Careful what you wish for

First, the people whose email I quoted yesterday – you know, the ones who could pay cash for a $2 million fixer-upper in Vancouver but have wimped out – would like to respond. They claimed to have made a 45% gain on real estate in a couple of years, which some bloggers thought was a dog that didn’t hunt.

“The email was real,” sez they.  “Property bought for $885k and sold for $1.3m.  It is a unique property.  You can covert the existing structure into three units and build three additional units on the property.  Therefore, it is a development play and not a SFH (although it could be). Generally, children do not ask for advice. We sought advice in an attempt to make a reasoned and informed decision!”

While we’re at it, they also say this:

“The benchmark price for a detached home in Richmond BC went from $884k in Oct 2010 to $1,037k in January 2011.  Something is driving that market … and it is probably not horny RE virgins. Would a bank really lend someone a million $ with only 5% down?  At some point don’t you have to ask who the hell is buying all of the million $ plus homes?  You know how much the average family makes in Vancouver. You know the average cost of homes in Vancouver.  The former can’t support the later.  It makes no sense to me. Who the heck has the facts?  It makes even less sense to me that the majority of the sales are very high leverage transactions. Forget the banks for a moment, who on earth would take on a million dollar mortgage and sleep well at night?  I would suggest you would need to be fairly well off to do that or f*&^%ing stupid.  Have some fun – go to MLS and do a search in the entire GTA for detached homes over $2m – the number is 286.  In Greater Vancouver, that figure is 433 – over a much smaller land area.
THIS WILL NOT END WELL ….”

You bet. That’s exactly what I have tattooed on my stone-hard but surprisingly pliant and sensual butt. It’s a poignant reminder.

Now, let’s clear up something else. Interest rates. Tuesday morning the Bank of Canada does nothing. April 12th will likely be another story. So will May 31st and July 19th. In fact, by August it’s possible we’ll have had three hikes, with the prime at least 3.75% – or a fat 25% higher than now.

Some people doubt this, saying the central bank can’t risk the dollar rising or cutting the housing market off at the knees. But neither matter. The loonie’s damage to exporters, manufacturers and tourism has been done. Oil has seen to that. Meanwhile Mark Carney, the guy with his finger on the rate trigger, is as aware as anyone real estate must stop being a casino. When people are paying $1,037,000 for a vacant lot beneath the flight path at YVR, and the average SFH in Toronto is $755,000, we’re all nicely screwed.

But inflation will take the official blame for rate roulette. Especially because of this week’s GDP numbers. With the economy growing at an annual rate of 3.3% (thanks mostly to crude), there’s no doubt Carney will be laying an egg for Easter. This means people coming up to a mortgage renewal might want to lock in. And it certainly means anyone in the middle of a house deal should take some time off. As I’ve said here for months now, things will look a lot a helluva lot different in July.

As I’ve also said, this will be the start of a long trip back to normalized interest rates. Before the world ended in the winter of 08-09 and we got emergency money, the average five-year mortgage over the previous twenty years was  8.2%. My first mortgage in the Seventies when I was a child was 12%. They even got to 20% a decade later, when five-year mortgages were temporarily suspended and everyone had to borrow short.

In other words, 3% money is an aberration. It’s about to end. And those who bought homes only because they could afford them with cheapo loans better have a grow op in the basement. Sadly, not enough of us are good with plants – an excellent reason why housing will be a crappy place to have the bulk of your net worth.

But don’t believe me just because I’m hot. Here’s Derek Dunfield, a professor from MIT who also thinks rising rates will take their toll. He said this days ago:

“The historically high levels of household debt present two possible problems for the Canadian economy. One scenario is that interest rates rise, house prices drop, and more people begin defaulting on their credit card debt and mortgage obligations.”

Hmm. Bummer.

“An equally worrying – and perhaps more likely scenario,” says Dunfield, “is that interest rates go up a little, and more of people’s disposable income goes to repaying their debt, leading to a significant reduction in consumer spending. Since personal spending on consumer goods and services accounts for 58 per cent of the Canadian gross domestic product, this decrease would provoke a ‘made in Canada’ recession.”

How likely is this? Well, household debt now equals $1.5 trillion, which is three times the national debt.  Families owe (on average) $1.50 for each dollar earned. The average downpayment on a house has shrunk to a pathetic 7%. Nine out of ten new mortgages taken last year were for 35 years, because people couldn’t afford any other. And housing prices keep rising while savings vanish.

I hear 40% of all US realtors have vanished, kinda like barn owls or spotted turtles. American families have lost $5 trillion in wealth, since they once thought real estate would always go up.

Those around you may claim they never saw this coming. You have no excuse.

203 comments ↓

#1 ballingsford on 02.28.11 at 10:30 pm

First for sure! My bet is that the BOC won’t raise rates!

But, but, but, they should!

#2 Jeff Smith on 02.28.11 at 10:34 pm

Obama thanked our prime minister again

http://www.google.com/hostednews/afp/article/ALeqM5i-4iF0Bn_pbGavx68Bk_peO0KjlA?docId=CNG.0c072a7a730504b85eecf4e0f0fdd530.1561

http://www.washingtonpost.com/wp-dyn/content/article/2011/02/28/AR2011022805411.html

#3 Jeff Smith on 02.28.11 at 10:37 pm

Good our prime minister is standing up against the freakin despot. I wonder if canada will send troops to Libya like afghanistan.

http://www.thestar.com/news/canada/article/946152–stand-down-or-be-overwhelmed-canada-warns-libya-s-gadhafi

#4 Secondisbest on 02.28.11 at 10:41 pm

I like how the kid doesn’t know someone’s tied a piece of string on his shorts and is tugging at it. LOL

#5 dumble.bumble on 02.28.11 at 10:41 pm

Number two…wooohooo!!…I second the motion. Rates stay unchanged!

#6 Ayn Rand on 02.28.11 at 10:45 pm

That pic is just too funny – but first time I won’t let my 11 and 14 year old girl and boy see it. But my daughter loves your puppy pics.

#7 mefirst on 02.28.11 at 10:45 pm

second at least!!!!!……for sure.

I went to a party long time ago with a good friend, drinks were free, so he start drinking like no tomorrow. He even tried to get me drink a lot too…..I see many people the same way with mortgages, because now money is cheap, it does not mean you have to get as much as possible…..the hangover is going to be f#!&*ing baaadd!!

#8 John on 02.28.11 at 10:47 pm

Garth, what do I tell my wife who thinks renting is crazy? We just moved from Letbridge AB to Medicine Hat. Needless to say we took it on the chin when we sold our house to move here. I am seeing what you have been telling us about already. If you want a good idea of what is to come, watch the smaller centres. i have seen houses for 400,000 that have been listed for over a year and not sold. No one can afford a 380,000 mortgage on 60,000 a year with 6% money over 30 years, let alone the down payment.

Thanks

Did she not learn in Lethbridge? — Garth

#9 l dubya on 02.28.11 at 10:52 pm

thanks Garth for your countless amount of advice.

when i first started to read this blog a few years ago, i was a house horny 20 something like you always talk about…. trying to save my $ for a down payment it was “own or bust”…

now with your wisdom, i have just moved out and rented on my own (got a sweet new condo in downtown T.O for less then $1200 a month with parking)

and i am investing the difference and not having to pay property tax, condo fees, and other maintenance fees. I let the land lord worry about that :)

I am liquid thanks to your wisdom!
my financial eggs are not in 1 basket :)

#10 The American on 02.28.11 at 10:52 pm

Garth,

First, let me say I do commend your efforts and the service you provide to your fellow Canadians. You are spot-on with your assessment of the Canadian market, and you can’t ever say you didn’t try to warn people. I write you this because I have friends an family who live there, and I feel badly for their naivety to the situation. We have an old saying – You can lead a horse to water, but you cannot make him drink. Keep up the good work.

Next, I’m interested in understanding if you or any of the bloggers have an understanding if within Canada there is the equivalent to a County Tax assessor that provides complete transparency to the public via online service in the form of “constructive notice” for all sales history, tax history, and survey history of each and EVERY property within a given area? If there is, is this a free service that is readily accessible to the public? It seems to me and the NAR (National Association of Realtors) that the CREA has been “cooking the books” for well over four years by market manipulation and “cherry picking” housing data to promote growth falsely in home sales numbers and home prices.

In the U.S. most every and all municipality will provide complete transparency via an online service for all real estate history within a property’s given county. The information is easily accessible and valuable for anyone looking to purchase a specific property. The information includes arrears in tax payments, any and all liens, all previous sales history, names of buyers/sellers, amount of sale, tax-assessed value, survey information, and so on. I do feel this information is extremely important for any potential buyer to understand prior to making an offer and gaining mutual acceptance.

The reason I am asking is because if it is NOT provided within Canada, could this also potentially be a reason such a tremendous bubble has continued to inflate? Or, are there other factors to consider as I see market data indicates both the U.S. and Canada began the incline within real estate roughly about the same time.

Any information is beneficial. Thanks in advance.

Sadly, this is not available. One reason we do not have a Zillow. — Garth

#11 The Phantom on 02.28.11 at 10:53 pm

Ahhh the picture is too funny…oh to be young and socially inappropriate again!!!

#12 Genghis on 02.28.11 at 10:58 pm

Here is the CMHC forecast for BC for 2011 and 2012.

http://www.vancouversun.com/business/housing+starts+trend+higher+2011+2012+CMHC/4302653/story.html

Stabilizing in 2011 and continuing upwards in 2012.

So no need to worry about jumping in now then. You can’t lose.

I can’t figure it out. Do the bureaucrats that put that release this kind of stuff to the press really believe it?

#13 David on 02.28.11 at 11:01 pm

3% money….and 97% stupid greed.

#14 wetcoaster on 02.28.11 at 11:07 pm

Had to stop watching any of these so called BNN experts last week. The short skinny witch-like woman was the final straw.

As they were breaking for a commercial, the co-host mentioned they would be talking later on the high level of consumer debt and how it’s threatening the Canadian economy. After he says it, the “witch” tosses down her papers on her desk in disgust and states, ” this is not a threat to the economy because the high asset prices off-set the high consumer debt, I’m sick of hearing this….” and she trails off as the cohost laughs saying he hit her sore spot.

An national investment show that can’t fathom that asset prices can’t go down ? BNN is officially a joke…..and Garth, don’t expect an invite any time soon, it’s sounding more like the Michael Campbell/Ozzie Circus show. I’m sure they’ll be on there next week talking about Chinese fortune cookies futures.

BNN banned me. Like Mubarak and the Internet. — Garth

#15 Jon B on 02.28.11 at 11:08 pm

Great post. Can’t wait for the show to start.

#16 eddy on 02.28.11 at 11:11 pm

Eric Sprott: The Government Lied… There is No More Silver!

http://www.youtube.com/watch?v=T2w7wGwUZ9Y&feature=player_embedded

#17 LJ on 02.28.11 at 11:13 pm

I agree, Carney will probably offer up a “last call” to the suckers before he starts to take away the punch bowl in April. He has been very forthright and will likely give a stern warning tomorrow about exactly what the plans are.

Those who fail to listen will be caught on the wrong side of the trade. Then again, we might see another sales goose with people trying to beat yet another deadline (interest rate hikes) – like it is a race or something.

I fail to understand the psychology inherent in the housing market. Got out last year when it looked like it was going to tank and look where we are now.

However, the flip into investments has done much better than any property could hope to… AND, it’s extremely liquid. That was before I started reading this blog: Garth is correct in his advice! (Except for bonds.)

#18 Cellar Dwellar on 02.28.11 at 11:22 pm

@ #14 “……sounding more and more like the Michael Cambell/Ozzie Circus show…..”
Good one.
I’m guessin yer not schuckin out $475.00 for Ozzie’s REAL ESTATE ACTION GROUP seminar?????
It Should be called RealAssedCashGrope..

Oh, I almost forgot ….

20th !

#19 bsallergy on 02.28.11 at 11:28 pm

I’ve known we’re screwed for a long time. Was talking to a colleague last week, he’s 60 and talking about retirement, only owes 205k on his mortgage, just bought a new F350 diesel pickup because the 65k behemoth gets better mileage, has credebt card debt and a line of credebt. I smiled and thought you’ll never retire, hell you’re not likely to ever pay off anything before you die. But he is pretty average . . .

#20 Siddelly on 02.28.11 at 11:34 pm

Well Garth, after 20 years at 11th and Camosun, My step-mom is listing her home in Point Grey and going with a professor of Real Estate from UBC whom apparently is very keen on the mainland Chinese buyers. The sign goes in on the Ides of March and I will have a front row seat to how this crazy market plays out. Will she hit the jackpot?
Is she too late? I’ll let you know how it all unfolds.

#21 kc on 02.28.11 at 11:40 pm

10 The American on 02.28.11 at 10:52 pm

Sadly, this is not available. One reason we do not have a Zillow. — Garth

This type of information is available to RE Agents. I guess this is why they call themselves professionals.

#22 Thetruth on 02.28.11 at 11:40 pm

Garth, your hypothesis doesn’t take into account the 559,000 newcomers per year… far higher than anytime in history!

Will those people live in tents?? or will they rent?? or buy?? Isn’t this demand?

Your posts have been repeatedly shown to be false. The country’s immigration total is 240,000, the bulk – 166,800 – accepted under the economy class, which includes people willing to start a new business, skilled workers and live-in caregivers. This equates to roughly 35,000 households, of which an estimated 10% can purchase a home within two years. That’s 1,750 sales a year. Meanwhile 251,840 people die each year in Canada. Last year 385,777 people were born. Immigration will not save real estate. — Garth

#23 Jay on 02.28.11 at 11:41 pm

I had a conversation with a BNN reporter the other day, and I asked “why do you only talk to bank and real estate representatives when talking about the housing market? Don’t you find their anti-bubble commentary a tad biased?”

His response: “Of course it is! You’re absolutely right!”

Me: “So then what do you think is going to happen here?”

Him: “When they raise rates, things are going to get very interesting. The same way they got interesting in the states.”

Me: “So then shouldn’t you be reporting that?”

Him: “Nah…”

And the conversation died there.

So that’s BNN for you folks; they know what’s going on, and choose to report the opposite.

#24 Concessionman on 02.28.11 at 11:50 pm

“In fact, by August it’s possible we’ll have had three hikes, with the prime at least 3.75%”

Crap…that means I’ll have an interest rate of 2.85%! The Horror!

If you have prime minus .9%, enjoy. You’ll never see it again. — Garth

#25 Moneta on 02.28.11 at 11:52 pm

Adventures in Sea-Tac with Moneta on 02.28.11 at 1:20 am
.

Phew… no pictures!

#26 Kevin in Winnipeg on 02.28.11 at 11:54 pm

I just finished watching the new documentary “Inside Job”. It is shocking the similarities between Canada now and the United States 3 years ago. Anyone who says our banking system is sound is very naive.

#27 Sasquatch on 02.28.11 at 11:55 pm

If your going to stand tall, you might as well walk proud.

#28 Cato on 02.28.11 at 11:55 pm

Democracy is two wolves and a sheep voting on what to have for dinner. We are all about to be royally screwed. Taking ownership of their own mistakes is last thing any of these spoiled, entitled individuals are going to do – its going to be everybody else’s fault but their own. None of them have saved for retirement so welcome to the social welfare state because as it stands now the spenders outnumber the savers by a large margin. Guess which way governments are going to sway when this mess really hits the fan.

#29 Moneta on 02.28.11 at 11:58 pm

Next, I’m interested in understanding if you or any of the bloggers have an understanding if within Canada there is the equivalent to a County Tax assessor that provides complete transparency to the public via online service in the form of “constructive notice” for all sales history, tax history, and survey history of each and EVERY property within a given area?
——–
For a while I could find Montreal prices within 1 year… or maybe 2 but I don’t know of any service that is easily accessible.

That’s just one more reason why I think reality is going to bite.

#30 JT on 03.01.11 at 12:03 am

Who would take out a $1 million mortgage. My idiot nephew in southern California whose house is now worth $400,000 and makes $7,000 mortgage payments when he only make $7,500.00. What does he say to this? ” I don’t want to lose my down payment.” I would scream, but its just not worth my sweet breath.

#31 Macrath on 03.01.11 at 12:05 am

BNN free for over a year now and my portfolio is loving it. Greaterfool, Zero Hedge, Naked Capatilism and all the other great internet sources has rendered them, as Garth would say, ~ irrelevant

#32 Canayjun on 03.01.11 at 12:13 am

To: thetruth

You have a lot to learn about the truth.

#33 wetcoaster on 03.01.11 at 12:18 am

“I’m guessin yer not schuckin out $475.00 for Ozzie’s REAL ESTATE ACTION GROUP seminar?????
It Should be called RealAssedCashGrope”

And for that $475, Ozzie will actually tell you that Detroit is where it’s at. I’m serious ! I thought it was a joke til I listened to his spewage 2 weeks back.

He thinks buying a $1000 house in the ghetto is a smart decision because the government will give you $25 grand to fix it up. Did this dumb -uck not watch 60 Minutes last year ? Anyone with a death wish was the only ones attempting it and there very few, especially white guys. The nutbar is a Charlie Sheen clone with an accent,one fruit loop away from reality.

#34 Investx on 03.01.11 at 12:21 am

“The average downpayment on a house has shrunk to a pathetic 7%. Nine out of ten new mortgages taken last year were for 35 years, because people couldn’t afford any other.”

Hi Garth, can you provide published sources for the above stats? I’d like to share them with friends.

#35 Basil Fawlty on 03.01.11 at 12:23 am

“BNN banned me. Like Mubarak and the Internet. — Garth”
Before BNN was purchased by Canned West Global, they had great guests. Now shows like Squeeze Play on BNN present a very narrow perspective, similar to the gunk that comes out of the Fraser Institute.

#36 Crash Callaway on 03.01.11 at 12:25 am

Jeez that lad is as enthusiastic as a realtor at an open house.

#37 Basil Fawlty on 03.01.11 at 12:27 am

The people are coming after the US Banksta’s.
http://www.thestreet.com/story/11026295/1/jpmorgan-fighting-10000-lawsuits.html

#38 Crash Callaway on 03.01.11 at 12:28 am

And they put up that fence special to keep the pervs out of their yard!

#39 Joe Realtor on 03.01.11 at 12:30 am

I didn’t think it was possible, but the quality of new builds is even worse than it used to be (and that was pretty bad)

I checked out some rental places at a new condo in downtown Toronto, where theres about 30 units for sale, and about the same for lease. Someone linked to it here in yesterdays post.

I think my parents did a better job finishing our basement in the ’70s.

Yup, the cheap ass doors and finishes are going to look like crap in less than 6 months.

It’s funny, several of the units for lease are brand new, asking upwards of 2 grand a month for what they call a 2 bedroom, and they aren’t even clean. Landlords aren’t even cleaning the floors before putting them on the market. 20 other similar units competing with you and can’t figure out why it’s still on the market after 2 months? Ah, maybe they have money to burn and don’t care.

#40 Patz on 03.01.11 at 12:31 am

#3 Jeff Smith
Good our prime minister is standing up against the freakin despot. I wonder if canada will send troops to Libya like afghanistan.

Nah, but Obama and Harper today jointly pledged to help the Libyan people in every way possible towards building a democracy.
Translation: You guys do the dying and other heavy lifting then we’ll come in lend you money to redevelop and when you can’t pay it back we’ll pick up your oil for pennies on the dollar–read Naomi Klein’s SHOCK DOCTRINE: the Rise of Disaster Capitalism.

#28 Cato
Democracy is two wolves and a sheep voting on what to have for dinner.
Love it!

#41 Utopia on 03.01.11 at 12:36 am

Excuse me, but if I stop posting squirrel recipes, will you start quoting me instead?

Back on February 4th I left comments similar to Derek Dunfields where I also discussed the probability of reductions in consumption and reduced savings rates as an outcome of high levels indebtedness.

Below are a reprint of those remarks.
———————————————————-
#72 Utopia on 02.04.11 wrote….

While it is understandable that interest rate increases will dampen home resale prices in Canada in the coming years and there is a certainty of the baby boom demographic patterns which will weigh on prices as too much supply meets too little demand in the future, we do face an outcome where home prices could remain persistently high for quite some time provided employment numbers hold up and interest rate increases are not too dramatic.

In that scenario, there would not be the much predicted crash in the pricier overbought and saturated markets. Perhaps there will not even be much of a significant melt as Canadians are enabled by an improving economy to continue to maintain the high payment levels on their homes as a real recovery period materializes.

Domestic risks to housing prices seem to be abating from a macro perspective however the persistent distortion in many of the key trends remains a real concern.

There is an acknowledgement that any significant shocks outside our own borders could still bring this party to a screetching halt. I do not incidentally see a significant risk arising from the conflicts in the Middle east. Of much greater concern are European debt woes and sovereign risk.

Increasing energy costs and the ongoing threat of price inflation meanwhile in commodities are an added burden on domestic houshold budgets.

Canadians in general though seem to be coping well with the added pressures on the expense side of the ledger and it is true that we have not experienced anywhere near the devastating outcomes that have already taken place in the US housing market.

Price stability in a high debt environment is certainly preferred to the massive asset correction as witnessed in the US.

We cannot have it all and so may discover that the price we really will pay for avoiding a massive real estate correction is simply a slow deleveraging through ongoing payments of mortgages and other related obligations. Helocs, credit cards and auto payments come first to mind here.

In Canada, we do in fact seem to have glided over the worst of the global recession intact, albeit in much deeper debt than when the country first entered the financial crisis that has been so damaging to other Western economies, particularly the United States.

Should the economy continue to improve then the real outcome in this sort of situation will be reflected more in reduced consumption and reduced savings rates as existing debt takes the lions share of current income.

This would represent an era of continued high prices and relative market stability combined with ongoing high home ownership rates while restraining the casual spending habits of most people.

The real casualty here would become disposable income and a slowdown in spending at the retail level and on services.

Another downside risk is that the savings rate as already mentioned would remain persistently low for the majority of families and retirement planning would continue to be put off by many where the bulk of their income is instead consumed by servicing existing high debt loads instead of fattening savings accounts.

This is not necessarily a negative where home price stability can be maintained over a long period of time and in relative terms and where the downside risks of a price collapse do not materialize.

A true economic recovery would certainly be welcomed by most people. This one is not likely to be met with rising wages though and so we could realistically enter a long period of relative economic stagnation and low growth prospects as the debts of yesterday consume the opportunities of tomorrow.

#42 NotAGreaterFool on 03.01.11 at 12:37 am

#10 The American…bang on with the questions. Garth, to me this is the story along with the fact Harper allowed CMHC’s insurable loan limit to increase to enable the current attitude in the marketplace. Who’s got this story?

#43 April on 03.01.11 at 12:38 am

Garth, I’m curious to know if the same kind on media real estate pumping, that’s happening here in Canada, went on in the US prior to their decline? Probably yes? Also, if a small hike in % rates would provoke a “recession” we must be on the verge of something very serious.

#44 Concessionman on 03.01.11 at 12:40 am

“If you have prime minus .9%, enjoy. You’ll never see it again. — Garth”

Yep, prime less .9%. The orange shorts guy was advertising it a few years ago, made TD match it on renewal.

Mind you it’s all relative…

First House 1991, 9.9% 5yr fixed (shoulda gone vrm)
Renewal in 1996, 6.6% 5yr fixed (thought it was a deal, shoulda gone vrm..)
Sold (at 75% premium) and bought bunker in 2001, fixed around 5.75% (cheapest rates I’d ever seen!)
Woke up, squashed and went vrm late 02, around 4.25%
Renewed in 07 for prime less .9%
Sittin at 2.1% now.
52K, 2 years to go.

So realistically if the kiddies these days are smart, they have it alot better buying now (as in this summer after prices cool off a bit). If they don’t bite off more than they can chew, they’ll have the big front end of the mortgage at very low historical rates, allowing more of thier payments to go to principal. If they wisely choose a 20yr am with weekly payments, by time rates get to historical norms they’ll have put a sizable dent in the mortgage.

I haven’t run the numbers, but I would think if my rates above were reversed, I’d be done by now….

#45 Dodged-A-Bullit-in Alberta on 03.01.11 at 12:42 am

Greetings: # 8 [John]

My wife and I came to The Hat 6 years ago from Calgary. We left just as the peak was being reached, prices climbed in cowtown for a few more months, then started to flatten. [condos]. Medicine Hat is going to be one of the bell weather communities for exactly what Garth has been saying about senior citizens. This city has a huge pop of these who are now finding they cannot financialy or physically maintain their homes. A large number of homes built in the 60s and 70s are coming on the markets, I don’t think there are enough first time buyers to absorb them. Anyone buying a new house here is crazy. However I think there is a good selection if a potential buyer is willing to look for a older home in a well established community, forget the McMansions in the SE and SW. We live north of the river and have a 60s home with great property and near 3 schools, paid 230K . Hang tough with the renting but keep looking, especially if you intend to remain a long term resident. We will see homes up for sale, with the vendors very motiviated. We are also seeing waiting lists for people to get into senior complexs, and assisted living units.This is the other half of the story that is unfolding.

#46 April on 03.01.11 at 12:45 am

Genghis – #12
For some reason I don’t think this Van Sun article means much. Does home building or home selling ever stop completely during a real estate decline? I don’t think so but I stand corrected if I’m wrong.

#47 Angela on 03.01.11 at 12:52 am

After the discussion last week I’m beginning to wonder if this is a cult. I eagerly anticipate the words of truth spoken each evening by my fearless leader. I read them with wide eyed wonder, nodding in agreement like a fricking bobblehead ornament. We are the chosen ones, the possessors of wisdom and truth. All of those immoral, stupid, greedy people around us who have feasted on cheap money and consumer goods will burn in fires of debt and misery, eating canned beans and squirrel and we shall vulch on thelr depraved carcasses, muwahahahaha!

On a serious note, the other night a friend said that she’d found a great house, that a deal fell through and that it’s a steal…at $499,999. The unimpressed looks on our faces caused her to falter. I guess stone silence was not what she was expecting. Me: “That’s half a million dollars.” Her: “But for the location it’s a steal.” It’s in the Lower Mainland, 4 bed, 3 bath, new-ish house. It’s not a steal. It’s a slaughter.

Call it a cult, call it what you will, I sleep very well at night on my rented pillow, thank you very much.

#48 mab on 03.01.11 at 12:52 am

from a NYT article … over 35% of all auto loans were made to subprime borrowers, and many with NO MONEY DOWN. ….Auto loan securitization market alive and well, thanks to the zero cost of money…yep, that is how it is supposed to work-make loans you won’t own and pan them off to investors reaching for yield…..

#49 Kits on 03.01.11 at 1:00 am

Further amusement ….

Fairmont Pacific Rim listings range from $1156 to $2237 a square foot

http://www.6717000.com/estates/listings/

#50 Kits on 03.01.11 at 1:03 am

http://www.6717000.com/estates/listings/

For your amusement – Vancouver Fairmont Pacific Rim listings – prices range from $1156 to $2237 a square foot

#51 Bottoms_Up on 03.01.11 at 1:07 am

Economic impact of immigration to Canada:

Essentially says that immigrants are more likely to live in poverty, less likely to use social services and, therefore, one can extrapolate they are not likely to be saviours of Canada’s real estate market:

http://en.wikipedia.org/wiki/Economic_impact_of_immigration_to_Canada

#52 Morry on 03.01.11 at 1:08 am

In fact, by August it’s possible we’ll have had three hikes, with the prime at least 3.75% – or a fat 25% higher than now

marked on my calendar. will be watching to see if you are accurate… fail the test and you are toast.

#53 Gord In Vancouver on 03.01.11 at 1:09 am

Families owe (on average) $1.50 for each dollar earned. The average downpayment on a house has shrunk to a pathetic 7%.
_________________________________________

Those are Canadian figures – imagine what the Vancouver averages are.

#54 Valkyrie on 03.01.11 at 1:14 am

My first mortgage 13.25% 1981
My second year…..19.75% 1982
My third year………12.5% 1983

Locked that sweet, affordable rate in for 5 years…
Enjoy today’s low rates indeed….

#55 nonplused on 03.01.11 at 1:16 am

Nice post today Garth, and a good reminder as we head in to the spring crazy season.

Listings are still low in Calgary, and what is listed is priced as if 2008 never happened, it was 2006 all the way along. People are literally starting the process listed at 3 times what the house was worth in 2005. I’ll grant that there has been substantial inflation since 2005, maybe as high as 6%/year (the CPI is a lie). But that doesn’t add up to a 200% gain or prices 3 times higher. It wouldn’t add up to a 100% gain.

Damn you Carney and F-bomb! You caused this! Central bank and government manipulation never end well. They can’t end well, because individual people and committees can’t know everything. They can’t even predict the results of their actions with any certainty. Market forces should have been left to preside over interest rates and mortgage standards should not have been manipulated through CMHC. Let the markets set rates and let the bankers evaluate and carry the risk for all but the very bottom tranche of the mortgage market.

They should immediately set the maximum insurable portion of the loan at the average house price. The government should not be guaranteeing McMansion McJumbo McMortgages. And CMHC should insure primary dwellings only, not vacation properties or rentals.

PS, one of the reasons the CPI is a lie is because they have included all kinds of discretionary items of little practical value in the calculation. For example, if computers get faster processors, well let’s hedonically adjust the price down. But people don’t need computers and they mostly use them to play games, surf porn, and read real estate blogs. They shouldn’t even be in the index, unless you are trying to measure business conditions.

Energy, on the other hand, is excluded, even though the price of oil is the price of everything. Food? Let them eat cake. House prices? Look at rent. Which raises an even greater question: how did we get a real estate bubble when rent was relatively benign? It had to be on the finance side.

#56 Morry on 03.01.11 at 1:22 am

oh to be young and horny again with a 24hr boner.

instead i am here getting cheap thrills laughing at the RE gurus, who are mostly commenting from their parent’s basement suite or hanging out at the local free wi-fi coffee house, paying 5 bucks for their lattes. sheeples.

#57 Junius on 03.01.11 at 1:24 am

To the Vancouverites on the sidelines,

There are plenty of people with 7 figure mortgages and low six figure salaries. I know a bunch of them. They own their own business and with the help of their creative mortgage broker they pushed their stated income up 3 to 5 times over the actual numbers.

There are lots and lots of them here. Just wait until the tide comes out. There will be more nudity on the West side and in West Van than all of wreck beach.

#58 Utopia on 03.01.11 at 1:26 am

#23 Jay

“And the conversation died there.

So that’s BNN for you folks; they know what’s going on, and choose to report the opposite”.
———————————————————

I hear you Jay. Part of the problem is that BNN, like most news outlets will stick to what they consider to be news or newsworthy stories. Facts that is.

Under that premise, it is not NEWS (for example) that we on this site speculate that housing prices will decline soon.

What is news is how many houses or condos actually sold last month. Or how a home in Vancouver was flipped in just hours for a fat, healthy profit. News also includes people flying in helicopters over Whiterock to veiw homes from the air. You see where I am going with this?

They report on events that have already happened, not on conjecture and speculation. There is however plenty of lattitude for guessing at the future and speculating IF you happen to be the guest who’s story is actually “news”.

That is why real-turds keep getting their story on the air even when they manufacture and stage events for public consumption. It is a little difficult to fight that racket from that perspective.

Naturally, some really excellent reports about the hazards to the economy from from outstanding sources in this country do not get nearly as much attention.

Even good projections and estimates of future activity from respectable sources can fall into the category of speculation and be ignored in favor of high profile events that are current.

When average home prices finally drop in Vancouver and Toronto and it is a statistical fact then BNN will report it as NEWS and we may even see Garth get invited back on the show where he can then say “told you so..”

Not before then. Get used to it.

#59 The American on 03.01.11 at 1:35 am

At #12 Genghis
At #21 KC
At #29 Monetta

Thanks. What I’m referring to is a site somewhat like this. In the States, this is all a free and common service provided to the public for real estate. Every country provides it. Information is held and archived from the very beginning of when the parcel was annexed. So, you’ll be able to see the ENTIRE history of the property, instead of only a couple of years. This tool is used by most home buyers today so they can tell if they’re offering too much or not from when the property was originally purchased. They can also see if the property is free of liens or not and what those liens are for, including mortgages, and exactly for how much. It puts the buyers in a tremendous advantage of negotiation. This is MANDATORY that all counties provide this as readily accessible in a user-friendly format, free of charge.

http://info.kingcounty.gov/Assessor/eRealProperty/Dashboard.aspx?ParcelNbr=6094680000

#60 nonplused on 03.01.11 at 1:36 am

PPS, more on inflation (rant coming).

Including things like computers and then hedonically adjusting them for performance improvements in the CPI is wrong because it is not measuring inflation, it’s measuring the cost/benefit ratio of entertainment and luxury.

We don’t need airbags, traction control, ABS or dvd players in cars, yet these make CPI go down while all the indications are they make the roads less safe because people adjust their driving habits on account of the technologies. I have 3 4×4’s, one with all the bells and whistles, one with ABS, and one with nothing. They all 3 get us around no problem and I would say the one with traction control is the worst to drive on ice because it gives a false sense of security.

The fact is all these iPhones, computers, dvd players, home theatre systems, etc. are complications that all have a monthly fee you didn’t have before and ramp up the electricity bill, and should be considered additions to the cost of living not deductions. CPI should include the basics, and they are through the roof! It’s the 70’s all over again, but because the Chinese can make an MP3 player you don’t need cheap (the car still has a radio) the CPI is somehow adjusted to nothing and we buy the story. Well, you can. I bought gas and groceries lately, and I know my money is ever increasingly worthless.

Soon it will be worth nothing if the C-banks don’t return interest rates to market. Printing money, whether outright or through excessive loan creation in a fractional reserve system, only has one result in all of history. (And fractional lending with zero required reserves is the same as printing money.)

#61 Zenith on 03.01.11 at 1:41 am

We’re all worried about 3% money? Really?

We’re lucky to be living in a country where residents have saved over $1 trillion in cash (let alone other assets on the balance sheet), where GDP is rising despite the CAD, and where foreigners can’t help but scoop up Canadian bonds?

Carney and the BoC won’t raise rates that high or fast anyway and even if they did, nobody I know would call 3% (and change) a ‘high’ rate.

Asset deflation will happen when Gaddafi gets the Order of Canada.

I can’t think of a better place to be than in this country. Canada has shown itself to be the most resilient of the G7 nations. Everything that bears have cited to bring down our real estate (bond rates, unemployment, high CAD, inventory, GaGa’s latest album release) have only pushed prices higher.

Canada is the best place to be and own real estate.

Seriously.

#62 Soylent Green is People on 03.01.11 at 2:02 am

Flaherty and Harper are trying to bankrupt Canada so they can justify killing our social programs and putting into place profit medicine like the USA has.

………………….

Harper’s government sponsored corporate welfare hands $4-6 billion to U.S. treasury

OTTAWA—Planned federal and provincial corporate tax cuts will transfer $4-6 billion of annual revenue from Canadian governments to the U.S. treasury, concludes a study released today by the Canadian Centre for Policy Alternatives (CCPA).

The study, by economist and CCPA Research Associate Erin Weir, explains the U.S. taxes its corporations on a worldwide basis.

When an American corporation repatriates profits from Canada to the U.S., it pays the 35% American federal corporate tax rate minus a credit for taxes already paid in Canada.

Given a Canadian corporate tax rate below 35%, American corporations will have to pay the rate difference back to Washington.

http://www.policyalternatives.org/newsroom/news-releases/canadian-corporate-tax-cuts-hand-4-6-billion-us-treasury-study

.
.
.
.
http://www.unseatHarper.ca

.
.

#63 tester on 03.01.11 at 2:17 am

American #10 – Comments on CREA and NAR

info such as sales transactions are available for a fee from provincial land titles offices (and in some case at the municipal level). Realtors have unlimited access included in their fees due to data sharing agreements between boards and the land titles orgs.

Contrary to popular belief CREA has very little data. Transaction data is kept at the board level, the boards only give up average pricing and sales data. Notice how CREA never provides median data and have not created any complex data products? It is because they don’t have the data. They may get listings data though since they post through mls.ca

#64 Mean Gene on 03.01.11 at 2:22 am

Lovely, do you truly want to know your neighbours?

http://www.thestar.com/news/crime/article/946088–neighbours-dismayed-woman-forced-to-live-in-garage?bn=1

#65 April on 03.01.11 at 2:25 am

I saw the headline on CBC 10 pm news tonight “Run on Real Estate” but wasn’t able to hear the story. Did anyone catch it?

#66 On_The_Edge on 03.01.11 at 2:31 am

#22 THETRUTH, you are a total idiot if not completely insane.
US accepts 10 times more people every year as new immigrants compare to Canada and and they did could not save RE, where average RE is much cheaper than Canada. Either you are a realtor or have some hidden interests in misguiding people.

#67 cc on 03.01.11 at 2:45 am

Garth, it seems to me you could fight the “yellow peril” hype with hard facts… I’ve been looking for stats on what percentage of home sales in Vancouver are to non-residents, and it’s pretty hard to find.

I recall hearing some time ago that the majority of out-of-province purchasers of Vancouver condos were actually retirees from places like Alberta… do you know of any stats that actually support that?

#68 anonymous on 03.01.11 at 2:57 am

Who would take out a $1 million mortgage? Story of a friend’s friend – a couple in their 30s likely making less than $140K gross per year – originally owns a condo in surrey, recently is able to buy ANOTHER SFH in Burnaby for >$700K. Proudly claimed that
1) one can only become rich from real estate
2) some banks are bad, won’t lend your lots, you can lots more thru mortgage brokers
3) they carry a $900K debt at a monthly cost of approx. $3000, with 2/3 covered by rental income from condo & basement. Out of pocket is just $1,xxx, which is totally affordable with their salary income
4) they are so lucky to get their SFH by bidding over asking
ENOUGH SAID !!!

#69 Onemorething on 03.01.11 at 3:03 am

Repost..still valid!

Well Garth, a good topic right now and maybe FINALLY all the Papered Over Fallout is about to roost.

I agree in the long drawn out demise of RE in the Western world actually. Not as much a demise but a massive well engineered (not) teetering on the edge scenario where shoes are dropping left and right, damage control, more shoes until some equalibrium can form.

This will however not occur without global pain, protectionism and massive consolidation at prices below cost. The biggest swindle ever recorded you might say and will take 100′s of years to ever match it going forward.

The reality is simply something that has to occur as some point for Canada, Australia and China RE.

I’ve learned that if you take RE investment off the table, you free up bandwidth to make loads of money in currencies, oil and all other REAL consumables.

RE is such an emotional illiquid play. Between fish farming, free range chickens and growing chili peppers, I have added Birds Nest export to my list.

All is sweet when you make what you eat!

#70 JSS on 03.01.11 at 3:09 am

On the other hand, there are many families that have two incomes. If the mortgage payment goes up a few hundred bucks a month, they will survive.

Not to worry.

#71 JSS on 03.01.11 at 3:13 am

Case in point…

I know a couple – an RN and a cook in their late 20’s – bought a house for $400K, 5% down. Calgary. Monthly mortgage payment approx. $1,800/month – 5 year fixed @ 3.8%.

Their income approx. $120K/yr.

They’re not worried.

What do you folks think?

#72 Adventures in Sea-Tac with Moneta on 03.01.11 at 3:17 am

25 Moneta – you are a good sport! I’ll go back to being
your friendly neighbourhood “Dark Sad Monster Bunny”

The American – the information is there, but you have to know where to look and be willing to pay

http://www.bconline.gov.bc.ca

#73 BrianT on 03.01.11 at 3:19 am

#Jeff-Rah Rah-somehow I don’t think you will be heading over there to fight anybody. In related news, the MSM let the sheep take a tiny peek under the curtain today http://news.sympatico.ctv.ca/home/gadhafi_stashed_more_than_2_billion_in_canada/dbc43fe6

#74 DaBull on 03.01.11 at 3:21 am

#253 Devore on 02.28.11 at 9:31 pm

Sorry bud your wrong.

The index is price weighted.

From http://www.djindexes.com/mdsidx/downloads/fact_info/Dow_Jones_Industrial_Average_Fact_Sheet.pdf

Components’ adjusted closing prices for stock
dividends
, splits, spin-offs and other applicable
corporate actions on trading session

From http://www.djindexes.com/mdsidx/downloads/brochure_info/Dow_Jones_Industrial_Average_Brochure.pdf

The DJIA is calculated with dividends. S&P 500 is not.

Also, lets treat the house purchase as just an investment. Now we have rent collected from said purchase, (same as dividends) ie cash flow from rental income. Factor that into the equation and see which one out performs the other. I’ll take the house any day.

This could go on and on, but in the end a house in Omaha bought 52 years ago performed the same as the DJIA in that 52 years (Dividends included, rent not).

#75 Blobby on 03.01.11 at 4:16 am

So garth.. Im currently due around 30,000 (pounds) in payment from UK companies… As 4 seperate payments, one a month…

Do you recommend i just take it directly as canadian and weather the blow on the exchange rate.. or put it into a bank account in uk pounds and hope the exchange rates returns in my favour in the next year?

I.e. do you see the canadian dollar going up consistently, especially with all the rate hikes? Or will the (inevitable – imho) property “crash” (ok, dip, then melt) cause the dollar to retreat signifciantly by the end of the year?

Take it now. — Garth

#76 Petrol Head on 03.01.11 at 5:20 am

BOC should raise rates, a 3.3% growth rate (which I think will be revised lower later on) should be the green light to “Bringing back interest rates to normalicy”

Vancouver will be the first RE place to topple, it’s in such bubble territory that you can’t even see the whole bubble anymore it’s that big. Imagine the bust when that goes south!

In the end, I wish people would just go back to focusing on what is truly important in life and no, it’s NOT money. (Clue – Family, friends, charity, etc)

#77 Kaganovich on 03.01.11 at 6:49 am

An interesting article that puts the events in Wisconsin into historical context. Worth a read.

http://www.nakedcapitalism.com/2011/02/guest-post-amity-shlaes-forgotten-history-%E2%80%93-when-unions-go-bust-we-all-do.html

#78 Jody on 03.01.11 at 6:54 am

Silver is now over $30, not many would have thought this to be possible, hell, I bet a year ago Garth would have said I was full of crap to think silver was going to be north of $30, well, here we are. Less than two years ago I bought silver for less than $18 an ounce, now look where we are. How the flip can people deny what is going on? This time next year epect to fork over $10 for a 4L jug of milk, while some prick faced politician gets there ass kissed, scum.

http://www.youtube.com/watch?v=T2w7wGwUZ9Y&feature=player_embedded

A crash is coming, to be lead into it by the US

According to Gallup, the U.S. unemployment rate is currently 10.3 percent. When you add in part-time American workers that want full-time employment, that number rises to 20.2 percent. Since 2001, over 42,000 manufacturing facilities in the United States have been closed. Half of all American workers now earn $505 or less per week.
In the United States today, 6.2 million Americans have been out of work for 6 months of longer. When you adjust wages for inflation, middle class workers in the United States make less money today than they did back in 1971.

#79 OttawaMike on 03.01.11 at 8:03 am

#222 Herb on 02.28.11 at 6:40 pm
Re:Free trade and globalization

Let’s look at India prior to 1990. That country had a policy where everything had to be made within their borders. Imports were strictly controlled and basically only military hardware and other highly specialized items were imported. Every auto, rickshaw, bicycle, tractor, sewing machine etc. was domestically made.

Their economy was a backwater and very little of the populace were moving into middle class status.
Since opening trade their manufacturing has thrived. The inefficient factories that made outdated products had to modernize or die and a new 20% of the population has risen above the poverty line.

Sure there are still environmental and social issues but the BRIC countries are all better off today with open trade policies than the closed border days.

#80 SAD on 03.01.11 at 8:17 am

“An equally worrying – and perhaps more likely scenario,” says Dunfield, “is that interest rates go up a little, and more of people’s disposable income goes to repaying their debt, leading to a significant reduction in consumer spending. Since personal spending on consumer goods and services accounts for 58 per cent of the Canadian gross domestic product, this decrease would provoke a ‘made in Canada’ recession.”

This fact is so blatant and in Canadians face. Housing wealth effect and debt driven recovery. Enjoy it well we can….

#81 Kaganovich on 03.01.11 at 8:21 am

Here are a couple frank but grim discussions of the state of the American economy in relation to their financial sector. Alpert clearly lays out the enormity of the problem posed by the shadow inventory of houses on the big banks’ balance sheets. Senator Sanders continues to hammer home the fact that US government has been captured by the monied tentacles of the FIRE sector. Please watch if you have the time.

http://jessescrossroadscafe.blogspot.com/2011/02/prospects-for-us-banks-and-economic.html

#82 john m on 03.01.11 at 8:36 am

#40 Patz on 03.01.11 at 12:31 am

#3 Jeff Smith
Good our prime minister is standing up against the freakin despot. I wonder if canada will send troops to Libya like afghanistan.

Nah, but Obama and Harper today jointly pledged to help the Libyan people in every way possible towards building a democracy……………………..<<<< is that not curious?? "O" and "H" pledging to build democracies in foreign lands and destroying democracies in their own turf …hmmmmmmm ohhhhhhhhhh the sincerity of these photo opps…..

#83 S-J on 03.01.11 at 8:37 am

# 10 The American. It’s funny, but I was thinking about this exact subject the other day – after looking through Zillow.com and seeing all the excellent information available to all. Even went to see if Zillow.ca was up and running yet! No such luck. Canada is behind the times and it is very frustrating for us not to be able to make informed decisions without all the available tools. I did find one in Nova Scotia (viewpoint.ca), but even that is limited. Wishing for a Zillow soon!

#84 SquareNinja on 03.01.11 at 8:58 am

If you Vancouverites think the money from Chinese investors is just going to keep on pouring into Richmond, think again: http://m.youtube.com/index?desktop_uri=%2F&gl=CA#/watch?xl=xl_blazer&v=rFwXM2M3tuY

That’s right, “China Cracks Down on Jasmine Rally.”

In case you didn’t know… the Middle-East revolutions are spreading. Soon, Chinese business will be stopped cold, and those rich investors will stop investing. They may not sell their “investments” due to the turmoil in China, but you can be guaranteed that no more new money will be coming in.

#85 Moneta on 03.01.11 at 9:03 am

The American on 03.01.11 at 1:35 am
——-
You can get this by municipality:

http://evalweb.cum.qc.ca/Role2011actualise/recherche.asp

It gives you the evaluation but not the last transactions. I think you have to do that in person or get connected with a real estate agent.

#86 House on 03.01.11 at 9:04 am

A year ago consumer spending was said to be 70% of GDP. Yesterday you said it was 60%. Today Mr. Dunfield say it is 58%. No wonder we have problems. Consumer spending is dropping like a rock. So what is all the other spending being done on, exports?

The US economy is 70% based on consumer spending. Canada is about 60%, as stated. Real estate activity is roughly 20%. Manufacturing is 11%. Blogging is 9%. — Garth

#87 WesternCanadian on 03.01.11 at 9:13 am

bsallergy: “has credebt card debt and a line of credebt”

I’m not the spelling police but is this guy joking?????

#88 WesternCanadian on 03.01.11 at 9:20 am

#72JSS:
“I know a couple – an RN and a cook in their late 20′s – bought a house for $400K, 5% down. Calgary. Monthly mortgage payment approx. $1,800/month – 5 year fixed @ 3.8%.

Their income approx. $120K/yr.

They’re not worried.”

I would not be worried either if I was them.

They paid a little over 3 times their household income. Looks very affordable for them.

Virtually no chance of either one of them losing a job or suffering a pay cut.

Are you serious? Cooks are an endangered species. — Garth

#89 Moneta on 03.01.11 at 9:46 am

In Seattle, we met a friend who moved there 2 years ago. They bought for 850K and he told me the house was now valued at 650K (on Zillow I think).

Seattle median price in 2006: 516K
2010: 349K

It really is a beautiful city. Amazing food… in the city core, I think the only chain I noticed was Starbucks ;)

But… real estate is still taking it on the chin.

#90 Moneta on 03.01.11 at 9:50 am

Canada is the best place to be and own real estate.

———–
At this particular point in time.

#91 Throwstone on 03.01.11 at 9:55 am

Great post garth!

I’m going to go with Dunfield options A and B but in reverse order.

The rates will rise and consumer spending will drop in syncronization, with an adverse effect on our consumer driven economy.

With our current debt levels, and no increase in wages to service these debts; defaults on larger debts will increase as they go unserviced.

With the consumer overleveraged credit will not be available, companies begin lay-offs with slowing sales, and the spiral descent begins.

Having one of the highest cost of living societies in the world, will surely have its downfalls.

#92 Jarry Street on 03.01.11 at 9:58 am

@Ottawa Mike,

Protectionism didn’t keep india in relative poverty. It was socialism, corruption of inefficient government controls, even local industry was too regulated. Government even owned(and still does in many cases) things like retail gas distribution. You could only own a gas station if you had the political connections. (which is still the case) Inflation is out of control and the same old morons that were running india are still running it into the ground. Labour laws are also still very socialist.

Protectionism in a relative capitalist economy is what made both Canada and the United States industrial heavyweights. Without the protectionist duties since confederation Canada could have been a jumbo sized new zealand. Just a resource base economy. What I don’t get is, we all learned about value added products back in school and how that was the key to maintaining a developed economy. Instead we shipped manufacturing overseas for the most part, and we are doing so with our call centres as well. To be honest all this talk about CHindia is a all hype. A 10 to 15 % duty packaged as a environmental duty to recycle all the plastic crap they export to us and (assuming the US also imposed such a duty) and Chindias export boom is finished. Chindia needs the United States and Canada much more then the other way. As for our service sector jobs, when you look at sectors protected from competition such as telecoms, Satellite and cable TV protected through CRTC and the chartered banks also protected from competition by the government. Not one of these sectors should be allowed to outsource to non Canadian based companies without losing their Canadian content %. Same with auto insurance in ontario.

If the bleeding does not stop, look for even more higher taxes and Canada to become a fully resource based economy.

#93 Moneta on 03.01.11 at 10:11 am

The DJIA is calculated with dividends. S&P 500 is not.

———
Adjusted for stock dividends, not cash ones.

#94 Crazy on 03.01.11 at 10:19 am

FOR IMMEDIATE RELEASE
1 March 2011
——————————————-

Bank of Canada maintains overnight rate target at 1 per cent

OTTAWA – The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.

The global economic recovery is proceeding broadly in line with the Bank’s projection in its January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing challenges associated with sovereign and bank balance sheets will limit the pace of the European recovery and are a significant source of uncertainty to the global outlook. Robust demand from emerging-market economies is driving the underlying strength in commodity prices, which could be further reinforced temporarily by supply shocks arising from recent geopolitical events.

The recovery in Canada is proceeding slightly faster than expected, and there is more evidence of the anticipated rebalancing of demand. While consumption growth remains strong, there are signs that household spending is moving more in line with the growth in household incomes. Business investment continues to expand rapidly as companies take advantage of stimulative financial conditions and respond to competitive imperatives. There is early evidence of a recovery in net exports, supported by stronger U.S. activity and global demand for commodities. However, the export sector continues to face considerable challenges from the cumulative effects of the persistent strength in the Canadian dollar and Canada’s poor relative productivity performance.

While global inflationary pressures are rising, inflation in Canada has been consistent with the Bank’s expectations. Underlying pressures affecting prices remain subdued, reflecting the considerable slack in the economy.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in an environment of significant excess supply in Canada. Any further reduction in monetary policy stimulus would need to be carefully considered.

Information note:

The next scheduled date for announcing the overnight rate target is 12 April 2011. A full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR on 13 April 2011.

#95 Crazy on 03.01.11 at 10:26 am

Garth- Now, let’s clear up something else. Interest rates. Tuesday morning the Bank of Canada does nothing. April 12th will likely be another story. So will May 31st and July 19th. In fact, by August it’s possible we’ll have had three hikes, with the prime at least 3.75% – or a fat 25% higher than now.

Just a month ago you were saying they would RAISE the rate. Just one month ago.

#96 Wilde_at_heart on 03.01.11 at 10:42 am

#72 JSS on 03.01.11 at 3:13 am

Case in point…

I know a couple – an RN and a cook in their late 20′s – bought a house for $400K, 5% down. Calgary. Monthly mortgage payment approx. $1,800/month – 5 year fixed @ 3.8%.

Their income approx. $120K/yr.

They’re not worried.

What do you folks think?

That’s not a five-year fixed – the payments would be a lot more than 1800 if it was. They might have that rate for five years but it’s a safe bet the amortization is a lot longer.

I also suspect that either the salary is inflated or someone (probably she) is putting in a lot of overtime. A cook except for an executive chef at a top restaurant is unlikely to make more than $40K of that and an RN only makes around $82K at the top of the payscale and trust me, that RN won’t be in her 20s.

#97 grantmi on 03.01.11 at 10:50 am

Totally unrelated!! BUT!

For all those Vancouver Real Estate kool-aid drinkers. Read this in today’s Vancouver Sun.

http://bit.ly/hDT6jg

Two fine dinning restaurants closing up shop.

Two quotes worth noting:

At any rate, Vancouver IS NOT New York or Beijing or Singapore, where $400 for a dinner for two is not a big deal!

and

And prehaps paying off the most expensive real estate in the country takes precedence over nine-course tasting menus

Hmmmm. Let them eat cake!

#98 Crazy on 03.01.11 at 10:52 am

Regarding HYPERINFLATION

Garth, you have said there will be no hyperinflation. Ok, so you are very likely 100% correct about this. You are saying that we will not be using barrels to carry our bank notes into the basement to keep the boilers going. I get that.

But there are degrees of inflation!

There’s deflation, which is what happened to house prices in the USA and elsewhere (a bit here in Canada too).

Then there is no inflation, which is a peaceful and productive period where wages and prices are stable.

Then, you have low inflation, which is what many people prefer to have, where wages are slowly rising, and one’s assets are growing in value.

You then have high inflation, where prices are rising faster than wages, and folks are saying “wtf happened to the price of gas?” or “how come my money doesn’t cover all my expenses any more?”

You then have severe inflation, which is where prices are really outpacing their historical norms. In this situation, folks are inclined to notice these trends, and they start to do something about it. Like, they might buy that house, because it seems to be a good (perhaps only temporarily) investment, or they buy gold, because historically it has been a good store of purchasing power (or due to severe inflation, its price has increased 15% per year for the past decade).

Then you have really really bad inflation, where the price of a house doubles every three or four years. Money doesn’t make sense to keep around, and it is going out of style. Folks just want to dump their cash, or better yet, borrow somebody else’s cash and buy something solid (like a house, maybe).

Then you have the hyperinflation, where everybody knows that today’s pay will not buy tomorrow’s cup of coffee, so they say “what is the point of this… thankfully I bought that coffee this morning.”

So Garth, the big guy at the Bank of Canada says that “inflation in Canada has been consistent with the Bank’s expectations”.

Do you agree? Probably not, as I recall you saying in an earlier post that your Jeep gets more love this year than a few years ago. Heck, I think we can all agree that our vehicles get too much love now.

Inflation in Canada is rampant. YET, the rates stay low.

Why?

Because the situation in the USA is soo poor. Rates stay low because if not, the Loonie will go to $2.00 US. Rates remain low because the world is addicted to debt, and debt is everywhere.

So, the bank keeps the rate down. In the meantime, prices of everything go up.

What are the chances that rates will rise this April? I say, based on past history, despite inflation, the rate will stay the same.

Or, the rate will rise, and the Bank of Canada will keep the Loonie down by doing something else: Quantitative Easing, which means what?

MORE INFLATION.

Spend your money accordingly.

#99 Nemesis on 03.01.11 at 10:53 am

“…my stone-hard but surprisingly pliant and sensual butt. It’s a poignant reminder.”…

I do hope that isn’t some kind of political legacy, Hon. GT – you saucy wag, you.

http://tinyurl.com/k87zm

(2:00 – “And I thought you were so rugged”)

#100 fancy_pants on 03.01.11 at 11:04 am

Does MC have realturds in the family? Or is MC the only retard? Reward the reckless spenders and punish the savers.

#101 Live Within Your Means on 03.01.11 at 11:17 am

#84 S-J on 03.01.11 at 8:37 am

Thanks I just registered out of curiousity.

#86 Moneta on 03.01.11 at 9:03 am
The American on 03.01.11 at 1:35 am
——-
You can get this by municipality:

http://evalweb.cum.qc.ca/Role2011actualise/recherche.asp

It gives you the evaluation but not the last transactions. I think you have to do that in person or get connected with a real estate agent.

……………..

We have the same here in NS at http://www.nsassessmentonline.ca/Forms/HtmlFrame.aspx?mode=content/searchoptions.htm

…………

I have kept a running list of property evaluations on our street since 2001 (though its on line). We’re still the 2nd cheapest. Until last year we’ve never had to apply for a permit for work done, that I’m aware of. Where I live, if you have a double lot, it’s assessed the same as a single lot. The website was easier to use years ago.

#102 Herb on 03.01.11 at 11:19 am

#80 Ottawa Mike,

googled “wealth distribution in India statistics” and was snowed under by an avalanche of 10M results. I am going to reserve judgment, but the Wikipedia entry is a good starting point.

#93 Jarry Street,

“… we shipped manufacturing overseas …” Yes, we did, but who is the “we”? Not governmen through policy, not workers or unions, but individual and collective owners to improve business results.

Which begs a trick question: What will bankrupt a population faster, government protectionism or corporate liberalism?

And a corollary: Does the poverty of a population matter?

#103 Gen Xer wife on 03.01.11 at 11:20 am

Hi Garth and everyone,
This is my first post and I have been enjoying this blog very much for a while every day and checked it out last year too when I read Money Road – great book by the way and I agree with what you see coming down the pike.
My question is this. I have 14 years left on my mortgage of $299K (house ‘apparently’ worth $500K, put 25% down when bought). We are currently at 4% fixed until 2014 and stupidly added to our mortgage after we moved in to fold in some debt (i.e. new furnace, used truck -we should be at $260K now). I told my Financial Advisor at our annual review that we are really wanting to be mortgage free as soon as we can and he suggested the Manulife One plan (full disclosure he said he gets a trailer for referrals).
The Manulife One lady called last night and said she could shave 4-5 years off our 14 years left with her variable rate of 3.5% (non compounded) which of course can change etc. etc. I am now not sure what to do as she did a good sales job and we have good incomes and no debt outside a car loan and the house. We can weather an interest rate to 7% if need be but I would far rather not have to shell out more if I can use the money elsewhere. We have a good chunk in RSP’s and started on TFSA’s and are just in the wealth building phase (i.e. early 40’s finally out of daycare paying years).
Garth, do you recommend the Manulife One plan? Thanks so much for all of the good, common sense advice!

ManOne makes a lot of sense and works extremely well for the self-disciplined. If that includes you, call her back. — Garth

#104 House on 03.01.11 at 11:25 am

And who buys the real estate and manufacturing? Surely consumers!

#105 Lisa on 03.01.11 at 11:28 am

…That’s exactly what I have tattooed on my stone-hard but surprisingly pliant and sensual butt. It’s a poignant reminder….

Oh Garth, now i’ll be thinking of your sensual butt all day long. God, you make me LOL!

#106 Live Within Your Means on 03.01.11 at 11:32 am

#102 Live Within Your Means on 03.01.11 at 11:17 am
#84 S-J on 03.01.11 at 8:37 am

Thanks I just registered out of curiousity.

……………

PS – I registered and the site sent me the following:

Which of the following best describes your situation?
Regardless of your answer, no agent will contact you.
I’m currently working with an agent who’s helping me buy or sell a property.
If I was going to act in the future I have an agent I’d likely use.
I don’t have a preferred agent.
Own a home? Let us give you some information.
We can send to you instantly via email:
– Number of clicks on your property.
– Number of clicks on neighboring properties.
– Report of recent sales and listing activity in your area.
I’d like to see this information.
Not at this time, thanks.
I cannot find my property.
…………..

I will not confirm my registration as it looks like a Realtor’s blog.

#107 Moneta on 03.01.11 at 11:33 am

Creating inflation. Let us count the ways:

http://www.theglobeandmail.com/report-on-business/economy/eu-court-bans-insurance-sex-discrimination/article1924689/

#108 The American on 03.01.11 at 11:43 am

At #84: That’s interesting. I do believe that not having complete transparency has somehow contributed to the housing bubble. Sites like http://www.zillow.com are good for base line information, but they aren’t that powerful in the eyes of U.S. consumers. Other sites like http://www.trulia.com are much better and more powerful as it provides not only pricing heat maps, but statistical data/charts to show an entire area’s overall health. Then there is http://www.redfin.com (much like a zillow). However, the MOST powerful tool is always the County Tax Assessor’s website, which will also provide WHO owns it, all liens against it, and the amount of each lien against it, along with all survey information. I would NEVER consider purchasing a property without having visited the County Assessor’s website first.

#109 Alpha Bravo on 03.01.11 at 11:46 am

“Indeed, if our economic forecasts are correct, the downward pressures on house prices are only set to build through 2011.”

http://news.assetz.co.uk/articles/5595.html

#110 BPOE on 03.01.11 at 11:49 am

So me see if I have this right. Richmond homes are exploding in price just over 1 year!!! Interest rates aren’t moving up (and they never will for that matter). And my views are wrong? I don’t think so. The news stories tell the FACT. Real Estate up in Vancouver nad Richmond. Interest rates steady. Vancouver is NOT Canada folks. Understand this FACT or be left out kicked to the curb like the rest of the shell shocked renters, number crunchers and blog writers that scribble down numbers and savings rates and job creation and incomes and debt levels but in the end don;t get it. Vancouverites and Richmondites driving this market buy with CASH or have the money in cash to buy but choose a mortgage because of the cheap rates. It’s not plane loads folks, It’s the world coming here to move their money offshore for safe investment.

#111 bigrider on 03.01.11 at 11:53 am

From David Rosenberg’s Breakfast with Dave daily market musings today I quote:

“The housing mania has been effectively defused(referring to Canada) and so it is with high hopes and s that the household debt bubble in Canada will also lose air without being popped in a destabilzing manner. In any event this is hardly and attempt to drape us in the red and white flag but lets face facts-the upside potential and downside risks to investing in Canada has rarely been as compelling a case as it is today, whether viewed from an economic, political ,fiscal or banking standpoint.This is why portfolio capital, investment and population inflows are all running at unprecendented levels”

Seems to me that he is backing off his earlier projections of Canadian RE being 15 to 35% over valued. By the way, he has not commented on Canadian RE in many months.

#112 wetcoaster on 03.01.11 at 12:02 pm

“Seems to me that he is backing off his earlier projections of Canadian RE being 15 to 35% over valued. By the way, he has not commented on Canadian RE in many months.”.

Rosenberg has become a real flip flopper and can’t be trusted. He was most likely talking down the market back then so it could buy him time to cover his shorts on the Canadian real estate stocks and convert them to long positions. You aren’t going to shoot yourself in the foot. Now he’s probably slowly dumping them getting ready to go short again.

#113 SAD on 03.01.11 at 12:08 pm

Interesting article on Inflationary band aids being applied.
Really makes you wonder how those free trade agreements are going….

http://online.wsj.com/article/SB10001424052748703749504576172200331597110.html

#114 wetcoaster on 03.01.11 at 12:12 pm

Re; Vancouver restaraunt closures, the same owners predicted on the news last night that there would be 60-90 more restaraunt closures over the next few months. If that is not a statement of the Vancouver economy then what is ?

Can’t blame the HST or the drinking laws cause of a one drink difference between legal and not. People are waking up after Christmas and counting their cookies in the jar and eating out is the first thing to go.

#115 BDG-YYC on 03.01.11 at 12:19 pm

#243 Industrial Guy on 02.28.11 at 8:28 pm
BDG-YYC
Canada ….. you remember … From sea to sea to sea.
A lot of Albertans thing the world ends a few Kilometers East of Not Medicine Hat and a Kilometer or two West of the Crows Nest Pass.
Until you seperate and issue your own currency and passports …. that oil is a Canadian resourse.
_____________________

Wow … that’s a pretty arrogant and provoking response but O.K. then … I see also that you gave Steve a hot one as well … so without trudging through the the venomous swill you’ve served up let’s simply explore the “Canada” you seem so concerned about … you know the “sea to shining sea” one who’s pockets are being picked. Oh … and by the way you forgot a sea but who’s counting.

So the good old shining Atlantic … NFLD – hmmm seems they have some oil industry … but then you aren’d from there are you … NS oops they also have some oil … but you aren’t from there either are you … PEI doesn’t have oil but I don’t think you’d be from there because if you were you’d likey display a little class. NB … Naaa – Irving Oil you know, the huge refiner exporter lives there … but you aren’t from there either are you … so there are 4 provinces … 3 of which seem to be oil stained … but none of which by ther way buy a drop of Alberta Oil anyway … so there’s one shining coast … Makes me proud to be Canadian …
Then there’s the other sea … the beautiful Pacific … BC also has Oil … actually quite a bit of it … so they are “oily” too … but you likely aren’t from there either as its not likely you’d be showing such a degree of envy and covetous greed since most people from that part of my Canada feel (and rightfully so) bountifully blessed to live in such a beautiful province. Oh … and oil flows both ways bertween Alberta and BC … so they pick each others pockets. Then there are those Alberta bastards … but you’ve already covered that one so let’s move on to Sask. … oops … really pretty oily … but you aren’t from there either are you … again if you were you’d display far more class and much less envy … they love thier province and why not its full of great people and places … Man? You could be from there but if you are you should know that you have a little oily spot in the southwest part of the province … but again you’d ber showing a lot more class and far less arrogance so I doubt it.
So … now we’ve covered 8 provinces … all oily to some extent … but of the 8 only Man. is a net consumer of significant Alberta Oil. PQ … hmmm you might be from La Belle Province … Beautiful Cultural Gem and a huge energy producer/exporter blessed with bountiful hydro resources. Don’t burn a single drop of Alberta Oil though. Nope … but a huge refiner and consumer of Oil … from Norweigh and Algeria though so while somebody is indeed picking their pockets … its not Alberta … but I doubt you are from there somehow either … yup its that class thing again. Oops … the third sea … our Territories … NWT? Naa far too oily and gassy to be bitching … Yukon? No bitchers there. Our newest territory … too busy to be bitchin and crying. Which leaves Ontario. Beautiful Ontario The Great Lakes, bountiful resources, mining, forestry, nuclear, manufacturing, Our Capital, a third of our national energy consumption, the largest refining operations of any province in the nation … but not a lot of pocket picking from Alberta Oil … see Ontario imports most over half of its Oil from the North Sea and Algeria. Not a lot of Alberta Oil gets there but a bit gets tapped in for sure so … yup there is some pocket picking going on if you want to look at it that way. But then there is a lot of manufactured stuff from Ontario that goes into the the Canadian oil industry. But I don’t think you are really from there either.

Actually … you don’t seem to be from any part of the Canada that I know and love, somehow I don’t think you are Canadian at all.

Its un-Canadian to be a loudmouthed, ignorant, asshole isn’t it? But hey … go for it … YOUR “Canada” is yours ALONE … so shove off and take your garbage with you.

#116 Canayjun on 03.01.11 at 12:33 pm

@BPOE

Yeah, I totally agree. Canada is the place to be. We are all going to be millionaires when the average price of a house hits a million dollars in a year or so. The minimum wage will be $20.00. 100% of all Canadians will own their own home, including the homeless and people living in old age homes. Billions of Asian money will come here, but we won’t have inflation, because we are sooooo special. And if the US has an economic downturn, we will be immune from it! So everybody should hold onto their hats because this baby is going to take off and we are all going to be sooooo rich. I can’t wait.

#117 vreaa on 03.01.11 at 12:43 pm

52% Backed By Real Estate –
Analysis Of Contributions To Campaign Of Christy Clark, New Leader of the BC Liberals

http://wp.me/pcq1o-1UX

Percentage of all contributions coming from contributors with known RE industry affiliation: 52.1% ($267,250 of $513,200)

Comment:
We anticipated that the RE-affiliated portion would be large, but 52% is substantially larger than we expected, very much more than the percentage of our GDP made up by directly RE-related industry (20-22%, we believe).
Powerful vested interests means ongoing misallocation of resources.
The provincial and municipal governments will likely continue to do everything possible to perpetuate the speculative mania in Vancouver’s housing markets.

#118 Petrol Head on 03.01.11 at 12:46 pm

Same the BOE didn’t raise interest rates today.

#119 CandleFish on 03.01.11 at 12:48 pm

Chilliwack developer goes bust owing $75-million

Rick Wellsby’s vision of a luxurious golf resort and housing development in Chilliwack has faded like a bad putt on the 18th green.

The company Wellsby founded, Blackburn Developments Ltd., has been granted creditor protection in B.C. Supreme Court with debts of about $75 million held by dozens of chagrined investors.

http://www.theprovince.com/Chilliwack+developer+goes+bust+owing+million/4356432/story.html

#120 Jarry Street on 03.01.11 at 12:54 pm

@ Herb post 103

Actually our federal government did do it through policy, when they signed those international trade agreements. After seeing their competitors move overseas to save on labour, even those that would have preferred to keep the majority of manufacturing in Canada had to follow suit.

Notice how commodities price jumps because of the North Americas desire to fuel the export based industrialization of Chindia. I for one would have rather pay for gas at 1.20 a litre knowing that it was mostly due to north american overconsumption, then because the manufacturing and services were sent to Chindia so that they can resell us products from North American corporations and their subcontractors.

The question has already been answered by the current economic situation. Corporate liberalism at its best.

Poverty of a population decides what is a developped economy and what is not.

#121 Herb on 03.01.11 at 1:05 pm

“Bank of Canada holds rate steady”

As predicted by a fellow dawg a couple of days ago (stand up and take a bow), this means that an election is dead ahead.

Our strategic genius PM knows that thou shallt not inflict pain on voters until the ballots are counted.

#122 1 on 03.01.11 at 1:05 pm

Um, interest rate hike on Aril 12th?

Does it still look that way to you Garth?

Statement seemed dovish (less so, but still so…)

thoughts?

#123 Jason on 03.01.11 at 1:06 pm

Well the rates didn’t go up this time but I bet they will next time the BOC meet.
OkotoksRealEstate

#124 DaBull on 03.01.11 at 1:32 pm

#94 Moneta on 03.01.11 at 10:11 am

Adjusted for stock dividends, not cash ones.

What??? Same thing… isn’t it.

#125 dd on 03.01.11 at 1:45 pm

#112 wetcoaster on 03.01.11 at 12:02 pm

“Seems to me that he is backing off his earlier projections of Canadian RE being 15 to 35% over valued. By the way, he has not commented on Canadian RE in many months.”.

Dont need Rosen to tell me that wages are not going higher. Therefore real estate is still overpriced.

#126 AM on 03.01.11 at 1:58 pm

Anybody catch the news feature on the CTV national news last nite re: mortgages, debt, and RRSP withdrawls?

In a nutshell, more canadians are withdrawing from their RRSP’s to cover living expenses. The part I like is the fact that of all the people withdrawing in Canada, reportedly half are from BC.

When will these news agencies drill down to the core and make a real story out of it? It appears pretty obvious as to why most are from BC, but the media will never say it.

#127 AM on 03.01.11 at 2:06 pm

“Our strategic genius PM knows that thou shallt not inflict pain on voters until the ballots are counted.”

_____________________________________________

Ya, what the hell….give Harper his majority and get it over with. After the first term, do you thing they will have any support? We’ll all see what kind of moron this guy really is when Canadians are wearing a lot of pain that will be inflicted by a Con majority.

#128 poco on 03.01.11 at 2:07 pm

lots of comments today on how to find out about re properties history-price reductions-past sales-etc etc

the easiest way is to get yourself a realtor or two–everyone has an old friend who is now a realtor–come on folks –get with it–link up with a good trusted realtor (there are a few) get whatever you need about any property anywhere–and the real kicker is— it’s all FREE

any realtor thinking they’re going make a sale thru you is going to bend over backwards for you

i know of no other way to follow a particular market without having a trusted realtor–do you believe CREA numbers?? i certainly don’t from the e-mails i get

we all get those flyers in the mail about “new listings” what that flyer doesn’t tell you is that the place was originally listed last spring and has had 4 mls #’s and 5 price drops and now is below or near what the owner paid several years ago–in my area prices have been dropping since last spring

#170 &176-Original Dave (from last post)–totally agree –these whiners on here are laughable–
Oh Garth, when will it crash? when should i buy? when should i sell?
you’re complete idiots–do your own research– you’ll know when–

#129 Jeff Smith on 03.01.11 at 2:11 pm

Uncle Carnie is keeping rates low.

http://news.ca.msn.com/top-stories/cbc-article.aspx?cp-documentid=27297895

#130 OttawaMike on 03.01.11 at 2:16 pm

#120 Jarry Street on 03.01.11 at 12:54 pm

Interesting views. You are an Indo Canadian perhaps?
I like the junk goods tax idea.

I don’t have an answer as to what we should be offshoring or not. You made the comment about monopolies like the cable cos. and banking sector offshoring call centres musing maybe these services should be kept domestic due to this. A TD banker recently explained to me that since moving cheque processing to India, their productivity has increased 2 fold and labour costs have dropped to 1/3 of the laid off Canadian workers. My business also just experienced a major cheque clearing error from an Indian banking centre belonging to .. TD.

I can tell you that the highly trained, skilled specialized part of our workforce will continue to thrive here.
The semi skilled and unskilled are the ones taking it on the chin from globalization.

Central America is in the process of being prepped by the multi nationals for off shoring as the alternative to high shipping costs from Asia due to a sustained oil spike. Multiple power plant and rail/ highway construction is underway.
I have heard rumours to the effect that Chinese foreign agents are assisting the drug lords in Mexico and central America to further the instability and delay the region opening as a viable competition to China.

#131 Jeff Smith on 03.01.11 at 2:19 pm

>#40 Patz on 03.01.11 at 12:31 am
>#3 Jeff Smith
>Good our prime minister is standing up against the freakin despot. I wonder if canada will send troops to
>Libya like afghanistan.

>Nah, but Obama and Harper today jointly pledged to help the Libyan people in every way possible towards
>building a democracy.
Translation: You guys do the dying and other heavy
>lifting then we’ll come in lend you money to redevelop and when you can’t pay it back we’ll pick up your oil for
>pennies on the dollar–read Naomi Klein’s SHOCK DOCTRINE: the Rise of Disaster Capitalism.

>#28 Cato
>Democracy is two wolves and a sheep voting on what
>to have for dinner.
>Love it!

The Libyan opposition is in the east, in control of the oil fields. We really should help the opposition with military hardwares so they will remember the help and payback with cheap oil instead of shipping them all to Italy. This might turn out to be a conflict between North America (US) and Italy. But hey, as long as we get cheaper oil, who cares about a freakin lil’ Nato ally, like they ever helped us with any real fight.

#132 Live Within Your Means on 03.01.11 at 2:24 pm

#107 Moneta on 03.01.11 at 11:33 am
Creating inflation. Let us count the ways:

http://www.theglobeandmail.com/report-on-business/economy/eu-court-bans-insurance-sex-discrimination/article1924689/

………………………

Crazy. And what has females smoking and males being more physically fit to do with driving accidents. Am I missing something? One thing I do know is that in France, over the last few years, there is zero tolerance for speeding. Two yrs ago I told my FIL (81 this June) that I would never again be a passenger in his car on the autoroutes. MIL, DH & I were afraid for our lives. He’s become a really aggressive driver if he perceives that anyone has cut him off. Recall 25 yrs ago driving down to the south of France to visit family, FIL was driving 150kms at times – freaked me & my MIL out. Since then I’ve seen some horrible accidents on the Audobahn.

#133 Live Within Your Means on 03.01.11 at 2:33 pm

#122 Herb on 03.01.11 at 1:05 pm
“Bank of Canada holds rate steady”

As predicted by a fellow dawg a couple of days ago (stand up and take a bow), this means that an election is dead ahead.

Our strategic genius PM knows that thou shallt not inflict pain on voters until the ballots are counted.

……………..

Totally agree. And then watch out.

#134 Kits on 03.01.11 at 2:35 pm

TD Economics – Special Report – http://www.td.com/economics/special/db0211_householddebt.pdf‏

Most vulnerable
Reflecting the lofty costs of homeownership, households in British Columbia record the highest vulnerability. In particular, B.C. residents on average register the highest debt-to-income ratio, debt-service cost, and greatest sensitivity to rising interest rates. What’s more, B.C. is the only province where the average savings rate is negative. None of this is new, however, as the province has systematically been the most vulnerable since the start of our data series in
1999. The structural nature of this challenge suggests that there maybe factors at play that are not being captured in the aggregate data. For example, the province’s relatively large economic reliance on its service sector and self-employment – two areas that tend to have higher-than-average incidences
of non-reported income – might be superficially driving down income and driving up the various sub-index readings.

In addition, B.C. households appear to have adopted coping mechanisms, such as renting out basement apartments, which might not be fully factored into the income side. Even if these factors are part of the story, they don’t address the fact that British Columbia’s index level has recorded the second fastest rate of increase among the provinces over the past half decade. Higher interest rates over the next few
years threaten to leave as many as one in ten households in B.C. in a position of financial stress. On the plus side, rapidly-appreciating home prices in the province has left the debt-to-asset ratio – a metric of household leverage – below the Canadian average. Still, with the home price-to-income ratio pointing to some ongoing over-valuation in the housing
market, stable B.C. home values are far from assured.

#135 Jeff Smith on 03.01.11 at 2:43 pm

OK good, we have got troops in Libya now, time to scare the terrorist. Hopefully Canada won’t lose any soldiers lives over there.

http://www.theglobeandmail.com/news/politics/elite-canadian-soldiers-hit-ground-in-libyan-crisis/article1925022/

#136 Jeff Smith on 03.01.11 at 2:44 pm

Garth if we have Libya under control, how long would it take for oil price to drop ? Only have around 3 months until fishing season comes into fullswing and i need to travel to the fishing holes in my gas guzzler minivan. Go Go Canadian troops!

#137 TheBigLebowski on 03.01.11 at 2:46 pm

BoC can’t raise rates when the USD is collapsing. Withe the USD as the world reserve currency we will all devalue together. Its a race to the bottom for all currencies at this point. Thats why owning hard assets that will shield you from the theft we call money printing and inflation is so important. Like i said, we are enter stage 2 of a 4 or 5 stage bull market and a collapse in the purchasing power of paper. Just read up on history to see what steps to take.

The US$ is not collapsing. And won’t. — Garth

#138 Devore on 03.01.11 at 2:49 pm

#75 DaBull

With all due respect, again, and for the last time, no it does not. That’s why there is a separate DJ index, DJITR, which is the Total Return, that tracks performance WITH dividends.

I can also Google as well as you can.

http://www.stanford.edu/group/siepr/cgi-bin/siepr/?q=system/files/shared/pubs/papers/pdf/99-16.pdf

“If Dow Jones & Co. had included dividend returns in the DJIA when it was reformed in 1928, the index would be over 250,000 today.” Is it over 250,000 today? Let me check… no it isn’t.

DJI does not include dividends, and your house price growth does not include property taxes and maintenance. Even trivial seasonal sector rotation will easily outperform DJIA, to say nothing of having a portion of funds invested in more risky growth companies. No one, I hope, holds the index for 60 years, and certainly not the DJIA index, which has proven to be a very poor representation, and generally useless. DJIA explicitly REMOVES dividends from its price so they have no effect on it, which is what you were reading about (the divisor).

So I stand by my conclusion, that there is a right time to buy a house, and a wrong time to buy a house (or any asset), and houses still make a very poor investment. If you can buy one for a fair price (2-3 times income) to live in, and its total cost is comparable or lower than renting it, then you should buy it and be happy. Otherwise, your money can be better deployed elsewhere.

#139 Mr. Plow on 03.01.11 at 2:51 pm

I normally don’t post about the pictures, but that one is a classic!

I have two boys (both very young) and I feel for them when they reach their teenage years. Especially now a days.

When I was a teenager, the “Seattle scene” was all the rage, Pearl Jam, Nirvana etc… Girls wore baggy jeans and plaid shirts with doc martens.

#140 Jeff Smith on 03.01.11 at 2:54 pm

>#79 Jody on 03.01.11 at 6:54 am
>Silver is now over $30, not many would have thought
>this to be possible, hell, I bet a year ago Garth would
>have said I was full of crap to think silver was going to
>be north of $30, well, here we are. Less than two years
>ago I bought silver for less than $18

as far back as 1999, I remember Warren Buffet was loading up on silver (at $6??) as he predicted the price would go up. The guru has been right every time.

#141 Otto Doppelganger on 03.01.11 at 2:54 pm

http://www.vancouversun.com/business/Soft+landing+Canadian+real+estate+market+Vancouver+could+outperform/4366345/story.html

“Soft landing for Canadian real estate market, but Vancouver could outperform: report”

Someone posted an April Fools’ Day joke a month early.

#142 Brian1 on 03.01.11 at 2:55 pm

I think Rosenberg was brought to Canada to play the good cop routine, much like Ignatieff was.

#143 new_era on 03.01.11 at 2:55 pm

As expected no rate hike.

http://www.winnipegfreepress.com/business/breakingnews/bank-of-canada-leaves-key-policy-interest-rate-unchanged-at-one-per-cent-117146823.html

Keep the party going, because no one want to pull the plug. Carney (Canadian Greenspan) is too afraid to do anything.

If the canadien dollar rises above the declining US greenback. The real estate in the US would look very interesting, especially if it keeps on falling with no end in site.

BTW, most of the Canadian Real Estate funds are looking to buy in the States and Europe. Not in Canada, doesn’t that tell you something.

#144 Mr. Plow on 03.01.11 at 2:56 pm

#23 Jay

I’ve asked this before of others, did you ask you friend why they keep reporting this biased info as news?

My guess is because that is what their audience wants. Right or wrong, they need to stay in business too. The alternative is to have government run MSM, and I think we all know how that would go based on what history has shown us.

#145 Devore on 03.01.11 at 2:57 pm

I should amend my post to read that houses make a poor investment based on price appreciation, which generally tracks inflation, good chunk of which growth will be eaten away by property taxes.

There is plenty of real estate (generally NOT houses) that make great income investments, for people who know what they are doing.

#146 Mr. Plow on 03.01.11 at 2:58 pm

Garth,

You mention locking in to people renewing. I’m wondering, if you can get a prime minus 0.8 or thereabouts is that not better? Or do you think the risk of potentially locking in later will be worse?

Lastly, I emailed you directly about RESP’s if you get a chance to answer in the next month (my wife is due at the end of the month) that would be appreciated.

#147 Form Man on 03.01.11 at 3:00 pm

Today Ford, Gm, and Chrysler reported sales increases in the U.S. for February 2011. All three reported decreases in Canada for the same month. Early indicator that Canada is starting into a home-made recession ?

#148 Devore on 03.01.11 at 3:06 pm

VCI has a post today summarizing the recent savings rate findings, broken down by province. Feast your eyes.

http://vancouvercondo.info/2011/03/bc-negative-savings-rate-does-not-compute.html/all-comments/

Lets see… this will not end well(tm)?

#149 Mickey on 03.01.11 at 3:12 pm

Not a snowball chance in a firestorm that interest rates will rise for 6-9 months. Conservatives want the economy full steam ahead for an election. Best to watch HGTV to pass the time.

Election in May. Rates rise throughout 2011. — Garth

#150 jen on 03.01.11 at 3:18 pm

A Canadian website that promotes house flipping. See link:

http://www.propertyhouse.ca/Choosing_A_Flip.asp

#151 BrianT on 03.01.11 at 3:20 pm

379Jody-The economic situation in the USA is actually quite a bit worse than you outlined. The vast majority of well paying, “middle class” jobs are in non productive sectors fed by government largesse. As Bernie Madoff noted, it is a classic Ponzi scheme and eventually it won’t be pretty-rather than the USA currently being in a recession, this is fundamentally closer to the top than the bottom. One example: thirty yrs ago the US dept of energy was set up to deal with the problem of reliance on imported oil. The problem is worse than ever, yet the agency now employs 16000 people (good “middle class” jobs) and spends 2 billion dollars of taxpayer capital annually (from memory). NOTHING OF VALUE IS BEING DONE. That is a snapshot of the current USA economy.

#152 BrianT on 03.01.11 at 3:32 pm

90Moneta-Actually if they bought 2 yrs ago they paid 1.09 million CDN (.78 US) and it is now valued at 633 CDN (1.027 US)-for a drop of 42% over 24 months.

#153 Crazy on 03.01.11 at 3:33 pm

Election in May. Rates rise throughout 2011. — Garth

——

Ya, ya. Maybe. Maybe not.

#154 OttawaMike on 03.01.11 at 3:40 pm

#120 Jarry Street on 03.01.11 at 12:54 pm

Interesting views. You are an Indo Canadian perhaps?
I like the junk goods tax idea.

I don’t have an answer as to what we should be offshoring or not. You made the comment about monopolies like the cable cos. and banking sector offshoring call centres musing maybe these services should be kept domestic due to this. A big 5 banker recently explained to me that since moving cheque processing to India, their productivity has increased 2 fold and labour costs have dropped to 1/3 of the laid off Canadian workers. My business also just experienced a major cheque clearing error from an Indian banking centre belonging to .. same bank.

I can tell you that the highly trained, skilled specialized part of our workforce will continue to thrive here.
The semi skilled and unskilled are the ones taking it on the chin from globalization.

Central America is in the process of being prepped by the multi nationals for off shoring as the alternative to high shipping costs from Asia due to a sustained oil spike. Multiple power plant and rail/ highway construction is underway.
I have heard rumours to the effect that Chinese foreign agents are assisting the drug lords in Mexico and central America to further the instability and delay the region opening as a viable competition to China.

#155 canali on 03.01.11 at 3:46 pm

when does it end??….
http://www.vancouversun.com/business/Soft+landing+Canadian+real+estate+market+Vancouver+could+outperform/4366345/story.html

#156 Crazy on 03.01.11 at 3:55 pm

Garth,

Why were you unable to predict the interest rate hold today?

Just a week ago you were calling for an interest rate hike.

Actually I did say today there’d be no change. And there wasn’t. You just wasted 23 words. — Garth

#157 Kitchener1 on 03.01.11 at 3:55 pm

regarding the interest rate annoucement.

Guys can cheer all they want

BUT

it just means that at some point, before the year is out we will see a rise of 50 basis points– no free lunches for anyone

#158 BrianT on 03.01.11 at 3:58 pm

#121Jarry-Look-it isn’t “liberalism”-current economic orthodoxy is designed to meet the needs of BILLIONAIRES, not you or me or anyone reading this blog. It is possible you would have the same views is you were a billionaire, but you would be the only one. Do people forget that our Prime Minister (Martin) had everything set up offshore? Has Harper attempted to do anything a typical billionaire would disapprove of? Any economist stating any idea not approved aby billionaires is immediately relegated to the fringe-did you notice any billionaires speaking out publicly against the looting of the US treasury? Many (like Buffett) were major participants. Rogers is the only one that comes to mind but he isn’t an American or billionaire (maybe).

#159 TheBigLebowski on 03.01.11 at 4:01 pm

The US$ is not collapsing. And won’t. — Garth

When it comes to financial information I do not listen to Carney, Bernanke, mainstream media etc. I turn to the main barometer , the true litmus test. I look at the price of commodities, food, clothing, oil, gold, silver, wheat, corn. All these are telling me we once again are being lied to by our loving leaders. Stockholm syndrome is not something I advocate yet it seems to be the most common ailment afflicting the common person. USDX is reflecting the dollar at 77. I am looking for a move to 71.8 and then down to 50. Not pretty I know but Bernanke and Carney aren’t there to tell us the truth or protect our families. They are there to manage the collapse and create an acceptable false reality for the public to swallow.

Inflation does not equal currency collapse. Get a grip. — Garth

#160 Anotherlowlyrenter on 03.01.11 at 4:16 pm

http://www.economist.com/blogs/freeexchange/2011/03/australias_house_prices

Australia 1st place for highest house valuations in world. Fully study comes out later this week. I bet Canada is #2 or #3.

#161 Still waiting on 03.01.11 at 4:41 pm

Hey guys.

Sold my house six years ago, been renting and waiting for the bubble to burst since while sitting on a pile of cash. Are any of you concerned that the fiat currency will come crashing down before you get to use that money to eventually buy a property?

I am concerned.

And I think its better to be prepared now rather than wait until the SHTF which I can’t see it not doing given what the US Fed has done. In April we’ll be looking for a large property that we’ll stock with the necessities and get off the grid and prepare for the worst. Feel free to tell my how I’m wrong.

#162 S-J on 03.01.11 at 4:53 pm

#107 Live Within Your Means – I think you’re right, you can’t seem to get away from having to use realtors! When I went on the Viewpoint site, I didn’t bother to register, but went to “Map” and searched around some of the properties. Initially, it showed me the lot plan and sold prices (although, not all were available). However, when I went back today, it asked me to register! I think I had a short trial period, which has now expired!!

# 109 The American. Thanks for the links – I haven’t looked at Trulia or Redfin before. It must be great to have this information at hand – I certainly think the price history is a valuable tool, as well as the market trends. Our realtor boards want to have all this locked up and keep us in the dark, other than what our MSM reports – that all is rosy!

#163 Hoof-Hearted on 03.01.11 at 5:03 pm

One parameter I use is the health of discretionary income..

In BC…William Tell restaurant closed. as did Lumiere and another high end one as well.

The local papers claim 1200 restaurants will close, on small margins the industry has lost $1.5 Billion in revenue.

#164 Priced out in Cowtown on 03.01.11 at 5:04 pm

Canadian home prices to rise modestly – Scotiabank

Article:
http://www.reuters.com/article/2011/03/01/canada-economy-housing-idUSN0114293620110301

I hope Garth is right this year…

#165 Not so negative on 03.01.11 at 5:13 pm

Nine out of ten new mortgages taken last year were for 35 years, because people couldn’t afford any other.

————

This statistic is not valid. Everytime someone asks you what the source is you make a joke and refuse to answer. If you cannot back up your numbers, please don’t post them. I come here to read a different view, not to continue to see made up numbers.

It’s a solid number, validated by daily mortgage practitioners who have done so here. Feel free to provide evidence to the contrary. — Garth

#166 DaBull on 03.01.11 at 5:31 pm

#148 Devore on 03.01.11 at 3:06 pm

From previous debate.

Your right, I thought the divisor took into account dividends paid, but it doesn’t. Only adjusts the price /weight to compensate for SP movements caused by dividends being paid. Also it doesn’t account for dividend reinvestment. Thanks.

Anyway about this post. Looks like Alberta is sitting in the cat birds seat. Bunch of little savers aren’t they. Holy Crap.

#167 The American on 03.01.11 at 5:37 pm

At #128: poco, your theory of getting a realtor to do your bidding and all your research (when it SHOULD be made readily available as a matter of public record for FREE to the consumer) is ridiculous. Realturds are in it for the money too. I’m not saying don’t have a realturd, but I am saying you need to do your OWN due diligence as well to ensure everything is above board. Your solution is like bringing the fox that is guarding the chicken coop right on into the chicken coop.

#168 Adam on 03.01.11 at 5:51 pm

Want to see what happens to real estate when nobody wants what you are selling? Have a look at Diana Ave in Brantford, ON. Every unit in the building is for sale. MLS #29423

#169 Alpha Bravo on 03.01.11 at 6:39 pm

#112 wetcoaster

“Dont need Rosen to tell me that wages are not going higher. Therefore real estate is still overpriced.”

Amen to that.

#170 City Slicker on 03.01.11 at 6:53 pm

#159 TheBigLebowski on 03.01.11 at 4:01 pmThe US$ is not collapsing. And won’t. — Garth

When it comes to financial information I do not listen to Carney, Bernanke, mainstream media etc. I turn to the main barometer , the true litmus test. I look at the price of commodities, food, clothing, oil, gold, silver, wheat, corn. All these are telling me we once again are being lied to by our loving leaders. Stockholm syndrome is not something I advocate yet it seems to be the most common ailment afflicting the common person. USDX is reflecting the dollar at 77. I am looking for a move to 71.8 and then down to 50. Not pretty I know but Bernanke and Carney aren’t there to tell us the truth or protect our families. They are there to manage the collapse and create an acceptable false reality for the public to swallow.

Inflation does not equal currency collapse. Get a grip. — Garth
———————————————————-
Q3 likely coming up. Gold hitting record highs today:

http://theeconomiccollapseblog.com/archives/qe3-several-top-federal-reserve-officials-seem-to-think-that-more-quantitative-easing-is-necessary

#171 realpaul on 03.01.11 at 7:02 pm

I gotta think that household debt is much higher than the official 1.5 trillion ( gee what a world we have created for the next gen eh) because the stat does not include all aspects of the equation…ie: second tier financing ( credit cards, second third and fourth mortgages, promisory notes, personal loans / family loans, lines of credit, unregisterd liabilities ( tax debt/owing, judgements, alimony, child support )etc etc etc) so bumping the number up 40 or even 50% would not be uncalled for.

The official national debt number is a joke. When the Liberal Party under Paul Martin moved to ‘balance the budget’ after Canada’s de facto declaration of bankruptcy in the 80’s the federal governmet offloaded the entire national debt (with rare exceeptions such as native and defense) onto the provinces, municipalities, quango’s, crown corps and cities as well as hiking persoanl tax rates to the obscene levels we face today.

With the exception of Quebec every citizen in the country became instantly poorer in the aftermath of the ‘Martin Balanced Budget’. In the past year the Canadian government has been spending tens of billions a month buying USD and selling Canadian to keep the $C down below the plumetting USD….quite feat when you look at the appreciation of every other currency. Last trade was 75 billion of tax payers money down the toilet to crush the rise of the $C…thats all become part of the ‘national debt’. Jiggery Pokery accounting trickery has the debt number of 1.5 trilly …but anyone with half a brain can extrapolate the real debt plus intrest and added spending well above 3 trillion and counting.

Personally I think this artificial economy is what the conservatives have accomplished in order to keep the peace while continuing to chase the elusive ‘majority’. The 55 billion dollar ‘deficit’ is only one line item….add up up all the spending and debt the feds have downloaded onto taxpayers directly and the figure is obscene.

#172 Patiently Waiting on 03.01.11 at 7:17 pm

The American:
I’m interested in understanding if you or any of the bloggers have an understanding if within Canada there is the equivalent to a County Tax assessor that provides complete transparency to the public via online service in the form of “constructive notice” for all sales history, tax history, and survey history of each and EVERY property within a given area?
_____________________________________________

Not sure if this service is available elswhere but I get recent \mls sales data emailed to me from a company in Vancouver called http://www.homebuyandsell.com . I receieve recent MLS sales, sales history information, days on market etc. It’s great. My guess is that there are similar services out there depending on where you are located . . .

#173 BAD on 03.01.11 at 7:18 pm

-
An interesting find I would like to share:

BMO Financial Group today revealed that a significant number of Canadians (four in ten) who hold Registered Retirement Savings Plans (RRSPs) have withdrawn funds before reaching retirement.

BMO Study: Troubling Trend Sees Canadians Dipping Into Their RRSPs Prior To Retirement

How is this going to end well?
-

#174 randman on 03.01.11 at 7:20 pm

#79 Jody…

SHhhhhhhhhhhhhh…….

You heard about the guy in Abbotsford that got robbed a few weeks ago?
hope you’re hiding it with the dehydrated squirrels!

#175 Jarry Street on 03.01.11 at 7:32 pm

@Ottawa Mike,

Yes I am.

Well yes, I do think the monopolies should not be able to offshore jobs when the Canadian taxpayer is protecting them via the CRTC, chartered bank status and even CMHC. They are sending canadian jobs and the taxes that these jobs use to feed the government revenues needed to keep the Canadian governments afloat. The same governments that keep these monopolies around and sheltered from competition and forcing their customers to be captive to them.

In terms of productivity improvements. Executive compensation and the needs and wants of the executives in the companies mentioned above, seem to always keep growing. Now when you don’t have real competition and are protected its very hard not to do a a decent job. On the other hand it unjustifiable to pay most of these do little execs the compensation they are getting. Might as well outsource them and save even more money. (we know that isn’t going to happen). I will give an example of one of the big Telco in Ontario and Quebec. They are worried about losing market share to cellphones from homephones. All this telco has to do is lower the price to 35 dollars for almost all features included and they would not have to shrink their market share, but they rather charge on average of around 50 dollars. The home phone is not what is outdated, its this telcos way of doing business. The infrastructure is already paid for and in virtually built into every Canadian home. Yet they are losing customers.

#176 ballingsford on 03.01.11 at 7:32 pm

Darn, I didn’t get any orders for the snow I was selling for $1600 a sq/ft yesterday. Guess, I’ll have to sweeten the deal. Buy 200 sq/ft or more and I’ll offer 5% down with 35 years to pay, but only until March 18th, 2011. Also, the first 100 orders get a free 7.0 cubic foot deep freeze.

#177 Coho on 03.01.11 at 7:37 pm

The American,

Canadians are subjects unto the British Crown. We do not have the rights and freedoms of Americans, so it is not surprising that information which is free and accessible in the USA isn’t here in Canada.

In my opinion, Canada (the government) has a much better reputation than it deserves. The closer you look, the more disappointed you will become. America on the other hand, by the actions of those loyal to the Ruling Class, has ruined its reputation as an example of citizens’ rights and freedoms.
===================================

The direction we’re going: These bubbles are just a transfer of wealth from the many to the few in order to abolish the middle class. It is really a financial war declared on the people. Look to the oppressed in the Arab world to see where this ends. But of course, “it’s different here”. How many times have we heard that?

Absolute power corrupts absolutely. It has always been about the problem of evil which has plagued mankind from the get go. Look at guys like Mubarak, Gadaffi and others. They’ll do almost anything to hold onto power, even kill their own people, the very ones they claim to SERVE. And these guys are just tin pot dictators. They are closer to the bottom of the ladder than the top (as all country heads are) of the true power behind the scene. So one can only imagine how vile the real force is behind world affairs.

There is a common misconception that technology makes societies “civil”. That barbarianism went out with the Vikings. Unfortunately, in addition to providing everyday conveniences. it serves to more effectively spy on, to control and to wage wars, shooting or otherwise. Welcome to the 21st century — a time when modern technology is used to facilitate the age old desire for world conquest and control of the people.

#178 skeptic_k on 03.01.11 at 8:05 pm

I’ve watched at least three bubbles now (energy stocks in the early 90’s, Toronto RE in the late 80’s, tech stocks in the late 90’s and possibly resource stocks again now).

They always go on longer than the bears think they should. Trying to time their end is pretty tricky. Bulls have a tendency to hang on too long (been there, done that).

Most long time investors have learned the hard way that prices don’t go straight up (or down!) forever. The biggest investing mistake I’ve made is to extrapolate the current trend too far out into the future. What often happens is that sharp, protracted price movements in either direction are usually followed by a move in the other direction (Gann’s law of action and reaction) or a long sideways move.

Of course, maybe it really is different this time. The problem is that that phrase gets said in every bubble I’ve ever seen. So, I remain skeptical. However, I would not likely be buying RE in Vancouver, even if the price were to drop by 90%. Vancouver is a nice place, but I live much closer to the other coast :-).

#179 john m on 03.01.11 at 8:11 pm

So Carney never raised rates..hmmmmmm anyone surprised?..Of course not we all know he’s a Harper man…and whats good for “stevie” in most cases sure as hell is not good for our country…….oh yes just keep things rosey until “stevie” has his election he is so desperately trying to arrange.

#180 Another Albertan on 03.01.11 at 8:14 pm

#104/Gex Xer Wife:

I ran about a half-dozen amortization scenarios last fall, all reasonably complex and requiring a good command of Excel.

The Manulife One account is a great method to beat down the mortgage repayment schedule, but the caveat is that one must be extremely disciplined. If you are a spender, you are toast. If you are a saver, it can compress the timeline significantly.

I passed one scenario through my CA for vetting. He had no issues. If the Manulife One holder is also a business owner with significant retained earnings in the company, the company can effectively loan a large amount of cash to the owner in every 3rd year (1, 4, 7, etc) for a corporate fiscal year without triggering flags with the CRA. The flags would be due to taking income under the guise of a loan, which is verboten. This approach is not for tax avoidance, but is instead geared toward interest avoidance.

Depending on the aggregate outstanding loan amount, the mortgager’s monthly net savings, the company’s retained earnings, and some other factors (namely future interest rates), it was possible to take a traditional 20 year amortization down to approximately 7 years, based on 25% down.

The macro caveat here is that, like Manulife’s ad, everybody’s ‘number’ is different. Such an appropriate would need to be derived from scratch by the mortgager and would be dependent on his/her own personal financial situation.

Additionally, there are trade-offs, including the fact that the company would no longer have that capital for investment at (presumably) higher rates of return.

I re-ran this particular simulation through a number of interest rate scenarios to test its sensitivity to a broad range of inputs. If one has the means and is capable of handling the financial responsibility, it is a very flexible and sharp weapon.

Everyone else’s mileage will absolutely vary. It took me a total of about 4 hours to build the models and do about 12 separate runs.

#181 Scare Crow on 03.01.11 at 8:24 pm

All right, Garth has told a nice bedtime story – the kids are feeling sleepy, now its time to tell the adults what really will transpire in the next little while –

Yes, Mr. C will ratchet up interest rates, a 1/4 point as to not spook the market – but lay the foundation that the gravy train needs to be set in lower gear. I agree 3 hikes, all back to back .. but the strategy is to have people take notice – not kick them in the nuts. when the media starts making front line reports – when the average Joe at the cooler realizes that hey – this mortgage – its real – and I better get my act together and get my financial house in order –

By late 2011, the rate move will stop – people will be actually thinking about what they have done (or abit peevd that they didn’t realize this was real money – not monopoly money) – Depending on outside factors that is beyond the control of our government – I say rates will then sit – if the message hasn’t rung true – another 1/4 point – if the message is finally being heard – we could actually see a drop into 2012 –

So, those who sit on the bleachers and wait for the housing market to bottom out (30 – 50 – 80%) you’ll be waiting a longggggg time. The states hit it hard cause good olde Bill Clinton – who had good intentions introduced the Subprime market that automatically reset mortgage payments – and those greedy bankers knew 100% these loans would fail – thats why they were cast adrift around the world.

When the subprime hit those most vulnerable – it created a shockwave – then the Alt-A loans (a notch higher but still risky) reset – round Two began –

Our rates won’t take out 1000’s every day – Mr. C knows that we need to carefully step back from the cracking ice- so goes the housing market – so goes the entire economy its a one size fits all – so you finally were able to afford a house – but now you lost your job and how does that work for you –

And for those who hold off – gleefully waiting for the carnage to begin – and buy that wonderful property they so painfully had to wait for (at a 40% discount – or so they think) – do you think you’ll be all nice and warm and safe in your newly purchase house – while the family that got thrown out lives by your curbside – enjoy your warm cup of hot cocco – and as the police car flies by to another call of a car jacking and the world has gone mad – just remember you now are a proud owner of a home with a property tax bill that will be 5x the current rate cause the massive unemployment just shot the governments budget –

Remember that olde saying – be careful for what you wish for – it may come true!

So throw another homeowner on the barbie – you haven’t seen nothing yet – ps – good luck not facing the previous owners wrath when he watches you step out of his only possession – Armed Cars will be a hot item -

#182 Oasis on 03.01.11 at 8:25 pm

The US$ is not collapsing. And won’t. — Garth
__________________________________________

yes it is, and it will… it’s a good thing i didn’t “harvest my gains” in gold as you poorly suggested. where would i be now?

the USD is going to since much much further, breaking to new historical lows on the USDX. Gold will move much higher, in panic buying soon, as it’s evident that America is bankrupt. oil will go much further too. the middle east is just ready to explode. everywhere there is rampant inflation.

oh .. and, yes. Canadian house prices will finally drop.

#183 jess on 03.01.11 at 8:26 pm

“Between 2000 and 2008, about $57.2 billion flowed out of Egypt because of graft, corruption, crime and illegal commercial activity, according to Global Financial Integrity, a program of the nonprofit Center for International Policy. Economists at the center have developed a methodology to track the unrecorded flow of money from countries based upon worldwide figures reported to agencies such as the International Monetary Fund and the World Bank. But the data are for the country as a whole and do not show individual transfers.

The overall amount of Egypt’s illicit flows, about $6.4 billion a year on average, is a staggering number compared with the average income of about $2 a day in Egypt. Yet it places Egypt at No. 21 on a ranking of developing countries that experience illicit capital flights. China, Russia and Mexico top the list, and in the Middle East, Saudi Arabia, United Arab Emirates, Kuwait and Qatar rank ahead of Egypt.

Global Financial Integrity economist Dev Kar estimates that corrupt funds flowing from the Middle East and North Africa between 2000 and 2008 outpaced the world’s other regions with developing countries. But the region still trails Asia for overall siphoning of money from domestic economies.

Mubarak is not the first member of his ruling clique to face investigation by the interim government. Several former ministers, party leaders and businessmen close to Mubarak have been jailed in the past two weeks on charges that include money laundering and profiteering. …” transparency international

===========

World leaders need to support people who risked their lives on the streets to put an end to corruption and autocracy. As geopolitical events move quickly, financial authorities should be ready to prevent deposed leaders from moving ill-gotten wealth to offshore bank accounts. TI issued the Bangkok Declaration in November 2010 calling on governments in countries that might be home to stolen assets to take action to both stop illicit money from entering their countries and to take steps to freeze, investigate and repatriate funds that are already there.

As part of the UNCAC Coalition, a group of more than 240 civil society organisations in more than 100 countries, TI expressed concern about public wealth being illicitly transferred out of Egypt.

In France, a preliminary enquiry into the assets of former Tunisian leader Ben Ali is ongoing, thanks to the efforts of Transparency International France and other NGOs.

In November 2010, following a long legal battle fought by TI France, a ruling in France paved the way for a full investigation into three African leaders after a preliminary investigations uncovered

more than 50 properties and 100 bank accounts linked to them. !!!!!!!!!!

#184 Otto Doppelganger on 03.01.11 at 8:32 pm

http://www.yattermatters.com/2011/02/prince-of-kitsilano/

Quoth the realtor®:
“Yes it’s true; own a detached character home in Kitsilano for under $1.1M.”

Oh jeez.

#185 ballingsford on 03.01.11 at 8:39 pm

Darn again, still no sales on my snow. Fake line-ups didn’t work, fake fly overs didn’t work, the sweetened deal didn’t work. I need to think of something before I go bankrupt. I spent all my money on a shovel and I borrowed the money for it.

I need to tug at the hearts of people.

How would you feel in the middle of the summer heat when your kids only had water guns and the rest of the kids had frozen snowballs. Would you ever be able to look your child in the eye again and hold your head high? Probably not, because you couldn’t keep up with the Jones.

You would probably have to move out of the neighborhood.

#186 Devore on 03.01.11 at 8:44 pm

Sold a bunch of silver today at the VBCE. Nearly doubled my money. A tidy profit, even after taxes. The person said they’ll happily take all I can bring, they can’t keep up with demand. You can buy today, but physical delivery is 4 weeks behind at least, there’s no inventory.

Being able to buy over the phone, with a CC, over the internet, means there won’t be any lineups around the block this time around to tell you the top is near. Interesting times indeed.

#187 Jeff Smith on 03.01.11 at 8:55 pm

Sounds like another indications, all is not good with this economic recovery.

http://www.thestar.com/news/ttc/article/946909–fare-cheating-on-the-rise-at-ttc?bn=1

#188 CalgaryBoy on 03.01.11 at 9:04 pm

I love the woody! LoL!

#189 robert in london on 03.01.11 at 9:06 pm

I hope Mr. Turner is right about interest rates. Us geezers who just want our boring old fixed income investments (you know, the kind where the annual return isn’t wiped out by the broker’s commission) could stop waking up at 3am in a cold sweat wondering how to get through those last ten years without an over reliance on roots, grubs and Fancy Feast. The odds that interest rates rise if the stock market hiccups south by a few grand? Slim to f&^%*@g nil.

Forget that. Rates will barely keep pace with inflation. You must invest. — Garth

#190 Jeff Smith on 03.01.11 at 9:09 pm

It seems, uncle Obama is rather indecisive and weak. Maybe Canada might have to go it alone to establish the no-fly zone to help the rebels kick out that bully despot and hence restore oil price to acceptable level. Wonder if uncle Harpie is up to the task?

#191 Kits on 03.01.11 at 9:13 pm

The craziest Vancouver bidding war yet …

http://rickstonehouse.com/blogs/opinions

“We viewed the house inside and out, basically it was lot value. The house “could be” two bedrooms up, a good sized main floor that had been gutted to the studs. There is a low basement bachelor suite presently rented for $300month.

Our clients decided to write an offer and after much deliberation offered over the asking price of $1,088,000. Offers were emailed to the selling realtor as the sellers were out of province. When I sent our offer in we were the 12th offer.
We didn’t get it!

There ended up being over 25 offers. The winning, subject free offer, was $1,611,000 !

#192 Jeff Smith on 03.01.11 at 9:14 pm

http://www.washingtonpost.com/wp-dyn/content/article/2011/03/01/AR2011030105317.html

#193 poco on 03.01.11 at 9:33 pm

#167 The American–ridiculuos–i think not–easiest way to keep on top of the market in any given area–and remember, i said friend and trusted
i agree, these stats should be available to all, but they’re not–so you do what you gotta do

and no; they do not do my research for me–i get e-mails from them — links if you like–giving me new listings –price reductions — and sales–it’s up to me what i do with it–i only follow the areas i’m intersted in eventually buying in (again)–quite simple really

my previous post was aimed at the whiners on here that don’t have a clue and don’t do any research but plan to jump into this ridiculuos housing market being pumped by lies and false statements

and no i didn’t let the fox into the hen house– i trapped it–i know whats going on in my neighbourhood–do you?

heres a couple of recent e-mails i linked to previous ones
mls#v872562 — listed apr10–424k–now 374.9k–and guess what? bought for 374.2 in dec09
mls#v864393–listed sept10-374.9k–now 343k–and again bought for 365k in nov 07—you don’t hear about these from the pumpers do you?
believe me, there’s lots like these two–so please let me know how to do it without a realtor (a trusted one)

#194 maxx on 03.01.11 at 10:00 pm

#71 and #72 JSS:

Beware the two-income trap, divorce or the unexpected…..

#88 Western Canadian…..read it again

#195 Dan in Victoria on 03.01.11 at 10:00 pm

Ballingsford @ 185
What ya gotta do is get the Canadians to sell you the snow cheap.
Ship it over to China.
Have it made into snowmen there, add a few secret ingredients in the core, you know old drywall etc.
Heck you could even squirt some colouring onto some of them and sell them as preminium snow men.
Then you ship it back to Cheapo mart in Canada and sell it there.
Its a time proven business model.

#196 realpaul on 03.01.11 at 10:08 pm

As outrageous a spin job as I’ve ever heard has the BC Health minister stating that putting emergency patients in Tim Hortons overnight as being ‘right’.

http://www.cbc.ca/news/health/story/2011/03/01/bc-royal-columbian-tim-hortons.html

As a THI shareholder I am outraged at the prospect of the company being held liable for a noro virua outbreak or something even deadlier among its regular customers when blood , pus, urine and feces are thrown up from the mayhem of an emergency ward onto the restaurant equipment.

#197 Al on 03.01.11 at 10:14 pm

Canada was once highly exposed to the economic performance of the USA. The last decade has seen China become a major destination for commodity exports and China’s citizens as major investors in Canadian property. This suggests that Canada’s economy and potentially housing market is now more susceptible to a slowdown in China than in the USA.

#198 yeah, but... on 03.01.11 at 10:20 pm

in response to #181 Scare Crow

I agree with much of what you say, but take issue with your portrayal of anyone who waits out this insanity and then buys a house as a heartless vulture.

And your image of the previous owner waiting outside to do harm.

The part that is missing from your overview is how people have piled on to real estate, and profited immensely from that. Whether they squandered those gains through HELOC’s or whether they squirreled their money away like smart bunnies is actually irrelevant. They made decisions, and that’s the deal.

Say I sell my house for $200K. The person who buys it from me sells it a couple of years later for $500K. Or maybe $100K. How is it my business or responsibility to care about either case? My interest in that transaction finished when I sold it.

IMO there are way too many self-satisfied smug people out there who think of themselves as RE geniuses. Won’t hurt if they get taken down a peg or two.

Just an opinion.

#199 Macrath on 03.01.11 at 10:42 pm

T.O. and Van are bidding war central and the southern Ontario rust belt is flush with power of sale properties.

I`ll be looking at an almost heritage place tomorrow because I love to fix-up these places, a hobby of sorts.
IT would be great to see a post on the subject, seeing as you are the quintessential Canadian expert on the subject.

#200 Industrial Guy on 03.01.11 at 11:55 pm

#116 BDG-YYC

“Its un-Canadian to be a loudmouthed, ignorant, asshole isn’t it? But hey … go for it … YOUR “Canada” is yours ALONE … so shove off and take your garbage with you. Nice response.” As for “venomous swill” ….. it’s a published letter and YES! He did support it. Hell, don’t blame me if your hero is a dumb ass. Maybe you should read Garth’s review of the Harper Government.

As for the rest of your text …… Interesting comments. I read your entire piece. …. You obviously had a eureka moment.

Yes, the transportation costs of moving oil across Canada have created the odd situation where it’s actually cheaper to refine imported oil in some parts of Canada. Our National tradition of Government sanctioned monopolies have created many of the odd market imbalances we see today. Telecommunications, grains, dairy products ….. pipelines for example.

If your theory is correct, then the National Energy Policy should have had no effect on the revenues of Alberta. Your claims of Billions lost would be unsupportable.
All exported oil was sold at World Price. Since, as you claim, a paltry sum is actually consumed by Canadians. Very little would have been sold at the lower Canadian price.
I was in Alberta in the 80’s. I guess Trudeau was responsible for the drop in World oil prices too.

Ontario has oil also. Been to Petrolia? I have. There are large Natural Gas reserves under Lake Erie too,

It’s funny, I have lived in many of the provinces you listed. Chilliwack (closed), Kingston, Medley, Bagotville (I’m fluently bilingual. I know …very Un-Canadian), Shearwater, Comox. …. did my bit for Queen and Country. How about you bud?

#201 Factedote on 03.02.11 at 3:47 am

Kits, thank you for helping me invent a new word…Factedote…an anecdote spun as fact.

#202 jess on 03.02.11 at 11:14 am

RealPaul who wrote that story ? exaggerated numbers ?
200 ? 100 which is it? half of half of half

incorporated: 1860
First Capital of BC: 1859-1868
Employment: 32,330 (2006)
Labour Force: 34,260 (2006)
Households: 27,050 (2006)
Population: 58,549 (2006)
Total number of occupied private dwellings: 27,050 (2006)
Land and water mass: 18.4 sq. kilometres (7.1 sq. miles)
Land mass: 15.3 sq. kilometres (5.9 sq. miles)

Doctors had to set up temporary beds in the closed coffee shop Monday night between 11:15 p.m. PT and 12:45 a.m after the hospital was swamped by about 200 patients
…….

…Plug said about 100 patients checked into the emergency room, half the number later cited by Hansen.

#203 Future Expatriate on 03.02.11 at 12:06 pm

Looks like whatever is in the young man’s pants is going to be the only highrise erection in his neck of the woods for the foreseeable future… and just as collapsible too once the string snaps!