After I finished speaking one night last week in Kitchener a petit blonde woman in the back of the crowd put up her hand and asked if I could help her. Close to tears, she said she had been devastated at the cost of getting out of a mortgage. She was utterly compelling. And yet I had little advice to offer.
Apparently the number of cases of people complaining to Ottawa’s banking ombudsman about breaking a mortgage has tripled. And F’s March 4th budget actually had one line in it about the need to come up with a standard penalty. So change may be in the air.
But for now, the bankers hold all the cards. Almost.
If you read your mortgage document (stop laughing), you will see that getting out of a home loan before the end of the term can be one hell of an expensive exercise. While most people think the standard penalty is equivalent to three monthly payments (which is bad enough), most lenders have the option of charging that, or an IRD, whichever is higher.
The IRD is the ‘interest rate differential’ between your existing mortgage rate and loan costs at the time you need to get out. So, for example, if you had a five-year 5% $400,000 mortgage with two years left on it, and wanted to grab a 3.5% fiver now before the BoC does its thing in a few months, expect to pay the difference – 1.5% – on the entire amount for the remainder of your term. For that, of course, you can buy a nice used minivan.
How can you get around this?
(a) Faint in the loan offer’s cubicle.
(b) Offer to borrow more money (this always works), or (a lot better)…
(c) Blend & extend. This simply means asking for a lower rate on your mortgage, but at the same time taking on a new, longer term. The rate you get may not be rock bottom, but it will definitely be an improvement.
And while you’re spending quality time in there, get signed up for a weekly-pay mortgage with accelerated amortization. By making the equivalent of an extra month’s payment a year, you can get this mortgage money off your back years earlier. Trust me. Totally worth it.
A Vancouver Special
It’s not often that I draw attention to a comment posted on this blog. Here’s an exception. Posted yesterday by a young woman in Vancouver.
I reprint it amid news that the number of listings in the city has taken a sharp turn higher, while national real estate sales have turned lower. The house-humpers say this is just an unintended consequence of the Olympics, but I wonder. At some point, every society in a bubble reaches a point of emotional meltdown, where logic loses to sheer desire. An asset becomes so coveted is consumes those who lust after it.
Thank the heavens, we still have new moms with balls.
I am a new mom and I am obsessed with owning a house on the westside of Vancouver, where I grew up. My husband is a realtor (an ethical, good one, for the record, not a slimy semi-retarded liar like most of them out there). We did a search for anything under a million dollars from Dunbar (very west) to Fraser street (east side). There were SIX LISTINGS. 5 were total dumps and the 6th was a super cute cottage 2 blocks west of the east border (that would have been considered by my circles as ‘ghetto town’ about 4 years ago). I would say 100 people viewed it yesterday (and it had been open the day before as well so I’m sure it was just as many people then). It will definitely go for over asking, probably a multiple offer situation. I’m pretty good at predicting these things, it’s on for $848K…I’ll bet it goes for $915K…I’ll post later to say if I was right.
Despite my stress and anxiety about getting ‘into’ the market, there was one listing that actually made me laugh. If you are from Vancouver you may know the term “Vancouver Special”. Vancouver Specials are homes that were built in the 70’s and 80’s and are cheaply built eye sores that are littered around Vancouver, mostly in the lower income neighbourhoods. Well, a “renovated” Vancouver Special went on the market last week for 1.5million dollars. They slapped some paint on it, put in a new kitchen, bathrooms and big deck on the back, but the house next door is the identical twin of the original house before reno’s and if you look at them side by side they have the exact same roofline, window placement, EVERYTHING but the paint. Sorry, you couldn’t pay me to live in a Vancouver Special, 2 blocks west of MAIN STREET, and for for 1.5 million??!!! That’s plain laughable. If it sells I’ll shake my head and move to Tucson.
It’s really ridiculous. I can’t understand where people are getting the money for these down payments and monthly payments. They can’t all be that stupid, can they?
I am stressing out about it so much. My brain tells me this is crazy, but my emotions are nagging at me that if we don’t ‘get in now’ we won’t get in at all. My husband isn’t stressed at all, he is very happy that we are renting and keeps telling me to be patient. Reading this blog helps me calm down…I really hope you are right, bring the bubble on!!!
158 comments ↓
wow, a realtor who is renting..that’s the first I’ve heard.
It’s so ridiculous that every time a house is mentioned in Van its a million+..are we talking dollars or peso’s? If that notion alone is not enough to convince someone to stay out of RE, then there is no hope for that person or persons ever in life.
I dont know how you do it Garth?
Convincing people of such blatantly in your face stupid ideas, and many still dont get it ..ie Thetruth.
“The house-humpers say this is just an unintended consequence of the Olympics, but I wonder. ”
All of the investors (4) suddenly listed their properties this last month. They all know each other (thus my management contract) yet not ONE listed during the 2009 downturn. I wonder…..
So do I Garth; for 8 years I have manged 14 condo properties in Vancouver, all by investors who are somewhat more well of then me!
That should be 2008 downturn!
Maybe it is starting to turn.
Just read this in the local paper. Canadas housing market showing signs of cooling.” The extent of the deterioration will depend on the speed that rates rise” http://www.timescolonist.com/business/Canadian+housing+market+shows+signs+cooling/2686067/story.html
I can’t understand why these people are stressing out about not buying a 850,000 dollar house that would literally cost 125,000 dollars to build? Do the math. Lets say mortgage rates climb to 7% in the coming years. 7% would still be historically low when you look at the history of mortgage rates. So that house that someone will buy for 850,000 will cost them 5,000 dollars a month at 7% just for the interest payments. This doesn’t even take into account the principal, the utilities, the property tax, the insurance, the maintenance costs.
You want to know who will be stressing out in the future? Not those people who were smart enough to not buy now, it will be the fools who actually bought. Every time they hear on the news that interest rates have gone up, they will get a sick feeling in their stomach knowing that their next payment will be hundreds of dollars a month more. Those that locked in will dread the day that their mortgages come up for renewal as many will have to renew at 2x possibly 3x or more than they are currently paying.
These ridiculously low, “emergency” level rates have lulled people into a state of stupidity. They are not seeing the big picture, they are only focused on the current month to month payments at today’s rock bottom rates. There will be many sleepless nights for those who have taken on so much debt solely based on historically low rates that have nowhere to go but up.
This is how bad it could get. If this doesn’t scare you out of overpaying today, nothing will. Mortgage rates have been below 6.5% for only a small fraction of history.
Canadian Historic mortgage rates:
http://www.mississauga4sale.com/images/mortgage-interest-rates-Canada-historically.jpg
EMOTIONS – EMOTIONS – EMOTIONS! Garth has said it at least 100x on this blog that RE values are based only on this along with teasers supplied by your Trusting PONZI government, realtors, media and family!
Neither one of your choices VAN or TUCSON to buy are viable! One is a pre burst and the other post with ugly written all over it.
Liquity not only provides opportunity to invest anytime but can move with you as NA erodes over the next few decades and other destinations provide both a happier and healthier life.
Onemorething….note the Realtor husband is renting…HINT…second, give him a break with the house looking…he’s doing the right thing already!
People in Vancouver have truly gone mad. And I thought they were crazy YEARS ago when prices were through the roof! Whoever thought the median cost of a SFH in the city would go to nearly $1million???
It’s gotta crash sometime…otherwise thank you very much, I will keep renting forever, because it’s sure a lot cheaper than buying a crappy Vancouver special!
RBC Sends Another Real Estate Pumper To BNN
http://watch.bnn.ca/#clip276480
BankSTERS… as in GANGSTERS … that’s what these people are… organized criminals. people that are allowed to counterfeit currency. what a scam. creating money out of thing air, and forcing someone to pay for 35 years.
what a scam job.
Another good story for whoever plans on making the future documentary about the great BC real estate crash of 2011.
Vancouver is in a classic phase 6 bubble sell off. The smart money is getting out and selling their properties to the Greater Fools. The stories of Asian hordes landing at the airport with suitcases of money continue to swirl around the city. Every rumour that favours Re prices rising and people being priced out forever spreads like a wild fire. Meanwhile the smart money is packing and getting out. As soon as the bubble euphoria burns itself out – and we are now close – it will all be over but the tears.
Ok first time buyers
Lets take a quick look from the street.
Blue paint, sealer? right hand side of the foundation, standing water there.
Looks like gate is attached to the house right hand side water penetration
Do you see any flashings around the doors and windows?
Upper window lower left, discoloration, look there for water damage. Go inside and push your fingernail into the window drywall return at that corner,or if its wood look for discoloration.
Hand rail left side stucco damage look for water problem.
Look at the deck in front of the upper slider. Standing water on a sloped deck. Usally when the plywood starts to go it “cups”
1.5 million think about it.
Funny you write this post of mortgage penalties Garth. I am selling our loft and asked my aunt, who’s a mortgage agent, if there were any penalties for stopping our mortgage earlier. This is verbatim what she wrote:
There It Is:
Is there a penalty for not fulfilling 2 years on the mortgage or ia a penalty for not fulfilling the whole term of the mortgage.
F’ing banks man always nickel and diming!
Aunt (mortgage broker in Ottawa):
Penalty is for paying it out anytime before the maturity date and thank goodness it’s variable…if it was fixed, the penalty would be the interest differential which could be in the 10 of thousands…a client just told me that (a Big Six Bank) was charging her 30,000.00 to get out of her 210,000.00 mortgage…you could have had a completely open mortgage but the rate would have been Prime plus instead of Prime minus so it would have cost you the same….
For what it’s worth, here’s my aunt’s opinion on the housing market going forward:
Might not be a bad idea to sell the condo…..right now it’s a sellers market here in Ottawa though I heard Toronto’s market is a bit softer…if you can turn a profit sell it and rent for a while and see what the market does…I can’t see it going down much…sales were up year across Canada and there are signs of recovery all across the country….I think rates will start moving up next year and go into the high 6′s or even 7s in next 5 years.
However as the condo is not the place you want to live in for the rest of your lives, selling (with a profit) might not be a bad idea…There will be a penalty to pay out the mortgage but it’s only 3 months….take your balance now, times your rate, divide by 12, times 3, and that’s your penalty. for example on a mortgage of 290,000 at your rate of 1.50 the penalty would be around 1,100.00…not bad..however you can always call XXX 1 111 111 1111 and get the exact quote as I don’t know what your balance is now.
Stay in touch…
#1 Igre
Not getting it, eh? The whole thing makes sense to me. Momentum with the backing of government (via policies) = Vancouver real estate!
Want to read what i mean… check my posts for the last 6 months. No need to repeat as I don’t feel the need to convince anyone anymore.
“While most people think the standard penalty is
equivalent to three monthly payments (which is bad
enough), most lenders have the option of charging that,
or an IRD, whichever is higher.”
I re-financed once when the original loan was CMHC backed (Yep, I admit it!) The bank tried to tell me IRD, but the document said 3 mo interest. Checked with lawyer buddy who confirmed all CMHC mortgages were 3 mo interest. Nice to know I got something for the premium. This was mid 90s.
Anybody confirm this is still the case? Check your mortgage document?
This just goes to show you how “not smart” Canadians are. We should all be changing the channel on this RE story and saying “Pfff…it’s just a rerun, this movie’s been playing in the US for years”
But no, we jump up and down and say “This is a NEW movie! Ours will end DIFFERENTLY than the one they made in the US! The evil villain gravity CAN be defeated once and for all!”
#7 Gord in Vancouver,
I actually didn’t find this guy too bad. I have seen much worse. His main conclusion is that affordability is tapped out in most major markets and will only get worse with HST and interest rates coming. He is arguing that it will be “less bad” than some people think but is not positive.
We won’t see him again.
#9 Jon,
Great BC RE Crash of 2010 to 2015 you mean.
For those of you wanting to give your delusional house-buying friends and family an excellent preview of things to come in Canada in the near future, this is by far the single best explanation of the cause (and aftermath) of the US house bubble I’ve ever heard:
http://www.thisamericanlife.org/radio-archives/episode/355/The-Giant-Pool-of-Money
wanna see a market in freefall?
wanna?
come on, do ya wanna?
Then check out the daily stats at http://www.yattermatters.com
Vancouverites love to list homes for sale. Buying – well, it appears they’re not quite as hot on that.
When I realize what kind of maddness has overtaken Vancouver I worry it might get worse here in “Tar Sands
Edmonton” where agents are calling for a price increase.
Co-workers keep saying we got the blue collar jobs here and it is better here. A few arguements hold some weight alberta has the third lowest unemployment in Canada. The homes here 370k not 950k. We have asians here too with suit cases full of money to by big chunks of black dirt why not some houses to boot.
Does the counties prices fall all together like the U.S., U.K. with little pockets of restiance or do we see Vancouver and Toronto tumble first and then the rest of us come tubmbling down with them?
I remeber that comment in Kitchener. I truly felt sad for the young lady.
I have a family friend that used to work in the finance industry as a FA both in the US and in Canada.
A bunch of us went to Vegas for another friends bachelor party and when it came time to rent the car, he took his time reading and reviewing the rental contract. Read over every line, every word. I thought it was weird asked him whats the deal with that?
He told me then (this is 3 years ago) that in all of his years in banking, he has only seen 4 people ever bother to read the prospects on investments or the fine print on mortgages. 4 people out of thousands if not 10 thousands actually read the fine print on their financial matters.
Told me that he has seen some wording on mortgage documents that he reviewed for his clients that where so restrictive in terms of penalties and fees that he couldnt beleive people signed into them. Human pyschology amazed him, he couldnt understand how people could sign the most important document in their life without at least reviewing it or having a profesional do it for them.
People on this blog, please, if you get a mortgage, buy mutal/index/etf funds, anything, review the documentation before you sign.
I have a hard enough time accepting house prices in the $500k range out here in the Fraser Valley. $1 mil plus for an older, smaller Vancouver house does not compute. Only when the dust settles will people finally realize how bloated this bubble became. That $1 mil house may only be worth $300k. I wouldn’t be entirely surprised. We’ll have a generation of people locked in to 35 year mortgages with a house that will not be worth more than its purchase value until 2025 (thanks to inflation, not appreciation).
#4 Dan in Victoria
Dan, from the article from your post:
Meanwhile, economists at Royal Bank of Canada on Monday released their latest housing-affordability index, and suggested it became slightly tougher for Canadians to own a home in the final months of 2009.
I think we solved the riddle on RBC’s slightly dropping their five year fixed.
Sending lambs to the slaughter. The banks damn well know what they’re doing and this just cements it.
“Quick dummies, get your utra-low interest rates and forget about that principle thingy-ma-bobber”.
Does anyone have the MLS listing for this $1.5 million Vancouver special?
Whoa girl – ease up on the East Van hate.
What do you mean there’s no such thing as “West side of Vancouver” citizenship. Boohoo.
On the other hand, Main street is getting a little tiresome what with all the lame hipsters trying so hard to look desperate and poor and strung out while sporting $5000 tattoos and hanging out all day drinking $3 lattees while the $1500 faux-cheap fixed gear bike sits out front in the rain.
Most people in the industry RESPECT Sprott Asset Management (Canadian Company) for their intuitive insight on Canadian Capital Market. Because of their independence, they are not beholden to the common groupthink the economists of the Big Six Banks have. After all, the Bix Six have their hands in the mortgage/securities underwriting/M&A piggy bank, so naturally they always see the economy as a glass half full. Because Sprott is not beholden to these interests, when they have a macro view, it should be heeded. They have a tremendous track record, including the dead on call of the secular bull market in gold in early 2000.
So when I saw this note they published last week, the hair stood up on my neck (note the ***):
..Servicing the housing boom propelled the financial sector into the US economy’s central economic driver, generating up to 41% of all corporate profits and making it the fastest growing sector of the economy.
In July 2005, Greenspan described certain real estate markets as “frothy” and recommended that the Federal Reserve rein in lending standards.
It was never done.
Again, in hindsight it’s very safe to argue that the Fed probably shouldn’t have lowered rates thirteen times between January 3, 2001 and June 25, 2003. It proved to be an extremely damaging policy.
Artificially low rates created a lending mania of enormous proportions which dragged consumers along for a debt-fueled buying orgy. It triggered a massive Ponzi scheme sustained by overleverage as the financial sector piled new mortgage financing schemes one atop one another
What happened next was more than just a market failure. It was a systemic meltdown. But it was a meltdown that happened so fast that it seems to have failed to burn into our collective memory.
Everyone remembers that we went into a severe recession in late 2008, but do they know the details of what actually transpired?
Tomorrow we will discuss the collapse of 2008.
***Then, later this week, we will discuss how the stage is being set for a Canadian collapse of historic and massive proportions.***
It’s the same as stock.
Insiders buying is positive.
When insider selling in large quantity, better be careful.
If realtors are renting, ops.
Hey Garth,
There is one more way to get out of your mortgage without paying the pre-payment penalty in dire situations where it cannot be afforded. A real estate lawyer can tell you how. It is a last resort, but it is possible. Might be good advice for the lady that was in tears.
The only reason I don’t say what it is here is because it might be used by someone who is not in dire need.
Also,
Borrowers should watch out for banks that calculate their IRD differently. For example, Bridgewater Bank last time I checked used a method that used the bond rate and added 50 bps to it instead of using the fixed rate. Because the fixed rate is priced off of the bond yield, and there is typically a 150 bps spread, it would mean that a borrower would have to pay a 100 bps premium in comparison to most other banks IRD. The IRD calculation should definitely be paid great attention when a client goes in to sign mortgage documents.
Toronto is not Vancouver. So Toronto shouldn’t see too much of a correction if compared to Vancouver. Then when you get outside of these big citys you will not see much of a drop at all. So if you are looking 45 mins outside of Toronto, whats the problem with buying now? Interest rates are lowest than ever, beat the HST and buy now.
Stop comparing all Canada to big city markets. Each market is a bit different. Look at Windsor, that market is in the shits but Toronto is humming along. Balance your investments and have some $$$$ in real estate. Renting is for losers! Get out there and buy! but buy SMART!!!
One of the tricks with mortgage penalties is that they go up as interest rates go down.
Say you locked in 5 years at oosted 5% and want to pay that out a couple months later when the posted 5 year rate is still 5%. You pay 3 months interest. That is the minimum
But say posted rates have fallen to 4% for the five year. Now you owe the interest differential of 1% for the remainder of the five years which is probably bigger than the 3 months minimum interest penalty. (Consider on a 5% mortage, 3 months penalty is 3/12 times 5 or “only” 1.25% or say $2500 on $200,000.) 1% penalty for 5 years is closer to 1% times 5 times 200,000 = $10,000.
Now say the five-year posted rate is 6% but you negotiate 4.5% and say anyone could do the same. Couple months later you decide to sell and you notice interest rates are unchanged. Great, you think, I will only have to pay the 3 months penalty because rates have not droped.
Wrong the Bank will calculate the penalty on the posted 6% rate and you owe 1.5% per year times the near five years remaining.
Don’t like it? Start your own bank or at least buy bank shares. Also next time don’t lock in if you might soon sell.
Heads!
http://www.theglobeandmail.com/report-on-business/influx-of-listings-set-to-cool-resale-housing-market/article1501516/
How do people dumb enough to pay these prices ever wind up with so much money?
Yale economist Robert Shiller writes in the NY Times,
“American mortgage institutions encourage people to take a leveraged position in the real estate market, which is quite risky because home prices can and do decline, as we have learned so painfully,”
“Leverage a risky investment 10 to 1 and you can expect trouble — and we have plenty of it today. More than 16 million homeowners owe more on their mortgages than their homes are worth.”
Canadians leveraging real estate purchases 10 to 1 or more would be wise to take note of Shiller’s warning.
haha… I live in Vancouver and know what this lady is talking about. In fact, I think I’ve seen that Vancouver special on my way to work. Having been in many multiple offer scenarios in Vancouver, it’s like boxing day everywhere.
I’m still renting, and rather move to a more affordable city than take on the risk of a leveraged investment on an asset that is at historical levels. Regardless if anything even happens, it’s not overly cautious to watch for a while as the world economies figure themselves out.
watch this at 16:37… Flaherty says straight out “we have weathered the financial storm without putting any tax payer money into the banks”
UMMMM wake up ass hole didn’t the banks recieve 85 million? double speak is great… they can’t even get a lie correct yet. some people knock CBC I can’t figure out why, that is one station that actualy seems to care and tell the other side or show it and let canadians use their brains to figure out the BS from the truth.
http://www.cbc.ca/video/#/News/TV_Shows/The_National/ID=1442022507
cheers
“…get signed up for a weekly-pay mortgage with accelerated amortization.”
I have an accelerated bi-weekly mortgage.
Will I benefit much to change the mortgage to accelerated “weekly” mortgage?
I asked the bank, and the mortgage rep told me it was a waste of time, and there is minimal if any difference between weekly and bi-weekly accelerated.
Is this true?
“It does not require a majority to prevail, but rather an irate, tireless minority keen to set brush fires in people’s minds.” — Samuel Adams
That is what the controlled m$m is for — to feed us drivel garbage for food, hoping we consume more and more of it, become hypnotized by it.
For instance, have any of you read this in the m$m? Possible terrorist attacks on the US leading to unexpected economic balderdash.
——
Bankers are Bonkers. Actually most are sheeple dressed in wolves’ clothing. Loan sharks, snakes etc. Plus they wear cute masks to go with their dominatrix outfits, complete with cat o’ nine tails (is this the reality of finance now?).
I like option ‘(c) Blend & extend’ the best, and hurry the payments up to every week. Forget the niceties of life — pay off mortgage while jobs are still hanging around.
——
Headline is right, but only because the cycles are changing, but it will be interesting to see how these two play out (if they run their course at roughly the same time). Global domination usually lasts for around 250 years, give or take.
Canadiens v. Leafs or global war?
Coronal mass ejection Wednesday, leading to more scientific what if’s, could be’s and maybe’s.
Note the sentence at the end: “The whole debt-money scam has got to go quickly, starting with our Federal Reserve, of which Goldman Sachs is an original holders of class A voting stock.” Clip is 7:57.
Has anyone noticed the munitions makers are raking in the profits, while other parts sink into obscurity? Invest in weapons manufacturers!
Look who has made the news again!
Never mind Greece, Spain, Latvia or Italy — this is spreading like wildfire!
It DOES look like “smart money is packing and getting out”!
For sale signs by the dozens…..very unusual in an area of east White Rock, …..beautiful large homes sitting on acreage, up for sale…… could hardly believe my eyes!
The End is Nigh!
I just don’t understand how RE in Vancouver makes sense. I rent in downtown Vancouver and if I were to (foolishly) buy a place, mortgage would EASILY be double what I pay in rent. And luckily, I make above the average income (which was recently reported in the neighborhood of $40K/year) Yet most friends/acquaintance/collegues I know own and think me foolish for not owning. I tell them that if I invested the difference between rent and mortgage, in 5, 10 whatever years, I would still be ahead by renting. I guess we’ll see who’s right, in the meantime, I’m not a slave to my mortgage and can still go out and enjoy life. Time will tell who’s right!
An unintended consequence of the Olympics, wtf does that mean?? Is that the same as saying “I am going to sue Air Canada for bad service because I had a hissy at the airport and the whole country knows about it and my hubby got a slap on the wrist for drunk driving and cocaine possession” ? Give me a break Canadian society at large, I am starting to gag..
Garth- Is your boy Nolan Matthias moving onto your side?
http://asknolanmatthias.com/media-altering-market-course/
I enjoy how he’s trying to blame the media.
For the record, I used to think you were a crackpot. And while I’m not fully convinced that some of your predictions regarding taxation and the future deficits, I am fully convinced we’re going to see values decline rather sharply in Canada’s big cities.
I’m too cheap to buy a book, but if you give me one for free I’ll review it on my site.
I doubt Vancouver will see much of a price drop, especially on the west side. It is the most desireable area in one of the most desireable cities on the planet. It already was before the Olympics.
It’s true, people from China, Russia, India and elsewhere are coming here with buckets of cash and think we still have bargain prices. They don’t have mortgages.
eg, a 6,00 sq ft Hong Kong condo recently sold for over 56 million!
http://www.nytimes.com/2009/10/15/realestate/15property.html
Bubble? Not likely. Maybe TO or Calgary, or even Kelowna in BC’s sunny Okanagan. Vancouver is so much like San Francisco which I don’t believe saw much if any of a real estate slump as in Nevada, Arizona or Florida.
Past 2 days GT postings: spotlight on young buyers, one set Greater Fools, the other not.
So I’m asking: who are these young Greater Fools?
And I know that the banks are offering cheap gov’t insured loans that the kids can’t really afford, and I know that the RE agents, mortgage brokers, TV ads and MSM all contribute to the whitewash, but I’m thinking, there’s still something missing here. What is it about this whole thing that makes it seem so sinister and ominous? Like cattle being herded into an abattoir. Why are they lapping it all up like this?
So I figure there’s the obvious rationale: “We need to do what our parents did” (ie) RE and GIC our way to retirement. And of course the parents in most cases are advising the kids to do just that, especially in the wake of the stock market crash. Buy now or never, it worked out for us, etc…
But I wonder if there are at least a couple of other factors at play.
The first may be generational. My wife teaches entry-level business at a university. She’s noticing a growing trend. These days, many of the students are barely literate. Only around 25% of them can write a coherent essay. Most are not even interested in the course material, and openly admit that the only reason that they sit in the seats for an hour 3x/week each semester is because their parents want them to be there.
Excuse me? You’re an adult paying tuition so you can go sit in a class and take a course in which you have no intention of participating just because your parents want you to be there? Oh. And I guess you expect to pass with flying colours and go on to be rich and successful and drive a Carrera C4 and buy a house on the west side of Vancouver in a few years, is that it?
Generation Me. Like, oh my god, like why shouldn’t the bank approve us for a 1M loan, like d’uh. Since kindergarden, they’ve learned that everyone wins, so why bother trying. So now as young adults their self-confidence and critical thinking is vestigial. Like your appendix.
The second, I wonder, may be cultural. Uniquely Canadian. An extension of the notion that as Canadians, we feel entitled to a lot. UI & welfare in tough times, health care always, Tim Hortons, etc… So of course the gov’t figures out a way that we can afford to buy a house, we’re Canadian after all, we deserve it!
And maybe this cultural factor differentiates us from our neighbors to the south in terms of how expectations (and lives) will be shattered even more up here. Down there you got nobody to blame but your dumb-ass self for re-mortgaging the farm and not reading the fine print. Up here, we all assume the gov’t has our back on stuff like this. So it’s the worst of both worlds. What a betrayal.
Garth, this is a timely post for me, because I am looking down the business end of a large fee to break my mortgage. My wife and I sold our leaky Vancouver condo ahead of a large assessment last month, with two years left before my mortgage reached maturity. From the IRD calculation, it look sliek I’ll owe about $10k in fees, more, if the bank’s posted rate drops before closing day. But the bank says that they’ll happily refund the fees we pay them if I take out an even larger mortgage within 90 days of closing on our first place.
Well, the Mrs. and I aren’t going to be buying again, not in Vancouver, and not for a long while. We couldn’t even if we wanted, because my wife can’t use her RRSP for a down payment, because she lived with me in the condo I bought, before and during the time that we were married.
So at least we were prevented from trying to buy something new in the Vancouver market (we found a rental for less than we paid on our first mortgage), but I’m still somewhat stung by the massive fee to break the mortgage.
At this point, I feel like I have no other option but to pay though the nose, and that I’ll pay more, if the bank decides to cut their posted rates further before my closing date. I can’t even BUY my way out of the hole, with a larger mortgage because we have no capital left, and are prevented by law from using a First Time Home Buyer’s loan, to try to make up a 5% down payment.
Do you have any other suggestions for how I could reduce my penalty at this point?
Here is an interesting story my friend told me:
He has a friend that I’ll call Tony. Tony asked my friend his opinion about housing in T.O.. He told Tony nothing but negative things and that he recently sold.
Late last year Tony told him that in spite of his advice he has bought a property. Its wonderful, $700,000 in Foresthill area and comes with a renter. Then Tony goes on to mention the renter is great, he is the previous owner and has a Free Mason bumper sticker.
My friend responds with “ congratulations” meanwhile thinking the previous owner removed his risk, is sitting in a basement with 700 large with the intention of buying the same house when the market tanks and didn’t even have to move.
And Tony … well he thinks he just outsmarted someone from Foresthill with a Free Mason bumper sticker. Is Tony a possible Greater Fool.
I’ve been reading this blog for about a year now, and thought that I’d finally chime in. I’m not the best writer in the world, so hold tight.
First off, that excerpt almost sounded like my wife who wrote in, but I know it wasn’t. I’m a realtor from Vancouver, stop throwing things at the screen and give me a sec.
I’m university educated in Urban Land, I’ve spent my life surrounded by some of the who’s who of the real estate world in this city, and I don’t always buy into the BS that some of my colleagues and other “experts” spout off about, ie the Olympics and all that crap. I tend to look at the big picture and try to figure out what that means to my market, much like Garth.
Right now, I think that things in this city are a little nuts, but not as nuts as Garth might think it is. I’m on the front lines and I see some stupid people, doing stupid things out there, but I saw that years ago as well and they’ve all made big money in this game. I deal with Europeans, Asians, and Americans buying here, and boy they are bringing some serious wealth with them. I see smart money getting out right now, but I also see smart money getting in. Some have said that it’s a bit of the Monaco effect, but I only see that in a very small area of Downtown and the Westside. There is no doubt that this latest run has been caused my F’s lax mortgage rules and poor monetary policies (rates), but the problem with Vancouver is, lots of demand and the lack of supply. Our land locked city is bursting at the seems with very little room to grow. I’m under no illusion that things could drop a good deal here, but I just don’t think that it’s going to be as bad as Garth thinks it is. At the end of the day, I’m of the belief that it’s going to land somewhere in the middle of the two extremes.
This is the thing, I’m always suspect when anyone makes sweeping claims about an industry as complicated and as local as real estate. For instance, real estate is a bad investment in Canada. Not true, there are pockets in this country that someone will make a killing in. However, Garth is eventually going to be right to an extent, but it’s going to be really hard to pin point the timing of such event. Interest rates might do it, but they were much higher when we were at these prices in early 08. Demand might decrease, but it all depends on where you are and what you own. If you’re not over your head and you are in control of how long you can carry the property, real estate can be a very lucrative longterm investment, just don’t get in over your head!
***A little advice, don’t let this stressful debate of buy vs. rent come between you and your spouse, it’s not worth it. You should both be on board either way, because it’s a big purchase to make.
Contrary to what most of you think, there are a lot of realtors that care about their clients and really look out for their best interests. I work primarily on referrals from past clients, so doing a bad job wouldn’t get me very far.
I’ll leave it there for now.
I guess i was a little lucky but the house we purchase in 2003 was on the market for approx 5 months. we made an offer that we wanted to pay, 30K under asking price. But my problem now is the inssurance companies they say the house is worth over 400K when we paid under 200K and they charge me inssurances for over 400K if anyone out there gives me 400K+ for my house we will sell it. As for the insurrance companies they are making a killing and no one is complaining about them….
Garth, think of the National political impact you could make…..by turning your Dufferin County, Bunker property into an exclusive BC Renter’s Ashram & Spa.
2/
…I understand Vancouver City Hall is planning to convert vacant land beside BC Place into a giant Resort & Casino Destination.
Nostradamus jr.
It’s starting to happen here in the UK now.
http://www.timesonline.co.uk/tol/money/property_and_mortgages/article7060101.ece
“Homeowners have been told to expect another slide in property prices after the general election as fears grow that rising unemployment and a second wave of mortgage shortages will suffocate the fragile recovery in the housing market.
Hetal Mehta, an economist from Ernst & Young, warns that a fall in mortgage approvals in January backs up the view that “the market is running out of steam”.
Simon Rubinsohn, chief economist at RICS, says: “Supply is certainly catching up with demand as sellers return to the market, which will hit prices.”Mr Rubinsohn expects house price gains made between January and June to be wiped out by falls in the second half of this year. ”
This from a hot 2009 market turned cold fast. But “It’s different here! We are hosting the 2012 Olympics”
Mike
How can you get around this?
*********************************************
Easy, get an open mortgage!!!!!!
The East Coast is indeed God’s country.
http://www.canadianbusiness.com/managing/strategy/article.jsp?content=20100315_10019_10019
“The average household in Canada now owes $96,100, according to a study released in February by the Vanier Institute of the Family, an increase of 5.7% over the past year. The same report found that mortgage debt is at a record high. ”
“……a survey from the Canadian Payroll Association in September found nearly 60% of the respondents said they would have trouble making ends meet if their paycheque was delayed by even one week. This group included many first-time buyers.”
Hi Garth,
Thanks for the advice on how to get a better seat in the matrix. The satisfaction of getting plugged in and directing all my energies to the system is what I live for. The more energy I can sap from those behind me on the grid and in turn direct to the masters at the top fills me with a real feeling of accomplishment and status. I know with just a little more effort and some luck anyone can become the strongest battery feeding on those greater fools late in arriving.
I think you have a short. — Garth
Taxpayer like everyone else said…
“I re-financed once when the original loan was CMHC backed (Yep, I admit it!) The bank tried to tell me IRD, but the document said 3 mo interest. Checked with lawyer buddy who confirmed all CMHC mortgages were 3 mo interest. Nice to know I got something for the premium. This was mid 90s.
Anybody confirm this is still the case? Check your mortgage document?”
This was true up until July 1999. Unfortunately, now it’s 3 mo interest OR the IRD, whichever is higher.
http://mortgagehelp.ca/penalties.htm
We left Vancouver 3 weeks ago and returned to Toronto after 19 years of struggling with BC’s feast or famine economy . . . We will dearly miss the beauty of The World’s Most Expensive Logging Camp and the many friends we made while living there but we sure won’t miss the lack of opportunity.
Vancouver real estate is insanely over inflated . . . In the beachside neighbourhood we where lived un-renovated two bedroom post-war stucco bungalows routinely sold for $1m plus only to be torn down and replaced with zero lot line monstrosities that hit the market in the 3.5 to 5 million range.
Over the years whenever friends asked if there was anything we missed about Toronto, other than friends and family, the only answer was ‘having an economy’
It had to happen, it happend in 2007, now yesterday/today. The USD to CDN “normal people” exchange rate at the bank is PAR.
$1 USD = $0.99 Canadian.
I didn’t expect to see that so soon considering in late 2008 we were at $1 USD = $1.30 Canadian.
Mike
If you were to include, Delta, Surrey,Coquitlam and North Vancouver, what is the population?
I really can’t believe how many listing there are in the GVA. Check MLS, you don’t get much for $500K
“How can you get around this?
(a) Faint in the loan offer’s cubicle.
(b) Offer to borrow more money (this always works), or (a lot better)…
(c) Blend & extend. This simply means asking for a lower rate on your mortgage, but at the same time taking on a new, longer term. The rate you get may not be rock bottom, but it will definitely be an improvement.”
_____________________________________________
Garth, I don’t know if this varies from bank to bank or mortgage to mortgage, but I am just in the process of breaking my current mortgage. I’m 3 years into a 5 year fixed and even with borrowing more (via blend and extend) to consolidate some other debts, the bank wants their penalty money. In my case the new 5 yr fixed rate would go up to over 5.5% from 5.25% to cover the cost of the penalty. My other option, which I took, was to pay the penalty and start over. Needless to say, I took my business elsewhere since I was starting over anyways, and even when the bank started to beg for me to stay, they did not offer me a blended rate without some form of penalty. I am not high risk and both my wife and I have an excellent credit rating, so this did not influence the bank’s decision in this case.
Regarding the IRD you mentioned, the interest rate differential is based on the posted rate on the day you signed the mortgage papers. This means that the spread to calculate the penalty is not, for example, 5.25 – 3.50=1.75%; that 5.25% was the discounted rate from 6.75%, the posted rate on the day of signing. Based on this, expect an IRD of 3.25%.
OR…see where fainting in the loan office gets you.
I can’t imagine why anyone would stress out about not being able to get into a housing market like this. Aren’t you better off staying out of it?
If the prices are causing you stress and you are of average means then that is a warning sign in itself.
The listings are growing as a mushrooms after the rain.
“The process is started” – said the first and the last President of USSR.
USSR was destroyed by itself, collapsed inside.
30 years ago, the blinded Bulgarian Prophetess Vanga predicted:
“The 44th President of USA will be black and the last”.
The process is started.
RE crash is only a small first sign of inevitable crash of Western: USA, Canada, Europe.
As Roman Empire was destroyed by barbarians, but not because barbarians were stronger than Romans, but because Roman Empire was rotten and corrupted from inside.
The same situation we can see today:
Western is collapsing and neo-barbarians aka Muslims will eat rotten Western.
There is only one world power could fight Islamic barbarian hordes – China, because China has no evil “politically correctness” or moronic “multiculturalism”.
Everything is connected in this world.
#37 Bill
The person at the bank was absolutely correct. To check for yourself, go to any mortgage calculator and work out the numbers for yourself. Accelerated bi weekly makes a big difference over a monthly payment schedule. But the difference between accelerated weekly and accelerated bi weekly is minimal.
It really depends on your income stream. If you are paid weekly then do it but if you are paid bi weekly then set up the payment to be bi weekly. Simplicity is a nice thing.
I looked into the difference when I got my mortgage nine years ago and found there to be no difference. Perhaps others know if things are different now but I don’t think so.
Make pre payments if you can or set annual goals as to how much principal you want to pay off. Good luck.
13 TheTruth on 03.15.10 at 9:55 pm
momentum? it means diddly squat in RE, as it cant be off loaded in a matter of minutes. You seem to be confusing RE with the equity markets.
Government? look what trillions of stimulus has done for the U.S, it has created nothing but temp relief (cash for clunkers) and now massive debt.
Believe what you want, but when I hear million everytime a house is mentioned in a city where the average person is making average wages..that just spells retardation to me.
To all you realtor RE bulls (yes, even you so-called altruistic ones) here’s something to chew on:
“It is difficult to get a man to understand something when his salary depends upon his not understanding it”
- Upton Sinclair
Looks like your gravy train is running out of steam. Boohoo.
Heck w/ Canada, I’m emigrating…to Greece!!!
…Hairdressers can retire at 50 w/ full pension…now about to be guaranteed by Germany & France.
Question
…Friends, where is better? Canada’s East Coast or say…Comox/Courtney/Campbell River/Powell River/Sunshine Coast?
Nostradamus jr.
#44 ron in bc on 03.16.10 at 1:19 am
WOW rose coloured glasses and pink cool-aid??
#33 Tom – Excellent question.
It can’t be brain power that earned them the money to buy these houses can it?
# 37 Bill
I know what the banks say, but if you go weekly you may same a couple of 1000.00 in the long run.
When interests rates were higher a few years ago I always went weekly. The lending institution frowns on this but, HEY its your money
45/Burnt – Amen.
My mother retired a decade ago after teaching junior high school for 35 years. I made a comment to her back then about the attitudes of the new-grads and co-op students I was encountering – kids just a couple of years younger than me. Entitlement, over-confidence, arrogance, in-your-face. You name it.
My mom’s response was memorable. “You’re complaining about those kids? No way. Wait a decade. The kids who are in junior high school right now are completely out of control. As teachers, we agree that we’ve never seen a crew like this ever before. And then you meet their parents. Wow. The kids are simply acting like a more intense version of the adults. They have no boundaries, no value structure and no control. Wait until those teenagers become adults. The kids who are five years younger than you are NOTHING like the kids ten to fifteen years younger than you.”
Yeah, well… that crew is now in their early to mid-twenties. Nuff sed.
I wouldn’t celebrate the end of days just yet, at least not in Van. I suspect that a flood of listings will bring prices down just enough that it will spur a last-minute run on properties. There are plenty of people here waiting in the wings for their chance at home ownership–lots of people “keeping their powder dry” as it were–which will likely result in a few final skirmishes.
#44 Ron_in_BC,
San Francisco saw a major fall and continues to fall after 3 years. Same with LA and Seattle. It is not different in Vancouver. Prices have a long way to go down here before they reach an economic equilibrium.
#48 Couver,
Good post. Very balanced.
I was reading on Re Blog in Vancouver lately that rentals on Craiglist shot up considerably on March 8th. More than 1,000 new listings in a day. You would expect a rise after the Olympics but the current numbers look huge. Does anyone know the normal number?
It will be interesting to watch if this supply is absorbed and what impact is has on rental prices. It will also be interesting to see if some of these rentals turn to listings. I know a number of people with investment properties who depend heavily on high rental prices to sustain their investment properties here. They cannot afford to go long without a rentor. This is going to be interesting to watch.
The affordability rate in Vancouver is the worse in Canada. It takes 70% of disposable income to service a house in that town. Other Canadians cities are high too but Vancouver is by far the champ!
http://www.rbc.com/economics/market/pdf/house.pdf
Makes you wonder what comes next, what if rates go up a little, will people stop eating to keep their houses?
You’d have to be creazy to buy anything there.
It’s just a feeling but I think fear is about to takeover that market, if that appens the slide could become spectacular! Better hope is does’nt spread to the rest of the country.
From Nathan’s Economic Edge: “I know… now that the sun is out, the snow is away, the birds are singing, let’s head out and buy a house for twice what our incomes can support, shall we?”
“Oh sure, dear, let me pop another Prozac before we head out and indebt ourselves to servicing a loan that will be underwater six months from now.”
That interlude was brought to you by Eli Lilly, the makers of Prozac, and by the National Association of Realtors who say to America, “Go ahead and take the double plunge! Prozac and housing are the perfect combination, they go together hand in glove!” See you in the food stamp line!
#21 kitchener1 said: “he couldnt understand how people could sign the most important document in their life without at least reviewing it or having a professional do it for them.”
Amen brother/sister! I too am perplexed about why people do that. I told the lawyer that I had do my paperwork when I bought my house that I would be reading everything before signing. They were stunned when it took me over 3 hours to read and digest the information (there was probably close to 20 documents). In the end, I found a mistake had been made regarding the oil in the furnace tank that after being corrected saved me over $700! His last words to me were “You are the only person that’s ever done that.” (read everything). They serve hundred of people per year in real estate issues…
Despite the occasional snide remark and sighs/eye-rolling of disapproval or inconvenience, I’m very insistent on reading the contracts before I sign. One guy actually refused me so I showed him the door. I’ve found that most agreements have at least some terms in them that have rubbed me the wrong way. In some instances I have been successful with having the offending terms negated, change or removed. Big corporations don’t like that so I have to go somewhere else sometimes. I could go on for days about it… but I won’t.
#45 –
i’m in the generation you speak of, and i would say that it’s probably around a 50-50 split. the younger you are (current teenagers especially) the higher the ratio of “Me Me Me” types. i also notice the proportion is higher among the children of professional / upper middle class parents.
that aside, there are some of us that are sane around here.
the pressure to purchase real estate (in this case) or attend business school (in the cases you mentioned) often comes from the parental units. you can’t really blame them either – many of the boomers have had a great deal of success quite easily. it used to be the case a few years back that if you could manage to go to university and major in say business or biology or journlism, get a bachelor’s degree, then you could find respectable middle class work and afford a respectable middle class home. hell even my immigrant working class grandparents could make it in toronto in the 60s.
now it seems you need a master’s degree to work at starbucks – the only growth industries seem to be real estate and wallyworld, and homes are extremely unaffordable.
however, the parents have no real experience of this environment. they don’t realize that their kids aren’t going to be able to get by on what got them by. again – can’t really blame them. people tend to learn by experience not by observation.
Hey Burnt Norton,
Those youngster’s your wife teaches only go to school because its a playground for socializing, when their fingers get sore from texting and typing on facebook.
They will all fail miserably when their are introduced to a 3 dimensional world…not the two dimensional digital one they live in now.
BTW..they probably don’t pay tuition…their mommies and daddies pay it for them.
#28 nolan If you know something please feel free to share the information.There’s probably many people out there that could use the information.
the pay off fees ae actually helping contain the bubble. In the USA, by federal law, there are NO payoff fees on insured mortgages. You can pay off any amount, anytime, no fee. That makes it vey easy to buy/flip with minimal cash requirements and make the decision to ‘upgrade’ or ‘cashout’ even easier. Thus homes turned nto ATM’s because they re-fi for more than they owed and use the cash to buy cars, tv’s etc.
I did this in 2001 while living in california, I re-fi my 85k mortgage (95k purchase price in 2000) at 6ish percent down to a 95 k mortgage at 5ish percent. I used the difference to pay off my car loan, and my monthly mortgage payment actually dropped. Also got mtg insurance waived as Loan to value was now less than 80%. I then made fee-free prepayments equal to the old car payments and came out way ahead. Used properly a great tool, but it was abused far too often…
and for the record, I stil have the car a 2001 RAv4. It is so slow I *wish* it would accelerate better, unintended or not!
sold the condo in 2005 for 289k. Insane.
Garth,
a friend of mine who is married to a commercial real-estate agent has put an offer on a house in TO that was listed at $539,900. Their offer was $565K. The house sold for $607,500 to a person that is also an agent who bought it for his daughter. He waived the 2% buying commission so in fact the house sold for 620K !!! I am lost for words…if real-estate agents are personally part of a bidding wars than how is this ever going to come to an end?!!! Would love to hear your thoughts on this please.
P.S. I told my friend to consider herself lucky that she did not get the house!
MIkey
OH yeah, that 95k to 289k price jump in 5 years was NOT a bubble. Things are different in southern california. everyone wants to live there. There is huge demand. Tons of immingrants with money buying up everything they can find. Prices won’t go down It really is different here…
This unit was next door to mine, and slightly smaller…same idea though…2000=90k, 2006=300k, 2010=?? see link…
http://www.realtor.com/realestateandhomes-detail/1101-East-Ocean-Boulevard-Unit-22_Long-Beach_CA_90802_1116488178
Not sure if anyone had a read of the last Toronto Sunday Star or if it has already been mentioned here but they have a big blow-up in the middle of the paper comparing TO real estate with US real estate.
The price differences are UNBELIEVABLE!
$55000 for a gorgeous 1 bdrm condo in an upscale Naples deveopment (parking likely free) vs a bloody parking spot ($56000) under a god for saken highrise full of snobs in T.O !
Why would anybody invest in obviously a market that is priced 3-5 time higher than our neighbours to the south.
Oh ya..I forgot, we’re better than they are…..
Brace for impact -
Fed weighs how and when to signal higher rates
http://news.yahoo.com/s/ap/20100316/ap_on_bi_ge/us_fed_interest_rates
#70 Another Albertan on 03.16.10 at 8:55 am
————————————————
It’s easy to blame the parents, but what about the educational system? Colleagues of mine with children tell me that teachers these days don’t even (aren’t allowed to?) correct students when they make a spelling mistake, so as to not offend them. It has now become the norm that simply showing up for school earns you a pass. In my day (elementary school in the 1980′s), I would have to re-write the incorrectly-spelled word 50 times. What is happening to our educational system?
Another friend of mine (from India) forces his kids to do 1-2 hours worth of extra homework every night because the school system is ‘failing’ our children.
@54 tran, hcmc
//The average household in Canada now owes $96,100//
I don’t know what blogdogs make from the statement above. I see it quoted quite often. My take on that stat is that during meltdown a lot of people took some loans to a) double-down on their investments to mitigate loses; b) to stock up on cheep investments in March/April; c) to buy house cheaper in the summer. I for one took one 50K investment loan in April, paid it back in September with capital gains and pocketed quite a lump sum, then took another 50K loan in November and plan to pay it off by June. I pay 3.75% variable, and investments that I purchased with that loan are paying cool 11-14% dividend with potential of 20-50% capital gain on top of that (due to income trusts conversions to corps by the end of the year). I don’t see that stat to be as damaging as it looks. What do you think about it?
Also I see some comments about credit cards and credit cards debts that I don’t agree with. People are saying that they feel bad for others whenever they see them paying with credit card in the store. It’s not that bad either. I have mbna smart cash platinum plus card. I pay with it whenever I can because it’s paying 5% cash back on groceries (3% after 6 months promo) and 1% on everything else. There are no levels on this card to get those 5% back and it’s no-fee card. Obviously, I pay my balance in full each month. So what is wrong with using this card?
Garth,
Sorry for these questions, but I see these topics coming back again and again. I think some clarification is due.
#45 Burnt Norton
I am told now in many companies in China have mandatory yearly tests of employees where the employee with the lowest score gets fired immediately. There have been many suicides because of this.
This from a country that is so competitive they absolutely demand perfection. Why do we see so many foreign students coming here for education? Because their grades are not high enough to make it into the schools there.
Kids here have absolutely no idea they are in competition globally now for jobs. For that matter neither do the governments or they just choose to ignore it. Education system has continued to deteriorate in NA with students to distracted with the internet, video games, music, video. No wonder there are so many young people buying at these prices. If the media and realtors say it is the time to buy well they just believe it without thinking for themselves.
I believe all this will end very badly for NA. Real Estate prices is one thing but a lose of skilled workers where companies need to resort to hiring foreigners is a huge problem. Companies will eventually relocate were the talent pool is.
#74 junius on 03.16.10 at 9:12 am
“”I was reading on Re Blog in Vancouver lately that rentals on Craiglist shot up considerably on March 8th. More than 1,000 new listings in a day. You would expect a rise after the Olympics but the current numbers look huge.”"
….Naw…These rental units are getting ready for Garth’s flock of sellers…They need a place to live too you know.
…Landlords preparing offers for Garth’s flock of sellers.
…Repeat of 2008
…RE $$$ Prices set to rise another 30% in Hongcouver.
You heard it here first
Nostradamus jr.
80 lawrence
agree totally
to 28 nolan–i’ve got a secret,but i’m not telling–get serious–grow up
#37 Bill
Using a $300K mortgage, 25 year am, 5% 5 year term, the mortgage would be paid off in 21.4 years under an accelerated weekly or an accelerated bi weekly payment schedule. If one selected the accelerated weekly they would save $411.96 over the 21.4 year as compared to the accelerated bi weekly. **based on the above inputs using a very large banks website calculator**
So the weekly will save you about $1.60 per month over the bi weekly. Enough to buy a small coffee…maybe.
Hello Junius
Yes that is an interesting development.
We are having trouble renting out apts. Most unusual.
Everyone off to live in their new house/condo? Maybe not…
All the tenants that left [3] stated they loved the apt and neighbourhood but could not afford the rent and were moving back with inlaws or relatives.One had in fact lost her job.
I would not be surprised if the rents here stay the same or even go down. Certainly no increase.
This does not bode well for a person seeking a mortgage helper. I see a competition for renters looming. Not good for our biz but renters can look forward to stable or reduced rent in the future, I reckon.
And we resorted to craigs list in an effort to find renters.
I would say that it worked for us. Got two new tenants and all we have to do now is rent the monastic cell on the first floor with a view of a wall….
#48 couver
So you sense the hostility towards realtors do you? he he, good for you for putting yourself out there and thanks for the fair assessment of Vancouvers unique local market.
Having been bit in the ass myself by Vancouvers RE, I watch the listings very closely and despite what everyone is saying here, there is no huge onslaught of property dumping by sellers, in fact, considering that were are in a spring market, there is very little supply – hence the skyrocketing prices.
And dont get all juiced up about reports that Couver sales were down in feb – of course they were, the city effectively shut down for the olympics- anyone who lives here knows that for a fact. Toronto, however, continued to blaze ahead and Vancouvers spring will inevitably follow.
Believe me, I want a correction as badly as the rest of you , this market defies logic, but you arent in Kansas anymore – I would love to be proven wrong here, but the cliff dive prices you speak of are not going to happen – people are just too weird and stupid here to stop.
So to the woman who submitted the letter – if you plan on staying here, and you are not overextending yourself, just buy for heavens sake-
meow
it is not easy guys.
we have no debt, a couple of years from becoming senior citizens. we own a medium condo in midtown in toronto. its price went up by 30% since we bought it in 2007 (from the builder).
reading the posts and the book we thought to sell and rent. BUT.
-there are not so many 2 bedrooms on the rental market.
-a 2 bedroom rental unit in the area costs around 1700 / month.
-a new rental in Vivere costs 2000 / month.
-a condo with 2 bedrooms for rent is around 2000 / month.
AND i found a site listing the rentals in toronto with bed-bugs. the list is huge and the stories frightening. practically all the rental buildings in the area are on the list.
is it worth to move over ? a human has one life only and living in a cheaper rental unit may look like trading money for your life. difficult decision.
2012 Credit Squeeze article from the NY Times
http://www.nytimes.com/2010/03/16/business/16debt.html?ref=global
I live in the heart of the west-side, the Arbutus district, and this past week three Asian owners of houses on my little block have moved out, lock, stock and barrel, back to China. The houses are empty now, no “for sale” signs yet, but I see it as a wave of the future. The block I live on now is mainly renters or empty houses, not much of a neighbourhood. The house directly next to me had been purchased by a 40ish Caucasian couple 4 years ago for about $850,000, they put about $100,000 into it and finally threw in the towel last August and sold for just under $1M (it was an ex-grow-op). An investor group now owns the house and, after sitting empty for four months, it was finally rented out to a family with large dog for under $2,500. I don’t know what the future of real estate in this area is but it doesn’t look bullish.
#83 – Hilarious. If that doesn’t tell you how ridiculous prices are here in Vancouver, I don’t know what does. I’ll take LA anyday over Raincouver, especially for 1/3 the price.
Oh well, buy away Bulls. If you really think Vancouver prices are never going down, you can have this overpriced, overgrown fishing and logging village with delusions of grandeur to yourselves. I’ll continue renting right downtown for 40% – 50% the cost of buying thanks …
There is only one truism about the relationship between interest rates and inflation…
Interest rates will always be higher than inflation.
Many people suggest that that in a low inflation era, it is not possible to have high interest rates.
That is not true.
Further, people mistakenly believe there is some guaranteed spread between interest rates and inflation.
Again, not true.
It is entirely possible to have 0% inflation and 10% interest rates.
#90 NDMS Jr.,
30% up? Good luck with that. Down yes, up no.
Simply not possible.
#37 Bill
What is a point of hanging around here if “the mortgage rep told” you? Could not not go online, find few mortgage calculators, punch few digits and compare two outcomes? Maybe 10 min work.
Yesterday, I needed to kill 40 minutes and went to London Drugs to watch a hockey game. While I was watching, a 50+ couple were looking for a flat screen TV. The rep told them that they definitely need 240Hz, 1080, plus a $70 antenna, plus a $60 power protector, plus an $80 HDMI cable; plus a wall mount for $99.
I quietly told the husband that if they are not going to play games, they only need 720 and they will never see a difference; that he can make an antenna himself for about $10 (instructions online), that the power protector is built-in; and that the cable he gets free if he subscribes with Telus; and he can get a wall mount for quarter of the price including shipping from US.
It was fun watching him trying to convince his wife and asking the rep whether what I told him is true. The man lost. And the couple paid at least $500 extra for bells and whistles that they will never need. Sad.
Always listen to the reps – they are so professional.
#90 Nostradamus jr.
…RE $$$ Prices set to rise another 30% in Hongcouver…
I hope this will not come true. There will be a financial mess to clean up after the fact.
Just be patient every one…………the US economy is imploding and the Obama Administration is sputtering badly right now!!!! It won’t be too much lomger before the second wave comes ashore…….remember “Depressions Take TIme”!!!!
http://www.businessinsider.com/15-reasons-why-barack-obamas-declaration-that-a-second-depression-is-no-longer-a-possibility-is-dead-wrong-2010-3
80 and 91
If you are in a position where a payout penalty will be financially crippling, I suggest you talk to a real estate lawyer. There is no secret, that is the secret, get a lawyer. There is a way for a lawyer to aid you in avoiding the payout penalty.
Telling everyone the specifics would be completely irresponsible. I’m almost sure that Garth is aware of the method, but notice he didn’t say it either, and he is as informed on real estate as anyone.
44 Frugal Trader – as for you. Go back and take a look at my comments on any post. I have never once stated whether I agree or disagree with Garth. What I have commented about are his methods of delivering the information. I think he sensationalizes, I also think we need people like him and Michael Moore, they play a valuable role in society. Polarization keeps us in check.
No one has a crystal ball clear enough to predict any of what will happen in any market. Garth doesn’t even need to attest to this, his predictions have taken far longer to come to fruition than he had ever expected. The one thing that remains true is that if you consistently predict a real estate boom eventually you will get it, vice verse for a bust.
My question to you, Financial Uproar, is how can you not think the media plays a pivotal role in the markets? I don’t think my post on my website was out of line at all.
PS. I’ll send you a copy of Garth’s book, it might come in handy considering your most recent piece of advice is how to cheat at online poker.
http://financialuproar.wordpress.com/2010/03/16/online_poker/
@ #44 Ron in BC
That is an expensive condo for sure, but real estate is not driven by the uber rich, it is driven by the lower to upper middle class. Simply put, there are not enough rich people to fuel a bubble. But by dropping the barriers to owning a home to the middle class and even the technically poor and that will drive a bubble, because we have the numbers.
So posting articles about what the super rich will pay for the place is not a predictor of what the masses will do, it is only an example of what someone with 56 million dollars to burn will do.
Re: #88 Azza4
Personal anecdotes are great to hear, but they don’t present an accurate measure of what is happening in the greater economy. What you’re doing is obviously smart and logical but most people aren’t borrowing to invest. They are borrowing to supplement their lifestyle after losing their jobs or essential living expenses. This conjecture is backed by the huge increases in unemployment. Also, nationwide surveys that found a considerable % of families being in financial turmoil even after missing 1 paycheque.
Then, you also have the record increases in home sales. A small boost in auto sales.
Also, if you look at other economic indicators you would be able to see a lot more GDP boost from the private sector if a bulk of the aggregated debt was for productive means like investment. The net worth of Canadians would have increased much more significantly over the last year as well.
Sure, some people may be doing what you’re doing and borrowing at low rates to invest into higher yielding investments. But I’m pretty sure the household debt numbers are based on consumer debt and mortgage debt. I could be wrong but either way there’s a lot of evidence that suggests most people aren’t doing this.
I also have a friend that works as an administrator at a big name Canadian bank that processes loan applications. He told me 6 months ago or so how busy he was at work because a huge inrush of loan applications were coming in more and more. He is on the customer service side of operations so he gets to talk to most of the individuals applying for the loans. I asked him if people were making these loans because of the low interest rates for productive investments or even at least house purchases. He scoffed at me and said, “no no no most of these people NEED these loans for basic living expenses”.
You have to consider that the employment rate is still fairly high and there is also rampant underemployment. A lot of full time jobs are being replaced with part-time jobs that pay half the wage. it only makes sense for debt to skyrocket if jobs, hours worked, wages are decreasing and at the same time House sales are increasing with prices increasing in tandem.
For those counting on this so-called “surge” in listings to break the market in Vancouver, did you ever think that there was a pent-up supply from the Olympics? Nobody bothered listing as the entire city was glued to the TV or attending Olympic events and parties? Did you ever look at the Y-O-Y numbers to see that this is all seasonal?
Come April, the buyers will be out in full force as they have been every year and will once again crush your hopes that this is the beginning of the inevitable collapse. Inventory is still incredibly low and the regular group of Spring buyers, coupled with some potential new Olympic emboldened visitors, will shrink that inventory right up…
You guys just don’t get it! The market is going to be like this for years with low interest rates staying it place for many many years….
#88 Azza4 on 03.16.10 at 11:45 am
—————————————
That quoted number includes total mortgage debt. Not bad if you ask me (i.e. the average Canadian owes $96,000 but has an underlying asset valued at $340,000).
In regards to your credit card question, obviously there is nothing wrong in using the companies money for a month and reaping the benefits of its use. However, remember that the stores you shop at that accept the cards pay a fee to the credit card companies, thus effectively raising the prices of the goods that you buy.
the US feds have just announced no guarantee on holding interest rates down as previously indicated.
#71 Prufrock I agree that there will be a run on housing in Vancouver with all the choices now available. I was struck by the number of ‘price changes’ reported on yattermatters for recent activity.
Using the term ‘freefall’ for this market is ludicrous at this point. Have a look at the weekly commentary that goes with the graphs – the week ended as ‘normal’. What is not clear is whether the ‘price changes’ caused the increase in sales.
#102 Patsan on 03.16.10 at 12:59 pm
————————————–
I like to compare behaviour and information divulged between reps at Future Shop (commissioned) and Best Buy (non-commissioned). Most times you get opposite advice…..
Tories in budget fantasyland
Conservatives convinced fairy-tale plan to erase deficit actually can work
http://www.edmontonsun.com/comment/columnists/greg_weston/
OLD NEWS:
interest rates to be held low until December 2011. Both in the US and CANADA.
#100 dave99
Interest rates will always be higher than inflation.
____________________________________________
that statement is patently false, beyond the misuse of the term “inflation”, why by, you mean, CPI.
#88 Azza4 on 03.16.10 at 11:45 am
Perhaps here ….. think? If you were stuck or did not get a raise ( Who Did) and everything cost more and money is cheap ….. Charge it! and Canadians did …. and we all here know what is coming eh.
http://www.financialpost.com/story.html?id=1295423
Prophet wrote: “As Roman Empire was destroyed by barbarians, but not because barbarians were stronger than Romans, but because Roman Empire was rotten and corrupted from inside.
The same situation we can see today:
Western is collapsing and neo-barbarians aka Muslims
will eat rotten Western”.
I completely agree with you. Unfortunately most of us looking on the approaching disaster through the pink glasses. Yesterday I “enjoyed” loudy Middle East song on arabic from the car of gas station employee while filling my car’s tank on one of north Toronto gas stations. To me it was not just bad music without melody, but the statement – “We are here”.
… in 20 years when 1 in 4 canadians will be older than 65, the unsufficient RRSP funds and the issues with RE might be our last problem…
#51 NSDM Jr.,
Yes, new Casino coming. We are more like Monaco every day!
City Hall expects to lose $300 million on the Olympic Village. Better double down now.
#48 Vancouver Old Timer,
I here this as well. A good friend of mine is a lawyer of Asian descent with family in Hong Kong. He says we are going to lose as many as we gain over the next few years.
@89 Dave
Wow. Your blanket generalizations about the education system and student performance are horribly ignorant.
Foreign students come to North American schools and universities because they are among the best schools in the world. They come here to learn English and pursue higher levels of education not available or as effective at home compared to coming here.
Canada’s education system and its students are among the best performing in the world. Canada consistently ranks in the top five among academics in reading, mathematics, and science.
The top 10 universities in the world are all located in the United States(Oxford and/or Cambridge are arguably top 10 and are in the UK though).
Sure internet/tv/video games are distractions. But that is why parents set boundaries.
Companies do not hire professional foreigners because they are better educated, they are hired because they are cheaper in terms of labour costs. Look at the IT industry as an example.
Unbelievable. YOU are what’s wrong… your ignorant fantastical beliefs.
#76 pbrasseur
The Chinese are now exclusively for the Canadian market making drywall out of gingerbread…
You heard it here first…
Scrolling through ‘Craigslist homes for rent’, I noticed a big increase of listings. 18 months ago, it was nasty job finding something that you would actually want to live in ……..even then, you just had to close your eyes and just fork over the money!
Looks like there are more ways than one, to get yourself head over heels in debt! Dozens of these of these ads too. Such a deal!
“2br – 2bth ***Can’t Get A Mortgage – Try Our Proven Lease To Own System*** (Abbotsford)”
——————————————————————–
Just talking to a loans officer at TD head office in Toronto. Apparently TD acknowledges that there is a RE bubble and even with the CMHC they are tightening their belts on lending money. They are valuing homes at lower prices (prices of 3 years ago) for mortgages and HELOCS. HE said there was a RE bubble. He said it not me.
Anyone surprised the Fed left interest rates unchanged today? I hope not. Once you understand there has been no recovery in the States. Contrary to what the propaganda arm of the government has been feeding us aka the mainstream media. Every 1% rise in interest rates adds 100 billion to the U.S annual dent payment. So even a rise to 5% would suck half a trillion more out of the economy yearly. They are royally hooped, they just don’t want us serfs to know about it yet. And the Fed’s little whipping boy aka Bank of Canada has such an incestuous relationship, the they are along for the ride. Anyone who advocates that currencies are the place to hide are missing the entire picture. I have stated before where a person needs to hide from the coming currency crisis/devaluation/revaluation.
#113, N
I’m not sure I understand what you mean? First, yes I meant inflation and not CPI. Second, no-one is going to knowingly deflate their capital by charging interest at a rate less then the inherent depreciation of their capital from inflation.
I will freely admit that there are many different “interest rates” and if one is locked into an interest rate than of course it is possible that inflation can change such that it will be higher than the locked in interest rate.
But you’re taking one sentence of my post, and ignoring the intent and message behind it.
That message being the the recent stable spreads between inflation and interest rates have lulled many into believing that no alternative is possible.
Allow me to ask, do you agree that 0% inflation and 10% interest rates are practically possible?
Today’s “Bankers blog”…very appropriate
FED today…”Rates are “likely to warrant exceptionally low levels of the federal funds rate for an extended period.” The key words “exceptionally” and “extended” remain in place.”
…So how in the wide wide world of sports are Canadian rates gonna rise?
the Loonie is effectively at par already.
…Yup, lets raise rates so Southern Ontario’s Export Manufacturing Industry can sink into its final six foot grave.
All the Bears on this site should call for a National Strike…meet in Ottawa and demand higher interest rates!
…Hey, lets call the National Strike a “Jihad” and the trip to Ottawa a “Haj”.
Nostradamus jr.
#107 Vancouver Rocks,
I put in my previous posts that listings would surge naturally. However they are way ahead of sales which is very surprising in advance of the April 19 rule changes. The incline of listings is very steep right now. Coupled with the massive increase in rentals the next 6 weeks is going to be interesting to watch. 2010 is not going to follow the pattern of previous years. Even you should know that.
#112 TheTruth,
Where is your information on the interest rates? The B of C has clearly stated they are going up.
Personally, I think it is a mistake. The economy is still too fragile and moving ahead of the Fed is unwise. I remember 2002.
However don’t think that keeping them low is going to prevent the Re market from falling this year. Rate changes will just accelerate the decline. They are going down either way.
“Flaherty urges countries to control their deficits”
http://www.cbc.ca/world/story/2010/03/16/flaherty-deficits.html
Who knows, maybe he’s just colour blind – “see dat dere, dat’s a billion-dollar surplus I tell ya”
Some nice stuff there too about the UK, my ‘old’ country, that’s doing it’s best to make Greece look positively solvent.
Reminds me of an old “Spitting Image” sketch from many years ago, when Neil Kinnock & the (old) Labour party were on the verge of taking over government from Maggie Thatcher (they didn’t).
All the top Labour MPs were around a table happily chatting about how they’re going to get the most votes YAY – and win the election YAY – then they’ll form the next government YAY – then they get to fix all the problems in the country……{complete silence with all the MPs shaking their heads and burying them in their hands}
#111 Ralph,
This is Tory pre-election spin. H and F are walking around like fluffed up peacocks right now. Meanwhile the fundamentals continue to be weak and we could be headed for a double dip recession by the fall. We will be very lucky if we manage to avoid one.
“Then when you get outside of these big citys you will not see much of a drop at all.”
I used to live in the Fraser Valley (Langley), and we moved to the lower Sunshine Coast (pop, 30,000), to escape the madness of Metro Vancouver. Property on the Sunshine Coast, is less expensive, but, in my opinion, too inflated to buy. Last March, we were looking to purchase a property. We couldn’t find a house on a property (not a condo or TH), for under 300,000. Today, there are several under $300,000 (a few of those, have been on the market for a YEAR)…. we are renting a house, and planning on staying put until the “storm” is over.
Wow the listing are getting bigger everyday and the RE agents are getting worried that the HOUSING BUBBLE is POPPING. RE agents like “thetruth” LOL are worried. You can tell who is a RE agent posting in theglobeandmail and here on greaterfool. The bubble is POPING RIGHT NOW”the truth” . Looks like you will need to find a real job. You can not stop CANADA’s HOUSING CRASH just like the US could not stop the HOUSING CRASH. 1……………………2 the housing crash is coming for you. 3………….4 you are going to be poor. Pump all yuo want RE agents the housing crash is here and now! POP………………….What was that?
It is definately ‘here’ kids. A large, prestigious Condo/resort development on Vancouver Island has just gutted their pricing model. 1 day ago $410,000. Today? $310,000. You want the Penthouse? Same deal, better savings. 1 day ago $1,076,000, today $545,000. It’s very nice, even nicer today. Maybe you will wait until late Autumn. Much better then. Just as the last 10 years were a time for us all to make a life-changing amount of money in real estate – so will be the next time. Only thing is you have to have GUTS and you have to be willing, depending on your personal financial situation, to rent. I sucked it up, sold my house and am sitting on the money. When the time is right I’ll buy in again. In both the US and here. Yes, you can become financially independent but you have to have some old-fashioned backbone and be willing to ‘ewwww!’ rent. Look around you! Look at your neighbours and the folks you know who are losing jobs! My business colleagues are ALL hurting. Spit! Don’t swallow (the news
#115 Desert Sun
True. 1 in 4 may be over 65 in the future. Who will pay their pensions??? Health care?? but government doesn’t think long term that way. They think of only winning the next election.
Me thinks people with lots of money will just leave Canada if they get taxed more and more. Well heeled canadians leave and the govt brings in more and more on the other end.
On BNN today, I heard that there are 3 MILLION Canadians overseas that don’t pay tax but when they retire they will come back and use the health care system they barely paid into. THAT IS ALMOST 10 % OF THE POPULATION!!
Great post Garth…..I really am amazed how so many people just don’t get it! Our political powers that be sure as hell do not! Today was a very shocking day for me today…….i went to my favorite grocery store today to buy a few items(a business that has been around for many many years)…….the shelves were empty and they were closing down..(the only grocery store in the town of Thamesville)…many people,and many seniors with no transportation have shopped there as well as many people from surrounding areas……i was shocked ..as well as the staff ..many who had worked there for years who found out last wednesday…i felt very sad and as i drove home i passed by my small town’s new community centre (2.8 million dollars in government funding nearing completion)….the old facility held a function perhaps once a month?………Do these people realize what is happening in our country? Could our tax dollars not be spent more wisely?Creating employment perhaps? From what i have read billions have been spent across our country building community centers,hockey rinks etc in the name of stimulus spending while the people that actually contributed to our economy face devastation all in the name of “show place vote buying schemes”….am i wrong?
wouldn’t want that seeping and creeping into my water
http://video.tbo.com/m/29252685/decades-to-clean-up-raytheon-plume.htm
Title: Decades To Clean Up Raytheon Plume
Published: Mon, 1 Mar 2010
Description: Raytheon now estimates it will between 8 to 78 years to cleanup all the toxic waste that has been seeping into groundwater and polluting St. Petersburg neighborhoods for decades.
#124 Nostradamus jr
U R a clown. Bring on the higher CDN buck! It motivates manufactures to buy equipment at cheaper prices. Productivity gains is were it is at.
…ah the known knowns or is it the known unknowns ?
There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we now know we don’t know. But there are also unknown unknowns. These are things we do not know we don’t know. ”
LOOKS LIKE THEY KNEW
According to emails described in the report, CEO Richard Fuld and other senior Lehman executives were aware of the games being played and yet signed off on quarterly and annual reports. Lehman’s auditor Ernst & Young knew and kept quiet.
The Valukas report also exposes the dysfunctional relationship between the country’s main regulatory bodies and the systemically dangerous institutions (SDIs) they are supposed to be policing. The NY Fed, the regulatory agency led by then FRBNY President Geithner, has a clear statutory mission to promote the safety and soundness of the banking system and compliance with the law. Yet it stood by while Lehman deceived the public through a scheme that FRBNY officials likened to a “three card monte routine” (p. 1470). The report states:
“The FRBNY discounted the value of Lehman’s pool to account for these collateral transfers. However, the FRBNY did not request that Lehman exclude this collateral from its reported liquidity pool. In the words of one of the FRBNY’s on-site monitors: ‘how Lehman reports its liquidity is between Lehman, the SEC, and the world’” (p. 1472).
http://www.newdeal20.org/?p=8954
#130 Bill,
Perhaps but I don’t think Re agents have any idea what a bubble is. One of my neighbours is a Re agent. She is very sweet but totally naive. I got into a conversation with once and used the term bubble and she had no idea what I was talking about. They go to meeting every week and get told all is well.
There are more thoughtful realtors but most of them along with most of the retail mortgage lenders don’t spend any time on the big picture. I am afraid this goes for much of the rest of the sheople out there as well.
#127 Dad Was Wrong,
Bloody F. Pot calling the kettle black. The hubris is just unbelievable.
#63 Prophet — “The 44th President of USA will be black and the last”. The process is started. Everything is connected in this world.”
In the Cantonese language (China’s second language), the number 4 sounds like ‘death’ and hence, it is avoided by most.
The Russian scientist / prof. who said the US will break up into six states is probably closer to the truth than what most think.
#104 TC — ” . . . the US economy is imploding . . .” — Pretty much the west’s economy(ies) are heading down the same path. See Prophet’s post — all in its rightful time.
#133 john m — “Our political powers that be sure as hell do not!” — Chances are they DO get it, but play dumb about that aspect as they know we’re screwed.
——
This will also contribute to the break up of the US, by other and outside forces.
Some countries are very productive!
Boomers up Shit Street, both here and the US.
Could be this is why economic and other woes will hit Brazil soon. Goes with the link last night (#39).
Further to PIIGS.
Petite blonde woman… ?? I can help her Garth!
#11 junius on 03.15.10 at 9:42 pm
So true, junius. Maybe one in 20 have deep pockets. The rest, regardless of color, have to borrow like the rest of the norm. When rates rise, this party will have a hangover we’ll all remember for decades.
#133 john m on 03.16.10 at 5:46 pm
From what i have read billions have been spent across our country building community centers,hockey rinks etc in the name of stimulus spending while the people that actually contributed to our economy face devastation all in the name of “show place vote buying schemes”….am i wrong?
******************************************
No your not wrong-
What you describe is a typical blowoff mania–
It is a psychological phenomena–often associated with things like lynch mobs and witch burnings and tulips-
This type of insanity-is only seen by a few–
To most-it looks perfectly normal–
Eventually the crowd starts to come to their senses in dribs and drabs at first-then it accelerates-and then the bubble explodes–
#31 home prices to rise on 03.15.10 at 11:10 pm
Another realturd troll! BEWARE.
#90 Nostradamus jr. on 03.16.10 at 11:54 am
Garth, please rethink your decision of allowing this troll to post. We are all tired of this pot smoking nay-sayer.
#83 mikey on 03.16.10 at 10:33 am
> if real-estate agents are personally part
> of a bidding wars than how is this ever
> going to come to an end?!
It is the end. The same thing was happening in the US at the top of the bubble. I believe, it was Doctor Housing Bubble Blog that said that they had drank too much of their own “kool aid”.
the biggest sign of a bubble just hit me in the head, the Manager of my Branch, the most senior person at that domicile, just sold her house and she said to me “she won’t be buying for a while”
things she’s told me:
1. People are not defaulting in record numbers, but record numbers are refinancing
2. She can’t believe the large mortgages that are going out the door, some north of $700k
3. Lots of people are getting or extending lines of credit, more than before because they’ve lost their job
kaboom!!
#130 Bill
LOL for the last time I’m not a RE agent or work in anything RE related. Can’t a guy have a different opinion?
FYI, i don’t think any reguar poster on this blog is a RE agent. They think they are above this blog me thinks…
And to add, why give RE agents recognition they don’t deserve…anyone can become one in a month.
In BC, one multiple choice test…i think you need 65/100 and there you are…you are a RE agent. Whole process from start to finish takes about a month.
ONLY ONE TEST! you an guess and get 25%
57 Randy – thanks, actually found the same link after some “google pain”. Bummer for borrowers.
102 Patsan – c’mon, 1080 for hockey!! lol…
123 Dave99 – I dont think zero inflation and 10% rates are “practically” possible at the moment. It could certainly happen at some point, but can’t help with when.
131 Toenails – where on my island is this? TIA.
#17 junius
Thanks – I’m so used to seeing pumping, your observation eluded me.
Hi everyone
Please check out professor didier’s work on predicting the future.
He predicts bubbles with great accuracy. His most recent work in zurich concerns housing bubbles
http://www.gold-eagle.com/editorials_03/sornette112403.html
gets some older work and this link is where he is these days
http://www.er.ethz.ch/
hope the links work out…
I am about to pay off my mortgage in full next month. I will have to pay an IRD penalty. What I am noticing is that the interest rates for 1, 2, and 3 years are really low. I believe that they are doing this to wring penalties out of people who are about to lock into lower rates. If you look at rates 3 years ago they were around 5%. Now if you took a fixed rate at that time and are worried about rising rates you are forced to pay the IRD which is based on the term closest to what remains on your current mortgage. ie I have 17 months left on my five year term. my IRD will be based on a current rate of between 3-3.75%. On the 78k I have left I will pay $2800 because in addition to the difference in rates they also calculate the discount rate which is an additional 1.3% on top. I think this is criminal and once I am paid out I will close all my accounts at BMO and find a credit union. Beware of BMO if you read the fine print their penalties are the highest of all the banks.
@TheMisTruth: It takes longer than a month to become a realtor. But even if it only took a month, what’s your problem? Do you measure someone’s worth by the time it takes to gain a piece of paper? That makes your a credentialist. As vile as unionists, monopolists and cartelists – like the MLS system you’ve probably railed against on this very board.
It’s funny how economic nincompoops like yourself always complain about realtors and lack of regulation. While not recognizing that your regulations ensure the maintenance of the cartel. You people bray and pray for your own economic abuse.
No one is forced to use a realtor. Stop blaming them for your pathetic lives.
Garth:
Do you and the blog dogs want to hear something very scary!
Patriot Radio News Hour-Monday March 15, 2010
-Seems like China has for the third month in a row refused to buy US treasuries. Analysts believe they may be getting ready to buy more gold to shore up its reserves.
US Social Security-Old Age Security Disability Income (OASDI) which has $2.5 trillion (IOU’s) or claims locked up in non marketable securities is short $28 billion this year. It was supposed to be in a deficit position in 2017 and run out completely in 2040. In 1985 The OASDI account during the Reagan Administration was $12 trillion and the government skimmed off the surplus to fund a lot of off budget programs. Now it’s all gone.
US states and municipalities are short $2 trillion in direct benefit pension contributions
The City of Los Angeles, California has a $208 million budget deficit this year and over $484 million expected for 2011. It is facing a $399 million debt payment. It is short an astonishing $6billion in pension liabilities. In 1984 it lay off 9 people and may be forced cut staff since 1932. It is asking the major banks to stretch its payment schedule in order to reduce the massive layoff some of which will start this week. The second largest city in the US has a $7 billion budget and 40,000 employees. It will move 2400 employees into early retirement lay off 1000 employees and eliminate departments.
Patriot Radio New Hour Tuesday March 16, 2010
Just reported today is the real reason why the NYSE rose from 6400 in early 2009 to 10,000 this week. This information will shock you! Then again it might not!!!!
Bloomberg TV reported that from March 2009 to December 2009 the Plunge Protection Team (PPT) filed privacy act papers 70,779 times to prevent the public especially the media from finding out how they manipulated the global stock market. The PPT was established by the 1998 James Brady Task Force on Market Mechanism’s after the October 19, 1987 stock market crash. Their trading desk team is located in the Cayman Islands. Charles Bergman CEO of Trimtab (a reputable Wall Street firm that monitors all stock trades by various organizations such as hedge funds) has advised clients to stay neutral on US equities. He believes that the FRB or Treasury may be manipulating the stock market by buying up equities to push stock values creating an artificial sense of confidence in the US economy. This is why the SP500 has rallied 69% from the March 2009 low of 6400 to the 10,000 level this week. He indicates since they have been tracking stocks from 1987 to the present he has never seen a rally where individual investors are not buying stocks, US equity outflows are -$50 billion in the last 5 months a month and pension funds not interested in stocks. In additions hedge funds were losing money up until November of 2009 and people are not buying ETF’s and US equities.
He does not know who is buying stocks and creating this artificial rally. Market capitalization is up $7 trillion dollars from the low of 6400 on the NYSE last year. Historically you need $500-800 billion of new money to get stocks to rise in price or value. It seems that the stock purchase are executed in the futures market 15 minutes after the NYSE closes and shuts down at 8:45am before the NYSE opens the next morning. All the gains in the market in March 2009 have occurred in the futures market overnight. Trading activity during the day same time last year were flat, indicating no buyers. The future’s market is leveraged 10x and to get $600-700 billion of buying power you only need to inject $50-60 billion and that sum of money is beyond the financial capacity of most hedge funds and some institutional investors. People have been wondering what is on the FRB balance sheet? Bloomberg has taken the Federal Reserve Board to court to get this information to no avail. Mr. Bergman indicated that their balance sheet of the FRB has grown by $2 trillion. The US government spent $23 trillion to stabilize banks, bail out companies, rescue Fannie May, Ginny Mac and loan modifications to keep people at home to prevent foreclosures. If they are the only ones buying US debt, no one would trust them and the market would crash/collapse.
One viewer e-mail on the Bloomberg TV show indicated that the FRB have been buying up every asset class and allowing indirect buying by authorized bond syndicate dealers to buy futures with guarantees against losses. About 13/30 of the largest hedge funds told Mr. Bergman that he is not crazy and is probably correct about his theory even though he can’t prove it! Surprisingly the government can’t sell in bulk nor can it stop buying or the market will crash. The $7 trillion in capitalization for Wall Street may be creating a wealth effect as investment firms are awarding huge bonuses to employees who are spending it. Mr.’ Bergman suggested that the purchase of the toxic MBS for at least three quarters will stabilize the economy to the point where the stimulus funds can be withdrawn causing a quick crash to wipe out debt and restart the private economy. The stock data so far indicates that companies and individuals are purchasing 30% fewer stocks and are heavy sellers buying hard assets. Banks are not lending to businesses and individuals, after tax income has fallen as well as real estate values. Foreclosures and bankruptcies are at record levels. There is no indication of a recovery and if the FRB stops buying the mortgage backed securities (MBS) the effect on the economy can’t be good. `
US Government is monetizing the debt with SDR from the IMF. Interest rates on US Federal debt is low now, but if it rises could cost taxpayers $2.5 trillion per year. Total US indebtness is $100+ trillion and to pay it off economic growth must average 10% over a decade when the average is just 3% or taxes must rise 75%. Two scenarios are possible. First a deflationary spiral followed by two years of hyperinflation worse than Zimbabwe in 2008-2010 or a hyperinflationary spiral followed by a 10 year super deflationary depression. Anyway you look at it folks it’s not going to end well for the western economies!
#132 TheTruth “On BNN today, I heard that there are 3 MILLION Canadians overseas that don’t pay tax but when they retire they will come back and use the health care system they barely paid into.”
As one of those expat Canadians, we DO pay tax, not Canadian tax but host country tax for their UI, health care and pension plans we “never” will use. Don’t forget there are most likely a lot of expats in Canada from other countries paying Canadian tax for services they won’t use either.
Mike
#154…very close to the truth
the immediate question that people should be asking themselves is NOT will there be a depression…it is what is the nature of that beast (deflationary or hyperinflationary)…..I still cannot tell…it could go either way……and it is now a worldwide phenomena….
I personally feel that the hyperinflationary event will precede a final crushing deflation…but it is a tricky beast to trap.
The thing that people should get their heads around is that this is not a “decades long” event..it is a permanent and final state of affairs…..
Just like Mayan priest kings attempted to placate the Rain Gods and extorted their populace to war with their neighbors the USA (and by extention Canada) are trapped in the morass of the peak oil event….the petro dollar currency is trying to ascend as the resource dissappears but the economics of running a paper dollar economy based on the reality of a declining resource base will put such devastating deflationary pressures upon the petro dollar that petro states (like Canada) will enter permanent depression along with the “have nots” like the USA……
My entire personal focus these days is investment for dividends and cash flow…to be converted into precious metals and their vehicles (do well either in deflation of hyperinflation) and then to be moved into truly hard assets as this roller coaster to hell progresses…..
Anyone have ideas how the economics of the southern BC interior (think WEED based) will fair short term (5 years) as the real estate market collapses and tough time assert themselves.
I am looking to invest in a professional service sector business in Nelson…thus my query?
Here is the site for the vancouver special that has been renovated two blocks west of Main street for 1.5 million:
http://www.realtor.ca/PropertyDetails.aspx?PropertyID=9203028
Note: The house next door (not in the picture , obviously) is the identical house to this one without the updates…like a ‘before and after” you lost your mind.