From policy changes to interest rates to home values, this in an enlightening chat with Dustan Woodhouse, author of Be the Better Broker book series. After a challenging couple of years in the mortgage and real estate industry, and following the most recent drop in the Bank of Canada interest rate, we hope that you enjoy the extra perspective in this episode!
[00:00:00] I mean, in a nutshell, I stepped into the industry in 2008, which is kind of an interesting time now to say that I stepped in at because I showed up just as the party ended.
[00:00:12] And a lot of long term brokers in the industry, they said, dude, pack your bags, go home, the party's over, forget it. Like this industry is toast.
[00:00:25] You've landed on the Mortgage Life Podcast, where we strive to bring you mortgage related info that's easy to understand.
[00:00:35] We have conversations with market experts to bring you timely updates, because there's one certainty in this industry, things change.
[00:00:44] I'm Mindy Baudlin.
[00:00:46] And I'm Pete Salamosi. Welcome to the Mortgage Life Podcast.
[00:00:51] Here we are today. We've got a special guest on the Mortgage Life Podcast today.
[00:01:02] We have Dustin Woodhouse of Be The Better Mortgage Broker fame, Be The Better Broker. I should say that right.
[00:01:10] And Dustin, welcome.
[00:01:13] Thanks for having me.
[00:01:14] Give us a bit of an introduction.
[00:01:16] I mean, in a nutshell, I stepped into the industry in 2008, which is kind of an interesting time now to say that I stepped in at because I showed up just as the party ended.
[00:01:29] And a lot of long term brokers in the industry, they said, dude, pack your bags, go home, the party's over, forget it.
[00:01:38] Like this industry is toast. And of course, that was April 2008.
[00:01:42] And of course, by 2009, it just got a whole new head of steam and things picked up and went nuts.
[00:01:50] And so over about a 10 year period, I processed 1695 files with a staff of one.
[00:01:59] I had an incredible, incredible underwriter. Angela was just a machine.
[00:02:04] The two of us both really liked to put in the hours.
[00:02:09] And then I wound up writing a book that led to a couple more books, the Be The Better Broker books.
[00:02:16] Nine years ago now, that first book came out. And it was really just because a lot of people kept saying, hey, have you got time to grab a coffee and tell me about mortgage brokering?
[00:02:25] And I kind of didn't, but I kept saying yes.
[00:02:28] But then I kept having the same conversation over and over.
[00:02:31] I should just write all this down and say, no, I don't have time for a coffee here.
[00:02:35] Have a book.
[00:02:37] And the books kind of took on a life of their own.
[00:02:39] And I had no idea that it would lead to the phone ringing and people saying, hey, would you come speak at our event?
[00:02:47] It was not.
[00:02:48] I don't have a very good master plan.
[00:02:51] I just kind of do whatever feels like is the right thing to do next.
[00:02:55] And it seems to work out.
[00:02:58] So that led to some speaking.
[00:03:00] And then I kind of pivoted from there and thought, well, why am I waiting to be invited to someone else's event to speak for 40 minutes?
[00:03:07] I can just create my own events.
[00:03:09] So I started creating my own workshops and doing that in 2017, 2018.
[00:03:14] And then wound up with an opportunity on the corporate side where a gentleman asked me, hey, I'm thinking about putting a new president in place for mortgage architects.
[00:03:25] These are the people I'm thinking about.
[00:03:27] What do you think?
[00:03:27] And I said, well, they're all great picks, but I think you should hire me for that role.
[00:03:33] You really?
[00:03:34] And I was like, yeah, let's figure this out.
[00:03:37] So I wound up in the corporate role.
[00:03:40] And basically it was like a one year recurring contract, but we did a five year deal.
[00:03:47] It was like a handshake five years.
[00:03:49] I'm like, don't worry.
[00:03:50] I know I've never worked for anybody else.
[00:03:52] And I've always been self-employed, AKA unemployable, but I'm committed to five years and let's see where it all goes.
[00:04:01] And so I did that for five and a half.
[00:04:03] And then, yeah, kind of got the itch to go be free and be me and do whatever I might wind up doing.
[00:04:11] And so now the question is, what am I doing?
[00:04:14] And I don't have a great answer for that just yet.
[00:04:17] I'm working on it.
[00:04:19] I mean, I do have a conference coming up under the Be The Better Broker brand in February in Whistler, BC.
[00:04:25] And we had just a nice little group of 150 producers last year.
[00:04:30] We'll probably cap out at 200 this year.
[00:04:33] And I look at my job right now as my full time role between now and February is to just frankly deliver the mortgage conference experience of anyone's life.
[00:04:46] Like last year I had people saying this was the best thing ever.
[00:04:49] So I want everybody to be, I want them to be so into it that they all re-register a year in advance for the 2026 event.
[00:04:57] So that's the focus.
[00:04:58] But ultimately when the dust settles after that, I do really miss broker.
[00:05:04] Frankly, I do.
[00:05:06] And it seems like there is to me certain niches in particular in our space that really do have some very big opportunity.
[00:05:17] So we wanted to get you on our podcast because of your experience that you've just told us about.
[00:05:23] Knowing how involved in the industry you've been, you've got a pretty good voice for being able to talk to clients and the potential reach that we have as brokers in the retail mortgage space.
[00:05:38] So we wanted to start the conversation with a little bit about your take on the upcoming policy changes.
[00:05:45] So there's a couple, December 15th, we've got a little bit of a change on CMHC's price caps for first time home buyers and for new homes.
[00:05:56] And then on January 15th, there's another potential increase to price caps on refinanced homes that are insured and that are being converted to having a suite.
[00:06:10] Now that's a mouthful.
[00:06:11] So there's a lot of stuff to chew on.
[00:06:12] Dustin, what's your take on this?
[00:06:14] It's a tricky one to articulate, isn't it?
[00:06:15] It is.
[00:06:16] Yeah.
[00:06:18] I mean, in a nutshell, I really saw that 1.5 million cap, the increase from 1 million max, or hell, it was never 1 million.
[00:06:28] Let's be really specific.
[00:06:30] The increase from the maximum insured purchase price of $999,999.99.
[00:06:37] Like really?
[00:06:39] Why can't you just make it a million even guys?
[00:06:41] And they had an opportunity to fix that.
[00:06:44] But no, the new limit of 1 million 499,999 dollars and 99 cents.
[00:06:51] So ridiculous.
[00:06:54] Every broker is going to deal with that offer that comes in.
[00:06:58] That's written at 1.5 on the dot.
[00:07:00] And you're going to have to go back and reduce the purchase price by a penny, Mr.
[00:07:04] and Mrs.
[00:07:05] Realtor.
[00:07:05] I'm so sorry that the media has miscommunicated this.
[00:07:08] They round up by a penny.
[00:07:10] But guess what?
[00:07:11] CMHC doesn't.
[00:07:12] Yeah.
[00:07:13] Anyway, I always feel like that little technical nuance is worth pointing out just to save somebody the hassle.
[00:07:20] I mean, I think it's long overdue.
[00:07:22] The million dollar, the let's just we'll round up from now on.
[00:07:26] Sure.
[00:07:26] The million dollar cap came in, what, 12 years ago.
[00:07:30] No indexing, no attaching to inflation metrics or median home price, like nothing.
[00:07:36] Just a million because that seemed like a lot.
[00:07:40] Now we have 1.5 million, which to many people outside of the greater Vancouver area or the greater Toronto area, seems like a lot.
[00:07:50] But a million doesn't seem like a lot to those same people anymore.
[00:07:55] So like that's they're really just the government's really just kind of given us a little bit of leash where, okay, it seems a little high now, but five years from now when there's still been no change and inflation marches along.
[00:08:08] That's not going to seem like an especially crazy number.
[00:08:12] And it is still a cap.
[00:08:14] I mean, previous to 2012.
[00:08:17] You could get 5% down more or less.
[00:08:20] I mean, previous to say 2010, you could put 5% down on a $4 million home if you qualified to carry the mortgage.
[00:08:28] And I think that was more a political maneuvering where we're not financing these mansions.
[00:08:34] We're not guaranteeing these mortgages for the rich, et cetera.
[00:08:38] And a little bit of political rhetoric because really, like what percentage of CMHC's book was $3.8 million mortgages, right?
[00:08:49] It's actually a really good point, Dustin.
[00:08:52] Where did that 1.5 number come from?
[00:08:54] Yeah, they're just picking a number.
[00:08:57] They're going, well, a million seems low.
[00:08:59] So, well, I will say, I think a big part of where that came from is you have a lot of developers trying to build townhouse product in the GVA, GTA, three-bedroom townhouse product.
[00:09:11] They can't build anything for under a million.
[00:09:15] So you're winding up with this oversupply, this abundance of studios, one bedrooms, two bedrooms.
[00:09:23] And for the first time, we're seeing projects with two, they're two-bedroom townhouses.
[00:09:29] A two-bedroom townhouse with a two-car garage.
[00:09:31] Like there's no den, there's no third bed.
[00:09:33] Like why?
[00:09:35] And it's because they're squeezing the square footage down to try and fit under a million to still be able to market to the pool of buyers that don't have more than 10% down.
[00:09:46] And so I've, you know, sort of developed the theory and I had a couple prominent economists actually agree with me, which was kind of neat to see.
[00:09:56] That that price increase, that cap increase, pardon me, is really about the builders.
[00:10:03] And it's about giving the builders the ability to actually build product in that 1.1, 1.15, 1.2 zone and have a potential pool of buyers.
[00:10:16] Because that hard stop at a million, it's just become, the numbers have become, it's a real challenge.
[00:10:23] It's a stumbling block.
[00:10:24] And so to have bumped it to 1.1 or 1.2 would have solved a problem that's two years old.
[00:10:31] Hmm.
[00:10:32] So to go to 1.3.5, that would have been probably adequate.
[00:10:37] And I would suspect, it wouldn't surprise me if 80% plus of CMHC's volume is below 1.3.5.
[00:10:44] Well, 80% of the volume over a million between the million, million, and five.
[00:10:50] I bet 80% of it falls in the million to 1.35 zone.
[00:10:54] Maybe even 90% falls in.
[00:10:55] Maybe I don't think it's going to be a huge amount in that final bit this year or next year.
[00:11:02] But three, four, five years from now, 1.39, 1.425.
[00:11:08] That could suddenly become much more common.
[00:11:11] But if we go back in history, I remember very well when the average detached home price crested a million dollars in Vancouver, which I want to say was around 2014, 2015.
[00:11:24] And we had clients literally saying, I'll pay $50,000 for the lawnmower.
[00:11:33] Because I want to pay 999, 999, .99 for the house.
[00:11:38] But they didn't have 200,000 down, so they couldn't compete.
[00:11:41] And so whenever I had buyers who had the 20% down, I remember the one set.
[00:11:47] They said, well, we're going to go in, we've done the math, and we've all agreed we think 992,000 is what we're going to go in.
[00:11:54] And it was like a bidding situation.
[00:11:56] And I was like, no, you're not.
[00:11:58] Like, what do you mean?
[00:11:59] You are not.
[00:12:00] You have a quarter million down.
[00:12:02] You're not going to play in that space with the rest of the people who are capped.
[00:12:07] You're not capped.
[00:12:08] You're going to write an offer of $1 million even.
[00:12:11] In fact, you should write an offer of $1 million and 88 cents or something like that.
[00:12:17] And you've just eliminated 50, 60, 70% of the competition because they simply can't write that high.
[00:12:25] And it's those nuances.
[00:12:27] Like this is where a mortgage broker adds so much value.
[00:12:31] And it's unfortunate that, to be clear, I didn't love that that was a situation.
[00:12:37] That was really rough for all those other families that had the 100,000 but didn't have 200 to put down.
[00:12:45] Again, it's housing for the wealthy.
[00:12:48] And that sucks.
[00:12:49] Yeah, I must admit, I had quite a few pre-approvals at that 99999, not because of income, but because of the down payment.
[00:12:58] Yeah.
[00:12:59] And people say like, who can afford a million or $1.2 million mortgage?
[00:13:03] And I'm constantly having to point out the example of, well, you know who they are.
[00:13:09] And it's a lot of fun in Vancouver to be like, well, especially in front of a live audience and I can really see them reacting.
[00:13:16] And I'll be like, well, you know who the problem is.
[00:13:19] You know, we know there's a specific group of people in BC that are really causing a lot of the real estate problems with the driving prices up.
[00:13:29] You know, and we all know them.
[00:13:31] We all know them.
[00:13:32] They're in our families.
[00:13:33] And then people start to go, wait, what?
[00:13:35] I'm like, yeah, yeah.
[00:13:36] They're teachers, nurses, police officers, and firefighters who, if they have their masters, if they work some overtime, if they have a side hustle, they make $100,000 a year each.
[00:13:47] And then they marry one another.
[00:13:49] And now you have a $200,000 household income.
[00:13:52] There is your million dollar mortgage.
[00:13:55] And that's usually not where the audience thinks I was going.
[00:13:58] So it's always kind of fun to point out that, yeah, no, it's, it's okay.
[00:14:03] I'm going to use air quotes for the, for the audio side of this, but it's regular people.
[00:14:09] It's relatively regular people that are buying 1.25, $1.4 million homes with a basement suite.
[00:14:17] Right.
[00:14:18] The suite rents for 2,500.
[00:14:20] And then they have, I don't know, what have they got about a $12,000 left over after tax each month after this.
[00:14:28] They're looking pretty good.
[00:14:31] I have to say that the, the strategy of, of being just over a million back in those days, that sounds like you're not only just being a good mortgage broker, but perhaps you watched a lot of prices, right?
[00:14:41] When you were young.
[00:14:43] Right.
[00:14:44] Yeah.
[00:14:45] It was like the reverse.
[00:14:45] It's like, you will not win by being a penny lower.
[00:14:49] I love it.
[00:14:50] I love it.
[00:14:50] So it's, it's very interesting to get your take on that because the idea that these price caps may actually be born by the construction side is, is very relevant to things that are happening today.
[00:15:02] We've, we've, we've kind of gone from the ideas of, uh, especially on, on the policy side of kind of a demand tamping type policy to keep prices low to now talking about supply.
[00:15:13] And it's great that we are talking about supply and hopefully these new policies help, uh, the, the builders and the, the kind of developers get more supply in place.
[00:15:25] Uh, and it sounds like maybe that might even be something that will be at the right price point or the right size point for, um, helping a lot of people in, you know, lower mainland is, is a big population center, but even, uh, greater Vancouver or greater Victoria and the Okanagan.
[00:15:42] The, the kind of middle size home is, is definitely one that has hit that cap.
[00:15:48] Yeah.
[00:15:48] And it was interesting too.
[00:15:49] It's not just supply in general, it's usable supply.
[00:15:53] Like you said, a two bedroom townhome with a two car garage, you know, who's buying that?
[00:16:00] Yeah, I am, but I'm a, I'm a, I'm a household of one.
[00:16:04] There you go.
[00:16:05] Like I, I joke, like I'm, I'm the only living thing in my home.
[00:16:09] There's no other people, pets or plants.
[00:16:11] Yeah.
[00:16:11] Well, you need the other bedroom for your motorbike.
[00:16:13] Yeah.
[00:16:14] Well, I need, I need a three car garage just to hold all the skis and the dirt bikes.
[00:16:18] Um, but, uh, but yeah, the, the second bedroom is the, the home office, right?
[00:16:24] Yeah.
[00:16:25] Well, let's, Hey, let's turn this conversation to, uh, the thing that we often as mortgage brokers get a question about, which is rates.
[00:16:34] We love talking about rates.
[00:16:36] Um, we've seen, so we're actually recording this the day after the bank of Canada.
[00:16:40] Canada announced its fourth consecutive rate drop.
[00:16:43] This one being the biggest, the media all wants to call this a jumbo rate drop.
[00:16:47] It was half a percent.
[00:16:49] So I'm not going to say it's jumbo.
[00:16:50] It's a half a percent, but, um, this, these are the things that are happening.
[00:16:55] So what do you think Dustin will happen as we move forward?
[00:17:00] Uh, variable rates are affected by the bank of Canada.
[00:17:03] Fixed rates, not necessarily, but let's get your take.
[00:17:06] Well, yeah.
[00:17:06] I mean, fixed rates of course follow the bond market and the bond market to some extent follows the bank of Canada.
[00:17:13] But, you know, sure enough, you see this 50 basis point cut in the overnight lending rate.
[00:17:19] And so people with variable rate mortgages and adjustable rate mortgage, they, they, they rejoice like, yay, my rates coming down.
[00:17:26] And a bunch of people about to close, uh, who were opting into fixed rates are suddenly saying, Hey, where's my rate drop?
[00:17:33] And it's like, well, actually the bond market went up.
[00:17:36] So actually there's rate pressure upward on the fixed side and like explain, unpack that, explain that, that to a client.
[00:17:45] Like that's not so simple.
[00:17:47] It's like you tapped into my text messages.
[00:17:49] I have this exact message from a fixed rate client.
[00:17:53] No, no word of a lie.
[00:17:54] It's like you, you got the message from the client.
[00:17:56] You got my response.
[00:17:57] I've talked to people.
[00:17:58] So exactly.
[00:18:00] I mean, there's a, there's, there's two, two thoughts I would share with you on, on rates right now.
[00:18:04] Um, one there's unfortunately, um, a lot of people out there who think that, oh, the, that rate cuts just going to stimulate demand.
[00:18:14] People are going to borrow more money than they can afford, et cetera, et cetera.
[00:18:18] And it's like, no, that rate drop actually had zero impact on the qualifying rate.
[00:18:23] Uh, well, I shouldn't say zero, but it's, it's, you're, you still have that base qualifying rate of five and a quarter that we're, we're still a little ways away from.
[00:18:32] Um, we're, we're not even back down to that.
[00:18:35] And, and during, during COVID, during 1.65% interest rates, you still had to qualify at five and a quarter.
[00:18:43] Like there was no mad rush of people borrowing more money than they could afford because you couldn't qualify to borrow more money than you could afford.
[00:18:52] And that, of course, is demonstrated quite clearly in the arrears rates.
[00:18:58] You know, so you do have people that are saying, oh, these new policies are going to stimulate demand.
[00:19:03] They're going to increase prices, all these lower rates, they're going to increase prices.
[00:19:07] Well, are they really?
[00:19:09] I mean, you've already got a situation where inflation is responsible for a lot of the increased costs in building new product.
[00:19:18] Um, and then the lower rates don't really allow people to borrow that much more money than they previously qualified for.
[00:19:25] So it's not as inflationary as people seem to think it is.
[00:19:29] But the bigger question around rates for mortgage brokers that they need to be putting to their clients now is, do you want to talk about variable?
[00:19:37] Because the odds are we're going to see another half point cut December 11th.
[00:19:42] And yes, that still puts you at a net rate a lot higher than say a three-year fix today.
[00:19:48] However, we do have a lender or two that you can convert to a three-year fix day one of a five-year variable.
[00:19:57] So you're not actually technically contracted for five full years.
[00:20:01] You can flip over to a three-year or a four-year or a five-year, et cetera.
[00:20:06] But there's that three-year fixed conversion option.
[00:20:10] And so do you take the variable today?
[00:20:13] And yes, you're going to pay a little more for the next couple of months.
[00:20:16] But you see another half point cut come December 11th, maybe another quarter point cut of the meeting after that in the new year.
[00:20:23] Where you could be seeing three-year fixed money down to 2.99, 3.29.
[00:20:30] It could happen.
[00:20:31] So do you go variable for now?
[00:20:34] And then I will help you lock in with the branch when the time comes.
[00:20:40] So it's a different conversation.
[00:20:43] And I think that the brokers that are having those deeper conversations and talking about a little bit of strategic maneuvering and really file that under options.
[00:20:54] Right?
[00:20:55] I just got off a call with a couple where I was explaining, like, in life, it's good to have as many options as possible.
[00:21:02] And so the variable, I think, it's kind of back in fashion to be talking about it because, okay, the trend is our friend right now.
[00:21:12] And you'll have off-ramps along the way.
[00:21:16] If you want to take an option to a three-year fixed, maybe wait two months to do that.
[00:21:21] Yeah, it's true.
[00:21:22] I mean, we obviously had all those rate increases.
[00:21:25] And I think a lot of clients, myself included, you know, a little bit of PTSD from all those big jumps.
[00:21:33] But now when you start doing the math, it's becoming a reasonable conversation, especially, like you said, when there are other options on the table.
[00:21:45] I think that's one thing that going through the COVID experience happened is that a lot of lenders built in these different flexibility pieces, which then can lead to options for clients.
[00:21:55] So even though you're locked in, you're not truly locked in.
[00:21:58] There are other ways of kind of maneuvering through your mortgage.
[00:22:03] And this ability to lock into a fixed is one of those.
[00:22:08] One other tidbit is the conversation between variable rate mortgage and adjustable rate mortgage.
[00:22:15] What's more important to you?
[00:22:16] And like this is, I think, a very important question for brokers to be asking clients.
[00:22:22] What matters more to you, the payment potentially coming down or your amortization potentially coming down?
[00:22:31] And I think you would find the majority of Canadians, especially those who have put themselves in a position to qualify for a mortgage, i.e. great credit, i.e. solid employment, i.e.
[00:22:44] Save the down payment or have family backing supplying a down payment.
[00:22:48] These are conservative Canadians.
[00:22:50] I'm not talking politically.
[00:22:51] That's a different podcast.
[00:22:53] But they're inherently fiscally conservative.
[00:22:57] And they're not spendthrifts.
[00:22:59] They're not out there at the casino every night, right?
[00:23:02] And so what's important to them is not being in debt.
[00:23:06] And I think a lot of clients, a surprising amount probably for some brokers, would actually say, give me the variable rate product, not the adjustable rate product, where my payment will stay the same through the balance of the term.
[00:23:22] But as the Bank of Canada lowers prime further, if that is the trend that continues, my amortization shortens.
[00:23:29] I think a lot of people will choose that.
[00:23:33] And again, it's just you're differentiating yourself from the next broker or the banker.
[00:23:41] Absolutely.
[00:23:41] One of the beautiful reasons to deal with a broker is that we've got options.
[00:23:46] Now, talking about options, Dustin, you funded nearly 2,000 mortgages in your career, potentially more if you get back into it.
[00:23:54] So if you've got all these clients from a decade plus of brokering, and one of your clients came up to you and said, hey, my mortgage is coming up for renewal.
[00:24:05] Aside from getting into really the details about that individual, where would your conversation take you?
[00:24:11] What should these individuals who are renewing, what should they be thinking about?
[00:24:16] So I have that email in my inbox right now.
[00:24:20] And I told him I'd reply to him after this meeting.
[00:24:24] I think we all have many of those emails.
[00:24:27] Yeah.
[00:24:27] And so what do I say to that client right now?
[00:24:30] Because we spoke on August 16th, for specific reasons.
[00:24:36] I remember the date.
[00:24:37] We spoke on August 16th.
[00:24:39] And at that time, I was leaning very heavily towards, you know what, man, take the three-year fixed.
[00:24:47] Mathematically, I've run the numbers in my own little spreadsheet.
[00:24:50] Like, I just don't think the Bank of Canada is going to catch up.
[00:24:54] Now we're seeing these bigger rate cuts.
[00:24:59] Arguably, the three-year fixed may still be the spot to land if you're getting like a 3.99 three-year fixed or 4.19, somewhere in that bandwidth.
[00:25:10] And on renewal, lenders really, really want to retain those clients, right?
[00:25:16] Like, most brokers have been there.
[00:25:18] Hey, I'm going to switch you to a new lender at renewal.
[00:25:21] And in the 11th hour, that lender comes out and either matches the rate that you got them somewhere else or blows you out of the water with a rate you can't even touch.
[00:25:31] Because the lender's not paying a new commission to retain that client.
[00:25:36] They're just having to eat the difference on the rate.
[00:25:39] So lenders will go to great lengths in the 11th hour to hang on to a client, as we know.
[00:25:46] And yeah, I mean, ultimately, I think that 3.99 three-year is still pretty attractive.
[00:25:53] But it's almost an even money at this point.
[00:25:56] Because, well, hey, he happens to be with a lender that does, in a variable, give him the option to look into a three-year two months from now.
[00:26:06] So for him, I'm going to phone him and he's going to hear the kind of ambiguity in my voice that you're hearing.
[00:26:14] You know, you could go variable and you could wind up with a half point lower three-year fixed as little as two or three months from now.
[00:26:24] So maybe that's the play.
[00:26:27] But then again, who are you as a person?
[00:26:30] Like, do you want to just have that bird in the hand?
[00:26:34] Or do you want to gamble to try and get a little bit lower?
[00:26:37] And, you know, hey, some world event could occur that suddenly has us doing a U-turn.
[00:26:44] On rates.
[00:26:45] As unlikely as that feels right now, well, did any of us think in March of 2019 that March of 2020 would look the way it did?
[00:26:56] Like, pretty sure out of 8 billion people on the planet, you know, maybe 12 predicted it.
[00:27:03] And 11 of them had been predicting it for like 30 years running.
[00:27:08] So that was a bit of a tough question because it's always a really individual conversation.
[00:27:13] And I love the fact that you brought it back to that.
[00:27:17] You know, having that conversation with your broker is really important because there are individual factors.
[00:27:22] And for some, you might lean towards that variable.
[00:27:25] For others, you might lean towards a fix.
[00:27:27] And it really is a personal conversation.
[00:27:29] So thanks for bringing it back to that.
[00:27:32] Yeah, it's not a one-size-fits-all answer.
[00:27:36] Questions, questions, questions.
[00:27:38] Well, Mr. and Mrs. Client, what are your plans for the next year, two years, three years?
[00:27:44] Oh, well, actually, I'm going to be retired in two years and we're going to downsize.
[00:27:48] We're going to sell.
[00:27:49] Okay.
[00:27:50] But the mortgage is portable.
[00:27:52] Thanks to the broker.
[00:27:54] Doesn't ask a follow-up question.
[00:27:56] So you're thinking of selling.
[00:27:57] Uh-huh.
[00:27:58] And you're going to buy?
[00:27:59] No, we're just going to rent.
[00:28:00] Yeah, we're going to buy in Mexico.
[00:28:03] Well, your mortgage isn't portable to Mexico.
[00:28:05] So, you know, what are we doing?
[00:28:08] And if you're going to rent, well, we definitely don't want to put you in something that's going to have a huge penalty two years from now when you're thinking of selling.
[00:28:16] And I'll never forget the clients I had where they went down to a branch, the branch manager put them in a five-year fixed, despite the fact that the clients had said they were going to list the home for sale inside 90 days.
[00:28:32] It was Christmas.
[00:28:33] They went down.
[00:28:34] They signed a five-year renewal right on the new year.
[00:28:37] And they were planning on listing in the spring market and making a move across Canada.
[00:28:43] And it was a credit union branch.
[00:28:46] That mortgage is importable to another province.
[00:28:49] So they locked themselves in to a pretty ugly penalty, as it turned out.
[00:28:55] Dustin, we're going to ask you some quick-fire questions.
[00:28:58] Your take, maybe even a hot take, on a few things that we are wondering, and I think our clients are wondering.
[00:29:05] Mindy, fire away.
[00:29:06] All right.
[00:29:07] So moving from rates to homes, and it's actually nice because we kind of touched on this earlier,
[00:29:11] but where are home values going?
[00:29:15] What's going to be happening over the next couple of years?
[00:29:18] Well, historically, you always used to hear, I used to always hear the old line,
[00:29:24] home values go where people go, people go where jobs go.
[00:29:27] So where's the employment?
[00:29:28] And of course, that typically was major urban centers.
[00:29:31] And so your major urban centers, you just kept seeing this kind of lockstep, nonstop price appreciation.
[00:29:38] Then COVID hit and jobs, jobs kind of went everywhere.
[00:29:42] And so you had these really weird situations where this little town, a population of 2,500,
[00:29:49] that had seen like an average 180 days to sell a single property, multiple bidding wars, prices shooting up 40%.
[00:29:59] And yeah, that's cooled down, obviously, significantly.
[00:30:03] There's been pullback in some areas.
[00:30:06] And people realized, actually, maybe I liked the convenience of being close to a major national,
[00:30:11] international airport, whatever.
[00:30:13] So there's been a pullback from that, especially with return to office and the rest of it.
[00:30:19] But ultimately, I listened to another podcast recently where I heard a developer say these words,
[00:30:28] and it's really stuck with me.
[00:30:30] He said, right now, this is in the city of Vancouver.
[00:30:33] He said, in the city of Vancouver, you could give us the land for free.
[00:30:37] And that's expensive land.
[00:30:39] You can give us the land for free, by the way, a half acre sold for $38 million.
[00:30:46] That's how expensive that land is.
[00:30:48] But he says, doesn't matter.
[00:30:50] Give us the land for free.
[00:30:51] We still can't make a profit right now building.
[00:30:55] Building costs are just too high.
[00:30:58] Yeah.
[00:30:58] Yeah.
[00:30:59] Labor, materials, the carrying cost because of interest rates and the time delays, right?
[00:31:04] Seven to eight years to go from signing on the dotted line to buying the piece of dirt,
[00:31:09] putting a key in an apartment, in a high rise door.
[00:31:13] So that seven to eight years of costs and red tape and everything else, they can't make a profit.
[00:31:19] So you've seen this pullback and housing starts are stalling, you know, despite politicians saying,
[00:31:27] we're going to build more homes or they're actually built, we're building fewer homes each year than we've built in previous years.
[00:31:34] So there's less supply coming online.
[00:31:37] Inflation has created a situation where new stock costs significantly more at cost, never mind putting any kind of 10%, 15% profit margin in it, than current stock.
[00:31:50] Is everything going to get cheaper?
[00:31:52] Are people going to work for less money per hour?
[00:31:55] Probably not.
[00:31:57] It's probably not happening.
[00:31:59] So ultimately existing housing stock in a lot of major markets, the prices will continue to rise because they're going to rise to meet the cost of new builds.
[00:32:12] So it's somewhat a foregone conclusion that between now and 10 years from now, prices will be higher in every major urban center.
[00:32:23] Will there be dips in different areas?
[00:32:26] Sure.
[00:32:26] But if you draw a line from 2024 to 2034, it will have gone up steadily.
[00:32:34] It's just riding through the little downturns and maybe positioning yourself to buy in the downturn.
[00:32:40] So, yeah, I think the old adage, real estate only goes one way, holds.
[00:32:47] Supply and demand too, right?
[00:32:49] I don't think demand is waning, especially with population growing.
[00:32:54] So, no.
[00:32:55] I mean, you had a story just today about, you know, the liberal government, the federal liberals pivoting on immigration and saying, we're actually going to cap it by 100,000.
[00:33:05] We're going to cut it even lower in the coming years, which is really interesting.
[00:33:09] That's definitely more of a right wing than a left wing policy.
[00:33:15] Like being, you know, I won't call them anti-immigration, but not being as super duper pro-immigration as they've been.
[00:33:25] That's quite the pivot.
[00:33:26] And that is very clearly a political move, probably too little too late to save them.
[00:33:33] And also too little too late to have any real impact on home prices.
[00:33:39] I mean, 400,000 new immigrants coming next year instead of 500.
[00:33:43] Well, we're not building fast enough for that.
[00:33:48] Yeah, it doesn't matter.
[00:33:49] We're already over capacity.
[00:33:50] So, definitely it sounds like based on a lot of those factors that house prices will most likely appreciate over the next while.
[00:34:00] Again, barring in mind that we know that there's ups and downs.
[00:34:03] So, knowing that, what do you think will be the next thing in houses?
[00:34:09] Are we going to go from detached homes to multifamily?
[00:34:12] Or is it going to be a movement from large cities to smaller centers?
[00:34:17] Or two-bedroom townhouses.
[00:34:21] Right?
[00:34:22] I think there's little question that in most cities in Canada, for the most part, single-family detached homes are going to become a thing of the past.
[00:34:39] We're not building them anywhere near as fast as we used to, nor do I see it happening anytime soon.
[00:34:45] And you've got a few different reasons for that.
[00:34:48] But ultimately, there are municipalities, so I've heard, that are starting to actually say we're not going to allow any more single-family developments.
[00:34:58] It's only going to be multifamily developments because the municipality is saying we're hemmed in by mountains, agricultural land reserve, a border, the ocean, the golden horseshoe, whatever it might be at whatever part of the country you're in.
[00:35:13] And there's a lot of different things.
[00:35:17] Like even in Saskatchewan, you've got farmland boundaries that you bump up against.
[00:35:22] So, it doesn't matter, it seemingly doesn't really matter where you are in Canada.
[00:35:27] There are geographical restrictions on just how much you can sprawl outward.
[00:35:33] And because of that, yeah, I think the trend is absolutely going to be multifamily.
[00:35:40] And is that would be greater than, say, just a home with a suite in it when you're speaking about multifamily?
[00:35:46] Yeah, I think what you're going to see is that row of six detached homes consolidated, leveled, and turned into 14 townhomes, turned into 46 condominiums, turned into 200 high-rise apartments.
[00:36:03] And earlier, Pete, you mentioned the view corridors.
[00:36:08] That was before we were recording.
[00:36:10] We talked about view corridors and different corridors.
[00:36:13] Vancouver is famous for this.
[00:36:15] They created these view corridors where you could only build to a certain height to maintain views for hundreds and hundreds of dwellings.
[00:36:23] They're now saying, you know what, folks?
[00:36:27] Party's over.
[00:36:28] Sorry.
[00:36:28] We're going to start blocking your view.
[00:36:30] And so, again, they're going to go that much higher.
[00:36:34] All right.
[00:36:35] One of the famous questions, especially with first-time homebuyers I'm finding, or maybe even people looking to downsize.
[00:36:42] Rent versus buy.
[00:36:44] What should people do?
[00:36:47] It's never been a better time to be a tenant in a number of provinces.
[00:36:52] It's a great time to be a tenant in many provinces.
[00:36:56] It's never been a worse time to be a landlord in some of those provinces.
[00:37:00] So, when it comes to buying, I still would suggest, ultimately, this is the single smartest investment anyone's going to make for themselves, buying an owner-occupied property long term.
[00:37:16] And the main reason for that is go back and look at the first weeks of March 2020.
[00:37:23] There's a lot of Canadians.
[00:37:25] If they could have hit a button on their keyboard and liquidated their house, they would have.
[00:37:32] But real estate is illiquid.
[00:37:34] Like, I think we want to sell.
[00:37:35] We should sell.
[00:37:36] Okay.
[00:37:36] What do we need to do?
[00:37:38] Well, we need to call the realtor.
[00:37:39] They can't meet us for three days.
[00:37:40] Oh, okay.
[00:37:41] They've met us.
[00:37:42] Oh, they can't get it on the MLS for four days.
[00:37:44] We've lost a week.
[00:37:45] And in that week, you cool down.
[00:37:49] Right?
[00:37:49] You cool down.
[00:37:50] And you think, okay, wait, what's actually happening?
[00:37:54] And there were a lot of people that liquidated their stock portfolios.
[00:37:58] And then the stock market went crazy.
[00:38:00] And they were like, what just happened?
[00:38:02] And well, what happened with real estate?
[00:38:05] Right?
[00:38:05] I mean, there were a lot of people that were, I don't know if I should close.
[00:38:08] And sure enough.
[00:38:09] So, yeah.
[00:38:11] I mean, an owner-occupied for all the reasons we've talked about just makes sense.
[00:38:15] I mean, buy as soon as you can afford to buy, as close as you can buy to your work, to the
[00:38:23] school catchment area you want to be in if kids are on the horizon or part of the picture.
[00:38:28] Buy, buy, buy that owner-occupied property.
[00:38:31] I have changed my tune a lot on residential real estate as an investment.
[00:38:36] It is a lot more challenging.
[00:38:40] I've never heard so many stories of people not paying rent for six, nine months and then still not getting evicted.
[00:38:51] Like then doing a workout plan.
[00:38:53] Like there's no workout plan that's going to work out six to nine months of missing rent.
[00:38:58] Like that's pretty tough to overcome.
[00:39:01] So I've cooled my jets on saying buy as many properties as you can buy.
[00:39:05] Like I, eh.
[00:39:07] But buy one.
[00:39:08] Well, it was, it was a thing at the time and it made sense.
[00:39:11] And it, it really, not only because, um, you know, you could track year over year gains, you also had the legislative framework to actually make it viable.
[00:39:22] So now we're in a different environment and I, I totally get that.
[00:39:26] So I was really hoping you'd say the, uh, yo-yo on an escalator thing.
[00:39:30] That is a very good analogy for thinking about the valuations in property.
[00:39:34] If you're talking about your own principal residence, you're on, you're on an escalator up.
[00:39:40] And historically we can look at that escalator and say, yes, your, your property will go up in value.
[00:39:46] You're going to have to spend money on it anyway, whether you're renting or buying.
[00:39:49] Why not take advantage of that built-in savings of the equity that that's being put into there every week.
[00:39:56] But at the same time, I think you cannot ignore the fact that for Gen Z, uh, people in their twenties, looking at the prices they're looking at, looking at the size of down payment that's required.
[00:40:09] It's just utterly overwhelming and seems impossible.
[00:40:16] And frankly, probably is impossible for a higher percentage of 20 somethings than ever before in history.
[00:40:24] I mean, when I was 20 something, I give you three quick stories.
[00:40:29] When I was 20 something, I bought an industrial strata unit for $78,000, $78,000.
[00:40:35] That unit today, $900,000 minimum 35% down.
[00:40:41] That's, that's crazy.
[00:40:43] Like no 21 year old kid is going to overcome that kind of down payment other than a sensational YouTuber or whatever.
[00:40:49] But I was just an average guy running an average typical turnkey business.
[00:40:54] And, um, yeah, you know, and then shortly after that, I bought 106, 1995, $168,000 house with an $8,000 down payment.
[00:41:04] And, you know, rates were higher.
[00:41:07] The payment was 1600 a month, which seemed crazy at the time.
[00:41:11] But that house today is 1.4 million.
[00:41:16] Well, really?
[00:41:18] Like even with the new changes, okay, you don't need 280 down, but you need 140 down and you need 220, 240 grand of income to qualify for.
[00:41:26] Well, I was 24 years old when I bought that house.
[00:41:30] Not a lot of 24 year olds are buying that.
[00:41:33] And we're talking about a 650 square foot, one bedroom house on a 33 foot lot, like, you know, 110 deep.
[00:41:40] Like this was no mansion.
[00:41:42] And I look at that and I just think, wow.
[00:41:45] And then on the rental side, uh, the first residential rental I bought was 1997, uh, downtown Vancouver, gas town, uh, $97,000 for a 480 square foot loft, 16 foot ceilings, cool little apartment rented out then for 900 a month.
[00:42:04] So you do the math on that.
[00:42:06] And, uh, that's what we call the 10 cap kids.
[00:42:08] Like, right.
[00:42:09] I mean, 10 cap.
[00:42:10] And I should say, that's what we call a 10 cap kids.
[00:42:13] Cause that's like ancient history.
[00:42:15] You're not buying any apartment anymore.
[00:42:18] And certainly in again, major urban centers at a 10 cap, like where you are a 10th of the purchase price is your annual rents.
[00:42:25] Well, especially with the changes to the short-term rental rules, right.
[00:42:30] That deeply affected that as well.
[00:42:33] Yeah.
[00:42:34] And that, isn't that such an interesting mess?
[00:42:38] Like people are so passionate on each side of that debate and, and there's valid points on both sides of that debate.
[00:42:46] And should it be all or nothing?
[00:42:49] Probably not.
[00:42:50] I mean, Victoria, uh, I, I know a young family that, you know, had a complicated childbirth and mom needed to stay in Victoria and family wanted to stay close to her.
[00:43:02] Uh, for two months.
[00:43:04] Well, you know, I had, I had a city worker say to me, well, the hotels aren't full.
[00:43:11] So this Airbnb thing, it just isn't necessary.
[00:43:14] There's room in the hotels.
[00:43:15] And I just was thinking to her, boy, if this was your daughter that was over in this hospital right now, and you needed to go stay there for two months, I bet you'd be freaking out about the cost of a hotel room with no kitchen, no laundry service, no nothing for two months.
[00:43:31] Like it doesn't work.
[00:43:33] So there are lots of instances where an Airbnb type product, a short-term rental, which I shouldn't, I shouldn't brand it Airbnb, I guess a short-term rental makes a lot of sense and stimulates the economy in different ways.
[00:43:49] And, uh, you want to take a family of five on a vacation for three weeks, you know, to Squamish, BC, adventure capital of the world.
[00:43:59] I thought I'll just put it out there.
[00:44:01] Um, you know, you're, you're going to do all the things.
[00:44:03] Well, great.
[00:44:04] You're going to do all the things.
[00:44:05] So you're bringing your kayaks and your bikes and three kids, and you're going to stay in a hotel room.
[00:44:12] Where are you putting your gear?
[00:44:14] What are you talking about?
[00:44:15] You're not staying in a hotel room.
[00:44:16] You're looking to rent someone's house, but you're only going to be there for three weeks.
[00:44:21] So it's kind of jamming up a lot of things that, that ban on short-term rentals.
[00:44:25] And, uh, yeah, that's, it's, but I get the other side of it too, where people are like, I can't find a place to live because nothing is for rent.
[00:44:35] Everything is short-term rental.
[00:44:37] But then again, you can kind of point back to policy and say, well, yeah, nobody actually wants to rent anything long-term because if the tenant stops paying you, it could take up to a year to get them out of there.
[00:44:50] And you're never going to get your rent back.
[00:44:52] And, and I think we all know people who live in detached homes with basement suites who have said, you know what, if I can't rent it short-term, I'm not renting it at all.
[00:45:03] It didn't put long-term stock back in the market.
[00:45:08] And it's just taken away options for people who are in need of a two month, three month stay.
[00:45:15] So, or a three week stay even.
[00:45:18] So it's, it's all very tricky, isn't it?
[00:45:20] I mean, it's difficult to come up with a right answer.
[00:45:25] Well, and you've talked about a lot of really important things, mainly the fact that having those deeper conversations with your broker is, is a really important thing to do because it's a big investment.
[00:45:36] And you want to be sure that you've explored all the options before you make your, you know, kind of set your path.
[00:45:42] I just wanted to wrap up with one last question.
[00:45:46] And I'm going to kind of put this to you as a mortgage broker to a mortgage broker.
[00:45:51] What is, what are the top values that we bring to clients as mortgage brokers that just doesn't exist anywhere else in the market?
[00:46:01] If you're a brand new broker, the value you bring is your previous life experience, whatever that may be.
[00:46:08] And a lot of times it actually does play a significant role in helping people through their first purchase.
[00:46:14] If you've already been through your first purchase.
[00:46:17] And again, as a brand new broker, you bring the gift of time.
[00:46:21] I'm really available.
[00:46:23] I'm really going to investigate every possible opportunity, every option with every lender, because I remember using these words.
[00:46:32] You are my number one client.
[00:46:34] Literally my first client.
[00:46:36] You're my only client.
[00:46:38] So in all the ways you're my number one, you're my favorite client.
[00:46:41] I mean, you're my number one client.
[00:46:44] And I think that's the gift you have in the early days.
[00:46:49] And then as you build your book of business and you get more experience and you get busier, you don't have quite as much time to invest necessarily.
[00:47:00] But you don't need as much time to work each file.
[00:47:03] You're much, much quicker at evaluating a situation and you build this knowledge base where you can say to a client, you know, I've actually dealt with several clients who've gone through a very similar situation.
[00:47:18] Whatever it might be, you're buying your first investment property.
[00:47:20] I've actually dealt with three dozen clients who've bought their first investment property.
[00:47:25] And here's a helpful sheet of advice and tips, vetting tenants, you know, the things you can put together from that experience.
[00:47:34] You just, you gather that wisdom from the experience.
[00:47:38] And so I think ultimately, as I say, the best thing you can do though is ask questions where the first comment you hear out of that client's mouth is no one's ever asked us that before.
[00:47:54] And there's a lot of questions to ask clients.
[00:47:57] And as you go through, you know, application after application, you learn to word them differently as well.
[00:48:06] Hey, are you married or single?
[00:48:07] No, no, no, no.
[00:48:08] That's not the way to ask that.
[00:48:12] But I love the awkwardness.
[00:48:14] The awkwardness makes the conversation.
[00:48:16] That's right.
[00:48:16] Are you currently married?
[00:48:17] Yes, I am.
[00:48:18] Is it a first time?
[00:48:19] No, actually, it's the third time.
[00:48:21] Oh, I see.
[00:48:22] Are there previous children?
[00:48:24] Yes, there are.
[00:48:25] Is there child support?
[00:48:26] Is there spousal support?
[00:48:27] Like all of that becomes, I learned that the hard way.
[00:48:30] I was working with a 21-year-old guy living at home.
[00:48:34] And you think a 21-year-old guy living at home must just, you know, I apply my own experience.
[00:48:40] I moved out when I was 21 or 22.
[00:48:43] So I'm thinking, okay, yeah, no.
[00:48:45] He'd been out, got married, had a child, got divorced, was paying child support, was paying spells of support at the age of 21.
[00:48:55] And that all came out in the 11th hour.
[00:48:59] Right.
[00:48:59] Not a good time for that to come out.
[00:49:02] So, yeah, number one thing a broker can do for a client is ask question after question after question and uncover the landmines before you step on one.
[00:49:12] So if I can just bring this sort of back to our renewal conversation, I mean, we're all hearing in the media, you know, the record number of renewals coming up.
[00:49:21] So with banks potentially offering deep discounts at branch level, not just for renewals, but purchases, et cetera, should mortgage clients be going to their bank or to a mortgage broker?
[00:49:35] And why?
[00:49:37] Well, well, Mindy, I wrote a blog post about that and I actually pulled it down because I had a couple brokers take me to the woodshed for even putting it out there.
[00:49:48] But since you put it out there, I think there's a couple things that have to happen here.
[00:49:55] And I think we need to acknowledge the reality that if a client comes to us and they are the client of Bank X and we know that we have access to a certain rate at Bank X.
[00:50:12] But we also know if that client at any point during this transaction or even worse, the day after the transaction goes into that branch of Bank X, they're going to get offered a rate 50 basis points, half a point lower than our rate.
[00:50:28] And I believe that if you love something, set it free.
[00:50:32] Right. I believe there's an onus on us to say to the clients, you know what?
[00:50:37] It's an interesting moment in time.
[00:50:39] This is not how it's always been.
[00:50:41] It's actually kind of the opposite of how it was for many years.
[00:50:44] We're just now on the other side of the coin.
[00:50:47] But at this moment in time, you can probably get a superior rate through your branch if you're thinking about going with this product because it is usually three year fixed.
[00:51:00] That's kind of the pain point for us right now.
[00:51:04] However, if you're thinking about taking a three year fixed two months from now, well, let's work together.
[00:51:12] I guarantee you I'm going to ask you a lot more questions than the banker is going to ask you.
[00:51:17] I guarantee you I'm going to pay a lot more attention through the term of your mortgage because I don't look at you as now in the machine and someone else's responsibility.
[00:51:28] I look at you as my responsibility for the life of this mortgage.
[00:51:32] So I'm going to stay in touch with you.
[00:51:34] And if we're thinking about maybe going variable right now and grabbing a three year a couple of months from now, we should definitely work together because I can assist you with communicating what those competitive rates are at the branch level.
[00:51:49] And so you'll get the same variable rate discount really at this point with me.
[00:51:55] And then down the road, you can get that branch three year fixed potentially at a lower rate in two months if that's where you believe rates are headed.
[00:52:03] So that was a typical Dustin answer, a lot of words in there.
[00:52:07] But I think there's a way to straddle that where you're open and honest and you're also putting your value proposition out there.
[00:52:18] And I think a lot of clients will at this point be saying, no, no, I want to work with you.
[00:52:25] Let's do the variable thing and let's stay on top of it and stay in touch.
[00:52:30] And then, boy, oh, boy, you better stay in touch with them.
[00:52:32] Yeah.
[00:52:33] Yeah.
[00:52:34] Like you better have a diarized reminder like December 12th.
[00:52:37] Like I got to call John and Susan, right?
[00:52:39] Like I got to call them.
[00:52:43] Dustin, your answers have been very, very insightful.
[00:52:47] And we really appreciate you taking the time out.
[00:52:49] If you're watching this on Spotify, you'll actually get the video of this.
[00:52:53] You'll see that Dustin's actually in Quebec.
[00:52:55] He's in Montreal today.
[00:52:56] A beautiful background.
[00:52:57] If you do get a chance, watch the video.
[00:52:59] So thank you for that.
[00:53:01] And thank you for all your time and your insights.
[00:53:03] It's been awesome.
[00:53:04] Yeah.
[00:53:05] I appreciate the opportunity.
[00:53:06] And we did have to reschedule this on my inconvenience.
[00:53:10] I inconvenienced you guys.
[00:53:11] So I apologize for that.
[00:53:13] And again, thank you so much for being so gracious and making this work.
[00:53:17] I appreciate it.
[00:53:18] This is The Mortgage Life.
[00:53:20] We look forward to continuing the conversation.
[00:53:22] So come back and listen.