The Real Estate Podcast

A Deep Dive Into Mortgages: Rates, Real Estate Trends, Buying Tips, and 2025 Forecast | EP309

In this episode, Ariel Kormendy and Adrian Trott delve into the intricacies of the real estate and mortgage markets, with special guest Cameron Mackie, exploring historical trends, current challenges, and future predictions for 2025. Topics include the cyclical nature of the housing industry, differences between US and Canadian mortgage rates, the impact of inheritance on home buying, recent changes in mortgage switching policies, construction permit delays, and strategic advice for first-time homebuyers and investors. Whether you're looking to buy your first home, invest in property, or simply stay informed about the housing market, this episode provides valuable insights to help you navigate the landscape effectively. ************************ 0:20 – Intro 3:15 – US vs. Canada Mortgage Rates 5:04 – Impact of Inheritance on Home Buying 6:35 – Mortgage Switching Policies Explained 10:49 – Big Banks' Aggressive Rate Strategies 12:33 – Tips for Renewing Mortgages Before Year-End 15:05 – $1.5 Million Cap on Insured Mortgages 21:07 – Construction Permit Delays and Housing Supply 27:50 – Renting vs. Buying Strategies for First-Time Buyers 35:18 – B-Side Lending and Amortization Options 42:23 – Reverse Mortgages and Living Inheritance 44:46 – Final Thoughts: Homeownership vs. Renting ************************ Want more real estate podcast discussions? Watch it here: youtu.be/uLhNb8fdHt4 Listen to it here: http://www.soundcloud.com/ktrealty Catch clips and highlights of the show here: http://www.instagram.com/kormendytrott ************************ Our Social: Instagram: http://www.instagram.com/kormendytrott  YouTube: www.youtube.com/user/kormendytrott  Facebook: http://www.facebook.com/kormendytrott  Twitter: http://www.twitter.com/KormendyTrott Soundcloud:http://www.soundcloud.com/ktrealty  LinkedIn: http://www.linkedin.com/company/ktrealty  Pinterest: http://www.pinterest.ca/KormendyTrott  TikTok: http://www.tiktok.com/@kormendytrott?lang=en ************************ In 2011, Ariel Kormendy and Adrian Trott formed The Kormendy Trott Team, now often referred to as KT (thanks to our logo!). The foundation of KT is built on providing unmatched value and attention to detail in everything we do. From our ever-expanding, comprehensive list of exclusive services to our expertly trained team, you will receive the highest level of care throughout your entire real estate journey. Originally a team of two in Milton, Ontario, the KT Team has grown into a large team of exceptional REALTORS®, a client-care department, and now includes KT media, KT Commercial and KT Property Management to provide our clients with a complete lineup of genuine, professional, and proven services across Halton Region, Peel Region and the surrounding Regions within the Greater Toronto Area. We’d appreciate it if you’d subscribe and follow us for behind-the-scenes footage, real estate tips, industry secrets, exclusive listings, The Real Estate Podcast, and more!

Broadcast on:: 14 Oct 2024
Audio Format:: other

So let's just say it's 1.5 million. Your minimum down payment now will be $125,000, right? But in order to get that mortgage, you need like a $350,000 household income of a 310. That's when little to knowing a debt. - Which is probably more than double the average. - Correct. Hey everybody, welcome to episode 309 of the Real Estate Podcast. Today, Ariel and Adrian talk with Cameron Mackie of Dominion Lending about mortgages. Hope you all enjoy. (upbeat music) - Welcome to the Real Estate Podcast, your go-to source for raw unfiltered stories and expert tips. Whether you're a buyer, seller, tenant, landlord, or realtor, join us as we dive into the world of real estate. (upbeat music) - Good morning everybody. - Good morning. - This is an exciting day. We've got our first guests on the Real Estate Podcast in our new studio. - We're in the new studio. So we're testing out all the cameras and hopefully it works well. - Beautiful spot. - Yeah, welcome Cameron. So I'll let you introduce yourself, but Cameron, we've known for, actually I don't even know how long we've known you. - Eight or nine years? - The first time I met you, I was on a boat. I was on your boat. - Yeah. - And like Ontario, and you were whining and dining a bunch of people, having a good time. And. - And then you invite your hands. - The rest is history. - Yeah. - That was the next time. - Absolutely. - Did we go on the boat again? - Yeah. - I don't remember the second time. - Well you probably don't remember. - Was that the first time? - Was I drinking? (laughing) I remember. So yeah, I can't remember much. - I don't remember much. - Introduce yourself to the audience. - Cameron Mackey, I've got a mortgage brokerage with up in Canada with Dominion Lending Centers currently. Down in the US, I've got a mortgage brokerage as well. So we do look at both sides of the border and it gives us some pretty good predictions of how things are going on, 'cause we can see what's happening in the US market compared to the Canadian market. And seem to, yeah, be very similar in specific ways, but then very opposite in others. So yeah, it's been doing it for 18 years now. It's been a long time. So, yeah, almost two decades, it's crazy. But, which is good, 'cause then a lot of the stuff we've found over the years, it actually repeats itself, very similar. Like if you really look at historical numbers. - Like the industry is very cyclical in terms of ups and downs and how it's trending. - Yeah, it's almost, it doesn't reinvent itself. It's very similar year after year. Obviously thrown in, yeah, you've got a pandemic or whatever, it's kind of throws things off, but very similar. If you look at statistics of, let's say, every eight to 10 years, you've got a spike in either rates or economic issues, all that kind of stuff. So it's interesting, but this one in particular is a little bit different than the others, but yeah, we'll see how it goes like 2025, I think it's gonna be an interesting year for sure. - Between the US and Canada, do you find like one is trailing the other? So you'll see changes in one before then the other and then it'll follow suit or are they in what ways are they similar or different? - So that is true, they do follow each other. Like when the Fed in the US changes their rate, usually Canada will always have to follow. The only difference is because the average mortgage rate or term down in the US is 30 year. - Right. - Here it's five years. So that truly if you're a homeowner down in the US and hey rates are too high, you just sit put, nothing changes. But here, like I think 65% of Canadians are up for renewal in the next year to year and a half. So if you're going from one and a half, 2% of a rate and you're jumping up to four, four and a half percent. - That's the same. - And what's the average mortgage for that dollar wise? - Dollar wise, 350,000 right now. It depends on like Ontario or if you're looking at Canada. - Yeah. - It changes, it changes a lot. - But for the average person, that's a pretty significant jump. - Our location where our average mortgage amount is about 635,000 right now, it's huge. So yeah, area to area, it's definitely different. - That's lower than I would have thought for Oakville, 635. - Yeah, it's been around there for about the last four years. It's as much as the values have jumped. Like really think of it, there's 50% of Canadians really only have a mortgage, but we think that's not the case. We think everybody has a mortgage, but that's why the value itself is put it this way. A lot of the new home buyers, it's the bank of mum and dad that's given them a lot of, we're refinancing the parents' house to give them money now so they can get into home ownership. So that's why it keeps the mortgage amount as low. Well, it's not really low, but 630,000 is still hefty. - There's a ton of articles right now over the last month or so about the early inheritance that is kind of trickling down from the boomers to their kids and grandkids. And the average right now is, I believe $120,000 or so that is gifted to first-time home buyers and it's like $180,000 gifted to people that already own a home and are upgrading. So if they own a town home, mum and dad give them a 180 grand so they can afford to get a detached home or whatever. - It's pretty significant if you think about it. - Yeah, nice. I just wanna actually jump ahead, Cam, because we made some notes on things we wanted to talk about today. And last night, last minute, you threw in something else, which kind of ties into what you just talked about about mortgage switches that they now qualify on the contract rate rather than the qualifying rate. So can you just elaborate on that? - So that just came down the pipeline, right? - Yeah, it just came out last week. And again, until it's fully announced, which is gonna be November 21st, that's the next quarterly announcement through off-speed, they're gonna announce it and everybody basically will follow the same guideline. Lenders currently are already setting up. They're working with lenders to launch this. So it's not like we're waiting until November 21st in order to actually have it fully launched. So it's currently active, you can work with it. The lenders have to obviously change their policy and their guidelines and everything in order to switch. Now, as much as it seems easy, yes, they still have some work to do. But what it is is when you're up for renewal, you're gonna have your mortgage, normally what would happen is if you went from, say, you're on a 20-year amortization remaining on your mortgage and you're up for renewal, what do you do? Okay, if you wanna call around for another rate, if lender B has a better rate than lender A, your current lender, you should be able to move. And yes, we usually, like to our clients, they switch and that doesn't cost them anything, but the problem is they have to re-qualify at the new qualifying rate, which is way higher than when they initially got their mortgage five years ago. So it made them, it restricted a client from saying, "Hey, I want the best mortgage rate." And what lenders were doing is they were saying, "I know that you had a hard time getting your mortgage "the first time around when rates were lower." So what do they do? They jack up the rate. I've seen a lot of renewals where we can't actually move them because of qualification standards. 'Cause they gotta go through the stress test. Right, the stress test. It hurts a lot of customers. They can't go because they're stuck. 'Cause there's a monopolization. Correct, yeah. So they're anti-competitive. But not only both, I mean, that's one component of it, but it is also even still going to take more work because with the current lender, they don't have to provide, correct me if I'm wrong, but they wouldn't have to provide proof of income and all that stuff again. But with a new lender, they would have to go through the motions of a formal approval. Yeah, so they do have to get approved with employment letter, pay stub, all that, the normal stuff is if you're attaining a new mortgage. But when it comes to the numbers, the numbers, like realistically, just as an understanding of the qualifying rate, let's say it's a four and a half percent, let's say the current rate as of today. So you wanted to move from to the next lender. So you would have to qualify it six and a half percent in order to make that switch. Right. So the new rules allow you to actually get approved on that switch at four and a half percent. So it knocks off two percent. And two percent on a 20 year amortized loan, right? The switches is made for specifically you're not touching the amortization. You're not touching basically anything. You're just going from one lender to the lender that has a better rate. So as soon as you, let's say somebody did want to extend the amortization, would that revert back to having to qualify the higher rate? Yeah, that's a, then you're into your standard refinance structure and that's you're qualifying it. You're the contract rate plus two percent. Interesting. Well, we should see some more competition then if you're... And that's good. If 65% of the country is up for renewal in the next 18 months, then that gives them a little bit better negotiating rate with their current lenders, right? Or negotiating power with their current lender. Yeah. I'm also trying to find out if we've got, like because all the details have not come out yet, I will. We need to have that, like when you go to the movies and they have the screen that says here's a little animated. Robbie, Robbie, we're going to need some instructions for guests. I thought I'd turn it off. Or we should have a little bucket. We'd put our phones in a bucket. I thought you were recording yourself because of the way it's tilted towards you. No, I got my notes just in case if I forget something. A little cheat sheet, that's smart. So what was the saying? Well, on the topic of renewals, you had mentioned before we got started with the podcast, you had mentioned that October 31st, is it all financial institutions year-end? Right. So I saw your previous podcast and you're announcing that the banking sector, like the big banks, the big five are really aggressive with rates right now. And that is true. Like we're most of our book right now and refinances and purchases are all going to the big banks. So because they're so aggressive. And the reason why they're so aggressive is because their year-end is actually October 31st. And there were a couple of other regulations that they were supposed to pay, and I won't get into the detail about it, but they had to allocate about 3% of their book in order to, with this new right that was coming and they had to basically put money towards it. The government backed down and said, "No, you don't need any more." But the banks basically have this extra pool of funds. So what are they going to do with it? So now they're really pushing money out as much as they can. So if you can get a pre-approval now between now and October 31st, great, you're probably going to get a really good rate. Our conventional rates, the big banks, they can't, like we, no other monoline can really touch them right now. So it's just because their year-end is ultimately what it is. So if somebody's watching this and they have a mortgage coming up for renewal in the next several months, like at what point do you think it would be worth them pursuing a renewal earlier in order to get in before that time? - I would do it. It's 120 days for the rate hold, which is good. However, with the way the market's trending even right now, they could actually decrease. Still, the rates could still decrease naturally. And then of course, as long as you lock in, you know that you've got the really good rate. - Right. And if rates don't decrease, it'll be, you know, you switch at that time. So. - There were some changes for first-time home buyers and new home construction buyers. We chatted about that a couple of podcasts ago. How do you think now with the $1.5 million cap on insured mortgages and the extended amortization for first-time buyers, new home buyers? Do you think that's going to play a big effect on the market? - I personally think it's a little bit more of a political stunt, but I don't think it's gonna have a large effect. As much as it is still gonna move the market, absolutely. I think 2025, we're gonna have good movement. Growth, not so much, but yeah, the actual- - Who really wants to tell us is 2025 prediction? - No, no, no, not yet, not yet. - Not yet. - We'll be back to the end, right? - Not yet. - We already started predicting very well. - Well, what we had thought with regards to that change was that it wouldn't so much. I don't think it would have, I think what it would affect the most is that from our perspective, what we see a lot of is houses that kind of hinge on that $1 million value. You'll get a lot of, even in multiple offers, people just are capped at $9.99, $9.99, 'cause they don't, they can't, or don't wanna go over the million or up to the million because it changes the down payment requirements. So we think that in some segments and certain situations that may benefit sellers, where buyers are now able to spend a little bit more without having the change in down payment. - That's also why the townhouse sector has done very well, 'cause it's kind of within that million dollar. It is not as high condo fees, but yeah, jumping into now the 1.5 gets you into like Milton area, stuff like that. It gets you into a single family dwelling, like it gives you the options, right? It really is gonna push that market. I think it's definitely gonna help. The difference though, like on a calculation in percentages and stuff, we'll go into those numbers. So right now it's about 4.2 times your income. - Affordability. - Affordability, yeah. When you're doing the calculating ratios for the boring stuff and the mortgage, the mortgage is in the back end, but the change we'll bring it up to, it is only a 0.3 times differently. So it brings up to 4.5 times your income from 4.2. It's not a huge jump. - Right, so you still have to qualify even though you're allowed to go to that number. - Yeah, so yes, it opens up the doors to, especially, I think it's gonna really help the new construction part of it, to go to the 30 year amortization from 25. That's definitely gonna help. - What was that? - I think that is a speaker dying or something. - Okay, I got an email or something. - Yeah, so it's not a big jump in how much more you can get, but for those who are that don't have more than 20% down, that wanted to get into that 1.5 million and they have good income, that opens the door for them, right? But realistically, there's not many first time home buyers that are making, they basically have to have a household income. Oh, do you guess how much it has to be at? So let's just say it's 1.5 million. Your minimum down payment now will be $125,000. But in order to get that mortgage, - You need like a $350,000 household income. - About 310, that's what little to knowing a debt, right? - Which is probably more than double the average. - Correct, average household income currently in Milton is hovering around 140 something. - Yeah, so that when I look at those numbers. And it's not that much higher in Oakville, surprisingly. And Milton is higher than most of the surrounding areas, which is quite interesting to me. But you look at like our buyers from the past, and I know so many of them purchased, you know, 1.5 million dollar homes and only putting 20% down. And I'm like, you got a 1.1 or a 1.2 million dollar mortgage, I'm like, I know you don't make that much money. Where, what are you doing? - Yeah, so that's why I think it's not going to make a large dent, like a change in the industry. It's the beginning. I think there's gonna be a lot more changes to come. Again, looking at historical, what they've done. Give us your prediction, Cam, come on, soon, soon. - I think there's a ballast too, because they don't, what they're trying to avoid is they don't want to make it overly affordable. They want to drive prices down, because the whole point-- - Have a balance. - Yeah, the whole point to raising the rates and getting inflation in check was they wanted to stop the craziness that was happening, I mean, across various industries, but in real estate in particular, it was just everything's unaffordable. As soon as you start making it too affordable, then you're going to run into that competitive marketplace. Again, it's going to start driving prices up. So it's kind of like, there's got to be a balance somewhere in there between building more homes, increasing supply, and making it a little bit easier for people to get approved within reason. - I do believe that the government definitely has failed in the last little while, with how they should have restructured a lot. If you look, again, historical, to previous government, like the Harper government, they change things as this is pre the collapse, 2007, they came up with a 40-year amortization. The rates were, they were already high, our rates were actually higher, so they should have done something for the homeowner. They restricted, the years later, they started realizing, oh, people are taking a 100-year, or 100% loans with 40-year amortization, and it's like they're paying interest only basically, 'cause the rates were so high. And it was, then they started changing things as the scope changed, but what's happened is the last couple of years, all of these changes, the driving of the value of the homes that they didn't restrict, they should have. They should have put the changes in play at the time, like maybe even anything, like refinancing, like we were able to refinance back in the day to 100%. - Oh, wow. - It was crazy, and then of course it would be CMHC, like it would be insured, but then they stopped refinancing. So everything's changed, but I find it really odd that they didn't make very many changes in the past little while. The number one thing though, I do wanna press on, no matter how much you change the mortgage rules, how much you do, like regardless of rates, it's affordability aspect, that's a day to day for someone to be part of home ownership. But in order to stop or control or decrease, whatever it be, the value of the property is the amount of new builds that they put out. And I don't understand to this day, we have the second largest country on the planet and we have an issue with builds, new builds. And they say that it's the protected area and stuff like that. But what about elder other provinces put out more permits there? And then people will say, you know what, it's really expensive to live in Toronto. I still work from home, a lot of people still do, that's why a lot of people now are, like a lot of my clients are Canadians and they live down in the U.S., I'm not supposed to say that, but they work from home. - For five months and 29 days. - Right, right. So for them to put out more permits out in Alberta or anywhere else or anything of the sort, like they can control the amount of growth on the property based on how many permits they put out. Down in the U.S., they just announced actually, they put out new builds or it's up nine percent. They just, so what they do is they realize, okay, well, we have to control more so they put out more permits. And then, hey, if there's too much supply, let's decrease it, work with the builders. Put out, it was every development, don't take a decade or two to put out a development, to get it approved. Say, okay, we're gonna allow you permits for phase one. Get on with it. Then they review the current market conditions. Okay, values are skyrocketing, put out two more phases, get going, get going in the larger scale, obviously. - Yeah. - That's ultimately how they're gonna control it, but they don't do it, so you know mad at me homes, everybody knows them, especially around here. The guy's owned property for over a decade, trying to get site plan approval. - Right. - So, where do you think he went? When you realize it's okay, this is taking too long, too much money. - Building lots in Florida and Carolina's. - In a year and a half, I think it was about a year and a half to two and a half years, he was able to take, he said, screw this. He's still building here, but he started building down in Florida. And he had an entire subdivision approved within a year and a half with, we're talking resort looking with clubhouse and everything. Boom, like build it. So it's, they've got to change how they're doing things here in Canada and definitely how the government can control growth or decline is going to be based on how many permits they put out. - Well, now the issue also becomes once it's permitted, the actual cost of the land, the cost of building and the affordability that way as well, right? Like we reviewed a stat, I think it was published in the Globe and Mail a few weeks ago about the length of time that applications take to be approved. And right now in Milton, it's just over two years and it used to be 10 months as of, I think it was 20, about five years ago or so. So in the past five years, it's more than double the length of time that the application gets reviewed. And you look at, 'cause Milton has, I don't know if the numbers are accurate, but one of the highest new construction numbers in the GTA and you look at the prices of some of these homes and it's, you know, they're ridiculous. And that's because there's not a whole lot of competition, right? So to your point, build more homes, supply and demand, drive the prices down a little bit and give more supply to, we recently reviewed all the immigration statistics. Like there's tons of people moving into this country on top of whoever is living here now. - Yeah. It also goes down to just the cost to build. - Right. - It's become very expensive. - Yeah. - Clients and- - $400 a square foot. - Well, I had clients in Pusselinch that we, they severed their lot. We sold off the preexisting portion and their plan was to build on the new lot. But by, between starting the process, selling the house and starting the process, they got permits to build. The price went from like, they were around, I think originally $400 a square foot. It went puts something like 700 a square foot to do what they wanted. I think it was a quarter million dollars just to frame the house. So they said, well, screw this. So we sold the lot. And then also just recently, my brother and sister-in-law, they have a lot in Costa Rica. They were really excited to build on and they just found out that from the last time I quoted to now, which was, I don't know, of course, a few years maybe, the prices went up 40%. So they're not building- - Costa Rica. - Yeah. - So I think that's a problem everywhere. - And while to camp. - At this point, you got all of the North American people moving into other places of the world because of the ease of working remotely, right? - Well, not only that, it's just the cost of living. Like, I talked about this in the last podcast or one previous where a guy that we often use for flooring in stairs, that's a specialty. He had several people working for him. They were all Polish. And then during COVID, they all moved home. They said, fuck, this is too expensive to live here. I don't like everything that's going on. So they retired and moved back home. So- - Sure, they made enough money in a year or two. - Yeah, they sold the house. - They sold the house. - Exactly. - Well, you've got, like, to my point of, like, I was saying Alberta, but what about out east? You've got like- - I've been watching Prince Edward Island. Just as an example, their market has actually taken a little bit of a crash. They have the biggest decrease in home values over the last year. And, you know, we went there for a conference several years ago and got to walk around and know Charlottetown a little bit. And I thought it was just a beautiful place to buy property and, you know, the people are great. The location is amazing. I mean, obviously you have some differences in the way of life compared to Ontario. But a lot of people always ask for that. I want more land. I don't want to, you know, smell my neighbors in the morning. I want a bigger property. I want to be close to the ocean. - We have a lot of clients now that are actually buying out east and because they know that it's cheaper. And of course, there's, for us having licensed, we have people within our brokerage that are licensed out that way. So we have to move it over. - So can I actually... - Yeah, let me ask you a question. If, because we're big on, if you can't afford to buy where you want to live, rent where you want to live and buy where you can afford. So as an example, somebody that's in their 20s or 30s that is a first time home buyer and they live in Halton region and they can't afford to purchase property in Halton region. So they rent something. Is there any difference with that individual if they wanted to buy a property, let's say out east in Canada and getting a mortgage for that property? - Same thing goes for if they live in Toronto where they have to work, they make great money and they buy a property out this way. - Yes, that happens as a rental. - That happens often. - And yes, it happens all the time. Actually, one of my, because we do a lot of mortgages in the US for foreign nationals, they invest, half of our book are clients that do not own their own property in Canada because they don't have enough money to get into the market here. So it would be the same case of buying out east. It's a lot cheaper, cheaper entry point. - From an approval standpoint, is there any difference? - No, you just, you're buying it as a rental property. It just has the debt service, everything as a rental. So there's no big issue. - No difference out of province. So if I was buying a rental in Ontario versus Alberta, there's no difference. - No. - Okay. - No, 'cause the lender, you're gonna have a small premium on the rate 'cause you're buying a rental property. - Sure. - But it's not significant. But the same rules apply as it doesn't matter what province you're in. - But you can also do longer amortizations isn't that still the case? - 30 years. - 30 years. - Well, so you have to, when you're buying a rental property, you have to buy it with 20% down. So in order to make everything debt service, you're generally always going to a 30 year amortization. If you go to 25 year amortization or 20 or even 10 on a rental property, first of all, it's not the best thing to do, but it doesn't change the rate. It doesn't nothing changes. So you might as well go to 30, bring it all the way out because then you have better cash flow, right? - Right. Any tips for first time home buyers that are in the market and any tips for investors that are, 'cause I think, and you're heavy into this and study it and watch it. So I'll get your opinion because two podcasts ago when we started talking about all these mortgage changes, what I commented on is over the course of the past two years, you've probably seen this. A lot of investors divested from their rental properties. They sold them off 'cause they were bleeding too much every month. They were in the red, they couldn't afford it. Their personal finances were strapped, et cetera. So we saw a lot of investors sell off property. I think they're gonna be coming back. We've already started getting some sniffs. And I think that's gonna start to increase in 2025. Would you agree? - As long as the rates continue going down, that's ultimately what it is. 'Cause the affordability aspect for a rental property, if you can't, if it's not servicing, it's just, and yeah, it is true a lot of investors are selling off. Obviously they're changing with the capital gains, like all the changes with the taxation, which I believe if the government's gonna do anything in the over the next little while, they're actually gonna come after second homes and investment properties, tax or more, which will push away more of the investor. That's again, another prediction I do have, but we'll see how that comes forward. But yeah, as the-- - Sell my cottage now is what you're saying. - But yeah, your capital gains is already going up, so you're your toast, right? So, but I think let's say the next, personally, I think they're gonna put like a second home extra tax per year, right? Like a-- - Luxury tax. - Yeah, luxury tax, a higher property tax. I've been wondering why they haven't done that for a while, 'cause I have a lot of my clients have like four properties. 'Cause I've been doing it for so long, they've slowly, they're not worth as grown. And what do they do with their money? They're buying more investment properties with it. And naturally, it's like, if my average client has two properties, they're probably gonna try to go after that, right? 'Cause that'll also help stall the market a bit too. If it starts to go back up, that's one thing that they might end up doing. - Again, with having to balance things, though, is a lot of, there's a need for rentals, 'cause there are, like, I don't think the prices will ever come down to a point where people who are not able to afford, like, there's still gonna be a group of people that need rental properties. - Yeah, yeah. - So, you know, these investors provide those. So, where's the balance? Where, like, you're gonna tax them more, so you're gonna pull some out of the market because all of a sudden, other investments look more lucrative, but then that's gonna potentially drive up the rental market causing issues in that segment because you're now removing inventory from there. So, you've got less to play. - You just gotta push, again, back to the permits. - Purpose-build rental buildings and stuff like that. - They've gotta do more when they're building out infrastructure they gotta understand. There's, okay, affordable housing. Even just naturally putting out more permits and keeping the property values from going up as fast then over, say, a decade, your incomes will start to increase and catch back up 'cause it's so far out of whack right now. Like, the changes, like I was saying, if you're putting down $125,000, if you're making household income, 300,000, 320,000, you can finally get that mortgage amount or the increase, the changes that are happening on December 15th, but your monthly payment, that's a hard stuff for right there. Like, it's huge money, right? It's a million dollars now is what, about $7,500 bucks a month, something like that. - The other thing that I've noticed too is the higher income you go, so you're in a different tax practice, a single taxation, as the more income you make, the higher you get taxed. That's not factored in to the approval. The ratios or the ratios, it doesn't matter how much you're making. They don't factor in, oh, you now are making 75,000 so your percentage of your income is changed. - So they're looking at gross. - They're looking at gross. So what ends up happening is you have $300,000, you're now paying 53% or whatever it be, like I'm not an accountant, but it's high. It's like 50% of your income is going to taxes. So you're really only making 150 grand. - But if you're a self-employed, are you still looking at gross? - No, no, no, well, it's whatever is actually on your, your notice of assessment, if you're going to the A side, if you're going to the B side of lending, then you can use bank statements. There's different ways of qualifying. - When you say B side, you're talking like credit unions or additional-- - Yeah, credit unions, trust companies, generally they're higher interest rates. Sometimes they have fees involved, like lending fees up front in order to close. I actually on the B side, a lot of the lenders are starting to come back with the 35 year amortization, which I do think that on the A side, they really have to press for that in order to help for affordability, get back into a 40 year amortization, which would be great. But yeah, B side is already starting, they're increasing. They actually had it a couple of years back, they clawed it back. And because of any of the, depending on if you're regulated under the banking laws, they're the ones that had to claw back first. But we're starting to see that's finally coming back into the market, which is good. - So, it's interesting. All these things we're talking about when you post things online about each, I can just, I can picture the responses, like everyone's, it's quite controversial. Like when it comes to investing in real estate, people say, well, real estate should not be an investment period, anything to do with essential needs. And then there's the extended amortizations, people are like, oh, great. So we're never gonna own our home, just keep paying forever. And you know, but these things need to happen in order to help people get into owning houses. - I honestly, as I think everybody can agree, I'd rather own a house and be paying interest only rather than paying rent. If you can get into home ownership, do it. - Yeah. - At all costs. It always has, like historically, actually-- - Oh, in this country, I mean, you know, that's-- - If you look at the difference, and I went to a conference in the US just before I came up here, and the average person in, again, this is US stats, not Canada, but the average person will retire. If they owned a home, they'll retire with about $580,000 on average of net worth. Or if they're a renter and they rented their entire lives, the average person in the US that retires only has $10,000. - Wow, yeah. - That's a huge difference. - And that's-- - Clearly, it's a nest egg. And get into home ownership, that's what it means. - I would say that's not to say that real estate's the best investment necessarily, 'cause there's a lot of options out there. But I think it is to say that it can be very lucrative, and we've seen that many times over the last decade, certainly, but I think it's that people just are not educated financially, and they don't, so owning a house is kinda like forced savings for retirement, versus when you're renting, it's like, "Okay, I got two grand, I got an extra three to spend each month, I'm gonna spend it." - Well, that said, people like to spend money, and it is forced savings. Like, if you think about if you're renting a home, like, look at all these people with all these nice fancy cars that don't own a home, right? Don't get me started. - Yeah. - Well, that happens. - That is actually everywhere. - That is the, so again, when I got off the plane here at Pearson Airport, I get picked up in what? A Tesla. You're driving an Uber with a Tesla. I guarantee you that guy doesn't own a house, he probably doesn't, most of the people don't. They don't put their priorities straight, and the first thing that I say to everybody, any of my clients that come to me, and I can have them on the books for years. - Buddy, Tiffany on our team, I don't know how old is Tiffany 26? - Yeah, something in that range. - Still lives with her parents, drives a Tesla. - Well, she's not gonna get an home ownership. - Well, that's another thing, is people are living at home longer. If not indefinitely, multi-generational homes. - You're gonna need a bigger home, bro. - So this-- - I'm okay with that. - I mean, let me change when my kids are teenagers, but-- - Yeah, just bring a boys home, you're gonna want a bigger home. - Again, back to that conference, I was down in the U.S. The average first-time home buyer, 10 years ago, 10 or 20 years ago, was 28. The new stat that just came out is 36. The second home is now 58. - Wow. - The second home is the new stat, which is weird. I thought that was really high, but-- - That is high. - I actually took a picture of it, I didn't believe the first home for 20 years. It is, so-- - We're almost there, but we've been in ours for 14 years, almost. - Well, this is our second, though. - Oh, true, my bad, yeah. I may live here forever, based on how things are going. - Yeah. - I don't know, I just-- - But that's okay. And you paid off your mortgage. - Yeah, that's true. - But it all correlates, like you've got the average person, their first child, right? They're in their 30s, right? So everything's shifted up. - But you know what's crazy about that, if you think about the logistics of that timeframe, is if you're buying your first home at 36, are you really living with parents or family? No, you're probably moving out and renting something during that course of time, right? In your first 36 years of life. So now you're renting. How are the hell are you saving up your down payment? - I wish I had this stat, I read an article on the weekend and it was talking about that and it was talking about how the average renter would take something like almost 30 years to save up a down payment. Based on the average income and the average amount of rent. - Well, this is why I was talking about the early inheritance and gifting from the older generations down, because I think that's gonna play a huge factor over the next five and 10 years, which is also, if you think about, sorry to be graphic, but people dying, there is an older demographic that owns a lot of real estate and has a lot of equity in that real estate, right? You think about the grandparents that we all have that bought their homes for 100 grand and now it's worth a couple million or whatever, like that's 20% of Oakville. - Yeah. Well, you'll probably see like estate taxes and stuff going up too. - Yeah. - Well, they just did, right? - Yeah. - Everything's gone up. The government already knows that the largest transfer of wealth is gonna happen in the next, I think 10 to 20 years. They've already predicted that. That's why their taxes are going up, your estate tax, your capital gains, all that kind of stuff. They're trying to increase taxes 'cause they want that money, right? - We should do a seminar with an accountant, the four of us and do it on planning for inheritance. - Yeah, yeah. Actually, one thing, and I'll quickly add to this, so we do a lot of reverse mortgages. At one point, I was one of the highest producers and now the rates have gone up, so it's released. - Explain a reverse mortgage. - Okay, reverse mortgage is basically if you're retired. You're over 55 and you wanna take some funds out of your property. You cannot get qualified on the standard way of financing to get money out. You're on CPP, OAS, like your pension, any form of retirement income, and the money that you want is just not accessible. - Tied up a bit. - With the standard ways of getting approved. So as long as you can prove that you can pay your taxes, your property taxes, and you have, there is a ratio that's very different than your standard way of financing, then I can provide you up to basically 50% of the value of your property, and you can use that to do whatever you want with it, and you don't have to pay any monthly payments on it, because reverse as being no monthly payments, the mortgage obviously will increase slightly because you're not paying it down or not paying the interest, so it's slowly ballooning into that, the property, the mortgage on the property. - So you're advancing the equity is really all you're doing, right? - Right, so what we're doing is we're doing, and it's happening a lot, is living inheritance. So it is, if they transfer that out, they refinance, give the child or their grand, or the grandchildren the money, it's living inheritance, it's actually tax-free, and it's a gift to the person that they give it to, so they're not taxed on it, and they take it out of their property. So now this living here is when they pass, and it goes to the estate, that mortgage is registered, so that gets paid out, it's not part of the probate, right? It's, it readjusts itself, so they save a lot of money, for sure, and that's actually a pretty hot thing to do, right now, it's everyone's trying to pull money out, whatever they got, they give it to their son, which of course, yeah, if their average age is 38 years old, that's probably around the timeframe, you might as well give it to them before you pass on, and it gets destroyed by the government and taxed. - Enjoy it while you can. - You have a conversation with my parents. - Yeah. (laughs) - You don't need money, come on. - Little more never hurts. - Any final takeaways before we wrap up, you don't wanna give us your prediction yet, so I guess we're gonna have to have you back on before the end of the year is up, but-- - I'll give that, I guess, that's not a problem, okay, final takeaway absolutely is we find this with every file, do not buy a car until you buy the house. Just buy a cheap beater, whatever it be, just get to, whatever, get to A to B with your, with a cheap vehicle, don't go and buy the Tesla. It's, I actually was walking around the mall the other day, and I saw that they've got a unit in the sure way with Teslas, I'm like, and it's full, full people are just looking at it, it's like, you gotta be kidding me. Like, there should be an understanding that if you're gonna walk away with a $1,500 a month bill, you're gonna really screw your chances of getting homeownership. - Yeah, well, we talked about the average cost that blew us away while blew Adrienne away. The average cost-- - That was a little heavy touch. - How much was it, over $62,000 is the current average price of a car in Canada? - Yeah. - 62 grand, so if you think of even leasing that vehicle, while now that you're leasing it at 7 or 8% interest, and a 50% residual value that leaves you 30 grand at 7 or 8%, so your monthly payment is over $1,000 easily a month. - Yeah, and factoring that in, it just, it just, it strips you from homeownership. So don't buy or lease a vehicle, buy something if you can. - Don't finance or lease. - Yeah, don't finance or lease if you can buy something cash, buy something you use, just close on the home first and then do whatever the hell you want to have. - Well, it may be right out for a year, so you understand the cost of homeownership before jumping into payment. - Most people won't. - Absolutely, yeah, I know they, I always say though, if you can buy 10 cars if you own a home, but you can't buy one home if you own one car and it's financed, clearly, that's the point. - Yeah, that's a good clip. - Yeah, there you go. - I've been saying that for years. - That's tip one? - So, I guess you guys had me back on here, or had me on here, 'cause I remember the podcast, you guys were asking what your predictions were and all that, right, where the market. - For the market, yeah. Yeah, for the market, that was what, in January? - December. - December, yeah. - Yeah, we'll look back year over year and see who was right. - Yeah, and do I get a prize for that? - No. - Whoever's closest. - Did you make a prediction? You did, I don't remember what it was. - I said it would decrease by 3%. - Okay. - Yeah, you were decreased, you were forced. - I had that. - I was increased by 3, 3 to 5%, I said. - So. - We're almost there to be interesting. - Well, we still got it. - I think it's actually gonna get a little worse, because all these changes are not happening. Actually, so last month, when I actually reached out to you and I said, we should do a podcast because of what's going on. And it's a, it was three point, sorry, it decreased. It's a negative by 3.9%, I'm talking all of Ontario. And I reviewed the stats a couple of days ago and now it's a decrease of 4.4, so it's gone down further. Given all these changes in the market, yes, the rates have gone down, which is a good part of the factor, but like the new mortgage rules, all these changes are not happening to the end of the year. So. - Well, we haven't seen any impacts from the current or the previous rate reductions. So I think we'll need to see them almost double in order to see a substantial change. - Yeah, I think it's gonna be around, I guess it's gonna stay steady around like the 4% decrease. So by the end of the year, going into 2025, though, you're expecting some more activity. - I think the activity, yes, values I don't think are gonna be jumping all that much. - Interesting. - For some reason, I think you're wrong. - Really, you think it's gonna go back to crazy? - I don't think it'll go crazy. - Not crazy, but I think supply is going to be there. - Going to be there for buyers and the buyers will increase. So I think there will be a balance because there will be more supply, so it won't allow it to go crazy. 'Cause when we saw, when we see those crazy times, it's because there's no supply, right? You put an offer on a house, there's 20 other offers because that was your only choice or you had very limited choices. I think buyers will have more choices. - I'm talking about resale market right now, right? But there will be more buyer activity with the rates coming down and I don't know. - Yeah, absolutely, yeah. There's so many people sitting on the fence right now, waiting for those rates to come down. But, and as you said, there's factoring in the amount of supply. I think it's gonna, there's gonna be a lot of movement, but to increase more than 5%, I don't think we're gonna see that. Just because the affordability aspect is still a hard thing to get over. Like I was saying that the average mortgage amount was $635,000 for my Oakville property, or Oakville location, but you would think it would be way more than that for a mortgage amount, not a British price obviously. But, and the reason why it hasn't continually gone up is because the income has not gone up. - Right. - So that's why it's kind of stalled. So, yeah, people are putting more money down or getting the bank of mom and dad help out if they need it exactly out of your point, say in second home, you're getting parents to help put more money down so they can get into that bigger home. So, I think it's gonna be around, I'm gonna say increase 5%. The other thing that might really help change that prediction is going to be if the government actually gets off their ass and helps an actual person in home, in obtaining a home. Like lowering rates is just a small factor, but if you go, if you increase to say a 40-year amortization, if they make any changes on the unsecured or the conventional. - Yeah, which I think we will see it. I really do think so. I believe it's to go right to 40-year, like the US, we can do 40-year amortization now. They're way ahead. But personally, I think it's a political stunt, like I was saying, they're waiting closer, they started doing this now, but now that the election's coming up, they're gonna change everything and say, "Hey, I saved the country," right? That's a shot in the dark, but at the end of the day, I think it's a must. So people can afford their house. It's not fair, as much as, yeah, a loaf of bread is doubled in price. Like they've really got to do something with the housing. It's unfortunate, but yeah, 5% is my prediction. - For 2025. - For 2025, yeah. Got it. - There you go. So thanks for joining us. If we'll put your contact details in the YouTube description, but for those that are listening to the podcast, if they wanna get a consultation with you in a mortgage pre-approval or approval, refinance, all that stuff, how does somebody, what's the easiest way to get ahold of you? - OntarioLenn.ca. - There you go. So go to OntarioLenn.ca. We've known Cameron for eight or nine years. He does a lot of business with our clients and somebody that we trust and recommend on a pretty regular basis. And first time on the new podcast, and we'll be happy to have you back and chat to see if your predictions are right. - And to answer your question about, is there a price for being right for the 2024 prediction? There was, I think it was a $100 gift card. So big money. - Right. - And I know you spent a lot of time in the States. - So I just wanna clarify, it's Canadian funds. - Yeah, so that's like $41 right now. - It was 40 bucks. - Yes, yours. - It's Canadian basis. - All right, guys, nice chatting today. - All right, good time. - Thanks a lot. - Thanks. - Hope you all enjoyed today's podcast and you learned something new today. Don't forget to hit that subscribe button and like button and follow us for more content. And have a great week. See you next time.