Comments on: Canadian Real Estate Wealth Went Vertical, and That’s A Problem: BMO

By: David

David — Fri, 25 Mar 2022 18:02:56 +0000

A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors.

By: John

John — Thu, 24 Mar 2022 00:25:52 +0000

Yes .. the money does have to be paid back – and if rates keep rising, paid back with higher and higher interest charges upon refinancing. Of course house prices will decline as demand drops off due to higher interest rates. If they decline too far there will be a significant increase in mortgage defaults. Banks will slide as they increase provisioning to cover debt default write-offs. Their stock prices will take a bug hit.

By: Richard Allen

Richard Allen — Wed, 23 Mar 2022 18:46:56 +0000

In reply to John. mostly agree, but eventually, all that money needs to be repaid, no? I mean, if rates are stable, then yeah, you just refinance, but if rate raise significantly (a word you can define as you will) then payments rise, without getting more house....

By: Kevin Logan

Kevin Logan — Wed, 23 Mar 2022 16:52:21 +0000

In reply to John. That's not how it works, since home prices rise with every low rate shock producing more wealth but causing more inflation (deterring international investment).

By: PatK

PatK — Wed, 23 Mar 2022 15:46:35 +0000

With the Canadian dollar at risk, people are jumping into real-estate as safe harbour. Better to own something solid, than the paper that banks are playing with. I do remember .59 cent hamburgers.

By: Chris P.

Chris P. — Wed, 23 Mar 2022 15:40:01 +0000

This is the Bernie Madoff type of miracle.
With household earnings of $200K, and $100K down payment, one can afford maximum $914K house in Ontario. Since a small minority of families make 200K and tiny minority of real estate can be bought for less than a 1M (Toronto), how can there be a record number of sales??? But houses for 1.5-2.M sell like hot cakes! The question is not” who buys them?”. The question is “Why no one in the media wonders out loud about the impossible math!”
Because if the government is in on it, don’t hold your breath waiting for the crash.

By: John

John — Wed, 23 Mar 2022 13:11:57 +0000

Yes .. most likely very ugly when the music is over. Remember when Bob Rae bankrupted Ontario? They loved him when he gave them all a 7% raise in the depths of the 1991-1993 recession when there was ~14% unemployment in the private sector .. then they hated him when the stack of cards collapsed. Harris came in and made all the tough decisions to get Ontario solvent again.

By: Scott

Scott — Wed, 23 Mar 2022 13:01:48 +0000

At least, with the NDP agreement, they will still be in power when the music stops in a couple of years. It’s going to be ugly…

By: Im Therious

Im Therious — Wed, 23 Mar 2022 03:46:57 +0000

A telling time frame from this chart would have been the 1950s-80s when real estate tanked and presumably didn’t look like this portion.

As this metric is a percentage, there likely would be upper and lower ranges. However, in the housing utopia that is Canada, it can only go up!

By: John

John — Wed, 23 Mar 2022 02:46:26 +0000

It’s not the price of the home he should be plotting against incomes. He should be plotting the monthly payments against incomes. As interest rates have fallen to all time lows, payments have too, causing demand to drive house prices up. Granted, monthly payments relative to incomes are higher than historical averages, but not nearly as much higher as house prices versus income.