[Cryptopreneur]

u have any links that states banks are not lending to people on CERB ??

Think about it - would a bank lend you money if you're unemployed? Probably not.

CERB is no different than unemployment.

 

[slickpete83]

Think about it - would a bank lend you money if you're unemployed? Probably not.

CERB is no different than unemployment.

maybe depends how big your down payment is , if your planning on renting it out , your credit score and if someone is co signing with you etc...

i just wanted the source where it states that they are not lending to CERB

 

[cdr108]

Prices are not dropping 50%. Just no. Yes, we have been in a bubble for a little while now but prices are not getting chopped in half. The only way that happens is if there are 10 waves and we have to shut down the economy for years.

can you provide some quantitative measures to support your thoughts that prices won't drop in half, or any %?

I saw a condo assignment listed that appreciated 80% in the past 5 years ...
if it can go up that much that soon, I don't see why a similar downward trend can't happen like 50% in 3 years.

I can see the unemployment rate be between 9-11% for the next couple years.

 

[TheKingEast]

can you provide some quantitative measures to support your thoughts that prices won't drop in half, or any %?

I saw a condo assignment listed that appreciated 80% in the past 5 years ...
if it can go up that much that soon, I don't see why a similar downward trend can't happen like 50% in 3 years.

I can see the unemployment rate be between 9-11% for the next couple years.

Lets revisit in 5 years? Cool?

 

[Avenue]

can you provide some quantitative measures to support your thoughts that prices won't drop in half, or any %?

I saw a condo assignment listed that appreciated 80% in the past 5 years ...
if it can go up that much that soon, I don't see why a similar downward trend can't happen like 50% in 3 years.

I can see the unemployment rate be between 9-11% for the next couple years.

80 percent appreciation over 5 years is 12.5% appreciation on average per year. A decline at the same rate compounded over 3 years would only result in the price going down 33 percent. 50 percent over 3 years is just a little extreme.

 

[kEiThZ]

can you provide some quantitative measures to support your thoughts that prices won't drop in half, or any %?

I saw a condo assignment listed that appreciated 80% in the past 5 years ...
if it can go up that much that soon, I don't see why a similar downward trend can't happen like 50% in 3 years.

I can see the unemployment rate be between 9-11% for the next couple years.

Take a $100k unit that appreciates by 80% in 5 years. It will be $180k after 5 years. You are suggesting that unit will $90k in three years or -10k return over 8 years? I think even you would say that is unlikely.

I do agree that there will be a drop. And it will be large. But these also take time. Therw is usually a larger initial drop (say 10%) followed by a slow bleed of a percent or two per year for a few years till it bottoms out. That's how corrections generally work. And given that this pandemic is a broad shock I agree it goes that way.

50% though is difficult. I believe the CMHC CEO when he said 18%. But that is nationwide. Hard to tell how that plays out in different cities and even different neighbourhoods and market segments.

 

[AlbertC]

GTA experiences largest drop in home prices across Canada | Urbanized

Ontario cities, are seeing the largest drop in average home prices, claiming the top five spots when ranked by dollar declines, with the GTA leading.

dailyhive.com

GTA experiences largest drop in home prices across Canada

May 25 2020

According to a recent report by Zoocasa, the GTA average home price dropped a “staggering” $88,898 between February and April, marking a 10% decline to $821,392 in April — it’s the only region to average a drop of over $50,000.

The report is using the latest data from the Canadian Real Estate Association (CREA) for April – which is the first full month coronavirus measures were implemented across the country.

The average home price in Canada is now $488,203, which is 10% lower than the average home price of $539,724 in February.

 

[Rimsky44]

National HPI Data: https://www.crea.ca/news/canadian-home-sales-and-listings-post-record-declines-in-april-2020/

"The Aggregate Composite MLS® Home Price Index (MLS® HPI) declined by 0.6% in April 2020 compared to March, the first decline since last May....
The MLS® HPI provides the best way to gauge price trends because averages are strongly distorted by changes in the mix of sales activity from one month to the next."

City of Toronto HPI Data (Also more detail based on regions in Toronto, and type of housing):
April (Composite $964,600): http://trreb.ca/files/market-stats/home-price-index/TREB_MLS_HPI_Public_Tables_0420.pdf
March (Composite $955,200): http://trreb.ca/files/market-stats/home-price-index/TREB_MLS_HPI_Public_Tables_0320.pdf
February (Composite $932,500): http://trreb.ca/files/market-stats/home-price-index/TREB_MLS_HPI_Public_Tables_0220.pdf
January (Composite $913,700): http://trreb.ca/files/market-stats/home-price-index/TREB_MLS_HPI_Public_Tables_0120.pdf

A swan song before Covid-19 Infects HPI? https://housepriceindex.ca/2020/05/a-swan-song-before-covid-19-infects-hpi/

"Based on home sales reported in land registries, resale prices rose at the fastest rate for a month of April since 2010...Of course, given that the Canadian economy entered into a recession following sanitary measures taken in order to prevent the spread of COVID-19, it is not likely that this momentum will persist. The Canadian unemployment rate went from 5.6% in February to 13% in April, and is expected to remain elevated at least up to the end of next year. In this context, demand for housing may decrease due to a reduction in immigration and would-be first-time homebuyers not being able to qualify for a mortgage loan. At the opposite, supply may be fueled by homeowners unable to meet mortgage payments and for that reason will look to sell their home. In other words, a lasting high unemployment rate could mean downward pressure on house prices. "

 

[cdr108]

Take a $100k unit that appreciates by 80% in 5 years. It will be $180k after 5 years. You are suggesting that unit will $90k in three years or -10k return over 8 years? I think even you would say that is unlikely.

I do agree that there will be a drop. And it will be large. But these also take time. Therw is usually a larger initial drop (say 10%) followed by a slow bleed of a percent or two per year for a few years till it bottoms out. That's how corrections generally work. And given that this pandemic is a broad shock I agree it goes that way.

50% though is difficult. I believe the CMHC CEO when he said 18%. But that is nationwide. Hard to tell how that plays out in different cities and even different neighbourhoods and market segments.

A -10% return over 8 years is not unlikely, given it has occurred several times/locations in history ... it really depends on timing and context.
The housing markets around the world are cyclical and typically follow business cycles.
3 years maybe too pessimistic for some, while too optimistic for others.
To me, it's a best case scenario where the drop is quick and then flatlines for couples of years before slowly rising to rebuild consumer confidence.
If it's too prolonged and deflationary, people will put off buying in anticipation of further lower values in the future.

Between 1985 and 1989, the average price of a house in the GTA increased by 113%.
Between 1989 and 1996, the average price of a house in the GTA declined by 40% with dt Toronto hit the worst with over 50% decline in value of a home.
A former neighbour, who is a dentist, had bought a house at the 1989 peak for $250,000 and had to sell in 1995 for $150,000 - a $100,000 (40%) loss in 6 years because the debt was too much to service. He had to declare bankruptcy.
That same house did not reach the 1989 $250,000 price until 2003 - 14 years later.
Once inflation is taken into account, they would have 'broke even' in 2008 - 19 years later, which still didn't cover interest costs.

Canadian real estate are in bubbles (worse in Toronto and GVA) and not based on economic metrics, so we could be looking at 50% decline:
* price bubbles are much worse now than 30 years ago,
* ultra-low interests rates that are guaranteed to go up marginally by 2-3% (200-300 basis points) which equals to 20-30% increase in mortgage payment, even after taking into account of principal repayments.
* Canadian household-debt-to-income ratio is 177 % (+/-)
* some properties are highly leveraged for more "investment" properties like STR Airbnb
* HELOCS used as ATMs
* Canadians are requesting relief from their mortgage payments at a breakneck speed.
The CMHC itself estimates 12% of insured mortgages are currently on payment deferral, and they expect this rate to rise to 20% by September.
More generally, the Canadian Bankers Association (CBA) estimates the big Canadian banks had 500,000 requests looking for mortgage payment deferral in the beginning of April. By the end of May, the handful of large banks had approved 721,000 mortgage payment deferrals. This represents about 14% ( more than $180 billion in mortgages and home equity lines of credit of the $1.24 trillion) in residential mortgages of all mortgages on their books, and that number will climb.

Big Six banks have offered deferrals on more than $180 billion in mortgages so far

That total represents more than 14% of residential mortgages on the balance sheets of chartered banks

business.financialpost.com

* Canada’s Big Six banks have set aside a lot more cash for bad loans these days. The sum of total provisions for credit losses (PCL) in earnings reports reached $10.92 billion, up from $2.45 billion last year.

* At the end of May, the Canadian government estimates 8.3 million unique applicants for CERB.
Considering Canada’s labour force is just 19.1 million, that’s 43.5% of them requesting emergency aid.
Even after the self-isolating restrictions are removed and people get back to work, I can see the unemployment rate be between 9-11% for the next couple years.

Posthaste: Canada's unemployment rate about to hit 16% — with job recovery likely to be slow

Sure, markets are looking to the future — but can we honestly say medium-term economic prospects look any better

business.financialpost.com

The Daily — Labour Force Survey, April 2020

Following a drop of over one million in March, employment fell by nearly two million in April, bringing the total employment decline since the beginning of the COVID-19 economic shutdown to over three million.

www150.statcan.gc.ca

 

[Admiral Beez]

Do these mortgage rules impact the chances of a bubble?

Posthaste: CMHC is making it harder to get a mortgage ‘just when the economy needs all the help it can get’

New rules will cut Canadians' home buying power by almost 12%

business.financialpost.com

I didn't agree with this part...

“Suffice it to say that this batters buyer and seller confidence and, all other things equal, has a net negative impact on the near-term housing outlook. Most importantly, in my view, these changes are unnecessary to protect the prudence of Canada’s home lending practices,” said Dr. Sherry Cooper, chief economist at Dominion Lending Centres.

By excluding sellers and buyers that are on financially shaky ground my confidence as either a buyer or seller would be emboldened, not decreased. Sellers can be confident that their buyers actually have the money to make the purchase, and buyers can be confident that they won't go broke by over extending their credit. This keeps the dead wood out of the market, where's the downside?

 

[Rimsky44]

By excluding sellers and buyers that are on financially shaky ground my confidence as either a buy or seller would be emboldened, not decreased. Sellers can be confident that their buyers actually have the money to make the purchase, and buyers can be confident that they won't go broke by over extending their credit. This keeps the dead wood out of the market, where's the downside?

I agree with you on a practical basis going forward for new buyers, but her point is a technical point which is correct as well applicable to existing owners.

1. All things equal, less buyers, and less sellers, means the market is less liquid and more constrained.
2. If you've got a whole bunch of people who own it already that are now unable to pay for their overlevered (and likely purchased at overpriced valuations) property, and
3. If they can't keep paying their debt because of the pandemic, they become forced sellers.
4. *IF* that happens, you have higher supply with no increased demand and lower liquidity in the market resulting in a "negative impact" on near term pricing.

As for the implications - remember the city is pretty reliant on home transfer/sale tax revenues that are pegged to the price of the property. City of Toronto and Vancouver are going to have a massive revenue shortage with the lower valuations and lower volume of sales, that could lead to deficits that need to be balanced through either a) somehow find new revenue streams (unlikely) or b) service cuts that impact the entire city (more likely).

 

[TheKingEast]

I don't get the move really. They could have made other moves to improve things. All I'll say is at least I know there won't be a crash the way the market is being manipulated by the powers that be. Should instil confidence.

 

[cdr108]

Shaun Hildebrand, president of Urbanation:
Expect a double-digit condo price drop by 2021

Expect a double-digit condo price drop by 2021: Urbanation president

Shaun Hildebrand, president of Urbanation joins BNN Bloomberg to discuss the trends in Toronto real estate as volume sets a record while the downtown Toronto condo market sputters amid soaring supply and cratering demand.

www.bnnbloomberg.ca

There's already a divergence with products and prices.
When tracking similar units in buildings, downtown Toronto condo values have lost at least 10+% and condo listings have surge 215% than a year earlier.

Condo listings surge 215% in signal of downtown Toronto weakness - BNN Bloomberg

Toronto’s flourishing housing market is beginning to show signs of strain, particularly in a condo segment suddenly flooded with new listings.

www.bnnbloomberg.ca

rents have dropped 15-30% from 2019 (to 2016-17 levels) with rentals supply much greater than demand on the market.

Freehold properties prices have gone up 10+%, rents have been stable.

 

[TheKingEast]

This is a short term drop.

 

[Cryptopreneur]

This is a short term drop.

Agreed.

The people that think homes in Bradford, Innisfil, barrie, etc. are going to increase while downtown is going to drop, are very naive.

The one thing that annoys me the most is that everyone is a realtor these days. Everyone suddenly knows about real estate. Lol, it's hilarious.

WFH is not sustainable, anyone that thinks it is, is ignorant. Just because tech giants have told staff to WFH until 2021, doesn't mean downtown is dead.

As soon as the vaccine is out, even though this won't eliminate cases, downtown will surge again.

The people to follow in situations like these for real estate are developers, not your uncle who knows a guy who knows who knows a guy.

You think Sam Mizrahi is worried about a short term dip in downtown prices? Last time I checked, they increased prices on their remaining units.

Prices will drop but it won't be area specific and it won't be just "condos" as people like to think. Old homes in innisifil are going for $1m+. They are not worth $1m+. People are overpaying thinking that property prices north of the GTA will continue climbing as downtown is "dead".

Remember guys, don't follow the crowd. When people are overpaying, you sit back. When people are selling downtown condos at a loss, you buy. Don't get caught with FOMO. Don't pay $1m+ for a 10 year old home in Bradford thinking your office in downtown will not reopen again.

EDIT: And PLEASE don't sell your home and then go out the next week and buy a new home. All you're doing is selling at a high and buying at a high. The $500k that you think you made, is inflated.