We’ll let blog dog Linda start today’s offering. “You want realtor porn?” she emailed me. “Well I have some for you.
“I was surfing the movies on my Telus OnDemand and I came across a XXX movie called “Hot Property Hos”. Summary: ‘Some girls are willing to do anything for a sale! The hot agents at Pearl Realty soon learn that the more they open their legs the more sales they close.’
“Is art imitating life or is life soon to imitate art? I laughed so hard that I wanted to share it on your blog, but I don’t want your underage fans to see this (and I know you have a few).”
Too late now, Linda. And don’t worry about the kids. Four hundred moldy renters just Googled ‘Pearl Realty.’
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Speaking of delusional people, a recent BMO survey found a third of all first-time homebuyers expect mortgage rates to be exactly what they are now in 2018. That’s amusing, of course, after what happened in June – when merely the expectation of less US central bank stimulus spending blew up the bond market and goosed five-year mortgages three times. More of that’s coming, along with repeated increases in Bank of Canada rates over the coming years.
The big worry F & the Peckerettes have is that legions of people who bought with 5% down in the past three years will be completely unprepared for the return of normal rates. This worries the mortgage brokers, too. In fact the industry’s online journal, Canadian Mortgage Trends, has published a mortgage stress test calculator that clients can use to see how screwed they might be as 3% mortgage rates go the way of Mike Duffy or Pamela Wallin.
Meanwhile the brokers are offering a few tips for minimizing payment shock. Included is the obvious strategy of locking into a five or 10-year fixed-rate mortgage now, while they’re still relatively cheap. You can also increase monthly payments slightly, for a big positive impact down the road. For example, hiking them by just 2% a year pays off a mortgage eight years sooner. Weekly payments have a similar impact. By paying weekly instead of monthly you make the equivalent of one extra payment a year, and hack years off the pay-back time.
More dubious choices include locking into the longest amortization possible (you can still get 35-years on a non-insured mortgage), but making monthly payments based on a shorter am. So, if you have a variable mortgage and rates balloon, there’s wiggle room. Or, you can trigger one of those idiotic take-a-payment-holiday schemes some of the banks offer. That has the same effect as lengthening your am – but remember each missed payment is added to your principal amount and itself amortized, which means you get to pay it back at least twice.
The best strategy, of course, is to sell your real estate when prices are still high and rates low, then buy in again when rates increase and houses are cheaper. If you don’t think that will ever happen, you must live in Calgary. We will light a candle for you.
By the way, you can find the mortgage stress test calculator here.
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Remember two years ago when this pathetic blog yammered away about investing in US real estate? At the time the usual America haters, doomers and metalheads swarmed on to say southern properties would collapse further in value along with the country itself, and I’m full of crap. I may be. But I was also right.
The price of resale houses across the States is rising now 1% a month on average. Yes, valuations are still 20% below those of 2005, but that’s a big hike from the bottom (negative 32%). Some markets, especially in the Northeast, are being rocked by bidding wars and soaring offers as the economy clearly rebounds.
The latest news is about new houses. While sales of new-builds have collapsed 40% in Toronto, for example, they jumped 8.3% last month across the US to the highest level since 2008. Yes, they’re still running below levels of five years ago, but they’ve swelled 38% in the past year, while prices are up 7.4%.
The average price for a brand-new SFH in America is now $249,000. In the GTA it’s $644,427.
Three guesses why we have the lowest sales on record.