Capitulation

Sales of existing houses in the massive GTA market fell almost 18% in the last two weeks, compared to last year. However that’s not the real story.

More significantly, the price of a detached home in the key 416 area has declined 7% since June – partially accounted for by a seasonal dip. But sales have tumbled 41.5%, sliding by almost 1,000 per week from just six months ago. You could attribute this to snow and cold, but there isn’t any. It was 11 degrees today and 17 last week. The closest flake is in city hall. You could blame higher mortgage rates, but they’ve actually gone down, thanks to a new bank 2.99% promotion. The fiscal cliff? Nah, non-event. The stock markets buried that one on Monday.

In fact the only thing that’s really happened in the last six months – during which real estate sales from Vancouver and Victoria to Toronto, Montreal and Halifax have faded badly – is F’s holy War on the House. As you know, the 30-year mortgage died on July 9th. That was the same time CMHC stopped offering insurance on houses over $1 million, meaning buyers now have to cough up at least 20%. And last month the banks were banned from giving away down payments in the form of cash-back mortgages. Plus, borrowers have to meet tougher debt-ratio standards.

So are sliding housing markets positively correlated with the elfin deity’s full Monty on the MLS? Of course they are. I told you back in March, when F was preparing this package, that Canadian real estate would not withstand what was coming. That, you might recall, was when the average SFD home in Vancouver was selling for $1.2 million, and home sellers in North Toronto were routinely showered with a dozen offers, all for more than they’d asked. I suggested you be a seller, not a buyer. Now you know why.

How serious is this?

Enough to make forex guys horny, apparently.

“Canada tightened mortgage requirements in the summer and there are signs the market is cracking,” writes Adam Button, on ForexLive.com. “As I’ve said before, this has the potential to be the major CAD story in 2013 but probably not until the second half. Even when house prices begin to fall, the FX market can be slow to adjust, often waiting until it shows up in GDP or employment numbers.”

But what might make astute currency traders money, is also stealing cash out of the pockets of the entire real estate industry, and they are wet-kitty pissed about it.  For example, the mortgage brokers released a coordinated attack on F this week, spearheaded by their chief economist, Will Dunning. “The changes to mortgage insurance criteria are unnecessarily jeopardizing the health of Canada’s housing markets and the broader economy,” he said, adding that a whopping 17% of all property virgin mortgages which were approved in 2010 would never have been funded had the new rules been in place.

Since 55% of all Canadian house sales involve high-ratio, high-risk mortgages (that’s the industry number – I suspect it’s higher), the impact is clear. It means one in ten deals wouldn’t happen – enough to wallop the entire real estate market, eliminating more than 40,000 sales nation-wide. Now add in the impact of all the wrinkly Boomers, house-rich and cash-poor, plus appalling savings investing habits overall and 30-year-olds underemployed while knee-deep in student debt, and you have the formula for a personal financial crisis. How will this not end in a mess?

And check this out: a year ago Dunning and his mortgage broker buddies were discounting the very notion of a real estate bubble in Canada. Now, he warns, “The U.S. experience has showed us that what starts as a small drop in housing prices can spiral into a dreadful outcome. This report is not concluding that the same will happen in Canada, but it is pointing out that the revised mortgage insurance criteria … is unnecessarily raising economic risks in Canada.”

Dunning also predicts a 20% collapse in homebuilding activity over the next two years. This is what happens when bulls morph into bears.

For its part, the Toronto Real Estate Board is singing the same anthem. The cause of lower sales? “The reduction of the maximum amortization period to 25 years translated into higher mortgage payments.  Some households will have to save more money for a down payment before purchasing a home, in order to offset these higher mortgage costs.”

Of course the real cause of the housing correction is not the feds. They just exposed it.  Instead, blame average prices that average people can’t pay, and can’t last.

How hard was that to figure out?

237 comments ↓

#1 Babblemaster on 11.19.12 at 9:05 pm

Apparently, all these draconian measures to rein in the housing market are actually having a measurable impact. Just a matter of time before we’ll be seeing a change of mind by the elfin deity.

#2 mark on 11.19.12 at 9:05 pm

“Some households will have to save more money for a down payment before purchasing a home, in order to offset these higher mortgage costs.”

Oh the horror.

#3 grasshopper on 11.19.12 at 9:07 pm

The closest flake is in city hall.

thanks for the laugh, Garth

#4 Derek R on 11.19.12 at 9:09 pm

Capitualtion — well maybe some day…

#5 Derek R on 11.19.12 at 9:09 pm

But Capitulation ? Now!

#6 Brian on 11.19.12 at 9:12 pm

Been following the sales figures for GTA, Hamilton-Burlington for the past year. Demand appears to be shifting westward as sales and prices continue to rise. The virgins are getting more for a buck in Burlington than Toronto, Oakville or Mississauga. I’m in the boat and following closely for my own selfish reasons. Take a look at SFH in Burlington, now contrast that with the GTA. One’s up the other down. Detached and Town houses are holding up for now while condo’s melt. Naturally, people who cannot afford SFH in the GTA are still buying by moving downmarket, while others who are not willing to sacrifice the space are willing to sacrifice the drive – story sound familiar? Looks like things are imploding, I will be looking to buy after the 25% drop. Happy Renting!

#7 smarter than terry on 11.19.12 at 9:13 pm

Smokey\Smith where are all your ideas on how SFH will not implode?

#8 Bman on 11.19.12 at 9:14 pm

First?

#9 NBE on 11.19.12 at 9:15 pm

Garth, Do you expect the number of listings in the 416 to drop as buyers disappear?

Thanks,

PS First!

#10 Extron on 11.19.12 at 9:16 pm

How hard was that to figure out?

I got it, my wife got it, the kids got it, the mother in law, not so much.

#11 LazyJason on 11.19.12 at 9:17 pm

Do I get a prize for being first?

If not that’s fine.

Garth, I’m looking for an advisor here in Vancouver. Can you recommend someone to chat with out here?

Thx!

#12 lore on 11.19.12 at 9:21 pm

It’s not just the debt Canadians are carrying, it’s also the increased cost of living. Our official inflation rate is much lower than what the man on the street is realizing. Higher food costs, fees, increased wholesale costs to retailers who pass this on to the citizen. People are not “consumers” they are citizens..tired of the government waste of their tax dollars…dollars that are hard earned often with long commutes, child care costs, and we are tired..tired and disenchanted with inefficient government management. And, burdened by these high housing costs where it takes two incomes to manage the mortgage, insurance, and property taxes.
We are the frog that didn’t realize the heat was steadily increasing until …..

#13 TOUGH TIMES on 11.19.12 at 9:22 pm

HGTV Virgins get out there and start low balling these realtards by 50 percent. Don’t waste your time going to open houses when you could just sit on the MLS and low ball these used car salespeople by email. Get out there and get your revenge. Show them that you are not as stupid as the show protrays you!

– Europe already in recession/depression, Japan and US right behind them. This will have a negative feed back loop across the global economy.

– jobs being lost everywhere and the Canadian economy is slowing down.

– austerity starting already in Canada. Many in government jobs will be bye, bye. Federal government last week fired over 10,000 workers in Ottawa and more to come!

– manufacturing jobs have moved to Asia and back to the US. You dumb Canadians can’t compete with the New America where the factory worker now makes $12.00 an hour and can buy a nice home for $100,000K. You are so screwed.

– 70% of CDN living pay cheque to pay cheque and have no savings and over 70% have no pensions

– 60% of boomers 60 years and older entering retirement in a shit load of debt. Also, a lot of these boomer fools co-signed for their kids $800,000 Mc Mansions. The banksters will wipe the floor clean with both the kids and parents after this 50% RE Crash when they both lose there homes!

– empty condos being built everywhere and will be going for 50% off soon. HGTV Virgins will be crushed!!!

– empty homes all over the MLS, can you say power of sales have started

– for lease signs everywhere in business districts and commercial areas, I guess business has moved out of Canada

– Canadians are 163 percent in debt! More than the US, Ireland, and UK when they had there RE Crash.

– Over 6 months of dropping RE sales. Next thing to drop will be prices by 50%.

– over 60% of mortgages in Canada are 5% or 0 down CHMC mortgages. Can you say high risk and backed by the taxpayer. When this baby blows up kiss your social services good bye. This is what the in action plan looks like. We supported our banks with free taxpayer dollars to give out loans to people with no money creating a RE ponzi scheme 10 times bigger than the US, Spain, Ireland etc.

– And remember a home is only worth what a buyer will pay.

– the realtards, brokers, banks and builders are in full out panic

The 50% crash is here my virgins. Get out there and start low balling as the time is now for your revenge. Don’t sign up for bank slavery like the other 70% of the virgins in Canada. They are screwed for life now as they were sold the Koolaid by the RE industry!

#14 Dorothy on 11.19.12 at 9:24 pm

While it is true that housing prices were destined for a fall, regardless of what F did or did not do, I have to wonder why the Government felt it necessary to exacerbate that fall the way they have? And why the media has jumped on the same bandwagon?

House prices are based as much on emotion as on the fundamentals (same as stock prices) and both the Government and the Bank of Canada, as well as the main stream media, have done everything in their power to generate negative emotion when it comes to Real Estate. It’s been a non-stop steady stream of negativity, that was bound to eventually have the obviously desired negative effect. And I have to wonder WHY these “powers that be” felt it so essential to decimate the housing market the way they appeared to want to.

For all the reasons Garth has so cleverly outlined, house prices were destined to fall anyway due to a lack of affordability. And to protect foolish property virgins from that inevitable fall, a return to stricter controls regarding who could get a mortgage and under what circumstances, was prudent. However, that said, the constant barrage of commentsf from Carney, F and the media about how house prices are destined to fall suggests an attempt at a bit of “social engineering” which finally appears to becoming successful, and I can’t help wondering WHY that particular bit of social engineering was considered necessary. Because, as I already stated, a lack of affordability and a quiet tightening of the rules, would have acheived the desired drop in prices all by themselves. All this extra “media pumping” will do is cause the very crash that Carney and F claim to want to avoid. So frankly, I’m not sure I believe them when they say that is not the outcome they are hoping for. And in view of that, I have to wonder just what it is they are hoping to achieve by helping to engineer an American style crash of our housing market?

#15 Brian on 11.19.12 at 9:26 pm

I’d like to add, prices will collapse when unemployment rises, although either can drag down the other. Housing is still technically affordable, depending on your definition – Kraft Dinner anyone???

Expect people to hold on for dear life. Prices are sticky. Those most leveraged, without savings or requiring dual incomes are the first to ruin, and since prices are relative forced sales will drag property values down.

Although there is a possible saving grace here that should not be discounted. If the US economy recovers, it’s possible that Canada may be pulled along with it.

Garth you could be both right and wrong.

#16 Don on 11.19.12 at 9:27 pm

Re- #13 TOUGH TIMES
His post are like a bad re-run.

#17 };-) aka Devil's Advocate on 11.19.12 at 9:29 pm

#217};-) aka Devil’s Advocate on 11.19.12 at 8:22 pm
Here’s the direct link to that Canadian Business Article

“House Prices: 9 reasons not to panic”

http://www.canadianbusiness.com/print/82720

The author was discredited with his last attempt at this. — Garth

The author was discredited?!? How? There was nothing in that editorial that could be anymore disproved that the predictions you make every day – less I’d venture to say as he made no such prediction either way. Maybe you should re-read that article.

Anyway I offered the article as an interesting reflection of days gone by pertaining to both sides of the argument.

So here we are closing in on the end of 2012 with so many still expecting the advent of the economic Armageddon that never appeared in 2008, or 2009 as they then warned, or 2010, or 2011 and now not in 2012. Of course now it’s, apparently, been postponed until 2013

Keep it up for as they say even a broken watch is right twice a day.

In January of this year Canadian Business ran an editorial OUTLOOK 2012 – The Canadian housing market will crash. A small survey was run in the online version of that editorial in which it was asked “Will the housing market finally crash?” 73.73% (1,187 votes) said “YES”. Has it happened?

Months before in April of 2011 Professor George Athanassakos wrote in The Globe and Mail Signs point to a severe housing correction in Canada. Has it happened? Could it happen? Hell ya anything could happen. You could be having a gay old time one minute and choke to death on a handful of peanuts in the next.

But as – Joe Castaldo wrote in the close of his article Prediction: The Canadian housing market will crash. ”That doesn’t mean that those considering buying a house today should necessarily let the prospect of a correction deter them. A house is firstly a place to live, not an investment. Bubbles occur, in part, because we forget that distinction. So buyers need to be comfortable knowing their houses might not increase in value over the next few years—and also that they could be worth much less.”

As stated in the editorial House prices: 9 reasons not to panic Larry MacDonald points out, “Behavioural finance tells us that when extrapolating into the future, people tend to give too much weight to recent events. Accordingly, a number of bloggers and many in the mainstream financial press presently appear to view a U.S.-style housing crash in Canada as a near certainty. But if one looks back in time over many decades, such calamities are rare, “fat-tail” events. On this basis, it seems importune to urge homeowners to sell for the sake of avoiding what historically is a low-probability event.”

You cannot time the market and you cannot predict the future.

#18 TRT on 11.19.12 at 9:30 pm

Let’s play a Game.. “Find a detached home without the number 8 in the asking price”. Scroll over the dots…who do you think the target market is?

http://www.realtor.ca/map.aspx#acr:false;ac:false;baths:0-0;beds:0-0;fp:false;gar:false;pmin:0;pmax:0;rmin:0;rmax:0;openh:false;pool:false;stories:0-0;buildingstyle:;buildingtypeid:;viewtypeid:;waterfront:false;forsale:true;forrent:false;orderBy:A;sortBy:1;LisStartDate:;mapZ:15;page:1;mapC:49.16836279608617,%20-123.17808866500856;curView:;curStyle:r;leftMin:false;rightMin:false;chkSchl:false;chkTran:false;chkPol:false;chkMed:false;chkWrk:false;chkFire:false;chkAll:false

#19 Mercy on 11.19.12 at 9:32 pm

I just put a downpayment on a house build for $360 in Calgary. I’m in my parents’ basement and can’t stay forever.

What do you think my exposure is in Calgary. I’m not an arrogant Calgarian who thinks the market here is immune. Nothing is immune to economic gravity.

#20 JuliaS on 11.19.12 at 9:34 pm

This may sound like a silly question, but does the 25-year cap on mortgages also kill the refinancing options for those stuck in 30+ year group and being less than 5 years into the contract?

Another question. The rule tightening came as no surprise. It was advertised well in advance. Typically such actions push demand forward, like the switch from the GST/PST to HST pushed people into tax-exempt purchases ahead of transition in affected provinces.

As far as I remember, there was no notable spike mortgages issued prior to the 25-year cap implementation, meaning the demand was already dead by then. The new rules do contribute to rate of decline, but they aren’t the cause, as the mortgage federation is trying to present it.

#21 Canadian Watchdog on 11.19.12 at 9:44 pm

#227 TurnerNation

Toronto’s water rates up 9% announced today. Expect hydro’s the same. Maybe 4-5% in prop taxes.

Yep. StatCan’s CPI basket shows water prices posted the second largest increase (#1 jewelry) since the 2008 crises. Link No deflation here.

#22 T.O. Bubble Boy on 11.19.12 at 9:53 pm

I’m sure that Dunning and friends were full of angst for F in 2006 when he introduced CMHC-insured 0/40 mortgages… they must have been telling everyone that this would surely create a credit bubble and lead to unbalanced markets.

After all, being an economist, Dunning would surely understand these factors and make the public aware, right?

#23 Joe on 11.19.12 at 10:10 pm

That new treb report says it all. Sales Down 17%!! Party is over RE pumpers! The dump is on! Oh and look how treb blames new guv rules and toronto land transfer taxes lol. More excuses. Can’t wait for a massive snow storm in December so they can add that to the next report excuse list.

#24 FerrisWheel on 11.19.12 at 10:11 pm

#13 TOUGH TIMES -I completely agree. It’s time home prices came back to earth. Party is over. No one will be able to reflate this puppy back to where it was. Watching and waiting for Montreal to plummet!

#25 ts on 11.19.12 at 10:13 pm

and here it is propaganda
http://homesmississauga.wordpress.com

#26 Daisy Mae on 11.19.12 at 10:20 pm

“Of course the real cause of the housing correction is not the feds. They just exposed it.”

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

I don’t understand this comment.

The Feds triggered this fiasco — they caused it and are responsible for the present mess — so what do you mean when you say they ‘exposed it’? They brought it to a head?

#27 };-) aka Devil's Advocate on 11.19.12 at 10:23 pm

#13 TOUGH TIMES on 11.19.12 at 9:22 pm

HGTV Virgins get out there and start low balling these realtards by 50 percent. Don’t waste your time going to open houses when you could just sit on the MLS and low ball these used car salespeople by email. Get out there and get your revenge. Show them that you are not as stupid as the show portrays you!

They’re not our houses dumb-ass. They belong to our clients you clueless malevolent moron. You’re not going to hurt our feelings by making such lowball offers. All you would succeed in doing is providing us ammunition toward helping get some much needed price reductions.

Seriously you misguided mental midget, you’re helping REALTORS more than hurting them. We don’t make the market we report it. Just imagine if you were successful driving prices down as you suggest you might be able. We REALTORS would be laughing all the way to the bank as so many of your lost hopeless legion would be compelled to then jump in.

But please keep up the good work you self-defeating little rascal friend.

#28 Retired Boomer - WI on 11.19.12 at 10:26 pm

Ah, well when your income is say, $50-150K depending if you’re single, married educated, or un-educated the first law is, you have to learn to live within your income.

How HARD is that? Apparently, for the indebted idiots both here in the U.S. and my northern neighbors, pretty dam tough!

Get over it. Make your income work harder. Develop a budget (that works), and live on the dam thing for a few months. No, you will NOT get it right for about 6 months.
Yes, crap happens which will screw the budget. Try again.
Save something, even $10 out of every pay cheque!

How the hell do you plan to retire someday, without debt if you can not manage your life now in your (fill in the blank).

The place is not getting any easier to live in (US) so, I gotta believe it is no smooth hockey rink up north.

I’m dealing with an idiot kid, who has racked up $6,000 in credit card nonsense, has a tired car, medical debt, a decent job, and no clue how to budget! This the kid of a guy who thinks he has his stuff pretty well together. It is obvious that financial acumen is not taught in school, and not learned through observation. Every Friday now, WE sit down and “spend his cheque together.”

He asked me last week, “how long is this going to continue?” I said, “until you’re out of debt.” Poor slob, he is going to spend some quality time with the old man until he “gets it.” At least, we aren’t spending MY money!

Charity & education truly begins at home!

#29 Brew on 11.19.12 at 10:30 pm

The loonie is now officially one of the reserve currencies.

http://www.marketwatch.com/story/aussie-canada-dollars-termed-reserve-currencies-2012-11-19?link=home_carousel

#30 Junius on 11.19.12 at 10:31 pm

#1 Babblemaster,

You said, “Either way, household debt will implode and get transferred to corporate and government balance sheets.”

How are they draconian? They are really just a return to more traditional levels of financing. They should never have been eased in the first place.

#31 Smoking Man on 11.19.12 at 10:34 pm

#7 smarter than terry on 11.19.12 at 9:13 pm
Smokey\Smith where are all your ideas on how SFH will not implode?
…………………………………………….
I don’t see it yet. Plus condos scew the stats 416 SFH sill a bull

#32 Bottoms_Up on 11.19.12 at 10:34 pm

I am seeing rents for SFH in decent neighbourhoods come down in Ottawa. 10-15% already. It seems renters are tapped out too!

#33 Smoking Man on 11.19.12 at 10:34 pm

I have been dying all day to weigh in on a current issue. Killing me, it’s like not being able to tear into and scratch an itchy Hemorrhoid on a crowded elevator.

Garth I respect your wishes and will not discuss it here. So I have posted my thoughts on this taboo topic on my blog, sorry garth for doing that, not trying to scoop audience here, you know I don’t post there that often, but the only way I can get it out of my system, The topic brings out the loons from all sides.

Nope. — Garth

#34 MrHulot on 11.19.12 at 10:37 pm

Garth, I don’t understand the implications for the loonie if housing breaks down? Are you saying it will appreciate or depreciate against the USD?

#35 Renters Revenge on 11.19.12 at 10:37 pm

Not that I want him to do this, but if Mr Flaherty switched the rules back to where we were in June, I am pretty sure this sucker would still go down. The issue is divergent growth rates: RE prices and debt levels have been rising faster than incomes and debt servicing capacity.

#36 X on 11.19.12 at 10:39 pm

Fortunately the Re boards/associations would never print anything in their own self interest. lol.

With the average Canadian debt levels so high, several changes were needed.

We always had 25 year amortization periods. They should have never changed from that in the first place.

I wonder what the impact would have been on the lending markets if CMHC were not allowed to take on any more mortgage responsibilites and the banks had to be responsible for their mortgage lending.

#37 Hugh Jasz on 11.19.12 at 10:40 pm

#13 TOUGH TIMES on 11.19.12 at 9:22 pm
HGTV Virgins get out there and start low balling these realtards by 50 percent…………….

#61 Interesting Times on 11.19.12 at 12:29 am
HGTV Virgins get out there and start low balling these realtards by 50 percent………

A post so nice you made it twice?

Same shit as yesterday, right down to typos. Some of it still stinks.

#38 45north on 11.19.12 at 10:43 pm

Dorothy: I have to wonder WHY these “powers that be” felt it so essential to decimate the housing market the way they appeared to want to.

guilty as charged

I have to admit that I have used my position to dissuade my children from buying a house. To protect them.

#39 ChickenLittle on 11.19.12 at 10:44 pm

I hope they don’t cancel all of those HGTV shows. They’re soooo good for a laugh! I have had so many WTF moments it isn’t funny! The foundaton could be cracked in more than one place, the roof leaking, he whole inside mouldy and uninhabitable, but ya, it is DEFINITELY worth $750,000 to live in a semi with paper thin walls, as long as there are more hipster couples around you.

#40 damien on 11.19.12 at 10:46 pm

#15 Brian

Don’t count on the USA to save Canada.
CAN$ is expensive, jobs are moving there because of cheaper labor and cheaper land.

Canada is becoming noncompetitive. It is too highly driven by construction/finance/commodities.

Like Garth said. I expect the CAN$ to fall because it will become less attractive and it will maybe be the recipe for a form of new competitiveness.

#41 Smoking Man on 11.19.12 at 10:49 pm

#1 Babblemaster on 11.19.12 at 9:05 pm

the elfin deity. any time I see F I LMAO I remember when Garth came up with that.

Its a beauty………..

#42 Toon Town Boomer on 11.19.12 at 10:50 pm

EXACTLY!

#43 T.O. Bubble Boy on 11.19.12 at 10:51 pm

Meanwhile, in the U.S.:
http://online.wsj.com/article/SB10001424127887324307204578128900029337018.html

Sales of previously owned homes were stronger than expected in October, putting them on track to hit their highest annual level since 2007.

#44 Ret on 11.19.12 at 10:53 pm

I have to wonder what da hecka is going on, if anything, in peoples’ heads. Builders are still servicing new land and flogging unbuilt homes in future subdivisions. This is going on continuously all around the GTA.

Mattamy is currently servicing this site on Highway #5 (Dundas) in Oakville. No holes in the ground yet so delivery will be next summer at the earliest. Prices will be higher then?

http://www.mattamyhomes.com/GTA/Communities/Oakville/The-Preserve/

Imagine, homes on 34 ft. lots starting at $599,990. Pre-register today the sign says.

Get in soon and get one loaded with some of these options. Tick off a few of these boxes and you will be at $650,000.

http://www.mattamyhomes.com/GTA/Communities/Oakville/The-Preserve/images/34HomesPPO.pdf

#45 416 is CRASHING HARD! on 11.19.12 at 10:54 pm

I can not believe how many houses in once hot C6 is not selling and this after having price drops of over $100k at a time without any results. I’ve see homes that sold for $1.2 million are now sitting on the market at $900K. Prices are falling all over the GTA and foreclosures are increasing alot (banker friend) . Many realtors haven’t made a sale in months. The party is over and the long drop back to economic reality is playing out now.

#46 Realtors in an all out PANIC! on 11.19.12 at 11:03 pm

Dorothy # 14

The machine as smokingman like to call them is pulling the rug from under Canada to bankrupt the middle class JUST LIKE THEY DID in the US . The US have given orders for Canadians to suffer a housing crash that will be worse then the US considering that Canada’s housing bubble is much bigger. It’s going to be a NASTY crash realtors , a NASTY crash!

It’s also going to be a financially COLD winter realtors….A financially COLD WINTER!

#47 Keeping the Faith on 11.19.12 at 11:05 pm

Dorothy #14
Good to hear from you again.
I remember debating your housing bull position about 8 months ago, now you’re whining about WHY, WHY, WHY … let’s put it this way.
Majority gov = certainty of next election = don’t want this crash waiting for 3 years = WHY = Because they want this crash long gone by the next election.

Hope that answers your REALTURD question.

#48 An Cat Dubh on 11.19.12 at 11:06 pm

Will Dunning. “The changes to mortgage insurance criteria are unnecessarily jeopardizing the health of Canada’s housing markets and the broader economy,”

Not quite Mr. Bill. The only health that is being jeopardized is your financial health.(You may have to sell your Caddillac Escargot) Alot of home buyers who would have been first timers don’t know how lucky they are that they don’t qualify this time.

#49 Toronto Bubble Boy on 11.19.12 at 11:06 pm

Condo with maintenance fee of $1195.
Are you kidding me? My rental apartment is probably bigger than that condo and I don’t have a mortgage that enslaves me.
http://www.realtor.ca/propertyDetails.aspx?propertyId=12560142&PidKey=2105040260

#50 JustTryingToProtectEquity on 11.19.12 at 11:07 pm

#14 Dorothy

Keep in mind Dorothy, Mr. Flaherty caused this whole situation to begin with, when he introduced the 0 down/40 year ammortization. For YEARS, he, Harper and Carney paraded around with thir chests puffed out, telling the world that Canada had escaped the downturn in the global economy. They were wrong. What they had created was a monstrous time-bomb. For years, they, the mortgage brokers and real estate agents propped up our housing market. Making so many people believe that housing prices only go up. And now, with the market on
the verge of collapse… they have finally seen the light.
But it’s too late. Far too late for far TOO many. While the average Canadian salary hasn’t increased since 1995, and many people are either out of work or working for less pay, and with property assessments going up, and
ammortizations returning to where they should have
stayed, and tighter lending practices by the banks…
tic…tic…tic… all these poor people with no savings… all these poor people over-leveraged …tic…tic…tic…
And it all could have been avoided if Flaherty had left mortgages, ammortizations alone. Our housing market would have corrected (it was correcting)… And we’d be coming out of it by now. Instead, tic… tic… tic…
Flaherty, Carney and Harper could have, should have avoided this… They should be making more noise about it even now… in an effort to save even greater fools from themselves… tic…tic…tic…

BOOM!

#51 Realtors in an all out PANIC! on 11.19.12 at 11:11 pm

TOUGH TIMES #13

Blog dogs get out there and make those realtors SUFFER and email them with offers of 50% or greater off the list price. Let them know they will suffer an economic nuclear winter unless they get sellers to drop prices by 50%. It’s going to be a NASTY economic nuclear winter realtors , a NASTY economic nuclear winter.

#52 martin9999 on 11.19.12 at 11:12 pm

The fiscal cliff? Nah, non-event. The stock markets buried that one on Monday. – garth

You are fun to read but sometimes you come into conclusions very quick. Monday was just a retraicement (38.2%) of the down trent. I believe we are still far from a reversal. At least a couple of months. Chances have turned very likely America will hit recession again next year. Until then, dollar will be the winner on the next while. We shall see

#53 Dean on 11.19.12 at 11:13 pm

http://www.mattamyhomes.com/GTA/Communities/Oakville/The-Preserve/

120 units, 300+ people camping in this weather, 50′ Homes price increased $30K overnight.

Garth, it is not happening…

On the contrary. This is the pattern. — Garth

#54 Awesome on 11.19.12 at 11:16 pm

I agree… Lots of 8’s in asking prices. Very noticeable. Can’t wait for realtors to quit being smug.

#55 Grim Reaper/Crypt Speculator on 11.19.12 at 11:19 pm

Capitulation?

Dr Wanker…is that when a couple “merge their assets ” and produce a baby ?

If not..whats the difference?

#56 Smoking Man on 11.19.12 at 11:23 pm

#40 Realtors in an all out PANIC! on 11.19.12 at 11:03 pm

I am glad you are in a party mood, hell I so want you to be right, got kids looking to buy.

The big butt

pisst sales down, but you see. NO inventory 416 sfh.

I called 2014 still sticking with it

#57 JustTryingToProtectEquity on 11.19.12 at 11:25 pm

#17 Devil’s Advocate.

“You cannot time the market and you cannot predict the future.”

But Mr. Turner did do both. He did forewarn us, he did predict the downturn.

And the Canadian real estate market was correcting, just as he said it would… until Jim Flaherty changed the rules, creating the 0 down/40 year ammortization. Effectively creating subprime here in Canada. Imagine a world where you are given a loan for a mortgage with ZERO down payment?! It boggles the mind. He effectively created a monstrous timebomb of debt and strapped in on the chests of all the poor souls who have bought real estate in the last few years.

Housing prices are correcting. We all see it.

The collapse comes in the spring.

There. That’s my prediction.

#58 Smoking Man on 11.19.12 at 11:26 pm

#33 Smoking Man on 11.19.12 at 10:34 pm
Nope. — Garth

Chicken LOL

#59 house burden on 11.19.12 at 11:27 pm

The blame goes to both the government, the idiot horny property virgins, the speculators and the old geezers.

Some of the old geezers like my parent believe things can only go up because thats what happened during their lifetime. But there are some who wanted the price to go up so they can sell.

The Speculator all were greedy and like the real estate casino which gave them instant cash via ATM machines.

But the biggest blame goes the F, and his non-policies. A little too late now or is this the NWO gameplan.
When government subsidizes things, things usually go into the crapper.

F opened up a whole new can of worms when he guaranteed load Via CMHC. This took risk off the Bank and insurance companies plate and landed it straight to the tax payers. Banks didn’t need to check credit anymore, just sell sell sell.

F let the 40 years go on and cash back allowing anyone with a heartbeat / deadbeat’s to get into the Real estate Casino game.

F lower rates, “chicken shit”, to stop people from saving and artificially run debt to limits we haven’t seen for ages.

The fiscal cliff and the Boomers was a topic in Economics 101. The aging boomer and demographics was also talked about. This is nothing new. F hasn’t done anything about it

#60 HogtownIndebted on 11.19.12 at 11:29 pm

From the local paper here today: another example of one of the many players whose self interest has been to pump real estate no matter what, leading us into the coming tumble.

http://www.thestar.com/news/gta/article/1290124–law-society-disbars-veteran-real-estate-lawyer-for-assisting-in-sham-deals

#61 Devore on 11.19.12 at 11:30 pm

#20 JuliaS

This may sound like a silly question, but does the 25-year cap on mortgages also kill the refinancing options for those stuck in 30+ year group and being less than 5 years into the contract?

You can refinance any time you like. You have to qualify under the new rules.

#62 International Man on 11.19.12 at 11:33 pm

Why is the canadian government dictating to banks on amortization periods, interest rates and who they can give money too? The banks and government are tied at the hip, this is not how a free market is supposed to operate, thats why we have a bubble in housing and coming economic crisis…

The banks can lend any way they want, but CMHC insures. — Garth

#63 martin9999 on 11.19.12 at 11:42 pm

In addition, even if the fiscal cliff were to be resolved, other issues will emerge on the background like:
1 November employment report due Dec 07
2 Eurozone debt crisis remains unresolved, with Greece and Spain struggling
3 most importantly,The Israeli-Palestinian conflict. if israel invades Gaza then can be negativity into the market. well oil might benefit a bit, but not heck of a lot

Is that the best you can do? — Gartb

#64 Dr. WAYNE on 11.20.12 at 12:11 am

#8 Bman on 11.19.12 at 9:14 pm

First?

You must be ‘terribly’ disappointed … not being first. Don’t fret … take solace in the fact that you are an a$$hole.

#65 $$$BPOE#1 on 11.20.12 at 12:18 am

Meanwhile I just received a circular a mail in the other day for another condo project along the Canada Line that sold out 80% instantly. Onwards and upwards folks. Things are going great

#66 WinterPeggy on 11.20.12 at 12:46 am

Trump Tower developer suing 7 disgruntled investors to close deals they now regret

http://www.thestar.com/business/article/1289698–trump-tower-developer-suing-7-disgruntled-investors-to-close-deals-they-now-regret

-property taxes alone at $30,000 a year
-blue-collar worker who borrowed the $175,000 down payment from his immigrant parents and owes $750,000 at month’s end

#67 GTA Girl on 11.20.12 at 1:02 am

This pisses me off.

http://www.mattamyhomes.com/GTA/Communities/Oakville/The-Preserve/

Mattamy and Remington, and Empire are opening up northWest Oakville. Way out towards the 407 highway. Up where they planted seeds and now townhouses grown in deserted flat acres of farmland. Where the main attraction is? The view of the 407 highway.

Someone posted that the Mattamy development had a crowd opening day. And we’re sold out in 2 days

Have you seen the prices??????

Stacked 2bedroom townhouses 1,000 sqft start at $350k….townhouse, 1000 sqft in a FIELD in the middle of NOWHERE!

The most expensive is 50ft front detached house 4,200 sqft going for $940k.

In a field, surrounded by wasteland, a view of a toll highway, squeezed in between semis and townhouses. Your 50ft front that you paid $1mil for.

Driving to anything includes 6 lanes roads all leading to WalMart, maybe a Price Chopper. It’s at least a 1.5 drive to Toronto…at non-rush hour

A sad sad life. People bought these pathetic products from builders rubbing their hands together at the thought of a 2014 Lamborghini & a girlfriend in a downtown condo far from the wife in Forest Hill.

#68 TRT on 11.20.12 at 1:02 am

The Realtors, Mortgage Brokers, Banks cartel are really scared now. Something we haven’t seen in the past. The fact that they are chattering and hollering indicates that this must be a genuine slowdown/correction! They are too naive to realize that their chatter is going to slow things down even more…self-fulfilling prophecy!

I’m just thinking about the power Banks have in Canada. They can convince F and C in a heartbeat. Wonder what they are up to? Awfully silent.

http://www.theglobeandmail.com/report-on-business/economy/housing/flahertys-rule-changes-will-bite-hard-mortgage-brokers/article5410889/

#69 Barry Lainof on 11.20.12 at 1:07 am

The banks can lend any way they want, but CMHC insures. — Garth

So why don’t the CMHC guys refuse to insure any mortgage that is not 25 year fixed (fixed in the same fashion as mortgages in the US). Why should Canadian taxpayers be on the hook for future interest rate hikes.

#70 Junius on 11.20.12 at 1:12 am

#63 International Man,

You said, ” this is not how a free market is supposed to operate,”

Yes but is how they do operate. Left to free they become quickly gamed by those in power. The Banks don’t want competition they want to be able to make money with no risk.

#71 Lotusman on 11.20.12 at 1:19 am

Ret #44

Developers have deep pockets. They buy the land, hold it for a few months to a few years to go through the development process. BEFORE final approval is given, they have to pay for Development Cost Charges (and sometimes Community Amenity Charges), plus putting in the required services like water, sewer, drainage, roads, street lights, hydrants and landscaping as part of the development/servicing agreement.

By the time they are ready to sell the lots after formal subdivision, they are in too deep. That’s why real estate prices are relatively inelastic. They have to recoup all the costs plus at least 15% profit. While proformas should cover small (5-10%) price changes, many developers tend to have a blind and bullish outlook.

One well-known land developer once said: “Developers are professional gamblers at the wholesale level.” Property virgins, speculators and flippers should be in the same category at the retail level.

#72 Oakvillian on 11.20.12 at 1:20 am

Things are nasty, nasty here in Oakville. Took a drive around my area this Sunday and there was a glut of open houses (north oakville). To add insult to the injury, there were no cars parked anywhere near those open houses for viewing. I am already seeing the price melt in Oakville area. Never saw so many open houses in the last 7 hours. POP!

#73 Raincouver on 11.20.12 at 1:21 am

I take exception to Garth’s comments …

“Of course the real cause of the housing correction is not the feds. They just exposed it. ”

That’s untrue. The feds and banks colluded to make this happen. It was not some “error” that has been uncovered by the feds.

“Instead, blame average prices that average people can’t pay, and can’t last.”

Maybe we can’t blame F’s pouring gasoline on the campfire with 0/40 mortgages. Maybe we can’t blame mainstream media for social engineering.

Let’s blame average prices and average people.

???
.

#74 This is Wonderland on 11.20.12 at 1:27 am

Just came home from the Neil Young concert at the ACC, lots of sweet smoke inhaled tonight from the neighbors sitting around me; Ah the 1970’s how I miss them. That old man can still rock his heart out with the best of them.

Thanks for the great pic tonight Garth, one of your best; great end to a perfect night.

#75 Cowpie on 11.20.12 at 1:29 am

#39 ChickenLittle on 11.19.12 at 10:44 pm

You said it. I’m still in shock over “Property Virgins” episode today:

Sandra R: “How much do you have saved for your down payment?”

20 somethings: “Uuuhhh…uuhh…ummm…” The “virgin” victims are a young + clueless couple with baby, pooling their $$ with knuckle dragging slack eyed friend/dude so they can get granite with SS in Bloorsomewhere

Sandra: “You DO have enough for closing costs – don’t you?” The “virgins” look blank. Later, Sandra spouts that it is her “job” to make sure they don’t get in over their heads, to stop them before they go “too far”.

That sure stuck in my craw. For 6 yrs I’ve watched Sandra R become high maintenance – and I’VE NEVER HEARD ANYTHING from the woman’s mouth besides ” How much do you want to spend” ! Oh, the SPIN. I can’t take it.

#76 Onemorething on 11.20.12 at 1:38 am

There’s a sharp rise in money leaving the PRC right now. Funniest thing is it’s targeted for US/CAN/AUS RE.

Vancouver – Buy at 1.2M sell at 888,888 in 24 months!

#77 lookoutbelow on 11.20.12 at 1:38 am

Nice try by the mortgage brokers, not a snowball’s chance in hell that F will back down. The rating agencies, one of which has already put the Canadian Banks under negative watch, would eat Mr. Flaherty alive.

Next step will be significantly higher interest rates demanded by the Bond markets, followed by a real estate crash landing, followed by loss of thousands of construction jobs, followed by reduced consumer spending, you get the picture; DEFLATION.

And there ain’t no cure for those blues!

#78 Cowpie on 11.20.12 at 1:41 am

Update: “After 130 episodes of “Property Virgins,” Rinomato felt it was time to move on. Over the years, she’s noticed that more and more single women are buying homes on their own. In fact, one of four buyers today are single women, while single men represent only one in ten buyers. With that intriguing stat in mind, Rinomato decided to craft a new house-hunting show around it.”

Could this be the next “vulnerable” market? Single women must be more irresistibly clueless than virgins? Perhaps vultching on “virgins” was a little too…obviously mercenary given the changing times? …REALLY?

Sounds like the low hanging RE fruit may now be divorcees and dare I say…(ahem)cougars. Well if HGTV virgins are drying up – we must be near THE END.

BUY GOLD NOW! Cue scary music.

#79 Cowpie on 11.20.12 at 1:52 am

#110 Ralph Cramdown on 11.17.12 at 5:35 pm

#97 Coquitlam Resident — Regarding this blog, while I enjoy reading the financial columns, I still don’t see a good argument against buying for households making 120-150k a year – the typical middle-class, late 20s, early 30s set.

“FYI, median income for a 2-adult family in Canada was $77k in 2010. I suppose it’s never a terrible time to spend 3.5x salary on a house you enjoy and plan to live in for a long time, but today’s question is, will a family earning $135k be happy for the next ten or more years in a home they can buy now for $475k, even knowing that they’ll be surrounded by mouthbreathing neighbours who probably only make $90k?”
______________________________________________

I must be the only one bothered by this comment. Apparently there’s a lot in my craw tonight.

Cramdown, this comment stinks. Take it from me. I know about stink.

#80 The end is nigh on 11.20.12 at 1:52 am

#61 Devore:
“You can refinance any time you like, but you can never leave”
Hotel REAL ESTATE Canada

#81 D.L.Williams on 11.20.12 at 1:55 am

Rather than raising the standard of living through wage growth the government promoted a policies that encouraged the public to see their homes as ATM machines. The greedy gained while the fiscally responsible were penalized for not buying since housing costs rose. Never in history have the fundamentals been so out of wack how can any reasonable person believe the experts, bankers, polititians and other vested parties could not forsee a inevitable correction. I believe the powers are trying to engineer a long slow decline but the market will not comply. It could take up to 10 years to correct underwater mortgages and regain prices, inflation is the saving grace….hold on for the ride!!!

#82 };-) aka Devil's Advocate on 11.20.12 at 2:04 am

#54 Awesome on 11.19.12 at 11:16 pm

I agree… Lots of 8′s in asking prices. Very noticeable. Can’t wait for realtors to quit being smug.

By your comment you implicitly concede we had good reason to be smug. Although I prefer to think of it as “contentedly confident”. What makes you so sure that will change?

I really just don’t get it though how people like you simply cannot see how it’s people like you Awesome who are the ones at the mercy of the market, not REALTORS.

Seriously we don’t try make the market; we work with what it is, whatever that may be, and, believe me, regardless of what the market is doing, there are ALWAYS a core level of buyers and sellers buying and selling. Really, it’s easier to work with the market than against or trying to change it.

Smug? Well it’s hard not to be in retort to such a pathetically ill-considered affront as that which you cast our way. Trust me Awesome we’re not going away. And our “smugness”? It’s merely perceived – a byproduct of your discontent.

#83 LS in Arbutus on 11.20.12 at 2:08 am

West 33rd is a busy street so the price reflects this, but, I cannot recall seeing an MLS listing on the west side of a lot that is ready to build on, that is, house has already been knocked down, but NOTHING on the lot. It looks bizarre. Remember though, it’s a great investment, even raw land, to be sure!!!

http://www.realtylink.org/prop_search/Detail.cfm?areatitle=&ARPK=&ComID=&agentid=&MLS=V977429&rowc=2&rowp=1&BCD=GV&imdp=9&RSPP=5&AIDL=28&SRTB=P_Price&ERTA=False&MNAGE=0&MXAGE=200&MNBT=0&MNBD=0&PTYTID=5&MNPRC=200000&MXPRC=99900000&SCTP=RS

#84 Soylent Green is People on 11.20.12 at 2:13 am

.

Prof. Noam Chomsky: When Israel, in the occupied territories now, claim they have to defend themselves, they are defending themselves in the sense that any military occupier has to defend itself against the population they are crushing.

http://chomsky.info/articles/20121104.htm

.

#85 AACI Okanagan on 11.20.12 at 2:17 am

27 };-) aka Devil’s Advocate on 11.19.12 at 10:23 pm

We don’t make the market we report it.
———————————————————–
You also try to sell the market.
——————————————————-

They belong to our clients you clueless malevolent moron

#86 AACI Okanagan on 11.20.12 at 2:18 am

27 };-) aka Devil’s Advocate on 11.19.12 at 10:23

They belong to our clients you clueless malevolent moron
—————————————————–
I agree..

#87 };-) aka Devil's Advocate on 11.20.12 at 2:25 am

The banks can lend any way they want, but CMHC insures. — Garth

And according to our (Okanagan Mainline Real Estate Board) Buyer Survey (October 2012) there are a lot more conventional borrowers (48.4%) than high ratio (15.9%) whose less than 20% down requires mortgage insurance. And a lot more again who buy with no need of a mortgage at all (15.9%). and only a very minor amount (0.5%) who required rental income to qualify.

So I don’t know where you come up with

Since 55% of all Canadian house sales involve high-ratio, high-risk mortgages (that’s the industry number – I suspect it’s higher), – Garth

Maybe you could provide us a reliable proof source that counters that of my own?

#88 Across the Pond on 11.20.12 at 2:26 am

#62 Spiltbongwater on 11.19.12 at 11:32 pm

I really don’t understand Toronto strata fees. They must include taxes or something with those. Why would anyone pay 400K and then pay $1100 per month in fees. That better include maid service for that price with at least 2 happy endings.

Actually Ontario strata fees are far more sane than the ones seen out here in BC. A large amount of BC stratas have completely underfunded their CRFs and have poor contingency planning – where Ontario is a decade or two before the game on this front. The depreciation reports that many stratas are signing up for are showing owners how much they’ve been lacking in their nice low strata fees.

#89 raider on 11.20.12 at 2:31 am

Some “unrelated” entertainment. Why does this remind me of Vancouver?
http://www.youtube.com/watch?v=5ysMt_9JnyI

#90 };-) aka Devil's Advocate on 11.20.12 at 2:31 am

Excuse me. There was a typo in my last post. The percent of all cash buyers in that survey was 35.2% and it should have read;

The banks can lend any way they want, but CMHC insures. — Garth

And according to our (Okanagan Mainline Real Estate Board) Buyer Survey (October 2012) there are a lot more conventional borrowers (48.4%) than high ratio (15.9%) whose less than 20% down requires mortgage insurance. And a lot more again who buy with no need of a mortgage at all (35.2%). and only a very minor amount (0.5%) who required rental income to qualify.

So I don’t know where you come up with

Since 55% of all Canadian house sales involve high-ratio, high-risk mortgages (that’s the industry number – I suspect it’s higher), – Garth

Maybe you could provide us a reliable proof source that counters that of my own?

#91 prairieperson on 11.20.12 at 2:38 am

Just came across a site by a fellow called Elkins. He’s built a shelter for homeless people using the frame of a grocery cart. This isn’t the Canada I grew up in or that my grandfather risked his life for in the war or that my wife’s father lost h is life in during the next war. I hate to wish ill on anyone but flippers and specers pushing one of these carts would do my heart good.

#92 Babblemaster on 11.20.12 at 2:50 am

#30 Junious

“How are they draconian? They are really just a return to more traditional levels of financing. They should never have been eased in the first place.”

————————–

Agreed. Totally. I was just being facetious. The RE cartel, through the MSM, is presenting them as being draconian in an attempt to get the government to change it’s mind and ease up. I think they may just be successful. Especially if sales and prices do tumble significantly.

#93 Buy? Curious? on 11.20.12 at 2:52 am

Hey Smoking Man! How was Cleveland? Did I mention that I Googled Red Hot Chilli Pipers + Cleveland + Nov 17 went through the links that came up. There’s one image from a fan that was posted up on Facebook and it has her, the band and this really old guy that looks like the body double of George Kostanza in his most casual outfit. I’m sure it was you. You bragged about it with such detail.

Smoking Man on 11.17.12 at 6:23 pm

“In Cleveland partying with red hot chillie pipers. Wife’s couson in the band. They flew in from Glasgow. Yesterday.

No wine tonight pure scotch so last post of the day. taken battery out. Last time had some scotch emailed everyone on my contact list and told them how unless they are. Long time to repair that one. Mind you I ment every word of it.”

You even corrected my mistake when I thought you were partying with The Red Hot Chilli Peppers.

Now that I know who you are, I will keep my eyes open for you. May even pop into the Duke. You should smile more, show off your veneers.

Don’t bother asking to have the picture taken down. I saved it to my hard drive.

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

#94 Babblemaster on 11.20.12 at 3:02 am

#41 Smoking Man

The elfin deity. I remember when Garth came up with that.

Its a beauty………..

—————-

It’s one of my favorites. Garth does have a flair for creative pseudonyms. He comes up with them to hide the identity and gender of the person under discussion. It’s probably a libel thing:)

#95 Vamanos Pest on 11.20.12 at 3:03 am

#26 Daisy Mae
For a short comment you managed to get a lot wrong:
-the feds didn’t cause this, the cause was people buying RE they could never afford with “hoping it goes up” as their long-term financial plan. If the new CMHC rules (or “the feds” as you put it “caused” this correction, than why did sales and even price declines PRECEED the new mortgage rules. Logically, an effect cannot precede a cause.
-this is not a “fiasco”, it’s a correction, and it’s the only way to restore affordability in RE in Canada. It’s only a fiasco if you were one of the geniuses I mentioned in my first point.
BTW-did you really think that the government saying you can borrow 95% of the cost of a house, the tax-payer will take on your risk of default, and you can have 25 years to pay it back, all in the context of unprecedented “emergency” low interest rates could really CAUSE a downturn in housing in an otherwise healthy market.
The feds are not the problem, this market is sick, and a correction is exactly what’s needed, the sooner we take our medicine, the better off we’ll be…so in a way, the feds have acted as a solution to the problem, not the cause.

#96 A Smith on 11.20.12 at 3:19 am

@International Man – All the government did is say they won’t insure mortgages via the CMHC with less than 5% down or for amortizations greater than 25 yrs. Banks could still make these loans, but they’d either have to assume the risk fully, or seek private market mortgage insurance. Banks don’t want to take the risk associated with having no default insurance and private insurers aren’t lining up to insure these risky mortgages, so that’s why this type of lending has disappeared.

#97 Joe Calgary on 11.20.12 at 3:51 am

#19 mercy, what do I think about Calgary? I think it’s over priced like all real estate in major centres across Canada. The apt I’m renting for $1000 is being sold for $240000 plus condo fees, plus ins. Carrying cost is about double to own vs. rent, and debt levels are ballooning. Calgary isn’t immune today, the way it wasn’t immune in early 80’s or early 90’s or 2008, 2009. That cardboard box that got flogged to you by a realturd will be worth 20% less in two years. So basically the dp you lived in your parents basement to save will evaporate with one swoop of the bears claws. Good job, you are a good simpleton, now pat yourself on the back for contributing to the sheep following.

#98 Freedom First on 11.20.12 at 4:20 am

Capitulation. Yes. The only healthy working people, regardless of income, who destroy their financial well being, either by financial mismanagement, or buying RE or any other assets, are people who are financially illiterate. An excellent start to financial literacy is on Garth’s blog everywhere. More specific, start on his blog titled “How To Invest”. Beware seeking advice from TNL@TB, or C.R.E.A. …….Just think, follow Garth’s
free blog here, and his free advice, maybe invest a few dollars in his book for a compact version of everything, and you could avoid financial ruin. I know…….it is a difficult choice:) ……. for the EGO is a cruel taskmaster.

#99 Ralph Cramdown on 11.20.12 at 5:05 am

The saddest parts of the “Dunning Letter”:

– The bit where he said (and I paraphrase) “I know this is the missive of an industry shill, but this time I REALLY BELIEVE THAT…”
– The underlying assumption all the way through the report that RE prices are the independent variable (i.e. if first time buyers can’t afford entry level product at current prices, they’ll have to save longer to buy it, etc.)
– The oddball assumption that public policy should be to keep house prices high and rental costs low, when they’re already at a historically high spread.

#100 Ralph Cramdown on 11.20.12 at 5:16 am

#63 International Man “The banks and government are tied at the hip, this is not how a free market is supposed to operate”

If you read your history, you’ll discover that we’ve tried independent, unregulated banks (etc.) with non-guaranteed deposits and, you know what? It sucked.

#101 T.O. Bubble Boy on 11.20.12 at 8:09 am

And, speaking of things that give the mortgage industry a bad name…

http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2012/11/kevin-oleary-on-oleary-mortgages.html

I guess he needs something else to promote after everyone started exiting his mutual funds?

#102 Herb on 11.20.12 at 8:47 am

Hey Smoking Man – you forgot your dog!

#103 TurnerNation on 11.20.12 at 8:47 am

#17Canadian Watchdog

What is water’s price rising, when GTA is beside the world’s largest freshwater body?
I suspect our water assets are being sold out to private equity/vulture funds, combined with multi-million dollar executive salaries and union excesses.

There are a few water ETFs out there.

#104 Static on 11.20.12 at 8:51 am

@ LazyJason, http://www.sacolafinancial.com/

#105 tonyw on 11.20.12 at 9:08 am

Will Dunning rarely understood the housing market when he was an independent analyst – hence he’s now employed by the mortgage broker association to help his cash flow. His builder clients stopped subscribing to his reports.
25 year amortizations were the norm for many, many years up to 1999 so what’s all the fuss about?
Rational house financing behaviour needs to be encouraged!

#106 Awesome on 11.20.12 at 9:26 am

Devils advocate. Times must be tough. FYI I outright own all my real estate holdings lol. Mine generate cash flow believe it or not. Helps getting in the market 10 years ago. I will buy more properties eventually when the time is right… Going against the herd… And likely without the help of someone like you. You can put 8’s in the number… You can act smug. Those with the right attitude will stay in the business. Judging a person with a three line post is amazing.

#107 Jeff in Moose Jaw on 11.20.12 at 9:34 am

Well it’s nice to hear some truth in the morning, thank you Garth.
Since this is all based on financing – imagine a world with a bank rate which doubled to 2%. Take cover! hahah 2%….

#108 Awesome on 11.20.12 at 9:34 am

Offered an agent a price on a home a month ago. Told him to call me when he’s interested, he laughed. The house is now listed at $5k below what I was willing to pay at the time. A price drop of $250k+. My spouse and I had a good laugh this morning and thanked our lucky stars we didn’t buy it. I’m expecting the price now to go down even more before it sells. I’m keeping my eye on more interesting properties now. Another neighbor listed her house and got an offer. Fast forward 6 months, a new agent, new landscaping and they finally sold to the original buyer for $10k less. Seems like waiting = makin money.

#109 LSC on 11.20.12 at 9:38 am

Garth;
I believe most of the first time buyers and individuals who purchased with amortizations above 25yrs, or at renewal time have less than 20% equity will face another problem.
Their current lender will in most cases renew, however that lender will have no incentive to deal. They will be fully aware that the client cannot move to another lender without writing a cheque to qualify at the new requirements.
So even if the Fed and the BoC leave rates low these homeowners are in for an interest rate increase. They will be handcuffed to their current lenders at the posted rate or higher depending on their financial situation for potentially a very long time, especially if property values drop 10-20 percent.
Is this a fair assessment of what is to come? Have you come across this with clients yet?

LSC

#110 maxx on 11.20.12 at 9:42 am

”How hard was that to figure out?”

As usual, brilliant post Garth.

F aimed perfectly this year with more stringent RE buying rules, because he realized that extreme polarization of cash to RE is most decidedly unhealthy for any economy. People cut back everywhere else and this pain is currently being felt in many sectors. People are increasingly in cash preservation mode and are learning very quickly how cut spending. This habit will become entrenched for a very long time.

Mr. Dunning seems to forcibly exclude any notion of an economy which is comprised of components other than RE in his pronunciations. He exclaims that F’s rule changes are damaging, but Mr. Dunning does not acknowledge the economy at large, only RE. Very gauche attempt at protectionism. More people realize with every passing day that they can fiscally damage themselves forever if they play along with the realtards game of unsustainable RE increases month after month.

RE in Canada will correct and the RE industry shrink very significantly. The smart realtards have begun to alter their strategies.

A significant and permanent decimation of this industry will go hand in hand with a return to economic health. RE needs to take its place in the broader economy and not dominate it.

#111 Dr. WAYNE on 11.20.12 at 9:45 am

” … wet-kitty pissed … ”

Brilliant coupling of words … I will use it.

#112 housedoc on 11.20.12 at 9:56 am

I hope an O’Leary mortgage is better than O’Leary wine.

#113 Canadian Watchdog on 11.20.12 at 10:02 am

Ontario, B.C., Alberta revive talks on national securities regulator Link.

This is what happens when too many incompetent lawyers are voted into parliament trying to push a proposal (or agenda) that has been ruled unconstitutional for decades. The government can’t even balance a budget and they want to expand their oversight over national securities regulation.

This is just another reason why Ottawa will eventually implode on itself from pushing more and bigger government agendas.

#114 Eaglebay - Parksville on 11.20.12 at 10:18 am

#50 JustTryingToProtectEquity on 11.19.12 at 11:07 pm

Who’s signature is on all these mortgages?
People did it to themselves.

#115 Herb on 11.20.12 at 10:25 am

#96 Vamanos Pest,

… the feds didn’t cause this, the cause was people buying RE they could never afford with “hoping it goes up” as their long-term financial plan.

Of course people bought RE they could never afford hoping/expecting/having been assured it would go up. But “the feds” made this possible by relaxing the mortgage lending rules with the fed CMHC insuring all comers.

Why, if “the feds” have nothing to do with the RE market, is there a hue and cry to take the restrictions on mortgage-lending periods and amounts eligible for CMHC insurance back off? The banks could lend any mortgage amount to anyone at any time, but they would have to carry the risk. That’s where “the feds” come – and did come – in.

You also might re-examine your cause-and-effect/timing assertion. Until the federal brakes started to bite, there was nothing but industry-wide denial that RE was vulnerable, much less “correcting”.

Cart before the horse!

#116 City Slicker on 11.20.12 at 10:29 am

Garth now that the Tsunami appears to be hitting Toronto and Vancouver how long before it makes it way inland to say Calgary. Thx!

#117 fancy_pants on 11.20.12 at 10:43 am

Happy that F is putting the hammer down,; however, unfortunate that he didn’t have the foresight to NOT offer 0/40’s when his brother in crime lowered the rates more than 4 score and 3 moons ago

#118 Buy? Curious? on 11.20.12 at 10:50 am

Smoking Man, what year did you and your boys get rid of your mullets?

http://www.youtube.com/watch?v=TkdCq3UIYiU

#119 };-) aka Devil's Advocate on 11.20.12 at 10:54 am

#107Awesome on 11.20.12 at 9:26 am
Devils advocate. Times must be tough. FYI I outright own all my real estate holdings lol. Mine generate cash flow believe it or not. Helps getting in the market 10 years ago. I will buy more properties eventually when the time is right… Going against the herd… And likely without the help of someone like you. You can put 8′s in the number… You can act smug. Those with the right attitude will stay in the business. Judging a person with a three line post is amazing.

You truly are an amazing King among men. No, you are… awesome! Yes some people are just that easily judged. And you are right, when it comes time for you to make another purchase I can assure you it will indeed likely be without the help of someone like me.

You sound young and with still a lot to learn. Good luck on that.

#120 Daisy Mae on 11.20.12 at 10:55 am

#19Mercy: “I just put a downpayment on a house build for $360 in Calgary. I’m in my parents’ basement and can’t stay forever.”

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

What compelled you to buy? You could have rented.

#121 };-) aka Devil's Advocate on 11.20.12 at 10:57 am

#107Awesome on 11.20.12 at 9:26 am

… Judging a person with a three line post is amazing.

It’s not at amazing. It’s Awesome

#122 Bigrider on 11.20.12 at 11:03 am

# 68 GTA GIRL.

I was speaking with a son of one of the principles in one of the three building companies you mentioned . He was telling me how he got the zoning onhis dads land, how he got Ball rolling on condo tower developments in Richmond hill.

Only thing he did growing was snort powder and blow his dads cash on hookers

#123 Bigrider on 11.20.12 at 11:04 am

Meant growing up

#124 Daisy Mae on 11.20.12 at 11:20 am

#50 JustTryingToProtectEquity:

“Keep in mind Dorothy, Mr. Flaherty caused this whole situation to begin with, when he introduced the 0 down/40 year ammortization. For YEARS, he, Harper and Carney paraded around with thir chests puffed out, telling the world that Canada had escaped the downturn in the global economy…..”

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

Very well said. This is exactly what has transpired. The ‘cons’ plan, if they had one, backfired. No matter what their motives were. And now, prepare for more of their excuses….

#125 Brdy skytrain on 11.20.12 at 11:28 am

People cut back everywhere else and this pain is currently being felt in many sectors.
…………………………………..
Not sure where the cutbacks are happening,don,t see any in vcr.

Malls packed, costco packed, huge new mercedes and porsche dealers going up nearby. Flights south booked heavily. Any decent restaurant still wall to wall

#126 Tony on 11.20.12 at 11:33 am

Re: #19 Mercy on 11.19.12 at 9:32 pm

Most likely scenario is prices will fall and keep on falling the bank will foreclose and you’ll end up back in your parent’s basement. Like i said when the worldwide recession really starts to bite we’ll see $30 U.S. a barrel for oil which can only spell doom for Calgary. You should’ve thought things out first instead of making that one stupid move. The good news is you’re still young and will know better next time… next time yeah next time.

#127 Doug in London on 11.20.12 at 11:36 am

So the question that begs to be asked, why didn’t all those people trying to sell now do so earlier this year (in Toronto) or last year (in Vancouver) when the market was buoyant and bidding wars were out of control?

#128 Brdy skytrain on 11.20.12 at 11:42 am

Art 7, official charter of hammas….

“The time will not come until Muslims will fight the Jews (and kill them); until the Jews hide behind rocks and trees, which will cry: O Muslim! there is a Jew hiding behind me, come on and kill him!”

Savage ,genocidal, and barbarian. There is no place for this in the world today. And gaza will suffer greatly for it, justafiably so.

#129 GTA Girl on 11.20.12 at 11:44 am

Omg, Big Rider…I know exactly who you mean.

I went to school with him.

He also likes to go to Leaf games. Sits behind the net with a revolving door of big busted girlfriends. Seems he likes when the camera keeps showing his date on the jumbotron.

Lets not even mention….that little incident up in cottage country in the 80’s with the poor daughter of the police officer. That quickly got quieted.

#130 RP McMurphy on 11.20.12 at 11:45 am

@ #27 Devil’s Advocate

“They’re not our houses dumb-ass. They belong to our clients you clueless malevolent moron.”

“Seriously you misguided mental midget, you’re helping REALTORS more than hurting them.”

“But please keep up the good work you self-defeating little rascal friend.”

As I see it, Tough Times uses the word “realtards” merely to point out his disdain at the industry. I’d hazard a guess that he understands that the “realtards” don’t own the bulk of the housing stock, but still have a vested interest in house prices being high and higher. A real estate crash would no doubt hurt you, even though you suggest otherwise. I know this because you are extremely rude and defensive and bristle at the suggestion of a market melt. Your worry leaks through your posts like week-old tuna through a compost bag. Tough times, indeed.

#131 Tony on 11.20.12 at 11:45 am

Re: #43 T.O. Bubble Boy on 11.19.12 at 10:51 pm

Foreclosures also rose 3 percent as the U.S. housing market continues to disintegrate.

#132 Daisy Mae on 11.20.12 at 11:48 am

Globe & Mail: “Mr. Flaherty has tightened mortgage insurance rules four times in four years in an effort to stem the growth of consumer debt and house prices.”

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

The Globe & Mail fails to point out that Flahertys’ ‘efforts’ are just him rectifying the mistakes he created in the first place.

And this is what disgusts me about media reporting.

#133 JustTryingToProtectEquity on 11.20.12 at 12:12 pm

#115 Eaglebay – Parksville

“Who’s signature is on all these mortgages?”

Of course, you’re right. To a very large extent, people did this to themselves. But we do have to ask ourselves, why, when interest rates were at historic lows, did Flaherty monkey with ammortizations? Why did he create the ZERO down? We all know the answer…it was coming up to an election year and he (and Harper) knew that they would be ousted if our housing market followed that of the United States. So they effectively bailed out the banks, put the risk and burden on the tax payer,
through the CMHC…and created the unthinkable…a subprime environment right here in Canada. And all this after we had already seen what subprime had done to our neighbor’s to the south. The average American lost 40% of their networth when their market collapsed. Why would Harper and Flaherty then turn around and risk doing the same to their fellow countrymen.
Yes, yes, you are indeed right. The buyers’ signatures are at the bottom of the mortgages. But Stephen Harper’s and Jim Flaherty’s signatures are all over this mess.
They own it. Like so many of our fellow countrymen own their overpriced homes.

#134 Junius on 11.20.12 at 12:16 pm

#93 BabbleMaster,

I see. Sorry for that!

I have a number of RE industry people around me who are now constantly complaining about the government as if they changes are “draconian” and unnecessary. They are not interested in hearing that this is restoring lending to what it traditionally was.

It is another great reminder of how this type of intervention quickly creates a new normal that people assume reflects real values. Like current insane prices.

#135 Junius on 11.20.12 at 12:17 pm

#114 Canadian Watchdog,

You said, “The government can’t even balance a budget and they want to expand their oversight over national securities regulation.”

What are you suggesting? That securities markets can self-regulate? Or is it something else?

#136 Paul on 11.20.12 at 12:24 pm

#27 };-) aka Devil’s Advocate on 11.19.12 at 10:23 pm

“All you would succeed in doing is providing us ammunition toward helping get some much needed price reductions.

In other words, prices are coming down.

#137 JustTryingToProtectEquity on 11.20.12 at 12:26 pm

As an aside, I, for one, really like the new Smoking Man.

#138 Tony on 11.20.12 at 12:29 pm

Re: #53 Dean on 11.19.12 at 11:13 pm

Not long ago Oakville was a giant field and for a very good reason. No sane person would reside there. It’s been a long time since i’ve been to Oakville but i do remember the age of cars the oldest cars i’d ever seen. The average age must still be 15 years old.

#139 45north on 11.20.12 at 12:37 pm

GTA Girl: People bought these pathetic products from builders rubbing their hands together at the thought of a 2014 Lamborghini & a girlfriend in a downtown condo far from the wife in Forest Hill.

good post

#140 Tom from Mississuga on 11.20.12 at 12:49 pm

So would you like US bank preferreds like say JPM’s over Canadian banks based on the exchange?

#141 Old Man on 11.20.12 at 12:49 pm

#128 Doug in London – the answer is simple. The masses will always follow the herd in search of more which is called greed, contrary to the facts and logic.

#142 Smoking Man on 11.20.12 at 12:51 pm

$Buy $Courious.

Your such a tool, I have spent a great deal of time and effort sabotaging myself as of late. In hopes of avoiding becoming famous. A nightmare I dread.

With your constant chirping you are making me look good and inadvertently make my task of self destruction difficult.

Please stop and let me do in the persona Smoking Man

#143 Karie on 11.20.12 at 12:53 pm

#73 – I don’t know about that but did you see the hundreds and hundreds of cars parked around the Mattamy offices at Third Line and Dundas this weekend?

Trish from yesterday – Garth and most people on here are pro-renting. No one is going to tell you to buy, at least not right now and with 2 not so great housing choices (by your admission) recently.

I plan to hold on to our house which we bought a little over 8 years ago. We bought a house that we could afford that was below (not at) our means and have fairly low mortgage payments. I will totally agree with Derek R and others though that we have put a little into our house here and there – replaced carpet upstairs, painting, other stuff. I the coming years we’ll need to do the roof, replace the furnace, etc. We don’t have granite, renovated bathrooms, etc – we’d have to update if we wanted to sell as those things seem to be the expectation of buyers now. Those are the costs that kill you!
I wonder if this is why some people move every 5-7 years so they don’t have to renovate?

Actually I am not pro-renting. Real estate ownership is just fine, if you can afford it and so long as housing remains a reasonable weighting in an overall net worth profile. — Garth

#144 Canadian Watchdog on 11.20.12 at 1:03 pm

#136 Junius

Yes securities markets can self-regulate themselves providing that institutors are allowed to go bankrupt with the absence of government intervention. This proposal is nothing more then another Harper-banksters’ power grab to grow government when they should be cutting back heading into a recession.

Here’s two perfect examples of what happens when macro regulatory institutions are created: SEC Rocked By Lurid Sex-and-Corruption Lawsuit

SEC Porn Probe: Staffers Watched Porn As Economy Crashed

We don’t need more government.

#145 Old Man on 11.20.12 at 1:08 pm

#68 GTA Girl – well see you are street wise, as they say. I have seen it all, as had an agent working for me making big money back in the 1970’s funding commercial mortgages. His wife walked into the office crying, as just left her husband, and needed some cash. Imagine my shock that he had a young mistress on the side, and was paying for her apartment on Davisville; furnished it; and gave her lots of spending money.

I never knew anything about this arrangement, but his wife smelled a rat, and started to pay attention; had him followed as hired a private detective; and he got hooped in the end with a divorce. She took him to the cleaners lol.

#146 Steven Rowlandson on 11.20.12 at 1:09 pm

Dunning also predicts a 20% collapse in homebuilding activity over the next two years. This is what happens when bulls morph into bears.

I would take that as a conservative estimate. My gut tells me things will be far worse and many tradesmen will be looking for any kind of work but construction or will attempt some kind of retirement.. Time will tell.

#147 Old Man on 11.20.12 at 1:50 pm

# 144 Karie – Garth is correct about a Real Estate portfolio weighting, as if one owns in the proper location the hit can be offset with other stuff. The hit might amount to 20% which will recover over time, and who wants to sell their love nest.

The problem is with those that bought condos over the past few years at the top who leveraged it all with debt, so they bought debt, and in some cases will take a massive capital equity hit.

#148 Bigrider on 11.20.12 at 2:06 pm

#130 GTA GIRL

I was actually referring to another son of one of the other builders in the group of three you mentioned but I know of exactly who you speak of as does anyone else who has ever spent a Saturday evening near the bar area at ACC.

#149 dddd on 11.20.12 at 2:09 pm

#148 Spiltbongwater on 11.20.12 at 1:11 pm

other places are less ”bongwatery’ if ya know what i mean ;)

and colder too, much colder.

#150 Vamanos Pest on 11.20.12 at 2:16 pm

#116 Herb
Thanks for the response, it’s alway gratifying to know one’s comments are sufficiently compelling to elicit a respond. As for your comments, I agree with most of what you said, at least factually, but I think our differences are a matter of perspective. Allow me to explain:

Your first point is the feds CAUSED the problem when they “made this possible by relaxing mortgage rules” I would assert that there is a difference between making something possible and causing it. I said the cause was the people actually taking on the mortgages. Your perspective implies that part of the role of the federal government is to dictate what financial decisions we may and may not make, for our own protection. My perspective is that the parties MAKING the financial transactions are responsible. Basically, we agree that the feds allowed this. but your assertion is that it is their fault when people did. My assertion is that just because these things were allowed, it doesn’t mean people are absolved of responsibility for doing so.

Your second point starts with “if the feds have nothing to do with the RE market”. I did not say that, nor do I believe it. In this situation Garth would say “learn to read”. I’ll just say your point is moot with respect to my comments as you are countering an argument that was not made.

Your third point simply isn’t true. Again, it is a fact (not an opinion) that many markets peaked (i.e. started correcting) in April, while the tightening in lending took effect in early July. I’m not saying the tightening had no effect, I’m saying it is impossible that it was “THE (lone)” cause. I’m also saying that if it could not be the cause, what was the cause? Answer: an unsustainable (I believe I said “sick”) market.

#151 Toronto_CA on 11.20.12 at 2:21 pm

#126 Brdy skytrain on 11.20.12 at 11:28 am
“Malls packed, costco packed, huge new mercedes and porsche dealers going up nearby. Flights south booked heavily. Any decent restaurant still wall to wall”

And yet household debt levels in Canada have never been higher? Much of that spending is being done with HELOCs, which people are using like chequing accounts.

#152 Vamanos Pest on 11.20.12 at 2:24 pm

#143 smoking man
NOOOOO! You can’t self destruct! I love the comments! I can almost see the steam coming out of peoples ears as they read your comments, and I love it! So compelling, so outrageous, so brilliantly aggravating!

Long Live Smoking Man!!!!

#153 Dontcallmeshirley on 11.20.12 at 2:28 pm

#91 };-) aka Devil’s Advocate

Maybe you could provide us a reliable proof source that counters that of my own?
—–

First, he’s referring to “Canada”, you’re talking about the Okanagan.

Second, Genworth and CMHC have over $800 billion of insurance in force on a total Canadian outstanding mortgages of $1.2 trillion.

A majority of mortgages do appear to be covered by insurance.

#154 Coquitlam Resident on 11.20.12 at 2:32 pm

Actually I am not pro-renting. Real estate ownership is just fine, if you can afford it and so long as housing remains a reasonable weighting in an overall net worth profile. — Garth

///

Careful Garth. You’re going to confuse half the people following this blog who think Realtors are Satan’s span and mortgage debt is total servitude.

#155 GTA Engineer on 11.20.12 at 2:34 pm

#68 GTA Girl on 11.20.12 at 1:02 am
This pisses me off.

http://www.mattamyhomes.com/GTA/Communities/Oakville/The-Preserve/

It’s at least a 1.5 drive to Toronto…at non-rush hour

———————-

You know, although I agree with much of your post, making exaggerations like this doesn’t lend you much credibility. From northwest Oakville to downtown Toronto is 40 minutes (no traffic), not 90 as you so stated. And to the edge of Toronto city limits, it’s only 25. Not everyone works in Toronto, either, so it could be more or less than these.

Regardless, the prices are crazy true, but let’s tone down the rhetoric before we start hearing even worse – “OMG – 2 millions dollars for a camper in a seasonal trailer park in Brampton, 4 hours from the GTA!”

#156 Junius on 11.20.12 at 2:45 pm

#145 Canadian Watchdog,

You said, “Yes securities markets can self-regulate themselves providing that institutors are allowed to go bankrupt with the absence of government intervention.’

Wrong. It was no regulation of the securities industry that primarily caused the crash of 1929. After the SEC was created in 1933 it did a good job until it started getting deregulated and defunded in the 1990s.

The fact that we have poor regulation and regulators that are hostage to industry is not inevitable. We just need better government policy – which we have in Canada at least in comparison to the US.

On a less theoretical note -I do agree with you regarding the Harper government’s motives.

#157 IM in C on 11.20.12 at 2:50 pm

Will this be the state of the Canadian housing market 5 years into the future:
http://www.redfin.com/CA/Los-Angeles/1802-W-12th-Pl-90006/home/6932445?source=Patrick.net

#158 Van guy on 11.20.12 at 2:55 pm

Kerrisdale character
2107 w 36 ave 60x134ft lot (over 8000 sq/ft)
List 2.3m
Reduced a bunch of times to 1.88
Assessed 1.96m
Sold 1.35m

Standard lot characters were selling at the peak for 1.7ish.

#159 Devore on 11.20.12 at 2:57 pm

#79 Cowpie

Sounds like the low hanging RE fruit may now be divorcees and dare I say…(ahem)cougars. Well if HGTV virgins are drying up – we must be near THE END.

Nah, all the virgins on the new show (that I’ve seen anyways) have been 30-somethings. You know, clock’s a’ticking. This is predation of the lowest order.

#160 Trish on 11.20.12 at 3:09 pm

#144 Karie
To be honest, we’re in the middle of a kitchen reno in the house right now. No granite countertops though. Financially speaking, the house wasn’t a bad decision, it is under what we could easily afford all costs in. We got it under asking (which was, and still is, incredibly reasonable right now) and all it needed was a new furnace and roof.
If the kitchen wasn’t the disaster that it was, we would have just left it, but what we inherited was starting to fall apart. If you can DIY, it’s ridiculously cheap!
Other side is that house on Broadview that was for sale earlier in the summer, “Renovator’s Dream”-type. Someone snatched it up, fixed it up and tried to flip it for heaps more. It sat and sat and sat. Noticed a for sale in the last couple of weeks. Would be interesting to see how it panned out.

Going forward, do you really think bathrooms and granite will be dealbreakers? I mean if the bottom falls out, you could be getting detached with heated floors in the basement for a song!

#161 Trish on 11.20.12 at 3:10 pm

Sorry, the house had the for sale sign for a few months. It changed to sold in the last few weeks.

#162 };-) aka Devil's Advocate on 11.20.12 at 3:23 pm

#131RP McMurphy on 11.20.12 at 11:45 am
@ #27 Devil’s Advocate

“They’re not our houses dumb-ass. They belong to our clients you clueless malevolent moron.”

“Seriously you misguided mental midget, you’re helping REALTORS more than hurting them.”

“But please keep up the good work you self-defeating little rascal friend.”

As I see it, Tough Times uses the word “realtards” merely to point out his disdain at the industry. I’d hazard a guess that he understands that the “realtards” don’t own the bulk of the housing stock, but still have a vested interest in house prices being high and higher. A real estate crash would no doubt hurt you, even though you suggest otherwise. I know this because you are extremely rude and defensive and bristle at the suggestion of a market melt. Your worry leaks through your posts like week-old tuna through a compost bag. Tough times, indeed.

Not so much McMurphy. I just have a very low tolerance for sheer stupidity.

Now seriously, think about it. Take a $500,000 home. Should it decrease in value by 20% to $400,000 the owner has effectively lost $100,000 in equity. The REALTOR who successfully finds a buyer for that owner, in Kelowna where commissions are typically 7%.0 on the firt $100,000 and 3% on the balance shared equally with the buyers agent, would earn $9,500 at $500,000 and $8,000 at $400,000 a paultyr difference of just $1,500. Come on now do you really think we care that much about price one way or the other?

#163 };-) aka Devil's Advocate on 11.20.12 at 3:23 pm

#137Paul on 11.20.12 at 12:24 pm
#27 };-) aka Devil’s Advocate on 11.19.12 at 10:23 pm

“All you would succeed in doing is providing us ammunition toward helping get some much needed price reductions.

In other words, prices are coming down.

As I have said before there are those who are ‘on’ the market and there are those who are ‘in’ the market. Currently of all homes listed only 36% will sell under the term of their current listing. 34% of the active listings today will expire without a buyer willing to pay near enough the asking price to be found. 40% of the listings will simply be cancelled by the owner who eventually comes to terms with the fact their loft expectations will never be met.

Of the 36% that will sell most 80% will take more than 100 days to sell and then when they do the sale price will be closer to 92% of the original list price. The select few, 20%, will sell within 50 days and do so for closer to 98% of their list price.

Now Paul if you ponder that information I think you would have to agree there is a good part of the market which most certainly has not been educated on the real value of their home. There is quite a difference, on many levels, between ‘asking prices’ and ‘selling prices’. Yes we need sellers who understand they need to lower their ‘asking prices’ Paul but ‘asking prices’ are quite different than ‘selling prices’ and those ‘selling prices’ really are doing just fine. Sales volumes are where they should be and prices are where they should be. There is an excess inventory in most markets but most of it is more of a shadow inventory which while ‘on’ the market couldn’t be further from being ‘in’ the market as it is grossly overpriced as evidenced by the huge number of listings that simply do not sell.

#164 };-) aka Devil's Advocate on 11.20.12 at 3:24 pm

Actually I am not pro-renting. Real estate ownership is just fine, if you can afford it and so long as housing remains a reasonable weighting in an overall net worth profile. — Garth

The problem is Garth that, if you recall back to when you were first starting out and I do recall reading something you wrote on your and Dorothy’s earlier years, it is hard to embark upon a financial plan that includes home ownership which does not a great weight on the housing component of the mix. At some point, if home ownership is to be attained, one must jump in and work through that particular time toward the more balanced personal net worth you advocate.

Both you and I know the great many benefits to be had by owning real estate in one form or the other. It would be nice to see you, occasionally, share your wealth of information in that regard with those readers who listen far more trusting to you than they might ever to me.

So why not try Garth to write such an editorial. Try not to slag anyone from Greater Fools to the CREA cartel but instead let your people know what I know you know.

Rule of 90. — Garth

#165 Ret on 11.20.12 at 3:37 pm

$488,888.88 Sorry, I can’t take a cent less or the house will bring you bad luck. We can’t have that, can we?

What simple minded, utter rubbish that whole “8” thang is, but I could be a believer if it works in my favour!

#166 Daisy Mae on 11.20.12 at 3:37 pm

#96 Vanamos:

Globe &Mail quote: “Mr. Flaherty has tightened mortgage insurance rules four times in four years in an effort to stem the growth of consumer debt and house prices. His fear has been that Canadians are taking on too much debt in the form of mortgages, and that the market – especially certain pockets, such as Toronto’s condo market and Vancouver – was heating up too quickly. His aim has been to help the market find a “soft landing” and prevent a crash. He has suggested that he believes the changes are having their intended impact.”

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

How can you dispute the fact that this idiot caused this fiasco — ridiculous (arousing ridicule) failure (expected action/performance)? By, first of all, tampering with the 25-year amortizations?

The federal government made it easy for the first-time buyers — and just about everyone else — to make idiotic decisions, being only human. They were lured. First, by the governmental stupid decisions…then the banks…and so on down the line.

#167 dosouth on 11.20.12 at 3:46 pm

#17- };-) aka Devil’s Advocate

Kudos for your research. Digging up really (un)relevant materials. Now is now.

By the way housing crash is relevant to each home owner’s personal situation. Losing 10k to some is a crash while 1mil is pennies and a minor inconvenience to others.

I believe this blog, like others, is trying to inform the masses not the rich or famous who weather this type of economy by “writing if off” in taxes or losses on the shoulders of most of these readers!

It leads me to believe over all this time and your continued defence of a defenceless position is your passion in life to take on a losing cause.

Heck even a very “well known” long time realtor in Vernon has gone to the 3% selling calling his real estate company by a similar name. He has seen the light – hope you will too.

#168 Old Man on 11.20.12 at 3:49 pm

#144 Trish – or for those that need a new roof depending upon how the sun hits it. There is new technology called solar shingles that can be installed; otherwise a steel roof scenerio needs to be looked at.

#169 DonDWest on 11.20.12 at 4:00 pm

#129 Brdy skytrain

I find your post racist and offensive.

#170 Daisy Mae on 11.20.12 at 4:09 pm

#126 Brdy Skytrail: “Malls packed, costco packed, huge new mercedes and porsche dealers going up nearby. Flights south booked heavily. Any decent restaurant still wall to wall….”

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

Unbelievable, isn’t it? The malls are crammed full of unnecessary ‘stuff’ expecting a consumer spending spree this Christmas…and it’ll happen. Canadians are eagerly waiting for ‘Black Friday’ south of the border, and now it’s coming to Canada. People just don’t get it. Either that, or they just don’t care….

#171 Roial1 on 11.20.12 at 4:12 pm

#115Eaglebay – Parksville on 11.20.12 at 10:18 am
#50 JustTryingToProtectEquity on 11.19.12 at 11:07 pm

Who’s signature is on all these mortgages?
People did it to themselves.

Yes, yes they did………………….With a multi BILLION dollar industry promoting the hell out of the sales.

Mass Media advertising revenue anyone??????????????

#172 Daisy Mae on 11.20.12 at 4:14 pm

#128Doug in London: “So the question that begs to be asked, why didn’t all those people trying to sell now do so earlier this year (in Toronto) or last year (in Vancouver) when the market was buoyant and bidding wars were out of control?”

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

Because we can’t generally see ‘our nose in front of our face’?

#173 eagle eyes on 11.20.12 at 4:16 pm

Words like “revenge” or “vindication” has been used by people to express their delight in the downturn of the real estate market. Others warn that such could cause pain and would spread to the whole economy. So why would anyone wish this loss on another person? Perhaps because the ridiculous rise of real estate for the last few years has caused pain and suffering for them? The gain which have made some very rich, while others gaze on the sidelines with caution. Can you imagine raising a family in Canada and not being able to provide a roof for them? Food and Shelter. One of the very basic essentials in life? It is time that the bubble deflates. It is time that the average working Joe can afford a basic home for his family. Revenge or not, it is time.

#174 :) :( Ying Yang on 11.20.12 at 4:17 pm

Tensions in Gaza are high(WW3)?, Greece’s euro debt problems have not yet been resolved (that’s what the Eurogang gets for letting countries like Greece join), and we have the ongoing discussions in the US over the fiscal cliff (That will never happen as thats what printing presses are for) So which of these three clouds on the horizon worries me the most out here in 905 land? None don’t care about Gaza, Greece or USA. Oakville prices are hard to judge, some areas up some taking longer to sell than normal. People out here are up to their proverbial Ying Yangs in $$$. We will as usual cruise through another housing crash/recession with only a glancing blow to the heel of our nine-west high heals. That is of course unless the jihad idiots in Gaza (Iran) decide to start something that will end it all for us! Dam I going out right now to buy a Lambo, on credit of course!

#175 eddy on 11.20.12 at 4:18 pm

In C11 (Leaside), the lowest price bungalow is listed at $1,099,000.
In 2010 these things went for 650k

#176 IM in C on 11.20.12 at 4:24 pm

@164 AKA devil’s Advocate
You wrote:

Come on now do you really think we care that much about price one way or the other?

My reply: Yes !

#177 Canadian Watchdog on 11.20.12 at 4:27 pm

#150 Junius

It was no regulation of the securities industry that primarily caused the crash of 1929.

Crashes are a function of markets and have existed for centuries. The notion that a regulator can prevent one is a complete fallacy.

After the SEC was created in 1933 it did a good job until it started getting deregulated and defunded in the 1990s.

And who deregulated and defunded the SEC during the 1990s? Bailed-out banks that grew more powerful then congress who should have defaulted back in the 1930s or during 1980s S&L crises.

#178 Coquitlam Resident on 11.20.12 at 4:34 pm

Rule of 90. — Garth

So, say I’m 30, take-home income of 125K, 400K mortgage, 25K saved through TFSAs, RRSPs, and have about $2500 leftover at the end of each month…

According to the rule of 90, my home should be 60% of my network.

The home is assessed at 460k. So my other assets should be worth about 350K..

350K? WTF? Why would I pay rent for the next 8-10 years to save up 350K? Each year that passes, the rule of 90 would be recalibrated, making it harder to stay complaint with the rule. Besides, my rent payment was only about $200 less than my mortgage/property tax payment that I currently pay.

IMHO, it makes no sense to me, unless I’m not reading it right?

#179 Daisy Mae on 11.20.12 at 4:34 pm

#152 Vamaos: “Your perspective implies that part of the role of the federal government is to dictate what financial decisions we may and may not make, for our own protection. My perspective is that the parties MAKING the financial transactions are responsible. Basically, we agree that the feds allowed this. but your assertion is that it is their fault when people did. My assertion is that just because these things were allowed, it doesn’t mean people are absolved of responsibility for doing so.”

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

The feds understand human nature very well. They knew what they were doing…and knew the potential outcome. Trouble is, the ‘three stooges’ didn’t care. And still don’t. They’re now trying to protect their own hides. And, you’re nit-picking.

#180 Daisy Mae on 11.20.12 at 4:36 pm

Make that ‘probable’ — erase ‘potential’.

#181 Junius on 11.20.12 at 4:39 pm

#164 DA,

You said, “Come on now do you really think we care that much about price one way or the other?”

You should be. When prices are rising people are much, much more inclined to pay full commissions. Just look at the Financial services business now as it struggles with charging fees in a less robust market.

The declining prices in the US cut into Real Estate commission heavily and caused more people to start looking at sites like Zillow.com and others.

#182 Daisy Mae on 11.20.12 at 4:40 pm

Aw, what the heck! The feds knew the outcome would be potentially devastating and quite probable.

#183 };-) aka Devil's Advocate on 11.20.12 at 4:49 pm

Rule of 90. — Garth

We bought our first home just after completing our post secondary educations. We had student loans that could choke a horse back then and at 18% interest ta boot. There is no way we could have pulled together a mix that met your rule of 90. Buying our first home, and we really couldn’t afford it then but then neither could we afford the rent they were charging for half the home, was the best financial move we ever made bar none. There were lean years but we held on and have no regrets what-so-ever.

While I do agree your Rule of 90 is a neat little guideline for those a little later in years. But the earlier you get started on homeownership, like any investment, the quicker you enjoy the more lucrative benefits it has to offer. Home ownership, if you do it halfway reasonably right, builds equity and with the equity comes the ability to do so much more. It’s been my observation that postponing getting into home ownership tends to build more obstacles to financial security than it breaks down.

We all need a roof over our head from day one that we leave that of our parents. The longer you wait the less likely it becomes that you will ever own a home of your own. Prove to me otherwise.

Also, it is a well-known fact that homeowners by a wide margin on average have a higher net worth than renters. Prove to me otherwise.

And, those children who are raised in owned homes tend to have a far higher scholastic standing than those raised in rented homes. Again, prove to me otherwise.

Of all the Boomers facing a financially tight retirement those who did buy a home earlier than later tend to face a far less impoverished retirement. Prove to me otherwise.

Lastly I’d like to ask any of the homeowners reading this blog who can honestly say that when they bought their first home it did not seem as difficult a task as a First Time Homeowner might likely face today. Every decade I have heard it said, time and time again, that “prices simply cannot continue to go up like they have”, yet decade after decade they continued to do just that. When that does finally change, and I do believe eventually it will, unfortunately you will have a whole lot more to worry about than the price of real estate.

#184 Van guy on 11.20.12 at 4:51 pm

Can someone answer this:

John and Jane both own homes and just got married. They decide to sell Johns and made a capital gain. Do they have to pay capital gains tax because they own 2 properties?

No. — Garth

#185 PoorgEoisie on 11.20.12 at 4:54 pm

In the past couple of days I have received two letters from two different realors claiming to have buyer’s interested in purchasing the unit I rent. One states that “there aren’t any similar units currently available”. An easy zoocasa search shows that there are currently 6 units like mine available. Looks like the beginnings of reverse bidding wars. I look forward to the constant barrage of realtor flyers changing their language from “I’ll sell your house for top dollar” to “I’ll help you get a house for less than anyone else”
Get ready for realtor thunderdome.

#186 };-) aka Devil's Advocate on 11.20.12 at 4:54 pm

#169 dosouth on 11.20.12 at 3:46 pm
and
#183 Junius on 11.20.12 at 4:39 pm

I am well aware some agents discount their fees… and so they should.

#187 Paul on 11.20.12 at 4:58 pm

I know of 3 people that have sold their places in kelowna since 09. All have lost money.

#188 ronthecivil on 11.20.12 at 5:00 pm

“Very well said. This is exactly what has transpired. The ‘cons’ plan, if they had one, backfired. No matter what their motives were. And now, prepare for more of their excuses….”

The feds sure seem pretty fixated on the fiscal cliff. Given that regardless of the outcome there’s going to be some sort of turmoil one way or the other coming as a Christmas present to the feds you can be certain they will happy to be ready to lay the blame on. A declining economy because of the Americans. So perfect, so uncontrollable, so completely someone else!

They go over the cliff! American recession hit Canada! Couldn’t do nothing!

The don’t go over the cliff but instead have a modest package of tax increases, some program cuts, but still serious debt problems that kick the can down the road? Doubts in American finance plus slowdown in the economy wash over to Canada putting a double whammy on banking and the economy! Nothing they could do! If only the US congress had been able to get along earlier!

Check out the soundbites! Not just F but even Harper seem really excited about their Christmas excuse!

And could you blame them?

#189 };-) aka Devil's Advocate on 11.20.12 at 5:02 pm

#183 Junius on 11.20.12 at 4:39 pm

The declining prices in the US cut into Real Estate commission heavily and caused more people to start looking at sites like Zillow.com and others.

That doesn’t even make sense. The bulk of the listings on such sites as Zillow are those where the seller is represented by a REALTOR. The bulk of those listings are posted there by a REALTOR.

Do you really think selling real estate is all about open houses, driving a BMW, putting a fancy schmancy ad in the newpaper or dropping a sign in the front lawn or merely posting a listing on a website? Are you serious? Any fool can do all that.

If it was just that I would have to agree REALTORS would be grossly over paid and you should not hire one but do all that yourself. So do it Junius and see how successful you are. Yes you might get lucky as some indeed do. After all even a blind squirrel will find a nut once in a while.

You really haven’t a clue what a REALTOR does do you? No matter not many do.

I’ve not had a problem charging what I do for my services and I doubt I ever will.

#190 Is there anything wrong with just owning a home on 11.20.12 at 5:14 pm

Hey People… is there anything wrong with just owning a home as an investment before making contributions to retirement?

Reading this blog daily makes one feel foolish to want to own a home when in reality we all want to own someday. Paying off a home is just a different kind of investing, one that will work very well for the majority of the people here. To think we can rent and invest over 25 years and on average and get that elusive 7% year over year return is not easy and one hell of a ride. In realty if one were to do that alone then good luck on timing the end game when you retire. 7% year over year is really 20% up then 10% down then 5% up then 15% down etc. over 25 years. All you do is hope for the 20% up part when you need to pull out (that’s what she said…).

Paying off a house over the same 25 years will get you 4% year over year return which is double the inflation. No need for financial advisors, no need for investing skills, no concern what the market is doing because you live in your investment. Your kids live in your investment. Even your kids moving back to save with their kids and so on… A family unit owning a home is a better investment over the long term, everyone draws on that investment. Once the house is paid off then you can start your retirement savings. Draw on your home equity as needed. Paying down your debt is a guaranteed 100% against loss. Put in $1000 and you get $1000 + the interest you saved on borrowing costs.

My advice to those who want to own someday is to get your down payment secured in a savings account. Risking your down payment in any market is foolish; simply because you need it short term. Contribute to that down payment religiously. Make the cost of living sacrifices now while you are renting. Keep an eye on the neighborhood you want to live in. Once you have your 20% down payment then start low balling your dream home. If you can’t save that 20% down payment then you are not a good candidate for owning a home. Change your life style or upgrade your skills first.

My advice to those who already own a home and feel they paid too much then you need to pay it down ASAP. Make those cost of living sacrifices now to get the mortgage paid off while the cost of borrowing is cheap. Any money towards your debt is guaranteed to earn you more than risking it in any other market and you will feel productive.

If you feel the need to sell your home then first consider your selling costs (staging, commission, lawyers and moving) before you list. Also consider the emotional aspect of selling when people walk through your home and constantly low ball your offer. Then consider the cost of buying again in the future (moving, land transfer, lawyers, higher interest rates).

Thank you Garth for all your postings.

1986 called. They miss you. — Garth

#191 Have to Speak Up on 11.20.12 at 5:16 pm

#171 DonDWest

Then you must find Hamas racist and offensive because those are their words.

I’m still not sure why Garth is allowing these kinds of posts on this blog because they are irrelevant to the discussion at hand. Why not just delete the stuff that is meant to inflame people and stick to real estate and financial matters. There are many other more relevant forums for these people to vent their spleens upon.

Good idea. — Garth

#192 Westernman on 11.20.12 at 5:19 pm

Three things are painfully obvious when reading the comments section of this blog:
1. Canadians assume absolutely NO responsibility for their own lives – everything is someone else’s fault.
2. Canadians believe deeply and preternaturally that more government regulations, bureaucrats, laws, licences etc. will solve everything.
3.That common sense is now officially dead in Canada.
This country is finished but just doesn’t know it yet…

#193 Form Man on 11.20.12 at 5:19 pm

Junius

My understanding is that there were adequate regulations in place to prevent the sort of shenanigans that almost brought down the system in 2008. Problem was a lack of enforcement.

DA
you are twisting yourself into strange contortions my sad and frustrated friend. On one hand you parade around boasting that Kelowna real estate prices are ‘holding’……in the next breath you berate the ‘holders’ for unreasonable expectations…….you are in a tough spot. In order sell some houses you need prices to come down significantly, and soon. But if this were to happen ( and it might ), your ‘holding’ boast will prove to have been absurd.

Daisy Mae

you are a voice of reason….thank you

#194 :) :( Ying Yang on 11.20.12 at 5:25 pm

#185 };-) aka Devil’s Advocate on 11.20.12 at 4:49 pm
….
I agree with El Diablo, been there and done that. Kraft dinners, peas, peanut butter. Build up equity slow and steady paid cash for all big ticket items later. Now I use credit but pay cash for credit card bills ASAP.

#195 Is there anything wrong with just owning a home on 11.20.12 at 5:32 pm

# 192 Is there anything wrong with just owning a home

“Paying off a home is just a different kind of investing”

1986 called. They miss you. — Garth

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

Funny, I believe those who are retiring now with a home paid in full are far better off than any lifelong renter.

To reply that a renter who invested and got a 7% ROI is better off financially is not a realistic. I can’t find any online calculator that would show renting vs. owning over the long term is better.

Also, owning a home over 25 years then investing in retirement is more realistic and achievable then renting and investing over the same period.

But hey.. 1986 is calling and I need to get that..

Cheers!

If you mistake owning a home for a retirement strategy, you court risk. The question is not between owning and investing nothing or renting and investing everything. Both are bad ideas. — Garth

#196 I'm stupid on 11.20.12 at 5:45 pm

Hi Garth

Quick question for you, what happens in the event someone has a pre-approval for a mortgage that includes all the goodies that have been removed. The 30 amortization, cash back mortgage etc. is that pre-approval void?

It should have an expiry date. — Garth

#197 rosie on 11.20.12 at 5:48 pm

#185
Homeowners also have better sex, clearer skin, cuter puppies, whiter teeth and fresher breath. They live longer and smell fresh all the time. They know how to choose the best wine and they appreciate modern jazz. They obviously dress better and have immaculate nails. Don’t get me started on the type of cars they drive or the sheer wonderment of their personas Prove to me otherwise.

#198 I'm stupid on 11.20.12 at 5:52 pm

I’m aware that pre-approvals have expiry dates some can go as long as 90 days. I’m sure that some where still valid after the 30 year was killed and some might still be valid that contain cash back mortgages. I’m just asking to satisfy my own curiosity.

#199 Canadian Watchdog on 11.20.12 at 5:57 pm

#198 I’m stupid

It should have an expiry date. — Garth

The better question is what happens to pre-approvals when a developer postpones or delays a project?

#200 };-) aka Devil's Advocate on 11.20.12 at 6:06 pm

#195Form Man on 11.20.12 at 5:19 pm

DA

You are twisting yourself into strange contortions my sad and frustrated friend. On one hand you parade around boasting that Kelowna real estate prices are ‘holding’……in the next breath you berate the ‘holders’ for unreasonable expectations…….you are in a tough spot. In order sell some houses you need prices to come down significantly, and soon. But if this were to happen ( and it might ), your ‘holding’ boast will prove to have been absurd.

Really Form Man… really… must I repeat it all yet again?

Prices are indeed holding. There is indeed a large contingent of would be sellers if a Greater Fool were to come along and pay their exorbitant price. But it is those sellers with warranted motivation who price their properties correctly that they are bought by diligent buyers equally motivated which establishes market price. You can ask whatever you want it doesn’t mean your property is worth it or that it will sell for anything close to what you ask.

Do we need lower selling prices? No! We are selling as many homes as we should be selling today and the selling prices are agreed by the buyers of those homes to be where they should be or they would not be buying them would they? So the price is right.

Would some like lower prices? Hell ya! Who, other than present owners, wouldn’t? Lower prices would offer both you and I opportunities not presently available to us. Is it going to happen? Maybe. Will prices go up or will they go down? Yes, prices will eventually go up or they will go down.

Absolutely, those who have unrealistic price expectations frustrate me to no end. It is they who bitch and complain most without realizing they are their own worst enemy. They confuse both buyers and sellers alike who tend, before they learn better, to look at ‘asking prices’ a measure of what is happening in the market just like you look at MOI. Both are grossly flawed indicators. What you need to look at is volume trends and actual sale prices – nothing much else matters.

But hey I get it. It’s a confusing parable in it’s simplicity and, I am sure, always will be. All the more reason for the services of a trusted advisor who will help you avoid those costly mistakes people tend to make along the way. It’s not what you know you don’t know that will kill you, it’s what you don’t know you don’t know that will do you the most harm.

#201 I'm stupid on 11.20.12 at 6:06 pm

#201 Canadian Watchdog on 11.20.12 at 5:57 pm

That’s what I was thinking too.

#202 Coquitlam Resident on 11.20.12 at 6:15 pm

If you mistake owning a home for a retirement strategy, you court risk. The question is not between owning and investing nothing or renting and investing everything. Both are bad ideas. — Garth

I’m not sure that is the question. Rather the question should be how is the Rule of 90 at all relevant for first time home buyers under 50-60 years of age?

If you have a decent income and want to buy an affordable residence, under the rule of 90, you would have to save up 300-400K to keep as investment assets, on top of the down payment required for a primary residence.

During the time a person is saving up this 300-400K, they are shelling out rent every month, instead of paying down their principal on the mortgage.

IMHO, it really only makes sense for the 50s,60s crowd. For people under 50s,60s, the Rule of 90 is probably bad financial advise.

#203 Alpha_Bear on 11.20.12 at 6:26 pm

};-) aka Devil’s Advocate on 11.20.12 at 3:23 pm

“Now seriously, think about it. Take a $500,000 home. Should it decrease in value by 20% to $400,000 the owner has effectively lost $100,000 in equity. The REALTOR who successfully finds a buyer for that owner, in Kelowna where commissions are typically 7%.0 on the firt $100,000 and 3% on the balance shared equally with the buyers agent, would earn $9,500 at $500,000 and $8,000 at $400,000 a paultyr difference of just $1,500. Come on now do you really think we care that much about price one way or the other?”

You might not care about lower commissions on an individual property, but I suspect that you’re more concerned about commissions drying up completely if sellers withhold their properties from the market when they see prices falling,

In addition, I also suspect you’re a typical realtor who has most of his “investments” in real estate, and are doing all that you can (including pounding away at your keyboard at all hours of the day and night) to keep prices high, so that you don’t lose your shirt in the current real estate collapse.

The only thing I want to hear from you (once the market has crashed, since you’re not honest enough to admit that you are wrong) is, would you like fries with that?

#204 Picasso on 11.20.12 at 6:30 pm

#199 rosie on 11.20.12 at 5:48 pm

I think it’s people in relationships, not home owners.

#205 };-) aka Devil's Advocate on 11.20.12 at 6:31 pm

Just an interesting observation I thought I’d share with the Blog Dawgs…

It appears that the market price for rentals is converging with the market price for such properties more and more such that one can today buy and rent out the property with reasonable anticipating of being able to break even. Doesn’t work so well the further up the food chain you go but rarely does it ever up there anyway. Slumlord stuff though is starting to look quite attractive once again – especially that with an as yet latent untapped value. I’m not shitting you this is happening.

You know what that means don’t you?

#206 robert on 11.20.12 at 6:32 pm

Whatever happened to common sense? To rent or not to rent, to buy or not to buy, why waste your breath. The fact of the matter is real estate has now become a depreciating asset and it is only in phase one so the real impact has yet to be felt. Buying a home now IMO is giving you worse odds than your local casino game. Would you borrow $500,000 to bet on one hand of blackjack? Things change in life look at the hp and the dells of the world who once dominated the computer market which has now collapsed. Why is real estate any different.

#207 BillyBob on 11.20.12 at 6:33 pm

Sorry for the dumb question, but what are the Forex guys expecting? The CAD to weaken I assume?

That was the columnist’s stance. — Garth

#208 };-) aka Devil's Advocate on 11.20.12 at 6:40 pm

#205 Alpha_Bear on 11.20.12 at 6:26 pm

Wrong. There are always sellers and buyers selling and buying – always.

Wrong. I am most certainly more heavily ladden in real estae holdings but do have other financial investments all of which are long term holds. I could care less what the markets do day to day. My investment advisor and I meet once in a while more for coffee than anything else and the value of my real estate is what it is. Both my real estate and financial investments are doing well enough neither breaking any records nor causing me concern.

and

Not going to happen.

I’m by not what most would call a wealthy man. My needs are simple and I have more than I need.

#209 };-) aka Devil's Advocate on 11.20.12 at 6:55 pm

Tuesdays in real estate, as some will know but most not, are a bit of a different day of the week. I’ve had some slack time. It’s been fun but now I must leave as I’ve got work to do – blieve it or not.

The market is what it is.

Price follows volume up and/or down.

No one has a crystal ball – no one.

Put money away each and every day. Put a third of it in high risk, a third in low risk and a third it in a “fun” account. At the end of each six months take the profit made in the high risk account, if there is any, leave a third there, put a third into the low risk account and a third into the fun account. Divvy up unexpected winnings, inheritances and gifts one third in each of your high risk, low risk and “fun” accounts. Spend the fun account on whatever you want without remorse for you have saved more than most and afforded yourself that reward for having done so.

Cheers

#210 What Reality? on 11.20.12 at 7:02 pm

@#192 Is there anything…
“when in reality we all want to own someday”

in reality there are still a few who have not been brainwashed by the “homeownership” machine, and don’t live their lives drooling at the idea of owning a house.

#211 Devore on 11.20.12 at 7:42 pm

#158 Junius

Wrong. It was no regulation of the securities industry that primarily caused the crash of 1929. After the SEC was created in 1933 it did a good job until it started getting deregulated and defunded in the 1990s.

Wrong. The 1929 market crash was primarily caused by bursting of the credit bubble clumsily engineered by the newly created FED. You didn’t really believe the roaring 20s were all about unbridled capitalism, hmm?

#212 Blobby on 11.20.12 at 7:52 pm

So is F likely to change the rules again under pressure? I dont know him like you do – but it seems to me that the Harper Government ™ seems to have a habit of doing what business/money pressure groups ask them to do?

How long before we’re back to 40 year mortgages in order to try to “save” property prices?

#213 Devore on 11.20.12 at 8:01 pm

#162 Trish

Going forward, do you really think bathrooms and granite will be dealbreakers? I mean if the bottom falls out, you could be getting detached with heated floors in the basement for a song!

Going forward, the trends have been pretty clear:

– master ensuite
– walk-in closets
– half baths on main and finished basement
– 1 bathroom per no more than 2 non-master bedrooms
– flexible, open concept kitchen/dining/living
– potlights

In terms of finishes, stainless steel and granite on counters, even outside kitchen.

In general, the trends are towards showing off conspicuous consumption and appearance of wealth. Look at what bona fide expensive houses look like. Large, spa-like bathrooms. Expensive stone counters. High-end professional grade heavy duty commercial appliances. Entire rooms with furniture dedicated to warehousing clothing and shoes.

Regular people, lacking actual wealth, will always tend towards replicating the appearance and trappings of wealth vis a vis fake and cheap knockoffs. Thin, cheap granite counter tops. Shiny plastic insert panels on fridge and stove. Laminate and engineered floors. Large, pretentious bathrooms (I mean, really, do you live in them?). Even behind the walls, use of cheap glue-sawdust to cover the skin of the expanding square footage and to support the structure and expansive open spaces.

This is what sells. Make it look expensive, as opposed to practical and solid. For yourself, if you are trying to justify renovating your kitchen and bathrooms this way, you are wasting your money, because improvements depreciate very quickly. A couple of years down the road, no one will care you spent $50,000 on the kitchen reno. Only renovate just before a sale to capture as high a premium as possible. Otherwise, figure out what you need and what works for you, and do as much of the work yourself as you can.

#214 M G on 11.20.12 at 8:04 pm

From the Canadian Business Article

Selling one’s house to become, for example, a renter entails giving up the inflation hedge represented by a hard asset. Prices for gold bullion and other precious metals have climbed over the past decade to new heights as investors sought protection against the erosion of incomes and wealth by inflation. This is a material threat given the vast quantities of money that central banks are printing to keep the banking and government sectors from defaulting on their monumental financial obligations. Indeed, the response to huge debt burdens historically has been to inflate them away. Owning a home is an inflation hedge, and unlike precious metals, the owners get to live in their hedge.

Let me ask Garth: If one is not to buy a home, she has to live somewhere. So they have to pay rent. So the land owner collecting this rent is helped to pay her monthly bills. So how is owning a bad thing?

Where are all these people supposed to go? I don’t have stats just street smarts. Been living in Toronto for 40 years – population and traffic goes up every year incessantly. Where are all these people going to live??? Eventually they have to buy or rent. This cannot be bad for real estate.

Supply vs demand. Sure the million dollar plus real estate will take longer to sell because the pool of buyers is smaller- but they are there.

And you want people to bet against the puppet master bankers who will keep interest rates close to zero as they work with their crownies in Ottawa/Washington to keep them in power. Nobody wants a depression especially politicians and big business. They will inflate as much as possible despite of course saying “OHH my fellow Canadians we are worried about inflation.” Thats a bunch of baloney. You are right Garth about one thing- deflation is the major worry for the power structures, Thats what they really fight.

Thats wha the poor and middle class dont get- left wingers like Obama outwardly say they are for thepoor but inreality they are for the rich- by working with the bankers to make money worthless by rpinting it. Them giving enough of this worthless script to the poor and losers just to mmek out an existence. Meanwhile the powerful take more control of the real money making process- real estate, stocsks, farms, etc.

Should I talk about the military industrial complex tonight. Naw i am just a nut gold bug who has made hundreds of thouisands i hard assets.

The truth!!!

#215 M G on 11.20.12 at 8:08 pm

http://www.debtclock.ca/

not bad we only owe 600 billion

look at the us

http://usdebtclock.org/

#216 Junius on 11.20.12 at 8:11 pm

#195 Form Man,

You said, “My understanding is that there were adequate regulations in place to prevent the sort of shenanigans that almost brought down the system in 2008. Problem was a lack of enforcement.”

I think it is partly true. The system lacks regulation of the entire derivatives market along with the shadow banking system which is valued at about $67 Trillion dollars according to a Bloomberg Report.

The other problem is the repeal of Glass-Steagall where the Banks can be both a traditional lender and an investment bank. This is also a problem.

However you are correct that lack of enforcement is a problem. This comes from defunding as well as regulatory hostage where the regulators go to work for the banks after leaving government.

#217 Hugh Jasz on 11.20.12 at 8:15 pm

#198 I’m stupid on 11.20.12 at 5:45 pm
……what happens in the event someone has a pre-approval for a mortgage that includes all the goodies that have been removed. The 30 amortization, cash back mortgage etc. is that pre-approval void?

Some of the seasoned vets can correct me if I’m wrong, but I don’t think anything happens.

I always took it that a pre-approval is just a disclaimed statement from a lender that says

“Based on what you’ve told us about your financial situation, we would hypothetically lend you money at some amount not exceeding value $XXXXXX…….”

Until a lawyer and lender come together to make a mortgage happen on a specific piece of real estate, you have no mortgage, and nothing binding to force the lender to give you a mortgage.

All you have is a piece of paper that has some loose promises on it, and some clauses that they can use to weasel out of those promises……such paper may not be worth much more than the roll in your bathroom.

#218 Smoking Man on 11.20.12 at 8:23 pm

Met a guy today called Richard Large

Started laughing. How can you not.

#219 Canadian Watchdog on 11.20.12 at 8:23 pm

Sizing up Toronto’s property speculation: Chart

U.S. had subprime crisis, Canada will be preprime crisis. You heard it here first.

#220 Junius on 11.20.12 at 8:31 pm

#191 DA,

Well, that was one hell of an over reaction. Sensitive are we?

My point is pretty simple. When prices decline and people are losing money they look to cut all costs including commissions. What goes for the Financial Services and every other business goes for Real Estate professional. And yes, this includes more people using do it yourself website whether you like it or not.

#221 Sir Finance on 11.20.12 at 8:33 pm

Coquitlam Resident:

“So, say I’m 30, take-home income of 125K, 400K mortgage, 25K saved through TFSAs, RRSPs, and have about $2500 leftover at the end of each month…

According to the rule of 90, my home should be 60% of my network.

The home is assessed at 460k. So my other assets should be worth about 350K..

350K? WTF? Why would I pay rent for the next 8-10 years to save up 350K? Each year that passes, the rule of 90 would be recalibrated, making it harder to stay complaint with the rule. Besides, my rent payment was only about $200 less than my mortgage/property tax payment that I currently pay.”

Net worth = assets – liabilities
The equity/net worth in your home is 60k.
Rule of 90 would therefore suggest you have a total net worth of 100k to be properly diversified…

#222 Daisy Mae on 11.20.12 at 8:39 pm

86Van guy: “Can someone answer this: John and Jane both own homes and just got married. They decide to sell Johns and made a capital gain. Do they have to pay capital gains tax because they own 2 properties?”

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

Just as Garth stated: No. The fact he married and for a short period of time the couple owned two homes, is neither here nor there.

Johns’ house was his ‘principal residence’, registered in his name, and is not subject to capital gains tax. Period.

#223 };-) aka Devil's Advocate on 11.20.12 at 8:48 pm

#205 Alpha_Bear on 11.20.12 at 6:26 pm

I might just do that someday. I was a waiter once before and I’m not opposed to being one again, no matter what class the restaurant might be.

Why do I envision you as a woman? You aren’t are you?

I don’t plan on retiring. Oh I know; travel, leisure, yada, yada, yada… It just doesn’t really appeal so much to me as we do plenty of all that now and I’ve seen too mamy die too soon after ‘retiring’.

Seriously, flipping burgers for a time could be a hoot. No pressure, talk to a bunch of new faces, at the end of your shift your done. Really, comes a time in your life it’s not about the money anymore so much as your health and good attitude. Without which it doesn’t make much sense to continue on. And so, when that day comes I won’t. I refuse to go there. I’ve already lived longer than I should have. That doesn’t mean though that I’ll give up what more I can get. I’ll keep on keepin’ on for as long as I possibly can, doing whatever seems like a good idea at the time. Flipping burgers or real estate, it’s all the same to me wherever it might be.

Life.
So Alpha_Bear it wouldn’t surprise me one bit if some day I ask you “would you like fries with that?” But you might want to check under that bun. };-)

#224 };-) aka Devil's Advocate on 11.20.12 at 8:50 pm

Fat fingers and an iPhone.

#225 A Smith on 11.20.12 at 9:04 pm

@Tony #139 –

What’s wrong with Oakville? The west GTA is ideal for me and for many people I know. Traffic in Halton isn’t as bad as most other parts of the GTA, taxes are lower, easy enough access to the airport when needed, easy access to the border. Great access to Mississauga, which itself is much more desirable than any of the east GTA in my mind. What’s your beef?

#226 Daisy Mae on 11.20.12 at 9:16 pm

#214 Blobby: “How long before we’re back to 40 year mortgages in order to try to “save” property prices?”

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

Haven’t they done enuf damage?

#227 Canadian Watchdog on 11.20.12 at 9:19 pm

#218 Junius

The derivatives market can not be regulated because of its complexity. The regulators know this and is the reason why they don’t bother. All those notional amounts you see are just bookings to hide contingent liabilities and keep the party going a little longer.

Everybody knows the derivatives market is going to crash since that amount of money doesn’t even exist. They just keep betting on it while they can.

#228 Bo Boka on 11.20.12 at 9:20 pm

We are all being ripped off by government being it federal or provincial. Taxes and fees through our noses…WDF
Everybody is tired of being ripped off at every turn.
Real estates agents and mortgage brokers: you guys can burn in hell.

#229 Bo Boka on 11.20.12 at 9:23 pm

#194 Westernman
Well said.

#230 };-) aka D.A. on 11.20.12 at 9:32 pm

#222Junius on 11.20.12 at 8:31 pm
#191 DA,

Well, that was one hell of an over reaction. Sensitive are we?

My point is pretty simple. When prices decline and people are losing money they look to cut all costs including commissions. What goes for the Financial Services and every other business goes for Real Estate professional. And yes, this includes more people using do it yourself website whether you like it or not.

Yes commenting on this blog would be so much more fun with the addition of an inflection font.

Junius, there is no question what-so-ever in my mind that full service real estate is here to stay. I’ve been around long enough to see different business models come and go while the traditional model remains constant through thick and thin. The more this business changes the more it remains the same.

It’s not at all about the internet Junius. As a matter of fact the internet is my competitors’ greatest weakness. Really think about it… how many are going to look up some weak website like http://www.juniusrealestate.com (well I’ll be damned, there actually is such a site). Not many, if any, I’d venture to say. But they do go to http://www.realtor.ca and they go there in droves. They go to where the action is Junius and http://www.theforsalebyownerof123Anystreet.com is not where the action is but rather nothing more the lonely domain of but one single property.

The internet, while it has indeed done a lot of good, has brought with it some not so good. The internet has given buyers and sellers a false sense of power that they are now more confused than ever in the past. Information overload… not all of it what it pretends to be. It’s not what you know you don’t know that will hurt you the most but that which you don’t know you don’t know that is the killer.

#231 I'm stupid on 11.20.12 at 9:32 pm

#219 Hugh Jasz on 11.20.12 at 8:15 pm

Makes sense thank you.

#232 };-) aka D.A. on 11.20.12 at 9:51 pm

#222Junius on 11.20.12 at 8:31 pm
#191 DA,

Well, that was one hell of an over reaction.

The name’s Devil’s Advocate for a reason };-)

#233 Snowboid on 11.20.12 at 10:00 pm

How to hijack a blog:

Forget your meds and pretend to be a gold-standard Okanagan RE agent! Post a near 10% of all submissions in one day, and still provide 100% nonsense!

#234 };-) aka D.A. on 11.21.12 at 12:12 am

Today, was indeed, a slow day in real estate boys… and girls or whatever you are.

#235 Sam Elgohary on 11.21.12 at 6:48 am

Garth with all respect you are way too negative in regards of real estate.
Here are some positive thoughts
– Canadian love home ownership and will continue to buy homes .
– immigration almost 250,000 yearly
-Canadian real estate much cheaper than real estate in countries which immigrants coming from so they buy .
– real estate is a long term equity building vs rent end with nothing
– home owners not in negative 8% as you mentioned as long as they live in their homes
– we all know interest rate will remain low for a while means every mortgage payment is building equity for hone owners .
– new mortgage rules makes it harder for people to buy ,they will rent , rent increase , more demands from investors , properties appreciate & the circle goes back again .
I think we will have a stable real state market for years to come

#236 Snowboid on 11.21.12 at 11:20 am

#237 Sam Elgohary on 11.21.12 at 6:48 am…

Are you related to any RE agents in the Okanagan?

Just asking…

#237 Sam Elgohary on 11.21.12 at 1:11 pm

Snowboid
no , i am based in Toronto , i am investor myself and buying real estate as i think is the only way to be retired happy when i look at it long term regardless what’s happening in the market YTY of sales , prices ….etc
i look for 10-15 years results as long as i can afford to buy get a mortgage , close and rent .