The sure thing

In 1990 banks were charging 15% for a variable-rate mortgage, while five-year home loans were 14%. The real estate market was tanking, as you might expect. The only way many people could sell their houses was to offer buyers a deal on financing.

I mention this for two reasons. First, interest rates will rise again and when they do current home prices will be crushed. Fifteen per cent loans are not in the cards, but it won’t take much to start breaking arms. Look at the serious impact F’s squishing of 30-year loans has had – and that was the equivalent of just a 0.9% rate hike.

Second, there was some discussion on this miserable blog last weekend about VTBs – vendor take-back mortgages – and how they’re a no-brainer way to sell your house, suck cash flow from the borrower, and take virtually no risk. One poster posed this question: “We are selling our home in Richmond Hill. What are the potential benefits and concerns of holding the mortgage?”

That elicited this response from another: “Private lenders are lending to those the banks reject lending to every day and for far better returns than anything Garth has ever suggested here. If the buyer is willing to put x amount of dollars of his own money into the purchase – anywhere from 5 to 10 percent of the purchase price and you can get him to go a 1st mortgage on 70% (with you) and let them find a broker who can arrange a second for the difference, then you move out with 30% of the purchase price in cash in your pocket while holding a 1st mortgage doable at 8.5 -9% – You will be way ahead in the game with a grand monthly income being generated from your Richmond Hill property. More than enough income there to rent a place with for yourself – and with a load of cash to boot with your bulk principle secure.”

So, let’s throw a little light on this subject. A VTB means the seller becomes a lender. Instead of pocketing the sale price of the home, you might receive only the down payment and forgo the principal in return for amortized monthly payments. Yup, just like a bank. But unlike a bank, you can’t get CMHC insurance on a high-ratio VTB (for 80% of more of the sale price), so if the buyer walks, you’re likely screwed (more on this in a moment).

A VTB is a legal obligation, so it has to be properly executed by a lawyer and registered against the deed. This costs money. You also want to ensure the buyer gives you not only a signature on the document, but a personal guarantee. It might also be wise to ask for a child as security.

On first blush, this may look like a good deal. Sell the house. Get 20% in cash. Take back a mortgage and enjoy a monthly payment with a fat interest rate. Get the property back if the dude walks. If you have a house with no mortgage, isn’t this a way of turning it into a cash-flow machine?

Not so fast. Like loaning money to ‘mortgage syndicates’ or ‘mortgage pools’ – both popular these days among people hungry for yield – this is a great way of making money disappear in a real estate correction. There’s a reason VTBs have typically been an instrument of despair – accepted by sellers who absolutely have to get out, and can’t get a buyer any other way. So, taking back a first mortgage is a rare thing. Normally a seller will assist only with the financing gap between what a buyer might have arranged from the bank and what they have as a down payment. That might be 5% or maybe 10% of the sale price, and still there’s huge risk involved, since in the case of non-payment you have no real security.

Does that mean letting someone buy your home with a deposit only, and you holding a mortgage secured against the property, is relatively riskless?

Hardly. First, if you can digest or breathe you can still get a mortgage in Canada, and at prime or less if it’s a variable-rate loan. That suggests anyone incapable of being bank-approved is homeless for a reason, like they have no money, a hideous credit history, or served time for grand larceny. Do you really want a relationship?

Second, if they stop paying it doesn’t mean you change the locks and move back in, keeping the down payment. Legally it’s not your house any more. You don’t own the deed. And the only way of getting it back is to begin power of sale proceedings (or, in some provinces, foreclosure). This means you need a lawyer (who needs a retainer), courts, and time. The guy you ‘sold’ to continues to live in the house, and by making a payment at any time during the long process, can set the legal clock back to zero.

Finally, why would any purchaser agree to pay 9% for a mortgage on your house, or about three times the going rate, if they actually intended on making payments for the entire three- or five-year term? Would you? What if they borrowed the down payment as well as your VTB, intend to live there for a year of non-payments, then depart? Under power-of-sale rules the property has to go on the open market and find a buyer at market prices. If you take less, the dude you sold to – who didn’t pay – can sue you.

Now imagine if we had a real estate correction (which we will), and the property declines to be worth less than the financing you hold. You have no house, no cash flow and (probably) no buyer. Oh yeah, and legal bills.

The moral? Never take advice from a stupid blog.

120 comments ↓

#1 Daisy Mae on 09.30.12 at 8:59 pm

OMG! You’ve got to be kidding? (I’m referring to the picture…) LOL

#2 Grim Reaper/Crypt Speculator on 09.30.12 at 9:03 pm

Fiiirssszzzzttttddttttt

#3 trex on 09.30.12 at 9:03 pm

But WHEN will intrest rates rise?

#4 furst on 09.30.12 at 9:05 pm

FFFFUUUUUUUUURRRRSSSTTTT!!!!!!

#5 NFN_NLN on 09.30.12 at 9:07 pm

When I was in Las Vegas (after the crash) there were a number of people offering Rent-To-Own. They would rent the house to you at an inflated rate and put aside some of the cash each month. If you decide to buy then that becomes the down payment. If you decide not to buy than the forfeit it.

Not sure the legality of that but if you could find someone to take you up on the offer it would negate a good chunk of the problems if they walked away?

#6 DM in C on 09.30.12 at 9:08 pm

Correction — never take advice from the anonymous comment section of a blog.

#7 Curious! on 09.30.12 at 9:08 pm

When is Mississauga going to correct?

#8 GLK on 09.30.12 at 9:18 pm

Thanks Garth for catching up on this one.
I was about to comment on the risks of VTBs while reading comments on your previous post.
As garth said, beware of various quick money making
tricks posted by blog dogs. Always look for professional advise before implementing any financial exotic strategy.

#9 walter safety on 09.30.12 at 9:42 pm

Or the new owners could make 4 0r 5 years payments on the VTB realize it’s never going to happen for them(appreciation) and just sign a quit claim . Minimal costs to the vendor .
Hugely profitable and one way money is made and has been made
in a tight credit(normal)
environment for decades .
I think Garth calls it diversification.

I think Garth calls it diversification.

I think Garth calls it diversification.

#10 anti_gta on 09.30.12 at 9:46 pm

@ #7,

Mississauga has turned into brampton And these two cities have the worst drivers and crime rates. I had to move out of mississauga b/c of everything I just mentioned. Mississauga sucks. Stay far far away.

#11 Seasonal Gays on 09.30.12 at 9:48 pm

VTB (Vendor Take Back) Mortgage = Lease Option = Rent-to-Own

#12 Paulzen on 09.30.12 at 9:50 pm

Things are chugging along in cowtown….newcomers are buying,oil is gaining,unemployment is moving lower.the only properties stuck in th slow grind are the 2M+ homes.Too much money,too little brains in Cow town,economic basics don’t apply.i just got quoted 450$/sq foot (excluding 15% builder fees,10% architectural) for my new build.crazzzzzyyyyy town….

#13 MoneyMyHoney on 09.30.12 at 9:57 pm

I am sorry to disagree. The ‘sovereign’ national of Canada WON’T be able to touch the rate for some time unless and until the US Feds decide to do something about their rates. If Canada was a financial island, yes rate hikes are long overdue. But, the fact is, we are not. So, it ain’t happening any time soon.

If the rates ever go up in this climate, expect a minimum of two things – exports tank further along with an increased borrowing rate (yep, a double whammy). Does that make us any more competitive than what we are today?

Ontario was asked to look at manufacturing for the rich, oil doused Alberta. When the rates go North, what do you think happens to the slimy oil?
As I have said in the past, Carney the Goldman is here to bury Canada (in debt). So, don’t be in a fools paradise. Rates are NOT going to go up any time soon in the foreseeable future. The simple reason being, the rot in the financial system is at epic proposition. There are nations that tried to prune this but soon realized that it is way too dangerous a task. Now they are trying to hold this rotten gigantic tree in place using flimsy poles and hoping it doesn’t collapse altogether.

Canadian rates will rise prior to those in the US. But it’s academic to housing. The correction is on. — Garth

#14 willworkforpickles on 09.30.12 at 9:58 pm

Thanks Garth for going into detail on that one.
I’m not in the position the Richmond Hill owner is in and personally wouldn’t do a vtb there if i was at any rate, but i do hold a first mortgage on a 6 plex paying 9 percent monthly interest and have had no problem from the owner making payments on time to me.

#15 deaconmoss on 09.30.12 at 10:07 pm

Once again, Garth to the rescue of us mortals not so astute in the ways of the real estate game. Good on you! Hopefully all who read this will think twice before making a possibly huge mistake.

#16 Old Man on 09.30.12 at 10:10 pm

The VTB mortgage was invented by two people in the late 1950’s, as both became my close friends during my walk in life in Toronto; it was Gerry Morris, and Morris Pompili, and no guarantee on the spelling, but they taught me so much. They ruled the entire VTB market during the 1970’s in Toronto.

#17 Van guy on 09.30.12 at 10:19 pm

Take advice from a pathetic blog, not a stupid blog.

#18 Hugh Jasz on 09.30.12 at 10:24 pm

One question for the Garth or others:

the interest collected on a VTB – it would taxed as interest income, yes?

It occurs to me that if a VTB scheme actually somehow makes sense, you have two choices to avoid a massive gouge:

-Hold the mortgage in a tax sheltered account

-rather than sell for market price at 4%/8%/whatever, sell for a somewhat higher price and loan the money at zero percent. (The buyer could end up with the same monthly payment for the same duration, while the vendor has “no profit” to be taxed on.)

Anyway, I’m not playing this game.

I’ve laughed away a few second mortgage schemes (scams?) recently on the same grounds. No one with a choice is borrowing money at higher rates than the banks are loaning it.

#19 Dr. WAYNE on 09.30.12 at 10:32 pm

#2 Grim Reaper/Crypt Speculator AND #4 furst …

A pair of a$$holes … attached at the waist.

#20 Pr on 09.30.12 at 10:38 pm

I bet, for the province of Quebec, that between 10-15% sales drop this month compare to the same month last year.

#21 Devore on 09.30.12 at 10:39 pm

Private lenders are lending to those the banks reject lending to every day and for far better returns than anything Garth has ever suggested here.

This is a false premise. There are plenty of places you can put your money that will get you more than what “Garth suggests”. That’s fine, but not something you want to put all your money into.

It’s one of those high risk things that makes you look like a genius as long as it works, but comes crashing down as soon as one little thing comes out of place.

#22 Macrath on 09.30.12 at 10:40 pm

“But WHEN will intrest rates rise?”

As soon as Bernanke, Carney and the rest of the central
bankers run out of digital ink !

#23 Mainlander on 09.30.12 at 10:42 pm

Interest rates don’t have to rise to prove vtb’s are crazy dangerous for both parties. Heaven forbid but what if the property were to skyrocket in value? The vendor would then try and wrestle the property back if it goes up just as hard as the buyer would try and walk away if it goes down.
One thing is certain, markets move in a direction either up or down and the price of real estate will be different in a few years than it is today. There is always a loser in these deals.

#24 Bob Copeland on 09.30.12 at 10:47 pm

With the announcement of unending qe3 in the states, eu and Japan, along with gold being counted at 100% for bank reserves, do you have any change of opinion on holding a % of cash in gold?

No. You should worry about deflation. — Garth

#25 brown on 09.30.12 at 10:50 pm

Thank you for answering my question.

#26 Smoking Man on 09.30.12 at 10:52 pm

MoneyBunnie,

I have to agree with The Gartho on this one. Canadian rates are going higher, and track sixears will use this as a catalyst to bomb more hard earned cashola into the GTA.

Prices will spike big-time, once rates start shooting higher next year.

Mark this in your calendar and put it next to your wheaties, we are going higher on both fronts.

#27 Old Man on 09.30.12 at 10:58 pm

The VTB market is good, but not today, as years ago one would sell a home with a VTB first, and a VTB second mortgage with say 10% down. Both would be taken back at 10% when the market rate was 12%, so I would buy the first mortgage if the loan to value ratio came in at say 65% be it a 3 year or 5 year term, as would discount it to yield 12%. This cannot be done today.

#28 Dave on 09.30.12 at 11:09 pm

The overnight rate in Canada is currently at 1%. Many economists expect this rate to increase over the next several years. However, it will be painfully gradual given the state of our fragile global economy. I would be shocked if the rate reaches a high of 3.5% by the year 2020.

Dave

#29 boston man on 09.30.12 at 11:13 pm

I was involved in tons of VTB mortgages in the early 80’s. You stated it correctly Garth: They are only used in times of desperation. And if you’re desperate to sell, you risk getting hosed by someone who knows the system.

I wouldn’t, for the life of me, EVER recommend selling a home VTB. If you’re desperate to sell, you didn’t properly plan or got in over your head. That’s the simple truth.

#30 THE CELIAC HUSBAND on 09.30.12 at 11:14 pm

Private lenders….after all the banks rejected us, since we were both self employed, we went the private lender route to build on our acreage.

25K up front in fees and 9% they wanted. On a 400K mortgage. And only single digits because we had the land free and clear, higher rates otherwise.

The rest is history as they say. Sold it all, made it small and keeping it all. Living mortgage free makes for a great life. In Europe to boot.

http://theceliachusband.blogspot.fr/2012/03/la-maison.html

#31 Macrath on 09.30.12 at 11:59 pm

“No. You should worry about deflation. — Garth”

Inflation fears? The real concern should be deflation

http://www.theglobeandmail.com/globe-investor/inflation-fears-the-real-concern-should-be-deflation/article4578268/

#32 25Alpha on 10.01.12 at 12:03 am

“The guy you ‘sold’ to continues to live in the house, and by making a payment at any time during the long process, can set the legal clock back to zero.”

“Under power-of-sale rules the property has to go on the open market and find a buyer at market prices. If you take less, the dude you sold to – who didn’t pay – can sue you.”

Ok, seriously, I am sufficiently scared/put off by that path. I need a glass of the Macallan.

#33 Big Al New on 10.01.12 at 12:06 am

#7 Curious! on 09.30.12 at 9:08 pm
“When is Mississauga going to correct?”

Well there’s no fixing that. Ive had the pleasure of driving to Stratford last week in the morning, then Oakville by 2:30 and then back home to the Durham region. I honestly can’t understand why road rage isn’t more prevalent given the traffic situation in the GTA. How, or better yet, why do you people do it? I have friends that see no problem with commuting 120 km a day stuck in 3 hours of traffic for what. Never mind higher interest rates gas at 1.45-50 would kill the housing market faster than a 1/2 point rise in interest rates. If you don’t think that’ll happen anytime soon than you haven’t paid attention, that’s the price last week in Montreal.

#34 Roial1 on 10.01.12 at 12:12 am

David Mirvish will raise the curtain Monday on his latest blockbuster – a soaring three-tower condo development (from the G&M online) OH, LOOK up in thde sky, is that a bird, or a plane, or is that SUPER DEVELOPER?

More is better, RIGHT???????????

#35 Snowboid on 10.01.12 at 12:19 am

#5 NFN_NLN on 09.30.12 at 9:07 pm…

Rent-to-Own? This is showing up in the Okanagan already, here are a couple of examples:

http://www.kelownahomedeals.com/

http://www.RentToOwnKelowna.com

As well a number of RE offering the same deals, such as:

http://kelowna.en.craigslist.ca/reb/3266823340.html

These sellers are in trouble, and in the case of the first site many of the properties have been listed for months now. It looks like you only have a limited time of renting (like 2- 3 years) before you have to walk or buy.

Sounds like a good deal, right? Looking at these sites I have my doubts.

#36 Nostradamus Le Mad Vlad on 10.01.12 at 12:47 am

-
This post has me confused, as it concerns math and vowels, both of which are too complex for me to interpret. I have to go into therapy now.
*
#210 Mr Buyer on 09.30.12 at 8:36 pm — Thanks for the feedback, and good post.

#3 trex — “But WHEN will intrest rates rise?” — When TPTB, in their infinite wisdom decide to ravage and screw sheeple again.
*
5:50 clip Really good business / worker speech, but TED banned it as it was too politically controversial; Nauseating In sickness and in health; Sarkozy As well as ordering the killing of Gadaafi, he also set up and framed DSK; Money Laundering a.k.a. Real Estate; Social Security running on empty;
Chinese PMI contracts again; Oz Evidence in trouble; US and Europe Two slightly different crackpots; John Mauldin and the suicide pool; Fiscal Cliff while Obomba’s lead grows; Frencg austerity; EZone Right / wrong; Spain Secession; Turkey the Tiger.
*
The Arab Spring has resurfaced as the Polish Fall. Curiously, Poland is next to Russia, and the west may be looking for an excuse to go there. Maybe this? Owning the Weather for military use. WMD? UFOs, ghosts and goblins; Water waste This is how TPTB work, taking money from a country and spending it on something stoopid; Nuke leaks all over Switch to thorium; Scientology Different view; Burning The US Constitution and the MEast simultaneously burn; The dis-United Nations; Cannabis Oil Para. is revealing; Libya Interesting date. Govts. spew lies; Traffic Jams? You ain’t seen nuthin’ ’til you’ve seen Golden week in China; Suicide Why vets kill themselves; Genetically Modified Camels Yes, it’s true.
*
disciple — The Pineal Gland, or the Third Eye, and 2:26 clip New golden age coming, but there’s a lotta crap to get thru first. One more — 6:05 clip Mass mind control.

#37 Freedom First on 10.01.12 at 12:48 am

That guy in the photo should learn that you never lead with your chin or your penis, unless you are looking for a severe beating. I don’t bet for money, but if I did, I would bet he is in: mortgage debt, credit card debt, and line of credit debt………right up to his urine.

#38 SCIB on 10.01.12 at 1:01 am

Smoking man is sounding more and more like a realtor every day.

#39 Frank on 10.01.12 at 1:10 am

I have not heard of VTB’s for decades. Why waste a blog post on this?

#40 Mark on 10.01.12 at 1:32 am

Besides, even with one of these vendor mortgage schemes, who would want their $$$ stuck in some low-returning mortgage investment, while the stock market rockets forward?

“Canadian rates will rise prior to those in the US.”

Does the phrase “when hell freezes over” sound familiar?

#41 Jay Currie on 10.01.12 at 2:02 am

In a quite predictable way, the tightening of the rules on conventional mortgages open the door for VTBs in a dropping market. The self-employed (of which there are many) are having a harder time qualifying for conventional bank financing regardless of income. VTB on a serious down payment is an option that many will explore.

Is it a great idea for your 80 year old mum? Er, no. But if you want to sell your deceased 80 year old mum’s house in a lot of markets you have limited options. Cutting price is a good one. But as the melt progresses that is not going to be enough. VTB on a second may make a lot of sense.

Similarly, if you were a genius and bought a condo off plans three years ago and you and the other 100 people who did all want to dump the box, a limited VTB may also make some sense to give you a bit of competitive advantage. (And to get out from under your own cost of ownership issues.)

But, for God’s sake, have a really solid, experienced, done private lending more than once, lawyer backing you up. The paper matters here and understanding how best to ensure you are able to take security in the event of default is critical. Look for someone who has done lots of private lending and check references.

#42 TNT on 10.01.12 at 3:11 am

Another caption-urine trouble-

#43 Onemorething on 10.01.12 at 3:31 am

RE Prices On the way up – rates matter! Especially on overpriced 8-10x income. What do you think caused the bubble.

Conversely, RE Prices On the way down are unstopple even if banks gave us the money for free or paid us to take loans.

The only time to buy RE will be when the bottom comes in and interest rates get to a normal level of 5-6% VRM or 7-8% 5 years with 15-20% down.

Rent invest save wait!

#44 Steven Rowlandson on 10.01.12 at 4:31 am

If you have to pay property tax on real estate then it matters not if the property is fully paid for or not. You don’t really own it. Therefore you should not pay much for anything you don’t or can’t own for real.

#45 Canuck Abroad on 10.01.12 at 5:23 am

“”…if you can digest or breathe you can still get a mortgage in Canada, and at prime or less if it’s a variable-rate loan…”

Garth, I have been away from Canada for 30 years and am self-employed. Are you suggesting I could get a mortgage when I move back if I want to buy? I have been assuming there is no way that will happen and I will have to be a cash buyer. Who on earth would give me a mortgage?

#46 TarSand Beetle on 10.01.12 at 6:08 am

Hiya Garth! I had the privilege of watching you speak in Calgary 2 years ago and have been following for the past 4 years! You should get a nobel peace prize or at the very least a blue participation ribbon.
I’m 28 years, left my hometown of Fort. McMurray and am now back making 160k a year! I pay $500/month in rent and will be for as long as I have childhood friends living here, I own both my vehicles outright and have a $70 phone bill per month. Life is hard. I first wanted to thank you for your great knowledge as you’ve saved me numerous times from pulling the trigger on a home. I have some inquiries and understand you’re busy so I’m ok if this falls on deaf ears. I have $20,500 in a stagnant TFSA and Super-Store does not do investments, I was ready to transfer my funds to a CIBC branch in which they handed me a 300 page binder and literally told me ‘have fun’ pick your own investments. This stuff can be a lot more difficult than you let on Garth and I’m certainly not confident in picking my own stocks for my TFSA, there has got to be another way. Mind you, the young hot banker lady looked like she hadn’t a clue what she was doing. Through the same bank I have 10k (from a previous employer) in an ‘interest-plus’ RRSP which I was told I am never allowed to pull out against my yearly income or transfer until I’m old and gray like you. I also have 20k in a RRSP which I’m allowed to transfer to a big bank and another 30k in savings. On top of that I have a RSP mutual fund plan through work where they match my 6% contribution. So far I’m at $1000 in two months not including my employers contribution.
I was in Phoenix 4 years ago looking at RE in the Queen Creek area when prices were higher and am now looking at re-visiting this. I also want to have stock/bonds/REIT’s and am not sure with what to start with first! The stock market will always be there and I feel my mutual funds contributions are ‘good enough’ which way would you go at my age Garth? I have all the time in the world. Any advice on how to make me into a millionaire with the extra $6000 a month I’ll be getting over the next few years would be greatly appreciated.
Now on to the fun part!
My twin sister bought her house in Timberlea 4 years ago for $520,000 she is also carrying a condo which is located next to the showgirls (I’m sure you’ve been), it’s worth $290,000 and was condemned 2 years ago due to cracks in the foundation (Penhorwood Condominium Association). The building will be demolished next year and I heard on the news today that this issue will be going to the supreme court. She has about 30k payed off on the condo and 35k off on the SFH. Both her and the spouse make a combined income of $420,000 a year working for a big oil company. They are now thinking of selling their current SFH to upgrade to a $750,000 home down the block to increase sq. footage and for a baby that doesn’t even exist. They will most likely be able to sell their current home for around $600,000. She is unable to sell her condo and may eventually be ‘bought out’ before or after the court proceedings. This is an unknown area for me as she has been told nothing about what is involved in recuperating any losses (if any) on this condo.
Has she gone nuts? Or is it truly different here since you’ve stated this in a previous post on Fort. McMurray in the past (like….3 years ago). I’ve noticed a few more ‘for sale’ signs up here and they’re definitely taking months to sell. Some locals are even talking how the market is ‘flooded’ but compared to other cities this is nothing. I feel my sister is a classic example of how someone can get screwed not only by the mortgage lenders at RBC but by the poor analysis of an inspector and workmanship of the condo association. Can you shed some light on her condo situation or simply tell her she’s screwed so she can cut her losses and move on taking care of her imaginary baby? Any information on these topics would be greatly appreciated as you’re literally the only person I trust, that’s scary isn’t it?

#47 John on 10.01.12 at 6:20 am

Moneymyhoney wrote:

Ontario was asked to look at manufacturing for the rich, oil doused Alberta. When the rates go North, what do you think happens to the slimy oil?
As I have said in the past, Carney the Goldman is here to bury Canada (in debt). So, don’t be in a fools paradise. Rates are NOT going to go up any time soon in the foreseeable future. The simple reason being, the rot in the financial system is at epic proposition. There are nations that tried to prune this but soon realized that it is way too dangerous a task. Now they are trying to hold this rotten gigantic tree in place using flimsy poles and hoping it doesn’t collapse altogether.
———

Canadian rates will rise prior to those in the US. But it’s academic to housing. The correction is on. — Garth
———
Here’s someone who actually wrote an excellent post that shows the opposite of brain death (ex: “when are rates going up?”), and the real content-direction of the post was ignored.

But narrow “in the box” shop talk about “Canadian real estate” and “investment” is just fine.

Not everyone is brain atrophied. The challenge remains on the table. Why is a normal 3 bedroom house in Toronto, Ontario, Canada 800,000 dollars? Why did that house double in price? What has been happening in Canada since 2002? Who is Mark Carney? Is Canada’s political and economic system sovereign? What’s going on with the world banking system and how is this tied to “Canadian” real estate?

“Interest rates going up in Canada first….”. Reverse gear. The point itself is academic and hiding from the dynamics of the situation.

Step up.

#48 maxx on 10.01.12 at 6:43 am

Greedy sellers in denial trying to get around the inevitable, huge price drops with a super messy schemie-weemie.

Sorry, won’t work. Hmmmmm, let’s see….double the bank rate on a ridiculously overpriced asset. Anyone buying on that basis is surely not an intellectual high-flyer with great future earnings prospects.

It’s too late anyway. Better slash those prices or risk losing far more in short order.

#49 Pr on 10.01.12 at 6:55 am

Quebec prvince -15% of sales for Septembre. Looks like a good start for the new rules.

#50 pencil on 10.01.12 at 7:05 am

I hope this is accurate, but this is my understanding – “Rent to own” involves a non refundable deposit and then a market rate rent, and then a sum that is on top of the rent that also forms part of the down payment.

For example –
$10,000 deposit plus $24,000 ($1000 x 24months) = $34,000 down payment

Also lets say the house rents for $1500 a month that has to be paid every month.

The seller has taken his house off the market and will not really be selling for 2 years at which point the buyer hopes to have a sufficient down payment to qualify for a bank mortgage – hence the deposit being non-refundable if the buyer walks. In the mean time, during the 24 month period if the market goes up, the seller is not happy, if the market goes down the buyer is not happy. Maybe the house gets trashed.

Rent to own just sounds good, but does not really work for both sides because of the time involved and most buyers can’t come up with the deposit, rent plus a monthly amount to apply to the down payment.
On the seller’s side you just delayed your sale for a at least a few months or a few years and made it complicated. Rent to own means both sides have to be in trouble before they begin or they wouldn’t have to consider it in the first place.

#51 T.O. Bubble Boy on 10.01.12 at 7:12 am

So, if the VTB mortgage is only for desparate sellers, what does it say that Daniels started offering “rent to own” on its condo development last year???

http://urbantoronto.ca/news/2011/08/daniels-offers-exciting-rent-own-opportunity-ny-place-boutique-condos

#52 kenken on 10.01.12 at 7:20 am

Should there be a more than mild correction, F will reduce interest rates (he has some margin vs the US) + he will backtract on the term reductions! mark my words… he will still manipulate this!!

BoC rates will not decline. — Garth

#53 Ralph Cramdown on 10.01.12 at 7:31 am

I have been away from Canada for 30 years and am self-employed. [...] Who on earth would give me a mortgage?

Scotiabank, according to a poster I saw at a branch just last week. They’re richer than you think.

#54 Ex-Edmonton Mortgage Broker on 10.01.12 at 8:35 am

private lenders in toronto should be losing sleep knowing how much exposure they have now the markets have turned. I did alot of private 2nds and even some 3rds there back in the day and no borrower who isn’t desperate would agree to the 12-18% interest plus 2-5% fees i would charge. there’s a reason (besides greed) why private lenders charge such rates. the risk of default is high. any toronto lender who’s been lending recently at 85LTV is probably developing an ulcer right now.

same thing happened in Edmonton in 2008. many private lenders burned when the market turned and borrowers simply stopped paying and walked. the banks in 1st position were lucky to get their outstanding loan paid in full in such a situation. the sorry sob in 2nd position gets squat.

those morons at REIN were convincing their members to invest their self directed RRSPs in private 2nds loaned other members at a LTV of up to 100%!!!

I tend to believe even those so called sophisticated real estate experts had no idea what kind of risk they were exposing themselves to. when a conservative private lender can get burned on even a 75LTV 2nd, where do you think that leaves the “sophisticated” REIN member who lent at 100%?

#55 Smoking Man on 10.01.12 at 9:05 am

70 precent destruction in new home sales volumn and No MSM reports since the release of that info.

The machine over shot, when we do see reports in MSM. It will be blowing sunshine on the market.

Bubble Head vs Machine.

Machine will always win

#56 The real Kip on 10.01.12 at 9:12 am

Interest rates are going nowhere.

#57 Grim Reaper/Crypt Speculator on 10.01.12 at 10:23 am

#2 Grim Reaper/Crypt Speculator on 09.30.12 at 9:03 pm

Fiiirssszzzzttttddttttt
===============================

This first contest is rigged

#58 Mixed Bag on 10.01.12 at 10:31 am

Garth, thanks for this teaching. Although I’d never get into such a risky relationship with strangers, this is good to know.

#59 Ex Realtor on 10.01.12 at 10:44 am

I sold a number of properties on vendor take backs in the late 80’s and early 90’s in outlying areas where the banks would only go 50% on a loan. The vendors usually didn’t owe much on the property or owned it outright. Rates were high and land was cheap. The buyers made out really well in the long run.

This time vendors without much debt could make out well, getting more than they would otherwise. Headache if they have to foreclose? Yes, but if they hold a second, the process is much easier. They have the right to buy out the first mtg, also in BC the title
stays in their name until it’s paid off.

#60 renters rule on 10.01.12 at 10:47 am

Well, the G&M does it again — look at this drivel they have posted/printed and attributed to Robert McLister – Special to the Globe…. the dude is a mortgage broker and is the co-editor of Canadian Mortgage Trends.com

http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/what-if-mortgages-were-more-expensive-and-less-accessible/article4573255/

What is going on at the G&M these days anyways? They are a train wreck of mistakes, etc these days?!

#61 Smoking Man on 10.01.12 at 10:49 am

#52.
Boc rates will not decline – Garth
………………………………….

Strongly Disagree. – SM

#62 Jim Lahey, Sunnyvale Trailer Park Supervisor on 10.01.12 at 10:52 am

#4 Fuuuurst

Welcome back cowboy!! The blog has not been the same without your Griffin Poetry Prize winning poems! The Sunnyvale gang and the rest of the blog dogs await another gem Fuuurst. You must be recharged and ready to pen some more award winning poems. Let us have another gem Fuuurst and many thanks in advance from everyone in Sunnyvale. Ricky has some of this year’s bumper weed crop set aside for you during your stay at the SASTPGFBDCParty. You will have a grand time!

#63 In Garth Almighty not God we Trust on 10.01.12 at 10:57 am

“The moral? Never take advice from a stupid blog.”

Wiser words were never spoken by the bearded mystic oracle, all knowing, all wise, soothsayer without equal, financial tea leaf reader extraordinaire, former MINISTER OF ALL REVENUES IN CANADA, fierce denouncer of parliamentarian peckerheads and peckerettes, Harley riding contrarian badass, Amazon bathed and protected, crystal ball gazer without equal,
lone voice of reason crying out in the HELOC infested wasteland of Canada and last but not least, all round jolly good fellow!

#64 Alero01 on 10.01.12 at 11:00 am

Thank you for this post, Garth. This is the best explanation of a VTB that I have ever read. I now have a better understanding of when and why these kinds of mortgages are used.

#65 John on 10.01.12 at 11:42 am

MoneyBunnie,

I have to agree with The Gartho on this one. Canadian rates are going higher, and track sixears will use this as a catalyst to bomb more hard earned cashola into the GTA.

Prices will spike big-time, once rates start shooting higher next year.

Mark this in your calendar and put it next to your wheaties, we are going higher on both fronts.
——-

Removing “math and vowels” out of it, Smoking Man’s idea doesn’t mean much longer term (3-7 years). The machine can’t manage a first world descending into third world ( class struggle) without the “machine” showing it’s teeth.

Where are the new players for the system? Out there “saving money”?

Climbing from floor 47 to floor 51 to jump doesn’t change things much.

#66 AprilNewwest on 10.01.12 at 11:45 am

#34…. and where in the world is this tower? It is so annoying when people don’t reveal the area their referring to.

#67 AprilNewwest on 10.01.12 at 11:55 am

#52- Why were all the other countries unable to stop their RE decline. We’re no different.

#68 Bernie Madoff on 10.01.12 at 12:14 pm

One more caveat in the mortgage racket and that is mortgage fraud. This is one of the leading causes of lawyer disbarrment. Lawyers draw up fraudulent mortgage deeds to unsuspecting clients and then use these funds to finance some unscrupulous activity. “Caveat emmptor” blog dogs!

#69 Hawk on 10.01.12 at 12:14 pm

#31 Macrath on 09.30.12 at 11:59 pm

Deflation is definitely a possibility in high priced assets, (housing, cars, boats, cottages etc) but not essential items.

World population & population in N. America is growing regardless of income, and people cannot eat less food or use much less energy then they are currently using. What they can do is have less expensive transport, housing & vacations.

Also, unless there are massive job loss, deflation effects will be limited and temporary, you need Spanish and Greek levels of unemployment before you start coming close to deflation.

#70 jess on 10.01.12 at 12:42 pm

to know what isn’t

12 years and still going ?
about $1.6-billion in debts – 1992 collapse of Montreal-based Castor, a private real estate investment bank.

#71 Form Man on 10.01.12 at 12:58 pm

#216 Hawk yesterday

I would rather not have the either the NDP or the Conservatives. Both ideologies are proven duds. Give me another Chretien/Martin government anyday ( I realize this won’t happen, but one can always dream).

Imagine that, administrations that balance the budget, and make decisions based on common sense and facts.
I know, its a crazy concept……..

#72 Smoking Man on 10.01.12 at 1:06 pm

Just in at 12:40 from bloombereg.

Bernake to keep rates low even after economy pick up.

Translation))))). lets inflate the debt away.

If F and C don’t follow welcome to a 125 cdn dollar and a massive export short fall.

This whole eng machine talk down of the re market was cause F and C knew they would need to slash rates going forward.

Appart from my bad spelling and loonacy I’m always right when comes to this sort of thing.

Bet accordingly

#73 Frank le Skank on 10.01.12 at 1:10 pm

#61 Smoking Man on 10.01.12 at 10:49 am
Why would you suggest that BoC rates will decline if you believe that RE prices is going to continue its ascent to infinity? Why will BoC lower rates?

#74 GregW, Oakville on 10.01.12 at 1:32 pm

Hi #36 Nostra, FYI, My dad sent me this link to a YouTube 5-1/2min, about ‘USA budget’.
If true, it doesn’t sound very good. And least we forget the H&F growing Canadian Federal det.!
The Accountant guy in the video didn’t mention the option to trim back military expenditures though. Didn’t that Roman empire run into money issues, and some other issue too?
And President Eisenhower also warned us about the military industrial complex just before leaving office, but he scratched out including congress at the last minute.
‘A Budget that can’t be balanced!”
http://www.youtube-nocookie.com/embed/EW5IdwltaAc?rel=0

#75 45north on 10.01.12 at 1:37 pm

renters rule: look at this drivel they have printed and attributed to Robert McLister

well I believe that McLister did in fact write it, I think that the article provides good insight based on his years of experience.

McLister’s comment on small and rural markets: Most lenders don’t like lending in small or rural markets where it’s hard to resell a repossessed home. Insured financing from CMHC encourages lenders to take that risk. Without it, more people would have to buy closer to urban areas, harming rural Canada and driving up urban home values.

His comments support my idea that even though prices went up and are now going down, the decline will not be symmetrical.

#76 zeman1 on 10.01.12 at 1:41 pm

Garth, just back from 2 weeks in Europe and all the big media are crapping themselves. It seems they’re preparing the populations that has had everything given to them for 70 years that austerity is going to happen and they better get used to it.

European economies are officially in contraction and people are scared.

We’ll see what happens after November when the US media is actually allowed to talk about the economy, but my guess is stagnation as a best hope, and possible contraction as well.

Isn’t the whole system screwed when people realize this and stocks are only doing OK because of fresh announcements of massive government money printing?

It’s almost like real economic activity is irrelevant in our new age.

#77 Ralph Cramdown on 10.01.12 at 1:46 pm

those morons at REIN were convincing their members to invest their self directed RRSPs in private 2nds loaned other members

Yeah, I googled VTBs the other night and, on some REIN page was explained that one of the advantages for the holder was a rate a few percent above government bonds! Genius, I tell ya!

#78 Timbo on 10.01.12 at 1:48 pm

#69 Hawk

you forgot about debt burden.

Taking on more debt without wage growth cannot last with trading partners who’s wages are falling. The US is suffering wage deflation and is devaluing their dollar to support prices. This is the only thing holding up oil and commodity prices.

#79 eagle eyes on 10.01.12 at 1:54 pm

#69 Hawk

Your deflation of asset/inflation of expenses is making sense.

In my neck of the woods, HAMville of Richmond BC, nothing is selling. Yes, you have the odd (very odd) loose HAM buying a house here and there. But overall prices are deflating fast. Listings galore, prices reductions, but no sales.

I hear of some HAM complaining about the cost of living here, and moving back to Asia where everyday life is cheaper and more familiar. They said that the prices at McDonalds in Asia is half of what it is here. Groceries are fresher and much cheaper.

If HAM is complaining about cost of living, how are the rest of us 99% supposed to survive?

#80 Buy? Curious? on 10.01.12 at 1:58 pm

Only 69 comments so far? What’s going on, Garth? Is there a convention going on that I didn’t know about?

Anywho, here’s a nice little article from the Huffington Post detailing what being underwater with your mortgage feels like. Enjoy it, my sheltered little Canadians, enjoy.

http://www.huffingtonpost.com/2012/10/01/eminent-domain-mortgages_n_1917391.html

#81 tkid on 10.01.12 at 2:01 pm

Article references inflation fears during the 1930s deflationary period:

http://ftalphaville.ft.com/blog/2012/09/24/1173781/a-time-of-hoarding-and-inflation-fears-1930s-edition/

#82 AprilNewwest on 10.01.12 at 2:04 pm

#31 Macrath – Asset deflation and goods inflation repeated many times here. Home values depreciate but food and energy prices increase

#83 kothar on 10.01.12 at 2:05 pm

I read this post 3 times and am still completely lost.

#84 NewWorldPartyDotOrg on 10.01.12 at 2:07 pm

Globe and Mail has this article today:

What if mortgages were more expensive and less accessible?
http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/what-if-mortgages-were-more-expensive-and-less-accessible/article4573255/

According to this analysis:

http://www.newworldparty.org/2008/10/ban-all-mortgages.html

Banning mortgages altogether, can make housing cheaper and fairer for first-time buyers in the long run.

#85 disciple on 10.01.12 at 2:15 pm

New home development in Etobicoke on Saturday northeast of 401 and 427 was packed. Line up was almost onto the busy major thoroughfare… the madness continues…

#86 Macrath on 10.01.12 at 2:26 pm

#69 Hawk
“Deflation is definitely a possibility in high priced assets, (housing, cars, boats, cottages etc) but not essential items.”

I think that sums up Garth`s appraisal of the situation.

Fuel, food, and other essential commodities up. Probably due to demand and a US printing press running on over drive ,causing a lot of global stress and rioting.
Part-time no benefit jobs and structural unemployment
(computer robotics and office automation) doesn’t bode well for over priced particle board and old decaying bricks especially when the free money taps are closing rapidly.

My concern is whether the markets will hold their current valuations and keep paying their dividends.
I`m too old and in no mood for a financial haircut.

Garth Turner says Yes and Daniel Park says No.

#87 Devore on 10.01.12 at 2:31 pm

#50 pencil

Rent to own just sounds good, but does not really work for both sides because of the time involved and most buyers can’t come up with the deposit, rent plus a monthly amount to apply to the down payment.

I just don’t see how rent-to-own makes any sense for EITHER party.

Lets look at the “buyer” in a 2 year rent-to-own scenario.

They can’t buy a house today, because they don’t qualify. Their option normally would be to rent for 2 years while saving up money and building their downpayment. If in 2 years prices are up, they locked in a lower price 2 years ago. Great! But the seller may have something to say about that. Could be legal trouble. If prices go down, the buyer will walk from the contract if the drop exceeds what they put in. Meanwhile, their deposit and the money on top of rent is earning no interest, and is completely illiquid. I see little upside in this arrangement for the buyer. Why not just rent normally, put money away, then re-evaluate in 2 years?

Now for the “seller”.

This guy is basically short-selling his house. He hopes the price falls, so that the buyer will pay him today’s higher price in 2 years, while collecting rent and 10s of thousands of dollars in interest-free deposits from the buyer that are held in escrow (sure they are). But he hopes the price does not drop too much, because then the buyer will walk away. If the price goes up, he would have been better off holding on to the house and renting it the normal way.

Both parties are taking on a lot of risk for a long time, for not that much reward. At the end of the day, I think this is clearly a better deal for the seller than the buyer (but really not that good for either of them). So much so, that you have to wonder about the intentions and nature of the buyer.

There is a reason rent-to-own places are scummy money-makers. You know, the ones with furnishings and electronics and appliances. Usually next to the money mart. People who go there end up paying 3 times the price over the life of the contract, vs had they bought normally, or financed like everyone else. Except they a) have no money b) have no credit c) have no math skills. That’s your target market.

They work, because, like credit card companies, they are very diversified in the number of customers they have. Simple stats. Some will screw them over. But most will not, and they pay the bills. Our home owner, on the other hand, is not diversified. He has only the one customer. It’s all or nothing. If the buyer is dumb and continues to pay the usually-above-market rent, PLUS the monthly, and then goes through with the purchase, you can make out like a bandit. But if he’s shifty, you’ll lose a whole bunch of money, and all you can do for 2 years is sit back and watch it unfold, as you’re locked into the contract. That’s a really long time to wait on that dice roll.

#88 disciple on 10.01.12 at 2:34 pm

They are describing Spain’s young adult demographic as the Lost Generation with 1 in 2 unemployed in a country in which 1 in 4 are unemployed and escaping to places like Canada. Countless youngsters were goaded into a plan to lustfully forgo training in the professions, just to get a slice of the illusory pie. Politicians and leaders in Spain like Rajoy (who is actually John Cleese) joined in the promotion of construction and housing, and when it collapsed, left in ruins the future of this nation.

These criminals have targeted Canada next for this type of develeraging, asset deflation, and theft of the middle class. There is no other explanation. Science wins.

#89 truth hammer on 10.01.12 at 2:34 pm

You’re right…the VTB is a mugs game…….especially in Canada where the foreclosure process can take several years and get very expensive. As you say a buyer can simply stop paying….and there’s nothing you can do.

On a lighter note…isn’t it nice to see proud Canadians who have done something positive for their community get GG seats instead of the Liberal practice of appointing CBC bobble head hacks as reward for spewing hatred against the liberals opponents.

http://www.vancouversun.com/news/metro/Nicola+Valley+rancher+Judy+Guichon+named+29th+lieutenant/7325645/story.html

The country may be slowing coming around.

#90 disciple on 10.01.12 at 2:39 pm

The pain is already being felt by overstretched families in the GTA. Even single people living alone or the 75% still living at home. Lawyers feeding off of the mortgage monster industry, previously making six figures already looking for extra income outside of their vocation, surely that is a clear signal the market has turned…

#91 TRT on 10.01.12 at 2:40 pm

Regarding Fraser valley/Vancouver, what if MOI (Months of Inventory) starts declining next month?

Will that push the correction into the spring months? An what if the spring market is strong due to gov interference?

Predictions have to have a timeline!

#92 Canadian Watchdog on 10.01.12 at 3:06 pm

Google Search Terms: Canada Small Business

#93 Devore on 10.01.12 at 3:16 pm

#72 Smoking Man

Bernake to keep rates low even after economy pick up.

Translation))))). lets inflate the debt away.

When risk-free money returns less than the rate of inflation, you are in hard core deflation mode. No one’s inflating anything away. Please explain how debt is being inflated away, preferably without referring to trains or tracks or bobble heads. The only debt going away is the one being written off, the opposite of inflation.

#94 Smoking Man on 10.01.12 at 3:20 pm

#73. Frank le shank

Read the post above yours for the answer.
#72

#95 Tom from Mississauga on 10.01.12 at 3:22 pm

The Globe finally enters into Canada’s CMHC debt ceiling debate.

http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/what-if-mortgages-were-more-expensive-and-less-accessible/article4573255/

#96 Tom from Mississauga on 10.01.12 at 3:24 pm

#7Curious! on 09.30.12 at 9:08 pm
When is Mississauga going to correct?

You obviously haven’t been paying attention.

#97 Drew on 10.01.12 at 3:33 pm

If the government really wanted to help with financing the current housing market. Then they would push towards insuring mortgages that were no more then ~4 times the applicants verified income. The market would normalize in no time, and those who need to get out of housing would have a quick chance to appease the current set of buyers.

In the mean time the renting seems so much better. I got so much spare income my friends sometimes wonder if im a baller.

Lol! Low expenses, nearly no debt, and an aggressive saving plan. Life is good. I just need to figure out how to properly invest the money l’m saving ( 10K / year ). I hope Garth has some pointers during his Toronto talk.

#98 Humpty Dumpty on 10.01.12 at 3:47 pm

Shouldn’t the pic be reversed G…

It appears “we the people” are about to get more that just wet…

Model Legislation seems to sweeping NA….

Canada-EU Free Trade Agreement: Harper Government deceiving Canadians about CETA’s effects on public services, regulation and local democracy, says new report

http://canadians.org/media/trade/2012/17-Jul-12.html

http://www.democracynow.org/2012/9/27/the_united_states_of_alec_bill

#99 Old Man on 10.01.12 at 3:55 pm

#80 Buy? Curious? – Garth has a hidden sense of humour that originates from his studies of English literature, and often stops his comments at 69, and have no idea what this means. I sure he was influenced with a course called the Canterbury Tales, as I took it, and was corrupted forever.

#100 gladiator on 10.01.12 at 4:17 pm

@92 Canadian Watchdog:

Tip-o’the-hat to you! Your posts are a must read for me and I immensely appreciate your work (the best BS repellent for MSM propaganda).

That link totally flattened me. Looks like small business in Canada is just dying off… Troubling, I say.

#101 Investx on 10.01.12 at 4:38 pm

Canadian rates will rise prior to those in the US. But it’s academic to housing. The correction is on. — Garth
——————————————————————-

Are you sure, Garth? You had thought rates would be well on their way up by now. Why couldn’t US rates go up first?

Low US rates are to encourage borrowing. We have the opposite problem. — Garth

#102 Old Man on 10.01.12 at 4:42 pm

#100 gladiator – small business is not dying off, as it is all a matter of supply and demand in the marketplace. I hooked up with a woman years ago with an idea that needed funding to address the demographic shift in society in regards to home cleaning. So supplied the capital for her business in exchange for a 10% royality on her gross income. She has steady clients; a work crew; vans; and she is netting 100K per year. She saw an opportunity well in advance, and sold me for seed money.

#103 Smoking Man on 10.01.12 at 4:43 pm

#93 Devore

Sorry but I need to use a sixer here.

When central banks talk inflation the track 6ers think its when price of eggs and mill go up.

Inflation is a trick word, track 5ers know it a different way.

Carney likes to use The out put gap.

Bottom line is when wagges go up that’s inflation to them. For the 30 years they have keeped the beast higher wages in check. They went to far. So when I say inflate the dept away I’m saying the policeys they are invoking will stimulate job growth then labour shortage that wege inflation.

Its cyrstil clear in my mind

#104 Old Man on 10.01.12 at 5:09 pm

#96 Tom From Mississauga – I know this area like the back of my hand, and see things correcting now, and in the future might become a good buy, as my focus starts at Port Credit, going north, east, and west. The area to the north around City Centre has it all which includes a GO bus to the Go train; shopping; and some elements that might become attractive to a young couple for a buy in a few years for a huge discount in capital purchase, as compared to the core in TO – time will tell!

#105 Brad in Calgary on 10.01.12 at 6:00 pm

Sure Garth, the correction is well underway.
In some places. But I think you owe Calgarians an apology.

We warned you Calgary shouldn’t be included in your “one size fits all” predictive approach and you mocked us instead of listening to our logic.

http://www.calgaryherald.com/business/real-estate/September+sales+prices+Calgary+resale+housing+market/7324577/story.html

What logic? — Garth

#106 Dom on 10.01.12 at 6:34 pm

Realtor smokingman you look worried with your non-stop uneducated comments. Here one for you smokingman . The machine is now crashing the Canadian housing market as jobs go back to the US . Did you think the US would allow Canada to not suffer financial pain? The US corrected the housing bubble and now jobs are flooding back to the US which are being lost in Canada since Canadian workers can not compete with $15 hr US wages and $150K home prices. The housing ponzi in Canada is starting to fall hard. Sorry realtor smokingman.

#107 Smoking Man on 10.01.12 at 6:59 pm

Hilarious, Nothing, nada, zippo. zilch. Ba hahahahaha

MIA Negative Real Estate Stories in MSM

Go get em LaughingCon
Its going to be a nasty crash Realtor s a nasty crash

#108 TurnerNation on 10.01.12 at 7:22 pm

Famed architect Frank Gehry was in Toronto this morning to tell reporters more about the massive high-rise complex he and David Mirvish are trying to bring to King Street West.

Behind a lectern at the Art Gallery of Ontario, Gehry described his plans for the three-tower, 80- to 85-storey complex. If completed as described, the new buildings would occupy an entire block north of King Street West, including the current location of the Mirvish-owned Princess of Wales Theatre, which would be demolished. The plan will need to go through a lengthy approval process with the City before it can proceed.

http://torontoist.com/2012/10/frank-gehry-talks-about-his-plans-for-king-street-west/#more-200949

#109 TRT on 10.01.12 at 7:27 pm

For a correction to occur, there needs to be a causative event. Status quo just means more and more people packing Canadian cities (Unlike Japanese cities where the population is declining!!), rents rising, inflation slowly eroding debt, etc…

1) Significantly higher interest rates and I’m not talking about 0.25% or 0.50%. Affording the monthly payment is the biggest factor people think of when deciding whether to buy.

So, best variable at approx 4.5% (today 2.3%) and best fixed at approx 5% (today 2.98%) would initiate that. The question is when will rates ever go that high and would it be in the gov’s best interest?

2) An unexpected global shock causing major job losses. Ask Garth the chances of this.

No event is required. — Garth

#110 Old Man on 10.01.12 at 7:38 pm

Knew Ed Mirvish personally, and was a great man with a kind heart and an open mind who understood it all, and his son David is nuts to even attempt this project.

#111 Smoking Man on 10.01.12 at 8:31 pm

#110 Old Man on 10.01.12 at 7:38 pm

Agreed.

#112 Smoking Man on 10.01.12 at 8:33 pm

#106 Dom on 10.01.12 at 6:34 pm

Why to go Dom you motivated one of my epic major posts, stay tuned to this bat channel, I dedicate it to you.

#113 Grim Reaper/Crypt Speculator on 10.01.12 at 8:34 pm

#19 Dr. WAYNE on 09.30.12 at 10:32 pm

#2 Grim Reaper/Crypt Speculator AND #4 furst …

A pair of a$$holes … attached at the waist.
=====================================

Hey Doc…..do you charge Medicare for self examinations ?

http://www.ebaumsworld.com/pictures/view/58073/

#114 Daisy Mae on 10.01.12 at 8:51 pm

#105 Brad in Calgary: “We warned you Calgary shouldn’t be included in your “one size fits all” predictive approach…”

***********************

Do you REALLY believe Calgary is ‘different’?

#115 Hawk on 10.01.12 at 8:54 pm

#71 Form Man on 10.01.12 at 12:58 pm

Agreed, I believe that the people need to come to their senses and cut government massively or else one day we’ll be Greece. But it’s hard to vote out unscrupulous politicians.

#116 Hawk on 10.01.12 at 8:58 pm

#79 eagle eyes on 10.01.12 at 1:54 pm

Yes Eagle Eyes, I agree. You would think that in the world’s second largest country, with some of the most fertile land in the world and natural resources, food and energy would be cheap here.

The fact that it isn’t speaks volumes for our government.

#117 Peter on 10.01.12 at 9:02 pm

amazing how so many people went to a new opening this weekend. plenty of fools in woodbridge, unreal.

#118 Herb on 10.01.12 at 9:25 pm

#107 Smoked Man,

man, you are dense!

Newspapers don’t report news anymore, they support advertisers. It’s advertising that makes the bottom line, not subscriptions. Subscriptions mainly serve to justify advertising rates (the more readers, the higher the rates.)

Now go check how much FIRE advertising is carried by your newspapers and wonder no more. And since the rest of the MSM is owned by the same corporations that own the papers, don’t expect any part of the MSM to gainsay another.

#119 Herb on 10.01.12 at 9:37 pm

#89 Truth Hammerer,

couldn’t you be obnoxious without being so g.d. dumb? How many Lieutenant-Governors in 10 provinces have come from the ranks of the CBC? Name one, paleeze.

#120 spaceman on 10.02.12 at 1:00 pm

1980, I was a young buck, just havin fun, but an older aquantance bought a log cabin at the 108 mile ranch.

1982, House plummets in value, (40%) and the mortgage payment is almost double. Lawyer advised him to live in the house for free, make a minimal payment to tie up the proceedings. Use the forclosure notices for bum wipe, and wait. I year pass’s until the Sherrif is at his door with the eviction notice. His bags were already packed, furniture sold, house empty.

He lost his down payment, and a bit on the first year of payments, but lived for free in his own house for one full year. If you were the bank, you could be screwed.

The house sat empty for over a year, until it finally sold for 2/3 of the original price.