{"id":17328,"date":"2021-02-09T10:10:00","date_gmt":"2021-02-09T18:10:00","guid":{"rendered":"http:\/\/www.roryc.ca\/blog\/?p=17328"},"modified":"2021-01-30T13:05:21","modified_gmt":"2021-01-30T21:05:21","slug":"no-canadas-housing-market-wont-crash","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2021\/02\/no-canadas-housing-market-wont-crash\/","title":{"rendered":"NO, Canada&#8217;s Housing Market Won&#8217;t Crash"},"content":{"rendered":"<p style=\"text-align: justify;\">A report from Lowestrates.ca with an alarmist headline predicts that housing prices will \u201ccorrect\u201d sometime this year, but according to a mortgage professional in Vancouver, a fundamental misunderstanding is at play.<\/p>\n<p style=\"text-align: justify;\">\u201cIt\u2019s as simple as this : basic, unreported inflation,\u201d Dustan Woodhouse, president of Mortgage Architects, told CREW. \u201cThere\u2019s an \u2018elite class of people\u2019 known as nurses, school teachers, firefighters, and the police, and what they have in common is with a bit of experience, qualification, overtime, they can all make about $100,000 a year. The other thing they have in common is they marry one another and they\u2019re in a 25% tax bracket, so you now have more dual-income households than ever before in history, and those dual-income households are in reasonably accessible jobs in our society.<\/p>\n<p style=\"text-align: justify;\">\u201cThose families now have $12,000 per month after tax in their households. To take on an $800,000 mortgage with a $3,200 monthly payment, they still have $9,000 a month in cash left over. So where\u2019s the problem? That\u2019s what\u2019s driving house prices. That and there aren\u2019t enough of them to buy.\u201d<\/p>\n<p style=\"text-align: justify;\">Lowestrates.ca\u2019s report, entitled \u201cWill the Canadian housing market crash in 2021?\u201d, used a hyperbolic headline, to be sure, but it postulates that the country\u2019s housing prices are headed towards a correction because of the COVID-19 pandemic. The report quotes Hilliard MacBeth, a financial advisor and author of \u201cWhen the Bubble Bursts: Surviving the Canadian Real Estate Crash,\u201d who says household indebtedness could trigger a financial crisis, and that debt loads are much higher than they were in 1990 when much of the Western world entered a recession.<\/p>\n<p style=\"text-align: justify;\">\u201cThe household is much more indebted than it was in 1990,\u201d MacBeth said in the Lowestrates.ca report. \u201cThe bursting of the bubble would be much more serious and will probably trigger a financial crisis. It didn&#8217;t really trigger a financial crisis in 1990. It was a crisis, but not a systemic financial crisis. This one is likely to be a financial crisis.\u201d<\/p>\n<p style=\"text-align: justify;\">MacBeth further predicted that mortgage defaults will skyrocket and that urban condo markets will spark the crash.<\/p>\n<p style=\"text-align: justify;\">\u201cRents have dropped a whole lot,\u201d he said. \u201cSo monthly losses that were $200 or $300 are now probably $500 to $800. And some of the owners will have trouble with their employment. So they&#8217;re going to have to face a real personal crisis in terms of what they are going to do because those condos are really hard to sell.<\/p>\n<p style=\"text-align: justify;\">\u201cThat\u2019s probably where the crisis and the crash is going to start is in those investor-owned condo buildings in Toronto, Vancouver and Calgary.\u201d<\/p>\n<p style=\"text-align: justify;\">However, Woodhouse notes that the overwhelming majority of Canadian debt is related to mortgages and that underwriting guidelines have been bolstered to avoid the exact scenarios MacBeth is warning about. In fact, mortgage arrears data has long demonstrated that Canadians curtail their spending before missing mortgage payments.<\/p>\n<p style=\"text-align: justify;\">\u201cWhen did the investor buy the condo?\u201d asked Woodhouse. \u201cI have clients who paid $250,000 for their condo that\u2019s worth $750,000 today. Other investors who bought more recently put 20% down and had to be very qualified. It\u2019s not some random dude who makes $32,000 a year and owns 19 apartments. Underwriting guidelines to be an investor are so high now. Your rental income coming down by 30% does not trigger a sale of property.\u201d<\/p>\n<p style=\"text-align: justify;\">In other words, investor-owned condos, especially in markets like Toronto and Vancouver, have accrued so much equity that, if forced to sell, the owners won\u2019t incur losses.<\/p>\n<p style=\"text-align: justify;\">\u201cIf they bought in the last five years, the qualifying criteria is so high that they have to be very well-heeled investors to purchase property,\u201d continued Woodhouse. \u201cAre there condo investors hanging by a shoestring? Sure. But the mortgage market is 6% rental, and of that 6%, 90% have no trouble servicing their mortgages. You\u2019re down to 1%\u2014if half of that 1% bought five years ago, they\u2019ve got a ton of equity.\u201d<\/p>\n<p style=\"text-align: justify;\"><a href=\"https:\/\/www.canadianrealestatemagazine.ca\/news\/no-canadas-housing-market-wont-crash-334471.aspx\" target=\"_blank\" rel=\"noopener noreferrer\">NO, Canada&#8217;s Housing Market Won&#8217;t Crash<\/a> by Neil Sharma | Canadian Real Estate Wealth<\/p>\n","protected":false},"excerpt":{"rendered":"<p>A report from Lowestrates.ca with an alarmist headline predicts that housing prices will \u201ccorrect\u201d sometime this year, but according to a mortgage professional in Vancouver, a fundamental misunderstanding is at &hellip; [<a href=\"https:\/\/www.roryc.ca\/blog\/2021\/02\/no-canadas-housing-market-wont-crash\/\">read more<\/a>]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[],"class_list":["post-17328","post","type-post","status-publish","format-standard","hentry","category-market-updates"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>NO, Canada&#039;s Housing Market Won&#039;t Crash &#8226; 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