Is it just me, or does anyone think a housing price decline is coming

The 2015 rising rates bit shouldn’t be too relevant, because mortgage prices respond more to the long end of the yield curve than the short end, and it’s the long end that is starting to rise right now.

In the UK many people have floating mortgages indexed on the Bank of England rates.

The Deutsche report, and all reports on Canadian housing, tend to say “Canada is overvalued” as a country because its overvalued as a country. Take out Vancouver and Toronto and Canada is not expensive. I believe price to income is near 5x including all cities but excluding Toronto and Vancouver, it drops to 4x. Considering 3-3.5x is the long-term mean valuation, and we have 5-year mortgage rates that are at 40%-50% of the long-term mean rate, I don’t see a major overvaluation outside of Vancouver and Toronto and to be honest, at 40-50% of the interest cost, 5x isn’t even that crazy. eveyone is afraid of rising rates and that’s why everyone assumes housing is expensive. at a 6% mortgage rate, housing is expensive but what if we sit at 3% for 10 years and everyone who buys today is halfway paid off by then? to expect 6% mortgage rates when gdp estimates 5 years out are below 3% is confusing.

using the price-to-rent metric, the Vancouver-Toronto skew is much worse. where i live, the price to rent metric is near the best its been in decades due to a 2.4% variable financing rate.

another thing, Canada is not the U.S. Canada does better at paying our top 50% well, not just our top 10%. our social programs make us more recession proof so prolonged housing market declines are less likely. 52 week unemployment and maternity benefits allow most people to make their mortgage payments.

i’m not a huge housing market bull but I’m getting tired of prognosticators lumping the rest of Canada with Vancouver in particular. price to income ratio in Vancouver is close to 9x and Vancouver makes up something like 15% of the Canadian market. it doesn’t take a rocket scientist to see that Vancouver skews the national data by quick a bit.

Not sure what the market share of fixed vs. variable rate mortgages is in the UK, but in the US, 30-year fixed is the most popular financing option. There are many laws and regulations in place to support this system, which creates huge systematic risk in real estate.

I want to slit my wrists every time I calculate the cap rate for an apartment in Boston. I imagine ppl in NYC feel the same.

I think the US housing market going forward is going to be driven much more by local supply/demand factors then the pre-2006 everything rise all at once mentality. In Texas the market has done well the past couple of years mainly because the housing bubble barely had an impact since the state didn’t see the double digit increases in the preceding years.

At the end of the day though, you have to live somewhere. I bought a place this year thinking I can either spend $1100 a month on my full payment and get the value upside or drop $900-1000 on rent each month.

Also I’ve been waiting for the Canadian market to fall for two years. Hasn’t happened yet. People who are waiting on the US to do the same may keep waiting. Just as an anecdote, all of the people we send up to our Alberta office from the US complain about the cost of housing.

I’ve been waiting for the canadian market to slow down since 2006.

I remember a discussion I had that year with a few people where I was confidently stating that it will happen soon. The Canadian market has been in an unprecedented 15 year bull run. Not even the global meltdown of 2008-09 could stop it.

There will be a landing at somepoint (soft or hard) but as a wiseman once told me, timing the market is a fool’s game.

Cash is king and it’s great to have it when blood is all over the streets. Just don’t expect to know when that will happen.

I’d say it’s kinda like picking a scab before its healed. But they gave it enough time, so any pullback won’t be like what we all suffered through.

I was amazed the first time I found out fixed rate mortgages is really only a USA thing.

That’s because you have long term fixed rates. Up until recently, I think Canadians could only have a 5 or 7 year fixed rate.

Yeah I thought it was strange how Canadian mortgage rates reset after a few years. I remember when I bought my house asking my parents how it was different there vs what I was doing in the US and they both conceded they had never bought a house with a mortgage so didn’t know. Buying a house in the US with a mortgage is a royal pain in the a** though…

^ Another big difference is you can deduct the interest for tax purposes.

^ Another big difference is you can deduct the interest for tax purposes.

Though that is true, only about 1/3 of tax payers itemize their deductions and therefore get any value from the interest deduction (the rest take the standard deduction). It’s a huge gift to the upper middle/upper class, and one of the few things that is holy in the US tax code. It predominatly benefits people in expensive housing states (NY, NJ, CA) so Dems will not touch it and Republicans won’t want to touch it under the “no to higher taxes” reason.

The WSJ a couple months ago had an awesome article and interactive maps showing the % of filers in each state claiming mortgage interest deduction, charitable deduction, average amounts, etc.