Feds prick bubble. Flippers & virgins nailed.
Ah the life of the poor contrarian.
Clad in sackcloth and trailing ashes, I drag my miserable skin from town to town with a heretical and out-of-favour message. Beware of seductive debt!, I cry. No asset rises forever! All booms end badly! Repent, and diversify into financial securities while you’re at it!
Well, after denying up and down that a housing bubble exists, the feds (as I told you yesterday) have decided to puncture it anyway. In his announcement this morning F ignites the gasbag that has propelled real estate out of reach of most middle class families. In doing so, he tacitly acknowledges the damage emergency interest rates have done.
But F won’t be raising the minimum insurable downpayment to 10% from its absurd 5%. Instead, he’s come up with other ways to squeeze the property virgins while taking aim elsewhere. Here are the new rules:
- Anyone applying for a new mortgage has to qualify for a current 5-year fixed rate, instead of the cheapo VRM.
- This means having enough income to make payments at the current 5.390% rate instead of the absurd 1.8%-2.25% currently being offered. The implications of this are large indeed.
- To stem a tide of money coming out of inflated houses, Ottawa will cap refinancings which qualify for CMHC insurance at 90% of home value, down from 95%.
- And, in a move meant to kneecap speculators, F decrees the minimum downpayment for getting insurance on a spec house will be 20%, up from 5%. He says this is to stop people “to use a home like an ATM” sucking money out through a refinancing “to buy three or four condos on speculation.”
Will this help? Maybe. It’s a shot across the bow of an industry which now embodies irresponsibility. In any case, it sends a signal out that the party is over.
Meanwhile a bunch of readers have sent me this story after it ran in the Montreal Gazette, then hit the Canwest wire (apparently they still have one) and ended up in the weekend’s Vancouver Sun. In it, reporter (sort of) Jay Bryan launches into the debate about whether or not Canada has that bubble – which seems a waste of time after real estate increased 20 times the inflation rate last year, and in light of F’s big move.
Whatever. The conclusion he reached was consistent with the corporate Global Canwest MSM view: No bubble. Go borrow and multiple.
To prove that, Jay referenced one person, economist Michael Gregory who says, yeah, prices are high but only because rates are too low and listings are too few. But Gregory says no worries, since speculators are absent (news to F, I guess) and mortgage rates and taxes will soon rise to naturally cool things off. So, keep buying.
Interestingly enough, Mr. Gregory is paid by the Bank of Montreal, which has a current mortgage portfolio of $45,524,000,000, and together with personal loans makes up a third of the bank’s entire assets. Nice objective source.
The only other person named in this article is moi. I get less flattering treatment.
“Now, there’s simmering worry about a Canadian housing bubble, based on the remarkably fast rebound of house prices here after a brief, violent crash triggered by the 2008 U.S. financial crisis. This week, the concern got more visibility when the venerable Wall Street Journal, where big Canadian stories are rare, belatedly reported it in a front-page article. But the large volume of hot air expended on this issue doesn’t seem to be matched by an equal quantity of careful analysis.
“The most prominently quoted source in the Journal article, for example, wasn’t an economist or real-estate expert. It was Garth Turner, a former politician who wrote a book two years ago predicting the collapse of housing prices in Canada. It didn’t happen and economists never took Turner’s analysis seriously, but he keeps making the same prediction.”
Well, it’s a pretty ease gig when you write a column on economics, interview one guy, diss another guy you didn’t talk to, and reach a conclusion. So I wondered if Reporter Jay had ever read this blog, or a book of mine, or watched people line up on a rain-soaked sidewalk to buy a condo in T.O. or Yaletown just so they could flip it? Or if he had a reaction to Vancouver, Toronto and Victoria being on the list of most unaffordable cities. Or if he was aware that the bulk of new mortgages are going to people who don’t have money – the 5% (or less)-down crowd?
Or maybe he just lost my phone number? (Guess he could call the Wall Street Journal to get it.)
Anyway, I sent Jay a nice note with my contact info. He responded, “Thanks for taking the trouble to write. I know you’ve sold a lot of books and that’s an accomplishment, but it’s not proof of expertise or credibility. If that were the case, I’d be calling James Glassman and Kevin Hassett every time I wanted a comment on the stock market’s future trend.”
Huh?
James Glassman was a senior economist with JP Morgan Chase, publisher of The New Republic, US Undersecretary of State for diplomacy, a writer for the NY Times, the WSJ, Washington Post and other publications, and co-author of a book on the stock market with Kevin Hassett. He’s a US economist and director of economic policy studies at the American Enterprise Institute. He was John McCain’s chief economic adviser, and also helped direct US economic policy.
Man, I mean why would you waste time talking to dudes like that when you’re a Canwest economics columnist? Crap. What is there possibly to learn? Why not just crib a report from BeeMo’s guy, and continue to spread the message that real estate is relatively safe?
Well, the criticism I don’t mind. Expect it, actually. Inspires me in a way.
Because unlike many corporate journalists today, I do believe reporters have a responsibility. It’s not good enough to present only one side of a story, or publish an article after making zero attempt to achieve some modicum of balance. It is just as irresponsible to tamp down the jagged edges of a housing mania as it is to interview a source whose career depends on compliance with company messaging.
Today too many young couples are jumping into the ownership of an asset at its highest valuation, risking 95% leverage and using money which will only rise in cost. You’d think that might be worth a mention. I mean, unless you didn’t care.
Mr. Bryan the reporter dismisses me as a former politician. But I know what really irks him.
He gets asked all the time if he’s Garth Turner.
204 comments ↓
Oh the huge amortizations!!!!
Here’s an interesting quote…do these guys read the things they write?
“When this kind of stuff is happening, the volume of mortgage loans soars, but in Canada, mortgage volume is growing sedately, at about the same pace as prices.”
last time I checked, prices weren’t growing ’sedately’…unless my thesaurus is out of date.
Canadian Journalists. Always politically correct, always ready to kiss some serious booty… And ready to serve whoever pays the bill..
Thay just makes me sick. There will never be true journalism in Canada, nobody has the guts to tell the truth. Specially when it is not popular with the masses…
Makes you feel like in a deep province.. Which Canada truhly is.
Its too much work for Mr. Bryan to find a balance of credible, unbiased sources for his column. The truth is that’s not his job. He gets paid to write fluff. God help anyone who takes him seriously.
…So…we will see a new R E spec tax rather than tougher buyin requirements by Ottawa.
1/
…Will R E prices in TO or Van stop rising as quickly?
2/
… will they rise more slowly?
3/
… will they go flat?
4/
… or will they reverse?
Flat (3) for both is my opinion….until the world recognizes Van for what it is and R E prices begin rising again.
…Everyone have a good day, eh…
Nostradamus jr.
Classic, just classic! He’s your Doppelgängern!
“Recognizes Van for what it is”: you mean a city with absolutely NO industrial base and the worst paying jobs of any major city in North America. Greater fool ground zero.
Garth,
Let’s say he does just that.
Would that PRECLUDE any further changes (ie. March 4th) to CMHC 5/35????
Thoughts on this? Is this the start of MORE changes, or the only change you would think they make for the year?
Jeez, slide it right out there under the nose of the Olympics, it will have to compete for news, eh!
Fun. I smell a change afoot.
Garth … you actually have been done a favour by this guy not interviewing you and asking for your opinions. I clicked on the link you gave and read this piece (first i clicked on) and trust me, if anyone reads this you can tell who he works for… He uses quotes from “Derek Holt at Scotia Capital Markets.” as he states that … “First, there’s the recovery in stock markets, which Holt estimates to have completely healed the severe losses inflicted on Canadians’ retirement savings.”
then … “Second, and perhaps even more important, home values in Canada have already recovered the losses they suffered through last spring.”
NOWHERE does this guy actualy state that economic conditions are improving because of a rebounding manufacturing growth or anything besides floating in increases in job growth (that good ol’ fudging of the “new job” mantra)… this guy should be on the running with Kramer and MAD MONEY…
Consumers set to lift our economy
“Home values have already recovered the losses they suffered through last spring.”
http://www.montrealgazette.com/business/Consumers+lift+economy/2511449/story.html
Isn’t Canwest broke? I thought Shaw just bought the electronic part of the business and said “screw that” to the print side.
That reporter is a jack ass. But the truth is, tell me who is going to talk bad about real estate???
It’s like volunteering to donate half your home to charity!
Garth,
What are your thought on RE in small town Alberta, where we’ve seen declining prices since late 2007/early 2008, and haven’t experienced the recent 20% uptick that the many other Canadian centers have? Assuming that the town has some underlying economic strength (ie. jobs), do you think it wise to invest in these areas as either rentals or flips, or am I better off to pay down my current debts?
Let’s drop all pretence about the Fourth Estate.
“Journalists” get paid by media owners to advance the interests of media owners. This includes advancing the interests of the advertisers who pay the owners, as well as the politicians who create or maintain the economic and legal conditions favoured by owners. It’s a closed system in which truth, fact and investigative rogues are counter-productive. And while we’re at it, this press is not free, being subservient to particular interests, and does not deserve the hallowed “Freedom of the Press”.
As to Flaherty’s plans, heaven help the hindmost, because the devil is about to take them. Flippers are not the problem: their capital gains tax is as good as anyone else’s. It’s the primary residence owner of stagnant-to-threatened income and rising costs who will get it in the neck.
Now, if only we had an opposition able to state convincingly “This is what has to be done for the following reasons, and we’re going to do it.”
I heard the EXACT, IDENTICAL same Grand delusional views that Nostradamus jr. posts on here from people living in Florida. My friend who lives there was also spouting the same delusional crap. That is that Florida is the place everyone is moving to, the place that the snowbirds were flocking to in greater and greater numbers every year. The place where the rich from around the world owned or were planning to own at least one vacation property. Blah, Blah Blah!!! My friend told me how his property that he purchased only a few years earlier had soared in value and that the prices would go nowhere but up. he told me about his grandiose retirement plans which would be funded by his soaring Florida home price…………and than the bottom fell out.
The great state of Florida, land of sunshine, palm trees and leisure all of a sudden saw their guaranteed home investments drop 50, 60 70% in value. They were shocked, stunned, this was not supposed to happen, especially in a place such as Florida which still really is one of if not the fastest growing States in the US.
The bottom line is a Bubble is a Bubble is a Bubble, no matter where in the world that it is located. The old and very tired argument “that it is different here” or it is different this time” has never, ever held up!!! It didn’t in Florida, it didn’t in California, it didn’t in Spain, it didn’t in tokyo, etc. etc. and it won’t in Vancouver, Victoria, Toronto, Calgary or Edmonton.
Oh ya, and I forgot. IMHO, the budget won’t pass, we’re in for a spring election, and the emergency rates won’t be going up yet because the emergency isn’t over yet. It’s just shifting gears.
If real estate can set some convincing new highs in the coming months, the spring sales season could defy all rationality, but it will be a last gasp. Once a trend is broken it stays broken until the correction is complete.
Garth,
Where is your conference in London this week? Is it open to the public?
Brew
It’s March 9th, at Chapters (south), 7 pm. Open to all. — Garth
Garth, your report/blog today doesn’t make me feel very hopeful about home prices going down any time soon. Am I misreading it?
Thanks
I wonder if Mr. bryan has a signed copy of Dwayne Chapmans book ? The past just ain’t what it used to be.
Garth,
You just need to sit back and relax. This real estate adjustment is written into the cards.
You can’t expand credit at the rate we have forever. It has added 10-15% of disposable income over the last decade. As soon as interest rate rise, credit will not only stop expanding, but it is more than likely to contract.
A reduction in outstanding credit of -3% per year for a few years, would be the equivalent of Canadians disposable income dropping by around 15-20%. That will trigger a recession.
It’s dangerous ground that we sit on. It’s unfortunate that individuals like Byran and Gregory don’t spend more time analyzing debt levels rather than price levels. It’s very difficult to judge a bubble just by looking at the price of something. However, if you look at the price/earnings, debt ratio and future earnings, you can usually identify a bubble dead in its tracks.
Hundreds of thousands of Vancouverites now have to change their underwear as we speak.
Come on Van has a great housing and grow op economy. The grow op economy is tax free so how can it keep from booming?
Who needs well paid jobs or an industrial base when you can be an entrepreneurial barrista at charbucks and sell pot on the side.
Typical political posturing – F’s “big announcement” will not change anything. Of all of the
Speculator tax? Please, people have already speculated, made their fortunes in this once in a lifetime opportunity, and have exited. This will do nothing.
If you actually wanted to target the source of the supposed bubble, you would really require more than 5% down.
But guess what everyone, just because F may make some changes, does not mean the banks will follow through with them.
Anyone remember the elimination of the 0 down/40 year amortizations? Rather than adhere to the spirit of that policy, the banks just continued on with 5% cash back – the same thing.
Its all in the implementation….and nothing with change….
You have finally Arrived on Broadway, Garth crashing and burning in glorious technicolor!
Better to leave F-C-H handle the excess baggage when all this starts unraveling. Write columns, let posters here continue being contrarians; we will mind our Ps and Qs.
Garth Turner — No Longer A Politician!
——
#118 Onemorething on 02.15.10 at 8:48 pm — Noted, but if solid silver (like gold) is removed from personal ownership, what then? You are also right — avoid currencies like the plague.
If it were possible for us, I would really have liked to own a few acres complete with water (well or city), be relatively self-sufficient, etc., but we’re getting on so that is not practical.
Shares will lose value (depending on what one buys), but owzabout Cdn. equity mutuals (ours rose 17% or or more last year), gold / silver shares, utilities or bank preferreds?
I agree that paper shares come and go, but they are a little better than currencies, so (other than checking out banks’ exposure to mtgs. / loans / LoC), for too much exposure will deal them a death knell. However, this follows on . . .
Rage Comment from wrh.com is good: “The latest official (and probably unrealistically optimistic) report from DC is that the unemployment slump will continue until at least the end of 2012.
“Obviously, the states will not survive that long. It may be that 2010 will be the summer of rage.” Neither will provinces here, so look for the same here — it is what the elite want, to have us fighting amongst one another.
Here as well.
As of 10:25 PST today, What Really Happened.com (wrh.com) was banned in Australia and New Zealand. So much for freedom of speech. Time to bring an unexpected ice-age on very quickly!
“I tried traceroute to WRH from several traceroute servers in Australia and New Zealand. Australians are behind a “Silicon Curtain” not unlike the Iron Curtain of the USSR!
“UPDATE: Apparently some Australians and New Zealanders are able to see this website if they are using non-default DNS servers like OpenDNS and GoogleDNS, or if they go through a proxy server.
“I have some new web stat tools to play with and am tracking web visit from down under today to see how they differ from the previous server.
“One reader has written in saying they cannot connect to WRH through Comcast.”
The F man probably won’t go far enough, it is all optics. I can’t see how half-baked measures like the ones you suggested will make a significant dent in the market.
Garth, why do you use the word Journalism with Can West in the same sentence?
I was watching keith on msnbc last week … a segment on the teabagger protests and I saw a sign, hand written saying stop the the morans in the white house . I laughed and laughed . Well you know.
“Recognizes Van for what it is”: you mean a city with absolutely NO industrial base and the worst paying jobs of any major city in North America. Greater fool ground zero.”
Don’t forget that wages here are lower than Alberta. Also, add to this, a 900 million dollar security bill for the Olympics, huge bill for the Olympic Village city council screw-up, a bill for trucking in snow from the interior- $1000 per load…
This is like closing the barn door after the horses have left…
Federal government set to restrict mortgages
OTTAWA — The federal government is set to announce new restrictions for Canadian mortgages on Tuesday, sources say.
The rules are meant to prevent a housing crisis from happening in Canada as interest rates rise, leaving homeowners with mortgages they can no longer afford to pay.
Financial experts speculated last week that the measures may include reducing the minimum down payment and amortization rate for Canadian homebuyers.
The announcement comes after increased concern by economists that Canada’s low interest rates may have encouraged homeowners to take out mortgages they can’t afford or increased their debt by remortgaging their homes.
Flaherty’s measures will help prevent Canada from suffering a housing crisis similar to the United States, where mass foreclosures caused prices to drop as the market collapsed, sources said Monday.
http://www.vancouversun.com/business/Federal+government+restrict+mortgages/2568109/story.html
Ha-ha, nice ending of post! He really looks like you… well, like a fat you
However, saying that a guy “and also helped direct US economic policy” can’t possibly mean anything good. US economic policy is in dire shape!
I think we should also blame the power of advertising. I believe this generation has been brainwashed.
There should be some controls in how financing is advertised. Much like tobacco or booze ads are. There could be graphic warnings shown with the ads what could happen if you live beyond your needs.
The photo of the Hindenburg crashing and burning would be a good one to use. Kids, this is what could happen flying attached to a highly flammable hydrogen filled balloon
Some public service workers in Ottawa being laid off:
http://www.ottawacitizen.com/business/workers+April/2568010/story.html
Should make R happy.
Brian’s charts are updated at chpc.biz. Here is the one I want to look at:
http://www.chpc.biz/Major_Cities_Chart.htm
Drawing the trend lines, Vancouver.
There is a big uptrend line that can be drawn from around Oct 02 to Feb 05, that looked like it failed in Feb 08, but the prices quickly reversed so this trend is in theory still in play.
However, the “power up” trend that can be drawn from Feb 05 to Apr 07 is clearly broken.
(PS you extend the lines all the way out).
Vancouver appears to have broken the old high from Jan 08 but this price is now resistance, so if it can’t sustain the increases prices should head for the old uptrend line.
Calgary is more interesting.
The “power up” trend from Oct 05 to Dec 06 is clearly old news However, drawing a line from Mar 07 to say Feb 08 gives a nice downtrend line, that meets up right about where we are price wise with an up trend drawn from Oct 04 to Oct 05 and extended. However, if this level doesn’t hold, the next line is drawn from pretty much any 2 dates prior to Oct 04, and extended looks pretty much like the Ottawa line, only straighter.
The implication of that is that if Calgary prices don’t hold, they coud end up looking a lot like Ottawa prices within a couple of years.
Edmonton:
Not as defined a line as Calgary but similar shape so may as well say “same thing”.
Montreal, Ottawa, and Toronto.
Boring. Prices are growing much faster than inflation but the lines are so boring as to indicate nothing more exciting than a range bound trend. Any collapse in these markets should be as boring as the increase was. As there were no 50% up years like 2006 was for Calgary, there should be no 50% down years either. Boring.
I prefer Nasty Jr.’s previous post lines!!
Delete, delete, delete!!
Dismissing Garth’s commentary is to dismiss common sense. Regardless of whether one agrees or not with his analysis of the state of the RE market one can not simply ignore the facts which he shines a spotlight on. I feel like beating my head against a wall when these idiots stick their heads in the sand. I sold my house in January and every day it feels more and more like it was the right thing to do. I am building my own house in a remote area and filling the pantry with soup.
Sorry, that last sentence should be “no 33% down years”. 50% up followed by 33% down leaves you were you started.
Example: $200,000 up 50% ($100,000) = $300,000. But taking $100,000 off of $300,000 is 1/3 or 33%.
I think the fundamentals support Ottawa prices in Calgary in the not to distant future too. What happened in Calgary that didn’t happen in Ottawa in 2006? Oh ya, the oil boom. But how did that work out for us? The jobs are still gone, as quick as they came.
Vancouver, of course, defies explanation. But I think I see why Carney says there is no bubble in Canada. He is saying “Canada does not have a housing bubble.” But where he put the period, he puts a comma in his mind and continues silently: “but everyone west of Winnipeg has lost their freakin’ minds!”
“We don’t see speculators flipping homes for a fast buck or people buying two or three homes, hoping to sell later for a profit.”
I don’t know how he could NOT see this… I’m 29, and know at least 5 people who have done this in the past 6 months.
This stinks of CREA damage control.
I read Jay the reporter in the Gazette regularly. You sort of have to wonder who pays his salary, the banks or the paper. Actually, I think he’s doing his best to get on CNBS!
Rates, by the way, Ottawa thinks could be doubled by the end of the year.
could and will
Jay Bryan gets asked all the time if he’s Garth Turner.
separated at birth
The article in the Van Sun actually makes a lot of sense.
The article makes the point that the talk of a bubble will actually have the opposite effect – the very essence of a contrarian view.
People have learned a lot since the 1982 BUBBLE that burst. That was the Holy Cow of a BUBBLE. The North American inflation was running @15%, speculation in RE was so obvious and rampant that the bidding was rapid and intense; and suddenly, something happened – interest rates were raised to 22%. By the time people realized that the BUBBLE was going to burst – it was too late – nobody noticed the mood of the investors until it was too late.
At this point in time, that history will not repeat itself as people are well aware of what can happen in rampant speculation. There is some speculation now – but not significant enough to effect the bubble burst – and the fact that everyone is talking about the BUBBLE will have the opposite effect.
The world is totally different since 1982. The manufacturing that existed in North America in those days is gone forever. The only way we can maintain our standard of living is to print money (which is what F is doing) – until we hit the wall; but that would be on some future date which is impossible to predict because you will only know it after it has happened – just like the 1982 crisis.
It is important to discuss and to plan your future; but, I do not see a significant correction in the RE market of Vancouver or TO any time soon.
The US situation was totally different because in that market there was rampant FRAUD. None of that is evident in Canada.
Garth, you are slimmer and more handsome than that guy.
You’re a very lucky man, Garth. Unlike Jay Bryan (not Jay Brain) you are not obliged to bend over frontwards to pleasure your bosses in order to keep your gig at the Montreal Gazette. His response to you was extremely ignorant and arrogant…must be as a result of that time he spent at Harvard.
Glassman and Hassett wrote a book entitled “Dow 36,000″ which they famously predicted would occur within in three to five years (1999 publishing.) I assume that’s what Bryan was referring to. And it was Hassett, not Glassman, who advised McCain.
Harper is NWO traitor to Canada. This housing bubble is intentional to destroy middle class in Canada and bring about NAU. The pain felt by Americans will soon hit Canada. 1 in 8 Americans on food stamps. Americans losing 1/2 million jobs every week. Why? When housing industry dies, so too does the economy.
Question is, will the US dollar sink before the Canadian dollar?
http://www.infowars.com
‘Rates, by the way, Ottawa thinks could be doubled by the end of the year.
Will this help? Maybe. It’s a shot across the bow of an industry which now embodies irresponsibility. Let`s see what the actual rules are in a few hours, and then assess.”
******************************************
Ottawa (GS North) sounds to me–like they’re trying to hurry the last of the fools into the market–to lock in at “current rates” before they raise–
This is bullshit–imo–
They will lower rates and the people who lock in–will be trapped there–while CB rates go to zero–
They’ll QE the long end to hold rates low–
This of course,wont work forever–but–lower rates are ahead–It’s “all” about the dollar–jmo
To quote William Bernstein:
“..the best data on house price suggests that after taking inflation into account, the answer [to how much a house appreciates] is slim to none. These data focuses on historical data from three nations. Real house prices (TMW- in other words after inflation return) in the United States did not rise at all between 1890-1990…Thus, at most you will receive a 3 per cent real (1 per cent price increase plus 2 percent net ‘dividend’) return on your home …”
A lot of indebted Canadians are about to get their financial heinies kicked by rising interest rates and falling R/E prices. No thanks to Blathering Bryan’s foolish flummery! As Canadians, we will rise above it.BTW, thank you Vancouver, you’re making us all proud, YEAH CANADA!
I don’t understand something………don’t we already tax the profits gained from the sale of your non-residential property ?
Maybe the government actually now plans to enforce that section of the tax code via audit, is that what you meant to say ?
It is a gravy train waiting to be derailed……..and something that is long overdue.
So Garth,
All this hope that the downpayment will rise, or amortizations will drop, and at the end of the day, nothing happens. Garth, your entries are like the stock market. You bring the bloggers hopes up and then crash them and blame the feds.
Does this mean on March 4th that the feds are definitely keeping down payments at 5 percent and amortizations at 35 yrs. If so, this so called bubble will last forever.
Garth,
I for one appreciate your daily blogs of fear and inevitable doomsday when it comes to those of us in Canadian real estate. Without this blog, let’s face it, I/we would be sitting around the camp fire drinking beer, wondering about the weather the following day. As this is as far future anyway. The rest of you just want to hope that real estate prices crater to the extent prices will become affordable to those of us that just barely can survice on two incomes.
Reality is that the rest of the world wants to come here and live. Why?
Well let’s look at my informal survey;
China is a great country governed by a dictatorship that may or may not take away your rights or priviledges
US is heavily in debt and may take a decade or two just to figure out what’s happened, let alone survive and prosper.
Eurozone is in trouble and at the moment, Greece, Italy, Spain, Ireland, Britain are the first to declare a serious problem. Who’s next to the truth or dare plate?
Australia is in fine shape but it’s an island far away from the rest of the world’s economies.
New Zealand, ditto.
India is a wonderful place but are you ready to live there?
South America? Ok, Brazil looks interesting, Argentina has a serious monetary problem, Chile looks really cool, Bolivia, Columbia, Ecuador, Venezuela are economies ready to implode or surrender to military dictatorship?
Want to move to 2nd and 3rd world economies?
Canada is still in great shape. Access to commodities, a stable government, recognition to human rights, property ownership rights, and so much more.
Why can’t you understand that the World has become a much smaller space. You can move your money in most states. Where do you want your children and your grandchildren to live? Yes. Canada is the place.
Stop this insanity Garth. You are doing everyone a disservice. People that have listened to your nonsense do not have the priviledge of seeing Canada from 50,000 feet. Get out of the gutter and start seeing Canada as a great country of cultures, opportunity and freedom like no other.
Only thing that will do real damage to the RE market is higher down payments without banks lending u it. Wont happen.
Possible changes for F wanting lower houses prices:
1. higher downpayments say 10%. For second homes, say 50%. For international investors, 100% plus a special yearly property tax surcharge of 100%.
2. Base income on revenue canada tax returns including for self-employed and small business owners.
Possible changes for F wanting flat to higher house prices:
1. Tinker a little here and there on things that home buyers can get around. Income checks, etc…
Garth, when you refer to Flaherty as F, it reminds me of the unscrupulous Minister D in Edgar Allan Poe’s The Purloined Letter. In that story, D has stolen a compromising letter and hidden it in plain sight. You’re playing the role of Auguste Dupin, the honourable amateur detective who returns the letter (an agreement of purchase and sale, natch) to its rightful owner (a first-time buyer) after intuiting the obvious: that there’s a massive and growing housing bubble in Canada.
Flaherty to toughen mortgage rules!
http://www.cbc.ca/canada/story/2010/02/15/flaherty-mortgage-rules.html
Flaherty Will Tighten – Spot The Vancouver Sun’s Freudian Slip
Okay, this is it. Metaphors involving nails and coffins, straws and camel’s backs, come to mind. At the very least, a shot across the bow of the SS Vancouver RE. After the message has been sephamored for weeks, Captain Flaherty will announce tomorrow how he will somehow restrict mortgages without scuttling the fleet. Flagship Vancouver Sun, the local RE regatta organizer, made a wishful flub in breaking this news. Take it up with your therapist, VancSun! Spot the slip in the article. -vreaa
See here:
http://wp.me/pcq1o-wl
Yeah…. a good deal of careers will end when this bubble craters. Heck, even before that (I predict a long slow melt to it that will last 5 years or more beginning in the second half of this year). Think about it. Every bubble denying journalist, every politician who had a hand in it, every banker willing to sacrifice the stable economic environment of tomarrow for the quick buck that can be made today and a good chunk of realtors, developers and contractors… these guys will be gone. (and by the end of it, possibly one or two of our chartered banks as well)
Will any of Can Wests newpapers be the same when Can West closes its doors and Shaw takes over? Will there be editorial/journalistic changes ranging from content to personel? Who really knows. Question I’ve got is… do reporters like Jay stand a chance to find a job when stories like this follow him on his resume during a RE bubble gone south? Guys like that will be lucky if they can still find their names in print a year from now. Them’s the breaks when reality writes the cheque.
I found this story to be quite interesting:
http://news.ca.msn.com/top-stories/cbc-article.aspx?cp-documentid=23463989
Leave it to MSN to give us some extra color, of all media. Flarehty won’t touch down payment percentages or the length of loans. The interest rate stress test spoken of will likely be a whopping 2% higher than it is now. His getting tough on regs amounts to CMHC not financing more than one home under one name. What does that mean?
Let the good times roll in real estate boys!!!!! Good times ahead and another banner year for bubblicious RE!!! (parties on the young, folks, they’ve gots of dough, lets borrow til’ we drop!) Really now… should anyone be at all surprised? All I can say is that it gets pretty bad when a government creates a RE bubble with the sole goal of unsustainable wealth creation to buy a majority government (with our own borrowed money) and possibly 4 in 10 (Conservative supporters) haven’t yet caught on. Ah… they’ve only been attempting this for close to 4 years now?
Sad, really.
The bad news is that my parents are in their sixties and they read the newspaper every day and they actually believe that if it is in the newspaper than it must be true, as if some moral authority goes over the content and checks it for truthfulness. It’s very sad because they might read this Jay character and take it for truth without ever checking the facts. How many others are like this?
The good news is that their son (that would be me) and his family read the best blogs on the internet and discuss where the truth lies in the mix.
If CanWest falls in the forest and nobody is there to hear it, does it make a sound?
Cheers to all
Meanwhile, to the south:
“More waves of foreclosures will keep downward pressure on home prices in parts of the U.S. over the next several years, two new studies project.
The studies—by John Burns Real Estate Consulting Inc. and Standard & Poor’s Financial Services LLC—both conclude that most efforts to modify loans with easier terms will delay, not prevent, the loss of homes to foreclosure.
The Treasury Department is expected to give its latest update this week on government efforts to avert foreclosures.
The John Burns study estimates that five million houses and condominiums on which mortgages are now delinquent will go through foreclosure or related procedures that put them on the market over the next few years. That would represent the bulk of the estimated 7.7 million households behind on their mortgage payments.”
Of course what happens in the USA has no effect on our prices…..
One of the bloggers on here just recently seemed to be disagreeing with Garth in his ‘88 book telling people to buy in 1988. I wish I’d know of Garth then as I wouldn’t have sold my house because prices went way up right after I sold. Also those people who wrote in some newspaper recently that Garth had said prices would drop in 2008 and “they never did” are lying to the public as most of us know prices did start to drop until government interference started the ball rolling again.
I hardly listen to CTV/Global/CBC news as they distort the truth to suit the agenda.
Gaaaak! $45,524,000,000… is that for real? Debt slave, tax slave, what’s the diff when CMHC is backing it all?
Ottawa wants an 80 cent Loonie!!!… to support Ontario’s Manufacturing Industry, the Prairie’s Wheat exports, Atlantic Canada’s fisheries, all of Canada’s Mineral Export industy and what’s left of BC’s Lumber Export Industry and to continue increasing all of Canada’s tourism industry.
Ottawa does not have the $$$ to support current Old Age Retirement, Employment Insurance or Health Care.
Citizen’s R E Homes is the last place available to protect themselves in their retirement years.
..So it’s low interest rates until we get back down to the 80 cent Loonie.
Nostradamus jr.
BWAHAHAHAHAHA
Sensational, Garth! Just sensational!
“Sack cloth and ashes” *snicker* Your writing has real class.
More enjoyable than any column I’ve read. Speaking of which, has anyone noticed the business section of the Star has that large section which is suppose to be giving financial advise and looks like a special feature artical…but is in fact a two page advertisement from a bank. I look pretty hard to find that tiny “paid advertisement” text rather un successfully.
Although, from this example in todays blog… perhaps every page in a paper should read that.
@ #3 True, however Rex Murphy came out as a skeptic of global warming. Now this has recently been news about how a Professor (IPCC) admits that he edited the numbers.
In addition to that there was a recent study by John Cristy (Former IPCC) who used weather baloons to show that the studies the IPCC may have done did not account for industrial surroundings in their studies. Read this at the Times online…
So long as the internet is free, we will get journalism elsewhere.
Ahhhhhhh …. brings to mind that golden oldie I’m For Ever Blowing Bubbles “…….
I’m forever blowing bubbles,
Pretty bubbles in the air,
They fly so high, nearly reach the sky,
Then like my dreams they fade and die.
Fortune’s always hiding,
I’ve looked everywhere,
I’m forever blowing bubbles,
Pretty bubbles in the air.
I’m dreaming dreams, I’m scheming schemes,
I’m building castles high.
They’re born anew, their days are few,
Just like a sweet butterfly.
And as the daylight is dawning,
They come again in the morning!
I’m forever blowing bubbles,
Pretty bubbles in the air,
They fly so high, nearly reach the sky,
Then like my dreams they fade and die.
Fortune’s always hiding,
I’ve looked everywhere,
I’m forever blowing bubbles,
Pretty bubbles in the air.
When shadows creep, when I’m asleep,
To lands of hope I stray!
Then at daybreak, when I awake,
My bluebird flutters away.
Happiness, you seem so near me,
Happiness, come forth and cheer me!
I’m forever blowing bubbles,
Pretty bubbles in the air,
They fly so high, nearly reach the sky,
Then like my dreams they fade and die.
Fortune’s always hiding,
I’ve looked everywhere,
I’m forever blowing bubbles,
Pretty bubbles in the air.
It apparently debuted in 1918. I wonder if Flaherty and Nostra JR collaborated in its writing ?
Unless the “flipper’s tax” is extremely high, I don’t see it having a significant impact.
Let’s say someone makes their living flipping condos. They buy on spec, and try to sell $40k-50k higher.
Now, if the Government taxes that $40k-$50k down to $30k-$40k, won’t the flipper just flip MORE properties and/or target more expensive properties?
The word is now out that Vancouver Winter Olympics 2010 will be the worst ever. And ladies and gentlemen the financial fall out will top world records also. All this will of course just had to housing woes. Stay turned the best is yet to destruct.
We’re talking about dissent here. Journalists write what they’re paid to write by their corporate owners. They use sources as a way of getting around taking any personal responsibility for the information.
Journalism isn’t about news. I went to J school. We were taught never to let the facts get in the way of a good story.
The internet is where the real news is.
(BTW what an honour to be dissed in an article like that! Congratulations!)
With lower wages and no raises all this could be heading our way.
Inflation soars to 3.5% and prompts Bank letter to Darling• CPI up from 2.9% in December to 3.5%
• RPI up to 3.7% in January from 2.4% the previous month
• Bank of England governor Mervyn King points to VAT, petrol and depreciation of pound as major factors
http://www.guardian.co.uk/business/2010/feb/16/inflation-soars-vat-petrol
#5 Nostradamus jr. “until the world recognizes Van for what it is and R E prices begin rising again.”
Please. Speaking as a world traveller myself, there are a lot of other places I would live than Vancouver, thank you. Vancouver just isn’t a world class city and if you think it is, you need to travel more. So before you try to “Vanspam” again, please research world class cities and you’ll find Vancouver isn’t one of them.
I’m getting sick of reading your constant Vanspam and I’m sure others are as well.
Mike
#62 T.O. Bubble Boy” Unless the “flipper’s tax” is extremely high, I don’t see it having a significant impact.”
The flipper tax could be plain old income tax bracket. Thus say you made $100k on your home + your income, welcome to the highest tax bracket.
Maybe a 5 or 10 year rule should apply for “primary residences” before being tax exempt.
I doubt flipper tax will be lower than dividend tax, thus 100% odds flipper tax will be over 18% IMO.
Mike
How in heaven can you call this market an “overheated market”?
I mean if the market was growing because people were getting ahead of themselves in a booming economy then you might consider mere “overheating” a possibility.
But in a sinking economy where growth is undoubtedly and solely based on unsustainable debt encouraged by government regulations and policies, there is only one word: bubble.
And it’s even worse than it looks, precisely BECAUSE the economy is shrinking, that makes the RE market disconnect with the real world even greater. The US bubble was at least occurring within a growing economy.
Flaherty applies an eyedropper to the inferno.
Bubbles don’t typically end with a lot of people saying it’s a bubble. They tend to end when almost everyone thinks you’re crazy not to buy. There are too many people expecting housing to crash, so it probably won’t.
When I heard the news breaking last night the room resounded with great guffaws and the only two words I could string together were “hopeless ineptitude”.
They couldn’t even raise the minimum down payment to 7%?! What a joke.
And Garth, heaven forfend, is that a stab at your beloved Bank of Montreal? I mean weren’t they adjudged the picture of fiscal probity as recently as last September? And what is this “mortgage portfolio”? I thought Canadian banks were all too smart to hold silly old mortgages which, you know, might be just a tad bit speculative. A picture of something coming back to bite someones five large asses comes to mind. Plus Royal is about to get their posterior doubly tarred with the Earl Jones brush.
Why would anyone bother watching reality tv when we’ve got this three ring economic circus running 24/7?
Here’s some math:
$300k house, 5% down, 5yr closed var 2.25%, 35yr am
$15k down, $3050(land xfer Ont), appr$6k closing costs(2%), CMHC $8977.5 (2.75% plus />30yr am levy = 3.15%). Total upfront costs $33027.50. (Note: of upfront costs, 5% is downpayment and 6%+ is fees).
Providing the buyer has cash to cover all upfront costs and not burying any in the mortgage, monthly breakdown will look like this:
$981.08 mortgage ($11772.96 yrly)
$300.00 property tax ($3600 yrly)
$100.00 insurance ($1200 yrly)
$250.00 utilities ($3000 yrly)
$1631.08 monthly carrying costs ($19572.96 yrly)
Historically, to afford a home and live within one’s means, housing costs should not exceed 35-40% of after tax income.
$19572.96 yrly costs means (at 40% net income) that this family needs to bring home $48932.40 net, or (at 25% marginal tax rate) $65243.20.
Doesn’t look too bad does it?
Fast forward 5yrs.
Renew mortgage. New terms:5yr closed at 6%, 30 am, $250599.64 left owing. New monthly payment is $1502.48 (+53% increase). Let’s assume all other carrying costs have not changed.
$1502.48 mortgage
$300 property tax
$100 insurance
$250 utilities
$2152.48 monthly carrying costs.
This family now needs to make $64574.40 net or (at 25% marginal tax rate) $86099.20 gross.
This families income will need to come up +32% over 5 yrs just to keep up with the increase in carrying costs.
With closing costs more than wiping out the down payment, this will get bigger with HST in Ont and BC.
Garth does not need to be spending his time pointing out what is coming, but I for one am appreciative that he is.
I suppose peer pressure doesn’t end with high school.
Here’s the official press release:
http://www.fin.gc.ca/n10/10-011-eng.asp
The changes are:
1) Require that all borrowers meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term. This initiative will help Canadians prepare for higher interest rates in the future.
2) Lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90 per cent from 95 per cent of the value of their homes. This will help ensure home ownership is a more effective way to save.
3) Require a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation.
oh, and timeframe:
“These adjustments to the mortgage insurance guarantee framework are intended to come into force on April 19, 2010.”
More Proof That Garth Was Right.
Average Canadian family debt reaches $96,000 in 2009, study finds.
http://www.investmentexecutive.com/client/en/News/DetailNews.asp?Id=52437&IdSection=3&cat=3
I love these folks who deny there is a bubble. “shortage of listings” … come on ..would you sell an asset thats growing at 20% per year? I think not. Once that growth vanishes and returns are in the negative numbers. There will be a sudden flood of listings. Far more than the market absorb. It will start with all those condos bough on speculation.
I wouldn’t want to be the head of Canada Mortgage and Housing Corporation. The wave of defaults is building and by the end of this year (maybe sooner) hundreds of thousands of Canadians will find themselves underwater. It doesn’t take long to erase the meagre 5% equity most home owners have. The provincial courts would be smart to hire a lot more bankruptcy staff.
As an industrial guy, I’m concerned about how changes in the housing market will effect my sector. As we all know … everything is connected in this economy of debt. Many business lines of credit are back stopped with hard assets like …. houses and real estate!! Business needs credit to survive. A significant drop in real estate prices could drive banks to reduce company lines of credit or just call in the loans with catastrophic results. I know this sounds crazy … but, the future of your job may balance on the value of your bosses house. Everything is connected.
The Ministry of Finance just finished his morning speech.
Let the freak out begin!!!
http://www.newgeography.com/content/001415-unlivable-vancouver
Did you hear that sound? A big whoosh, as the air blew out of the bubble.
I am waiting for the whine from Realt(ho)rs(TM), expect to hear the screaming hundreds of miles away. Have some cheese with that.
We will soon see some price discovery in real estate in a way we have not for years.
Mr. Bryan’s response was exceedingly unprofessional. He was offered easy access to the original source and then rejected the source as not newsworthy, but he published anyway. This is the exact opposite of investigative journalism. Garth, as a former journalist yourself, you probably know more about this than I do, but isn’t this kind of behavior unethical? Why not just say so directly?
WOW! 20% down payment for CMHC insurance…
Pooooof!!!!
http://bit.ly/cktESH
….on non-owner-occupied properties purchased for speculation. (sorry! Forgot the rest!)
That will slow the flippers! (Possibly)
#38 Rain,
I don’t agree that “talk of the bubble” changes much except now perhaps the rules. If talk made a difference then F wouldn’t have to make the changes he is set to implement.
It is like saying we know the impact of dangerous drugs like Meth and Heroin so now there will be no addicts. You are underestimating the power of fear and greed to drive our behaviour.
Also remember that most of the buyers entering this market with low downpayments and fear of being “priced out forever” are too young to remember anythiing but a ever inclining Re industry.
From the Market Ticker this morning:
How liquid is your house?
What a load of crap. Guess what Flaherty – the same rules apply in Canada as do anywhere else. They are:
20% cash down payment, thus restricting leverage to 5:1. At no time may a loan be approved that results in less than 20% equity. This is the only way to prevent speculative leverage games in the housing market.
“Back end” debt service ratios must be limited to 36% on pretax income, and this assumes a total tax system load similar to the United States. Total tax loads in Canada are somewhat higher, so a few points lower is likely required (e.g. 30-33% is probably about right.)
Predictability of debt service cost. Oops. There is no such thing as a 30 year fixed loan in Canada. Hmmmm… that’s a problem.
Average house PRICES should be no higher than 3x average incomes in a given area. Good luck – Vancouver anyone? Toronto? That’s not a bubble, it’s a ticking nuclear bomb and the timer window has tape over the numbers.
When it looks like a bubble, smells like a bubble and has finance ministers trying to pump markets and keep people from figuring out the SCAM they are complicit in pumping and trying to maintain, it is a bubble.
We’ll see how long it takes before I get to fax you a copy of this with “See, I told you so – JACKASS!” scrawled across the front in black sharpie marker!
http://market-ticker.org/archives/1966-Hi,-I-Lie-About-Bubbles!-Canada.html
#54 Tober:
The other side of that argument, though, is that we’re dealing with markets and the human behaviour within them here… and if the majority read the column and other columns just like it and believe it, and act on it, then it may well turn out to be true.
That’s what bubbles are all about…
I hope I’m not reading too much into it, but I see “Feds” and “prick” in the same sentence above!
One thing I don’t get… why is CMHC insuring investment properties at all?
simple maths
Case1: (Present times) – FTH averages
ING Variable rate: Closed (5yr) = 1.95% (prime – 30bps)
House price = $400K (average TO)
Term = 35 years
Downpayment = 5%
Monthly payment = $1249
Case 2 (Proposed F plan)
Same as above but using ING Fixed rate Closed of 3.89%
Monthly payment = $1657
Working backwards. If a couple can only afford case 1 monthly payments, then using case 2 logic, house price has to be ~$330K (24% reduction)>>> unless downpayment increases to 28% or term increases to 110yrs.
It all starts on April 19.
Nothing changed – I just read an article describing the “new” rules and they look exactly the same as the “old” ones. 5/35 and low prime still exist! How is asking the big-banks what they do and making that the standard changing anything? Jim F. should be fired! Unfortunately, he did not take real stesp to deflate this bubble and now it’s going to have to pop (when will this happen?)
@Grantmi, the 20% down is for non-primary residences only
Most new sales are first-time buyers purchasing primary residences.
Well all those 43000 people with the new 10-20 hour per week minimum wage jobs can still buy a dream house. No money down and 35 years to pay. Party on people, no problems here in Canada. If the Gov and the media say so it must be true !
Most of these guys didn’t see the largest worldwide recession since the great depression coming. Why would anyone expect them to detect a housing bubble in Canada?
Here’s some math:
$300k house, 5% down, 5yr closed var 2.25%, 35yr am
$15k down, $3050(land xfer Ont), appr$6k closing costs(2%), CMHC $8977.5 (2.75% plus />30yr am levy = 3.15%). Total upfront costs $33027.50. (Note: of upfront costs, 5% is downpayment and 6%+ is fees).
Providing the buyer has cash to cover all upfront costs and not burying any in the mortgage, monthly breakdown will look like this:
$981.08 mortgage ($11772.96 yrly)
$300.00 property tax ($3600 yrly)
$100.00 insurance ($1200 yrly)
$250.00 utilities ($3000 yrly)
$1631.08 monthly carrying costs ($19572.96 yrly)
Historically, to afford a home and live within one’s means, housing costs should not exceed 35-40% of after tax income.
$19572.96 yrly costs means (at 40% net income) that this family needs to bring home $48932.40 net, or (at 25% marginal tax rate) $65243.20.
Doesn’t look too bad does it?
Fast forward 5yrs.
Renew mortgage. New terms:5yr closed at 6%, 30 am, $250599.64 left owing. New monthly payment is $1502.48 (+53% increase). Let’s assume all other carrying costs have not changed.
$1502.48 mortgage
$300 property tax
$100 insurance
$250 utilities
$2152.48 monthly carrying costs.
This family now needs to make $64574.40 net or (at 25% marginal tax rate) $86099.20 gross.
This families income will need to come up +32% over 5 yrs just to keep up with the increase in carrying costs.
Get ready for the “Liar Loans.” Lots of them. Suddenly every member of the family will be living in their own condo to avoid the speculation requirement of 20% down.
The major banks are, no doubt, meeting this very hour, plotting how to do an “eight ball in the side pocket” on CMHC. The same guys who will be verifying the documentation on these loans.
Let the Games begin!
We might want to consider that what really forced the issue here is that F now sees interest rates rising sooner than he once thought. There is now lots of speculation in the U.S. that rates will rise by at least 1% very soon.
See below:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/02/15/MNSP1BVILP.DTL&source=patrick.net
And in other news, Toronto is proposing a 4% increase to residential property taxes.
http://tinyurl.com/ygchfsc
Fasten your seat belts.
Hello Garth.
The following is a start on the road back to fiscal sanity if infact it is enacted.
———————————————————
•Anyone applying for a new mortgage has to qualify for a current 5-year fixed rate, instead of the cheapo VRM.
•This means having enough income to make payments at the current 5.390% rate instead of the absurd 1.8%-2.25% currently being offered. The implications of this are large indeed.
•To stem a tide of money coming out of inflated houses, Ottawa will cap refinancings which qualify for CMHC insurance at 90% of home value, down from 95%.
•And, in a move meant to kneecap speculators, F decrees the minimum downpayment for getting insurance on a spec house will be 20%, up from 5%. He says this is to stop people “to use a home like an ATM” sucking money out through a refinancing “to buy three or four condos on speculation.”
——————————————————–
I would like to see the percentages 50 to 100 percent higher in the near future and kept there as a deterant to the excesses of the real estate market. The way things are now either prices have got to get a zero knocked off or wages need a zero added and right now we have an impass on both.
Steven
Never any mention about Canadian banks involvement in US RE–
They were heavy into California/Florida markets-prior to the crash–
Were they allowed to hide in –level 3?
Did the Fed bail them out through Swaps–like they did the rest of the world?
We’re very sneaky up here–the US has its problems,everyone knows–
There–they at least hang “some” dirty laundry out for all
to see-
Check the swap flow chart on the eve of Bear Sterns–
Why would Canada be involved–i mean–our banks are rock solid–right?
http://www.zerohedge.com/sites/default/files/images/BIS%207.jpg
Garth,
is that the five year posted rate or the discount rate?
RBC 5 year posted rate is 5.39%, special rate is 4.09%
On your side bar it shows a rate of 3.59% for 5 years.
These spreads do make a difference.
I would imagine the banks are still going to cram people into houses.
Nothing really changed this morning.
#22 Vancouver Rocks, #48 Allan, #49 The Truth, #58 Nostradamus jr remain on point.
I must admit that when I read the new rules my instant reaction was “This isn’t enough”.
Maybe because when we pre-qualified we did the math and qualified for the 5 year already and ensured we could pay our mortgage at 8%, 10% etc. That’s how we decided on our maximum budget.
Now if Flaherty had raised the downpayment to 20% on primary residences, THEN I’d be impressed. Right now, I don’t know if these new rules are going to make a huge difference at all.
Mr Turner, You promote readers to sell their properties and invest in banks?
Banks who are the primary lenders to home borrowers?
Canada is printing money like every other indebted country?
Can you please explain why that is wiser than owning a home.
Thank you
Is that a trick question> — Garth
As of 10:30am, the mortgage rule changes were not on the 1st page of the Toronto Star. Hmmmm, move along folks, nothing to see here!!
http://www.thestar.com/news
All the news is here, dude. — Garth
“in a move meant to kneecap speculators, F decrees the minimum downpayment for getting insurance on a spec house will be 20%, up from 5%.”
How do they plan to define “a spec house”? Or will the rule apply to all non owner occupied properties, no matter what the motivation of the buyer might be?
As for the 20% rule, I thought that with 20% down, no CMHC insurance is required.
“F” and company’ have proven beyond any reasonable doubt.. they unquestionably have taken a serious economic situation and turned it into a pending disaster…and now they are going to solve it?? Perhaps they should be told..the song”i believe” is referring to our Canadian athletes and in no way expresses any reference to “their” problem solving abilities
#96 LRS,
You, #22 Vancouver Rocks, #48 Allan, #49 TheTruth and #58 Nostradamus Jr. need to open your eyes, ears and mind up.
Toronto Re taxes are up 4%. I had budgeted 3% for an increase in Vancouver. I am now guessing 5-6% this year.
Good thing that can’t impact prices either. It can’t happen here.
Great thing you are all here. Otherwise this wouldn’t be any fun at all!
What is that low hissing sound I hear? Sounds like air slowly coming out of a bubble.
Thought this was pretty interesting…….
We certainty are treated like mushrooms .
http://www.vancouversun.com/business/Canadian+households+sinking+further+into+debt+Study/2570469/story.html
#22 Vancouver Rocks
I agree – not much will change as it’s still possible for a speculator to own only 1 home; hence, he can easily dodge the down payment constraint.
Flaherty also didn’t shorten the maximum amortization length, a factor that has also bloated Canada’s housing market.
Garth my ideal reforms would be that minimum down payments be 25% down or higher with no CMHC insurance. Also people must be prohibited from combining incomes. One income is counted for home ownership affordability. I suppose cheaters should be stuck with a 50% minimum down payment requirement. And withdrawing equity from over valued properties to fund speculation, income or consumption should be illegal.
Maximum term of mortgages should be 25 years with no renewal every 5 years and that likely means rates around 10% plus or minus a few percent.
People have got to remember that real estate is just a place to live rather than an investment vehical.
Ownership of the means of production should be the prefered and most beneficial means of obtaining wealth with savings as a close second.
Steven
nothing to serious in the new laws but it will have some ramifications:
Less or no bidding wars after April 19, as people will have to qualify for the 5 year fixed instead of the 6 month variable.
Watch for a mini rush until april for those that know they will not qualify after these laws come into effect
the HELOC will make no difference what so ever
The 20% down for non principle residence is HUGE. Espically in investor heavy areas, think Toronto(condos) Vancouver(condo;s) and univeristy towns (Waterloo etc..) townhomes/homes etc…
Lots of downward pressure and really bad news for the little investors, instead of buying 3 or 4 condos with 5% down each they will only be able to buy 1. Big news.
CMHC is out of doing insurance for non principle residences, stop loss for the govt, when it impoldes they will say they tried to stop the speculators.
This will basically effect homes in the 500K and up range as thats where people where using the variable rate to get into bidding wars etc.. and low end of the market, starter condo;s and townhomes as investors will no longer be bidding against each other to buy them (remeber the X2 condos on Jarvis a few months ago, no more lineups for those LOL)
Most of today’s “news” doesn’t seem to represent major announcements to me?
The qualification based on fixed vs. variable should be done by the banks anyway… I don’t believe that banks approve people based on a 1.8% variable mortgage rate?
The HELOC reduction to 90% also seems like a minor change (and – doesn’t this impact diversification strategies more than just homebuyers?)
The 20% down requirement on investment properties is the most meaningful change… and, when you combine this with the 90% HELOC limit, means that you’ve eliminated some of the most extreme leveragers. I would hope that at some point, CMHC doesn’t even allow for insurance of investment property mortgages.
While everyone is occupied with the Olympics, Greece outlawed cash transactions over 1500 Euros, a sign of whats to come… total control of your money movements in the name of fair taxation to all….blame national debts on certain cash oriented population segments to rally supporters….. should not be difficult….
Lending institutions will not wait for April 19th they will implement these changes almost immediately.
These are just preliminary changes there will be more to cool this euphoria for real estate.
I’m getting sick of reading your constant Vanspam and I’m sure others are as well.
Mike
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Can we permanently ban Nostratard?
Thats up to Garth.
I think Garth likes to have some filler for his threads.
So the banks are going to have mortgage applications from buyers who have to qualify for 5 yr. fixed mortgages at 5.??% but they are going to keep offering those people 2.15% variable rates as long as they qualify for the higher rate. And, oh yes, let’s keep doing those renewals at the cheapo variable rates as well. Great business plan.
Are the Banks nuts? Do the Bank’s shareholders know about this? These cheapo VRM’s days are now numbered. Expect a VRM rate reset very soon IMO.
Difference in max affordibility for the 5yr variable versus the 5yr fixed is approximately $100K for a person or a family with an income of $100K. This means the variable rate a $100K income earning family was able to get a $575K mortgage, versus April 19th it will be $475K.
Can you break a YOY housing record in a month?
http://edmonton.ctv.ca/servlet/an/local/CTVNews/20100216/household_debt_100216/20100216/?hub=EdmontonHome
Average Canadians up to $96K in debt, lets break $100K!
The economy in canada is becoming more of a phantasy every day.We are not an island unto oneself,why should we pay triple for real estate versus the usa and other developed countries,there is very little justification for this discrepancy in my opinion.
#22 Vancouver Rocks
You do realize that its the banks pushing for these changes. People like Royal Banks chief economist Patricia Croft, whom once upon a time denied any problem in housing is now sounding the alarms.
Why a change in direction?
It seems that the banks are worried about something, like their balance sheets.
Defaulted car payments, credit cards and unsecured lines of credit all get ignored long before a mortgage payment does.
If you don’t sound the alarms how can you say, we told you so and get that next round of $70billion in mortgage bailout money?
Your assesment of the 5% cash-back is correct, and it will be interesting to see what banks like ING whom want the party continued do to get people into houses they can’t afford long term.
Here’s a neat little report on household family debt.
See, we don’t learn, we just keep piling it on high.
http://www.theprovince.com/business/Canadian+households+sink+further+into+debt/2570443/story.html
IS THE 5 YEAR POSTED OR THE 5 YEAR ‘SPECIAL RATE’ THE RATE THAT WILL BE USED? AVRY SCHENFIELD INDICATED THE POSTED RATE – ANY CLARIFICATION ON THIS?
http://www.cbc.ca/video/news/player.html?clipid=1414953560
For someone with 29 years of investment industry experience, Patricia Croft has never sounded so confused and confusing about where this market is headed, and how effective today’s new regulations will be.
Her message was the investment advice equivalent of a dog chasing its own tail.
No wonder sheeple get so overloaded with so many contradictory messages that their only recourse is to buy a house to stop the voices inside their heads.
What defines an asset “bubble”? Is it the crash, or do bubbles exist by virtue of the assets being “over-priced”? If there is no Hindenburg-like flameout would Garth still have been right? And, more importantly, would it have mattered? If the Feds & Bankers are able to pilot the airship of RE safely to the ground by taking incremental steps, isn’t that a preferred outcome to a complete meltdown?
Not a bubble at all, not in Toronto…
http://www.theglobeandmail.com/real-estate/queen-and-dufferin/article1469786/
11 Earnbridge St., Toronto
Asking price: $589,000
Selling price: $725,000
Previous selling price: $336,500 (2000)
Taxes: $3,536 (2009)
Lot size: 18 by 107 feet
To all those contrarian contrarians: the people that read this blog are not like “most” Canadians. Most Canadians are like that deluded woman in Red Deer salivating over her sixth rental property in hopes that her ballooning credit line will soon be increased so she can buy.
I live and work in Vancouver and there isn’t a person in my office of 60 who wouldn’t draw and quarter me if I said something negative about real estate in Vancouver. Why? Because it’s the only asset they own and every vacation for the past 10 years has been paid for by a HELOC that will soon be bigger than their equity.
There aren’t near enough bubble believers to signal that there’s not a bubble. Especially in VanTown. When the editorials in your major newspapers are saying that there isn’t a bubble; when your politicians are saying there isn’t a bubble; and when your 25 year old co-workers are planning menus for their all night pre-sale vigils THEN maybe (just maybe) there’s a bubble.
Love the Olympics, though.
Well if all the bears were hoping for a significant change to mortgage rules and requirements I guess they are all retreating to their caves right about now….
This “big announcement” is not even worth discussing. All the drama and dire predictions over that unworthy announcement? Same old same old….the man panzied out on making any changes that would make a dent in the market.
Once again bears, you will be left waiting and waiting and waiting for many more years….keep listenting to your nostradamus and check back in 2015
Yikes … some ugly world press.
Vancouver … on the world stage. Good thing there is no such thing as “bad” press. This little piece should make for some very “special” tourist traffic.
http://news.bbc.co.uk/2/hi/americas/8505061.stm
#82 mattbg
I’m with you. It’s a sad state of affairs when the news stories are outright manipulative like that. I’ll concede that they must work to some degree and contributed to the bubble that so many are denying right now. Trouble is when that bubble bursts, all of us get hurt.
Just look South to the ongoing American Housing Crash and ask all the Americans who always paid their mortgages on time and in full, but couldn’t get renewals when their turn came up. They did what they were told and still got hurt.
Not saying that will happen here, but it certainly looks like a tipping point is near here in Canada. Faux-journalism like Jay B. distributes just disappoints and its partly because it is likely successful in duping some newly minted Greater Fools.
Mr. Flaherty is taking a page out of the US Federal Reserve playbook in a pathetic attempt to use jaw boning and moral suasion to close the barn door long after the horse has left. (The detective in the Simpsons satire of Cape Fear pleading politely with Sideshow Bob as Max Cady to leave town comes to mind).
It will fail.
My apologies if the article has been posted already today… huge list of comments to go through!
“Household mortgage debt hits record
Households across the country are more indebted. The average debt per household rose to $96,100 in the third quarter of last year, with consumer and mortgage debt levels at record highs, the Vanier study said. That put the debt-to-income ratio at 145 per cent – the highest level since the annual study began 11 years ago.”
http://www.theglobeandmail.com/globe-investor/personal-finance/household-mortgage-debt-hits-record/article1469439/
A good read with many key statistics showing the dire circumstances that many families have dug themselves into.
Maybe the lenders know something we don’t. 350 million dollar Project in Colwood has its financing cut. “In Colwood there are half a dozen projects now on the sidelines.” http://www.timescolonist.com/travel/Lenders+funding+Colwood+million+Aquattro+waterfront+development/2569545/story.htmls
Garth, thank you so much for keeping that stethoscope of yours on the pulse of this terminal beast for those vultures with the vulture to do list creed refrigerator “magnetted” to the sub-zero. On another note the corporatist journalist is one absolute buttaface. You’ve got the elegance and grit he looks like he’s hiding a set of double “d” bi@#ch t!ts beneath that mug.
well I don’t think the new rules are enough to protect the financial system but
it’s better than nothing
lack of substantive change makes it easier to sell the house in Toronto
Tober If CanWest falls in the forest and nobody is there to hear it, does it make a sound?
Hmmm. link not work?, type in” Victoria Times Colonist,” front page.
Garth, my hubby and I ordered your book as a Valentine’s gift to each other. Can’t wait for it to arrive this week.
Where are you speaking in Kingston? We’d love to come and see your presentation.
Sorry, it is a private gig! Thank you for the order. It’s coming with free hugs. — Garth
Just for fun:
$300K in T.O. gets you:
35 x 22 ft Lot and a 1 story building filling it
http://www.realtor.ca/propertyDetails.aspx?propertyId=9098483
#120 Gimme Shelter – I so agree. The number of people I know in Vancouver who are confident in a bubble is very, very small. Even the people who are worried about it ask me to shut up like somehow talking about will bring it on. It is a very weird, cult like behaviour.
#121 Vancouver Rocks,
Try again pal. While these are not major changes they will be enough to start the market downward. It is already flat now in Vancouver. Combined with every other downward force – raised taxes, massive debt, flat wages, continued high unemployment and a sputtering economy this will begin the unwind.
We will be able to see the effects by March. The impact will remain slow until the summer but the peak is over.
#123 Tober,
I totally agree. It is the part of all of this that really gets me angry.
Our middle class is eroding because we have been sold a fraudulent bag of goods for so long. Most of the middle class have 90% or more of their equity tied up in their home. Convinced that prices will go up forever we all feel pretty good about our personal net worth and our prospects for retirement. Most people have even gone out and got LOCs against their homes for vacations and other short terms joys on the belief the party never ends.
When the party does end this year there will be a lot of horror stories about people near retirement who lost their entire savings or young adults who are in negative equity and have lost their earnings for a decade or more.
This is the deception that will be unmasked. I simply do not understand why we think things are going to be so different here than the U.S. Sure, I see that things were stoked up there worse than here – but the fundamentals are the same. We are over leveraged as a society and asset prices will adjust. We will all lose over the next few years.
Won’t be as easy as using someone else for the second home now that everything goes through FINTRAC (Fed money laundering and terrorism squad) you’ll have to be able to justify where the money came from. Anything over $10,000 cash is screened
RE investor Don Campbell agrees /w bears here about bubble in TO & Vancouver.
Also mentions 10/35 as a possible solution for cooling those markets.
http://bit.ly/diolQt
Garth,
Will your book be showing up at Costco?
Looks like the changes are set for April 19th. Obviously this means the market will remain high and probably will get hotter until this takes effect.
Great time to sell.
The 20% downpayment rule for spec’s?? Now family members (wife, the grandparent, son, daughter, etc.)will buy…
Qualify for 5 year…mortgage brokers will probably find a way around that too.
Like I said, nothing is going to happen unless down payment goes up to 10% and income is verified via revenue Canada. All else is just drama.
Avoid the bubble.
I think agents make it worse. They compile excessive fees on home transactions after home transactions. We can’t control the price of our homes, becuase they autimatically increase 5% per tranfer..can approx. 20,000$ or more.
Read This: (found this interesting)
http://realestatebubblegta2010.wordpress.com/2010/02/16/take-control-of-the-real-estate-market/
#58 Nos Jr.
I say 70-75 cent range…it will be justified by our huge debt and rising deficit caused by health care we can’t afford….I can already hear the words fom a future finance minister “…come hell or high water!”
To avoid this, we need to privatize health care over the next 5 years or so. Maybe to a user pay system where older people pay more as they use it more. Sounds fair to me as the boomers have had a free ride for far too long!
The only journalists left at Canwest papers are the ones who minored in “Bootlicking” when they did their MJ or BJ at Carleton or other diploma factories.
Hongcouver, North America’s financial, trade, leisure and drug lifestyle capital/paradise
…The North Shore…w/ Cypress, Grouse and Mt Seymour Mts, all overlooking Hongcouver…being Canada’s exclusive private gaited community, accessable by only two bridges and Whistler Hwy 99 to the North.
…plus Downtown’s lower east side, the Drug Capital of North America
Where else in North America can you ski, golf and get smacked out all in the same day?
Nostradamus jr.
Garth;
How do you put up with people who show their complete lack of knowledge when it comes to your background?
It is amazing how some in the media portray you as just a politician, making it sound like you have been a career politician and that you have no business commenting on anything else but politics.
I have always believed that one must question everything they see and read in the media. Examples like Mr. Bryan’s article makes me distrust mainstream media completely. Regardless of whether they are reporting on politics, the economy, or anything else their feeble little minds conjur up.
#58 Nostradamus jr.
…Ottawa wants an 80 cent Loonie…
It doesn’t matter what Ottawa wants. It is what the bond market and investor want. The CDN buck is going higher long term because a growing world population needs want Canada has (raw resources).
With all the debt coming to the market today and years to come interest rates have to go higher to draw capital. Low interest rates are not here to stay long term.
Garth, my Credit Union is recommending I go into ’short term income funds’. Just wondered if you know anything about these?
Thanks
Only if you need income. — Garth
Change happens at the margins first. I love all those who confidently predict this or that. Raise your hand if you think tightening credit is good for real estate and will drive prices to fresh highs this year? Please give supporting reasons.
Let’s review some facts: without using the word bubble, F just told everybody there IS a bubble. If there was no possibility that such bubble exists, why would F have to take action such as this mornings? Anyone? Do you really expect a Finance Minister to tell you the real facts anyway, or try to use soothing language instead of harsh facts? Read between the lines. Politicians only respond to critical situations that can’t be safely ignored anymore.
Also, though I don’t like F, at least he and S took some action, which carries political risk. If real estate does now decline or crash, many will blame Ottawa, meaning the Cs. They could easily lose a future election over this, as there will be few more angry than those who have had the real estate crack pipe taken away. This is precisely why he did not announce stronger measures today – politics. Unfortunately for them, there are probably enough voters connected to real estate in some way who will seek to blame someone, anyone for their plight, other than the person in the mirror.
Then the Libs/NDP/Bloc are cued to announce they will relax such harsh measures that punish poor citizens. Things like being able to afford to repay what you borrow, a concept leftists are unfamiliar with.
Real estate bulls can try and spin it any way they want. They are just mobile hamburger meat now. Credit will revert to the mean, which means it will be tighter than anytime in the last few years, and stay that for a while. Interest rates could stay low for years yet, and no one will care, as the economy will still be flat as a pancake.
Mortgage Intelligence on BNN stated that the 5 year qualification rate will have limited impact as the 5 year posted rates are different from place to place They range from 5.39% to about 3.7%….so brokers will qualify homebuyers at the lower rate.
Banks already qualify homebuyers at a 3 year rate so very little impact indeed.
Also, 70% of mortgages taken out last year by first time home buyers were 5 years fixed. In total, 86% were fixed and 14% were variable.
14% variable last year folks!!!!
How are the changes gonna change anything?
The numbers you cite from the mortgage brokers recent survey are totally bogus. In any case, let’s just wait and see what transpires. — Garth
To Vancouver Rocks,
Waiting for what? I already own (and so does Garth and many of the other posters here I’m sure). We are concerned about the long-term health and wealth of this country and deeply dismayed by the unsustainable, debt-fueled real estate orgy. Speaking of my home, we own a nice modest bungalow in a pretty neighbourhood in North Van. We’ve made upgrades but we never added that second floor or put Malay teak on our pool deck. It’s a choice to be modest and to diversify. We had a couple over for dinner a few weekends ago and they said: “We don’t save anything – our house is our savings, ha ha ha.” It’s also their ATM as they continue to take outsized vacations on modest incomes. Maybe they’ll be OK. Maybe they won’t. What’s certain is that they’ve got all their eggs in one basket and no non-home equity cushion if things go south (not pun intended!). Just for a little perspective, a CDO is theoretically a much less risky investment than their home.
Can’t wait for Olympic hockey to start. Go Team Canada.
#55 Starving Artist
Your article states, that in the USA:
“7 million homes in USA to go bankrupt”.
I don’t have the link handy, but Bob Chapman estimates recently in one of his Youtube videos, that upwards of 13 million Americans will loose their home to the banks this year. Big disaster either way.
What makes Canada soooo special? Is it all those Chinese in Hongcover driving up the markets? How many people are speculating. Must be every RE agent buying up all the available homes and flipping causing this “issue”.
The governments position, for all I see is:
Too little, and way too late. Once the fall starts, people will loose their homes like in the USA, Windsor, St. Thomas and all the other one horse towns in Ontario where the only employer went belly up in 2009. Many people are already feeling the heat. Same thing happened in the 1980’s. Saw my relatives loose their jobs, and then their homes. Minimum wages won’t pay a mortgage, no matter how many hours you work.
Many people are going to get a tough lesson soon.
Dr. Flarekenstien is changing the monster they created today … news just in … harper .. flanagans creation is on vacation in haiti this morning and the band plays on. What the hell are they doing ? My guess is they are starting realize that they are going to wear this mess that they created forever or at least 40 years and harpo is in hiding .
The Finance Minister will do nothing that might cause prices to drop. What politician wants that on his back.
So this should not be expected to result in any major changes to the market.
Although you may all think the federal government is staffed by morons – it is not – they have a lot of smart analytic talent there. They will have done a lot of background analysis on this at Ministry of Fin and CMHC and know exactly what they are doing.
As I have said before – no major change to housing market until interest rates rise markedly OR until economy turns down in a major way.
Arent most people already taking out fixed term mortgages? Or are people REALLY stupid?
Now we’ll see what the bankers are made of, I suppose…
I cannot imagine a thinking person, or even one with a pulse, lending one red cent in this market, without being able to offload the risk to the taxpayer.
Looks like 5.4ish percent for a fixed five year… wow!
Someone explain to me how this is not a game changer.
These new changes won’t make enough of a difference to the common buyer. If anything it might even stoke the fire as some people perceive this as “My last chance to buy!”. Its another disappointment frankly.
I get the impression that they are looking to keep housing moving along at almost any long term cost to the average canadian. Housing being the main driver in the recession recovery.
Speaking as one of the lowly average joes, remember the 3 to 3.5 times your income for a mortgage is the golden rule?
If you make 35K, mortgage falls between 105K-122.5K. If you have a dual income (assuming no kids) of say 70K, then mortgage in the 210K-245K. Simple math.
Just because you qualify for more than that doesn’t mean you should. Hell, you can drive a car with you feet if you really wanted too, but that don’t make it a good idea! Simply put: Debt WILL enslave you. period.
Lots of news today about household debt at record high.
Some highlights:
The number of credit card holders who were behind at least three months in their payments was up 40 per cent in 2009.
The number of mortgage payments at least 90 days late was up 50 per cent in 2009, compared with 2008.
The average debt per household of $96,100 includes consumer and mortgage debt and represents an increase of 5.7 per cent from a year ago.
Read more: http://www.cbc.ca/consumer/story/2010/02/16/consumer-family-finance-vanier.html#ixzz0fjJ1tctd
Read more: http://www.cbc.ca/consumer/story/2010/02/16/consumer-family-finance-vanier.html#ixzz0fjIcRThY
Have patience grasshopper. Price corrections are due.
#142 Nostradamus jr. on 02.16.10 at 2:11 pm
(and every other posting you have ever made)
Man, many blog dogs with no sense of humour! Do we all know what tongue in cheek means??
Hellwoah?
Toronto — Globe and Mail Update
Published on Tuesday, Feb. 16, 2010 7:22AM EST
Last updated on Tuesday, Feb. 16, 2010 10:15AM EST
.More Canadians – especially young, first-time home buyers – are assuming mortgage debt they might not be able to afford once interest rates start to rise, an annual study cautioned Tuesday.
National house prices hit $340,000 in late fall, equal to five times the average after-tax incomes of Canadian households – a far greater portion than the long-term average of 3.7 times, the Vanier Institute of the Family said in its report on the current state of family finances.
Canadian interest rates are set to rise, as early as this summer, and the report warned that many families – especially first-time buyers who took advantage of record low rates to enter the market – “may not fully realize” what an increase in mortgage rates by several per cent will mean for their monthly payments.
The report comes as Ottawa tightened lending standards for mortgages Tuesday amid concern homeowners could get pinched as rates rise.
governments are pulling in two directions, in TO, Miller and Dolt on e-Guilty roll out the red carpet for first timers with rebates of land transfer tax. maybe flaherty should just ask those two stooges to eliminate rebates. fair is fair.
to many government are melding in the same economy, none of them have a clue about business, and none of them give half a shit about average working canadians
cmhc is a a proxy printing press, expansion of the money supply by giving easy credit, Harper should do the honorable thing and resign, he is a failure, Rothschilds should recall him, like a Toyota, for re-programming
Post #140 To avoid this we need to privatize health care over the next 5 years or so. Maybe to a user pay system where older people pay more as they use it more.Sounds fair to me as the boomers have had a free ride for far too long.
Really? That’s a great idea, lets expand it to the young couple who have a premature baby that needs around the clock care, after all they haven’t paid into the system long enough to warrant that much care.
Or how about the permantely handi capped person who will never work full time, yep lets dump them to.
Or maybe the mentally ill people who have been turned out on the streets of Vancouver and Victoria, hows that one working out?
Or what about your average blue collar type that has a catastropic health failure, sorry nope you should have contributed another 5 dollars a month and we could have helped you . Next please.
Why stop there we could start up debtors prisons for those unable to pay, yeah we could privatize that and make some money off that.
Or how about cmhc since most of us boomers here have houses already paid for, when that goes under I guess only the young ones should pay after all we’re not using it so why should I pay.
Keep in mind where all of social stuff came from. It came from people before you who had a vision for this country and for the people who lived and worked hard to accomplish it.
Medical for all.
Unemployment insurance.
Free speach.
40 hour work week.
Freedom.
The right to vote.
And more.
Thats what some of those old people did, what are you contributing?
Wow, lots of weighing in today from the West Coast RE honks! lol
I don’t want to see the GVRD go into a bad slump (I grew up in White Rock, relatives still live on the west coast), but my observation, and I think many others on here is this;
Real Estate profits/growth are basically fueled on wreckless lending practices. And for the health of the Canadian economy….in all regions, that needs to change. If RE is such a great investment, that should be welcome, and it shouldn’t effect it a whole lot…and if it does, then the industry needs to adjust to it.
As for the Lower Mainland itself, you guys commenting today remind me of why I DON’T miss living there.
- you probably inherited some little shack on the north shore from your mummy and daddy
- you’re signed up to the BC Gov’t’s Tax Deferral Plan because you can’t afford to pay them (inspite of probably faking neck injuries and suing ICBC as a source of income)
- if you didn’t have high property values, you’d have no self worth whatsoever…..get a life. Try creating wealth on your own for once instead of thinking you’re a financial genius because you had a piece of property in the right place at the right time…..given to you. You’re basically a bunch of deadbeats who just happen to live in a nice geographical area, pure and simple.
Having said that, for all the people in the east, you need to stop moving out here….You fuel not only the prices, but the egos.
Maybe prices will never go down there? Who knows? It is a beautiful place and maybe the Lower Mainland is destined to be an elitist type/expensive area to live, if it isn’t already? But in my opinion….(for the average person), if you wanna pay $500K + to live in Surrey or Pitt Meadows or some place like that…..go right ahead. : )
tech4monkies – I must be a total freak! Age 52 and never been in debt. Currently sitting on tons of cash (with awful interest rates) waiting for that ever distant fall in the real estate market while we “flush our money down the toilet” renting. Any day now….
#151 OMG,
WTF? What world are you living in. The Finance Minister just did exactly that – a change that will lead to lower prices. He has now signalled that the gov’t is pulling back on the consumer stimulus in relation to real estate. A frenzy will ensue and then the prices will drop after the April 19th rule changes. I think a big part of it is that risks now far out weigh the benefits.
I don’t think most people think they are stupid at all. We think they are manipulative.
The really disconcerting thing is that he didn’t have to do it earlier or take more serious measures because the economy is really, really crappy. If the fundamentals weren’t so lousy just think of what prices would have done.
The economy is very flat and we easily could slip into a double dip recession this fall. Look at Europe and look at what is happening in China.
And interest rates are getting set to rise in the U.S. – perhaps sooner then we all thought. We will be close behind.
#132 Junius
You know as well as I do that these “changes” will have no impact.
The one that caught my eye was that FTBs would have to qualify for a five year rate. However, I trust that the new requirement will be fairly easy to bypass from a lending perspective as mortgage brokers create “new incomes” for applicants.
The 95 – 90% withdrawal of equity rule will really have no impact as it still allows for significant leveraging, while the 20% DP for a investor property will not dent speculation (how will you determine what a “primary residence” is when investment property mortgages can be put under the wife’s or son’s name).
As for your previous diatribe on property taxes, an increase of 10 or 20% in property taxes will not bring the so-called house of cards down. While that sounds like a significant increase at face value, in nominal terms it is nothing. So your water bill goes up 100 bucks – small price to pay for your house going up tens of thousands in a year.
And as for unemployment, we saw prices increase 20% despite a doubling of the unemployment rate in the province while wages have remained stagnant for decades. When adjusted for inflation, our average wage is about 25 cents less than it was in the 80s. And yet, our prices have continued on an upward trajectory for 8 years. Sorry, but the only substantive catalyst for a market “correction” has already taken place, and our market responded accordingly : )
I dont understand why some of you people are saying that today’s announcement means nothing. Basically, Flaherty raised interest rates without actually raising interest rates. And we all know what’s going to happen to housing when interest rates go up, officially or not.
Rob Carrick: New rules won’t make a dent in the RE market.
http://www.theglobeandmail.com/globe-investor/personal-finance/why-jim-flahertys-mortgage-rules-wont-hurt-homebuyers/article1469927/
My opinion, not a bad start…rates are going up, so lets factor that in now. More down for speculators, a market stabilizer.
Lets give it some time.
it’s only the BBC with it’s unfortunate penis envy. Of course they have neither crack heads nor prostitutes in London.
They did mention that ‘anything’ is 10$. This may bring more tourism from the ‘dollar store’ afficcionado segment.
Hello Garth and followers.
Food for thought on how the world works. Use link for details.
Steven
http://www.321gold.com/editorials/roache/roache021610.html
IRT Junius
The swirling cloud of self-righteousness around you is thicker than a Vancouver fog. I love your bogus statements like “Most people have even gone out and got LOCs against their homes for vacations and other short terms joys on the belief the party never ends”. Most people? lol! You WANT the RE market to fail.
#151 omg on 02.16.10 at 2:38 pm
The Finance Minister will do nothing that might cause prices to drop. What politician wants that on his back.
So this should not be expected to result in any major changes to the market.
Although you may all think the federal government is staffed by morons – it is not – they have a lot of smart analytic talent there. They will have done a lot of background analysis on this at Ministry of Fin and CMHC and know exactly what they are doing.
*****************************************
I don’t doubt their level of intellect–
What’s missing in all of it–is the ‘type” of economics,they’ve been educated in–ie–”Keynesian”
If they actually “knew” what was happening and what was–going to happen–as a result of their flawed economic policies,they would have stood aside and let the market work–
Had we/the world–done this-when it first came to light–one awful day 3 years ago–we would be at a level of affordability–
Sure–we would be experiencing much higher unemployment today–we would have had a horrendous housing crash–stock/RRSP holders would have suffered large losses–but today–most prices would be at market clearing levels–much lower–
This is where we’re going in the end anyway–
We cannot print the debt away–
“They” will fight the market–all the way to the bottom–
The market will win–it always does–
All the people i mention above–will lose anyway–
Stimulus-will only prolong the agony–
Death by a thousand cuts–
Can someone explain to me if “it is different here in Fort Mac?” Will there (ever) be real estate correction here? Average home prices here are are still in the $500, 000 to $650, 000 range. I had my rent lowered from $2800 a month to $2000, however, there are others out there paying more……
Bummer!!!
http://www.thestar.com/news/gta/article/766123–toronto-property-taxes-rise-along-with-user-fees
http://news.google.com/news/more?pz=1&cf=all&ned=ca&ncl=dO6iB-F3NEcX22MuK31r8t4Y-rlEM&topic=h
Hey Vancouver Rocks
Just curious – I think you mentioned once that you are sitting on 10 years of equity growth in Van.
You’re pretty hyped on Vancouver RE – are you using your equity to buying RE in Van?
I am seriously curious and not just asking so I can dump on you. After all nobody knows the future and I will be the first to admit that there is a potential that you may be right.
Do keep posting, it does keep the blog fun.
…”a competitive market structure is built on effective competition and empowered consumers”
competition law+ consumer protection need merging into one. This would be more efficent!
Isn’t the market defined as a place where consumers have access to a range of competitively priced goods and services free of unfair and deceptive practices.
…so Mr. Flaherty sees the housing market as a structural problem only therefore, self correct down the roa? I am confused who the real “Protectionists” are.
All the education will not help me if i have different information as a consumer.
“The CDS market has been largely unregulated and last year was valued at twice that of the US Stock Exchange. The lack of transparency has meant exposures to bad debt is unknown.”
=and this asymmetry
A wealthy investor in Virginia pleaded guilty on Tuesday to criminal tax evasion involving an international bank, said by a person briefed on the case to be HSBC, one of the world’s largest private banks.
UBS AG
“The case is significant because it shows that the authorities are expanding beyond UBS, the giant Swiss financial company, in their scrutiny of banks suspected of helping wealthy Americans evade taxes. It also provides an example of a bank that apparently took steps to hide its operations in the wake of the UBS case, even as many banks said they were shutting down their undeclared offshore services for American clients.”
>#110 $fromA$ia ( o Y o ) on 02.16.10 at 11:14 am
>I’m getting sick of reading your constant Vanspam
>nd I’m sure others are as well.
>Mike
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
>Can we permanently ban Nostratard?
>Thats up to Garth.
>I think Garth likes to have some filler for his threads.
>
Comic reliefs!
Wow! My hero! I now feel so relieved. There are no housing bubble in Canada. Thank god!
http://money.ca.msn.com/investing/news/business-news/article.aspx?cp-documentid=23466177
I wonder if Mr. Flaherty reads this blog? Seems suspicious doesn’t it?
#158 Dan in Victoria
Don’t worry Dan, with what little extra cash we actually save with privatized health care, we’ll be able spend on real estate and health premiums.
Karl Denninger thinks Flaherty is in Denial:
http://market-ticker.denninger.net/
#169. Yep, It’s different there in fort McMurray. Just ask Garth with that $650,000 trailer he was lookin at. So much sarcasim about ” It was different there too” Check out local markets. Real estate is a local market making places dare i say “DIFFERENT” – plain and simple
I guess, with all the bad international press the Vancouver games are getting, the world will NOT all be moving to Vancouver. Someone better tell Nostro’ that.
Hmmm….I wonder if he predicted that everyone would be avoiding Vancouver after the Olympics. Maybe he did and sold his house before the games started.
The guardian was comparing this games to Montreal for debt and Atlanta for quality. They said that “Things are not quite that bad yet.” Notice the YET.
http://www.guardian.co.uk/sport/2010/feb/16/will-london-learn-from-vancouver-olympics
The absolute last place one should gather reliable news is from most North American newspapers.
IMO, if newspapers (especially the Calgary Herald) were as soft or absorbent as Charmin, I would have a practical reason to buy them.
Was listening to CBC Toronto on the way home. There was an interview with a Mortgage broker saying how GREAT the governments move was.
This is the thing that made me laugh. He said (and I am paraphrasing) the last thing the Fed wants to do is throw water on the only thing that is supporting this recovery.
Hey peps!! If the only thing that is supporting this recovery is people selling and reselling property then there is no recovery. There are only so many people who can work in an industry that makes nothing.
#162 Vancouver Rocks,
Now I get it. You can see that RE: prices gained 20% at the same time that wages were flat and still believe that they can keep going up. Economic laws do not exist in your universe. When they return prices will go down by at least 30%. Sorry, you are just wrong. Let’s check in again this time next year.
#167 Hoon,
Bogus statement? Sorry but I know too many people that have lines against their homes to count. I also know 2 people who own their own business who acquired HUGE mortages by pumping up their self-employment numbers so they could buy their dream home. I am terrified of where it will leave one of them who is a dear friend.
Want RE to go down? No. Hurts me as well. Besides, nothing I say here is going to change it either way.
My concern is that we are creating a bubble that will make matters worse and will do significant long term damage to many individual Canadians and all of us collectively when the CMHC needs to pay off loan guarantees.
What’s your excuse?
“He gets asked all the time if he’s Garth Turner.”..hilarious
…no problems here in Canada-were different!..time will tell..and in my opinion the outcome will not be pretty…and we will all be paying the piper thanks to the “sheeple” that got sucked in by “F”and company….time will tell!
#110 $Asia (Yoyo for brains)
Lets ban Nostratard???
…My friend, Yoyo for brains from $Asia, can’t afford to return to Hongcouver…hence his negative slant towards me. (all approved by Garth of course)
Nostradamus jr.
Hi Garth
Are you in scarborough on thursday 25th Feb?
What time?
Chapters store, Kennedy & 401, 7 pm for a talk. — Garth
F in translation to the layman:
There’s no housing bubble!!
…but just in case, here are some rules I’m enacting so that when the whole thing goes south, I can blame the banks, the borrowers and point to myself and say:
‘See, I took steps to prevent this, the rest of you ruined everything!’
To tell you the truth I don’t see the bottom falling out of this bubble market with the the gov keeping house prices artificially inflated. I also don’t think its in the banks interest to see a decrease in the value of homes, being as you’ll pay them over half the cost of your house in interest over 25 years.
Sure some of these new rules that F is pumping into the system are going to have an effect, limit some buyers but I think it’s going to create a level of hysteria that will drive the market into an even greater frenzy.
I don’t want to see this bubble pop, deflate or exasperate itself. I want to see it EXPLODE, like the in the States, Australia & the all the rest. Canadians are already at a measly $96k in dept, whats a couple hundred more, thats the way my generation looks at it and I think we’re happy as slaves.
I digress.
At least afterward we could return to a semblance of normality where the average house price is in ratio with the average income of a house hold. So I ask myself, who would this benefit?
Not the banks, not investors, not the rich and not the government and if it doesn’t benefit them then it doesn’t benefit any of us right? So I must conclude that this really isn’t an out of control housing market but a carefully well laid plan to make the rich richer and the poor poorer.
I hope they lose control and it explodes.
#169 Rhonda on 02.16.10 at 4:54 pm
Can someone explain to me if “it is different here in Fort Mac?” Will there (ever) be real estate correction here? Average home prices here are are still in the $500, 000 to $650, 000 range. I had my rent lowered from $2800 a month to $2000, however, there are others out there paying more……
******************************************
There will be anomalies/pockets that are less effected,based on employment/weather/scenery etc. that will act as cushion on prices–
I still believe prices will fall all over–just less in some places–
Supply and demand will dictate–
Watch your listings for time length on the market,if they’re slowing–prices will fall–
Watch for any up or down ticks in employment activity–
Higher unemployment will lead to lower prices–
These will be your leading indicators–
Remember your market rules–
“when in doubt–stay out”
Well, if there really is a big push to get in under the wire, that means a nice appreciation of at least another 10%…
So, if you had listened to advice on this blog, on average you would have missed out on 20-30% gains in a year and a bit…
How long do you think it will take for those increases to be eroded by any supposed price declines? A couple of years? We know that prices are sticky on the way down. Factor in negligible interest rate increases at best, and it might take even more years…
So in essence, you could be waiting another 3-5 years for prices to hit 2008 levels. In the mean time, lots of rent will have been paid, and lots of books sold just to end up at square one again…lol
So the new nukes plants are going to Georgia
Georgia Gov. Sonny Perdue signed into law Thursday a bill that allows banks chartered by the state to exceed current lending limits if a borrower hasn’t fallen behind on payments. ‘If this did not pass, it would deepen the real-estate crisis,’ said Keith Caudell, CEO of Bank of Hiawasse.”……
“Loan losses since the housing bubble burst have eaten into capital levels at many of the 251 state-regulated banks that existed as of Dec. 31, 2009. For decades, it was illegal for such banks to pour more than 25% of their total capital into an existing lending relationship secured with collateral or more than 15% to an unsecured borrower.”
“In 2007, the federal Office of the Comptroller of the Currency made permanent a pilot program allowing nationally chartered banks to exceed U.S. restrictions in states where more favorable terms are available. The move was a concession to national banks that argued they faced a competitive disadvantage to state-regulated banks, said Mark Tenhundfeld, at the American Bankers Association. In 2007, Arizona bumped up its single-borrower limit to 20% from 15%, partly because bankers complained about higher limits in California and Nevada.” ……..
“Harvard Law School Professor Elizabeth Warren predicts things will even get worse once the banks admit their losses. Warren heads a congressional oversight panel that came recently to Atlanta to assess just how bad the picture is. ‘These mortgages are going to fail, and they’re already starting to fail,’ says Warren. ‘And we fear we’re going to see more failures in 2011, 2012, 2013. We’re only on the front end of this crisis.’”
http://www.thehousingbubbleblog.com/index.html
#42 Ghost of Tom Joad — Things are proceeding nicely now. The Bilderberg Group et al are well pleased with their minions’ efforts.
——
#137 junius — “Great time to sell.” — Right on, esp. sell privately. No RE fees, then rent.
——
Speaking of The Bilderberg Group (who had a meeting in Athens last spring) and continuing with onemorething and Nosty Jr. from yesterday — A column in today’s KDC (“Bad times for the Euro”).
David Bond writes that “. . . no nation should run a deficit greater than three per cent of its GNP. Greece currently has a deficit of 12.7 per cent, something that it admitted falsifying documents with the EU during the past six years.”
(There are reports that GS and JPM helped Greece cover up its deficits, but nothing concrete. It does bear striking similarities to what transpired on this continent.)
“Last year, 29,000 people were hired to replace the 14,000 public-sector workers who retired.”
(Along with several expensive sweetheart deals with other trade unions. One para. which was quite interesting is this . . )
“To finance the PIGS’ existing deficits and to refinance their outstanding maturing debt, investors, fearing possible defaults, are demanding high rates of interest. And rising interest rates, combined with with inefficient and corrupt public service sectors, means slow if non-existent growth and even greater deficits.”
Germany is staunchly against bailing Greece out, as the others would also ask and get a bailout. Sound familiar?
Police State 1 There are always two or more sides to each story, so here are two of them — Police State 2
China’s Oil Sands?
The cartoon is good. Where is Danny Williams? Was he flying on one of those recent UFOs seen in Nfld.?
Seems like the US has chosen to go down the poor road path. Looming bankruptcy, illegal aliens (not from space, from Mexico) — Obama has a handle on things, right?
New Carbon Currency.
#169 China will most likely follow Japan’s path of the 90’s well ahead of the US & Eurozone economies (half of world gdp) beginning to emerge between 2012 to 2014. In other words, oil will start to weaken this summer from a high of possibly mid $90’s and decline sharply for the better part of a year. The ‘peak oilers’ are jumping the gun by almost a decade. There’s collectively over a trillion cheap barrels left in Saudi, Iraq, the Gulf, India, coastal Brazil, Venezuela & China alone. And ‘peak oilers’ don’t consider the advancements in exploration & recovery technologies.
Hey Garth,
Why do you have Michael Moores photo at the end of your post?
And when did he start writing for Can West and instead of churning out lefty documentaries for Hollywood?
F’s announcement I would have to agree will not stop all the buying but deter enough to think about it. It was a step (message) by the Fed’s only.
It’s just another example of Canada being the last one’s leaving at closing time which will find our bubble the worst for downside in the world unless AUS can beat us to the punch.
Whoever mentioned Canada forcing a 0.80 cent dollar is lost! We will never find that mark as all other currencies will debase quicker and Canada will have NO way of exporting when it needs it most…right now!
RE Bubble, low GDP, high unemployment, massive debt puts Canada on the chopping block down the road for any other nation to call the shots…hint…look south!
The Big L’s view on the NA Union may be taking shape as Canada runs high so that the negative split on currency and damage to RE bubble etc etc is more acceptable for the Fed’s to manage and sell down the road.
Oh yeah, all those complaining about the Van Bulls on this blog, you must be new, just ignore them like the long time contributors do!
Focus on Garth’s message, take from it what you need!
Garth must be accepting of these views which support the manipulated and herd mentality which is cited in his books and editorial as evidence that is DOES EXIST!
Amigos: So why are taxpayers backing speculation at the cost of home ownership for families? CMHC Insurance should only be available for resident ownership not speculative purchases of residential properties. Let the Banks and Mortgage lenders price in the risk on speculative ownership through higher interest rates for the flippers. That would reduce the cost of RE for families, and deflate the market. I have no problem with my tax dollars supporting home ownership; but a real problem supporting speculators. 20% down to get CMHC for speculators isn’t high enough.
junius- Your concern over the fate of the middle class is certainly warranted, their memories are too short and their expectations wildly impossible. Most people I know have swallowed the debt lure and will soon be reeled in for their inevitable appointment with the fish bat!
got a watch- Yep, our economy will remain flat and that should sink enough households on its own without a significant rise in the cost of debt. As for Greece, the majority of its citizens are victims of reckless government policies, but it is not the average ordinary Greek citizen who should acquiesce to the austerity measures being called for by those in france and germany who are afraid of losing their investments in the event of a default. Greece is rife with wealthy tax evaders not to mention the possibility that much of german surplus ‘looking for returns’ was funnelled out of Greece (into a bank account, perhaps)as quickly as it was ‘borrowed’ in by corrupt politicos…it never touched the real economy. The recognition of the class element in this situation would benefit all the readers including myself.
Although I can understand that there is alot of equating leftist thought and whatnot with Keynes economic theory, I do think that Keynes would laugh at such an equation. The most leftist part of his general theory is his call for the euthanasia of the rentier (makes good sense), hardly a call for the outright eradication of capitalism. His ideas qua new deal policies saved capitalism. I have a hard time believing he would applaud the pumping and priming of an unproductive asset class such as RE. He would most likely call it a misallocation of resources. A house is not a bridge, a factory nor an engineering degree. A house provides shelter and that is about it despite the obvious status a large OSB shitshack provides nowadays. Whether his ideas worked or not in dealing with the depression is an arguable question. I am not a Keynesian, but I do get a kick out of what goes for ‘leftist’ on this blog. Flaherty should read List.
What minister F did today is to put a thin shell around the house bubble for two purposes:
1. to protect it from blowing up
2. to prevent it from growing bigger
I am not sure that shell is strong/good enough for what he wants. He should really use more efficient method to just let some air out, but no, he wanted to play safe.
We will see …
Hello Garth. If Canada needs a new finance minister I am available. I’d wipe out all this debt and deficit crap and put the feds on the straight and narrow. The job would have to be permanent , I would need the authority to over rule the politicians and reap a damned good salery to boot. Otherwise I think Canada is going to go down the tubes along with its allies who practice Keynesianism and irresponsible government.
Steven