HawthorneVillager.com

Hmmm I read somewhere that the bubble effects generally hit the highest prices houses the worst, regardless of location. Similar to what the US saw in Miami and Los Angeles. Especially if the bubble is caused by individual economic stresses (interest rates, lack of credit). i.e. If people can't afford to be approved, they won't buy at any price.

Those homes that are more affordable from the get go will experience the least decrease.

It will be interesting, my take is that as long as someone will lend someone money and the mortgage payment is do-able, there will be no issues. The banks seem to be A-OK with lending money at record lows as their profits are also at record highs these days.

I know the interest rates during the 80s crash were nothing like they are today. 5yr fixed around 12% from 1986-1990 - they dropped a bit to help the market but only down to the 9s through the 90s.

The single biggest impact on prices will be if people can't qualify/afford to buy the house at X price. If that happens, you may see the prices of more modest priced houses increasing as demand for cheaper homes unfolds. Maybe a two tier system?

This didn't happen in the US, but that wasn't caused by rising interest rates -- it was caused by excessive supply given out to unqualified buyers.

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Yeah, see I don't see that ever happening. Debt and interest are the greatest way to make loads of money. Banks are no different than the mafia loan shark who has no problem lending a gambling addict more money because even if that person never repays, the lifetime of "interest payments" will easily double, tripple, quadruple the money lent in the first place.

Basically, the people with money (banks) don't want a world where people put 20% down on anything. We won't go back because they have found the way to make money and they will keep giving it out unless the government regulates it. The CHMC has nothing to do with protecting the banks from anything.. it's more about protecting the government from the banks (keep them from collapsing). The banks don't care about the insurance on the 15-20% high risk. They would gamble that in an instant -- look at the investments in derivatives, futures, etc.

I actually believe its good for people to move into a house with 5% down and start moving towards paying it off. I don't see a problem with it. The problem is more with people going crazy on their 5% down homes or trying to upsize every few years.. or even worse, borrow against the home for a pool or a Disney vacation.

Easy solution in my mind is set maximum prices based on down payment for CHMC. 5% down, maximum mortgage amount = X$.. 10% down, maximum mortgage amount = X$. This would force those with 5% down to move into townhouses or condos until they build enough equity to move up rather than the 3 car garage, 3600 sq/ft mansion.

Next, limit the HELOC so that no more than 60% of value can be taken out -- instead of the current what.. 85%.

Those two moves and then a commitment to slowly bring down the max amortization would be great -- from 30 down to 27, then back to 25.

If they were smart, and slowly implemented this (high price thresholds to start but slowly lowering), I think they could easily get everything back in balance without any bubble risk.

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I think if it were instituted in the correct way, you could prevent price drops and instead prevent price increases. Bring the 11% increases down to 2% increases (to hedge against inflation). The mini runups for property would help to keep prices respectable. (i.e. people know the next rules are coming in X months, they buy now).

I dunno.. I just think if you are "helping someone out" with CHMC, Low Down Payment Mortgage -- they shouldn't be greedy.

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I think the issue with this blanket statement is you are mixing two different stats together to make it appear like a huge issue. It's always said you can't look at average prices or average incomes because one high or many lows will skew your statistics.

There aren't any home owners being approved for a house at 6:1 ratio in the GTA. It's not happening.. not even the Soprano's Savings & Loan would give that to you. You are seeing a top of 35% of gross based on current rates. Hardly 6:1.

In Vancouver you are also not seeing 6:1. You are seeing people with a lot of money buying high priced property, a lot of people with extremely low incomes renting. There is a middle tier as banks in BC *will* allow you to be approved for a higher mortgage based on a potential rental income from the property. Very few middle class in Vancouver are the sole occupants of their homes.

Basically, everyone that is living in a house today was approved at some point based on that 35% gross ratio (it varies by bank).

Here is another article I found today -- I believe it's the BMO report you mentioned earlier.

http://www.torontolife.com/daily/inform ... t-toronto/



Who do you know in Milton who was approved for a $600,000 mortage with 5% down and a household income of only $100,000?

At TD, that income with 5% down over 30 years with NO debt (no car payment, no loans, no credit card debt) would afford you a $450,000 mortgage. Still very high, but that sounds more like 4.5:1 than 6:1. And that's a best case example using the super low 5 year fixed posted rate (what is needed to qualify now).

I would say for the average home owner, it would be somewhere around $425k tops.

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thats funny as 2 houses on my street priced well over 500k sold in under a week, further solidifying my beliefs dabills that you are full of sh*t. good thing my cut and paste hero ol skool is back, i was getting worried.

The people who buy the 500k houses are those who have 100-200k to put down. Probably from the sale of another property that they both had equity in from a few years of mortgage payments as well as a hefty increase in prices on their resale.

You also should remember you can't do 5% down if you aren't a first time home buyer. You need minimum 25% down. On a 500k house, that's 125k. 125k in equity isn't hard to come by in this day and age -- heck, my new build is selling for $75k higher than when I purchased a year ago. Add that to my downpayment (equity) and you are close to that $125k right there.

At the end of the day -- the issue isn't the price of the house. It's the price of the mortgage. And even more so, the monthly payment it costs.

Like I said, there may be some stupid insane first time buyers who managed to sneak their way into a 500k home -- but I don't think it's very many. Most of the people I know living in a 500k Milton home now, only paid high 300s for it 5 years ago. They are lucky too, they are all renewing their mortgages for another 5 years at 3.7%.

The ones who are buying those same 500k homes are the ones moving from downtown condos or smaller townhouses looking to upsize to the 4 bedroom for their families. Those who already had equity. Not first time buyers.

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You are correct. I was confused between primary and investment. But the rules of CMHC still say what I said, your 100k household would not qualify for 600k home with 5% down.

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not 800k dabills, rather 200k with your gifted insight. not personal at all. just a web forum with banter. just keeping it balanced. if were going on global prices were not in a bubble. we also dont have most the problems many other countries have. if Canada remains level with low un employment and steady immigration i think well be fine. our banking is stable enough so no worries there. economy is key right now. a slip up could send things downward very fast, that would be my concern.

if demand is there, prices will see increases. albeit to what i dont know, no one does. this year there are less listings, putting further strain on price, also due to pent up demand. there are many variables other than the ones mentioned. do i think my house is worth 550k? no i dont, but the market does. my buddy just sold his house yesterday for 1.6m, bought for 370k in 1996, not that long ago. prices have risen very fast even over last 5 years, hard to say where its going.

housing doesnt worry me, other items such as groceries, gas for vehicles, hydro, etc. will erode affordablity much quicker, hence people moving farther and farther away to afford a house. they dont tally these things up when you apply for a mtg.

Another story in the news about renting in the GTA that may be of interest:

http://www.moneyville.ca/article/100580 ... tment?bn=1



Looks like the rent could go up substantially if the rent controls get bumped up or removed. They can't force landlords to keep the rent down when the price of housing is skyrocketing for very long. Especially when it appears we have supply issues on the rental front as well.

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Oh, and I'm sure some will love this article

http://www.moneyville.ca/article/100571 ... y-one?bn=1

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Dabills, you currently are renting and dont own a house?

Are you planning on buying a home again if prices decline 10%?

As a renter, if people believe this doom youre saying, and dont buy, thus causing a downward pressure on home prices, I think it benefits you greatly. Moving to sweden or not. lol

You have to admit your motives may be construed as suspect. (No offense)