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Baby, we got a bubble!?

interested said:
I believe there are conditions on the mortgage. For example, I don't believe you are allowed to pay down earlier on these. Not that the rate still isn't great but they make sure they get their interest for the whole term of the loan. At least, that is what they suggested on the National yesterday.
Click to expand...
Yeah the BOM one is a no frills mortgage, but there are key points about it that make it very significant.

1) It may be a no frills mortgage, but it's an actual advertised rate, right on their website. It's not a broker-only thing or something like that. Actually advertising 2.99% means that consumers are aware, and will use that as a starting point for negotiation for other mortgages at the big banks and at the smaller lenders too. It's no surprise that TD and RBC quickly dropped their rates to follow. Theirs are only 4-year, but they're regular mortgages AFAIK, not no frills.

2) If a big bank is offering a no frills 5-year mortgage for that rate, you can be sure that a smaller lender (like an insurance corporation or a mortgage-only lender) will offer a regular mortgage for about the same rate, or maybe 3.09% or something.

3) Although rate decisions are made for various reasons by banks, and a lot of it has to do with the low bond yields, banks are probably factoring in the expectation that rates are going to stay low for quite some time. I guess more are buying into the belief that we'll continue to have such low rates into 2013 (which would be great for me) before really starting to rise.

4) The vast majority of people don't pay down their mortgages early anyway. If you know you're going to stay put, and you're one of the many that doesn't intend to pay down the mortgage early, having a no-frills mortgage isn't that much of a disadvantage. I personally do need flexible payment options because I pay things early, but I'll only pay so much of a premium. Most are similar. So, while I'd be willing to pay 0.1% or maybe even 0.2% higher for those early payment options, I won't pay 0.4% more, hence the necessity for BMO's competitors to stay close to that 2.99% rate.
 
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Here are details for the BMO Low-Rate Mortgage:

■5 year fixed term
■Only 10/10 pre-payment privileges (vs 20/20 on other BMO products)
■Maximum amortization period: 25 years
■You can’t refinance or switch to another mortgage lender before the 5 year period is over
■Not available on non-owner-occupied rental property


http://www.ratesupermarket.ca/blog/...ates-hit-all-time-low-with-2-99-5-year-fixed/
 
ILuvTO said:
What specific houses are selling for today and what they sold for 5 years ago courtesy of the Star:

http://www.thegridto.com/life/real-estate/houses-that-were-loved-and-left/
Click to expand...


too bad it only tracked 4 houses and they didn't keep the timing consistant. couple of the examples were from 2006 and the other 2 from 2007. a larger sample would have been more effective and appreciated.

from the article, it would appear prices have appreciated at least 30% from 2007 and upwards of 50% from 2006.
 
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As you said, cdr: 4 houses selected by who knows what for which purpose and what criteria they were using (random or preselected to show a result). It really shows us absolutely nothing.
By preselecting had I wished to show close to 100% increases, I would have shown 4 houses in ridiculous bidding wars.
The other thing of course again is one does not know if any improvements were done. This was over the time frame when at $10K of renovations was given a 15% subsidy and I would bet that most people moving into a house did some improving, especially since HELOCS were available so freely from 2007 to 2009.
That said; if we assume this is indicative; it suggests 6-10%/year appreciation which seems to be more or less in line with
what the market has been telling us; though I believe other than "hot areas" I think it is closer to the 6% from some of the previous posts by others here who have looked at Taranet figures.
 
From the Globe and Mail:
http://www.theglobeandmail.com/repo...ome-sales-rise-18-in-december/article2303868/

Home sales rise 1.8% in December
Ottawa— The Canadian Press
Published Monday, Jan. 16, 2012 9:49AM EST
Last updated Monday, Jan. 16, 2012 11:39AM EST

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National resale housing activity continued to rise in December, up 1.8 per cent compared with November, the Canadian Real Estate Association said Monday.

CREA says the December figures represented the fourth consecutive monthly increase in home sales and pushed annual sales to almost 457,000 units, up 2.2 per cent over 2010.
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Canadian home sales top expectations

However, the price increase on a national basis in December was relatively modest, up just 0.9 per cent compared with December 2010.

Meanwhile, CREA said the number of newly listed homes on its Multiple Listing Service increased 3 per cent from November to December, but that the national resale housing market remained in balanced territory.

The latest read on the Canadian housing market, while in positive territory, was below the expectations of some analysts on both sales and prices.

However, BMO Capital Markets economist Robert Kavcic wrote in a report that the December numbers were likely to presage a cooling market.

“Looking ahead to 2012, cooler housing activity should prevail as elevated household debt levels, shaky confidence and a weakened job market counter extremely low mortgage rates,” Mr. Kavcic said.

Late last week, some of Canada's biggest banks began advertising promotional ultra-low mortgage rates as their battle for customers intensified.

The Bank of Montreal (BMO-T58.25----%) began the marketing race with a special discount five-year fixed rate at 2.99 per cent for a limited time and with limits on payment options.

TD Bank (TD-T77.65-0.10-0.13%) responded with a four-year special fixed rate at 2.99 per cent available until the end of February, pointedly noting that takers would still be entitled to all the bank's usual early payoff options.

Meanwhile, the Royal Bank (RY-T52.280.190.36%) later matched those offers with its own four-year 2.99 per cent rate offer, along with a seven-year special fixed rate of 3.99 per cent.

Royal LePage Real Estate Services has predicted the price of homes in Canada will continue rising this year, but the hottest markets in Toronto and Vancouver will grow much more slowly than in 2011.

The country's largest real estate broker said low mortgage rates will continue underpinning housing demand despite the weakening economy.

The International Monetary Fund has suggested that Canadian homes on average are 10 per cent overpriced and warned it may be a factor that puts the country's economic recovery at risk.

The Bank of Canada has also repeatedly cautioned prospective buyers to guard against being lured by low mortgage costs because interest rates and therefore monthly payments, will eventually increase as the economy gets stronger.
More related to this story

Home sales, prices climb in November

12 comments
 
I know that this might be a little off topic... but MPAC re-assessments are coming... using 2012 property values for 2013-16 Property Tax. I know that "experts" are all talking about interest rate increases affecting borrowers ability to repay loans and the idea that lower interest rates make paying a large loan affordable. But, I would like to know if our leaders have thought about how MPAC re-assessments might impact the condo boom/real estate market... and should the media perhaps consider warning property owners there could be large bill coming for some neighbourhoods?
 
macookie said:
I know that this might be a little off topic... but MPAC re-assessments are coming... using 2012 property values for 2013-16 Property Tax. I know that "experts" are all talking about interest rate increases affecting borrowers ability to repay loans and the idea that lower interest rates make paying a large loan affordable. But, I would like to know if our leaders have thought about how MPAC re-assessments might impact the condo boom/real estate market... and should the media perhaps consider warning property owners there could be large bill coming for some neighbourhoods?
Click to expand...

Politicians will only react in hindsite. Remember MPAC is province wide.
So the fact that TO has probably outpaced the outside Toronto area
in prices means we will proportionately pay more taxes in and around Toronto than in other areas where price
escalations have not been as large. However, I think that even if we assume a worst case scenario of 10% on average increases in the hotter areas, I am sure the less hot areas will go up 6% in Toronto or 24% on average. It means the last 16% will increase the valuation by 4%/year if they apply the formula over 4 years in the hotter areas. Then there would be the increase in Toronto vs. other areas and if it is say 20% greater; this would translate to another 5%/year or 9% (4 +5%) increase in actual tax in the hot area every year from 2013 to 2016 assuming the same mill rate.
I think actually the resale increase in prices may be higher in homes than in condos in Toronto. But yes Macookie, you are right to think about these issues.
Of course the Real Estate Board/agents won't bring this up and unless outside people do, it won't get reported. After all, if you are selling do you really want to tell people count on 9%/year increases in your property taxes!!
property owners had better be ware.
 
^ ^ ^

R/E agents disclaimer is that property taxes are subject to CMV assessment, so buyers need to do their homework.
 
But Realtors should be disclosing all fees that come with homeownership. They should be more accountable on this matter.

Many people don't realize the additional fees, and never put aside that money.
 
About Brad's view. This is the standard line. Brad in 2008 when the market stopped was saying all was rosy. He later admitted he was having tremendous difficulty to get money to build his projects and was very concerned. When was the last time you heard a developer/realtor say "this is really bad" until it is totally obvious to the last person on the planet.

Please understand, I am not saying he does not truly believe what he is saying. Of course I would expect him however to say this. He does afterall have product to move. As well, he may well prove to be quite right. The condo rental market downtown in the core for the time being is quite tight and rents are going up somewhat from what I can gather. That said, landlords I don't think are going to opt to buy $600-700/sq.ft. places unless rents come up considerably from where they are. However, in Vancouver rents are no where near as high as in Toronto I believe when one factors in the difference in the cost to buy and what the condo returns vs. its value to purchase yet people/investors/speculators still kept buying. I don't know if they still are however.
 
drewp said:
Interesting article from everyone's favourite developer about vacany rates in Toronto.
http://blog.buzzbuzzhome.com/2012/0...ates-below-1-per-cent-in-central-toronto.html
Click to expand...

Lamb- Slick, integrity and veracity challenged salesman.
Buzz Buzz- industry shilling blog with funny name.
Existing Rental Stock- somehow the majority of pre-war housing seems to work in NYC. You can easily retrofit older building with newer amenities if there's demand for it but there isn't. I don't buy that argument for a minute.

The simple answer to the condo investor rental market is that buyers are willing to accept a 2% return on investment. Lamb would never say it but that's what's going on.
 
Brad brings some good points, but as interested said, he is a developer/realtor (essentially a salesman) and will not paint a bleak picture and cause consumer fear to hurt his business.
Also, the rental listings he mentions are MLS. A good share of the rentals are not on MLS, but rather advertised privately by owner. It will be interesting, albeit hard, to factor in these figures.

2012 will still be a good year, possibly 2013 too, but I think there will be a good number of new large condos developments that will be completed starting fall of 2013 onwards which will bring lots of inventory to the city. The kind of inventory will be mostly similar small 1-bedroom units which investors prefer, but we will see if renters will really adapt to especially with rising values (and end result rents) of new construction condos.
 
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