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October 24th, 2009 at 12:35 pm
This is from the G&M:
Thursday, October 22, 2009 11:38 AM
Dollar over housing
David Berman
The Bank of Canada released its quarterly monetary policy report on Thursday morning, two days after it caused turbulence in currency markets when the bank reiterated its commitment to keeping interest rates unchanged until at least next June.
The report provided some more information about that commitment, making specific references to the Canadian housing market, which has been picking up lately – to the point where some observers believe it is being fed by low rates.
Here’s what Eric Lascelles, chief economics and rates strategist at TD Securities, said in a note: “A telling message that continues to be sent is that the strength of the Canadian dollar is the more important factor than housing market strength,” he said.
“In fairness, the housing market did receive more ink than it did on Tuesday, but the references were still quite calm. Recent strength was characterized as being primarily due to ‘pent-up demand for housing,’ and the overall assessment was still fairly blasé: ‘the housing sector appears to have bottomed out, and some firming in house prices is evident.’ There is nothing to suggest the Bank of Canada has any desire to go on the warpath against rising home prices, despite Governor Carney’s earlier sympathetic comments towards leaning into asset bubbles.”
Madness, dear friends, madness…Carney is so wrong, but we will all have to apy for his misplaced judgment. Wait a few more months and then we can start evaluating the new inflation figures.
October 24th, 2009 at 11:22 am
One small comment: I don’t care about politics much, and am not Liberal nor Conservative. To be honest I have limited trust in both parties, but that is my problem.
I must admit, however, that the handling of the economic crisis by the Conservative party is absolutely horrible.
- excessive lending is the cause of the problem? Let’s lend some more through government-insured CMHC loans!
- excessive government intervention in the economy? Let’s spend some more through an economic action plan which allows people to fix their patios… (that’s some productive investment, isn’t it?)
- fiscal conservatism and careful debt management? Let’s generate a massive current account deficit and additional increase in debt which adds one third to the existing load (part of it stealth-debt, through liabilities and guarantees due to CMHC, which will be there for decades to come!).
- free markets and economic freedoms? Let’s intervene on exchange rate markets to limit the ascent of the C$; let’s mess around with taxation of housing, income, resources; let’s provide huge subsidies (and I mean huge!!!) to declining sectors (see auto, forestry);
These guys have no credibility, probably less than the ones before them. they will hopefully be wiped out at the next elections.
And this is without even starting to talk about the provincial politicians, like Mr Campbell. Let’s not get there.
If the real quality of people becomes evident during crises, i think we know how our elected officials score.
October 24th, 2009 at 11:10 am
patriotzed:
I am with flip on the inflation problem. This is not just going to be a question about Canada, but a question about the value of the C$ and trade with the US.
You are mighty optimistic about our politicians. I think it is clear by now that the US will inflate prices to some extent. Canada can play tough and get a loonie above 1.10 US$, with all its consequences. Or it can follow suite.
Following suite means also lower unemployment and pain in the short term, say next 3 years. Why wouldn’t they do it? Are they so honest? Do we have check and balances that could prevent that?
If the US will do it, so will Canada.
October 24th, 2009 at 9:53 am
No, the CMHC even if it does implode and in a worst case scenario loses about 1/4 of the 600 billion it can currently insure won’t bankrupt the country, we’re 800 billion in debt now, it would just push the debt clock back a decade.
Still, a decade of paying off debt cancelled out by a few years of fiscal mismanagement from a so called “conservative” government is nothing to sneeze at. I could find a better use for 150 billion dollars other than propping up a market that will inevitably collapse and will only cause more damage the longer it goes on. Healthcare, education, daycare subsidies…
It’s beside the point that it won’t kill the Canadian economy, it’s grossly irresponsible behaviour that hurts Canadians for the sake of short term political gain.
October 24th, 2009 at 9:44 am
flip, the debt levels of all governments in canada is getting pretty bad and worsening. in the 90′s they had discreet monetization and u.i. reforms, etc; i’m not so sure they have quite the same options this time. hyperinflation is a long shot but i think low “real” interest rates regardless of the inflation level is what they will be interested in.
October 24th, 2009 at 8:09 am
@patriotzed::
I would agree that the federal debt situation in Canada is manageable, with the mortgage debt I am not so sure. The debt situation in the US however, is really getting out of hand. Do you think there is a high probability of inflation in the US? If so, inflation in the US is going to be exported to Canada, because to keep Canadian dollar from rising against USD, BoC will have to keep their rates low. Artificially low rates are known to cause inflation, especially in the asset markets. And it did happen before: in the 70s both countries had inflation simultaneously.
October 24th, 2009 at 7:45 am
@patriotzed::
Canada’s debt/GDP ratio today is less than half than it was when the Liberals took office in 1993. Was the debt situation unmanageable then? Did Paul Martin resort to hyperinflation to get rid of the debt burden?
Despite the past few years of Conservative mismanagement, we are nowhere near the situation that we were in at end of the Mulroney government, never mind Argentina. We also don’t have an ill-conceived currency peg to the USD that was the root cause of Argentina’s most recent crisis. We also produce a lot of oil (Argentina doesn’t), which counts for a lot.
I get the feeling many posters on this board don’t have much feel for Canada’s economic history of the last few decades.
October 24th, 2009 at 7:10 am
@patriotzed: An interesting turning point is coming up soon because the YOY decreases in oil will start to get smaller as we are approaching the time last year when they crashed. So one would expect a temporary uptick in headline inflation numbers starting with the next cpi report. The question is whether this is going to be a blip and the trend is still downwards (because of overcapacity, delays in incorporating the deflation in energy prices, and our currency appreciation) or it marks a return to BofC targets.
October 24th, 2009 at 7:05 am
@patriotzed:
Good post. The cost of debt servicing is also lower now that it was in 1993.
I agree with the tax cutting done by the Conservatives, but I don’t agree with how they let the federal government grow faster than GDP. The demographic shift is a good opportunity to rightsize government. I would like to see a ten year plan for rightsizing.
October 24th, 2009 at 2:18 am
@flip_this:
Canada’s debt/GDP ratio today is less than half than it was when the Liberals took office in 1993. Was the debt situation unmanageable then? Did Paul Martin resort to hyperinflation to get rid of the debt burden?
Despite the past few years of Conservative mismanagement, we are nowhere near the situation that we were in at end of the Mulroney government, never mind Argentina. We also don’t have an ill-conceived currency peg to the USD that was the root cause of Argentina’s most recent crisis. We also produce a lot of oil (Argentina doesn’t), which counts for a lot.
I get the feeling many posters on this board don’t have much feel for Canada’s economic history of the last few decades.
October 24th, 2009 at 1:44 am
“u.s. allowed deflation”- 85
They did no such thing. The US tried to fight it, but failed. Deflation is the worst nightmare for those in debt.
October 24th, 2009 at 1:10 am
Talking with my parents. My father is a realtor apparently he had clients looking at home caught in bidding wars. One last week had 9 offers(sic) and was listed at 639 yet went over 700k. What is wrong with vancouverites. Everyone in the city is insane.
October 24th, 2009 at 1:09 am
Talking with my parents. My father is a realtor apparently he had clients looking at home caught in bidding wars. One last week had 9 offer(sic) and was listed at 639 yet went over 700k. What is wrong with vancouverites. Everyone in the city is insane.
October 23rd, 2009 at 11:57 pm
@anonymous: Anonymous, thanks for the information. That’s exactly how I understand/see entire RE buying experience in high priced market/city.
Your numbers are exactly something that only folks (like maybe 15% of Canada’s families) with solid/high income could afford if they chose to buy something above aware (say luxury) or pick decent 2 BR condo (1180 SF) in the downtown for 170K – 200K instead. These are exactly numbers I can understand, digest and possibly accept to pay in order to become an owner. I make 6 figures and wife is going to get back to work soon and I seriously think that I can’t afford a bachelor apartment in some of the older buildings in Lower Mainland.
October 23rd, 2009 at 11:40 pm
CMHC is part of the problem? Hoocoodanode!!!
October 23rd, 2009 at 11:31 pm
indeed the deflation senario is a real longshot. deflation is the most moral/ethical means of dealing with debt but currently the levels of debt are way to high to be resolved with deflation. japan and u.s. allowed deflation and their problems are bigger than ever. the u.s. should have started quantitative easing three years ago. history has shown that governments only have fully independant bond markets when it is in their interests to do so. i don’t expect governments to be caught flat footed again but you never known.
October 23rd, 2009 at 11:03 pm
@patriotzed:
I agree with you about what WOULD happen if inflation took hold.
I disagree with you that institutions will do what they can to avoid that inflation takes hold.
It seems to me that some politicians/bureaucrats might just do what is good in the short term for themselves. This might include some price inflation.
You must be an optimistic type and trust institutions more than I do. Hope you are right.
October 23rd, 2009 at 11:03 pm
patriotzed: The BoC (and other central banks) are all too aware of this and they are not going to let consumer price inflation get out of hand.
I am sure that the central bank in Argentina was aware of inflation as well. If a government is going broke, because they not sustain their debt payments, which would they choose: increasing taxes and cutting expenses, or inflating their debts away? It appears, that the US government if they remain on their present course is going to be bankrupt at some point in not too distant future. It seems doubtfull that they will be able to pay their obligations through rising taxes, so they are printing money. In the 70′s, the inflation in US was exported to Canada. I don’t see why it will be different this time around.
October 23rd, 2009 at 10:50 pm
Sorry, I signed my preovious message as vreaa by accident. It should be flip_this.
vreaa: I don’t see the ‘implicit’ link being present in the bear arguments or positions. How do you draw that conclusion?
What I meant is that many people talk about a drop in nominal prices. An the nominal price is nothing more pieces of paper issued by Government of Canada per house. So, what on earth can stop Canadian government to issue more pices of paper? Political will?
It seems to me that the mortgage credit is a bit like a separate currency: where else in the economy a person with an average income can get a 1/2 million dollars in credit? Once the mortgage credit being created, very little of it leaves the housing market. Very few people just sell their houses, take cash, and go back to renting. Governemnt of Canada effectively has a monopoly on creating the mortgage credit, and it can keep issuing more of it.
Sorry I signed my preovious message wrong.
October 23rd, 2009 at 10:45 pm
@Anonymous:
As I said before, any indication of a significant rise in consumer price inflation would mean a prompt and significant rise in interest rates, i.e. a crash in the bond markets. This would have a major and immediate negative impact on business earnings and consumer spending, as well as on other asset prices (i.e. stocks and RE).
The BoC (and other central banks) are all too aware of this and they are not going to let consumer price inflation get out of hand.
October 23rd, 2009 at 10:42 pm
vreaa: I don’t see the ‘implicit’ link being present in the bear arguments or positions. How do you draw that conclusion?
What I meant is that many people talk about a drop in nominal prices. An the nominal price is nothing more pieces of paper issued by Government of Canada per house. So, what on earth can stop Canadian government to issue more pices of paper? Political will?
It seems to me that the mortgage credit is a bit like a separate currency: where else in the economy a person with an average income can get a 1/2 million dollars in credit? Once the mortgage credit being created, very little of it leaves the housing market. Very few people just sell their houses, take cash, and go back to renting. Governemnt of Canada effectively has a monopoly on creating the mortgage credit, and it can keep issuing more of it.
October 23rd, 2009 at 10:33 pm
78 was me, forgot to sign.
October 23rd, 2009 at 10:31 pm
@patriotzed: No again, I must disagree. It is true that interest rates for companies (and consumers) will hit the sky again, no question there. However the politicos have a short term view: they don’t care about reigniting inflation and letting the genie back out of the bottle. Re-election for them means that it is a prioriy to avoid the crisis which would follow a major adjustment (downward) in nominal prices of assets. They have just shown us that they won’t accept that. If you think they will, just give me a chronology of events as you see them happening.
By the way, I wish i was wrong: prove me so and make my day (but make it ‘incentive compatible’ for policy makers).
October 23rd, 2009 at 10:25 pm
@flip_this: “I noticed that many housing bears have an interesting contradiction in their arguments: on one hand they exhibit a mistrust in the ability of the government to “regulate” or to interfere in the markets (CHMC), but on the other hand there is implicit trust in the paper money”
—
That doesn’t follow — I don’t see the ‘implicit’ link being present in the bear arguments or positions. How do you draw that conclusion?
Plenty of RE bears are concerned about inflation of the fiat money supply and are hedging their invested down-payments against inflation.
Future inflation may help RE somewhat, but it would have to be profound to prevent a crash of RE prices in Vancouver.
October 23rd, 2009 at 10:22 pm
@domus:
No it won’t, because interest rates will rise to compensate for the inflation. In other words, real interest rates will remain the same, or even increase, because lenders will become increasingly uncertain about the real value of the principal when repaid.
Believe me, if consumer price inflation ever gets north of 2% (the BoC target), you will see a big jump in interest rates, pronto. You think a 6% prime would be good for business?
And before someone chimes in “the government won’t allow rates to go up” the bond market is a lot bigger than any government. Ask George Soros.
October 23rd, 2009 at 10:13 pm
@realpaul:
Because the great majority of cars sold in Canada are imported. Conversely, the majority of cars produced in Canada are exported to the US. Therefore, the “Cash for Clunkers” program in the US actually supports more Canadian jobs than a similar program in Canada would. Or to put it in economic language, the auto market in Canada is too open for local producers to benefit from consumer subsidies.
A program of subsidies to purchasers of Canadian-made cars only would be both ineffective (because of the fraction of models made in Canada) and violate NAFTA.
October 23rd, 2009 at 10:11 pm
I’ve been a bear on Vancouver housing market for a long time, but recently my views have been changing somewhat… I am still quite confident that housing in Vancouver is overpriced, and will at some point get in line with the fundamentals. I am still convinced that this price adjustment will take place, at least in real terms. By the real terms I mean against a basket of commodities and against a unit of labour, i.e. if historically price of the house was equivalent to let’s say 4000 hours of labour, then this is the average historical price housing market will eventually come back to.
Now, I am not so sure about the nominal, or money denominated prices. On that score I have to give the due credit to Dave, who was pointing out on many occasions that for a mortgage holder, price drop in real terms is actually beneficial, and the price drop in nominal terms is not. Whether the drop in nominal terms will occur will depend on the supply of paper or fiat currency. The defining variables in this equation are the government and the central bank, and their respective fiscal and monetary policies. The questions is just how much money are they going to create? The usual amount per annum or slightly more, or much more?
I noticed that many housing bears have an interesting contradiction in their arguments: on one hand they exhibit a mistrust in the ability of the government to “regulate” or to interfere in the markets (CHMC), but on the other hand there is implicit trust in the paper money, which above mentioned government has full control of. The government can create and does create paper money at will. So, to say that real estate prices will fall in nominal terms is to believe that the value of the pieces of paper with the dollar signs on them will at some point inevitably rise against the real assets, such as houses. And in principal I would not dispute that such appreciation of paper against housing can happen (USA, Japan). But it will happen only if there is political will for this to happen. And this is a big IF. It seems to me that with the low rates they pushed themselves into the corner, any significant raise in the lending rates will cause mortgage defaults, and there will be a political pressure to do something (most politicians want to get reelected). In my opinion, it all will end up in a nationalization of mortgages, Government of Canada owns them indirectly anyways. So, at some point they would just freeze the payments on the all of the existing mortgages…
In conclusion, I think that, in the long run, the people with the biggest mortgage possible will win the most, because their mortgages will be inflated away. I am not going to buy however. I still think that buying right now is risky. There will be a brief period when interest rates will rise but mortgage payments are not frozen by the government yet. In the USA it is a no brainer: with a 5% mortgage locked in for 30 years one simply can not go wrong… Here in Canada with maximum 10 year lock-in period getting a big mortgage is not such a sure thing.
October 23rd, 2009 at 10:08 pm
@patriotzed: I disagree. What i am saying is not that homes will be more affordable, because I am well aware that there will be an interest rate ‘hurdle’ which will make the repayments hard from the very outset of the loan. What I am saying goes beyond RE and has to do with the general level of prices: inflation will distort incentive, labor supply, it will reduce the real purchasing power of salaries and wage, it will surely make credit harder to come by. However it will definitely also provide a much needed reset of a vast amount of nominal loans, including loans to firms and companies. It would be a (very unfair) way to kick-start the economy and throw out the ballast and dead wood of past.
Of course, this could be implemented in a stealth way: like, for example, increasing the target inflation rate to 5% (claiming some external shock or other excuse). Over a 3 years period they could run inflation rate closer to 6% or 7%, without exceeding their bounds and virtually erasing big chunks of existing liabilities.
They could do it. It would mess up credit markets, mortgage origination would collapse and the dark days of decreasing purchasing power and distorted labor markets would be back. But, let’s be realistic, do you think they really mean all this new debt to be genuinely repaid? Will they raise taxes to repay all this government debt? Will they not bailout unwise borrowers again?
October 23rd, 2009 at 10:02 pm
@Drachen:
This is course is the former BC Hydro (originally BC Electric) head office, hence the name “Electra”. The reason the condos are so small is that they used to be offices.
When it was converted to condos in 1995 it heralded the start of the head office flight from downtown Vancouver, although I think few realized it at the time.
October 23rd, 2009 at 9:51 pm
@domus:
Wrongo, because rising inflation inevitably results in rising interest rates. That is exactly why we had double digit interest rates in the 70′s and 80′s.
You are also implicitly assuming that wage inflation would keep up with price inflation. How likely would that be?
There is no way out of this bubble except a price bust.
October 23rd, 2009 at 8:12 pm
What do you think the impact of the HST will be? Some say that resale homes will be more desirable than new builds. Will the housing market go splat after the HST is implemented?
October 23rd, 2009 at 7:15 pm
The whole future income argument is fine but investors do the same. Investors compete head-on with owner occupiers. By that measure it’s future rents not incomes that determine the price. Last I checked rents were rising very slowly. And rents don’t get promotions.
October 23rd, 2009 at 7:04 pm
Let CMHC go bust. No tax payer bailout. Let the banks (participants in crime) take the hit.
This would only happen in a society where people had brains if their own.
October 23rd, 2009 at 6:55 pm
You guys get it all wrong. BC bud will save this country. Yes people are getting in debt, but sofar everyone seems to be paying their morgage. Where is the money comming from? The basement morgage helper is transformed into a grow up cash cow. as long as this continues, real estate is going to be stable at worst or go up at best. Stop looking for other explanations. BC Bud is the name of the game. People dont know that in a small aera of 80sqft in their basement they can get close to 20 000 cad each 6 weeks with minimum hussle. And that is cash money, no taxes paid!!! And I keep working 9 to 5 making 50k a year and still giving 20k to goverment in taxes. Life sucks…
October 23rd, 2009 at 6:01 pm
Who’s face in the new $1 million bill?
This is a really interesting article from Bloomberg.
http://tinyurl.com/yzjws6g
“Forty years ago, the U.S. government said the $100 bill would be the highest-denomination note. With the Federal Reserve now trying to print its way out of the financial crisis, it may be time to revisit that decision.”
I don’t know what the governments will do about the huge amounts of debt they are issuing or guaranteeing. If they were to actually pay them, taxes should raise a lot (!) and services should be cut. Any politicians around who are serious enough for that?
There is an alternative, though. Printing paper money over the years and dilute the debt. I wonder whether that is a given already, or maybe I am just been cynical.
October 23rd, 2009 at 5:53 pm
How about?
Dear Government Running Dog,
Stop your evil abusive conspirocy – which sees you in league with the RCMP, Communists, the KKK and Satan – and set us freee from you meddling.
If you do not I will come over as part of my latest world trip and kill you with a stick. Because I can.
Signed
(un) RP
October 23rd, 2009 at 5:45 pm
@Boombust: Brilliant! I shall do the same! In fact, if the Pope wants to prepare a common format, I could just wait and send the same letter that everyone else will send. It would be cool to have a ‘class’ letter from all people reading this blog and agreeing on its contents.
October 23rd, 2009 at 5:14 pm
I e-mailed a letter today to the “Chairman, CMHC” about their reckless and wanton ways.
Not too difficult. Just go to their website.
Think I’ll receive a scripted reply about their mandate to create “affordable” housing for all Canadians?
Hmm…we’ll see.
I’ll keep you posted!
October 23rd, 2009 at 4:13 pm
@Milton Friedman: How the hell are you maximizing expected utility if you’re paying 2 or 3 times as much for housing than if you rented it instead?
Taking on debt can be rational–in the sense of maximizing expected utility–at times. Taking on housing debt in Canada right now is not rational.
October 23rd, 2009 at 3:58 pm
@Milton Friedman:
Ya great, the futures so bright I gotta wear shades. The basis of the model is based on expectation within the macro enviornment in which it resides. Apply the theory to Detroit why don’cha?
Vancouver for example has no permanent tax base per se. 80% of the Board of Trade representatives are buisnesses employing less than 50 people. Small business and single family homeowners are transient by definition.
The Shitty Council of Vancouver has as its head a guy who bottles ‘several thousand bottles of juice per week’ that coming from the Happy Planet webpage.
The city is temporary and smalltime. Expectations are that that the facade is temporary and without industrial foundation to suggest permanence and thus has no basis on which to base Freidmans Theory.
October 23rd, 2009 at 3:48 pm
59
From your link : “In its simplest form, the hypothesis states that the choices made by consumers regarding their consumption patterns are determined not by current income but by their longer-term income expectations”
I am an uneducated staffer at Safeway making $16 bucks, but I EXPECT (insert the word hope) to make $100 an hour at the same job down the road, so I am sure that giving me a $500,000 mortgage is the right thing to do…
I like that hypothesis…it makes me feel good about my home purchase. Oh wait, didn’t I hear that same hypothesis from my realtor about ever rising incomes ….
October 23rd, 2009 at 3:39 pm
Hey All,
Don’t forget about the permanent income hypothesis. In a standard two period model, borrowing today can maximize overall utility if you expect to be able to pay back what you borrow tommorrow. This is just standard undergraduate Economics. Unless most of you armchair economics gurus don’t know what you’re talking about.
http://en.wikipedia.org/wiki/P.....hypothesis
What might extrapolate that they don’t have bright prospects for future income.
October 23rd, 2009 at 3:37 pm
Does anyone wonder why the government was willing to put 600 ++ billion into buying mortgages and another 200 Billion in outright debt as the deficit numbers are showing (and the year isn’t over ) and zero money into any other consumer produces? Why wasn’t there any incentive programs like Cash For Clunkers to revive the auto industry in S. Ont. The program was very effective in Britian, Japan and the US. What else could have been done for buildings hospitals, seniors homes, low income housing and assistance. training programs etc? Why did they blow the entire nut on house buying?
In BC we’ve seen a 6 Billion ++ blow out for the Olympic fiasco with nothing to show for it and no legacy beyond sinking buildings and duplicated facilities that no one in the sports world knows what to do with after the 21 days of use. I think people are going to look back and say ‘what the fuck happened to all that money?’ Post Olympics of course the stricks will start and the ‘happy face’ ad revenue will have shifted to London or Rio. We’ll be left with questions and not a pot to piss in.
October 23rd, 2009 at 3:28 pm
#12:
Is that the provincial tax payers or national?
B/c I am thinking about skipping the province. (Pardon my french, but to the hell with those who are irresponsible, they are the ones that should sleep in their ugly bed, not me).
It is unfrugal to pay for others stupidity, and frugal is my mantra. I really dont care what others do, big house, fancy car or whatever, it is their load to carry. I did not aquire any of those things therefore I dont pay for it.
SIMPLE. I dont go with the expectation that anybody else is going to pay for my groceries when I go to the grocery store, nor do I pay for anybody elses either. What you put into your basket is up to you, and paying for it is up to you too. SIMPLE.
SQUEAK!!!!!! i just had to purge..back to collecting some walnuts for the winter..
October 23rd, 2009 at 3:27 pm
On another note, there is a debt-cycle in the economy where people alternately get ahead by either taking on more debt or by having no debt. For example, in the 1970′s currencies were inflated away so someone who borrowed to purchase assets early in the cycle made out like a bandit. People who tried to replicate that strategy in the early 1980′s were crushed. The inflection points are always brutal for the debt-holders because their position can’t easily be changed. A saver can always purchase assets at the beginning of a credit expansion though.
So where are we now? We’ve seen a continuous 15 year expansion of credit since the early 1990′s recession, and the US has clearly passed an inflection point. Look at this:
http://market-ticker.org/archi.....rning.html
Anyone with a Citibank credit card are being charged 30% interest! It’s the same rate whether or not you are in default! Other banks are starting following suit, and anybody in debt is basically screwed. People who think this can’t happen here are delusional. The big banks will charge you whatever they can, and if people start defaulting on their mortgages (blowing up the CMHC) you can bet they will max out their credit cards and default on those first. My advice to everybody is to stay out of debt at all costs, the wind is changing.
October 23rd, 2009 at 3:21 pm
So if we understand that the banks have a vested interest in lending to those who have LESS than a 20% downpayment, has anyone encountered a situation where the banks actively encourage people to put down less than 20%?
Then again…with prices this high, I’d say it’s pretty difficult for most to put down any more than 20%.
Sad.
October 23rd, 2009 at 2:56 pm
#45 @Supported By The Taxpayer: We may all have to pay for this, but we won’t have to pay equally. People with mortgages *need* to maintain a high income, especially if they become trapped by falling house values in a crash scenario. They will bear the brunt of the taxes, while people with substantial savings may be able to buy a modest dwelling with cash and over the next few decades, work less and have more time for family and friends. The difference in “quality of life” could be incredible.
October 23rd, 2009 at 2:53 pm
@Starving Artist:
#42 the 329 sq ft place at th eElectra was also built in 9999, very futuristic.
October 23rd, 2009 at 2:48 pm
“But meanwhile, two things are booming: Real estate and lending money. House sales are up by a third nationally. The average price is ahead 11% on average. Mortgage loans have hit an all-time high – rising an estimated 12% in 2009 alone. Consumer credit has soared 9% during the recession. And we now owe more, per head, than the Yanks. Household debt in Canada is 140% of income. Down south, it’s 132%.”
http://www.howestreet.com/arti.....e_id=11240
October 23rd, 2009 at 2:40 pm
@vreaa:
17 The poor being moved into ownership because of a temporary negative interest rate, ya thats smart. Will their incomes go up as fast as the interest rates will?
we’re in solid bubble territory,
“Roubini: I could make a similar argument for other commodity prices. In my view, rising commodity prices are not justified by the fundamentals.
There’s a huge bubble, because we have zero rates in the U.S., zero rates around the world and a huge carry trade. Everyone is borrowing at zero interest rates in dollars and getting a capital gain because the dollar is weakening, so they are borrowing at negative rates. And then they invest in risky assets: commodities, equities, credit. We’re creating a bigger bubble than before.”
http://www.indexuniverse.com/s.....l?Itemid=5