Canada's Big Six banks are adding billions of dollars to their emergency funds as mortgage renewals approach for more than three quarters of homeowners. Andr...
We are not the US in 2008. At that point, half the market was new buyers that could only afford the ARM rates they were given ( maybe even interest only ). When home values became less than the mortgage, they just walked away. The system often allowed them to walk away without losing other assets.
In Canada, the majority of mortgage holders have mortgages far smaller than their home value. They are not going to causally walk away from these assets. Look what you are saying about lower prices being “good” for you. It does not sound like you are going to panic and sell your home in a down market. Mortgage holders also had to qualify at rates higher than they borrowed. Not as high as they are now but the new rates will not be so wildly beyond their means as happened in the US. Mortgages that are close to home value are likely insured.
Finally, rates are coming down. While higher rates will certainly apply downward pressure, the rate reductions help close the gap and also send a signal that rates will be lower in the near future ( not as low as they were ). We will probably see a lot of variable rates with expectations of sticking it out for a year or two while rates drop. If prices do come down, some people will value hunt, making bets that declining rates will drive prices up again in the future.
Once more, I think some downward pressure is likely. I do not expect anything even close to 2008.
My point was just that the government can’t exert complete control on the market to keep housing values inflated. If it’s a bubble, then eventually prices will revert to their “true” value, regardless of government interference.
We are not the US in 2008. At that point, half the market was new buyers that could only afford the ARM rates they were given ( maybe even interest only ). When home values became less than the mortgage, they just walked away. The system often allowed them to walk away without losing other assets.
In Canada, the majority of mortgage holders have mortgages far smaller than their home value. They are not going to causally walk away from these assets. Look what you are saying about lower prices being “good” for you. It does not sound like you are going to panic and sell your home in a down market. Mortgage holders also had to qualify at rates higher than they borrowed. Not as high as they are now but the new rates will not be so wildly beyond their means as happened in the US. Mortgages that are close to home value are likely insured.
Finally, rates are coming down. While higher rates will certainly apply downward pressure, the rate reductions help close the gap and also send a signal that rates will be lower in the near future ( not as low as they were ). We will probably see a lot of variable rates with expectations of sticking it out for a year or two while rates drop. If prices do come down, some people will value hunt, making bets that declining rates will drive prices up again in the future.
Once more, I think some downward pressure is likely. I do not expect anything even close to 2008.
I agree with all of that! Well explained.
My point was just that the government can’t exert complete control on the market to keep housing values inflated. If it’s a bubble, then eventually prices will revert to their “true” value, regardless of government interference.