Economy: Back to normal or just plain screw

[cdnsoldier]

Front page Toronto Star:

"GTA housing market hot"

Article wriiten by Tony Wong, a cheerleader for MLS.

Followed by this headline:

"More Canadians not paying bills, study finds"

So how does this work? Are the rates so low that people who shouldn't be buying homes are (cough cough a la fanni mae)? Or are people making money despite what is going on? Mind you companies are late paying bills to in my industry.

[macka]

we've only had a smattering of shit spattering, with people not paying bills, the credit companies and banks will take a huge hit.

[JonnyO]

Of course it's hot right now House sales are going up because rates are so low people are rushing now to get in on them before its too late, they dont want to miss out. What happens 5 years from now when it's time to remortgage and the rates are double? There will be an abundance of houses on the market and people not being able to make their payments. People are getting themselves into situations they cannot get out of in the long run. BE smart and think about the future and expect rates to go up and make sure you can afford it.

[cog]

True enough.But I don't believe any government would let mortgage rates double,if at all possible.

[Seth]

^ 1986 I beleive rates went up to nearly 10% in the US, and even higher in Canada I believe but don't have any data to back the later. I could see it happening again

[cog]

Yeah,I had a 11% mortgage in 87,a little later some people thought that was good.But that was in a time when a 50G mortgage was considered OK,70 or more was considered big(Calgary).What about now,many people have enormous mortgages?

Back to topic,in tough times some outfits will always search for people they can wring out.

[Bowlcut]

^ 1986 I beleive rates went up to nearly 10% in the US, and even higher in Canada I believe but don't have any data to back the later. I could see it happening again

http://research.stlouisfed.org/fred2/series/MORTG

That is convention 30 year rates.

Honestly I recommend everyone use this calculator from Bloomberg to see if owning is worth it.

http://www.bloomberg.com/invest/calculators/index.html

Nothing says sweet like paying $220k in interest on a $250k home amortizing over 30 years.

For the record Canada does not offer the same fixed rate scheme as the USA but in general one can still do some good analysis.

[manfreakca]

u not goin to cee a normal economy for a lonnng time!!to many people still out of work in north america that wont change or maybe never change for a very long time

[cdnsoldier]

Of course it's hot right now House sales are going up because rates are so low people are rushing now to get in on them before its too late, they dont want to miss out. What happens 5 years from now when it's time to remortgage and the rates are double? There will be an abundance of houses on the market and people not being able to make their payments. People are getting themselves into situations they cannot get out of in the long run. BE smart and think about the future and expect rates to go up and make sure you can afford it.

5 years ago people were saying the same thing. Rates didn't change much and in fact, got lower. I doubt the banks will make the same mistake (80's recession) twice. You'll never see rates above 8% in a long,long, time.

[faller]

5 years ago people were saying the same thing. Rates didn't change much and in fact, got lower. I doubt the banks will make the same mistake (80's recession) twice. You'll never see rates above 8% in a long,long, time.

Exactlly! If rates ever went back up to 80's level we'd have an all out depression, let alone a reccesion.

[tiramisu]

In the us mortgages are tax deductible :(

[Bowlcut]

In the us mortgages are tax deductible :(

Which in some ways is a bad idea because it encourages and subsidizes home ownership over renting despite the latter being better in many occasions (especially in the USA market)
Government would best to just give everyone a tax break.

[cog]

5 years ago people were saying the same thing. Rates didn't change much and in fact, got lower. I doubt the banks will make the same mistake (80's recession) twice. You'll never see rates above 8% in a long,long, time.

I hope you are correct.

[cog]

Exactlly! If rates ever went back up to 80's level we'd have an all out depression, let alone a reccesion.

My bet is unrest.

[MuSuLPhReAk]

I can't verify it but my dad had told me in the 80's, mortgages were has high as 20%+ here in Quebec.

Imagine having a 200k mortgage and paying 40k/year just on interest alone?

I have heard that the interest rate should go to 10% within the next 5 years. All this is speculation though.

The only problem I'm having is that I don't believe anything the government or media is saying. I think things will get much worst than they are because there is really nothing to help us get out of this situation. Our whole economy is built of debt repayment.

[cog]

I can't verify it but my dad had told me in the 80's, mortgages were has high as 20%+ here in Quebec.

Imagine having a 200k mortgage and paying 40k/year just on interest alone?

I have heard that the interest rate should go to 10% within the next 5 years. All this is speculation though.

The only problem I'm having is that I don't believe anything the government or media is saying. I think things will get much worst than they are because there is really nothing to help us get out of this situation. Our whole economy is built of debt repayment.

Early 80's they really spiked,people were even comparing it to the situation in Germany earlier(20's?).Some are saying the economy will recover very slowly because even if people spend,so little is actually of benefit locally.Free trade might be good for some industries,but really....it's just to facilitate better profits for liquidity,which has zero loyalties.We have so much in this country,who do we really need?

[nisser]

There's a whole slew of low rate mortgages up for renewal in 2009/2010. I remember seeing a chart from the economist showing that the bulk of the mortgage resets is coming up and is way bigger than the shit we got hit in 2008.

This isn't over and won't be over for a while. How can you even pose the question when unemployment is still rising month to month? Things have to hit rock-bottom, linger for a bit and then go up. We're not there yet.

[Bowlcut]

I can't verify it but my dad had told me in the 80's, mortgages were has high as 20%+ here in Quebec.

Imagine having a 200k mortgage and paying 40k/year just on interest alone?

I have heard that the interest rate should go to 10% within the next 5 years. All this is speculation though.

The only problem I'm having is that I don't believe anything the government or media is saying. I think things will get much worst than they are because there is really nothing to help us get out of this situation. Our whole economy is built of debt repayment.

In Alberta it got that bad too. My buddy is from a hicktown north of Edmonton and he said that people who packup their possessions in the middle of the night and leave the house because they couldn't afford the payments.

The reason things were not so bad back then in terms of foreclosures, like in the USA, is that home prices were much lower when compared to average salaries, and most people had put down a 20% down payment.

My friend has some former peers who are doing finance work in Russia and they use an interest rate of 20-25% to discount future cash flows.

[michealJ]

Of course it's hot right now House sales are going up because rates are so low people are rushing now to get in on them before its too late, they dont want to miss out. What happens 5 years from now when its time to remortgage and the rates are double? There will be an abundance of houses on the market and people not being able to make their payments. People are getting themselves into situations they cannot get out of in the long run. BE smart and think about the future and expect rates to go up and make sure you can afford it.

I've been saying this for years! So many of my friends are buying that 400,000 home and driving the new SUV. I guess live it up well you can, I cant live like that tho, knowing that it 5 to 10 years I may not be able to afford all the stuff.

I think feeling the effects of the Economy is all depending where you live and what you do!
I dont think where out of the shit yet.

[JonnyO]

Oh and what about the new tax...HST? This will add a lot of $$$ on top of already over priced housing market here in BC.

[faller]

Oh and what about the new tax...HST? This will add a lot of $$$ on top of already over priced housing market here in BC.

Ya no shit!! On new construction it'll add an additional 7% in tax's. So on a $400,000 home you were paying $20,000 GST and $4,000 PTT, thats $24,000. With the new tax that will add an additional $28,000 for a grand total of$52,000!!!! You used to pay on average of $12,720 on realtor fee's, with the new tax that's and extra $940.00 for a total of $13,660.

WTF is Gov. thinking?

[Bowlcut]

Ya no shit!! On new construction it'll add an additional 7% in tax's. So on a $400,000 home you were paying $20,000 GST and $4,000 PTT, thats $24,000. With the new tax that will add an additional $28,000 for a grand total of$52,000!!!! You used to pay on average of $12,720 on realtor fee's, with the new tax that's and extra $940.00 for a total of $13,660.

WTF is Gov. thinking?

Less for you, more for them.

[ironwill]

Oh and what about the new tax...HST? This will add a lot of $$$ on top of already over priced housing market here in BC.
We had a pleasant surprise whn we bought our place in AB....No PTT, PST,nothing....the homes are high priced here, but no extra bullshit like we have to pay in BC...The only extra money we had to put out was the taxes for the yr....We got lambasted in BC, but AB did us happy....

The housing market spiked because interest was down to 3.7 percent, people flocked to the banks...The realtors said that they as a whole had the best month in June in the past 3 yrs....I believe that was he lowest interest rate in 40 yrs...
I am not sure what happened in other areas of the country....
I have heard my dad say it was 18 percent interest in the 80s, i remember we were pretty poor for awhile.....We made it through....The fellow that mentioned people fleeing in the mid of night, That was no exaggeration, my folks had friends that just left their homes, and farms because they couldnt afford the homes they had...Ive heard speculation of 8-11 percent in 3 yrs....i hope not, but if it does happen, people will just own smaller vehicles, or less luxuries, its not going to be as bad as it was in the 80s, that would cripple us all..
Ill keep my truck, because the used vehicle market will be through the roof in 3-5 yrs also......You dont see as much leasing, and new vehicles will be out of reach with high interest rates and overpricing and the monopoly that is being creatd in auto industry....
but i think it looks ok for awhile, yet it may get worse ...Im feeling more optimistic lately.....

[faller]

Less for you, more for them.

No it'll be even less for them. New houseing starts will come to a grinding hault..... Which if i think about it might not be so bad in this over inventoried market.

[Bowlcut]

No it'll be even less for them. New houseing starts will come to a grinding hault..... Which if i think about it might not be so bad in this over inventoried market.

You operate under the assumption that if one tax fails to collect sufficient revenue that the government won't raise another one.

[Thorgrim]

The economy is done. They are going to drag it out as long as possible but they can't save it. If they raise rates nobody will be able to pay their bills. If they don't we will probably have hyperinflation.

The reason why rates were so high in the early 80's was because they were trying to combat inflation by making borrowing more expensive. If they try the same thing now it won't work because debt levels are so high. It would only accelerate the crash.

[Mad-Bull]

Ya no shit!! On new construction it'll add an additional 7% in tax's. So on a $400,000 home you were paying $20,000 GST and $4,000 PTT, thats $24,000. With the new tax that will add an additional $28,000 for a grand total of$52,000!!!! You used to pay on average of $12,720 on realtor fee's, with the new tax that's and extra $940.00 for a total of $13,660.

WTF is Gov. thinking?

Wow when you put it like that I actually feel sick to my stomach. The fact that I would work almost a full year JUST to pay the taxes on the home I purchase. ****ing disgusting....

[CanadianIron]

I work for a company that sells large manufacturing machines into the states and in Canada. We basically make the machines people manufacture product with. If the economy dips, we feel it later, when it picks up, we feel it first. August has been the slowest month since the early 70's when our company started, the economy is still total shit, dont believe anything anyone says.