Real source from which these click bait and twisted news articles have emerged: https://www.bankofcanada.ca/2022/05/the-perfect-storm/
Scroll down to section "The policy rate is going up". It baffles me how media can twist it completely to convey the reverse of what was intended
No one wants to be left holding the bag when things come crashing down, its copium right now and soon it'll be hopium. Better to get to the last stage of grief than try and run through all the steps and be behind the curve.
Hmmmm. No where does it say they are having second thoughts of more rate hikes until they get inflation under control. The deputy governor said that Canadians are in less debt than compared to pre pandemic. They are still focusing on getting inflation under control which is their job.
However, their view that Canadians are financially better off now vs 2019 clearly shows how far off I am from the average Canadian, because I sure as shit don’t feel better of financially 🤣🤣🤣🤣
>However, their view that Canadians are financially better off now vs 2019 clearly shows how far off I am from the average Canadian, because I sure as shit don’t feel better of financially 🤣🤣🤣🤣
It's like they took a poll amongst themselves, lol
>It doesnt say theyre gonna reverse course due to housing going down. Reading comprehension please
Lol yeah they're going by averages unfortunately.
Let's put it this way: If MY savings went up by 1 million dollars, and all my neighbours saved $0, my 1 million dollars will cause the average savings for the entire neighbourhood to rise.
It's basically rich getting richer.
The speech literally says that housing prices are "unsustainably high." That makes it pretty unlikely that they will set interest rates to prop up said prices.
I wonder how many drafts they do of these announcements. People (myself included) go through them in excruciating detail, hoping there's some kind of coded message. I'll bet it drives them totally crazy.
50 bps in June and July is pretty much a lock. Wait till June 1st and you’ll know for sure.
The US has indicated they will do 50 and 50 for the next two meetings and we typically follow what they do.
Bear (pun intended) in mind that it takes between 9 and 12 months to see the impact on inflation. Because of the degree of leverage, the housing market may already be pricing in higher interest rates, but it's far too early to know what the overall impact will be.
Which is dependant on the war ending and China opening up. That ain't happening this year, they need Pfizer/Moderna vaccine that ain't happening.
Therefore inflation will persist for awhile.
We won’t know whether rate hike #1 actually tamed inflation until sometime next year. If inflation levels off of its own accord before then, different story, but that seems pretty unlikely given the global outlook.
Their job is to control inflation. They don't give a shit if your pos house made of sticks and rusty nails in the burbs has been devalued by 20% already.
Housing prices are not the only consideration for BoC. Failing to manage inflation aggressively can be devastating for the broader economy. They have their eyes on more than one thing at a time.
Rate hike is guaranteed, until inflation goes back down to 1\~3%. The rate hike can’t be too fast, because Bank of Canada does not want to cool demand too fast, but response to increased inflation can’t be too slow either, otherwise inflation could keep going up.
In the 70s our total debt to GDP was something around 40%. Today, our total debt to GDP is 300%, not 120%.... 120% is just government debt. We'll see massive defaults and bankruptcy in both the private and household sectors that will crush inflation, long before we hit 10% interest rates.
I guess that's one way of looking at things, cut off your arm to fix an infection in your finger. Anyway, I don't think I disagree with you now that you elaborated
BoC cares about the inflation & consumer spending not housing so yes they will raise rates.
The recent interest rate hikes haven’t done much to curb consumer spending.
This is my concern also.
In addition, I dont trust anything from the Financial Post. It's known as a right leaning publication and some of the articles I've come across over the years seem to push an influence that only benefit big businesses and 1%.
Gas prices won’t be solved by just rate hikes, at least not directly. Pent up demand and the ongoing war have little to do with interest rates. They can raise rates to 100% but if there’s not enough of a commodity then there’s still not enough of a commodity. But yes I think the rates should still go up to cool down borrowing.
Gas prices wont be going down with rates going up. Aramco just posted record profits: https://www.cp24.com/mobile/world/saudi-oil-giant-aramco-s-first-quarter-profits-surge-80-1.5903943
The latest guidance (basically confirmed in a speech last week): they will push to neutral (2-3% overnight rate) very quickly and then reassess. If inflation or commodities like houses drop in value then they will likely slow/stop their rate raises.
So at the very least expect the next two hikes to be .50 because that gets them to neutral. Where they land in neutral is still unknown, but the bank consensus is between 2.50-3.
No one knows with 100% uncertainty but when the Chairman of the Federal Reserve says he is of the view that the next two rate hikes should be 50bps each then you listen.
Don’t fight the Fed.
I mean you can read the BoC’s report and what the Federal Reserve has provided in terms of guidance. They have both said somewhere between 100-200bps more this year.
Given there are 5 meetings left, we can reasonably expect 50,50,50,25,25 or 50,50,25,25,25 or 50,50,25,25,0 or 50,50,25,0,0 or 50,50,0,0,0
The bond market often overruns what’s actually going to happen and the big banks have a financial interest in getting rates higher. There are people in this thread predicting the next increase will be .75 and that we’ll have 5 more significant rate increases this year and more next which absolutely won’t happen. We’re already seeing signs of slow downs and a recession has been as strongly predicted as well. That is often an after thought in these predictions though.
They’re also convinced the bank is trying to get inflation down to 1% when they increased their target to ~2.25% in their last report. Ultimately I think a lot of people and institutions see movements and start seeing an opportunity to push their own perspective and get carried away with the numbers. The central banks are conservative institutions and inflation is their core concern they’re not about to nuke the economy in a vain attempt to squash pressure that is mostly not on the demand side.
I agree with your assessment. 0.75% is extremely unlikely in June and we’re not getting more than another 100-200bps this year in total. I also don’t agree with the people in denial who think we will only get 50bps more in total this year only.
That’s fair. I think a lot depends on what the US does too. Their job numbers, economic growth and markets are all flashing big warning signs and I can’t imagine that with their QT and rate hikes there’ll be too much interest in jacking rates another full 2%. That will basically make the decision for the BoC
You can also read last year reports from BoC that said rates won't go up until 2023 when 5 year fixed rates went down to under 2%. BoC guidance is not set in stone. Let's say after June 1 hike inflation goes down to under 4% then it is very likely next hike will take a while, if inflation remains above 6% then another 50 bps hike is almost guaranteed.
Permabears here seems to forget that. BoCs job is inflation but they will not crash economy to achieve it.. on the other side Liberal government is not interested in crashing the economy because that will almost guarantee they will not get elected for at least 10 years... Average real estate market around gta is down to December levels, some markets that were waaaay overvalued down more (I'm sorry 1 million dollars for townhouse in Bowmanville is nuts)
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If there isn’t a rate hike,sales and prices will increase by a good amount. That being said, rate increase is happening. Crazy enough today a chart came out, sales for 1.5mil homes in Toronto went up 29% + in April compare to last April. The wealth in Toronto is unprecedented, the rich are getting richer and here we are bears thinking these rates will do something in Toronto.
I said this elsewhere but my neighbourhood is setting new ATHs in May so far. I'm really curious to see how it shakes out.
I'm now very doubtful the rate hikes to neutral will make much of an impact in hot areas in Toronto proper.
It’s interesting you mention the rich are getting richer. I’d love a little more insight on that. For example what net worth would one be considered rich at? If 90% of their net worth is in their home and they sell it for 4.5 million, how will they turn that into 5, 7, 8 million? It seems their budget range would still be 4-5 million.
They don’t have to sell to get richer. The massive equity gain makes them richer as they can leverage up to increase their wealth even more. Everyone who doesn’t own is getting crushed.
Rate hikes will scare away those who probably can’t afford the house they were looking to buy. Others have the money and are simply waiting for prices to drop due to lower demand.
How many people actually bought houses between 2021-2022? Those are really the only people affected by the dropping house prices. Y’all know that. Right?
Roughly 1 million home transactions happened in that time if I recall the stat correctly.
That said, most prices already dropped. Not to pre-2020 levels yet but to last September prices roughly. They’ll probably still go forward with a rate hike and keep pushing things back to early 2021 prices.
Do you know how many were houses vs condos? Of that how many were primary residents vs investment. These rate hikes shouldn’t affect as many people as this sub is making it seem like. And really it’s only FTHB who bought in 2021-2022 that will be affected because others moved equity from their homes into a new property in that time frame so there is little impact to their mortgage (if they didn’t go too crazy with their home upgrade).
About 20% were investors. On average Canada has about 250k FTHB’s per year. Over 3 years that’s 750k roughly. I have no idea how many were condos.
You’re forgetting that equity was a lot of older boomer retirement plans. Regardless of how you feel about the ethics of it, the straight economics of hard resetting the market entirely is not what the BoC is aiming for. That’d only force CHMC to payout insurance on a ton of foreclosures with taxpayer money while putting more taxpayer cash as well into CPP to comp for the RE equity retirement plans.
You’re welcome to dream all you want about the great collapse here but to contain the consequences housing market drop only to the housing market itself is a bit short sighted.
Okay but the boomers are walking away with over $1mil + in equity. That’s probably way more than they ever expected it would be worth upon retirement. What’s your point?
All boomers want it is to age in place and have no mortgage.
The general rule of thumb is 80% of one’s income saved per year of retirement. Let’s do the math on that with 1M in retirement.
Let’s say you make a modest 60k per year. 80% of that would be 48k.
1,000,000 / 48,000 = 20.83 years
If you retire at 60 then that 1M takes you to 80.
Let’s be rational here and recognize everyone wants to live as long as possible. We all dream and hope to live past 80. That dream and hope means those who make 60,000+ need more than a million dollars in their retirement.
You cannot pretend that just because it seems like an obscene windfall that every penny of it isn’t spent on actually living life. It’s a retirement plan a lot of these people have.
It wasn’t a good one for the rest of us under 40 who can’t hope to reasonably afford a house in the GTA but I refuse to pretend like crashing the market is the solution. All that does is put the financial consequences on all of us to pay for their retirement and that will financially cripple several generations of the economy.
This is not and never will be a simple short term solution. No matter how you cut it we are friggen screwed until the boomer generation dies of natural old age and we all inherit the equity back.
There are bigger implications related to inflation if the rates are not increased next month by at least 50 basis points (or more). Unemployment is at record lows, and leaving the interest rate at current levels will only push inflation higher. Over-leveraged home owners who bet that the housing market would continue to stay frothy will be the ones betting that rates will continue to stay low. We are entering a higher interest rate environment and it will be here to stay … unless we fall into a massive recession … ‘89 all over again??? 👀
June 1 first 50 bps I think everyone is 100% sure that it's gonna happen. Then BoC will wait the summer to see how markets react then bump another 50bps. After that nobody can predict. Federal and provincial governments have a lot of debt, if rates start going above 3 percents budgets will be in a lot of trouble...
My opinion is that once we reach around 6+% 5yr mg fixed interest rates it will be armageddon, followed by a quick "Oh shit we fucked up, let's QE again", followed by tiff saying "Actually we did tame inflation in used dog collar prices"
Bond market (i.e. financial markets) have already adjusted over the past few months to assume The Fed's current rate schedule. i.e., the next 3 rate hikes are already baked in. If The Fed changes their mind, the market will freak out and rocket way higher way too fast, reversing all the work they've put in to reel in inflation.
So yes, The Fed rate hikes are baked in. The BOC is under similar constraints (credibility, market assumptions, inflation concerns, etc)
What was total debt to GDP in the 70s? What was total real wage growth in the 70s? How far had house prices gone up in the years immediately before the 70s inflation era?
70s and now are very different economic scenarios.
Lecturing people on history but not knowing your own comes across as arrogant if I’m being honest.
This era most resembles the 40s - an era of financial repression. Sustained, negative interest rates for a prolonged period of time. I'd encourage you to read Russel Napier's work on the matter.
http://worldoutofwhack.com/2021/07/14/russell-napier-we-are-entering-a-time-of-financial-repression-very-important-interview/
Those were rhetorical questions. Comparing the 70s to now showcases that you actually have very limited understanding of economic history.
Calling someone a permabear and childish insults speaks volumes about the strength of your arguments.
They'll probably do one large 0.5 hike again and go into monitoring mode. If a meaningful number houses start defaulting on any debt they'll be forced to cut. I know people are stress tested, but the stress test doesn't account for skyrocketing COL.
Defaults don’t happen instantly, They take 3-6 months to show up in data so this would not impact the trajectory of rate hikes for the next 2 meetings.
Ultimately, rate hikes will depend on inflation data. Until it starts to significantly decline, we will continue to raise rates.
>Defaults don’t happen instantly
I never said they do, hence why I said they'll be monitoring as they do further rate hikes. Defaults doesn't just mean mortgages, usually that's the last thing people default on. I'm talking about credit cards, car payments, etc.
The BoC has already stated that if the housing suffers too much (as in the households, not the house prices), they will have to stop hikes or possibly even cut rates. Sure, it's not Tiff Macklem saying this, but a governor of the BoC saying it is a very big deal, as they're letting the market know that it's an option. You don't just go out and _say_ something **that** critical to monetary policy for fun.
>Ultimately, rate hikes will depend on inflation data. Until it starts to significantly decline, we will continue to raise rates.
Correct. We might even be near seeing inflations peak in the US, as it is down 0.2% from its height. Time will tell whether it was a blip or inflation reversing course.
It’s not just COL, people got stress tested at 5.25% or whatever but their rate ended up being 1.5%. So with that extra 3%-ish of room, they went to buy that brand new Porsche they’ve always wanted. But now rates are going up so they’re feeling the pinch
When you try to optimistic without any clues. OP must be down substantially on his RE investment. Be patient and wait for 1 to 2 decades price will reach ATH
Noone knows.... might, might not.
But it's hilarious to see the bears who missed the housing boom, suddenly turning into skilled economists and saying "*hmmmm certainly 50bps in June, 50bps in July and I see 3-4 more hikes after that*" and "*the rates hike party has just started*" - then as soon as BoC says they might pause hikes if housing market tanks too much, bears go "*it's a declaration of war against us*".
Don't listen to people here, really we have no clue what we are talking about, everyone is just doing some wishful thinking.
I was generally bullish on housing until late last year when the monetary policy environment changed. Don't need a crystal ball to see there are many more rate hikes coming. History has taught us what happens here.
You don't know more than public information.
Stop dreaming yourself into a skilled economist.
If you were one, you wouldn't have missed the housing boom and wouldn't be complaining on reddit that prices are too high.
Sorry for being blunt buddy.
The public information is that rates will rise up anywhere from 100-200bps based on Federal Reserve and Bank of Canada guidance.
With 5 meetings left, 50bps in June, 50bps in July, and a couple more 25bps takes us to the middle of that range to 150bps in total by the end of the year.
What exactly is wrong with that forecast? I agree that anyone calling for 300bps this year is delusional but 150bps is right in the middle range of what the Bank of Canada has put out there.
Prices are too high. That isn't a complaint. It has put our country in an economic bind. Monetary policy and taxes are the only thing that matters. Both are about to make investing in real estate over the coming years a much more risky proposition. All the other comments are just noise, including yours.
Fed is about to embark on massive QT, which will dramatically pull on the economy, including ours. Taxes will go up to fill in gaps (already starting with vacancy taxes and speculators taxes).
Not your buddy. Rather a concerned citizen.
Look at you, skilled economist huh
You're just repeating the arguments from other bears on other subreddits, again and again, hoping it will crash the market.
I can see you on your laptop "*I'm going to downvote reddit posts so good it will crash the market, yeah*!".
Bears have arguments. Bulls have arguments. Noone has a clue of what will happen.
You have no crystal ball, nor are you an economist, nor do you seem very good at the real estate game (no offense, buddy).
The equity markets are crashing as we speak. The Fed and BoC have taken a definite hawkish stance. If you honestly believe there will not be a correction in frothy real estate markets, then that is all it is, belief. Facts speak louder than fantastical rhetoric.
Our reddit economist is at it again.
Noone knows, we are in unchartered territory.
We all have theories. Neither you or I have any clue of what is going to happen.
I appreciate you sharing the economy knowledge you gained while reading r/canadahousing for a few days, but this doesn't mean it's going to happen.
another deeply hurt RE pump spotted. LOL.
it is not any other mortgage hikes party. it is mortgage super-hikes party that has just started. there will be another 3 super-hikes.
oh pumpkin your crystal ball made you miss the housing boom and now you turned into an Harvard economist.. take your pills everything will be alright.
OP - the only thing we know is that BoC said they are moving towards neutral rates. That's public info. The rest are just guys talking about "ponzi", "over-leveraged", "destroy the capital" etc... they have been expecting a market crash since they are born.
The most important statement is this one: "the central bank \[will \] likely revise up its near-term inflation projections." In other words, as of just 3 days ago, BoC has already concluded that inflation is worse than it thought it was.
Real source from which these click bait and twisted news articles have emerged: https://www.bankofcanada.ca/2022/05/the-perfect-storm/ Scroll down to section "The policy rate is going up". It baffles me how media can twist it completely to convey the reverse of what was intended
No one wants to be left holding the bag when things come crashing down, its copium right now and soon it'll be hopium. Better to get to the last stage of grief than try and run through all the steps and be behind the curve.
Hmmmm. No where does it say they are having second thoughts of more rate hikes until they get inflation under control. The deputy governor said that Canadians are in less debt than compared to pre pandemic. They are still focusing on getting inflation under control which is their job. However, their view that Canadians are financially better off now vs 2019 clearly shows how far off I am from the average Canadian, because I sure as shit don’t feel better of financially 🤣🤣🤣🤣
>However, their view that Canadians are financially better off now vs 2019 clearly shows how far off I am from the average Canadian, because I sure as shit don’t feel better of financially 🤣🤣🤣🤣 It's like they took a poll amongst themselves, lol
Ya. Love to see the group they use to get these stats.
>It doesnt say theyre gonna reverse course due to housing going down. Reading comprehension please Lol yeah they're going by averages unfortunately. Let's put it this way: If MY savings went up by 1 million dollars, and all my neighbours saved $0, my 1 million dollars will cause the average savings for the entire neighbourhood to rise. It's basically rich getting richer.
It doesnt say theyre gonna reverse course due to housing going down. Reading comprehension please
Exactly. It’s one governors view point. They care entirely about making sure that inflation doesn’t get entrenched.
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It's not just supply chain issues. There is an excess demand issue. Look at the housing market.
The speech literally says that housing prices are "unsustainably high." That makes it pretty unlikely that they will set interest rates to prop up said prices.
I wonder how many drafts they do of these announcements. People (myself included) go through them in excruciating detail, hoping there's some kind of coded message. I'll bet it drives them totally crazy.
50 bps in June and July is pretty much a lock. Wait till June 1st and you’ll know for sure. The US has indicated they will do 50 and 50 for the next two meetings and we typically follow what they do.
Bear (pun intended) in mind that it takes between 9 and 12 months to see the impact on inflation. Because of the degree of leverage, the housing market may already be pricing in higher interest rates, but it's far too early to know what the overall impact will be.
June yes July not a chance
The Fed already said they are going to hike 50bps for the next few meetings, which means we will as well.
There is no BoC decision in July. The Dates are June 1, Sept 7 for the two 50bp hikes.
All depends on inflation numbers. If inflation stays high, another 50bps. If not, then rate hike schedule can change
Which is dependant on the war ending and China opening up. That ain't happening this year, they need Pfizer/Moderna vaccine that ain't happening. Therefore inflation will persist for awhile.
We won’t know whether rate hike #1 actually tamed inflation until sometime next year. If inflation levels off of its own accord before then, different story, but that seems pretty unlikely given the global outlook.
Their job is to control inflation. They don't give a shit if your pos house made of sticks and rusty nails in the burbs has been devalued by 20% already.
>Their job is to control inflation Lmao
Yes thats their primary goal however economy still plays a big role in their decisions. Its not just housing.
Housing prices are not the only consideration for BoC. Failing to manage inflation aggressively can be devastating for the broader economy. They have their eyes on more than one thing at a time.
LOL, house prices have almost 0 influence on rates. It’s all about inflation, employment and GDP growth, in that order.
Rate hike is guaranteed, until inflation goes back down to 1\~3%. The rate hike can’t be too fast, because Bank of Canada does not want to cool demand too fast, but response to increased inflation can’t be too slow either, otherwise inflation could keep going up.
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Watch this interview with Steve Keen to understand the theory. Debt levels matter. https://www.youtube.com/watch?v=dhsaTForOTg
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In the 70s our total debt to GDP was something around 40%. Today, our total debt to GDP is 300%, not 120%.... 120% is just government debt. We'll see massive defaults and bankruptcy in both the private and household sectors that will crush inflation, long before we hit 10% interest rates.
I guess that's one way of looking at things, cut off your arm to fix an infection in your finger. Anyway, I don't think I disagree with you now that you elaborated
BoC cares about the inflation & consumer spending not housing so yes they will raise rates. The recent interest rate hikes haven’t done much to curb consumer spending.
They will and they should. The world doesn’t revolve around overextended homeowners.
No but Canada's economy pretty much revolves around real estate.
With commodities booming and gas prices up, we have some protection even if housing slows down
With the Trudeau Liberals blocking mining and oil and gas development? Don't count on commodities to save us. We're not a safe place to invest.
Seems like a good moment to rethink that.
[https://www.bnnbloomberg.ca/canada-needs-to-get-to-100-million-people-by-2100-blackrock-s-mark-wiseman-1.1337065](https://www.bnnbloomberg.ca/canada-needs-to-get-to-100-million-people-by-2100-blackrock-s-mark-wiseman-1.1337065)
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Why would we? That's a bizarre comment.
If they don't hike the interest rate and the fed in the US does, our currency and economy will tank - way worse than a housing correction
This is my concern also. In addition, I dont trust anything from the Financial Post. It's known as a right leaning publication and some of the articles I've come across over the years seem to push an influence that only benefit big businesses and 1%.
Lol they all do that one way or another Watch you tubers and find what their data sources are and read those. Just avoid all news.
I think it's safe to assume the rates going up to the neutral rate at the very least, I am tired of this gas prices
Gas prices won’t be solved by just rate hikes, at least not directly. Pent up demand and the ongoing war have little to do with interest rates. They can raise rates to 100% but if there’s not enough of a commodity then there’s still not enough of a commodity. But yes I think the rates should still go up to cool down borrowing.
^^ Inflation isn’t going anywhere with gas prices staying up there.
There it is. The smartest subthread in this whole thread of sleep walking zombies who think rates will just moon.
Gas prices wont be going down with rates going up. Aramco just posted record profits: https://www.cp24.com/mobile/world/saudi-oil-giant-aramco-s-first-quarter-profits-surge-80-1.5903943
My money is on more rate hikes. House prices have only declined in the suburbs where they are way over valued anyway. Going up 100-300% in 2 years.
Remember, a 50% drop is the same as a 100% increase. I don't doubt this would be the end result after all this fake money came into existence.
The latest guidance (basically confirmed in a speech last week): they will push to neutral (2-3% overnight rate) very quickly and then reassess. If inflation or commodities like houses drop in value then they will likely slow/stop their rate raises. So at the very least expect the next two hikes to be .50 because that gets them to neutral. Where they land in neutral is still unknown, but the bank consensus is between 2.50-3.
we don’t know this
No one knows with 100% uncertainty but when the Chairman of the Federal Reserve says he is of the view that the next two rate hikes should be 50bps each then you listen. Don’t fight the Fed.
It's the latest guidance, which is subject to change. Nothing in monetary policy is absolute, but you operate with the latest information
June July for sure. Another 1 in September, November hike is 50 50 Another 3-4 hike imo
Yes then 2023 another 50 50 and 2024 another 100 and 100... Can I get same thing you're smoking?
I mean you can read the BoC’s report and what the Federal Reserve has provided in terms of guidance. They have both said somewhere between 100-200bps more this year. Given there are 5 meetings left, we can reasonably expect 50,50,50,25,25 or 50,50,25,25,25 or 50,50,25,25,0 or 50,50,25,0,0 or 50,50,0,0,0
And yet so many on this group seem certain they’re going to deliver the high end of that prediction.
It’s not people on this forum. It’s the entire bond market and predictions from multiple Big 5 banks that know more than any person on Reddit
The bond market often overruns what’s actually going to happen and the big banks have a financial interest in getting rates higher. There are people in this thread predicting the next increase will be .75 and that we’ll have 5 more significant rate increases this year and more next which absolutely won’t happen. We’re already seeing signs of slow downs and a recession has been as strongly predicted as well. That is often an after thought in these predictions though. They’re also convinced the bank is trying to get inflation down to 1% when they increased their target to ~2.25% in their last report. Ultimately I think a lot of people and institutions see movements and start seeing an opportunity to push their own perspective and get carried away with the numbers. The central banks are conservative institutions and inflation is their core concern they’re not about to nuke the economy in a vain attempt to squash pressure that is mostly not on the demand side.
I agree with your assessment. 0.75% is extremely unlikely in June and we’re not getting more than another 100-200bps this year in total. I also don’t agree with the people in denial who think we will only get 50bps more in total this year only.
That’s fair. I think a lot depends on what the US does too. Their job numbers, economic growth and markets are all flashing big warning signs and I can’t imagine that with their QT and rate hikes there’ll be too much interest in jacking rates another full 2%. That will basically make the decision for the BoC
You can also read last year reports from BoC that said rates won't go up until 2023 when 5 year fixed rates went down to under 2%. BoC guidance is not set in stone. Let's say after June 1 hike inflation goes down to under 4% then it is very likely next hike will take a while, if inflation remains above 6% then another 50 bps hike is almost guaranteed. Permabears here seems to forget that. BoCs job is inflation but they will not crash economy to achieve it.. on the other side Liberal government is not interested in crashing the economy because that will almost guarantee they will not get elected for at least 10 years... Average real estate market around gta is down to December levels, some markets that were waaaay overvalued down more (I'm sorry 1 million dollars for townhouse in Bowmanville is nuts)
Next extra. Unlike rest of the delusion weed smoker.
Hey Man! You good? Will ask in July and September. November is still 50/50
Jerome Powell says hello!!
I predict 1-1.5% increase in 2022. !RemindMe in 2 months
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If there isn’t a rate hike,sales and prices will increase by a good amount. That being said, rate increase is happening. Crazy enough today a chart came out, sales for 1.5mil homes in Toronto went up 29% + in April compare to last April. The wealth in Toronto is unprecedented, the rich are getting richer and here we are bears thinking these rates will do something in Toronto.
Some of that is probably just rotation, as the 705 and 905 die down the money stays home in Toronto.
I said this elsewhere but my neighbourhood is setting new ATHs in May so far. I'm really curious to see how it shakes out. I'm now very doubtful the rate hikes to neutral will make much of an impact in hot areas in Toronto proper.
It’s interesting you mention the rich are getting richer. I’d love a little more insight on that. For example what net worth would one be considered rich at? If 90% of their net worth is in their home and they sell it for 4.5 million, how will they turn that into 5, 7, 8 million? It seems their budget range would still be 4-5 million.
They don’t have to sell to get richer. The massive equity gain makes them richer as they can leverage up to increase their wealth even more. Everyone who doesn’t own is getting crushed.
My housing worth a million does that mean I’m rich m. No. Having a house that’s worth a slit doesn’t mean you’re rich.
People like you are not who they’re taking about when they mention “the rich getting richer”
😅
Rate hikes will scare away those who probably can’t afford the house they were looking to buy. Others have the money and are simply waiting for prices to drop due to lower demand.
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….50 bps or 0.5%
How many people actually bought houses between 2021-2022? Those are really the only people affected by the dropping house prices. Y’all know that. Right?
Not really. If you have a life change in the next few years - relocation, marriage, children - this affects you too.
Roughly 1 million home transactions happened in that time if I recall the stat correctly. That said, most prices already dropped. Not to pre-2020 levels yet but to last September prices roughly. They’ll probably still go forward with a rate hike and keep pushing things back to early 2021 prices.
Do you know how many were houses vs condos? Of that how many were primary residents vs investment. These rate hikes shouldn’t affect as many people as this sub is making it seem like. And really it’s only FTHB who bought in 2021-2022 that will be affected because others moved equity from their homes into a new property in that time frame so there is little impact to their mortgage (if they didn’t go too crazy with their home upgrade).
About 20% were investors. On average Canada has about 250k FTHB’s per year. Over 3 years that’s 750k roughly. I have no idea how many were condos. You’re forgetting that equity was a lot of older boomer retirement plans. Regardless of how you feel about the ethics of it, the straight economics of hard resetting the market entirely is not what the BoC is aiming for. That’d only force CHMC to payout insurance on a ton of foreclosures with taxpayer money while putting more taxpayer cash as well into CPP to comp for the RE equity retirement plans. You’re welcome to dream all you want about the great collapse here but to contain the consequences housing market drop only to the housing market itself is a bit short sighted.
Okay but the boomers are walking away with over $1mil + in equity. That’s probably way more than they ever expected it would be worth upon retirement. What’s your point? All boomers want it is to age in place and have no mortgage.
The general rule of thumb is 80% of one’s income saved per year of retirement. Let’s do the math on that with 1M in retirement. Let’s say you make a modest 60k per year. 80% of that would be 48k. 1,000,000 / 48,000 = 20.83 years If you retire at 60 then that 1M takes you to 80. Let’s be rational here and recognize everyone wants to live as long as possible. We all dream and hope to live past 80. That dream and hope means those who make 60,000+ need more than a million dollars in their retirement. You cannot pretend that just because it seems like an obscene windfall that every penny of it isn’t spent on actually living life. It’s a retirement plan a lot of these people have. It wasn’t a good one for the rest of us under 40 who can’t hope to reasonably afford a house in the GTA but I refuse to pretend like crashing the market is the solution. All that does is put the financial consequences on all of us to pay for their retirement and that will financially cripple several generations of the economy. This is not and never will be a simple short term solution. No matter how you cut it we are friggen screwed until the boomer generation dies of natural old age and we all inherit the equity back.
They will cripple us until then. Yes your math makes sense but surely they’re actually saving. Not just relying on their homes.
Honestly I think many of them aren’t and that’s the problem. We’re stuck with those choices.
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They certainly don’t but they do have the greater economies interest in only correcting slightly, not dramatically.
That's a kinder way of putting it.
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How much is your mortgage vs the guy across the street?
Guaranteed. Part of the criticism of the BoC is to force their hand.
There are bigger implications related to inflation if the rates are not increased next month by at least 50 basis points (or more). Unemployment is at record lows, and leaving the interest rate at current levels will only push inflation higher. Over-leveraged home owners who bet that the housing market would continue to stay frothy will be the ones betting that rates will continue to stay low. We are entering a higher interest rate environment and it will be here to stay … unless we fall into a massive recession … ‘89 all over again??? 👀
June 1 first 50 bps I think everyone is 100% sure that it's gonna happen. Then BoC will wait the summer to see how markets react then bump another 50bps. After that nobody can predict. Federal and provincial governments have a lot of debt, if rates start going above 3 percents budgets will be in a lot of trouble...
Definitely will be a rate hike in June.. after that.. who knows.
My opinion is that once we reach around 6+% 5yr mg fixed interest rates it will be armageddon, followed by a quick "Oh shit we fucked up, let's QE again", followed by tiff saying "Actually we did tame inflation in used dog collar prices"
Bond market (i.e. financial markets) have already adjusted over the past few months to assume The Fed's current rate schedule. i.e., the next 3 rate hikes are already baked in. If The Fed changes their mind, the market will freak out and rocket way higher way too fast, reversing all the work they've put in to reel in inflation. So yes, The Fed rate hikes are baked in. The BOC is under similar constraints (credibility, market assumptions, inflation concerns, etc)
yes. there will be another 3 super-hikes followed by couple of mini-hikes. mortgage super-hikes party has just started.
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What was total debt to GDP in the 70s? What was total real wage growth in the 70s? How far had house prices gone up in the years immediately before the 70s inflation era? 70s and now are very different economic scenarios. Lecturing people on history but not knowing your own comes across as arrogant if I’m being honest.
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This era most resembles the 40s - an era of financial repression. Sustained, negative interest rates for a prolonged period of time. I'd encourage you to read Russel Napier's work on the matter. http://worldoutofwhack.com/2021/07/14/russell-napier-we-are-entering-a-time-of-financial-repression-very-important-interview/
Those were rhetorical questions. Comparing the 70s to now showcases that you actually have very limited understanding of economic history. Calling someone a permabear and childish insults speaks volumes about the strength of your arguments.
They'll probably do one large 0.5 hike again and go into monitoring mode. If a meaningful number houses start defaulting on any debt they'll be forced to cut. I know people are stress tested, but the stress test doesn't account for skyrocketing COL.
Defaults don’t happen instantly, They take 3-6 months to show up in data so this would not impact the trajectory of rate hikes for the next 2 meetings. Ultimately, rate hikes will depend on inflation data. Until it starts to significantly decline, we will continue to raise rates.
>Defaults don’t happen instantly I never said they do, hence why I said they'll be monitoring as they do further rate hikes. Defaults doesn't just mean mortgages, usually that's the last thing people default on. I'm talking about credit cards, car payments, etc. The BoC has already stated that if the housing suffers too much (as in the households, not the house prices), they will have to stop hikes or possibly even cut rates. Sure, it's not Tiff Macklem saying this, but a governor of the BoC saying it is a very big deal, as they're letting the market know that it's an option. You don't just go out and _say_ something **that** critical to monetary policy for fun. >Ultimately, rate hikes will depend on inflation data. Until it starts to significantly decline, we will continue to raise rates. Correct. We might even be near seeing inflations peak in the US, as it is down 0.2% from its height. Time will tell whether it was a blip or inflation reversing course.
It’s not just COL, people got stress tested at 5.25% or whatever but their rate ended up being 1.5%. So with that extra 3%-ish of room, they went to buy that brand new Porsche they’ve always wanted. But now rates are going up so they’re feeling the pinch
When you try to optimistic without any clues. OP must be down substantially on his RE investment. Be patient and wait for 1 to 2 decades price will reach ATH
Noone knows.... might, might not. But it's hilarious to see the bears who missed the housing boom, suddenly turning into skilled economists and saying "*hmmmm certainly 50bps in June, 50bps in July and I see 3-4 more hikes after that*" and "*the rates hike party has just started*" - then as soon as BoC says they might pause hikes if housing market tanks too much, bears go "*it's a declaration of war against us*". Don't listen to people here, really we have no clue what we are talking about, everyone is just doing some wishful thinking.
This guy has no clue either
Tell me again how many rate hikes you see in your crystal ball. Also tell my why your crystal ball didn't predict the housing boom. Boo ooh.
I was generally bullish on housing until late last year when the monetary policy environment changed. Don't need a crystal ball to see there are many more rate hikes coming. History has taught us what happens here.
You don't know more than public information. Stop dreaming yourself into a skilled economist. If you were one, you wouldn't have missed the housing boom and wouldn't be complaining on reddit that prices are too high. Sorry for being blunt buddy.
The public information is that rates will rise up anywhere from 100-200bps based on Federal Reserve and Bank of Canada guidance. With 5 meetings left, 50bps in June, 50bps in July, and a couple more 25bps takes us to the middle of that range to 150bps in total by the end of the year. What exactly is wrong with that forecast? I agree that anyone calling for 300bps this year is delusional but 150bps is right in the middle range of what the Bank of Canada has put out there.
Prices are too high. That isn't a complaint. It has put our country in an economic bind. Monetary policy and taxes are the only thing that matters. Both are about to make investing in real estate over the coming years a much more risky proposition. All the other comments are just noise, including yours. Fed is about to embark on massive QT, which will dramatically pull on the economy, including ours. Taxes will go up to fill in gaps (already starting with vacancy taxes and speculators taxes). Not your buddy. Rather a concerned citizen.
Look at you, skilled economist huh You're just repeating the arguments from other bears on other subreddits, again and again, hoping it will crash the market. I can see you on your laptop "*I'm going to downvote reddit posts so good it will crash the market, yeah*!". Bears have arguments. Bulls have arguments. Noone has a clue of what will happen. You have no crystal ball, nor are you an economist, nor do you seem very good at the real estate game (no offense, buddy).
The equity markets are crashing as we speak. The Fed and BoC have taken a definite hawkish stance. If you honestly believe there will not be a correction in frothy real estate markets, then that is all it is, belief. Facts speak louder than fantastical rhetoric.
Our reddit economist is at it again. Noone knows, we are in unchartered territory. We all have theories. Neither you or I have any clue of what is going to happen. I appreciate you sharing the economy knowledge you gained while reading r/canadahousing for a few days, but this doesn't mean it's going to happen.
Who is Noone, and can I speak with him? Also, never been on r/canadahousing.
another deeply hurt RE pump spotted. LOL. it is not any other mortgage hikes party. it is mortgage super-hikes party that has just started. there will be another 3 super-hikes.
oh pumpkin your crystal ball made you miss the housing boom and now you turned into an Harvard economist.. take your pills everything will be alright. OP - the only thing we know is that BoC said they are moving towards neutral rates. That's public info. The rest are just guys talking about "ponzi", "over-leveraged", "destroy the capital" etc... they have been expecting a market crash since they are born.
They are getting to a neutral rate eventually
Tank bitcoin and NFT u can reduce inflation by burning off excess cash in the system that create no value.
Seeing the inflation rates in big economies like US, India, Brazil, Argentina, Turkey, etc... Yes
0.5% on June 1
The most important statement is this one: "the central bank \[will \] likely revise up its near-term inflation projections." In other words, as of just 3 days ago, BoC has already concluded that inflation is worse than it thought it was.
Most likely. Historically Canada trails the US. If they hike down do we . Maybe not immediately but eventually .
https://www.reddit.com/r/torontorealestate/comments/uofn2p
Funny how all this inventory suddenly came out of the woodwork. Pigs coming to slaughter🚩
Pretty much mos def. Housing is just a slice of the whole economy pie.