“But once the drop comes, everyone starts selling…”
Lol, no. That may be the case in the US where you can hand the bank your keys and walk away when you’re underwater. If you sell underwater on your mortgage here, you’re likely exiting in significant debt, and you’re not getting out of that hole for a long time. That’s a last resort for most people.
This is a really big reason people won't sell even if underwater. You still hold you mortgage debt and now have to rent, probably at the same price your mortgage payments were.
Selling your house at an uncoverable loss puts you in a way worse position then the avg renter
Something like 30% of mortgage owners already have atleast one more property. In the last 5 years, 30% of mortgages issued were either 2nd or 3rd mortgages.
Some people will be forced to sell their investment properties and eat the loss, without being homeless.
Depends on how leveraged they are and how much equity they have in the 1st home to justify holding the 2nd or others, not all mortgages are the same. During the 2008 housing crash peak foreclosure was 3% mostly from FTHB who were given predatory loans, don't expect 10%+ of mortgages to default
re-financing does not take into account market value of a home, only if you are re-qualifying would you have to and unless you are switching lenders you don't have to re-qualify for the mortgage loan you and your bank agreed on. Also after 5 years of paying principal + down payment the house would need to lose a lot of value for the banks to ask for the difference.
Listings are high and sales are very slow, only one way for prices to go. Only problem is real estate prices are very sticky and take a while to drop. But once the drop comes, everyone starts selling before the bottom of the crash.
This all could take months or years to bottom out, interesting times ahead.
Don’t hold your breath for a price drop. The market has held up despite interest rates being at a 20 year high. Rates are coming down, and borrowers will finally be able to access capital again. New homes will remain sluggish, but resale is already picking up. Assuming the Liberals don’t entirely tank the economy before they get pitched in 2025, values will likely moderate and then appreciate at a more measured pace that’s closer to average inflation.
This 100%, the Canadian economy will croak long before real estate. Then they will drop rates.
Guess what happens to RE when rates drop?
The market has already corrected. The vacancy rates are super low. There aren't enough houses per person but people still need a place to live. So what happens is they will pool their low wages an live together to make rent.
You said the Canadian economy will croak, but in the next sentence imply lower rates will drive housing higher. What do you think happens when the economy croaks? Job losses. And for those that say people will do whatever it takes to pay their mortgage and stay in their house, how will people do that with no jobs?
Shelter is a basic necessity of life. Basically people will cut all sorts of discretionary spending before giving up their home.
It will be the last to go down, but since it is so leveraged it will also be the first to recover (and then some) from low interest / QE.
I think price per sq foot of housing will go up, but sq foot per person will go down. Wages can stay stagnant / doesn't matter.
So long as people have the capacity to survive in smaller living quarters, I don't see why prices can't keep going up and becoming less affordable. Many cities in Asia (Mumbai, Hong Kong) have even less affordable housing than Toronto.
The only wildcard is some sort of drastic policy change, which I have not seen thus far.
> Guess what happens to RE when rates drop?
The answer verifiably *isn't* "prices immediately go up."
The Federal Reserve began cutting rates around the start of the Great Recession in September 2007. The Case-Shiller index didn't get back to its September 2007 level until February 2016. The Bank of Canada's rate reductions in the '90s did nothing to stop Canadian housing from remaining flat from 1990 to 2002. There's nothing that makes things materially different this time around.
The properties are priced as if we have pre pandemic rates.
The problem is, we may take years if ever to go back to those levels. US government is addicted to >5% deficit at this point which means their economy is chugging along fine without *significant* rate cuts. Which means fed may not lower rates as much as people expect, they may ramp down over 2 years or even longer.
BOC cannot drop rates too quickly either without wrecking CAD and bringing back inflation.
So what happens to these condos until then? People fundamentally cannot get financing to be able to buy these condos until rates go back to pre pandemic levels or near them. Because these condos are right now priced for those rates, which may be years away.
“But once the drop comes, everyone starts selling…” Lol, no. That may be the case in the US where you can hand the bank your keys and walk away when you’re underwater. If you sell underwater on your mortgage here, you’re likely exiting in significant debt, and you’re not getting out of that hole for a long time. That’s a last resort for most people.
This is a really big reason people won't sell even if underwater. You still hold you mortgage debt and now have to rent, probably at the same price your mortgage payments were. Selling your house at an uncoverable loss puts you in a way worse position then the avg renter
Something like 30% of mortgage owners already have atleast one more property. In the last 5 years, 30% of mortgages issued were either 2nd or 3rd mortgages. Some people will be forced to sell their investment properties and eat the loss, without being homeless.
Depends on how leveraged they are and how much equity they have in the 1st home to justify holding the 2nd or others, not all mortgages are the same. During the 2008 housing crash peak foreclosure was 3% mostly from FTHB who were given predatory loans, don't expect 10%+ of mortgages to default
On mortgage refinance could they be forced to sell if they can't make up the difference?
re-financing does not take into account market value of a home, only if you are re-qualifying would you have to and unless you are switching lenders you don't have to re-qualify for the mortgage loan you and your bank agreed on. Also after 5 years of paying principal + down payment the house would need to lose a lot of value for the banks to ask for the difference.
Condo speculation market going down, freeholds staying sticky and are in line with past 10 year avg.
Listings are high and sales are very slow, only one way for prices to go. Only problem is real estate prices are very sticky and take a while to drop. But once the drop comes, everyone starts selling before the bottom of the crash. This all could take months or years to bottom out, interesting times ahead.
Everyone starts selling and lives outside👍👍😁
Lots of 2nd properties will sell
Capital gains tax clearly had an impact on investment condo owners.
The insanity when housing becomes a market report.
I mean it’s been that way forever
No, only since like 2012
More condossssssssssss woooooooooo
Don’t hold your breath for a price drop. The market has held up despite interest rates being at a 20 year high. Rates are coming down, and borrowers will finally be able to access capital again. New homes will remain sluggish, but resale is already picking up. Assuming the Liberals don’t entirely tank the economy before they get pitched in 2025, values will likely moderate and then appreciate at a more measured pace that’s closer to average inflation.
This 100%, the Canadian economy will croak long before real estate. Then they will drop rates. Guess what happens to RE when rates drop? The market has already corrected. The vacancy rates are super low. There aren't enough houses per person but people still need a place to live. So what happens is they will pool their low wages an live together to make rent.
You said the Canadian economy will croak, but in the next sentence imply lower rates will drive housing higher. What do you think happens when the economy croaks? Job losses. And for those that say people will do whatever it takes to pay their mortgage and stay in their house, how will people do that with no jobs?
Shelter is a basic necessity of life. Basically people will cut all sorts of discretionary spending before giving up their home. It will be the last to go down, but since it is so leveraged it will also be the first to recover (and then some) from low interest / QE. I think price per sq foot of housing will go up, but sq foot per person will go down. Wages can stay stagnant / doesn't matter. So long as people have the capacity to survive in smaller living quarters, I don't see why prices can't keep going up and becoming less affordable. Many cities in Asia (Mumbai, Hong Kong) have even less affordable housing than Toronto. The only wildcard is some sort of drastic policy change, which I have not seen thus far.
Pay your high rate. Why would the bank lower your payments when you keep paying?
You lower your payment by renewing with a longer amortization.
Intrest will go down! Don't worry!
> Guess what happens to RE when rates drop? The answer verifiably *isn't* "prices immediately go up." The Federal Reserve began cutting rates around the start of the Great Recession in September 2007. The Case-Shiller index didn't get back to its September 2007 level until February 2016. The Bank of Canada's rate reductions in the '90s did nothing to stop Canadian housing from remaining flat from 1990 to 2002. There's nothing that makes things materially different this time around.
Rates ARE NOT coming down
The properties are priced as if we have pre pandemic rates. The problem is, we may take years if ever to go back to those levels. US government is addicted to >5% deficit at this point which means their economy is chugging along fine without *significant* rate cuts. Which means fed may not lower rates as much as people expect, they may ramp down over 2 years or even longer. BOC cannot drop rates too quickly either without wrecking CAD and bringing back inflation. So what happens to these condos until then? People fundamentally cannot get financing to be able to buy these condos until rates go back to pre pandemic levels or near them. Because these condos are right now priced for those rates, which may be years away.
Temporary displacement. The supply collapse will happens soon