The fact Macklem pivoted so quickly from telling Canadians to "not worry" and to continue making large purchases, to now these numerous rate hikes. Tells you all you need to know.
Lost all credibility. PS, my var for my primary is with Scotia, luckily we didn't buy at our limit, but the situation is hilarious given my kid's Montessori pricing has gone up. Basically the price of a mortgage at $1800. I'm sure they'll lower the price as rates go up 🙄
You’re right. People got too greedy and now it’s time to pay the piper. Fomo pandemic in RE has caused this mess- Tiff is sliding his brass knuckles on and is ready to get to “work”
Heloc are at a crazy amount. Now the payback is rising. Canadians have used housing like a credit card for the past 10 years. Now we are going to see if the stress test worked. I am going to say no.
I agree with you on what is coming. However I think the stress test works if people don’t get around it by using their house value as a credit card. People have nobody but themselves to blame for that choice.
@@ayela562 the stress test is a joke. They imput your gross pay. Not your take home. That by itself is ridiculous. Then there is nothing to stop you after from racking up the debt with a new car in.the driveway. Or refurnish the house. I have seen people finances. This is going up in flames
Helocs are just like those balloon mortgages that got people in trouble in the US in 2007. Interest only, callable and very susceptible to rate hikes. If the market is down 10% I see banks amortising or outright calling those loans. Helocs just might be what gets people into trouble.
@@laja82 let's not forget about the commercial market. That nobody is talking about. It will pop before housing and it is much larger than the 2008 crises.
Stress test is a joke snd everyone knows it. “Stress test” tells you if you can afford it- yah right. Tiff is going to get to the 2% stress level in less than four months. I disagree with Steve when he says inflation is peaking. Inflation is just starting!
@@KJV1776WASP Its been this way and increasingly so for decades. The one family one household thing is getting less and less common. Average wage by me is about 45 k per person. Average detached house is 1.5 million. Cant say no to reality. A guy i pickup for work rents in a townhouse where a couple literally live in a room that used to be the living room
Best time to invest? thats funny though because in the last four months I have lost more than $47,900 in stock market which is the biggest I have loss since I ventured into stock investment.
you could be right or wrong depends on your expertise, I once made such loss when i invested thinking i have gathered enough trading skills from youtube videos
now its a different ball game for me because I was lucky to have met TERESA JENSEN WHITE, a financial manager and stock expert, I have made more than $165,000 in 6 weeks under her supervisions.
Really? people are cashing in from the stock market and frankly speaking its comforting seeing someone admit to the fact that they actually seek help from professionals. please how can i reach TERESA ?
You guys should do some spreadsheet examples next loonie hour of avg mortgage increases $ wise relating to possible scenarios. This is the only way it hits home for people
BoC knows exactly what it's doing. It knew exactly what it was doing 2 years ago. The real question to ask nowadays is why. Why is the BoC playing Russian Roulette with massive Canadian debt?
Question: Do you think we would be in a better situation now had the BOC started rate increases last April at a slower pace? Say 0.75% over the course of 2021.
I don’t care about affordability, I just want prices to come down (but payments can stay the same due to higher interest rates) so that I feel less subject to interest rate risk.
Property speculation is the problem. Because in Canada property speculation is the only investment guarantee to increase year on year. The solution: New construction needs to be about 40% large coops units which are shared building ownership and individual unit ownership. You buy a share of the building or building complex. When you sell, the money from the shared ownership goes to the coop community or is not sold because it was rented. Coop government regulation needs to be improved so that building management companies are libel for the advice they provide.
House prices and interest rates are just correcting back to what they were pre-Covid. Back then people were plenty happy with the mortgage rates they were getting and the equity they were building in their home. So for the Vast majority of home owners, that owned more than 2 years, this is nothing more than a blip on their assessment. For the few that actually bought in the last year, they may be wishing they waited, but overall if they plan to live in it long term, they’ll be fine. For the guys who cashed out in the peak, congrats!!
TMB, the prices are going down a lot further than pre-Covid. We already were riding a 19 year housing bubble at that point. The sheer disgusting amount of debt being held by Canadians is going to get purged long and hard. This is going to be a very long, nasty recession/depression. The numbers don’t lie. So hang on and buckle up ladies and gentlemen
Great video Steve. Love it when Canadians get on the tube and call it down the middle as you do. Government has crippled us and will likely run us into a 80’s style recession where middle class folks lost it all. Government spending has to decrease no ifs and or buts.
Carmelo, now it’s the government’s fault?? Steve doesn’t call it down the middle- he’s middle/left. It’s the government’s fault, it’s the banks fault, it’s my bosses fault. People put themselves in a predicament to be crippled. I am going to blame my grade 4 math teacher!
@@DTrent-uy1wl What do you think caused 400 billion of money printing, zero percent interest rates, paying people to stay home closing the economy and inflation at a forty year high? Would you think this was caused by the hard working middle class? Obviously not our government caused it. Now they intend on raising rates until inflation gets under control which will kill the housing market since it’s inflated 50 percent in the last two years alone. You think this is normal? I’m not sure how your looking at this but Steve calls out inflation and government spending all the time. Families won’t be able to afford the payments once interest rates rise which could cause stagflation. I could go in for days. The liberals will spend us into oblivion or take over our lives and make it universal income for all. Not sure how and where you stand but that’s my opinion.
@@DTrent-uy1wl I am fully for personal responsibility, have absolutely no debt, husband and I have house paid, cars paid. College fund for the kids, live within our means etc. But the disastrous government response to covid and all the consequences of them, the government overspending causing inflation and even government policies on "climate change " (attacking the oil and gas sector) as well as their ideological running of the country, scaring off investors and wealthy canadians who are fleeing to the US....none of that has anything to do with people living beyond their means. The problems discussed in this video are directly related to government mismanagement and quite frankly, their unlawful and criminal enterprise.
I don’t think it’s twisted to have the BOC increase interest rates and keep them high to combat inflation. Inflation hits the poor and middle class the most. Those are the groups that need to be protected. Asset owners have been the beneficiaries of artificially low (government manipulated) interest rates for 3 decades which has led to massive increases in inequality (low interest rates increase the value of hard assets and poor people don’t own hard assets). In order to let society rebalance, interest rates should go to a free market rate. Central Banks are a communist notion. The free market should decide interest rates not central banks.
One percent hike is unprecedented in our life time as far as I know. However, even more significant will be the psychological impact this rate hike will have.
Some quick math. If you run a Variable mortgage 25 year amort with 1.2% implicit rate and in the first 6-18 months of the mortgage, the rates increase to 4.5%. All else being equal, if you renew the mortgage and continue the amortization after 5 years - the payment at the will renewal date will be ~50% higher. What people maybe don't understand is that your true cost of going from 1.2-2.4% is actually that the cost of your mortgage has doubled - - - not from a cash flow perspective but the true cost has doubled. That can affect prices. A 3% increase in rates - all else being equal should equate to approximately 30% fall in purchasing power and thus a fairly large reduction in underlying real estate values.
Haha they think we are fools. They stick used car prices in NOW? They know that market has gone absolutely ballistic, so it is due for a pullback. Thus, their next CPI they can say, “look guys, it’s only 6% now!” because they just added used cars and when their prices come back to Earth it makes the overall number look sane. At the end of the day, there’s too much debt and the currency is a dead man walking. They’re just buying time with all these absurd shenanigans.
You and I both know they are that twisted.. Promise everyone that rates wont go up, entice people into variable rate mortgages, raise the rates (substantially) and offer debt relief in exchange for acceptance into the new digital system.. I could see something like that coming down the pipe.
@@dwightcarlson7136 I hope I'm wrong. Could also see an option for the gov. to come in and buy your house and rent it back to you at a quarter of the price. We say that would never happen but if your on your knees with a family and struggling to live you may just take it.
@@sarahwaters7290 you are correct, it's beating families into submission, a new system of digital control to reduce carbon footprints and family sizes through injectable mandatory shots that reduce life spans.
An honest advice from us who purchased our first home 7 months ago. I regret not waiting. Our decision was made on emotions and not logic. We are already in the negative and planning on selling due to our company cutting back and layoffs. You are not safe. Don’t listen to real estate sales people especially mortgage brokers. Our broker got us an approval by making fake job letters without our knowledge and we didn’t question it because we were excited.
Fantastic content, Steve is the first honest Realtor I’ve ever seen, no exaggeration. I was a Vancouver Realtor. 99.999% of Realtors will say it’s a great time to sell, also a great time to buy, like politicians they speak out of both sides of their mouth and are completely full of shit, their income depends on that. Steve gives out all information for both sides of the debate then give his honest insight to what he sees and what he honestly thinks. Keep up the good work Steve, I’ll call you if I need a Realtor 👌👊
I agree. I have FRIENDS, guys I grew up with, and they still refuse to tell the truth. They continue to tow the company line that housing sales are great, all is well
True. Look at the latest Reddit posts, there are a lot of people panic buying to lock in their low rates. Little do they know that the rate savings may be nulled due to lower prices in the future.
adding used car prices to CPI almost looks like they are trying to raise inflation measure to justify raising rates. They should just go back to measuring CPI like they did in the eighties but I guess it would show inflation is probably double what is presently presented.
Good video Steve! To be clear, when scotia’s economists expect housing prices to remain stagnant, this IS downward movement in real terms given inflation. They’re saying downward pressure and upward pressure are approx. equivalent, and rates will rise significantly, therefor inflation effects will be equally significant. Logically, I don’t think either of their predictions have to be wrong.
A scramble to hike rates has less to do with housing and more to do with bonds and the Fed's ability to drop them again when the US recession hits due to the incoming dollar spike. Mortgage defaults will be unavoidable. sorry for your loss in income but a correction was inevitable and jist prolonged by covid
it wasn't that long ago that all the internet pundits were hyping negative interests rates 24/7....People have already forgotten about that escapade......
I like that little Johnny scenario. Many people have mama and papa helping them to buy things. And the person receiving the hand outs acts so arrogant and acting as if they did it themselves. Every home I bought, and every car was from me alone. It made me a strong man, the hard reality so now nothing surprises me. I never took a penny from my mother or anyone. There are also certain people who buy property for their son overseas, buy him his visa and pay for the plane ticket.
So I asked this to a realtor back in 2021 when house prices were going up crazy.... If interest rate is high and house prices low, home buyers are nonchalant and they don't rush in. Then if interest rate goes lower, house prices go higher, why would home buyers rush in? Isn't it the same thing or worse even? She just shrugged, it is what it is. And come to think of it, it doesn't make any difference for the banks either, at least for the Canadian housing market... Higher rate means higher interest income even if home prices are low; lower rate means higher income too as home prices are high (and more loans taken)! 🤔🤔🤔
I never understood the need to rush and lock on a rate and pay big price *before* interest rates are about to rise. At the end of the day its capacity to service the debt that matters. If affordability goes down, prices go down as well.
@@pouetpouet941 well if you're already in a mortgage, then you have to rush in to lock the rate before rate goes up. Unless, you mean lock on an offer rate before buying a property? Then yep, that was my question to the realtor...lol.. Why make customers rush in... As for capacity to service debt, the stress test does check that so far I understand. I think the stress test on a loan application should be with circa 5% rate or offer rate + 2%, or something like that. So home buyers who got their homes after proper stress test should not be under pressure, except that they will have to pay higher monthly when their rates go up which they should be able to, unless they got even higher expenses like bought a Tesla, or Lucid, or both lol, expensive vacations, cottage too, etc...
@@abu4729 Yes i was talking for people who want to enter the market. For the stress test, while it is useful and helpful at the personal level, it won't save by much the overall situation. First, stress test rate will go up. Second, people who have been stress tested and can afford to pay higher rates will need to compensate by either saving or consumming less. Not good for the economy.
In 2020 CMHC warned us we were headed for a cliff so we turned and went up a hill. Now they are warning us we are going too far up the hill and we are turning back towards the cliff.
Great video Steve. I appreciate the work you do. You get me thinking about what’s happening, and what I need to be doing. I don’t believe in trying to time the market - I prefer macro economics and thinking long term where things are going.
BOC won't stop raising rates even if that tanks the housing market for a while and hurt badly the "investors". They represent 30% of the market and put the normal families at risk with their greed. Most families will actually do fine with their mortgage because they will be able to pay. It is better to act now than make things worst later.
rates have been in a steady decline for 40 years...7% was the normal over the last 80 years...they wont even be able to get to 4% this time......they could get to 5% after the 2008 fiasco....
@@bonniejohnson1518 rates were getting lower because inflation also declined. You can't have low rates and high inflation without crushing the population. Look at Turkey.
thanks Steve! I have similar belief as yours. Central bank cannot keep borrowing cost at high rate(4%) for federal government for a long time. It simply doesn’t are any sense or sustainable. To be clear: Im not saying it cannot go up to 4%, the point is they cannot keep it for long time. And the quicker they raise the rate, the harder they will drop and expand balance sheet in the future.
@@v.p9412 this is fraud. Bo body got paid for their savings bur end up paying higher for everything. Many business are still struggling. Toronto downtown is still no where 50 percent of 2019
@@v.p9412 normalizing is another 75 basis points and agreed that’s all fine and necessary but if you thinking normalizing is another 400 basis points…recession and currency crisis incoming. The government - not the Canadian consumer - is the biggest borrower and the Trudeau government in particular with their massive deficit driven spending pre pandemic, pandemic and now post pandemic would trigger a downgrading of the Canadian government, currency and bond market at those rate levels which would be welcome to Canazeula…and then house prices would be the least of our worries, we’ll be lining up grocery carts of money for food. This is called financial repression 101…Japan has been doing it for 40 years and that’s where we’re headed too…rates will go up but they’ll stay in a band sub 3.5% over time because the consequences of anything different would be catastrophic at the government and currency level let alone the consumer. Macklem and crew know this and are trying to spook the market to cool inflation. Don’t worry if you are getting your popcorn out to watch the over levered suffer, they will at 2% - it won’t take much. There’s so many pools, boats and hot tubs on HELOCs these days that a change there will be trigger lots of pain.
@@BA-kp1us fully agree with your statement. This government is useless and the cause of all this nonesense. BOfCanada it's just a puppet of this retarded government. They got rich from this house boom and they knew about it and nobody did anything. This Canadian fault for electing this dictator Trudolf again. Time to suck it up and deal with this. It will go away but a recession is imminent. If you work in the investment industry you would have been prepared. If you're in RE industry you live in lalaland like Steve.
Steve, do you have stats for average rent in Vancouver? The home prices are cooling but the rents seem to keep on rising. Is it because even though home prices are dropping but interest rates rising means that monthly costs of owning a house remains the same? Do rents scale more with HPI or does it scale more with average mortgage payment?
The only ones who set themselves up for a financial mishap are the people who overextended themselves- unfortunately that is more than 75% of the people who bought over the last two years. This dumpster is in fire and raging. Tiff is going to be setting fires everywhere on June 1st. The vast majority of people don’t understand what is coming down the pipe. So many price reductions and homes sitting here on Vancouver Island it’s laughable. Tiff just slid in his brass knuckles snd is going to work on extended debt ridden homeowners. I keep saying- Pain is coming down the pipe
the war is waged upon all 99% of the peasants....always been that way...the people were declared enemies of the bank in 1933 by Roosevelt via the 1917 War Powers Act (aiding the enemy act) ....that is still in effect today, as no president as ever reseeded it since then.....that's why a person needs a license for everything, because they are the enemy of the state..................
@@DTrent-uy1wl you have a guy on the inside at a brokerage? Fancy. Once that rate hike went through and 5ers went to 4% this Turkey was cooked. All there is left is the excuses and then the crying.
@@jeffotoole4509 check these guys out- telling everyone that immigration is going to save this pile of turd ruclips.net/video/B7qkGooM4gA/видео.html They invited me on the show lol. Under my post about “price fluctuations”.
Very smart guy thanks for these informative videos. Like I said before houses must come down at least 50 percent in order to be affordable for normal people.
Do you know what it costs in materials alone to build an average house? How about labour to do so? And the land that it sits on? How about all the taxes and fees the cities/municipalities take? Which one of these do you think you can cut in half? The government share? You can negotiate lumber and brick prices down 50%? No wait, the roofer makes too much, cut his payroll in half. He’s gonna be there on Monday, don’t worry.
@@goldenhandcuffs that is a brilliant analogy. Can you please explain to the crowd how real estate in the USA currently is 65% less expensive than comparable in Canada. I will grade you on your answer. Look forward to hearing your rebuttal
@@kingShadow29 hahahaha. That is awesome. We all know Canada housing is a total unequivocal joke. Like really? Lol. This dung pile is already starting to get flushed
Great stuff Steve. What do you think happens if/when the Fed keeps hiking if the s&p goes into a bear market? Does Powell stop after he gets phone calls from his buddies on Wall Street? And does the Bank of Canada follow suit, as they typically do? Does all this hiking continue when growth / GDP decelerates in Q2 and Q3?
I think his buddies on wall street will wait until they can buy low before they make those phone calls. You can make a lot of money off market fluctuations as long as you're the one controlling them.
How high do the rates go and how long do they stay elevated? I'm a 5 year fixed that ends April of 24. Are they going to go up to 8% or even higher, or do they go up through the end of this year and then start to come back down? I guess come 2024 I could always get a shorter term if things look like they are coming down.
BoC is still printing over $3B per week under their QE program which is highly inflationary. When they are force to stop QE and reverse it (QT) bonds yields are going to spike up and the housing market will feel it.
@@DTrent-uy1wl Nah there are just hundreds of meaningless spam posts (like yours). Feds can just let the bonds mature and collect their interest. They don't have to sell or buy more...last time I checked they were already at a neutral stance aka only buying a few bonds and letting the rest mature. They are literally making money off the interest on the whole deal. The only time you lose money on a bond is if you panic sell (or default but that is rare). Sure you might get less interest than the next guy but usually is a small amount as compared to the loss of selling.
@@GreenBeanGreenBean My understanding is the Bank of Canada a month ago said they have ended QE. They have said they will be reducing the size of their balance sheet beginning Aril 25 (maturing bonds will not be replaced). So Quantitative tightening begins on Monday :-)
When the sell off in the debt market happens people are going to lose their mind ! Were already in an economic collapse and this one is going to be a shit show.
Steve great channel, I'm from Australia and very interested in what is happening in New Zealand and Canada at present interest rate wise. Australian's are in for a shock because the RBA historically hold out to keep us all contained and when the proverbial hits the fan they pass it on just like they did in 2010. 8 interest rate rises in 10 months. Banks lowered property valuations, credit tightened up. Real Estate Agents love boom and bust...they have a script for both scenarios.
Victoria the realtors are still trying to pump up our real estate market even after the prices in Vancouver and Toronto have started plummeting. I don’t particularly like Steve’s delivery but I have to say he’s not a bullshitter like some coward crooked real estate pro pumpers. We are probably 6 months behind Australia & New Zealand
@@DTrent-uy1wl From what I am seeing New Zealand is first, Canada now feeling it and Australia coming next. I do wonder if the healthy Commonwealth Nations are part of an experiment to see how far international investors screw our lives before the gutless leaders realise they screwed their own people.
Government friends with investors and high rise builders therfore they will never raise rate to that point where it crash May be 2 to 3 % correction when they sold most of their pre sale Reason every second household bought 3 to 4 rental property either condo or townhouse in last 2020 or 2021
Good Information Steve, 2023 will have some investors and families get hurt, with increasing interest rates. The growth in home prices from 2020 to 2022 was a bubble not difficult to see. I think government may increase rates to bring down home prices to 2020 levels.
I don't think this is about controlling house prices. It's more about controlling the price increase of everything. For those working between 1975-85 will know what I mean, and the meaning of hard times ahead.
4% on a 5-year closed mortgage still sounds like reasonable low rates of borrowed money to me. I would imagine the investors are not happy about it though.
4% is low in comparison to historical rates, with historical house prices. With today's house prices + price of other goods compared to today's income... it could be too high for many Canadians. If the BoC doesn't raise rates to fast enough, inflation continues and they have to raise rates even higher to completely get inflation in check. The real problem will be when everyone has to renew their mortgages in 5 years or less.
Price is what you pay. Value is what you get. Higher rates = Lower asset prices. All those recently sold signs stating amounts over asking will only highlight who the village idiots are.
@@tony182709 the ! $1M condo should be worth $300-350K. Total joke- $1M condo in Toronto or Vancouver. You have to be so soft in the head to think this is normal
You shouldn't really ever take financial advice from people on RUclips, but if I were you I'd just chill for two years. Locking yourself into another 5 year now purly out of fear that you MIGHT have to pay Abit more later seems like a fool's errand when you consider all the fees that accompany it. Maybe if youd decided to do that when rates were rock bottom it might have made sense but not when fixed are running way hotter than variables anyway
There'll be a recession in 6 months timeframe when housing sales fall off a cliff, variable will be higher than now at that time, fixed will be less now.....in 6 months +
Think of it this way..... nothing has worked ? And for clarity.... realize we are truly only 'free'.... to be good little consumers. "Costs" of money ARE/WILL being addressed as the root cause of current woes after 10+ years.... and implementation of a coordinated 3pt strategy of currency defense, wherein a system wide 'baseline' costs of capital will be adhered to if for no other reason than actuarial based currency clarity. This will quite obviously result in knee-jerk reactions across many asset classes...... inflation targets be damned, alternative/historically repetitive courses of action unfortunately offering little respite from inevitability in known result. ZERO-bound is about to change.... "ZERO" will no longer be "0" as far as stimulative monetary policy for CB's is concerned.... they having at this very late juncture now realized the morale/debasement based hazards. ~2.5% - 3% will now be the new "ZERO"..... never again below which even during severe DE-flationary pressures would "other" Fiscal/Monetary initiatives would then be triggered(later discussion Pts 2 & 3)..... irrespective a baseline 'cost' of money WILL be maintained as CB's begin forays into digital realms.
Q: I have a 1bdrm Yaletown condo w HELOC (don’t currently qualify for conventional mortgage so to lock in would need a B lender I.e. higher rate)… Sell and buy back in later? I can rent elsewhere for $1300. Advice? Anyone? Bueller?
lol interest rates don't ONLY revolve around residential housing there are more factors at play as to why some banks want higher rates in the shorter term. I assume listening to this you're heavily involved in real estate. you gave me a good chuckle lmao
Thanks for the content! So when hear that prices won’t drop because there’s no inventory what do we make of that? It’s all very confusing. I agree that rising rates it have to do something to demand. The prices though, definitely need downward correction
The amount of debt to household income and equity has gone to far Also there are alot of backdoor deals in mortgages in the gta Some people are going to be swept away !
How do I hire you as my real estate agent? I’m not looking to buy within the next few months, but would love to start a relationship with you and hire you when the time comes
Love your content also by the way ! Ill be honest some realtors need a economics lesson 101 to understand how markets actually work ! Even some of these realtors on youtube still are bullish when our economy is in free fall ! People have borrowed so much money and are in so much debt its crazy ! What scares me is that the Federal Reserve is deliberately causing a recession and wipe out the entire middle class ! In the end they will blame the war and pandemic for having to raise interest rates so high in order to contain inflation. I honestly think that in the next 6 to 12 months we will see a massive sell off in the debt market and see the 10 year yield spike uncontrollably. We were in a currency crisis and we could see the central banks soon eliminate cash entirely soon enough. Scary stuff
The housing market is a house of cards and the only way things normalize is going to involve pain. Government intervening in the housing market to mitigate that pain just leads to more pain down the road. For every crushed homeowner to come in the next years there is a saver that's been crushed for the past couple of decades.
GK, you’re one of the smart people out there. So many money dummies thinking they can put maneuver the system lol. Gonna be so sad to see the suffering that will transpire
I understand concern about killing demand but can you really increase the supply when you have unlimited money poured into real estate. Up to 41% are investment properties in some provinces. Even if one bus Pierre's argument that cities need to do more. Where will you bring workforce to build millions of homes
Investors will sell their holdings. They will not sit on a losing asset. There is going to be a lot of supply very soon. Faisal, are you one of the people who have been tricked into thinking there is a massive housing shortage?
@@DTrent-uy1wl there is absolutely no shortage it’s insane. Bring rates at 5%+ and just see all the hidden inventory hit en masse. What about all those people that bought and decided to ride the equity wave up and sell this spring. Lock in a house at 1.5million. Sit on your house at present at 1 million. Ride it for 4-6 months before close or bridge finance. It goes up 200k and you only have to come up with 300k. The problem with this scenario is that what has happened is the house you are sitting in has gone from 1 million to 800k. You now need to come up with 700k which they can’t. I guess riding the wave some times doesn’t work. The amount of crying we are going to see in the next few months is going to be epic.
@@jeffotoole4509 Jeff, you are one of the brightest guys I know. Jeff, honestly, think about the amount of morons who went and refi’d on a refi…. People are leveraged up to buy their 2nd, 3rd snd 4th properties. We have friends who currently own $3M of real estate with minimum down and only make $160K combined yearly income. These are good people but got trained into thinking that they could never lose. So many people from all walks of life are teetering on collapse. I don’t know if tiff pulls trigger on 1%… but he actually might! I think adding in used vehicles into cpi is the right thing to do. You have been correct from the start of this and so have I.
@@DTrent-uy1wl we are not popular people at cocktail parties but I am ok with that. I know of many many people with but even close to that income with 2-3 million in mortgages. Add into that car loans, jet ski loans, snowmobile loans, first class vacations, it goes on and on and on. I know people with 2 million in loans with less than 100k in income and all the other loans. Do these banks even check into what other loans people have? I truly believe that the BOC and all the economists that work their have no idea what is really going on out there. The mortgage fraud is probably the most disturbing of it all. The problem here Trent is that once this all lets loose we will have to absolutely shut our mouths to everyone and anyone about the carnage. Get ready to be the nicest friend to all the people we know who will be in absolute distress. Never loan them money under any circumstances and keep like a church mouse. We will end up looking really really bad. The upside here is that I will be going on the biggest shopping spree of my lifetime. I can live with that.
@@DTrent-uy1wl There is a shortage and it will always be there if large number of buyers are investors who are funding down payments by taking money out of existing properties (HELOC, Refinancing etc.). I call it artificial shortage. Also, don't forget corporations hedging money in residential real estate. I disagree on the sell off part. Investment properties are generating revenues and speculator/flipper must have started listing them considering there are signs of cooling. I am not seeing drastic jump in listings (talking about my city , Calgary). Inventory in my city is still low compared to last year and the year before
@@v.p9412 agree but that incoming recession tho ... in my dreams I can see the house of cards blowing in the wind ... looking forward to meeting you in the soup line
Will rising rates reduce single home owners incentive to sell? I assume that higher rates will necessitate a new mortgage with a higher rate to replace the old one. Thus someone in that situation should be less interested in selling, thus reducing supply even more? The only way I see house prices going down is if people are forced to sell, and the only way I see people being forced to sell is if they lose their source of income. So only if there are wide spread layoffs do I see a reduction in home prices. And I'm not sure that is coming, at least not yet. In short, I'm not sure rising rates on their own will lead to lower home prices. Not unless they lead to a recession that is.
Many people own multiple properties, holding them as investments. There have been many articles on it, but stats usually range from 25%-50% of sales in major markets are by investors with no intention of living there. Most rent them, and typically at a Cash negative flow, just holding it for capital appreciation. I suspect, when these investors think the market is peaked, they will look to get out fast, and that will cause inventory increases, and prices to continue to drop. As many of these 2nd properties were financed with HELOC’s and VRM’s, as rates rise, that is more incentive to dump the property, take whatever profits you can, or cut your losses.
@@tmb3224 you are so correct. These new “land barons” are mom and pops who stuck their nexks out way too far. Cash negative and prices dropping like a rock. So many of these unprofessional investors will be wiped out
The thing I am constantly confused by is the first time buyer who’s wanting a housing market crash….shows you how financially illiterate people are… If there’s a housing crash it’s because rates have gone up and/or recessionary effects in the market. So great your downpayment gets you in but your borrowing costs quadrupled and so you are actually just as house poor at 40% lower prices and 400% rates as you would be buying the high prices in February at 2%. And that’s all assuming the recession hasn’t caused you to lose your job/income or see a reduction in your income…which then makes it even worse. Weird - is there a sentimental thing that makes people happier to pay less for something and then consequently pay a higher interest rate? To me there has to be a more balanced view of prices, costs of borrowing, growth or income potential etc etc…
That's assuming people waiting for the crash are only sitting with a small amount of money. So funny people going from they are going to the moon to oh no you have to stop it from crashing. Good luck to all
@@angusyoungistheman9795 Agreed. If you have a large amount of money, you don't need a mortgage (or a much smaller one) and a housing price decrease is a massive opportunity.
Smaller housing amounts allow younger generations to get in. Plus push investors out. Yes you will still have the monthly payments high. But you will actually have a chance to pay your house off before you retire. Interest rates will go back down. If anything. Let's get these morons out that put 300 grand over asking with no inspection. What is wrong with people.
While you are going to be paying higher interest if the market crashes and rates go up, you are more protected from loss of equity. If someone buys in now on low interest rates but higher price, they pay less interest and have a larger principal to repay. If the market crashes the principal amount will stay the same while your equity could go from 20% equity to zero or even negative. On the other hand if you enter the market after the crash, you keep your equity relatively the same unless it the market crashes even further. Yes you have higher interest rates, but your equity is more protected and even the real estate agent fees will be lower if you were forced to sell.
Good commentary as always. With regards to same payment variable rate mortgages, I must say I am surprised that you are in one of those. I have been a mortgage broker for 22 years and I have never once placed a client into that type of mortgage. We as brokers know full well that this is not in the best interests of the client. The trigger point puts the client at serious risk of losing their property if they are unable to get the loan back on schedule. This is particularly dangerous in times of falling values as you can imagine. Thankfully those loans are only offered by a couple of lenders.
You are correct. That is why it is preferable to place a client in a true adjustable rate mortgage where the principal and interest payment will adjust based on the current rate. This ensures that you never fall behind and keeps the borrower in touch with their mortgage even with a floating rate. The risk only relates to variable rate mortgages where the payment is fixed and in a rising interest rate environment can reach a trigger point . This leaves the borrower with 3 options. When Variable interest rate mortgages exceed their trigger rate until they reach what is known as a balance called the Trigger Point they will be required to adjust their payments, make a prepayment, or pay off the balance of the mortgage. Hopefully they have the capacity to do this as the bank can then begin action to recover. Capacity to borrow to accomplish this is affected when values are dropping. Even if there only option is to refinance or convert to a fixed payment mortgage. All told it puts the borrower in a difficult place to say the least.
Clearly i am an idiot. Bank of Canada took interest rates to zero in 2000. Housing prices, already a bubble, popped 50%. Zero interest rates, among other things, are also DRIVING 8% inflation in the broader economy. Bank of Canada is now in the process of (belatedly) normalizing (increasing) interest rates. House prices might come down 10 or 15 or 20% by year end. And the problem is? Even down 20%, that will still leave the vast majority of home owners with big gains the past 2 years. Steve, you talk lots about the debt bubble Canada has (consumers and government). Normalizing interest rates is necessary to start to correct this problem. Will it be painful? For some, yes. Is it terrible? No.
Viking, very good points but has one flaw. MSM is saying 2-3%. It is going to 5-6% minimum. Your entire argument gets blown out of the water. 2-3% is the absolute best case scenario and I still think that is grossly over optimistic
@@DTrent-uy1wl who actually thinks they can have rates at 3% and bring inflation from 6-7% to 2%. I have grade 10 math and even I can do that math. If they actually get it to 5% they are going to have to be at 7% to even move the needle. What kind of excuse do you give people if and when it hits 10%? They have one freaking job and we have inflation at 4x what it should be. Anyone in the private sector would have been fired ages ago. This is a complete joke
@@DTrent-uy1wl i agree that there is a good chance the bank of canada rate could go to 3.5 or 4%. I don’t understand why Steve thinks 2% Bank of Canada rate is armageddon for the Canadian economy. We are in a housing bubble… being CAUSED by crazy low interest rates. The air needs to be let out of the bubble. That is what the Bank of Canada (belatedly) is trying to do. Will it be painful? Maybe. But that is NORMAL. That is how life goes…
Hey, Steve. Thank you for a great video as always. I just wanted to point out one thing mentioned in Loony Hour couple podcasts back. Keith was saying that Canadian real estate crisis will hit us not because of our economy, but because of shit show somewhere else in the world. Japanese yen has been in a free fall, Russian rouble has bounced back significantly being pegged to gold, there are food riots in Sri Lanka, and Peru, Chinese government locked down almost 400 million people due to Covid, Europe has a crazy humanitarian crisis, potentially getting much worse with Vittorgan threatening to release his share of people from Middle East into Europe, there is an election in France, potentially threatening to break the European balance….. what are your thoughts on an alert level we should have here in Canada for the next 12-18 months? Thank you!
Wow, you didn’t mention the biggest real estate bubble, losing air. In China. With the Russia disruption. It’s derivatives, they are back on the chopping block. It will shut down, all the banks.
The fact Macklem pivoted so quickly from telling Canadians to "not worry" and to continue making large purchases, to now these numerous rate hikes. Tells you all you need to know.
Lost all credibility. PS, my var for my primary is with Scotia, luckily we didn't buy at our limit, but the situation is hilarious given my kid's Montessori pricing has gone up. Basically the price of a mortgage at $1800. I'm sure they'll lower the price as rates go up 🙄
So true
He didn't say continue to make large purchases that was up to the idiots who didn't think before buying never trust the banksters.
@@mohammedshussain9087 He literally did say that, maybe watch the clip of what he actually said before commenting.
You’re right. People got too greedy and now it’s time to pay the piper. Fomo pandemic in RE has caused this mess- Tiff is sliding his brass knuckles on and is ready to get to “work”
Heloc are at a crazy amount. Now the payback is rising. Canadians have used housing like a credit card for the past 10 years. Now we are going to see if the stress test worked. I am going to say no.
I agree with you on what is coming. However I think the stress test works if people don’t get around it by using their house value as a credit card. People have nobody but themselves to blame for that choice.
@@ayela562 the stress test is a joke. They imput your gross pay. Not your take home. That by itself is ridiculous. Then there is nothing to stop you after from racking up the debt with a new car in.the driveway. Or refurnish the house. I have seen people finances. This is going up in flames
Helocs are just like those balloon mortgages that got people in trouble in the US in 2007. Interest only, callable and very susceptible to rate hikes. If the market is down 10% I see banks amortising or outright calling those loans. Helocs just might be what gets people into trouble.
@@laja82 let's not forget about the commercial market. That nobody is talking about. It will pop before housing and it is much larger than the 2008 crises.
Stress test is a joke snd everyone knows it. “Stress test” tells you if you can afford it- yah right. Tiff is going to get to the 2% stress level in less than four months. I disagree with Steve when he says inflation is peaking. Inflation is just starting!
The Ontario housing market is severely overvalued and that's an understatement.
If a house is a micro condo for young people and immigrants, its undervalued still
@@hotcoffeegaming3397 that's not a house no
Kan, you are right. Lots of fomo junkies on this channel still trying to validate their stupid decisions
@@KJV1776WASP Its been this way and increasingly so for decades. The one family one household thing is getting less and less common. Average wage by me is about 45 k per person. Average detached house is 1.5 million. Cant say no to reality. A guy i pickup for work rents in a townhouse where a couple literally live in a room that used to be the living room
Yes sir, the law of gravity always applies. Consumers are maxed out and with interest rates set to rise we’re only going down from here.
There might be an economical turmoil but there is no doubt that this is still the best time to invest.
Best time to invest? thats funny though because in the last four months I have lost more than $47,900 in stock market which is the biggest I have loss since I ventured into stock investment.
you could be right or wrong depends on your expertise, I once made such loss when i invested thinking i have gathered enough trading skills from youtube videos
now its a different ball game for me because I was lucky to have met TERESA JENSEN WHITE, a financial manager and stock expert, I have made more than $165,000 in 6 weeks under her supervisions.
Really? people are cashing in from the stock market and frankly speaking its comforting seeing someone admit to the fact that they actually seek help from professionals. please how can i reach TERESA ?
search her name on the internet to reach her
You guys should do some spreadsheet examples next loonie hour of avg mortgage increases $ wise relating to possible scenarios. This is the only way it hits home for people
Great channel Steve, the value you bring to Canadian real estate is huge and your one of my go to channels.
Thank you
Good. There needs to be a fiscal mishap and a systemic breakdown in overlevered credit markets accompanied with a massive asset deflation
Brar, did you, Doc and Marty fly to Oct 2022? This sucker is taking on water fast. Ladies and gentlemen, please make your way to the lifeboats
BoC knows exactly what it's doing. It knew exactly what it was doing 2 years ago. The real question to ask nowadays is why. Why is the BoC playing Russian Roulette with massive Canadian debt?
Japanification of the canadian economy
Market fluctuations are very profitable for people who can control or at least predict them. Buy low, sell high, repeat.
Little Johnny is about to learn how the real world works lol
Question: Do you think we would be in a better situation now had the BOC started rate increases last April at a slower pace? Say 0.75% over the course of 2021.
Far better. That’s a no brainer
Yes 100%
Yes, but if they did that we wouldn't fall to our knees begging the government for a 'solution' to our problem.
I don’t care about affordability, I just want prices to come down (but payments can stay the same due to higher interest rates) so that I feel less subject to interest rate risk.
Property speculation is the problem.
Because in Canada property speculation is the only investment guarantee to increase year on year.
The solution:
New construction needs to be about 40% large coops units which are shared building ownership and individual unit ownership.
You buy a share of the building or building complex. When you sell, the money from the shared ownership goes to the coop community or is not sold because it was rented.
Coop government regulation needs to be improved so that building management companies are libel for the advice they provide.
House prices and interest rates are just correcting back to what they were pre-Covid. Back then people were plenty happy with the mortgage rates they were getting and the equity they were building in their home. So for the Vast majority of home owners, that owned more than 2 years, this is nothing more than a blip on their assessment. For the few that actually bought in the last year, they may be wishing they waited, but overall if they plan to live in it long term, they’ll be fine. For the guys who cashed out in the peak, congrats!!
We still at the peak 🤔
I bet you you’re wrong and interest rates keep going way past the pre Covid levels until something breaks and the central bank has to pull back.
alot of those people took out home equity loan with their new found house wealth - renos, expenses, new car, travel etc.
@@DJRS2178 .. this is going to be the real problem.
TMB, the prices are going down a lot further than pre-Covid. We already were riding a 19 year housing bubble at that point. The sheer disgusting amount of debt being held by Canadians is going to get purged long and hard. This is going to be a very long, nasty recession/depression. The numbers don’t lie. So hang on and buckle up ladies and gentlemen
Great video Steve. Love it when Canadians get on the tube and call it down the middle as you do. Government has crippled us and will likely run us into a 80’s style recession where middle class folks lost it all. Government spending has to decrease no ifs and or buts.
Carmelo, now it’s the government’s fault?? Steve doesn’t call it down the middle- he’s middle/left. It’s the government’s fault, it’s the banks fault, it’s my bosses fault. People put themselves in a predicament to be crippled. I am going to blame my grade 4 math teacher!
@@DTrent-uy1wl What do you think caused 400 billion of money printing, zero percent interest rates, paying people to stay home closing the economy and inflation at a forty year high? Would you think this was caused by the hard working middle class? Obviously not our government caused it. Now they intend on raising rates until inflation gets under control which will kill the housing market since it’s inflated 50 percent in the last two years alone. You think this is normal? I’m not sure how your looking at this but Steve calls out inflation and government spending all the time. Families won’t be able to afford the payments once interest rates rise which could cause stagflation. I could go in for days. The liberals will spend us into oblivion or take over our lives and make it universal income for all. Not sure how and where you stand but that’s my opinion.
@@carmelogiovannelli543 nobody forced these people into an oblivion of debt. Be responsible for your own actions. “The government made me do it!”- LOL
@@DTrent-uy1wl I am fully for personal responsibility, have absolutely no debt, husband and I have house paid, cars paid. College fund for the kids, live within our means etc. But the disastrous government response to covid and all the consequences of them, the government overspending causing inflation and even government policies on "climate change " (attacking the oil and gas sector) as well as their ideological running of the country, scaring off investors and wealthy canadians who are fleeing to the US....none of that has anything to do with people living beyond their means. The problems discussed in this video are directly related to government mismanagement and quite frankly, their unlawful and criminal enterprise.
@@carmelogiovannelli543 yeah, we should have just stayed open and let a huge portion of the population die. I don't like people anyways...
At this point, I just want the everything bubble to end. Fucking end this zombie economy.
I don’t think it’s twisted to have the BOC increase interest rates and keep them high to combat inflation. Inflation hits the poor and middle class the most. Those are the groups that need to be protected. Asset owners have been the beneficiaries of artificially low (government manipulated) interest rates for 3 decades which has led to massive increases in inequality (low interest rates increase the value of hard assets and poor people don’t own hard assets). In order to let society rebalance, interest rates should go to a free market rate. Central Banks are a communist notion. The free market should decide interest rates not central banks.
One percent hike is unprecedented in our life time as far as I know. However, even more significant will be the psychological impact this rate hike will have.
Going to snap this fragile market in half
Great video! Love the explanation
I work in construction we work ourselves out a job everytime
Buy what you can afford!
The bank wants there payments!
no idea what were the first ~10 sentences in this video.
The rest was great ! Just subscribed !!
There has not yet been a proper economic response to the spending of the Can Govt. every action has an equal or greater reaction.
Some quick math. If you run a Variable mortgage 25 year amort with 1.2% implicit rate and in the first 6-18 months of the mortgage, the rates increase to 4.5%. All else being equal, if you renew the mortgage and continue the amortization after 5 years - the payment at the will renewal date will be ~50% higher. What people maybe don't understand is that your true cost of going from 1.2-2.4% is actually that the cost of your mortgage has doubled - - - not from a cash flow perspective but the true cost has doubled. That can affect prices. A 3% increase in rates - all else being equal should equate to approximately 30% fall in purchasing power and thus a fairly large reduction in underlying real estate values.
Haha they think we are fools.
They stick used car prices in NOW?
They know that market has gone absolutely ballistic, so it is due for a pullback.
Thus, their next CPI they can say, “look guys, it’s only 6% now!” because they just added used cars and when their prices come back to Earth it makes the overall number look sane.
At the end of the day, there’s too much debt and the currency is a dead man walking. They’re just buying time with all these absurd shenanigans.
Would you recommend given in light of how things are going its best to sell now then rent and come back in as we continue to see price declines?
You and I both know they are that twisted..
Promise everyone that rates wont go up, entice people into variable rate mortgages, raise the rates (substantially) and offer debt relief in exchange for acceptance into the new digital system.. I could see something like that coming down the pipe.
Now that’s a conspiracy
@@DTrent-uy1wl but could very likely be correct
@@dwightcarlson7136 I hope I'm wrong. Could also see an option for the gov. to come in and buy your house and rent it back to you at a quarter of the price. We say that would never happen but if your on your knees with a family and struggling to live you may just take it.
@@sarahwaters7290 you are correct, it's beating families into submission, a new system of digital control to reduce carbon footprints and family sizes through injectable mandatory shots that reduce life spans.
An honest advice from us who purchased our first home 7 months ago. I regret not waiting. Our decision was made on emotions and not logic. We are already in the negative and planning on selling due to our company cutting back and layoffs. You are not safe. Don’t listen to real estate sales people especially mortgage brokers. Our broker got us an approval by making fake job letters without our knowledge and we didn’t question it because we were excited.
I hope things work out for you
Where did you buy? Cost of purchase?
About time to deal with this high inflation rate.
Worse than Zimbabwe!!
Fantastic content, Steve is the first honest Realtor I’ve ever seen, no exaggeration. I was a Vancouver Realtor. 99.999% of Realtors will say it’s a great time to sell, also a great time to buy, like politicians they speak out of both sides of their mouth and are completely full of shit, their income depends on that. Steve gives out all information for both sides of the debate then give his honest insight to what he sees and what he honestly thinks.
Keep up the good work Steve, I’ll call you if I need a Realtor 👌👊
Thank you sir
I agree. I have FRIENDS, guys I grew up with, and they still refuse to tell the truth. They continue to tow the company line that housing sales are great, all is well
No flip flopping with Steve. Best channel on real estate.
True. Look at the latest Reddit posts, there are a lot of people panic buying to lock in their low rates. Little do they know that the rate savings may be nulled due to lower prices in the future.
“May be nulled”? Recent buyers will lose hundreds of thousands of dollars or end up foreclosed
I would rather pay lower prices
adding used car prices to CPI almost looks like they are trying to raise inflation measure to justify raising rates. They should just go back to measuring CPI like they did in the eighties but I guess it would show inflation is probably double what is presently presented.
Good video Steve! To be clear, when scotia’s economists expect housing prices to remain stagnant, this IS downward movement in real terms given inflation. They’re saying downward pressure and upward pressure are approx. equivalent, and rates will rise significantly, therefor inflation effects will be equally significant. Logically, I don’t think either of their predictions have to be wrong.
A scramble to hike rates has less to do with housing and more to do with bonds and the Fed's ability to drop them again when the US recession hits due to the incoming dollar spike. Mortgage defaults will be unavoidable. sorry for your loss in income but a correction was inevitable and jist prolonged by covid
it wasn't that long ago that all the internet pundits were hyping negative interests rates 24/7....People have already forgotten about that escapade......
Rates have been too cheap for too long and now there is a crisis
Also, why did you get a variable rate mortgage if you thought interest rates were going to rise?
I like that little Johnny scenario. Many people have mama and papa helping them to buy things. And the person receiving the hand outs acts so arrogant and acting as if they did it themselves. Every home I bought, and every car was from me alone. It made me a strong man, the hard reality so now nothing surprises me. I never took a penny from my mother or anyone.
There are also certain people who buy property for their son overseas, buy him his visa and pay for the plane ticket.
Probably wipes his ass too
So I asked this to a realtor back in 2021 when house prices were going up crazy.... If interest rate is high and house prices low, home buyers are nonchalant and they don't rush in. Then if interest rate goes lower, house prices go higher, why would home buyers rush in? Isn't it the same thing or worse even? She just shrugged, it is what it is.
And come to think of it, it doesn't make any difference for the banks either, at least for the Canadian housing market... Higher rate means higher interest income even if home prices are low; lower rate means higher income too as home prices are high (and more loans taken)! 🤔🤔🤔
I never understood the need to rush and lock on a rate and pay big price *before* interest rates are about to rise. At the end of the day its capacity to service the debt that matters. If affordability goes down, prices go down as well.
@@pouetpouet941 well if you're already in a mortgage, then you have to rush in to lock the rate before rate goes up. Unless, you mean lock on an offer rate before buying a property? Then yep, that was my question to the realtor...lol.. Why make customers rush in... As for capacity to service debt, the stress test does check that so far I understand. I think the stress test on a loan application should be with circa 5% rate or offer rate + 2%, or something like that. So home buyers who got their homes after proper stress test should not be under pressure, except that they will have to pay higher monthly when their rates go up which they should be able to, unless they got even higher expenses like bought a Tesla, or Lucid, or both lol, expensive vacations, cottage too, etc...
@@abu4729 Yes i was talking for people who want to enter the market. For the stress test, while it is useful and helpful at the personal level, it won't save by much the overall situation. First, stress test rate will go up. Second, people who have been stress tested and can afford to pay higher rates will need to compensate by either saving or consumming less. Not good for the economy.
@@pouetpouet941 👍
The same realtors who helped push this and didn’t understand retention as the most important tool in business is crying foul.
In 2020 CMHC warned us we were headed for a cliff so we turned and went up a hill. Now they are warning us we are going too far up the hill and we are turning back towards the cliff.
Great video Steve. I appreciate the work you do. You get me thinking about what’s happening, and what I need to be doing. I don’t believe in trying to time the market - I prefer macro economics and thinking long term where things are going.
I sometimes wonder what their overall long-term plan is
Rates need to be jacked to 10. % and kill the bubble
BOC won't stop raising rates even if that tanks the housing market for a while and hurt badly the "investors". They represent 30% of the market and put the normal families at risk with their greed. Most families will actually do fine with their mortgage because they will be able to pay. It is better to act now than make things worst later.
rates have been in a steady decline for 40 years...7% was the normal over the last 80 years...they wont even be able to get to 4% this time......they could get to 5% after the 2008 fiasco....
@@bonniejohnson1518 rates were getting lower because inflation also declined. You can't have low rates and high inflation without crushing the population. Look at Turkey.
thanks Steve! I have similar belief as yours. Central bank cannot keep borrowing cost at high rate(4%) for federal government for a long time. It simply doesn’t are any sense or sustainable. To be clear: Im not saying it cannot go up to 4%, the point is they cannot keep it for long time. And the quicker they raise the rate, the harder they will drop and expand balance sheet in the future.
You live in lalaland - rates were low for the past 2-3 years. Time to wake up buddy rates are normalizing now.
@@v.p9412 this is fraud. Bo body got paid for their savings bur end up paying higher for everything. Many business are still struggling. Toronto downtown is still no where 50 percent of 2019
@@v.p9412 normalizing is another 75 basis points and agreed that’s all fine and necessary but if you thinking normalizing is another 400 basis points…recession and currency crisis incoming. The government - not the Canadian consumer - is the biggest borrower and the Trudeau government in particular with their massive deficit driven spending pre pandemic, pandemic and now post pandemic would trigger a downgrading of the Canadian government, currency and bond market at those rate levels which would be welcome to Canazeula…and then house prices would be the least of our worries, we’ll be lining up grocery carts of money for food.
This is called financial repression 101…Japan has been doing it for 40 years and that’s where we’re headed too…rates will go up but they’ll stay in a band sub 3.5% over time because the consequences of anything different would be catastrophic at the government and currency level let alone the consumer. Macklem and crew know this and are trying to spook the market to cool inflation.
Don’t worry if you are getting your popcorn out to watch the over levered suffer, they will at 2% - it won’t take much. There’s so many pools, boats and hot tubs on HELOCs these days that a change there will be trigger lots of pain.
@@BA-kp1us fully agree with your statement. This government is useless and the cause of all this nonesense. BOfCanada it's just a puppet of this retarded government. They got rich from this house boom and they knew about it and nobody did anything. This Canadian fault for electing this dictator Trudolf again. Time to suck it up and deal with this. It will go away but a recession is imminent. If you work in the investment industry you would have been prepared. If you're in RE industry you live in lalaland like Steve.
The mortgage rate was 18% in 1988, borrowing money shouldn’t be cheap and cost the high inflation like now!
Thanks for the insights - really like your work
Why did they wait so long to raise rates>?
Sucker people into debt levels and force injections for current long term employment. A trap
Love ur stuff bud... Keep it up
Steve, do you have stats for average rent in Vancouver?
The home prices are cooling but the rents seem to keep on rising. Is it because even though home prices are dropping but interest rates rising means that monthly costs of owning a house remains the same?
Do rents scale more with HPI or does it scale more with average mortgage payment?
I love it when the pumpers call the housing market “cooling”
Rents are typically tied to labour markets. Rising wages are pushing rents up.
Great capsule, thanks Steve
Thankfully there is only 35 million Canadians. But for your presentation, I believe you are exactly on the mark.
Great video Steve, appreciate it.
The only ones who set themselves up for a financial mishap are the people who overextended themselves- unfortunately that is more than 75% of the people who bought over the last two years. This dumpster is in fire and raging. Tiff is going to be setting fires everywhere on June 1st. The vast majority of people don’t understand what is coming down the pipe. So many price reductions and homes sitting here on Vancouver Island it’s laughable. Tiff just slid in his brass knuckles snd is going to work on extended debt ridden homeowners. I keep saying- Pain is coming down the pipe
Yes it is. Yes it is.
the war is waged upon all 99% of the peasants....always been that way...the people were declared enemies of the bank in 1933 by Roosevelt via the 1917 War Powers Act (aiding the enemy act) ....that is still in effect today, as no president as ever reseeded it since then.....that's why a person needs a license for everything, because they are the enemy of the state..................
@@jeffotoole4509 Jeff!!
@@DTrent-uy1wl you have a guy on the inside at a brokerage? Fancy. Once that rate hike went through and 5ers went to 4% this Turkey was cooked. All there is left is the excuses and then the crying.
@@jeffotoole4509 check these guys out- telling everyone that immigration is going to save this pile of turd
ruclips.net/video/B7qkGooM4gA/видео.html
They invited me on the show lol. Under my post about “price fluctuations”.
Great video great Canadian Vancouver Canada
Very smart guy thanks for these informative videos. Like I said before houses must come down at least 50 percent in order to be affordable for normal people.
Minimum 50%. My prediction is 60-70%
Do you know what it costs in materials alone to build an average house? How about labour to do so? And the land that it sits on? How about all the taxes and fees the cities/municipalities take?
Which one of these do you think you can cut in half? The government share? You can negotiate lumber and brick prices down 50%? No wait, the roofer makes too much, cut his payroll in half. He’s gonna be there on Monday, don’t worry.
@@goldenhandcuffs that is a brilliant analogy. Can you please explain to the crowd how real estate in the USA currently is 65% less expensive than comparable in Canada. I will grade you on your answer. Look forward to hearing your rebuttal
@@DTrent-uy1wl i have family in USA, they own properties there. the houses that are over a million in ottawa is around 300k in Virginia.
@@kingShadow29 hahahaha. That is awesome. We all know Canada housing is a total unequivocal joke. Like really? Lol. This dung pile is already starting to get flushed
Great stuff Steve. What do you think happens if/when the Fed keeps hiking if the s&p goes into a bear market? Does Powell stop after he gets phone calls from his buddies on Wall Street? And does the Bank of Canada follow suit, as they typically do? Does all this hiking continue when growth / GDP decelerates in Q2 and Q3?
Nope. Powell is going to scrap it out with inflation. Interest rates are going higher than most people think
Yes. Just a matter of what level
I think his buddies on wall street will wait until they can buy low before they make those phone calls. You can make a lot of money off market fluctuations as long as you're the one controlling them.
So my question is, as always, where is the opportunity in all this change?
Hold Cash for now...
How high do the rates go and how long do they stay elevated? I'm a 5 year fixed that ends April of 24. Are they going to go up to 8% or even higher, or do they go up through the end of this year and then start to come back down? I guess come 2024 I could always get a shorter term if things look like they are coming down.
Pretty sure things will crash hard way before it gets to 8%...
BoC is still printing over $3B per week under their QE program which is highly inflationary. When they are force to stop QE and reverse it (QT) bonds yields are going to spike up and the housing market will feel it.
Actually they're not.
“Feel it” lol. How about implode in on itself
@@GreenBeanGreenBean You must have a beanstalk in your backyard
@@DTrent-uy1wl Nah there are just hundreds of meaningless spam posts (like yours). Feds can just let the bonds mature and collect their interest. They don't have to sell or buy more...last time I checked they were already at a neutral stance aka only buying a few bonds and letting the rest mature.
They are literally making money off the interest on the whole deal.
The only time you lose money on a bond is if you panic sell (or default but that is rare). Sure you might get less interest than the next guy but usually is a small amount as compared to the loss of selling.
@@GreenBeanGreenBean My understanding is the Bank of Canada a month ago said they have ended QE. They have said they will be reducing the size of their balance sheet beginning Aril 25 (maturing bonds will not be replaced). So Quantitative tightening begins on Monday :-)
Did the stress test include the rising prices of everything else?! Likely not.
Be responsible for yourself
@@DTrent-uy1wl what does that even mean?
It's a good point. The stress test would not have factored in food + gasoline inflation at these levels
I wonder how much worse CPI would look if they used average interest rate over the last 30 years to calculate housing costs.
Thanks!
When the sell off in the debt market happens people are going to lose their mind ! Were already in an economic collapse and this one is going to be a shit show.
Steve great channel, I'm from Australia and very interested in what is happening in New Zealand and Canada at present interest rate wise. Australian's are in for a shock because the RBA historically hold out to keep us all contained and when the proverbial hits the fan they pass it on just like they did in 2010. 8 interest rate rises in 10 months. Banks lowered property valuations, credit tightened up. Real Estate Agents love boom and bust...they have a script for both scenarios.
Victoria the realtors are still trying to pump up our real estate market even after the prices in Vancouver and Toronto have started plummeting. I don’t particularly like Steve’s delivery but I have to say he’s not a bullshitter like some coward crooked real estate pro pumpers. We are probably 6 months behind Australia & New Zealand
@@DTrent-uy1wl From what I am seeing New Zealand is first, Canada now feeling it and Australia coming next. I do wonder if the healthy Commonwealth Nations are part of an experiment to see how far international investors screw our lives before the gutless leaders realise they screwed their own people.
If our economy was a used Corolla, and BOC was the driver... By now BOC would've been charged for stunting under influence 😀
Government friends with investors and high rise builders therfore they will never raise rate to that point where it crash
May be 2 to 3 % correction when they sold most of their pre sale
Reason every second household bought 3 to 4 rental property either condo or townhouse in last 2020 or 2021
Good Information Steve, 2023 will have some investors and families get hurt, with increasing interest rates. The growth in home prices from 2020 to 2022 was a bubble not difficult to see. I think government may increase rates to bring down home prices to 2020 levels.
Do you honestly think tiff is that good at his job that he can control the market perfectly. It's going to 2011 prices
I don't think this is about controlling house prices. It's more about controlling the price increase of everything. For those working between 1975-85 will know what I mean, and the meaning of hard times ahead.
4% on a 5-year closed mortgage still sounds like reasonable low rates of borrowed money to me. I would imagine the investors are not happy about it though.
4% is low in comparison to historical rates, with historical house prices. With today's house prices + price of other goods compared to today's income... it could be too high for many Canadians. If the BoC doesn't raise rates to fast enough, inflation continues and they have to raise rates even higher to completely get inflation in check. The real problem will be when everyone has to renew their mortgages in 5 years or less.
On top of the fact that the average mortgage is about $600,000 now so that 4% will have much more of an impact
Yeah it's kind of funny how debt works.
@@anthonym9130 it will be over 5% by June
Price is what you pay. Value is what you get. Higher rates = Lower asset prices. All those recently sold signs stating amounts over asking will only highlight who the village idiots are.
So sad but so true. Lots of idiots
How much can the price fall for condos ?
60-70%
@@DTrent-uy1wl sure!
@@tony182709 the !
$1M condo should be worth $300-350K. Total joke- $1M condo in Toronto or Vancouver. You have to be so soft in the head to think this is normal
@@DTrent-uy1wl “should be” belongs in another dimension of space.
@@tony182709 yah, current prices are from the twilight zone. The current prices are going to get scourged soon enough
Hi Steve. Would you recommend doing an early renewal? We have at least 2 years left on our 5 year term.
You shouldn't really ever take financial advice from people on RUclips, but if I were you I'd just chill for two years. Locking yourself into another 5 year now purly out of fear that you MIGHT have to pay Abit more later seems like a fool's errand when you consider all the fees that accompany it. Maybe if youd decided to do that when rates were rock bottom it might have made sense but not when fixed are running way hotter than variables anyway
There'll be a recession in 6 months timeframe when housing sales fall off a cliff, variable will be higher than now at that time, fixed will be less now.....in 6 months +
I would not be panicking into higher rates
Great news.
Keep them coming
Turn off the lights the partys over
The music has stopped, bouncers are ushering people out. This pile of steaming manure has been taken out behind the shed and put to sleep
Think of it this way..... nothing has worked ?
And for clarity.... realize we are truly only 'free'.... to be good little consumers.
"Costs" of money ARE/WILL being addressed as the root cause of current woes after 10+ years.... and implementation of a coordinated 3pt strategy of currency defense, wherein a system wide 'baseline' costs of capital will be adhered to if for no other reason than actuarial based currency clarity.
This will quite obviously result in knee-jerk reactions across many asset classes...... inflation targets be damned, alternative/historically repetitive courses of action unfortunately offering little respite from inevitability in known result.
ZERO-bound is about to change.... "ZERO" will no longer be "0" as far as stimulative monetary policy for CB's is concerned.... they having at this very late juncture now realized the morale/debasement based hazards.
~2.5% - 3% will now be the new "ZERO"..... never again below which even during severe DE-flationary pressures would "other" Fiscal/Monetary initiatives would then be triggered(later discussion Pts 2 & 3)..... irrespective a baseline 'cost' of money WILL be maintained as CB's begin forays into digital realms.
Q: I have a 1bdrm Yaletown condo w HELOC (don’t currently qualify for conventional mortgage so to lock in would need a B lender I.e. higher rate)… Sell and buy back in later?
I can rent elsewhere for $1300. Advice? Anyone? Bueller?
Need to know your personal situation. Feel free to email me
lol interest rates don't ONLY revolve around residential housing there are more factors at play as to why some banks want higher rates in the shorter term. I assume listening to this you're heavily involved in real estate. you gave me a good chuckle lmao
Thanks for the content! So when hear that prices won’t drop because there’s no inventory what do we make of that? It’s all very confusing. I agree that rising rates it have to do something to demand. The prices though, definitely need downward correction
They are mostly correcting
The amount of debt to household income and equity has gone to far
Also there are alot of backdoor deals in mortgages in the gta
Some people are going to be swept away !
Swept away in a bloody tornado!
great content 👍🏼 new subscriber here
Don't act surprised when the wheels fall off, were fvcked
The wheels have fallen off. We are currently sliding down the road
How do I hire you as my real estate agent? I’m not looking to buy within the next few months, but would love to start a relationship with you and hire you when the time comes
waiting for BoC's big sweep.
Love your content also by the way ! Ill be honest some realtors need a economics lesson 101 to understand how markets actually work ! Even some of these realtors on youtube still are bullish when our economy is in free fall ! People have borrowed so much money and are in so much debt its crazy ! What scares me is that the Federal Reserve is deliberately causing a recession and wipe out the entire middle class ! In the end they will blame the war and pandemic for having to raise interest rates so high in order to contain inflation. I honestly think that in the next 6 to 12 months we will see a massive sell off in the debt market and see the 10 year yield spike uncontrollably. We were in a currency crisis and we could see the central banks soon eliminate cash entirely soon enough. Scary stuff
Lets goooooooooo
The housing market is a house of cards and the only way things normalize is going to involve pain. Government intervening in the housing market to mitigate that pain just leads to more pain down the road. For every crushed homeowner to come in the next years there is a saver that's been crushed for the past couple of decades.
GK, you’re one of the smart people out there. So many money dummies thinking they can put maneuver the system lol. Gonna be so sad to see the suffering that will transpire
they manipulate the markets for their own benefit..They don't care if the populous suffers, it doesn't even enter their mind....
I understand concern about killing demand but can you really increase the supply when you have unlimited money poured into real estate. Up to 41% are investment properties in some provinces. Even if one bus Pierre's argument that cities need to do more. Where will you bring workforce to build millions of homes
Investors will sell their holdings. They will not sit on a losing asset. There is going to be a lot of supply very soon. Faisal, are you one of the people who have been tricked into thinking there is a massive housing shortage?
@@DTrent-uy1wl there is absolutely no shortage it’s insane. Bring rates at 5%+ and just see all the hidden inventory hit en masse. What about all those people that bought and decided to ride the equity wave up and sell this spring. Lock in a house at 1.5million. Sit on your house at present at 1 million. Ride it for 4-6 months before close or bridge finance. It goes up 200k and you only have to come up with 300k. The problem with this scenario is that what has happened is the house you are sitting in has gone from 1 million to 800k. You now need to come up with 700k which they can’t. I guess riding the wave some times doesn’t work. The amount of crying we are going to see in the next few months is going to be epic.
@@jeffotoole4509 Jeff, you are one of the brightest guys I know. Jeff, honestly, think about the amount of morons who went and refi’d on a refi…. People are leveraged up to buy their 2nd, 3rd snd 4th properties. We have friends who currently own $3M of real estate with minimum down and only make $160K combined yearly income. These are good people but got trained into thinking that they could never lose. So many people from all walks of life are teetering on collapse. I don’t know if tiff pulls trigger on 1%… but he actually might! I think adding in used vehicles into cpi is the right thing to do. You have been correct from the start of this and so have I.
@@DTrent-uy1wl we are not popular people at cocktail parties but I am ok with that. I know of many many people with but even close to that income with 2-3 million in mortgages. Add into that car loans, jet ski loans, snowmobile loans, first class vacations, it goes on and on and on. I know people with 2 million in loans with less than 100k in income and all the other loans. Do these banks even check into what other loans people have?
I truly believe that the BOC and all the economists that work their have no idea what is really going on out there. The mortgage fraud is probably the most disturbing of it all.
The problem here Trent is that once this all lets loose we will have to absolutely shut our mouths to everyone and anyone about the carnage. Get ready to be the nicest friend to all the people we know who will be in absolute distress. Never loan them money under any circumstances and keep like a church mouse. We will end up looking really really bad.
The upside here is that I will be going on the biggest shopping spree of my lifetime. I can live with that.
@@DTrent-uy1wl There is a shortage and it will always be there if large number of buyers are investors who are funding down payments by taking money out of existing properties (HELOC, Refinancing etc.). I call it artificial shortage. Also, don't forget corporations hedging money in residential real estate.
I disagree on the sell off part. Investment properties are generating revenues and speculator/flipper must have started listing them considering there are signs of cooling. I am not seeing drastic jump in listings (talking about my city , Calgary). Inventory in my city is still low compared to last year and the year before
From disco inferno to lights out 😎
Can you say recession.
Wow Tiff has no clue what he is doing.
Don’t say that!!!🤫 🤫🤫🤫 🤐
You're clueless. The rates are coming back to where they were supposed to be. It's called normality- you live in lalala land
He knows exactly what he is doing. He is trying to make Canadians debt slaves, he serves his masters at the WEF.
@@v.p9412 agree but that incoming recession tho ... in my dreams I can see the house of cards blowing in the wind ... looking forward to meeting you in the soup line
Controlling inflation is more important than the housing market to the BoC. If they don't raise rates we will see a currency collapse
Will rising rates reduce single home owners incentive to sell? I assume that higher rates will necessitate a new mortgage with a higher rate to replace the old one. Thus someone in that situation should be less interested in selling, thus reducing supply even more?
The only way I see house prices going down is if people are forced to sell, and the only way I see people being forced to sell is if they lose their source of income. So only if there are wide spread layoffs do I see a reduction in home prices. And I'm not sure that is coming, at least not yet. In short, I'm not sure rising rates on their own will lead to lower home prices. Not unless they lead to a recession that is.
100s of thousands have lost their Jobs and are homeless in the past 2 year fiasco...It seems Venezuela is the new future..
Many people own multiple properties, holding them as investments. There have been many articles on it, but stats usually range from 25%-50% of sales in major markets are by investors with no intention of living there. Most rent them, and typically at a Cash negative flow, just holding it for capital appreciation. I suspect, when these investors think the market is peaked, they will look to get out fast, and that will cause inventory increases, and prices to continue to drop. As many of these 2nd properties were financed with HELOC’s and VRM’s, as rates rise, that is more incentive to dump the property, take whatever profits you can, or cut your losses.
Most mortgages are portable with a blend and extend
@@tmb3224 you are so correct. These new “land barons” are mom and pops who stuck their nexks out way too far. Cash negative and prices dropping like a rock. So many of these unprofessional investors will be wiped out
too many people spend money they don't have, to buy things they don't need, to impress people they don't like.
The thing I am constantly confused by is the first time buyer who’s wanting a housing market crash….shows you how financially illiterate people are…
If there’s a housing crash it’s because rates have gone up and/or recessionary effects in the market.
So great your downpayment gets you in but your borrowing costs quadrupled and so you are actually just as house poor at 40% lower prices and 400% rates as you would be buying the high prices in February at 2%. And that’s all assuming the recession hasn’t caused you to lose your job/income or see a reduction in your income…which then makes it even worse.
Weird - is there a sentimental thing that makes people happier to pay less for something and then consequently pay a higher interest rate? To me there has to be a more balanced view of prices, costs of borrowing, growth or income potential etc etc…
That's assuming people waiting for the crash are only sitting with a small amount of money. So funny people going from they are going to the moon to oh no you have to stop it from crashing. Good luck to all
@@angusyoungistheman9795 Amateur investors being caught are now randomly targetting the BOC, the banks, the first time home buyers.
@@angusyoungistheman9795 Agreed. If you have a large amount of money, you don't need a mortgage (or a much smaller one) and a housing price decrease is a massive opportunity.
Smaller housing amounts allow younger generations to get in. Plus push investors out. Yes you will still have the monthly payments high. But you will actually have a chance to pay your house off before you retire. Interest rates will go back down. If anything. Let's get these morons out that put 300 grand over asking with no inspection. What is wrong with people.
While you are going to be paying higher interest if the market crashes and rates go up, you are more protected from loss of equity. If someone buys in now on low interest rates but higher price, they pay less interest and have a larger principal to repay. If the market crashes the principal amount will stay the same while your equity could go from 20% equity to zero or even negative. On the other hand if you enter the market after the crash, you keep your equity relatively the same unless it the market crashes even further. Yes you have higher interest rates, but your equity is more protected and even the real estate agent fees will be lower if you were forced to sell.
I thought I have a crack on my phone. Can you fix your wall ?
Good commentary as always. With regards to same payment variable rate mortgages, I must say I am surprised that you are in one of those. I have been a mortgage broker for 22 years and I have never once placed a client into that type of mortgage. We as brokers know full well that this is not in the best interests of the client. The trigger point puts the client at serious risk of losing their property if they are unable to get the loan back on schedule. This is particularly dangerous in times of falling values as you can imagine. Thankfully those loans are only offered by a couple of lenders.
4/5 big banks offer those. Don’t see how those are more risky than floating rates.
I smell trouble in the air
You are correct. That is why it is preferable to place a client in a true adjustable rate mortgage where the principal and interest payment will adjust based on the current rate. This ensures that you never fall behind and keeps the borrower in touch with their mortgage even with a floating rate. The risk only relates to variable rate mortgages where the payment is fixed and in a rising interest rate environment can reach a trigger point . This leaves the borrower with 3 options. When Variable interest rate mortgages exceed their trigger rate until they reach what is known as a balance called the Trigger Point they will be required to adjust their payments, make a prepayment, or pay off the balance of the mortgage. Hopefully they have the capacity to do this as the bank can then begin action to recover. Capacity to borrow to accomplish this is affected when values are dropping. Even if there only option is to refinance or convert to a fixed payment mortgage. All told it puts the borrower in a difficult place to say the least.
Great insight, thank you Steve. :)
they are that twisted. beyond twisted.
Clearly i am an idiot. Bank of Canada took interest rates to zero in 2000. Housing prices, already a bubble, popped 50%. Zero interest rates, among other things, are also DRIVING 8% inflation in the broader economy. Bank of Canada is now in the process of (belatedly) normalizing (increasing) interest rates. House prices might come down 10 or 15 or 20% by year end. And the problem is? Even down 20%, that will still leave the vast majority of home owners with big gains the past 2 years. Steve, you talk lots about the debt bubble Canada has (consumers and government). Normalizing interest rates is necessary to start to correct this problem. Will it be painful? For some, yes. Is it terrible? No.
Viking, very good points but has one flaw. MSM is saying 2-3%. It is going to 5-6% minimum. Your entire argument gets blown out of the water. 2-3% is the absolute best case scenario and I still think that is grossly over optimistic
@@DTrent-uy1wl who actually thinks they can have rates at 3% and bring inflation from 6-7% to 2%. I have grade 10 math and even I can do that math. If they actually get it to 5% they are going to have to be at 7% to even move the needle. What kind of excuse do you give people if and when it hits 10%? They have one freaking job and we have inflation at 4x what it should be. Anyone in the private sector would have been fired ages ago. This is a complete joke
@@DTrent-uy1wl i agree that there is a good chance the bank of canada rate could go to 3.5 or 4%. I don’t understand why Steve thinks 2% Bank of Canada rate is armageddon for the Canadian economy. We are in a housing bubble… being CAUSED by crazy low interest rates. The air needs to be let out of the bubble. That is what the Bank of Canada (belatedly) is trying to do. Will it be painful? Maybe. But that is NORMAL. That is how life goes…
@@vikingvancouver9832 oh it’s going to be painful. It’s okay to admit that pain is coming- it’s the first step to a balanced reality
Free money has gone on to long
Full of bull, people been taking for years about a interest rate hike, or housing crash...where, where!
Macklem really dropped the ball
Greedy fomo debt junkies dropped the ball
Wish he started raising rates in late 2021
Hey, Steve. Thank you for a great video as always. I just wanted to point out one thing mentioned in Loony Hour couple podcasts back. Keith was saying that Canadian real estate crisis will hit us not because of our economy, but because of shit show somewhere else in the world. Japanese yen has been in a free fall, Russian rouble has bounced back significantly being pegged to gold, there are food riots in Sri Lanka, and Peru, Chinese government locked down almost 400 million people due to Covid, Europe has a crazy humanitarian crisis, potentially getting much worse with Vittorgan threatening to release his share of people from Middle East into Europe, there is an election in France, potentially threatening to break the European balance….. what are your thoughts on an alert level we should have here in Canada for the next 12-18 months? Thank you!
Wow, you didn’t mention the biggest real estate bubble, losing air. In China.
With the Russia disruption. It’s derivatives, they are back on the chopping block. It will shut down, all the banks.
Alert level is high
@@saretsky thank you. And thanks for a great work. I’ve been your loyal follower for the past few years. Keep it up, man!
I'm looking forward for for double digit interest rates.😅😅
Me too. Bring it on
You will have hard time putting food on the table lol. Forget the housing market.
Steve - do you trust BOC and Governments.
LOL.....every time you remind - the BOC said go spend more money ☎☎☎