We're just about to list our starter house in Mckenzie for $309,900 - we bought well before the boom so there's a nice portion of built up equity in it.
My wife and I are going to be upgrading into larger house that's bigger and a little closer into the city. We've really staged our house well and cleaned it up well and know exactly how much we can afford in a new mortgage and overall are really quite well prepared.
Looks like the pending sales for both condos and SFH are really lagging even the numbers from 2010. Only been 2-3 weeks but interesting to see if things improve at all - looking kinda nasty for future months?
Not sure if you guys have seen the whole "empty cities" thing in China - crazy stuff:
My little view of wanting to move to another house in my neighborhood is pucked. There is NOTHING. Overpriced crap, thats selling. Sold signs everywhere. Not on the things on the market for a year that are hilariously overpriced though.
Oil at this price just changes everything. Jobs are everywhere, not enough people for them, salaries go up. Job prospects are going back to boom levels. You buy a house you can barely afford, within the year you can quite easily afford it. At this price its economic to kidnap teenagers and harvest their oily faces, you'll see teenagers duct taped to the side of cars with their face jammed into the gas inlet.
I remember one of my most intelligent and old engg profs advice to us was to buy much more house that you can afford. Maybe this advice was to be just to us. He is a world renowned finite element analysis guru and that was his advice. Weird.
Top level 'geer makes $250K, with 30% bonus at certain oil company.
Managers get over 100% bonuses now.
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My little view of wanting to move to another house in my neighborhood is pucked. There is NOTHING. Overpriced crap, thats selling. Sold signs everywhere. Not on the things on the market for a year that are hilariously overpriced though.
I remember one of my most intelligent and old engg profs advice to us was to buy much more house that you can afford. Maybe this advice was to be just to us. He is a world renowned finite element analysis guru and that was his advice. Weird.
What neighborhood? Everything that's been on my radar hasn't sold at all. Price drops over the last 6 months to a year and no bites at all. (That would make me nervous as heck if I were the seller.)
Hehe, well if he is indeed that old I'm sure he'd want that. Somebody has to buy his real estate holdings when he's retiring and down sizing to fund that stage of his life. Heck, I'm sure he also wants you to vote for political parties which might want to triple old age security programs.
Should be intriguing to see the raises and bonuses are this year - fun times.
This is the issue that will pop the bubble. The retort from CMHC in the article that Canada did not and do not have subprime rates is false. The definition of a sub prime loan is one where the borrower made payments at teaser rates before they were jacked 3-5 years later. We do not have subprime rates in intentional strcutures, but people who barely qualified for a 0 down 40 amort, or a 5 down 35 amort, at record low rates of the past couple of years are effectively subprime borrowers as they are now paying much lower rates than they will have to refi for in 3-5 years time while not really paying down much principal because they're down payments were so low or non-existant. These are people who should not own their homes, and their high risk for default when rates inevitably normalize has been offloaded to CMHC in much the same fashion as Fannie mae and Freddy Mac in the US 5 years ago.
Do you really think the fact we have people who are in zero down mortgages and 40 year amortizations is anywhere near the same situation the US housing market faced with their sub prime mess?
It's not even comparable. Yes, when some of these people who are in a 40 year amortization renew their mortgage their new rate might be marginally higher than the current rate. However it is not going to be anywhere close to the difference between the "teaser" rate and what the new rate reset at on the US mortgages. Not to mention we still had relatively strict qualifying guidelines compared to what they had down in the US. A huge portion of the problem in the US was the fact they would give ANYONE a mortgage regardless of credit or income. Canadians still has to show solid credit history as well as good income to support the loan payments.
The comparison between the US sub prime crisis and people qualifying for 40 year amortizations with zero down is ridiculous.
I don't disagree that perhaps some people in Canada will have a difficult time making mortgage payments when they renew at a higher rate, some may even get foreclosed on, but that happens all the time. We will NOT see anywhere near the same numbers that they saw in the US, not even remotely close. And guess what? Some of these people who took 40 year mortgages were young and just starting careers, chances are they are making more money now than they did when they took out the mortgage. A slightly higher payment in the future is not going to crush them financially, they may have even started paying the mortgage down quicker and built equity with this additional income.
This thread has been going for a couple years now and there have been all sorts of reasons listed for this supposed bubble burst. None of them seem to have come to fruition..... I guess I'll just have to keep waiting for it to happen.
^Great post and I totally agree with your last sentence.
Just wondering (you're the expert here!), can you just relate how many NINJA (No Income, No Job) mortgages you wrote during the boom times? My guess is zero....but we might as well hear that from the horses mouth if you don't mind.
^Great post and I totally agree with your last sentence.
Just wondering (you're the expert here!), can you just relate how many NINJA (No Income, No Job) mortgages you wrote during the boom times? My guess is zero....but we might as well hear that from the horses mouth if you don't mind.
I personally have never written a NINJA loan and as far as I know Canada never had them to the same extent as the US. Lending guidelines are certainly tighter now than they were a few years ago. But even during the boom times you had to show good credit and the income to support.
There were certain lenders that would lend based on equity in your home (usually 20% or more) for people that had credit or other issues, but as far as I know there were no NINJA loans in Canada. I started in the business in 2007 however so I can't say for certain what happened previous to that. However I have never heard any associates ever mention anything like that was ever available.
One other thing to note on the zero down 40 year amortization mortgages - many lenders actually charged a rate premium on those loans. So chances are they could actually be paying a higher rate now than when they renew. If someone got the 40 year am 5 years ago and their mortgage is up for renewal this year, they are able to renew at 35 years as well. It's not like they have to all of a sudden drop to a 30 year and deal with higher payments because of a shorter amortization. CMHC is allowing everyone to continue with your original amortization schedule.
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CMHC and Genworth used to be very leniant on their stated income programs for BFS applicants. You just stated what you made and no income confirmation was necessary
To me, that is almost the same as a NINJA loan. You just had to set up a business, and boom! You're approved.
I do realize that these posts have a great horrific potential form me to eat my words if armageddon comes to fruition.
Meh, it's like most things in life - it'll probably land some where in between a rapid ridonkulous boom and outright armageddon.
I try not to get too worried about whomever being right or wrong but I do find it interesting that there seems to be more/increasing discussion in the media about potential inflated prices, bubbles, debt ratios, etc. Discussion is always good - like this thread.
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Hmmm I believe the banks lowered interest rates by 10 basis points last month (not sure to be honest) - looks like they're going up 35 points tomorrow.
Do you really think the fact we have people who are in zero down mortgages and 40 year amortizations is anywhere near the same situation the US housing market faced with their sub prime mess?
It's not even comparable. Yes, when some of these people who are in a 40 year amortization renew their mortgage their new rate might be marginally higher than the current rate. However it is not going to be anywhere close to the difference between the "teaser" rate and what the new rate reset at on the US mortgages. Not to mention we still had relatively strict qualifying guidelines compared to what they had down in the US. A huge portion of the problem in the US was the fact they would give ANYONE a mortgage regardless of credit or income. Canadians still has to show solid credit history as well as good income to support the loan payments.
The comparison between the US sub prime crisis and people qualifying for 40 year amortizations with zero down is ridiculous.
I don't disagree that perhaps some people in Canada will have a difficult time making mortgage payments when they renew at a higher rate, some may even get foreclosed on, but that happens all the time. We will NOT see anywhere near the same numbers that they saw in the US, not even remotely close. And guess what? Some of these people who took 40 year mortgages were young and just starting careers, chances are they are making more money now than they did when they took out the mortgage. A slightly higher payment in the future is not going to crush them financially, they may have even started paying the mortgage down quicker and built equity with this additional income.
This thread has been going for a couple years now and there have been all sorts of reasons listed for this supposed bubble burst. None of them seem to have come to fruition..... I guess I'll just have to keep waiting for it to happen.
My point was that the CMHC insures mortgages that FI's wouldn't underwrite naked. That's additional credit risk that's pooling up and is ultimately the risk of the tax payers. It also does the perverse effect of making homes less affordable, unless of course affordability is only measured by one's means of obtaining a 5% down mortgage.
Also vis-a-vis bubble, I think the comment applies more to places like Vancouver and Toronto where prices for homes are 9-14 times average income. That isn't sustainable, and there's nothing economically that can bring real incomes up to support those price levels in those cities.
In Calgary we hit our peak in 2007 and haven't seen it since. The boom itself was a bubble that corrected but got glossed over by the fact that things were worse in the US and everyone took a similar hit on their equity holdings. Meaning if you bought a home at a highly leveraged amount and did not make any extra payments all you accomplished is negative equity and lining the banks pockets with interest payments. Hardly a great move with your money. Houses don't always go up and in real terms do not always outperform every other asset class.
Can you avoid paying CHMC fees by "securing" a mortgage to additional assets? (ie, physical gold bullion)
Since gold appears to be a hedge against everything else completely falling apart perhaps it's best to keep some gold and other investments instead of putting all of your money into a down payment. As long as borrowing is still practically free it seems to me you'd be better off keeping your down payment invested to ensure better diversification. If interest rates were to really jump you'd still be able to take advantage of your 20/20 payment option to reduce your principle.
Can you avoid paying CHMC fees by "securing" a mortgage to additional assets? (ie, physical gold bullion)
Since gold appears to be a hedge against everything else completely falling apart perhaps it's best to keep some gold and other investments instead of putting all of your money into a down payment. As long as borrowing is still practically free it seems to me you'd be better off keeping your down payment invested to ensure better diversification. If interest rates were to really jump you'd still be able to take advantage of your 20/20 payment option to reduce your principle.
In an indirect way, couldn't you get a secured LOC against your gold, than just use that $ to put your downpayment over 20%?
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This more spin or are you guys (in the industry) seeing this? From what I can see the bottom fell out of the pending sales since the March 18 deadline - I assume that it is mainly the first timers? And it's probably why prices have propped up a bit since then - much fewer people buying at the marginal end.
We've been pretty steady at the 300-315 range since March 18. I would assume April sales numbers are going to be materially down even from April 2010.
I've been busy.
We've sold 6 homes at Drake since the weekend (all under 300K) and I've being watching the Marda Loop area or a friend (first time buyer looking under 300K) and everything he wanted got snapped up.
Haven't paid too much attention to the stats lately because I've been too busy with transactions.
Last edited by Winsor_Pilates; 04-06-2011 at 09:27 AM.
When the statistics are not looking good according to your point of view, it’s time to jettison them. It seems that an investor on his blog agrees, posting:
Great analysis Don. I shy away from a the statistical tools. Properties values are extremely local. The municipal, regional and provincial stats are great for data-junkies, realtors who need to justify their existance and news media looking for something to do
You can be sure that if the stats were looking favorably at the moment, they would be touting them.
Young adults are the most likely age group to buy a home in the next two years but more than half of those surveyed think the time isn't right yet, according to a poll released Thursday by Royal Bank of Canada.
RBC's annual home ownership poll found that 55 per cent of respondents aged 18 to 34 said it makes sense to delay a home purchase until next year. That's 10 percentage points more than the national average for all age groups.
Meanwhile, about half of young people who have already delved into home ownership responded that their mortgage is eating up too much of their income — suggesting their peers may have good reason to wait.
This thread has been going for a couple years now and there have been all sorts of reasons listed for this supposed bubble burst. None of them seem to have come to fruition..... I guess I'll just have to keep waiting for it to happen.
Answer: Rates are still at record lows since the thread started.
