When asked by a reporter last week if Canada has a housing bubble (real estate prices increased by 20 times inflation last year), the official CMHC response was: “it is not clear that this perspective is supported by the facts.”
Welcome to Canada. Enjoy the ride. Bags are in the seat pocket in front of you.
Facts, of course, are elusive little buggers. You think you have one by the wing or the foot, and then they wiggle away and disappear under a baseboard. But I’d imagine the feds could look at the recent Demographia survey showing Vancouver, Victoria and Toronto on the list as being among the most unaffordable places to live. Or the sidewalk sleepovers of speculators in front of Yaletown or Bloor Street condo sales offices. Or the 87% jump in Toronto sales last month. Or Vancouver’s average $950,000 single family home. Or a national house price surge of 19% in a year when wages went up zero.
Or this blogger in Victoria, who writes me:
I bought a new condo, 2000 sq ft, facing the ocean on ocean frontage in 2007 for $1,200,000 A rental agency has advised me not to take short term tenants since possible damages to the condo may deflate the value.
I partly financed by taking a conventional mortgage on my present home property for $875,000 prime minus .69%. Current rate is 1.56%. My home property is appraised at $1,700,000 (2007).(Prime ocean front). I rejected an offer of $1,600,000 in 2008. The market is firming up again in the Victoria area. We intend to move to the condo when the house is sold. My question: I would love to deduct the mortgage interest on the condo! How can this be done?
Just to put this in Dick-and-Jim terms for the feds: Guy with inflated property borrows 50% of its value to buy a spec property with 72% financing. He is able to get a mortgage at 1.56%, which is the current rate of inflation, which also means the money is free.
Guy is a tool. His action serves only to pump up real estate values further, thanks to absurd interest rates, orchestrated by the Bank of Canada. He now wants to deduct the interest on his free mortgage money from his taxable income, which means other taxpayers (who don’t have $2.7 million in real estate) would pay half his costs for him.
And you think we have not created a casino mentality?
Interestingly enough, even the commercial bankers are now asking Ottawa to slam the on the brakes. Covering their collective posteriors, the lenders have made it known they told F three months ago that mortgage lending rules need to be tightened, if Canada is to avoid the kind of post-bubble carnage that ate the US middle class.
So, they want CMHC to be forced into raising the minimum down payment eligible for insurance from 5% to 10% – and perhaps even trimming back on the max amortization, to 30 years from the current thirty-five. The impact of this would be major, knocking an army of first-time buyers out of the market.
Of course, it would also be the right thing to do. After all, this housing inferno needs constant fuel, and that’s been provided by buyers who have no money – but who do have the CMHC, which by insuring 95% financing guarantees they can borrow as cheaply as the tool in Victoria.
Having said that, it is more than convenient for the commercial mortgage lenders to lay this all on the feds. As this blog has liberally reported, certain of our banks still provide liar loans, while others give cash kickbacks to new equityless borrowers. All of them court mortgage business, cater to first-timers and played a decent role in the housing bubble run-up by approving loans based on postal codes.
I’d think it would be a highly responsible move if they cleaned up their own acts first, not to mention being in their own naked self-interest. If the real estate market implodes and negative equity seeps north, there will be anguish high above King & Bay.
As for the feds, well, we’ll see what F does. The last I heard, he’d rejected down payment changes, since the hot housing market is masking the utter failure of the stimulus program. Yup, the one that’s put us into a $56 billion hole this year.
Sad.
The housing runup has increased the cost of shelter for all Canadians. The gains made will be, at least in part, illusory. The debts incurred will be legacy. The trip back down, nauseating.
Deduct that.
153 comments ↓
Listings in Greater Vancouver have definitely increased
http://canadabubble.com/charts/452-greater-vancover-latest-weekly-sales-data.html
I have been finding it hard to believe that the housing market at least in the Vancouver/lowermainland has had an increase of 17% over the last yr. I’ve noticed properties sitting for as long as 3 mths, list price reduced twice before they sold. Some signs have just disappeared, expired? Perhaps some sellers have been lucky to find a “greater fool” who was willing to pay list price or more but that doesn’t seem to be the majority. Many think the numbers are being skewed to keep things pumped.
Garth,
It is not clear how this guy has become a tool of the BOC to mask the ineffectiveness of the stimulus when he bought the condo in 2007.
You say that inflation is 1-1.56%. If you agree with this how is the BOC acting outside their mandate?
The stimulus is responsible for a portion of the $56 billion dollar deficit. In hindsight, do you think the entire plan was an utter failure or only certain portions? Was it a good idea to extend unemployment benefits? Which specific infrastructure projects are wasteful? Regarding the other cause of the deficit, would it have been better to raise taxes in 2009 instead?
Your blog just took on a whole new complexion. — Garth
Garth, for those of us who are curious, can you take a run at answering the guys question?
I had a similar situation years ago when I bought the lot I later built my PR on. I was advised by my accountant that the interest could not be deducted as I was not deriving income from the property.
So I guess if he moved to the condo and rented the house
he could do it.
Come’on Garth, you may be able to pull the wool over some of readers here who have never previously taken out a mortgage…but tool aint no dummy.
…This “tool” is still sitting on nearly 50% equity in his primary home plus $325K cash as downpayment on his condo…came from his bank account.
If all the readers were as credit worthy as this “tool” you wouldn’t need this blog site.
…Your prejudice vs Western Canada really shows.
Nostradamus jr.
Jimbo won’t increase the down payment or reduce the amortization because he knows CMHC would become another significant drain on Ottawa if the market did a US style swan dive. Prices must rise or the risk of them falling becomes too great. It’s “extend and pretend” time.
But sooner or later you run out of greater fools no matter what. There are only so many people who can fog a mirror, and the number of them who even have jobs is down.
Plus the builders are back in business! They are still pretty cautions, not going crazy bringing new lots on line but if they can slap up a house they can make money, so new supply remains available.
At least with Bre-X there were salted drill samples, but the market still drove the price at one point to a level which would have been appropriate if all the claimed gold was already out of the ground in bar form sitting in a warehouse. There was no accounting for mining & processing costs, taxes, grade disappointments, delays, unrest, government interference, time value of money, nothing. Did someone really have to “fall” from an army helicopter to put an end to that one? It was probably already done.
Client of mine went to the bank the other day to improve their retirement savings plans and walked away with a BIG FAT mortgage pre-approval. Go figure… completely contrary to what they went there for in the first place!?!?
People, people, people… when will you learn that the banks are NOT your friends.
Amy #1
Try to paint the complete picture if you cite Vancouver sales and listings information….
First of all, an “increase” in listings is really seasonal.
Is it really a surprise that people took their houses off the market in December and then re-listed in January and February. This supposed “bearish” pattern has been the same all during the boom years. Sorry, but this is no “flood” of listings.
Second of all, listings are still extremely low, around 9000 for the REBGV. Just to keep things in perspective, during the last EIGHT boom years, when MOI favoured sellers, listings hovered between 8000 and 12000. We are STILL in very firm sellers territory and MOI is still around 3/3.5.
It looks like someone is grasping at straws…
Oh well, maybe things will change with the March federal budget. Oh sorry, I forgot there will be no catalyst this year with changes to the DP and amortization requirements…
To: Victoria Condo Dweller
If you have the financial wherewithall to have a house and a condo, in Victoria, ..surely you must have a good accountant that you see oh each year around this time? I recommend talking to this professional. That or find some BC granite, line up your noggin and start banging it vigorously against said surface.
Should the granite not pound some sense into you… there is a wonderful mountain top mansion available at Mt. Tremblant for a measely 9.9 Mil. It comes with lots of granite stonework –for those pound sense sessions–and apparently can be had right now for a steal. Call Jennifer McKeown to close the deal! –www.tremblantrealestate.ca–
In all seriousness have you considered the downside to even a moderate 15% correction in the market and what that would do to your situation? How you would carry your obligations? What about a hike in rates..even a couple of points?
If you were solely responsible for covering your obligations I would end here and just wish you luck. Which in any case.. I do wish you luck!
Instead I shake my head in wonder that ultimately this may well come back to CMHC and every single tax payer in Canada. In spades. With whip cream and cerries. Oh and dont forget the apocalyptic BOOM. -there must be an ominous boom-
Now a tiny rant about paying for stuff for a very long long time:
About 110 years ago an arms race started by the european powers had Canadians pay up for ships we would never see but were used once during Jutland in WW1. The War -all moral geopolitical issues aside- was extremely expensive. To cover this expense we invented income tax. We have been paying this ever since. We have paid… and PAID.. and PAID.
Fast forward to the present:
The sheer scale of the CMHC financial burden is almost beyond words. Your purchase is but one of many carefully covered by all of us and dare I say “retranched” and put out into the world as Bonds by our government.
Victoria: you and I and every relation we have.. plus generations not yet born will be paying for this. That is the inescapable truth of hundred of billions loaned. Someone once said: “compound interest is the most powerful force in the universe”
Aint that the truth!
Hunkered Down in Milton
WallStreet Journal article on Canada’s real estate market (with even a quote from Garth to boot!):
http://online.wsj.com/article/SB10001424052748703808904575025100730017666.html
“. . . the sidewalk sleepovers . . . which means other taxpayers would pay half his costs for him. . . you think we have not created a casino mentality? . . . their collective posteriors, the lenders . . . anguish high above King & Bay.”
Barf bags are supplied free of charge (part of the billion dollar bailout, coming from our pockets to line somebody else’s. There — we’ve all lost 30 kg in weight. Do y’all feel better now?!).
I used to work on the tenth floor of King and Bay, but it sure is nice being out of the rat race!
Of course, lenders are arseholes, the back end of the horse preparing to dump all over sheeple. Or is it the other way around?
Suckers who can no longer afford to keep their trophy homes, so dump them back onto the market?
Indeed, it may be illegal to walk away from one’s (former) home, but it’s no different than what GS, JPM. the USFed and plenty of others have perpetrated, behind the illusion of law and closed doors.
No one is above the law, unless the law is an ass.
“Guy is a tool.” — Money is a tool, to be used as needed. Put the two together, and guytool appears!
——
Most know that Hell Froze Over when The Eagles reunited. This is the visual version. Could be why The Goon Squad met in the Arctic a few days ago.
Wazzup with this? Something is happening which we are not supposed to know about. Second para. and comments are interesting: “Most notably are telecoms, banks and energy companies. People who would have insider knowledge if something huge were about to happen.” Also, see if this company is in the Top 50 list.
When did any of us last see the headline “China defaulting loans soar” in the same sentence?
Probably hooks up with the preceding, as the whole mess is now flushing down a toilet.
GS – AIG, but from a new angle.
Debasing currencies.
Oil — A contrarian’s view, but now the real reason behind the Swindle of Copenhagen — to impose a new worldwide carbon tax so the oil companies continue making profits (they were behind this CC barf).
Hi Garth, does the stat on house prices take into account of the fact that most Single Family Houses (SFH) are occupied by more than 1 family? I have noticed this trend in my area. This trend is not confined only to new immigrant families anymore. Many SFHs have 2+ families occupying the main&2nd floor, while the basement is rented out as mortgage helper.
You can easily notice this if you see upward of 10 cars parked outside each house.
#2 April – yes prices in Greater Vancouver are up about 18% according to the Vancouver Real Estate Boards HPI.
But lets remember – to be up 18% you had to be one of the few people to buy during the Jan-April 09 period.
If you bought before or after that you are up much less.
Also the 18% rise bring things back just south of the Vancouver market peak of mid 2008.
Hey all …
To all those that bang on me for wanting to roll back salaries and benefits by 20% of .gov employees because .gov employees do make more than the private sector in equivalent jobs – from 7 to 45% when benefits are included…really!!
I have posted links to research. What do I get in return …BS about me picking on you and saying we work hard and deserve it (and more) …well we all work hard and want more …hell who doesn’t …you want to invalidate my point show me one ‘real’ research paper that shows you are the underprivileged class …just one and I will do my best to shut up. Remember to compare apples to apples.
And I have repeatedly asked for someone to post a link…met all the time, up until now anyway, by silence.
We simply have .gov we cannot afford. Anyone got any other real solutions other than whining.
P.S. – At least my idea should keep jobs and help nicely to make homes cheaper.
Brilliant, Garth, brilliant!
“The impact of this would be major, knocking an army of first-time buyers out of the market.”
Why is this always the line that we are fed? As a first time home buyer I would welcome the return of 25/25 mortgages. All the easy money/mortgage policies have done is screw first time home buyers out of a reasonable price for their first home. Sure it may take a me a bit longer to save a full 25% but the corresponding price adjustment by the markets and the extra 10 years of being mortgage free would be well worth it.
The truth is it’s bad politics for existing home owners (majority of voters) to see the equity in their home decreasing. They need to keep first time home buyers flush with 95% mortgages they can’t afford unless they ammortize them for 35 years so the house of cards doesn’t collapse on their voters and spill over into the economy as it did in the states.
Looking around Vancouver, it would seem we are reaching that same affordability ceiling we did in 2008. No way to lower rates this time, things could get very interesting after the Olympics are over and the March budget is announced.
But Garth, its different here! God stopped making land and Canada is already so overpopulated.
China will never have a hiccup and their affluent Chinese will buy every house in Vancouver because China is the next superpower in waiting and will buy the world very soon and we have a government that would never betray its citizens by keeping interest rates at or near zero just like prudent Japan did for their people for 15 years and Canadians can take on twice the debt we have now because we are so ambitious and creative and there are plenty of young people to keep contributing to the nation by taking on so much more debt than they already have, and we’ve got all the resources the world wants and we’ve got all kinds of government programs and stimulus spending and we can borrow for decades more because we are managed so well and if interest rates ever do go up 10 or 15 years from now, we can introduce 50 year nothing down mortgages just like prudent Spain did.
Its so different here, our economy is recovering quickly and incomes will balloon when we fully recover and Canadians are so wealthy now, its so different here! And we won’t have bankrupcies like other nations because we have recourse loans and banks are so well regulated here and CMHC is doing all they can to make homes more affordable.
And look, the olympics is here now in Vancouver and they’ll all hang around waiting for the snow to come and while they wait, they’ll all buy homes because Vancouver is so great! The fish are going to come back and the trees will grow back and everything will be just fine because its so different here!
So don’t any of you worry your pretty heads for nothing because Flarehty’s got it all under control. Harper is a smart man and he would never lead Canadians into a housing bubble. Its only been 4 years of 40 year nothing downs and 35 year 5% down (depending on the bank you go to, they are doing everything they can to help people afford homes, they are so thoughtful). Everyone is so much richer thanks to Harper, he is so intelligent. Nothing can go wrong now, homes will rise forever because its different here and we have the best plan thanks to having the best leaders in the world! Why, they saw the last downturn coming so far off, they decided to hold an election to try to get a stable majority government the rest of the world can trust because majorities are so much more stable.
Real estate is the place to be! It rose 17% in Canada last year alone so with performances like that, its such a safe bet that the next 10 years will repeat because our government is so great. Its so much safer to own real estate… we could have had our money in the TSX that only rose 45% since March of last year and Ventures only did 60% better since March, so Real estate was such a great choice for everyone last year considering what else we could have bought. 40 year old homes are selling for more than new cause the wood and craftmanship is so much better on these homes. Yes, its so different here!
No one can lose with real estate cause we aren’t like americans who lend irresponsibly. Canadian banks are the envy of the world so we are constantly told by our government so it must be true! Canada is the best place to live in the world because everyone is so wealthy here and have great jobs and everyone wants to live here, its true! We’re it, so Real estate can only rise for all time and I’m tired of telling you all why cause its so different here! Ask anyone, they’ll set you straight cause wealth created through unprecidented credit expansion without extra earnings or growing GDP to get in the way of it all, is a great thing! Everyone is so much richer because of these Conservatives, may they live forever, we are so lucky to have Harper he’s so great!!! So much foreign investment has come here because Harper is such a great man, its so different here…
CMHC and realitors are sucking the pig dry. They seem to be cutting their own throats long term for short term money in the bank.
Over at http://www.ratesupermarket.ca the best rates (5 year fixed) are for high ratio mortgages only. Now why on earth would a conservative banking system like Canada’s give their best rates to high ratio loans? Oh right, that’s where CMHC comes in. Conservative for the banking system but not the CMHC = tax payers. What a monster the conservatives have created!
Hmmm I don’t think it’s fair to criticise an individual homeowner or investor for “pumping up real estate values” based on low interest rates.
Our Guy did not set the interest rate he merely borrowed at the offered rate.
Our Guy may be a fool, perhaps okay to insult him for his individual investment decision. But to blame our Guy for the general price of real estate is ludicrous.
Adam Smith taught that we are all to take care of of our own interests and this way the invisble hand of the market will take care of things overall.
I prefer to see the criticism heaped on the Feds who interfere in the free market thru CMHC and with articifical low interest rates.
Our Guy can deduct interest if he rents the place out and shows that there was a reasonable expectation of making a profit on that basis.
It’s a free market (well not at all that free… but let’s pretend). It is the god given right of each person to act in their own economic interest. No private individual is responsible for the impact on housing prices.
To be clear: Greed is good! Greed is what built our wonderful living standards that we have today. And yes we are living like Kings compared to 200 years ago. So let’s rejoice about that.
In case I am still not clear:
Long live greed!!
It appears that proudly canadian banks are in control, so have no worries, their pupies will do as told. The mortagage brokers will be squeezed, as they have no much choice. Things will change sooner than expected.
http://www.theglobeandmail.com/report-on-business/big-six-banks-urge-ottawa-to-tighten-mortgage-rules/article1458585/
Garth, housing up 20 times rate of inflation means investing in real estate was are great idea the past 3 years. Keep smoking the big crash pipe and i will keep making cash-flow from all the renters. and your comment about living below your means is a joke. no-one should plan to live below their means. Give your head a shake!
At the beginning of March, short days after the close of the much vaunted and ballyhooed winter olympics, the Province of British Columbia will receive it’s budget for 2010. There can be no doubt that it is going to be FUUGLY!
Perhaps buyers will decide that they can live without a 1.7 mil waterfront property, when they can’t sell their million dollar problem.
T-minus 22 days and counting.
I just don’t understand why the Feds don’t reign it in. I understand that Carney says it is not his business and he is correct. He can wait until the US rates move in the summer before doing anything. But what the hell is Flaherty thinking.
Unless the Cons are going to the polls soon they are just going to end up looking like the idiots we know they are. I guess we get the gov’t we deserve.
On a more serious note:
“The impact of this would be major, knocking an army of first-time buyers out of the market.”
What’s the percentage of first timers who shouldn’t be in the market to begin with? Most of them? All of them? And how many first time buyers are in way over their heads already…
The evidence is grotesquely obvious and fast piling up that this Conservative government will stop at nothing to continue to inflate the asset bubble that they alone have already created, as much as they possibly can in a bid to buy the next election with our own borrowed money. If at first you don’t succeed…
There is no listening to Canada’s bankers, no deterence from staying the course which everyone should know by now is to buy a federal election with our own borrowed money through an artificially created wealth effect. People who get richer, regardless of how artificially and unsustainably created it is, vote for the status quo.
There was no good legitimate reason for the Harper party to introduce 40 year nothing downs to begin with at the time they did it (spring of 2006 to Oct 2008) as the economy was doing well during this time and earnings was already pushing asset valuations higher naturally on its own.
While its arguable that the BoC introduced lower rates to stimulate the economy, the BoC dropped rates to a record .25% low for more than any other reason to keep the loonie from popping past parity or risk being responsible for devastating what is left of our manufacturing sector (and then some) and while this created record credit affordability for mortgages even with the paltry CMHC reg tweak to 35/5, Flarehty/Harper could have brought CMHC lending regs to 25/10’s at any time or brought it back to this level in increments to let RE adjust to first time homebuyers being priced out of the market or cool off an already warped an overheated market of which, in case readers haven’t yet caught on, mortgage affordability would have still increased from 2008, 2007 and 2006 levels due to record low interest rates even with reduced mortgage terms. Instead, CMHC itself has seen nothing but deregulation in every way, shape or form possible to facilitate an unheard of credit expansion both in mortgage insurance in force, (around 470 million and expected to reach 600 mil by years end) ABCP and mortgage backed securites (expected to reach over 400 million as well, by years end) in an insane effort to expose taxpayers to over a trillion dollars of credit exposure peaking simetaniously with the peak of an asset housing bubble. Within 2 years, the Conservative government will have succeeded in turning CMHC into Canada’s largest bank.
The question we should all be asking ourselves is… if our PM and finance minister is so ideologically and morally corrupt as to not listen to what our chartered bankers have to say, or note the many historical years old references of nations now experiencing currency crisis’s for having elected governments who took the exact same irresponsible, self serving path of long mortgage terms and little to no down payments leaving in their wakes devastating credit/currency consequences, then there really is only one thing left for Canadians to do.
Change governments.
Its either change governments and hold this current government responsible for all the damage its done, or face being the next nation that faces the results of years of government led rapid asset inflationary policy which is: rapid asset deflation combined with staggering debt loads, substantially higher taxes and a looming currency crisis.
You all know what this means. It means shrinking earnings from tax increases, shrinking currency values from higher debtloads (which is great for exports, don’t get me wrong, but terrible for our own investing abroad and far too few people are mentioning this. Too low a loonie is a win lose because it forces us to try to earn earnings through trade and domestic investment as opposed to earnings through investment in other nations) and far greater indebtedness to banks then ever before and if there one huge MF ‘er of a big threat to Canadian democracy and freedom, its too much bank ownership of Canada’s future.
Who do you want our government to serve first? The U.S.? foreign banks and bond holders? Or us! Because in case readers haven’t figured it out yet, we’ve had a federal government that serves banks first and foremost (and mostly foreign ones at that), serves itself at everyone elses expense for power, and serves nations (mainly the U.S.) over our own. I don’t care how media and self interests spin it, we’ve got a federal government that should have been replaced years ago. They are reckless, self serving hypocrites that begged for replacement years ago, never mind now. The damage they’ve done is already extreme. To keep the CON’s in power any further is to ensure a fiscal collapse that has the potential to knock Canada back 10 years. They are akin to a dog that bites its owner and its owners children, only in this case, it takes a while for the teeth to sink in. Must I spell it out what needs to be done?
The Conservative government is nothing but a bunch of has been bums that can’t even show up for work any more.
What else is there to say, other than this and I’m not sure if this point has been mentioned yet on this site. The Canadian RE melt down to follow insane CON policies that created this bubble did not create a big boon in RE construction like the U.S. example did. The U.S. is facing serious oversupply because americans with their ease of credit built new over old. Americans believed that new housing would keep the valuations sustained with the misplaced faith in believing that new homes would retain their cost of construction. This obviously didn’t happen due to the simplistic fact that asset values have to be sustained through earnings growth far more so than ease of credit. They lived beyond their means, its a tough lesson and they’ve earned their lumps.
Canada on the other hand, has taken huge debtloads to buy old homes as opposed to building new. Canadians have been in such a hurry to “capitalize” on ease of credit, that they are paying more for old than they can build new in LARGE numbers. As a result, there will be less of an oversupply situation as opposed to the U.S. which one would realistically think would be good for Canadian RE, but…
Canada’s major pains will come from paying way too much for existing homes to begin with, with the driving factor being ease of credit instead of earnings. We will be facing the same hardships negative equity created in the U.S., only we paid too much for something old as opposed to new and its peak value might take decades, possibly never, to be worth what it is now today.
Its hard to put an accurate number on just how many new first time homebuyers have over extended themselves, but the effects of taking a large percentage of consumers out of the consumption market that drives the economy will be no less painful. (think real hard now, what will the effects be of slowly removing 10%, I think that number is likely accurate, 10% of this nations consumers and as a result, their consumer spending over the next 5 to 7 years? Now start adding steady tax increases to the consumers that are left. Its an ugly picture)
Negative equity comes as a result of paying too much for something, pure and simple and what it all boils down to is that we have a full generation, perhaps two generations that have not yet learned how to put an accurate long term monetary value on things whether its raw goods, manufactured goods or intellectual properties never mind RE and in many cases, this includes morality and simplistic knowing the difference between right and wrong. The best example of blind delusional buying by first timers glares right at you. Is it wise to pay more for an old car than it is, a new one? Is it morally right to talk people into doing it? We’ve done it with homes for 3 years and running with overwelming numbers of people paying more for old than brand new, more evidence of bubble mentality that cannot be sustained.
And so it does go folks… stupidity does not go unrewarded.
I rejected an offer of $1,600,000 (2008
My home property is appraised at $1,700,000 (2007
some missing factors, todays offers?? – and todays appraisals? If you thought -$100K was a low ball offer 2 years ago, why are you in here crying now about not being able to … (one thing is always left out of these cry me a river letters… is your Ocean front paid off or are you eyeballs deep into a second or third, and LOC tied to your ankles as well)?
move to the condo when the house is sold – remember, You can place any price you want on your place, however, It is only worth what the next person is willing to pay
2 things are going to be affecting your plans
1 can’t sell and make enough to pay off your high plans
2 you cry wishing for that 1.6 offer to come back as the market keeps tanking all around you.
then … Bank owns both in 2012
And Garth is right, you are a tool or a fool, (which ever fits better)
If someone told you, you can double your money guarnteed, but the catch is you have 50% chance of losing your money would you do it?
Garth – I’ve read through your last few posts and have to point out some fundamental flaws and gross assumptions on your part, however, the basis of your argument is bang on – WE’RE SCREWED!
#1 – Advising people jam as much as they can into RRSP’s & TFSA’s is ludicrous for two reasons. The first, most people can’t afford RRSP’s & TFSA’s for the simple reason you pointed out – our household spending is 145% of income. Cutting up the credit cards, lowering expectations and killing the overrated sense of an entitled lifestyle is a). When done with a) – move to b)….saving.
Secondly, you erroneously assume that the government wont claw back TFSA’s, RRSP’s etc. Look at the US, where there is already talk of seizing 10% of all 401(k)’s for the “greater good”. I’d give it 3-4 years before our TFSA’s & RRSP’s are raped and pillaged by the government of the day. It’s almost baked in the cake;
You also state that “we’re royally screwed, and real estate is to blame”. Hardly. Loose monetary policy, crooked banks and a burger eating, TV watching, fiscally irresponsible public are to blame. Real Estate is the symptom, not the disease. Anyone with half a brain would wake up to the fact that the middle class is a dying breed and mortgage serfdom is a planned event.
Third, I watched the interview you had posted about higher commodity prices and agree, however, your statement in the past about needing to carry our share of the tax burden by declaring any capital gains in the sale of gold, silver, etc. is ludicrous. It’s a fiscally irresponsible government that has encouraged loose spending, easy credit and the mother of all bubbles. Not only have the managed to piss away every tax dollar I and everyone else has given them – they have borrowed against our childrens future. I’ll be damned if any money I can keep out of the hands of the parasites at the CRA and in the Commons is going to be taxed as “part of the burden”.
You assume by that statement that: a) I currently dont contribute more than my fair share to this country and b) That government is something more than what it really is – a parasite feeding off the people. We’re one of the highest taxed countries in the world and we STILL run into the red. That tells me only one thing – that incompetence reigns!
Pandering to the proletariat Garth, by slamming the house-rich? Frankly, I like it…
@Amy: listing always go up this time of year. So far, compared to the last 2 years, nothing is abnormal so far.
http://agentwill.com/weekly-stats/
how can low interest rates be absurd?
1 : ridiculously unreasonable, unsound, or incongruous
2 : having no rational or orderly relationship to human life : meaningless ; also : lacking order or value
low rates means less support for the banking cabal, less usury.
We live in a planned society as written about as far back as the 1800’s and beyond. Nothing in politics, socially or economically happens by chance. The public is given a good reason by government as to why things happen, and then there’s the real reason. The financial system dating back to 1913, when the bankers slipped through the federal reserve act on Christmas Eve when most Congressmen where away for Christmas began this collapse. The Banks took away the control of the issuance of money and credit from government and put it in the hands of the private Federal Reserve Bank. A small group of people now controlled the money supply and the demise we are seeing today was put in motion. Since then the U.S dollar has lost 98% of its purchasing power and is about to drag down with it all currencies as the last 2% evaporate. All planned and all going according to plan. It is a massive transfer of wealth from the middle class globally into a very few elite hands. The housing over leverage, then demise will be the final sucking sound of most people’s wealth in the western world being given back to the banks. A new currency system will be implemented with even more control allotted to the private bank of the world, the IMF. Nothing has randomly happened over the past century, we live in a planned society after all and its all moving along exactly as planned.For the past century western governments have had hundreds of think tanks working around the clock roll playing every scenario ever conceived in society. To say, as the MSM does, that nobody saw this coming is laughable.
“The housing runup has increased the cost of shelter for all Canadians.”
There is no upside to higher housing costs, other than selling more Lexus SUV’s to RE agents or helping big bank balance sheets.
Even Lexus’ can be recalled.
It doesn’t seem like the lenders have it too hard. Make money on setting up the mortgage. Then act as agent of CMHC to dispose of the property when, not if, the bubble bursts. Are they making much from the mortgage payments when the spread is so low and they could make a larger spread on other types of loans?
This weekend I turned and asked my wife if those average Canadian families in 148% debt are just plain stupid. How could anyone justify spending more than you make? If you make $1, you can’t go and spend $1.48, you just don’t have it.
Schools need to teach basic finance again, just simple balance sheet, bank account, debt, income stuff.
BANKS – Well, banks should get together on their own and impose their own rules outside of the BoC if they want to protect their own futures and their shareholders. We should have a 5/25 or a 10/30 max mortgage in place with reasonable debt to income ratios.
There is no excuse for greed and stupidity. Everyone (especially banks) should know a heck of a lot better.
Mike
P.S. Garth, I’m on page 267 of your book, been a great read thus far, I learned a lot.
#2 april “I have been finding it hard to believe that the housing market at least in the Vancouver/lowermainland … Many think the numbers are being skewed to keep things pumped.”
April, I wouldn’t doubt you and many others who think the VREB are skewing numbers to make prices look good, at least within the legal room they can do it in.
The CREB, VREB, TREB, etc are in business to sell homes and find buyers, they are not in business to tell you not to buy or sell, but to tell you NOW is the best time to do either and of course to use their services to do both.
The CREB, VREB, TREB, etc can change (at any time) the way they report sales, prices, DOM, etc by limiting, expanding or changing the way numbers are reporting. The CREB has changed the way they come up with price and sale data 3 times in the past 5 years (and are on the move to change it a 4th time now). By limiting areas of higher value you get higher numbers, if a rural area isn’t doing so well, you can disinclude that area.
Also you might notice a trick with the end and start of each month in reporting. Houses get delisted mostly on the end of the month (thus, lower inventory number reported) and relisted or listed on the 1st of each month. DOM is an irrelevant number as it doesn’t count total DOM, ie DOM is just for the current listing (or relisting) of a home; so if a home sat on the market for 365 days total before it sold, but was listed 3 seperate times (ie, 200 days, 100 days and last 65 days) it would be reported as a DOM 65.
% list price sold. Same as the above. The above house could have had 10 price drops, but the final listing price vs sale price is what is reported.
True Facts as Garth would say are hard to come by sometimes.
Oh and never trust facts from a business designed to give you those facts based on how they profit from those facts. Would you ever ask a car salesman if now is a good time to buy a car?
Mike
No change to mortgage rules
http://www.globeinvestor.com/servlet/story/GI.20100208.escenic_1459673/GIStory/
I have a feeling they are going to keep interest rates low in june/july.
Well I know I’m screwed.
FR G&M
Finance Minister Jim Flaherty appears to have no immediate plans to tighten Canadian mortgage rules despite the advice of senior bankers concerned about surging home prices.
Mr. Flaherty said he sees no evidence of a housing bubble in Canada
So there you go Ladies and Gentlemen …. BUY BUY BUY and BUY some more.
Mr. Turner please call CTV and tell them it was all a mistake ….. and CNN while you are at it, and do not forget Greece Iceland Ireland and Portugal ….the world is booming according to Flaherty and God knows he knows ” Everything” and he and his clones are still on Christmas vacation at taxpayers expence.
Postscrpit:
A fool and our money are soon parted.
Great work Garth. I have been following your blog for over a year. One thing I think you have failed to mention and explain is that wonderful device bankers have the priviledge of indulging in, fractional reserve banking. By being able to create money out of thin air, it is in their best interest to create life time debtors. There are many in our society who don’t even understand what fractional reserve banking is. It is one of the best kept secrets of the banks and is a major contributing factor to the huge profits that they reap year after year.
Rory:
Your position that government is costing us more than we can afford is arguable – it suffers from the same diseases that drive the costs of the big 3 auto makers and other large corporations upwards.
Where you err, is that you place the blame for the policies and practices that generate the bloat on the people at the bottom. This may not be your intention, but it is what you are saying.
The clerk you deal with at city hall, or the provincial automobile license bureau, or the EI office has absolutely no control over what their wages and benefit package is, what their hours of work are, or how many of them exist. They are not even responsible for the fact they operate in a unionized environment. All these decisions ultimately come from the elected politicians.
If you drill down into the demographics of wages and benefits in the public service, you will find that the jobs traditionally filled by females are generally paid much better that the comparable positions in the private sector, as are the administrator positions. IT positions, and other technical jobs tend to be paid near or below the private sector.
Government also has a number of joibs for which there is no comparison – jail guard is a prime example of this. How much is that job worth?
By all means, tell the world how many jail guards and license clerks we need in Canada and how much they should be paid – in your opinion. Please be precise. The Glasco commission report needs updating.
Don’t we all wish we were tools? It’s like winning the lotto.
Also from the MSJ piece!!
Mr. Gray, the Toronto concierge whose deal fell through at the end of 2008, is looking again for a condo, although he’s had to raise his budget to around C$350,000, from C$250,000. Ms. Gerard, the housewife in Red Deer, says she hopes to buy a seventh unit in a few months—after she pays down enough of her credit-card debt to qualify for another mortgage.>/i>
What more do you need. A Red Deer housewife.. is looking to buy her 7th apartment unit. And Mr. Gray is raising his budget from $250K to $350K.
Insanity!!
Now I know we’re at the very peak!!!
“Move along! Nothing to see here!
Well its 6:19 am here in Calgary…morning coffee at hand… I just perused my fav am websites (of which this is one)……LATOC, TOD, Clusterf..nation, quite a list I have.
Once again I will wade into the fray on here by talking about something which appears to have little to do with Canadian real estate bubbles and “classical investments strategies”. Oh yeah and I will beat the already dead horse (or donkey ) a bit more.
The photo today Garth was much more appropriate than perhaps you realize?
Can anyone here think up what the most rewarding career was in post invasion Iraq? (aside from being a blackwater exectutive I mean)…..hint…it was in “the transport industry”….
wait for it…….
yeah…donkey handler……
funny think is, with large scale invasions these days, they tend to be disruptive of infrastructure…like they blow buildings to sh.. and destroy the ability of the local populations to access fuels (you know the stuff that drives buses and trucks and taxis)
soooo…..post appearance of the Abrams and the camo…..donkeys were in HUGE demand….they can eat roadside weeds (cheap fuel), they can go places even a hummer would not tread….over rubble) and they can pull/carry a lot (photo is case in point)
So what does this have to do with real estate bubbles in Canada eh???
It reflects the “reasons’ that these particular bubbles are forming……yeah…you know what I am gonna say right??
The world peaked in liquid crude production in 2005 and has flatlined until this year (where it might actually have gone down….dragon country that)…
In a world economy built on fantasy….that paper dollars or residential real estate is actually “worth” something…..and where real wealth (oil and grain for example) are discounted heavily…….well if the “cheap stuff” is actually discovered to be priced in post war “donkey dollars” in reality…then “taxi cabs without gas” (Vancouver houses and RRSPs) are literally goin away!
Joseph Tainter in his absolutely brilliant work “The Collapse of Complex Societies” has laid it out..and we ignore his message at our extreme peril.
Complexity in a civilization can only exist and be maintained when energy flows into that system of living can sustained.
Guess what folks?….it is over…..the economy is buckling not because of shoddy governance (although it is widespread) it is not failing due to lack of intelligent “investment methodology” by its citizens (except in a broader sense)….it IS failing because the EROEI of Tar sands…deepwater oil riggs in the Arctic Ocean….even Iraqi sweet crude pumped under the eyes of US marines……is to damn low to keep the machine running.
Ergo…COLLAPSE has arrived…..anyone got a migraine yet?…..getting thrown through a windshield at 120 km per hr…and then hitting the tree that stopped you, tends to create issues with ones cranial well being.
We are crashing back into a simpler society now…whether we like it or not….and that means MASSIVE CRUSHING economic withdrawal…..massive unemployment (from all conventional urban jobs at least)….collapse of ultimately most government infrastructure (esp federal/provincial) and a fundamental change in the way we as humans do business.
Young boomers and all that follow should be more concerned at how to get their money OUT of the system and into “Donkey Dollars” as fast and efficiently as possible…cause all the other kinds of “hummer dollars, condo dollars, RRSP dollars” etc will be lost/stolen/devalued as the system tears itself apart……..
But what do I know anyway?….maybe my liking of squirrel meat is clouding my judgment??
This morning I heard on the the radio ad, you can buy a condo and they’ll give you a car or GO train passes for a year I think (but I swear I heard a 5 yr) I got over excited on the free car I missed the rest.
Yes it’s free. Comng near you.
Now go live in Brampton starting low 170k…hhmmm doesn’t sound that expensive.
“Mr. Flaherty said he sees no evidence of a housing bubble in Canada.”
ok – he can’t SEE a bubble… what about the other senses?
Can he hear the bubble?
Can he smell the bubble?
Can he taste the bubble?
Can he touch the bubble?
All I know is, this is the same guy that “didn’t see deficits” only DAYS before the whole economy collapsed, and the same party that built their “Action Plan” on re-paving roads, reno-ing kitchens, and apparently on buying expensive advertising. (how many more of these stupid ads can our tax dollars possibly buy?)
So – if there’s one thing all Canadians should have realized by now: any prediction from Flaherty/Harper is going to be proven inaccurate within a few months.
More anecdotal evidence that the banks themselves may be pulling in their laissez-faire attitude to mortgages. Last week I went to see the nice man at the bank. I currently have a HELOC based on 2003 appraisal. I wanted to increase the limit since the house is now paid and I’m sure the appraised value is now higher….but I wanted the nice bank to pay for the lawyer (since they did the last time). I was told no way, ‘they didn’t have it in their budget’. Seems the bank didn’t want me to increase my borrowing and therefore their interest revenues…….unless I paid the $500 for the lawyer…….I told them that I’m not paying for the privilege of borrowing their money….to me it’s all a cost of doing business…….so my conclusion is that they do not want to do any more business…….Oh well there are more fish in the sea……..
cheers.
“It looks like someone is grasping at straws…” -Vancouver Rocks
Hmm, I’d say that would be YOU.
Thousands of thousands of words were written on this blog about how different actions like bank’s rate, mortgages rules, gold, stocks etc will influence the RE market in Canada.
It’s actually does not matter. Actions may only prolong Canadian agony, because fundamentals of Canadian economy are built on the snow.
There is not such nation: “Canadians”; there is conglomerate of different ethnic, racial, religion, language, cultural groups in Canada, having nothing in common: no common history, traditions, language, religion, culture.
They have only one in common: the desire to have easy money.
When Canada will not be able to supply money to those groups – Canada will fall to pieces as a card’s house.
It is an accelerating process as snow avalanche.
We are the witnesses of this process.
Read “A Bubble in Search of a Pin”, with excerpts from “This Time Is Different” (a book by Carmen M. Reinhart and Kenneth Rogoff):
http://www.ritholtz.com/blog/2010/02/a-bubble-in-search-of-a-pin/
Almost all of the bolded quotes on this page apply to Canada 2010:
“In fact, the U.S. economy, at the epicenter of the crisis, showed many other signs of being on the brink of a deep financial crisis. Other measures such as asset price inflation, most notably in the real estate sector, rising household leverage, and the slowing output – standard leading indicators of financial crises – all revealed worrisome symptoms. Indeed, from a purely quantitative perspective, the run-up to the U.S. financial crisis showed all the signs of an accident waiting to happen.”
(Leverage? Like 95% Loan-To-Value ratios?)
“The thinking that “this time is different” – because this time the U.S. had a superior system – once again proved false. Outsized financial market returns were in fact greatly exaggerated by capital inflows, just as would be the case in emerging markets.”
(you mean like, CMHC-fueled inflows?)
“Above all, the huge run-up in housing prices – over 100 percent nationally over five years – should have been an alarm, especially fueled as it was by rising leverage. At the beginning of 2008, the total value of mortgages in the United States was approximately 90 percent of GDP. Policy makers should have decided several years prior to the crisis to deliberately take some steam out of the system. Unfortunately, efforts to maintain growth and prevent significant sharp stock market declines had the effect of taking the safety valve off the pressure cooker.”
(hmmm – Canada is at $1Trillion in mortgage debt and growing… I’m sure we’ll hit 90% of GDP soon)
“The greatest barrier to success is the well-entrenched tendency of policy makers and market participants to treat the signals as irrelevant archaic residuals of an outdated framework, assuming that old rules of valuation no longer apply.”
(you mean, like 25% down, or price-to-income?)
I’m a 42 yo professional living in Nanaimo (Van. Isl. ) & looking forward to hearing/meeting Garth. Have been reading this blog for a long time now and it’s really “tempered” my perspective on the emotionally-laden world of home ownership (the “gotta have it now”).
In 2002 my wife and I were contemplating buying a condo in Van—we could have bought a 2 bedroom, 840 sf condo on16 floor for $164K in N. Van facing Stanley Park. The small size and height (scary) made us reconsider. We ended up relocating to Nanaimo where I grew up and we bought 2 houses. Everything seemed cheap compared to Van. More than anything else, we were “lucky” in timing as the house prices soared (170K original purchase to assessed $411K at height).
The second house was again lucky timing as we had money and didn’t fully understand nor trust the stock market—the house was a good buy and is pretty much carrying itself. As prices soared I was astounded at investors who thought buying a $350K or higher for a single family home (not a full duplex) as a “rental” was a good idea
We put 25% down for both because I absolutely hate paying interest as well as the penalty that CMHC imposes if you don’t put this down. We also make weekly mortgage payments.
FYI, when we bought in 2002 we saw sales histories showing that the 92’ sales prices were still double 10 years later. I heard there was a housing bubble that burst in late 92’ or 93’ here (thank goodness I was a poor university student not in the market at the time!).
We almost bought close to the height in 2007 before any sign of the recession (at least in the media) and the house has gone down in assessed value at least 11% since then. It had a gorgeous lot in a very nice area but had 1970’s flooring, kitchen, bathrooms, had mould, carpenter ants, rotted deck, old windows….. We had a formal offer and refused to accept the building inspection as one of the subjects in the offer. It needed at least $80K to renovate—dodged the bullet on that one!
Here in BC there is the annual BC Assessment which lists assessed market value as of July 1 in the previous year (that can be accessed online from Jan-March or thereabout). It’s always interesting to see the discrepancy b/w MLS (especially as of July 1 for properties that I’m tracking) and BCA assessments. On the higher end, I’ve seen a $300K difference for lakefront house (listed for $700K). BCA will also make available at this time comparable sales property. I’ve noticed many sales “last summer” where people paid a lot more than the BCA assessment (i.e., $125K higher sales price). Many realtors say it’s not credible but I can easily see their self-interest in doing so.
My opinion is that house prices will decrease here so the BCA as of July 1, 2009 for properties selling “today” is very insightful. Rarely do I see MLS listing prices compare to BCA and many houses I’m tracking show $10K to $264K differences.
From Ken Norquay, a toronto stock technical analyst:
Toronto Real Estate: “Déjà vu all over again.”
Baseball’s legendary Yogi Berra is credited with our headline’s déjà vu quotation. It means: “We’ve seen this before.”
The real estate industry released some great numbers this week. Home sales have increased by 87% over last January’s depressed levels and prices have gone up by 15% to 20%. For homeowners and real estate speculators, this is welcome news. Or is it? Is there more to this story than the collective sigh of relief of two thousand real estate agents? Let’s look more closely.
What’s happened so far?
Many investors are fed up with the stock market after the 2008-09 crash when market averages dropped 50% in only nine months. Many fed up investors turned to real estate for something more wholesome, less risky.
The stock market crash was followed by a world banking crisis, a crisis in corporate America and the continuation of the US junk mortgage crisis. These crises triggered a massive drop in interest rates, including mortgage rates.
These two factors combined to give us the flurry of real estate activity that was reported this week. Volume of sales is up and prices are up.
Has this ever happened before? Remember the late 1980s?
After the 1987 stock market crash, many investors became fed up with the stock market. They turned to real estate for something more stable, less risky.
The 1987 crash was followed by a US ‘Savings and Loan’ crisis. [In the USA they refer to trust companies as ‘savings and loan’ companies.] And that crisis was followed by a junk bond crisis. Those crises triggered a huge drop in interest rates, including mortgage rates.
These two factors caused an increase in both volume of sales and house prices.
In late 1988 early 1989, there was an up-tick in interest rates, including mortgage rates. This triggered a rush to buy houses – that rush to buy resulted in an even greater flurry of sales and house price increases.
In April 1989 a hush settled over the real estate industry. The top of the cycle was in.
House prises dropped and did not start up again until 1996. The world’s biggest real estate company, the Reichmann brothers’ Olympia and York, went broke. Construction was stopped on the monolithic office tower between Bay and Yonge Streets in Toronto [just south of The Bay]: the unfinished building stood there for years. The game was over. It took seven years for the real estate down trend to stabilize.
The Warning Signs.
IF mortgage rates tick up ever so slightly AND this triggers a flood of buying – beware. The real estate market will be in the same condition it was in 1989: a long term top.
Warning #2
Our American cousins are already well into the downward part of their real estate cycle. Both their housing and commercial real estate are in trouble. Remember Pierre Elliott Trudeau’s famous words: “When America sneezes, Canada catches a cold.”
Prudent Action
What should a real estate owner do in the face of all this? Here are some thoughts:
Homeowners: don’t do anything. Just keep living in the home you love. If you are thinking of selling your small house and buying a big one because you need more space, do it. But if you are thinking of buying a bigger home to increase your overall investment exposure to real estate, put off your decision until things stabilize. And if you are thinking of selling your large house and buying a smaller one, do it sooner rather than later.
Investors in houses: those who buy residential real estate and rent it out. Sell your rental properties when mortgage interest ticks up. You could be selling at the top. And, as the house prices drop, you will be in the perfect position to buy future distress sales.
Commercial and industrial. How did you feel when the recession was ON in 2008 and 2009? How did you feel when your tenants were laying off employees and subleasing their space? Imagine how real estate investors feel in the auto manufacturing towns of southern Ontario. Or the oil patch in western Canada. Consider selling your marginal properties and reducing the debt on your higher quality properties. Read more about the pickle our American cousins are in. Re-read the story of what happened to the Olympia and York’s $14 billion real estate empire in the early 1990s. This is not a time for complacency. Try to stay positive: if trouble develops, you want to be the strong one when the others are weak. In order to buy at the bottom of the cycle, you have to sell at the top.
In my book, Beyond the Bull, I discuss the correct attitude for stock market investors to take in a long term bear market. This is the same attitude that real estate investors should have now: the attitude of a fighter. It’s like the Kenny Rogers song: “You got to know when to hold, know when to fold ’em. Know when to walk away, know when to run.” There is a strong possibility that real estate investing is coming into a time like 1989 to 1996 – the down part of the cycle. It’s time to fold ‘em and walk away. The down part of the cycle brings opportunity for those in a strong financial position. Having more cash and/or less debt is strength.
Massive unemployment will put the brakes on all the bubbles. Soon the EI cheques will start running dry in southern Ontario. Stores are closing down all over Toronto and the ones that are left can`t pay the rent. MSM is blind and silent.
Garth:
Could the surge in housing starts change F’s view and announcement in early March?
(in conjunction with the bank comments and Carney’s clear between the lines msg)?
Thx.
Garth in the WSJ
http://online.wsj.com/article/SB10001424052748703808904575025100730017666.html
I wonder what Gov. Dodge would have done in this situation? It seems that Carney and Flaherty are asleep at the switch, or somebody else not in our interest is calling the shots.
Mr. Tool has a tax problem.
He can indeed deduct his mortgage interest for the condo and the condo-portion of his primary residence from his income tax IF he can prove that there was a realistic expectation of return (“REOP”) on this investment. He can do that by showing a rental profit within five years. If he fails to do that, he will be considered to have engaged in “an adventure in the nature of trade”, and can merely add his carrying costs to the adjusted cost base of the asset when he sells it and deducts the capital cost from the capital gain to pay tax on the difference.
Now, his problem is that he will not have a snowball’s chance of showing a rental profit considering increasing mortgage costs, property tax, condo fees and anything else that might crop up, compared to any rental income he will be able to get. He can try to claim losses for a number of years, but sooner or later CRA will ask him to prove that he had a REOP, and if he fails to do so, all the years of losses will be reassessed – with interest. Tax Court will back CRA in such an open-and-shut case.
Of course there is the possibility of a capital gain to cover his costs, but if he has read this blog long enough he will know the realistic expectation of that this time around. So, what Mr. Tool bought himself is a capital loss. Hope that this was his aim to begin with, and that he has the capital gains to make use of it.
Printed off the Valentines coupon of the Chapter’s site and got 25% off the book. The plan is to read, reflect and respond appropriately realizing that Rome wasn’t built in a day, and my financial future won’t be either.
Good luck to the sheepeople who have run with the herd and have gone “all in” on RE. They will deserve my sympathy down the road in some small measure, but certainly not any of my tax dollars.
52 Ken on 02.08.10 at 10:43 am
I wonder what Gov. Dodge would have done in this situation? It seems that Carney and Flaherty are asleep at the switch, or somebody else not in our interest is calling the shots.
******************************************
Carney is a Gold Man–
They never sleep–
They win–
They never lose–
They front run their clients–
They front run country’s–
They short themselves–in their own best interest–
They have no borders–
The world is their playground–
Flaherity doesn’t even know there is–a switch–
The pic–of the suspended ass–for this thread?
Enough said–
This from David Rosenberg’s market commentary this morning:
“Rest assured that when this topic [the Housing Bubble] makes it to front page of the WSJ, as was the case today (Housing Rebound in Canada Spurs Talk of New Bubble), the likelihood that the bubble started months ago is likely very, very high.”
#5…Your prejudice vs Western Canada really shows.
Nostradamus jr,
Your insecurity about Western Canada really shows.
Yes! Jimmy Boy is asleep at the switch alright!!
http://bit.ly/c5EZlG
#33 Mike(authentic)
“DOM is an irrelevant number as it doesn’t count total DOM”
There’s a realtor in Calgary who gives the CDOM(cumulative days on the market) which factors in the re-lists.
http://www.bobtruman.com/HomesAuthenticated.aspx?tabid=1691541
He’s the only one I’ve ever seen with such revealing information which you generally never hear about.
Well maybe these new measures will help slow real estate down a bit because interest rates are not going up anytime soon.
Instead of a “lender of last resort” how about an employer of last resort.
Understanding Modern Money -Randy Wray
Omg, I am always sceptical of the Real Estate board numbers.
#53 Herb,
You said and explained it very clear and well. Most activities are in the under million houses in Victoria, the above million house market is still slower since the last half of 2008, and will for sure more slower in the times to come.
A quick question to knowledgeable Herb, can the mortgage interest on a rental property be deducted from rent income, and then again as part of the adjusted cost base against the capital gain on property sale? My guess is only one of the two, but not both?
“Competition Bureau challenges real estate association
MLS rules restrict consumers’ choice, agents’ ability to innovate”
http://www.cbc.ca/consumer/story/2010/02/08/consumer-real-estate-competition-bureau.html
-
Hmm…
Here are the BC wages:
BC Wage & Salary Survey – 2009
And the average SFH in Vancouver is $950,000…
There seems to be a totally new logic ruling the area. It’s a brave new world, a different world there. A world of high property values, high RE price appreciation and high RE activity… in general a world of high.
The only questions remaining are: What exactly is inducing that high? Is it addictive? What are the effects on wealth and health? And what are the withdrawal symptoms?
-
Well, here is to another decade of sitting on the sidelines for many bears…
Your government has spoken and their will be no interest rate hikes for years to come (especially if the stock market crashes like the bears hope) and no changes to the DP and amortization requirements. The feds have even rejected the call for caution by all of the central banks.
It is clear – this party will continue because housing has been a shining sector in the national economy, and because overwhelming majority of voters are homeowners. And when job prospects look bleak, the fact that you know that you have money coming in through an appreciating house keeps people’s spirits up.
In Vancouver, the bears have been saying that the “bubble” will burst since 2004, and yet here we still are with increasing prices and bidding wars. The best case scenario for all you bears is to hope for flat prices, because that is probably the best you will get.
And if this all deflates, it will be another 5 or 10 years before prices go back down to being “affordable” by all your economic metrics. For all you hardcore Vancouver bears that have been saying its unaffordable since 2004, enjoy paying a minimum of a decades worth of rent…
#37 William Laidlaw on 02.08.10 at 8:20 am
Exactly the right point Mr. Laidlaw.
Blaming front line government workers for all of the country’s ills is absurd. They have absolutely no say over policy, and in many cases are told to just do the job at hand and not comment or act on comments.
Blaming front line workers for most things is quite useless, and is the sign of someone who really doesn’t understand how things work, since in most organization managers and supervisors hide from accountabilities to the public. If you want change, target, blame, and start bugging-to-no-end the leadership of those places. Workers are actually told its part of their job to pay lip service to the complainers, to tell them you’ll address it with management, but never to actually bother management with the issues. I’ve even worked at a couple of places where you were a pariah if you brought up client complaints to a higher level.
The leadership of bad government offices and bad companies rely on folks like Rory to yell at the front line staff and walk away feeling smart and satisfied – and nothing changes.
The fact is .gov is increasingly becoming our big brother and feeds on itself to get even bigger with of course the corresponding increased costs. The little guy is just fighting for this share like the rest. So I agree with you, however it fixes nothing by agreeing with you. The problem is the .gov still needs to trim its spending …so again do you have an idea or is your idea business as usual.
“As to the IT people:” I agree on the salaries but disagree on total comp …remember the defined pension advantage.
“As to the prisoner guards:” Privatize the prison system and see what happens to the wages and benefits.
“As to the license clerks:” If we did not over regulate, or try to get tax revenue on everything that walks, talks, or eats then maybe we would not need so many of these clerks…got this idea from watching the guy from Waste Management after the Super Bowl …he got rid of ‘big brother’ at the recycling plant and both morale and efficiency improved …go figure.
We as citizens cannot see the forest because of the tress.
William thanks for the feedback … we need this dialog to continue because like the house prices we fixate on this is an even larger issue that will determine our financial and economic future …of course, as always, IMHO.
In addition to the Wall St. Journal article, the Fraser Institute also came out with their 104-page report today:
(warning – 2MB download)
http://www.fraserinstitute.org/commerce.web/product_files/Mortgage-finance-reform_Cdn.pdf
This report compares Canada (and specifically CMHC) against the US (Fannie/Freddie), Australia, and other places.
Some of the conclusions:
A) When there is an explicit or implicit government guarantee on mortgage insurance, this skews the market an introduces unacceptable risk (as per what happened in the US)
B) Privatized mortgage insurance does not make mortgages less obtainable or slow down the overall market (as shown in Australia)
C) CMHC should be privatized, to get the mortgage risk away from the taxpayers (put A and B together)
Sorry all …this was supposed to be at the start of my last post …
#37 William Laidlaw
“Where you err, is that you place the blame for the policies and practices that generate the bloat on the people at the bottom. This may not be your intention, but it is what you are saying.”
William, you are correct in that it was not my intent, it is the politicians and by default all voting citizens. The .gov employee’s are just working stiffs like the rest of us but unfortunately shit does flow downhill. That will not change.
Kitsilano listings are now at 166 units. My favourite one is:
http://www.realtor.ca/propertyDetails.aspx?propertyId=8967336
652 sqft basement ‘townhouse’ for 530K.
Absolutely mental.
Great post today over at Mish’s site … http://globaleconomicanalysis.blogspot.com/
It is an email from a volunteer firefighter which by extension can be applied to the unions and the government here in our country.
This is the essence of what I believe is happening and it becomes self-perpetuating.
#29 – I couldn’t agree more with you.
Our so called wealth is linked like a chain to the hands of a few people. When they decide to fully implement the next part of ‘the plan’, the house of cards will be intentionally collapsed (obviously it’s already started), and most people will support the ’solution’ they have for us (and have had in the making for a long time), because it will look like they are ’saving us’ all from financial ruin. (Just like 9/11 gave the US the support they needed to invade the Middle East, or the Detroit airplane bomber scam and the ‘body scanner’ solution).
The system we’ve been using since 1913 was designed to implode from the very beginning (while lining the pockets of a few in the process). It’s all about absolute power and corruption. Period.
Having said that, I have virtually no money anymore, so I have nothing to lose. Those of you who DO have something to lose though, better start opening you eyes in a big hurry …
Did a few people mention that there will be no change to the 5/35 several months ago?? LOL… and people thought this was going to happen to hurt the RE market… even more laughable! Why would you want to hurt the RE market?? Only reason I can see is self-interest—so you can get in at a low price. Housing is not a right…its a privelege so they say.
And by the way, interest rates in Canada are staying put for the next 22 months. Don’t be suprised when this happens!
Thanks CoB.
Let us know when it hits 175, thanks!
Blame the roads rather than design?
….”antilock brakes seemed to fail momentarily while driving on bumpy roads.”
“Regional Chair Ken Seiling said the region is so far behind on road maintenance it cannot afford to divert that federal gas tax revenue to support other forms of transportation. ” (kw record)
Does this not contradict the citizens ideas of creating vibrant downtowns /communities with more “green” people friendly spaces?
Perhaps we need less backpedalling words of politicans that mismatch the forward steps of the citizens that desire change.
#71 CoB
That Kits Basement is lovely, but wow half a million bucks? It makes me wonder what else I can put sexy dark wood panelling on and sell for 3x more than what it’s worth.
See if this story from Bloomberg sounds familiar: Pay particular attention to the quote from Andy Xie in this excerpt – * Note – this is dateline December.
Gloria Gu paid $483,000 for an apartment near Shanghai’s financial district so her 3-year-old son could attend one of the city’s best kindergartens. Six months later, a similar place in her building sold for $615,000.
“Prices are way past reasonable,” said Gu, 31, a food company manager who bought her three-bedroom, 140-square-meter (1,507-square-foot) apartment in the Pudong area in May. “The market is too good to be true.”
Escalating prices in Pudong, transformed within two decades from vegetable fields to skyscrapers for Citigroup Inc. and HSBC Holdings Plc, underscore a Chinese property market that set record highs this year after the government unleashed $1.3 trillion in new bank lending to counter the global recession.
Premier Wen Jiabao said Nov. 28 that property speculation must be suppressed, and the government on Dec. 9 reinstated a sales tax on homes sold within five years of purchase after reducing the period to two years in January. That change is superficial and will have minimal impact, said Lu Qiling, an analyst at Shanghai Uwin Real Estate Information Services Co.
“It’s only a token measure,” Lu said. “It won’t change the upward trend in housing prices.”
Government ‘Dilemma’
China’s leaders won’t make major policy changes because they are preoccupied with economic growth and social stability, overriding concerns that rising property prices are forming a bubble, said Clement Luk, an analyst at Centaline Property Agency Ltd. in Shanghai.
“The government is clearly in a dilemma,” Luk said. “It wants to address the surging property prices and concerns on bubble-bursting, yet it dares not take drastic measures for fear of hitting the market too hard.”
The nation’s real estate and stock markets are a “bubble” that will burst when inflation accelerates in 2011, former Morgan Stanley chief Asian economist Andy Xie said in an interview in Hong Kong today.
“China’s asset markets are a Ponzi scheme,” said Xie, now a Shanghai-based independent economist. “Property is heading for one huge bust that will take a year and a half to unfold.”
Home prices in 70 major Chinese cities, including Shanghai, rose 5.7 percent from a year earlier in November, the fastest pace in 16 months, according to government data. The property market was a prime driver of the economy’s 8.9 percent growth in the third quarter.
> A PONZI SCHEME. Real Estate.
There in black and white.
Garth and Mr. Xie seem to be reading from the same Austrian School of Economics texts.
link: http://tinyurl.com/yz2zy5s
“The Bureau is focused on striking down these anti-competitive rules, so that real estate agents wishing to offer innovative services can do so, and consumers can benefit from greater choice,” said Commissioner Aitken. “While the market will ultimately determine prices for residential real estate services, we expect that if the Tribunal strikes down the anti-competitive restrictions, there will be downward pressure on real estate fees in Canada.”
http://competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03196.html
Garth, don’t forget that behind the inflation in RE ‘values’ is a tidal wave of free money in tax revenue for the government. For everyone who’s assesment went up this year mine 21% this has created a windfall in tax revenue for the government at a time when corporate profits have sunk.
Does Flaherty know this ? Of course. The government is sucking money out of the citizens when it has promised not to raise direct taxes, so, they sneak in the back door and drive ‘values’ up, pretty sleazy.
#66 Vancouver Rocks,
Out tilting at windmills again are we? Who said anything about sitting out 10 years. 2 may be enough – perhaps 3 or 4. Being a RE Bear is about timing. It is not about a permanent state of mind.
What do you mean “no interest rate hikes for years to come”. They are coming later this year. Besides, if they don’t it is only because the economy is in such a rough state there continues to be widespread asset deflation. In this case RE will go down EVEN WITHOUT RATE HIKES. This will be much worse because imagine what will happen when they eventually do.
At some point in the not too distant future – perhaps 4 or 5 years from now – we will go through a period of rapid inflation because gov’ts – our gov’t – will print money like crazy in order to better deal with the deficits of today. If you think that interest rates will not rise for years you are smoking more crack then the rest of the RE Bulls here in Vancouver.
Smoke away. It will make you feel better when the crash comes.
Off topic a little, but worth the journey.
Garth, you’ve been quoted by my favourite Canadian prophet, Murray Dobbin.
Harper runs roughshod over women’s rights
If there was any doubt that it was Stephen Harper’s personal determination to set back women’s equality, Garth Turner, a Conservative MP who eventually left the caucus, left none. He told the Georgia Straight: “[Harper]said, ‘We have determined a series of cuts, … which will be announced…. They are our position. And…anyone [who] has got any problem with that — who says anything about it — is going to have a short political career.’ He said that in caucus.”
The rest of the article is worth a read, too (always).
Troubles in Canada will start after Olympics.
The huge problems are coming at summer.
For the next winter start to lay in stocks food, clean drinking water, warm clothes, wood for heating and medicines.
You will need it.
PS. You will need also ammo to defend yourself and your family.
http://www.theoildrum.com/node/6191#more
a view that needs to be broadly shared!
The “Real” problem in the economy
As Bill Strunk (‘the inventor of bank overdraft protection in the 1970’s)) said about the massive credit abuse in America
” There are two things Americans like,”Free” and “All you can eat”.
Sums it up, we’re all greedy bast#rds
Live Within Your Means
Congradulations on Surviving Cancer……the ultimate survival experience….
MIke
#40 knucklewalker — nice post, your Monday mornings sound just like mine. I do think we still have time to play the system before converting to “donkey dollars”, but not long.
To all RE agents on this blog….better go and look for a real job, rather than being housing pimps…you will go broke pretty soon. Kudos to the Competition Bureau!!!
http://www.vancouversun.com/business/fp/Competition+Bureau+challenges+rules/2536948/story.html
#13 Rory,
Ever hear of Bill C10?
http://womanatmile0.amfresh.ca/canadian-politics/keith-martin-on-conservative-wage-rollbacks-for-dockside-dnd-workers/
Freedom_2008 at #63,
you guessed it: it’s either/or, not both.
My “knowledge” is strictly amateur, based on a three-year dogfight with the Revenooers that is going to be heard in Tax Court this summer. REOP was one of the issues I prepared for in case it was raised by CRA, but they didn’t after all.
It’s amazing what you learn about taxation when you study the “Reasons for Decision” in about 100 court judgments dealing with income tax and rental property. The good thing is that these judgements are readily accessible on the internet before paying a lawyer for research.
As a service to such fellow blog dogs as may be interested, I like http://www.canlii.org/en/index.php. This site allows you to enter specific issues (such as “mortgage interest”) or sections of the ITA in Line 1 of the search, and will list and give you direct links to relevant cases citing the specified words or sections. You can also go to the respective web pages of the Supreme, Federal and Tax courts and access their judgments from there. This will give you the “rules of law” established in precedent judgments. Of course CRA tends to ignore the decisions they don’t like: they have nothing to lose, and can always hope that you’ll fold or get tripped up in court. But you can get a good idea of your chances should you decide to push it.
#62 April – “sceptical of real estate board numbers”
Thanks for that.
I agree the numbers are always massaged to show things in the best light. But they are all we got that is the least bit methodoligical.
My point is that people in the Vancouver RE market are not up 20% – they are about even with were they were in 2008.
That is unless you were one of the very brave few that bought during the exact 4 or 5 month period when the market fell over the abysse in 2009.
Hey vancouver rocks
The rates are not going up and I am also not going to tax the income trusts …..
Yeah I would trust our leaders.They wouldnt lie to us would they?
I do wonder though ,how all this stimulus and what not is going to be paid for?
Perhaps the vast profits from realestate would help to offset the cost. Maybe a little donation from your friends in the biz ?
I dont think there are going to be enough jobs to cover the taxes so every little bit will help.
http://i300.photobucket.com/albums/nn29/aangelinsf/TheGreatContraction.gif
why in reality the Canadian economy and the rest of the planet is just so hopelessly screwed…
Hope this isn’t to doom and gloom for ya’ll
#66 Vancouver Rocks on 02.08.10 at 1:03 pm
I think Vancouver and Canada overall looks less attractive to a wise investor. As for me i am not going to throw all the money i make on a rotten, rats infested shack with a mold in this city. I’ve been to many houses doing my contractor work….and majority of them have that funny rotten smell….i call it “old farts smell” and yet ppl who live in those shacks are so proud of them…or the smell they are proud of, I am not sure, but i would not even spend a night in such shack.
Anyway in my opinion in such a humid climate as Vancouver wooden shacks must be rebuilt every 15-20 years, otherwise they smell funny inside because of the rotten wood structures.
As for land shortages look at Hawaii, they have way less land than we have here, they are on the islands. And yet it’s cheaper to buy an ocean house in Hawaii rather then tear down shack next to Hwy1 in Vancouver.
Where would you live?
Here:
http://www.realtor.ca/propertyDetails.aspx?propertyId=8917894
or here:
http://www.realtor.com/realestateandhomes-detail/3025-Diamond-Head-Rd_Honolulu_HI_96815_1114918892
I would rather be in Hawaii.
#69 TO Bubble Boy
Privatize CMHC – that is a great idea. Let the private sector hold the risk instead of the tax payer.
Unfortunately politicians would never allow this as it may reign in the housing market and stop the party.
It would interesting to see whether the private sector would place a value on CMHC portfolio or require the government to guarantee all of CMHCs insurance exposure.
Given what CMHC has done in the last couple of years and the background of the US market meltdown the smart money may view CMHC as a Fanny Mae or Freddy Mac in waiting and not want to take on that risk.
I am becoming more and more convinced that these clowns are engineering a crash. Nobody could be as incompetent as these people are yet still remain in office. Remember Bernanke’s famous statement? How he declared that there is no housing Bubble to go bust?
Again, these people are either way dumber than we give them credit for or they have ulterior motives for what they are planning. I suspect they are perparing for an election call soon.. Any if they get there majority look out chnages galore..
Remember this guy.
Bernanke: There is no Housing Bubble to go Bust
The rest was history.
‘Dad was wrong’ and ‘jr’ both replied to my comment on sovereign debt risk, but I am not sure either got my point.
My chart is from a Bond market analysis in the Financial Times of London, and cites the various Government statistics for national debt vs GDP and national budget deficits vs GDP – it is mostly known fact based. These are the factors Bond markets use to evaluate the sovereign (default) risk on national Bonds issued by Governments. These statistics should include Provincial, City, University system debt and any other debt guaranteed by the Federal Government of the nation in question. The Bond traders run models based on statiscal analysis, and they are betting huge sums on the probable outcomes. You can go argue with them why various nations are ranked higher or lower.
The rankings are what they are, and they say Canada and the USA are not near the top of the risk pile. If anything the Greek statistics (and those of many other nations) have been deliberately understated by wide margins, see Greek Debt Crisis How Goldman Sachs Helped Greece to Mask its True Debt and the earlier finding last week that Greece had not included some $40 Billion of local debts in its totals – Greek stats are highly fictional at best.
For more analysis, try Greek Ouzo crisis escalates into global margin call as confidence ebbs and Greece needs IMF to stem contagion and Athens Shares Extend Losses On Bank Stocks Decline “What we are clearly seeing is not a sell-off in just specific Greek shares, we are seeing a wholesale selling off of the country,” said Nicholas Douzinas, head of foreign markets at Intersec Securities in Athens. “We are seeing many open sell orders on the market,” he added.” ”
Zero Hedge had 2 stories “Deutsche Bank And Unicredit Pull Out Of Greek Repo Market, Cease Lending Against Greek Collateral” and yesterday “The Run On Greece Is Here: Investors Pull Out €10 Billion From The Troubled Country; Crisis Escalation Approaches” and also Rosenberg Recaps The European, And Sovereign, Risk Soap Opera In Ten Paragraphs Or Less” a reprint of a very clear analysis of the current state of play from one of Canada’s best analysts.
Maybe one day the USA and Canada will top the list, but today there are many nations on the verge of default now. Nations that collapse like Iceland get removed from the que, so we could move up as those ahead of us default, that would take years yet.
For Canada the task is not so difficult, compared to the others. You may argue your points as valid, but the market is not seeing it your way, judging by today’s price action. From reading your comments I can see some validity to your points but I think you are arguing apples to oranges to the Bond markets view, and they win with deeper pockets.
oops mucked up html there, sorry, bilge that if you want and I can repost fixed
Competition Bureau seeks to smash ‘anti-competitive’ rules on MLS
http://www.theglobeandmail.com/report-on-business/competition-bureau-seeks-to-smash-anti-competitive-crea-rules-on-mls/article1460083/
What’s going on with Le Madd Vlad. Not many postings these days.
Question: Will Minister Stop Privatization of CMHC?
Tue 17 Oct 2006
Mrs. Irene Mathyssen (London—Fanshawe, NDP) :
Mr. Speaker, I am sorry but I have to say that Canadians are very skeptical about this housing strategy from the new government. The Liberals starved housing in this country and now according to the reports the Conservatives are prepared to kill it. We need more affordable housing, not less. There is a national crisis out there. I want to hear absolutely, not only that the minister is committed to funding affordable housing and will not be privatizing our national housing corporation. I want to hear her say that they will stop the privatizing–
Hon. Diane Finley (Minister of Human Resources and Social Development, CPC):
Mr. Speaker, it is rather difficult to stop something that was never started or even contemplated. We will not have any plans to privatize CMHC. Any reports to the contrary are unfounded, baseless, without any reason and without any factual background whatsoever.
Mrs. Irene Mathyssen (London—Fanshawe, NDP) :
I am sorry, Mr. Speaker. I heard the same words from this minister when she talked about supporting SCPI and in my riding six out of ten projects have been cut; six out of ten projects for the most vulnerable people in this country. I want to hear once again that the government is prepared to bring forward a national housing program to make sure that people in this country are properly housed and to tell me absolutely there will be no privatization.
Hon. Diane Finley (Minister of Human Resources and Social Development, CPC):
Mr. Speaker, we recognize how important it is to take care of those less fortunate in our society. That is why we are spending over $2 billion a year through CMHC on affordable housing. That will help over 630,000 families right across this country. That is why also we reviewed all of the programming for SCPI and for the homelessness. In fact, we confirmed that $37 million for that program that went unspent by the previous government was available this year.
================
..”the Rudd Government has made a policy commitment to expand the affordable housing stock by 50,000 units through the national rental affordability scheme over four years and for another 50,000 units beyond that if there is sufficient investor interest (FaHCSIA 2008). However, the slow take up of the scheme thus far suggests that these ambitious targets will be difficult to achieve. We note also that $6.4 billion has been made available by the Federal Government to boost social housing through the auspices of the economic stimulus package. However, while this money will enable states and territories to build 20,000 new social housing units by 2012, this will not make up for the 23,134 unit decline in the social housing stock that occurred between the years 1996 to 2006. page 38 Australian Housing and Urban Research Institute February 2010
What future for public housing? A critical analysis
authored by
Keith Jacobs, Rowland Atkinson, Angela Spinney, Val Colic-Peisker, Mike Berry and Tony Dalton
Rory,
you were entirely too quick to declare victory at your #13. Links to organizations serving particular interests, such as the Conference Board, and media perpetuating the self-serving views of such interests or of their owners, do not amount to proof of anything (except the existence of such interests).
The devil almost made me post a link a few days ago. Looking for the total number of federal public servants and the associated costs of this “human resource”, I found myself on a PSAC webpage seeking to bust the myths of the cost of PS salaries and pensions. The reason I didn’t address the link to you was that, in good conscience, I would not consider it to be objective either.
Please do “show me one ‘real’ research paper” that does not cook the books to achieve an end. For a start, you could find and link to pages buried somewhere in the federal government that show the actual numbers and costs of the public service. It would be interesting to know what percentage of government operating costs are eaten up by human resources, then how these human resource costs stack up against government program costs. What slice of the total federal budget is public service pay and benefits vice transfer payments, etc.?
Without such discrete and comparative numbers, I suspect that you are trying to treat colorectal cancer by squeezing the human resource pimple on the government’s ass. The question of whether government is too big should be phrased only in terms of the role of government. Answer that, and the rest will be easy, although it might disappoint a lot of interests and people. And don’t ignore the common good; remember how the lack of regulation and regulators played out in the financial sector in the States.
That would be the debate worth having at the federal level, to be extended to provinces and municipalities in due course. Only after full use of facts and logic could “Right” or “Left” claim victory. But not on “Greater Fool”, given the current parameters of Garth’s site.
“As to the prisoner guards:” Privatize the prison system and see what happens to the wages and benefits.
Rory – are you suggesting that the present system whereby the courts decide who should be an inmate of a prison in this country and that the state pays the expense of operating these prisons is not how the prison system should be operated? Are you suggesting that all prisons should be operated by entrepreneurs? That the inmates should be recruited to become inmates at their own expense? That the courts be eliminated? Please explain what you mean and elaborate on how this model of yours will be paid for, as well as the numbers and types of facilities, numbers of guards versus numbers of inmates.
Stop bashing the 5/35 scenario like it is inherently evil and the root of the “problem”. It’s not. The real problem is sub-prime lending. And as far as I know Canada has a relatively low percentage of sub-prime borrowers. There’s nothing wrong with 5/35 for borrowers with a prime+ score. Moving to 10/30 WILL cause the big meltdown Garth and his cabal of emo boomers are waiting for.
IRT Knucklewalker
ROFL!
I’m in Victoria and cant believe the prices here. There are lots of high income earners here. One acquaintance is an Endodontist, he easily makes more than $400k per year. 2 years ago he bought a million $ waterfront and bulldozed it to build his dream home. Probably cost another cool Mill. He doesnt care what its worth as its his dream home.
Just some perspective here. There are people out there like this guy that have more money than God and are immune. Me, I bought my Oak Bay home in ‘98 for $280 and put about $100k into it. Cleared the mortgage 3 years ago and am enjoying the ride.
@Rory – Privatize the prison system? You have done zero research on private prison systems in the US if you think that privatization will actually save us money.
You want ideas on how to save tax money? Pull all the corporate welfare and make medium and large businesses stand on their own merits. Pull farm subsidies (etc) that go to large farm or farm-related corporations (I’m looking at you, Cargill). Continue to provide support to small businesses and new start-ups, including family farms.
No corporation is too big to fail. Support the former employees of failed corporations through unemployment and retraining opportunities, but stop feeding the corporations millions of our tax money. Stop selling public buildings to corporations and then renting them back at market rates forever.
Stop supporting the freaking tar sands and start supporting renewable energy projects – fund research and development and science and get out ahead of the rest in high tech. Stop dumping high tech projects because the US objects.
And most of all – DIVERSIFY our trading relationships so that we aren’t tied so closely to the US in all things.
Laying off (even more) public servants (and don’t kid yourself – federally and provincially public sector jobs have been dropping like flies – politically, it tends to be a popular move) just means you have less people to do the same amount of work and eventually you lose the efficiencies and too much doesn’t get done, just like in the private sector. It’s not the answer. They’re the people doing the work. It’s how the money is spent that needs some change. And how the money is raised. Personally, I’d dump the GST and replace it with a deliberate consumption/carbon tax on things that aren’t necessities (books, food, school supplies, fabric, kids clothes, generally the things you buy in a grocery store untaxed but electronics, cars, luxury items, “sin” items get a tax), and raise income taxes for all of us who make more than $50,000 per year. I’d raise corporate taxes to equal rates in the US (yes, our corporate taxes are lower than theirs – and we still have leverage because of universal health care – corporations save money because of this.)
Personally, I don’t like leaving things for future generations to pay which is why I’m willing to see my income taxes go up. If my generation (widely defined in this case as those of us who vote and pay taxes NOW) ran up the bills, we ought to pay them.
What a fantastic day here is the best place on earth! It is a balmy 12 degrees, and even the arriving international Olympic press is commenting on the great weather and the beauty of Vancouver! So much for all the gloom and doomers hoping for our traditional rainy and foggy February!
The exposure of a quarter million people to this piece of paradise during this fantastic weather will certainly stimulate interest in our real estate! This weather is conducive to walkabouts, visits to open houses, and patio dinners at a time when the rest of the country is buried in snow. The massive party, coupled with the weather and scenery, will leave a positive lasting impression on people! All those people that bought hoping to sell to Olympic visitors may have their gamble pay off.
And anyone who thinks that snow is a requirement to sell the city obviously does not know their Olympic history (venues in Nagano, Turin all had similar issues). What will sell this city is outdoor beer gardens, with weather and views unique to Vancouver!
Better start doing your rain dances bears, because nothing is going to cramp the Olympic spirit!
Remember and repeat to yourself, Rory: “I don’t mind paying taxes; it buys me civilization”.
Or, you could move to Somalia.
#88 Vancouver_Bear and #99 Hiteclowtec,
One of the undiscussed problems with the Realtors holding all the info on properties is that it has allowed them to make huge gains through speculation. They have access to information before the public. Very much like insider trading. How many realtors do you know in Vancouver that don’t have an investment property or 2 or 4?
If this system changed and created more transparency it would help bring prices down and create more equilibrium for buyers. Don’t get me wrong, not a huge impact but a positive one.
-
According to some there’s no bubble because:
There isn’t a bubble because of a lack of speculation in the real estate market, said Scotiabank senior economist Adrienne Warren.
(…)
“You are not hearing about a lot of speculative buying,” Greg Klump, the national real estate organization’s chief economist, said from Ottawa.
“Nor is there a lot of speculative building.”
It’s still a seller’s market in housing but it’s not a bubble, economists say
So really what issue?
I wonder how they would classify Garth’s blogger from Victoria. It would be interesting to see what the above economists would define as speculative buying or speculative building. Obviously anyone betting on RE price appreciation in one’s decision to buy property is not speculating as per Klump and Co.
Interesting times we live in, interesting indeed.
-
Bank of Canada Upholds Low Rate Pledge
http://www.financialpost.com/news-sectors/story.html?id=2537398
I could have paid off a mortgage by now…
#82 Junius
“Being an RE bear is about timing….”
Too funny…
Actually, if you followed your own bearish advice, and adhered to the much vaunted economic fundamentals like rent to own ratios and price to income ratios, YOU WOULD have sat on the sidelines for more than just two years because the economic fundamentals in Vancouver have been “out of whack” since 2004.
Nice try Junius, but your own bearish logic would have dictated a different tact than simply sitting on the sidelines since 2008….
The Canadian Real Estate Association has revised its forecast for Canadian home sales over the next two years. According to the report, activity will reach a record 527,300 units, up 13.3% from 2009. Meanwhile, home prices will climb 5.4% to a record $337,500, with gains in all provinces.<<<<<<<<< no technical recession here…its been solved….after all who needs jobs? the money is easy..future?–what future?….we live in a paycheque to paycheque society and stevie harpocrite will take care of us all……….vote for him after all what could be better…….we are all plastic millionaires and Canada's different (for sure)
#112
“Tyler Durden”
Why he was the “hero” in Fight Club.
Willing to fight Ghandi if he had the chance.
Ed Norton at his most bizzarre.
Classic
Sorry #113 was what i was commenting on
DOH!
#67 BigAl (Original)
Let us not forget the unions, the venom that breeds entitlement and abuse.
A REAL good read about the economic decline in the states. Written by an average joe like you or I . http://www.smirkingchimp.com/thread/26614
# 107 Vancouver Rocks
…Are we related?…Are you my long lost nephew?
Many Eastern Canadians “will never get it” and absolutely refuse to appreciate the West coast lifestyle positives…which therefore explains why they will never accept the cost premium to own here?
West Vancouver’s Evelyn project may well be a harbinger of Vancouver’s future R E Values.
http://www.evelynliving.com/
May we live and safe and interesting times.
Nostradamus jr.
Treasury Secretary Timothy F. Geithner said the U.S. is in no danger of losing its Aaa debt rating even though the Obama administration has predicted a $1.6 trillion budget deficit in 2010.
“Absolutely not,” Geithner said, when asked in an ABC News interview broadcast yesterday whether a downgrade is a concern. “That will never happen to this country.”
Really —–”NEVER”
Sail1 @ #117,
yea, damn those unions!
If it weren’t for them, we could still operate in the 19th Century, with 16 hour work days at little pay and no benefits, and wouldn’t have to export jobs to sweatshop countries to make the modest profit we’re entitled to.
Didn’t know, though, that it was unions that bred entitlement and abuse. Thought that was the prerogative of us corporate plutocrats. Would you happen to know which unions wrecked Wall and Main Streets and crashed the Big Three?
#100 Darryl on 02.08.10 at 4:39 pm — Still here Darryl, just hanging loose for a while!
——
Lotsa psychobabble happening in the world. Does anyone hear the sound of the crash-train steaming toward us? It is getting ever louder. Patience — all things in their time.
#49 Hiteclowtec on 02.08.10 at 10:04 am — “Massive unemployment will put the brakes on all the bubbles.” — Good point, as we ain’t seen nuthin’ yet. Sheeple on EI or welfare are not going to upgrade their unpaid-for McMansions, too busy trying to unload them. to Greater Fools.
#29 TheBigLebowski on 02.08.10 at 5:48 am — “We live in a planned society as written about as far back as the 1800’s and beyond. Nothing in politics, socially or economically happens by chance.”
True. Everything is unfolding at its’ own pace, but there is one item — nature — which no one can ever control. Real nature is the external forces of life, such as ‘quakes, asteroids, comets, tsunamis, Yellowstone, Toba and their cousins erupting unexpectedly.
——
Sunday, Feb. 14 is the start of the Chinese Year of the Tiger. Plenty of interpretations, not the least of which is the Tiger is to bring in jungle power. Gonna be an interesting year in more ways than one can imagine.
In Cantonese (the second Chinese language), the number 4 sounds like death (pronounced ’say’), which is why it is rarely used. Super Bowl 44 happened, so in combination with #93 knucklewalker on 02.08.10 at 3:37 pm — “. . . the planet is just so hopelessly screwed…” and Beware The Ides of March! — SB44 / Remember Haiti and 9-11?
D #106. Excellent comment. Consider the following if you want to see how the Stelmach Conservatives are running Alberta. This Canada’s future under Harper. The comment comes from a Wildrose Alliance MLA.
“Anyone with even basic financial literacy knows that to be penny-wise and pound-foolish can quickly leave a household or business insolvent. Government is no different. Why cut $10 million from disabled persons when you could cut $35 million in grants to Horse racing Alberta? Why contemplate $300 million in reductions for education when we could save $2 billion by cutting the carbon capture and storage corporate welfare handout? Why cut $70,000 from Alberta Hospital for basic living essentials for the mentally ill when there is roughly $1.5 million per year spent on grants to golf courses?” Rob Anderson, MLA Airdrie-Chestermere
There are two things infinite:
The universe and human stupidity…
and I’m not sure about the universe.
#97 Got A Watch on 02.08.10 at 4:10 pm
‘Dad was wrong’ and ‘jr’ both replied to my comment on sovereign debt risk, but I am not sure either got my point.
For Canada the task is not so difficult, compared to the others. You may argue your points as valid, but the market is not seeing it your way, judging by today’s price action. From reading your comments I can see some validity to your points but I think you are arguing apples to oranges to the Bond markets view, and they win with deeper pockets.
******************************************
I think i did get your point and that is why i said–
We need to see where the market places our CDS risk,when the bubble pops-
I realize the US is as low default risk and will probably stay at low risk–
They’re credit bubble popped long ago–as you know–
They owe all debt in USD–so they will never actually “have” to default–
Canada is still in an Inflationary blow off–proof is in our housing market–
My point was–how will the swap traders rate Canada,when the losses start to be realized,and the picture changes from today?
Until then–of course we’ll rate low–
Spreads have only recently started to really blow apart,with Greece and we all knew they were hooped–long ago–
I suspect Canada,will move up–not down-with CDS risk ratings-
MBI litigation against Countrywide Financial et al, MBIA Insurance Corporation v. Countrywide Home Loans, Inc. et al. the lawsuit now includes BAC explicitly.
http://us1.institutionalriskanalytics.com/pub/IRAMain.asp
================
Banks are not helping their “Brand” with words like this
Re: Hans-Olaf Henkel, Bank of America’s Senior Advisor in Germany
Dear Dr. Massey,
I am writing in my individual capacity. It came to my attention yesterday that Bank of America’s “senior advisor” in Germany is Hans-Olaf Henkel. I believe that Bank of America should consider the context in which I became aware of this fact very disturbing. Mr. Henkel has just written the following:
Bank of America’s “senior advisor” in Germany – the leader of a team of advisors that help set the bank’s policies – is bemoaning the end of redlining and claiming that American bank loans to black “slums” caused the global financial crisis. I know that you understand exactly what redlining means – the deliberate exclusion of minority borrowers from credit on the basis of ethnicity. I also know that you understand that Mr. Henkel’s effort to blame the global crisis on black Americans has no basis in fact and is the product of the vilest bigotry.
Americans, of course, are not unique in being susceptible to the bigotry. Consider the policy advice that Mr. Henkel gives in the German context.
Dr Thilo Sarrazin, a member of the executive board and head of the bank’s risk control operations, told Europe’s culture magazine Lettre International that Turks with low IQs and poor child-rearing practices were “conquering Germany” by breeding two or three times as fast.
“A large number of Arabs and Turks in this city, whose number has grown through bad policies, have no productive function other than as fruit and vegetable vendors,” he said.
“Forty per cent of all births occur in the underclasses. Our educated population is becoming stupider from generation to generation. What’s more, they cultivate an aggressive and atavistic mentality. It’s a scandal that Turkish boys won’t listen to female teachers because that is what their culture tells them”, he said.
“I’d rather have East European Jews with an IQ that is 15pc higher than the German population,” he said
Yes, he actually said that things had gotten so bad that he’d prefer to have Jews, ratger than Arabs and Turks, move to Germany. (Because, as we all know, Jews are 15 percent smarter.) How did Bank of America’s senior advisor respond to this delusional hate speech (made public in early October 2009)? He began an immediate media crusade in support of Mr. Sarrazin’s bigotry. He gave video interviews and sent (and published widely on the web) an open letter to “Lieber Herr Sarrazin” to express his unqualified support for Mr. Sarrazin’s statements (without any “if” or “but” as he put it).
Bank of America chose Mr. Henkel as its senior advisor in 2006. He has been assembling the bank’s team of policy advisors since that date. Given the fact-free, virulent bigotry that lies at the core of Mr. Henkel’s view of minorities it is certain that his bigotry determines his policy recommendations. Moreover, the individuals he has recruited to serve as the bank’s policy advisors under his overall direction, at a minimum, are willing to stomach his bigotry without protest.
And it continues to accelerate.
Foreclosures up 27% in Atlanta area, Feb over Jan. MSM is actually publishing figures which do not pump RE. It is a buying opportunity!
http://www.myfoxatlanta.com/dpp/news/Metro-Atlanta-Foreclosures-Jump-in-Feb.-020810#
Their economy has gone for a 5h1t and we are catching up.
Just curious,
Anyone out there besides me think that the usual West coast professional protestors with their natty dreadlocks and hydroponic pain killers will be front and center at the opening ceremonies at BC Place this Friday? Its only a short mob induced pepper sprayed stagger from the Art Gallery where they usually congregate.
Any bets the the unemployed little gaffers will be pushing and shoving to get on the International Stage with their Luddite version of the New World .
Not much news media coverage on last Fridays pushing and shoving match at the Art Gallery.
Stay Tuned folks only 3.5 days til Friday.
Should be interesting
I’m curious how many other Conservative voters on here have decided to not vote for the Conservatives in the next election. It is quite obvious that they have almost single handedly destroyed housing affordability in this country. I have never not voted Conservative but they have pi$$ed me off so much on this issue that I will not vote for them in the next election.
They have manipulated and created an environment where housing has gone from being an affordable dream to an unaffordable nightmare. Low interest rates and terrible decisions by Flaherty and the Conservatives started the Bubble and they are doing everything in their power to keep it growing.
Pass the word to your Conservative friends, it’s time to vote the bums out of office.
http://www.rabble.ca/news/2009/10/canadas-sub-prime-mortgage-time-bomb
Let them know how you feel.
Jim Flaherty: jflaherty@fin.gc.ca
Stephen Harper: pm@pm.gc.ca
#66 Vancouver Rocks on 02.08.10 at 1:03 pm
You continue to make foolish ascertions of which, I am moved to point out.
“Well, here is to another decade of sitting on the sidelines for many bears…” – Vancouver Rocks
Are you a prophet of God or the devil? A sayer of soothes? How can you be so sure, 10 more years you say…
“Your government has spoken and their will be no interest rate hikes for years to come (especially if the stock market crashes like the bears hope) and no changes to the DP and amortization requirements. The feds have even rejected the call for caution by all of the central banks.” Vancouver Rocks
Government sources have spoken, no rate hikes for years to come… sources please. C’mon now, don’t hold out, lets drop some names. You won’t mind if we don’t all hold our breath for this one. Yes, quite an ascertion! Our governments will never even change in the years to come apparently, our central banks will of course, simply do nothing about failed governmental policy stances, not through the media or otherwise that they also finance, apparently banks too, are powerless to do nothing about governmental policy for years to come. Why? Vancouver Rocks said so!!!!
“It is clear – this party will continue because housing has been a shining sector in the national economy, and because overwhelming majority of voters are homeowners. And when job prospects look bleak, the fact that you know that you have money coming in through an appreciating house keeps people’s spirits up.” – Vancouver rocks
Yes, it is all so crystal clear as you say. The rosy past and present will always be the future now as nothing changes, including the extremely high values of real estate. (yawn)
“In Vancouver, the bears have been saying that the “bubble” will burst since 2004, and yet here we still are with increasing prices and bidding wars. The best case scenario for all you bears is to hope for flat prices, because that is probably the best you will get.” – Vancouver Rocks
2004? Where do you get 2004? Don’t you know RE’s history? Our federal governments haven’t artificially stimulated RE signifigantly until Hapless Harper came on the scene and brought in 40/0’s or Canada’s versio of sub prime in 2006. (after reading some other comments, look like you aren’t alone) We didn’t begin to enter bubble territory until 2008… It is here that long amortizations (40 year) created cheap credit the likes of which Canadians had not yet seen historically. Going from 25 year terms to 40 year terms increased mortgage affordability by dropping payments all on its own by 40%… of which, in a static interest rate environment combined with earnings growth, would lead to a 45% increase in home valuations over 2 years time. How much time would it take before such amortizations get fully priced in?
The U.S. example suggests 3 years… maybe 4 before flatlining without a drop in rates. There were signs of flatlined RE valuations in some markets in Canada by the end of 2008. 40 year nothing downs changing to 35 year 5% down regs also created a flurry of buying over the last 3 months of 40/0’s and with a world wide recession beginning (or finally made public), RE was poised to cool after the end of 2008…. but that all changed when the BoC dropped its rates to a jaw dropping .25% fed rate so even with a reduced 40/0 subprime down to 35/5’s, current regs combined with current interest rates (2.25 VRM’s) have brought mortgage affordability to levels unseen historically in Canada and these new, record cheap levels of mortgage affordability will be priced in as home valuations continue to rise.
Hey, is there anyone who is surprised by 19% year over year appreciations in national RE valuations last year considering this? Anyone surprised about a 17% prediction of RE increase in valuations this year? Where will it be this year if interest rates stay unchecked? How many years will it really take for record cheap credit to be priced into RE to the point of full max? Vancouver Rocks says we have 10 more years to go. Anyone believe him? (I’ve got a bridge to sell, cheap! Only 30 years old. Think of the money you could make with a toll!)
“And if this all deflates, it will be another 5 or 10 years before prices go back down to being “affordable” by all your economic metrics. For all you hardcore Vancouver bears that have been saying its unaffordable since 2004, enjoy paying a minimum of a decades worth of rent…” – Vancouver rocks
Wow, you make a 5 to 10 year slide in RE valuations sound real sexy! Affordable to me is 2006 levels. Again, I have no idea where 2004 comes from in your mind. A dinner guest at a party perhaps?
When anyone can rent homes for a full third less than the cost of payments to buy (never mind taxes and upkeep) in a climate that will never again see such cheap credit (too bad most of it is already priced in), it is foolish to own. If you don’t mind, I’ll stay renting. The alternative to the risk of negative equity isn’t worth it. Its disappointing to see that individuals like yourself won’t address such risks knowing that such risks realized, will ruin lives.
Actually, it blows my mind that you can take on this position without guilt or conscience. Bears buy in when things are cheap so they don’t get hosed with negative equity. They’ll be the ones who don’t go bankrupt because they didn’t live beyond their means. They’ll also be the ones who pick up the pieces of a devastated economy, just like they are in the U.S. Don’t you yet realize that just as cheap credit is getting priced into RE valuations, so too, will expensive credit in the way of higher interest rates?
Those you try influencing towards “ownership” today (and ownership of what, a home that the bank owns with 2 missed payments) will be walking into 8 to 10% interest rates when they come up for renewal. There is going on a full year of people who have 4% mortgages now, but will be seeing their debt service double or worse 4 to 5 years from now when it comes time to renew. Will they be able to do it? Obviously you don’t care. Own over rent at any cost is your motto. What if it costs literal lives or breeds a recession outright. Do you care? I don’t see any evidence of it.
The federal Competition Bureau says it will challenge the restrictive rules that govern the multiple listing service (MLS) system used by most Canadian home sellers to list their properties
What are the positives of this for a buyer and seller what addtional info will we get?
The trend is your friend … gettingtechnical.com is saying a shallow spring correction on 2010
Shane
# 127 Jess
….Racism in Germany?…or better yet, in other parts of Europe too?
Too many on this site don’t know just how lucky they are living in Canada, more specifically, Western Canada and even more specifically Vancouver and most specifically the North Shore.
…Just wait untill large scale physical racism occurs in dozens of spots around the world.
May we live in interesting and safe times.
Nostradamus jr.
G,I hope you don’t mind the repeat . I think it is a good reminder of what we, as a nation, are facing on a daily
basis .
I know it is politics but in this era of intolerance I feel it is necessary .
http://www.thestar.com/News/Canada/article/431370
…Your prejudice vs Western Canada really shows.
Nostradamus jr.
Yea, so why don’t you take a walk in the ocean till your hat floats . Moron .
94 Bear – the median multiple from demographia (price over income) is 9.3 Vancouver, 8.2 Honolulu. Quite comparable. Cherry picking two properties does not provide a basis for debate.
131 Daystar “Affordable to me is 2006 levels”. Again according to demographia, median multiple for Vancouver in Q3 2006 was 7.7. That would be about 21% correction.
Still defined as “severely unaffordable.
Interestingly, demographia does not cite the low interest
rates as being a cause of the bubble. If they were,
wouldn’t we get a more uniform effect?
nostradamus jr.
I’m repeating myself for people like yourself.. I live in Kelowna…Lighten up..He has a lot of good advice …I’ve taken some….
There are two things infinite:
The universe and human stupidity…
and I’m not sure about the universe.
Think about it….
I think it’s time to put the union pig on the Atkins diet.
You know what, maybe we can exile all public union leaders to Somalia so that they can help Somalis build their civilization. LOL.
Tool man epitomizes everything that is wrong in this world.
You are one greedy bastard . Hope a tsunami wipes out your precious waterfront with you in it .
What a goof !
[...] Comment This anecdote is third hand. It comes from a speculator in Victoria, and has already been headlined at greaterfool.ca, and commented on there by Garth Turner. It deals, however, with a sentiment that is so seminal to [...]
Dan in Victoria — always great and interesting comments from you. I notice a lot of Garth’s Vancouver Island bloggers make great comments. They must not be drinking the fluoride water that the rest of us “useless eaters” are stuck drinking.
Get the truth while you still can:
http://www.infowars.com
There have been rumors in Vancouver that the increasing rental stocks are at least partly attributable to overseas investors cashing out of the Vancouver market and selling their unoccupied condo’s and houses to overleveraged local buyers who rent out a room or a basement as a mortgage helper.
I recently rented out a basement of a 5 year old house bought by a local couple. This house was previously owned by an overseas investor with Cdn citizenship who spent no more than a month or two in Vancouver each year. Apparently, he is planning to relocate to the U.S to take advantage of better business opportunities.
Someone’s also suggested that the Obama administration is trying to make it easier for immigrant investors to obtain green cards. With the advantages of a U.S. green card and relative advantages in the prices of American real estate and business opportunities, perhaps it’s possible that mobile oversea investors without any particular attachment to Canada have started selling their Vancouver units in favor of investment opportunities in other markets.
131 Taxpayer like everyone else
Can you give me a link for that? Thanks
#107 D ..
I have said previously to dump all subsidises so I agree with you …also I agree in not laying off public servants (again, sated previously) but we need to control costs AND we need to do something …my something is a reduction in salaries and benefits for all levels of .gov and across the board …that’s it, you keep the people and you keep the service levels … KISS.
#109 DUI on Money Road
I have no problem paying my fair share of taxes and I do every year like the rest of us …but I do have a problem with paying taxes when the people I pay them too have such little regard for the money I do contribute and think I will happliy give more just because they want more …you do know you could do more for your country and just sign your whole cheque over to the CRA …is that the intent of your comment.
#90 luckyc
As to Bill C-10 …I dislike when particular groups are targeted and others are not …my idea is everyone gets picked on equally to balance both sides…fairness for all.
Good night all …been a fun day.
138 Taxpayer
Thanks for pointing out that nice little nugget!
131 Daystar
If you think that 2006 prices were affordable by your bear metrics of a 1:3 income to price ratio, then you are delusional or simply cherry picking what is a bear metric. And yes, there was a buzz around town and by some bankers that were were in a bubble because of the rapid appreciation in two years. TD even published a report in 2004 that raised bubble concerns in Vancouver….
Bear blogs in VANCOUVER (
RE: #134
I’m a total amateur at reading/interpreting charts, but I think I could make a case for 340K being the support price (about 20% drop from 420K high).
In 2005 about 340K was a bit of a ceiling, before breaking through in 2006. This then turned into a support level tested at the end of 2006 and again in 2008. I imagine under this level may be over correction territory?
Or I could be totally out to lunch on this this and should leave commentary to those who have a clue….
#138 Taxpayer like everyone else
Yeah, you’ve got me thinking with that one. I didn’t think Vancouver values had only risen 21% since 2006 until you forced me to look into it of which I’m thankful. After looking into it more closely, 2004 levels are much more realistic benchmark of re-entering the Vancouver RE market which would mean a 38% correction from where it is today. Even if RE values rise another 15% this year if interest rates remain unchanged, I would think that Vancouver RE will revisit 2004 valuations as rates begin to rise regardless of where Vancouver peaks.
This link, I found interesting in search of Vancouver RE historical Vancouver RE valuations which backs up your ascertion that Vancouver RE has risen a paltry 21% since 2006.
http://www.chpc.biz/Vancouver_Real_Estate_Chart.htm
http://bp2.blogger.com/_PiR0viQSvUQ/SCdpktKrQNI/AAAAAAAAAC4/S16CXUMSuzI/s1600-h/canada_interest2.png
Please compare this chart above with the last 23 years of interest rates to get an idea of how dramatically interest rates influence RE markets with Vancouver as no exception, with Vancouver buyers financing for lion’s share of their mortgages regardless of where they are from or moving to. Although 5 year term rate chart provided by the link above is slightly dated, we all know that terms are now around 3.79%, lower than they have ever been before in Canada’s history. This has taken Vancouver back to its bubble peak values which have risen 16.2% from Nov 2008 to Nov 2009.
When combining the link above with a historical chart of interest rates, its plain to see that increased mortgage affordability boosts RE valuations. Long amortizations combined with record low interest rates has stoked the RE markets in Canada like never before (and likely never will again). In essence, Vancouver is in a bubble that is at extreme risk of imploding with even the most modest of rate hikes? With 40% of current mortgage holders floating, another 10% at 1 year terms and the remaining 50% at 5 to 7 years, the answer is a loud yes. Rate hikes will not only have a dramatic impact on monthly payments, it will have a dramatic impact on consumer spending as it reduces disposable income.
http://vancouvercondo.info/2010/01/at-home-in-the-tulip-patch.html
Its simple math, really. A $700,000 home that was impossible to finance for most 5 years ago can be done with a $70,000.00 net income today. With a 35/5 mortgage, interest on $665,000 on a 3.79% 5 year term is $25203.00 Add 20,000 on for principle and debt service is $45203.00, or $3767 per month. The question most of us should be asking, is… thats all? Sounds too good to be true… cause it is.
Lets say interest rates come back to a more normal 8% as evidenced by this historical chart (where is that chart):
http://bp2.blogger.com/_PiR0viQSvUQ/SCdpktKrQNI/AAAAAAAAAC4/S16CXUMSuzI/s1600-h/canada_interest2.png
Payments at 8% suddenly become $6100 a month as opposed to $3767 today. Will today’s 5 year term holders be able to adjust to a mortgage hike of $2300 a month? Maybe… maybe not. Maybe they float in the hope of dropping rates so they can better cope but the gamble doesn’t pay off or by 2015 rates are 10% or rise to it. Monthlies suddenly balloon to $7208 per month, or nearly double the monthly payments on the same mortgage of today. Will today’s homebuyers be able to afford to hold onto their homes?
Certainly common sense dictates that new buyers won’t be able to afford these higher, more realistic levels of debt and the market will correct accordingly. In this case however because the numbers are much larger in Vancouver, higher rates would spell disaster for Vancouver RE.
Thanks for forcing me into taking a better look at Vancouver. I can easily see RE values returning to more realistic 2004 levels as interest rates rise accordingly.
I found this link below to be quite amusing. It reminded me instantly of Vancouver Rocks most naturally, as I read it.
http://vreaa.wordpress.com/2009/09/28/bearish-since-2004-looking-for-a-semblance-of-sanity-in-vancouver-re/
Hi Garth
I have been reading your site for a long time mostly the real estate part. I try to read most of the comments. most of the thing I wanted to say has said by others so I never posted a comment but today I feel so angry that I had to say something.
I am very angry at the liberal party by their opportunistic and bad dcisions and I tell you why. I voted liberal all the time except last election. because they were incompetent and they basically took no firm position on any issue So they lost the vote. time passed and there came out of US Mr. Egnatieff and couldn’t wait to be a PM . When the news about the economy slowdown came at the time of the budget Mr. Flehrty said the gov. like all canadians must tighten their belt and go through this , oh my god !all the insult started that the gov. has no plan and people are loosing their job ..and save GM ..and put a 30 Billion $ shovel in the ground asap we don’t care where and Harper has no plan ….and Ganging up to bring the gov. down. and putting the gov. on probation and all the propeganda and . nobody wanted to do the right thing . now they say why this much defficit its all Harper’s fault we could do this and that.
I now see even if sombody wants to do the right thing they bully him and waste people’s money.
Now I do not want to defend Harper nor blame the liberals too much just want to say for God sakes just make a decision for people and agree on it . What have we regular people done to deserve so much hardship.
Who is gonna pay this defficit and all these HST and GST and all this taxes from our tiny after tax income and don’t you even ask about Toronto under Mr. Generous with people’s money Mr. David Miller.
I am so diappointed
Garth, Do we have a choice to vote somebody else ? if we do I am with you. it seems that good politicians lost the courage and bad politicians dirty talk the opponent out of the game and pass the ball to each other back and forth and us left to look after ourselves.
#147 Vancouver Rocks on 02.09.10 at 2:07 am
Its simple. Your own buzz is unrealistic. You are bashing bears for being intelligent and talking up real estate as though it’ll never depreciate substantially. If anyone takes you seriously at all, you’ll do nothing but harm. Do you care? Thats what I want to know. Do you have any feeling whatsoever on the possible consequences to your own influences on this site?
I do. Make mistakes all the time and they are sometimes quite easy to spot. But don’t we all, Vancouver rocks. If you don’t find yourself humbled from your stances on this site, reality itself will find a way of humbling you. All it will take is a hike in rates and this party is over.
Garth ,
How can we put pressure on the federal Competition Bureau to brake up the CREA? Since they are getting on the CREA maybe this is the time for people to speak out and put the final nail into this IMO criminal organization. Anyone have an idea on how we can all put pressure and crush them and this bubble once and for all?
151 Daystar
“You are bashing bears for being intelligent and talking up real estate as though it’ll never depreciate substantially.”
Actually, YOUR intelligence was called into question by Taxpayer 138 who pointed out that your concept of “affordable” in 2006 was incongruent with your own bear metrics.
And what is with the emotional plea of me caring about the “consequences” of my upselling RE?
Buddy, go ask that question to the realtors, the bankers, the developers, the government – in other words all the “salesmen” out there whose purpose was to get people to buy. Do you blame a car salesman because you bought a product based on his “advice” and it turns out to be crap?
Or ask yourself the same question – do you care about the consequences of your own advice that may have resulted in people missing out on a 25% runnup and the chance of owning their own home?
Buyer beware and do your own due dilligence is something that everyone should be aware of. Stop trying to be the noble individual that altruistically warns people not to buy…
Daystar – thanks you for the links. ‘Tis grand blog ye bring.
The demographia.com website has the latest housing
affordability study front and center. See Garths “the big
one” from a few days back. The study has been greatly mis-qouted as “vancouver has the most expensive RE in the world”. The study uses the “affordability” ratio and only studies six anlgophone countries.
As Sarah’s picture awaits, I will only counter that rates
are closer to historical norms now than they were in 1981
or perhaps 1990. So maybe house prices were held
artificially low during those periods.
We can catch up later.
This Time Is Different. Canada is different from the U.S. and F is confident there is no housing bubble. We’ll that’s good enough for me. Go housing prices Go!…Yah!
http://news.goldseek.com/MillenniumWaveAdvisors/1264953600.php
Below quote is from the article above:
“If there is one common theme to the vast range of crises we consider in this book, it is that excessive debt accumulation, whether it be by the government, banks, corporations, or consumers, often poses greater systemic risks than it seems during a boom. Infusions of cash can make a government look like it is providing greater growth to its economy than it really is. Private sector borrowing binges can inflate housing and stock prices far beyond their long-run sustainable levels, and make banks seem more stable and profitable than they really are. Such large-scale debt buildups pose risks because they make an economy vulnerable to crises of confidence, particularly when debt is short term and needs to be constantly refinanced. Debt-fueled booms all too often provide false affirmation of a government’s policies, a financial institution’s ability to make outsized profits, or a country’s standard of living. Most of these booms end badly. Of course, debt instruments are crucial to all economies, ancient and modern, but balancing the risk and opportunities of debt is always a challenge, a challenge policy makers, investors, and ordinary citizens must never forget.”
And this is key. Read it twice (at least!):
“Perhaps more than anything else, failure to recognize the precariousness and fickleness of confidence-especially in cases in which large short-term debts need to be rolled over continuously-is the key factor that gives rise to the this-time-is-different syndrome. Highly indebted governments, banks, or corporations can seem to be merrily rolling along for an extended period, when bang!-confidence collapses, lenders disappear, and a crisis hits.
“Economic theory tells us that it is precisely the fickle nature of confidence, including its dependence on the public’s expectation of future events, that makes it so difficult to predict the timing of debt crises. High debt levels lead, in many mathematical economics models, to “multiple equilibria” in which the debt level might be sustained – or might not be. Economists do not have a terribly good idea of what kinds of events shift confidence and of how to concretely assess confidence vulnerability. What one does see, again and again, in the history of financial crises is that when an accident is waiting to happen, it eventually does. When countries become too deeply indebted, they are headed for trouble. When debt-fueled asset price explosions seem too good to be true, they probably are. But the exact timing can be very difficult to guess, and a crisis that seems imminent can sometimes take years to ignite.”
How confident was the world in October of 2006? I was writing that there would be a recession, a subprime crisis, and a credit crisis in our future. I was on Larry Kudlow’s show with Nouriel Roubini, and Larry and John Rutledge were giving us a hard time about our so-called “doom and gloom.” If there is going to be a recession you should get out of the stock market, was my call. I was a tad early, as the market proceeded to go up another 20% over the next 8 months.
As Reinhart and Rogoff wrote: “Highly indebted governments, banks, or corporations can seem to be merrily rolling along for an extended period, when bang! – confidence collapses, lenders disappear, and a crisis hits.”
Bang is the right word. It is the nature of human beings to assume that the current trend will work out, that things can’t really be that bad. Look at the bond markets only a year and then just a few months before World War I. There was no sign of an impending war. Everyone “knew” that cooler heads would prevail.
We can look back now and see where we made mistakes in the current crisis. We actually believed that this time was different, that we had better financial instruments, smarter regulators, and were so, well, modern. Times were different. We knew how to deal with leverage. Borrowing against your home was a good thing. Housing values would always go up. Etc.