Its interesting how the extreme views are going on in the media... Something I got to read today http://www.financialpost.com/news/features/Housing+price+hits+record/4293312/story.html

Given the extreme views, what might practically happen is nothing, right? Prices just keeping steady for some years?

The 6% mortgage rate you mentioned - is that for Fixed? 5-6% for fixed is not bad....

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Originally posted by ashedfc

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Originally posted by aqua
The 6% mortgage rate you mentioned - is that for Fixed? 5-6% for fixed is not bad....

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Right now a lot of homeowners are jumping into variable Prime-0.7/8/9/whatever. so it comes to little over 2% interest rate (at a time when Prime rate is 3%). Imagine this same 3% prime, heading to 6%, & do the math.

Regarding fixed (its all fixed), you don't have to worry till 5yrs are over (normal mortgage is 5yrs in Canada), We don't have 30yr mortgages here in Canada, so you cannot lock this low price for the next 30yrs.
The amount of inflation (& inflationary pressures due to money printing & debt monetization) is very significant, & interest rates are bound to go up..
It takes time, nothing happens in a day or two. Housing is not a stock, it affects & impacts gradually.

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I think it cuts both ways. If interest rates goes up, one can not own a house, he is forced to sell it when mortgage is up for renewal. But that means, he is going to rent. Demand for rental units goes up, supply can't increase over night, so rent goes up. Either way monthly exp is going up.

I think, as long as we stick to keeping the mortgage payments (which includes tax for me) to be same or around to the rent we r paying otherwise, v should b good. Isn't it?

It's not that easy..who is going to pay the difference? There will be lot of foreclosure inventory in market when mortgage is more than market value or people are unable to pay/sell.

Calgary -
http://indigosky.ca/
ONE BEDROOMS STARTING FROM $125,900
TWO BEDROOMS STARTING FROM $129,900
Payments starting from $223 bi-weekly*

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Originally posted by aqua
If interest rates goes up, one can not own a house, he is forced to sell it when mortgage is up for renewal. But that means, he is going to rent. Demand for rental units goes up, supply can't increase over night, so rent goes up. Either way monthly exp is going up.

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Here are real 20% price down example by listing from peak (2007-08). Now we have higher interest rates and tighter mortgage conditions.

http://calgaryrealestatereview.com/2011/02/17/overpriced-calgary-homes/#comments
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Yes.. price can go down.

The reckoning we’ve been warned about has arrived. For the past year or so, economists have worried that Canadians are spending too freely and carrying too much debt as a result.

And yesterday’s alarming report from the authoritative Vanier Institute of the Family confirms our national dilemma. We’re saving too little, for our own sake and our country’s.



http://www.moneyville.ca/article/940973--olive-the-danger-in-our-savings-shortfall?bn=1

Toronto condo market is near its saturation point and looks set for a fall.
http://financialinsights.wordpress.com/2011/03/02/more-signs-of-a-coming-condo-glut/
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I know two families who want to get out from RE but can not as they bought in 2007/2008. They are under 50K+ negative equity without Realtor commission. There are HELOC and luxury toys from home ATM machine.

sub-prime did not bring USA to knees but negative equity and no saving. But Real Estate board are still selling to half brain people that negative equity does not matter as long as you are paying bills, March 18th deadline, BOC did not change rates. Everybody makes money upfront in RE transaction so who cares long term.

2nd half of 2011 market will be interesting.