Hear Garth in T.O. tonight @ 7. Here.
In the spring of 2005, US housing prices were at record highs – just like now in Canada – and had increased about 20% in the previous year – same as here. Real estate was everyone’s fav investment.
And why not? The experts said it was okay. No danger. Keep on buying.
“Our analysis reveals little evidence of a housing bubble. In high appreciation markets… current housing prices are not cheap, but our calculations do not reveal large price increases in excess of fundamentals.”
That, if you can believe it, came from a Federal Reserve Bank of New York report written by three of the country’s best real estate economists.
Four months later, the market started to crumble. Five years later, prices across America have collapsed from 20% to 70%, one in four homeowners is in negative equity, seven million families have lost their homes to foreclosure, the middle class has been eviscerated, properties sell for less than $100 in several cities and the US has plunged into recession and debt on the back of a mortgage crisis. It’s the worst event since the Great Depression. Because of a bubble the experts told citizens did not exist.
I thought of that today when I heard the words “Re/Max.”
The country’s biggest property pumper came out with one of its publicity barrages, which are routinely licked up by the MSM. Here are two of my favourite quotes, both from Elton Ash, Re/Max executive vice president, Western Canada – one from each side of his mouth:
“I’m confident that we are not going into a bubble situation. I don`t think that the Canadian buyer is that naive at all.”
“Affordability is the catalyst for the vast majority of purchasers in today’s housing market… There is a growing sense, on both sides of the fence, that the time to act is now.”
Notice the suck-and-blow? On one hand, new buyers are told this is a stable market without the dangerous excess of a bubble (just like US suckers were reassured). But on the other hand Re/Max and others try to whip the market into a crescendo of Spring buying, creating that ‘buy now or buy never’ mentality which always marks a bubble top.
And it’s working. At least as far as the slobbering, sycophantic media is concerned.
“Calgary will experience a ‘very active’ spring housing market as improved an economic outlook combined with record low interest rates and affordable housing are ‘fuelling recovery’ in residential real estate sales..” said the Herald.
“Toronto leads the country when it comes to a lack of listings on the real estate market, contributing to upward pressure on pricing, according to a report by Re/Max” said the Star.
“Re/Max said Wednesday that housing supply is drying up relative to the number of people looking to buy,” said Canwest News. “It said expected higher interest rates from the Bank of Canada by mid-year, tougher mortgage conditions imposed by the federal government effective in April, and the implementation of harmonized sales taxes in Ontario and BC in July should cause a surge in demand this spring.”
And that’s just what Re/Max wants. By pouring accelerant on the hot coals of the housing market, these self-dealers seek to squeeze out every last dollar of commission before the inevitable dousing. Why else churn out media releases telling people listings are scant, when they’re in fact increasing? Why encourage young buyers to slither hopelessly into debt if the market is about to cool? Why downplay fears of a bubble, only to pour every corporate resource into gassing it up further?
If I were F, I’d be pissed. Only a week after trying to dampen the fire down by tightening up mortgage regs, the finance minister sees his modest work dashed by these house monkeys.
So, let’s remember. There are those among us who, in serving themselves, serve no one.
BTW, between 1980 and the late 1990s the average US house price-to-income ratio was 3. By 2006, when the market crashed, it had reached 4.6 – termed seriously unaffordable.
Today the ratio in Canada is 5.2. Toronto, 5.7. Vancouver, 9.3. Re/Max, 0.
140 comments ↓
If I were F, I’d be pissed. Only a week after trying to dampen the fire down by tightening up mortgage regs, the finance minister sees his modest work dashed by these house monkeys.
But, isn’t Mr. F supposed to keep this “economic action plan” of renovating homes and flipping houses going indefinitely?
If F actually wanted the market to flatten out, he could change the CMHC rules back to pre-2006 (pre-Flaherty) levels. Too bad Harper would send him back to Whitby for admitting the emperor has no clothes.
CBC says there will be a shortage of listings in the spring:
http://www.cbc.ca/money/story/2010/02/24/realestate-listings.html
I’m still seeing 40% more listings in Kits (compared to the 2006-2009 data I’ve collected from MLS) and it’s the end of February. Anyone else see more listings?
Also, Craigslist rentals haven’t been moving at all. It might be the Olympics and no one wants to move Mar 1.. we’ll find out soon…
There is no housing bubble in Canada…..
There is no housing bubble in Canada…..
There is no housing bubble in Canada…..
There is no housing bubble in Canada…..
Just don’t pop it.
What’s your thoughts on Bernanke suggesting low interest rates for an extended period of time?
How will this affect the Canadian markets and will Carney follow suit?
Sold my condo today, two days on the market, 99.5% of list price. Looking forward to paying off the mortgage and socking away the equity and then a $1000+ a month. Will finish Garth’s book and then decide on my investment strategy. Although I decided a few months ago to sell my house, I have only been reading this blog for about 6 weeks. It has confirmed my gut instinct that this was the right thing to do at the right time. Looking forward to finishing the book Garth, thanks for this blog and thanks to all of the blog dogs for their insight and their ideas.
One thing that should be pointed out, is that in some instances house prices do stay high. While I don’t think that’s the case in Calgary/Canada for various reasons, it’s interesting to look at the home prices in my native Holland. House prices there have grown at staggering rates since ’96, and are now still 2.5x higher than the average price 14 years ago. The big difference, I think, is that the growth over there has been much slower, and much more controlled, whereas Canada has seen much more of a “hype”. Thoughts?
Netherlands:
http://www.hypotheker.nl/GetImage.axd?type=HOUSEPRICES&TitleText=Prijs+%7B0%7D+in+%7B1%7D&AverageText=Gemiddelde+huizenprijzen+in+%7B0%7D&LocationID=18&PropertyTypeID=
Canada:
http://www.chpc.biz/Major_Cities_Chart.htm
PS – we sold our condo, which we bought at the ’07 peak, and are now happily renting. Just yesterday our realtor phoned us to let us know that “now is the time to buy”. With spring around the corner, prices would go up 10%. Geez – if there’s one thing that says “unhealthy market” to me, it’s a 10% price increase in a few months…
One reason TO has a shortage of listings is that Miller (he supports councilors who admit having sex in their offices at city hall) and Dolt on e-Guilty (I’m so so sorry about that missing Billion tax dollars) have killed the upgrade market.
for example, if someone outgrows a 450k bungalow and wants to upgrade to 800k 2 story, they have to shell out about 20k in taxes on closing, because they are not first time buyers.
So, 25k to Realtors and lawyers, 20 k in taxes. Tell me again, i forget, what do they get for that 45k?
that’s right, absolutely nothing.
“Honey, let’s just stay put and spend that 45k on ourselves.”
result, less listings, inflating entry level prices
Good data is hard to find on rentals, but CoB@#2 makes an interesting point – has someone skimmed the Craiglist data to try and get a real-time readout on rental listings? Given that scum like Re/Max try and obfuscate the truth as much as possible.
Part of me as a home owner of a 2 story home in the Edmonton area with 60% equity wants housing to stay stable or drop little like 10-15%, but part of me with 12 nieces and nephews from 16 to 20 years of age hope it drops a lot for there sake when they get to buying in 4- 8 years time. Anyway it’s out of my control so I just have to watch.
When I sold a rental in 2005 I did not buy another property because I thought most of the gains where done with a 5 year rise in Victoria, and the market would peek in a year or two, as it normally would of, but the mortgage rule changes and low % rates fed the bubble, I just can’t believe that “they” have been successful so far in keeping the game going.
See above comment; replace 2005 with 2006
Garth – I am a Property Manager in Calgary and I can tell you, based on the number of tenants we have asking for rent roll backs or reductions, that the recession is not only no where near over here, but it is really just starting to take hold, especially on retailers.
I am staying put, and keeping my money out of REITS, at least for the next while. Maybe they are good to short in the market right now??
Remember Mr Lereah, the spokesman for the National association of Realtors in the US. He was the spokesman talking up the US housing market before the crash. No, there is no bubble was his clarion call. In fact, he even wrote a book suggesting that if you didn’t buy then, you would miss out for good.
Of course now he is unemployed, lost his house and is now trying to salvage what little credibility he can amass. I read an interesting article where he states that it was his job to continually put a positive spin on the market. Ignore the facts and accent the positive, he was told. And he did.
Sure, I heard the Remax guy on CFAX this morning here in Victoria. Had a good laugh as he was saying prices were up 20+ % this year. Many of the listings I have seen have been on the market for ages. Only the low end is selling. For whatever reason, I cannot see what he is seeing.
Maybe he should give Mr Lereah a call. Go figure.
Garth – your giant SUV may soon be extinct:
Hummer Faces Shutdown After Chinese Sale Collapses
I guess the Chinese don’t want to buy any more US Dollars or US SUVs.
Hi Garth…
Your predictions/warnings with respect to RE in those cities you most often reference are “cast in iron”, so to speak…
However, I have to believe many of your ardent readers do not reside in those particular areas…
For my own part, I do not plan to move my family to VCR, CGY, TOR, or any other “bubble city”…
Me, I plan to remain in Saskatchewan..
I expect that a great many others may also be of the same opinion with regards both to their current abodes in their current Provinces…
Would you be so kind as to provide some of your valued insight to those of us who find ourselves in the above two categories…?
Not every city has a “Bubble”…nor does every “Bubble” have a city – if you get what I mean…
Tks OM..And 73′s…
Be sure of my best wishes…
I get strange looks when I tell people I’m buying/building AFTER July. Buy when demand is LOW NOT HIGH. Labour and materials will be lower cost, and if you stay below $400K the HST is rebated in full.
“The conventional wisdom is that Canadians will try to meet their mortgage payments even if the house price falls below the value of the loan, and that idea is baked into many bank forecasts.”
Now, the above quote is from the Financial Post so it must be true. You see, Canadians won’t just ‘give up the keys’ (thus exacerbating a housing implosion) because, not only are we not dummer than Americans, but we are morally superior to them.
Consider our southern neighbours. They are the largest per-capita users of resources and energy in the world- I mean, they are DISGUSTING. They’re overextended in an expensive and dangerous war in Afghanistan, and they have an abysmal environmental record. They’ve almost completely outsourced their manufacturing sector, trading good jobs for short-term profits, and they’ve even let companies like Walmart, with their low wages and questionable labour practices, build these crazy super-centers that have destroyed Main Streets, and wiped out mom-and-pop businesses everywhere!
Heck no! We’re not like them, and Canadians DO NOT just stop paying their mortgages because things get a ‘little tough!’
RE/Max is right, and real estate is hot, man. The Lord ain’t making more of it, and the Lord knows Canada is running out of land… FAST.
There won’t be enough houses. You won’t find a place to live. Buy a house now, or buy a cardboard box tomorrow and park it next to Charlie Homeless in some alley under the shadow of my HipsterHaven Green-Powered Solar Condo you suckers !!!!
(heh-heh)
“BTW, between 1980 and the late 1990s the average US house price-to-income ratio was 3. By 2006, when the market crashed, it had reached 4.6 – termed seriously unaffordable.
Today the ratio in Canada is 5.2. Toronto, 5.7. Vancouver, 9.3. Re/Max, 0″…………….wow great post Garth…those figures are shocking.
“”Four months later, the market started to crumble. Five years later, prices across America have collapsed from 20% to 70%”"
Garth
…Fair enough Garth….Since you believe a drop of 20% to 70% is very probable over the next five years, will you be selling your bunker, then renting?
We’re talking saving at least 20% tax free dollars here.
Nostradamus jr.
“BTW, between 1980 and the late 1990s the average US house price-to-income ratio was 3. By 2006, when the market crashed, it had reached 4.6 – termed seriously unaffordable.”
Mr. Turner, Am I too old school or price-to-income ratio is (was?) recommanded to be 2, 2.5 max, or is 3: single income family, 2-2.5: two incomes family ?
Listings in Kelowna are starting to pop up everywhere as the olympics draw near. Remax was on the local radio today claiming prices have increased approx 17% since last year. I would like to see how they calculated that because it sure appears that new listings that did not sell last year are appearing on the market again for less than they were asking prior.
Should they not be 17% higher??
Alan What’s your thoughts on Bernanke suggesting low interest rates for an extended period of time?
How will this affect the Canadian markets and will Carney follow suit?
The Fed doesn’t set interest rates. Buyers and holders of US Treasury Bonds do. The link says that auctions of new US Treasury Bonds show that buyers aren’t buying.
http://www.financialsense.com/fsu/editorials/willie/2010/0223.html
At some point the Fed will jack up interest rates to defend the US dollar. My feeling is double digits (means 10% or more). Bank of Canada will raise interest rates to defend the Canadian dollar. This raise will stop the real estate market in its tracks.
Watch out?
http://www.financialpost.com/news-sectors/financials/story.html?id=2608752
Don’t forget those wise, soothing words back in 2005 from the man who is supposed to be 100% on top of all things to do with the US economy. If he says it won’t happen, than surely it cannot happen, right? And people still listen to this clown?
http://www.washingtonpost.com/wp-dyn/content/article/2005/10/26/AR2005102602255.html
“Never ask a barber if you need a haircut.”
Listings in Toronto are growing, I wish these clowns would put up a YOY # instead of talking nonsense.
HST coming in July, I feel sorry for any sucker that buys a condo in Ontario or BC. HST applies to all services, but not the total condo fee amount. Now for the math:
Condo fee approx .51 cents/sq foot (that includes utitlites) X 800 sq foot condo= $408 lets assume that of that $408- 80% goes to serivce utilties/grounds/salaries for management/cable all of this things are HST applicable = $326 X .13= $42.43 increase in condo fees a month.
Now, condo fees usually go up $30-50 a month year over year so that modest $408 fee will now cost $490 ($408 + $42.43 + $40 increase in services/salaries etc..)
wow, thats almost $490 a month in Jan 2011 compared to today;s $408 an $80 month over month increase. That plus investors requiring 20% downpayment and overcompacity in both GTA/VAN and I see a big decline on the way.
PC should start a new line of food products called memories of Miami cause thats what our condo market will look like.
I don’t think it is correct to compare the US situation to Canada – Vancouver included.
The reason is simple; in addition to the fraudulent mortgage schemes that were committed in the US the bigger issue that killed the RE market was a HUGE OVERSUPPLY of housing units. Nothing kills the RE market like the oversupply of inventory.
In Canada – including Vancouver – there is no oversupply – therefore while there may be seasonal fluctuations there will not be a reduction in prices as there is more demand (foreign and domestic) than supply.
Supply can be controlled by prospective sellers since they can simply take their property off the market when there is too much supply. Also, builders can simply stop building if they think there is too much supply.
In addition, don’t expect anyone to rock the boat with raising of interest rates – in any significant way – as that would be politically impossible to do and it would kill the rest of the economy.
#4 Alan on 02.24.10 at 10:02 pm
What’s your thoughts on Bernanke suggesting low interest rates for an extended period of time?
How will this affect the Canadian markets and will Carney follow suit?
****************************************
Bernanke–
Trying to talk down the dollar–imo–
I can’t see them raising rates and goosing the already rising USD higher–
Especially after Obama just announced–that “he” was going to double exports–starting this year-lol
We’re in the well known deflationary phase of the cycle–
Known as– “bugger” thy neighbor–
Canada is still– in an inflationary overshoot–
These never end well–
Low IR rates–printing-
competitive currency devaluation–and–
We are already starting to see protectionism rear its head–imo–we’ll see much more–
Those that know of the–Smoot Hawley act–from the 30′s–know how it put a drag on world trade and prolonged the depression–
We never learn–we’re right back where we were-
80 years ago–still trying the same–bound to fail–stupid fixes–
Kondratieff deflationary cycle–
http://photos1.blogger.com/img/101/3984/1024/cycleofdeflation1.jpg
No doubt about it. This story will not have a Hollywood ending.
Garth,
Am going to sign up for your talk in Calgary. Hopefully, the weather is warm and sunny for you (I want you to come back). If you find the city is drab, just remember what new house-owners in Vancouver, Toroto and Calgary know “this city is the BEST place to live.”
Look forward to seeing you and all the other Calgary blog-dogs.
@6
There was a study of long term prices in a particular area of Amsterdam. You can see the chart in this article here.
http://www.huizenmarkt-zeepbel.nl/14-06-2008/huizenprijzen-op-hoogste-punt-in-300-jaar/
Lot’s of ups and lots of downs.
Congrats #5!
If only more people were like you.
Every year this time I have heated debates with clients that want to wait for the “spring market” that listing now, when the number of competing houses is lower, is better than waiting until April or May, when listings jump. They don’t get it.
Latest is a couple who want to sell. No debate about that. I suggested that since the house is ready, lets do it NOW. No go. They want to wait until the second week of March. Why? They’re going on holidays in March and don’t want to deal with the “stress” of having people/showings.
A lot can happen in two weeks.
Again, congrats on selling your place.
god I hope we have a market this spring. As a real estate agent I just need a couple more big sales and then I will be happy. God, just let me sell $2 million more in listings, then I’m out baby!!!!
Feb 24 – #133 JIM – Renters Pissing away money – Reality Check
Isn’t hindsight a great reality check?
This whole thing about RE prices being up 20% is really a HUGE RED HERRING.
IN most markets, prices have ONLY recovered to WHERE THEY WERE in mid 2008, or just above.
Prices may be up 10% to 20% for those people that bought in the MARCH-APRIL 2009.
But for almost all other people that have bought in the last three years prices are FLAT or up just SLIGHTLY.
Remember March 2009 – top economists were predicting massive deflation/inflation/stagflation/1930s scenario, the S&P was moving up and down hundreds of points in a day, and 1/3 of the world population was going to be wiped out by swine flu.
SO I DOUBT very much that you would have bought in spring 2009. As an RE agent friend told me at the time – only those people that had to buy were buying (i.e. transfers, people that had already sold) because people were scared sh*tless.
IF you truly need to buy a house, BUY ONE now since you can get it at just about 2008 prices. What a steal that is!
Shortage of listings? Oh please. Where do they get their facts from? Oh right…they just make them up as they come. Enjoy the show everyone! I meanwhile, am looking for a 2/3 bedroom I can rent for the next few years (Vancouver) while all hell breaks loose. I’m amazed at the selection available, compared with a couple years ago when I looked. What a difference. Maybe wait till spring to find an even better deal.
Re/Max said Wednesday that housing supply is drying up relative to the number of people looking to buy,”
what city was this in? can’t be mine…. I could stand on the corner, throw a rock north and hit 4 for sale signs, west i would hit 2, east there is 1 (then long throw hit 2 more) and south is 1 other. give a 4 block radius there has to also be 6 vacant houses for rent…
Garth, where did you get the ratio number for Canada as being 5.2 ?
In the latest Demographia survey, they say that the median ratio for canada is 3.7. The other numbers for Toronto, 5.7 and Vancouver, 9.3. are correct, as they are the same as the demographia numbers.
Average CREA national price divided by average StatsCan family income. — Garth
Re: #7 Nanook of North York
I respect your opinion on why there are so little listings, Nanook. But I’m afraid most people don’t only look at closing costs when people are deciding when to sell.
They are looking at one thing: capital gains. They think to themselves: ” is this a good time to sell?” They look at the past numbers that are published and see prices are way up and STILL going up!
Mr. and Mrs. Smith figure “why the hell would i sell now?? I just have to wait a year and i could sell for 10% higher than today’s price!!”
This is what causes the drop in listings just before the crescendo and market top.
Think about it like a stock. If it’s price is going up and has been going up for the last 9 months and still looks like its going up some more why would you sell? It’s greed, greed and more greed. They aren’t thinking rationally because they’ve been fed the real-estate lies that the worst case scenario is that prices will probably just flatten if the prices STOP growing. The common person does not perform a technical analysis on trending future RE markets. They just ASSUME based on past performance or word of mouth. The result that there will be PENT UP sellers ready to list as soon as the market starts losing steam.
What happens when 100% of the PENT UP sellers decide to sell at that same flattening period? the price will drop sharply. This will then affect the speculators that rely on the consistent increases in house prices to fuel their positive cash flow. When the total cash flow goes to negative they will in turn have to reduce their exposure. It’s a domino effect that has a long way to go in markets like Toronto and Vancouver et al.
It’s the herd effect and it’s very real. It happens time and time again. If you haven’t read Garth’s book I highly recommend it even if only to help you understand human nature. It has all this other good stuff in it too but those parts definitely help understand WHY bubble markets form and how they pop.
I hope the “shortage” won’t continue when the H.S.T. hammers all the home builders buying supplies? Especially without the continuation with the HRTC.
The budget will sort it all out though, b/c we know Flaherty has it all under control.
Don’t forget the increase in energy cost too!
Well Folks, looks like its a choice between keeping the hot tub running or the morning latte from star bucks!
Yikes!! Tough one?
Always easier to go from a dime to a dollar, than a dollar to a dime…
“If I were F, I’d be pissed. Only a week after…”
Garth, what else can anyone expect?
What I am not getting is the grace period that F & Co have given the RE industry to chill. The same mistake about announcing 35/5 about 3 months before the D-day led to an unnecessary upswing in RE prices. If I were F, I would start the press conference with words “Effective immediately, …”.
#2 CoB,
I agree. Listings are going to surge. I hear many people in Vancouver listing properties because they know this may be the best time for years.
Buckle up – 7 weeks to go.
Garth, Re/Max is just trying to run their 3 tonne Cadillac a little further down the road on the remaining fumes of real estate hysteria. Chances are half their Realtorbots will be gassed in a year. The Competition Bureau will take Re/Max et al. out behind the woodshed for the mother of all whoopings and it won’t be pretty for PNL Statements (profit & loss).
another re max buffoon on bnn today– i think this might be his last interview that he’s allowed to do
-didnt seem to know how much the GST is and when asked how much it would add to an average 400k house he states 10k to 20k (i think BC has a 525k ceiling before it kicks in)
-also windsor is in a tough situation–too many houses for sale he says
http://watchbnn.ca/clip#269678
also http://watchbnn.ca/clip#269570
and http://watchbnn.ca/clip#269574
these clips are the resident economist “bankers” pushing the housing market
one of them actually says that it would be a “crime” if people didn’t take advantage of the low interest rates and jump in.
It’s a very perplexing situation for anyone even remotely interested in economics. I mean why would such an extreme bubble in the West be so ignored and played down by both Industry specialists and government financial experts, these are smart men and if I can see what’s going on then there is no way on Earth that they don’t know the risks they are taking by pleading ignorance to something so crystal clear – a massive debt and housing bubble.
I understand that current economic policy is mainly geared to keep the East in as strong of a position as possible, regardless of what people say Ontario is the Industrial / Manufacturing capital of Canada and it’s economic failure would damage Canada immeasurably. Compared to Vancouver and Victoria housing in Ontario is still relatively affordable based on average incomes there, yes I know it is classed as unaffordable based on a recent survey but I am comparing it to the West of Canada not the rest of the planet.
Now, what interests me is why Canada’s current economic policies mirror the US and UK so closely, you know bank bailouts, non existent interest rates and QE etc., the US and UK saw (and are still seeing) much worse economies than Canada’s and both countries went through a fairly hard recession involving credit contraction and a real risk of a deflationary crash, this dictated their current emergency policies and they appear to have worked as well as could be expected under the circumstances. Canada had nowhere near the meltdown that other countries saw but followed their lead with the same economic measures. So Garth and blog dogs, has Canada set itself up for financial armageddon by implementing economic policies that were designed by other countries to rectify an event there in order to prevent it happening here? If this is the case (which it is by the way) then there are no more tools in the toolbox when the Government eventually requires them, if Canada crashes then Gen X, Y and Zed will be witness to the biggest crash in Canadian financial history! Now you know why the Canadian Government is treading so carefully, your welcome
Don’t you need to get bitten by a dog to become afraid of one? Canada never got bitten but is clearly wearing the bandage while still playing with the dog!
Thoughts?
The thing I can’t figure out is where all these new home buyers come from. I know the population is increasing, but at a slow rate. I also know that developers collude with town/city counsels to limit the supply of new lots. But I also know that they keep building, and that the number of new condos in the pipeline is impressive. Is everybody getting divorced and needing 2 houses??? I don’t know. It seems not to add up.
#6 Will
My parents are Dutch, and I love what the Dutch have done with their underwater delta. It’s a nice, very European place. Although I liked the beaches better before cameras in phones. But the fact is they are going “Greek” too. More conservative attire on the beach and irresolvable government finances, no printing press like the US because they are stuck to the Euro.
Iceland was the starter’s gun. The playbook from here forward is government default where the currency cannot be devalued, and devaluation where it can.
And there is no help from the lecherous government employees. In Greece they have practically shut the place down protesting that they don’t have to sacrifice anything, even as their country slides into oblivion. The Greeks somehow think that German retirement should be moved from 67 to 69 in order to protect their retirement at 60. Watch for this “Union” to fall apart.
But we have are own unions, our own problems, and so does just about everyone else.
Look folks, all hell is going to break loose. The amount of money people expect from their governments is far beyond the ability of those governments to raise the money. Default or depreciation from here on in.
Interactive chart: Greater Vancouver sales 23.5 per cent decline in January 2010, listings up, sales down
http://canadabubble.com/charts/439-greater-vancouver-sales-2007-2010.html
I absolutely detest the term “affordability”. Its use by the RE industry is a great example of their pitching of debt as something merely to be “serviced” but never to be paid off.
Relax (Garth) Don’t Do It (Garth &) Frankie Goes To Hollywood — great song!
“The experts said . . .” — Well, use their nuts to stuff their cheeks with, as there nuthin’ but pure BS coming out. Experts on what? Legoland?
Sheeples all over are falling into the traps laid for them by (un)suspecting realtors. No matter, as we are all here to learn from our mistakes.
——
Interesting, because if something unexpectedly big happens — another 9-11 — then one can refer back to this link which gives the percentage of memory retention.
The preceding leads to Harper’s possible proroguing of Parliament (time out for good behavior), ‘coz he’s up to his neck in this. 6:14 clip (preview) of what may eventually happen in the US, possibly this year. Note the name George Soros pops up just prior to the four-minute mark.
There are some reports that nearly a fifth of Americans are jobless and another 20 million have lost their homes and are in the street, which parallels what Garth writes in this post.
Should be added to the above.
Wealth is being sucked dry from the soon-to-be former middle class, then passed over to the wealthy, at a quick rate of speed.
Guess that Citibank’s seven day withdrawal notice for all customers wanting to end their accounts their is included with this. Withdrawing from the banks.
Treasuries
Those media releases by industry hacks represent whistling by the grave yard at dusk. By all accounts the US housing correction will run until about 2014 and the Canadian housing market correction barely has peach fuzz and pubic hair at this point. Recessionary job losses and higher interest rates will purge the market of those witless mullets wildly over bidding on multiple offers for aging bungalows and leaky condos.
The innumerate real estate industry dunces actually have the audacity to use the word “fundamentals” no less. Home prices doubling in three years is great fundamentals…sure it is! Good riddance to an industry that sucked the last bits of marrow out of what used to be called the middle class in this country.
From the other side of the pond…
HONG KONG (MarketWatch) — Australia’s seemingly bulletproof economy could soon face fallout from high debt levels and purportedly misguided policies designed to pump up asset prices, according to an outspoken skeptic of the nation’s housing boom.
Economist Steve Keen of the University of Western Sydney, who claims to have accurately foreseen the global financial crisis, said he’s been dismayed by what he sees as a growing nationwide housing bubble stoked by government efforts to forestall economic pain.
Keen points to a first-time homebuyer subsidy program, various other stimulus programs, and a 4-percentage-point reduction in interest rates — policies introduced in the wake of the 2008 crash and which he termed “The Boost” — as having helped fueled a new housing boom and a 6% rise in mortgage debt last year.
Hey, when do we get our FTB credit???
The debt-to-income ratio in Australia is 156% the last I checked. I wonder who will tank first.
Garth, so if we follow suit from the americans its should be really bad in 2012 the housing market?
Shane
Re/Lax…
Every/thing will be al/right!
NEW YORK (CNNMoney.com) — Despite signs that the real estate market might be lurching forward, prices are expected to fall further this year and next.
The average home price in the United States will fall by about 6% by September 2011, according to Fiserv, a division of Moody’s Economy.com. And that’s after plunging more than 27% in the past three years.
and what about Canada?
US interest rates are beginning to rise. The US Federal Reserve is in a panic mode since its latest US Treasury Auction tanked last week. Around the world, buyers of US treasuries are beginning to avoid the purchase of 30-year bonds. Foreign governments and investors bought just 28.5% of the bonds sold last week, compared to a ten-auction average of 43.2%. Prices slumped as a result and US Federal Reserve had little choice but to raise the discount rate charged to banks by .25%. This is the first rise since 2006….and at a time when the US economy is still in a fragile state. In January, China dumped more US bonds than in any month in history since this stat has been tracked (i.e. 2000). Hold on to your hats kiddies!
The latest announcement from Bernacke is nothing more than government ‘double speak’…trying to hide reality by saying something that directly contradicts the actions that were actually taken. The Fed raised rates because it had to because the US Treasury auctions of US debt instruments are tanking. Without higher yields the US cannot get the cash it needs to sustain operations. Economics 101. Never pay any attention to what government officials of any stripe say….WATCH what they actually do to understand what is happening.
Other troubling news coming from the US…data released by the FDIC indicates that the number of banks on the ‘problem list’ in the US now stands at 702 at the end of December 2009, up from 522 at the end of December 2008. The number of banks in trouble in the US is now 1 out of every 11! 20 have already failed this year, a pace that far outstrips the failure rate in 2009. The only banks that are currently doing well are the ones which benefitted from billions of US government bailout money.
Where is the money going to come from to offset the next round of mortgage failures and foreclosures, anticipated to peak in late 2011 and early 2012? Without significantly higher interest rates foreign governments and investors won’t be buying US bonds.
Followers of the Elliott Wave Principle will see all of this as indications of a classic three wave decline pattern with the recent run up in stock markets as a Wave 2 example. That means that we are only 2/3 of the way through the decline period. Wave 3 is most likely on the way, and should bring with it a decline in the stock markets to levels BENEATH the lows experienced back in March 2009.
With a sovereign debt crisis spreading in Europe (Greence, Portugal, Spain and Ireland) and the US Federal debt auctions clearly in trouble it is clear that we are far from being out of the economic woods. Tax hikes, spending cuts, and higher interest rates are the only tools that governments have at their disposal to deal with the underlying fundamental problems.
As Wave 3 of the Elliott Wave Principle hits, US stocks (and probably Canadian stocks as our economies are so tightly linked) are likely to go into a choppy pattern of decline for the next 3 years as the fundamental problems of government deficits, mountains of consumer debt, and chronic unemployment will need to be addressed, before the economy can right itself and real recovery can begin. By the way….the Elliott Wave Principle defines recovery in 5 distinct waves….and it will take some time for North America to get out of this mess. 2012 is a decent bet for the early signs of recovery.
Garth has been writing about the underlying problems in the economy here for many, many months. Lots of naysayers on this blog. The tipping point on Wave 2 is near…probably no later than June/July of 2010. Watch for it and the ensuing panic that it brings. For those of you who have been patient and prudent…send a note of thanks to Garth.
Garth, your blog is addictive. I love your writing style, your humour, the straight to the point no nonsense dialog. You are an great writer and amazingly you can do it day-in and day-out.
I am reading this blog from NC with the hopes of moving back to Canada in the next year or so (to a suburb of Toronto). As you can imagine now would not be the time to sell a house down here and then buy one up there, so what happens with real estate up in Canada over the next few years is very important to me. Keep up this great blog/service!!
Elton Ash, Re/Max = Mr Lereah NOR pre-US crash
The similarities are astounding!
Lereah has produced four titles on real estate:
investing. His most recent book,
“All Real Estate is Local” was published by Doubleday in 2007.
His 2005 book
Are You Missing the Real Estate Boom?: -Why Home Values and Other Real Estate Investments Will Climb Through The End of The Decade—And How to Profit From Them was rereleased in February 2006 as Why the Real Estate Boom Will Not Bust—And How You Can Profit from It.
All Real Estate Is Local: What You Need to Know to Profit in Real Estate — in a Buyer’s and a Seller’s Market in 2007
Then, the astute forture teller departed with his tail between his legs!
#43 Cheese Greater Fool
I hear ya! I have been thinking that myself! The pain with be much greater in 4-5 years.
” The slobbering sycophantic media” Thanks for calling it like it is Garth. Great post! Keep them coming!
After a quick read I wondered why there hasn’t been a Class Action Lawsuit against any of the parties in the US that primed/pumped/pushed/flogged/hyped RE. Indeed in a country where people will sue for coffee that’s too hot, it would seem that some of those responsible for ‘blowing so much smoke’ should be called before a jury. Ideally Cape Coral would be a nice venue, but doubtful you’d find many unbiased/unaffected.
Want a sign of just how bad the economy must really be?
Yesterday I got junk mail from “Money Mart”. Not a flyer, a direct mailing, my name and address hand-written on the envelope.
I cashed a couple of cheques there a few years ago. I guess they want me to come back. Even offered cash back on my next transaction. LOL
I’m afraid that moral suasion from our economic mandarins is just far too little, far too late to save people from themselves and their real estate folly. Rest assured however that when the debacle is in full view of even the most deluded economic analysts and home debtors, the recriminations, hand wringing, teeth gnashing and cries for government to “do something” will be deafening.
Calgary listings have risen from 4900 at the end of January to 5800 this morning, or ~18% in 25 days, according to my latest MLS search with the following parameters:
Zones A-D, Inner City & Airdrie. Residential, Condo & Acreage.
I would expect roughly another 100 or so (3/25 x 900) listings before the end of the month if this continues, taking us to a 20% increase in listings in one (short) month.
Again, anybody know if this is normal?
#16 Tim,
Are you talking to yourself, or just motivating yourself.
The smell of the real market downturn is in the air finally, one which will be unstoppable even by papering over the problem once again.
Euro is set to fall off a clip, followed by the pound! Watch that USD now run up before it’s final demise.
HINT!
0.999 Fine Silver Bullion.
1,000 oz bar to store.
100 oz bar to trade and barter!
Today Denninger writes….
“”Echoing the kind of trades that nearly toppled the American International Group, the increasingly popular insurance against the risk of a Greek default is making it harder for Athens to raise the money it needs to pay its bills, according to traders and money managers…..
Now we get to repeat it, because we have refused to force these abusive derivatives out of the market.
Except this time, instead of destroying a few banks, we’re going to do nations, likely destroy the EU, perhaps destroy the Euro, and there’s a non-zero chance we get a war out of it before we’re all done too.
Congratulations CONgress. …..”"
…I posted the U.S. is out to bankrupt the world before it would ever let itself go BK…..and wars there would seem inevitable.
Eastern North America would not make for safe R E investment of any kind.
Garth, your 20% prediction of a World Depression could be low.
Nostradamus jr.
Rain: I don’t think it is correct to compare the US situation to Canada
You hope that it’s not correct.
The semi next door just went on the market FSBO, asking 900K (Toronto, Annex). Interestingly, for the past month one of the recently reno’d apartments (3 units) was for rent but no takers. My guess: cash flow miscalculation and get out while he still can.
#12 Bobby, #20 Dexter and #42 Poco,
Good Posts. I call this the cheerleader media and have posted about it before. It stems from the belief that the market is entirely built on confidence and opinion – fundamentals do not matter. Something is worth what you sell it for. We can all agree that on a temporary basis this is true however the problem is that in the long run economic fundamentals play a more important role – like when you need to sell the asset later.
The really insidious part is the MSM is so desperate for advertising revenue they tend to over book guests from the industry establishment. When have you ever seen a commentator ask the guest if they are personally buying or better yet if their bank will agree in advance to change the mortgage terms so they don’t miss this chance of a lifetime. Never. Such dreadful manipulation.
For all of you professional soccer players out there making $426k/year, some RRSP advice:
http://www.theglobeandmail.com/globe-investor/personal-finance/rrsp/whats-your-game-plan/article1479271/
Now I know what to do with my Nutella sponsorship dollars!
The whole thing makes me ill…I saw this ReMax guy on BNN yesterday…..a real winner. What makes me even more ill is how stupid people are to fall for it all. Why would one want to
“hurry” to beat the inevitable rate increases, HST, mortgage rule changes etc….when in 5 years when they go to renew, those same rates will be higher, their house value will be lower, and people who cannot buy because of the above will not be entering the market en masse like they are now.??!
The only thing that makes sense is the current ReMax sales campaign….that’s just good business agree with them or not.
Musings from Funcanuck on VI:
A practice of many corporations and also gov’ts–”if they want you badly enough” is to pay relocation costs such as realtor commissions and moving expenses.
Am seriously reconsidering moving to another beautiful VI city if my employer pays this–quite the bit of change. I would never willingly pay realtor’s suggested commission and don’t buy their arguments re: them being on par w/ lawyers and doctors,….
With the retiring boomers there is going to be a shortage of skilled, experienced managers (“experienced” being the key word). Those who can negotiate these things will take advantage of it.
I was hoping for the change in MLS via the competition issue–but that could easily be a year or two in the making (opening up MLS to buyers directly,….).
“Average CREA national price divided by average StatsCan family income. — Garth”
Speaking only as a stats geek, you shouldn’t really do the above (at least not without a statement or an adjustment). You have two different sets (one a population; the other a sub-set of home-owners) and once you start performing operations on the two sets you are potentially magnifying the difference. I suppose if the data you are comparing against in the end is generated in the same manner then you could compare the results, but if it’s not you may be looking at very different things. Love the blog by the way, I just am a bit anal on statistical analysis.
#30 nonymouse:
I really like that graphic of house prices (adjusted for inflation) over the past 400 yrs (http://www.huizenmarkt-zeepbel.nl/images/huizenprijzen_300jaar.jpg).
It would seem to demonstrate not only the short-term variability, but also long-term consistency of the cost of housing. The only caveat I see is that human population is exponentially increasing in only the past 50yrs or so. Surely, this will impact the future of owning land.
http://www.sustainablescale.org/images/uploaded/Population/populationgrowth.JPG
Garth,
Why would anyone want to spend 5.2 times their income to live in a city riddled with pollution and oppresive humidity and mind-numbing traffic? A city that has smog alerts because the air is so bad. A city where you can be stuck in traffic on the 401 for an hour in a daily commute? What’s the appeal?
Hey Tim,
The whole idea that Canadian’s won’t default on their mortgage means a little more than you think…
I think your missing the fact that people will be HOUSE BROKE, and as a result will not engage, (never mind indulge) in any other recreational spending.
The economy will suffer as a result, and anyone with a job in any of those service industries-ie. hmmm let me think here … B.C. find themselves at the tipping point.
BTW dont forget the H.S.T too…
Garth, what happens beginning July1st to the R E Markets after HST begins?
…We know first time buyers get squeezed, as new construction flounders, hence the rush for them to buy today.
Doesn’t it support the resell R E Market instead?
Might it squeeze “Rental rates” higher?
The jobs are in the cities in question.
govt services cannot be allowed to lessen in the cities where the jobs are…but will be lessened in urban locals where the population decreases.
Ottawa wants an 80 cent loonie so exports can be more competitive.
Ottawa will hurt any economy reliant on exports if it raises rates…Ontario is the leading manufacturing economy in Canada.
http://www.vancouver-real-estate-direct.com/HST/presale.html
Nostradamus jr.
#33 omg on 02.24.10 at 11:37 pm
Feb 24 – #133 JIM – Renters Pissing away money – Reality Check
IN most markets, prices have ONLY recovered to WHERE THEY WERE in mid 2008, or just above.
**************************************
Your not looking at the right data–
What needs to be feared–is the increase in mortgage debt–
Canada’s mortgage debt has grown by 132% in the past ten years. In the US it was only 110%.–
$1 in 2000 costs $1.19 in 2010–
So–Inflation only accounts for 14% of the total growth in Canadian mortgages–
Also important in the mortgage comparison to the US is–
Canadian’s earn on average $6000/yr less–
then US bag errrrr– Mortgage holders–
There is your RE froth–
The other 86% increase is what needs to be feared–
as unemployment rises–
From today’s BREAKFAST WITH DAVE
(daily newsletter from David Rosenberg – chief economist and strategist from Gluskin & Sheff)
Quote: “Many Canadian pundit sees the Bank of Canada lifting rates in the second half of the year and yet that would be a real break in the past because after sifting through three decades worth of data, I couldn’t find one time when the BoC led the Fed when it came to embarking on a fresh cycle of interest-rate hikes. If anything, the Bank tends to lag by anywhere from 1 to 5 months.
The same pundits who are calling for early BoC hikes, with all deference to the recent improvement in the economy, may be missing a few key items:
1. The Bank has a wide range around its growth forecast;
2. The Bank remains as concerned over the U.S. economic outlook as Bernanke and Yellen (and Canadian exports to the U.S.A. represent 18% of GDP, which is almost as much as the combined share of capex, commercial construction and housing).
3. The Bank is still worried about the Canadian dollar and the impact it is having on the manufacturing sector, which could be exacerbated by a widening in Canada-U.S. interest rate spreads (now at +45bps for 2-year bonds).
4. The extent to which Mr. Flaherty does the job of “tightening” in terms of fiscal policy when the federal budget is unveiled on March 4
What this means for the BoC is that the Bank will likely hold off raising rates since it has never led the Fed when it came to embarking on a fresh cycle of interest-rate hikes” (end of quote)
That would imply that interest rates would stay low for quite a while, incoraging RE prices to go higher unless comforted by more strict rules specifically designed for RE sector (not overall economy)
Glad I’m not in so many blogger’s situations re RE. Agree that young children don’t care whether they live in an apt. or a house. As long as they are loved, well fed and taken care of is all that matters. In 1950 when we moved to P.Q., and there was next to no available housing, we actually lived in an old farmhouse for a year – no running water, but we 4 kids loved it. For my Mom not so much.
Re #160 Dan in Victoria on 02.24.10 at 10:19 pm
Post#153 Ret. yesterday. Agree. It’s amazing how much (actually little) people will sell “used” stuff for. Years ago I’ve bought used appliances for next to nothing. When my hubby redid our kitchen in our old inexpensive townhouse we ‘dumpter’ dived at Ikea. They would put pallets of stuff (fiber board?) out. We asked if we could take it. Sure. Hubby used that as the core. That stuff sells for a fair $ today. Our kitchen reno helped sell the place. Next door neighbour had an old Indeset (sp?) Italian made dishwasher (all stainless inside) that went on the fritz and couldn’t find a part for it. Original sold by our power co but they stopped selling them. Asked hubby if he wanted it. Yep. He found a part costing a few bucks and we sold it with the house. Worked great. Mind you, we never heard the end of it from the neighbours. Hubby is a ‘great’ barterer and buyer, but not the greatest ‘seller’.
P.S. to my last comment to Dan who about a month or so ago chastized us for putting up cameras in the basement to catch those mice. Those were freebie cameras! And he caught a few. As he’s in IT he likes doing that sort of thing.
Canadian banks only require appraisals on 23 percent of their mortgages. The rest are done by computer programmes. That percentage is expected to drop to 5 percent in the next five years.
I would expect the banks to take the next logical step and outsource the data entry to India or China.
Re/Max has always played fast and loose with the facts and/or rules when it’s convenient. The real estate landscape varies widely from city to city. I spoke last week with colleagues from across Ontario. The hottest market appears to be Toronto with strong markets in Ottawa and Kitchener-Waterloo. Areas like London, Woodstock, Cambridge and Barrie have deluded sellers waiting for peak prices to magically reappear.
RE/max propaganda is weak. The FACT is listing are increasing while home stay on the market. Homes are not selling and this spring will mark the start of canada’s housing crash. No amount of propaganda will change that.
Unrelated Question:
If you have, for example, $200,000 in your RRSP, $200,000 in non-registered investments and already paid off everything on your first home,
Can you then buy a house cash, using your 200K investment,
Get a mortgage to put money back in that investment so the mortgage is tax deductible…
BUT use your own RRSP (self-directed) to hold the mortgage itself?
You can, but lose the tax-deductibility. — Garth
Boomers listen and do absorb,
you are the problem, you did gorge,
the debt you made, is now a rage,
pay the piper, it must be paid.
You did worship, the god of mammon,
and like a fish, we’re all now salmon,
following, a god of lies,
in histories grave, we all now lie.
Don’t you see, the horizons cloud,
moving faster, towards the crowd,
children crying, going hungry,
millions suffering, tents and sundry.
You said that we, could have it all,
debt to the sky, ahead of the fall,
But thats ok, they said to us,
you are fine, just do trust us.
Now we’re not Congress, no we’re not,
debts to the moon, we go to pot,
they say to all, it’ll be ok,
clouds do gather, not here today.
A hurricane gathers, around the land,
generation zero, does try to stand,
what it means, they just don’t know,
filled your minds, all full of glow.
You went to class, and they did do,
a criminal act, they said to you,
that debts can grow, unto the sky,
a trick they pulled, upon your minds.
Cycles of history, they do flow,
unto the minds of men, you know,
they deceive and they do fool,
we end up in mud, and left with grool.
The good times of credit, do not last,
after the good, does come the fast.
its different this time, they did proclaim,
we knew better, but went insane.
We the boomers, created the fall,
boomers must change, one and all,
we must find, a life without sin,
of he who dies, with the most toys wins.
I’ve sold 2 houses in Saskatoon recently and am heading to the lawyers now to sign off on the sale of my 3rd and last residential investment property.
Yesterday I secured the purchase of a commercial/retail building at $50/sf that can serve me in many ways over the long term: office for my business, commercial income property, potential capital gains if I sell in 10 – 15 years once the area turnaround is finished.
Garth, am I crazy to consider commercial property at this point? Lease renewals are squeezing people out of downtown and prime areas, bringing them to my doorstep looking for affordable rents (which this is). While I agree residential will take a kicking in the short term, aren’t commercial property and lease rates somewhat independant? Seems the supply/demand of housing is in no way correlated to commercial space.
Straight from Rosenberg’s newsletter:
“BERNANKE SOUNDS A “DOVISH” TONE … WHAT THIS ALL MEANS FOR THE BANK OF CANADA
Chairman Bernanke’s testimony strongly suggested that the Fed does not have an itchy finger in terms of doing anything on the funds rate front for the foreseeable future. He reiterated that rates will remain “exceptionally low” and despite Mr. Hoenig’s dissent at the last meeting, Bernanke repeated the words “for an extended period”. He sees inflation as remaining “subdued” for years, not months or quarters, and even with the base-case view of a sustainable recovery, the unemployment rate outlook is “tilted to the upside”. This is key since the Fed, as a rule, does not begin to tinker with rates until the unemployment rate is down one percentage point from the recession peak. That could be well into next year and many Fed watchers I respect do not see a move until some time in 2011.
Many Canadian pundit sees the Bank of Canada lifting rates in the second half of the year and yet that would be a real break in the past because after sifting through three decades worth of data, I couldn’t find one time when the BoC led the Fed when it came to embarking on a fresh cycle of interest-rate hikes. If anything, the Bank tends to lag by anywhere from 1 to 5 months.”
There is no urge to raise rates, especially if the US does not. Would Carney really want an above-par loonie on his conscience?
I guess a more compelling question would be: does he even have one?
# 38 Throwstones.
The HST will be good for service contractors . They can now write off pst as well as gst. It will be bad for the rest though.
Just got the new Sales pitch from the Feds reasoning why we are (and will be) okay:
Canada’s deficit is only 3% of GDP. 1% after the economic action plan is finished (2011)
USA is running at about 10% of GDP
UK at about 12%
#55 C.T.O.,
Yes, my fav is the “All Real Estate is Local” book. Tell that to people in Dubai. It is one of the cornerstones of the B.C. Bull horn arguments. Vancouver is “World Class” so our RE market can defy international or national prices. Just read Nostradumbass here on the site every day. It is his positioning statement. It is not only wrong headed but dangerous to think so.
Markets are international, national and local in character. The price of homes in the U.S. matters to us as does potential sovereign default in Greece. Since pretty much all economic news globally is bad these days we cannot hide from it in a bubble for long.
#19 Mr.M
Morton Shulman always said never pay more than 3 times the husband’s gross yearly salary for a home.
Behold the future for jobs training; in the new economy:
http://www.good.is/post/detroit-high-schools-teach-how-to-work-at-walmart/?gt1=48001
A world-class newspaper covers Vancouver’s Olympic and RE and is not particularly encouraging:
The New York Times – “The real estate development industry, unusually powerful in Vancouver, provided the city with an Olympic Village plan that ultimately was too good to be true.”… “What has Vancouver to offer other than its nice mountains and vastly overpriced real estate?”
Excerpts at VREAA:
http://wp.me/pcq1o-xI
NYT link:
A $1 Billion Hangover From an Olympic Party
http://www.nytimes.com/2010/02/25/sports/olympics/25vancouver.html
#92 VREAA,
Thanks for posting these. Many of us have been saying this for a long time.
I am really, really enjoying the Olympics. We have been lucky enough to get to some events. I am a bit disapointed in how difficult it is to get into most of the open venues but the energy is tremendous. However I embrace it with the full knowledge that someone still has to pay for this potlatch – namely us.
The economic bill is just part of the story. The underlying economy here remains very weak and the end of the Olympic stimulus will expose how bad.
Our company just advertised for a position and the flood of resumes was unbelievable. It is tough out there and going to get tougher.
Once the hang-over ends and people realize the games did not create a sustainable bounce in themselves I expect the mood to get pretty gloomy.
It is time for us to get serious about sustainable job creation and long term economic planning. Perhaps the best part of the legacy here will be an end to the short sideness of the past. Or perhaps I am just being overly optimistic and naive!
#91 OttawaMike,
That is just unbelievable. High school students being trained to work at Wal Mart as job creation. I don’t know where to begin. Might as well teach them to row so they can man a slave ship.
On a positive note – and we need one – I just finished reading Seth Godin’s new book “Lynchpin” (after Garth’s of course!). It is an excellent book for people thinking about the skills needed for the new economy. It is very positive and enlightening. Please read it instead of training to work as a WalMart zombie.
WTO stated that in 2009 had a 12 per cent drop
Amid vast government deficits, “intolerably high” unemployment that the International Labour Organisation estimates has hit 200 million people worldwide – 20 million of whom have lost their jobs since the crisis began on Wall Street.
Bernanke noted that the recession continues to abate, but not when it comes to the job market, which “has been hit especially hard,” he said.
=====
The turning worm?
“Foreign workers are good but too many foreign workers growing at too fast a rate is no good for the economy because it dilutes our focus on productivity.”
We’re not against foreign workers,” Lim Swee Say, a government minister and secretary-general of the National Trades Union Congress, said at a Feb. 1 media briefing. “But just like drinking wine, wine is good but too much wine is bad. Foreign workers are good but too many foreign workers growing at too fast a rate is no good for the economy because it dilutes our focus on productivity.”
#87 Darryl,
I too am trying to see the ‘Harmony’ in this TAX.
But I’m afraid a policy that does not benefit the majority will enevitably be a failure.
Unless of course, the majority means government.
re #26 RAIN
I have family in the States who a few years back used your exact same supply reasoning in explaining why their property values couldn’t go down. It will be difficult to see the oversupply in Canadian cities until later this year. Some of the pivotal points will include negative cashflow, over-leveraged investors selling units (due to falling rents/prices), average persons per household shooting higher due to job/investment loss, and all the multi’s (& SFH) started in the last few years coming to completion (tens of thousands of units are still completing in US cities that were started around their peak). I’ve been warning friends with multiple units in Vancouver for 6 months now that their selling window will close midway 2010 after all the global stimulus wears off and bond investors start forcing rates slightly higher (default risk premium). Fixed rates shouldn’t rise too much in Canada unless contagion from Eurozone spreads (real possibility). Rates are one of the biggest investor misunderstandings right now. Real rates are actually presently too high to blow another bubble big enough to reflate world assets. The problem is most of the advanced world can’t go any lower, we’re zero-bound. It seems counter-intuitive, but it’s been dubbed a liquidity trap. Deflation is a far bigger threat next couple years than inflation. There’s been many a study on the aftermath of financial crises (google it) – mind you, none that have coincided with the bursting of such a massive credit bubble. Anyway, the key takeaway is they have long drawn out effects on all assets classes. Trust me, Canada will soon realise we’re not so different here. We’ve only briefly benefitted from the timing of the ‘big fish’ stimulating. With 60% of the world’s GDP (US, Euro, Japan) already stagnating again and soon to be double-dipping – we’re going to feel it.
I have friends scrambling to get a house for 750 while they can ‘still afford it’ I advised them to also buy a condo for their 10yr old. Because by the time he graduates from college, a 1bedroom downtown toronto condo @300k today will be selling for 2.67M.This is guaranteed because house prices never go down! Of course his salary will ony be 42% higher than todays graduates. Even of the growth rate drops to HALF what it was last year, the 300k starter unit will set him back 941k.
Now they are worried, and looking into rental properties, so the kids have somewhere to live…*sigh*
R1200C.
3% deficit? excuse me…
3% of what, GDP?
The oficial government deficit (provincial and federal) is around 100 B (Federal government 50-60, Ontario, 25 and counting…), municipal governments not included. Is this 3%? No, GDP is 1.3 Trillion, 100 B is 7.7 percents of GDP. (again municipal governments not included).
How about CHMC that adds 120-150 B of insured morgages per year mortgages?(total of 600 B so far…) Well my friend you are looking at at leats 60-70 B of these 120-150 B as a collateral, this adds another 4 percents of GDP, we are running at effective deficit of 13-15 % of GDP per year (municipal govenmnets included).
“The Pakistani elite benefit from the sustained illiteracy of the Pakistani people.”
Where did that education money go?
Shakespeare 1592: “The smallest worm will turn being trodden on, And doves will peck in safeguard of their brood.”
http://www.pbs.org/frontlineworld/stories/pakistan901/
ahh the POWER of the internet!!!
OUR BANKS AND POLITICIANS MIGHT AS WELL COME CLEAN TOO!!
MAYBE ROBIN HOOD WILL GET THEM TOO!
I WOULD BET THEIR IS’NT A SINGLE PERSON WHO POST’S HERE THAT WOULD’NT WANT OPEN ACCESS TO THE BACK ROOMS OF OTTAWA!
ESPECIALLY WHEN CARNEY AND THE BIG 6 SIX DOWN FOR A CHAT.
http://news.bbc.co.uk/2/hi/technology/8533641.stm
NOT ONE OF YOU WOULD DENY THE OPPORTUNITY TO SEE THE FACTS.
WE NEED A ROBIN HOOD TOO.
http://news.bbc.co.uk/2/hi/technology/8533641.stm
POL-CAN I love you man. In an economics kind of way.
Everyone who has not read it should read post # 105 in prior thread about Hyman Minsky. The ‘Minsky Moment’ is when the herd realizes they have been left holding the bag, and they all try to sell at once. Happens at the end of every Bubble.
I know, I know, in Canada “It’s Different Here/This Time!”. Real estate Bulls should get that tattooed on their arm.
Greece being pushed to the edge today, $21 Billion Euros of “off-balance sheet debt” discovered in the last 2 weeks or so. You know, it’s the debt you don’t count but you have to pay it anyway. The invisible debt to Greeks. How much there is, no one can say. I’m sure that will end well.
Stories about capital flight from Greece and Europe in general. Pressures Greek Banks some more, just what they needed right now.
hey, let’s send this one to Re/Max as our reply:
“Watch Out for that Home Listing Agent Hanging from the Shower Head”
“If you absolutely have to buy a home, make sure that you pick up one of those once-in-a-lifetime deals where you are taking it off a bank, or out of foreclosure, at 30% below the appraised value. I know these deals are happening. Buy it because you need a place to live, not an investment, and don’t count on selling it for a decent profit this decade. And also don’t expect to get the first born child you are putting up for collateral back until they are a teenager.”
He’s talking about the US real estate market 4 years into their bust, or as we call it in Canada, the future.
” Add a real unemployment rate of 17% to the 25% who have negative home equity, and who is left to buy houses? Only those who are bribed. Graduating from the negative equity city the negative equity state. Net baby boomer demand for housing is shrinking by tens of millions of square feet per year.
Re: #7 Nanook of North York
You asked what do you get for the LTT? Well, you get the City of Toronto and Province of Ontario services.
Someone has to pay for them. We have huge and unsustainable deficits at the Provincial and Municipal level. Seems to me that if someone can afford to pay $800k for a 20×120′ housing plot and house, then they can afford 2.5% of that for the city and province in which they live. $20k spread over 10 years is not so much, surely?
This link might turn Garth to stone but DR. EDWIN VIEIRA is a constitutional scholar and talks about how money works. Watch the video about half way down the page. It will explain to people why the world is in such a financial mess. Anyone interested in cutting through the fog will find this very good.
http://www.runtogold.com/2009/07/pieces-of-eight/
27 spaceman Thu, Feb 25, 2010 | 12:49 pm “The spring housing market in Canada will likely see more heated bidding wars as an active January led to a steep drop in active listings in most parts of the country, a new report said Wednesday.”
January in Victoria, 127 listings (SFH and town Houses)
Feb 25 196 listings… that is up 54%… I am seeing on average 8 new listings every day… listings are going ballistic in Vic…
#94
((That is just unbelievable. High school students being trained to work at Wal Mart as job creation. I don’t know where to begin. Might as well teach them to row so they can man a slave ship.))
that’s what’s wrong with our society … a bunch of snots sneering and looking down their now at an honest day’s work … former generations who were in dire straits were glad and grateful to take any job .. as are people today in the developing nations .. that’s why industries move there … then the snots whine about that .. there’s just no pleasing some people
a would rather see a hooded robin than so called legal vultures
Many proposals to restructure the international finance system are similar to American bankruptcy laws. The IMF proposed a Sovereign Debt Restructuring Mechanism (SDRM).
========================
A vulture fund is a fund or investment company that purchases debt claims as a secondary lender. This means that vulture funds are not primary lenders, but rather are entities that have purchased the debt from some other source, such as a bank. Generally, these funds purchase debt involving highly distressed countries. The sellers of these debts usually are more than willing to rid themselves of these debts because many of these debts may soon come into default or face restructuring negotiations. Thus, the vulture funds purchase this debt as it is about to be written off. (Banks will write off loans as a loss if they believe that the borrower will no longer be able to repay the loans.) Then, the vultures sue the debtor or borrower for the full value of the debt, plus interest. The lawsuits occur in national courts, often in the United States, Paris, or Brussels. Through litigation and negotiation, vulture funds have been able to secure a payout greater than the cost of the vultures purchase.
============================
Vulture Funds awarded $20 million from Liberia in High Court
26 November 2009
The Republic of Liberia has been ordered to pay $20 million in the High Court in London today to two Vulture Funds, for a debt dating back to the 1970s.
Liberia – one of the poorest countries in the world (2) – had been taken to court by Hamsah Investments, registered to the British Virgin Islands, and Wall Capital Ltd, registered in the Cayman Islands, to recognise a US judgement from 2002 worth $18.4 million, plus accrued interest of over $2 million. The original loan, of $6 million, had been made to Liberia by US-based Chemical Bank in 1978. But the debt has been sold on so many times that there is no longer any record of what was paid at any point.
Mr Justice Burton, presiding, said: “The only issue raised is plainly a sad one, that Liberia is a poor country, and cannot afford it”. But he was forced to find against the country. The judgement means the Vulture Funds can now seize Liberian assets in the UK.
==========
“Since the vulture fund buys the loan from the creditor, not the debtor, the vulture fund can technically claim payment of the full amount, even if it paid only a fraction of the value,” explains Africa Action. Investment funds that pursue vulture activities often do so in great secrecy, by basing their operations in tax havens like the British Virgin Islands and litigating in European and U.S. courts, which they see consider more creditor-friendly and efficient. Moreover, some investment funds — known as hedge funds — are exempt from certain regulatory processes and can more easily target indebted countries…
Parliament to vote on Vulture Funds bill tomorrow
25th February
The Bill aims to restrict the activities of so-called ‘vulture funds’ – investment companies, often based off-shore, which buy up cheap poor country debts, and then sue for massive profits. It would impede the ability of vultures to recover debts through the British courts from countries which have had debt relief under the Heavily Indebted Poor Countries (HIPC) initiative.
http://us.oneworld.net/article/364800-anti-vulture-fund-legislation-introduced
http://www.jubileedebtcampaign.org.uk/Vulture%20Funds%20awarded%20$20%20million%20from%20Liberia%20in%20High%20Court+5239.twl
Vulture funds are legal but not ethical. Now there are calls to stop companies scavenging profit from the world’s poorest countries. adrienne margolis
http://www.ibanet.org/Article/Detail.aspx?ArticleUid=706e20b7-d800-4efd-a69d-ff1ec9efa5e2
Hi,
I am new to site and find the discussions regarding RE fascinating.
This might have been covered before in an earlier posting but I think that Canadians who have over extended financially have not fully examined all the consequences when the collapse does occur. Unlike some of our American counterparts, they just can’t walk away from the property if it is under water. Mortgages are recourse loans here and if you default lenders will come after you for everything you got, banks accounts, cars, wages, etc. There is a world of hurt that awaits the greater fool in Canada.
@6 the Dutch market is all but dead, have a friend who is trying to sell their property there, made a nice profit on it but had 3 serious offers and none of them could get financing!!!!!
BTW Garth thanks to your blog I talked my Nephew out of buying this spring, told him we bought our place in the last bubble no money down and spent 10 very hard years crawling out of the hole. He’s decided to wait and actually save up a downpayment and see what happens. Hopefully prices won’t double again before the bubble pops!
Based on a sepcific set of criteria, I track house sales and listings in the White Rock South Surrey area of BC on a 30 moving average basis. Listings are up by about 60% from November, and sales are down 40% over the same period. I suspect I would find similar stats in tracking other areas of the lower mainland.
I read this blog every couple of days, but most times don’t bother to post.
However, what I conclude from reading this blog is that the RE bulls that post to this blog are like most other RE bulls I meet in real life. That is, most are financially illiterate or have a vested interest in talking up their RE holdings. The more rational the reasons I provide for my thesis of a RE blow-up, the more irrational and illogical their arguments become.
I am going to enjoy immensely gloating openly in front of these fools, greater or not, but probably not as overtly as the RE bulls do now. I intend to be quite mean and it’s gonna be fun!
re # 108
Sorry, no profit till its sold and money is in hand.
They are only anticipating a profit at this juncture – until its sold and money collected, the profit is only potential.
#89 Junius
…Sir, you lose all credibility in your post when you need to personally insult your opponents view.
Nostradamus jr.
# 106 Evangeline
The complaint wasn’t about the status of Walmart jobs, but rather that this ‘training’ is pathetically labelled “job training”. What do you have to train a Wallyworld employee to do that anyone with a room temperature IQ wouldn’t already know how to do – a secret handshake?
Btw Evangeline, I bet you are just itching to get yourself a job at Walmart – be honest, we know its your DREAM JOB, isn’t it?
the Bad Developer Task Force for the law department
http://www.wbez.org/Content.aspx?audioID=40224
#96 throwstones
Thats correct . The HST will be good for a few businesses but poison to many individuals. I believe it will be a net loss to the overall economy at this time.
It should be obvious to everybody now that the policy makers and those that stand to benefit most from pumping an insane real estate market are not acting out of ignorance and incompetence but by manipulation and deception.
Their role in this hasn’t been reactive. Rather, it has pro-active in creating the global financial meltdown and real estate is one of the areas where the middle class is being separated from its wealth.
If it wasn’t the end of the middle class, the lady in the last posting wishing for four walls and a patch of grass to call her own wouldn’t be asking for much, but if she is in the bubble markets, she is asking for the moon because that where prices are.
#106 Evangeline,
If I came across as being snotty or looking down on people I do apologize. That was not my intention and what I believe.
I have held a number of service and labour jobs in my life and I place a high degree of value on an honest days work. My problem is not with the student or the job at Wal Mart if that is all that is available. My problem is with our society as a whole and our approach to work.
I take issue with a society that is training young people just to be cogs in the wheel instead of giving them real skills to help them stand on their own two feet and think for themselves. They should be learning skills at school that make them self reliant and being trained to run their own small businesses.
Instead they are being shaped for minimum wage and no way out jobs. Comply and consume and all will be taken care of for you. A society of sheep.
There are few companies more responsible (apart from the banks) for the state we are in than WalMart. They have destroyed local retail across North America, fueled suburbia and perfected out-sourcing. Please watch the movie – “The High Cost of Low Prices.”
The book I mentioned in that post – Seth Godin’s “Lynchpin” discusses these issues and how we have to work our way out of the commoditized approach to work – be a chef not a cook – in our approach to whatever we do. I would rather see those ideas taught then how to mark down prices with a staple gun.
#43 Cheese Greater Fool — Good post and I agree. There’s nothing anyone can do about it.
Depopulation is the main driving force behind all of this, but it had to start with an event.
Witness 9-11 and the following implementation of TSA and other stuff. After the present housing debacle nears its end, something will replace it and that is when the real ‘dumbing down’ will be greater. Your post is tied with . . .
#64 Nostradamus jr. — “. . . your 20% prediction of a World Depression could be low.”
Which is why the US, by hook or by crook will bankrupt the world. They have nothing left to lose any more; and
#101 throwstones — Several countries have brought in ‘net censorship / controls, to monitor what is going on and being said by bloggers.
I have no doubt that CSIS is among them.
Uh, did someone say more taxes & service fee and reduce services are coming? Higher prop tax, this and that, and this, anything else?
http://www.theglobeandmail.com/news/politics/air-travellers-face-extra-security-fees/article1481434/
>#64 Nostradamus jr. on 02.25.10 at 10:02 am
[snip]
>Garth, your 20% prediction of a World Depression could be low.
>Nostradamus jr.
There wont’ be a depression. A global-size war is coming to increase all kind of economic activities. Why is this ? Because everybody and his cats around the world are buying weapon and military spending like crazy. They wouldn’t be doing that if they aren’t getting reading to fight a war would they? Probably before 2015
For the last time…lol…rates won’t rise until January, 2012 or thereabouts. That’s when the mortgage resets in the US are completed. Until then, the Fed funds rate will be kept low and fed will continue to buy MBS.
Sometimes people just analyze too much!
“Royal Bank of Scotland (RBS) has announced losses for 2009 of £3.6bn ($5.5bn), after struggling with billions of pounds of bad loans.
Despite the losses, the bank is set to announce it will pay bonuses totalling £1.3bn to its staff.”
You can’t make this stuff up, RBS is 84% taxpayer owned after all the bailouts
Time for a taxpayer revolt in both the US and UK over all these bonus payments from bailed out banks, sadly it won’t happen, maybe the taxpayers enjoy the shafting!
Re: # 107. Master Chief
That’s worth repeating, see Garth’s Sept. 26, 2009 entry titled – Your Mortgage
thanks to people who are reporting their findings regarding listings and sales activity in their area. it is interesting to follow developments since we are now more aware what will happen then when we had “the scare” of fall 2008.
How about a little more coverage than the owe-lympics?
A HOUSE with the lights out?
http://network.nationalpost.com/NP/blogs/fpcomment/archive/2010/02/24/ontario-power-risk.aspx
Our future is just a short drive across the border to the US………our powers that be can preach till hell freezes over that things are different here BUT since confederation what happens there happens here! We depend on them,without them we would have been easy pickings for anyone…..when our economic crisis hit –our powers that be followed to the letter every remedy they adopted……right or wrong we are not immune we are small apples on a big tree…..the era of importance displayed by our elected officials carries about as much weight in the world picture as a “fart in a windstorm”
Sheeple, keep buying the homes, there will not be bubble bust. Sheeple’s incomes will rise 20% a year so the increase will be affordable.
NOT!!! Everything is so messed up right now that it’s unclear how disasterous it’s going to be.
As Garth’s book and blog says, it’s going to be a wild ride. Probably something unprecedented and will go into the history books.
Me, I’m staying put and will buy once the market corrects itself!
Fun times ahead. Buy now with 10% down and lose 40% when the market corrects. Man, that loss would drive me nuts!!!
Garth et al:
There are 2 people who are friends of mine that sell RE, and are reasonably successful. I had calls from both in the last couple of weeks looking or probing to see if I was going to sell soon. One of them said, that things are flying in GTA, not much stock either, and said sell now, before the HST etc bla bla bla…story. The both know I am outa work and they both want me to join the band wagon, so they can get another commission.
RE is heating up a bit here. When will this insanity end?
Hi Garth, FYI, link to an artical
Greenspan said that while the economy was in worse shape in the Great Depression, the recent financial crisis was potentially more harmful than that in the 1930s because “never had short-term credit literally withdrawn.”
http://www.infowars.com/greenspan-worst-financial-crisis-ever-including-the-great-depression/
Re: #7 Nanook of North York
You asked what do you get for the LTT? Well, you get the City of Toronto and Province of Ontario services.
Someone has to pay for them. We have huge and unsustainable deficits at the Provincial and Municipal level. Seems to me that if someone can afford to pay $800k for a 20×120′ housing plot and house, then they can afford 2.5% of that for the city and province in which they live. $20k spread over 10 years is not so much, surely?
>>>>>>>>>>>>>
Dave99, your argument is the same as David Miller’s ‘someone has to pay’, well , every homeowner uses services, so they should all pay, not just the 5% who buy a house. here we have a small minority subsidizing services used by all. All Toronto tax payers have by now figured out that Miller just can’t cut spending, he hasn’t got the guts to stand up to unions
Good Show tonight. Glad I made the time. Thanks.
Pretty sure I saw Larry Berman in the crowd too…
Hey Nostra Le Mad Vlad,
I know CSIS is monitoring.
But there is nothing they will be able to do about it.
The Kevin Mitnik’s of the world will be one step ahead.
Headline is good. Another reason why Harper prorogued Parliament.
Along with stuff happening faster, this.
Isn’t this one of many reasons why the US is so screwed up?
Dennis Miller asked about The Bilderberg Group (2:13 clip).
Real estate is doing nicely here! 4:11 clip.
Phase 3 starts. Didn’t even know the first two phases were over and done with!
The west will not be back for a few thousand years, because the cycles are changing.
Cdn. Monsanto? I wouldn’t doubt it!
Of course Canadian’s aren’t naive, they are just totally clueless to what is a true market correction. In early 80′s the first 15 -20 % was quite quick and at this time of the year.
RE agents will get caught off guard how many listing will hit the sheets when the first signs the prices are going down again at the supposed hot time of the year. Herd mentality can change much faster when house prices are worse than Nortel at $100. It’s called The Empty Pool Factor…. or is that Fool Factor.
71 Josh – try this table:
http://www12.statcan.gc.ca/census-recensement/2006/dp-pd/tbt/Rp-eng.cfm?LANG=E&APATH=3&DETAIL=0&DIM=0&FL=A&FREE=0&GC=0&GID=0&GK=0&GRP=1&PID=96272&PRID=0&PTYPE=88971,97154&S=0&SHOWALL=0&SUB=0&Temporal=2006&THEME=81&VID=0&VNAMEE=&VNAMEF=
Hope that fits in the blog window. Its statscan income data broken down into RE owners, owners with mortgages etc. Few years old now, but note that the median/average for all is about $52k/$65K while for owners with mortgage its $74K/$84K – significantly higher. Keep in mind the “3″ average mulitple is
historical. I’ve never seen anybody argue its based on
fundamentals.
83 Von – Not sure I agree with Garth. What is different with your example vs simply using your RRSP money for a mortgage then investing it without ever selling your house? I dont know why it wouldnt be treated like an
arms-length mortgage (interest now deductible).
#113 Nostradumbass,
You are not an opponent until you offer an opinion. The mere recital of endless jiborish is not an argument. It is a one chord polemic that does not serve the purpose of illumination or providing insight.
Your approach bothers me because I am a Vancouverite as well. I love Vancouver and the people of this city but we need to remove the blinders that we live in a utopia divorced from the rest of the world. It prevents us from moving beyond the myth.
You are not my opponent. You are just perpetuating a fiction that I am feel is deeply naive and dangerous.
Garth those price to income ratios should be doubled becauses it counts 2 incomes instead of one. Using 2 incomes to calculate home affordability is cheating and should be out lawed as a crime against humanity.
Do you know why Rockefeller sponsored womens lib long ago? I’ll tell you. It was a device by which incomes could be increased so that more taxes could be paid to governments that owed money to bankers and to decrease the birth rate and increase the price of real estate so that banks can lend even more money to support a real estate hyperinflation that either prevents family formation or lowers the birth rate by creating financial stresses that dictate a limit to the size of families. More financial crimes against humanity. Oh yes by having twice as many people working it means us guys can be paid half as much under threat of being fired and being replaced by someone willing to work for next to nothing.
For looters and plunderers to do their dirty work they must take over and or control the government and by political correctness overthrow society from the top down slowly but surely in order to succeed. The culmination of this work is close at hand. I am just guessing but I think the process was enabled as early as the mid 19th century after the 1837 rebellion when radicals sought to establish responsible government
in Canada. This would lead to increasing radicalism, masonic banker and lawyer power as well as the social activism needed to promote the sins of the 20thand 21st century. History proves that not only were the liberals not conservative but neither were the conservatives ,conservative. Politics was and still is a scam to support plunder rather than the regulation and defence of society. That is why the world as we know it is in trouble. The wrong kind of people are in charge.
Steven