Pooched 2

pooched 1

While a thousand suits were shuffling into a Toronto hotel ballroom Friday to hear bankers tell them housing in Canada will land softy, the world was hearing something different. It’s the burning question these days. After all, everyone knows real estate is pooched one way or the other. The question is how much?

We’re now about ten days away from the start of a flood of listings which will wash over markets like Toronto and Vancouver. Realtors expect the make-or-break Spring season to flower sooner than ever, simply because the autumn sucked and sellers held back, waiting for all those buyers to return.

Now, five months later, it’s a new game. Not a day goes by that the mainstream media isn’t yapping away about the latest evidence of a housing disaster in slow motion. The meme is out there. By the end of this year, mortgages will cost more and houses will cost less. Soon the big cities will be following the regions and the smaller centres, where housing deflation’s been a fact of life for months already and buyers have been voraciously vultching.

So there they were. The bank rock star economists. Each grabbing the mike at the Economic Club of Canada to tell Bay Streeters what comes next. It was a piteous sight, almost as indigestible as lunch, with a main message that the housing bubble nobody would admit to a year ago will slowly dissipate, rather than rupture. Of course, it will still bring pain. Construction jobs will start disappearing by the summer, says Scotia’s Warren Jestin. The nation’s entire economy will take a hit, says CIBC’s Avery Shenfeld. Echoing this pathetic blog, they opined that we’ve all let real estate become way too big a hunk of the GDP.

Nobody laughed or snickered, threw buns or even threw up, I noticed. Lost on the crowd was the fact Big Banks were giving away downpayments to young hornies with no money until two months ago, encouraging mindless borrowing with 2.99% Specials or routinely allowing liar loans and robo-appraisals. Lax lending standards in Canada, along with gutter interest rates, are the two reasons household debt has soared along with the cost of a bung in Red Deer – something not lost on others.

Like The Economist, which just blew the doors off the notion Canada is a prudent place where risk went to die.

The international publication has published a global comparison of real estate affordability. We fail.

The two measures used are the price-to-rent ratio and the ratio of home prices to disposable income per citizen. Price-rent for homeowners is like price-earnings for stock investors, roughly equating rents to profits. Remember the dot-coms with their high share prices and microscopic earnings? That’s like buying a $2 million house and only getting two grand a month from the tenants. Why the heck would you do it?

So how did we do? Hmm. Sucked. Housing in Canada is overvalued by a massive 78% – the worst showing in the world (Hong Kong is only 69% too expensive) – while Japan came in at the other extreme, with real estate undervalued by more than a third.

CHART

The US, interestingly enough, is still a bargain despite prices rising at over 4% a year. Houses are 7% cheaper than they should be, and 20% below fair value, based on American incomes. By the way, in terms of what Canadians earn, the analysis suggests real estate here should fall in price by 34%.

Overvaluation is especially marked in Canada, particularly with respect to rents (78%) but also in relation to income (34%). Mark Carney, the country’s central-bank governor, who is soon to jump ship to join the Bank of England, where he takes over from Sir Mervyn King in July, may have shown good market timing with his move to London as well as a deft hand in negotiating his lavish remuneration.

Of course, 34% is no soft landing. It’s a smoky hole in the ground with tail fin sticking out of it.

This is why real estate’s dangerous. People crave it when it soars and flee when it tumbles. They buy for emotion, not logic. They use extreme leverage and think it’s riskless. They get market advice from their mother, whose best-before date was 1988. They succumb to our cultural bias that a roof, even mortgaged and unaffordable, equates security.

It will be a Spring to remember. Fleurs du mal.

165 comments ↓

#1 TurnerNation on 01.11.13 at 10:17 pm

For those which believe in genetic hygiene: you should know much of the World’s poverty is forced upon it:

1. Driven off the land by corporations, into slums. Now you know, the whole “Rainforest Alliance” thing is yet another charity that is playing on Western “liberal” guilt. What happened to your money sent to Haiti? It’s still under US military occupation and lockdown. It’s a haven of drug and human smuggling.

http://www.amazon.ca/Devils-Curve-The-Journey-Amazons/dp/1553658973

“In Colombia, Kopecky roams the slums of Medellín, where thousands of internally displaced citizens wind up each year after being kicked off resource-rich land in the countryside, forced now to survive on the margins of the City of Eternal Spring. These travels and the conflicts he witnessed formed the basis for Arno’s first book, The Devil’s Curve: A Journey into Power and Profit at the Amazon’s Edge.”

2. Up to half of world’s food goes to waste, report says

Published on Thursday January 10, 2013

That’s the kind of ingenuity the world needs today, according to a new report on food wastage that concludes roughly half of the four billion tonnes of food produced in the world each year ends up as waste.

http://www.thestar.com/news/world/article/1313110–up-to-half-of-world-s-food-goes-to-waste-report-says

#2 TnT on 01.11.13 at 10:18 pm

Found this site a few months after Garth got me hooked learning about personal investing.

http://canadiancouchpotato.com/

I did a blend of these template ideas and used Garth’s encouragement to build my portfolio.

Thanks Garth

#3 furst on 01.11.13 at 10:22 pm

#19 Furst — Is that you in the lead pic? I can see the ladies drooling over you!
___________________________________________
Correct, in the last posting titled ‘Out There’, that was me in the photo. Had a hard day at the office so wasn’t looking 100% but hopefully not terrible. On another note, the lead photo for this blog is Dr. Wayne.

#4 gmoneyluv on 01.11.13 at 10:30 pm

In on one.

Luv your writing G. Informative and entertaining. Please don’t stop (that’s what she said!).

#5 Bob on 01.11.13 at 10:31 pm

$22.2 billion flowed into equity funds this week, marking the second-largest weekly inflow in history

Shares of BlackBerry maker Research in Motion (RIMM) surged even though the stock was downgraded by BMO Capital.

Shares of Facebook closed over $31 this week, the first time in nearly half a year, staging a remarkable comeback after the stock plunged to $18 last year.

#6 Mixed Bag on 01.11.13 at 10:39 pm

“They get market advice from their mother, whose best-before date was 1988.”

Ironically, I can’t find the words to express how good your lines are.
Bravo.

#7 Sebee on 01.11.13 at 10:42 pm

1988 was an awesone year by the way. My favorite Christmas movie came out – Die Hard. Ben Johnson was the fastest man on the planet. U2 came out with Joshua Tree. Solidarity was making the big move. And I think the Iraq war ended. Has there ever been peace in Iraq?

#8 Country Girl on 01.11.13 at 10:46 pm

“Best before date”? I hope you’re referring to the advice, not the person. Although some men do have best before dates, like Mark Carney.

#9 blase on 01.11.13 at 10:47 pm

Turnernation, stay on topic please. This is a housing/investment blog.

#10 Grim Reaper/Crypt Speculator on 01.11.13 at 10:47 pm

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I know people East of ‘Peg feel Valhalla time -shares are pro- rata based on how many toys you have before “Code Blue “.

Sorry, but WRONG.

Such a$$ets are evil…you can NOT take them with you, (even Civil Servants with Super Duper Hyper Indexed Pensions).

Simple let me reduce your burden exponentially…
E -mail me at “Grim Reaper/Crypt Speculator.com “…. or I will post a 1-666 number with lawyers waiting to draft POA’s.

PS : referrals get 25% cut !

#11 a prairie dawg on 01.11.13 at 10:50 pm

“Of course, 34% is no soft landing. It’s a smoky hole in the ground with tail fin sticking out of it.”

– — –

EJECT! EJECT! EJECT!

#12 TnT on 01.11.13 at 10:55 pm

The Economist full article

http://www.economist.com/news/finance-and-economics/21569396-our-latest-round-up-shows-many-housing-markets-are-still-dumps-home

Enjoy!

#13 An Cat Dubh on 01.11.13 at 11:09 pm

Condos for sale at Silver Star Ski hill in Vernon, B.C. add in paper says SALE up to 45% off. What’s up with that? According to the bean counters the HST was to bring jobs, BC leading the country in job creation, everyone and their dog want to come here.

http://www.firelightlodge.com/

#14 An Cat Dubh on 01.11.13 at 11:12 pm

Sebee-U2 came out with Joshua Tree (1988)
Close that was 1987, Rattle & Hum came out in 1988. U2 never quite reached those levels again. Something like real estate was recently.

#15 young & foolish on 01.11.13 at 11:14 pm

Either way, it looks like the cost of housing yourself should be going down (whether you own or rent).

It a wonderful thought.

#16 45north on 01.11.13 at 11:17 pm

Of course, 34% is no soft landing. It’s a smokey hole in the ground with tail fin sticking out of it.

US sells fell 30% across the board. I expect the same here.

Looking at guava.ca sales double from January to May going from 5 K to 10 K per month. We’re not quite at 4 K right now. If sales are above 8K by May then that would be “disappointing”, below 8K would be a “smokey hole in the ground”.

#17 Smoking Man on 01.11.13 at 11:18 pm

Vlad you as per your request

Last Geo-political thing I’m doing. NeoCitrin + scotch
not my best work……enjoy

http://dyslexicsmokingman.blogspot.ca/

#18 Canadian Watchdog on 01.11.13 at 11:19 pm

This is what I meant about sales rising and average prices falling Garth.

Okanagan home sales up, but prices down

The more laggards who jump in thinking it's a bottom or sale price — the more averages prices fall — the more negative "prices down" headline — the more buyers sit on the fence. Repeat until the market crashes.

#19 will on 01.11.13 at 11:30 pm

“We’re now about ten days away from the start of a flood of listings which will wash over markets ”

Garth, what is happening in ten days? What’s on your calendar. Please.

-w

#20 HogtownIndebted on 01.11.13 at 11:35 pm

Is that alleged 905 Woodbridge/Vaughan etc..real estate value built on pure toxic hot air?

I wonder how rampant this kind of problem has been:

http://www.thestar.com/news/gta/crime/article/1314075–woman-concedes-making-bogus-tax-data

Especially scary is this part:

“The Crown has suggested that the firm jacked up income numbers on the assessments to help clients qualify for mortgages”

#21 Rob on 01.11.13 at 11:39 pm

Ballsy Garth did anyone recognize you at the hotel ballroom? Thats ok, just ask us to show up.

#22 Mark W on 01.11.13 at 11:47 pm

http://www.canadianbusiness.com/blogs-and-comment/canadian-housing-may-be-most-overvalued-in-the-world-says-the-economist/

#23 Count Flipalot on 01.11.13 at 11:58 pm

Even if home/condo prices in Vancouver dropped 50 %, the price would still be a rip off. This is especially true with the last 10 years worth of housing inventory built.

#24 Taco Bell on 01.11.13 at 11:58 pm

Garth and gang, take a look at this property and monitor the fall:

http://www.realtor.ca/propertyDetails.aspx?propertyId=12697496&PidKey=2032016247

This “investor” has already lowered the price and changed agents. Looks like the owner wants to catch a greater Chinese fool.

#25 Smoking Man on 01.12.13 at 12:03 am

#22 Mark
The only reason you see these tid bits in MSM is because to date they have not succeed in stopping growing prices, goal of BOC and Govt…

Where were they last may? is the question you should ask yourself

They day they succeed is the day you stop seeing these story’s

I have so much to teach

#26 Seriously? on 01.12.13 at 12:05 am

“But I don’t want to move to Canada! Noowwoooohhhh!!

You know you’re pooched when even the dog doesn’t want to move to Canada.

Seriously

#27 Kurt on 01.12.13 at 12:06 am

God, I love that photo!

#28 a prairie dawg on 01.12.13 at 12:13 am

Just received the property assessment for 2013.
Almost double the value that it was last year. :/

Gives them an excuse to jack taxes up a few notches. Can’t wait until that notice arrives…! lol

Glad to be in an older neighborhood at the lower end of the market though. ie: still affordable

The mid to top end crowd are going to freak.

#29 Canadian Watchdog on 01.12.13 at 12:14 am

#24 Taco Bell

Sep-12 C2457853 88 OTONABEE AVE $1,988,888
Nov-12 C2517537 88 OTONABEE AVE $1,988,888 0.0%
Dec-12 C2517537 88 OTONABEE AVE $1,888,888 -5.0%
Jan-13 C2528940 88 OTONABEE AVE $1,798,000 -9.6%

#30 freakazoid on 01.12.13 at 12:16 am

GOD is coming Garth.
GOD will be here in spring for the reckoning, just you wait and see!

#31 Oakvillian on 01.12.13 at 12:20 am

http://www.moneyville.ca/article/1313605–why-more-home-sellers-are-listing-in-january

#32 Mark W on 01.12.13 at 12:24 am

# 25 Smoking Man

http://www.economist.com/node/4079027

Article Economist Magazine June 16, 2005.

“Where were they last May?” Where were who?

The Economist Magazine is hardly a fringe publication.

It’s been in print since 1843.

But according to you what would a 169 year old publication know anyway about economics.

#33 Smoking Man on 01.12.13 at 12:29 am

#31 Mark W on 01.12.13 at 12:24 am

But according to you what would a 169 year old publication know anyway about economics.
…………………………………………………………….

Publications cater to advertisers and political pressure…

Mark I know everything……Its Smoking Man here.

I have visions and voices…..done good so far….

#34 Ken R on 01.12.13 at 12:34 am

It will certainly be a spring to remember. Have some house plans dropped off to me today. More living space, garage the size of my own bungalow. Go baby go! Another over indulged individual looking for a massive tax bill and and no buyers upon completion. Tired of reasoning with these people, ring the till!

#35 Ogopogo on 01.12.13 at 12:37 am

Great post. Sometimes it takes an outsider (The Economist) to see our situation better than we can. It makes me even prouder to be a renter, fully invested in a balanced and diversified portfolio.

Our landlady didn’t dare raise our rent this year. In fact, we’re paying $100 LESS than the previous couple that occupied our unit. As I pointed out about a year ago, we’re saving an average of $950-$1000 PER MONTH by renting this unit, as revealed by my rent vs. buy calculations based on the asking price for an identical unit for sale on our floor. That unit, and others in the building, has languished now for over a year–unwanted, unsold.

Once the evisceration of the Okanagan market deepens, I’ll push for further reduction of the rent. When the time is right and with Garth’s blessing we’ll vultch.

In the meantime, munching popcorn and watching the circus on fire.

#36 Alberta Ed on 01.12.13 at 12:47 am

Fleurs du mal… good name for all the FOR SALE signs springing out of the turf on southern Vancouver Island.

#37 Ayn Rand Army on 01.12.13 at 12:49 am

This whole native affair problem illustrates something interesting…..

I see two groups of fighting over a dead rat. And we the private sector taxpayers are the rat, soon to be dead.

#38 Stupesing in Cabbagetown on 01.12.13 at 12:53 am

This morning at the gym the noisy conversation of a group of young women was imposed on all bystanders. One claimed she had recently inherited $50 thousand. She briefly considered using the money to pay-off student loans but decided instead to use it as the down payment on a condo. This brought about squeals of congratulations from her companions.

Poor fool I thought. She is about to add to her student debt with the tuition fees of life – probably the most expensive education she will ever fund.

#39 Nostradamus Le Mad Vlad on 01.12.13 at 12:54 am

-
“It will be a Spring to remember.” — Newfoundland should have dug its way outta the blizzard by then, and the next Continental Cup (curling) is in Las Vegas.

“It’s a smoky hole in the ground with tail fin sticking out of it.” — Apt description of Property Virgins!
*
#192 Smoking Man — “Commenting on geo-politics is getting dangerous, . . .” — Guess they don’t like being exposed for what they re — stormtroopers! Who gives a fat rat’s ass anyway, life is too short to be concerned with any of this mess. Cheers!

#17 Smoking Man — Understood, but the lady at the end is rather tasteful! Plus Two min. clip UFO shooting beams by / at the sun, and Chinese Desert UFO / alien base?
*
PHD’s on foodstamps; Greeks upset Govt. privatizing banks? Min. wage, maybe? Facebook Not smart business; Hmmm. Is Laureen following other investors’ leads by dumping at the right time? Inside info.? Rothschild on Regulation What regulation? Bailout Superstars The crooks are running the show; UK Ministers encourage gambling; Osborne to EU Change or we’re out; Corporations Well, the cartoon is good; Honda Sales slump, axe workers; California Austerity The intro paves the way for European-style austerity.

Cdn. Friday links; Remonetization of Gold, and Eating Gold? 4:39 clip Reagan warned about Obomba, but he left the constant war / drone parts out; IMF Let’s tax ourselves into oblivion; US Deficit Gone? China Demographics We’re all getting older; Vienna Esp. for BPOE and Mikey the Realtor; Stocks Is this why Laureen (and others) have cashed in on their portfolios? USPS Heading the way of the dodo bird? Zombie 4closures; Pick of the Crop Glad I’m retired.
*
Live Within Your Means – This one is for you; China vs. Japan Gunfight at the OK Corral; Rare Pic of ‘shroom cloud over Hiroshima; Disable Java Security flaw found; Fishing Boat Apparently, the nuke sub came off worse, and 26 min. clip Iran – Egypt ties piss US – Israel off; 0:50 clip in Soccer A goalie makes a double save following his error; Ammo Shortage Guess what DHS and TSA have been doing? FBI Inside the terror factory; Obomba Wants to take gun control further, and From freedom to tyranny; UK Health Care Worse than guns here; GW Cold headed to California; 3:27 clip Honesty? Creationism vs. Evolution Oh dear, not again.

The USAF Portable nukes; Sand Tsunami over an ocean; Loves Hospitals Like me, he’s made up of spare parts, most of which don’t work; Poland and GMOs Political deception; Aspartame vs. Stevia Stevia wins, hands down; Galaxies May the force be with you; Largest Spiral Galaxy lost in space; Chipotle Best fast food chain; Baseball Bats used for robberies, so ban bats; Jimmy Savile Pervert probably had a high sexual drive.

#40 Bob on 01.12.13 at 1:02 am

POST #5 is sitting there. PLAIN AS DAY. READ IT OR WEEP!

#41 Grim Reaper/Crypt Speculator on 01.12.13 at 1:03 am

This blog’s photo of Dr Wanker after a Half Moon+/- a draft beer is truly __________?!?

#42 Bob on 01.12.13 at 1:06 am

re. #34 ogopogo SOMETIMES? it takes an outsider?…. The light in the tunnel IS a train and you lot are debating the finer points of whether its wavelength is more a bluish or white hue! Sie ernten, was man sät

#43 Canadian Watchdog on 01.12.13 at 1:16 am

#34 Ogopogo

Ten more years to go. Chart

#44 Bill Gable on 01.12.13 at 1:18 am

Bazinga – It’s done. Over. Kaput. Krumped.

Watch out, below.

#45 Gunboat denier on 01.12.13 at 1:25 am

If we are overvalued 34%, a 25% correction will bring us to fair value.

#46 Pooched 2 — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate « The Affluent Boomer™ on 01.12.13 at 1:35 am

[…] via Pooched 2 — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate. […]

#47 Soylent Green is People on 01.12.13 at 1:39 am

Cowpoke should like this pic, he likes them hairy apparently he heheh
O
O
O

#48 Taco Bell on 01.12.13 at 1:55 am

Gartho,
Check the picture of this listing and confirm the real estate market in toronto is upside down

http://www.realtor.ca/propertyDetails.aspx?propertyId=12668170&PidKey=1780758450

LOL

#49 Taco Bell on 01.12.13 at 2:07 am

http://blogs.wsj.com/canadarealtime/2013/01/11/toronto-condo-sales-fall-sharply-prices-down-1-from-year-ago/

Toronto = fail

#50 MarcFromOttawa on 01.12.13 at 2:09 am

Most condos in Canada have lost value since spring 2012.

http://www.chpc.biz/plunge-o-meter.html

That’s on top of paying condo fees to live in a concrete box in the sky while tens of thousands of new condos are being built.

Scared? Got silver?

#51 cynically on 01.12.13 at 2:46 am

Lax lending standards are indicative of a weakness in not only the private sector but also the public sector where many government departments manifest it. Is it our ineffective leadership or a flaw in the Canadian character?

#52 sheik yahboudi on 01.12.13 at 3:18 am

#7 SeeBee – 1988 did not spawn Joshua Tree. I was listening to it in 1987 while doing the wild thing in France. Came out in Spring 1987.

#13 – SilverStar is a pet project of mine watching it collapse. I used to own there but sold before the Olympics. I know people who still own there and they say nothing moves above $400 K. Some people used to brag about million dollar homes on the knoll. Oops…not worth a million if you can’t sell it. Funny thing is you can get a small house or a suite for just a bit more than the price for condos so the condo crowd is delusional.

Final thing is the place is overbuilt so rents are paltry and don’t cover your costs.

#53 Freedom First on 01.12.13 at 3:43 am

Garth, love it!…….”Big Banks giving downpayments to young hornies with no money”.

No ego intended, but what makes this ugly truth bearable, is knowing, being debt free, balanced, liquid, and diversified, that: every time someone fills up their gas tank I get paid, every time someone turns on their electrical device I get paid, every time someone pays their rent I get paid, every time someone makes their mortgage payment I get paid, if interest rates rise I get paid more, PM’s go way down in price I don’t care, PM’s go up in price I don’t care as I am covered, move to another country…..anytime.

Garth, love your blog, when I hear your advice, this is what I think of…….Freedom First. What I can’t understand Garth, is that so many people sell their soul for a house when they simply can’t afford it. Yet, everyone can afford to be: balanced, liquid, diversified, and debt free. The problem is in the masses being brainwashed. I was on my own since the age of seventeen, simply as one of lifes tragic happenings. I think this has made all the difference. Learn fast or die. I have no regrets, and never had any self pity either. I have been blessed.

Listen to Garth, or that room full of bankers, realtors, and baystreeters will eat you alive.

#54 A Nightmare on Bay Street on 01.12.13 at 3:53 am

Its the SuperBowl first.

This bubble collapse will have to wait until the nachos and hotdogs are finished first.

Only then should the economy crash.

Garth, please, have mercy. Cant we have one last stupid, drunk and clueless moment together ?

#55 Buy? Curious? on 01.12.13 at 4:42 am

Are you sure you were in the right room? A hotel room of Banksters is the ultimate sausagefest and I don’t think you’d fit. Those economic clubs, full of old white dudes, is probably the best cure for insomnia.

“In 2013, we see a flatlining of mortgage approvals….”

Zzzzzzzzzzz.

Boring!

Go Leafs, Go!

#56 Devore on 01.12.13 at 4:52 am

#18 Canadian Watchdog

the more negative “prices down” headline — the more buyers sit on the fence.

In Kelowna buyers don’t sit on the fence, they circle the city anxiously.

#57 Ronaldo on 01.12.13 at 5:02 am

#60};-) aka D.A. on 01.11.13 at 1:10 am

“Back in ’81 my wife and I were wanna-be first time homes. Real estate values seemed impossibly high at the time. $65,000 was a lot of dough back then and there was a feature article in the Vancouver Sun titled something to the effect “Your $65,000 dream home!” over the picture of a run down Surrey Crack Shack. We thought all prospect of ever owning a home was gone for us. And then interest rates cranked up. Sure those increased rates pushed real estate prices down, but not all that much really.”

Well DA, it seems that when you entered the market likely in the spring of 81, the prices according to two well known professors, Robert Helsley and Tsur Somerville, in Vancouver had seen the first and most dramatic boom in housing from the 1st quarter of 1979 to the 1st quarter of 1981 with the price of a reprentative home having increased by 119%.

According to what they state, “this was followed by a longer but equally dramatic, bust that saw prices fall close to their original pre-boom level, nearly wiping out the gains of 1979-1981.”

And you state that the increase in rates from the 11% in the spring of 1979 to the high of 21.75 in the summer of 81 did not push the price of real estate down that much. Come on now.

I remember that period of time very well having built my home in the spring of 1979 when I was able to lock in my mortgage rate at 11% that spring and to see rates rise to 14.75 by the fall. By the time my mortgage came up for renewal 5 years later, the rates were still around the 14% range. By that time though, with inflation as it was, my wages went up considerably and I was able to put a substantial lump sum down to reduce the payments so even at the 14% it was still very manageable on one salary.

The value of the home by 1990 when I sold was still down over 16% from its peak and very close to what it cost me to build after 11 years. This is what can happen with real estate and what we are likely going to see going forward. And with rates their lowest in history.

For your interest and anyone else on the blog, check out this very interesting paper written by these two individuals. It may give you some idea as to where we are headed with the real estate values in the lower mainland. Hang on.

http://www.sauder.ubc.ca/Faculty/People/Faculty_Members/~/media/Files/Faculty%20Research/Publications/Helsley-Paper-BoomsBustsBubbles.ashx

#58 incubus on 01.12.13 at 8:11 am

“Overvaluation is especially marked in Canada, particularly with respect to rents (78%) but also in relation to income (34%).”

This is an average for Canada, probably true for vancouver.

In Montreal, it is about 35% for duplex or houses and at least 50% for condominiums.

Currently in Montreal, they continue to build condominiums like crazy.

#59 The American on 01.12.13 at 9:05 am

Canadian real estate is certainly going to depreciate in excess of 34%. A predicted 34% decrease in value, as the chart provided indicates, is based on economic fundamentals as of TODAY – not tomorrow. Much like what has happened in the U.S., as values decline across Canada, people will find themselves struggling to make payments and many will find themselves out of work. It starts with a slowing in the housing sector, and you cannot believe how many industries are directly connected to housing, especially when considering the percentage of GDP connected to housing within Canada. It is pure INSANITY. More and more jobs are lost, and there is very little that is untouched by it. It is all a symbiotic relationship. This only exacerbates the conditions, ultimately compounding the problem of lost value in real estate. The less money people make, the lower the values will plummet. Canada will have an EASY 40%+ average real estate value correction. Don’t think it can happen, EH? Wait and watch the carnage. Why else do you think Carney is skipping out on town, and just in time for that matter? Canadian banks prudent? LMFAO!!! :-) They’re some of the worst behaved in the G20, and history will prove this. Mark these words.

#60 The American on 01.12.13 at 9:09 am

Canada didn’t escape any kind of a real estate melt/crash, nor did Canada escape an economic downtown. Canada merely prolonged the cycle for which it is now going to have to pay the piper. Prolonging it all to the degree of which has happened in Canada is only going to make matters worse for Canadian families across the board. Carney’s head should roll.

#61 House on 01.12.13 at 9:11 am

Does the Economic Club of Canada offer a golf membership? Poor old Avery thinks it is a professional association.

#62 The American on 01.12.13 at 9:24 am

Some nice reading:

http://www.economist.com/node/21546057

http://www.businessinsider.com/robert-shiller-canadian-housing-bubble-2012-9

http://www.huffingtonpost.ca/news/canada-housing-bubble

As of 17 hours ago http://www.huffingtonpost.ca/2013/01/11/house-prices-canada-overvalued_n_2457058.html

http://www.theglobeandmail.com/report-on-business/video/video-economist-says-canadas-already-in-housing-bubble/article4544515/

http://business.financialpost.com/2012/12/21/feds-ok-another-50-billion-of-mortgage-guarantees-for-private-sector-players/

http://www.thetrumpet.com/article/10159.19.0.0/economy/canadian-housing-bubble-about-to-pop

http://www.businessinsider.com/canadian-housing-bubble-2012-12

http://business.time.com/2012/11/30/oh-no-canada-as-household-debt-skyrockets-will-canadians-face-a-2007-style-crisis/

http://www.youtube.com/watch?v=QvafSVkOAc8

#63 Goldfinger on 01.12.13 at 10:22 am

Here’s the next topic for Garth to talk about…real estate in space!

http://news.yahoo.com/obama-wont-support-building-death-star-084649302.html

#64 claudius emperor on 01.12.13 at 10:48 am

Yep, from slow decline to crash, we are slowly getting to my numbers.

If we count the level of taxation….
We will easily see 50-60 % decline across the border, min 35 at the most ‘exclusive’ and ‘desirable’ locations.

The American was correct.
The most stupid and manipulated market where the most incompetent central banker and financial minister, irresponsible banks covered by the government and idiot real estate agents completely screwed the most stupid buyers one can find.
And all this under the slogan: We are prudent, we are different. All this bragging will bite us big time.

In the process screwed all the savers and retirees.

Yep, the big fun begins.

#65 Herb on 01.12.13 at 11:08 am

#32 Smoking Man,

too bad your visions and voices result only in the “sound and fury signifying nothing” you lay on this blog.

#66 Realtors in an all out PANIC! on 01.12.13 at 11:14 am

Canada is the BIGGEST PONZI in the world. Realtors like smokingman posting in an all out PANIC! The housing crash in Canada is going to be EPIC! It’s going to be a NASTY housing CRASH realtors , A NASTY CRASH!

http://www.thestar.com/news/gta/crime/article/1314075–woman-concedes-making-bogus-tax-data

http://www.canadianbusiness.com/blogs-and-comment/canadian-housing-may-be-most-overvalued-in-the-world-says-the-economist/

#67 The American on 01.12.13 at 11:25 am

Responding to Timing Is Everything from the previous string: What Canadians refer to as a “fixed” mortgage rate is in actuality a VARIABLE RATE MORTGAGE. Canadians lock in a rate for a period of up to only five years. After this time, the rate resets, and the rates are only going to go up, baby. This is the EXACT SAME THING as an ARM in the U.S., and it is responsible for bringing down the real estate values across the board. The big difference between the two countries is over 90% of the Canadian population have these types of mortgages, whereas less than 20% of the U.S. population had these. A typical mortgage in the U.S. is FIXED, meaning no changes EVER until the home is paid off. In the U.S., typical buyers lock in their rate today, and it remains that same rate for 30 years, fully amortizing and being completely paid off at the end of that period. I could care less what your government posts in a link, only confusing your population (and it clearly has) into believing your banks are prudent and Canadians have fixed rate mortgages – they simply do not. Canadian banks are a freaking nightmare. Wait and watch.

#68 maxx on 01.12.13 at 11:26 am

#58 The American on 01.12.13 at 9:05 am

Agree 100%. The other edge of the blade is a resource-heavy economy. Risk abounds.

#69 Ogopogo on 01.12.13 at 11:27 am

#41 Bob on 01.12.13 at 1:06 am
re. #34 ogopogo SOMETIMES? it takes an outsider?…. The light in the tunnel IS a train and you lot are debating the finer points of whether its wavelength is more a bluish or white hue! Sie ernten, was man sät

#42 Canadian Watchdog on 01.12.13 at 1:16 am
#34 Ogopogo

Ten more years to go. Chart

Bob, I don’t doubt it for a second, but clearly the house-horny masses have yet to see that train approaching.

Watchdog, I can’t wait as long as it takes. In fact, my discovery of this blog has had such a dampening effect on my house-horniness of 2011 that it would really take a crash to get me frisky for bricks again.

Debt free and lovin’ it.

#70 Ogopogo on 01.12.13 at 11:29 am

Watchdog, the previous should read: “I CAN wait as long as it takes”. A malicious realtor would no doubt read a Freudian slip in the erratum.

#71 TurnerNation on 01.12.13 at 11:44 am

Today’s photo is of Bandit’s nemesis, the dark mutt.

Et tu, Pooch?

#72 INTERESTING TIMES on 01.12.13 at 11:51 am

TO LATE THE 50% RE CRASH HAS ARRIVED!!!!

The 50% RE Crash has arrived and will get very nasty soon!!! Many HGTV Virgins will get slaugthered. As I predicted everything I have been saying is starting to unravel faster than predicted.

If you are an HGTV Virgin who has not bought yet, it is time to start low balling these realtards by 50% through MLS by e-mail. NOW is the time as the bleeding has started in the industry. You work hard for your money so don’t let a realtard or bankster take your hard earned money$$$ from you that easily.

Look at articles below everyone and the shoe shine boy who cleans my shoes at the airport knows the 50% RE Crash has arrived in Canada.

We are no different than the US, Spain, Ireland, UK, Greece etc. We are worst than them as our HGTV Virgins in Canada are 164% in debt and are Champions living large on debt and Helocs just to survive to pay the rent/mortgage to the banksters.

Banksters, Builders, Brokers, Realtards and HOT Properties Show von CityTV are in full out panic as the FREE CHMC Money is drying up fast. No Free CHMC money to RE market. Now the REAL MONEY will have to step in like in the USA and buy up all the RE at 50% off like they are doing now in the USA and renting the homes back to the HGTV Virgins.

If you only put 5% down on RE, you better bail out fast like tomorrow as you will experience a financial disaster in your household. You don’t want to sign up on 40 years of debt slavery with the bank while your property will be worth 50% less!!!

(To Read Global and Mail Articles delete your browsing History First).

http://www.thestar.com/business/article/1313810–november-trade-deficit-reflects-slowdown

http://www.thestar.com/business/article/1313908–cooler-housing-market-will-hurt-construction-jobs-retirement-savings-economists-warn

http://www.zerohedge.com/news/2013-01-09/guest-post-america-meet-your-new-slumlord-wall-street

http://www.theglobeandmail.com/globe-investor/investment-ideas/why-lower-home-prices-are-a-national-priority/article7233016/

http://business.financialpost.com/2013/01/11/canadians-pin-retirement-dreams-on-not-so-safe-houses/?__lsa=222c-053a

#73 Mithan on 01.12.13 at 12:01 pm

They succumb to our cultural bias that a roof, even mortgaged and unaffordable, equates security.

Yes, that is one I hear a lot from friends actually.

Quickly followed by the “you are throwing your money away when renting”.

#74 Just Sayin' on 01.12.13 at 12:27 pm

You know, that dog looks just dumb enough to answer to ‘wayne’, or ‘here asshole, come to daddy!’, take your pick.
On a diff note, today we are treated to the juxtaposition of pudgy Ontario teachers (led by a union stiff who looks totally capable of having double-tapped Jimmy Hoffa – I wonder how much this lovely gent makes) audaciously demanding even more money from the indebted public … vs a sorry-looking, downtrodden group of rank & file natives trying to tell Harper they are sick of being ripped off by their own crooked chiefs. The chiefs are desperately trying to stop this mutiny which could impact their gravy train. What a mess. Reminds me of the Charles Dickens book ‘A Tale of Two Cities’ which ends up badly for the governing class, anyone with me in this? As Bob Dylan said, ‘… there’s a slow train comin’ … around the bend …’

#75 Hoof Hearted on 01.12.13 at 1:08 pm

Taking to builders…

The formula was put as much value into the new house as the cost of the lot.

ie $500,000 lot = $500,000 into the new house..total = $1 Million

However, this latest generation of McMansions are way over the top. It appears that the lots are so overvalued,the the builders put far more into design features in following this formula.

I see McMansion homes built in what were once middle class neighbourhoods that could easily fit in with wealthy neighbourhoods.

So , my point is…a lot of builders went waaaaaay over the top , will get caught….and will go belly up.

#76 Hoof Hearted on 01.12.13 at 1:13 pm

The ” 7- 11 Factor”

Here in Hamville…a friend told me a 7-11 convenience store shut down. Seemed hard to believe as it was near a high school, but he was right.

The other day I was in White Rock, and lo and behold, saw another 7-11 closed.

Anyone else noticing this ?

#77 Timing is Everything on 01.12.13 at 1:19 pm

Garth, your ‘buddies’ ;) are putting the squeeze on little old ladies and Joe Average. Nice. As long as the shareholders get their pound of flesh. What a ‘racket’.

‘Banks tighten their squeeze to extract fees’

http://tinyurl.com/a6syzqq

Maybe Gen-XYZ et al should get thee to a Credit Union…

‘In 2010, the Bank Act was amended to allow federal credit unions to exist as a new class of financial institution. Federal credit unions will differ from banks in that they are member-owned, democratically controlled and governed by co-operative principles.’ -wiki
http://tinyurl.com/d65mxt8

Garth, do you foresee The Harper Government ® mucking with The Bank Act or The Interest Act in any substantial way?

I don’t work for a bank. Just own them. The best revenge. — Garth

#78 Ronaldo on 01.12.13 at 1:19 pm

#55 Devore –

”#18 Canadian Watchdog

the more negative “prices down” headline — the more buyers sit on the fence.”

”In Kelowna buyers don’t sit on the fence, they circle the city anxiously.” Devore

Actually Devore, they are circling the corral waiting for someone to open the gate. The place is so dead in winter that we used to say, “would the last person leaving town, please close the gate”. The downtown is an absolute dead zone from September to April. Summer, now that is a different story but it’s hard for buisinesses to make a go of it 4 months a year. Reason why restaurants don’t last long there. Seen many come and go. But there is one good thing about the place for the young dudes. The ratio of gals to guys is very high. One of the reasons that realtors give for high prices is called the “Sun Tax”. If you want to live there, you have to pay the premium. At least that was the theory. Until the next boom in ten years time.

#79 Ronaldo on 01.12.13 at 1:28 pm

#67 The American – you are absolutely dead on the money. And this is coming from a Canadian that has seen just as many booms and busts as Garth has.

#80 Form Man on 01.12.13 at 1:37 pm

#76 Hoof Hearted

I agree with little of which you post, but on this you are dead right ( coming from a builder )

#81 jess on 01.12.13 at 1:48 pm

that no check box
“willingness” not to know
http://www.forbes.com/sites/robertwood/2012/07/22/fbar-penalties-just-got-even-worse/

#82 Hoof Hearted on 01.12.13 at 2:11 pm

#81 Form Man on 01.12.13 at 1:37 pm

#76 Hoof Hearted

I agree with little of which you post, but on this you are dead right ( coming from a builder )

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

What dotcha agree with? LOL

I’ve seen this market from the trenches since Day 1…when the HAM started coming over in mid 1980’s.

#83 SmokinJoe on 01.12.13 at 2:36 pm

Even more evidence that Vancouver and toronto markets are gonna tank, especially condos.

http://m.moneyville.ca/article/1313408–chinese-the-new-florida-snowbirds

#84 jess on 01.12.13 at 2:58 pm

http://www.forbes.com/sites/johnseigenthaler/2013/01/12/my-saturday-java-scare/

WABC TV in New York warned us that the U.S. Department of Homeland Securitywas urging Americans to disable Java software on our computers.
is the flaw is limited to JDK7?

#85 Old Man on 01.12.13 at 3:04 pm

#76 Hoof Hearted – this is why certain areas in Toronto will survive the big hit in the older sections because the land lots are much larger, and Garth knows where they are, so perhaps down a modest 15% for them; not to mention the ownerships will yawn at a modest correction. The idiots that will get hooped bought the core condos with leverage to buy a pie in the sky, and down by 50% when the panic sets in; there will be no way out.

#86 Old Man on 01.12.13 at 3:18 pm

The top 10 neighbourhoods in Toronto that will survive the meltdown are as follows: Lawrence Park, Lytton Park, Moore Park, Armour Hills, York Mills, St. Andrew – Windfields, Markland Wood, Princess – Rosethorn, The Kingsway, and Bedford Park.

#87 Humpty Dumpty on 01.12.13 at 3:19 pm

Now why did we experience this global housing mania? Part of it has to do with easy banking policies mimicking one another. If you think that all of this came at no cost just look at the balance sheet of big central banks:

http://www.doctorhousingbubble.com/global-housing-bubbles-china-real-estate-bubble-canada-housing-bubble/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+DrHousingBubble-HowILearnedToLoveSocal+%28Dr.+Housing+Bubble+-+How+I+learned+to+Love+SoCal%29

#88 Tony on 01.12.13 at 3:25 pm

Re: #2 TnT on 01.11.13 at 10:18 pm

Investing is like playing an entire chessboard or remembering every horserace that has ever taken place if you have a photographic memory such as i do. You look at the entire chessboard and instantly know or remember every race and instantly make a decision. It’s the same with investing in the real world. In my opinion all variables point to many years of down markets and a long sideways movement.

That’s how you invest or you’re at the mercy of pure luck and usually over time luck runs out.

#89 Tony on 01.12.13 at 3:31 pm

The chart shows the present valuations but you have to make a judgment call on the future prospects of each country. I’d say the prospects are much better for the European nations than for the future of America. The other markets i don’t follow that much because i wouldn’t be buying or selling there.

#90 Old Man on 01.12.13 at 4:36 pm

#84 jess – this is just a test run to see if the masses will comply to disable Java based on a warning. Now for myself am running the secret SeaMonkey, as with a click can go offline into any site; bet the Smoking Man knows not, as needs to be taught by the Old Man, as was on the internet when nobody knew it even existed, and gave lessons to all for a small fee.

#91 MB on 01.12.13 at 4:46 pm

Hey Garth, when do expect a drop in the equity markets as the debt ceiling fiasco ramps up? End of Jan early Feb?

#92 Rick0Shea on 01.12.13 at 5:14 pm

USA RE bubble redux, read all about it – desperate buggers took a page from Harper/F’s play book:

http://www.counterpunch.org/2013/01/11/housing-bubble-on-the-horizon/

#93 Smoking Man on 01.12.13 at 5:15 pm

#60 The American on 01.12.13 at 9:09 am

I was at the boat show today, lots of boats sold. It was packed….not everyone around is broke. Just the ones that come on here and wine….about real estate

No crash, nothing see, move along…….

#94 The Karma Police on 01.12.13 at 5:16 pm

Words to consider:

Follow those who seek the truth.

Be wary of those who claim to have found it.

#95 yel on 01.12.13 at 5:20 pm

calgary: busines as usual, prices slowly creeping up (inner city especially)

#96 Hoof Hearted on 01.12.13 at 6:26 pm

#93 Smoking Man on 01.12.13 at 5:15 pm

#60 The American on 01.12.13 at 9:09 am

I was at the boat show today, lots of boats sold. It was packed….not everyone around is broke. Just the ones that come on here and wine….about real estate

No crash, nothing see, move along…….
=========================

What..pontoons on condos…?

…..brilliant !!!

#97 Joe on 01.12.13 at 6:27 pm

@91 Fleeing to the equity market is possibly telegraphing a raise in interest rates.

#98 Hoof Hearted on 01.12.13 at 6:45 pm

A bubble blows – month by month

http://whispersfromtheedgeoftherainforest.blogspot.ca/2013/01/a-bubble-blows-month-by-month.html

Below are the monthly average prices for detached homes presented in the Vancouver Average Sale Price Chart you see above.

Starting in 2002 until now.

It’s the evolution of our housing bubble charted month by month over 10 years from $363,900 in January 2002 to the current high in February 2012 at $1,235,200 and it’s downward slide since.

Somewhat mesmerizing, isn’t it?
=================================

.
Thursday, January 10, 2013
A bubble blows – month by month

Below are the monthly average prices for detached homes presented in the Vancouver Average Sale Price Chart you see above.

Starting in 2002 until now.

It’s the evolution of our housing bubble charted month by month over 10 years from $363,900 in January 2002 to the current high in February 2012 at $1,235,200 and it’s downward slide since.

Somewhat mesmerizing, isn’t it?

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

Here is part of the chart….it goes back 10 years and goes Month by Month

DEC/12 – $1,078,500
NOV/12 – $1,053,900
OCT/12 – $1,116,100
SEP/12 – $1,119,200
AUG/12 – $1,142,200
JUL/12 – $1,041,300
JUN/12 – $1,061,100
MAY/12 – $1,073,300
APR/12 – $1,106,600
MAR/12 – $1,155,500
FEB/12 – $1,235,200 — the current high!
JAN/12 – $1,145,900
DEC/11 – $1,064,200
NOV/11 – $1,134,900
OCT/11 – $1,162,300
SEP/11 – $1,104,800
AUG/11 – $1,162,200
JUL/11 – $1,133,300
JUN/11 – $1,215,200
MAY/11 – $1,223,400
APR/11 – $1,204,500
MAR/11 – $1,155,000
FEB/11 – $1,173,300
JAN/11 – $1,144,500
DEC/10 – $1,046,300

etc etc

MAR/02 – $393,000
FEB/02 – $389,700
JAN/02 – $363,900 — This represents just over a 70% drop from the Feb. 2012 peak

#99 Gunboat denier on 01.12.13 at 6:48 pm

67 American
“Canadians lock in a rate for a period of up to only five
years.”

Though many do, longer terms are available.

http://www.rbcroyalbank.com/mortgages/mortgage-rates.html

#100 Old Man on 01.12.13 at 7:01 pm

#96 Hoof Hearted – the bargains are never at any boat show, but at the marina of your choice on sale in storage at this time of the year for one that is but a year old, and the seller needs to unload, so hoop him with cash for 50% off with the lawyer giving a clear title on it. Deals can be made for a good boat ride in the Springtime; oh yes there are those in distress, and when I eat a meal for 1/2 price off it tastes so much better.

#101 Doug in London on 01.12.13 at 8:01 pm

@Smoking man, post #93:
What you said about the boat show was probably also true of the 1989 boat show, and I think we all know what came after that. Or maybe the people who were smart enough to sell recently and lock in BIG capital gains (tax free, too!) are the ones buying the biggest, fanciest, and most expensive boats.

#102 AK on 01.12.13 at 8:39 pm

#88 Tony on 01.12.13 at 3:25 pm

“That’s how you invest or you’re at the mercy of pure luck and usually over time luck runs out.”

Interesting.

#103 Smoking Man on 01.12.13 at 8:41 pm

Doug I had to talk my buddy out of dropping a million on a 50 footer, the nevo rich… He’s probably going back with wify poo tommorow, I have been there done that.. Never liked my rich freinds, love the dudes I give my empty bottles too. But then not everyone is a natural born writer…. Looking for material. Faking poverty best thing I did in my life..

#104 a prairie dawg on 01.12.13 at 8:45 pm

@ #67 The American

– — –

(ahem) Gotta call BS.

You can get much longer terms than 5 years on Canadian mortgages. And that’s been available for many years now. Decades in fact. post-WW2.

My parents had a 25yr mortgage on their first house back in the 50’s. Full 25yr term, at a fixed rate. Just like what you mentioned is available in the US now.

Just because banks here don’t push them anymore, doesn’t mean they don’t still exist.

They aren’t popular anymore when people can save a few thousand a year taking shorter terms at lower interest. But that’s a risk. And always has been.

But phone any chartered bank here and ask. They’ll quote you a 25 year fixed full term price.

It just isn’t artificially subsidized by the feds here (yet?) so the banks here will price in their risk and you will get a very steep quote on that long term.

But they did, and still do exist. Make no mistake.

Here’s a cut and paste from RBC’s web site:
– — –
Mortgage Rates

The charts below show current mortgage rates for fixed and variable rate mortgages, as well as the Royal Bank of Canada prime rate:
Fixed Mortgage Rates(21)
Term Posted Rate Special Offers(22)
Collapse Convertible Convertible
6 Month 4.000% Call for details
Collapse Closed Closed
1 Year 3.000% Call for details
2 Year 3.040% Call for details
3 Year 3.650% 2.990%(3)
4 Year 4.640% Call for details
5 Year 5.240% 3.290%(4)
7 Year 5.950% 3.590%(5)
10 Year 6.750% 3.990%(10)
25 Year 8.750% Call for details
http://www.rbcroyalbank.com/mortgages/mortgage-rates.html

#105 TurnerNation on 01.12.13 at 9:06 pm

If you are wondering what H and the Fed CONs are thinking about Idle no More…I’m reminding you of former Conservative Ontario Premier Mike Harris’ reported tirade on Natives who were occupying Ipperwash:

“I want the f—ing Indians out of the park.”

http://cnews.canoe.ca/CNEWS/Canada/2007/05/31/4223584.html

#106 jess on 01.12.13 at 9:43 pm

http://truth-out.org/news/item/13869-the-us-coal-industry-wants-to-boost-exports-to-asia-native-american-tribes-stand-in-the-way
=

#107 claudius emperor on 01.12.13 at 9:46 pm

Aha,

In Canada:
25 Year 8.750%

——————————-
In the states:
http://www.mercurynews.com/real-estate/ci_22350201/us-rate-30-year-mortgage-rises-3-40

US rate on 30-year mortgage rises to 3.40 pct

#108 mark on 01.12.13 at 9:59 pm

http://www.cbc.ca/player/Radio/Local+Shows/Alberta/ID/2324604102/

Garth on Edmonton for anyone who hasn’t heard it.

#109 Smoking Man on 01.12.13 at 10:07 pm

Bubble Heads, say you go to court, they read out to you. Do you swear to tell the truth, the whole truth and nothing but the truth. And you say nope.. It’s like dropping a wrench in the machines gear box. been there done that.. One of my many adventures…..

#110 Timing is Everything on 01.12.13 at 10:09 pm

#104 a prairie dawg

Mum and Dad got their 25 year term @ 6% in 1965 from THEIR credit union. They slept thru 1979-82, no worries. They’re still in the same house to this day.

#111 brainsail on 01.12.13 at 10:49 pm

#104 a prairie dawg on 01.12.13 at 8:45 pm

Sorry to rain on your parade, but how many Canadians actually commit to 25 year fixed rates vs. 5 year rates?

#112 HogtownIndebted on 01.12.13 at 11:59 pm

I have just read some ill-informed (completely uninformed?) comments here by the usual suspect about the general economy and boat sales. There is some interesting insight into real estate and the economy to be had from the perspective of this industry, but let me try to offer some substance instead of vapid blather and unsupportable realtard cheerleading.

Boat shows in fact have not been doing very well, in Toronto and elsewhere. As someone who has been a boater and involved with the industry for decades, I can tell you that the fees for being in a show now drive out many possible vendors. The Toronto boat show will likely disappear within a few years at most at the current rate of ineffectiveness for vendors.

The boat show environment is actually a very good analogy for the condo sales centre, in its offerings of overpriced merch. with little real value and future.

In Canada, the boating industry has lost many manufacturers in the last twenty years, and the same in the US. I have seen reports from the National Marine Manufacturers Association about the industry in recent years (you can see them here but they charge a bundle – another sign of an industry in trouble, kinda like CREA hoarding its data) and to say the Canadian industry, like that in the US, is softening, would be an understatement.
http://www.nmma.org/statistics/publications/statisticalabstractca.aspx

The Globe reported recently on NMMA data that power boat sales in the US have completely crashed over the last decade, from 311,000 to 142,000 sales annually. This is no less than an economic catastrophe for the industry.

http://m.theglobeandmail.com/report-on-business/economy/americas-two-tiered-future-the-deterioration-of-the-once-mighty-middle-class/article4898538/?service=mobile

To buy a new boat (which depreciates mercilessly, in spite of the sales rhetoric) when there is so much to vultch on craigslist and elsewhere is just dumb, and to suggest anecdotally that boat show activity is a sign of a good economy is just…..did I mention ‘dumb’ already? It’s the same sort of silly denial that the RE types here offer repeatedly.

Boat sales, per the Globe article, do tell us some things about the economy and the hollowing out of the middle class, which will have real impacts on RE here and which even the vaunted SFH simply cannot escape in most areas of Toronto and elsewhere.

Boat sales may also indicate another interesting RE trend. They are also quite likely down due to cultural demographics. The new immigrants to the GTA have little interest in life north of Highway 7, and Muskoka is notorious for its almost complete lack of any kind of cultural diversity. (Sadly, we notice this more each summer now when Ontario drownings happen increasingly and disproportionately to newcomer families who never got into the habit of swimming and watersports and encounter tragedy when they make a rare outing to cottage country)

The immigrant newcomers to Brampton and other 905 locales have little interest in boats. They also have little interest in cottage properties or canoeing in our parks. National park attendance in Ontario plummetted from over 3 million visits to only 2.2 million visits in just 2007-2012.

http://www.pc.gc.ca/docs/pc/attend/table1.aspx

So who will be rushing to buy those inflated cottage properties that we used to think all Canadians lusted after once their house horniness was sated? Those little shacks going for $350K in the Kawarthas and those condos for $250K plus in Collingwood and similar areas are doomed without Torontonians interested in buying them, and those potential buyers are mostly about to retire and downsize or simply cannot afford them or just don’t have them on their radar.

The newcomers to Ontario show no sign of picking up the torch to fuel any more demand for cottage properties. The real vlaue, the utility value of a cottage is quite limited. When you consider the capital invested and alternate returns, the cost of maintenance and taxes, and the limited number of days they can be used and what a nice vacation would cost elsewhere, cottage prices are more purely a product of emotion than most other real estate. The utility value of a Kawartha or Muskoka cottage might be around $50-100K based on such calculations. Given that the housing bubble-era market has priced these properties between $200K and $1 million plus, what is there to sustain such valuations? (I noticed this year much more than usual numbers of cottage properties malingering on MLS for months and never being sold.)

First, boat sales tank. That’s done. Next, there is less interest in cottage country generally. Check. Then, many boomers look to sell cottage assets to fund their debts and retirement or to avoid the day of reckoning on their sinking urban real estate. This is unfolding in front of us and will become a newsworthy sidebar story on real estate this year and next.

Want a boat? Buy used from the classifieds and drive the price down. (Be careful if your insurer demands a marine survey btw – that’ll set you back $500)

Want a cottage experience? Rent one for a week or two for a fraction of the interest you’d lose on a wasted investment in a cottage property. Or just wait for prices to return to pre-2000 levels. They will.

Look out below, cottage country is coming in for a landing too.

#113 Nostradamus Le Mad Vlad on 01.13.13 at 12:07 am

-
#109 Smoking Man — “It’s like dropping a wrench in the machines gear box.”

Noisy as hell and screws the whole system up, their comfort zone!
*
Uh huh See headline, and 10:45 clip See headline again and clip; Call Centre Swindle Very profitable; Foxconn Workers strike; Fortunes come and fortunes go; Zombie France; Tri. $ boondoggle; Seeking The Best Ending up in heartache; John.Mauldin Fight between middle class and American power.
*
Scandal may lead to Obomba’s downfall, BULLSHIT ALERT! Propaganda disinfo. from the US military — avoid at all costs, and Syria The coming false flag in Syria is designed to discredit Russia, but Russian Drill off Syrian coast; Reddit “He also founded and served as the director of Demand Progress, a non-profit political action group that focuses on “civil liberties, civil rights, and government reform”; Conspiracy theorists come out of the closet now! 1:16 clip Creating a lava lake; 5:16 clip Sandy Hook pre-planned; video uploaded prior to shooting, 0:27 clip Sandy Hook exposed and Antidepressants vs. Ecstasy Anti’s win; Jackie Chan There are two: the US and Sssshhhh – you know who; Ohio Better yet, ban anti-depressants and keep guns; 24:44 clip SCarolinians meet to nullify ObombaCare; Flying Fun This will add an extra dimension to airline travel; Four bln. light years from end to end. That’s one helluva collection of miscreants; Psychiatrists have become Obomba’s gun control weapon; Blowing up Planets We’ve blown economies up, now it’s time to move on to new adventures; Fish catches man, has chips to go along with him; Monkey-faced flower; Civil War’s a-brewing Which would be an excellent excuse for martial law / dictatorship; Iran war Would it destroy the US super power status? 2K year old treasures found in Black Sea; Forever Young It’s true for this person; Out of body adventures and Remote Viewing Roughly the same thing, but under different titles.

#114 Hoof Hearted on 01.13.13 at 12:34 am

#100 Old Man on 01.12.13 at 7:01 pm

Any moron that pays retail for what could be bought for less for wholesale deserves to live East of Winnepeg…

If it Flies ….Floats or…(well y’know)……….RENT IT!!!!

#115 Smoking Man on 01.13.13 at 12:38 am

Yes drinking again flu over…..plagerized pom

He blesses the boys as they stand in line
The smell of gun grease and the bayonets they shine
He’s there to help them all that he can
To make them feel wanted he’s a good holy man

Smoking man How high can you fly
You’ll never, never, never reach the sky
He smiles at the young soldiers

Tells them its all right
He knows of their fear in the forthcoming fight
Soon there’ll be blood and many will die
Mothers and fathers back home they will cry

Smoking man
How high can you fly
You’ll never, never, never reach the sky
He mumbles a prayer and it ends with a smile

The order is given
They move down the line
But he’s still behind and he’ll meditate
But it won’t stop the bleeding or ease the hate

As the young men move out into the battle zone
He feels good, with God you’re never alone
He feels tired and he lays on his bed
Hopes the men will find courage in the words that he said

Smoking man
How high can you fly
You’ll never, never, never reach the sky
You’re soldiers of God you must understand

The fate of your country is in your young hands
May God give you strength
Do your job real well
If it all was worth it

Only time it will tell
In the morning they return
With tears in their eyes
The stench of death drifts up to the skies

A soldier so ill looks at the smoking man
Remembers the words
“Thou shalt not kill”
Smoking man
How high can you fly
You never, never, never reach the sky

#116 Smoking Man on 01.13.13 at 1:07 am

How the hell did Cohen know 30 years ago when he wrote this.. Great Canadian…….

“Everybody Knows”

Everybody knows that the dice are loaded
Everybody rolls with their fingers crossed
Everybody knows that the war is over
Everybody knows the good guys lost
Everybody knows the fight was fixed
The poor stay poor, the rich get rich
That’s how it goes
Everybody knows
Everybody knows that the boat is leaking
Everybody knows that the captain lied
Everybody got this broken feeling
Like their father or their dog just died

Everybody talking to their pockets
Everybody wants a box of chocolates
And a long stem rose
Everybody knows

Everybody knows that you love me baby
Everybody knows that you really do
Everybody knows that you’ve been faithful
Ah give or take a night or two
Everybody knows you’ve been discreet
But there were so many people you just had to meet
Without your clothes
And everybody knows

Everybody knows, everybody knows
That’s how it goes
Everybody knows

Everybody knows, everybody knows
That’s how it goes
Everybody knows

And everybody knows that it’s now or never
Everybody knows that it’s me or you
And everybody knows that you live forever
Ah when you’ve done a line or two
Everybody knows the deal is rotten
Old Black Joe’s still pickin’ cotton
For your ribbons and bows
And everybody knows

And everybody knows that the Plague is coming
Everybody knows that it’s moving fast
Everybody knows that the naked man and woman
Are just a shining artifact of the past
Everybody knows the scene is dead
But there’s gonna be a meter on your bed
That will disclose
What everybody knows

And everybody knows that you’re in trouble
Everybody knows what you’ve been through
From the bloody cross on top of Calvary
To the beach of Malibu
Everybody knows it’s coming apart
Take one last look at this Sacred Heart
Before it blows
And everybody knows

Everybody knows, everybody knows
That’s how it goes
Everybody knows

Oh everybody knows, everybody knows
That’s how it goes
Everybody knows

Everybody knows

#117 45north on 01.13.13 at 1:17 am

HogtownIndebted: First, boat sales tank. That’s done. Next, there is less interest in cottage country generally. Check.

good post, very good

Last summer, my son was looking for a cottage in Quebec. One owner was about my age. We talked. I could see it in his eyes – the cottage was too far and too much money.

#118 Cici on 01.13.13 at 1:29 am

Hey Garth,

Just waiting patiently for you to put up the next post.

Ok, I’m addicted. But it’s a healthy addiction, and my one and only…Afterall, everyone needs a vice :-)

Please, keep it coming! The more I read, the less I spend. The meagre savings are slowly, but surely, growing, and I’m becoming a happier renter by the day.

You do good work.

#119 Phil Indablanque on 01.13.13 at 1:36 am

“It’s a smoky hole in the ground with tail fin sticking out of it.”

One for the ages Mr. Turner.

#120 Phil Indablanque on 01.13.13 at 1:54 am

#9 Blase

I think this blog already has a moderator thanks.

#121 a prairie dawg on 01.13.13 at 2:27 am

#110 Timing is Everything

My folks got theirs at 4%, full term. Had the bank phoning after 20-ish years offering them options to pay it off early. lol Interest rates were climbing and they wanted out from ‘unprofitable’ mortgages. Of course he told them ‘no thanks’. Pretty sure rates were almost 7% by the time he paid it off at 25yrs.

#111 brainsail

I don’t what part of this is so hard.

The American said “they don’t exist here”. I proved they did, and still do. Case closed.

Whether any ultra risk adverse people actually use them anymore, is NOT the point.

That they exist here, IS the point.

50 years ago rates were stable and predictable. The spread between short and longer terms was much narrower than today. Conservative folks went long term. The rest didn’t.

Fast forward to today and we have an entirely different rate landscape. Mostly everyone goes shorter term now to lower the payment, or buy an even bigger house, or both. This does nothing but increase your risk through over-leveraging. It’s amazing how many people don’t grasp that simple premise. But they don’t even read the freakin document either, much less understand it. They just ask for the lowest monthly payment possible and then want to know where to sign it so they can leave. They have granite to shop for, I guess.

And the only reason our 25 yr rate here is so high is that the bank is taking all the interest rate risk on a term that long, and pricing it accordingly.

In the US, since the crash, the Fed has backed all those long term mortgages almost at prime, to keep the ship from sinking. (ie: the USS Economy)

And if the SHTF here like that, don’t think our own BOC wouldn’t hesitate to do the same thing as a last resort.

Let’s just hope it doesn’t come to that.

#122 hoser on 01.13.13 at 3:33 am

The Idle No More movement has something to do with Harper’s Government approval of the China buying of Nexxon? It’s about money? Environment? Control? Can they stop the sale?
Has Harper violated the native treaties?
I don’t even know what this is about. I just hear it being reported on the news all day long.
However I suspect that this may scare away future foreign investment.

#123 Freedom First on 01.13.13 at 5:43 am

Garth, I listened to your cbc interview from post#108 with Darryl Cook.

Garth, you are one cool dude…….calm, cool, and collected…..you smoked Darryl with the truth. Beauuuttiffful:)

#124 GTA Girl on 01.13.13 at 5:44 am

Greatly enjoyed the comment on boating industry and cottage real estate. Very very true.

As I listen to heavy rain outside, today’s +12 temps, I count my blessings that I didn’t get suckered into the Blue Moutain ‘chalet’ idea. $1mill to live in a winter wonderland theme park…where there’s no snow.
This explains the recent death of a 40 something skier. Hardly any snow 5 runs open. 40 minutes lift wait. And everyone elbowing to get up what jokingly is referred as a Mountain. Packed ski run full of once a year types. No Ski Patrol Canada. Slush and ice. Dangerous conditions.

Owners have to justify the heavy RE prices in Blue. With this season, it’s disastrous

#125 Mr Buyer on 01.13.13 at 6:21 am

Twenty some straight years of property price decline in Japan and still declining (ever so slightly now). Home owners best get ready for the LONNNG haul if they plan on waiting it out. It can be done. Friends and friends of friends have recently made final punishing payments on properties still valued far far less then they were bought for. Decades of interest payments on top of a hugely inflated purchase price. Families living very very different lives then they would have if they had held off even 6 months in some cases. Children growing up wearing different clothing then they would have, eating different food, going to different schools, landing different jobs. It is not a theoretical thing that has happened. Sales organizations and their accomplices in financial organizations marching hordes of people into unsustainable financial situations so the kids of sales people and bankers can go to different schools and wear different clothing and land different jobs. Politicians playing games that have little impact upon themselves personally and devastating consequences for their constituents. It is real and with dire consequences. Think of that cold bucket of water as a Realtor or self proclaimed market guru is telling you sleepy bedtime stories over the coming decades. Buyers simply have to wait a year or three and it will be unrecognizable out there. Downward momentum in sales and heaven forbid prices will be well and truly entrenched very shortly but how am I supposed to know other than it is a well worn story told and retold more than a few times and fairly recently.

#126 Herb on 01.13.13 at 9:06 am

#115 Smoked Man,

?

#127 Herb on 01.13.13 at 9:22 am

#109 Smoking Man,

and how did you enjoy your 30 days for contempt of court?

#128 Smoking Man on 01.13.13 at 10:17 am

#126 Herb on 01.13.13 at 9:06 am
#115 Smoked Man,

?
…………………………………………………………………….
Dont remember flu gone, was making up for a bozze free week

#129 robert james on 01.13.13 at 10:18 am

Bloody hilarious !! From the Victoria blog,, some realtors refer their clients to Garth`s blog to encourage them to lower their price so it will sell.. (second post from the bottom) LOL http://www.blogger.com/comment.g?blogID=7123542260692860177&postID=1844159259548439737

#130 HogtownIndebted on 01.13.13 at 10:38 am

One point I meant to add (and sorry for my last long post, folks) about the value of recreational properties – the ones floating on top of the water and the ones soon to be underwater:

Boats are like condos in another way – moorage fees are the condo fees of the marine world, and it can cost thousands a year. Even with this cash flow, lots of marinas have gone belly up. Kijiji and Craigslist this year have seen many ads for boats being given away ‘free’ or close to it, as long as the buyer pays for moorage and/or transportation.

Here’s a ‘free’ 40 foot yacht worthy of Garth and his lovely entourage:

http://toronto.en.craigslist.ca/tor/boa/3405891492.html

So forget the boat shows – you may be able to get your own floating condo for free* (*additional charges may apply)

Maybe the condo kings should try this approach ….?

#131 Ann on 01.13.13 at 10:46 am

#112 HogtownIndebted

“kinda like CREA hoarding its data)”
—————————————————
Nice to know you agree on those data it is.

#132 Ronaldo on 01.13.13 at 10:49 am

#127 – Herb – here’s an ex. prisoner who spent an extra 22 years over the recommended 10 years for speaking against the system. Now a regular blogger. A very interesting individual.

http://www.blogger.com/profile/14923205052778958118

#133 The American on 01.13.13 at 11:36 am

Alas, I stand corrected. I guess you can get longer terms on loans in Canada. Forgive me. In revieweing rates on a 25 year term loan in Canada (we typically get 30 years in the U.S.), you’re still going to pay well over TWICE the interest that one would pay in the U.S. Besides, the point wasn’t more about whether or not longer terms were available in Canada. The point is that over 90% of mortgage holders within the last 5 years in Canada have taken out the equivilent of what we refer to as ARMs in the United States. At peak in the U.S., less than 20% of buyers had these kinds of mortgages. Do the math. You say tomato, I say BULLSH&T!

In Canada, a 25-year fixed rate is pushing 8.75%
In the U.S., a 30-year (longer terms, mind you), is at 3.35%

#134 robert on 01.13.13 at 12:18 pm

Lets see as of yesterday there were 12876 listings in Vancouver and sales for January 11/2013 totaled 38. The Vancouver Market is already in full crash mode and it looks as though the downside momentum is building quickly. This is going to be a very ugly spring market both for Home Sellers and for Realtors. This market has gone “No Bid” as the qualified buyers dig in their heels and see no reason to pay anywhere near Assessed Value.

#135 Hoof Hearted on 01.13.13 at 12:33 pm

#112 HogtownIndebted on 01.12.13 at 11:59 pm

Excellent post.

I fully agree….

I do a mental cut and paste and try to envision todays average 30 year old or 40 year olds buying that cottage or that new boat….just can’t see it.

I also see Golf dying out, skiing as well. Once you go past HOPE BC, out of the urban areas you see few if any Non Caucasians.

Its just too costly too own, or indulge in.

#136 Devore on 01.13.13 at 12:41 pm

#101 Doug in London

Purchase of luxury naval assets by Joe Everyday is a sign of excess, not wealth.

#137 Devore on 01.13.13 at 12:47 pm

#67 The American

Before you go off feeling all too smug, only reason for this is the government underwriting and guaranteeing (ie subsidizing) the 30 year rate. Or do only dirty pinko commies do that?

#138 berniebee on 01.13.13 at 12:56 pm

#121 Prairie Dawg

OK, 25 year mortgages exist in Canada. Point taken.

But the rate premium makes a 25 year term fixed rate mortgage very expensive. Like a Porsche Carrera GT, (list $484,000) 25 year fixed mortgages do exist, but virtually nobody has one.

When Americans refer to “fixed rate” mortgages, they are talking about a fixed rate for the LIFE of the mortgage.
Americans often don’t realize that we Canucks call “fixed rate” mortgages have typically 1-5 year terms and that when the term expires, we renew our “fixed rate” at the new rates, again only choosing the term length/rate. Americans don’t call these 1-5 year term mortgages “fixed rate”. These mortgage deals are closer to what Americans refer to as ARMs (Adustable Rate Mortgages) ARMs have fixed rate for typically 2 or 3 years, then are floating rate for the rest of the amortization. ARMs are often called “nightmare mortgages” in the USA, because you usually have to renew at a higher rate.

The big point? Canadians realistically don’t have 25 year fixed term mortgages, so plenty of us are renewing mortgages at any given time, and if rates go up, all mortgaged Canucks will (eventually) get creamed.

#139 Devore on 01.13.13 at 12:58 pm

#109 Smoking Man

Do you swear to tell the truth, the whole truth and nothing but the truth. And you say nope.. It’s like dropping a wrench in the machines gear box. been there done that.. One of my many adventures…..

Adventures? You’re just being a prick now. The reason being “swearing” in is a formality. Like giving your name. You’re compelled to testify in court, and in Canada you don’t get to take the 5th. The difference is self-incriminating testimony cannot be used against you in another trial.

If this is something you consider “an adventure”, it is testimony (har har) to your sad and boring life.

#140 Dom on 01.13.13 at 1:06 pm

GTA Girl on 01.13.13 at 5:44 am
Greatly enjoyed the comment on boating industry and cottage real estate. Very very true.

As I listen to heavy rain outside, today’s +12 temps, I count my blessings that I didn’t get suckered into the Blue Moutain ‘chalet’ idea. $1mill to live in a winter wonderland theme park…where there’s no snow.
This explains the recent death of a 40 something skier. Hardly any snow 5 runs open. 40 minutes lift wait. And everyone elbowing to get up what jokingly is referred as a Mountain. Packed ski run full of once a year types. No Ski Patrol Canada. Slush and ice. Dangerous conditions.

Owners have to justify the heavy RE prices in Blue. With this season, it’s disastrous
—————————————————————-

The credit bubble allowed the stupid to buy things they otherwise couldn’t or shouldn’t have bought. the credit bubble has hit it’s peak and the crash back down will be painful. One can go on Craigslist and get a free boat..Yes..FREE boats due to people with no money having bought stuff they can not afford to maintain. What a painful crash back down Canada will have. Look out below.

#141 Steven Rowlandson on 01.13.13 at 1:16 pm

Housing in Canada is overvalued by a massive 78%.
It is at least that overvalued Garth and may be more.
You could knock 90% off the average price of a house and it would be expensive but tolerable relative to 3 years pay for a working man or tradesman.

#142 Ogopogo on 01.13.13 at 1:18 pm

Attention desperate Penticton landords (FYI: Penticton = one of the worst affected areas in the Okanagan RE collapse). Couple with pet pig looking to rent a 2bdr/2bth house. Call now or risk being tenantless forever!

http://kelowna.kijiji.ca/c-real-estate-house-rental-House-for-rent-W0QQAdIdZ444731546

#143 Adviser on 01.13.13 at 1:29 pm

#112 HogtownIndebted on 01.12.13 at 11:59 pm

Great post, share your views.

And thanks to Nostra for pumping out the links!

#144 berniebee on 01.13.13 at 1:32 pm

#67 The American

I realize now that I just posted the same view as you, but from a perspective which is a little further north.
Twenty five year fixed rate mortgages are absolutely a non factor in Canada’s real estate business.

And yes, people will be walking away, recourse or no.
Lets say you owe the bank $200,000 more than the house is worth, have $30,000 in credit card debt, and a leased car. (Hey, I think I’ve just described a typical spring time Vancouverite!) And now you can’t afford the payments. After careful consideration and consultation with a lawyer, you, like many others, will choose bankruptcy.
Canadian banks are going to be real estate owners, big time.

#145 Devore on 01.13.13 at 1:36 pm

Garth will enjoy this one:

http://www.torontosun.com/2013/01/04/politics-isnt-so-easy-breezy-beautiful

He bought Cover Girl loose powder, Maybelline loose powder, Maybelline concealer, Maybelline “Min Blush,” Maybelline LMU, Smashbox concealer, cosmetic wedges, a powder brush, a foundation brush and “SBM Top Zip Shave.”

#146 mathman on 01.13.13 at 1:50 pm

To the American – you are 100% correct. The 5 year fixed will be one of the many catalyst’s, when it resets for anyone who has taken one in the last 4 years, it will be ugly.

CDN’s can get longer MTG’s, but I invite you to find me any stats that say a material amount of people have locked in for more than 5 years. That’s not in our nature, the banks/brokers push vrm and closed 5 year and less only.

I laugh my butt off anytime an economist and or RE, MTG Broker ETC, says that we have better lending standards. We need to get off our high horse and realize that anyone with a pulse in this country could have gotten a mtg in the last 4 years. Certain areas of Toronto, people look the part, but they are up to their eyeballs. Y and E, Leverage Village(Liberty), The University Dorm they call Cityplace, Yonge and Shep etc. etc. etc. These areas represent thousands of shoeboxes in the sky, probably the majority are CMHC and they “owners” are also in deep with CC’s/Loan’s etc.

I hope for the Countries sake I am worng, but the fundamental and everyday evidence suggests we are ini for a 30-40% correction.

#147 The American on 01.13.13 at 1:53 pm

At #137: Devore, The U.S. government does not subsidize 30-year rates. Period. That’s some funny sh*t. Again, I love what they teach you up there. Kinda like American factory worker only earn $12-$15/hour and can buy houses all day long for only $100,000. LMAO. Damn, your media and government have done a tremendous job on your heads.

#148 a prairie dawg on 01.13.13 at 1:59 pm

#133 The American
#138 berniebee

– — –

and I explained why the rates are so different between the 2 countries:

-The US 30yr rate is directly subsidized by the Fed.
(if it wasn’t, the banks there wouldn’t be giving it away that cheap, for that long a term)

-In Canada the bank shoulders ALL the interest rate risk on the 25 yr rate they offer. (no subsidy, so far)

The main reason no one here takes out 25 yr mortgages anymore is that, as Garth has mentioned before, most people here suffer from “recency”. Rates have recently been non-historically low for some time now, leading most of the “slow thinkers” out there borrowing, to think they’ve always been that low. Ergo, they shun the longer term at the higher rate. Suddenly they’re all Forex experts. I hadn’t realized HGTV covered that topic matter. lol

But then I took out a personal loan to buy a used vehicle back in 1981, at 19.75% interest. (mortgages were going for about 17% at the time too)

What I’ve learned from that era is, never say never. ;)

#149 mathman on 01.13.13 at 2:04 pm

my challenge was to the board and not the American around % of CDN’s with fixed terms greater than 5 years. Does not matter how you dress it up the 5 year is an ARM.

I would also argue that a very large percentage of folks that did “qualify” for a 5 year, qualified on the margin. For the majority of greater fools they see no problem in just qualifying, in the lowest interest rate environment we have ever been in. The RE, MIL and MTG B, feed them all the BS to put them at ease with a decesion that will eventually lead to financial ruin.

If you put 10% down – The Bank Owns your Home
If you put 20% down – The Bank owns your home
If you put 30% down in the last 5 years, and the market corrects by 30% – The bank owns your home.
If you put 0 down and the market corrects – The bank owns your home and you are paying them for the privilage of staying in the home that you don’t own

#150 brainsail on 01.13.13 at 2:05 pm

#133 The American on 01.13.13 at 11:36 am

Let’s hope that the “Fixed Rate” mortgage difference finally sticks. It has been the most difficult thing that I have tried to explain to friends and relatives living in Canada. They do not believe that Canada’s housing could collapse any where near the extend that some areas in the US experienced.

There are other remarkable mortgage differences between the two countries. For example, the debt to income calculations used for determining maximum mortgage payments and the methods used to determine property market values for mortgage approvals. But, let’s save those for a rainy day.

#151 Had To Speak Up on 01.13.13 at 2:09 pm

#112 HogtownIndebted on 01.12.13 at 11:59 pm

I have to agree with the others — great post Hogtown! I totally agree with your assessment. There has been little said about cottage country at this point but I believe it will take a bigger hit than anything in the city.

My mother sold the family cottage this past fall and she was one of the few who managed to do so. The first agent she spoke to suggested she list at $529. The second agent suggested $459. She listed at $459 early in the summer and got no offers. Finally before Labour Day, I begged her to drop the price and she did to $399. It finally sold in October for $382, under the assessed value. The neighbours are upset because they think she ‘gave it away’ but no one seems to realize how lucky she is. I told her if she didn’t sell it then, she’d be listing at $349 in the spring. It was a lovely cottage but I’m glad we’re out of there.

#152 Timing is Everything on 01.13.13 at 2:25 pm

#163 brainsail said – “In Canada, if you have a 25 year mortgage, you cannot get a fixed rate for the 25 year duration.

You are just plain–>wrong, too.

#153 Derek R on 01.13.13 at 2:57 pm

#123 Freedom First on 01.13.13 at 5:43 am mentioned Garth’s Edmonton AM gig. Here’s a link for anyone else wanting to hear it.

http://www.cbc.ca/edmontonam/episodes/2013/01/11/real-estate-predictions/

#154 Ann on 01.13.13 at 3:07 pm

re#142 Steven Rowlandson on 01.13.13 at 1:16 pm
Housing in Canada is overvalued by a massive 78%.
It is at least that overvalued Garth and may be more.
You could knock 90% off the average price of a house and it would be expensive but tolerable relative to 3 years pay for a working man or tradesman.
.
Have you priced any construction materials and labor cost in the last 15 years
Just asking

#155 Devore on 01.13.13 at 3:35 pm

#86 Old Man

Hmm, Bedford Park, that sounds homey.

The problem with the rich is that they really do live in a different universe. Unfortunately the middle classes have deluded themselves, and believe imitation of success is the path to success.

You can extend this analogy past real estate too. For example, watch what Buffet does, sure, but do not imitate. When Buffet buys or sells, he is getting the deal of the century, which your average day trader can’t even understand the mechanics of, much less swing for himself. His comings and goings should be, at best, of passing interest to normal people.

#156 Hoof Hearted on 01.13.13 at 3:51 pm

re Family Cottages etc.

Given they are not principal residences, the inheritors will be whacked with taxes.

I see this as a huge looming demographic, and the market will begin to get flooded.

#157 Hoof Hearted on 01.13.13 at 3:58 pm

#154 Ann on 01.13.13 at 3:07 pm

Have you priced any construction materials and labor cost in the last 15 years
Just asking

=====================================
Family member had a new house built (circa 2000) in a new subdivision in South Surrey. “All in” it was under $400,000.

Market was quite slow then.

The house next door was built by a father and son framing crew. Upon inquiry, they said they were getting approx. $10 (TEN DOLLARA) per hour.

Given all the overbuilding since then, I don’t see any reason why wages could NOT collapse for trades.

#158 Canadian Watchdog on 01.13.13 at 4:40 pm

Some Burano Condos May Be Small But…

"The smallest Burano Condo in the building is a gigantic 445 sq.ft. when placed side by side this unit"

U.N. Agenda 21 winning. Torontonian's quality of life, deteriorating.

 

#159 Fed-up on 01.13.13 at 5:10 pm

@#59 The American

______________________________
Totally agree, Canadian banks have invloved in some of the riskiest lending practices in the world. Especially when one considers how they were already bailed out back in the 2009.

#160 AprilNewwest on 01.13.13 at 5:49 pm

#144 – I know someone who was unable to keep up with his mortgage payments due to job loss [bought in the last 2yrs, min DP]and was given a yr of no payments by his bank. Didn’t know banks had such provision.

#161 maxx on 01.13.13 at 6:24 pm

#34 T5>myT4 on 01.10.13 at 11:54 pm

“Saving money just isn’t cool anymore.

Robert Kiyosaki said so; …”Saving money will never make you rich”

So why bother ?”

First, love the moniker, really excellent! …and congrats.

As for the quote (and thanks for sharing), what a load of manipulative BS!
Many are living the dream, having saved their way there and retiring decades before the “standard” age. Those who believe idiotic statements like that one mindlessly kiss their wealth potential away. Save, save, save and hang on to that wealth with a vengeance- it IS a lifeline in this day and age.

#162 Ronaldo on 01.13.13 at 7:10 pm

#141 Steven Rowlandson –

”Housing in Canada is overvalued by a massive 78%.
It is at least that overvalued Garth and may be more.
You could knock 90% off the average price of a house and it would be expensive but tolerable relative to 3 years pay for a working man or tradesman.”

Not sure I would agree with that Steven. For example let’s look at a place I purchased back in 1970 in North Vancouver.

1970

Average salary – 8000 1 person
Average house – 21000 = 2.6 times one salary (gross)
Interest rate – 10%
Interest expense = 26% of one salary (gross)

2013

Equivalent salary – 60,000 1 person
Same house – 470,000 7.8 times one salary(gross)
Interest rate – 3.4%
Interest expense = 26% of one salary(gross)

So, at this moment in time, at least in this particular instance, it seems that cost to own that home is pretty much in line with what it was back in 1970 but it all has to do with current low interest rates.

However, if interest rates were to rise to 5%, it would require a drop of 32% or $150,000 to $320,000 to maintain the same percentage cost to service the interest expense. Or, a 12.5% increase in pay. Not likely.

Across the Ironworkers Bridge, that’s another story altogether since prices have risen beyond all reason. A 50% drop in some of those areas would not be out of the question to get them back in line with the above.

In many other parts of the province, far away from the BPOE, prices are still very affordable for the average wage earner. As long as people are willing to live within their means, they shall be fine. Those who got lured into the no down payment, low interest rate fiasco will suffer greatly.

#163 Mr Buyer on 01.13.13 at 8:08 pm

Save, save, save and hang on to that wealth with a vengeance- it IS a lifeline in this day and age.
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This underlines one of the greater failures of my entire life. The perspective taken by myself did not ever go out much further than a year or two and most often just to the next pay. I really should have been saving not for myself but in fact for my children and they in turn for theirs. I know an over 86 year old woman who gets up most days in a given year and goes out into her garden plots (permanently hunched over mind you from a lifetime of doing so) and grows and sells about 9 or 10 thousand dollars Canadian worth of vegetables between her and her daughter. The old lady has rice fields as well that she and her family no longer work but are now farmed by a co-operative that shares profits with them. In addition to this there is an amount of savings and investments that I have no real idea of but it is safely a great deal of wealth that would put her in league with many here on this blog that share their insights from the upper crust. This old lady has produced much more for her family and future iterations of it than she has consumed on a daily basis for over 8 decades and will do so until she leaves this earth. She has accomplished something truly worthy. With no flash, pomp, or ceremony and from time to time under horrible conditions. The expression of her life and her ancestors has left options open to her descendants that come with the expectation that said descendants purse those that follow in a similar fashion. There is no magic secret. Saving might not be the flashiest way to accumulate wealth but it is practiced by a huge number of people around the world.

#164 InLimbo on 01.14.13 at 11:04 pm

I don’t know where the data for this is from, but this shows that home inventory in some major American cities is down nearly 60-70% yoy. What are the chances it’s the same in Canadian cities at the top of the food chain like Toronto?

http://socialtrade.com/date/2013/jan/14

#165 Sebee on 01.15.13 at 3:53 pm

#14 An Cat Dubh

Cat, as a U2 fan, I can tell you that Joshua Tree came out in 1987. Google it. Early 1987 too.

As for the heights reached by U2 – strike 2. They have topped it big time with ZooTV Tour, then All you can leave behind, etc. U2 are huge, packing 50K arenas and having highest revenue tours year after year.

U2 and Real Estate – like comparing apples to shoes.