Canada's 'housing bubble' deemed close to bursting

[thebasketballgeek]

^Nobody said it had no effect. It is definitely a tool to lower house prices especially in a market with a high foreign buyer presence such as Vancouver. What you’re glossing over is that the 4% interest rate hikes this year was a much larger factor for the reduced demand. So is the fact we’re entering a nearly worldwide recession. Oh yea there’s also a bunch of new housing popping up all over the country to alleviate supply concerns. Add the foreign home buyer temp ban and all the factors start compounding.

It really surprises me when analysts like LePage say that Canada house prices will stagnate when the writing on the wall is for an absolute collapse. The rate hikes haven’t even come into play for the majority of Canadians who will need to renew in the upcoming year.

Hot take: Canada is going to be a buyers market in a few years and prices won’t start trending upwards until 2025 at the earliest. 2030 if Canada is really serious about housing affordability.

[theman23]

Originally Posted by rousseau

This makes my heart swell as a Canadian. Rural areas tend to be the least welcoming for non "old-stock" people in any country. With our crazy immigration numbers, it had to be only a matter of time before first or second generation immigrants started showing up in the agricultural sector.

My parents both grew up on farms in Niagara, and about half of their generation and the subsequent ones (some fifty people in three generations following my grandparents, now gone) still live there in the cities and towns. I have strong ties there and can't help but feel moved by this story.

My grandparents were young children when they and their families fled Ukraine following the Communist revolution. They eventually ended up in Niagara and took over small farms. They were immigrants too. The circle of life in Canada.

Aren’t a lot of the vinyards in Niagara owned by wealthy Chinese families?
BC has a lot of farms that are owned by Punjabi families that eked out a livelihood and managed to set up a family business, but the newer cohort of “immigrant farmers” seem to be wealthy investors looking for a good ROI.

[Wigs]

Originally Posted by theman23

Aren’t a lot of the vinyards in Niagara owned by wealthy Chinese families?
BC has a lot of farms that are owned by Punjabi families that eked out a livelihood and managed to set up a family business, but the newer cohort of “immigrant farmers” seem to be wealthy investors looking for a good ROI.

A good chunk of the 100-ish vineyards are what I'd call "corporate vineyards" but there's still many family run ones.
My point being it's foolish to plow tender fruit orchards and vineyards for tract housing, particularly when Niagara has some of the best soil and climate for Canada.

[casper]

Originally Posted by Wigs

A good chunk of the 100-ish vineyards are what I'd call "corporate vineyards" but there's still many family run ones.
My point being it's foolish to plow tender fruit orchards and vineyards for tract housing, particularly when Niagara has some of the best soil and climate for Canada.

Same situation in BC. Land within the agricultural land reserve does permit the farmer to build a house on their farm. That does need to be restricted a bit to avoid the house becoming a super mansion.

[niwell]

FWIW I know some people who recently bought a vineyard in Prince Edward County. They have some corporate backing for distribution but it’s still very much a family thing. My acquaintance was able to leverage the sale of a townhouse he’d bought for a fraction of the price in Squamish, BC.

Based on my knowledge of the wine industry in Ontario I’d guess that some of the really big wineries have big corporate ownership structures but most of the highly regarded ones are still smallish businesses.

[Truenorth00]

I don't know if this is bad journalism (for not digging deeper) or the opening vignette for Big Short 2.0. Apparently, Uber drivers are buying $2M homes as First Time Homebuyers.



Source: https://ici.radio-canada.ca/rci/en/news/...-downturn-now-theyre-struggling-to-close

Very reminiscent of the Stripper scene in the Big Short:
• Video Link

[casper]

Originally Posted by Truenorth00

I don't know if this is bad journalism (for not digging deeper) or the opening vignette for Big Short 2.0. Apparently, Uber drivers are buying $2M homes as First Time Homebuyers.

Very reminiscent of the Stripper scene in the Big Short:

I don't see how they would have passed a bank stress test. How do people get into this mess. There should have also been a financing condition in their offer.

There has to be more to this story.

[Truenorth00]

Originally Posted by casper

I don't see how they would have passed a bank stress test. How do people get into this mess. There should have also been a financing condition in their offer.

There has to be more to this story.

I'm going to guess there's some family money and private lending involved. Along with insane leverage.

Either way, the fact that people thought it was normal to buy a $2M house with $5k mortgage payments and that there was no risk here, very much says a lot about the state of the market in Canada. If this is the marginal buyer, 2023 is going to be absolutely epic for Canadian housing.

[casper]

Originally Posted by Truenorth00

I'm going to guess there's some family money and private lending involved. Along with insane leverage.

Either way, the fact that people thought it was normal to buy a $2M house with $5k mortgage payments and that there was no risk here, very much says a lot about the state of the market in Canada. If this is the marginal buyer, 2023 is going to be absolutely epic for Canadian housing.

Yes, people need to recalibrate expectations. No one in London or New York expects to buy a single family home on a modest income. A town house or condo yes. But not a $2M home. The same should hold for Toronto or Vancouver.

If he had $260k for a down payment. That would have been a great start against a property worse just under $1 M.

[samne]

Much of the over leveraged mortgages come from alternative lenders not the big banks as they compete for customers. These guys are just as irresponsible IMO. Looks like 2023 is gonna be a messy year as these 1-2 year term alternative mortgages will be renewing.

[esquire]

Originally Posted by Truenorth00

I'm going to guess there's some family money and private lending involved. Along with insane leverage.

Either way, the fact that people thought it was normal to buy a $2M house with $5k mortgage payments and that there was no risk here, very much says a lot about the state of the market in Canada. If this is the marginal buyer, 2023 is going to be absolutely epic for Canadian housing.

I guess it seems like a safe bet if you think prices are just going to keep going up.

But if you're an Uber driver... then even with a couple of side gigs how on earth do you manage to make the mortgage payments on that thing? I'd imagine it would have to be over $10K a month?!

One of my wealthier relatives has a house assessed at $1.3 million but that I'd more realistically peg at a little over $2 million. But he owns multiple successful businesses with probably dozens, if not hundreds of employees. I could not imagine an Uber driver carrying that kind of load by himself.

[Wigs]

Uber driver buying million dollar houses...pfft
These are probably trust fund kids now pretending to be Adults.

Had a friend that did Uber,Lyft, and Uber Eats on the side. He told me Uber Eats was only for him and his wife to have alone time together in the car you got paid so little when all is said and done.
Uber and Lyft were only worth it for events or airport trips. I can picture my friends eyes light up "SURGE-uh Pricing!" meaning during busy events one can make 2-3x regular Uber fare.

[lio45]

Originally Posted by Truenorth00

I don't know if this is bad journalism (for not digging deeper) or the opening vignette for Big Short 2.0. Apparently, Uber drivers are buying $2M homes as First Time Homebuyers.



Source: https://ici.radio-canada.ca/rci/en/news/...-downturn-now-theyre-struggling-to-close

Very reminiscent of the Stripper scene in the Big Short:
• Video Link

What an idiot! In all my years, I’ve never seen an offer that requires financing that didn’t have an escape clause for failing to get the financing in question, and at worst, if you really want your offer to be on top of the pile, then okay, regardless of financing working out, give some non-refundable earnest cash that you can afford to lose, like $10k or $20k, but not $260k

[lio45]

Also, over one year between accepted offer and closing?!? WTF?

[Truenorth00]

Originally Posted by Wigs

Uber driver buying million dollar houses...pfft
These are probably trust fund kids now pretending to be Adults.

Read the article.

Immigrants who were stretching to buy that house.

[lio45]

Originally Posted by casper

I don't see how they would have passed a bank stress test. How do people get into this mess. There should have also been a financing condition in their offer.

Yep.

BTW, earlier this year, I was in talks with the owner of a building that I’ve wanted to buy for years, he wanted me to make it official, so I accepted to sign a formal offer for $1.6M, my banker was so busy he didn’t manage to greenlight me before the deadline, so I let the offer lapse, didn’t cost me a thing.

This was in early 2022, back when rates were low. I wouldn’t give $1.6M for that same building now that we’re in a markedly higher rate environment. So I’m glad I didn’t close — just like this guy should be glad he can let his $2M offer on a property worth $1.7M lapse……

[Truenorth00]

Originally Posted by lio45

What an idiot! In all my years, I’ve never seen an offer that requires financing that didn’t have an escape clause for failing to get the financing in question, and at worst, if you really want your offer to be on top of the pile, then okay, regardless of financing working out, give some non-refundable earnest cash that you can afford to lose, like $10k or $20k, but not $260k

Originally Posted by lio45

Also, over one year between accepted offer and closing?!? WTF?

You've clearly not bought pre-con residential.

The best part is that there's rumours that a lot of the condo game in Toronto and Vancouver is realtors getting high on their own supply. Many bought assignments hoping to flip. And they are now freaking out.

[lio45]

Originally Posted by esquire

I guess it seems like a safe bet if you think prices are just going to keep going up.

Sure, the same way it “seemed like a safe bet” in November of 2021 to borrow tons of money from organized crime at exorbitant interest rates, in order to put it all into bitcoin.

[lio45]

Originally Posted by Truenorth00

You've clearly not bought pre-con residential.

The best part is that there's rumours that a lot of the condo game in Toronto and Vancouver is realtors getting high on their own supply. Many bought assignments hoping to flip. And they are now freaking out.

The article didn’t say anything so I assumed the default scenario of an existing house, but you’re right, that would explain it.

I’ve never bought anything that didn’t already exist (I have actually built, but never pre-sold my unbuilt constructions) but I’m familiar with the concept. (With larger condo buildings, you kinda have to pre-sell at least a chunk of the building, unless you’re Elon Musk.)

It’s logical that a smaller GTA builder would need to pre-sell a $2M house before building it, now that you mention it.

Anyway, I stand by what I said — if the guy wasn’t 100.00% sure he’d secure his financing, he totally should have stuck to making offers on existing buildings that didn’t require a sizable nonrefundable deposit.

[kwoldtimer]

Originally Posted by lio45

What an idiot! In all my years, I’ve never seen an offer that requires financing that didn’t have an escape clause for failing to get the financing in question, and at worst, if you really want your offer to be on top of the pile, then okay, regardless of financing working out, give some non-refundable earnest cash that you can afford to lose, like $10k or $20k, but not $260k

This is all normal when it comes to preconstruction purchase, at least in Ontario.