7 ms·

Canada’s housing market is much more vulnerable to “popping” than the US because everyone’s mortgage rate resets every 5 years. Let me know what happens to pri

by tempsy 3y ago

Canada’s housing market is much more vulnerable to “popping” than the US because everyone’s mortgage rate resets every 5 years. Let me know what happens to prices when everyone has to pay 8% soon.

aquaticsunset 3y ago
Unless legislation changes, investors will just scoop up the sales and keep property values high. It's a pessimistic take but I don't see any deviation from this path (in Canada and the US).
- tempsy 3y ago
  Investors paying 8% can’t make the math work either.
  - aquaticsunset 3y ago
    They're not getting mortgages. All cash purchases are extremely high right now (roughly 30% of all home sales in the US). They can fleece us for "modest" rent increases every year, conveniently just less than 8%, while property values stay high because these investors are able to gobble up the housing stock. Without legislation dissuading this behavior, home ownership will continue to be increasingly difficult for working people.
    - kevin_nisbet 3y ago
      I think the only good news I heard in this area in the US, is one of the big companies doing this was going bust because they screwed up their calculations for how much to offer when buying homes. So if the companies just can't make the math work and go bust that would also be a good outcome here.
    - ddorian43 3y ago
      Pretty sure investors buying have dropped by 50% according to /r/rebubble
    - HWR_14 3y ago
      "All cash" just means "no contingency on financing". It rarely means "will not be financed".
      - deleted 3y ago
        [deleted]
    - xhkkffbf 3y ago
      IT just differently mortgaged. It's not a direct mortgage, but the company that's buying these had to raise the capital one way or another. And if the company didn't buy a house, they have the choice in investing it in something else. If the bonds are paying 8%, the company must believe that the house will return even more which is pretty hard.
    - wil421 3y ago
      Why would they use cash when they could buy 5x the amount of houses by spreading the cash buy into 5 down payments? It’s likely less than 5 if you’re putting 30% down for investment properties.
  - mattnewton 3y ago
    Why would they pay 8%? Surely they can get margin at a cheaper % somewhere other than a retail mortgage if they are a professional investor or firm.
  - CapitalistCartr 3y ago
    But as the quote says, the market can remain irrational longer than you can remain solvent.
- nonethewiser 3y ago
  Who are they going to sell to for more at 8% rates?
- refurb 3y ago
  No, investors won't scoop them up, just like in 2008 in the US, where there were screaming deals to be had for years yet housing was regarded as radioactive for years after the crash.
deleted 3y ago
[deleted]
blindriver 3y ago
I've lived through 2 housing crashes in 20 years in the US, and personally suffered both times, while there's been 0 in Canada. Maybe this time it's different? Maybe, but probably not.
- tempsy 3y ago
  we've been in ZIRP for nearly 20 years so yes it's quite different right now
01100011 3y ago
Losses will be socialized like they always are. Homeowners are too politically powerful. No government will let them bear the costs of their decisions.
- jjav 3y ago
  > Homeowners are too politically powerful. Could you be more specific, in what ways does one homeowner have more votes than one renter? Or if there are special elections where only homeowners can vote, could you give some citations to those? AFAIK everyone gets one vote, regardless of home ownership status. Am I wrong?
  - pcthrowaway 3y ago
    For whatever reason, homeowners in Canada are much better at mobilizing to vote than non-homeowners. Probably because non-homeowners are busy working 60+ hours a week to pay the rent seeking homeowners
  - Tiktaalik 3y ago
    Those wealthy enough to own homes are more likely to have the time (especially if retired!) to be able to organize, communicate with their representatives and assuredly to vote in an election. In contrast the poorest working class people (renters) that are struggling just to survive, are more likely to be so busy working multiple jobs, commuting etc, that they literally do not have the time to vote in an election. Additionally because of this, the two parties that have traditionally formed government, rarely even acknowledge the issues of the working poor, which means that the working poor are even more dissuaded from participating in the process, because regardless of who wins they can be assured that neither party is interested in policy change that would help them.
    - jjav 3y ago
      The picture you paint is that homeowners are the independently wealthy rich people with tons of idle free time, while renters are all very poor working multiple jobs. In reality the vast majority of homeowners are regular working professionals, working those 50-70 hour weeks to pay the mortgage.

by tempsy 3y ago

aquaticsunset 3y ago

Unless legislation changes, investors will just scoop up the sales and keep property values high. It's a pessimistic take but I don't see any deviation from this path (in Canada and the US).

tempsy 3y ago
Investors paying 8% can’t make the math work either.
- aquaticsunset 3y ago
  They're not getting mortgages. All cash purchases are extremely high right now (roughly 30% of all home sales in the US). They can fleece us for "modest" rent increases every year, conveniently just less than 8%, while property values stay high because these investors are able to gobble up the housing stock. Without legislation dissuading this behavior, home ownership will continue to be increasingly difficult for working people.
  - kevin_nisbet 3y ago
    I think the only good news I heard in this area in the US, is one of the big companies doing this was going bust because they screwed up their calculations for how much to offer when buying homes. So if the companies just can't make the math work and go bust that would also be a good outcome here.
  - ddorian43 3y ago
    Pretty sure investors buying have dropped by 50% according to /r/rebubble
  - HWR_14 3y ago
    "All cash" just means "no contingency on financing". It rarely means "will not be financed".
    - deleted 3y ago
      [deleted]
  - xhkkffbf 3y ago
    IT just differently mortgaged. It's not a direct mortgage, but the company that's buying these had to raise the capital one way or another. And if the company didn't buy a house, they have the choice in investing it in something else. If the bonds are paying 8%, the company must believe that the house will return even more which is pretty hard.
  - wil421 3y ago
    Why would they use cash when they could buy 5x the amount of houses by spreading the cash buy into 5 down payments? It’s likely less than 5 if you’re putting 30% down for investment properties.
- mattnewton 3y ago
  Why would they pay 8%? Surely they can get margin at a cheaper % somewhere other than a retail mortgage if they are a professional investor or firm.
- CapitalistCartr 3y ago
  But as the quote says, the market can remain irrational longer than you can remain solvent.
nonethewiser 3y ago
Who are they going to sell to for more at 8% rates?
refurb 3y ago
No, investors won't scoop them up, just like in 2008 in the US, where there were screaming deals to be had for years yet housing was regarded as radioactive for years after the crash.

deleted 3y ago

[deleted]

blindriver 3y ago

I've lived through 2 housing crashes in 20 years in the US, and personally suffered both times, while there's been 0 in Canada. Maybe this time it's different? Maybe, but probably not.

tempsy 3y ago
we've been in ZIRP for nearly 20 years so yes it's quite different right now

01100011 3y ago

Losses will be socialized like they always are. Homeowners are too politically powerful. No government will let them bear the costs of their decisions.

jjav 3y ago
> Homeowners are too politically powerful. Could you be more specific, in what ways does one homeowner have more votes than one renter? Or if there are special elections where only homeowners can vote, could you give some citations to those? AFAIK everyone gets one vote, regardless of home ownership status. Am I wrong?
- pcthrowaway 3y ago
  For whatever reason, homeowners in Canada are much better at mobilizing to vote than non-homeowners. Probably because non-homeowners are busy working 60+ hours a week to pay the rent seeking homeowners
- Tiktaalik 3y ago
  Those wealthy enough to own homes are more likely to have the time (especially if retired!) to be able to organize, communicate with their representatives and assuredly to vote in an election. In contrast the poorest working class people (renters) that are struggling just to survive, are more likely to be so busy working multiple jobs, commuting etc, that they literally do not have the time to vote in an election. Additionally because of this, the two parties that have traditionally formed government, rarely even acknowledge the issues of the working poor, which means that the working poor are even more dissuaded from participating in the process, because regardless of who wins they can be assured that neither party is interested in policy change that would help them.
  - jjav 3y ago
    The picture you paint is that homeowners are the independently wealthy rich people with tons of idle free time, while renters are all very poor working multiple jobs. In reality the vast majority of homeowners are regular working professionals, working those 50-70 hour weeks to pay the mortgage.