Real estate in Calgary - another bubble?

[DoubleF]

Originally Posted by Weitz

Can I ask why you would like to see that?

I think, that person assumes it would stop a potential explosive price increase on Calgary properties akin to Toronto/Vancouver.

I don't see that happening TBH. If anything, I think doing that hurts locals more than it hurts foreign investors.

[Geraldsh]

Originally Posted by Sylvanfan

It would be interesting to know how many people have their rates locked in to continue house shopping. If someone locked in at 120 days yesterday do they have until the end of June to buy and still get that rate, or would they need to be in the house and making their first payment at that time?

As a landlord the lease on the house is due at the end of August, and I would love to sell that place. But I think timing wise I'm screwed because come Summer the market will have lot's of places on it, and the panic buying will be done. I believe that I can list the place while the tenant is still there 60 days before the lease expires. I'm sure I can work out a deal where the Tenant there so long as they didn't have to move during the school year. So I'll just have to jack the rent and hope there's still people out there who don't want to buy a house if I can't scoop up one of these last home buyers.

You can sell now with possession date in August.

[blankall]

A thing to consider about raising federal interest rates is that it doesn't always translate into much higher mortgage rates. Currently the banks are offering relatively high interest rates, in relation to federal rates, because they expect rates to rise.

At many times, the banks will actually offer less than prime rates for mortgages. For example, right now CIBC has a fixed 5 year rate of 3.29% and a variable rate of 1.65%. The fixed rate is above prime now, but that's not always the case.

[fundmark19]

Originally Posted by Sylvanfan

It would be interesting to know how many people have their rates locked in to continue house shopping. If someone locked in at 120 days yesterday do they have until the end of June to buy and still get that rate, or would they need to be in the house and making their first payment at that time?

You transaction finalized by your rate expiry date.

[fundmark19]

Double post

[albertGQ]

Fixed rates are tied to the bond market, not the federal bank rate

[Johnny199r]

Originally Posted by Weitz

Can I ask why you would like to see that?

Because owning a home is increasingly out of reach for many people all over the country? These ever increasing prices are leading to big time inequality in Canada.

[Enoch Root]

Originally Posted by blankall

A thing to consider about raising federal interest rates is that it doesn't always translate into much higher mortgage rates. Currently the banks are offering relatively high interest rates, in relation to federal rates, because they expect rates to rise.

At many times, the banks will actually offer less than prime rates for mortgages. For example, right now CIBC has a fixed 5 year rate of 3.29% and a variable rate of 1.65%. The fixed rate is above prime now, but that's not always the case.

Mortgage rates are a function of the yield curve (longer term bond rates for corresponding terms). For example, 5 yr mtge rates are a function of 5 yr bond rates.

Mtge rates can be lower than prime, when the yield curve is very flat (as it has been for the past few years)

But now that there are expectations of higher rates in the future, the yield curve has/will steepen in reaction to that. And as it steepens, mtge yields will rise with it

[bizaro86]

Originally Posted by albertGQ

Fixed rates are tied to the bond market, not the federal bank rate

That's true, but longer bond rates are very much tied to the market's expectation for the path of short term rates of the duration of the bond.

The BoC going through with this raise makes future raises seem more likely, imo.

[Enoch Root]

Originally Posted by bizaro86

That's true, but longer bond rates are very much tied to the market's expectation for the path of short term rates of the duration of the bond.

The BoC going through with this raise makes future raises seem more likely, imo.

Not necessarily - a rate hike can often be a one-and-done.

What matters (and I suspect you were getting at) is the expectation that there will be more rate hikes. That expectation is what steepens the yield curve, pushing longer term rates up. And that in turn pushes up mortgage rates.

[bizaro86]

Originally Posted by Enoch Root

Not necessarily - a rate hike can often be a one-and-done.

What matters (and I suspect you were getting at) is the expectation that there will be more rate hikes. That expectation is what steepens the yield curve, pushing longer term rates up. And that in turn pushes up mortgage rates.

Right, exactly. I probably should have used the phrase "makes the market expect" vs "seem more likely" as I agree 1 hike doesn't necessarily change the probability of more (except as an indicator of the BoC willingness to move at least once). But I do think the first hike makes future hikes more likely to get priced in, steepening the curve.

But really, what do I know. If I could predict interest rates I'd be bidding on that giant yacht they seized from the oligarch...

[Enoch Root]

Originally Posted by bizaro86

Right, exactly. I probably should have used the phrase "makes the market expect" vs "seem more likely" as I agree 1 hike doesn't necessarily change the probability of more (except as an indicator of the BoC willingness to move at least once). But I do think the first hike makes future hikes more likely to get priced in, steepening the curve.

But really, what do I know. If I could predict interest rates I'd be bidding on that giant yacht they seized from the oligarch...

Yeah, well don't feel bad because you are not alone there.

One would think that predicting changes in interest rates would be much easier than predicting changes in the stock market. But it turns out that it is actually much more difficult.

One study that I recall found that not only were most bond managers unable to predict the amount to which future interest rates would change with any degree of accuracy, but that about 80% of the time they got the direction wrong! (meaning they weren't even able to correctly predict whether they were going to be higher or lower).

[Weitz]

Originally Posted by Johnny199r

Because owning a home is increasingly out of reach for many people all over the country? These ever increasing prices are leading to big time inequality in Canada.

Rates raising by 2% just make it harder for those people to live. It’s not going to make homes more affordable. Not at this time anyway.

[Enoch Root]

Originally Posted by Weitz

Rates raising by 2% just make it harder for those people to live. It’s not going to make homes more affordable. Not at this time anyway.

For now, supply constraints are having a greater effect, and continuing to push prices up.

But higher interest rates will eventually affect demand, which will have a negative effect on pricing.

[Fuzz]

I know everyone is afraid of mortgage affordability, but we really do need to raise rates so we have a buffer for the next crisis. We can't just sit at 0.25%.

[Johnny199r]

Originally Posted by Weitz

Rates raising by 2% just make it harder for those people to live. It’s not going to make homes more affordable. Not at this time anyway.

In the medium to long term it could help. Rates going up absolutely will lead to lower prices as people won’t be able to borrow such insane amounts to purchase and some people who purchased with 0 wiggle room will have to sell.

[Weitz]

Originally Posted by Johnny199r

In the medium to long term it could help. Rates going up absolutely will lead to lower prices as people won’t be able to borrow such insane amounts to purchase and some people who purchased with 0 wiggle room will have to sell.

Correct me if I’m wrong, but don’t most people have to qualify at higher rates anyway? So most people are unaffected in the amount they can borrow even with the change.

[Regorium]

I'm always frustrated that it seems like Calgary real estate seeing increases is the line in the sand for the BoC to act.

We haven't had a run up in a decade, and even in 2017 when we were starting to see a sign of a recovery, immediately we were hit by 6 rate hikes to cool the TO/Van markets.

I don't know what the solution is, but I wish there was some way to cool those markets without affecting places that might still need the stimulus.

Edit: Whoops - just went back a page and this sentiment was already expressed. Sorry.

[Enoch Root]

Originally Posted by Fuzz

I know everyone is afraid of mortgage affordability, but we really do need to raise rates so we have a buffer for the next crisis. We can't just sit at 0.25%.

Yes, rates are too low.

The key is they need to rise slowly

[Fuzz]

Originally Posted by Enoch Root

Yes, rates are too low.

The key is they need to rise slowly

How slowly? Is a quarter point per quarter to fast?