Anikiri wrote: ↑Mar 10th, 2017 10:00 amFirst of all, you gotta be drinking some badly spiked coolaid if you think the RE market is going to correct south of 60%. You may as well leave the country, because there may not be a country left.
Second of all, you are assuming anyone in the household loses a job or has a kid. You are also assuming that we cannot simply rent the house out and live elsewhere.
Third of all, you clearly don't know how homeownership works. It's not a financial instrument, it's a home. The financial gains are just kosher. Most people buy homes as a means to live, not as means to make money.
Fourth of all, do you understand that you can pay a mortgage down? In effect, it is something akin to around 20% - 30% of your mortgage per 5 years, depending on how aggressive you are. The more you pay it down, the more likely you are to weather a harsher decline. But I digress, you have gotta be living in some sort of alternate reality if you think this market is going to tank 60-70-80%, are you on glue?
Fifth of all, if I bought a house for 1.5mil and I carry a mortage of 1mil, I would be earning close to 200k per year. I am not your little guy barely making ends meet, I am part of the top income bracket in this country. I am certainly not going to sweat over losing some equity that I can gain back later.
For your situation to truly unfold, I would have to lose at least a significant part of my household income, have a kid, carry a significant amount of mortgage, my renewal would be up at the time of the crash, the crash would be extremely severe, and that it won't bounce back.
Why live in this country if you think that's gonna happen? Go move elsewhere.
1. I never said the market would correct "south of 60%". You did. I used 50% in a simple example for you to understand. The fact that RE in many places around the GTA is up 50% in a short time means it can come down also. Like the stock market, it's not a one-way street. The fact that all this actually happened in the last crash with less of a drop to trigger it also means it can happen again.
2. Wow. More Fake News.
I was not suggesting all these things need to happen or will...you just did. Again, the last crash (and any "crash") was only triggered by a few of these conditions.
3. Sadly, you would be incorrect again. I own 3 homes and have been a landlord for decades. Maybe your mortgage lender never explained things to you, but if you don't make your monthly payments you will sooner or later not own your house any more. When you can't (or don't want to) make payments any more, they don't lend you money. Contrary to your statement "Most people buy homes as a means to live, not as means to make money...", lots of people do when prices go up 25% YoY.
4. When you have no equity left in the equation you can keep making payments but you never gain anything because the value of the property is going DOWN. I know this is a difficult word for many since all they know is property values that go up. More Fake News. Sorry to break it to you, they do go DOWN. People who are already at the max with a huge debt load are barely making the payments...they are not paying much of anything off. Go check the current CDN debt/income ratio and get back to me.
5. Many people today will have 2 incomes that qualify the mortgage which could be affected in any downturn. People walked away from properties with less leverage and much better ratios in the last crash. Go tell them they should have kept paying into a sinking ship.
The great thing is that the situation I described wasn't made up (unlike your response)...it actually happened.
Sure this time may be somewhat different, but most of the ingredients are already here.
The numbers are also much bigger this time.