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October 4, 2019 30 min

 Jon Lafferty:
What is that old commercial, "Bah, bah, bah, dah, dah, dah, wouldn't you like to be a butter too?"

Tony Abate:
No.

Jon Lafferty:
Where is it from?

Tony Abate:
"Wouldn't you Like to be a pepper?".

Jon Lafferty:
Oh! It's to be a pepper. You know I hate that soft drink. I've never liked it, but their commercials are pretty cool. Hey everybody. Welcome to Avoiding Real Estate Turbulence Podcast. This is your pilot, Jon Lafferty with CENTURY 21 Town & Country.

Tony Abate:
And copilot Tony Abate, with Ross Mortgage and we are your Real Estate pilots. I do like Dr. Pepper by the way just so you know. Hate the commercial. I'm on the polar opposite of you. Our job is to be your real estate advocate, and also make sure you're educated about the buying and selling process. We'll keep you informed throughout until we get you safely closed.

Jon Lafferty:
In a real estate transaction, there are many reasons why you can encounter turbulence. Today, we are going to talk about, I guess government oversight, and how it can help you in this discussion today.

Tony Abate:
Yeah, this is an interesting topic. It's really amped and flowed since before the recession, and then through this recession, and then back out of the recession.

Jon Lafferty:
I think what interested me about this topic, Tony, I came across a law that was passed in Canada back in 2016. The reason for it was because in Toronto and in Vancouver, housing prices were out of control. They were appreciating at such a rapid rate that people were getting priced out of the market. And so this was their attempt to try and adjust, to make a change so that people weren't buying above their means, and setting themselves up for failure.

Jon Lafferty:
So one of the first things that they did was they said, "Hey, if you're a first-time home buyer, and let's say the interest rate is three and a half, well, whatever you qualify at three and a half, you have to be able to qualify at four and a half. And if you can't qualify four and a half for that, well what do you qualify four and a half for?" Whatever that number is, that's what you qualified for.

Jon Lafferty:
So apparently the Canadian government in all their wisdom said, "Hey, this program is working fantastic. So why don't we just make it the law for everybody for any house that they want to buy?" So in the secondary mortgage market ... I'm sorry, not the secondary mortgage market, but in the buy up market, where people are selling that first home, or that next home to buy a bigger home, or something that is in a better area, now they have to go through the same test.

Jon Lafferty:
"Hey, I can buy a 600,000 dollar house at 3.5%. Would you be able to buy at 4.5%?" "Not a 600,000 dollar house. No, my purchasing power is only maybe 500,000. Well, crap, I can't buy in the area that I want to buy in, so where the heck's my incentive to move. There isn't one anymore. I might as well just stay put. I'm kind of happy with my house and so we'll just stay put and not sell."

Jon Lafferty:
And so it's created an arbitrary shortage of inventory now because people aren't moving up, and you've got the high-end houses, that are sitting longer and can't sell. So what's happening? It's forcing prices to come down.

Tony Abate:
Oh, man. Unintended consequences.

Jon Lafferty:
Unintended consequences.

---
Avoiding Real Estate Turbulence
info@avoidingret.com
http://www.avoidingret.com
Facebook: fb.me/avoidingret

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