Hear Garth in Victoria. Feb 14 noon, Conf Ctr
A month from tomorrow Jim Flaherty will cave. The finance minister’s 2010 budget will fail to raise the minimum downpayment for buying a house to 10%, after a fierce and successful lobbying effort by the real estate and mortgage business. The man who brought us to the edge of the abyss with his 0/40 insanity will, once again, take the road of political expediency.
F knows there’s a bubble, even as he denies it. So does Finance. So does everyone. Last year alone it raised the price of housing 20 times faster than the inflation rate, at a time when salaries increased by zero. This is crushing the middle class. But it will end.
Not, he thinks, on his watch.
That’s called politics. It’s why the country will continue down a path leading to trouble, as it insures 95% leveraged home loans, turn a blind eye to lax lending standards and keep interest rates at absurd levels. It means the bubble has the potential to grow a little more, which will make the deflate all the more miserable.
But F shrugs. Whazza problem?
Well, you’d think a G7 finance minister would get it, since Canada now stands alone among the industrialized nations when it comes to a government-sponsored asset bubble. The second-last national bubble is just starting to gush, and you can hear the air escaping all the way back to Australia.
The country, too, decided creating an artificial housing boom would be the best defence against global economic meltdown. So Australia spent bigtime, giving homebuyers a gift of $14,000 to purchase a home, allowing 100% financing and keeping interest rates at equally ridiculous levels. The result was predictable – the country has become unaffordable to its own middle class.
Remember that report we booted around last week showing Vancouver as the priciest market in an international survey? Well of the 20 least affordable cities in the world, two are in Canada and a whopping 12 are in Australia. The consequence of bone-headed public policies was a real estate mania and rampant price speculation which even the government recognized could backfire and destroy the economy.
So, the $14,000 homebuyer bribes ended. And interest rates have risen. As an inevitable consequence, the real estate market is falling apart. News came yesterday that rising rates will trigger defaults on Australian mortgages. Last week a survey found 45% of all recent buyers (in the last 18 months) are under severe mortgage stress, with many forced to use credit cards to keep up their home loans.
Why? Simple. As a result of the housing love affair and cheap money Australians have a debt-to-disposable income ratio of 156%. Hell, that’s just like ours (we’re now at 145%). That means it was a cool idea to pile on more mortgage financing and buy a nice sucker of a home with little money down when prices were rising, since equity grew overnight. But when the market froze, all that remained was the debt. Whoops.
So, F would know this stuff. Just as he knew it was an almost identical trap which gutted the American middle class. As home prices raced higher amid low rates and cheesy mortgages, families bought ever-pricier houses knowing a rising market would make it all work out. But when the music stopped, the situation turned extreme.
And just to remind us of what happens when reality returns, it’s still happening.
This week CIBC economists predicted a second price crash in the US as listings jump, tax stimulus ends and rates inevitably increase (all things which we should expect).
How bad is this?
“The risk of a double-dip in U.S. home prices is not simply the result of properties being sold at ‘fire-sale’ valuations, but also due to a deluge of shadow inventory coming onto the market. Although conventional inventories are trending lower, shadow inventories, capturing seriously delinquent and bank-owned properties, are just as large.”
Mr. Tal and Mr. Grauman noted that almost 2 million U.S. mortgages are more than 90 days delinquent, and most will end in a foreclosure. Some 2.3 million properties are already in foreclosure or seized by banks, they said, also warning of a record number of unemployed and the fact that some 10 million households are in a negative home equity position of more than 20 per cent.
This is what happens when governments screw up, distort market forces, trick people or paper over their failures with the creation of false conditions. Real estate has destroyed the US middle class for at least a generation. The bursting bubble in Australia will be the cruelest of jokes on hundreds of thousands of young couples. And it’s coming here.
Only a greater fool wouldn’t see this.
Unless the fool is elected, and cares not.
177 comments ↓
Amazing post.
Dim Jim is truly becoming the jester in the world economy, dancing around with his claims of superiority for our banks, while secretly throwing hundreds of billions (nearing trillions) of dollars at the real estate market through CMHC and the mortgage purchase program.
The emperor (in this case, jester) has no clothes.
Just wait for the second half of 2010 for the house of cards to collapse, and Flaherty to get the boot as Harper tries to avoid the fallout.
Here is a great link to start this blog thread…
http://www.businessinsider.com/your-house-will-lose-12-value-in-2010-2010-2
USA – but it states that US house prices would lose another 50%-75% if Fannie and Freddie stopped making loans.
Canada – CMHC is our Freddie and Fannie – so any new conditions imposed by the Government of Canada on CMHC will cool things down? What will happen here?
The housing market is managed by the Government on both sides of the border.
Hmmm…so Garth, what you seemed so sure of you are now not. CMHC and interest rates….hmmm…Vancouver appears to be starting its decline, regardless….
What are the odds that Jim sucks it up and tightens cmhc?
Well said Garth … which begs the question, Who is the Greater Fool ? A tin-horn, shyster, lawyer come politician, masquerading as a Finance Minister or the Guru of Economics Esso copy-boy, masquerading as a Prime Minister ?
Canadians should be very afraid of the consequences of their actions ! The die has been cast ………. in more ways than one.
But Garth, not in Vancouver, we have ran out land, everyone wants to live here. And it’s different here-this time, ask a realtor, and BTW, we have no subprime -honestly, ask any mortgage broker, they know, they are specialists.
garth, not so fast…we don’t know that…he might succumb to the obvious reality and tweak things a bit….doesn’t matter cause its game over anyways….vancouver listings surging….sales slowing….I KID YOU NOT MY DEAREST FRIEND IT APPEARS (ITS EARLY YET) THAT THE TIDE HAS TURNED MY LOVE!
I am so convinced that these politicians could care less about the long term health of our country and only care about the short term health of their careers.
How can they not understand that record house prices are an economic disaster in the making? This generation will be desperately needed to fuel our future economy as the baby boomers begin to retire en masse yet this very same generation are paying unheard of sums and taking on staggering amounts of mortgage debt. When rates go up, this entire group of people will be taken out of the economy. For many of them, every penny they earn will be needed just to fund their mortgages, and what about their retirement savings? Forget it, there will be nothing left over.
I scratch my head trying to understand people who willingly take on these types of debts. They are like deer in headlights and just do not get it. They just do not understand that the current interest rates are as low as they will ever see. I can’t understand it that is until I watch shows like “Till Debt Do us Part”. Gail will go into a house and council families that are on the verge of bankruptcy. She will tell them, “you earn 5,000 dollars/month but your monthly bills equal 6,000 dollars”. They look at here with a bewildered, child like confusion not fully grasping that spending more than you earn cannot continue forever. They just do not get it.
Throw in a government that cares less about the financial health of families and encourages them to go as deep into debt as possible and you have one screwed up society.
BTW, I am a Conservative voter but the PC’s have lost my vote come next election. I voted for a fiscally responsible government and they have not met my expectations. Next election, I vote for no one as I could not stomach voting for the other clowns.
Key word here is the “Elected”!
How they simply will try to maintain the status quo even if it means pushing the country into a depression that could last decades.
Obama cant even begin to clean up Bush’s mess and 30 years of Greenspan.
This is it folks! The big one! The Game Changer!
Dont be fooled…you are pawns! Boomers cashing out to survive, Middle Class to be wiped away slowly but surely.
AUS – CANADA – NZ, three classic commodity driven economies ready to burst, living in a dream with the big boyz ready to pounce, rape and pillage the resources at below cost.
If your smart you will not only sell your RE and hunker down but look at rural destination towns OR just cash in now, move to a country to gives half a SH*T about it’s people or at least let’s you keep most of what you earn.
Lets face it. In is in interest of governments to keep the party alive as long as they can since local municipalities are able to collect higher tax revenue. Of course this work nicely when the market is going up, but once it deflates it creates serious budget problems for the governments since none of them take into consideration a budget shortfall as a result of possibility of declining tax revenues.
Great news on the Vancouver front! Prices have increased over 17% over the last 12 months, and we have now officially reached new highs!
With a 17% increase in just one year, it was a good thing that all the bears on this site sidelined it! I wonder what the increase will be next year?
Read’em and weep bubble watchers…
http://www.rebgv.org/sites/default/files/REBGV%20Stats%20Package_January%202010.pdf
No Aid or Rebound in Sight, More Homeowners Just Walk Away
http://www.nytimes.com/2010/02/03/business/03walk.html?hp
No federal move to a 10/30? Is that really a surprise? Lol. As I said before, there are plenty of options to keep this party going for a long time. I guess the amount of time people will be on the sideline has just increased eh? Oh well, what’s another 5 or 10 years waiting for a market to deflate when many people have been waiting for 5 or 6 years already….keep waiting
the damage has already been done to Canada, so the government will now turn the damage into carnage
what exactly did we expect ?
responsible leadership ain’t gonna happen
meanwhile Edmonton is in a world of pain
Edmonton mortgage owners seeking 2,199 greater fools
Garth says … “And it’s coming here”
……………..to a theatre near you!
Oh goodie I’ve been waiting to see this one!
and who can’t wait for this circus to come to town……
“Flaherty said he intends to unveil government’s “path” for getting out of the fiscal hole in the March 4 budget, although he gave no estimate when that might be accomplished”
(sorry my computer seems to be falling apart as we speak, so I’m a bit distracted……think this link is from money morning)
elle
Don’t worry Vancouver, the Martians are coming. The Martian economy is invisible to our crude technological instruments, but I assure you, they have even more money than the Chinese from Martian diamond mines. And they all want to invest here. Vancouver real estate never goes down!
“Well of the 20 least affordable cities in the world, two are in Canada and a whopping 12 are in Australia.”
Garth, please correct this. The study provided no data for non-anlgophone countries, and I havent found a study that does, though I will keep looking.
I did however, see a list on another site of “expensive” cities, of which Moscow and Mumbai make the top ten. I
cant recall the metrics, but I hardly picture the average person in either of these cities making huge dough. I wonder what their RE prices and rents are like.
Vancouver Rocks,
Eastside looks…limp…westside held it up – that looks set the change.
Enjoy it – the listings surge I mean.
Cmhc/march 4th…let’s see what happens.
Greater Vancouver sales 23.5 per cent decline in January 2010
Listings Up, Sales Down
http://canadabubble.com/bubble-watch/429-sales-235-per-cent-decline.html
CONservatives are the biggest socialists and debt spenders. CONservative are financial terrorist who wish to ruin Canada and it’s middle class. The stupid debters/freeloaders cheer the socialist CONservative who have ruined our country in only a few years. Every CONservative should hang their ignorant head in shame.
Well of the 20 least affordable cities in the world, 2 are in Canada and a whopping 12 are in Australia.
I’m sure we can beat Australia.
I’d rather we spend our time and efforts trying to beat other countries at the Olympics and shit, and not the housing bubble game.
Just like the economic meltdown last fall, all the while our esteemed leaders denied there was ever a problem until is was no longer deniable, the same will happen with this little secret.
No way in hell that any finance minister or prime minister barely holding on to power will ever admit to a any kind of “glitch” in the economy, especially one intentionally caused with a potential election on the near horizon.
Can’t even get a majority in parliament after doubling the value of the largest asset class of the largest demographic group in Canada, useless is all I can say.
Does anyone have any reliable listing/sales stats for Vancouver? #3 & 6 say listings are climbing and sales are decreasing, where do you get this info from?
Well, the financial crisis in the US didn’t happen on Greenspan’s watch, but when the history books are written on this sorry era, the “Maestro” and his ilk will not be treated kindly.
Hopefully, with the benefit of having seen what happened in the US, Mr. Flaherty will resist the dulcet voices of the Real Estate/Financial lobbyists and do what’s right. Otherwise, his name will surely accompany Mr. Greenspan’s in future recountings of this latest financial scandal.
#13 Vancouver Rocks
So much confidence, arrogance. The tide has already started to turn, in areas outside the GTA, those that are manufacturing dependant.
Kitchener/Waterloo/Cambridge/Guelph/Barrie/Whitby/Ajax/Oshawa are all seeing increased listings with slowing sales, even a few dramatic price reductions.
Only a matter of time before it hits the urban centers like Vancouver/Toronto etc…
This is grade 5 economics, you cannot have sustained growth without an increase in salaries, cant happen. Can;t have cheap money for ever either.
People, this is an emotional game, dont think for a second that last years gain are going to be a yearly given. Future demand forward, last time an industry tried that it didnt work out too well (auto industry) wont for the RE market either.
The Cons will not raise the bar to 10/30 no suprise there, its all politics:
there poll numbers are decreasing after Harpers last stunt to give themselves a extended winter break
Interest rates will start to rise, they have too
Economical, they are aware of the consquences, the market will slow down on its own, CMHC will tighten standards a bit and that will be the end of it.
For my beloved Blog Dogs’, enjoy.
http://www.youtube.com/watch?v=XMTLMrd9c6E&feature=player_embedded
#10 Vancouver Rocks,
No one is weeping here. I re-financed instead of moving up in the market. You really do enjoy lighting straw men on fire don’t you?
One things the soon to be castrated bulls like you don’t realize is that you actually have to sell to make the money. Don’t count your chickens. Some people sold and got there money out. Good for them. Others bought at absurdly high prices and will live to regret it. Trouble is they are probably too young and naive to understand what they just did.
I actually feel sorry for them and sorry for you that you don’t. Flaherty is pretty much committing a fraud on the Canadian people. He gets away with it because of ignorant people like you who don’t get it.
Good article in the NY Times in the situation in the states. Canada in 2013 (or sooner):
http://www.nytimes.com/2010/02/03/business/03walk.html
Vancouver Rocks
You are right. About the past.
All I see now are more and more and more FOR SALE signs. Why the rush to the exits?
At some point the Canadian dollar will be back at $0.80 USD (the target), and at that point interest rates start to rise. Why?
Glad I asked. Of course it’s very hard to predict things, especially in the future, as the Dutch say, but here is my guess:
Step 1 could be that the Obamamania deficits of 1.5 trillion unfreaking believable dollars per year simply can’t be absorbed by the market, or the US government makes enough military sales to Taiwan that the Chinese say “no mas” to US debt and begin selling.
Step 2 would be the Federal Reserve tries to buy up the excess debt itself. The massive purchases are apparent to everyone putting great pressure on the US dollar (not necessarily in other paper money terms, instead we would see price inflation in most every commodity as investors and consumers alike start to hoard and China accelerates it’s conversion of US dollars to raw materials supplies).
Step 3 Private borrowing rates rise to reflect the inflationary risk and the Fed is forced to follow suit although they stay “behind the curve” (official rates are lower than private rates, no Volker at the Fed even though they are humoring him more these days).
Step 4 The Canadian dollar overshoots the $0.80 USD target and the Bank of Canada is forced to shore it up by following the Fed rate higher. Prices of imported goods (pretty much everything in your house except food) rise 20 to 30% causing the CPI to rise even with high unemployment.
Step 5 Variable rate mortgages are still a deal compared to 5 year mortgages but they are 5%.
Step 6 The housing market locks up. Look out below.
If it unfolds in a manner somewhat similar to the above it’s a multi year process. Probably 2 years minimum.
Step 4 needs some further elaboration. In a world where you make pretty much all of your own manufactured items and grow your own food, the thinking is inflation with high unemployment is not possible. But here are 2 arguments against this. First, we don’t manufacture our own junk anymore, so there are now a lot of world wide variables that determine whether or not a factory in China can actually accept less than they currently charge for a TV. Based on the lack of employment standards (or any standards) I would say they have probably been pretty close to rock bottom already. Second, we have had unemployment for years, and we have still had inflation. There is no reason to think with the current monetary system there is a predictable correlation between the two.
And don’t forget black swans. Say, if Israel decides to act against the Iranian threat. There is, again, no way to predict how that would go with accuracy. But higher oil prices are a given, at least for a while. Maybe much higher.
And then what if the Iranian response isn’t against Tel Aviv, but primarily against Israel’s nuclear reactor, which isn’t hardened in an underground bunker. Or at least not all of it is. Would they be successful? Probably not. But what if they took it down and caused a nuclear leak? What would Israel do then? There are so many possibilities for escalation it is just depressing to think about, but yet the people of Israel can’t just perceive that Iran is trying to put them off the map forever. This is a lit fuse. And if it gets to the dynamite, all bets are off.
I really hate to be a contrarian on a contrarian’s blog, but the more I read the more it seems to me that policy makers are making decisions that will put extreme upward pressure on inflation in the years ahead. And if this is the case, then real estate really is the place to park your money. If double digit inflation lies ahead of us in 3 to 5 years as some are suggesting, this will likely more than compensate for any loss in real estate values in the short term as the economy is thrust into an inflationary cycle. Jim Flaherty even said today that there will be no let up in spending until the government perceives the economic recovery is real. I really think we should be basing our assessments of Canada’s real estate market as to what the inflation rate is expected to be in 3 to 5 years time, as opposed to focusing on any possible short term correction. The short term losses in the real estate market as opposed to the long term gains may turn out to be pennies on the dollar.
Not to defend Mr. F but it seems he’s damned if he do and damned if he don’t.
OOps ronaldo silver it is ” a silver miner is a liar standing by a hole in the ground ” …reading too much at the same time . Mine ( no pun) is clq . Whats your zinc .. as you I love la belle province .
> giving homebuyers a gift of $14,000 to purchase a
> home, allowing 100% financing and keeping interest
> rates at equally ridiculous levels.
FYI: The Federal component, the bit over which our spendthrift accountant Rudd has control, was indeed $14k. However there are also state-based grants. In debt-serf in Victoria, the grants totaled $40k.
Source: http://globaleconomicanalysis.blogspot.com/2010/02/how-big-were-housing-tax-breaks-in-oz.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29
Governments have become like HAL, the computer on Space Odyssey that becomes self aware and self absorbed pursuing Its self interests, which is often diametrically opposed to the peoples’. And it doesn’t matter who gets in.
But because we each exercise our vote, we are fooled to think we have some sort of control, which we don’t. We no longer have governments that represent the people but governments which represent shadow governments. We’ve been disenfranchised of true representation and are now reduced to picking our poison.
Even with what has happened in other countries much like ours, US, UK, Australia etc, too many of us are still programmed with denial…that it’ll never happen here. All the fundamentals do not support RE prices just like the fundamentals don’t support the price of many stocks.
The reason the bubble hasn’t burst here yet is because the order hasn’t been given for F to pop it. But I’d wager he’s been warned it’s coming, and soon.
Excellent Post Garth,
Until our govt stops inventing reality we’re totally screwed. They’re giving people bogus road maps and laughing as they waddle toward the cliff.
F’s motto: just keep the line moving along at any cost.
And let’s not forget the other elephant in the room.
Healthcare…. just waiting to devour boomer life savings.
Going to be ugly for many
“A month from tomorrow Jim Flaherty will cave.”
Lol, when did F ever stand tall? Since 2006 on when the Cons took federal power, they’ve goosed RE in every which way they could from 40/0’s at red hot economic times to so called scaling back to mere 35/5’s in the midst of 2.25% variable rates making Canadian borrowing power the greatest Canadian has ever seen. Too bad its become dangerously priced into the markets.
There has been no other time in Canada’s history that one can borrow so much money so cheaply as there is now, considering the combination of long 35 year mortage regs and interest rates at record lows. There should be no question in anyones mind as to who is responsible for the creation of Canada’s asset RE bubble regardless of the hype and spin.
Years of hard times are coming as a result of Harpers self serving lust for power at all costs including buying our votes with our own borrowed money. From those who can’t find affordable housing to especially those Canadians who are about to experience financial ruin from buying into a high flying market in the last couple years or more, the damage will be felt by us all no matter who and what we are for a long to come. How many consumers will Harper/Flarehty’s failed policies take out of the economy outright, from too much debt load, its hard to say. 1 in 10? More? The longer this continues, the worse it will get. And will it breed a long lasting recession and knock Canadian growth back 5 to 10 years?
Ask Japan what they think of their RE bubble of the 90’s. 15 years later, wallowing in debt, a YEN teetering towards long term collapse and a deflationary bottom with no end in sight… yeah. Ask Japan.
And watch these Cons blame everyone else for their misdeeds when this one is over. There isn’t but a one of them, yes men and women alike that won’t deserve daily running kicks from the masses when this one is over. It would please me to see every CON MP unable to walk the streets for fear of justice from all the victims they are leaving behind through reckless, made in U.S.A. policies in the years to come. In truth, for blindly following a traitorous leader and finance minister void of conscience, they deserve far worse.
“Last week a survey found 45% of all recent buyers (in the last 18 months) are under severe mortgage stress, with many forced to use credit cards to keep up their home loans.”
That’s Canada’s future, thanks to Harper/Flarehty. Boy, are fellow Canadians collectively dumb to not catch onto this dog and pony show. One would have thought that Canadians would be smart enough to elect goverments who actually serve Canadians first instead of banks and other nations at what will be every Canadians future expense. If the rich don’t feel it when assets deflate with rising rates, they sure will feel it as the loonie spirals from governmental debt, higher taxes and an ugly, long term internal chronically shrunken economy spawned by at least one in 10 or more, taken right out of the economy, no longer able to spend from shrinking income, too much debt and negative equity.
Apparently all Canadians want from politicians these days is someone who speaks fluent English. Doesn’t matter if its all lies, as long as they are good communicators, right? Thanks, CON voters. Thanks for electing a federal government that will easily ruin through its traitorous policies, 1 in 10 Canadian lives (many of them children about to be raised by one parent or worse). Thanks for our lost generation. Hope it was worth it for you.
Garth–Your best thread since i’ve been here–Also–
Nice kick in the balls to a brother politician–
I’m impressed–
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#7 GetReal on 02.02.10 at 9:31 pm
I am so convinced that these politicians could care less about the long term health of our country and only care about the short term health of their careers
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Good post–
#13 Vancouver Rocks
You are bang on, there are plenty of options left and the government will use them all, even quantitative easing,to keep the party going. They will not allow the bubble to burst, the consequences are too dire. The economy and GDP would crash and the boomers would be poverty stricken in retirement. The only solution is to keep inflating and to enslave the young into a lifetime of debt.It will work too, because debt is invisible and most of us aren’t very smart.
There be a slow train a’comin, a’comin round the bend.
Hi Garth – been reading your blog for a few weeks now & finding it very interesting & entertaining.
Bought and read the new book – found it very helpful as well. Thank you.
A small business person operating a professional corporation usually has the majority of his or her net worth invested within the corporation. This changes the landscape significantly with respect to many of the topics covered in your latest book. Any chance of including a section on professional corporations in your next book?
http://www.demhow.bham.ac.uk/reports/B2.pdf
OK so we’re not Hungary. Here’s two quotes:
“The social consequence of the affordability problem in regards to access to housing was the increasing role of intergenerational transfers. This is the only explanation how housing market could exist with so high P/I ratio and low housing affordability index. Sociological survey shows evidences that in housing finance intergeneration transfers (transfers of family savings and inheritance) play an important role. In the case of Hungary, 50 % of the households (recently moved) had help from the family.”
And this:
“In Hungary, a special type of crime is closely related to the affordability issue. Households with high utility debts (typically struggling with other social problems as well) are cheated by the so called „real estate mafia‟, which offer an inhabitable home (typically in a dead-end village or slum area of a city) in exchange of the apartment with debt. (The registered number of these cases was more than 400 between 2001 and 2003.) These cases are the tips of the iceberg, and the downward mobility contributed to the problem of slumification of remote villages and part of the urban areas.”
Garth,
What makes you so sure he will stand firm on CMHC rules? Is this rumor, conjecture, a well placed source or an educated guess? Please enlighten us.
As someone who is about to re-enter the real estate game, this has huge implications on what market I will find when I arrive.
Garth, did you ever think that Flaherty reads this blog and is simply staying the course in spite of knowing what to do? Maybe if you lay off him for a bit he will see the light?
The coming real estate Tsunami has been coming for more than a year in the US as the number of Alt-A refis coming up in 2010 -2012 drawf the number of no doc loans, liar loans, Ninja loans and sub prime loans by a factor of 10 – 1. The graphs have been all over the news, but, typically most prople just don’t want to consider the ‘technical stuff’.
The fact that banks are holding back millions of listing in an attempt to ‘ balance’ the prices is faltering as most of these properties are now falling into such a state of disrepair that they may never be in a condition to sell. What that means is a total loss for the banks in an enviornment where there is no more bailout money coming from the government to prop up this ’shadow inventory’ any longer. What we are most likely looking at in the US is a firesale scenario.
Consider the lesson of Japan where the government subsidized the banks to keep bad real estate loans on thier books for ten and then twenty years. The overhang created a cancer with the Japanese banking system that brought the country to its knees. Will the US regulators allow that same scenario to play out? Not likely. Because in the US banks are expendable.
Australia has now hit the wall where the average person can no longer afford to buy a home even with free money in hand for the down stroke. We are there as well, you can see it in peoples personal debt ratio rising above 158% (sorry about that Garth but your figure was wrong) and people are subsidizing thier monthly payments with credit.
“Not on my watch”? says Flaherty. Ponzi schemers never win, too bad there will be so many victims when this one is over. JIM ‘Bernie Madoff” FLAHERTY. Stephen harper is seemingly willing to do anything in his quest for a majority government, just one he thinks would be good. What ever happened to taking pride in public service and a job well done?
Post #10,13 Vancouver Rocks, wow !!!! thanks for that link.
How many are you buying?
Think of the potential profit !!!!
You’re not on the sidelines are you?
I think everyone here understands and agrees that US interest rates will not rise any time soon. Therefore, Canadian interest rates will remain low for a very long time. In addition, the unemployment situation will also keep the interest rates low. The Governments would rather see inflation than deflation – it keeps them employed ( elected). Something has to trigger the fall of RE and at the moment there is nothing on the horizon that would have that effect. In 1981 it was the 21.5% interest rates and that was because the inflation was rampant at 14%/ year. There is nothing like that now. High interest rates such as 14% or more would do it but that ain’t coming.
To Vancouver Rocks….
I also live in Vancouver have my whole life it’s a good city but certainly is not one that is going to weather this upcoming storm.
You would have to be a fool to not see the skies getting ever darker all around you, and hitting all corners of the globe.
The basic principle is simple the young people that live here cannot afford to buy a home. Who’s going to buy yours????
Sure some think they can but as we all know they really can’t they will find out soon as well.
You actually kind of remind me of all those people that didn’t evacuate New Orleans before Katrina hit. I only hope there will be some room for you in the superdome
Hey Garth picked up you book at the Broadway and Grandville chapters yesterday. I couldn’t find it as I guess they had just arrived. Got the clerk to grab a bunch from the back and put them out for you. See us “Blog Dogs” have to look out for one of the few speaking the truth!
Cheers
Brilliant Garth, absolutely brilliant!
Garth for President!!!!!
#13 Vancouver Rocks
15 and/or 30 year terms are headed our way…trust me
Wonder what would happen to prices if Harper made mortgage interest tax deductible, like the US. Would give the economy a huge boost until we resume growth again!
#13 Vancouver Rocks
Do you understand how much family waqes have to go up to justify present nearly 1Mil prices in Van for SFH ?
How expensive rent must be in Van are to justify 500k condos ?
Do you understand that those people need to pay off the house in 15 years max because after that they have to save for their retirement ?
This is no laughing matter for first time buyers in Van area.
Those prices are only justify by taking huge leverage (1:10 – 1:20) and very long amortizations with combination of ZIRP (zero interest rate policy).
To assume that these conditions are here to stay for 20 years is beyond foolish in face of how much money do we need to borrow and how many people are loosing their good credit history.
This will create decade of pain sooner or later. People at this site are trying to figure out how to navigate this storm that is coming. And our government is not helping at all with their effort to try to extend this bubble longer and push it higher.
Best you can hope for home owners is that nominal prices will stay the same. But we would need big inflation for that (Not a good scenario either because we will be victims of stealing by means of inflation).
Ahh … why do I even waste my time on you …. you clearly enjoy other people suffering.
Good night everybody.
Ps: I hope our government will not go down the road of house subsidy as USA and Australia did. It will extend the buble even more. Btw subsidy in Australia is 40k (Federal and state together, info from Mish site).
Cant vouch for its accuracy
http://www.numbeo.com/property-investment/rankings.jsp
I really do prefer this one!!!!
http://bit.ly/JimmyBoy
Vancouver Rocks – we will see how this party ends and of course it only works if other people join the party. Once you guys party till the price is too expensive for everyone, the party will inevitable have to end.
F – I do feel there has been an impact on the middle class, for those who have taken on too much debt and those who aren’t willing to take that debt on when others are. For me the impact is more. I believe a house will help with adoption and when the party dies I may no longer need a house because I will be past the age when adoption is viable
There is going to another housing boom planned by the cons (no pun intended) to house the increase in prisoners expected as a result of their new law and order agenda.
You would think they would have bigger fish to fry then worrying about ma and pa grow ops.
I am so convinced that these politicians could care less about the long term health of our country and only care about the short term health of their careers.
————————
who cares. It’s their policies that are going to give the prudent individuals assets for much cheaper prices. Just like the U.S’ continuous price drops, I see Canada’s RE market overshooting as momentum builds.
Dear Mr Flaherty, Mr Harper, and Mr Carney,
I feel compelled to let you know how your policies have affected me and my family.
First, a little bit about me. Unlike many Canadians, I’ve got some cash – not enough to be considered “rich” but enough to raise an eyebrow or two. I didn’t inherit it, win it, marry into it, or obtain it through illegal activity. It’s a result of hard work, living below my means, and most importantly taking entrepreneurial risks.
Over the years, I’ve been one of those fellows who have repeatedly incorporated startup businesses and have created jobs for Canadians, with the hope that I would reap the financial rewards. Along the way it usually didn’t turn out that way, as most of my businesses failed and I lost much of my invested time and money. And believe me, there have been periods of my life where the time invested has been equivalent to 60+ unpaid hours per week. It hasn’t been easy. But I learned from my mistakes and, eventually, one of my ventures paid off and produced a bit of a windfall for me and my little family.
This brings me to the real estate situation in Vancouver, which is where I was born and have lived my entire life.
Even though I have savings, your easy money policies have allowed practically anyone to compete with me in purchasing a house for my family. If I attempt to place a reasonable offer for a house, I know there will be a dozen young kids with no savings and horrifically large pre-approved mortgages outbidding me and driving the price of these shacks in Vancouver ever higher.
But these buyers do not appreciate how long and hard one has to work, risk, and save to actually come up with the cash to buy a house at these levels. A representative example is my son’s preschool teacher who recently informed me, “I bought a place! I got a 1.75% mortgage and my bank helped me to open up a line of credit to come up with the down payment!”
At the other end of the spectrum, higher end houses are being bid up by foreign buyers. A news article appearing in the Vancouver Sun this morning provides evidence of this, with its revelation that higher-priced properties in the west side of Vancouver, Burnaby, Richmond, and the Tri Cities are experiencing the most sales. These happen to be areas in which Asian demand is high.
Now I know how it works in Canada; If you object to selling out your city to the highest (foreign) bidder you are called a “racist”. But let me say this. In the process of earning my nest egg, I paid plenty of taxes to Canada and BC all along the way: payroll taxes, corporate income taxes, personal income taxes, capital gain taxes, worker’s comp, etc that were used to build the infrastructure and fund social programs. These taxes and regulations often brought me and my businesses to their knees.
Yet, through association with several new Canadians, I know many foreigners have built their wealth without facing the same levels of taxation, legal obstacles, fair pay for workers, and environmental concerns in their home countries. And, as politically incorrect as it is to state, from what I have seen, experienced, and read, I’m convinced that much of this foreign money is dirty – generated through crime and corruption.
How can I reasonably compete with these foreign buyers? How can our children be expected to compete?
So, in spite of my successes, I am living, along with my wife and kids, in an older, very modest rental house. And I feel stuck. Renting has its benefits, but I’m also under the thumb of my landlord.
The easy money and immigration policies of the federal government and the Bank of Canada have resulted in a personal dilemma. I can’t afford a house of reasonable quality in Vancouver. So I’m left with three choices:
1. Rent indefinitely.
2. Blow my life savings on an over-priced, tear down dump.
3. Move away from all our friends and family in Vancouver so that I can provide a quality house and better standard of living for my family. And if we move away from Vancouver, it may make sense for us to move away from Canada altogether.
It simply makes no sense to me that this government is maintaining policies that reward only those with nothing to lose (new buyers with no savings) and those who make their riches in offshore businesses.
I’m convinced that, in the end, it is our younger people and children who will be paying a huge price for these short-sighted policies. Does anyone in Canada believe that our children will be enjoying a higher standard of living than our past generations? I certainly don’t.
#13 Vancouver Rocks – it’s okay to chat it up…your increases are only on paper and you’ll never time the downturn.
For you especially, I hope we see another 20% increases in the next 4 months given the above…it will just ensure there will only be sellers and ZERO buyers!
There is nothing wrong with making money in RE, but the greedy will always pay….learn to take profits when there are still buyers!
Of coarse you will then try and tell us that the rats in Vancouver are different and enjoy jumping onto sinking ships!
Eventually the problem must be addressed as in time it manifests itself in a different form. Falling housing affordability leads to dissident unrest. Dissident unrest leads to revolt. Revolt leads to change. It need not be violent.
Flaherty may cave in order to maintain the status quo on his watch but that short sightedness will result in change, peaceful change, through the democratic process. What Flaherty and his boss Harper might think a strategic self sustaining manoeuvre will prove only to exasperate the situation ultimately disclosing their own ineptitude. Greater fools, en masse, will come to realize what greater fools they have allowed themselves be manipulated by and cast them from office.
Of this I am confident but not without concern that these bandits might test the limits of Canadians toleration of totalitarianism to the point that less peaceful means of change may be found necessary.
#2 Brico9 good link. I like the following lines:
We are in a radical real estate depression hidden from us by massive government fixes.
My prediction is that the leaders at our Treasury and the Fed will finish as the bigger or the biggest fools. They are waging nuclear war to maintain bubble pricing on 129 million housing units (If you are like me, you say that sentence, and you know that the policy is dead wrong.).
Only an academic bureaucrat could make such a choice and believe in it. And the financial press has not even one word to say against this lunatic fantasy. The blind cover the dumb and vice versa.
Ben Bernanke and Timothy Geithner prove that book learning makes you dumb and government work makes you slow. Don’t put your faith in them or their experience. They haven’t spent enough time in the real world.
Jim Flaherty, there are more people votes than business votes so be careful of your political future if you are only listening to the real estate and mortgage business lobby groups. These groups do not work for the people, they work for their own interests, you, Jim Flaherty, on the other hand, who should you work for and who’s best interest should you have at hart? The voters or the lobby groups?
Mike
Great post Garth.
I t truly is a two country race now, Australia Vs Canada. Down to the line.
Bother thought their strong banks, both don’t realise their banks are the biggest home owners in their respective countries.
Both have underutilised land and both have natural resources.
Let’s also remember that “F” burned through $13 Billion in surplus dollars BEFORE the recession started.
He can also take credit for the 0/40 mortgage. My main concern with “F” isn’t that he is an ideologue or a Harper crony; I don’t think he knows what he is doing, really and truly.
You can not just simply walk away from your mortgage obligations in more than 30 US states!
http://money.cnn.com/2010/02/03/real_estate/foreclosure_deficiency_judgement/index.htm
Gee can a mortgage income fund freeze withdrawlals in Canada? That should be a wonderful suprise just like Jimbo’s help for the income trust crowd.
Let’s see Federal debt $600 billion + CMHC debt on defaults could be up to $600 billion does this mean we are in the trillion dollar club soon.
The Great Depression began in 1932, not 1929. The economy actually rallied after the 1929 crash. A couple of years later, it sank like a stone under the weight of the piled-up mistakes and excesses.
Consider that by the time this situation finishes unfolding, the Conservatives likely won’t be in power anymore.
One of the great flaws in Obama’s presidency is that in his zeal to be bipartisan, he failed to brand the current situation as the Republican Depression. Republican spin doctors and the folks who wear teabags on their heads are making sure he ends up taking the blame for the whole thing.
The same might happen for the Liberals. The slickest time for the Tories to bail is when they can’t sustain the housing bubble and the illusion of an economic recovery anymore. They’ll hand the opposition a nonconfidence vote and escape before the sh** hits the fan.
Their story will be that they did so well to help the country recover after the crash, and then the Liberals came along and loused it all up.
Really nice post Garth, your blog is a treat every day!
I think the comparison with Australia is bang on, there the policies were even more aggressive than Canada, so are the results…
And you are absolutely right, anywhere you find real estate price insanely high you will also find government intervention, whether it is through monetary policy, fiscal measures, loan guaranties, direct subsidies, regulations, etc…
Another example is Switzerland, there not only interests on loans are tax deductible but you can span a mortgage over generations, up to a 100 years!!!
http://www.somersetmortgages.com/switzerland/buying-guide/
What happened to prices? You guessed it, through the roof!
The irony is that when as a result of those bad policies housing becomes out of reach for the middle class government is then solicited to subsidize “social housing” (among other programs).
If there is a lesson to be learned from all of this: Government should get the hell out of housing, in the end we’d all be better off.
What it all hinges on is this:
http://www.theaustralian.com.au/business/opinion/if-china-sneezes-we-may-catch-more-than-a-cold/story-e6frg9if-1225824856693
This is why RBA Gov. Stevens stayed his hand and set the timer back another month.
Hey…Ottawa wants an 80 cent loonie so that Southern Ontario’s Manufacturing economy can compete with the rest of the world and doesn’t turn into another Detroit.
The above policy wouldn’t be required if wages & Pensions of Unions and Civil govt workers didn’t have such a strong and unfair Ontario presence.
…Plus the incoming HST will kill future new construction in Ontario and BC limiting future Real Estate inventory.
Renovating will come back…that supports related Real Estate “Jobs”.
…Higher interest rates kills all the above.
What is so hard to figure?
Nostradamus jr.
Garth et al:
More “squirrel” stuff and emergency preparedness. I found this web site, thought it might be useful to some.
http://www.whentechfails.com/
Good luck to all. Hope the SHTF preparedness will never be used, but better prepared than sorry.
Mike
Now if we only had an opposition that would remind government and country of what was said and done by Harper & Co., how this has worked out, that would tell Harper to take his budget and shove it, and go to the voters with the facts and the policies required by these!
Can’t happen in Canadian politics, not now, if ever, but wouldn’t it be nice?
Ahhhh, come on Garth,
Once upon a time you were Finance Minister and you know very well what its like to run a deficit. Remember?
You’re thinking of somebody else. And where did I mention ‘deficit’ in this post? — Garth
“But I say unto you, That it shall be more tolerable for the land of Sodom in the DAY OF JUDGMENT, than for thee.” – The Bible
******************************************
You lost your house – but you still have to pay
By Les Christie, staff writerFebruary 3, 2010: 8:18 AM ET
NEW YORK (CNNMoney.com) — As terrible as it is to lose your house to foreclosure, at least it’s a relief to put your biggest financial headache behind you, right?
Wrong!
Former homeowners may still be on the hook if there’s a difference between what they owed on their mortgage and what the bank could sell it for at auction. And these “deficiency judgments” are ticking time bombs that can explode years after borrowers lose their homes.
It can even happen to people who got their bank to approve them selling their home for less than it is worth.
*
*
“My understanding was that the deficiency was negotiated away,” she said. “Then, last November, I got a letter from a lawyer telling me I owed my lender $65,000. I had to declare bankruptcy. There was no way I could pay it.”
http://bit.ly/bvuOXr
Ouch! That’s going to leave a mark!!
Macleans Article – Awash in a sea of debt
Too much information for me to quote.
http://www2.macleans.ca/2010/02/02/awash-in-a-sea-of-debt/
Great post Garth…makes me wonder where we are headed with this power hungry government or why any political party in their right mind would want to take over the mess the Harper government has created. With the lack of openness and accountability of this Government it makes me cringe to think what really has went on behind closed doors.My bet is it will be shocking.
#42 Kelowna Bound,
The tightening of the CMHC rules has been discussed and speculated about for many months. A few months back it appeared imminent because of the pace of rising prices and the formation of a bubble. One key concern is the size of the loan guarantees which we now understand may be over a Trillion dollars. If that continued to rise then this potential liability would have forced the gov’t to tighten the rules like what is happening in Australia.
In fact, it is starting to look like there is little need to tighten the rule because so many first time buyers came into the market last year there are few who can take advantage now. This is in fact bad news because it shows just how weak the underlying economy is. If people were more confident and wages more secure you would have thought Flaherty and Carney could take the throttle back a bit. However the fact that these measures seem to have run their course should be cause for concern about the depth of the imminent correction.
#49 TheTruth,
You said – Making mortgages tax deductable would give the economy a huge boost. Oh really? How so and for how long? The more you distort the economy through policy the longer you prolong the inevitable. The underlying problem remains a flat job market and a poor economy that fails to add good jobs. If wages were increasing 10% per year then no one would care about rising prices so long as their is a relationship between the two. The fundamental problem is that the relationship has been out of alignment for a decade and that is going to correct soon.
#29 Joseph,
You make a great point about inflation but think about what that does to interest rates. You have hit the crux of the problem. If the governments of the future are forced to print money to pay the debts of today then interest rates will rise. In fact, they could rise beyond 10% to 12 or much more like in the 1980s.
What do you think happens to Real Estate prices in that event? Clearly they come down. What do you think happens when mortgages are re-set from 2.5% to 6, 8 or 10%. Negative equity. This has happened to more than 25% of U.S. homeowners. It is not fiction but a day to day reality in the U.S.
Good thing it can’t happen here.
#23 Peter Pan,
At least Greenspan admitted to his mistakes and had the decency to publicily come forward and accept responsibility. What are we to think of a finance minister who knowingly makes these decisions for political reasons?
Greenspan was wrong because of flawed ideology. Flahtery is a fraud because he knows better because of what happened to Greenspan and the U.S.
#38 Crashproof,
No, you are wrong. The government only has so many options and ways to stimulate the economy. They gambled on the interest rate drop and CMHC relaxation because it was easy to do and politically viable. However other forces will move to tie their hands.
Nothing changes the fact that the core of our economy is much weaker then we pretend it is. There are fewer and fewer high paying jobs and fewer innovative and productive companies after years of poor political and corporate leadership in North America.
I feel for these people really. Now that is out of the way is there a way to profit from this in Canada? Is there any short positions that can be linked to the real estate market (not including banks).
“Does anyone have any reliable listing/sales stats for Vancouver? #3 & 6 say listings are climbing and sales are decreasing, where do you get this info from?”
Try Larry Yakowsksy at “Yattermatters”.
#22 Phil,
Below is the operative sentence from the report. Prices in Vancouver have now returned and are in fact 0.8% higher than their previous high in May 08. Obviously affordability is better because of the interest rate situation. Sales and overall volume is not high so it is a strange market. The next few months will be interesting.
Over the last 12 months, the MLSLink® Housing Price Index (HPI) benchmark price for all residential properties in Greater Vancouver increased 17.2 per cent to $573,241 from $489,007 in January 2009. This price is 0.8 per cent above the previous high point in the market in May 2008 when the residential benchmark price sat at $568,411.
Robert Fontaine, CBC movie reviewer, recommends:
Edge of Darkness, playing all over town right now.
It’s apparently about when “convolution replaced revolution”.
I thought you guys might dig something like this. I am going to see it.
#56 Vancouver_Renter on 02.03.10 at 3:28 am
————————————————–
Amen. Great post, a good read.
Suggestions for places to move your family:
1) Montreal — cheap real estate, great culture (bad drivers)
2) Ottawa — big city with a ’small town’ feel. Great place to raise kids. Middle-of-the-road real estate prices.
And think–with the money you save by not buying Vancouver real estate, you can afford to fly your extended family and friends out to visit many times a year!!!
@ #56 Vancouver_Renter: nicely written… true for many parts of Toronto as well.
I agree with ONE MORE THING.
This looks like the “let it burn” thing; “with the big boyz ready to pounce, rape and pillage the resources at below cost; Asia crisis of 1998″.
Shock Doctrine by Naomi Klein, the daughter in law of Stephen Lewis.
By the way, thank you ONE MORE THING about recently suggesting we look up Malaysia for retirement.
At first glance, it seemed impossible because we do not have a government or company pension. But we can generate the equivalent with our savings, if “they” don’t mess us up. Any comments?
Good Post over at Whispers from the Edge of the Rainforest on the Canadian debt situation. Similar to yesterdays Maclean’s article. For all of you who don’t understand the debt bomb problem and the impact of future interest rate rises.
http://whispersfromtheedgeoftherainforest.blogspot.com/
FOREVER IS A LONG TIME
The Creature from Jekyll Island : A Second Look at the Federal Reserve
To all the blog dogs:
If you have not read this book and it is a big book (over 600 pages!). It is a fascinating look at the Federal Reserve and its history. I am not a conspiracy theorist at all but I do take a hard look at reality for what it is worth and I do not trust Main Stream Media at all. Never have and never will…
Here is a description from the back of the book:
Where does money come from? Where does it go? Who makes it? The money magicians’ secrets are unveiled. We get a close look at their mirrors and smoke machines, their pulleys, cogs, and wheels that create the grand illusion called money. A dry and boring subject? Just wait!
You’ll be hooked in five minutes. Reads like a detective story – which it really is. But it’s all true. This book is about the most blatant scam of all history. It’s all here: the cause of wars, boom-bust cycles, inflation, depression, prosperity.
Creature from Jekyll Island is a “must read.” Your world view will definitely change. You’ll never trust a politician again – or a banker.
I am not aware that Jim Flaherty has a finance background (like accounting or economics etc.) yet he seems so assured in his economic policies and platforms. Accounting is tough and thorough. Is giving out 0% down, 40 year amortization mortgages financially prudent? Is giving out 5% down, 35 year amortization mortgages financially prudent? I’m going through my accounting books and I have never heard of such a ridiculous, unconscionable policies before. Is this not worse than what has been going on is the States?
It will help explain why Jim Flaherty doesn’t give a damn about the price of homes in Canada (he continues to deny that there is any housing bubble in Canada right now and humorously states that he is continuing to monitor the situation and will act if he sees any signs of a housing bubble!) , the first time buyers, even though he has the power and authority to clamp down on prices by a change in the minimum down payment requirements and the maximum amortization rate of mortgages being sold in Canada right now.
Hey “Jimmy Boy”, what about a 25% down and 25 year amortization?
Or what about a 20% down and 25 year amortization? (more politically correct, i.e. keeps your job)
Why did Jim Flaherty introduce a 0% down 40 year amortization?
The answer is simple actually.
It seems and appears from his reckless mortgage policies, that Jim Flaherty, whether intentional or not, wants to wipe out the middle class through excessive, lifetime debt. Again, he has the power to raise the minimum requirements for mortgages but has yet to do so and may never do so. This debt benefits the bankers by having a lifetime customer and a lifetime of interest payments if not longer. Further, by keeping home prices high and always moving higher, protects his banker buddies from negative equity in the event that a home owner defaults on the mortgage and the bank has to foreclose on the property in a down market. Even further, the original mortgage is securitized by the bank and handed off to the CHMC which is backed by the Canadian taxpayer and is no longer a risk to the bank. Nice move “Jimmy Boy”. With a friend like you, who needs enemies!
The whole idea of the Federal Reserve in the States is to get a country (through the IMF and World Bank) so far in debt that they will never be able to pay off the original loan in the first place. The international bankers are very sharp business people. They are cash flow investors. Why have a customer paying interest charges for 25-30 years when you can have them for life or better yet, forever (their heirs and successors of the debt).
Remember first time buyers:
STOP BEING LAZY!
EDUCATE YOURSELVES.
RENT INSTEAD OF BUYING.
SAVE UP A SUBSTANTIAL DOWN PAYMENT
……………………..FOREVER IS A LONG TIME…………
#73 Gord In Vancouver on 02.03.10 at 9:16 am
Macleans Article – Awash in a sea of debt…………..excellent article.
Garth
Could you see some CMHC tweaking – ie. 7.5% downpayment needed by end of year or something like that?
Can someone please tell me where the opposition is on these issues? What are Iggy and Jack doing right now? Just blows me away.
H and F are just going to let it all happen and then blame someone else. Our leaders have failed us.
#71 My_View on 02.03.10 at 8:55 am
——————————————
I’ve seen ‘My_View’ used to comment and defend the CONS on newspaper sites…I think you have a CON troll here Garth….
My work collegues in Calgary claim we will have 50 year mortages in order for their teenagers to buy a house because prices always go up. I’m regarded a freak because i rent while others claim i’m scared to commit (I’ve been married for 16 years lol). The masses here are oblivious to what lays ahead. Keep us posted on that trip to Cowtown Garth.
March 31st. — Garth
Garth,
What is your honest opinion about the 2010 Budget?
Will this budget pass?
Yes. Or there will be an election. Ignatieff is not on a suicide mission. — Garth
RAIN wrote:
Ben Bernanke recently locked in his mortgage at a rate of 5.1%, yet he still had roughly a year-and-a-half left on his variable rate mortgage at 3.75%. Why would he do this?
#65 Nancy on 02.03.10 at 7:32 am
The same might happen for the Liberals. The slickest time for the Tories to bail is when they can’t sustain the housing bubble and the illusion of an economic recovery anymore. They’ll hand the opposition a nonconfidence vote and escape before the sh** hits the fan.
Their story will be that they did so well to help the country recover after the crash, and then the Liberals came along and loused it all up
**************************************
Good point you bring up–
“New boss–same as the old boss”
That’s all we do,is recycle–
As long as Keynesian economics are the platform,they all preach from–nothing will change-
Voting has become an exercise of futility–
BC = “Bring Cash” Hey, maybe Vancouver real estate will never come down? It’s possible. I grew up in White Rock so I think I have the perspective to say that if someone wants to pay that kind of money to live there….let them. Equally, if you think living in the Fraser Valley (Surrey, Langley, Maple Ridge for example) is worth half a million dollars or more….have at it. Enjoy the poor infrastructure, the crime rate and high taxes.
The west coast on a sunny warm day is pretty hard to beat, but everything has a price. To me, it’s not worth it. I can fly out and visit my parents there and get my fill. That’s my choice.
I’ve lived in Calgary since 1996 and the only thing that’s disappointed me here is that the “west coast RE honk mentality” invaded here around 2002 and it got completely out of control. Which is a shame, it’s turned Calgary from a nice, “can do” kinda place into a shallow, “complete douche” kinda place. Very sad.
And as much as the Vancouver Rocks guy epitmizes everything wrong with modern western civilization, I think the Ontarians need to understand something; it’s mainly people from the east moving out to BC that cause the upward prices. Your whole life growing up out there, all you ever hear from Ontarian refugees is how great it is to be here, how much Toronto sucks, and there’s no snow! So how do you not expect their egos to be inflated?
So before you condescendingly shake your head at us westerners, you need to realize that your migration out here is a big factor. In Calgary, it was an influx of blue, four lettered license plates that sent prices out of control around here.
Loving my MONEY ROAD Garth, I’m just starting Ch#2.
How dumb and irresponsible can these people in ottawa be?
LOL is the Liberal Party so bad?
What this current party has done to Canadians and there future genereations is terrible.
http://www.youtube.com/watch?v=XMTLMrd9c6E&feature=player_embedded
Were going to a socialist system to bail out votes!
Conservatives are clinging to power with printed money and closing Government.
Tell me though, are any Canadians going to go against the value of their homes to do whats right?
Sick!
“You are bang on, there are plenty of options left”
Let me translate for you:
It’S DIFFERENT HERE/THIS TIME!!!
Sure. The same “options” “they” used in the US and UK? Where they have tried every desperation measure to prevent real estate prices from crashing, and were completely unable to? Riiiiight. Logic award.
And the guys who think Canada is going to make mortgage interest tax deductible – with a record budget deficit and falling tax revenues, they are in a superb position to give taxpayers a break costing the Federal and Provincial Governments Billions of further lost tax revenue. OK, I lied. Maybe if we had no deficit, but even then the Marxist/leftists would have a fit if this was proposed – they want everyone to be equally poor with no one able to own a house as private wealth is not politically correct.
How about some reality – just accept real estate prices in Canada’s 10 largest metro areas are totally detached from economic fact. The market goes up, then goes down, like all markets. After a 12 year run up, which is much longer than the usual real estate boom, prices are supposed to just keep going up and up and up? OK, I can the merit (none) in that argument.
All the symptoms of a classic blowoff top right before the crash comes are present in Canada. Straight out of an economics textbook. Just like the USA or UK a few years ago. You will note despite the largest Government pump jobs in history in those economies, they were unable to do anything about plunging real estate prices.
The recent book by Kenneth Rogoff et al covering some 250+ historic credit busts make it clear that after the blowoff top of a credit induced bubble, there is only one place to go, and it is not up some more.
Keep repeating that mantra “It’s Different Here!”. Maybe you can use it on your mortgage company when they call you about how your mortgage balance is more than the real estate is now worth, and they need some more cash now. I’m sure they will agree it is different this time here in Canada. Or not.
Thanks for Van anecdote on affordability last thread. Does anyone have the latest average home price for the metro Vancouver and Toronto markets? Income info we can get from StatsCan etc, then we can do our own calculation of the present levels of (lack of) affordability, it probably looks worse than the Demographia study.
Actually, I suspect that study understated the size of the bubble. For instance, in Toronto if average family income is around $60-$65K and average family home price is $400K, the affordability ratio is high at around 6 -6.5, more than the 5.4 quoted in that study, IIRC. Vancouver’s numbers look even more ugly, at $60-$65K family income vs $600k home price (I’m going easy) the actual multiplier is more like in the 10-15 range depending on what value you use for “average home price”, more than the 9.3 quoted.
Up to date statistics anyone? I know I could probably go to the Vancouver RE Board site or whatever, but I might catch communicable bubbleitis.
With the implosion in Australia under way, I wonder if those “sure-thing” interest rate hikes here in Canada will really take place this summer.
For the record, I’m in favor of rate hikes. I’m a saver, and I’m being spit-on every day in favor of reckless borrowers and large institution speculators.
http://www.ottawacitizen.com/Brighter+January+Ottawa+home+sales/2517477/story.html
———————————————
Ottawa prices up 11% y/o/y and sales at ‘levels expected for a typical January’
#24 kitchener1
Couldn’t agree with you more about the price drops.
For the sake of curiousity I recently checked MLS in the Oshawa area to see what was going on.
Last year majority of homes were still relatively in the 200-250K + range and up. What I saw floored me. You can get a detached house with a massive yard for around 150-180K. Same goes for different price drops in areas like Ajax, Whitby and Pickering.
It’s been interesting getting repeat listings emailed to us with the changes but more so to see how long they’ve been on the market. One home we were watching went from 379K to 349K and is now at 314K. I’ve said it already but the homes that are selling the fastest there are the ones that are competitively priced (approx 3 x the average annual income).
I can’t remember who posted it the other day about your property tending to keep it’s value in the long run in places near the subway in downtown. While I tend to agree because they’re not building any more detached homes, I also believe it’s for a certain lifestyle at a certain point in your life. Right now we live in such an area and it’s the last place that we want to be since we had our child.
Both of us grew up in typical bungalows in the outskirts of the GTA and our fondest memories of childhood are of being outside with our friends playing street hockey or riding our bikes around the block and catching crayfish in the local creek.
It’s really difficult to do that when you’re living in an urban area (unless you’ve got the money to live in say High Park). But most don’t. So you then start to weigh the pros and cons of commuting to have a different lifestyle outside of the city. It doesn’t become so much about the cost of living (i.e. saving on commuting costs) vs the quality of living based on your needs at that time in your life.
Being downtown was great when I was single, in my 20’s, could walk to work, go out with my friends etc. But not so much anymore. So while a boring house in a smaller community may seem like a horrible place to live to some, to us it sounds pretty good right now. There’s nothing wrong with with being an urban parent and raising your kids in the City if that’s what you enjoy and like to do.
I just wanted to present a side to say that it’s not everyone’s dream to live here and gladly pass the torch or condo onto the next 20 something that does.
IRT #56 Vancouver_Renter
Or…
4. Take advantage of the same 5% down policy your kid’s preschool teacher did and live happily with your wife and kid in a nice house you own.
Garth is it hard to go bankrupt? Getting sick of waiting for the government of canada to allow the free markets to work.Planing to buy with the intention of going bankrupt when (odds are) housing market crashes. I also have lots of avalible credit card debt which I plan to max out before going bankrupt. Told my wife the house will be in my name only and expenses would only be paid for by me while she banks a downpayment incase market crashes and I go bankrupt. I know many people who are doing this and trying to figure out if this is possible. I don’t care to go bankrupt I will go so far in debt before I do. The goverment wants to punish savers and producers while rewarding the lazy and broke debters? Is it possible and whats the best way to do so
We’re being F’d
Guess what fellow Hosers, we’re stuck with the bill! The USA thanks you for paying up, day after day, in every way.
You have a neighbour that is able to counterfeit money, year after year. Trillion after trillion. This year he is budgeting 1.6 trillion that he can’t pay for. He buys food and electricity and gasoline at prices lower than you but his spending is starting to be noticed. Consequently, the prices for you of these items are going up.
His student loans will be forgiven, paid for with counterfeit money. His relatives are living in foreclosed homes, paying no rent or mortgage. He gives counterfeit money to his businesses if they hire more of the family. How can your business compete? He gets lower pricing on his cars and everything that he buys. His counterfeit dollars buy depleting oil and gas at your energy outlets.
His mountain of money are a magnet drawing away your best doctors and nurses. He is able to get a heart operation the next day while your daughter waits in line for five weeks for a cancer detecting biopsy and then stands in line for months for the operation. You want shiny Olympics? That will be 90 million for use of the ski hill. Pay up, or else.
You just can’t compete with that mountain of paper dollars. Therefore, day after day, you pay. You’ve been F’d.
I believe that this (housing debt) is more of a way to indebt the > boomers so they can serve the boomer class.
But Canadians should also be advised that the Finance Department has power over the BoC. Meaning that Finance can force BoC to flick the rate switch off and on. Finance has the final call.
Don’t let the optics fool you into thinking this is a BoC caused bubble anymore. All the power lies with the Finance Department and when you see the laws that are governing mortgage rules being changed what seems to be on a yearly basis. It should give a clear indication that its not for the best interest of Canadians.
Just like home onwership for the majority wasn’t in the best interest for the USA.
If the mortgage rules had have been left alone and not continually tinkered with in order to cury favor with the voting public, playing off peoples economic ignorance and emotions of greed, we’d still have affordable housing, and we’d have substainstily less consumer debt. We also wouldn’t be pulling demand from the next five years into today.
Canadians should also, not confuse their own financial successes with that of the Canadian banks.
Run the leverage numbers on the Canadian consumer versus the Canadian banks and our(the Canadian consumer) balance sheets look very much like those of the American banks.
So remember where to lay blame when the house of cards comes falling down and we have to start paying more interest to service that debt.
I believe that this (housing debt) is more of a way to indebt the > boomers so they can serve the boomer class.
Sheettt, where is my editor, sorry bout that > sign, instead of the < sign as in Gen X and below…
Peace
Sorry, this is off topic but I just wanted to add a little to the health care debate. Have a look at this chart by National Geographic:
http://blogs.ngm.com/.a/6a00e0098226918833012876a6070f970c-800wi
I am glad you elaborated on the Australia situation. It really is leading indicator of things to come in Canada.
How certain are you the down payment rules will change? Insider information?
Flaherty made some comment yesterday-ish about being “conservative” as far as withdrawing stimulus too soon. Interesting use of the word coming from a Conservative.
#10 Vancouver Rocks on 02.02.10 at 9:47 pm
Ah yes, the jester’s apprentice! and I suppose Avatar is the greatest movie of all time as well?
Garth,
Any detail in Calgary? Date, time, place, who to contact for register?
March 31. Details soon. — Garth
Garth, do you think Mark Carnage raise rates in June? He’s damned either way, isn’t he?
#62 McSteve on 02.03.10 at 6:23 am
Let’s also remember that “F” burned through $13 Billion in surplus dollars BEFORE the recession started.
He can also take credit for the 0/40 mortgage. My main concern with “F” isn’t that he is an ideologue or a Harper crony; I don’t think he knows what he is doing, really and truly.
……………….
I think both he and Harper know what they’re doing. F was in the Harris govt. and H has always been out to destroy what he considers our second rate socialist country. They’d like nothing better than to destroy the economy to further their goals.
First Prorogue, then Eviscerate
Harper’s agenda has a simple goal: destroy the Canadian social safety net.
http://thetyee.ca/Opinion/2010/01/11/DobinProrogue/
I can’t believe that so many people are unaware of what Tom Flanagan has been gushing over for the last several years. Step by tiny step. It’s all part of the plan.
Thankfully, the RE market in Edmonton is all good according to this post:
“New Edmonton-area real estate listings double in January
EDMONTON — Just as Edmonton-area home sales slowed from December’s pace and overall prices dropped, the number of new listings doubled in January as home sellers returned to the market.
There were 2,199 residential listings added during January, up from 1,118 new listings in December, according to figures released Tuesday by the Realtors Association of Edmonton. ”
http://www.edmontonjournal.com/business/Edmonton+area+real+estate+listings+double+January/2514331/story.html
With spin skills like these, it’s unsurprising that the RE (and banking) cartels succeeded in convincing our government that all is rosy in Canada.
What’s next? Home buyers cash credits, a la U.S.?
Vancouver Renter’s engaging story, with brief commentary, archived at VREAA:
http://wp.me/pcq1o-sg
Thanks.
Garth et al:
You have your bunker. The rest of us are on our own, when the SHTF. A lot of people are not prepared. I thought the information was quite useful for preparation.
Here is the video (you tube) on how to prepare a 72 hour emergency kit. Matt Stein narrates.
http://www.youtube.com/watch?v=DY99Zb_jNsY
Today’s home buyers are not thinking beyond the mortgage payments. I’m concerned we will see a generation of people who wont be able to pay for the monthly basic costs of providing for their families or the investment required for retirement. This will have serious consequences.
#56 Vancouver_Renter
Hint: they don’t care.
Garth, you are usually bang on with your facts, but not today…………….
The survey you quote by Demographia that made the rounds last week surveyed only 6 countries in the world, not really a “world” survey.
Vancouver’s 9.3 income to home price ratio is high, but there are dozens of cities in Europe and Asia that are much higher. Zurich, Oslo, London, Moscow, Chennai, Shanghai, Beijing, Athens, Belgrade, Bucharest and the polish town of Gdynia, to name just a few.
You confuse unaffordable with expensive. We had this discussion days ago. — Garth
Oops, I meant house price to income ratio. Sorry.
#56 Vancouver_Renter,
Excellent post. Thank you. Best one on this blog in a long time – at least for us Vancouverites.
It matters not what F does or doesn’t do now. His actions, or lack thereof, can only shorten or extend the bubble a matter of months. Drop the hammer and it’s over in March; don’t drop the hammer and it’s over in July. The few stragglers who want in but aren’t yet will make the leap before July.
Someone should do a survey to see if the 5/35 year folks of late are the same ones who bought Nortel and Bre-X at the top. I’m willing to bet so.
Nonplused
On china’s usa debt . China being usa’s banker this is true .. this brings to mind an old analogy . The numbers are much higher now but the premise is still valid .
I f one owes the bank 100,000 dollars and can’t pay them back you are in allot of trouble . If one owes the bank a million dollars and can’t pay them back then the bank is in allot of trouble. imho Obama has heard this before . China can whine all they want in end they will be running for the nearest waste paper basket and Obama can poke them in the eye all he wants . If china crashes the us dollar they will be the biggest bag holders in history .
@Alpha_Bear
What I find terrifying is the man in charge of the largest economy in the world needs a mortgage to buy a house.
#57 oneomorething
The gains are not on paper until sold.
I know house rich parents who have sent their children to prestigious professional schools (medicine, dentistry, law, business etc) that command obscene tuition fees. They took out a second mortgage for their kids. If house prices didn’t rise, they would have never had access to this much money.
Once the kids are done school, they will be earning big bucks to pay back the parents. Parents would not have been able to do this if it werent for the paper gain on their RE holdings. Welcome to the 21st century where the house rich prosper and the house poor, well…
#75 Junius
Does not matter. The sad fact is the top 75% of earners is where all the disposable income comes from to drive the consumer based part of our economy…not the bottom 25%. So as long as the top 75% are taken care of, the bottom 25% really don’t (unfortunately) matter as they would have little disposable income.
Somebody isn’t telling the truth…
http://ca.news.finance.yahoo.com/s/03022010/2/biz-finance-higher-taxes-need-eliminate-deficit-former-finance-officials.html
Garth, does the fact they won’t increase the min down to 10% change your projections on how slowly things will melt down?
The raise to 10% would have been a nice dampener on the drop.
#29 Joseph — “. . . If double digit inflation lies ahead of us in 3 to 5 years . . .” / #33 Coho — “. . . he’s been warned it’s coming, and soon.” / “Or there will be an election. — Garth”
Chances are this is why Harper prorogued Parliament for a second time, in order to rally the troops, get a majority (only needs a few seats plus the senate is wrapped up), then Joseph’s and Coho’s remarks come into play.
Obviously, Harper & Co. stand to gain enormously from this.
#56 Vancouver_Renter
I’d like to add that subsidizing housing causes a huge distortion in the allocation of credit away from entrepreneurial activities that create real wealth for Canadians and toward house price inflation.
If the Conservatives are serious about improving the productivity of Canadians, a great way to start would be to eliminate the CMHC and provide loan insurance to small businesses instead.
Sure, house prices would drop and many Canadians would lose their shirts sooner rather than later. But perhaps if some of those Canadians saw the opportunity to start a business and to do something creative and productive rather than sanding hardwood floors on the weekend, we’d end up with a wealthier and happier society in the long run.
#96 David in Calgary on 02.03.10 at 11:00 am
“….it’s mainly people from the east moving out to BC that cause the upward prices.”
———————————————————
You’re wrong (according to stats for the year 2007). In fact, interprovincial migration was not a big component of growth for Vancouver (it was for Edmonton and Calgary, though). See the following document, pages 15 and 16:
http://www.statcan.gc.ca/pub/91-214-x/91-214-x2007000-eng.pdf
Some other very interesting stats: 99,000 international immigrants moved to Toronto whereas 33,400 moved to Vancouver (this will be an interesting stat for N. jr. to steam over). Also, growth in the population of BC occurred primarily from international migration (8.7 per thousand), NOT interprovincial migration (2.4 per thousand) (see pg. 114).
@Debtfree & the debt to China: that’s the obvious and reassuring asnwer that’s always trotted out. I thing it is too complacent. As we’ve seen from the squid/AIG transactions, clever financiers have all sorts of ways of profiting from debts gone wrong. In any market if you have the hammer then you have control. You can structure counter measures against expected movements especially when you control the timing, amount and direction of the move. They’ve been given a very large hammer.
AVERAGE RESIDENTIAL MORTGAGE LENDING RATE – 5 YEAR*in percent
1981 jan to dec
15.17 15.27 15.75 16.45 17.82 18.55 18.90 21.30 21.46 20.54 18.80 17.79
CHARTERED BANK ADMINISTERED INTEREST RATES – CONVENTIONAL MORTGAGE 5 YEAR*
1981 jan to dec
15.50 15.50 16.00 17.00 18.50 18.75 20.00 21.75 21.75 20.25 17.75 17.75
jan
1951- 5%
1957 6.70%
1960 -7%
1968 -8%
1970- 10%
The wiping out of the middle class is not the result of poor planning…..it is the plan. I am thoroughly convinced the inevitable financial turmoil has been engineered and will be used to usher in radical changes. When people are pushed to the end of their financial rope, they will be more willing to give up freedoms for security. We can look forward to increased social stratification and increased centralization of control as this mess unwinds. If you think that Bernanke/Geithner/Paulson/ Flaherty/Carney etc are all stupid, you have been deceived. They know exactly what they are doing.
Bubbles burst when the pool of greater fools runs out, and not before.
#56 Vancouver Renter
Hold out man, renting ain’t so bad especially when you see your landlord shelling out thousand on upkeep.
Alternatively, have you looked into transferring all you assets to your wife and kids.
Then you personally buy with 5% down. Usually banks want it to be a matrimonial house – ie both names on the mortgage but in this climate you should be able to get a mortgage in just your name. So if RE continue to go up your’re at least in the market.
If things take a dive then you simply default and go into personal bankruptcy. Your assest are in your wife and kids names and beyond the creditors reach. This will be the new morality of the next decade.
Intrawest trying to get 90 million from CDN Govt
http://www.nypost.com/p/news/business/ski_venue_cold_cash_CI7Dzm00ESILjSYEvdc0YN
Intrawest trying to fight off foreclosure. Another pre-olympic bomb drops… Maybe these people can get a job at Vancouver City Council, the folks who brought is into massive debt due to their inept handling of Olympic Village.
All of a sudden, living in a third world country doesn’t seem so bad after all.
Mr. Harper in Chile promoting our social system
17 July 2007
Santiago, Chile
…”We believe in a Canada that must work for all Canadians.
Our country is safe, civil, embracing of regional and cultural diversity, and at peace with itself.
And our shared success and programs of fiscal transfers have enabled us to provide a strong system of education at all levels, a system of universal public health insurance and a pension plan that is fully funded.
These are part of a model designed to ensure that the life of every Canadian is one of opportunity. They are cornerstones of our development, shared prosperity and social cohesion.
As I often say: we are building a Canada where what really matters is not who you know or where you’re from, but rather what you have done and where you are going….”
http://www.pm.gc.ca/eng/media.asp?id=1759
The cats at play.
http://www.foxbusiness.com/story/markets/industries/finance/revive-private-mbs-market-think-big–jumbos/
#135 Jake on 02.03.10 at 3:04 pm
The wiping out of the middle class is not the result of poor planning…..it is the plan. I am thoroughly convinced the inevitable financial turmoil has been engineered and will be used to usher in radical changes. When people are pushed to the end of their financial rope, they will be more willing to give up freedoms for security. We can look forward to increased social stratification and increased centralization of control as this mess unwinds. If you think that Bernanke/Geithner/Paulson/ Flaherty/Carney etc are all stupid, you have been deceived. They know exactly what they are doing.
*******************************************
Other then Paulson and Carney –
Yes–i think the others don’t have a clue–especially–
Flaherity–
Do you actually believe–HE–could be “possibly” be involved in a conspiracy?
Geezzuzzz–
But–i do agree with you,about the coming–
total government control of “dumbed down society’s” Which Canada and the US have both become–
this is a good insight into how and why–
http://www.deliberatedumbingdown.com/
*********************************************
Someone was wondering what a trillion dollars looks like
http://www.globalresearch.ca/index.php?context=va&aid=12754
Ok Garth….Since you keep predicting % rates will inevitably rise……. please explain how your home province of 12 million citizens can expect to compete on the world stage selling Ontario manufactured goods with a higher and uncompetitive Canadian Loonie?
Nostradamus jr.
#127 TheTruth,
What does that have to do with anything?
The top 75% represent about 90% of the people eligible for a tax break on mortage payments. The top 5-10% in this economy will be fine but everyone below that is going to see their incomes flat or drop and taxes rise. You still haven’t responded to the main point.
To repeat, creating a tax write-off for mortgages would only provide a one time benefit to homeowners but it would not provide a sustainable solution to the affordability problem. It would put some more money in the hands of homeowners but raise the deficit further.
Only a better economy can improve affordabity over the long run.
iggy coming up on fox north can you believe it ??? I wonder if he’ll tell the truth.
I concur.
The US government has amassed $1.8 trillion of new indebtedness during the last 15 months. Astonishingly, each and every one of the last 15 months produced a deficit, including the tax-collection month of April, which had produced a surplus for 26 straight years.
So how much is $1.8 trillion, anyway?
Well, let’s see… It’s about 13% of US GDP. $1.8 trillion is also about double what the IRS collected from all individual taxpayers last year. In other words, if every American taxpayer had simply agreed to double his or her tax payments last year, the nation could have avoided this whole deficit mess.
For one final bit of perspective, $1.8 trillion is more than double the total debt America had accumulated during its first 200 years as a nation. America’s debt load did not crack the trillion-dollar level until after 1980. These days, we rack up 200 years worth of debt every six months or so.
>Joel Bowman from DailyReckoning.com
really bad timing for me. i have substantial savings and in my late 20s. but just can not bring myself to buy a house! fixed mortgage rate is great and i can pay off in 5 or 10 yr. but principal would not be safe. same goes for stocks and even bonds (unless held to maturity). no sector seems safe. guess can allocate equally to all. hard choices.
56
One of the best posts I’ve read here. You’ve articulated the situation many of us with families are facing. While I agree with Garth that sometimes we attach too many emotions with the thought of owning our own house, I also believe there is a feeling of comfort one has knowing you are in your own home. Unfortunately through financial irresponsibility by our elected leaders, we who have contributed our whole life to society are excluded from the opportunity to purchase a home in a way that is sensible. I struggle everyday as this consumes my thoughts endlessly.
#56 Vancouver_Renter: Great insight on the situation in Vancouver, it’s easy to buy today – and if you don’t know what you’re doing, you’re bound to get into some serious trouble tomorrow.
Nobody wants to be the bad guy, neither Flaherty or Harper. But we don’t need a temporary fix, which would make things look good for some time, we need to work on a long-term solution, anyone who’s not insane has to agree with that. Look at the news and prognosis from US, for example this one: http://www.cbsnews.com/stories/2010/02/02/eveningnews/main6167610.shtml – Are they just going to let this happen here?
#56 Vancouver_Renter
I once had a job where I worked hard, understood the work better than most, was a great team player, went above and beyond. But there was a corporate psychopath in the office who was malicious and sycophantic with the boss, took up every activity the boss did (golfing, guitar), and slowly through outright lies and manipulation ruined my (and others’) reputations and careers in that office – while having little to no skills other than schmoozing. Then, he had the nerve to backstab THAT manager, and take his job as he had begun clandestinely communicating in the same way to head office.
Lesson learned.
# 13 Vancouver Rocks
Ahh, the hands of time. The older folks know, and for those of us who have been listening, well we know too.
Yes,…we will sit on the sidelines, for we have long lives to live yet. For me, it’s a move up to bigger, for others it’s first time. We will be rewarded in the end. we will also see unpresidented missery around us!
Over the past 30ys mortgage rates have cycled between 5% and 22% from powers far beyond the control of goverments, just like wars and global warming. What are the chances that those rates will reach 6-10% in say 10-15 yrs. Statistics would say “very high”.
$400000 loan X 10% = $40,000.00 per year interest, so you better start paying off those 35 yr ams people of Van and TO! Because we will be back there at some point down the road.
This is why Flatulence will not raise the minimum downpayment:
“If you have a $50,000 deposit and you can get a 95 per cent loan, you are able to bid on a property worth $1 million,” said Steve Keen, associate professor of economics at the University of Western Sydney. “But if the LVR is cut to 90 per cent, your $50,000 deposit is only equivalent to 10 per cent deposit on a $500,000 property, so the amount you can spend is halved.”
Australia is the most expensive housing market in the world. They have given first time home buyers a $8,000 tax credit, and continue to inflate their housing market. Both the Canadian and Australian economies are in fantasy land and are only being propped up by a housing market not based in reality. Therefore the governments of these two countries are only extending the timeline of the eventual collapse. It will be timed with a %30-%50 devaluation in the U.S dollar and another engineerd war in the middle east to divert the attention of the voters away from the imploding economy. This will begin to unfold over the course of this year and into 2011. The scarey part is, all the governments are in on this and already know where the path leads . Oil priced in U.S dollar will therefor double along with gold on the low end. You can take this to the bank.
The Bubble….awh THE BUBBLE, right now the best medicine is not a housing price correction, but kicking the can down the road works just fine. Those hard working and over paid real estate industry lobbyists should not be denied no matter how much damage they will do to the REAL ECONOMY.
#56- Great Post! I feel your frustration. Acting responsibly has certainly not paid off in the last 8 years……the tides will turn though.
24 years ?
Update (links added) 23:30 Bern, Switzerland (GenevaLunch) – The Swiss government Wednesday morning 3 February took the unusual step of freezing funds in a bank account once held by Haiti’s former dictator, Jean-Claude Duvalier, based on a special cases clause in the Swiss constitution. At the same time the Swiss supreme court published its ruling on the frozen assets, saying that they cannot be returned to the Haitian people as mandated by the Swiss Office of Justice in 2009. The court decision has prompted the Swiss Federal Council to freeze the funds long enough to pass a law that will help it avoid releasing the assets “for the benefit of the Duvalier clan, which the Federal Criminal Court deems to be a criminal organization.”
A new law would allow the Swiss parliament input on how to best return the money to Haiti.
The ruling Federal Council is asking the Foreign Affairs Department to “complete by the end of the month its work on drafting a federal law that would ultimately allow such assets to be confiscated, and to submit the draft law for consultation.” A spokesperson for the Federal Foreign Affairs Office told GenevaLunch that the law is likely to be passed in 2010. It will cover similar situations of confiscated assets, several of which have come up in recent years.
Switzerland is the only country in the past 20 years to have returned stolen “potentates” funds to the countries previously ruled by the dictators: more than CHF1.6 billion has been returned to Peru, the Philippines and Nigeria among others.
The Duvalier family has been fighting to obtain access to $5.7 million sitting in Swiss bank accounts since they were frozen in 1986, when the Haitian government made a first request for assistance to obtain what it said were stolen funds. Jean-Claude Duvalier, popularly known as Baby Doc, ruled Haiti starting in 1971, when at age 19 he became the world’s then-youngest ruler. His father, known as Papa Doc, had ruled it for the previous 13 year.
…Jean-Claude Duvalier and his extended family fled the country with the help of the US and France as lynch-mobs roamed the streets of Port-au-Prince, Haiti’s capital.
He was taken in by the French government and became the unwelcome guest of the Hotel de l’Abbaye in Talloires, near Annecy, for several weeks in early 1986, hiding inside the chateau while world media held a siege outside, hoping to photograph him and his glamorous wife Michèle. A political circus ensued, with Duvalier attempting at one point to sue France for holding him hostage at the hotel.
His wife divorced him in 1993, reportedly taking much of his wealth in the process. France refused to grant him political asylum, and he has been living relatively quietly as a private citizen. An announcement that he intended to run for president of Haiti in 2006 met with a cold reception in the country, and he never became an official candidate.
Haiti’s requests for judicial assistance to have the money returned to the Haitian government lay dormant, despite efforts by Switzerland to goad the politically unstable country into action on the accounts before the statute of limitations ran out.
The Swiss Office of Justice ruled in February 2009 that the money must be returned to the Haitian people, a decision the lawyers for the Duvalier family appealed. The Justice Office’s decision was upheld by the Swiss Federal Criminal Court in August 2009.
This decision was overturned by the Swiss Supreme Court 12 January 2010, but the news was announced only Wednesday.
The court says the money cannot be frozen, based on Swiss criminal law, because the statute of limitations has run out. It left open, however, the possibility that the assets could be frozen, based on an article in the Swiss constitution that allows extraordinary measures to be taken, for a fixed period of time, when the country’s political will in a matter is clear and the normal course of the law and politics run counter to the political will. In the case of Haiti, the Swiss government has made it clear over the past 24 years that it does not believe the Duvaliers should touch the assets, and that they should be returned to the Haitian people.
Clear that the Duvalier family “obtained the funds illegally”: Swiss court decision carries weight
The federal government’s announcement of the news Wednesday notes that “the Federal Supreme Court did not call into question the judgement of the Federal Criminal Court concerning the criminal origin of the assets. In view of this situation, the Federal Council has been looking for a way to avoid allowing the assets to return to the Duvalier family who acquired them by illicit means. In pursuing its policy to avoid allowing the Swiss financial centre to become a haven for illicitly acquired assets, the Federal Council has decided to continue the freeze on the Duvalier assets on the basis of the Federal Constitution. Moreover, it considers it necessary to respond to the issue of assets of politically exposed persons by means of a specific law.”
http://genevalunch.com/blog/2010/02/03/bern-freezes-haitis-criminal-clan-money/
Case Schiller predicts prices in the US will be 1970’s levels. How can Canada keep these price levels if the US will collapse to the 1970’s? Magic?
If the elected fool cares not than we have the right to change said fool or “clowns” by voting in the next best choice even if we could not stomach voting for the other fool(s) or clowns.
They might do better.
Hope an election is called soon , we are still in time to soften the blow somewhat, and put a permanant end to this irresponsable government
Iggy said that it is more important to create a national daycare program than to balance the budget. He also mentioned that solving (perceived) social ‘inequalities’ should come BEFORE balancing the books.
Very responsible. Let’s give this guy a chance.
#56– ouch, I feel your pain man, we’re on the same train. (Didn’t drink the kool-aid, didn’t leap with the lemmings.) Unfortunately it seems this situation is the direct result of ta government policy of debasing currency to reduce the impending national debt. Canadians are (through our social programs) the greatest “liability” on the ledger so an easy way to reduce that cost might be to inflate circulating currency. By encouraging our chartered banks and mortgage lenders to “forge” money through fractional lending, the central bank has ballooned the money supply. Flush with play money, the kids have rushed out and flooded the market; we know the rest. Is this wise stewardship of the nation’s fortunes? Will this ensure a solid and stable middle class? Hmmm..
I wonder if a class action lawsuit ,against this travelling clown and mistrel show ,would bring the head jesters to
heel .
Obviously these morons have no understanding of markets or debt ratios .
The world is collapsing around them and they continue to whistle a happy tune .
Real people are about to be shattered,torn and twisted on a steel spike .The may never recover from this
catastrophe .If I see one more picture of that griinning gargoyle,Flaherty , I will puke .
Thanks Ontario for reelecting this misfit .
And the idiots keep grinning like all is well in Wonderland
Love it Garth….I think that’s your best piece yet…no wonder people are turning away from the MSM. Besides, I open the paper now and see a few condensed articles surrounded by ads. The blogosphere rocks!
Vultures LOVE deficiency judgements
Deficiency judgments on short sales and deeds-in-lieu So, if you are pursuing a short sale, be sure your attorney asks the bank to release you from any further obligation.
He expects many will be filed over the next few years, based on the fact that banks have sold many of these accounts to collection agencies and other third parties, at discount.
In Florida, the bank can wait up to five years to file. Once the court grants a judgment, the lender has 20 years there to collect, with interest.
It doesn’t have to be a large amount of debt for a lender or collection agency to come after borrowers. Richard Varno and his wife short sold their Nashville home back in 2004 after he lost his job.
It wasn’t until 2008, when the second lien holder asked him for $25,000, that he realized he still was liable.
Releasing title does not necessarily end the debt. It’s complicated because of variations in state law, but, generally, a mortgage has two parts: a pledge of collateral, represented by the home, and a promise to pay off the loan.
Lenders may release property liens in order to facilitate short sales without releasing borrowers from their obligations to pay under the promissory notes. The secured debt can convert to an unsecured one after the sale.
Zaretsky had one client who was so relieved to have arranged a short sale that he signed every paper his real estate agent shoved at him, even a confession that clearly stated he still owed the debt.
“He had no idea what he was doing,” said Zaretsky. “All the lender had to do was go to court to convert the confession into a deficiency judgment.”
Lenders are also very inconsistent. One of Zaretsky’s short-sale clients was ready, willing and able to pay, but the bank did not even ask; another lender always reserves the right to pursue the deficiency.
Strategic defaults
Sometimes lenders go after borrowers walking away from their homes if they have other assets, according to Florida real estate attorney Larry Tolchinsky.
“Banks are pulling credit reports to see if it’s a strategic default,” he said. “If you’re behind on all your other payments, you’re okay. But if you’re not, they’ll come after you.”
If borrowers have any doubts about their risks, they should seek legal advice. Or, at least, call non-profit organizations such as NeighborWorks for advice. According to Doug Robinson, a NeighborWorks spokesman, its counselors always try to negotiate away deficiencies when they facilitate short sales or deeds-in-lieu.
“We don’t favor any short-sale contracts that leave any deficiency that can be pursued,” he said.
Robinson himself knows what can happen. He paid off a deficiency after his own New Jersey house went through foreclosure 11 years ago.
http://money.cnn.com/2010/02/03/real_estate/foreclosure_deficiency_judgement/index.htm?hpt=Sbin
Vulture #87
Right On. I read that book 10 years ago and it changed my way of thinking more than anything else in my lifetime. Ask yourself people, why is it that money, one of the most important things in your life, is such a mystery. How is it that no one learns about it in school or you never see a documentary about it on the mainline media. The bank of Canada is not owned by Canada, but by private shareholders. The same shareholders who own the Fed, Bank of England, France etc. If you truely want to take control of your finances, then at the very least, find out how the system works.
Hey vancouver rocks…it looks like they are painting the tape to me.
and ,of course, i wouldnt pay half of what is being payed for a genuine piece of crap built to the unbelievably poor standards of construction that pass for a ‘house’ around these parts.
#90 Junius Can someone please tell me where the opposition is on these issues? What are Iggy and Jack doing right now?
missing in action
A month from tomorrow Jim Flaherty will cave.
we are close to an inflection point
News Item: March 3, 2010 “Stephen Harper dissolves Parliament and calls an election. He announces that his government intends to restrict mortgages to 10/30 and asks Canadians to elect a Conservative majority that will protect the economy.”
My wife graduates soon and we have been thinking about a move out east (currently renting in Calgary). Just checking out some real estate in Fredericton and found this kinda amusing from a realtors blog. Basically she returned to her native Australia–Melbourne last month. http://www.katemammen.blogspot.com/
“Of course I paid attention to the real estate. Things are certainly nothing like they are here! Imagine a half a million dollars for a small apartment in the city or a townhouse for $800,000. In some of the really sought after neighbourhoods, a small home is easily over a million dollars. Phew! The upside of that is that Australia seemed to have escaped the recession that has gripped North America. Things appeared to be booming.”
Junius #76 replied, “What do you think happens to Real Estate prices in that event? Clearly they come down. What do you think happens when mortgages are re-set from 2.5% to 6, 8 or 10%. Negative equity. ”
That’s what I once thought but when you look at the last time we had 20 percent inflation, real estate prices rose too, even with 15 percent mortgage rates. Secondly, why did Warren Buffett dump all of his cash recently ($20 billion all in real assets) if he thought cash was king. Thirdly, interest rates will only rise to fight inflation if democratic governments have the political will to do so. If unemployment stays high, they will likely not raise rates quite as high as they need to be in order to get re-elected. This is not as straightforward as you might believe.
Alan Greenspan must be Flaherty\’s role model. that\’s pretty sad. Politicians in Ottawa should read history
people have asked \’who do these guys work for\’?
answer- the Illuminati, the same folks who sent your jobs to Mechindia, the same folks, via their department of Mayhem aka Mossad, who did a controlled demolition of the twin towers
#165 goldenfox
I have also ready “The Creature From Jeckyll Island”. A great book.
One correction though…The Bank of Canada, unlike the US FED, is a crown corporation. But even though our central bank is owned by the “people” we still comply with regulations from the Bank of International Settlements.
http://www.bankofcanada.ca/en/faq/faq_bank_roles.html
120 Nelly – please refer to my link at 51. I am trying to verify further.
Some cities seem to jive well with the demographia data. London does not.
Tokyo still over 11. Have read that prices have dropped by two-thirds since their bubble popped. Gives us a factor of over 30 at the peak. Many cities in developing world, as well as second world (East europe) are well into double digits. Also some in West Europe (Paris,
Athens) and South America (Bogota). Perhaps comparing apples and oranges in many cases due to larger percentage of poor people in many of these places – they dont own RE and skews the average income down.
But it is a good reminder to all how much of the world lives and how lucky we are to live in a “property
owning democracy”
56 Vancouver renter – good to hear from you. As I recall you cashed out completely from RE a few years back. You had two places I believe. Hindsight now, but did you ever consider keeping one or getting another one at that time to reduce the exposure but keep a foot in the door. Mom once told me “Don’t speculate with the
family home – up or down”
#85 Movie Goer…all your require dependant on your age is the initial investment into a property.
This range is from $50K – $75K CAD only!
Also check out the following link to the THE EXPAT KL
http://www.expatkl.com which has an online guide and forum to discuss everything.
#126 The Truth…so what’s your point? This is likely a handful scenario not even worth mentioning!
My sidelines position ensures my children dont feel the burden of taking care of parents who caused the whole problem we are facing today.
I believe your so-called friends will at the end of this reset fall below the line and their kids not so forgiving once the blame game begins!
#143 nostradamus jr.
Toronto is going to host the summer Olympics…
#154 Big L,
That’s what I’m counting on! Mid 2010 to Q3 USD index around 0.85, GOLD down to 900! Repeat of Nov 08!
I may grab some gold but it’s SILVER I like during the upcoming currency crisis!
#73 Gord In Vancouver on 02.03.10 at 9:16 am
Gord
Excellent detective work on finding the Maclean’s article on “Awash in A Sea of Debt”! I found the article thought provoking and a harbinger of frightening economic events awaiting Canada.
Garth
It is interesting that Maclean’s did not even bother to talk to you about key points in the article that has been discussed in detail since the publication of Greater Fool and After the Crash.
This definitely proves that the MSM (after doing their research) can’t call you chicken little anymore. There is solid and concrete economic data that backs up your thesis of a housing bubble and the growth of personal& mortgage debt in Canada.
When this housing bubble and debt bomb explodes some time in 2011-12 you will as popular as Peter Schiff when he published “Crash Proof” in 2002. So get ready for the media spotlight soon!
This would be an excellent blog topic for you to throw at the blog dogs.