Canadian Real Estate - Ep 1: Don't do it!

The new B20 stress test actually reminds me of the B-21 US stealth bomber: looks pretty on paper and has the ability to create devastating results. I'm sure the politicians were thinking of achieving the same outcome, but in order to not make it too obvious, they've changed the 1 to a 0. Or maybe they just like Computer Programming.
Regardless of what they call it: B-20, B-21, A-Bomb, H-bomb, it really doesn't matter; it will have the same devastating effect.

The real estate prices in Canada will be hit hard by this new test.
The buyers of entry level housing will have ~$100,000-$150,000 less to spend. This will have a great impact on all types of housing. Why? It's simple. The housing industry is like a chain. Let me explain.

A young person or couple is looking to buy their first starter home, let's call it Home_1. Now the owner of Home_1 most likely has outgrown that starter home and is looking to move into something bigger, call it Home_2, so their children, Barbie and Ken, will each have their own bedroom because sharing a room is sooo yesterday. Plus, it gives them cooties.
Unfortunately (or fortunately - depending on which side of the fence you're on), the owner of Home_1 will get ~100,000 less from the sale of their home which means, and they will have $100,000 less to spend on their future Home_2.
The owner of Home_2 is looking to cash out and move into something bigger and/or more luxerious, or in a better neighbourhood, with better schools. God forbid Barbie ends up going to a public high school ranked in the bottom two-thirds. Barbie deserves only the best. Plus, Ken needs to play football for an high school that has money for new uniforms every year. Therefore, the price of Home_3 will also go down substantially.
And so on.

Yes, you may say that the price of a house is what the buyer is willing to pay for. That's only true if the buyer has cash. So basically a drug lord, or Bitcoin pioneer. If he depends on a bank to get a loan, it doesn't really matter what he wants to pay for it, as the bank will show him the middle finger.

The real estate scumbags are trying to scare the people into paying more than what they have to. Why? It's simple: they work on commission. When you take 2.5% of $100k, that's $2,500. Per house. That's a trip to the Dominican Republic where you can get drunk and make out with the bartender, and no one would know. Or the monthly lease for their BMW. At the end of the day, they're just a glorified taxi service, driving the contract between seller, buyer, and their lawyers. With the rise of many great FSBO services, complemented by sites like realtor.ca, they are as obsolete as a floppy disk in 2017; err, I mean an 8" floppy disk. [A side note: I wonder why prostitution still exists? The average house in Canada is ~500k. That means a realtor gets $12,500 per house sold for roughly 5 hrs of work (when selling. the buyer realtor still has to show the house). That's $2,500/hour. Even high class prostitutes don't make that much. Heck, even Pablo Escobar worked harder for his money.]

What does all this mean? It means the house price will fall harder then the temperatures in Canada. At the end of 2018, the houses will be ~$100,000 (and I'm being nice here) less than what you would pay for the exact same house now. So why do you want to have a higher mortgage than you want to? Let's say mom & dad gave you 20% down payment for Home_1. That would probably be $75K for a simple starter home. By the end of next year, that "equity" would have evaporated. Save your money and invest in something meaningful, like the latest iPhone; that shit ain't cheap.

Don't believe any advice from a realtor, their broker, or a mortgage "specialist." They are all excellent salesman (or saleswomen) and if you don't have the right information, you will get screwed for the next 25 years.