Cliffenomics

What do you do when your house won’t sell?

Drop the price, of course.  But when even that doesn’t squeeze an offer out of anyone in a declining market, there’s always one desperado action left. The auction. Needless to say, you’ll be seeing more of these in the months to come.

In fact Saturday morning a 2-bed, 2-bath, 1950-build, two-storey went under the hammer in Saskatoon, where delusional locals think everybody wants to live (with a foot of snow). Of course, GreaterFool correspondents were there:

“The auction got started by the auctioneer at 200,000, and he did his best to talk it up. No bites happened. Price moved to 175,000, not a flinch from the crowd. Price moved to 150,000, and I heard crickets calling out their bids. Then suddenly there was a loud burst from the living room that called out “60,000”. I thought, right on — now we have an auction!”

We’ll take you back into the kitchen of 2105 20th Street West in a few moments. First a few words on the fiscal cliff. For those of you just joining society, these words were coined by US Fed boss Ben Bernanke and refer to the simultaneous triggering of tax increases in the States and spending cuts to the federal budget. The combined $607-billion sucker punch would likely lead to recession and boost unemployment back above 9%.

But don’t worry. It won’t happen.

President Obama thinks he has enough testo from the recent election to bully through higher taxes for the rich, while shielding middle class families. The Republicans want spending cuts, higher taxes for nobody, but will agree to limit deductions for millionaires. Doomers think this is a pivotal event leading to the decline of the American empire, so their gold will be worth something again. Stock markets are losing interest. Most Americans are fed up, and want them all to piss off.

Some weeks ago I said the fiscal cliff would be a non-event, averted (of course) by a political compromise. This could pave the way for a 2013 in which the US continues to recover, with unemployment inching down and housing in full renaissance. Five years after hitting the wall, America will be on a path of inescapable recovery – the first phase of a long process of rebirth from debt excess and the insanity of two unwinnable wars.

These are exactly the times you would want to be liquid, diversified and carefully exposed to growth assets – especially as Canadian real estate wobbles and slumps.

By the way, a ‘cliff’ story moved by Bloomberg news yesterday carried this expert opinion: “The threat from the fiscal cliff is greatly, hugely and fantastically exaggerated. It’s almost reached comical levels. Of course, if we really were to go over the cliff, that would be bad news – and that’s precisely why it won’t happen.”

You bet. And it never was going to happen. But it’s a great little fear-monger if you need to unload some bullion. If equity markets do waver and dip, then I hope you find the courage to ETF your way into them.

Speaking of courage, let’s revisit the drama gripping 20th Street, in the city where the only decent building is a hotel:

“I was inching to get in on the action when another bidder cried out, “a hundred and twenty-five thousand!”. Dang I thought, what a jump. He really values this falling knife. Shorty after a third bidder quietly tells the actioneer’s helper $132,500. At this point I’m noticing the auctioneer’s helper hand frantically waving and shaking in everyone’s face to stimulate bidding I suppose.

“I started  to just stare at the kitchen floor, and starting making notes on my cellphones saying to myself that I just gonna let someone else catch the falling knife. Well the hand waving and shaking worked for the auctioneer, cause with me standing right next to the baby boomers. the second bidder that called out $125,000 now quietly said $134,500. The auctioneers did their best with the hand waving and shaking in people faces, as well as to talk up the revenue potential of the property to get a higher bid. But it stuck at $134,500.

“Wasn’t the end of the auction yet. No call of going once… going twice…. sold! We’ll take a short break, the auctioneer called out. Huh??????. The crowd seemed to divide. Some that were in the kitchen moved to the living room to congregate, and all that was left in the kitchen was me and the two boomers. A few moments past, I think the auctioneer went to consult with the seller; and the auction started up again. With me staring at down my cellphone texting my wife the results, the auctioneer’s helper came back with his hand shaking in your face thing with the two millionaires.  Coming around to me with his shaking hand seemed like he was trying of get me into the fray but I didn’t. I kept thinking to myself  “Give it to the man, Geez”

“Finally with no more price movement the sale was called. Was no monumental cry of SOLD! Instead it was a “There we have it folks, the property has changed hands today”. And I said to myself, there I have it! House had support at $60,000 and met resistance at &134,500. Wow, approximately $70,000 below asking.”

There you go. We don’t need no US crisis. We have our cliff.

Update: Poor Victoria – single-family home sales in November crashed 31% over year-ago levels. “For buyers, there is a good supply of homes on the market,” say the realtors, “so while they have time to conduct due diligence they shouldn’t expect large reductions on all properties.” You wish. Details here.

165 comments ↓

#1 TurnerNation on 12.03.12 at 7:54 pm

Early supper tonight?

Early flight. — Garth

#2 Derek R on 12.03.12 at 7:55 pm

Gripping stuff indeed

#3 TurnerNation on 12.03.12 at 8:11 pm

Oh dear. Canadian Tire charge card’s just sent a No Interest payment plan for purchases over $150. You can defer all of it for at least 60 days whereupon the full amount is due or chargable at once.
Maybe they know, consumers are tapped out already?
Moving into the kneecapping industry?

#4 Old Man on 12.03.12 at 8:12 pm

I had an uncle who bought a church not far from KW, and he paid nothing for it. So he renovated it into his principal residence, and the zoning was cool, and took a part of it which became a restaurant and pub for the local area for cashflow; he made a fortune. I was the one who gave him some mortgage money to make it all happen, and he paid dearly.

#5 TurnerNation on 12.03.12 at 8:13 pm

Wait, the fine print says you may defer all payments for up to 12 months into the future!

#6 Smoking Man on 12.03.12 at 8:16 pm

Whats happens when its Last week in Nov 2012, and you just moved from London, You get involved in 3 bidding wars at 403 and major mac. Your bids all over asking in you strike out 3 times in a row.

What happend when you find a rental building in the cities core viod of crack heads and hookers where you lose in a rental bidding war.

And what happens when your an elfin dwarf watching over the fence thinking wtf?

Wish I was making it up.

It’s going to be a long WAIT Basement Dwellers a long WAIT.

#7 Shane on 12.03.12 at 8:22 pm

Garth, what about buying a new house in London Ontario they have good deals?

If you don’t need a job, it’s great. — Garth

#8 Victor V on 12.03.12 at 8:31 pm

“Less demand, lower prices, modestly, in the housing market are much better for Canadians than a boom followed by a bust.” – F

http://business.financialpost.com/2012/12/03/cooling-housing-market-shows-stricter-mortgage-rules-working-flaherty/

#9 Victor V on 12.03.12 at 8:38 pm

http://business.financialpost.com/2012/12/03/condo-buyers-unfazed-by-rising-fees

A new survey shows a majority of respondents have not taken into consideration the fact fees may rise. Worse still, many condo owners appear to have little wiggle room when fees do increase.

The Toronto-Dominion Bank Group-sponsored survey by Environics Research Group contacted 609 residents in Montreal, Toronto, Calgary and Vancouver between Oct. 20 and 25. Respondents had to be currently living in a condo, had recently purchased a condo or were considering purchasing one.

Among the findings of the poll, released last week: 68% didn’t realize condo fees can increase at any time and 38% said they didn’t feel confident they could afford an increase.

“It’s scary,” says Farhaneh Haque, director of mortgage advice at TD Canada Trust, about how unprepared consumers are for any sort of increase.

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

This will not end well.

#10 Old Man on 12.03.12 at 8:40 pm

#6 Smoking Man – I owned a condo in Toronto years ago and my tenants were two call girls, but they paid on time, and was happy. Hey just met them once, and they gave me a full disclosure, and the honesty was enough for me, as will not become a judge about how others live – just take care on the unit and pay the green on time.

#11 Short Vowels on 12.03.12 at 8:49 pm

Garth, any opinion on US dividend plays at the edge of the cliff?

#12 Nostradamus Le Mad Vlad on 12.03.12 at 9:03 pm

-
“Most Americans are fed up, and want them all to piss off. There you go. We don’t need no US crisis. We have our own. The foolscal cliff.” — Plenty of Cdns., Brits. and the west in general are pissed off at these make-believe politicos – lobbyists – financier types, who talk in loud voices and generally know a lot about nothing.
*
1:13 clip US mfg. down; HSBC “I predict that the interested hedge funds are looking at paying pennies on the dollar for these toxic assets, and if that happens, there will be a stampede to unload all the failed mortgage bundles.” wrh.com; China says hello to Iraq; Profits — Record High Wages — low; Debtpocalypse Looms or the archeology of decline; Ben Stein Garth, you might like to pass this on to Cameron Muir; College Not worth the cost; New Bailouts DC considering US$1 tri. bailout for student loan debts; Former Comet boss stands to reap millions.
*
New Madrid Fault Changes beckoning; 8:35 clip Harley’s are better than Triumphs; 1:19 clip Kenya bans all Monsanto’s junk; China unearths city; Free Flu Shot when you turn in your gun, and Taking the Guns Away or stripping civil liberties from citizens; Ingenious Invisible OS and Linux Munich certainly saved money on it; Vitamin D (sunshine) may reduce Alzheimer’s, and Cannabis Oil treats a lot of things; Billary Running for prez. in 2016; Pentagon Money for Nothing along with cyber war plans; 15:17 clip A lot of misinformation is widespread now. Note that Hitler let the Red Cross have free access to prison camps, the US doesn’t (Guantanomo Bay is one), and Illegal Settlements.

#13 Smoking Man on 12.03.12 at 9:05 pm

#10 Old Man on 12.03.12 at 8:40 pm

Seriously Old Man. To bad they made all their payments.
I’m sure something could have been negotiated.

:)-

#14 Saskatoon escapee on 12.03.12 at 9:12 pm

I guess in the spirit of the season the people there managed to forget about the shooting in the park less than a block away recently, the busy street right out front, ambulances ripping by at all hours to the hospital a couple of blocks up, the drunks and the addicts staggering home (I know, I’ve had to avoid running them over more than once), oh and for sh$ts and giggles you get to live a few blocks from a beer and wine store that gets knocked over (more than once). No way could you pay me enough to live in alphabet soup. $135,000? Suckers. But Merry Christmas.

#15 JSS on 12.03.12 at 9:14 pm

Just wanted to let everyone know that Kia makes good vehicles.

Amusing, too. — Garth

#16 JSS on 12.03.12 at 9:15 pm

” 10 Old Man on 12.03.12 at 8:40 pm
#6 Smoking Man – I owned a condo in Toronto years ago and my tenants were two call girls, but they paid on time, and was happy. Hey just met them once, and they gave me a full disclosure, and the honesty was enough for me, as will not become a judge about how others live – just take care on the unit and pay the green on time.”

Yeah Old Man, I bet those call girls DID give you a “full disclosure”

#17 Old Man on 12.03.12 at 9:17 pm

There was this other time just like the call girls coming into to my office to rent or wanting a mortgage as nobody could fill out an application. Now this guy came in as wanted to buy a home, and said you are the man, as need a sense of discreption. Hell he looked like something the cat just dragged in, as all the freaks came to me.

Now this young man was working undercover for the RCMP, so said now what? He said any application has to made off the books for a home purchase, but can give you phone numbers to verify my income; my true employment; as can be checked out. I said can place it with a Trust Company at prime rate, but it will cost you 2%. It was done!

#18 randman on 12.03.12 at 9:18 pm

Garth..

“Gold will be worth something again!”

LOL!

But,I can buy a new KIA with a shiny maple!

#19 mel in victoria on 12.03.12 at 9:19 pm

Garth…….a couple of quotes from your Cliffenomics, Dec 3 post…

“Some weeks ago I said the fiscal cliff would be a non-event, averted (of course) by a political compromise. This could pave the way for a 2013 in which the US continues to recover, with unemployment inching down and housing in full renaissance. Five years after hitting the wall, America will be on a path of inescapable recovery – the first phase of a long process of rebirth from debt excess and the insanity of two unwinnable wars.”

“You bet. And it never was going to happen. But it’s a great little fear-monger if you need to unload some bullion. If equity markets do waver and dip, then I hope you find the courage to ETF your way into them.”

Garth, you’ve been taunting folks who have some interest in gold for quite some time. Let’s see how strong your conviction is…

Let’s have a friendly wager…..$100.00 says the price of $GOLD reaches US$ 1800.00 before $SPX reaches 1800…..to be given to a charity of our choice…..Gold looks like it’s gonna collapse….this should be an easy win for the anti-gold types…

What say you oh bearded one?

Just what I would expect from someone who confuses investing with gambling. Well done. — Garth

#20 Mean Gene on 12.03.12 at 9:19 pm

Bidding wars are just not the same any more, too bad.

#21 Dr. WAYNE on 12.03.12 at 9:20 pm

For the less erudite, this site will explain why the term “a$$hole’ has moved into everyday language when circumstances dictate (like unscrupulous real estate salespersons … or … “firsts”):

http://www.cbsnews.com/video/watch/?id=50136253n

#22 eagle eyes on 12.03.12 at 9:26 pm

Please follow up on this story. I know that the auction in Toronto on Bridle Path announced that it was sold through auction, only later to update that the buyer backed out. It is now back on the MLS. These auctions may not result in a confirmed sale. I’ll believe it when it is registered.

It’s called a reserve bid. The buyer did not back out. The reserve was unmet. — Garth

#23 Taxc on 12.03.12 at 9:27 pm

“so while they have time to conduct due diligence they shouldn’t expect large reductions on all properties.”

Ha ha ha ha ha ha ha ha ha ha!!!!!

Poor Real Estate cheerleaders, so laughable…

#24 Yep.....uh huh..... on 12.03.12 at 9:31 pm

Average detached in Van is now $1,053,900 down from peak of $1,235,20 in February. The twits that bought in the last year with 5% down are in the hole about 200k and this thing is just getting started.

http://forums.redflagdeals.com/vancouver-bubble-road-50-housing-crash-w-monthly-stats-1194032/

#25 Austrian school on 12.03.12 at 9:34 pm

Fiscal cliff? No big deal.
http://www.zerohedge.com/news/2012-12-03/total-us-debt-hits-1636954879960493-debt-ceiling-just-63-billion-away

#26 pathcontrolmonk on 12.03.12 at 9:34 pm

Victoria is hardly a buyers market, all “Price Reductions” are consistently exactly 5% lower as sellers are still in denial. From the realtor sites I follow, NOTHING is selling.

Follow the plan: wait. — Garth

#27 OlderbutWiser on 12.03.12 at 9:36 pm

MSM always needs some new crisis to “sell”. I hope they continue to talk up the cliff as it may make for a great buying opportunity.

I hope you are right about the economy in 2013 Garth, there are alot of doom and gloomers out there.

#28 blase on 12.03.12 at 9:36 pm

“Garth, what about buying a new house in London Ontario they have good deals?

If you don’t need a job, it’s great. — Garth”

Stats Canada: Unemployment rate for Toronto Oct. 2012 8.8%, London 9.0%.

Well, there goes that theory.

#29 Peter on 12.03.12 at 9:38 pm

Garth, I think you may be a bit optimistic about US real estate prices continuing to improve. Most Americans are facing higher taxes with poor job prospects (low pay, underemployed). People here in the good ol’ US of A are struggling to make ends meet (higher food and fuel costs) and will shortly have less discretionary income.

Middle-class tax hikes will not happen. I’m more concerned with sales than prices, and I see great momentum in many markets. Not sure where you are, though. — Garth

#30 Daisy Mae on 12.03.12 at 10:04 pm

“Some weeks ago I said the fiscal cliff would be a non-event, averted (of course) by a political compromise….”

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

Doesn’t matter what or who — unions, governments — there’s ALWAYS an 11th hour compromise. Games people play…

#31 Country Girl on 12.03.12 at 10:07 pm

Just because the auctioneer started at $200,000 doesn’t mean it was the seller’s asking price. The first rule in having an auction is not to disclose your reserved bid to anyone. So it’s probably inaccurate to assume the house sold at $70k below asking.
Also, it’s common practice for the auctioneer to take a break and consult with the seller before accepting a final bid. It doesn’t necessarily mean the amount of the selling bid was below the reserved bid.
(And, auctions work best for properties that have not been on the market in the recent past.)

#32 mel in victoria on 12.03.12 at 10:10 pm

‘Garth…….a couple of quotes from your Cliffenomics, Dec 3 post…

“Some weeks ago I said the fiscal cliff would be a non-event, averted (of course) by a political compromise. This could pave the way for a 2013 in which the US continues to recover, with unemployment inching down and housing in full renaissance. Five years after hitting the wall, America will be on a path of inescapable recovery – the first phase of a long process of rebirth from debt excess and the insanity of two unwinnable wars.”

“You bet. And it never was going to happen. But it’s a great little fear-monger if you need to unload some bullion. If equity markets do waver and dip, then I hope you find the courage to ETF your way into them.”

Garth, you’ve been taunting folks who have some interest in gold for quite some time. Let’s see how strong your conviction is…

Let’s have a friendly wager…..$100.00 says the price of $GOLD reaches US$ 1800.00 before $SPX reaches 1800…..to be given to a charity of our choice…..Gold looks like it’s gonna collapse….this should be an easy win for the anti-gold types…

What say you oh bearded one?

Just what I would expect from someone who confuses investing with gambling. Well done. — Garth ‘

Some charity would love to get your hundred bucks Garth!!

#33 Snowboid on 12.03.12 at 10:15 pm

#28 Peter on 12.03.12 at 9:38 pm…

Went to some open houses over the weekend, surprised that asking prices are already so high, then U of Arizona Carey School of Business announced today that average Phoenix SFH sales prices are up 34% YOY for November.

We have been looking for relatives, but it is obvious the deals of late 2010 to late 2011 are pretty well done.

Regular gas is .83 cents a litre today, and the stores are packed. Of course it is snowboid season, but it is really hopping here in the Valley of the Sun.

Based on our working friends and neighbours down here, they admit things are still tight, but aren’t struggling.

At least they get a good laugh when I tell them how much most food items, fuel, housing, booze and taxes are in Canada.

Only problem here is above average temps (28C for Wednesday).

#34 Mad Scientist on 12.03.12 at 10:25 pm

Fiscal Cliff – you gotta love it – there was probably a group of people sitting around a table, thinking, how do we term this pending situation – a word that everyone can relate too – but not scary enough to cause a panic…lets call it “fiscal cliff”- everyone knows that you can always stop before you reach the top – backstepping will save the day.

God Sakes, I travelled to Detroit 3 weeks ago – and I have never been more scared and shocked all at once. You want a dose of reality for America – see the industrial heartland at it’s worst. Pictures can paint what really is happening throughout the entire country. $16 Trillion debt load – switch the numbers, $61 Trillion – still the same – I applaud Garth in believing the American system is still strong and running – but I will take the sane approach and realize when your country is maxed out – and the national past time is buying cheap foreign products – it’s just a matter of time….tick tick tick (or maybe the Mayan Calender will be the solution to this madness).

#35 Old Man on 12.03.12 at 11:12 pm

#34 Mad Scientist – it took me 10 years to get me a 5th Dan black belt in Tai, but when I ask women in Detroit to date me with a walk down Woodward Avenue they just laugh at me, as say if if you are not packing a gun will be toast.

#36 Austrian school on 12.03.12 at 11:13 pm

I’m going to hold on to my precious metal position, actually I think I will add to it.
http://www.zerohedge.com/news/2012-12-03/time-bernanke-reevaluate-his-sworn-testimony-congress

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”
Ludwig Von Mises

#37 Realtors in an all out PANIC! on 12.03.12 at 11:23 pm

Realtor smokingman you are posting in an all out PANIC! Bidding wars on rental units? LOL drive around the GTA and see THOUSANDS and THOUSANDS of EMPTY rental unit’s. Bigging wars for 403 and MAC? LOL nothing is selling with empty open houses and price drops is the norm. It’s going to be a NASTY housing crash realtor smokingman , A nasty crash!

LOL…you must be hurting for sales as many realtors haven’t made a single sale in over eight months now!

#38 Stu on 12.03.12 at 11:26 pm

Garth my gold is worth over 1700 per ounce, but I am not going to argue with you about the only true money in the world as history suggests.

Garth, please explain how if housing collapses as you suggest that this phenomenon won’t spark a huge recession in our country?

Please explain how the US will grow with manufacturing and heavy industry constantly leaving North America? We and our neighbours to the south do not have the high end manufacturing culture or know how as the Germans do. We are indeed doomed.

I never suggested housing would ‘collapse.’ It will correct, wiping out the equity of many who should never have bought. I do not anticipate a recession, let alone a ‘huge’ one. As for the US, 70% of the economy is consumer-driven, and with unemployment dipping and housing rising there will be more expansion than contraction. We are not doomed. Just many among us. — Garth

#39 Realtors in an all out PANIC! on 12.03.12 at 11:26 pm

Realtor smokingman posting in an ALL OUT PANIC!
Read the FACTS posted below as sales continue to CRASH HARD! It’s going to be a NASTY housing crash realtor smokingman , a nasty crash!
——————————————————————
eagle eyes on 12.03.12 at 9:26 pm
Please follow up on this story. I know that the auction in Toronto on Bridle Path announced that it was sold through auction, only later to update that the buyer backed out. It is now back on the MLS. These auctions may not result in a confirmed sale. I’ll believe it when it is registered.

It’s called a reserve bid. The buyer did not back out. The reserve was unmet. — Garth

#40 daystar on 12.03.12 at 11:27 pm

Apologies Garth as I know you have to read the length of it (here I go again).

First, I’d like to talk about Canada’s credit cliff. We have one coming soon with CMHC hitting its $600 Billion debt ceiling as most blog dogs already know. If Canada goes over its credit cliff, banks will qualify borrowers much more closely than they have beyond regulation, as well as increase their spreads to reduce risk and setting their own minimum downpayments higher ferreting more high risk borrowers out of the market.

http://www.verybestmortgage.ca/artman/publish/The_facts_about_CMHC_risk_printer.php

Mis-leading stats like this one:

“It (CMHC) can handle some pretty devastating housing scenarios, especially given that the average mortgage in its portfolio has equity of 45%.” – link

… is a portfolio that is heavily weighted with mortgages at or near the end of their amortization. Some 38% (as I recall, can’t bring up the link within the link above, its dead) of all mortgages are set to end within the next 5 years according to a CMHC spokeman early this year but this is not lions share of CMHC’s debt or by any means, its risk.

Its not the mortages that have been nearly paid off that have the industry and government worried, its the much higher mortgages that have been written since 07′ and beyond, especially early 09′ or newer with terms set to renew into higher rates that have people nervous and so they should be.

The biggest flaw I saw when looking into the viablity of CMHC was that none of the risk models ever publically shown worked a scenario of CMHC not generating revenue from insuring new mortgages so where is the future revenue going to come from to offset future losses if they end up being as high as oh… say… 10% of their 100% insured portfolio over 5 years if the ceiling isn’t raised? Their assets, where else. Under this scenario (a Mark Carney scenario delivered this spring through the mere mention of 1 in 10 mortgage holders at risk and this only includes what they 100% insure, there’s close to 1.1 trillion worth of debt that is insured at 90% or more) Thats $60 billion worth of defaults CMHC will have to cover (if its averaged out) with no meaningful CMHC revenue coming in to offset. What do they have, $14 billion to cover?

The highest risk loans have come since 2007. CMHC had $275 Billion of insurance in force in January of 2006, the beginning of Harper’s reign and is now nearing $600 Billion since early 07′ (100% insured only). Revenue sure won’t be coming from the 2+% they charge to insure mortgages on mortgage holders that average 7% down in this nation as the chart below atests.

http://www.ratehub.ca/cmhc-mortgage-insurance

… and if one goes by the chart in the link above as any kind of indicator of what private insurers will charge going forward, once CMHC hits its limit, the ballpark increase in new mortages will go up by more than 2%, closer to the 2.5% insurance fee CMHC charges upfront on all new mortgages to offset their own risk and who can take on more risk than CMHC?

Buyers of uncovered MBS’s will want higher rates… I would think that the mortgage industry will be headed for much higher rates regardless of what the BoC does if CMHC’s debt ceiling isn’t extended. Readers should seriously look at where rates are at with bank customers that don’t have CMHC’s 100% insurance at present for a guideline assuming the same down payment percentages as we see today (7% average)and judge for themselves what will happen. (and swallow) The U.S. has a fiscal cliff while we have a credit cliff coming here in Canada and its coming soon.

Garth, I’d like you to think about this scenario I’m about to describe. You already know part of the equation. Obama was going to win. Closer than some would like to admit, true, but when GWB tax cuts were set to expire as well as spending cuts set to kick in at the first of the new year, hey, dude, the narrative has been pre-written many moons ago, don’t you think? I mean, look at how far apart they are right now 3 weeks away from Christmas:

http://www.cbc.ca/news/business/story/2012/12/03/gop-fiscal-cliff-offer.html

They are nowhere near close and its intended that way. This deal, I believe, has already been negotiated behind closed doors possibly as long ago as 2010 and as a consequence, the U.S. is headed over this purposely created cliff without a bungee. In essence, I believe the U.S. government will pull a Clinton so to speak and here’s my case as to why that is and how it will impact Canada.

Lets look at history for a moment regardless and look at this chart:

http://www.cbc.ca/news/interactives/map-history-dollar/

… and begin with the Reagan years.

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

The Reagan years early on should have crushed the U.S. dollar but Canada’s fiscal house through the 80′s was worse and as a consequence, the U.S. dollar strengthened until 1986. Reagan won a second term and tax cuts weakened the U.S. dollar, deficits ballooned and the loonie bounced back as a direct consequence:

http://en.wikipedia.org/wiki/George_H._W._Bush

George Bush Senior comes along, raises taxes in 1990 and the U.S. dollar strengthened weakening the loonie. Bill Clinton takes over in Jan of 93′ and coupled with a Rep congress raises taxes in 94′ and further strengthens their fiscal policy through to the end of Clinton’s reign and the loonie gets beat up for 8 long years until 98′. (again, look at the loonie chart) Canada had its own fiscal crisis as many will still remember but this was overshadowed by a U.S. dollar that strengthened from 1990 til’ 2001 cheapening imports and by the end of the 90′s, consumer spending in the U.S. is on a tear. From 1998 til’ 2000, commodities recover in Canada strengthening the loonie not through a weaker U.S. dollar but through sheer demand fundamentals swelling monetary supply. Bill Clinton, as we know, raises taxes in his first presidency with a Rep congress and the U.S. dollar strengthens really, throughout his entire presidency and from 2000 to 2002, the dot.com bubble bursts, weakening Canadian exports, the Canadian monetary supply shrinks and the dollar falls during these 2 years.

GWB II comes along, inherits a dot.com bubble bust recession and lowers taxes, blows housing bubbles, starts new wars, spending inflates out of control, fiscal reality gets ugly and the U.S. dollar weakens throughout his 8 years as president. All the while, the loonie soars as commodities and gold strengthens. Again, look at the chart. The dollar weakens all the way through his presidency until Obama takes over. Obama comes along and tries to fix the cracks and holes in a leaky waterlogged ship but the damage is extensive and the U.S. dollar continues to weaken with fiscal reality hemmoraging.

My long winded point? Look at the effects U.S. fiscal policy has had on our currencies! Look at this chart in the link above and you’ll see U.S. fiscal reality effecting the loonie like no other and why shouldn’t it. More than 3/4′s of our trade is with the U.S. during this time.

So when I say Obama is pulling a Clinton, I mean for us to look at history, a Democrat presidency coupled with a Republican congress leading to Clinton era tax increases in the mid 90′s that brought them to fiscal balance by 1998 through 2000 generating lower interest rates on debt and a stronger U.S. dollar increasing buying power for imports leaving the loonie flatfooted and laggard along with commodities tanking (because commodities are priced in U.S. dollars) until demand overrides currency related values that will take years for Canada to be the beneficiary of.

Lets fast forward to the present and what do we have? A fiscal cliff poised to raise taxes and chop spending slashing the deficit by 2/3rd’s. If it happens, price in oncoming GDP growth along with the end of war in 2014 and we don’t have to guess what will happen to our currencies… we’ll know even before then. In short, under this scenario, the fiscal imbalance is corrected or close to it, the U.S. dollar strengthens amid the rest of the world’s weakness and gold’s reign is done. U.S. imports will cheapen, housing is poised to recover regardless and consumer spending could rage creating jobs once again and that, readers, is the true carrot, the reason why they’ll go over.

We can also pretty accurately guess that rates will stay low in the U.S. as a consequence, but rise elsewhere in the world including here and what does that spell for U.S. investment abroad along with increased buying power for U.S. imports, not to mention Canadian RE?

I believe history will repeat and reveal our weak, unprepared and poorly led Canadian economy for what it is. As the spread between the falling loonie and rising dollar widen in response to U.S. fiscal strength, the BoC will have to raise rates in response to currency weakness beginning in the later half of 2013, early 2014 at the latest. Higher debt demand from our governments missing fiscal revenue targets related to a falling currency and falling commodity values will force BoC rates to rise, addressing fiscal and currency weakness regardless of who is the next BoC governor. Couple this with higher spreads from our banks in response to higher risk with CMHC getting out of the business and we’ve got a credit cliff in Canada hitting home.

2013 is poised to be an ugly bubble correction year as it is without interest rate issues hitting the markets. 2014/2015 are poised to be ugly correction/melt years caused directly by rising interest rates and this could be accelerated should CMHC’s limit not be extended. Its an ugly narrative for Canada if the U.S. goes over the fiscal cliff, especially if credit becomes expensive for Canada if CMHC doesn’t raise its ceiling and really… it can’t unless Canadians want to risk damaging the system any more than our Harper government already has and Canadians have to face this truth now or later but we will face it long before the next federal election. The Harper government simply will not be able to outrun this. The best they can do is…

Hyperbole (minimizing, exaggerating, obsfuscation with half truths and last but not least… lies, i.e., a majority government coasting into its 10th year and blaming it all on the Liberals. How does one spell another 2 seat victory)

There are other reasons why I think the U.S. will go over the fiscal cliff. One of them is found in Obama’s stump speech as well as victory speech where he spoke these words. “We’ve tried it their way. Their way doesn’t work. (tax cuts) We’ve tried it our way. Our way has worked before and it will work again.” What was he talking about? Fiscal policy. Obama also said this in the debates talking about fiscal policy. “We will not follow Japan. We’ll go our own way.” I’ll take it from the dude from Chicago who “says what he means and means what he says.” They are going over without a bungee and it makes me nervous because when I disagree with you Garth, I’m usually wrong but… this time… I just don’t think so. #1 reason of all? They really haven’t got a choice unless they do want to follow Japan’s route and try desperate energy taxes in between resigning finance ministers amid emerging trade deficits. No comprimise on income taxes, some adjustments to payroll taxes and some concensus on added spending cuts and thats it, outside of what it will do Canada and rates here.

#41 Boombust on 12.03.12 at 11:28 pm

#33

“At least they get a good laugh when I tell them how much most food items, fuel, housing, booze and taxes are in Canada.”

Well, I must say, you easily humoured.

Why?

Because they really don’t give a damn.

#42 Smoking Man on 12.03.12 at 11:28 pm

Old man you are always projecting the good deed doer.

What are you selling, steeling, or hiding. ?

The same question that rings threw this over sized coconut when ever I meet some one new.

Your text don’t fit.

Beach Girl=True
Vlad = True
Turner Nation = True
Even Buy? Curious? =True

Old Man=?

#43 Boombust on 12.03.12 at 11:31 pm

“Doesn’t matter what or who — unions, governments — there’s ALWAYS an 11th hour compromise. Games people play…”

Exactly.

Anyone remember the “Solidarity” movement in BC in 1983?

It seems Jack Munro (of the IWA) and Premier Bill Bennet reached a “compromise” at the 11th hour in Kelowna.

Never did discover the “details”, did we?

#44 HogtownIndebted on 12.03.12 at 11:34 pm

I’d like to concur about Bernanke’s fiscal cliff not coming to pass, but I notice today in the news again how Geithner’s proposal was apparently laughed at by Mitch McConnell and I really wonder. We are so in the grips of entitled neocon neanderthals at home and in the USA that I really do wonder if they won’t let the worst happen as some kind of lesson to their opponents (who can also of course use the resulting catastrophe to find Jesus/Amway/Whatever in the end days the neocons create) In Toronto we have an idiot neocon mayor who wants a casino, a likely premier in waiting idiot neocon (who’s had his nose in the public trough his whole adult life) who wants to privatize all casinos (before taking some cushy board positions in his retirement a la Mikey Harris, no doubt) and an idiot neocon federal government that still thinks it and Carney did a good job so steady as she goes. They have a lot in common with Republicans who don’t seem to be relenting on their crazy demands to cut medicare. I put nothing beyond these people in their chaos-making wilfulness.

On the local front, my MLS litmus test of the week is a place in an allegedly resistant part of Toronto central-west. Saw this place recently and the pushy agent insisted on us ‘registering’ (sorry smoking man, I gave your name and number) before touring. An 1890 house with a history of impoverished tenants and kitchens and baths not updated since the 1950s. The low-ceiling basement smells of mould and the old floorboards are covered with a carpet camouflage on the stairs and elsewhere. At least $200K is needed to modernize it, and the price seems about $300K too high. They want almost a million, and are “holding offers on Wednesday”. As if the last three months have never happened. This will be an interesting reality check, whatever happens:

http://www.realtor.ca/propertyDetails.aspx?propertyId=12637200&PidKey=475553264

#45 Chickenlittle on 12.03.12 at 11:37 pm

This is an old listing, but it STILL makes me laugh! This is from FML Listings…I used to read this blog, but sadly the writer stopped posting and writing. Maybe the MLS mafia got to her..who knows? I miss her!!

http://www.realtor.ca/propertyDetails.aspx?propertyId=11696841&PidKey=451424227

Well, here’s a ONE BEDROOM, ONE BATHROOM Candy Factory loft in Queen West, across from Trinity Bellwoods. It’s $639,900.00. At first I thought it was justified because maybe it was just a massive loft, then I looked at the dimensions… your one bedroom is 11×9. Not even a den or anything!!! Just literally one small bedroom, then a lofty living room.

You’ll need a $127,000.00 down payment to buy this without CMHC fees, and it’ll be around $2,500 a month in mortgage. Plus property taxes and maintenance, you’re looking at over $3000.00 a month to live in a one bedroom Candy Factory. OMG but how much fun does that sound?!?!

I love that the listing says it’s an ideal purchase for an artist. Because out of all the people in this city buying these overpriced homes, I know for a fact it’s the artists that can afford them, no problem. Artists in this city are thriving, they’re making like six figures a year. Guaranteed. Right? No? Ugh. Sorry, I’m bitter because I paint and I know how much artists get paid… they don’t.

So this listing is ridiculous. Like why not tell the truth… “This is the perfect loft for a yuppie couple who both have great jobs and a hefty down payment from mom and dad, don’t care about value, and like drinking coffee from fair trade coffee shops, complaining about first world problems while walking with their fair trade coffee, hanging out in Trinity Bellwoods waiting to to play tennis, and walking with your boston terrier down Queen West while buying expensive “vintage furniture” that was found on the road outside of the gutted north york bungalows.” It’s the circle of life.
(side note: I hate myself, because I like most things above. I even sadly like the loft. #Hypocrite)

#46 Guy_in_Regina on 12.03.12 at 11:46 pm

“I said the fiscal cliff would be a non-event, averted (of course) by a political compromise.”

You mean “can-kicked” just like the debt ceiling.

#47 JD on 12.03.12 at 11:52 pm

Victoria; wait until you see the sales drops in blue-collar Nanaimo, where 1 in 4 people either builds houses, fixes them, or does yard maintenance.

#48 neo on 12.03.12 at 11:52 pm

Fiscal Cliff? Theatre…U.S. should be more concerned with their manufacturing ISM being in contraction 4 out of the last 6 months and this November being the lowest since July 2009. That all got lost today in your post as well as the MSM in all this Fiscal Cliff foolishness.

#49 GTA Girl on 12.03.12 at 11:55 pm

Splitting hairs, Smoking Man. But 403 and Major Mac do not meet. Perhaps you mean McLaughlin?

#50 Chickenlittle on 12.04.12 at 12:00 am

Buy-Curious…(sorry! my question marks aren`t working tonight) LOVED the SM tribute!!! My personal favorite is `Carney likes his booze.`

#51 cecil henry on 12.04.12 at 12:05 am

Why, why would someone double the bid on a house from $60,000 to $125,000?? You’re the buyer!!

The purpose of buying something is to get it at the lowest price possible, not the highest!!!

What are these people thinking??

I’ve seen houses like this– (my grandparents owned one like this) and $60,000 -80,000 is about right.

YES –PLEASE let me pay more???

Where does this stupidity come from??

#52 kreditanstalt on 12.04.12 at 12:05 am

“…I said the fiscal cliff would be a non-event, averted (of course) by a political compromise. This could pave the way for a 2013 in which the US continues to recover, with unemployment inching down and housing in full renaissance. Five years after hitting the wall, America will be on a path of inescapable recovery…”

Or it could just be another episode of can-kicking. Until the next crisis episode. Debt ceiling time? Next December? Who knows?

Or maybe prices will just keep rising, jobs keep disappearing, wage gains vanishing, living standards falling…slowly, slowly, but continuously…

What recovery? What’s been fixed?

You have terminal short-sightedness.

#53 dd on 12.04.12 at 12:05 am

The Fed will buy all the bonds (90%) offered by treasury. If there was a true recovery buying would be decreasing via governments!

http://www.bloomberg.com/news/2012-12-03/treasury-scarcity-to-grow-as-fed-buys-90-of-new-bonds.html

#54 Smoking Man on 12.04.12 at 12:12 am

As I watch Peter Mansbridge I think of the track6ers

Track6ers intently watch the green monitor at the go station, It don’t talk, no sound, just a post at 10 minutes to go. They channel up one tiny stair well. guaranteed to make you finish second.

Peter has sound, he has sound effects, he is owned.

We will never beat the machine…. The machine is all mighty. It will tell you what to buy and when to buy.

A basement dwellers dream is dependent on the track6ers mood.

Humanity has but one choice to a good life as the sun turns us toward death.

We have but 80 ish years if we are lucky. Good wine tonight, my brand doc workers on strike in chilli. so I splurge to an auzzy brand. Nice.

Music. damn music. Artists, creativeness with the right cords is our only salvation to true happiness.

everything else is noise……………

#55 Steven Rowlandson on 12.04.12 at 12:17 am

Get used to snow everyone. All honest climate scientists know we are at risk of a little or even a large ice age. If we get a large ice age all the real estate in canada won’t be worth the match to burn it.
A little ice age means crop failures, famines and population reduction due to lack of food and epidemics.
Too many houses for too few people. That means price collapse and bad news for bankers and realtors. That might explain why the powers that be behind the global warming scam have something to do with big money.
There is alot of big money in real estate and all that money is at risk if we get any kind of an ice age as opposed to global warming which is less of a risk to the real estate market. Enjoy the snow but remember that interglacials last only 11,500 years on the average and we are just about finished with the one we are in. So don’t fall in love with real estate values unless you are planning on moving your house to the southern states for the next 105,000 years.

#56 Smartalox on 12.04.12 at 12:34 am

Garth, any thoughts as to whether the US will introduce a TFSA, to help the wealthy offset increases in their taxes? It would be nice if the US had an analog, so they’d recognize and stop taxing the proceeds from dual citizens’ TFSAs.

The Roth IRA. — Garth

#57 Sparky55 on 12.04.12 at 12:38 am

Big reductions are starting

House was sold (new) in 2005 for $206,777
Went to market this Sept 16 2012 $339,700
Price reduced on Oct 16 to $327,900
Sold 79 days later, on Dec 3rd 2012 for $180,000
2012 Assessment: $311,900

This is almost a 50% reduction (sold for 53% of first asking, and significantly less then the 2005 price)

PID 41076910

http://www.viewpoint.ca/property/cutsheet/41076910?no-nav=1&no-footer=1

#58 Smoking Man on 12.04.12 at 12:41 am

Music the humanity glue!!!!!!!!!!!!!

PHY

The Jews Love him
The Muslims Love Him
The Christians Love Him
The Buddests love Him
The Atheists Love Him

I’m starting a band. I just wanna be loved, we all do, we don’t want to be judged, cataloger, or branded. Yet we all play a stupid game trying to fool our fellow humans to achieve the same goal

Don’t know what spin I will be on earth as it orbits the great ball of fire. But Im going out with a black coffin, Clare Torry belting out that wordless death cry, great gig in the sky.

I see it.

Auzzy wine, man never going back to chillian.

#59 in S'toon it 'Swinter on 12.04.12 at 12:42 am

Sorry Garth, for that area of S’toon, the price is about right. It might make a decent rental, but only through the welfare system. No humans live out there.

The alphabeticals are scary in the daylight. Don’t slow down at night.

#60 Toon Town Boomer on 12.04.12 at 12:45 am

That 20th st is a scary area, and a $135,000 is still over paying for that house & location.

#61 live within your means on 12.04.12 at 12:46 am

#8 Victor V on 12.03.12 at 8:31 pm
“Less demand, lower prices, modestly, in the housing market are much better for Canadians than a boom followed by a bust.” – F

http://business.financialpost.com/2012/12/03/cooling-housing-market-shows-stricter-mortgage-rules-working-flaherty/

……………………..

The elfin created this mess and now he’s trying to take credit for tightening up the rules. LOL There’s a fool born every day.

#62 Shrit4brawns on 12.04.12 at 12:50 am

Smoking Man,

Your delusional dude.

416 is getting hammered, big time.

Do you have your head stuck up your arse again?

Go do some tequila shots and take another look around, you loser.

#63 Smoking Man on 12.04.12 at 12:57 am

As the analysts at spy central go, what the fk is Smoking Man up to………

The answer………….

Gangnam style………………………

enjoy

http://www.youtube.com/watch?v=60MQ3AG1c8o

#64 Saskatoon-Living on 12.04.12 at 1:16 am

You gotta bring your mullet out more to S’toon Garth, we don’t have any nice hotels.

#65 A Smith on 12.04.12 at 1:26 am

#34 Mad Scientist – The democrats and the unions have done a nice job with detroit over the last 50 years, haven’t they?

#66 Nostradamus Le Mad Vlad on 12.04.12 at 1:44 am

-
0:25 clip Video of the Month. Briefly, it explains why women live longer than men, and with men like this, why do you ladies need us anyway?!
*
Defaults States most likely to default / go bankrupt in the present decade; Fiscal Ceiling and Debt Cliff but Get Serious No one else is; Vulnerable Accurate, and that’s what depop. is for; IMF endorses That’s a red flag; Fewer Homes entering 4closure What’s the shadow inventory? But China’s coming crash could hurt US recovery (if there is one), and Dow Chemical China, not the FC is the biggest problem; Gold Bugs The Donald speaketh; Cheesecake Owner ObombaCare is a mistake; Apple Destroying the iPhone.

Strikes do have a financial impact; Creative Spontaneity Changing a scene or two in a film; As Good As It Gets ‘tho some may differ; China can invest where it wants; Pension Deficit Disorder; Debt Ponzi grows; Loss of Income equal to world war; Oil Wars in the MEast.
*
December 14 Global governance starts; This universe is one wacky joint, and Nuts! ‘Quale 5.8 near Anchorage; Outcasts or social rejects; Not very comfortable Sleeping in a car instead of going home; 2:49 clip If it’s okay for cops to kill citizens, why was Bob Costas (sports announcer) calling for gun control after the NFL incident? Venusian Volcanoes Having a spat; 2:13 clip GMOs not feeding the world, but killing it; Pic of the Day New star being born in distant galaxy; Salt and White Bread Two foods cutting lives short; State of the Web address (new gizmos, gadgets etc.); John McAfee Surreal; Monsanto US health care provider says nyet to GMOs.

#67 Tom from Mississauga on 12.04.12 at 1:58 am

They say prices won’t move and then contradict that in the next paragraph with only competitive priced homes will sell. Oh well, they had to say something.

#68 Soylent Green is People on 12.04.12 at 2:04 am

.

Why It’s Hard to Replace the “Fiscal Cliff” Metaphor truth-out.org/opinion/item/1… #cpc con talk #cdnpoli

.

#69 The end is nigh on 12.04.12 at 2:16 am

God bless America!
$ 16,000,000,000,000 in debt.
$ 3,000,000,000 debt added every day.
This will not end well.

#70 SilverMeridian on 12.04.12 at 2:27 am

Would you look at that, even Victoria Real Estate Board has already released it’s numbers for November 2012, they have graphs showing change of Number of Sales, Average Price, etc. They also put together a little table comparing current data with numbers from 2011! Not as good as Calgary Real Estate Board with it’s 20 page report which has become available even before weekend, but to be fair there are only approx. 350 000 people live in the Greater Victoria. What about Ottawa Real Estate board “serving” almost 1.2 million customers? First work day of the month has already passed but Ansel Clarke still seems to be struggling to come up even with his usual five paragraph “Latest News Release” for November, and he doesn’t even have any graphs in his piece of work, let alone any kind of comparison tables. I wonder what’s taking so long? Still trying to come up with new and creative way to put a spin on the Ottawa’s failing Real Estate market? When I look at the amount of work other Real Estate Board do, it just make me wonder; why there is such a huge discrepancy in standards and quality of work between Regional Real Estate Boards? Who allowed these high school dropouts to run the Real Estate Board of the Capital of the Canada? There is a “News Release” for you Ottawa Real Estate Board, your “Latest News Release” is officially and literally “Latest” out of all regional Real Estate Board news releases!

#71 prairieperson on 12.04.12 at 2:28 am

Yes, there will be a reserve bid. It will not be revealed. The auctioneer will usually start the bidding at what he thinks is a likely price but will take the first bid. However, he might say something like, come on folks, you can do better than that and go 175, 170 and work his way down. Or, judging the crowd and the mood, will as the auctioneer did, take the 60 and work his way up. The break was for potential bidders to think through what maximum they were willing to pay and for the seller to rethink what he’s willing to take. Auctioneers with experience are pros at reading a crowd. in some areas of the US, house auctions are fairly common. Not so much in Canada. Except, of course, in recent years with RE setting a lowball price and then taking bids. But that’snot the same as collecing a group at the property and opening for bids. The situation is not yet desperate. If it gets desperate, then that 60k bid will be followed by 61k, 62k because bidders will know that prices have fallen and are falling. To offset this is that owners seldom own a house outright and have to sell it. That means the banks, credit unions will take over mortgages and, if the 80s was any model, their lobbies will be filled with room dividers covered in photos of houses for sale at huge discounts on their mortgages. If I remember correctly, 50%. I don’t remember any of the banks or mortgage companies resorting to auctions.
A few defaults are just business. A lot of defaults are a disaster for a financial institution. When, if, the dividers turn up in the lobbies offering houses for sale you know that you can negotiate a bargain. The bank or credit union has now become a real estate company.

#72 Canuck Abroad on 12.04.12 at 4:15 am

Of course the fiscal cliff is a non-event. The fiscal cliff gives Obama political cover to gut entitlements. Anyone who thinks he is even a little bit interested in the middle class has not been paying attention the last four years.

Re the US recovery, maybe. It’s about time, right? But what about the level of debt being bought by the Treasury, now at about 90% of all new issuance:
http://www.zerohedge.com/news/2012-12-03/time-bernanke-reevaluate-his-sworn-testimony-congress

Okay, so the US can print, and it has the reserve currency, so it can do whatever it likes. And Zerohedge are sensationalist doomers. But seriously, how exactly does the US extract itself from the current program of debt monetisation? Does it not need to? Can it just carry on like this for decades? Centuries? Does it even matter, so long as stock prices are going up? Anyone?

#73 Buy? Curious? on 12.04.12 at 6:18 am

Ok people….let’s turn those frowns, upside down! We all know what’s going to happen. Just sit back, and, enjoy, the, show.

Brad Lamb vs GODFRICKINZILLA (check it out on youtube)

http://www.youtube.com/watch?v=8Rac224iR4U

Please, no applause.

#74 Tito Santana on 12.04.12 at 6:33 am

My buddy just reduced his house again in a usually robust area near new west bc. Nothing but lame showings over 2 months and he is growing anxious. He says he knows many wannabe builders and developers who are stuck with overinflated properties that are not financially viable that simply will not sell. He knows what is coming .

#75 daystar on 12.04.12 at 7:24 am

Woke up, couldn’t sleep. Some folks wake up with the usual, “I’m hungry, thirsty, gotta pee”, “the neighbors are at it again” or “my friggin car is nickel and diming me, is it even going to start?” or “my mate (his/her/it) is having a birthday, what to do and get?” or “its cold” or “this damn caugh won’t go away” or “I gotta got to get back to sleep, how will I function”. For me it was… Japan.

I couldn’t help but be concerned for this aging population of 128 million on a lonely nuke melted island hobbled by the fallout. As I began to research Japan’s fiscal realities and wonder how this environmentally damaged spatial arrangement of rocks and mountainside would cope, I was reminded of a nation rich with history and legacy, a nation still ruled by honor, rebirth, regeneration and survival.

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

Japan’s medicare is fed/state provided and free. 75.6% of highschool graduates move on to secondary education. 15 year olds there are ranked by OECD as 6th best in the world as of 2011. This nation is healthy, seemingly absent of crime, following the path of Shinto and Buddha’s way (sort of) and yet… beneath this strong social fabric of heritage that runs deep for millenia, a nation that possesses the majority of the world’s robots is now becoming the “land of the setting sun”.

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

An ugly real estate bubble formed in the 80′s in Japan (bet some wondered if i would ever become topical :) amid the wake of Jikininki (oh, daystar is slipping again), of hungry ghosts:

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

The Oni (evil spirits) grew in numbers in those days as Shi Tenno (the four heavenly kings who protect Japan from Oni) became weakened as the Japanese, influenced by the modern era, slowly walked away from such silly beliefs in Shinto and battles ancient past and so… an ugly, nasty asset bubble began. Greed was rampant in those days that saw asset bubbles rise to the heights that would cause any Bush Republican to stand back in anime amazement and any Spaniard to blush. A social nation seemingly absent of crime, suicide and dishonor, embraced unsustainable values as the way of the way of the future arrived. Does America wish to follow?

http://www.telegraph.co.uk/finance/financialcrisis/9283417/Japans-fiscal-death-is-a-warning-to-the-West.html

Japan’s net government debt is projected to be at 137% and growing by 10% annually while gross debt is beyond that of any African nation I know of and off the charts:

http://theextinctionprotocol.wordpress.com/2012/08/31/japans-debt-keel-country-could-run-out-of-money-in-october/

Embattled in trade weakness as exports shrink from Europe contraction, a glacial U.S. recovery, Pac Rim debt throttling back growth and Chinese trade competition becoming fierce at a time when Japan is most vulnerable (lets kick ‘em while they are down) has led to 2 lonely months of trade surplus this year while the last quarter of GDP contracts by 3.5%. Japan… ravaged by SUIJIN (water dieties) and melting nuclear power plants (KAGUTSUCHI), is now a nation crippled by higher energy imports & trade deficits:

http://www.taipeitimes.com/News/biz/archives/2012/11/22/2003548287

… and negative GDP growth.

http://www.wsws.org/articles/2012/nov2012/pers-n15.shtml

Japan is dire warning for all nations to take their debt and their asset valuations ultra seriously right down to their core beliefs or they may follow the path of Japan and for them I’m afraid, much worse is yet to come which brings me back to the U.S. fiscal cliff.

Does this world need the U.S., poised for a housing recovery to have a dollar as strong as it can be? Yes, it does. Does the world need the U.S. to ignore its fiscal realities and not take the bitter pill only to become the next Japan? No… the world does not. My belief is the majority of the representatives in congress know it too and their time to deal with it is now. The world either sucks it up, contracts and resets values for sustainability going forward or it limps along with western world fiat currencies that can’t self sustain and face the consequences. The land of the rising sun is now reminding us of this cold fact.

#76 daystar on 12.04.12 at 7:49 am

#72 Buy? Curious? on 12.04.12 at 6:18 am

Nicely done. Cheers!

#77 Risk Analyst on 12.04.12 at 8:12 am

God bless America!
$ 16,000,000,000,000 in debt.
$ 3,000,000,000 debt added every day.
This will not end well.
*******************************

Check your math dude

#78 cjlizzard on 12.04.12 at 8:16 am

Can we get an update on the Calgary market………oh, never mind

#79 Aussie Roy on 12.04.12 at 8:27 am

Aussie Update

HAM is dead, lets target Aussie buyers…

Melbourne, where home prices have fallen more than in any other major Australian city, may see further declines as a record number of new developments approved in the boom years hit the market.

Home values in the capital of Victoria state lost 6.6 percent in the year ended in June, the biggest drop among the eight state capitals

Far East Consortium Ltd. (35), based in Hong Kong, is developing a A$1 billion ($1 billion), 2,600-apartment complex in the city center, about 2 kilometers (1.2 miles) from the Rod Laver Arena, where the Australian Open tennis championships are played. Malaysia’s SP Setia Bhd (SPSB) is building almost 800 apartments in two towers close to Melbourne’s 134-year-old Queen Victoria Market, also in the city center.

SP Setia sold 70 percent of the first building in Malaysia and about half of the second tower to buyers in Malaysia, Singapore, China and elsewhere in Asia, Choong Kai Wai, the company’s Australian chief executive officer, said in a telephone interview from Melbourne.

It will begin marketing a second development in South Yarra, a riverside Melbourne suburb, this year, targeting mostly local buyers, he said.

http://www.bloomberg.com/news/2012-08-30/melbourne-hasn-t-seen-worst-of-lower-home-prices-as-glut-builds.html

#80 Tony on 12.04.12 at 8:37 am

Re: #19 mel in victoria on 12.03.12 at 9:19 pm

Everything i see about gold points to the next move down to the 800 U.S. level before it holds or hits resistance there. In this case India of course was the last country to pay far too much for the metal.

#81 TurnerNation on 12.04.12 at 9:08 am

Australia cuts! Getting too close to home.

“RBA Cuts Key Rate to Match Half-Century Low as Currency Holds UpQ
The Reserve Bank of Australia cut its benchmark interest rate to the half-century low set during the 2009 global recession as hiring falters and an elevated currency hurts industries such as manufacturing and tourism.

#82 Jeff in Moose Jaw on 12.04.12 at 9:20 am

In the year 2000, I bet that house would sell for under $60,000.
That was great to come along for the auction experience, interesting.
The part which indicates we have a service engine soon light on the dash, is that we are still at emergency level interest rates… lets pull over and see what’s going on under the hood.

#83 Tony Right on 12.04.12 at 9:32 am

Love it! The gold bugs must be fuming, frantically searching for a chart from Glenn Beck as evidence that gold will be over $10,000 an ounce by next year. Haha, please, keep your gold, more American equities for the rest of us! (PS here’s a little secret: many equities pay you to own them, unlike gold). Bon Chance!

#84 AK on 12.04.12 at 9:34 am

“You bet. And it never was going to happen. But it’s a great little fear-monger if you need to unload some bullion. If equity markets do waver and dip, then I hope you find the courage to ETF your way into them.”

Agree. I recently sold YRI-T and replaced it with JPM-N. JPM is trading below it’s book value with a 3% divi.

I am still going to hold ABX for the copper content.

#85 Howdy There on 12.04.12 at 9:43 am

US debt is about 16 trillion
US collected 2.3 trillion in 2011
US spent 3.8 trillion in 2011
deficit was 1.5 trillion
Almost 40% of US spending is funded by debt

There is most definitely a fiscal cliff, but it’s in the rear view mirror.

#86 Grantmi on 12.04.12 at 10:05 am

Gehh. Interest rates stayed put today. But indication is next round is they are going up.

Here we go…. Whheeeeeee.

#87 robert james on 12.04.12 at 10:11 am

A couple of weeks ago someone asked Garth for a possible 10 bagger.. I answered with V.OPL as we were waiting for the New Laser announcement .. The Laser announcement was made at 8 am this morning and it appears the fireworks are just about to begin.. http://www.stockhouse.com/bullboards/messagedetail.aspx?p=0&m=31858443&l=0&r=0&s=opl&t=list

#88 lpm on 12.04.12 at 10:23 am

US real estate recovery gathering pace.
Inventory down 22% year-over-year in early December – http://www.calculatedriskblog.com/2012/12/housing-inventory-down-22-year-over.html

#89 Atrate on 12.04.12 at 10:25 am

Good post as always, Garth.

#90 SKRenter on 12.04.12 at 10:34 am

Anyone who knows Saskatoon knows to stay out of that neighbourhood. Houses in North Central Regina going for that price. House in decent neighbourhood, 350 K. Same house.

However, you are seeing 20 and 30 somethings from the burbs who can’t afford anything else moving into those neighbourhoods. I a migration happening and the only ones losing out on that migration are the poor. They need to go somewhere, but where, i guess shanty towns are next on the bill.

#91 Dr. WAYNE on 12.04.12 at 10:38 am

#40 daystar on 12.03.12 at 11:27 pm

Why didn’t you simply publish a book … you actually expect someone to read all that … perhaps not …

#92 Drifter on 12.04.12 at 10:40 am

Garth,
If your theory about US housing recovery proves to be correct, what is the best way to participate in that upcoming growth.i do not wish to buy equity in companies that build new houses there as there is more than enough supply.

How can one win from this knowledge you share with us? Anything that trades on the tsx fit the bill?

Thanks for your insights.

#93 Eaglebay - Parksville on 12.04.12 at 10:44 am

Rosenberg: Why I’m bullish on Canada.

For the doomers, most people on this blog.

http://business.financialpost.com/2012/12/04/david-rosenberg-why-i-am-bullish-on-canada/

#94 Buy? Curious? on 12.04.12 at 10:45 am

Thank you to the Dudes with the good advice.

I’ll be posting another video this Saturday.

Now if you’ll excuse me, I have to think of something to do with footage of real estate agents riding in their cars to the soundtrack of Tupac Shakur. Someone’s always selling, someone always willing to buy. People just have to figure out who’s who’s.

“You can’t be a pimp and a prostitute too.”

#95 Stickler on 12.04.12 at 11:00 am

I agree the can will be kicked. The problem is that the US can not grow out of their debt problem.

They need to go over the cliff, and then cut much much more, AND completely restructure their tax code. Because this will not happen expect low interest rates as far as the eye can see.

Math matters.

#96 Aussie Roy on 12.04.12 at 11:02 am

Aussie Update

The Govt can always save housing by dropping interest rates.

Right?

Not the current Aussie experience

In the last two months it has become apparent that the current generation of first home buyers is different from the generations that have dominated post-war Australia.

The lower interest rates are not causing them to rush into new dwellings.

Australia’s largest apartment builder, Meriton’s Harry Triguboff, says that he has never experienced anything like it and admits that he has been caught by surprise, as have many other builders and developers.

In the past, when interest rates were low and housing affordability increased first homebuyers moved into the market. Now Meriton’s research is discovering that most will not buy a dwelling until the repayments are less than what they are paying in rent.

By late 2013 Australia will face a catastrophic fall in mining investment and we are going to need dwelling developments to fill at least fill some of the gap. Triguboff is supported by anecdotal evidence around the country.

Mirvac has confirmed it’s refunding off-the-plan deposits for a 263 apartment development in Hamilton Brisbane and a 71 apartment development in Townsville. In Brisbane even though the apartments were priced from only $345,000 The Courier Mail reports that only three had been sold.

In Melbourne’s outer suburbs, particularly in the north and west, there has been a dramatic rise in the number of people who have agreed to buy land but then cancelled.

In the apartment markets in Sydney and Melbourne there are still Chinese buyers but when they wake up to the vulnerability of the Australian dollar they may subside.

As a result, the attitude change by first home buyers hangs over the market. This generation has a lot of ways to spend cash and saddling themselves with a very large mortgage does not seem a priority unless it saves them money and gives them more cash to spend.

(Free subsciption required)

http://www.businessspectator.com.au/bs.nsf/Article/house-prices-apartments-interest-rates-Meriton-Har-pd20121203-2LRMM?OpenDocument&src=rot

#97 Herb on 12.04.12 at 11:16 am

#40 Daystar,

frightening scenario but nice work, Lorne.

#98 TB at BlueCollarWorkman on 12.04.12 at 11:20 am

Everyone keeps saying that if the fiscal cliff thing happens, that we’ll head into another recession and unemployment will go up. As though it were a foregone conclusion. Is it actuallyu though? Are we sure? Maybe if everyone wasn’t saying that we’ll go into recesssion, people wouldn’t panic and we wouldn’t go into recession. THoughts on that?

#99 Snowboid on 12.04.12 at 11:52 am

#41 Boombust on 12.03.12 at 11:28 pm…

I’m not the one easily humoured (I consider our Canadian problems quite serious), nor are they.

It’s true they don’t know much about current issues in Canada, most of them haven’t travelled there in many years – but they certainly find it funny that Canada is facing the same RE implosion they went through.

And they do ‘give a damn’, maybe selfishly, as they see Canadians helping revive the economy down here.

It is entirely possible that as RE crashes up north may force many Canadians to sell their homes down here.

These aren’t stupid people, some even retired financial sector CEOs, and they ask intelligent questions, but are amazed that we didn’t learn from their RE experiences.

#100 45north on 12.04.12 at 11:57 am

daystar: Does this world need the U.S. to have a dollar as strong as it can be? Yes, it does. My belief is the majority of the representatives in congress know it too and their time to deal with it is now.

I pray that they do.

#101 Brad in Calgary on 12.04.12 at 11:58 am

Mornin Garth. Hey, how’s Calgary doing?
Sales up. Prices up. Employment strong. Migration strong. Economic envy of the nation.

Nevermind.

#102 Daisy Mae on 12.04.12 at 11:58 am

#61 LiveWithinYourMeans: “The elfin created this mess and now he’s trying to take credit for tightening up the rules. LOL There’s a fool born every day.”

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

Are Canadians listening and learning anything? Or do they just blindly believe? Hmmm….

Anyway, I noticed yesterday the malls are packed with shoppers spending money they don’t got. Amazing.

#103 kreditanstalt on 12.04.12 at 12:29 pm

Art Cashin on the U.S. “recovery”…

“…this economy is much weaker than anybody in the press is letting you know or leading you to believe…”

http://www.zerohedge.com/news/2012-12-04/out-fiscal-cliff-and-fire-art-cashin-real-looming-malaise

ZH adds

“… a secular decline in the US economy, where a 1% growth rate will soon be the “New Killing It”, where millions more (in part-time workers) will soon be let go, and where businesses no longer generate the cash flows needed to stay open.”

And we’ve only just begun!

More tripe from the Zero guy. Suicide is quicker. — Garth

#104 JohnnyBoy on 12.04.12 at 12:37 pm

Elfin deities are coming! Just like Asrai A small, delicate female fairy who melts away into a pool of water when captured or exposed to sunlight. This is what will happen to your GTA housing values when the sun finally rises on that day or reckoning. Beware the beast is coming. If your hour is numbered 666 be especially cautious. I am investing in fairy dust myself its the only sure bet when the rapture is upon us. Pray to the GTA Real estate priests for they shall tell you what you want to hear! For those who want the truth drink heavily, eat some psilocybin mushrooms and put on In-a-Godda-da -Vida or Astronomy Domine. Peace out housing investment bondage fools.

#105 Westernman on 12.04.12 at 12:56 pm

# 103 kreditandstalt – You nailed it…
Just where this fantasy recovery is going to get its power from is the stuff of MSM shills and other wonks dreams.
There is no underlying basis for the belief of a “recovery” in fact. The west has buried itself under entitlements, welfare, regulations taxes etc and the holders of capital ( which is the fuel that launches growth ) are going to hide their capital and sit tight until conditions are more favorable for investment.
And no, for the thousandth time – a herd of brainwashed sheeple with maxed out plastic buying cheap Chinese made trash at Wal-Mart over Christmas is not a recovery or a viable economy. NO economic growth will occur until the boot of Socialist government is removed from the throat of business. All the cheerleading in the world won’t change that.

#106 gladiator on 12.04.12 at 12:58 pm

Is “daystar” another word for “verbal diarrhea”?

#107 IM in C on 12.04.12 at 1:12 pm

@10 Old Man -I owned a condo in Toronto years ago and my tenants were two call girls, but they paid on time, and was happy

For your benifit , and for all the other potential landlords, knowingly allowing your residence to be used as a ‘common bawdy house’ makes you at best an accessory, at worst ‘living off the avails’ ie a pimp. (Yes the laws may be changing, but until they do …. and yes I am not a lawyer so I could stand to be corrected)
Yet another thing for all you specers out there to consider when thinking that you will ‘just rent it out’. The people most likely to pay the rent on time with no problems, are possibly using your -investment – for nefarious purposes.

#108 futurologist on 12.04.12 at 1:28 pm

#103 kreditanstalt on 12.04.12 at 12:29 pm

Art Cashin on the U.S. “recovery”…

“…this economy is much weaker than anybody in the press is letting you know or leading you to believe…”

http://www.zerohedge.com/news/2012-12-04/out-fiscal-cliff-and-fire-art-cashin-real-looming-malaise

ZH adds

“… a secular decline in the US economy, where a 1% growth rate will soon be the “New Killing It”, where millions more (in part-time workers) will soon be let go, and where businesses no longer generate the cash flows needed to stay open.”

And we’ve only just begun!
——————————
You’re totally right.
USA and Europe already passed the “Point of no Return”.

They will decline until total collapse, chaos (as former Soviet Union), social unrest and tsunami of crime.

It is not any more prediction of future; it’s already reality show happening now.

But most of the people prefer to put their heads in the sand. In any case they can’t change anything – they voted for “change” – they are deserving what they are getting.

#109 eddy on 12.04.12 at 1:34 pm

No one here at the blog could come up with a Leaside bungalow for under $1,000,000. because there were none.
Last week 73 Vanderhoof Ave came out @ $809,000 .
It gets sold today. Then, once again, there will be no leaside bungalows for under $1,000.000.

#110 dosouth on 12.04.12 at 1:50 pm

#87- Robert James – shilling your product here – shame.
52 week low .20

52 week high – .53

Presently at .46 after the laser pronouncement. Maybe you should keep your penny stocks for your next great pronouncement on the VREB website where some one cares.

This weblog I believe is for educated investment parties, not shills.

#111 JohnnyBoy on 12.04.12 at 1:57 pm

Well according the CHMC the Apocalypse will be here shortly, however hell will only be released on earth until the third quarter of 2013.

http://www.cmhc-schl.gc.ca/odpub/esub/64319/64319_2012_B02.pdf?lang=en

Oh well back to the magic mushrooms, far out man the houses here don’t devalue, they appear to melt………………….

#112 Ron on 12.04.12 at 2:06 pm

I am sure that Obama will compromise with the Republicans and make deals to simplify the tax codes and cut entitlements and even offer a few tax cuts.

But not until after the cliff. No way in hell the Zombie King Grover lets his guys vote in anything resembling a substantial tax increase. Not even a tiny portion of the increases already on the books that one would have in a theoretical compromise will be considered acceptable to the Americans for Tax Reform.

Obama has all the bullets. The default plan is a democratic ajenda dream.

Do what he must to finally get revenues up and THEN talk to them about a fiscal rescue package.

Politically all he has to do is insist on the tax increases for people over 250k and if he sticks to his guns hard enough he will get all the bush era tax increases and a few more as a bonus prize. With all the blame on the other side for people that wouldn’t even budge on asking rich dudes for a small increase.

#113 Ron on 12.04.12 at 2:09 pm

“Everyone keeps saying that if the fiscal cliff thing happens, that we’ll head into another recession and unemployment will go up. As though it were a foregone conclusion. Is it actuallyu though? Are we sure? Maybe if everyone wasn’t saying that we’ll go into recesssion, people wouldn’t panic and we wouldn’t go into recession. THoughts on that?”

Total GDP is a combination of private and public growth. The fiscal cliff spending cuts reduce expenditures enough to make -2% GDP from the total right off the bat.

So unless the private sector swells to fill in the void, and fast, it’s a guaranteed recession.

So in short, yes is a recession for sure. With knock on effects to Canada.

#114 Mister Obvious on 12.04.12 at 2:13 pm

For various reasons I’ve been monitoring a particular MLS listing in Victoria. It’s for a SFH near the university. (5 bed, 3 bath, in-law suite)

Its been on and off the market for about 18 months. It first listed for 670K but did not sell and went off the market for many months.

It then came back on the market last September with a different agent for 609K. Over the next 6 weeks it went to 595K, then 585K, then 569K, then went off the market again for a few weeks.

Now its back with yet another agent and back up to $609K. I suppose the latest agent convinced the owner that the price was too low to expect a quick sale.

If this one listing is anything to go by, things are not going so well Victoria.

#115 IM in C on 12.04.12 at 2:25 pm

@51 cecil henry- why did they bid like that.
Most people are unfamiliar with an auction. My parents once saw a couple at an estate auction cheerfully bid each other up, not quite realizing…

#116 Not So Fast Bucky on 12.04.12 at 2:45 pm

“This could pave the way for a 2013 in which the US continues to recover, with unemployment inching down and housing in full renaissance.”

You can’t spend your way to prosperity, when 50% of Americans rely on the USA Govt in some shape or form.

And now this, and no, scarcity does not mean treasuries are more valuable.

Treasury Scarcity to Grow as Fed Buys 90% of New Bonds:

http://www.bloomberg.com/news/2012-12-03/treasury-scarcity-to-grow-as-fed-buys-90-of-new-bonds.html

#117 Regan on 12.04.12 at 2:50 pm

Beyond gross. If you want to hire a sex worker, pay money to someone willing to exchange it for sex. If you are titillated by the idea of paying for sex, try paying for sex, not creeping your tenants. Adding coercion to the interaction because you’re in a position of power is abusive, regardless of whether you’re dealing with a sex worker or anyone else.

#13 Smoking Man on 12.03.12 at 9:05 pm

#10 Old Man on 12.03.12 at 8:40 pm

Seriously Old Man. To bad they made all their payments.
I’m sure something could have been negotiated.

:)-

#118 IM in C on 12.04.12 at 3:05 pm

http://www.latimes.com/news/local/la-me-loft-squatter-20121202,0,6392806,full.story

There are so many issues in this article surrounding condos, investment, and ownership- and the definition thereof. Certainly worth a read.

#119 Smoking Man on 12.04.12 at 3:08 pm

#117 Regan

Quit your chirping you fired air traffic control. Now get your but over the the schoolyard an take care of business.

Fire them all……

#120 robert james on 12.04.12 at 3:14 pm

#110 dosouth You know I hate to break the news to you ,but I wasn`t talking to you.. For one thing, it is not my product and someone asked for Garth`s opinion on a 10 bagger and Garth did not answer.. Why did you even look at it ? Don`t look next time and you will feel better..

#121 Macrath on 12.04.12 at 3:33 pm

~a fiscal and social crisis the government will be forced to respond to. — Garth

“Once again, food prices are soaring. For the third time in five years, the world seems on the verge of a crisis. Prices for corn, soybeans and wheat have all skyrocketed on international markets, rising 21 per cent, 41 per cent and 31 per cent respectively since the start of the year.”

http://www2.macleans.ca/2012/09/24/how-financial-bets-are-pumping-food-prices/

And its not only food. Soap prices doubled along with increases in all the necessities. How long before those of modest means or living on the edge are pushed over the cliff ? Recovery ! maybe at Scotia Plaza, but definitely not at Main and Danforth.

#122 Andrew on 12.04.12 at 3:36 pm

To all the Calgary cheerleaders:

“Mornin Garth. Hey, how’s Calgary doing?
Sales up. Prices up. Employment strong. Migration strong. Economic envy of the nation.”

True Today, but will the market still be as healthy 5, 10, 20 years down the road when everyone is still grappling with today’s bloated mortgages?

#123 Hogtown indebted on 12.04.12 at 3:39 pm

This is getting very sad for the poor hoodwinked Trump buyers – the OSC just ruled against their case.

http://www.thestar.com/business/article/1296946–more-trump-hotel-buyers-turn-to-courts

#124 LaughingCon on 12.04.12 at 3:45 pm

Fraser Valley Real estate board stats are out ( this is the TRT fiefdom):
===================================
Property sales through the Fraser Valley Real Estate Board’s Multiple Listing Service® (MLS®) decreased by 19 per cent in November compared to the same month last year, moving from 1,120 to 905. Sales also decreased 14 per cent month-over-month compared to October 2012. …

“For three months in a row, we’ve seen a decrease in sales of detached homes $700,000 and up and greater demand for those $400,000 to half a million. Tighter credit conditions are having an impact on the market.”

In the last six months, prices for all three residential property types combined have decreased by 1.4 per cent while year over year they’ve increased by 1.3 per cent. For single family detached homes, the benchmark price increased by 2 per cent in one year, going from $533,800 in November 2011 to $544,700 last month.

For townhouses, the benchmark price in November was $298,900, a decrease of 1.5 per cent compared to $303,600 during the same month last year. The benchmark price of apartments in Fraser Valley in November was $202,800, an increase of 2.6 per cent compared to $197,700 in November 2011.
===================================

Nice hiding under the “benchmark price” – the actual report is here – http://www.fvreb.bc.ca/statistics/Package%20201211.pdf

Double digits decreases in the sales and IN THE PRICES for HAMland pearl White Rock – the detached houses with CMHC unavailable for properties above 1M are dropping like er…. white rocks!

Average detached house was $ 819,978 (down 18.3%) from last year high of $ 1,004,060 and down 15.8% from Oct.2012 of $ 973,620

#125 Patiently Waiting on 12.04.12 at 4:05 pm

Saw this on BNN this morning:

Vancouver home sales plunge, prices dip
Brent Jang, The Globe and Mail
2:37 PM, E.T. | December 4, 2012

Residential sales in Greater Vancouver’s housing market slumped 28.6 percent in November, though sellers aren’t panicking as prices slipped only 1.7 percent from the same month in 2011.

There were 1,686 sales of single-family detached homes, condos and townhouses last month, down from 2,360 a year earlier, the Real Estate Board of Greater Vancouver said Tuesday.

“Home sellers appear more inclined to remove their properties from the market today rather than lower prices to sell their properties. On the other hand, buyers appear to be expecting prices to moderate,” board president Eugen Klein said in a statement.

Overall sales were 30.3 percent below the 10-year sales average of 2,420 for November. The board said it uses a home price index that strips out the most expensive homes because that serves as a better barometer of trends than average prices. Under that statistical gauge, the index price of single-family detached home on Vancouver’s west side was $2.03 million in November, or a decline of 8.4 percent from the same month last year – the sharpest drop among districts in Greater Vancouver.

“Home prices in Greater Vancouver have generally declined between three and 5.5 percent, depending on property type, since reaching a peak six months ago,” Klein said.

The region’s home index price stood at $596,900 in November – a drop of 4.5 percent since peaking at $625,100 in May of this year, or down 1.7 percent year-over-year.

#126 Picasso on 12.04.12 at 4:16 pm

Gold falls through $1,700 floor

Gold
1,695.20
-24.40
-1.42%

#127 daystar on 12.04.12 at 4:41 pm

#91 Dr. WAYNE on 12.04.12 at 10:38 am

I do actually, just as I expect you to not have much of anything nice to say about anyone or anything at any given time.

#106 gladiator on 12.04.12 at 12:58 pm

I hope you aren’t grudging from battles past. The solution is painless. Just… forgive as I have long ago.

#97 Herb on 12.04.12 at 11:16 am

I don’t know if I’m right Herb but considering the options, U.S. politicians haven’t got much for choices. U.S. external debt is too high, they can’t do a Japan. A few more years of trillion dollar deficits and the math no longer works for them regardless of what they do.

One of the links I stumbled upon with Japan’s debt crisis spoke of dead bears lying everywhere who dared to call Japan done like turkey dinner and the reason for it is simple (thanks to a fellow blogger pointing it out to me years ago, I do sometimes miss the obvious). Japan’s external debt (I haven’t looked at it lately, need to be careful here) two or three years ago was less than 10%. Its the main reason why Japan hasn’t imploded on their debt woes because they have largely kept it “inhouse”.

The problem Japan is encountering now is that they aren’t producing nuclear power to fill their needs meaning they have to import energy and in so doing, are running trade deficits not to mention exports are in serious decline there and up til’ now, this has been their bread and butter, their domestic revenue keeping things running so its coming at them from all sides now.

The Japanese government has countered energy imports by hiking taxes just lately specifically on energy in an effort to keep external debt levels low but it likely won’t be enough. If Japan is forced to borrow (and right now, they are) outside of itself, external debt levels rise and the cost of borrowing combined with a falling yen from a shrinking money supply will drive inflation and their debt levels are so extreme that they can’t afford any kind of jump in rates. Debt service is what… 57% if one of the earlier posted links are accurate and they are running 10% annual deficits as it is. Clearly this is unsustainable and I’m not sure what governments there can do to fix it. A 30% devaluation or writedown of domestic bonds perhaps combined with serious tax increases and an all out race to energy self sufficiency perhaps?

If there is one nation in the world that can do it the way of Buddha, suck it up, pool together and take it on the chin for the team, its Japan but it remains to be seen whether the political, corporate and domestic will is truly there. The way I see it, if Japan doesn’t get it together soon, they’ve got less than 5 years before experiencing an all out currency crisis and hyper inflation. I doubt that it would cause a GFC, but a world recession, most definitely, so all eyes are on U.S. fiscal policy right now and so they should be and I’m guessing with this, but I think the deal has already been cooked, the U.S. is going over the fiscal cliff with a few minor changes and Canadians better prepare for currency/commodity consequences if I’m right. This is one time you don’t bet against america.

Thanks Herb, I’m off the grid for a few days and wish you and the rest of the blog dogs and reader faithfuls all the best til’ next time.

#128 Realtors in an all out PANIC! on 12.04.12 at 5:14 pm

Hogtown indebted on 12.04.12 at 3:39 pm
This is getting very sad for the poor hoodwinked Trump buyers – the OSC just ruled against their case.

http://www.thestar.com/business/article/1296946–more-trump-hotel-buyers-turn-to-courts
—————————————————————–

It’s going to be a NASTY crash realtor smokingman , A nasty crash as people go BANKRUPT and loss it all in this RE ponzi. Realtors like you better hide under a rock when the pitch forks come out. It really is going to be a NASTY nasty CRASH! The sad fact is it’s already a NASTY crash but it’s going to get much much worse.

#129 kreditanstalt on 12.04.12 at 5:14 pm

#126 Picasso

The “price” you’re referring to is the result of paper bets on “gold” – which will never see any real metal put up or delivery of same – being allowed to determine “the gold price”.

Who in their right mind would “sell” his physical gold for “money” now?? No one.

And none is changing hands!

#130 JohnnyBoy on 12.04.12 at 5:22 pm

To all the housing investment bondage fools.
Life is like a box of chocolates. A cheap, thoughtless, perfunctory gift that nobody ever asks for. Unreturnable because all you get back is another box of chocolates. So you’re stuck with this undefinable whipped mint crap that you mindlessly wolf down when there’s nothing else left to eat. Sure, once in a while there’s a peanut butter cup or an English toffee. But they’re gone too fast and the taste is… fleeting. So, you end up with nothing but broken bits filled with hardened jelly and teeth-shattering nuts. And if you’re desperate enough to eat those, all you got left is an empty box filled with useless brown paper wrappers.

#131 broadway skytrain on 12.04.12 at 5:27 pm

bc booming…………….

Petronas and Progress announce go-ahead for $9-billion LNG plant at Prince Rupert

Much larger facility to be built if Ottawa approves Malaysian giant’s purchase of Canadian company

Read more: http://www.vancouversun.com/business/bc2035/Petronas+Progress+announce+ahead+billion+plant+Prince/7649961/story.html#ixzz2E7YShAzD

#132 Dr. WAYNE on 12.04.12 at 5:31 pm

#127 daystar on 12.04.12 at 4:41 pm

#91 Dr. WAYNE on 12.04.12 at 10:38 am

I do actually, just as I expect you to not have much of anything nice to say about anyone or anything at any given time.

You, undoubtedly, are in a ‘major’ state of dillusion … on both counts …

#133 Snowboid on 12.04.12 at 5:33 pm

#114 Mister Obvious on 12.04.12 at 2:13 pm…

I agree things don’t look that good – one SFH near our former Victoria home sold for $ 540K in the fall of 2009 – it’s now listed with an asking price nearly $100K less.

Other former neighbours decided to stick with their unrealistic prices, but have now taken their properties off listing, and are renting them out – hoping they can hold on.

The outcome doesn’t look positive, they seem to think prices will be back up by mid-2013!

#134 Patiently Waiting on 12.04.12 at 5:47 pm

#127daystar

Thanks again for your insightful comments. I for one do read all of your posts, and find that I learn a lot from them . . .

pw

#135 DondWest on 12.04.12 at 6:04 pm

What I truly can’t stand are people who list houses for several months, can’t get a sale or even find a perspective buyer to attend an open house after small incremental price reductions of say 5% every 3-4 months, then they unlist the property.

Then no more than 2 months later, I find the same property relisted, this time at a much higher price (along with a new real estate agent). The justification? Our precious owner worked so hard to install a new fridge and new floor tiles. Give me a break!

Realtors are just pushing the entire population towards bankrupcy. Can’t sell? Don’t lower your price by 20%, instead spend 20K on renos for crap you don’t need and then relist at double the price. Surely that will work, how can we fail?! Sheesh!

#136 Canadian Watchdog on 12.04.12 at 6:07 pm

A good study guide for all you young folks thinking of becoming a debt slave.

On Amazon.ca  $15.82 CDN

Debt Sentence: How Canada's Student Loan System Is Failing Young People and the Country

Thomas F. Pawlick exposes the exploitation and entrapment in Canada's student loan system: a system that ruins the careers, health and hopes of thousands while lining the pockets of banks, collection agencies and bureaucrats. Students are driven to abandon school for minimum-wage work, prostitution or gambling to pay debts. Some commit suicide. Others flee Canada with their expertise, brain draining the economy. A two-tiered system is created, favoring the wealthy, while sentencing the rest to lifetime debt.

This is an ad.

#137 LaughingCon on 12.04.12 at 6:11 pm

Vancouver stats are out:

http://tinyurl.com/c46muwj

Full report – http://www.rebgv.org/sites/default/files/201211-REBGV-Stats-Package.pdf

Whazzup, TREB data due tomorrow

#138 dv8 on 12.04.12 at 6:13 pm

Come on Garth ,you seem to think that spending money forever without paying it back will have no consequences in the USA with all due respects you definitely know realestate and economy but completely ignore monetary science altogether ie……. what is money? where does it come from? who makes it ?PS gold has been around alot longer than any TFSA ,dow jones ,or any stockmarket index

#139 house burden on 12.04.12 at 6:26 pm

Garth I think that is Obama and the US politicians laughing at all the fools buying US Debt.

Obama is indicating he can’t pay off his debt without more debt.

Or you can say My mastercard debt cannot be paid unless you raise my mastercard limit so I can use more credit to paid for the existing minimum payment.
(and recursively the spin goes on) until the foriegner realizes that they are caught up in the US dollar ponzi scheme.

#140 Mike on 12.04.12 at 6:38 pm

ruh roh

http://www.thestar.com/business/article/1296946–more-trump-hotel-buyers-turn-to-courts

#141 house burden on 12.04.12 at 6:43 pm

“Once again, food prices are soaring. For the third time in five years, the world seems on the verge of a crisis. Prices for corn, soybeans and wheat have all skyrocketed on international markets, rising 21 per cent, 41 per cent and 31 per cent respectively since the start of the year.”

http://www2.macleans.ca/2012/09/24/how-financial-bets-are-pumping-food-prices/

And its not only food. Soap prices doubled along with increases in all the necessities. How long before those of modest means or living on the edge are pushed over the cliff ? Recovery ! maybe at Scotia Plaza, but definitely not at Main and Danforth.
===================

Its call inflation, which the US likes to hide with its frankennumbers. How can printing more debt and selling it to the rest of the world not cause inflation.

China produces goods for the US
Canada has raw material exported to the world
Arab country has oil and gas

So what does US contribute to the world, US dollars printed from thin air?

#142 syfon on 12.04.12 at 6:46 pm

#40 daystar
great post today
keep them coming
We leave a metals for now let them cosolidate.
Greaterfools come in different shape and forms
DON’T BE ONE

#143 kreditanstalt on 12.04.12 at 6:49 pm

#130 JohnnyBoy

There ARE a lot of those housing investment bondage fools here, aren’t there?

North American housing. I’ve never people come up with so many convoluted, ingenious, inventive ways to allow themselves to use borrowed money to “invest” in an “asset” whose price won’t bottom out for years to come…

#144 dv8 on 12.04.12 at 6:53 pm

Hey smoking man and Old man .You do realize that you are the same person don’t you ?or you are a multiple personality disorder person lol forget to take your meds today

#145 live within your means on 12.04.12 at 7:13 pm

#102 Daisy Mae on 12.04.12 at 11:58 am
#61 LiveWithinYourMeans: “The elfin created this mess and now he’s trying to take credit for tightening up the rules. LOL There’s a fool born every day.”

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

Are Canadians listening and learning anything? Or do they just blindly believe? Hmmm….

Anyway, I noticed yesterday the malls are packed with shoppers spending money they don’t got. Amazing.
………………….

I bought, on line, the one gift for Xmas I wanted – a chef’s knife. Hubby bought a few parts for his latest bike – Da Beast – so I said Merry Xmas and Happy next b’day.

My eldest sis was out again today, pumping up the economy, on her visa or her LOC. She told me she was really cutting down this year. I’ve heard that song before. She’s upset with me ’cause we won’t have all kinds of gifts under the tree.

#146 Smoking Man on 12.04.12 at 7:14 pm

#144 dv8 on 12.04.12 at 6:53 pm

Smoking Man = Old Man

Interesting theory, nothing wrong with critical thinking. Don’t you realize if that was the case how absolutely brilliant that would make me. Or him.

Two completely different writing sytles, One can spell the other can’t, one is a good guy, the other a HO.

I will take credit, your not the first to suggest it.

Old Man
I’m thinking he’s the likes of CSIS, CIA, Mossad, KGB.

Has not been back since I called him out.

I’m soooooooo Gooooooood

#147 Smoking Man on 12.04.12 at 7:17 pm

#137 LaughingCon on 12.04.12 at 6:11 pm

So

Sales Down Price Up. SFH

Zzzzzzzzzzzzzzzz

It’s going to be a long WAIT basement dwellers, a long WAIT.

#148 Macrath on 12.04.12 at 7:22 pm

#141 house burden
So what does US contribute to the world, US dollars printed from thin air?
———————————–

Lots of military hardware ,ammo and the new toys -drones flying around the neighbourhood !

#149 Jas on 12.04.12 at 7:40 pm

Garth:
you have stated few times in your blog that a mix of ETF, preferred (perhaps Banks mainly), REITs can get 7% return. Are you including some potential capital growth in there ir not? Because dividends along will come to 7%

Thanks

#150 T.O. Bubble Boy on 12.04.12 at 7:40 pm

@ #109 eddy on 12.04.12 at 1:34 pm
No one here at the blog could come up with a Leaside bungalow for under $1,000,000. because there were none.
Last week 73 Vanderhoof Ave came out @ $809,000 .
It gets sold today. Then, once again, there will be no leaside bungalows for under $1,000.000.
————–

That may be true, but there are plenty of unsold McMansions sitting on top of where the bungalows used to be. I see a McMansion glut in midtown/north Toronto these days – the city is running out of people to pay $1.5M+ for these skinny stucco palaces on 25ft lots.

#151 Ret on 12.04.12 at 7:52 pm

If London’s Western U, Fanshawe College, airport and two large hospitals can’t keep the economy going in a city of 360,000 people, things are not good in SW Ontario.

It’s in the snowbelt, but the RE prices are lower than Hamilton’s for newer homes on larger lots in safer, more upscale areas.

#152 LuckyRenter on 12.04.12 at 7:58 pm

Mark Carney Abandons Canadians Sinking Ship, As Housing Market Crashes !!

To see what Carney is leaving behind, some comparisons are made to the United States. These are meant to show that Canada is heading into a housing catastrophe. The numbers are calculated differently in each country so are only vaguely useful to judge the severity of Canadian indulgence.

The signs of collapse are manifest: new housing supply is booming; housing demand is waning. Prices are too high for the average buyer (the average Canadian house now costing $350,000). Without the average buyer, house markets tumble. Home equity withdrawal rose from 2% to 8% of disposable income, which spurred spending, and mortgage debt has more than doubled over the past decade.

How are those bullet-proof Canadian banks doing? Since 2000, they have expanded lines-of-credit by 700% when disposable incomes rose 70%. The five largest Canadian banks hold $400 billion of uninsured consumer credit. The Canadian Mortgage and Housing Corporation (CMHC), which insures mortgage loans, got giddy (increasing insurance to 100% of loans and to 40-year amortization periods in 2006). The government lifted the limit on CMHC insurance from $450 billion to $600 billion in 2009. The $600 billion limit is close to capacity, which may not excite a U.S audience, but Canada’s GDP is around 10% of its southern neighbor, so the liability (in comparative terms) is around $6 trillion.

http://www.marketoracle.co.uk/Article37867.html

#153 Hugh Jasz on 12.04.12 at 8:24 pm

#129 kreditanstalt on 12.04.12 at 5:14 pm
#126 Picasso………..Who in their right mind would “sell” his physical gold for “money” now?? No one.

Well, if you bought for “money” at $1900, maybe you ain’t all that inclined to sell for $1700 in “money” right now.

I like Garth’s methods – keep a little gold around, but keep it in balance, and take profits when it makes sense to.

#154 Nostradamus Le Mad Vlad on 12.04.12 at 8:29 pm

-
Good posts today.
*
SArabia Will be interesting to see what happens if the west keeps up with its fake war on terror; Not since WW2 has unemployment been this bad and college grads can’t find work. Just what the Communist Party of America wanted; Bypassing “Given the current tensions in the Middle East, the creation of this pipeline was visionary, indeed, and the Chinese government now has an alternative supply of oil if their oil production in southern Iran gets shut down for any reason. China has been developing Iran’s southern oil fields for domestic consumption since this last July.” wrh.com; Timing the Market with inside information. Another method of how the rich get richer; Morgan Stanley hypocrisy Lotsa links in; 0:59 clip Ex-GS trader manipulated market? Say it ain’t so, Joe! US Households and their debt cliff; Scams New York must be running outta money; UK falls into DD Not the beer ‘tho, French economy jellybellyflops and Spain’s unemployment nearly five million.
*
37:20 clip Steve Quayle — World in chaos. Life’s a bucket of shit; 10:15 clip GW fraud used as a distraction to keep sheeple’s attention spans away from the real stuff of the world, and CNN Only CNN would ask for a global carbon tax, which will make the rich richer; 2:58 clip Just label it — foods, that is, and 15:01 clip Manufactured terror, something the west does really well (it’s all made up) plus NATO The west is going in again, under a false pretext so Russia pulling out; 3:48 clip “This is why the only “winners” in the alleged “war on terror” are the drug dealers; the banks which launder the drug money; and the huge defense contractors providing hired mercenaries, materials, logistics, and weapons.” wrh.com and Odronebomba Making up the rules as he goes along; Fat Chance Look up in the sky — pink elephants flying in the fairy dust! China in space; Zap! Conventional food zapped with a microwave blast; UN governance over ‘net No dickheads from Brussels (or anywhere) should be allowed to censor what we see.

#155 Daisy Mae on 12.04.12 at 9:17 pm

#134Patiently Waiting
#127daystar

“Thanks again for your insightful comments. I for one do read all of your posts, and find that I learn a lot from them . . .”

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

I agree. Very informative! I also enjoy ‘Aussie Roy’.

#156 Dudley Do-Right/ Eternal taser Mountie on 12.04.12 at 9:17 pm

#10 Old Man on 12.03.12 at 8:40 pm

#6 Smoking Man – I owned a condo in Toronto years ago and my tenants were two call girls, but they paid on time, and was happy. Hey just met them once, and they gave me a full disclosure, and the honesty was enough for me, as will not become a judge about how others live – just take care on the unit and pay the green on time.

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

Living off the avails of Non Political prostitution eh…?

#157 TurnerNation on 12.04.12 at 9:26 pm

FML listings has a NEW website:

http://fmllistings.tumblr.com/

#158 habbit on 12.04.12 at 9:35 pm

Johny Boy #130 LOL great post! you talkin politics?

#159 Daisy Mae on 12.04.12 at 9:41 pm

#145 Live Within Your Means: “I bought, on line, the one gift for Xmas I wanted – a chef’s knife. Hubby bought a few parts for his latest bike – Da Beast – so I said Merry Xmas and Happy next b’day.

My eldest sis was out again today, pumping up the economy, on her visa or her LOC. She told me she was really cutting down this year. I’ve heard that song before. She’s upset with me ’cause we won’t have all kinds of gifts under the tree.”

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

Well, you’re the smart one. Let your sister BE upset. I’ve cut back substantially. Enuf already. Three kids, their spouses, nine grandkids, two step grandkids. I don’t even try to keep up — gave up long ago! And it’s all okay.

It’s really all so stupid, isn’t it?

#160 new-era on 12.04.12 at 9:44 pm

Macrath on 12.04.12 at 7:22 pm

#141 house burden
So what does US contribute to the world, US dollars printed from thin air?
———————————–

Lots of military hardware ,ammo and the new toys -drones flying around the neighbourhood !
========================

Yeah in terms of keynesian economics, the US is doing the Arab countries a favor

They bomb the crap out of those country so they can rebuild and create jobs.

Even better the US kill the children so they can create more children meaning more jobs and for doctors and etc.

How demented is keynesian economics.

#161 habbit on 12.04.12 at 9:48 pm

135 DondWest will add that to your list Don.

#162 Hugh Jasz on 12.04.12 at 9:54 pm

#140 Mike on 12.04.12 at 6:38 pm
ruh roh

http://www.thestar.com/business/article/1296946–more-trump-hotel-buyers-turn-to-courts

Still wondering how the hell this works

You have no money and limited ability to raise money through mortgage, and despite this, you allow yourself to be convinced that it’s a good idea to put everything you have into something (i.e. hotel suites) that there’s no shortage of in Toronto.

If there’s one thing I’ve learned, it’s that when a business opportunity is pitched directly to schmucks on my rung of the socio-economic ladder, the only person that’s going to make money is the guy that’s collecting my money!

The other thing I’ve learned is that real estate is a rock solid investment always goes up……….except when it isn’t/doesn’t.

#163 HogtownIndebted on 12.04.12 at 10:44 pm

This can’t be good. Front page story just a little while ago about the new MPAC assessments to affect SFH in Toronto. This may be another icy splash of cold water.

http://www.thestar.com/news/gta/article/1297706–biggest-property-tax-increases-expected-in-davenport-willowdale-neighbourhoods

#164 Tinfoil Hat on 12.05.12 at 4:34 pm

the fiscal cliff explained by Monty Burns (Simpsons):

http://www.youtube.com/watch?v=c91usT4P1u0

#165 Robert on 12.05.12 at 7:57 pm

Just posted.. Look out below..

HUGE HUGE HUGE PRICE REDUCTION!!! $133,000 BELOW THE ASSESSED VALUE!!! Welcome to 2405 Sunriver Way in the Sunriver Estates. This home has a lot of potential. Upstairs you will find a gently lived in, spacious layout including 9 ft ceilings, large living room, open kitchen, 2 bedrooms and 2 bathrooms. Downstairs is a 1,600 sqft open canvas with roughed in plumbing just awaiting your ideas. This house sits on 8,859 sqft lot. Move in and enjoy creating a space that fits your needs.”SOLD AS IS WHERE IS” COURT ORDERED SALE