Hosernomics

WORLD END

If you keep saying it, maybe it will come true. Then you won’t seem quite so ridiculous in your desperate desire for validation of your dead-wrong RE predictions. – Realtor comment on GreaterFool.

A couple of months ago I hosted two investment banker-type dudes from Wall Street who ventured north to find what could possibly be keeping the Canadian real estate market aloft. I told you about that. It was weird. They had trouble understanding how they could be in a city (Toronto) where the average income is less than $100,000 and the average SFH costs $866,326.

But not me. I understand it perfectly. Most people are nuts.

Not long after, I told you about a piece in the journal of the New York Society of Financial Analysts, which referenced this pathetic blog. More bewildered, bemused Yanks.

“What is great from an American’s perspective is that all of the characters that we saw in the US housing bubble are up there in Canada leading the lambs to the slaughter. In another awesome coincidence the main villain is named Brad J. Lamb.  Turner has a great characterization of Lamb, whose nickname is the “Condo King of Toronto.”   Lamb reminds me of some sort of motley blend of Angelo Mozilo and Donald Trump. Lamb is encouraging people to lever up their primary residence to go buy a second, third, or fourth piece of real estate as an investment.

“Going through Lamb’s obviously foolish math in Turner’s post makes me think that ultimately shorting the mortgages on Lamb’s projects will be a money maker in time. Just like in the US, eventually people realize there are no more greater fools and the bubble bursts. I want to be ready.”

Speaking of ready, the number of mammon-obsessed Americans looking for ways to short Canada before our real estate blows up is definitely growing. Not only is there now a destructo-Canada hedge fund, but various vultures (like Steve Eisman, the hero of this book) have identified publicly-traded companies they think will not survive the HouseAgeddon which lies ahead.

As you also read here, the eggheads at The Economist think we’re delusional, and the International Monetary Fund won’t be buying a McMansion in Mississauga or Richmond, either. Famed US economist Robert Schiller, shunned when he warned circa 2004 that the American housing market was a ponzi, and now a demi-god, is also perplexed. “I worry that what is happening in Canada is kind of a slow-motion version of what happened in the U.S.”, he said in 2012. And more recently he warned about our unsustainable, steaming pile of consumer debt.

Then there’s that Nobel-winning Paul Krugman guy, who weeks ago made big waves writing this: “Canada ought to be quite vulnerable to a big deleveraging shock despite its boring banks. Of course, people have been saying this for several years, and it hasn’t happened yet — but remember, the US housing bubble took a long time to pop, too.”

Now here’s Adam Peterson, an expat with a New York investment firm writing for the misguided colonials back home. “Housing in Canada is unaffordable. International experts are unequivocal in their concern, and Canadian lawmakers are taking measures to deflate slowly rather than crash. Ironically, only Canadian homebuyers seem to think the market is sustainable. Sale prices are still rising. So when does it all start to unwind? Right about now.”

Peterson frets over two things. First, Canadian house prices are insane relative to what people earn. Second, at 19% of the economy, real estate is a gasbag whose rupture could explode jobs, businesses and the blessed GDP itself. But all the hand-wringing might be academic because, “I believe we are witnessing the crash right now…” Yup, in slo mo.

I mention all of these Americans and various other foreigners since we never heed native intellectuals like William Shatner, Justin Bieber or Pamela Anderson until they cross that bridge. Does this mean we’ve simply lost perspective, sitting here with our beer and Timbits, staring into the national navel? Are we in more trouble than, say, Global TV lets on?

Silly question. Screwed.

Real estate sales have slowed and mortgage rates risen. The feds have done everything but machinegun the young to stop them from buying. There’s nowhere in Canada now that you can buy a house, pay closing costs and reasonably expect to make a profit after occupancy costs and commission within five years. In fact, in every city it’s cheaper by far to rent than to own. And yet the house horniness, and especially the denial, persist. Prices stay sticky because vendors have a sense of entitlement , thanks to the pumpers at Royal LePage and Re/Max. Meanwhile the doubters pour on to this defenceless blog to rain down kidney punches, and question my economic manhood.

But I’m still standing. No wavering. Those with the bulk of their net worth in a house, with a monster mortgage at 3%, or freshly ensconced in their equityless new home, all should be worried. You can ignore me. Millions do. But I’d be asking myself why you’re so much smarter than the dudes referenced above.

Your mother-in-law will be so surprised.

155 comments ↓

#1 Randy on 07.15.13 at 6:34 pm

Can always use the timeless excuse …

“How did I know that I was gonna live this long”…..

#2 DAD on 07.15.13 at 6:35 pm

OH YEA

#3 TurnerNation on 07.15.13 at 6:44 pm

Eat the rich?

Here in Kanada we enjoy exquisite freedoms of choice.

Whether you are shopping at Safeway-Sobeys or Loblaws-Shoppers you are shovelling your cash to the mutli-billionaire Sobeys and Weston families.

Who will, then, ask you at the checkout for more hard earned money toward their charities.
You first. I’ll make sacrifices when you do. Billionaires asking me for money?
If they care so much why not divert money from the common and preferred dividends? Ok I make joke.

What people need is FOOD. But no retailer will ever give food away for free. Never. It’s an unwritten rule.

You give. And give:

http://www.newswire.ca/fr/story/547111/loblaw-springs-into-action-with-toronto-s-daily-bread-food-bank-and-kicks-off-food-drive

“Starting Friday, March 20 until Friday, April 17, Torontonians can make a
difference by purchasing or bringing non-perishable food items and dropping
them into donation bins located in Loblaw stores”

I see their giving when their name is involved.
Sobeys School of Business. Weston Wing of whatever building.

(My, my reflection is looking good today.)

#4 John on 07.15.13 at 6:52 pm

Great piece Garth, do you think prices in Edmonton are overvalued as well? Average family income is around 90K but average homes around 400K half of T.O

#5 Hadster on 07.15.13 at 6:52 pm

Well said, Mr. Turner!

#6 Julie on 07.15.13 at 6:57 pm

Top ten?

#7 Richard on 07.15.13 at 6:59 pm

Agree that when rates rise, the troubles with affordability will rise. Meanwhile, arrears & distress sales are low. Prices remain firm and now we are past July 9, year-over-year sales numbers should improve. Not sure I see a problem – yet.

#8 mark on 07.15.13 at 7:02 pm

“but Canada is different…”

Beats any intellectual argument.

#9 Old Man on 07.15.13 at 7:03 pm

I am thinking that might just throw in the towel with a few bucks and move to Nova Scotia to live the good life, as that is where the quality of life exists, as they have everything.

#10 Nosty in Vladland on 07.15.13 at 7:07 pm

-
Blacksheep, SMan et al — Rupees? OMG. Where did the Petro Dollar go? Here? Work harder, faster, produce more, get less and don’t enjoy retirement! Or here. Maybe China 1 = China 2. Gold backed Yuan? See y’all round!

#11 Freedom First on 07.15.13 at 7:11 pm

Garth, I am constantly amazed at how you keep providing Canadians with the truth delivered on a silver platter, and spoon fed too, so to speak. This, in spite of the abuse from the financially illiterate Canadians, who are headed over a cliff. Now, we all knew that you were still standing and unwavering, have abs of iron and steel balls, but I am really glad to hear you also have titanium kidneys. If you are a unethical RE pumper, a house horney whatever, or a know nothing MIL, this post by Garth is for you. Be very very glad it is not me talking to you. I am not as nice as Garth.

#12 An Importation to Prop the Ponzi Scheme on 07.15.13 at 7:12 pm

Great, 19% of the GDP is pimping GDP. This without adding the prostitution/soap/massage GDP.

#13 Selasse on 07.15.13 at 7:15 pm

Everyday, teach teach teach, always great G! I must say People are born with two ears and one mouth, that means realtors too. As a realtor myself, most of my associates should listen rather than bash the blog. The numbers (data) doesn’tt lie, you make sense. Relationships before transactions, this market is def turning!

#14 Mister Obvious on 07.15.13 at 7:16 pm

I know people who waited over a year to “get their price”. No dice. They just couldn’t do it.

So they are off the market until it “improves”. They don’t realize the market has already improved, with lots more improvement just ahead.

#15 Andrew on 07.15.13 at 7:20 pm

What are the chances that the feds allow 30+ year amortizations on mortgages again if housing prices start to decline?

#16 CP on 07.15.13 at 7:21 pm

Brad Lamb… good for, if nothing else, a laugh

#17 screwed and tatooed on 07.15.13 at 7:23 pm

think the banks in canada were not in trouble read this, please someone explain to me why the gov inflated the housing???
http://www.policyalternatives.ca/sites/default/files/uploads/publications/National%20Office/2012/04/Big%20Banks%20Big%20Secret.pdf

#18 Rob on 07.15.13 at 7:23 pm

Garth,
When RE starts to slide downhill; will it pick up speed? I would think so since people panic when fear takes over, I dont see it staying slow motion for a decade. If so, can you explain?

#19 John on 07.15.13 at 7:25 pm

Hey Garth

My post got removed for some reason. Great read, do you think Edmonton home prices are overvalued? Average family incomes are around 90K while average SFH are approx. 400K. A lot lower than TO prices at 800K.

#20 Mocha on 07.15.13 at 7:28 pm

It looks like F was one of the only guys to keep the same post in the shuffle. Good news for GreaterFool since he’s such a celeb here.

#21 Von on 07.15.13 at 7:29 pm

Here’s an awesome article.

http://www.calgaryherald.com/news/calgary/Realtors+deluge+home+buyers+Calgary+after+last+months/8662447/story.html

#22 Derek R on 07.15.13 at 7:29 pm

Where’s my sackcloth? Oh, yes. In the ashes drawer.

#23 screwed and tatooed on 07.15.13 at 7:34 pm

check out what Bill Graham has to say about our banks based on the auditor general report

http://www.youtube.com/watch?v=JuP2hH0Kpro

It’s Abram, not Graham, and he is a looney. — Garth

#24 Saskatoon-Living on 07.15.13 at 7:34 pm

Nice post Garth. The greater fools in S’toon are still buying, but of course their driveways and landscaping won’t be done for 4 years.

#25 lucyj on 07.15.13 at 7:36 pm

Great upbeat way to start the week. NOT! Boy the truth sure does not sound good the way you tell it Garth, but it is what it is. There are a lot of Canadians on that Egyption river cruise this summer. ( de nile) Many lessons are soon to be learned and then the blame games will begin. A true eye opener, great post as always

#26 Fort Mac Flatlander on 07.15.13 at 7:38 pm

Hello Garth,

We have been made aware that the rising prices of Canadian RE is directly related to the drop in interest rates and the rise in available credit. My question to you is: is margin or more importantly the growth of magin responsible (wholly or partly) for the rise we have seen in the S&P?

Thanks

Companies make profits and pay dividends. Houses don’t. — Garth

#27 Ralph Cramdown on 07.15.13 at 7:40 pm

Oh, Keystone XL… Any day now. What with super-effective minister extraordinaire Leona Aglukkaq being moved from Health to Environment, how could Obama say ‘no?’ Doesn’t this appointment prove we’re serious on the environment?

It worries me greatly that Mr. Harper thinks that just because he sees the logic in something, the US will too without any coaxing.

#28 Fort Mac Flatlander on 07.15.13 at 7:42 pm

#3 TurnerNation

Here in Kanada we enjoy exquisite freedoms of choice.

Whether you are shopping at Safeway-Sobeys or Loblaws-Shoppers you are shovelling your cash to the mutli-billionaire Sobeys and Weston families

Is there no CO-OPs where you are located?

#29 Devore on 07.15.13 at 7:44 pm

#8 Richard

Meanwhile, arrears & distress sales are low.

I don’t know what method you use to determine distress sales. Perhaps you’d like to share?

Arrears and bank sales are trailing indicators. By the time you see them, it’s already over.

#30 Nemesis on 07.15.13 at 7:45 pm

“The feds have done everything but machinegun the young…” – HonGT

As it happens, AuldPol – there is actually an historical precedent/’play book’ for that… Sadly.

http://en.wikipedia.org/wiki/On-to-Ottawa_Trek#Regina_Riot

#31 bob on 07.15.13 at 7:48 pm

Hi Garth,
Me thinks it is the language of your blog posts versus your actual predictions. e.g. in some posts, you hint (you might even have said ‘hard land’). In this post, “screwed”.

But in other blog entries, you’ll say things like “real-estate is local” and argue that some will see minimal declines, and others (like Vancouver) will see larger declines.

Your past blog posts have explicitly said we won’t have a crash, but your language suggests otherwise, especially to people who may not have seen prior posts.

And really, we’re not talking about everyone being screwed. Only those who are highly leveraged… and then, everyone else suffering because of the cumulative impact it has on the economy. But no crash, like you say.

Is that still “screwed”

#32 the other side on 07.15.13 at 7:50 pm

Garth – heres the other side

http://www.youtube.com/watch?v=5zD7xR0DGuE

I know Jeff Berwick. Do you? — Garth

#33 Peter on 07.15.13 at 7:59 pm

Hi Garth,

how do you explain this story:
http://www.calgaryherald.com/news/calgary/Realtors+deluge+home+buyers+Calgary+after+last+months/8662447/story.html

Update: Calgary realtors see ‘crazy’ rush of home buyers after flood

and:

http://www.cbc.ca/news/business/story/2013/07/15/business-real-estate-prices.html

Thanks

#34 Smoking Man on 07.15.13 at 8:00 pm

Like you Garth, the expert’s don’t understand the herd, put to much weight in fundamentals.

Example, I’m desperately trying to talk my y oungest son from buying a place with his two buddies, place is 300k in mississauga, town home with maintance fees.

Now all 3 rent, each paying over 700 per month just for rooms and sharing rest of house. If they buy, split 3 ways it’s 600 to 700 pemonth… But the idea of being a landlord is intoxicating to these kids, it’s status.

Financially makes sense, but 3 young guys living together, peacefully, girl friends…. Good luck..
But my guys is running the food processor distribution and sells keysme to Corp clients part time, he can well afford it on his own.

I said way don’t you that.

He said Garth scared him… Reads the blog. Not comments… If he only knew pops was the weekend star on here.

In other news thinking of buying a 2000 car just so I can open the door when phyco cyclist wiz by.. I would than duck tap little X under my side wind shield, like the fighter pilots who took out boogies..

#35 Roxy on 07.15.13 at 8:02 pm

I’ve been looking at condos on MLS for over a year…I’m starting to see a LOT of $250K condos. Never seen so many in that price range. They’re starting to go down!

I still can’t afford them though, lol.

#36 Dean Mason on 07.15.13 at 8:10 pm

Houses in Toronto have been unaffordable for at least 17 years.This is nothing new.The average SFH price in Toronto should be $350,000 to $375,000 maximum not $866,326.

Even if you use demand and supply in certain areas in Toronto $450,000 is pushing it.The under $100,000 a year average Toronto family income is probably gross not even net.This means $78,000 net if an even $50,000 split of 2 family working income.If not it is more like $74,000 net a year.

Once you add all your gas,car insurance,car payments,utilities,property taxes,maintenance and repairs,CMHC premiums,home insurance,food,clothing,cell phone,internet etc. not much is left for mortgage payments.

People are reaching their limit.Today, a CIBC poll showed that 59% of retirees are in debt and have at least 2 to 3 payments a month.It also said 39% are credit card payments,16% are mortgage payments,30% are carrying a line of credit,14% are loan debt.

#37 takla on 07.15.13 at 8:12 pm

I think we all know where this train wreck is heading .Im going to call it the “great Reset”.The house humpers are in denial and hopeing that getting in on these 5-10 yr renewals will save thier day only to realize they will have to reset @ much higher rates /houseing worth much less and thier insanely high principle never seeming to come down with bank interest ,tax’s,upkeep,and life happening.reminds me of an old saying “SH_T happens when you party naked”!

#38 Old Man on 07.15.13 at 8:15 pm

I saw Mr. Turner mentioned the mother in law, and that was my first engagement in marriage to be called off in my sordid life, as she was a nasty woman who was telling me what to do with her daughter with her orders on me. Nope, will never happen in a NY minute, so bailed out on this all to find someone else.

#39 :):( Ying Yang on 07.15.13 at 8:17 pm

#35 Smoking Man on 07.15.13 at 8:00 pm

WTF are you saying?
Man English is my second language and I can put better sentences together. Wow, how do you survive Smoking Man?

#40 Dean Mason on 07.15.13 at 8:25 pm

An $800,000 mortgage at an 8.00% fixed rate mortgage amortized over 25 years is $6,105.70 per month or $73,268.40 per year.This eats up all a family’s average net income in Toronto just for mortgage payments.

The limit is here and there will be a downward adjustment to real estate.How much and how long is the wild card here.

#41 Piccaso on 07.15.13 at 8:28 pm

Living in Canada costs 22% more then the international average

A major contributor to Canada’s high cost of living comes down to how much we pay for our housing. Turns out that not only is Canadian real estate overvalued, but it is the third most overvalued real estate market in the world. Wu-hoo, bronze medal!

The OECD studied real estate prices, rents and household incomes in 34 developed countries. They compared the price of an average home to what it could be rented for, and the price of an average home compared to the average salary. The OECD calculated that based on home prices to income, Canada’s real estate prices are overvalued by 30%. Compared to rents, real estate prices in Canada are overvalued by 60%.

So this means that Canadians are paying, on average, 30%-60% more than we should be for our homes based on our incomes and what we would pay in rent for the same homes. Only Belgium and Norway were deemed to have more expensive real estate than Canada.

In case you feel like shopping elsewhere – real estate markets that are currently undervalued include Japan, Germany, South Korea, Ireland and Portugal.

Finally, just to add insult to injury, BMO Nesbitt Burns recently conducted a study of the housing market in Canada and the US. This research revealed that average home prices in Canada are a “towering” 62% higher than real estate in the US. Yikes!

http://ca.finance.yahoo.com/news/oh-canada-home-expensive-land-110000828.html

#42 TO and GTA SFH and condo stats -not looking good on 07.15.13 at 8:42 pm

Looking at the data that I have makes me wonder if the real crooks that made leave my country were actually that bad !
I am really curious to see what TREB might get out of this data for this first half of July

Here are the stats for today. I will soon post the stats for this mid month.

http://recharts.blogspot.ca/2013/07/gta-condo-stats-july-15-toronto-4.html

http://recharts.blogspot.ca/2013/07/gta-sfh-sales-and-stats-july-15-average.html

http://recharts.blogspot.ca/2013/07/to-sfh-sales-and-stats-july-15-avg-sold.html

My advice: compare the average of last month with the daily average for each type of house and each area.

It will be little consolation for the sellers of the last few days that the prices in June were higher

#43 DaleFromCalgary on 07.15.13 at 8:53 pm

It didn’t take long for the flood to goose prices in Calgary. The Calgary Herald ran an article today on Cowtown real estate which basically said “Whee! You’re richer than you think. And it IS different here.” There apparently is a mad rush to buy anything more than a metre above the high water mark.

The link to the story is here: http://www.calgaryherald.com/touch/news/calgary/Realtors+deluge+home+buyers+Calgary+after+last+months/8662447/story.html?rel=841484

#44 craig on 07.15.13 at 8:54 pm

Historic low rates = historic high prices for houses.

Rates start to climb, prices drop. Why are so many struggling with this basic concept.

House prices will level off if rates level off.

If rates continue to climb prices will continue to decline.

Then throw in the new mortgage rules and things get tighter and prices decline a bit more. Pretty basic.

A collapse…..not a chance. Some here are just scare mongers and obviously FOS.

#45 DreamingInTechniColour on 07.15.13 at 8:57 pm

What a great time it will be to be a”pots and pans” lawyer (divorce), when the market hits the rails.

#46 Realtor # 1 on 07.15.13 at 9:02 pm

everytime there is a change in rules or rates ” a crash is coming!!”
We have 70% ownership in the GTA – OK so why are sales only down 15%
35 year amor rate to 25 year- prices continue to rise
tightening of credit – N0 crash

The problem with these predications is that its been going on for years and you never have a hard timeline.

As rates rise and prices will adjust but the carrying cost
will be relatively the same.
BoC will not raise interest rates, there is no need to with mortgage rates rising it solves his housing and credit issues associated with housing like HELOCs.

Prices will not hit the 08/09 level.

#47 Bigrider on 07.15.13 at 9:09 pm

Before all these quoted ” smart” Americans start trying to find ways to short our RE market , they better do a full analysis on the downside risk to their shorts from all the Italians inhabiting the GTA.

They know not the full extent of the obsession of the pasta eaters for RE

#48 Bo Boka on 07.15.13 at 9:09 pm

“I mention all of these Americans and various other foreigners since we never heed native intellectuals like William Shatner, Justin Bieber or Pamela Anderson until they cross that bridge. Does this mean we’ve simply lost perspective, sitting here with our beer and Timbits, staring into the national navel?”

That was funny. I would say that on average Canadians are downright dum. They do not have a clue.

#49 TO and GTA SFH and condo stats -mid month disaster ? on 07.15.13 at 9:10 pm

http://recharts.blogspot.ca/2013/07/july-mid-month-preliminary-numbers.html

#50 HOMEless on 07.15.13 at 9:12 pm

You CANNOT be truly Canadian if you don’t owe a HOME, period.

Do you know, why? Here is the story:

. . . “We feel Canadian. We feel we belong here. Our status is just details.

… Since they came to Toronto from Mexico, this family has led a life of secrecy, while buying a home and running a successful business.
. . . They put a $120,000 down payment on a $650,000 home and got a bank mortgage under Carlos’s wife’s name and a separate $50,000 loan (at 15 per cent interest) from a private lender. Their monthly mortgage payments include $2,200 to the bank and $850 just for the interest on the one-year private loan. . . . “We put every single penny into this house. It is our biggest commitment now. We can’t miss a payment.”

Source: Toronto Star, July 14, 2013
Does this undocumented family deserve to stay in Toronto?

http://www.thestar.com/news/immigration/2013/07/14/does_this_undocumented_family_deserve_to_stay_in_toronto.html

#51 Bo Boka on 07.15.13 at 9:13 pm

Grossly over valued, no doubt. How about construction quality? Any numbskull that can swing a hammer call themselves a contractor here in Victoria.

#52 takla on 07.15.13 at 9:18 pm

post#22….Ahhh… saska-bush,hit the pavement after grad ’76 and ended up there,my other choice was Okalla……wont go there…..never want to go back to stoon as well…..

#53 len on 07.15.13 at 9:26 pm

#34 Peter and #44 Dale

I saw that article and just shook my head: Anecdotal evidence from Calgary Realestate “specialists”. Think about it: 25 houses were condemned, later reduced to half that so right there, additional 12 potential buyers. Apartment dwellers: to what extent were they affected by the flood? I saw no mention of apartment buildings being condemned. I also know that 300 temporary housing units will be established to handle those who trully have been displaced.

The realestate industry treats people like Pavolov’s dogs – probably to a good effect. Now they are trying to whip up a frenzy – you know, don’t let a good crisis go to waste! It is actually shameless and eventually, self destructive in the long run.

The one interesting aspect of the flooding is the new restrictions in the pricest areas of the city. What is the value of the “million” dollar homes in those “don’t pay a cent in a future disaster” going forward? What bank will loan money against a property that has flooding warning attached to its title and its owner is on his or her own?

Now that would be an important story impacting the realestate market – not a peep from the propaganda organs. People really need to understand that they are on their own, analyzing the situation through their own prism, and try their best not be let others mislead them.

I am pretty sure, that people are mostly less dumb in aggregate. A few fools will be influenced and snared – those are the marks and they are willing participants.

My two cents

#54 retired Boomer - WI on 07.15.13 at 9:34 pm

About time to goose up those short rates. We are in recovery about as far as we are ever going to get without providing some CASH for the RISKS.

long term rates might follow, but why should anybody settle for the crap 1,3, 5, 10, and 30 yr bond rates anymore?

Hey, want to borrow money, MY money, I want adequate compensation for the risk.

After 5 years, getting a little antsy here….

#55 steve p on 07.15.13 at 9:49 pm

Great piece. If I may add my thoughts I think that the prices are high because there is a pyramid dynamic involved. The prices are not reflective of the rental value and of the income levels of the population.

#56 CalgaryFloodBoom on 07.15.13 at 9:56 pm

#44 DalefromCalgary

…and wait for it Dale, the loudmouth BobT, self-appointed Truth Teller of Calgary real estate will be spinning it up our wazoos probably by tomorrow. You can bet he’s all over ‘dat!

And you’re welcome Blob for all of those new fans “clicking” over to your blog from the evil Greaterfool nation.

#57 Cory on 07.15.13 at 9:57 pm

While your comments and logic are definitely sound Garth, since the real estate cartel controls the stats inbound and outbound, they will pump this market more than all of the pumps pumping water from basements in Calgary. The market will not die. It is definitely not a slow death here, it is an ongoing lie and we don’t have any politicians who will right this wrong.

Low rates inflate prices it’s that simple. Same as longer amortizations on new vehicles purchases distort pricing to the high side as well.

The pumping from realtors who can typically barely spell let alone give financial advice, is almost taunting the Feds to tighten rules yet again. If they were smart….and we all know they are not, then they would stay below the radar and stop their lies and pumping to avoid being in the spotlight. These people could learn from the Rothschilds or Hells Angels for example….lol

#58 Happy Apartment Dweller on 07.15.13 at 10:03 pm

Hi Garth, I love the typical airhead real estate agent quote at the start.

There is absolutely no question where real estate is headed in places like Vancouver. The only debate remaining amongst thinking persons is around which one of the dozens of contributing factors that could trigger the correction (which is already underway) will first bring it into a more significant event.

One of the more visible aspects in Vancouver is the thousands of condo units about to hit the market. But wait we had more people leave the province in the last 12 months than came here. How does that end in the supply – demand economics 101 class?

Then there’s interest rates, demographical shifts, over extended owners, utilities , taxes and cost of ownership growing steadily, aww come on people this is not rocket science where it is going.

Sure the prices are persistent, we all know the reasons for that. Denial of owners trying to sell and manipulation of marketing message by the cartel. Neither of those factors can stand the test of time.

People who are close to the market (yes even real estate agents) and who can make some educated guesses already know what is going on. It’s just a matter of when and of course F and H will do their best to try and make it after the next election.

#59 Canadian Watchdog on 07.15.13 at 10:09 pm

Think you'd be able to tell if the market is crashing by looking at average prices? View the following table showing 2012 GTA housing data compared to a hypothetical crash model with average prices remaining 0% changed year-over-year. Table Average resale prices mean nothing when sample size and volume is declining.

If you missed it, this is what Toronto's total housing sales looks like. For you analysts, have a look at JPM's China property weekly report to see how pre-market futures (primary) and resales (secondary) are analyzed, properly.

Canada has serious legal issues relating to a lack of transparency (CBA/CMHC/RE boards), incestuous regulators (OSFI, FCAC) and a conglomerate media industry that lacks investigative news against the interest of companies that support their ad revenue. The notion that everything is fine based on limited data is exactly what will tip this market over when our government et al are forced to reveal what's really going on behind the scenes. 

We've now securitized $1.1 trillion worth of debt and sold the bulk of it as AAA, all on good faith that if anything goes wrong, you, the taxpayer, is paying for it. We already know how this ends, unless it truly is different here.

#60 Old Man on 07.15.13 at 10:26 pm

#49 Bo Boka – do you think Pamela Anderson is hot? I have a 12 x 9 in her birthdate suit that is signed, and will blow it off for $500.00, as need to get rid of some of my porn stuff.

#61 Cristian on 07.15.13 at 10:26 pm

Right on.
Other than that, the word “ex-pat” does not exist, unless you want to indicate someone who used to be called Pat but changed his name in the mean time, and in that case you should spell it “ex-Pat”.
The correct form is “expat”, abbreviation of “expatriate”, coming from the latin words “ex” (out of) and “patri” (fatherland).

#62 KommyKim on 07.15.13 at 10:30 pm

RE: My question to you is: is margin or more importantly the growth of magin responsible (wholly or partly) for the rise we have seen in the S&P?
Thanks
Companies make profits and pay dividends. Houses don’t. — Garth

Yes, but have profits increased by 18% since the start of this year? The S&P has gone up by 18%. People rightfully wonder how much of the S&P’s rise is attributed to economic growth and how much is QE. All this talk about tapering is because the FED is afraid of creating new bubbles.

#63 Smoking Man on 07.15.13 at 10:35 pm

#40 :):( Ying Yang on 07.15.13 at 8:17 pm

Started early tonight, booze and auto correct don’t mix well.

But I bet you read my post more than once..

See the genius in that….

#64 chojo88 on 07.15.13 at 10:42 pm

Can we please have the links to this article from the US analysts? I tried googling and unable to find. Thanks anybody and everybody.

#65 Nemesis on 07.15.13 at 10:51 pm

@BoBoka/#49

You forgot this one…

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

[NoteToLordLunenberg: I always thought MissLabatts knew exactly what she was doing. Not so sure about CaptainKirk... although I can personally vouch for Lt. Uhuru.]

#66 Smoking Man on 07.15.13 at 10:52 pm

Actually had a tear this weekend

My youngest sons post on Facebook and re my birthday.

He posts a pic of me and Bruce Willis on FaceBook

(Happy 50is bday, to the biggest beauty I know, still living the dream, never given a f©¥¢ about nothing.
Doing, dreaming and always having fun, you filthy animal) .

Love that kid

#67 Nosty in Vladland on 07.15.13 at 10:54 pm

-
Larry Silverstein SMan, remember WTC Building 7? If some of the dirt is revealed [inside / mossad job], which it probably won’t, it would certainly change people’s views on a lot of things!

#68 Hosernomics — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate | The Affluent Boomer on 07.15.13 at 10:58 pm

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

#69 not 1st on 07.15.13 at 10:59 pm

I wish there was a reverse Brad Lamb ETF. I would be buying that sucker hand over fist.

#70 Big Sexy on 07.15.13 at 11:01 pm

The way I see this, is that the bump in sales in June is:

1: Only a rise when compared to May. It’s still less than last year,
And
2: If so many people are rushing to lock-in pre-approved mortgage rates while home prices are still high, how bad is it going to be in 2018 when the rates are closer to 10%??? Its going to be a bloodbath!

Funny, it was announced at work today that I was moving to the ‘Peg, and within 1 hour I had 3 co-workers trying to sell me their house. Sign of the times?

#71 Yitzhak Rabin on 07.15.13 at 11:03 pm

Agree 100% with Canadian housing.

In all of this, how can you still like the banks? Even if they unload most of their mortgages to CMHC and Genworth, a large portion of their earnings still come from mortgage originations. What line item in their income statements offsets that drop?

Also, when 19% of our economy is real estate, finance and insurance dependent, isn’t it reasonable to except any harm in those sectors to also hurt the banks earnings?

#72 Okanagan Kingpin on 07.15.13 at 11:07 pm

Great insight tonight.. I have been pondering similar trains of thoughts over the last few days and spat it out here: http://mayer320.wordpress.com/2013/07/14/extraordinary-popular-delusions-and-the-madness-of-crowds/

#73 butgarth on 07.15.13 at 11:11 pm

Garth.

The US housing market crashed to the depth that it did for many reasons, but none of the main ones were simply because prices were too high. Worst recession since the 30s: check. Huge job losses and big real economy impact: check. Fraudulent underwriting: check. and the list goes one.

So my genuine question is this: assuming that employment in Canada is stable and there is not major shock that results in a major upsurge in arrears, is your crash simply a price crash with a whole lot of people with houses worth less. Or, are you thinking a major upsurge in arrears and ultimately claims? lets take the conversation to a deeper level, shall we, as I have investments to manage…

#74 AK on 07.15.13 at 11:21 pm

#63 KommyKim on 07.15.13 at 10:30 pm
“People rightfully wonder how much of the S&P’s rise is attributed to economic growth and how much is QE. All this talk about tapering is because the FED is afraid of creating new bubbles.”
——————————————————————–
The S&P 500 is at the early stages of a secular bull market. You should stop wondering and try to profit from it.

#75 Ralph Cramdown on 07.15.13 at 11:21 pm

#63 KommyKim — “Yes, but have profits increased by 18% since the start of this year? The S&P has gone up by 18%. People rightfully wonder how much of the S&P’s rise is attributed to economic growth and how much is QE.”

And how much is sentiment?

Nobody says you have to buy the stuff that’s gone up. There’s markets and individual stocks that have lousy looking charts if that’s your bag. Or be a momentum player, buy the stuff that’s going up and hold it until it stops. Or be a fundamentalist and find stuff that you think is a bargain. Or buy the index, keep buying periodically as you save more money and the dividends come in, and trust that over your long holding horizon you’ll do OK.

#76 NEL on 07.15.13 at 11:24 pm

http://findcalgary.files.wordpress.com/2013/07/weekly_stats_07-14-13.png

Don’t believe anything that the Calgary Herald says about real estate. From July 1-14th 2013, as compared to 2012 sales in Calgary are actually down slightly. I went to an open house yesterday that was a couple of streets over, the house was on busy street, was much smaller then ours (we rent) and in about the same condition. If we were to buy that house we would end up paying at least $700 more per month then what we currently pay for rent. Calgary will not be different, despite the best of efforts made by the Calgary Herald and the Realtors here to pump people full of fear that they need to buy NOW or forever be priced out of the market.

#77 B on 07.15.13 at 11:26 pm

Every day brings a great blog, but today’s was, in the words of my little son, “greaterer”!

#78 I am in C on 07.15.13 at 11:33 pm

Garth
The Canadian house market will NOT crash. It is going to hover there for the next decade, slowly sucking the life out of all the young house hornys who bought in the last 5 years.

#79 Saskatoon Land of the Living Dead on 07.15.13 at 11:37 pm

@ #25

I just really don’t get it. What do we have here in Saskatoon that makes the prices of everything like houses and rents to be this exorbitant. I met lots of delusional people talking that the prices of home here in the future will rival Vancouver.

Damn I was laughing so hard on the inside.

I wish I can get away from here. To be honest I never mind taking a pay cut not to experience another horrible winter again.

Yes, “It Different Here.” One of the most delusional places in Canada.

#80 old gringo on 07.15.13 at 11:54 pm

Just aheads up for any ex-pats on the site.
Met two more couples this week, both seniors , that have thrown in the West Vancouver towel to move south of the USA border.
It’s all about quality of life, or what’s left of it.
adios my pool awaits

#81 worried realtors on 07.16.13 at 12:00 am

You can see the fear from the out of work and hungry for a sale realtor. Sales are dropping fast and hard. Sales always get adjusted down after they reported higher sales numbers for the month as realtors inflate sales by 10 or more % to hide the crash. The market in the gta is falling hard. Why else would out of work realtors be posting and wasting their time here. I think the answer is obvious.

#82 T.O. Bubble Boy on 07.16.13 at 12:01 am

Things must be turning ugly out there… BMO is now posting “seasonly adjusted” stats in their monthly housing market report:

http://www.marketwire.com/press-release/canadian-home-sales-show-highest-quarterly-growth-since-2010-bmo-economics-tsx-bmo-1811129.htm

They also highlight the “sales to NEW listings” ratio, which I believe is another new franken-number (since the traditional metric is sales to active listings, not new listings).

#83 Left Vancouver and Happy on 07.16.13 at 12:05 am

“In fact, in every city it’s cheaper by far to rent than to own.” -GT

I’m currently renting a waterfront condo in the Okanagan for $1200/mth. To ‘own’ this place, with a standard 25 year, my carrying costs would be over $2400/mth… Owning is so last decade :)

#84 KG on 07.16.13 at 12:07 am

Garth, I guess you disagree with Eisman on his Canadian banks assessment in relation to real estate exposure ?

#85 OZY - Conspiracy man! on 07.16.13 at 12:08 am

Conspiracy man! We all know who runs those monopolistic banks, and that thye are in bed (the banks) with the elected (by them) government officials.

So, prices dip more than 5% in a year, mortgages SPECIALS will pop again.

They are smart enough to model 1.5% a yer mortgages (shall cost lenders to atract 10% to lend 100%, so maybe 0.5% a year on the bond market)

Garth if we see 10% price decline and 1.5% mortgages, and prices recover, who’s gonna be the iconomist?

#86 aprilnewwest on 07.16.13 at 12:11 am

#44 – Realtors will say whatever it takes to bring in more buyers.

#87 Donald Trump on 07.16.13 at 12:11 am

The world ends when Smoking Man and Old Man STFU

#88 OZY - Ying Yang - start your imagination man on 07.16.13 at 12:12 am

OZY – Ying Yang – stop reading letter by letter and start your imagination man! Bless god for people like Smoking Man to force you use more imagination :)

==========
#40 :):( Ying Yang on 07.15.13 at 8:17 pm
#35 Smoking Man on 07.15.13 at 8:00 pm

WTF are you saying?
Man English is my second language and I can put better sentences together. Wow, how do you survive Smoking Man?
.

#89 aprilnewwest on 07.16.13 at 12:14 am

#34 – Are you not suspicious of this seeing as it’s coming from realtors???

#90 45north on 07.16.13 at 12:34 am

Famed US economist Robert Schiller: “I worry that what is happening in Canada is kind of a slow-motion version of what happened in the U.S.”, he said in 2012. And more recently he warned about our unsustainable, steaming pile of consumer debt.

Schiller is right it’s a kind of slow-motion version of what happened in the US. It’s happening right now, sales are down across the country. You know you have to expect that realtors pump real estate – it’s how they get paid.

#91 realist on 07.16.13 at 12:55 am

Very interesting article. It still amazes me how people can continue to buy and finance houses at a half million plus considering the economy in my opinion is still “weak”, especially comparing to 2008 and prior. Also, something I was surprised at reading recently is there is a big percentage of car loans are now being financed at 8 year terms. This has never occurred to this extent till now. Are there that many people who are living pay check to pay check? Any wobble in the economy could create a domino effect in Canada’s retail market. Interesting times for sure out there. That being said people are still able to scrape together monthly payments for their 1/2 million dollar house.

#92 Threesome on 07.16.13 at 2:26 am

A little TLC is all that’s needed:

http://www.postcity.com/Eat-Shop-Do/Do/February-2013/Bring-it-on/roundtable-turner-27217.jpg

#93 betamax on 07.16.13 at 3:37 am

Great post, one of your best.

Then you still get realtor responses like #47 who apparently can’t read.

You can lead an ass to water, but you can’t make it think.

#94 Tony on 07.16.13 at 7:14 am

The problem with owning is home prices are falling and will continue to fall. Existing (resale) Edmonton apartments and townhouses cost about half of what it would cost a renter. Put another way the carrying costs of a resale apartment or townhouse are about half of what a renter would pay in a calendar year. Obviously rents will fall there in the future.

#95 Tony on 07.16.13 at 7:24 am

Re: #77 NEL on 07.15.13 at 11:24 pm

Yes those backwoods hillbilly hicks from Calgary will learn. I see real estate in Calgary is falling as we speak.

#96 TurnerNation on 07.16.13 at 7:45 am

‘Cause we’re always being hosed!

Paying some of the highest telecommunication costs in the world (developing or not).

If you’re using cable internet your monthly scraping is towards the Shaw or Rogers dynasties.
(Even the ‘alternates’ Tek Savvy, Acanac, et al., are running over Rogers lines.)

Pick your poison. Scion on the bottom line.

But you are free to leave at any time!!?

#97 TurnerNation on 07.16.13 at 7:48 am

#31 Nemesis

Just the other day I noted the greatest State resources and state-sponsored violence is directed towards the working poor. When OCAP protest city hall the police response is worthy of a rebellion. This for a group of unarmed, weak, sweaty folks?
In your place! A phalanx will swam a single person and knee him to the ground. No treatment is too rough for those…those…(spit it out) protestors!
What we fought for, eh. Who’s the real enemy.
Yet when your car or home is broken into they won’t even come by and investigate.

Next time tell ‘em a ruffian is attempting to climb up your social ladder. Instant response.

#98 craig on 07.16.13 at 7:59 am

Good read and reality check on where the US is really headed.

Debt forecast: U.S. will look like Greece by 2021

http://www.marketwatch.com/story/debt-forecast-us-will-look-like-greece-by-2021-2012-09-06

The US is recovering. Your constant bash-America posts are getting embarrassing. — Garth

#99 Ralph Cramdown on 07.16.13 at 8:02 am

#74 butgarth — “The US housing market crashed to the depth that it did for many reasons, but none of the main ones were simply because prices were too high. Worst recession since the 30s: check. Huge job losses and big real economy impact: check. “

http://research.stlouisfed.org/fredgraph.png?g=kDg

#100 Wes Mantooth on 07.16.13 at 8:10 am

In a city the size of Toronto, what makes it reasonable that an “average” person should be able to afford a home?

Without fuel the fire extinguishes. — Garth

#101 craig on 07.16.13 at 8:36 am

The US is recovering. Your constant bash-America posts are getting embarrassing. — Garth

I’m pointing out the obvious and in line with your thoughts on the real estate board fudging the numbers.

Do you not think perhaps the US Gov’t is doing the same thing.

101% Gov’t debt to GDP and trending to 150% by 2021 will not take anyone to their happy place.

Rates are not going up and here’s why as I’ve said before;

Today the federal government pays a paltry 2.6% interest on its debt. Even if the Federal Reserve can hold rates that low for the next nine years, the U.S. will pay almost $1 trillion in interest in 2021. That’s more than the government currently spends on the national defense budget, more than it spends on Social Security, and more than the cost of the entire Iraq War.

No, the US government is not fudging statistics. Park the tinfoil. Maybe you should spend this inordinate amount of time on your own finances and family. The Americans will take care of themselves. — Garth

#102 Steven on 07.16.13 at 8:54 am

They had trouble understanding how they could be in a city (Toronto) where the average income is less than $100,000 and the average SFH costs $866,326.

But not me. I understand it perfectly. Most people are nuts.

Garth that is the best explaination concerning the nature of humanity in general and Canadians in particular. 85% of people in the world are RHD positive. (positive blood type)
I wonder if there is a correlation between having something in common with the rhesus monkey and not being quite right in the head? What do you think Garth?
By the way I am a type O negative and most would consider me a little off beat. In a world of crazy people the sane man is considered to be nuts and out of line.

#103 Mike2 on 07.16.13 at 9:04 am

“destructo-Canada hedge fund” – which one is this? and how does it work?

#104 gotthardbahn on 07.16.13 at 9:13 am

Hey Garth -

When I started reading your latest missive I thought it was, like, last February. Same ol’ same ol’. C’mon up to Yonge & Eligible and count the tower cranes! Each one a brand new condo with several more waiting to be excavated and even more being mooted. That, sir, is demand!

One rule I have when reading financial market literature is to discount any article – and I mean ANY article – which quotes that old ‘gasbag’ Paul Krugman. Talk about overrated. Sure I know he won the Nobel Prize – big deal. So did Yassar Arafat, Al Gore and the European Union, which tells you where the Nobel committee is coming from. As for the rest of these so-called ‘experts’ you quoted with such approval, well, they claim they’re experts, so it must be true, right?

Perhaps the Canadian RE market will collapse, perhaps not. Maybe we will just muddle through, like we always have. But to quote a pack of overrated, overeducated Americans indicates to me, at least, that you have run out of arguments. JMHO

Besides being a guy who lives besides cranes, who are you? — Garth

#105 The American on 07.16.13 at 9:27 am

At #48: Bridger, Americans understand perfectly what it means to be Italian. Far more than what Canadians understand. Today, Canada has about 1.5MM Italian Canadians. The U.S. has over 17.5 Million Italian Americans. The U.S. has more people of Italian descent both in numbers and as a percentage of the population.

At #74: butgarth, you asked, “So my genuine question is this: assuming that employment in Canada is stable and there is not major shock that results in a major upsurge in arrears, is your crash simply a price crash with a whole lot of people with houses worth less.” The answer is easy. TODAY employment in Canada is not nearly as stable as it was even a year ago. When nearly 20% of your nation’s economy hinges on the sale of wood and nails and concrete, you have a MAJOR problem. Once the arrears start trickling in (and they already in in your nation at an ever-increasing rate), it only snowballs from there. It effectively becomes an unstoppable and growing mess until it finds the bottom, adversely affecting not only house prices, but people will lose jobs, which further compresses those home prices, consumer spending will lessen, affecting retailers, restaurants, services, manufacturing everywhere. It becomes a mess. Or, have you all thought that deeply about it? It isn’t like it only affects a few people who are connected to a single industry.

At #91: 45North, a slow melt in Canada is wishful thinking. The crash itself is at the very beginning stages. Although the crash will be slower in nature than what happened in the U.S., it will not be as slow as what many Canadian economists would like to predict or convey to the masses. A primary contributing reason to the slower crash in Canada is immense lack of transparency to data, readily available at consumers’ fingertips. Canadians, band together and DEMAND MORE. This lack of transparency in your system is allowing the realturds to bold-face lie to you. If Canadians had real information available to them today, you would see a crash taking place much more quickly because they would have ability to fight the lies the realturds are spewing.

#106 sciencemonkey on 07.16.13 at 9:28 am

@101 Wes Mantooth:
Even though I wish it was different, I think I agree with you. Someone previously said on this blog that the average house (for the average person) in Toronto is a condo or a rundown townhouse. Just one reason among many to avoid this city if you can.

On the topic of buying cars, I bought my Honda Fit cash because a) I couldn’t find significant savings on used vs new (high resale value, unfortunately), b) I was able to negotiate a better price for cash, and c) Honda’s finance rates are ok, but definitely not rock bottom like some other manufacturers’ rates. I suppose 2.5% for 42-48 months and 3% for up to 84 months isn’t too bad, but I didn’t want to have to worry about monthly payments.

84 month car loans and Kias are annoying because they jack up car prices, and the increased # of cars on the road is bad for traffic.

#107 frank le skank on 07.16.13 at 9:38 am

Its different here in Canada:

1) Incomes can stagnate while house prices inflate to infinity.
2) Interest rates never rise.
3) We’re not making more land.
4) Immigration will save housing when Canadians can’t afford it.
5) Our banks are responsible and are not interested in making money, they just want to put everyone in a house.
6) Our high moral standards make us impervious to weaknesses that affect other nations.

Not sure if I left anything out here? I guess you can shut down the blog now!

#108 D.D. Corkum on 07.16.13 at 9:44 am

#63 KommyKim on 07.15.13 at 10:30 pm

“[...] have profits increased by 18% since the start of this year? The S&P has gone up by 18%. [...]”

————-

1) Share prices partially reflect the estimated value of future earnings. Keyword: future.

2) Share-buy-backs help to account for some of the rise. Prices are climbing faster than market caps.

#109 Bottoms_Up on 07.16.13 at 9:47 am

#101 Wes Mantooth on 07.16.13 at 8:10 am
———————————————-
Exactly. Toronto has a couple centuries of accumulated wealth; many people have lots of equity. And many don’t. The average family certainly does not align with the ability to purchase a SFH.

The average home in Toronto is more a dilapated, garage-less townhouse, that 350 sqft SFH, or a new 2-bedroom condo.

#110 Bottoms_Up on 07.16.13 at 9:49 am

And for those Americans that don’t understand:

Toronto is our New York.

Ottawa is our Washington.

Montreal is our New Orleans.

And Vancouver is our Hawaii(?).

#111 frank le skank on 07.16.13 at 9:57 am

I’m now starting to notice the pumpers like #45 craig and #47 Realtor# 1 are altering their positions regarding real estate. Instead of saying prices will NEVER decline, they are now changing their tune by saying that prices fluctuate with interest rates and mortgage rules changes. Now they are debating over semantics as if that’s always been their position. They are now saying that there will be a decrease in value but that it won’t be a crash. They will claim this has always been their position, however this blog knows better thanks to Garths archive.

#112 Daisy Mae on 07.16.13 at 10:13 am

#21 Mocha: “It looks like F was one of the only guys to keep the same post in the shuffle….”

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

Moving him out of that post means the feds would have to admit his/their colossal mistakes…and they’re not about to do that. The damage has been done. Can’t get any worse. Making a change won’t help matters.

#113 Daisy Mae on 07.16.13 at 10:14 am

CBC:

“For seven years, the prime minister has maintained an iron grip on the government, his ministers routinely reduced to delivering policies and pronouncements scripted by his office.

Branding itself the “Harper government” was both deliberate and expensive.”

#114 The American on 07.16.13 at 10:33 am

At #111: Bottoms_Up, you said:

Toronto is our New York.

Ottawa is our Washington.

Montreal is our New Orleans.

And Vancouver is our Hawaii(?)

I’d have to differ with you on Vancouver because only Hawaii is Hawaii. No getting around that. Vancouver is Canada’s “Miami.” Here are the respective price declines these cities saw in the U.S. from peak to trough:

New York lost 25%
Washington D.C. lost 26%
New Orleans lost 34%
Miami lost 47%

#115 Shack@63 on 07.16.13 at 10:36 am

I was once advised by someone much older and wiser that you should never pay more than 2-3 times your annual income on your house. Made sense at the time. Still makes sense today. It continues to astound me the multiples people are paying for a house.

And I never looked at my house as an investment. It’s my cave where I hang out, sleep and live my life. Investments on the other hand provide cash flow or growth that I can convert to cash flow. I always viewed the conversion of home equity to cash via debt as a form of enslavement…maybe I’m the weird one here.

#116 Doug in London on 07.16.13 at 10:49 am

For as far back as I can remember, Americans have been criticized for their lack of knowledge about countries outside their own, including Canada. However, when it comes to the state of our bloated out of control real estate bubble, it appears the Americans know more about our country than we do. It’s comical that while we Canadians take in a lot of other cultural and entertainment influence from the United States, for the most part we haven’t observed what happened to real estate there, connected the dots, and figured anything like that could happen here. If my memory serves me right, both countries experienced a real estate bust in the early 1990s.

#117 Buy? Curious? on 07.16.13 at 10:52 am

Hey Garth, what about the pool of morons that say that they’re just waiting a year or two or until the real estate market crashes, then they’ll swarm in and get a great place for “20%, 30% or even 50% peak of the market!” When these turkeys start to buy in as a herd when news reports are saying the market has “crashed”, won’t that keep prices stable?

http://www.youtube.com/watch?v=HHxNu-o3sHk

#118 sue on 07.16.13 at 10:53 am

#74 butgarth

House prices decline first and then people lose that “wealth effect” and stop spending. That behaviour affects businesses signifigantly and the unemployment comes 2nd.

#119 Iconoclast on 07.16.13 at 11:03 am

Krugman didn’t win a Nobel. The economics guys just like to photobomb the real Nobels, and hang around them to try to look smart. Damn pseudo-sciences.

Explained here:
http://www.dailykos.com/story/2013/04/14/1167782/-Paul-Krugman-Did-Not-Win-a-Nobel-Prize-in-Economics

But Dronin’ Obama won the peace prize… and that is a real Nobel. So what the heck. Why not.

#120 Ron on 07.16.13 at 11:13 am

Honest Ed’s to turn into a Condo. Mr. Lamb seems happy.

“It would be great,” said Mr. Lamb, about the Honest Ed’s site. “That thing is an eyesore.”

#121 dienekes on 07.16.13 at 11:25 am

S’toon is looking pretty bad. Lots of houses for sale. Nothing really moving.
Who wants to live in Evergreen where the housing density is the highest in the city, 8.5 houses per acre?
Take a drive down 42nd street, what a mess.
Do not move here, there are no jobs, unless you want to work for contractors out at Agrium and get screwed on overtime and travel allowance. The companies are getting double time on the weekend for your efforts, why should you only get time and a half?

#122 Post Haste on 07.16.13 at 11:29 am

We bought our first home in 2002 – we never even thought of a bubble was a few years away from brewing. Our “shelter” was a perfect change from years of renting from sleeze bag landlords. I had terrible luck in my 3 separate rentals..each had it’s own set of horrors.

In 2005 – I thought things are surely wrong, prices are moving up to quickly and it appeared everyone was rich but me. I first followed an American blog and those who wrote then were saying the same things we Canadians are saying now – what gives, how does this defy logic. I was convinced to sell in 2005 which would have provided meager price appreciation at the time. I surely could not invest the profit to cover monthly rent expenses…A good thing my wife said no way – now, we are inches away from paying off our home that was truly affordable at the time we bought – timely was everything..

My father-in-law who lives in Kleinburg – and this area has seen absolutely insane price increases – well, his neighbour’s son is a sales rep for a new home development in Nobleton, just minutes north of Kleinburg. I normally don’t even bother asking – but we talked last weekend about how sales were going – he completely floored me with his response. HOT – first phase which starts at $799K all spoken for. How, not everyone is making $250K a year – his response – There is an army of well to do foreign buyers – not investments but actually meant for them to reside in. All his sales were from 3 specific regions around the world (won’t name them as I will be accused of racism) – This is what he claims is why the housing market has moved steadily upward. Homes in this subdivision exist only by their presence.

Garth, love the blog – but what happened yesterday doesn’t mean it repeats tomorrow. I agree the housing market needs a major adjustment. I as a homeowner I hope for some type of normalicy – but we live in a differnt world – Canada is now a safe haven, with plenty or resources (fresh drinkable water) and not the extreme overcrowding in parts of the world.

I feel those who are waiting for a price correction will wait for some time – as long as Canada appears to be a solid democratic country – prices will keep steaming forward. There are millions around the world who can easily pay prices here – it’s the average working Canadian that will be left out in the dust!

#123 maggie on 07.16.13 at 11:31 am

hi garth

my husband and I are both in our early 30′s and have recently found out we’re pregnant. We own a 1 BR condo that we bought 5 years ago and we only have about 40k left on the mortgage. We would eventually like to move to a bigger home to accommodate our family. do u suggest we sell now and rent? we live in north york.

maggie

If you have made capital gains, then realize them. The condo prognosis is not encouraging. — Garth

#124 jerold on 07.16.13 at 11:37 am

problem with this blog is the implied formula
CANADA = VANCOUNVER + TORONTO

this just in. Try buying a place in Calgary. Not gonna happen. Prices aren’t going to drop, they’re not going to crash and it’s hell trying to find a place to rent. The economy is booming, people flock here in droves which adds solid fundamentals to house prices. Rated one of the best places to live in the world. What do you have to say about that? Oh right, you have no idea about anything other than Vancouver and Toronto

Actually, Calgary has been addressed here often. It’s not different. — Garth

#125 Ron on 07.16.13 at 11:42 am

Hopefully all these new high net worth immigrants know how to swing a hammer, because the only jobs in Canada are mostly real estate related. Most other industries have been in steady decline for over a decade now as all money just flows into real estate.

Spain??? Florida??? Here we come. Only thing different is that foreigners won’t be flocking here to buy their winter retreat vacation properties in Canada!

#126 gotthardbahn on 07.16.13 at 11:50 am

No. 105, and I quote:

‘Besides being a guy who lives besides cranes, who are you? — Garth’

A guy who spent twenty-odd years in the Canadian fixed income markets and the last thirteen in the foreign exchange markets. A guy who remembers Bill Miller at the Fed. A guy who has seen it all and, even better, HEARD it all.

BTW Don’t knock cranes, especially those big German all-terrain hydraulic units. They’ve been quite busy installing tower cranes at Yonge & Eligible -you know where THAT is, Garth – helping build all these condos you claim nobody wants to buy.

#127 @ #123 with all due respect and excuse my language on 07.16.13 at 12:10 pm

I feel those who are waiting for a price correction will wait for some time – as long as Canada appears to be a solid democratic country – prices will keep steaming forward. There are millions around the world who can easily pay prices here – it’s the average working Canadian that will be left out in the dust!

You seem to live in a fantasy world or to be strongly biased toward a forever going real estate porn otherwise I can’t explain the B$ with the democratic country with salaries very low compared with home prices and which country guaranteed bank loans for investors via CHMC putting the average Joe on the hook while 20% of the rich of this country got richer. That is real democracy.

Then you did not even breath before you spit the next one: “millions of ‘flipvestors’ from other countries can afford what the regular Joe, the lame Canadian can’t” That is how I read your gems above.

I have no problems with going back (and taking a good amount of money with me) from where I came if that makes sense. I am curious to find out where do you believe that your children and the children of your children will go if they can’t afford paying what foreigners can pay for a house in Canada.
While other countries ban such “investments” Canada and people like you encourage this and seem to be OK.

And I love the stupidity (excuse my frankness) “but what happened yesterday doesn’t mean it repeats tomorrow” followed by feel those who are waiting for a price correction will wait for some time – as long as Canada appears to be a solid democratic country – prices will keep steaming forward.

in other words you are saying it is not going to happen again unless if favours me !

#128 Ron on 07.16.13 at 12:14 pm

“BTW Don’t knock cranes, especially those big German all-terrain hydraulic units. They’ve been quite busy installing tower cranes at Yonge & Eligible -you know where THAT is, Garth – helping build all these condos you claim nobody wants to buy.”

Plenty of people want to buy… But problem is that most will also want to sell soon. Most people who buy real estate are investors who can’t do simple math. Similar type investors that chase penny stocks.

#129 @ #110 with all due respect and excuse my language on 07.16.13 at 12:16 pm

Exactly. Toronto has a couple centuries of accumulated wealth; many people have lots of equity. And many don’t. The average family certainly does not align with the ability to purchase a SFH.

The average home in Toronto is more a dilapated, garage-less townhouse, that 350 sqft SFH, or a new 2-bedroom condo.
Yeah and those centuries of wealth stayed hidden all this time and started surfacing like around 2008. Interesting thoughts … 6 months of RE education by any chance ?

#130 Kilby on 07.16.13 at 12:31 pm

aprilnewwest on 07.16.13 at 12:11 am
#44 – Realtors will say whatever it takes to bring in more buyers.
********************************************
That may be true of some, especially in big cities like Vancouver, many I know are decent and work very hard for everything they earn. Bankers, mutual fund salespeople, contractors, plastic surgeons, dentists, events managers all “say whatever it takes” to sell their products so why target realtors specifically? Home sellers and buyers have to take some responsibility for their own finances and futures, that is why this blog has so many readers.

#131 Puzzled Redneck on 07.16.13 at 12:32 pm

Garth, given all this I would imagine the TSX is not in for a happy time. If you were building a new portfolio, how would you handle the buy-in?

For that matter, you’ve suggested waiting to buy into bonds as well, so I suppose the question is more general.

#132 GCR1968 on 07.16.13 at 12:36 pm

What a fantastic post Garth! I absolutely don’t know what I would do without your wisdom. Sold a year ago this July for full asking price and have never felt better about the decision. I couldn’t get that money now for the exact same home in the area, so things are a chang’in. My personal banking officer at Scotiabank said that business is slowing down and mortgage approvals are more difficult to get.

#133 No Longer Innocent on 07.16.13 at 1:09 pm

Treb has released the latest condo figures… There wizardry has produced these numbers for the GTA:

Sales down 6%. New listings down 4%. Inventory up 2%. Prices up 1.7%. DOM up 7%.

http://www.torontorealestateboard.com/market_news/condo_report/2012/condo_report_Q2-2012.pdf

#134 :):( Ying Yang on 07.16.13 at 1:09 pm

#89 OZY – Ying Yang – start your imagination man on 07.16.13 at 12:12 am

OZY – Ying Yang – stop reading letter by letter and start your imagination man! Bless god for people like Smoking Man to force you use more imagination :)

==========
#40 :):( Ying Yang on 07.15.13 at 8:17 pm
#35 Smoking Man on 07.15.13 at 8:00 pm

WTF are you saying?
Man English is my second language and I can put better sentences together. Wow, how do you survive Smoking Man?

Smoking Man is 99% neurotic and 1% rational. It’s the 1% I like where he hits the target 99% of the time with his picks. His musings sometimes hurt my brain when I try to decipher them. I have connected my cousin back in Hong Kong to this blog and he has an excellent command of the English language but even he says WTF is this guy saying? What is very funny is that my cousin is also a VB code monkey working for HBSC.

#135 No Longer Innocent on 07.16.13 at 1:10 pm

Wrong link above… that is 2012.

here is Q2 2013 – http://www.torontorealestateboard.com/market_news/condo_report/2013/condo_report_Q2-2013.pdf

#136 Steve-O on 07.16.13 at 1:21 pm

If prices will drop and interest rates will rise, when is the right time to get in?

I currently have a pre-approved rate of 2.89% and I need to use it soon. I am seeing my local market soften up.

I could let my rate expire and buy next year or the year after but will the price difference be justified after accounting for the higher interest rate that I will get at that time?

#137 BNOBPOF on 07.16.13 at 1:21 pm

Buy now or be priced out Forever….

lol

Sorry, just reminiscing about realtors and their sales shtick last year…

#138 TnT on 07.16.13 at 1:50 pm

#137 Steve-O

Depends on what product and market you are talking about.

Just for fun, factor in a 7 % decline in purchase price 2 years from now with a 2 % rise in your rate. Also add in 2% gains from your down payment over the same 2 years and how much you paid for rent.

#139 Ralph Cramdown on 07.16.13 at 2:11 pm

“Debt forecast: U.S. will look like Greece by 2021″

A huge slice of the population employed with unaffordable entitlements in the civil service, endemic tax evasion, an economy hugely reliant on tourism and monetary policy outsourced to the Bundesbank? Somehow I doubt it.

#140 Smoking Man on 07.16.13 at 2:34 pm

#135 :):( Ying Yang on 07.16.13 at 1:09 pm

See, now you know what I go through when I read Conrad Black….

Print paper journalism is history anyway… Garth timed his exit well..

#141 jess on 07.16.13 at 2:45 pm

whose hose is hosing who?

credit card debt

Whistleblower Linda Almonte, alleges that employees known as “attorney liaisons” signed “multiple stacks of affidavits” without looking at the underlying documentation. She alledges that 11,472 out of 23,000 cases in one portfolio, or 50%, were “missing adequate documentation.”
==============
- possibility that derivatives trades could simply be shunted to the laxest jurisdiction to escape regulation.

Americans for Financial Reform (AFR) in the U.S., who have been pushing hard to support efforts to close the offshore derivatives loophole, issued a press briefing recently under a headline that summarises the issue nicely:

“Cross-Border Exemption = Backdoor Repeal”

#142 Dienekes on 07.16.13 at 2:46 pm

#140 Ralph
Amen to that one.
I don’t think published numbers reveal how fast the US is advancing economically.
Inversely, Canada’s numbers are not revealing how much we are declining.
We had 34 men busy last year, we are scratching to keep 3 busy this year.
That could be partially due to the cold spring, but when the mines call and tell you they are out of money, they have to stop spending on capital projects, something is up.
And china is not truthful about their GDP numbers. They are not 7.5 this quarter, more like 3%. Not great for Canadian resources.

#143 LP on 07.16.13 at 2:59 pm

#141Smoking Man on 07.16.13 at 2:34 pm
Print paper journalism is history anyway… Garth timed his exit well..

****************************************
SM, this one’s for you:

I was visiting my niece last night when
I asked if I could borrow a newspaper.

“This is the 21st century,” she said. ‘I
don’t waste money on newspapers! …Here, use my iPad.”

I can tell you this…

That fly never knew what hit him!!!

#144 Post Haste on 07.16.13 at 3:02 pm

Hey Hey # @ #123 with all due respect and excuse my language on 07.16.13 at 12:10 pm

You are the biggest dip sh$t around – I didn’t ask for some loud mouth to rip my opinion apart – and 2ndly – you didn’t even get what I was trying to say.

You have some major pent up anger and need to see a professional – I quoted exactly what a sales rep told me – that is all – I didn’t say it was right or wrong!!

And if you compare our country’s standards to many in the world – we are a major draw – try to get out abit more. The #1 future cause of wars will be drinkable water – think for a second which country currently holds vast amounts of that ….. (are you still thinking?)

I think retards like you must be shipped off to a little island in the middle of no where as “one one gives a sh$t what you think ” – if you are gonna spew – at least under the facts at hand!! Geez Garth, how do you put up with such freaks!

Must be the calm, rational people like you who compensate. — Garth

#145 :):( Ying Yang on 07.16.13 at 3:06 pm

#141 Smoking Man on 07.16.13 at 2:34 pm
#135 :):( Ying Yang on 07.16.13 at 1:09 pm
See, now you know what I go through when I read Conrad Black….
Print paper journalism is history anyway… Garth timed his exit well..

See now I don’t understand at all, as I understood every word you just typed. Now my brain really hurts as you are making perfect sense. Look at the means which a man employs, consider his motives, observe his pleasures. A man simply cannot conceal himself! That’s it I’m going for a smoke, need to clear my head.

#146 Whinepegger on 07.16.13 at 3:53 pm

No, the US government is not fudging statistics. — Garth

Au contraire. The Americans, and probably innumerable other countries, are fudging the numbers and have been doing so, incrementally, for some time. Read pages 43 – 59 of this report: http://ftalphaville.ft.com/files/2013/01/Perfect-Storm-LR.pdf
Chart shows that, if stats were calculated in the same manner since 1981, the Americans have seen a contracting economy since 2001(Fig 4.6), unemployment is at 15%(Fig 4.5), not the 7.9% reported and inflation is around 5% higher than reported (Fig 4.2).
But all is relative. If current calculation criteria are used, the American situation is improving marginally. Instead of standing in a pigpen waist-deep, its now only knee-deep. Still getting a ‘booter’.
Am a member of a few Forums inhabited by blue-collar Americans. Try telling them that things are improving in their country. The laughter is audible through the Internet lines. And I keep making a few bucks by buying goods that Americans are unloading due to desperation and selling for a profit north of the 49th.
Garth, let me know when you tire of your current Harley, I know where there are great deals to be had.

#147 TnT on 07.16.13 at 4:15 pm

Sales and prices will fluctuate on a downward trend for year(s).
Variations of these fluctuations will be dependent on the local neighborhoods.
Because of the variations in these local markets both side can always claim victory even as we ride the gradual decline and eventual rise.

#148 Tom on 07.16.13 at 4:46 pm

@ #123 with all due respect and excuse my language

Local Canadians can’t afford local housing….unless they binge on debt.

Foreigners has tons of money and richer than the average Canadians. It’s a fact and deal with it.

You want to be rich? Easy find work in another country with better opportunities.

http://ftalphaville.ft.com/files/2013/05/World-Cities-wealth-briefing.pdf

#149 Squatter on 07.16.13 at 4:47 pm

#147 Whinepegger

No, the US government is not fudging statistics. — Garth

Au contraire. The Americans, and probably innumerable other countries, are fudging the numbers and have been doing so, incrementally, for some time. Read pages 43 – 59 of this report: http://ftalphaville.ft.com/files/2013/01/Perfect-Storm-LR.pdf
—————————————————–
It’s not Zerohedge, it is the Financial Times, must be serious, I’m gonna look at it.

#150 Mister Obvious on 07.16.13 at 5:02 pm

#123 Post Haste

“I feel those who are waiting for a price correction will wait for some time – as long as Canada appears to be a solid democratic country – prices will keep steaming forward.”
—————————–

Come to Vancouver. The wait is over. Prices are indeed correcting (still stupid, but falling) and sales numbers are poor.

We are the RE trendsetters on both upswing and downswing. Watch and learn.

#151 jess on 07.16.13 at 5:27 pm

trader trial

fabulous “fab” frankenstein

http://www.therecord.com/news-story/3893539-mortgage-securities-case-about-wall-street-greed-lawyer-says/

#152 jess on 07.16.13 at 5:28 pm

Intraday Liquidity Flows
Report of the
Payments Risk Committee
March 30, 2012
….”The Intraday Liquidity Flows report provides a unified view of the infrastructure that enables more than
$14 trillion of USD denominated payments and the associated $9 trillion of cash needed to settle those
payments to move through the financial system. Seventeen financial market utilities and two clearing
banks participated in the study, providing hour-by-hour statistics on the movement of USD into and out
of their settlement accounts. The study describes the dependencies and interconnections across
payments, clearing, and settlement systems. It highlights the importance of the underlying
infrastructures and the value of continuous review of and improvements to liquidity management. In
addition, the study underscores the influence that underlying economic conditions, regulatory
mandates, and liquidity policies have on the pattern of hourly USD flows….”
http://www.newyorkfed.org/prc/files/prc_120329.pdf

#153 jess on 07.16.13 at 6:06 pm

Tom said: Local Canadians can’t afford local housing….unless they binge on debt.

worldwide humans can’t afford their local housing unless they binge on debt.

http://triplecrisis.com/the-asian-housing-bubble-burst/

#154 Tom on 07.16.13 at 9:09 pm

#154 jess

The difference is, with your example, asians can buy 3 houses in Canada by selling just one of theirs. But it doesn’t work the other way around.

Canada has some catching up to do. You can either participate or step aside. No denying somebody will get hurt…until the music stops. Do you know when?

#155 True Animal Lover on 07.17.13 at 3:23 pm

I haven’t visited this blog in awhile..
where’s NOSTY ?