Real Estate

What happens when credit tightens?

  • Last Updated:
  • Feb 26th, 2018 1:12 pm
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[OP]
Penalty Box
Aug 11, 2005
4124 posts
1357 upvotes

What happens when credit tightens?

What happens when credit tightens?

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Last edited by Luckyinfil on Feb 25th, 2018 5:34 pm, edited 1 time in total.
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20 replies
Deal Fanatic
Feb 9, 2009
7818 posts
4800 upvotes
Luckyinfil wrote:
Feb 25th, 2018 5:34 pm
What happens when credit tightens?

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Astroid hits us and we all die... so wont matter.
Deal Addict
Jul 7, 2013
1136 posts
632 upvotes
North York
Gee I can't wait to buy detached houses for 200k! Renting ftw!
Banned
Aug 28, 2017
301 posts
362 upvotes
We are all going to buy detached homes for 300k in the GTA!!! All of us!!

The crash is close..very close...i feel it...just keep holding on for another few decades people!
Deal Fanatic
Feb 22, 2011
5890 posts
5589 upvotes
Toronto
What happens when credit tightens? Houses struggle for a bit and condos hit an all time high in prices. Then when condos hit that long run median price ratio houses start going up again as people upgrade.
Member
Jun 19, 2017
449 posts
691 upvotes
The OP raises a good point and everybody turns on him with sarcastic rhetoric about how detached houses will be 200k. So if you don't believe that our household debt is an issue then why, how will we deleverage while maintaining RE prices and sustaining the economy.

Won't deleveraging will occur? My concern is suffering the consequences brought on by reckless borrowers.
Deal Addict
Jan 17, 2006
1589 posts
1458 upvotes
Toronto
Qrewpt wrote:
Feb 26th, 2018 10:38 am
The OP raises a good point and everybody turns on him with sarcastic rhetoric about how detached houses will be 200k. So if you don't believe that our household debt is an issue then why, how will we deleverage while maintaining RE prices and sustaining the economy.

Won't deleveraging will occur? My concern is suffering the consequences brought on by reckless borrowers.
I am pretty sure your concern is same as your buddy's OP, how to get prices on level of 10 years back. Unfortunately even if all 4 full-time dedicated bears will keep creating new threads here it is not going to happen, you have to move on and accept reality.
Member
Jun 19, 2017
449 posts
691 upvotes
ilim wrote:
Feb 26th, 2018 10:53 am
I am pretty sure your concern is same as your buddy's OP, how to get prices on level of 10 years back. Unfortunately even if all 4 full-time dedicated bears will keep creating new threads here it is not going to happen, you have to move on and accept reality.
This is just more rhetoric instead of answering the questions raised in the post directly.

"Just move on and accept reality"....sounds like a would be argument made by a reckless borrower.
Sr. Member
May 9, 2017
999 posts
1012 upvotes
Qrewpt wrote:
Feb 26th, 2018 10:38 am
The OP raises a good point and everybody turns on him with sarcastic rhetoric about how detached houses will be 200k. So if you don't believe that our household debt is an issue then why, how will we deleverage while maintaining RE prices and sustaining the economy.

Won't deleveraging will occur? My concern is suffering the consequences brought on by reckless borrowers.
But the OP, as usual, offers no context to the graph and is just trying to be provocative to stir the pot.

I eyeball the chart and estimate that credit has grown by 5-6% per year over the past 10 years.

Is that a lot? How has net worth increased over the same period?

Of course deleveraging is a concern but this poster deserves sarcastic rhetoric based on previous posting history.
Deal Addict
Sep 13, 2016
1987 posts
998 upvotes
Mississauga
Qrewpt wrote:
Feb 26th, 2018 10:38 am
The OP raises a good point and everybody turns on him with sarcastic rhetoric about how detached houses will be 200k. So if you don't believe that our household debt is an issue then why, how will we deleverage while maintaining RE prices and sustaining the economy.

Won't deleveraging will occur? My concern is suffering the consequences brought on by reckless borrowers.
What OP and many find difficult to understand that the relationship of household debt and home prices is not as simple as they think. There is certainly a relation, but it is not linear, but much more complex and multidimensional.
So is reckless spending a concern - definitely.
Are people buying much more than they can afford - certainly, but not all.

What everyone should realize is that there is no scarcity of people who can easily afford a million Dollar home in GTA. And as long as we have rich people in decent supply, current prices will find enough buyers. You don't need the entire 6 million population of GTA to have 200K plus household salaries.

Interestingly, if the prices indeed crash and a detached could be bought for 200K, I could easily buy one more while easily affording my current mortgage as well. And I am not even upper middle class financially.
Deal Fanatic
Feb 22, 2011
5890 posts
5589 upvotes
Toronto
IndyBeak wrote:
Feb 26th, 2018 11:27 am
What OP and many find difficult to understand that the relationship of household debt and home prices is not as simple as they think. There is certainly a relation, but it is not linear, but much more complex and multidimensional.
So is reckless spending a concern - definitely.
Are people buying much more than they can afford - certainly, but not all.

What everyone should realize is that there is no scarcity of people who can easily afford a million Dollar home in GTA. And as long as we have rich people in decent supply, current prices will find enough buyers. You don't need the entire 6 million population of GTA to have 200K plus household salaries.

Interestingly, if the prices indeed crash and a detached could be bought for 200K, I could easily buy one more while easily affording my current mortgage as well. And I am not even upper middle class financially.
Yea there are 900k individuals making over $100k in Ontario. Last year was a record setting year in terms of house sales and in the city it was still only 9000 houses. It's not terribly hard to see that the upper echelon of income earners can fulfill these sales. Banks will definitely tighten up a bit but I don't they they are worried about a dual income couple pulling in a quarter million a year.

http://www.statcan.gc.ca/tables-tableau ... 5g-eng.htm
Member
Feb 13, 2018
439 posts
386 upvotes
OP asked a legit question but I don't think it is an easy one to answer. Credits can get tighten during good times and bad times. And the results can vary from bad to disaster for the over leveraged folks. I personally don't want to see the worst case for my worst enemies.

I hope we can get some more intelligent discussions here. There are economists that believe QE is the best way to allow people to de-leverage, but there are economists that believe QE will compound the issue as people tend to load up more debt as credit become too easy to get, Eventually that causes asset bubble and stagflation. Ie. high inflation with slow growth.

We can only tell for sure after the fact. Otherwise, we won't be posting here. Cheers and hope we all learn something here.

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