Quote:
Originally Posted by Realtor 1
You would never know there is a recession in the under 500k market.
It is slower in the 500-700 range but not bad.
The 700+ is where you can feel a recession!
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Credit is loose, when it tightens up back to long run criteria, where banks actually start being concerned about people paying back mortgages.
We have seen artificial house price gains in Canada due to loosening lending standards and more access to credit.
In the late nineties, early 2000's your banker was the cheapest most cautious person you knew, that changed as our economy needed housing for GDP growth.
We moved from average down payments of 15 to 20% on CMHC insured mortgages to only requiring 5% down and that becoming the norm, jacking average amortize periods of 25 years in early 2000's to 40 year amortize periods with 0 to 5% down in 2006. Check price gains in all Canadian markets from 2003 to 2007 - very telling.
It is easier for a person today to get approved with an income of $75,000 per year on a $400,000 mortgage with 10% down than a person making $150,000 per year and putting 26% down on a $600,000 home. Bankers actually love to talk you out of large down payments so you can get CMHC and "keep all your cash invested making you a return, house prices will always go up"
As soon as you are outside CMHC and the bank has to actually be concerned about you paying it back and not the tax payers of Canada - lending standards seem to get very stringent - amazing isn't it.
Reversion to mean, needs a catalyst - for Alberta/Saskatchewan it will be the price of oil and layoffs, for other parts of the country it will be over levered home owners and slight rises in interest rates.
If you have bought a home in Canada over the last 5 to 7 years with less than 20% down you will be underwater in the coming years. Recover under new CMHC rules and lessons people will learn will mean we revert back to long run fundamentals of home price appreciation - 1 to 2% per year - will take many years for some to return to equity positions on their homes.