Pressure on Bank of Canada to bailout real estate investors, power of sale | General financial discussion | Discussion forum

Norman1 said
Mortgages are stress tested to the higher of (a) the offered rate + 2% or (b) 5¼%.

Fake drama. Nothing is going to happen until mortgage rates exceed both those rates.

Real estate agents are complaining because sales are down substantially. Unfortunately for home buyers, the prices are not coming down as much as sales. For example, Vancouver sales are down 17% but prices are up 1%.  

Great post. Real estate agents are self-serving and anything they say should be taken with a pinch of salt.

AllanB said

https://financialpost.com/executive/executive-summary/posthaste-the-way-the-housing-market-is-stalling-the-bank-of-canada-may-have-to-hit-the-brakes-sooner-than-expected  

What Norman said in Post #4 ⬆; "Fake Drama".

Any real estate agent worth his/her weight in salt knows that over time, real estate markets have Up sides and Down sides.

Welcome to the beginning of the next 'Down Side' ... Let the chips fall where they may ❗

Dean

P.S.
Any prospective homebuyer who relies Only on the latest mortgage stress-test, does so at their own risk, and potential peril.

My take on this is that both the Fed and the Bank of Canada are not arms-length; they are heavily influenced by the governments in power--which will always do whatever they think they need to do to get reelected. For the past 15 years or so, governments in both countries (and they've been both left and right) have propped up things with low interest rates to keep the coffers filled and the party rocking...and they've been able to do that without worrying about being voted out of power. Now, things have switched. As consumer prices soar, the majority of voters in both countries now think that taming inflation is the highest of priorities, and if governments don't respond, they will be replaced. In other words, for the first time in a long time, the voice (and voting power) of realtors, speculators, and all those who benefited from low interest rates and skyrocketing real estate won't be nearly as loud as the masses who are getting pinched by severe inflation. So I don't give much credence to stories like this in the Financial Post, or the warnings/complaints/whining of those deeply invested in seeing the continuance of low interest rates. Just my take, based on the thoughts I've seen expressed in credible news sources by people a lot smarter and more educated than I am.

cgouimet said

Just curious... What are the credible news sources you trust. Not arguing, just curious ...  

If you're hoping that I can point you to a specific news story that precisely supports what I've written, you're going to be disappointed. Again, what I wrote above is "Just my take, based on the thoughts I've seen expressed in credible news sources by people a lot smarter and more educated than I am." You know this means it's my opinion, based on some supporting analysis in the media, right? Given that, what exactly are you hoping to see? For example, if you'd like me to point you to a story on central bank independence, just search yourself. You'll find a ton of stories like this: https://www.forbes.com/sites/norbertmichel/2019/03/19/the-fed-has-not-been-independent-perhaps-it-should-be-restructured/?sh=90fb61e7888c. If you'd like impartial analysis (in other words, opinions of experts not affiliated to any bank or real estate company, etc.) of why the Fed and Bank of Canada will have to continue with steep interest rate raises, even if it risks recession, I'd suggest the latest issue (and others) of The Economist. If you'd like me to point you to something that compares the unpopularity of interest rate hikes to the unpopularity of not raising interest rates to protect real estate values and stock portfolios, I haven't seen that yet. But common sense tells me that the average working family (the majority of voters) is going to be far more concerned with the prospect of $2.50 per liter gas, or $10 per liter milk, than whether or not the stock market swoons because rates were hiked.

Long time Realtor here, 34 years next month. I have seen a few cycles. I could write a book on it, and maybe I will, but not in this post.

My 2 cents in this thread is, based on my experience, that very few homeowners (not talking investors) have financial hardship because of their initial purchase price/interest rate/ stress test, etc.

The way the system works, any Mortgage Broker worth there salt advises clients in the preliminary meeting to not take on anymore debt and screw up their ratios. So they don't.

Then they move in, lease/buy a new F150, buy new furniture on credit at Leon's, ring up their credit cards at home improvement stores or wherever. Lately, because of rising home values they can get a HELOC if they have been there a few years so they can go on vacation and put in a pool or buy a boat.

This is the problem with cheap money, folks get in over their heads... when short term rates go up.

Bill said
I've been around a while and I honestly can't remember a time when more than a very few folks lost their homes due to economy problems, just hasn't happened in Canada. I remember when $200k was considered to be a crazy price but then it just kept going up and now $1 million or so seems crazy but likely it'll just be the same, soon we'll think $1.5 million is crazy, etc. Maybe different in boom-bust places like Alberta, I don't know, but GTA, etc I can't remember mass defaults ever.  

It did happen in Canada in the early 1980's and IIRC it was called " Jingle Mail" by the media because many people were so far under that they couldn't afford the payments and couldn't sell either because the prices had collapsed so they put the keys in an envelope and mailed them to the bank.

I have been looking for upper end real estate for a few years. I know people living in houses much bigger than mine (and mine is pretty big) who make much less money.

I am waiting for an opportunity to snap up a couple of theses properties when inevitably the current owners will have to sell. When the market shifts to a negotiated closing price then I will jump.

As long as I have to bid on a house I will be biting my time and watching my investments grow.

Opportunity is key, negotiation is the best tool, if the market does not allow for negotiation then the smart investor turns their back.

We are headed for some major negotiations and I feel investors will rescue the housing market.... at a price though, I will bail you out but it will cost you.