CMHC: Home prices could fall 47.9%

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Originally Posted by Gilroy

Sorry 41000 but you may be to late already, the Chinese are ahead of you right now. You could have bought a 10 acre rural lot south of me for
$25,000 up until a few years age, straight bush, no hyrdo .Last SPRING ONE SOLD FOR $71,000, NOW AN AGENT IS TRYING TO FLIP IT FOR
$250,000 so basically a 10times increase over the past two years.

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Same here but not the Chinese........Torontonians! War time wood bungalows around the corner being sold for anywhere between $1M and $1.2M and town down for a new build. New builds are anywhere between $1.8M and $2M and are selling. We get letters weekly and phone calls weekly for people asking if we are interested in selling. I moved to downtown Burlington for a reason and that is location to amenities (pubs, restaurants, access to the lake) and re-sale. I am not overly concerned about rural property pricing as I think that my Burlington house and my student rental in St. Catharines will far out pace rural property value over the next 10 years.

I see that I am not far off........Niagara #1 and Burlington #3:

https://financialpost.com/real-estat...firing-equally

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Originally Posted by trimmer21

We can't forget about the "stress test" where buyers must have 25% down and qualify at double their stated interest rate.

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Double 1.5% is still nothing ... wait until it hits 5% to 6%, then see what happens ... I heard nightmare stats that 25% of homeowners will fold. If that doesn't create a fiasco and major drop in prices, then I don't know what will.

For now, everyone is being saved by low interest rates.

To compound the issue, my theory (and likely the same with many of your opinions) is that people are spending beyond their means, which is only made possible by appreciating home prices ... people re-mortgage every 3 to 5 years, access a few extra $100k of line of credit, and then use that credit to subsidize their lifestyle. It's worked for decades because home prices have gone up, up, up. If we end up in a correction, that takes a while to deal with (several years before the prices come back to where they were before the correction plus some more $$ to create a line of credit increase) ... then people will be in huge trouble ... spending will be curbed, economy drops, some declare bankruptcy ... anyhow, it literally would be a disaster.

So, we don't need to make it complicated ... watch interest rates ... when you see evidence of it going to 5% ... it's almost a given, the market will be in big, big trouble.

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Originally Posted by 410001661

There might be a correction coming but the one rule that will buck market trends is LOCATION - LOCATION - LOCATION. You may see a drop in some areas or type of houses (ex) condo's but there are areas that will still demand top $$ and there are people that will pay that, and maybe more, to move there.

I doubt you will see a large correction without increasing the mortgage rate

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Allow me to change your wording.
the one rule that will buck market trends is EMPLOYMENT-EMPLOYMENT-EMPLOYMENT.

Where would any one look to move and work...........For the last 12 years, today, and the next 5 years.....No argument the GTA has taken a hit in job losses like...... everywhere else. Likely less than other areas, other provinces ( Alberta anyone?) Regardless, where are the jobs? This year is an anomaly with immigration, and who knows when it will open back up but there are reasons for demand far outstripping supply. Immigration alone adds over 100,000 people per year to the GTA. That doesn't count Ontarians/Canadians looking for a better life/work

I heard a report the other day that Durham region grew by 80,000 people in 2020.
Correction" Sure. Outright crash?
Who knows, but the bottom line is, demand is still through the roof. If it wasn't there would be no bidding wars, no stupid prices, no ripples now into outlying areas

No that is correct and I think always there. When I purchased my first home in 1996 I only had 5% to put down so I had to go under CMHC for Mortgage insurance. I don't know much about the stress test but I think it has more to do with a minimum interest rate. For example I have told my daughter and her boy friend that they should make sure they can afford the mortgage based on an 8% interest rate.

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Originally Posted by MikePal

I pulled this off the front page for the CMHC Mortgage Calculator...I think it is because of the stress test stuff they implemented...



https://www.cmhc-schl.gc.ca/en/finan...age-calculator

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Originally Posted by greatwhite

For example I have told my daughter and her boy friend that they should make sure they can afford the mortgage based on an 8% interest rate.

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Tell them they shouldn't buy anything that will suck more than 30% out of the their household income. That's what the banks were doing back in the early 90's...made sense. Not sure why they don't stick to that anymore.

Also don't listen to your banker. They kept telling me I could afford a house about $90K more than I was mortgaging. I said "no" amortize it for 15 yrs instead of 25. Made for bigger monthly payments but the mortgage got paid off in 15 yrs.

I'm not sure what the banks are doing with allowing people to forgo their mortgage payments since the pandemic hit. If there will be a penalty or if they will just tack it on at the end.

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Originally Posted by MikePal

I'm not sure what the banks are doing with allowing people to forgo their mortgage payments since the pandemic hit. If there will be a penalty or if they will just tack it on at the end.

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No penalty but the interest continues for the length that you push it back, compound that over 20 years on a $500K home and the banks are going to do fine.

We made sure that we could pay the mortgage on 1 pay of the 4 pays we get a month between my wife and I, that way if I go on EI or if she was home on mat leave we would not be screwed. Fast forward 4 years, coming up to mat leave without top up number 2 and we will have a mortgage payment more than we need a month based on our salaried jobs and still have our side gig to pay off anything we want to do for fun. I feel like we did things right, did not end up house poor and will have some backup in case things hit the fan down the road.

There is so many people up to their eye balls in debt. They will fall hard. This craziness has to plateau sometime, Im better its not far away. Save your Pennies!

Sent from my SM-G960W using Tapatalk

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Originally Posted by MikePal

Tell them they shouldn't buy anything that will suck more than 30% out of the their household income. That's what the banks were doing back in the early 90's...made sense. Not sure why they don't stick to that anymore.

Also don't listen to your banker. They kept telling me I could afford a house about $90K more than I was mortgaging. I said "no" amortize it for 15 yrs instead of 25. Made for bigger monthly payments but the mortgage got paid off in 15 yrs.

I'm not sure what the banks are doing with allowing people to forgo their mortgage payments since the pandemic hit. If there will be a penalty or if they will just tack it on at the end.

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First house buy a duplex or a triplex and live in part of the house and rent the rest out. If rates do what they say there will be lots of renters. After 5-8 years you can either sell for profit or keep it as income and buy another house to live in.

As far as the future goes cash is KING! You need to insulate yourself from the ability of the gov't to claw back anything.....because you know they will be recouping COVID for the next 10-15 years

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Originally Posted by 410001661

First house buy a duplex or a triplex and live in part of the house and rent the rest out. If rates do what they say there will be lots of renters. After 5-8 years you can either sell for profit or keep it as income and buy another house to live in.

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Had a cousin do that back in the 80's. Bought a big house, put a suite in the basement for himself and rented the top floors for enough to pay off the all the bills. Smart move for a young 25 yr old construction worker.

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Originally Posted by MikePal

Had a cousin do that back in the 80's. Bought a big house, put a suite in the basement for himself and rented the top floors for enough to pay off the all the bills. Smart move for a young 25 yr old construction worker.

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That's what i did when i was 21. Bought a house in a university town close to the school and rented most of it out to classmates and than to the children (who were than students) of my parents friends. Did that for 10 years until house was paid for. Flipped that place when the time was right and have not had a mortgage or owed anybody anything since - that was 25 years ago.