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Baby, we got a bubble!?

I feel that such undisclosed conflicts of interest should be illegal. If an agent is representing a buyer, it should not be legal for that agent to accept fees above the typical (industry standard) 2-3 percentage without full disclosure to the buyer prior to offer submission (and even prior to showing so as not to waste a buyer's time). Why are these forms of undisclosed compensation not recognized for what they are -- kickbacks to agents for breaching their contractual obligation to represent solely the purchaser.
 
Article in the National post. BMO dropping rates on 5 year mortgage to 3.59%. I will wait for condo George to return to say how this is a good thing and prices will go up up up. Clearly the banks are not seeing demand for money and BMO is trying to lend out. I fear this shows the slowdown may be more dramatic than we have appreciated to now. I would think mortgage applications dropping indicates how new buyers are just not coming to the table.

http://www.financialpost.com/news/cuts+mortgage+rate+spur+home+buying/3469471/story.html
BMO cuts mortgage rate to spur home buying
In this story:







Reuters
BMO said in a statement that the move was an effort to provide potential home buyers an incentive as the fall season rolls around.

Bank of Montreal has chopped its benchmark five-year mortgage rate, aggressively throwing its weight behind what many are calling an increasingly wobbly housing market
.

“It’s a great time to buy a home,” Martin Nel, a senior BMO official, said in news release announcing the change. He added that people who take advantage of the offer will benefit.

“If ever there was a time to buy, it is now,” Mr. Nel said.

The move which takes effect Thursday brings the bank’s key five-year rate to 3.59%, down from 3.79%, making it one of the lowest five-year rates ever offered by a Canadian bank, says industry newsletter Canadian Mortgage Trends.

But some experts are already scratching their heads because of the aggressive tone of the announcement as well as the timing, given the recent spate of warnings about the uncertain state of the market, including one earlier this week from the Canadian Centre for Policy alternatives predicting an imminent collapse.

When the big banks make mortgage rate changes they generally just disclose the new numbers without commenting on housing market conditions. If pressed, bank officials are usually quick to explain that the change in these consumer lending rates are merely a function of fluctuations in their own borrowing costs.

“It’s a bit puzzling to me,” John Andrew, a professor at Queen’s University’s School of Urban and Regional Planning, said of the BMO announcement. “Perhaps they are concerned that the number of new customers will fall off precipitously.”

Residential real estate prices have been in free-fall in the United States as well as many European countries in contrast to the Canadian market, which has been on a tear for a good part of the past decade with prices in many cities at record levels.

But analysts worry that it’s only a matter of time before the Canadian housing market moves in the same direction, and they point to warning signs that have already appeared.

Earlier this year Moody’s reported that debt to income levels of Canadian households is the highest ever and close to where they were in the United States before that market started to fall apart in 2007.

The Bank of Canada has raised concerns that the high debt loads of Canadian consumers has made them vulnerable to changes in interest rates and potential deterioration of the economy.

In a bid to crack down on what some described as reckless real estate speculation, the Federal Government brought in new regulations in the spring to make it harder for first-time buyers to qualify for government-backed mortgage insurance.

Borrowers must now meet standards for a five-year fixed-rate mortgage, even if they want a shorter-term, variable-rate product. As the key measuring stick for many home buyers, a lower five-year mortgage rate will mean more people will qualify to buy more expensive homes than with a higher mortgage rate.

The tougher rules had the desired effect. The recent imposition of the new harmonized sales tax in Ontario and British Columbia also impacted demand, and as a result the market cooled so much that industry insiders became worried it had gone too far.

The housing market is important to the banks because residential mortgages make up the single biggest asset class on their balance sheets.

There are nearly $1-trillion of home loans outstanding, according to the Bank of Canada, about half of which is held by the chartered banks.


jgreenwood@nationalpost.com
 
http://www.financialpost.com/news/cuts+mortgage+rate+spur+home+buying/3469471/story.html


Earlier this year Moody’s reported that debt to income levels of Canadian households is the highest ever and close to where they were in the United States before that market started to fall apart in 2007.

The Bank of Canada has raised concerns that the high debt loads of Canadian consumers has made them vulnerable to changes in interest rates and potential deterioration of the economy.


i find the above to be overlooked by many people and wholly ignored by the RE industry.
 
Yes it would.

Respectfully, I too would have to disagree. There are many more headwinds and I just don't believe that the simple elimination of the Toronto Land Transfer tax would be enough to offset all the negatives. Of course that would help.

Anyhow, first Rob Ford has to win and politics have a way of changing day to day. And then, let's see if it is a promise that is kept. As well, the mayor can't do it on his own. He is but one vote. There is already alot of talk of a dysfunctional and shadow cabinet by some left leaning councillors who say(whether they do it or not or are reelected - who knows) they will not support alot of Ford's iniatives.
 
Ford would have to a) get a majority of council on his side and b) develop a plan to replace the lost revenue. While he talks a big story about cutting the waste, in no reality will efficiencies be enough to bridge this gap. Trying to increase the police budget at the same time makes this an even more difficult balancing act.

Real estate agents like to make excuses, but Toronto saw a mini-boom after the LTT, so I don't see any real connection. Same with the HST - claiming that it had any significant long-term affect on the market is just making excuses.
 
Agree with Graphic Matt. The HST effect will be short lived and then people "get on with their lives". They may make decisions not to buy new or factor in the increased cost when making the purchase decision but that will not stop people buying for more than the next few months. Then they will adjust to the new reality of HST on new purchases over 400K.
 
agree with Matt and interested ...
buyers for pre-construction will expect the HST to be included in the quoted price.

RE agents and developers screamed bloody murder b/c it ultimately ate into their profit or the base amount in which the commission is based upon.
 
I hate politics, but Rob Ford will end the Land Transfer tax.

That will help the Toronto RE market considerably.

The Toronto LTT didn't hurt sales in any way, shape or form, so why would scrapping it help RE? If anything, it would force the city to drive up property taxes (exactly what they didn't want to do, so they created the TLTT) to make up for lost revenue. Would higher property taxes also help Toronto RE? Didn't think so.

I WILL get political and say that Rob Ford would be completely ineffective as Mayor. He's a one note guy with little comprehension of any of the issues and on this one note he doesn't even understand the numbers. He's horribly inept and has lost every single mayoral debate and even his supporters can't really express what it is they like about him - they support him out of sheer frustration with typical politicos and a misguided sense of urban/suburban inequality (again, something the numbers completely refute). Remember, back in 2002, at this point in the race nobody had even heard of David Miller. We may see a dark horse come a runnin'.

Regardless, I don't mean to start a debate as it''s somewhat irrelevant to the topic of this thread. We can argue in the other threads dedicated to this.

Numbers for August should come out tomorrow, so we'll see how much of a trend we have. BMO rates are a very interesting indicator.
 
Hazard a guess about tomorrow's numbers? I will go out on a limb and say 20% less sales than same time last year and month on month price decrease of 1%to 2%.
I realize this is just frivilous. Just having a bit of fun. Anyone else care to guess before Simuls I hope posts numbers tomorrow.
 
Wow. If that happens today prepare for 25% drop in price within 1 year an absolute free fall.
UD I know you are a pessimist but that is striking. Not so much the sales figure(assuming you are comparing to last year) but the price drop month on month.
 

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