Months of inventory or sales to list: which is better?

Ahh, always back to your semi-hostile different way of knowing in trying to interpret things that aren’t actually written to fit a your view of what must be. However, your not so vague trolling attempts are always worth a chuckle… I hope your day is going well.

Noticed you left out the part of my reply pointing out how ridiculous your logic in your previous post was (you refer to this as trolling), but glad you’re having a chuckle

“Whatever happened to people just loving their house because it is their home with memories of friends and familly?”
“
“
TV home shows for one thing made people feel that their current homes were inadequate. Then people stated looking at their homes as an investment rather then a place to live. I for one would welcome a very large correction in home prices or a capital gains tax on peoples PR to reduce our obsession with real estate.

Since a lot of people in the last decade sacrificed saving and investing in order to obtain a house, selling becomes their only option when hit with hardship.

Someone that bought within the past decade has been building equity in their home and is most likely also saving and investing. Buying in the last couple months, sure there are probably some people desperate to hold onto the home they live in so I would imagine they’ll do anything to keep it, not sell. I can’t say I understand the moral high ground you seem to be standing on recently because you have down payment and some investments (again, who doesn’t?) as interest rates rise. You seem to be one of those people that thinks they can time the market, so good luck I guess. Looking forward to the triumphant update this summer that you’ve bought a home and are only a decade behind those that “sacrificed” saving and investing…

I would say 60+% of homeowners have no intention to sell their properties because rates are going up. 30+% of the renters are content with their accommodations, which leaves a small percentage of investors, flippers, etc.. that may want out. I don’t think they represent a large enough contingent of owners that can move the market significantly. Maybe for a few months at best. Property is not like equities that can be dumped onto the market in one day. Unlike property, equities have little use, especially when they are out of favor.

There are a few contradictions in that one. So, if 60% won’t be selling, you don’t think a number up to 40% selling would be significant? (I am not saying either number is accurate) Not sure the where the point was going on the 30% of renters staying put? Do you mean rents stay consistent for the investors or that 70% of renters are looking to buy to take up any listings? As for properties not being equities, that factor results in the opposite of what you asert, the illiquid asset (a house) stagnates on market as other listings join it because the cash strapped person has no choice due to increasing costs. This building listings and inventory. Since a lot of people in the last decade sacrificed saving and investing in order to obtain a house, selling becomes their only option when hit with hardship.

I would say 60+% of homeowners have no intention to sell their properties because rates are going up. 30+% of the renters are content with their accommodations, which leaves a small percentage of investors, flippers, etc.. that may want out. I don’t think they represent a large enough contingent of owners that can move the market significantly. Maybe for a few months at best. Property is not like equities that can be dumped onto the market in one day. Unlike property, equities have little use, especially when they are out of favor.

Disagree, you don’t know what people would do when things don’t go their way. Victoria market hasn’t experienced a meaningful sustained rate increase in a very long time. It’s like the stock market when people say “I love this stock, if it goes down then its on sale and I just buy more”, when it actually goes down for real then more time than not people would just sell.

For people that bought say 10 years ago and and can cash out with close to a million dollar gain now, if they see prices start to trend lower with no end in sight, do you think they will all hold tight and not cash out to pocket the gain now?

Keep in mind last year at 1,333 other than 2020 (covid lockdown) was the lowest new listings in 15 years so we are 12% higher than a very low baseline, aka new listings not flooding the market as one would suspect with interest rates going up.

I find that Victoria prices are slow to adjust both ways, we were behind the 8 ball compared to Vancouver, Toronto when prices were increasing in 2016-2017 and 2020/21, we were also slow with the price declines in 2018/19 so I bet we are just slow to the current decline too. Toronto market experienced what we are currently experiencing in late Feb/March. I bet if all things staying the same and we get the next 50 bps hike in June then we are going to see some serious build in inventory.

Why would increasing interest rates induce an increase in new listings?

Folks that were planning on selling see the potential for flattening or declining declining values bring their sales forward. Investors planning flips see carrying costs increasing, but their potential end sale price dropping. Folks that planned to rent properties that factored their costs on 1 year variables that were below 1%. People that maxed out their HELOCs and now are in a debt trap and need to sell to hold off a default. And more…..

Millenialhomeownerx2

“The loss would have been far greater than 191k when you factor in property transfer tax, realtor fees, legal fees.”

Sorry, I added $1000. for a flat fee commission service and didn’t factor in the other costs. You’re right … ouch.

The loss would have been far greater than 191k when you factor in property transfer tax, realtor fees, legal fees.

997 Amblewood sounds like a relationship problem necessitating the property to be liquidated. This is one of the ways properties come up for sale. My current tenant recently sold her property due to marital problems and was thankful my property became available in her neighbourhood.

997 Amblewood sold for 1.81 M in 4 days.

As Leo stated:
“Listed February 16th at $1,595,000
Sold feb 22 for $2,000,000

Listed May 12 for $1,788,800. Offers on the 16th”

So those sellers took a loss from a few months ago. I wonder what happened to make them sell so quickly.

Hello, Thanks for the interesting read.
Would someone be able to tell me what 679 Vanalman Ave sold for? Thank you!

Why would increasing interest rates induce an increase in new listings?

Keep in mind last year at 1,333 other than 2020 (covid lockdown) was the lowest new listings in 15 years so we are 12% higher than a very low baseline, aka new listings not flooding the market as one would suspect with interest rates going up.

We were still losing listings 2 months ago. A reversal is news.

I don’t think it’s any cheaper in Toronto. So why are prices falling there?

I think we once played the game “What does lumber cost at different Home Depots across Canada?” and learned that the price is uniform.

The MLS HPI benchmark would not be affected by sales mix changes so look at that

As I understand it, the definition of the benchmark home changes over time, including size of home and land size.
They review the model each year. https://www.crea.ca/wp-content/uploads/2016/07/HPI_Methodology.pdf

Do you have any data on if/how the benchmark home parameters have changed over time? People assume the benchmark compares apples to apples but maybe the benchmark home is getting smaller w/less land, but might have some better features too?

As has been pointed out on this forum, buyers had the option of getting a 10 year term at historically low rates which would have virtually eliminated interest rate risk.

Right. It would still be a good move – looks like 10 years are about 4.75%. https://www.ratehub.ca/best-mortgage-rates/10-year/fixed
There are lots of people who prefer variable rates. but they are (hopefully) financially able to withstand high rates. If rates higher than 6% would mean that you’d be unable to pay your mortgage, and losing your home would be a big deal, I think it’s a smarter move to lock in the rates for 10 years.

But I honestly hope that we dont see 6 much less 8, but since Scotia is already past 4.5 then I cannot honestly say that six is out of the question.

Barrister,
Yes, I don’t think there’s any good news in interest rate hikes above the “neutral range” of 2-3%. I don’t think many people would be happy to see homes opening up because others are losing them to foreclosure. Thanks for the discussion.

What appears to be falling prices may be due to a slow down in sales of expensive homes. Without the multimillion $ homes sales, overall averages appear much lower. If the average drops from 1.5 million down to 1.2 million, that doesn’t mean areas where the houses were selling in the 1.5 m range, are all of a sudden selling for 1.2 m. A more in-depth analysis needs to be done by neighborhood. It depends what kind of spin one wants to put on raw data. Expensive homes don’t even have to sell for less money, just at a much lower number of sales, which would also skew an average downward. Averages can be deceiving.

Sheet of OSB $43+, there ain’t no way housing is dropping in any significant way.

I don’t think it’s any cheaper in Toronto. So why are prices falling there?

a) they’ll give you a % at their cost or slightly above it as not to risk their portfolio

Ha. Banks take a haircut? Unlikely. More likely they increase amortizations so to reduce payments but actually earn more interest over the life of the loan.

d) a simple rule of thumb, very rudimentary, is for every 1% mortgage rate increase, expect a 3.0%-3.5% decrease in RE values.

I’ve never seen this – most ‘rule of thumbs’ say 1% increase in rate and a 10% drop in price. But that rule was around when mortgages were 4 or 5% percent so a 1% increase was a 25% percent increase in interest payment on a smaller loan. Now we have million dollar loans at 1.50% so a 1% increase is a 66% increase in interest. Could make an argument it’s more than 10% now imo (if u believed that rule in the first place.). These things get even more difficult to predict once you add in things like qualifying rates.

@Debt Monster

Absolutely does. The builder that I bought my first home from bought down the mortgage rate by 3%. He had already dropped his price by 45%

I’m starting to think Debt Monster is Hawk after all.

Patrick, I spent over thirty years working on Bay Street and it is not a catch phrase for just the banks (although it includes the banks). it is the markets and the corporate law firms and the private finance as well as major corp headquaters. There are major investment houses involved as well. Sorry, but you are absolutely mistaken if you think the term refers to just the banks.

Nobody, and especially me can predict 5yr mortgage rates but you must appreciate that the banks projections are somewhat tailored to create perceptions. Some of my friends are extremely knowledgeable but nevertheless it is still guesswork.

But I honestly hope that we dont see 6 much less 8, but since Scotia is already past 4.5 then I cannot honestly say that six is out of the question.

Well, considering Scotiabank’s mortgages are already over 4.5%, I would have to suggest that the market won’t crash at that rate but they are certainly starting to turn over.

Thanks for the reply DM.
We have actually found “common ground”. If your prediction of 8% mortgages comes to pass, I share your view of a crash coming to house prices. And if we get 4.5% mortgages, there’ll be no housing crash.

fwiw,
—- An 8% mortgage costs 70% more per month than a 2.5% mortgage.
— An 8% mortgage costs 40% more per month than a 4.5% mortgage.

I haven’t seen any mention on HHV about the BC government’s plans for a new museum and the $800million dollar price tag for that

Guessing the actual costs will be 30 to 50% higher by the time it’s done, and it will take several years longer than they anticipate. I also wonder what kind of museum they are going to make – one that shows representative aspects of history in a interesting and factual manner while having a little fun, or one that’s primarily focused on “the message”.

In any case, I think health care is a greater, almost emergency priority at the moment…

Went to Home Depot today. 2x4s $13.00+. Sheet of OSB $43+, there ain’t no way housing is dropping in any significant way. It probably costs double to build a house from a few years ago, if you can source some of the necessary fixtures. I’d put money on it. With today’s shortage of inventory and plenty of affluent buyers, if anything, prices will rise.

> I absolutely never said that the banks were predicting rates of 6 to 8%. Perhaps you might want to read my post more carefull

Well, here’s what you said
“For the moment, the talk on Bay Street is to expect six to eight by the beginning of next year. That is what I am hearing from TO.”

… and as we know, the term “Bay Street” is the catch word term for the Financial District with the 5 banks
https://www.investopedia.com/terms/b/baystreet.asp#:~:text=What%20Is%20Bay%20Street%3F,the%20U.S.%20financial%20services%20industry.

What Is Bay Street?
—Bay Street lies at the heart of Toronto’s downtown business district and is often used as a catchword for Canada’s financial industry, just as Wall Street has come to be a shorthand for the U.S. financial services industry
—The area around Bay Street houses five of Canada’s main banks: the Bank of Montreal, Scotiabank, Canadian Imperial Bank of Commerce (CIBC), Toronto-Dominion Bank (TD Bank), and the Royal Bank.
—- When individuals refer to Bay Street, they are typically referring to economic and financial topics in Canada.

Debt Monster,
Thanks for the reply, but you didn’t answer my question.

My question was
– if you are wrong about MORTGAGE rates rising (to say 8%), and instead they only rise to 4.5% (as some others are predicting)…
Q. Are you still predicting a house price crash?

Increased prices increase demand…Until they simply aren’t able to pay.

You certainly are consistent, sir. “You’re wrong,” or, “You’re right, except you’re actually wrong,” or in the case above, “you’re wrong, except you’re right”.

You do like to simply contradict people, haha. Reminds me of one of my favorite Monty Python skits, “Argument Clinic”…

I might be alone in believing that it wasn’t really interest rates that killed the housing market then, because prices were exploding upwards as rates got higher; even soaring past 17% it showed no sign of slowing down.

People were resorting to increasingly desperate measures to compensate for the higher rates – e. g. financing from parents, buying with a partner (which I almost got into). Housing was considered to be the only safe haven from inflation. Eventually they ran out of tricks. Sound familiar?

The point is just because higher rates didn’t sink the market immediately it doesn’t mean that higher rates didn’t sink the market. It’s always about affordability.

October 1981 arguing for a cap in the tax free gains on a house.

When we were looking for those articles, one of the things that stuck me was the range of debate there was on policy solutions to high housing prices. A lot of very clever people with all kinds of ideas – build supply, reduction of red tape, rent controls, new taxes, you name it. It wasn’t really different than the discussion we have today, other than this time around it’s been going on quite a bit longer.

The point is, in the end, the market died of its own volition. Few of those policies were implemented in the end, and they weren’t needed either. We have the same conversation every market top, like we’re experiencing it for the first time.

I might be alone in believing that it wasn’t really interest rates that killed the housing market then, because prices were exploding upwards as rates got higher; even soaring past 17% it showed no sign of slowing down. There’s several articles I recall finding (you might even have them still) that specifically mention, with apparent bewilderment, that despite steeply climbing rates the housing market appeared to be unstoppable. Until one day, the lights just went out.

Market exhaustion is a powerful thing…

To be clear, my post of the 6 banks projections was only in response to a poster saying that the Bay Street banks are predicting rates of 6-8% in a year. Because that is just factually wrong, as they are predicting 3% BOC rate as I showed.

Yes of course noone knows the future, and that is especially true for rates and inflation. So feel free to accept 8% rate projections from Debt Monster, and ignore the consensus of 4.5% 5-year rates from the 6 big banks.

But our discussion of rates and housing should at least not accept the false statement that the 6 banks are predicting rates of 6-8% in a year.

The issue with any projections right now will be accuracy because of the current state of uncertainty driven by inflation.

The even bigger issue is almost no interest rate forecast from any major Canadian think-tank in the last 15 years has turned out to be remotely close to accurate. There’s no reason I can see to suspect that anything has changed.

Those projections that are being posted are worthless IMO, and going back and forth on it is debating in a vacuum. Expect uncertainty. Expect market manipulation by central banks. Pay down debt. Don’t use your house as an ATM. It’ll be what it’ll be, regardless.

“While we’d love to have a “Bay St whisperer” here on the board, how’se about something more credible next time?”

I’m kinda believing the Bay St whisperer as the Big 6 predictions for interest rate projections from just over 4 months ago seem to be well off target. Let’s call it fluid.

http://www.canadianmortgagetrends.com/2021/12/2022-housing-and-interest-rate-forecasts/

2022 real estate and interest rate forecasts
Steve Huebl·Real Estate
·December 29, 2021
2022 Housing and Interest Rate Forecasts

Interest Rate Forecasts

Below are the latest rate forecasts from the Big 6 banks. Averaging the forecasts, the Big 6 banks expect the overnight rate to rise about 1% by the end of 2022, meaning four quarter-point rate hikes by the Bank of Canada.

Looking ahead to the end of 2023, analysts from the big banks are calling for an additional three rate hikes, bringing the overnight rate to 1.75%.
Target Rate:
Year-end ’21 Target Rate:
Year-end ’22 Target Rate:
Year-end ’23 5-Year BoC Bond Yield:
Year-end ’21 5-Year BoC Bond Yiel
Year-end ’22

BMO 0.25% 1.25% NA 1.45% 1.80%
CIBC 0.25% 1.00% 1.75% NA NA
NBC 0.25% 1.50% 1.75% 1.40% 1.90%
RBC 0.25% 1.00% 1.75% 1.25% 1.65%
Scotiabank 0.25% 1.25% 2.25% 1.50% 2.05%
TD Bank 0.25% 1.00% 1.75% 1.35% 1.90%

Meanwhile, the bond market is maintaining its forecast for more aggressive rate tightening by the Bank of Canada.

As of Tuesday, it is still fully priced in for five quarter-point rate hikes by the end of 2022, which would bring the overnight target rate to 1.50%.

Bay Street is to expect six to eight by the beginning of next year. That is what I am hearing from TO.

No, “Bay Street” isn’t “expecting six to eight by the beginning of next year”.

The six big Canadian banks (“Bay Street”) all provide detailed, current projections of where they expect rates to be for the next two years. All of the banks project the BofC target rate maxing out at about 3% (it is currently 1%), with the 5year bond around 2.8% (it is 2.78% now) . That would put 5 year mortgage rates around 4.5% max

Here’s a link to the projections of all the banks, if you click on a bank, it goes to the bank’s web page, where the economics department provide more details. https://www.canadianmortgagetrends.com/2022/05/the-latest-in-mortgage-news-boc-rate-hike-expectations-grow/
For example, here’s RBC (current May 2022 projections for 2022 and 2023) , with 2.5% BOC rate by Dec 2022 and then staying flat “pausing” until at least December 2023. http://www.rbc.com/economics/economic-reports/pdf/financial-markets/rates.pdf

That is what I am hearing from TO.

While we’d love to have a “Bay St whisperer” here on the board, how’se about something more credible next time?

Bay Street is to expect six to eight by the beginning of next year.

Let hope it doesn’t happnen, because that translate to many SFH will face $5K/mo or more payment when renew in 1-2 year from now, north of $6K/mo in 3-4 years, and well north of $7K/mo in 4-5 years.

IMO, the melt down would drop your house value 35-50%, and unemployment run between 12% and 18% on the island like the 80s.

… the likelihood of government stepping in to help by getting rid of the stress test or increasing AM is likely if ppl start losing homes like 2008 …

Getting rid of the stress test wouldn’t help someone that cannot pay their current mortgage. Unless you are implying that the stress test is preventing existing homeowners from refinancing and consolidating their non-mortgage debt and that would help them keep their house…

If a mortgage is insured the bank will renew. As long as the payments keep coming they’ll be happy, that what they loaned the money for.

If the owner can’t make the payments that’s another story, but I think most will cut everything else first. However walkaways do happen when a property is underwater and the owner doesn’t see the point in continuing payments. But that happens a couple of years into a bust at which time the decline is baked in the cake. For example the US market peaked in 2006, but things didn’t get really nasty until 2008.

lol look at the mortgage deferrals that was introduced during COVID.

I agree the likelihood of government stepping in to help by getting rid of the stress test or increasing AM is likely if ppl start losing homes like 2008 in the US; however the one difference in your comparison is during the pandemic the government told people they couldn’t work. If it wasn’t for government people would have continued working and would have been able to make their mortgage payments but government forced them to shut down for the greater good. They were obligated to help in that scenario IMO. They MAY not feel that way if they have to increase rates due to inflation – then it’s more indirect. Pandemic was (hopefully) a once in a lifetime scenario.

In March, though, Canada’s housing market still had only 1.8 months of inventory, meaning it would have taken less than two months to sell all listed properties at the prevailing rate of sales activity. While that was up from an unprecedented 1.6 months in the previous three months, it usually takes at least six months of inventory for conditions to resemble a buyers’ market.
.
But in some particularly overheated areas, like the Greater Toronto Area, even the moderate market slowdown seen so far has already caught out some sellers. These are often homeowners who bought a new property near the peak of the market and now can’t sell their old home for as much as they expected, said Daniel Foch, a broker and real estate analyst at Foch Family Real Estate.
.
Another source of stress for some who are closing purchase deals now: Appraisals commissioned by lenders are coming in far below the contract price buyers committed to earlier this year, according to Mr. Foch. Low appraisal values usually mean buyers won’t be able to borrow as much as they need from the bank they had lined up for the mortgage. The options, then, are to pony up a larger down payment, borrow from friends and family or line up a private mortgage to bridge the gap, Mr. Foch said. As the market cools, though, it’s getting harder to find lenders for such deals, he cautioned. Buyers who walk away from a purchase agreement typically forfeit their deposit and may face a lawsuit, he added.

https://www.theglobeandmail.com/investing/personal-finance/household-finances/article-cooling-housing-market-gives-some-leverage-back-to-homebuyers/

Most are getting by on a shoestring budget.

People on shoestring budgets shouldn’t be getting mortgages, let alone substantial ones…. I guess that’s the problem with the gift down payments, folks that weren’t able to demonstrate a financial capability to save ended with mortgages that they shouldn’t have gotten. Fixed mortgage rates are now in the mid 4% range of so 8% isn’t that far fetched by the end of summer or fall now especially for the higher risk shoestring types.

I don’t interpret that as them saying they will let inflation run rampant if housing activity drops a lot. My interpretation is that they will watch housing carefully to see if there’s a big crash in activity that could cause an overshoot from rate increases. Housing works on a lag, so they don’t want to be in the situation where they keep raising rates too quickly, housing crashes, and we get swept into a deeper recession than they wanted due to the knock-down effects. Unless I hear them specifically say that if housing activity crashes we will abandon our inflation targetting mandate, then I think this is more likely.

The BOC speech didn’t say they would abandon the inflation target. What they did introduce as new policy (they referred to it as a “nuance” in their policy) was the idea of a “pause” in the rate rises when they get to the 2-3% range, if the housing sector is slowing.

I expect that they’ll find some excuse to do this “pause” at 2-3% , if it isn’t a housing slowdown it will be the economy slowing. It is disappointing that they are thinking like this, because most central banks (like the USA) are saying that the rates need to rise fast until inflation is stopped and they certainly don’t mention pausing if the housing market slows.

The reality was only a few percent of folks in some states ran into trouble, but the effects nationwide on the credit market were almost globally catastrophic.

That was a direct result of securitization of risky mortgage loans, as is well known. It’s also well known how mortgage debt in Canada is handled, namely that risky loans are backstopped by CMHC and the “private” insurers. Financial institutions just don’t have the kind of exposure that would get them into trouble as the result of a bust. Didn’t happen in the Toronto bust of late 1980’s-early 1990’s which was huge. Serious recession in Ontario, but no financial crisis.

Certainly there would be a knock-off effect from a housing decline on other sectors, but as has been discussed that appears to be part of BoC’s calibrations. I do not believe that BoC is going to abandon its CPI inflation target just to keep the RE market from taking a hit. Whatever it takes will happen.

Local Fool

” The reality was only a few percent of folks in some states ran into trouble, but the effects nationwide on the credit market were almost globally catastrophic.”

Okay, my friend let’s try this differently.

Mortgage rates at 8% would be a huge problem for B.C. and Ontario. It wouldn’t be the same problem in any other province by any stretch of the imagination.

Therefore, the upcoming housing crash in Ontario and B.C. will not result in a national crash.

you are projecting the sky high prices and speculative fever that was rampant in B.C. and Ontario as nationwide

No, I wasn’t. That’s like supposing that in 2008, because homes in Los Angles, Phoenix and New York were overpriced but homes in North Dakota, Delaware and North Carolina (you can insert most other states) were not, the housing crash in the US only mattered for New York, Arizona and California. The reality was only a few percent of folks in some states ran into trouble, but the effects nationwide on the credit market were almost globally catastrophic.

What actually matters is how much housing activity in aggregate, and its supporting industries, comprise the national GDP. Right now, RE selling, buying and leasing is a double digit percentage of GDP, and that doesn’t even count those peripheral, supporting industries. Therefore, a reduction in that sector of the economy means an outsized effect on the national economy including less credit nationwide, fewer job opportunities, less wealth generating activity, and less taxation revenue. This, is on top of what could become crippling debt levels for a relatively small but still potent segment of the population. Like in the US, it won’t matter for the country whether those folks live in BC, Ontario, Manitoba or PEI, although RE values will not correct to the same degree from one region to another, just as has happened in the past. BC and Ontario historically bear the brunt of RE price escalation and retrenchment.

Basically, let them burn!

It is observations like these that make it sound like you are hoping for a crash and will enjoy watching it.
If you are here to just warn people as you you would not be using rhetoric like that.
Also if a correction is to come in these high priced markets of 20-40% from peak prices bringing them more in line to the rest of Canada, this would just bring us back to price levels from about 4 years ago. Hardly a bonfire.

From earlier: “But that’s not going to happen to a company like Telus. Telus has earned about $1 USD/share forever (2010-2022). It’s share price has tripled, yet it’s earnings have stayed the same.
The shares have tripled ($8 – $24 USD) because people are seeking high dividend stocks, and Telus fits the bill.”

Shares purchased near the beginning of the above time frame at an actual cost of C$37.36 were subsequently split twice. So the number of shares held were quadrupled and the apparent cost per share was reduced to C$9.34 The current annual dividend is C$1.3544 which produces a dividend yield of 14.5% against that original cost, and a current dividend yield, for a present day purchase, of 4%.

The reported current profit per share can also be quadrupled when compared to the profit per share at the beginning of the above time frame. Patience can be a profitable virtue…

Lots of good points being shared about RE (asset) prices and interest rates. But cause and effect of this occurred way BEFORE the pandemic and alarms bells were being raised in World economic/finance circles!

This article from 2018 sheds light of how society as a whole, especially our neighbours down south have created a mess…that IMO will be IMPOSSIBLE to get out of – short of a revolution. There are no conclusions, but mere warnings from 4 years ago.

https://indepthnews.net/index.php/sustainability/peace-justice/1811-g7-fiscal-monetary-policies-are-ticking-time-bombs

Since 1971, when President Richard Nixon ended unilaterally the direct international convertibility of the American dollar to gold, the US, which continues to enjoy the “exorbitant privilege” (of printing its currency and paying other nations for goods and services bought from them), has become the epicentre for the unsustainable monetary policies without any concern for its ballooning twin deficits.

Thus, the G7 monetary policies “are a common factor to most of the speculative excesses observed in bonds, stocks, and real estate.”

The flawed monetary and fiscal policies being implemented by the G7 countries are contributing to the twin dangers of “the global warming time bomb” and “war,” Hannoun and Dittus said.

HOW TRUE the author’s last point from the Secretary General of Bank of Int’l Settlements (BIS)

The economy is bigger than the housing market and inflation is bigger threat to the economy than the housing market giving back 2 years artificial gains that arose from a crisis intervention. The anomaly was the pandemic gains and not a new norm because it came from the public subsidizing private debt. Guess what! Even if the BoC stops it’s rate increases (which it won’t) mortgage rates will continue to climb across the board because BoC and CMHC are no longer purchasing billions in bonds from lenders to subsidize low lending rates. At this point, the BoC rate is more symbolic and psychological for the public. If it doesn’t increase, lenders will just change how the peg their prime rates and their variable rate formulas to account for what they need to sell their bonds for on the market. Someone has to want to buy your mortgage, and look at what returns you can get on bonds now. So, why would someone want to invest in low yeild mortgage debt? The solution, increase the yeild (mortgage rates) to get investors to buy it…. So, unless there’s going to be new rounds of QE, just get use to paying more on all debt.

With 68% of voters owning homes, and the other 32% wanting to own homes, this would be just a case of cynically giving the voters the interest rates they want

That’s exactly why the BoC is independent of the government. They don’t have to worry about votes.

VicREanalyst:

“Unfortunately we are tied to the Fed, I can see BoC raise rates while CMHC bails out existing primary residence mortgages in trouble so people don’t lose their homes.”

You are very right and very hopeful. CMHC won’t be bailing anyone out simply because they are providing insurance to the banks. Let’s see, do we bail out Joe Blow who has an $800,000 mortgage on a $600,000 home or do we simply let nature take it’s course and make sure the bank is made whole. Uh huh.

” Primary residences are Canadian homeowners biggest single asset and component of their net worth.”

…. and I’m retired, don’t use my home as an ATM and other than a “dick measuring contest”, what does the value of my home mean?

“Do you seriously expect people to believe that you are cheering for the home you own to lose its value by 50%?”

See above, but you have not seen me “cheering” on this blog. I’m simply warning anyone that wants to listen what’s coming down the road.

this would be just a case of cynically giving the voters the interest rates they want

Or, dole bailouts again to juice the housing market if they trip up and went overboard with rates.

Like I’ve been repeating on this board over and over – central banks are not going to get far with their quaint little pretense of back-to-normal, regardless of the forcefulness of their rhetoric or the moves they’ve made to date. In Canada, it’s not very complicated: You trip up housing, you bust the economy – and they know that.

RIght. And if you read the BoC speech, they might pause the rate hikes at 2-3% with just a slowdown in the housing sector – irrespective of house prices. I think it will be easy for them to spot and declare a “slowdown in the housing sector”, and they will be done with the rate hikes, despite ongoing inflation. With 68% of voters owning homes, and the other 32% wanting to own homes, this would be just a case of cynically giving the voters the interest rates they want

Lol It’s not an asset. It’s a home, my friend. Thinking of your home as an asset has led to the Heloc revolution.

Do you seriously expect people to believe that you are cheering for the home you own to lose its value by 50%?

” Lol if you are mortgage free then why are you cheering for an event that will see your asset depreciate by 50%?”

Lol It’s not an asset. It’s a home, my friend. Thinking of your home as an asset has led to the Heloc revolution.

I don’t think the BoC is in the habit of casually deciding to abandon their mandate in a random speech

Well no, it wasn’t some random speech – that’s not how the BoC works. And he’s mainly talking about slowdown in the housing sector, which is a much broader category than house prices. It was from Gravelle (Deputy Govenor). And transcript was released on the BoC site as an official release 11:35 pm Thursday night. And he leads off his speech by telling you that this will describe the BoC policy response to rising rates when he says “Finally, I want to talk about what our policy response might look like going forward. But here’s where I want to discuss some of the nuances of the future path of interest rates.”

He is clearly speaking on behalf of the BoC, as he refers to “we” and “us” throughout. Then he talks about the “neutral range” where the BoC rate is 2-3%. And then he says that if there is a big slowdown in “housing activity” they might pause the rate hikes. If anything stops inflation, of course he would stop the rate hikes. But that’s not what he’s saying. He specifically specifically singled out slowing housing activity as a separate reason to stop (pause) rate hikes, and that this would be a separate reason than inflation stopping. He describes the BoC policy response that if inflation is still high, but “housing activity” is way down, then the BoC could pause their rate hikes in the neutral range, which is 2-3% Note that all his references are to “housing activity” – which, although related to house prices, is a term describing a bunch of factors like housing sales, construction, employment, building permits, new mortgage activity etc

The transcript is here….
https://www.bankofcanada.ca/2022/05/the-perfect-storm/

“First, what might lead us to pause our policy rate increases as the rate enters our estimated range for neutral of 2% to 3%? One reason would be if price increases reversed course. Commodity prices could start to decline, especially if the war in Ukraine is resolved. Another reason is related to the bullwhip effect. Spending habits shifted dramatically into goods and out of services at the outset of the pandemic. But now the economy is almost fully open. Because of this, spending on goods could decline faster than we expect, just as goods supply and inventories finally expand. Faced with excess supply, retailers and manufacturers could put large discounts on goods. This too could reverse observed price increases.
Another factor that might lead us to pause is that many households have taken on more debt to get into the housing market. At the end of 2021, the household debt-to-income ratio was 186%, above the pre-pandemic level of 181%. And rising interest rates are designed to slow the economy by making borrowing more expensive. That tends to slow sectors like housing. But this slowing might be amplified this time around because highly indebted households will face high debt-servicing costs and will likely reduce household spending more than they would have otherwise. Our base-case scenario includes a slowdown in housing activity. But we could see a larger-than-expected slowdown due to higher indebtedness and unsustainably high housing prices.”

It appears that rising interest rates have also solved global warming. The weather has been horrible across Western Canada. April was entirely a winter month, complete with blizzards, freezing temperatures and record snowfall in Saskatchewan and Manitoba. Now we’re flooded out with no relief in sight. If farmers can’t plant soon, food costs are going to skyrocket (they already are). Raising interest rates isn’t going to help with food shortage price increases.

prefer to buy a home for $500,000 @ 8%.
They will have to wait several months for that.

No harm in waiting a few months to buy in Victoria right now. Market conditions (for buyers) are bound to improve somewhat. But I hope no one is deluded enough to think that a median SFH in Victoria will be available at $500 K in “several months”.

would you be able to afford a house if they were now $800k instead of $1.6M but mortgage rates are at 8%?”

What were house prices the last time rates were 8%? Not $800K I think. I’m pretty sure 8% would crater the RE market – and consumer spending – coast to coast. Which is why I don’t think we’ll see rates that high – I think inflation can be brought under control before that. We could well see 6% though.

” Debt Monster, would you be able to afford a house if they were now $800k instead of $1.6M but mortgage rates are at 8%?”

VicREa analyst, I’m mortgage free but if I was a new buyer, I would much prefer to buy a home for $500,000 @ 8%.

They will have to wait several months for that.

This is only news if you’ve been living under a rock for last 20 years. He just stated the obvious.

Interesting contrast to the Fed, Jerome Powell said yesterday that the mandate is to get inflation under control and they cannot guarantee a soft landing. I wonder if Canada will pause once housing corrects while the U.S. pushes ahead with rate hikes. The CAD is still so weak with oil above $100, seems like USD is the currency to be in. Weak CAD is good for foreign buyers though or “domestic buyers” with lots of foreign assets.

As long as you don’t lose any sleep when it goes from $18 to $9 then back up to $17 and now down to $13.7 then its all gravy. Seems like you got ~50k worth in your TFSA, pretty solid position.

Bought post covid around $11ish….I figured government threats against the industry are all non-sense posturing to give the impression to the public like they are doing something. Government can’t find staffing for desirable clean hospital jobs let alone to privatize and staff retirement residences. Then culturally, in Canada, I figure no way people don’t stop stuff their 85-year-old parents in these places. Swings are wild on Sienna, but the dividend comes every month. Not the safest dividend but they’ve weathered a decent storm.

millenialhomeownerx2

” Seems to me that someone who bought pre-2020 and has a variable is still sitting pretty and enjoyed 2 years of lower payments due to covid, and are now just getting back to ‘normal’.

… or maybe no payments at all. Not so pretty.

” Roughly 760,000 Canadians applied for some sort of mortgage deferral from a chartered bank since the pandemic began. Canada’s big banks control about two-thirds of the mortgage market, so that figure suggests that one out of every six people with a mortgage has opted to defer at least one mortgage payment since COVID-19 began.”

The Deputy Governor would be remiss not to suggest that they aren’t looking at all aspects of the economy during their discussions.

Introvert and Local Fool are absolutely correct in their assertion that the BOC will reverse course but ….well after the bubbliest cities crash.

I’m sure that the BOC has heard all of the blathering from the Toronto Real Estate Board. Prices are dropping $100,000/ month. If Macklem is concerned about that kind of
affect on the housing market then you’ll see him raise interest rates by only 1/4%. Lolol.

There is no doubt that another 1/2% rate increase will be coming on June 01.

” All Canadians feel the cost of this high inflation. Inflation at 5% for a year—or 3 percentage points above our target—costs the average Canadian an additional $2,000 a year. And it is affecting more vulnerable members of society the most because prices of essential items like food and gasoline have risen sharply. This broadening of price pressures is a big concern.

https://www.bankofcanada.ca/2022/05/the-perfect-storm/

” All of this means that our policy rate, at 1%, is too stimulative, especially when inflation is running significantly above the top of our control range. We need our policy rate to be at more neutral levels to help cool demand growth and bring the economy into balance. That’s why we are taking actions to normalize our policy rate quickly and are prepared to be as forceful as needed.”

A TFSA is such a powerful tool. I am setting my 19 year old cousin up with hers and buying her a value dividend ETF. She has 18K of room! And she has so many years to let those dividends reinvest themselves. Compound interest is so powerful when you start young. I only wish someone did this for me when I was 20.

Curious – was 997 Amblewood sold in the last few years? It looks very familiar

Can’t you put the GIC inside the TSFA? How many people have 87k sitting around to max out a TSFA let alone couples at 175k.

I would say a lot of homeowners at least. My husband and I have maxed out our TFSAs and they each now sit at 100+K. However we only did this in the last 2 years using large lump sums. The earlier you max out, buy those dividend value stocks, and turn on the DRIP, the more opportunity your TFSA will swell far beyond the contribution limits. I’ve always though that DRIP in an RRSP or TFSA was a cheat code to wealth generation.

Interest rate trajectory will depend heavily on housing market, Bank of Canada deputy governor says

That policy to limit rate increases if house prices fall too much is absurd. They pretend they care about inflation, but reveal that preserving high house prices is more important.

In the USA the “fed put” refers to the fed history of protecting stock prices by rate policy. Looks like we have a canadian “housing put” version of this, but to protect housing prices.

There are few things quite as patriotic as borrowing against the equity in your primary residence, and YOLO-ing that debt into home renovations, investment properties, and the stock market. And those are the most responsible uses. You’d be hard pressed to find a Canadian borrower who hasn’t quietly consolidated some credit card debt or wiped out a student loan by borrowing against their home equity.
.
The statistics reflect our addiction: Canadians now owe $168.5-billion in HELOC debt. Borrowers took out $2-billion in HELOCs in February alone, the highest single month increase since 2012. For most Canadian homeowners, a HELOC is their own personal ATM, funding everything from personal emergencies to family vacations.

https://www.theglobeandmail.com/investing/personal-finance/young-money/article-helocs-have-us-complacent-and-greedy-about-debt-theyre-now-a-defining/

Cryptocurrencies seem to be getting hit hardest with rising interest rates

Looks like Bitcoin has gone up nearly 20% since 7am today?

Cryptocurrencies seem to be getting hit hardest with rising interest rates. Why? They don’t earn any interest. The conspiracy theorist in me wonders if this is a method to destabilize that market. I’m positive governments hate cryptocurrencies, something they can’t control, even if they think they can. Several have already been near ruin and that will only destroy confidence in all crypto. Talk about heading for the exits.

Something that people who haven’t experienced inflation seem to lose sight of is that having GIS rates 3 percent higher than inflation is very different when inflation is 10% than when it is 2% because you pay income tax on the face value of the GIS return.

The first $1000 of interest income annually used to be exempt.

where an eighty foot high oil painting of Leo awaits for me to grovel before

I have the same magnolious portrait enshrined atop my mantlepiece.

Every Wednesday evening, we have mass to celebrate our Dear Leader. A substantial and revolving floral arrangement adorns the tribute, on either side numerous books describe and celebrate his glorious achievements, including the time he scored 14 holes-in-one his first time playing golf (the next closest record is 11).

We do permit pictures to be taken of the portrait, but it must include the entire length of the image. Failure to adhere to these elementary principles will result in internment at a reeducation camp. Our beneficence means we have historically permitted residents of our magnificent camps to access to the internet to facilitate their reeducation. However, Frank the Tank’s unprincipled and unenlightened posting underscores the struggles some of our “residents” have, and we may be forced to rescind his privileges and “invite” the rest of his family to join him. We won’t give up on you and your potential, FTT.

Glory to the exalted Spalteholz.

You make the types of colourful, simple graphs that most people learn to make in high school, you pass yourselves off as experts, and people have to listen (and grovel) because that’s all there is to base incredibly important life decisions on.

I couldn’t agree more. Every morning, jackbooted thugs from the real estate board kick down my door, force me to read this blog, and then drag me to the town square, where an eighty foot high oil painting of Leo awaits for me to grovel before. I’m at a loss for how we can cast off this tyranny.

Can’t you put the GIC inside the TSFA? How many people have 87k sitting around to max out a TSFA let alone couples at 175k.

I believe you can have GIC inside TFSA, but I think 81.5K is the max contribution currently, and any amount over is subject to 1% tax per month.

As for dividends, all are not created equally. Some are eligible dividends and others are non eligible dividends such as oil & gas.

He said “Might – might be some inflation”, not we’re going to see inflation like we haven’t seen since the 80s.

I think it’s fair to say there was more inflation than Krugman guessed there would be. However, a decent chunk of recent inflation is due to the war in Ukraine, which was unforeseeable early in the pandemic when Krugman made that comment.

I thought you said you were already fully invested. Except for your DP which was in money market.

I never said fully. I said I separated my DP from my investments. That doesn’t count emergency funds, play cash, opportunity money and etc…. I have always been about diversity and remaining agile. So, being able to exploit opportunities when they arise is a part of a balanced approach. That way if it goes wrong on a guess acquiring a declining asset the overall impact is minimized.

Yep, lots of big discount opportunities out there right now. A good time to grab up some value.

I thought you said you were already fully invested. Except for your DP which was in money market.

Claimed they couldn’t get handles, I doubt that was the only reason.

Right. And the inflation isn’t only caused by external factors like supply chain issues. There’s a problem with productivity of existing workers.

“U.S. productivity dropped in the first quarter by the most since 1947 as the economy shrank, while labor costs surged and illustrated an extremely tight job market.”

https://www.bloomberg.com/news/articles/2022-05-05/u-s-productivity-drops-on-weaker-output-while-labor-costs-jump

Output per hour slumped an annualized 7.5% in first quarter
Unit labor costs post largest annual increase since 1982”

We will see.

There’s usually something else bad that happens with inflation – like a recession or two. And that just makes everything worse financially.
As Warren Buffett says “Inflation swindles the bond investor… it swindles the person who keeps their cash under their mattress, it swindles almost everybody”,

James, is that not a fairly reasonable and accurate prediction from Paul? And also aligns with what he is saying in the bloomberg interview posted? Modestly higher interest rates (which is underway) but nothing like the 80s?
I still find it bizarre that people who are hoping to improve their financial situation and buy a home are hoping for something like that to happen. It triggered a recession in the 80s, unemployment skyrocketed and home construction came to a halt. Who is the best position to weather/take advantage of a recession? Those who already have a bunch of money. It’s like people are fixated on the idea that extremely high interest rates will cause house prices to go down without realizing it means prices would go down for everyone, not just them

I don’t think raising rates the way they’re forecasting raising them over the next few months is in anyway “modest”. He said “Might – might be some inflation”, not we’re going to see inflation like we haven’t seen since the 80s. I’d be more than surprised if the rates got to even half of what they got to in the 80s. The steepness of the curve will be similar though.

It’s not hoping for it to happen, it’s planning for, since it’s gonna come regardless as it’s baked into the system.

All the “brilliant “ investors that made big bucks the last several years are watching their fortunes disappear. It’s very similar to the high tech crash of 2000.

I’m nowhere near brilliant and just an average joe who ride coattails on the stock market. Currently I have given back 1/3 of my gained from the pandemic crash, and have purchased more in the last 3 days.

Be fearful when others are greedy and be greedy when others are fearful. — Warren Buffet.

It’s like people are fixated on the idea that extremely high interest rates will cause house prices to go down without realizing it means prices would go down for everyone, not just them

I don’t get this. If prices go down for buyers, they have to go down for sellers too. I think everyone understands this. Anyway, in today’s debt context, I think we would just have to go back to pre-GFC rates of 6% or so to have a similar impact as those 1981 rates, which were about twice the rates of the previous decade.

Also, the 1982 recession was not just about a RE bust, but a commodities bust – particularly for BC and Alberta. If commodities remain strong (think about why) that gives the BoC more leeway to raise rates without producing excessive unemployment.

James, is that not a fairly reasonable and accurate prediction from Paul? And also aligns with what he is saying in the bloomberg interview posted? Modestly higher interest rates (which is underway) but nothing like the 80s?

I still find it bizarre that people who are hoping to improve their financial situation and buy a home are hoping for something like that to happen. It triggered a recession in the 80s, unemployment skyrocketed and home construction came to a halt. Who is the best position to weather/take advantage of a recession? Those who already have a bunch of money. It’s like people are fixated on the idea that extremely high interest rates will cause house prices to go down without realizing it means prices would go down for everyone, not just them

Wouldn’t profits soar for a lot of companies with inflation?

If you find a company with a high dividend yield, and its profits “soar”, then you’ll be fine.

But that’s not going to happen to a company like Telus. Telus has earned about $1 USD/share forever (2010-2022). It’s share price has tripled, yet it’s earnings have stayed the same.

The shares have tripled ($8 – $24 USD) because people are seeking high dividend stocks, and Telus fits the bill.

“ Wow!…4% dividend!. I’ll take that forever, and it sure beats 1% in a GIC. Heck, I’ll borrow against my house and pay 2% HELOC interest to collect 4% dividend all day long as well! ”
Nothing wrong with that, except the reverse process happens on the way down. As rates rise, the Telus 4% dividend looks small, so people dump it and the shares fall.

Chart of Telus earnings (USD)

More than $200 billion erased from entire crypto market in a day as sell-off intensifies

https://www.cnbc.com/2022/05/12/bitcoin-btc-price-falls-below-27000-as-crypto-sell-off-intensifies.html

And it’s ridiculous that someone with degrees in econometrics and finance, quoting a nobel laureate in economics, can be shot down so definitively and with so much support by a computer programmer/realtor making statements about economics.

Doesn’t matter who they are if they’re wrong.
Here’s Paul from the beginning of the pandemic courtesy of Introvert

frank.the.tank….having a bad day? Maybe if you go visit Garth Turner’s blog you’ll feel better.

Rising rates in the early 80s actually crushed inflation (and the economy) quickly. Inflation went from 12% in 1981 to 4% in 1984

Leo, I’m not sure you understand what transitory inflation means, or even “short term” in the context of economics.

And it’s ridiculous that someone with degrees in econometrics and finance, quoting a nobel laureate in economics, can be shot down so definitively and with so much support by a computer programmer/realtor making statements about economics.

People come to you (realtors) for information about realty because you’re the only ones who have it. Period. You make the types of colourful, simple graphs that most people learn to make in high school, you pass yourselves off as experts, and people have to listen (and grovel) because that’s all there is to base incredibly important life decisions on. Get real.

Lots of dividend paying stocks drop in value when there is a safer alternative. People dump them, they all head for the exit at the same time, it can get quite ugly. Most never recover (except the banks, hopefully). I think it’s happening right now. If oil goes to $200 we’ll all starve to death, truckers can barely operate at these levels, there would be no food on the shelves.

because CPI is nowhere near 12.05% to 12.9% CPI

Yes it is, we’re just counting it differently than we did in the 80s.

So I actually went and found an economist (John Williams) who actually calculates CPI the same way they did in the 80s. CPI calculated that way was 16.5% in April.

” Sales in the 2 to 4 mil seem to have dropped off a cliff”

Based on the three most recent sales on Dewdney Ave and the one on Burdick Ave, if 3020 Devon Rd couldn’t sale this weekend, I’d say the 2 mil above market is turning direction.

Sales in the 2 to 4 mil seem to have dropped off a cliff.

Yes, I’ve noticed that the for sale signs are staying up on the expensive houses. In the good ‘ole days (about 3 years ago) it used to take years to sell these houses.

Sales in the 2 to 4 mil seem to have dropped off a cliff.

The average baby boomer household net worth was 1,336,000 in Q3 2021. Check out the chart below. I know my net worth in 1980 was zero. Most boomers would have had a net worth of 0- $100,000 in 1980. My mother’s net worth in 1980 was, I’m guessing, well under $100,000, maybe $20,000. We were never hungry, paid all our bills, I had no student debt, went on vacations, etc…, life was good.

How it’s going

There’s cash flowing real estate available out there? I guess he doesn’t elaborate on if it’s flowing in or out…lol.. or is it that thing where the appreciation is pulled out of a HELOC and then called cash flow? But… What if that HELOC that was flowing cash was put into crypto?

This sums it up: https://youtu.be/qJH2HjQCfZU

Seeing on the social media that some who went in big on bitcoin are now suicidal.

My father was able to purchase a lifetime annuity that paid 21%. He lived 21 years after that. Of course it was still a gamble because inflation really was a day to day concern. Nobody knew if it was going to be Germany in the 30’s.

Another historical financial event in 1981 was the Canada Savings Bond Rates. They were around 12% in 1980 and soared to 19.50 % in 1981. So if you were lucky enough to have sold your home very early in 81 and then went and rented, one could have put all those funds in CSB’s. I remember it was mind boggling. Anyway, as I recall the Feds stepped in at some point in 1981 and started to limit the amount of bonds you could purchase. I think it was around $15K – $25K. Not sure what month they started the limit.

Got my pre-approval mortgage options today…..ewwwww…

Some of the listing in the last few days seem to be widely optimistic or maybe I am out of touch.

Rising rates in the early 80s actually crushed inflation (and the economy) quickly. Inflation went from 12% in 1981 to 4% in 1984

Yes, that’s correct. But mortgage rates mostly stayed above 10% until 1990.
In USA https://fred.stlouisfed.org/series/MORTGAGE30US
And Canada https://www.ratehub.ca/5-year-fixed-mortgage-rate-history
… and fed funds rate was 11.4% in September 1984. https://fred.stlouisfed.org/series/FEDFUNDS

“History of highway 1 through Banff and the Castle Mountain internment camp says otherwise.”

Yes it’s dreadful stuff. It’s truly amazing that the governments of a democratic country like Canada can participate in such mass human rights abuses but they seem to regularly do it from time to time. Difficult times seem to give governments here the justification to commit horrible things against certain groups of people and the people just cheer it. We are not so holy as we would like to believe.

The only concern here is that how long the Ukraine and Russia war will continue, because it will be the main factor that prolong the high energy price, thus inflation.

High energy prices are dependent on Putin being out of power. No chance will Europe go back to funding him even if they do pull out of Ukraine.

the Ukrainian have similar culture and value as Canadian

History of highway 1 through Banff and the Castle Mountain internment camp says otherwise.

Not everyone is deeply in debt.

Certainly not the immigrants, and the Ukrainian have similar culture and value as Canadian that have absolutely nothing to lose with a good work ethic.

Five years from now it will be the Ukrainian bogeymen that take our homes and jerbs!

The buyers might back off, but they might miss a buying opportunity.

Buyers that have found reasons to not buy over the past 5 years will certainly find reasons to not buy over the next 5 too

Maybe the flippers are getting nervous. Investors, if they have been active in the last several years can wait things out or afford to take s hit. They’ve made a ton of money in the last 10 years and some will have no problem renting their property and riding things out. I just don’t see where an influx of listings are going to come from. The buyers might back off, but they might miss a buying opportunity.

If interest rates go to 10%, Canada will be bankrupt given its current debt (1 trillion). We’ll have a choice, debt interest payments or health care..interest rates are not going through the roof.

Don’t have to. Remember mortgage rates were over 9%, and usually over 10% through the 1970’s. The increases of the early 1980’s were starting from a much higher base.

Appears to me that the central banks are betting that a brief, sharp increase in interest rates will reduce consumer demand enough to get inflation under control. If the housing market takes a beating, so be it.