Archive for the ‘Canada’ Category

Party like it’s 1981

Wednesday, July 1st, 2015

Remember the 80’s?

Big hair, jelly bracelets and 20% interest rates.

Homebuyers back then had a tough time, they had to save up for a big down payment and the cost of holding a mortgage was high.  All that hard work and sacrifice was well rewarded though as Rob Carrick points out in the Globe and Mail:

The high interest rates of the early 1980s must have felt unbearable for all Canadians buying homes and arranging mortgages (it was heaven for savers, but never mind). The reward for perseverance was a 30-year run in which resale house prices on a national basis surged by an average annual 5 per cent and were up in 28 of 34 years.

This rally was fed by falling interest rates. After the visit to high-rate hell in the early 1980s, home owners benefited from a long decline in rates that continued into 2015. House prices haven’t gone up because homes are a great investment, because of immigration, because of foreign money or because home ownership is awesome. It’s because we’ve had a 30-year sale on the cost of financing a home purchase, with ever-increasing deep discounts.

That sale may be ending. There’s a growing sense that the U.S. economy is on the upswing, and interest rates in the bond market have already started to creep higher. Mortgage rates take their cue from rates in the bond market, so we could see lenders increase fixed-rate mortgage costs at some point this year or next.

For the historical perspective read the full article here.

The thing that may surprise you is that despite a housing market that has provided magical returns for older buyers and cheaper and cheaper debt seniors are still going bankrupt in record numbers.

Time for another recession?

Tuesday, June 30th, 2015

It seems like it was just a few years ago we had a recession, could it really be time for another already?

The Canadian economy has now contracted four months in a row and if that trend continues will Poloz have to cut rates again?

Economists have already written off the first half the year, but something better was still expected for April.

This also brings into question the outlook that had been painted by Bank of Canada Governor Stephen Poloz.

A recession is typically defined as two consecutive quarters of contraction, meaning May and June will have to be stronger to avert that in Canada.

Even if the May showing is flat, said Andrew Grantham of CIBC World Markets, there could still be a “modest negative” for the second quarter.

“It probably already feels like a recession for people in Alberta and Saskatchewan,” he said.

Read the full article here.

Who’s worried about debt?

Monday, June 15th, 2015

According to this article over at the CBC, Canadians love a good home equity line of credit – they’re practically addicted to that sweet sweet HELOC money at rock bottom rates.

“We are addicted for sure. Who wouldn’t be addicted to something so easy [to get]?” says 35-year-old Ali about the free-flowing lines of credit that have enabled him to splurge on the finer things in life.

“It’s easy, accessible cash at a very cheap price. The banks make it so easy for you to obtain it,” says the software engineer.

Some people say the national reliance on debt is a risk to our economy and to the lifestyles of the indebted.  But the Canadian Bankers Association isn’t worried and spenders say they are aware of the risks:

While Ali and Haji like to spend, they believe they’re behaving responsibly and say they’re aware of potential pitfalls. That’s why they’re still undecided about another loan.

“If you get a line on this [house] and God forbid something happens to me or [my wife] and we are unable to sustain our lifestyle or stream of income that we have, then we would be in trouble and that may lead to us losing this house,” says Ali.

And that’s why some rooms in the family’s home remain empty. Ali shows CBC News his large, mostly barren master bedroom and talks about his grand plans to furnish it — sometime in the future.

“Without the credit line, it’s slow,” he laments.

But things could always change. The couple says just last week the bank called, inquiring if the family was interested in another loan.

Read the full article here.

 

Zoocasa shuts down

Thursday, June 11th, 2015

Zoocasa was supposed to be the Canadian answer to Zillow – making real estate transaction information more available and driving down the cost of buying and selling a home.

Well, as space889 points out that experiment has ended. Rogers is shutting down Zoocasa.

The move by a multibillion-dollar telecommunications company into real estate sent shock waves through the industry, particularly once Zoocasa began offering buyers and sellers a 15-per-cent rebate on the commissions they paid to their agents, sparking ire among some in the industry and putting pressure on other brokerages to lower their fees to compete.

Read the full article here.

Ontario cracking down on phantom bids

Tuesday, June 9th, 2015

Most real estate professionals are honest and unless there is a signed offer in place would never use the threat of a competing offer in an effort to drive up a property sales price.

But just to make sure a few bad apples don’t spoil the bunch Ontario plans to crack down on phantom bids.

The scam involves a sales agent hinting to prospective buyers there are other bids as a way to coax them to bid higher.“You say, ‘We’re expecting another offer. I do have another offer. You may want to go back to your client and make sure this is their best offer’,” says said Joseph Richer, registrar of RECO. “You are suggesting there might be competing offers when there may or may not be.”

With the new rules, “You cannot suggest or even imply that you have an offer unless you have one in writing, signed sealed and ready to be delivered,” said Richer, while adding there have been very few formal complaints about phantom bidding over the years.

Read the full article here.

House-poor Canadians

Thursday, May 28th, 2015

Southseacompany pointed out this article.  Seems like the more valuable our real estate gets the more house-poor Canadians become.

“Campbell says that many, like Edgerton and Camus, are surviving now, but the big question is what happens if there’s an unplanned setback — from a job loss to a rise in interest rates.”

“”If the housing market goes down and those individuals have to sell, we’re going to see a lot of houses on the market, which will further reduce the house market in general,”

‘Canada has among the highest home ownership rates in the world; owning a home is one of the ultimate Canadian dreams. And it’s perhaps why so many people choose to live house poor rather than sell their home.”

Read the full article at the CBC.

Friday Free-for-all!

Friday, May 15th, 2015

It’s that time of the week again…

Friday Free-for-all time!

This is our standard 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:

How about more taxes?
Not all owners oppose lower prices
Equity Protection
What a realtor says
The premier wedge issue?
Lessons learned in the 80s?
Harper warns of high debt

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

 

Canadians deep in debt and getting deeper

Monday, May 11th, 2015

The Globe and Mail nicely sums up the current Canadian obsession with taking on household debt. This infographic has all the pretty charts related to the current situation in which current debt totals a record $1.8 trillion. Just over a trillion of that is Mortgage debt, with the other big growth seen in lines of credit and car loans.

One Trillion is a big number and it can be hard to visualize.  Here’s one way to put it into perspective:

If you spent $1-million every day, it would take you 2,740 years to spend $1-trillion.

Albertans carry the largest debt to income ratio followed by BC. It seems the nation loves debt, but the west loves it best.

Read the full article here.

Should you walk away from your Alberta mortgage?

Monday, May 4th, 2015

southseacompany pointed out this article in the Financial Post:

You can walk away from your mortgage (if you live in Alberta) but should you?

“Francis, a 34-year-old welder from the mining town of Grande Cache, Alberta, says he wishes he could get out of the townhouse he bought four years ago.”

“He bought the home for $175,000 with a five per cent downpayment but still owes $150,000 on his mortgage. He says the market for his home has collapsed in his town and a realtor just told him the best price he could expect is $75,000.”

“Since the loan is “under water,” his bank would be left with a shortfall that CMHC would have to cover. The Crown corporation would likely sue him for any losses it has to cover, so if he has any assets, CMHC will go after him.”

“Handing over the keys to the house and walking away from your mortgage, called “jingle mail,” was a defining act of the American housing crisis and helped send the market south of the border into a deeper tailspin.”

Interesting theory, but as we actually saw in the US states with recourse loans (i.e. Nevada, Florida) saw just as much of a collapse as non-recourse states.

Angry tweets won’t bring prices down.

Wednesday, April 29th, 2015

Well! They could have told us this earlier and saved us a lot of time… Turns out desperate tweets won’t solve our housing cost problems.

Sociologist Nathan Lauster calls the current clash the “intergenerational drama of urban house ownership as a life goal.”

“It produces this sensation for a lot of people like you’re trying to make a home on quicksand,” says Lauster, who is part of UBC’s urban studies department.

“So you’re trying to do everything that you think is right, everything that your parents have done, and it’s still not going to be enough.”

But home ownership hasn’t always been the ultimate goal for a family. In Germany, for instance, renting is the norm.

And in Vancouver, in recent years, it seems people don’t just want a home, they want a perfect home, tearing down old stock to build new mansions, ripping rather than renovating.

“There are a lot of different ways to live. But a lot of policy and a lot of our intergenerational culture has encouraged only one way, and that’s the single family house,” says Lauster.

‘Dr. Zen’ in the comments section of that article has one possible fix:

Solution… leave Vancouver. You will not regret it.

Read the full article here.

 

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