Canadian Real Estate Facing 6% Mortgage Rates by November 

With oil prices and in general energy prices ramping up again moving into the winter, inflation with go higher again.

Who has their house paid off? It's the 60yo+ crowd who bought them at 200k$ or less. How much money do you need to make to qualify for an 700k$ mortgage? What percentage of Canadian house holds, especially young ones that are forming families. This is such a dumpster fire, look at market place mortgage fraud.

$32,000 weekly profit Our lord Jesus have lifted up my Life!!!

The average age of covid death in Canada 83.3...Hope it was all worth it!

Just like markets don’t go straight up and down, inflation also doesn’t just roll over and go straight down. One of the biggest worries they had on this CPI is that Services are now adding to the core rises in inflation. People are demanding higher wages because of the increased cost of goods. But when wages go up, corporations don’t just absorb those costs because they only care about profits. So then they raise the costs of goods again and the cycle of inflation starts over….. That’s why they raised interest rates so high in the 80’s. The Strong job market is only adding to this because companies will pay to fill positions which will only inflate wages further. They are definitely going to miss again on the inflation as you suggested though. We can only cross our fingers and hope it’s not by a lot…. So good to hear a real estate agent speak honestly about where mortgage rates are heading and what real values of housing should be. And you are spot on that this is the return to the 2-4% real rates era. The negative real rates experiment for the last 10-12 years failed and only made the rich richer, housing unattainable for the 99% and made retirement close to a dream for most….

Looks like they're not reversing like you said they would... Good old 90s

We may not be seeing feb prices for another 7 yrs. Even if interest rates start to come down. Assuming interest rates start coming down to 3.5 percent by july of next year. Most of the investors and first time buyers will be out of savings due to high interest rates and high prices.

6% is just a marker on the way to 10%. Housing downturn is just getting started.

Some ppl have VRMs from a few years ago which we're set up at 25 yrs amortization with super low rates. As the banks are not updating payments the adjusted amortization is now over 50 yrs. There is going to be a lot of shocked faces at renewal.

Hey Steve, have you seen the latest CBC Marketplace episode on Mortgage Fraud in Canada? It was outrageous, would love to see you talk about it in a video!

Probability of 75 bases point is more than 50 bases point for October. 50 bases point increase should or will happen in December 2022.

They won't stop raising rates because they keep creating inflation (cutting $1600 cheques to the homeless + free housing, rent assistance, etc. etc.). Keep positioning to milk that yield boys

once the layoffs gain momentum in the new year and hiring stops, maybe not in the Public Sector, that will help reduce rents just as cost of borrowing will deflate home prices. Going forward energy, food, and essentials will be our inflationary items. The question will be if housing and consumables drop faster to bring down the CPI. Even if CPI flattens as a result of this I think over the next 9 months that by summer when we've lost 250,00-500,000 jobs, possibly more, people will care about a lack of employment opportunities and food going up double digits versus a drop in laptop prices. Many Western Countries have prevented farmers from using fertilizers in the fight against global warming. This, along with normal droughts and floods annually around the world, will likely put a strain on food production next year and until going forward as long as politicians continue limiting food production in the Western World and paying farmers around the world to not farm. In a few years when people have been starving those insect manufacturing plants will be up and running and we'll embrace what ever processed food they are willing to provide us. Kidding. It will probably take longer than a couple of years.

I don't want my house to have less value but there has been way too much profit and greed including government greed. Not enough units built and too much immigration in a short time. My HELOC interest rate has added 600.00 per month to my interest. I am usually not paying much attention to the housing market.

Another banger. Would love to hear your take on how the rental market is effected by this in the mid-term (6-12mos). Feels like there should be more demand for rentals, however, I’m also noticing rents possibly starting to decline. Could just be the time of year or it could be the start of a major poop storm. It’s a battle between the “I’m just going to wait for the market to rebound and rent it out” crowd (deflationary pressure on rents) and the “I need out of this now” crowd (less rental supply but downwards pressure on sale prices which, in turn, may still result in rents declining).

If we will go this way we will reach 10% soon, houses will decline in price significantly

Oil prices after the midterms are going to decide where rates go. Plus housing is going to continue to plague cpi. 8 pct mortgage rates and they stay is now on the table for the future

If US market is pricing 75 rate hike for FED in November. why would BOC will go with 50 . Can we afford on $CAD side ?

What were GVR, GTA detached prices the last time fixed was at 6.2% @steve? And when they were at 7.2%? Would love the data point, thanks if you oblige

Data, statistics and the slanted metrics used to quantify them are one thing. Consumer sentiment, the ability to service ones debt and real world political consequences are another. The problem with some of this so called data is it appears to be harvested in some kind of unworldly vacuum by people who appear to be totally detached from reality whether by design or otherwise..I've adapted a new mantra for the times "I'll believe it when I see it"

Weren't you saying at some point that RE won't be going down?

Everyone I know has money 💰. Strange, eh? Will wages ever go up? Realtors aren't smiling much these days!

People secured mortgages so don't need to sell. Buyers looking for a better price. But supply is not there. Renters locked into condos. Homeowners not selling.

Calgary down less then gta and Vancouver but also Calgary didn’t see a crazy spike in prices like Toronto etc. i bet you those areas are still up more compared to a Calgary property.

I don't think inflation is going down to the 2% range that the BOC is targeting. In fact, I think that's "Pie in the Sky". The BOC is going to try to convince us that a higher target rate of inflation is better for us. Based on 25 years of capital market experience and past chair of a CFA derivatives committee, I view the recent rate of change numbers as just noise and clearing the foam off the top. Where do we go from here? Personally, and I may be wrong (it would not be the first time), I think inflation is here to stay in ways that no one can contemplate. The central banks are stuck and are not going to collapse the collateral value of the banking system especially the USD as the global reserve currency. Having said that, keep in mind that the central bank's role is adding liquidity to the banking system by expanding the money supply and consequently diluting the purchasing power of the currency. They are not there to keep stable prices as the narrative goes. SO, where does the average guy hedge himself? Call me stupid, but I think Real Estate prices are going to go up after the froth has been scooped off the top.

Worst is yet to come but I’m not leaving. Wealth is built in sh$tty times!

Gonna crash another 50% from here

Great explanation of the markets...I hope you can get into details about other debts Canadians have.....like Heloc debt...

Steve - as you pointed out, people are sitting on the sidelines waiting to see what happens. At what point do you think people will panic and capitulate and start selling at a progressively faster pace? Ie... prices may not decline or even shallowly but still decide it's better to get out now than wait for further potential losses.

I can confirm that rents are coming down in at least one US market (Phoenix)

Great vid - u should do a video with a MTG broker on the recent fraud special from CBC marketplace. How prominent u think this issue is/was and what impacts, if any, it could have.

Thanks Steve, nice commentary. Given how closely tied house prices are to maximum achievable leverage, I am still waiting to see both the peak interest rates and the duration at which rates remain above 2.5% (which is a rough estimate of where Canada's long-run interest rates will have to sit with current population projections). I suspect we are looking at ongoing downward price declines until the end of 2023. After that, the rate at which prices flatten or rise will likely be heavily dependent on the forward rate projections. I suspect we will see a fairly prolonged period of a couple of years with rates above 3%, which will keep prices flat for several years. Certainly this is what the big banks (now that they have caught on to the BOC plans) have started to predict. This is of course all speculative. A big recession could throw this out of whack. On the flip side, a sudden reversal of rate increases, perhaps driving rates down below 2% by the end of next year, while unlikely, could certainly put a lot of steam back into the market given how much demand there is from potential homeowners. It's a complete guessing game, but there is a lot of benefit in waiting for people who can do it.

I mentioned not long ago that I could see rates going up to 10%. This may just happen

At present renting is cheaper than paying mortgage payment. 5-6 normal mortgage rate to stay longer period than most people think until trillion dollars gone out of household income to super lenders.

Did anyone see rates going this high last year?

I believe that the rate will increase by 75BPS on October 26th. The low interest rate party is over folks. The interest rate will have to be higher then the rate of inflation. I see interest rates going north of 7.5 percent in the next year. The real estate market will tumble just like the stock market will!

People need to stop spending money, especially borrowed money. Things will settle in 2 years. I don't really see a problem unless you are over leveraged, in which case, get out of debt, short term pain will lead to long term gain.

HI Steve most Townhouse 2bed 2bath +den price at this time is almost 700k in Frazer Valley. Do you think by early next year the price would go down between 500k to 600k?

Any news on Dec 1 meet up?

"Sales Decline" putting downward pressure on prices ... but "Rents Increase" .... this scenario only works because there is a shortage in supply combined with Landlords passing on increased mortgage financing costs to renters .... this scenario in my opinion will start to dissolve when we get farther into the "Enforced Recession" the World's Federal Institutions are leading us all into .... while new job numbers continue to decline and heating fuel and diesel costs continue to rise over the winter the spring housing markets see the "Kick in the Ass" we are all expecting ... a good percentage of those people holding back on listing will adding to housing inventories in order to take their profits from the last 15 years of Interest Rate Stupidity. ...

Sounds like the party is over.

Rent prices are going to tank

Calgary is a great place to live. We're getting inundated by BCers in the last 6 months

What’s the ticker on yahoo finance for the can-05y ?

I just sold for 10% less than the highs last spring. I’m still happy with that. I’m hoping to gain it back on the flip side when I buy in a few months. Poor us. We only doubled or tripled our money since 2015. Lol. Hopefully it cools the market enough to buy and sell real estate normally again.

60/40 just getting crushed by this. Glad I'm 26, not 66.

It's ok. Just pay more. What choice do people with mortgages variables have?

Raising interest rates this aggressively is becoming a known fact it is not lowering inflation. Real inflationary culprits: corporate pricing, energy costs and supply chain disruptions. blame is on the hard working homeowners where it should be pointed at trudeau and tiff himself

The bond market is point to 4.5-5% rates near term. I'd say later in Q1. I wouldn't touch the overpriced Canadian real estate market with a 10 foot pole. Our house is nearly paid off but buying another property isn't an attractive option until we see a capitulation.

Inflation 👍👍👍👍 was waiting long time for it.

Thanks Steve. Good stuff as usual.

T Mac about to cause the big R

Another great episode thanks

How can you claim any knowledge of economics while saying “the days of sub-two percent inflation are gone”. It inflation remains above 2-3% it means the eventual death of our currency, period. The fact that so many in the investment class are willing to sacrifice this for their own short-term gain is ridiculous.

Hey Steve, will BOC cut interest rates if we hit a recession?

Steve, I don’t track how rent/ shelter component in the CPI print is being calculated. Higher interest rates = more renters= more demand=higher rental rates=higher shelter print= higher interest rates. It’s a snake eating itself. With that said, why are rents topping out or coming off? Are people literally just out of money or moving in with family ? Few qualify at 8%. Bc flooding with newcomers. Good to own in the core right now.

If home prices drop, yet interest rates go up does that mean monthly mortgage payments will be higher than when home prices were high, which means there will be no new home buyers because they are all prices out. 🤔 Like this is great the million dollar home could move to $500K but if that does happen ppl may have to qualify at 10% interest 🙄which sadly nobody will, however for those who do monthly mortgage payments look like $4500 per month. What a 💩 sandwich, who wants a bite...

Just pay more and more mortgage now. Can't afford anything else.

Real Estate discovers Bond Market.

Rich back tracked on dancing on the unfortunate first time home owner in last broadcast.

Your dog has hiccups Steve

LOVE IT!!! CRASH AND BURN IT TO THE GROUND!!!!!!!!!!!!!!!!!!

As always

Teach a man to fish - not give free fish - if liberals stopped spending we would all recover.

There is still a lack of supply in the lower mainland that will not resolve for a long time. Housing prices will gradually fall (as interest rates rise) but it doesn’t seem likely they will crash. Sorry eternal pessimists!!

🇨🇦🇨🇦🇨🇦🍺🍺

First

Peak inflation.... lol.... 1) Oil production curtailments from Saudi and the rest of OPEC+ is going to force energy prices higher. The USA will try to fight it by releasing oil from their SPR but eventually they will need to buy back all that oil at a premium price to replenish it for a real emergency. The result? - Energy prices are going right back up forcing the CPI higher. They could rely more on Canada for cheaper oil, but their obsession with "green energy" can't allow them to do that. 2) Ongoing war between Russia and Ukraine (where Putin's strategy is to drag conflict into the dead of winter and use his energy stranglehold on Europe to inflict maximum pain and damage) - Europe will get desperate for energy, forcing energy prices higher. Given the importance of Russia and Ukraine in the global commodities market, prices of most commodities will go up aka higher inflation 3) Western governments have lost their minds and are literally gearing up to fight inflation by borrowing and spending even more money... (liberals in Canada and Biden in the US have inflation fighting bills that will spend billions of dollars into the economy) ..... I'm surprised you still think that inflation has peaked already after just a couple of months and given all of these tailwinds that remain for it.... Again, stagflation is more likely than anything. This battle for financial stability and control is far from over. Best of luck to everyone.

👍