Rick (Master Crayon Eater) on choosing your political horse

[Good2Golf]

sure and its possible that the interest rates continue to go higher notwithstanding inflation as a means of getting housing under control. We already know Tiff and Justin dont care

Just how far does housing have to plummet to be ‘under control?’ 🧐

Housing is a convenient, but specious justification for interest rate hikes. When the Government slows its massive issue of federal bonds (incr. M2) needed to finance its huge deficits and debt financing requirements, the rates may be able to be eased, but that seems not to be slowing any time soon…and if Team Justin kicks off another election, the federal floodgates are more than likely to open wider, not close…

 

[suffolkowner]

Just how far does housing have to plummet to be ‘under control?’ 🧐

Housing is a convenient, but specious justification for interest rate hikes. When the Government slows its massive issue of federal bonds (incr. M2) needed to finance its huge deficits and debt financing requirements, the rates may be able to be eased, but that seems not to be slowing any time soon…and if Team Justin kicks off another election, the federal floodgates are more than likely to open wider, not close…

I dont think they raised interest rates due to house prices more the usual inflation but that doesnt mean that they dont take the opportunity. Housing has been too high for a couple decades IMO but the last couple of years its put that to shame

 

[Good2Golf]

Rates were to deal with inflation. Remember, the BoC is ‘totally separate’ from the GoC, and many are so quick to point out.

It was the GoC demonizing housing prices as the principle impact in interest rates until…you know…housing fell 20% and inflation kept rising.

Not sure about others, but food and fuel (tpt and heating) inflation (well, well beyond the 2022 CPI of 6.3%) have been the biggest impacts on my budget ballooning.

 

[dapaterson]

There is no good answer for housing in the short term. Higher rates? Folks who are heavily leveraged who bought because of FOMO will lose their homes, something no government wants on their watch. Lower rates? Without new supply (and we'd need to double current building to make a dent in pent up demand) prices will merely increase.

Add to that restrictive R1 zoning which incentivizes large poor quality single family dwellings that are expensive to service (both to extend services, and on an ongoing basis) and you've got only a small part of the chaos in the housing market right now.

 

[Brad Sallows]

Population of Canada is over 38.5M; government policy is aiming for closing on 0.5 immigrants per year. Upward pressure on housing prices.

Inflation is running high, so central banks are raising rates. Downward pressure on housing prices (roughly 10% drop year-over-year since last Jan).

Most workers are agitating for substantial wage increases to match inflation. Success will not be evenly distributed and will tend to favour workers whose employers mostly don't care about running a solvent business. Upward pressure on housing prices.

Inflation isn't due to one thing. Loose government spending, supply chain disruption, and increased cost of energy due to anti-fossil government policies and positions all play a part. To the extent that governments can avoid some of the first and withhold hostility regarding the last, governments bear responsibility. Governments managed things badly in the 70s for several years before things got turned around; no reason to believe current office holders are super-competent.

 

[Good2Golf]

Population of Canada is over 38.5M; government policy is aiming for closing on 0.5 immigrants per year. Upward pressure on housing prices.

Inflation is running high, so central banks are raising rates. Downward pressure on housing prices (roughly 10% drop year-over-year since last Jan).

Most workers are agitating for substantial wage increases to match inflation. Success will not be evenly distributed and will tend to favour workers whose employers mostly don't care about running a solvent business. Upward pressure on housing prices.

Inflation isn't due to one thing. Loose government spending, supply chain disruption, and increased cost of energy due to anti-fossil government policies and positions all play a part. To the extent that governments can avoid some of the first and withhold hostility regarding the last, governments bear responsibility. Governments managed things badly in the 70s for several years before things got turned around; no reason to believe current office holders are super-competent.

Housing…pshaww! We need to take climate change more seriously, even if it means people going homeless. We’ll all be homeless if we don’t address the specter of environmental devastation…

Ontario Greenbelt 'is our jurisdiction,' Ford says after federal environment minister suggests intervening in housing plan

The plan 'flies in the face of everything we’re trying to do in terms of being better prepared for the impacts of climate change,' Steven Guilbeault said

nationalpost.com

 

[Eaglelord17]

Simple things that can happen to correct the housing market.

1) Make it illegal for companies to own homes other than apartment buildings. Homes shouldn’t be a investment for companies, there is many vacant homes in this country due to speculative investing. If those homes were on the market and occupied the prices would go down.

2) Allow those who overleveraged themselves at too high a mortgage to fail, the market needs to correct and part of that is short term hurt over long term pain.

3) Prevent foreigners from owning in country, you don’t live here you can’t own here.

4) Get rid of mortgage insurance (CMHC, Genworth, etc.). These have driven a large part of banks lending bad loans due to the fact they aren’t going to have to face the consequences of their actions. If you default currently the mortgage insurance company takes the house and writes off the loan.

Historically the home was the collateral for the loan and if you failed to pay the bank would then have to recover the debt from sale of the house. The reason this matters is because they won’t give a mortgage they feel you can’t afford or is overpriced in the first place as they won’t make any money on it. Currently they don’t care as they don’t take any sort of hit if you default.

The biggest people harmed by the inflated housing prices aren’t even home owners, its the renters. They have no choice but to pay ever increasing rent to cover the larger and larger mortgages. We are even creating basically a locked in class system in some cities as due to rent control. Many cannot afford to ever move from their apartment due to the massive rent increase that would come from moving anywhere else.

 

[Brad Sallows]

Housing isn't part of the BoC's lane. Central banks work on keeping inflation within set bounds - under 2%, for example. They might pay a little attention to employment rates.

Even with mortgage insurance, banks have criteria they apply. Payments as a fraction of income, for example.

Most people who qualify for a CMHC-insured mortgage are relatively low risks in the first place.

If governments yank out investors and the price of homes really does fall, a lot of non-investors are going to be underwater. I don't know exactly what is likely to result from that, but pretty much every time government fucks with investments, bad things happen.

 

[foresterab]

I wouldn’t have a mortgage if I owed only 25,000. But I’ll play along, what % of gross income would you say someone would be spending on a mortgage for 3x rise in interest to not be a concern?

If I remember the numbers from when I applied for my home I think it was a maximum of 65% take home salary for all debts/expenditures and of that only 45% maximum could be considered the mortgage. So ran some math on an online mortgage calculator based upon $100k annual gross salary, 40% taxes paid and max 45% mortgage payment per month.

Bank was pushing to lend me the maximum 45% rate which on rough math today makes it out for me at $2,250 maximum mortgage payment per month. So ran some math on an online mortgage calculator based upon $100k annual gross salary, 40% taxes paid and max 45% mortgage payment per month. That's the number the bank says....but it sure as heck isn't a nice way to live. I went for a mortgage closer to 35% or $1400.

To use your example of trippling the mortgage...or in my case to move from the $1400/month (@ 3%) to a 9% interest rate...it puts me right at the theoretical maximum allowed at $2170. That would really hurt and frankly I couldn't do it with taxes, heating and food also all much higher.

So to answer your question...and running some numbers I had to have over 75% equity in the home before the interest rate difference resulted in less than a car payment increase in finances.

Or to put in another way less than 18% of monthly cash flow in has to be on the mortgage...that's a fairly small segment of people with mortgages

 

[dapaterson]

My philosophy was to buy much less than the bank thought I could, and pay back at an accelerated rate (ie payments close to the max the bank would have given as a mortgage). Paid down faster; if financial problems hit would have scaled back to minimum payments.

Delayed gratification means no mortgage earlier, but on a smaller house.