COVID and the housing market | Page 156 | GTAMotorcycle.com

COVID and the housing market

Not every home is an investment. Too many here can’t see that way. My house is my home. I would happily own it if it didn’t appreciate one bit over the last 30 years. So many memories. Raised two girls here. I don’t see it as a pile of money. It’s so much more.


Sent from my iPhone using Tapatalk
 
Allistonfjr said:
Not every home is an investment. Too many here can’t see that way. My house is my home. I would happily own it if it didn’t appreciate one bit over the last 30 years. So many memories. Raised two girls here. I don’t see it as a pile of money. It’s so much more.


Sent from my iPhone using Tapatalk
Click to expand...
That's my problem with unlimited capital gains exemption. Lots of people chase houses as investments instead of picking a house to be a home. I know many people that made hundreds of thousands a year tax free through their principal residence. The person that owned our house last has been in three houses over four years and in the process ended up with a brand new house and many hundreds of thousands in the bank (probably close to 500K a year made on buying and selling their primary residence).

When moving the last time from our small house (amazing for a couple, painful with a couple kids and a home office), my wife wanted to move further north and basically trade distance for space but keep approximately the same price for purchase and sale. Instead we roughly doubled and got something that is much nicer to live in and also increases by far more dollars per year than the cheaper option we considered. Better for family and better for investment. If I was purely viewing principal residence as an investment play, I would move far more often and could generate far more dollars per year but the family would be in constant turmoil. I don't want that path.
 
Mad Mike said:
BOC purchases mortgages to fix it's balance sheet, and so banks the liquidity to issue mortgages. Again, not a solution, if BOC didn't buy CMHC insured high ratio mortgages, it would be near impossible for first time buyers to get into the game - this solution benefits only the rich landlord, and cripple the first time home buyer.
Click to expand...
The major problem is not as much CMHC's high loan to value mortgage insurance program. It's their bulk Insurance (a.k.a. Portfolio Insurance) which also insure low value to loan mortgages which they sell to banks.
Effectively off-loading risk from banks onto the taxpayer via the BoC mortgage backed security purchases. The BoC prints money out of thin air to buys these MBS and dilutes the purchasing power of the dollar creating inflation and fueling loan issuance.

Here's a summary:
Lenders buy bulk insurance on their low-ratio mortgages for three reasons:

1) Capital relief (lenders need to maintain less capital for mortgages that are insured) (thus encouraging further mortgage credit issuance)
2) Risk reduction (bulk insurance covers the lender in the unlikely scenario that a borrower with 20%-plus equity defaults and the lender can’t recover its principal) (Where does this risk go to? ....the taxpayer)
3) Securitization (insured mortgages are easier package up and sell to investors) (mostly to the BoC)

CMHC summarizes portfolio insurance as follows:

“Portfolio insurance helps lenders manage their capital more efficiently and small lenders to compete on an equal footing with large lenders. It allows more lenders to compete in the mortgage loan insurance market by lowering entry barriers, thus expanding consumer choice.”

Here's a page for the Government of Canada's webpage:

Mortgage insurance is provided by Canada Mortgage and Housing Corporation (CMHC), a federal Crown corporation, and two private insurers, Genworth Financial Mortgage Insurance Company Canada and Canada Guaranty Mortgage Insurance Company.

The Government backs 100 per cent of the mortgage insurance obligations of CMHC, in the event that it is unable to make insurance payouts to lenders. In order for private mortgage insurers to compete with CMHC, the Government backs private mortgage insurers’ obligations to lenders (in the event that a private insurer is unable to make insurance payouts to lenders), subject to a deductible charged to the lender equal to 10 per cent of the original principal amount of the loan.

Conclusion: the taxpayer is the ultimate bag holder.
 
Last edited:
DarR said:
The major problem is not as much CMHC's high loan to value mortgage insurance program. It's their bulk Insurance (a.k.a. Portfolio Insurance) which also insure low value to loan mortgages which they sell to banks.
Effectively off-loading risk from banks onto the taxpayer via the BoC mortgage backed security purchases. The BoC prints money out of thin air to buys these MBS and dilutes the purchasing power of the dollar creating inflation and fueling loan issuance.

Here's a summary:
Lenders buy bulk insurance on their low-ratio mortgages for three reasons:

1) Capital relief (lenders need to maintain less capital for mortgages that are insured) (thus encouraging further mortgage credit issuance)
2) Risk reduction (bulk insurance covers the lender in the unlikely scenario that a borrower with 20%-plus equity defaults and the lender can’t recover its principal) (Where does this risk go to? ....the taxpayer)
3) Securitization (insured mortgages are easier package up and sell to investors) (mostly to the BoC)

CMHC summarizes portfolio insurance as follows:

“Portfolio insurance helps lenders manage their capital more efficiently and small lenders to compete on an equal footing with large lenders. It allows more lenders to compete in the mortgage loan insurance market by lowering entry barriers, thus expanding consumer choice.”

Here's a page for the Government of Canada's webpage:

Mortgage insurance is provided by Canada Mortgage and Housing Corporation (CMHC), a federal Crown corporation, and two private insurers, Genworth Financial Mortgage Insurance Company Canada and Canada Guaranty Mortgage Insurance Company.

The Government backs 100 per cent of the mortgage insurance obligations of CMHC, in the event that it is unable to make insurance payouts to lenders. In order for private mortgage insurers to compete with CMHC, the Government backs private mortgage insurers’ obligations to lenders (in the event that a private insurer is unable to make insurance payouts to lenders), subject to a deductible charged to the lender equal to 10 per cent of the original principal amount of the loan.

Conclusion: the taxpayer is the ultimate bag holder.
Click to expand...
The taxpayer is always the bag holder. Taxpayers own gov't debt. Tax payer are also the ones who hold stock in the banks (at least this tax payer does).

Capital relief insures liquidity and competition in the mortgage markets. This protects consumers by making sure banks and lenders don't run out of money to fund mortgages. If a lender didn't have the capital available, new housing development would grind to a halt - catastrophic for the economy (jobs), the cost of lending would skyrocket (supply and demand on mortgages would allow banks to charge whatever they could get), and finally the competitiveness and control of the in the mortgage market would likely distill down to TD and Royal Bank.

It's true that the tax payers are in the hook, the reality is that Mortgage insurance is a great and profitable business for CMHC, Genworth & Canada Guarantee. If the government ever had to step in to fund a catastrophic payouts to CMHC (or FDIC) you better own a rifle and enough seeds to grow your own food for a while.
 
Allistonfjr said:
Not every home is an investment. Too many here can’t see that way. My house is my home. I would happily own it if it didn’t appreciate one bit over the last 30 years. So many memories. Raised two girls here. I don’t see it as a pile of money. It’s so much more.


Sent from my iPhone using Tapatalk
Click to expand...
All real estate, is an investment.

I get your point, it's also a 'home', something the family enjoys and loves over a very long period of time.

Same could be said of a rental property -- my uncle rented the same 'home' in Edmonton for his whole life, raised 3 kids, had dogs, and a lifetime of memories. What he didn't have in his home was a financial benefit for 40 years of rents. You likely will, you have an investment.
 
Mad Mike said:
Affordable housing is a complicated issue - it will involve changes to environmental regulation, freeing up of development lands, and redirecting demand through economic development to places outside Canada's large urban centers.
Click to expand...
The problem is simple. The solution isn't.

We pride ourselves in our socialism but it's going off the rails. We need to focus on getting the minimum wage earners into decent income brackets where they can afford homes, not subsidizing the homes.

We are importing buyers instead of growing our own.
 
nobbie48 said:
The problem is simple. The solution isn't.

We need to focus on getting the minimum wage earners into decent income brackets where they can afford homes, not subsidizing the homes.
Click to expand...
I agree the solution is not easy (or maybe even possible?).

I don't think paragraph two is possible. I think you can reasonably ignore numbers and just look at percentiles. It really doesn't matter how much the minimum wage earner makes, they will likely never be able to afford to buy a dwelling. The only scenario that lets them buy is if they climb on top of other people like government assistance, fixed income, etc. Say minimum wage went to 100K, "starter" home prices and rent would rise to meet the new ability to pay and fixed income renters would be driven to Porcupine to try to survive as they are still stuck at the pre-inflation income. I don't know what the actual percentiles are but I would guess something like the bottom 10% struggle to afford food and a place to live, the next 40% or so can survive rent or saving but not both (if they got lucky or help to get into the market they may be ok long-term), the next 20% can buy homes but will be house poor, the next 20% can buy an "affordable" house with little pain or step up in the market and be cash-strapped, the top 10% can do almost whatever the f they want. Changing minimum wage just changes who is in the lower percentiles, you still have the same number of people in each percentile.

I still think the best approach to housing prices is massive increases in supply. If a buyer or renter has a choice of 10 different properties that are reasonably equal, the properties try to compete on price and that helps those trying to find a place to live.
 
GreyGhost said:
I agree the solution is not easy (or maybe even possible?).

I don't think paragraph two is possible. I think you can reasonably ignore numbers and just look at percentiles. It really doesn't matter how much the minimum wage earner makes, they will likely never be able to afford to buy a dwelling. The only scenario that lets them buy is if they climb on top of other people like government assistance, fixed income, etc. Say minimum wage went to 100K, "starter" home prices and rent would rise to meet the new ability to pay and fixed income renters would be driven to Porcupine to try to survive as they are still stuck at the pre-inflation income. I don't know what the actual percentiles are but I would guess something like the bottom 10% struggle to afford food and a place to live, the next 40% or so can survive rent or saving but not both (if they got lucky or help to get into the market they may be ok long-term), the next 20% can buy homes but will be house poor, the next 20% can buy an "affordable" house with little pain or step up in the market and be cash-strapped, the top 10% can do almost whatever the f they want. Changing minimum wage just changes who is in the lower percentiles, you still have the same number of people in each percentile.

I still think the best approach to housing prices is massive increases in supply. If a buyer or renter has a choice of 10 different properties that are reasonably equal, the properties try to compete on price and that helps those trying to find a place to live.
Click to expand...

One can buy reasonable accommodation for $50,000, an RV. Throw in another $10,000 to make it suitable for Canadian climates. The piece of land it sits on is a million. They can make trailers but not the land.
 
nobbie48 said:
One can buy reasonable accommodation for $50,000, an RV. Throw in another $10,000 to make it suitable for Canadian climates. The piece of land it sits on is a million. They can make trailers but not the land.
Click to expand...
That may be a reasonable approach but finding a place to live in it (especially in the winter) is not easy nor cheap. Most campgrounds are not equipped for winter water and waste.

The other option that I strongly considered when I was younger was a bubbled in boat. Same issues as RV but opens up living downtown so you could avoid owning a vehicle if desired/required.
 
nobbie48 said:
The problem is simple. The solution isn't.

We pride ourselves in our socialism but it's going off the rails. We need to focus on getting the minimum wage earners into decent income brackets where they can afford homes, not subsidizing the homes.

We are importing buyers instead of growing our own.
Click to expand...
I think what we are seeing is just new to us -- in many parts of the world people live where they can afford to live. In Canada, the big urban centers have always been relatively affordable, that's changing and there may be no way to stop it.

Thinks about it for a second - most of us can't live in Forest Hill, High Park, Cabbagetown neighbourhoods -- we live where we can afford it. That may be close to those areas, or it might be Scarborough, North York, Cambridge, Oshawa... I'd love to have my house in a downtown TO hood, but it would be 5x the price it is in Markham -- so I live in Markham.

Recently the entire GTA has been priced out of range for many. Do residents have a right to live in the GTA? Or is it reasonable to expect them to relocate to affordable locales... say Peterborough, Kingston, Windsor or any other area in Canada where employment is available and their income fits the cost of accommodation.

I have one kid who did that. He makes great money on a small Northern Ontario city where a really nice house costs 1/4th of that it would be in the GTA. He's 26 and was saving for a house in the GTA, after moving he used his savings to buy a house cash. No rent, no mortgage - instead he spends that money on toys.
 
Mad Mike said:
All real estate, is an investment.

I get your point, it's also a 'home', something the family enjoys and loves over a very long period of time.

Same could be said of a rental property -- my uncle rented the same 'home' in Edmonton for his whole life, raised 3 kids, had dogs, and a lifetime of memories. What he didn't have in his home was a financial benefit for 40 years of rents. You likely will, you have an investment.
Click to expand...

My beneficiary’s will have my investment. But I get what you are saying.


Sent from my iPhone using Tapatalk
 
GreyGhost said:
That may be a reasonable approach but finding a place to live in it (especially in the winter) is not easy nor cheap. Most campgrounds are not equipped for winter water and waste.

The other option that I strongly considered when I was younger was a bubbled in boat. Same issues as RV but opens up living downtown so you could avoid owning a vehicle if desired/required.
Click to expand...
I'll bubble mine and rent it to you next winter -- $500/mo for a 1br waterfront downtown, includes 1 parking spot, utilities and internet.

You can let us know how comfy it really is!
 
I would put a simple capital gains tax on primary residence as follows (I posted something similar previously):

Live in the house:
1-2 years - 50%
2-5 years - 25%
5+ years - 0%

That means the builder / contractor / investor now has to hold the debt for an extended period of time.

Change the years to whatever you like, but when I live in a house for 366 days and can make hundreds of thousands of dollars tax free...there's obvious incentive to muck around.
 
Mad Mike said:
I'll bubble mine and rent it to you next winter -- $500/mo for a 1br waterfront downtown, includes 1 parking spot, utilities and internet.

You can let us know how comfy it really is!
Click to expand...
I didn't say it would be the most comfortable accommodation. I was trying to save money and it was looking like the cheapest way to live. Based on your price, that's still true. Save $2000 a month for six months and that makes a big difference decades later.
 
GreyGhost said:
I didn't say it would be the most comfortable accommodation. I was trying to save money and it was looking like the cheapest way to live. Based on your price, that's still true. Save $2000 a month for six months and that makes a big difference decades later.
Click to expand...
It depends if you invest the $2k ... or blow it all...

As for boat living, buddy of mine did it for a few years. His wife lived somewhere middle of nowhere, and instead of commuting he just had a boat at Port Credit Marina and lived there year round. Said it was the best. Hell @crankcall may even had been drinking with him.
 
Two seperate family friends living in Toronto just got their rent jacked up 20-30% starting 2022 due to the rent control loop hole.

I'm talking about the built on / first resided after "November 15, 2018 are exempt from rent control."
 
george__ said:
Two seperate family friends living in Toronto just got their rent jacked up 20-30% starting 2022 due to the rent control loop hole.

I'm talking about the built on / first resided after "November 15, 2018 are exempt from rent control."
Click to expand...
Rent control is a failure. Sadly rents need to float with market conditions. If they don't landlords find ways around to evict tenants and reset the rent. Either way the tenant is stuck with market rent but they could have avoided the expense and turmoil of a move (and potentially have some control over timing, eg eviction in 61 days or rent increase in 91 days).
 
As interest rates rise, so will rents. Landlords / investors are going to want to cover their increased mortgage payments (if they have any) and the renters are going to be stuck. Renovictions will be much more common, more so than now.
 
Mad Mike said:
Recently the entire GTA has been priced out of range for many. Do residents have a right to live in the GTA? Or is it reasonable to expect them to relocate to affordable locales... say Peterborough, Kingston, Windsor or any other area in Canada where employment is available and their income fits the cost of accommodation.
Click to expand...
My wife and I have been applying to jobs as far as Edmonton recently. We're just thinking about the basics now: affordable housing, secure employment with fair wages, decent schools in the area, reasonably low crime rate, enough space to start a family. We're willing to sacrifice on the nice things like warmer weather, proximity to family/friends, access to different cuisines, track days :( just to get on with our lives.
 
You must log in or register to reply here.

Back
Top Bottom