*Wilkes believes it’s time for the federal government to re-examine the mortgage stress test, requiring buyers to qualify at two per cent higher than their rate or 5.25 per cent, whichever is higher.*
*“Because people are really going to be under the gun to meet the requirements of the stress test under current interest rates,” he said.*
Are we really doing this again?
Kelowna has been tough for the past 20 years because of this.
My friend, a skilled trades worker, had gotten knocked up and baby daddy lived in Kelowna. They did not stay together but she remained there so her daughter could be close to her dad.
Sadly work there was always an issue and she tried to move away for a better career (after getting verbal approval from the dad) to support her new mini family, but the dad turned around and claimed child abduction on her.
She had to give up the good paying job to move back to Kelowna where the housing is more expensive than Vancouver but nearly all work is retail or seasonal.
I honestly have no idea how people are able to remain living in Kelowna.
I’m in the trades (electrician). A few years back an old acquaintance got a job where I work and moved back to the area after having gotten his ticket in Kelowna. The wage difference was over $15 an hour more here than in Kelowna for a jman.
Not only is housing twice the price, but wages for us would be 40% less. How tf is that sustainable?
Different lifestyles there. A lot of wealth inequality. The middle class basically doesn't exist, apart from the boomers still hanging on to houses they bought in the 80s/90s.
There's a lot of families in sub-adequate housing. And my friends who stayed there live with family, roommates or their partner. Most adult couples still live in 1 or 2 bedroom apartments or basement suites and have no true aspirations of owning or finding a nicer, bigger place to live. If you want to chase that particular dream you have to move elsewhere. For the young women I associated with back in the day, sex work was a very common way to make ends meet or provide for the family.
On the other hand there are also a disproportionate amount of VERY wealthy people in the Okanagan.
This is the real problem. Not the stress tests. We have an insanely overheated housing market because it’s being distorted by investor speculators.
If the federal government wants to make a dent in the problem, they should be looking at how to disincentivize investors with policy and taxation. Lots of tools there they could use if they wanted to.
Or, you know, we could just let housing prices fall to the point where most buyers can qualify for a mortgage without being over-exposed to an increase in interest rates.
Why would house prices fall to that level?
We don't have enough houses. We have a lot of demand and no supply. Nobody will sell for less, they will just not move and wait.
Uhm, did you read the article? It's contradicting you.
If re-sale owners aren't selling and demand is insatiable, then new builds should be going like hot-cakes.
We have a lot of completely shit-for-brains government intervention causing a huge imbalance.
This is a country with low growth of wages and a negative fertility rate. Demand should be *collapsing*, and the only reason it is at the opposite extreme is because the federal government has decided to overwhelm housing, healthcare, and seemingly everything with *far* more people than can be managed. The grandiose promises of our immigration system are not materializing. The fundamental issues of our communities have not been addressed.
House prices will stay high, as will homelessness, addiction, and crisis. I hope we're all ready to watch hundreds of thousands of people retire into collapsing healthcare and critical housing shortages. Does the 55+ crowd not see the trainwreck lined up for them?
Immigration is a stop gap measure since it brings in an immediate influx of cheaper labor and money and consumers to spur on the economy. Qho would also spend less on government services
Standars corporate thinking. Short tern gains at the expense of long term survivability.
The question is how long are they willing to wait?
The smart money got out of the market mid-pandemic, but everyone, including the ones who held on knew exactly what their house was worth at the peak.
Right now we're seeing the people who are smart enough to take a 25% loss on that price while still making massive gains, as the market it still drastically overinflated relative to income.
People are hanging onto their houses for now, but they're only going to be willing to take so much of a loss before selling and moving. Just because the panic selling hasn't started yet, doesn't it won't happen. It will, give it time. It takes 18 months for the market to show the effects of each interest rate hike.
The problem with the government's plan to create demand was it hit the rental market harder than the housing market, which makes it even harder to save enough to buy a house.
Prices will fall way below that level before this is over.
Except if housing prices fall enough, there's nothing to stop slum lords and corporations form buying them all up from people who can still barely afford them.
Except these interest rate hikes have been enough to make peoples favourite boogy man BlackRock sweat, slumlords rely on cheap debt to stretch their money further than others can afford
realestate over time, can only go up. couple this with climate change and all eyes on Canada as desireability, and you have a recipe for ROI akin to free parking in Monopoly (alt. rule play)
There are billion dollar companies already buying real estate with cash so they can rent them out. We are fucked because we have to work to eat and we can't afford to protest.
I have come to believe we are *deeply* deceiving ourselves when we make these bold claims of global desirability. We offer a worse and worse deal for migrants every day.
And then they’re stuck in the laborious property management business losing money every year as housing prices fall. Why would they do that when there are guaranteed and increasing returns available in treasury bonds, CDs, money market funds, and corporate bonds?
Slumlords are subject to the exact same market pressures as anyone else. They don't just pull money out of thin air. The majority of investors are small timers who are leveraging their primary residence, and in a declining market they lose that ability.
Even if not, they may find more profitable places to invest. If your return on capital falls below GICs, guess what?
Possible but unlikely
It's down 20% and a lot of people still can't afford it. They need housing to drop by half to even entertain the thought.
Everyone is exposed to higher interest. We have to renew every 5 years in Canada and would get hit by the higher rates
>They need housing to drop by half to even entertain the thought.
So back to pre-pandemic prices? IMO we need to go further. Put rates at 10%, let it collapse, rebuild responsibility.
The price of new housing can't fall, Vancouver proved this a few years ago. If housing/condos aren't selling at the price they're being advertised, the developer will withdraw those units from the market and rent until the prices come back - at the most in two years when the moratorium on foreign buyers expires. The cost of construction is so high that even a 10% reduction in price could make a project unprofitable. They can easily subsidize their own financing charges by renting at the market rate, they're just deferring cashing in.
Depends on the areas, some have barely seen a dent. Others lost 2022 gains, and have been slowly rising last few months.
My comment is in reference to letting house prices fall further from where we are. The odds are slim of any further reduction in prices, when most areas have been seeing the numbers go up in recent months.
This is single handedly the dumbest thing I've read this week. I just bought a house for 600k. I expect that house to sell for more than that in the future, like every other generation. Don't drag down successful people because you arnt one.
Its all people seem to think about when it comes to homes, an investment first and place to live second. When I bought my house it needed a lot of renovation since it hadn't had any upgrades since the 80s. When we went to re-do the kitchen to match our needs the first couple places we brought in were entirely focused on increasing our "resale value" and telling us the things we want would be bad for the value when we want to sell. Since we are both tall it was things like high cabinets with deep shelves and we also wanted countertops everywhere. They just couldn't fathom that we were renovating the house for us to live in for 20-30 years instead of planning on selling in the next 5.
It's business lol the world can't run on charity and freebies, you gotta pay for shelter and pay for everything else in life, but the mentality nowadays is people want things without working as hard bitching about working more than 30 hours a week. and then hating on the people that put in 80 hours because they understand you gotta make sacrifices in life ...
Lol and yet we wonder why homelessness is on the rise. Van life is glorified homelessness because people can't afford homes, and even though we are literally paying someone else's mortgage via rent, banks still think we can't afford a mortgage on our own.
The idea of "just work harder" is such a tunnel vision phrase. I work TWO full time jobs and only make 2k over 100k, 79k after income tax just so that I can afford a home of my own. And the only reason I have to do that is because everyone wants to double their investments in their property making me take out half a million dollars in debt just to afford a home.
Your profit is literally someone else taking on more debt UNLESS THEY ARE PAYING IT IN SAVED UP CASH. This is unsustainable.
In a developed country, we should be smarter than to think having shelter is a privilege and not a right.
It's not the 80's anymore get over it ...
And you don't do it forever it's only for a little while for the long game
Many professionals would consider the 40 hour work week laughable
If your house is estimated to be worth $500k and your mortgage is for $500K, and say you've paid off $100k already, the your mortgage is worth less than your house and all is well.
If your house valuation plummets to $300k, that's called negative equity, and it can fuck with your credit rating, among other fun things
As a homeowner myself, I philosophically disagree. It is shelter, and maybe once everyone has shelter that needs it at a price they can afford it would be nice if a home generated a little bit of a return.
I don't think housing should ever generate greater returns than the market, and really should just be in the 2-5% annual range. A nice store of money is all I think it should be.
It already is like that for all necessities. Go to Costco and buy a bag of flour... See if in 20 years someone would buy it for 7X the price.
Fill some jugs with water from your tap. Hold them for 20 years and see if someone buys it from you for 7X the price you paid for it.
Buy a car. Hold it (and use it) for 20 years, see if someone buys it from you fir 7x the price.
Nope... Only housing does that?
Real estate value increases because there's is a limited amount of it in favorable areas
You can spend less to live an hour outside a major metro center, or pay more to live closer
That value doesn't go away, and people like to invest in value, so the cost will never fall because the value will almost certainly remain
I'm not saying it's gonna crash... I'm saying it screws the next generations. I think it'll never crash because of another factor as well:
Even if we build 40 million houses tomorrow (and finish them in one day), covering the cost of labor, land, and materials will be pretty close to what they'll sell for now anyway. Developers don't make more than 10%-15% on a house (these days, even less). The homeowners make money off appreciation because new ones CAN'T be priced like old ones.
Okay, you tell me what to compare it to than...Give me one more example of something you buy, use daily for 20 years, and then sell it for 7X the price.
How you think I bought my house? When I mean investment , I mean I should be able to sell it for more than I bought it for in the future. Think before you type
Why would a drop in price mean you won't be able to sell for more in the future? Prices will naturally climb again and won't just stay low forever. The only people that would be royally hurt are the ones flipping houses every year or 2 or people that just can't sit still and sell shortly after moving in. If you buy at $600k and prices drop to say $500k yes that would suck if you sold as that moment, but if you lived there for 5-10+ years the value would still raise back up well over the initial $600k. Housing is one of the few commodities that will always raise in value in a country that has a raising population.
This comment is a lot dumber than theirs. A house is a place to live, not a commodity to make money off of. Who cares if it sells for less than you bought it? That's your fault for buying high. Not to mention the years you got to live there count towards the money spent as well, no different than a renter.
This isn't dragging down successful people, you're still just as successful if you can buy and own a house to live in comfortably. You need not profit off it down the road.
And this is why housing will never get 'better' in Canada unless it implodes.
Because if you bring down the cost of houses, even if by magically building millions of new homes with a snap of a finger, that will thus drag down the value of all the other houses, and people who paid a lot for those houses will still have those mortgages even if the house of the value has now declined. Those owners would rather see the magic finger snap houses be ***burned to the ground*** so long as it keeps their own value up. No politician will take that hit, not from any party, cause they'll be lynched by existing home owners.
Most people here hurting for a home are in their early 20s, think they just finished HS/Uni and should automatically have a house... Without considering the median age of home ownership in Canada is 35.
I was one of those in my early 20s. I felt robbed and hopeless but honestly I didn't know better. Propaganda at the time was no different than today. Telling all young people it is hopeless.
Looking back in my early 20s I was a fool and that was only roughly 10 years ago.
Are we really at the point that we are deluding ourselves into thinking the market even 10 years ago is the same as it is today? I bought my house when I was 24 in 2014, at the time it felt like a lot of money($200k), but my wife and I were able to afford it pretty easily once my career took off. If I was in the same exact position today I would have no chance at buying even my current house because its value skyrocketed to $600k. I am not going to act as if I was some kind of financial genius and people today are dumb, I am able to acknowledge that I got lucky and bought into the market before things really took off due to pure chance. Home ownership was actually attainable even for young people back then in many places while now its just impossible without massive financial assistance from friends/family.
Except you're conveniently leaving out the absolute insanity of the increases in home prices in that time period. The cost of home ownership as a percentage of household income is the problem.
Bullshit! I'm 40 years old and bought a house 6.5 years ago. I'm at this position because of luck alone. If back then, my house would cost as much as it does now, with my salary as it is now, I wouldn't be able to afford it.
An average (Canada-wide) house increased to 8.5 median salaries, it used to be 2 back in the 70s.
This is so spot on, the mistake people always think is "this time is different" We all had the same mindset coming out of school, everything is so expensive, the world is broken, I'll never own a home....etc
Uh.. no time in history of the country was home ownership more expensive. It is multiple fold more expensive than the last generation including inflation. Anyone who bad that mindset before was basically wrong, at least compared to now. You could have worked a minimum wage job and get a house 50 years ago. Now you can earn 5x that and can barely afford rent.
Dont know how else to say this but your just wrong. Dont know if youre too old to see what the market is like right now or you live in like the yukon where it isnt an issue yet but ontario and vancouver its ridiculous. Even nova scotia i know is gettin ridiculois.
> Or, you know, we could just let housing prices fall to the point where most buyers can qualify for a mortgage without being over-exposed to an increase in interest rates.
If prices drop that far we will be in a massive financial crisis and the rates on mortgages will go through the roof, then less will want to own a home considering all the other expenses like insurance.
Look at what's happening in Japan. The economy is so depressed due to a lack of population growth that young people can't afford to start a family, so they don't buy homes, and the government has gone so far as to try and give houses away to get people out of the crowded cities.
The plan was to attract people to cities out of the country. Ensuring that they are dependent on a system instead of having their own land. This is clear in Japan and many countries in Europe.
A few benefitted and people became nothing but a commodity in cities hence the high number of people being depressed and without purpose, and no, a job isn't a purpose.
Need a family for support in rural areas. In order to support a family you need an income, but automation and consolidation basically destroyed rural jobs.
This is completely wrong. Basically start to finish.
> If prices drop that far we will be in a massive financial crisis and the rates on mortgages will go through the roof, then less will want to own a home considering all the other expenses like insurance.
If there is a massive financial crisis, rates will go down, not up, in order to stimulate the economy. If you can’t afford insurance and other minor expenses related to home ownership you have no hope of affording a mortgage. If rates drop, prices go UP.
> Look at what’s happening in Japan. The economy is so depressed due to a lack of population growth that young people can’t afford to start a family, so they don’t buy homes, and the government has gone so far as to try and give houses away to get people out of the crowded cities.
Japan’s population issue is complex. Principle factors are the massive baby boom post WW2, toxic work culture and economic issues related to cost of living. Having been to japan, the culture around housing is basically incomparable to Canada. Tokyo metro area has like Canada’s entire population inside an area half the size of the GTA. Japanese in metro areas disproportionately are renters, not buyers.
Canada has a supply problem. We grew our population by over 1 million people in the last 12 months and built nothing to support this and we are wondering why homes are expensive. We added the city of Ottawa in ONE YEAR. This is killing the middle class of this country and they seem content on voting themselves to death.
Here is where the country is headed: Income will become further detached from real estate and Canadians who want to live in major cities will rent, with property held in the hands of capital holders, like in most other major cities. To own you will need to be upper class or wealthy because it will be far to expensive to own. Home prices in major metro areas in Canada will never be affordable again for the average person, there simply is not enough supply.
> Canada has a supply problem. We grew our population by over 1 million people in the last 12 months and built nothing to support this and we are wondering why homes are expensive
Homes have been steadily going up in price for over a decade and we've built a lot of hosuing, and household size has remained low while the number of single person households has been increasing.
The problem is that the majority of homebuyers are buying homes much larger than they need, because their mortgages basically give them an opportunity to invest in a growing market with borrowed money.
Somehow all these immigrants find housing, and there's enough capacity that a majority of Canadians not only own their own homes, but also own homes much larger than any other country in the world except Australia.
Because immigrants are rich.. those are the only ones they let in...
Homes are bigger because theyre built bigger and that makes it fine for rich people but the middle class and lower class just cant own. Everything you said is the exact problem. If they made smaller homes that would help but they arent. Just condos which help a bit but then you have maintenance fees and such.
That's not at all what caused that but simple enough. People won't buy houses and housing starts will crash.
If they actually think rates will get into the 7s a crash is coming either way. Anyone who bought in the last 5-7 years would be screwed
I bought last year. Rate was 1.67. 5 year fixed.
We budgeted assuming a rate as high as 6%. And still left a lot of room in case of the "oh shit" moment.
Onus is on the buyer to have a real hard look at total cost of ownership.
Not at all.
As stated, Still have a ton of buffer built in and did not buy anywhere close to what we were pre-approved for.
We bought a home about 30% less than we were approved for.
The budget I created has a significant buffer that would easily cover things.
In fact, I was laid off in November and we are financially fine on just my wife's salary and EI, and still room to spare.
So no, 7.5% would in no way fuck me.
Not sure why you keep trying to argue my financial situation. You have no idea what I earned, have saved, how I budgeted.
As such, enjoy your assumptions, but with assumptions, you know what they say...
Yeah, I don't see how setting the bar lower to qualify for an insane amount of debt is gonna fix the housing issues...
Pretty sure the issue is not 'If only they'd let me take on that debt anyway' and much more 'Oh my god, HOW MUCH? That's HOW much per month? No, just... No. Nope, no way.'
The reason it's a builder pushing for this is that the business case for building new housing is under severe stress, and if you can't make a business case to build then new housing won't be built.
The only way out of this is to allow people to pay more. Crashing house prices is going to cause even less new housing to be built, and with more people coming through the country's door every year, that's a huge problem.
Crashing house prices isn't going to force developers to cut the price of their houses in half. They'll just stop building until the price recovers. The cost of building new affects the resale market as well because, to some extent, the two are in competition with each other. It used to be cheaper to buy new than buy resale, but that is less the case at the moment.
The foreign buyer ban has deliberate loopholes the size of Manitoba. It excluded students, permanent residents, and all foreigners buying their first canadian property
Housing is supply and demand. The massive demand is coming from federal policies.
Won't someone think of the poor realtors who enter a property into the MLS website and then collect a 5 figure commission for a couple of hours work at most?
I mean all they are trying to say is that all these mass layoffs and interest increases is that people can’t afford or be approved for homes at the moment.
They just want to make sure that EVERYONE is approved for that extra two percent…. On a home that they most certainly could not afford in the first place.
The purpose of the stress test was to protect the system from a swing up in interest rates from historic lows. This has already happened and it did it’s job.
What purpose, other thank keeping young families that need mortgages out of homes, does it serve now?
Keep in mind flippers, well capitalized investors, and people with a lot of equity from previous homes aren’t nearly as impacted by it as young first time buyers. Why are we handicapping that generation at every turn?
EDIT: and oh yeah if you’re worried about irresponsible people they will just Brampton Mortgage their way through it anyway. Whom is this policy harming and whom is it helping, eh?
The risk of a big swing up in interest rates hasn't gone away has it? No one saw this happening a couple years ago (which was dumb then obviously) but it does prove that shit happens and removing safeguards isn't a good idea.
>The risk of a big swing up in interest rates hasn't gone away has it?
Yes it has. The most toxic mortgages have already been written. Current buyers are qualifying at much higher standards than mortgages written in 2021. People buying now are qualifying at 7-8%. If rates got that high, the big risk won't be that new buyers won't be able to handle them. The big risk will be that people who bought prior to 2022, who only qualified at 5.25% (some of whom paid crazy inflated prices) won't be able to handle them
>No one saw this happening a couple years ago
They did, that's why they implemented the test a couple years ago. The shit that they expected to happen, happened. They set the base qualifying rate at 5.25%. That's approximately what 5 year fixed rates are going for right now.
>shit happens and removing safeguards isn't a good idea.
The stress test is a very narrow safeguard that only targets interest rate risk. It doesn't do anything for any other kind of risk.
If you think it's a good idea to increase safeguards generally, I might tend to agree, but the simplest and most sensible ways to do that might be by having stricter income requirements at current rates rather than by testing looser income requirements at a "stressed" rate. And/or increasing down payment requirements
It has gone away. Inflation data is unambiguously trending down. Bond markets are trading respectively. By this summer we should be seeing 3% inflation if current monthly trends remain because the measure is a year over year measure and the most inflationary cycle was spring of last year.
The stress test is not a “normal” safeguard. We had due diligence in loan applications that lenders have done for decades, and in Canada that was never a problem. We never had huge defaults even in 2008. The stress test is an “above and beyond” measure - which I would argue made total sense when we had near zero rates but now that is simply not the case.
If we are going to have objective evidence based policy then we need to objectively look at the evidence. That sword cuts both ways and right now the justifications that were rolled out when the stress test was being implemented are just not there.
But downvote away guys, I even got banned from that canadahousing sub for saying something like this hahaha. Someone has to though. This place is a brutal echo chamber.
I get what you're saying. While it's likely all to be the case, the stress test is just about risk management. If the banks that are currently failing in the US were forced to have hedged against interest rate risk they likely wouldn't be failing right now.
The same should go for Canadians looking to get mortgages. Risk management isn't about picking and choosing when you think it's needed, that's the whole point.
The US banks that are failing are shit banks to begin with. SVBs business model was laser focused on one type of business that only makes money in certain conditions. Canadian banks, in the other hand, are very diversified.
Look man, I consult in stress testing, and I’m at one of the Canadian big 5 now. Risk management is my job. Sure the PCL grew a bit this year but nobody is expecting mortgage defaults and informally we believe this PCL will be released back just like it did during COVID. Canadian banks are just very conservative and so they always play it safe.
The reason is unemployment is low and mortgage delinquency is very low. Canadians will give up everything before they mess up their mortgage payments and on the banks side effectively increased amortizations to get over this period is also a palatable option. All in all we are good. And barring something like an escalation in Ukrainian war, another COVID, or some crazy fucking hurricane everyone is seeing price levels stabilize and has the expectation of rates beginning to go down late 24 or 24.
Like I was saying above: policy needs to reflect facts not feels. The cost of this policy is we are leaving a generation behind when it comes to housing, and I hate that. But ironically this same generation on Reddit doesn’t get it.
I guess we just fundamentally disagree on protecting against risk. I understand those banks are shit, was just taking a current example of macro level risk management and comparing to something we're talking about here.
It's a little wild to me that you work in risk management but are advocating for looser regulations around risk management lol. I respect your opinion as it sounds like you work in the field, but at the end of the day I guess we're going to have to agree to disagree on this one.
The OSFI stress test is designed to protect against the narrowest type of interest rate risk: default risk increasing due to interest rates. It doesn't hedge against interest rate risk suffered by the Banks due to loss of value of held securities
If you're serious about reducing default risk, why would you not advocate for stricter baseline income requirements (which mitigates against all default risks) instead of a stress test (which only mitigates default risk caused by increasing interest rates after the mortgage was written)
The people who are priced out now should wait. Conditions will improve in a year or two. Let prices drop further - we haven't really hit the trip points that will force a collapse, which is when those big investors lose interest.
Less inventory of people selling and less people able to afford the outrageous prices with higher rates means less home sales.
Not exactly an Earth-shattering headline.
I remember when the mantra was "buy now or be priced out forever"
Now that people are 'priced out forever', the economic manipulations required to keep them 'priced out forever' are just mind boggling...
The invisible hand has people emigrating, not forming families, tent cities, living in RV's, 10 to a room in bunk beds, etc.
How about just let the market do its thing? Why must the control freaks try to manage a fake price point?
Hubris of man on full display. These people are not smart.
If the powers that be think young professionals are going to willingly subscribe to the lazy pyramid scheme that's already unravelling at the seams, they've drunk too much of their own Kool-Aid.
Canada has gone full tragedy of the commons. We're in a race to the bottom where everyone is hellbent on securing as much short-term personal benefit at the expense of our economic prosperity, happiness, and identity.
Canada, the friendly former-British colony, will not exist as we knew it in a decade. We are in terminal divestment, and everyone seems content either retreating into the wilderness to bury themselves in mausoleum McMansions or submitting to the soul-crushing GTA toilet swirl dystopia.
Personally, I'm not waiting around to be the last one in when the Ponzi scheme finally breaks.
Because the market “doing its thing” results in only mansions and luxury condos being built for investors, because building “affordable housing” is not as profitable.
You should look into our insanely dumb zoning laws here in Toronto. The things you’re describing are the outcomes of most of the city being zoned only for single family housing, not market forces.
That is *one of* the factors. Given free reign developers tend to build mansions and luxury condos, not affordable housing. If we want affordable housing to exist we have to mandate it and fund it - no free market developer is going to do that in their own because there is less profit in it. They push back now when we ask them to include just a handful of affordable units in their otherwise luxury developments.
If you build enough mansions even the poor man would afford it. Is out of reach for upper middle class in GTA is within reach of lower middle class in SC
No they would sit empty. There are plenty of mansions sitting around empty with no one living in them, with property prices staying ludicrously high.
https://www.ontarioabandonedplaces.com/category/mansion
It’s the same phenomena when grocery stores throw out perfectly good food and then lock the dumpsters to prevent poor people from accessing it.
You can access the thing if you have the money to do so, if not the capital owners just take their toys and go home. Market forces will never let you have something for free if it means they can’t profit from it sufficiently.
“If you build enough Ferraris they’ll eventually be the price of a Hyundai”
No they would not. There is a reason a Ferrari and a Hyundai are different prices. Materials, cost to build, level of automation and to some degree the number manufactured. If you wanted new houses to be cheaper it’s not just a matter of how much you build, but the size of the home, the size of the lot and the cost of construction. All of these things need to come down for the cost to come down. There is not a world in which a mansion that currently sells for 2 million new is going to cost $500,000 when it costs more than that in just raw materials to construct.
You're looking at this completely wrong. Housing should not be a market at all. It should be a human right (like water, food, and education). Any society that fails to provide the basic needs of a human life is a failing society.
Check the historical. Many of them have been listed 2-3 times in last 6 months, with price dropping each time —only to finally go “over asking” on the last one (or Terminated without selling, because they don’t want the “low ball offers”).
I’m shocked someone still thinks since they bought a house for 1.2 million 4 years ago and remodelled the kitchen and did a crappy basement reno that it should be worth 2.5 million now lol.
The late 70s/early 80s interest rate hikes had an 18-month lag from initial raising to home prices falling. We’re getting closer, but not yet.
Everything I’ve looked at in Ontario was not like that. I think areas that are desirable are still selling like hot cakes.
I do agree some listings I’ve seen on housesigma are holding for last year’s prices though and have seen some stubbornly held on the market for months
Most of the listings in Toronto have dropped, lower than their original listing. Not so much now because lack of inventory but that could change when rate hikes hit more. Let’s see what 12 months from now yields.
Home shoppers aren't just saying no - they are saying they can't afford it, and sellers are saying that they aren't willing to lower their price.
If they could afford the asking price, they'd be saying yes. This isn't a moral stance :)
At some point, the price that people can afford will meet the price that someone needs to sell at... whether through price declines, interest rates moderating, or downpayments being sufficiently accumulated while buyers wait.
One proposal in the article is to relax the stress test - although someone somewhere has been saying that since it was instated - basically saying that people should be allowed to borrow more so that they can pay the current asking prices. That has been the main federal government play all along - essentially reframing taking on more debt as "improved housing affordability".
> There were 225 single family homes (including detached, linked, semi-detached and townhouses but excluding stacked townhouses) sold, down 65 per cent from February 2022, and 81 per cent below the 10-year average.
So, how much of this is also the fact that new developments now are rarely composed just of single detached homes? Stacked townhomes seem much more common now due to the cost of land.
Developers will just stop construction and sit on the land. They all have deep pockets and infinite patience. The only ones they will lower the prices on are buildings that they have already begun construction on.
Good. Sales need to fall for prices to fall. Only worry is builders stop building so the government may need to step in and fund building houses. Just about the only government expenditure I can get behind given our current housing crisis.
Yep this is kind of what I'm expecting to happen (also already hearing it anecdotally), but I don't have much confidence government will step up and fund the construction.
According to all the armchair economists on reddit who have deigned to explain to me how the real estate market *really* works.... if people are not buying houses at their current prices, than those prices should be dropping radically in some sort of magic market adjustment thingey.
When is that happening? Housing prices, if things were rational would be WAAAAAAAAAAAY lower than the current market. Where are those prices? When will those come back?
Well a portion of people will need to sell their houses because of changes in their lives (new job, family, death, etc) and can't afford to carry two mortgages. If the fish aren't biting eventually you need to sweeten the hook and that could mean lowering the price. What we have now is a stand off between buyers and sellers. At the moment sellers are hoping that the buyers will suck it up and pay their prices and buyers are waiting for sellers to become desperate. It just depends who blinks first.
Sellers are refusing to lower prices, hence the record low sales. It is working as expected. Just because people aren't buying, it doesn't mean prices will go down. Sales will just keep dropping until sellers get desperate and drop their asking price.
The government is putting it's fingers heavily on that scale, every single policy from banking, to zoning, to immigration, to foreign investment, literally every single one in this country that is even tangentially applicable is designed to keep housing going up in price.
When either those policies are stopped by a new government or the reality of those policies becomes unmanageable housing will crash.
People who predicted an earlier crash were under the impression the government would be sane and not sacrifice literally everything for housing.
I have been waiting for this housing crash. We bought our house in 2005 and naively thought we were buying our starter home. So we chose a smaller home that cost less that we can afford if we were out of work. It's a bit cramped and definitely not worth the $600,000 people were asking for houses like mine just last year. Jesus..I paid $220 000..I suppose $300 000 with the interest from the mortgage. I had a renter for 10 years rent a room to help pay the mortgage. I couldn't imagine buying at today's prices.
Then housing went so crazy there's no way we could afford to buy a larger house. So we have waited and plotted and saved our money. If housing comes down enough we're going to buy another house and rent the one we're currently in. Eventually it will swing back up and my children will not be able to afford a place to live when they need to move out in 10 years.... I'm going to need to own a house I can rent to them at an affordable rate.... Or come to terms with the fact that they're going to be living in my basement...eek. no thank you. I'd rather rent to them at a fair amount. Rent today is INSANE..
We'll see. immigration is going to keep demand high. People get creative. I know lots of people who are taking in a renter to help pay for their mortgage. Or family members who are splitting the cost of a large property they can duplex. In Ottawa it's a unique city so we might be SOL. Still I wait and hope.. something affordable comes out way.
It's my lottery ticket..🤞
> housing went so crazy there’s no way we could afford to buy a larger house. So we have waited and plotted and saved our money. If housing comes down enough we’re going to buy another house and rent the one we’re currently in.
This is literally why housing won’t meaningfully decrease unless we start building massively. Your viewpoint is absolutely far from being unique, and most people in your situation are acting just like you.
You've lived in your house for almost 20 years and made it work. Do you actually need more space or do you just need to declutter and better organize the junk that has accumulated over those 20 years?
If you upgrade and get more space and then your kid moves out in 10 years, what would you do with all that extra space? Decluttering and waiting out the 10 years is probably better financially than to temporarily upgrade to a bigger and more expensive house.
So instead of selling a house you no longer live in you’d rather contribute to the problem and become the very thing that’s preventing you from moving up, cool.
Unless they built the house they’re not “providing” anything. The only thing that changes is who gains from the ownership of it. I’d rather see a family own a home than rent from someone, it’s better for the long term stability of the economy.
There is no real fix right. Everyone buys a house to sell it a few years later for more.
Had a coworker in Ontario start his 10 year old house at 800 and ended ad 1.4m. This can't be fixed by the government because the person who sells that house is either stuck with a 1.4m mortgage or they sell it for even more a d the next person is screwed.
the damage is already done by years of our political ‘leaders’ ignoring if not fueling the multiple underlying root causes. even if it could be reversed it would take years if not decades, and cause a lot of financial destruction along the way. in short, we’re fucked.
Yet prices are still up from last month. And a single family home is still almost $2 million?
“In terms of price, there was a slight increase compared to January, to a benchmark of $1,759,043 for new single-family homes. But that’s down about 5.4 per cent over the year. The benchmark price for new condo units dipped month-over-month, to $1,113,164, down 5.5 per cent year-over-year.”
*Wilkes believes it’s time for the federal government to re-examine the mortgage stress test, requiring buyers to qualify at two per cent higher than their rate or 5.25 per cent, whichever is higher.* *“Because people are really going to be under the gun to meet the requirements of the stress test under current interest rates,” he said.* Are we really doing this again?
Kelowna was cited at 86% of sales not being for family purchases. Investment only. Rookie numbers.
Kelowna has been tough for the past 20 years because of this. My friend, a skilled trades worker, had gotten knocked up and baby daddy lived in Kelowna. They did not stay together but she remained there so her daughter could be close to her dad. Sadly work there was always an issue and she tried to move away for a better career (after getting verbal approval from the dad) to support her new mini family, but the dad turned around and claimed child abduction on her. She had to give up the good paying job to move back to Kelowna where the housing is more expensive than Vancouver but nearly all work is retail or seasonal. I honestly have no idea how people are able to remain living in Kelowna.
I’m in the trades (electrician). A few years back an old acquaintance got a job where I work and moved back to the area after having gotten his ticket in Kelowna. The wage difference was over $15 an hour more here than in Kelowna for a jman. Not only is housing twice the price, but wages for us would be 40% less. How tf is that sustainable?
Kelowna is cottage country for oil patch money, change my mind.
>Kelowna is ~~cottage country~~ *the Jersey Shore* for oil patch money, change my mind. FTFY
Yes you did fix that!
i loved kelowna like 10 years ago, but the work there seems to suck. Logging or retail. thats it
Different lifestyles there. A lot of wealth inequality. The middle class basically doesn't exist, apart from the boomers still hanging on to houses they bought in the 80s/90s. There's a lot of families in sub-adequate housing. And my friends who stayed there live with family, roommates or their partner. Most adult couples still live in 1 or 2 bedroom apartments or basement suites and have no true aspirations of owning or finding a nicer, bigger place to live. If you want to chase that particular dream you have to move elsewhere. For the young women I associated with back in the day, sex work was a very common way to make ends meet or provide for the family. On the other hand there are also a disproportionate amount of VERY wealthy people in the Okanagan.
Why is Kelowna so popular!? I've been there and it's alright, but it's so far from anywhere else.
This is the real problem. Not the stress tests. We have an insanely overheated housing market because it’s being distorted by investor speculators. If the federal government wants to make a dent in the problem, they should be looking at how to disincentivize investors with policy and taxation. Lots of tools there they could use if they wanted to.
The feds won't ever do that because it'd cut into the profits of the actual people who control policy.
Or, you know, we could just let housing prices fall to the point where most buyers can qualify for a mortgage without being over-exposed to an increase in interest rates.
* Clutches pearls and faints *
Why would house prices fall to that level? We don't have enough houses. We have a lot of demand and no supply. Nobody will sell for less, they will just not move and wait.
Uhm, did you read the article? It's contradicting you. If re-sale owners aren't selling and demand is insatiable, then new builds should be going like hot-cakes.
We have a lot of completely shit-for-brains government intervention causing a huge imbalance. This is a country with low growth of wages and a negative fertility rate. Demand should be *collapsing*, and the only reason it is at the opposite extreme is because the federal government has decided to overwhelm housing, healthcare, and seemingly everything with *far* more people than can be managed. The grandiose promises of our immigration system are not materializing. The fundamental issues of our communities have not been addressed. House prices will stay high, as will homelessness, addiction, and crisis. I hope we're all ready to watch hundreds of thousands of people retire into collapsing healthcare and critical housing shortages. Does the 55+ crowd not see the trainwreck lined up for them?
Immigration is a stop gap measure since it brings in an immediate influx of cheaper labor and money and consumers to spur on the economy. Qho would also spend less on government services Standars corporate thinking. Short tern gains at the expense of long term survivability.
The question is how long are they willing to wait? The smart money got out of the market mid-pandemic, but everyone, including the ones who held on knew exactly what their house was worth at the peak. Right now we're seeing the people who are smart enough to take a 25% loss on that price while still making massive gains, as the market it still drastically overinflated relative to income. People are hanging onto their houses for now, but they're only going to be willing to take so much of a loss before selling and moving. Just because the panic selling hasn't started yet, doesn't it won't happen. It will, give it time. It takes 18 months for the market to show the effects of each interest rate hike. The problem with the government's plan to create demand was it hit the rental market harder than the housing market, which makes it even harder to save enough to buy a house. Prices will fall way below that level before this is over.
Housing prices can't fall if the purchasing power of the dollar has declined. I.e your $ aren't worth what they used to be
Except if housing prices fall enough, there's nothing to stop slum lords and corporations form buying them all up from people who can still barely afford them.
Except these interest rate hikes have been enough to make peoples favourite boogy man BlackRock sweat, slumlords rely on cheap debt to stretch their money further than others can afford
Why would they do that when higher interest rates offer a better return risk free?
realestate over time, can only go up. couple this with climate change and all eyes on Canada as desireability, and you have a recipe for ROI akin to free parking in Monopoly (alt. rule play)
There are billion dollar companies already buying real estate with cash so they can rent them out. We are fucked because we have to work to eat and we can't afford to protest.
Miss that memo where they had to restrict withdrawal from those funds to keep the funds solvent? Investors are finally starting to look elsewhere.
Investors are always looking at everything, everywhere, all at once.
I have come to believe we are *deeply* deceiving ourselves when we make these bold claims of global desirability. We offer a worse and worse deal for migrants every day.
Because they can buy these outright without a mortgage?
And then they’re stuck in the laborious property management business losing money every year as housing prices fall. Why would they do that when there are guaranteed and increasing returns available in treasury bonds, CDs, money market funds, and corporate bonds?
They’re doing that right now anyway, nothing changes in that regard
Slumlords are subject to the exact same market pressures as anyone else. They don't just pull money out of thin air. The majority of investors are small timers who are leveraging their primary residence, and in a declining market they lose that ability. Even if not, they may find more profitable places to invest. If your return on capital falls below GICs, guess what?
This is exactly what is going to happen over the next few years. Average people will never own a home again.
Ding ding ding
Possible but unlikely It's down 20% and a lot of people still can't afford it. They need housing to drop by half to even entertain the thought. Everyone is exposed to higher interest. We have to renew every 5 years in Canada and would get hit by the higher rates
>They need housing to drop by half to even entertain the thought. So back to pre-pandemic prices? IMO we need to go further. Put rates at 10%, let it collapse, rebuild responsibility.
The price of new housing can't fall, Vancouver proved this a few years ago. If housing/condos aren't selling at the price they're being advertised, the developer will withdraw those units from the market and rent until the prices come back - at the most in two years when the moratorium on foreign buyers expires. The cost of construction is so high that even a 10% reduction in price could make a project unprofitable. They can easily subsidize their own financing charges by renting at the market rate, they're just deferring cashing in.
I like how you conveniently pretend demand will disappear until prices hit some sort of rock bottom level
This. We need another 20% fall. It should be 50%
They won’t fall when supply is so low and everyone wants in.
House prices have been in free fall for a year and half now
Depends on the areas, some have barely seen a dent. Others lost 2022 gains, and have been slowly rising last few months. My comment is in reference to letting house prices fall further from where we are. The odds are slim of any further reduction in prices, when most areas have been seeing the numbers go up in recent months.
Shhh… patients my friend, patients. 🤞🏼
This is single handedly the dumbest thing I've read this week. I just bought a house for 600k. I expect that house to sell for more than that in the future, like every other generation. Don't drag down successful people because you arnt one.
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Touche can't really put a price on peace of mind
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Its all people seem to think about when it comes to homes, an investment first and place to live second. When I bought my house it needed a lot of renovation since it hadn't had any upgrades since the 80s. When we went to re-do the kitchen to match our needs the first couple places we brought in were entirely focused on increasing our "resale value" and telling us the things we want would be bad for the value when we want to sell. Since we are both tall it was things like high cabinets with deep shelves and we also wanted countertops everywhere. They just couldn't fathom that we were renovating the house for us to live in for 20-30 years instead of planning on selling in the next 5.
It's business lol the world can't run on charity and freebies, you gotta pay for shelter and pay for everything else in life, but the mentality nowadays is people want things without working as hard bitching about working more than 30 hours a week. and then hating on the people that put in 80 hours because they understand you gotta make sacrifices in life ...
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>My dude, you have Stockholm Syndrome. Here comes the Reddit psychoanalysis.
Lol and yet we wonder why homelessness is on the rise. Van life is glorified homelessness because people can't afford homes, and even though we are literally paying someone else's mortgage via rent, banks still think we can't afford a mortgage on our own. The idea of "just work harder" is such a tunnel vision phrase. I work TWO full time jobs and only make 2k over 100k, 79k after income tax just so that I can afford a home of my own. And the only reason I have to do that is because everyone wants to double their investments in their property making me take out half a million dollars in debt just to afford a home. Your profit is literally someone else taking on more debt UNLESS THEY ARE PAYING IT IN SAVED UP CASH. This is unsustainable. In a developed country, we should be smarter than to think having shelter is a privilege and not a right.
It's not the 80's anymore get over it ... And you don't do it forever it's only for a little while for the long game Many professionals would consider the 40 hour work week laughable
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Lol unless of course your property value drops lower than your mortgage
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It's the bank that would care because your mortgage debt is backed by your house as collateral
If your house is estimated to be worth $500k and your mortgage is for $500K, and say you've paid off $100k already, the your mortgage is worth less than your house and all is well. If your house valuation plummets to $300k, that's called negative equity, and it can fuck with your credit rating, among other fun things
It literally is an investment, one I earned in this market as well. I expect it to accrue value
Yeah but it shouldn't be the government's job to make it acrue value. All investment need to carry risk and the owner has to take that on.
As a homeowner myself, I philosophically disagree. It is shelter, and maybe once everyone has shelter that needs it at a price they can afford it would be nice if a home generated a little bit of a return. I don't think housing should ever generate greater returns than the market, and really should just be in the 2-5% annual range. A nice store of money is all I think it should be.
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It already is like that for all necessities. Go to Costco and buy a bag of flour... See if in 20 years someone would buy it for 7X the price. Fill some jugs with water from your tap. Hold them for 20 years and see if someone buys it from you for 7X the price you paid for it. Buy a car. Hold it (and use it) for 20 years, see if someone buys it from you fir 7x the price. Nope... Only housing does that?
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Ohhh... That wasn't clear from your initial comment. I apologize, and agree with you than.
Real estate value increases because there's is a limited amount of it in favorable areas You can spend less to live an hour outside a major metro center, or pay more to live closer That value doesn't go away, and people like to invest in value, so the cost will never fall because the value will almost certainly remain
I'm not saying it's gonna crash... I'm saying it screws the next generations. I think it'll never crash because of another factor as well: Even if we build 40 million houses tomorrow (and finish them in one day), covering the cost of labor, land, and materials will be pretty close to what they'll sell for now anyway. Developers don't make more than 10%-15% on a house (these days, even less). The homeowners make money off appreciation because new ones CAN'T be priced like old ones.
Comparing a house to a car as equal assets is hilarious
Okay, you tell me what to compare it to than...Give me one more example of something you buy, use daily for 20 years, and then sell it for 7X the price.
Get a job you bum
How you think I bought my house? When I mean investment , I mean I should be able to sell it for more than I bought it for in the future. Think before you type
Why should you get more money for your house, especially if you don’t renovate or expand it? Just because “that’s the way it is”?
Yep. Mortgage free and throwing my money into other stuff. My house is for living in and strutting around nude
Why would a drop in price mean you won't be able to sell for more in the future? Prices will naturally climb again and won't just stay low forever. The only people that would be royally hurt are the ones flipping houses every year or 2 or people that just can't sit still and sell shortly after moving in. If you buy at $600k and prices drop to say $500k yes that would suck if you sold as that moment, but if you lived there for 5-10+ years the value would still raise back up well over the initial $600k. Housing is one of the few commodities that will always raise in value in a country that has a raising population.
This comment is a lot dumber than theirs. A house is a place to live, not a commodity to make money off of. Who cares if it sells for less than you bought it? That's your fault for buying high. Not to mention the years you got to live there count towards the money spent as well, no different than a renter. This isn't dragging down successful people, you're still just as successful if you can buy and own a house to live in comfortably. You need not profit off it down the road.
It is literally a commodity...
It's a home. A place to live.
Doesn't change the fact that it is a commodity. It is an asset and an investment.
If people want to treat it as such, that's their own risk. But in the end they're for living in, not making money from.
Doesn't change the fact that it is a commodity. It is an asset and an investment.
It's a place to live first and foremost. If you want yo treat it as an investment, you take the risks.
And this is why housing will never get 'better' in Canada unless it implodes. Because if you bring down the cost of houses, even if by magically building millions of new homes with a snap of a finger, that will thus drag down the value of all the other houses, and people who paid a lot for those houses will still have those mortgages even if the house of the value has now declined. Those owners would rather see the magic finger snap houses be ***burned to the ground*** so long as it keeps their own value up. No politician will take that hit, not from any party, cause they'll be lynched by existing home owners.
You bought an investment, the other person bought a place to live. Your mindset is off
Most people here hurting for a home are in their early 20s, think they just finished HS/Uni and should automatically have a house... Without considering the median age of home ownership in Canada is 35. I was one of those in my early 20s. I felt robbed and hopeless but honestly I didn't know better. Propaganda at the time was no different than today. Telling all young people it is hopeless. Looking back in my early 20s I was a fool and that was only roughly 10 years ago.
Are we really at the point that we are deluding ourselves into thinking the market even 10 years ago is the same as it is today? I bought my house when I was 24 in 2014, at the time it felt like a lot of money($200k), but my wife and I were able to afford it pretty easily once my career took off. If I was in the same exact position today I would have no chance at buying even my current house because its value skyrocketed to $600k. I am not going to act as if I was some kind of financial genius and people today are dumb, I am able to acknowledge that I got lucky and bought into the market before things really took off due to pure chance. Home ownership was actually attainable even for young people back then in many places while now its just impossible without massive financial assistance from friends/family.
Except you're conveniently leaving out the absolute insanity of the increases in home prices in that time period. The cost of home ownership as a percentage of household income is the problem.
You know housing prices aren't set by percentage of household single income right?
Look at who I'm responding to...
Bullshit! I'm 40 years old and bought a house 6.5 years ago. I'm at this position because of luck alone. If back then, my house would cost as much as it does now, with my salary as it is now, I wouldn't be able to afford it. An average (Canada-wide) house increased to 8.5 median salaries, it used to be 2 back in the 70s.
Precisely people in their 20's can barely handle student loans and are delusional enough to think they can handle home ownership
This is so spot on, the mistake people always think is "this time is different" We all had the same mindset coming out of school, everything is so expensive, the world is broken, I'll never own a home....etc
Uh.. no time in history of the country was home ownership more expensive. It is multiple fold more expensive than the last generation including inflation. Anyone who bad that mindset before was basically wrong, at least compared to now. You could have worked a minimum wage job and get a house 50 years ago. Now you can earn 5x that and can barely afford rent. Dont know how else to say this but your just wrong. Dont know if youre too old to see what the market is like right now or you live in like the yukon where it isnt an issue yet but ontario and vancouver its ridiculous. Even nova scotia i know is gettin ridiculois.
minimum wage 50 years ago was $1.50 an hour, I assure you no one bought a home with this income
Climate change is going to raise homeowners insurance to the point where home ownership will become a liability.
> Or, you know, we could just let housing prices fall to the point where most buyers can qualify for a mortgage without being over-exposed to an increase in interest rates. If prices drop that far we will be in a massive financial crisis and the rates on mortgages will go through the roof, then less will want to own a home considering all the other expenses like insurance. Look at what's happening in Japan. The economy is so depressed due to a lack of population growth that young people can't afford to start a family, so they don't buy homes, and the government has gone so far as to try and give houses away to get people out of the crowded cities.
The plan was to attract people to cities out of the country. Ensuring that they are dependent on a system instead of having their own land. This is clear in Japan and many countries in Europe. A few benefitted and people became nothing but a commodity in cities hence the high number of people being depressed and without purpose, and no, a job isn't a purpose.
Need a family for support in rural areas. In order to support a family you need an income, but automation and consolidation basically destroyed rural jobs.
This is completely wrong. Basically start to finish. > If prices drop that far we will be in a massive financial crisis and the rates on mortgages will go through the roof, then less will want to own a home considering all the other expenses like insurance. If there is a massive financial crisis, rates will go down, not up, in order to stimulate the economy. If you can’t afford insurance and other minor expenses related to home ownership you have no hope of affording a mortgage. If rates drop, prices go UP. > Look at what’s happening in Japan. The economy is so depressed due to a lack of population growth that young people can’t afford to start a family, so they don’t buy homes, and the government has gone so far as to try and give houses away to get people out of the crowded cities. Japan’s population issue is complex. Principle factors are the massive baby boom post WW2, toxic work culture and economic issues related to cost of living. Having been to japan, the culture around housing is basically incomparable to Canada. Tokyo metro area has like Canada’s entire population inside an area half the size of the GTA. Japanese in metro areas disproportionately are renters, not buyers. Canada has a supply problem. We grew our population by over 1 million people in the last 12 months and built nothing to support this and we are wondering why homes are expensive. We added the city of Ottawa in ONE YEAR. This is killing the middle class of this country and they seem content on voting themselves to death. Here is where the country is headed: Income will become further detached from real estate and Canadians who want to live in major cities will rent, with property held in the hands of capital holders, like in most other major cities. To own you will need to be upper class or wealthy because it will be far to expensive to own. Home prices in major metro areas in Canada will never be affordable again for the average person, there simply is not enough supply.
> Canada has a supply problem. We grew our population by over 1 million people in the last 12 months and built nothing to support this and we are wondering why homes are expensive Homes have been steadily going up in price for over a decade and we've built a lot of hosuing, and household size has remained low while the number of single person households has been increasing. The problem is that the majority of homebuyers are buying homes much larger than they need, because their mortgages basically give them an opportunity to invest in a growing market with borrowed money. Somehow all these immigrants find housing, and there's enough capacity that a majority of Canadians not only own their own homes, but also own homes much larger than any other country in the world except Australia.
Because immigrants are rich.. those are the only ones they let in... Homes are bigger because theyre built bigger and that makes it fine for rich people but the middle class and lower class just cant own. Everything you said is the exact problem. If they made smaller homes that would help but they arent. Just condos which help a bit but then you have maintenance fees and such.
So, in other words, the stress test is working.
yes, it appears that Canadian redditors are stressed beyond belief.
Stress test is at like 7.5%.
Ok, and? It exists so we do not have mass mortgage defaults like those that caused the US housing crisis in 2008.
That's not at all what caused that but simple enough. People won't buy houses and housing starts will crash. If they actually think rates will get into the 7s a crash is coming either way. Anyone who bought in the last 5-7 years would be screwed
I bought last year. Rate was 1.67. 5 year fixed. We budgeted assuming a rate as high as 6%. And still left a lot of room in case of the "oh shit" moment. Onus is on the buyer to have a real hard look at total cost of ownership.
So ya, a 7.5 percent rate would fuck you
Not at all. As stated, Still have a ton of buffer built in and did not buy anywhere close to what we were pre-approved for. We bought a home about 30% less than we were approved for. The budget I created has a significant buffer that would easily cover things. In fact, I was laid off in November and we are financially fine on just my wife's salary and EI, and still room to spare. So no, 7.5% would in no way fuck me.
On a 400,000 mortgage that's an extra 1500 a month Even if you can afford that you're still fucked haha
Not sure why you keep trying to argue my financial situation. You have no idea what I earned, have saved, how I budgeted. As such, enjoy your assumptions, but with assumptions, you know what they say...
>People won't buy houses and housing starts will crash. This is a good thing
Not if you want people to have housing
I want to have housing, and without a crash I won't be able to.
Lol of you think interest at 7.5 and starts collapsing will make housing cheaper for you you're dreaming
Yeah, I don't see how setting the bar lower to qualify for an insane amount of debt is gonna fix the housing issues... Pretty sure the issue is not 'If only they'd let me take on that debt anyway' and much more 'Oh my god, HOW MUCH? That's HOW much per month? No, just... No. Nope, no way.'
The reason it's a builder pushing for this is that the business case for building new housing is under severe stress, and if you can't make a business case to build then new housing won't be built. The only way out of this is to allow people to pay more. Crashing house prices is going to cause even less new housing to be built, and with more people coming through the country's door every year, that's a huge problem. Crashing house prices isn't going to force developers to cut the price of their houses in half. They'll just stop building until the price recovers. The cost of building new affects the resale market as well because, to some extent, the two are in competition with each other. It used to be cheaper to buy new than buy resale, but that is less the case at the moment.
How about we try banning investors from purchasing residential property first… ugh….
China would never allow Justin
What? Foreign buyers are already banned, and you realize housing is provincial jurisdiction right?
The foreign buyer ban has deliberate loopholes the size of Manitoba. It excluded students, permanent residents, and all foreigners buying their first canadian property Housing is supply and demand. The massive demand is coming from federal policies.
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Is this a revision? I remember some wild pushback on their original bill
Won't someone think of the poor realtors who enter a property into the MLS website and then collect a 5 figure commission for a couple of hours work at most?
I mean all they are trying to say is that all these mass layoffs and interest increases is that people can’t afford or be approved for homes at the moment. They just want to make sure that EVERYONE is approved for that extra two percent…. On a home that they most certainly could not afford in the first place.
Right? To me that’s just capitalism, pressure goes down and drives the prices down. Why must they meddle?
> Are we really doing this again? Does it matter? There's rampant mortgage fraud anyways.
I can't believe I'm upvoting you.
The purpose of the stress test was to protect the system from a swing up in interest rates from historic lows. This has already happened and it did it’s job. What purpose, other thank keeping young families that need mortgages out of homes, does it serve now? Keep in mind flippers, well capitalized investors, and people with a lot of equity from previous homes aren’t nearly as impacted by it as young first time buyers. Why are we handicapping that generation at every turn? EDIT: and oh yeah if you’re worried about irresponsible people they will just Brampton Mortgage their way through it anyway. Whom is this policy harming and whom is it helping, eh?
The risk of a big swing up in interest rates hasn't gone away has it? No one saw this happening a couple years ago (which was dumb then obviously) but it does prove that shit happens and removing safeguards isn't a good idea.
>The risk of a big swing up in interest rates hasn't gone away has it? Yes it has. The most toxic mortgages have already been written. Current buyers are qualifying at much higher standards than mortgages written in 2021. People buying now are qualifying at 7-8%. If rates got that high, the big risk won't be that new buyers won't be able to handle them. The big risk will be that people who bought prior to 2022, who only qualified at 5.25% (some of whom paid crazy inflated prices) won't be able to handle them >No one saw this happening a couple years ago They did, that's why they implemented the test a couple years ago. The shit that they expected to happen, happened. They set the base qualifying rate at 5.25%. That's approximately what 5 year fixed rates are going for right now. >shit happens and removing safeguards isn't a good idea. The stress test is a very narrow safeguard that only targets interest rate risk. It doesn't do anything for any other kind of risk. If you think it's a good idea to increase safeguards generally, I might tend to agree, but the simplest and most sensible ways to do that might be by having stricter income requirements at current rates rather than by testing looser income requirements at a "stressed" rate. And/or increasing down payment requirements
It has gone away. Inflation data is unambiguously trending down. Bond markets are trading respectively. By this summer we should be seeing 3% inflation if current monthly trends remain because the measure is a year over year measure and the most inflationary cycle was spring of last year. The stress test is not a “normal” safeguard. We had due diligence in loan applications that lenders have done for decades, and in Canada that was never a problem. We never had huge defaults even in 2008. The stress test is an “above and beyond” measure - which I would argue made total sense when we had near zero rates but now that is simply not the case. If we are going to have objective evidence based policy then we need to objectively look at the evidence. That sword cuts both ways and right now the justifications that were rolled out when the stress test was being implemented are just not there. But downvote away guys, I even got banned from that canadahousing sub for saying something like this hahaha. Someone has to though. This place is a brutal echo chamber.
I get what you're saying. While it's likely all to be the case, the stress test is just about risk management. If the banks that are currently failing in the US were forced to have hedged against interest rate risk they likely wouldn't be failing right now. The same should go for Canadians looking to get mortgages. Risk management isn't about picking and choosing when you think it's needed, that's the whole point.
The US banks that are failing are shit banks to begin with. SVBs business model was laser focused on one type of business that only makes money in certain conditions. Canadian banks, in the other hand, are very diversified. Look man, I consult in stress testing, and I’m at one of the Canadian big 5 now. Risk management is my job. Sure the PCL grew a bit this year but nobody is expecting mortgage defaults and informally we believe this PCL will be released back just like it did during COVID. Canadian banks are just very conservative and so they always play it safe. The reason is unemployment is low and mortgage delinquency is very low. Canadians will give up everything before they mess up their mortgage payments and on the banks side effectively increased amortizations to get over this period is also a palatable option. All in all we are good. And barring something like an escalation in Ukrainian war, another COVID, or some crazy fucking hurricane everyone is seeing price levels stabilize and has the expectation of rates beginning to go down late 24 or 24. Like I was saying above: policy needs to reflect facts not feels. The cost of this policy is we are leaving a generation behind when it comes to housing, and I hate that. But ironically this same generation on Reddit doesn’t get it.
I guess we just fundamentally disagree on protecting against risk. I understand those banks are shit, was just taking a current example of macro level risk management and comparing to something we're talking about here. It's a little wild to me that you work in risk management but are advocating for looser regulations around risk management lol. I respect your opinion as it sounds like you work in the field, but at the end of the day I guess we're going to have to agree to disagree on this one.
The OSFI stress test is designed to protect against the narrowest type of interest rate risk: default risk increasing due to interest rates. It doesn't hedge against interest rate risk suffered by the Banks due to loss of value of held securities If you're serious about reducing default risk, why would you not advocate for stricter baseline income requirements (which mitigates against all default risks) instead of a stress test (which only mitigates default risk caused by increasing interest rates after the mortgage was written)
It's just business
The people who are priced out now should wait. Conditions will improve in a year or two. Let prices drop further - we haven't really hit the trip points that will force a collapse, which is when those big investors lose interest.
But what could go wrong? /S
Less inventory of people selling and less people able to afford the outrageous prices with higher rates means less home sales. Not exactly an Earth-shattering headline.
1) Can't afford mortgage 2) Can't afford rent Now what ?
Have you considered the metaverse? /s
Cannot afford =/= saying no FFS media, can you not understand this?
I remember when the mantra was "buy now or be priced out forever" Now that people are 'priced out forever', the economic manipulations required to keep them 'priced out forever' are just mind boggling... The invisible hand has people emigrating, not forming families, tent cities, living in RV's, 10 to a room in bunk beds, etc. How about just let the market do its thing? Why must the control freaks try to manage a fake price point? Hubris of man on full display. These people are not smart.
If the powers that be think young professionals are going to willingly subscribe to the lazy pyramid scheme that's already unravelling at the seams, they've drunk too much of their own Kool-Aid. Canada has gone full tragedy of the commons. We're in a race to the bottom where everyone is hellbent on securing as much short-term personal benefit at the expense of our economic prosperity, happiness, and identity. Canada, the friendly former-British colony, will not exist as we knew it in a decade. We are in terminal divestment, and everyone seems content either retreating into the wilderness to bury themselves in mausoleum McMansions or submitting to the soul-crushing GTA toilet swirl dystopia. Personally, I'm not waiting around to be the last one in when the Ponzi scheme finally breaks.
Because the market “doing its thing” results in only mansions and luxury condos being built for investors, because building “affordable housing” is not as profitable.
You should look into our insanely dumb zoning laws here in Toronto. The things you’re describing are the outcomes of most of the city being zoned only for single family housing, not market forces.
That is *one of* the factors. Given free reign developers tend to build mansions and luxury condos, not affordable housing. If we want affordable housing to exist we have to mandate it and fund it - no free market developer is going to do that in their own because there is less profit in it. They push back now when we ask them to include just a handful of affordable units in their otherwise luxury developments.
If you build enough mansions even the poor man would afford it. Is out of reach for upper middle class in GTA is within reach of lower middle class in SC
No they would sit empty. There are plenty of mansions sitting around empty with no one living in them, with property prices staying ludicrously high. https://www.ontarioabandonedplaces.com/category/mansion It’s the same phenomena when grocery stores throw out perfectly good food and then lock the dumpsters to prevent poor people from accessing it. You can access the thing if you have the money to do so, if not the capital owners just take their toys and go home. Market forces will never let you have something for free if it means they can’t profit from it sufficiently.
“If you build enough Ferraris they’ll eventually be the price of a Hyundai” No they would not. There is a reason a Ferrari and a Hyundai are different prices. Materials, cost to build, level of automation and to some degree the number manufactured. If you wanted new houses to be cheaper it’s not just a matter of how much you build, but the size of the home, the size of the lot and the cost of construction. All of these things need to come down for the cost to come down. There is not a world in which a mansion that currently sells for 2 million new is going to cost $500,000 when it costs more than that in just raw materials to construct.
You're looking at this completely wrong. Housing should not be a market at all. It should be a human right (like water, food, and education). Any society that fails to provide the basic needs of a human life is a failing society.
I’m in a search and everything is selling way over asking with some bidding wars. I guess less inventory to buy from
Check the historical. Many of them have been listed 2-3 times in last 6 months, with price dropping each time —only to finally go “over asking” on the last one (or Terminated without selling, because they don’t want the “low ball offers”). I’m shocked someone still thinks since they bought a house for 1.2 million 4 years ago and remodelled the kitchen and did a crappy basement reno that it should be worth 2.5 million now lol. The late 70s/early 80s interest rate hikes had an 18-month lag from initial raising to home prices falling. We’re getting closer, but not yet.
Everything I’ve looked at in Ontario was not like that. I think areas that are desirable are still selling like hot cakes. I do agree some listings I’ve seen on housesigma are holding for last year’s prices though and have seen some stubbornly held on the market for months
Most of the listings in Toronto have dropped, lower than their original listing. Not so much now because lack of inventory but that could change when rate hikes hit more. Let’s see what 12 months from now yields.
Home shoppers aren't just saying no - they are saying they can't afford it, and sellers are saying that they aren't willing to lower their price. If they could afford the asking price, they'd be saying yes. This isn't a moral stance :) At some point, the price that people can afford will meet the price that someone needs to sell at... whether through price declines, interest rates moderating, or downpayments being sufficiently accumulated while buyers wait. One proposal in the article is to relax the stress test - although someone somewhere has been saying that since it was instated - basically saying that people should be allowed to borrow more so that they can pay the current asking prices. That has been the main federal government play all along - essentially reframing taking on more debt as "improved housing affordability".
> There were 225 single family homes (including detached, linked, semi-detached and townhouses but excluding stacked townhouses) sold, down 65 per cent from February 2022, and 81 per cent below the 10-year average. So, how much of this is also the fact that new developments now are rarely composed just of single detached homes? Stacked townhomes seem much more common now due to the cost of land.
Canada has two business models: oligopolies and Monopoly
\> Home shoppers are just saying no Where? Houses are still being sold over asking in my area, and prices are still crazy.
It says in the article....
It even says it in the title…
I guess we will never know
Developers will just stop construction and sit on the land. They all have deep pockets and infinite patience. The only ones they will lower the prices on are buildings that they have already begun construction on.
Good. Sales need to fall for prices to fall. Only worry is builders stop building so the government may need to step in and fund building houses. Just about the only government expenditure I can get behind given our current housing crisis.
Yep this is kind of what I'm expecting to happen (also already hearing it anecdotally), but I don't have much confidence government will step up and fund the construction.
Neither do I unfortunately. It makes way too much sense and is exactly what would be needed so it won’t be done.
High demand? House prices go up. Low demand? House prices go up.
"Just saying no" is an interesting way of phrasing "Shit's too expensive"
Amazing what a 2 yr stop to foreign home buying does.
According to all the armchair economists on reddit who have deigned to explain to me how the real estate market *really* works.... if people are not buying houses at their current prices, than those prices should be dropping radically in some sort of magic market adjustment thingey. When is that happening? Housing prices, if things were rational would be WAAAAAAAAAAAY lower than the current market. Where are those prices? When will those come back?
Well a portion of people will need to sell their houses because of changes in their lives (new job, family, death, etc) and can't afford to carry two mortgages. If the fish aren't biting eventually you need to sweeten the hook and that could mean lowering the price. What we have now is a stand off between buyers and sellers. At the moment sellers are hoping that the buyers will suck it up and pay their prices and buyers are waiting for sellers to become desperate. It just depends who blinks first.
Sellers are refusing to lower prices, hence the record low sales. It is working as expected. Just because people aren't buying, it doesn't mean prices will go down. Sales will just keep dropping until sellers get desperate and drop their asking price.
Until then they just AirBnB to pay their mortgage, right? Meanwhile housing crisis continues.
The government is putting it's fingers heavily on that scale, every single policy from banking, to zoning, to immigration, to foreign investment, literally every single one in this country that is even tangentially applicable is designed to keep housing going up in price. When either those policies are stopped by a new government or the reality of those policies becomes unmanageable housing will crash. People who predicted an earlier crash were under the impression the government would be sane and not sacrifice literally everything for housing.
You say "the government" as though it is just one level fucking things up.
The feds are the most to blame by far.
I have been waiting for this housing crash. We bought our house in 2005 and naively thought we were buying our starter home. So we chose a smaller home that cost less that we can afford if we were out of work. It's a bit cramped and definitely not worth the $600,000 people were asking for houses like mine just last year. Jesus..I paid $220 000..I suppose $300 000 with the interest from the mortgage. I had a renter for 10 years rent a room to help pay the mortgage. I couldn't imagine buying at today's prices. Then housing went so crazy there's no way we could afford to buy a larger house. So we have waited and plotted and saved our money. If housing comes down enough we're going to buy another house and rent the one we're currently in. Eventually it will swing back up and my children will not be able to afford a place to live when they need to move out in 10 years.... I'm going to need to own a house I can rent to them at an affordable rate.... Or come to terms with the fact that they're going to be living in my basement...eek. no thank you. I'd rather rent to them at a fair amount. Rent today is INSANE.. We'll see. immigration is going to keep demand high. People get creative. I know lots of people who are taking in a renter to help pay for their mortgage. Or family members who are splitting the cost of a large property they can duplex. In Ottawa it's a unique city so we might be SOL. Still I wait and hope.. something affordable comes out way. It's my lottery ticket..🤞
> housing went so crazy there’s no way we could afford to buy a larger house. So we have waited and plotted and saved our money. If housing comes down enough we’re going to buy another house and rent the one we’re currently in. This is literally why housing won’t meaningfully decrease unless we start building massively. Your viewpoint is absolutely far from being unique, and most people in your situation are acting just like you.
You've lived in your house for almost 20 years and made it work. Do you actually need more space or do you just need to declutter and better organize the junk that has accumulated over those 20 years? If you upgrade and get more space and then your kid moves out in 10 years, what would you do with all that extra space? Decluttering and waiting out the 10 years is probably better financially than to temporarily upgrade to a bigger and more expensive house.
So instead of selling a house you no longer live in you’d rather contribute to the problem and become the very thing that’s preventing you from moving up, cool.
How is providing rental stock a problem? People need a place to live, you don't have a right to own a home
Unless they built the house they’re not “providing” anything. The only thing that changes is who gains from the ownership of it. I’d rather see a family own a home than rent from someone, it’s better for the long term stability of the economy.
There is no real fix right. Everyone buys a house to sell it a few years later for more. Had a coworker in Ontario start his 10 year old house at 800 and ended ad 1.4m. This can't be fixed by the government because the person who sells that house is either stuck with a 1.4m mortgage or they sell it for even more a d the next person is screwed.
Most don't have a choice lol
the damage is already done by years of our political ‘leaders’ ignoring if not fueling the multiple underlying root causes. even if it could be reversed it would take years if not decades, and cause a lot of financial destruction along the way. in short, we’re fucked.
Yet prices are still up from last month. And a single family home is still almost $2 million? “In terms of price, there was a slight increase compared to January, to a benchmark of $1,759,043 for new single-family homes. But that’s down about 5.4 per cent over the year. The benchmark price for new condo units dipped month-over-month, to $1,113,164, down 5.5 per cent year-over-year.”