Zero down means zero house

Credit squeeze hits 40-year mortgages

Unless you’ve been sequestered in your condo’s windowless “flex room” for the last 48 hours doing nothing but basking in the glow of your own self-appreciation, you’re well aware that the feds popped a cap in the ass of the 40-year amortization and the zero-down loan.  With this decision carried out by the government to minimize the risk of a “U.S.-style housing bubble” happening in Canada, the threshold to borrow moves higher.  And as such, the pool of potential home buyers grows smaller.  Could this be the bullet that kills B.C.’s real estate bull for good?  

While the media and the experts are far from waving the white flag, it’s impossible to interpret their analysis as positive in tone.  In fact, the Sun’s sensational front-page story about the new mortgage rules is probably the most negatively toned story related to B.C. real estate since the leaky condo crisis of the 1990s.  What’s sad is that the current story isn’t actually very negative — it only appears so in comparison to the euphoric “Vancouver real estate is hotter than sex with Angelina Jolie” coverage of the past five years.

The disconnect between public opinion and media opinion on the B.C. real estate issue is growing.   When Cameron Muir took questions on Thursday’s Bill Good Show, many callers expressed serious concerns about mortgage lending and approval practices.  I was struck by the technical nature of the questions.  They seemed to catch Muir a little off-guard, forcing him to fall back to broad key messages about the “strength” of the Canadian banking system as a safeguard against bad lending.

Like everyone, I watch and wait with great anticipation.  We have the makings of a meltdown.  The heat is on.

15 Responses to “Zero down means zero house”

  1. Larry Yatkowsky Says:

    40 year is dead but what may be more important are requirements for more scrutiny in the practises of some lenders – Street Rumor phoned to say that paper work was getting sketchy. The globe’s take on it is fair but the gov’t site has it all if you are up for it. Let’s see high volume of listings, potential rate increase, price reductions starting to flow, lumber industry shot to hell, markets flipping, affordability out the window, cost of living higher, yep i’d say the RE Emperor is ready for new clothes. It’s that or a cold bath.

  2. greg Says:

    Except for HELOCed long time owners and recent purchasers, I can’t understand why there is such a preoccupation in the MSM with the negativity of anything that squeezes the buyer pool at the margins. If the valuations weren’t so out of whack, this would be a non-story.

    If buyers get squeezed out short term, so what? It just means the day of real estate reckoning is nigh – and when all is said and done, and prices have collapsed back towards some kind of supportive relationship with incomes, we’ll all be a lot happier and less stressed out about our bleepin’ houses.

    Bring it on.

  3. Rock Says:

    Hilarious article. “Sequestered in your flex room” very funny indeed, your articles are a joy to read. And the heat is on. I hope Bill Good and especially Sommerville and Muir take it in the rear over the next 12 months. Their day is due and I hope that they don’t disappear and that they’ll face the music.

  4. Bubble Lad Says:

    Looks like Muir is really hitting the hustings – he was on Breakfast Television this morning too…

    funny article – is the flex room the one they tell you is the “den” on the floor plan, then when you move in it’s a boom closet?

  5. ThePope Says:

    ..a boom closet

    That must be just like a regular broom closet, but half the size and built quickly during a market upswing. It can be pre-purchased for twice the normal price and is guaranteed for 10 years against the water ingress issues that will show up in the 11th year.

  6. mk-kids Says:

    lmao. you’re on fire pope.

  7. Zero down = zero house? — Greater Fool - The Troubled Future of Real Estate Says:

    […] Reprinted from condohype blog (Vancouver), here. […]

  8. Bubble Lad Says:

    I think that was an unconscious slip, but it works – could be applied to describe the entire condo -“boom closet”.

    I like the sound of “water ingress” as well – sounds much more friendly than “crappy leaky condo”.

  9. Bubble Lad Says:

    You’re on the Greater Fool blog! Way to go condohype!

  10. Paulb Says:

    LOL! That first paragraph is the funniest thing I have read in ages. You have a real talent!

    The end of the 40 year mortgage combined with the 5% down payment requirement and 45% gdsr etc. will just accelerate the market correction. Vancouver’s housing is collapsing under its own weight due in part to terrible affordability. Now we have this news, more leaky condo headlines, record high oil prices and a North American recession looming. Can you say perfect storm?

  11. GarF Says:

    “take it in the rear”!!

    Tsur Sommerville has get sitting on the fence for so long, that there is probably no more room in there any more!!

  12. GarF Says:

    oops! make that “has been sitting on the fence”

  13. MJ Says:

    Vancouver’s housing is collapsing under its own weight due in part to terrible affordability. Now we have this news, more leaky condo headlines, record high oil prices and a North American recession looming. Can you say perfect storm?

    That storm has been brewing for a few years now. Luckily, we have some great socio/economic meteorologists among us to give a heads-up warning of what to expect.

  14. MJ Says:

    You’re on the Greater Fool blog! Way to go condohype!

    Dang! Quoted, word for word. You’re a happenin’ bloke, there, condohype. What a guy!

  15. condo abbotsford Says:

    no more 40 yrs amortization is not going to affect the market as much (3 yr is still available) but no more zero down will make a little dent.. Private insurance (non cmhc) is trying t0 fight it or find a way around it..

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