The BoC meets tomorrow and will almost certainly increase interest rates. Even with all of this recent juice, Vancouver prices have flattened and likely already begun their descent. Some kind of extreme has been hit, and the rate hikes will add to downward pressures. Our estimation is that, over the next two years, prices will likely correct by >33%. Thereafter we will grind lower, and the eventual trough will represent >50% off current prices. -vreaa
This excerpted from ‘Mortgage debt surges as economy picks up steam’, G&M 31 May 2010 -
“Canada’s economy is on fire, surging 6.1 per cent in the first quarter at an annualized pace.”
“A Statistics Canada report also shows personal debts rising, as mortgage growth surged $76.4-billion annualized in the first quarter from $59.8-billion per cent in the fourth quarter of last year. People are using more credit for homes, but less for other items.”
“Household debt as a percentage of personal income probably rose to a record 148 per cent.”
The population’s lack of financial literacy is absolutely frightening.
OT re: real estate, but got a scary anecdote nonetheless. Had a coworker today escape work quickly to go to the bank. He was applying for a $10,000 LOC to buy a car.
We were talking after about what to purchase, and he kept referencing this $10,000 ceiling. I asked him if he thought of financing through a dealership, since some are offering 0% interest right now (I know, to qualified buyers only, but some rates are pretty darn competitive).
His answer? Looked at me dead in the eye and said, “I don’t want to finance it. I want to pay only cash.”
A bit stunned, I asked him what the difference was between paying with a LOC and financing. His response? “Oh, uh…”
As one who worked so hard to pay off debt and then amass savings, I find this terrifying. If people think their LOC is “cold-hard cash,” we’re screwed.
I hope Carney jacks it by 50 bps tomorrow… Good shot across the bow to all the Variable Rate jerkoffs who think my savings will be free to them forever.
For the record, the BoC raised rates by .25% .