Home prices 10% to 30% to high! and Oil.

[SASKFARMER3]

Seems their is rumblings again that home prices are to high. No shit Sherlock a home in Regina or Saskatoon or Vancouver or Toronto that's worth 750000 to 1000000 for a basic home is WTF.
Similar homes can be purchased in warm locations on a beach in form of a Condo or retirement home for 350 to 575.
So really yes I believe home prices are to high.
But who let this happen. HM

[SASKFARMER3]

Yea the other comment was if oil workers start getting their pink slips and the rigs shut down with oil under 60 which it hit early this morning. Will these workers start to panic if it last a year long and homes will be put on the market for distress sales.
How fragile is the Canadian home market.
Where is a small town house worth 325,000. Like really its not only a city thing out this way.

[SASKFARMER3]

The Bank of Canada has acknowledged that the country’s housing market may be overvalued by as much as 30 percent as a long-awaited soft landing remains elusive.

The bank based the estimate on a new model it has developed, details of which are contained in its twice-yearly assessment of threats to the Canadian financial system released Wednesday.

The bank said Canadian house prices have been overvalued by at least 10 percent since 2007, and may now have overshot by anywhere from 10 to 30 percent.

The range is significantly higher than estimates by the International Monetary Fund (10 percent) and Canada Mortgage and Housing Corp., which judges there is a “moderate degree of overvaluation.”

Bank Governor Stephen Poloz acknowledged Wednesday that “some financial vulnerabilities appear to be edging higher.”

These include a growing appetite in Canada for subprime mortgages and risky auto loans, triggered by sustained low interest rates.

But Poloz pointed out that the risk of adverse shocks to Canada’s financial system, including a spike in global interest rates or a re-emergence of the euro crisis, are lower now than six months ago, leaving the “overall stability risk roughly the same as in June.”

The bank is still expecting a soft landing in housing, and that may already be happening in Eastern Canada. But it said prices are still rising in cities, such as Toronto, Calgary and Vancouver.

In Toronto, for example, the bank warned of the risk of an “impending overbuild” in the condominium market.

Rapidly escalating prices are also hitting the commercial real estate market, which the bank called dramatic. Average per square foot values are up 39 percent since 2009, led by downtown Calgary, where prices are up 50 percent.

Among the worsening “vulnerabilities,” the bank’s Financial System Review pointed to a growing subprime mortgage market.

“A more worrisome aspect of this trend is that a sizeable proportion of new uninsured mortgages are being issued to riskier borrowers,” the bank said.

About 35 per cent of new, uninsured mortgages by smaller federally regulated banks since the end of 2012 could be considered non-prime, according to the report.

The bank said various less-unregulated institutions are also getting into the subprime market, which was famously blamed for helping to trigger the financial crisis in the U.S. in 2008.

The share of mortgages in Canada that are considered subprime remains in single digits.

The bank also expressed concern about the auto loan market, where it said borrowers with low credit scores now account for roughly a quarter of all new loans.

“Riskier loan characteristics, such as longer loan terms and higher loan-to-value rations, have become more common,” the report said.

The growth in auto loans has doubled to more $120-billion since 2006, “substantially outpacing” all other forms of household borrowing. Auto lending has grown by an average of 9 percent since 2011, versus 4 per cent a year for overall household credit.

The report said growth has been driven by strong auto sales, increased lending by major banks as well as new entrants, such as credit union, insurance companies, foreign financial institutions and “unregulated entities.”

Low interest are also causing “increased risk taking in financial markets,” according to the central bank. One manifestation of the trend is that investors are shifting to corporate bonds from government bonds.

The report said the main risks to Canada’s financial system are the same as in June – the possibility of housing crash, an interest rate spike, financial stress in Europe and a banking crisis in China.

[sumdumguy]

Ridiculously low interest rates, that's Who? I hate to see the fallout from this one.

[freewheat]

Like anything, it varies. In our small towns, houses are easy to find for under 150. These are decent houses, not mansions, but nice.

Am I the only one living in practical land, where people think things through before they buy stuff?

Cousins sold a junky 450 sq foot house in Vancouver, for 900 000.

Saskatchewan needs more industry. Some of these people, if jobs were available in rural sask, would cash in and move out here in a heartbeat.

SF3, like land though, don't home values only ever go UP???

[cottonpicken]

Dont worry the tax payers get to foot the bill the riskiest stuff is in cmhc.

Bankers bonus's this year-13 billion.

[SASKFARMER3]

Agree cot that's the problem taxpayers will pay for this shit

[Guest]

yes taxpayers will pay for it , same as they did in the 80's when farmers had paid too much for land

[Oliver88]

From my experience, a typical younger person in a city will get approved for a mortgage and figure they can afford whatever the number is.
Very rarely does a younger urban person put down 20% to avoid CMHC insurance. (Which is a terrible penalty/premium)
If I was finance minister, I would eliminate the CMHC insurance and force all home buyers to put 20% down and things would take care of itself.
This would eventually drop home prices.

[cottonpicken]

I agree,but that would crash home prices,kick in 10% interest,which is where it should be and kaboom.

The existing morgages on the banks books would topple the system and at a 10% npr at cmhc the banks need 70 billion from the tax payers on that side,but what is the tax base at at that point?

This is part of the reason deflation HAS to be fought tooth and nail.

[Oliver88]

Without a CMHC available, the typical buyer would be able to afford a larger % for a down payment due to lower house prices.

In my opinion, CMHC indirectly is a large subsidy for the real estate industry.

[cottonpicken]

Fun with math,if there are 200,000 people working in the banks and 13 billion was paid out thats 65,000 per employee,all for bonuses but i bet the locals didnt get that and the top brass in toronto probably made out like bandits.

[helmsdale]

I lived across from a house in Burnaby (vancouver suburb), that a year before i started school sold for mid 300s. Guy put hardwood in sells 2 years later for 450. Next guy does baseboards and windows, sells after 1 year for 570. Next person renovates it to include a non-permitted basement suite and sells for 750. Last i heard it flipped again for north of 900! 3x appreciation in 10 years! Wtf?

[sumdumguy]

Yep, Helmsdale, this is a governmemt in control, no doubt about it! Good government would legislate controls on this crap!

[farmaholic]

How can you legislate price control? Housing prices are reflecting supply and demand. (Rumour)At one point when houses were listed, it was like an auction sale, people were getting more than their listing price because buyers were bidding each other up through their agents. Tides have now turned and its a bit of a buyer's market. Nothing goes up forever, there are always corrections and my prediction for a farmland correction will come true as well. Stay tuned, Investors want returns. Listen closely and you'll hear a whooshing sound when the money leaves ag land. Let it correct and that will be the true value based on what it's capable of, not someone looking to hide some money. Buy then. They may not be making more but no one may want the stuff there is...