After 35 years in the business, even slow old pokes like myself tend to get a feel for markets and it always amazes me how the media sees things and the very different way that I see things. My clients get monthly newsletters that are more optimistic than anything in the media and it’s not just wishful thinking on my part.
The latest fear is that the world will come to an end for mortgage holders because rates are going up. Well, I disagree.
1. Rates do not go up five per cent at a time, they usually move at a quarter or half per cent.
2. If this should happen, all people need do is go out and get an early renewal and lock in for five years, long enough for a disaster to pass.
3. If rates did go up from 3½ to 5½ per cent, I do not think that would be tragic or stop demand, though it might ease prices slightly.
The Bank of Canada hints at rising rates. Ha! They stated rates would rise in June 2010 – it never happened. Mr. Obama in the U.S. has said rates will not go up before 2014. Canadian rates are unlikely to go up before U.S. rates do.
Canadians are very conservative and most have reasonably healthy down payments. They don’t like paying CMHC fees. They are also conservative with their budgets.
Apparently the condo market is flooded with Asian speculative buyers. Where these stats come from I have no idea. Do they fill out forms saying, “I am a spec?” Today’s condos are pre-sold and mainly to buyer users.
Pre-inheritance money is more evident every day and is never mentioned. A client of mine just gave his two kids $60,000 apiece. The most I have seen given is half a million to each of two children. There will be significant inherited wealth coming on board as more seniors pass away. They may be taking longer to die but believe me they will.
There are more bubbles in my bath than in the real estate market.
John Zimnoch
Sales rep
Re/Max Hallmark Realty
Toronto
In the following item you state:
3. If rates did go up from 3½ to 5½ per cent, I do not think that would be tragic or stop demand, though it might ease prices slightly.
My friend if rates went up to such extent not only will there be a tragic or stop demand, it will mean disaster for the real estate market.
On a $400,000 loan A 5 1/2 % mortgage increase will add $21,000.00 in extra interest alone. That's about $1,800 additional interest to the monthly payments.
Hi John:
You make some interesting points…here is my take on things:
I remember the early eighties (1982) when I and my partner had just received our registration for our new brokerage (Bell Real Estate Brokerage). When we had initially applied for the registration, interest rates were climbing, and were at 10%, up from about 8.5% a year earlier if memory serves me correctly. By the time we became legal, about three months hence, they had hit over 20%, eventually topping out at 22%. I wthdrew from the business…I wasn't that egotistical that I thought I could survive when I knew many established brokerages would fail within six months, which they did (in the Peterborough, Ontario region). Prices plummeted as the result. Realtors' numbers declined quickly.
Locking in a submerged mortgage principle will be a difficult thing to accomplish two years hence from today.
Mr. Obama has no control over the pending collapse of the European Union as the dominoes begin to fall (Greece, Italy, Spain, Ireland, Iceland…and on it will go), eventually affecting Canadian real estate prices as buyers dry up and start counting their cash reserves…under their floorboards. The drivers of the markets, the speculators, will have already closed up the game and taken their balls home, leaving only the amatures to try to guess what will come next…a little recession or a big, world-wide depression.
Look for the latter, by about October-December 2014.
As a former appraiser, I can attest to the fact that Canadians, especially young Canadians, love paying the C.D.I.C. fees; this allows them to get in on the game without adequate financial qualifications in their quest for a chance at participating in the inflationary spiral to wealth.
Are the bubbles in your bath from soap or from used, recycled hot air?
(just kidding!)
Many Realtors talk up the game to keep it going for mercenary purposes.
Look for a 60% drop in Realtor numbers by June 2015.
Look for CREA, if it still exists as same, to finally be forced to rethink its purpose, as the 40% 'survivors' at long last demand that it represent 'their' interests, for which they are well paid, vs the interests of all other interest groups of which they derive no funds from. It may take all of this to happen before Realtors grow a collective backbone, take charge of their own affairs (away from the CREA bureaucrats, CEO types etc.), and keep the riff-raff from entering their ranks again as the economy slowly starts to pick back up, ready for another run to speculation-based riches.
I'm glad I'm out of the business. My blood pressure has dropped to normal…without pills no less!
I take showers…I don't like sitting in dirty water…bubbles or no bubbles.
Squeaky-clean Brian