Speaking with a broker this afternoon I’m told that buyers may select any rate plan available but that they are qualified using the lender’s three-year posted rate. So, for instance, Scotiabank might offer me options as low as 2.75% but they would calculate my maximum TDSR using their three-year fixed rate of 4.65%.

Kermit,

Sorry for the confusion. A “public comment,” in this context, would be the remarks made by an agent on an MLS listing that migrate to various websites where they can be read by the public. The largest box of text on realtor.ca listings would be an example. An MLS listing also usually contains Realtor comments, which remain somewhat private and only accessible in the back end of our system and public comments that go to the front end (realtor.ca). I was probably speaking realtorese there.

The idea of comments from the public on listings is an interesting one, but I expect you won’t see it for some time. Point2 ventured into this territory at one time. Agents flipped their lids (apparently some sellers did as well) and threatened to remove their listings from the site. The idea died a quick death.

Yes, that was the case with us and our recent mortgage approval through a bank. Don’t know if it’s an industry standard though, or how the brokers work it.

Regarding the recent twitter post:
Overheard on the public comments of an MLS listing, “OPEN HOUSE – SATURDAY, APRIL 4TH, 2-4.” Man, I admire her ability to plan ahead.

Funny stuff, but where is it that people can post/read public comments on individual MLS listings?

Thanks

I think young couples should factor in future higher interest rates, having a family and the possibility they may not be able to tap into their home for equity if they bought with little down. They should have some sort of saving each month for the unexpected. Every buyer should plugging in numbers with many different scenarios down the road when it comes to buying a home. It is the biggest investment most will ever make.

I am one also hoping for River Landing but wondering about its future

Too funny! Lol. Humans are strange, strange animals.

Buyers don’t have to qualify for a renewal on a CMHC insured mortgage, but I’m completely with you in your concern as to whether these buyers will actually be able to pay. Seems to me that buyers are actually being “qualified” on the posted rates (some fixed term), and not the “special” rates that are being offered. Anyone know if that’s so?

River Landing – I got an invite to the groundbreaking, sent in my RSVP, and within a couple of days was asked not to come. They said something about “dignitaries” not being able to make it but no rescheduling yet. My fingers are still crossed.

Well if people begin rushing in to buy I would say interest rates trump purchase price, for the simple reason absolutly everybody who lives in Saskatoon knows prices are falling and “ahem” are going to continue to do so untill they start rising.

Well we all know the lighthouse project downtown is toast, and the other super mega developement, the hotel on the riverbank seems suspiciously a little quite. Maybe it’s because when it was in the feasability stage it was all we heard about, sure has toned down a bit. If I’m not mistaken there supposed to break ground this month, maybe they already have.

You’re right Norm the Bay aka 2nd Ave lofts may have come down, as I mentioned some sky high prices have. From my daily observation I would say that as of June ’09 prices are down $100 on average across the board since last summer, of course there are still quite a few holdouts.

“Probably the best route would be for buyers to purchase well below their means which would create somewhat of a permanent safety net, however whith human nature what it is, that’s not going to happen.”

Probably won’t be the common approach, and yes, the consequences could be fairly serious.

“Rents are going up on average”

Maybe. I wonder if the rental market isn’t like the resale market as it’s going through a correction. You can find lots of stuff that’s overpriced and some selection of sstuff that’s in the process of getting to the right range. I know you could easily get $1500 in the second avenue lofts last year. Now they’re going for $1275-1300. Someone told me that those three storey walk-ups on Stlllwater have come down $50. Maybe this is one of those “year-over-year things where the actual yea-over-year number isn’t representative of what’s been happening lately?

Jason and Rick,

I don’t think that prices are secondary at all, but whenever you have a product that is most typically financed, interest rates are certainly going to be as important as the price and I know we can count on both of you to make the same arguments as rates continue to rise.

Jason,

“I’m not sure gambling on inflation and wage increases to offset this is a sound plan.”

I would say that everything is a gamble nowadays. Things aren’t exactly unfolding as one might expect.

“This company may be struggling due to their desire to only attract short-term tenants.”

Lol. These guys made their intentions known long ago and all of those buildings are listed for sale on a “to be moved” basis. I cannot understand how they could possibly be confused as to why people aren’t lining up to rent them. Forgive me for being blunt, but that’s simply stoooopid! Not you Jason, them.

Rents are going up on average, could be. Some property’s that were sky high are coming down a bit, on the other hand places like the Milroy are at $1,100 for a 2 bedroom which is up, a 2 bedroom Styleright property on Siverwood and Lenore was $875 as of June 1 it’s $975. Looks like there may be a lot more 1 bds then 2, suggesting that there is a lot more people doubling up. I would say the average price for a 1 bedroom is $ 650- $700 and about $ 800 for a 2 bedroom. One thing for sure is that as rents rise people begin to make other living arrangements.

Yes perhaps your idea does make sense. Fundamentaly something seems to be not quite right. Home purchase focus seems to be all about interest rates with the purchase price being a far secondary consideration. I doubt anybody really wants to carry a mortgage for the full 25 year term, rather does anybody consider if they can pay off there house in 10 to 12 years by making lump sum payments here and there when they can. I have heard of re-fi, in the past I was famaliar with 3 months penalty for paying off a mortgage early, but I think I have heard of thousands of dollars for early re-fi, there seems to be a whole lot of shuffeling around to make home ownership work, it all seems to point to the fact that houses are very expensive or overpriced or unaffordable, like a pair of shoes it’s nice to have a little wiggle room, but for a lot of buyers the ducks will have to all stay lined up for a long time to successfully facilitate there ongoing lifestyle. Probably the best route would be for buyers to purchase well below their means which would create somewhat of a permanent safety net, however whith human nature what it is, that’s not going to happen.

Seems pretty much anything is available for wordpress. When my prospective web guy delivers his quote I’ll ask him about adding a preview. It’s a good idea. Thanks.

“CMHC report says Saskatoon rents up more than $100 in past year”

I just don’t believe this. All of the rent stories we’re hearing from actual renters indicate that pressure is off of rents and that they’re coming down, but it’s not unusual for CMHC to report the opposite of what’s really going on.

Crikey, in terms of financing, I think it’s going to be a catch-22 over the next few years in striking the optimum balance between finding the best price at the lowest rate. That being said, if it were me, I’d focus on location first, since these kind of properties hold their values better and always command a premium (even in a down market). Something to also consider: in a tough real estate market (one with excess inventory or where high interest rates exclude many buyers), there may be deals to be found in seller-financed options (where owners may have equity but no means to either convert it to cash or an income stream).
CMHC report says Saskatoon rents up more than $100 in past year http://www.thestarphoenix.com/CMHC+report+says+Saskatoon+rents+more+than+past+year/1682017/story.html

Norm, now that we can utilize html, is a “preview” option (prior to submitting) available?

“I guess the fear is that most people are close to maxing themselves out at these low rates”

I’m completely with you there, and as crazy as it sounds, I think an interest rate which is somewhere close to historical norms would be better, sooner, rather than later.

“Thoughtful feedback, fellow bloggers?”

Making sense to me, if one wants to be in their own home in the next few year. Again, the I think the key right now is to buy well below what you can actually qualify for at today’s rates. Hitting a 40% Total debt service ratio on a 2.85% variable rate mortgage probably isn’t the best strategy.

Like you say, that comment is heresay but I don’t doubt his own claim of “On the East side I did an evaluation and during the processing time 3 properties went 100k over.”

Vancouver W. – Tanking or Ticking?

Norm,

I’m getting your reasoning. I guess the fear is that most people are close to maxing themselves out at these low rates, which as we’ve seen in the States, could conceivably harm even prudent mortgage-holders at some point in the future. If you’re giving yourself a good cushion for future (ie. you’re not at all stretched with current rates, you can ride out probable short-term fluctuations in the market, and you’ve actually run different interest rate scenarios at refinancing to see if they’re financially tolerable), yeah, you have a great point. Right now the market is in a place where I’m starting to find very reasonable homes for a price that I would consider good even in a longer historical context, considering our income. I’m not saying that this makes sense for everyone right now, but seems to for us.

Here’s our situation. Granted, I don’t think we’re typical, but I could be wrong about that:

-We’re lucky enough to have well-paying jobs (that I think are relatively stable), such that homes we’ve been looking at are well under 2.5 times our annual household income. To tell the truth, I’m really encouraged by this. I wasn’t sure I’d ever see this again a couple of years ago. Yes, prices were much lower pre-2006, but we weren’t in a spot to comfortably buy then and our incomes are quite a bit higher than they were then too.
-Thanks to your continuing and wonderful help we were able to work with a broker that quoted us a (frankly, crazily) low rate recently. Our projected monthly payments are within a very near margin of what we’re currently paying in rent.

Now, I happen to think that downward pressure on prices outweighs upward. How much might they go down and for how long? I honestly have no idea. Right now inventory is high, prices are appreciably lower than they were last year at our price range, and the cost of financing is ridiculously low. So, what to do? If we let the quoted rate expire, some months from now the cost of financing may be quite a bit higher. Do we wait until the rate lock expires and hope prices drop enough to equalize the payment at some point int he future?

I also agree that if we do buy, interest rates will in all likelihood be higher when it comes time to refinance. Now, we’ve run the numbers, and interest rates would have to triple the rate we’re quoted before the monthly payment would really start to hurt, assuming our incomes stay the same. Are rates this high possible? Absolutely. Likely? Who knows.

Thoughtful feedback, fellow bloggers?

Bidding wars again? Some people have such short memories. Only 35 countries in the developed world participated in the world wide housing bubble in which every country had some sort of bidding wars that took place just a few years ago. Millions are now licking their chops after the implosion. But hey, RE only goes up. Maybe these people in the bidding wars believe RE has hit close to bottom. Just for reference, they have been calling bottom in the States for over 40 months. I’ll make a bet and say they will eventually call it right.

I actually wonder if there will be inflation though. I have this theory rattling around my head that the current economic situation is a bit of a trap. On the one hand you have the natural effects of deflation as all this foolish debt binging implodes and net credit (basically money) decreases. This is counterbalanced by the government which is trying to inflate with deficits and government bond purchases. However, they are now in a situation where any recovery immediately sparks inflation as a result of their actions, which again is what we are seeing today. Like I said, they want inflation just not so quickly and at this preliminary stage of the recovery. So either you accept a timid recovery with high inflation and ultimately higher interest rates on government debt or you reign in spending and watch the economy fall flat on it’s face. I still vote that the US chooses the inflation path but I am seeing more and more opposition to this from the Republicans (in the US) and investors. Choices, choices.

BTW, as bad as the mortgage rates are in Canada, they have risen even higher in the US. 25 year fixed up about 1 percent from it’s lows. Canada always seems to follow the States on these things so export more fixed rate increases in the future.

“Maybe they will go for a 4 year fixed at 4.09% or variable at 2.85%”

Maybe they’ll go with a broker and get a five-year rate at 3.85%?

“.6% in less than 10 days.”

Things can change rather quickly can’t they? I just could not do the variable thing right now. Roger, where do you think rates are going over the next 12 months?

George,

“I don’t think the low rates have had a upward pressure on prices”

I agree that hasn’t happened here but I gotta think there’s some upward pressure elsewhere.

This from a Vancouver friend in early May.

FYI in Vancouver’s east side and parts of the west we are back to multiple offers. Worst I heard was 25 offers on a 1.5 million home. On the East side I did an evaluation and during the processing time 3 properties went 100k over and my eval wasn’t worth squat….

My buddy had opens last Sunday and Saturday and had 83 and 90 sets through. It’s a dump.

It’s actually heartbreaking to see this kind of foolishness return. Like him, I just don’t get it.

Lets take a look at TD’s “special rate” for a five year fixed mortgage. It is now 4.55% vs. 3.89% two weeks ago. Here is what that means to a buyer that has $1300 for a monthly mortgage payment. All calculations are based on a 35 yr. amortization.

@ 3.89% the max. mortgage is 300K
@ 4.55% the max. mortgage is 274K

This is a considerable reduction in mortgage amount and consequently maximum home purchase price. So what will home buyers do? Maybe they will go for a 4 year fixed at 4.09% or variable at 2.85%

@ 4.09% the max. mortgage is 291K
@ 2.85% the max. mortgage is 346K

Things will get interesting once the current pre-approval letters expire. Will today’s variable holders get nervous and switch to a fixed rate? Will there be a big push by the RE industry and media suggesting that variable mortgages are the way to go?

Thank you.

Jason,

Thanks very much. I really appreciate it. I have installed several plug ins so I’m confident that I could follow the install instructions. I actually did a Captcha plug-in a couple of weeks ago that added an entry box, but no submit button. Comments couldn’t be entered at all. After some time I figured out how to remove it, but I scared myself a bit because we’ve put a helluva lot of time moving content. Jay Thompson has shared some stories about plugins gone wild so it’s possible that something could go wrong, and it’s clear to me that you can’t just call up a wordpress guy for help. I did get a response from a “Thesis expert” today. I’ve got a to-do list for him including some forms which I’ll want to include the captcha on, so I’ll wait until those are done and I have someone who can rescue me if something goes wrong. Thanks again.

Rick,

$200,000 @ 3.85% over 25 years = $1035.84 per month
$162,000 @ 6% 0ver 25 years = $1035.48 per month

Prices would have to drop more than 20% to trump a rate increase of 2.15%. Wouldn’t it make more sense to do this while rates are low and just make sure that you buy within a range where you can afford the higher rate when you renew in five years? Help me out here please.