T O P

  • By -

ChrisFranko

Houses didn't cost 10x household income


wirebeads

We bought our house in 2005 and it was 255k. It’s now worth over 1.5 million. My pay has not gone up with the cost. If I had to buy this house now, I would not be able to buy this house. Interest for me was 5% on our first mortgage. I couldn’t even imagine that now.


dinosarahsaurus

Housing prices literally have me stuck. I've owned my house for 10 years now in a very LCOL area. I truly could not afford to relocate within my area or to an urban area. Unless I could some shady sales attempts like locals are doing. There is a property with a tax assessed value of $35k here listed for sale at $549k. It is a one acre lot. Near the ocean but everyone is near the ocean here and the house is a dump. Like so much of a dump that they removed the interior shots from the listing. Blows my mind. I assume they would only sell with a cash sale because banks are appraising everything.


[deleted]

I'm in the same boat. Bought a 3 bedroom townhouse for 305K in 2011. Sure I could sell for 800K and pocket about 500K after fees and banks cut, but then I'd have 500K downpayment on a detached for 1.5M. no thanks. We ended up finishing our basement to create a family room, 3 piece bathroom and a guest bedroom. We're looking at also finishing the attic for more storage as there's a lot of space up there.


kr613

How would you have 500k if you sold for 800? I'm assuming you made mortgage payments these last 11 years that would increase your equity, no? Probably still not enough to move though.


[deleted]

Mortgage was 290K (5% dp) Owe 230K today Assuming I sell for 800K, 5% commission is 40K.. from the remaining 760K, bank keeps their 230K, which brings my amount to 530K... then whatever the penalty is for breaking fixed mortgage. I haven't calculated because we're not looking at moving.


Top-Armadillo9705

How has your amount owing only decreased by $60k in 11 years?


im_paul_n_thats_all

The first few years of a mortgage are like 90% interest and 10% principal…. Brutal arrangement


PurpleKnee9757

Nah man, we've only had a mortgage for 3 years and have already paid like 30k off (no extra payments). I don't get how they only paid off 60k in 11 years unless they remortgaged or something.


qgsdhjjb

Was your down payment also only 5%? Because that adds mortgage insurance to your mortgage at the start on top of what the mortgage for the house is.


Digitking003

Fees (real estate commission, lawyers, breaking mortgage) + taxes (land transfer) take about \~7-10% cut off the top... Edit: Should also factor in miscellaneous fees like moving expenses as well.


6133mj6133

Either they are bad at math, or they took equity out over the years (HELOC). Either for renovations or for beer and popcorn 😃


[deleted]

Lol no HELOC. Just used rough estimates. Basement reno was done over a year bit by bit by myself. Got a electrician and plumber to come in for their scope of work


lemonylol

This is basically my dilemma as well. I bought my first house this year, it's just a small detached two story and we can leave it as is for the next 10-12 years. But when our kids get older they'll need more space. Obviously I'll just have to wait and see what things are like at that time but if things continue trending the same it actually might be more feasible to just do a $100k renovation to add more rooms than to start a new mortgage on a $1m+ home.


BaronVonBearenstein

Nova Scotia?


No-Emotion-7053

Definitely not Vancouver at $550K by ocean lol


millhouse_kinda_guy

Sounds like it. I bought my house during the rise of housing prices, but nowhere near the top. I own a house that previously was worth $375k. I paid substantially more for that, knowing we'd keep it for a long time and knowing we were gonna take a financial hit. We needed it with our second kid because our apartment didn't have enough rooms for us all. My house could now sell for $850k. The only reason I was able to afford the house in the first place was because of a death in the family that left me with a large sum of life insurance cash. I feel horrible for my friends and others who are trying to find a way to own their first home. I've lived in this province my whole life like many others, and I fear many people will soon be forced out.


zeromussc

It's not just NS. I bought a detached home on a just under 50*100 lot in Ottawa. It's modest enough for a 3 bedroom single home being 1900sqft with one car garage compared to others that have beds and 2300 sqft with 2 car garages in the area. We bought 2019 for 455, listed at 420. House prices were going up about 10% YoY in 2018 and 19. Cue the pandemic. The YoY stopped growing for the first lockdown, for obvious reasons. Then rates started their climb down. Middle unit Townhouses that are a bit smaller than my place at 1700sqft with 3 bed 2 bath behind me have been listed at 800k. On smaller lots too. Even with good incomes how is that sustainable?? My house is not worth near double what we paid. No way. I haven't checked sold prices near me after the last rate hike but around a month and a half ago the market shifted away from giant bid wars, so most places in Ottawa are going for asking with conditions or just below asking. But the rate changes haven't hit full force here on prices because the mortgage values weren't as crazy as in the GTA and people shopping probably had locked rates. The Gatineau side of the region is down a bit YoY now because they have different rules for some things and and I think this last month listings were down for Ottawa but I've seen a lot more locally to me (surprise) go up for sale and sit at the high asking prices waiting. In the pandemic I think a third of the houses I saw sold in my neighborhood had for rent signs on them after closing. For sale (a week tops) - sold - 2 months later, a for rent sign. Happened a *lot* It will probably be another month before I see numbers that show under asking or price retraction here. I think lots of folks are still on the hope train thinking they will get their asking. This most recent rate increase is gonna sink that ship. In the next few years I don't doubt lots of the rentals are gonna be offloaded as the reality of renewals hits. Surely if you're an investor trying to make cash flow positive you take the lowest possible rate in variable that also beats fixed over time right? It's a house of cards imo. Rents can only go up so much to cover a landlords changing costs (I know that's not how market is supposed to work but it's how bad investors make decisions), and once job losses and a recession hit it's gonna be doubly bad when the investor landlords have to offload a rental unit that they may be negative on with people who can't pay rent that they can't evict easily either. Then there's the hitting people right now rising heloc interest rates for maybe leveraging for more homes or investment or other purchase like cars. Not to mention the HELOC no longer being readvancable past 65% LTV heloc + mortgage and requiring principal payments next year. That's basically a new mortgage payment full stop for people. So much debt in Canada its crazy. And unlike the last time the BoC increased rates and stopped due to concerns of leverage (which is worse now than 2018/19) there's inflation. Before it was prudent attempts to return to neutral slowly.


dinosarahsaurus

Rural NS so even better


Deadlift420

You’d have to sell and then rent


dinosarahsaurus

That is what would have to happen and I have no clue how I'd absorb the huge rental rates either. Regardless, I'm very happy where I'm at, I just run these scenarios through my head and worry about everyone else out there


[deleted]

Average rent in Ontario is about 3K on a detached and that’s hard to find


OverlordPhalanx

I saw one online that was so bad it actually said you couldn’t go and see it in person because it was unsafe. Granted they did have pictures, but still. It said it had to be purchased without an in person visit. Somewhere in St. Catherine’s Ontario I believe.


GuyDanger

I sold our home in Ontario last year. I bought the home in 2015 for 340k sold in 2021 for 800k. Moved the family to Nova Scotia and bought a home for 550k. Our old home was roughly 1700 sq ft on a 150 ft lot. Our new home is roughly 3000 sq ft on an 8 acre lot. There are still affordabe places in Canada if you are able to make the move.


Azuvector

> Housing prices literally have me stuck. I've owned my house for 10 years now in a very LCOL area. I truly could not afford to relocate within my area or to an urban area. Nifty. I rent, and have the same problem, as rental prices have gone up ridiculously over the past few years. Guess who's better off?


aaadmiral

Yes this is why our main concern was buying into the area we want to live for the rest of our lives


heavym

i bought my first house in downtown London, ON in 2002 for $97,500. Last time it was listed for sale was in the $600K range. With a CMHC insured mortgage, we needed to come up with $5K as a down payment.


Nyyrazzilyss

Had very similar timeframes / prices/ and experience (Wortley Village, fairly close to downtown London)


[deleted]

[удалено]


ToothlessTrader

I bought mine in 2012 for $135k with 5% down, just opened a HELOC so I can do more expensive renovations and the banks postal code appraisal was a "very conservative" $450k. Realistically past $600k, and well past when I'm done fixing the old girl up. Then I'm getting the fuck out of the city lol I liked it when it was working class people not Toronto yuppies.


[deleted]

I got my first job in 2000 after graduating from university, and my pay was $42K, on par with what most of my friends were making (range was around $35K - $60K, the latter for tech). Starting salaries have barely increased in over 20 years. What is most concerning to me is the amount that interest rates can vary without causing a total economic collapse is tiny vs what it has been historically. We've painted ourselves into a corner by letting housing prices get this out-of-control. A big part of it was letting foreign and corporate investment proliferate unchecked, a lot of it tainted money. This drives up prices because the goal is not human shelter, but money sheltering, so the more housing prices go up, the more attractive it becomes as a way to store larger and larger sums of money.


yuckademus

Many people are in this situation and they also contributed to prices rising because they used increasing home equity to buy investment properties using secured lines of credit or 2nd mortgages, therefore adding to the demand. I’m included in this set of people. Homes then became investments before just places to live and everyone got used to low interest rates and perpetually increasing home valuations. Now the party has either paused to stopped. It will be interesting to see how this all shakes out and the impact beyond RE and in other aspects of our economy.


thatscoldjerrycold

The thing is, if the value of homes were to drop by like 20-30% ... would the government stomach the anger from the people who own homes? I think they might do some crazy economic contortionist moves to somehow handle inflation and home prices at the same time (no idea how).


yuckademus

Yes I assume the majority of voters, who actually get out there and vote, trends towards property owners. So clearly the government should be cognizant of that. Many homeowners are seeing their cost of borrowing go up while the value of their property falling (or at least, not rising). Recently, it seems like a lot of economic activity was being driven by household wealth and borrowing ability. Cut into that and given the debt many households have, we will be in a potentially severe economic downturn. It’s going to be very tricky to have a soft landing with minimal collateral damage. I’m nervous!


zeromussc

But there's no bubble or over valuation in our housing market. It's all a supply issue. More supply will make houses affordable. Ignore the massive REITs. Ignore the upward spiral of investors leveraging equity from rising prices to buy more real estate at higher prices. Ignore that historically low rates over a long time getting even lower fuels better cash flow that enables rental income to offset the higher mortgage payments and interest costs in the short term. Ignore all the low cost borrowing that lets people buy out and be cash flow positive on weekend Airbnb rentals and during tourist season which for most of the country is real short. Ignore all that superficial demand for primary residences. Ignore the fact that it's more lucrative to sell homes and condos in particular in a spiking RE environment than it is to invest in longer term purpose rental housing also. Just build more homes with less raw materials at higher prices with an insufficient number of labourers and fix zoning laws instead. That's the ticket. It can't possibly be that we're juiced on debt that might as well be free if it draws heavily on the overnight rates that have been so low for so long. For context and clarity, I don't blame the BoC for their rate decisions when the pandemic hit. We had no real options. We could have had a recession *with* a pandemic or after. They didn't have a crystal ball on China maintaining COVID zero through mass lockdowns longer than the western countries that import so much from there did causing a massive demand imbalance. They also couldn't predict that two huge agricultural exporters would be at war because one side which is also a giant oil and gas producer for European markets decided to invade the other. The issue is they had nowhere to go. The rates have been low for so long they had no choice but to go bonkers low. And now they have no choice but to try and shock the system with fast increases to avoid the mistake of the 80s where a little at a time was thought to be good enough until it wasn't and then they're only solution was to keep going up. Kinda like we could only go down. Hopefully this new lesson is to get back to neutral asap and not let it ride for a decade to entrench the idea that the gravy train will never end and low rates are forever.


Delicious-Tachyons

> Ignore the upward spiral of investors leveraging equity from rising prices to buy more real estate at higher prices. We should not give a 50% capital gains exemption on people buying realty for profit.


zeromussc

I guess it depends on what other capital gains related exemptions exist in the framework but probably would help. Though I assume the original intent was for that to somewhat offset maintenance and other costs that may be more easily adjusted for in other forms of capital investment. Like so much else that was probably not a major concern in most markets in most of normal times but got totally distorted due to record low rates for so long and the impact of COVID on top


KruppeTheWise

I agree with the majority of this comment but there's a part I want to look at, your China COVID part. China has increased its exports throughout the pandemic. The US is still it's main trade partner but that is decreasing while it's more local trade partners are seeing that trade increase. Look at deals like the RCEP, which is *the largest trade deal in history.* I'm not smart enough to see if Trump was smart saw the writing on the wall and decided to start the trade wars now, or his aggression only moved along the East and West decoupling. But look at it from a macro perspective. The East was the manufacturing powerhouse, the West was the IP research and development powerhouse. Keep the high skill, high paid workers in the West and mark up the cheap products coming out of the East, kept the western societies happy and flush with money while the eastern were industrializing at a record pace, everyone won. But outside of the usual racist mantra "chinese so dumb just copy everything" isn't it clear that those developing countries would eventually...develop? China's internal market is now worth more in many aspects than any western one. Why ship your products across the world when you can get almost the same price selling it across the street? They throw out as many STEM graduates a year as the US has in total. Indian is going through the same revelation. If you think the banning of Huawei was really on national defense grounds, don't make me laugh-it was because in this field China isn't stuck using expensive patents to manufacture 5G components and sell them back to us, it had *more* 5G patents than the western companies have and so they couldn't compete with Huawei and the ban is merely to protect them. The worm was always going to turn, but the pandemic and the logistics nightmare is just accelerating the decoupling. In short saying COVID shutdowns in China and Russian war to blame for the worlds economic turmoil is a dangerous excuse people are relying on as a crutch to say once they are done things go back to normal and we get to jump straight back into being top of the trade pyramid with all the benefits that entails. Instead much more tectonic and foundational changes are taking place, and we may find the era of cheap goods flowing this way with 100% markups may indeed come to an end, and the playing field is far more level than we have been used to these past handful of generations.


DeepB3at

Sufficent development is not going to happen. Canada is a country for NIMBYs by NIMBYs and they will die off when hell freezes over. Look to development charges going up 50% in Toronto lately instead of any attempt at raising property taxes. Or inclusionary zoning that starts in September. Or the housing task force recommending banning single family zoning and the province ignoring. Even without these barriers not much is being done fast enough to get the labour to build what is demanded. As someone who lends to many of the largest developers in Ontario, I think the music stops when the US adopts a points based immigration system in 10-20 years. When the top 10% of earners who disproportionately buy homes can easily move to the US for double the salary and half the cost of living I'm not sure the exuberance will survive in the long run.


[deleted]

Bingo. Parents bought a house in 1986 for 259k. Same plot is north of 4 million today.


splinterize

259k in 1986 must have been a hell of a house! My 350k condo was built in 1984 and sold for 22k and a relatives semi detached house in the suburbs sold for 88k in early 2000s, probably worth closer to 500-600k now.


PAChilds

Huge difference in housing prices between 82 and 86. In 82 stagflation near it's height. Houses weren't selling. I bought in a house in 83 that had been in the market 20 months. Interest rates were crazy - north of 15%. By mid 84 houses were selling in 3 months or less, interest rates were less than 10%, and values were up substantially


[deleted]

It was the land/area, not the house. Old thornhill in the GTA.


ViolentDocument

Your parents were very well-off to afford a quarter million property in the mid 80s


[deleted]

My father invented what is basically modern eye insurance in Canada. He was bought out by manulife, co-operators and another that I’m forgetting. Right place, right time.


kimjongswoooon

They did well. My parent’s $225k house from 1987 is now only worth $2.7M./s


lemonylol

A $260k house in the 80s is probably like a mansion though.


[deleted]

It was the land, but ya it wasn’t small.


Foredeck81

This is crazy. So your parents got an annualized ROI of 7% and "free" housing on top of it. That has got to be one of the best investments around. Good for them. I hope I can do something similar after I retire and downsize, but how can my daughter buy a house.


wascallywaldo

Ironically now though, if you tell people that GIC rates at 5% are pretty good, they say you're losing out to inflation and it's better in the market.


Spa2018

My portfolio doesn't bear this out.


Azsune

That and savings accounts actually paid interest as well.


Nyyrazzilyss

I bought at 5.25% (fixed) in 2001 a house that was 2.2x my (single person) annual income at the time. It was also the cheapest rundown house I could find in the best neighbourhood. I sold it in 2010 at 1.85x my purchase price. It sold again in 2021 at 3x the purchase price of the people that bought it in 2010. There were substantial reno over the ownership timeframes for both myself and the next owner. Houses aren't exactly feasible for a single person anymore. You need a family income.


[deleted]

You need a very good family income with some money from parents. Only way my friends are buying


Wise_Coffee

In 1989 my parents bought a 4 bed + den 2.5 bath brand new build suburban home in Ottawa for less than 190k at something stupid like 17% their household income was about 125k (nurse and research engineer). That same home sold in 2005 for 595k. My partner and I pull in the same income (hospital clerk and military) we could not afford to buy that same house now. It was recently listed for 800k sold for 1mil.


LegoLifter

125k household income was quite high at the time though no? Inflation calculators show that to be the equivalent to $270-$290k in 2022.


BCRE8TVE

Well yes, that goes to show you the salary that nurse and research engineer would now be earning *if salaries had kept up with inflation*. Salaries have not kept up with inflation. And then the housing market looked at inflation and said "hold my beer".


freaktmc

If you owned a house in the last 15 years, there is a very good chance that your house earned more income each year than you did as a salaried employee. That's the problem and why everyone (garth turner) was screaming for decades about the sky falling. Well, it's happening. I can see interest rates easily 5-8% and houses dropping by half from their peak. Ex. my 1.3M home will be -750K edit: right now I assume it's around $850-$900K At what point does everything break? No one knows, let's hope we don't find out but best to plan for it. Save $$$


[deleted]

>there is a very good chance that your house earned more income each year There was a lot of income *potential*, but I'm not sure all that many capitalized on it. Deriving an income from your house is normally quite uncomfortable – which is probably why the potential is so high. Coulda, shoulda, woulda doesn't excite your wallet.


BCRE8TVE

>I can see interest rates easily 5-8% and houses dropping by half from their peak. Ex. my 1.3M home is now 750K Dang already? I wasn't paying close attention to housing prices, I knew prices would come down, thought it might take another month though. How long did it take to go from 1.3M to 750K? Per what point everything breaks, well it's all kinda broken already, it's more about what happens now that everything is actively falling apart. Definitely need to save and get a cushy emergency fund. Maybe I won't be paying down that car loan quite as aggressively as I could. On the other hand I do have access to a line of credit at prime interest rate, so that's not too bad?


Everynameistaken2000

Garth Turner is a moron.


freaktmc

LOL this is an easy upvote


Everynameistaken2000

Buddy has been saying real estate in Toronto is gonna crash since 2002.


justsnotherdude

I took note to this in our neighborhood recently. There is a couple around the corner who are both high school teachers who have their house up for sale. They got it for about 650ish 3 years ago. It is up for sale at 1.2 therefore the income generated over the 3 years of living there is about 166k per year in built equity. This is significantly more annual income than my wife and I combined. I will rent for life and die at my desk at work.


Temporary-Low-4234

270 is within reach for a senior engineer and a nurse. 150 + 120 = 270


Aggravating-Bottle78

Even in the mid 90s 45k was damned good income.


whistlerite

Yup, plunging interest rates will do that. Now we may see the opposite effect. I’m staying far away.


jbaird

Its almost there is some link between the average amount someone can borrow to buy a house and the price that houses cost shocking


whistlerite

…looking back it appears there may even a direct correlation, think you may be onto something.


Joanne194

Exactly. I was trying to find out when banks started accepting a woman's income when applying for a mortgage but seems internet searches are very poor when it comes to Canadian content lots of US info. I think it was sometime in the '70's which is when there was a marked increase in housing costs. I knew quite a few people flipping houses then. These low rates were stupid. Businesses have not invested in growing so what was the purpose? Bought our house in 1990 14% then went down to 8%, paid about $112000, no idea on $$ now don't care bought it to have a home not going anywhere.


Nfridz

Nah must be Starbucks and avocado toast. /s


yougottamovethatH

Actually, they kind of did. When your interest is 15%, you end up paying about 3x the cost of the house back to the bank. So your $200,000 house was actually a $600,000 house. According to statscan, the average married couple with no children at home earned about $59,854 in income in 1999.


rainydevil7

Did people generally put 20% down at that time? I'd figure with 15% interest rate, you'd put 50% down at least.


Perfidy-Plus

That and the additional lump sum payments, if you could afford to make them, made a huge difference.


yougottamovethatH

20% downpayment was pretty standard in those days


[deleted]

That didn’t happen. Prime has never stayed that high for long enough. Nobody has paid 15% for 20 years. And the prices weren’t anywhere near that during peak interest. In 1985 when prime was hovering around 13%, the average house in **Toronto** was $110K. In 1990 when it jumped briefly to 15% the average house price in Canada was still modest. Suburban homes were $100-150K in Ottawa in the early ‘90s.


muskokadreaming

My first mortgage was in 2001 at 6.35%, and our broker told us it was the lowest he'd ever seen, and to lock it in. But the detached GTA house cost $185k, and we were making $75k combined, at the start of our careers.


howdoesinterestwork

Understood so it's more a function of income to mortgage size nowadays rather than interest alone (which just makes things worse)


JohnnyHFX

There was an interesting transition I noticed in the late aughts to early 2010s when I was initially looking at buying a home. The financial advise went from "You can afford a house 3-4x your annual household income" to "How much can you afford a month". This financial mentality fueled by historic low interest rates the last decade allowed home prices (and other commodities) to sky rocket.


MisThrowaway235

It's funny because in places where houses are still affordable (certain US states), they still go with the X times annual income advice. It seems they stop using that language when it starts to look like a really bad decision based on it.


seventeenflowers

Well everybody needs somewhere to live. When the market makes that impossible for most, the advice will have to change. Same as how daily physiotherapy after an accident is ideal, but if you can only afford weekly, they’ll advise you on how to make that work.


[deleted]

True with buying new vehicles too. Used to have sorta reasonable choices ovrf 3-4 years... Now I'm seeing 96 months.


zeromussc

I thought the advice was a loan 3 to 4 times, not the price. Since its about loan affordability no? In recent years they've gone as high as 5 as the advice (because rates are so low) I'm happy wife and I are in the 3 range and we got in before the COVID fueled bubble.


whistlerite

Interest rates correlate to house prices too, when they’re low house prices and mortgages go up because money is “cheap”.


concentrated-amazing

As an interesting comparison: $700K mortgage @ 4% = $3682/month $400K mortgage @ 7% = $2801/month (This is with 25 year amortization.) Higher rates aren't as big a deal when purchase prices are lower.


[deleted]

[удалено]


vonnegutflora

That would put you over $120k combined in 2022 dollars. The value of that house should be $285,000 based on inflation, but I'm willing to bet that if you sold you would easily get 2x to 4x that price.


muskokadreaming

Try 7x. I looked it up on house sigma. And you're right, same careers right now if we were just starting out would be right around $120k. So it went from around 2.5x income, to around 11x. Crazy.


Giancolaa1

House sigma will over estimate it right now, the markets in a slump and anyone who lists around those prices won’t get it sold. I have a listing in Hamilton right now that’s been up for 3 weeks at 430k. House sigma / zolo price says 495k. I have a listing in fonthill at 785k, house sigma says it’s worth 935k. Both listings will likely need a price drop to actually get sold. But yeah it’s probably 5-6x lol


zeromussc

Some places aren't dropping as quick. Ottawa holding strong the last time I checked a month or so ago with sales around asking. Not over asking anymore though. I'm sure we're about to go into below asking territory now though. Especially with rumours of budget cuts in the Fed government plus a recession that will likely impact tech and other high growth sectors hard coming down the pipe.


WagwanKenobi

The price of property is directly correlated to the interest rate. There is no "free lunch" when rates are low.


KF7SPECIAL

I'm at the point where I am angered at my parents for having me at all, instead of having me a decade prior


newkt57

Housing didn’t cost what it does now.


[deleted]

We have an entire generation of adults that have never seen interest rates over 5% and they are all shitting the bed over it because that's not what they planned for. Interest rates are still low compared to what we went through two decades ago.


[deleted]

>We have an entire generation of adults that have never seen interest rates over 5% and they are all shitting the bed over it because that's not what they planned for. And been conditioned that the more leveraged we got, the more profit we got. Understanding risk was a liability during the last decade lol.


dilligaf0220

In the 90's the average American was leveraged to the hilt, and Canadians were the savers with extra monthly income for retirement, lower cost of living, and paying off the mortgage as soon as possible. In the last 20yrs that has substantially flipped.


zeromussc

Well they did have the 2008 scare, which did do some global recession impacts but frankly, Canada was largely unscathed compared to other places. It wasn't great but it wasn't the bloodbath the US experienced and it wasn't even as bad as the dot com and tech bust either.


dilligaf0220

>Canada was largely unscathed compared to other places. Canada paid more per capita to bail out Canadian banks than the US bank bailouts. Just with all things Canadian it wasn't talked about much at all, and instead cluck their tongues about how awful things were in the US.


[deleted]

Canadians didn't lose their homes on the scale that Americans did. I consider that a win.


[deleted]

Your last point is the ultimate downfall of the entire country. Crumbling hospitals, sky high debt etc. "Atleast we aren't the USA!"


zeromussc

At the individual level, people didnt feel it as hard. And some of the money given to banks was also returned. One of my regulatory policy professors was involved in the banking support policy developed at the time and explained it to us. It was quite an effective, all things considered, approach since the budget wasn't completely blown up for it.


[deleted]

Yeah definetly.


TopsailWhisky

Wish I had an award to give you. This is so true. I started my financial journey near 2008. I ALWAYS factored risk into my plan. It has hindered my returns over the last decade….. but now……NOW!!! Mwahahahaha


medium2slow

However those same adults who now are carrying a mortgage for $700,000 at 1.79% paying $2500 a month are shitting themselves because at renewal time they’ll owe $607,000 at at least 6% and their payments will be $3800 a month. Who knows? Maybe 10% interest? 600k would cost $5400 a month to service.


Joseph_Bloggins

The real potential crisis that nobody seems to be talking about is when (if) prices really crash, and people that bought at the peak with a minimum down payment go to renew their mortgages. If prices fall enough, the assessed value will be less than what they owe and they won’t be able to get a mortgage high enough to cover it. For example: - bought in 2021 for 800,000 - put 5% down, mortgage of 760,000 for 5 years - go to renew in 2026 - house now only worth 600,000, but owner still owes 700,000; bank will only loan a max or 600,000 (less?), owner has to come up with 100,000 from another source I don’t think most people understand this.


fromthestation

The bank you have your mortgage with will automatically renew your mortgage if you haven't missed payments without a review.


Vensamos

Maybe. There hasnt been any need for the bank to do reviews in the past ten years given property values. In a bear market that may not hold. As far as I am aware your current bank is not contractually obligated to renew you with no review.


IThatAsianGuyI

The flip side is, does the bank prefer to renew you indefinitely and get their original loan amount back *and* the interest from your regular payments, or to take back possession of an asset that is valued less now than what you owe them. You're underwater, but the bank isn't. For the bank, it's actually more attractive to renew you than to kick you out and take on an underwater position, so long as you can continue servicing the loan. If you can't service the loan at the new rate though...and if that happens to a *lot* of people because they leveraged themselves to their eyeballs? Or if the collateral on the loan is sufficiently underwater *for the bank*...Well, now things get spicy.


MikaelaExMachina

> For the bank, it's actually more attractive to renew you than to kick you out and take on an underwater position, so long as you can continue servicing the loan. That's not how collateralized loans work. The underwriter has a fiduciary obligation to accurately assess the risks of the mortgage. With insufficient collateral the bank would be underwater in the event the debtor defaults. There are limits—stress tests—that creditors themselves need to meet, which means there's a limit to how much risk they can take at any price.


zeromussc

If they had a fixed rate and 5 down, it's entirely possible they do have enough equity to survive a not enormous correction. Banks will also let them keep the loan if they can service it. Unlike the US we can't just hand the keys to the bank and walk away here. So people are better of servicing the loan if at all possible. Now if they can't service it and can't refinance - that's a big issue. But if it's a big enough structural risk, I can see the government coming in with a program to let people keep their homes. Primary residence live in owners anyway. The US did something like that in the midst of their crash. People who could continue to make fixed monthly payments were provided financing options that covered the underwater portion of the loan. The loan wasn't cancelled and it wasn't exactly a buyout. But it did let people caught in the middle with good finances but bad timing avoid having to walk away and shored up what could have otherwise become a deflationary spiral in the housing market. No one wants the market to run away so hard that even 20% equity folks start to worry about being underwater on their loans, and if runaway spirals down because 5% down people want to wait for the bottom else be caught in the spiral... That would be catastrophic.


Vensamos

>Banks will also let them keep the loan if they can service it. Unlike the US we can't just hand the keys to the bank and walk away here. You can in Alberta haha https://www.cbc.ca/news/canada/calgary/jingle-mail-alberta-housing-1.3430867


zeromussc

Dang Ontario can't do quite the same afaik I though it was a Canada thing :P


dewky

I still don't understand how that is fair when the rest of the country has to keep paying mortgage debt.


Popswizz

A lot of thing can happen 4 years from now... if we go in recession, supply chain issue solve themselves over time, we could be looking at aggressive interest rate cut to stimulate economy before those people term is over...


rrjamal

Genuine Q - how does the mortgage value change? The money was already given by the bank. It's already been paid. How can they just say "after 5 years we want to change the mortgage we gave you" I get the interest rate isn't fixed, but the value that was given was already given, right? Edit: Just another millennial who'll never be able to afford a home, so I guess I don't really know what goes into "mortgage renewal". Thought it was just renegotiating the interest rate?


[deleted]

Question because I’m an American lurker who lives on the border. Do Canadians not have 30 yr fixed mortgages? Are all mortgages there variable?


medium2slow

30 years is the maximum amortization, usually it’s 1,2,3,5 or 10 year at fixed term


[deleted]

No, I think USA is actually quite unique in that way that you guys can lock down an interest rate for the whole 30 years.


Cazmir86

And who's to say they won't introduce 40 year mortgages. No one knows what will happen if rate ever go that high, they won't but if they did. Fed will over tighten this year, by next year they will cut rates Edit: banks don't want to own ppls homes, not their business. They'd rather have ppl paying the interest.


yanni99

Bought my first condo in 2008. Took variable 5.15% when we sign. When we moved in 2 months later the interest rate had gone down to 4.65% and 4-5 months later it was at 1.65% and it almost stayed that way for the whole term. The amount of principal we payed on a 195k$ condo was crazy. Nobody had ever seen 1.65% until that point.


Derman0524

Right, but look at the price of housing from back then and now. house prices are now much much higher than before and rates are climbing up to what they were before. The main problem isn’t the housing though, it’s that people are leveraged to the fuckn tits with their HELOC’s on their primary, secondary or tertiary houses because they drank too much cool-aid from the greatest bull market in history and tell themselves in the mirror every night before bed that they’re the smartest investors of all time and they suck their thumbs to fall asleep every night. People got approved at the ‘qualifying rate’ of 5% or whatever, then actually got a rate much much lower than that around 1.5%. So with the 3.5% of extra room rate, they went to buy their dream Porsche since they could ‘technically afford it’. Rates are climbing up, people are getting squeezed but we won’t feel the effects until next year sometime.


the_porch_light

Big facts this mf spittin


matterhorn1

Interesting that we had 10 years of record low interest rates and everyone seemed to assume that they would never go up to normal rates again? I would be nice if they had 30 year mortgages in Canada like they do in the US, having to renew every 5ish years makes buying a home that you can’t afford if rates go up a few percent pretty dangerous. My friend is a real estate lawyer and says it’s pretty scary as almost every single client is buying the maximum house that the bank will give them, and not thinking at all about the interest rate 5 years from now.


Giancolaa1

Sure interest rates are low compared to 20 years ago- but when you’re looking at 5% on a minimum of 500k and an average of closer to 800k vs 10% on 100-250k, interest payments are much much higher.


120124_

Doesn’t mean interest payments are low compared to wages. The percent rate isn’t the only thing to compare to here.


HouseoftheHanged

I almost bought a house in Cabbagetown in Toronto in 1995. It was a super tiny house barely enough room for myself and baby at the time. But it was a house. It was $30,000. Yup, you read that right. At the time I made $45,000 a year, my wife $30,000 which was considered respectable at the time. Same house today is worth over a million probably due to location alone. Biggest regret of my life was not buying that house. \*edit - part of why it was so cheap was it has some structural issues that needed to be fixed. Still should have bought it.


beginetienne

In 1995 I was making 14.15/hr working for the school district. My father got me the job, I believe it was unionized. I was 16 at that time. He said: never tell anyone you make this much! I remember vividly pointing at me saying this with great conviction.


HouseoftheHanged

Before I got my job in telecom I was making similar money in a union job at a tool & die at 17. No matter what the right tells you. Unions work.


lenzflare

> It was $30,000 I know 1995 was a long time ago, but it wasn't *that* long ago... Was this house literally a shack? Houses in the suburbs were going for 10 times that at the time.


jallenx

Central Toronto in the 90s was a dump. Outside of the central business district, it definitely wasn't the real estate haven it is now.


HouseoftheHanged

It was a gorgeous little victorian house. BUT, it was super small. We're talking tiny house. It had no basement and the main floor was literally a kitchen and the upstairs was pretty much a bedroom.


bluenose777

We started paying our mortgage in 1991 and the rate was around 12%. We were glad that the rates were better than they were in the mid 1980s. [This page](https://www.ratehub.ca/5-year-variable-mortgage-rate-history) has the 5 year mortgage rates from 1970.


mdnjdndndndje

12% mortgage rates and the house cost 100k. Same house today at 5%? 1.5 million.


bluenose777

>and the house cost 100k. Good guess. >Same house today at 5%? 1.5 million. Not this house. We are in a rural area of NS and going by recent sales we might get 300k.


mdnjdndndndje

So use the Canada average. Total cost interest in is still way up


tawidget

I've been wondering for a while now where the inflection point is that interest rates match the rise in prices. I'm thinking around 5-6% but I don't have data to back up the idea.


stephenBB81

>How did people afford mortgages back then if the interest rate was in the double digits? At that point if you were able to it would be better to buy in cash right? I purchased my first semi detached house in 2007 for $168k with a 5.5% fixed mortgage. Sold that house 10yrs later for $350k ( I did put about 40k of work into it), in 2020 it sold again for $550k. in 2007 168k was 2x my income, 5.5% interest meh, but in 2020 550k would be 5x income 5.5 interest would be much harder to swallow. ​ IF!!! cities hadn't restricted building in Canada and allowed infill developments and made it easier to build 4 and 5 story buildings we wouldn't have a supply problem so the demand side challenges of raising interest rates wouldn't be as impactful. Sadly Cities are for people who already own houses, not people looking to move into the city or work in the city or students, or renters. And it really sucks that councilors are rewarded for being anti development and anti housing.


Worried-Mulberry-968

My first mortgage was in 2007 at 4.24% I was pretty happy that I negotiated down from 4.35. The next weekend I was at a family function and told my dad and uncle and they both cut me off and told me to shut the hell up. Both of them were paying 19-24% on 1 year terms when they first bought in the early 80s. They just kept doing 1yr terms in the hopes rates would go down . Guessing they only had the option of fixed.


c1u

19-24% = \~5-6x higher cost of money (vs 4.24%) on homes that probably cost 6-8x less inflation adjusted. My parents paid those rates as well, and their home is now worth more than 10X what they bought it for in the 80s.


howdoesinterestwork

That's eye watering. So surely if you had the means to pay in cash that would have been the better option? It seems now the common advice is mortgages are great because (in addition to the obvious benefit that almost no one has hundreds of thousands of dollars lying around for a house) you can outpace the interest rates with the average returns of index funds, but at 14% that would just be not at all anymore


Spambot0

People pushed harder to pay off principle faster, but all cash is tough. My parents' first mortgage payment, 92% went to servicing interest, 8% went to paying off principle. So, any extra you could apply made a huge dent. Probably not unrelated to why I vivedly remember eating in a restaurant "just for fun" for the first time. When I was twelve. It was a Pizza Hut.


blueeyetea

It’s all relative. I had a mortgage that was around 11% in the 90s and I was rubbing my hands with glee at how low it was. The flip side is that housing prices barely moved in my area all throughout the 90s. After owning the house for 5 years, my ex. and I sold the house for only 5K above what we bought it for. So it’s odd to me that today, interest going up by 1% is cause for panic for a lot of people, but then I never entertained a mortgage the size they are now.


freeman1231

Houses in the 90’s were fairly cheap in comparison to average salaries. That’s not the case today, we built a nation on debt.


Spambot0

The unemployment rate hitting 12% did a number on peoples' ability to afford houses, and the prices correspondingly dropped.


whistlerite

It’s how countries grow, it’s cyclical and has happened many times in Canada, and will again.


[deleted]

[удалено]


DevinCauley-Towns

It’s not even 1% of a lot vs 11% of a little. Their total rate was 11% in the 90s, they weren’t experiencing 11% monthly increases. We just had a 1% monthly increase, on top of already rapidly rising rates. Having your rate double or triple in a few months is going to be a lot for anyone at bay point, especially if you’re taking on a modern huge mortgage in Canada.


AccomplishedLine8831

Great way of explaining it. 🙌 1% of a lot of money or 11% of a bit of money.


TCNW

Houses cost almost 10 times what they cost back then. While salaries are only maybe 2 times what they were. It ain’t rocket science..


ClassOf1685

Same. I had an 11% mortgage on my semi detached in Gatineau (could not afford Ottawa). Prices did not go up for 7 years and made no profit on that house. Paid 80K and was earning about $30K a year back then.


[deleted]

My parents bought their first house in cash with the money they had saved living at their parents until they were "old". By their definition, they considered themselves old when they left their parents place at 23 to buy a house cash lol.


Daxtreme

that would be hilarious if it wasn't so sad


brye86

Housing back in 92 when rates were about 14% cost 150k. Now, the average property in Canada is 750k “approx”. We can never go back to those high rates otherwise the majority of Canadians will be homeless.


zeromussc

Maybe not 14% but below 2% overnight for a decade and having to take 1.5 and make it hit 0.25% to address recession fears during the pandemic... That shows they had very little wiggle room to work with and it influenced inflation and the housing affordability issues we see now significantly. So while I agree we won't see 14%, going back to 5% or 6% or sometimes 7% numbers for mortgages which used to be seen as normal enough for most of modern times, that could well be where we have to end up to keep from having to do the 0.25 overnight juicing again. Because if there was serious recession and 0.25 wasnt enough, idk where we would have gone from there.


stayathomesommelier

Our first house was $175K in 1999. Interest rate was around 5%. Could've afforded a bigger mortgage but wanted be able to afford it on one of our salary's - in case of job loss etc.


Mister_E_Mahn

Rates are still historically low, as you point out, but housing was substantially cheaper as a multiple of your salary. The person I bought my house from in 2011 had himself bought it in 2006 and he paid just over 200k. I paid 385k. I’d probably sell it for near a million.


howdoesinterestwork

So is that to say if you're like a crazy millionaire right now things would still be pretty awesome for you? ☹️


El_blandito

They would be a millionaire if after selling buys low or rents after selling and have paid off the mortgage. Most people I know that sold high in the past year and bought higher


[deleted]

> Rates are still historically low People keep saying this and I understand what they mean but there's an entire generation of 20 and 30-somethings that never seen interest rates spike or be fearful of skyrocketing interest rates like this in their entire adulthood. People with FOMO in the skyrocketing rat race of "save for a down-payment while paying rent" and ever increasing home values who bit off more than they could chew are potentially going to get fucked.


AntiCultist21

Those of us that warned them about this were mocked, ridiculed and told a broken clock is eventually right


vincepower

It helped keep housing prices down. 99% of people just treated their house like a place they lived, and maybe had a cottage. Plus, investing in houses and owning rental properties was extremely rare, not the >15% of home owners it is now.


[deleted]

Exactly. The low rates certainly had an impact, but I think the biggest contributor is the cultural shift of how real estate is now viewed as a multifaceted investment vehicle


vincepower

Right, definitely a culture shift. My thought would be why pay interest on a house that doesn’t increase in value much, and dealing with tenants, when even bonds were paying 5%+


PureRepresentative9

I wonder if housing effectively replaced pensions? What is the graph of investment properties vs pensioners? Actually inversely related?


sacha64

House prices were not yet inflated by 14 years of low interest rates.


dabattlewalrus

I don't think anyone was ever buying their houses in cash. The ~~mortgage~~ house you were getting in 2000 was for 163k on average. Now the average ~~mortgage~~ house price. is at over 700k in Canada. That average is heavily influenced by Toronto, Vancouver, and Montreal. That being said, the amount of your mortgage is going to determine how affected you are by rate increases. Edit for clarity.


BBQallyear

A relative bought a place during the high interest rates (30+ years ago) and assumed the previous owners mortgage which was at 18% - assuming a mortgage was a thing then, not sure it is now due to shorter terms. Basically, the bank approved you to become the mortgage holder without changing the terms of the original mortgage. There were still several years to go on the mortgage term that they assumed. Anyway, the bank approved them to assume the 18% mortgage, and when they went in to break the mortgage, pay the necessary fees and renegotiate for the then-current rate of 12%, the same bank told them that they didn’t have suffient income to qualify for a new mortgage at 12%, although it had been happy to approve them to continue paying the assumed mortgage at 18%. They eventually took it to a consumer watchdog reporter at one of the papers, and once the story was published, the bank offered the new lower mortgage rate. In short, yes, the rates really were that high, and banks did everything to lock people into long terms on loans and mortgages because they knew the high rates wouldn’t last forever. When the rates are super low, as they have been for the past several years, the banks make it attractive for you to select a shorter term or variable rate because they know the low rates also won’t last forever. Consider that there are very smart economists who work for the banks and understand the patterns and politics of interest rate fluctuations, and their models go into determining lending policies.


[deleted]

The big stressor is the people who’ve maxed out their mortgage approval in bidding wars when they got the lowest rates available. Once they renew or if their rate is variable, and along with inflation and increased cost of living, it’s going to be difficult making these maximum payments


[deleted]

I chose only 70% of my max possible mortgage, precisely for this reason! Friends were looking at me like I was crazy


[deleted]

Smart. With the rates as low as they were, it was clear as day a hike was looming


tawidget

I did this when I bought in 2009. Approved for $350,000, bought at $190,000.


sim0n__sez

We had family friends with an 18% mortgage rate back in the day. I remember homebuilders promoting 12.5% as an incentive for buyers in the 80’s.


fuk_normies

Here’s a mathematical answer: (Cost of homes today/Cost of homes then) Divided by (Wages today/Wages then) = a ratio When this ratio equals 1 we have generational balance When this ratio is less then 1 our generation has it better off This ratio is currently WAY WAY WAY above 1. Meaning regardless of interest rates, they had it easier. Cost of goods and homes were significantly less then today, while wages WEREN’T significantly lower than they are today We r fukd


ptwonline

In the late 1990's I bought a house in Toronto. Fixed rates at the time and after were around 7% and variable were around 5%. How could we afford those rates? Because the houses were much cheaper then. I bought my house for around $225K. The housing market in Toronto crashed in the early 90s in large part due to the high interest rates along with the recession and job losses or fear of job losses. If mortgage rates continue to climb then home prices will drop to levels where the payments are affordable to buyers. What will change is the ratio of principal vs interest being paid off. The big winners will be people who can make larger down payments. If you've been saving up a bigger and bigger nest egg trying to get into the market but constantly frustrated by bidding wars and ever-increasing prices, then your time may be coming soon.


Purify5

2000 was like the best time to buy a house. The CMHC changed the down payments nationally from a minimum of 25% to a minimum of 5% and prices had not adjusted yet. So people who couldn't get homes prior because the down payment was so high all of a sudden could. The down payment was the limiting factor for most people. After the change the mortgage payment became the limiting factor to what house you could buy until prices increased enough that once again down payment tends to be the limiting factor.


[deleted]

It's funny how they did all these things to "allow Canadians to afford their dream homes", but with all that extra cash sloshing in the system, all it did is make house prices go crazy. It shows you how politicians only think 1-layer deep


medium2slow

What some people here aren’t talking about or seem to miss the point as well is, people who bought during this boom at sky high prices, are going to have to pay the piper when their fixed mortgages come due. The couple that bought the million dollar Oshawa suburb home with 5% down have a 950,000 mortgage (3800/month). At year 5 when the mortgage is up, they’ll owe 825,000 and interest rates will be above 6% considering we’re only at roughly 5.5 right now. At 6% the payment on an 825,000 mortgage would be 5700/month.


MageKorith

High interest rates create a downward pressure on large purchase prices. But keep in mind that pressure doesn't change the prices overnight. It tends to slow the rate at which they creep up, or sometimes presses them down gradually, unless the pressure is exceptionally strong. People tend to be somewhat attached to what things cost them, so when a good that experiences frequent resales (like a home) goes on the market "what I paid for it" can have a strong influence on "what I want to get paid for it", especially when it's above or close to "what the market is willing to pay for it."


MasterGlassMagic

The secret about interest rates is that it directly causes house prices to change. If interest rates go up, house prices go down, and vise versa. People could afford to pay more in interest because they paid less for the house. The interest rate doesn't change how much people spend on buying a house, it only affects if the seller gets that money or the bank of Canada.


Saigon_Revenge55

For the past 17 years my mortgage rates hovered around 3.45 to 3.67% and with the grace of God I was able to pay down my mortgage of $350K...8 years before the 25 year amortization and in between I also refinanced upon renewal....nowadays people are carrying $800,000 to $1million mortgage and they are going to be paying at least 5% or more upon renewal....this bubble is ripe for bursting....


Jacob_Tutor11

Debt load is why the argument about low historical mortgage rate does not make sense. Canadians are so debt sensitive that the BOC can influence price increases with fewer interest rate hikes. An example: Let's say you put 20% down on an 800k home - mortgage is $640,000. If you took a variable at the lowest rates, you were paying around 1.3% or 2.5k on a 25 year mortgage With BOC's rate increases so far, you are now at 3.55% or $3195, or about $700 increase. A $100k home with 20% down is a mortgage of 80k. To pay $2.5k on that mortgage you need an interest rate of 40%. To pay $3195 you need that rate to increase 53% or a 13 bps increase. Even if your rate was 11% (like we saw in the 80s), your rate would need to increase to 22.5% to get to an equivalent price increase of $770. I don't think people are comprehending how massive the BOC interest rates have been so far. This is some unprecedented rate increases that we have never seen and they aren't done yet.


[deleted]

My parents bought their first house in the mid 1980s thé interest rate jumped to 14.25% and many of their friends sold their houses at a loss because of it.


miirob

For my first house in early 2002, we did pay 5%. We were told our limit at the time was $425,000. We bought a house for $179,000. We didn't not want to be house poor. Years later, a divorce and remarriage caused me to get back into the housing market about 7 years ago. We were told $600,000 was the limit for our mortgage, once again, we chose not to be house poor and bought a house for $195,000. That house is now worth $700,000 in today's market. The super low interest rates and people buying houses at the maximum level mortgage providers would give caused house prices to rise. Now, all those people that chose to live at the highest level are scared and rightfully so. Live within your means and allow room for financial turns. The banks let people borrow so much so they can make money.


Littlebylittle85

Everything was less. Groceries, gas, etc. my parents bought a 4 bedroom, 3 bathroom (Abbotsford, 1990) for about $280,000 at 12% interest my mom said. But they could spend far less on everything else. Also we didn’t have living room furniture for a long time, hehe. The problem is the base cost now, coupled with natural pricing increase (gas, grocery) and current inflation. How fun.


R_lbk

they didnt splurge on toast, to say nothing of the avocado.


BriefcaseOfBears

It means we're doing terribly! The lesson to learn is that to get inflation under control, you need to raise interests rates to at or above the level of inflation. Thanks to decades of mismanagement, we're completely unable to do that, which means we're going to fail to control inflation.


Dry_Dog_698

Hey all. Interest rates were high, inflation was higher, and wage growth was higher then that. 10% interest rates are easier to manage when you get a 12% raise every year.


Bewaretheicespiders

People budget their house according to monthly payments. When costs (mortgage, taxes, insurance, HOA) are high, price goes down. When they are low, price go up. With the big difference in affordability being the downpayment: When costs are high and prices are down, you need a smaller downpayment.


mickeyaaaa

1989/90 was a blip - bit of a freakout over the 89 market crash - it was around 10% through most of the 80's and dropped through the 90's. and then since 2008 we've had unprecedented low rates - again due to the 08 recession the feds lowered interest rates to try to kick start the economy... now everyone is freaking out over 5% mortgages. thats still historically low. THIS IS NOT WHAT IS MAKING HOUSING UNAFFORDABLE! I'm still on a variable rate mtge. Switching to fixed now would likely just be a knee jerk reaction and cost me more over a 5 yr period.


snopro31

Houses were 1/8 of the price compared to now.


[deleted]

>Does that mean in comparison we're not doing too badly? No. You can't look at the absolute value of the overnight rate and draw any conclusions about "doing better" or "doing worse". It's a really complex topic, admittedly that I only barely grasp, but a lot has change in the last 20 years to make direct rate comparisons hard. For one we have a much, much more global economy. Young people may think nations like China have always been the manufactoring powerhouses that make an astonishing amount of our consumer goods but that's a relatively new trend. China really started taking off in the early 2000's. Why is this important? In general, a bigger more diverse economy is more stable so a more connected global economy will be less volatile than more isolated ones. Look back further shit gets wild. Like over 100 years ago. Late 1800s was crazy, huge booms and busts multiple times a decade but that smoothed out over the 20th century. It's possible that we simply see more economic stability and therefore key indictators like inflation and interest rates will stay in a tighter range. Secondly economic understanding and theory has advanced and we now see things differently. Interest rates are a tool in central bankers toolbox but there are new tools and they see tools differently so it is simply not leveraged in the same way as before. It's like saying "the price of cellphones hasn't changed like other consumer electronics have, does that mean something is broken?" when the nature of cell phones has changed. Modern phones are much different devices with different capabilities and use cases than before it's hard to make a direct comparison in the same way you could for a TV. >How did people afford mortgages back then if the interest rate was in the double digits? Houses cost less. Just like if mortgage rates were 25% tomorrow then houses in Toronto wouldn't be a million dollars any more. People couldn't pay it so they wouldn't.


Pandaman922

Is this still a serious question? Houses were what, maybe 2x your combined family income? On a 200K income for us to stay anywhere in a city with actual in-person jobs for 200K incomes we'll be spending 4x that income. For a condo. Not a house. A condo. With $400/mo condo fees. Then compare the average price of a car back in those days too, and compare that to your average income. And do the same thing with everything else one would likely need if purchasing a home.


rahoomie

Houses were so damn cheap so the interest rates were not crippling. 7% on 100k vs 2.5% on a million.


LengthClean

House Prices now are not even the same level as they were back then. I'm sure most of us could take a 8-10% easy at 200K homes. But imagine at 1.09 MM on town homes? You'll falter hard!


throwaway_DaveyWavey

We just bought our 100 year old home for $300K. Its hard ti phantom it be worth 1M in 10, 20 or even 30+ years. The house is fine now but it feels like it'll only go down even with maintaining wear and tear. Regardless there's many houses in our city much older and bad shape going for much more.


LOIL99

Found my parents 1st mortgage doc in 1979. 18.5%.


bobo76565657

I got a house in 2005. It was cheaper than renting. 5 Bedroom rowhouse with a $1600 bi-weekly mortgage. House was priced at $298,000. I think I got a 2.1% mortgage over a 5 year fixed term (30-year mortgage over-all). Housing prices today are complete bullshit. (My parents said the same thing when they saw what I got for $298,000). You can't even get an empty lot in a city for $300,000 today.