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Home prices to slide, not crash: economist

LORI MCLEOD

Globe and Mail Update

Latest comment posted at 4:02 PM EST 11/10/08

Canadians will see prices drop up to another 10 per cent, then level off, CIBC's Tal says ...Read the full article

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  1. I love Canadian Rockies Cleavage from Canada writes: Wait a second, the Real Estate Board said that the fundamentals are strong and that we would see little difference.
    I wonder who could be right?
  2. Ben Dover from Toronto, Canada writes: Oh, hang on I'll email this article to the idiots at MPAC who claim my house will go up 30 percent.
  3. Fall of Discontent from Ottawa, Canada writes: Yeah, housing prices will drop 10% in Vancouver and Calgary.

    Big whoopee, they are still going up and up in Ontario.
  4. Ed Long from Canada writes: It will not be 10% across the board.

    Condo.s and new high density will be vulnerable because they're overbuilt.
  5. High Entropy from Waterloo, ON, Canada writes: Economic forecasts are about as useful right now as AIG stock.
  6. Adil Burney from Canada writes: Sure, Benjamin 'Trigger' Tal- he said that there is no 'trigger' for house prices to fall...Hmmm, wake up and smell the coffee

    Didn't this guy also say that oil was going to $200...

    http://canadahousingcrash.blogspot.com/2008/09/merrill-lynch-gets-it.html
  7. Mark P from Calgary, Canada writes: Yeah right. The cost of equity capital is going up by the minute, as well as debt financing. Buying a house in this environment easily costs 10-12% for both equity and debt financing, and most houses only yield 3 or 4%, even less in Vancouver/Calgary.

    Do the math. The housing market will correct more than the stock market. At least the earnings yield on the stock market was quite reasonable before the credit crunch. Housing has no earnings support whatsoever.
  8. Ro Mac from Toronto, Canada writes: Ya, Bennie's housing loss numbers are getting bigger every few months. I'll check in with him in Feb and we'll see what this blowhard has to say then.

    'Irrational exuberance' and asset bubbles mean nothing to this dork.

    Do economists not realize that fear has now actually taken hold of the various markets?? They don't realize that the general public don't view the financial situation we find ourselves in from the egocentric perspective they do.
  9. Comments closed, censored, deleted or made to disappear from Mini Bushland, Canada writes: All we need now is the CIBC (the CIBC!!!... believe it or not the CIBC!!!!) to tell us what is what on our investments. --- Good Heavens, the sky is indeed falling!
  10. Jack Ripper from Canada writes: CIBC says the housing market will not crash....which means it will DEFINITELY crash....
  11. Non Partisan I AM Canadian from Canada writes: I was sort of hoping for a wee bit more a downslide than 10%.

    ;)

    BUYER!
  12. K P from Canada writes: The CIBC has absolutely Zero credibility in any of their market prognsticaions.
    At least they seemed to have muzzled the drivel from Mark Rubin and bought a new 'Magic 8' BAll.
  13. john smith from toronto, Canada writes: If i had access to mortgage and loans information from all our banks, then perhaps i would trust what this article is saying. But, as it stands, our banks, and other financial instituitions, and the real estate industry, are not obligated to disclose any important information that could help the canadian consumer to make up their own opinions and judgements about our current economic condition. All is well in canada; we should keep spending and watch all our investments climb above realistic expectations. Our banking system is different from the american banking system; we have not spent recklessly as the americans have. We will not be affected by the global economic slow down.

    In other words, Canada is bullet proof.
  14. Ghetto Dude from Istanbul, Turkey writes: Dear Toronto houses, after a rise of at least 20-30% thanks to the appreciation of the CAD, and an additional rise of almost 15% due to demand in 2007 alone, please lose some of your inflated value so that we shall buy a better house when we come there. (A 10% decline within a year is too optimistic an expectancy given the losses in shares today.)
  15. dreaming of a green party majority from Canada writes: If this stuff came from Rubin then I am going to buy a second house because it is sure to increase in value by 10%
  16. Don Corleone from Toronto, Canada writes: Isn't Tal the same baffoon that said that oil will shoot up to $200 a barrel. Honestly, how does this guy keep his job. Housing market is going to get hit hard, real hard. Once interest rates go up 1 % that means an 11% increase in mortgage payments. How many people do you and I know that are living paycheque to paycheque? Or will no longer have a paycheque. Quite a few I bet. Real Estate will be sinking like the Titanic. Hopefully most of the properties will be those of real estate agents who inflated the market by purchasing 5 condos and trying to flip them. Buckle up folks, it's gonna get ugly.
  17. b W from Canada writes: To quote from the G&M on 10/4/08:
    After more than twelve years of rising real-estate values in [Toronto] prices dropped in August by 1%...September figures, released yesterday, were even worse, with prices falling 6%. The report also noted that prices in the GTA fell more than 3%.
    For someone with this information already available, I think Mr. Taj's his 5% estimate is out to lunch. Guess he wants a job at CREA.
  18. Andre Carrel from Salmo, Canada writes: Oh good. At least as it concerns real estate we have people who can give us a guarantee about what the future holds for us.
    Maybe we should turn over the management of banks to real estate brokers.
  19. Credit Watcher from Toronto, Canada writes: Hmm..... The toronto real estate board reported that September 2008 prices declined by 6% from 2007.

    If you assume normal mortgageability (80% debt/20% equity ) for the normal new home owner, and then account for a 5% real estate commission on sale, then this means that approx. 50% of a home owner's equity has vanished in one year. As people largest asset is usually the equity in their home, they are unable to move from the home they just bought and hence you have demand destruction.

    With Canandians having very high debt levels demand destruction Bank's lending less money in light of credit crunch high inventory levels in most markets=== much lower home prices.

    From a historical perspective, the cost of renting and the cost of buying cross each other in a downturn until an equilabrium is reached. For Toronto, average pricing would need to decline by about 25-30%. Sorry Mr. Tal for bursting your bubble....watch out below....perhaps, rather than forecasting real estate using complex econometric models( or the toss of coin) you ought to study the history of how real estate bubbles usually deflate.......history repeats itself.
  20. Bob Macdonald from Liverpool, United Kingdom writes: Operation Complete Hooey is up and running! House prices never gently fall to earth like a feather; they crash. And they will crash in Canada like everywhere else. Why? Credit is drying up. They said it wouldn't happen in the UK a year ago too. Now, houses are being repossessed all over the place.
  21. M F from Canada writes: Does anyone have an idea on what is happening in the market in Vancouver? The average income in this city is $59,000.00, 700 sq ft condos are listed around 500K, and if you look at MLS or craigslist it seems like there are huge numbers of new condos for sale. There are also a lot of buildings that seem to be listing 'executive rentals'.

    The city also seems to be in the process of completed many new condos. Who is buying these places?

    How are investors in Europe and Asia able to afford maintaining empty condos with the current problems in world markets?

    Can anyone venture a guess as to the outlook for the condo market in Vancouver in the next year?
  22. Jonathan T from Canada writes: Median prices are down 6% YOY in Toronto, median prices are down almost 10% in the town of Milton (GTA, Canada's fastest growing city). Average prices are down much further than that.

    Too much supply and too little demand. Economy in recession. US possibly depression. Financial crisis.

    It's suprising that an economist would even try to predict how home prices will react to the crisis. Then again will he even be accountable.
  23. Marvist Clank from Canada writes: I just paid too much for a house but I sold one for too much and expect in the end the market will drop ~20% from the peak. That means 10% for me and I'm not worried. Still a bargain compared with markets that are land constrained (Vancouver and Toronto) and considering labor constraints I'm comfortable with the dropping in activity. I agree Real Estate surveys and the CIBC ... but the only thing worrying me is the new poll showing Ontario and Quebec drastically turning. That only means they want massive corporate welfare to prop up the Tembecs of the world (hyperleveraged stressed/'worn out' assets) and to throw money at large corporations like Bombardier and Volvo. If individuals have to compete with capital consumption into black holes like that it will indeed be deflationary. I don't thing the Bank of Canada could print enough money to make up for the lost asset value. It appears we won't follow Australia but go the way of Europe. Those who looked at us as a light in the World of 'Central Banking' appear to have been mistaken in their judgement. Corporatism seems to be the order of the day. Hyper subsidized and taxed inordinately .... yeah Jack. Buzz says yoh the man. I started making lump sum payments on my mortgage yesterday and I am watching the bond markets to see when to lock in ... probably January. My job is secure even at $20.00 oil ... bring it on.
  24. PETER T from Markham, ON, Canada writes: Of course CIBC does not want to say that, Go CMHC and go look at how many MBS Mortgage Vehicle CIBC (very agreesive, top of the player in mortgage business), Royal and TD sold off to investors ? Look at how much ($ amount) they did during 2002 until now ? If these people were NOT paying for their mortgages and credit card and line of credit debts, the screw is 50% in for them...With the phychology of people walking out of their home if they see a 20 or 30 % decline...PLUS people got laid off from their jobs or getting a lower paying job to cover the expenses PLUS another nail in homeowner's head - PROPERTY TAX (10 to 20 % rise from past 3 years), they would not pay for their home anymore and would simply go rent...With more people getting unemployed....banks will be pissed !!! Lastly, with commerical mortgages, builder loans, commericial line of credit starts to get a cold feet, manufacturing plant shut down and let the bank to do the rest, that would be another 50 % for that screw will PUSH into these banker's HEADS !!! If you think we are far away from the crisis down south or europe, think TWICE !! The CDN banks are NOT traditional deposit and loan out anymore...They do all the TRICKS and GIMMICKS that the US banks did and load up the market with these PRICE-LESS papers !!! How dare you all think the CDN banks does not have any SIV, CDO and SWAPS in their holdings ??? THINK !!!
  25. Claus Mohr from Toronto, Canada writes: Why on earth are you quoting opinions from financial institutions that don't even know how to run their own business?
  26. Chilled One from Canada writes: These 'economic experts' should simply go away and get a real job. That alone would solve most of the worlds current economic problems.
  27. B C from Canada writes: 'Can anyone venture a guess as to the outlook for the condo market in Vancouver in the next year? '

    Down two percent a month, until the properties become cash-flow positive as an rental property with 0% down. About 50% down from the peak, ballpark. Condos have no land appreciation potential from densification so they are, from day one, depreciating assets and one should not pay more than the corresponding rental income stream dictates.
  28. jck from ontario from Canada writes: Back in 92 I bought my house in the Toronto area for 30% below sellimg price in 89. The vendor owed the bank over $20,000 after the deal was done.Tell me this is not as bad as 92 . Vancouver Calgary good luck .
  29. CallofDuty . from Toronto, Canada writes: Jack Ripper from Canada writes: CIBC says the housing market will not crash....which means it will DEFINITELY crash....
    --------------
    I was about to say the same thing. Hold onto your hats!
  30. I.R. Warner from Cowichan Bay, Canada writes: Is it really that bad or is everyone beginning to panic because they took outrageous 90-95% equity loans against their plunging asset? Sound familiar? Most of the foreclosures in the US are for that reason, not for the people with a sound financial plan who were living way beyond their means. Get a financial advisor (not a bank because they have no vested interest in your welfare, only your money) and have them prepare a plan and stick to it. The economic fundamentals our parents lived by didn't fail them, did it? Get a house, pay down your mortgage, save a few bucks for a rainy day and live within your means and voila, the spoiled brats are off to university and life is good. Notice I didn't mention the Hummers, 60 inch TVs or credit cards. Here on Vancouver Island, prices are still going up (probably because of our weather) but slowing down and I expect they will be flat for the next couple of years. Good time to pay down the principle as much as possible so that when they do go up again (they always do), we're that much further ahead. Don't want to sound pretentious (probably have anyway) but the sky is not falling for those who live within their means. Take care.
  31. A reader from Canada writes: 'Chilled One from Canada writes: These 'economic experts' should simply go away and get a real job. That alone would solve most of the worlds current economic problems. '

    *********
    Add the media to that group who appear to applaud all negative forecasts. Many Canadians have a tendency to believe all the B.S. that the economists and media dish out with the result of irrational exhuberance
  32. Carl Hansen from Canada writes: House prices will remain level but your mortgage will now be a low cost one with a 25 year term provided by the govt. Happy days continue.
  33. ALASTAIR JAMES BERRY from Nanaimo BC, Canada writes:
    Considering all the 'FOR SALE' signs everywhere on the front yards and the 'FOR LEASE' signs I see on empty shops, in Nanaimo, on Vancouver Island I reckon the market has to drop some more before these signs are removed.

    Money is already tight and many of the old folks who seem to make up the majority of our population since our industries closed up, have seen their savings hard hit. I reckon a few will be forced by rising taxes and high fuel prices to sell up and move in with their children, adding to the inventory of properties available.

    I expect to see housing in Nanaimo at about $200,000 for nice detached home with garden by next spring.
  34. Marion B from Calgary, Canada writes: Who cares about the housing crash, its not a loss until you sell your home. Buying a house is still worth it in the long term. Here's how I see it:

    To rent my house would probably be 1500/month (estimate even on the low side)

    to buy my house would be 1900/month (including property taxes)

    So even if I saved the 400/difference per month by renting (which takes discipline I'm not sure I have) I will still only have about $330,000 in 30 years (using a 5% rate of return, compounded sem-annually) versus being mortgage free. Good luck buying a house for 330k in 30 years. Even with just inflation rates a 200,000 house today will cost over 400k in 30 years (probably more).

    Okay so you can argue there are added repairs and maitenance, insurance blah blah. My house is small so those things are minimal. I still think its worth it.
  35. Rudy H from Canada writes: Hard to call that a slide. More like a dip.
  36. garlick toast from Canada writes: Watch out for economic 'cheerleaders'. The game is just starting.
  37. Marvist Clank from Canada writes: Carl, that is funny. I guess you expect we'll have to nationalize all our banks :D If that happens expect all your private pensions to be expropriated and the spirit medium of Otto von Bismark, the new Kaiser, Jacko will sit at your kitchen table and explain to you why you only need so much and that the table you are sitting at is public property while we start spending wheel barrels of Weimar dollars for basic necessities. Forget Australia North, Argentina North, its Zimbabwe North.
  38. duncan owen from Canada writes: How on earth can you trust anything any of these prognositicators have to say on the economy? They have misled the public on every major economic question for the last 18 months, terrified that the public can not handle the truth, even though the truth has been blatantly obvious. It sickens me that they hold any meaningful employment position in our society. Both politicians and economists, leading up to this current meltdown have done nothing but lie and deny the facts while doing their very best to cover their own butts. Cowards and thieves.
  39. H B from Canada writes: Question, I'm confused about where interest rates are headed, and wondering whether I should be thinking about renewing a year early. Central banks are cutting their rates at the moment to help ease the crisis and to keep the taps open, but now I read that retail interest rates will rise. Which is it? A year from now, will banks be making up sub-prime and related losses through retail rates, or will a downward trend at the central banks continue to guide mortgage rates?
  40. Marvist Clank from Canada writes: Ha Ha ... 'garlic toast' ... I recommend we get the fab four clowns (ABC) to contract Kudlow from CNBC to explain to Canadians the multitude of ways to print money and everything will get better. Just hand it to every intellectually bankrupt enterprise and need person and 'goods and services' will fall from the sky. Heck, Dion can even torture us with 30 days of Kudlows 'funny money' optimism.

    Can't have an austere, responsible measured plan that has been in place for a year to win the day. Harper admitted he is not an emotionally expressive man, time for more flair.
  41. globefan Eh from Canada writes: Iceland has interest rates running at 15% and an economy in collapse, the Russians just bailed them out with 5 Billion.

    Someone has to lend money to the US.. what will the rates be..Iceland may be our first indication.
  42. John Keller from Calgary, Canada writes: Who still believes the economists ??????????

    Just a lot of hot air, could be one of the causes of global warming?????
  43. Marvist Clank from Canada writes: Iceland fell into the same trap as a house buyer figuring is tax deductions and believing the bank's estimation of what he could borrow at 125% of the inflated value of the property was perfectily ... OK.

    Maybe this will help Bjork come up with some new material ... bluesy stuff ;)
  44. Voice of Reason from Ottawa, Canada writes: They will never say crash.....if they did they would be asking the market to drop quickly....so how much can you put into what they are really saying.
  45. Marvist Clank from Canada writes: I'm for the Austrian School (economists), www.mises.org ... but I have trouble with their constrictive ideas on currency. I think the economy based value of our 'fiat' currencies can work (and Australia and Canada could come out of this in a sweet position) Sorry, didn't mean to get overly serious but it seems everyone forgets about the 'business cycle' except these guys. They study it as an obsession.
  46. Richard Roma from Canada writes: Some people can be incredibly stupid in living beyond their means and thinking that the interest rate would be in the mid single-digits forever. It's time to watch the timber fall!
  47. Freddie B from Woodbridge from Canada writes: Today, the TD announced that they were raising varaible prime rate mortgages and Home Owner Lines of Credit by 1%. This is a direct effect of the added cost banks are facing in aquiring credt. This will add an extra $3400/year to the average mortgage. This calculation is based on the fact that the average mortgage is $340,000. $3,400 is a lot to swollow when you are already strapped. Read your credit agreement. The bank can do this legally. Houses will drop more than 10%. They dropped 6% in one month in Toronto. As others have mentioned, watch out Vancouver & Calgary.
  48. Not the Alliance from In my opinion, The Harper Gov't is totally Incompetent but always blames somebody else., Canada writes: In fairness to Tal, it should be pointed out that the $200 oil price forecast was from Jeff Rubin, NOT Benny Tal. Yeah, they work in the same department, but let's be fair here.
  49. J A from Ottawa, Canada writes: A direct quote from CIBC...... where is G&M's critical analysis?
  50. bill k from Canada writes: Jonathan T from Canada writes: Median prices are down 6% YOY in Toronto, median prices are down almost 10% in the town of Milton (GTA, Canada's fastest growing city). Average prices are down much further than that.

    Too much supply and too little demand. Economy in recession. US possibly depression. Financial crisis.

    It's suprising that an economist would even try to predict how home prices will react to the crisis. Then again will he even be accountable.

    These propagandist said no prices declines and even prices gains and now they claim prices will only drop another 10% LOL . The housing crash is just getting started as prices in the GTA are ALREADY DOWN 6%YOY. By the end of the year we will see price declines in Toronto by 15% or more. Sales are falling and inventory in rising and 'power of sales' are rising as well. POP.........what was that?
  51. J. Michael from Australia writes: What a joke - no one has a clue of what is going on, or where this economy is headed. We are like Christopher Columbus heading into unchartered waters - over the horizon might be a new world, with great riches, or we might be met by an abyss!
  52. Marvist Clank from Canada writes: I had my first check in 8 years, because it was interbank, with a 5 day hold on it. Guess we are getting back to reality. Thank goodness Canadians don't have too far to go to get back there.
  53. Freddie B from Woodbridge from Canada writes: Marvist Clank from Canada writes: I had my first check in 8 years, because it was interbank, with a 5 day hold on it. Guess we are getting back to reality. Thank goodness Canadians don't have too far to go to get back there.
    =================================================
    Thanks to Harper. If Jack and Dion were at the helm, we would have 50 year mortgages with no money down.
  54. John John from Canada writes: Marion B from Calgary, Canada writes: Who cares about the housing crash, its not a loss until you sell your home. Buying a house is still worth it in the long term. Here's how I see it:
    *********
    I do agree with you. Those who are terrified by current crisis either have mortgage on second property and speculate on the fast rise of house price, or need to cash the house for retirement.

    As long as you spend as much as you can make, you don't have to worry too much about the crash.
  55. Marvist Clank from Canada writes: Freddie B, Ha Ha and who would pay for those bonds? Are you thinking nationalize all the banks as well. Then we could expropriate all private pensions for a common pool ... I think I typed this B*S already ...
  56. Adil Burney from Canada writes: Marion B: When you pay $1,900 a month you are only paying a small amount toward equity in your house (say $200). Therefore, $1,700 is interest on your mortgage (debt).

    In Canada, you can't walk away from that mortgage, so you either have to sell or hold on to your house until you pay your mortgage. If you hold on long enough and make enough $ to pay the mortgage every month, you can hopefully pay off that debt but there is inflation, opportunity costs, etc...

    http://canadahousingcrash.blogspot.com/2008/09/merrill-lynch-gets-it.html
  57. R. M. from Regina, Canada writes: Nonsense. Don't believe him. He is an entrail reader at best. NO ONE knows where prices are going!
  58. Marvist Clank from Canada writes: Whatever, the fab clown four scenario (ABC) means I can quit now and retire like my grandfather with a high top volkswagon van as my RV/home and if I decided to work ... it would come to the same conclusion. Like I said, whatever ... my wife would be disappointed and I hope Jack likes sitting at the kitchen table in my modest bungalo (circa granparents expectations). One question, since that is now the poverty level and most of us were there how are we going to define progress?
  59. Panty in a knot from vancouver, Canada writes: maybe on average but vancouver is boom and bust
  60. Freddie B from Woodbridge from Canada writes: Marvist Clank from Canada writes: Freddie B, Ha Ha and who would pay for those bonds? Are you thinking nationalize all the banks as well. Then we could expropriate all private pensions for a common pool ... I think I typed this B*S already ...
    =================================================
    I was ridiculing Jack & Dion. Harper put a stop to the 40 year no money down mortgage. I did not endose a 50 year mortgage. Harper is telling it like it is. Just like he did when he had flip on the income trust issue. If the other two clowns get to team up and run the country, watch the bail outs at the middle classes expense.
  61. Marvist Clank from Canada writes: Freddie B, OK, I agree on the 'income trust' thing as well. Despite Kevin on BNN and his denial of public property (royalties) and need for an income based investment ... Income Trusts were smelling like 'casino capitalism' with Telus and Bell going that route. Harper did what he had to do. That a couple of American Investors got burned on their 'scratch and wins' ... all the better. We had to nip the monster as it was about to stand.
  62. Jonathan T from Milton, Canada writes: Globe and Mail should read Saul's book 'Unconcious Civilization' before quoting any more 'economists' opinions. Do they mind lending the crystal ball. I'd like to know what Potash and Encana will be worth in 1 year time. You really hit that on the nose with your last guess a couple months ago.
  63. Marvist Clank from Canada writes: It was fun, have to work on domestic issues now.

    Remember ...

    ABC=4 Clowns

    Harper=Canada (with a future)
  64. bill k from Canada writes: Freddie B from Woodbridge from Canada writes ``Harper put a stop to the 40 year no money down mortgage``

    FACT it was the CONservatives were the ones who introduced the 40 year mortgage and nothing down. You are a fool who is ignorant to the facts. Take that stupid CON. HARPER WILL RUIN CANAD.
  65. Oslo Karmen from Canada writes: A.J. Berry - dream on - not in a city on the Island.
  66. Peter Fulton from Vancouver, Canada writes: Good downtown Vancouver condos will decline 20% and thereafter there'll be a long period of static prices, taking 10 years to recover.

    Bad/undesirable condos...30%

    But then there'll be another spike in prices, and on we go...

    If you're paying your mortgage, and therefore building equity, it still all works out fine, just so long as you're in it for the long run and you're not a flipper.

    Slow and steady wins the race.
  67. tim johnson from Ottawa, Canada writes: He is underestimating the size of the drop in real estate prices. Granted he does work for CIBC and they have an interest in keeping the real estate market stable. He has not accounted for the coming recession in Canada. There is a recession in the US and its could be a deep one lasting a couple years. There is a recession in Japan and Europe. Has he looked at what the stock market has done in the past few weeks. Seems to me that most people who are going to be buying houses over $200K will have some money in the stock market (could be in mutual funds). Where do you think the down payment for these large houses is going to come from if your mutual funds or stocks are going down the tubes. Credit is really tight right now. Money flows across borders and what is happening in the US is affecting everyone around the world. All of those people who bought houses in the last five years will be having their mortgages come due, with higher mortgage rates as a result of the credit crisis. A couple of percent does not seem much but on a $300K mortgage it can add up. The tipping point will be the rising unemployment. Canada is interconnected with the rest of the world. If your largest trading partner is in a deep recession, Canada is going to lose a lot of jobs. The sub prime market in Canada as well as the 0 down 40 year mortgages will also be a tipping point. Leverage works great when values are going up, but when house values are going down it is terrible. Nobody is going to renew a mortgage for a house that is valued less than the value of the house. In that case there will be a forecloseure on that house. In Ontario, MPAC will be sending out tax assessments to homeowners for house values at the peak of the market at the end of 2007. This will send others over the tipping point into a force sale. I have been expecting this event to happen for a while and suspect there will be appoximately 25-30% loss in house values in the next year.
  68. tim johnson from Ottawa, Canada writes: He is underestimating the size of the drop in real estate prices. Granted he does work for CIBC and they have an interest in keeping the real estate market stable. He has not accounted for the coming recession in Canada. There is a recession in the US and its could be a deep one lasting a couple years. There is a recession in Japan and Europe. Has he looked at what the stock market has done in the past few weeks. Seems to me that most people who are going to be buying houses over $200K will have some money in the stock market (could be in mutual funds). Where do you think the down payment for these large houses is going to come from if your mutual funds or stocks are going down the tubes. Credit is really tight right now. Money flows across borders and what is happening in the US is affecting everyone around the world. All of those people who bought houses in the last five years will be having their mortgages come due, with higher mortgage rates as a result of the credit crisis. A couple of percent does not seem much but on a $300K mortgage it can add up. The tipping point will be the rising unemployment. Canada is interconnected with the rest of the world. If your largest trading partner is in a deep recession, Canada is going to lose a lot of jobs. The sub prime market in Canada as well as the 0 down 40 year mortgages will also be a tipping point. Leverage works great when values are going up, but when house values are going down it is terrible. Nobody is going to renew a mortgage for a house that is valued less than the value of the house. In that case there will be a forecloseure on that house. In Ontario, MPAC will be sending out tax assessments to homeowners for house values at the peak of the market at the end of 2007. This will send others over the tipping point into a force sale. I have been expecting this event to happen for a while and suspect there will be appoximately 25-30% loss in house values in the next year.
  69. Trudeau's Apricot poodle from Canada writes: Economic soothsayers apparantly have their crystal balls clouded with melamine. None of them predicted the dire consequences leading to the recent disaster. But for those who let other people watch their money, it gives them somthing to read while their loony's are migrating south.
  70. Frigid Media from T'ranna, Canada writes: Ya right! Down we go. 10% around the board. It will be much worse in Vancouver and Calgary (oil price drops that will make the tar sands more and more difficult to maintain, huge 2005 USA-type credit evil lurking. I would bet at least 2 years of steady decline, at which point Vancouver will have to deal with a post-olympic burst at the worst of times. There have been huge divergences in the cost of a home and rent, and the cost of a home and inflation. bubble bubble toil and trouble!
  71. Steven Ferguson from Canada writes: Tim Johnson, you suggest people about to buy big homes would have been parking their money in the stock market. I hope not. The stock market is for long term investors. If you are/were saving money for a purchase this year, it should have never been in the stock market in the first place. It was more likely in bonds, which are doing OK with the declining interest rates.

    We get so much US news in Canada that we forget we are a separate country. Our banks were not nearly as crazy with the sub-prime mortgages and so Canadian home owners are in financially much better shape. A 10% drop is probably about right, and not anywhere close to catastrophic.
  72. Peter Lucas from koloa, Canada writes: In a much earlier post, B C from Canada guesses condo prices in vancouver will decline to the point rental income covers carrying costs with 0% down. That will never happen. And with this great advice and $3.00 one could almost buy a cup of coffee.
  73. indy jones from The stock market is sliding NOT crashing, Canada writes: Slide? SLide??? SLIDE ????????????

    Yeah, and the stock market is sliding NOT crashing.....You hear me - sliding. Just like Harper saying 'What recession?'. Can't get people scared now..... say a small number and call it a slight adjustment.....

    50 percent off housing in 18 months !!!!
  74. Wilma Guywin from Allover Canada, Canada writes: can some one tell me is the following part of the report or what the reporter inserted to try and scare the unknowing public?

    As home prices continue to fall, mortgage rates are on the rise, with banks passing on their higher borrowing costs to consumers. While mortgage rates are still near historically low levels, the increase is fuelling worries that debt-laden Canadians could be in danger of tumbling into a U.S. style housing crisis.

    The concern is heightened by the fact that some existing mortgages are zero-down, 40-year amortization products, which have extended some home owners to their financial limits
  75. j wilson from vancouver, Canada writes: There will be a 50% drop in many areas of Vancouver.

    What the high water mark will be considered, I dont know: but there are condos in Surrey that would have fetched 400G last year that can't sell for 300G now. To see them go down to 200G would not be surprising.

    I would suggest that Calgary and Victoria are next on the overpriced list, then Edmonton. But the west will bleed a lot more than 10% - it has already.
  76. Go Oilers Go! from Calgary, Canada writes: Successful housing markets such as those seen in Canada over the past years attract investors.

    Now that the market has topped out many of the investors are leaving the market. Inventories have increased and it will likely take 2-3 years to fully eat up the inventory.

    The market isn't going to crash but it's definitely going to pull back.

    Markets don't go up forever. What did people expect?
  77. Dave C from Canada writes: I have to agree with some of the comments. The only place that I would expect a possible crash would be Alberta due to the Very over priced values of homes and 'feast/famine' history of their 'one trick pony' economy and I would also argue that BC, which is seriously overpriced, could see some drastically lower prices.

    If the Alberta economy begins to slow, and I suspect we will start seeing this happen, Alberta Real Estate could have a repeat meltdown just like after the last Boom.
  78. Matt P from Calgary, AB, Canada writes: Just for the record I don't own a home so any declines in real estate values would be good for me..
    Curious about some comments saying how BC Calgary homes are due for a bigger crash. I agree the homes here in Calgary are way overpriced considering there is lots of space to build and opportunities to make neighbourhoods denser.
    But if anybody can comment what does make Ontario immune to this decline? I could easily see what is happening in places like Windsor expand to the rest of the province. I understand there hasn't been as much price speculation in Ontario but at some point the job losses and GDP decline will probably have an impact in this..
  79. Paul Bayer from Parksville, Canada writes: Indeed, not every region of Canada will have same impact , but Vancouver will fall more than 10% ... there will be considerable economic fallout yet to come, and a low oil price will have severe impact in Oilberta. Southern Ontario already feeling manufacturing cuts, more to come sorry to say. I would hold off buying a house as we have not seen the bottom of the real estate market.
    Canada is not in a bubble, and there is real economic turmoil in many parts of the globe.
  80. deep breaths from Partly Sunny Vancouver, Canada writes: I have 500,000 in cash to spend in Vancouver come 2009. Only reasonable offers considered. Sure glad I stuck to my convictions when everyone was putting in multiple bids on sunday nights just to try to 'get in'.
    I told ya so attitude just had to vent after I had to listen to two years of everyone around me questioning why I was not getting in.

    Prediction.... Vancouver town houses & Condos will be down 20-35% by 2010. You seen all the cranes out here? It's crazy!
  81. John K from Vancouver, Canada writes: At the end of the day, the markets which rose the most (not necessarily the fastest) and are the most overvalued will correct the most. No market in this country is remotely close to Vancouver's overvaluation; hence, Vancouver will correct the most.
  82. Marv M from Canada writes: Merrill Lynch economist says Canada could face a US housing meltdown, this CIBC economist says we won't. If I was betting man my money would be on the Merrill Lynch economist. Why? Just look at what drove prices to the record levels they were at. Very easy and abundant credit, banks willing to loan to anyone with a pulse, economies booming (thanks almost fully to that easy credit) so people were confident and were not worried about recessions or job losses. Now fast forward to today, everything that I mentioned as a reason for the house prices skyrocketing has unraveled. Credit is not cheap and easy anymore, banks are becoming more and more reluctant to loan let alone loan large sums of money to anyone, we are probably going to be in a recession or much worse thanks to the crumbling financial systems around this world. The once booming economy of the West will fizzle as demand for commodities slows drastically. People will lose jobs and there will be allot of fear so people will be very reluctant to spend anything let alone large amounts on a house. Prices will plummet.

    This is exactly what will unfold, I guarantee it.
  83. Rene L from Canada writes: Fall of Discontent from Ottawa, Canada writes: Yeah, housing prices will drop 10% in Vancouver and Calgary.

    Big whoopee, they are still going up and up in Ontario.
    --------------------------------------------------------------------------
    Fall of Discontent... just wait 6 months. Canada is not an island onto itself. If the U.S. unemployement rate goes to 7.5% or possibly higher, you can pretty much bet the house ( literally ) that all of Canada will be severely affected. If there is a severe global recession, it will be even worse...
  84. jack jones from Calgary, Canada writes: Here is how it is going to play out. Those of you who bought in the last two years within your means, bought a 10 year home, and put >25% down and longer-term fixed rate mtges (variables already getting the squeeze) you will survive just fine. On the other hand, I would be worried for those who bought in the last two years with 0's, 5's and 10's down, variable rate, mtg dependant on two incomes, and a 2-3 year home, I hope at least your bed is comfortable. Too bad, I hate seeing anyone suffer, unfortunatly the cost of entry-level housing got ridiculous. no comment on those who levered to buy a vacation property, we all know whats coming there. 1982, 1987 and now 2008 here we come.
  85. jack jones from Calgary, Canada writes: btw, in 1987, it took a full year before the flood of houses causes a material sizable drop in procing. Canada 2009.
  86. scott thomas from Canada writes: The big brains in the CIBC have some ABCP to sell us too.
  87. Ron Jachere from Toronto, Canada writes: Just for the record, I work for a Canadian bank in Toronto and I can tell you that there are fewer new mortgage applications and renewals coming in the door to that area these days, but that the people in that area are fighting hard to maintain the book. There are some (relatively few) relationships we'd like to exit, but any client whose been paying their mortgage properly over the last 3-5-10 years is chased relentlessly. Responsible borrowers do not have trouble finding credit in this market, at variable rates of Prime - 50 to 75 bps, or fixed at 5.2 - 5.5%. As an owner, it is unpleasant to think that if I had to sell my house now, I might only break even after costs, but with a long term time horizon in mind, I'm far happier to be an owner than renter. All of these clowns here who pray for a market collapse would be the wimps who would not have the guts to actually buy something as the backdrop of a recession would scare them too much. If you're a responsible person who can pay rent, then you can pay a mortgage. Quit hoping for a collapse, as that's not good for anyone, and you know it.
  88. Wafflehut Guy from Charlotte, NC, United States writes: been there - done that - Orlando 2003 - 2005

    except that despite what the realtors said - the market plunged 30 %

    ... now it's charlotte - sheesh
  89. Marvist Clank from Alberta, Canada writes: Marv M, Jack Jones ... I agree. Housing isn't an investment, its consumption that takes 25 years to consume with no maintenance or upgrades. If you continuously dump money into it ....

    Anyway, just because you kept your cool in the bidding war, don't miss out buying something you may want.

    West of Edmonton there are houses 25% more than mine that were not as nice and when I asked my Realtor why such disparity in pricing, she said they were probably trying to get their money out and keep the shirts on their backs. Now there are people taking jobs over in the 'Alberta Industrial Heartland' (massive development) and they can no longer swap houses to the right side of the city at any price (even with decent relocation).

    All I'm saying is I bought, but I was fussy. Keep shopping, you might find something you want to live in. If it goes down another 20% ... who cares if you really want to live there. There was somebody waiting for my deal to fall through even with 15,000 plus homes on the market and condo's going up in communities with a commute.

    Edmonton's market was flat from 1980 to 2002, had a pop and back slid a bit and will probably stay flat again for 20 plus years.
  90. duncan owen from Canada writes: Ron Jachere, after watching your co-workers act like cheerleaders rather than finance professionals for the last couple of years telling every one with a pulse that did not own a house, they had better buy NOW! before it is too late, and having watched many friends mortage their future that the economy will never contract, interest rates will always be stable, and their house will do nothing but gain in value (and we won't get any older, and we won't ever die) I think it is a bit disingenuous of you to be the steady voice of reason now.
  91. yuri gershman from Toronto, Canada writes: 30% down in Toronto within 18 months is very likely scenario, but depends on depth and severity of the recession (seams that it will be worst than 1990) I wouldn't be surprized to see 40-50% in 2 years.
    US has been sliding for 2 years already, but Canadians tend to believe that we were insulated from the US scenario by our comodities. With this insulation melting away at catastrofic rate Canadian's net worth is falling like a stone. When anual disposable after tax income is not enough to service the total accumulated debt (mortgage, credit cards, line of credit, etc...), and with investment portfolios being decimated, people will be forced to sell homes. However, after terrible events of September-October the last remaining buyers are deserting the market. Terrified sellers now find themselves hanging on the ladder (like Jack Nicholson in last episode of Batman) with huge boulder (mortgage) tied to their legs. Remenber expression on Nicholson's face? The guy is Brilliant!!!
    So, forr how long they gonna hang?
  92. Ron Jachere from Toronto, Canada writes: Duncan, perhaps you should have acted as a better voice of reason to your friends then if that's how you feel. Caveat emptor as they say. Some people will definitely get burned, and maybe lose some money when they try to sell their house. As I said, I bought a house three years ago, and might sell it for break even at best in this market - though I'm not selling. I bought into the idea of home ownership as well, but I'm glad I did. Rather than paying $2,500 a month in rent on someone else's house or apartment (in order to have the space I want for wife, child and me in the centre of the city), I've been paying $30,000 a year (which is principal, interest and taxes) for a detached three bedroom home with two car driveway and easy access to public transportation, with an initial downpayment of $65,000. With weekly prepayments, we've trimmed our effective amortization from 25 years to 14 and built an equity cushion strictly for rainy days. Blame the agents for cheerleading as much as a banker, and tell your friends to wipe their noses and get to work paying off their debt so they don't become an unfortunate statistic. My point was not to condone aggressive lenders, but to say that nobody really wins if the market craters. Even the people who want a crash, want it so they can...wait for it....buy a house too! We're all after the same thing here, Duncs.
  93. Mickey Hickey from Toronto, Canada writes: O ye of little faith. With Harper's steady economist hand on the tiller. And the solemn word of a CIBC economist. If that is not enough to calm you all down so as you stay the course I don't know what will. By the way I saw Flaherty on TV today in Ontario, wearing green no less. We can now rest assured that climate change will at least be arrested if not reversed.
  94. duncan owen from Canada writes: Whether you believe it or not Ron, I don't really think too many people want a crash on the magnitude that we are currently looking at. To buy a house or otherwise. Only a very few would benefit, compared to the loss of a great many. If one were to study history one could suppose when such things happen, very bad things follow. Unfortunately when credit has been given easily and cheaply to anyone and everyone, (my sheepdog would have qualified a year ago if I let her apply) even a slight contraction in the economy can set off a very nasty chain of