Friday Free-for-all!

It’s that time of the week again…

It’s Friday Free-for-all time!

This is our regular end of the week news round-up and open topic discussion thread for the weekend.  Here are a few recent links to kick off the chat:

no quick end to the boom
risk from heavy mortgage debt
Poloz tells Trudeau to spend
26% of Ontario struggles to afford homes
move to Austin?

So what are you seeing out there? Post your news links, thoughts and anecdotes here and have an excellent weekend!

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burnabonian
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burnabonian
paulb
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http://www.paulboenisch.com

Best place on meth
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Best place on meth

@1

Pretty wishy-washy move raising the down payment only on the portion over 500K.

Should have been 10% DP across the board.

I suppose it’s better than nothing though, and if they start an investigation into the money-laundering I’d be all ears.

elvince
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elvince

@#1: “Once implemented, that would mean someone looking to buy a $750,000 home would need to have a minimum down payment of $50,000: which is 5% of $500,000, plus 10% of the remaining $250,000.”

50k DP isn’t much to ask for someone buying a 750k$ house. 2 people can each withdraw 25k$ from RRSP and come up with the DP from tax-defered money.

I’m not sure anything over 500k$ should even be insured by CMHC. If you can afford anything that costs half a million, you don’t need taxpayer subsidy for your mortgage insurance. Either let the bank take the risk or use a private insurer.

Tiger
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Tiger

Billionaire Chinese businessman Known as china warren buffett disappears.

http://www.forbes.com/sites/liyanchen/2015/12/10/report-says-chinas-warren-buffett-billionaire-guo-guangchang-has-gone-missing/

APPARENTLY HE IS HIDING IN ONE HIS 31 HOMES HE BOUGHT IN VANCOUVER WITH CASH

patriotz
Member

@4:

In the US, federal insurance is only available up to $625,500 in LA and San Francisco metros. In Seattle, $517,500. These are for SFH, legal multi-family are higher.

Note that this works a bit differently than in Canada since the limit is on the loan amount, not the selling price.

space889
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space889

@Patriotz – I have been told that you also pay the insurance on the loan amount until the down payment is brought up to the minimum %, unlike the 1 time fee that’s charged by CMHC. So there is also more incentive to pay down the loan quicker to avoid having to pay ongoing insurance premiums.

space889
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space889

@BPOM – actually let’s just raise it to 20% period and then morons like you can be priced out of all the nice neighborhood and banished to damp basements or 200 sq ft lofts. That would be better for everyone.

And, those west side house will still go for $3M+, $5M+ since they aren’t bought by local money and pay for in cash.

Oracle
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Oracle

Down payment changes mean nothing.

The mortgage brokers can fudge everything.

Until they obtain income verification directly from CRA, nothing gonna change.

All a red herring.

Cat in the hat
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Cat in the hat

50%-ass change on the down payment makes little effect, but the undertone of the message tells a bit deal, ie the fed is scared, but too afraid to rock the boat since the entire economy is floating on this only boat.

Otherwise, they could just increase the down payment to 40% to anything over 1M, reducing the risk if the buyers has more skin into game.

At a lunch downtown, I overheard a young couple’s plan to buy a 1.2M house and 2 townhouses with 30k(30K for all 3 properties, not each). A fews of their friends have done it, why can’t they pull it off, being are younger and with double incomes and smarter.

elvince
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elvince

Meh, anything over a million isn’t eligible for CMHC insurance. The whole west side isn’t even an issue in this discussion.

patriotz
Member

@10:

Purchases of properties over $1mil are uninsured and the banks are required to get 20% down by the Bank Act. I believe this would have to changed by legislation, as opposed to requirements for insured loans which can be changed by regulation.

I have heard that banks in some markets are requiring over 20% for $1mil+ properties. After all they are the ones on the hook.

Yunak
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Yunak

@10

I don’t get it, were the young couple heavily drank or just had a daily pass from psychiatric hospital or else?

Bull! Bull! Bull!
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Bull! Bull! Bull!

>Meh, anything over a million isn’t eligible for CMHC insurance. The whole west side isn’t even an issue in this discussion.

no livable house in the city of vancouver or inner suburbs is an issue in this discussion.

burnabonian
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burnabonian

#9 Mortgage brokers can fudge incomes but they can’t fudge the size of a cash money bank balance.

I believe this massively reduces the number of eligible buyers.

You either have the cold hard cash or you don’t. Money talks, bullsht walks.

Increasing the amount of cash money required for middle class speculators to “add to their portfolio” means that you narrow the group who is eligible.

Dollars to donuts this reduces the number of people shopping for sub $1MM SFHs by half.

boom
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boom

the way CAD is going, the question we all should be asking is when BoC intervenes to support the currency?
Will CAD become worthless? Will prices explode upwards as we import most things and export raw materials?
Where is the limit that this becomes a concern to BoC, 60cents, 50, 40 or 30 cents?
May you live in changing times!

patriotz
Member

@16:

BoC’s official mandate is to target consumer price inflation, not exchange rates. Of course a falling CAD results in higher consumer prices so there’s some implicit point where the BoC would intervene to keep the inflation target, but remember the CAD has gone all the way down to 62 cents US before.

bestplaceonearth
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bestplaceonearth

oh no, new mortgage regulation…this is the end of the world folks, ask WSR Romeo Jordan.

burnabonian
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burnabonian

From the links above:

http://www.thestar.com/business/2015/12/09/26-of-ontario-homeowners-struggling-to-afford-homes.html

How many of these households would have been prevented from buying by the new rule.

HUNDREDS OF THOUSANDS.

I’m telling you: Most people will not admit that they are buying or carrying a house by the skin of their teeth.

Add $10k to a $35k downpayment requirement and you forcibly exclude a large segment of the population.

Lots of people who can come up with $35k down cannot come up with $45k. Full stop.

This means that those who were $700k eligible are now $600k eligible.

$900k eligible buyers just became $700k eligible buyers.

It is a major change.

Whether or not sellers will panic is the question.

(Also what else our new boy king has planned for our market. Remember that deflating our bubble is a platform promise!)

Brian Ripley
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Brian Ripley

re: “no quick end to the boom”

Depends on the boom and the relationships. I just updated my post of yesterday on credit cycles with another chart illustrating the “contagion” in the high yield markets:

http://www.chpc.biz/history-readings/credit-cycles

The commodity crash began in earnest in 2011, so yes it has been a drawn out affair, but the effects are now compounding. Slow moving assets like real estate are not immune when sentiment changes and liquidity is sought.

burnabonian
Guest
burnabonian

mortgage old dp new dp delta $ delta %
$500,000 $25,000 $25,000 $0 0
$525,000 $26,250 $27,500 $1,250 5
$550,000 $27,500 $30,000 $2,500 9
$575,000 $28,750 $32,500 $3,750 13
$600,000 $30,000 $35,000 $5,000 17
$625,000 $31,250 $37,500 $6,250 20
$650,000 $32,500 $40,000 $7,500 23
$675,000 $33,750 $42,500 $8,750 26
$700,000 $35,000 $45,000 $10,000 29
$725,000 $36,250 $47,500 $11,250 31
$750,000 $37,500 $50,000 $12,500 33
$775,000 $38,750 $52,500 $13,750 35
$800,000 $40,000 $55,000 $15,000 38
$825,000 $41,250 $57,500 $16,250 39
$850,000 $42,500 $60,000 $17,500 41
$875,000 $43,750 $62,500 $18,750 43
$900,000 $45,000 $65,000 $20,000 44
$925,000 $46,250 $67,500 $21,250 46
$950,000 $47,500 $70,000 $22,500 47
$975,000 $48,750 $72,500 $23,750 49
$1,000,000 $50,000 $75,000 $25,000 50

Cat in the hat
Guest
Cat in the hat

#13

The funny is they can retired now if that lunch happened in 2008. No joke. But I am not sure today, was not sure during 2008. Who knows.

patriotz
Member

@22:

My guess is that for every buyer who purchased in 2008 and is getting out now – with a big gain of course – there are more who are using the equity to increase their holdings.

Madashell
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Madashell
CMHC foreign ownership math… About 8000 condos were bought in Vancouver in 2015 so far. There are about 80,000 condos in Vancouver in total. Using the CMHC’s own numbers, that means that the share of foreign-owned condos went from about 2700 to 4300. That means net 1600 condos were sold to foreigners in 2015 so far. That is 20 per cent of all condo sales! Suddenly foreign ownership doesn’t look so harmless. And this analysis ignores the first two problems I mentioned above. Namely that we’re just talking about condos here. The actual effect on all housing including townhomes and detached properties is likely even higher! We could easily be looking at 30 per cent-plus of housing demand in Vancouver coming from abroad. And if we make the added assumption that foreign demand is less price sensitive than domestic demand,… Read more »
burnabonian
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burnabonian

#24 You left out the most important part:

“Let me say that this is a rough analysis based on data I gathered from news releases.”

He might as well be reading tea leaves.

He is complaining about confirmation bias by industry stakeholders — people cherrypicking questionable data points to reinforce the narrative that they want to believe.

And then he does the same thing: “O GOD EVERYTHING IS OWNED BY FURRINERS! BY 2020, 250% OF CONDOS WILL BE OWNED BY FURRINERS”

He sounds like Donald Trump.

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