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Buster
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quote:

Bunch of shit gone down since our last exchange on this.

HCG is pretty much done. I'm pretty sure they are almost, or entirely, out of writing mortgages at this point. They are selling off assets - and it looks a lot like a controlled demolition. Once the "good" assets are sold, they will let the thing go into bankruptcy, and the shit-eaters will pick over the corpse getting pennies on their dollars.

At this point HCG is an afterthought, though. The big Canadian banks are under the spotlight as of today.

https://www.bloomberg.com/news/arti...ers-debt-burden

Six Canadian Banks Cut by Moody's on Consumers' Debt Burden



Toronto is seeing 1200 new listings every 24 hours right now. And the rate of additions is increasing. Our previous discussions about an "imminent" crash might be corrected to: it's here forks. Hang onto your butts.

One thing that has been raised a couple of times in this thread that is worth correcting - default rates on a mortgage book would go up as a result of declining asset prices. But they would not be the cause of the crash. Just because a mortgage book is not seeing larger default rates, does not mean anything. To see significant default rates requires the actual market to deflect down. In a rising market people who are at risk for default can liquidate their house easily, and everyone is made whole. In a declining market, it is much more difficult to liquidate the asset to avoid a default. In other words, default rates would be a lagging indicator not a leading indicator.

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Old Post 05-11-2017 04:28 PM
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Sugarphreak
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quote:

Originally posted by Buster
Our previous discussions about an "imminent" crash might be corrected to: it's here forks. Hang onto your butts.



They pulled out the "I" word in quotes...

kind of makes me feel famous

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Old Post 05-11-2017 04:38 PM
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ercchry
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Yeah HGC started telling brokers last week to take any live deals they had and move them else where... done for sure

As for a crash? I think you're over simplifying it, I'd say speculative real estate deals are a minority and most people are buying to have a roof over their heads, or to put one over someone else's head. For these people to default it's going to take a decrease in population and underlying economical issues, not simply a lack of demand and a decrease in prices

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Old Post 05-11-2017 07:04 PM
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Meback
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Moody is always behind the times. A down grade in the banks over "consumer debt burdens" means that the problem is already becoming more troublesome. Hell, currently you can lease a car for 60-84 months, when the norm in the past have been 48. - This is proof that consumers are already cash strapped. ohh. Lets not even mention about all the vehicles that are getting repo'ed

In regards to housing, yea like Ercchry said "most people are buying to have a roof over their heads, or to put one over someone else's head." While this is true, you have to factory in the ability to service mortgages, with the economy the way it is right now, this is becoming more difficult for some people. I believe that for housing to crash. We need a scenario where Job Loss is so severe that it results in mortgage default, with the banks tighten up lending.

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Old Post 05-11-2017 09:19 PM
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Feruk
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Or how about a 2% increase in interest rates? That'll bring it down pretty fast.

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Old Post 05-11-2017 10:36 PM
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ercchry
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quote:

Originally posted by Feruk
Or how about a 2% increase in interest rates? That'll bring it down pretty fast.



Considering that's basically at the qualifying rate... doubt it, especially with how many current owners are on fixed 5yr terms

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Old Post 05-11-2017 10:51 PM
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Buster
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I don't subscribe to the notion that people were buying into rocket ship prices because they were looking for a roof over their heads. It was pure speculation.

You can tell for a couple of reasons:

- the correlation to rental rates. If people considered housing just a roof expense, you would see a closer coupling of rental rates and home prices, and a higher rate of rental rather than purchase

- the rate at which people subscribe to the notion that renting is just "payng someone else's mortgage".


In either case, the rationale for purchasing a house in an inflating market is to capture an equity gain. That's speculation, by definition.

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Old Post 05-11-2017 11:38 PM
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ercchry
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Just look at beyond for examples; two types of buyers primarily

1. "I need to buy now before I get priced out of the market"

2. "It's a bubble and I will rent and save my pennies till prices correct"

In calgary over the past two years it's been the #2 mindset that's propping up the entry level to mid tier homes and for those in TO I bet it's the same way

Actually I can tell you what I'm seeing out there as I have a bunch of friends in the area

The ones that can stand it are living at home till well into their late 20s saving for down payments

The ones that can't are renting tiny condos in TO proper

And the ones that are actually pulling the trigger are avoiding TO all together cause they simply can't afford to buy there and are buying in Barrie, or much further south (even have some friends that just bought in Windsor of all places after renting in TO for multiple years)

If TO or the GTA starts to fall you best believe there are many millennials just sitting on the sidelines waiting for their chance to buy within a 1hr commute of their workplace which will make for a very soft landing, just like calgary (suck it sugarphreak)

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Old Post 05-11-2017 11:59 PM
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Buster
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I don't disagree with that. A deflationay event can come quickly (usually associated with a liquidity crisis in addition to an asset-value-confidence crisis).
Or they can deflate more slowly as people enter the market as it goes down.

However, deflating bubbles have shown that people actually do NOT pull the trigger when asset prices are in decline, for two reasons:

1. they think prices will go lower, and

2. prices that are out of step with their earnings can no longer be justified because they are protected by inflating prices. In other words, someone who can barely afford a $1MM home, might buy it on the way up, but they won't buy that same home at $1MM on the way down.

Bubbles are predominantly psychological phenomenon, after all.

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Old Post 05-12-2017 12:25 AM
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