Home sales dropping because of higher interest rates

[seewood]

https://www.castanet.net/news/BC/411449 ... ity#411449

Mentioned this to my wife and she pretty much did an eye roll. 5-7% interest rates I thought were pretty much the norm except for the past few years. Bought two residences with mortgages around those rates, 92(sold) and 99. The past number of years interest rates were extraordinary low at around 2-3%.
They were high when I bought my first house in 81 at 18%.

However, saying that, the boomers were not retiring and moving to nice places to live drumming up the house prices back then.

[d0nb]

The erosive effect that inflation is having on disposable income is also a factor. In real terms, income levels have been falling for most Canadians.

[Mazdatruck]

Biggest drop in house prices from peak since the 1970's. Worse than the 1980's drop!

Realtors sweating and panicking. 50% less sales this year and getting worse. I remember reading that 66% of realtors switched jobs during the last downturn in the 1980's/90's.

No interest rates cuts this year. Bond market already pricing in a few more rate hikes.

Just getting started! The long slow burn.

No crash, just a even, steady amount of pain spread out over the next foreseeable future. If you bought in the last few years you better have very deep pockets. We get to see who was swimming naked while bragging about being savvy real estate geniuses.

[countmeout]

No crash, just a even, steady amount of pain spread out over the next foreseeable future. If you bought in the last few years you better have very deep pockets. We get to see who was swimming naked while bragging about being savvy real estate geniuses.

Based on history, in 10-15 years we will surpass the peak we are currently dropping from. If you know better than history I'm interested in the analysis to get there.

Anyone who bought to live in will be just fine.

The doom and gloom have been presented since I started looking to by my first place in 2018. I was told the bubble would pop in a year. Had I waited, I wouldn't have made the gains I made and would be paying much more for the same home today. I would have had to delay home ownership by about 10 to 12 years to get the same deal.
My advice for anyone looking for a home, budget for increases, if you can afford it, it’s not a bad time to buy.

[Mazdatruck]

Based on history, in 10-15 years we will surpass the peak we are currently dropping from. If you know better than history I'm interested in the analysis to get there.

Anyone who bought to live in will be just fine.

The doom and gloom have been presented since I started looking to by my first place in 2018. I was told the bubble would pop in a year. Had I waited, I wouldn't have made the gains I made and would be paying much more for the same home today. I would have had to delay home ownership by about 10 to 12 years to get the same deal.
My advice for anyone looking for a home, budget for increases, if you can afford it, it’s not a bad time to buy.

For almost 2 decades house prices stayed flat or even declined in Canada.

We just went through a 20 year unprecedented boom, totally built on the back of a central bank fiat debt bubble.

No great technology was invented, no huge increases in wages or productivity.

Just bloated assets and debt taken out on those assets.

We're not even 18 months into the reverse cycle and you're already counting chickens. Sketchy!

Anyone who bought to live in will be just fine.

As long as Dad can get a 3rd job to cover the mortgage and the bank renews on your devalued home.

Also gone baby gone to the HELOC renos, car purchases and vacations.

[countmeout]

No great technology was invented, no huge increases in wages or productivity.

Just bloated assets and debt taken out on those assets.

Cost per sqft has increased significantly. A home built in 1983 and a home built in 2023 are very different in construction and permitting requirements. Technology has changed a bit.

The number of women in the workforce is steadily increasing too, increasing the amount of $$$ chasing a single home since men & women still live together. While this isn't an increase in wage, it is a significant increase in family income. Total family income has doubled from 2000 to 2020.

I suspect the above helped to influence prices along with low interest rates.

I see more restrictions/requirements being added to adding to our sprawl and environmental impact, increasing costs. I don't see women leaving the workforce to mostly stay at home or part-time like they were in the past. So these will keep pressure on prices, while the interest rates lessen borrowing power. Those with money can still scoop up homes now at better valuations since first-time homebuyers still make up a decent chunk of home sales, and first-time home buyers almost solely rely on financing.

I can take on the additional mortgage with no issue, and no second job is required. I plan to hold my asset for 25 years. Think its safe to count my eggs unless Kelowna becomes undesirable due to some external issue like a forest fire wiping us out or something...

[Mazdatruck]

The thing is the investor $ will go elsewhere because it will be juicer somewhere else.

Why snap up houses when their money could be doing much more productive things elsewhere? No negative carrying costs either. Real estate investment made sense at very low rates and the guarantee they wouldn't rise. Everyone was in on the ponzi so it was safe. Government was fine to make houses 20 million bucks if they could, but then food prices started to rise and they couldn't hide the ponzi anymore. That's now over.

60% of Canadians own homes but 100% of Canadians eat food.

Government couldnt risk losing control so they had to stop the ponzi.

Things will change.

[countmeout]

The thing is the investor $ will go elsewhere because it will be juicer somewhere else.

Why snap up houses when their money could be doing much more productive things elsewhere? No negative carrying costs either. Real estate investment made sense at very low rates and the guarantee they wouldn't rise. Everyone was in on the ponzi so it was safe. Government was fine to make houses 20 million bucks if they could, but then food prices started to rise and they couldn't hide the ponzi anymore. That's now over.

60% of Canadians own homes but 100% of Canadians eat food.

Government couldnt risk losing control so they had to stop the ponzi.

Things will change.

Sounds like the rental situation will just get worse.

[DoDo1975]

No crash, just a even, steady amount of pain spread out over the next foreseeable future. If you bought in the last few years you better have very deep pockets. We get to see who was swimming naked while bragging about being savvy real estate geniuses.

Based on history, in 10-15 years we will surpass the peak we are currently dropping from. If you know better than history I'm interested in the analysis to get there.

Anyone who bought to live in will be just fine.

The doom and gloom have been presented since I started looking to by my first place in 2018. I was told the bubble would pop in a year. Had I waited, I wouldn't have made the gains I made and would be paying much more for the same home today. I would have had to delay home ownership by about 10 to 12 years to get the same deal.
My advice for anyone looking for a home, budget for increases, if you can afford it, it’s not a bad time to buy.

You better relook at history and maybe spend a little time thinking about the interest rate environment. Your 4 years of experience are going to count for about nothing.

[countmeout]

You better relook at history and maybe spend a little time thinking about the interest rate environment. Your 4 years of experience are going to count for about nothing.

I looked at a few charts from major downturns in home values. After the 1980s crash, prices were stagnant for awhile and then after about 15 years picked up. Today, we're well past 1980s pricing.

I don't think I'm wrong to predict in 10-15 years prices will have recovered or surpassed current highs.

If I am wrong, I don't see historical data to back it up, just a some folk telling my me experience is worth nothing (I have more than 4 years studying the topic, not sure why one must own a home to gain knowledge...).

So yes, I'm paying attention to the interest rate, it's much higher now. I've also provided information about how family income is increased and the cost of regulation is increasing as we make "greener" homes.

None of that is brought up here, just a mention of my 4 years of ownership and joking at my ignorance of interest rates.

There's a general consensus that housing is too expensive, I agree I paid a fortune. Problem is, my family like other are able to weather these high expenses, so will it really collapse pricing? I won't be selling my place unless I can get a profit. I suspect many will hold it they can until prices are offing profits.

[DoDo1975]

You better relook at history and maybe spend a little time thinking about the interest rate environment. Your 4 years of experience are going to count for about nothing.

I looked at a few charts from major downturns in home values. After the 1980s crash, prices were stagnant for awhile and then after about 15 years picked up. Today, we're well past 1980s pricing.

I don't think I'm wrong to predict in 10-15 years prices will have recovered or surpassed current highs.

If I am wrong, I don't see historical data to back it up, just a some folk telling my me experience is worth nothing (I have more than 4 years studying the topic, not sure why one must own a home to gain knowledge...).

So yes, I'm paying attention to the interest rate, it's much higher now. I've also provided information about how family income is increased and the cost of regulation is increasing as we make "greener" homes.

None of that is brought up here, just a mention of my 4 years of ownership and joking at my ignorance of interest rates.

There's a general consensus that housing is too expensive, I agree I paid a fortune. Problem is, my family like other are able to weather these high expenses, so will it really collapse pricing? I won't be selling my place unless I can get a profit. I suspect many will hold it they can until prices are offing profits.

Ahhh, yes. The no-one will sell therefore prices won't come down argument. Never have I seen that used before to argue against price declines.

Interest rates are still low. They just aren't impossibly low. 15-20 years from now, prices will likely have passed todays prices at least in nominal terms. But from a price to income multiple and affordability perspective we may never see these numbers again.

History does not show that this is a good time to buy. In fact, corrections have taken about 4 years to bottom out and based on just how far outside normal we are, we aren't talking about $15k a year. And those corrections and subsequent gains were aided by interest rates that went lower than they were during the runup and then continued going lower and lower and lower. That is a virtual impossibility now as interest rates can't really go lower than the nothing they were held at.

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If you are going to invoke the history argument, best understand history.

[Glacier]

Canada will be one of the most populous nations in the world by the end of this century, with 25,000,000 more than Japan.

So we are going to have way more immigration than ever before, and building restrictions will continue to be more restrictive toward building new houses, so prices will continue to go up, as well as rents. We should see a downturn for 3 to 5 years now, but then right back up to where it was and then some.

[DoDo1975]

Canada will be one of the most populous nations in the world by the end of this century, with 25,000,000 more than Japan.

So we are going to have way more immigration than ever before, and building restrictions will continue to be more restrictive toward building new houses, so prices will continue to go up, as well as rents. We should see a downturn for 3 to 5 years now, but then right back up to where it was and then some.

Yes of course. The legions of poor immigrants from 2nd and 3rd world countries are going to bid our house prices up to 50X incomes.

We will get back to where we were but incomes will be much much higher when we get there.

[alanjh595]

At the same time rental prices are rising out of control.

https://www.cbc.ca/news/business/cmhc-r ... per%20cent.

[Mazdatruck]

More rate hikes coming...

Settle in guys. Get comfortable.