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Discussion Starter #1
I hope links to YouTube are ok here.
I watched this video today and it makes me think it’s better to wait for a correction to buy rather than taking advantage of low interest rates now. Not all regions are the same but I think this pandemic will probably cause a major correction in the coming months. My situation is that I’m a 1 house owner with no mortgage and I’m looking around at landlord possibilities as cash flow and investment. What do you guys think about waiting ? For example, nobody wants to buy for 300k now to see it drop to 275k next year. Unless of course you plan on living in it for a long time.
 

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My friend, who is 45 said the same thing in 2005, 2007, 2008, 2009, 2010, 2011...you get the point. He bought his first house in 2017....right before the housing pullback. He could have bought the same house in 2005 for less than half the price.

trying to predict the housing market is like trying to predict the stock market.
 

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I have no crystal ball but it think there's good reason to think real estate might go through turbulent times in the next 6 months or so. Things could get really gloomy in the winter when CERB and other economic programs run out, then the return to school causes a massive second wave of Covid and jobs are lost again as we need to tighten the social distancing. People might well need to sell the house in favour of buying something smaller or renting...
 

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It definitely makes you think -- if not for the mortgage deferrals and CERB, what would the housing market look like right now? But I get the impression that most people think the danger has passed and we're in the clear.

The real estate industry likes to point out that most people who lost their jobs during the pandemic aren't homeowners in the first place. I'm not sure how true that is, but it's clear that many homeowners are still feeling the crunch in one way or another. Perhaps they're still employed, but getting fewer hours, or their tenants are not paying rent. Job losses usually start at the bottom and work their way up. Just because someone hasn't lost their job yet, doesn't mean they won't. Many businesses are hanging by a thread right now. If they've already trimmed down their frontline staff to a minimum and still can't turn a profit, who's next?

We know that 16% of mortgage holders have taken a deferral, and about 9% still have active deferrals. It's been reported that lenders are lukewarm about extending deferrals and will likely go forward on a case-by-case basis. If I was a lender, I'd be looking closely at the employment prospects of anyone requesting an extension of their deferral. What's the point of giving someone an extension if there's little chance they'll be employed anytime soon?

Mortgage deferrals alone probably don't tell the entire story. Not every homeowner who is feeling pain would necessarily take a deferral. Some will keep scraping together their mortgage payment, right up until they can't. Some will rely on a combination of savings and CERB, or selling other assets in order to make their payments.

Anecdotally, one of my friend's parents recently had to sell their house because they'd accumulated too much debt. I was really surprised to hear this, because they are (or were) high earners and I'd always assumed they had plenty of money. It's the kind of thing no one talks about until it happens.
 

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Discussion Starter #5
It definitely makes you think -- if not for the mortgage deferrals and CERB, what would the housing market look like right now? But I get the impression that most people think the danger has passed and we're in the clear.

The real estate industry likes to point out that most people who lost their jobs during the pandemic aren't homeowners in the first place. I'm not sure how true that is, but it's clear that many homeowners are still feeling the crunch in one way or another. Perhaps they're still employed, but getting fewer hours, or their tenants are not paying rent. Job losses usually start at the bottom and work their way up. Just because someone hasn't lost their job yet, doesn't mean they won't. Many businesses are hanging by a thread right now. If they've already trimmed down their frontline staff to a minimum and still can't turn a profit, who's next?

We know that 16% of mortgage holders have taken a deferral, and about 9% still have active deferrals. It's been reported that lenders are lukewarm about extending deferrals and will likely go forward on a case-by-case basis. If I was a lender, I'd be looking closely at the employment prospects of anyone requesting an extension of their deferral. What's the point of giving someone an extension if there's little chance they'll be employed anytime soon?

Mortgage deferrals alone probably don't tell the entire story. Not every homeowner who is feeling pain would necessarily take a deferral. Some will keep scraping together their mortgage payment, right up until they can't. Some will rely on a combination of savings and CERB, or selling other assets in order to make their payments.

Anecdotally, one of my friend's parents recently had to sell their house because they'd accumulated too much debt. I was really surprised to hear this, because they are (or were) high earners and I'd always assumed they had plenty of money. It's the kind of thing no one talks about until it happens.
Personal debt is a part of the flawed economy. Lots of people who earn deep into six figures spend beyond their means. Conservatives, Liberals or NDP can’t stop the temptation. Marketing has become extremely effective. Last I heard Canada was in the hole for about $ 250 billion in mortgages alone.
 

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Its always a good time to buy when you find a good deal. Stay in good locations and you have nothing to loose unless you buy a negative cash-flowing rental property.
If you're in it for the long term, then there is no point in waiting. If you want to time the market, you're better off investing in lottery tickets.
 

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I am watching how the housing market goes as well. I agree thal81 that some people may be in trouble in the next year when government programs run out.
 

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My friend, who is 45 said the same thing in 2005, 2007, 2008, 2009, 2010, 2011...you get the point. He bought his first house in 2017....right before the housing pullback. He could have bought the same house in 2005 for less than half the price.

trying to predict the housing market is like trying to predict the stock market.
You have no idea how close I personally became to being just like your friend. Around '05, university degree in hand, OSAP paid off, and savings for a down payment. 95% of people told me to wait for the crash. The crash was inevitable, these prices are crazy, one guy told me he bought his house in Mississauga for $42,000, and no house should ever cost over $150,000.

Unlike your friend, I didn't listen to the 95%, but looked at the actions of the 5% who were better off, and actually knew what they were talking about. I bought 2 houses since '05, and both of them have more than doubled. To the point, where I couldn't afford them both right now if I waited for the "inevitable crash", and I would still be paying rent almost 2 decades.

2 sayings are extremely true, write them down somewhere and only revisit them years from now, and tell me how well they've held up.

1. Economists accurately predicted 9 of the last 2 recessions.
2. Predictions are hard. Especially about the future.


If I wrote a book on doom and gloom, and how you must protect yourself at all costs right now of the inevitable doomsday coming, then I'll sell millions of copies. If I wrote a book on how the only real economy that matters, is your own individual economy, and how absolutely no one can predict the future, then I'm very likely to not even sell a single copy.


My situation is that I’m a 1 house owner with no mortgage and I’m looking around at landlord possibilities as cash flow and investment. What do you guys think about waiting ? For example, nobody wants to buy for 300k now to see it drop to 275k next year. Unless of course you plan on living in it for a long time.
You're most definitely not looking at it as an investor.

Investor says, nice property, good cash flow, nice return on my money that's just sitting in the bank earning nothing, and I've locked in a low mortgage rate, using other people's money. If prices drop by a whopping 10% next year, I'm still cash flow positive on a great property that history says is likely to recover and double in price in a decade.

Speculator says, I'll just wait and see if the price drops.


Study the area you want to buy in, have your own finances and economy in mind. A housing crash in Alberta has had 0 impact on the GTA or Vancouver, and vise a versa. If you're adamant you've read everything and trust all of the experts, and houses in Mississauga will once again cost $42,000 then please buy me some lottery tickets. You pick the numbers, you buy the tickets, and I promise to give you 95% of the winnings, no questions asked.
 

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I'll refrain from making any predictions, but anybody can massage statistics to craft a narrative.

At Bank of Nova Scotia, 99% of mortgage borrowers whose deferrals have expired are current on their payments, the lender said in a statement. Scotiabank now has C$39 billion ($30 billion) of deferral exposure, down from C$41.5 billion as of July 31, and expects the “vast majority” of its remaining balances to expire this quarter, Chief Executive Officer Brian Porter said in the statement.
Put another way, 94% of mortgages that were on deferral as of July 31st are still on deferral. (That's a lot!) Of those whose deferrals have expired (they don't say how many), 1% are delinquent. Sounds worse, right? -- But it's essentially saying the same thing.

Even if only 1% of mortgages eventually go into foreclosure, would that not put downwards pressure on real estate prices? What is the magic number?

I agree that there's a chance the whole "deferral cliff" could end up having a minimal impact, but I think it's too early to say. On the balance, I'd say there's more probability to the downside than the upside. Notwithstanding the deferral situation, fall and winter is traditionally a slow period in real estate anyways, so it seems unlikely we'll see much upward movement prices over the next six months.

Would I advise someone to hold of on purchasing a home they could afford right now? No, provided they're confident in their finances and ability to weather whatever the economy throws at us over the next 12 months.
 

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Even if only 1% of mortgages eventually go into foreclosure, would that not put downwards pressure on real estate prices? What is the magic number?
1% of a single lender's loans (commercial and residential) going bad isn't gonna mean too much.
 

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I'll refrain from making any predictions, but anybody can massage statistics to craft a narrative.



Put another way, 94% of mortgages that were on deferral as of July 31st are still on deferral. (That's a lot!) Of those whose deferrals have expired (they don't say how many), 1% are delinquent. Sounds worse, right? -- But it's essentially saying the same thing.

Even if only 1% of mortgages eventually go into foreclosure, would that not put downwards pressure on real estate prices? What is the magic number?

I agree that there's a chance the whole "deferral cliff" could end up having a minimal impact, but I think it's too early to say. On the balance, I'd say there's more probability to the downside than the upside. Notwithstanding the deferral situation, fall and winter is traditionally a slow period in real estate anyways, so it seems unlikely we'll see much upward movement prices over the next six months.

Would I advise someone to hold of on purchasing a home they could afford right now? No, provided they're confident in their finances and ability to weather whatever the economy throws at us over the next 12 months.
What is missing out of this equation is the amount of deferrals from the start of the pandemic. July 31st was the second wave. I can assure you that over 50% of mortgages that were on deferral payment from April have now resumed regular payment and that's a common statistic across all lenders. So its not 94%.....you can, however, say its an additional 6% that came off the program.

So the true story is that the deferral program helped enormously and avoided many people from defaulting on their mortgages. It also goes to show that 50% of those who opted for the deferral program didn't really need it. They took it cause they thought it was free money. Lenders were so overwhelmed with requests that they granted it to whoever asked, without question.
 
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