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Originally Posted by Innsertnamehere
5-year fixed mortgages are already at 4%.
I agree though, anything above 5 or 6% for a 5-year fixed is going to start making people sweat - and to be honest, is probably what is needed to pull this country out of spiraling inflation.
The reality is that we need to tighten our collective belts to kill inflation, and that means people's disposable income will drop for a few years to make that happen. We are all in this pickle in the first place because the government decided to give everyone free money for nothing and massively inflated the money supply leading everyone to go on a massive spending spree, driving product prices up.
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The cause though isn't high home prices, that is the indicator. The problem was the shutdown of the world's industrial complex which caused shortages, which caused prices to rise.
Quote:
Originally Posted by thewave46
This is where I wonder.
As long as one can make the payments and has no intention of moving, being underwater isn’t the end of the world. Eventually, the mortgage principal declines to a point where one is above water. One holding a house to live in only cares about the value on a few days:
1. The purchase day
2. The sale day
This will deflate the flip market. Buying a house and expecting a six-figure profit for floors and paint just ended.
Those who are stretched to the max, have variable mortgages, and were planning to not stay somewhere very long will be hurting.
The large scale effect of this? We shall see. I am hopeful that the underlying economy is more robust and the froth of housing prices is like the froth of the stock market - largely illusory to the average person who isn’t buying or selling.
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The problem lies with the people that seem to sell their house every few years. Those people will feel this the most. For people like us who plan to never sell till we are either moving into a LTC home or the ground, this will be a bump.
Quote:
Originally Posted by jonny24
You have a good point - for example, every single person who buys a new car is "underwater" for a bit. But it's okay, they aren't looking to get rid of the new car they just bought.
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Some do. I know of many people who just roll that into the next car.
Quote:
Originally Posted by kwoldtimer
Depending on how much house prices drop, one could add:
3. Mortgage renewal day - if your house is now worth less than the outstanding mortgage, you may have a problem.
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Makes me wonder if due to everyone being underwater, if the mortgage companies will be ready for this and will work with the home owners to prevent a default.That would be 2008 all over again. I am guessing that they will have options, like extending the amortization time or a lower interest if you have been making regular payments, or other stuff.
Quote:
Originally Posted by lio45
And one could also add:
4. Refinancing Day - the day you show up at the bank intending to use the equity you have in your house.
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That will only hurt those that plan to use that money for something. Another date would be when you qualify for reverse mortgage (CHIP is a popular one advertised for.) If you planned to use your home's equity for a supplemental income, this could really mess up things. It may see the older people who should be retiring at ~65 staying longer.
Quote:
Originally Posted by thewave46
Oh yes, absolutely. Someone who bought in the past couple of years is probably stuck, especially if they don’t have much equity. It isn’t great for mobility, that’s for certain.
What I am trying to say is that a US-style crash is less likely, where demand went to near nil and large numbers of defaults/bank collapses happen because large numbers of people can’t make the payments, because they were relying on equity gains exclusively.
What I am curious about is who owns at the expensive end. A million dollar home requires significant cash up front, so is this older people who are rolling equity into a new place? It would seem to be unlikely to be a younger couple, as they are priced out.
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This is where looking at your house as an investment could be an issue. Now, you might be stuck and not able to use it for that.
Quote:
Originally Posted by lio45
BTW, I’ve been paying 12% interest on my deferred property taxes for 15 years and counting. That’s how it works in Quebec.
BC could take a page from this playbook: 12% interest, but no need to pay a penny until you sell or die. It’s a good deal for the older multimillionaire homeowner who doesn’t want to move. Don’t like it, cash out and downsize/move away.
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So, deferring payment, as in not paying taxes? While our infrastructure is crumbling? No, pay your taxes.
Quote:
Originally Posted by thurmas
CMHC in globe and mail says Canada would need to build 5.8 million new homes by 2030 to bring home prices down to affordable levels.
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I heard that too, and most of it was in Ontario BC and Quebec.If this is not a reason to improve internet access in rural areas, work from home becoming mandatory unless the job requires a physical thing, and improving intercity transportation (investing in Via to expand and improve their network); I don't know what is. Many people leave smaller communities to get the big paying job in the big city. If the rural places were an option for someone to grow in a company and make real money we would see the country more prosperous. We would likely also see the housing costs in the big cities cool enough that a worker could afford it.
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