Willy,

Public sentiment is hard to pin point so specifically, however, sellers have 2 months to “cash-in” on buyers “soon to be decreased” ability to use low interest rate buying power so I don’t think it would be too much of a stretch to guesstimate that anyone who has been on the fence, whether to sell or to hold out for more – will sell. Those not needing to sell, and/or not looking to cash in will probably hold, and that’s fine, there’s plenty that can’t or don’t want to or never intended to hold. Once this supply is added over the next two months and the decrease in buying power follows on Jan.1, I once again don’t think it is too much of a stretch to guesstimate that prices will start to adjust to the new affordability levels which will be lower across almost all classes of buyers. In addition, keep in mind that builders have a lot of inventory to off-load and they are completely uninterested in holding onto these newly built units for any longer than they have to. So these new units will go to market and they will reflect what people can afford. If yesterday they could afford $750,000 soon they’ll be looking at $100,000 less…..if the builders are forced to adjust their prices, everyone else will have to as well, otherwise they will be over priced comparatively and their DOM will start to stretch…….have you ever seen the emotional response that sets in when someone can’t close the sale of a property they want to off load…..all rationale goes out the window when these emotional responses start kicking in….it’s been said that some buyers might turn to unconventional lenders to bypass the new rate rules, however, while this might be true for some people and to some extent, I would argue that if there’s an increase of listings and only price softening lies in the future, most people won’t be eager to do whatever they can only to take on a drowning level of dept on a property that is just one of many new listings all who are seeing their prices fall month over month.

Soon, the answer is soon Willy. But the real question, or rather the real answer everyone should be looking for is, for how long and how low will prices drop……the drop is coming, but the depth to which prices will fall is most important to anyone who sold at the high point and is looking to get back in at the low point and to repeat their success. The BOC can easily cut interest rates and give everyone their buying power back if the impact is too adverse, or any number of other adjustments can be made, however, these effects are only national, are controllable , and were announced……it’s always the internationally impacting uncontrollable factors that you don’t see coming that you have to worry about…..they can boost an economy or pull one down….I see a lot more downside storms brewing out there than I do to the upside.

All this said, I’m not a “real estate professional”, I don’t have 3 letters behind my name, and I’m no oracle.

Cheers.

Something else to consider…
Supply has been constrained for additional reasons and potential changes to B20 won’t create the ‘new market’ you speak of.
Here is an anecdote….if you sell a million dollar home you are inevitably paying 50k realty fees, some untold amount for breaking your mortgage early, legal fees, moving fees, stress etc. And guess what, if you buy another million dollar home, or sold to move up, the additional land transfer taxes for an equal value home is north of 30K in Toronto. Likely more if you’re attempting to move the family up. That decision to sell just cost the seller an extra 100k. In my case, I’m adding an extra level and not moving anywhere.

Hi Kris. How soon after the stress test is implemented the prices will start coming down do you think? I mean immediately after, 1 month, 3 months or longer?

At the start yes there will be those that don’t have to sell and those that don’t want to sell who will both hold back and for a very short time contract inventory….but as emotional as home buying is, with the ever increasing price downward adjustments, emotions will win over and the fear of losing more money will spur many listings in an over supply that will push prices further down…..for a time……just like they have been to high for a time….then the like always, supply and demand will hit another inflection point and head back up.

That’s the cycle folks…..if it’s not this there will be something else and you may not see it coming as clearly and as far out…..at least on this swing you could easily capitalize on your profits……know when to cash out….know when to buy in…..or hold and enjoy 🙂

Exactly. It’s not in the BoC’s mandate to tame the housing market, and this OSFI rule is a way smarter approach to it. The crying from the real estate industry I’ve seen in the media is often about how it will hurt first time buyers. Well… time will tell. If prices fall in the hottest two market then they’re actually further ahead. Unless well-heeled speculators pick up the slack.

Well said.