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- Thread starter simuls
- Start date
redfirm
Active Member
Question for all r/e agents making posts here over the last couple of days: record high level of personal debt in Canada, especially in large cities, compared to both Canadian historical levels and other nations these days - do you see any problem with that in relation to r/e market?
drewp
Active Member
You are right Cdr, my apologies. What I meant to say was that you started the debate after Mike was talking about selling his condo.
UD.....we are talking about resale. In regards to pre-construction, yes you are right that some developers have put their projects on hold probably to market them in spring with some price adjustments. It is second week of February, so I think it is to premature to assume anything. If builders price their projects properly, and the resale market picks up again, I think pre-contsruction will do fine, not as good as 2011-2012. Builders were charging WAY to much in 2012, and realized that after some projects never took off.
Realtors offering first time buyer seminars is an actual argument? It is called prospecting, and we have to do that everyday. The problem, is there are too many part time Realtors who look at this job as a hobby, and not a career, too little training, and no criteria to enter the field.....but that is a story for another time.
And my "market intelligence" proves that I don't need to justify anything to you.
Yes, I am Realtor but if you read my posts you will know that I try to be objective. I am not saying everything will be rosy, just talking about the market at its current state.
UD.....we are talking about resale. In regards to pre-construction, yes you are right that some developers have put their projects on hold probably to market them in spring with some price adjustments. It is second week of February, so I think it is to premature to assume anything. If builders price their projects properly, and the resale market picks up again, I think pre-contsruction will do fine, not as good as 2011-2012. Builders were charging WAY to much in 2012, and realized that after some projects never took off.
Realtors offering first time buyer seminars is an actual argument? It is called prospecting, and we have to do that everyday. The problem, is there are too many part time Realtors who look at this job as a hobby, and not a career, too little training, and no criteria to enter the field.....but that is a story for another time.
And my "market intelligence" proves that I don't need to justify anything to you.
Yes, I am Realtor but if you read my posts you will know that I try to be objective. I am not saying everything will be rosy, just talking about the market at its current state.
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drewp
Active Member
Yes personal debt should be a concern. I would be curious to see the debt of specific age groups, because I would be certain that the under 40 year old age group has acquired more debt.
I find a lot of people aged 25-40 do have more debt than they should, but get so much money from their parents. I think the generation X and Y do get a lot of money from the baby boomer generation who was more conservative with their money.
I find a lot of people aged 25-40 do have more debt than they should, but get so much money from their parents. I think the generation X and Y do get a lot of money from the baby boomer generation who was more conservative with their money.
redfirm
Active Member
Yes personal debt should be a concern. I would be curious to see the debt of specific age groups, because I would be certain that the under 40 year old age group has acquired more debt.
I find a lot of people aged 25-40 do have more debt than they should, but get so much money from their parents. I think the generation X and Y do get a lot of money from the baby boomer generation who was more conservative with their money.
Sorry, not following your logic. Young people have more debt, but they also get lots of money from their parents, right? So if they are getting all this cash, why are they having this record debt?
drewp
Active Member
Again, I don't have any numbers to specify anything but what I am saying is that I think the younger generation do have more of a cushion if they run into financial problems because they either have money coming to them, or their parents will help them out in a time of need.....Just a theory.
TorontoMike$$
Active Member
They use the money for investment or income properties
TorontoMike$$
Active Member
Ud have you noticed what price points are builders offering incentives at? Ive seen many incentives from builders but when I probe further prices for these units are way above market value. One example comes to mind is daniels cinema tower. They were giving it all away free maint fees, no interest, credits on closing, 5% down, etc etc and the starting price was 360k for a studio.. most builders give away incentives for the last 15% of units where the increases have already built into prices and the people that bought first are up 10-15% on their purchases.
Projects can be delayed for many reasons - slow sales, permits, zoning issues, financing conditions .. so many possibilities
Projects can be delayed for many reasons - slow sales, permits, zoning issues, financing conditions .. so many possibilities
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TorontoMike$$
Active Member
Tridel blew out 80% of 10 york in a couple of weeks. In the worst time late last year
TorontoMike$$
Active Member
CG what do you think about my incentives comment? Or you still waiting for CN.. think he disappeared or working on his career
cdr108
Senior Member
You are right Cdr, my apologies. What I meant to say was that you started the debate after Mike was talking about selling his condo..
yes because i find it very hypocritical of one to be pumping up the market, while doing the opposite and selling off their own holdings.
from TM postings, it seems he has sold off several units and the re-positioning explanation makes no sense at all.
the asset class remains the same if what he says he's doing is even logical, etc.
marsh
Active Member
Published in the National Post: IMF says Canada’s housing market still overvalued, warns more intervention may be needed
Louise Egan, Reuters | Feb 14, 2013 9:08 PM ET | Last Updated: Feb 14, 2013 9:35 PM ET
More from Reuters
Gazette/Colin O'Connor Residential prices and construction are both still excessive, according to the IMF's OTTAWA — Canadian housing prices were still about 10% overvalued at the end of 2012, the IMF said on Thursday, and it warned that authorities may have to intervene a fifth time in the mortgage market if personal debt levels rise further.
The International Monetary Fund, in its annual report on Canada, also said the country’s currency was between 5 and 15% higher than warranted by long-term economic fundamentals, lifted in part by commodity prices and the country’s safe-haven status for investors.
The Washington-based lender acknowledged that government measures since 2008 – and most recently last July – to cool overheated mortgage borrowing and house prices have helped prevent a U.S.-style housing bubble.
But residential prices and construction are both still excessive, according to its assessment based on meetings with Canadian officials from December 3-18.
“Our analysis suggests an overvaluation in real terms of about 10% at a national level, although with significant variations across provinces,” said Roberto Cardarelli, IMF mission chief for Canada, in comments provided as a complement to the technical report.
Since the Washington-based lender conducted its study, there have been more signs of moderation in the housing market. Home prices grew at the slowest pace in three years in December year-on-year and housing starts fell more steeply than expected in January.
Like Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty, the IMF worries that highly indebted Canadians make the country more vulnerable to an external shock that could lead to job losses and bankruptcies.
While it expects a soft landing, it urged Ottawa to be ready to intervene again if the household debt-to-income ratio rises further from already record highs.
“These measures could include higher down-payment requirements, lower caps on debt-service-to-income ratios, and tighter loan-to-value ratios on refinancing,” it suggested.
The central bank, for its part, should not use interest rate hikes to curb household borrowing except as a very last resort, the IMF said. It urged the Bank of Canada to keep its benchmark rate on hold at 1.0% until growth regains momentum, which it expects in late 2013.
The IMF report’s outlook is broadly in line with that of the government and central bank, which see growth picking up in the second half of this year after a weaker-than-expected 2012.
STRONG CURRENCY HURTS MANUFACTURING
Wading into a controversial domestic debate, the report states that the sharp appreciation of the Canadian dollar and increased competition from China as a trade competitor “contributed to the decline of Canada’s manufacturing market share in the United States over the last decade.”
It noted that the Canadian authorities “only partially agreed” with this view, saying the decline of manufacturing was a trend among all advanced economies. The main opposition party, the New Democrats, has clashed with the ruling Conservatives on this issue, contending that the strong currency, which it says is caused by heavy reliance on oil sands development, has hammered manufacturing jobs.
The federal government is on track to balance its budget by 2015-16, but the fiscal outlook for some of the largest provinces such as Ontario and Quebec is less certain, the IMF said. A priority in the medium term will be to contain healthcare costs, a provincial responsibility, it said.
The IMF urged the federal government to consider two new approaches to fiscal planning, but policy makers appeared reluctant to agree, according to the report.
First, it suggested Ottawa publish a “fiscal sustainability report” every 3-5 years which would review progress by each level of government – federal, provincial, territorial and municipal on managing debt and deficits.
Secondly, a variety of measures could be adopted to soften the impact of volatile prices for oil and other commodities on the economy and on government budgets. For example, the government could put aside savings during commodity booms for use in leaner times, and exclude commodities from some of its fiscal indicators to produce more accurate projections.
Louise Egan, Reuters | Feb 14, 2013 9:08 PM ET | Last Updated: Feb 14, 2013 9:35 PM ET
More from Reuters
Gazette/Colin O'Connor Residential prices and construction are both still excessive, according to the IMF's OTTAWA — Canadian housing prices were still about 10% overvalued at the end of 2012, the IMF said on Thursday, and it warned that authorities may have to intervene a fifth time in the mortgage market if personal debt levels rise further.
The International Monetary Fund, in its annual report on Canada, also said the country’s currency was between 5 and 15% higher than warranted by long-term economic fundamentals, lifted in part by commodity prices and the country’s safe-haven status for investors.
The Washington-based lender acknowledged that government measures since 2008 – and most recently last July – to cool overheated mortgage borrowing and house prices have helped prevent a U.S.-style housing bubble.
But residential prices and construction are both still excessive, according to its assessment based on meetings with Canadian officials from December 3-18.
“Our analysis suggests an overvaluation in real terms of about 10% at a national level, although with significant variations across provinces,” said Roberto Cardarelli, IMF mission chief for Canada, in comments provided as a complement to the technical report.
Since the Washington-based lender conducted its study, there have been more signs of moderation in the housing market. Home prices grew at the slowest pace in three years in December year-on-year and housing starts fell more steeply than expected in January.
Like Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty, the IMF worries that highly indebted Canadians make the country more vulnerable to an external shock that could lead to job losses and bankruptcies.
While it expects a soft landing, it urged Ottawa to be ready to intervene again if the household debt-to-income ratio rises further from already record highs.
“These measures could include higher down-payment requirements, lower caps on debt-service-to-income ratios, and tighter loan-to-value ratios on refinancing,” it suggested.
The central bank, for its part, should not use interest rate hikes to curb household borrowing except as a very last resort, the IMF said. It urged the Bank of Canada to keep its benchmark rate on hold at 1.0% until growth regains momentum, which it expects in late 2013.
The IMF report’s outlook is broadly in line with that of the government and central bank, which see growth picking up in the second half of this year after a weaker-than-expected 2012.
STRONG CURRENCY HURTS MANUFACTURING
Wading into a controversial domestic debate, the report states that the sharp appreciation of the Canadian dollar and increased competition from China as a trade competitor “contributed to the decline of Canada’s manufacturing market share in the United States over the last decade.”
It noted that the Canadian authorities “only partially agreed” with this view, saying the decline of manufacturing was a trend among all advanced economies. The main opposition party, the New Democrats, has clashed with the ruling Conservatives on this issue, contending that the strong currency, which it says is caused by heavy reliance on oil sands development, has hammered manufacturing jobs.
The federal government is on track to balance its budget by 2015-16, but the fiscal outlook for some of the largest provinces such as Ontario and Quebec is less certain, the IMF said. A priority in the medium term will be to contain healthcare costs, a provincial responsibility, it said.
The IMF urged the federal government to consider two new approaches to fiscal planning, but policy makers appeared reluctant to agree, according to the report.
First, it suggested Ottawa publish a “fiscal sustainability report” every 3-5 years which would review progress by each level of government – federal, provincial, territorial and municipal on managing debt and deficits.
Secondly, a variety of measures could be adopted to soften the impact of volatile prices for oil and other commodities on the economy and on government budgets. For example, the government could put aside savings during commodity booms for use in leaner times, and exclude commodities from some of its fiscal indicators to produce more accurate projections.
jremazki
New Member
From G+M
If Canadian homes are overpriced by 10%, what happens next?
IMF on housing
The International Monetary Fund has added its calculations to those of others who have been measuring the over-valuation in Canada’s housing market, coming to the conclusion that the level is about 10 per cent.
The question then becomes: What happens next? According to the IMF and others, possibly not much.
That’s based on studying rental rates and household income, an analysis that’s used by others, as well.
But Roberto Cardarelli, the group’s mission chief for Canada, believes, as do others, that the scenario is one of a “soft landing."
The country could, he said, absorb a price drop of 10 per cent over five years providing the economy doesn’t stall and the labour market continues to grow.
The real estate market has been slowing since Finance Minister Jim Flaherty moved to cool things off with his latest round of mortgage restrictions last summer.
But based on early reports from some local real estate boards, January wasn’t as bad, and bolsters the soft-landing view.
As The Globe and Mail's Tara Perkins reports today, home sales in Canada inched up 1.3 per cent in January from December, though were down about 5 per cent from a year earlier. The MLS home price index was up just 3.1 per cent, marking the slowest increase since the spring of 2011.
The pause in the market isn’t particularly unusual given Mr. Flaherty’s rules changes, the latest in a series.
Since peaking in June, BMO Nesbitt Burns notes, the MLS home price index has declined by about 1.5 per cent. But, says BMO’s Robert Kavcic, its previous, steady climb was not “without interruption,” having been bumped around by previous restrictions in the morning market.
“In each case, underlying fundamentals like a falling jobless rate and low mortgage rates ultimately saved the day, and there’s little to suggest that those fundamentals won’t be in pace this time around, as well,” the economist said.
“It also stands to reason that a one-time change to mortgage rules (lower amortization period, for example) would cause a one-time level shift in prices, after which time underlying fundamentals (income, joblessness, mortgage rates, etc.) take over in setting the path.”
Mr. Kavcic has found that the average time of “adjustment” to the previous rule changes – there were three before those in the summer – was in the area of seven months. And, he pointed out, the market is now seven months on from Mr. Flaherty’s latest move, though it was tougher than those of the past.
“The spring selling season will be a telling one, and with sub-3 per cent five-year fixed rates, don’t be shocked if prices find a floor again.”
If Canadian homes are overpriced by 10%, what happens next?
IMF on housing
The International Monetary Fund has added its calculations to those of others who have been measuring the over-valuation in Canada’s housing market, coming to the conclusion that the level is about 10 per cent.
The question then becomes: What happens next? According to the IMF and others, possibly not much.
That’s based on studying rental rates and household income, an analysis that’s used by others, as well.
But Roberto Cardarelli, the group’s mission chief for Canada, believes, as do others, that the scenario is one of a “soft landing."
The country could, he said, absorb a price drop of 10 per cent over five years providing the economy doesn’t stall and the labour market continues to grow.
The real estate market has been slowing since Finance Minister Jim Flaherty moved to cool things off with his latest round of mortgage restrictions last summer.
But based on early reports from some local real estate boards, January wasn’t as bad, and bolsters the soft-landing view.
As The Globe and Mail's Tara Perkins reports today, home sales in Canada inched up 1.3 per cent in January from December, though were down about 5 per cent from a year earlier. The MLS home price index was up just 3.1 per cent, marking the slowest increase since the spring of 2011.
The pause in the market isn’t particularly unusual given Mr. Flaherty’s rules changes, the latest in a series.
Since peaking in June, BMO Nesbitt Burns notes, the MLS home price index has declined by about 1.5 per cent. But, says BMO’s Robert Kavcic, its previous, steady climb was not “without interruption,” having been bumped around by previous restrictions in the morning market.
“In each case, underlying fundamentals like a falling jobless rate and low mortgage rates ultimately saved the day, and there’s little to suggest that those fundamentals won’t be in pace this time around, as well,” the economist said.
“It also stands to reason that a one-time change to mortgage rules (lower amortization period, for example) would cause a one-time level shift in prices, after which time underlying fundamentals (income, joblessness, mortgage rates, etc.) take over in setting the path.”
Mr. Kavcic has found that the average time of “adjustment” to the previous rule changes – there were three before those in the summer – was in the area of seven months. And, he pointed out, the market is now seven months on from Mr. Flaherty’s latest move, though it was tougher than those of the past.
“The spring selling season will be a telling one, and with sub-3 per cent five-year fixed rates, don’t be shocked if prices find a floor again.”
brockm
Active Member
You know, it's pretty silly how much of the economy is tied up in housing in developed countries relative to developing countries. So much so that economists now consider housing to be the key-driver of a modern economy, which is why central bankers focus on the housing market to lead us out of recession.
Then we wonder why our productivity is so low. Could it have anything to do with the fact that nearly a quarter of all capital in this country is tied up in the housing industry either directly or indirectly? Add to that, the financial sector component that greases it's wheels and it's even more baffling.
When we start worrying about whether or not our economy could survive a housing slowdown, I think we should be asking serious questions about just how balanced our economy is.
NOTE: To those people who say I'm just bitter because I didn't get in at the beginning of this housing glut, I say nonsense. My earnings are in the 95th+ percentile, and my rent comprises about 11% of my after tax salary. In that time, I have amassed a large amount of income-bearing investments. And I also got in early in gold, etc. So I feel fantastic that I didn't fall victim to the lost opportunity cost that parking hundreds of thousands of dollars in real estate would have caused.
And if I need to move to San Francisco tomorrow for a job, I wouldn't be sweating unloading a property in this market.
Then we wonder why our productivity is so low. Could it have anything to do with the fact that nearly a quarter of all capital in this country is tied up in the housing industry either directly or indirectly? Add to that, the financial sector component that greases it's wheels and it's even more baffling.
When we start worrying about whether or not our economy could survive a housing slowdown, I think we should be asking serious questions about just how balanced our economy is.
NOTE: To those people who say I'm just bitter because I didn't get in at the beginning of this housing glut, I say nonsense. My earnings are in the 95th+ percentile, and my rent comprises about 11% of my after tax salary. In that time, I have amassed a large amount of income-bearing investments. And I also got in early in gold, etc. So I feel fantastic that I didn't fall victim to the lost opportunity cost that parking hundreds of thousands of dollars in real estate would have caused.
And if I need to move to San Francisco tomorrow for a job, I wouldn't be sweating unloading a property in this market.
js97
Senior Member
I think a 5 % price adjustment would bring all prices back in line (at least in Toronto) to realistic levels. That being said, there are a lot of 30's professionals that (at least in my circles) that don't evaluate a home's price based on medium historic prices, but their current affordability level. I've noticed this phenomenon in the past few years, where couples will pay 30/50/100k more than actual worth because they were tired of looking and okay with overpaying. This is the same generation that's never experienced scarcity and/or a housing crash. It will be interesting to see how the next 5 years unfolds.
p.s. those expecting a rapid sell-off. If you take a look at the trends in the 80's when interest rates spiked to 18%, it took that market 4 years to bottom out. I can't see Toronto experiencing anything like that so for those 'looking' for that type of adjustment, it probably won't happen.
p.s. those expecting a rapid sell-off. If you take a look at the trends in the 80's when interest rates spiked to 18%, it took that market 4 years to bottom out. I can't see Toronto experiencing anything like that so for those 'looking' for that type of adjustment, it probably won't happen.
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