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TrickyRicky said:
The real question then is not if what I'm saying is right or wrong but if you yourself can handle the following financial stress test:

-real estate values dropping 25% (example: your $400,000 condo becomes worth $300,000)
-borrowing costs doubling (example: your $1800 per month mortgage becomes $3600 per month)

If you can handle this personal financial stress test you have no worries and the market direction is only relevent to you as an exciting opportunity. However, if you cannot handle such a personal financial stress test than the market is a looming danger and the mere suggestion that my little stress test exercise is relevent or within the realm of possiblity will cause you to be defensive or argumentative or concerned.
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while i agree with the majority of your statements, borrowing costs doubling seems extreme and unlikely.

i figure if interest rates go back up to historical norms, i say a 50% increase in mortgage payment is likely.

unless, of course, we get higher than normal inflation, then you will be right.
 
Let's assume one can afford a 600$/bi-weekly mortgage. With today's rate on 30yr amortization that would be roughly a $310,000 mortgage. Add to that a 10% down-payment and voila, one has a $341,000 condo which if you're lucky can get you a so called 2-bedroom (700 square foot) condo south of eglinton to the waterfront without living in a rat infested shitbox.
Assume rates double in the near future (near future does not mean 12 months) which can happen. That same $310,000 mortgage becomes unaffordable. In order to continue paying the $600/bi-weekly one would need a $215,000 mortgage. Let's assume the individual still has the 31K for down-payment and voila, a $246,000 condo. Almost 100K less.

"but I can't see Toronto's prices taking a 25% drop in prices. The predicted population growth for Toronto will exceed the available housing stock."

That's assuming the population being added can afford the current prices. Now add to that the increased payments due to the higher rates and what do you have?
 
The city of Toronto will not be immune to country-wide correction. As someone that is actively looking to upgrade/buy a second home in T.O., I can tell you that the prices do not support fundamental salaries within this city.

-I've witnessed bidding wars with international buyers that have no idea how grossly they just over-payed for their property.
-Too many families making it their 'personal' business to speculate on homes that they cannot afford if interest rates go up by 2-3 points
-Agents giving financial advice that would not be compliant if they where under similar regulations as any MFDA/IIROC dealer
-A lack of general sense of 'value' for a home. No one looks at if the home is actually worth the listed/expected price, just on a monthly 'affordability' payment schedule, based on 2.5% mortgage interests.

September will be an interesting time for sure.
 
js97 said:
The city of Toronto will not be immune to country-wide correction. As someone that is actively looking to upgrade/buy a second home in T.O., I can tell you that the prices do not support fundamental salaries within this city.

-I've witnessed bidding wars with international buyers that have no idea how grossly they just over-payed for their property.
-Too many families making it their 'personal' business to speculate on homes that they cannot afford if interest rates go up by 2-3 points
-Agents giving financial advice that would not be compliant if they where under similar regulations as any MFDA/IIROC dealer
-A lack of general sense of 'value' for a home. No one looks at if the home is actually worth the listed/expected price, just on a monthly 'affordability' payment schedule, based on 2.5% mortgage interests.

September will be an interesting time for sure.
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I agree that the housing price far exceeds the average salary (for example, see Hong Kong). But unfortunately, I think we all need to rethink how the average joe making average salary should be able/entitled to purchase an average condo to live by themselves. This means you would either have to live with your family (shared income), or rent out a room or two to generate some income.

The whole notion that the average salary exceeds affordability of the average house leads to one think there will be a bubble burst in the near future. Truth is, everything will get more expensive (food, transportation, rent). Housing price in Toronto might drop a bit, but I doubt for much. Vancouver on the other hand is a totally different story, prices double of Toronto..
 
Here is Vancouver even a significant rise in interest rates won't make any difference. Stats out today state that the average price of a SFH in metro is up 30% in the last years and 9 % in the last 3 months and now stands at an unbelievable $1.388 million.
There is no longer any connection between real estate prices and the local economy. Unemployment in Vancouver is now higher than the national average and per capita income in BC is now a very significant 16% below the national average.
Needless to say it's not the locals who are buying these houses but rather the "investors" from China. They are now responsible for 40% of all SFH sales in metro. Many of the remander are also Chinese who have made there way in in the last 10 years and are now immigrants so they don't count as foreign "investors". There is no escaping the prices either as an average condo in metro is now $503,000.
The only thing that will make a major difference in Vancouver, and to a much smaller extent Toronto, is turn off the "buy your way into the country" immigration system.
Thankfully that has now appears to be happening with the new immigration rules. In Vancouver new CMHC have meant nothing as it is foreigners who are buying with cash and new home buyers are completely out of the market.
This is why the new immigration rules are BIG news in Vancouver as many expect this is finally the straw that broke the camel's back.
Some are expecting that prices could completely collapse by as much as 40% over the next year as a true turn and expected crash will have thousands {especially the foreigners who care little for the country itself} will begin to sell as fast as they bought. Locals will also sell due to having equity and get cash quick.
 
SimonP said:
If the price of oil hits $200, maybe hydrogen suddenly makes sense. One of the biggest problems with hydrogen is the huge upfront cost of concerting over the fuel infrastructure.
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I had to respond to this partial quote from this post because people don't understand and the media never corrects this misconception regarding hydrogen.

Hydrogen isn't a power source. It's energy storage and you use more power generating the net energy return you get out of the process. So forget about hydrogen cars replacing conventional cars running on gas/oil. Not going to happen. What is true is that converting and upgrading our electrical grid to handle electric cars isn't feasible nor likely in the future.

You have to upgrade the grid and then you have to look at generating this extra electricity and this would either require more nuclear or coal. Your pick.
 
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tkip said:
Hydrogen isn't a power source. It's energy storage [/I.
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It's both, same as fossil fuels, and anything else we burn or consume to convert energy to create usable power. Fossil fuels are the ideal energy storage - the energy has been created already and stored in the matter, and the transportation and refining is affordable (even at today's $1.30/L auto fuel prices).

As for hydrogen, once we find a way to create the energy that is already stored in fossil fuels then hydrogen will become popular. If we can not find a way to cheaply create hydrogen then forget about it - we'll do something else.
 
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As I understand it, hydrogen cannot be an effective power source no matter how cheap they can make it as it is not mobile................that is to say that it cannot be transported via pipeline like natural gas or oil.
Anyway, back at the housing bubble thread.....................
 
It is possible to transport it (see hydrogen pipeline transport ) it's just more expensive than oil, and requires the construction of a whole new infrastructure. There are certainly drawbacks to hydrogen, which is why no one uses it these days, but at a certain price point it does become cheaper than oil.

Hydrogen isn't the only alternative, if oil hits $200, then maybe electric cars also start to make sense. Other schemes like a methanol economy might also be possible.

As to the storage vs. power question, the limiting factor is storage. From hydro, solar, wind, and nukes the amount of energy accessible to us is essentially unlimited. If we're willing to pay for it, and in a $200 barrel world we will be. It's getting that energy into a transportable form that's the barrier, and which requires major innovation.
 
cdr108,

I agree that my statement of doubling mortgage payments may be extreme. I believe it not because it is not within the realm of possibility based on market fundamentals but because there are now so many people who are hyper-sensative and dependent on low rates that it will soon be politically impossible to raise rates even by a few percentage points.

As an example I have a variable rate mortgage on my principal residence from 2007. Rates have dropped since then. My mortgage payment would have to increase by 33% just to match the payments I was making in 2007. Payments at rates I thought back then were historically low. So suddenly your 50% payment increase possibility doesn't seem so outlandish. Even if payments increase 50% they would still be historically low. If rates went to historical norms my monthly payment would increase by 70%. Well shy of my 100% statement which now that I do the calcs would be unlikely. Rates would have to be at 9% to cause my monthly payment to double or increase by 100%.
 
ssiguy2 said:
As I understand it, hydrogen cannot be an effective power source no matter how cheap they can make it as it is not mobile................that is to say that it cannot be transported via pipeline like natural gas or oil.
Anyway, back at the housing bubble thread.....................
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Exactly. There's never going to a any hydrogen infrastructure because you get less energy out of hydrogen than what you put in. It's a net energy loss.
 
There is hydrogen infrastructure. It's called our water piping system. Not sure if you guys remember grade 9 science -
Run a 9v battery through H2O (water), and you'll get the bi product of oxygen and hydrogen. Combust hydrogen by introducing a spark (by product is water vapour as the H recombines with oxygen). That was a random experiment from 1990 that I got to perform in grade 9 science.

Imagine if that kind of accessible, cheap energy was allowed into our society? Energy/oil companies? It's all a big conspiracy.
 
js97 said:
There is hydrogen infrastructure. It's called our water piping system. Not sure if you guys remember grade 9 science -
Run a 9v battery through H2O (water), and you'll get the bi product of oxygen and hydrogen. Combust hydrogen by introducing a spark (by product is water vapour as the H recombines with oxygen). That was a random experiment from 1990 that I got to perform in grade 9 science.

Imagine if that kind of accessible, cheap energy was allowed into our society? Energy/oil companies? It's all a big conspiracy.
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My recollection is the amount of electricity that is used to create the hydrogen exceeds the amount of electricity that you get by burning the hydrogen. I guess it could make a battery.
 
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