One morning in the summer of 1995 we rolled Dorothy’s oil-burner to a stop in front of a skinny, 80-year-old red brick house a few miles north of Toronto’s downtown core. ‘This is it,’ George said, exiting the white Caddy parked behind us. The lot was two cars wide and the lawn a mess. Then I looked around and noticed that every other structure on the street was a skinny, 80-year-old red brick house. It was Leaside. At the time I did not understand I stood in paradise.
The reno couple living there had blown the back off and added a family room and nice kitchen. We gagged, and bought it for $550,000. Later I learned why people want to live here – drive downtown in 15 minutes, good schools, leafy streets, shopping and Beaver Cleaver permanence. But for this there’s a price. Anorexic lots, leaky basements, no garages, napkin backyards and the inability to exit your car without stepping on the neighbour’s lawn. Oh yeah, and money.
Three years later, tired of living on a postage stamp, we sold for $100,000 more after spending half of that on landscaping. Last week I saw George the realtor again and he happened to mention what the old place was selling for now: $1.75 million. “I know,” he said, watching my pupils dilate, “it’s absolutely crazy.”
By the way, that’s $58,300 per foot of frontage.
Leaside is not The Bridle Path, home to stars like felon millionaire Conrad Black and economist princess Sherry Cooper, where a house is currently for rent at $53,000 a month. It’s not Shaughnessy, Vancouver’s toniest hood, where $6 million buys a gut job. Instead, this is a place long known for middle-class families who drive Volvos and shop at Costco. And who now embrace debt like a drug.
This week every major media outlet in the country carried a similar headline: ‘Homes get more affordable.’ It was the result of the latest housing affordability survey done by the Royal Bank, which I hear makes mortgage loans. Radio and TV stations in delusional markets like Toronto and Vancouver ate it up, with several turning it into the lead story of the day. ‘This just in… good news about real estate!’ And it came just as the crazed lending dorks at Beemo were trying to ignite another 2.99 frenzy.
And why not? Apparently all this talk about people no longer being able to afford homes without massive dollops of debt is plain wrong. Said RBC’s economist: “At this point, housing in Canada is essentially as affordable as it was a year ago, and only slightly less affordable on average than it has been over the long term. All things considered, the housing market is sitting in a reasonably balanced position overall, despite some minor stress being exerted on housing demand.”
What does this mean?
Hmm. Well, RBC based its numbers on what it thinks is a standard downpayment – 25% of the purchase price. (In Leaside that would be $437,500.) Of course, 95% of all new mortgages taken today are high-ratio, which means less than 20% down. In fact, nine of ten are for 95% of the purchase price, with just 5% down. RBC knows this. They grant more mortgages than anyone.
So much for useful information. But even with a mama of a down, what does ‘affordable’ mean to the bankers?
To own a bung in Toronto, it says, now takes 52.2% of pre-tax household income. The average family makes $96,000 (gross), so 52.2% of that equals $50,112, leaving $46,000 on which to live. But wait. After-tax income (what you actually get) is $68,421 in Ontario, leaving just $18,421 a year to buy food, run the car, feed the dog, afford clothes, insurance and ammo, go to Orlando and own some beer. And did I mention bank service charges? Anyway, that’s $350 a week. This, of course, is real estate servitude. But the mortgage gets paid!
In Vancouver, the same bung (says the bank, celebrating enhanced affordability) now requires 86% of pre-tax income. That’s $71,491 out of the average gross household income of $83,130. And it’s $5,200 more than the $66,301 that family actually receives after tax. This leaves no money for alcohol or personal lubricant, and might explain why BC has a negative savings rate (and really needs that stuff).
See what I mean? It’s a bogus report. Meaningless, useless, dishonest information designed to fool the media (like that’s hard) and bombard people with a single message: it’s okay to be house horny. It’s all good. Borrow. Buy.
What would drive an esteemed bank to this level of propaganda?
The answer might be contained in a message coming out of RBC’s Capital Markets unit in Toronto, written by fixed-income specialist Ian Pollick to institutional bond clients. The bank is telling investors to expect a jump in the yields on government bonds of as much as 20 basis points because of an anticipated gush of house horniness across the land.
“There are reasons to expect huge volumes of mortgage applications this year, which will contribute to a very weak four- and five-year sector of the (yield) curve,” he said. That means home-buying could whack the bond market as people rush to lock into ‘more affordable’ homes at cheap interest rates that F is telling them won’t last. Of course, the bank will be protected, since it uses five-year interest rate swap contracts to offset the mortgages it writes.
But who protects families handing over 52% or 86% of their gross incomes to own houses with mortgages in place for three-quarters of their values, destined to reset to higher rates at a time homes will likely be worth less?
Exactly.
Now let’s figure out how much income you’d need with 25% down to buy my old place. The first three correct answers win a signed book and an RBC sucker.
258 comments ↓
2.99% coming back with BMO:
http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/bmo-kicks-off-new-mortgage-fight/article2362256/
No problem for our Canadian banks!! They don’t assume the risk…
Mass of ease money lending since several years and the result is huge Canadian overindebtness households problem:
http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/connect-the-housing-bubble-dots-there-could-be-trouble-on-cmhcs-horizon/article2310132/
If BOC want to keep key rate at 1%, Canada have to tighten CMHC rules SIGNIFICALLY.
Canadian taxpayers don’t have to take this crazy credit risk.
Enough is enough. Canada have to act AS SOON AS POSSIBLE.
And you know what Garth.
The tax farm slaves in mass will swallow the RBC kool aid, in the same way your disiples on here swallow at the drop of bubble speak.
But sadly more kool aid sippers thean marshmellow wana be bubble head camp fire dancers.
Where is that fat lady? I wana sqwize her.
You do the fundementals I do the herd.
Thats why Im right way more than you. I play poker dude. I read the eyes of the prey……….You calc the odds
One day you will be right
‘Sqwize’? Even for you, that’s a work of art. — Garth
Houses are becoming more affordable. They have passed the peak in value over all and are slowly gaining momentum for the ride down. First falling sales, then falling prices. Just wait and they will be extremely affordable. BUYER BEWARE. NOW IS NOT THE TIME TO BUY A HOUSE. THE BUBBLE HAS TOPPED. EVEN THE BANKS HAVE CITED ‘softening prices.’ BUYER BEWARE.
I can’t predict what might happen… But the obvious is obvious. It seems to me that those heavily in debt don’t even worry…. Interesting times ahead… Patiently sitting on the sidelines waiting. FYI, 2012 mandate for mpac to re evaluate everyone’s property taxes… Should factor some interesting calculations above as everyone’s taxes will increase. What will people give up to pay the bills? Food?
Garth, what would a RE crash do to the Canadian dollar in your opinion? How much could it drop? or would it somehow rise?
The dollar is commodity-fueled right now. Little to no impact. Besides, no crash coming – a correction, then an inexorable slide. — Garth
Can anyone elaborate on this:
“Of course, the bank will be protected, since it uses five-year interest rate swap contracts to offset the mortgages it writes.”
The interest rates will drive a frenzy of buying again. I hope F has the guts to clamp down with new rules on CHMC, why should tax payers be the insurance company of the country. We should the government even be allowed to run an insurance company?
CHMC should be privatized! Like any other insurance company.
Answer: $375,000.
Let’s see…your old house now worth $1.75M with 25% down would cost you around $75,000 in mortgage payments per year…but only with BMO’s 2.99 special and a 25 year amortization period. But you’d have to be a special kind of jackass to think that’s all you need to afford the place.
A better measure of affordability would be to look at rates where the mortgage term is equal to the amortization term. The current rate for a 25-year term is 8.35%. This is, after all, a better way to judge future costs since it’s what the bank/market estimates is a reasonable expected return. Under these terms, the cost of the mortgage goes to $124,000. Buyers shouldn’t be obligated to take a 25-year term, but they sure as hell should consider it as a measure of future affordability.
But it doesn’t stop there…add 1% property taxes and assume a paltry 2% in maintenance expenses. Those two factors add an additional $52,000 to the costs of ownership.
So the cost of owning a $1.75M home with 25% down is $176,000/year. How many people earn that kind of cash, after tax? That’s also assuming the poor bastard buying the place has a cool $437,500 laying around in cold, hard, cash.
To make it possible to own in Van, many transform their basement into a beautiful green garden. And it’s tax free too.
I make 450k pretax. That’s enough to buy your old home eh?
I’d say around $330,000 a year!
Garth, is Ben “RabidDog” (Economist lite) giving you trouble? Just give the word, and the blog dogs will be unleashed onto his blog, turning it into a steaming, drenched, dug-up pile of cyberturf.
Answer = $437,500
Actually I forgot property taxes and utilities. It would be more like $400,000 a year!!
Great article, though you did miss the news about BMO reigniting the mortgage battle today. Re: “Now let’s figure out how much income you’d need with 25% down to buy my old place. The first three correct answers win a signed book and an RBC sucker.” I’m going to say you’re going to need above $144K annual income to be able to afford this place at the 51%.
$388888!
Its too bad that the average Joe simply does not understand MSM and looks no further for news and information . My friend just bought a house because in his words ” the market is balanced , with lots of new buyers always entering the market , it cant go down too much before it rises again in a year or two”!!!!!
Oh and its nice not reading any of those gay Furst comments … for once!!!
Garth won’t Carney have to raise rates soon to prevent a catastrophic collapse of Canada’s big life insurers?
BTW, 2.99% for 5 years fixed is back thanks to BMO. I am sick of this nonsense.
Smoking man this is for you (school farm).
ps. do you know of Lorne Meiers up at BMO? An old time codesmite/IT type.
http://www.thestar.com/news/article/1139739–student-fights-suspension-over-letter-praising-women-s-inner-beauty.
“A Catholic high school student is appealing a suspension he received after distributing a Valentine’s Day letter to classmates that praised women’s inner beauty.
“Real attractiveness comes from having a certain dignity,” wrote Paul Gomille, a 17-year-old student at Archbishop Denis O’Connor Catholic High School.
“It comes from having class. It comes from being true to yourself, being yourself, and being comfortable in “your own skin.”
Modifying my answer to $358K. :)
New mortgage rules at the end of the month. Love it
Bank of Montreal (BMO-T57.06-0.06-0.11%) is reigniting the mortgage wars among the country’s major banks.
Canada’s fourth-largest bank is bringing historic low rates back into the market, only a few weeks after it and several other lenders pulled similar discounts, amid concerns over collapsing profit margins. The bank lowered the rate on a five-year mortgage to 2.99 per cent, a drop of a half a percentage point. It also cut the rate on 10-year mortgages to just 3.99 per cent, a level that no Big Five bank has posted until now
Gross Income of $646,625.00
“Of course, 95% of all new mortgages taken today are high-ratio, which means less than 20% down. In fact, nine of ten are for 95% of the purchase price, with just 5% down.”
Wow.
Source?
Ask any mortgage broker. — Garth
If you were to spend 50% of gross income (Toronto average) to service the house you’d need about 150K income. That’s for a 30 year, 5 year fixed term at 3%.
Lord knows how much you’d need at renewal.
Great post Garth, those press release made me angry too.
$260 000
“Garth won’t Carney have to raise rates soon to prevent a catastrophic collapse of Canada’s big life insurers?”
Of course not. Our life insurers actually benefit from the low interest rate environment as, at least in the case of Manulife, they are effectively “long” the stock market. Rising rates would be the nail in the coffin for Manulife, and probably other insurers.
Garth do you or any commentator has any data/graph showing first time home buyer participation for the past 5~10yrs. Looking forward for it. Thanks n keep up the good work!
Garth using your Leaside home example if you purchased on 1.1.1995 and it sold for today 1.75M, that is a 6.9% gross annual return. Considering it probably cost about 5% a year to run the home, the return is 1.9% a year. So what looks to be big price is in fact not over the 17 years.
Tell me what incomes have done and how ‘middle class’ people could afford it then and now. — Garth
Rates are never gonna rise. Party on people!
Annual Income needed to afford a $1,750,000 home assuming a mortgage rate of 4%, and a 25% down payment ($437,500) would be:
$325,000 annually
According to RBC’s “affordability” calculator.
Did they send you back a mortgage approval with the answer? — Garth
The mortgage amount would be $1,312,500. At a 5 year fixed rate of 3.19% (posted on monstermortgage.ca) the monthly payment would be 6340.01. I believe the bank rules for lending are maximum 32% of monthly pre-tax salary for mortgage, property taxes and hydro. But just for kicks, lets assume you only have to qualify for the mortgage amount. That would require a monthly pre-tax salary of 19812.53 or 237750.37 per year. Higher if you include property tax and utilities of course. I guess Leaside now only houses executives.
@Smoking Man
Sooner or later the delusional herd runs of the cliff. In Victoria realtors aren’t busy. Garth has been right on the money with respect to what is coming. Most people are impatient and demand it to happen now or ‘it will never happen’. Most likely the same people that would take fish steaks on a camping trip into grizzly bear country. Human’s should learn to control the egos. I must agree with you about education, it is lacking these days and it doesn’t make you smart it only makes you knowledgeable in a specialty.
I wonder what one would find if they interviewed the average new home buyer. I bet they would still quote the same old mantra, as News is boring to most 20 – 40 yr olds and the older generations are victims of recency. The tipping point is upon us at what stage we can only guess, but now is not a time to bet against it. I also can read people and rely on my other senses as well. Lost is the sense of good times. You can see it all around it you really look. I hear no longer hear about any house chatter other than this blog. Only pockets such as Vancouver, but those folks are delusional most of the time, that’s what happens to folks when they only see the sun 3 months of the year.
Best rain on earth.
Own some beer? Garth, you never own beer; you just rent it.
75% of 1.75m =$1,312,500 for your mortgage. The payments on that mortgage on a 25 year amort with 2.99% BMO rate = 6,217/month. 6,217*12=74,606. It costs 52.26% of PRE TAX income so 74,606/.5226 = $142,760. You would need an income of 142,760 to afford that house with 25% down.
I want the book.
With my salary of $348,582, and 25% down (437,500), I can get Garth’s old digs at the asking price with 25 year amortized. And of course that is with RBCs special offer of 4.04% over five years – sign up before March 31st folks!!!
Quick honey – start packing!
Sure Garth, in 95 @ 7.5% you paid $41,250 in interest (550k), in 2012 (1.75M) @ 3%, you paid 52,500 in interest – assume full leverage of 100% that is exactly 1.4% a year increase in financing over 17 year which is about the excess you made a year in my last example.
Some places are ahead of themselves, but I believe this work captures it best. This is only $10,000 more over 17 years. This is why I agree with you, correction, collapse no way.
I have ran this growth analysis over 000′s of MLS listings using price history, only a few pockets are out of whack. Its about debt servicing.
http://www.polofg.blogspot.com/2011/12/off-topic-canadian-housing-bubble-two.html
It’s about incomes. — Garth
An income of $437,500 is needed
$325,000
Of course, 95% of all new mortgages taken today are high-ratio, which means less than 20% down. In fact, nine of ten are for 95% of the purchase price, with just 5% down. RBC knows this.
RBC does know this. So does CMHC. So do Jim Flaherty and Mark Carney. So does Bob Rae. So do Paul Dewar and Thomas Mulcair.
scene from House of Commons March 7, 2013:
Leader of the Opposition: “Mister Speaker can the Prime Minister tell the people of Canada what he is doing to keep people in their houses? Across Canada, the banks refuse to give families a break even though their homes are worth less than their mortgages. Mister Speaker, families who have worked hard and played by the rules all their lives are losing their homes. What is the Prime Minister doing to help them?”
speech writing services available by the hour, contact
[email protected]
Man I love BMO. They are being so aggressive trying to take others business. I say good for them, its high time the banks fought over each other for our business.
#162 Devore on 03.07.12 at 9:50 pm
You make your own opportunities and in that you need not worry about or fear the future for if you have a plan to achieve a given goal and diligent follow that plan and are persistent in the pursuit of your goal, despite the occasional setback, eventually you will meet with success.
There are things beyond your control that you need not worry about. Things you can not change that you must adapt to as they alter your path. But a persistent pursuit of your goal will ultimately get you there.
Again, you make your own opportunities; you plan your own future as you pursue your chosen goals. There is no fear. There is no worry. There is no doubt. It is a plan no different than any other a blueprint by which one turns thought into reality. How do you think the house you live in, the car you drive, the chair you sit on and the computer you type on came to be? Many would once have considered they who dreamed of them quite mad. Yet they turned those thoughts into reality and so too can you yours.
There is no fear, there is no worry there is only failing to persistently follow your plan.
And you gotta admit Devore, if nothing else, I am persistent. };-)
$ One million zillion bajillion kajillion dollars.
That will also pay for the frickin’ sharks with the frickin’ laser beams on their heads…
Assuming a current mortgage rate with a big bank of 5.29%, locked for 5 years and amortized over 25 years. With 1% property taxes that do not increase and not including the land transfer taxes (which I assume you have the cash to pay upfront).
You would be looking at a gross salary of around $360,000/year, to buy this place.
This is also assuming that you are only spending about 1/3 of your net income on servicing the massive debt – if the bank is prudent enough to factor this in…
It was easy to find out how much I would need to make. I did a google search for “mortgage calculator”, and the respected name of RBC was first (in the ad section).
I didn’t know what interest rate to use, so I picked the lowest rate I could see using RBC’s handy link: 3.39% for four years. I’ll trade up in 4 years, so that’s perfect. I plugged in the mythical $437,500 down payment, then guessed $300,000 income. It was pretty close, so I just went back and forth a few times improving my guess to $306,000.
I’m sure this is how the pros do it for stated-income mortgages.
a nice article
http://www.theglobeandmail.com/globe-investor/personal-finance/rob-carrick/buy-a-nice-house-forget-about-retiring/article2362155/
In fact Garth, the SP500 was 459.11 on 1.3.1995 and without dividends, it paid about the same, 6.4% yearly since then. Real Estate in the long run has not over shot by any stretch…vs risker assets.
Then the S&P wasn’t riskier, was it? — Garth
That’s all the bank cares about. Their version of “affordable” is “can you make the monthly payment”. They care nothing for anything else, or real affordability. By that measure, houses are certainly “affordable”, and even there are really pushing the limits of not just historical debt servicing, but the practical ones. And when you have a monster of a 30 year mortgage, does it really matter if you throw an extra couple thousand on it every year? Not even a drop in the bucket.
Beyond today’s affordability lie only lower interest rates (yea right), longer amortization (not a chance, besides, more than 25 years? just swallow your price and rent already), or perpetual interest-only mortgages (true debt servitude).
It’s completely insane this situation..here in montreal we have the same situation… i am land surveyor i can see all the transaction. There is an increase of 6 to 10% per year since 7 or 8 years…the people have really short term vision. Sorry for my english, as you can see i am a french ‘québécois’
For the answer i would say that you need to make about 475000$ per year to afford this ‘casa’
Purchase price: $1,750,000
Mortgage: $1,312,500
Amortization: 25 years
Rate: 3.49% (5 year closed)
Monthly payment: $6,546
Yearly Mortgage Cost: $78,552
Yearly Salary: $224,434 (assuming 35% debt/income)
Buyer purchases a home with less than 20% Down.
Buyer pays the CMHC insurance premium. But the Mortgagor (i.e.) Bank gets the default protection (100%). That’s a free lunch paid for by the Buyer.
Buyer is still on the hook for any shortfall in case of default.
I call that Moral Hazard. Garth, send an e-mail to F, I have but he didn’t listen to me.
@#27
The question was for Garth.
Your response is contrary to the majority of analysis I have heard.
The lifecos depend heavily on fixed income yield to meet their annuity obligations. From what I have gathered from the financial press, their weighting of equities is a direct consequence of the current low rate environment and is causing serious challenges.
And you are correct. — Garth
That is why you got paid the dividends Garth, risker asset did pay more. Let me ask you this, in the late 90′s crash followed by 10 years of stale activity, what trade would have performed the best? Because that is exactly what is going to happen, small dip and then nothing for 12 years.
For the question: with 25% down, 3% mortgage and 30 year amortization, you would need about $252,000 annual income, and your monthly would be $5500.
# 12 Turner Nation
Right on!!!
#7 s – “…privatized! Like any other insurance company.”
BC, Skatch, Manitoba and Quebec all have public auto insurance.
And you all wonder why people want to leave places like Toronto to move to Kelowna?!? Our prices are downright BARGAINS in comparison. And we have a quality of life that can’t be beat.
Oh I know I’m going to take some flack for that…
I doubt the people with mortgages will have to worry about rising interest rates. They’ll lose their homes to the bank long before rates rise.
300K
Why do you pick on the innocent banks? That’s like blaming McDonald’s for North American obesity. You know they do sell apple slices and milk.
With 25% down you’ll owe $1,312,500.00. Assuming 4% annual interest on a 30 year mortgage that’s $6516.72 a month or $78,200.64 in payments per year. To keep a decent debt-to-income ratio we shouldn’t spend more than 28% of our income on the mortgage, so we should have a total household income of $279,288.00!!!
OK Garth,
Now I suck at math, but am taking on your challenge. So here’s my flawed logic…
Step 1: I’m 53 so the amount of that I (you said ‘you’ in your challenge) should put towards a house is 37% of my income.
Step 2: Assuming I have cash for the down (Yea OK), my mortguage amount would be $1,312,500.
Step 3: Using RBC rates and their online calculator, I used a variable rate at 4% (prime + 1%), interest term of 5 years, ammortization of 25 years (I’m responsible) and payment frequency of monthly (I’m not that smart) and came up with monthly payment of $6,927.86
Step 4: Using genious algebra taught in Ontario public school grade 10 (I think), I ciphered that I would need a monthly salary of $18,724 (rounded) to hand over 37% of that amount as a mortguage payment.
Step 5: So that means I need an anual income of $224,688 to afford your old place.
P.S. I did not factor in taxes so I probably should realistically need more…and…even if I screwed up in the logic or math department, you should give me points for a valiant effort.
lookoutbelow: But the Mortgagor (i.e.) Bank gets the default protection (100%).
The borrower, known as the mortgagor, gives the mortgage to the lender, known as the mortgagee.
http://en.wikipedia.org/wiki/Mortgagee
look out yourself
well, if i’m self employed and have 25% down, i don’t need to have ANY income to qualify for a mortgage.
BAM! thanks for the free book mr turner. :)
#20 TurnerNation on 03.07.12 at 10:39 pm
The education industrial complex is out of control.
#33 Don on 03.07.12 at 10:50 pm
@Smoking Man
Sooner or later the delusional herd runs of the cliff.
Sooner or later an asteroid hits the planet and re sets the game of monoply.
You point is…………………..
$437,500. I’m going off of 3x gross income.
By the way, that’s the average doctors income in Canada.
Down payment $437,500.00
Annual payments $65,733.00 at 3.99%
Household pre-tax income required $289,222.00
I know how to play this game …
$1
Assuming a mortgage of about 1.3M, assume long term interest rates of 7% and a tax regime that doesn’t allow mortgage interest expensing you should have a gross income of 500K-550K. Of course common sense lending has been thrown out the window, I bet RBC is giving out mortgages of this size to families with only 125K in income.
Annual income of $126,745.52 would be required factoring in only Mortgage cost and assuming the 52.2% of gross income, 2.99% rate, and 30 year amortization period.
Talking of bubbles… As a newcomer to Canada, I thought I might as well share my experience. Well, you ain’t seen nothing yet. Just sold last December my 500 sq. f. condo in Moscow, Russia. It has been on the market for nearly 8 months, but the final offer – $300K – was 6 times the price I paid for it back in 2000. Mind you, we are talking here of a Soviet-style decrepit concrete box – no parking, no concierge, loose syringes here and there. On the plus side – virtually non-existent condo fees and zero taxes. We decided to diversify geographically, and thanks to this blog, will not envisage buying any time soon. True, Canadian dividend yields appear to be somewhat disappointing compared even to blue chips in Russia, but that’s a premium for so-called safety, I guess. Thanks!
Mortgage rates cuts are becoming irrelevant. Sales are on the march downward irrespective of MSM or blogs or whatever focusing on what ever outliers there are now and yes even the whole of Toronto can now be considered an outlier (but not really as sales are not attaining bubble peak levels). The top has passed. BUY NOW AND YOU WILL DEEPLY REGRET IT IN THE NOT TOO DISTANT FUTURE. BUYER BEWARE. Real Estate may be local but not in a bubble. THE BUBBLE HAS TOPPED. I sometimes feel that this blog inadvertently serves to perpetuate this bubble, possibly in the hopes of avoiding the outcomes of bubbles but there is far to much minimization going on. People are not being made aware of the dire state of affairs this situation can bring about. The mere assertion that a crash will not occur is nothing more than that. Especially when it is backed up by another mere assertion that America is now in recovery. Corporate profits can easily be tied to the massive and unprecedented QE that has transpired this past decade. BUYER BEWARE. BORROW, BORROW, BORROW. Does that have a nice ring to it? I does not sound so great to me. Dismiss me as a doomer if you like but sliding melts, or correcting slides sound far less threatening then CRASH and I wonder if they are appropriate. I would describe what happened in America as an outright CRASH but I have read even less about finances then I have about the Military Geopolitics.
Smoking Man:
Even my pet monkey is bearish on housing. That is when he’s not busy making me feel like the luckiest pet monkey owner on earth (I mean, out of this world!).
So Smoking Man, I think that the herd is out or room to run, the cliff looms large.
Now, back to my monkey and to an evening of bliss.
Junius
1.75 million at 6% would pay me about $105,000 per year. That is the opportunity cost of being stuck with that pile of bricks. Pile on the maintenance, taxes insurance and repairs in the $30,000 k range. So living in that place with no mortgage is costing you about $135,000 per year. If you were wacked and signed your future away with a mortgage then you are really digging a much deeper and wider hole. It would be just too painful to calculate.
If the rule is still 3-4 times income, I am going to say $437,500. But I am conservative about such things, so I say look at 3.5 times income which means $500,000.
But people earning $500K pay mostly at the top rate, so the rules are a little different due to almost all the money being at a 50% tax rate in Ontario. I wouldn’t want in at that on much less than a mil, or close to 2 times earnings.
And no, doctors do not earn on average any of the numbers thrown around so far by either me or the other dogs. Maybe a plastic surgen with his own practice.
Down payment $437,500=25%
Required income= $0-as it only needs to be “stated”…
You have to take in 93048.99$ per year to get the house with a 2.99% 30 years amortisation in Ontario.
It is a trap.
One 96K income is fine, but it requires to be self-employed,a desirable postal code, a neat credit score of 800+ an a buddy to borrow the missing 175K to make the 35% pre-qualification. Make sure to declare an income of 217K+,take a mortgage over a 30 years ammo. period, variable 5 years close 3.1% and ask TNL@B where to sign on the Self Employed Recognition Mortgage before F. kills the 30 years mortgage.
Oh No!! Not another Liberal delusion biting the dust. Was the Kyoto Accord just a false flag and red herring scam to raise taxes and lavish guilt cash on the thrid world dictators so that a few nutty professors in Rosedale could feel better about their higher standard of inheritance living? Say it ain’t so Garth.
http://fullcomment.nationalpost.com/2012/03/07/lorne-gunter-for-climate-cues-look-to-the-sun/
People, stay sober for a few days and start peeling back the onion….your taxes should be a sixth of what they are. Stop supporting the propagandista’s.
I’m going to go with my The Price is Right game show strategy and say the answer to the question is $1. Surely I’m correct. The banks don’t care how much income I have – their ASSets are protected thanks to CMHC.
Assuming 25% down need to support principal of 1312500. Assume 25 yr amort at BMOs current juicy 2.99% then monthly mort payments of 6217.20, annual 74606.39. Assume standard 32% GDS ( I know the land of make believe for banks) then you would need gross 233144.96 annual income to support that mort. (assume TDS 40% (again currently the land of make believe and fairy tales for the banks)
Garth if I win could I have a pony as well
Ed
Just copy my answer people. Dave was closest, but used a 30 year amort.
HI Garth,
Based on the $437,500 down a person getting a 25 year mortgage @ 5%, paying $24000 a year in property taxes, $10,000 a month in other debt and a paltry $500 a month in heating would have to make $604,02 a year or $50,335 a month to be able to afford that home.
THE GODS MUST BE CRAZY,
and if not them then the people are.
Dear Garth,
Mr. Carney should do his homework to determine what interest rate would be best for the people of Canada. I don’t like the fact that economists are working for him and today I have read that these same economists are predicting that the interest rate will remain unchanged.
Your thoughts on this?
Until prime rates rise by at least 100 basis points and affordability starts to erode with increasing monthly payments, this blog will keep going and going….
TurnerNation… you had me fooled there for a while… but now I know… consider yourself unmasked.
#33 Don on 03.07.12 at 10:50 pm
@Smoking Man
Sooner or later the delusional herd runs of the cliff.
Sooner or later an asteroid hits the planet and re sets the game of monoply.
You point is…………………..
***
Not the topic but it is more than obvious that all systems reset to what degree some might say equilibrium and some argue in a delusion trance that it won’t happen. We aren’t talking about
Tomorrow = Asteriod = Total reset
Figured that one out a long time ago. Dam it! Here comes the conspiracy comments.
Today = Housing Bust = In the early stages, already here. You can even hear the roll call
The old aren’t even buying anymore…things are way to far out of reach for the young. Tons of rentals ads, all young people trying to rent out their starter homes and of course others who are now aware and need the extra rental incomes. Job losses (which the young take the brunt of) have brought entry level jobs to a standstill. Lots of people sitting on the sidelines.
I guess my point is…That Bitch is singing! Now… denial sets in, foot stamping denial followed by a rebirth of reality, higher divorce rates etc. Human nature is like walking with a stumbling drunk…always having to wait for him to get up and falling backwards constantly. As fun as that may be amongst friends.
I have to go do my homework now. Coming mom!
#62 45north …..
I stand corrected. Thanks.
Do u agree with the point I was trying to make ?
Answer: what I made from my main (bankster) job last year (850K pre-tax)
Two ways to make housing more affordable:
1. Intervention in the markets. Push interest rates to artificially low levels. Protect lenders via government-insurance (CMHC). Provide first time homeowner grants. Pump pump pump. They’re short-term “fixes” that are unsustainable.
2. Allow the markets to be free. Let real estate correct and all the speculators and fools to be wiped out. Real estate will fall to truly affordable levels. Our kids and our kids’ kids will be able to comfortably buy homes and get on with their lives. Instead of speculative capital flowing into housing, it will flow into productive industries and technologies, which will provide Canada with a stronger, healthier economy.
I don’t know why we tolerate solution #1. It’s wrong. It’s evil. These madmen who are responsible for all these market distortions are going to end up creating a systemic economic crisis and financially wiping out average families across this country.
When average people with average incomes are forced to take on massive risk just to own an average house, something is very wrong.
When wealthier people who may have worked, saved, and invested all of their lives can’t comfortably afford a reasonably nice house, something is very wrong.
‘Good’ jobs are difficult to get, often they don’t last long and soon you are out there searching for another job. Usually its far away from where you live, so you need to either commute 100 to 300 kms each day, or move closer to work and at least have some time to sleep each day.
So: Buy a house, be stuck in one spot
OR:
Rent a place, and be free to follow the jobs when they come along.
Yes, you can sell your house in a week or two, but then there goes your profits, the costs of selling eat up a large chunk. And what happens if the market freezes up and you CANNOT sell for a few years, what then?
The answer is …. it doesn’t matter what you make. Just walk away and diversify!!
check this out…
House in the annex (2 bedroom) listed two weeks ago at $589K, didn’t sell!!
However, smart marketing guy at the real estate agency said, raise the price $80k to move it off the market!!
It worked!!! Moved the price up to $649, sold for $640K.
-
Paradise or Paradise Lost? Answer soon.
“This, of course, is real estate servitude. But for this there’s a price. Oh yeah, and money. And who now embrace debt like a drug. So much for useful information. It’s a bogus report. But the mortgage gets paid!” — Debt for life, then you die. Not much of a life for worshiping bricks and mortar, is it?
“RBC based its numbers on what it thinks . . . RBC knows this.” — Even the widest distance would not be far enough to separate thinking from knowing, and RBC, as with all financial institutions, knows exactly what it is doing. Sheeple get spoonfed the Pablum leftovers.
Re: the question. Except for tripling the amount, due to ultra soopah doopah hyperinflation, I concur with #43 Dr. Evil — “$ One million zillion bajillion kajillion dollars.”
*
Mess up the GoM – receive a hefty bonus; Loan Sharks run rampant in UK;
35 Statistics Proof that the US doesn’t know what’s going on; 2:03 clip Have Greeks woken up? Possibly; Nice chart; More bank resignations; Gold and lots of it; Schiller on RE; China not playing fair, but why should they? The west doesn’t, either; US$150K / yr. to lead a good life in the US; RBC Strategist in Moneynews.com; Apple stock Better than RE/ Only if the profits are harvested; American consumers borrowing again.
*
9:54 clip Ever wonder why the m$m dislikes Putin so much? Here’s the speech exposing the NWO (Eng. subtitles); Smoking Man Seems you are right about edukayshun! and here; Fruit extract or chemo? Extract 10K times stronger; One Picture in Bangkok Clever arrangement by the sun and clouds, and Dinosaur Tree; Two different apples combine to make one; Putin A headache for the west, as they don’t know how to deal with him; ‘Net stuff Brit. version of ACTA; John McCain Why on earth was he ever invented? See immediately preceding re: UK; Justifying Justice Plenty of countries do this; Oblastit dubya was never this bad.
” But the Mortgagor (i.e.) Bank gets the default protection (100%) ”
Maybe the Banks should be calling it a Mortgorge or a Mortgouge !
Now let’s figure out how much income you’d need with 25% down to buy my old place. The first three correct answers win a signed book and an RBC sucker.
=====================================
Why sweat it…?
How hard can it be to forge an “X” ?
750k
85th……………
I find it rather amusing that the math geniuses expend such effort to calculate the numbers associated with a mortgage.
I wonder how many can calculate or understand the REAL returns associated with sorry-ass mutual funds or the REAL income from their pay cheque.
Wild guess, $375,000 annual income?
The dollar is commodity-fueled right now. Little to no impact. Besides, no crash coming – a correction, then an inexorable slide. — Garth
———————————————————–
Several posts ago you said you are likely going to revise your prediction. But it looks like you are sticking with your original prediction?
Anyway, if Van doesn’t crash, it may never be a good time to buy. We need a 65% slide to get back to 3.5 X median income. Which is affordable. I’m happy at 5 x.
“…. and an RBC sucker.”
Before I try to figure it out, what flavour is the sucker?
No more dinner and a movie for fun. That’s so 80′s! A Bimmer and a big honkin mortgage tells the world you’ve arrived! Banks will like you, the government, mainstream media, realtors, and yes even your MIL…well…maybe!
Of course there are other ways to be noticed. For instance, you can become a propagandist extraodinaire like the CNN bunch. One in particular has been rewarded with three shows because he ‘s so good at pretending to be a journalist! Hint: AC 360. I think those are his initials and the amount of shows he does each month. And you gotta laugh at one of his segments called ‘Keeping Em Honest’. How laughable is that? Really, who could make this stuff up?!
It’s the ‘machine’ against the people, people…a multi-pronged war waged on us by subtle and not so subtle means. But that is such doomer talk. Who wants to hear such negativity? People will think much better of you for viewing the state of world affairs and the destructive path being paved by our leaders as one of honest mistakes and ‘happy accidents’. No one likes a party pooper…..
The correct answer is: a few million yuan.
Harper’s majority hinged on as little as 8,000 votes in the last election. And so far 31,000 Canadians have contacted Election Canada about calls, live and recorded, misdirecting them to nonexistent polling stations.
How many people didn’t bother to report voting fraud?
Without a full public enquiry into the matter, at this stage the federal Conservatives cannot claim to govern with the people’s consent.
http://www.vancourier.com/Robo+calling+Conservatives+have+lost+people+consent/6266190/story.html#ixzz1oVM5hj00
Each time this cabal screws around in the laboratory of democracy, they turn the Bunsen burner up another notch. And we, the sleepy amphibians in the pot, blithely paddle around as the mercury goes up. If there was ever a time to go “ribbet,” it’s now—before we start croaking.
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♥
Or, to pretend that someone would actually be buying this through a $1,312,500 mortgage (ha):
I use the CMHC calculator:
http://www.cmhc-schl.gc.ca/en/co/buho/buho_010.cfm
Key inputs:
$200/month heating costs
$500/month property taxes
Beemo rate of 2.99%
30-yr amortization
$437,500 down payment
The gross monthly income required is $19,417, or about $233,000 per year before taxes.
Of course, this goes up when (if) F kills the 30-yr amortization, and would also be higher if Beemo and others don’t actually let you combine their 2.99% rate with a 30-yr mortgage.
I guess Leaside is now just a place where the upper echelon of the Sunshine List hang out?
Here’s an interesting note: looking at MPAC (Municipal Property Assessment Corporation – who definitely have all the data on house prices), only the President/Chief Administration Officer could “afford” this house!
http://www.fin.gov.on.ca/en/publications/salarydisclosure/2011/otherp11.html
I don’t mean to throw a wrench in anyone’s forecast but what if by the stroke of a pen,…
Flaherty makes 30 year mortgage terms available while doing all it can to lower the yield on the long bond?
…and don’t tell me it can’t happen. All it takes is a few signatures. Then what? That correction will be nowhere to be seen.
Just saying and not pumping.
Vancouver in one simple video:
http://www.youtube.com/watch?v=VI-OuRkwapY&feature=plcp&context=C3d6a7faUDOEgsToPDskKNLfIpbzgDfo_lQ-7W_51Z
Looks like the EU / Greece situation is becoming “interesting” once again.
http://www.theage.com.au/business/world-business/greece-could-default-within-hours-20120308-1um68.html
Lots of “if’s” but worth bearing in mind – once one domino falls there’s plenty more behind (Portugal, Spain, Italy (especially Southern Italy), and our old friend Eire!
- Cue the doomers on breaking out the ammo!
Spin spin spin.
Those shysters could even come up with a way to create overnight camp out demand for the guillotine.
” oh yeah… it comes with a stainless steel blade to match the stainless appliances”
Keep your heads people. don’t buy Real Estate
take up a safer hobby like chain saw juggling
Garth, you’re calculations are entiely correct regarding real disposable income. It has come to the point where people who need two jobs actually need four….let me explain.
Two people each make 75K per….150K gross between the two of them and they pay roughly the equivalent of one full income in taxes back to Ottawa, the Province and the City take even more. Fraser inst., says we’re at 85% taxation….but I know everyone hates these baldheaded truth tellers so much because the teachers union tells them to.
Out of the disposable they have left they pay the mortgage and the car leases x’s two…after all if you’re a millionaire on paper who here thinks the wife is going to drive the bucket?
You live in an area where yuppies and asst wealthy looking people have moved in and all the kids go to private schools…got two…I paid 20K a year for mine to attend such a place. …thats fourty in school fee’s.
You say they have some disposable income for soup and KD….I say no……so where the heck are they getting the money to live on……is this 165% income/debt thing a bit low?
Personal debt is a far bigger issue in Canada than is being advertised.
Might be able to afford it off $350,000 per year if you have no kids and spend zero dollars on luxuries. . .
Garth, “Liquidity=Freedom” Turner, you’re a hero. This is the modern day speech from Braveheart you should give on the steps of Parliament Hill, on Canada Day just before the Tragically Hip start into their song Courage.
“Sons and Daughters of Canada, I am Garth Turner.”
(Blog Dog from some Small Town Ontario): Garth Turner is 7 feet tall.
GT: Yes, I’ve heard. Gives sound financial advice to men and women by the hundreds, and if he were here he’d consume the Real Estate Cartel and Banks with REIT’s from his eyes and bolts of one-liners from his arse. I am Garth Turner. And I see a whole army of my countrymen here in defiance of tyranny. You have come to learn about money as free people, and free people you are. What would you do without financial knowledge? Will you diversify?
(Smoking Man): Diversify? Against that? No, we will buy a house at low interest rates; and we will live.
GT: Aye, buy now and you may die. Rent and you’ll live — at least a while. And dying in your beds many years from now, would you be willing to trade all the days from this day to that for one chance, just one chance to come back here and tell the Banks that they may take our granite counter tops and stainless steel appliances, but they’ll never take our liquidity!!!”
LIQUIDITY!!!!
http://www.youtube.com/watch?v=FhpezwGtDEg&feature=fvst
Most likely we will see a slow down in the increases in prices in Canada and then a slow slide down, not a crash.
so list price of 1.75 million
$437 500 down payment
lets say the 25 year special at 8%, by some stroke of luck that’s the avg interest you pay over the next 25 years.
you’ve got a monthly of $10, 017.18, ouch!
If you’re not clearing $150 000 a year you’ll be eating bugs. So grossing north of $200, 000 a year, that’s middle class? Yea right. I still remember when my dad made $40 000 a year with AGT, now Telus, that was a good solid middle class salary, what the hell happened?
Self employed
Stated income $1,000,000
Actual income $0
1.75Million x 5% cash back = $87,500
I would make $87,500 buying this house
So i would need to make $87,500 to buy this house.
“That means home-buying could whack the bond market as people rush to lock into ‘more affordable’ homes at cheap interest rates that F is telling them won’t last.”
Mr. Flaherty will not allow interest rates to rise in our country (Canada) until they rise in the US and that won’t happen until Mr. Obama wins or loses in November. To widen the interest rate spread would hammer Canadian manufacturing and that will not happen.
Interesting day. I own a few rental properties (GTA). Mostly paid for. Small amount owing 160,000 total. No car payments or anything. RBC phones, too inquisitive for my taste. Do I want to insure my line of credit? For $100 a month. I asked what are you smoking and can I have some? I only pay interest and write that off. Now, why are they phoning me? Do they think I am dying or what? Kinda pissed me off. What do the unwashed think? Yes, you on this blog.
On a much lighter note I am going to the Scandinavian Spa in Collingwood Friday with some girlfriends. Hopefully should be a nice day all around day. Might run into a servant named Igor. If Garth has his Amazons I am entitled to a large Arian person. LOL.
RBC pissed me off. Am I being paranoid?
I am a small white woman, but Arnie or a younger version is out there. Grapes anyone. Feel like Cleopatra. My day will come. Mini holiday.
It’s the age old question! Can an insolvent Bank make a profit of One Billion Dollars in a quarter? Answer with the help of Mark and Jim YES!
No banks here are insolvent. Is that a NF thing? — Garth
It’s hard to believe a house like this one in Leaside has tripled in value since 1995 but it has.
Townhomes along Yonge St. just north of the 407 east side first went for sale back in 1997 for 178k and Greenpark, the builder was throwing in extras as they sat for a year with virutally no bites. Stonefronts, some nice upgrades etc.
Those same townhomes trade regularly and fast now for 550k plus. Triple the original price. Garth you know them ,right next to Davies HarleyDavidson.
How can anyone believe that a threefold increase in property values over a 17 year period is normal?
Where else would you want to live? Then you can walk over every day and see your HD in the shop. — Garth
I’m still playing conservative with bonds, less of the government kind these days but more into preferred/corporates.
Kinda figured the real estate nonsense would have come to an end by now.
Just hoping this scenario doesn’t adversely affect bond returns/yields in the “money road ahead”.
A year and a half ago I suggested a strong bond component to portfolios, and that worked well. Now bonds will decrease as equity markets start a long-term swell. Hope you adjusted. — Garth
” ‘This just in… good news about real estate!’ And it came just as the crazed lending dorks at Beemo were trying to ignite another 2.99 frenzy.”
Trying to? The morning news in GTA is saying they did bring back 5-year money at 2.99% and 10-year money at 3.99% but only on 25-year ammortizations.
If governments around the world keep printing money it will soon be worthless! The people buying now will pay it back with inflated worthless dollars.
Lower rates make money more valuable, not less. — Garth
My guess for the oil-burner: a Jetta. Or was our forum host tony enough for a Merc? What was standard CPC issue back then! :)
GT-We all should appreciate that Mr. Black defended himself and won against a corrupt and powerful justice system that has a 99% conviction rate, that takes balls of steel and lets not forget the hundreds of millions of dollars taken by lawyers and accounts and consultants after he was forced to resign, ask the shareholders if they feel they have been treated fairly by those appointed by the government to look after their best interests, it cost the shareholders dearly the company went under.
Mr. Black will be released from coleman federal prison in a few days, time served with dignity and compassion for his fellow man. He took a bad situation and made good things happen, God Bless Conrad Black.
Love your sight, keep up the good work.
Thank you, Mr. Black. We are grateful this blog makes it through the prison firewall. — Garth
In today’s news:
“European Central Bank leaves rates unchanged at 1.00%”.
#92 Beach Girl
Yes you’re being paranoid, but about the wrong thing.
RBC did that with me in the past too. So did a few credit card companies. Those were the funniest calls. I asked the CC reps why I’d buy insurance for balances I don’t have on my card? -silence-
The easiest way to avoid that in the future is to contact customer service with each company. Tell them you don’t wish to receive any calls that don’t directly relate to your account. (ie: No sales of any kind) They will update this info on your account, and it should end these types of calls. It’s worked for me so far. ;)
But the thing you should be paranoid about, is announcing in advance on a public forum read by the unwashed masses, where you’re going to be this Friday. Unless you’re Lady Gaga. lol
Just sayin…
@ #88 LH
If you make $850k/yr, why the hell are you hanging out on Garth’s “pathetic” blog?
Shouldn’t you be busy keeping the economy going?
Smarmy Torondo condo hawkers admit: “When prices are rising at 7% (and salaries are not keeping pace), there must eventually be a levelling off of prices. Historically, real estate prices tend to increase in the 3-5% range.”
http://www.remaxcondosplus.com/blog/februarymarch-market-report-2011-2/
It’s time to put the risk on the ones making profits – the sleazy financial institutions.
It’s not complicated. Remove CMHC insurance entirely and allow the banks to take all mortgage risk. With this framework in place there would NEVER have been a run on houses and for once folks who can actually afford them would be the majority of owners.
Oh ya, I forgot, the nobs on the hill are in bed with anything that makes money – either pilfering them with taxes or through mutually beneficial arrangements.
Them banks sure have the power… while the average mortgage holder is bent over the table by the banks, are those same banks not also bending the leaders over a table too? – only inserting $ up their shorts instead.
I find it amazing that the banks take all the profit while placing all the risk back on the ones they are profiting from. The amazing part is most are too busy watching HGTV to even notice. Plus what can we do anyways?
baahhh.
I’d like to bid $1, Bob (‘The Price is Right’).
That’s my lowball income guess for today’s quiz.
“Housing prices were a once-in-a-multi-generational bubble, now gone bust. The mentality that “your home is your retirement” is dead for decades to come. A similar bust will happen in Canada, Australia, and China”
http://globaleconomicanalysis.blogspot.com/2012/03/lps-home-price-index-shows-us-home.html
#85disciple on 03.08.12 at 12:54 am
I don’t do charades. What’s up?
My mind flashes back 30 years when we were making sacrifices to pay off a $35K mortgage on our bog standard Georgetown two storey.
PIT was probably $6K a year at the time which was about 20% of our gross income. I suppose RBC would consider that affordable.
Interest rates were 14% at the time which concentrates the mind wonderfully to pay things off.
I wonder if we were living in the last century, or maybe another planet.
The real crack high isn’t in the RBC scam. It’s believing that when this unwinds, the rest of the playing cards won’t.
Time to read the fine print on the shoot-from-the-hip explanations.
Wait…there is no fine print. We don’t need that anymore.
Glad you touched on that article from RBC. Had quite a few friends send that to me yesterday gloating about how housing is still affordable and it won’t ever go down. They still just don’t get it and are part of the problem. I’m in my early thirties and make a decent living as does my wife, no dependents yet and a good amount of savings. We were approved for a >$900K mortgage last year in Toronto and that’s about what it will cost us to live in something decent in a neighborhood we like. If we accepted this, we’d be forking over more than $5K a month for mortgage (I mean interest) payments and that is more than 60% of our take home income and we still have to pay for food, entertainment, clothes, travel, property taxes, maintenance, etc. Too many of my friends have accepted the full amount of what the bank has offered them to get into houses that they will outgrow in less that five years. It’s amazing how sure they are they will build a ton of equity over those five years. I just don’t know how to educate them that we cannot accept this as home buyers.
Quarterly after tax profits for the Canadian Chartered Banks for the last Quarter aggregate about $ 8 Billion which works out to about $ 90 Million per day.
If you take the actual business days for the period at say 5 of 7 days per week that turns into close to $ 125 million per business day after tax.
Much of this income is non tax deductible by the payors (you and me) as it is considered personal spending.
Anyone feel we are being Punked by the system?
I do.
Beach Girl. Hope you find a mimi Arny
10 min to Carneys rate set. And does BMO not dump in his cornflakes.
Bubble Heads. BMO. 5y 2.99. 10y 3.99. To be a fly on the wall when Carney calls Dave Galloway
TD to follow. Just when we thought the fat lady was about to come out of shadows
“Lower rates make money more valuable, not less. — Garth”
Could you (or anyone) elaborate on that? It would ease my troubled, financially illiterate mind.
Neat trick question on affordability by prefacing your post with those fictional bank affordability guides , Garth.
Using the affordability measure of 32% gross (PITH) that the banks *used* to use and 25% down, you’d need $420k/yr gross to afford that sucker.
Of course, the real answer is that a fool and his money are soon parted.
#150 jess on 03.07.12 at 8:25 pm
You are free to visit slums of Hamilton…
Paradise, eh? Pardon me, but I must poop on it (nature calls). Fake news gets info from intelligence agencies:
http://destructionist.wordpress.com/tag/fake-news-gets-info-from-central-intelligence-agency/
Even the criticism of the fake news is fake.
http://www.youtube.com/watch?feature=player_embedded&v=6Ggon23tL4o
Does anyone here know if the CMHC is on the hook for the entire amount of a mortgage in default or just the first 20%?
For example if one defaults on their payments and the house is sold at a huge loss. Does the bank then receive the full amount of what’s left on the mortgage from CMHC or just the 20% of the purchase price?
Leaside…wow…assuming 25% down (leaving $1,312,500 to finance) @ 5.24 (5 year closed) and a GDS ratio of 30%….you would only need an income of $239,795 pa to qualify….thank god for voluntary disclosure forms….
Is the correct answer to Garth’s question that you don’t need any income – just a pulse and the ability to fog a mirror?
Prices are still up. Looking for a crash? It ain’t coming. Even if that occurs it will need to be a 25%+ all anticipated “correction” to hit 2009 levels. Should of bounced on that opportunity. Whoever said that the responsible people get far in this world anyways?
$7,194 per month (plus property tax, hydro, water, maintenance, etc.)….holy crap…we’re screwed…!!! apologies for the language…
it’s a trick question. If 25% down were required, the house would be half that price. That’s only 4:1 leverage compared to 360:1 for a 30 year with 0% down (5% cash back).
#104 Soylent Green is People on 03.08.12 at 3:08 am
The one pervading evil of democracy is the tyranny of the majority…
The History of Freedom in Antiquity, 1877
When the music stops, I have a chair, liquidity is freedom. The biggest gains in real estate has been made. It is a rare few that buy a home not expecting to profit at some point, or at least keep up with inflation. Just sold a few months ago, for double the original value, 10 bagger on my 5% down. If I had a nickel for all the folks that are close to retirement saying they can retire anytime they like and plan to sell their home to do so, I would be filthy rich! Glad to be ahead of that curve. I would not put more that 5% down of my own capital in this housing market, too risky! Its more of a lifestyle choice, but I cant justify heating rooms I dont use, property tax creep, utilities,water, higher each year, insurance, and especially maintenance! Anyone with low income/hard to prove income can still get a mortage…with a little creativity, and a who you know list. It feels counterintuitive to rent (for a third of the price), probably from all the media from birth, however the surprising amount of extra time and new cash flows tell me a different story! Cant predict the future…..but have seen 5 decades of cycles, and this is quite the run up, cant see it ending well…..As for realtors with any worries, you may lose a little on price, but will make it up on volume when the rush for the exit begins!
And rates remain low… again.
Nobody expected the BoC to change. But read the statement. Change is coming, — Garth
re#120. wrt Leaside house up 3x in price
Familiar with house in R-Hill sold 9 yrs before for 100k, now is 6x that
R-Hill was great, mix of people.
What happened to diversity some places anyways–
wa
wa
wahh
#117. Beachgirl, more paranoid–u sure it was RBC
What a change to start of comments, omg TurnerNation must be having a flips$#$
five-year mortgage to 2.99 per cent, 10-year mortgages to just 3.99 per cent. So many new buyers will be lock in a *prison* with 3 bedroom and two fireplaces. Think about it.
http://fullcomment.nationalpost.com/2012/03/07/robocalls-scandal-andrew-coyne/
Thank you, Mr Harper, for turning Canadian politics into a fresh hell, and your blog trolls for stoking it.
lookoutbelow: Buyer pays the CMHC insurance premium. But the mortgagee (i.e.) bank gets the default protection (100%). That’s a free lunch paid for by the Buyer.
well the bank does get some protection, I think the degree of protection depends on who sits on the Board at CMHC. Up until now, the premiums paid by the buyers are more than the claims submitted by the banks. This surplus is a function of the default rate which is currently at 0.5%. In the US the default rate is 10%. In the US the bodies that correspond to CMHC are Fannie Mae and Freddy Mac. The US taxpayer has pumped 100s of billions of dollars into these two bodies to keep them afloat but the dollars are inflated dollars. The US because it has the reserve currency of the world has been able to inflate its money and export it to the rest of the world.
However when the Son of Man returns, it will all be put right.
Assumptions:
Mortgage: $1,312,500
Amortization: 25 yrs
Int rate: 3% per annum for the full 25 yrs
Payment schedule: bimonthly (twice a month)
Payment: $3,096.72 ($6,193.44 per month)
Payment per ann: 74,321.28
Income required: 74,321.28/0.522 =$142,378
@abraxas: the bank gets protection for the entire amount of the loan: if the borrower defaults, the banks takes ownership of the house, sells it and if it gets less than the outstanding balance of the loan – CMHC covers that difference.
Can anyone related to the industry please confirm or refute what I wrote above?
I wounder how much the city has evaluated that 1.75 Mil home. I bet you it is no more than 500,000 that is a 3.5 times more than what its already inflated value is. Wow…
there is a big disconnect from reality here. Who are these delusional people even considering to buy something like this? We need a crash this is getting beyond ridiculous. It must be made out of gold, or it has a gold mine in the basement, or maybe people are buying it to launder money somehow, i don’t know, all I know is upper middle class can not afford anything even close to that for a million years.
Third person I know now, in last year and half, ‘let go’ from ‘stable’ healthcare related job, 10yr plus employees, high levels of ed’n (I know,…smoking man) . Hunh, guess employment lawyers must be doing ok
Not worth my time. The guy is like a talking bubblehead. all bark no bite. blah blah blah. I won’t believe in any anticipated rate increases until it is after the fact. Even the can and the road are getting tired.
I’m still waiting for Garth and his Dawgs to convince me to remove myself from my convictions. And the most ironic thing is; I came to here just over three years ago from where they are today.
Thinker (#47)
“[Housing and the S&P] paid about the same, 6.4% yearly since then.”
Then the S&P wasn’t riskier, was it? – Garth
That’s not how “risk” works, Garth. You can’t look at something in hindsight and evaluate the risk. Risk only works looking forward.
If I have a regular 6-sided die, and a 20-sided die, and I bet $1,000 that the 6-sided die will roll a 2, and another $1,000 that the 20-sided die will also roll a 2, and amazingly, they both roll a 2, you cannot possibly be suggesting that the risks were equal? Clearly, the 20-sided die was the bigger gamble. I just got extremely lucky.
‘That’s not how “risk” works, Garth. You can’t look at something in hindsight and evaluate the risk. Risk only works looking forward.’ That is exactly what I responded to. — Garth
The scary thing is Garth putting up this mini contest, and there are a ton of different answers from $0 to $500,000+. Some are jokes, some are not – and it’s hard to distinguish which is which at times.
With this kind of variance on the answer, no wonder people can’t figure out if they can afford housing any more. People should be more scared of the fact that the market has screwed everyone up so much that there’s now 100 different answers and no one knows which one is right.
Garth: You should be handing out your book to those that can’t figure out the answer, rather than those that can.
(No guess here since it’s probably wrong, but at least I know it would be wrong – but I’d take a book to help learn the right answer).
Nobody expected the BoC to change. But read the statement. Change is coming, — Garth
And why would the BoC lift rates when it holds (and continues to acquire) $63 billion in government bonds?
It will. — Garth
March 7,2012 stats
Vancouver East & West*
New Listings – 87
Back On Market Listings – 1
Price Changes – 36
Sold Listings – 21
Vancouver All Areas*
New Listings – 260
Back On Market Listings – 6
Price Changes – 111
Sold Listings – 71
Listings are well over 15k now.
If there are 10,000 people here reading this blog everyday, and if most of us feel that rates in Canada will not be going up more than 1% over the next 15 years, then why don’t we have a poll and see how many of us believe that to be true, then in 10 years we can see if we are correct or not?
Everyone thinks it is so great that BMO is bringing back the 2.99…
BUT
Please read the FINE PRINT…
Contains a very new Clause, you cannot not prepay that mortgage unless a bonified sale, or death of the applicant beyond the 20/20 prepayment priviledges.
Hotel California Clause……”You can check-out any time you want but you can never leave.”
So if after year 3 you need to refinance, your only option is with BMO, and guess who won’t have to give any discount on future refinances, “YOU CAN’T LEAVE BMO”. You can no longer consider to early renew that mortgage with another lender prior to maturity, so once again lender has no reason to give good rates on early renewals…You can’t leave..
Ever been handcuffed to a lender before??? Take the BMO 5 year 2.99% and BMO will have the 5 year golden handcuffs applied instantly.
Please read your doc’s before you sign…..
Garth, your fellow blog dog, Carney, has decided to keep the stuff where it is now. Ask your fellow blog dog to grow a pair of Iranian balls, similar to the ones Ahmadinejad has.
One other thing, is the RBC saying Housing is getting more affordable rally the same as housing prices are actually going down ??
Doesnt that mean the Bubble has a leak??
@ #65 Bottoms_Up on 03.07.12 at 11:27 pm
“$437,500. I’m going off of 3x gross income.
By the way, that’s the average doctors income in Canada.”
I assume you meant the above as a joke about average doctor’s incomes. However if you’re curious about what doctors really make in Canada, you can find it here:
http://www.canadianhealthcarenetwork.ca/physicians/life-travel/working-life/are-all-doctors-rich-21212
no crash just a long slow slide- Garth
But a slide that will not effectively ever end for anyone alive today my good man.
Just as in the USA economic market forces have now been dealt a death blow by escalating energy pricing. The housing market stateside is nowhere near the bottom and will not get there until we are pricing houses in hard silver or beaver pelts.
The idea that Garth put out that we should never bet against the USA reflects the same attitude that I saw expressed in my father when the americans were bombing Tora Bora in Afghanistan…..imperial power is inviolate…..technology will triumph……
When I mentioned that history has always shown that imperial powwers destroy themselves in the afghan highlands I was waved away as a heretic……
So hows that particular war going for the yanks eh?
We do not get it…..we do not want to get it……..
The modern world is in full scale rapid collapse. It is proceeding faster than historical collapses have ever happened before…….petro based civilization cannot help but fail fast once certain extraction cost thresholds are passed.
88 million US citizens have no jobs now…and never will again….that number will continue to climb skyward….but it will never be advertised on CNN.
Canada is screwed as the rest of the importing world comes in for a true hard landing (not some economic theory, but the hard reality of empty store shelves, living in the streets and crime rising apace).
Aussie land has entered the decline now early last year and Canada did as well. But like Americans circa 2005…we think there is no problem…….
Remember, just because you have not lost your job yet does not mean that you won’t!
Oops! I meant average doctors’ incomes. Need to get my grammar straight :)
Crazy! This whole bubble thing has blown to crazy proportions. I’m sure it will also pop in a crazy way too. I’ve taken out the popcorn and enjoying my role as a spectator. The best character to watch are the ones in denial with their heads in the sand.
CMHC housing starts for February 2012 released this morning.
Interesting to note that rate of starts are slowing from January, which is unusual seasonally ( similar to how 2008 unfolded, and starts were dramatically lower by autumn of that year ). Absorption rate is trending down, and buildings under construction is trending up.
Kelowna total starts are down 53% from Feb 2011. This is a good thing in an overbuilt market. Canada is up 15% from February a year ago……not good in an overbuilt market.
The rate of starts nationally is still well above household formation rate. This is alarming. Expect Flaherty to tighten the noose………
check for yourselves at http://www.cmhc-schl.gc.ca
“#138 Flint on 03.08.12 at 9:58 am
“Lower rates make money more valuable, not less. — Garth”
Could you (or anyone) elaborate on that? It would ease my troubled, financially illiterate mind.”
Not likely, most people can see the value of money is eroding fast.
Would the bank do it if you had roughly an income of $183,000 assuming you went with a 5 year closed variable rate? Probably a trick question though cause you are sneaky!
I’m probably late to the party – all the firsters and East Coasters beat us morning-reading Westies to the punch.
I’ve calculated my answer based on how we do it in Van City:
First, I take “buy” to mean “what it would take to get your name on title”, without paying attention to any starvation or court-ordered sale the future might hold.
$1.75 Million House – 25% down payment from mom and dad or grow op = $1,312,500.
$1,312,500 financed by the scummiest mortgage you can find at 3%, then assuming that your rate won’t change for 30 years and that you’ll make monthly payments = $5,520 a month or $66,240.
Even the banks will want to see that you can pay this after taxes, since CMHC isn’t insuring it so you’d better make somewhere around… $96K a year!! As for groceries, taxes, etc., that’s what HELOCs and basement tenants are for.
OK, the answer is income required $314,500. Based on:
$1.3125 million mortgage, 25 year amortization (30 yrs is soon to be axed), variable 3.5%, gives $8,394 a month in bank rent. TDS ratio of 32% max as per CHMC website says I need to make $314,500 a year to afford $8,394 a month in bank rent.
Too many variables in your question to get you a more precise answer. What’s the interest rate to use? That is the deciding factor IMHO.
“Does anyone here know if the CMHC is on the hook for the entire amount of a mortgage in default or just the first 20%?
For example if one defaults on their payments and the house is sold at a huge loss. Does the bank then receive the full amount of what’s left on the mortgage from CMHC or just the 20% of the purchase price?
”
The CMHC is responsible for making the bank whole on the money borrowed. So say someone took out a 95% mortgage (ie: 5% downpayment) on a house, and proceeded to contaminate the land with pollutants — the CMHC is on the hook to repay the entire loan, and rehabilitate the property.
I’m just a guy in a comment section on a great blog.
I normally don’t shill other peoples sites.
I’m as busy as most with 2 – 3 jobs trying to recovery from a terrible job layoff during the recession and loss of a ton of capital to boot. But…
I follow or listen to three sites. That’s it! All I have time for.
* Garth’s site here
* Mish’s
* and this guy! Gary Kaltbaum’s. His podcasts.
Gary was on fire yesterday! And he puts the USA in perspective (yes.. He’s American) on what’s coming for up for them. (And the fact he thinks Uncle Ben is a Duffus!)
it’s worth a listen to:
http://garyk.com/?p=3644
or
Itunes version (that’s how I listen to it on my nano)
http://bit.ly/wa7YoQ
Out …………..
#170 arctodus
It’s sure nice to see such a cheerful post every now and then.
Realtor shenanigans, to the extreme:
C2295010 – M4N – 46 RANLEIGH AVE Toronto, Ontario – $899,000
Price Change:
- Feb 28: $678,000
- Mar 8: $899,000 (+33%)
http://www.realtor.ca/PropertyDetails.aspx?PropertyID=11611344&PidKey=1934485698
Much like that Richmond Hill line up for $700k new burbs homes, I wonder if it is HAM driving this bidding war?
(I happened to look at the realtors driving this listing: http://www.homelifelandmark.com/ )
“Of course, 95% of all new mortgages taken today are high-ratio, which means less than 20% down. In fact, nine of ten are for 95% of the purchase price, with just 5% down.”
Wow.
Source?
Ask any mortgage broker. — Garth”
I hardly doubt you, but it would be nice to have credible and official sources cited. With your journalistic background I’m sure your understand.
Not your research assistant, dude. — Garth
Mortgage Amount:
$1,312,500.00
Interest Rate Type:
Fixed
Payment Amount:
$7,193.87
Amortization Period:
30 years 0 months
Payment Frequency:
Monthly
Interest Term:
5 years 0 months
Interest Rate:
5.240%
So….this mortgage would cost $86,326.44 per year. And this represents 52.2% of annual income.
I’m getting a headache….
Further to last…I figure about $170,000.00 after-tax dollars needed to service this mortgage.
Well, actually….$170,000.00 after-tax dollars would leave about 47.8% left for living.
Isn’t this fun?
$250k
180 Mister Obvious on 03.08.12 at 1:41 pm
#170 arctodus
It’s sure nice to see such a cheerful post every now and then.
Thing is, Obvious, arctodus is not exactly wrong. Our way of life depends on cheap energy. Don’t get me wrong, oil producers will continue to be subsidized by governments until every last drop is out of the earth. But over time (and likely within the next 40 years), as resources become more scarce the cost of oil will become prohibitive for consumers.
But that’s okay, because I’m willing to bet we’ll all have suffocated to death by then:
Maximum amount of acceptable CO2 emissions in the atmosphere: 350 ppm
Current amount of CO2 in atmosphere: 392 ppm
http://www.350.org
A family with $161,610 income could afford to qualify for this property. I wouldn’t advise it, but they could. The down would likely be from the sale of their previous residence.
A two income family, each earning 80k, could buy this house. Just not working with the bank-posted-rate and the bank preferred 25 year am.
If they wanted to put 5% down, an income just over 200k would do it. And they could put the rest in bank preferreds, if you like.
Here’s a short conversation between CBC’s Vancouver’s morning man Rick Cluff and Chris Carter from ScotiaMcLeod on Vancouver’s early edition today. (Paraphrased by me, not exact quotes).
Chris: The Bank of Canada has left interest rates unchanged at 1% for the twelfth consecutive time.
Rick: But isn’t that good news?
Chris: Well, it’s good news if you want to borrow money or you carry a lot of debt, but if you are older and bought a home as well as put savings away at a time when interest rates were very much higher you will probably be getting rather impatient with these ongoing ‘emergency’ rates.
Rick: Hmmm… let’s move on.
Talked to my BMO man, he said it was unethical for that RBC scumbag to phone me. But assured me it is just the insurance branch of RBC trying to drum up business. I deal with TD, RBC and BMO. Like BMO the best.
Everyone out there, which bank do you prefer, if you can. Am pissed off today.
Talked to a best friend, who is a mortgage broker. Now if you need a mortgage broker with record low interest rates you are F **ed. She said total carnage.
Not very often do I get in this mode. But she told me everyone is broke. In the total scary zone.
I value mortgage brokers, like used car salespeople. Often required and easier to deal with, and smarter. Still pissed off today.
I’m telling ya the system is rigged by the NWO. No other way to explain the insanity.
#24 Investx on 03.07.12 at 10:42 pm “Of course, 95% of all new mortgages taken today are high-ratio, which means less than 20% down. In fact, nine of ten are for 95% of the purchase price, with just 5% down.”
Wow.
Source?
Ask any mortgage broker. — Garth
———————————————————
I had a mortgage broker tell me 40% of people in Calgary are under water. The other real estate agent I know says it’s definietly a buyers market.
So what’s the scoop on the CMHC ceiling, is it being raised seeings how the bank is bringing back the 2.99?
#92 Beach Girl
Yes you’re being paranoid. They’re just trying to drum up business ’cause they’re hurting. Ignore the calls.
Ah hahahaha….
http://www.dailymail.co.uk/tvshowbiz/article-2111940/Britney-Spears-puts-Los-Angeles-villa-sale–4million-paid-it.html
$525,000
Approximately 25,000 doctors in Ontario in 2010:
https://www.ophrdc.org/Public/Report.aspx?owner=pio
OHIP payments in 2010 of $11.9 billion:
http://www.fin.gov.on.ca/en/reformcommission/chapters/ch5.html
Works out to $476,000 per doctor.
#169 Michelle on 03.08.12 at 12:39 pm
——————————————
ps. I couldn’t find anything from your link to indicate average income of doctors
#138 Flint
Cash (what I assume you mean when you say “money”) earns nothing, so holding cash when rates are high erodes its value quickly. When rates are going down, cash becomes more valuable, as does everything else that pays a fixed amount of income regardless of rates.
Read more: http://www.chicagobusiness.com/article/20120306/NEWS02/120309907/chicago-feels-chill-as-g8s-global-spotlight-swings-away#ixzz1oYYVUxdw
Stay on top of Chicago business with our free daily e-newsletters
G8 summit now moved out of chicago to camp David …
===============
Though Chicago will still host the NATO summit on May 20 and 21, and President Barack Obama will still make an appearance, many downtown restaurants and hotels are feeling the sting of a reduced branding opportunity.
Read more: http://www.chicagobusiness.com/article/20120306/NEWS02/120309907/chicago-feels-chill-as-g8s-global-spotlight-swings-away#ixzz1oYYJ6J4i
#129 fancy_pants
How are they sleazy? They’re a for profit business. They have shareholders. They have employees. They have customers. They play in the sandbox the government gives them, and they play by government rules.
Again, if you have an issue with how a heavily regulated industry is behaving, you look to the regulators, because they are almost certainly playing by the rules (if they are breaking them, that is a separate issue). I don’t care what their excuses are, and there are plenty of those, the buck stops with them.
#195 Daisy Mae on 03.08.12 at 3:23 pm
#92 Beach Girl
Yes you’re being paranoid. They’re just trying to drum up business ’cause they’re hurting. Ignore the calls.
___
Thanks
#127 T.O. Bubble Boy
because I love this blog
Vodafone: Undercover investigation exposes Swiss branches The Bureau of Investigative Journalism
Mar 7 – “Vodafone’s accounts suggest it attributes billions of pounds in profit to branches in the tax haven of Switzerland – but an undercover investigation indicates hardly any business is done there … Vodafone’s Swiss branches are run by a single part-time bookkeeper, indicating their main purpose is tax avoidance.”
http://taxjustice.blogspot.com/
OECD recommends action on international tax loopholes OECD
Mar 5 – “OECD’s new report Hybrid Mismatch Arrangements: Tax Policy and Compliance Issues describes arrangements that exploit national differences in the tax treatment of instruments, entities or transfers to deduct the same expense in several different countries, to make income “disappear” between countries or to artificially generate several tax credits for the same foreign tax.” Hat tip: Bruno Gurtner.
I’m with #88 LH. Here in the Maritimes we pay our mortgage with after tax dollars. So an after tax income of 437,500$ per year becomes 841,000$ before tax.
I want the prize, Garth.
I think you would need an income of about $350,000 a year.
The “for sale” signs on the west side of Vancouver have been popping up like mushrooms in the rainforest. They swing in the wind to forecast the weather. If the wind comes from the West it means fair weather, from the East, it indicates storms and cold. When a poperty finally sells, they leave the “sold” sign up for weeks even months. I guess no one actually moves into these houses.
I overheard 2 Real Estate Agents talking yesterday about how things were going for them this week. They said they had some good open houses, lot’s of interest … no offers.
Here is what you can get in Malibu, California for $3.5 million. Dick Clark’s “Flintstone House” on 23 acres with ocean views.
http://www.cartoonbrew.com/cartoon-culture/dick-clark-is-selling-his-flintstones-home.html#comments
Anyone paying millions for a shoebox on a dark narrow street in Vancouver is just plain crazy.
“Now let’s figure out how much income you’d need with 25% down to buy my old place. The first three correct answers win a signed book and an RBC sucker.”
This is easy, and all you fools took the bait. This is a trick question – the answer is, NO ONE. It’s overpriced and only a greater fool would bother buying this house.
Mark Carney hints at higher rates
Last updated Thursday, Mar. 08, 2012 12:23PM EST
Domestically, the central bank said the economy is probably growing faster than expected in the current quarter, and that private demand is expected to be “slightly stronger than projected” as sentiment improves and amid “highly-supportive financial conditions.” At the same time, Mr. Carney again flagged record levels of household debt as the biggest made-in-Canada threat, indicating once again that he is less than comfortable with a key byproduct of his low-rate policy.
“Canadian household spending is expected to remain high relative to (gross domestic product) as households add to their debt burden, which remains the biggest domestic risk,” the central bankers said.
In a hint that Mr. Carney may be inching a touch closer to countering the buildup in household credit by raising interest rates, policy makers noted that inflation is expected to be “somewhat firmer” than in their January forecast, “as a result of reduced economic slack and higher oil prices.” Inflation will hover around the bank’s 2-per-cent target for much of its two-year projection period, due to factors such as “modest growth” in wages and an economy that is moving toward its potential, Mr. Carney and his team said.
http://www.theglobeandmail.com/report-on-business/economy/interest-rates/mark-carney-hints-at-higher-rates/article2362703/
“I hardly doubt you, but it would be nice to have credible and official sources cited. With your journalistic background I’m sure your understand.
Not your research assistant, dude. — Garth”
Not asking you to be… just to support your claims and figures. You know better, dude.
I make everything up. Saves time. — Garth
#209 Investx
Leave Garth alone… He is not main stream media so all of his sources are from anonymous spies. Those spies work on a ‘if I tell you, I’d have to kill you’ basis. Garth is just the messenger. It’s a conspiracy, man.
#198 bottoms up
I am assuming the OHIP payments are gross ( i.e. the Doctor must pay all his expenses out of this money). Deduct office, clinic, staff etc.
This is what I heard from an American, and it follows true that the same thing will soon happen here in Canada:
“Back in 2001 I was trying to sell my home in the States and interest rates were dropping. I had my house on the market for nearly nine months with no offers.
- When the interest rates went up a quarter of a point my house sold in two days. People now do not realize that even if interest rates went up two % the rates would still be cheap. The people now keep waiting for the last shoe tp drop before they buy.
- If the interest rate starting going up prices of home will even go higher than they are now because there will be a mad stamped of buyers all trying to buy at the last moment.
- Canadians can easily see house prices jump 35% in as little as 6 months when rates finally do start to rise, that is what happened in 2002 where I live here in the States.”
—-
Hearing those words got me angry, really really angry! Why the heck am I waiting to buy a house if prices are only going to shoot up from here? WHY?
180 Mister Obvious on 03.08.12 at 1:41 pm
#170 arctodus
It’s sure nice to see such a cheerful post every now and then.
Thing is, Obvious, arctodus is not exactly wrong. Our way of life depends on cheap energy. Don’t get me wrong, oil producers will continue to be subsidized by governments until every last drop is out of the earth. But over time (and likely within the next 40 years), as resources become more scarce the cost of oil will become prohibitive for consumers.
But that’s okay, because I’m willing to bet we’ll all have suffocated to death by then:
Maximum amount of acceptable CO2 emissions in the atmosphere: 350 ppm
Current amount of CO2 in atmosphere: 392 ppm
http://www.350.org
I never even touch the climate issue as people simply do not have the intestinal fortitude to understand the ramifications of what we have done to the ecosphere.
We will probably see a completely ice free summer arctic ocean within 3 years now. The remaining ice cover over the pole is almost entirely composed of 1-3 year old ice…no old multi decade ice remains….
With the ice free event will come truly catastrophic changes to planetary climate patterns (as is indeed happening already)…
Regardless, we are in the midst of a die off of life on Terra that has not been seen for epochs.
But why would human monkeys be expected to understand such things? Heck I know people that just paid 200,000.00 for shacks built in the 40s in butf… BC. These people continue to think that “everything is OK”
They know nothing and as this decade alone rolls on that will become obvious to all but the uber rich and the ruling legal-political class.
The apocalypse is not, will not and will never be, headline news….
It is here like dense fog creeping slowly into the lives of people who have only ever known sunlight.
How can they be expected to know that the moisture they feel on their faces and the difficulty looking ahead is the beginning of their end?
“Maximum amount of acceptable CO2 emissions in the atmosphere: 350 ppm
Current amount of CO2 in atmosphere: 392 ppm”
Are you so oblivious that you don’t understand what you’ve just said?
Current CO2 level is the atmosphere is well past the point where we’re all doomed, and yet here we are with Europe freezing their nuts off.
No one (with any intelligence) is buying Al Gore’s little Carbon Credit selling scheme…reminds me of buying “Papal indulgences” for your sins from the Church back in the day…same line, different product – You are wicked and your sins will lead to hellfire and damnation…unless you act now and buy CO2 credits from Al Gore’s handy CCX CO2 exchange.
Answer: With a very ordinary lifestyle of $30,000 for all living/carrying costs:
Approximately $150,000.
-25% down;
-borrow: $1,312,500.00;
-25 year term;
-BMO 10-year rate 3.99% (YOYO after that, but let’s say it stuck for the entire life of the mortgage);
-monthly payment $6,897;
-total annual paid: $82,763 (after tax);
-gross up to $120,000 for tax;
-add 30K for living costs = $150,000. BUT!!
-TOTAL interest paid, even at this crazy low rate for the entire life of the mtg: $756,570, making the actual cost of the house (with original down payment): $2,506,570.00 -RIDICULOUS!
I´m not good at mathematics so I leave the guessing for others.
Yeah, yeah and yeah. We are living in insane times. Banking propaganda is now dictating the media “the truth” about what is and what is not affordable. It is really astounding where house prices can get. Imagine that one day we will all end up living in Canada’s Ten Richest Neighbourhoods with mortgages eating us and our families alive.
When I read these mortgage prices and I realize that there are actually people who are insane enough to give it a try, I feel sad. Who will protect them? We all know that the majority of the population (which is definitely not reading this blog) knows nothing about finances, mortgages etc. I´m learning here with every article I read so much!
#210 Investx
Nobody has that information other then CMHC, which they will never disclose the exact figures. However what we do know is their LTV portfolio allocation. https://p.twimg.com/AlLLkFBCQAMcMpM.png:large But even this data is skewed because they adjust their portfolio to home appreciation (marked-to-market) on a quarterly basis to show higher equity loans. The issue starts when home prices start falling and by my calculation; a 10% correction in the market would send their portfolio back to 2010 levels being 43% or nearly half of their portfolio holding 80%+ LTVs. Any further correction beyond 10% and we’ll be talking about a CMHC bailout.
#187 Wage Slave
Long way to go until we’re suffocating (OSHA maximum safe level is 3% or 30000 ppm), but thanks for spreading pointless hysteria. Do the nuts still want to classify CO2 as a toxic pollutant?
Sounds like someone pulled 350 out of their you-know-what.
The nice calculator at BMO says I would need to earn $317,102 in order to buy your old house, heat and property taxes not included.
I adore the picture of Joy.
160000
Besides, no crash coming – a correction, then an inexorable slide. — Garth
The way I’m reading this is that you essentially agree the Canadian Troika will engineer the slow controlled baloon gaseous release. 10% correction then slide – I bet you they would take that scenario happily. It’s probably the target.
The only thing manipulating it will be human emotion. — Garth
this video is very interesting in how to avoid tax
24 names on a letter box companies
a single office manages all of them
one part time bookkeeper
http://www.thebureauinvestigates.com/2012/03/06/in-video-swiss-tax-wheeze-exposed/
#67 Bob Barker on 03.07.12 at 11:36 pm
That’s hilarious!!
“Washington (CNN) — The Senate narrowly rejected a Republican-sponsored measure Thursday that would have bypassed the Obama administration’s current objections to the Keystone XL pipeline and allowed construction on the controversial project to move forward immediately.”
http://www.cnn.com/2012/03/08/politics/senate-keystone-vote/index.html?hpt=hp_t1
215 David Jensen on 03.08.12 at 5:09 pm
Are you so oblivious that you don’t understand what you’ve just said?
Current CO2 level is the atmosphere is well past the point where we’re all doomed, and yet here we are with Europe freezing their nuts off.
Climate change does not equal global warming. You’re relying on a mish mash of outdated information.
219 Devore on 03.08.12 at 5:40 pm
Long way to go until we’re suffocating (OSHA maximum safe level is 3% or 30000 ppm), but thanks for spreading pointless hysteria. Do the nuts still want to classify CO2 as a toxic pollutant?
Those standards apply to compressed CO2 in a workplace setting. Not the atmosphere at large. In case you have trouble putting it together, there’s a big difference between a canister of compressed gas and the atmosphere at large. Nice try, though.
@Devore,
The banks may not be breaking any laws, but that may be because the laws have not been written yet. Certainly, the banks are gaming the system.
it used to be that profit was commensurate with risk: no risk, no reward. With predatory lending practices, CMHC lifelines, and the sale of ‘covered bonds’, the banks are reaping rewards, but shirking the risk onto taxpayers, and investors, including those that went out out their way to avoid taking on risk in the first place.
TD Bank now getting involved in the game.
http://m.theglobeandmail.com/report-on-business/toronto-dominion-slashes-mortgage-rate/article2363206/?service=mobile
#176
$1.75 Million House – 25% down payment from mom and dad or grow op = $1,312,500.
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ROTFLMFAO
Good one!
The Harper Government is a disaster to this country.
Listening to Del Mastro is an insult to Canadians.
Funny how that nasal plugged loud mouth Baird can talk about free and fair elections in Burma while they commit election fraud in Canada.
Is there anything this Government won’t do to embarass our Country.
The next election can not happen soon enough.
THE CONSERVATIVE GOVERNMENT IN CANADA IS A DISGRACE TO CANADIANS.
Liars, cheats, theives, immoral, indignant pigs! The conservative government is the worst government for this country.
CONS ARE LIARS!!!!!
Wrong blog. — Garth
Seniors Texting Codes
ATD: At The Doctor’s
BFF: Best Friend Farted
BTW: Bring The Wheelchair
BYOT: Bring Your Own Teeth
CBM: Covered By Medicare
FWB: Friend With Beta Blockers
FWIW: Forgot Where I Was
FYI: Found Your Insulin
GGPBL: Gotta Go, Pacemaker Battery Low
GHA: Got Heartburn Again
LMDO: Laughing My Dentures Out
LOL: Living On Lipitor
OMSG: Oh My! Sorry, Gas
TTYL: Talk To You Louder
WAITT: Who Am I Talking To
WTP: Where’s The Prunes
that picture is too mother-fathering cute
It’s shows my nurturing, sensitive feminine side. So shove off. — Garth
Sorry Mr. Turner….My apologies.
I supported you when you were in government, regardless of the party you were running with.
I supported your idea’s, your solution based thinking.
Thanks for reminding me why you left politics alone…I should do the same…
Loved the pic – but not as cute as some baby hedgehogs. Who can resist loving all baby creatures.
#231 NoName on 03.08.12 at 7:03 pm
Seniors Texting Codes
………..
Great. Started reading this to DH. He had already read it. Shoot, almost every joke I send him, he’s already read it. I know he’s got a bunch of friends that send him a lot jokes – many of which he doesn’t pass on to me.
#222 Sebee
10% correction then slide – I bet you they would take that scenario happily. It’s probably the target.
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The 800lb gorilla is the 1-2 million spec units that could flood the market, if it drops 10%.
Hope ya got airbags. :)
#227 Smartalox,
Keep up the bank bashing and you will be deleted into oblivion. Also, you may be blacklisted for any future mortgages/loans. But you will be free to open as many accounts as you want at the branches.
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Hello, good evening and welcome to Garth Turner’s Flying Circus.
Today, we continue with our studies on trying to comprehend why men (not all) are slower than a worthless sack of shit.
Well documented is the basic premise that dustbunnies, rabbits transporting between Neptune and Sirius as well as broken down traffic lights, in general, have higher IQ’s than the male species.
This is why men rule this planet, and women don’t (they’re smart). Please consider:
*
A husband and his wife who have been married 20 years were doing some yard work. The man was working hard cleaning the BBQ grill while his wife was bending over, weeding flowers from the flower bed.
So the man says to his wife, “Your rear end is almost as wide as this grill.” She ignored the remark.
A little later, the husband takes his measuring tape and measures the grill, then he goes over to his wife while she is bending over, measures her rear end and gasps, “Geez, your butt really IS as wide as the grill!” She ignores this remark as well.
Later that night while in bed, her husband starts to feel frisky. The wife calmly responds, “If you think I’m gonna fire up the grill for one little wiener, you are sadly mistaken.”
*
#231 NoName — Good one!
Now let’s figure out how much income you’d need with 25% down to buy my old place. The first three correct answers win a signed book and an RBC sucker.
************
I read your post a few times and I’m lost. The answer is not evident. How much is the old place? Maybe I’m tired.
Gross income of $250,000—Minimum.
Why does the gov get involved in Air Canada’s private affairs??? It is a private company isn’t it?
If there is a problem for consumers, allow open skies with the USA. Let foreign carriers pick up and fly between 2 Canadian cities. But no open skies…let the workers and consumers suffer.
This gov/corp partnership has happened before. Is this fascism?
…and no I’m not a realtor, mort broker, nurse, teacher, Air Canada employee, etc, etc. etc.
#166 refinow
Everyone thinks it is so great that BMO is bringing back the 2.99…
BUT
Please read the FINE PRINT…
Please read your doc’s before you sign…..
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A+ Very good info. You probably saved a few folks. Unfortunately some of the people on here don’t even read all the comments, so fine print is WAAAY off their radar. lol
i don’t know what ‘middle class’ means anymore, anyone can ‘look’ middle class using debt. Leaside is still afordable to the middle class. 1.7 million is the highest end of leaside prices. Some bloggers are trying to ‘qualify’ this purchaser for some reason, when in reality many transactions in this price range and above are cash. Cash qualifies.
1.7 million as a purchase puts one above middle class. In Leaside this is a type of gentrification, it is also happening in ‘The Beach ‘ : Postal workers live next door to dotcom millionares
#228 Slim Jim on 03.08.12 at 6:44 pm
Not just TD. CIBC and RBC have also jumped in now. Just need BNS and we’ll have all the big boys at the party.
http://ca.finance.yahoo.com/news/battle-home-mortgage-market-heats-233312842.html
#165 ANONYMOUS
If there are 10,000 people here reading this blog everyday, and if most of us feel that rates in Canada will not be going up more than 1% over the next 15 years, then why don’t we have a poll and see how many of us believe that to be true, then in 10 years we can see if we are correct or not?
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10,000 opinions won’t make any difference to what will transpire. We’ll see a 1-2% higher BoC rate by the next election.
But there will be nothing but smoke and mirrors from Ottawa until then.
After that the wheels can fall off…
Priority 1 is re-election.
It’s S.O.P. for any 1st term majority guv.
*sigh* You just don’t give up do you? Yeah, there are hundreds of thousands trying to enter Kelowna by any means necessary. The bridge over Lake Okanagan is congested with traffic from the East and the 97 is choked with everything from the West. YLW can barely handle air traffic and soon a lottery will be set up so that only the luckiest outsiders can move to Kelowna. Real estate here is reaching the stratosphere. Homes sell within seconds of MLS postings.
And no Kelowna realtor has ever told a lie. Honest…
Erratum: “…bridge congested with traffic from the WEST and the 97 is choked with everything from the EAST.”
The cacophony of newcomers entering Kelowna even as I type is messing with my sense of direction!
#138 Flint
“Lower rates make money more valuable, not less. — Garth”
Could you (or anyone) elaborate on that? It would ease my troubled, financially illiterate mind.
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Ultra low rates have given me the ‘ability’ to pay down a 25 year mortgage in about 14 years. (2 left)
With 98% of your payment going to principal, you can save a ton of money on the 11 years worth of compounding “interest” the bank “WAS” going to get, but now won’t. :)
That’s one example.
Stick it to the man…
#230 throwstone,
you were a little off the topic of real estate, but you were right on.
#113Arse on 03.08.12 at 6:07 am
Most likely we will see a slow down in the increases in prices in Canada and then a slow slide down, not a crash.
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Lets just think this slow slide thing through. I want to buy, rates are low but the prices of houses are decreasing. Like I am going to buy a house that is going to be worth less next year. Slow slide my eye. Unicorns and slow slides. BUYER BEWARE. THE BUBBLE HAS TOPPED. NOW IS NOT THE TIME TO BUY A HOUSE.
If you were to just pay the interest on the $1,312,500 mortgage at 2.99% this would equal $39,243.75 per year or 52.2% of an income of $75,179.60. Unbefriggin believable.
#215 said ( “Current CO2 level is the atmosphere is well past the point where we’re all doomed, and yet here we are with Europe freezing their nuts off.” )
The reason for this is something called the Gulf Stream, scientists refer to it as ‘the Global Conveyor’. When massive amounts of cold fresh water enter the northern parts of the Global Conveyor, this current pattern which brings warm water North to Western Europe; it stops. And when it stops you get massively cold winters in Europe, just like we are seeing now.
Here is a link that explains it all:
http://www.wisegeek.com/what-is-the-global-conveyor-belt.htm
I don’t know if CO2 amounts at the current levels are dangerous or not, but the truth is that our ice caps are melting, and melting fast. Again, I am not sure if that is a bad thing or not. Just make sure you don’t live in Florida, because if the Antarctic ice cap fully melts then in about 300 years all of Florida will be fully under water. Of course, none of us will be around in 300 years time, so again that is not our immediate problem is it? (its our kid’s problems.)
#238 Nostradamus Le Mad Vlad on 03.08.12 at 7:54 pm
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Hello, good evening and welcome to Garth Turner’s Flying Circus.
Today, we continue with our studies on trying to comprehend why men (not all) are slower than a worthless sack of shit.
………………..
I needed that laugh.
#241 TRT on 03.08.12 at 7:58 pm
Why does the gov get involved in Air Canada’s private affairs??? It is a private company isn’t it?
If there is a problem for consumers, allow open skies with the USA. Let foreign carriers pick up and fly between 2 Canadian cities. But no open skies…let the workers and consumers suffer.
…………………
It’s quite evident – this government is against ‘all unions’. And, IMHO, this govt is turning into a ‘fascist’ govt.
Thought I’d share my screensaver photo. I love Meerkats. Watched many docs about them. They are tenacious.
http://captiontime.tumblr.com/post/817474202/meerkat-meerkat-mere-cat-meerkat
With what is happening with our democracy, I can at least smile every time when I see the above screensaver.
Have a question. Can anyone provide a ‘plausible’ link to how much this govt. has spent on ads for their ‘Economic Action Plan’ propaganda. I wake up in the middle of the night many times, turn on the TV , and all I see are ads by this govt for not only the above but multiple other ads promoting themselves. I’m totally disgusted.
I’ll be 65 soon, have always been politically aware, but don’t recall previous govt. ads to this extent. Am I just naive? When I was in my early 20′s I remember meeting & having a great discussion with Brian Stewart in a bar on Crescent St. in Mtl & we chatted on the phone later. I’ve always followed politics. I remember living under the Duplessi era – Dad was thrown into jail for a day or 2 for dissenting. Are we going back to the McCarthy 50′s.?
What is the correct answer, Garth? And how did you arrive at your answer?
We all used different calculations based on various amortizations, terms and rates….arriving at salaries necessary, some ‘before’ and some ‘after’ taxes to arrive at figures from a high of $646,625 to a low of $87,500.
So most of us were off by a country mile and do not know WHAT we were doing…but we ARE curious!