Garth does Cowtown. Wed @ 7. Airport Radisson.
The bond gods leaned over Monday and hurled a bolt. As the smoke cleared, my email was lighting up. “Talk about skipping baby steps of quarter-points,” a worried VRM borrowed gushed, “Are they going to drop another big bomb come June/July when the BOC hikes rates? Yikes.”
As you know, today mortgage rates are higher. Led by the Royal and TD, costs are rising by a fifth to more than a half a point, taking a five-year loan to 5.85%. It was a surprise to most people – at least those who don’t read this blog or listen to Mark Carney, guv of the bank of Canada (who also sups here).
So, why is this happening? What comes next? What should you do about it?
Interest rates will be rising for the next few years. The only story is how fast. Since last winter we’ve had emergency levels of interest designed to drug you into a borrowing stupor, make you lust for material pleasures then wake up the parent of a granite-and-stainless dependent. Funny where horny gets you these days.
In other words, cheap money was a deliberate economic policy to encourage consumer indebtedness and spending, and make you forget about recession, unemployment, deficits, inflation and taxes. And it worked. We got a housing bubble. While inflation was nothing, houses increased in price by 20% and sales spiked 70%. Mortgage debt is now at a record level, household debt exceeds that in the US and incomes have flatlined. You can hear the giggles in Ottawa from here.
Rates will continue to rise because (a) inflation has been rekindled, (b) the monetary authorities are worried the bubble will burst if it’s not first deflated, (c) indebted governments will be flooding the bond market and (d) we overdid it. Consumer debt is now a threat.
How much will rates rise? Well, the central bank has not even moved yet – that is scheduled to happen in July, but it could take place weeks sooner. The prime rate of 2.25% – on which variable rate mortgages are based – could well be 1% higher by Christmas, or maybe even 1.25%. That will add exactly this amount to all variable rate mortgages, so you can kiss the days of 2% home loans goodbye. They will not return in this lifetime.
Next year, more increases. Eventually the prime rate will double (I told you that months ago), and then travel a bit north of that by some time in 2011. This will cause rape & plunder in the housing market, while not being enough to make a difference to savers with their brain-dead GICs.
In fact, the housing bubble’s now officially dead. It may takes months for this to be reflected in prices, but there’s no longer any fog on the mirror.
This also shouldn’t surprise anyone. We’re in a jobless recovery with no income growth, rising debts, incompetent bankrupt governments, tapped-out borrowers, average houses average people can’t afford, the looming HST and a society in which the MSM, the mortgage lenders and the house-humping real estate industry willfully created buying panic. The next stop will also be no surprise: negative equity.
But the big question I was asked today: what should you do about your mortgage?
The bankers will be on the phone to you soon ‘suggesting’ you lock in, ‘for your own protection.’ Have none of it, if you are in a cheap VRM. We know why the lenders are saying that, since they count on scores of people now rushing in to voluntarily increase their payments. Once again, they play the emotional card, consistently suggesting actions counter to the best interests of Canadians.
A prime-minus VRM is a gift. Keep it. The Bank of Canada rate would have to soar by more than 200 basis points (2%) by Christmas for you even to consider locking in. And even then you would be saving money staying variable. In fact, the typical prime minus one half borrower would be better off staying put until the prime mushroomed almost 4% above current levels. You’d still be paying less a month.
And a prime rate of 6.25% is not going to happen for two, three or perhaps four years. Any sooner and you could mop up the economy with a Swiffer.
Finally, what can we expect for real estate now?
I answered that a few days ago. The market’s already entering a correction. Prices will slowly start to turn, and averages will be lower by the end of the year. The bubble markets – Vancouver, Calgary, Toronto – are where the most heartache will befall the speculators, the casual condo flippers and the newbies with their 5% sacrifice.
In the next few days, the MSM and its talking heads will tell you to expect a ‘more balanced’ market as a result of this even, and that price increases ‘will flatten.’ They wish.
Over the last five years we’ve all been given a very clear, precise and close view of what happens when a middle-class North American real estate bubble deflates.
I hope you were watching.
191 comments ↓
“…you can kiss the days of 2% home loans goodbye. They will not return in this lifetime”.
Come on, Garth, you aren’t that old! The next generation of fools is only 20 years away. You’ll make it.
Looking forward to seeing you scare some sense into people when you hit Saskatoon on Thursday.
Break out the Cristal!
You had best take protection with you when you visit Calgary.
(e) many countries are now bankrupt
- http://news.bbc.co.uk/2/hi/business/8592647.stm
6.3% yield on 10-year bonds sold
5.9% yield on 7-year ” ”
(f) when 18 yr olds are buying their first home with parents financing and backing you know there’s a problem (from yesterdays Mississauga’s video link)
Its bloody well about time !
Frikin A Garth.
You are declaring the bubble officially over. Glad to see you black and white assessment.
I concur.
And the market will soon too!
Yippeekiyay!
OHMYG-D!
…Thousands of Lemmings are lined up and jumping off Hongcouver bridges!
…Thousands of Moscovites Mafiosi now readying their move to Hongcouver…5.5 million subway commuters there in a standstill…
…Garth, you speak with forked tongue, keemosabee.
“”Interest rates will be rising for the next few years. The only story is how fast.”"
“”The next stop will also be no surprise: negative equity”"
and
“”A prime-minus VRM is a gift. Keep it. The Bank of Canada rate would have to soar by more than 200 basis points (2%) by Christmas for you even to consider locking in. And even then you would be saving money staying variable. In fact, the typical prime minus one half borrower would be better off staying put until the prime mushroomed almost 4% above current levels. You’d still be paying less a month.
And a prime rate of 6.25% is not going to happen for two, three or perhaps four years. Any sooner and you could mop up the economy with a Swiffer.”"
2012…it makes no difference…aliens are coming and they eat humans, don’t you know.
Nostradamus jr
Let the fun begin.
In keeping with the last post about “London” I had dinner with a group of people tonight. One of them, a first time buyer, purchased a new build condo in Toronto through a builder without benefit of a buyers agent or even asking questions.
Feel bad for the guy. They’ve just broken ground on it, and probably won’t be ready for occupancy until late 2011 or early 2012. It’ll be interesting to see if his lender “reassesses” things closer to closing. Supposedly he got a 5 year fixed at 3.95% but even if the lender honors that in 2 years when it closes, that won’t mean much if he has to come up with a whack of extra cash just to close because the lender won’t lend the amount they’ve agreed to several months ago.
I think we all know how this’ll end.
You’re right Garth about people who have VRMs and are talking about locking in. I heard the same thing from 3 people this afternoon alone. It’s shocking just how un-savvy some people are with their money, and not all of them are people who rolled 25,000 or 30,000 in credit card debt into their mortgage to “consolidate”.
Garth,
This is a little off topic but did you know you and your tax avoidance strategy of getting money out of an RRSP and into either a TFSA or a non registered account with capital gains earning investments are getting slagged in the “Investment Reporter”. They refer to it as a tax gimmick that Revenue Canada may not OK. I just laughed when I read it. They are preaching putting as much in your RRSP as possible before anything else.
Keep up the good work. We love your message.
Gary T in Kelowna
Oh hear that Nost? Interest rates are rising? I thought that you said it was the BOC that set mortgage rates? Wrong again. You should have predicted this 500 years ago!
Garth, everything you say is true and logic is on your side. But it will take longer than you think for this thing to deflate and it may not deflate at all. They will pull more rabbits out of more hats to keep it inflated because deflation means disaster. And the general population is brainwashed and most people want the bubble maintained so that they can feel good and feel that they are getting rich. It will take a sea change in the way people think to deflate this thing and that may be a generation away.
Post#7 Nosty Jr
Thousands of lemmings are lined up and jumping off Hongcouver bridges.
It’s okay Nosty, they aren’t hurt, because they are all landing on taxpayers.
Imagine an over-correction in prices, imagine bagging a house for only 1.5 times avg CDN family income. haha.
the end of the spender grasshopper is slowly coming, ants rejoice!
happy day happy day ~
@#11
That’s just a complicated way of phrasing the old “It’s different here” argument. Deflation will occur, as it did each time in the past when the fundamentals were violated this severely.
Seems like just a couple weeks ago we were reading about the BMO lowering their 5 yr fixed to 3.75 from 5.25 and now today we hear that RBC and TD are raising rates .60 to 5.85 for a 5 yr fixed. Was in to the TD talking to one of the gals there regarding the proposed increase and questioned her on the 3.75 rate. She said, “that’s the discounted rate, the other is the posted rate”. So what gives? Told her this does not make sense. She said that the bond market determines the mortgage rate of 5.85 but says it could just as easily go back down. Now I get to thinking, what’s this little game all about? Maybe the dudes with the prime minus VRM’s did not fall for the bait of the 3.75% so they decided to throw a scare in them with a nice solid .60 increase in the 5 yr rate to see if that would get them moving. Don’t think it will work but I also think it could backfire on them in that we could see a rash of recent buyers decide to put their shacks on the market and get out while the getting is good. Yep, could be a stampede in the making and then watch them lower the rates again. Gonna be a lot of “For Sale” signs going up soon at a neighborhood near you.
Hi Garth,
This inflation has been created by pumping money into the system. So, it is not created by the market itself and is artificial. When the rates go up, this indebted system will collapse and the inflation will turn into deflation, and the recession will turn into depression. And the rates will go back down again.
#11 Debt Is Invisible
…But it will take longer than you think for this thing to deflate and it may not deflate at all…
It is called the law of gravity. What goes up must come down (without fundmentals). Canadian’s are debted up to the eye balls. There is no wiggle room. However the government will soon ask us to find that room because taxes and service costs will increase. Along with this interest rates, insurance, fuel and food price increases are not far behind.
Oh did I forget to mention the zero wage rate increase this year? People will not view a house as a “must have” soon. It is going to be a heavy burden.
I already know people who are underwater in certain markets: Kelowna, Vancouver. Just tack on that CMHC fee to your mortgage and you’re drowning before you even step foot into your new place!
It can only get worse (better) from here.
Bill said:
“Absolutley right Mike. Closest speculation would be the depression in early 1900’s. Only difference now is that the whole world will be brought into it at different stages. The push for this global economy was the start of our long downward spiral which we will be heading into.
Most people fail to realize that government officials do not run countries. Big business does.”
http://www.greaterfool.ca/2010/03/28/condo-cowboy/#comment-67978
A reasonable synopsis.
One quibble…your quote was
“All for the sole purpose of obtaining more wealth and control, driven by greed.”
I would suggest that that might be
“All for the sole purpose of obtaining more power and control, driven by greed.”
after all…when credit is created at the stroke of a key, (at compound interest) what value has “money” (bank credit)?
“Wealth” is merely a means to an end.
Standard disclaimer: IMHO
Yeah, rates are rising, there was a 50% chance of guessing correctly on that. THere was only one direction for them to go-up. Having observed that, the US is in such bad shape that the Fed will not jack rates up too much or too fast, there are too many unemployed Yanks and too many foreclosures. As the dollar is at parity, Carney knows he can’t hike rates much higher than in the US, or he’ll have a bigger problem on his hands. Based on this, I can’t see a dramatic difference in the housing market, except for the people short-sighted enough to assume 35 year mortgages and who are currently barely able to make their payments. We have to remember that many people who bought 3-5-10 years ago, are not streched too thin and have already doubled their money. They are not going to foreclose if the rates increase by a point or two.
To back up my post:
“Last week, the Federal Reserve concluded its two-day policy-making meeting, say- ing that the weak economy and subdued inflation “are likely to warrant excep- tionally low levels” for interest rates “for an extended period.” S&P Economics expects the Fed to hold the funds rate stable until the unemployment rate declines more consistently. As such, S&P does not expect the Fed to move until
the third quarter or after the November election.”
S&P Quarterly Outlook
R.I.P. Vancouver real estate bubble.
~ Feb, 2002 – Apr 19, 2010 ~
#11
Are you really that naive?
Financial reality will trump emotional exuberance EVERY TIME. Get ready to learn something about this over the next 6 to 12 months.
The real players in the markets are the Bonds guys, they are the ones that set the rules, so to speak, as we found out today.
The market will delfate faster then people realize, we have brought so much demand forward these past 9 months that their are simply less and less buyers in the market. Meanwhile supply is set to sky rocket.
Immigration or rich foreign money will not be enough to save the day. Look at the last little while at our bubble check list.
Housing up 20% YoY- 20 times inflation– check (think of various bubble stock market examples, nortel, bre x etc..)
Average house price up at 5 times family earnings, 10 times for Van city– check (think of crazy P/E ratios in said stock market bubbles)
Crazy over bidding driving the market up, not based on any real fundamentals–check (think of the unsupported rise of stocks in the dot.com bubble)
People waiting in week long lines just for a piece of the action, remeber the X2 condos; in toronto or the Daniels townhomes in Erin Mills– check (looks like California in 2005)
Interest rates rising–CHECKMATE
People in debt at the highest levels ever– check, this effects affordability across all verticals in a consumer driven economy like ours.
Make yourself comfortable and get your popcorn out, this is going to be one long movie.
As you know, today mortgage rates are higher. Led by the Royal and TD, costs are rising by a fifth to more than a half a point, taking a five-year loan to 5.85%.
__________________________________________
A good start indeed.
Hopefully, this is just the beginning.
So Danny Boy and everyone else in negative equity will just declare bankruptcy and then end-up renting for the rest of the decade (just like they should have been doing in the first place). Ho-Hum.
Even if there were some more severe repercussions for dopey RE defaulters, our justice system would probably just deem that they need ‘treatment’, house them in the Olympic Village, pay their room & board as well as tuition for an MBA or PhD in Economics.
Meanwhile, it’s buffet time at the taxpayers’ trough for the RE lawyers and bankers.
# 11 Debt is invisible you are a dreamer but the housing crash nightmare is coming for you. The US is more powerful then Canada and even they could not stop the housing crash. Canada housing bubble is now the biggest ponzi in the world. The BoC does not set long term rates, the bond market does and since all the world governments are going into crazy debt, the long term rates will continue to go up. I don’t think garth or anyone else knows just how fast and high rates will go? My guess is higher and faster then anyone will believe. The housing crash is here and now . POP………WHAT WAS THAT?
I have a VRM at .3 below prime – Garth you have been preaching for months to lock in – I tried at Christmas however the bank talked me out of it because they thought I was nuts to give up a low rate. The rates went down from 4.19 to 3.85. Last week I decided enough and went to lock in my rates based on your blog – it didn’t happen by odd circumstances – by what you are saying now I should keep my VRM – what gives?
A prime minus VRM stays. Prime plus will need to get locked by end of year, depending on the premium. — Garth
Well, is this the other shoe?…..
http://www.cnbc.com/id/36085517
Mid size and little banks don’t have the lobbyist to get the bailouts…….
This lady was in the Michael Moore Show Capitalism: A love story.
http://www.michaelmoore.com/books-films/capitalism-love-story
Good flick to watch.
Kelowna has so many listings over $850,000 they do not display on MLS.ca.
Check it out!!
For a small (town), it is not looking good??
“Are they going to drop another big bomb come June/July when the BOC hikes rates? Yikes.” — Plus HST kicks in along with the second half of the year. Let’s get the party started!
“. . . cheap money was a deliberate economic policy to encourage consumer indebtedness and spending, . . . You can hear the giggles in Ottawa from here. . . Consumer debt is now a threat.”
Yes, it was a well pre-planned event, but sheeple had to be hypnotized first, have their wool pulled over their own eyes so reality became blurred vision. Freedom of choice allows people to participate in rabidly stupid things.
Consumer debt is a threat to whom? If consumers can’t (or won’t) pay their debts / mtgs. back with job losses and bankruptcies, all levels of govt. will deteriorate.
Stag- and hyperinflation, daft politicos who choose to serve outside interests while their country is hammered down like a nail into wood pose greater threats along with GS, JPM et al — these are the loonies running the asylum.
——
Regime change in DC? With the US broke and spending artificial money beyond belief, this is a good, short article.
Change BS everyone can believe in! More jobs headed east.
Talk is cheap; actions speak louder than words so don’t believe a word of this.
Comparisons — Ontario vs. California plus banks.
See headline for #1. Imagine my complete lack of shock.
Call it as it is.
Gold market ponzi scheme? Probably, but they’re all in this together, and the politicos let them get away with it.
St. Al of the Goregonezolas — where are you? THIS AIN’T SUPPOSED TO HAPPEN!
Hadron Collider. Imagine if it was able to smash back holes! Then we wouldn’t live in a void again!
Credit is suspicion asleep…….get ready for a massive bust….in Canada the debt levels are now much higher that the U.S. When the wheels fall off this one it’s going to be biblical!
I love reading this blog! So many great tips and recommendations. My friends (those who haven’t bought yet) and I are going to see you on Wednesday & I’m looking forward to that.
More and more people I know are diving right into the market. One just bought last week. Another is thinking of buying by summer / fall. They still have this fever and notion that prices will ALWAYS go up, there will ALWAYS be equity gained. They have never heard of negative equity because it doesn’t exist. I’d be interested in hearing more about negative equity and how it affects refinancing of mortgages.
I’m so excited about this correction, and it’s about time! Plus, I’m so glad people (on this blog) are spending time researching about the market before making a purchase. I’d never feel comfortable taking on such a huge loan without some research…and unfortunately, most people don’t do their research and dive right in and carry huge mortgages.
My landlord recently offered to sell his condo to me and I politely declined. And that was the same day that you had posted a landlord offering to sell his house to the couple who have been renting a basement suite! My jaw just completely dropped.
Anyway, in conclusion, there is just no way of convincing and changing people’s minds to wait it out because they are all scared they will be forever priced out and they are completely convinced prices will go up forever. Plus, they don’t take the time to research, so pooey on them.
Glad to hear that the bubble is officially over.
I concur with blogger #11. It will take another unexpected cataclysmic financial event to shatter the steady slowdown in the real estate market that the government and the BoC have orchestrated. Seeing interest rates climb 1 percentage point isn’t going to cut it.
#11 debt is invisible
There are no more rabbits to pull out of the hat, it has crested and the party is over, does not matter scratch what the general population thinks, never has..general polulation is glued to the tv screen and has no idea what is coming..
Sing Tao Daily in Toronto just published headlines targeting Mainlanders about they are brings billions of CAD to boost up our real estate market and they will buy up what they can buy in Canada in Metro areas (specially vancouver and toronto), the spokesperson said mainlanders viewed long time ago that making 10 % in real estate in canada is not viable, however, they said for the past years, they are enjoying the growth and will send more monies here, also indicated that, they do not worry about FINTRAC, not worry about millions of dollars in scooping up real estate, not needing a mortgage and willing to buy from china (do not need to come in) and only RISK that they are currently facing is NOT GOING UP IN PRICE !! This seems a myth as being talked about previously in some other posts, however, this seems to be reality now or what we call cheerleaders !!! A new mall will soon to be build and invested by mainlanders will now be sell at $ 900.00 – $ 1200.00 per sq ft and radio pumping it all day and said this preview was just opened this wkend and lots of units were SOLD and lots of people believe this will go up even more..so, as to Mainlanders, who care about interest rates as I can made 25 % in 1 day…
GREAT GLOBAL RESET – Timeline 10 years to trough, 10 years of Muddle Through.
Good luck to anyone selling on the way down, even if deflation is at a snails pace.
Boomer buckle up!
#11 DiI
While I have no doubts that govs will pull out all the stops they possibly can to keep the debt wheels turning, they will eventually come flying off the economic train causing it to wreck. It will be a long slow train wreck, and anyone anticipating a recovery within a decade is delusional.
As far as people wanting to feel good and feel like they are getting rich, they will eventually get a hard lesson in life 101.
If the 2008 correction was any indication as to how fast things can turn, I’m anticipating that once the correction finally begins (and I am again not ruling out the gov stepping in with some other short term magic wand), it will be hard and fast for a year or two, followed by many years of gradual declines.
Of course this may vary a bit depending on what part of our large country you live in, but Vancouver and TO are in for a real shocker.
This bubble is done. I can’t see it inflating into rising rates like this now. The stats are a full quarter away plus to prove it as Garth atests. This prudent move by TD and Royal Bank will prove itself wise in hindsight. We can look at all the self interest angles we like with banks encouraging 5 year terms with a rate hike, but the bottom line is this is a good call by the banks to step in and do something on their own.
Its late… don’t misread me, but its still a good call. Its in everyone’s best interest that interest rates pop sooner than later as the longer sales sell at these premium zenith peak values, the more people get credit crunched out of being consumers when rates rise draggin our future economy and the worse and longer the second recession would have been (and could still be) when rate hikes hit. Someone had to step in since this government shamelessly wouldn’t with their looney tunes CMHC regs and thats good and bad. Good that our banks had enough wherewithall to put the customer first for a change and bad because our elected public officials couldn’t do the same far sooner and for all the wrong reasons.
Gordon M Nixon & Edmund Clark, Kudo’s and bum slaps for your efforts in the banking field today. Just when I was beginning to lose hope, you both acted in what I believe to be everyone’s best interests. Nicely done!
Getcher “vultch” hats ready….
because deflation means disaster
I’m not sure if you’re saying you believe this, or that governments believe this, but deflation is a completely natural phenomenon based on supply/demand of money and credit and is good in many ways (summary: stuff gets cheaper). It’s only a disaster for the heavily indebted. Governments can print their way out of it (consequences be damned) so it’s all the mindless debt slaves that would suffer. Savers would rejoice. Bring it on!
April 19th is right around the corner with new changes in how rental income affects mortgage qualifications. As I understand it, only 50% of your rental income will be used for mortgage qualification. This 50% will be added to your income and this will be the figure used to determine how much mortgage money you can receive. Eg $1000 a month rental, only $500 will be used ($6000 added to your income of $80,000 is now $86,000). $86,000 is the new figure used.
Prior to this, 80% of rental income from a basement suite or rental property was used. Rental income of $1000, $800 would be counted toward mortgage payment. Therefore, a person would qualify for a much larger mortgage. Huge difference!
In B.C.’s lower mainland, many owners depend on rental suite income to qualify for their mortgages. Is it true that only legal suite income can be used?
#1- Try forty years. If humanity lasts that long.
Real estate price deflation in Canada is not some airy fairy thing that won’t happen as “greater fools” try to state. I’m still surprised at how so many people, ones you’d think were well educated, think it just won’t or cant’ happen here. Look folks, if the USA the said to be bastion of free markets (cough cough, yeah right! It never was and it never will be!) has seen its real estate prices drop off a proverbial cliff with all the consumer and social devastation as a result, then there is nothing to keep it from not happening here.
Everything we read, see or hear today and over the last what 6months to a year in ” It’s different here Canada” was the same crap said in places like the USA and Britain to name two of our peers.
WE ARE NOT DIFFERENT! and we are going to prove that we are just as STUPID!
A society built on ever more credit made available to then equal more and more debt, with a public who show little knowledge over what money really is and has little understanding over the power money (good and bad) including money via debt creation is a society that will CRASH AND BURN!
There is no true growth in our economy folks and has not been for oh over 25 years or so. Only each of us and all corporations and governments just wringing up our collective credit cards. That can’t and won’t go on forever folks.
BoC can not raise rates aggressively like Canada exists in some kind of a vacuum. This would cause our currency to rise while the rest are falling, essentially taking the legs out from under our economy and throwing us back into a severe recession. Canada can’t just leap ahead with rate hikes one after another while the U.S is locked into a negative interest rate death dance. Each 1% rise in interest rates adds 100 billion to the U.S interest payment on their debt so higher rates are not in the cards. Canada is like the little Chiwawa on a leash, we can’t just go leaping out ahead when our U.S master is holding the other end when it comes to 70% of our exports. This is a race to the bottom for all currencies and we will play our part. The BoC simply telegraphing that they will raise rates by June tells me that is exactly what they won’t do. The incestuous relationship between the U.S and Canada must continue whether we hate being the Chiwawa or not. There are 19 countries which are bankrupt, next year there will be a meeting of all nations and debt will be defaulted on and currencies will be devalued and re aligned similar to the Louvre Accord in 1987 or the Plaza Accord of 1985. This global finacial crisis has all be engineerd to consolidate power into fewer and fewer hands and bring about a world government with a new global currency run by the same banking criminals who have been manipulating interest rates and creating bubbles for the past 100 years.
Excellent post Garth..the inevitable is starting to happen.A fine fix our country is in….the recession destroyed many jobs and brought hardship to so many who had no savings… now many more who had savings and believed the impossible gambled them to acquire cheap interest mortgages face impending disaster.
#3 squidly77 wrote:
“You had best take protection with you when you visit Calgary”.
Are you, Squidly77:
a. Comparing Garth to Ann Coulter?
b. Threatening Garth?
At best Squidly77 you are a strange creature.
Seems every 5-10 years one sector inflates into a bubble. Now that real estate is on the way down. I wonder which one is on the way up. Judging by all the doom and gloom/fear tactic propaganda presently in MSM….Well seems like they’re preparing the herd for the next move
Okay, so many of you were right about mortgage rates going up but we’ll have to wait until summer to see if the second prediction (BoC raising rates) comes to pass. I for one am not prepared to celebrate the end of the housing bubble (and its many dire implications) just yet. The Australian central bank has been in tightening mode for awhile now and the last I looked their housing market was still in a bubble. Also, please see Spain for what happens after a gigantic property bubble, masking underlying systemic problems for years then goes poof.
#29 Big L
Nice post (especially the lap-dog bit) though I would like to think we are heading in the opposite direction of one world government and currency. How boring would that be!
This fraud makes Bernie Madoff look like a school kid stealing bubblegum from the corner store. Look out above and below!
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/3/30_Andrew_Maguire_%26_Adrian_Douglass.html
Well on that note…I’m off to make some homemade bread …getting back to SELF SUFFICIENCY is looking more appealing all the time. Did you hear in MSM today, some respectful (ya right) citizen, put bits of needles in baked products.
BTW, Has anyone else noticed how in many of the schools in our great country they removed Home Economics and Shop. God forbid they give children skills to ensure self sufficiency. It seems as long as they can gawk into some scientific screen ie. computer, blackberry, calculator, etc.
My grandfather only had a grade six education, but was highly intelligent, went on to be a businessman several times over, was very self sufficient, was not wasteful therefore ensuring he was a good provider, and at the same time was respectful of others and the environment by these good habits.
It is sad to think in our modern world people are being brainwashed into believing they have no merit intellectually unless they have a University education.
Children are not being prepared to think quick on their feet anymore….Sad.
Where are the elders stepping up to the plate.
Q: Does anyone know what is being forecast for the US / CDN exchange?
We’re still sitting near-par, and historically this has not lasted long.
However, we’re seeing some unprecendented decline in the US on various levels.
Tx!
Ah, the conscience issue. While the flagrantly arrogant realtors, speculators and ‘yeah that house is worth a whole bunch of cabbage (ugh… referring to money (I hate that term))’ – types are getting justice…
I really don’t want to see anyone go bankrupt. I don’t want the middle class ruined. I don’t want to tell anyone ‘I told you so’.
I just want to be able to afford a house.
This blog, when it talks about the bubble, refers to housing real estate. In the US the other bubble is hitting the fan now with commercial real estate.
Garth what about the commercial real estate market in Canada? Is there a bubble or policy echo forming there too? Or is the bubble exclusively in housing? Good blog. Cheers Pathrik
I know this is off topic and only if you’ll allow it Garth cause this is just creepy, I’m not sure if it’s Canada yet:
http://www.youtube.com/watch?v=t4ZdgIk8f_o&NR=1
Actually `key man insurance`is an established practice which protects a company in a limited away against the death of a person who is integral to the organization. The company pays the premiums and accepts the benefit in case of death, which gives it more capital with which to try to sign on a qualified replacement. I have worked in several instances where such insurance on my life was routine. Michael Moore needs to get out more. — Garth
When the jobs report comes out very soon in America and in Canada interest rates will plummet and the long bond will soar in both countries. Be in long term bonds for the next week or so.
I used to be quite short-term and medium-term bearish like most people here, but I have recently changed my mind. I think the majority of people in this world are not smart enough to realize magnitude of the problem, so they will go about their business as usual. They have gained a false sense of security from the fact that each major market correction (housing, equity or bond) recovers in relatively short order. They do not understand that the government basically socializes the losses by borrowing and printing to bail out and stimulate, resulting in inflation.
The disaster in real estate that most people here are expecting imminently will not come for many, many years. The element of surprise is not in play like it was for the US. The US did not even suffer as they should have thanks to the knowledge of Japan’s prior crisis. And Japan didn’t suffer as they should have thanks to the lessons of the Great Depression and the magic of fiat currency.
As long as there are simple financial minds on this planet that do not comprend the problem, the governments and central banks will exploit this weakness. They will do anything they can to hide the problem and protect the wealth transfer apparatus that funnels printed and borrowed money from the middle class to the illuminati.
I know that this will eventually fail catastrophically, but not anytime soon. Real estate in Canada will deflate slowly and not by much. We are headed for a very soft landing.
Garth’s advice to stick with a Prime-minus VRM needs to be tempered.
The question is not where will rates be at Christmas — it is where rates will be when your renewal comes up. If you have a Prime-minus VRM with 3 or 4 years left, it might be worth locking in now. You can still get a 5-year fixed for under 4%. That’s ridiculously low by any measure. Sure, for the next year you might “lose” money, but for the following 2 or 3 years you would make money.
Run a spreadsheet to see what your own conditions are depending on term remaining, rate expectations, etc.
Your advice is wrong. To lock in a prime-minus now is to throw money away since rates will not rise enough to justify paying such a huge premium for several years. Think with your brain, not your gut. — Garth
and on top of all that and this …..
Ontario is looking like the basketcase of North America!!
http://bit.ly/9UPdAw
BigLebowski Re #47.
I’m with you. The grand puppeteers of this world are drooling for this anticipated event to happen. Forming a one world government, one world police state through blind, bought and paid for self righteuos egotistical managerial puppets of this regime. This has been tried over and over again as history has shown.
‘ Order out of Chaos” is the motto. Makes sense, unless: the choas is carefully orchestrated by these same people who in turn will step in with their final solution coming across as our saviours. Sad thing is
most people will not see this coming. Remember this now has gone to a complete global level. Not to be insulting to the rest of the world: We, on this side are the last strong hold of stability. They cannot just break us over night. We must be chiselled away slowly . A death of a thousnd cuts. More must still come through increased debt load, reconditioning of our armies by telling them that our next set of terrors will come from within not abroad. ( Preparing for any revolts of the general populous who’s backs can no longer take the strain of being overburdened through taxation)
But then again most people would say: This could never happen over here, we are a civilized country, it only happens in less fortunate countries.
Everybody is so concerned about making money. What happens to your money when a new world currency is brought in. Won’t happen you say. What about the south during the civil war. Won’t buy the arguement that we had to have the one currency in a country.
Is it so far fetched to believe that this will happen on a global level.
#3 squidly77 wrote:
“You had best take protection with you when you visit Calgary”.
Are you, Squidly77:
a. Comparing Garth to Ann Coulter?
Forget Ann Coulter….. Nicky is gunning for Garth!!
“Flack jacket please!!”
hi garth…would you recommend buying HTD? the bond bear ETF.
I don`t suggest securities for people I have never met. You might be an 83-year-old Wal-Mart greeter. — Garth
OT but important: The Harpoons are giving away our rights and freedoms right now in secret negotiations with Europe and the US over ‘ACTA’. The Harper Government represents the greatest threat to Canadian democracy in our history – there is nothing they will not give away for a pat on the head and a milkbone from their corporate masters outside of this country.
EU Demands Canada Completely Overhaul Its Intellectual Property Laws
“Late last year, a draft of the European Union proposal for the intellectual property chapter of the Canada – EU Comprehensive Economic Trade Agreement leaked online. The leak revealed that the EU was seeking some significant changes to Canadian IP laws. Negotiations have continued and I have now received an updated copy of the draft chapter, complete with proposals from both the EU and Canada. The breadth of the demands are stunning – the EU is demanding nothing less than a complete overhaul of Canadian IP laws including copyright, trademark, databases, patent, geographic indications, and even plant variety rights.”
Beyond ACTA: Proposed EU – Canada Trade Agreement Intellectual Property Chapter Leaks
“Beyond ACTA: Proposed EU – Canada Trade Agreement Intellectual Property Chapter Leaks
Canada’s participation in the Anti-Counterfeiting Trade Agreement negotiations has understandably generated enormous public concern as leaked documents indicate that ACTA would have a dramatic impact on Canadian copyright law. The U.S. has proposed provisions that would mandate a DMCA-style implementation for the WIPO Internet treaties and encourage the adoption of a three-strikes and you’re out system to cut off access where there are repeated allegations of infringement.
Yet it would appear that ACTA is actually only part of the story. Canada is also currently negotiating a Comprehensive Economic and Trade Agreement with the European Union. The negotiations have been largely off the radar screen (and similarly secretive) with the first round of talks concluding in October in Ottawa. Intellectual property figures prominently in the agreement. In fact, the EU proposal for the IP chapter has just leaked online and the document is incredibly troubling. When combined with ACTA, the two agreements would render Canadian copyright law virtually unrecognizable as Canada would be required to undertake a significant rewrite of its law. The notion of a “made-in-Canada” approach – already under threat from ACTA – would be lost entirely, replaced by a made-in-Washington-and-Brussels law.”
If this goes through, Mr Harper can claim his rightful place in history – the man who sold Canada for 30 pieces of silver. My contempt for the man and his Party is absolute. No wonder they have to keep this stuff “secret”. I hang my head in shame that I ever voted for that walking sack of ass-kissing corporatist feces.
Shame on the Conservative Party – who are your real employers, traitors?
Get ready for the “empty house fires” whioch will soon start again since homes will not sell. We had “empty house fires” almost daily during the last short term crash. Watch for these “empty house fire” to happen much more often. It’s not different here. POP……………..WHAT WAS THAT?
Even before the rate hikes:
http://www.theglobeandmail.com/report-on-business/many-struggle-to-afford-their-homes/article1516948/
Your advice is wrong. To lock in a prime-minus now is to throw money away since rates will not rise enough to justify paying such a huge premium for several years. Think with your brain, not your gut. — Garth
Sorry Garth, but I’m not wrong. Say you have Prime minus 0.5=1.75% currently. Rates only need to go up 2.15% to be higher than today’s ING 5-year fixed (3.89%).
Earlier you said we should expect that Prime will double (I told you that months ago), and then travel a bit north of that by some time in 2011.”
In other words, you expect it to be at least 4.5% by 2011, right? Is my math wrong, or is 4.5% bigger than 3.89%?
Depending on how much term you have left, and how long you think rates will remain higher than 3.89%, you will lose money by sticking with a VRM.
That’s not thinking with my gut, it is thinking with cold hard numbers and a handy excel spreadsheet.
The prime will not double this year. Anyone locking in a prime minus now will pay for it. The better strategy is to accelerate principal payments with the extra money, not pee it away in bank interest. — Garth
@41
don’t fool yourself. This move was coordinated with the government and the Bank of Canada
#23 Best place on meth on 03.29.10 at 10:38 pm
“”R.I.P. Vancouver real estate bubble.
~ Feb, 2002 – Apr 19, 2010 ~”"
1/
…Methinks you mean….
R.I.P. Toronto real estate bubble
Feb 2009 – April 2010
2/
Coincidence/Collusion?….TD/Royal Banks raise similar rates & terms on 4 & 5 year rates?
3/
Garth, when will you bite the bullet and tell your readers Ontario is toast… and owning a home in an around Toronto is financial suicide?
…Ontario carrys @50% more debt to GDP per capita than does California.
…Yet Canada only carrys 69% debt to GDP per capita vs the US carrys 108% debt to GDP.
…Ontario is toast and you blanket sweep your punditry across Canada.
With respect…The fiscally prudent are moving to Western Canadian major cities…but you cant see it from your windowless bunker.
Nostradamus jr.
There is a frighteningly large portion of blog commenters here who are positively salivating at people getting into financial distress and losing their homes.
Sick puppies you folks.
Yes, these people overextended themselves… and there will be real consequences to that. Like raiding their kids education savings and their own retirement savings, to start with. Which just means more taxes for you and I to pay in the future in order to bail them out of THAT predicament.
At least when they’ve overextended themselves now, they’re not hurting anyone but themselves (outside of the chance that CMHC needs to call on the taxpayer).
If I were all of you I’d be hoping for an extremely soft landing, and very very gradual increases in rates, or else we are all screwed.
Mortgage editor says only 3-5% of people could not afford a 3% mortgage increase right now.
What else would you expect? — Garth
re # 12 Dan from Victoria
I laughed outloud at your post, thanks for the smile this morning “…landing on taxpayers.”
Isn’t it so charming that a mere day later after the rate hikes, both the front pages of the Toronto Star and the G&M have captions reading “Many struggle to afford their homes”.
So this the moment where the media turns the other way.
On a personal note we’ve been watching 2 homes in the burbs.
First house listed several months back at 319K, is now down to 269K. No bids.
Second house, listed at 298K last month, now down to 279K, with the sellers agent constantly phoning saying they’d take under 250K just to get out b/c the sellers desperately have to move.
I would like to see a Debt prison for those who I consider financial terrorists who together can bring down an economy. Look at the US where the debtor /financial terrorists brought down the US. Now in Canada we have financial terrorists/ debtor’s who with little or no money bought overvalued homes which they can not afford or never afford without any care. These financial terrroists need to be punished for their financial crimes against humanity. If we had a debtor prison their would NEVER EVER be another bubble again. People would think twice about going into debt.
Re #56 Diana ( Garths comment on key man insurance)
From my interpretation of this clause:
Joe is driving in to work one day thinking about the economy and effects it has had on the company he is working for.(loss or revenues…) Being in one of the top teer positions of the company he has a lot on his mind.(must have a big policy being so important). While driving Joe was involved in a horrific accident.(accident was not his fault) He did not survive. Company has huge funeral for Joe.
Thank God they insured Joe. Lets start looking for replacement . This is where it start’s to get confusing. So now they have their insurance money to go hire someone else.
Always thought people applied for job positions. Only ones I know who are paid and given money for certain positions are called ‘Lobbyists’.
#70 Ivan,
I agree with your sentiment. I certainly take no joy in watching it begin even though I have been one of many predicting it for months. I do admit a sense of relief in that soon the bubble insanity will be over but I am no better off.
We will all be collectively poorer as a result. Even if your position relative to others rises it real terms it has fallen.
My only hope is that the gov’t doesn’t try the silly tax credits and other measures like in the US. None have worked and they just end up costing everyone more money. They need to let the market crash and then we need to rebuild from the ground up.
Hopefully (wishful thinking here) we can now concentrate on trying to restore productivity, innovation and meaningful job creation to our economy.
The decade running from 2000 to 2010 will be seen as the bridge between the dot-com bubble to the housing bubble and period in time where we valued paper money wealth over sustainable wealth.
When will we learn?
#74 Dan,
Why don’t you start the debtor’s prison with the current PM and Finance Minister for opening up the CMHC rules? A great place to start as we sift through the banksters.
Forget Ann Coulter….. Nicky is gunning for Garth!!
Heard Nicky on the radio yesterday talking about buyers getting in before rate hikes.
And the Calgary Herald’s RE lords have a BIG counter-offensive splashed front and center
http://www.calgaryherald.com/business/Fear+rising+interest+rates+causes+jump+Calgary+housing+sales/2741607/story.html
Your visit to Calgary is perfect timing and as usual all is good in cowtown. We have the beautiful Tamara ready to sell you a house if your not satisifed with Nikki.
http://www.calgaryherald.com/business/Fear+rising+interest+rates+causes+jump+Calgary+housing+sales/2741607/story.html
That would enrage Nikki. Sorry, I’m taken. — Garth
# 58 Realist
Perhaps consider changing your blog name as you are anything but realistic. The first part of your post presumes that the average person’s attitude somehow makes the unsustainable, sustainable. We’ll see.
An article on the question of “When we will Learn” courtesy of Canadabubble.com. Let’s hope it is true that we learn after 2 mistakes.
http://www.housingwatch.com/2010/03/29/best-protection-against-another-housing-bubble-a-generations-p/
# 74 Dan
Agree completely, but realistically the only way these pricks will pay for their crimes (yeah, I believe they have committed GREAT CRIMES) is if society really disintegrates and the lynch mobs come for them. Beyond that, the politicos will protect the pigmen (banksters) and the average Canadian will pay for it all. People get the government / power structure they deserve and it is often a relection of the charachter of those who elected them.
#3 Squidly
“You had best take protection with you when you visit Calgary.”
Hopefully you don’t run into this guy…
http://www.bobtruman.com/Squidly_photo/page_2267545.html
We will never get our well payed middle class manufacturing jobs back. Big business has outsourced the jobs to countries where a bowl of rice is standard pay for a days work. Only way to start turning around economy over here is to put huge tariffs on these countries, in turn recapturing our lost employment. Wonder what would happen if people would started calling our Primeministers office telling him this is what we want “SINCE THEY WORK FOR US”.
Spin doctors would surely create another election. Only this time prior to voting we would tell them to put “NONE OF THE ABOVE” on the ballot form.
Ensuring that eventually we could vote for a candidate who would have our best intersts at heart as a country.
Now that the shoe is on the other foot check this out. A realtor arguing that the tightening of the CMHC rules and the raising of interest rates is a CONSPIRACY to end the Housing Bubble. Amazing.
http://www.yattermatters.com/real-estate/bubble-consipracy/#more-12576
Re: #70 Ivan, #76 junius
It would be quite disconcerting to know that the majority of people on this blog are truly salivating for “distressed” foreclosures. However, I’ve said it before and I’ll say it again: Foreclosures will NOT be hitting levels even close to the U.S. This is due to the nature of Canadian recourse loans. Anyone that finds themselves distressed will end up eating at soup kitchens, digging into retirement funds, borrowing money from relatives, reducing any unnecessary expenses to zero, and anything they can to basically service the overhanging debt before it pushes them into foreclosure. Yes there will be an increase of mortgage arrears to ~1%(from 0.40% now) by 2015. But that’s not even close to the rate at which U.S. experienced. The people that will be hurting the most in “distressed” sales/foreclosures are speculators and people that NEED to move for personal/career reasons. Prices will come down due to the lack of demand and over supply; NOT abundance of foreclosures. If you look at the peak mortgage arears from the 90′s bust it only reached a level of 0.80%. Make no mistake that Canada won’t feel a depression-like environment though. Once a good majority of consumers become savers and only use their disposable income for debt servicing, the true nature of this downturn will reveal itself. Also, remember disposable income is going to be decreasing significantly over the next 6 months. HST will decimate the middle class spending habits. This will increase insurance costs, gasoline costs, house repair costs, car repair costs. Basically all the fixed costs associated with daily life. Moreover on top of that auto insurance and home insurance are increasing their rates across the board AND credit card rates are going up. This is going to be a true wake up call for the generation that has yet to experience a severe credit contraction.
#55 Pathrik74
——————————————-
WHY CANADIAN COMMERCIAL REAL ESTATE IS STILL SO FIRM
We are not talking about residential real estate, which is in some form of a bubble, especially in Toronto and Vancouver. But anecdotally, commercial
real estate is holding in very well and one of the reasons could well be foreign expansion into Canada.
For a sign of what is happening in the retail sector, as one example, have a read of the article on page B4 of today’s WSJ (U.S. Apparel Retailers Map an
Expansion to the North). What does Canada offer to American companies who want to grow but cannot do it without moving aggressively to gain market
share in an over saturated U.S. backdrop? Well, as the article asserts, Canada offers “a way to expand internationally but in a market that’s closer and more
familiar than Europe or Asia.”
The prospect of more U.S. money being put to work north of the border is of course also long-term bullish for the Canadian dollar, which may be
overvalued now by about a nickel; however, at the same time, the fair-value line keeps moving higher, which is a hallmark of a secular uptrend.
In Canada, the commercial real estate market is holding in very well compared to the residential sector, which is in some form of a bubble.
David A. Rosenberg
Chief Economist & Strategist
I’ve been talking about selling my house for a couple of years in anticipation of the bubble bursting, finally about 3 weeks ago I started talking to a realtor and decluttering the house. Tomorrow I have a handyman coming over to do some exterior clean up. But I couldn’t wait. Yesterday afternoon I went outside and put a for sale by owner sign up. By next week I’ll have it on the MLS. My timing is interesting. Yesterday had the feeling that it has definitely started. Perhaps I have missed the boat. Oh well, hopefully there is still a couple of greater fools floating around. I’m just glad the house is paid off and I have a basement suite.
The Vancouver Sun had a special section on mortgages this morning. Let me summarize it for you to save you the nausea.
Buying a house is a great thing to do and now is the time to do it (but don’t get over your head, that would be naughty).
How much longer can the MSM continue its depth less coverage of RE and still maintain any credibility with the general public?
I’m not sure I would be conflating a rise in mortgage rates as an immediate precursor to falling prices. The Australian central bank has raised rates, (What twice now?), and that has not curbed enthusiasm for borrowing or housing prices, one iota. I would look to Spain as a possible road map of where we might be headed though. The economy was invincible until the housing bubble/tide went out and things turned to shite when all the “naked swimmers” were exposed. If you believe as I do that this housing mania masks a lot of structural and systemic weakness in our financial system better start seeking cover soon. Anyone in doubt about the direction we are likely heading needs to read this:
http://globaleconomicanalysis.blogspot.com/2010/03/california-usa-vs-ontario-canada-which_29.html
#57 Tony
I hope you are correct, but don’t underestimate the madness of crowds and the persistent strength of a mania (not to mention government obfuscation and financial legerdemain). The Census hiring (stateside) is no doubt going to artificially boost hiring. Getting people to account for its one-off effects in this sea of bullishness/complacency? About the same odds as getting them to stop watching American Idol and Dancing with the Stars.
It seems the reality to which you refer, the same type that began showing up in May-June 1930, may be making its appearance in an economy near you, a year later than its Great Depression antecedent. This extension of the echo bubble is not surprising, given the exponentially larger degree of this credit bust and the enormously costly but ultimately futile efforts of our governments to stop it.
While I agree that long dated government bonds are oversold here, unless an impulsive correction shows up in equities, the best buying opportunity probably lies ahead in June/July.
#47 Big Lebowski
Nice comment although I hope you are wrong about the one world government and currency stuff. Just imagine how boring that would be!
What would you rather carry………
$400K at 5.75 % ?
“or”
$275K at 10.75 % ?
In 2008 single family home prices in Calgary dropped $90K in 10 months until the government panicked and had the Bank of Canada dropp their rate to 0.25 % and CMHC threw their lending standards out the window.
Patience can be very rewarding………
Houses are like long term bonds, when rates rise they drop in value fast.
“The prime will not double this year. Anyone locking in a prime minus now will pay for it. The better strategy is to accelerate principal payments with the extra money, not pee it away in bank interest. — Garth”
I cannot understand why you keep claiming this, unless you think that once Prime goes up it is just going to come right back down again. Earlier you said it will double (at least) by 2011.
Run some numbers using your assumption that Prime will double (at least) by the end (to be conservative) of 2011 vs a 5-year 3.89 ING mortgage starting today.
My spreadsheet tells me that paying slightly more interest between now and the end of 2011, but significantly less for the following 3.5 years saves me a boat load of money.
What am I missing here?
#80 Wiener:
Classic response from a permabear waiting for a repeat of the Great Depression. I know, I was one of them.
I’ve been hearing that this is unsustainable for the past 20 years, and yet here we are. All around me people are rejoicing about the latest recovery (the 3rd since 1987) and coming out of hiding to spend again. Meanwhile in the blogosphere I’m reading the same nonsense that had me captivated in 2006-2007, when it actually made sense.
I love reading guys like Garth and Mish. But their message is contrary to the desires of the establishment that does not want the party to end. In playing the extend and pretend games they make the inevitable correction catastrophic, but that won’t come for many more years, and after several more soft landings.
I won’t see it in my lifetime, but I will be warning my kids to look out for it.
This is a realistic view, and to think otherwise is very a naive.
Since you don’t want to do the numbers, here they are:
Assumptions:
$250,000 mortgage
25 year Amm
Scenario #1: 3.89% ING 5-year fixed
– Principle paid after 5 years: $32784.14
Scenario #2: VRM, Prime-0.6%
April-June 2009: 1.65%
July-Aug 2009: 1.9%
Sept-Dec 2009: 2.4%
Jan-Feb 2011: 2.9%
Mar-May 2011: 3.4%
Jun-Aug 2011: 3.9%
Sept-Nov 2011: 4.15%
Dec 2011: 4.65%
Jan 2012-Apr 2015: 5.15%
- Principle paid = 31673.24
I pay down more principle with the fixed rate mortgage EVEN THOUGH
- this assumed rate hike schedule is much slower and more conservative than most here anticipate;
- this assumes that rates go no higher than 5.15 and stay there after 2012. Is this likely to you . . . or do you think it might go higher?
- this assumes that you start both today. In reality, you have even less time to benefit from the VRM because you are starting sometime into it, and then must refinance at the higher rates in 2-4 years . . .
All in all, I can’t see how you can claim that sticking with a VRM rather than locking into today’s fixed rates is a better deal, unless you see rates climbing slower than you have previously stated, rates not going as high as you previously stated, or rates coming back down.
Rates cannot explode or the economy croaks – as I wrote. The prime will not double by the end of the year. Locking in a prime-minus is a dumb move. But do what you want. — Garth
Whisle Blower from London Metals Exchange tells the world the gold market is not only rigged but leveraged 100:1……Well GATA was right……Gold and Silver prices are about to explode!
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/3/30_Andrew_Maguire_%26_Adrian_Douglass.html
#56 Diana, thanks for the post and Garth re your response to Diana
With all due respect Garth, perhaps as you argue so-called ‘key man insurance’ originated as a ‘practice which protects a company in a limited way against the death of a person who is integral to the organization’ and I always take Michael Moore with a grain of salt, but, many of the deceased people featured in his film were ‘rank and file’ employees and how could you not feel empathy and compassion for the families of these people, who on the heels of a devastating loss of a loved one (in one case a 26 year old woman who worked as a Bakery assistant at a WalMart and left behind a husband and two children and over $100,000 in medical bills) discover that the large corporations their loved ones worked for received in some cases millions of dollars for their demise.
The bank featured in Moore’s film, Amegy Bank, actually had a secondary policy on the gentleman who died of cancer and their total benefit was close to $5 million dollars – does it really take that kind of money to find a replacement employee?
And what about the tax breaks these companies receive as a result of taking out these policies – don’t you believe that factors into the equation?
And the internal memos that were discovered referring to the policies as ‘Dead Peasants’ policies, and the accounting departments of some of these companies analyzing the ‘premium cost to death benefit ratios’ (nothing about hiring costs offsets) of these policies as if they are no more than potential investment profit centres.
It seems a very slippery slope, a huge conflict of interest and an example of potential moral hazard to me. Anyone else?
#29 Confused on 03.29.10 at 10:52 pm
——————————————-
Based on Garth’s advice, I locked in last Dec. I had VRM +0.4%. To lock in was only a jump of 1.34%. To date it’s cost me an extra ~$550, but now I’ll save $100/mo based on current fixed rates (thanks Garth!). If I had VRM -X%, the savings are too great to justify locking in. Ride it out! As a fun game, you can put aside the extra money a fixed rate would cost you, and lump-sum it on your mortgage every year, or use it to fund increased payments once prime rises.
Hah… this one made me laugh.
Here’s the article:
http://www.financialpost.com/news-sectors/economy/story.html?id=2740736
And here is one of the responses in the comments section.
“mr mcgugan states that a typical renter winds up $600,000 ahead by putting away the money he saves from renting over a 25 year period. if, for example, someone purchased a property for 400,000 today the value of that property would likely double or more to a vaule of minum 800,000 in 25 years. this would put the homebuyer ahead for 200,000 or more. meanwhile the home owner has the enjoyment of living in his own home which is probably much nicer than renting something and he does not have to put up with the whim( rent increases, eviction due to sale of property, no pets, etc.) of a landlord for 25 years.
i find it nauseating that some financial advisors would suggest people by bonds instead of a home.”
Idiot. Clearly someone that hasn’t looked at long-term data to see that housing prices match inflation over the very long term. It’s funny how people look at the last few years they can remember and somehow think that this is “the norm.” So sick of short-sighted idiots toeing the line.
This has probably been linked before, but here is Pestov’s MBA thesis:
http://www.scribd.com/doc/28454918/Canadian-Housing-Bubble
Thou shalt not point out contradiction.
Anyway, rising rates strengthens the case for paying off your mortgage more than ever. If you have a house and aren’t overly attached to it, sell it. If you are attached, pay off that mortgage with everything you have. Having a giant mortgage in favour of investing is not diversification (you lose just as much if the housing market tanks), and unless you are damn sure of high returns you will be worse off financially as well.
Dan # 64 you needn’t wait for financial combustion to begin it’s begun . Have you seen how many hotels and resorts are for sale in B.C /alberta ? Last years tourism industry in OK was a disaster , this year looks to be worse or so I’m told by an insider .
http://www.opinion250.com/blog/view/12265/3/108+mile+resort+fire++investigation+continues
Daystar kudo’s bumslaps huh! Which part of the bondmarket don’t you understand . Bumslaping banksters????? When the pain that the craparty created starts to bite lets all of us remind their victims whom to thank. The canadian neocon party.
At VREAA: Transcription of quotes from Danielle Park, an Ontario based portfolio manager and financial advisor:
http://wp.me/pcq1o-Ei
“I must talk to 5 people a week who say: “I’ve lost a ton of money in the stock market over the last ten years, but I’ve still got my house, and our plan is to sell our $1.2 million house and downsize to a $500K condo, in the next two or three or four years.”
“I think that boomers are going to find out that the population behind them has a whole lot less money and a whole lot less appetite for the million dollar homes.”
—
A crucial component of the coming Vancouver RE price bust will be the liquidation of properties by those owners whose financial futures are entirely wrapped up in the market price of their primary residence. -vreaa
…errr, obviously those 2009 dates should be 2010. What year is this again? Otherwise it is all the same.
In the local Ottawa area the real-estate market is still going gangbusters, despite looming interest rate increases, and the fact that most people in this region, one way or another, depend on the Fed government for their income. As we all know, that government announced 3 year budget freeze, which effectively freezes PS salaries. This translates into a reduction easily approaching 10% in the pay of public servants (from 2011-2014, in real dollars). Not to mention possible job cuts and other Fed spending reductions that will no doubt hurt the local economy. From what I can tell, the frenzied buyers in this region (many, if not most public servants) are not paying much attention. I don’t get it. Perhaps they don’t listen to the news or have not thought through the implications of a multi-year pay freeze, i.e. the effects of inflation on future income.
Finally an honest realtor — over 2 year supply of homes for sale in Vernon alone. Read her report below, she says its a buyers market and will be for a long long time.
http://www.saltteam.ca/gold_affilform7.asp
Kelowna is next…prices will be dropping
#44 CJ
If the 50% add to income rule for rental income is adopted, it won’t matter too much whether the suite is legal or not because it will only add a little more to the amount you qualify. For example, $1200 rent will only get you an extra $40,000 mortgage (approx).
My understanding is that presently banks accept rental income for suites at 80% offset. They never verify whether they are legal or not. Anyone second that?
For Surrey BC, this is significant if adopted along with the changes to income verification. Wait and see.
CMHC Self-employed income verifcation rules
Can anyone elaborate on it? Is the category going to be subdivided into three : commission, etc., etc. ??? Any RE agents or mortgage brokers here?
Dan – they’ll land not just taxpayers but savers as well.
Over the last five years we’ve all been given a very clear, precise and close view of what happens when a middle-class North American real estate bubble deflates.
we have
Dan I don’t think Garth or anyone else knows just how fast and high rates will go? My guess is higher and faster then anyone will believe.
mine too
In regards to locking in vs variable, its a bit of a conundrum as riding on a p -.8% wave is great but who will guarantee you 5 year lock in at sub 4% in december? Think about it, rates will move up be it .5 or 1% but similarily long term bond rates will be higher as well, making medium term mortgages more expensive. Expect 4.5-5% 5 year terms by end of the year, so figure it out for yourself.
#69 Nostradamus jr.
…Ontario carrys @50% more debt to GDP per capita than does California….
I bet the Vancouver homeower owes a lot more than this.
Tom #21 & #22
You make a good point but central banks can’t control everything. Ultimately interest rates are controlled by the bond market. Right now still bearish investors keep flocking to bonds almost as never before, that helps to keep low rates for bonds, especially safe AAA rated government bonds and government backed mortgage securities. Once investors increase their tolerance level they will be attracted toward other assets so bonds will have to give up more yield to attract investors.
http://www.bloomberg.com/apps/news?pid=20601039&sid=aHwhhQIwHrO8
“So far this year, investors have placed about $89 billion with bond managers, according to Emerging Portfolio Fund Research Inc. That was about five times the rate in the first quarter a year ago. If investors sour on bonds, that amount of money will funnel into stocks.”
Also you may think there will be no inflation because our economy is weak. If that’s the case, think again.
http://articles.moneycentral.msn.com/Investing/JubaksJournal/a-whole-new-brand-of-inflation.aspx
When you increase the money supply more than true growth you create inflation, it’s that simple but it’s hard to predict where and how inflation will manifest itself. This time it seems it’s hitting emerging nations. As it does, it increases their production costs and that will come to bite us back when we shop.
“we’re looking at a shift from a global economy where China and other developing economies were exporting deflation in the form of a larger and larger supply of cheaper and cheaper goods to one where prices are rising on the shelves at Wal-Mart “.
Inflation is on the way and that includes higher interest rates.
Don’t be too sure of that. Once Nostradamus and all his rich friends move there, RE over there will be worth lots more.
>#23 Best place on meth on 03.29.10 at 10:38 pm
>R.I.P. Vancouver real estate bubble.
>~ Feb, 2002 – Apr 19, 2010 ~
The new rates are bound to take a few months to have an effect — anyone pre-approved for a mortgage has a few months to access the rate they were pre-approved for.
So, maybe we will see an effect by the end of the year?
>.#18 dd on 03.29.10 at 10:23 pm
>#11 Debt Is Invisible
>
ls). CanadianÆs are debted up to the eye balls. There is no wiggle room. However the government will soon ask us to find that room because taxes and service cos
ts will increase. Along with this interest rates, insurance, fuel and food price increases are not far behind.
>
>Oh did I forget to mention the zero wage rate increase this year? People will n
ot view a house as a ômust haveö soon. It is going to be a heavy burden.
>
Actually having zero wage rate increase is considered extremely luck at this time. I was calling some old colleagues over the weekend and was astounded by how many people are already laid off or are in the process of being laid off. It’s just scary! Some kind of economic recovery.
20% of Canadian home owners struggle to keep payments, homes now unaffordable:
http://cnews.canoe.ca/CNEWS/Canada/2010/03/30/13406206-cp.html
…”Economists will conduct a complete autopsy of the crisis for years to come. But there should be no debate about one thing: a central cause of the financial crisis was a financial regulatory system decades out of date and riddled with gaps and loopholes.
So while we can have legitimate disagreements on the details of financial reform, there can be no disagreement that reform is necessary. And there should be no disagreement that reform is long, long overdue.
That is why it is so puzzling that, despite the urgent and undeniable need for reform, the Chamber of Commerce has launched a $3 million advertising campaign against it. That campaign is not designed to improve the House and Senate bills. It is designed to defeat them. It is designed to delay reform until the memory of the crisis fades and the political will for change dies out.
The Chamber’s campaign comes on top of the $1.4 million per day already being spent on lobbying and campaign contributions by big banks and Wall Street financial firms. There are four financial lobbyists for every member of Congress.
All told, it is one of the most expensive special interest campaigns in history…”
March 24, 2010
TG-606
Deputy Secretary of the Treasury Neal S. Wolin
Keynote address before the U.S. Chamber of Commerce,
Center for Capital Markets
Competitiveness Fourth Annual Capital Markets Summit
“The Urgency of Financial Reform:
Why We Should Not Wait for One More Finance
Crisis before Fixing What’s Broken”
As Prepared for Delivery
============
by Elizabeth Warren
Banking on hypocrisy
…”ABA lobbyists now aggressively insist that separating consumer protection and safety and soundness functions would unravel bank stability. Yet just a few years ago, they heatedly argued the opposite — that the functions should be distinct. …”
http://www.politico.com/news/stories/0310/35163.html
This was the file she refers to
http://www.fdic.gov/regulations/laws/federal/2005/05c23guide.pdf
http://www.roubini.com/financemarkets-monitor/258626/the_ongoing_battle_against_error_and_hypocrisy
“1. The Guidance overstates the risks of these other mortgage products. Much of the tenor of the Guidance is that nontraditional mortgage products are inherently fisher than other products. We believe that is incorrect; rather, they simply present dfferent types of risks that may be well-managed by prudent lenders. In fact a number of savings associations and national banks have managed the risks from these products for two decades. We are concerned that the Guidance pays little heed to that experience and the increased supervision over the last two decades.”
=====
By Simon Johnson
http://baselinescenario.com/2010/03/26/senator-which-part-of-too-big-to-fail-do-you-not-understand/
Probably it’s becuase Sing Tao boss/employee/reporter got huge money invested (i.e. stuck) in real estate. Pump out lots of stories, make it look really good, so greater fools will come in. Flip! Then run like a bat out of hell ! ps: I think my grammer(sp) is just as bad as yours
37 GTAInsider on 03.30.10 at 12:44 am
Sing Tao Daily in Toronto just published headlines targeting Mainlanders about they are brings billions of CAD to boost up our real estate market and they will buy up what they can buy in Canada in Metro areas (specially vancouver and toronto), the spokesperson said mainlanders viewed long time ago that making 10 % in real estate in canada is not viable, however, they said for the past years, they are enjoying the growth and will send more monies here, also indicated that, they do not worry about FINTRAC, not worry about millions of dollars in scooping up real estate, not needing a mortgage and willing to buy from china (do not need to come in) and only RISK that they are currently facing is NOT GOING UP IN PRICE !! This seems a myth as being talked about previously in some other posts, however, this seems to be reality now or what we call cheerleaders !!! A new mall will soon to be build and invested by mainlanders will now be sell at $ 900.00 – $ 1200.00 per sq ft and radio pumping it all day and said this preview was just opened this wkend and lots of units were SOLD and lots of people believe this will go up even more..so, as to Mainlanders, who care about interest rates as I can made 25 % in 1 day…
@111 – mattbg – you are absolutely right. I wouldn’t expect a drastic effect until the end of the calendar year. It would make sense, however, if prices started to at least stabilize quicker than that since this increase should at least signal that interest rates can go up and create a little bit of buyer caution to not over bid and try to get places under asking price.
I’m also pretty sure that real estate agents will now start pushing the “urgency” factor even more. I’d expect activity to pick up significantly over the next few months.
@113 nobody – it’s funny how the media takes a 180 swing in 1 day. Goes to show how well thought out all their news is. It’d be even more interesting to see what they’re going to be publishing over the next few months to keep their realtor buddies happy.
Again about inflation import:
http://network.nationalpost.com/np/blogs/tradingdesk/archive/2010/02/10/u-s-will-import-inflation-rate-hike-coming-in-august.aspx
Remember, bonds yields (therefore interest rates) will respond to inflation.
Interest rates will NOT stay low indefinetely.
Why not just well the damn thing and go rent!
http://www.theglobeandmail.com/report-on-business/many-struggle-to-afford-their-homes/article1516948/
Wow, Canada Bankrupt because of CMHC!
http://fishyre.blogspot.com/2010/03/could-chmc-bankrupt-us.html
“Our total debt is $700 Billion”
“The CHMC liabilities are probably not far shy of $500 Billion (and growing) or about 40% of the total GDP of Canada.”
What if the repo rate rises above the rate of return of the security financed by a repo?
Re #112 Jeff. Last paragraph.
Too late for wage freezes. Won’t recover jobs we have lost overseas. Only jobs I see being created here are fast food, big box stores… Usually paying minimal wages with no benefits. Trying to figure out a formula how average guy who still has bills to pay, but not overextended, will survive when either one or both people working in family have to take pay cuts to keep jobs. Factoring in of course the cost of living going up for the basics in life.
Realistate is the least of those peoples concerns. Those are the ones I feel sorry for. The Lemmings who hopped on this realistate ride I have very little sympathy for. They should have done their homework.
Still trying to be pro-active. Every time I go for a hike and hear a rustling in the bushes, I ever so quietly peel back the bushes in hopes of catching that elusive leprachan. Or when I visit my farmer friends once in a while I go into the barn lifting up the laying geese in hopes of finding the golden egg. It just wouldn’t be practical trying to catch the unicorn. They’re just to fast.
Unfortunatley have to go now and clean fishing boat . Trying again this year to catch that 12 pound large mouth who keeps breaking my line every year around the stumps. Bastard. Who knows might even get a mermaid this year. Rumours are they are starting to make a comeback.
See everybody has certain issues in life, most of which are self created. Don’t worry be happy. ( for those who can)
#92 ted on 03.30.10 at 11:03 am
——————————————
Well, there are a lot of assumptions in your 0.5% rate hikes every quarter (2%/year) just to save yourself $1000. If we truly are experiencing deflation, VRM -X% is the way to go.
I’ll tell you this: my mortgage broker (a banker at one of the big ones) told me that banks are getting KILLED by people that have VRM -X%. In essence they are beating the bank! Why would you want to change this?!?
When are the masses going to wake-up and understand that THE CONTROL AND ISSUANCE OF THE WORLD MONEY SUPPLY IS IN THE HANDS OF A PRIVATE INTERNATIONAL BANKING CARTEL!!!!
Check out the list of the central banks that are controlled by the Rothchild banking dynasty. Unbelievable! http://thatsjustplumdumb.com/index.php/2010/03/bank-for-international-settlements-bis-how-the-rothschilds-control-and-dictate-to-the-world/
“Let me control a peoples currency and I care not who makes their laws”-
Meyer Nathaniel Rothchild in a speech to a gathering of world bankers February 12, 1912.The following year, the newly incorporated Federal Reserve was created, headed by Mr. Rothchild
Make no mistake about it, all this global economic and financial turmoil and destruction that is currently underway is deliberately being played out by this criminal private international banking cartel, for the sole purpose of introducing a one world currency and the creation of a global government and global economy under their complete control.
“We are grateful to The Washington Post, The New York Times, Time Magazine and other great publications whose directors have attended our meetings and respected their promises of discretion for almost forty years. It would have been impossible for us to develop our plan for the world if we had been subject to the bright lights of publicity during those years. But, the world is now much more sophisticated and prepared to march towards a world government. The supranational sovereignty of an intellectual elite and world bankers is surely preferable to the national auto-determination practiced in past centuries.”
David Rockefeller, founder of the Trilateral Commission, in an address to a meeting of The Trilateral Commission, in June, 1991
All our lives we have been pre-conditioned to believe that the future direction and true power structure of our nations lies in the hands of our elected government officials (presidents and prime ministers, etc.). This could not be further from the truth! You need to begin to understand how money is created, who is in control of the money supply and where the true power architecture of the planet can be found. But first you must understand the true nature of the US Federal Reserve, IMF (International Monetary Fund), BIS (Bank of International Settlements), CFR (Council on Foreign Relations), Trilateral Commission, WTO (World Trade Organization), UN and the WHO (remember H1N1). These are all organizations that have been created to facilitate the takeover and consolidation of power to a “global government”, basically a “shadow government “, consisting of a number of international power elites such as the Rothchilds and Rockefellers that have been working behind the scenes for the good part of the last century. You might also have heard of them referred to by a number of other names such as the Illuminate, Freemasons, One World Government, New World Order, globalists, internationalists etc. They operate using the Hegelian Dialectic “problem, reaction, solution” methodology. Example; create a problem, people react and plead for a solution, power elites introduce their solution.
To continue their push towards “Global Government” the most powerful nation in the world “The United States of America” has to be brought to its knees both economically and financially! This in turn will cause a domino effect around the planet, as we are currently witnessing.
People must understand that the plan for world government has been in the works for well over a century. You can trace the beginning stages back to 1913 when the fraudulent “Federal Reserve Act” was enacted that gave the control and issuance of the “US money supply” to a private international banking cartel.
“When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes… Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.”
- Napoleon Bonaparte, 1815
In the end money is the ultimate tool of power and control, and for this shadow government “money is only the means to an end!” The endgame is a global agenda, an agenda to establish a “centralized world government”.
Awaken and free your enslaved mind!
Perhaps we are all the “GREATER FOOLS!”
#88 Bailing in B.C. on 03.30.10 at 10:11 am
————————————————
40% of the general public believes humans and dinosars co-existed and were created merely 10,000 years ago. That’s why depthless real estate articles continue to be published.
#86 Gary,
You are forgetting bankruptcy. If a 30 something year old finds themselves deep in negative equity they will bail out by way of bankruptcy.
#92 Ted, it doesn’t appear that your calculations reflect using the front end savings to lower the interest on your back end principal. Also, your model presumes those rates are 100% guaranteed, and doesn’t reflect the IRD considerations if things change and you want out of your deal.
Ultimately, there is one very easy way for you to know that trading in your prime minus 0.6% is a bad idea. The banks are unwilling to give anyone else a prime minus 0.6%. If the best they will do is prime or prime minus 0.2%, then that seems like a pretty good indication you are good where you are.
#94 City with a Woman’s Name,
Agree. Key Man insurance is often a requirement of financiers and shareholders. It is for their protection in the event a key management person – like a Steve Jobs – is seriously injured or dies.
#108 dd,
Never mind the homeowner. The gov’t here is in for a rough ride. If Real Estate values drop they way we expect and sales drop as well there will be a major hit on gov’t coffers from sales and property taxes.
BC is already running a large deficit. I suggest their current revenue estimates are very optimistic.
NDMS Jr. sitting on his mountain top in North Vancouver will be one of the few not underwater.
People should not be concerned about missing the boat with these “never to be seen again ” 2% loans as the principal amount for some of these monstrously expensive homes here in T.O. are the real killers at all-time HIGHS.. Who really cares if the rate at which you are borrowing 500K or more is 1-2% if in the first 5 years , the first five years of your mortgage, will be mostly interest. At the end of 5 years you paid too much for the home and are now paying the bank to lease a house that will likely wander up and down in value but not sky rocket again for perhaps a decade or more..
#109 pbrasseur
Inflation is on the way and that includes higher interest rates.
———————————
And higher taxes as well.
Tax hike in store for Quebeckers
http://www.theglobeandmail.com/news/national/tax-hike-in-store-for-quebeckers/article1517624/
#88 Bailing In BC
I’m almost in the same situation as you. I have a firm offer on my 4-bed townhouse in Ontario, but it is two months before the sale goes through. I’m worried that higher interest rates plus a falling real estate market may put my sale in jeopardy.
Budget is out in Quebec.
Major tax grab!!! PST will go up 2%, gasoline tax will go up 4 cents in next 4 years (1.5 more in Montreal and Quebec city), $200 per adult fee for health, etc…
Just to play devil’s advocate the folks at ING Direct are offering a 5 year fixed at 3.89% …Not sure why the huge spread between them and the big 5 … You can get a 10 year fixed at 5.2% which is still cheaper than the big 5 banksters rate at 5 years…
The best mortgage is NO MORTGAGE …
They have a great calculator on ING
http://www.ingdirect.ca/en/mortgages/whatweoffer/index.html
Recently saw a house in T.O. that had two mortgages on it. First was 670K …second was over 80K..
Using that ING calculator . The first mortgage alone was close to $2800 per month. And that was at the 1.75% variable interest rate amort of 25 years.
If you slide that to 3.89% then monthly is $3500 . And of course this is before taxes and maintenance. They ended up renting it out for 3000 per month which is still loosing money even at the gift variable rate..
Now add the second mortgage at say 4% and you are looking at a minimum of $3200 per month. Now that’s investing indeed. I guess you could argue that they are still getting most of their monthly paid for so only a bit out of pocket… Problem is… what if the house drops in value a 100K…
Buying a house in the current market at high leverage is certainly a suicide mission. Perhaps a couple years from now things will favour the buyer and see a 20% correction. Unfortunately there is alot that can happen between now and then and the banks and the agents will figure something out to keep their cash coming in.
Yesterday BNN pointed out that the banks make about 40-50% of their money loaned to mortgages.
Can you say ouch if you owe alot.
Met a guy today who only works at night … he delivers legal papers to people who are defaulting on their mortgages. I literally just bumped into the guy. So there has got to be some stat out there demonstrating some issues with home payments
http://www.hatton.ca/tax%20shelter.htm Off the housing subject but in keeping with some of the things Garth is preaching and that is tax avoidance….this may be a good way to do it and legal……what are your thoughts on this Garth?
#69 Nostradamus jr. on 03.30.10 at 8:55 am
Please tell us “the sheeple” where those cities are. I saw one savvy investor complaning about getting into $100k trap in Calgary already. Similar stories are happening in Vacnouver….but M$M talking heads keep their mouthes shut…..as it will debase the golden RE here, but as negative equity will mushroom everywhere it will finally get to the headlines…. And Hongcouver, C@lgarry and Endmonton won’t be safe……So where we are “the sheeple” should move? I am thinking right now about taking a position south of the border with bigger salary, lower taxes, dirt cheap McMansions, cheap food and other stuff. Yes US may be broke, BUT I will be better off there then here when crap hits the FAN beside you.
#108 dd on 03.30.10 at 12:57 pm
Little correction: Vancouver mortgage owner (homebuyer) owes a lot more than this. Those who had not finished paying the mortgage are not owners, bank owns the property.
How many people fell into the housing bubble trap thinking they will become rich doing no work? Now that the majority of people bought at the top the rug is now pulled from under and soon thousands of people will be underwater on their mortgage. Many will go bankrupt as they can not sell their homes and can not afford to keep them. I know countless people who were close to going bankrupt but found a greaterfool. If people stop buying prices will crash HARD! There is no more suckers unless you become one. The crash is here and now and thousands will lose their homes and go bankrupt. The game is over and years of pain begin. POP………..WHAT WAS THAT
Mortgage rate parade: Scotiabank joins other banks in boosting rates. POP…..What was that?
http://www.vancouversun.com/business/Mortgage+rate+parade+Scotiabank+joins+other+banks+boosting+rates/2743851/story.html
@Derek, #96
This is the astute financial mind of the home buyer; one that does not take into account cost of borrowing, maintenance, taxes etc.
“Nostradamus” Jr. – You really are the blog joke, you know? NO ONE even begins to take your endless braindead pumping seriously for a single second.
If you’re trying to be sarcastic, even that’s failing. You’ve fallen into self-parody and you can’t get up.
Try reality sometimes.
#101 Genghis
Do a quick search on the MLS in the core, inventory is building > $500K.
Ottawa deals with a lot of outsourcing which means that a lot of companies that do business with the federal government will be cutting back without the vast demand over the past few years from that customer.
Real estate is “local”and each area has its own real estate fable, whether its rich public servants in Ottawa, Calgary oil barons or boat loads of immigrants traveling the pacific to Vancouver.
Waiting for RateSupermarket.ca rates to change on Garth’s blog!!
THEN we know the poop has hit the fan!!
I think mortgage rates will spike more than we think and faster. The benchmarks have been steadily climbing in the bond market this month, then Bombardier pulled a debt offering earlier this month (then re-issued…higher yield?? not sure) and sold it.
I believe Alberta also did a bond issuance to fund seniors homes and it did not sell out either….I could be wrong on that one but I have not checked into this in detail.
I dont think rates will spike high for an extended period but as I said I do think they will go higher than anyone anticipates due to bond market conditions and the fact all levels of gov’t and corporations are selling debt at the same time. It will be a race to the top this time instead of the bottom…there’s a switch.
I wonder how anybody in the media can keep a straight face and say “it’s a good time to buy a house” I heard something this morning on CBC this morning, they talked to a mortgage broker who said “YES! Now is a GREAT time to buy!” and the same thing last night on Global TV-they interviewed a couple who said they were rushing to buy before rates went up. The media just sounds completely brain dead when they fail to point out, every time, that when rates go up, fewer people will be able to buy and…guess what??? PRICES WILL GO DOWN! Nope, nope, will never happen. They must think we’re idiots.
Then again, maybe we are.
#113 NOBODY
…20% of Canadian home owners struggle to keep payments, homes now unaffordable…
But not in Vancouver, where people are falling over themselves to load up on a $700K mortgage because the price is only going to go up and up. Just as Nost jr. He knows all about it.
#137 Future Expatriate on 03.30.10 at 5:00 pm
“”“Nostradamus” Jr. – You really are the blog joke, you know? NO ONE even begins to take your endless braindead pumping seriously for a single second.”"
…Last two years Im up 20% in RE….You?
Nostradamus jr.
Quebec budget hikes fees, sales and fuel tax
Read more: http://www.cbc.ca/canada/montreal/story/2010/03/30/cp-quebec-budget.html#ixzz0jhdmSG8r
Let the games begin and hold on to your hats (wallets), governments at all levels are coming ….. Yup just give me chance is all Harper asked …..
#141 Cory,
There are a couple of possible events that could really push rates up fast. One is a soveriegn debt default in Europe. The other is a bubble burst in China. Either of these events is possible in the near term.
#135 Vancouver_Bear,
What if they held a parade and EVERYONE came?
#47 TheBigLebowski and #61 Bill — Heading all the way back to Alexander The Great, one-world govts. have long been purred for and over by the rich, smart and elite of the world.
All have failed, including Hitler and others. Trouble is, they mess up ordinary peoples’ lives. Doesn’t matter, as that is what positive – negative karma and reincarnation were created for. They get to come back and experience the downtrodden side for themselves.
Yup, the next decade or longer will be brutal. Not much anyone can do about it, except to stay afloat.
#87 Hiteclowtec — “Expansion to the North).”
A country’s needs can outweigh the day-to-day stuff involving other countries.
For instance, although the cycles are changing rapidly from Caucasian to Asian, China is having a major drought.
If things continue, they would have no choice but to either (a) import water, or (b) steal it (take over another country).
Russia already owns a large chunk of the Arctic Circle, and as they and China have being constantly cozying up to one another to keep the US (and a few of their friends) in place, Russia would invite China to split it 50-50.
The other countries would be shit outta luck — those two combined have superior military forces, so the RE – monetary – pension stuff don’t count for anything.
Expect the unexpected, no matter how freakish and far-ranging it may appear.
#117 confuse — That’s another Bingo! As much as the FDIC is underwater in the US, so too are CMHC here, and taxpayers are left to pick up the tab.
H-F-C get away scot-free with this. No doubt they will enjoy hell, as this will come back to haunt them.
——-
Slush funds. Where would the world be without them?!
Joining all the little dots together into one big dot. First few paras. worth scanning over.
Re #121, Men Who Stare At Steeple.
Finally at last, You renew my faith that there are still people out there in the know. And speak of such things.
For the rest who dare to be enlightened check on web :
1) THE HISTORY OF THE HOUSE OF ROTHCHILD
2) THE HISTORY OF THE ” MONEY CHANGERS’
AND FINALLY FOR THOSE WHO DARE
3)PROTOCOLS OF THE MEETINGS OF THE LEARNED
ELDERS OF ZION
The later of these three will really bake your noodle.
These three things once read wiil open your eyes beyond any doubt. It is a compilation through different times in history how things have been manipulated.
PLEASE DO TAKE THE TIME. IT WILL CHANGE YOUR OUTLOOK ON EVERY THING YOU DO.
Scenario for you: I’m in the fourth year of a five year fixed mortgage (5.1%). Do I go to the CIBC and try to get one of their <4% 5-year fixed mortgages, pay my bank the early cancellation penalty and hope I save more than the penalty as interest rates climb in the following five years; or, go to my bank and ask them to 'blend-and-extend' at current discounted rates?
I don't want to wake up next July in a 7-8% 5 year-fixed rate world and realize I missed my chance to lock in at today's rates. Thanks.
Garth- Thanks for the info on the VRM vs FRM. We are P-.50% fully open. We were thinking of selling and renting for a year but will now have a hard time of convincing my wife of selling with a 3yr old and 1 week old at home. Think we will sit back and enjoy the great hood we are in and watch the kids grow up. If all goes to plan the remaining 50% of equity we owe the bank will be paid off a few yrs before they are off to post secodary school.
The Irish Government is preparing to nationalise a large portion of its financial services sector in a radical bid to restore confidence in its embattled banks……..Two of Irelands building societys, Educational Building Society and Irish Nationwide are also likley to be entirely nationalised as part of the rescue package…….http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7536228/Ireland-poised-for-once-and-for-all-15bn-bank-rescue.html
If the price of natural gas plummets this summer as some people are predicting. The Calgary market will be in for one heck of a crash.
#122 Bottoms_Up on 03.30.10 at 2:44 pm
40% of the general public believes humans and dinosars co-existed and were created merely 10,000 years ago. That’s why depthless real estate articles continue to be published.
Are you trying to tell me that the Flintstones and real estate industry news releases are not based on fact?
#37 GTAInsider
You write in a Chinese accent too!!!
91 (un) Realist
Don’t make assumptions. Permabear? From what knowledge of me do you draw this conclusion? You have no idea of how I invest or think whatsoever.
You seem to believe that the laws of economics don’t apply because that is not what the majority wants. Ridiculous!
Guess what, the majority of people probably didn’t want a 40% equity haircut last year in equities, nor the rollercoaster ride that went with it – but they got it!
They probably didn’t want a corrosive slide in home prices in the US and just about every other country outside of Canada, China or Australia, but they got it. And despite every trick in the book and virtually free government mortgage funding, they still can’t revive housing some 4 years after the peak!
They probably would have preferred that the general market indices made gains for the past 10 years, but they got a flatline at best, despite unimagineable dollops of liquidity and a 2 TRILLION dollar Fed buyer of last resort balance sheet.
Even in the most financially homogenous economy in the world (Japan) the powers that be are powerless against the market forces and are on their second decade of stagnation.
None of this shows any degree of “not letting it happen” as you claim. Quite the contrary!
Btw, Mish has made excellent market calls and Garth called the bottom in equities in March 2009 within days if I recall correctly.
Have you been to the US lately? Have you been to any EU countries in the past year – I have repeatedly visited both
in recent months and I can tell you the economies of each respectively are very much NOT what the powers that be want them to be.
Your capitulation just re-inforces the scenario that is about to unfold. Stay tuned and intellectually honest and report back in say, 6 to 12 months. Let’s see who is naive then, shall we?
Oh and if you really believe in what you have written in the # 91 post and just aren’t pulling our collective legs here on this blog as it were, then I’d fully expect you to be lining up in Misssissauga for a townhouse with the other timing geniuses, shorting the heck out of gold, buying land regardless of cost and changing your name to Pollyanna!
Good luck to you sir, I feel you may need buckets of it soon, cause your critical facilities don’t seem to be doing the job for you.
Have a nice evening, I know I will.
Full disclosure: I have sold EVERY piece of land, commercial buildings and businesses in which I have had an interest in Ontario over the past 2 years with the exception of farmland.
Banksters, there is a method to the madness of rising rates, and it is not with info presented to the press. There is a well defined strategy that involves many key players but will not be revealed to us common folks. Am I paranoid? No, I am not!
The interest rate increases coming in the next year(s) are not the whim of individual banks doing their own forecasting, but strategic moves of many players.
The cards have been dealt! The moves will soon reveal themselves. So sad for the purchasers of homes the last few years!
I don’t have a house. I get angry about it. I don’t wish any one loose their house though. I don’t think it’s good for anyone. The sad part is I was watching this old house. They are currently renovating a foreclosed house and went to Florida to see what is happening with the foreclosures down their. Entire neighborhoods were basically emptied. But the salesman always wins. They went on a sales tour with people who went to different houses on a boat looking to invest in real estate. Instead of telling people house prices are going up buy buy buy they will always go up now they are saying it is a buying opportunity. The perspective buyer was asked do you feel bad profiting on another person’s misfortune? The buyer said no, because last time they got to play and now it’s my turn. And so the cycle starts again and things never change
#151 Bill on 03.30.10 at 6:29 pm
Re #121, Men Who Stare At Steeple
Sigh.
I don’t know where to begin with a rebuttal to your fringe theories. So i won’t bother.
#94 …. I totally agree … a pathetic way for a company to make money and Garth, you need to get out more!
#86 Gary
We might not see the number of foreclosures but there is another disheartening sign and a continuing trend.
http://www.bankruptcycanada.com/bankstats1.htm
http://www.stats.gov.nl.ca/Statistics/Trade/PDF/Bankruptcies_Can.pdf
Expect us as Canadians to beat those numbers in 2009 over the next 3 – 5 years by a long shot.
Also of note, businesses seem to be bucking the trend?
Funny to hear from the bank governor that we aren’t as competitive from a business perspective. Makes sense that the less risk you take as a business, less chance to go belly up.
So why scold business for being conservative, the consumer is spending and collecting debt like a drunken sailor, I don’t see a problem with a more conservative business stance.
Start backing business loans via a vehicle like CMHC and you’ll get your risk takers. Of course all on the backs of the taxpayer, thankfully we have this remarkable spending beast to pluck us from the depths of recession.
USA style housing bubble begins in Canada: 10% of Canadian homeowners to default in 2010.
http://www.vancouversun.com/business/Mortgage+brokers+taking+closer+look+buying/2742438/story.html
#146 Nostradamus jr. on 03.30.10 at 5:45 pm
“…Last two years Im up 20% in RE….You?”
And … NEXT TWO YEARS ???
You, if anyone knows, ought to know.
Didn’t you know … 500 years ago?
Weiner,
You gonna give ur shekels to Israel, do good in Africa or what?
Nostradamus jr
88 Bailing
“I’m just glad the house is paid off and I have a
basement suite.”
Good for you! So may I ask why are you selling?
Re #154 Dan in Vancouver.
That will be least of their problems. They have seen up to a 50 % drop in housing prices in the last while. No work either. (friend just came back from there recently )
#146 Nostradamus jr.
…Last two years Im up 20% in RE….You?
Great. Hope you can hold onto it.
Hey Garth,
Can you please hurry up…I got to go to bed.
Re: Bank of Canada, Rothschilds, etc etc.
It would appear that neither the Rothschilds nor any other private group owns the Bank of Canada, although I know this is the case with the US Fed.
From the Bank of Canada website:
“The Bank was founded in 1934 as a privately owned corporation. In 1938, it became a Crown corporation belonging to the federal government. Since that time, the Minister of Finance has held the entire share capital issued by the Bank. Ultimately, the Bank is owned by the people of Canada. ”
So it looks like it was originally established as a private bank, but since 1938 it is wholly owned, via shares, by the government.
Significantly however, the bank’s decision-making is done by a board wholly separate from the government. So the question really becomes: In whose interest does the bank’s board work? And, does all profit go to the government?
Can’t wait to hear what you have to say tomorrow night, Garth. Here’s my two bits:
http://www.econoom.ca/2010/03/your-mortgage-broker-isnt-worth-spit.html
Have a safe trip from wherever you are and welcome home.
#83 Qualifier on 03.30.10 at 9:51 am
#3 Squidly
“You had best take protection with you when you visit Calgary.”
Hopefully you don’t run into this guy…
http://www.bobtruman.com/Squidly_photo/page_2267545.html
+++++++++
Truman is the poster boy for what is wrong with the realturd industry. Ignore him, the competition bureau will take out the trash.
#94 City with a woman’s name on 03.30.10 at 11:14 am
++++++++++++
Delta?????
Defaults on US municipal bonds is escalating and it was recently reported that at least 10 US states are is desperate financial shape, and some may declare bankruptcy in 2010.
We are also seeing the sovereign debt crisis in Europe grow…..Greece, Ireland, Spain…etc. etc.
Of course all of this means that this overload of shakey debt will need to be serviced through interest rate premiums on bonds…so we have only started to see the tip of the iceburg in terms of rising interest rates.
And don’t kid yourselves….Canada is not immune….our idiot Conservative government has mismanaged our economy with ill-advised tax cuts with the GST…and has now created a structural deficit for Canada. We have no way out except to increase taxes and our government will now have to compete with higher bond interest rates to secure the funding it needs to continue government operations.
We will all pay the price for mindless political expediency with higher interest rates. Hold on to your hats kiddies.
#146 – Last 20 years I’m STILL up 50%, and paid off, NO mortgages. And in Las Vegas!
Talk to us this time next year and tell us how far you’re down.
Pffffffffffffffffffffffffffffffffffffffffft!
the truth…dd…
…I’m up the 20% for not selling the last two years.
Weiner…
…So you sold all ur holdings last two years?…If you sold most of it earlier than later, then You sold early and lost a big chunk of profit.
If so, no wonder you wouldn’t buy back 20% more expensive.
…Real was just being Real….unless you factualize your sell dates…your just another angry poster.
Factualize the dates of the sale of all ur holdings.
tia
Nostradamus jr.
#173
Truman is exactly what the real estate industry needs. Transparency. He gives us information you never were privy to until he came along. Plus he has a sense of humour. His site is the best I’ve ever seen from a realtor.
# 166 Nosti Jr.
Meaning?
reference to Israel why?
If your comments have no religious / racial intent, then no, I’m simply not that generous.
ing what I’m thinking
# 166 Nosti Jr,
…besides you should have known, 500 years ago!
I really hope you are not a racist a-hole on top of all your other charming qualities.
One thing I like about Bob Truman’s blog is that he’s not scared to present both sides. How many realtors give Garth equal time on their blogs? Truman is frequently quoting Garth or giving a link to the doom and gloom side of things. He even promoted Garth’s trip to Alberta, and I’ve never heard him say “It’s a great time to buy.” Just the opposite in fact. He had a blog posting “It’s a great time to sell.”
He also had this: http://www.bobtruman.com/blogs/bob_truman/archive/2009/05/27/garth-turner-says-today-s-buyers-are-the-greatest-fools.aspx
#93 Golden Oracle-regarding recent CFTC hearings and the revelation by Andrew McGuire, whistle blower and London metals trader regarding the manipulation of the precious metals market. Here is an article http://www.resourceinvestor.com/News/2008/8/Pages/Special-Got-Gold-Report—Silver-Investors-Sucker.aspx from August 25, 2008 which is directly related to the silver manipulation by 2 big banks in the U.S. and which has now been confirmed by GATA who were instrumental in revealing the whistleblower to the CFTC at the hearings on March 25th. It would not surprise me to see the precious metals markets explode in the coming weeks as things start to unfold and the general public becomes aware of the tremendous fraud particularly in the silver market. People who have bought into the precious metals ETF’s thinking that they are actually buying the real stuff may discover that all they have bought is paper backed by paper. There could be a huge squeeze on the Comex if large buyers such as China, India and other countries who may have been quietly purchasing positions throught the use of ETF’s all of a sudden decide to take physical delvery. Should this happen and now that it’s been confirmed that 100 times more silver was being sold than what physically exists, it could result in the Comex defaulting and shutting down. Is this possible? Time will certainly tell. In the meantime, I think I am going to buy some more silver.
#174 The First Rick
Thanks for asking, you’re close but no ‘bingo’, not Delta.
Here’s a hint: I took the name from a song Canadian musician Leeroy Stagger wrote about his hometown called ‘This is where I live’
Some lyrics:
‘Yeah the rain is fallin’ hard on a town with a woman’s name,
ain’t no different from the others’ a little nicer just the same……..
Dumpin’ raw sewage in the deep blue sea, if it’s outta sight and outta mind don’t make no difference to you and me….
Yeah this is where I live, seems like a joke, house you can’t afford, and lots of pretty folks…..
Got it yet?
#146 Nostradamus jr.: “…Last two years Im up 20% in RE….You?”
You bought a mere two years ago…no wonder you’re in denial. Wait till you’re negative 20%.
#85 Janius re conspiracy! Tell me you are not serious!
I can’t believe that you would buy into a tongue in cheek fairy tale.
Hopefully the other visitors get it and have a much fun as I did!
Oh please, forget my grammar..I am just telling what are Asian momentum right now in real estate as it seems Sing Tao and other Asian’s media (TV, Radio and etc.) are being brainwashing Asian’s into investing in real estate and Fairchild also shows GLOBAL tv clips and selectively shows or mainly pumping real estate and from the news, they just simply report Mr. Li-Ka Shing on the clip captured what Mr. Li mentioned today on his annual meeting ” BUY A HOUSE RIGHT NOW AND YOU WILL BE RICH, THERE IS NO WAY YOU WILL LOSE !”..well, the sad thing is most Asians has tied into Mr.Li’s mentality right now but Mr. Li can hold his house forever since he can paid off his multi billion mansion but not for an average joe…
#146 Nostradamus jr.: “…Last two years Im up 20% in RE….You?”
You’re only up 20% if you sell now and realize the gain monetarily. Otherwise it is just a speculative value.
#157 – Wiener
I rather enjoy reading you get your panties in a bunch over my opinion. Your potshots are oh-so painful.
I really don’t care what you’ve done in real estate, where you’ve travelled and how you invest. However, I expressed a somewhat positive opinion and you seem to have gone after it like a starving dog on a bone. That makes you sound like someone who has placed a huge bearish bet. If not, then you need a hobby to de-stress.
So I have laid out an opinion that a soft landing is in the cards because it is being engineered. I have no vested interest in what actually happens. I own a home that I consider a principal residence and not an investment, I haven’t had a penny of debt in years, cashed out of the markets in 2007, and I have allocated my pile of cash in a conservative manner because that’s just how I roll now. I don’t care if real estate crashes or markets crash, or if they both go to the moon. I guess I should be concerned about hyperinflation, but I don’t see that happening because that wouldn’t serve the illuminati well.
So what do you think is going to happen? Armaggedon? Martial Law? How friggin’ catastrophic is this going to be? Am I not going to be able to feed my family? Should I be stashing weapons? Will there be a shortage of fuel? Will my principal residence collapse on my head?
Please, with your infinite wisdom that causes you to be so vitriolic towards a moderately optimistic opinion, tell me how this will all play out.
#70 Ivan, please read #54. We just want somewhere to house our families we can afford….if those bragging about their massive ‘gains’ get hurt in the process, sorry.
A reasonable home for a reasonable price. This isnt’ an investment game for many of us, it’s life.