Canada's 'housing bubble' deemed close to bursting

[MolsonExport]

Can you imagine what HFR would do for a city like London (Ont)? It just needs that extra push to become the city it always should have been.

[Truenorth00]

Originally Posted by MolsonExport

Word. This is how things work in much of Europe. Paris has exocities surrounding it, like Lille, Reims, etc., that are less than an hour away by train. These trains are filled with commuters. Mind you, Lille and Reims have way, way more to offer residents (even of the commuting sort) than comparable cities in Canada.

Sadly, urbanism and urban design are seen as something only for big cities in Canada. Hell, for a long time was only seen as something for Toronto, Montreal and Vancouver. Not even for Ottawa, Calgary, Edmonton, etc. At least this mentality is changing. Now we gotta work on cities like London, Regina, Kingston, etc.

Originally Posted by MolsonExport

Regional passenger train infrastructure in Canada is horrible, outside of the very narrow catchment area of the Greater Golden Horseshoe (and even here, it ain't good, unless you are nine-to-fiving in downtown Toronto).

Exactly. Though, if RER and HFR actually come to fruition as envisioned in the next 15 years, a good bit of Southern Ontario and Eastern Ontario will have service levels approaching European levels. Places like Guelph, KWC, Peterborough, etc would benefit massively.

Originally Posted by MolsonExport

Can you imagine what HFR would do for a city like London (Ont)? It just needs that extra push to become the city it always should have been.

Would they actually change their mindset though? Just look at what went down on the LRT plan. Not Just Bikes might actually have a small part in at least embarrassing 1-2 members of city council there into action. But not much more.....

[casper]

Silly article, why would anyone have buyers remorse if your buying a house to live in. Your buying something that your going to hold for at least a decade. No one knows what the price would be in when actually sell.

Now if your a flipper or investor, then perhaps you deserve to have buyers remorse.

https://www.ctvnews.ca/business/real...izes-1.5908296

[thewave46]

Originally Posted by casper

Silly article, why would anyone have buyers remorse if your buying a house to live in. Your buying something that your going to hold for at least a decade. No one knows what the price would be in when actually sell.

Now if your a flipper or investor, then perhaps you deserve to have buyers remorse.

https://www.ctvnews.ca/business/real...izes-1.5908296

It's the twisted mentality of home purchasing come to bite us in the ass.

It is sold now as an investment first and a place to live second. This is backwards to how it has historically been viewed.

In ye olden days, a home was a place to live that happened to retain (some) value. If one broke even or profited after principal, interest, property taxes and upkeep, it could be a nice windfall. If one is buying a home with the intent to sell in less than a few years, maybe they shouldn't be buying at all. Especially not in the mania moment.

What home values do in the next few years is irrelevant if one isn't selling. Sure, I get that one might want the value to cover the outstanding mortgage if something bad happens and one is forced to sell.

[lio45]

Originally Posted by thewave46

It's the twisted mentality of home purchasing come to bite us in the ass.

It is sold now as an investment first and a place to live second. This is backwards to how it has historically been viewed.

In ye olden days, a home was a place to live that happened to retain (some) value. If one broke even or profited after principal, interest, property taxes and upkeep, it could be a nice windfall. If one is buying a home with the intent to sell in less than a few years, maybe they shouldn't be buying at all. Especially not in the mania moment.

What home values do in the next few years is irrelevant if one isn't selling. Sure, I get that one might want the value to cover the outstanding mortgage if something bad happens and one is forced to sell.

Not just “if one is forced to sell”. Most of my friends bought their houses 10-15 years ago, without any intent to speculate nor even invest—you want to have a family, you “need” a house, so you get one, that’s the mindset—but now they can use their HELOCs to fund projects and ventures (one actually launched a business not long ago).

If their houses had stagnated in value, they’d still be fine (they’d be living in them as they are right now, with no intention of selling, just like right now) but the ability to use it as an ATM is really nice.

[Truenorth00]

It's also a huge problem because those mortgages are massive liabilities. Sure, you can argue that people shouldn't care if the bought it to live. But even if they live in that home for a decade, the extra mortgage they are paying above the value of that home is a massive drain on their finances. And if they have to sell and move because of a change in circumstances, they will realize the loss and it'll be an even bigger problem.

We were warned about this. Regulators, financiers, speculators, investors and buyers all chose to ignore this.

[MolsonExport]

Homes in my neighborhood (NW London, Ontario) are fetching 1.5 million. The math just doesn't add up.

let's say by some miracle you can put down 250K as a down payment (putting aside the fact about who the fuck can save up that amount: it is bigger than my first mortgage was in 2006!). So you are financing 1.250 million at say, 3% for 25 years. Your payment per month is a cool $5,915.57. let's say you can only get a 20 year mortgage. Guess what you pay per month? $6920.85. Oh and if rates rise, and you pay 5% interest, you are looking at $8214.06 monthly.

Who can afford this? Even with a two-income family, how the hell can you pay $6920.85 a month, and still be able to eat, buy clothes, drive, pay for insurance, property taxes, utilities, etc.?

[Truenorth00]

Realistically. Here's what is happening. Many of them are putting 5% down, with substantial assistance from the Bank of Mom and Dad and then taking out 25 yr mortgages with CMHC insurance. And yep, many of them are paying half their take home pay in mortgage, strata fees and taxes. There's a lot of young people that are either house poor or have given up on the home ownership dream entirely.

The starters aren't buying million dollar detached homes though. They are buying condos for half million. It's everybody else who has equity that is buying those million dollar homes. The real question is what happens when the condos get too expensive and those at the bottom can't build enough equity to move up the housing ladder? Guess we're about to find out.

[someone123]

One question is what happens to all the HELOC and "B" lender people if interest rates go up and stay up. A variant is how the BoC handles it if we get more external pressures like high US interest rates and high inflation. They are somewhat constrained and can't put 100% of their effort into coddling the housing market.

We may see problems in the late Boomer retirement years as so many average people turn out not to have much wealth left. If you treat your house like an ATM in your 50's and 60's you won't necessarily have much left in your 70's and 80's, nor will you pass much on to your kids. It could turn out that Canadians as a whole end up a lot poorer in the future with wealth shifted to globalized creditors. Inflation is a part of the readjustment.

[Truenorth00]

I foresee problems much sooner. In theory, the stress test is supposed to qualify people at about 5%. In reality, nobody actually lives according to their stress test. Most people don't save the difference or contribute more to their mortgage. So if variable rates go to even 3%, a lot of people will be very uncomfortable.

The hidden timebomb is all these Boomers who helped their Millennial kids buy houses with money from their HELOCs. Mom and Dad and the kids all face higher payments and declining home values now.

[MolsonExport]

As much as I would prefer not to think about it (given my own situation), variable rates are almost certainly going to be above 3% by the end of the year. I am paying 2.40 now.

[Truenorth00]

Originally Posted by MolsonExport

As much as I would prefer not to think about it (given my own situation), variable rates are almost certainly going to be above 3% by the end of the year. I am paying 2.40 now.

Why would you not lock in?

[Vorkuta]

Originally Posted by Truenorth00

Why would you not lock in?

A lot of fixed 2-5 year rates are 3.6 - 4.4... So it's "save some money and hope they don't go up too high, too fast" or "take a chance on saving money LATER if it goes above 4%..."

I'm in the middle of getting a HELOC for a home project... ugh, timing. My main mortgage has gone from 1.65 to 2.4 in the past 6 months.

[MolsonExport]

Originally Posted by Vorkuta

A lot of fixed 2-5 year rates are 3.6 - 4.4... So it's "save some money and hope they don't go up too high, too fast" or "take a chance on saving money LATER if it goes above 4%..."

I'm in the middle of getting a HELOC for a home project... ugh, timing.

yeah, this. I am gambling. The way I see it, if the BOC raises rates too high, too fast, the cure for the housing issue will be worse than the disease. They know that the current state of affairs is unsustainable, but I think a soft correction and stagnation is what they are after, rather than a huge shock that will cause an immense amount of wealth to evaporate, and reverberate down through the rest of the Canadian economy.

I will take my chances with 2.4% now (I was also paying 1.65 earlier this year). If I could lock in for 3% I would do it pronto.

[Vorkuta]

Originally Posted by MolsonExport

yeah, this. I am gambling. The way I see it, if the BOC raises rates too high, too fast, the cure for the housing issue will be worse than the disease. They know that the current state of affairs is unsustainable, but I think a soft correction and stagnation is what they are after, rather than a huge shock that will cause an immense amount of wealth to evaporate, and reverberate down through the rest of the Canadian economy.

Yup. I'm banking on much above 5% being unpalatable to the banks themselves (defaults are almost as bad for them as home-owners). I'm prepared the weather a 5-7% storm for half a year if I have to, but I won't like it. I'm hoping I won't have to...

[swimmer_spe]

Originally Posted by biguc

^Your trips to Toronto sound like heroic feats of driving.

You do make a good point though. Sudbury and North Bay are the exoplanets of Toronto's orbit--far as they are, they're still juuuust close enough for routine visits. Both cities should agitate for better rail service to Toronto. Turning that 4hr drive into a 2.5 hour train trip would make it much more comfortable, and make both cities that much more appealing. Not to mention, convenient access to Pearson is a great selling point.

The way things are going, it seems more likely that GO would end up delivering that service. They seem to have great momentum going.

It's a 4 hour drive. I have done weekend trips to Montreal. That's an 8 hour drive....

It is stupid that I cannot take transit, or park in a safe location to get on the Via to Toronto. It would be nice that I could take the train, but it is always late and takes sometimes more than double time driving time.

Originally Posted by biguc

The remote work thing is a massive red herring. Being able to work from home doesn't mean that you don't care about where your home is--you care more than ever. It's one thing to live in the suburbs if you go into the city every day. If you're stuck at home, you want your home to be in the best place possible.

I live in one of the European tech hubs. It's not stopped being a tech hub because people can work remotely. People still need to connect--in person, in the same timezone, at events, accidentally. That doesn't often happen remotely. And people still love living in Kreuzberg. That they can spend winters in Bali and summers in Portugal doesn't change what they want outside their front doors.

Imagine going into the office for a day or so every month. Why would you live close by?
Another thing is the office towers...
https://www.canadianrealestatemagazi...es-334492.aspx

Originally Posted by Truenorth00

I didn't say nobody is doing this. Just that there's no broad statistical support of a trend of people leaving large cities. All their CMA populations are still growing. And to whatever extent there is spillover it's mostly to satellite towns and cities in the region. There's a lot more people moving from Toronto to z London or Guelph than North Bay.

https://www.uhaul.com/Articles/About...-Cities-22748/

The largest city is Vancouver at #7. North Bay is #1, Sudbury is #6.Toronto isn't on this list of top 25 places. I'd say the evidence points to it.

Originally Posted by Truenorth00

"Close enough" is subjective. But I'll just say that for most people, 4-5 hr drives to go to IKEA or a hockey game are not considered easy or pleasurable. You have to really like driving to do that. For most people, I'd draw a 200 km radius from Toronto and about 100 km from other cities for what they consider acceptable radius for satellite cities.

When I was working, my commute was 75km each way. The nearest Walmart is over 40km away... I am not unusual around here. Most people will talk of going to Toronto for the weekend every few months. It may be onerous, but people do it.

Originally Posted by Truenorth00

That's not evidence of urbanism. That's just generic suburban crap scaled down. Was hoping to hear of something different. The best urbanism in smaller urban areas in North America are usually in college towns. Was hoping to hear some idea of walkability taking hold. But I guess that's hard if the sales pitch is based on discount sprawl.

Well, since our subdivisions are smaller, they tend to be more walkable, in the summer. The other draw is things like parking and traffic are non issues as well. Imagine not having to add an extra hour to go somewhere due to traffic. Also, we are close to endless forests and lakes. Many of them are free access. Maybe there aren't Starbucks on every corner. Maybe there isn't some new trendy restaurant. Maybe we don't have all the activities as downs south. North Bay had a motto for years "Just north enough to be perfect". Live here for a while and you agree. A friend of mine is from Montreal and Toronto. Moved here about 10 years ago and has never looked back.

Originally Posted by Truenorth00

North Bay and Sudbury are kind of funny in the mental geography. People from there may think Toronto is close enough. But very few people from the GTA would think of those places as anything but a substantial excursion. North Bay is not much further from Toronto than Kingston. But you'll find way more back and forth with Kingston than North Bay and Sudbury. This is despite Kingston and Sudbury being about the same size in population.

There are people who have lived in Toronto their whole life and are middle age and have never been north of Steeles. Those are not the people who will move here. How many people do you know say they will retire to their cottage? Imagine working from there instead.

Originally Posted by Truenorth00

I will never understand folks who drive in from these places, see what sprawl has done to the GTA and then go home and decide that it's a good idea to replicate it, but space out everything even further. They love to complain about traffic in Toronto. Nobody talks about how ridiculous peak traffic is at certain times in London and Halifax, or even Kingston and Belleville. The whole idea of small town living being easier goes out the window when you actually experience how unwalkable and ridiculously car dependent many of those places are.

You mean how Canada's Wonderland used to be surrounded by farmland?

Originally Posted by MolsonExport

Word. This is how things work in much of Europe. Paris has exocities surrounding it, like Lille, Reims, etc., that are less than an hour away by train. These trains are filled with commuters. Mind you, Lille and Reims have way, way more to offer residents (even of the commuting sort) than comparable cities in Canada.

Regional passenger train infrastructure in Canada is horrible, outside of the very narrow catchment area of the Greater Golden Horseshoe (and even here, it ain't good, unless you are nine-to-fiving in downtown Toronto).

Every time I suggest improving non Corridor trains, I hear it from others about how it is a bad idea.

Originally Posted by Truenorth00

Sadly, urbanism and urban design are seen as something only for big cities in Canada. Hell, for a long time was only seen as something for Toronto, Montreal and Vancouver. Not even for Ottawa, Calgary, Edmonton, etc. At least this mentality is changing. Now we gotta work on cities like London, Regina, Kingston, etc.

We need to not just focus on places where cost of living is almost unaffordable, like London, Kingston, etc. We need to have it so that The difference in living in Toronto and Thunder Bay is size. The problem is that most governments do not want to help out the far flung areas as they are not a vote rich area.

Originally Posted by Truenorth00

Exactly. Though, if RER and HFR actually come to fruition as envisioned in the next 15 years, a good bit of Southern Ontario and Eastern Ontario will have service levels approaching European levels. Places like Guelph, KWC, Peterborough, etc would benefit massively.

And the cost of housing will continue to be unaffordable.

Originally Posted by Truenorth00

Would they actually change their mindset though? Just look at what went down on the LRT plan. Not Just Bikes might actually have a small part in at least embarrassing 1-2 members of city council there into action. But not much more.....

I feel that sometimes something has to be pushed through from a higher level government. By having GO going to London, the LRT could be a Metrolinx project.

[casper]

North Bay is a weird place to commute from to Toronto.

I don't know have its changed, about 20 years ago I use to live in Deep River Ontario. Would regularly have meeting in downtown Toronto.

I always found the worst route was having to be in Toronto for a Monday morning meeting in the summer and driving through North Bay and down through cottage country. Sunday afternoons that highway was always highly congested.

Deep River has changed quite a bit. AECL (Nuclear Industry) back then was the main employer. Between AECL having major operations in Chalk River/Deep River and Mississauga and Ontario Hydro being a major customer there was always regularly travel in/out of Toronto. People being seconded for stretched of time from teams in one location to another.

Today I think Deep River has become a bit of a bedroom community to the military base. That was never he case back then. Not certain the dynamics of why.

[WarrenC12]

Originally Posted by MolsonExport

I will take my chances with 2.4% now (I was also paying 1.65 earlier this year). If I could lock in for 3% I would do it pronto.

Yeah I was riding the 1.4% train after March 2020. Back up to 2.15% now and we'll see how it goes.

If you can handle the volatility, variable rates have been the best performers for something like 95% of the last 60 years.

Given we are already seeing the impacts of a few quick raises that normally take a few quarters to work through the system, I'm actually doubtful the BoC will continue with their plan to raise it another full point in 2022. Perhaps 0.5% or 0.75%.

[casper]

Originally Posted by WarrenC12

Yeah I was riding the 1.4% train after March 2020. Back up to 2.15% now and we'll see how it goes.

If you can handle the volatility, variable rates have been the best performers for something like 95% of the last 60 years.

Given we are already seeing the impacts of a few quick raises that normally take a few quarters to work through the system, I'm actually doubtful the BoC will continue with their plan to raise it another full point in 2022. Perhaps 0.5% or 0.75%.

I would surprised if they even go up another 0.5%. The existing increase they have done has had the intended consequence. The world economy is going into recession.

[whatnext]

What are these "mortgages" you speak of?