Garth live, Nanaimo Sat., Victoria Sun., noon, Conf Ctrs.
Once upon a time I sat in a caucus meeting of federal Conservative MPs and pitched them on the need to let retired couples split pension income. When I was done all eyes turned from me to the end of the table, where the finance minister was sitting, jotting notes.
Jim Flaherty looked up, then trashed the idea. Fifty-eight days later he implemented it.
This is called politics. It’s about expediency. Kinda like being elected on a promise never to put your country into deficit, then spending your brains out. Some may call this flip-flopping, deceit, manipulation or bait-and-switch but it’s just the way Ottawa works now. There are no touchstones any more.
And this brings us to F and March 4th. Budget day. After denying there’s a housing bubble in Canada and pooh-poohing the need to toughen up on mortgage regs, he is about to do exactly that?
I told you days ago my sources were saying F was not planning on CMHC changes which would require a minimum 10% downpayment (up from 5%) in order to qualify for mortgage insurance. Too drastic, they intoned. Hammer treatment for a gnat. Market forces will prevail.
And so they have. The latest numbers show a 19% price jump in 2009 when inflation was 1% or less, wages actually fell and unemployment rose. Now CREA says expect another 5.5% this year, while developers and realtors in BC and Toronto are openly talking of double-digit increases. This means Canada has surpassed the level of unaffordability at which the US market collapsed. It puts Vancouver, Victoria and Toronto on the list of the dumbest places on the planet in which to buy real estate. And it guarantees middle class angst as the price of a shelter crowds out everything else.
Hell even the Wall Street Journal this week carried a front page story on Canada’s bubble, amid news that senior bankers have been asking F – in private – to cool this thing off before it inevitably blows up, complete with a home-grown mortgage crisis.
Now controversy rages. The head of ING Direct Canada is warning F that tougher mortgage rules could topple the market. “I worry about government-based tightening of the mortgage rules creating a much worse reaction – too fast of a cooling, which is not really good for anyone.” Well, Peter Aceto, not exactly true. Some market sanity might help us prevent repeating the mistakes others have made, as much as you like giving mortgages to people with no money.
Meanwhile Scotiabank warns, “”You can’t go from 100 km/h to zero in a nanosecond without suffering harsh consequences. Newton’s third law is the best caution that can be served up with respect to abruptly altering Canadian mortgage rules as per some of the whisper talk leading up to the March 4th federal budget after the currently government sharply liberalized the mortgage market in early 2007.”
In case the dog ate your physics text that law says, for every action there is an equal and opposite reaction. This is what the BC Mortgage Brokers Association has also been warning – mess around with downpayment rules, and there’ll be seriously negative crap flying in the direction of everyone who’s bought in the last two or three years.
Which is quite true – if they went in with 5% down, or less, and gorged on a cheapo 35-year mortgage. For those people the inevitable market correction of 10% in the months after the rule change, and the further 10-20% that will occur in 2011 as interest rates rise, will wipe out their equity. Leave them wondering how they could have believed anyone who said house prices would rise without end. They might even understand some day why it takes actual money – you know, like, savings – to buy something which costs half a mil.
In any case, that F is a wild one. Say this, do that. Pledge something, reverse it. Make a solemn promise, hump it. Whatever.
But I’m thinking there might be one hell of a buying binge coming in two weeks.
And now, just to show a few normal people read this blog, we whisk you to Ontario:
Dear Garth: I feel like I’m taking my life in my hands, just writing you this question. I’m 35, single, own my own moderately successful business. I have no debt and have saved more than 200K.
I live in southwestern Ontario and want to buy a modest house ($230,000) for myself. My father yells at me that this is not the time. Your blogs yell that this is not the time….I even agree that this is not the time to buy. However… I’ve put off buying for five years already- waiting for this big housing bubble to burst. (And as smart as you and my Dad are- you can’t predict these things to an exact date)
I live in a one bedroom apartment and renting the house I would like would cost between 1,200 and 1,400 per month. I’m not one of the nitwits putting 5% down on 40 year mortgaged McMansions… so does buying now make me a Greater Fool or someone who just wants a home?
Shaking in my boots, Lynn.
What’s not to like about a 35-year-old self-employed woman with $200,000 in cash?
So, Lynn, you have to ask yourself why you’re buying. First, you live in the rust belt so mercifully houses are dirt cheap – and likely to stay that way until China comes to its senses and sends our jobs back. Second, you have tons of liquidity. In fact, if you invested that two hundred in dividend-paying preferred bank stock, you’d have almost enough of an after-tax income to rent the same house. And you’d still have the $200K.
Third, given the above – if Ottawa does drop the hammer, or the central bank hikes rates, or another car plant or two bites the dust in your area – then you have every reason to believe prices will be lower by Labour Day. So wait, already.
But if you do succomb, pay cash. Next, take out a big mortgage on the house and buy $200K in dividend-yielding preferred bank or utility shares along with corporate bonds. You will then have your home, your investment portfolio, enough new income to pay the home loan, and a 100% tax-deductible mortgage.
Which, trust me, will make you even more desirable.
159 comments ↓
Vancouver 2010, The WEATHER, and international buyers!!!
Looks like rain for the Feb 11th, 12 (opening day), 13, 14, 15, and 16th. No one with big bucks will buy in Vancouver if this weather persists. First impressions count and this won’t be good for the bulls on RE.
Wonder if there is a bailout for that? doesn’t hurt to ask.
Good point, everyone is guessing about what F will do.
My guess is that he will bring in 10% ammort. What the blog dogs and media are forgetting is that is all about CMHC.
Self peservation
The banks are all going to be against as this will significantly affect their profits. They get the best of both worlds, they make the interest on the mortgage, get to sell the mortgage in bits and pieces, yet if the mortgage goes bad, CMHC covers the loss.
Love reading about all the “doom” that this will cause. LOL
I still remeber back in the 90’s it was at least a 15 or 20% downpayment with 25 year ammort, that was not the end of the world. And back then, mortgages were tough to get, not like today where if u can fog a mirror, you are approved.
politics is ugly
I don’t vote, hell over 40% of Canadians don’t vote
is that unpatriotic or patriotic ?
I’m sure Vancouver politicians would love a buying binge on the Olympic Village condos. The city ended up financing the project after the US lenders backed out. City taxpayers will be on the hook for any losses.
I love how all of these cautionary statements from the real estate industry and the banks conveniently forget that before the Conservatives came to power in 2006, one could ONLY get a minimum 20% down / max. 25-year amortization mortgage (and 25% down only a short time before that).
Somehow, I just don’t see the parallels between “going from 100 km/h to zero in a nanosecond” and raising mortgage down payments to 10%. Is requiring 10% down really the equivalent of travelling at 0 km/h in mortgage land?
10% down is HALF OF WHAT WAS REQUIRED ONLY 3-4 YEARS AGO!!!
That’s like saying, if you put the GST back at 6% (half way back to the 7% it was before the Conservatves cut it), then the entire retail/consumer society will stop buying things.
For all the insults thrown at the “sky is falling” bubble believers, the ridiculous over-reaction from real estate and mortgage industry is actually far more distant from reality.
The Commissionaire security guard at my workplace entrance has 3 properties and we have had discussions on where things are going. He has always maintained real estate is a fine investment which never goes down.This morning he started up a conversation about real estate bubbles.
When the security guard and the “shoe shine boy” and every MSM outlet are talking it, you know the game is up.
Isn’t putting all that cash in bank stocks like putting everything in one basket? And if the stock drops back to $35?
Garth,
After preaching diversification in your latest book, I’m surprised to see you recommending putting her entire net worth into one asset.
Also, what do you expect to happen to the value of Canadian bank stock during a prolonged housing downturn? (Or the dividends). The fact that the banks are pushing for tighter CMHC rules leads me to believe that they expect to take a significant hit if this bubble gets any bigger and values fall over 15-20%.
PF stock is not like volatile common stock, and this was illustrative of splitting wealth between real estate and bond-type equities. — Garth
Too late “The Truth”
Weather has been nice for several weeks while everyone was setting up…it was on NBC this morning, which hits 5 million people
And did you note that the second week of the Olympics will be sunny with even warmer weather….
Face it, with 250k people on the ground, enjoying the fantastic beauty and patio weather, these rich tourists will be buying. It only takes a fraction of the visitors buy and eat up the already super low inventories.
Vancouver will become a city owned by the rich, foreign and local….get used to it
#1 TheTruth
…Looks like rain for the Feb 11th, 12 (opening day), 13, 14, 15, and 16th….
What? Rain in Vancouver in February?
#3 squidly77
It makes you a homer Squidly.
Only you can prevent career politicians…
“‘TRUTH”
So some ‘international’ buyer with ‘big bucks’ who flies in for the big party is going to lose interest in purchasing a home because of the weather? Really? Really?
We have to stretch for a negative angle on everything, no matter how irrelevant? I’m not a Van pumper, but come on, lets get real. Not everybody thinks in such simplistic terms. Especially those who have made their wealth already.
F is in the nasty “Rock and Hard Place”. Can’t toughen up rules because of potential voter backlash, but to not toughen p may bring huge consequences later.
Being a politician he will opt to not do anything rash and keep the party going. After all he will be long gone to a nice cushy private sector job or some international posting, before the poop hits the fan in a few years.
#3 squidly77
It’s disgraceful. It’s definitely not patriotic.
A bubble in search of a pin. Canada has the classic warning signs. Same signs the U.S. politicians chose to ignore.
http://news.goldseek.com/MillenniumWaveAdvisors/1265562000.php
What’s this world coming to? Stock markets are up 60% in one year and real estate is back to where it was 2 years ago. Is it possible that you are all wrong? Maybe the costliest mistake is not owning real estate or stocks. Sitting on the sidelines might make you a whiner for the rest of your lives.
The govey’s need to keep real estate up to keep themselves in office and to also protect the economy. That’s what you all can’t see. Pure math does not work when you have governments prepared to to everything to keep their jobs and all us sheep happy.
Don’t do it Lynn–
2015 “maybe”
When you hear politicians warn you to never buy a house or invest in the stock market- because deflation will never end–
BUY –
btw–i never give advice–
What would be this dividend-yielding preferred bank share you are referring to?
- Which, trust me, will make you even more desirable.
Ha, ha, ha…you re funny Garth.
A little economic humor that explains poor F’s failing grade:
http://www.youtube.com/watch?v=VVp8UGjECt4
Better late then never to raise the downpayment to 10% however we’re still bolting the stable door after the horse has left 2 years ago. #3 Squidly I don’t know if not voting is unpatriotic however it does give me justification to tell you to shut it as you can hardly bitch about the politicians if you choose not to vote.
I’m confused about CMHC. Maybe someone help clear this up for me.
Everyone talks about how if the homeowner screws up, they can’t just walk away and hand the keys back to the bank without repercussion. However, isn’t that the reason the homeowner pays for this insurance in the first place?
The beneficiary of this insurance seems to be the bank as I understand. This being the case, shouldn’t they be the ones paying the premiums on this?
Also, I don’t understand how it ends up being the taxpayer that shoulders the burden. Is this not covered in the premiums that the homeowner paid in the first place? If it’s not enough, then maybe the premium should be raised to ensure it covers default thereby not involving the taxpayer at all.
Why is this any different from any other insurance?
So Alberta is out with a big ole Spendin’, Pavin’ and Borrowin’ buget.
$4.7 billion deficit planned.
Heritage Savings Plan to be almost wiped out over 3 years ’cause this is a rainy day, you know.
Yeah, we are all starvin’ here in Alberta.. it’s pourin’ man…
Yeesh, wait until we really have hard times here… we will have no savings left.
Not to worry though we have no provincial mortage (debt) so we can go crazy with deficits for a decade or so maybe…
Clearly the Alberta PCs are conservative no more, apparently the NDP have taken over in a silent coup. (or however you spell that – phonetic = Koo).
Look for the Wild Rose star to be risin’ in Alberta.
Greetings: Here is another method being attempted to put the brakes on ” speculators/investors” in an attempt to bring housing back into the realm of sanity and common sense. Notice the reference to rising interest rates. A pity “it is different here in Canada.”
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10625361
Interesting Move By BC Government
“Families with children under the age of 18 will be able to defer their property taxes”
http://www.theprovince.com/technology/Throne+Speech+offers+breaks+more+preschool+options+cheaper+housing/2542276/story.html
#3 squidly “I don’t vote”
Don’t blame you. As many are becoming aware, both parties are owned by NWO banksters in pretty much all western nations (Canada, USA, etc.).
George W. Bush == Obama == Palin == McCain
Democrats == Republicans
Harper == Ignatieff
Whoever you vote for, the underlying direction of the country stays the same. The agenda is always that of the NWO.
If you control the head of the party, you control the party. If the head of the party starts to think too independently, then they take a bullet (JFK & Reagan).
Reagan was the last non-NWO president puppet, but he became a lot easier to control after he took a bullet.
Garth, finally got your Money Road book (Chapters was sold old so had to go to Coles). The guy at Chapters said your book was flying off the shelf and they re-ordered another 30.
#3 squidly77 on 02.09.10 at 10:24 pm
I don’t vote, hell over 40% of Canadians don’t vote
is that unpatriotic or patriotic ?
++++++++++++++
Neither Squid, just irresponsible.
Jim, peanut-size yellow-bellied character (IQ), a person that can never, ever be trusted which explains his collapse into politics. No one would hire him.
It would be really interesting if sheeple grew up, became normal people, took matters into their own hands with regards to borrowing, somehow got out of (and stayed out of) debt and started living productive lives, responsible only to their families and themselves.
Then what would govts. do? Nothing! Govts. wouldn’t be able to do a damn thing. Nice to dream about, ‘tho!
——
#129 TheTruth on 02.09.10 at 8:31 pm — Not conspiracy at all.
Everything has a beginning, middle, end. It will be only a short time — five years or less — before inflation travels across the Atlantic, mixes with deflation then messes everyone up.
With wages stagnant, ever-increasing taxes (all sorts), rising utility and power costs, selling up shop (home) within 18 months, investing the money either / or in dividend-paying / bank preferreds then renting looks like a very viable option.
From Sunday past, keep in mind that plenty of unpredictables are in all this hullaballoo.
——
Whether Jim Sinclair is accurate or not on finances, I don’t know but this small article is interesting (with a link in it).
As far as I understand the basics of money, the reserve system of banking has created a world in which there is far more debt than money to pay it off. Accounts are likely to be settled with the next world war (unpredictable).
One episode of Sherlock Holmes was entitled “The Sign Of Four”. Here is another four. The names of the four at the top have all advocated a NWO and are a part of the elite.
The following gentleman is somewhat different — GS this ain’t!
The elite are using all their puppets to run the show; one of the better articles which says it like it is.
Now it’s getting complicated, yet funny!
Does this sound familiar?
Crotch bummer sounds a tad schizy-paranoid!
Absolute insanity. RE Buyers today are running into the fire rather than for the Exit. Lemmings off a cliff. Frog in slowly increasing temperature water. Diving off the deep end with no water in the pool.
The sad part is the Realtors, Brokers and banks are making money off these people they are leading off to doom.
In 2-5 years when their mortgages come due, their house values have fallen and they are under water financially, they will ask these people…Why. Why didn’t you tell us. Why did you let us buy?
Why? Greed my dear.
Mike
I think they will push it till a later date. Why? Because the banks came out and said they want the mortgage rate increased…
Then later on they can just blame F didnt do anything, mean while F gets paid under the table by the same very banks.
Banks make new profit highs… next year or end of this year they change the mortgage rules after everyone who shouldnt be buying rushes in to buy buy buy before the change.
Is that an advertisement I see on your site?
Yeah, a test. What is your opinion? — Garth
#61 knucklewalker
“The arrival of Peak OIL has set the stage for truly cataclysmic events…”
knucklewalker, I don’t believe oil will be the catalyst for a financial or social collapse. I used to have similar concerns until reading several books on the oil industry a few years ago. One of the most interesting reads was:
The Deep Hot Biosphere, by Thomas Gold
http://en.wikipedia.org/wiki/Thomas_Gold
Give that a look.
Another interesting thing is the oil reserves around the world have steadily grown. I believe current amount is ~1.5 trillion barrels. Thats doubled over the last 7-8 years. People keep shifting forward when the oil supply will peak.
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2178rank.html
To me it looks like the public is being badly manipulated by people in power and trying to con and soak us.
So there you go Lynn, you have options one even with sound investments. Cash rules Lynn and that is why you have options. As mentioned decide what your short term future is choose a house wisely and enjoy life.
There was a point last year I gave up on the whole lot and threw in the towel, then came CAPP soon to have over 1/4 million members. So-ooh I changed my mind and will vote. Whatever Flaherty & Co decide to do chances are it is a shot in the dark as they are still wearing blinders and care not for anything but “REFORM”.
“”if Ottawa does drop the hammer, or the central bank hikes rates, or another car plant or two bites the dust in your area – then you have every reason to believe prices will be lower by Labour Day. So wait, already.”"
…Garth, If Ottawa raises rates you can be guaranteed another car plant or two will bite the dust.
What will you recommend after March’s Budget if CMHC terms are not tightened or rates not raised?
Nostradamus jr.
“Some may call this flip-flopping, deceit, manipulation or bait-and-switch but it’s just the way Ottawa works now. There are no touchstones any more. – Garth”
“now” as this is supposed to be new?
I don’t want necessarily to defend de PCC but What about the liberals flip-flopping on free trade, on the GST and (Trudeau era) on salary-price control? Were those minor issues?
As for deficit it’s not an agreement you sign like free trade, no politician with a sane mind is going to announce one before they have to. The Quebec liberals have done exactly the same thing.
Hey Garth. Love the site and your writing. You definitely are not afraid to speak what is on your mind, no beating around the bush.
As far as advertising on your site goes, hey isn’t that what the free market and being an entrepreneur is all about?
I (just my opinion) don’t think advertising for low mortgage rates is appropriate for a blog that is pointing out the issues with cheap money and real estate. You and your site have a lot of credibility and I would hate to see it take a hit. Anything else would be fair game though.
For what it’s worth. Have a great day.
I don’t lend mortgages. My opinion on the current rate environment is well known. If an advertiser wants exposure to you, that’s his risk to take. — Garth
The govey’s need to keep real estate up to keep themselves in office and to also protect the economy. That’s what you all can’t see. Pure math does not work when you have governments prepared to to everything to keep their jobs and all us sheep happy.
—————————————————
you’re wrong. Historically, governments have tried price fixing many many times in the past. What happens is it works for a while and the inevitable is prolonged. Unfortunately, we’re now in that period where home prices are being propped up by the government and so the course that the RE market is going to take, will take a bit longer.
I’ve explained this before. Sometimes governments may try to fix a price of grain or something very low. Well when that happens, farmers stop planting that grain as there’s no profit margins. Then demand starts flying and there’s no supply. Then the price of the fixed grain flies beyond the highs the government was trying to fix the price at.
It’s not as you’ve suggested. Governments can try to price fix, but it only makes things worse when momentum builds for what has to happen when market forces naturally regain control.
Even if rates stay this low, even if 5/35’s are still handed out, even if hst doesn’t come into effect, the public will still say “eff off” to real estate and its irrational gains of the past decade. Common people are struggling, and as prices are bid upwards, it just puts more pressure on the public.
We’ve pretty much set ourselves up for a long bear market in real estate
Lynn
Not much advice to give, the best advice is to follow your heart you’ve been waiting 5 years!. I just sold my mothers house to a young women under 30 who waited a year. Forget all the negatives, the question will you live in the house for a long time? How much is real estate really going to drop????
Then ask yourself this why is every one telling you to wait, what do you want to do? always go in the oposite direction of the masses. Have you noticed not one person on this Blog says buy. Hmmmmmm
Funny Garth states over and over again do the opposite of the masses. Your father does not want you to buy why? because he’s your father. Garth says sell but hes owns two houses. The bloggers say do not buy are they selling?
I have owned 5 houses since 1987, not one ever declined in value. And i missed two opportunities within one year to make $100,000 as I missed the spike!
Thes bloggers are all hot wind quoting this and that statisitc? I posted a blog a few days ago about Garth Turner’s book in the 80’s that Canada would be Bankrupt by 1999. Guess what he was wrong.
Oh yes they say 50 or 60 Billion this year in deficit is a thing to worry about??? duh did you forget the last 7 years of Surpluses were more than that?
Everyone forgets that over time inflation will make this big debt disappear.
One last thing to Ponder, go look up the Revenues of General Electric ….183 Billion you will be surprised thats its larger than many countries on the planet. Now go look at the revenues and expenditures for the Government of Canada.
http://www40.statcan.ca/l01/cst01/govt49b-eng.htm
Puts things in prospective. Oh while your looking at the expenditures Look how much the government redistributes your tax dollars, amazing is it not!
Cheers
No matter what all the advice givers say follow your heart.
That’s not advice? — Garth
20/20 is the way to go. Canada govt. is helping Canadians to commit hara kiri en masse by keeping
the 5/35 and by covering the banks’ posteriors via
CHMC.
Lynn, if you do decide to buy a house, why not find something with a basement suite you can rent out, besides the benefits Garth describes, you can further increase your cash flow with rental income…..that is, if you’re willing to be a landlord.
International Olympic Committee President Pumps 2010 Athletes’ Village
Mr. Rogge has obviously been informed of the negative consequences that’ll appear (higher Vancouver property taxes, tarnished IOC image) if these suites don’t fetch high prices when they go to market in March.
I’ve followed the Olympics for 20+ years and have never seen an IOC president do this.
http://news.yahoo.com/s/ap/20100210/ap_on_sp_ol/oly_ioc_village_2
#32…I truly sorta wish you where correct….it would make the rest of my life much easier and would make my forward decision making radically different than it in fact is.
Gold has been thoroughly and widely discredited at this point….abiotic oil is a pipe dream driven by cornucopian fantasies and are basically an economists wet dream.
Fact is sadly that oil is biological in origin….the presence of hydrocarbons on the moons of Jupiter not withstanding…..
Oil reserves have not in fact been increasing to my knowledge…..discoveries peaked in fact several decades back and have been in decline ever since. Of particular ominous concern is the complete lack of any further super giant fields like Ghawar or Canterall…..and it is these fields that are the lifeblood of a cheap energy economy.
Furthermore it is vitally important that we again revisit the concept of EROEI…it is the crux of the matter…the famous reserves that you perhaps believe in are in fact real…but they comprise oil sands..oil shales….and other extremely low EROEI….this makes them essentially worthless for they cannot ever be developed……one must always be careful not to confuse human “economic” reality with real world physical properties. It is that thinking that got us into this disaster that we are now intractably mired in.
But thanks for the input and I always respect an alternative view as it keeps me thinking and aware of the dangers of group think.
#32 one further item…oil PRODUCTION has already peaked….2005 (crude oil)…2008 total liquids…..
we are already looking in the rear view mirror in this regard…..that is why time is very very short. It is when we see the hills rise past our view in that mirror that signal the end of our civilization…because that view will show that we are on the oil slide down in production (a situation that may in fact have begun this past year….we need a year or so to find out for sure).
Hi Garth,
Where are you speaking in Scarborough on the 25th? I’d like to register.
Thanks
I am doing a public lecture at Chapters. Details soon, but the event begins at 7 pm. — Garth
RE agent fees discussed on http://www.canadiancapitalist.com today, regarding the chapter in Freakonomics.
The ad is subtle, so it is ok w me.
It would be nice to see a politician do the right thing regardless. 10% down would protect the sheep from themselves.
Budget Strategy:
“Yes, we are spending a lot more than we are currently taking in, but we will make up the difference once things improve and we get our gigantic raise.”
That’s the Budget strategy currently exercised by everyone from the Alberta government to national governments around the world. Is this a reasonable way to run your household? It’s a budget tragedy.
So, the more articles I read on these topics, the more I question what qualifications you need to be a referenceable “expert” or a “Chief Economist”.
In the Globe & Mail article today:
Ottawa warned against altering mortgage rules
There are some ridiculous quotes:
“New rules from on high are not necessary, Mr. Aceto said. “The banks in this country don’t have to lend to the limit of the law – they can make smart rules on their own and not have Minister Flaherty make the decision for them.”
Patricia Croft, chief economist at RBC Global Asset Management, said it would be “shocking” if the minister introduced new rules in the coming budget. “I don’t think there consensus yet on whether there’s even a problem.”
REALLY??? This would be “Shocking” to change mortgage rules back to levels that are still far more lax than they were 3-4 years ago?
Is this now like climate change, where 1 or 2 dissenters against 1000 other experts can still make the consensus “inconclusive”?
Also – if CMHC and Flaherty decide on the standards for every mortgage, and provide insurance on almost all new mortgages, how are they not “making the decision for the banks” about how much to loan people?
It’s laughable that someone would argue that banks don’t automatically offer mortgage products at precisely the lowest standards that the government sets. Every bank offers the exact same mortgage, with the exact same rates (+/- 0.1%), with the exact same qualifications. The market is completely dictated by what CMHC will insure, and the amortizations/down payments that the law will allow.
Lynn,
i personally think homes in some part of Southern Ontario are so cheap that the downturn risk is minimal, it’s definately not the same game as buying in Vancouver. If you want to be extra smart about buying a home, put a basment suite in and generate an additional 10K a year in rents from your property, that way if the price of your 230K home crashed down to 180K in the next 5 years, you’ll have made up the difference with the rental income.
How is a PS less volitile than Common stock?
It is an equity with bond characteristics and inherently less affected by market fluctuations. However, like any bond, its capital worth is influenced by interest rates. Most people buy them for stability, excellent income and serious tax advantages. It’s all in my recent book. — Garth
F – BIG MAN ON CAMPUS
My prediction is that F will do nothing (though I could be wrong, too much damage has already been done in the real estate sector to matter).
Flaherty is just posturing. Big man F trying to scare up some respect and street cred. It is political suicide for a prorogued minority government to rock Canadian’s homes valutations, i.e. with the sorry state of a great deal of Canadians, their sole source of their retirement funds (their home!).
There will be blood on the streets.
The cabal of Real Estate spooks, bullies and double dealers will also be pissed if F drops anything more than his pants and shows off his manhood. There is too much funny money and self dealing, selfish self interest out there to do anything drastic. The money snowball is too profitable for everyone involved to have the music stop.
This is, unfortunately, politics at its worst. Cowards….vote hungry market manipulators.
Turn the TV off and put that MSM paper down. Instead, read a good book on economics, finance, politics etc.
May I suggest “Money Road” as a great place to start. I am loving it.
Your time is precious and valuable. Spend it with good company. Expand your financial intelligence and general education. The monkey business going on right now in the Canadian real estate market is anything but intelligent. It is a casino, Las Vegas styled. The house is stacked against you. The Grim Reaper will get his pound of flesh eventually. What they failed to teach everyone in school is that knowledge is power and the love of learning is divine.
Don’t blame F for all the nonsense in the real estate market right now even though he has been pounding on his chest a great deal. He is just a gear in a much bigger problematic system. He just thinks he voice is golden like that of Alan Greenspan and the markets will get spooked and instantly react to his every word. Chill out everyone. Flahery likes his job too much and has to ultimately answer to master of control Stephen Harper.
What Harper says F does. After all, F is a small on campus man but Stephen Harper is the Big Man on campus now.
Canada is dying country.
The fertility rate for only replacement of the population must be 2.1-2.7; but in Canada – 1.9.
To prolong Canadian agony and to pay huge wages to enormous Canadian Plutocratic Apparatus the Canadian Government is importing population from abroad under cover of “new immigrants” and hypocrisy of “refugees”.
As well as gigantic phony scam to have “new comers” money.
How could this huge country Canada with rudimentary economy of Bantustan continue to survive?
There is only one way – to sell almost unlimited Canadian natural resource – land.
There is only one “Industry” working in Canada – creating unlimited number of so called “houses”, but actually mouse traps from wood scrap, with lifespan of decaying maximum 30 years.
That’s the reason why the government is continuing to inflate the RE prices by 0 down payment and almost 0 interest and huge psychological brain wash by MSM; because Canadian Government is understanding very well, that crash of RE is automatically crash of Canada, contrary to the other countries, where crash of RE is hurting, but not killing the country.
But as any other phony scam, Canadian RE scam will be exploded and will destroy the country.
Is that an advertisement I see on your site?
Yeah, a test. What is your opinion? — Garth
Fine with me. Websites cost money to run, and I would imagine you probably spend thousands of dollars keeping this one up, so why not have an ad or two on it?
Although it is kinda funny to see an ad for mortgages on _this_ blog
Mike, #29 being a mortgage broker myself i find it painful how people like you take the position that the buyer is the eternal victum….
Over the last 20 years when the value of ones homes have been increasing at near double digit values annualy, all buyers were savy investors, but…. as soon as property values start to drop, it now becomes the fault of the mortgage broker, bank and government alike. I think people have to start taking responsibility for their actions, stop partaking in the “Victim Olympics” every time something does not go their own way.
Why do consumers have to wait for the government to change lending policies, before they can stop borrowing more then they can afford.
This reminds me of when Ben Johnson crossed the finish line for Canada, we all cheered as a nation…. Then when he was caught using steroids he was instantly accused of being a “Stupid Jamaican.”
I agree that we need to impliment a changes in lending, to reduce the size of mortgages for qualification, but I think there is a better way then doulbling the required downpayment in the year HST is being implimented. One bitter pill at a time please !!!
Being in the business for 20 years I have seen the opening up of lending criteria with the bank’s competing for market share. I think we would be better off using realistic figures, and reduce the Ratios’ back to where they were 10 years ago…… instead of implimenting a harsh change like having to put 10% as a minimum down payment.
#1 Go back to 32 % and 40% GDS and TDS, most banks have eliminated the GDS ratio with good credit ratings, and increased the TDS to 44%. People with no debts end up being penalized, as they are given “More rope” to hang themselves with.
#2 Use realistic figures for Heat and Hydro, CMHC only requires $100.00 per month, that does not even cover my cable bill, make the figure a percentage of the value of the house. The bigger the house the higher the heat and hydro figure.
#3 CMHC need to stop playing in the secondary housing market, by lending to self employed individuals by using stated income that often exceeds the Gross Earnings of the individual. At least impliment a stated policy that forces the utilization of income that falls between Gross and Net…..
Any time I complete a stated income deal for a self employed client I have the client sign an acknowedgement of the amount of income that was neccessary to qualify this mortgage and their current debt obligations, and their indication of their ability to meet these financial obligations. I have talked clients out of taking on $1MM mortgages and try to keep things as affordible as possible.
I think we are in for some interesting times, unfortunatly if the government does nothing, then the “Bubble” may end up growing a little bigger before the big bang.
I don’t think Flaherty is going to do anything come March.
I’d like to him to, but I really don’t think he gives a crap.
He’s made it clear who he is catering to and it’s not young families being forced to choose between renting or 35 years of debt.
Here’s some ongoing Toronto madness in real estate.
Friends of ours live off the Danforth. About a 5 min walk to the subway.
Put their semi-detached up for about 390K.
It sold with almost 10 offers, at almost 450K in just days.
I know how much they make and I know how much they paid for this place back in the day.
It’s enough to make me want to pop open a bottle of Wiser’s and burrow myself into hole for a day.
Maybe I can go back and ask my parents to conceive me earlier? Just 5 years.
That way I could have had my downpayment saved up by at least 2005.
Because 2005 prices sound dreamy right now.
Yes I am that fed up. Woe is me.
That’s the world’s tiniest violin playing.
“Leave them wondering how they could have believed anyone who said house prices would rise without end. They might even understand some day why it takes actual money – you know, like, savings – to buy something which costs half a mil.”
___________________________________________
why would someone want to “save” whey governments continually print and debase currency year in and year out? why would someone want to save money, when those savings loose value constantly?
you fail to see the root of the problem. decades of inflation, decades of central banks creating money and credit..
#46 T.O. Boy
If you want to see the “experts” from the banks change their tune, just have the Government discontinue CMHC on all new mortgages and see how much the Banks would lend without it. Let’s see the lending institutions put their money on the line not the taxpayers.
You’re too charitable in suggesting our politicians are flip-floppers.
I have a slightly worse view:
http://catharticranter.blogspot.com/2010/02/gutless.html
Great blog btw…it’s tough to find much of anything with a Canadian bent wrt the housing market.
Sigh.
Toronto’s market will never crash.
Maybe I should start fixing up my rental apartment a bit – I’m gonna be here a while!
I just don’t get it! The BC Gov’t introducing tax deferment for couples with children up to eighteen years of age. The poor stiffs that opt in to this fiasco will be just lured into further overconsumtion. Not responsible Gov’t practice in my humble opinion. I voted for these clowns. DUH!!
Leveraging an overpriced asset (house) to buy another over priced albeit income generating asset? No thanks. I’ll continue to rent, buy long dated US Treasuries and short everything else (except the US Dollar) on sight.
Feb. 1 (Bloomberg) — Build America Bonds, the fastest- growing part of the $2.8 trillion U.S. municipal debt market, would become permanent under a budget proposal released today by President Barack Obama.
Issuers from Oshkosh, Wisconsin, to the state of California to the New York’s transit agency have sold more than $70 billion of the taxable securities, which were created as part of the economic stimulus package Obama signed into law in February 2009. The program helped revive borrowing for municipal capital projects after the global credit crisis led investors to seek the safest assets and dump tax-exempt bonds, driving their yield premium over Treasuries to a record.
“Issuers love this program” because it improved their access to capital markets, said Christopher Mier, a strategist at Loop Capital Markets in Chicago, in an interview. The administration also “feels very good” about it because it spurred capital spending and job creation, he said.
The Build America program subsidizes 35 percent of municipal issuers’ interest payments if they sell taxable securities instead of tax-exempt and was set to expire Dec. 31. The proposal would reduce the subsidy to 28 percent, according to a Treasury Department official who spoke on condition of anonymity.
============
…”On Tuesday, Canadian officials confirmed that they had been in discussions to purchase the Ambassador Bridge from Moroun, but that no offer had been made.
Mark Butler, a spokesman for Transport Canada, said he was limited in what information he could release. “We will not comment on the details of those discussions,” he said.
Moroun bought the bridge in 1979 from investor Warren Buffett for $30 million. Buffett’s office declined to comment Tuesday night about the potential sale. The Ambassador Bridge reportedly takes in at least $60 million a year in tolls.
In recent years, Moroun has proposed building a “twin” to his Ambassador Bridge while tenaciously fighting plans for another publicly owned bridge that would be constructed about two miles from the Ambassador. “…
From The Detroit News: http://www.detnews.com/article/20100210/METRO/2100369/Canada-sought-Ambassador-Bridge-but-price-too-high#ixzz0f96SEasq
=====================
People Carriers
The People Mover operates at a high cost per rider. The system was designed to move up to 15 million riders a year, yet in 2008 saw just over 2 million riders. In fiscal year 1999-2000 the city was spending $3.00 for every $0.50 rider fare, according to The Detroit News. The system has also required costly repairs. In October 1998, the demolition of the Hudson’s building damaged the track, closing the People Mover for two months, with full service not restored until the following year. Renovation at the General Motors headquarters at the GM Renaissance Center kept the People Mover from offering full-circuit operation from September 2002 to September 2004. In 2006, the Mover (which costs $12 million annually in city and state subsidies to run) filled less than 10 percent of its seats.[12]
=========================
Detroit police officers had patrolled buses until late 2005 when budget cuts forced the department to stop the patrols.
“We’re not striking,” said union president Gaffney, “but the city has an obligation to supply us with a safe environment to work in. It’s about health and safety.”
=======
This one-level-of-safety controversy raises important questions about the safety responsibilities of the major airlines under the code-share contracts. If something goes wrong, like it did on Continental 3407, who is responsible? These contracts are considered proprietary by the companies and are difficult to find. This 1999 code-share contract [PDF] between Colgan Air and US Airways lays out the legal responsibilities and liabilities of the contracting carrier. The language on page 21 states that Colgan “employees, agents and independent contractors … for all purposes, under no circumstances shall be deemed to be employees, agents or independent contractors of US Airways.” In addition, on page 22, Colgan is required to “assume[s] liability for and shall indemnify, defend, protect, save and hold harmless US Airways … from and against any and all liabilities, claims, demands, suits, judgments, damages and losses … for death of or injury to any person whomever.”
Former Department of Transportation Inspector General Mary Schiavo, now a plaintiff’s attorney, told FRONTLINE that these kinds of code-share contracts were typical and effectively let the major airlines “off the hook” for legal responsibility over the safety of their regional partner carriers.
http://www.pbs.org/wgbh/pages/frontline/flyingcheap/view/
Sorry to be a bit off topic here but I have a question for the gold bugs here. What are the reporting requirement for firms such as Kitco.ca when Canadians buy gold through them by way of certificate from say the Perth Mint in Australia?
Thanks in advance to those who offer advise.
A bit of an eye-opener for the boomers heading into retirement and old age …..
Case: 86 year old woman ( husband deceased )
Physical Condition: Poor
Events:
#38 JamesOttawa on 02.10.10 at 8:49 am
Then ask yourself this why is every one telling you to wait, what do you want to do? always go in the oposite direction of the masses. Have you noticed not one person on this Blog says buy. Hmmmmmm
*******************************************
Sounds like you had your breakfast between two zig-zag papers today–
Look at the chart-
Can you see the money pump?
Ask yourself–what would have happened without it?
Then ask yourself–can we keep doing it?
http://www.istockanalyst.com/images/articles/can12010138733.jpg
might want to consider this as well,since this outfit buys 85% of our exports–
http://static.businessinsider.com/~~/f?id=49d74ad14b54372b00134f9f
Avoid the risk of holding your mortgage in your RRSP
“But the rules of diversification should still be adhered to. You also don’t want to violate your asset allocation. So if your mortgage is more than 25 per cent of your RRSP, you may be taking on too much risk. Moreover, if you miss mortgage payments, your RRSP trustee could be forced into a power of sale.”
Financial expert from Globe and Mail
Not much of an expert. — Garth
Re#9 Eyes of the World
Too late “The Truth”
Weather has been nice for several weeks while everyone was setting up…it was on NBC this morning, which hits 5 million people
And did you note that the second week of the Olympics will be sunny with even warmer weather….
Face it, with 250k people on the ground, enjoying the fantastic beauty and patio weather, these rich tourists will be buying. It only takes a fraction of the visitors buy and eat up the already super low inventories.
Vancouver will become a city owned by the rich, foreign and local….get used to it
————————–
WHere have you been, it already is…
From my observation, Preferred Bank stocks had just as much a correction as the common stock during the last big correction. Their liquidity was worse and the bid/ask spread was huge. They were a leading indicator of trouble to come. After the rebound, they haven’t bounced back as much as the common stock.
Do a weekly overlay chart to confirm for yourself.
Most people do not buy preferred shares for capital gains, but for income and long-term capital preservation – because these are more like bonds than equities. Your comments are irrelevant in that context. — Garth
If you want to see some changes in high ratio lending practices, then you will have to bring some accountability and responsibility to the game. The lender can not get off completely, they originated the loan and should have some “skin” in the game to ensure responsible lending practices.
The lender should be accountable for the first 5 percent of the loss in a foreclosure.
This is something Flaherty could do, that would meet with public approval. As Flaherty would be seen a punishing the public perceived big bad lenders and not Joe Public.
As it is now CMHC is way over exposed in this market and, if it were not for the taxpayer guarantee, would have collapsed like Fannie Mae in the USA. Flaherty and the conservatives have been playing politics with a “man’s castle” if this explodes during their reign they will have another Mulroney backlash come next election.
I get the impression that F is being pulled in two directions by two groups that are covering their arses.
On one side are the Realtors who want the party to keep going and keep the spiked punch-bowl (5/35) at the table, thus further advancing the bubble market and their inflated salaries. They know there’s a day of reckoning coming and prefer slowly incrementing climbing interest rates to soften the blow.
On the other sire are the banks who are just fine at borrowing money from BoC virtually free and making gains with speculative investments. They know there’s a day of reckoning and they prefer changing the 5/35 to something more strict.
Which side will win, I don’t know. Whatever the outcome, I do know who will lose: tax-payers and savers.
“PF stock is not like volatile common stock, and this was illustrative of splitting wealth between real estate and bond-type equities. — Garth”
******************
PF’s are volitile too. 3 or 4 years ago I’ve bought CIBC new issue 5.75% PF’s @ $25. When Interest Rate started going up, price of my PF’s slided under $15.
Of course. They are like bonds and change in market value with rates. Do not confuse these with common stock and buy them for capital gains, rather for tax-advantaged income and stability over long periods of time. Sheesh. Were you your own advisor on that trade? And did you sell them low before they shot up again as rates fell? — Garth
RE #23 The Investors Friend Alberta’s 4.7 Billion dollar deficit.
This is only the second time this happened. With an inept boob like Ralph Clown who had no leadership, no plan to manage growth and just opened the flood gates to the oil sands, what did you expect? They charged far too little for lease rates and then they tried to raise them when the economy tanked. They failed to adequately diversify their economy, a lesson they should have learned after the first crash in the 1980s. What can you expect from a petro state? Norway manages their oil intelligently, they have a state owned oil company, who by the way is buying up part of the oil sands. They have one of the best economies in the world. What do we do in Canada? Stupid things like privatizing Petro Can. We just give away our resources. God help the Albertans if the Wild Rose Party gets in. From right wing province to far right wing… What can you expect from a one party province.
#38 JamesOttawa on 02.10.10 at 8:49 am
Judging by your confidence in the markets, by all means, why don’t you go all in yourself? You’ve sold 5 homes in 23 years and made a profit, a little debt doesn’t scare you whether its record deficits or credit expansion or otherwise… you know you are a winner and history can only repeat iself so why not put your money where your mouth is?
Think of all the equity you could be missing out on! Think of all the easy money to be made!!!! Mmmmm….. yummy money, its so good for you… hey, its risk free, why inflations will always save the day, you’ve pretty much said so yourself.
Time to lead by example buckaroo, time to double down and go ALL IN!!
A bit of an eye-opener for the boomers heading into retirement and old age …..
Case: 86 year old woman ( husband deceased )
Physical Condition: Poor
Events:
Having lived in her own home, for her entire life she has found that this is no longer possible in the last 8 months. Numerous ambulance trips ( at 300.00 or so dollars per )to the hospital has resulted is a “bureaucracy of health care bungling “. Panelling, if that is the proper term, has been ongoing to see if she qualifies for a Long Term Care facility. Initailly the answer was YES …. then revised to another “Paneling” which was NO ….. then revised again to YES … with a caveat that she undergo some rehabilitation to see if her medical condition improves….. another “Panelling” concludes the YES as confirmed and then transferred to a transitional facility to await a LTC facility. While awaiting the LTC facility the decision was reversed again and the woman was told that she had a week to get her own “lodgings”. Of interest in this whole debacle, the lady was paying a so called private facility over $2000.00 per month even though she was in a hospital. When she was awaiting the LTC she gave up the private facility and now has arranged for another one at $2800.00 per month, as the previous one has been taken.
So lets take a look at the arithmetic on this one. The $2800.00 is for the roof over her head and food only. Prescription medicines and incidentals are extra. This roof over her head provides one nurse, not sure if it is an RN, that is shared between two senior residences ( Monday through Friday 8:00 – 4:00 ) and an On Call doctor.
Just suppose you are an 80 plus year old couple and have no pension and limited savings …. where in hell do you get $70,000.00 plus a year to pay for this ? What are the alternatives ?
#19 Which, trust me, will make you even more desirable.
Ha, ha, ha…you re funny Garth.
—
Funny?? Sounds to me like more sexist drivel served up with the helpful financial information…Call me inattentive, but didn’t see where Lynn was looking to become “desirable”…just a homeowner…Good luck Lynn…I’m sure Garth means well…he just doesn’t know better….
Always nice to hear from the Pilgrims. — Garth
“I’m sure Vancouver politicians would love a buying binge on the Olympic Village condos. The city ended up financing the project after the US lenders backed out. City taxpayers will be on the hook for any losses.”
Thanks to our incompetent city council we are in this mess. Instead of trying to govern and manage a city, they are gambled and speculated on real estate with our tax dollars and cost us millions. They should be sued. Then our mayor Gregor Robinson has the nerve to accept more than $300,000 worth of free Olympic tickets for the city staff. He should forfeit these tickets and hang his head in shame. No, wait, these are green Olympics- burning up carbon by trucking in snow from the interior to the coastal mountains and having a fleet of over 400 gas guzzling SUVs for security forces.
“Flaherty and the conservatives have been playing politics with a “man’s castle” if this explodes during their reign they will have another Mulroney backlash come next election.”-Gordon
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
I’ve been saying this for months, the Conservatives are F@#King us royaly to keep their heads above water.
Garth selling ad space for low-interest loans. hahaha! That’s almost as funny as knucklewalker’s daily rant!
Still waiting for some message forums, Garth.
Not coming. — Garth
“#3 squidly “I don’t vote”
Don’t blame you. As many are becoming aware, both parties are owned by NWO banksters in pretty much all western nations (Canada, USA, etc.).”
Because of people like you, we end up with power hungry, sociopath, control freaks like Stephen Harper.
“I don’t lend mortgages. My opinion on the current rate environment is well known. If an advertiser wants exposure to you, that’s his risk to take. — Garth”
And it says a lot about your character Garth…
Explain. — Garth
Please, don’t get the “1 tip to a flat belly” ad!
No need. I have killer abs. — Garth
How come house prices rose 19% last year if inflation was only 1%? Seems like a logical impossibility.
Mr. Bubbles. — Garth
I wonder why they didn’t throw buns at him ?
http://www.stockhouse.com/Columnists/2010/Feb/10/Insider-s-view-of-the-real-estate-train-wreck
Re: #71
No, I did not sell my prefs. My point was that prefs still are volatile.
In times when it is inevitable that int. rate will go up, to buy bonds, bond/balanced funds, is a recipe for loosing capital money.
Only if you hold PF for capital gains, which is a dumb reason to buy them. In any case, your shares have regained everything, right? You forgot to add that part. — Garth
What’s the main worry of the banks on a strapped consumer? Most of the high ratios mortgages are on CMHC’s books.
Could it be that, lines of credit and charge cards are the first to take the hit when people are cash strapped, the mortgage is the last domino to fall?
What is the cost for banks for the foreclosure process?
It can’t be cheap if the home has to go up for POS and the net loss/difference to be garhished from wages.
Now we know what Flaherty will say:
From G&M
Federal Reserve chairman Ben Bernanke began Wednesday to outline the central bank’s strategy for reeling in stimulus money once the economic recovery is more firmly rooted.
so there you have it …… Canadian Budget speech in advance. and for this they had to take an extra 6 weeks off ….. really.
#32 Atomic on 02.10.10 at 6:52 am
“Another interesting thing is the oil reserves around the world have steadily grown. I believe current amount is ~1.5 trillion barrels. Thats doubled over the last 7-8 years. People keep shifting forward when the oil supply will peak.”
At 80 million bpd usage now, 1.5 T translates to only 51 years…in the big scheme of things 51 years is a very short period of time.
Simple economics, people need to have disposable income to help grease the wheels of the economy at large.
People buying with 5/35 mortgages max out are not going to contribute to the economy at large after they buy their house in a meaningful way.
Its short gain for long term #’s a small segment does very well, banks, developers, construction workers etc….
For our economy to function people need to spend money since we are transitioning to a service based model. People need to buy new cars, tv’s, go to movies, resturants etc…
If people are maxed out right now, no real increase in wages anytime soon, and the economy is just barly moving along, what happens when mortgage rates reset in 2-3-4 years??
If 10 percent down comes in, it would halve the price at which most buyers would by, so I think it would push prices down by way more than 10%.
But wouldn’t banks and mortgagel lenders just get around this the way they do now with the trick of cash back? I can go to a bank and put down 5% on a house, and the day after closing they give me 5% back. The catch is you have to opt for the 5-year closed rate for this deal, but I could see banks offering better deals on this if the 10/25 rules come in. Unless, of course the March budget adds a CMHC rule forbidding cash-back mortgages.
I still say we have a STRONG possibility of a non-confidence vote on the March budget whereby, if successful, the house of cards will come down.
#25 Gord In Vancouver on 02.10.10 at 1:11 am
Interesting Move By BC Government
“Families with children under the age of 18 will be able to defer their property taxes”
When I read this in the paper this morning I just shook my head.
If they don’t have to put $200 bucks a month away for property taxes people will be able to increase their mortgages payments by $200 a month. Up go property prices again! More money for the same product and a massive tax bill when you sell.
People who want to pay their taxes will be punished by having to compete with buyers who can afford to pay more by virtue of the fact that they defer their taxes till the cows come home.
I did a quick calculation using my house and property tax as an example. A buyer with 5% down and amortization of 35 years would borrow back about 30% of the principle they paid down in the first year of the mortgage. It would be interesting to see how long it would take after the mortgage was paid to pay back the property taxes. Would a 35 year mortgage turn into 50?
I wonder how it will feel, when your property is 20k underwater and you have to pay the realtor 20K, to know that you also owe the city 10K.
The world’s gone mad when we finally have to admit, that having a place to live and children in your prime working years is unobtainable without subsidies. If we can’t pay property taxes in our between the ages of 30-50 when are we going to pay them? In our 20’s when were still paying off education and saving downpayments? In our 50’s and 60’s when we realise we have NOTHING saved for our retirement? I guess it will have to wait til we die when the city and the and the bank (reverse mortgage) fight over the house we sacrificed our entire lives to own.
Kris: why not find something with a basement suite you can rent out?
because you don’t want to deal with the landlord/tenant act
because you don’t want to deal with bad tenants
because you live upstairs
why not make your living as a professional bull rider?
…………..”When Interest Rate started going up, price of my PF’s slided under $15.
Of course. They are like bonds and change in market value with rates…………….And did you sell them low before they shot up again as rates fell? — Garth
Would it be better to buy these PF’s after rates rise later this year, or just dollar cost avg in over the next year or two?
Our situation, 200K morg on a 430K house, 100K fixed@4% the other 100K in a HELOC, and an inheritance of over 100K coming once the lawyer can disperse the funds, we want to do what is best for our family of four and respect the money.
(single income of 74K, age; early 40’s)
PS; I’m reading your signed copy of Money Road, for some direction also.
There is no simple answer to that question, as all equities react in their own fashion. Suffice it to say that PF shares will be lower in acquisition costs as rates rise, so DCA is not a bad idea. If you are buying them primarily for income, this may not be a big factor for you, depending on the total exposure. — Garth
@Robert1 #74
Thanks for that eye opener. Loss of income and health with increasing age is hell on earth. Retired folks used to have options in annuities, bonds, and GIC’s for income. That has all been removed by our “going forward” thinking governments as they slashed interest rates to feed the greed machine. Meanwhile health costs have skyrocketed. As an alternative, is it still possible to buy long term health care insurance or is this just another losing proposition?
You constantly hear that a quicker diagnosis betters your chances for recovery. Yet the Medical response to everything these days is to put you on a very slow moving assembly line as your condition worsens month by month. All practioners along the line do their jobs but nobody takes responsibility or has jurisidiction for the overall survivability of the patient. It doesn’t seem to matter how much money is thrown at this issue, the new normal just gets worse.
#54 refi now “Mike, #29 being a mortgage broker myself…”
If only all brokers were as ethical and looked out for their clients interest as you do. Obviously while you are lumped into a “Mortgage Broker” group due to your occupation, you choose to raise above the average. Thus the comment wasn’t directed to you or those simular to you.
Mike
Lynn, No better time to buy than now. Bottom line, people buy homes because they need a place to live and call there own. How much rent will you pay in the next five years when all these mortgages are up? How much so far? Dont listen to this foolishness, glad i didnt in 2003. Post 39 is 100% right. This advice has been too wrong for too long.
Big Al (Original): Do you really think the Liberals want to follow in Obama’s footsteps? If Garth is right were they to bring the Cons down, they would take over as a minority just in time for the country to fall apart. Do you think anyone will remember that the Cons caused the problem, or will they just curse the Liberals for being in power when it happened. Far better to sit back let the country fall apart, let the Cons do all the dirty, unpopular work trying to clean it up, and only THEN come in, once things look t be improving, and take a majority government. But then, are the Liberals that smart/patient?
So, Garth… Any predictions, guesses, speculation?
Do you think “F” will bump it up to 10% down? Remove CMHC for seceond properties? Stop “5% cash backs”? Reduce armotizations?
This is clearly on his radar now, and he has no shortage of options in his arse…nal.
Last few years north of Toronto mushroomed “Potemkin villages” of thousands of so called “houses” from wood scrap, without adding any additional infrastructure of transportation or roads. Today small mouse trap so called “house” cost almost half of million CAD.
For people who is not familiar with this expression:
“Potemkin Village”, some explanations:
“Potemkin village” has come to mean, especially in a political context, any hollow or false construct, physical or figurative, meant to hide an undesirable or potentially damaging situation, the phrase may not apply to its original context.
Potemkin villages were purportedly fake settlements erected at the direction of Russian minister Grigory Potyomkin to fool Empress Catherine II during her visit to Crimea in 1787. According to this story, Potyomkin, who led the Crimean military campaign, had hollow facades of villages constructed along the desolate banks of the Dnieper River in order to impress the monarch and her travel party with the value of her new conquests, thus enhancing his standing in the empress’ eyes.
Canada is the biggest “Potemkin Village” in the human history.
Sorry to see the advertisement on your web site. Not because I doubt your integrity, but because you are human.
Humans do not do well at being critical of those close to them, or those who give them money and / or other considerations. There is a whole field of study devoted to demonstrating this fact: “motivational psychology.” And there is a whole industry which exploits these facts: advertising and public relations.
On a macro level, this is why Roosevelt and company passed the Banking Act of 1933 (Glass–Steagall) which restricted conflicts of interest between bankers, stock brokers and insurance companies. And of course the repeal of those laws by the Clinton administration played a large role in the current financial meltdown.
Yes, I admit it. An ad on my site precipitated global financial Armageddon. — Garth
19% price jump — Madness! Unfortunately, I still think the government still has some tricks up their sleeves to prevent this bubble from popping too quickly — the slow trickle of air coming out, that began in Alberta almost two years ago, will spread to the more bubblicious areas of the country.
Interest rate slashing worked in this country but it didn’t in the US, it’s probably safe to assume the more desperate measures of principal reductions and payment deferrals that have been done in the US, will probably work here as well. We won’t see mass foreclosures; not anytime soon anyway. The indebted will continue to be rewarded; credit card companies are already settling accounts for pennies on the dollar. Imagine homeowners getting a 10% or more principal reduction on their mortgage to try and keep them in their home and making payments; this is what I think will happen as home values slowly drop. The over indebted won’t get their comeuppance for quite some time.
Garth I like the ad …. capitalism rocks
do you get payed for it just being there or if we click on it
or more if we click on it ?
Every click turns me on. — Garth
read today that the US fed will have purchased 1.45trillion in mortgages by March.
http://www.financialpost.com/story.html?id=2545504
given that canada’s economy is typically 10% of the US, it stands to reason that the cmhc could reasonably be expected to have backstopped $145billion, not the $600 billion that they have.
this is wrong!
B.C. deferred property tax…now that’s magical forward thinking right in line with everyone elses idea of kicking the debt can further down the road for immediate gratification. The provincial government will pay the municipalities. Really? Where do they get their magic money from? Are they in surplus?
I will gladly pay you next week for a hamburger today. These loonies are living in a cartoon world of their own.
Hey, why not extend that great “deferral” idea to Provincial taxes. Wouldn’t that work even better? Then, then….!oh nirvana!…we can have Federal Tax deferral.
Everything will be paid off “at the end of the day”, “going forward”, after “the perfect storm”.
Where IS all this demand for housing coming from?? This is an area I seldom see discussed on this forum. In late ‘08 / early ‘09 demand was dead. The rates crashed down, and for the most part people here were saying that since there was so much demand leading up to late 2008, future demand was being artificially brought forward so by late ‘09 / early 2010 demand would be gone no matter how attractive Real Estate might appear. Apparently that didn’t happen. My question is: Are we completely (intentionally) mis-reading the demand side? Is there some unique characterstics to demand here in Canada, as some here have suggested?
People have speculated at length on supply, economic factors/indicators. Is demand just a passive player in the scheme of things?
Re – #90 Bailing in B.C.
wrote: “…If they don’t have to put $200 bucks a month away for property taxes people will be able to increase their mortgages payments by $200 a month. Up go property prices again! …”
-Good point. Seems that if we save some money in one area of our lives, up go house prices and poof! what we saved is instantly gone. Not saving anything as you point out, as that tax bill is only deferred, not eliminated.
Re: #96 Guan-Di
You make a good, valid point. Whether the libs are that smart or patient is what we’ll have to wait for and see.
re #84
“…. In any case, your pref. shares have regained everything, right? You forgot to add that part. — Garth”
Yes, they are up (didn’t go back to $25 thou), because int. rate went down, and RE didn’t crush…….., but who knew this will happen!!!
Possible March changes…
They won’t touch first time buyers but, maybe a tiered structure will emerge:
5/35 for mortgages under 500,000.
10/35 for ‘jumbo’ mortgages (over $500,000).
15/35 for ’super’ mortgages (over $1,000,000).
Bernanke while preparing his “exit strategy” just said that interest rates should stay “extremely low” for a long time, he said “the recovery still needs support from record-low interest rates.”
http://www.theglobeandmail.com/report-on-business/bernanke-outlines-plan-for-pulling-in-stimulus/article1462784/
From a Canadian perspective, Canada has to keep its own rates relatively close to US rates, this means that the RE bubble could go on and inflate for a long time unless the government tightens the CMHC rules. They must have realized having no other choice really, they have to stop this bubble before it becomes even more dangerous, but raising interest rates would adversely affect the rest of the economy which is still very weak (despite the RE frenzy…).
I can just imagine the discussions going on in government offices theses days: How to calm the RE market without provoking a collapse of both the RE market and the economy? A though balancing act.
I wonder if government can really control that, my guess is they might for as long as the Americans are not raising rates, when they do Canada will have to follow and then the shit is going to hit the fan…
#18
((What would be this dividend-yielding preferred bank share you are referring to?))
I don’t believe the ‘dividend’ paid on preferred shares is based on profit sharing … it’s more of an interest coupon they pay you for essentially loaning money to them. I bought some preferred shares last summer and I am getting about a 6% coupon … but have lost money on their equity value … they are not my ‘preferred’ investment
Garth, real happy to see you (and your blog) being discussed within the headline story at CBC Money
http://www.cbc.ca/money/story/2010/02/09/f-housing-bubble.html
The best way to address the overheated housing market is to raise the min dp to 10%. Messing with rates will cool the housing market (which needs cooling) but would also cool the broader market which is on life support.
There were 2.82 million foreclosures in the U.S. last year. 21.4 percent of owners of mortgaged homes were underwater. Yet here in Canada we are in some kind of real-estate fantasy land. A seemingly endless supply of greater fools willing to endure debt serfdom for 35-40 years if they last that long. I just find the situation hard to believe. Have Canadians become that stupid, greedy and irresponsible ?
http://www.bloomberg.com/apps/news?pid=20603037&sid=at6VKvccpCzs
@Evangeline 108
“… they are not my ‘preferred’ investment”
I believe Ben Graham in his “Intelligent Investor” (an even better book than Money Road
) said that those were best left to professionals.
Mere mortals such as ourselves were better served by buying common stocks.
Garth … in answer to your question to #31
I think advertising on the site is a great idea .. the more you can monetize the site the merrier ..
#78…..rant?…..is that what I have been doing?…….and I don’t even get a soap box?…….
seriously though can anyone give me a single reason based upon physical reality why what I have been saying is wrong?
We can debate details endlessly….but does anyone on here (excepting the few “wild eyed types” that truly think “residential real estate is a good long term investment that is) actually think that we are not going to see a radically different world (IE much lower standard of living) over the next decade??
I give Garth credit for at least recognizing the reality of the oil peak.
Since I am not a classically trained economist (thank whatever gods might be out there) I just do not see how a growth based economy can not utterly and completely collapse on itself when the energetic subsidy underlying it goes away.
If someone out there in the electron atmosphere has the answer, then please do ..speak up….I will immediately cease and desist and return to the medical realm from which I sprang…its quieter there….I will enjoy it (didn’t Bill Murray say something like that to New Yorks Mayor re: prison time for being wrong about the spooks flying in NY airspace?)
Nice little article on the BBC News for Nostradamus Jr:
“Vancouver: ‘Drug Central’ of North America”
http://news.bbc.co.uk/2/hi/americas/8505061.stm
And Garth gets quoted on the CBC News site:
“Should Canada fear housing bubble trouble?”
http://www.cbc.ca/money/story/2010/02/09/f-housing-bubble.html
#32 Atomic
I agree with your take on peak oil even though peak oil skeptics are almost as pariah as global warming skeptics
Imv PO falls into the same fear mongering genre as buy now or never wrt real estate. Last century they said all the same stuff about coal.
From FT today: “Here’s a ranking of countries by perceived risk, taking into account things like current account balances, public and private debt, and CDS spreads. It comes from a note on the impact of sovereign risk on European banks, published on Wednesday by Jagdeep Kalsi (Credit Suisse)”
Rankings are similar on all of these I’ve seen lately, more or less:
iceland
hungary
greece
portugal
spain
latvia
ireland
ukraine
romania
lithuania
turkey
bulagaria
egypt
india
italy
united states
estonia
poland
kazhakstan
Canada is not in the top 30 listed and is ranked less risky than Australia or Japan. The bond traders have many places to look first.
Hungary making a late charge. Note 18 of the top 25 are in Europe, in the Euro or on the periphery. The problem is not even the budget deficits and Government debt in these nations. The real issue is the vast amount of loans made and debts owed between closely interconnected Banks within and without.
Swedish Banks lent heavily to Estonia, Latvia, Ukraine, etc. German Banks are exposed up to $200B Euros in just Greece. Spanish Banks are massively exposed all over southern Europe and at home. Etc etc.
Multiply this by each nations Banks having lent wildly in any or all of the Euro area and surrounding. The numbers add up to several Trillion worth of ‘value’ ‘at risk’ and it is enough to sink the global Banking system and all the national Governments involved on it’s own. US Banks are in there too, and to a lesser extent Canadian Banks. Most have not even thought about writing off large portions of this debt – yet.
It’s a problem of too much debt vs ability to repay them. Who knew? Nobody, apparently. Greece and so many others have been running massive deficits for decades, it’s catching up now. Don’t look back, the Debt Monster is gaining. Don’t ask, don’t tell.
Europe usually leads off a Depression, don’t they? “Credit Anstaltdt in Vienna on Line 1, they need an urgent loan!”
Even if the Euros put a bandaid on Greece for now, nobody really thinks Greece can cut their budget effectively or soon. Repeat for the others. This looks to be a long term drain on the European economy for many years. An ‘Age of Austerity’ they are calling it now already. Tighten your belts, mend the old socks, rice and beans for dinner if you’re lucky, higher taxes, no jobs. Might as well go protest. It will be a lively summer I think.
I don’t want to sound too gloomy. The Euros will probably waffle their way to a temporary ’solution’, as usual. They are averse to difficult decisions. That just lengthens the time to get the problem resolved.
Canada will escape relatively unscathed compared to what citizens of some of these nations will see. Be thankful you live here, not there. Say a prayer for the hungry and less fortunate and donate to charity if you can afford it.
RESIDUAL INCOME RESIDES EVERYWHERE IF YOU PAY ATTENTION
Though I fully understand their reasons for raising the issue; I cannot believe some of the negative postings or questioning of the ethical/purist nature concerning Garth now having “click through ads” on his blog. Study from the best I say. Garth is a brilliant entrepreneur and a very successful business professional. Learn from him instead of questioning him. Imitation by doing is the best way to learn (see “Cone of Learning” studies).
Money is not evil or dirty. Everyone deserves a fair shot a acquiring it. Go for it Garth. The more ads the greater the possible longevity of your blog and its attractiveness. Nothing is really absolutely free in life. I fully stand behind your decision to increase your net income from business activities. Pay attention everyone. This is SMART. Really SMART in fact. Garth is my teacher. Again, learn from the best. If you question Garth’s motives you are not paying attention to his teachings. Open your mind and you may get some income generating/business ideas from Garth to expand your net income through passive income A.K.A residual income. Again, this is an example of one way to make additional revenue. Writing books another (intellectual property) etc. Smart, smart, smart!
They don’t teach you this stuff in school, the streets teach you this if you pay enough attention.
Money actually represents debt and not something of value. Betcha’ they didn’t teach you that concept in school. Might cause political unrest if people knew that their central banks were making interest payment monies off of worthless (not back by any tangible like gold or any another desirable commodity/ precious metal) paper money. This is an outrage if you think about it. You work hard for your money and the central banks print the money for free and charge interest for it! Welcome to modern serfdom.
The name of the game by the central banks is to get you into debt and keep you there for life. This is why banks pay so little for your savings accounts and home prices keep rising without any abatement in sight.
Remember, don’t save this worthless IOU stuff. Keep it circulating at high speed (velocity of money/aggregate positive cashflow) or you will find it increasingly difficult to be able to afford assets as time marches forward. These central bankers are printing money, not earning it like you and I. To add insult to injury, they charge interest on their printed money they never had to work for in the first place like you and I have to! Madness.
MONEY IS
D
E
B
T
Rental rate
Interesting how over the course of the past year RE is up 18% from the trough but rental rates (in $$ terms) are down. In general one would expect rental rates to go up as house prices go up.
My guess why the rental market is weaker:
1) low interest rates do not help renters pay higher rent, although it may reduce interest payments on other loans to free up more money to pay towards rent.
2) the vast majority of the housing stock was bought at much lower prices, and with lower interest rates. Any landlord with a variable will see lower interest cost – therefore make more $$ net.
3) a lot of renters are vacating rentals to buy
4)typically the economic position of the rental class is such that they are the first to be hit by a weak economy
Canada, as a train without the driver with accelerating speed, is running downhill to its crash.
Every one of the passengers has to think how to jump out from this train without to crumble his skull.
But do not jump to the trains named “US” or “EU” – they are going to the same direction as a Canadian train.
Obama got Peace Nobel Price in Oslo – it was very unusual light sign in the sky of Norway.
Obama went to Global Warming Conference in Europe, Copenhagen – it happens to be the coldest weather and winter in Denmark and Europe with enormous quantity of snow.
Obama in Washington now – successfully destroying US economy – there is endless snowmagedon in Washington, DC.
Obama came from Chicago – earthquake in Chicago yesterday.
What next?
#49 Sid on 02.10.10 at 9:38 am
“i personally think homes in some part of Southern Ontario are so cheap that the downturn risk is minimal, it’s definately not the same game as buying in Vancouver. If you want to be extra smart about buying a home, put a basment suite in and generate an additional 10K a year in rents from your property”
____________________________________________
Sid, you must be from the Vancouver area. People from southern Ontario actually do the “extra smart” thing by NOT renting out their basement. If you can’t afford the payments on your own, don’t buy it.
Renting out the basement has become so commonly accepted in the greater Vancouver area, I wouldn’t be surprised if it’s part of the reason housing has become so expensive there.
By the way, southern Ontario is not “cheap”; it’s just not in a bubble (excluding the GTA of course).
Should Canada fear housing bubble trouble?
What the experts are saying
http://www.cbc.ca/money/story/2010/02/09/f-housing-bubble.html
Seems CBC sees Garth as an expert. Go figure.
#112
((Mere mortals such as ourselves were better served by buying common stocks.))
If this trend continues Alberta may be for a rude awakening, unless Chinese step in.
http://www.oilweek.com/news.asp?ID=26715
1/
If or when Europe Implodes…..Flames may jump the Atlantic Ocean causing Eastern Canada to catch fire too.
…Suggestion…Eastern Canadians move west…ASAP
2/
“”Nice little article on the BBC News for Nostradamus Jr:
“Vancouver: ‘Drug Central’ of North America”
http://news.bbc.co.uk/2/hi/americas/8505061.stm“”
…Don’t bogart that joint my friend…pass it over to me.
Nostradamus jr.
#114 knucklewalker
Since I am not a classically trained economist
Remember now Paulson and the head of JP Morgan chase both admitted they never seen housing prices dropping ever and I’m sure they have as fancy a degree as any in economics. Seems to me some of the best “economists” in the last few years have been those that have not forgot about “history” or “fundamentals”.
#119 omg
(3) a lot of renters are vacating rentals to buy
You hit it bang on. That is the number #1 reason, combined with the fact that more investment properties are getting into the mix.
This addition of more investors looking for renters and renters becoming owners adds a double whamming on downward pressures on rents and distorts the price to retn ratio even further.
#126
((If or when Europe Implodes…..Flames may jump the Atlantic Ocean causing Eastern Canada to catch fire too))
what special connection exists between Europe and Eastern Canada?
AGIC said (in #84):
“In times when it is inevitable that int. rate will go up, to buy bonds, bond/balanced funds, is a recipe for loosing capital money.”
AGIC, bond price will drop when interest rate is up, but you don’t loose any capital if you hold the bond (not bond funds) to its maturity and the bond issuer is still intact then. The only thing is that the bond coupon is taxed as regular income.
I live in calgary,
I know in 2007 2 BR cost about 1250/month, recently I heard that Broadwalk one of the biggest renatl apt reduce the price to 800/month including heat and water. I know that Broadwalk doest not has a good image, but I think the lower rate not because of the poor service only, but becuase there are many plenty vacant apt, specially private that compete with the companies.
Supply and demand matter.
What next??
#39James: “always go in the oposite direction of the masses. Have you noticed not one person on this Blog says buy.”
People on this Blog are not representative of the masses, and the masses do advocate buying. Therefore, according to your own argument, people shouldn’t buy.
#9 Eyes o’ the world — I thought the world already knew that Vancouver was the Best Place on Earth. And yet, now all hopes are pinned on a 2-week sporting event to increase awareness? Good luck with that.
FRBSF Economic Letter
Global Household Leverage, House Prices, and Consumption
January 11, 2010
By Reuven Glick, is a group vice president in Economic Research at the Federal Reserve Bank of San Francisco
Kevin J. Lansings a senior economist in Economic Research at the Federal Reserve Bank of San Francisco.
Household leverage in the United States and many industrial countries increased dramatically in the decade prior to 2007. Countries with the largest increases in household leverage tended to experience the fastest rises in house prices over the same period. These same countries tended to experience the biggest declines in household consumption once house prices started falling…
United States and 15 other industrial countries over a 10-year period ending in 2007, according to data from the Organisation for Economic Co-operation and Development.
http://stats.oecd.org/Index.aspx
Knucklewalker,
“seriously though can anyone give me a single reason based upon physical reality why what I have been saying is wrong?”
OK, I’ll bite. I honestly don’t know if you are right or wrong. Forecasting of this magnitude is inherently difficult. However, when I’ve asked myself the same question and tried to argue against the logical consequences of peak oil, I fail to be convincing to myself.
Peak oil is exists. I think it is misunderstood by many. Obviously, oil will be around for a long time, but it will not continue to be cheap. There is no abiotic oil. This is a finite resource.
The way we will cope with this fact is really the question to ask. Resource wars, tanks in Alberta, Bartertown: it depends on a lot of things. Timing is everything. Will we summon the collective will to transition to an energy future that is less intense? Will we fulfill the hope and expectation of so many and find some ingenious new technological way of harnessing some renewable source of engergy? Perhaps, but I’m not banking on it.
One of the pertinent questions that are hard to answer is how much oil do we have left. Many authors have spoken to this question and most suggest that we don’t really know for sure. Oil rich countries manipulate the numbers to their benefit and oil companies are not going to be upfront with the real data because they want to keep their party going for as long as possible.
In the absence of clear answers to these important questions, the prudent will prepare for contingencies. However, this doesn’t make issues like housing bubbles, current deficit spending or a hundred other topical concerns inconsequential. The world is a complex place.
I think the preparation for effects of peak oil are going to get more difficult as time goes on. I wholeheartedly agree with you that most people are blind to our collective energy circumstance. I’m just not sure that I share all of your pessimism. Garth points out that politicians follow the way the wind is blowing. We perhaps need a kick start to awaken ourselves. Then we can act in concert. We humans are capable of great things. Opposable thumbs and frontal lobes and so forth. In the meantime, all I can do is try to be a little prepared, more self-sufficient, support government policy when it is headed in the right way, oppose crappy policy and try my best to constructively educate people.
#119 OMG,
Two factors are impacting rental rates now.
1) Many renters can afford to buy because of the low interest rates and the expanded CMHC rules. This is especially important in market like Vancouver and Toronto.
2) Affordability remains unchanged or worse for the rest of the population. Wages are flat or worse. Cost are up. There is no more money to pay for increased costs of rentals.
The only money available is cheap debt which is driving the Re bubble up. Rents will continue to decline.
Lynn,
I think you’d be wise to heed Garth and your Dad’s advice…be patient and wait…afterall sounds like your current shelter is just fine. In waiting, you may end up with a 50% or more discount. Bargains are good!
I considered selling, but family lives with me and I don’t want to disrupt their lives, besides our region seems to have remained somewhat sensible/conservative. Our prices, for the most part, haven’t skyrocketed as in other Canadian areas. I also have my business in my home which serves as a bit of a deduction.
Why wouldnt F raise the down payment 1% per year for the next 5 years and lower the amortization by 1 year every year for the next 5 years?
Is there a reason why the increments are done (and discussed) in 5’s?
#49 Sid
Regarding “cheap” housing in southern Ontario I know someone whose father bought what were then considered decent starter homes in Windsor during the depths of the Depression for ten cents on the dollar. That’s $5,000 dollar homes going for $500.
Things can still get a whole heck of a lot cheaper before this is over.
RE: low rental rates
Seems every new house and TOWNHOUSE here in Nanaimo have suites in them. Since when did they start putting suites in townhouses?
#89 BigAl (Original) — “. . . a STRONG possibility of a non-confidence vote on the March budget whereby, if successful, the house of cards will come down.”
A very good reason for Harper to prorogue in the first place (unnecessary), Iggy to say nothing but enjoy the free ride (‘limprix) then play fiddles while we crash and burn. Good post. See following links re: finances.
#117 Got A Watch — “Don’t look back, the Debt Monster is gaining. Don’t ask, don’t tell.”
Also an excellent post. As #118 The VULTURE says, Money is debt; adding to that, debt is pure greed and stupidity. Stupidity = sheeple. Stupidity and sheeple doesn’t pay the bills.
This his may be part of the “punch” Iran has promised tomorrow. Life is sure getting interesting!
Paging Al Gore! Al Gore to the courtesy snowy phone please! BTW, this is what happened last time. It took less than a year, and most if not all Europe was completely blanketed in ice (about 13,000 years ago).
Monsanto’s here — back to KD!
China playing hardball with the US?
Who will enforce this?
Let the Dump and Pump begin!
And Oh Dear!
The fiscal downturn since GD1 is squeezing municipalities across the country, which is why property taxes are headed into the ionosphere.
Housing — another 9-11 now well underway.
BC’s deferral on property taxes for anyone with children under 18? Wow. Must be taking a page from Harper’s Book of Stimulus Optics.
Lesson 1: “How to create and market tax incentives/plus economic stimulus programs using smoke and mirrors.”
Regarding the proposed BC property tax deferral:
A mortgage is conditional on staying current with the property taxes on the home, so possibly the tax deferral option will be only for those young families with a fully paid-for home.
Not too many of those around.
for those that say i should vote 3 questions
1-Leyton, Harper or Ignatiuff ?
2-which of the above will actually do what they promise ?
3-am i responsible for Harper ?
#139 Would like to thank Nostradamus le Mad Vlad for all the useful links.
Would also like to recommend that instead of worrying so much about the RE bubble, we should be more worried about the effects of GM foods and radiated foods (that includes EVERYTHING we eat now). Educate yourselves and write to the government if you care about this.
I’m waiting for the market correction here in Ottawa. The prices of homes have skyrocketed recently because of cheap interest rates which might be here for a while, even with a few percentace point increases. Even though Ottawa was less affected by recent events, I think it’s going to feel the effects soon. There are a lot of properties on the market in the last few weeks, and they all listed to over 50,000-100,000 what they should be worth.I
In my opinion, let the Bank of Canada raise the rates, stop taxpayers from being responsible for CMHC delinquentcies, which will get things moving again. No way should someone be paying a mortgage that is more than 3 times their income.
Let the bubble bursting begin; and soon!
Everyone must see this:
http://www.ohcanadamovie.com/
That is riddled with false information. — Garth
Thanks Nostradamus Le Mad Vlad
for your kind comments.
I really enjoy the work you put into your posts and all the cool links. Man do you know your stuff!! WOW.
I am not worthy….I am in awe of your knowledge. You are awesome…an intellectual tour de force.
Where do you find all this info and have the time to do it. Amazing…
David Dodge on housing and the overall economy, part 1 and 2.
http://watch.bnn.ca/squeezeplay/february-2010/squeezeplay-february-10-2010/#clip265651
http://watch.bnn.ca/squeezeplay/february-2010/squeezeplay-february-10-2010/#clip265656
#128 Evangeline writes…
((If or when Europe Implodes…..Flames may jump the Atlantic Ocean causing Eastern Canada to catch fire too))
what special connection exists between Europe and Eastern Canada?
Well, Niall Ferguson writes…
“”it is appropriate that the fiscal crisis of the west has begun in Greece, the birthplace of western civilization. Soon it will cross the channel to Britain. But the key question is when that crisis will reach the last bastion of western power, on the other side of the Atlantic.”"
http://www.zerohedge.com/article/coming-america-greek-sovereign-debt-crisis
Nostradamus jr.
TO bubble boy/junius others re: cmhc and their role in creating the bubble:
5% DPs have been available since 1990. I know – I had
one.
http://www.cmhc-schl.gc.ca/en/corp/about/hi/index.cfm
“In 1999, the National Housing Act and the Canada Mortgage and Housing Corporation Act were modified, allowing for the introduction of a 5% down payment – a change launched as a five-year pilot in 1990, extended and finalized in 1999 – removing a significant barrier for first-time home buyers.”
“That (Ohcanadamovie.com) is riddled with false information.” — Garth
Would you provide any examples of false information?
It looks credible to me so far.
Then learn more. — Garth
#148
((”it is appropriate that the fiscal crisis of the west has begun in Greece, the birthplace of western civilization. Soon it will cross the channel to Britain. But the key question is when that crisis will reach the last bastion of western power, on the other side of the Atlantic.””))
Thanks for the link … I don’t think the term ‘other side of the Atlantic’ was specifically referencing Eastern Canada … it was more like saying ‘across the pond’ … it referred to North America as a whole, both east and west coast.
Greece like every other government is in between a rock and hard place. Yes corporate financiers are partially to blame for the mess, but the government is culpable as well. Greece’s political system has been giving out too many freebies that the taxpayers can’t afford. When and if there are any cuts in the freebies Greece’s volatile population will react violently. But I can’t see that the Greek government will have much choice, they will be forced to reduce their debt by reducing their spending.
#68 PTDBD,
Sorry Garth, I’m going to have to disagree with you on this one. My unit of 3 portfolio managers run a pref portfolio for high net worth clients and trust me, risk is the feeling of tightening sphincters when they see their monthly statements. Most of them didn’t give a rat’s behind about their income when they saw their account values drop like Paris Hilton’s drawers at a Keg Party. October of 2008 to March 2009 wasn’t fun for anyone, especially clients who bought prefs. Remember, financials were in everybody’s bull’s eye and many prefs are issued by financials.
Ignatieff and Harper are two sides of the exact same neo-con coin. The Neo-cons have always hated the relative autonomy of our parliament, and now they have covered all their bets.
And I can sum up the Neo-con position thus: do whatever you want with domestic policy – we couldn’t give a hoot, for the most part. Be liberal, be conservative…whatever. But there’s only ONE way on middle-east policy and you’d better be in line on that.
The neo-con agenda has only one enshrined rule, and that rule relates to middle-east policy.
A few gems from Ignatieff’s writings, 2003, before he came North and joined his fellow neo-con Harper on the other side of the House:
“Regime change is an imperial task par excellence, since it assumes that the empire’s interest has a right to trump the sovereignty of a state. . . . The question, then, is not whether America is too powerful but whether it is powerful enough. . . . The case for empire is that it has become, in a place like Iraq, the last hope for democracy and stability alike.”
or this one…
“America’s empire is not like empires of times past, built on colonies, conquest and the white man’s burden. We are no longer in the era of the United Fruit Company, when American corporations needed the Marines to secure their investments overseas. The twenty-first century imperium is a new invention in the annals of political science, an empire lite, a global hegemony whose grace notes are free markets, human rights, and democracy.”
In the rest of the article from where this comes, the author refers to the last Ignatieff quote above:
“The historian Howard Zinn correctly pointed out that ‘only someone blind to the history of the United States . . . could make that statement’. ”
The whole article is here:
http://www.huffingtonpost.com/joseph-a-palermo/michael-ignatieff-gettin_b_59261.html
Ignatieff has been given a job to do here by the NeoCons. That is to give Canadians the illusion of choice, the illusion of an alternative to Harper. He is allowed some degree of freedom in some areas, but his main purpose is to get Canada in line with U.S. Middle East policy. Note that Obama has the same task in the U.S. – Middle East policy is not allowed to change no matter who you choose.
76-tom
news flash — those olympic tickets gregor is holding in his hot little hand were not freebies—bought by the city of vancouver (taxpayers)
i think he’s going to try and “scalp” them and try and pay for the olympic village condos
Be careful advising anyone to buy a house with a basement suite to rent out to cover the mortgage.
Number of available rental accommodations are way up here in Victoria. Lots more competition, while suites/apts are sitting vacant longer and price reductions are snowballing.
#90 Bailing in B.C.
Interesting reply – thanks.
#152
Speaking from the client side, you’re comments hit the nail on the head. Losing huge amounts of capital is not worth the paltry returns. Sure, one can buy and hold, and pray the stock will go up again, but what if you need the money now? Liquidity is not such a great deal when you have to sell at fire sale prices.
Some of my other random thoughts on preferreds:
1. the higher interest rate means higher risk, meaning the company has debt issues … maybe even **serious** debt issues; in a credit contraction that is not a comforting thought. Maybe someone has access to balance sheets that are not accessible to the public.
2. when a full service bank-affiliated broker pumps a particular company’s preferreds, the question is: does the bank have a back door stake in helping this company out with its debt problems?
Wow… no offense but let me get this straight. Buy a house at the height of a national housing mania. Buy in a market that is so unhealthy from a macro viewpoint, that it can’t even play catch up with zero rates and a mania raging across the land. Then borrow against it to buy into bank stocks which have enjoyed a record breaking run already… and are likely to implode if the much awaited housing bust does in fact arrive …
?
Much as I enjoy the analysis on this blog in general, this recommendation amounts to putting all your eggs in one basket, and then borrowing against the eggs, to buy more eggs, to put in said basket.
Good luck!
Lynn
you’re business may not be so successful 6 months from now. keep the money in the bank. you will have money for food