Real Estate

Rate Hike, Drop or Flat?

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  • Mar 5th, 2020 7:42 pm
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Deal Fanatic
Oct 7, 2007
9404 posts
5374 upvotes
rjg4235 wrote: So is census Canada lying too.... the population numbers are not dictated by the city or developers.

These numbers are from Statistics Canada, are you seriously accusing the federal government about lying about the population?
Not at all. I believe Statistics Canada is the most reliable data we have. What I am saying is that if you listen to the nonsense, the real estate cartel and Vancouver City Hall would have everyone believe that our population is growing like crazy. However, if you look at the analysis, you will see that our population is growing at less than 1% per year and that the growth rate is shrinking over time. The last census was done in 2016 (reflects 2015 data) so if you factor in the fact that many people have left since 2015/2016, it would be interesting to see if the growth rate is actually negative now. Check it out for yourself if you don't believe me. All the data is public.
Deal Addict
Mar 20, 2017
1370 posts
1165 upvotes
Meanwhile, a meltdown on stock markets continues. You never know, if stock crash happens, BoC would need to lower rates a lot in one moment.
And there is increasing evidence this time it is the crash, since stock-bond correlation reached negative zone and there is already nowhere to hide.

Stocks, RE - whichever falls first, the second one will get all benefits from the situation.
Deal Addict
Jul 14, 2002
2759 posts
1397 upvotes
GalvToronto wrote: Meanwhile, a meltdown on stock markets continues. You never know, if stock crash happens, BoC would need to lower rates a lot in one moment.
And there is increasing evidence this time it is the crash, since stock-bond correlation reached negative zone and there is already nowhere to hide.

Stocks, RE - whichever falls first, the second one will get all benefits from the situation.
If you have a hoard load of cash/equity lying around after the crash, sure. But usually crashes do not benefit 80-90% of the general public.
As time goes on, the inequality will keep widening through the ups and downs.
Deal Addict
Mar 20, 2017
1370 posts
1165 upvotes
dantey wrote: If you have a hoard load of cash/equity lying around after the crash, sure. But usually crashes do not benefit 80-90% of the general public.
As time goes on, the inequality will keep widening through the ups and downs.
I am not sure If I get no benefits from sudden BoC rate drop down to 0.5% or lower. Mortgage payment would decrease.
Only losing a job can mix the cards, but the whole idea of rate drops is to prevent that before it started to happen and cause only minor unemployment increase, few percents.
Deal Addict
Jul 14, 2002
2759 posts
1397 upvotes
GalvToronto wrote: I am not sure If I get no benefits from sudden BoC rate drop down to 0.5% or lower. Mortgage payment would decrease.
Only losing a job can mix the cards, but the whole idea of rate drops is to prevent that before it started to happen and cause only minor unemployment increase, few percents.
The situation will have to be pretty dire for the BOC to decrease rates with the momentum and direction that we're going. The reality is that we're tied at the hip to the US.
Market corrections don't figure as much to the BOC than GDP growth and inflation figures, recession indicators.
The RE/stock market could correct and BOC wouldn't move rates if we're not in a recession.
The opposite of a RE bear looking for $600k detaches is an interest rate bear looking for 0.5% or lower rates.
Deal Addict
Mar 20, 2017
1370 posts
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dantey wrote: The situation will have to be pretty dire for the BOC to decrease rates with the momentum and direction that we're going. The reality is that we're tied at the hip to the US.
Market corrections don't figure as much to the BOC than GDP growth and inflation figures, recession indicators.
The RE/stock market could correct and BOC wouldn't move rates if we're not in a recession.
The opposite of a RE bear looking for $600k detaches is an interest rate bear looking for 0.5% or lower rates.
You completely forgot what happens during stock market crashes. Your theories are wrong.
People stop getting stock appreciation and they become scared. Next, they stop buying new cars and iphones.
Already at this moment BoC says "Consumer activity decreased, we are going into deflation and BoC must support the market".
But its just the begining, since people stopped buying cars and iphones, the market crash becomes bigger, since sales are down and BoC knows it must act in advance, because crash is always one step ahead.

Only in theory GDP and inflation are not tied to stocks. In reality sales/consumer activity fall pretty fast and it affects both GDP and inflation numbers. I know its a fake temporary numbers of negative inflation caused by fear, but BoC still uses it and it has all the data to support and justify his low rate decisions.
Deal Guru
Feb 9, 2009
12381 posts
11307 upvotes
The issue is trump's tax cuts...totally wasnt needed right now.

Should have waited until growth slowed and then pulled that rabbit out of his hat...he brought it out when growth was already strong...now the orange face idiot has nothing he can do to push the trigger except go out and do his rah rah rallies.

The tax cuts just prolonged this stock market rally. Now if we get some moderation or correction this may have businesses spend a little less this quarter and move back..if this happens I expect rate hikes to slow down.

If car sales and such are slowing down in Canada, I dont get why they would increase...we have already seen in 2015 we can detach from the US on rate policy, if needed...lets see.
Deal Addict
Jul 14, 2002
2759 posts
1397 upvotes
GalvToronto wrote: You completely forgot what happens during stock market crashes. Your theories are wrong.
People stop getting stock appreciation and they become scared. Next, they stop buying new cars and iphones.
Already at this moment BoC says "Consumer activity decreased, we are going into deflation and BoC must support the market".
But its just the begining, since people stopped buying cars and iphones, the market crash becomes bigger, since sales are down and BoC knows it must act in advance, because crash is always one step ahead.

Only in theory GDP and inflation are not tied to stocks. In reality sales/consumer activity fall pretty fast and it affects both GDP and inflation numbers. I know its a fake temporary numbers of negative inflation caused by fear, but BoC still uses it and it has all the data to support and justify his low rate decisions.
They are tied together and yes a stock market crash would cause other things to occur. E.g. recession or so.
Meh, we're in a 10 year old bull market so far, feel like timing the market?
If rates go to 0.5%, I'll borrow all of my HELOC and pump them into blue chip stocks at a 50% discount.
Deal Guru
Feb 9, 2009
12381 posts
11307 upvotes
dantey wrote: They are tied together and yes a stock market crash would cause other things to occur. E.g. recession or so.
Meh, we're in a 10 year old bull market so far, feel like timing the market?
If rates go to 0.5%, I'll borrow all of my HELOC and pump them into blue chip stocks at a 50% discount.
Thats what Im waiting for.

I already own my house that is nearly paid off, have tons of equity -- will pull it out and buy stocks on a correction...

At least I dont need to worry about buying a house now and luckily I did so 10 years ago and didnt listen to anyone... or else I'd be in a bind like alot of people on here just to get into the housing market..that decision will allow me and others to use the equity to move into the next rung of wealth...
Deal Fanatic
User avatar
Jan 6, 2011
6190 posts
1546 upvotes
GTA
Sanyo wrote: Thats what Im waiting for.

I already own my house that is nearly paid off, have tons of equity -- will pull it out and buy stocks on a correction...

At least I dont need to worry about buying a house now and luckily I did so 10 years ago and didnt listen to anyone... or else I'd be in a bind like alot of people on here just to get into the housing market..that decision will allow me and others to use the equity to move into the next rung of wealth...
But rate would be lagging indicator and it's unreliable for RE.

If you got it right, 10x off RE and 6x off eqt. Your $10K becomes $600K. If you got it wrong, you may have to pawn your underwear.

Rate drop reflects confidence collapse and causes eqt mkts to correct and RE to go flat since rent is artificially propped up. But once eqt go long bear, what do people do? They reinvest eqt gains into RE.

I think we are close to that point, say Dow break March low.
Deal Guru
Feb 9, 2009
12381 posts
11307 upvotes
LongLiveRFD wrote: But rate would be lagging indicator and it's unreliable for RE.

If you got it right, 10x off RE and 6x off eqt. Your $10K becomes $600K. If you got it wrong, you may have to pawn your underwear.

Rate drop reflects confidence collapse and causes eqt mkts to correct and RE to go flat since rent is artificially propped up. But once eqt go long bear, what do people do? They reinvest eqt gains into RE.

I think we are close to that point, say Dow break March low.
Regardless the lower it goes the more I buy...in addition to my house I did buy some stocks like TD in 2008 and made a nice penny. I can only hope we have a 2008 correction again, but I dont expect it will be that bad this time, maybe 20-30% for stock market... regardless the stock market was acting like the toronto housing market in March 2017...just needs to simmer down thats all... long term bull all the way!
Deal Fanatic
User avatar
Jan 6, 2011
6190 posts
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GTA
Sanyo wrote: Regardless the lower it goes the more I buy...in addition to my house I did buy some stocks like TD in 2008 and made a nice penny. I can only hope we have a 2008 correction again, but I dont expect it will be that bad this time, maybe 20-30% for stock market... regardless the stock market was acting like the toronto housing market in March 2017...just needs to simmer down thats all... long term bull all the way!
This is why how GTA RE peak is crucial. If RE doesn't correct, your risk of selling is high for no return. This is why for 99% of people, not selling GTA and just invest on the side has highest alpha. The worst is loose all your shirt in eqt then come back seeing your rental shoot up in price, because more rent controls.

For speculating outside of GTA or US, RE would correct first, then eqt, then rate. Rate lagged everything, well, maybe it lead you to the bottom.

'09 was once or twice in a life time, but that is because US RE corrected, causing the planet to wobble. So RE was the leading indicator of all indicators. US RE is correcting now, and ours is suppose to lag US. I don't think we will surge again until US is surging again, just trending mildly.
Deal Addict
Jul 14, 2002
2759 posts
1397 upvotes
Sanyo wrote: Thats what Im waiting for.

I already own my house that is nearly paid off, have tons of equity -- will pull it out and buy stocks on a correction...

At least I dont need to worry about buying a house now and luckily I did so 10 years ago and didnt listen to anyone... or else I'd be in a bind like alot of people on here just to get into the housing market..that decision will allow me and others to use the equity to move into the next rung of wealth...
Best time to buy anything, when news can't get any worse and everyone wants to dump. =)
If the market keeps going down, might be some boxing day sales in December when people dump to window dress their gains this year.
Then hold on for another cycle of inflation to pump up those equities and churn into RE investments later.
Deal Fanatic
User avatar
Jan 6, 2011
6190 posts
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GTA
dantey wrote: Best time to buy anything, when news can't get any worse and everyone wants to dump. =)
If the market keeps going down, might be some boxing day sales in December when people dump to window dress their gains this year.
Then hold on for another cycle of inflation to pump up those equities and churn into RE investments later.
That's the exact opposite of common sense.

You will feel hurt no matter what I said so I will let others call it.
Deal Expert
Feb 22, 2011
16521 posts
21871 upvotes
Toronto
sp500 getting close to negative for the year, rate hikes imminent, this is no fun. Am I seriously considering HISA now lol.
Deal Addict
Jul 14, 2002
2759 posts
1397 upvotes
LongLiveRFD wrote: That's the exact opposite of common sense.

You will feel hurt no matter what I said so I will let others call it.
TD Bank - 2008 @ $25, 2018 @ $75
MSFT - 2008 @ $25, 2018 @ $105
AAPL - 2008 @ $15, 2018 @ $215
4 BR Detached - 2008 @ $650k, 2018 @ 1.1 million

Compounding gains at it's best.
Deal Fanatic
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Jan 6, 2011
6190 posts
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GTA
dantey wrote: TD Bank - 2008 @ $25, 2018 @ $75
MSFT - 2008 @ $25, 2018 @ $105
AAPL - 2008 @ $15, 2018 @ $215
4 BR Detached - 2008 @ $650k, 2018 @ 1.1 million

Compounding gains at it's best.
Take that base case, at whatever eqt-re split you liked.

What if you did 100% eqt since 09 march low then roll gains into RE in 2018, will that outperform the base case? Or the inverse, liquidate RE now and roll RE gains into eqt, today.

You mentioned the key driver but you got the direction wrong. And if you get this wrong, it's not 6,000% gain, your wife may divorce you.

Our bear friends don't understand what/how one factors drives the other and think RE tracks the cost of whole turkey they just had Monday.
Member
Oct 16, 2010
309 posts
163 upvotes
Toronto
Canadian firms expect to ramp up investment: Bank of Canada survey

"Canadian business sentiment remains at elevated levels, with companies expecting to ramp up investment to build new capacity and accommodate demand, according to a survey by the central bank.

The Ottawa-based central bank’s third-quarter survey of executives -- which took place in August and September before Canada reached a deal with the U.S. to replace the North American Free Trade Agreement -- shows an economy in which companies see their outlook for sales improving but continue to find it difficult to increase production. To cope, investment intentions are near records, the survey found.

The report should bolster confidence among Bank of Canada policy makers the economy can handle the higher borrowing costs needed to bring rates back to more normal levels. The central bank has already increased rates four times since last year, with investors expecting as many as four more hikes over the next 12 months, including one later this month.

“Responses to the autumn Business Outlook Survey indicated that near-term business prospects continue to be robust,” the Bank of Canada said in a summary of its findings. “Strong demand and elevated capacity pressures support firms’ investment and employment intentions.”

The Bank of Canada’s composite gauge of sentiment -- what it calls the Business Outlook Survey underlying indicator -- recorded a 2.83 reading. While slightly less than the 3.11 reading in the second quarter, it is one of the highest scores in records going back to 2001.


The Canadian dollar rose on the report, gaining 0.1 per cent to $1.3010 per U.S. dollar at 10:36 a.m. in Toronto trading.

Highlights of the Survey

Companies are expecting stronger future sales growth than they were three months ago, with more firms (41 per cent) expecting an acceleration in sales growth, and fewer firms expecting a deceleration
The share of firms anticipating higher spending on machinery and equipment rose to 51 per cent, matching a record last hit in 2006.
Employment intentions actually declined. The share of businesses anticipating higher employment over the next 12 months dropped to 51 per cent from 56 per cent, while those anticipating less employment rose to 13 per cent from 5 per cent
The number of companies reporting at least some difficulty in meeting demand was little changed at 56 per cent, historically elevated levels.
The number of firms facing labor shortages increased to 37 per cent, the highest since 2008. Firms are also reporting labor shortages are intensifying at a pace not seen in more than a decade.
Inflation expectations aren’t intensifying but remain relatively elevated, with 62 per cent of respondents expecting inflation of above 2 per cent
Expectations for output and input prices were little changed
--With assistance from Erik Hertzberg".


No more "NAFTA uncertainty" to blame. Looks like we are practically locked in for a hike on the 24th and potentially another one on the 5th of December whether Poloz likes it or not. Smiling Face With Sunglasses
Sr. Member
Aug 3, 2006
881 posts
767 upvotes
attire wrote:
No more "NAFTA uncertainty" to blame. Looks like we are practically locked in for a hike on the 24th and potentially another one on the 5th of December whether Poloz likes it or not. Smiling Face With Sunglasses
I think Poloz likes having the ability to hike rates. He just has to show face to those poor over-leveraged souls who wouldn't appreciate if he did it in a cheery manner. He often raised concerns about homeowners in Toronto and Vancouver borrowing beyond their means but it fell on deaf ears.

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