Canada's Housing Crisis

[forum]

There are 8 cities in the world that have entered the red zone for housing bubbles. Toronto and Vancouver have both been listed in the top eight.

https://therealdeal.com/2017/10/01/bubble-risk-watch-out-if-youre-investing-in-one-of-these-eight-cities/

Many will argue that the housing bubble has already popped in Toronto and that it's shockwaves are just beginning to ripple outside of Toronto and into the GTA.

Vancouver is seemingly being artificially propped up by speculators and money laundering. Regulators are having a hard time measuring it.as affordability heavily outstrips average civilian incomes. Some people forget how Rome was taken down.

Look at all the red:
http://www.myrealtycheck.ca/

With the tightening of credit on borrowers, a magnifying glass now placed on money laundering businesses, and higher taxes on small businesses playing the tax games; how bad is it going to get for Canadians?

The Americans have been warning us for years after their housing market finally bubble burst. But Canadians just keep piling on debt, as if one day it will take care of itself.

With all the foreign money, criminal money, unrealistic lending practices, the face of Canada is beginning to look a lot like someone that took on too much Botox and didnt know how to accept their fate.

Will Canada's Housing market die an ugly death?

[TylerM4]

12 years ago now I purchased my 1st home.

Back then the real estate market was booming, houses were selling within 24hrs and everyone was posting on Castanet forums "The bubble is going to burst" and "You're far better off to rent". I'm very glad I didn't listen to them.

Every since then I've been watching these forums in amusement as that same message has persisted. I suppose there will be a significant market correction someday. Maybe even someday soon. Keep saying it long enough and you're bound to be right eventually.

[forum]

The last 12 years has been a good run.

Lots of things happened to keep everything propped up.

The difference now is that the markets are very sensitive.

A measly 2% interest rate hike is enough to put your average Canadian mortgage servant into a financial crisis.

[Ka-El]

A measly 2% interest rate hike is enough to put your average Canadian mortgage servant into a financial crisis.

Why? I was a "mortgage servant" for twenty years. During that time rates went up, they went down, they went up and they went down again. I was never close to having a financial crisis. In fact, my mortgage payments have steadily declined over the years and I pay less in housing costs than most renters (leaving more to invest), and unlike renters all that money (and then some) is coming back to me. Ya, our housing market right now is crazy and it is really hard for most people to get into the market, but while housing prices will continue to go up and down just as they have for years, over the long term (ten to twenty years) we can expect prices to be significantly greater than they are today. People waiting for some "crash" of 50% or more are going to miss another opportunity to get in the market. Most people don't plan to fail, they simply fail to plan.

[TylerM4]

The last 12 years has been a good run.

Lots of things happened to keep everything propped up.

The difference now is that the markets are very sensitive.

A measly 2% interest rate hike is enough to put your average Canadian mortgage servant into a financial crisis.

All of the above are similar arguments to what I heard 12 years ago.

A 2% rate increase would put SOME mortgage holders into a pinch. The average Joe with a mortgage would be fine.

[forum]

That's right Tyler. Fundamentals have kind of gone out the window. If you base your conclusions from history itself, Canada should have plummeted like the USA did in 09'.

But Canada kept on truckin' defying traditional market trends.

The big question is, what do we do with all the people carrying record debt levels?

Why does your average Canadian feel comfortable living pay cheque to pay cheque?

If Homeownership is already 70% are we aiming for 100% homeownership? Where everyone is financially tapped to the max?

[Ka-El]

The big question is, what do we do with all the people carrying record debt levels?

I don't know. You should start a thread related to that topic.

[Catsumi]

Are you anticipating a scenario a la 1929 world disaster, Forum?

Thousands lost their homes, ranches, businesses; however, many somehow managed to hang onto their real estate. It started in the USA, then like dominoes, affected the entire world economy.

It began with a run (massive demand for return of deposited funds) on the Banks, which was set off by rumours that the Banks were short of cash. Where was the money the depositers wanted back? Tied up in mortgages, for the most part.

I realize that there were other factors in play, and the above is a simplified version of events.

What if the same thing happened today, or can it happen at all? Printing more money than what assets back it up is policy today when it wasn't back in the 30's.

So, I am curious, is this the sort if thing you are expecting?

We know that many homeowners are struggling to meet their payments, but many aren't in that terrible position...paid up and paid off, they own their homes.




.

[TylerM4]

That's right Tyler. Fundamentals have kind of gone out the window. If you base your conclusions from history itself, Canada should have plummeted like the USA did in 09'.

But Canada kept on truckin' defying traditional market trends.

The big question is, what do we do with all the people carrying record debt levels?

Why does your average Canadian feel comfortable living pay cheque to pay cheque?

If Homeownership is already 70% are we aiming for 100% homeownership? Where everyone is financially tapped to the max?

Getting a little distant from the original topic, but it's your thread.

I agree - record debt levels are a concern. But it's also important to recognize that debt is actually good for the economy, especially when interest rates are low. Debt isn't all bad. It's no coincidence that Canadians having record debt has occurred at a time when interest rates have been at record lows for such a long time.

Debt is also a risk. I'm no financial expert, but I expect that risk will be managed. Interest rates will climb, but they'll be controlled so that they climb slowly allowing people time to get out. Banks and governments don't want people defaulting on their debts - it costs them money. They'll do everything in their power to prevent that from happening. Lesson's were learnt from what happened in the early 80's

I don't believe your statement about "Average Canadian living paycheck to paycheck" I know many people - none of whom would be in serious trouble if they missed a single paycheck.

[forum]

Tyler, with a household income of $150K/year. If you were house shopping in Kelowna tomorrow, what would you buy?

[forum]

More rocks being turned over in Vancouver.

This time developers come slithering out...

CRA is all over it now.

Canada Revenue Agency targets more Vancouver pre-sale condo contracts

https://www.biv.com/article/2017/10/canada-revenue-agency-targets-more-vancouver-pre-s/

[TylerM4]

Tyler, with a household income of $150K/year. If you were house shopping in Kelowna tomorrow, what would you buy?

Way too broad of a question to answer. What are my needs/desires/hobbies? Where do we work? How old am I? How stable is that income? Kids? Am I a handyman and can do my own repairs, Etc.

About all I can say is that I'd buy something well within my means along with a flexible mortgage that allows me to make extra payments. Much better off buying something cheaper and paying it off in 10-15 years than to go for your dream home and take 25-30years to pay it off with a lot of risk attached.

[forum]

Its happening...

https://www.google.ca/amp/s/globalnews. ... e-squeeze/

[hobbyguy]

The entire "housing crisis" is really just a function of the big metropolitan areas maturing. In big metropolitan areas around the world, people have no expectation of owning. 69% of people in New York are renters. Something like 80% in Singapore. London is over 50% renters and expected to hit 60% by 2025. 70% of people living in Amsterdam are renters.

The soaring prices are a natural function of mature metropolitan areas. What is creating a "crisis" in Canada is that metropolitan mayors are too dense to recognize the natural trends and focus on rental stocks, plus Canadians are used to buying. Buying will be out of reach for most very shortly in the metropolitan areas.

It is a paradigm shift, and in many ways regrettable, but inevitable.

[GrooveTunes]

The entire "housing crisis" is really just a function of the big metropolitan areas maturing. In big metropolitan areas around the world, people have no expectation of owning. 69% of people in New York are renters. Something like 80% in Singapore. London is over 50% renters and expected to hit 60% by 2025. 70% of people living in Amsterdam are renters.

The soaring prices are a natural function of mature metropolitan areas. What is creating a "crisis" in Canada is that metropolitan mayors are too dense to recognize the natural trends and focus on rental stocks, plus Canadians are used to buying. Buying will be out of reach for most very shortly in the metropolitan areas.

It is a paradigm shift, and in many ways regrettable, but inevitable.

Vancouver as well according to the mayor.