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Some Sellers Are Reaching The Point Of Realization They May Have To Entertain Less Than What They Expected

A report from the Canadian Press. “Canadians looking to borrow money for a home purchase a home are in for some extra challenges after the Canada Mortgage and Housing Corporation announced changes to its lending standards on Thursday. The country’s national housing agency is increasing the qualifying credit score for mortgage insurance to 680 from 600 and limiting gross and total debt servicing ratios to their standards of 35 per cent and 42 per cent, respectively.”

“‘COVID-19 has exposed long-standing vulnerabilities in our financial markets, and we must act now to protect the economic futures of Canadians,’ CMHC head Evan Siddall said in a statement. ‘These actions will protect homebuyers, reduce government and taxpayer risk and support the stability of housing markets while curtailing excessive demand and unsustainable house price growth.'”

“Under the changes effective July 1, CMHC will also no longer treat non-traditional sources of down payment funding, such as a personal unsecured line of credit, as equity for insurance purposes. It will also suspend refinancing for most multi-unit mortgage insurance. The move comes just weeks after Siddall appeared before the Standing Committee on Finance in Ottawa to warn of trouble ahead for the housing market.”

“‘Our support for home ownership cannot be unlimited,’ he said. ‘Home ownership is like blood pressure: you can have too much of it. Housing demand is far easier to stimulate than supply and the result, as we’ve seen, is Economics 101: ever-increasing prices.'”

The Globe and Mail. “The new criteria, effective July 1, are designed to help weed out borrowers who are less likely to make their payments and could reduce demand for homes at a time when real estate sales have dropped. ‘The purpose of this is to eliminate demand that is viewed as too risky,’ said Benjamin Tal, deputy chief economist with CIBC. ‘It is consistent with the way CMHC is viewing the housing market at the moment. They are trying to eliminate risk.'”

“The most recent national data show sales from March to April falling nearly 60 per cent and the average selling price across all types of residential properties down 10.9 per cent. Banks have provided mortgage deferrals of up to six months for about 15 per cent of their residential loan portfolio. CMHC has forecast that home prices could drop as much as 18 per cent over the next 12 months.”

From Now Toronto. “The new rules will limit both mortgage eligibility and purchasing power for a very small segment of the market place in Toronto, says Steven Parks, a broker at Redpath Financial. CMHC insured-mortgages only apply to homes purchased for less than $1,000,000. There aren’t a lot of those here. ‘They are taking what’s already conservative approach and making it a little more conservative,’ says Parks.”

“Odeen Eccleston, a broker at WE Realty, primarily works in suburban areas. She has yet to see significant dips in pricing but is believes a price drop could still happen. ‘This past month, we definitely saw more lowball offers being submitted,’ says Eccleston. ‘Whereas sellers were refusing to even look at these types of offers at the beginning of the pandemic, some are reaching the point of realization that they may now have to entertain less than what they expected pre-COVID-19.'”

From Global News. “Home builders in Regina and Saskatoon are staying optimistic about home sales, despite Canada Mortgage and Housing Corporation stating otherwise. ‘The harsh forecast released by CMHC really only reflects a ‘best guess’ of what might happen in the housing market over the next year,’ said Stu Niebergall, Regina & Region Home Builders’ Association CEO. ‘Their predictions come off a bit like someone running into a room screaming ‘fire!’ when things are hot, but no one has seen any smoke or flames yet.'”

The Huffington Post. “The spat between Canada’s government-run mortgage insurer and the country’s residential real estate industry appears to have been a big misunderstanding over units of measurement. Notably, the average selling price in Canada has already fallen more than the CMHC’s best-case scenario of a 9-per-cent drop; it fell nearly 11 per cent in April alone.”

From Mortgage Broker News. “Toronto’s rental property owners are gradually losing hope as the COVID-19 pandemic drags on, according to RE/MAX. A significant contributor to the gloom is the almost-overnight collapse of Airbnb, which suffered much-reduced bookings once the coronavirus took hold of the global economy. RE/MAX said that these developments have left Toronto’s landlords over-leveraged and susceptible to market volatility.”

“‘Many real estate investors were reaping the benefits of Airbnb-style short-term rentals, where the profit margin was so much greater than a traditional lease,’ RE/MAX said. ‘With the closing of the US/Canada border and the imposed stay at home measures, the demand for short-term rentals disappeared overnight, and now some investors are left scrambling to find tenants for their vacant spaces.'”

“‘Since the closure of non-essential businesses across the city in late March, many tenants are struggling to make rent payments. This will inevitably put downward pressure on demand for a brief period of time, even after protection measures have been lifted,’ RE/MAX said. ‘This extra supply flooding the rental markets, coupled with depressed demand levels, means there is potential for average rental rates to decline within the Greater Toronto Area. This anticipated drop in rent prices and competition may translate to a less stressful home search for new renters, post-crisis.'”

The Vancouver Sun. “Is Canada returning to the 1990s, when tens of thousands of Hong Kong residents fearing China’s authoritarianism crossed the Pacific Ocean to buy property and a safe haven in Toronto and Vancouver? Some Canadian realtors have suggested as much during the past year of clashes in Hong Kong. However, there does not seem to be a strong flow of returnees, for many reasons.”

“Lily Wu, a Vancouver-based chartered accountant, noted that last year, when protests were peaking in Hong Kong, a handful of Vancouver realtors obtained attention in the media by claiming Hongkongers were flooding back into the city’s housing market.”

“‘But it didn’t amount to anything. The realtors were just trying to scare people into thinking they had to buy in Vancouver. They were trying to create a fear of missing out,’ said Wu, who has colleagues, clients and family with links to both Hong Kong and Canada.”

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This Post Has 56 Comments

  2. ‘claiming Hongkongers were flooding back into the city’s housing market. ‘But it didn’t amount to anything. The realtors were just trying to scare people into thinking they had to buy in Vancouver. They were trying to create a fear of missing out’

    There isn’t anything they wouldn’t do to exploit, freaking dogs. Then when people get foreclosed, does the media remind anyone of this reckless, phony boosterism?

    If these UHS really had some inside info on something like this, they would get off their greedy asses and start buying everything in sight, not try to stampede the herd.

    1. I have been saying this for a long, long time in my “Metro Vancouver Housing Collapse” Facebook group; it goes back many years, too. The intent has always been to spook local into FOMO-buying.
      Guess what, it’s not working anymore; Vancouver area residents are beginning to realize how they have been played by both the RE industry and media hype. The boom is long over; however, with gobs of money at stake, the shills/pumpers will continue to pull out all the stops.

      We are going to see the biggest housing collapse the GVRD has ever experienced.

      1. “We are going to see the biggest housing collapse the GVRD has ever experienced.”

        I’m going to retire in about ten years. Hopefully it will have bottomed out by then. A condo near Stanley Park would be a great place to retire to.

    2. What COVID is teaching me is that everyone is freaking dogs and they’ll exploit anything. Nobody — and I mean nobody — is letting this COVID crisis go to waste. Everyone from Federal Reserve to gold bugs to vegans to the Kennedy Center are jumping on this.

      1. Everyone needs to watch this. People who have been saying that the coronavirus and the riots are part of a larger plan have been called “crazy conspiracy theorists.” Now, the globalists aren’t even trying to hide it anymore.

        https://www.weforum.org/great-reset

        1. Ca renter,

          And the problem is …….who are the masterminds of the “great reset “?

          There are masterminds that think that the world should have only 500 million.

          There was Hilter who thought people should be killed because the German Super race deserved their rightful place.

          There are masterminds that think we should have a one World order Communist where the State is your God.

          A individual in charge of their own person, earning what they get based on merits and character, is not what these masterminds want. They are trying to play God really

      2. Of course they are. That’s why it’s widely known as CoronaScam.

        It’s a fraud… Just like housing.

      3. Nobody — and I mean nobody — is letting this COVID crisis go to waste.

        My email inbox was full of “COVID-19” in the title, from the many companies I have done business with over the years. Now, it’s filled with “Black Lives Matter.” This country is disgusting right now.

        2. This country is disgusting right now

          +1. I’m drowning in the same and its embarrassing.

    3. First buy everything in sight, then stampede the herd…exactly like today’s stock market action on Wall Street.

  3. ‘‘This past month, we definitely saw more lowball offers being submitted…Whereas sellers were refusing to even look at these types of offers at the beginning of the pandemic, some are reaching the point of realization that they may now have to entertain less than what they expected pre-COVID-19’

    Knock off the queen Elisabeth routine Odeen. In a couple months you’ll be saying, ‘drop your prices you greedy bashtards I’ve got to pay for my Mercedes!’

  4. ‘could reduce demand for homes at a time when real estate sales have dropped. ‘The purpose of this is to eliminate demand that is viewed as too risky’

    This is how credit events play out. Lower demand, lower prices, more credit tightening. I know a person who applied to refinance a rent house last week at a major bank. Yesterday got a letter saying they no longer refinance investment property. Same inquiry last decade was told you have to own the house for 3 years. Ten years later no loan at all. In that respect loans are getting tighter now than in 2010.

    1. “This is how credit events play out. Lower demand, lower prices, more credit tightening.”

      More of this credit tightening leads to even lower prices, which leads to even lower demand.

      This lower demand, leads to still lower prices, which leds to more credit tightening. And on and on it goes.

      If the prices were disconnected from perceived values then the rules that we all learned in Econ 101 would kick in and value hunters would eventually come in and snap up the lower priced houses.

      But prices and values are perceived as being the same thing (go to Zillow if you do not believe me and ask yourself how current house values are determined) and since they are perceived as being the same thing a reduction of one translates to a reduction of the other.

      Shoppers go crazy and fight over merchandise when Macy’s has a sale because these crazy shoppers do not associate prices as being a measurement of value, instead these crazies view the value as remaining fixed while the price gets reduced. These crazies call this lowering of prices as “creating bargains”.

      But bargains are not created when prices of houses are lowered because lowering the price of a house reduces its value and nobody wants to buy and investment that gets reduced in value.

      Same rule goes for stocks.

      This entire situation may come across as being rather stupid, but there it is.

      1. The valve that controls the price of house prices and hence the value of house values is the availability of money to potential buyers. Most people could not possibly buy a house without some outside source of money because the prices of houses are way too high. Which means the reason the prices of houses are way to high is due to the availability of money. The common factor here is …

        (pay attention, this is important)

        … the availability of money, aka credit. Take away the credit and everything collapses. Or, on the other hand, make credit available and everything expands.

        The magic of credit is one can buy something that he cannot afford. If enough people are given the opportunity to buy something they cannot afford then the price of whatever it is that is in vogue (houses, stocks, etc) will rise. These rising prices creates rising values. These rising values make the what-ever-it-is (houses, stocks) more attractive to the next guy in line to buy and his buying will push the price up even higher which pushes the value up even higher and off it goes, higher and higher UNTIL the availability of money is shut off.

        1. That first sentence is the wisest thing you’ve written, during my fifteen years of following this blog. It applies to the price of everything, and is easily determined. When the price of money cannot go lower, and the availability is restricted, the prices of real estate assets cannot go up.

          1. Here’s another thing about my experience with this two decade mess. In 2005 I read an article in the Wall Street Journal about $1MM neg am mortgages with payments at 1% of principal. I knew then, that “money” for houses could not get cheaper. Sold a waterfront FL condo, and to this day it’s never reached more that half of what it sold for. Why? Because even at todays low rates, the payments would be more than that goofy neg am mortgage. So, if the PTB want higher prices, they’ll need to start offering 50 year 1% mortgages. FYI, don’t rule it out.
            The ONLY way states and municipalities will ever hope to sustain their massively underfunded pensions, is to maintain and raise property taxes. A significant drop in R/E prices and taxes, will crush them, with no hope of recovery.

          2. The ONLY way states and municipalities will ever hope to sustain their massively underfunded pensions, is to maintain and raise property taxes. A significant drop in R/E prices and taxes, will crush them, with no hope of recovery.

            These pensions are unsustainable, and the people never voted for them in the first place. These public servants bestowed gifts upon themselves which amount to nothing more than theft. “Pension spiking,” etc. We need it all to collapse.

          3. So, if the PTB want higher prices, they’ll need to start offering 50 year 1% mortgages. FYI, don’t rule it out.

            I don’t rule it out at all…I expect us to go there soon. Or at least as close to it as necessary to save the People Who Matter. Even beyond if necessary. The only question is what will happen if/when free money completely stops working.

  5. CMHC insured-mortgages only apply to homes purchased for less than $1,000,000. There aren’t a lot of those here.

    Jesus.

    1. All utilities are included in this price…… Hint its Illegal no Certificate of occupancy, they cant install a separate electric meter.

    1. Okay, I REALLY like that one. It’s clearly a Wright-inspired architect but well-done. I’d rather take this than that awful Chip and Joanna.

      1. Birmingham is about the only place you’ll see them in this area — they stand out well on their own, but sometimes look a little incongruous next door to a 1940s bungalow or Cape Cod that has not been torn down for new construction yet.

        There were quite a few going up in 2016-7, but lately builders appear to be focusing more on traditional or modern farmhouse plans.

        1. They still are, though not as much over the past month or so. Still too soon to tell whether the recent drop is closings is temporary or structural.

          I have noted, though, that listings coming out of the pandemic have prices that are now even more out of touch with reality than they were beforehand. These are folks who listed in 2019 and languished without selling, and are now re-listing even higher.

  9. My new book, The Great American Housing Bubble: What Went Wrong and How We Can Protect Ourselves in the Future is being released on Tuesday by Harvard University Press. The book is co-authored with my long-time collaborator, Wharton real estate economist Susan Wachter. It’s the culmination of over a decade’s worth of work on housing finance that began in the scramble of fall 2008 to come up with ways of assisting hard-pressed homeowners.
    https://www.creditslips.org/creditslips/2020/06/the-great-american-housing-bubble.html
    The Great American Housing Bubble
    What Went Wrong and How We Can Protect Ourselves in the Future
    https://www.hup.harvard.edu/catalog.php?isbn=9780674979659

    1. “It’s the culmination of over a decade’s worth of work on housing finance that began in the scramble of fall 2008 to come up with ways of assisting hard-pressed homeowners.”

      The fed and gov were assisting banks that loaned too much money. To paint it as helping po’ Americans is yellow journalism.

    2. How much money did they take from the NAR to write that book?

      “In the book we present a full-throated argument in favor of homeownership. Since the 2008 crisis, the policy goal of promoting homeownership has been subjected to much criticism, often misguided. While homeownership isn’t for everyone, homeownership has numerous individual and societal benefits, including some that are not generally appreciated, particularly that it serves as a hedge against being priced out of a community because of gentrification. Homeownership is key to community stability, which produces all sorts of social benefits.”

      1. How much money did they take from the NAR to write that book?

        “In the book we present a full-throated argument in favor of homeownership.”

        Yeah. **vomit**

        1. “as a hedge against being priced out of a community because of gentrification. Homeownership is key to community stability, which produces all sorts of social benefits.””

          That’s even more vomit-inducing. Community stability? WTF is this, Leave it to Beaver? “Oh, Wally, please run next door to Mrs. Jones to borrow a half cup of sugar.” Come on, half my neighborhood doesn’t even speak my language.

          My goal is owning a home wasn’t “stability” or “community” or any other hippie claptrap. I bought a house because I had one financial goal: to own a paid-off home in retirement. That is, be able to sell the house I bought and use the proceeds to buy a retirement house outright. I didn’t want to be faced with paying 25+ years of rent on little income. And rents were rising fast enough that I would never be able to save up enough cash through renting.

          1. I bought a house because I had one financial goal: to own a paid-off home in retirement. That is, be able to sell the house I bought and use the proceeds to buy a retirement house outright. I didn’t want to be faced with paying 25+ years of rent on little income. And rents were rising fast enough that I would never be able to save up enough cash through renting.

            And thanks to the Fed it’s worked out so far. Don’t forget to tip the steamroller driver.

      2. ” homeownership has numerous individual and societal benefits,”

        As always, it depends on the price but they deliberate omit that conversation.

        As a noted economist asked, “Why buy a house when you can rent one for half the monthly cost? Buy it later after prices crater for 70% less.”

        Kenmore, WA Housing Prices Crater 11% As King County Unemployment Surges On Ramping Tech Layoffs

        https://www.movoto.com/kenmore-wa/market-trends/

  10. Has anyone else noticed that Marketwatch is eliminating its comment sections for more and more stories? I wonder why… my guess is that the commenters are smarter than the journalists and won’t hesitate to call the journalists out.

    1. marketwatch was acquired by CBS.

      It now just churns quick, positive articles that benefit wall st and larger companies. I still remember when it continued to support the GE business model even as it is failing

      1. Do you know when CBS bought Marketwatch? This only started with the COVID crash. More world-events articles with no comment section… they’re going woke.

        I won’t go as far as to say that COVID itself was a “plandemic.” Science is not that easy to control. But I do believe that the libs have been coordinating something in the works for a while, and when they saw Trump’s bumbling they pulled a trigger.

        Before all you folks start screaming “wake up” and “I told you so,” you know, I don’t really care. I’m woken up and blah blah. I just want to know what to DO. And no, going full second-amendment homestead is not a solution.

        2. I just want to know what to DO.

          Turn off the TV. I did so over 5 years ago and it has been one of the best decisions I ever made. Next, do your best to not patronize businesses which are destroying this country. Lastly – and this will take some time – pick a low tax area with good water and a decent quality of life to “retire” to when prices crash.

          1. Not helpful to turn off the TV. I haven’t watched TV in years. But now even online news like Marketwatch is biased beyond saving, without a comment section to keep it in check. It seems that everything is either Orange Man Bad or Plandemic Solar Minimum, no in-between. I suppose I could spring for a subscription to the Wall Street Journal. Or Peak Prosperity.

          2. These are just things I practice myself. I am really trying to pick and choose who gets a dime of my money. I shop local as much as possible. I go to a farmer’s market every Tuesday to buy vegetables. They are more expensive, of course, but I like supporting these people.

        3. I just want to know what to DO.

          I honestly believe this is the goal of enterprises which make money off of you tuning in to find out what you should do. They’ll have you running back and forth, all the time if they can.

  11. If they are going to be “entertaining less,” they don’t need as big a house.

    1. The generation now concentrated in Florida has shown very little concern about the common future during their lives, which will be over by the time this happens. People should just stop investing in coastal Florida, use what is there, patch as long as possible, and then abandon it.

      I guess in 100 years Upstate New York will be Florida.

    2. obama recently purchased a $16 million beachfront property.

      That is all you really need to know about global warming, science and politics.

      1. And not $1 to end the school to prison pipeline in Chicago. But they are there in full view supporting BLM.

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