HawthorneVillager.com

Both Fred and I actually agree with your main points Ol Skool, but you come off very negative to anyone that questions you - and then you throw out more "stats" that you want to use to support your point, whether they are right or not - and you have been doing it since 2008 whenever a housing discussion comes up - the sky did not fall last year, and it will not fall next year either, even if there is a double dip recession.

Let me be clear - I do think that Canadian debt levels are too high, I do believe that there will be a correction in home prices, and I do believe that there are SOME people buying beyond their means. But that is personal opinion only. I also have more risk aversion than many other people - and there are people who take bigger risks and get bigger rewards.

Based upon the number of foreclosures and the number of bankruptcies, Canadians are actually coping with their debt well (I used the word coping instead of managing on purpose) - we also have government policies and mortgage insurance that offers greater protection to our market than to the US as well.

People have been calling for a crash as long as I can remember, it may happen eventually then again it may not.

One thing you can bank on though, is that in the meantime I'll be taking advantage of my 1.9% interest rate, by upping my extra payments to the maximum 25% allowed by my mortgage, if/when rates start to rise and I cant afford it, I'll scale back that extra payment. This is a golden time to do damage to mortgage debt.

Right now with my current payment ~75% of that goes to principle

ROCK_80 has THE solution all should consider. As rates are at historical lows, take advantage of your ability to increase your payments or/and your prepayment privledges. This will build in a buffer for WHEN RATES RISE and your elders will love that you're saving for a rainy day.

May I make one more comment: please do not buy in to converting short term debt in to long term debt. Do not refinance car debt or credit card debt in to your mortgage. I do not believe that short term debt such as credit cards or car loans should ever (99% of the time) be amortized over the same period as a mortgage. You may help yourself with short term cash flow, but you'll end up paying more in interest - and isn't that what you are trying to save? So when you get pitched on refinancing all your debt "in to one convenient payment," run the other way as that's non a financial planning solution.

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http://tickers.TickerFactory.com/ezt/d/ ... /event.png

Last comment on this thread, as we are saying the same basic message from 2 different directions.

Thank you for posting links to actual data and graphs - but they don't really relate to what we have been talking about. Your original point was that Canadians make less than Americans and yet buy more expensive homes.

Also, I said a combination of our policies AND mortgage insurance help Canada do better than the US - again our foreclosure rate is 10 times less than the US, even with prices twice as high. We also have more stringent requirements for mortgages than the US, and this combined with mortgage insurance helps Canada in general do better. When the Canadian government bought mortgages from the banks to get them lending more, they made a profit - and banks essentially stopped selling to the gov because they make more profit holding the mortgages themselves.

So in general, Canada has a healthier market, but we do agree that prices are still too high and need to be corrected.

Have a great day go enjoy ribfest!

I am no analyst but when 300 or so people line up for a mattamy release, I think the market is good.

But I am just an average Joe.

I wanted to stay away, but I must reply...

I said at least twice that that I think prices are too high and that we need a correction - where we don't agree is that you think we are automatically following the US because we have high debt levels (which I also agree to) and (you believe at least) lower incomes.

You can believe that foreclosure rates are going to sky-rocket, but even if they quadruple from current rates, we would still be at about 1%.

And since there are new rules in place for new mortgages (20% downpayment for speculative protestors, minimum test of affordability - with 5 year posted fixed rates, etc.) we are not likely to add new risks. That leaves existing mortgages as the at risk ones, and those survived 2008 pretty well.

So in summary, house prices ARE too high, rates ARE going to go up, some people WILL be in trouble. But we will not have a massive collapse - only a probably 10% or so correction. But that is just my opinion.

BTW, Ribfest was great!

Money's a game, does it really matter all that much if interest goes up if the cost of houses goes down at the same time. It might put the squeeze on existing home owners but people buying dont see a huge difference to enter the market, so does it really change demand, and if demand doesnt change, prices slowly go up for new home owners, and current owners still have their equity to pull from if things get tight and they want to downsize.

We'll assume variable and that canequity is representative (http://www.canequity.com/ontario/milton-mortgages.htm),

250,000 with 20% down
200,000 mortgage @ 2% interest @ 25yrs= 850month

house drops 10% interest goes up 1.5
225,000
180,00 mortgage @ 3.5 interest @ 25 yrs = 923 month

Is there a recent stat (last 6 months) that has numbers on how many of those are still in play and of those are actually considered risky ( and not just a bad financial decision)?

I know some flippers I know used open 35/40 years to lower payments for sitting on properties.

I agree the growth isnt sustainable but it doesnt mean it has to drop , it can simply level out and slow down. I just dont see it dropping like that without another catalyst like job losses etc.

The problem here is that a confidence level is also the highest in years in Canada, and it almost never dropped. While high confidence level mostly a desirable goal for any economy, and our government done great job keeping it this way, combined with large debt levels makes long term effect quite the opposite. I was at mattamy event and 500k homes were going faster than a Christmas Wal Mart Sale items. I'm talking about 2600 - 2900 q ft homes. I personally believe the values are not there. Don't mistakes price of the house (the price that we pay) and the value of the house (that’s what we get).

While attending CIBC head economist meeting, they indicated that a 3% increase in interest rates will not only slow down the housing market, but wipe it out. Everything was supported by household income/debt/payment data. It is quite scary believe it or not.

So my suggestion will be to stay put for some time, and concentrate on catching up with debt levels, because we could see some major adjustments in the future.

_________________
Dmitri Ivanov
Mortgage Broker
Lic # M09000265
Office: 905 876 4751
Cell: 905 691 6706
Fax: 905 693 1858
email: dmitri.ivanov@migroup.ca
www.home-mortgage-advice.com

"If you were to look at Toronto, a household would spend 90% of their after-tax income on home ownership costs"

This is where you lose me. You can't take averages and medians of different stat categories, and come up with a statement regarding "a household".
Very few, if any households spend 90% of their net on home ownership costs. If that was the case, People wouldn't be eating or traveling to get to work.

I understand averages, medians, etc, but once you make a statement like that, you're skewing your position.

Lastly, you can't use a city's median pre-tax income since you're including renters and basically everyone in that example. If you break down to instead use the median homeowner family income, THEN the stat has legs to stand on, and I guarantee it's no longer 90%.

Regardless of the specific details, stick me right in the middle of this debate... The sky is not falling, but at the same time, we shouldn't be taking on as much debt as we are collectively, otherwise a lot of people could be in trouble only a few years from now if rates jump even a few percent. I'm the eternal optimist - if people do need to sell in huge numbers, the rental market will once again go insane and vacancy rates will be at all time lows - great for property investors!

This is what I am waiting for...

Man, I am tired of waiting now. When will this all unfold ...

Oh! I am definitely "living" the life but one should always aspire to get to places in life and that road possibly involves some rental properties ...

You're making me sound bad ........its nothing like that....I run my household on a very simple, straightforward model. Presently, the cost of rental properties are too high to justify a decent ROI, let alone any appreciation of the property itself........so I am just waiting for some market correction, that's all! If/when it would happen, remains to be seen......but I doubt it will affect Milton much as most people here talk about live-in/out nannies, house cleaners etc. so there is definitely a lot of disposable income...

Agreed but I think you can reduce your headaches quite a bit if you choose your tenants wisely...