year and you now have to qualify for a 5 year regardless of what you're doing. That hasn't destroyed prices and refinancing either.
Not every mortgage restriction causes major decreases in affordability and pricing, so hard to say this would be different. In both of those other 2 changes, they seemed to have been made early enough to support healthier mortgage situations and the health of the overall mortgage market.

Not sure how much different this would be; really depends how many people are on 35 yr amortization's, and of them how many are in over their heads if they need to change to 25.
Lots of people might be able to handle the extra payments, and most people taking on 35 years have been young buyers who's incomes tend to be growing as they move forward as well.

Also, most people pay off their mortgages in 1/2 - 2/3 the actual amortization anyway which indicates a lot of Canadians do have extra money and throw it into extra payments when they can.
Prices weren't destroyed when it moved to 5/35 because interest rates were much lower than the days of 0/40s, thus offsetting the sting. But the combination of higher interest rates and tighter standards at the same time will.
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