I can see it going up .25 and then .25 again. I would be surprised if it went up a full percent in a year.

can see a few people just say fuck it and can't afford paying their mortgage if it went up. Is it going to slow down; maybe for a month or so.

Higher interest rate will not solve inflation, it'll help, they need to tame supply chain issues, labour issues.

Speaking of RE flyers, this came into the mail at my parents lol

https://i.imgur.com/2nLb4mT.jpeg

Also you guys didn't factor in New immigrants, from what I've heard we're super backed up with immigration, buddy guys waiting to come in, plus ppl from HK/ China plus I guess now Ukraine and Russia :lawl::troll:

So I don't see prices dropping much. Yes rates go up. But they have a fine line to walk on. One new variant and back to zero it is. The gov has no more money to hand out to the truckers. They can't cure inflation with just rate hikes. Rate hikes ain't building new farms or highways, or send truckers back to work. Just make everything cost more.

I was expecting a rate hike somewhere between 2022 to 2024 so that we can save our dollar + inflation. I was assuming there was a reasonable 7 - 8 rate hikes over that time period. So 1.39% fixed at that time + 1.75 - 2% rate hike = around 3 - 4% rate at the next renewal.

Didn't know if we would ever trend back to 5-7%+ environments so rather lock it in earlier than later.

Great way to swindle home owners when they see their house back on the market 40% higher than they sold it.

This.

https://dailyhive.com/vancouver/metr...n-housing-2022

Some of you are nuts to think prices will crash down. Floods of immigrants coming here. HK people moving back with Macau money. Lots of locals waiting with cash burning a hole in their pockets. Simple supply and demand economics. The market isn't hot it's gone crazy. Like I tell our clients it's the Wild West now. Anything goes.

There's 8 announcements a year, I wouldn't be surprised if I saw 4 raises over 8 announcements. Not like 2 - 4% interest is a lot anyways.

I don't think the people that are buying in today's market will default at 4%. With the qualification required to get a mortgage, seems like all the the people who are buying right now are single income $80 - 120K+, or it's just a rental unit and they are living at home.

Regardless, if the parents gave them a $100 - 300K downpayment, odds are parents will also help them pay off the mortgage if interest rates got too high with their basement suite rental incomes.

You should troll them with a text that you have offers from mainland China for 30% more than the current local highest rates, and see if they can top it

They can top it > profit

They can't top it > reply with well then you ain't the best option are you

I agree with a lot of what Tapioca said below where a crash would only be a crash in hindsight after all the data has been collected. If you really want me to put hard numbers to define it, then I'd say a 20%+ drop in a 12 month rolling average in transaction prices. It would be hard to tell even if we are in the midst of a crash as it moves slowly.

Even with those numbers it's a little more nuanced than that. Housing isn't a liquid asset and things take time to sell and close. You might not see numbers for awhile because 1) if things start trending down ppl will hold on to their wallets more and transactions will lag, 2) there are trickle up/down effects in the market as it's segregated into condos/townhouse/SFH and changes are clustered. There's also differences in terms of location and quality within each segment so it'll take time for the crash to hit all sectors. 3) There are ppl way smarter than most of us here crunching numbers and figuring out things at the BoC and all the various banks to try and prevent it being a bloodbath.

Now considering though even at a bottom of 20%, I might still have broken even on my house that I bought last May, that's how much the market has gone up.

Just wanted to quote this for the above comments.

A lot of the housing shortage bust articles talk about how much housing there is in BC. But the problem is most of BC isn't where ppl want to be. There's realistically only 3 cities where ppl flock to, that's GVRD, Victoria, and Kelowna. Housing everywhere else means very little.

New immigrants have been raised a few times, and there are more coming. A lot of them would be high earners as well and will prop up/demand more condo/townhouse supplies. That pushes the pressure on SFH as more and more along major routes will be torn down to build higher density dwellings.

Not just immigrants. There's high income Canadian citizens from across the country moving here. Anyone with successful business/commercial property outside of BC that benefited from good cap rates are moving here with deep pockets.

I'm not as bullish on the RE market as some of you because but I'm still expecting the rate to easily hover around 2% a year from now.

Anyone who thinks higher rates won't impact our RE market is out to lunch or too worried about their paper gain getting erased.

Being worried about paper gains and being realistic about it are two different things. My upper guess of 1.5% to your 2% prediction honestly isn't that far off.

2% isn't really enough to scare people off and cause a fiery crash, might cause the gains to taper off though. The last time that rates started creeping up in 2017/2018, the market just took a pause.

This isn't 2018, it's a different market, higher debt levels and unsustainable gains.

And saying the Canadian real estate market isn't rate sensitive is ridiculous. It's because of rock bottom rates the Canadian RE market is a dumpster fire. Any rate hike will make a lot of buyers think twice about taking on a mortgage they can't afford.

Just curious about what you guys think. What about stocks? Specifically Canadian bank stocks. Where will people start parking their money if RE starts to level after the rate hike?

I've been hearing analysts say feds might not raise rates due to Russia with the market uncertainty :pokerface: so you might wanna thank Putin for that

Here is my take on the whole situation.

I believe that the rate will increase (duh). But the speed at which it increases would be much slower than what the market wants people to believe.

The reason is simple. Usually when there's is high inflation, it means that the economy is overheating and the central bank reduces the money supply by increasing the rate.

That's how it works in theory if you go to any econ 101 class. The problem, though, is variables that one needs to consider when doing calculations.

We have a huge uncertainty in the equation: Covid. This is not something that ends overnight. Yes, the worst of *Omicron* is over. But as the virus continue to evolve and mutate, it's a matter of time that some other mutation ravages through the world. And we can see South Africa and Norway being hit with BA2/3 variants.

This would put severe pressure onto the supply chain, more specifically, human resources because anything that requires frequent person-to-person contact is just a breeding ground for a covid outbreak.

Thus, the economy would not be overheating, but rather just the bare nominal amount of increase that is reflected in the supply chain/economy in general. And continual tamping of monetary policy makes little sense when you don't see the economy reflecting that. Usually, when the bank raise rate, it's because the economy is so hot that is running out of control. We are hardly there or anywhere close.

If we take China's case as an example, where it basically used RE as a flood-diversion zone to absorb excess inflation in the economy for the last decade while it keeps its currency relatively stable at a pegged value to USD. I think it is possible that something similar happens to Canada in the short-mid term as they deal with COVID aftermath. If you take a look at the recent USD-CAD chart, you'd see that for the first time in a long while, the CAD has decoupled from oil. Meaning that an increase in petro price no longer has a significant influence on CAD.

But it's not good news for RE bulls either.

Our gov't needs money. They have spent through the roof during covid. What is going to happen when you suddenly drop the country into crisis? You cut gov't income by a huge amount (less taxes to collect) and people blame the gov't. Whoever is in power now would be gone. No sane politician would do that.

Instead, they would increase the rate... only so much that the bubble doesn't blow out of control... but keeps the bubble going.

For them to really start to tighten up, we need either covid to end or the whole human resource shortage comes to an end and the economy drives full steam ahead.

So, I think we wouldn't see a 20% increase over 6mth like it just happened, but don't expect the market to suddenly crash into oblivion either.

We're in a tough position right now though, we have so much debt that we have to print money otherwise we'll default on our loans/bonds.

Raising the rate just hurts the governments ability to pay back the money they are spending.

It's a really pickle we're in right now. We need to increase interest rates, but it's such a delicate issue. I don't think anyone really knows what the best outcome is.

I disagree with Harvey on the outlook of rates and RE prices, but that's cause his life experiences are different from mine, we see things differently and I think it's ok to agree to disagree. That's also the other reason why things aren't always easy to predict because what happens in the real world is an aggregate of actions from everyday normal ppl like him and I.

What's happening in Eastern Europe also throws a huge wrench into things, and eyes are on China to see what they do or don't do in the next month.

I remember the doomsday people in this thread saying the market was going to crash 50% when homes weren't selling in 2019 when in reality prices dropped maybe 10% because sellers just wouldn't sell for lower since most people have so much equity in their homes

Anyone predicting a crash from a 1% hike in rates is just speculating, and historically don't have a track record of being right

I'm a skeptic that rates will rise a lot (from .25% to 2%) b/c I think there's too much fragility in the economy for that to happen. I suspect that gov'ts will all let inflation (4-5% vs 1-3%) ride higher than normal until they see more stability in the economy. The betting man in me says we get to 1% this year and see 1.5% next year.

As for housing prices - there's no crash happening in my view but we should see a slowdown or stability show up b/c of the rate increases. I just think the housing shortage is way too severe to push enough people out of the market - I think demand is so much higher than supply that interest rates would have to go WAY higher to cause a "crash" (I think we need more than half the buyers to quit the market to see any real downturn). The stress test already weeds out a lot of people who want to buy and we still see craziness in the market.

The government knows fast rate hikes will cripple the country. Although there will be hikes I do agree it'll be slow. But anyone who's in the position to buy will still be in the same position regardless what the rate hikes will be. Banks will also find a way around things. All account managers have numbers to hit every quarter. This RE train will still chug along

This the best line I hear in our local RE market:

“Borrowers are tested for the ability to repay a mortgage at a higher rate, so defaults are unlikely”.

I know people who couldn’t get a mortgage through the front door of the bank based on their salary but someway found the back door of the same bank through a broker and got themselves a million plus mortgages. This is not how a "normal" RE market should operate.

And not sure what the logic is when people claim a rate that could hit 2% won't impact our pandemic induced RE market bubble. The last time we had a rate around 2% was prior to 2008 and since 2008 you can chart how RE prices and rates have basically moved in tandem.

I'm not saying the RE market will crash by 50% but it can (and most likely) go down to pre-pandamic levels. Anyone who bought at peak prices could be a in for a shock because what I've also realized is a lot of people are oblivious to what's happening with rates and the economy in general. They react when it's too late and that's when panic sets in and panic is the last thing you want in this market.

and also, just because people pass the stress test, doesn't mean they actually have the ability to afford the payments at that rate. it's just a test.

Continual rise for this year, stabilize next year rising rates. Doubt we will see a decrease. Increase immigration and a population who believes real estate is the only way to make money.

Debt? We aren’t getting out of it. Mini Japan here we come. lol

I agree with you that Canadians are rate sensitive and many are pushing their affordability.

However, while a few rate hikes might slow the crazy pace that prices are moving upwards, that is still a VERY far cry from prices coming down at all, and even further from them coming down meaningfully.

I don't believe for a second that the (extremely well telegraphed) slow inevitable upward movement of rates is going to trigger any sort of meaningful decline in prices over where they are today. I could be totally wrong, but this is my belief.

-Mark