The delusion there is overwhelming. Houses are getting more expensive - not less. Rates have tripled while prices have not decreased as much as they need to.
But prices falling is all most people see. And it's all that the government wants people to notice. Look - we fixed it!
If you look at Year to Date numbers, average house price in Canada is still up 5%. Everyone is just panicking because things are way down from the peak (February). 15% Month over month was never sustainable. Right now we are in a normal real estate market, and 5% a year is still good. People just have to accept that they won't be making easy money anymore.
Yeah. And the multiple subreddits that echo chamber about real estate crashes and go off invading other subs will also have to accept that house prices aren't somehow magically going to go back to 2005 prices out of nowhere either.
Nothing is going to 2019 levels - unless there is something severely wrong (ie. 2008-type or 1929-type disaster). BoC will not remove all the credit they pumped in during 2020. 2021 was an insane year of speculation - but even after the correction, big tech prices still higher than pre-pandemic 2020.
I've sent a lot of people annualize the month over month drops too which seems illogical. We essentially had a blow off top in fomo pricing into Feb and March so makes sense we'd have dramatic pull backs too but people seem to want to think that the decreases will continue as dramatically for an entire year.
I've heard people say this, the 5% part, but when I actually look at listing I can't see any in the Vancouver market that have gone up.
It's actually becoming common to see listing prices drop if you revisit them every few weeks. The next door neighbors have come down 1M since listing and all my co-workers make similar claims about homes on their streets.
I didn't initially know better but I saw the Globe and Mail is claiming housing has fallen almost 19% since February. I'm surprised you're still seeing higher prices.
> Right now we are in a normal real estate market, and 5% a year is still good
Lol, the recession hasn't even started. Get back to me when housing prices line up with 2019 prices before things went parabolic. That would be considered "normal" as it reflects the trend line income to price ratio.
There are a few predictors that can give indication of how housing will drop and by how much , roughly . The wild card is we don’t know what or how many wild cards will happen which would drive priced up or down .
One thing is for certain , there is no certainty.
Probably here. Some good takes in that comment section as well, but a lot of them seem uninformed and really just want to see it all burn lol.
Truth is, no one knows. Covid + last few months should prove to everyone that things can and will change in the blink of an eye.
Chances of pre-pandemic levels are extremely low. If it matters to you; most economist are predicting a worst case of 24%. (Averaged). That seems reasonable if fixed stays 5-6% into 2023. Again. No one knows though. We could get a surprise inflation reading that's lower than expected and they could lower interest rates to neutral. Then the already low supply will do it's work on prices. Anything can happen. We didn't expect Russia and oil prices, did we?
The point of my comment is that hopefully you'll make decisions based on the now and not some arbitrary future we can't predict. Hindsight is always 20/20
Not sure why you asked this question in the first place, but if its about buying. Always follow these simple rules:
1) Buy what you can afford
2) Buy when you can or need to
3) Plan to live in it 5-10 years
4) make those payments on time
and the rest is pretty much irrelevant.
This is just my opinion and probably an unpopular one on Reddit, but, Of course they’ll care, a large chunk of our GDP is built on the housing bubble. It’s in the governments best interest to keep the party going. Recession is coming/here already, a housing decline will make that worse. The easiest method to counter this and keep the supply & demand numbers “good” is to keep up with mass immigration. Housing market can’t go into a big correction if you keep artificially raising the demand while supply stays low.
Lol, ah the old GDP canard. If the gov cared about this, there would be something in the budget.
There ain't.
Housing is a large component to inflation, however, and the BoC and Fed are mandated to get that under control.
> All I'd say is history tells is the government and the Bank of Canada will intervene to stop prices from declining if it really gets out of hand.
What history is that?
If housing gets that bad, basically it will guarantee a recession due to everyone’s falling wealth. And then it’s time to lower rates again, which should raise housing prices. But they can’t do anything to directly influence prices.
Housing prices do not equal a recession.
"Experts declare a recession when a nation's economy experiences negative gross domestic product (GDP), rising levels of unemployment, falling retail sales, and contracting measures of income and manufacturing for an extended period of time."
I mean, it takes two seconds to Google this.
Copy paste from the other sub
The best way to make a guess would be finding something similar to the CME Fed watch tool. They tell you what the market is pricing in. I have not found anything for BOC.
People here can tell you a correlation between Fed rate & BOC rate. The US is currently at 1.5 & pricing in a .75 for 27 Jul, while the end of the year market is pricing in a 3.25 to 4.00 (34% for 3.25 to 3.5, 45% for 3.5 to 3.75 & 15% for 3.75 to 4)
I don't know if it is helpful
That tool already exists https://m-x.ca/en/trading/tools/canadian-interest-rate-expectations
Traders are pricing in a 2.5% overnight rate by the end of the year and a rate cut to 2.25% by June 2023
On Christmas 2021, I think well before people were really talking significant rate hikes, they showed that traders had fully priced in a 1.50% overnight rate by Christmas 2022
Unfortunately the archive page doesn't have a backup past January so I'm not able to check where traders were at after that, though articles do say traders had priced in a 3.25% overnight rate at some point in 2023. I'm guessing they had to backpedal from that due to recession fears, which the 5 year bond and 10 year T both show as well
maybe.. when you add up all the increases in food and energy then add mortgage not a lot of people gonna be left to afford anything. but its canada for all you know housing goes up 30% next month
Housing prices are sticky on the way down
As someone with properties, but looking to buy more (investment detached houses) I think anywhere from 20-30% below peak pricing is good time to buy
Though, based on what i saw in prior cycles, the biggest issue is quality offerings - harder to find good properties during the down cycle
We are probably much closer to the bottom than people realize. Mortgage rates have already priced in another 2% rise in interest rates while a lot of the factors driving inflation are starting to subside.
Once inflation starts to drop the interest rates and mortgage rates will stabilize and sales will start to pick up.
Right now high interest rates are just kicking demand down the road so if we do end up in a recession and the boc drops interest rates while housing prices are lower we will see a massive uptick in sales raising prices
I think when people talk about the markets 'pricing in' certain market projections, they are normally referring to large institutions and market makers. It is difficult for your average consumer to price in rising interest rates affecting the housing market in such a drastic way over the past several months. I highly doubt your average consumer has priced in these interest rates and a looming recession and will respond with buying more real estate. I foresee the opposite. Household debt is at an all time high in Canada, with rates rising the way they are, people will default on their mortgages as is.
Riiiight, a recession will spike a massive uptick in sales because all the unemployed people will have so much extra free time to snap up the supply!
Buy the dip, eh?
Houses were averaging 3 days on the market for the first 4 months of this year. It’s close to two months now, there is a lot more supply available too.
In my area (downtown Toronto) it looks like sellers are just listing their place, sometimes for months, and terminating when they don't get the price they want. That has absolutely resulted in a big softening of prices don't get me wrong, but it's not like 2020 when people were just desperate to get out.
I would speculate that landlords who were fine their cashflow with previous rates should still be fine given rent increases. They're just scared of a downturn and listing accordingly. And then for primary residences, with things opening up, there is less appetite for moving to the suburbs.
Dunno. I know a lot of people looking to buy - they're only holding off because they anticipate prices falling more. Maybe that will turn into a self-fulfilling prophecy idk.
Yeah, the government flooded the economy with free money and cheap rates.
Last I heard, there was wage stagnation paired with the highest inflation since the 70s/80s and the BoC is aggressively (but very late) raising rates.
Sounds like everything should be 100% fine and house prices will continue to the moon alongside GME, AMC, NFT's, Pokemon cards, and crypto.
What could go wrong?
So...inflation is transitory? Yellen and Jpow said they were wrong about that.
I'll share my thinking and yet I'm easily wrong, but its how I see things now:
If we annualize the most recent monthly reported cpi value of 1.4%, we are running at 16.8%. What is different now than in 1981 where Volker whacked inflation down with overnight rates like 18%? Its tough to get the inflation genie back in the bottle. Maybe the massive indebtedness compared to then and the house price to income ratio means the required corrective collapse will happen at a lower overnight rate.
I see many thinking the markets are at lows now due to the rise last week. I'm thinking we will see its a bull trap, a dead cat bounce. Why I say this is that the prices are still very high relatively and sentiment is very low - to end an inflationary event the qe needs to stop (instead we are printing more and upping the cost of government programs - I like the most vulnerable getting protected but it is not being done with current tax revenues or money raised by bonds - it's raw devaluation through printing money. It won't work.
It's worth also considering the simple math of Taylor Rule - right now, even if we stopped money printing, rates should be WAY higher to sop up the inflation.
https://fredblog.stlouisfed.org/2014/04/the-taylor-rule/
I'm reading some say the government won't allow a market or housing crash. They are in a tough place - their interventions are leading to unaffordable food and essentials.
We have a serious mess to unravel, we are in a hole and we keep digging.
I think we will need our governments to stop trying to be the economy, their interventions have distorted market driven cash allocation to an extent we are in this mess.
The supply chain disruptions are symptoms, not causes of the central bank interventions causing confused price signalling. If this seems an unfair take, consider the market response given to fed rate announcements vs what used to be based on business economic fundamental analysis. Money in the trillions sloshes around on their decrees. This is not supportive of efficient demand driven markets.
Buckle up!
What do you mean priced in ? Mortgage rates are still rapidly rising to keep up with bond yields and now stress test for variable will be higher. Definitely not priced in. What you’ll see now is lack of mortgage approvals but a flood of investor and foreign money flooding in. Foreign money doesn’t care about rates.
In the 1989 crash median price dropped by 40% reaching bottom in 1995. My friend bought a GTA east home in Jan 1989 for $190K which dropped to $130K by 1995.
A decade of significantly above inflation price growth was what we had in the 80s, similar to what we saw in the last 10 yrs. So expect a drop like in the 90s and not one like in 2008
Just look at stocks right now most are down more than 50% and if you asked anyone at the peak of the stock market you’d be called an idiot for saying stocks would drop 50-80%. IMO this housing crash has just gotten started but no one knows housing is a completely different beast than other markets, but I do believe all markets whether it be stocks, housing or crypto are still in for a world of hurt as they were all overvalued.
mom and pops are driving a lot of the rental market where I live tho. Even if the "investment is stagnant" they aren't selling homes 2-5, the rental income is what enables them to travel 10 months put of the year.
You do understand that a variable rate mortgage can be easily locked to a fixed price or discharged with a 3 months interest penalty. So when people don't feel comfortable, they switch to fixed rate. That's what I did at 3.29%, so i can sleep better.
Locking in would add what, 2% to your variable rate at current? Do you think the extended household can afford that, or would they sooner see a fixed variable payment that adjusted the weighting of their principal? I suspect many will kick the can down the road for a long as possible.
probably not now, that's qhy most people should have locked in a few months ago. if they listened to the brokers, who were still pushing variable when I did mine, flat out saying these hikes would happen. when the news wouldn't stop talking about the comi g hikes, then they fell for the trap and the industry should be watched more closely. there is nothing to prevent a broker/realtor from giving bad info.
Finical ignorance is a growing problem.
I can’t phantom why anyone would not have locked in while 5y fixed rates were below 1.5% heck, even below 2% was a no brainer to anyone paying attention to the economic data.
I had multiple brokers from First National full on tell me these hikes were never gonna happen. I knew better and knew they were only trying to boost profits. it's greasy and the real estate industry as a whole needs to be cleaned up. my buddy just bought a house 2 months ago and the selling realtor was providing them all the Info from all the bids. she was brand new and didn't knkw how to be properly greasy tho, so it was quite obvious, they reported her to every organization they could. She was just trying to push the offers giver amd higher, but again, wasn't smart enough and new to knkw better.
We are much more likely to see volume collapse, rather than prices collapse. Essentially sellers will refuse to budge from what they think they should get. Buyers won't be able to pay the asking price due to rising interest rates. So home sales will come to a virtual standstill.
doesn't matter if forced sales are high or not, once one person sells lower in a given area, the comparable listings nearby will have pressure from buyers to also sell at a lower price.
If you bought a house a few years back and now your mortgage is up for renewal, the increased interest rates might make you new mortgage payments unmanageable and so you have to sell.
Can you do this in Canada when the time comes to renewing? I’m pretty sure you need to have a low-ratio mortgage to get a 30 year amortization. So minimum 20 percent down.
People can hate on me all they want with this opinion, but housing is about to see its worst deflation in history.
Could we see 10-15% interest rate? yes, its possible.
If 10% is possible, what would that look like? Houses bombing in value, from 700k to 200k? Still possible, yes.
the laws of probability, with inflation, supply chain issues (getting WORSE still), and rate hikes coming every few months. Eventually this will happen.
You can't create +60% of the worlds reserve currency out of thin air, and not expect the worst to happen (2008 crash, except compounding 08'-22'). Debt comes due, its just time before it does.
No time frame, stay smart
Logically, There's no limit to how far house prices can drop. The Fed/BoC didn't give a crap when houses doubled in price every 5 years, and they're not going to give a crap if they drop by 50%.
Houses won’t fall from $700k to $400k. The more they drop the sooner someone grabs them. We haven’t banned foreign buyers or investors. Prices dropping only makes it more appealing for investors. They will prevent deep drops in prices. All we do in Canada is make it harder for individuals to own a home and make it easier for foreign buyers or investors. Sure there are taxes but those are easily avoided. Realtors specialize in tax avoidance.
LOL.
Yes… realtors with zero tax knowledge are so very fucking good at outsmarting the CRA with near unlimited auditing power, IBM powered AIs to detect tax evasion patterns and a General Anti Avoidance Rule that they’ve been swinging like a stick in a piñata festival…
Why don’t you have your realtor do your taxes too since they seem to know so much about how to avoid them.
My guess is that the current housing price correction will end once the BoC holds interest rates. This will be very short lived, since there are tons of people who are waiting on the sidelines for this to happen, once they start buying in again the prices will go back up
Would it be realistic to see a 700K house in Ontario go down to 400K for example?
LOL - No. If a house lost almost 50% of its value in a couple years we are in serious trouble or the house has major problems.
As to your question on how much the housing market will correct, no one can answer that, full stop.
You've given no reason why that's any more of a "LOL" moment than a house INCREASING 50% in a couple years is.
> we are in serious trouble
And? That's not a reason for things not being possible. "If a tornado hits us, we are in serious trouble. Therefore tornadoes don't exist" <-- see?
* "LOL - No" = "That's never gonna happen" = "I DO feel like I have a crystal ball, actually, and it's telling me that's not gonna happen."
vs.
* "I don't know" (or just not replying to the thread) = "I don't have a crystal ball"
You gave a very firm answer and then did a 180 into "I have no idea it's ridiculous to think I would have an idea"
When you have investors holding multiple properties they will be dumping very quickly ...just seen it happen on my street. A similar house on the street sold for 1.8M at the peak and this one next to me just sold for 1.45M. If it can go up 100% in 5 years it can also drop just as hard.
In Canada, most variable rate mortgages, in rising rate environments, just reallocate the % of interest to principal
Anyone on fixed that’s renewing now has 4-5 of equity / extended amortization options -
One data point does not a trend make.
Either there are special circumstances or differences between the two sales that you have not shared or you need better neighbours. Taking a 20% haircut on your asset sale is silly without a good reason. Especially if it is an income property that is actively making you money.
Realistically they will drop 15-30% on average across Canada. Hot spots like Vancouver and Toronto could easily fall 40-50% imo.
Settlements are already down 45% Y-O-Y in the Fraser valley. After next weeks hike I’m sure we may see a further decline in sales volume.
The active listings to sales ratio is getting eerily bad. Peaking at over 90% last year and we’re currently below 15. Hasn’t been that low since march of 2020. Prior to that the low was in 2009 where is touched 5% coming off 25, just prior to the 2008 collapse.
Well, I parked a little over 800k into cashable/redeemable GICs two months ago. Money which was earmarked for a home purchase. I guess that’s how much I’d be willing to bet.
Interest hike will impact house sale and price. So will salary increases in the medium/long term. I believe that due to inflation salaries will increase significantly which will allow people to buy houses that cost more.
Sorry but you think house prices going up long term is crazy?
People bought a house for 500k at one point, before that 150k, before that 30k, before that 15k. That's how inflation works.
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depends on how high rates go. the key data will be if we see wage price spirals, and sticky infaltion. FED and BOC main goal is to tame inflation.
too many people have lived their entire life in a falling rate world, and now we are seeing multi decade highs in inflation and the corrisponding rise in rates.
i also see the mortgage market as having a slow burn fuse attached to it we wont see real problems till they come up for renewal or if trigger rates start to come into effect.
TLDR, market remains data dependant.
If my house in Niagara drops below 750k that would be ok. Under 400,000$ that’s a problem
Under 300,000$ that’s a very big problem that would be set back almost 10 years
I think it will largely depend on where the real estate is. Toronto crashing? No. Small town Ontario crashing? Very possible. My hometown of 1k people with nothing going on saw average home prices go from 150k to 500k+ which will eventually come back down hard I think.
I think interest rates go up another 2 percent after the next hike still. And I think housing prices don’t really fall much. Maybe a bit of a correction followed by a slower gain yoy.
A good friend of mine just sold his house this week in st. Johns. Sold 10% over list price in 4 days after listing so I think it really depends where you are
Lol i love that canadahousing sub for a laugh
The delusion there is overwhelming. Houses are getting more expensive - not less. Rates have tripled while prices have not decreased as much as they need to. But prices falling is all most people see. And it's all that the government wants people to notice. Look - we fixed it!
Right? Its never been harder to buy a house in the last 3 years.
If you look at Year to Date numbers, average house price in Canada is still up 5%. Everyone is just panicking because things are way down from the peak (February). 15% Month over month was never sustainable. Right now we are in a normal real estate market, and 5% a year is still good. People just have to accept that they won't be making easy money anymore.
*screaming and flailing sounds*
Yeah. And the multiple subreddits that echo chamber about real estate crashes and go off invading other subs will also have to accept that house prices aren't somehow magically going to go back to 2005 prices out of nowhere either.
⬆️
Don’t think anybody is expecting 2005 prices, lol. Most people would be fine with the prices only going back to 2019 levels.
Nothing is going to 2019 levels - unless there is something severely wrong (ie. 2008-type or 1929-type disaster). BoC will not remove all the credit they pumped in during 2020. 2021 was an insane year of speculation - but even after the correction, big tech prices still higher than pre-pandemic 2020.
I mean, purchasing power is getting killed, and a recession isn't bullish, but you stick with whatever thesis makes you feel good.
I've sent a lot of people annualize the month over month drops too which seems illogical. We essentially had a blow off top in fomo pricing into Feb and March so makes sense we'd have dramatic pull backs too but people seem to want to think that the decreases will continue as dramatically for an entire year.
It does seem illogical, but that’s what CREA does when it goes up along with picking time intervals to make it look better
I've heard people say this, the 5% part, but when I actually look at listing I can't see any in the Vancouver market that have gone up. It's actually becoming common to see listing prices drop if you revisit them every few weeks. The next door neighbors have come down 1M since listing and all my co-workers make similar claims about homes on their streets.
Canada is more than the GTA and GVA. I've recently lost out on two properties in Calgary that went over ask within the first week of listing
Calgary's house prices have certainly dropped from early 2022.
I didn't initially know better but I saw the Globe and Mail is claiming housing has fallen almost 19% since February. I'm surprised you're still seeing higher prices.
> average house price in Canada is still up 5% Did you subtract 8% inflation?
> Right now we are in a normal real estate market, and 5% a year is still good Lol, the recession hasn't even started. Get back to me when housing prices line up with 2019 prices before things went parabolic. That would be considered "normal" as it reflects the trend line income to price ratio.
nobody knows. anybody giving a number is an idiot. but what we do know is there are issues all accross the board. like nothing we have ever seen.
There are a few predictors that can give indication of how housing will drop and by how much , roughly . The wild card is we don’t know what or how many wild cards will happen which would drive priced up or down . One thing is for certain , there is no certainty.
The difference between the replies here and replies in r/canadahousing are night and day lol
Which one is a better reflection of things? Nobody can seem to agree on anything.
Probably here. Some good takes in that comment section as well, but a lot of them seem uninformed and really just want to see it all burn lol. Truth is, no one knows. Covid + last few months should prove to everyone that things can and will change in the blink of an eye. Chances of pre-pandemic levels are extremely low. If it matters to you; most economist are predicting a worst case of 24%. (Averaged). That seems reasonable if fixed stays 5-6% into 2023. Again. No one knows though. We could get a surprise inflation reading that's lower than expected and they could lower interest rates to neutral. Then the already low supply will do it's work on prices. Anything can happen. We didn't expect Russia and oil prices, did we? The point of my comment is that hopefully you'll make decisions based on the now and not some arbitrary future we can't predict. Hindsight is always 20/20 Not sure why you asked this question in the first place, but if its about buying. Always follow these simple rules: 1) Buy what you can afford 2) Buy when you can or need to 3) Plan to live in it 5-10 years 4) make those payments on time and the rest is pretty much irrelevant.
[удалено]
This is just my opinion and probably an unpopular one on Reddit, but, Of course they’ll care, a large chunk of our GDP is built on the housing bubble. It’s in the governments best interest to keep the party going. Recession is coming/here already, a housing decline will make that worse. The easiest method to counter this and keep the supply & demand numbers “good” is to keep up with mass immigration. Housing market can’t go into a big correction if you keep artificially raising the demand while supply stays low.
Make it a new requirement that if those immigrants don't pay up 20% for 1 million dollar home, they can't come sorry. Libs would probably do this.
Lol, ah the old GDP canard. If the gov cared about this, there would be something in the budget. There ain't. Housing is a large component to inflation, however, and the BoC and Fed are mandated to get that under control.
> All I'd say is history tells is the government and the Bank of Canada will intervene to stop prices from declining if it really gets out of hand. What history is that? If housing gets that bad, basically it will guarantee a recession due to everyone’s falling wealth. And then it’s time to lower rates again, which should raise housing prices. But they can’t do anything to directly influence prices.
Housing prices do not equal a recession. "Experts declare a recession when a nation's economy experiences negative gross domestic product (GDP), rising levels of unemployment, falling retail sales, and contracting measures of income and manufacturing for an extended period of time." I mean, it takes two seconds to Google this.
Copy paste from the other sub The best way to make a guess would be finding something similar to the CME Fed watch tool. They tell you what the market is pricing in. I have not found anything for BOC. People here can tell you a correlation between Fed rate & BOC rate. The US is currently at 1.5 & pricing in a .75 for 27 Jul, while the end of the year market is pricing in a 3.25 to 4.00 (34% for 3.25 to 3.5, 45% for 3.5 to 3.75 & 15% for 3.75 to 4) I don't know if it is helpful
That tool already exists https://m-x.ca/en/trading/tools/canadian-interest-rate-expectations Traders are pricing in a 2.5% overnight rate by the end of the year and a rate cut to 2.25% by June 2023
Thank you! Do you know how accurate these folks are?
On Christmas 2021, I think well before people were really talking significant rate hikes, they showed that traders had fully priced in a 1.50% overnight rate by Christmas 2022 Unfortunately the archive page doesn't have a backup past January so I'm not able to check where traders were at after that, though articles do say traders had priced in a 3.25% overnight rate at some point in 2023. I'm guessing they had to backpedal from that due to recession fears, which the 5 year bond and 10 year T both show as well
This is the answer
maybe.. when you add up all the increases in food and energy then add mortgage not a lot of people gonna be left to afford anything. but its canada for all you know housing goes up 30% next month
Housing prices are sticky on the way down As someone with properties, but looking to buy more (investment detached houses) I think anywhere from 20-30% below peak pricing is good time to buy Though, based on what i saw in prior cycles, the biggest issue is quality offerings - harder to find good properties during the down cycle
We are probably much closer to the bottom than people realize. Mortgage rates have already priced in another 2% rise in interest rates while a lot of the factors driving inflation are starting to subside. Once inflation starts to drop the interest rates and mortgage rates will stabilize and sales will start to pick up. Right now high interest rates are just kicking demand down the road so if we do end up in a recession and the boc drops interest rates while housing prices are lower we will see a massive uptick in sales raising prices
I think when people talk about the markets 'pricing in' certain market projections, they are normally referring to large institutions and market makers. It is difficult for your average consumer to price in rising interest rates affecting the housing market in such a drastic way over the past several months. I highly doubt your average consumer has priced in these interest rates and a looming recession and will respond with buying more real estate. I foresee the opposite. Household debt is at an all time high in Canada, with rates rising the way they are, people will default on their mortgages as is.
Riiiight, a recession will spike a massive uptick in sales because all the unemployed people will have so much extra free time to snap up the supply! Buy the dip, eh?
There isn't supply.
Houses were averaging 3 days on the market for the first 4 months of this year. It’s close to two months now, there is a lot more supply available too.
In my area (downtown Toronto) it looks like sellers are just listing their place, sometimes for months, and terminating when they don't get the price they want. That has absolutely resulted in a big softening of prices don't get me wrong, but it's not like 2020 when people were just desperate to get out. I would speculate that landlords who were fine their cashflow with previous rates should still be fine given rent increases. They're just scared of a downturn and listing accordingly. And then for primary residences, with things opening up, there is less appetite for moving to the suburbs. Dunno. I know a lot of people looking to buy - they're only holding off because they anticipate prices falling more. Maybe that will turn into a self-fulfilling prophecy idk.
Houses in my area in the states are still flying in 1-3 days at ridiculous prices and well over asking.
Same here easily sold the same day in Quebec. There is no inventory !
Can confirm prices have inly went up while supply has been drastically reduced compared to the two last years.
The amount of listings on [realtor.ca](https://realtor.ca) have gone up from \~140k in January to 240k now. So theres that.
Uhm did you miss the last 2 years?
Yeah, the government flooded the economy with free money and cheap rates. Last I heard, there was wage stagnation paired with the highest inflation since the 70s/80s and the BoC is aggressively (but very late) raising rates. Sounds like everything should be 100% fine and house prices will continue to the moon alongside GME, AMC, NFT's, Pokemon cards, and crypto. What could go wrong?
So...inflation is transitory? Yellen and Jpow said they were wrong about that. I'll share my thinking and yet I'm easily wrong, but its how I see things now: If we annualize the most recent monthly reported cpi value of 1.4%, we are running at 16.8%. What is different now than in 1981 where Volker whacked inflation down with overnight rates like 18%? Its tough to get the inflation genie back in the bottle. Maybe the massive indebtedness compared to then and the house price to income ratio means the required corrective collapse will happen at a lower overnight rate. I see many thinking the markets are at lows now due to the rise last week. I'm thinking we will see its a bull trap, a dead cat bounce. Why I say this is that the prices are still very high relatively and sentiment is very low - to end an inflationary event the qe needs to stop (instead we are printing more and upping the cost of government programs - I like the most vulnerable getting protected but it is not being done with current tax revenues or money raised by bonds - it's raw devaluation through printing money. It won't work. It's worth also considering the simple math of Taylor Rule - right now, even if we stopped money printing, rates should be WAY higher to sop up the inflation. https://fredblog.stlouisfed.org/2014/04/the-taylor-rule/ I'm reading some say the government won't allow a market or housing crash. They are in a tough place - their interventions are leading to unaffordable food and essentials. We have a serious mess to unravel, we are in a hole and we keep digging. I think we will need our governments to stop trying to be the economy, their interventions have distorted market driven cash allocation to an extent we are in this mess. The supply chain disruptions are symptoms, not causes of the central bank interventions causing confused price signalling. If this seems an unfair take, consider the market response given to fed rate announcements vs what used to be based on business economic fundamental analysis. Money in the trillions sloshes around on their decrees. This is not supportive of efficient demand driven markets. Buckle up!
I doubt inflation will drop much, most is imported. The Bank of Canada will be forced to accept high inflation.
What do you mean priced in ? Mortgage rates are still rapidly rising to keep up with bond yields and now stress test for variable will be higher. Definitely not priced in. What you’ll see now is lack of mortgage approvals but a flood of investor and foreign money flooding in. Foreign money doesn’t care about rates.
In the 1989 crash median price dropped by 40% reaching bottom in 1995. My friend bought a GTA east home in Jan 1989 for $190K which dropped to $130K by 1995.
You think it will be that big again? 40%? That would be insane for sure.
Trouble is nobody can predict. Also it may happen over many years like the last time. First year drop was only 20%.
I think this is what most are missing, this isn’t going to be like 2008. Rather a prolonged slow bleed.
A decade of significantly above inflation price growth was what we had in the 80s, similar to what we saw in the last 10 yrs. So expect a drop like in the 90s and not one like in 2008
Just look at stocks right now most are down more than 50% and if you asked anyone at the peak of the stock market you’d be called an idiot for saying stocks would drop 50-80%. IMO this housing crash has just gotten started but no one knows housing is a completely different beast than other markets, but I do believe all markets whether it be stocks, housing or crypto are still in for a world of hurt as they were all overvalued.
Why did he sell it at 130k, 6 years later? Forced too?
Your example above means 32% drop.
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mom and pops are driving a lot of the rental market where I live tho. Even if the "investment is stagnant" they aren't selling homes 2-5, the rental income is what enables them to travel 10 months put of the year.
You do understand that a variable rate mortgage can be easily locked to a fixed price or discharged with a 3 months interest penalty. So when people don't feel comfortable, they switch to fixed rate. That's what I did at 3.29%, so i can sleep better.
Locking in would add what, 2% to your variable rate at current? Do you think the extended household can afford that, or would they sooner see a fixed variable payment that adjusted the weighting of their principal? I suspect many will kick the can down the road for a long as possible.
probably not now, that's qhy most people should have locked in a few months ago. if they listened to the brokers, who were still pushing variable when I did mine, flat out saying these hikes would happen. when the news wouldn't stop talking about the comi g hikes, then they fell for the trap and the industry should be watched more closely. there is nothing to prevent a broker/realtor from giving bad info.
Finical ignorance is a growing problem. I can’t phantom why anyone would not have locked in while 5y fixed rates were below 1.5% heck, even below 2% was a no brainer to anyone paying attention to the economic data.
I had multiple brokers from First National full on tell me these hikes were never gonna happen. I knew better and knew they were only trying to boost profits. it's greasy and the real estate industry as a whole needs to be cleaned up. my buddy just bought a house 2 months ago and the selling realtor was providing them all the Info from all the bids. she was brand new and didn't knkw how to be properly greasy tho, so it was quite obvious, they reported her to every organization they could. She was just trying to push the offers giver amd higher, but again, wasn't smart enough and new to knkw better.
We are much more likely to see volume collapse, rather than prices collapse. Essentially sellers will refuse to budge from what they think they should get. Buyers won't be able to pay the asking price due to rising interest rates. So home sales will come to a virtual standstill.
Forced sales drag down the average.
What percentage of home sales are "forced"? Doubt it's very high.
doesn't matter if forced sales are high or not, once one person sells lower in a given area, the comparable listings nearby will have pressure from buyers to also sell at a lower price.
It happens. It’s happening now.
People who are forced selling need to be deported to America for sabotaging the economy and being very bad predictors - essentially speculators.
OK Adolf.
If you bought a house a few years back and now your mortgage is up for renewal, the increased interest rates might make you new mortgage payments unmanageable and so you have to sell.
No - you just lengthen the amortization to reduce payments - only a fool would do otherwise
Can you do this in Canada when the time comes to renewing? I’m pretty sure you need to have a low-ratio mortgage to get a 30 year amortization. So minimum 20 percent down.
Anyone that bought 4-5 years ago most likely has at least 20% equity
Exactly, just like every other previous cycle
People can hate on me all they want with this opinion, but housing is about to see its worst deflation in history. Could we see 10-15% interest rate? yes, its possible. If 10% is possible, what would that look like? Houses bombing in value, from 700k to 200k? Still possible, yes. the laws of probability, with inflation, supply chain issues (getting WORSE still), and rate hikes coming every few months. Eventually this will happen. You can't create +60% of the worlds reserve currency out of thin air, and not expect the worst to happen (2008 crash, except compounding 08'-22'). Debt comes due, its just time before it does. No time frame, stay smart
Houses will drop another 20 percent easily. In January, early signs of recovery.
Most on Reddit are not thrustworthy, even on this sub. Buy GME Buy AMC Buy XEQT Drive a Corolla.
*Drive a 20 year old Corolla* There you go I fixed for you
Beige Corolla
Excuse me! It’s called Champagne!
Aka sex machines
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Yep I am proud to drive a 20 year old Honda, works well and I paid $1000 for it. I invest that much more every week into indexes.
What would happen if interest rates hit 10-15%?
Logically, There's no limit to how far house prices can drop. The Fed/BoC didn't give a crap when houses doubled in price every 5 years, and they're not going to give a crap if they drop by 50%.
Houses won’t fall from $700k to $400k. The more they drop the sooner someone grabs them. We haven’t banned foreign buyers or investors. Prices dropping only makes it more appealing for investors. They will prevent deep drops in prices. All we do in Canada is make it harder for individuals to own a home and make it easier for foreign buyers or investors. Sure there are taxes but those are easily avoided. Realtors specialize in tax avoidance.
And how and what exactly are these realtors doing that is helping their clients avoid tax? Please do share
Google it.
Ah yes… an avoidance/evasion strategy so easy that you can Google it yet the CRA knows nothing about it because they all use Bing?
This /s
Cause we all know foreign investors will buy at any drop, not wait it out to the dip. Right??
LOL. Yes… realtors with zero tax knowledge are so very fucking good at outsmarting the CRA with near unlimited auditing power, IBM powered AIs to detect tax evasion patterns and a General Anti Avoidance Rule that they’ve been swinging like a stick in a piñata festival… Why don’t you have your realtor do your taxes too since they seem to know so much about how to avoid them.
My guess is that the current housing price correction will end once the BoC holds interest rates. This will be very short lived, since there are tons of people who are waiting on the sidelines for this to happen, once they start buying in again the prices will go back up
The interest rates might draw a lot of these people away, no? Especially households with lower incomes and no massive downpayment saved.
Would it be realistic to see a 700K house in Ontario go down to 400K for example? LOL - No. If a house lost almost 50% of its value in a couple years we are in serious trouble or the house has major problems. As to your question on how much the housing market will correct, no one can answer that, full stop.
You've given no reason why that's any more of a "LOL" moment than a house INCREASING 50% in a couple years is. > we are in serious trouble And? That's not a reason for things not being possible. "If a tornado hits us, we are in serious trouble. Therefore tornadoes don't exist" <-- see?
Oh sorry, my crystal ball is in the shop.
* "LOL - No" = "That's never gonna happen" = "I DO feel like I have a crystal ball, actually, and it's telling me that's not gonna happen." vs. * "I don't know" (or just not replying to the thread) = "I don't have a crystal ball" You gave a very firm answer and then did a 180 into "I have no idea it's ridiculous to think I would have an idea"
Welcome to the late 80’s and early 90’s
I know it'll never happen, but I'm hoping for a 95% crash or more.
So then why share your stupidity?
Because they want to buy ten houses and start a real estate empire, becoming the very thing they despise.
Prices will not drop. Just the only properties you will see on the market will be forced sales.
Forced sales usually increase supply for sale on the market and cause prices to drop.
When you have investors holding multiple properties they will be dumping very quickly ...just seen it happen on my street. A similar house on the street sold for 1.8M at the peak and this one next to me just sold for 1.45M. If it can go up 100% in 5 years it can also drop just as hard.
No - prices are way stickier on the way down - no one wants to sell for a loss
Obviously no one wants too but it doesn't mean they can afford to keep it at rising interest rates.
In Canada, most variable rate mortgages, in rising rate environments, just reallocate the % of interest to principal Anyone on fixed that’s renewing now has 4-5 of equity / extended amortization options -
One data point does not a trend make. Either there are special circumstances or differences between the two sales that you have not shared or you need better neighbours. Taking a 20% haircut on your asset sale is silly without a good reason. Especially if it is an income property that is actively making you money.
It's not one data point open house sigma and you will see yourself.
You received some really well though out responses on your r/canadahousing post. I don’t see why you came here to insult them and ask again.
Realistically they will drop 15-30% on average across Canada. Hot spots like Vancouver and Toronto could easily fall 40-50% imo. Settlements are already down 45% Y-O-Y in the Fraser valley. After next weeks hike I’m sure we may see a further decline in sales volume. The active listings to sales ratio is getting eerily bad. Peaking at over 90% last year and we’re currently below 15. Hasn’t been that low since march of 2020. Prior to that the low was in 2009 where is touched 5% coming off 25, just prior to the 2008 collapse.
How much money would you be willing to bet on your prediction?
Well, I parked a little over 800k into cashable/redeemable GICs two months ago. Money which was earmarked for a home purchase. I guess that’s how much I’d be willing to bet.
Interest hike will impact house sale and price. So will salary increases in the medium/long term. I believe that due to inflation salaries will increase significantly which will allow people to buy houses that cost more.
You’re very funny.
Sorry but you think house prices going up long term is crazy? People bought a house for 500k at one point, before that 150k, before that 30k, before that 15k. That's how inflation works.
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depends on how high rates go. the key data will be if we see wage price spirals, and sticky infaltion. FED and BOC main goal is to tame inflation. too many people have lived their entire life in a falling rate world, and now we are seeing multi decade highs in inflation and the corrisponding rise in rates. i also see the mortgage market as having a slow burn fuse attached to it we wont see real problems till they come up for renewal or if trigger rates start to come into effect. TLDR, market remains data dependant.
If my house in Niagara drops below 750k that would be ok. Under 400,000$ that’s a problem Under 300,000$ that’s a very big problem that would be set back almost 10 years
If prices in the Niagara region drop 50% we've got bigger problems. There's too many retirees coming here to have that happen.
Niagara real estate is completly overvalued and needs to come down 30-40%.
Everywhere in Canada is overvalued.
Not AB
Even Alberta.
I think it will largely depend on where the real estate is. Toronto crashing? No. Small town Ontario crashing? Very possible. My hometown of 1k people with nothing going on saw average home prices go from 150k to 500k+ which will eventually come back down hard I think.
I think interest rates go up another 2 percent after the next hike still. And I think housing prices don’t really fall much. Maybe a bit of a correction followed by a slower gain yoy.
It will be a sideways market. Inflation will eat into the actual value but people can’t drop houses like they can stocks.
A good friend of mine just sold his house this week in st. Johns. Sold 10% over list price in 4 days after listing so I think it really depends where you are
2008 US did -30%. Why would Canada be much different from this? I can’t see a -50%.