Will they be scary for the bears??
We really cannot go up much higher in price without jeopardizing the 'bubble bursting graph'.
Real estate has definitely cooled from the heat of summer, but is still being bid, supported mainly by incredibly low rates.
Five year variable rates are as low as 2.25% at ING!
No wonder some folks are saying..price be damned...the carrying costs are low....so I am buying!
As long as rates stay low, they are fine. Once rates rise they will be skewered and we will all be picking up the tab, either through CHMC bail-outs or our savings will be inflated away or home owners in trouble will get tax relief or other help.
Once again this potential crisis-in-the-making could be stopped right NOW. Raise the minimum deposits and severely restrict the CHMC are two first steps.
Heck put a Federal RE sales tax in place taking 1% from buyers and 2% from sellers, so when the banks start crying about foreclosures or the CHMC needs a capital infusion, the government has a 'sinking fund' to pay out of, not just throw the bill at everyone else. That extra 3% will help cool the market, then when RE strats to fall down, take it off.
Owning a home is not a decision to take lightly. A deposit must be saved, a potential rise in interest rates must be budgeted for, repairs and assessments (eg a special post Olympic assessment??) must be expected.
It is too easy to make an offer and sign on the dotted line and then wail when it doesn't work out.
If you have any doubts about that..take a look at the US. Despite the soaring stock-market, in the third quarter (which just ended) there were over 900,000 foreclosures in the US, the highest number on record...ever.
Who is the gate-keeper? The Commission-based Realtors and mortgage brokers who could be telling the buyers what they can afford and should not over-extend themselves? I am sure some are and some aren't.
Bank of Canada Governor Mark Carney made some weak noises about the housing market being frothy and people taking on too much debt at these low rates.
If he believes that he should walk across Ottawa to Stephen Harper's office and tell him we have the potential for another bubble, which will be supported, eventually, by the money of the prudent.
Happy Halloween!
"We really cannot go up much higher in price without jeopardizing the 'bubble bursting graph'."
ReplyDeleteFiiiish. Tsk, tsk. Sure we can.
You assume the last 'peak' was the top of the bubble.
If we go higher than that peak and establish a new high, then what we have just been through is a jagged stumble on the way to the peak.
The bubble will burst and that burst will be spectacular - we all know that.
We just assumed that the last high was the peak.
Well it would indicate that the bubble was not in bursting mode, and the burst had been delayed for now.
ReplyDeleteThat's assuming it was going to follow the path of the average.
If we are headed up to a new 'peak'(wash your moth out!).. then I think there will be some bears hanging from lamp-posts or emigrating to Las Vegas :)
Based on the charts on yattermatters the "double-top" formation the bears have been praying would hold has not held and the Vancouver market, specifically attached and apartments have made new highs.
ReplyDeleteNo, we're at the double-top now. We'll see if it goes any higher.
ReplyDeleteBTW from my understanding, the second top is near the price of the of the first. It can be slightly lower or slightly higher.
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