Haiti and Leveraging the Web
We all know what’s going on in Haiti, and we all know that the internet can be a tremendous tool for good, especially when creatively leveraged.
I follow a few blogs, and two I mention here from time to time are Seth Godin’s and Bloodhound Blog. Seth wrote today about companies that can turn on a dime and respond to a changing environment. He pointed to Ford, among car manufacturers, and Brandon Smith and DoubleTake Clothing for his quick response on Haiti. Smith put the T-Shirt together in a couple hours (note how the backdrop for the picture is the floor – talk about down and dirty). Every shirt sale gets $5.00 sent to Haiti, and the idea was cool enough to turn up on Seth Godin’s blog. That’s some leverage. Maybe you should buy a shirt.
Even better,though, is the story from Bloodhound Blog. One of BHB’s regular contributers is a mortgage broker from Grand Rapids, Michigan, named Tom Vanderwell. I’ve read Tom plenty of times over the past 18 months or so, and I know he’s for real. I also know that he’s adopted two kids from Haiti, because he’s talked about it in the past. He’s involved with the orphanage in Haiti that his two kids came from.
Tom’s got a blog of his own, he guest writes on BHB, he’s on Facebook, and of course, he’s on Twitter. When the earthquake hit he got a tweet from the LA Times (his news source) and quickly jumped online to check on the orphanage staff and the orphans. He then started assuring adoptive parents waiting for kids that everybody was safe, and then he came up with a new plan that would make use of social media – 1000 x 1000.
So, do the math: 1,000 x 1,000 equals 1 million. We’re talking dollars. If 1,000 people each got 10 people to donate $100 each they’d raise $1,000,000. How many people does Tom know through Facebook, Twitter, and his blog presence? How many people do those people know? I suspect that the $1,000,000 can be raised. I’m not going to start putting a Paypal widget on here right now because it would take me too long and probably not work. Instead, I’ll vouch for Tom. He’s for real. Go to BHB and click on his post archives and he’ll bore you to death with mortgage arcanity.
71 comments
Bless you for this, Rob.
Whoops! My fingers beat you too it, Rob. Hubbie and I just donated $100 bucks to Red Cross and Medcins Sans Frontiers and then I went on Facebook and posted about it and urged my friends to do the same. I didn’t manage to come up with Greg’s brilliant 1000×1000 idea but I’ll go back right now to spread the word.
Whoops again! Credit to Tom Vanderwell for the 1000×1000 idea.
I’ve been seeing on US TV that there’s a number you can text message to which will automatically donate $10 via your cellphone bill. Does anybody know of an equivalent that works from Canada?
FTB:
http://www.cbc.ca/technology/story/2010/01/13/text-donations-haiti.html
I’m still just doing it online to the red cross. I figure Bell will try to charge me $1.50 for that or something due to some processing fee.
<a href=http://www.cbc.ca/fp/story/2010/01/14/2440804.html>Canadian mortgage borrowers not taking ‘undue risks’</a>
Canadian mortgage borrowers not taking ‘undue risks’
Hiya TurboTimmie:
HTML doesn’t work here, and that link, although interesting, is a survey of unknown methodology, by a far-from-unbiased group, Canada wide so not overly relevant to Vancouver, and in general fairly fluffy and needs salt. As in a grain or two.
Congrats on your 2009 RE prediction — I think you were closer than anyone else.
WBWUCR’t’13?
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Just what are you talking about? Care to fully explain WBWUCR?
How were sales vs. Listings battle this week?????
?????
????
????
8, many who post on here would accept such evidence if it supported their point of view. At least that survey was actually regarding Canada and not the US, the bears’ favourite yardstick. I don’t remember the methodologies ever being demanded previously, either?
FTB
Did you bid on any pads this week? How go the bidding wars – have you won the war?
Anyone know how listings surge/moi battle went this week?
So if you accept such evidence go out and win your bid, for god’s sake. No one has a lock on absolute truth. What are you wasting your time for? Go out and BID! Before you are priced out forever.
But history has a nasty habit confirming that what looked like a bubble, was a bubble.
Articles like that abounded in the last gasp of the US bubble, as they did back in the Dutch tulip bubble.
And yes, I want methodologies. Lots of them, from unbiased and knowledgeable sources, but they are hard to come by.
Garth Turner didn’t comment on that “undue risks” article, but does have a strong opinion on media bias and how what you see and read is controlled behind the scenes. Sometimes blatant, as in his case, sometimes much more subtle; a reporter who wants a long career knows to take subtle hints as to what to emphasize and who to report on (it’s news, after all, can’t just ignore it) in a condescending mocking tone.
This is Garth:
“Perhaps I’ve just gained a small insight. More than a week ago the host of a BNN show invited me to be a guest and discuss ‘Money Road,’ and my views on the future of real estate. On Friday, Mark Omelus, the network’s executive producer (momelus@bnn.ca) personally vetoed my appearance.
The guys who invited me were apoplectic. Professionally embarrassed. They were told only that there was ‘a problem with Garth Turner.’”
(Boy, it would be nice to have italics, bold, blockquote or HTML enabled. Is that not just a matter of some simple settings? King-o’-the-geeks Turkey, I’ll give you some of my fabulous Imperial Stout if you’ll go to Rob and kick some sense into his Commodore 64 or whatever he’s using these days!
AC
Do you get the sense that the market is inflecting downward?
16:
Bubbles pop. When, I don’t know.
What I do get strong sense of is that although there are effective medications and treatments available for adult ADHD, you aren’t availing yourself of them.
A lot of people talk of irresponsible lending by the banks and liar loans in Canada. My experience has been the exact opposite. I will show two examples:
1. Two yrs. ago I financed a $30K boat and although I had a significantly above average income with very little debt I was required to show three years of tax returns. (and they took the boat as coll.)
2. I had a friend just purchase a unit to rent (Don’t ask me why???) It was $650K. HSBC would only finance 75% on the first $500K and 50% on the balance. The local Credit Union he went with did 75% on the first 600K and and 60% on the balance. (Due to the fact it was a rental) They all required reams of documentation and fact checked several things.
If people out there think that fraud and lies on applications will form a big part of the sell off, in my experience they will be wrong. For all their problems Canadian banks have done a much better job than the ones down south mostly due to fact the loans stay on the books so if the have a vested interest to avoid liar loans that are sure to blow up.
McLovin
PS – Can anyone else share recent experiences?
McLovin
McLovin, I won’t go into details, but I have personally experienced and observed the same thing from others. Banks have been very conservative as of late.
Like you, I don’t buy the argument that most new buyers are over-leveraged and that banks have been irresponsible.
Thanks Rob. I already donated
Dave,
I bet you think most buyers are not over levered, and that a few % point rise in rates and 15-20% drop in prices won’t even dent their overall financial condition.
You amaze me.
AC
Why should I take drugs – are you an advocate of perscription medication – is that the answer for everything?
My condition requires a return to reality for the local RE market, that is all. I think it may be on my doorstep now – looking forward to the stats update….
Read the comments.
http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2010/01/canada-prepared-for-rising-rates-caamp.html#comments
The original report, with not a whisper of the original “survey” questions that they derived the (also unavailable) raw data from.
http://www.canadianmortgagetrends.com/canadian_mortgage_trends/Article_Files/CAAMP-January-2010-Mortgage-Market-Risk-Report.pdf
I’m sorry, but that whole thing is NOT scientific, it is PR work. Very well done PR, but not suitable for people to base such important decisions on.
Edmonton blog’s take on the report:
http://edmontonhousingbust.blogspot.com/2010/01/circle-wagons.html
“The report could have offered some real insight, but instead resorted to cherry picking data that met their pre-determined narrative… and even at that, it needed to employ some amazingly convenient assumptions just to get that far. Loaded with vague language, and immediately dismissive of anything that would poke holes in their rice paper castle of a hypothesis. ”
AC
Your views on this se plait:
http://theautomaticearth.blogspot.com/
Ps. Why does Rob not offer comments on the RE bubble anymore? Has the rebgv cencored him?
22:
Yeah man… drugs are the answer… now what was the question again?
Seriously though, your lack of a consistent name, and your incessant questions seeking confirmation of your hope, without ever taking the time to supply any data or analysis of your own does get rather wearying.
Try contributing some thought-provoking links. Your assignment for the day is to find some data to support or undermine that fluff piece from CAAMP.
My assignment is to see if Seymour has any snow left on my routes. Too hard for snowshoes, crampons today.
Anon 21, guilty as charged.
I think you underestimate most buyers. I think people are more intelligent than you give them credit for and I think they appreciate interest rate risks. If a buyer can’t stomach a 15-20% correction, then they probably shouldn’t be in the market. If you buy real estate, you should plan on owning for at least 5 years, which provides a buffer to market fluctuations. You should be able to comfortably afford your mortgage payments and be ready for the potential of higher rates. That said, recent articles have shown that most buyers are staying with fixed rates.
With five years of inflation, it would take quite a rise in long term rates before there would be a significant effect on disposable income because wages grow over time while your mortgage shrinks in nominal dollars. Worst case, you just amortize over another 25 year period.
Dave
Where buyers in:
- Ireland
- Spain
- England
- USA
- Dubai
Of a sub-human/lower level of overall knowledge than those in Canada/Vancouver? Are buyers that much smarter than those of the early 80s?
WoW, that is some very regional/rapid evolution – the species is saved…
Let’s see what 2010 brings.
Enjoy the sunshine…
“Were buyer”…
Blackberry spanglish…
actually AC, the CAAMP research is not that bad. In fact, the key advancement to knowledge the study provides is a new database- the 40,000 or so mortgage loans they had access to. I think they made a clear statement about the validity of the data and whether it was representative of the market. I wouldn’t expect them to provide the actual raw data, in fact you would be hard pressed to have academics provide their raw data, let alone the private sector. Try obtaining that information from banks or CMHC (the government) and they will say no. I don’t believet hat should be public information.
In the future, I would hope they would have enough information to model the data, I could foresee some type of probit/logit model of analysis to determine which type of buyers are more likely to default or fail to meet payments.
Beans
What’s your guesstimate on the trend in listings vs. Sales this week?
Dave 26
I think that the buyers that are standing in line and buying multiple units are sheer speculaters and this is why we are where we are. I don’t consider this intelligent investing. This is the type of buyer we have seen in the last few years.
“Worst case, you just amortize over another 25 year period.”
I don’t know how long you think you will live but this I guess Vampires and Dave live forever.
Standing in line for a product that is grossely inflated is not intelligent. This will end badly for anyone with not much skin in the game. Probably Dave…
From that CAAMP report:
“The data, provided by corporate members of CAAMP,
includes more than 40,000 mortgage loans, totaling $10
billion, that were funded during 2009, for home purchases
only (excluding renewals or refinances of existing
mortgages). Over the same period, total mortgage activity
for home purchases was in the range of $60 billion. This
dataset therefore represents about one-sixth of total
activity. There is no guarantee that this dataset exactly
represents the characteristics of all new mortgages, but it
is highly likely that it provides a close approximation.”
Again, no meat, just vague bland reassurances. Did they do any spot checking with the banks to get a gauge of how well this study reflects the banks books? What about CMHC? We really don’t know. It doesn’t even state if this is all the mortgages that CAAMP members processed, or if it is just a portion. Selected how? By who?
The mere fact that outstanding mortgages in Canada are up by 60% in 5 years is a fairly big red flag in itself, that kind of growth rate in excess of wage or GDP growth just screams bubble.
http://www.yattermatters.com/neighborhood-numbers/fraser-neighborhood-numbers/#comments
Well, looks like listings/MOI surge has maintained traction thus far this year.
AC what do you think?
Disbelief, do you believe this?
Dave, where are the ‘intelligent buyers’?
Wonder if the weather is impacting sales…
Good Times.
Disbelief:
Be fair. Dave’s not recommending that people remortgage forever. He’s saying worst case scenario someone remortgages for a new amortization period rather than face losing the house. Its not a bad idea if someone gets caught in a five years with higher rates and can’t quite hold the property. Remember, he’s countering the worst case scenario of Mr. Anonymous, who says a drop of 15% and a rise in rates will kill some leveraged homeowners.
There’s lots to take apart, constructively, with both scenarios. A 15%-20% drop doesn’t matter if the owner can hold the property. Anonymous is out to lunch on that.
But, if they’re 5% down, and in five years face a rate rise that they can’t easily afford….tough, as far as I can see, to re-amortize – property appraises for 80% of initial purchase, and mortgage paydown hasn’t been anywhere near 75% (round numbers). Dave’s dreaming a bit on that score, I think.
If we’re down 20% from today in 5 years and rates are up, today’s entrants have to suck it up. Period. (Or lose the house in foreclosure).
Anonymous 27 (aka mythman):
“Are buyers that much smarter than those of the early 80s?”
That was, from start to finish, a 2 year deal. Prices doubled, then lost 45%. Rates were crazy (20%+ at the peak). The question is – how do you compare the intelligence of this market’s buyers with ‘81/’82’s? We’ve got close to a decade of “kool-aid” drinkers in this one, and nobody has really been hurt (I know, the operative word is “yet”). However, we do have a huge numebr of people who have made some pretty awesome gains. In ‘81/’82 a small number were in the market (it was a shorter time frame, smaller population and smaller city) and not all of them got hurt. Many faced losses on paper, but held on through a ime of decreasing rates (thereby making holding easier). You’re comparing a small group of people who lost with a huge group of people who haven’t lost. You’re assuming both groups are stupid, but you’ve got no evidence.
Anonymous 24 (are you the same guy each time? Are you WoW? Is there not a random name generator somewhere on the ‘net?):
“Why does Rob not offer comments on the RE bubble anymore? Has the rebgv cencored him?”
Yes, they censored me. T”hey called me up and said “You may think you have charter rights in this country, but we were recently purchased by the telephone company, and as you know, the telephone company is the most powerful force known to man. Stop telling people you think the market is out of whack with fundamentals or we’ll start screwing with your phone service”. What could I do?
ps. You didn’t hear that from me.
33, the intelligent buyers are those who’ve borrowed a conservative multiple of their income, bought a place in a good area rather than the first dump they saw that happened to have a granite countertop and shiny appliances, are aware of how increase in rates will affect them, etc, etc. I think it’s foolish – and somewhat arrogant – to assume that anybody who’s buying right now is a “greater fool”.
35 FTB:
I thought the reason you haven’t won one of your bidding wars yet is because you are trying to be an “intelligent buyer” as well defined above by you. And yet you haven’t won one yet. And the intelligent buyer keeps getting outbid. Are you really so substandard in assets and income that you can’t compete against the typical FTB? (I don’t think so, BTW)
Does that not indicate that those winning the bidding wars are, at the least, greater fools than you?
(And I would say that you are already foolish enough to be entering those wars ,but I have resolved to be nicer so I won’t. Does inside parentheses count?)
Anon/24… I have it on good authority that – like many Toronto Realtors – SenorCaballero not only isn’t discussing the “B” word anymore – but actually can’t. It isn’t well known – but TPC [ThePhoneCompany] CerebrumCommunicator implantations are a mandatory licensing requirement for all BC/ON Realtors…
http://tinyurl.com/dzmsg3
Does that help?
#18 Are canadian banks really more prudent?
here is a link from cibc site, look what it says in bold:
“ you don’t need to prove your income”
https://www.cibc.com/ca/mortgages/self-employ-rec-mortg.html
Is this prudent lending today after what we went through?
Also go to TD or any other bank, ask for a 5/35 morgage and you will see that the bank will be glad to finance your 5% down payemnt as well, all courtesy of CHMC. Dont listen to anecdodal evidence, go and find out yourself, you will be surprised how friendly the bank will be with you, especially if you qualify for CHMC insurance.
The idea that candaian banks are keeping loans in their books has been entirely discredited already, we know that CHMC is behind, insuring all high risk loans. (banks morgage portofolio in 2009 in Canada grew by approx. 0.1% )
The main problem I find here is lack of information and statistics compared to the US. Try to find some detailed information on the CHMC insured morgages and you will realise that there is not much. Their report is so general, not workable at all.
Rob, I am not sure I follow your criticism. Maybe you misunderstood me, or maybe I need more explanation.
I’ll try and elaborate… If rates return to their recent historic norm (say 5.5 – 6% five year fixed), somebody who renews in five years would have a similar payment if they amortized for 25 years again. If you include inflation, this is even more true. And of course, higher five year rates will mean higher inflation, which implies higher wages. All I am trying to say is that I believe current buyers will be able to weather higher rates without going bust.
Dave
Dave Dave Dave
Why are buyers in all of these other countries unable to ‘weather’ the storm? Perhaps they are not as waterproof as Vancouver buyers?
Just kidding, your points are fair enough. I just read RBC’s forecast on rate increases, I”m suprised how stiff they are expecting rates to rise over the next 24 months (starting in the second half of this year).
Yattermatters comments highlight a continued surge in listings/moi - I look forward to Rob’s report on the weekly trends.
Well, its raining…AGAIN!:(
anyone think the Olympics could be cancelled for a lack of snow?
CREA also brushed aside any suggestions of an overheated market yesterday as it released the data.
“Cooler heads recognize that many of the recent gains reflect temporary factors that could fade by summer,” said chief economist Gregory Klump.
New listings posted a year-over-year gain in December for the first time in a year, with 33,090 properties made available. Along with interest rates that are expected to be higher by the second half of the year, he said the market should find its balance.
“A more balanced market will result in smaller price increases in the second half of the year,” he said. “By the second half of 2010, price gains are likely to shrink significantly, since a year will have elapsed since the decline and rebound.”
I don’t know anymore.
Dave – good points, I tend to agree.
To disagree.
Dave has been more right than the bears so far, it is good to get opposing views that are backed by some type of analysis.
Still, I believe this market is way overpriced.
Just my two cents.
Dave — “All I am trying to say is that I believe current buyers will be able to weather higher rates without going bust.”
I’d agree that most buyers will probably suck it up and weather higher rates. But what about the ones at the margins who can’t? If they are a large enough group they will begin to pull the market down with them as they are forced to sell or foreclose. Remember the ARM’s in the US were less than 7% of all mortgages.
http://www.bankofcanada.ca/pdf/annual_page57_page58.pdf
Bank of Canada says 5 year fixed rates were below 6% a few time in the 1950’s, then not that low again until 2003. Never were they below 5% until 2009.
And suddenly this is the new normal, and people shouldn’t even allow for the possibility that rates rise back over 5.25%?
**************************************************************************
http://www40.statcan.gc.ca/l01/cst01/famil129g-eng.htm
2006
Vancouver
(B.C.)
Owner’s major payments
527,670
Less than 15% of 2005 household income
200,425
15-19%
72,345
20-24%
64,965
25-29%
47,120
30-34%
32,465
35-39%
21,715
40-49%
25,915
50% and over
62,725
I’d say there are quite a few people in Vancouver with a higher GDS and TDS than that fluff piece from CAAMP thinks.
***************************************************************************
This is how CAAMP members get paid:
“Mortgage Consultants/ Mortgage Brokers: these are independent mortgage providers that theoretically work for you and not one particular bank. These individuals are paid a finder’s fee from the institution that the mortgage is funded with. The problem is that not all banks are paying the same amount for each of the mortgage products. The lenders pay brokers based on the size of the loan and the term selected. The longer the term selected, the bigger the commission to the broker. On top of the different pay-offs for the terms, some lenders also pay more for the same product. A broker could make more money funding a five-year term through one lender over another. Typically, there is no advantage to the broker if the consumer gets a higher rate, but there are now even exceptions to that rule.”
Again, “ The longer the term selected, the bigger the commission to the broker”.
No possible conflict there, is there?
Still haven’t found much on average mortgage terms.
CAAMP from just a few months ago.
62%: Chose 4- or 5-year terms (56% chose 5-year terms)
11%: Chose terms over 5 years
27%: Chose terms less than 4 years
Type of rate:
68%: Chose a fixed rate
27%: Chose a variable rate
6%: Chose a hybrid mortgage (part fixed / part variable)
http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2009/11/caamps-annual-mortgage-market-report—2009.html
So has the market changed that much in just a few months? Or has the methodology and/or dataset criteria changed. We don’t know.
Sorry for sucky formatting. That long vertical is percentage of gross (not net) household income spent on shelter by owners. Mortgage, taxes, R&M, Strata.
Followed by the number of households paying within the preceding percentage range.
AC
Bank economists are forecasting BoC rate to rise by 1400% (to 3.50%) by end of 2011 – what do you make of it?
How about those shiny new For Sale signs that have been sprouting everywhere?
Signed,
ADHD
Apart from the topic alluded to in this thread’s leader the weekend media cycle has been decidedly quiet on issues normatively of interest to us… However, here are three pieces which prove instructive/entertaining….
[UK Guardian] Naomi Klein on how corporate branding has taken over America
http://tinyurl.com/yegjxw4
[UK Guardian] Edmund L Andrews on his own $500,000 credit meltdown [albeit an older piece promoting Andrews' book, "Busted: Life Inside The Great Mortgage Meltdown" it is nevertheless a fascinating cautionary tale for those contemplating hormonally driven, highly leveraged RE acquisitions]
http://tinyurl.com/n4yscd
Last up, something which may well prove of interest to WoW…
[Xinhua] Home trading in Beijing plummets in first two weeks of 2010
… Property trading in Beijing in the first two weeks of this year slumped, following a string of government moves to curb soaring real estate prices. Beijing property transaction management authority said on its website Friday that sales of future delivery residential apartments during Jan. 1 to Jan. 13 were down 63.9 percent month on month to 3,031 units, compared with 8,397 units in the first half of December. Those for second-hand homes also plunged 73.3 percent to 4,800 units, according to data from the website…
http://tinyurl.com/y8oeh2c
WoW
Thank you HP, pls keep us in the loop on China RE near-term trends – me thinks the new China policies could have a direct influence here…is Vcr RE poised for a perfect bear storm (higher rates, hst, slow economy, less speculation)?????
HP, any thoughts on how this plays out????
????
????
Formatting seems to work in Chrome
At least I think so.
Maybe I have to post to make sure.
Nope, not in Chrome.
Firefox? Let’s see. Have to post.
Nope again.
rob:
if you can’t get your blog to display HTML
maybe you should give up on the idea
of flying your own plane……..
these new fangled flying machines
are fiendishly complicated…. more so than HTML
Blueskies:
You’re no fun. Besides, I’m going to buy something really old and cheap, like a ‘46 Taylorcraft.
Didn’t work in IE, either.
That’s what you get when you pay for a custom theme, I guess. The buttons are there but they don’t work in comments.
On another note, anyone read this blog on a mobile device? I can’t comment from my BB. Any iPhone glitches?
Rob: Formatting shows up in the text box when you’re writing a comment, just not once you post it. Interestingly enough, if you copy and paste into the comment box, colours, fonts and size also show up, but again don’t post.
AC:
Why I ever doubted you I don’t know. I’ll try to get Tom to straighten this out.
“I can’t comment from my BB.”
WoW has that one working. (Unfortunately?
)
Hey, where is your assignment, WoW? I found a bit to start you off, I hoped to be able to award a gold star.
I’d also like to see some supporting evidence from Dave. He likes the truthiness of that CAAMP study, but where is some corroborating evidence?
Don’t you read your own blog, Rob? The lack of formatting has been a frequent complaint. It was working for the first couple of weeks of the new platform, and then POOF>
Sure, I read it, but the question is what grabs my attention. I guess I figured it was working and that you were having problems originating on your end. As aluded, my lack of faith is a source of shame
rob,
formating works fine, but when you save (“submit”) the message the saving process stripp all the html comments.
I wrote this couple of months ago. Thanks for reading my comments.
Currently I am split between writing dozen different browsers so you can test them as well, or just tell you that the problem is browser agnostic and it will behave same everywhere. Oh, well..
Just joking…
http://mobile.bloomberg.com/apps/news?pid=2065100&sid=a5eEZ64lTTPM
What does this have to do with that?
http://globaleconomicanalysis.blogspot.com/2010/01/housing-bubble-comparison-us-uk-canada.html
Mish featuring an interactive housing price chart for a bunch of countries, Canada included. Canada looks pretty good by comparison. As a whole, that is, with a couple of caveats. The house price against income uses average income, not median, so the growing inequality in income doesn’t show. Also, and central to the theme here, is that it is average for Canada, so bubble cities (Vancouver?) get lost in the data. It doesn’t say whether house price is average or median.
AC
That’s just a mishmash.
We know the score.
Game.Set. Match.
67:
I’m not so sure about that, for Canada as a whole. Food and resources should be strong in the future. Winnipeg, Halifax, Thunder Bay etc don’t have grossly overpriced RE, don’t have a lot of highly levered owners who either bought recently or joined in that absurd concept of cash-out refi’s or taking HELOC money out to have fun with or for living expenses.
I am really not convinced that Canada in general is doomed. Just certain bubbly cities that think double digit outstanding mortgage growth and over 10% of the economy being construction is normal, desirable and (gasp) sustainable.
“I believe current buyers will be able to weather higher rates without going bust.”
Not all buyers. There will be death, divorce, job loss, and relocation. In all cases the cash flow supporting the mortgage evaporates and a sale is required based on market rates. In these unfortunate cases there will be huge hits to balance sheets if mortgage rates are higher.
So long as everyone knows the risks.
Dave:
“If rates return to their recent historic norm (say 5.5 – 6% five year fixed), somebody who renews in five years would have a similar payment if they amortized for 25 years again.”
OK, for sake of argument, $100,000 purchase today, $95k mortgage, $5k dp, forget about CMHC fees, etc. Best rate you’ll get on 5 years is, say. 3.99%. 25 year am.
Payment is $499.20. OSB at 5 years is $82,686.
$82,686 @ 6% has a payment of $529. That’s only 6% higher, and only $30/$80k, so you’re right, not all that hard to make it work if you had to.
But…what if the property that is bought for $100,000 is only worth $80,000 in 5 years? Then its tough to remortgage at $82k for another 25 years unless the bank really wants to work with you. Granted, they’re not dead yet, but throw in some job challenges, bad economy, death, divorce, etc, and there will be some deals. To get a US style meltdown we need a bigger jump in rates, I think.
Jan sales volume for detached homes east and west is well below the 5 year average for january.
olympic effect or inflection point ?