Whispers from the Edge of the Rainforest: Toronto Star

Wednesday, October 9, 2013

Pre-sales closing crunch in Toronto? And... Vancouver foreclosures running at 6-7 per working day.

Debt is endemic. They use lines of credit to make mortgage payments. They routinely increase the size of their home loans to renovate. Four in ten people now say they have trouble paying their monthly bills. And yet 70% own a house. Prices have been bloated by cheap money, not greater income.

That's a quote from one of Garth Turner's posts (May 16th, 2013)

"Endemic Debt" comes to mind when you read this article in yesterday's Toronto Star - Toronto real estate: Condo buyers ‘scrambling' to close deals: Mortgage brokers have seen a surge in people who bought pre-construction condos a few years ago and are now “scrambling” to get financing to close deals.

Mortgage brokers, realtors and developers have seen a surge the last few months in people who bought pre-construction condos two to three years ago “scrambling” to get financing to close deals.

Some have had to walk away from deposits worth tens of thousands of dollars. Others have been forced to borrow from family — or against their principal residence — to come up with final payments on condos that lenders are no longer keen to finance, according to interviews with a number of players in Toronto’s condo industry.

Hardest hit have been the self-employed who had pre-approvals from lenders when they bought their pre-construction units. But now, with the unit almost complete and final payments due, they are being told they need 35 to 50 per cent down, instead of just 20 per cent of the purchase price, unless they want to rely on secondary lenders offering rates that can hit double digits.

Many investors who bought units intending to flip them on completion, or rent them out for a few years, have also been shocked to find they thought they had pre-approvals, but they are no longer being honoured in the wake of tighter lending rules imposed by Ottawa.

Can you imagine what things will be like if the Federal Government responds to the idea that mortgage debt is a threat to the economy?

Or if interest rates really do start to rise?

On another note, an interesting post over on Vancouver Condo Info from Ham Solo

From the start of the last paragraph: "Looking at a couple of weeks of data, adjusting for double-counting, we are seeing Vancouver foreclosures totalling about 6-7 per working day."

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