I can't see the feds ever letting rates get near those levels (within the next 30 years). They have bet the economy on housing. Letting rates climb collapses the economy. I could obviously be wrong but I just don't see how it could happen.
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COVID and the housing market
- Thread starter mimico_polak
- Start date
Mad Mike
Well-known member
Or the bank calls the loan - which they did - because the value of your property didn't meet their debt:equity ratio.
In 93 a $370K suburban house was pretty nice, probably equiv to a $2.5M home today. You could get in with 10% down and 120K income. Prices were rising fast, $10K a month from 86-91 so a lot of speculators had 2 properties or pre-construction contracts. When the correction hit, stuff over $350K fell 20-30% very quickly - negative equity on one property is bad, but on 2 or 3 it's big trouble. A lot of small time spectators lost everything.
20 or 30% drop I have no problem believing (hell, in current times, that was the appreciation over less than a year). Nobbies guy was down over 75% which seemed very strange.
Mad Mike
Well-known member
Bigger drops did happen, my parents got transferred abroad, they had a large house in a nice part of Newmarket that cost them $650K in 1990, they sold if for $270 in 93. A $4M house in 1993 would have been rockstar stuff -- a friend of mine had a 12,000 sq' home with a 16 car garage on 100 acres at the Forks in '90, he bought it for $2.5M.
The drop isn't linear. The guy in the 6000 SF can downsize to a bearable 2000 SF. The guy in the 1000 SF bungalow has to hang in. A lot depends on where you have your money. People were practically giving away cottages and boats to reduce debt and overhead. Sell the boat or cottage for less than what's owing but reduce the overall debt and eliminate storage fees and insurance.
Pay cash for toys. The cottage may appreciate with fluctuations but not boats, cars, bikes etc.
Add Nortel to the story. A stock market millionaire one day and a pauper the next.
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Is there any reason some con artist couldn't recreate 2008?
P.S. Big money runs the country not the feds. PM stands for Puppet Minion.
Collapsing housing kicks banks in the nuts and on a much smaller scale the developers will be very upset.
Sky_high
Well-known member
I was checking my favourite app recently (House Sigma), for house prices in Scarborough Malvern area...I can't believe homes are selling for low to mid $900k.
In my opinion, there is something really wrong with housing market and prices, if homes in Malvern are approaching $1M.
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In my opinion, there is something really wrong with housing market and prices, if homes in Malvern are approaching $1M.
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It would be interesting to see what is happening with income in Malvern. Is it being gentrified or is it internal churn with neighbourhood residents using recent gains to jump up? If incomes are climbing quickly, where are the lower income people going that are being driven out?
My inlaws live in Scarberia in a side split. Nice enough but somewhat dated. They have a big pie shaped lot, their neighbour has a much bigger lot (tennis court, pool and lawn in backyard). The neighbour is contemplating selling in a few years. My FIL is considering trying to sell as a package as a townhouse development could fit. My MIL would be crushed to see her house torn down.
Co-worker bought in 94 a house downtown for $248K power-of-sale. The previous amount owing on the mortgage was $675K. I remember the numbers as they were all shocking to me at the time. There were some pretty big drops in that time frame as people were a short time before going nuts in bidding wars.... and mortgage rates were also crazy.
Edit.... I also know a few people that lost their homes around then as they could not cover the mortgage at the high rates and they were also underwater.
Edit.... I also know a few people that lost their homes around then as they could not cover the mortgage at the high rates and they were also underwater.
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Just checked…the house listed nearby for 1.25 was sold about 10 years ago last for 500k.
not bad ROI. Although I did hear the owner has/had a restaurant and it didn’t survive COVID. But that could very well be just a rumour.
not bad ROI. Although I did hear the owner has/had a restaurant and it didn’t survive COVID. But that could very well be just a rumour.
How does that work in Canada? Are you still on the hook for 400 unless you declare bankruptcy or does the sale clear your debt (as well as all equity that you had at one point in the property)?
I’d say it’s no different than any other debt. If you sell underwater you’re still liable for the difference.
The prime residence is gold in Canada, especially with the market going nuts. A place to live, massive gains and no taxes. That is one investment to be protected. If you want to mess with speculation create a numbered company.
But that means you have tons of free capital. Getting loans for speculating within a numbered company is not easy (except for the dodginess in BC with 30% down, no proof of income for foreign students).
If you have enough money to weather the storm you survive and come back stronger and richer.
I'll skip the names but a half century ago there was a conglomerate A that stretched its finances to take over conglomerate B. The stretch caused the share value of A to drop drastically. The owner of conglomerate B used the money from the sale to buy into conglomerate A and with their money backing the operation, conglomerate A shares came way back up. It must have been one heck of a poker game.
My understanding here, and I could be off... Bank forecloses (owner stopped paying/default), bank tries to sell the property (power of sale) for what they can. If it sells for more than they are owed (I am sure there are fees of course...) they give the delta back to the previous owner, if less the previous owner is on the hook but at that point they have likely declared bankruptcy so the bank is screwed. Of course why would the bank try hard to maximize value (over what is owing) in the sale unless it will sell for less than they are owed. If the property was worth well over market value a smart person would sell instead of defaulting....
On a side note... During the US financial crisis some banks were paying extra cash to the underwater defaulters to not trash the place to protect value. Until the bank takes possession it is your house and you can do whatever (within reason)... it is not like the person did not know they were losing the house. So they were trashing the place or smart ones were selling as much off as they can (cabinets. appliances, copper....) and when the bank took possession it was at a big loss due to the damage.
WOW….that bungalow just sold for 1.387M….140k over asking.
Almost triple in 10 years. woof. At least they renovated along the way so maybe closer to double which is in the ballpark of the general market.
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