The negatives of sitting on the fence are not always related to home prices. Interest rates, mortgage rule changes, etc all can play a negative role.
Yeah, but price levels aren't static in those scenarios. If you get priced out at current prices by those factors, chances are a lot of other people do too and over time prices respond accordingly. The only way real estate becomes unaffordable long term to someone is if something specifically effects that one person more heavily than the broader market (Ie unemployment, medical leave, stagnating employments vs. the rest of the market). People should never let fear of being 'priced out' force them into making a move over the fence.
Also, IMO if you need to do a 5/35 to make it happen right now, cannot withstand interest rates at more normalized levels, you're best served not buying. The Bank of Canada, and the Finance Minister think so, and they're more qualified to make that call than those whose livelihood depends on higher prices and more sales.
Also, IMO if you need to do a 5/35 to make it happen right now, cannot withstand interest rates at more normalized levels, you're best served not buying. The Bank of Canada, and the Finance Minister think so, and they're more qualified to make that call than those whose livelihood depends on higher prices and more sales.
I think it depends on the situation a bit. I have a friend who graduated a couple of years ago, and was putting all extra cash towards student payments. He's got a secure job as a teacher, with contractual raises baked into his next 5 years. He could rent for a few more years and save more money, but he could also buy now w/ 5% down. Even if rates go up, his income in 5 years will be higher.
All that being said, I hate it when the government tries to tell people what to do. You get your 40% of my money, let me spend the rest of it how I want.
I think it depends on the situation a bit. I have a friend who graduated a couple of years ago, and was putting all extra cash towards student payments. He's got a secure job as a teacher, with contractual raises baked into his next 5 years. He could rent for a few more years and save more money, but he could also buy now w/ 5% down. Even if rates go up, his income in 5 years will be higher.
All that being said, I hate it when the government tries to tell people what to do. You get your 40% of my money, let me spend the rest of it how I want.
Sure, sounds pretty secure, but all the above mentioned factors are downward levers on Real Estate prices. Why not rent for cheaper, invest and earn an income on the difference (home equity doesn't pay you an income) and then buy when he actually can afford it in the here and now and not based on forward expected earnings? What if he gets married, has a kid, get injured and makes 70% of full salary on disability pay? Only way he loses is if his contractual raises perform worse than the market he's in. Even so he still would have all the cash he would saved by not buying (Oh shudder!).
The bigger risk is getting caught underwater and then having a life situation occur (of which someone in their early to mid 20s has a pretty volitile life) that would force him to have to make a cash payment to move out. Essentially if the amount underwater was substantial enough, this would 'trap' him to a piece of property. Not only does it make fiscal sense to rent, but also it makes life sense to rent in that you have an element of freedom taken away by buying with so much leverage.
Also in regards to your second point, if you're buying a home with only 5% down, only 5% of it is your own money and the rest of it is OPM (Other people's Money) which is only made available to you because the government (taxpayers backing CMHC) is willing to insure it at the terms they prescribe. If the banks had to go naked on a 5/35, they wouldn't even lend it out to pretty much everyone that qualifies at those levels. So goverment interference is actually what makes a 5/35 mortgage possible, not unfettered capitalism.
If the banks had to go naked on a 5/35, they wouldn't even lend it out to pretty much everyone that qualifies at those levels. So goverment interference is actually what makes a 5/35 mortgage possible, not unfettered capitalism.
This is a fair enough point, and you're certainly right that a non-insured 5% mortgage would be hard to get. Of course, the government won't allow the banks to lend anything <20% down without gov't insurance, so it's hard to say what the market would look like without the gov't involved.
It's also a bit hypocritical of the gov't to say "we're guaranteeing these mortgages so Canadians can by houses" on the one hand, and "it's irresponsible to be borrowing that money" on the other hand.
"without oil, the country would be in trouble"
Thoughts?
Reminds me of Oilers fans saying without Iginla & Kipper, the Flames would be just as bad as them.
How can the guy make an argument based on removing such a significant factor? We have Oil, that's a fact; and predictions need to be made with that as a constant, not what ifs.
Anyone catch the headline on housing prices to drop 25% the other night.
It is media hypes like this that can make that become a reality. It is always entertaining to watch the "news'" view on real estate as they get their statistics late. It can be a very slow month and they will be saying things are on the rise at a fast pace or vice versa.
I think it'd take more than media hype to have the market move 25% down. Though it could help accelarate it just like prices probably went overboard the other way in 2006/2007 because the media, realtors etc. used the scare tactic that if you don't buy now, you'll never be able to afford a home.
You'd need rates to rise fairly quickly and debt levels to continue to be at record highs. You'd probably need a hiccup in oil prices and gas to continue to stay low as well in terms of Calgary leading to more layoffs.
The Canadian Real Estate Association cautioned the federal government to stay out of the mortgage market until the effects of recent changes can be gauged, as it suggested buyers raced to secure 35-year mortgages in January before they are banned in late March.
My thoughts.....probably not a bad idea to see the effects before any more large changes take place but at the same time tough to take this too seriously when it's coming from an association that represents realtors who thrive on high home prices based on their pay structure. What's always best for the home owner isn't always best for the realtor.
My thoughts.....probably not a bad idea to see the effects before any more large changes take place but at the same time tough to take this too seriously when it's coming from an association that represents realtors who thrive on high home prices based on their pay structure. What's always best for the home owner isn't always best for the realtor.
I fully admit CREA often sounds like a propaganda machine, but what's best for the home owner should always be what's best for the Realtor. That's our job, and some of us take that seriously, despite what the "you're all the same" crowd will tell you.
If it's not best for my home owner, than I'm doing it wrong.
Also, If you've ever sold a home you'd likely know it's actually the Realtor looking to lower pricing and get the home sold, and the owner looking to keep the pricing too high and beyond the reality of their market.
High prices are not a big motivation to Realtors, that's a myth.
Repeat customers, client loyalty and referrals, and overall volume are far more important.
And Would decreased home values be best for home owners?
Also, If you've ever sold a home you'd likely know it's actually the Realtor looking to lower pricing and get the home sold, and the owner looking to keep the pricing too high and beyond the reality of their market.
High prices are not a big motivation to Realtors, that's a myth.
Repeat customers, client loyalty and referrals, and overall volume are far more important.
And Would decreased home values be best for home owners?
Once a realtor has a listing, it's absolutely in their best interest for it to sell right away, even if for a slightly lower price. For Realtor's in general, rising prices lead to rising volumes, which is where they make their money. Also, many of the changes will only reduce prices by removing some marginal buyers (==Realtor clients) from the market when they can't get a mortgage under the new requirements.
Hmm if I were cynical, I wonder how the "keep your hands off" reconciles with their updated forecast which says things should be up in the next two years? (being a bit facetious hehe)
I also do not recall the history - did the CREA make the same call publicly when the government did the opposite? That is, increase the amortization from 25 years to 30. And then 30 to 35 three months later. Or from 35 to 40 just five months after that?
^Apparently they've already sold about 20-40 to a "select group" and people are mad that "VIPs" got to buy already
Haha, at least somebody has to get upset no matter what.
Hopefully they get all that money back - it would be a piss off for tax payers to have to eat any amount on that. Though I guess 30% off doesn't bode well.
As a Vancouver tax payer, I assure you we're eating it anyway. At this point, it's best to get them sold and cut losses though. The Vancouver RE market is actually very strong right now, so it might be the best time to just get them sold.
The part I find most humorous is they renaming to "The Village". It's only 1 year after the Olympics and that word has been stripped from the development as if it's a bad stain.
The SFH surge until March 18 looks to be coming in - still rather low imo. I figured it would push more sales in my head for some reason. It's better than 2010 numbers but still behind most years - a bit lame. Condos are terrible in comparison.
Great comparison of homes and how much people have had to eat in losses (not counting realtor, moving, interest fees.)
Bob Truman had a good post & comments recently about how “most of the inventory is poor quality and as I mentioned before, it’s picked over. It either sells quickly, or it never sells…Good quality, attractive listings are gone in the blink of an eye. Most of the remaining inventory has been collecting dust and is crappy or overpriced.“
That debt is including mortgage though. Don't most people who have a mortgage have 6 figure debt if they include it?
The numbers have always included mortgages but the signifigance is that it has hit 6 figures for the first time. Probably a lot has to do that incomes haven't kept up to home prices.
(being a bit facetious hehe)
