Quote:
Originally Posted by Carl Johnson
Anyone else surprised by how much and how fast the mortgage rates have risen the last few weeks? Canadians who have too much household debt and still on variable rate mortgages are gonna feel the full forces of this. When you are the 2nd most expensive city on planet Earth and an overwhelming supply of housing stocks about the hit the market in the next couple years, it just feels that the housing bulls are losing their cases day by day. I can't say this is finally the straw that broke the camel's back but will definitely watch incoming data on how the market adjust to high rates in the 2nd half of this year.
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not at all, 5/10 year treasuries spiked - mortgage rates follow (in the US, it's based on 30 year paper, as they offer 30 year mortgages), and we all knew it was coming - rates are only super low b/c the fed (in the US) has bought all the treasuries at super low rates to flood money into the market to get businesses to invest and grow. How anyone could not see that the US is recovering, slowly, but recovering is beyond me.
i actually think this is the straw that breaks the camel's back - for all the ppl who say 'the chinese are buying up vancouver' - two things, 1, the majority of houses are bought with mortgages, and 2, china is started to see some HUGE slowdown in credit availability - so whether you believe the chinese buying up vancouver story or not, no. 2 harms it HEAVILY. It's not true, anyways - it's a small sect of the sales, but they attract the most headlines - lets not forget until recently it was americans doing the same when the US dollar was worth $1.50 cdn.
so, first, ppl won't be able to afford as much anymore (Remember house prices aren't relevant, monthly payments are), so prices will suffer. Now, there may be a 3 month lag, as those first time buyers looking today should have been prequalified, so will still have their 3% mortgage when they close - having said that, i'd hope that these ppl would think 'fuck that, i'm not buying now, i'll wait' - which will again add pressure to prices as buyers back off. remember, two things drive real estate in most cities - first time buyers, and people buying second properties - the latter is dead as you can't rent them out to cover cash outflows, and number one is about to die even harder
second, people coming up to renew this year (god i hope they blended and extended - if not, what idiots), and beyond will not be able to afford as much as they could before, yet carry a monster mortgage - they may be forced to downsize, bringing on more 'forced' sales, which brings down markets VERY quickly.
all i have to say is, thank god for the end of QE over the next 12-18 months, shows the US economy is on teh right track, and will bring along a US/Cdn dollar range of $1.10-1.15 or so, which is great news for canadian manufacturing, terrible for ppl who shop cross border (unless, of course you moved ALL you money to US at par, which is what everyone should have done - sell canadian, buy american was the winning trade of 2010-2012... i did just that and am reaping the benefits now and into the future - in 5 years, i will probably sell some american, and buy some canadian)