We bought our house in Parkdale back in '89. It’s all paid for. I’m probably gonna die in it. I don’t care what it’s worth. Someday’s it’s just hard not to be a smug bastard.
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L.A. should totally move to Toronto.
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I’m glad things are cooling off in Toronto, it’s tough how many people get hurt by these bubbles. I thought Vancouver was slowing down too. Is that not true @D_Farmz?
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Yeah, I don’t mean to say anything bad about variable rate mortgages in principle, I just wasn’t impressed with the sales pitch I was given for them at the time I was given it which made me wonder if I was getting scammed or talking to an idiot. It was like they thought interest rates were going to keep going down from 0.25%.
I agree with you about the 5-year thing. Fixed rate is what it is. Fixed vs. variable is a 5-year decision.
But obviously the question is whether rate increases are going to mean people lose their homes. That’s a rotten situation, and people are vulnerable to that whether they have fixed or variable mortgages when there are 5-year renewals.
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Toronto’s property market might be imploding, but you won’t be able to tell that from one month’s data. Especially not February data. February is a very slow month for real estate, so that average price is based on very few actual sales. Small changes in the types of house that sold last month will make for big shifts in the average price.
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It slowed briefly after the foreign buyer’s tax was introduced and then rebounded. Townhomes and condos are still rising, as that’s all that non-millionaire buyers can realistically afford. The rate of increase on single family homes isn’t rising exponentially anymore, but it’s still climbing.
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The risk of loosing your home is a terrifying scenario. I’m not sure how it happens though or even how often.
Even if the interest rates have risen, the benefit of having spent 5 years putting money down the principle should leave people with margin to play with. Perhaps a drop in property value (preventing refinancing) colliding with a sharp increase in interest rates might do the trick.
Either way it’s a tough situation to be in and it gets worse as people stretch their budget fit a bigger mortgage. In most places you can choose something a bit older or smaller (unless you are truly a borrower with marginal ability to repay) but in Toronto and Vancouver (increasingly in Calgary also), getting into a truly affordable property can chain you to a commute that eats your life.
our lowest “paper” denomination is $5.
$1 and $2 coins have been around for years.
I’d like to see a $5 coin soon. We could put an orca on it and call it a ‘finny’. 
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Love it! I always wanted to see a $5 coin with a beaver on it. It occurs to me now that that may be a bad choice from a toxic masculinity standpoint.
It’s not a very large margin, though. If someone bought four years ago when the base rate was 0.25% and they are renewing now with the rate at 1.25% that could easily overshadow the amount of principle they’ve paid down.
The problem is people buying houses they can barely afford to make the payments on in the first place. Of course with absurdly low interest rates and an seemingly ever expanding housing bubble buying the most expensive house that the bank will let you looks like a good plan.
It’s not going to be like what happened in the US in 2007-8 because we never went quite that insane with our mortgage rules, but a person who is already house poor might get into trouble if their mortgage is up for renewal this year or next.
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So, am I reading this correctly that Canada just doesn’t have long-term fixed-rate mortgages the way the US does? Is the US unusual in that regard? Because while yes, the subprime mortgage crisis a decade ago was ridiculous, the standard mortgages here are 15 or 30 year fixed rate. I know for a fact that my mortgage from 2016 will have the same interest rate, and same monthly payment, from now until 2046 (assuming I’m still in this house and haven’t paid it off or refinanced).
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Yeah, in Canada typically you agree to a mortgage for a 5-year term. So you might be amortizing over 25-years, but every 5 you have to renegotiate the rates (of course this also means that every 5 years you are free to take your business elsewhere).
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While longer terms do exist from some lenders, 99" of all mortgages in canada have a term <= 10 years and only 8% are in that 6-10 year range (data from 2010).
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I mostly like that calling it a “finny” plays off the old slang “fin” for a $5.
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I’ll believe that the bubble’s burst when I don’t see houses in my hood selling for crazy sums… One across the street for a million. Another a few blocks away selling for two and a half million, or $648,000 over asking.
I’m not saying it won’t burst, but I don’t think we’re there yet.
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“Imploding” and “bubble” are really not the right words here. The market has gently dropped, for a very short period of time. The prices are still high and it’s hard/impossible to imagine them going down in the short term. If you want a fairly reasonable, although slanting a bit to the right, insider’s analysis, there is one here: http://torontorealtyblog.com/archives/20548
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You can’t make everybody happy. Value for the last buyer equals cost for the next one.
If we had a system of privilege based on middle-class people “investing” their “wealth” in food rather than shelter, so that everybody had huge freezers full of hoarded nutrition and the price of food was expected to go up and up forever, then eventually some people would starve and other people would be wringing their hands about how they don’t want food prices to decline TOO much. Not all at once. Think of the recent foodbuyers! How can they get their investment back?
The way we deal with housing in THIS universe is just as crazy as that.
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Cory tends toward the hyperbolic in his style, and I agree that “imploding” isn’t an accurate term. “Leveling off” or “Correcting” would be better descriptors, reflecting what’s probably a re-set to (still-insane) 2015 or 2016 levels driven by a combination of increased supply by developers (and panicky sellers) and government policies designed to cool the market.
Those policies remain important because the term “bubble” is accurate is describing the current norm for residential real estate in the downtowns and inner suburbs of alpha-tier (and some beta-tier) global cities. The real estate interests in Toronto may be smart enough to accept this deflation of the bubble as a temporary respite needed to draw in new buyers before it’s re-inflated.
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@smulder I don’t believe that housing should be used as an investment by any means. However, the rental market in Vancouver is equally ridiculous and if someone managed to scrape together enough to buy a condo to get out of the insane rental market, I don’t think the value of their home should tank while their interest increases, in the case of a massive bubble burst. No one who lives in their mortgaged home deserves to owe more against their place than what it is worth, just because the market crashed.
Obviously speculators and investors should not be turning profits at the expense of others. I’m all for a market stabilization, as someone stuck in the Vancouver rental market for, foreseeably, the rest of my life. I just don’t think the average buyer should have their homes jeopardized to punish the less scrupulous property owners out there.
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