Hi Rajeev,
where do you see that homes in Brampton are flying off the shelf?
I can see them in Miss but not Brampton.
Perhaps you can pinpoint the place on the net , not physically.
Thanks

Investpro,

Lakelands is experiencing good sales for properties in the range of 300-315K. Most new listings in this price range were gone within a week of listing.

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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

I have been looking at homes in Brampton for last 4 months and will agree with Rajiv that houses are getting sold pretty fast.

In my other post i also mentioned about Great gulf home builder and they release around 10-15 lots every Saturday and people start lining up around 11 PM in night and the office opens at 11 AM in morning, so they wait for around 12 hrs and all lots are gone in few minutes...

Also i got price comparison list from my Realtor (for the property i liked) and was surprised to see that most of them were sold for around 98%-100% of listing price.

Reminded of this headline on CP24 3 days back ................. " Home sales are going down but realtors are portraying growth " .....

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Fido.

Back in 1989 the discounted five year mortgage rate was 11.25%. Today the best five year rate is 3.69%. Back in 1989 buyers could only extend amortization period out 25 years whereas today we can go out 35 years.
So most of these FTB’s today are likely doing the same thing people did long time back. They go to the bank and are told how much they can borrow. But today because of changes to both interest rates and amortization periods, the amount one can borrow has increased substantially.

1989:
Income Level: $100k
Interest Rate: 11.25%
Amort. Period: 25 years
Maxx. Mortgage: $229600
Monthly Mortrage:$2250
Debt to Income Ratio: 2.3
House price to Income: 2.55
Yrs to payoff with 10K prepayment: 10.4

2009:
Income Level: $100k
Interest Rate: 3.70%
Amort. Period: 35 years
Maxx. Mortgage: $532000
Monthly Mortrage:$2250
Debt to Income Ratio: 5.32
House price to Income: 5.91
Yrs to payoff with 10K prepayment: 20.5

So today someone with 10% down can easily buy a home worth six times their income whereas back in 1989 you were limited to about 2.5 times your income. If the 1989 family was able to save 10% of their income ($10k per year) and apply this annually to the mortgage, they could pay off their mortgage in just over ten years, but it will take over 20 years for the 2009 family to pay off their home. If the first family after paying off their mortgage continued to contribute the same amount into a retirement fund earning only 5%, they would have over $475,000 saved in the ten years while the former family was still paying off their mortgage.

This whole thing got me thinking that maybe we can explain most of the housing bubble through mortgage lending changes, so we need to pull an analysis of average income levels in 1989, 1999 and 2009 with mortgage lending practices and average house prices to see if there was a correlation.


1989:
Family Income: $57k
Interest Rate: 11.25%
Amort. Period: 25 years
Maxx. Mortgage: $112600
% Change for 1989: 0%
Average SFH Price: 160K
% Change for 1989: 0%


2009:
Family Income: $75k
Interest Rate: 3.7%
Amort. Period: 35 years
Maxx. Mortgage: $374000
% Change for 1989: 232%
Average SFH Price: 535K
% Change for 1989: 234%


Amazingly the increase in SFH prices over the past twenty years is highly correlated to the maximum mortgage being made available to average families. This analysis aligns with what the greatest real estate investor I know once told me which was always to buy real estate when interest rates are at their highest levels because prices will always be lower. Mortgage rate can change but price of house you signed never change.

Today many people that could not have qualified for a SFH because of their income levels, now can with these ridiculously low interest rates. This has increased the pool of buyers and resulted in a mini sales boom for entry level homes. It appears to be almost predictable.

Smart money will wait for interest rates to rise as this will both decrease the number of buyers in the market while simultaneously putting pressure on people renewing their mortgages at higher rates.

Quote:

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Originally posted by rahul_singh23


Today many people that could not have qualified for a SFH because of their income levels, now can with these ridiculously low interest rates. This has increased the pool of buyers and resulted in a mini sales boom for entry level homes. It appears to be almost predictable.

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Chandresh

Advice is free – lessons I charge for!!

Chandresh, you said my heart. I have been thinking about it for days after reading numerous expert opinions/analysis on this site, but couldn't gather words to sum it up.

Well said (or asked).