Almost human

BACON

“How ridiculous is this?” he asked. “The same group did in two other developments. It works for newer Canadians – but it just shows housing has become a commodity. Maybe it’s time for me to retire.”

He’s a senior exec with a Toronto-area housing development company. Not only does he have decades of experience, he’s one of the talking heads on a local TV show aimed at juicing up virgin homebuyers. But some days, even a career real estate dude can only shake his head at the tactics used to whip up buyer frenzy.

Aurora Trails is a development of almost 600 homes to be built in empty fields 60 km north of downtown Toronto, with towns starting north of $500,000 and detached homes available at prices which are currently a secret. All will be revealed three weeks from now when the four builders involved host a thinly-contained riot. But that’s only the tip of this marketing iceberg – then horny homeseekers will have to go through a process ensuring they’re desperate to hand over deposit cheques.

RULES modified

“This is a two day event and no offers will be written,” the barbarians at the gate are warned. “An Open House provides the opportunity to see what each builder has to offer. You can book a Purchaser Appointment online, after the Open House.” And then you can bet several hundred people will buy million-dollar houses in less time than they spent driving there.

David Madani worries about where all this is heading. The chief economist at Capital Economics has been noting the same things this pathetic blog yammers on about with terminal repetition. Namely, the housing market outside of a few bubbly centres of mass delusion (like the GTA) is getting increasingly crappy. “Frayed,” he calls it.

As I’ve told you recently, if you have a house to sell in Montreal, Halifax, Winnipeg or Victoria, good luck. Buyers are hard to find and nobody’s storming the sales trailers. Prices have flatlined. Sales are thinning quickly. The notion is spreading that housing is not such a great place to put all your wealth unless you need a place to live (what a novel way of thinking). Experience is showing that families can buy real estate and easily lose money on it several years later once the punitive costs of buying and selling are factored in.

Says Madani in a new report: “Canada’s housing market performance over the past year or so has been astounding, with rising prices defying fundamentals such as household incomes and rents. While this fact has convinced some observers that the housing market is healthy, the regional breakdown reveals some troubling twists and turns. In short, Canada’s housing market appears to be fraying, surviving for the time being on rapidly rising prices in some of the most overvalued and more thinly traded markets.”

Toronto and Vancouver will continue to see momentum for a few months, he adds, because of sheer velocity. In other words, there are enough greater fools left in large urban centres to be convinced by media boosterism and silly teaser mortgage rates to keep average prices advancing. But higher values on declining volumes is a fundamentally unhealthy thing.

Eventually, says Madani, reality catches up. “With house prices already declining in some smaller regions, it may only be a matter of timing before prices in other larger and much more overvalued markets begin to fall more sharply. We still believe that the housing market is overdue for a longer-term correction of as much as 25%. “

Hmm. A 25% correction would reduce the average GTA property by about $150,000. That would dial the clock back to mid-2010, meaning most people who have bought since then would see a major reversal in their net worth. Worse, if we did have that kind of correction, sellers would have to weigh commission and initial closing costs, meaning many – especially those who bought with less than 20% down – would end up in absolute losses.

Madani is also clear on how he thinks this will happen. No soft landing. Instead, a big smoky hole in the tundra.

“Overall, with house prices already declining in some smaller regions, it may only be a matter of timing then before prices in other larger and much more overvalued markets begin to fall more sharply. We still firmly believe that the housing market will ultimately experience a hard landing with prices falling by as much as 25%.”

The longer the current market bubbles along, the more people believe it will never end. That’s human nature. It’s why everybody bought Nortel. It’s why the boys  behind Aurora Trails are convinced their manipulative sales tactics will work, one more time. And they probably will.

Just don’t be the last guy in.

120 comments ↓

#1 AK on 05.18.14 at 5:49 pm

Gundlach: Bonds, On the Verge of ‘One Of the Biggest Short-Covering Scrambles Of All Time’

#2 AK on 05.18.14 at 5:49 pm

Fed To Raise Rates in 9 Months

#3 Romeo Jordan on 05.18.14 at 5:54 pm

I still contend that Westside of Vancouver has had a tepid spring marker, at best.

I see softness here. Flaccid, and ready to shrink.

#4 Butch on 05.18.14 at 6:05 pm

Eventually drop 25%? In 2018-2019 I think people are predicting right? Seems pretty likely prices will run up another 5-10% a year like they have done the last 10+ years before that maybe eventual drop of “up to” 25%?

Bernanke and his dinner conversions pretty much shred the previous statement that rates are going to rise around 2015 as well.

Turns out it was different here! Huh…

#5 Ben on 05.18.14 at 6:05 pm

Hey Garth – have you seen Carney sinking fast in the UK?

http://www.telegraph.co.uk/news/politics/10839191/Mortgages-could-be-capped-to-control-house-prices-says-Bank-Governor.html

He thought he was coming over to dispense some wisdom. He’s just realised he’s the patsy. Going to be a long five years for your boy.

#6 Joe on 05.18.14 at 6:12 pm

I guess banks are ready for meltdown…….

According to the Toronto street rumors….it will happen during summer time……

Flippers doing right now the last act of selling and going for vacation…

#7 X on 05.18.14 at 6:14 pm

Too bad buyers don’t have at least 10% of their RE purchases down. This would have both prevented such a run up in valuations, and would give property owners more equity in the event of a RE cyclical downturn.

#8 Bobby on 05.18.14 at 6:22 pm

I can certainly attest to the falling market in Victoria. I have been watching a couple of houses I’m interested in. They’ve been sitting there for quite awhile with the prices slowly falling. Why buy it this month when in three months it will be cheaper.
I think they call it deflation. Ouch!

#9 Lastline on 05.18.14 at 6:32 pm

In the trading world, rising prices and falling volume is called “divergence” and usually results in a pullback or a reversal. However, in the real estate world there is far less liquidity to support falling prices.

So basically, when there’s no buyers left (remember the Flash Crash of 2010) you might be shocked to see the housing panic fall much further than you can imagine. All it takes is a major catalyst to pop the bubble such as prices going parabolic which is already happening. Go luck new homeowners.

#10 Old Man on 05.18.14 at 6:40 pm

Aurora Trails is god’s country and hurry for the buy of the decade and forget about the secret prices just get excited and juiced up by the hype because – “Insanity is knowing that what you’re doing is completely idiotic, but still, somehow, you just can’t stop it.”

– Elizabeth Wurtzel

#11 crowdedelevatorfartz on 05.18.14 at 6:45 pm

I heard a couple of 20-something radio dj’s blathering away the other morning during my commute.
They ALL agreed the Vancouver market was “bubbly”, overpriced, unaffordable………..
When “hipster” dj’s on a local station are questioning the state of the market….you know the gig is almost up.

#12 Richard leblond on 05.18.14 at 6:56 pm

The average house price in Canada will not drop 25% to 2010 levels. It will drop 50% to 2008 levels. If not more. Mark my words.

#13 LH on 05.18.14 at 7:02 pm

As I have written before, Aurora may as well be Nunavut e.g. no bearing on truly urban houses, in c01 and c02 which are still sizzling on scarcity value and zero new supply. 2010 prices Ha.

LH

#14 Bast on 05.18.14 at 7:05 pm

Calgary’s market is about to get interesting…1000s of rental homes being completed and on the market, and more on the way. Let’s see how this plays out. Even Mike Fotiou is inferring it might cause a problem given Calgary’s propensity to extremes…

http://calgaryrealestatereview.com/2014/05/17/calgary-to-get-massive-amount-of-rental-units/

#15 DAN on 05.18.14 at 7:07 pm

#6 Joe

While newbie flippers (a house here and there) continue to do what they do.

I’m an engineer, currently doing the design of a 4500sq. ft. tear down. The owner (late boomer) lived in the old house for a while but is seeing larger houses on his street being listed for M2.5. His thought process: build the monster – heated floors, elevator shaft, cantilever balconies, precast slab garage, sell, strike it rich.

I just hope that I can knock this job off before the melt down. He wouldn’t be so enticed to pay me if he wasn’t going to see any ROI.

The funny part is that he’s trying to save a thousand here and a thousand there. Boomer Flakiness, mentioned on this blog, I witness it constantly.

#16 james on 05.18.14 at 7:09 pm

I shudder at the thought of the construction quality on those homes. Nothing worse in terms of incentives than knowing that you have a horde of desperate, house-horny purchasers who consider themselves lucky to have a home.

Markham is bad enough already, with the shoddy construction quality of a lot of the newer subdivisions. I can only imagine.

#17 Dean Mason on 05.18.14 at 7:12 pm

I have been saying short, intermediate and longer term interest rates which includes, mortgage rates, savings accounts rates, GIC rates, government bond yields etc. since 1994.

All the so called professionals kept saying that interest rates would fall but stabilize in the 5% to 6% range but they are all dart throwers and have no clue or are just misleading the public.

Everyone is going to pay some way. Those that have interest bearing investments just paid first but everyone will pay eventually as well. It is a matter of time.

#18 Dean Mason on 05.18.14 at 7:14 pm

All interest rates would fall more and more and more for decades.

This is what I forgot to put in my first sentence above.

#19 Ben on 05.18.14 at 7:23 pm

Richard Leblond – they will drop – but will it be real or nominal? Either way the smell of boomer toast will be overpowering, but for others it matters.

#20 Julie on 05.18.14 at 7:30 pm

I can understand the hysteria in some neighborhoods in Toronto to some degree – there are only so many SFHs in central demand areas, but I don’t get anyone getting in over their heads financially for a subdivision house an hour out of town – plenty of those available! To each his own, but I’d rent in the city before living in a popcorn ceiling house in the middle of nowhere! The new subdivisions without a tree taller than me just depress me!

#21 east van on 05.18.14 at 7:32 pm

Does anyone know where to get reliable sales and pricing stats on condos in the major cities during the past few years?

Thanks in advance.

#22 TheCatFoodLady on 05.18.14 at 7:44 pm

I can’t believe that sort of over the top, blatant, manipulative marketing would work. Sadly, I fear it will. It’s stated this tactic was used in two other developments & I’m assuming they wouldn’t be repeating it if it hadn’t worked.

But here’s a dose of reality. In theory *I* am the potential purchaser of this product. It’s a very expensive product for which I’m selling my shrivelled soul for the next 25 or so years.

I checked the web sites of the 4 builders involved for actual information. All I got was prettily sketched teaser bs. A two day open house with hordes of frenzied buyers’ is not an atmosphere conducive to obtaining the vital info you need before plunking down your & your children’s life savings.

There are detailed questions best asked in the calm of a one on one environment but this media campaign is telling me I have to preselect ONE builder for a purchasing appointment? And I am dying to see the ‘complete list of rules’ to which prospective purchasers must adhere.

I would die laughing if no one showed up except a primed press. I know – won’t happen but allow a girl her fantasies.

#23 Freedom First on 05.18.14 at 7:56 pm

David Madani is a smart man. A 25% RE correction. He is being both prudent and kind with his prognosis. Look at history, even just the last 10-20 years of housing corrections world wide. Up to 25% correction? There is no such thing as a soft landing in RE. As the ceiling prices overshoot in all bubbles, so does the bottoming prices overshoot in all markets. Not to worry though, as being financially liquid diversified balanced and debt free always works.

#24 the jaguar on 05.18.14 at 7:57 pm

Imagine the panic of the house horny people when the worm turns. The same compulsive behavior will repeat itself all over again. But this time the ‘desperation behaviour’ that was applied to the purchase of granite countertops, etc. will be applied to the disposal of that same asset for fear of waking up in a deep, deep financial hole. It’s going to be something else. This generation that is so plugged in with facebook, twitter, etc., all of which allows for instantaneous communication….omg!. The selling frenzy will be like rats abandoning a sinking ship. Where will it all end? How will it all end? I suppose with so many people asking why they didn’t see it coming. They drank the Koo-laid instead of asking themselves what could happen if interest rates increased and they had to renew their mortgage at 6.00% versus their 2.99% on a cornflake box that cost them 3/4 of a million dollars. There is a whole generation that has not experienced this kind of hardship and very little hardship in their lives otherwise. Their helicopter parents have spared them these life lessons.
I think the death of this kind of consumerism is going to be like the fall of the Soviet Union. A little bit unexpected and it will take quite some time for the fallout to really be understood…
Enough said.

#25 van guy on 05.18.14 at 8:02 pm

“The longer the current market bubbles along, the more people believe it will never end”

Just like US equities. S&P and DOW look good, Russel and NASDAQ are in big poopoo. Large caps to follow, this rally has been too extended

#26 Retired Boomer - WI on 05.18.14 at 8:25 pm

Interesting post tonight, Garth.

Were *I* the buyer today, would I allow a home builder / marketeer dictate terms upon which I enslave myself, and for this I get to pick one of four probably shoddy builders?
No, definitely not!!

This is 2014 threats of “Global Warming / Climate Change” are fairly undeniable. Now, whether “we” the collective developed world take any action, which by its very inference will likely be detrimental to the economies we have known. In for 30 years with a stretched budget, but the ‘new rules’ mean petrol prices double within 24 months due to taxation… think about it. Electricity rates double….local taxation rises like the seas levels.

Smoking man, and other climate change deniers have passed away due to their own bad choices…this blog’s popularity is diminished…

Of course, we do NOT know what is ahead, only the best guesses of the most learned men. Only they are NOT generally politicians, or the unschooled who know better.

People must know where the source materials are vouchsafed, few do in this “new and improved” information age.

Still the stoic will muddle on through the carnage of changing times. Careful out there

#27 triplenet on 05.18.14 at 8:29 pm

#12 Richard LeBlanc

Interesting and very knowledgeable prediction, probably based on empirical fact.

Would it he possible to give me the winning numbers for this weeks Lotto Max?

#28 omg on 05.18.14 at 8:32 pm

CORRECTION OF 25%? – CHUMPS CHANGE COMPARED TO WHAT IS TO COME

A correction of 25% just takes us back to the already EXTREMELY bubbly prices of 2008 to 2010 for the hot markets.

Prices were ridiculous then and will correct from that – BUT NO TIME SOON.

It will be a long slow march down in REAL VALUE over the next 10 to 15 years, maybe longer. INFLATION will slowly eat away at the value of real estate. At the end of it the average house in markets like TO and Vancouver will be down 60-70% in real terms.

Luckly, most people will not even notice the decline in the real value of their home, as we humans tend to fixate on the dollar value.

It will take a generational shift to understand that houses are a just a place to live, not a supercharged investment platform.

Look at some of the towns on south western Ontario London, Chatham, Windsor) to get sense of this. Houses bought in the late 1980s for $250K will sell today for less than $300K. Adjust for inflation and the real value of the house is less than 1/2 of what it was in 1990.

Its a hard thing for some people to accept. But if you did not buy in the 1990s your screwed – just rent and save your money for other investing.

#29 Joe2.0 on 05.18.14 at 8:33 pm

The Coming Economic Armageddon begins Sept 2015.
16 months to reacess, downsize and get out of debt, focus on what’s important.

#30 omg on 05.18.14 at 8:35 pm

#5 Ben’s Comment regarding Mark Carney “Going to be a long five years for your boy.”

Yep long 5 years for Mark at $1 million annually.

Then he’ll go back to Goldman as a partner at several million per year, plus $250k per speaking engagement.

Not a bad deal if you can handle the heat!

#31 OffshoreObserver on 05.18.14 at 8:36 pm

#10 Oldman
—————
That was Albert Einstein on the definition of insanity:

http://www.brainyquote.com/quotes/quotes/a/alberteins133991.html

#32 Waterloo Resident on 05.18.14 at 8:42 pm

Sorry but from the INSANITY that I am seeing in Toronto, house prices will rise up 100%, maybe 200%, before they drop 25%

#33 fyi on 05.18.14 at 8:56 pm

David Madani himself renting. He was asked on TV if he owns or rents . He replied He is renting.

#34 Vlad on 05.18.14 at 9:05 pm

If Real Estate drops even 10% in the hot housing markets there will be a flood of people, who have been waiting on the side lines, who will flood in to buy. The only way we would get more than a 10% correction in real estate is if we have a major depression. Then all bets are off on all investments including your “balanced” portfolio. LOL

There was a 35% decline in 1990-2, and no depression. Research before you type. Less embarrassing. — Garth

#35 Cowtown on 05.18.14 at 9:08 pm

Apparently there will be a “massive” influx of rental units in Calgary:

http://calgaryrealestatereview.com/2014/05/17/calgary-to-get-massive-amount-of-rental-units/

As it is already well know, many condos are bought as investments and are rented out to tenants.

This should put downward pressure on rents and possibly reduce condo prices which are already ridiculous in Calgary, especially downtown.

Anyone who can do math can see that with these prices it is not economically profitable to buy to rent, without a loss on investment, unless prices keep rising for ever.

#36 winterpeg on 05.18.14 at 9:11 pm

“As I’ve told you recently, if you have a house to sell in Montreal, Halifax, Winnipeg or Victoria, good luck” GT

Actually, things are brisk in my Winnipeg ‘hood. An older desirable but not richy rich area. House prices still climbing. A 1100 ft reno’d with Ikea kitchen, finished basement cracked the 300,000 listing price at 309,000 and apparently went for 368,000. Also 4 houses went on my street alone all within a week or so. So the frenzy is alive and well here. Stopped in at an open house in my hood today. 339,000 asking price. Needed lots of cosmetics. The agent and a mortgage salesman were there touting the market. The realtor was saying she knows of young people who wouldn’t look at this and go for something much newer and more expensive than this Basically saying the kids look at the what the payments are only. The mortgage guy was complaining about “the regulations” the government put back on the industry. I replied it had to be to prevent people from overextending. Another older boomer visiting the open house weighed in and pointed out the maxed-out nature of the market. The realtor and the mortgage broker cautiously conceded that the market might be at a “high point”.
My sense was that they (a) don’t really understand the dangers of the market right now, (b) don’t want to hear about it. But then , why would they? They’re there to sell while the going is good.
Anyway, Winnipeg seems to be bubbling along, at least in certain areas.

#37 Happy Renting on 05.18.14 at 9:13 pm

With even a 25% correction I would expect Toronto to still be overpriced vs. income.

#38 Mister Obvious on 05.18.14 at 9:14 pm

By early 2016, a consortium of wealthy contrarian investors had banded together to form the Northern Lights Out Distressed Property Buyers Group. Their main purpose was to drive the price of the choicest residential properties even lower than those brought on by the RE crash of the summer of 2015.

The Northern Lights Out group was keen on creating a “final selling frenzy” to push prices below the historical mean which had been so rapidly reached the year before. (The NLO was nothing if not vindictive and heartless). In March, 2016 they held a huge buying event. Here are the rules as published on their website:

HOW TO SELL AT NORTHERN LIGHTS OUT

To sell you must register at underwaterfool.com by March 15, 2016

When you enroll for a seller’s appointment you will be given a time, convenient to us, to visit our offices and present your case for the investment merits of your property

No presentation will be considered without a seller’s appointment

Seller’s appointments may be booked with only a single prospective buyer at a time.

You are free to book as many appointments as you wish and continually lower your price as you deem necessary to complete a sale.

#39 Inglorious Investor on 05.18.14 at 9:16 pm

#26 Retired Boomer – WI on 05.18.14 at 8:25 pm

They couldn’t prove global warming, so they switched the label to ‘Climate Change.’ And this is leading to scandals: http://www.humanevents.com/2014/05/16/the-new-climategate-scandal/

So, the climate is changing? What a revelation? That’s like society suddenly discovering that water is wet.

Of course the climate is changing. The climate is ALWAYS changing. The earth’s climate has repeatedly swung between extremes in hot and cold, like, forever. It did so at times when humans did not exist. And at times when we can be pretty certain (e.g. pre-industrial times when the population was far less than now) when humans could NOT have had any effect whatsoever.

There are forces far greater than humanity that affect our climate. And there is precious little we will be able to do to change the trend. Pitting humanity against the sun, for example. I think I’ll go with the sun: http://news.bbc.co.uk/2/hi/sci/tech/56456.stm

All we can do is react, or better yet be proactive. But trying to change the trend will be a huge waste of time, money, and human capital. Not to mention potentially harmful. For example, there are some so-called ‘scientists’ who want to seed the atmosphere with sulfur. Sulfur? Yes, the same stuff that causes acid rain. So they are willing to do something that they know poisons the world to attempt some experiment that has no guarantee of doing any good.

Politicians and bankers will attempt to use climate change as an excuse to raise taxes and maybe reduce the global population. So they want to tax carbon. Carbon? Carbon is life. Plants are carbon. We are carbon. This is lunacy of the highest order. And people are buying it!?

What really bothers me about the climate change priesthood and their naive disciples and acolytes is that all their fuss is causing us to lose focus on the real effects that humans have: mainly, on pollution of our air, waters, soil, ecosystems, etc. and all the problems this is really causing. It’s in this area where we CAN have some real, positive effects, yet we are wasting so much time talking about hair-brained schemes and raising mass hysteria. We will kill ourselves with pollution before we do anything about the climate.

#40 Mark on 05.18.14 at 9:25 pm

This is all very funny as evidence is abundant that GTA real estate prices on like properties have been falling over the past year. Manufactured bidding wars, and incomplete/almost doctored statistics aside. Gotta hand it to those GTA-area Realtors, they sure have quite the command over the media to push their misleading propaganda.

#41 Pooh on 05.18.14 at 9:26 pm

Re: #14 Bast

Ahh yes, the refined wisdom of Mr.Fotiou – a Calgary industry ‘insider’ who thinks that tweeting bush-league MSM articles all day offers some sort of value.

With any hope, a market correction will also expose these uneducated windbags and reshape the so-called expert landscape to one that actually provides unbiased insight and knowledge.

#42 Mark on 05.18.14 at 9:27 pm

“If Real Estate drops even 10% in the hot housing markets there will be a flood of people, who have been waiting on the side lines, who will flood in to buy. “

The ownership rate is already at record levels, who exactly are these “flood of people who have been waiting on the side lines”? And more importantly, where will they get subprime credit to buy with, now that the CMHC has been cracking down on CMHC subprime insurance?

#43 Bob Rice on 05.18.14 at 9:28 pm

Madani has been calling for a 25% correction for 3 years now…

#44 TurnerNation on 05.18.14 at 9:32 pm

This is too easy. 500,000 for a townhouse likely with paper walls in Aurora? Driving to insidious soulless big-box “Smart Centres”?
With closing, taxes I bet 520k out the door.

If by some miracle a younger couple/new family has 20% down – $100,000 to be doing nothing in a house – the monthly mortgage is $2000. Add $500 for taxes, townhouse/strata fees.

Yet you can rent the same for under $2000.
And invest the $100k in bikes, babes and balanced portfolios.

http://www.kijiji.ca/b-house-rental/gta-greater-toronto-area/aurora-townhouse/k0c43l1700272

#45 Old Man on 05.18.14 at 9:35 pm

#39 Inglorious Investor – sun article is from 1998 so we need an update, as of course the sun rules the weather with so many twists and turns.

#46 Porsche on 05.18.14 at 9:43 pm

The longer the current market bubbles along, the more people believe it will never end. That’s human nature. It’s why everybody is still invested in all time high stock markets.

Seventy per cent of Canadians do not own stocks nor have the bulk of their net worth there, often with 95% leverage. — Garth

#47 BallsofSteel on 05.18.14 at 9:44 pm

#39 Inglorious Investor – you have nailed it in one.
Actually they are trying to make it a religion to cater for all the unthinking acolytes that are attempting to jump on the gravy train.

#48 Habs76-79 on 05.18.14 at 9:56 pm

Dogs chasing tails…. The real estate frenzy by many is just that. Buy now or forever be price out of the market. What do these new buyers expect to do one day with their new cardboard box over priced homes? One day for some sooner others later they look to want to resell these so called future investment drivers? If nobody will be able to enter the market tomorrow, then how will they one day sell?

They will likely lose their shirts and many will cry for the govt. to help them out, bail them out. As if it’s the govts. responsibility. Or just like Garth’s post the other day about the guy asking for a much bigger raise from his employer as his overpriced condo is in need of him spending $100,000+ on repairs. Why is it is employers responsibility to pay him more as result?

I’m gonna give you some of you numbskulls who buy this real estate hype and nonsense a lesson.

TIME!

Time is the most important thing we each have and for most of us it’s taken for granted especially when young(er). Time can be a great ally for you but it can become a big enemy too.

When I was a still wet behind the ears young adult back many years ago a piece of advice was given to me by an older coworker (mid 1980’s) . I was making my way through life as older teen/young adult. He told me the best thing I could do was to learn about and invest in long term RRSP’s put away at min. 10-15% of my income in a positive interest bearing investment ( above inflation) and just keep doing it as a part of living. He said you get use to the naturalness of this money being put aside automatically. Of course being young still rather empty headed guy, I chose to have more fun and spend more money than I had to to have said fun. I did not even want to think about 20-30-40+ years later. But even if I did as he told me back now 25+ years ago based on my life and even at 10% income, by today I could likely have seen oh maybe $300,000-$500,00 in long term investments. My life would not have been to compromised by such but yes some of the money I basically pissed away would not have been. Well lesson learned and TIME LOST I do have investments and try to do the best I can while still living some semblance of a life. I do not have $300,000-$500,000 working for me today, BUT I SURE KICK MYSELF FOR NOT LISTENING TO SOME OF THE BEST ADVICE I WAS GIVEN AND GIVEN FOR FREE!

So house horny dweebs and twits are falling all over themselves buying an asset that will not likely make them rich and will likely enslave them with too much debt and rising costs of said assets for taxes and care. They will squander ability to long term investments much like Garth says here and as such little to no investments that can be kept liquid if need be all to live in a likely shabby built press board prison.

House buying is ok WHEN IN BALANCE with income , market and life’s costs. When it’s spun as a white picket fence at all costs, it will probably become YOUR NIGHTMARE! GAWD HELP YOU IF/WHEN YOU AN YOUR SIG OTHER DIVORCE!

#49 45north on 05.18.14 at 9:57 pm

We still believe that the housing market is overdue for a longer-term correction of as much as 25%. “

which is pretty much the same as the 30% correction in the US

Julie : I don’t get anyone getting in over their heads for a subdivision house an hour out of town – plenty of those available!

Google maps gives 43 minutes to 215 Huron Street at 21:34 Sunday. I’m guessing 90 minutes Tuesday morning at 7:30.

The Jaguar : But this time the ‘desperation behaviour’ that was applied to the purchase of granite countertops, etc. will be applied to the disposal of that same asset

well they will be desperate but what can they do? If they have substantial equity they can knock off half the purchase price and throw up a “for sale” sign. I mean if they have substantial equity in a house that actually exists.

#50 Porsche on 05.18.14 at 9:59 pm

#46 Porsche on 05.18.14 at 9:43 pm
Seventy per cent of Canadians do not own stocks nor have the bulk of their net worth there, often with 95% leverage. — Garth
……………………………………………………………………….

You may have a point, I don’t own real estate but I play U.S. markets.
I imagine the average Canuck is so tapped out paying for that box, he can’t afford anything else.

#51 Nemesis on 05.18.14 at 10:10 pm

@DameCatFood/#22

“I know – won’t happen but allow a girl her fantasies.”

Boyz, too?

http://youtu.be/WfjuZVG4wGM

#52 Hurt'n Albertan on 05.18.14 at 10:16 pm

#39 Inglorious Investor on 05.18.14 at 9:16 pm

You’re right about pollution. Mankind post-industrialization has done a great job of poisoning the land, sea and sky. Now they’re finding our garbage in ocean depths not previously explored.

Unfortunately the products of burning fossil fuels are laden with pollutants, including CO2 which is acidfying the oceans.

As for climate change I’ll trust the vast majority of scientists and other climate professionals who have dedicated their lives to studying such things and are nearly unanimous in their fundamental conclusions and in their alarm and sense of urgency.

Regardless of what you or I or our backwards provincial and federal governments think of climate change, once the rest of the world starts to act decisively via policy and investment/divestment those who are overly reliant on fossil fuels for income/revenue will get hammered.

#53 Jay Currie on 05.18.14 at 10:19 pm

A 25% correction in Victoria would bring prices bad to around 2007. But in the over 1 million market it would make very little difference.

Half The Uplands is either for sale, for rent or recently off the market. Houses have been listed for two year and, like the leaves of Autumn, are gradually falling to earth. 3/4 of an acre with a 70 year old house which already needs 100k to cover deferred maintenance is not the 1.5 deal people want.

There are hundreds of these lovely old white elephants. And half of them are for sale.

At the high end think closer to 50%.

#54 -=jwk=- on 05.18.14 at 10:35 pm

@38 Mister Obvious. Bravo, that was brilliant. And I can’t wait to use it…

#55 OttawaMike on 05.18.14 at 10:47 pm

Jalopnik refuted that ZH article about the cars piling up unsold around the world:
here

Those pictures are almost certainly from 09, I posted here at that time about fields full of excess auto inventory as I traveled up the Eastern Seaboard as the markets hit all time GFC lows.

#56 ed on 05.18.14 at 10:48 pm

https://homes.yahoo.com/news/whos-afraid-chinas-ghost-towns-225800226.html

#57 OttawaMike on 05.18.14 at 10:49 pm

try link again:
http://jalopnik.com/that-zero-hedge-article-on-unsold-cars-is-bullshit-1578124255?utm_campaign=socialflow_jalopnik_facebook&utm_source=jalopnik_facebook&utm_medium=socialflow

#58 Panhead on 05.18.14 at 10:53 pm

WOW … what tactics. Sure glad I lost my virginity a loooong time ago. Don’t think I’ve seen anything that bad even out here on the West Coast. I’d sure hate to be young trying to “buy in” now … just “aint” worth it anymore.

#59 Retired Boomer - WI on 05.18.14 at 10:56 pm

#39 inglorious investor

You are correct on the pollution of air, water, sea, land – ourselves. Global climate change may be bit player, or maybe the main event. I am not a scientist, I am a carbon based unit. Perhaps I would fair better as a silicon based unit? I don’t know.
I know we buy a lot of crap from the number 1 and two polluters on this planet. (US & China – how do you like me now?)
I’m 62, so is the better half so this likely will not be our fight. Our kid has been instructed to minimize the crap accumulation, use the non-renewables as sparingly as possible, avoid debt, and invest wisely. Tell people exactly what you believe, then let them decide what constitutes ‘you.’ Follow your heart for your vocation, not the crowd.
Decent advice I believe, and so far he has done good.

Death, and Taxes will always be with us. A miserable planet on which we exist is largely the choice of the humans, yet it affects the fish, birds, and other animals.

Your decisions are local, as are mine.

#60 In the cold on 05.18.14 at 10:59 pm

Capital Economics predicted a “25% drop in real estate prices over the next two to three years” back in 2011… just Google it…

I think the correction will be bigger than 25%, and I don’t believe Capital Economics.

#61 Cici on 05.18.14 at 11:09 pm

#10 Old Man (quoting Elizabeth Wurzel)

You are so cool, old man…love, love, love your posts!! :-) ;-)

#62 Smoking Man on 05.18.14 at 11:17 pm

#26 Retired Boomer – WI on 05.18.14 at 8:25 pm

Smoking man, and other climate change deniers have passed …. away due to their own bad choices…this blog’s popularity is diminished…
…..

Seams senility had taken you early….

Although garth owns page one, page two is mine.

Climate change denier…

Your an old fool, I have just spent the last 2 hours on the strip teaching Israelis how to profile and sell.. Wrinkle cream, they are sharks in spirit but lack the MOJO..

Sandra a new fan just dinged an old lonely basted for 3 k worth of wrinkle cream… I was the satisfied advocate.. Helping the close…

I’m God damn good… Mine was free..

#63 Christopher Lackey on 05.19.14 at 12:12 am

Just talked to my buddy in edmonton. The flow of people in from ontario is steady and growing. You can make 80k there with your eyes shut goodluck finding a job paying that in the gta average joe. But housing bears will be proven wrong living on the danforth really is like manhattan london paris and those are the fundamentals. Theres no turning back. Well see

#64 Blacksheep on 05.19.14 at 12:31 am

Inglorious Investor # 39,

“Of course the climate is changing. The climate is ALWAYS changing. The earth’s climate has repeatedly swung between extremes in hot and cold, like, forever.”
——————————–
Solid post.

#65 Conrad on 05.19.14 at 12:35 am

IDK WTH is going on in Edmonton!? Dated 50 year old 1100 sq ft bungalows are selling for over $400,000. We have been told by our landlord that they are selling and we have to leave this house. Everyone out there read Rich Dad, Poor Dad and is buying a house to rent out at $1800-$1900 a month, some have been sitting on there house for 6 months waiting for someone to rent. Just crazy. When is this crazy ride gonna end? Everytime we get close to being able to purchase a home there is a run up in prices.

#66 Smoking Man on 05.19.14 at 12:50 am

IDo you dogs all remember last Xmas when I told the story of my scathing Facebook post to wifey poos family. I used words like dushbagary, shit stain masked as perfume.

All in the defence of my nice and nefew who for no fault of there own where squized out into existence by a raving loon of a mother.. She was banished and I had no problem with that. But, the nefew with an equally out of sight psychopathic father already feeling the back of the bus bumps I had to do what was right. They should have been invited for the sake of the kids.

But the novo ritch elements of the family exercising what cones after a few quid, power.

And I gave it to em, not a private call of email but a Facebook post that every one in there world could see.. I held nothing back…

I deliberately spilt red wine on a fine family cotton table cloth. The table in all out decadence, silver and China and all the things that make the insure feel important. Unmasking these self absorbed newly aristocrats who had actually believed my road to poverty was real.

I had suicidal drug addicted kid, I had to do something.. (it’s all good now, save the tears)

Well in my quest for ET in Vegas, I find the wife’s brother, and his honey, honey. Odds astronomical.

And boy did he fill me in, my words at Xmas stabed the bastards in the heart.. My words printed and still glued to the fridge with pizza pizza magnets. More worse, sharing the truth with the hole world, their friends and foes . It was bad.

I was in a drunken stupper.

My other two brother in laws, men of the wife’s sisters I ravaged came to my house when I was at Seneca, wanted to punch me out.. Just found out from wife’s brother.

I have 3 boys, hockey goonary who look for the slightest excuse to re asert manliness.
They naturally backed off.

Never resized my dyslexic word smithing has evolved so much, and I have so much power now.

I’ve become the fricking smoking man….

#67 LP on 05.19.14 at 12:51 am

More about the ethics of real estate agents…

My daughter’s home has been for sale for about 4 weeks now and she recently accepted a low, but do-able, offer conditional on inspection. This weekend, the May holiday, was supposed to be free of all commitments, no showings, open houses etc.

However, yesterday (Saturday) with only two hours notice, she was informed that the inspection would take place and she should vacate the premises, which she did. After a couple of hours upon arriving home this is what she found:

– 5 cars full of family belonging to the two potential buyers plus the inspector and the 2 buyers
– the DAUGHTER of the buyers’ realtor (note, NOT their actual agent)
– a baby lying on the living room carpet happily playing
– her own glassware and coffee mugs which had been taken from the kitchen cabinets and used by those milling around the house and those mugs and glasses placed on tabletops without using coasters
– when everyone left the house, she was left to gather up and wash the dirty dishes

Our daughter really needs this offer to go through and is afraid to follow up this travesty with a complaint that might queer the deal. I say at the very least she should report the buyers’ agent and inform her own realtor about this blatant unprofessionalism.

#68 Choo Choo on 05.19.14 at 1:46 am

I was reading this, “Overall, with house prices already declining in some smaller regions, it may only be a matter of timing then before prices in other larger and much more overvalued markets begin to fall more sharply. We still firmly believe that the housing market will ultimately experience a hard landing with prices falling by as much as 25%.”

I was wondering where I heard something similar, so I did a search and found this, “Overall, the willingness of buyers to pay these historically high house prices now looks to be proving fragile against the increasingly disappointing macroeconomic backdrop,” he said. “The housing bubble in Vancouver already appears to be deflating, with only Toronto defying the inevitable. Accordingly, we expect substantial declines in house prices over the next year or two.”

Which was written in the Financial Post 2 years ago at:
http://business.financialpost.com/2012/07/25/canadian-housing-looks-to-be-in-soft-landing-but-actually-heading-for-25-crash-capital-economics/

That made me laugh out loud. Isn’t that funny?

#69 april on 05.19.14 at 1:59 am

#43 – Bob Rice – … and so it has begun.

#70 Tony on 05.19.14 at 2:41 am

Re: #2 AK on 05.18.14 at 5:49 pm

That’s a laugh, rates will fall to zero in America just like Japan and stay there for at least several decades. The 30 year bond will probably drop below one percent within the next two years in America.

#71 AK on 05.19.14 at 6:01 am

#46 Porsche on 05.18.14 at 9:43 pm
“The longer the current market bubbles along, the more people believe it will never end. That’s human nature. It’s why everybody is still invested in all time high stock markets.”
====================================

The stock markets are at all time high. How did you arrive at that conclusion?

#72 dan on 05.19.14 at 7:45 am

Mark Carney said there would be no hard landlord. So would you trust the Maldini guy over him ?

#73 Inglorious Investor on 05.19.14 at 7:59 am

In my previous post I said that we would kill ourselves with pollution before we do anything about climate change.

For those interested in the climate change issue, I recommend watching the following video of a presentation by Rosalind Peterson. Watch her entire preso, it’s worth it.

http://www.youtube.com/watch?v=4IxAcyE2Z48

It’s a good, comprehensive starting point on the issue of geoengineering. This deserves further inquiry and awareness on the part of the public.

You may also want to watch: http://www.youtube.com/watch?v=jHm0XhtDyZA Kristen Meghan is a former Air Force Industrial Hygienist, turned whistleblower. Admittedly, I have not thoroughly checked her out. But again, the issue deserves further inquiry.

Geoengineering is exactly the kind of response to climate change that really concerns me––where the ‘cure’ is far worse than the ‘disease.’

#74 Ontario's Left Coast on 05.19.14 at 8:42 am

#66 SM – …and I have so much power now.

As long as you believe all that horse poop I guess that’s all that matters. Compensating for much? Smokey, we had a meeting and everyone agrees: get lost – nobody cares about your useless, self-deluded excuse for a life.

#75 Retired Boomer - WI on 05.19.14 at 8:58 am

262 SMOKING MAN

You may well be correct, but if i am suffering from dementia, how would I know?

Just offering some thoughts to the “new buyer” (see my post #26) on 25 years of bondage on a place 40-60 km from downtown accessible only via highway.

Hey it’s not like I will ever be a buyer of that development.
Many things will impact a 25 year choice, we both know that.

Whether the scientists have it mostly right, or mostly wrong…. it’s a wager, smoking man, who knows wagering better than you? My point was merely to look at the credible evidence, and factor in the probabilities.

Do nothing, ok with me, recalibrate your options, ok with me, as well.

#76 Retired Boomer - WI on 05.19.14 at 8:59 am

#62 SMOKING MAN

You may well be correct, but if i am suffering from dementia, how would I know?

Just offering some thoughts to the “new buyer” (see my post #26) on 25 years of bondage on a place 40-60 km from downtown accessible only via highway.

Hey it’s not like I will ever be a buyer of that development.
Many things will impact a 25 year choice, we both know that.

Whether the scientists have it mostly right, or mostly wrong…. it’s a wager, smoking man, who knows wagering better than you? My point was merely to look at the credible evidence, and factor in the probabilities.

Do nothing, ok with me, recalibrate your options, ok with me, as well.

#77 Uh Oh Canada on 05.19.14 at 9:02 am

This may be another indication: I know an excellent contractor in the business for over 25 years. Work just dried up this winter. Thought it was because of a really bad winter but this spring- no calls at all.

I also noticed a lot of listings in MLS of old houses that have been renovated like the cold, modern hotels- granite kitchen top, cheap kitchen cabinets, and the like. I suspect more out of work contractors are joining the house flippers. This is a sign of the housing doom to come.

#78 Porsche on 05.19.14 at 9:33 am

#71 AK on 05.19.14 at 6:01 am

The stock markets are at all time high. How did you arrive at that conclusion?
———————————————————-

Sarcasm right?

http://www.stockwatch.com/Chart/Advanced.aspx?action=go&time=10&symbol=$INDU&region=U

http://www.stockwatch.com/Chart/Advanced.aspx?action=go&time=10&[email protected]&region=U

#79 maxx on 05.19.14 at 9:39 am

“…..the housing market outside of a few bubbly centres of mass delusion (like the GTA) is getting increasingly crappy. “Frayed,” he calls it.”

Price drop of 18% in 7 months on a property we’re currently tracking, amongst other properties.

The trend has begun, is no longer just a “possibility” and is spreading. I’ve never seen so many solicitous realtards and owners. Most reply immediately or call back within the half hour. Back in 2000, we had two realtards not even show up at the appointed time for viewings. The arrogance of yesteryear is melting quickly.

Cash is so thin on the ground now, as are borrowers with the means to pay lenders back. Those who intend to and haven’t yet sold have already lost and losses are mounting.

Reverse mortgage? What will be left for junior?

#80 Stickler on 05.19.14 at 9:50 am

“But higher values on declining volumes is a fundamentally unhealthy thing.”

…smells just like the US stock markets.

#81 Old Man on 05.19.14 at 9:59 am

#67 LP – you need not worry about mugs or glasses anymore leaving a white water ring on the tabletops because have discovered the solution. I messed up one day washing my fine glassware left to dry on my all too expensive dining room table – water stains! I tried all the traditional solutions and nothing works, but found some magic. It is possible to make a water stain disappear in seconds with my method; nothing to worry about anymore.

#82 Daisy Mae on 05.19.14 at 10:16 am

#39 Inglorious Investor: “They couldn’t prove global warming, so they switched the label to ‘Climate Change’.”

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

Excellent post. Agree completely.

#83 Ralph Cramdown on 05.19.14 at 11:03 am

The most expensive housing market in North America is not where you’d think. It’s not New York City or Orange County, California, but Vancouver, British Columbia. Now, Vancouver is a beautiful city—a thriving deep-water port, a popular site for TV and movie shoots. By all accounts, it is a wonderful place to live. But nothing about its economy explains why—in a city where the median income is only around seventy grand—single-family houses now sell for close to a million dollars apiece and ordinary condos go for five or six hundred thousand dollars. “If you look at per-capita incomes, we look like Reno or Nashville,” Andy Yan, an urban planner at the Vancouver-based firm Bing Thom Architects, told me. “But our housing prices easily compete with San Francisco’s.”

http://www.newyorker.com/talk/financial/2014/05/26/140526ta_talk_surowiecki

Uh-oh, Garth. Looks like another thought-leader media outlet has been coöpted into repeating the yellow peril theory.

#84 Tony on 05.19.14 at 11:15 am

Re: #50 Porsche on 05.18.14 at 9:59 pm

Garth forgot about the margin debt levels for people (imbeciles) buying U.S. stocks. All of them soon will be living on the sidewalk in a cardboard box begging for change.

#85 Aggregator on 05.19.14 at 11:46 am

BC's household debt to GDP ratio hit 100% in 2012 (chart) and if net government debt is included, it's 117% (chart).

Ok it doesn't take a genius to figure it out: BC household debt is growing at 2.8% and GDP is growing at 1.3% (chart), and if you take the long term averages at 8.6% and 3.7%, respectively, and this is what compounding that rate looks like over the next fourty years (chart: period 1=100).

I don't think it's about home prices anymore. At this point, big daddy BC gov will have to pimp Vancouverites to a lower standard of living. There's no other choice.

#86 Son of Ponzi on 05.19.14 at 11:51 am

#43 Bob Rice on 05.18.14 at 9:28 pm
Madani has been calling for a 25% correction for 3 years now…
———————–
That makes it 75% in my books.
Bring it on.

#87 Joe on 05.19.14 at 11:53 am

Look what are the prices in UK….

Canadian prices look so innocent…..

So the pendulum in Canada will follow…..the same Master arranged it …….

#88 BCD on 05.19.14 at 12:09 pm

#24 the jaguar on 05.18.14 at 7:57 pm
Imagine the panic of the house horny people when the worm turns. The same compulsive behavior will repeat itself all over again. But this time the ‘desperation behaviour’ that was applied to the purchase of granite countertops, etc. will be applied to the disposal of that same asset for fear of waking up in a deep, deep financial hole. It’s going to be something else. This generation that is so plugged in with facebook, twitter, etc., all of which allows for instantaneous communication….omg!. The selling frenzy will be like rats abandoning a sinking ship. Where will it all end? How will it all end? I suppose with so many people asking why they didn’t see it coming. They drank the Koo-laid instead of asking themselves what could happen if interest rates increased and they had to renew their mortgage at 6.00% versus their 2.99% on a cornflake box that cost them 3/4 of a million dollars. There is a whole generation that has not experienced this kind of hardship and very little hardship in their lives otherwise. Their helicopter parents have spared them these life lessons.
I think the death of this kind of consumerism is going to be like the fall of the Soviet Union. A little bit unexpected and it will take quite some time for the fallout to really be understood…
Enough said.
_________________________________________

I love these Henny Penny “sky is falling” type comments, reminds me why I invested in guns and ammo for the Zombie Apocalypse.

That said, comments like this are way off the mark. NO housing correction worth any significant discourse coming up. . .just a slow burn and stagnation at WORST. Society will not fall apart, as much as our renters would like it to so they could “vulture” a house and profit of someone else’s misery–really that mentality makes me sick.

Renters, grow up, get some balls, buy a trailer at least so you can live in a van down by the river. By the time these interest rates rise all the people who you think paid WAY too much for their houses will have had half of it paid off. . .which means they will be better off for it and also able to handle any interest rate hike.

Seriously, stop waiting for misery you basement dwellers. If you want something you’ve never had before you have to be prepared to do something you’ve never done before. Ante up, find a decent deal and get a mortgage.

#89 BCD on 05.19.14 at 12:20 pm

#83 Ralph Cramdown on 05.19.14 at 11:03 am

http://www.newyorker.com/talk/financial/2014/05/26/140526ta_talk_surowiecki

Uh-oh, Garth. Looks like another thought-leader media outlet has been coöpted into repeating the yellow peril theory.
____________________________________________

I have neglected to jump into this discussion for fear of sounding xenophobic. However, it’s not a theory in my opinion. If you lived in this area and had a pair of eyes in your head you would see the influence of Asian money. Vancouver is directly opposite China (right across the puddle). There are a lot of rich folks in China/Asia. China has surpassed one million millionaires. . .think about that for a second. . .to say that Asian money has not affected the prices in Vancouver is to miss the point entirely.

Go live in Richmond for a year, drive around and look at the signs. Go live in Burnaby and do the same. Ask people who live in these areas who their neighbors are. To say that Asian money has no influence on the market price there is just plain wrong.

I commend Garth in not allowing his blog to go down the route of “blaming the Asians” for the house prices in Vancouver. It’s simply not PC. However, it has a grain of truth in it. Like it or not.

Of course offshore money has affected some market segments. But it has not been responsible for $1 million shacks. You did that. More troubling is the tendency to lump native-born Canadians of Asian heritage into a big xenophobic group called ‘Chinese.’ Chinese people come from China, not Burnaby. — Garth

#90 Old Man on 05.19.14 at 12:52 pm

I love the Chinese as they gave us restaurants and dim sum to party on, or for wives who cannot cook past boiling water they cell for a dinner order. Now when I dine at a fine Chinese restaurant get special service as put aside the dinnerware and bring out my ivory chopsticks to wave in the air. They come running for me, and get priority order status and free tea too.

#91 Joe on 05.19.14 at 1:05 pm

We have seen already ….

not long ago money were pouring into the gold…..
They pulled the rug and lot of money were wipe out…

Now money pouring into the RE…….

It is only a matter of time when they pull the rug…
lot of money will be purged of the system….

It is so obvious…..

That how the economy works…..

Fairly story about supply and demand….for little joe
Having control over money is a lot of power…

#92 coastal on 05.19.14 at 1:05 pm

“Seriously, stop waiting for misery you basement dwellers. If you want something you’ve never had before you have to be prepared to do something you’ve never done before. Ante up, find a decent deal and get a mortgage.”

Something you’ve never done before ? Hmmm…like go bankrupt ? Spoken like a true chump of the obnoxious. A 25% drop might be too generous.

#93 condopoor on 05.19.14 at 1:39 pm

“More troubling is the tendency to lump native-born Canadians of Asian heritage into a big xenophobic group called ‘Chinese.’ Chinese people come from China, not Burnaby.”

Thank god somebody knows a little history. I am an average caucasian dude living in Van. The number of Canadian friends who need to be told this is alarming… sadly it feels racist to me. Go read a book before contributing to stereotypes. It makes you look dumb.

#94 dosouth on 05.19.14 at 1:52 pm

Woohoo!!… a balanced market comes to the Okanagan (again..)

No signs of price comparison though…

#95 Old Man on 05.19.14 at 2:17 pm

Years ago there was really only two restaurants in all of Toronto to dine on Elizabeth Street. Kwong Chow was my favorite walking up the steps and turning right into a spacious setting waiting to be seated. I was a regular going several nights a week between 9:00 PM and midnight. There was a man of great mystery who sat in the north east corner with yellowish styled hair wearing sun glasses, and always took his daughter out for dinner. He had many a daughter over time as saw him often.

I was stepping up in the world, and one night my date was a young woman who knew the social scene as was in training at that time. We had dinner at 11:00 PM and there he was in the same corner wearing sun glasses with a daughter, so told her the story. She whispered in my ear that it was Pierre; like Pierre who and she replied the guy who writes books silly as he is a player.

#96 Ralph Cramdown on 05.19.14 at 2:18 pm

#89 BCD — “If you lived in this area and had a pair of eyes in your head you would see the influence of Asian money.”

I spend several weeks a year there, and I see the influence. Garth figures we can’t tell the difference between locals, tourists and offshore money, but it’s pretty simple. Locals look like us, tourists dress differently and carry cameras, and the offshore money crowd is invisible.

“Vancouver is directly opposite China (right across the puddle).”

Which is important… if you’re going by boat. Most people fly, and the flight time from Shanghai to Vancouver is about the same as to London. Australia is closer.

http://www.gcmap.com/mapui?P=PVG&MS=wls&MP=a&DU=mi

Real estate prices are being driven up by foreign money from unstable regimes/economies looking for safe-ish assets. I think this is likely a temporary phenomenon. Either capital controls will get stricter, the Chinese economy will crash, the Chinese economy will stabilize with a more kleptocrat-friendly regime and offshore money will be repatriated for higher returns, or something else.

It’s probably all locals buying teardowns east of Main for $1mm, but they justify it by telling themselves that west of Main it’d be $1.5mm and it’s only a matter of time.

I say it’s an asset bubble, and I think I can get better returns elsewhere than in urban Canadian real estate, so I don’t own any.

#97 Edmontonian on 05.19.14 at 2:59 pm

Interesting article related to this: Mark Carney has created a “housing Bubble” in the UK already, sound familiar? http://www.theguardian.com/business/2014/may/18/mark-carney-house-prices-risk-economy-bank-of-england

Living in Edmonton we have huge towers being built, but sales are slowing faster than the building. Many towers remain consistantly “1/4 lit up at night” like the Q tower, as it has been heavly speculated investors flipping like RE was a commodity. Huge condo development in the Prestigious Glenora area goes under-the crane hasn’t moved until Christmas! http://www.edmontonsun.com/2014/01/30/glenora-skyline-condomium-tower-construction-stopped-leaving-an-eyesore

http://www.edmontonsun.com/2014/01/30/glenora-skyline-condomium-tower-construction-stopped-leaving-an-eyesore
Even if SEVERAL towers go under, we should have a massive over-supply of condos for Edmonton, as we are in a “building bubble” and by 2016 thousands & thousands of construction jobs will be lost. Many will be moving away.

#98 straight six on 05.19.14 at 3:01 pm

re #83. that huge sucking sound..

Of course offshore money has affected some market segments. But it has not been responsible for $1 million shacks. GT

Metaphorically speaking.. the gargantuan deep hulled Asian investment tug plying our waters has churned up housing debris that’s been turned into million $ shacks all supported by the tug’s massive standing wake.
Tugs eventually anchor, wakes collapse and debris sinks.
But we can’t be sure this is a bad thing as there’s no shortage of bottom feeders.. and cheap money.
Maybe a whole new ‘whiteman from town’ sub species will be created.

#99 Mark on 05.19.14 at 3:10 pm

“Go live in Richmond for a year, drive around and look at the signs. Go live in Burnaby and do the same. Ask people who live in these areas who their neighbors are. To say that Asian money has no influence on the market price there is just plain wrong.”

There is little to no evidence that any statistically relevant number of “Chinese” are coming to Canada with anything more than enough money to make a modest down-payment on an apartment and to buy a used car. Garth hit the nail right on the head when he states that it is rather unfortunate that people have decided to confuse anyone who may be of the Chinese ethnicity, with being rich Chinese immigrants.

Most “Chinese” who own in Richmond, Burnaby, or elsewhere, and bought recently, did so with a very large mortgage. Just like almost every other Canadian. The culture of leverage in the GVR and the GTA is right off the charts. Extremities in leverage, not “Asian money”, completely explains price growth.

#100 Midas on 05.19.14 at 3:16 pm

An article from the New Yorker on real estate in Vancouver:

http://www.newyorker.com/talk/financial/2014/05/26/140526ta_talk_surowiecki

#101 Mark on 05.19.14 at 3:19 pm

“Real estate prices are being driven up by foreign money from unstable regimes/economies looking for safe-ish assets.”

There’s no evidence of “foreign money” even being a factor in Canada (Canada’s price increases over the past decade can be completely explained by credit expansion, particularly in CMHC subprime credit). And foreigners have a multitude of other assets they could potentially buy in Canada to hide their money, including stocks, bonds. Why would ‘foreigners’ buy real estate instead of buying Garth’s “balanced portfolio”? Especially now that RE is declining yet the “balanced portfolio” soldiers on!

#102 Pope Snugglybutchbums the 666xf (aka Nosty) on 05.19.14 at 3:32 pm

Re: the continuous debate over CC, GW or GC.

Why not have:

(a) Toba and Yellowstone, two supervolcanoes in the southern and northern hemispheres, erupt simultaneously?

Then, add in:

Dimona, Israel’s not-so top secret nuclear WMD facility, located about 55 miles from Gaza (at the last count, Israel had 400 or so nuke WMD loaded and ready to go), the US’s, China’s, Russia’s Pakistan’s and India’s nukes, then garnish it with all volcanoes, both above ground and undersea erupting all within 24 hours of each other?

That would give humanity less than a week to escape this forthcoming frozen wasteland of a planet (which is physically impossible), and take all of our worthless, pathetically stupid and dumbass opinions with us.

Then we can move into the next worlds and fuggedaboud this one!

#103 Old Man on 05.19.14 at 3:45 pm

There is great danger coming to Alberta and British Columbia with a total economic collapse. Beware of the deal coming next week between Russia and China. This can all be blamed on Caesar and his marching band of do nothings who spin their wheels and blow smoke about oil, natural gas, and LNG for Asia with nothing accomplish. Now Europe has saddled up with USA but that is another story leaving Caesar running empty on all sides of the equation for his idiotic energy policies blowing in the wind.

#104 Steven on 05.19.14 at 3:45 pm

This real estate insanity will continue until it can’t and then the reality check just might trash the economy altogether.
I know I am a doomer and I am right but I must confess this waiting for the end of this mania is starting to become seriously frustrating.

#105 Ralph Cramdown on 05.19.14 at 3:54 pm

#98 Mark — “There is little to no evidence that any statistically relevant number of “Chinese” are coming to Canada with anything more than enough money to make a modest down-payment on an apartment and to buy a used car.”

For the most part, that’s true, because there’s little evidence either way. There is the 2011 Landcor study, which I’m sure you know about. The rest is all anecdotal. Real estate agents going to China to sell condos (those would be cash sales; banks won’t generally take a mortgage from a non-resident non-citizen). Large numbers of new, vacant condos in Coal Harbour. The South China Morning Post writing about Vancouver detached home prices and covering the mayor’s overseas visits, something they wouldn’t do if they thought their readership didn’t care.

Or you can just spend some time in Vancouver and compare it to other cities you spend time in. You can look up those cities’ GDP and average and median incomes and you can compare and contrast the observed standards of living you see. Then you can come up with your own pithy theory of where the money comes from.

#106 Mark on 05.19.14 at 4:32 pm

“Or you can just spend some time in Vancouver and compare it to other cities you spend time in.”

I spend plenty of time in Vancouver. Your point? Debt is right off the charts, and it is debt, not overseas savings, that is responsible for the high Vancouver RE prices.

If cash sales existed in any significant numbers, this would lead to a reduction in leverage amongst the GVR crowd. Not seeing this happening. Real cash would also be pushing up salaries and lessen the house price to income ratio. Again, not seeing this happening.

If anything, Vancouver RE may be actually a net source of cash for so-called “Chinese” investors, as Vancouver properties are refinanced and the proceeds used to prop up failing businesses back home. Not a sink of cash. China’s rich didn’t get to be rich by investing in overpriced assets, that’s for sure!

#107 Ralph Cramdown on 05.19.14 at 4:34 pm

#101 Mark — “There’s no evidence of “foreign money” even being a factor in Canada”

48,000 Angry Chinese Millionaires say otherwise!

#108 Nemesis on 05.19.14 at 4:49 pm

#SeeingIsBelieving #VeryFengShui

http://tinyurl.com/ot6m9zm

http://tinyurl.com/l2ql5nx

#109 Mr. Frugal on 05.19.14 at 4:56 pm

If housing drops 25% greed will be replaced by fear and most people will be afraid to buy.

#110 Bargains everywhere on 05.19.14 at 5:12 pm

#107 Ralph Cramdown on 05.19.14 at 4:34 pm

Methinks Mark is a troll…

#111 Who's da fool? on 05.19.14 at 5:28 pm

Cheap Condo Experiment Fails to Live up to Hype
Planner finds result of Vancouver project ’embarrassing’ as buyers flip for profits.

When one of Vancouver’s most prolific developers proposed 60 West Cordova on the edge of the Downtown Eastside in 2010, he promised it would be a bold new experiment in housing affordability.

The units would be priced as low as possible and sold only to those who lived, worked, or volunteered in the neighbourhood. Buyers would have to agree to live in their units and promise not to sell for at least a year — a strategy meant to discourage investors.

But some of the early buyers who got a great deal cashed out shortly after the one-year limit, turning profits as high as $74,000 on their “affordable” units. Others have begun renting out their units. According to data gathered at the BC Assessment office in March, 16 per cent of the condos in the building are no longer owner-occupied.

read on:
http://thetyee.ca/News/2014/05/08/60-West-Cordova-Condo-Experiment/

#112 Nemesis on 05.19.14 at 5:31 pm

#LinkErratum #VeryFengShui

http://tinyurl.com/krrlreq

#113 Mark on 05.19.14 at 5:44 pm

“48,000 Angry Chinese Millionaires say otherwise!”

Just because they’re “millionaires” in China doesn’t mean that they’re bringing liquid wealth to Canada to invest in Canadian RE. As is the case with most of the wealth of “millionaires”, it is tied up in various business entities. Most of those people, if they were even to emigrate to Canada, would be taking out CMHC subprime mortgages just like everyone else.

#114 Mark on 05.19.14 at 5:51 pm

“Methinks Mark is a troll…”

Nope. Just trying to inject some common sense here instead of the coated-with-xenophobia claims, largely without evidence, that “foreign” money is coming to Canada. When the culprit to high Vancouver, Toronto, and Calgary RE prices is clearly the ease of availability of CMHC subprime credit.

In fact, if you look at the data, Canadians invest more money outside of Canada than foreigners invest in Canada. Canadians are acquiring net assets overseas, not the other way around.

#115 BCD on 05.19.14 at 5:59 pm

#93 condopoor on 05.19.14 at 1:39 pm
“More troubling is the tendency to lump native-born Canadians of Asian heritage into a big xenophobic group called ‘Chinese.’ Chinese people come from China, not Burnaby.”

Thank god somebody knows a little history. I am an average caucasian dude living in Van. The number of Canadian friends who need to be told this is alarming… sadly it feels racist to me. Go read a book before contributing to stereotypes. It makes you look dumb.
____________________________________________

This is not a black/white issue either. There are plenty of immigrants that never bother to learn English, or associate with people of a different race. The tendency for the average white guy to think someone is right off the boat from China when they see them walk out of a store in a neighbourhood with ONLY Mandarin signs and speaking Mandarin is somewhat justified. As for myself I don’t lump every Asian into the “Chinese” category as Garth says, and besides, I am ornery, I dislike everyone equally–this includes every race, including the white one.

However, I think generally there is a tendency of immigrants (my parents included) to not embrace their new country and to continue to “glorify” their old homeland and their old country’s ways. To this end everyone would get along better and benefit from adopting a little adage and putting it into practice: “When in Rome do as the Romans do”.

#116 Old Man on 05.19.14 at 6:05 pm

The scholars who are planning to build LNG export centers in BC under the guidance of our politicians are out of luck, and Caesar grandstands on this fairy tale as Canada is a mega energy center with Asia as the market or Europe. It takes 6 years to build a terminal on average, and next week China might sign a deal and Australia which is a world leader can cover the rest of Asia.

North Shelf Venture operating since 1989; Darwin Basin operating since 2006; Wheatstone operating since 2011; QGC converts coal into gas operating in 2014; and Gorgon will be operating in 2015 with more to come. There will be no markets in Asia that Canada can compete on price with, so what are they all talking about? The QGC alone cost $20 Billion so if anything is ever built in BC they are left with a few scraps at best.

#117 Setting the record straight on 05.20.14 at 1:32 am

http://davidstockmanscontracorner.com/keynesian-madness-central-banks-waging-war-on-price-stability-savers/

#118 geofferson on 05.20.14 at 3:21 am

#39 Inglorious Investor – John Coleman (co-founder of the Weather Network) did a presentation recently echoing much of the same views on climate change and how the politics has gotten in the way of the science: http://youtu.be/7P5RW0Tmp-U

#119 :):(Ying Yang on 05.20.14 at 12:46 pm

#66 Smoking Man on 05.19.14 at 12:50 am

IDo you dogs all remember last Xmas when I told the story of my scathing Facebook post to wifey poos family. I used words like dushbagary, shit stain masked as perfume.

……………………………………………………………………..
So Smoking Man does your brother in-laws shit still stink? Or are you all good with drinks in Vegas? Know what you mean about pussy ass relatives. Have some my self. They are rich as hell but never ever helped my parents out. So the parents did it all on their own.
Go hit Black on Roulette now!

#120 M on 05.20.14 at 3:25 pm

60-80% baby.
50K avg income with a 20 yrs 10-15% mortgage boils down to 170K max the avg house.
Off the cliff 40% then the rest slowly in 20 years.
With unemployment 12% official
Here you have it. Build on it. Stockton California sweethearts.

Garth..git in some babe pics for good spirits