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Soft landing seen for Canada's housing market

LORI MCLEOD

Globe and Mail Update

Latest comment posted at 11:54 PM EST 25/06/08

But Bank of Canada warns of complacency on newer products like 40-year mortgages ...Read the full article

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  1. Can Do from Canada writes: Why do they bother with these articles, what else are they going to say, "expect a crash?".
  2. Dave C from Canada writes: And how in the world can they predict this?? For years in the US all of the experts were telling their citizens that there was no Real Estate Bubble and that at worst prices would just level off. We also have heard the same from the UK who are now witnessing their own Real Estate Bubble burst. This is nothing more than an optimistic guess.
  3. Soft Landing from Toronto, Canada writes: Soft landing eh ... recent shift of market momentum looks more like a crash to me.
  4. Carmen Rae from Calgary, Canada writes: How is an "optimistic guess" any different from the vitriolic pessimism that abounds by those that missed the real estate boom and are left to post bitter comments on a online forum. The Canadian housing market is strong, lending fundamentals are much strong with subprime being less than 5% of all Canadian mortgages, and the Wests economy has never been better with natural gas and oil prices rising. Btw, rent is due next Tuesday.
  5. Marv M from Canada writes: " Carmen Rae from Calgary, Canada writes: How is an "optimistic guess" any different from the vitriolic pessimism that abounds by those that missed the real estate boom and are left to post bitter comments on a online forum. The Canadian housing market is strong, lending fundamentals are much strong with subprime being less than 5% of all Canadian mortgages, and the Wests economy has never been better with natural gas and oil prices rising. Btw, rent is due next Tuesday."

    Carmen, if you live in BC or Alberta I bet that the rent that is due is a fraction the size of the mortgage payment that is due by the poor fools who bought over the last year or two. BTW, natural gas and oil prices won't sustain growth forever. Once the oil driven construction boom is over, what is left? Our economy is strictly construction fueled. This never lasts forever.
  6. Sam Grey from Canada writes: Another Central Bank down south was saying the exact same thing a year before everything collapsed. The only thing different between the Canadian and US Real Estate Market is the timing.

    Bernanke: There's No Housing Bubble to Go Bust
    Fed Nominee Has Said 'Cooling' Won't Hurt

    http://www.washingtonpost.com/wp-dyn/content/article/2005/10/26/AR2005102602255_pf.html
  7. Jane Smith from BC Interior, Canada writes: There is no oversupply of housing--I guess she hasn't seen the inventory stats for Edmonton or Calgary?
  8. Dave C from Canada writes: "Carmen Rae from Calgary, Canada writes: How is an "optimistic guess" any different from the vitriolic pessimism that abounds by those that missed the real estate boom and are left to post bitter comments on a online forum."

    The West is full of some very house poor families. We better hope that the economy never slows or that Interest rates never go up because there will be a heap of pain. Even if they are still fully employed. Most of the home owners in the US that are going bankrupt are still fully employed. They just over extended themselves and never calculated what their costs would be if Interest rates went up. My guess is we have the same problem in Western Canada.
  9. Ed Chateau from Canada writes: Our central bank has the advantage of being able to talk about national figures. The real estate market in Montreal is very different from Vancouver.
  10. Mr. Andrew Toth from Oliver, BC, Canada writes: Soft landing, sure. I believe in the tooth fairy also.
  11. Canary in the Wharf from Toronto, Canada writes: Can someone recommend a weed killler to me? When, I'm driving around Toronto these days I keep seeing more and more of these weeds popping up on nice manicured lawns and the homeowners can't seem to get rid of them. They say "For Sale" on them. There is at least one on each block now and they keep multiplying each day.
  12. Ace Frehley from Vancouver, Canada writes: Carmen Rae: the people who missed the boom are not renters. They are the owners who haven't sold yet. They missed their chance and it's gonna be a bloodbath, unless they were lucky enough to have bought several years ago.

    Anyone who has bought in the last year in most western Cdn markets is a sucker, plain and simple.
  13. Carmen Rae from Calgary, Canada writes: "the people who missed the boom are not renters. They are the owners who haven't sold yet. They missed their chance and it's gonna be a bloodbath, unless they were lucky enough to have bought several years ago."

    Of course it's the renters. Why would homeowners be selling 1 year after they bought? It's their fault if they were speculating. For those that bought to actually live in their home will be fine. Real estate is cyclical. Prices will drop, then go even higher than the previous peak. (See mid 80's to-mid 90's) The cycle will then begin anew.

    The amusing thing is, when the market stabilizes at its low, there will still be those that will still not buy ("Prices will drop to under $100,000 just like suburbs in Spain! That's what that blog said!") and then when the market resurges they will be left with their bitter comments, eviction notices, and rent hikes. But hey, I can't complain. Without renters, who would be making me all this money?
  14. Captain Ontario from Canada writes: Only the clown Carney can create a crash in Canada.
  15. Anti Elvis from Calgary, Alberta, Canada writes: What's funny is I remember reading these same words in the Wall Street Journal back in 2005. It was going to be a "soft landing". 1 in 10 American households missed a mortgage payment in the past 3 months.
  16. Roop Misir from Toronto, Canada writes: Nice to know about this 'soft landing.' scenario. First time buyers might have been lhopng for bargains.
  17. Marcus Leja from Calgary, Canada writes: I'm curious to know what is so financially conservative about the entire 40 year mortgage model. Renting is far more fiscally prudent in comparison.
  18. Ace Frehley from Vancouver, Canada writes: Carmen Rae from Calgary, Canada writes: "Why would homeowners be selling 1 year after they bought?"

    L-A-Y-O-F-F-S

    You "own" a place you bought with almost nothing down. You lose your job. The bank wants to get paid. You try to sell but you can't even get what you owe. Nice.

    Some of us remember a time when unemployment was more than 4%. Yes, even in Calgary. The economic sun hasn't always shone out of that city's back pocket, you know. And no, the NEP is not the only economic calamity to have ever hit Alberta.

    It's been 15 years since the last major job loss event in this country. Another one is coming and the conditions are ripening for it. People in AB are going to get the rudest shock of all because it strikes me that the good times are making them complacent.

    Remember, not everyone works in oil. In fact, high oil prices and tight labour makes business a lot harder in AB for those who aren;t swimming in energy cash.
  19. Marv M from Canada writes: Low interest rates are the absolutely WORST thing for a housing market. House prices climb WAY higher than they ever should fueled by low rates and speculation. The low interest rates trick new home buyers into paying WAY more than they ever should based on the fact that they can afford the payments, but generally only at these record low rates. The problem comes when the record low Interest rates begin to inevitably climb. You than have home owners who are WAY over their heads. What's better a 400K house at 6% or a 200K house at 12%? Most definitely a 200K at 12% because the principal will be paid off twice as fast. You also have much greater risk of that 6% rate going higher pushing the homeowner to bankruptcy.
  20. bill wilson from Taiwan writes: Canadian real estate prices have actually climbed a lot more...in US dollars. While that may not seem important it is because Canadian wages going forward are going to limited by competition from lower paid US workers. Canadian prices are now too high.
  21. jeff russell from Golden triangle, Canada writes: I think its funny when alot of people talk about how they made money on there house. there may be a select few but once you pay the principal and interest on your 25 year mortgage rennovations property tax house insurance broker fees lawyer fees ect ect then you probably have paid more then you will sell it for, even if you pay it off in five years your still in the red. I'm a poor student and have tax deductable rent but even afterwards it may be best to take the difference from a rent payment and a mortgage pmt all other home exlusive expenses and invest it, you would be much better off.
  22. Ed Long from Canada writes: Inventory on the West Coast is also rising and unit sales are down. That is MLS.

    New projects are another story ... there are many to come on line and pre-sells are reportedly slow.

    At our meeting today, many projected falling condo/townhouse prices in the new year.
  23. Joseph Whistle from Canada writes: It all depends where you are and what type and condition of house you're dealing with. There are lots of areas where the value is well protected. There are also areas that are subject to a serious correction.
    So where's that "pop-what-was-that" village idiot that keeps jumping on articles like this? That guy that is renting his whole life and can not wait for all the home owners to lose everything they have, so that he can come and take it all away, and then watch the value go right back up again, that sadistic guy, what's his face...
  24. PETER T from Toronto, Canada writes: Of course they said soft landing...if they say it will crash pretty soon..how would you all react ??? Obviously, more and more people are taking on the EXPRESS route (40 years, NO money down or HELOC it until your home until 10 - 20% equity left inside your home) of Home Ownership for the past years...Outstanding Mortgages for all banks, trusts, alt-a lenders in Canada has been grown by multi-billions to trillions and its mortgage brokers and bankers inside your bank are all banking for these deals..if the market goes slow or something hits the fan and go on reverse mode...you all will know what happened....Thats why NO such banks or these pumpers wants to say more people couldnt afford mortgage payments and bills where they all chants that we all be fine and working and getting paid...they all likes to PAINT great pictures...and these economists, analysts and talking heads on financial TV are the GREATEST painters in Canada instead of the Group of Seven....!!!
  25. PETER T from Toronto, Canada writes: The New Money Laundering ACT has been EFFECTIVE today, all realtors and real estate agency must have do their own KYC, client names, details and identifications are required when submitting a deal and this includes foreigners...so this act should go thru the system real soon and it should stop a PILE of HOT money coming in from all these emerging market countries and flood the market...so, If some guy in Europe, India, China or Korea keep wiring money to so called his friend to buy a home or wire directly to buy a home, his or her chance is THINNER and THINNER..I would like to WATCH if these HOT money are leaving the market and see how can they do business !!!
  26. Alastair james Berry from NANAIMO BC, Canada writes:

    SOFT WORDS TO SOOTHE THE PUBLIC while those in 'the know' get their irons out of the fire!

    On Vancouver Island we are in a depression already..Paper mills closed, saw mills closed or on short time, copper mine closed, Heavy machinery manufacturer closed, Herring and salmon fisheries in a state of collapse, tourism is way off this year and to add to the misery temperatures have been running well below average for about a year and NOW THERE IS TALK OF ANOTHER MAD COW!

    In Nanaimo we have houses in a LUXURY SEA FRONT COMPLEX still looking for buyers after about 2 years on the market.

    Things do not look good for housing in Nanaimo at present.

    BUT THINGS MIGHT PERK UP IF WE GET A "COAL to OIL" INDUSTRY STARTED BECAUSE WE HAVE LIMITLESS SUPPLIES OF GOOD QUALITY BITUMINOUS COAL right here.
  27. bill k from Canada writes: "Soft landing seen for Canada's housing market"

    Canada will have the SAME soft landing just like the "soft landing" the US was going to have. With RECORD HIGH INVETORY and LOWER SALES you have a US style CRASH. POP........what was that?
  28. Stephen Duke from Vancouver, Canada writes: Joseph Whistle:

    Yup, then that guy become that which he loathed.

    The haters deride a bubble if they aren't in it, but then love the idea of cleaning up so they can get first dibs on a seat in the next.

    It's all fear and self-loathing. Shoulda, woulda, coulda. Buy low/sell high is such a hard thing to get right.......

    SD
  29. B C from Canada writes: The ones who come out ahead are the financially literate people who can assess present value based on what income could come from the property. Bubble in Vancouver? Yes there is.
  30. pants 7 from Japan writes: When you see the asking prices for old shacks in Vancouver, its hard not to believe they won't loose 2/3 of their "value." Believe it or not I can buy a brand new house made with imported and taxed Canadian lumber and a lot in one of the most densely populated prefectures in Japan (Fukuoka) for about $250 000, no money down @ 3.5% interest. If one is willing to live as far as 40 km out of the city a house can be rented for free.
  31. MD Kachmar from Bubbleville, Canada writes: Carmen Rae -- No offense, but it appears your grasp of market fundamentals is a little weak. You mention "The Canadian housing market is strong, lending fundamentals are much strong with subprime being less than 5% of all Canadian mortgages"

    Ummm, Mortgage debt in Canada as a percentage of GDP is at an all time high. And consumer debt continues to grow at twice the rate of wage increases. Do you think that is strong? Do you think that is sustainable?

    And if you think that property values can't drop by 50% because that kind of thing never happens in nice, clean countries like Canada you should check your history. I'll even give you a hint...Sweden and Japan.
  32. robin sweeny from Vancouver, Canada writes: Geez, I wonder what the real agenda for such a prediction from the BOC is?....perhaps because they're really quite worried about the housing market in light of their need to shift focus and policy to tackle inflation.

    .... Add a point or two to rates and markets like Vancouver should fall like a house of cards.
  33. John Connor from Canada writes: Soft Landing? Doubtful.
    Total Crash? Equally So.
    But there is going to be some bargains shortly. Keep your credit clean, and start moving to cash to take advantadge of the results of other people's greed, and short-sightedness.
  34. pran manga from ottawa, Canada writes: Just watch the housing market closely, region to region, and forget broad predictions like the one from the Bank of Canada. The world economy is rife with uncertainties and this means Canada too will be subject to unforeseen stresses.
  35. yuri gershman from Toronto, Canada, Canada writes: Real Estate surge in the last 6 years, combined with effective drop in family incomes, brought this market to overheated condition. Great numbers of new players joined the bush lured by Prime-0.9% mortgages (oh, year, we don't have sub-prime mortgages in Canada!). On top of it, recent spike in cost of living (fuel, food, taxes...) brought this solution to the over-saturated, unstable condition. Grim example of the US, combined with persistent whispers in the Media Outlets about the looming bubble burst, scared away potential buyers and made sellers very nervous. Result - 5 months of drops in sales and raise in listings. Some experts are calling it "healthy slow-down in price growth" - (they still comparing prices to last May) and pointing out at the fact that some people sold their homes 5 years ago and still waiting for correction. In my opinion, 5 years ago the key piece of the puzzle was missing, that is economy. It is, sort of, conventional wisdom now that we are heading into the recession within 6 months. Actually, Ontario and Quebec could be there sooner. And, unlike previous recession of 1990, it could be a really deep one, with many big shots calling it "the worst recession since Great Depression". Sighting the devastation of the world financial system, combined with global manufacturing and wealth shift toward the Asia, it is quite likely that they are right. Any way, loss of incomes triggered by descending recession will ignite the chain-precipitation in the oversaturated Un-Real Estate Market. Then, by the end of the year the prime rate is widely expected to change direction... Raising mortgage rates will fire the last nail into the coffin of the great Bubble.
  36. Simon Templar from Vancouver, Canada writes: Yuri, I think 'sub-prime' refers to mortgages given to clients who for reasons of income, credit, etc. would be dismissed by a major bank. A 'below-prime' mortgage isn't necessarily sub-prime if the borrowers are strong.

    As for the 40 year amortization racket...the mortgage insurers opened the door to this kind of lending and the banks jumped onboard asap. Why? They will tell you it was out of compassion for those clients and families who couldn't quite qualify at a 25 year amort. In reality, the housing market was showing some signs of slowing down as most people who could afford to buy new jumped into the market a few years back...with 40 yr amorts, a whole new market of buyers was created. And the fact that paying a mortgage back over 40 yrs makes the Bank twice as much interest - that didn't hurt either. For a current home owner, this is great - why would I sell my house for a measly 400K when I now know that over 40 years, a buyer can afford to give me 500K. Cheers to CMHC and the big five for allowing me to make more money! And don't worry folks....if the market truly does soften, we'll see 50 year amorts coming soon.
  37. Will Hoaccio from Canada writes: You can't win! BoC says real estate is not going to crash? Reverse psychology! It totally IS going to crash. BoC says real estate is going to crash? We are all going to die! BoC says nothing? They are covering up something, everything is going to crash!

    The same people have been predicting this crash since 1998. Try buying a home in Toronto outside of N. Scarborough or Etobicoke. It is impossible. This has stopped being about actual forecasting and is just an excuse for people to console themselves they weren't idiots to not buy a house 5 years ago.
  38. Sam Grey from Canada writes:
    Will Hoaccio

    I dont know what planet you are on, but sales in Toronto have dropped 16% and Inventory is up 17%. Even if you have a shred of economic knowledge you would know the very BASIC concept of "Supply and Demand".

    Heres an idea, Go to www.google.com, type in "Supply and Demand", and read what happens to prices when supply goes up and demand goes down.

    Then pray you don't lose your shirt on your overleveraged house.
  39. Will Hoaccio from Canada writes: Sam Grey from Canada-

    Yet prices are up... Try finding a house in Toronto, I dare you. Outside of some sh1tboxes in the suburb ghettos, housing in so called "desirable" neighborhoods are still far from the economic collapse people here seem to love predicting. Even in the USA, housing prices within "urban" areas has stayed steady or increased slightly.

    Don't get me wrong, I do think prices will probably decrease over the next few years and housing starts will continue to drop. What I take issue with is this apocalyptic, the end is nigh economic forecasting which has permeated every thread on real estate so far. Since 2001, the bubble will burst TOMORROW apparently. It's not economic forecasting, and predicting the same thing for for 10 years and being wrong for 9 of them does not make you some kind of genius.

    And even if their is some kind of mother-of-god collapse (which no one credible is actually predicting) withing 3-5 years we will be back in the same position. So great, keep on predicting the end of modern civilization.
  40. Aloha Eric from Toronto, Canada writes: First sentence of RBC's latest Housing Affordability report: "Nationwide housing affordability deteriorated in every consecutive quarter throughout 2007 to end up at its most unaffordable level since the housing bubble peaked in 1990." http://www.rbc.com/economics/market/pdf/house.pdf Sub-prime was only the first shoe to drop; take a look at IndyMac Bancorp IMB which has lost 97% of its value over the last year and a half. Only 3% of it's loans were sub-prime. The problem is falling home prices which affects every class of mortgage. The bubble was caused by a "social contagian", as people thought houses were an important investment and rushed to buy real estate, as in all bubbles. This was explained by Yale Economist and creator of the S&P Case Schiller Home Price Indes, Robert Shiller in a recent paper. http://cowles.econ.yale.edu/P/cd/d16a/d1630.pdf There's an ominous warning is his paper; "If the United States shows substantial price declines, then the underlying popular story of the boom, related to the perception of a triumph of capitalism and the explosive growth of the world’s economies, may become old. The United States, the premier example of a capitalist economy, has the potential to lead price expectations downward in many countries."
  41. Aloha Eric from Toronto, Canada writes: Will, i suggest you check out today's S&P Case Schiller Home Price Index. Contrary to your belief that US housing prices in urban areas are not affected, the Index shows that every top metropolitan area has now posted annual losses with many showing double digit declines.

    The 16.3% annual drop was a new record.
    http://biz.yahoo.com/rb/080624/usahousingcaseshiller.html
  42. R E from Canada writes: Carmen Rae has proven that you can't buy class.
  43. Silver Standard (Used to be gold) from Canada writes: We are in for something much harder than a soft landing. We are to close to the American market not to be hammered.

    Central bankers like the BOC are not dealing with "soaring commodity prices" we are dealing with a crashing paper currency.
  44. Will Hoaccio from Canada writes: Aloha Eric from Toronto, Canada writes: "Will, i suggest you check out today's S&P Case Schiller Home Price Index. Contrary to your belief that US housing prices in urban areas are not affected, the Index shows that every top metropolitan area has now posted annual losses with many showing double digit declines."

    I meant "urban" areas as opposed to suburban areas (i.e. Scarborough-Malvern vs. Toronto-Danforth). The Case-Shiller composite simply includes "metropolitan areas" which are largely suburban. Even with this broad data however, the largest drops are being registered in Phoenix, Los Angeles and San Diego, not surprisingly some of the most suburb-heavy regions. Real estate in Park Slope or Lincoln Park, or any other neighbourhood with a decent public transit connection and urban aesthetic have by and large kept their value.
  45. Binder Dundat from Toronto, Canada writes: Even a soft landing will be disastrous if the price and terms (ie 40-yr mortgage) of people's homeownership purchases are based on the assumption of never-ending appreciation and ongoing prosperity.

  46. Aloha Eric from Toronto, Canada writes: Will, that's a lot of lipstick on this pig.
  47. Crimson The-Red from Canada writes: Across Canada, there were 462,000 EI claimants in April, 2008, down 3.6 per cent from April, 2007.

    Chew on that all you "Chicken Littles".
  48. Brad Bender from Calgary, Canada writes: Why is a "negative" story on Canadian Housing prices always moved off the front-page by 9am? This is like the 3rd article on Globe-and-mail that reports negatively on Canadian housing, and every time it gets pushed off the front-page, or the title is "toned" down, or whatever. Of course, US Housing slump is always front-page material :-P The sooner we get the inevitable Canadian correction, the better. Put this on the front-page already.
  49. H M from Canada writes: I think the market needs to come down. I prefer a slightly softer landing than "crash", but not too soft. Nip these housing speculators in the bud, cool off the prices of everything for a while.

    I am a homeowner (and a new one too!) and I don't consider myself a "sucker". I needed a quality place to live. I am here for the long term, in a stable, salaried job and places to rent were a) impossible to find and b)atrociously priced if they ever came available (over $1200/month).

    I bought a nice, small (730 sq ft) home 2 blocks from where I work. My mortgage payment is $260/bi weekly. ($563/month, ish). If my rate goes up, well, it might take me 20 years instead of 15 to pay it off.

    The easiest way to avoid getting burned is to be reasonable. Sadly, fewer and fewer people can handle that. They want it all. The brand new, 2800 sq ft home and the new car and the 2 garages etc.
  50. Dave Kar from Vancouver, Canada writes: Just a note to everyone that there are other economic principles other than just supply and demand - the other relevant one to this story being elasticity. Even if demand goes down and supply goes up, prices for housing are extraordinarily "sticky" or inelastic in terms of dropping prices (note that prices will have no problem going up). People will not sell at a loss (or what they value as a loss) unless they have to. The US market has collapsed due to foreclosures (i.e. forced sales) and overbuilding (forced sales by developers). Most people in Canada don't have to sell their homes, and this will keep prices up and steady for a while as we don't have massive amounts of foreclosures or an overabundance of supply by developers, and therefore people will just live by keeping their places up for sale for longer periods of time.

    If you're a purchaser, the key is to find someone who has to sell, as you'll find the better deals there. Otherwise, people can sit on their houses for a long time. They might want to move, but they don't have to.

    Please note that I live in the west but don't own, so the above theory greatly annoys me.
  51. Gandalf The Grey from Ottawa, Canada writes: The report by the BoC is plain wrong. These reports are not unlike the Fed. Res. chairman stating in 2005 that there was no housing bubble in the US. Of course the Federal Reserve knew there was a housing bubble! And so does the BoC!

    This is what will happen in the next 5 years - mark me. Oil will begin trading near $200 per barrel within 18 months. This will finally crack the CPI wide open and inflation will start to increase incessantly. Once this happens the BoC will be forced to quickly respond with massive interest rate hikes (just like the early 1980s all over again). When this happens, the foreclosure rate will explode because today young couples buy houses with virtually no money down or take on huge carrying costs. And don't forget, the "equity" that they built up will be completely wiped out. You can only sustain exponential growth on credit for a limited period of time - welcome to the 21st century.

    Watch and see, 15% rates are less than a decade away!
  52. Joseph Whistle from Canada writes: H M: Some people have families with multiple kids and need more square footage. They need to be in the suburbs because of the quality of living for the kids and it's the only way to get a house big enough for all that family space.
    Many of these types of families pay over $2000 per month including mortgage, property tax, and life insurance.
  53. Trevor Ouellette from Canada writes: More economists "predicting" soft landings. Right, just like they were predicting in the US in 2006. If that's what they believe, then their calculations are flawed, because it's going to be harder than the 1980's correction.

    We have no tax benefits to owning a home in Canada. In the US, you can deduct your interest payments... so their recovery will happen sooner than ours. The US housing has been crashing for three years and it's still crashing! It's too early to predict what will happen to the Canadian housing market. Housing crashes is like a train wreck in slow motion. It just keeps coming.

    The real estate party is over. Get out while you can.
  54. Sam Grey from Canada writes:
    Another Central Bank south of the border said the same thing about the "soft landing" and "cooling" of the Real Estate market and we know how that ended!

    Bernanke: There's No Housing Bubble to Go Bust
    Fed Nominee Has Said 'Cooling' Won't Hurt

    http://www.washingtonpost.com/wp-dyn/content/article/2005/10/26/AR2005102602255_pf.html
  55. Joseph Whistle from Canada writes: Trevor Ouellette: the pessimism isn't necessary. In the US the interest of the mortgage is tax deductible, combined with major discount mortgages (1st year 1%, stuff like that), zero down, 40 year amortization, through the (false) promise that thing can only go up, and that your better paying job is just around the corner, in some sort of manic American way, are the causes of their crash. Us Canadians are a little more careful and realistic. We don't give ourselves enough credit. We're much more stable and seasoned than the Americans. We ought to be real darn proud of ourselves, we have one amazing kick ass country we live in. We have space, resources, and really good people. Our crime is low, and the promise of a good life is all around us. Cottage life, camping, open fields, forests, lakes, we have no idea how good we have it. Anyway. A lot of people have equity after faithfully paying our mortgages and working our jobs and just being good diligent responsible citizens. We have reserve. Sure, there is the odd reckless nutball, but the majority of the more mature crowd isn't that stupid. I think we have way more cushion than we think. The peaks in places like West Vancouver might get shaven off, but even if property across he board reduces, say, 5%, people will grump at first, but will live with it, and hope that it'll recover. Everyone else is in the same boat, which makes it ok. Don't expect these people to sell their houses either. The MLS will have nothing but crappy houses, with the very occasional really good buy. People that rent with sadistic thoughts about stealing people's precious homes will remain frustrated. New house prices can't plummet very much because the cost of building will go up due to higher building costs. Less new houses, hence the value of resale homes are cushioned even more. I think we're much stronger than some tout around here.
  56. KP P from Halifax, Canada writes: Carmen Rae dear you may want to renew your real estate agent license because it's pretty clear you are one. I had a guy tell the other day that real estate is the only game in town. Jeez, i kindly mentioned that real estate historically has never had a runup like this. He said i didn't understand the fundamentals. Well here they are:
    oil $140 a barrel
    House Taxes - up 100% in 4 years where i live
    Heating oil tripled in 3 years

    I believe the con is being recognized for what it is. Yes we will fair better than the US, not much though. GM has a huge drop in sales and Oshawa closes down. So much for de-coupling. What no one seems to get here is that we are at a watershed time in the business cycle. The US is simply imploding with manufacturing base to prop up the economy because they outsourced or moved their plants to China.

    The grand experiment of global business and free trade has proven that it is an experiment that failed. Without a manufacturing base to draw upon all we have is resources. Now we have the US govt banning ALberta oil sands oil for govt depts. Carmen you better sell now honey cuase there's a banker coming a calling ot take that fundamentally sound house you have.

    dream on little sheepies.
  57. red marabunta from Barbados writes: Marv M writes
    Carmen, if you live in BC or Alberta I bet that the rent that is due is a fraction the size of the mortgage payment that is due by the poor fools who bought over the last year or two. BTW, natural gas and oil prices won't sustain growth forever. Once the oil driven construction boom is over, what is left? Our economy is strictly construction fueled. This never lasts forever.

    Wrong Marv, I bought in Vancouver a year ago and my renter covers the mortgage to the penny, whats more my interest is locked in for 5 years as is my renter.
  58. Glynn W from Kingston, Canada writes: Joseph Whistle - I entirely agree with you. I have just recently immigrated to Canada from the UK. 55% increase in a decade is a reasonable increase in any sort of economic environment and one that does not encourage over-borrowing from one's equity in one's home. I bought my house in the UK for 120,000 GBP a decade ago and sold it last October for a 200% profit. I sensed that things couldn't go on like that in the UK and did my homework 4 years ago preparing for the move. I am glad that I did (just in time). I think in many respects we should learn what not to learn from the UK such as squadering all its oil wealth; indeed we should take the advise of the Norwegians and the "extravagant" Saudis and create a sovereign wealth fund to hedge against future economic calamities. The worse thing that the British and their equity have done not only in the UK is to have a very negative impact on countries such as Spain and Portugal where their house prices shot up over the last decade to such an extent that the locals couldn't afford houses in their own country. Now that the British are by and large experiencing negative equity, a lot of them have just up and gone, leaving a glut of properties that no one wants as the pricing levels are still to high. Live and Learn.
  59. Joseph Whistle from Canada writes: Glynn W: I'm watching those real estate shows on the home and garden network, sometimes about all those properties in Spain. Oh my god, the corruption people have to deal with some times, people's properties getting taken away, and shotty engineering. And the price inflation. No wonder the locals aren't interested in buying these un-Spanish type condo like properties. The British might be interested in taken a serious look at Ottawa. 2 acre properties in the 350 K range, in driving distance to Kanata / Ottawa, try that on for size in the UK...
    All this talk about crashes and cushions and what-nots. Huh? What now? Not here, so far, that's for sure.
  60. yuri gershman from Canada writes: Simon Templar from Vancouver, Canada writes: Yuri, I think 'sub-prime' refers to mortgages given to clients who for reasons of income, credit, etc. would be dismissed by a major bank. A 'below-prime' mortgage isn't necessarily sub-prime if the borrowers are strong. Well,.. there are many "strong borrowers" who also overextended themselves during the latest rush. Sub Prime is a Sub Prime, regardless of the strength of the borrower. If we have an option of re-defining this term, I would define it as phenomena when borrower is committing himself to the serious financial obligations based on unsustainable and unrealistic assumptions and expectations. For example, the assumption that the interest rate he is going to pay for decades to come will be around 4%, or that if can not pay for some reason, he can always sell it and make some profit because housing prices will always go up, or that his 150K job with CIBC is secure and will never kiss him good-bye... There are facts, and there are assumptions. You own the House - it is the fact. You are having $300K mortgage and another 90K HEL - it is a fact. Your equity value is $500K - it is an assumption. Your yearly income is projected to grow 4%/year over the next 5 years - it is an assumption. 12% mortgage rate is relict of the last century - it is an assumption. Now, what will happen if some of these assumption turn to be wron?
  61. BRad D from Vancity, Canada writes: To those with vested interests in RE, congratulations on your new-found fortunes over the past few years. Perhaps you should enjoy it rather than trolling threads like these to seek satisfaction through mud-slinging, name-calling, and rhetoric.

    Instead of flagrant demonstrations of your own insecurity, try providing conclusive evidence that supports your claims for bullet-proof canadian real estate and it will be debated.

    In closing, the BOC, gov't, banks, "credible economists", pundits of the RE industry and mainstream media will do exactly as the US did and will NEVER report (let alone acknowledge) about bubbles bursting until it's too late. No one wants the blame for triggering any mass herd scenario and they all want the party to keep going because it's in their interest. Cheers

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