Up Up and Away....Posted by GM on Thursday, July 6th, 2017 at 9:20pm
If interest rate can't cool housing, government will be out of idea, for interest rate was lowered to support housing at the beginning. If that's the case, maybe give up to the free market is not a bad idea.Posted by Sharon on Thursday, July 6th, 2017 at 9:28pm
Increases in interest rates never fail and have never failed. Paul Volcker is a living testament to that.Posted by Tony on Thursday, July 6th, 2017 at 9:42pm
Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety.Posted by wsn on Thursday, July 6th, 2017 at 11:55pm
Sorry, I missed the "to".Posted by wsn on Friday, July 7th, 2017 at 12:01am
Real estate predictions round 2 results.
Just explain my last post:
An accounting rule was passed in US before housing crisis that allowing banks to foreclose people's home even they still can afford their mortgage.
Some economists think, based on the timing, it's this accounting rule that destroyed US housing market, and it's also the eventual removal of this rule stopped the bleeding of US housing market.
They think the government bank rescue package is not the main reason saved US housing market, since after the rescue the housing crisis went deeper. Their conclusion is the problem is caused by over regulation instead of free market.
The inflation rate Bank of Canada is watching is an artificial number that not including housing price.
When people cut all other expenses to increase housing expense, that's number goes even lower, so bank need to lower interest rate.
Next week bank may ignore the inflation rate and raise interest rate a little bit, but it's hard to see how far it can goes if the inflation rate is still a main factor to monitor.
The inflation rate is not the consideration, when US rates rise so to does Canada's, employment rate is getting better, jobs are increasing. We are talking numbers here. Rates have to rise from .5%. Cheap credit days are over. When the rates rise so to does our dollar. The govt is worried about the hot housing markets, rate increases will solve that. If employment gets better the rates will rise along with GDP. I see 2% by end of 2018 at minimum.
What does it mean for Alberta, rate increases do not help, does the Trudeau govt and the NDP care, hardly.
For last 10 years, Bank of Canada is keep watching the inflation rate at 2%. It's a big change if they stop watching it.Posted by Sharon on Saturday, July 8th, 2017 at 6:25am
It's free market, if interest rate so low, who's going to save money for other people to borrow?Posted by Sharon on Saturday, July 8th, 2017 at 6:34am
Trev, those you mentioned have been driving the housing market in Alberta for the last few years and not only now otherwise the price would have dropped more significantly but unfortunately and apparently buyers love high levels of debts maybe it makes them ecstatic to be highly indebted. It's always a sellers market at 90% of the times even at recession times because when there's a bubble of say 150% over a period of time then if there's a correction it's mostly 5% to 10% only.
Anyways in regards to what's pushing the price up now it's definitely people buying more house for their buck which means the higher end properties and the interest rate which is pushing people to get in before it gets higher and here I personally don't agree with buyers on that.
My reasoning is that if the interest rate goes up by say 0.25 the monthly mortgage payment on an average house of 450k will go up only about 3000 for the term of 5 years and that would be their total loss whereas if they rush to buy they will push the average price way higher than 3000 and subsequently their loss would be way higher because if they put too much pressure the price might go up by 20k, 30k or even more in a short period of time. And also if they don't rush to buy and sellers find buyers are still not excited to buy they will reduce their asking price and sometimes you could get a strong deal which could save you way more than $3000.
Inflation will not stop the rate hikes we are sitting at .5%, unless inflation is an issue and its not, rate hikes will curtail that. Its been 10 years of low rates its time to mive them up.Posted by Vault on Sunday, July 9th, 2017 at 4:28am
Wally- Agreed there's more house for the buck nowadays, at all price ranges. My theory above is just my hypothesis on why people are not only getting more bang-for-buck, but also why they're shelling out more bucks on average.Posted by Trev on Sunday, July 9th, 2017 at 4:33am
So this is anecdotal observation based conjecture, but here's what I see driving the market right now:
The number of deals that are falling through due to financing is growing as new mortgage rules and steadily tightening lending practices over the past couple years (and especially since Oct 2016) are keeping marginal buyers on the sideline. Not everyone gets to buy a house nowadays- I would speculate that ownership rates are slightly decreasing as a percent of total households. Don't know if anyone can confirm this statistically???
General inflation, and specifically wage inflation, means that people in the 60-90% of wage earners are making more money than ever- wages in AB are 20-30% higher than they were ten years ago, and interest rates are still near an all time low, which means the purchasing power of Joe and Jane Zinfandel (notice its not six-pack, those are the 25-60% wage earners) has finally surpassed where they were in 2007, despite changed down payment rules, the death of 40-year amortizations, and mortgage stress tests. And they are the ones with the most job security (teachers, nurses, cops, engineers, middle managers), and they are the ones buying houses right now. Thus, the bottom part of the market (condos, anyone?) is struggling with nearly 10 months of inventory as people are priced out and have to rent. Meanwhile, Joe and Jane Z are going to do what they've always done- but the most expensive place they can afford. It doesn't matter that some consider "affordable" payments that are 35% of their salary, and that for some it may be 20% that they're comfortable with; the bottom line is people will buy the nicest house they feel they can afford. And those people can finally purchase as much/more house (dollar-wise) than they could in 2007. The high listings:sales ratio and climbing inventory is part of this- fewer buyers, but the ones that are left are buying the nicest house they can for their families.
Pure speculation, all of it, but if human nature with regards to RE has taught me anything, it's that the majority of people will buy the nicest shack they can, and the average sale price of a house is mainly reflective of WHO can buy right now, and HOW MUCH financing they can get. The high ASP isn't a surprise to me based on those two factors. That said, if you buy into what I'm saying, further gains will be limited by stagnating wages, increasing mortgage rates, potential for further regulation changes. Upside potential for price is there- if more of the lower end of the market drops out. That doesn't mean your house is going to increase in value, only that you're going to have a harder time selling it. Employment needs to increase, and in-migration needs to increase for any sizeable same-house increase in value. I don't see that happening significantly for the near future (18 months out), so don't expect climbing house values. I wish they would, as I've got a rental condo I'd love to unload (cash flow positive to the tune of $300/m if anyone's interested.....jk I'm not using your site to shill my own stuff Sarah) if I thought I could come away with what I paid for it after fees.
My three cents.
^but=buyPosted by Trev on Sunday, July 9th, 2017 at 7:56am
Keep trying to polish that cow pie, Deficit Joe.
1) The interest rate is only semi-market. The central bank is lending out almost unlimited amount of money at an artificial interest, while not expecting any real return, unlike any real market participant.
2) I always support the free market approach. If people lose their homes due to market movements, that's OK. Hopefully, people would learn from their own and others' mistakes. But if you bail them out, they won't learn.
Simple. Because they have the bucks. The relatively poor performance of Edmonton's real estate is due to lower incomes, but due to lower expectation itself. People simply don't believe the price will go up. That's why it's not going up (like Vancouver anyway).Posted by wsn on Tuesday, July 11th, 2017 at 4:30am
The interest rate is up by 0.25. I'm relatively new to real estate. For those who have been involved for a very long time and from experience how much do you think the house price will go up in the next 3 to 4 months as buyers rush to get in before the next rate hike in October?Posted by Wally on Tuesday, July 11th, 2017 at 9:42pm
2%Posted by GM on Wednesday, July 12th, 2017 at 3:17am
There will be no hike in Oct.
Ideally, everyone prefer no pain, but if you know there may be either a smaller pain earlier or a bigger pain later, what people will think?