August 25: National Post newspaper has carried a big article in their Financial Post supplement page 16 about the fear of a slump in home sales in US.

What triggers such fears which actually take shape and see a slump in the prices?? Will this effect also affect the Canadian market in the near future?? We also hear that the mortgage rates may also come down, is it true???

Is US market going to affect Canada?
What I can see in BC is that the prices are tapering off.
A lot of houses for sale have now boards showing price reduced etc.
The houses in market taking a bit longer to sell than a few weeks ago. This is just my observation and I am no expert, maybe some experts from this forum can shed some light.

-----------------------------------------------------------------
"After climbing a great hill, one only finds that there are many more hills to climb." (Nelson Mandela)

One of the media reports last week stated that while hose prices in the Western Canada are showing downward trend, the market in Eastern Canada and Toronto Areas in particular shows the seasonal correction.

There had been some drop in mortgage rates last week...albeit very minor. Bank of Canada has also left the interest rates unchanged for now (though it was expected that they would reduce).

In another report today, Toronto Real Estate Board stated strong sales in the month of August...This report is pasted below:

Wednesday, September 6, 2006 -- TREB President Dorothy Mason announced today that the Toronto resale homemarket continued its run of healthy showings in August, with 6,976 homes changing hands through the TorontoMLS system. "Last month was the second best August ever recorded, off moderately from the record 7,498 figure achieved in 2005. In addition, the year as a whole has seen 59,488 single-family dwelling sales, up marginally from 2005's January to August performance. As people return from their summer holidays, we are looking forward to an even more active autumn market."

Prices remain stable in August, with the Average coming in at $338,192, less than one per cent lower than the July figure of $342,034. This figure is up five per cent over the $323,255 recorded during August of 2005.

Breaking down the total, 2,627 sales were reported in TREB's 28 West districts and averaged $321,415; 1,181 sales were reported in the 14 Central districts and averaged $401,244; 1,493 sales were reported in the 23 North districts and averaged $388,674; and 1,675 sales were reported in TREB’s 21 East districts and averaged $275,050.


.......Still waiting for the market to CRASH?! It ain't happening here!! Slow down is what was expected and will happen with average price still higher than last year prices.

-----------------------------------------------------------------
Rajeev Narula, Broker, REALTOR®
ACE TEAM REALTY INC., Brokerage
10 Kingsbridge Garden Circle, Suite 704
(Opp Square One - HWY10/403)
Mississauga, ON L5R 3K6
Bus: 1-888-355-3155 Ext. 300
Fax: 1-888-443-3155
Email:
Web: http://www.RAJEEV.ca" rel="nofollow">LINK

It is only a matter of time before Canadian market cools down.

My suggestion is that do not buy at today's over inflated prices. Wait for a few months for market to correct.

-----------------------------------------------------------------
Non illigitamus carborundum

Two nights ago I saw a program on CTV where a guy was advising all home owners (for investment purposes) in Canada to sell as soon as possible, and buyers to really take their time before buying anything now!

And those of you who think your real estate agent knows the best (regarding the housing bubble), you are wrong! (nothing against any real estate agent here)

An extensive resource (with very logical reasonings) for those who want to know what is happening in North America concerning Real Estate and the bubble.

http://patrick.net/housing/crash.html

-----------------------------------------------------------------
No trees were killed by this post, but a large number of electrons were terribly inconvenienced.
__________________________________
George Malley: Hey, would you, uh, love me the rest of my life?
Lace Pennamin: No. I'm gonna love you for the rest of mine.
__________________________________
None of us knows God until someone introduces us - Life of Pi

The link provides in-depth information, for San Francisco CA (California...not Canada) area. I don't think California's market trends dominate the whole of NORTH AMERICA.

Looking at the 1st 3 points of the article....

QUOTE
House prices are far beyond any historically known relationship to rents or salaries. Rents are less than half of mortgage payments.
UNQUOTE

FACT
Rent of a 2 bedroom apartment in Toronto/Mississauga would be between 1300-1600 depending upon the building. Mortgage payment on these apartments would range between 1000 - 1500 with 5% down payment.

QUOTE
Interest rates going back up. When rates go from 5% to 7%, that's a 40% increase in the amount of interest a buyer has to pay. House prices must drop proportionately to compensate.
UNQUOTE

FACT
Interest rates may have gone up in the US too fast (and the FEDs actually did say that they committed a big mistake as it hurt their economy). I Canada, BoC was more cautious. And while the interest rates have gone up a few notches in Canada as well, the mortgage rates have in fact dropped recently. 5-yr Closed is now available at 5.25 against 5.5% a little while ago.

QUOTE
A flood of risky adjustable rate "home equity loans". Just like the bad primary ARM loans, these loans do not have fixed interest rates. When the interest rate adjusts upward, it can double monthly payments, forcing owners to sell.
UNQUOTE

In Canada, you can take a credit line equal to 75% of your equity in your house. How many of the readers who own homes have taken advantage of this and for what, I would love to know. Canadians are more cautious with their money compared to the Americans. Besides, any such credit lines (in my opinion) is used for business purposes (including speculative investment in 2nd home) or home renovation. I am sure no one would renovate their home unless they can afford it. And all investments come with risk and it is upto an individual to determine their risk-tolerence.

QUOTE
Massive job loss. More than 300,000 jobs are gone from Bay Area since the dot-com bubble popped. This is the worst percentage job loss in the last 60 years. It's worse than Detroit car problems or Houston's oil bust. People without jobs do not buy houses and owners without jobs may lose the house they are in. Even the threat of losing a job inhibits house purchases. Santa Clara County posted its fourth straight year of job losses in 2005, so it's not over yet.
UNQUOTE

FACT
Again, it talks about Bay Area in California. In Canada (all over...not just Calgary) we have witnessed job growth (except for today's report that stated that we shed some 16000 jobs unexpectedly in August).

QUOTE
Salary declines. From http://www.mccallstaffing.com/need/needsal.html we hear that "salaries have in fact returned to 1997 and 1998 levels." Local household incomes are not even half of what they need to be to sustain current house prices
UNQUOTE

FACT
We have witnessed wage increses and in a report in Globe & Mail recently, it was stated that most companies and employees are expecting the wages to go up (except for Auto Manufacturers...where the wages will stay frozen..but not decreased).

QUOTE
Population loss. San Francisco continues to lose population at the fastest rate of any city in the US and most of those are professional jobs. The problem is not only the dot-com crash, but also the outsourcing technical jobs to India, which continues as corporations realize they can pay an Indian only 20% of what they must pay a similarly qualified employee in the Bay Area. Fewer people in the Bay Area means less demand for housing. It recently cost $3623 to rent a UHaul from San Jose to the midwest, but only $1800 to move the other way. This is because far more people are moving out of the Bay Area than are moving in.
UNQUOTE

FACT
And how many people settle in GTA every year? You are right, 70% of the 300,000 new immigrants that arrive every year. And they need a roof over their heads!

QUOTE
Extreme use of leverage. Leverage means using debt to amplify gain. Most people forget that losses get amplified as well. If a buyer puts 10% down and the house goes down 10%, he has lost 100% of his money on paper. If he has to sell due to job loss, he's bankrupt in the real world. Even a small price decline will bankrupt buyers with small equity. Buyers foolish enough to buy with no money down are already bankrupt, but still unaware of the fact.
House prices do not even have to fall to cause big losses. The cost of selling a house is six percent. On a $600,000 house, that's $36,000 lost even if prices just stay flat.
UNQUOTE

FACT
That's why banks here don't just extend 0% down mortgage to everyone. Didn't I say banks in Canada are very cautious....and then we have CHMC that has to approve all lending where the buyers do not have a minimum 25% down.

QUOTE
Shortage of first-time buyers. According to the California Association of Realtors, the percentage of Bay Area buyers who could afford a median-price house in the region plunged from 20 percent in July 2003 to 14 percent in July 2004. Strangely, the CAR then reported that affordability fell another 4 percent in 2005, yet claims affordability is still at 14%
UNQUOTE

Again Californian Association of Realtors. In Canada, majority of the new homes are being sapped by First time buyers and the bigger homes by the people who are upgrading.


QUOTE
Surplus of speculators. Nationally, 25% of houses bought in 2005 were pure speculation, not houses to live in. It is now possible to buy a house with 103% financing. The extra 3% is to cover closing costs, so the buyer needs no money down. All this is on the unwise assumption that housing will rise ever higher, covering interest payments through appreciation. Even the National Association of House Builders admits that "Investor-driven price appreciation looms over some housing markets."
UNQUOTE

FACT
I don't know how many of the homes are being bought by the speculators. The Banks here will require you to have minimum of 15% down to buy a second property.

QUOTE
Lightbulbs going on in many brains in the Bay Area: "Hey, I can move to New Mexico or Oregon, buy a gorgeous house outright, and comfortably retire on the price difference. My neighbors just did it, so I'll have friends there too."
UNQUOTE

FACT
If you are living in owned property in Calgary or Vancouver , you could use this logic. Hey, but if you are living in Canada, where would you move? We don't have opportunities available everywhere!

QUOTE
Trouble at the builders. They are being forced to drop prices even faster than owners. They overbuilt and have huge excess inventory that they cannot sell at current prices.
UNQUOTE

FACT
Give me a break! Have you seen a builder in GTA area lower his prices? Yeah they will throw in a few extra "upgrades" which practically come to them at not much cost.

QUOTE
Trouble at Fannie Mae and Freddie Mac. They are being forced to tighten up sloppy lending. This means they are not going to keep buying very low-quality loans from banks, and the total money available for buying houses is falling.
UNQUOTE

FACT
Who are they? CHMC & GENWORTH are sitting on huge amount of cash reserves. As long as they keep insuring the mortgages, banks will lend!

QUOTE
The best summary explanation, from Business Week: "Today's housing prices are predicated on an impossible combination: the strong growth in income and asset values of a strong economy, plus the ultra-low rates of a weak economy. Either the economy's long-term prospects will get worse or rates will rise. In either scenario, housing will weaken. Caveat emptor."
UNQUOTE

Is this a Canadian Magazine? What does McLeans say? Try reading Globe & Mail of today........Here are the links

http://www.theglobeandmail.com/servlet/story/RTGAM.20060908.wdollar0908/BNStory/Front

http://www.theglobeandmail.com/servlet/story/RTGAM.20060907.r-flaherty08/BNStory/Business/?cid=al_gam_nletter_maropen



QUOTE
And those of you who think your real estate agent knows the best (regarding the housing bubble), you are wrong! (nothing against any real estate agent here)
UNQUOTE

So who is right? Patrick in California??!!

-----------------------------------------------------------------
Rajeev Narula, Broker, REALTOR®
ACE TEAM REALTY INC., Brokerage
10 Kingsbridge Garden Circle, Suite 704
(Opp Square One - HWY10/403)
Mississauga, ON L5R 3K6
Bus: 1-888-355-3155 Ext. 300
Fax: 1-888-443-3155
Email:
Web: http://www.RAJEEV.ca" rel="nofollow">LINK

Quote:

---

Originally posted by Rajeev Narula

FACT
And how many people settle in GTA every year? You are right, 70% of the 300,000 new immigrants that arrive every year. And they need a roof over their heads!

---