House prices 20% overvalued in Canada, Fitch warns

[TheDudeAbides]

This is Canada wide. So I would say it's more like 40% in Kelowna.
http://www.cbc.ca/news/business/housing ... -1.2706388

Cue the Realtors saying Kelowna is different because...reasons.

[the truth]

agree..............

[OgopogoO]

In Kelowna, we're already off the 2008 top by a significant margin. It will get much, much worse. The same real estate cultists who have cheered on this bubble will be the first to deny it when it pops... all the way down. It's not a matter of if, but when. The higher it keeps inflating in Canada's bubblicious centres the more drastic the burst will be.

Millions of Canadians who overleveraged themselves with mortgage debt will learn a too-little-too-late lesson. Then the blame game will begin. Meanwhile, those of us who prudently stayed out of the circus profiting even more than the danger-fraught housing gains with liquid, diversified, balanced portfolios will nod wisely at each other. Forgive us if we sport a barely visible smirk then.

[jimmy4321]

Maybe so but homes are selling and the prices haven't plummeted

[Panzer130]

In Kelowna, we're already off the 2008 top by a significant margin. It will get much, much worse. The same real estate cultists who have cheered on this bubble will be the first to deny it when it pops... all the way down. It's not a matter of if, but when. The higher it keeps inflating in Canada's bubblicious centres the more drastic the burst will be.

Really? Do you have data to back that up? I can certainly provide you with significant data that proves your are dead wrong. The real estate market in Kelowna is on an upward trend, certainly not a downward.

[atenbacon]

In Kelowna, we're already off the 2008 top by a significant margin.

No, not really... Unless "signifigant margin" is some new definition you are using to describe pretty much identical.

http://www.trishwise.com/market-watch.php

[Hmmm]

The previous crash worldwide resulted in what for Kelowna's home prices? And now, where are those prices? While it is true, there may or may not be a crash in the housing market, one day, this area, because its so desirable to live in, will bounce back quicker and not fall as far.

Thats what happened in 2007. And if the whole worlds falls to pieces, well it won't matter anyhow.

[Queen K]

We know a family in North Carolina, 3800 sq/ft house, got deflated in the 2008 housing crash and he said, "prices still haven't recovered." They've lost thousands.

Kelowna will always be amazing to live in. When we travelled through several communities on our last trip, I looked at them with more critical eyes and no doubt about it, Kelowna rocks.

[TheDudeAbides]

Really? Do you have data to back that up? I can certainly provide you with significant data that proves your are dead wrong. The real estate market in Kelowna is on an upward trend, certainly not a downward.

Here we go. I have my popcorn ready. Please continue telling us that house prices will continue going up forever even though wages have been flat for years. Simple math. About the only thing driving prices are low interest rates and those are set to go up soon.

[TheDudeAbides]

The previous crash worldwide resulted in what for Kelowna's home prices? And now, where are those prices? While it is true, there may or may not be a crash in the housing market, one day, this area, because its so desirable to live in, will bounce back quicker and not fall as far.

Thats what happened in 2007. And if the whole worlds falls to pieces, well it won't matter anyhow.

I don't know what crash you are referring to. The only one I am aware of is the one in the US in 2008. Canada hasn't had one yet. If you bothered to learn from history you would know that historically, US and Canadian housing crashes do not happen at the same time or for the same reasons anyways.

Interest rates are what are going to put a lot of people under water on their mortgage payments and they are GUARANTEED to start going up soon.

[Hmmm]

Lol....sigh. There are no words to describe how to respond to this which the moderator will just delete anyways. Just wow!

I don't know what crash you are referring to. The only one I am aware of is the one in the US in 2008. Canada hasn't had one yet. If you bothered to learn from history you would know that historically, US and Canadian housing crashes do not happen at the same time or for the same reasons anyways.

Interest rates are what is going to put a lot of people under water on their mortgage payments and they are GUARANTEED to start going up soon.

I do know little about this for sure, at least not as much as I do about frozen yogurt.

[Panzer130]

Here we go. I have my popcorn ready. Please continue telling us that house prices will continue going up forever even though wages have been flat for years. Simple math. About the only thing driving prices are low interest rates and those are set to go up soon.

There in-lies your error. You are trying to use simple math to calculate a complex problem.

You need to calculate for some very important variables:
1.) Creating land to live on in Kelowna is becoming more & more expensive
2.) The population moving to Kelowna have higher incomes or significantly higher savings / pensions
3.) Kelowna is a destination point for retirement - throughout Canada

Kelowna is certainly not immune to economic impacts felt across the country, but you can not use your "simple math" when making market comparisons. Kelowna felt a large adjustment in 2008. It is just now slowly recovering. Believe me, this is a slow recovery, not a boom.
Look back in history; there are always booms and busts, but the market still continues to slowly climb. Home prices will continue to rise through all busts & booms.

[frellingdren]

The only way to guarantee a price crash is for me to buy. The second I sign papers the market will drop by 50% overnight.

I'm currently shopping around. Hold on to your hats!

[OgopogoO]

Look back in history; there are always booms and busts, but the market still continues to slowly climb. Home prices will continue to rise through all busts & booms.

Tell that to folks who bought homes in Phoenix, Miami, Detroit, Houston, Atlanta, [fill in blank], in 2007 because "home prices will continue to climb". Many will never recover from the crash. I'm afraid your revisionist history is a fail.

But "it's different here", right?

[hobbyguy]

However, if the general housing market does take a dive, then the market in Kelowna is not immune from the effects.

Perhaps the high end of the market may not see the same impact, but for the average Jill or Jack what they sold their last home for, and/or what they would pay in other markets, have significant impacts in their decisions.

When we were looking at a retirement move out of the lower mainland, those were considerations. We weren't just looking at Kelowna as a possible destination, we were also looking at places like Parksville, Gibsons, Prince George, Nelson, and Salmon Arm. Balancing off the pros and cons against a budget. IF we had been unable to find what we wanted within our budget in Kelowna, then we would have gone to one of the other communities. And, IF those places were still out of the budget ... places like Campbell River, Smithers, Kimberly, Grand Forks etc. would have popped up on the "B" list.

I'm sure that we are not alone in making those kinds of decisions. Retirees have an "x" pool of funds. What happens if suddenly Kelowna becomes vastly more expensive? Kelowna will drop off the "A" list - and that will remove a set of buyers. Remove a set of buyers from any market, and that market declines significantly.

This article is getting old, but has a lot of sound arguments about the fragility of the housing markets and our economy in general: http://www.macleans.ca/economy/business/youre-about-to-get-burned/

Add to that mix, the recent statement that Mark Carney made regarding interest rates, where he states that the UK can not withstand rates higher than 2.5%.

IF the BOC were to "normalize" interest rates to 4% (where we were in 2007), a $300,000 mortgage payment would jump by over $500/month. That would do two things: first it would price the current market completely out of reach for many (most?) "first time buyers", and secondly it would remove a huge whack of money from the consumer spending portion of the economy. The Canadian economy is more dependent on consumer spending today than it was in the past. That would result in lots of lost jobs, further reducing the market, possibly killing new home builds, creating more unemployment and then the spiral continues.

I think Mark carney has does a very careful calculation in realizing that central banks have held rates too low for too long. The "sugar" effect of lower rates has long past, and now the super low rates have become structural to the economies.

So I wouldn't expect interest rates to rise any time soon, and if at all, by very small and widely spaced increments.

Meantime, Canada is continuing to blow a housing market bubble. But that won't burst - until it does.