I'm assuming there will be a massive drop in sales over the next few months while we wait for sellers to align more closely to the new market realities and drop their prices 20%.Posted by Taraz on Monday, December 25th, 2017 at 12:31am
There will also be a big drop in listings in Edmonton. Toronto and the GTA will be in a Mexican standoff for who knows how long as sellers disappear and listings drop. Vancouver prices will be decimated by the B20 OSFI rules so selling prices should go into a virtual nosedive as early as January 2018. Prices there should be down at least another ten prercent by March 2018.Posted by Tony on Tuesday, December 26th, 2017 at 5:35am
Nobody knows yet so we have to wait and see as there are ways around it. I can't see a healthy market in the long term unless the interest rate goes up to more normal levels and the down payment is made 20 to 25% for everybody.Posted by Wally on Tuesday, December 26th, 2017 at 6:26am
I'm pretty sure you can still purchase with a pre-approval acquired bfeore January 1 for as long as the pre-approval is valid.
I'm also pretty sure that the credit unions have no intention of mimicking B-20 and that alternative lenders sure as hell don't.
I just don't think this will be the straw that breaks the camel's back, and I say that as someone who has been waiting for a correction for 5+ years...
Yup, but we both know this can never happen.Posted by Anonymous on Tuesday, December 26th, 2017 at 9:59pm
I asked the bank about the pre-approval and their answer was if you submit a mortgage application to buy a property before Jan 1 and even if the closing takes a few months through 2018 you will still qualify based on the old criteria which if I understood correctly you have to submit a purchase order with your realtor and if accepted move on to submit the mortgage application before Jan 1.
But from what I read online on different forums some people say if you just have a pre-approval for a few months without even submitting any application before Jan 1 you will be ok after Jan 1 for the length of pre-approval.
I didn't contact the bank again to verify this information on forums because honestly I don't care as I can buy cash 100% if I wanted to but for those with little cash and who are concerned I just don't know.
Define "healthy market" Wally. I see a RE market that is floundering in Edmonton right now, if that's the geography you're referring too.
I see an unbalanced market, with more supply than demand, sluggish sales, a ton of ultra-competitive new inventory coming on line faster than it can be absorbed, and prices that are barely keeping above water for SFH and that are rapidly drowning for certain types of condos.
Interest rate increases won't to a thing to help balance this, except to slow the pace of new building. Down payment increases to 20% won't help it either. But maybe I'm misreading what you mean by "balanced", and misunderstanding the time-frame over which you're speaking.
Trev, my definition of balanced is totally different from what it is meant to be in the stats.
Some define balanced as a balance between supply and demand and they measure it by the number of months a property sits on the market and by prices keeping pace with an inflation rate of about 2%.
My definition of balanced is when a property is not overpriced, overvalued or extremely expensive regardless of supply and demand because these two can be easily manipulated to create certain market conditions.
I'll give you a numerical example of what I mean. Before 2005 the prices in Edmonton were kind of fair then they ballooned all the way through 2007 when they almost doubled or tripled so if say a property was 150 k and then it went up in a very short time to 400 k which is way more than 100% up and after that the prices have stagnated, would you consider the market during the stagnation period a balanced or a buyers market since it is neither going up nor down or barely going up by 1 or 2%? by some people's definition yes this is considered balanced whereas in my point of view it is not balanced because it crossed the long term baseline valuation and by a huge percentage and become way overvalued compared to wages, home price to gross rent ratio and affordability. So in other words if in 4 years it was a sellers market and the price went up by 100% I mean it became 70 to 80% overvalued and then it stopped going up so now is this considered a buyers market? Of course not because it is still 70 to 80% overvalued.
And since many of you on this blog are investors as opposed to home owners would you consider a home price ratio to gross rent in the range of 17 to 20 for a suited house a healthy ratio when at times in the past the ratio was between 10 and 15 ? Any real positive cash flow nowadays ? not really if you account for all expenses including property management and other stuff. IMO a sophisticated investor is not supposed to cover the expenses from their own pocket and then hope for substantial appreciation as this becomes speculation and not investing.