Interesting charts. I personally know a few people who have
recently bought houses. Some of them are students with very little
income. Another guy had huge debt already, and he upgraded to a
house that's worth twice as much. Most of them are buying within a
day or two. Everybody thinks they're making a great decision
because they're buying while the rates are still low and they can
still get the tax credits. "Yeah I can get a $750 tax credit! Well
then I don't mind paying 20% more for this house." I think the
market is sure to cool down once the rates go up, but I wonder if
the worst will only come later when people have to renew their
mortgages in 4-5 years.
Posted by sporopat on 21st of Mar 2010 at 02:43 pm
I manage a microbiology lab and there are 7 people in my dept
including myself. Four have just bought homes in the last few
months (three are first time buyers and one is upgrading). My
husband and I were also looking to upgrade from our tiny two
bedroom which would have made us #5 out of 7 but we're planning on
holding tight for now cause things are so crazy (no way we are
going to walk into these bidding wars)!
I totally agree mvachon, if a five year rate goes up even a
couple of percentage points by the time people have to renew in 5
years and with the way people have totally stretched themselves
right now, things have got to cool down the road. Nobody is
talking seriously about there being a bubble but the signs seem
like they are there in Toronto (I don't think it has been quite as
crazy outside of the city). Maybe things will cool after the
summer but who knows.
It's the f^%$#ing HST! you know what happens if you don't buy
RIGHT NOW! Once July 1 rolls in, the air will start to come out!
can you say "I can't afford this $500,000 house any more, only
$450,000? and if interest rates rise, which they will, I can only
afford $400,000! so no wonder everybody is rushing like mad to buy
buy buy...nobody knows exactly how the rules will work - some of
them are yet to be written, all we know is costs will rise
depending on a million little things and the whims of gov't...
http://network.nationalpost.com/np/blogs/toronto/archive/2009/05/20/toronto-real-estate-market-recovers-but-hst-storm-cloud-looms.aspx
"Currently, new homes are exempt from PST. Under the HST, new homes
worth less than $400,000 will qualify for a 6% tax rebate, but new
homes worth more than $500,000 will be subject to an additional 8%
tax. This would mean an additional $30,000 on a $500,000 home."
since there are two sides to every coin, it could be possible
that when interest rates begin to rise, people will rush to buy a
house and get a loan before rates are raised again. Due to the fact
that once rates reverse trends, they do so for a very, very long
time and in this case this will be a generational change.
Posted by mhordila on 21st of Mar 2010 at 04:25 pm
Garth Turner, author, financial commentator, and has twice
served as a Member of Paliament in Canada’s House of Commons.
Actually, the current Prime Minister of Canada kicked him out of
the caucus a few years ago, for too many personal but public
comments. He's of a doom and gloom orientation.
Canadian Bubble
Posted by marketguy on 20th of Mar 2010 at 09:47 pm
I know there was some banter this past week around whether or not there was a housing/credit bubble in Canada....check on the link from Mish.
http://globaleconomicanalysis.blogspot.com/2010/03/canadian-credit-bubble-in-pictures.html
Housing
Posted by mvachon on 21st of Mar 2010 at 11:23 am
Interesting charts. I personally know a few people who have recently bought houses. Some of them are students with very little income. Another guy had huge debt already, and he upgraded to a house that's worth twice as much. Most of them are buying within a day or two. Everybody thinks they're making a great decision because they're buying while the rates are still low and they can still get the tax credits. "Yeah I can get a $750 tax credit! Well then I don't mind paying 20% more for this house." I think the market is sure to cool down once the rates go up, but I wonder if the worst will only come later when people have to renew their mortgages in 4-5 years.
Toronto Bubble
Posted by sporopat on 21st of Mar 2010 at 02:43 pm
I manage a microbiology lab and there are 7 people in my dept including myself. Four have just bought homes in the last few months (three are first time buyers and one is upgrading). My husband and I were also looking to upgrade from our tiny two bedroom which would have made us #5 out of 7 but we're planning on holding tight for now cause things are so crazy (no way we are going to walk into these bidding wars)!
I totally agree mvachon, if a five year rate goes up even a couple of percentage points by the time people have to renew in 5 years and with the way people have totally stretched themselves right now, things have got to cool down the road. Nobody is talking seriously about there being a bubble but the signs seem like they are there in Toronto (I don't think it has been quite as crazy outside of the city). Maybe things will cool after the summer but who knows.
Thanks for the charts marketguy!
Toronto Bubble
Posted by pdani on 21st of Mar 2010 at 03:44 pm
It's the f^%$#ing HST! you know what happens if you don't buy RIGHT NOW! Once July 1 rolls in, the air will start to come out! can you say "I can't afford this $500,000 house any more, only $450,000? and if interest rates rise, which they will, I can only afford $400,000! so no wonder everybody is rushing like mad to buy buy buy...nobody knows exactly how the rules will work - some of them are yet to be written, all we know is costs will rise depending on a million little things and the whims of gov't... http://network.nationalpost.com/np/blogs/toronto/archive/2009/05/20/toronto-real-estate-market-recovers-but-hst-storm-cloud-looms.aspx "Currently, new homes are exempt from PST. Under the HST, new homes worth less than $400,000 will qualify for a 6% tax rebate, but new homes worth more than $500,000 will be subject to an additional 8% tax. This would mean an additional $30,000 on a $500,000 home."
two sides to every coin
Posted by 8899 on 21st of Mar 2010 at 03:59 pm
since there are two sides to every coin, it could be possible that when interest rates begin to rise, people will rush to buy a house and get a loan before rates are raised again. Due to the fact that once rates reverse trends, they do so for a very, very long time and in this case this will be a generational change.
just something to think about imo.
Garth Turner's blog discusses this in detail every day...
Posted by mhordila on 21st of Mar 2010 at 04:25 pm
Garth Turner, author, financial commentator, and has twice served as a Member of Paliament in Canada’s House of Commons. Actually, the current Prime Minister of Canada kicked him out of the caucus a few years ago, for too many personal but public comments. He's of a doom and gloom orientation.
www.greaterfool.ca