7 years of CMHC dampening

First a Monday market update courtesy of Marko Juras.

December 2015
Dec
 2014
Wk 1 Wk 2 Wk 3 Wk 4
Unconditional Sales 124  244
389
New Listings 125 261
419
Active Listings 2797 2734
3210
Sales to New Listings
99%
93%
93%
Sales Projection 479
Months of Inventory

8.3

The latest round of mortgage tightening rules came in pretty weak.   A 10% minimum down payment on mortgage balances over $500,000.    For a city like Victoria, even if everyone was buying with 5% down, the median house would only require an extra $5000.  Also expect rates to go up by a few tenths of a percent due to higher capital requirements for lenders.    I suspect the impact will be completely imperceptible here.  This was aimed squarely at Toronto and Vancouver, and even though the hit is more direct, it’s little more than a Nerf gun against those monster housing markets.

However this latest CMHC move to reduce risk and put a damper on the market shows that the new government has not lost the appetite for keeping a lid on the market.  This is now the sixth move to restrict credit since 2008, and I’m willing to bet there is more coming if rates don’t increase soon.   I have to hand it to the regulators, they seem to be doing a good job of carefully unwinding the excesses of the early 2000s without pulling the rug out from under the market.

cmhc

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75 thoughts on “7 years of CMHC dampening

  1. Does knowing that the Victoria market has not had substantial declines for the last 25 years reduce the probability of a significant market decline!?

    That’s like predicting an earthquake. Just because we haven’t had a major earthquake in 25 years doesn’t mean we won’t have one. It’s more likely the opposite, the longer the market goes without a significant correction the more likely one will occur.

    And that likelihood of a correction increases as the market becomes increasingly shallow and dysfunctional. Which is happening in our market today with low inventory and erratic month to month swings in the median and average prices.

    While it may be true that we have not seen a double digit annual decrease in prices in the last 25 years we have had price declines. What is also true is that we have never had a market like the one we are in today in the last 25 years either.

    The bigger they are, the harder they fall.

  2. If we look at the VREB stats since 1988 the biggest YOY drop was 1995 at 5.47%. After that we have 2011 at a 2.55% drop. For the market to give back the gains seen this year it would have to be the largest YOY drop we’ve seen in 25 years. History has shown the Victoria market to be resilient after run ups.

  3. This is what a $22 Canadian Select oil price does to some poor folks. Could you imagine the hurt here ? Nope, will never, ever, ever happen, cause this is Victoria, and we’re special afterall. 😉

    Fort McMurray sees plunge of nearly $125,000 in average home prices with more pain to come

    “The crash in oil prices this year is hitting Alberta’s residential real estate market hard these days with Fort McMurray in particular feeling the pain – and a report released by the Canadian Real Estate Association forecasts continued volatility in 2016.

    New data by CREA indicates Fort McMurray, in the heart of the oil patch in the province, saw a 27.7 per cent year-over-year decline in MLS sales in November with the average sale price plunging by 19.1 per cent to $519,193, which is down from $642,003 in November 2014.”

  4. I dunno, California’s a big place… more people than Canada eh!

    Lol…WW3? …where else do you think all the american defectors would end up but in BC? 😉

  5. I could see a wave of Californians selling out and heading to BC in the unlikely event of Trump getting in.

    Thing is, even allowing for the exchange, house prices are higher in BC than in California by about 20%. As for the unlikely event of Trump getting in, the polls show he’s leading all of his Republican rivals by double digits, and he also leading Hillary. So “unlikely” seems to place the odds a little longer than is realistic.

    But if you don’t see Trump winning, how would WW3 affect Victoria’s house prices, WW3 being the alternative to Trumps economic program, according to former Presidential speech writer and presidential candidate Patrick Buchanan.

  6. For things like oil & loonie the 80s road map has done an incredible job of predicting both time & distance.

    ie.
    * oil peaked early ‘80 (and mid’08), remained elevated for 6 years, then crashed 70% early ‘86 (and late ‘14)
    * loonie peaked above par ‘76 and bottomed 9 nine years later at 69 cents in ‘85, loonie peaked ’07… 9yrs later would be ’16 and we’re already nearing 70 cents.

    Works well for bonds & RE too.

  7. I think my bear case in the event of a Trump presidency is logical

    I could see a wave of Californians selling out and heading to BC in the unlikely event of Trump getting in. They’re running out of water anyway…so they may as well get a piece of Tectoria/Hollywoodnorth while their dollar is 40% stronger than ours 😉

  8. Oil like real estate is market driven. If it can happen to oil (i.e., crash) – it can happen to real estate.

    Exactly. And that was my point about regime change USA. Sometimes markets turn on a dime for reasons that are obvious in hindsight, even though they are anticipated by few.

  9. You need to let go of your Garth complex Marko. Just because he banned you from his blog is no reason to dismiss the obvious evidence that a larger percentage of mortgage holders can’t pay their monthly bills and could crash the market.

    You only need a small percentage to do that and an increase in inventory which is long overdue to rise. We already have higher mortgage rates kicking in and a rising unemployment rate from 4.7 to 6.3 in less than a year. The seeds have been planted in my opinion.

    Again, bashing Garth and saying it won’t happen cause it hasn’t yet is indeed ignorance and denial of a clear shift in the real world of homeowners. They don’t all have 50% down and perfect lives where financial difficulties never happen.

    Personally I hope the panic buyers keep paying 50K over for all the Gordon Head type shacks that need 100k renos. That will leave the good places for me and everyone else whose patient for when it tanks.

  10. We haven’t had a credible bear blogger since Leo bought his house

    Only Garth has the intestinal fortitude to be a bear blogger during 7 years of a bull market. I feel more comfortable looking at the current conditions and being a whatever kind of blogger that I think it’s indicating.

  11. Oil is a finite resource. They aren’t making any more of it and more people are using oil than ever before. Yet the price has dropped 75% from peak prices. Oil like real estate is market driven. If it can happen to oil – it can happen to real estate.

  12. I didn’t read anything credible that suggested that it was predictable that Victoria would be the weakest market across Canada for nearly 5 years, and yet here we are, more affordable that we were in 2010.

    Agreed. In 2008/09/10 the signals for a local overvaluation were strong, so we delayed buying, banking on a decline in prices. We got lucky and prices did in fact decline moderately. But at the same time those same signals showed even greater overvaluation in Vancouver, and the market took off like a rocket instead.
    Then in 2013 we bought a place because of unrelated factors coming together. At the time I wrote that I expected prices to decline another 5-10% and I was ok with taking that hit. Turns out the market turned around instead. Who knew?

    The only strong relationship is between actual market conditions (MOI, S/L) and price movements. Everything else is probably so heavily influenced by external factors that there is almost no way to make a prediction that is better than a random guess.

  13. Any chance we can have the performance chart of the markets across Canada dating to January 1st, 2008 updated? Kind of curious to see where we now sit compared to Vancouver/Toronto/other cities with the small run up we’ve had this year.

    Sure. Will be one of the ones migrated over to the automatic page eventually as well but I’ll update it in the next day or two.

  14. “I think my bear case in the event of a Trump presidency is logical and, so far”

    Your argument is based on an event, which may or may not occur, and that extremely macro political event triggering some extremely complicated macro-economic factors that would lead to a decline in our local real estate market.

  15. “Since then it has been all doom and gloom “the world is ending” bear posts which has effect of making the bull bloggers look even more credible.”

    Spoken like a true salesman. It can’t happen because it hasn’t. Any of my bear posts are numbers from stats based on facts of debt bomb that has peaked and trying to be reeled in but most likely too late, just as it did in the US.

    Why is the Bank of Canada, OSFI, banks,financial entities, CMHC and from every corner of the world warning so heavily Marko ? Because they want less profit off of sales ? Why aren’t they saying keep on buying your ass off, buy 3 houses, 10 if you want ? Why did they roll back the mortgage rules ? Because they see the warning signs of a crash if it doesn’t stop now. Your ignorance is astounding but then again, you’re a salesman, not a financial advisor.

  16. We haven’t had a credible bear blogger since Leo bought his house

    Dunno about that Marko. I think my bear case in the event of a Trump presidency is logical and, so far, unrefuted, unless you count Michael’s illogical contention that rising interest rates leading to decreased affordability will result in an RE boom.

  17. “Many young potential buyers read this site I would bet who might believe that crap of $1 million median in a few years and get sucked in at the top.”

    Most young buyers that have called me off HHV over the years were actual lead to buying thanks to bloggers like “Info.” We haven’t had a credible bear blogger since Leo bought his house. Since then it has been all doom and gloom “the world is ending” bear posts which has effect of making the bull bloggers look even more credible.

  18. Relax Hawk. It’s absolutely foolish to think either of us could have any effect on the market whatsoever. Renters & owners are incredibly polarized and even if someone did read a few of our comments, it would only entrench them further.
    There‘s no sense getting stressed over a blog, for me it’s just fun & educational (mostly on human perception). If anything, at times I’ve simply tried to help you see other sides to your bearish slant… but then you’ve also helped me at times. I completely understand the psychology of being bearish, I just think I’ve gotten a little better at knowing when it’s time to take off the bear suit (ie. burning houses on the cover of Macleans).
    Btw, I am not a salesman or in “the bizz” of any sort… that one cracks me up. I simply find the subject interesting and enjoy learning from others.

    Fear is the path to the dark side, young skyhawker 😉

  19. “I’ve recently heard of several snowbirds selling US and looking back at our island”

    I know several who have left the island in the past year. All irrelevant,anecdotal and hypothetical. Tell us when they buy.

    firecology,
    When I see someone posting bullshit from someone clearly in the bizz it’s worth debating. Many young potential buyers read this site I would bet who might believe that crap of $1 million median in a few years and get sucked in at the top.

    It’s interesting that Mike’s posts only ramp up the more the media is shedding the light of a possible serious market correction. The average optimistic homeowner wouldn’t go to that extent, just a sleazy salesman.

    I have zero effect on the market, so why his deep concern and twisting of facts ? Greed and a massive ego that he could well be wrong in the coming months as debt loads hit records as we see price reductions are increasing.

  20. I suppose it’s an easier to compare with aligning the starting points…since they’re scaled the same anyway.

    StatCan latest median income (2013)
    Toronto $72830
    Vancouver $73390
    Victoria $84500

    I still think one overlooked factor as to why Vic now plays catch up (& why we dropped) is many of the Canadians who bought vacation/retirement property in the US will now instead look back to Canada‘s traditional retirement haven. It’s the same reasoning why so many foreigners are now seeing us as cheap. I’ve recently heard of several snowbirds selling US and looking back at our island…some doubling their money after conversion. US is great until you realise you’re an old boomer and need health care year round.

  21. When you put things into perspective we’ve had a relatively small run up that is no where comparable to Toronto or Vancouver.

    Average SFH Price 2001 = 259,138
    Average SFH Price 2007 = 565,904

    118% increase over 7 years.

    That is a bubble type run up.

    Average SFH Price 2008 = 583,701
    Average SFH Price 2015 YTD = 646,215

    10% increase over 8 years.

    Median total income, by family type, by census metropolitan area
    (All census families)

    Victoria 2009/2013

    77,840/84,500 = 8.5% If we had stats available for 2008-2015 it would probably be around 12%.

  22. Geez you guys are harsh with each other. Relax – we’re talking about human behaviour here; no one knows all the great or dumb reasons people choose to buy or sell houses or condos. We think we understand the main drivers of behaviour, but people are irrational. Fear, hope, family, greed, inheritance, illness – it all adds up to a ton of noise in the models. I didn’t read anything credible that suggested that it was predictable that Victoria would be the weakest market across Canada for nearly 5 years, and yet here we are, more affordable that we were in 2010.

    The fact is – no one predicted that prices would have risen so steeply and unflinchingly in Toronto and Vancouver. That suggests that the models of human behaviour around RE, at least in these cities, are poor – they have weak explanatory power. We don’t know that similar factors couldn’t happen in Victoria (overseas purchasers? Money-laundering? Wave of retirees? Rise in the tele-commuting class who are desperate to escape Canadian winters?). We also don’t know what bit of fear could start a wave of selloffs, as happened in ’08 (additional terrorist attacks? Canadian recession? West coast earthquake? just continued economic uncertainty?).

    The fundamentals are a bit shaky in many cities, though I maintain not in Victoria. Real estate is local, but also not immune to national patterns (and foreign too – quite a few Americans are also interested in our market).

    Disclosure – It seems important to state if you’re a potential buyer or seller here to weed out the ‘pump and dump’ types. I currently own a fixer-upper/teardown SFH in the core (yay – value of assets rising!) with about $200k left on the mortgage. However, my family is looking to upgrade, so we would benefit most from a price correction (yay -price of larger homes dropping!). Except that the local factors strongly suggest continued price growth here, so we may be out of luck and have to compete with everyone else for the plums of the market. So it goes.

  23. “One has to wonder if people like Alexandrahere or buyers of 1711 Haultain in late ‘09 who lost ~1/3rd of the purchase price would agree with that statement.”

    The Haultain story of shitty little house with a quick Home Depot reno on a busy street was not the norm and is the only example you keep grasping on to. Show us 100 more then we’ll talk that it was a real trend of 30% reductions. These type of places will obviously be the first to tank next time around tho.

  24. “Toronto And Vancouver Real Estate Is Undervalued”

    You left out the part with the link that shows it’s written by a real estate developer. No bias there of course. Sounds like desperate agents trying to reel in the remaining sheep before the slaughter in the new year.

  25. performance chart of the markets across Canada dating to January 1st, 2008 updated?

    Not exactly what you wanted but here’s a Teranet comparison…

    I thought this article headline from today has an interesting viewpoint.

    “Toronto And Vancouver Real Estate Is Undervalued”

    I suppose that would mean Victoria RE is considerably undervalued.

  26. Week 2 of December 2015 for detached homes in the core.

    At the end of the 7 day market ending December 14 there were 25 home sales in the core. Up 47% from 17 the year before and nearly the same as in 2013 when there were 24 house sales.

    New listing for that week stood at 31. Which is up 29% from 24 the year before and 22 the year before that.

    That puts us at 51 house sales and 55 new listings for the first fortnight of December which a ratio of 1 new listing for every home that sells. The big difference is the days on market with half the houses listed selling in under 22 days down substantially from last years 41 days and 53 days in the first fortnight of 2013.

    All of this mirrors what prospective purchasers have been saying on this blog. The market is heavily weighted in favor of sellers with the better properties receiving multiple bids over asking price.

    This isn’t the market that a first time house buyer should be wading into. The odds are against them as they have little to none negotiation strength in the core house market.

    As for the move up house market. This market only makes sense if you’re fat in equity in your current home. Equity that you don’t care if it shrinks as inventory, sales and new listings return to balanced levels.

  27. Any chance we can have the performance chart of the markets across Canada dating to January 1st, 2008 updated? Kind of curious to see where we now sit compared to Vancouver/Toronto/other cities with the small run up we’ve had this year.

  28. The basic difference between Canadians and Americans is that Americans have gone through a correction in their all-important housing market, and we haven’t.

    One has to wonder if people like Alexandrahere or buyers of 1711 Haultain in late ‘09 who lost ~1/3rd of the purchase price would agree with that statement. If they held on they were ok, but I know Haultain for instance crystallised those losses.

    Alexandrahere said… (previous hhv blog)
    “I just received my condo property assessment. The total assessec value has gone down by $80K!!…Biggest investment mistake I made in my life was buying this one.”

    Then there were all the cities like Denver, Dallas, etc. that hardly skipped a beat as the US bottomed in 2012.

  29. As per Leo’s article, the elevator down is much harsher than the escalator up.

    “Still, he says, “it can be a nothing little event that starts the fall.” And that “the panic on the downside is a much more powerful force than the optimism that builds the market.””

  30. “40 year 0 down was just the last in a long run of CMHC moves to loosen access to credit. Amortizations over 25 years, removal of the regional insurance caps, zero down, cash back. Those changes had a large impact on the market in the 2000s.”

    Exactly Leo. Wether Mike is in denial, ignorant of historical facts, or needs to pump this fairy story to his clients, the bottom line is the market was up huge during that time period by 100K give or take.

    There is no government helper plan to keep this gong show going other than horny house hunters bent on having that worn out shack even if it costs them an extra 5 years of payments. If that’s not the biggest sign of a market top then you haven’t been around very long.

    There’s a thing called a debt bomb now and I would bet that bankers and CMHC are scrutinizing borrowers much deeper than ever with the national economy headed into the tank. Bankers look at the whole country when they lend and head rule changes from head office back east, not wether there are more restaurant and floor scrubber jobs in Victoria.

  31. ” Currently, when a building
    is at the end of its life cycle, or owners
    want to sell for redevelopment, all eligible
    voters must approve. The proposed
    amendments would lower that threshold
    to 80 per cent, which is an approach
    taken by several other jurisdictions
    in Canada and elsewhere. ”

    Interesting, Sensible but somewhat disconcerting that your neighbours could force a sale of your condo.

  32. Those changes weren’t brought in until ‘07 (maybe one of them was late ‘06…at the very earliest).

    40 year 0 down was just the last in a long run of CMHC moves to loosen access to credit. Amortizations over 25 years, removal of the regional insurance caps, zero down, cash back. Those changes had a large impact on the market in the 2000s.

  33. Charts and graphs are interesting and they may have some predictive value, but nothing speaks like being on the ground and seeing the action of particular sales.

    The charts and graphs match the experience on the ground. The market is active and improving rapidly. Not quite at the level of the mid 2000s but close, and probably very close in the core.

  34. the point and recurring debate is how prices always seem to shoot up as mtg rates start to rise

    Problem is you need to look at the entire range, not just the periods where they rise together.

  35. From my perspective as someone who is still looking to buy, the market is crazy out there. Charts and graphs are interesting and they may have some predictive value, but nothing speaks like being on the ground and seeing the action of particular sales. For example: house at 1274 Persimmon Close in Cedar Hill/Maplewood with suite listed at $630K (assessed $516K) sold immediately for $670K. I was at the open house and there were people like fruit flies around a banana. This house was cheaply built in the 1970s and had several issues. I think there are a lot of buyers like me who couldn’t find anything this past year and will be jumping on any new listings come next year. I don’t want that to be the case, but I’m afraid it will be true.

  36. Regardless Hawk how much or how little prices went up after the changes mid’06 that had nothing to do with our discussion point…
    …the point and recurring debate is how prices always seem to shoot up as mtg rates start to rise as they did for instance in March ‘04. Again, Mar ’04-Jan ’08 mtg rates went up 150 points while prices rose ~50%… the 70s saw mtg rates rise well over 1000 points and yet prices went up 5-fold. I’ve often posted DavidL’s chart showing how mtg rates & prices have risen in conjunction since 1960… and yes, I know you have 101 reasons why it’ll be different this time, but my guess is you’re starting to face the proof and in 2016 that yet again it won‘t be different this time.

    @Katusha, this link seems to work (go to page 3)
    http://www.bcrea.bc.ca/docs/the-bulletin—2015/2015-11.pdf?sfvrsn=10

  37. Spin it how you agents do Mike, but the June 2006 median( a month after 40 year mortgages came out), was $487K and December 2008 median was $598K so what’s another $50K off the mark right ? All according to VREB stats of course.

  38. @Marko Looks like an interesting read, but the site is password protected. Any chance you can paste the text?

  39. Victoria vacancy numbers being low are nothing new. Last time they were that low was in 2007 and 08 when the markets tanked. Numbers don’t jive with what’s available online. Lots of one and two bedroom places for rent.

  40. Only 30K Mike ? The chart above shows 6 month median going from $455 to $540K. You need some glasses bud or a new calculator. The party is over, there’s a new kid in town.

  41. To me rising rates indicate ‘increasing’ affordability, as it means job growth, incomes & foreign buyer incomes are rising quick enough that central banks need to tap on the brakes. Another way to think of it, if Vic/Van was a small country with our own central bank, they would have already tapped those brakes (raised rates) numerous times. That’s one of the great advantages of investing in such a diverse country like Canada… you just have to pay attention to the shifts in growth & opportunities.

    Today’s cmhc report is actually a great indicator what’s going on Vic/Van …quite something to now have the tightest vacancy in the country… newcomers, new incomes, eventually new owners.
    Even that godforsaken Nanaimo is attracting people 😉

  42. The Fed rate increase is from a range of zero – 0.25 to a range from 0.25 -0.50. Yesterday’s rate was 0.13, so the actual rate increase need be no more than 0.170%. Hardly likely to send Canadian RE into the stratosphere, on Michael’s counter-intuitive theory that decreasing affordability increases prices, assuming it has any affect whatever on Canadian mortgage rates.

  43. My leveraged bet is our RE market will behave similar to how other assets are reacting to the rate hikes this week. I had to throw in ‘leveraged’ since Hawk thinks I’m leveraged to my eyeballs 😉

    4.6% in 9 mth is not too shabby for Colwood.

    they went up $100,000 range in a little over a year from mid 2006 to early 2008

    Mid ‘06 to early ‘08 Vic prices were already stalling out (hence the mtg changes from the new govt), from the vreb chart prices only went up about ~30k here in that timeframe.

  44. “A 2,600 square foot Colwood home purchased March of 2015 at $480,000. Resold today at $502,000. That’s a 4.6% increase over 9 months.”

    Guess the poor dude lost money after fees, original transfer taxes, paying out mortgage early, fancy that. I thought everyone wins when you spin the Victoria real estate wheel.

  45. “Those changes weren’t brought in until ‘07”

    40 year mortgages were brought in by Harper in May 2006. Hope you aren’t saying it had no effect on Victoria prices Mike, they went up $100,000 range in a little over a year from mid 2006 to early 2008 after they were introduced. 60% of new borrowers were loading up with the 40 year. They had plenty to do with the market price rising.

    You need to get over the Libs in power, they are telegraphing to the market that prices are topped out and if they persist we will see more changes. Not every politician is out to juice home prices just to keep power. JT can see it’s out of control and people will get hurt bad, and most likely will, and is trying to reduce the body count.

  46. A re-sale for the teranet index today.

    A 2,600 square foot Colwood home purchased March of 2015 at $480,000. Resold today at $502,000. That’s a 4.6% increase over 9 months.

  47. 40 year mortgages and zero down payments were brought in during that 2004 to 2008 period

    Those changes weren’t brought in until ‘07 (maybe one of them was late ‘06…at the very earliest).
    Btw, if anyone juiced the market it was the Liberals (who were in power until ‘06) by doing things like removing homeowner price ceilings and reducing insurance premiums. My bet is your love affair with JT will turn into heartache like it did with Stephen, as you look to lay blame again in a few years.

  48. You are ignoring once again Mike that 40 year mortgages and zero down payments were brought in during that 2004 to 2008 period which nullifies your cherry picked interest rate move. I could pick out a 3 – 4 year move depending on the month where rates barely moved. Picking the absolute low to the absolute high is pretty lame when free money was being dished out to anyone with a pulse. Those days are gone, mortgage rates are moving up, and the trend is now up as per the US economy, not by a bunch of new part time low paying cyclical service jobs in Victoria.

  49. But Canadian mortgage rates between 2003 and 2007 were flat to slightly downward.

    Actually if you look at your link they went up 150 basis points from Mar ‘04 to Jan ‘08…within that 3yr 10mth time frame Vic prices went from roughly 400k to 600k. However, I doubt we’ll see that 150 point movement in mtg rates this time, unless inflation really warms up.

    The key for Vic/Van of course is we are getting all the benefits of wage inflation, rising rents, etc. with our leading economy and job growth, while also benefiting (rate-wise) as so much of the country still suffers.

  50. Big day ahead.

    Nah!

    No Fed increase means the US economy is so desperately sick that even a 10 or 25 point rate rise would prevent further concealment of the fact that the US is in a depression with depression era unemployment if correctly tallied.

    A rate increase of up to 25 basis points, means the Fed positioning itself for a strategically time rate cut later in the year to maintain the fiction of an economic recovery — an impossibility when a stagnant economy (i.e., the US) is faced with something like a one-third increase in the trade-weighted value of its currency.

  51. The last time the Fed started raising rates (~2003-2007) our prices shot up 50+%.

    But Canadian mortgage rates between 2003 and 2007 were flat to slightly downward. So what the Feds then did had little if anything to do with what happened in the Canadian RE market.

    Begs the question…if we lift off today, do we achieve similar increases from now ‘til 2020?

    For the reason stated, your question does not follow from your proposition. It is a non sequitur.

    A rise in the Fed rate does not mean the “we lift off” if by that you mean Canadian mortgage rates rise.

    Rather than talking of correlations between unrelated things, why not explain the economic logic that underlies your belief that rising rates necessarily mean increased property prices.

    Historically, rising rates have coincided with rising RE prices when inflation has been running ahead of interest rates, meaning times when real interest rates are negative. But this can only happen if affordability is, if not high, at least not low.

    But now affordability is very low, so any substantial Canadian rate increase will inevitably kill the market.

  52. Big day ahead. The last time the Fed started raising rates (~2003-2007) our prices shot up 50+%.
    Begs the question…if we lift off today, do we achieve similar increases from now ‘til 2020?

    Or as CS is sort of suggesting, maybe we’re entering a 20yr period like 1961-1981 where prices go up ~10-fold.

  53. but if you can hang on to the place you’ll be in good shape.

    If you hang on to the place during a period of rising interest rates you will not go broke, that’s true. But you may find your house worth less than you paid for it. For example, if rates double, prices must fall by 50% for affordability to remain constant unless wages rise by the same proportion as interest rates. But while a doubling or even a quadrupling of interest rates within a period of three or four years is conceivable, a doubling or quadrupling in household after-tax income seems most unlikely.

  54. It also means increased incomes and your mortgage balance reduced by 5, 10, 20% every year in real terms.

    Yes, but in the case at least of the 372 thousand households with debt of more than 350% of gross income, and probably many others too, a 5, 10 or 20% wage increase will not compensate for a 50, 100, 200% increase in mortgage interest, i.e., from the current 2.99% of whatever to 6, 12 or 24%.

    Moreover, if inflation takes hold because of dollar devaluation or import tariffs, wages increases will probably not match inflation. (Or if they do, then the devaluation or tariffs fail of their intended effect.)

  55. 5, 10, 20% inflation would surely mean something like 5, 10, 20% interest rates as in the early 80’s.

    It also means increased incomes and your mortgage balance reduced by 5, 10, 20% every year in real terms. People on the edge will be in jeopardy, but if you can hang on to the place you’ll be in good shape.

  56. I see another Barrie bro went into receivership to the tune of $20 million out in a Sooke waterfront condo development. Did they both skipp math class ? Will be interesting to see if it’s a canary in the coal mine for all those other hot shot developers in town. I thought the wave of boomers were rowing their own boats to get here to the island life before everything sells out ?

  57. Why would high inflation be bad for RE?

    5, 10, 20% inflation would surely mean something like 5, 10, 20% interest rates as in the early 80’s.

  58. Expect 5, 10, 20% inflation and a sharply debased US dollar, both of which will have a huge spillover effect on Canada — very negative for RE.

    RE is an inflation hedge. Why would high inflation be bad for RE?

  59. Poloz says there are 720,000 households with debt in excess of 350 per cent of gross income. It might take only a small dip in the market to set off an avalanche.

    The IMF says Ireland’s unemployment rate of 13% is false, the real rate including those in search of a full time job or those who’ve given up looking is now 24%. Wonder what the IMF makes of Canada’s unemployment stats.

    http://www.independent.ie/business/irish/forget-parttime-jobs-real-unemployment-rate-is-24pc-says-imf-29358808.html

    Any increase in the Fed rate tomorrow will be for the purpose of allowing the Fed room to cut during the run-up to 2016 the elections, while pretending that it signifies a strengthening economy.

    The real turbulence will hit if Trump wins the Republican nomination, and even more so if he wins the election. Expect 5, 10, 20% inflation and a sharply debased US dollar, both of which will have a huge spillover effect on Canada — very negative for RE.

  60. Can’t keep living in the past Mike. As Leo stated, it’s just a party name not a similar political policy. As a bull with too much leverage I would be awake at night wondering what JT has planned next. He’s a do’er not a watcher as we can all see.

    The message his government has clearly implied is the prices and debt loads can’t keep at the pace you keep salivating about on a daily basis, or everyone is going to have their ass handed to them on a silver platter.

    I tend to think their actions are too late and debt loads are at the point of no return. We’re in a global world now with many more outside risks then previous market tops. This junk bond market liquidity problem has a serious chance of spreading to the credit markets.

  61. The Libs (trudeau) were in power in the 70s when prices went up ~5-fold, and then again for the 00s run up until ‘06.

    I think the actual actions of the current government speak louder than what happened 45 years ago during a government that just happened to share the same name.

  62. I find it strange how the bears are now grasping at the Liberals to keep a lid on prices. The Libs (trudeau) were in power in the 70s when prices went up ~5-fold, and then again for the 00s run up until ‘06.
    Not that governments have much control over markets, but if you’re a bear, I would think the last people you want governing are the Liberals.

  63. Don’t say they didn’t warn you. What do they know that we don’t ?

    Bank of Canada still wary rising debt, high home prices could lead to housing market ‘shock’

    “OTTAWA — The Bank of Canada has piled on more concerns over the country’s housing market, warning that rising household debt and regional price imbalances could lead to a “adverse shock” to the sector.

    If those vulnerabilities remain, the central bank said Tuesday it was concerned that could lead to a major squeeze on homeowners’ ability to service their debt and “cause serious and broad-based declines in house prices.”

    http://business.financialpost.com/news/economy/bank-of-canada-still-wary-rising-debt-high-home-prices-could-lead-to-housing-market-shock

  64. Coming next, new foreigner buying rules to slow the HAM down from buying their way in to Canada plus rising mortgage rates. It’s obvious the new government won’t sit back and let Harper’s bubble expand any further.

    You forgot to put at the 2009 low how Harper flipped $90 billion of risky mortgages off the banks to the taxpayers so banks could keep the bubble alive. Only reason we didn’t tank like the US.

    http://www.macleans.ca/economy/business/the-real-canadian-bank-bailout/

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