Federal move on housing. Did they go too far?

[CITIZEN_2015]

Nice crystal ball you have.

It is basic economics no crystal ball needed to see two plus two is a four.

Edited October 4, 2016 by CITIZEN_2015

[Smallc]

It is basic economics no crystal ball needed to see two plus two is a four.

Except it isn't as simple as that.

[BC_chick]

There will be severe economic consequences in 6 months to a year from now. Not only they destroyed the housing market as nobody can qualify to buy houses now or very few do but they also shut down the Canadian economy.

You didn't answer the question. Interest rates are very low which means the people taking out huge mortgages may very well end up seeing some hikes in the future of their mortgage.

What is wrong with ensuring that people can afford it?

You'd rather see a US-type of meltdown? Because that's exactly where we were headed with our average household debt.

[CITIZEN_2015]

Except it isn't as simple as that.

As I see my equity drops by 20 to 30% I stop traveling (the hospitality industry will suffer). I cut down on clothing and food (the textile and food industries will suffer). Keep my old car (the auto industry will suffer).I pay much less GST and PST (the federal and provincial budgets will suffer). Now "I" was an example of an average Citizen. There is also no brainier to calculate what level of income is needed to qualify for a $350,000 to #400,000 mortgage to buy an average house outside the heated region even.

[Smallc]

As I see my equity drops by 20 to 30%

Did that happen today, already?

I stop traveling (the hospitality industry will suffer). I cut down on clothing and food (the textile and food industries will suffer). Keep my old car (the auto industry will suffer).I pay much less GST and PST (the federal and provincial budgets will suffer).

Why? Nothing in your life - nothing - has changed.

[CITIZEN_2015]

You'd rather see a US-type of meltdown? Because that's exactly where we were headed with our average household debt.

That is exactly what the Feds just engineered.

[Smallc]

That is exactly what the Feds just engineered.

You're stating an opinion as if it's fact.

[CITIZEN_2015]

Did that happen today, already?

.Why? Nothing in your life - nothing - has changed.

No you know I meant over a year or so. Are you saying that in a market that some 90% of potential buyers were just kicked out of the market then prices would stay the same????? Really?

[BC_chick]

That is exactly what the Feds just engineered.

Still didn't answer my question. What's wrong with ensuring people can afford a rate hike?

[Smallc]

No you know I meant over a year or so. Are you saying that in a market that some 90% of potential buyers were just kicked out of the market then prices would stay the same????? Really?

90%? Not likely. You're overreacting.

[?Impact]

As I see my equity drops by 20 to 30% I ...

You don't spend your equity in your house, what ridiculous conclusions you are drawing.

This is a good move, the economy will prosper and people will be able to afford housing.

[msj]

Here is a timeline of governments trying to cool housing over the past 8 years: http://www.bloomberg.com/news/articles/2016-10-03/how-canada-has-tried-to-cool-down-its-housing-market-chronology

Maybe the Liberals will be more effective than the CPC.

They usually are so no surprise there.

[BC_chick]

You don't spend your equity in your house, what ridiculous conclusions you are drawing.

This is a good move, the economy will prosper and people will be able to afford housing.

Agreed, you're always going to afford something relative to the market in which you bought your home.

Some people just like to be rich on paper I guess. They managed to get in the market before it shot up so they want to close the door behind them for anyone else who didn't get that chance.

In order to preserve their perceived 'wealth' they would prefer people continue to take on mortgages that will cause hardship should rates go up 0.5%.

[overthere]

It'll make things more affordable. They've now curtailed the local demand in the same way Vancouver had done to foreign demand.

Inevitably this leads to prices coming down. It's basic economics.

The whole country needed an intervention, not just Vancouver and GTA.

No, the whole country does not need an intervention at all. There is no pressing need- in the tiny portion of Canada that is not the GTA or Lower Mainland- to crush the housing industry.

Who backs the mortgage insurance?

Who regulates lending and the banks?

The mortgage insurance is backed by the buyers of the houses, who pay very substantial premiums. Note that CMHC and insurred loans have not been available to houses costing over $1 million(hello Van and TO) for a couple of years.

Banks and mortgage lenders are regulated by the feds, mostly via the Bank Act with dates from near Confederation. The Regulations stemming from that Act have been used and manipulated by nearly every PM and Finance Minister to diddle with CMHC and influence the housing industry.

[BC_chick]

No, the whole country does not need an intervention at all. There is no pressing need- in the tiny portion of Canada that is not the GTA or Lower Mainland- to crush the housing industry.

More than 50% of Canadians could not afford a $200 increase in their monthly expenditures. The stress test is what the banks ought to be doing on their own but since they won't, it has now been legislated.

http://www.huffingtonpost.ca/2016/09/28/canadian-debt-levels_n_12235290.html

It'll be great in ensuring that there isn't a meltdown down the road because because people should not be taking on mortgages if the maximum they can afford is historical rock bottom interest rates.

Also, if you think the prices across Canada are fine, then there is nothing to worry about in those markets.

Edited October 4, 2016 by BC_chick

[overthere]

More than 50% of Canadians could not afford a $200 increase in their monthly expenditures. The stress test is what the banks ought to be doing on their own but since they won't, it has now been legislated.

http://www.huffingtonpost.ca/2016/09/28/canadian-debt-levels_n_12235290.html

It'll be great in ensuring that there isn't a meltdown down the road because because people should not be taking on mortgages if the maximum they can afford is historical rock bottom interest rates.

Also, if you think the prices across Canada are fine, then there is nothing to worry about in those markets.

Every insured mortgage in Canada qualified via strict CMHC rules, and the prime part of that is spending 32% of income max on mortgage. Housing for the middle class is most certainly affordable outside the twin Centres of the Canadian Universe, but all are hit hard by this new rule. The smug iteration of 'nothing to worry about ' is straight from the Handbook of Economic Jeanius subtitled as 'the budget will balance itself' . Spare me.

[BC_chick]

Every insured mortgage in Canada qualified via strict CMHC rules, and the prime part of that is spending 32% of income max on mortgage. Housing for the middle class is most certainly affordable outside the twin Centres of the Canadian Universe, but all are hit hard by this new rule. The smug iteration of 'nothing to worry about ' is straight from the Handbook of Economic Jeanius subtitled as 'the budget will balance itself' . Spare me.

I'm not a smug Liberal supporter who thinks the budget will balance itself. Maybe you haven't been aware but I've been tremendously critical of Morneau's spending, but I do think this decision was a good call and I do so for the same reason I am critical of Morneau - I believe in responsible borrowing.

Most people lack to restraint to consider a rate hike and they are taking out the maximum they can afford under the current interest rates (my link earlier discussed this). To continue down the same path will have catastrophic consequences should rates go up.

As for the issue of 32% of income, I'm not sure if you are being deliberately misleading or if you really didn't understand my point. Yes, it's 32%, but the new rules will ensure that people will not go over 32% in the case of a modest rate hike.

As such, people are not forced to forfeit on their mortgages if rates go up in a year or two.

[CITIZEN_2015]

You don't spend your equity in your house, what ridiculous conclusions you are drawing.

This is a good move, the economy will prosper and people will be able to afford housing.Quote

The only thing ridiculous is your statement. Do you have the ability to read or understand. Nowhere in my post I even remotely indicated that I want to spend the equity in my house but rather stated that consumer confidence will drop as they lose their equity so they reduce or stop spending on other items such as cars, clothing, food, travelling and I used myself as example. Read and try to understand (i know too much to ask from you) and then comment or respond.

Some people don't understand basic economics and throw accusations like saying "Some people just like to be rich on paper" or like "they want to close the door behind them for anyone else who didn't get that chance".

If I can sell my property at 200 thousand higher than what I purchase 5 years ago that is real wealth not paper wealth and it is harsh rules disqualifying most people from mortgage loans that closes the door for other people left behind in the housing. People losing property value lose confidence in the economy and low consumer confidence always triggers slow economic growth if not a recession.

Edited October 4, 2016 by CITIZEN_2015

[BC_chick]

The only thing ridiculous is your statement. Do you have the ability to read or understand. Nowhere in my post I even remotely indicated that I want to spend the equity in my house but rather stated that consumer confidence will drop as they lose their equity so they reduce or stop spending on other items such as cars, clothing, food, travelling and I used myself as example. Read and try to understand (i know too much to ask from you) and then comment or respond.

Some people don't understand basic economics and throw accusations like saying "Some people just like to be rich on paper" or like >they want to close the door behind them for anyone else who didn't get that chance".

And some people are really irrational if they stop travelling or buying clothes just because the groundwork has been implemented to ensure that your new neighbours don't forfeit on their mortgage.

[CITIZEN_2015]

As I said some people don't understand basic economics and the role consumer confidence plays and how it affects every aspect of economy as related to growth and employment and the danger of deflation and consequences of downturn in housing market.

[BC_chick]

Some people got an A in economics and understand very well when other people are being irrational about the sky falling when in fact the measures in place are put there to ensure that the sky does not fall.

[msj]

As I said some people don't understand basic economics and the role consumer confidence plays and how it affects every aspect of economy as related to growth and employment and the danger of deflation and consequences of downturn in housing market.

You are presuming that you do understand it.

I doubt any of us have much of an understanding of it giving how quickly it can change.

Ultimately, confidence must rest on a foundation of substance: character, capacity, and capital. The 3 C's of lending.

Canada has blown through all 3 in the quest to purchase spiraling higher houses fueled by spiraling higher debt loads which are received on ever flimsier underwriting standards.

[CITIZEN_2015]

Would some of you ladies and gentlemen who oppose my posts just please take a moment and read what I have posted before commenting. I am not saying no actions were necessary because indeed Vancouver and Toronto/GTA had serious problems with skyrocketing housing prices so yes actions were necessary but what I am saying is that the issue was local and local governments should have taken action to cool down markets NOT at the federal level was a clear mistake because housing is already very slow in many municipalities even before these tough measures and it is now going to nose dive in Ottawa, Montreal,, Calgary, Edmonton, Saskatoon, Regina, Winnipeg and all small municipalities. That is 70% of the country will suffer now thanks to Feds and their miscalculated actions. To you since you live in BC or southern Ontario then those two regions are the entire Canada? Well not so. Many other regions have already slow market or had a balanced market and they will collapse now.

[Smallc]

Would some of you ladies and gentlemen who oppose my posts just please take a moment and read

You first?

http://business.financialpost.com/personal-finance/mortgages-real-estate/cmhc-warns-of-strong-overvaluation-in-canadian-housing-markets-very-high-evidence-of-problematic-conditions-in-vancouver

[?Impact]

That is 70% of the country will suffer now thanks to Feds and their miscalculated actions.

Nobody, repeat nobody, is suffering. If you can't afford the house, then you can't afford it - period. Overextending yourself based on very low interest rates is a big problem, no matter what part of the country you are in.