[Merged] Real estate crash - yes, no, maybe?

[Mark77]

I have it on good authority that should the feds not increase CMHC's ceiling, Genworth and Canada Guaranty are poised to fill the void.

Yeah there's some room for that to happen, but those two firms are re-insured by CMHC (with a limit of $300B ontop of the $600B apparently). And whether banks/investors will accept their guarantees in a significant fashion remains to be seen (since the CMHC re-insurance is only good for 90%, not 100%).

[DearSummer]

CMHC doesn't discriminate based on occupation, but the banks certainly have methods by which to assess creditworthiness.

CMHC is problematic (for among other reasons) in that it doesn't recognize that certain occupations have risk that is highly correlated to the housing market.

Just like the job fortunes of ECE engineers collapsed alongside Nortel in Canada, its reasonable to assume that the employability of many occupations relating to real estate will see collapses in income. All things considered, I'd assume that most banks would be more willing to lend on better terms to a physician or a dentist, than a construction worker.

If it's being insured by the CMHC, why does it matter (aka the argument you have been making the whole thread)? It's funny how you change your stance depending what suits your current train of thought.

[Mark77]

If it's being insured by the CMHC, why does it matter (aka the argument you have been making the whole thread)?

It matters because the worst quality mortgages have been offloaded to the CMHC. The banks have proprietary algorithms to determine this.

I don't think anyone, short of nuclear war, is worried about high income dentists/doctors defaulting, even if they are on a high ratio mortgage. That's not where the fireworks will occur, at the margin. Even if 5% of the marketplace ends up defaulting, the implications for pricing with the rest of the market are enormous.

[gomyone]

Yup. Despite rants from DearSummer and gomyone to the contrary, the credit tightening (in the absence of increases to the benchmark/"policy" rates) is now underway.

So far I have a pretty good record. Almost as good as "pitz"'s record in predicting the collapse of the US banking sector. Maybe DearSummer does have good reason to think I'm "pitz" .

Boy are you deluded and have an inflated sense of yourself. All that's happened is that the banks are not going to loosen up on lending any more than they have been - this doesn't mean credit is "tight" it means credit will not be "as loose" - a pretty big distinction and one that does not foretell of a housing crash. In fact its more consistent with a soft landing for the housing market as activity cools off, not capitulates.

On that note let's look at your record so far. You've predicted:

1. Housing crash of at least 30% - a big fat wrong on that one. Yeah, yeah, you'll says its "going to happen at some point"....as they say a "broken clock..."

2. Bank of Canada cuts rates - another big fat wrong call - no sign of that - their last move was up and their next move is likely up again pending the Fed

3. QE in Canada - the worst "call" you've made - that's not on anybody's radar screen at all - you would have been laughed out of a fixed income trading floor for that one!

4. Government bailing out the CMHC - another one you'll probably say will come eventually -- again "broken clock"

Those are the big ones you've got wrong on this thread but I'm sure there are many others elsewhere on this board that others can point out - thanks for coming out though as your comments are always good for a laugh

[smp]

He has some good points but his understanding of how banks operates is not accurate.

Here is how it is going to happen,

1. US Housing bubble Burst, Fed lowers interest rate to zero and print money
2. BoC lowers interest rate and print money so CDN will not appreciate against USD like crazy
3. Lower interest rate/money printed enters housing market
4. Debt driven economy raises up the housing price and drive GDP growth
5. House price stops moving up
6. Speculator begins to leave the market as the price is not moving up
7. The unemployment rate starts to increase as our GDP growth was relying on housing price increase
8. unemployment causes further correction on housing market
9. The unemployment rate increases more as more people from different sectors lose jobs
10. BoC will need to introduce liquidity to the system such as helping CMHC writing down bad loans

I think we're only on step 5, 6.

During step 7, TSX should experience a big correction and continue going down when more information disclosed to the public.

During step 9, the house market price correction will be obvious to the general public

During step 10, Canadian currency will depreciate against USD.

I'm in the market for a detached house in Toronto right now. I've been watching bidding wars that are crazier than the bidding wars I thought were crazy back in 2007 when I bought my condo. Two houses of note in the past couple of days, detached, w/ garages, 2 bdrm bungalows in East York.

1. asking 569 sold 644
2. asking 519 sold 627

I don't think we're at step 5 or 6 yet. I'm strongly considering renting as an option. I am definitely selling my condo.

edit: and man, this thread is long! I would really like to see a new poll reflecting the sentiments of early 2012 over early 2011.

[gomyone]

I'm in the market for a detached house in Toronto right now. I've been watching bidding wars that are crazier than the bidding wars I thought were crazy back in 2007 when I bought my condo. Two houses of note in the past couple of days, detached, w/ garages, 2 bdrm bungalows in East York.

1. asking 569 sold 644
2. asking 519 sold 627

I don't think we're at step 5 or 6 yet. I'm strongly considering renting as an option. I am definitely selling my condo.

edit: and man, this thread is long! I would really like to see a new poll reflecting the sentiments of early 2012 over early 2011.

..don't look at this thread for real estate advice - alot of it is full of conjecture, lack of facts and emotion - some frequent posters here even have no practical experience with real estate at all, let alone a job.

The only advice I would give you is that its fool hearty to try and time a market - either going up or potentially going down. If you have outgrown your condo or it doesn't suite your lifestyle then sell. But if you are doing this with some intention of selling at the top, waiting for a large correction and then buying back in, your being speculative. Look at housing as a long term investment both in your lifestyle and financially as what you can reasonablly afford and you'll save yourself alot of anxiety.

[smp]

Thanks Gomyone. Yeah, I have outgrown the condo for sure, there's two of us living in 550 square feet now and it's time to move up.

[nalababe]

I'm in the market for a detached house in Toronto right now. I've been watching bidding wars that are crazier than the bidding wars I thought were crazy back in 2007 when I bought my condo. Two houses of note in the past couple of days, detached, w/ garages, 2 bdrm bungalows in East York.

1. asking 569 sold 644
2. asking 519 sold 627

I don't think we're at step 5 or 6 yet. I'm strongly considering renting as an option. I am definitely selling my condo.

edit: and man, this thread is long! I would really like to see a new poll reflecting the sentiments of early 2012 over early 2011.

Keep in mind that in many areas like East York (including Leaside), a bungalow is purchased for express purpose of tearing it down. The property itself which will determine the size of the rebuild will dictate much of the price. Around here, the detached homes are now also purchased by builders much of the time. Our new neighbours were completely amazed that we didn't tear down the house we bought.

[smp]

Indeed. Some of the listings in East York are "buy it and build" listings where the plans and city permits are available and part of the purchase (and purchase price so it would seem).

[budwizestest]

why everyone is wrong :-)
http://www.movesmartly.com/2012/02/f...te-market.html

[Mark77]

why everyone is wrong :-)
http://www.movesmartly.com/2012/02/f...te-market.html

I'd just say -- don't we usually look at average rent versus average buying price? Or compare renting versus buying identical or similar units in buildings? Or look at average prices as a multiple of personal income? I don't see anyone in this thread or elsewhere making reference to the 'quality-adjusted' index that the blog author is referring to.

1. Housing crash of at least 30% - a big fat wrong on that one. Yeah, yeah, you'll says its "going to happen at some point"....as they say a "broken clock..."

2. Bank of Canada cuts rates - another big fat wrong call - no sign of that - their last move was up and their next move is likely up again pending the Fed

3. QE in Canada - the worst "call" you've made - that's not on anybody's radar screen at all - you would have been laughed out of a fixed income trading floor for that one!

4. Government bailing out the CMHC - another one you'll probably say will come eventually -- again "broken clock"

Those are the big ones you've got wrong on this thread but I'm sure there are many others elsewhere on this board that others can point out - thanks for coming out though as your comments are always good for a laugh

Actually you're the guy they're laughing at, although I got to admit, this bubble has persisted a lot longer than I had ever thought. So remain in your delusion that things aren't in the process of going downhill.

[bcbgboy13]

why everyone is wrong :-)
http://www.movesmartly.com/2012/02/f...te-market.html

Perhaps because of this:
http://i43.tinypic.com/24pc9di.png

and that:
http://i40.tinypic.com/15ov7s6.png

And if not enough then you have the RE agents with lots of clients calling and demanding "I need 10 condos by the end of the month or else..."

BTW compare the John P. from the "budwizestest" link above with this one: http://www.pbs.org/newshour/bb/busin...ing_11-29.html
Just do not pay attention to the date.

[Mark77]

BTW compare the John P. from the "budwizestest" link above with this one: http://www.pbs.org/newshour/bb/busin...ing_11-29.html
Just do not pay attention to the date.

DAVID LEREAH:

*puke*

[polk]

..don't look at this thread for real estate advice - alot of it is full of conjecture, lack of facts and emotion - some frequent posters here even have no practical experience with real estate at all, let alone a job.

The only advice I would give you is that its fool hearty to try and time a market - either going up or potentially going down. If you have outgrown your condo or it doesn't suite your lifestyle then sell. But if you are doing this with some intention of selling at the top, waiting for a large correction and then buying back in, your being speculative. Look at housing as a long term investment both in your lifestyle and financially as what you can reasonablly afford and you'll save yourself alot of anxiety.

+1

[bcbgboy13]

Hot off the press - Ben S. Bernanke just said "housing may no longer be viewed as the secure investment it once was thought to be, given uncertainty about future home prices and the economy more generally."

Added plus - speech at the 2012 National Association of Homebuilders International Builders' Show, Orlando, Florida - February 10, 2012