Hurry, LOL, beat those rates.

[89coupe]

Too funny.

http://money.canoe.ca/money/business/canada/archives/2011/02/20110215-112132.html

[ercchry]

and this is why i was not in a rush to buy...


“People are like deer in the headlights when these things happen, but they need to be properly informed,” she said. “This is a good thing, it saves them money.”

Reducing the amortisation period by five years to 30 years would save about $53,000 in interest payments over the life of the mortgage, she said.

... not that i would ever get a 30 year mortgage though... or take the full life of the mortgage to pay back either...

[broken_legs]

CREA warned the government not to take any further action until the longer-term impact of the most recent changes is fully known.

^^ ABSOLUTELY SHOCKING!



CMHC Mortgage Amortization History

Before looking more at the implications of a mortgage rule change like the one being proposed, it may be helpful to provide a brief overview of the mortgage changes that have occured over the past few years:

* In 1999, the National Housing Act and the Canada Mortgage and Housing Corporation Act were modified allowing for the introduction of a 5% down payment….a far cry from the minimum 25% of a few years earlier.

* In 2003 CMHC decided to remove the price ceilings limitations. That is, it would insure any mortgage regardless of the cost of the home.

* In 2005 and 2006, CMHC began insuring 30, then 35 year amortization mortgages.

* In 2007, CMHC allowed people to purchase a home with no down payment and ammortize it over 40 years. This was changed back to a 5% down payment requirement and a maximum amortization length of 35 years in 2008 once the idiocy of this policy was blatantly obvious.

http://financialinsights.files.wordpress.com/2010/12/real-home-prices-canada-real-estate.jpg

Effect of CMHC Rule Changes on House Prices

In an amazing report, the City of Calgary’s Corporate Economics division studied the effects of the amortization rule change on house prices in the city (hat tip to Jen for bringing the article to my attention). Since CMHC rules affect all markets equally, strong parallels can certainly be assumed in the aggregate Canadian housing market. Their conclusions?


“Our analysis of CMHC rule changes on Calgary prices indicates that for every year that insured mortgage terms were extended beyond 25 years Calgary house prices rose by between $6,000 and $10,000. Between 40% and 70% of residential price changes in Calgary between 2004 and 2009 can be attributed to CMHC amortization rule changes.”

[Xtrema]

I think 2003 rule should be reversed. CMHC should set a limit on the mortgage they would insure. Limit should be average price in the area -5%.

If the point is affordable housing, there's no need to insure overextended people in $400+ houses.

[ZenOps]

People can see the writing on the wall.

There is a short period of time here were you can get low mortgage rates.

The US already pumped its 10-year bond to 4%, and *IF* they decide to do the nasty, they could try a very harsh move to double digits very, very quickly.

Its what our finance minster has been warning a few times now - do not be caught off guard by low interest rates. If the governments decide they need money (which they do) they may increase rates dramatically and sharply. Back in the days, they used to announce rate increases on a weekly basis.

[Supa Dexta]

semi related question.

Can you get a mortgage just on vacant land? I assume you can, but theres not much info about it.. I'm talking a larger amount of land, say 50 acres.

But really would be no different then say a small lot right in the city, price wise.

Or would they want you to get a mortgage for the land +whatever you expect to build on it..? (I doubt it, because what if you just want to sit on it for a while?)

[Cos]

Originally posted by Supa Dexta
semi related question.

Can you get a mortgage just on vacant land? I assume you can, but theres not much info about it.. I'm talking a larger amount of land, say 50 acres.

But really would be no different then say a small lot right in the city, price wise.

Or would they want you to get a mortgage for the land +whatever you expect to build on it..? (I doubt it, because what if you just want to sit on it for a while?)

Not an expert by any means but there was a lady who purchased a $500,000 cabin and was turning it into her primary residence. She needed us and a few other facilities installed before she could actually qualify for her mortgage. According to her they wouldnt give her a mortgage until it had utilities.

That could also have been a very elaborate scam to get us to build faster and rush the project.

[Supa Dexta]

Found this>

http://www.bankrate.com/brm/news/DrDon/20010914a.asp

Just harder to secure a loan for vacant land, especially if you don't have immediate plans for it.. Maybe I'll try another route, line of credit or something perhaps.

[dimi]

I don't know if this is just me or if I have it all wrong but...

If you can't afford to ammortize over 30 years or have an insufficient downpayment, WTF are you doing buying a house !!!!

:nut:

[JordanLotoski]

I've been very busy the past 5 weeks. None of my buyers are taking 30-35 year mortgage's, regardless of this new mortgage rule things usually pick up this time of year. The mortgage rules have just given it a kick in the butt.

[HiTempguy1]

Originally posted by dimi
I don't know if this is just me or if I have it all wrong but...

If you can't afford to ammortize over 30 years or have an insufficient downpayment, WTF are you doing buying a house !!!!

:nut:

A graduate with a degree tends to start (on average) at about $55k/year. Considering if they had a 4 year degree, with an average of $15k in debt (average student takes 9 years to pay of their loans). Houses in Canada have raised exponentially compared to salaries (my father earned $60k 20 years ago as a brand new operator for instance, his salary is somewhere around the $100k mark now, but house prices have more than DOUBLED since that time).

So, uh, yea, longer amortizations are needed. It is a sign of a failing system IMO.

[7thgenvic]

such a kick in the ass. That's why I'm happy renting at the moment. Lock myself into a failing system where I will be burdened with debt by purchasing a crummy house for 300+ No thanks.

The market in this city stinks. I really hope I get relocated to the US.

[89coupe]

Originally posted by 7thgenvic
such a kick in the ass. That's why I'm happy renting at the moment. Lock myself into a failing system where I will be burdened with debt by purchasing a crummy house for 300+ No thanks.

The market in this city stinks. I really hope I get relocated to the US.

You can a buy a really nice townhome in Calgary for that price, you just need to go really far south...LOL

[ercchry]

Originally posted by 89coupe


You can a buy a really nice townhome in Calgary for that price, you just need to go really far south...LOL

or duplex ;)

besides using an extra tank or two of gas a month i am enjoying the 1500sqft and garage

[Xtrema]

Originally posted by HiTempguy1
So, uh, yea, longer amortizations are needed. It is a sign of a failing system IMO.

It is a sign of economic power house.

[HiTempguy1]

Originally posted by Xtrema


It is a sign of economic power house.

Sorry, but I am confused by the poor wording of your statement. Care to expand a bit? ;)

[Wrath]

Originally posted by HiTempguy1


A graduate with a degree tends to start (on average) at about $55k/year. Considering if they had a 4 year degree, with an average of $15k in debt (average student takes 9 years to pay of their loans). Houses in Canada have raised exponentially compared to salaries (my father earned $60k 20 years ago as a brand new operator for instance, his salary is somewhere around the $100k mark now, but house prices have more than DOUBLED since that time).

So, uh, yea, longer amortizations are needed. It is a sign of a failing system IMO.

Exactly....there are people who need these terms (I am one @ 30 years) I am somewhat of a recent graduate 2008 w/student loans in repayment and some other debt...so i'm above that salary average....but my wife and I have chosen to have her stay at home with my kid(s)

Having a little more $$$ on the bottom line each month means a great deal right now. Yes I know it costs more in the future...but there has to be a life balance and a longer term worked for us

[7thgenvic]

As a 26 year old graduate with a small down payment. This is a terrible market to shop in. I make good money for my age and still work at the bar on the weekends for extra cash and I can justify having a 300-400 mortgage for a small 645 SQFT apartment downtown. I don't get how people do it in this city.

[89coupe]

Originally posted by 7thgenvic
As a 26 year old graduate with a small down payment. This is a terrible market to shop in. I make good money for my age and still work at the bar on the weekends for extra cash and I can justify having a 300-400 mortgage for a small 645 SQFT apartment downtown. I don't get how people do it in this city.

Why do you need to be right down town? All along the beltline you can get 900-1100 sq/ft condos in the low $300's.

...and on the outskirts of the city you can buy a brand new 1500sq/ft townhome for $300

[dawerks]

Originally posted by HiTempguy1


A graduate with a degree tends to start (on average) at about $55k/year. Considering if they had a 4 year degree, with an average of $15k in debt (average student takes 9 years to pay of their loans). Houses in Canada have raised exponentially compared to salaries (my father earned $60k 20 years ago as a brand new operator for instance, his salary is somewhere around the $100k mark now, but house prices have more than DOUBLED since that time).

So, uh, yea, longer amortizations are needed. It is a sign of a failing system IMO.

You just made the case for higher house prices.

[HiTempguy1]

Originally posted by dawerks


You just made the case for higher house prices.

What is with the CRYPTIC STATEMENTS TODAY?!

Fawk people, at least explain yourselves when you say something that is worded relatively inflammatory like. At least prove why I am wrong :facepalm: When the price of housing costs "more" than it comparably did yesteryear, then why should the house prices be higher?

[Xtrema]

Originally posted by Xtrema


It is a sign of economic power house.

Wherever real estate become expensive, it's a sign of economic growth. Better economy = richer people = more buying power = inflation.

Hong Kong, Tokyo, New York, Vancouver, Moscow.

You think kids in those city can own any real estate at all without parents helping or make it big? You can own dick all working a single middle class job.

That's where we are heading, if not already there. Just be glad we don't have much external factors (Hong Kong, Tokyo - lack of space, Moscow - Mafia $, Vancouver - Chinese investors), or price will skyrocket even faster.

Unless you want to live under a true communist regime, this is just business as usual.


Originally posted by dawerks


You just made the case for higher house prices.

Reread it.

He's saying house prices increase beyond inflation using his dad as an example.

While his dad got pay 60% more in 20 years, house prices is 100% more in just 10.

It's a vicious circle. House not affordable? Make longer term loans so more people can get into the market. More people are in the market? Let's raise prices! Houses is again not affordable? Let's relax more lending rules.

[Cos]

If you guys are that worried about 35 year mortgages. I changed my 35 year from monthly to bi-weekly accelerated payments and I dropped to 29.7 instantly.

7thgencivic, you can sit on the fence as the world passes you buy or realize that you live in a world that plays a game, it sometimes isnt a game you agree with, but NOT buying into real estate is not a good long term solution. Yes waiting until it is affordable sure but saying it is expensive and you think it should drop will not mean it WILL drop.

[Super_Geo]

This just further proves how fucking stupid people are. We're getting rid of 35-year mortgages, and after that happens the expectation is that housing prices will fall as it takes some fringe buyers out of the equation. So why are these fucking muppets rushing to locking into mortgages when the government is signaling that they want to lower property values?

And it's not just the consumers... it's the banks too. I was talking with some guy from TD who said that they were making a push to pick up as many of these new mortgages as they could before the rules change in March, and he thought it was a great idea! He actually looked pretty surprised when I told him his logic is fucking retarded.

Higher interest rates are coming. Shorter amortizations are almost here. Government is no longer insuring HELOCs. In the major Canadian cities (especially Vancouver and Toronto) the price of a house is way out of line with the rent that it can fetch. Canadian's household debt levels are at all time highs.

Anyway, I don't care what the muppets think or do anymore, you can't keep these people from tying themselves to debt at high tide. I've lost my ability to empathize, I just don't care how badly they get fucked anymore. I'm going to get a shitload of cash set aside to buy all their toys for pennies on the dollar once they have to refinance their underwater mortgage at a higher interest rate and are forced to start liquidating assets.

[BigMass]

Originally posted by Super_Geo
This just further proves how fucking stupid people are. We're getting rid of 35-year mortgages, and after that happens the expectation is that housing prices will fall as it takes some fringe buyers out of the equation. So why are these fucking muppets rushing to locking into mortgages when the government is signaling that they want to lower property values?

And it's not just the consumers... it's the banks too. I was talking with some guy from TD who said that they were making a push to pick up as many of these new mortgages as they could before the rules change in March, and he thought it was a great idea! He actually looked pretty surprised when I told him his logic is fucking retarded.

Higher interest rates are coming. Shorter amortizations are almost here. Government is no longer insuring HELOCs. In the major Canadian cities (especially Vancouver and Toronto) the price of a house is way out of line with the rent that it can fetch. Canadian's household debt levels are at all time highs.

Anyway, I don't care what the muppets think or do anymore, you can't keep these people from tying themselves to debt at high tide. I've lost my ability to empathize, I just don't care how badly they get fucked anymore. I'm going to get a shitload of cash set aside to buy all their toys for pennies on the dollar once they have to refinance their underwater mortgage at a higher interest rate and are forced to start liquidating assets.

Agree with your sentiment. Another point is that all the sideline buyers are rushing to buy now. In the spring inventory goes up as people put their houses on the market with a depleted supply of buyers that jumped in early to grab the low rates. This will actually exasperate any price declines. And of course, with the decreased amount people are able to borrow and higher rates, comes lower prices.

People also have to look at the over-all national and international picture and not form an opinion about the economy based on what’s happening in Calgary alone. Calgary is in a bubble. It has many support mechanisms that speed up the inflation of bubbles and slow down their decline. Higher wages, higher savings, unemployment insurance, tax incentives, low interest rates, etc. all these will put an artificial support under the market.

So either you believe the world’s debt problems are over and recovery mode is here to stay, or that the problems are only band aided over but still there, systemic and on a much larger scale than they were previously. If you believe the former, then Calgary is a great place to be currently. If you believe the latter, then it’s only a matter of time.

[Mys73ri0]

Originally posted by Super_Geo
And it's not just the consumers... it's the banks too. I was talking with some guy from TD who said that they were making a push to pick up as many of these new mortgages as they could before the rules change in March, and he thought it was a great idea! He actually looked pretty surprised when I told him his logic is fucking retarded.


He's got sales goals - like he actually gives a shit what happens to the consumers... more mortgages he can get dumb people to take on the more he'll take home (in bonus or opportunities for advancement)

but i do agree with the rest of what you're saying though...

[kaput]

.

[Cos]

Originally posted by kaput


Captain obvious here... I just want point out that you're also making making the equivalent of 29 extra monthly payments. The people who are going to have problems with the new 30 year limit probably can't afford to do that.

Haha yeah I know but people are assuming that they go to a 35 year because they cant afford it otherwise. The bank gave me a 425,000 limit. Guess what I didnt even crack 3.

Reason why I did the 35 year? I pay the same every month (not counting extra paycheck months which dont matter anways) but cut 5.4 years off what appears to be my mortgage. I can have extra spending money and I was 23. Who the hell cares if I decide I want to keep my mortgage for the entire term.

[kaput]

.

[dawerks]

Originally posted by Xtrema


Wherever real estate become expensive, it's a sign of economic growth. Better economy = richer people = more buying power = inflation.

Hong Kong, Tokyo, New York, Vancouver, Moscow.

You think kids in those city can own any real estate at all without parents helping or make it big? You can own dick all working a single middle class job.

That's where we are heading, if not already there. Just be glad we don't have much external factors (Hong Kong, Tokyo - lack of space, Moscow - Mafia $, Vancouver - Chinese investors), or price will skyrocket even faster.

Unless you want to live under a true communist regime, this is just business as usual.



Reread it.

He's saying house prices increase beyond inflation using his dad as an example.

While his dad got pay 60% more in 20 years, house prices is 100% more in just 10.

It's a vicious circle. House not affordable? Make longer term loans so more people can get into the market. More people are in the market? Let's raise prices! Houses is again not affordable? Let's relax more lending rules.

You were going on the right track in the first part of your post then you kind of got de-railed. The key thing you are probably missing is that the average salary in North America has been stagnant since the 80's. If he is saying his fathers income doubled in 20 year or so (don't know the years), then the case is correct for housing prices to beat the average.

We should have higher house prices, why? If the 'dad' makes 100K and the 'mom' makes 60-70K (or whatever), then can houses really cost 200K like in the early 2000's?

No. It would be ridiculous. That's EXACTLY what happened, salarys were increasing at an incredible rate from late 90's to 2005ish (and still today), but house prices in Alberta were DEAD Flat. So is it any wonder prices jumped? No. If I make 100K and a house costs 200K, why wouldn't I buy?

I have a house in St. Albert, average salary is over 100K. AVERAGE. How much is a smallish/average house? 400K. That is CHEAP for this area. (Understand my reasoning?) There is a reason why 7-800K houses just flew off the lots, because that is reasonable for people here.

[Xtrema]

Originally posted by dawerks


You were going on the right track in the first part of your post then you kind of got de-railed. The key thing you are probably missing is that the average salary in North America has been stagnant since the 80's. If he is saying his fathers income doubled in 20 year or so (don't know the years), then the case is correct for housing prices to beat the average.

We should have higher house prices, why? If the 'dad' makes 100K and the 'mom' makes 60-70K (or whatever), then can houses really cost 200K like in the early 2000's?

No. It would be ridiculous. That's EXACTLY what happened, salarys were increasing at an incredible rate from late 90's to 2005ish (and still today), but house prices in Alberta were DEAD Flat. So is it any wonder prices jumped? No. If I make 100K and a house costs 200K, why wouldn't I buy?

I have a house in St. Albert, average salary is over 100K. AVERAGE. How much is a smallish/average house? 400K. That is CHEAP for this area. (Understand my reasoning?) There is a reason why 7-800K houses just flew off the lots, because that is reasonable for people here.

His example is coming from perspective of someone that has fallen behind inflation.

Your example is coming from perspective of someone that has beat or match the inflation.

My gut feel is that a 60/40 split where 60% of the people belong to the first group and complain about house prices. And latter like yourself think it's fair.

I'm glad I was able to stay ahead, especially seeing kids who starts working now and many on fix income that slowly fall behind.

[themack89]

lol yikes... I'm glad I plan on investing first before buying.

[HiTempguy1]

Originally posted by dawerks

*snip*

.

Do you know what the average annual salary of a Canadian is? Do you know what the average annual salary of an Albertan is?

As was pointed out, you are on the win side. In my current position, even if I work/move around in my field, become extremely proficient and valuable to a company, I will only ever be worth $100k tops in my current career path (and that would be after 15 years of experience) unless I open my own business. 60/40 split for behind/ahead? More like 80/20.

[dawerks]

Just so you know, there was a time when I couldn't get a job paying $4.xx at McDonalds holding a University of Alberta degree. (In Edmonton if that matters).

But things were more fun then and people were more chilled out and everyone wasn't a fucking real estate expert. :)

You're young, chill out, you should be thinking about getting laid not buying a house. Speaking of getting laid, I'm gonna jump on the wife.

[ZenOps]

Real estate inflation for middle class housing is holding fairly steady.

Upper class/elite has already started to collapse and will continue to collapse. If Corn, wheat, coffee can rise about 80% on year due to inflation, then the more stable pork bellies, etc... may start inflating fairly quickly too.

But do not fool yourself, higher prices (in real estate or commodities) does not equal a healthy and growing economy. It can signify a much more devestating and insidious form of economic collapse. It is especially true if commodities essential to survival rise too quickly.

http://www2.macleans.ca/2009/06/22/can-they-pay-it-back/

[dimi]

Originally posted by Super_Geo
This just further proves how fucking stupid people are. We're getting rid of 35-year mortgages, and after that happens the expectation is that housing prices will fall as it takes some fringe buyers out of the equation. So why are these fucking muppets rushing to locking into mortgages when the government is signaling that they want to lower property values?

And it's not just the consumers... it's the banks too. I was talking with some guy from TD who said that they were making a push to pick up as many of these new mortgages as they could before the rules change in March, and he thought it was a great idea! He actually looked pretty surprised when I told him his logic is fucking retarded.

Higher interest rates are coming. Shorter amortizations are almost here. Government is no longer insuring HELOCs. In the major Canadian cities (especially Vancouver and Toronto) the price of a house is way out of line with the rent that it can fetch. Canadian's household debt levels are at all time highs.

Anyway, I don't care what the muppets think or do anymore, you can't keep these people from tying themselves to debt at high tide. I've lost my ability to empathize, I just don't care how badly they get fucked anymore. I'm going to get a shitload of cash set aside to buy all their toys for pennies on the dollar once they have to refinance their underwater mortgage at a higher interest rate and are forced to start liquidating assets.

Bang on! Couldn't have said it better myself.

Just talked to a colleague at work today and he mentioned that they were in the market for a house. I told him that its maybe a good idea to wait after the new mortgage rules come into effect. "Oh no we are actually trying to find one before the rules come into effect as to take advantage of 35 year mortgage."

:rofl: :rofl: :rofl:

[sputnik]

There is a difference between voluntarily getting a 35 year mortgage and needing one to qualify.

I know a number of people with 35-40 year mortgages but increase their monthly payments so that they are essentially paying off the mortgage is 20-25 years.

What it does for them is give them a buffer should they run into financial issues and have to decrease their payments to make ends meet.

It is the people who only qualify for a mortgage with a 35 year amortization that are nuts.

[dimi]

Originally posted by Wrath


Exactly....there are people who need these terms (I am one @ 30 years) I am somewhat of a recent graduate 2008 w/student loans in repayment and some other debt...so i'm above that salary average....but my wife and I have chosen to have her stay at home with my kid(s)

Having a little more $$$ on the bottom line each month means a great deal right now. Yes I know it costs more in the future...but there has to be a life balance and a longer term worked for us

Please take absolutely no offense when I say this but why are you buying a house then? From the debts that you mentioned and having 1 household salary to support everyone, it just doesn't seem like you can afford it. :dunno: The difference between monthly payments on 30 vs 35 year mortgages is not that large so if that makes a difference in the bottom line, I would be stressing.

A lot of people in this city seem to have quite a weird attitude towards housing. It's almost as if they feel that they are entitled to own one. "Yea I live Calgary, I work in O&G, why should I not have my own house!"

[Wrath]

Originally posted by dimi


Please take absolutely no offense when I say this but why are you buying a house then? From the debts that you mentioned and having 1 household salary to support everyone, it just doesn't seem like you can afford it. :dunno: The difference between monthly payments on 30 vs 35 year mortgages is not that large so if that makes a difference in the bottom line, I would be stressing.

A lot of people in this city seem to have quite a weird attitude towards housing. It's almost as if they feel that they are entitled to own one. "Yea I live Calgary, I work in O&G, why should I not have my own house!"

None Taken.....I already own a house....for 5 years now....I never mentioned that I also own a business that almost makes up for my wife salary. I am by no mean rolling in it.....but I always make payments....and mn getting rid of debt...don't own any brand new vehicles/have car loans.....Rarely go out and buy things.....and Like I said....I have a 30 year mortgage..not a 35

Really it's the owning vs. renting thing again. I live in Airdrie...and rental costs are RETARDED. It's totally a case of people trying to cover their mortgages by rent. I shit you not when I say renting is NOT cheaper then a mortgage there...also...I do not want the "renting lifestyle"....I want to make decisions on my own. I enjoy the sense of ownership ect...

[Feruk]

Originally posted by HiTempguy1


What is with the CRYPTIC STATEMENTS TODAY?!

Fawk people, at least explain yourselves when you say something that is worded relatively inflammatory like. At least prove why I am wrong :facepalm: When the price of housing costs "more" than it comparably did yesteryear, then why should the house prices be higher?

Say we only had 30 year mortgages. Suddenly the government passes legislation to allow 35 year mortgages. Result: A LOT more people are now eligable to buy houses. Same supply of houses, more buyers, prices go up. Now the government eliminates the need for down payments. Exact same result, prices go up. Did the houses somehow become more materially valiable? No, just more people can buy them.

One of the big reasons that housing isn't affordable in Calgary is because people like yourself (no offense meant) are willing to pay the price and government regulation allows them to buy something they really can't afford. If not for government regulations, people couldn't afford these houses, and prices would have to be significantly lower.

Which brings me back to the article. The people rushing to buy and get in on some imaginary "great deal" are idiots. Basic supply demand economics will require a correction.

[89coupe]

Originally posted by Feruk


Say we only had 30 year mortgages. Suddenly the government passes legislation to allow 35 year mortgages. Result: A LOT more people are now eligable to buy houses. Same supply of houses, more buyers, prices go up. Now the government eliminates the need for down payments. Exact same result, prices go up. Did the houses somehow become more materially valiable? No, just more people can buy them.

One of the big reasons that housing isn't affordable in Calgary is because people like yourself (no offense meant) are willing to pay the price and government regulation allows them to buy something they really can't afford. If not for government regulations, people couldn't afford these houses, and prices would have to be significantly lower.

Which brings me back to the article. The people rushing to buy and get in on some imaginary "great deal" are idiots. Basic supply demand economics will require a correction.

Except Calgary doesn't apply, why? Because the economy in Calgary is booming, and there will always be a demand. So there goes your theory out the window.

[broken_legs]

Originally posted by 89coupe


Except Calgary doesn't apply, why? Because the economy in Calgary is booming, and there will always be a demand. So there goes your theory out the window.

uhhhhhhhhhhhhhhhhhhhhhhhh



Effect of CMHC Rule Changes on House Prices

In an amazing report, the City of Calgary’s Corporate Economics division studied the effects of the amortization rule change on house prices in the city (hat tip to Jen for bringing the article to my attention). Since CMHC rules affect all markets equally, strong parallels can certainly be assumed in the aggregate Canadian housing market. Their conclusions?


“Our analysis of CMHC rule changes on Calgary prices indicates that for every year that insured mortgage terms were extended beyond 25 years Calgary house prices rose by between $6,000 and $10,000. Between 40% and 70% of residential price changes in Calgary between 2004 and 2009 can be attributed to CMHC amortization rule changes.”

[HiTempguy1]

Originally posted by Feruk


One of the big reasons that housing isn't affordable in Calgary is because people like yourself (no offense meant) are willing to pay the price and government regulation allows them to buy something they really can't afford. If not for government regulations, people couldn't afford these houses, and prices would have to be significantly lower.

See, the issue that I have with this is that as an educated male who is responsible with his available resources, I SHOULD be able to get a house, just like anyone 20 years ago could. You are suggesting that in prior times someone like myself could not get a house, which is NOT the case, someone could, and could afford it on a shorter amortization rate. My point, housing inflation/prices have outpaced salary which has NOTHING to do with mortgage rates. Home ownership ratio-wise is going down in Canada, so there should be more available to the fewer home owners or those looking to become. I don't see house prices dropping because of that, do you (unless an extreme example like Detroit is used).

In your theory, people just shouldn't have mortgages in general because they can't afford it (that is why they have a mortgage). At least, that is what I take from it. If I understand you correctly, there is a certain period of time and size of downpayment that is appropriate for a mortgage, but 35 years and 5% is not?

[Xtrema]

Originally posted by 89coupe


Except Calgary doesn't apply, why? Because the economy in Calgary is booming, and there will always be a demand. So there goes your theory out the window.

I'm siding with 89coupe now that activities is picking up. Is it another boom, we'll know by mid year.

Engineering and IT recruiters has been very busy the last few weeks.

[dawerks]

Whenever people hope prices of something will go down, prices go up.

When people don't care, prices will go down.

When people are selling, then prices go down.

So, figure out where your mind set is, and you will instantly recognize where prices are heading (for you). You can usually extrapolate this to the general public (except it's hard to read everyone's mind..).

[yellowsnow]

Originally posted by dawerks
Whenever people hope prices of something will go down, prices go up.

When people don't care, prices will go down.

When people are selling, then prices go down.

So, figure out where your mind set is, and you will instantly recognize where prices are heading (for you). You can usually extrapolate this to the general public (except it's hard to read everyone's mind..).

^^ wow thanks for that amazingly insightful post... :rolleyes:

[dawerks]

Originally posted by yellowsnow


^^ wow thanks for that amazingly insightful post... :rolleyes:

Ironic.

[Cos]

Originally posted by HiTempguy1


See, the issue that I have with this is that as an educated male who is responsible with his available resources, I SHOULD be able to get a house, just like anyone 20 years ago could. You are suggesting that in prior times someone like myself could not get a house, which is NOT the case, someone could, and could afford it on a shorter amortization rate. My point, housing inflation/prices have outpaced salary which]

Obviously I dont know you or your situation but according to beyond I make 1/3 of what the average middle class does (bit of a joke, I do well but make 10/20k more than what people say a new grad should be starting at).

I purchased a townhouse on my own and am paying it at a 30 year rate. I have lots of extra money and am currently shopping for a summer car. I could afford a 25 year and maybe a 20 year. Once the wife gets a job we will be paying down the mortgage debt at an increased rate.

I think you need someone to look over your finances and help you work out what you can actually afford. It isnt as bad as you are making it seem at all.

[HiTempguy1]

Originally posted by Cos


Obviously I dont know you or your situation but according to beyond I make 1/3 of what the average middle class does (bit of a joke, I do well but make 10/20k more than what people say a new grad should be starting at).



If we go according to Beyond, I am dirt poor and living in poverty :nut:

I'm not saying that there is anything inherently wrong with this, but a mortgage for a $300k townhouse is ~$1500/month. Couple that with taxes, utilities, etc etc and you will probably approach $2k per month averaged over 12 months a year. That is a lot of coin. I couldn't do it by myself at this point in time even if debt free (I could do that with two roommates though, which is what I'd have), but I am just starting my career and have student loans :dunno:

My main point is when somebody comes on here and starts clambering for 25 year amortizations being the max, I ask why?

[masoncgy]

It has been demonstrated that increases in amortization periods have subsequently increased housing prices, so in theory a reduction in these periods will decrease prices... but perhaps not to the same degree.

Thoughts?

[Xtrema]

Originally posted by masoncgy
It has been demonstrated that increases in amortization periods have subsequently increased housing prices, so in theory a reduction in these periods will decrease prices... but perhaps not to the same degree.

Thoughts?

That's what I'm getting at.

One of the reason house prices are out of whack because borrowing rule relaxed, flooding market with demand.

Impact should be pretty low tho. If anyone in the mortgage business can charm in on the % of mortgages are over 25 years would add to this conversation.

[89coupe]

Amortization periods has nothing to do with housing prices. It has everything to do with supply and demand.

You can still build a 3000 sq/ft home in a small town for $400k

[max_boost]

Originally posted by 89coupe
Amortization periods has nothing to do with housing prices. It has everything to do with supply and demand.

You can still build a 3000 sq/ft home in a small town for $400k

Wut? :rofl:

Changing amortization periods effects the demand (# of qualified buyers). What you saying man?

[89coupe]

Originally posted by max_boost


Wut? :rofl:

Changing amortization periods effects the demand (# of qualified buyers). What you saying man?

Nope, a person will buy a home regardless. All amortization does is allow a person to get a little more then they normally could.

[adam c]

Originally posted by 89coupe


Nope, a person will buy a home regardless. All amortization does is allow a person to get a little more then they normally could.

nope, a person might qualify on a 30 year mortgage but not a 25 year

[kaput]

.

[max_boost]

Refer to my sig.

:D

[89coupe]

Originally posted by adam c


nope, a person might qualify on a 30 year mortgage but not a 25 year

So what, in a supply and demand scenario, for the guy who can't get qualified for a 25 year mortgage there are 20 guys behind him who can.

[adam c]

Originally posted by 89coupe


So what, in a supply and demand scenario, for the guy who can't get qualified for a 25 year mortgage there are 20 guys behind him who can.

please refer to max_boost sig

[yellowsnow]

Originally posted by 89coupe


So what, in a supply and demand scenario, for the guy who can't get qualified for a 25 year mortgage there are 20 guys behind him who can.

seriously?

why don't you think that through a bit more... like in a broader spectrum.

[Cos]

Dude, you had it going for you. You were right until now. No, prices will suffer if they lower the amortization periods.

I had qualified for 425k with a 35 yr. On a 25 I dont know but it would NOT be 425.

[89coupe]

LOL, I'm not going to argue with you. Think what you want.

[Xtrema]

Originally posted by 89coupe


So what, in a supply and demand scenario, for the guy who can't get qualified for a 25 year mortgage there are 20 guys behind him who can.

You just described Vancouver where middle class are being priced further away from metro by foreign investments an immigrants. Don't know if that will ever happen to Calgary.

[broken_legs]

Originally posted by 89coupe


Except Calgary doesn't apply, why? Because the economy in Calgary is booming, and there will always be a demand. So there goes your theory out the window.

uhhhhhhhhhhhhhhhhhhhhhhhh



Effect of CMHC Rule Changes on House Prices

In an amazing report, the City of Calgary’s Corporate Economics Division studied the effects of the amortization rule change on house prices in the city. Since CMHC rules affect all markets equally, strong parallels can certainly be assumed in the aggregate Canadian housing market. Their conclusions?


“Our analysis of CMHC rule changes on Calgary prices indicates that for every year that insured mortgage terms were extended beyond 25 years Calgary house prices rose by between $6,000 and $10,000. Between 40% and 70% of residential price changes in Calgary between 2004 and 2009 can be attributed to CMHC amortization rule changes.”



Originally posted by 89coupe


Nope, a person will buy a home regardless. All amortization does is allow a person to get a little more then they normally could.

^^ A person will buy more of a home, than they would have previously.

[barmanjay]

Wow

Stop bickering you guys!

Everyone has an opinion,.. know one knows the future.

After a couple glasses of my home made wine, I will instill my professional opinion.....

The change in Amortization is aimed to stop another mini-boom and hold property values at bay.

The government sees what is going to happen, now that the US is working towards a more domestic resolution for oil supply vs unpredicable overseas supply.

The predicted interest rate hike is also there to stop property values from increasing if the new mortgage rules don't help.

Does the government want prices to go down,.. heck no!!!

More foreclosures will happen and then CMHC will have to pay out their ass to the lending institutions. BTW: CMHC = fed. funded insurance for lenders.

Do I foresee prices dropping? not really.. do I see prices jumping,.. not really either. Speculators will try though.

Did the new city assessments affect,.. of course,.. already seen it happening in riverbend/quarry park


***disclaimer - I've been drinking my home made wine,.. I may or may not be right and may or may not be intoxicated,.. I may or may not be even relevant to your current conversation

[Feruk]

Originally posted by HiTempguy1


See, the issue that I have with this is that as an educated male who is responsible with his available resources, I SHOULD be able to get a house, just like anyone 20 years ago could. You are suggesting that in prior times someone like myself could not get a house, which is NOT the case, someone could, and could afford it on a shorter amortization rate. My point, housing inflation/prices have outpaced salary which has NOTHING to do with mortgage rates. Home ownership ratio-wise is going down in Canada, so there should be more available to the fewer home owners or those looking to become. I don't see house prices dropping because of that, do you (unless an extreme example like Detroit is used).

In your theory, people just shouldn't have mortgages in general because they can't afford it (that is why they have a mortgage). At least, that is what I take from it. If I understand you correctly, there is a certain period of time and size of downpayment that is appropriate for a mortgage, but 35 years and 5% is not?

If you read Broken-Legs' post, it shows how housing prices have been DIRECTLY influenced by changes in mortgage RULES (not rates). Article quotes the rise in housing prices due to changes in down payment and length of mortgage as being responsible for "40-70%... between 2004 and 2009" of the increase. I never said educated young people 20 years ago couldn't afford houses at prices 20 years ago, just that by easing mortgage rules we have allowed buyers who could not afford to buy into the buying pot, which has caused demand to rise, and therefore price to rise. The result is educated young people suffer from higher house prices.

I'm not saying they shouldn't have mortgages in general; don't put words in my mouth. People shouldn't have mortgages that they can't afford to pay off in a decent amount of time. Say you're on the 35 year mortgage with a 5% down payment and the economy recovers. Interest rates go up. Can you still afford to make house payments if they rise say 2-3%? Even if you can, what happens to your standard of living? Do you become "mortgage poor?" IMO, the ratio of mortgage to gross annual current income has historically been a good measure. If your ratio is above 4:1 (maybe even 5:1), you should NOT be buying. Say you make $70K/year gross. You should be looking for a mortgage of ~280K max.

[dawerks]

Originally posted by Feruk

Say you make $70K/year gross. You should be looking for a mortgage of ~280K max.

Just curious how you came up with this calculation?

[Xtrema]

Originally posted by dawerks


Just curious how you came up with this calculation?

$70K gross = ~$49K take home. = ~$4000/month

280K mortgage = ~$1600/month @ around 5%

So mortgage will be 40% of your take home.

And that leaves $2200 for car/insurance/food/RRSP etc. Pretty conservative estimates.

[dawerks]

Cool, thank you!

It's kind of disheartening to see that we give up 28% off the top to taxes and 30-40% on the bottom for housing. No wonder everyone has to be 'hustling' every day.

(I also have a house/land in another country and our house has been free and clear for over 4 generations. The concept of mortgage and taxes is totally foreign there!)

[Super_Geo]

Originally posted by 89coupe
LOL, I'm not going to argue with you. Think what you want.

I think you're fuckin retarded... and I'm glad you aren't going to argue that.

[tpurcell4]

If I could venture an opinion on this hot topic. Anyone getting into the market with less than 20% down, cannot have their Principle and Interest payments, heating, taxes and condo fees (if they apply) exceed 35% of their monthly gross take home, unless they have good credit or better 680 beacon score. Meaning you have not missed a payment in over 2 years or only one or two in the last two years. If you have "excellent" credit (680 or higher) you can borrow up to 44% debt servicing on your monthly income (all of your debts combined). So current mortgage rules will not allow someone with low down payment to get in over their heads. The total debts servicing (house payments + all other debts) cannot exceed 42% of gross income for lower credit applicant or 44% for people with exceptional credit.

Here is an example of how the new rules will affect buying power:
(Assuming 5 year fixed rate of 3.99% in both scenarios)
Pre-March 18:
Purchase Price = $350,000 (approx average home price)
5% down, 35 year amortization, CMHC fee = 3.15%
Monthly payment = $1,509.82.

Post-March 18: (Trying to keep same payment for debt servicing)
Purchase price = $325,000
5% down, 30 year amortization, CMHC fee = 2.95%
Monthly payment = $1,509.68

There is a difference of $25,000, which when purchasing a home in the grander scale of things is really peanuts. It may push those buyers who are buying at their absolute max down a bit. For first time buyers, odds are they are not looking in this price range and it is possible to get into a condo or town house between $200,000 - $250,000. For someone buying at the top end of this market pre-new mortgage rules versus post new mortgage rules would be a drop to $235,000 purchase price.

For the average home buyer that shows an approximate reduction in maximum purchase price of roughly 7%, for a new home buyer it shows a drop of roughly 6%. In the grand scheme it is not a huge amount.

Then if you look at the Canadian Real Estate Associations predictions, housing prices in Alberta are expected to go down by 1.4% by the end of 2011, and then up by 1.4% by the end of 2012. So likely the new rules will not affect the home prices by the full amount of what the change in amortization shows, as the average amortization period is currently around 30 years.

There are those buyers out there who purchase with a 35 year amortization who cannot afford to make additional payments in the first five years of their mortgage (typically first time buyers), but with most people in this situation, fresh out of university, just starting their career making anywhere from $30,000 - $60,000 per year depending on how many extra letters your degree puts behind your name, who will be earning more in about five years, and decrease their amortization at that time, or can start making extra payments to bring down their overall amortization period.

Aside from first time buyers, the other class of buyer that will likely be affected by this change are the self-employed. We will typically direct self-employed individuals to longer amortization periods if they experience high volatility in their monthly income. Where one month may be $10,000 and the next could only be $3,000. Having that cushion to fall back on is always beneficial, and with the new rules it just means the cushion will have to shift.

On the other hand, with all that taken into account. If interest rates go up by 1.00% and house prices don't change, it will have almost the same effect on buying power. And looking at historical numbers, the average interest rate on a 5 year fixed mortgage should be between 5.5% to 6.5%, not 3.99% - 4.50%. So when interest rates do hit normal levels again, a slight reduction in house price will not have as much affect on what people can buy as the interest they are paying on the borrowed money.

So yes, their is rational to, beating the rise in interest rates and locking in before they go up. Locking in before the new rules, well, that is more of a case by case basis who will actually be affected by that. The change in amortization periods is not going to affect the market that greatly, who cares if the government won't back HELOC's, no lenders offering HELOC's have them backed by CMHC currently as their must be 20% equity in the property to get one anyways. And for those people who's only financial planning is to consolidate high interest debt into their homes using the available equity, well, then you may want to get that done before the rules change, and then take another good look at your long term strategy and start fresh.

What hasn't been mentioned and I'm sure will be a great topic starter is, what is going to happen to interest rates and house prices once the baby boomers start flooding the market with real estate as they liquidate for retirement?