Too big to bail

Should the government save the butts of people in Vancouver about to see the value of their homes plunge by a third or more? Should emergency measures be put in place to ensure this correction doesn’t cream an economy grown fat on real estate profits? Is there a responsibility to protect folks from the kind of equity plunge which eviscerated the US middle class? Don’t owners living in million-dollar houses with all their net worth deserve to be bailed out so their retirements are not spent dumpster-diving?

Those were the questions a BC business magazine writer fired at me some hours ago. And he was serious. Even told me the schemes he’d heard business and government leaders are kicking around, now that they’ve learned it isn’t different there.

So I reflected briefly before I answered, because I don’t wish to be a hypocrite. There was a time when I actually advocated for government protection of the middle class during a real estate crisis. Are there any parallels?

It was thirty years ago, in 1981, and I looked like this: 

Back then inflation was outta control and the Bank of Canada decided to squeeze the economy like a bloated Shamwow. Up went interest rates to unheard-of levels, and in the early 80s the five-year mortgage rate touched 21.75%. People renewing their home loans (five years earlier a mortgage had been 7%) were being crushed by payments 300% higher. Default rates spiked and the market collapsed.

I was a crusading, contrarian, pain-in-the-ass, arrogant, iconoclastic and vaguely pathetic daily newspaper editor and columnist at the time. I rallied my readers, rounded up 40 or 50 highway coaches and landed a few thousand people on Parliament Hill, where we stomped and flummoxed. In a few hours the government emerged and declared a moratorium on mortgage foreclosures.

So there, I admit it. I lobbied the feds on behalf of homeowners. Why would it be any different now?

After a nano-second of reflection it was clear that everything’s different, and nobody invested to their clavicles in real estate deserves any special treatment. After all, it was only four years ago the economy had a near-death experience, with stock markets crashing, jobs evaporating, houses plunging, with the spectre of systemic financial collapse. If there was ever a lesson in what debt and dumb can do, that was it. We watched the US economy implode as its housing market collapsed.

Of course, your friends, your parents, that idiot BIL and all the girls at work learned nothing. Mortgage rates spiraled lower and the greatest housing orgy in Canadian history began. Forty-eight months later we have more debt and higher home prices than Americans ever did. Saving and investing is out, Miele and Aga are in. Kids brag about how much mortgage they carry and wrinkly Boomers wheeze around their new trophy houses.

There’s no state-imposed regimen of 20% mortgages and scant credit. Instead, money is the cheapest and most plentiful in history. People routinely buy houses with 95% financing, and the government protects their lenders. It’s suddenly a disaster when mortgage pay-back times drop from 30 years to twenty-five, or banks no longer give away free down payments. Ottawa passed around crack cocaine, and now we’re all wasted. How is this supposed to end well?

Such things swirled in my mind as I listened to the reporter itemize the proposed ‘emergency actions’ he heard are being contemplated by government officials. There were three. First, a special fund which homeowners could draw upon to make mortgage payments if a real estate correction impacted their employment. Second, the ability to write mortgage interest off income tax, as is the case in the US (where houses cost a quarter what they do in Vancouver). Third, a ban on anyone losing their home for non-payment of a mortgage.

Won’t work, I said. Governments cannot afford the billions to keep Vancouver mortgages current, or allow everyone to turn their mortgages into tax deductions. Nor should they even try. If prices correct by 20% or even 40%, there’s never been a more well-deserved financial haircut. Speculation, greed, house lust and profligacy have turned shelter into a commodity, bestowed windfall profits upon the undeserving and created a new tenant class. This is self-inflicted risk, an HGTV-imbued delusion leading us down the same sorry-ass path Americans trod. We’re not special. Or different. Just whacked.

But you know what? It might happen. Once this mess starts to creep you can be sure a demagogue or two will emerge.

Let’s hope some rebels do, too.

292 comments ↓

#1 Randy on 10.01.12 at 9:21 pm

It’s a safe bet that FAT cat can’t see his unit below his belly !!!

#2 gladiator on 10.01.12 at 9:24 pm

Garfield exists!!!!

#3 waiting on 10.01.12 at 9:24 pm

my sister-in-law continually renegotiated her U.S. mortgage over the years and lived off the increasing debt. She was one of the lucky ones to get bailed out and have her mortgage reduced by 150k and then continued to rack up more debt … It was free money and she was laughing all the way to the bank …

#4 Bottoms_Up on 10.01.12 at 9:26 pm

They had colour pictures back then? ; )

#5 Oranje Boven on 10.01.12 at 9:26 pm

Eerste. Geen big deal!

#6 prairie gal on 10.01.12 at 9:27 pm

Sweetie, 1973 was almost 40 years ago.

Holy crap! I’m in good shape. (I meant the 1980s) — Garth

#7 Djb on 10.01.12 at 9:27 pm

I want my cake and eat it too…..

#8 NoOneOfConsequence on 10.01.12 at 9:27 pm

I agree…grudgingly.

I don’t know if it’s fair that the banks, government, mortgage brokers and real estate cartels get to profit from their blatant misleading of the horny ones.

If you look at the stream of information that these groups have been spewing over the last 7 years…it’s pretty clear that they are a big part of the cause.

As usual…the unwary are swept away whilst the perpetrators profit.

It’s not right. Higher authorities should be held accountable too.

#9 T.O. Bubble Boy on 10.01.12 at 9:27 pm

What does it say if leaders are already debating bailouts of homeowners? What about the balanced markets and soft landings? What about the “deflating balloon” that won’t pop like other bubbles?

If Flaherty killed Income Trusts without any bailouts why would this be different?

The Canadian Taxpayer already insures nearly $600 billion in mortgages via CMHC, and gave away hundreds of millions in home Reno tax credits.

Let’s put some money into growing companies, not condo towers.

#10 Tim on 10.01.12 at 9:28 pm

Anyone who buys a house with less than 20 percent down doesn’t deserve to be bailed out, especially after most people have been told repeatedly since 2008 that the market is overvalued and cannot go up forever. If we bail these clowns out, then we should also share in the money people made off real estate, and of course that will never happen.

#11 Old Man on 10.01.12 at 9:30 pm

Garth cool down as our Caesar will have the solution to all the woes in the coming years LOL.

#12 Over here on 10.01.12 at 9:30 pm

Great post. Hardly anyone is worrying about this. Looks like a pile is coming and I don’t want to be around to the the end. Sell now, rent now… same thing.

and I think I’m firrrrrst.

#13 LH on 10.01.12 at 9:33 pm

http://www.torontomls.net/PublicWeb/CL.asp?link_no=45554918.175000

http://www.torontomls.net/PublicWeb/CL_CF.asp?link_no=45519736.175000&t=l&fm=F

660 Dundas says it all, 484k for less than 13 ft
and how about 506 1/2 Clinton St , 981k and not even a whole street number

Mr. Market has dumped west vancouver but C01 is still hot hot hot

#14 Socrates Berlin on 10.01.12 at 9:35 pm

London Ontario is only down 15%, it’s looking good here because as my neighbors all tell me that real estate never goes down. Except that three houses in my area have been taken down because of no buyers.

#15 DMZ on 10.01.12 at 9:35 pm

Garth, dude. Are you sure you got your dates right?

1973 is almost 40 years ago, not 30. But I recall the big spike in rates was 1982, not 1973. Did I miss something back then?

Nope, fat fingers. Your dates are correct. — Garth

#16 Roland on 10.01.12 at 9:39 pm

Won’t it be bad enough when the taxpayers have to rescue the CMHC?

Hasn’t it been bad enough that there is no capital gains tax on sales, no matter how high the value of the principal residence? That tax exemption should have been hard-capped a long time ago, and maybe we wouldn’t have had as bad a speculative bubble to begin with.

And now perhaps deductible mortgage interest? Biggest writeoffs to the biggest borrowers.

Nice regressive taxation, eh?

#17 Skip Breakfast on 10.01.12 at 9:40 pm

My, how quickly things change. The mainstream press hasn’t yet even acknowledged a real estate meltdown, and already there’s talk of bailouts? Apparenlty, no one is ever supposed to make a bad investment when it comes to real estate. Even when a very good portion of the the city of Vancouver just did.

I agree, the government cannot afford to deliver such a baoilout. Though jaw-boning about what sort of “help” theuy can offer will win votes, since so many voters are in very deep shit. We WILL hear about special initiatives to keep folks in their homes…but as we’ve seen in the U.S., these will be largely ineffective. If the losses are deep enough, the banks will be supported over the individual homewoner, lest the whole shebang come crashing down.

But I do wonder about Garth’s justification for no bailout this time, seemingly prefaced on the assumption that he’s going to give some fatherly tough love this time and make greedy Vancouverites take their lumps. I’m of the mind that bad investment decisions should ALWAYS take their lumjps. And so I see no real moral argument for bailing out the homewoner in the 1970s or the homeower in the 20’Teens. The real measure of a bailout isn’t a moral one, but whether the society cracks and falls apart without one.

When the real big chunks of concrete start falling down from this economy, the pressure will be there to do something. My prediction is government will pretend to. But its hands will be tied, just as Garth suggests. It’s too epxensive, and our government is overly in debt as it is.

#18 Randy on 10.01.12 at 9:42 pm

Can’t Ben Bernanke takes some credit for creating a massive credit bubble and destroying the Canadian Housing Market too ???

#19 renters rule on 10.01.12 at 9:44 pm

No way my tax dollars are going to bail out these arrogant morons. There has to be accountability for actions chosen with their own free will.

They will have to file for bankruptcy, that’s what people did on the early 1980s! There is no way to “fix” this except to let the economy return to a normal balance when it comes to residential RE and its role in the Canadian economy; it is simply unsustainable to keep propping up this bloated pig. The mortgage brokers can go and get file clerk jobs at the trustees in bankruptcy firms, who are going to become extremely busy….

#20 Blacksheep on 10.01.12 at 9:46 pm

Smok’in realtor # 103,

“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.”
———————————–
This ones gonna haunt you.

take care
Blacksheep

#21 Smoking Man on 10.01.12 at 9:48 pm

Is the Machine is following my posts, Can you blame them.

Maybe I’m the Machine. Maybe I call the shots, seeing that anything I predict usually happens within days of my posts. Who knows?

So Canadian Entrepreneurs are afraid of risk, and Canadian companies lack productivity, what else is new.

Our education system castrates the skills needed to be successful Entrepreneur. The Ego, The Balls, The Rebellion, The bully, The screw being nice, It’s war, I take no prisoners. I am happy to kill or be Killed.

When a hiring manager scans resumes to make his shortlist, he’s not focused on improving the operation, he’s looking at selecting a candidate that if they fail, his ass is covered.

“Look at the degrees this guy has, who would have known he was useless. “

In fact, in most Canadian companies, there is absolutely no financial upside bonus, or incentive for risk taking to improve, but f-up, you’re out the door fast, so no one bothers trying to hard.

In Canada if you bring revenue into a company you’re golden and are paid well. You save a company 10 Mil on an Idea, nothing. That’s why I always push sales. Your leverage in negotiation is the customer list and the relationships you build with customers. It’s worth a fortune.

Today people live in cubes with diplomas proudly on display. Vast majority of cube squatters are useless. The diploma is an invisible ball and chain that narrows your options, but teachers have done a masterful job convincing you otherwise. To add insult to injury you paid through the nose for this enslavement.

Some people cringe at my posts here, I promote risk taking, having fun and laughing at yourself. My posts are like my real life, evolving, never boring, and always pushing the envelope. Count my deletes. You can’t bend what you can’t offend.

Yet the schooled as I call them, come out to attack me regularly, I don’t take it personal, I know they have huge disadvantage in life, they are schooled. Schooled=Slavery, yet most are beyond my help, 12 to whatever number of years in school, without a major de-programing program, they will work for and kiss the asses of Smoking Men world over.

Smoking Men do well in life because, they don’t fit the mould, they demand more for themselves, they despise kiss-ass-arey. They like to eat what they kill. They fear no man, god, or beast. Just the tax man.

Smoking Men Rule This World, always will, you shits should be happy and bloody great full to you have real one here, an in the flesh real live SM trying to help you snap out of your poverty set minds every day.

But you take turns with words I pretend to not understand, attacking and trying mob the Great One. I am a lightning rod for your life’s frustrations, a target of your fear of risk. A realtor (ba hahaha) cause I’m bullish on 416 SFH. Idiots. I should just take my ball and leave the playground but…I’m a Smoking Man.

We don’t give up, time to put on my Clark Kent glass and a suit over my SM super hero outfit and keep trying to save the world.

#22 Old Man on 10.01.12 at 9:49 pm

#14 Socrates Berlin – you are correct as nobody will escape this mess, and London, Ontario will go down hard, as they all live in a dream world, as these fools have an attitude that not here, but everywhere else, and just sit back and laugh about it all.

#23 Bo Xilai on 10.01.12 at 9:52 pm

Why is it financial ‘tards always want to be saved from their own stupid decisions?

Why is it always the cautious savers who bail out the “pedal to the metal” spendthrifts?

#24 LJ on 10.01.12 at 9:53 pm

“Second, the ability to write mortgage interest off income tax, as is the case in the US (where houses cost a quarter what they do in Vancouver).”

If they changed the rules (above) and applied it to all taxpayers, to bail out the “underwater” homeowners, there would be a lot of people who actually own their homes, particularly seniors, who would not be very happy, as they would have to pay the capital gains – very unexpectedly.

Why not give people the choice. On their next tax filing they would have to declare which route they would take (ie. follow current Canadian rules, or switch to US style), after which they would be locked into that regime until the house was sold (or they die, whichever comes first).

That would make a difficult choice for first time buyers…

#25 T.O. Bubble Boy on 10.01.12 at 9:54 pm

I also heard that the other levels of government might bailout everyone who didn’t win the lottery, and anyone who lost money at an OLG casino. Oh – and they’ll buy your car off of the lease if you don’t like it.

#26 Canadian Watchdog on 10.01.12 at 9:55 pm

And who would come up with such a brilliant idea to bailout distressed homeowners? Hint

Because heaven forbid, if the deck of cards starts falling and mortgage docs are reviewed by the courts, this happens:

Broker gets 3 years for fraud

“A five-month RCMP investigation into the operations of William Priest-Phillips of Nackawic, and his company Priest Phillips Management, which operated under the name DLC Priest Financial, has uncovered at least eight mortgage applications with Scotiabank containing falsified documents,”

“The RCMP was alerted of Priest-Phillips’s activities by the New Brunswick Securities Commission, said the officer, confirming the commission had been investigating the broker for an alleged Ponzi scheme bilking families and close friends out of nearly $600,000, in mostly retirement savings.”

It’s only a matter of time before they start catching the big fish.

#27 GTA Girl on 10.01.12 at 9:57 pm

One of the few times I’ve ever agreed with Kevin O’Leary. Regarding the proposed Gehry/Mirvish condo-palooza at old Prince of Wales theatre site. three 80+ stories of small mini suites?

“As an investor, I’d run the other way.

That boat has sailed .

#28 no bailout, no way no how on 10.01.12 at 9:59 pm

like a few other posters, and Garth, I am firmly against any kind of bailout for underwater homeowners. None of them have shared any of the upside that they’ve been enjoying for years now. With the government via taxes or with me, that’s for sure.

If the government gets involved and lets them off the hook it would be the ultimate slap in the face; privatize all the RE gains yet socialize all the RE losses. (Hm kind of like what happened with the banks in the US….I digress)

If this comes to pass in any form, we will be entering into deep deep trouble. The government (ie all of us via our taxes) cannot possibly afford to take this on.

just an opinion.

#29 John Prine on 10.01.12 at 10:02 pm

East Vancouver completed residential sales 2012. Is this a trend?

Jan. 177
Feb. 267
March 336
April 343
May 314
June 281
July 247
August 159
Sept. 165

BC Ferries were just granted three 4% fare increases over the next three years and have to cut another 54 million from their budgets, probably from more service cuts…..Won’t help Victoria and the rest of Vancouver Island’s markets as it is a deciding factor for many contemplating a move over.

#30 tomohawk on 10.01.12 at 10:03 pm

I’m sorry, I don’t understand. If someone buys a house for say 800K and it skyrockets to 1.2M they get to keep the profits. Meanwhile, if they buy for 800K and it plunges to 500K they get a bailout? Seriously? They took a risk and lost. So let them accept the consequences!

#31 Joe on 10.01.12 at 10:03 pm

Garth, I think I asked the wrong question about two weeks ago. The question I meant to ask was, if the economy takes a hit due to the housing market crashing, won’t this (the economic downturn) significantly impact REITs as well at some point? REITs don’t sound like such a great investment in this scenario.

No impact on commercial REITs. Positive impact for residential ones. — Garth

#32 Retired Boomer - WI on 10.01.12 at 10:07 pm

Go get ’em smoking man! I would guess you are right now developing a vulch syndicate to gobble up 416 homes that are forced sales / foreclosures when the inevitable shirt hits the fan. (I would be).

Meanwhile back on earth, let one who is not a slave to debt suggest a way to save your asses, and live much more comfortably. Sell your house if you have less than 30% equity in it, and rent. You will be able to buy that shit-box back for less in a few years. (Trust a US guy here)

Second, I wouldn’t invest any of it in anything with a long commitment, as rates may not stay in the basement for more than a couple of years. Stay liquid within reason, and pay off some hi cost debt.

Where the US is going, except to higher taxes is anyones guess. We get to select a new loser, I mean president in another month, but little will change. You’re even worse off, but you didn’t notice it until very recently.

#33 Thomas on 10.01.12 at 10:09 pm

Saw this in the comments section of a news article today:

http://re.olvius.com/

Good summary of price drops in Vancouver. Thought some on here might appreciate it.

#34 Smoking Man on 10.01.12 at 10:12 pm

#20. Blacksheep

I’m a narsist with a false ego. Nothing can hurt me

#35 Fodork on 10.01.12 at 10:21 pm

Garth, If I park all my investments in the US and default on payments here, can Canadian banks lay a stake on my US assets? Are there any kinds of assets which are off limits?

#36 Hugh Jasz on 10.01.12 at 10:22 pm

#13 LH on 10.01.12 at 9:33 pm
………….660 Dundas says it all, 484k for less than 13 ft

The listing says ~13 foot lot, but you somehow end up with a 36 x 49 living room + dining room.

I started to add up the rooms’ areas, and quit when I broke 3000 square feet with rooms left to count…….

Maybe you’re paying bucks deluxe for this beaut due to a fascinating hole in the space-time continuum?

Or maybe the room dimensions are listed in hands rather than feet?

#37 Canadian Hero on 10.01.12 at 10:25 pm

Great post Garth. Imagine giving this speech before a crowd of angry BC tokers and earth mothers whose yoga pants are wearing thin at the knees.

“…And I commit to you today that the Toronto banks will not foreclose upon one more home, one more family, one more child. Why is it that bailouts only get written in big cheques to Bay Street? You ask me, where is my bail-out? Well, brothers and sisters, we are going to tell the provincial courts not to foreclose on any more houses across British Columbia. The banks engaged in predatory lending. They didn’t abide by proper underwriting standards. They thought the taxpayers were going to provide them a free lunch. Well they were wrong…” [Speech to be uttered by NDP hero in Victoria around about October 2014.]

If a British Columbia leader refused to foreclose on owner-occupied houses whose owners were perhaps “paying what they can,” that person would get elected. One forgets that the majority in lotus land is an irresponsible majority.

#38 best place on meth on 10.01.12 at 10:25 pm

Not only would a bailout not work, they wouldn’t even think of trying it.

Not only because of the massive cost but because the Conservatives don’t give a rats ass about Vancouver.

If an earthquake struck the lower mainland and caused it to slide into the ocean they still wouldn’t care.

#39 Smoking Man on 10.01.12 at 10:26 pm

#30 retired boomer

Keep your loot under the matriss and as uncle ben spews out doolars like rice and C follows

Watch your buying power get cut in half

Don’t like re might I suggest gold

#40 Toronto_CA on 10.01.12 at 10:30 pm

At the risk of sounding like one of *those* people, I would seriously look at leaving Canada permanently if the government decided to have ridiculous bailouts for those who go underwater after the government allowed 0 down 40 year mortgages and record low interest rates for years at a time.

Better my tax dollars (significantly less of them I might add) go to Bermuda or Grand Cayman, places I have lived in the past, than to pay for a bunch of speccers and flippers. Heck even Australia. They need trainded accountants everywhere, at least for now…

Let’s hope our government doesn’t go this route, but as Garth says, it’s very likely if things get bad enough. The alternative isn’t pretty either.

#41 mac on 10.01.12 at 10:31 pm

What might happen? Emergency actions like the ones proposed by the journalist? Your last sentiment is unclear.

#42 Sebee on 10.01.12 at 10:31 pm

Man up you 95% financing wimps and face the storm. You had the balls to sign have the balls to deal with the fallout.

Unfortunately you handed your balls over to the banks and government. Now they will probably have to save them from being crushed.

#43 taxes, hipsters, and communism on 10.01.12 at 10:33 pm

tax dollars bailing out the many, oh so many latte-sipping, vespa-driving hipsters who over-leveraged themselves to the teeth with near insatiable condo lust?

incestuous and communistic.

didn’t we fight a world war to protect our children from this sort of political and economic madness?

#44 Cory on 10.01.12 at 10:38 pm

I would be absolutely LIVID if something like this occurred!!!!! LIVID

Complete bullshit. Let em suffer. Once again the responsible would be punished for doing the, well, responsible thing which is manage cash properly.

This can’t be for real!!!!!

#45 Sebee on 10.01.12 at 10:39 pm

Oh yeah, since I dont smoke and don’t drink, I was pumping iron tonight at the gym and Q107 was on. Two back to back debt management ads for different firms about being over your head in debt. Duck and cover.

Hey Smoking Man, beside gold which paper currency do you like?

#46 Timbo on 10.01.12 at 10:43 pm

http://www.testosteronepit.com/home/2012/10/1/worse-than-the-infamous-lehman-september-frances-private-sec.html

Lacking new orders, manufactures ate up their backlog at the fastest rate since March 2009—when the economy appeared to have seized.

The wheels are coming off…turn up the radio!

http://www.newyorker.com/reporting/2012/10/08/121008fa_fact_freeland

“he has drafted a second open letter, which he hopes will be co-signed by a large group of self-made billionaires, and published as a newspaper advertisement in some swing states. Cooperman estimates that it will cost around a million dollars, a sum he says the group will split. “It’s going to be, you know, ‘We are the one per cent that came from the ninety-nine per cent, and we want to see more of the ninety-nine per cent move in our direction, but we fear the President’s policies discourage that from happening,’ ” Cooperman said.”

See…the rich feel victimized too.;)

#47 prairieperson on 10.01.12 at 10:44 pm

Business and government leaders. Pretty broad. What business and gov. leaders? Sounds more like a BS session after a few drinks. Let’s hear it from the premier and the premier to be. It might get some yatter during the election but, as we are seeing in Europe, you can’t do much if you ain’t got the money. It’s t he old cry. Somebody do something to save me from my own bad decisions. Daddy, daddy, don’t take my ATM away.

#48 Grim Reaper/Crypt Speculator on 10.01.12 at 10:44 pm

Madam Zelda reads Smokinky Mans mind

DELETED

#49 coastal on 10.01.12 at 10:45 pm

After watching the political gong show in BC the past year, I guess Harper would want a total riot on his hands. Screwing with capitalism like that would instigate anarchy like no other time. Punish those who chose to be fiscally responsible and give billions to those who have none ?

By the looks of Harper slashing a few more billion from DND and still no steel contracts signed for all the massive ship building deals they announced last year, me thinks he has other places to spend money than bail out the greedy dicks who can’t make a basic financial decision other than “sign here”.

#50 young & foolish on 10.01.12 at 10:46 pm

Garth brings up an interesting point …. the inevitable politicization of the economy. You see it everywhere theses days. Don’t buy the “free market” claptrap, it’s a fantasy sold to idealists and academics.

When you owe somebody $1000, you are scared, but when you owe somebody $1.000.000, they are scared.

No doubt politicians are considering what would happen here if the RE market contracts. We are already in slow growth territory. Honestly, there is no easy way out.

#51 45north on 10.01.12 at 10:47 pm

Once this mess starts to creep you can be sure a demagogue or two will emerge.

the US has the best sound bites: families who worked hard and played by the rules

http://voterguide.sos.ca.gov/candidates/us-president.htm

like “Canadian families who worked hard and played by the rules deserve a break on their mortgages” what Obama is going to sue you?

Skip Breakfast: When the real big chunks of concrete start falling down from this economy, the pressure will be there to do something.

we are not there yet – we’re still at the “balanced market”, “regular cycle” stage.

oh by-the-way, the banks in the US have played the moratorium-on-foreclosure to their own advantage: they don’t have to maintain the property, missed payments are added to the end, homeowner rights available on the original mortgage are dropped on the redo, banks get to keep the mortgage on their books as “performing”

my plan would pay families $1000/month for a year – once their houses were foreclosed. Banks would get their insurance money after they foreclosed. They would have to maintain the house and declare the loss.

#52 Mark W on 10.01.12 at 10:49 pm

“Should the government save the butts of people in Vancouver about to see the value of their homes plunge by a third or more?”

ANSWER: NO … !!!!

Save them – How?

Save them – Why?

#53 Observer on 10.01.12 at 10:51 pm

The moral hazard is incredible.

Garth, I’m shocked that you’re even going there.

#54 John on 10.01.12 at 10:53 pm

“There’s no state-imposed regimen of 20% mortgages and scant credit. Instead, money is the cheapest and most plentiful in history. People routinely buy houses with 95% financing, and the government protects their lenders. It’s suddenly a disaster when mortgage pay-back times drop from 30 years to twenty-five, or banks no longer give away free down payments. Ottawa passed around crack cocaine, and now we’re all wasted. How is this supposed to end well?”
————

Would you be able to back up the assertion that “Ottawa” doled out the crack cocaine? This point is fundamental to your argument.

Who doled out the cheap dough? What a coincidence that anywhere there was a central bank machine the same thing happened.

Ottawa? Politically irrelevant when the money that flooded Canada was international in every way.

What has “Ottawa” got to do with anything? A house in Toronto is 800,000 dollars. It doesn’t really matter how far down the wrong road the argument has gone. If it’s the wrong road, the option to turn back has to exist.

What’s the timeline on the cheap money pump. Starting in 1981. How did we get here?

The dynamics of 1981 are utterly gone.

#55 renters rule on 10.01.12 at 10:55 pm

@#36 Hugh Jasz

THANKS FOR THE BELLY LAUGH!!!! :-)

#56 Bobby on 10.01.12 at 10:55 pm

Just read today’s summary of the September housing stats here in Victoria. Sales are flat and buyers are sitting on the sidelines waiting for pricing to fall. But wait ……… the head of the Victoria Real estate board says that buyers shouldn’t wait for prices to drop because governments could increase interest rates to stimulate the economy. No, I’m not making this up.

Using that logic, just imagine how the economy would hum if interest rates were increased to say 15%.

It is starting to get ugly out there.

#57 Inglorious Investor on 10.01.12 at 10:56 pm

Add my voice to the rebels who would try to prevent the government from using hard-earned tax dollars to bailout the overextended homeowners.

If huge numbers of Canadians can’t afford their mortgages due to a severe economic downturn, a spike in rates, etc., make the banks renegotiate temporary mortgage terms, and make MBS investors take the hit too.

The banks were the biggest beneficiaries of the housing bubble; they should pay the price if it corrects. And MBS investors assumed the risks that pertain to these securities. If investors feel the banks hosed them, let them sue the banks in court like good capitalists. But leave the tax payers out of it.

If one accepts the rewards, one should also accept the risk. Or have it jammed down one’s throat if necessary.

#58 Renters Revenge on 10.01.12 at 10:59 pm

My blood is curtling at just the thought.

#59 wes coast on 10.01.12 at 10:59 pm

Garth when you lobbied the government you actually were defending the people – as they all had at least 25% down in their homes and made wise choices – they got creamed by an oil embargo that spiked inflation.

Today, the government will step in – not to protect people – but to protect the banks and CMHC. Most people have no skin in the game and could afford to walk. The others that do have skin only risk losing the froth they didn’t deserve in the first place (unless they were smart enough to cash out)

If the conservatives enact such measures, it’ll just prove that we have no party politics in this country. All parties will just pander to the vote and being a statesman is just career suicide – even if it does help the country.

#60 Click Here, its different on 10.01.12 at 11:00 pm

Bailing out speckers ?

Bailing out the bubble heads who bought 800 000$ garden sheds to flip a quick buck ?

Bailing out Barbie and Ken in Toronto about to jump off their condo tower ?

If you want a civil war, bail em out. Just f.ing bail em out.

#61 Canadian Hero on 10.01.12 at 11:03 pm

@ Sebee, Toronto CA and others

I really can’t understand why you figure that something like a foreclosure moratorium or interest deductibility would be some kind of “last straw” that would make you lose faith in this country.

Let me remind you, for a second, what page of the crazybook we are already on. Canadian banks are willfully lending vast sums of money to twenty-somethings with borrowed downpayments and intermittent McJobs to buy overpriced condos like there is no tomorrow. The banks are doing so at razor thin margins ONLY because the CMHC is providing dramatically underpriced credit insurance (and even these ridiculously non-stringent CMHC terms are being fraudlently circumvented by pimple-faced twenty-something mortgage brokers).

The whole housing “finance” world in Canada has been a scam in which the banks write bum loans in anticipation of a future government bailout at least since 2006.

The doobie smoking condo dwellers of Yaletown deserve free cash no less or no more than the smoked salmon scarfing doughboys of Bay Street. In fact, by virtue of their general ignorance of things financial, the pot smokers have the relative moral high ground.

#62 Keith in Calgary on 10.01.12 at 11:04 pm

#40 Toronto CA……..

I am already way ahead of you in that regard. The vast majority of my net worth is outside of North America and has been for years, and in <5 more years I will be as well.

Permanently.

After 36 months of residence in my chosen country I get to burn my Canadian passport on the beach, and put my new one in my pocket. I'll wait until it legally expires though, so they can't prosecute me for making such a blatant political statement.

Once landed, over the next two decades of my life, by my calculations I will legally keep $1MM of net tax revenue out of the hands of the Caandian system, simply because I will no longer be a Canadian citizen anymore. If I die when the rest of the adult males in my family did, it will run closer to $2MM.

What is that song from "Flashdance" again ?

Oh yeah…….."WHAT A FEELING" !!!!

#63 45north on 10.01.12 at 11:07 pm

John: Would you be able to back up the assertion that “Ottawa” doled out the crack cocaine?

can you spell CMHC?

#64 TRT on 10.01.12 at 11:09 pm

It would be in the best interest of government/economy to Bail out underwater homeowners immediately if prices were to drop. Maybe write off the principal above a certain amount in exchange for continuing to make payments/avoid bankruptcy. If a big drop happens, this will happen whether you like it or not.

Not doing so will lead to a domino effect and more bankruptcies and huge job losses…a downward spiral…

Is it morally wrong? Of course it is, but moral hazard should be a part of you financial strategy. Not emotions. The banks use it, why shouldn’t you??

A friend’s relative in Visalia, California bought his own home back for $200,000 after he stopped paying his $400,000 mortgage for about 18-24 months. Needless to say, he is happy.

#65 LTR,FTW on 10.01.12 at 11:12 pm

#30 tomohawk & #38 best place on meth.

The Government will bail out these crooks and gamblers because they want the votes. If it were just you or I, we would get the boot but when it’s thousands, well you scratch my back and I’ll scratch yours.

Why do you think nobody has gone to jail down south over the Sub Prime fraud ? Too many people involved that wield the influence in Washington.

http://market-ticker.org/akcs-www?post=211989

#66 Gord In Vancouver on 10.01.12 at 11:13 pm

RE: #19 renters rule and #28 no bailout, no way no how

My sentiments exactly.

#67 In Colwood equity = debt on 10.01.12 at 11:15 pm

I have always lived within my means – purchased a piece of seriously unwanted land and built my own modest house (arborite counter tops, linoleum flooring, wood heat etc.) As a result I am very well off – saved money rather than spending it. I would object violently to bailing out deadbeats who live in homes that make mine look like an outhouse. Where is the payout to me in any of this?

#68 TRT on 10.01.12 at 11:22 pm

I’m sure I hit a nerve with the above comment but I am only looking at it objectively.

If prices crash, the Banks will own the government’s ear. Not you! It has been like this for about a decade or two now. Don’t you feel the noose tightening? What have you done?

The Banks will force gov to use taxpayers money to Bailout people in order to prevent an economic calamity (hit on bank profits) whether you like it or not.

#69 Smoking Man on 10.01.12 at 11:28 pm

Gartho,

What do you think of my theeses? Gold higher, interest rates getting slashed, and the GTA home prices climbing at a double digit pace over the next few years?

That’s how it will unfold, don’t miss the bote.

#70 Not 1st on 10.01.12 at 11:29 pm

How about letting people tap their RRSPs to make emergency mortgage payments if needed and pay it back within 6 months or something.

#71 Jimbo on 10.01.12 at 11:29 pm

Human nature always has the upper hand. People become tainted with ambition and have an insatiable thirst for living beyond their means. Many people live for today and do not consider tomorrow. This kind of ephemeral thinking, of course, expedited by your friendly neighbourhood bank and goverment.

Because of the aforementioned, no bailouts.

As an aside, if banks only gave 5 year amortizations at current rates what would the price of a house be?

#72 Grooby on 10.01.12 at 11:32 pm

#54 John,

CMHC Mortgage Insurance is the crack. No bank would lend much without that coverage, since they’re off the hook for all the risk.

Always Central Bank’s fault indeed. You need to put down your Libertarian handbook and see how the real world actually works.

#73 house burden on 10.01.12 at 11:34 pm

8 NoOneOfConsequence on 10.01.12 at 9:27 pm

I agree…grudgingly.

I don’t know if it’s fair that the banks, government, mortgage brokers and real estate cartels get to profit from their blatant misleading of the horny ones.

If you look at the stream of information that these groups have been spewing over the last 7 years…it’s pretty clear that they are a big part of the cause.

As usual…the unwary are swept away whilst the perpetrators profit.

It’s not right. Higher authorities should be held accountable too.
============================

It the job of the banks, mortgage brokers, Home network, Home depot and the rest of their sales crew to sell sell sell. So don’t blame them.

However “THE GOVERNMENT ” should not be involved with the free market. Government never does a good job of anything.

CMHC had plenty of money at one point. Who told them to spend all the money in the nest egg. Even a 12% drop will do them in, their done!!!

As for who should be bailing the financial troubled people out. Its very simple increase the cost of CMHC insurance, Those F%^%$ers got themselve into it, the group should bail themselves out. Or increase property taxes, People who doesn’t own houses should not be involved in bailing them out.

But leave the banks alone, I’m enjoying the rise in stock prices and dividends

#74 eagle eyes on 10.01.12 at 11:35 pm

Quick, somebody find me a ridiculously overpriced home to buy right now. I don’t want to miss the boat with the government bailout money. I think I can save on rent if instead I “owned” my place, can’t make payments, then continued to live there while not making any mortgage payments, until they reduce my prinicple amount owing by 50%. After which, I can “feel good” again because it is so important that I “feel good” that I have some “equity” again and I’m not “underwater”. By then I would have lived rent free for many years, and walk away with a good chunk of change for retirement. My retirement plan – take that Garth!

#75 2centsCdn on 10.01.12 at 11:42 pm

No bailout’s …. let the correction happen. No matter what is done things will eventually settle to reality. Prices are nuts. We ain’t Paris, we ain’t Manhattan. Start the pain now and get the ball rolling. It’ll be an education for the greedy and stupid …. living beyond your means is risky …. be wary of people in suits ….. and there’s no such things as a free (or low interest) lunch.

#76 Dude from Richmond on 10.01.12 at 11:43 pm

Garth,
Totally agree with you, there’s no money in the coffers to bail out underwater homeowners.
In the early 1980’s here in B.C. as interest rates shot up to 20% the Government issued cheques to relieve the burden. But then back, B.C. was flash with cash.
Remember the BRIC shares!
Money was for nothing and the shares were free.
Fast forward to 2012.
Huge deficits on the Federal, Provincial and Municipal levels.
As you say: This will not end well!

#77 KG on 10.01.12 at 11:49 pm

More power to #43.

#78 Doug in London on 10.01.12 at 11:50 pm

If I bought a house in Toronto or Vancouver in the late 1990’s and sold it at the peak, I would pocket a large capital gain. Since I didn’t, am I entitled to a payment from the government for my “losses”? If not, then neither should a greater fool who bought high and is under water be eligible for any kind of bailouts. Is there anyone, even one of you, out there who believes in capitalism where the market is left to sort itself out? It’s just what we need, more bailouts to suck money out of government programs like education, health care, maintaining infrastructure, or other programs that some of us actually value.

Now proof that the only thing we know from history is that we learn nothing from history. The latest talk in Toronto is of Ed Mirvish starting a project (doesn’t he know better?) to build even more condos. There could be an overwhelming selection of condos in Toronto in years to come. Just think of what that will do to prices.

#79 KG on 10.01.12 at 11:51 pm

Garth, are you kindling and preparing a bus load to Ottawa.

#80 KG on 10.01.12 at 11:53 pm

#64: Stop right at the morally wrong step. Otherwise what kind of education are you giving to the next generation.

#81 Canadian Watchdog on 10.01.12 at 11:55 pm

Why It Won’t Work.

Crunching some quick numbers: as of July the total outstanding amount of residential mortgage credit stands at $1,156,490,000,000, of which $862,343,000,000 is insured (in-force) by CMHC and Genworth (taxpayer-backed). This equates to 75% of all mortgage credit being insured, but here’s the catch.

There is only $37.6B remaining until CMHC & Genworth breach their limit; $24B was used in Q2 alone. This was a surplus on top of the estimated $15B drawdown per quarter from paid-out mortgages, which means, at best, over the next two quarters (considering declining sales) insurance-in-force would remain unchanged or hovering around the current balance going into the spring (generally speaking), moreover, with 177,000 units under construction in Canada, comprised mostly of pre-approved mortgages and assignments who have not yet (but are obligated to) fulfill a mortgage, will keep constant upwards pressure, if not possibly force insurers to breach their limit.

Therefore, insurers are now working with a $37.6B buffer going into next spring, which pretty much assures mortgage insurance will be limited. Keep in mind CMHC’s mandate is to provide affordable housing for low-income borrowers, so they would likely (if they care) keep some capacity to insure upcoming developments.

Why it won’t work, is because if they assist distressed homeowners (who would have otherwise defaulted and drawn down insurance-in-force), they (insurers) would literally have to start stiffing pre-market buyers just to stay within the limit. Lastly and quite humorously, with the amount of leverage outstanding on $862B in insurance-in-force, means a 0.75% loss would equate to more then the government’s entire $5.2B budget cut planned over the next few years.

Hello Moody’s. Hello S&P. Bye bye AAA rating for Canada. Then the real budget cuts come.

#82 KG on 10.01.12 at 11:55 pm

#53: Garth is just kindling the fire. This should not pass by.

#83 pretzels on 10.01.12 at 11:56 pm

#61 TRT

So..the South Asian pumper from Surrey is back.

No “550000 immigrants keeping up the RE” argument today??

#84 Inglorious Investor on 10.02.12 at 12:00 am

If anyone else out there in the Garthosphere is also looking to finish their basement, I’d like to share the kind of nonsense I am encountering while trying to find a reputable, quality contractor in the hopes that I can help others avoid the same issues.

First of all, I am having a heck of time finding someone who is willing to actually do the work. Many have come to look. Very few have followed up with an estimate. If they are too busy to care, why bother looking in the first place? Are they scoping out possible heists? Who knows these days.

Well, after months and months of fruitless searching, I finally found one that was serious, substantial and eager to do the job. I was this close to dropping the requisite deposit.

Then I read their Terms and Conditions:

• The wanted 50% of the project estimate up front. Now, I don’t care if the contractor descended from the Mount of Olives, I strongly advise any would-be basement finisher to NEVER pay a contractor 50% of any job before they start.

• Any changes made to the original work order must be paid in full and up front. Again, never agree to this.

• Any delays caused by the client will be result in a penalty of $200 per day. Now, I can understand the rationale, and I agree that contractors should not have to pay for a client’s mistake. But this is the construction industry; delays and work-arounds happen every single, bloomin’ day. Believe me, the contractor is not going to pay a sub who does not work that day, so I doubt highly the cost is justified. Furthermore, if the contractor causes a delay (which is as common an occurrence as the sunrise) which caused the client to miss work or causes some other inconvenience, will the contractor compensate the client? Good luck.

• The contractor cannot guarantee that the finished installation will be straight or level, unless you paid extra for this. Did you get that? Straight and level are now “extras.”

• The contractor will not be held responsible if a discrepancy in their site measurements and the plan they created causes a difference in the cost. Get it? You have to pay extra if they took bad measurements.

• According to them, the job is done––and final payment must be made––when it’s 95% complete. You see? Under their “rules” the job is technically complete once they do 95% of the work.

• If the contractor, or one of the subs damages your property while they are working, you have to pay to repair the damage. But hey, if you don’t like their repair estimate you can always get another contractor to do the repair instead. Isn’t that nice? They do the damage; you pay to fix it.

• Late payments are subject to a $200 per day penalty. So let’s say you owe them a balance of $10,000, and you’re a week late. They would charge you $1,000 penalty (assuming they don’t include weekends). That works out to an equivalent annual interest rate of over 500%.

Needless to say, I politely gave this contractor the boot. But what worries me is, there must be many people out there who actually either accept their terms willingly, or simply don’t read them.

In other words, there must be a lot of people who are either incredibly naive or incredibly negligent. Sounds kind of like the housing market to me.

BTW: I also recently redid my roof, which cost me almost $10,000. It took a while to do my due diligence, but I found an excellent roofing company that did what they promised and the work was top notch at a fair price. No downpayment. No skewed T’s and C’s. Just honest to goodness Canadian quality work. The supervisor even tried to talk me out of installing a drip edge because he thought it was unnecessary. “Don’t waste your money,” he said, even though it was right up his alley. But on this point I disagreed and he did the extra work and did it well. A week after the job was done, he came to collect his money. Would that all contractors operated this way.

#85 betamax on 10.02.12 at 12:00 am

The market’s bigger than the govt, same as everywhere else that crashed, including the US.

It’s. Not. Different. Here.

#86 Grim Reaper/Crypt Speculator on 10.02.12 at 12:01 am

Odious debt

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

In international law, odious debt is a legal theory that holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, should not be enforceable. Such debts are, thus, considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state. In some respects, the concept is analogous to the invalidity of contracts signed under coercion.

Origin

The doctrine was formalized in a 1927 treatise by Alexander Nahum Sack,[1] a Russian émigré legal theorist, based upon 19th-century precedents including Mexico’s repudiation of debts incurred by Emperor Maximilian’s regime, and the denial by the United States of Cuban liability for debts incurred by the Spanish colonial regime.

According to Sack:

When a despotic regime contracts a debt, not for the needs or in the interests of the state, but rather to strengthen itself, to suppress a popular insurrection, etc, this debt is odious for the people of the entire state. This debt does not bind the nation; it is a debt of the regime, a personal debt contracted by the ruler, and consequently it falls with the demise of the regime. The reason why these odious debts cannot attach to the territory of the state is that they do not fulfil one of the conditions determining the lawfulness of State debts, namely that State debts must be incurred, and the proceeds used, for the needs and in the interests of the State. Odious debts, contracted and utilised for purposes which, to the lenders’ knowledge, are contrary to the needs and the interests of the nation, are not binding on the nation – when it succeeds in overthrowing the government that contracted them – unless the debt is within the limits of real advantages that these debts might have afforded. The lenders have committed a hostile act against the people, they cannot expect a nation which has freed itself of a despotic regime to assume these odious debts, which are the personal debts of the ruler.[2]

etc etc.

#87 pretzels on 10.02.12 at 12:04 am

# 68 TRT

I’m sure I hit a nerve with the above comment but I am only looking at it objectively.

If prices crash, the Banks will own the government’s ear. Not you! It has been like this for about a decade or two now. Don’t you feel the noose tightening? What have you done?

The Banks will force gov to use taxpayers money to Bailout people in order to prevent an economic calamity (hit on bank profits) whether you like it or not.
———————————————————-

So that’s your “new” argument to your clients.

Quite pitiful! I think there should be some regulation against such irresponsible and self-serving actions

#88 $$$BPOE#1 on 10.02.12 at 12:19 am

First of all Vancouver is goin up not down. Vancouver just keeps piling up the awards. Second of all in the highly improbable bust so many renters dream of the Cons would bail housing out and keep the good times going

#89 Nostradamus Le Mad Vlad on 10.02.12 at 12:23 am


“. . . jobs evaporating, house [prices] plunging, . . .” — Those four words can be applied to the first para. As long as people have jobs, then income/s are coming in, bills can be paid and food on the table. Take ’em away and a revolution forms.

“Forty-eight months later we have more debt and higher home prices than Americans ever did. Default rates spiked and the market collapsed. Ottawa passed around crack cocaine, and now we’re all wasted. We’re not special. Or different. Just whacked.”

Cdns. must have been overdosing on stupid greedy pills for the past several years. No. No bailouts, as the smart ones who saved and invested, lived relatively disciplined lives and well within their means to get where they are now — why should they be held responsible for somebody else’s cock-up?

Each is guaranteed the right to the freedom of choice to do as they please. Each has the right to make their own choices, and each is responsible for living with the consequences of those choices.
*
#74 GregW, Oakville — Hi Greg, and thanks for the link. In real terms, the word ‘balance’ is gone, as everything is so lopsided.

For example, see first link as to why the US Fed stole Germany’s gold reserves. Think they will give it back? There’s more chance of peace breaking out in our time. Cheers!

#20 Smoking Man — “Some people cringe at my posts here, I promote risk taking, having fun and laughing at yourself. You can’t bend what you can’t offend.” — Right on! Life is way too short to take anything seriously. Remember Eric Idle singing on the cross in Life of Brian — “Life’s a laugh and death’s a joke it’s true”!
*
Honor Among Goldfingered Thieves Hmmm; Iran See third para. down; Smoking Man is right Central bankers inflate; Germany has a one tri. Euro headache; Water Prices Same as UK; Cutting costs costs jobs, and Lobbyists / Consultants This is what they do best, and why they are not needed; Cheapies Desperate sellers; Bangers ‘n Mash with an expensive price tag; The French Depression It wasn’t Hollande, it was TPTB as they stand to gain the most; Japanese Boomers Actually, over one billion boomers worldwide in a decade.

Taxes, taxes everywhere going up; Brazil The new America; Investors Favor Indexing? IS MStanley doing a Lehman / Bear Stearns? EZone Jobless = Disaster; Mexico Obviously. That’s how the weapons mfgrs. stay afloat, creating artificial terrorist wars.
*
Kissinger If true, this would make things very interesting, esp. now that Obomba has distanced the US from Noddin’ Yahoo, and 13:48 clip Better understanding of what is going on thruout the world, ‘tho the US may let Israel take Iran on by itself; Poland – Russia Makes sense, because of all the natural resources in the Caspian Sea; China – Japan Shoving match to add to the ‘quakes Monday that hit Japan; NDAA military detention is martial law Guess we were going this way; Iran Reuters reporter guilty of of propaganda and lies; Mental Illnesses Add ‘net surfing and video games to the list; Muslims Unless we rise on our hind legs and ba-a-a our way to freedom; Seven Trillion Calories of sugar drinks; Lost and Found 68 years later; Mega Regions America 2050. Fortunately most of us will be in the next worlds by then; Self Sufficiency Ten steps toward it; Paris Auto Show.

#90 Soylent Green is People on 10.02.12 at 12:25 am

People who write blog posts then copy and paste them into comment board here mke me just asvill as stephen harper

Dat,s a lot of hate

.

.

#91 Mithan on 10.02.12 at 12:26 am

With 70% of the country owning a house, I think we can pretty much expect a bailout if the worse happens, as wrong as it is.

The funny thing is, Canadians are too damn ignorant to realize that if the government got the hell out of the market entirely, our home prices would never have grown to stupid levels in the first place, and homes would be way, way less than they are now.

Government involvement in the market has only served to inflate it, with governments in the last 35 years making it easier and easier for people to own houses, which has pushed the price up and up, actually making it harder to pay off and people more vulnerable in the process. Instead of saving money for a retirement or putting it into an actual investment, we take on $2000 a month in mortgage until we die.

A bailout will not prevent a crash, only make it take longer and divert MORE vital capital into a useless area of the economy, but it will sure make a bunch of useless Politicians “popular”, for a while. If they don’t take the cut now, they will take it with increased taxes down the road affecting home prices because people will have less to spend on mortgages or when they retire and the government has less to spend on them and their homes are worthless.

As they say, “it wont end well”. It sure is funny watching dumbass politicians trying to “save” something though.

#92 THE CELIAC HUSBAND on 10.02.12 at 12:27 am

http://theceliachusband.blogspot.fr/2012/10/france-blogs.html

If the sh#@*t hits the fan, take the plunge. There’s already plenty of Canadians and Americans over here….

#93 Kingarthur on 10.02.12 at 12:27 am

Another lovely sunny early fall day here in East Van. I thought I saw a pig fly by, as this weather has been with us for two months now. Winnipeg, on the other hand experienced its first snow on the last day of summer:

http://www.cbc.ca/news/canada/manitoba/story/2012/09/21/mb-weather-120921.html

Some things are different here.

#94 lookoutbelow on 10.02.12 at 12:27 am

Did I hear “bail out homeowners”. I think NOT. As a recently turned Senior, with a capital S, I need to bailed out as well. Just raise the daily interest on my balance in a High Interest Savings Account with TD Canada Trust retroactively to March 2009 by about 3%. You owe me that much at least, given these ultra low interest rates were suppose to “temporary due to the GFC”. You can count on my vote!

Government bailout = MORAL HAZARD. It will never happen here.

#95 patiently waiting on 10.02.12 at 12:27 am

These are for White Rock mom as per your request last night – I am out of town so not a lot of time. These are some of the better values in White Rock in the 1 – 2 mil range. Most have had price reductions, some more than one . . . a few foreclosures etc . . . prices are still coming down albeit slowly . . . though there are some more desperate ones that are starting to appear . . . my guess is it is still a little early to bargain hunt unless you see a situation like some that I have found where they have 2 or more mortgages on title, or are being foreclosed on . . .

Regards
PW

http://mlslink.mlxchange.com/DotNet/Pub/EmailView.aspx?r=1318644393&s=BRC&t=BRC

#96 Ed on 10.02.12 at 12:27 am

I’d like to see them justify bailing out latte-sipping million-dollar Vancouver McMansion owners while the people of Attawapiskat are still living in trailers because their homes were condemned and nobody will help them build new ones.

“Last month, the community learned that its application with the Canadian Mortgage and Housing Corporation for a loan to build 30 housing units could not be approved…”
http://www.wawataynews.ca/archive/all/2012/9/27/attawapiskat-planning-housing-crisis-round-two_23522

These people don’t want granite counters and 5 baths!

#97 Steve from Calgary on 10.02.12 at 12:31 am

Canuck blogger Ian Walsh already solved this one back in ’08 for the American housing market–not that his proposal was ever going to be taken serious, but let’s imagine for a minute it was in Canada. Here’s what it’d look like:

http://www.ianwelsh.net/how-to-bail-out-ordinary-mortgage-holders-and-not-just-banks/

“What the government should do instead is set up a Trust to buy mortgages at a discount, then reset them to 20, 30 or 50 year fixed mortgages with a reduced face amount. If the house is later sold, half of the increase goes to the government, so that taxpayers make a profit. The mortgage cannot be paid off before the end of its term so that financial scavengers cannot come around and, as they did over the last ten years, say “get rid of that mortgage, and take ours. It’s better. Honest!”, because we know that when they say better, they don’t mean better for the mortgage holder. The mortgage is attached to the property and is transfered to any new buyer. And the mortgage cannot be removed from the property, and any new mortgages attached to the property are junior to the government mortgage.

End results:

a) a floor is set for mortgage prices. (Whatever discount the government is buying at. Probably 60% to 70%, but it should be based on what the long run price was in the area before the housing bubble.) This ends the confidence crisis in these securities, because there is now a market price—what the Trust will pay.

b) It helps homeowners stay in their homes.

c) It gets rid of overly complex mortgages and puts in their place a dead simple mortgage that anyone can understand.

d) It punishes lenders, which they deserve, for making loans they should never have made.

e) While it does keep homeowners in their homes, it doesn’t let them off scot-free either. In exchange for a good mortgage they can service, they give up some of the future profits on sales in their houses.

f) The government will almost certainly make a long term profit on this. This is important, because it’s not fair for people who aren’t underwater on mortgages to spend hundreds of billions or trillions bailing out those who are without some expectation that in the end it won’t be more than just a transfer of wealth to them and to investors and banks.”

#98 Retired Boomer - WI on 10.02.12 at 12:36 am

Smoking Man….

Interest rates are like .5 here….where is down from half a point?

They are slightly higher in Canada so there is a bit more down lever.

Gold works, also some hard assets. The buck….say loser as the thing will have less value ’cause helicopter Ben needs to inflate away at a debt bubble.

What next?

#99 Kilby on 10.02.12 at 12:39 am

Paid weekly mortgage payments, paid extra on the anniversary of the mortgage every year and now are debt free, it took over 20 years and we are comfortable. Bailing any of these people out considering all the warnings that have been coming out for years is an insult to all savers.

#100 Devore on 10.02.12 at 12:56 am

#13 LH

Hot hot hot, so relative.

The only thing interesting, aside from the house-sized Horadric Cube in one of the listings, is that things over $1,000,000 rarely go over asking. This is very consistent with what I observed in Vancouver earlier this year. People can still readily borrow up to about $800,000 (+ downpayment) so buyers are plentiful and there is no shortage of bidders on attractive properties in this segment, and beyond that cash rules. And when people are spending their own money, they tend to be much more picky.

Hence, a natural tendency for prices to top off around $8-900k. Also, why average/median/benchmark prices appear to be so sticky, even as nearly every house sold goes through multiple price reductions; buyers are still spending $800k, they’re just following the old maxim to buy the most house you can afford, and they’re getting more for their money.

Victoria did it, Vancouver did it, Toronto is catching up. Centre of the universe, always late to the party.

#101 dosouth on 10.02.12 at 12:57 am

Going d
o
w
n.

I guess most of these whiners would like some fries with their “wah”burgers.

#102 Victoria Tea Party on 10.02.12 at 1:17 am

BAIL-OUT? OUTRAGE! SLIDIN’ DOWN THE OLD BIRTH CANAL STRAIGHT INTO FASCIST HELL

So, members of Canada’s allegedly vaunted MSM are deciding to lead the way for soon-to-be blown-out former property virgins! Bailout-City!

HERE’S THE “THINKING”

“We’ll be saved (!) should, at some point in the future, our financial incompetence come roaring home to roost, thus resulting in our own personal bailout! Whoopie, let’s borrow some money loot!”

WHY NOT?

If Wall Street, Fannie, Freddie, and pals, got free lolly in the US, why not some 20-grand a year Canadian yob who blew his “brains” out by signing a few mortgage docs?

What’s not to like? After all the government’s job is to “look after my needs and wants,” this amoral little flake will “reason”.

CAN’T REALLY BLAME THEM?

His “philosophy” is the follow-on to the ever-creeping soon-to-be prevailing (if we’re not careful) “mind-set” for a civilization that is moving from entrepreurialism to totalitarianism. STUDY YOUR FLAMING HISTORY!

In other words this king-sized stupid-assed reporter, and some of his business contacts, are advocating approval of the “end as we know it” world.

THEY’RE PLAYING WITH FIRE

And they’ll be roasted and toasted big-time IF their dreams come true.

WANT PROOF?…LOOK SOUTH

The US is a classic example.

It is a troubled empire, broke and busted from years of foolish borrowing by going the morally-bankrupt route of bailing out everything and everyone in sight since 2008. It is fast becoming a fascist dictatorship.

Where else does foolish borrowing lead? Why, see the obese, poor, under-educated wretches egging on their nearest and dearest on those “reality ” TV shows!

Why are they so desperate for stardom?

Because that’s the only ticket the uneducated, desperate, masses can use to escape from their impoverished ghettos and move into the gated ghettos of the “rich, famous, and perfect!”

WE LIVE IN DANGEROUS TIMES

Once upon a time I was a MSM reporter. I used to watch some of my colleagues ask what I thought were the dumbest of questions. “What, were you born yesterday?” I would ask some recent J-school ninny.

That reporter St. Garth of Zero Redemption so adequately drew to our attention to belongs to a whole new legion of such trolls.

Problem with this generation is, they’re all still picking their way blindly through the birth canal of mindless, feckless journalistic Nowhere’s-ville.

Good thing we hold bankers and used car dealers in higher esteem. Is there hope?

It’ll depend on YOU!

Time is not on the side of those who still want to be responsible for making their own decisions or, should that read, those who don’t EVER want those obligations to be taken over by government!

The day after that happens, it’s so over.

#103 Coho on 10.02.12 at 1:26 am

Comments from around the galaxy about the earthly powers that be and their enablers:

The Romulans:
“If they had brains, they’d be dangerous. They do, however, have just enough knowledge to do themselves in fully and completely. Good thing they haven’t figured out how to venture out from their planet yet. We expect they’d be terrible company.”

The Klingons:
“We’re hard pressed to find a single one with honour among them.”

The Borg:
“Resistance is WORTHWHILE! WE DON’T WANT YOU POLLUTING OUR RANKS!”

The Ferenghi:
“Hey these guys are great! We like ’em. Deceitful, cunning, adept at using their monetary system to manipulate, control, enslave and just plain ol’ screw over their underlings! They love money and power and trinkets even more than we do! We could do without their brutality though, but hey, these guys can teach us a thing or two. Maybe we’ll grow to be as rotten as them someday!”

#104 Benchwarmers on 10.02.12 at 1:26 am

Brilliant piece Garth. What a great angle! This will fire everyone up and get them talking! You’ve just opened a whole new can of worms! Haha! Again Brilliant. Check and Mate!

#105 Molly on 10.02.12 at 1:32 am

Garth you age very well! You look the same as in the 80’s haha

#106 Blacksheep on 10.02.12 at 1:33 am

Smok’in man #21,

“you shits should be happy and bloody great full to you have real one here”

“I should just take my ball and leave the playground”
———————————–
Your ego thrives on this crap, so I’m calling your bluff.

Your deluded into thinking, you’ve got exclusive insight into how the world functions.

You wanna talk down to someone, do it somewhere else. The good people of this blog don’t deserve your disrespect because you made some asinine statement you can’t back up.

I’ve learned from many here, but virtually nothing from you…

Leave……..for……..good, I dare you.

Blacksheep

#107 Jay Currie on 10.02.12 at 1:34 am

The first house my first wife and I bought was in Kits in 1981 with a 19% 6m adjustable mortgage. The good news was we paid 215K for 3500 square feet and we had 25% down. My banker father was sanguine – “six months from now the rates will be 15 and drop from there”. And he was right.

The rate is part of the equation; but the price is the whole story. My now ex-wife missed the last million but she walked with a little over 1.5 net of renos etc. a few years ago.

We are in for a correction. A large one. The interest rates are a secondary consideration; the primary consideration is the return to value. We are a long way from that but it will come.

And then, perhaps, it will make sense to buy.

#108 Finally on 10.02.12 at 1:34 am

Garth, no offense, I love your column and your advice, but I think it’s time to change your hair style.

#109 Industrial Guy on 10.02.12 at 1:41 am

Garth, you used to work with the Conservatives in Ottawa. Are they all crazy?

Immigration Minister Jason Kenney’s parliamentary secretary for multiculturalism invited a white supremacist group to speak at a commons hearing on immigration.

A week later, some backbencher prone to Bozo Eruptions claims that the present leader of the NDP pushed the previous one into an early grave.

#110 Mr Buyer on 10.02.12 at 2:01 am

Am I to understand that these home owner bail outs are an attempt to keep house prices high? Good luck with that. I was thinking free Post Secondary Education (especially science and engineering) and selective grants to repatriate strategic manufacturing might be a more effective way to spend money but hey if throwing away money on severely over priced houses makes sense to the electorate who am I to argue? It is not going to have any impact on the real estate collapse in the long run.

#111 Freedom First on 10.02.12 at 2:16 am

Interesting post tonight Garth!

1st thing that came to my mind while reading it was the Beatles song “Help”, been singing it for a few minutes now. 2nd thoughts were of the U.S. and Europe. I think the U.S. gave the biggest of the help offered by giving food stamps to about 50,000,000 Americans. Meanwhile, looks like all the people in Europe are getting is the riot police. I think the help in Canada will come somewhere in the middle of those two methods. Helping the middle class and the poor is something that Governments will stop at nothing to give. Kind of like consumer protection, as, “Just look in the mirror”.

#112 Phumb Ducker on 10.02.12 at 2:47 am

The day that the government wants to subsidize my rent or bail me out of any of my debt obligations (to the tune of ten’s, possibly hundreds of thousands of dollars per household) is the day I will accept that the government should be bailing out distressed home owners who have foolishly over indulged on credit.

In my perfect world, the CMHC would be abolished. Why should my hard working, tax paying, sorry ass have to pay out bail out either lenders or debtors for decisions gone bad?

#113 superman on 10.02.12 at 2:56 am

Garth, what do you think of the guys giving away free cars with the purchase of a townhouse in Richmond BC?

#114 Ano - GTA on 10.02.12 at 2:58 am

I’d like some free money too… Is it too late to get in?

Yeah rite – Let’s reward financial illiteracy and irresponsible decisions with CA$H…

We bailed out Auto industry(How did that work oout?). Now we bail out distressed home owners…

I say if they do that, then they also add a clawback – to anyone who profited by selling investment properties – and back date this to 2008!!!

For every penny that they give distressed home owners, they need to balance it off by giving tax credit/CA$H to non home owners…. Only then it will be a fair game…

I’m thinking being a Contrarian is good… But walking with dumb herd might just be a notch better…

#115 futureexpatriate on 10.02.12 at 3:07 am

“…and I looked like this.”

Hippie!!

Oh, loving the picture of the “fat cat” by the way!!

#116 futureexpatriate on 10.02.12 at 3:08 am

Look. EVEN Vancouver and Victoria houses will sell like hotcakes.

WHEN the prices are finally low enough.

#117 gtrz4peace on 10.02.12 at 3:16 am

#40 Toronto CA

Isn’t that lovely? Making sure to “shelter” all your money out of North America while you live like a parasite OFF OF North America.

Offshoring of jobs, and revenues, and taxes that people gleefully get to “keep” from the government, when it becomes the modus operandi, is a problem, not a solution.

#118 gtrz4peace on 10.02.12 at 3:23 am

RE: Bailouts

There should be NO bailouts for speckers. On the other hand, a primary residence, that might be a separate issue.

For speckers and nultiple property owners who went into debt to try and”cash in” on real estate, no bailouts.

For homeowners caught in a bad spot out of ignorance (bad) but they would be in the street with children eating out of dumpsters (worse) we should consider ways to let them keep their homes.

Perspective.

#119 Saskatoon-Living on 10.02.12 at 3:25 am

Are you sure your’e not from SK Garth?? Anyone with a haircut that like for this long has to be from this province. Is that the reason why you don’t do a post on S’toon???

#120 dosouth on 10.02.12 at 3:37 am

This is too good not to be shared!

http://whispersfromtheedgeoftherainforest.blogspot.ca/2012/10/meanwhile-in-usa-perfect-storm-is.html

#121 Jack on 10.02.12 at 4:01 am

@#60…AGREED!

#122 Mark on 10.02.12 at 4:55 am

The banks bought CMHC insurance. They bought it to collect on it. Otherwise they would have not purchased it.

The government will be taught a lesson in terms of playing with the sharks (bankers).

Wouldn’t surprise me one bit to see the government ultimately take a $300B loss on the CMHC. All of this will ultimately end up in the hands of Canadian bank shareholders.

#123 Deb on 10.02.12 at 5:42 am

How bad had things become in 1981? I distinctly remember seeing my high school algebra teacher at the mall. He had taken on a part-time job at a kiosk selling hard candy.

#124 John on 10.02.12 at 5:49 am

Renters Rule wrote:

“They will have to file for bankruptcy, that’s what people did on the early 1980s! There is no way to “fix” this except to let the economy return to a normal balance when it comes to residential RE and its role in the Canadian economy; it is simply unsustainable to keep propping up this bloated pig. The mortgage brokers can go and get file clerk jobs at the trustees in bankruptcy firms, who are going to become extremely busy….”
——-

Still think it’s a “Canadian” problem eh? So let’s here more about “Canadian” real estate and it’s role in the “Canadian” economy. You don’t seem to have even a clue about the big picture, cause and effect and where this is going.

Do you still think this is a “correction”? Why? This “let them take responsibiity” BS is a red herring. You drank the koolaid.

#125 Tony on 10.02.12 at 6:38 am

A free tent and a free blanket for anyone who lost their house to the bank. Canada will likely make the same mistake of huge property tax increases at a time when the housing market is making the biggest crash on record. One thing is for sure taxes will go sky-high.

#126 pbrasseur on 10.02.12 at 7:11 am

Garth I did not know you were THAT old!!!! :-)

#127 Lead Paint on 10.02.12 at 7:16 am

That’s not a cat, that’s a wookie!

Garth, your beard hasn’t aged one bit.

#128 Smoking Man on 10.02.12 at 7:24 am

#106 Blacksheep.

O vay. Has it not crossed your mind that the Smoking Man is not real. A character invented by a big brested menoposal woman, out of battaries writing a book at an internet cof shop.

I’m a writter, all writers are wack jobs get over it.
So I can’t spell why should that stop me.

The fact that I have touched you and have had several emotional responces is a testement to my skill.

The perfect calling of markets and everything a fluke.

Darn just chipped a nail on the keyboard

#129 TurnerNation on 10.02.12 at 7:29 am

Another one, cut:

RBA Cuts Rate to 3.25% as Mining-Driven Growth

Australia’s central bank resumed cutting its benchmark interest rate to revive demand outside of a resource boom that may crest at a lower level than previously expected, sending the nation’s currency to a three-week low.

#130 TurnerNation on 10.02.12 at 7:35 am

So they were right.

http://www.bloomberg.com/news/2012-10-02/top-1-got-93-of-income-growth-as-rich-poor-gap-widened.html

Top 1% Got 93% of Income Growth as Rich-Poor Gap Widened

#131 Form Man on 10.02.12 at 7:37 am

President of the Victoria Real Estate Board has a warning for buyers:

“people shouldn’t wait for prices to drop, because we never know when interest rates will be increased to stimulate the economy”
http://vreb.org/mls_statistics/current_statistics.html

so that is what has been holding the economy back……!

#132 Steve on 10.02.12 at 7:40 am

#70 Not 1st on 10.01.12 at 11:29 pm
How about letting people tap their RRSPs to make emergency mortgage payments if needed and pay it back within 6 months or something.
___________________________________________

Provision for using RRSP in emergency already exists…rules relaxed a little by, you guessed it, F after the GFC

http://www.cbc.ca/news/business/story/2008/05/09/rrspchanges.html

#133 Mark on 10.02.12 at 7:41 am

Spoken like a true conservative, Garth. Conservatism is a reaction against emancipatory movements.

It’s interesting that a reactionary position in support of the status quo can be thought of as the “rebel” position. Edmund Burke would be proud of you.

#134 Gord Morrow on 10.02.12 at 7:41 am

The government has already protected the lenders from mortgage defaults with CMHC insurance, They will probably be stupid enough to try and protect the buyer as well. Only thing that may stop them is they a broke and at some point they wil have to stop borrowing as well.

When will their come a time that people are responsible for their own actions? We have been warned not to take on too much debt but we refused to listen.

If people get bailed out for housing, I want to get bailed out for the my losses in Income Trusts, something that we were not warned about.

But I can hear the argument now, we are losing home not just an investment, this is different. Well tough, yes, you need a place to live but it was you who chose to buy something you could not afford.

Unless you can prove someone held a gun to your head and made you sign on the dotted line when bought your house, you are on your own. NO BAILOUT!

If you have more house than you can afford (http://www.timeandmoneyconnection.com/2011/11/is-your-house-your-castle-or-your.html) then take Garths advice and get out before it is too late.

#135 TurnerNation on 10.02.12 at 7:42 am

As previously mentioned: shades of the USPS’s Elvis stamp debate.

Will Canada Post’s commemorative Garth stamp use his youngrt, trim visage. Or the older, wild-haired one?
:-)

#136 Steven Rowlandson on 10.02.12 at 7:49 am

Should government bail out or subsidize the real estate market or mortgage lenders in any way shape or form?

No! Absolutely not! Those that practice financial sodomy like real estate speculation and paying too much for real estate must financially perish from the earth. The wages of sin is death. Death comes in many forms.

#137 Smoking Man on 10.02.12 at 7:51 am

#60. That’s the spirit about time you gen grew some

#138 Victor on 10.02.12 at 7:59 am

http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/why-gen-y-should-tough-it-out-in-the-rental-market/article4580877/

Renting is the obvious alternative for someone who is unready for the financial blood-sucking that home ownership entails.

But low vacancy rates have made it a landlord’s market in some cities, notably in Toronto. Might as well buy as pay hefty rents, some will say.

Don’t listen, Gen Y. Tough it out in the rental market unless you can truly afford a home or, if extreme measures are required, move back in with your parents for a while to save a down payment.

#139 █ ♣ █ Pofit is MINE - Loss is OURS on 10.02.12 at 8:01 am

#28

So Garthoney, are you saying that Bailout might happen to Lululemonized-Starbuckers Miele-Aga Horny?

or
just the lobbyist -Talk about bailout might happen.

I know that you have ear in certain circles and that few big shots read your pathetic blog.

Should we get ready for massive demonstration soon?

Only if you call me that again. — Garth

#140 wildcat on 10.02.12 at 8:11 am

Garth, much of what you say makes sense but … how are people to opt for rental housing when there isn’t any? Winnipeg, for example, has a vacancy rate of less than 1 or 2 per cent. Thanks for your blog.

#141 NewWorldPartyDotOrg on 10.02.12 at 8:12 am

“Should the government save the butts of people in Vancouver about to see the value of their homes plunge by a third or more?”

When the stock market plunged in 2008, millions of investors (speculators/gamblers) lost billions of dollars. Should the government have bailed them out?

The vast majority of the population are self-employed or work for small to medium size businesses. Thousands of them go bankrupt every year. Many of them lose much more than just home equity. Do taxpayers bail them out?

Whenever the government bails out Paul, it has to get the money from Peter. Peter is the taxpayer and the younger generation due to the huge deficits and debts.

Speculating in real estate is no different than speculating in stocks. They are both gambling activities. An activity is classified as gambling when there are these elements:

1. put in some money
2. chance
3. pay-off or loss

Boston University Law Review clearly explains how investing is identical to gambling:
http://www.bu.edu/law/central/jd/organizations/journals/bulr/volume86n2/documents/HURTv4.pdf

“…gambling and investing are identical activities of wagering
on an outcome in an environment of uncertainty.”

If the government bails out home-owners, then the government should reimburse all the money that gamblers lost at lotteries and casinos.

For the past 1-2 decades, homeowners and speculators (gamblers) benefited from the massive manipulation of housing by the government:

http://www.newworldparty.org/2011/04/housing-most-manipulated-market-in.html

Now that those benefits are vaporizing, they want the government to give them more money?

They made the wrong gamble and they want to reneg on their bets.

#142 Nukester on 10.02.12 at 8:19 am

Fannie Mae and Freddie Mac cost the US people over 317 Billion dollars and growing. CMHC has little room to “insure” Canadian mortgages. A bailout is the worst thing that can happen to Canadian taxpayers and yet that is probably what is going to happen. It will come slowly with rule changes and under reporting of the true costs, sort of like the F35 fiasco.

http://www.cbc.ca/fifth/2012-2013/2012/09/runaway-fighter.html

My question is: Where is all the money collected from all those insurance premiums? Who has it, who controls it and where is it “invested” or has it just been spent by the CMHC organization? At the bottom of this fetid barrel is the truth that may be the biggest scandal of all time.

#143 Mr Buyer on 10.02.12 at 8:20 am

In Japan, or more accurately in the little town of 250k people I live in, many people are still paying their way out from under the bubble 21 years later and some have paid their houses off recently (these are the people that borrow that is, there are a number of people that pay cash and they are not rich).

#144 mythbuster on 10.02.12 at 8:23 am

Dear Garth,

Now I understand why you did not last in the political world: You believe that what is RIGHT trumps what is WISE [and expedient, and opportunistic, and … add your own…].

It’s the other way around. And that is why in Canada too there will be a political ‘fight’ against implosion. It gets votes!

#145 EIT on 10.02.12 at 8:24 am

By protecting people who made a poor RE decison, we are hurting those who didn’t. More social propaganda, more looting, more of the same. There is no free lunch, yet here we are, again. Shame.

But… Skeptics be dammed! Do they not know this is all for the public good! Pah! Makes me sick!

#146 robert james on 10.02.12 at 8:25 am

Pigs get slaughtered.. They don`t get bailed out ..

#147 Cory on 10.02.12 at 8:31 am

Got my 2012 assessment yesterday. Almost fainted. I live in Woolwich Township.

Went from $652K to $752K. Taxes are already 7K per year.

#148 2centsCdn on 10.02.12 at 8:42 am

There’s no way out of this without pain, screaming and misery …… for crying out loud just let it happen. All the home money gains people think they have (had) are artificial. Anyone who didn’t cash out in the last 12 months and rent, is going to ride this roller coaster into the next valley. Just keep making your payments and keep going ….. you’re in the same house, your kids are going to the same school, you’re going to the same coffee shop, you’re just as financially tight as you were last month, just keep going. How was it going to be any different? You were going to sell your mansion and move to a shack? …. and get rid of that mortgage? …. I think not. How uncool would that be? It’ll all be the same except people will have less equity than they had. As far as the building and real estate industries getting hammered? Let them get hammered. Let the risk takers take one on the chin. You can’t “save” the ignorant, greedy and stupid and load it on everyone else.

#149 };-) aka D.A. on 10.02.12 at 8:52 am

If prices correct by 20% or even 40%, there’s never been a more well-deserved financial haircut – Garth

It may just be that I am getting old and long for days gone by but it seems to me the people are getting more combative with one another as they compete for a life and lifestyle they seek to attain or maintain – like rats in a cage.

Since the discovery of oil our economy has grown like never before, our world has become smaller and our global population increased. We transport once exotic foods to and from all corners of the world that they are now commonplace, expected and taken for granted. We produce things where they are cheapest and ship them to where the finish product can command the most.

The internet disseminates information as quickly as one’s own synapses and the economy reacts just as quickly to the signals often overreacting one way or the other.

The sleepy almost hamlet I grew up in has become a major metropolis and those close-by along with it – there is no escape.

Yet so many expect a return to the way it was; prices to fall despite increasing demand, less competition for that which they too want despite increasing popultions…

We’ll never run out of oil. There will always be oil. It’s just that eventually there will be but one last barrel of it which no one can afford. Between now and then oil will become a more scarce and expensive to obtain commodity – like a rare coveted wine it will be sipped and enjoyed by only the most affluent. Meanwhile expect the cost of everything dependent upon it (oil) to continue to go up and along with that so too will the price of keeping a roof over your head – be it bought, borrowed or rented.

Peak oil is here, cheap oil has passed and along with it all that you long for. Things are going to get more difficult for many. As cheap oil wanes income disparity will broaden and the rats in the cage will become more and more hostile. It is oil which facilitated the packing of six billion more bodies on this planet where just one hundred years ago there were but one. That’s seven times the population, seven times the demand, seven times the number of rats in a cage, seven times the competition for limited resources.

Figure it out.

#150 Herb on 10.02.12 at 8:57 am

#8 NoOneOfConsequence,

your comment contains a chunk of truth. The banksters and rest of the FIRE industry made out like bandits, the government got itself re-elected (twice), some homeowners cashed out and bailed, and the hindmost are stuck with the bill.

Time to add insult to injury and blame the victims. They didn’t have to believe the BS of marketing and propaganda. Everyone knows that buying a case of a brand of beer does not deliver the cottage, girls and party of the ad, and yet corporation pay bundles for making and running such ads – because they work. People aren’t born stupid, they are made that way, in a long, expensive, self-serving process.

If we had truth in advertising, would government and the economy grind to a shuddering halt?

#151 Buy? Curious? on 10.02.12 at 9:03 am

Oh, the eighties, Duran Duran, Miami Vice and Canada’s contribution to pop culture, The Littlest Hobo, good times Garth. However, a bus load of complainers isn’t going to do it this time. The Conservatives won a majority with the lowest voter turnout in ages. Apathy rules. All these attempts to keep the party going are happening whether you like it or not. Canada only riots after hockey games.

I have a question that maybe one of your wrinkly fans could answer for me. If all the fundamentals that happened in the US with regards to real estate and in fact, we are in a worse position, does that mean that the unravelling of the social fabric there, will happen here?

#152 Herb on 10.02.12 at 9:03 am

#8 NoOneOfConsequence,

your comment contains a chunk of truth. The banksters and rest of the FIRE industry made out like bandits, the government got itself re-elected (twice), some homeowners cashed out and bailed, and the hindmost are stuck with the bill.

Time to add insult to injury and blame the victims. They didn’t have to believe the BS of marketing and propaganda. Everyone knows that buying a case of a brand of beer does not deliver the cottage, girls and party of the ad, and yet corporation pay bundles for making and running such ads – because they work. People aren’t born stupid, they are made that way, in a long, expensive, self-serving process.

If we had truth in advertising, would government and the economy grind to a shuddering halt?

[Apologies if this appears twice: got a “Oops, this link appears to be broken” when I tried to submit, so re-submitted after link seemed restored.]

#153 Steve on 10.02.12 at 9:09 am

I have seen this mis-guided thinking before.

My FIL wanted to teach his 2 daughters how to manage money, so gave them both a few dollars. The older one put the money in the bank (the behaviour he had wanted) and the younger one ran out and bought candy. When he found out what they each had done, his response was to give the younger one another few dollars, so she could try again.

He died in 2006, penniless. His younger daughter is pretty much penniless too, living on CPP/OAS only.

Seems like allowing people to enjoy the rewards when RE increases in value and then bailing them out when it decreases is as backwards as his thinking was, and will likely end with similar pathetic results. Most will still not learn how to take adequate care of themselves.

I don’t mean to suggest that we should throw people over a cliff, just that we should let people reap the outcomes that they have created for themselves. The only way that people will learn to be responsible for themselves is if they must be/are allowed to be.

#154 Steve on 10.02.12 at 9:10 am

I have seen this misguided thinking before.

My FIL wanted to teach his 2 daughters how to manage money, so gave them both a few dollars. The older one put the money in the bank (the behaviour he had wanted) and the younger one ran out and bought candy. When he found out what they each had done, his response was to give the younger one another few dollars, so she could try again.

He died in 2006, penniless. His younger daughter is pretty much penniless too, living on CPP/OAS only.

Seems like allowing people to enjoy the rewards when RE increases in value and then bailing them out when it decreases is as backwards as his thinking was, and will likely end with similar pathetic results. Most will still not learn how to take adequate care of themselves.

I don’t mean to suggest that we should throw people over a cliff, just that we should let people reap the outcomes that they have created for themselves. The only way that people will learn to be responsible for themselves is if they must be/are allowed to be.

#155 John on 10.02.12 at 9:15 am

A very dynamic blog today. The cost of not understanding where the cheap money came from means Canadians turn on each other. I’d say that this is an example of ignorance being dangerous. It’s amazing how quickly this can devolve into a mish mash of wrong questions and wrong answers.

Nostradamus Le Mad Vlad wrote:
“Cdns. must have been overdosing on stupid greedy pills for the past several years. No. No bailouts, as the smart ones who saved and invested, lived relatively disciplined lives and well within their means to get where they are now — why should they be held responsible for somebody else’s cock-up?

Each is guaranteed the right to the freedom of choice to do as they please. Each has the right to make their own choices, and each is responsible for living with the consequences of those choices.”
—–
This is very clearly the way to go with everything in life. This is freedom, responsibility and adulthood. But do the due diligence first. As your many links have demonstrated, it’s clear that the recent ( four year) promotion and sale of cheap international cartel money was fraudulent. You know this is true.

What percentage of the people posting here don’t know about this fraud? 5%? 10? They would be the ones to make your comment ( which would be true in a disclosure context). But the context is full-on fraud. The largest global fraud to have occurred in history. Correct? Is that a matter of debate? Of course not.

If you posted a survey about LIBOR, how many know what it is and what the LIBOR fraud means? 2%? How about the suckers who got hooked in the money sale? Maybe .1%? How many still believe Canada is sovereign? 97%?

We’ve got a big problem here. As long as the “big lie” stays in place, people turn on each other. The continual avoidance of connecting the dots isn’t free. Look at the uninformed comments that are showing up.

What do you think? Nobody here does more reading and Internet link providing than you.

#156 Frank le Skank on 10.02.12 at 9:27 am

No bailout, look at the big picture and its pretty obvious. By bailing people out, you will not increase affordability. Why try to sustain unaffordable house prices that are going to kill consumer spending? It doesn’t benefit anybody. The Metro paper in Toronto had a few articles related high unemployment for the next generation of buyers aged 15-24. There was also talk of unaffordable housing, imagine that! A lot of companies are negotiating a two tier wage system, which means that all new hires will not be paid very much. IMO, what that will probably translate to is the eventual layoff of the employees who are under the old pay scale. So if you compound this with the retiring baby boomers who underfunded their retirement, the long term outlook seems pretty sad and will no support current RE prices. No bailout for you!

#157 Frank on 10.02.12 at 9:44 am

You must go through a lot of black shoe polish.

#158 Smoking Man on 10.02.12 at 9:48 am

MIA. Negative real estate stories in the MSM in fact there are a few blowing sunshine.

No accolades black sheep. A bow and an I’m not wothy will do.

#159 Pr on 10.02.12 at 9:48 am

Can they just leave the real estate alone for a couples of decades.

No more manipulation and new rules for : schl,cash back morgage, amortization, interest rate, etc.

If gouvernement keep making intervention like that. Theirs no end.

#160 David McDonald on 10.02.12 at 9:50 am

Hi Garth,

I was with you in that rally on Parliament Hill! My own self interest was what drove me there but I still feel there was a fundamental unfairness in the way government mandated high interest rates fell on a small proportion of the population; i.e. those unlucky home owners whose mortgage fell due at the wrong time. I always felt it was like the Roman policy of decimating a legion that retreated in battle; i.e. they executed every tenth man. It works to keep discipline but it’s a bit unfair.

#161 Daisy Mae on 10.02.12 at 9:50 am

Must the government go from bad to worse? Must they throw good money after bad? Haven’t they learned anything at all? Appears the stupidity might continue.

Thousands of ‘newbies’ made poor decisions. Now, they either sink or swim. Period. End of story. And maybe, just maybe, they’ll learn something from this experience….

The situation in the eighties was, of course, entirely different. There are NO parallels.

#162 };-) aka D.A. on 10.02.12 at 9:58 am

#151Buy? Curious? on 10.02.12 at 9:03 am

I have a question that maybe one of your wrinkly fans could answer for me. If all the fundamentals that happened in the US with regards to real estate and in fact, we are in a worse position, does that mean that the unravelling of the social fabric there, will happen here?

We are inseparably joined at the hip to the US economy. What do you think? But, growing word on the street is that the US economy is picking up with marked signs suggesting so. Does this mean still we must falter while they prosper or will their return to more buoyant times spill over to Canada that we never falter quite so as they did? And then there are those who believe the US has only deferred the “inevitable” day of reckoning…

Your guess is as good as anyone else’s. Or do you too have a crystal ball?

It is what it is. I think we are coming to realize and cope with that – that it is different now and will be tomorrow and the next day and the next. We are moving forward – with new parameters, some broader others more restrictive, but within those parameters the story remains pretty much the same. The only thing constant is change – and how we deal with it. Coping and dealing with the new realities not knowing what the next will be – for some it’s not so easy, some will not survive. Darwin would be quite intrigued.

Rats in a cage.

#163 TorontoBull on 10.02.12 at 10:09 am

@21
SM, I find our post entertaining and mildly enlightening. When you say you are bullish SFH 416, do you mean detatched, semi, and row? Supply is pretty low for detached so you might be right therre..just curious
btw…how is the long oil play working for you? :)

#164 Paul on 10.02.12 at 10:14 am

#27 GTA Girl on 10.01.12 at 9:57 pm

He also said that so far there has been no correction on prices.

#165 Toronto_CA on 10.02.12 at 10:19 am

#117 gtrz4peace on 10.02.12 at 3:16 am

If I moved away permanently to Australia or some foreign country, as in permanent emmigration, please explain how I would be a parasite to North America? You do know that non-residents of Canada don’t get health insurance (legally) and if you don’t file Canadian tax returns you don’t get any CPP credit right? You can’t really benefit all that much from a country’s services like police/fire/roads if you don’t spend any time in it. I wouldn’t be “sheltering” my money I’d be taxed in the new jurisdiction that I move to (via extremely high consumption taxes on the islands or income taxes elsewhere).

I’m not sure where the parasite accusation comes in. Right now I pay more in federal and provincial income taxes each year than the majority of Canadians earn in a year (from Stats Can). From that fact alone I’m surely subsidizing a lot of people (as are most high income earners). That would make me the host creature being fed off of, rather than the parasite.

So leaving Canada to go live in another country would just remove me from this particular host/parasite relationship and put me in another one with the same dynamic. Rather than turn me into a parasite of Canada.

Hope that clears it up.

#166 IM in C on 10.02.12 at 10:19 am

Don’t kid yourself. If the real estate market goes as far in the tank as some people on this blog hope it will; the government will step in. Why? Because this is Canada and we are Canadians.

#167 Canadian Watchdog on 10.02.12 at 10:20 am

Royal LePage, Genworth Canada announce strategic relationship Link

Distressed homeowners are already being bailed out. So whatever (if) is being discussed would be an expansion of similar measures currently in place.

As for Genworth: how could they afford to bail out homeowners? Simple. F changed the rules for private mortgage insurers and returned their posted collateral for the 90% taxpayer-backed guarantee. Link This means tax-payers are now guaranteeing private sector insurance with NO COLLATERAL behind it.

The only certainty in an uncertain economy is that the government will do stupid things.

#168 Daisy Mae on 10.02.12 at 10:27 am

#53 Observer: “Garth, I’m shocked that you’re even going there.”

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

Why not? I, for one, want to know about any possible scenarios that the ‘cons’ might try to implement.

#169 Daisy Mae on 10.02.12 at 10:31 am

#54 John:

I scroll past your posts. I don’t believe you want to debate. You seem to just want to contradict.

#170 John on 10.02.12 at 10:51 am

Daisy Mae wrote:

#54 John:

I scroll past your posts. I don’t believe you want to debate. You seem to just want to contradict.
——

I read your posts. Your point of view just seems to be a “general agreement” with the supposed “contrarian”, chapter and verse.

You say that the content of those posts is “contradiction”, yet you haven’t the slightest interest in their content.

I’d say you don’t need to scroll past anything…your denial filter, designed to protect existing beliefs, is in very good shape.

You’re following a “crowd”, and not thinking for yourself. What to you appears as contradiction is actually a sustained challenge to the fundamentally flawed status quo.

Just because it doesn’t fit into your neat belief system does not mean what’s being said is “contradiction”. You’re not interested in what it is. Which is fine.

Scroll on.

#171 jess on 10.02.12 at 10:55 am

from watchdogs link :

“Mortgage fraud negatively affects the real estate market,”
=======
“Piece of shit,” “shit breather”
Oh, the metaphors!
So as a breather following the fumes ,would that make them free riders?

http://www.huffingtonpost.com/2012/10/01/bear-stearns-mortgage-bond-emails_n_1930731.html?utm_hp_ref=business

http://thechronicleherald.ca/business/138736-ex-arbitrage-genius-unveils-corruption-evil-on-wall-street

#172 disciple on 10.02.12 at 10:58 am

#21 Smoking Man… Your greatest post ever!… But you’re still an idiot…;)

“The word theatre comes from the Greeks. It means the seeing place. It is the place people come to see the truth about life and the social situation. The theatre is a spiritual and social X-ray of its time. The theatre was created to tell people the truth about life and the social situation. Life beats down and crushes the soul and art reminds you that you have one.” – Stella Adler (a Keira Knightley look-a-like…

#173 rosie on 10.02.12 at 11:03 am

#130
Looks like the top 25% have prospered mightily since Ray-gun started trickling down onto the silent majority.

#174 disciple on 10.02.12 at 11:06 am

I wrote a few cheques the other day; therefore, I created money out of thin air. Money is just a promise to pay. If the funds are not in the account upon which the money is drawn, I will have to come up with it somehow later on. Most of you are chasing something that does not exist, because you believe it will buy you something you feel you need. What is stopping you from denying “Smoking Man’s Machine” its fuel supply and dropping out of the rat race? Demand from your government what needs to be done. Honey Booboo is just distracting you. Just like all these actors I’m pointing out to you… Can you see it?

#175 Smoking Man on 10.02.12 at 11:09 am

#163 TorontoBull
Sfh. Detatached and semi. Touch nothing with maintance fee.

Oil down a bit. Mk to Market but I bought jan contracts. but its an isreal attk Iran bet. And money printing bet. When Cnn reports breaking news bombs are falling on Iran. It will be to late to buy. Will be in the money severl times before contact matures

#176 kreditanstalt on 10.02.12 at 11:20 am

I don’t see any difference between 1981 and 2012.

Possible future government/central bank actions are a factor to take into account when making any financial decision. Everyone has to reckon with that, at any time…

What I’d have expected to see from you is not ad-hoc policy advocacy but a philosophical objection to – or approval of – government interference in free markets.

#177 45north on 10.02.12 at 11:23 am

Mithan: As they say, “it wont end well”. It sure is funny watching dumbass politicians trying to “save” something though.

up to now the only political actors are the Federal Conservatives. The Liberals and the NDP are missing-in-action.

#178 robert on 10.02.12 at 11:35 am

Canadian Bailout for homeowners? Please people since when did the Canadian Government ever execute a major program in a timely manner. Remember in order to have a basis for a bailout you must have a crisis and a 20% haircut is far from a crisis. What this does tell me though is the Government is very nervous by what they see and are trying to jawbone this market hoping to avoid a panic RE price drop to the tune of 50% or more. If there is a bailout it will be far to late to save this market and IMO in the next 6 months to a year you will be buying Canadian RE at fifty cents on a dollar. On the other side of the fence you could be selling for fifty cents on the dollar. Does anyone really think that at a time of record home ownership that Ottawa is going to suddenly allow mortgage interest to be written off. Oh yes they will want to apply capital gains at the top of the market too.. I agree that they are not that smart but you have to give them a little credit..

#179 2centsCdn on 10.02.12 at 11:37 am

Smoking man:
MIA. Negative real estate stories in the MSM in fact there are a few blowing sunshine.

No accolades black sheep. A bow and an I’m not wothy will do.
—————————————————————–You’re not wothy alright …. you can say that again. MSM trying to keep the lie going isn’t a good thing. But its a gift for people who haven’t got their sh!t in order yet. It’s buying some people some time to fix their dept problems, sell sell sell (sorry BC …. too late for you).

But MSM’s smoke and mirror show will eventually crack …. and the data will become so obvious that no more facts will fit under the rug. Smoking man …. we always eventually pay for what we do wrong …. ask your lungs and liver ….. you also will pay. Reality always eventually surfaces. We can delay it … but we can’t stop it.

#180 Suede on 10.02.12 at 11:39 am

Looks like we are in a grey state of somewhere around here:

“Phase three: Now sales levels decline exponentially, but prices stay sticky. Idle real estate agents spend their nights on GreaterFool.ca questioning my manhood. They fail.” (GT)

#181 gladiator on 10.02.12 at 11:49 am

ok, fellas, everyone has an agenda. the guvmint wants votes and will cater to the majority of potential voters. with 70% of people “owning” houses, who will the guvmint listen to? answer: those 70% and not us who will be kicking and screaming at this absurd move (bailout of the home “owners”). you may protest all you want and even go into the streets. the guvmint has batons, rubber bullets and pepper spray for that. the home “owners” are indeed richer than they think.

#182 Duncan on 10.02.12 at 11:51 am

Is it my imagination, or did you look like a more professional Russel Crowe….?

#183 Canadian Watchdog on 10.02.12 at 11:55 am

#176 kreditanstalt

“I don’t see any difference between 1981 and 2012.”

You do now. This is not 1980s.

#184 steve p on 10.02.12 at 12:06 pm

Hi Garth

please answer this question for me:

what is the total mortgage debt in canada up to August 2012.?
i can only find figures up to feb 2011

your answer would be greatly appreciated
thank you

#185 daystar on 10.02.12 at 12:07 pm

Brilliant piece Garth. You’ve nailed the mood out there for one as realtors know first hand what the market is doing and its their bread and butter so they know the market is in trouble and what is their solution? Lets generate some “bail out” noise for support, most naturally to wit, I must say, “let them cry”.

I speak generally when I say this but realtors, bankers, flippers and speculators, politicians and anyone who had a hand in creation of this nasty housing/credit bubble could have, at any time voiced concern with running up valuations too unsustainably high. (Ah, but look at what happens with those who do right?) Instead, their only greedy concerns were to run up valuations to BEELZEBUBBLY unsustainable highs as though they were all going to get 5 gold stars for each new “record”.

I say, let them see stars. I could really give a rats ass if they lose their jobs, their bonus’s, their houses, their livelyhoods, their status, their prestige, everything short of their physical health and why? Because its all a product of greed, pride and pure selfishness. (the same kind of product that wrecks planets, btw)

When the economy goes to hell (and it will) and governments become unpopular and bankers become evil and they bemoan their own illogical, greed and power filled choices when it all caves, should the taxpayer bail them out? Should the taxpayers and shareholders vote them back in? Should we reward utter failure with support and success?

To do so would make us the greatest fools of all.

This is your nation, fellow Canadians. Unbeknownst to some of you, we still have one. I don’t expect all of you to understand that government policy can take years if not decades for the true damage of bad choices to be revealed whether its through regulations, taxation, spending, new and old laws or old fashioned governance within those laws. Throw in the failings of human nature into the equation and some of us truly don’t have either the time or the means to understand it all and some of it is complicated. However… if some of you wish to not become politically engaged, to keep your voices quiet, to not challenge authority when its needed, never mind question… there will be consequences to such inaction. To not think so is to look upon a spoiled child crying because the toys are taken away and think giving them new toys will solve the problem.

Like today. Just wait til’ tomarrow.

#186 Dude from Richmond on 10.02.12 at 12:12 pm

#113
Giving away a car if you purchase a Townhouse in Richmond.
They did the same in 2008/2009.
It’s deja vu all over again.
But this time, there will be no Chinese buyers.
They are selling out and going home.

#187 betamax on 10.02.12 at 12:13 pm

#91 Mithan: “With 70% of the country owning a house, I think we can pretty much expect a bailout”

Like TRT, you have it backwards. The market is too big for the govt to bail out. Same reason the US govt. didn’t bail out middle-class home owners comprising a similar 70%: because it couldn’t. Didn’t happen there or anywhere else there’s been a housing crash ever.

It’s not different this time. On all counts.

#188 daystar on 10.02.12 at 12:16 pm

177 45north on 10.02.12 at 11:23 am

One doesn’t support the Lex Luthor’s of the world just because they are smart and when I see so called “smart” politicians in the world run their nations into the ground just because they are way smarter lobbyists, I can’t help but say to myself, “my how utterly dumb they are and moreso, the ones who follow and support”.

#189 In Garth Almighty not God we Trust on 10.02.12 at 12:22 pm

“It was thirty years ago, in 1981, and I looked like this”.

The gaze of the sage is evident Garth, even 30 years ago. Within that gaze is all knowing, all seeing, all encompassing, bearded mystic oracle, denouncer of parliamentarian peckerheads and peckerettes, Harley riding badass, Amazon bathed and protected, contrarian lone voice of reason crying out in the HELOC infested wasteland of Canada.

#190 EIT on 10.02.12 at 12:30 pm

High Canadian public debt equals cheaper Canadian resources for the powerful.

#191 Hawk on 10.02.12 at 12:32 pm

#84 Inglorious Investor on 10.02.12 at 12:00 am

Did you get an aluminum roof done? How large is your roof in sq feet?

#192 MaggieM. on 10.02.12 at 12:33 pm

Have to whole-heartedly agree with Garth. Government didn’t force anyone to purchase a home that they can’t really afford. My husband and I, who live in the 416, have yet to buy even though we earn over $200k/year combined because when we calculate affordability, we build in the risk of interest rates going up etc . Why should we have to bail out those who haven’t weighed the risks carefully when they opted to enter in of their own free will? That would be totally unfair. (And we have 18 month old twins and are the only ones in our social circle who don’t own, so we are well aware of all the societal pressures to “buy”).

#193 a prairie dawg on 10.02.12 at 12:33 pm

@ #149 DA

It may just be that I am getting old and long for days gone by but it seems to me the people are getting more combative with one another as they compete for a life and lifestyle they seek to attain or maintain – like rats in a cage.

– — –

“All your anger, all your hurt
Doesn’t matter in the end
Those days go by
And we all start again”

http://www.youtube.com/watch?v=vkJzwsdMoTk

#194 brainsail on 10.02.12 at 12:38 pm

#165 Toronto_CA

I hear you loud and clear.

I am sitting here looking in the mirror in awe. I’m a graduate of the ’80s bust in Alberta. Then I was a Registered Architect that had worked on some of the major projects in Alberta including the Edmonton Convention Center or what ever they call it now. I found myself out of work and divorced (she married the attorney). I was living on welfare and a part time job in a stereo store. I finally got a job in my profession in the US and have been living there since.

I worked 60% of my life in Canada starting when I was 14 pumping gas. I have just reached retirement age and just found out that my CPP benefits total $153/mth and in order to collect that we have to file a joint tax return. That would put us in negative territory.

So, WTF did I do wrong? I worked during the boom years when the skies were full of cranes and Architects were a dime a dozen because they came from all over world lured by the ads that said that by 1984 oil will be $84 a barrel. Most of us were hired under contract which means no benefits. No overtime and no CPP contributions. No raises or a bonus. If you wanted to make more money you had to change employers that would usually offer you a couple hundred dollars more a month. In a ten year period I worked for seven different organizations. In the US if you work under contract you can not escape Social Security or Medicare payments.

#195 Smoking Man on 10.02.12 at 12:47 pm

#172 disciple

Thanks man.

#196 Smoking Man on 10.02.12 at 12:50 pm

179 2centsCdn

You hit the nail in the head. And I will pay one day.

#197 FullofFear on 10.02.12 at 12:52 pm

It’s disturbing to see a discussion of forgiving loans at this stage. But I’ve said on this blog many times earlier, that those who are up to their eyeballs in debt have no intention of paying it back. I say we hold them to it. Like a U.S. student loan, not even a backruptcy should clear them of their debt. I’m sick and tired of paying for other people’s mistakes and indulgences.

#198 Macrath on 10.02.12 at 12:57 pm

How to make better decisions – BBC Horizon

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

Garth what is the status of the new book you`ve been working on? Is the forlorn gene pool not worth the effort ?

#199 Smoking Man on 10.02.12 at 1:03 pm

180 posts thus far most talking about a bail out.

Well don’t we need a crash first. Just saying

#200 futureexpatriate on 10.02.12 at 1:17 pm

#117 – “Economic Patriotism”… an idea whose time has come!

#201 luke8929 on 10.02.12 at 1:20 pm

You could see this coming, socialize the risks onto everyone and privatize the profits, that’s what this would be for homeowners.

Any why not for homeowners? we did it for the banks to the tune of $114 billion dollars and have insured most of their potential losses through CMHC. Don’t see why you can’t make a case for it, off course it should have never happened for the banks but now the precedent has been set. Who is next? Pension funds? if people are entitled to stay in their house surely their entitled to their pensions? It never ends.

We are going to find out if the rule of law prevails in this Country. I think not, be prepared for government to step in and change the rules to benefit anyone who might vote for them.

Its “Moral Hazard” and no one will stop it until it simply can’t be funded anymore. No chance we take the proper steps to slowly stop this, its full speed into the wall.

#202 futureexpatriate on 10.02.12 at 1:20 pm

#173- you said it Rosie!!

1980- Top 1% of wealthy in US controlled 7% of the wealth

2012- Top 1% of wealthy in US control 24%!!!

That’s redistribution, all right. UPWARDS.

Imagine Canada’s numbers will have been a bit less. Hopefully.

#203 Frank le Skank on 10.02.12 at 1:29 pm

http://www.sfgate.com/business/investopedia/article/What-About-Canada-s-Housing-Bubble-3910240.php

The conclusion of this article is very interesting. It explains what needs to happen to allow for a safe slowdown in RE. Do you see the feds or anyone else including the common folk doing any of these precautions? How many of your co-workers or friends are aggressively paying off their debt right now? Do you see the American economy recovering fast enough to increase our exports?

All I see if more of the same from a good majority of the population.

#204 Lettuce on 10.02.12 at 1:35 pm

Anytime society will accept a car maker to include the ability for a “car that will drive itself” or a car that will “park itself”, it shows that society has no faith in themselves, and that individuals need to be protecting – from themselves!! Now it appears we are thinking we also need to save individuals from the stupid money-mistakes they made. Its never been a better time to be a proud human being – not!

#205 Leon Lens on 10.02.12 at 1:35 pm

Better reserve some rebel busses for a return to the Hill! Bailout notion absurd.

#206 truth hammer on 10.02.12 at 1:42 pm

The definition of ‘Ransack’……is what you’re describing the Fed do when Vancouver homeowners feel the pinch of lower ‘values’ and foreclosures become a reality.

The word ransack comes from the Norse language…it means simply ‘Ran’ which is ‘house’ and ‘Sack’ which is their word for ‘Bag’ ….put them together…you have ‘Ransack’…or ‘put the house and it’s contents in a bag’ and take it away with you.

This was a common term in the context of ‘Viking’…another misunderstood Norse word…..Viking was a thing that a subset of the Norse people did….not a word for the greater community of the Norse people. When someone or a group of men ( and sometimes women) went ‘Viking’ it meant that they were going away to do ‘Viking’…..meaning that they were going to Ransack ( take away someone elses possesions and bring them home in sacks) as well as rape pillage and plunder at will. These people became known as ‘Vikings’ because of what they did..not by who they were.

The ‘Viking’ were part of a North South trading route that went as far south as Egypt. They were great slavers and mercenaries. The tribe of Norse people who were dominante were the Russe…..after whom Russia is now named. Bloody savages who had one particularily nasty party game that included passing the bodies of infants from spearpoint to spearpoint around a camp fire for entertainment….there was no market for children.

Now you ask…..Truth Hammer …why do you write this…..I’ll tell you why. This morning…one of the radio pimps here in Vanstupid….was asking the question..”Are you willing to pay higher taxes for education”….this of course is a trial balloon paid for by the hand wringing NDP who smell another shift in power.

The last time the NDP were in office they Ransacked the public purse and let the public service unions Viking all over the balance sheet of every ministry….it was like an invasion of thieves and pirates….truly..a case of barbarians at the gate.

Lets put one thing in perspective…..there is absolutley no need for wage increases or the function of private money being raised for charitable causes under the current tax regime……the ministries are being raped by the barbarian unions who steal 100% of every dime allocated to these functions of government.

Look at any increase in revenue and you will see that it all gets sucked back into the greedy wallets of the civil servant….when has that not happened?

Be smart and charitable….get on the phone….send a letter….march in the streets…stop all charity walks and such and instead fund organizatiuons like the Canadian Taxpayers Federation who have worked tirelessly to shock the people into conciousness over the ransacking of the public purse.

Garth…this would be a good cause for you to organize another bus campaign…..

#207 daystar on 10.02.12 at 1:45 pm

#72 Grooby on 10.01.12 at 11:32 pm

True. Folks really are missing the fundamentals driving interest rates. The BoC rate for example, can remain at 1% (SM, John, are you reading this?) but mortgage rates can soar to 6… 8% for consumers shopping for mortgages reflective of risk with MBS’s and financials. What I see coming for Canadians is just that, btw. I see low Central bank rates for the next 2 to 3 years but much higher rates established in the bond markets and its not just risk that is driving it but the need for profits to offset future losses.

Some folks just don’t understand the fallout of what will happen when CMHC no longer 100% backstops MBS’s (as they are reaching their $600 billion limit). It won’t be easy to find lenders like it was with CMHC tapped out and rates will have to adjust to reflect new risk. How much, its hard to say but the consensus is between 1.5 to to 3% higher than present rates (which, of course, is passed onto the consumer) with CMHC getting out of 100% insuring MBS’s within the next year. This is not unrealistic to phathom and as RE values correct it will simply feed more risk into the marketplace driving rates ever higher from there and this is separate from the potential sovereign risk credit faces in Canada. Gross public debt to GDP is at 109% as of June:

http://www.statcan.gc.ca/daily-quotidien/120615/t120615b004-eng.htm

Where does that place us in the world?

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2186rank.html

The numbers are dated and bias with the U.S. but it would place us among the top 12 most indebted nations in the world, half of which are in a currency crisis and the other half of which caused a European currency crisis. This isn’t great company to be in.

Add the consequences of a collapsing RE/credit bubble in Canada and sovereign risk enters the equation as money begins to leave Canada. Most of us believe central bank rates will remain low in Canada until the U.S. raises rates and some believe the U.S. will never raise rates again, citing the Japanese model of Q.E. to infinity and endless U.S. trade, fed and state deficits. Gold buggers sure think so and if they are right, the U.S. dollar will continue its descent relative to world markets leaving the loonie to soar regardless of Canadian sovereign risk.

While the future of the U.S. dollar is cloudy in the context of what their governments can still do in terms of taxation, spending and trade, Canadians should not put their heads in the sand in terms of Canadian sovereign risk separate from what the U.S. dollar does. Canada is heavily indebted with households and governments. We should know that our currency is destined to fall relative to world currencies because of our debtloads regardless of what the U.S. dollar does and lets not put our heads in the sand in terms of economic risk coming from being a commodity based export nation. Should the “experts” be wrong and the U.S. dollar sustainably strengthen for whatever reason whether deficits are dramatically reduced or Europe/China struggles or both, commodities bottom and this includes Canada’s big fat plan to be an energy superpower. U.S. drilling on U.S. soil has ramped up and will continue to do so.

http://www.canadianbusiness.com/article/100596–the-next-cold-war-us-gas-drilling-boom-rattles-russian-markets-and-government-policies

If commodity prices tank in energy, what happens to Canada’s almighty loonie? What will Mark Carney do in response? These are not difficult questions to answer really. If the loonie falls below .95… .90 cents or lower, Mark Carney will have to raise rates. Again, this is likely 2 to 3 years away, but Canadians should really stop ignoring the true risks that drive interest rates higher, as I believe we have been. We needed a government and its supporters who were smart enough or loyal enough to lobby on behalf of Canada enough (y’know, patriots) to insulate Canada from the potential damaging effects of the higher cost of borrowing. Y’know, like Garth has as an example. The opposite happened.

Most of us should have an inkling of an idea of what above normal rates will do to the RE industry and the economy as a whole considering valuations and household debt levels and if we don’t know, we are essentially financially illiterate because the answer is simple. Canada, with the debt load it now has and how new much of that debt is in RE specifically, will be damaged relative to how high rates go. Its not if really, its when and when one looks at it that way… it really doesn’t take rocket science to concur that we already have a damaged economy right now because of how prone it is to higher rates (really, its like watching a slow moving train wreck that takes years if not a decade to stop), or who is responsible to wit, we needed leadership changes years ago an the only way to control the damage from here is to replace the ones who got us into this mess as quickly as possible. We have to clean house. Heads must roll. Its uncomfortable I know but koolaid drinkers will have to switch drinks because what they are drinking is killing the host.

#208 Roial1 on 10.02.12 at 1:53 pm

#43taxes, hipsters, and communism on 10.01.12 at 10:33

tax dollars bailing out the many, oh so many latte-sipping, vespa-driving hipsters who over-leveraged themselves to the teeth with near insatiable condo lust?

incestuous and communistic.

didn’t we fight a world war to protect our children from this sort of political and economic madness?

———————————————————–

Don’t you just love it when someone tries to change history to suit their world view?

You are a deluded piece of poo!

Fashism was what my father fought, and his youngest brother died, to protect you from.
The world view that it is OKAY to kill or degrade anyone who is not them. At their choice.
This is NOT COMMUNISM! Communism is people working together to the betterment of ALL.

In truth “communism” as you use the term is also a lie.
The right term is TOTALITARIANISM! Which is just another name for fashism.

They all put you (the chosen victims) down so to cheer for fashism (in any form) is as stupid as it gets.

#209 TRT on 10.02.12 at 1:53 pm

Pretzels,

No 550,000 post yesterday. Had to go to the airport to pick up relatives.

#210 Nostradamus Le Mad Vlad on 10.02.12 at 1:54 pm

#155 John — “As long as the “big lie” stays in place, people turn on each other.”

Hello John. The ‘big lie’ stays in place because the m$m continues to promote it, and sheeple lap it up.

Who controls the m$m and the CPC? Zionists, not folk of the Jewish faith or Israel, but zionists who come from every walk of life, which is why we’re following the US down the drain.

The removal of money from ‘the system’ is currently happening, but we’re too busy arguing and fighting with each other to even notice what is happening.

Better examples of this are #161 Daisy Mae — “Must they throw good money after bad?” and #174 disciple — “Honey Booboo is just distracting you.”

We are in a long, drawn-out FF and all the parts that happen are in the middle, are happening so quickly, there is too much noise in the world and TPTB are using all means available to keep sheeple distracted from what is really going on behind the scenes.

Thanks to #167 Canadian Watchdog for his link — http://postimage.org/image/b2eqflp5r/ — seems what Garth wrote of is already underway, and all that needs done is for it to be transferred to the feds., so Canada will be just as broke as Europe and China shortly.

So I agree with you. This whole exterior of life is all what most see, like sitting in a nice car. Hardly anyone bothers to look at the engine that’s doing the work for itself, thus profiting handsomely from it. Conspiracy theorists are right — the m$m are a bunch of lying gasbags.

#211 Doug in London on 10.02.12 at 2:14 pm

The fact that there are any bailouts, or even talk about them, at all makes you wonder who really won the cold war. Congratulations, Soviet communists!

#212 jess on 10.02.12 at 2:21 pm

Canadian Watchdog
…the repeated headline americans/canadians have too much debt.
Next people were buying houses they could not afford .
If financial companies knowingly lent to people who could not afford the homes why were the bad debts bundled and sold as securities?

=============

Even though, the allegations predate JPMorgan’s acquisition…
=================
Late last week, for example, JPMorgan lost a round in one of these battles when Jed S. Rakoff, a federal judge in Manhattan, rejected the bank’s request to dismiss a complaint brought by Dexia, a Belgian-French bank. The European bank had bought $1.6 billion in mortgage securities issued by Bear Stearns and Washington Mutual, another institution taken over by JPMorgan during the credit crisis.

The firm provided documents and e-mails showing that Bear Stearns routinely ignored major defects on loans it was purchasing and pooling so that it could preserve its relationship with mortgage originators.

Bear Stearns did not require originators to buy them back as they were obligated to do. Instead, the firm allowed the originators to settle the put-back claims confidentially “by making cash payments that were a fraction of the contractual repurchase price,” according to the lawsuit. .

#213 futurologist on 10.02.12 at 2:50 pm

Garth,
Why you allow to Nazi propagandist, “Nostradamus le mad Vladimir” to spill his racist nazi poison on your blog?

#214 TorontoBull on 10.02.12 at 2:51 pm

I wonder what will the impact be on the market from the upcoming MPAC appraisal? would it equate to 0.5% interest rater increase…

#215 Regan on 10.02.12 at 2:53 pm

#169 Daisy Mae – yeah, me too.

I really don’t know about a bailout or not, or even if it’s meaningful, or fair or actually makes any difference. You get the behaviour you incent. If you didn’t want people to act that way, it shouldn’t have been incented. There is no ‘learn your lesson’ or ‘punishment’ that will change things after the fact. Don’t want people to take on loans they can’t afford? Then don’t lend them money, or insure other companies who do.
I think the U.S. mistake has been not pursuing fraud charges aggressively in the many, many cases where it’s been well documented, undoing the conflicts of interest that plague the political and finance communities, and changing the failed deregulatory policy. Picking up the shattered pieces of your banking system, or just leaving them on the ground, changes nothing. The incentives to change, or not, are the only things that will affect future behaviour.

#216 jess on 10.02.12 at 2:53 pm

when the “land men” come a-frackin’

http://www.reuters.com/article/2012/10/02/us-chesapeake-landgrab-substory-idUSBRE8910E920121002

#217 Toronto_CA on 10.02.12 at 2:54 pm

“#199 Smoking Man on 10.02.12 at 1:03 pm
180 posts thus far most talking about a bail out.

Well don’t we need a crash first. Just saying”

Zing. Well spotted, SM. Although I’d argue in BC the crash has undeniably began. You’re good with your predictions, I’ve always thought/said that October will be the beginning of the end. OSFI rules don’t kick in until November though, so we’ll see.

#218 Dontcallmeshirley on 10.02.12 at 3:12 pm

@ #165 Toronto_CA

No kidding eh?

How many juniors from your office left for the Bahamas or Grand Cayman and became “CFO” or “VP” in one of the 1000 odd banks down there?

I’ve heard this story time and time again.

I’d love to open a Cayman account.

#219 Toronto_CA on 10.02.12 at 3:18 pm

For smoking man
http://www.theglobeandmail.com/report-on-business/top-business-stories/vancouver-home-sales-plunge-more-than-30/article4582491/

Top stories, doom and gloom.

#220 };-) aka D.A. on 10.02.12 at 3:26 pm

#193 a prairie dawg on 10.02.12 at 12:33 pm

Exactly.

#221 Blacksheep on 10.02.12 at 3:48 pm

Smok’in mans creator, #158,

Enough with the “I’m the machine, I’m all knowing, your so lucky, I should leave.”

“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.”

Bestow your endless wisdom upon us.

How exactly will this work. After years of stimulus, western economies, are still experiencing flat lining GDP?

take care
Blacksheep

#222 jess on 10.02.12 at 3:49 pm

They are still sending liar loans !!!!!!

the servicers had no intention of modifying the loan.the investors who bought the trust also bought insurance that pays out in DEFAULT.

How come loan trust with lots of insurance no modifications . however, the ones without insurance are modified?

The register of deed in salem -challenging the biggest banks . He has 38,000 doc that contain fraud .e.g.Linda Green and Brian Bly robo assignments. only 16% legal in his registry are legal.

LIAR LOANS
Mr. O’brian staff sends the robo assignments back with an affidavit attached wanting the bank officals to swear to the authenticity and no bank ever has!

CBS Atlanta News Special: Foreclosure Fraud in Georgia
http://www.youtube.com/watch?v=svS63XBfK8Y&feature=share

#223 Canadian Watchdog on 10.02.12 at 3:49 pm

#212 jess

“If financial companies knowingly lent to people who could not afford the homes why were the bad debts bundled and sold as securities?”

Because they could insure crappy loans and sell it as AAA.

———————

Wondering why Canadian banks keep saying they expect a 10% decline?

May 21, 2012: Fitch: Canadian banks’ residential mortgage exposure manageable

“Fitch applied three-year cumulative losses of 1%-10% on the residential mortgage and HELOC exposures of the six largest Canadian banks. Cumulative gross losses for the Big Six varied from $9.1 billion-$91.3 billion depending on the magnitude of the stress, but declined to net losses of $4.1 billion-$41.5 billion after taking into account mortgage insurance provided by mortgage insurers owned or backed by the Canadian government.”

The hope here is to change buyer’s expectations to jump in the market at a 10% correction (a bull trap), which many buyers will in factdo only to get slaughtered as the market continues down.

Anymore then 10% will cause banks to start capitulating. It’s the leverage that matters.

#224 fredflintstone on 10.02.12 at 3:51 pm

Vancouver home sales in September plunge 32.5 per cent from year ago mark

http://ca.finance.yahoo.com/news/vancouver-home-sales-september-plunge-32-5-per-180704167.html

The composite bencmark prices are all negative too. That really means things are not good.

YABADABADOOOOOOOOOOOOOOOO

#225 Westernman on 10.02.12 at 3:51 pm

Good post today, Garth,
On the subject of bailouts for financially irresponsible idiots you can best your last dollar that’s exactly what the government will do to prevent financial/social collapse and the ensuing chaos that will follow.
Therefore to all those that can think clearly ( the few left ) I offer this advice: live within your means, avoid debt if at all possible and arrange your life so that you are as invisable to the tax-man as possible. Not recommending tax aversion just tax avoidance which is doable if you know how.
Because they are going to raise taxes big time on everything to try and sweep the gigantic mess they made under the rug. Count on it…

#226 Devore on 10.02.12 at 3:56 pm

#112 Phumb Ducker

I would settle for some tax credits for renters. Home owners already get tons of breaks, even property taxes are lower on owner occupied houses (even if they’re billionaires) and rentals are treated as a business (so working poor get to pay high property taxes through their rents).

There’s no reason government should subsidize homeowners, or skew the market so much that developers would rather build and flip condos to speculators, rather than build housing for all income brackets. Make no mistake about it, a neutral tax policy would make it a coin flip as to whether to build a apartment tower for individual condo owners or for a REIT. These wild swings in either direction are a direct result of government policies.

#227 Really on 10.02.12 at 4:15 pm

They BETTER NOT. If everyone that sold their house in the last 5 years is willing to share their profit with me.

Our government better not do ANYTHING to bail out homeowners. You’re a homeowner good for you – I’m not, each of us makes our own choices. I’m not asking or a bailout and will not get one with my tax payment either.

Garth – not like it’s your responsibility but I’ve asked you a few time before (because of your former government experience) – can you do a post on how the government might step in a socialize homeowners losses (whole sticking it to the renters and the debt adverse) for the sole purpose that we can identify those actions so the governments feet can be held to the fire.

There should be a full tax revolt in this country if our government starts to artificiially prop up the market or takes steps to bail out homeowners.

I DONT care if my work an business will b affected as long as the MARKET dictates the market and not government.

Non homeowners need to start a movement NOW to make sure that subsidizing homeowners is not even a conversation in government.

You bought and made a pile of money – Awesome. You overbought and can’t afford TFB, collect pop bottles work 4 jobs, move out. Lose your investment – and still owe. The market NatuRally FIXES problems like this.

If you help a caterpillar out by breaking the cocoon for him – them he doesnt fully develop the muscles (from fighting out of the cocoon) to fly.

Commenting with my iPhone garth and its really difficult to look at the post and fix spelling and context – sorry.

#228 Smoking Man on 10.02.12 at 4:19 pm

#221 Blacksheep

I don’t know exactly how it will play out. But that is the intent. Worce case senario the fed gives every american that can fog up a mirrior 10k go buy something.

The men who run the show. See vlads post if the want to keep control of the printing press. Need to do something or the loss the keys to the press

#229 Grim Reaper/Crypt Speculator on 10.02.12 at 4:32 pm

#128 Smoking Man on 10.02.12 at 7:24 am

#106 Blacksheep.

O vay. Has it not crossed your mind that the Smoking Man is not real. A character invented by a big brested menoposal woman, out of battaries writing a book at an internet cof shop.

=================================

We know dude

http://www.youtube.com/watch?feature=player_embedded&v=wX0PpMTE7sA

#230 Junius on 10.02.12 at 4:37 pm

A Modest Proposal,

I find myself very much in agreement with the “no bailout” crowd here. It is not just the moral hazard argument but the cost will be insane. So, Westernman, hell has frozen over because I totally agree with you above.

However I also agree with the crowd who suspect that something will be done because of pressure on the government. The question is whether there is a “less bad” approach that does not help the stupid and greedy but also does not leave the country in a wasteland situation while recognizing that at the end of the day nothing will work long term.

One idea might be to create an incentive for first time home owners including perhaps a credit or favourable long term mortgage terms. This is generation screwed after all and if they have never owned a home they are probably innocent of stupidity (at least in respect to realty) and are not flippers.

I know this approach was used by the US in the form of a tax credit and it had a short term impact followed by no long term effect. However it did give the government cover while people adjusted to the new normal. That is my kind of solution to this problem!

#231 jan on 10.02.12 at 4:41 pm

If any kind of bailout happens I the renter will take it to the streets,as God is my witness!
Good luck trying to catch me.

#232 Herb on 10.02.12 at 4:42 pm

#225 Westernmoron,

I didn’t know “financially irresponsible idiots” got bailed out. I thought it was banks and carmakers.

#233 AprilNewwest on 10.02.12 at 4:50 pm

I’m not knowledgable on these matters but surely the housing decline would have to be huge before the Government puts in any policies to try to stop the slaughter.

#234 Blacksheep on 10.02.12 at 5:05 pm

Grim Reaper #229,

Thanks for the laugh: )

take care
Blacksheep

#235 jess on 10.02.12 at 5:08 pm

215 Regan

early adopters

Bernard Madoff’s multi-billion dollar Wall Street fraud started in the early 1970s, the US federal prosecutor’s office says

Kugel was a supervisory trader in the proprietary trading operation of Bernard L. Madoff Investment Securities.

#236 eagle eyes on 10.02.12 at 5:08 pm

You sure know how to press the right buttons Garth. When housing prices skyrocketed in the past 48 months, it was difficult for renters to get reasonable rents. Many rented basements suites that would make my skin crawl. The responsible struggling working class who was too sensible to borrow $1m to live with SS and granite paid astronomical rents to subsidize the schmucks who went in over their heads. Imagine the backlash if indeed the government were to bail these guys out. There will be blood on the streets if that indeed did happen.

#237 Sebee on 10.02.12 at 5:18 pm

OK, seriously. It’s been a week. Not a peep from anywhere about 64.5% drop in 416/GTA new home sales. This is not news worthy? But The Dutches’ mammaries are?

This is bloody scary. They are all in on it!

Time to dig a bunker and get a gun…with gold bullets. It’s the only thing that will stop these real estate sucking vempires.

#238 T.O. Bubble Boy on 10.02.12 at 5:49 pm

Vancouver home sales fell 32.5 per cent in September compared with a year ago, says the Real Estate Board of Greater Vancouver.

http://www.huffingtonpost.ca/2012/10/02/vancouver-home-sales_n_1933180.html?utm_hp_ref=canada

what bubble?

#239 daystar on 10.02.12 at 5:53 pm

Geez, I guess I’m in a wordy mood today (lets put on our shocked look) but I just wanted to emphasize what kind of economic “damage” it is we are talking about when it comes to our economy and higher rates and make clearer what I believe will happen to interest rates going forward.

I believe interest rates from the BoC will stay flat for the next 2 to 3 years. No surprise, I don’t think anyone really expects much deviation from this? However, the bond markets are another story. Once CMHC hits its 600 Billion limit, rates with MBS’s that heavily influence what these folks charge:

http://www.ratehub.ca/best-mortgage-rates/5-year/fixed

… go up between 1.5 to 3% for the mortgage shopper from what we see today. I believe we will see a 1.5% uptick straight off the hop as CMHC gets out of the insurance game and as the market continues to correct, 3% within three years in the bond markets alone. This makes all the numbers we see in the above link roughly 3% higher than it is today within 3 years or roughly 6% on average for the mortgage industry without any changes in BoC rates.

What this also means is that folks who didn’t get a 10 year term as opposed to 5 or less will really wish they had and likely end up trapped in a repetitive “what were we thinking” moment that never seems to end. 6% within 3 years, thats my belief and what would that do to today’s valuations aside from a 10% correction from mere tighter regs in 2012? Well, what would a 50% rise in mortage payments do to affordability… I believe… a 25% correction from today’s national valuations, possibly more as it would spook the entire marketplace and valuations are primarily credit driven. Thats within 3 years. Cities like Vancouver will be decimated but it won’t end there.

Between 3 and 5 years from now, it gets interesting. Sovereign risk, as earlier explained, surfaces and BoC rates rise to between 3 and 4% on top of higher MBS rates in the bond markets pushing the average mortgage rate to 8%. What will 8% rates do? Try virtually doubling payments of all mortgages causing a 40+% drop from today’s national average, a huge drop in consumer spending and chronic recession (but we’ll already be there at 6%). Essentially, valuations would peel themselves back to 06′ valuations. After the 5 year mark, it gets worse. Between the 5th and 6th year (2017-2018), rates from our financial institutions flirt with double digits, lion share now coming from sovreign risk (public debt, currency, inflation) with BoC rates around… 5 to 6%. Is that abnormal? BoC rates were around 4% between 06′ and 08′:

http://www.bcrealtor.com/d_bkcan.htm

…but credit regs were much looser than they are today during that time so valuations would likely fall to 04’… 05′ levels. Mortgage lenders hitting double digits would be the worst case scenario I would think, it likely wouldn’t happen for a minimum of at least 4 years (I can’t say 5) and its obviously less hard to predict when one looks past 5 years because of the longer timeline but! Its still possible and I have to say once again, people have seriously underestimated what rates can do, or failed to understand perhaps entirely what moves them higher. In a word… risk. Its not just the BoC or the bond markets but the spreads between the banks that play in this. Lets just say, if rates hit double digits however briefly within 6 years I won’t be the least bit shocked.

Nor should the rest of us.

Now… alot can happen between now and then. Some things can change the course of what I believe but what I believe at present is that we will have nearly a generation that is pressured to buy a home for all kinds of social and financial reasons and it will end badly for them. What it means for homeowners who bought a home between 06′ and today and most likely into 2014 (since Harper’s rule and government policies that led to all this) is financial ruin unless they can mysteriously grow their incomes by 50% or more these next 5 years with all that mysterious growth going straight to debt service. My thoughts are that, since we have recourse loans for all provinces except Alta that foreclosures won’t soar like they did in the U.S. (except maybe Alta) for at least 2 years after rates rise to at least 6% but after that, the numbers will mount and roughly 2/3rds of the 10% or more that bought into beelzebubblish valuations from 07′ til’ now AND the next couple years will end up declaring bankrupcy, most of which will happen between 5 and 9 years from now and the 2 year lag again from higher rates leading to unsustainable debt has everything to do with full recourse loans in Canada:

http://www.greaterfool.ca/2009/09/26/your-mortgage/

Translated… Canada experiences a chronic recession very much so like the U.S. experienced beginning next year minus a collapse in financials and bankrupcies until between 5 and 9 years from now, or when interest rates walk to 6% or higher and add a 2 year lag for the bankrupcies and writedowns to begin as recourse loans create this lag (as evidenced with Spain who has recourse loans like ours with a collapsing RE bubble).

In short, we are screwed. All it will take from here past this mere 10 to 15% correction to see just how screwed we are is normal (6%) to above normal (+8%) and time and by the time it truly happens, our present hero’s in public and corporate office will be gone with no one left to blame but ourselves for the way we voted, bought, profited from and advised others yesterday and today.

Again. Its a slow moving trainwreck we are witnessing. The train left its tracks back in 06′ with H & F introducing 40 year nothing down regs and deregulating CMHC who provides insurance for, well… everyone and its going to take another 5 to 7 years (possibly longer) before this derailed train actually stops its long slide so… glacial as it is, it will destroy wealth, families, careers and possibly our economic sovreignty without the right people in the right places from here on in and thats a big disappointment in itself when we know there won’t be a federal election for another 3 years. This year’s regulatory changes are welcomed by government but it comes so late and the issues involving governmental debt so challenging that we need new ministers straight across the board that are suited for it (y’know, ones that actually knowledgeable, lobby for Canada and aren’t corrupt. They do exist). We likely won’t get that unless enough of the Conservative base and/or enough Con MP’s revolt before the next election but we need it and it doesn’t stop there. The financial corporate world very much so needs the same flush (it too, will come late if at all). I hate to say it, I truly do but… I believe we are screwed.

#240 Blacksheep on 10.02.12 at 5:55 pm

Smok’in man # 228,

“Need to do something or the loss the keys to the press”

Bens tool box is empty and the velocity of money (M2V) is running below 1960s levels. More cheap money can’t help companies that won’t borrow, do to a lack of growth.

http://research.stlouisfed.org/fred2/series/M2V/

How could we be so naive as to think we could maintain our elevated existence, while trading with a 3 billion strong labour force, willing to work for a mere fraction of western expectations..

Houston we have a problem.

take care
Blacksheep

#241 ballingsford on 10.02.12 at 5:57 pm

I’m going with the cash under the mattress for now at diddly squat interest; less than 1% interest. Hopefully we all survive December 2012

I’m not sure what to think anymore.

Garth, would it be prudent just to purchase shares in the big five and take the dividends?

ETF’s seem to tanking.

Nothing is tanking. — Garth

#242 jess on 10.02.12 at 6:02 pm

buy insurance from yourself burn your house down pay yourself huh ???
Glencore accused of slashing tax bill by using complex insurance deals Guardian
Sep 30 – “A leading tax expert – Richard Murphy – has accused Glencore of cutting its UK tax bill by tens of millions of pounds after profits at the commodity trader’s London arm were depressed by complex insurance contracts taken out with its own parent.”
==================

Glencore accused of slashing tax bill by using complex insurance deals Guardian
Sep 30 – “A leading tax expert – Richard Murphy – has accused Glencore of cutting its UK tax bill by tens of millions of pounds after profits at the commodity trader’s London arm were depressed by complex insurance contracts taken out with its own parent.”
================
interesting

tax avoidance scheme a type of generation-skipping trust known to tax planners by the nickname: “I Dig It.”

http://www.bloomberg.com/news/2012-09-27/romney-i-dig-it-trust-gives-heirs-triple-benefit.html

#243 Smoking Man on 10.02.12 at 6:08 pm

#232 jan on 10.02.12 at 4:41 pm
If any kind of bailout happens I the renter will take it to the streets,as God is my witness!
Good luck trying to catch me.

ah? Jan did you not catch the G20, did you not see what happens to folks that took to the streets.

They where herded like cattle, the tax farm slaves arrested. Are on terror watch lists.

Really the streets. ?

Sure…………………………………….

#244 ballingsford on 10.02.12 at 6:11 pm

REIT’s also seem to tanking. Maybe not for the Residential though.

#245 Smoking Man on 10.02.12 at 6:12 pm

A bail out will only cost a Trillion, but a banker bail out will cost many trillions, with no trickle down.

C & F have it al figured out, what a wonderful way to knock the CDN down to match the green back, Exports anyone.

Re mind me to mortgage my place to the max before this happens.

Nice

#246 Doug in London on 10.02.12 at 6:12 pm

I’m nowhere near as good at ranting as Rick Mercer, but will do my best. We all remember the tech bubble that ended in late 2000. In 2001, after tech stocks dropped, I in my infinite wisdom figured it would be a good time to buy science and technology funds. It seemed like a good idea at the time, but they dropped far more than that since. Only recently, with the NauseateDAQ finally exceeding 3000 again is the unit price even close to my adjusted cost base. I’ve redeemed some units at a loss, figuring the money could do better invested elsewhere. If the government bails out idiots who bought houses high, why shouldn’t I be compensated for my capital losses also?
Oh, by the way, please COMPLETELY ignore the fact these capital losses were entirely 100% MY FAULT and no one elses.

#247 neo on 10.02.12 at 6:13 pm

I knew as soon as Vancouver starting crashing they would ONLY release that voodoo index. Down 0.8%? Please.

Anyone know what the average price for detached homes as well as overall or is that info no longer going to be made available?

#248 Canada is Different, It's Retarded on 10.02.12 at 6:21 pm

How can the Government think about bailing out home owners when the bigger issue is for them to deal with affordable housing first.

#249 Dom on 10.02.12 at 6:26 pm

The GTA is also starting to get hit hard as the housing crash spreads all over Canada. Realtors in the GTA are said to be very worried and reading the countless realtors on this blog one can see the crash will be bad.

http://www.theglobeandmail.com/report-on-business/top-business-stories/vancouver-home-sales-plunge-more-than-30/article4582491/

#250 tkid on 10.02.12 at 6:34 pm

Of course there will be a bailout – by the time the next election rolls around the underwater homeowners will vote in any party who promises to rescue their insolvent backsides. And it will be Mulcair and the NDP who will promise them the most amount of federal funding.

And I promise you, I will have my money out of the country, down to the last thin dime, by then. I’m just trying to figure out if it’ll be Switzerland or Singapore. It won’t be the US – their banks fail all the damn time.

My emergency fund will be in gold, and I won’t give a damn what the price will be, gold will let me keep my cash the hell away from the NDP’s tax-those-greedy-rich-folks eyes.

Y’all know what greedy rich folks are. You know, the ones who earn so much money they can afford to save.

#251 Investx on 10.02.12 at 6:42 pm

http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/why-gen-y-should-tough-it-out-in-the-rental-market/article4580877/

From the above article, on low rental vacancy rates:

“Canada Mortgage and Housing Corp.’s latest report on the rental market says the national average vacancy rate for apartments was 2.3 per cent in April, which compares to 2.5 per cent a year earlier and a long-term average of 3.2 per cent. Regina, Winnipeg and Montreal are among the cities with smaller vacancy rates than the national average, but Toronto stands out on the low side at 1.5 per cent in April. The city’s vacancy rate for condos is even lower at 1 per cent. ”

How can apartment vacancy rates be so low while home the ownership rate (70%) is at a historic high?

#252 Blacksheep on 10.02.12 at 6:43 pm

We are now on an accelerated version of ‘The American Plan’ ™ They could have bailed the people, but instead supported the banks. We will get the same. No bailing will take place. Research shows American’s on Food Stamps experience a perceived loss of personal dignity, so instead, our system will issue, Hungry Beaver Gift Cards or HBGCs ™ to be redeemed at any one of the 3000 conveniently located, Tim Horton’s stores, nationwide.

OH…did I mention Canada Pension is now a major share holder of THI stock.

take care
Blacksheep

#253 Coraline on 10.02.12 at 6:46 pm

Smoking Man, we need you to acknowledge that the mainstream media published several articles high on their websites re the plunge in Vancouver sales. You have an annoying habit of only remembering your correct predictions.

Or perhaps you’ll just come up with a rationalization that these new articles aren’t really the kind of stories you were talking about.

#254 Macrath on 10.02.12 at 6:56 pm

#241 ballingsford

“I’m going with the cash under the mattress for now”

If that’s what it takes so you can sleep at night. So be it.
David Stockman recommends it.

My ETF Dividend investments during the last year are down somewhat but nothing I can`t handle. My wake up in a cold sweat scenario is another 2008, but Garth says “it ain`t gonna happen”.

“…in silence learned the sweet solace which affection administers to sorrow.” ― Louisa May Alcott

#255 TurnerNation on 10.02.12 at 7:17 pm

Toronto is becoming “world class”, I guess. A Casino.
Good news for Smoking man…
————————————–
Soon, City Council will be debating allowing a mega casino to be built in Toronto and casino lobbyists have their eyes on our waterfront.

Toronto and East York Community Council wants to hear from residents about their views on the potential location of a Casino in downtown Toronto. We have scheduled a special public consultation session and I hope you can attend:

Date: Wednesday October 10, 2012
Time: 6:00 pm
Location: Council Chambers, Toronto City Hall, 100 Queen St W

To register to speak, please contact the Clerk, Ros Dyers either by email [email protected] or phone 416-392-7033.

#256 LSC on 10.02.12 at 7:25 pm

From an interview on BNN:

A long-time bull on Canada’s Real Estate Investment Trust (REIT) sector says the heady days for REITs are coming to an end.

CIBC analyst Alex Avery is lowering his rating on the REIT sector to “market weight” after five years of maintaining an “overweight” rating.

Just in case you missed it!

Alex who? — Garth

#257 Nostradamus Le Mad Vlad on 10.02.12 at 7:28 pm


QE4 Unofficially. of course; USSR General What he says is quite accurate; Mtge. strike Same as labor strike; Gold and the lack thereof; Sheila Bair’s new book involves Robert Rubin, who ran the Wall St. bailout and Tim Geithner; ECB’s missing assets and liabilities; George Osborne’s new tax (for TPTB) will double electricity bills; Soros’ Panic Attack; Californornia Exodus or Crazifornia.
*
Iran “Iran poses a great threat to Zionist terrorist state of Israel. Iran poses even greater threat to the present hegemonic world order controlled by the Western power elite through their financial institutions and the undemocratic United Nation with all its many branches.”; N and SKorea More than one clash going on in the world. Add to this China – Japan. If the two Koreas start warring, then the US and China come to their aid; Geo-Engineering can kill blns. of people. So can nukes; #243 Smoking Man — “They where herded like cattle, the tax farm slaves arrested. Are on terror watch lists.” — Something like this? — Crowd Control? Five mln. volts may be a little heavy, and Obomba’s police state; Biological ‘Net Beats me; Civilization on the edge Interesting title for a cycle change; Foreigners 95% of insurgents in Syria are from foreign parts; Hot Venus, Cold Mars; 5:14 clip “Abby Martin takes a closer look at the incestuous relationship between the White House and Monsanto, by calling out Romney and Obama’s longstanding ties with the company.” and GMO Cows from Frankenscientists; 2/3 of all scientific publications are frauds; Palestine US warns Euro. govts. against supporting Palestine; Iran – Argentina bilateral talks (the US and Israel are concerned); Georgia Another US / Israel bootlicker loses.

#258 tkid on 10.02.12 at 7:29 pm

*How can apartment vacancy rates be so low while home the ownership rate (70%) is at a historic high?*

Many of the condos that came on the market are investor owned, and many of those are empty. Take a look at a new-ish condo building, preferably one with floor to ceiling windows and then count the number of windows that don’t have drapes installed. Those condos are empty and will remain that way.

The investors don’t want icky renters damaging their nice new investments.

#259 Westernman on 10.02.12 at 7:36 pm

Herbie @ 232,
Herbie, Herbie, Herbie – do you ever put away your Marxist, bleeding heart, socialist playbook? Financially irresponsible idiots can include anyone from your next door neighbor to the CEO of GM.
Financial irresponsibility crosses all lines of society – only the magnitude of the numbers change.
Why don’t you stop your 60’s style socialist crusading for a while – you’re making yourself look foolish…

#260 Canadian Watchdog on 10.02.12 at 7:46 pm

#251 Investx

“How can apartment vacancy rates be so low while home the ownership rate (70%) is at a historic high?”

It’s called propaganda. Edward Bernays’ style. If you want to know how many units are sitting empty, use indirect sources.

#261 Inglorious Investor on 10.02.12 at 8:10 pm

#191 Hawk on 10.02.12 at 12:32 pm

Regular roof with:
• 30 year Certainteed shingles
• 6 feet ice/water shield (3 feet is standard but my roof has a low pitch)
• synthetic underlayment over entire roof (very expensive)
• removed all existing attic vents and installed a ridge vent
• new washroom vents
• new flashing
• replaced a couple of sections of sheathing
• custom-formed steel drip edge for eaves trough
(In a new roof you should wrap the ice/water shield over the fascia board. You can’t do that once the eaves trough is installed, hence the the drip edge.)

I got 5 quotes, ranging from $7500 to $9500 plus tax. I chose the contractor whom I felt I could trust the most. The supervisor is a great guy. He might help me finish my basement. When you meet good people, hang on to them and treat them well.

#262 kreditanstalt on 10.02.12 at 8:11 pm

#183 Canadian Watchdog…

So interest rates were higher in the 1980s…we all know that. I still can’t see any difference between a 1981 home’owner’ unable to make his payments and the 2012 version unable to do so…

Neither of them deserved/deserves being bailed out at great cost to the innocent taxpayer, saver and consumer.

#263 Devore on 10.02.12 at 8:13 pm

#154 Steve

My FIL wanted to teach his 2 daughters how to manage money, so gave them both a few dollars. The older one put the money in the bank (the behaviour he had wanted) and the younger one ran out and bought candy. When he found out what they each had done, his response was to give the younger one another few dollars, so she could try again.

Wonder what kind of lesson the older one took away from all this. Probably not the lesson he intended.

But modern society (ie socialism) teaches us this behaviour. To maximize our utility at the cost of everyone else. It’s not like they can opt out. Subsidies, tax breaks, special status, regulatory favours, there are many ways for the few to extract, ultimately monetary benefits from others.

#264 Dr. WAYNE on 10.02.12 at 8:13 pm

CBC headline: Vancouver home sales decline 32% …

#265 Smoking Man on 10.02.12 at 8:16 pm

#230 Grim Reaper/Crypt Speculator on 10.02.12 at 4:32 pm

Cutie grim one, cuite

But grim you sack as a Reaper, I have given you so many chance this year, The storm in Lake Ontario was close the lightning, the huge waves, I cranked floyd, and said take me bastard, You failed, I have no respect for you what so ever after that.

It was fun 8 footers over the bow.

#266 Smoking Man on 10.02.12 at 8:20 pm

OMG I found a negative RE Story in the Vancouver Sun

Commercial RE MIA Res Housing Gloom.

http://www.vancouversun.com/business/west+ascendent+eastern+Canada+real+estate+lies+dormant/7325662/story.html

#267 Devore on 10.02.12 at 8:25 pm

#174 disciple

I wrote a few cheques the other day; therefore, I created money out of thin air. Money is just a promise to pay. If the funds are not in the account upon which the money is drawn, I will have to come up with it somehow later on.

You did indeed create money, but not out of thin air. It is illegal for you to write a check for which you do not have funds in the account it is drawn on.

The money you created (the check) is backed by the funds in your account (so it is not “out of thin air”, as you’d like to believe), and because there is no way for anyone to verify this, your checks do not make a very marketable currency. The recipient will redeem it as soon as possible, which will transfer more trustworthy assets from your account to his.

That is the essence of paper money (notes). They are a convenient and portable version of assets held elsewhere. In the modern case, those assets are just digits in a bank account. They have value, because of “full faith and credit” of a sovereign entity. Your checks have little value, because my faith in your credit extends no further than I can throw you.

#268 Inglorious Investor on 10.02.12 at 8:28 pm

#248 Canada is Different, It’s Retarded

“How can the Government think about bailing out home owners when the bigger issue is for them to deal with affordable housing first.”

Politics.

#269 Realtors and bankers in an all out panic on 10.02.12 at 8:28 pm

It’s going to be a NASTY crash realtor smokingman a NASTY crash!

http://www.theglobeandmail.com/report-on-business/economy/housing/tighter-mortgage-rules-start-to-take-toll-on-high-end-homes/article4583509/

#270 Devore on 10.02.12 at 8:37 pm

#247 neo

For the most part meaningful stats now need to be independently derived. The many good folks @ VCI work tirelessly to track a multitude of stats on a regular basis. A local realtor also releases the extended monthly stats from REBGV @http://www.paulboenisch.com/MarketTrends.ubr which include median prices (average is out completely).

In other news, the September stats from REBGV are titled “Conditions continue to favour buyers in the Greater Vancouver housing market”, obviously once ALL your metrics (average, median, benchmark, sales) are down YoY and MoM, it’s tough to keep calling it a “balanced market”.

http://www.rebgv.org/news-statistics/conditions-continue-favour-buyers-greater-vancouver-housing-market

#271 Smoking Man on 10.02.12 at 8:49 pm

#269 Realtors and bankers in an all out panic on 10.02.12

LaughingCon

I look forward to the day you say, It was a nasty crash Realtor smoking man, It was.

I will be dead by then.

#272 Devore on 10.02.12 at 8:52 pm

#260 Canadian Watchdog

This will measure total vacancy, not just rental vacancy.

It is certainly well within the means of local utility companies to track monthly how many of their subscribers are below a certain usage threshold, indicating the units are unoccupied. I am 100% sure they do this already internally, to track trends and predict future usage and demand patterns.

#273 Smoking Man on 10.02.12 at 9:00 pm

#253 Coraline on 10.02.12 at 6:46 pm

Smoking Man, we need you to acknowledge that the mainstream media published several articles high on their websites re the plunge in Vancouver sales. You have an annoying habit of only remembering your correct predictions.
…………………………………………………
The globe ran a story by an in house bear. He’s been calling for a crash for 4 years like gartho. he even has a beard. Copy cat. Prices have not dropped. just Volumn and listings. So what.

The headline was much worse than the story.
No one reads this guy other than laughingCon.

few weeks ago every radio, tv, news paper where glooming and dooming real estate daily. They even got Gartho. The new build numbers came in bad, switch was turned off.

Chirp me when a mild one sneaks threw, but I called it.
I’m right Period

#274 Form Man on 10.02.12 at 9:01 pm

#259 western infant

the NDP have never formed a Federal government in Canada, and the Liberals have been out of power for 6 years now. Harper has presided over the fastest rise in deficit, debt, and growth of the civil service ever. Does this make him the greatest socialist of all ?

#275 Canadian Watchdog on 10.02.12 at 9:16 pm

This condo justforeclosed, and it’s brand spanking new.

#276 };-) aka D.A. on 10.02.12 at 9:17 pm

#248Canada is Different, It’s Retarded on 10.02.12 at 6:21 pm
How can the Government think about bailing out home owners when the bigger issue is for them to deal with affordable housing first.

If that doesn’t sum it up; on one hand you have Dumb Asses who made poor purchase decisions looking to be bailed out and on the other you’ve got Dumb Asses who think they have a god given right to a home and expect we should subsidize it!

You are absolutely correct in your moniker “Canada is different, it’s retarded”

Come to think of it Dumb Asses are the same no matter no which part of the globe they reside in.

It’s going to get ugly real soon and like the saying on my family physician’s office wall “Smokers (Dumb Asses) reduce smokers (Dumb Asses). Leave them all to their own devices and they will soon smarten up. Bail them out and they will just do it again and again and again.

#277 Smoking Man on 10.02.12 at 9:18 pm

Wow 274 post on a Tuesday,
Obviously boating season is over, SM is back for another season of enlighten the nave

#278 Toronto_CA on 10.02.12 at 9:20 pm

#273 Smoking Man on 10.02.12 at 9:00 pm

I believe Garth has always said that sales crash first. Prices follow later.

#279 happy renter on 10.02.12 at 9:22 pm

Here in Victoria a lot of families live hand to mouth.But theres hope,in Langford you can buy houses for $175,000 through the city social program.Families makeing under $65000 qualify for the new houses.So come to Langford and live cheaper.

#280 Canadian Watchdog on 10.02.12 at 9:27 pm

#273 Smoking Man

Does MSM even matter anymore?

Infographic: The Growth of Social Media

As they say, bad news travels faster then good news, and you don’t’t want to be in a market where blogs, tweets and Facebook posts will be going viral with double digit home price declines.

The social medium is much much different from 2008.

#281 Mr Buyer on 10.02.12 at 9:31 pm

Housing will not return to bubble prices in all likelihood no matter how magnificent smoking man thinks he is.

#282 Mr Buyer on 10.02.12 at 9:37 pm

#245 Smoking Man on 10.02.12 at 6:12 pm
A bail out will only cost a Trillion, but a banker bail out will cost many trillions, with no trickle down.

C & F have it al figured out, what a wonderful way to knock the CDN down to match the green back, Exports anyone.

Re mind me to mortgage my place to the max before this happens.

Nice
………………………………………………..
Dream on.

#283 Mr Buyer on 10.02.12 at 9:46 pm

Smoking man is baiting a bull trap. DO NOT BUY A HOUSE FOR THE FORESEEABLE FUTURE no matter how fantastic the persona Smoking man turns out to be.

#284 Mr Buyer on 10.02.12 at 10:31 pm

It is not that there may or may not be opportunities to profit and the profits turn out to be huge and can be had by simply having the courage to grab them. The point is that there are always opportunities and some opportunities are framed in much more dangerous circumstances than others. The simple mechanisms to profit from real estate are easy to understand and thus the greatest number of people participate in the activity. The greatest number of people expect profit over time from real estate and do not expect serious risk. It is this expectation that real estate types really wish to preserve. It is in this ethereal world of expectation that influence is exerted. We hear Canada is different from America due to recourse. The impact that potentially has upon expectation far outweighs the the actual content of the assertion. Recourse = no need to expect real estate meltdown = buy immediately upon the first sign of a correction (nice clean word that is unobtrusive in the world of expectation). This engineering of expectation is a real force. The problem is that expectation can and does change and this is why it is critical to manage what does and does not pass as news or at least manage the interpretation of it. The important thing to notice is that expectation does not have to have anything to do with reality. We have recent examples of bubbles collapsing around the world that up until now the logical impact upon expectation has been successfully minimized. That does not mean these events will not have a full impact upon expectation tomorrow. Even in the most responsive individuals the over use of psychological buttons produces diminishing effects. In short, the potent magic behind the bubble will not work forever and it has worked for a long time now to huge effect so even if it seems to be an opportunity it is an opportunity in an adverse set of circumstances. There is little need to exploit such an opportunity when others will present themselves.

#285 Westernman on 10.02.12 at 10:46 pm

Form Man @ # 274,
I doubt the accuracy of your accusations… considering the source ( you ).

#286 tonysilverdick on 10.02.12 at 10:49 pm

Nothing is tanking. — Garth

now come on there Garth housing is

#287 Mr Buyer on 10.02.12 at 11:17 pm

The idea that renting is throwing away money is another example of a notion having disproportionate psychological impact. This idea is employed to influence people to buy under highly adverse conditions and its full impact relies heavily upon the expectation of eternally rising real estate prices. It is very easy to rationalize that one’s intent is not to rent forever but to rent until favorable circumstances present themselves to buy. This notion is adversely impacted by the notion that there will not be better circumstances in which to buy and thus rent is lost money. Simple math can easily frame this situation in a way that effectively mediates the rise and fall of expectation. While interest rates are indeed low they are not negligible and the amount paid out in various forms of interest is staggering once fully appreciated. If people did the math it does not take a very large drop in the price of a home to justify what one spends on rent for a year or two (even at these horribly inflated rental rates that will fall during the collapse in real estate). There are many mortgage calculators online and I will leave the math to others to carryout due to time constraints (I did a quick estimation that revealed that a 10% drop in a 500k house price produced 14k in savings in interest payments over a 25 year amortization at 3.2% interest and monthly payment schedule. It is worth pointing out that in both cases the mortgage payment was well over 2k per month at 2.4k and 2.1k respectively). Each purchase now has a disproportionate impact upon the expectations of sellers which in turn drags this process out further. It is not that we will not begrudgingly grind our way to the ultimate collapse that is upon us, it is how many decades will it take. The idea of renting until a more opportune time to buy makes increasing sense as we progress through the collapse of this horrendous bubble.

#288 };-) aka D.A. on 10.03.12 at 6:08 am

#19Lotusman on 10.02.12 at 10:16 pm
It’s amazing that there were over 1500 Greater Fools in Vancouver last month!

Sarcasm, LOL I get it… sarcasm.

#22Dorothy on 10.02.12 at 10:23 pm
…most of what I hear is pure venom borne out of jealousy of those who have been able to find a way to buy that which others can only covet. Most of the bloggers on here are praying those poor folks WILL have to sell at record low prices merely so that they (the bloggers) can swoop in and vultch the houses all up!! Its disgusting!!!!!

We’re not in Kansas anymore Dorothy.

#29Realtors and bankers in an all out panic on 10.02.12 at 10:29 pm
CHMC is the ONLY reason why prices are where they are today. Funny how CHMC no longer insures financing on homes selling for $1 million or more and very little is selling for over $1 million. CHMC shouldn’t be insuring any RE over $400K and then lets see how strong the market is in reality. Realtor scum hate the free and open markets since they know the RE market is nothing but a government backed ponzi scheme.

First, in Kelowna where the statistics are not likely to be too much different than anywhere else in Canada, 30.9% of homes are bought with “all cash” and 52.5% with a conventional mortgage of 20% or more down. That’s 83.4% of the market who needed no CMHC backed financing.

Second, almost 70% of all sales, in Kelowna where prices have a reputation for being on the high side, were for homes under $400,000.

If you extrapolate the above statistics I believe you will understand that your proposal would have no significant impact on the market as only a very, very few such buyers exist who would be seeking such mortgage financing on a home over $400,000 in the first place. The need for high ratio mortgage financing decreases at an exponential rate beyond $400,000. Those your proposal would hurt most are but a very, very a small part of the market but they most in need – those in that $400 – $500 K market which puts them squarely in that middle class that seems to get repetitively screwed over and over again. “Diddled”.

#32 Realtors and bankers in an all out panic on 10.02.12 at 10:33 pm
Dorothy #21

You know what is disgusting? CHMC and taxpayers money used to back a ponzi scheme. CHMC is anti-free market and that is disgusting.

Man it`s getting dark in here again. Need I shed some more light on the topic? Of course not. Best leave the ignorant to their own devices… or lack there-of. People here what they want to hear and believe what they want to believe. Oh and on that note, I find Garths statistical manipulation not at all less contrived than that which he accuses others of so doing.

#274Form Man on 10.02.12 at 9:01 pm
#259 western infant

the NDP have never formed a Federal government in Canada, and the Liberals have been out of power for 6 years now. Harper has presided over the fastest rise in deficit, debt, and growth of the civil service ever. Does this make him the greatest socialist of all ?

Not sure how to interpret that… None-the-less, while I am not by any means a big Harper fan, I think we all must admit we can’t really hang the blame for that “fastest rise in deficit, debt, and growth of the civil service ever” you speak of on Harper alone as this seems to be a worldwide phenomenon created by the economic financial crisis. The fact is Canada has emerged, yes emerged, from that financial crisis relatively unscathed.

#289 };-) aka D.A. on 10.03.12 at 8:48 am

#286tonysilverdick on 10.02.12 at 10:49 pm
Nothing is tanking. — Garth

now come on there Garth housing is

So you think “housing is tanking” do you? While I have no crystal ball which unequivocally tells me otherwise what I can tell you is; it has been my experience that the cost of housing has roughly doubled over the course of each of the 10 year periods since 1971. The cost of housing since 1971 certainly did not follow a straight line upward trend but on average it, despite the peaks and valleys on the way, it has been my experience that it has roughly doubled every ten years.

What we are experiencing right now is a valley in that trajectory just as five years ago was a peak in that roughly ten year cycle – both admittedly more significant than those of the past but peaks and valleys in an overall upward trend none-the-less.

So what does that mean? Does it mean that five years from now, based on those historical trends, we can expect another peak followed by yet another valley? I really don’t know the answer to that, as I mentioned I have no crystal ball, but based on that fairly consistent historical track record I’d be willing to bet more on the presumption that buoyant times are closer at hand than worse.

The U.S. is already showing significant signs of recovery. No, they are not out of the woods quite yet nor are they beating their chests in a display of such victory but they are smiling more and talking optimistically both of which do an economy nothing but good. Canada tends to follow our neighbours to the south by a one to two year lag. I can’t say for sure but my money is on better times closer at hand than worse. There is a US Housing Recovery Fund available which my broker has brought to my attention that I suspect might prove to be a lucrative investment.

#290 deja view? on 10.03.12 at 12:53 pm

Oh boo.. finally, an increase.
Being a survivor of an english boarding school and the dastardly ’80s, surviving because I retooled my palate to survive on tree bark and rice, I have no sympathy for todays whiners looking at the prospect of a mere point or two.
Speckers have made fortunes on these low low rates that were in effect powered by savers who took it in the shorts for a dozen years.
You’ve been caught! Cut with the tears and assume the position..
3 swats with the ‘corrective’ running shoe.
Administered by F..
(you didn’t actually believe he was your friend did you?)

#291 disciple on 10.03.12 at 6:06 pm

#267 Devore… I did not specify Personal Cheques. Anyway, the marketability of my paper notes is irrelevant. It is money that has been created whether or not it is backed by any “assets”. Money and assets are both abstract concepts and have no intrinsic value. Neither does the word intrinsic. Whether something is legal or not does not make it true or untrue (You have trouble with this concept). I appreciate your response.

#292 Red Tory Tea Girl on 10.03.12 at 8:17 pm

Frankly, I agree with the angry newspaper columnist. The government should intervene to help people with housing… in that they should promise there will always be a supply of publicly contracted overbuild, so a disaster like this never happens again, and so people don’t ever have to decide between food and rent again either. Also so that cookie-cutter suburb-builders are no longer the metastasizing agents of sprawl they once were. The cul-de-sac is dead… All hail the concrete box and the fourplex!