As the man history will remember taking the country’s finances down a rabbit hole, Jim Flaherty should expect certain things. Not being finance minister after the last election’s a high probability. Being mugged earlier, a certainty.
In fact, already happened. In a Goldman Sachsy sorta way. You know, with class and subterfuge.
The Governor of the Bank of Canada even got other people to hold the little guy down and beat the crap out of him, while he kept his cuffs clean in that glass and stone tower. In case you missed it (and most did), Mark Carney just took all the blame he’s been shouldering for a housing bubble, for middle class people being priced out of their own homes, for a burgeoning subprime-like negative equity crisis, and dumped it on the guy lying in the alley.
It came Monday in a carefully-worded speech spelling out that the central bank would not be immediately raising the cost of money to address the gassed-up real estate market because of collateral damage. “If the Bank were to raise interest rates to cool the housing market now…we would, in essence, be dousing the entire Canadian economy with cold water just as it emerges from a recession.”
And that, damn sure, is true enough. Teaser Carney interest rates caused the housing market to tank up like a swollen gland, but jacking up loan costs now would also hurt small business, big business and jobs. So, back to Plan A: rate hikes this summer.
Of course, that was not the news. We knew that. Nobody here was expecting a rate hike in the winter. But nor were we expecting Carney would leave a body behind, either.
But he did. “Ultimately,” Carney’s spokesguy said, “it is the minister of finance who is responsible for the sound stewardship of the financial system.” That means, “the government could increase capital requirements for lending institutions, adjust the loan-to-value ratios and change the terms and conditions required to obtain mandatory mortgage insurance.”
So, there you have it. Mr. Carney’s respectfully telling you he’s had enough of your lip and plebeian wailing. Go dump on Jim.
And with that, everyone should be expecting the next big move to come in the March 4th budget, when the expendable Mr. Flaherty could announce that in order to get CMHC insurance, a buyer will need 10% down and be able to swing a 30-year amortized mortgage. That will have a major impact on the housing market, perhaps much more dramatic and swift than any mortgage rate hike.
(Not to say loan rates couldn’t still rise, since long-term mortgages are set in the bond market – where Mark Carney, Jim Flaherty or even that Avatar dude have no influence.)
So will this happen?
Maybe. But I’m thinking now, maybe not. The reason is a market condition which in itself could turn a seller’s market into a rapidly-cooling, more balanced situation – setting it up for a softer plunge once BoC rates do start climbing, post-July. And that, of course, is listings.
I’ve hinted here a couple of times that the number of houses for sale will probably explode, starting about now. Human nature makes people reluctant to put their homes on the market when prices are shooting higher, a reality which has helped demand overwhelm supply and increase prices. Why would folks act that way? Simply because homeowners in a housing boom feel wealthy and like to wallow in it, plus they don’t look forward to selling, then buying again from a greedy person such as themselves.
By the same token, listings always swell when markets start to level off, or decline. That’s when owners realize they just missed the bus. It’s a Canadian thing.
In any case, I have no doubt an avalanche of new properties will be the big real estate story in the weeks ahead. Hell, maybe it’s already happening. I see listings in Vancouver have shot ahead dramatically – doubling pre-Christmas levels – with the sales-to-listing ratio plunging to 31% from over 90%.
Hmm. Already started? But maybe Mark knows that, too.
Maybe he knows everything.
Hear Garth speak. Free events. Halifax Jan 13 (902) 576-3162 Red Deer Jan 19 (403) 341-5888 Kelowna Jan 21 (250) 860-6494 Surrey Jan 22 (604) 585-0090
183 comments ↓
Didn’t Benanke just do the same thing in the US? His article lasat week effectively blamed the entire US bubble on regulation vs. interest rates.
Also – won’t Flaherty have to change the down payment and/or amortization rules just to make the CMHC holdings less of a risk? New buyers these days must be less and less qualified, so even if the market evens out, the average CMHC-insured mortgage could still become a riskier and riskier item for the government to back.
It will be interesting to see how the supply/demand factor counter-balances the other things (rush to beat HST, rush to beat elimination of 5/35, rush to beat rate increases) that should push the market higher until June 2010.
Not what I expected and rather disappointed.
I figured you would at least play out the idea of low rates for 18 months but once again you chose the “huge listings this spring” route.
See you in a few weeks to talk after this didnt happen.
Good Night Garth.
No rate change for 18 months is a fiction. — Garth
My aunt lives in a small town in East Europe. She is retired. Her children left that town a few years ago and she wanted to go back to her birth village. She wanted to sell her 2 bedroom apartment two years ago. She was offered 70,000 Euro but she didn’t sell because of the “more latter” factor. Apartments identical with hers sold for 70,000 Euro, but there were only a few for sale. Yong people had to enter in bidding wars in order to buy one. Today she is really sorry. There are quite a few units for sale but not than many buyers… Units like hers are selling now for 40,000 Euro now ….and still dropping…
There was no stimulus from government in this country.
Human nature is the same everywhere on Planet Earth.
Disagree with you garth. Listings in ontario are down and we are in for a soft landing. People on the sidelines waiting for a crash made a huge mistake.
New builds are also down and if jim goes to 10/30 that will have little impact on the market for second and third home buyers. boc has their hands full with the rising dollar and it looks like the USA are keeping rates low in 2010. This will cause BOC to fallow suit or risk the dollar to rise.
bty all those people lined up at BNS waiting for gold are out of their minds. probably same people that were lining up for the new 400 sqft condos in Toronto.
People, get a grip! we all have to live somewhere, your choice is an apartment with noise, low lifes etc or your own home that doubles as an investment as well.
Garth, I think alot of us have been eagerly awaiting this post in light of the BoC’s declaration that they will hold off raising interest rates for the forseeable future.
The way the BoC statement was worded clearly implies that even when rates do go forward the increases will be muted.
As you stated in earlier blogs, it isn’t right. It used to be that people were rewarded for savings, you needed to prove your creditworthiness before you can enter the market, but now its all different. You are punished for holding cash, and the high rollers are rewarded for playing the real estate market with no money down. Our Canadian post-WW2 ethics have been turned on their head. As badly as I feel for the people that stood on the sidelines this past year, the announcement from the BoC that low rates are here to stay is practically an open ended declaration that real estate will likely experience even more upward momentum, so I guess its never too late to start and enter the market. If you live in BC, I really pity you folks having to mortgage your life away.
What’s also striking about the BoC wording is that it makes vividly clear that they engaged in careful deliberations on the warnings from sites like this one promoting the dangers of pushing up the real eatate market with low rates, and concluded that the Canadian real estate market is not the center of gravity in its decision making policy. Not by a long shot. The tone is clear. They are going to let real estate fly.
Remember the not too long ago days (only roughly 10 years ago)when the housing market was purely about buying a place to live and not overpaying in the process. What the @%#$@# happened?
Realtor’s have gone from being a group that helped families and individuals to buy and sell a house to become housing pimps. Driving around in flashy cars, making television shows and commercials flaunting how successful they are or pretend to be, coaxing the public into believing that a house is not about finding a place to live but about becoming wealthy. They started using catch phrases such as “investment”, it is not a home, it is an “investment”. They realized that fear as a motivator to scare people into taking on exorbitant amounts of debt was a great way to sell houses and the so called “advice” that they dish out about the market is nothing more than a disguised sales pitch.
The general public went from viewing real estate as not a home but as a way to get rich quick. Forget about the usual investments, the housing market is the new casino where you gamble away your financial future taking on extra mortgages that might look good in an up market but that will wipe you out financially when the market inevitably turns. Worried about spending 2 to 3X more than you ever would have believed you would spend on a house? Don’t worry, the Real Estate industry has told us that “It is always a good time to buy” and that prices “always go up in value”. US TV shows showed that all you needed to do is buy a house, put a coat of paint on it and maybe put in wooden floors and you can flip it for big bucks. What an amazing concept for a lazy society looking to get rich quick without the usual hard work and effort.
Behind all of this you have the enablers. Those are the Bank of Canada who hand out the credit “crack” to all of the “oh so willing” credit addicts. You also have the Finance minister Jim Flaherty under the watch of the Prime Minister of Canada flooding the system with massive amounts of new CMHC approved mortgages. Not for the long term health of the economy or country, most definitely not for the financial health of those foolish enough to buy a bubble priced house at emergency interest rate levels that have nowhere to go but up. No, they pretty much did it for their own political lust for power. Jump start the housing market to give the impression that the economy is stronger than it really is, (during a recession to emphasize the madness of it) to hopefully get elected with a majority than worry about the consequences of the inevitable US style housing collapse. They are basically following the US plan to a “T”.
The entire housing system is sick beyond belief and unfortunately many are in denial and cannot see it.
I have no doubt an avalanche of new properties will be the big real estate story in the weeks ahead. Hell, maybe it’s already happening. I see listings in Vancouver have shot ahead dramatically – doubling pre-Christmas levels – with the sales-to-listing ratio plunging to 31% from over 90%.
I’m not sure about Vancouver, but I keep a record of the number of properties for sale on MLS all over the country.
For example, the residential listings:
July – 223244
August – 216333
September – 211069
…
Now – 154381 — 4K up in the last 4 days, that’s true. Maybe just a seasonal trends… not sure, as I don’t have the number from the same time last year.
For everybody worried about the article “Bank of Canada won’t raise interest rates to cool housing”
You have to understand that Bank of Canada backed itself in the corner.
They’ve lowered interest rate same as USA to keep exchange rate competitive for Canadian exporting businesses.
Every country that exports to USA wants to have currency that is cheaper as USD (Japan, China, Canada, …)
But they have problem.
Canadian RE and debt market didn’t explode and is rising with unbelievable speed.
Oil prices have moved from 40 to 82. Gold has moved from 800 to 1200.
From outside Canada looks like it didn’t print that much money and didn’t have such atrocious stimulus (not true but that what it looks like from outside).
That supports strong Canadian dollar.
And that is bad news for this false Keynesian/debt driven recovery.
BoC needs to cool it down RE/borrowing without destroying exchange rate.
They cannot touch prime rate because exchange rate USD/CAD would tanked.
It moved from 1.06 to 1.025 in couple of weeks and BoC is worried that it will kill recovery.
So we have nice article about not raising interest rates. How predictable.
So what they do is talk. Talk is cheap and it helps move exchange rate at least a little bit.
#155 Vancouver Rocks previous post– it’s not about that bear are greedy or bulls are greedy and that we are all the same. It’s about disconnection between wages/interest rates and housing. It’s about not buying very expensive investment that can expose you and your family for years with huge financial troubles. It’s about unfair situation for first time buyers who has to take loads of debt to afford a shack.
Educated bear even if buys house today because he has to for whatever reason will not become bull next day. He/she knows that drawdown in equity is coming and rising interest rates are coming and he/she will be prepared. Only stupid people are switching from bear to bull in blink of eye and gloat about it.
It’s like gold today. You don’t buy at the tops, you buy at pull backs. By the way I am not gold bug.
So, Possibility of quick (2 – 3 years) correction was destroyed by government/CMHC/BoC in March 2009. Now it will be grinding down market for RE for next 5 – 10 years because I don’t see wages going up with present structural unemployment and interest rate are driven by bond market and that will be moving rates up with first sign of recovery.
So, higher unemployment will keep wages under pressure. We are losing high paid jobs and getting back part time crappy ones. Competition between government and private companies will keep interest rate on road to higher levels.
Energy, water, taxes will go higher in next decade and squeeze home owners even more.
We needed deep recession to clean our capitalistic system of inefficiencies – in RE, in companies, in government (local or federal one). Government is postponing it and making it worse by doing it.
Who bought from 2005 till present is dancing with joy but problem is that they are locked in RE wealth and that wealth is usually all they have because they’ve focused on paying down the mortgage.
Uff this post is getting longer.
Present owners are hoping for inflation and believing that house will protect them against inflation and at the same time make nominal prices affordable again.
Problem is that house is not perfect hedge against inflation. It will protect you against 50 – 60% of real inflation. Best way from 1983 – 2008 was not to have a house but to buy Dow index or something similar.
House went up from 100k to 380k in GTA area in that time but Dow index went up from 1075 to 10500 nearly 1000% in that time.
Anyway this post is already too long.
I will be needing bigger place for my family in 2011 (second kid on the way). If house rents will stay in 3 – 4% range of the price of the house or go lower I will rent. It provides flexibility and doesn’t expose my family to huge debt. If area that we want to move to doesn’t have suitable houses/apartments for rent we will be something in lower price range and accept drawdown or loss. But we need shelter and right now that shelter is damn expensive.
To buy real estate when interest is at all time low, ability to enter this market is to show up in bank and have pulse and all you have on the market in range of 500k – 600k is 30 – 50 year old shack is very very bad idea.
Those who are cheering zero interest rates remember “There is no free lunch”. You don’t want to go down Japan road.
Uf I didn’t post anything in long time. So here is my contribution now. Good night.
listings going up in the tri cities also–I’ve been following this market for 2 years
first 5 days of 2010–195 new listings—sold propetries wait for it—-35–
I didn’t think I would see these disproportionate numbers til at least mar or apr–if the listings continue this way we’ll have more listing than the spring of 2008 when the market began to turn here–also many price drops on listed properties
Wow, didn’t see that coming; good for Pontious Carney, the BOC has kept inflation in check – his hands are clean. What happens next is purely the will of the people as we elect governments, who appoint finance ministers.
How can mortgages 6-7X yearly incomes not be considered a bubble? What’s next? Flattery to tell us he concurs: prices are in check with supply and demand; tax payers like taking all the risk for big banks – back to the days of 0/40 we go!
I am extremely frustrated – FARGE. In Calgary, masses of people think the US fiasco will never happen here and keep buying – why I will never know; as far as I can tell the unemployment rate is rising and well paying jobs are diminishing. (Fellow Calgarians correct me if I am wrong).
Like many renters I qualify for a large enough mortgage to buy a house (you barely need anything for the bank to give you ridiculous over sized tax-payer backed mortgages). I just think RE is a really bad investment right now (but then again Mr. Carney and the house buying masses disagree with me so I might just be insane).
Hi Garth. Just wondering what happens in Canada when, as is looking more likely, the US has to keep rates low thru 2010? Although the Carney has said they will hold off raising rates until summer, surely they can’t if the US is unable to as well? That would create huge pressure for the CAD to go above parity, which would hurt businesses and exports (and even pressure mighty oil and gas profits out here in Calgary). If Carney changes his tune come June and waits (or marginally increases rates) in lockstep with the Americans, asset prices (of all kinds) will continue to inflate for the bulk of 2010. I am kind of hoping there simply aren’t enough Canadians to keep buying if 10/30 comes down, because otherwise wouldn’t it become more of a slow leak rather than a big pop.
Nice chart: Of course the Canada-averaged curve is a wee bit lower than what we know to be true in the western cities…
http://www.economist.com/media/houseprice2/Economist_HPI_July_09_Chart.swf
feasting on the taxpayers cash
When Goldman Sachs announced last week that its swelling bonus pool for top performers had reached a record $23 billion — about $700,00 for each of its 32,000 employees — the chorus started anew over excessive compensation on Wall Street.
good carma
The BubbleBloggers will someday bawl balefully in private, but they will never, ever admit that they have been very publicly very foolish
Tom Flanigan, Harper’s former chief of Staff goes on CBC and calls Harpers excuse for prorouging a lie:
“The governments talking points don’t have much credibility. Everybody knows that Parliament was prorogued in order to shut down the Afghan inquiry, and the trouble is that the government doesn’t want to explain why that was necessary. I personally think it was a highly defensible action but instead of having an adult defense of it the government comes up with these childish talking points.“
“…a market condition which in itself could turn a seller’s market into a rapidly-cooling, more balanced situation”
Eastasia has ALWAYS been at war with Eurasia!
Or, was it the other way around? And, as for Oceania…
What is your next train of thought, Garth?
Wow, the early comments here are typical of those who this blog is trying to assist. Making the assumption that this news of keeping rates low for some time will fuel the RE market further is just typical denial behavior.
There are many shoes that could drop in which any one will turn the market negative.
If none of them drop this year (which would be almost impossible), BOOMERS are going to jump start things as this is the most popular discussion being held behind doors at the BOC and between Boomers today.
It will start with a very selective group of early gen boomers now around 64-65 years old who are doing the next 20 years of retirement math.
They dont have the money past 2-3 years out, liquidity is tied to RE over 85% of their net worth today!
They will need to pull equity of of their homes plain and simple either through reverse mortgage or downsizing.
As most will still like to OWN OUTRIGHT, and less space/simplicity finally an awareness, downsizing will be the choice and you will as Garth states witness a complete flood of listings.
I think this is the big plan by both governements in the US and CANADA to get people back in check starting this year to put a cap on the bubble as there is no re-employment possibilities.
However…what they believe is a soft landing plan will be a downward momentum that cannot be stopped until both realistic terms and affordable housing will be put back in place. A decade of collateral damage is awaiting us.
The only one’s that will have some level of savings and liquidity will be the early stage boomers who get out now AND those of us who sold into the climb the last year or so and are liquid.
That’s all folks!
My mother-in-law is in a retirement home in T.O. We’re putting her crapshack on the market this spring. Hopefully some over-leveraged, real-estate hot-to-trot genius will hit the asking price (or above)…
Has anyone been to a mall lately – especially a HomeSense or a Walmart? Jam packed. Never seen a January like this before. Expect these retailers to surprise to the upside. Reminds me of the USA in 2006. People leaching off the equity in their homes thanks to easy credit and huge price gains. Well at least Canada knows what’s in store for us..
#5 Joseph
You get the BINGO !!! today.
Amazing — didn’t Garth just call a top in the real estate market?
gold bugs me, the moniker you chose to post under says it all. If gold bugs you now, wait until 2012 when this currency crisis is at it’s nadir and see how you feel.
#2c
#4 Gold Bugs Me
Thanks for keeping it real guys.
Its good to remember there are other views out there.
But PLEASE PLEASE keep coming to Garth’s blog and posting when the market craters
Interesting that David Wolf, who delivered the speech today on behalf of the Bank of Canada, stated that the Bank of Canada does not see a housing bubble forming in Canada. However, in September of 2008 when he was former chief economist for Banc of America Securities-Merrill Lynch, he did warn of a Canadian housing bubble. See the following Reuters article: http://www.reuters.com/article/idUSN1116060820100111?type=usDollarRpt
Looks like all the criminals are starting to rat each other out in an effort to get a reduced sentence to me.
In any market driven by credit, the interest rate is the prevailing factor. No amount of restrictive lending standards is ever as good as a solid 5%+ prime rate at keeping out the riff-raff.
Fact is, Blarney Carney keep rates way too low for way to long. They never should have been set less than 1% above rolling average CPI. Negative real yields always lead to bubbles.
Rate rises this summer? Not a chance unless Bernanke goes first. And I don’t think there’s much chance of that. This guy already said it way better than I could:
http://www.howestreet.com/articles/index.php?article_id=12068
The long bond on the other hand….
The bond market had a pretty bad year last year in % terms, although the total increase in yield was only like a single %. But going from just over 3 to just over 4% is a pretty big hit on the price.
#5 Joseph
Yup, they’ll let it fly on the way up, but as the 80’s proved they’ll let it crash on the way down too.
In Ireland 2 years ago people lined up and fought bidding wars to purchase a 320k – 355k Euro condo, today the same condos are being sold for 110k – 40K Euro.
http://www.leinsterleader.ie/news/All-of-the-reduced-price.5853334.jp
There is no stimulus money or govt backed mortages in Ireland. Like another poster said greed is worldwide.
I no longer dwell on the foolish prices people here in Calgary are willing to spend on shelter, i enjoy the time with my wife and daughter, eat out, travel and for once in my life drive a nice car.
Hi Garth,
I saw this chart from the Economist that strangely seems to indicate the Canadian housing market is far from overblown, at least in comparison to other countries. Sitting here in Toronto (in my rental house) prices sure seem to have gotten out of hand, but perhaps it’s just the curmudgeon in me.
http://www.economist.com/media/houseprice2/Economist_HPI_July_09_Chart.swf
The tone is clear. They are going to let real estate fly.
—————————-
price fixing in any market does not work. The attempt to price fix, only makes the eventual outcome more dramatic. Governments have tried to fix the price of gold low in the past. Governments have tried to fix the price of grains low in the past. Governments are fixing the price of homes in Canada right now. In the previous instances, market forces (gold miners & farmers in the second example), could not mine or plant at the price the government fixed. Less mining happened and less farming happened. What was the result? A sky rocketing gold price, and sky rocketing grain prices. Home prices being propped up by the government will be taken care of by market forces just like any other market. We’re talking about an exhausted sector now because of price fixing. We can now expect prices to drop dramatically because the fixed price is unsustainable under normal and sound principles. The laws of supply and demand, which rule all in the market, have been thrown out the window. It doesn’t take an economist to know what happens under these circumstances.
Our children will reading about this housing bubble many years from now. Be proud (or embarassed) as many stories will be told of our stupid ways.
I like Mark Carney. Well, I like his suits. Notice how the
shirtsleeves protrude that half-inch (OK 13mm) past his
jacket sleeves. Impeccable. I bet his duds cost more
than an ounce of the shiny yellow stuff – a very old and somewhat useless (IMO) guideline by the way.
I examined the RE stats for my area (VI not incl Victoria) by reviewing the month of September from 1997 until
now. Basically a 10% dip from 97 to 01, then a 130%
increase from 01 to 07. Then flatline. So what gives? No
increase despite the record low rates. It looks like Mr.
Carney is a master of the “elevator fart”, preventing a
ripper but perhaps allowing a slow deflation.
Now the economy hasnt changed here. If anything, forestry continues to wither. So why do other places continue to have RE prices rise despite crumbling economies? I guess every place is really different after all.
So I dont see how we can blame Carney for that.
#4 gold bugs me
I believe that Garth’s statement, “Human nature makes people reluctant to put their homes on the market when prices are shooting higher, a reality which has helped demand overwhelm supply and increase prices” implies that he knows listings are down right now but that they will rise as the trend changes from the ‘buy now or never’ mantra. They will soon begin to exhibit the exact same behaviour as those lining up for gold after the bird has flown – crazy behaviour of sheeple.
Also, as stated many times on this blog, second and third time buyers have ramped up and reno’d so much that many of them do NOT have 10% in their homes (i.e. new, ever higher mortgages and HELOCs have enabled them to pillage their own net worth). And, given that we can reasonably expect a minimum 15% drop in value over the next few years, people should be aiming for 25% equity just to qualify for their renewals.
The crap shacks currently for sale at half a million bucks each are just as noisy as most apartments but you only need 60 days to walk away with no harm done to your nest egg. Obviously, each family has different priorities but those that have been waiting for something they can manage (long term, rather than right now) should be commended and supported – they may have to wait a while still and what they need is to be told that they aren’t crazy, they are sensible!
I live in Bloor West in Toronto. We are planning to sell our house as soon as we finished the necessary repair(hopefully in a few weeks), but so far no comparable houses (in size and price) in this neighbourhood. What is happening? I have been watching the market for a few years but it is very rare situation. Suddenly houses for sale will mushroom here and there soon?
Garth, you should have added Mr Wolf’s words about the Canadian RE market when he was in the private sector.
31 Bobby from false +ve – just to clarify my post -
depending on what month and sub-area you pick you
of course get varying results. I still think we’re off 5-10%
from the peak.
So Garth might get a bunch of “what – me worry?” looks when he’s in Nanaimo.
[...] Edit: Garth Turner has some interesting thoughts on the same speech here. [...]
Garth,
Very perceptive of you. I have been reading Carney for weeks now and noticed that every release has a legal disclaimer attached to it. Clearly he is worried about the long term potential for negative equity in the housing market.
I hope you are right about the 5/35 being scaled back to 10/30. However I have my doubts. I am more cynical and believe the Conservatives will push hard for a Spring election before the market falls and the economy dips. They see the writing on the wall.
Once we dip next time they will have no monetary tools to bring it back for a long time. Better to go to polls now arguing their great stewardship saved us from the perils of the U.S. situation. Push for a majority and then afterwards let the economy go to crap.
I attended the Bank of Canada speech to the Chartered Financial Analysts in Edmonton on Monday.
Here is what I thought I heard: (and I am paraphrasing )
Bank of Canada’s job is to keep inflation at 2% target. Not much above and not much below.
Cooling the housing market right now would interfere with getting inflation up, so not going to happen. It’s not our job. The Minister of Finance has many tools for the job if indeed a cooling is needed. Go talk to him.
Anyway, our definition of a bubble is when assets go up just because they are going up. In the case of housing if prices are up due to low interest and affordability, well that is jut not a bubble by our definition.
Wolf said House prices have risen due to factors that are temporary such as low interest rates, pent up demand, sometimes a lack of supply and from demand brought forward as people rush to buy with cheap money.
So I interpret that as Bank of Canada giving a bit of a warning here that house prices will fall when the temporary factors go away. Prices may drop but still they are not in a bubble right now since the house prices are justified by fundamentals (albeit fundamentals that are temporary).
If you thought a bubble was when house prices are at risk of a big drop, well that is simply not how Bank of Canada defines a bubble.
Mr. Wolf was extremely clear that the Bank of Canada interest rate will not rise before June 30.
Bank of Canada also commented on the Canadian dollar. Again they have a one track mind and the indication was they will focus on the 2% inflation. They will not target any level of the Canadian dollar because they can’t serve two masters and their master is the 2% inflation. Period. full stop. (This is my interpretation of what I heard).
I take this to mean we could see our dollar back over parity with the U.S. it will wreck the export market but Bank of Canada will not act unless they need to act to keep inflation at 2%.
The old saying is, be carfeful what you ask for, you might get it. In this case it seems Bank of Canda has a mandate to bring 2% inflation. Nothing else seems to matter to them. Go talk to the finance Minister…
Thank’s Garth.I’ve been reading your blog and books for a while.Dabbled at the thought of buying here in Vic,not gonna happen.Thank’s to many other posters here as well.We can all agree or disagree,fine.Comes down to paying the bill.Got out here late,missed the train.However,didn’twant to get rich by flipping,just have a home.I realize now,35 years is a long time to pay for a “home” when we have it now.Renting,that is.I see too many peers on the train,not seeing the end of the line(may be a trustle not finished)I’m over it…
I would rather help my kid’s further education than be a slave to debt(mind you,she shall pay for the fisrt year).The future of this country is not in bricks and mortar,but the minds of our children.Even I the kid of a baby boomer can see the change in society,and having been in foreign lands,I know the importance of education.If we put half of our energy and money into education of our children we would be a lot better off.This blog covers a lot of topics people,however,our most important human resource is our children.If we make mistakes,don’t let our future make the same mistakes.Nintendo will not teach them right from wrong.We have to…
Deletedammit Jr. ……
I’ve noticed that G.T. doesn’t delete every word that you post….
What you should do is take the average of all of your posts and see how many words that you are allowed and then only make the first couple of words in your suceeding posts mean something so that we could string these words together and continue to be advised about your brilliant predictions.
It might take 20 or 30 posts to construct an entire sentence, but what the hell…what else do you have to do.
“Maybe he knows everything.”
thats the absolute best.
Hi Garth
So would a person needing to renew a 0/40 after 5 years need a capital infusion to still qualify for federal mortgage insurance protection if it was upped to 10%?
Regards,
Tom
Sale/List suffered a record drop from 152% to 31% in Greater Vancouver
http://canadabubble.com/bubble-watch/320-seasonal-influence-or-trend.html
I expect this housing bubble is going to die all on its own very soon now even without the raising of interests rates. The final rise in home prices between now and June will result in prices reaching unaffordable levels even at 2.25% and the rise in unemployment levels, the increase in mortgage defaults, and the lack of Greater Fools will finish it off. We pretty much know what would happen if the BOC were to raise the rates right now, the banks would just revert back to the Prime Minus mortgages to nullify the BOC increases. It’s what they did before remember. Methinks Mr. Flaherty better do something pretty quick to stop this little game that is going on between himself, the banks and Mr. C. Doesn’t seem like these three are seeing eye to eye. Different agendas I reckon. Oh well, nothing that hasn’t happened already time and time again. Good job keeping the pressure on Garth.
No Job……. No Mortgage…..Heads up Vultures……I Smell POS in the air
I realize that this is primarily a RE blog but seriously people….can you not see the forest for the trees??
It matters not one wit whether or not there is an interest rate hike in the spring, fall or never…not really.
The world economy has been effectively gutted….forever.
Peaking of oil supplies in the 2005-2008 timeline effectively and permanently has shut down growth based economics forever.
Oil prices can never again be maintained for long, above the $85 (current us dollar value) per barrel without KILLING the economy. The sands CANNOT function with numbers like that……and that my friends is what Canada has to offer….not a lot.
We will now see overall crushing deflation worldwide with wide flat out hopeless attempts to use electronic money printing to hide the fact.
The second wave of ARM is hitting the us res market now and the CRE market is now in collapse……but these are symptoms……the problem is the oil deal……and it is permanent.
You are all either to damn scared to admit the truth or to blinded by keynsian economics to admit that modern economics was built on the quicksand of cheap energy……or maybe your just not that bright (no offense to the few bright lights on here).
I hear in China for 2nd home they are trying to enforce now 40% down to try to discourage flippers. Jeez wonder what was required for their 1st homes?
So even there they have problems with speculators.
#4 gold bugs me
You think apartments are full of low lifes. More likely there all your neighbors. So then what does that make you then?
“By the same token, listings always swell when markets start to level off, or decline. That’s when owners realize they just missed the bus. It’s a Canadian thing.”
BZZZZZZZZZZZZZZZZZZZZTTTTTTTTTTTT
Wrong, Garth, it’s not just a Canadian thing – it happens the world over – it is, as you said, a thing of human nature – not just a thing of Canadian nature.
Happy New Year to all – Munch has been wallowing in luxury in Mauritius for the past month
New taxes coming, not
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I had an interesting read yesterday. A local magazine listed the Top Ten employers in the city ( said to be 122,000 population ). Interestingly, the top 9 were various forms of tax-payer funded institutions, municipal – provincial and federal governments, hospitals, education facilities etc. Number 10 ….. a manufacturing plant. This, in a formerly robust resource based, blue collar community.
Hmmmmmmmmmmm……. what will happen when the inevitable government cut-backs come ?
“In any case, I have no doubt an avalanche of new properties will be the big real estate story in the weeks ahead. Hell, maybe it’s already happening. I see listings in Vancouver have shot ahead dramatically – doubling pre-Christmas levels – with the sales-to-listing ratio plunging to 31% from over 90%”.
What about a spring rush?????
Garth, if you can predict that listings will soar for some areas, that interest rates will go up and that maybe we’ll need 10% down… Why can’t you make predictions for resale prices for major urban centers like you’ve done in years past?
Too tough to call?
The system is at a point where many in the system can see that it is not working, but not even the top leadership can take the steps that would address the problems (they feel it would be political suicide). We’re all on borrowed time with respect to our entitlement life style.
The Conservatives are dodgers. No matter how serious the issue (e.g., global warming), they dodge doing anything about it. Sure, now Harper’s waiting to see what the States does. But once that’s apparent, he will say that it’s not appropriate for Canada. His goal is to do nothing.
With the housing issue, the Conservatives are not going to want to be seen as the ones who pulled the plug. No matter how irresponsible it is, they will do nothing to bring the housing market lower. If it happens of its own accord, then fine, they’ll work with that. But they’ll make sure everyone knows that they’re blameless and that it’s somehow the Liberals’ fault.
Their goal is to get an majority, not to keep Canadians from bankruptcy.
“If we have sufficient economic growth, we won’t have to do as much …”
That’s Jim Flaherty speaking, quoted at http://www.thestar.com/news/canada/article/749494–jim-flaherty-s-rescue-plan-blasted?bn=1
Translation: “If we don’t hit an iceberg, we won’t have to slow down.” Who made this man Finance Minister?
Dear Garth:
I am not surprised Mark passed the buck, didn’t Ben do too? “It wasn’t the job of the chairman of the Fed………”
I’m thinking that the only way we’re going to get the cleaning out the system needs, an end to artificially propping the economy and postponing the inevitable, is when a new government can come into power, allow the ‘collapse’, and blame everything on the previous government. As long as Harper’s government remains, there is no way they want the collapse on their watch. But if the Libs manage to win an election in the near future, what have they got to lose by letting it all go to pot the day they begin office? They can look good as the re-builders of the economy.
….afterthought from previous post….
But there’s little chance of regime change if you can just shut down parliament every time there’s a threat to your position or reputation.
It’s just talk. Their guns are empty so now they’re just threatening to do things. Based on their track record, if they’re denying that there is a housing bubble, you can bet your ass there is one. Remember when there wasn’t going to be a recession?
Dear Doc (#6):
“The revolving door syndrome” being a well known problem South, I researched important Canadian political names and guess what…..!
I therefore concluded that “a housing market sick beyond belief” can be a rational thing, after all.
I think the BoM is in a bubble
In Toronto/GTA, the number of new listings typically jumps from 5000 in December t0 10,000-12,000 in January.
So, if we see say 13,000-15,000 new listings (or a slow down in sales volumes) in January, that would be an indication that things are changing.
http://guava.ca/indicators.html
So much for predicting the next decade ….. you’re changing your predictions faster than I can read them Garth.
But really, you’re basing anything on listings being up in Vancouver just prior to the Olympics? OMG…… they have been wailing in Vancouver for years about how the housing market would not peak until the Olympics.
They really believe this crap. So why wouldn’t the listings expand? If you want to extrapolate anything from that, it is how stupid people can be.
As far as Toronto goes, this past weekend on my street the cars were circling, and circling around one of the VERY FEW listings in my neighborhood. It is probably sold by today.
But listings are up in Vancouver…… so what?
So a fool ignores what is to come, to cling to what is today. — Garth
I don’t think regulation is the answer–
It’s all about rates–
Cheap,easy money–will always find a home and a bubble will form–always–
Flaherity got bested by Carney–
Carney isn’t stupid–typical Gold man–
Flaherity–well ya know–
Should I care if my neighbours and colleagues at work blow their brains out with cheap money? I hope they financially commit themselves up the ying-yang for the next 20 years.
They don’t feel sorry for me because I don’t ski in Whistler, have a vacation property, granite countertops or live a regal lifestyle. Boo hoo. Poor me, -NOT.
My cash will be worth even more after the pull back/meltdown(?) anyway. Big screens, furniture, tires and just about everything else will be on Kijiji and will be going for a song. I won’t be paying any HST on that stuff either.
RE will be very affordable but I’ll be playing hardball so don’t even waste time showing me the “comparables.” Take it or leave it.
In a perverse way, I fully support what the government is doing with interest rates. The sooner the mortgages, lines of credit, Heloc’s and plastic gets maxed out, the better off I will be and so will many who contribute to this Blog.
“Ultimately,” Carney’s spokesguy said, “it is the minister of finance who is responsible for the sound stewardship of the financial system.” That means, “the government could increase capital requirements for lending institutions, adjust the loan-to-value ratios and change the terms and conditions required to obtain mandatory mortgage insurance.”
It isn’t really Mr. Flaherty who is the bad guy here. Mr. Flaherty would not break wind without first having the entire event preapproved and preplanned by the PMO and his boss. Mr. Flaherty is simply the financial mouthpiece for Mr. Harper.
So whatever evils you read into the Conservative’s handling of the economy over the past couple of years, place the blame where it is due – squarely PM Stephen Harper’s shoulders.
Dear Martin:
I sympathize with you. This bubble is lasting longer than some of us will.
It is money illusion for some folks and a grave injustice for others. A few get very rich and keep it.
In Ottawa, rentals are generally dumps. If a place is not kicked around by the speculators, you can be pretty certain that it is no secret that there is something very wrong with it.
I rent one of those, nice curb appeal, but you can’t heat it (electricity).
When you own a house, you fix what is wrong. When you rent, what can you do?
People, on this blog, spend $1500 – $2000/mth plus utilities to rent; I find that too high since I dread the utilities.
We clear $6000 a month (we don’t count the confiscated part); and to us, $2000+/month for rent, would be a third of our earnings. Not much fun!
The situation is really nauseating; if we knew of a better country who would accept us with fair prices and stability, we would go for it. We don’t think a poor country is suitable though; suffering eventually always breeds violence.
We don’t need a job, since we could retire with savings that, without hyperinflation in everything but wages, would have been plenty in Canada.
But hasn’t this been the way worldwide since the mid nineties? I will re-read “The globalisation of poverty”. It is in my neighbourhood library.
Did anyone notice yesterday that the Bank of Canada trotted out some relatively unknown, bald, and poorly dressed lower level functionary peon, rather than Mark Carney himself, to proclaim to the assembled media whores that raising rates would throw cold water on the Canadian economy ?
I guess Carney doesn’t want to be caught in a lie when the time comes and the world’s bond markets force his hand.
Hey, people, don’t you see it very clear?
The whole idea is to make people to jump into the buyers pool. The pool is getting more and more empty (emptier). The few ones still in, are the ones that don’t want to buy because …. (whatever is the reason) The gov’s job is to bring all of them into the game. Very ease: scare them. You will see the rush of buyers, it always works.
The times when you went to the market place with stuff and goods that people there wanted and needed are not longer today. Today you go to the market place with “promises” (debt) and that’s what the other players want to buy. In order to have more and more promises to take with you to the market place, you need your people to get more and more in debt.
Now, sustitute “you” by gov. That’s how I understand the situation.
Be sure of this: nobody is your friend. Gov will not increase interest rate to help you. In a few years catastrophe ? who cares, it won’t be me who is in power.
Flaherty is a tool but Carney is the one in control of interests rates, no-one else, he’s the grandmother-”lover”.
He’s the one beating her up every day with 0.25% rates for the fixed-income/money-market funds she depends while Goldman Sachs borrows money virtually free to speculate on commodities and reap billions.
Garth: That should be “alley” not “ally.” But not to pick, because your spelling is usually perfect.
More evidence I type this drivel myself. — Garth
Garth,
Why were my comments not posted? Unreal, seriously you bash the msm outlets for there “false positives” meanwhile all the optimist’s (which I feel are unwelcomed here) that comment here have a better chance of there comments being posted on some daily rag. Is your server located in South America?
Have no idea what you are talking about. Hit ‘send’ next time. — Garth
not higher
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The obama administration and Canadian government are travailing to postpone the crush and collapse of USA and Canadian economic and society.
But all their “hard work” is impotent, because they trying:
“To pour water from empty to vacant” – Russian proverb.
They forgot that money is only the measurement tools for quantity and quality of goods, products (K. Marx).
For creating more money, first we have to create more products; obama (and Canada) is trying opposite; as a result will be inflation and crush.
The problem of obama and Canada today is: it is much cheaper manufacturing products in Asia, so, the sunset of USA Empire (and Canada) is unavoidable and around the corner.
The real problem is not economical at all, but social.
The western Judeo-Christian civilization spent centuries to create free, tolerant, democratic society based on Ten Commandments.
It’s really sad and bad that we’re witnesses to the collapse of this civilization because of politically correct and multicultural morons with masochistic brain pathology, living in the fantasies and hallucinations, but not in real World.
It is not the end of the world, but hard times.
The biblical moral and Ten Commandments will be back after years of bloody conflicts, thanks to “neo-liberal” politically correct, multicultural masochists.
So, should we expect the opposite story to come out in 1-2 weeks about Flaherty “stepping down to spend time with his family”?
http://ca.news.yahoo.com/s/reuters/100112/canada/canada_us_shuffle
As far as who’s to blame: I actually agree with the assessment that Flaherty’s regulations should be seen as the primary cause (vs. interest rates). How can anyone suggest that we’d have seen the bubble we have today if you still needed 25% down and a max 25-yr amortization?
All of the various GTA burbs that have been developed over the past 5-10 years (Milton, Vaughn, Stouffville) have expanded on the backs of newbie buyers with minimum down payments.
Let’s say the average GTA home is $400k.
25% down/25 years = $100k in savings plus $1580/month (@ 4%) required
5% down/35 years = only $20k in savings plus $1320/month (@ 4%) required
I highly doubt that all of the late 20′s/early 30′s buyers would have been able to find $100k lying around — I mean, even with a top-bracket income that’s still several years of disciplined savings.
The same thing goes for condo buyers — the skyline would look a LOT different if everyone needed 25% down.
#63 Keith in Calgary
It was easier for BoC to hire David Wolf to shut him up versus have him continue to sound off on a Canadian housing/credit bubble.
While we were sleeping, China raised interest rates.
Trade balance sinks to deficit in November
Last Updated: Tuesday, January 12, 2010 | 9:16 AM ET CBC News
Canada’s trade balance with the world went from a surplus of $503 million in October to a deficit of $344 million in November.
This of course will have an effect on jobs and jobs have more to do with housing/Real Estate/RRSP’s than Flaherty/Carney are willing to talk about and where is our PM?
Heading west to collect the first Gold Medal for snowballing Canadian voters … all while on a his second annual extended taxpayer’s Christmas vacation.
yum yum, free taxpayer money
When Goldman Sachs announced last week that its swelling bonus pool for top performers had reached a record $23 billion — about $700,00 for each of its 32,000 employees — the chorus started anew over excessive compensation on Wall Street.
#67 My View:
Optimist and pessimist according to who? Actually the main stream media is pessimistic on saying that housing will “rebound” and there is a “silver lining”.
More property taxes, higher rents, higher housing costs are not a good thing for anyone. Owners pay more on mortgages. Renters pay more. Higher property taxes. Harder to sell houses. Harder to buy houses.
A crash and collapse is actually a very good thing. If the houses in Calgary were suddenly to go from $400k to $180K there would also probably be a collapse of jobs. Ask yourself if you are getting ahead by supporting current bogus prices. Not really. Am I able to save much paying high rent and then buy a house. No. Sure my job is ok. I make $100K a year. It isnt hard. But my money and my job dont define who I am. That is defined in my head by myself. So all this nonsense about a crash is actually very optimistic because it forces people to take a hard look at values and priorities. My priority is simply to afford a basic house say 1500 sq. ft with a basement for a decent price, say $200K. All that has been screwed up by all the idiots in my way that have manipulated the system to make a fast buck. It gets in the way of people working hard to support their family.
In Calgary unless you make close or at $100k good luck surviving. You’ll be scrambling. Something very wrong that people making $20K per year in many cases are homeless.
Get your priorities straight to all you who say real estate is overvalued and properties are priced appropriately.
??????????????????????????????????????????????????????????????????????
?CAN A CENTRAL BANK MANUFACTURE A DEPRESSION AT WILL?
??????????????????????????????????????????????????????????????????????
Hard to believe but the evidence is more than a curiosity….more than a mere coincidence.
“The Federal Reserve, the U.S. central bank made money off its efforts to rescue the country from worst economic and financial crisis since the 1930s.
The Federal Reserve made a record profit of $46.1-billion last year, reflecting money made off its extraordinary efforts to rescue the country from the worst economic and financial crisis since the 1930s, the central bank announced Tuesday. (Source: The Associated Press / Globe and Mail )
“Many people don’t know or understand that the Federal Reserve System is not a government institution or bank, nor does it have any reserves. Rather, it is a banking cartel run by some to the most powerful men in the financial world. The creation of the Federal Reserve was basically a license to print money and to protect the biggest banks from failing by providing liquidity to those banks when they were in financial trouble, which protected the wealth of the rich, not of the taxpayers.
“Give me control of a nations money supply and I care not who makes the laws.” (Mayer Amschell Rothschild)
Oooopps….
Forgot to quote the source of the quote. Symmetrical symmetry seems synonymous succinctly with sympathetic symbiosis.
“Many people don’t know or understand that the Federal Reserve System is not a government institution or bank, nor does it have any reserves. Rather, it is a banking cartel run by some to the most powerful men in the financial world. The creation of the Federal Reserve was basically a license to print money and to protect the biggest banks from failing by providing liquidity to those banks when they were in financial trouble, which protected the wealth of the rich, not of the taxpayers.” (Source: Robert Kiyosaki, Rich Dad Poor Dad Guy)
10% down, 30 yr amortization, the HST and rising rates, would be quite the 1-2-3 punch for the RE market.
Personally I like the 10% down, 30 year amortization to protect people from themselves. But maybe extending the home reno tax credit, which was popular, would help to continue stimulating the economy.
I am obviously not a home builder.
“Teaser Carney interest rates caused the housing market to tank up like a swollen gland” – Garth
I love laughing out loud at the coffee shop in the morning while reading your blog!! Keep ‘em coming!
Jimbo deserves everything he gets. Carnival, too.
Guava’s been posted on here many times. It’s an independent real estate blog showing houses that are for sale, price drops and how long they have been on the market for in more of the core of Toronto.
Here are some fun ideas for you to see what your hard earned money can buy you in this City. I realize for those in BC these will seem like a bargain.
I clicked on the LO prices just for this (aka under 500k) but you can choose high to see what goes on.
http://guava.ca/map-checkbox.html
Less than 4 years ago, a good group of the homes you see East of the Don Valley Parkway were selling for around 200 – 250K.
This one is by far my favourite because it’s a rare listing under 300K.
http://www.mls.ca/PropertyDetails.aspx?PropertyID=8935901
After yesterday’s fun filled announcement, we regarding our house hunt have decided to do…absolutely nothing. We have become part of the lucrative amount of first time buyers that have officially been priced out of the current market (based on the budget we’re comfortable with).
And as for new listings, they’re coming out like avengeance as we get masses of new ones being emailed to us daily by our realtor and the lists get longer each day.
The irony is, some of of the listings we’d actually consider buying if they would just drop their price to a about 30K less. Unfortunately everything we’re getting is about 25% more asking than it really should be going for. And those are the ones that are sitting on the market not selling. Common sense still exists amongst some buyers, it’s not being showcased in mainstream media.
# 22 – Pat
Brilliant ‘discovery’. I think that should be posted on as many people’s radar screens as possible.
Hey goldbugs
the houses are still made of crap and you want me to buy one and [gulp] it just might be next door to you?
Pass. As stated before in this blog you can tell which apt are owned in our neighbourhood [arbutus and broadway] . The ‘owned ‘ apts look like noone takes care of them. Our front garden looks so much better than next door.Mind you their mortgages are so big they cant afford a gardener. At least their apts were built in the 1960′s so they havent had to fix much. Unlike the Condo’s behind us. They should be emerging from the green tarp soon …..something about the integrety of the building envelope?
@ #80 Grey:
That property is amazing! It brings new meaning to the term “Semi-Detached”.
I guess I can see why most people choose to buy condos in that $200k-$225k range (or keep renting).
Let’s all remember the demand suck effect Garth brought up previously.
This 3am party requires a constant influx of newbie buyers to keep the music playing.
They’ve all rushed hither from the future (where they would/should have bought if not for the emergency rates/msm encouragement.)
The effects of this will begin this spring, when everyone is shocked that the once numerous and thriving newb population will be strangely withered.
Hmmm..”where are all the newbs” they’ll say….
And then Christopher Lloyd will say…”Great Scott, they’ve gone back to the future!”
…yes indeed, far far into the future.
#60…..You hit the nail on the head……..Good One !
http://finance.yahoo.com/tech-ticker/survivor-america-%22it%27s-only-going-to-get-worse%22-gerald-celente-says-401199.html
re: “long-term mortgages are set in the bond market – where Mark Carney, Jim Flaherty or even that Avatar dude have no influence.”
The Federal Reserve can influence long-term bond market rates in the following ways: 1) Recent benign comments to hold the historical low overnight rate with “extended period” language; 2) The Fed purchases unlimited 2 year and below securities at target yields – they are; 3) Fed interferes with mortgage-back securities market, which they are also, by purchasing more than a $1 trillion; In addition, the Treasury has recently implied a deluge of upcoming 10- and 30 year Treasury bonds issuance – influencing the steep yield curve further.
Who was talking about the Fed? — Garth
Bubble mentality reminds me of the “Hello Kitty Craze” incident in Singapore 10 years ago. People were queing up outside McDonalds to get one of the cute cat (without a mouth) dolls that one can purchase with a McDonald meal. Long lines spilled into the streets, some fought and some fainted from exhaustion. I was there and witnessed it first hand. This happened for many days and then the mania suddenly died down. I finally managed to pick up two dolls without having to queue some months later, intending to keep them for my kids as an prop to teach them how crazy can people get sometimes. In fact, these soft toys are the few items that we brought with us when we moved to Canada.
Google search “hello kitty queue singapore” or refer to http://www.atimes.com/se-asia/BB12Ae01.html
Beware of confirmation bias. In the age of internet anyone seeking opinions that affirm his own beliefs or wishes will find what he is looking for. There is a blog for everyone out there. Like most posters here I feel that Canadian real estate has gotten ahead of itself. .. I felt this way since 2005. To affirm my reasoning I sought out “equally astute” investor opinion on the web regularly checking several websites. So far we have all been wrong. Sometimes it is best to detach for a while, listen to ones own intuition (learn to differentiate intuition from wishful thinking first) and do what it dictates. Because you may just be able to buck a trend. Make a few bucks when everyone else is loosing… Or lose a fortune when everyone else is getting rich. It happens everyday.
http://www.vancouversun.com/travel/Olympic+property+rentals+Great+expectations+take/2430230/story.html
A key issue that seems to have been missing from today’s discussions is the issue of the BoC’s inflation mandate.
If you pay attention to yesterday’s BoC speech, you can see they stress that every decision is guided by their target inflation rate (2%):
“Canada played an active role in this global policy response. While we did not need to bail out our financial institutions, fiscal and monetary policies were applied vigorously. Guided by the *2 per cent target for inflation*, the Bank of Canada pushed its overnight interest rate essentially to the floor – that is, to the effective lower bound of 25 basis points. We also set out a framework for unconventional policies that could be used to provide further stimulus if needed. We implemented one element of this framework – our commitment to hold rates at the effective lower bound until the end of the second quarter of 2010, *conditional on the outlook for inflation* – while stressing that other unconventional policies were available if needed.”
And:
“As Canada’s economic growth moves towards its potential, it is expected that *a robust housing market, supported by exceptionally low interest rates, will continue to work as an important engine pulling the Canadian economy out of recession*. This has implications for monetary policy, which, as I’ve said, aims to achieve the Bank’s inflation target of 2 per cent over the medium term. It’s important to remember that this target is symmetrical; that is, *we are equally concerned about whether inflation is above target or below target – as we expect it to be until 2011*. The revival of the housing market is one factor that is helping us to achieve our inflation target, and it is a powerful means through which monetary stimulus affects the economy.”
The above paragraphs seem to suggest that the BoC:
a) Sees the RE market surge as a means to push inflation higher towards 2% – which they want in the short term
b) Expects inflation to remain below target until 2011.
Hence, there is a fair chance they will not raise rates in June.
*Unless*, we see inflation (CPI?) hit 2% by then.
What are the chances of that?
The full speech can be found here:
http://www.bankofcanada.ca/en/speeches/2010/sp110110.html
This story didn’t even make the front page of the Victoria Times Colonist this morning. A gas line rupture caused by human error and the chaos that ensued did. I guess the moral of the story is don’t let shitheads work on your gas line. I do hope Mark, Jim, and Steven are reading this.
The Canadian economy is a prisoner of outside forces.
We depend on exports to the USA. Our interest rates are determined by what others do, whether that is the US Fed or the Bond market. All we can do is react when others make a move.
I have said here before that Canada will not move to raise headline interest rates unless forced to. If the US Fed does not raise interest rates until 2012 or later, as they have stated many times over and over – there is a very low probability that Canadian rates will rise during that time IMHO.
The Australian experience is illustrative – every time they raise interest rates, their $ soars. Not the desired outcome if you are an exporting nation, it makes selling your exports more difficult as they cost customers more to buy. All you do is make your country attractive for hot money carry-traders looking for yields higher than in the US or Japan.
There are also political considerations, David Dodge came under heavy fire in the ’90s for creating a “Made In Canada” recession by raising interest rates farther and faster than other nations. Memory of this lingers at the Bank of Canada, they have even referred to it at times in speeches. They don’t take criticism easily there, being the stiff-necked Banksters they are. Raising interest rates might bring an end to their independence, as opportunistic Opposition Parties in a fractured Parliament could score easy points by calling for Carney to be fired, rates lowered, BoC taken under the Government’s wing etc. There would be massive political pressure from clueless self-interested groups like the Realt(ho)rs (TM) etc. Nobody loves a Central Bankster, many would like to see them lose their authority.
The path of least resistance is what Wolf (and others) have stated recently: tighten lending requirements, but don’t raise interest rates unless forced by the Bond market. But the Bond vigilantes are focused on the UK and USA and the weak nations like Greece and Ireland etc of the world. Canada is way down the list of nations that will see soaring borrowing costs on their debt, yet.
I see little pressure on the Bank of Canada to raise rates, and much to leave them where they are. The path of least resistance looks to be “stay the course”. If Flaherty announces a Budget with spending cuts come March, that could be enough for the Bond Vigilantes, they are not focused on Canada anyway. Our numbers look great by comparison to so many other nations.
We are still in deflation, the only reason GDP growth is above 0 now is Government intervention across the globe. In that environment, 2 % interest rates are too high. Inflation has yet to make any appearance except in food and energy, which are not counted in CPI headline numbers.
All in all, I see almost no reason for the BoC to raise interest rates this year or next, they will be following the Fed’s lead. If we slip back into recession, even less reasons. It is my opinion they will simply watch and wait, doing nothing.
Disclosure: I have a VRM, now at 1.6%. A raise of interest rates by 0.5% would see my monthly mortgage payment rise about $37. Hold me, I’m scared. If I was a new home buyer, it would scare me, given the enormous size of a fresh mortgage these days.
There is no doubt a sharp correction in Canadian real estate prices is needed, we are way above most affordability metrics. I think it will be driven by the lingering recession and poor job prospects, not the BoC raising interest rates month after month. Others see it differently. Time will prove somebody correct. YMMV.
…interest rates
Nostradamus jr.
Is Carney checking out a stripper in that pic?
Here you go guy’s a quote to remember:
No rate change for 18 months is a fiction. — Garth
It’s January 12, 2010. Anyone writing this down? This time let’s see him squirm out of this one.
#22 Pat
hard to know the truth when someone speaks with split in one’s tongue.
antagonyms have previously been called “contronyms”
Mr. Wolf is deceptively smart.
either he is smarter than he appears/dumber than he appears
Take the word transparent – invisible, obvious
We know the obvious but what we need is the invisible
ponzi players ,shadow banking, etc made visible!
“Last month, the Treasury estimated that the net cost of TARP to taxpayers would be $41.4 billion. For example, Treasury Secretary Tim Geithner said last month that the bailouts of the automakers and insurer American International Group (AIG, Fortune 500) would not be paid back in full.
There is a significant likelihood that we will not be repaid for the full value of our investments in AIG, GM and Chrysler,” Geithner told an oversight panel.
Yet, the financial industry tax under discussion could impact the entire financial industry, a prospect the banking industry opposes. With few details available about any proposed fee, it’s unclear whether banks would be required to pay for losses incurred by GM and Chrysler.
“Imposing new taxes on top of the increased regulatory costs will weaken the industry, just when the industry is helping lead the economic recovery,” said Scott Talbott, chief lobbyist for the Financial Services Roundtable, a bank lobbying group.
==========
24 Larry –
well what do you call raising the protected deposits to 250k from 100k
or creating good/bad banks Ireland seems to be doing what Paulsen suggested.
41/Knucklewalker: No, people can discern the individual trees for the collective in which they exist. That is plain and obvious and has been reality forever and will continue to be.
I disagree this is the end of the world. It may be, though, the end of the world for those who are wholly “invested” in the status quo and who have neither the time nor the background nor the patience to capitalize on what may be around the corner.
There is as much, if not more, money to be made solving the current technical problems than ever before. (Of course, this may not apply to political and economic issues at all…).
The whole hydrocarbon discussion is tantamount to the forest/trees concept. Fundamentally, it’s an energy game, period. People will whinge when gas is over a dollar per litre… but they pay… and they continue to pay. Wait until your power grid starts to become unstable. When oil is pricey, people complain bitterly, but life still goes on. When your electricity goes out, life literally stops. After 24 hours, you’ll do ANYTHING to get the power back on. How long until the oil and gas companies simply become “energy” companies? Oh wait, it started a number of years ago with some of the super-majors investing in wind and other alternatives. Ultimately, they aren’t going to care if they sell you a thimble of gasoline or a kilowatt-hour of nuclear-fired electricity.
Expensive oil will definitely scuttle the traditional economy, but it will also have the side effect of promoting the alternatives and substitutes. This promotes change and innovation, even in a manipulated economy. It will just come down to who has the contacts…
At the highest level, this isn’t a debate we’re having here on real estate or the economy, it’s a debate on the direction of our standard of living. And, yes, there will be definite winners and definite losers. And it’s possible those who hold fast and hard to the “current” (or “old”) worldview may end up being the bigger net losers at the end of the day.
#86 Michael
“The Federal Reserve can influence long-term bond market rates”
Really? Bond investors influence the long rate a lot more than the Fed.
Really quite sad that the Feds have actually admitted that the only thing we have going economically is a real estate bubble.
Talk about being cornered and having no way out.
Did I mention that Denmark is starting to look real good?
Bubble boy-
How can anyone suggest that we’d have seen the bubble we have today if you still needed 25% down and a max 25-yr amortization”
************************
True–the bubble wouldn’t have formed in housing—but–
It would have formed in something–
You cannot give away free money and expect that it wont drive up prices and create a bubble,in some sector–
They know this as well–so its really all about “where” and what area,they want to chase the money into–
Housing j6P can relate to–commodities–not so much-
Had the market been free to set rates,based on reality–it would have brought about a spending curb and we wouldn’t be looking at this shit show right now-
Garth and bloggers is this true?
The HST only applies to home equal to and greater than $400 K?
A friend mentioned to this today. I never heard this.
Is this true?
It applies to the total purchase price of higher-prices homes, but applies 100% to the commissions, moving costs, appraisals, home inspections, repairs etc. on all homes, new and resale. — Garth
STAY FROSTY…
25% down amortized over 25 years. If you can’t do this than do not buy as you cannot afford the home. This is a minimum requirement not an extreme. This is common sense. If you are thinking different then societal engineering, group dynamics and the “mad rush of the crowds” has been doing a number on you. Let the other fools rush in to their inevitable financial deaths. Stay financially smart and above all stay financially safe.
Stay frosty…
#62 Curious girl. If you’re retired, you could live very well in Mexico on that income. Suggest you do some research.
Nothing more entertaining reading the speculation on how a new tax will effect property prices and then following the actual outcome.
We all know how the below was hyped and then how it actually turned out.
Toronto housing market continues to cool, economist blames new tax
Posted: August 06, 2008, 6:58 PM by Rob Roberts
Real estate
By Allison Hanes, National Post
Toronto’s vigorous housing market softened in July, and one economist attributes the weakening to the city’s new land-transfer tax.
According to figures released today by the Toronto Real Estate Board, sales have declined slightly over July, 2007, but average prices remain stable across the Greater Toronto Area.
July sales dropped 12% regionally from the best-ever record of a year ago, but are still up 10% over 2006. In Toronto sales dipped 14% while in the 905 sales were down just 11%.
This article has a great chart comparing “real” interest rates to gold prices. (Real interest rates are usually defined as the interest rate minus CPI, to calculate how much interest you actually earned once the decline in the purchasing power of the dollar is taken into account. That is the standard definition but I prefer i-cpi-tax rate because you can’t spend the portion the tax man takes either. Anyway, the link)
http://www.321gold.com/editorials/mcclellan/mcclellan011110.html
Blarney Carney knows quite well this relationship. And he also knows it is likely to apply to other goods too, including houses. He knew darn well they were causing a bubble in houses, but the $0.80 USD target for the loonie was much more important to them. As well as saving the manufacturing industry through inflation. Who cares if a few percent of households on the edge end up bankrupt? Bankruptcy isn’t the end of the earth. In fact, for many Canadians their net worth will actually be higher after bankruptcy, especially in non-recourse provinces.
$0.80 USD remains the target, as it has been for 100 years.
Garth, what do you think the percentage chance is that Flaherty will shift to 30/10 in March?
Oh, and in follow up to my question on the percentage chance of Flaherty changing the requirements. Do you think it might be beneficial to simply lower amortizations and increase down payments required on revenue properties only? That would seem to have a sufficient cooling effect while not pushing genuine owner occupied home owners out of the market.
I don’t know how many of you are following the Iceland bank bailout scandal but there has been an interesting development:
http://tarpley.net/2010/01/07/a-call-to-the-people-of-the-world-to-support-iceland-against-the-financial-blackmail-of-the-british-and-dutch-governments-and-the-imf/
So, as I understand it, British and Dutch citizens were putting their money in Iceland banks to get higher yields.
The banks went bust.
England and Holland lent these banks $5 billion so they could repay the British and Dutch depositors.
Now the British and the Dutch want the government of Iceland to guarantee the loans.
The people of Iceland told the government to get lost.
It appears as a result the government of Iceland is therefore going to have to tell England and Holland to get lost.
The English are threatening an economic blockade.
The major difference in Iceland and with the US & Canadian bank bailouts, is that in the US & Canadian banks held their own citizens for ransom rather than trying to hold some other country’s citizens for ransom. I wonder if there is a way to tell the banks to get lost here too? Make them take back all those securities CMHC bought from them. But then on the other hand, MY deposits are probably at risk if they do that so maybe not.
#83
((This 3am party requires a constant influx of newbie buyers to keep the music playing.))
Doesn’t this also apply to our entire credit-based economy, not just the housing market?
((They’ve all rushed hither from the future (where they would/should have bought if not for the emergency rates/msm encouragement.)))
Isn’t the housing party kept going to keep the bigger party going? Once housing is no longer a viable source of credit expansion, what happens to the larger economy?
((The effects of this will begin this spring, when everyone is shocked that the once numerous and thriving newb population will be strangely withered.))
credit contraction=depression
None of the guilty parties will want to accept blame for causing a depression; the banks will blame the politicos and the politicos will blame the banks. Perhaps that is what the mugging is all about.
#8 Martin
“It’s about unfair situation for first time buyers who has to take loads of debt to afford a shack.”
Sorry, Martin, but the old adage still stands – life is not fair. Life is about choices, and if you choose to buy now, then you choose to take on significant debt. If you want a certain lifestyle that comes with home ownership, then there are tradeoffs, and the current tradeoff is taking on significant debt. Besides, homeownership is a privilege not a right, as is so often quoted here. And if renting is really the smartest choice as portrayed on this site, then grab a pair, go rent and be comfortable in the CHOICE you made.
Sorry, but no one is forcing anyone to buy a place. As for the ”stupid people who turn from bear to bull in a blink of an eye,” you obviously have not lived in Vancouver very long if at all. There is a huge stigma associated with renting, and once renters turned homeowners, are often the most vicious in “gloating.” Odd, but true…
local zoning laws that turn into greedy nightmares
Waterloo council defers Northdale discussion
570 News Jan 12, 2010 04:31:52 AM
Some residents who live in what they call a troubled part of Waterloo say intensification is the answer.
Most of the 10 delegations that appeared before council Monday night called for low-rise condominiums, more shops and green space for the Northdale area.
But at least one resident suggested re-zoning won’t change bad behaviour. In fact, hundreds of criminal charges were laid in the area in September.
A study of the area bounded by Lester, University, Columbia and King streets also found that only six homes are not used as rentals.
A motion that asks city staff to investigate how the neighbourhood could be transformed and the cost was deferred last night.
Council will vote on it at their next meeting.
================
zoning change stimulus – unintended consequences?
thought this would lower rents by creating more spaces for student /rental housing
is this not an example of the intensification of speculators and the drive for monthly revenue thirst
and surely this clicked up the numbers of sales/bungalows over the last while but at what cost ?
Yikes! Maybe the guy who was arguing they will confiscate/tax/change RRSP’s was right!
http://www.businessweek.com/news/2010-01-08/americans-oppose-initiatives-limiting-401-k-choices-ici-says.html
Only the way they will do it is by mandating “annuities” (a.k.a. government bonds).
Remember what happened to the social security trust fund? These jokers aren’t going to stop until they have stolen every single penny, replaced it with a bond, and then say “see ya later suckers!”
Also read that Venezuela’s economy collapsed today and they have armed guards in shopping malls.
Wee! Don’t forget that California gets much of it’s gasoline from our good friend Hugo.
I figured I would expand on a personal level why the speech from the Bank of Canada will once again benefit most Canadians as a whole.
Since the beginning of my mortgage I have been floating. Started around 2002 that way on Garths Addvise. With the exception of the last 4 years when I locks in at 4.45% its been outstanding.
Mine is up in June and after the speech yesterday I was talking to the bank who funny enough is already advising clients to steer clear of locking in.
Why? Same reason Garth had sayed in 2002 and for some reason is not now.
1) unemployment will remain week for the next 18 months at least
2) high canadian dollar will help keep inflation in check as does #1. Also, prevents the Bank of Canada from raising as they published yesterday.
Which brings to the bottome line.
I will be going in come June and getting a 2.29% rate and keeping the same payments schedule as 4.45%.
translation?
Bank of Canada will have to see such blistering growth in unemployment and inflation that they would nee to raise the rates.
1,2,3,4,5,6,7,8, 9….thats right NINE .25% moves to put me right back to where I am now.
Oh, and did I mention the bank just offered me a 5 year UNSECURED car loan at 4.85% yesterday too?
These are the facts.
I just wish we could have intellegent feedback on where we are headed that is not tainted with personal interest, but rather fact.
That’s an interesting comment at the end of a post that’s all about you. — Garth
I am constantly amazed at the ability of bears to eschew key arguments that they have clung onto for years, and pick new ones once the old ones are debunked. First, they noted a coming “collapse” and moved onto a “correction” amidst the price gains of 2009; then we had the shift to the collapse in the coming decade as opposed to the coming months/years; now we have shifted to rising inventory instead of rising interest rates as a catalyst for a market shift. If I did not know any better, the bears here are acting like politicians sensitive to ever changing political winds, and are adjusting their arguments accordingly. Hmmm….I wonder where that influence comes from….
By the way, extrapolating one week of new inventory in one city (during a historically slow time) and projecting it onto the entire country sounds like the bears are grasping at straws. I guess that is fair enough since all of their definitive predictions have proven wrong, and all the “economic fundamental” reasons why the market will collapse have failed to materialize for half a decade. The comments by Carney yesterday sounded the death knoll to the whole “rising interest rates will lead to a collapse in the market” argument.
I, for one, am looking forward to the next “reason” why the market will definitely correct – maybe climate change – that one has some good commentary going on now……
When you get older you’ll understand the economy is a complex interrelated maze of constantly-changing factors. But, one step at a time. I know this is a challenge. — Garth
Vancouver is looking very interesting these days. It does look like a number of people have started to see this as a great time to sell. Probably too late now for most.
Some interesting things we have not seen in years (if ever):
Unlisted prices with “inquiry within” on smaller properties – must mean they are worried about listing and have to reduce or pull
In the rental market “price reduced” and “renter incentives”.
Just looked at winnipeg MLS by the way. Well it’s hard to say. It will be interesting to see the listing numbers for january. However if you look at the map there sure are a lot of red dots
Dissention in the ranks.
Carney has towed the Harper line since his appointment, but is now realizing that his reputation is going south as Harper is sinking. Even yesterday a former Harper aid has said that the proroguing of parliament was wrong.
I think if you watch closely that the conservatives are starting to crumble within and we can expect to see more cracks in the days ahead.
Flaherty is being put out for slaughter.
10% down, 30 year is just a start… should go to 15-20% to avoid everyone including all those with massive house equity from buying 10 houses on spec…. still see the US bullying/posturing the bond investors into accepting low rates with the threat of another collapse which will deter rate increases for a LONG time even though US debt is escalating “out of control “. It will take a credit rating downgrade for Ben Bernanke to move in my estimate. Let the money flow for years to come… what a nightmare scenario
I would actually go as far as disbanding the CMHC.
This would force banks to take the full risk for the lending. No bank in their right mind would bet 400+k for
a standard hen-house in TO.
There is something very wrong with a country whose GDP depends on primitive structures made of dry-wall and wood instead of innovations in technology/medicine/sciences/manufacturing…
If people were to invest as much energy emotions and money into the robotics sector, non of us would have to work any more.
So let me get this straight, I didn’t buy this summer because of advice on this site. And now I’m being told I may not be able to buy unless I have 10% down over max 30 years? Tell me again why those I know who bought during low rates are the greater fools and I’m not again?
If you don’t have 10% to put down, you sure need this site. — Garth
I agree with Don (# 30)…This chart from the Economist shows that Canada isn’t even close to bubble territory…Something has to be wrong with this data?? Anyone? Australia is insane…and I thought we were comparable….
http://www.economist.com/media/houseprice2/Economist_HPI_July_09_Chart.swf
100 Junius
Stats from one week does not make a trend my friend – you are grasping at straws.
Come back once listings get to the 20k mark like they did in 2008, or MOI goes well beyond 6 months into “buyers” territory. Throughout the “boom years” inventory hovered between 8-12k in the lower mainland, and we are still very much in that zone.
Breaking News:
A sitting Parliament causes market instability. Prime Minister Stephen Harper offered up that excuse yesterday in an interview on BNN.
Ladies and gentlemen have you ever heard such words from any so called leader in your life anywhere in world… are really on the planet earth.
Sorry but when Garth Turner first opened a blog which got him tossed from Harper’s caucus stating this new electronic media had long legs even he under estimated a growing giant. 150,000 on a Canadian Facebook page is indeed a giant.
Housing and Real Estate will be effected one way or another by these events. and my bet is it will not be good.
#121 perhaps the province did not have a housing bubble
but alberta sure did
http://spreadsheets.google.com/pub?key=pKhf_Qhx1jfrbTbcuR-dHSw&gid=1
Everything is be coordinated on a global scale. Carney is only a puppet for the real U.S government, Goldman Sachs
Re the HST
My understanding is that the HST will not apply to the sale prices of resale homes, just the transaction cost (commissions, legals fees, homes inspections, ect).
Most people do not understand this and it is not really a part of the purchase decision. Its not until closing that sellers find out that the real estate commissions they are charged are 12% more than they thought. The buyer never hears about this HST on the commission.
Transaction costs are already subject to the GST so the increase is only 7%.
Bottom line – the HST will just become another one of the huge transaction cost that Canadians pay when they sell/buy a house. People really do not understand the transaction costs until after they make the offer.
II do not think the HST will have an impact on the market.
Visible costs like interest rates and whether you have a friggen job or not are the overwhelming drivers of the market.
Well, that was a terrifically exciting few days away ‘tho there are some very interesting posts. I’ve been traveling through Cloud 37, but back to this dump of a planet now.
Many here already know that the US has defaulted on a trillion dollar debt with China. Would this cause any friction between the two countries? Chances are it will, plus Eminent Domain; see the first head, scroll down and see the second and Martial Law. A further reason that the last official act of any govt. (including Canada, with RSPs and RIFs probably being taxed at higher rates) is to loot a nation of its’ wealth.
We’re all (broke) Icelanders now; Feb. 14 (Valentine’s Day) is when the Chinese Year of the Tiger begins; Tigers usually lead the way;
Wealth of Nations 2010; This will affect Canada sooner or later;
Call To Arms, because we may all end up like this;
Another ‘quake,but not that close to the SAF.
Is this before or after WW3? (assuming there IS a war; we may all be frozen stiffs by then!
123 david …. Last century a guy in europe some where had a similar problem with a parliament … he used matches.
FACISM SUCKS
Time to fire Steven Harper.
Prorogued parliament twice now within a minority government!
Your time is up pal. Vote him out!
We need courageous leaders in this great country. This is still the greatest country on earth. Why are we letting Steven Harper shut down parliament?
If you voted the Conservatives in, my sympathies. I used to be a very strong Conservative supporter until I learned how apparently dangerous fascism is!
This country had better wake up to the apparent wicked agenda of the “Kings and Merchants”.
Stephen, you and all the boys at the top may be starring in Revelations 17: Take center stage. Exit stage left.
Don’t worry, this play is for real and has a happy ending for the just, for the wicked, I won’t spoil the ending for you. Lets just say it is really nasty. For the wicked, enjoy the free ride for now as it will be brutal in the end for all of you.
For you, well, ummm, read revelations and you may understand before it is too late…You may denounce your puppet masters and cut ties from them..I suggest running as fast as possible the other way and have the Lord on your side not his great adversary. For your own sake I hope you do. Don’t let power go to your head for the meek shall inherit the earth.
“Come, I will show you the punishment of the great prostitute, who sits on many waters. 2With her the kings of the earth committed adultery and the inhabitants of the earth were intoxicated with the wine of her adulteries.” (Revelations 17)
The great prostitute represent a particular world system of political, religious, economic, military and the melding of said factions into one entity. The “Kings of the earth” represents world governments and the “merchants” are the international bankers. When these two forces unite. watch out! The wine of her adulteries is the rampant selfishness, corruption, materialism, idolatry, and iniquity going on in the world (fueled by deception aka drunkenness) and those that are deceived by the father of all lies…Truth shall prevail. Love is eternal.
Pride goes before the fall.
The LORD detests the proud;
they will surely be punished. (Proverbs 16,5)
Pride goes before destruction,
and haughtiness before a fall. (Proverbs 16,18)
Better to live humbly with the poor
than to share plunder with the proud. (Proverbs 16,19)
Remember to smile at the audience and bow before exiting the stage.
Looks like squidly77 might be right about impending layoffs in Alberta:
Suncor says sales of natural gas and U.S. assets could mean loss of 1,000 jobs
“CALGARY – Around 1,000 more employees are expected to leave Suncor Energy Inc. (TSX:SU) as Canada’s largest energy company sells some of its natural gas and international assets.”
http://news.ca.msn.com/money/article.aspx?cp-documentid=23241097
#121 brendo
#124 squidly77,
The graph is irrelevant.
In Calgary, for example, families today are paying 5x median household income to purchase a house. This is extremely high by historic standards. We are still in bubble territory.
Who was talking about the Fed? …… Red Herring – divert the audience from an item of significance.
98 got my point, sort of. By making explicit statements about the future stance of policy the Fed influences market expectations about monetary policy tomorrow (future), this has a substantial impact on long rates today – best not to underestimate rhetoric power of Fed to influence bond market.
Well of course the Harper crew will a day at a time offer hope to the overextended sheeple….in fact today he announced there will be many confidence votes when parliament resumes……..step by step a plan to achieve power and a majority……the economy,our democracy and hard earned standards of living have no bearing nor does the overpowering debt we are facing…..in fact it will be increased most likely…their spending spree (on our dollars) has no hope of balancing the books……..but just wait because we will pay dearly when his goal is achieved………pretty sweet scam id say!The moves that have been attempted to eliminate any opposition will become reality with a majority……..better start watching people ..our countries future depends on it ! IMO………..p.s. what about our economy?(is anyone paying attention),what about our environment(is anyone paying attention?)…doesn’t seem like that to me we are all so consumed with “Harpers” next move..that so many sheeple are totally dependent on………is this democracy?? ………..i think not
I think Vancouver Rocks (#110) pointed out the most significant fundamental driving this housing bubble…. stigma attached to not “owning”. People will go to extreme lenghts, signing their lives away to “get in”. Well, they’re welcome to it. P.T. Barnum said “there’s a sucker born every minute”, but I think he was being kind.
I don’t care if this thing carries on for years – it will pop.
Its time for the lenders to have some “skin” in the game. How about a new CMHC rule that says the lender is responsible for the first 5% of the loan default. This would bring back some accountability and responsibility to lending practices.
And, if you’re buying a second property you have to put 10% down and amortize over 25 years. This would slow down the hoarding of real estate and give the first time home buyer an advantage over the investor/speculator.
Flaherty is between a rock (Stephen) and a hard place (Mark) and is soon to become political road kill.
Jim, its time to start writing three letters to your successor. Perhaps you can start a blog.
http://www.cbc.ca/canada/newfoundland-labrador/story/2010/01/12/suncor-layoffs.html
Look! The economic recovery is gaining steam. Brace yourself for the bright days ahead. Halelujah!
#62 curious girl, you can always try
http://www.mm2h.gov.my/
Thanks for the blog today Garth, it answered a lot of the comments that were posted yesterday.
Flaherty is definitely going down as the fall guy to save the emporer Carney from Goldman Sachs as being the cause of this mess, (google ‘Jekyll Island’ for the complete history of Goldman being one of the instumental players in the creation of the Federal Reserve System (aka any Central Bank in any country that followed suit since.) [Note: Garth doesn't advise any of you to believe in this conspiracy theory that took place 97 years ago, but it seems like a believeable yarn to me when you look back at recent events.] Each of you can form your own opinion.
Anyway, Flaherty will get credit in history for destroying Ontario as Finance Minister, and also for destroying Canada as Finance Minister.
Good night Irene!!!
Just talked to an hot dumb agent in my building about to show a condo. I said we are in for a bust. She said CANADA is different! I had to laugh in her face and explained economics in a few words.
Interest rates will go up and real estate will go down….far. Really far. Thats economics in a nutshell, sweety.
The following types of comments are useless and should be avoided in the future:
From the bulls:
1) Chalking up big real estate gains to anything but dumb luck. You are not a genius or a wizard – you caught a nice wave and good for you. And the reason you have stayed in this long is not because of any great insight on your part – it’s because it is a pain in the ass to move!
2) Any comment referring to non-owners as having missed the boat. Maybe the guy who didn’t buy a house 10 years ago put his “down-payment” into RIM and watched it go up 10-fold. We don’t know the situations of other people.
3) Referring to a rent payment as flushing your money down the toilet. Please. Shelter is an expense. Rent is no more a waste of money than food. By this logic, anybody who buys food is wasting money because they should go buy a farm with cows, chickens, vegetables, the works…
From the bears:
1) Categorizing any house built after (insert date here) as a shit-shack.
2) Any comment in which you have a future plan to “swoop in” and buy somebody’s real estate at 20 cents on the dollar. Give your head a shake.
I’m sure there are others – these are just for starters.
Also useless are any postings that do not further the debate, such as this one.
A counter to the bulls that keep repeating the interest rates won’t go up for a while, yada, yada, yada. That may be so but the only reason for this scenario would be that our and the US and Canadian economies will continue to be weak, employment will continue to be weak, the Canadian $ will continue to hurt exporters, and we will go deeper into deficit faster as tax revenues will be weak and who knows, maybe more stimulus will be applied. Please explain how this could be good for RE when 70% of households already own. Where are the new buyers going to come from? Pent-up demand??? Ha.
That’s an interesting comment at the end of a post that’s all about you. — Garth
Garth,
You know very well that the post I put up is basically describing the vast majority of the people who will be walking into the bank this spring.
You used to discuss this strategy in length, but I guess it must not be of interest to you anymore.
At the end of the day, you were the only person writting about doing this in 2002-2004.
But I will take the cheap shot if thats what it takes to get you to come up with new contructive ideas rather than trying to predict the housing crash that has past.
-
The mentioned graph from “The Economist” uses a “House-price index” so the countries can be compared, however the house-price index calculation methods are not described and may not be comparable.
Let us take look at our Canadian New Housing Price Index NHPI.
New Housing Price Index 2004 – 2008
For 2008 it’s shown as 158.2 (1997 = 100) for Canada. Which suggest that to build the same house in Canada in 2008 cost 58.2% more than in 1997. Hmmm…
Let us factor in the inflation as per the following table:
Consumer Price Index, historical summary
It shows CPI of 114.1 for 2008 but with the base year 2002 (2002 = 100) and the 1997 = 90.4
A quick CPI “re-basing” to 1997 = 100 yields the CPI 126.2 for 2008.
Thus, according to these indexes, the NHPI adjusted for inflation would be 125.3 for 2008 (1997 = 100). That would indicate the average house price in Canada was only 25.3% higher in 2008 than in 1997 on the inflation adjusted basis. That means we’ve had (on average) only about 4.3% house price increase per year in nominal dollars and about 2.1% increases per year in inflation adjusted dollars.
According to that there’s absolutely no housing bubble in Canada. But let us take look at how the NHPI is calculated:
Definitions, data sources and methods – NHPI
Looks good except for the “hedonistic” (quality) adjustment as per the above link:
Through discussion with the builders, models are selected and tracked which are identified as representative of the current construction portfolio of each builder. In addition to pricing data, detailed information is obtained describing physical and non-physical characteristics of each model home. This is considered to be an important data source which assists the assessment of quality changes in terms of dollars and cents. In the new housing price survey reported prices are adjusted for changes in quality of structure and land. This is important because the NHPI attempts to measure changes in price over time of identical houses in consecutive periods. Most often the estimate of the value of the quality change provided by the respondent is used to adjust the reported price to an estimate of “pure” price, unaffected by quality change.
So the NHPI track a “pure” price not the actual price. And the real or perceived “higher quality” does not change the fact that the housing is less affordable since there are no comparable quality houses built. Otherwise the “higher quality” adjustment would not be necessary.
So as the saying goes:
“‘There are three kinds of lies: lies, damned lies, and statistics.”
-
Garth
I guess I’m screwed…
The past 2 yrs, my wife has been adamant to move up to her “trophy house” with me, as at this stage in our lives through good money management we can afford it now.
However, I have held my ground, like a “solid foundation of prudence” to wait, at least another few years based on what I feel as smart, carefull, mature values. All the old time- testing virtues such as:
“what goes up, must come down”
“those who wait, will be rewarded”
“don’t bight off more than you can chew”
etc, etc, etc
My wife listened to the “HIGH ROLLER types and real estate agents telling her “BUY NOW” or be PRICED OUT!!!
If a correction of any kind doesn’t happen this summer, the old school advice and values my parents instilled in me will look foolish,
and my words will be mush,
babbled from a spineless wimp to afraid to take a chance.
I know you are right. This housing market has to correct, either slowly over time or break sharp at some point. People are too in debt, cashless, and expecting a future full of positive miracles!
But I fear my time (marriage) has/ will run out soon. My wife will soon, no longer respect my advice or value system.
I guess, I believe it was Keynes said, “a bubble can last longer than you can remain solvent”
Carney looks like Agent Smith and Agent Brown in
The Matrix.
Ugly, with no feelings.
the big lebowski posted that carney is a goldman sachs puppet. i agree. that is the company where he spent most of his professional career. so presumably he should know how to do a controlled demolition of a major economy.
By Frances Barrick, Record staff
WATERLOO REGION — For a second consecutive year, Waterloo regional council may have to dip into its reserves, by as much as $4 million this year, to cover rising welfare costs.
“We anticipate the caseload to continue to climb in 2010,” said David Dirks, regional director of employment and insurance support.
Last month, the number of welfare cases in the region rose by 107, basically wiping out the decrease of 90 cases since September.
In December, there were a total of 8,286 welfare cases, up 1.3 per cent in one month and up 32 per cent since September 2008, when the local economy started to sour.
The region’s unemployment rate remains high at 9.5 per cent in December.
On Wednesday, councillors are slated to approve the region’s 2010 budget and the funding of rising welfare costs will be one issue before councillors.
Regional staff presented councillors with three scenarios on projected welfare numbers this year.
The first, called the “optimistic scenario,” assumes the monthly caseload will remain at the December 2009 level of 8,268 cases. If that occurs, the projected budget deficit for welfare costs in 2010 is $163,630.
The second scenario, which staff calls the “more reasonable projection,” assumes an average monthly caseload of 9,863 cases. This would generate a $2.6-million budget shortfall.
And the final scenario, called “pessimistic,” assumes the caseload will resemble what occurred during the recession of the early 1990s and reach 10,673 cases a month. This would generate a $4-million budget shortfall.
The region budgets about $9 million a year to cover social assistance costs, but last year that budget was exceeded by about $3.1 million and the region dipped into its $10-million tax stabilization reserve fund to cover this shortfall.
Staff is predicting this year’s welfare shortfall could be as high as $4 million.
Since there is only $3.9 million left in the region’s tax stabilization reserve fund, staff is recommending that council dip into its working reserves fund to help finance this cost.
============
so who wanted to know about kitchener waterloo?
When you get older you’ll understand the economy is a complex interrelated maze of constantly-changing factors. But, one step at a time. I know this is a challenge. — Garth
*****
The challenge is actually keeping track of your predictions – they sway to and fro like the political winds you dislike….
And if there is a correlation between age, broad based understanding and predictive ability, well then I hope to avoid those years where ever changing positions and/or predictions take hold.
After all, there is the old saying, the more you learn the less you know. Perhaps someone’s cumulative experience has led to that situation.
By the way, my predictive abilities have been correct for 8 years running, despite the “complex interrelated maze of constantly-changing factors.”
Apparently you are a dink. — Garth
#140 Medic
Excellent post.
just wondering wrote
Note: Garth doesn’t advise any of you to believe in this conspiracy theory that took place 97 years ago, but it seems like a believeable yarn to me when you look back at recent events.
Jekyll Island was the crime of the century, the fact that it’s not taught in Canadian schools is an outrage.
Garth, agenrs are knocking you read below
Conclusions that I draw from this and other sources and my predictions for 2010
Mark’s Crystal Ball for 2010
This is what I predict for 2010 in real estate, interest rates and more!
So here we are again, at the end of another year, actually the end of a decade and the beginning of a new year. Every year at this time we can look back and reflect on what has happened in the past year with certainty. Also at this time of year this is the time that we try and peer into the future and predict what will happen with far less certainty. In real estate it’s very critical to try and predict the future because so much is relying on it.
It takes quite a bit of time to condense my thoughts and observations into this section of predictions for 2010. Part of the reason is that I want to be as accurate as possible. As well, I know that many people will read this page and rely on some of the predictions contained herein. Therefore, I want to give as good advice as possible, advice that is realistic and yet insightful.
Real estate is one of the few things in our lives that tends to increase in value year after year after year. There is no certainty with this increase, but it sure has seemed certain over the past 15 years. Our year over year average single family residential price has increased every year since 1985, except the fall of 2008, including this year. Don’t believe me, see the graph here:
http://www.mississauga4sale.com/TREBavg1995date.htm
There are some, many in fact that are predicting that we in the GTA and especially BC are sitting at the peak and prices are about to crash. Garth Turner is one person who is predicting that prices are almost guaranteed to fall in 2010 I don’t agree with him and don’t feel that our area, Mississauga and the GTA will fall in the next year.
What do we know with certainty for the future? We know the following is almost guaranteed to happen in the Mississauga and GTA real estate marketplace:
Interest rates will increase in 2010, the Bank of Canada is currently stating rates will increase in mid 2010 – this will put downward pressure on prices after rates increase, but will cause many buyers to buy before the rates increase and anticipation of the increase in rates
there will be a shortage of listings for at least January and maybe into February, this is a near certainty based upon the past 22 years for January and early February, not many people list their homes at these times – this will cause upward pressure on prices in the fist quarter of 2010
HST will come into effect July 1, 2010 and this will increase the cost when selling your home and to a lesser extent increase the cost to the buyers, this will put slight downward pressure on prices
This is what we know with less certainty:
the US real estate recovery seems to be chugging along, not quick, slow but sure
the US and global economy will improve in 2010
people may perceive that the HST will causes prices to increase once it comes into effect and try to save some money before July 1st and this could cause a mini boom in our market in the late spring of 2010
Due to the fall in late 2008, the average price in 2009 compared to 2008 is up about 12%. We are up about the same percentage comparing 2007 to 2009 This is what I predicted in January for 2009 http://www.mississauga4sale.com/Toronto-GTA-Real-Estate-Market-Predictions-2009.htm#2009 When I read the predictions I made back in January for 2009 it makes me think that maybe I should go into the prediction business, more than 3/4 of the things I predicted came true! I was wrong on Gold and wrong on Gasoline prices, otherwise my predictions were quite close.
These are my predictions for 2010 below and also online at this link: http://www.mississauga4sale.com/Toronto-GTA-Real-Estate-Market-Predictions-2010.htm#2010
I predict that our prices will increase about 4 to 6% in 2010 with some softening in our market when the Bank of Canada increases rates in the middle of 2010, once the Olympics end in the first quarter of 2010 and the ‘dreaded’ HST comes into affect July 1st of 2010
Mortgage rates will increase beginning about July of this year, the bank prime rate as of January 1, 2010 is 0.25% and I predict by year end it will be at 1.00% to 1.50% This means that current mortgage interest rates will increase by about 1.25% to 2% over what they currently are. This may sound excessive, but I firmly believe that our economy will bustle this year and increased rates will be necessary to calm things down a little, plus the banks will want to gouge a little in light of increasing prime rates. They often do this when rates are increasing as they can get away with it with little backlash.
I still believe you should go short term on your mortgage, read more here about why I feel this way: http://www.mississauga4sale.com/Lock-In-Short-Term-Long-Term-Mortgage.htm
We live in a very vibrant, growth oriented area of North America with a very diverse economy and culture. People seem to want to work hard and improve upon their personal and financial situation and almost everyone I meet is employed and optimistic about the future. This is good for the local economy and our future.
No matter what happens, as long as you continue to work hard, save 10% of your gross income, watch what you spend, don’t get into too much debt that you can’t handle it should you find yourself with a a job for a few months, then you should be able to slowly and surely achieve financial independence.
The condo market will continue to surge, it’s affordable and desirable
Bungalow style homes will become more desirable, (they currently are very desirable), as our population age increases
Barrel of oil will be $100 at end of year and gasoline will be $1.10 and gold will be $1100 per ounce at end of 2010
Once again, beware the emotions of the marketplace and stick to your long range goals , currently I believe we are in the optimism/excitement phase so things may get really hot this spring in the market.
I still subscribe to all the values and principles that I’ve written about in the past on this page below.
I am a very optimistic person and always believe that I can do better by reading and doing things every day that contributes to my long term goals. I always set high but attainable goals and often come close to reaching my goals and even if I fall short, I’ve surpassed what I have done in the past. I subscribe to many newsletters that preach optimism and growth and these help me stay sharp and continue to learn. Every day I seem to learn something new, so at least I’m growing. You can read some of the ideas that I subscribe to and believe at this page: http://www.mississauga4sale.com/Motivation-Success-Ten-Scrolls.htm
That’s about it for now, keep to your plan invest in real estate for the long term, you cannot go wrong.
I wish you a very Happy New Year and all the best to you and your family in 2010
#99 tjmikey
congratulations! you get a BINGO! today.
#122 Vancouver Rocks,
Let’s keep watching and see. The Big Party is almost upon us. Certainly my feeling remains that most of the drop in prices will take place in the second half of 2010. However it will be interesting to see the various machinations over the next few months as uncertainty continues to drive behaviour.
PS – I stand by my 30% prediction for Vancouver prices to drop by the end of January, 2011.
#141 Reasonfirst,
Exactly. The one thing we can be sure of is that interest rates are not going down. First time homebuyers are probably close to exhausted in any event. We have pulled buyers forward from 2011 and probably 2012 to keep the market high.
Meanwhile wages will probably go down this year and many costs will go up. Even if interest rates don’t go up……..except eventually they will.
#148 Vancouver Rocks,
I love the way you conveniently dismiss 2008 as an abberation in the Vancouver market and not an early prelude to where we are headed. If the gov’t hadn’t skewed the market by dropped interest rates to the floor the market would have continued dropping from then until now.
Eventually market forces will return and we will see what a castrated Bull looks like.
#42 Knucklewalker , #97 Another Albertan
The pessimist in me is with Knucklewalker. Without issue it will be a much different world. As Chris Martenson says “The next 20 years will not be like the last 20 years.”
The optimist in me is with Another Albertan. I am finishing Thomas Friedman’s “Hot, Flat and Crowded” which makes the case for a future in which innovation, intelligence and creativity will allow for a reduction in energy use (smarter use of energy) and at the same time producing more clean energy.
Many peak oil commentators indicate no amount of alternative energy will even remotely come close to replacing oil, and no scientific silver bullet will save the day. I am not optimistic for the most part, but I am hopefull. If only we could all pull together.
‘Apparently you are a dink.’ — Garth
Man you make me laugh Garth.. That was classic!
Post#44 Munch, was wondering where you got to. Mauritius eh? See any DoDo’s? We got plenty here.
To all those recently crowned new “home owners” out there that put less than 10% down I have some terrible news. You don’t actually “own” anything. The bank owns your ass and your home. Oh sure you might now own 5% of “your” house. Good for you…you own a fraction of a decaying wood structure and a patch of dirt. You can point to a corner of the foundation and say…I own that! What you actually own is a mortgage that helps pay a banker’s yearly bonus. Yup you own dept on a rotting money sucking black hole. Good for you. So while I’m out kayaking or hiking or skiing, I hope you enjoy your weekends mowing your lawn and or blowing your kid’s college money on new laminate floors at the Home Depot with all the other glossy-eyed couples. Oh I’m so envious of your amazing lives! I’m going to plan my trip to Africa now.
How long before the craparty throws harper under the buss ? They must know they have shot themselves in the head . Even flimflanagan is starting to clue in. If Flaherty does and writes a book I’ll buy one .
To reason first, posting no. 141:
My answer as to who will buy a house next is:
Someone who already owns one or more. They
They have already speculated in 2nd or thrid or fourth properties. They are on a binge (of avarice).
To Jeannie & One more thing:
Thank you for your suggestions for expatriation. They are most appreciated.
LOL. Proves my, often repeated point, that few renters actually ‘save the difference’. So at some point in the future you’ll be just another 50 year old loser that lives in a crummy rental with nothing to show for your life. Good luck in Africa.
BTW, Not sure why you think that burning through your cash boozing in 3rd world countries is more honourable than providing a home for a family.
@ #121 brendo:
I agree that the data on that Economist link doesn’t seem to line up… for example, it shows that prices have only risen 50% from 2000 to 2009!
I’ve seen other tables that had the average price in 2000 at $164,000 and in 2005 at $249,000 (and that’s before the well-documented 50%+ gains from 2005 to 2009).
Even if you adjust for inflation, I just don’t see how Canadian house prices have only risen 50% over the last 10 years.
As far as comparisons to Australia goes, I think their bubble has consistently been reported on as more extreme than our’s. Case and point: Australia raised interest rates specifically to combat the housing market, whereas Carney won’t touch our rates.
If you ignore Australia and compare us to the US, our data is worse in many areas (price-to-income ratios for example).
Maybe this just means that Australia will be seeing the biggest decline in the coming years. The US housing bubble was pretty bad — imagine something that was 50-100% worse!!!
The Economist is wrong. Canadian house prices increased by more than 70% during that period. — Garth
#95 Soju wrote:
Here you go guy’s a quote to remember:
No rate change for 18 months is a fiction. — Garth
It’s January 12, 2010. Anyone writing this down? This time let’s see him squirm out of this one.
******************
The Fed is ceasing its purchase of Mortgage Backed Securities at the end of February. When that happens, most analysts believe rates will jump 50 to 75 basis points. I don’t think we’ll need to wait half way thru 2011 before we see a rise in mortgage rates….
#162 Calgary Rocks
Chip on your shoulder much?
151 shane/mark
you are a realtor, aren’t you
#92 Got A Watch
Your posts are always appreciated.
#151 shane
That guys charts clearly show that current average prices are unwarranted (and unsustainable!).
It was his data that first alerted me to the RE problem 4 or 5 years ago.
But as he says, he is an optimist and surrounds himself with optimistic notions. He has also posted here in the past.
#162 CalgaryRocks
Save the difference? We save well over 50% of our income. Try that with a mortgage. We have saved so much by renting that we can afford travel on a regular basis and save for retirement. What a strange concept! That’s the problem with your perceptions of renting. Either you just haven’t crunched the numbers or you just ran out of fingers. We could easily be in a house right now with a large down. We choose not to for the reasons outlined in my post. I’m not saying we’ll never buy a house. Just not now. It has nothing to do with honor. It’s common sense. Now stop blogging and go fix something!
#129 ha ha how many times did Chretien and Trudeau do exactly the same thing with parliament..look it up..and get over it..sure are some downward looking people around here, yes maybe peak oil is here and that would be grand because maybe, finally, there would be sufficient stimulus to develop other energy sources and just get over this petroleum thing..you would think it was the end of the world..it’s not..some people/interests would like us to believe that, I am sure, but Mad Max is only a movie..over 100 years of the internal combustion engine and we are still selling less than 20mpg trucks..come on..we still fly around in mach .80 airplanes powered by kerosene, we still heat and cool our homes in this country with fossil fuels and hydro, there is something wrong and it is the fact that we have become so unimaginative, must be the food they feed us..
#153-#154 Junious…good posts!
I agree with 30% in VAN by Jan 2011, and further predict a decline to 40% by June 2011 and 50% by Jan 2012.
I would also expect great incentives from banks who have set in place tough minimum requirements and rates to be around 7-8% climbing to 10-12% that year.
#162 CalgaryRocks
For such a know it all that has all the answers, you sound extremely bitter.
Thanks for the heads up on how to be a person of good moral fibre and integrity, didn’t know home ownership provided that.
You never really add anything to any arguement; just slagging people like an ass mouth.
#151 Shane,
Loved this. The realtor admits that interest rates are going up, HST is going to put a bit of a drag on the market but still comes up with a 4-6% increase in prices.
Meanwhile he talks about the U.S. economy and market as in full recovery. Oppppps! Must have missed the current job numbers.
Many RE agents are very bad at math!
Mark Carney is right. His mandate is only to manage inflation. Increasing interest rates will adversely affect the whole economy,not just housing. That is Mr. Harper and Mr. Flaherty’s job. Governments’ role should be to initiate and implement regulation.It was they, at the behest of the banks, who introduced the policy to take all the risk away from banks by allowing these financial institutions access to the taxpayers coffers and by extending and increasing CMHC protection to their riskier loans. It was they who allowed the 0 down and 40 year amortizations.Having done what they were put in office to do (ie empty the cupboards),it is now they who must introduce the changes to these policies to cool a housing market before IT takes the whole economy down with it.
So let me get this straight, I didn’t buy this summer because of advice on this site. And now I’m being told I may not be able to buy unless I have 10% down over max 30 years? Tell me again why those I know who bought during low rates are the greater fools and I’m not again?
—————————————
it’s this rationalization that makes you broke. You can’t afford a home my friend. If an increase downpayment of 5% presents a problem to your affordability, you shouldn’t be considering a purchase that big on borrowed money.
People need to break out of the left/right paradigm in politics. People vote the Conservatives in and hope for change but the same agenda is carried forward .Then they vote the Liberals in hoping something will change, but the baton is passed and the same agenda is carried forward. You will know you are under tyranny when you see certain patterns or policies continue no matter what party is in power. Carbon tax, HST, man made global warming hoax, free trade, globalization, off shoring and outsourcing of jobs. Both parties have carried this forward. We are living under a tyrannical Government.
My punny 1k/month mortgage on a sfh is something you could only dream of having.
I won’t even go into how much disposable income this leaves us with as it would make you green with envy.
I found out yesterday that a friend of a friend bought a house in Toronto for $535k and get this… it needs to be totally renovated! What the hell are these people thinking? Oh yeah I forgot, nesting girlfriend soon to be wife is in the picture…
#177 CalgaryRocks
“My punny 1k/month mortgage on a sfh is something you could only dream of having.”
You are my idol. I still don’t see how YOUR situation relates to my earlier post. You need to relax guy!
TO Bubble boy said:
“I highly doubt that all of the late 20’s/early 30’s buyers would have been able to find $100k lying around — I mean, even with a top-bracket income that’s still several years of disciplined savings.”
That’s exactly what I did before buying. It took me 10 years but I save a 25% down payment!
#110 Vancouver Rocks
“Vancouver…There is a huge stigma associated with renting…”
You will find that everywhere. I run across it almost daily here in Ontario. You have to decide up front if you care what others think of your decision to rent or not. There will be dancing in the streets when housing finally does slide and it won’t be from the home owners…
#148 – “Apparently you are a dink. — Garth”
In the old days a “dink” used to refer to a well-dressed man such as yourself… I’m guessing that’s not what you are referring to in this case though…lol
Never second-guess me. — Garth
#166 poco – yes, I am a realtor, how could you tell?!
)
#173 junius said “Many RE agents are very bad at math!” – nothing to do with math – the economy will decide the direction based upon previous equations and future calculations – but they have been wrong many times in the past.
As I said in my post, the past is math, the future is pure speculation – nobody knows.
I’m an active agent in Mississauga and our market is fast, there is almost 50% less listings compared to this time last year, this is not good for anyone, the buyers or sellers or agents, there is no inventory to sell, buyers are frantic and under pressure and sellers are very edgy.
I am worried that some world event rocks the economy and then we may fall into a tailspin. Even after 911 and the latest economic disaster in the US and global markets, Mississauga, Toronto and the GTA (to which I can speak for), were only mildly and temporarily affected. Our marketplace is on solid ground compared to other areas of the world.
Real estate is not for the short term, read my personal thoughts about long term real estate investing here:
http://www.mississauga4sale.com/Lock-In-Short-Term-Long-Term-Mortgage.htm
Which is better, stocks or real estate investing?
http://www.mississauga4sale.com/blog/2009/10/what-is-best-stock-market-versus-real.html
Where do you think we are on this graph today?: http://www.mississauga4sale.com/Market-Emotions-Cycle.htm
All the best!
Mark