Tuesday was a long day.
And I don’t mean because of the incessant media coverage on everything from Coronavirus to….well, actually, that’s all the media coverage is about these days.
No, my day was long because I find myself at home more often, and I had absolutely no idea how hard a job being a parent actually was.
I was in the office from 9am to 2pm, and from 2pm to 6:30pm, I swear, it felt like a full day. That’s crazy thing! Standing outside at 5pm, being tired as hell and wondering how my 3-year-old has such incredible energy, I would have sworn I had just put in a full day with the kid. But no, in fact, it was merely three hours. And by God, was I already looking forward to bed.
I’ve heard some people say that this “forced vacation” has its upsides. Staying home, chilling out, watching Netflix, reading that book or taking that course that you could never find the time for. Well, I’m of the opinion that it’s ten times more work to find things to do with kids all day than it is to do your job. Any job.
Good lord, let me get back to work…
I received an email on Tuesday from a morning show that wants me back on this Friday to answer some questions about the Coronavirus and the impact its having, or may have, on real estate. Just from the email alone, I could tell there’s a lot of misinformation floating around out there. And we know what misinformation can do, right? Just think “Donald Trump” and “drinking aquarium cleaner.”
There are a slew of ways in which misinformation is floating around out there, pertaining to real estate, but there are two that I want to comment on today:
1) Mortgage Deferrals
2) Mortgage Rates
Last Friday, we first started seeing articles pop up about mortgage deferrals.
The world is changing rapidly with every passing day, and each and every day, we cross a bridge that we never thought we would.
Mortgage deferrals? Really? Are we expecting things to get that bad out there?
Yes, it would seem. All five of the major banks are set to offer some sort of deferral option.
But as usual, a large percentage of the unwashed general public (ie. not those who comment on this blog) merely read one headline or see one phrase that piques their interest, and that’s it, they’ve come to the conclusion they like most.
The qualification criteria for a mortgage deferral is still unclear, but I would like to think I’m sophisticated and cynical enough to offer the following:
Banks are in business to make money.
Banks primarily make money by lending money to others.
Banks do not own real estate as their primary source of revenue.
Ergo, ceasing to lend money, and beginning to own real estate is not something the banks want to start doing, in droves, in 2020.
Make no mistake, the banks don’t want mortgage defaults, and they don’t want borrowers to fall behind on their payments. Banks are completely and utterly uninterested in foreclosing and taking over houses and condos.
So what’s the best way to get out ahead of that? Offer mortgage deferrals.
They’re not doing this because they, like Labatt making hand sanitizer instead of beer, want to help Canadians. The banks are doing this because they’re guarding against the worst case scenario.
Now, for the perennial headline-reader, who doesn’t feel the need to dive any deeper into a story once the words “Chinese virus” are strewn across the footer of a Fox News broadcast, we must distinguish between “banks to offer mortgage deferrals” and “banks to offer mortgage deferrals to everybody, everywhere.” Because unfortunately, this is what I’m hearing about from a lot of people.
Somewhere out there, right now, is a person who pays $2,400 per month on their mortgage, who believes that, despite being gainfully-employed, and having $38,000 in savings, that he or she will simply stop paying their monthly mortgage.
Is it really going to be that simple?
Would the Big-5 banks, who each make about $1 Billion per month, allow little ole’ Jannie or Jimmie game the system?
Not a chance!
There’s no way in the world this is going to happen, and yet it’s all anybody wants to talk about. Bear in mind – the people who comment on this blog do not represent the ‘average’ person on the street. You guys are way ahead of this, but you’re smart. Most people out there, in today’s society, are not.
But click on a link, read the headline of a newspaper story, or just talk to the person bagging your groceries with a mask and gloves, and you’ll hear that banks are, in some cases, forgiving mortgages!
How did we go from “deferral” to “forgiveness?”
No word of a lie, that’s the email I received from a reader today. Okay, fine, it was only one instance, but in this era of misinformation, one is enough for me to think there are more.
The biggest problem that I have with this idea of mortgage deferrals is not that people are spreading misinformation, but rather that they’re believing it.
I truly believe that once the proverbial dust settles on this week and next, and the Big-5 banks roll out their “plans” to deal with possible late mortgage payments, we’re going to find that VERY few borrowers will actually qualify for deferrals.
If you’ve got a $2,000 mortgage payment, and you’ve got another $4,000 floating around out there somewhere, I don’t think the bank is going to let you off the hook.
The second topic that is prone to an absurd amount of misinformation is that of mortgage rates.
And the problem stems from the following: most people don’t understand, or refuse to learn, the difference between “interest rates” and “mortgage rates.”
I’ve heard, over and over again, that “rates are low.”
I’ve heard, “the banks are dropping rates close to zero.”
This couldn’t be further from the truth, however.
I asked my mortgage broker, Tony Della Sciucca, to weigh in with his thoughts on this:
–
To say that we are living in unprecedented times would be an understatement. COVID-19 continues wreaking havoc on the global financial markets, but most importantly our health, safety and well-being.
The uncertainty and anxiety of the virus is causing panic in worldwide markets as the majority of share prices plummet, slowly eroding any savings that we may have accumulated over the years.
In a span of ten days;
- Bank of Canada (BoC) makes an emergency rate cut, lowering its target for the overnight rate by 50 basis points to 0.75 per cent. As a result, prime lending rate has dropped one full percentage point from 3.95% to 2.95%.
- Fixed interest rates plummeted, hitting record lows of 2.49% (5yr fixed – uninsured), only to see them sharply increase again to 3.24% (5yr fixed – uninsured) in the last 72 hours with Scotia leading the pack. A swing of 75 basis points.
- And, if that wasn’t enough, Canada’s major banks will allow (on a case by case basis) mortgage payment deferrals for those hit hardest by COVID-19.
The public are often mislead by the term “Bank of Canada lowered its overnight target rate to 0.75%”. Some are under the impression that fixed and variable interest rates are now 0.75%.
That’s simply not the case.
To clarify, The “overnight rate” is the interest rate at which major financial institutions borrow and lend one-day (or “overnight”) funds among themselves.
Those funds are then passed on by the banks in the form of credit to the consumer/borrower in the form of “Prime Lending Rate” (currently at 2.95%) and is often expressed in a percentage above or below prime rate.
Keep in mind that variable rate mortgage can be subject to rate fluctuations given that the overnight target rate can also change.
See link below for historical changes to the Policy Interest Rate.
https://www.bankofcanada.ca/core-functions/monetary-policy/key-interest-rate/
When it comes to variable rate mortgages, banks have historically offered discounts to prime rate in order to incentivize borrowers to assume the risks associated with the fluctuation of the prime lending rate. In today’s world, that’s not the case.
Currently, variable rate mortgages are priced at; prime + 0.05% – 0.10% by most financial institutions.
Which begs the question, particularly in a low interest rate environment, If banks are not offering a discount to prime rate, why would a borrower assume the risk, especially when fixed interest rates are currently cheaper?
Personally, to even consider a variable rate mortgage, I would need to see banks offer prime minus 0.75% to 1% to make this a consideration.
So, are the banks really that greedy? Is COVID-19 causing a real liquidity concern for our major banks?
When it comes to fixed interest rates, they work a little differently.
Unlike variable rate mortgages which are hedged against the prime lending rate, fixed interest rates are tied (indirectly) to Government bond yields. Simply put, when government bond yields increase, fixed interest rates will typically rise and conversely the opposite.
Fixed rates can be subject to change on a daily, weekly or even monthly basis. Have a look at the link below at some of the bond market movements in the last 12 months. https://www.bankofcanada.ca/rates/interest-rates/canadian-bonds/.
At the request of Federal Finance Minister Bill Morneau, banks have agreed to defer up to 6 months of mortgage payments for individuals that qualify, specifically those who have lost their job, along with small business owners.
Each bank has their own criteria as to who qualifies and how those payments are being deferred. If you’re concerned about your ability to make mortgage payments during these times, it’s best you speak with your financial institution to see if/how you qualify. Allow yourself some time as wait times have been in excess of 3 hours for some people.
On a personal note, if COVID-19 has taught me anything, it’s that we’re all vulnerable in some way or another. The impact of the virus has left many of us concerned about; our employment, our health, our families and friends and our finances.
Now more than even we are being called upon to help our fellow neighbours in this time of need and uncertainty. Let’s give it our best!
Stay safe, my friends!
Tony Della Sciucca
Mortgage Agent, FSCO Lic: #12214
Dominion Lending Centres
tony.dellasciucca@dominionlending.ca
Like I said, the basic understanding of both “interest rates” and “mortgage rates” is needed to see just how wrong people are about the current mortgage rate environment.
Tony raises a good point about the banks’ reason for the increase in rates. Is it, in fact, greed? Or is this corporate responsibility, ie. answering to shareholders who want a return?
There’s a tremendous amount of irony in that. Banks need to lend money at rates designed to bring in revenue, in order to provide dividends to investors, and to see a rise in stock price. But almost all of these investors/shareholders also have mortgages…
On Friday, I’m going to show you what’s happened to showings in the past two weeks, since, as you probably would have guessed, they’ve fallen off dramatically.
I’ll also take a look at the listings that were “holding offers” last week and see what sold, and what didn’t.
Appraiser
at 7:37 am
It’s remarkable how many people are taking this opportunity to try and scam the system or look for freebies.
“People all over Toronto say they are not going to pay rent on April 1.” https://www.blogto.com/real-estate-toronto/2020/03/people-all-over-toronto-not-paying-
rent-april-1/
“Some have also been quick to point out that Premier Doug Ford just placed a moratorium on evictions in Ontario in the midst of COVID-19 outbreaks, meaning that those who are unable to or choose not to pay rent will not have to worry about potentially losing the roof over their head along with everything else that’s going on right now.”
Bal
at 8:13 am
Don’t they have to show some kind of proof that they are unable to pay…..if their jobs are okay…can they still say they are not going to pay without showing any sort of evidence?
Chris
at 8:45 am
They don’t have to do anything. What’s their landlord going to do about it? Evict them?
Jennifer
at 9:31 am
isnt everything a deferral (unless a landlord agrees to waive a payment)? they will still have to pay eventually. so i wonder if they dont pay now (even though they still have a job and income cause they are smarty pants) and then everything comes up and running again as it will, and the tenant doesn’t pay for the missed periods, will the landlord be able to evict then? i would assume so.
Chris
at 9:45 am
At this point, there’s been no government decree on the subject, other than asking landlords to work with tenants.
So I suppose it depends on the case specifics. If you as a landlord defer rent, presumably it would come due eventually. If you reduce or forgive rent, presumably it wouldn’t.
condodweller
at 9:21 am
@Jennifer Clearly the government can’t expect landlords to defer rent for ever. Once this crisis is over we go back to normal. Unless the landlord decides to waive any part of the amount owing the full amount will become due and I would think it is reasonable to also charge a reasonable interest just as banks would on deferred mortgages. Obviously there would have to be some sort of agreement to pay it off in installments as no one is going to have a lump sum available at the end to pay it off otherwise they would have been able to just pay their rent on time.
The problem becomes as I mentioned in my other post is that how likely will it be that the tenant just walks away without paying? My position is that government should help landlords collect the outstanding amount and and one shouldn’t have to go through court to do it.
Appraiser
at 9:11 am
@Bal:
The entire “don’t pay your rent” movement appears to be based on the erroneous assumption that no one has to pay their mortgage on April 1st because of the deferral program.
“We are going to make it as easy as we can to get you help if you need it. In return, we ask you to please continue to pay your rent or mortgage if you can and please leave the assistance to those in need.
If we all pitch in – governments, businesses and citizens all doing our part, we will show each other once again how Canada works, and why we are so lucky to be Canadian.”
Evan Siddall, President and CEO, Canada Mortgage & Housing Corp. https://www.thestar.com/opinion/contributors/2020/03/24/help-for-canadian-renters-and-homeowners-in-the-time-of-coronavirus.html
Chris
at 9:20 am
Nope, incorrect again, appraiser.
“Residential landlords are facing mounting pressure to ease or defer rental charges as the COVID-19 pandemic results in widespread layoffs and loss of income, leading some tenants to consider withholding payments as part of a “rent strike” due to start next month.”
https://www.theglobeandmail.com/business/article-residential-landlords-face-mounting-calls-for-rent-relief-as-covid-1/
Canada just had almost a million people lose their jobs. Do you honestly believe people all of a sudden are not paying their rents because they’re scammers? Don’t be so naive.
Chris
at 8:49 am
“Mayor John Tory says that it is “not good enough” for landlords to just consider rent deferrals on a case-by case basis without first communicating in a direct fashion to their tenants, many of who he says are “worried and scared about the consequences” they will face when rent comes due next week.
He said that in the interim, though, landlords should be showing as much flexibility to tenants dealing with job loss as possible.
“The fact is we are not spending enough time thinking about the average people who have gone through the horror of suddenly losing their job when they probably thought it was secure,” he said. “Landlords buck up and get on with this and tell people that you have some empathy for them and some consideration for them. Do it.”“
https://toronto.ctvnews.ca/mobile/toronto-landlords-must-be-flexible-right-now-tory-says-1.4867313
Sounds like even the mayor knows many tenants are withholding rent not because they’re scammers, but because they can’t afford it due to loss of income.
Appraiser
at 9:26 am
Those that can pay their rent and “choose” not to may think they are pulling one over on society without fear of consequences. That may be true in the sense that they will not lose their residence in the short term.
In the long term, such scofflaw tactics may come back to bite the scammers back real hard when they take a look at their credit scores, or require a letter of reference from their landlord when looking for a new place down the road.
Chris
at 9:40 am
You’ve missed the point entirely, yet again. I suspect you’re doing so by choice.
People who have lost their jobs and cannot pay their rent are not scammers who are pulling one over on society. While these people invariably exist, given the scale of layoffs, they’re almost certainly the minority.
Derek
at 9:48 am
Sometimes I think you two could argue about length of a ruler!
Chris
at 9:52 am
If he thinks they’re 12 inches, rather than 30 cm, I’m gonna drop the mitts.
J G
at 10:17 am
Think about it, most renters are lower income people, they don’t think about long term. If landlords starts the evictions process (2-3 months), there’s no guaranteed he will be able get higher rent in the current recession.
So basically the landlord is stuck between a rock and a hard place. Your tenant tells you “I don’t have any money, but I’ll try to pay the entire amount next month”, do you believe him? Or are you gonna start the eviction process? Tough choices… meantime all the expense still need to be paid. So much hassle owning investment RE
Chris
at 12:36 pm
“If landlords starts the evictions process (2-3 months)”
Going to be a much longer process than that. No evictions happening right now. Even before this, LTB was slow at processing evictions. No telling how long it takes once evictions are re-started. Meanwhile, if you’ve filed an eviction notice against the tenant, chances are they aren’t going to re-start paying their rent.
Ed
at 12:44 pm
12 inches is 30.48 cm
Chris
at 12:48 pm
You lookin’ for a donnybrook, Ed?
Kyle
at 9:15 am
While there is a moratorium on evictions, that’s not the same as a moratorium on rent. The rent owed continues to accumulate and at some point when the eviction moratorium is lifted renters will either have to come up with what’s owed (which will probably be a much more difficult task if it ends up being several months worth), or face the eviction process.
Chris
at 9:43 am
You’re correct, but realistically this could mean a tenant lives rent-free for many months. If/when the moratorium on evictions is lifted, I can only imagine the scale of the backlog at the LTB. It wasn’t exactly efficient even before this.
Kyle
at 7:16 pm
Sure they can live rent free for many months, and then be homeless thereafter, since they’ll have ruined there credit and references. Not a great trade off in my books, and i also don’t think the backlog will be allowed to get too long once things get back to normal.
https://www.thespec.com/news-story/9162117-ford-government-considering-ways-for-landlords-to-speed-up-evictions/
Chris
at 7:24 pm
That article is over a year old. Somehow I think Ford’s priorities may have shifted in the interim. Even when this is all over, there will likely be bigger fish to fry, such as getting the economy back to normal working order.
I’m not suggesting people skip rent just ‘cuz. But to dismiss people being unable to pay rent as a bunch of scammers pulling one over on society is naive.
“In addition to its serious health consequences, COVID-19 is causing Canadians to worry about their financial health, according to a survey commissioned by the Angus Reid Institute.
More than a third (34 per cent) of respondents said they were worried about missing a rent or mortgage payment this month because of the virus, which has caused widespread layoffs and a drastic reduction in the amount of paid work available for those lucky enough to have kept their jobs.”
https://www.cbc.ca/news/business/angus-reid-covid-19-1.5509242
If you’re a landlord, you cannot evict your tenants for foreseeable future, whether they’re able to pay their rent or not; so your only viable option right now is to work with them and come to some agreement.
Jimbo
at 12:25 am
Garnishment of wages may become a popular method of repayment……
Jimbo
at 11:38 am
http://parkdaleorganize.ca/2020/03/20/keep-your-rent/
Disgusting
Appraiser
at 10:11 am
“New listings for the first couple of days this week are actually on the decline, down around 26% over last week. We’ll see if that extends to the rest of the week.” ~ John Pasalis
https://twitter.com/JohnPasalis?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor
Chris
at 10:15 am
“Checking in on weekly 416 MLS sales, after the first full week of full-on serious mode. Remember this year started off strong in sales. GTA was +15% in Jan and +46% in Feb.
Below you see that carried into March, but there was a sharp deceleration last week (still > 2019 for now).”
– Scott Ingram
https://twitter.com/areacode416/status/1242508127825788928
Chris
at 10:17 am
“Weekly thread: Live look-in at 416 active listings
Most interesting change is that % on a price change has taken a sharp turn, from recent lows. Neither at alarming numbers, but sharp turn may indicate a couple of things:
1) buyers not buying
2) sellers in more of a hurry”
– Scott Ingram
https://twitter.com/areacode416/status/1242542482224754693
Chris
at 10:18 am
One more for good measure:
“Rents trending down is not what pre-con condo investors are expecting and it may rattle their confidence and expectations”
– John Pasalis
https://twitter.com/JohnPasalis/status/1242783221730992129
Appraiser
at 10:44 am
Latest weekly sold over asking data from Scott Ingram: https://twitter.com/areacode416?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor
Freeholds = 59%
Condos = 61%
Chris
at 10:53 am
You missed some parts. Let me help you out:
“Some more stats I’m tracking weekly to see if there’s a market turning point. Shared some weekly sales and active listings stats. Here is sold-over-asking (SOA). 416 freeholds dropped last week. But you can see things can be bit jagged. Can’t call trend from down
one week
That said, the drop was 7 percentage points. Note the 59% still above just 2 weeks ago. Here’s 20% above asking. This definitely seems to be cooling a bit. Still highest for any recent year other than 2017.
Switching to 416 condos. Not much drop here. To be clear, sales declined last week, I’m just tracking percent here. I use this as just one measure to track how hot the market is. Nobody was “holding offers” in Phoenix in 2009 – and you can see how 2017 played out through this.
Yet again 20% over asking seems to have taken a turn down. It’s still happening at greater rates than years other than 2017, but only half the rate as couple of weeks ago. In 2017 you can see this stat turned down before 1% SOA, so I’m thinking is showing signs of cooling.”
– Scott Ingram
David Fleming
at 10:53 am
@ Appraiser, Chris, Kyle, Derek, et al
I saw in Monday’s comments section that Derek had asked a question and Chris suggested I provide some answers.
In lieu of me trying to find appropriate topics to write about, as well as working on my real estate biography in case I need a 5-part series in April (true story…), I’m happy to do a Q&A post for you guys. Just let me know!
Chris
at 10:55 am
I think Derek’s question was a great one. What is your advice to your clients right now? Buyers and sellers.
Derek
at 1:11 pm
Hi David:
Some good ol’ real time, real life anecdotes would be nice (plus that earlier question).
How about pricing / listing strategy. If you’re about to list, are you telling your client to temper expectations going forward, versus the original expectation when you would have started the process of getting the property ready some weeks ago?
Are there some with the “strike now” attitude? That is, when others might be pausing, they have the stones to take advantage? (This assumes that there is any “pausing” going on in the first place). This takes me to the simple question of, what are you seeing going on? What is the sentiment out there with buyers, sellers, your industry compatriots?
And how about you, Appraiser? Busy, Busier, Busiest, or Bust these days?
Kyle
at 1:54 pm
Hi David,
Looking forward to the Biography! Would love to hear about the crazy stuff you experience regularly.
I’m with Derek, I’m interested to know what the current pulse is. Some people expect supply to explode, due to job losses, Airbnb drop off and Investors not being able to evict or having to defer rent collection. To what extent are you seeing that filter through your business? And conversely, are you seeing any of the opposite happening (i.e. ordinarily there are large number of Spring sellers planning to come to market, are you seeing people holding off until this is over)?
Also what are you seeing with respect to Airbnb hosts? Seems there are certain infamous buildings that are being affected, but is this prevalent across the market as a whole?
Appraiser
at 2:37 pm
Hey Derek,
Slower than usual, partly because the industry is in flux right now as we grapple with lenders and Appraisal Management Companies (AMC’s) over the complexities of completing acceptable full appraisal reports without entering the house / condo.
We are hopeful to have these issues resolved with all of our partners, including our E&O insurance provider by the end of this week.
Our business is closely related to but not solely dependent on the residential resale market, so it might not be a fair comparison.
In fact, the bulk of the work we do is mortgage renewals and HELOC’s. That has been the case for well mover a decade now. We also appraise brand new homes / condos before closing.
Anecdotally, some clients have recently been arranging HELOC’s on their properties strictly as a precautionary measure given these uncertain times. That part of the business may begin to pick up more so in the coming weeks.
We live in interesting times.
Derek
at 4:46 pm
Interesting to learn more about what you do. I’m always fascinated by the massive numbers of people who earn there livings in insurance (my field, broadly speaking) and of course, real estate.
condodweller
at 2:40 pm
I’m on record for being here for in the trenches stories. I’m also interested how people react to this situation. It might be early days though until the dust settles with the mortgage deferral issue. I missed a point the other day that if AirBnB owners sell in droves buyers who want to live in the condo could be all over it. I also would not be surprised to see opportunistic buyers take advantage of the situation with less competition from other buyers.
Appraiser
at 6:06 pm
OK David here goes. When is the market going to crash?
Asking for a friend ????
Appraiser
at 7:25 am
Alright David, here’s a slightly more serious question / postulation.
This is the second time in recent memory (the GFC of 2008 being the last) that socialism has been forced to bail out capitalism.
If capitalism is so great, why is it such a colossal failure ?
condodweller
at 9:30 am
“If capitalism is so great, why is it such a colossal failure ?”
You know Appraiser this is the most intelligent statement/question you have made as long as I have been reading this blog.
That is the billion dollar question. I have read an interview with a Nobel price winner in economics where he postulated that it’s because the top 1% control everything and their actions always benefit themselves. At the end of the days it boils down to pure greed.
Capitalism is basically a wealth transfer mechanism from the “poor” (including the working poor) to the wealthy.
Chris
at 10:42 am
Agreed with Condo, this is a great question. Not sure David is the one to answer it, but rather something we as a society need to consider.
It’s pretty galling to see big corporations like airlines pay exorbitant executive compensation and bonus packages, conduct big share buybacks, nickel and dime passengers, etc. Then, two weeks after a downturn, come crawling to government for a bailout.
Yet, somehow we expect the average minimum-wage earner to have a 3-6 month emergency fund, and we scold them for not anticipating rainy days when they are ill-prepared for them. Pull yourself up by the bootstraps, and all that.
Somehow many of us have just come to accept that it is to be socialism for big corporations, rugged capitalism for everyone else.
No wonder more people are turning to populists politicians.
Jon
at 10:55 am
“Mortgage Forgiveness” LOL thanks for the laugh, needed that today. Yes, the same banks that nickel and dime you for service and ATM fees are going to consider “mortgage forgiveness”…hahaha!
Libertarian
at 11:02 am
David, I totally agree about staying home with a kid. This is crazy! It’s impossible to get any work done and the kid needs so much attention that it’s more tiring than being at the office. I can only get some work done when he’s sleeping.
Not a vacation at all! Not catching up on Netflix at all!
Jeremy
at 11:09 am
Mortgage deferrals = HELOC = Second Mortgage.
Appraiser
at 11:55 am
“Responsible landlords don’t need anyone’s sympathy. But calling all landlords dicks and telling every tenant to go on a rent strike even if they are working is not responsible. Everyone will eventually have to pay their bills. There is no free ride for anyone!”
~John Pasalis
https://twitter.com/JohnPasalis/status/1242837091597369344
Kyle
at 5:07 pm
Agreed with John here, this is very likely to back fire on Renters and is highly irresponsible. By supporting this movement and not paying rent, you’ve given your Landlord grounds for eviction and are risking your own credit rating and future reference. And when you eventually get evicted, Geordie Dent and all his BS strength in numbers will be no where to be found to support you.
Also longer term these movements discourage rental supply which is why we’re in a housing crisis to begin with. Obviously if you can’t actually afford to pay rent, try to work it out with your Landlord, but if you can afford it but just want to stick it to someone, you’re likely going to end up being the one feeling the sharp end of the stick.
Appraiser
at 6:37 pm
I find it hard to fathom that Gail Vaz Oxlade is supposedly a respected financial advisor.
Advocating for people to skip out on their obligations while impairing their credit, risking eviction and / or a civil lawsuit for damages is completely thoughtless and irresponsible.
Instead of apologizing or clarifying her position on this matter, she too is doubling down with a slew of non sequiturs and false equivalencies on her twitter feed, where she is taking some heat over her comments.
For example: In answer to a small time landlord who needs the rent to pay his bills, she replied the following: “And so, the people who rent from you, do you expect them to have 6 mo of rent waiting to pay you, or do you expect to be paid from cashflow, as you operate?…also, did you think the risk on property ownership/rental was 0?
Wow!
Derek
at 9:05 pm
She has lost her mind!
Appraiser
at 12:26 pm
“Prices continue to soar in Toronto real estate market — despite COVID-19 crisis”
https://www.thestar.com/business/2020/03/23/prices-continue-to-soar-in-toronto-real-estate-market-despite-covid-19-crisis.html
Chris
at 12:31 pm
Whoops, you missed John’s comment on this article!
“Toronto’s housing market has been very competitive the past few weeks, but I’m starting to see the momentum cool down this week” – John Pasalis
https://twitter.com/JohnPasalis/status/1242650566758731776
Natrx
at 10:56 am
Article like that sound like “hey, we only have 10 cases of COVID-19. We’re not China.. go out and enjoy the parade!”
condodweller
at 12:44 pm
At the risk of staying on topic here are some thoughts.
“Somewhere out there, right now, is a person who pays $2,400 per month on their mortgage, who believes that, despite being gainfully-employed, and having $38,000 in savings, that he or she will simply stop paying their monthly mortgage.”
The question here becomes what is the expectation of people with savings who have some level of income loss and can’t/don’t want to pay rent? Whether you pay rent at the end of the month of after six months are people expected to liquidate everything to cover expenses including a TFSA/RRSP/car etc.? What happens to an investor landlord who doesn’t qualify for a mortgage deferral and his/her tenant does not pay the rent.
I fear that tenants will take advantage of the situation and not pay rent for 6 months at which point how likely will it be that facing $10,000+ balance they just move out and stick it to the landlord?
I’m generally positive but I’m also realistic. This is another case where the landlord helps out the tenant and he gets screwed in return. Ideally any solution should take into consideration everyone involved. With mandating an eviction moratorium how about putting some checks and balances in place to protect landlords?
What I don’t get is why people have to qualify for a mortgage deferral? I mean the banks will charge extra interest and will make more money. They are not showing any sort of act of kindness to their customers. If anyone is in a good position to help out it’s the banks.
Here’s an idea. How about the government mandates a stop payment on all mortgages and those who can and want to continue paying their payments can contact the bank to take their money. The customer pays interest if they defer and it shouldn’t matter whether they actually can or can’t make the payment.
Ed
at 1:02 pm
Thank goodness that all those renters have been taking the money they have been saving from NOT buying a house and putting it in balanced and diversified portfolio……
Ooops, wrong blog
Kyle
at 1:56 pm
Before the accusations fly, Ed and i are not the same person using different posting handles.
J G
at 4:08 pm
Hey, I bought in the last few days when things were on sale, AMZN, MSFT, even beat up travel stocks. Did you?
Oh Right, RE is always the investment, sorry.
bal
at 5:37 pm
I did the same thing…:)
Bal
at 8:10 am
J G – I think you asked me if I am looking home for investment or primary… I am not a investor and did not ever invest in the real estate….I am 47 yrs old and mother of two grown up boys….one of my son just got the job and he wants to buy townhouse. He is asking for some guidance from me ( don’t know why…lolol…knowing mom has zero knowledge)…..and I guess I am searching some guidance online….lollol
J G
at 12:59 pm
Assuming your son is in his early 20s. He should contribute as much as possible to RRSP, when he has at least 20%, then start looking. Home Buyers Plan.
Bal
at 2:11 pm
Yes he is 25 and got a job with Health Canada….yea I will tell him to invest in RRSP
Bal
at 3:45 pm
But plan is he wil buy a townhouse and rent it out until he is able to afford…..he is expecting mom will also help financially..lol
Marina
at 3:42 pm
Having worked in foreclosures during the last housing crisis, I can attest that banks do NOT want to be real estate owners. Like, at all. Real estate holdings are a massive liability and a cash drain (taxes, insurance, etc don’t stop because the bank owns the place). Two things that are total opposites to how banks like to run their business.
Not to mention that owning a foreclosed property is a massive pain in the ass. People do NOT leave those properties in good condition. You can do $50K worth of damage to a house for about $25 worth of materials, and many will also trash the place on the way out the door (ripping out cabinets, pulling wiring out of the walls to sell the copper, etc). It is not pretty.
But bottom line is, nobody should be waiting for deferrals. If you lose your job and can’t pay your mortgage, call your bank. They will work with you, whether it’s a temporary deferral, waiving some interest in the short term, lowering payments, extending amortization, whatever. Call and ask, don’t wait for the government to come up with some magic bullet.
Appraiser
at 5:34 pm
Well put.
In the early 90’s I listed a dozen or so power of sales for a Trust company that shall remain nameless, over the period of about 2 years. Some of the properties were in pretty rough shape by the time the lender changed the locks and took possession.
One townhouse property we sold in Brampton had large puncture holes in every sheet of drywall including the ceiling. A can of blue paint paint had been poured down the carpeted staircase, some interior doors had holes kicked into them and the whole interior was filled with putrid garbage.
To top it off the previous owner left 2 cats inside the house after he was evicted. I had to call the SPCA to have them rescued.
And you are absolutely correct that lenders are not keen on taking possession of real estate. Sometimes the properties were on the market for months (it was the 90’s after all) and the lenders expenses just kept piling up. Not pretty at all.
J G
at 4:05 pm
https://www.cnbc.com/2020/03/25/airbnb-hosts-turn-to-long-term-rentals-competitors-due-to-coronavirus.html
Rent will keep going up right?
Chris
at 4:17 pm
“Real estate companies helped push the Canadian stock market to a record high before the coronavirus crisis. Now the sector is proving to be a millstone.
Even large national tenants such as Cineplex Inc. and Indigo Books & Music Inc. are looking for a break on rent, Sonshine said. “They’re big strong companies but we know they’re asking for some help and we are going to give some of them help,” he said in a telephone interview, adding that some smaller tenants won’t survive unless they are given rent relief.
Property owners across the U.S. and Europe are preparing for pain as economic activity grinds to a crawl. American retailers such as Mattress Firm and Subway have warned landlords they plan to withhold or reduce rental payments after closing stores because of the virus. Real estate investor Tom Barrack warned this week the commercial mortgage market is near collapse in the U.S. and said it could create a “domino effect” of calamitous economic consequences without government action.”
https://www.bnnbloomberg.ca/property-shares-a-haven-no-more-in-canada-with-rent-woes-brewing-1.1412226
Looks like Subway is just a no-good scammer too! Trying to pull one over on society!
Appraiser
at 5:03 pm
Yup!
They’ve been scamming consumers for years with soy chicken, why not landlords ?
Bad example there tiger.
“Subway must pay CBC $500,000 for failed defamation lawsuit over chicken”
https://nationalpost.com/news/canada/subway-must-pay-cbc-500000-for-failed-defamation-lawsuit-over-chicken-2
Chris
at 5:12 pm
Your reading comprehension could use some work. That’s a ruling on a defamation suit, not on the protein content of chicken and/or if Subway has been scamming consumers.
“It bolstered its response by releasing the results of its own study, commissioned in the wake of the CBC report. Subway hired two analytical laboratories to independently test pieces of the sandwich chicken from Canada, a Subway representative told The Washington Post in a statement. Maxxam Analytics in Canada and Florida’s Elisa Technologies evaluated the soy protein in the chicken samples. The plant protein was less than 10 parts per million, or below 1 percent of the sample, Subway said in Wednesday’s statement.
“These findings are consistent with the low levels of soy protein that we add with the spices and marinade to help keep the products moist and flavorful,” Subway said. It characterized the CBC report as misleading and demanded a retraction.”
https://www.washingtonpost.com/news/morning-mix/wp/2017/03/02/subway-fires-back-with-its-own-study-to-prove-its-chicken-is-chicken/
Good try though, solid attempt at deflection with a funny story!
Appraiser
at 5:39 pm
“DNA Tests Find Subway Chicken Only 50 Percent Meat, Canadian News Program Reports”
https://www.npr.org/sections/thetwo-way/2017/03/01/517920680/dna-tests-find-subway-chicken-only-50-percent-meat-canadian-media-reports
Chris
at 5:46 pm
You’re going in circles now, buddy.
NPR is citing the CBC Marketplace episode, which was argued by Subway who presented the independent lab tests. The court case you referenced was on the defamation suit, not who’s chicken test was right.
Once again, your reading comprehension is lackluster. And now we’re wildly off topic!
Appraiser
at 5:48 pm
Looks like someone’s planning on not paying their rent next week.
Chris
at 5:50 pm
Yep: Subway! Good reading, pal, you’re getting it!
Appraiser
at 7:00 pm
PS SLAPP lawsuits are a scam by definition:
Initiating a strategic lawsuit against public participation (SLAPP) is a lawsuit that is intended to censor, intimidate, and silence critics by burdening them with the cost of a legal defense until they abandon their criticism or opposition. Such lawsuits have been made illegal in many jurisdictions on the grounds that they impede freedom of speech.
Looks like Subway is the type of Corporation you admire.
Chris
at 7:14 pm
Wow, quite the leap in logic there! I’m pointing out your mistakes, therefore I must love Subway.
You said they’ve been scamming people with soy chicken, when the lab results are mixed, and not ruled upon in the defamation lawsuit. In fact, the same judge that ordered Subway to pay CBC’s legal fees also ordered Trent University, which performed the test for Marketplace, to pay Subway $220,000 in a negligence suit.
So are we going to keep debating Subway’s chicken? Because if so, I might have to grab a snack!
Appraiser
at 7:55 pm
Run along now tiger. Maybe grab a chicken sub on the way.
Chris
at 8:20 pm
No thanks pal, I’ll stick around to keep on proving you wrong!
Chris
at 4:21 pm
“Mortgage rates on the rise again as coronavirus and oil shock weigh on lenders’ minds
Canadian mortgage rates are increasing again, as economic and profitability concerns associated with the coronavirus crisis and lower oil prices outweigh aggressive monetary stimulus from the Bank of Canada.
Lenders had dropped rates to historic lows this month as the central bank twice cut its key interest rate, ultimately lowering it to 0.75 per cent, one of the lowest levels on record. But starting last week, mortgage lenders across the country began hiking again, according to James Laird, co-founder of mortgage comparison website RateHub.ca and president of brokerage CanWise Financial.
“With Canadians losing their jobs, lenders are building a bit higher of a risk premium into their mortgage rate,” Laird said. “While this stuff is so fresh, and so uncertain, I think you can expect to see the upward pressure on mortgage rates until mortgage lenders feel like they have an understanding of what the new normal is going to be.”
McLister said in an email that it was a “frankenstorm of factors” forcing banks to raise rates, such as concerns around the toll that the virus and the oil shock are expected to take on the economy, as well as the profits of lenders.”
https://business.financialpost.com/real-estate/mortgages/mortgage-rates-on-the-rise-again-as-coronavirus-and-oil-shock-weigh-on-lenders-minds
Natrx
at 10:57 am
More immediately, Fixed rates are also going up due to increased risk of those getting a mortgage than immediately asking for a deferral (from my bay street banker friend).
Chris
at 4:23 pm
Even Ben Myers is turning increasingly pessimistic:
“So nearly a quarter of you think it will be a huge decline, but just over 40% think the decline won’t be that severe. I’ll say 10-15% decrease.” (April price change from February)
https://twitter.com/benmyers29/status/1242496219424919553
As a side note:
“I always scoffed at those reports the bears always shared about people being a month away from financial ruin without income. I was like, come on, those are exaggerations or a non-representative sample. After seeing how many people are freaking out after 1 missed paycheque…. I’ll admit you were right and I was wrong. But what is it, poor job market or poor financial management? Too much school or housing debt, not working hard enough? Disabilities, dependents, divorce, inflation, injury?”
– Ben Myers
Condodweller
at 7:53 pm
I forget the exact number but I do recall seeing a poll which claimed that more than 50% of Canadians can’t meet their financial obligations after missing one paycheque.
I recently saw US governor who said 40% of Americans can’t come up with $400 for an emergency while still employed when they discussed paying for the covid19 test
Chris
at 8:33 pm
These polls have come out every year for awhile now. Many of the more bullish commentators here dismissed them as biased rubbish because they were commissioned by insolvency trustees, etc., even when it was independent organizations conducting the poling.
Nice to see Ben Myers admit that maybe there was some validity to them after all.
condodweller
at 9:42 am
They can dismiss it all they want. I have said many times I’m not here to convince anyone of anything I’m simply sharing my opinion.
Whatever the number is it should be 0, and I think even the bulls might agree that it is not.
Natrx
at 11:00 am
Especially in the city, there are alot of renters who work retail/hospitality type jobs and are hit immediately.
Chris
at 9:00 pm
Condodweller, John Pasalis had this comment related to what we were discussing the other day:
“Any condo investor who is even considering selling their unit now will learn very quickly what an illiquid asset means. Your tenant isn’t going to want showings and no buyer is going to want to take over your tenant.”
https://twitter.com/JohnPasalis/status/1242933990404882433
Condodweller
at 9:55 pm
I wonder, what if a sale of a unit is not considered an eviction? Technically, you evict someone when you have some sort of grievance i.e. nonpayment of rent or any breach of lease. Notice to move out due to a sale can be considered a termination of contract. Just brainstorming here.
Chris
at 10:12 pm
I don’t know, I’m not an expert in the field but I believe it’s considered an eviction for personal use. Unless the tenant agrees to vacate, but if they refuse I think it becomes an eviction trial. Which are not happening right now.
Natrx
at 11:02 am
Sale is not typically grounds for eviction. Now you can say you need it for personal persons, and rely on the ‘good’ will of the person. But if they want to be a jerk about it, they’re going to make you go through all the hoops, non-payment, etc. Good luck trying to show it then.
Chris
at 11:28 am
I think both Condodweller and I were referring to sale for personal use, which would require an N12 eviction. I would imagine these are on-hold right now as well, given the moratorium on evictions?
If you’re buying a property without the intention to move in, you’re correct, there isn’t grounds for eviction.
Chris
at 9:16 pm
Great interview by John Pasalis on BNN. Key Points:
– Still a seller’s market, but cooling down, market has momentum but starting to see homes sitting for longer
– Demand is cooling, but fewer listings as well, some buyers are seeing this as an opportunity to make conditional offers
– Tough to say if prices will go down, depends on if there are many distressed sellers, government is doing what they can do prevent this, will take awhile to see effects and hard to know what impact will end up being
https://www.bnnbloomberg.ca/video/~1928369
Bal
at 8:06 am
Good Morning – Agreed…I still see as a Seller’s market…houses are still selling and selling over asking……many houses are suspended…..I think people are thinking this is a temporary phase and it is gonna pass out. They will relist once this is over. Furthermore, many companies are also hiring staff…I read this morning approx. 425,000 workforce will be hiring ( Walmart, amazon, 7 eleven, Dollarama etc. .) so job front it might wont be that bad. Govt trying best to save the economy.
I work for supply chain and we are seeing shortage of staff…..I really don’t see much impact on the house prices….but again I guess I will wait and watch
Chris
at 8:22 am
Bal, I think you’re citing American hiring numbers again.
https://ottawa.ctvnews.ca/canadian-companies-hiring-during-covid-19-pandemic-1.4866002
Walmart Canada is hiring 10,000. Other companies here are hiring too, but I don’t think the figure adds up to 425,000. In the USA, that number seems much more plausible.
Not to mention, some of those laid off, such as from Air Canada or Bombardier, will likely take a significant pay cut to work at Dollarama or Walmart.
Bal
at 8:56 am
I think I saw on the MarketWatch..yes it is the American site…..did you see unemployment figure this morning…also American unemployment figure.holy
Chris
at 9:06 am
3.3 million filing. Not good. Although Canada with almost 1 million new EI applicants, despite having roughly 1/10th the population of the USA isn’t good either.
condodweller
at 9:50 am
I think ultimately, as David says the laws of supply and demand will prevail. We might see a temporary dip in prices, how much nobody knows, but things should return to normal once this is over, and it will be over. Unless new viruses like this start popping up every couple of years where we have to do this.
Chris
at 10:36 am
I’m not sure. Maybe we quickly return to normal. Maybe “normal” changes after this pandemic.
I could feasibly see more people working from home even once this is done.
It wouldn’t surprise me if we saw fewer people willing to highly leverage themselves to buy multiple rental or AirBnB properties – they’re getting a pretty stark reminder right now of the risk these investments entail.
The average family will still need a roof over their head, that isn’t going to change. Toronto will still be a good city to live in. But I do think the “normal” on the other side of this is going to be different than our day-to-day pre-Covid. Who knows though, we’re all just guessing at this point.
Condodweller
at 10:49 am
By normal I meant the status quo before this started, i.e. most people go back to work, stores open, markets recover, re markets etc.
People don’t seem to listen to reason and warnings of using excessive credit until TSHTF and hopefully some will adjust their attitude/behaviour.
I don’t hold out much hope for the work from home movement. Generally employers don’t trust their employees to actually do the work without supervision.
Appraiser
at 11:51 am
“If you’re using the pandemic to show that real estate is a bad investment, I encourage you to show us what investments you have that are doing well right now.” ~Ben Myers
https://twitter.com/benmyers29?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor
Chris
at 12:04 pm
A balanced portfolio has seen a decent haircut. Take VBAL.TO as a proxy, it’s -10.20% YTD. Not very good, though could certainly be worse. But I agree with the crux of Ben’s point, almost all asset classes are likely to take it on the chin, including real estate.
Let’s also not forget about the leverage component of most real estate investments, which as we all know, serve to amplify both the risk and the return.
Derek
at 12:53 pm
My balanced diversified portfolio appears to be down approximately 15% give or take, from the last time I logged in and looked at the total. Just now was the first time I looked at the total in many weeks. I don’t think today’s total includes today’s green charts so hopefully it will be improved if I look again tomorrow. That said, I fully expect there are many more DOWN days and weeks and months ahead for the poor little fella.
J G
at 2:40 pm
That’s the beauty of stocks, when it crashes 35% in 1 month due to something that won’t last a long time, you buy.
So when it recovers to the same level (12 months, 18 months, whenever), you would have made more because of the opportunity. No realtors, no mortgages, just a laptop with internet connection.
Btw, Dow gained 4000 points in the last 3 days.
Condodweller
at 1:46 pm
Mr. Ford just answered a question regarding inability to pay rent. He advised people who have to choose between putting food on the table or paying rent, they should not pay their rent.
Chris
at 2:15 pm
I would imagine most people in this scenario were already going to do so, but at least now they have Premier Ford’s backing to forego rent.
Appraiser
at 2:24 pm
While I normally find DOFO repulsive at the best of times, I could not agree more. Those who are in need deserve a break right now, including homeowners who can’t pay their mortgage.
As for those who can afford to pay their rent but are choosing not to in order to “stick it to the man” I have little sympathy.
“Greed is greed, whether it’s a lender who refuses to reschedule a borrower‘s payments, a landlord who won’t share mortgage relief with the needy, or a borrower/renter with enough cash who skips rent. We’re in this together: hoarding cash will make the economic pain worse.” ~Evan Siddall
https://twitter.com/ewsiddall?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor
Derek
at 3:14 pm
Someone other than our Lord God with weekly sales numbers:
https://torontostoreys.com/toronto-real-estate-snapshot-march-18-2020/
Derek
at 5:37 pm
CMHC not sitting on its hands per cbc.ca, tripling down:
The taxpayer-funded agency, which backstops the vast majority of Canada’s housing market by insuring the loans that finance them, announced earlier this month it was willing to take up to $50 billion worth of loans off of banks’ books.
On Thursday, the CMHC announced it would expand that mortgage-buying program to $150 billion.
Appraiser
at 7:44 pm
Wow! Liquidity on steroids.
J G
at 5:13 pm
Yep, sales down 20-30% across the board. Thanks Derek.
Appraiser
at 5:37 pm
Pretty obvious that the number of transactions would be down. As I’ve said from the start.
Let’s see about prices.
Derek
at 5:38 pm
It’s not always about you 😉
Bal
at 6:39 pm
prices will follow…….first step is always sale…
Mortgage Jake
at 12:58 pm
“Personally, to even consider a variable rate mortgage, I would need to see banks offer prime minus 0.75% to 1% to make this a consideration.”
This post or comment didn’t age well. Right now I’m advising EVERYONE to strongly consider variable at prime.
The fact is it gives you a lower rate now.
It allows an easy exit.
It allows easy option to convert.
I just don’t see how I would need a discount from prime to get all of that.
And penalties with banks (if you Go fixed long term) are abhorrent.