CMHC: Home prices could fall 47.9%

[canadaman30]

If prices drop 47%., the banks will be owning a helluva lot of homes

[73hunter]

So,what does everyone think of this? I was just talking with my daughter (real estate agent). Her clients,5 years ago,bought a house in North York in a middle class neighborhood for $779K,just got in under the wire and mortgaged the property up the wazoo at almost 75% of the value,including a huge second mortgage from the Bank of Mom&Dad. They struggled to make the payments and taxes which took almost 90% of their combined income,so,for 5 years,they're literally living hand-to-mouth. They list their house for sale last week,daughter shows them an older house south of Peterborough for $510K that needs some work,but,nothing immediate. She lists their house at $1.4M and it sells unconditionally in a week. The kids pay cash for the house and there's lots left over for renos. This stuff is typical according to my daughter. The kids are sacrificing like crazy in the short term and making out like bandits in the long term. Kids are smart. We don't give them enough credit.

Well, that’s an impressive success story and good for them. A hike in interest rates will make stories like that one and many others go another way and end up in a scenario like JBen said. I could never live like that. I saved hard after college and put down a healthy (30%) down payment on my first house and killed the mortgage in 5 years (no kids, wife or vehicle payments) and never owed anything to anyone since - and even doing that I was careful how much I spent on my current house. Later on I was happy I did. I’m quite envious of newer houses with far more room and nicer finishes, but the lack of mortgage stress is immeasurable. Not bragging here - but if more people lived BELOW their means they’d be better off IMHO.

[410001661]

This is what blows my mind, I have coworkers who drive 2 hours 1 direction in perfect weather and traffic. Imagine the vehicle costs and the toll on health and family. Come winter time or cottage season traffic they spend half their life during the week driving. I opted to suffer up front and pay more on the mortgage to live driving junkers and have no internet or cable for a few years and I'm sure glad I did because commuting 3-4 hours daily and replacing my vehicle every couple years would get old quick.

This is definitely a 'I want it and I want it now'. I have friends that lived in Oakville/Burlington and wanted to 'cash out' and move down the QEW to Niagara - Grimsby and Beamsville and buy a bigger house for less money. One of these guys is a TO copper and worked shifts so the drive/traffic was not that bad most days (other than beating the out of truck). The other guy works at TD Bank downtown and from his house in Burlington which was close to the GO station still had a 1Hr 15min commute..........after he moved to Grimsby it went to almost 1Hr 45min (with no traffic issues).

This is a personal decision - is your bigger house worth the additional windshield time, cost, stress? For me it is not. I do not commute (home office based) I just need to be close to an airport but my wife works on 'pill hill' in Mississauga. But just looking at the financial situation - a home in Oakville/Burlington will appreciate more than a house in Cambridge or Beamsville so I cannot justify doing that move until I am close to packing it in (work not life). Even if both houses appreciated the same 50% of $1.5M is more than 50% of $700k so if you wait 10yrs you will have more buying power when you decide to make that move.

[Fisherman]

Not bragging here - but if more people lived BELOW their means they’d be better off IMHO.
You nailed it, every house needs 2 70 inch TV's every person has a 5G cell phone with unlimited, more toys than Santa Clause could ever hope to make. But, that's their wish and problem when stuff goes over the cliff. Bought our house in '83, mortage free in 87, raised 2 boys in it, and definitely don't have the need to heat or clean any more than we did at the start. I didn't buy toys until I was around 35 and even then pretty modest.

[JBen]

Not bragging here - but if more people lived BELOW their means they’d be better off IMHO.

No argument that is part of it. I think especially for the upper midddle class. Those lower down the food chain, it gets blurred. How much of it is living beyond their means by choice and how much because is "cost of living". Which is really, driven by those who have more.... Just look at what cars cost these days....let alone appliances, etc, etc, etc.
Look at how much rent is...Kind of hard to leave the Credit card alone, when X cost Y because others want to paid Z and buy ABCD and rent is $2,000/month and the median duo income for the have nots is 80k.

Not sure what you do Fisherman. So I'll use 41000 to "illustrate" the next thing. 4100 would likely not own his house, be able to afford vacations, or a boat or what ever 2 cars are in his driveway. If the masses weren't in debt, fueling the economy, creating the need for his products/services and putting food on his, your and my tables.

Some comnenting here I know are or were public servants. No mountains of debt, no economic growth, no income or corporate taxes, no paychecks and no pensions.
"food for thought"

[MikePal]

My sister got so fed up with the Go Train commuting and the GTA ...she gave up a good Bay St job, took an $80k cut and moved up to Kitchener. Ended up living 5 minutes from work and had more money in her pocket at the end of the month than she ever did in the GTA.

For some people it's all about the income more than the quality of life. I always figured I'd rather mix paint at a hardware store and live in a small town than sit in traffic for 3 hrs a day and work in a cubicle...no matter what the material goods it would entitle me too.

[impact]

It is all about cash flow. My first home back in 1984 had a first mortgage at 10 7/8% that we assumed from the previous owner and topped it up with a second mortgage at 13%. Wife and I budgeted and walked into it based on our modest income and made a good go of it. Sold the sports car and kept expenses to a minimum. Interest rate relief came and 3 houses later have been mortgage free for the last 28 years.

The shock will come to many this year when the interest rates rise once again. A lot of people will be hurting as loss of and / or lack of rise in income will not keep up with the inflation. This will be on a massive scale hence the Global Reset. No worries though. Our benevolent government will step in and help / for a price......

[Fisherman]

Not bragging here - but if more people lived BELOW their means they’d be better off IMHO.
Not sure what you do Fisherman. So I'll use 41000 to "illustrate" the next thing. 4100 would likely not own his house, be able to afford vacations, or a boat or what ever 2 cars are in his driveway. If the masses weren't in debt, fueling the economy, creating the need for his products/services and putting food on his, your and my tables.

I did my 25 in the Military from '70 to '95, didn't stand at the bar every night when I was a single rat, saved a pile of money with excellent ROI on the (RHOP) reg home ownership, packed over 20K in there, the girlfriend at the time was doing similar. When we bought we had about $40k for a $50k house, 4 year mortgage, one car, no boat's, trains, planes, or snowmobile or holidays to the other side of the world. 1 TV. Once the debts were gone, we started living but not crazy, I'm retired now and have my toys to play with.

[JBen]

Fisherman, I'm not suggesting otherwise.

Economic growth, relies on spending. Whether that's consumers buying things, or companies spending to expand, or governments spending on infrastructure, and/or employee's, like you in the military. In the link below is a chart that represents household debt since around 1990. Worded differently, what occurred in both 2008 and 2020. People aren't spending, people aren't keeping up with the Jones, and the economy is in the toilet.

Other than governments, "everyone" spent far less. Everyone decided not to buy big screen TVs, not to take vacations, not to redo their kitchens. Not to use credit.

For all the comments about people living beyond their means. Fact is, doing so, put food on your table and money in your pocket and pension....large.
Whether your a government employee, "car salesman, real estate agent, insurance broker, teacher, electrician/tradesman, roofer, whoever


https://creditcardgenius.ca/blog/deb...e-ratio-canada

[MarkB]

This is what blows my mind, I have coworkers who drive 2 hours 1 direction in perfect weather and traffic. Imagine the vehicle costs and the toll on health and family. Come winter time or cottage season traffic they spend half their life during the week driving. I opted to suffer up front and pay more on the mortgage to live driving junkers and have no internet or cable for a few years and I'm sure glad I did because commuting 3-4 hours daily and replacing my vehicle every couple years would get old quick.

There is an opportunity that was created by COVID. Many have realized they can work from home, which means the 2 hour drive is a non-issue ... so it creates the option of selling for big $$ in the city, and moving to cottage country with far less debt. But I agree, if you look at the cost of using a car to travel hours back and forth to work (which is basically throwing money into the fire) ... you're better off using that expense and getting more mortgage, and hopefully that gets you closer to work. At least then you have put the expense into subsidizing equity.