What Affect Will Expected Mortgage Rate Increase Have
Monday, August 12, 2013 @ 3:45 AM
It doesn’t sound like much but economists are predicting a 1% increase in the price of a mortgage could trigger an 8% decline in house prices in many major cities across Canada. Economists have been saying for some time that the price of mortgages will have to increase. The days of the 2-3% mortgage rate are beginning to look like a thing of the past.
Over the past four years with rates hovering in the 2-4% range home prices have increased in some cities to a point of absurdity . That increase has been acceptable for the new home buyer who look only at the payments, and low interest rates mean they are still able to enter the housing market regardless of the price.
It is hard to predict what affect this will have on the lumber market given that Canada has seen its presence increase dramatically in the Chinese market which has insulated us at home from any swings . With both Japan and China seeing signs that they are recovering from a slowdown in their economy , the Canadian market and any affect it might have on the local production of lumber becomes less important.
South of the border, while the turnaround has been extremely slow, never the less there are signs that market as well is set to rebound and so we are likely to see demand for our lumber off shore while at the same time in the local area , buying a home will become more difficult fore those entering the market.
I’m Meisner and that’s one man’s opinion.
Comments
Economists do a lot of predicting. We really need to follow their predictions and log them against reality over say the last 3 or 4 decades.
If we were going to do that, I think that their predictions would not be much different than fortune tellers.
Perhaps they need to be held a bit more accountable for their predictions.
Here is another view of the influence of China in the long term.
http://www.foreignpolicy.com/articles/2010/01/04/123000000000000?page=0,0
Sometimes if you predict something for long enough, you’ll eventually be right.
Raising mortgage rates might be an easy thing to say, but it would have a lot of repercussions in many other areas, especially to a fragile economy.
Affect? Does someone need a grammar lesson?
Thank you cutbanks54. I was going to comment on it as well.
Affect is a verb. Effect is a noun.
The word in this title should be ‘Effect’.
Sloppy editors… :-)
“…buying a home will become more difficult fore(sic) those entering the market.”
It appears a spell-check is needed as well.
Does Canada have a housing bubble? It surely can’t be any worse than China where they build cities and housing to support hundreds of thousands or millions of people who have yet to even occupy the places. At least in Canada’s major cities, most homes are signed for before they are built . . .
As JohnnyBelt noted above, it’s easier said than done to raise interest rates. Generally speaking, Canadians also have a great deal of equity in their homes. So long as they can afford the increased payments (which I’d suggest most people can), they and the banks can deal with a small drop in home values.
Other than Vancouver or boom towns like Fort Crack and places like that, I’m not even sure that home prices are all that crazy in the major centres. Truth be told, I think it’s the smaller cities that probably need an adjustment downwards. The larger urban centres at least have population growth and ongoing demand for new housing to keep prices constant or going up. Smaller places (sorry PG, I have to do it) seem to have increasing prices without any logical reason behind them, unless one thinks that speculation is a legitimate reason for inflated prices.
One thing is for sure, there are a heck of allot of people in PG with allot of equity in their homes that can absorb a big drop in the market thanks to recently inflated prices. People just need to recognize that those assessments aren’t “real” money unless you actually sell.
People should also use caution when looking at Vancouver stats and using those as some sort of proxy for the Canadian real estate market. Vancouver is an aberration and it’s prices are very much impacted by wealthy foreign buyers who see Vancouver as a bargain . . . which it is on the world scale.
Check these stats out for average home price in some other Canadian markets:
Vancouver: $750K
Victoria: $505K
Edmonton: $344K
Calgary: $434K
Saskatoon: $350K
Regina: $293K
Winnipeg: $266K
Toronto: $523K
Ottawa: $356K
Montreal: $321K
Quebec City: $269K
Saint John: $192K
Halifax: $267K
PEI (not broken own by city): $132K
NFLD (not broken down by city): $285
Geez, maybe people were right that everything is more expensive as soon as you get near to or cross the Rockies, LOL.
Most of the lumber sold to China is 4th grade, and not planned. It is used for Concrete forms in the building of high rise apartments, which is the most common type of housing in China.
They can get this type of lumber anywhere in the world, and actually import a lot from the USA. We are able to sell this lumber to China cheap, because most of it is beetle kill, and the lumber companies pay a very low rate for stumpage. How long will this cheap lumber be available.?? Who knows.
In the meantime the Japanese market, and the US market buy top of the line lumber, and pay a good price for it. Hopefully this trend will continue.
There has been a lot of talk about China buying lumber, however I have yet to see or hear anyone mention what the sale price is. We know what the US price for lumber is as it is posted on this site seven days a week. However nothing on the sale price to China. Why is that??
As an example you will see that Japan and China passed the US in volume sales, however they generated less money than sales to the USA.
China’s economy is only as good as its customer’s and if the EU is any indication then they could be in trouble. If we keep taxing the hell out of people in Nth America, they to will discontinue buying a lot of **stuff** and China will suffer.
Imports through the Port of Prince Rupert from China are down this year to date over last year. Could this be a trend??
“China’s economy is only as good as its customer’s”
Let me see, they have about 3 times as many internal customers as the USA does. And, now that China is in a mode to increase the economic well being of its citizens, the same way that the USA was a century ago, it will simply keep going creating its own “bubbles” the same way that the USA was able to do and in a smaller way Canada through their immigration policies of allowing lots of people in to populate the space they took over from the indigenous population.
I would not worry about China and its people too much. I might worry about China and its influence over the rest of the world a bit.
Imagine what might happen to countries like Germany if it cannot sell high quality goods to China anymore. It is not China that has to watch out. India might still be there to take up the slack.
The world is changing. One cannot rely on past practices.
And then there is South America and Mexico.
Economists are working in a different sphere now. They have little to go by to give them guidance.
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