Canada Housing/Debt: Trust me, I'm a landlord.

The Something Awful Forums > Discussion > Debate & Discussion > Canada Housing/Debt: Trust me, I'm a landlord.

namaste friends: Sep 18, 2004; by Smythe

http://www.theglobeandmail.com/repo...hboard/follows/

quote:

The Bank of Canada is raising red flags about the Toronto, Calgary and Vancouver housing markets.

Those are, of course, key markets in Canada, where real estate values differ widely across the country.

In its monetary policy report today, the central bank said housing activity �has been more robust than anticipated, buoyed by continued very low mortgage rates and exhibiting strength beyond a rebound from weather-depressed levels earlier in the year.�

However, it highlighted big regional divergences colouring this picture.

Housing markets in eastern Canada �appear to show signs consistent with a soft landing,� given slower price increases and sales volumes.

"This contrasts with major cities in Ontario, Alberta and British Columbia, where housing markets are generally robust and much tighter," it said.

�While a good part of the strength can be explained by favourable demographics and strong employment gains in parts of the country, it nonetheless suggests that household imbalances could increase further,� the central bank warned.

It did not cite specific cities. Nor did it say they were headed for trouble. But I took it as a warning sign.

�Simply, this is the main reason the bank would be extremely reluctant to consider cutting rates (in a stress situation),� said chief economist Douglas Porter of BMO Nesbitt Burns.

�They have frankly been surprised at the underlying strength in housing and consumer spending, and now explicitly tie that to low interest rates,� Mr. Porter said.

�There is no more brave talk about a soft landing for housing.�

Over all, Bank of Canada Governor Stephen Poloz and his colleagues noted �renewed vigour� in residential real estate.

�Housing activity has been more robust than anticipated, buoyed by continued very low mortgage rates and exhibiting strength beyond a rebound from weather-depressed levels earlier in the year,� it said in the report.

�Housing starts have remained broadly in line with demographic demand in recent months,� it added.

�However, sales of existing homes have picked up noticeable since the beginning of the year, to a four-year high � This is contributing to sizable increases in house prices, although the national picture continues to mask important regional divergences.�

According to the Teranet-National house price index, home prices in Canada rose 0.3 per cent in September from August and 4.9 per cent from a year earlier.

Notably, Calgary, Toronto and Vancouver were well above the national average, at 9.5 per cent, 7.4 per cent and 6.5 per cent, respectively.

Just this week, Moody's Investor Service also flagged concerns of Canadian home prices, warning the housing market and swollen household debt levels are a risk.

Mr. Porter noted the shift in the central bank�s tone over the past six months where housing is concerned.

�Earlier they were convinced (perhaps bravely so) that the housing market was on course for a soft landing,� Mr. Porter said.

�Now, they are openly suggesting that it has been stronger than they expected, and thus the associated risks with household debt �are edging higher,�� he added.

�The focal point of that �stronger than expected� housing market has been in Calgary, Toronto and Vancouver, as we (and others) have noted. Most of the rest of the country is not seeing particular strength in housing.�

What�s important here is that the strength in various housing markets is �localized,� as Mr. Porter put it, and thus �broad� policy measures are not necessarily the best way to deal with it.

As in, �higher interest rates would hit all markets, including many cities that don�t need cooling.�

Remember that former Bank of Canada chief Mark Carney and the late Jim Flaherty, Canada�s finance minister at the time, each took measures as household debts got out of hand.

Mr. Carney threatened to raise interest rates, and Mr. Flaherty brought in a series of measures.

As The Globe and Mail�s Barrie McKenna reports, the Bank of Canada also held its benchmark overnight rate at 1 per cent today, bringing to more than four years its longest rate freeze since the 1950s.

The sudden drop in the price of crude has become a new wild card for the Bank of Canada, our Ottawa correspondent writes, knocking the wind out of inflation and delaying any move to hike interest rates.

The central bank said inflation risks remain �roughly balanced,� but it pointedly dropped the word �neutral,� a hallmark of its monetary statements for the past year. This comes after Bank of Canada Governor

Stephen Poloz indicated he wants to move away from an explicit commitment on future changes to its key rate.

The most significant shift in the bank�s latest economic forecast centered on inflation, where the bank said that patchy global economy is pushing some prices up, while depressing others. There is strong growth in the U.S. and weakness virtually everywhere else in the world.

A news conference by Mr. Poloz, which was to have come later in the morning. was cancelled.

# ? Oct 22, 2014 18:13

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# ? Jun 8, 2024 10:45

namaste friends: Sep 18, 2004; by Smythe

http://www.theglobeandmail.com/repo...rticle21180431/

quote:

For Vancouver home buyers who get the shivers at high prices for even run-down houses, there is also the haunting sight of a tax goblin.

The B.C. government�s property-transfer tax has become a growing burden for buyers in the Vancouver region�s housing market over the past 27 years. The province introduced the PTT as a way to generate revenue, especially targeting the upper crust of B.C. house purchasers.
But the province-wide formula for the tax hasn�t changed since 1987, when Vancouver-area homes were much cheaper. Today, on the purchase of a $5-million home, the buyer has to pay $98,000 for the PTT. On a $2-million home, the tax rings in at $38,000, and on a $1-million property, the extra outlay is $18,000.

The B.C. government collected $937-million in the 2013-14 fiscal year from the tax. Housing industry observers note that the province�s coffers get an added lift when wealthy buyers, including those offshore, acquire high-end homes.

The PTT formula works like this: On the initial $200,000 of the purchase price, the home buyer must fork over 1 per cent of that first tier and then pay a 2-per-cent tax rate on the amount above $200,000.

The Real Estate Board of Greater Vancouver estimates that 96 per cent of properties in the region sold for at least $200,000 last year. That contrasts sharply with 5 per cent of properties in 1987 that changed hands for $200,000 or higher.

Far from being a targeted tax on the wealthy, the PTT�s net captures the vast majority of buyers of detached homes, townhouses and condos in Greater Vancouver, the board argues.

In this past February�s provincial budget, the B.C. Liberal government announced an improved break for eligible first-time home buyers. Those who qualify could save up to $7,500 on buying their first house, as long as that property is acquired for $475,000 or less, up from the previous threshold of $425,000.

B.C. Finance Minister Mike de Jong tweaked one aspect of the broader tax system in February to make up for the revenue lost from giving tax relief to some first-time home buyers. The province decreased the threshold for phasing out the homeowner grant from $1.295-million to $1.1-million in a property�s assessed value, effective the 2014 tax year. In short, the change means that more homeowners will be paying higher municipal property taxes annually.

Despite the tax burden, housing demand remains robust in Vancouver, says Dan Scarrow, vice-president of corporate strategy at Macdonald Realty Group.

Mr. Scarrow doesn�t see a Vancouver housing bubble because many existing homeowners have lived in their abodes for at least 15 years, before the sharp run-up in prices. With small or non-existent mortgages, there isn�t financial pressure on those long-time homeowners to sell, and they can afford to hold out for higher offers when they do decide to move for whatever reason, he reckons.

�It comes down to huge demand globally and restricted supply locally,� Mr. Scarrow says.

The benchmark home price index last month hit a record $633,500 for detached homes, townhouses and condos sold in Greater Vancouver, which includes suburbs such as Richmond, Burnaby and Coquitlam. On Vancouver�s west side in September, the index hit a record of nearly $2.3-million for detached properties.

Having grown accustomed to a cash cow, the B.C. government isn�t about to dramatically revise the PTT formula any time soon. The province conservatively forecasts that revenue from the PTT will be $854-million in 2014-15. That would be down 9 per cent from the previous fiscal year but still more than double the revenue garnered in 2002-03. From the province�s viewpoint, the tried-and-true PTT isn�t a scary trick, but a valuable treat inside its revenue bag.

For gently caress's sake. If you're buying a multimillion dollar home and a 2% tax is a loving burden, you shouldn't be buying that loving home. Or a loving 500k home for that matter.

# ? Oct 22, 2014 19:34

Rime: Nov 2, 2011; by Games Forum

To put that in perspective, the government is forecasting higher revenue from housing sales than it recieves from the entire forest industry, and more than it would from the LNG proposal.

Condo speculation is our primary industry, bar none. :psyduck:

# ? Oct 22, 2014 19:46

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

Rime posted:

To put that in perspective, the government is forecasting higher revenue from housing sales than it recieves from the entire forest industry, and more than it would from the LNG proposal.

Condo speculation is our primary industry, bar none.

You mean over and above regular corporate (and personal) income tax rates for entities in those industries right? Royalties or what not?

Apologies for the heretofore omission of the promised spreadsheet. Busier week than expected. I haven't forgotten...

# ? Oct 22, 2014 19:54

Rime: Nov 2, 2011; by Games Forum

Lexicon posted:

You mean over and above regular corporate (and personal) income tax rates for entities in those industries right? Royalties or what not?

Apologies for the heretofore omission of the promised spreadsheet. Busier week than expected. I haven't forgotten...

I was basing it off this quote:

quote:

De Jong said one mid-sized LNG plant will pay about $800 million in taxes annually under the new rules, an amount equivalent to the taxes B.C.'s entire forest industry pays in one year. He said one plant, producing 12-million tonnes of LNG annually, will pay taxes of $8 to $9 billion over 10 years.

Not sure how it breaks down. Granted, I missed that the figure was from a single LNG plant and not the entire sector.

# ? Oct 22, 2014 20:16

melon cat: Jan 21, 2010; Nap Ghost

Cultural Imperial posted:

http://www.theglobeandmail.com/repo...hboard/follows/

quote:

�They have frankly been surprised at the underlying strength in housing and consumer spending, and now explicitly tie that to low interest rates,� Mr. Porter said.

I don't understand how they're "surprised" at the upward movement in housing and consumer spending. Interest rates are at an all-time low, which means that people put debt repayment on the back burner ("Why pay off debt since debt is cheap?" :downs:

) and low rates mean that more people will get mortgages since we use current rates as a means of qualifying mortgage applicants.

How is this at all suprising to them? I just. I can't... :psypop:

# ? Oct 22, 2014 21:21

namaste friends: Sep 18, 2004; by Smythe

melon cat posted:

I don't understand how they're "surprised" at the upward movement in housing and consumer spending. Interest rates are at an all-time low, which means that people put debt repayment on the back burner ("Why pay off debt since debt is cheap?" ) and low rates mean that more people will get mortgages since we use current rates as a means of qualifying mortgage applicants.

How is this at all suprising to them? I just. I can't...

Bro, based on what I know about your profession, if you don't know how these guys operate then :shepicide:

# ? Oct 22, 2014 21:23

ascendance: Feb 19, 2013

And if interest rates rise, the whole house of cards comes tumbling down, and the entire economy is hosed.

# ? Oct 22, 2014 21:42

namaste friends: Sep 18, 2004; by Smythe

ascendance posted:

And if interest rates rise, the whole house of cards comes tumbling down, and the entire economy is hosed.

So this is a really interesting question so I went googling.

http://blogs.wsj.com/developments/2013/09/20/what-rising-interest-rates-mean-for-home-prices/

quote:

It�s a hotly debated question among economists and analysts right now: What will the recent spike in mortgage rates do to the housing market?

Mortgage rates fell to 4.75% last week, down from 4.8% for the average 30-year fixed-rate two weeks ago, according to the Mortgage Bankers Association.

Existing home sales in August hit a 6�-year high, rising by 1.7% from July, according to the National Association of Realtors. The report measures sales that closed for contracts that were signed one or two months earlier. Weekly data on mortgage-purchase applications suggest, however, that higher mortgage rates are leading to a mild slowdown in demand, and a modest drop in the average amount of debt sought by prospective buyers.

The upshot: higher rates could have a greater impact on price than on the total level of sales.

Over the long run, �there�s no major correlation between rates and prices,� says Douglas Duncan, chief economist at Fannie Mae. Moreover, even at 4.75%, interest rates are still very low by historical standards. But the speed at which rates climb matters in the short-run, Mr. Duncan says, because it can force would-be buyers to adjust what they�re willing to pay.

Consider: a homeowner shopping for a $500,000 house and making a 20% down payment would have been able to purchase a home in April with a 3.5% rate that offered a $1,800 monthly payment. Right now with a 4.75% mortgage rate, the same house would cost 16% more on a monthly-payment basis, or almost $300 more.

Of course, this math doesn�t account for the fact that home prices are also higher than they were a few months ago�meaning sellers may have lost the advantage they had on prices earlier this spring. Since many buyers who need a mortgage shop for a house based on how much they�re going to pay every month, the increase in rates together with the increase in prices could lead to some sticker shock.

This chart from Sam Khater, a senior economist at CoreLogic, shows that the overall level of mortgage applications (excluding refinancing) hasn�t much changed over the last two years, even though mortgage rates have fallen sharply. Mortgage applications in April, before rates rose, stood around 14% above their year-earlier levels. Now, they�re just 1% above last year�s levels.

Other data, however, show that the amount of debt sought by prospective borrowers has fallen from a peak in early May, before mortgage rates began to rise, as the accompanying charts illustrate. While borrowing amounts are still above their year-earlier levels, the rate of growth has slowed.

In early September, the average loan on an application for a mortgage to purchase a home had fallen to $252,400, down from a high of $269,700 in April. While some of this decline could be seasonal, the average loan amount in early September was up by 7% from one year earlier, compared with gains of 12% witnessed in April.

Rates jumped this summer as investors began to anticipate that the Federal Reserve would wind down its bond-buying program later this year. On Wednesday, the Fed opted not to begin that process, saying it still wanted to see stronger economic growth. The Fed also indicated that it was keeping a close eye on how housing markets were digesting higher financing costs.

In 1994, the average 30-year mortgage rate jumped from 7.1% to 9.2% by the end of the year, denting a broad-based housing rebound. An annual home-sales gain of 13% that June became a 7% decline the following May, according to Moody�s Analytics. In 1996, rates rose from 7% to 8.3%, slowing single-family home sales from an annual gain of 11% to a gain of just 3% eight months later.

To be sure, interest rates aren�t nearly so high today, and the market could eventually shrug off a 4.5% mortgage rate. But in the short run, the overall level of rates may not matter as much as the speed of the increase in those rates. If higher rates stick, it remains to be seen just how quickly buyers and sellers will adjust to that over the next few months.

From my layperson's point of view, this totally makes sense. The housing market was batshit insane before interest rates dropped from 3.5 to 1% in 2008. I don't see why the level of sales would taper off IF interest rates are raised slowly enough. And as shown by the US, people are more willing to stick around in their underwater houses than to call it quits and sell them. Because of Pride of Ownership I guess.

# ? Oct 22, 2014 21:46

ascendance: Feb 19, 2013

Loss aversion makes it hard to sell an underwater house. People just suck it up and live there,

Source: Has am aunt who lives in Milton Keynes.

# ? Oct 22, 2014 21:52

namaste friends: Sep 18, 2004; by Smythe

ascendance posted:

Loss aversion makes it hard to sell an underwater house. People just suck it up and live there,

Source: Has am aunt who lives in Milton Keynes.

Sure, but what if you have a massive HELOC as well? And several maxed out credit cards? And ongoing home maintenance? A car loan? Kinda like most canadians right now.

# ? Oct 22, 2014 21:54

Brannock: Feb 9, 2006; by exmarx; Fallen Rib

http://www.huffingtonpost.ca/2014/10/21/foreign-investors-housing-canada-cmhc_n_6022378.html

quote:

CMHC: We Don't Know How Many Foreign Investors Are Buying Canadian Homes

Canada�s government-run mortgage insurer has admitted it has little grasp on how much of the housing market is now owned by foreign investors, but insists the issue is not a problem.

As house prices continue a years-long runup, and warnings pile up about mortgage debt and a possible housing bubble, many analysts have pointed out that Canada is �flying blind� when it comes to detailed data about residential real estate.

As HuffPost Canada reported in a recent series, the lack of detailed data about who is buying homes in Canada poses a risk to the housing market that could affect the entire economy.

One of the most contentious issues is whether or not foreign investors have driven house prices above levels that Canadian homeowners would actually support, particularly in Toronto and Vancouver.

Some analysts worry about the condo �ghost towns� or ghettos that could result if and when foreign investors decide Canadian real estate is no longer a good place to park money.

In an interview with the Financial Post, Canada Mortgage and Housing Corp. president Evan Siddall admitted the country�s largest mortgage insurer has �data gaps� when it comes to understanding foreign ownership levels.

Siddall said it�s difficult to gauge who�s buying houses because many purchases are done through nominees or corporations, and �we need to look for ways to pierce that.�

The CMHC carries out phone surveys to get data about ownership but �we can�t phone people in Singapore or Hong Kong, we don�t know who to call.�

But �right now, based on what we know � we don�t think the level of foreign ownership in Canadian housing markets is excessive,� Siddall said.

Estimates of foreign ownership vary widely. Prominent Toronto developer Brad Lamb raised a fuss this summer when he asserted that 50 per cent of Toronto condos are being bought by foreign investors.

"There is a big interest in Toronto as a safe zone to put money," Lamb told the CBC.

Some developers see a risk from the fact homes are being bought by people who won�t live in them.

Toll Brothers, a major luxury home builder in the U.S., recently said it had �snooped around� Toronto�s housing market, but was scared off by the fact that that 60 to 70 per cent of new condo buyers didn�t plan to live in their homes.

�The level of investment, and not just foreign investment, is what concerned us,� CEO Douglas Yardley said, as quoted at the Globe and Mail.

# ? Oct 22, 2014 22:01

namaste friends: Sep 18, 2004; by Smythe

Considering the median family income in china is like 9000 USD a year, exactly which mainland chinese investors are buying these condos for investment? Like, if I got rich taking bribes in China, and I wanted to launder my cash in Macau at a baccarat table, would I be buying a 300k condo or would I be buying a million dollar house in vancouver? I don't think small fry mainlanders would have the means to launder their money by putting in massive orders for steel rods and then having the order magically disappear would they?

# ? Oct 22, 2014 22:07

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

Cultural Imperial posted:

Considering the median family income in china is like 9000 USD a year, exactly which mainland chinese investors are buying these condos for investment? Like, if I got rich taking bribes in China, and I wanted to launder my cash in Macau at a baccarat table, would I be buying a 300k condo or would I be buying a million dollar house in vancouver? I don't think small fry mainlanders would have the means to launder their money by putting in massive orders for steel rods and then having the order magically disappear would they?

Come on, you're smarter than this. There's more than enough lovely, innumerate arguments on the bull side; let's not bring them over to this side of the house. You can argue your thesis without respect to the median of a very wide statistical distribution.

# ? Oct 22, 2014 22:30

ascendance: Feb 19, 2013

Cultural Imperial posted:

Considering the median family income in china is like 9000 USD a year, exactly which mainland chinese investors are buying these condos for investment? Like, if I got rich taking bribes in China, and I wanted to launder my cash in Macau at a baccarat table, would I be buying a 300k condo or would I be buying a million dollar house in vancouver? I don't think small fry mainlanders would have the means to launder their money by putting in massive orders for steel rods and then having the order magically disappear would they?

New lending requirements saying that you need to put 20% down on properties over $1 million definitely means the $300k condo is a better buy. also way easier to flip.

Also, you dont need $300k... You need 5% down amd some chucklehead willing to loan you the rest in the form of a mortgage. Meanwhile, you are absolutely necessary to the developer because they dont start building until 80% of the units are sold.

# ? Oct 22, 2014 22:38

namaste friends: Sep 18, 2004; by Smythe

Lexicon posted:

Come on, you're smarter than this. There's more than enough lovely, innumerate arguments on the bull side; let's not bring them over to this side of the house. You can argue your thesis without respect to the median of a very wide statistical distribution.

Whatever, 9k, 90k, 900k, 9mil. Think of my question more as a lack of understanding of how money laundering works, specifically the tools that are available to people who don't have shitloads of money.

# ? Oct 22, 2014 22:49

namaste friends: Sep 18, 2004; by Smythe

ascendance posted:

New lending requirements saying that you need to put 20% down on properties over $1 million definitely means the $300k condo is a better buy. also way easier to flip.

Also, you dont need $300k... You need 5% down amd some chucklehead willing to loan you the rest in the form of a mortgage. Meanwhile, you are absolutely necessary to the developer because they dont start building until 80% of the units are sold.

If I were laundering money why would I take out a mortgage? Wouldn't that mean more paperwork making me more culpable?

# ? Oct 22, 2014 22:50

ascendance: Feb 19, 2013

Cultural Imperial posted:

If I were laundering money why would I take out a mortgage? Wouldn't that mean more paperwork making me more culpable?

I am not sure if they get real mortgages, or some kind of shell game loan from the condo development corporation.

# ? Oct 22, 2014 22:56

Buskas: Aug 31, 2004; ?

Cultural Imperial posted:

Whatever, 9k, 90k, 900k, 9mil. Think of my question more as a lack of understanding of how money laundering works, specifically the tools that are available to people who don't have shitloads of money.

I might be misunderstanding, but I think Lexicon's point is that China's median income is irrelevant and it's only those with shitloads of money who are in question.

# ? Oct 23, 2014 10:36

on the left: Nov 2, 2013; I Am A Gigantic Piece Of Shit

Literally poo from a diseased human butt

The thing about China is that even if only the top 1% have that kind of money, that's still a full third of Canada's population.

China needs its lebensraum, especially after imperialists stripped poor China of its rightful territory.

Also, it should be possible to make a good estimate of Chinese home ownership based on foreign investment numbers. Those are pretty good at recording flows of currency and capital, although obviously it would be a country by country breakdown.

on the left fucked around with this message at 10:48 on Oct 23, 2014

# ? Oct 23, 2014 10:45

namaste friends: Sep 18, 2004; by Smythe

http://business.financialpost.com/2014/10/23/canadians-may-be-buying-too-much-car-moodys-sounds-alarm-on-bank-auto-loans/

quote:

Bank auto lending has grown at a compounded annual rate of 20% since 2007, �significantly outpacing� the growth of even red-hot mortgages, credit cards, and lines of credit., according to the ratings agency report released Thursday. In seven years, vehicle loans have jumped fro $16.2-billion to $64-billion.

Authors Jason Mercer and David Beattie warn that with household debt already at record levels, the concerted push into auto lending � buoyed by low interest rates and longer amortization periods that reduce a buyer�s monthly payments � has exposed Canadian banks to the risks of soured loans and lower recovery rates in the event of a downturn.

�If the economy takes a turn for the worst, we could see these loans becoming problematic for the banks,� said Mr. Mercer, an assistant vice-president at Moody�s.

High unemployment rates in past severe recessions suggest there would be �a sharp increase� in soured loans.

�We are in a much more vulnerable position,� Mr. Mercer said in an interview, adding that some auto loans now extend for as long as eight years, up from a traditional three-to-five-year horizon. More depreciation means there�s less �collateral� to recover, putting the banks on the hook for higher losses.

Mr. Mercer said there are some parallels between the Moody�s analysis and concerns about the hot housing market that prompted federal officials to tweak the system with changes including shorter amortization periods.

�We see some similarities between the increasing terms in auto loans to the lengthening of terms in residential mortgages several years ago,� he said. �Instead of �buying too much house,� borrowers may be �buying too much car�.�

How am I supposed to signal to my peers that I'm a Successful Person if I don't buy an 80k car?

# ? Oct 23, 2014 15:08

Ceciltron: Jan 11, 2007; Text BEEP to 43527 for the dancing robot!; Pillbug

Cultural Imperial posted:

http://business.financialpost.com/2014/10/23/canadians-may-be-buying-too-much-car-moodys-sounds-alarm-on-bank-auto-loans/

How am I supposed to signal to my peers that I'm a Successful Person if I don't buy an 80k car?

Man, forget getting the car, it'll be amazing to see if the banks can even get the cars back when people default.

# ? Oct 23, 2014 16:19

PT6A: Jan 5, 2006; Public school teachers are callous dictators who won't lift a finger to stop children from peeing in my plane

Ceciltron posted:

Man, forget getting the car, it'll be amazing to see if the banks can even get the cars back when people default.

Luxury cars also depreciate like a motherfucker, so realistically having a luxury car as security against a loan to buy that luxury car, without at least a 60-70% downpayment, is pretty stupid.

# ? Oct 23, 2014 16:38

Saltin: Aug 20, 2003; Don't touch

Ceciltron posted:

Man, forget getting the car, it'll be amazing to see if the banks can even get the cars back when people default.

In the US they are starting to put immobilizers in cars and turning them off when people are delinquent. Look for that trend to continue. Also, how exposed are banks in Canada to new auto loans really? I'm sure there's some, but it cannot be that significant. I get my banks best rate for everything, and when I was looking at an auto loan for a new car a few years back the bank could not come close to beating the rate the car manufacturer's financing wing offered me. I mean there was something close to a 4% spread in favour of the manufacturer. With cheap cars they often offer 0% financing, which the bank will never do. It's hard to imagine a lot of people taking a bank loan, at least on new luxury or mid range cars.

# ? Oct 23, 2014 17:52

Baronjutter: Dec 31, 2007; "Tiny Trains"

Yeah the financing for my car was 0.9% or a measly $500 cash back if you pay cash. Took the .9% and made 2k off the cash I was going to use. Manufacturer financing is crazy and I assume done at a loss to move cars.

I wonder though if the banks got directly involved in development if you'd see poo poo like that? Like if RBC was directly building a ton of condos in Toronto or a huge sprawl in Calgary would they offer crazy low rates to get people to buy their development rather than move into TD-Town.

# ? Oct 23, 2014 17:59

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

Saltin posted:

In the US they are starting to put immobilizers in cars and turning them off when people are delinquent. Look for that trend to continue. Also, how exposed are banks in Canada to new auto loans really? I'm sure there's some, but it cannot be that significant. I get my banks best rate for everything, and when I was looking at an auto loan for a new car a few years back the bank could not come close to beating the rate the car manufacturer's financing wing offered me. I mean there was something close to a 4% spread in favour of the manufacturer. With cheap cars they often offer 0% financing, which the bank will never do. It's hard to imagine a lot of people taking a bank loan, at least on new luxury or mid range cars.

The manufacturer rate isn't a true cost of financing though of course. It's basically one big voodoo operation to hide the cost of capital in the vehicle price or vice versa. It doesn't invalidate your argument, other than to point out that the 4% spread only exists because it's an apples to oranges comparison.

# ? Oct 23, 2014 18:02

Saltin: Aug 20, 2003; Don't touch

Lexicon posted:

The manufacturer rate isn't a true cost of financing though of course. It's basically one big voodoo operation to hide the cost of capital in the vehicle price or vice versa. It doesn't invalidate your argument, other than to point out that the 4% spread only exists because it's an apples to oranges comparison.

Sure, I know this, but what I'm saying is people will always prefer oranges in this context so exposure to the traditional apple loans from the big banks are likely smaller than you would imagine - i.e they aren't exposed to the majority of new car loans in Canada.

# ? Oct 23, 2014 18:07

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

Saltin posted:

Sure, I know this, but what I'm saying is people will always prefer oranges in this context so exposure to the traditional apple loans from the big banks are likely smaller than you would imagine - i.e they aren't exposed to the majority of new car loans in Canada.

Just had a thought: where is the manufacturer's capital for their loans coming from? Presumably not in-house.

So maybe the banks are exposed more than it seems, if they're the ones lending to the auto companies so they can do their voodoo loans?

# ? Oct 23, 2014 18:18

Mexplosivo: Mar 8, 2007; The monetary system is not ratified by society yet it shapes and dictates our entire existence...

Robert Skidelsky on the inevitable (imo) debt jubilee. Always good to see the "status quo" slowly coming to terms with reality asserting itself.

The Moral Economy of Debt

From the article:

quote:

The truth of the matter, as David Graeber points out in his majestic Debt: The First 5,000 Years, is that that the creditor-debtor relationship embodies no iron law of morality; rather, it is a social relationship that always must be negotiated. When quantitative precision and an unyielding approach to debt obligations are the rule, conflict and penury soon follow.
Read more at http://www.project-syndicate.org/commentary/creditor-debtor-battle-supply-and-demand-by-robert-skidelsky-2014-10#FMRqRYs2u0SMU7JB.99

Majestic is an understatement, anyone who has trouble imagining a world where debt jubilee is a thing needs to read that book or wait it out and see it irl :cheeky:

# ? Oct 23, 2014 18:23

Saltin: Aug 20, 2003; Don't touch

Lexicon posted:

Just had a thought: where is the manufacturer's capital for their loans coming from? Presumably not in-house.

So maybe the banks are exposed more than it seems, if they're the ones lending to the auto companies so they can do their voodoo loans?

I considered this as well, but honestly I have no idea. The banks are obviously involved in all sorts of things, but I do know the financing wing of all major manufacturers is huge and generally international with local subsids

# ? Oct 23, 2014 18:23

namaste friends: Sep 18, 2004; by Smythe

Mexplosivo posted:

Robert Skidelsky on the inevitable (imo) debt jubilee. Always good to see the "status quo" slowly coming to terms with reality asserting itself.

The Moral Economy of Debt

From the article:

Majestic is an understatement, anyone who has trouble imagining a world where debt jubilee is a thing needs to read that book or wait it out and see it irl

LOL that they're quoting the irish. It seems they learned nothing as their housing market is shooting up again.

quote:

Morality, however, has not been entirely on the side of the creditor. In New Testament Greek, debt means �sin.� But, though it might be sinful to go into debt, Matthew 6:12 supports absolution: �forgive us our debts, as we also have forgiven our debtors.� Widespread social resistance to creditors� claims on debtors� property for non-payment has meant that �foreclosure� has rarely been carried to extremes.

Indeed.

# ? Oct 23, 2014 18:46

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

Buskas posted:

I might be misunderstanding, but I think Lexicon's point is that China's median income is irrelevant and it's only those with shitloads of money who are in question.

Exactly. To depart from housing for a moment, it would be profoundly stupid to say: Apple shouldn't bother selling iPhones in China - the median income is only $9000, after all

Summary statistics like means or medians rarely have any applicability in any discussion about a segment of a frequency distribution.

# ? Oct 23, 2014 18:50

LemonDrizzle: Mar 28, 2012; neoliberal shithead

Mexplosivo posted:

Majestic is an understatement, anyone who has trouble imagining a world where debt jubilee is a thing needs to read that book or wait it out and see it irl

this thread would take a major turn for the awesome if overleveraged homeowners suddenly had their debts zeroed out while getting to keep their houses

# ? Oct 23, 2014 19:01

namaste friends: Sep 18, 2004; by Smythe

LemonDrizzle posted:

this thread would take a major turn for the awesome if overleveraged homeowners suddenly had their debts zeroed out while getting to keep their houses

So what would happen if some significant portion of almost a trillion dollars of mortgage debt was forgiven?

Is canada going to be more like another argentina or another mexico?

# ? Oct 23, 2014 19:04

Mexplosivo: Mar 8, 2007; The monetary system is not ratified by society yet it shapes and dictates our entire existence...

The Mexican tequila crisis is a textbook bailout (and its social consequences too!) before they were called that.
The Argentinian default, either one of them, is about as far from a debt jubilee as you can get.

Mexplosivo fucked around with this message at 19:41 on Oct 23, 2014

# ? Oct 23, 2014 19:15

Rhobot Mk. II: Jan 15, 2008; Mk. II: Bigger, longer, uncut robo-cock.

Lexicon posted:

Just had a thought: where is the manufacturer's capital for their loans coming from? Presumably not in-house.

So maybe the banks are exposed more than it seems, if they're the ones lending to the auto companies so they can do their voodoo loans?

I work in the retail auto industry, and I've answered this a few times, but there are specific institutions that deal with auto loans.

First, you have "the banks". Retail auto lending is held by a separate arm of BMO, TD, and ScotiaBank. They're arms-length from retail banking, but there is exposure. Then you have captive finance companies like Ford Credit and Toyota Financial Services. These are actually lending institutions exclusive to the manufacturer.

The last time poo poo hit the fan in auto industry, it was the captive finance companies that went tits up, not the banks that were heavy into auto loans.

As mentioned before, 0% or below prime financing is a marketing gimmick for dealers and manufacturers. It's called a sub-vented rate. The cost of borrowing is built into the vehicles pricing. The manufacturer will buy down the rate shown to the consumer with its own cash before approval.

# ? Oct 23, 2014 19:25

MickeyFinn: May 8, 2007; Biggie Smalls and Junior Mafia some mark ass bitches

Cultural Imperial posted:

So what would happen if some significant portion of almost a trillion dollars of mortgage debt was forgiven?

Is canada going to be more like another argentina or another mexico?

Banks would become immediately insolvent, I think. Banks use mortgages they own as assets to borrow and lend against so forgiving the debt without paying the banks would cause significant collapse. You'd have to pay the banks back for the mortgages at the very least. In effect, you'd be taxing everyone to pay off the gambler's debts. A better way to do it would be to write everyone a check for X amount and then let people walk away from their presumably underwater homes and then make the banks whole at the time of sale of the house (so they can't claim it as worthless, recoup full value and then sell it afterwards).

# ? Oct 23, 2014 20:02

JawKnee: Mar 24, 2007; You'll take the ride to leave this town along that yellow line

MickeyFinn posted:

A better way to do it would be to write everyone a check for X amount and then let people walk away

This sounds remarkably like lowering interest rates to increase the amount of cheap credit available

# ? Oct 23, 2014 20:16

MickeyFinn: May 8, 2007; Biggie Smalls and Junior Mafia some mark ass bitches

JawKnee posted:

This sounds remarkably like lowering interest rates to increase the amount of cheap credit available

Sorta, except it would be occurring after housing prices collapsed and people were stuck with assets that will never be worth what they owe on them. If the real rate of return wants to be below zero, you gotta spend instead of screwing with the interest rates. At any rate, you probably shouldn't read in to my statement too much, lots of assumptions in there.

# ? Oct 23, 2014 20:25

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# ? Jun 8, 2024 10:45

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

Rhobot Mk. II posted:

Ford Credit and Toyota Financial Services

How do these folks raise the capital for the loans?

# ? Oct 23, 2014 20:43

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