When Will Mortgage Rates Go Down ?

[00:00:00] Welcome to the Canadian Real Estate Investor, where host Daniel Foch and Nick Hill navigate the market and provide the tools and insights to build your real estate portfolio. Welcome back to another episode of the Canadian Real Estate Investor podcast.

[00:00:16] If you're just joining us because it's the new year and you're doing the new year new me thing. Welcome aboard, we really appreciate having you. If you are a longtime listener, I would just like to say I appreciate you just as much.

[00:00:29] And thank you for making us Canada's number one real estate podcast. My name is Daniel Foch and I'm a real estate broker and investor and I'm joined here by a handsome young gentleman who goes by the name of Nick Hill. You flatter me, it's amazing.

[00:00:42] Dan, you brought a new year new me. Are you doing new year new me? What are we doing? No, we're doing the same as the same old podcast. But yes, to reiterate Dan, welcome back everybody new old dedicated. If you're listening for the first time, good for you.

[00:01:03] There is a immense amount of value in the 160 episodes of this show so far. And that value does not stop today because we are talking about one of Canada's favorite subjects right now, more gauges. So today's episode, we're going to look at mortgage rates.

[00:01:23] We're going to be talking about what happens when people can't pay their mortgage. That's a scary thought. We're going to be talking about when will interest rates come down. We'll interest rates go back up again.

[00:01:36] Of course, we'll touch on things like inflation, recession, bond yields and then also what affects the bank of Canada's decision to actually change that interest rate. So lots of discussed in. Yeah, I mean there's a lot going on. There's lots to talk about.

[00:01:54] It seems to be the question that everyone's asking right now. So we're going to try to answer them the best that we can and how do we do that? Well, we do that by not really answering because,

[00:02:06] guess what, no one really knows including the people in charge of the bank of Canada, including two lowly guys that sit around talk about real estate, that being us.

[00:02:16] But what we do do is we present and distill all the data and try to interpret it as best we can. So let's start off then. Yes, so it's not a coincidence that Canadian mortgage rates have been about as volatile as house prices.

[00:02:33] The two are inversely correlated, which means that typically house prices rise as interest rates fall as they have for nearly 40 years. And house prices fall when interest rates rise as they have for the past two years.

[00:02:47] Much of this has to do with the fact that when money is cheap, the economy runs red hot and when the economy runs red hot, people flock to real estate as an investment or a hedge against inflation.

[00:02:56] This speculation puts more pressure on the housing market and it exacerbates the inflationary impact, perpetuating the vicious cycle. Yeah, exactly. And the impact of a rate increase can take up to four quarters at least one full year and some people even say to really work.

[00:03:16] It's way through the economy can be up to 18 months. So before they, like one interest rate will take that now we've had many interest rates.

[00:03:26] So after the last seven quarters our economy is now starting to feel the effects of the ten interest rate increases that the bank of Canada.

[00:03:34] Implemented over the last 21 months. So we're finally starting to feel the impact of those interest rates and we're talking about the impacts of the first ones way back when. Now nearly half of all Canadian mortgages 2.2 million mortgages are coming out for renewal over the next two years.

[00:03:58] Now this is leaving many homeowners with the reality of much higher mortgage interest costs at their renewal because a lot of these people that the 2.2 million, a lot of them signed rates in the last few years that were anywhere between 1 and 3%.

[00:04:16] Those rates are now double or triple or quadruple in some cases. Yeah. So some shock I think in the system about to be experienced.

[00:04:26] Yeah. And if you really examine that, like a lot of these individuals are seeing their interest costs double or triple or four acts like you're saying and that could means that their mortgage payments are going up by 20, 30, 50% in some cases depending on what their amortization was and how much principle they were paying before.

[00:04:48] And this is interesting because we, one of our investors who, you know, we have an investor who's stuck in a tougher position, a deal that we're in right and we're and we just got news because he had just been renewing on a 1 year to try and, you know, basically just not be exposed to something for too long.

[00:05:05] They were just at end of being a timing issue that happened probably bought really well in the before the peak took too long to get permits because of the municipality changed something on the way. They were getting permits. They're going to be released through their horrible.

[00:05:18] And yeah, and so anyway it's it's it's leasing now and not perfectly cash flow positive but actually last year that because of that huge renewal jump.

[00:05:28] The mortgage went from like what was it? It was like 2500 bucks a month, like three or four or thirty five hundred bucks a month.

[00:05:33] But now it's coming back down because rates are on the fixed side are lower again because bond yields are coming now we're going to talk about that a little bit later in the episode because bond yields impact fixed rates bank of Canada impacts your variable rates.

[00:05:45] So on that side, the mortgage rate forecast for Canada is a rate hold until at least mid 2024 with some predictions indicating a rate cut at the Marcher July announcements.

[00:05:57] The big six banks all agree in their predictions that while we're not likely to see interest rates come down in time for the spring lending season February to April, we will see interest rates come down this year.

[00:06:07] Now that's interesting, Danckes. We've been we've been talking about the potential of a of a stronger spring market right I mean seasonality, cyclicality that that just happens every year regardless.

[00:06:19] So we'll be interesting to see these predictions and that's all they are. These are all to them. We're going to read them. We're going to read the the big six and their predictions for each quarter, but it will be interesting to see where that first potential cut does happen.

[00:06:35] And if it does time nicely with the spring market because if it does, I'm assuming there is going to be a little bit of mayhem. I don't know.

[00:06:44] I don't know if it goes far to call it mayhem, but I think we saw a strong spring market in 2023 the strongest spring market in Canadian history if you're just looking at price growth in a five year period and that came after the worst crash we've ever seen in us prices in Canadian history in 2022. So right now bond yields have kind of come down and that matters because anyone well actually not anyone in the right mind because people are starting to get back into the variable, but usually the consumers are rational so they'll choose the cheaper rate so they can maximize their borrowing power.

[00:07:14] And so most borrowers are using the five year fixed right now or affects product and so most borrowers are seeing reduction in their capital costs or increase in their buying power in the spring because bond yields are lower and bond yields determine what the five year fixes doing.

[00:07:32] And so bond yields have come down and five year fixed rates are coming down by compare to January, February, rates are lower than October November rates.

[00:07:42] Yeah, no you're right where we are seeing some movement in the right direction. Finally for sure. Yeah. So predictions on our mixed from a bank economist perspective on exactly how much and by when we'll start to see rates decrease these predictions however are always subject to change depending on geopolitical and macro economic conditions.

[00:08:02] We need to keep it on job numbers unemployment inflation and more but regardless this is what the big banks are predicting as of now. So why don't you start me off with BMO?

[00:08:11] Yeah, so BMO is predicting a so right now it's it's five percent we should we should clarify that the policy rate right now is five percent so for Q1 no movement their five percent so rate hold but they do see 25 bit cut in

[00:08:31] Q2 so the policy rate drops to 4.75 and then another cut by Q3 of another 25 bits bringing the policy rate down to 4.5 and then BMO is got the policy rate in Q4 at 4% which is a full one percentage or 100 basis points lower than we were at right now.

[00:08:58] So they are predicting three cuts 125 another 25 and then a 50. So and it's worth noting that everybody sees policy rating Q1 being five percent so yeah no even if you cover that one the big six year right all the big six or in line at that not no movement in Q1 and then in Q2 and Q2 consensus seems to be that it'll be dropped to 4.75.

[00:09:22] So you see a 25 basis point cut in Q2 except for national and TD who are saying 4.5 percent so that'd be a 50 point cut yeah and then in Q3 consensus seems to be that will be this is where you kind of get a little bit further away but the most common I guess your mode is where that data point comes in handy is 4%

[00:09:47] so a lot of people are expecting a full 100 basis points in reductions by Q3 and then in Q4 the same thing policy rate most people are most banks are expecting that to be in the around 4% with some banks expecting it to come all the way down into the 3s you have a 3.5% I guess 4% is the higher balance.

[00:10:09] So why don't we read just each bank and then their prediction will skip to 2 Q3 and we'll just go straight over to Q4 so BMO again we're at 5% right now by Q4 BMO predicts the policy rate will be at 4% okay see IBC predicts that it'll be at 3.5% by the end of the year here's where things get nice and this is the little bit of an outlier here national bank is predicting

[00:10:36] 3.25% by Q4 RBC is seeing a 4% over night rate or sorry policy rate by Q4 so it's going to be at 4% and TDC is a 3.5%

[00:10:52] so we're looking at anywhere from 1 to 1.75 in total cuts between now early January Q1 to the end of the year I mean that's substantial if we see that now it's going to take us a while to get there but that you know 1.75 that's no joke

[00:11:16] I think it's interesting from my perspective because like 1.75 in cuts like when you're getting closer to 200 basis points and cuts by the end of the year it's like how bad is the economy after be for that to take place right

[00:11:28] I don't know if I call that bullish no that again and we'll explain what damn means there as we get deeper into deeper into the show here but

[00:11:37] I do want to go back to something we said before we started going through the bank predictions here and again that's what they are this is this is just predictions maybe from the big banks who probably know a bit more than Dan and I

[00:11:48] were it is it's interesting to see so before we are reading that we did discuss the nearly half of all Canadian mortgage is 2.2 million of them are coming up for renewal over the next two years and that's leaving many homeowners with the

[00:12:01] reality of much higher mortgage costs at renewal so this begs the question can these mortgage renewals have an effect on the housing market and the answer is

[00:12:13] yeah quite possibly they can and they likely will see each sea estimates that the average monthly mortgage payment could increase by a month estimated 30 to 40 percent as mortgages come up for renewal between 2024 and and again 2025 will be another big big year for that this means it can

[00:12:34] be as a whole need to find an additional 15 billion dollars within their household budgets to afford housing costs and you've got any changed laying around it started

[00:12:47] here in the building at that much so while Canadian homeowners are known for prioritizing their mortgage payments above other financial obligations housing costs are clearly causing financial strain

[00:12:57] and there's a noticeable uptick in mortgage delinquencies year over year especially when compared to other types of debt so when we're looking at the 30 to 40 percent increases and monthly payments this is likely going to produce a bit of a ripple effect that could draw so the entire housing market yeah kind of scary stuff so just as an example here let's look at a $500,000 mortgage which is probably low for most people listening to GTA here but a little more standard for people listening across the country

[00:13:26] five hundred thousand dollars mortgage with a five year fixed rate term and a twenty five year amortization that's that's historically the most common mortgage in Canada so originally you would have had a

[00:13:40] one point nine four let's say one point nine four interest rate let's say that jumps up to a five point four five that's a thousand dollars more in monthly payments

[00:13:54] so that's concerning stuff I mean we're talking hundreds or thousands of more dollars a month for people and the worst part about it is we've done full episodes on this is it all of that extra money that your pain

[00:14:08] is going to probably just go to the interest portion of your mortgage loan not even the principle right remember mortgages have two parts each payment

[00:14:18] and interest and the principles actually what you are paying to own more of your house whereas the interest portion is just what you are paying to borrow that money so you're just paying off more of the cost of the money that you borrowed to purchase that house

[00:14:37] and it's not really doing any favors that thousands of dollars a month is essentially just disappearing into the banks vault

[00:14:45] yeah I mean the banks are really the big winners here in this whole scenario so let's move on to what happens in the event that people can't actually pay their mortgage

[00:14:55] and so renewals are too much for some people what happens then the upward trend that we're seeing in mortgage rates is put noticeable pressure on Canada's housing market and consumers

[00:15:04] with some noticeable consequences so let's look at a couple of examples of this distress mainly mortgage delinquencies and power of sales so the mortgage delinquencies are rising most quickly on mortgages over eight hundred fifty thousand dollars so neck and you please

[00:15:19] next scenario this one for me my pleasure a mortgage delinquency this just means that we're seeing an increase in mortgages that have been

[00:15:27] unpaid for more than ninety days that's what a mortgage delinquency means to be fair to like it is worth noting that you really have to almost be like deliberate about not

[00:15:38] paying a mortgage like in that ninety day period like the banks like hey can we help you sell your property hey can we how come you know are you in financial stress can we help you by extending or you know

[00:15:50] to shuffling some stuff around like you literally would have to ignore every phone call that you know what I mean like they don't for that to show up as a data point so i think that while the link with these look exceptionally low in Canada and it's

[00:16:01] there's it's clear why like there are so many compromises that banks are willing to and now regulated to make based on these new rules from the from that we're announced by christia freeland in the Canadian mortgage charter so anyway power of sales are our

[00:16:18] are up a hundred percent since last year right so so you're seeing them basically doubling do you want to do your thing on this one as well i mean it's good like we you know the people got an order power sale is and

[00:16:30] yeah for sure for everybody here's four closures right like Jordan screen code is a friend of the show we've had them on here a couple times he posted this on

[00:16:39] on youtube like my data from when we were speaking together at veritas and in his like thumbnail he used the word for closure because you have to like most people are thinking that because when they think about the US and you know four closures and

[00:16:51] and watch the big short too many times i think this is why a lot of people don't like be lenders as well because they think sub prime mortgage right well we and we've talked about that in the show as well right like why there's such a misunderstanding about

[00:17:02] b-lenders and there's that's one of the reasons that most Canadians still i think it's like fifty four forty six or something like that that are still just going directly to the bank and ignoring the broker channel anyways yeah so a power of sale is a legal provision

[00:17:17] giving the lender the authority to sell the property and secure the mortgage and if you want more terms or you're trying to get caught up on that concept we did i a whole episode way back it was like every real estate investing term you need to

[00:17:31] know and maybe we'll do another episode like that in the next couple weeks just for for all our new listeners out there so

[00:17:38] yeah and then you were saying more is the link with these are our way up and power of sales are up over a hundred percent the GTA that's a crazy

[00:17:46] staff yeah for sure and basically and so yeah against the the other distinction before we jump on is a power of sales basically when the lender forces you to sell the property as a seller and a four closure is one a lender actually takes possession of the

[00:18:01] property just so we're clear and so Alberta has foreclosure BC has a little bit of a mix of both in Ontario really only see power of sale and it just depends on how

[00:18:09] efficient the court is taking the process to happen but power of sale can happen in like a month and a foreclosure can take a year because they have to actually take possession of that house so since the

[00:18:19] interest rates have rate rates have started we've seen everything from protest to letters to the government asking the bank of Canada to stop so if Canadians are suffering so badly why don't they just decrease interest rates while the answer

[00:18:29] of the question is quite simply they can't right now the central banks job is to keep inflation in the neutral range of two to three percent and interest rates are essentially the only tool they have to do that

[00:18:39] yeah great point okay so let's revisit the bank of Canada for a moment there the only ones who can raise or cut rates but what determines them making that decision the bank of Canada makes that decision based on

[00:18:57] the growth of CPI the consumer price index that's reported on by stats Canada and CPI is calculated from the price of a basket of goods and services typically consumed by Canadians again we've talked about this extensively in other

[00:19:13] episodes so CPI represents a broad picture of consumer spending across Canada essentially a way to just kind of take a pulse check the pulse of the market right check the check the consumer sentiment what are people spending money on it

[00:19:28] how has that price changed so using these monetary policy tools the bank of Canada aims to maintain inflation as calculated by the changes in CPI within a certain range so the inflation control target sets a range of one to three percent

[00:19:44] as the ideal range for inflation with the midpoint of two percent being the commentary rate so the bank of Canada reviewed its benchmark interest rate eight times a year and they consider all of these different factors

[00:19:58] geopolitics macro economics local they say not political but there are I would say definitely political influence especially when you talk about like you know go we don't think you ever see rate high string in election year under why in the U.S. at least I don't know

[00:20:14] about Canada but so anyway yeah they they they continue to do this to control inflation and a lot of that has to the inflation pieces to do it the political business cycle where you basically have politicians who create inflation and

[00:20:26] politicians who destroy inflation and that's really in Canada you see a lot it's like whips off conservative liberal conservative liberal and and the and this isn't like it isn't partisan language here it's just like that's what

[00:20:41] the political business cycle which is theorized by economists that aren't me have have acknowledged over centuries of of history yeah I mean so long story short inflation it needs to come down right so let's say it does come down

[00:21:00] and then we'll rates follow or what if inflation stays where it is do rate stay where they are we've been hearing a lot of this higher for longer talk

[00:21:11] or what if inflation actually goes up right where I'm so close to that two three percent range but we've seen the levels of volatility in the economy recently

[00:21:23] and so we've got a lot of things to do with the inflation go back up and then would rates follow the inflation numbers so let's look at this and discuss this is what everyone wants to know when will interest rates come down in Canada we already went over the bank predictions you know they

[00:21:40] start in Q2 and they continue through the rest of the year but we're going to go through our own our own ideas your dance so start us off yeah so for me it's not a question of when it's it's why right and it's what would it take for interest rates to come down I think this comes from is this from that's all article this is from the I pulled this from this is all article written by this guy named Daniel Foch this piece sounds like a

[00:22:04] this is a piece of work so interest rates could come down in Canada if any of the following things happen so if government have

[00:22:11] can't a bond yields come down if the market prices in cuts and and kind of tells the government that or sorry tells the central bank that that's expected rate path which we're seeing take place right now that could push

[00:22:23] the bank to start moving rates down rates could also come down if inflation reached the neutral range of 2 to 3% which we're really not that far off in Canada right we hit 2.6 before and everyone had a

[00:22:35] and a really bad at 3.3 and it seems to have kind of flat line but like once those big rate remember a lot of this comes from shelter costs right so rent inflation mortgage

[00:22:45] cost inflation once you're past that the hump that's created by that that all people find us right so the final one is interest rates could come down if the economy fell into a

[00:22:54] recession right recessions are deflationary they're very good at bringing inflation back down it takes about 16 months but they typically will get inflation down to the neutral

[00:23:02] range and so if the economy falls into recession the government probably would be in a hurry to get rates down to stimulate the economy to do the opposite

[00:23:09] have the opposite impact of what we're talking about right now so let's start with bond yields I guess so number one bond yields perhaps the most appropriate starting point when answering the questions when will

[00:23:20] interest rates come down in Canada say that they already have right several Canadian lenders reduce their fixed rate mortgages in early November this is when the government of Canada's five year

[00:23:29] bond yield dropped from nearly 4% to the three point six percent to 3.7% range other Canadian banks echoed the reduction of 30 basis points they then reduced their fixed mortgage rate interest rates by similar amount so this begs the question why did that happen

[00:23:46] so government can a bond yields play an essential role in mortgage rates historically five year fixed mortgage rates trade around 200 basis points or two percent higher than the government of Canada's five year bond yield

[00:23:57] this is why you often hear that fixed mortgages are priced at goc plus 2% we talked about this a couple of times on the show goc being the government of Canada bond yield

[00:24:06] so the market determines the bond yield by paying a price for the mark for those bonds on the market and that services almost like a forecasting mechanism and the forecast is on whether not the market expects

[00:24:18] interest rates are rise or fall during that period of the bond so if it's a 10 year bond and it's high and this is where you hear that a lot of people using the two year 10 year spread

[00:24:28] on as an indicator of recession when that inverts the price of the bond determines the yield and the market determines the bonds price so this is what it means when somebody says interest rate hikes or cuts are being priced in by the market

[00:24:42] yeah exactly and if any of that sounded confusing to you go back to episode 141 can you predict mortgage rates using bonds or we do an extensive deep dive into what is a bond history bonds how they're used

[00:24:58] and how you can get a bit of a prediction going based off of the bond market so now i want you to imagine your a bank

[00:25:11] you have two options the first is you can lend money to the Canadian government the second option is you can lend to homeowners

[00:25:20] you purchase a government of Canada bond when you lend to the Canadian government the yield or earnings they pay you on that they pay you on that bond is akin to that interest rate

[00:25:34] so the alternative scenario you would be able to lend money to a Canadian homeowner by giving them a mortgage sounds a little bit more risky than the Canadian government right so as a lender you might charge them a premium for the risk that you perceive

[00:25:47] and if you know maybe the Canadian government can't necessarily lose its job and so rather than expecting them to pay the 3.65% that the Canadian government pays you might expect them to pay 5.65% or 2% risk premium above what the government pays this is how you get fixed mortgage rates that are priced relative to bonds with a similar duration

[00:26:09] while the bank of Canada can control the variable interest rates through their overnight rate and that decides lenders prime rate they can only partially control how the market price is bond yields and forecast rates and they can influence the market with their language

[00:26:22] and response to the data points that the market uses to price bonds such as employment or inflation which will discuss next

[00:26:30] so let's look at inflation another condition that might cause mortgage rates to come down in Canada is inflation does reach that neutral range and the neutral range is at which the bank of Canada feels that the economy is growing

[00:26:46] and moderately in the purchasing power is being reduced at a sustainable rate so again this goes back to the concept of hard landings and soft landings

[00:26:56] economy is a big delicate thing we don't want to jostle it around we don't want to have a hard landing because things will break so we have to guide it back to that 2%

[00:27:12] so if inflation does reach that target of 2% to 3% the bank of Canada should consider cautiously reducing and just rates slowly to see how it impacts inflation now if we look back at the hiking cycle that we just experienced

[00:27:26] not only was it an aggressive hiking cycle because of where it started and where it finished but it was also aggressive based off of how quickly it happened right we always heard

[00:27:37] this is one of the most aggressive hiking cycles in history this is it was just so quick the way that it happened now again going back to the top of the show we know that it takes

[00:27:48] let's say a year or more for one interest rate hike to be felt in the economy now again you add several interest rate hikes their pain is going to keep on coming so the more pressing questions are how far would interest rates go down from where they are now

[00:28:07] they would likely not be reduced to the record low levels that we saw during the pandemic given that the economic emergency required low rates to keep the economy moving right we had to lower rates back then because

[00:28:21] we were in member when everyone said unprecedented times like seven times a day man i'm happy we are past that but the press it into the use of the word unprecedented go ahead and going back to those unprecedented unprecedented times

[00:28:36] we you know we didn't have a choice but to go to very low rates to pump some consumer sentiment into the economy

[00:28:44] but now that that's all done and we're you know living in a different world we had to ask ourselves what could cause inflation to get back to that neutral range

[00:28:53] I can have one guess and i think we mentioned it in the summary but i think recessions are good way of getting inflation down and it's not and sure or ventile says this a lot like i know watch the guys speak a lot because i've fortunate to speak alongside him sometimes and

[00:29:08] he says you know if the bank of Canada's to choose between inflation and recession they will choose a recession every single time

[00:29:15] so the most likely path towards inflation reaching the neutral range is a recession which were all already likely seeing Canada they did revise us away from it right right i think i could just change definition

[00:29:28] things in reality change that would be nice i am a millionaire yeah so over the history of the financial system recessions have taken an average of 16 months

[00:29:37] to bring inflation back to the neutral range according to economists michael cantor the site can't throw the bank of Canada may proactively reduce interest rates if the economy slips into recession

[00:29:52] trying engineer something called a soft landing which you hear a lot or a softening of that economic impact so this rate reduction would stimulate the economy by

[00:30:01] making borrowing money less expensive encouraging businesses and business activity to grow and invest by using debt i'm just going back to the cause we had so much fun with this the soft and hard landings stuff

[00:30:12] and just a reference for again if you're new to the show we do reference lot of other episodes just because we've been doing this for a while and we've talked about a lot of different things so

[00:30:22] if you want to know more about what a soft landing or what a hard landing is comes up multiple times but we did a full episode on episode 129 can real estate

[00:30:31] and survive a hard landing snup dog and say little jackson both making appearance and so as guests they weren't really guess i honorable mentions cameo's yeah kind of guess

[00:30:44] say go back and check that out if you want more information on can we actually survive that hard landing so kind of in closing you know if you see one of these things take place the other is likely close behind

[00:31:00] these these three things are all semi intertwined the only scenario you wouldn't see them all occur is that the economy is in steg

[00:31:10] inflation where gdp is contracting and inflation is still persistent we really don't want to go there that is not somewhere we want to be yeah you don't want to stag

[00:31:20] and that's not a big thing you can use with swagflation which is when you're swag is improving in your life I have never been lucky enough to never experience swagflation or stagflation so far but I went through a phase of swagflation when i was in high school

[00:31:36] and we all back then yes i mean knowing when interest rates come down is a double edged sword right on the on one hand you've got the reality that lower interest rates could make mortgage payments more affordable

[00:31:50] and increase bind power for potential home buyers but then on the other side of things sorry on the other side you now understand that if mortgage rates come down you prompted me so loudly there too

[00:32:35] and anyway so that's why i just got distracted here you might have heard me distracted or you might even hear most clicking the odd time what tried to switch for next camera to my camera so

[00:32:44] and if anybody listening actually is good at this stuff feel free to give us a share of the people have a whole pay with consulting feeds to help us fix that problem but anyway on the other side of the double edged sword that we're talking about you now understand that if mortgage rates come down is likely to the economy suffering

[00:33:01] and it's hard to say whether or not that's good for housing right like you know a six and a half percent or seven percent unemployment rate isn't

[00:33:10] and it's probably not a market in which i would say you're going to see a strong housing market and this is why it often after you see these huge counter cycles like we saw in the 90s it often takes a really long time for the market to start ripping again you almost go sideways for years and so

[00:33:25] and it's not like to forecast i try and avoided actually it will be worth saying okay and we talked about this in episode one or two of this podcast where

[00:33:33] what happened the last couple of times we saw interest rates go up why did it take place what you know what were the recessionary impacts what happened to house prices after that

[00:33:42] it's worth looking at history and saying could this happen again and it just factor that in as a potential outcome in in your real estate investment decisions okay would i still be happy with this investment if it took

[00:33:55] ten years to get back to the price that it was worth in twenty twenty one or if prices were went sideways for five years or ten years what i still be happy with this investment if the answer is yes then it's probably worth doing and that's what that's

[00:34:07] a summary of downside risk analysis downside risk management right there it's like are you come for what the downside this is why i'm

[00:34:14] embarrassed right it's like i i i i other than like the the cowboys that we work with like you just buy everything like all the time like but

[00:34:20] like i buy an investment in a lot of real estate and i'm very bearish and the reason that that takes place is because i've said okay here's

[00:34:29] the worst case scenario m i okay with it yes this is a good investment done right yeah i mean it's uh it's a simplest that i mean look the first cut by the way the the bank of canna's rate schedule is it starts later this month

[00:34:42] so jan twenty four th will be the first one everyone's expecting nothing to happen march still nothing maybe you know April 10th June 5th July

[00:34:52] 24th we start to see some action if you're waiting for that first twenty five bit cut to purchase i think you've got a wrong

[00:35:04] i i you know the first of all twenty five bips isn't going to if twenty five bips on on a mortgage rate makes or breaks your investment

[00:35:11] thesis or makes or breaks yeah you might need to come up with a different thesis or maybe just go put your stuff in in an ETF i here big coins

[00:35:20] got one now so you know go do something like that um did you see what actually happened with that like no so i mean i saw like thirty people post about it yeah so it came from the SEC Twitter and then basically they

[00:35:33] so the original sweet came out saying big coins body TF has been approved and then um right after that they like shortly after and Bitcoin went up way like he agreed right and then it came in then basically they came out saying

[00:35:48] SEC Twitter was hacked i and oh way and then yeah and then it then basically just went off like right away so anyway they kind of fascinated me because now you know like now you can know how the market's going to respond

[00:36:00] to that's yeah a little bit of foreshadowing there so now someone just needs to make you to the bank of Canada's Twitter like great cuts are coming and seal it happens there and i actually it won't surprise me

[00:36:11] because it wouldn't surprise me if that took place because like it seems like they always don't do that anyone that's listing not that but like door scene yeah not that but like it seems like they do

[00:36:19] kind of leak these policies are laid to see what the reception is like and be like oh that's about idea or like to see if like there's other feedback that they can get from like these like Twitter threads

[00:36:28] where they're like oh we should add that's a great idea we should add that to the policy but this one was interesting because it literally was like a huge green candle and then a huge red candle

[00:36:36] and um and it's it makes me wonder like if it was actually hacked or if like it was literally just their social media manager being like actually like hitting the schedule wrong and that up for three hours yeah honestly because it was expected it's expected to be

[00:36:52] approved today why the day January 10th which is quite a bit you'll hear this episode like a week later but today's Wednesday January 10th and it's supposed to be approved today but it was yeah it was a

[00:37:01] a little bit of roller coaster for what at that period of time when it was too kind yeah anyway anyways enough enough Bitcoin let's finish this off strongly then so you were just giving some some great advice

[00:37:11] on on what this means for Canadian investors and that can be in you if you're trying to buy your trying to buy your first property and that can mean you if you're trying to buy your fifth property

[00:37:20] your tenth property or if you're trying to renovate or whatever investment thesis whatever area you're in whatever you're trying to accomplish what does this mean for you well in my opinion it shouldn't mean a whole lot now obviously mortgage rate and it integrates play a massive role

[00:37:41] in real estate investing that's why we've seen such little activity that's why we've seen the lowest sales and in decades in the GTA here right there's less than 66,000 transactions lowest transaction volume in in decades and and unfortunately that 66,000 sales is dispersed among

[00:37:59] 77,000 agents right so a lot of people not doing deals out there right now you know speaking to real state professionals is one thing but we're speaking to probably primarily investors or at least

[00:38:11] people that are maybe a bit of both right your real estate investor and a real estate agent or mortgage agent or whatever obviously this stuff is important it's great to see what the banks are

[00:38:23] predicting but you should be running your own numbers at 5 plus a percent right if a mortgage if you're again if you're waiting for something to drop 25 or 50 bips it's likely not a good deal anyways

[00:38:37] so this just means to go out and find better deals and to start looking at stuff like power of sales or potentially foreclosures if you're in a different province if you're listening

[00:38:48] from Alberta you know mortgage delinquencies will keep tracking that but you know for me the the main takeaway is keep doing what you're doing keep abiding by the fundamentals of real estate investing

[00:39:03] which are adding value working with the right people and you know again a 25 bip cut isn't going to make or break anybody at this point and anything else you got there then. Not really maybe just

[00:39:18] worth doing a bit of housekeeping before we wrap up here so we have we have meetups across the country that we would love for you to be at we just had one I guess a lot of the Ontario ones got canceled

[00:39:28] because of the big storm that we had on the line on the 9th there next didn't because people don't have to drive to next because he's an urbanite and everyone just walks everywhere down in

[00:39:37] the liberty village but with so we have Calgary Calgary's was good Edmonton and we are we're looking for for local partners that for all of these meetups yeah we're bringing people in Vancouver on people in Surrey Peter Brogis got fired up like literally this stuff is happening across

[00:39:58] the country guys yeah and if you're if your city has a Canadian broh house in it it's super easy for you to become meetup post because you already have a venue because they've been kind of

[00:40:07] enough to put up their venues for these two participate we're working on a similar partnership in Ontario because there's only two Canadian broh houses in Ontario and I guess Ontario in east but yeah we're looking for realtor's lawyers mortgage professionals who want a good opportunity

[00:40:23] to be promoted on the show and be promoted at these events to basically sponsor these events host them be there's a host of panelists etc we have an amazing community built already

[00:40:33] we have awesome like the first ones we launched were in Alberta with cash and homes and and Calgary make as an example and they have put on amazing events they've grown their meetup group to like 450 people they're getting like they think she said last night it was 70%

[00:40:48] shout out to Candace by the way but who who hosts on behalf of cash and then checks into our monthly meetup groups but basically 70% new people they're getting deals they're doing deals

[00:41:00] as big investors going so if you want to if if you want to be part of that growing community we would love to have you just give us a shout send us a message to the show or send me a message

[00:41:10] on Instagram nick a message on Instagram whatever social media platform you want and that is that whole infrastructure is kind of designed to feed into this big national community that we're trying to put together so we can have a big national event where we host thousands of

[00:41:27] investors hundreds of investors from coast to coast in one place talk about all the things that are important to us as investors and so that's something that we're really working to do

[00:41:36] well for the end of the year I think we'll probably we're we're probably going to have a an early bird yeah take it thing for that big we'll do a big national event basically by the

[00:41:45] end of the year targeting targeting kind of I think it's early early October so that October and it would be Toronto yeah early October and Toronto not really going to give too many other

[00:41:55] details away yet just because it's it's early days for for us and this is just we don't have said details crazy amount of well we kind of do but they might change it's a crazy amount of

[00:42:04] planning to get this done and just like with everything Dan and I do we want to do it the best way possible well a big piece is also like putting together an event as a huge undertaking and it's

[00:42:12] also like you can you can do it like like everyone else does and and our goals and not we don't want to be like unicorns but but like we think that that market is already tapped like everybody's

[00:42:22] really done a good job and so we have to we have to do something different to stand out and so it's like we could do it like a lot of the other events in the real estate space and it could be you

[00:42:31] know maybe like a 200 ticket price kind of event and or or we could do what I think the industry needs and what we're hoping to do which is going to be probably a little bit more expensive and so we're

[00:42:42] just trying to figure out how to whether or not the audiences are accepted that how to execute it properly so it honestly I mean any commentary on what you think about what it would look like

[00:42:52] for us to put on an annual event to have all of our audience gathered together and what kind of content you want what kind of panelists you want what kind of sponsors you want to see do you want to

[00:43:00] see a you know a big vendor haul with tables and you can interact with prop text and get discounts just like talk to us we want to hear from where audience wants because that's really who we're

[00:43:12] serving here so I think that's all you got yeah love it a lot of exciting stuff early on in the year day and night or planning big years for both of us on both the real estate acquisition side

[00:43:24] growing the podcast we're about to hit a million downloads which is which is just awesome we'll definitely talk to you guys about that when we get there and we want to just see growth across every

[00:43:34] across all platforms right in the digital world and in real life so if you want to be part of anything we're doing reach out there's power numbers and we'd love to hear from you so thanks so much

[00:43:46] for listening hope you got a ton of value out of today's episode and we will talk to you soon the Canadian real estate investor podcast is for entertainment purposes only and it is not a financial

[00:44:00] Nick Hill is a mortgage agent with premier mortgage center and a partner in the G and H mortgage group licensed number one zero three one seven agent license M two one zero zero four zero three seven

[00:44:15] Dino photos are real estate broker licensed with rare real estate a member of the Canadian real estate association the Toronto real estate board and the Ontario real estate association