The melt

Time for a few updates, and a little clarity. No goats today. Promise.

Days ago I gave you the skinny on what’s happening in a number of spots across the country, from the Maritimes to Ottawa, Montreal and across the flat bits. Without a doubt, housing markets in most places outside of Calgary, urban Vancouver and hipster Toronto are anything but booming – despite those sexy mortgage rates and come-hither bankers.

So, let’s talk about the GTA. This week the local realtor cartel announced a boffo July complete with a 10% jump in sales over last year, and a 7% annual increase in the average price to $550,700. Overall, listings dipped 5%, and all this adrenalin led the Toronto Real Estate Board’s economics guy, Jason Mercer, to blurt: “Strong demand for ownership housing will underpin robust average price increases for the remainder of 2014. In fact, the pace of price growth that we have experienced over the past year will continue…”

Isn’t it a good thing Jason works in a fundamentally unregulated cowboy industry where ‘professionals’ can tell investors anything they want? Because if he was in the securities business, he’d be on his way to jail. Or at least out the door. He just guaranteed anyone buying a house now will make a profit by the end of the year. What if he’d said that about, oh, Royal Bank stock, or a mutual fund? Next stop would be a body cavity search.

Well, things are not exactly as the realtors would have you believe. Sales activity is in fact up – but not by 10% over last July. It’s 7.5%, because the board once again went back and secretly altered last year’s statistics.

But that’s not the issue. Instead it is a withering at the top end of the market, as many properties above $1.5 million go unloved and unsold, as is now the case in almost all major markets. Of course, the kids are still borrowing their little brains out and the hot zone remains $700K to a million (where CMHC insurance ends), which explains the overall average.

But TREB’s assertion that 416 detached houses are in hot demand is a bunch of hot air. Back in the Spring when average prices neared the $1 million mark this market finally found its ceiling, and bounced off. If this were a stock, we’d be looking at a classic head-and-shoulders formation. The truth is that single homes in urban Toronto have dropped in price by more than $85,000, or 9%, in just the last four months.

416 modified

As you can see, it can’t be explained away as mere seasonality, since prices have been declining steadily since April – after a long winter and a wet spring which pushed the peak out from March. Truth is, a melt has begun. From the top. If you’ve been waiting, you win.

*    *    *

But it could be worse. It could be Saskatoon.

Sigh. Was it only a year ago the prairie people were telling us they were different? How everyone in a province where football fans wear actual melons on their heads was getting rich? That Saskabush was booming?

You might want to rethink that. There are now more people bailing out of their houses than at any time since back in 2008. Listings have surged by 19% from this time a year ago, and at the same time sales have dropped by 9%. Supply up. Demand down. Guess what comes next?

*    *    *

Now, the cheapest real estate in Canada – by weight.

For that we go to the picturesque, sea-side Nova Scotia town of Pictou, which is having a lousy summer. Seems the dingdongs who run the local kraft paper mill there broke the bit that scrubs pollutants out of the smokestack, and the town has been blanketed in stinky dust as a result. In the real world, the mill would be forced closed until they fixed the problem. But in a province where jobs are precious, people would rather inhale crap.

Well, this has just made a bad real estate market worse. But what a place to do some vultching, especially if you love history, gigantic slabs of granite or need the ultimate bunker for the coming zombie apocalypse.

More than two years ago I told you about the old Pictou post office hitting the market – 7,500 square feet of pre-Confederation majesty, boasting the only chimney in Canada with a window in it, a lower level recently renovated into a high-end eatery, a hand-painted safe (no, the kind you put money in) and a commanding presence in the middle of the downtown. I actually toured this place with Dorothy and the agent, Giovanna Ferrera, one day between gigs. I felt baronial for two days.

Anyway, a dude in Florida bought it, loved it, poured hundreds of thousands into renovations he never finished, and has been trying to sell it for a l-o-n-g time. When it was listed for about $300,000 it was deathly cheap. But today it’s yours for $115,000, and the owner will take back financing.

PICTOU modified

By the way, the soaring stone post office in historic Annapolis Royal is also on the market. It started at $295,000 and is now a hundred grand less. Also the centre of town. When I asked the listing agent what was wrong with it, he said the only small issue is some water in the cavernous, grotto-like basement.

“But,” Alyn added, “it’s only really bad at high tide.”

145 comments ↓

#1 Billy on 08.07.14 at 6:27 pm

When you say that the boards have altered the stats from last year, how have you determined that? I’m not doubting you, I would just like to know if you’re looking at any websites/reports/whatever for your information.

Specifically how can someone not tuned into these things, unlike yourself, run the numbers to determine what’s actually going on?

#2 Shane on 08.07.14 at 6:30 pm

How is the brampton market doing?

#3 Yogi Bear on 08.07.14 at 6:32 pm

So the correction is finally here? The masses will be angry.

Pitchfork and torches time!

#4 Shawn on 08.07.14 at 6:34 pm

Old Post Offices

Perhaps these are like certain older used cars.

Some old cars are just money traps that are in a sense are worth less than nothing. If you buy it, it just costs you money as one thing after another has to be fixed and for example a shocks or brakes or even tires installed might cost more than the car.

So $115k seems like an incredible bargain for the Post Office but then it could just become a money pit as the Florida buyer found out.

Tempting though as I always wanted to be a Baron.

#5 Garden Growing In London on 08.07.14 at 6:38 pm

Mr. Turner, thank you very much. Now my wife is post office curious. Goodbye GTA hello toothless Okies. I’ll write you from down east if the worst should happen. Oh by the way…don’t ever stop writing, we love your blog!

#6 nubbers on 08.07.14 at 6:39 pm

Mmm… I wonder how much the fine would be if you just knocked it down.

#7 Happy Renting on 08.07.14 at 6:42 pm

I’m familiar with the look of laser-focused desire in Cooper’s eyes. Our pup (cancer got him two years ago) LOVED McDonald’s ice cream. Took him more than one chomp to eat a cone, but not much more!

——-

Appreciate the Toronto SFD chart. If we were to buy that’s what we’d want, but prices are a long way from where we’d begin to consider it.

#8 Steve French on 08.07.14 at 6:44 pm

If ya like my body
and ya think I’m sexy
tell me baby
…. I’m #1 !!!!!!

#9 Cici on 08.07.14 at 6:49 pm

Garth, the lasts link requires a login. Can you post a picture so I don’t have to create an account?

Thanks!

#10 Chopper on 08.07.14 at 6:50 pm

I cannot understand why people will make one of the most important purchases of their lives and not do their homework. No conditions on a purchase is crazy, an inspection is a “MUST” but yet people forego that. CRAZY.

Oh well fools abound that is why we have 1% of the population who are millioners controlling the other 99%.

#11 Singaporean Investor on 08.07.14 at 6:59 pm

there’s nothing to worry here, we are moving much higher..

#12 Singaporean Investor on 08.07.14 at 7:01 pm

the real estate market may seem overpriced if one uses the traidition average house prices/median household income, but… we have a much wider wealth gap in this country and around the world.

Just look at this news: “Richest 5% account for almost 40% of consumer spending”
http://www.finfacts.ie/irishfinancenews/article_1027224.shtml

It can be said the same thing in real estate, the wealthiest 5% might be buying 40% of the real estate in the country.

#13 Steve on 08.07.14 at 7:16 pm

What’s an average house worth in pictou? Like 40,000?

#14 X on 08.07.14 at 7:21 pm

“Isn’t it a good thing Jason works in a fundamentally unregulated cowboy industry where ‘professionals’ can tell investors anything they want? Because if he was in the securities business, he’d be on his way to jail. Or at least out the door. He just guaranteed anyone buying a house now will make a profit by the end of the year. What if he’d said that about, oh, Royal Bank stock, or a mutual fund? Next stop would be a body cavity search.” Garth

Exactly.

Good thing that most Canadians don’t have most of their net worth in RE…wait…oh, no…..

Yep, total sense that it is unregulated. Perhaps a class action suit for Jason from those that buy later this year and don’t make money.

#15 Son of Ponzi on 08.07.14 at 7:21 pm

#4
Shawn, go for it.
Then you can call yourself Post Master.
Would go well with your big ego.

#16 Smoking Man on 08.07.14 at 7:22 pm

The melt, ha… Hope your right, love to see all those tree huggers that voted for Wynne get burned…

But I think it’s season slow down…

For Holly Chap Tylenol….. For you… I’ll see you at the UFO conference… Here is a bit of chapter 2, enjoy…

http://www.dyslexicsmokingman.blogspot.com

#17 Frustrated on 08.07.14 at 7:22 pm

Hi Garth, I think you should be a special guest on cp24 hot property. All the guest on the show are all so bullish. The viewers should know the risk we are in now. Great blog and keep up the good work you are doing

#18 LH on 08.07.14 at 7:22 pm

Good thing all seven SFHs I own are in the hipster precints of Toronto! No time to sell yet, trend is still my friend!

LH

#19 Chickenlittle on 08.07.14 at 7:25 pm

Does anyone live in the Sardis/Chilliwack area? I would be curious to find out how the RE market is doing there.

“Boffo “…..LOL! Garth, you kill me!

#20 Mark on 08.07.14 at 7:34 pm

Good post Garth. Tried to explain the shifting sales mix, and the price declines in the GTA that have been occurring over the past year to the folks on RFD, mostly a bunch of deluded Realtors and mortgage brokers. But to no avail. It doesn’t take a rocket scientist to realize that GTA real estate, as well as Calgary/Vancouver have been seeing declining prices on identical properties for the past year now, in wake of F’s Budget 2013 moves to crack down on CMHC subprime mortgage insurance.

#21 Daisy Mae on 08.07.14 at 7:35 pm

“Isn’t it a good thing Jason works in a fundamentally unregulated cowboy industry where ‘professionals’ can tell investors anything they want? Because if he was in the securities business, he’d be on his way to jail. Or at least out the door. He just guaranteed anyone buying a house now will make a profit by the end of the year. What if he’d said that about, oh, Royal Bank stock, or a mutual fund? Next stop would be a body cavity search.”

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

Our damn government just turns a blind eye because it’s in their best interest to do so. Is it any wonder they command so little respect?

#22 polecat on 08.07.14 at 7:41 pm

Yeah, Nova Scotia is cheap in some places, hope you like high taxes and no jobs outside Halifax. Beautiful place but becoming a retirement community, I think my next career will be home care, only growth industry. Market is taking a s#!t kicking. The melt is here we just don’t have a subway system to go with it. On a good note, my bunker is slowly getting ready for the zombie apocalypse, lots of deer in the province too. If it hits the fan come on down, we’ll close the border at the marsh and be the place to be just like in that movie with Brad Pitt. We should have palm trees in about 50 years.

#23 rainclouds on 08.07.14 at 7:43 pm

#5

“The worst that could happen” is one of those “toothless oakies” kicks your arrogant ass back to London town.

Idiot

#24 Smudgekin on 08.07.14 at 7:51 pm

Who wants to pay 3.8 for next to the Toronto CBC receiving? Not even atop the subway and in an area where there’s little ‘Ritzy’ to see & do after office hours.

1 Bloor is up to about the 15th/16th. Note this address is never called EAST cause that would be strictly the wrong side of the tracks.

Big happenings from Tridel for QQ East once the present tenants like Guvernment Nightclub have been booted.

#25 Bob turner on 08.07.14 at 8:00 pm

#23, you just signed your post, Idiot.
I guess #5 was right.

#26 saskatoon on 08.07.14 at 8:02 pm

NOOOOOOOOOOO!

say it ain’t so, garth.

#27 Mike T. on 08.07.14 at 8:03 pm

Nice post

‘So the correction is finally here?’

no – not yet
people need to here it from the TEEVEE

change what is on the TV, change what is on peoples minds

blogs like this, however awesome and helpful they are, are still fringe lunatic to the zombie masses

it is going to make for an epic ‘I told ya so” though

#28 james on 08.07.14 at 8:04 pm

#12

“the real estate market may seem overpriced if one uses the traidition average house prices/median household income”

you mean, the metrics that won Shiller the nobel prize in economics?

Yeah, turfing that methodology is a great idea.

#29 Guy on 08.07.14 at 8:05 pm

Sounds like Jason Mercer could find a better job for the American government calculating inflation and unemployment. What ever happened to honesty?

#30 Freedom First on 08.07.14 at 8:07 pm

Amusing, but sad, Garth. People would rather inhale crap, TREB blowing hot air, dude from Florida with more money than brains, and the water in the dungeon is only really bad at high tide. Reminds me of the movie, “Dumb and Dumber”.

No wonder we have people in Canada paying a million$ for a tear down shack with no money and no inspection.

#31 rainclouds on 08.07.14 at 8:12 pm

#25
Dear bob the idiot

Got all my teeth and live in Vancouver

Is that better?

#32 Smoking Man on 08.07.14 at 8:15 pm

#29 Guy on 08.07.14 at 8:05 pmSounds like Jason Mercer could find a better job for the American government calculating inflation and unemployment. What ever happened to honesty?
…..

It was never here to begin with, get over it.. Learn to take from the dumb…..

#33 Vangrrl on 08.07.14 at 8:16 pm

Love that video clip- Cooper rocks!! Haaaa

#34 Mike S on 08.07.14 at 8:17 pm

“Toronto have dropped in price by more than $85,000, or 9%, in just the last four months”

So, does that mean additional 6% for 15% correction (as suggested by you in a few post before) in GTA, and then buy?

#35 JOe on 08.07.14 at 8:19 pm

Garth I have a question…

What is your business in this RE….People have free will what they are doing….and take consequences…

It is not your business to judge it..!!!!

Let it go….what you want to prove ? that you are genius and people who buy RE are idiots???

What the difference that makes….think about it…

and do something else….than this blog

#36 Mark on 08.07.14 at 8:21 pm

“So, does that mean additional 6% for 15% correction (as suggested by you in a few post before) in GTA, and then buy?”

Of course not. The decline will be far greater than 15%, and could be up to 70-80% relative to out-of-favour asset classes such as the stock market.

Think of the 1990s. The best time to buy of course was a decade after the peak. And that was in a falling rate environment. We are now faced with a long-term rising rate environment and significant capital losses on long-term debt.

#37 Smoking Man on 08.07.14 at 8:23 pm

Amazing never had so many chics stair at me.

Is it the way my pleated pants project a faux Package… No

My 5 lbs toy poodle likes to sleep between my head, and the head board. She loves it up there, who needs an exfoliating tool…

Well my wee wife decided it was time for a nail clipping on the wee dogs paws.. Just before bed….

I got this gouge on my nose like I was in a knife fight.

That little dog hot me good… Told everyone at the tax farm, my wife kicked the crap out of me…

That’s what they where thinking anyway..

#38 billybill on 08.07.14 at 8:23 pm

so given the madness of the world…you still think gold doesn’t have place…my god you were a politician..once you were a believer…it’s worse now….tom

Dead money. No income. No reason to own it. US$ rules. — Garth

#39 Saskatoon-Living on 08.07.14 at 8:24 pm

Yep, Garth is telling the truth about S’toon:

http://www.thestarphoenix.com/business/Housing+inventory+highest+since+2008/10093685/story.html

#40 lee on 08.07.14 at 8:28 pm

I don’t think it’d fair to say prices are off 85,000 in 4 months in Toronto for detached single family homes. I think it’d safer to say some really desperate stupid people skewed the average in April by over bidding anything under a million since CHMC covered the stupidity.

It has declined each month since the spring. Are the stupid people taking turns? — Garth

#41 Suede on 08.07.14 at 8:34 pm

Putin 1
Canadian Brittle Economy 0

Sanctions will backfire for H. What a dummy.

#42 Mike S on 08.07.14 at 8:40 pm

“Of course not. The decline will be far greater than 15%, and could be up to 70-80% relative to out-of-favour asset classes such as the stock market.”

Garth said several times, that it would be 15% correction for SFH, no crush in the GTA
so basically 820K for average SFH is about it?

Don’t be so naive as to think there will be a blanket price adjustment across an area containing 6 million people. Expect wide fluctuations by district and neighbourhood. — Garth

#43 Tony on 08.07.14 at 8:48 pm

Re: #34 Mike S on 08.07.14 at 8:17 pm

The entire Canadian economy is going down the drain. Oil is falling, commodity prices will plunge especially palladium. The cost of living is way too high. Be prepared to wait a long time before buying a house.

#44 Calling the top.... on 08.07.14 at 8:49 pm

$8 million for a house in canmore
http://luxuryhomes.com/lh/listing/ByAgent/Ann_Keith-Rob_Stevens/821_Silvertip_Heights

any takers?

#45 Smoking Man on 08.07.14 at 8:54 pm

#40 Suede on 08.07.14 at 8:34 pm

Putin 1
Canadian Brittle Economy 0

Sanctions will backfire for H. What a dummy.
…….

Ha, I don’t mind, he’s going to send the price of bacon to the basement…. Their is an up side to everything…

He’s not an idiot, he knows who’s going to butter his bread when he gets the boot.. Actually, tactful and smart..

Heather and Gerry will take good care of him…

#46 Montellino on 08.07.14 at 8:55 pm

Lee and Garth… More like stupid ppl turning away.. If you look at the west end gta market you can see cracks in the hot zone as well… Less and less places sold in bidding wars, mls reports typical sale is 95% to 97% of list price but if you search for original list price its more like 90% of asking.. For example house on Melbert – listed at $629 sold $525.. Mark land woods listed 720 sold 660.. Kipling/burnhamthorpe area a number of reduced listings 1 house went from $599 to $499…another from $720 to $680.. Have some contractor friends many of whom are home out of work for days/weeks at the time… To Garth’s earlier point – its the middle of the summer!!

#47 dan on 08.07.14 at 9:03 pm

I have email CP 24 twice requesting that they bring different guest speaker on their show. To-date, I have not received any response from them.

#48 notagreaterfool on 08.07.14 at 9:10 pm

Re: GTA, isn’t it normal for the average price to slide down in the summer from the peak spring season? If so, why so certain the thaw is underway?

#49 crowdedelevatorfartz on 08.07.14 at 9:31 pm

@#5 Garden Growing In London

“Toothless Okies”?

Well, I was down there last month and didnt see any toothless Oakies. But if you spout off like that in Pictou , I garantee you’ll be toothless .
Go ahead, and take Bob turner with ya.
Gonna be fun watching both of you eat corn on the cob without any teeth

#50 Bobby on 08.07.14 at 9:41 pm

Here in Victoria, lots of properties just sitting with New Price stickers on the signs. Many have been on the market forever. Some of the houses haven’t been updated in decades.
At some of the open houses I’ve visited, the realtors sound desperate and are trying too hard.
One idiot even said 2×4 construction was the better choice as it was cooler in summer. Would have had a hard time getting a job pumping gas.

#51 young & foolish on 08.07.14 at 9:43 pm

People have become accustomed to higher and higher prices, and so are often listing at unrealistic asking prices.

#52 young & foolish on 08.07.14 at 9:46 pm

““Toronto have dropped in price by more than $85,000, or 9%, in just the last four months”
So, does that mean additional 6% for 15% correction (as suggested by you in a few post before) in GTA, and then buy?”

It seems there will always be buyers ….

#53 Mike S on 08.07.14 at 9:47 pm

“It has declined each month since the spring. Are the stupid people taking turns? — Garth”

It sure seems that way in GTA
This last year, absolutely everyone loaded tons of new debt, to buy any type of property. Often keeping the old one unsold. There are a few people who actually believe RE can go anyway but up, and even these few start to question their sanity

“Don’t be so naive as to think there will be a blanket price adjustment across an area containing 6 million people. Expect wide fluctuations by district and neighbourhood. — Garth”

How do you get anything to the average of 15%
condo overbuilt, and more starts everyday. yields are as low as it gets, and that before tax. debt load for SFH is enormous, and went up last several years?

Which asset in the GTA is going to correct by less then 15%?
Are we to expect this 15% average correction in the GTA, and then wage inflation accross the GTA region, even though there are plenty of construction and financing jobs, that are going to be hurt?

I really like your blog Garth, but sometimes your different posts just don’t add up though

#54 takla on 08.07.14 at 9:49 pm

16429 DOW level jan 1st 2014 ,today 8 months later DOW closes 16368 after loseing all gains from 17151 .Has the reset begun in the stock market?Will this further exasperate the housing slide from the highs?Will employment drop as it did in 2008/2009 further stressing the realestate market?08/09 saw prices drop20-40%in many markets.
Get liquid and save for the sale if your house horny…its comeing

Of course stock markets will correct. None now for three years of relentless advance. — Garth

#55 Roy on 08.07.14 at 9:51 pm

Recent First-Time Home Buyers ‘Particularly Vulnerable’ To A Debt Shock: RBC

House-poor adults aged 35-44 carry heaviest debt load
http://www.cbc.ca/news/business/house-poor-adults-aged-35-44-carry-heaviest-debt-load-1.2730243

Nothing to see here, move along. Just another bank giving out a dose of reality, but then putting their rose-coloured glasses back on so they don’t sound alarmist.

#56 Mark on 08.07.14 at 9:56 pm

“People have become accustomed to higher and higher prices, and so are often listing at unrealistic asking prices.”

Exactly. And housing starts may actually rise in a declining price environment as existing housing suppliers sense an urgency to lock in margin while they still can.

#57 Realties.ca » The melt on 08.07.14 at 9:59 pm

[…] Source: http://www.greaterfool.ca/2014/08/07/the-melt/ […]

#58 Ayn Rand Army on 08.07.14 at 10:02 pm

Well congratulations Garth, you’re finally right!

You know what they say about stopped clocks…… haha… i’m kidding and have always agreed the good days were numbered.

With credit expansion inflation directed by policy it’s inevitable to create a bubble and the longer it goes the more damage is done.

The coming reckoning is not the damage, it’s the result and is why we call it a CORRECTION.

The fact that’s it’s taken this long will sadly give you more satisfaction whey you say i told you so to all the naysayers.

ps, a little bird also tole me today that apparently our banking system is on death watch according to Weiss ratings agency. hence the bail in legislation etc…

it’s coming, and so is www3

:(

#59 NostyVlad the Snugglebombed on 08.07.14 at 10:03 pm

Great clip! Good post to boot as well.
*
#41 Suede on 08.07.14 at 8:34 pm — “Putin 1
“Canadian Brittle Economy 0
“Sanctions will backfire for H. What a dummy.”

Speak of shooting one’s self in the foot! One should remember that the west will feel the backlash, not just Canada — The US, for instance.

There are several countries who are trying to break free of Bretton Woods, and going their own way. TPTB realize this, and creating false wars is a very effective way of distracting sheeples, by using their own m$m. After all, Sadaam had tons of nuke WMD, didn’t he?

All Putin has to do (doesn’t require much effort) is turn off the natural gas pipes (such as here) to the EU and Ukraine a few weeks before winter sets in. See how long the populace remains loyal to the money junkies then! Out of chaos, order — There is nothing to fear but fear itself, and that’s not particularly scary.

#60 Cha Ching on 08.07.14 at 10:09 pm

Bears have warned for years that the market is headed for a big drop, sales are dropping, inventory is rising, that the levels of borrowing and sky-high pricing are unsustainable. But so far they have been wrong. Prices continue to rise.

Homeowners win.

Sorry.

#61 Mike S on 08.07.14 at 10:25 pm

“Think of the 1990s. The best time to buy of course was a decade after the peak. And that was in a falling rate environment. We are now faced with a long-term rising rate environment and significant capital losses on long-term debt.”

The future is uncertain, 10 yr canadian debt just went down to 2.07%
In the meantime where would one park a downpayment money, just to keep up with inflation after tax?

#62 Only Look Stupid on 08.07.14 at 10:29 pm

That show on CP24 is a 45 minute commercial dressed up as a real estate information show. Hence the “guest experts” are a representative from the biggest sponsor of the show, who stays for the whole time, the mortgage broker. The builder and and real estate agent represenatives split the time as they are smaller sponsers. It’s all bought and paid for to sell to the viewer.

#63 Smoking Man on 08.07.14 at 10:34 pm

#59 NostyVlad the Snugglebombed

DELETED

#64 Temporary Foreign Prime Minister on 08.07.14 at 10:38 pm

“…..will underpin robust average price increases for the remainder of 2014. In fact, the pace of price growth that we have experienced over the past year will continue…”
=========================

TRANSLATION: “….will underpin robust unemployment for the remainder of 2014. In fact, the pace of price growth that we have experienced over the past year will further encourage employers to flee the province in search of countries whose citizens don’t require above market wages to pay for million-dollar bungalows…”

#65 Mark on 08.07.14 at 10:40 pm

“In the meantime where would one park a downpayment money, just to keep up with inflation after tax?”

The sort of balanced portfolio that Garth routinely recommends here would be my suggestion. Don’t fall into the trap of putting it all in a no/low-interest savings account as many do.

#66 BG on 08.07.14 at 10:40 pm

#35 JOe

Your are pathetic.

The fact that Garth has no “business” in RE is one of the reasons people come to this blog for information and debate.

Now, why don’t you apply your precious advice to yourself and never come back here?
Oh, maybe you DO have business in RE. Try the MSM then.

#67 T.O. Bubble Boy on 08.07.14 at 10:56 pm

@ #48 notagreaterfool on 08.07.14 at 9:10 pm
Re: GTA, isn’t it normal for the average price to slide down in the summer from the peak spring season? If so, why so certain the thaw is underway?
——————————-
The stats are available… no need to wonder.
http://guava.ca/indicators.html

May-to-July average price drop is something like 5%-6% over the past 5 years… and this year it is 5.9% (for entire GTA).

So, percentage-wise, the decline from the spring peak to July bottom is pretty typical.

Not what I referenced. — Garth

#68 devore on 08.07.14 at 11:02 pm

#1 Billy

When you say that the boards have altered the stats from last year, how have you determined that? I’m not doubting you, I would just like to know if you’re looking at any websites/reports/whatever for your information.

Look at the original realty board report for July 2013, note the numbers. Look at the report for July 2014, and note again the numbers for July 2013.

You may line up for tinfoil hats over there.

#69 pictouprince on 08.07.14 at 11:22 pm

That Pictou Post office would make a good debtor’s prison…..

#70 takla on 08.07.14 at 11:34 pm

Garth”of course stock markets will correct,none now after 3 yrs of relentless advance”,,,kind of like the relentless advance of gold for 3 yrs from 972.00 in 2008 to 1900 plus in 2011,,,point is all investments are cyclicle even those barbaric “rocks” as you call them. But I digress{again sorry garth} the point of my first post was to bring up the relation of a correction in the stock market and the resulting weakness in the the economy and broader housing market which can last for yrs

#71 notagreaterfool on 08.08.14 at 12:14 am

67 T.O. Bubble Boy

Right…..there is a downward trend in the average price. My bet is this is also true for the SFH segment that Garth speaks of.

Still don’t see the evidence the thaw in the 416 has started. If it has, the bust Fall season should provide more evidence.

#72 Tom from Mississauga on 08.08.14 at 12:41 am

AX, MRG and MST REITs reported decent quarters. Leave my dough in their units instead. Thanks though.

#73 Sparky55 on 08.08.14 at 1:30 am

#141 Mark on 08.07.14 at 2:43 pm

“reactive power creation. – what’s that?”

Its a very highly technical aspect of the power system/electrical engineering, referring to current which flows between capacitive and inductive elements of the system, but does not actually contribute to physical work or heat creation.

Typically in a power system, it is used as a measure of ‘voltage support’, and much of a power systems’ reactive power requirements are created by turbine generators by varying synchronous generator excitation by way of an AVR.

It is because of reactive power that you can’t, in doing AC power calculations, simply go P = IV. You have to use phasors, and the heavy duty mathematics thus involved.

That’s the first year EE course version of it. To get more into it, I suggest you Google for additional resources.

To make a long story short, reactive power is, just like those other aspects we discussed, not really a characteristic of solar energy production. Thus lowering its value and requiring supplemental resources as backup.
*********************************
Your arguments do not make sense.

Power factor (relationship between apparent, real and reactive power) comes from electrical LOADs, and not electrical generation sources. The generation source simply has to deal with it as effectively as possible.
Reactive power (in EE terms can also be called imaginary power) has no energy consumption (ie the non “real” part), but causes higher transmission losses, and reduces transmission capacity. It is due to the voltage and current waveforms being out of phase and or distorted.

Distributed generation, such as wind and solar actually HELP the grid, as it adds many points of redundancy as localized distribution increases, and also helps correct power factor and AC waveform distortions closer to the sources.
The new smart grids being developed and implemented actually help use renewable energy much more effectively, for example a hot water heater tank or thermal storage unit won’t heat up more then absolutely necessary during low excess energy, and will store extra heat during times of excess available energy. Electric cars will be able to use the smart grid very effectively, reducing charge rates when low amounts of energy is available, and increasing charge rates when excess energy is available. There have even been some proposals of electric cars selling power back to the grid when needed.
Utility scale batteries are becoming a reality. Hydro can be ramped up and down very quickly also, thus acting as a reserve to fill the low generation capacity gaps.

Investment wise, Wholesale pricing on small scale solar has a 3-5year payback in most places with nominal kWh charges. I can’t see how that is a bad thing, even if the installer charges enough to push the payback further down the road a couple of years. It is also an investment in the future by reducing pollution and the very rapid consumption of non renewable resources – burning millions of years worth of fossil fuels in a couple of centuries can’t be a good thing. We actually have smog now in my area – this was not an issue when I was younger.

The only thing I agree on is the kWh sell back pricing structure will have to change at some point in the future as more and more local generation is added to the overall energy generation mix. Oh, and if you want to see subsidies and tax incentives, look at the fossil fuel sector…

#74 Londoner on 08.08.14 at 4:16 am

“Truth is, a melt has begun. From the top. If you’ve been waiting, you win.

Congratulations on calling the top of the Canadian housing bubble. Well done.

Also, congratulations to all the “winners” that have been waiting for this.

#75 The real Kip on 08.08.14 at 7:03 am

“Now, the cheapest real estate in Canada – by weight.

For that we go to the picturesque, sea-side Nova Scotia town of Pictou, which is having a lousy summer.”

I’ll bet the people in Windsor, Ontario will be glad to hear they’ve been beat out from last place.

Oxygen issues up on the crane today, eh? — Garth

#76 bigrider on 08.08.14 at 7:21 am

We will see a 20% decline in the financial markets again and way before we see the same decline in the GTA housing market.

This is simply a reality for all to accept.

Yes, part of the reason for the above, does have to do with the incredibly high standard regulatory framework financial market professionals have to operate within, compared with the gun toting ,shoot from the hip, anything goes, RE “professionals” virtually non existent regulation.

#77 bigrider on 08.08.14 at 7:25 am

To add to my previous post.

I am still waiting for those red and green neon signs on the front lawns of home owners ,that give a second by second account of the value of those same homes, much like BNN which gives a second by second account of the value of financial assets. I want to have those same red and green signs stir the emotions of investors in RE to a frenzy both on the way up and down.

Ya I know, no chance of that happening.

#78 OttawaMike on 08.08.14 at 7:30 am

73 Sparky55 on 08.08.14 at 1:30 am

Exactly.

#79 bigrider on 08.08.14 at 7:31 am

You can buy/sell 500k worth of a security for 5 bucks and get all the info about it , its history and plethora of details regarding it, anywhere, for free with a simple click on your computer.

To sell the same RE value ,you have to pay 5% to a couple of cowboys who will provide you some info, if the want to, filtered to insure their collection of same 5%.

Might as well be comparing quantum physics to dinosaur fossils

#80 TurnerNation on 08.08.14 at 7:36 am

Yikes, more kandos.

http://www.thestar.com/business/real_estate/2014/08/07/new_owner_of_jillys_strip_club_buys_two_sites_nearby_for_condos.html


The new owner of Jilly’s strip club has bought up 4½ acres of land just to the west of the landmark hotel and hopes to create a new community — including three condo towers — that will connect Riverside to the downtown.

The large development parcel, to be called Riverside Square, includes the Toyota dealership on Queen St., just east of the Don Valley Parkway, as well as two sizable Tippet-Richardson Ltd. warehouses adjacent to the dealership.

Some area residents are already concerned about the proposal for 555 residential condos in one 24-storey and two 12- or 13-storey mixed use buildings in an area which has undergone massive change just in the last few years, including a major influx of new condos and busy bars.

#81 Nuke on 08.08.14 at 8:42 am

Maybe I should move back East and buy that fixer upper in Pictou.

#82 Exiled on 08.08.14 at 8:49 am

Sir Garth: RT News has just broke the storey that Ukrania is going to shut off all the Gas going to Europe!!!!!!!!!!!!! Oh $h1t!! Here comes Putin!!!

#83 Italians love real estate on 08.08.14 at 9:08 am

#78 Bigrider

Go ahead and post those green neon signs on the front lawns of GTA houses but don’t waste your money on the red ones. You won’t be needing them.

#84 Holy Crap Wheres The Tylenol on 08.08.14 at 9:16 am

#59 NostyVlad the Snugglebombed on 08.07.14 at 10:03 pm

Great clip! Good post to boot as well.
*
#41 Suede on 08.07.14 at 8:34 pm — “Putin 1
“Canadian Brittle Economy 0
“Sanctions will backfire for H. What a dummy.”

Speak of shooting one’s self in the foot! One should remember that the west will feel the backlash, not just Canada — The US, for instance.
All Putin has to do (doesn’t require much effort) is turn off the natural gas pipes (such as here) to the EU and Ukraine a few weeks before winter sets in. See how long the populace remains loyal to the money junkies then! Out of chaos, order – There is nothing to fear but fear itself, and that’s not particularly scary.

_______________________________________________

Canada could take advantage of the valves turning off in Russia. Export our oil and gas to Europe with a nice profit margin. Its not personal, its business! We can support Europe though the crisis and make some money. The Russians are going back to their old cold war ways and want to keep Russian as a global power no matter who gets in their way. Anyway like I keep saying build the god dam pipelines to the east coast and west coast and sell the black gold before some dumb-ass figures out fusion and were screwed sitting here with messy black tar!

#85 Montellino on 08.08.14 at 9:21 am

200 new part time jobs (for people aged 15-24)
and we were looking for 20,000

Garth – I’m scared

The condo economy in full force. You can only base growth on people borrowing money to buy real estate for so long. I told you: this will not end well. — Garth

#86 Holy Crap Wheres The Tylenol on 08.08.14 at 9:25 am

#73 Sparky55 on 08.08.14 at 1:30 am
#141 Mark on 08.07.14 at 2:43 pm
“reactive power creation. – what’s that?”
_____________________________________________
Sparky while I understould what you said I am not sure Mark would unless he was an Electrical Engineer.
Heres my simple dumbed down version of it!

While active power is the energy supplied to run a motor, heat a home, or illuminate an electric light bulb, reactive power provides the important function of regulating voltage.
If voltage on the system is not high enough, active power cannot be supplied.
Reactive power is used to provide the voltage levels necessary for active power to do useful work.
Reactive power is essential to move active power through the transmission and distribution system to the customer.

#87 Londoner on 08.08.14 at 9:51 am

Still think BoC is going to raise the overnight rate instead of cutting it? Not likely the way things are looking at the moment. As I said before, it will all come down to employment and GDP numbers, CPI be damned.

Of course there will be no cut. — Garth

#88 JL on 08.08.14 at 9:58 am

Idiotic comparison, someone saying “average” house price growth expected to increase is not guaranteeing that if you buy a house today you are going to make money. As for comparing to the securities business, there are people on BNN and CNBC everyday coming out with forecasts for the DOW, S&P and TSX saying it will rise x percentage over next year. Exactly the same as someone forecasting average home prices will rise. The Realtor is not saying that a specific property will go up, only that the average price will increase. No different from the financial guy saying the indeces will rise.

#89 Big Ed on 08.08.14 at 10:05 am

The truth is that single homes in urban Toronto have dropped in price by more than $85,000, or 9%, in just the last four months.-Garth

If the message that you are trying to get across is that there is weakness in the higher end of the market and that in turn is making the average sales price for SFH drop, then I wholeheartedly agree.
If you are trying to imply that comparable homes are selling for 9% less that they did in April, well I think that is scare mongering.

Previously we were warned that higher prices and lower volume were signs of a weakening market. Now we have the opposite, lower prices (according to you) and higher volume but that is still a forewarning of a crash to come.

I think a correction will come one day too, but it’s not around the corner as you would suggest.

Volume and prices in the top end of the market are equally weak. — Garth

#90 uber doomer gloomer on 08.08.14 at 10:16 am

Can we just stop the green energy post’s this is an investment blog no one on here gives a s*%# about energy savings in Arizona. Im sure David Suzuki has a blog for you guys to yammer on about who has the smallest carbon footprint or as I like to call it ” Hippie penis measuring contest “

#91 Nomad on 08.08.14 at 10:23 am

LesAffaire says this morning that Quebec got heavy full-time job losses: 59 700 jobs.

“Le mois a été difficile pour le travail à temps plein avec la perte de 59 700 postes”

http://www.lesaffaires.com/bourse/nouvelles-economiques/emploi-le-temps-plein-recule-au-quebec-et-au-canada/571116

Garth: In Quebec City apparently there are 12 sellers for 1 buyer. This is a number that came from a radio station, so it could be lies. Trying to find a reliable source. Impossible, as usual.

#92 TEMPLE on 08.08.14 at 10:25 am

Isn’t it a good thing Jason works in a fundamentally unregulated cowboy industry where ‘professionals’ can tell investors anything they want? Because if he was in the securities business, he’d be on his way to jail.

I am not sure about this- when I watch some of the various financial channels on TV, there is an awful lot of the same sort of predicting going on. How is TREB’s in-house bean counter saying house prices are going to increase any different than a talking head on the TV saying the same about the stock market? Neither of them are directly selling anything, and it’s what they are paid to do.

The Condo Lamb is a different animal, obviously. He’s not exempt.

TEMPLE

#93 Joe Hockey - Treasurer and Member for North Sydney on 08.08.14 at 10:42 am

No, Meestah Turnah, that’s not Sydney in your pathetic Nova Scotia (as if the original was any worse), but here on the naw shaw of Sinny, in beautiful Oz.

Now me mates to-die have been telling me of some bloke and his Oz bashing happening on a blog. That’s bull dust to me, you ocker.

Crikey mate, hant you got some better targets than us, taking an x to us like we’re some bug infested tree?

You Canajians have nothing to boast about. Egg jelly, yer in for some real trouble. Your air fridge Canajian could be a little more assprad with their debts and money up there, and you need a better bandry on who gets loans. Scona rine big time up there, but the sun will shine on Oz forever.

It’s different here, mate. Our prices keep going up. We have beautiful year round beaches. And our lovely, musical Strine.

(And no, my web address is not for sale to any pathetic Canajian, no jans of that. But you can admire it, here:)

http://www.joehockey.com/

I hear you got run right out of your tan cancel, Meestah Turnah. I can see why. You’re a wowser, mate.

Well, it’s night here and the kids ere sander’s lape and Oy’m knackered meself, so I might as well just turn on the egg nishner and have a laidan too.

Oy’lll check back here inner narkup luddaze, and hope you’ll be retrine to play a little nicer. Australian rules, doncha know.

Now, wezzme pillah…?

#94 Bottoms_Up on 08.08.14 at 11:08 am

#1 Billy on 08.07.14 at 6:27 pm
———————————-
The way they work their numbers enables them to continually sales volumes higher than they actually are. By comparing today’s ‘draft’ numbers with last year’s ‘real’ numbers, the increase is there. But next month they will revise down ‘todays’ number, meaning in reality the increase is less. It’s always an apples-to-oranges comparison that favours the industry, and they can do this because it’s not regulated.

#95 Mister Obvious on 08.08.14 at 11:23 am

#89 JL

I’ve been reading a lot of MLS listings lately. There’s lot of realtor talk about what a great ‘investment’ some particular (probably empty) property would be.

Agents say things like this all the time: “here’s a little gem you can rent out until you are ready build your own dream home”.

But there’s never any talk about how the current owner has been trying for 18 months to unload this ‘no revenue dump’.

There really is no question that financial advisors are held to a very much higher standard of integrity than RE agents.

A piece of communication from any certified financial advisor is invariably filled with caveats about how he has no special information, no magic bullet and can’t promise you anything.

“Past performance has no bearing on future profitability.” I’d love to hear a realtor have to say that over and over.

#96 CP on 08.08.14 at 11:32 am

Gotta say, next to Garth’s posts I come here for Nosty’s replies.

#97 Big Ed on 08.08.14 at 11:32 am

Here is a theory. Maybe the high end market in Toronto goes into hibernation at this time of year because all the rich folk are too busy at their cottages, or like Garth at his summer home in Nova Scotia, or travelling. Damn rich folk.

Pick it apart or add to the theory, everyone ‘cept you Mark.
Not you Mark, but that Mark.

#98 Mark on 08.08.14 at 11:33 am

“Power factor (relationship between apparent, real and reactive power) comes from electrical LOADs, and not electrical generation sources. “

Yes, but that refers to the demand side, not the supply side. The supply side for reactive power *is* electrical generation sources primarily. Occasionally capacitors are added, but there are limits on what can be done with them without running into problems of resonance and real-time voltage control.

Sparky while I understould what you said I am not sure Mark would unless he was an Electrical Engineer.

And that I am…. I don’t wanna really run the risk of raising the ire of Garth by turning this into a deeply technical thread of debate, but let’s just say that I’ve made my point.

#99 Suede on 08.08.14 at 11:35 am

#77 Big Rider

20% correction? Bring it on. Have attack capital soldiers waiting to go into battle at back to school prices like in 2011.

Don’t be scared. Be prepared.

#100 Mike S on 08.08.14 at 11:40 am

“The sort of balanced portfolio that Garth routinely recommends here would be my suggestion. Don’t fall into the trap of putting it all in a no/low-interest savings account as many do.”

Garth’s portfolio is great for long term investment, and I certainly use a similar 60%/40% portfolio distributed between RRSP/TFSA/taxed accounts

That said, it is not suitable for any short term investment (such as a few years), because of its short term volatility

Garth says that 2008 won’t be back in our lifetime, and while I tend to agree with him there, but I heard 2015 might be just around the corner ….

So my question still stands
Where does one keeps a money for a down payment, to be used in 1 to few years
Assume it is a significant amount (for 20% down payment), and the rest of one’s net worth is already invested (TFSAs maxed, RRSP is already at a desired level)

#101 Mark on 08.08.14 at 12:25 pm

“Here is a theory. Maybe the high end market in Toronto goes into hibernation at this time of year because all the rich folk are too busy at their cottages, or like Garth at his summer home in Nova Scotia, or travelling. Damn rich folk.

Pick it apart or add to the theory, everyone ‘cept you Mark.
Not you Mark, but that Mark.

High end housing is doing just fine. Its the low-end stuff, the stuff that is financed primarily with CMHC subprime credit almost exclusively, with the 5% loans, that really has taken it hard over the past year. Which is to be expected as “F” tightened down the rules at the CMHC significantly with the 2013 Budget.

In fact, high end is doing so well, and has become such a portion of the sales mix, that it gives the allusion that the rest of the market is healthy. Which, to actual on-the-ground observers, couldn’t be any further from the truth.

#102 Sam the cook on 08.08.14 at 12:28 pm

85 Holy Crap Wheres The Tylenol on

How do you propose exactly to deliver gas to Europe? With a pipeline at the bottom of the ocean?

The idiots in Ukraine are giving the EU and Russia every excuse they need to isolate Ukraine and to develop the north and south stream pipelines which bypasses Ukraine.
EU needs Russian gas and will get ti one way or another. EU is getting fed up with US. Harper is a clown, nobody takes him seriously and notices him anyway. Too bad for the pork producers, they should dump their pork at the parliament.

#103 Mark on 08.08.14 at 12:29 pm

“That said, it is not suitable for any short term investment (such as a few years), because of its short term volatility”

Housing isn’t a short term investment either. Dollar cost averaging into a high quality long-term investment portfolio, to buy a long-term asset (ie: a house) makes perfect sense. What doesn’t make sense is to accumulate most of one’s funds in cash (ie: very low risk), and then jump into an extremely risky long-term investment (ie: a leveraged house). If you can’t tolerate the risk of the former, why should a person be able to tolerate the risk of the latter?

#104 Blacksheep on 08.08.14 at 12:56 pm

Londoner# 74,

“Truth is, a melt has begun. From the top. If you’ve been waiting, you win.
Congratulations on calling the top of the Canadian housing bubble. Well done.
Also, congratulations to all the “winners” that have been waiting for this.
——————————————-
I think celebrations, may be a little premature.

Today’s shit jobs report give Joe the green light to hold (lower?) rates. Low rates, equals lower canadian $.

Which means cheaper canadian homes, in US $.

Let the dollar go to 75 cents and: Exports will improve, jobs will improve, fears of a housing correction will dissipate. It’s just way to obvious. Solves multiple problems with one action.

The dollar IS going down and the Cattle will absorb the inflation at wallmart. Joe gets to keep his head and harper may actually have a chance.

We have always been “hewers of wood and drawers water”, we just got ahead of ourselves, thinking we could compete on a global stage.

The minister of finance does not set interest rates. — Garth

#105 Big Ed on 08.08.14 at 1:00 pm

“Here is a theory. Maybe the high end market in Toronto goes into hibernation at this time of year because all the rich folk are too busy at their cottages, or like Garth at his summer home in Nova Scotia, or travelling. Damn rich folk.

Pick it apart or add to the theory, everyone ‘cept you Mark.

Sorry I should have made it more clear. Everyone except for know it all Mark, who is delusional in thinking prices have been dropping in Toronto the past year and couldn’t be more wrong.

The decline I showed is for May, June and July. Even the rich people were working for most of it. Fail. — Garth

#106 Bill on 08.08.14 at 1:17 pm

RE #76 Joe & #86 Montellino on 08.08.14 at 9:21 am
200 new part time jobs (for people aged 15-24)
and we were looking for 20,000

I believe the full story was ~60,000 full time jobs lost and ~60,000 part time jobs gained. Hello underemployment.

Wonder if those part time jobs were just seasonal too? Don’t personally know how they are calculated.

#107 Rational Optimist on 08.08.14 at 1:26 pm

101 Mike S on 08.08.14 at 11:40 am

“Where does one keeps a money for a down payment, to be used in 1 to few years”

Mark was right- but only this time, because he said that Garth was right. A balanced portfolio is fine. Go with a 50/50 split between bonds and equities- this barely declined even in 2008.

#108 Toronto_CA on 08.08.14 at 1:28 pm

I just don’t see how this:
http://www.huffingtonpost.ca/2014/08/08/manufacturing-crisis-canada_n_5662323.html

and this:

http://www.huffingtonpost.ca/2014/08/08/unemployment-canada-july-2014_n_5661523.html?utm_hp_ref=canada-business

..equate to our house prices increasing. I don’t see how anyone else can either. Cheap easy credit is a devil.

#109 Holy Crap Where The Tylenol on 08.08.14 at 1:33 pm

#103 Sam the cook on 08.08.14 at 12:28 pm

85 Holy Crap Wheres The Tylenol on

How do you propose exactly to deliver gas to Europe? With a pipeline at the bottom of the ocean?

The idiots in Ukraine are giving the EU and Russia every excuse they need to isolate Ukraine and to develop the north and south stream pipelines which bypasses Ukraine.
EU needs Russian gas and will get ti one way or another. EU is getting fed up with US. Harper is a clown, nobody takes him seriously and notices him anyway. Too bad for the pork producers, they should dump their pork at the parliament.
______________________________________________
Tankers duh, how do you think Japan, China and most of Asia get their oil!
You can liquify gas it takes 1/600th the volume of natural gas in the gaseous state.
Its business, not personal.
As for Harper, Obama and whoever is running our countries pleeeeease, Everybody bitches about everyone in power until the next clown comes along. I have news for you, Meet the new boss, same as the old boss!

#110 Holy Crap Where The Tylenol on 08.08.14 at 1:42 pm

#99 Mark on 08.08.14 at 11:33 am

When sized properly, power factor correction will enhance the electrical efficiency and longevity of inductive loads. Power factor correction can have adverse side effects (e.g. harmonics) on sensitive industrialized equipment if not handled by knowledgeable, experienced professionals.
This I recognize, I have my own PF Caps located on my main at the MCC in my home just for the motors I play with.
You are correct we better drop this talk and get back to $$.

#111 Rabbit One on 08.08.14 at 1:50 pm

#104 Mark

Good point.
House ownership gives false feeling of security, but
going into investing in leveraged, illiquid, local fixed assets in low employment environment is high risks.

#112 JimH on 08.08.14 at 1:52 pm

“Melt” is a much better description of what has started and what is coming than “crash”.

There sometimes appears to be a mistaken notion that housing in the USA “crashed”; as if the drop was extremely sudden and catastrophic.

In fact, decline (“melt” if you will) in the major US
housing markets took 3-4 years or more from the peak. Some markets are still in decline and many are flat-lining at or slightly above the latest bottom.

http://vancouverpricedrop.files.wordpress.com/2013/08/graph.png

There is a cautionary tale buried in the chart.

On the way down, every seller eventually found an over-eager, bargain-hunting vulture salivating over the decline and ready to pounce. There were (almost) as many greedy, panicky buyers as there were terrified, panicky sellers.

Only the most patient of the vultures, those content to remain circling the carnage below for years rather than months are above water.

Those too quick to swoop in and ‘vultch’, gorged and exploded.

#113 Rational Optimist on 08.08.14 at 2:05 pm

103 Sam the cook on 08.08.14 at 12:28 pm

“How do you propose exactly to deliver gas to Europe? With a pipeline at the bottom of the ocean?”

Why are you posting? Go look up Liquefied Natural Gas. Try reading a newspaper while you’re at it- where on earth could you possibility get your “ideas”?

#114 Victor V on 08.08.14 at 2:07 pm

https://ca.finance.yahoo.com/news/canadian-dollar-slides-data-shows-only-200-jobs-132221842.html

TORONTO – The Canadian dollar tumbled almost half a U.S. cent late morning Friday amid a huge miss in expectations for job creation last month.

The loonie was down 0.33 of a cent to 91.08 cents US as Statistics Canada reported that the economy created a paltry 200 jobs during July. Economists had generally expected that 20,000 jobs would be created.

The jobless rate dipped 0.1 of a point to 7.0 per cent.

Traders were increasingly risk averse at the end of the week amid a number of geopolitical flashpoints and that also weighed on the loonie.

Traders bought into U.S. Treasuries and the yield on the benchmark 10-year bond stood at 2.38 per cent, down from 2.43 per cent late Thursday, which was already the lowest level of the year.

#115 Victor V on 08.08.14 at 2:11 pm

http://www.theglobeandmail.com/report-on-business/economy/unemployment-rate-falls-to-7-per-cent-despite-minor-jobs-gain/article19967683/

Canadian employers created barely any jobs in July, surprising forecasters and reinforcing the Bank of Canada’s decision to keep interest rates low.

Statistics Canada’s monthly tally of hiring and firing produced a net gain of 200 positions last month, as a 60,000 increase in part-time jobs marginally outweighed a 59,700 plunge in full-time positions.

The consensus estimate of economists on Bay Street and Wall Street was for an increase in total employment of 20,000. Canada’s unemployment rate dropped to 7 per cent from 7.1 per cent, but only because more than 35,000 people gave up looking for work, according to StatsCan’s report, released Friday in Ottawa.

“Overall, the report is negative,” said Charles St-Arnaud, a former Bank of Canada economist who now works at Nomura Securities.

#116 james on 08.08.14 at 2:12 pm

Same thing happens every year. It peaks and then it drop. Hardly any evidence of a melt. Wait for next spring for prices to hit new highs. As for Toronto, the market fundamentals are sound and strong. And nobody cares about the rest of Canada other than Vancouver and Toronto, just like the rest of the world.

#117 Mid30sBanker on 08.08.14 at 2:18 pm

Garth,

since you blogged on the effect of 1Million cap on CMHC insurance, thght I will bring this to everyone’s attention

http://www.beintoronto.com/35-Balmuto-St-Uptown-Yorkville-Toronto-Condos-For-Sale-Suite-4201.html

This unit was listed for ~1.4MM, yet it was sold for ‘999,999’. Exactly a dollar less than the magic CMHC insurance number. I wonder if this can be interpreted as the buyer paying the rest of the price ‘off the books’ to get the insurance. Of course, you can also see this as an indicator for condo mkt collapse but 40% less than asking in today’s mkt? nah.. atleast not yet!

Bottomline, 1Million cap by CMHC will have the unintended consequence of creating under the table deals.

#118 james on 08.08.14 at 2:19 pm

Don’t be so naive as to think there will be a blanket price adjustment across an area containing 6 million people. Expect wide fluctuations by district and neighbourhood. — Garth

Ie. Nothing will happen in the GTA. Business as usual.

The condo economy in full force. You can only base growth on people borrowing money to buy real estate for so long. I told you: this will not end well. — Garth

That is why you buy a detach home.

#119 neo on 08.08.14 at 2:23 pm

#2 Shane on 08.07.14 at 6:30 pm

How is the brampton market doing?

Shane,

Drive down Queen Street from Airport Rd. until Kennedy road and count how many Cash Advanced stores there are inside those strip malls. There is even a Lick’s that was turned into one. I counted 30 in just that stretch. There is your answer. Brampton is going to be ground zero in the GTA. Actually, when you hit Kennedy turn left and see how many for lease signs you see at store fronts.

#120 CJ on 08.08.14 at 2:31 pm

#20 Mark

It pains me to post this again but I hope, one day, you will pay attention to facts. The Calgary market IS NOT going down. Far from it:

http://www.calgary.ca/_layouts/cocis/DirectDownload.aspx?target=http%3a%2f%2fwww.calgary.ca%2fCA%2ffs%2fDocuments%2fCorporate-Economics%2fHousing-Review%2fHousing-Review-2014-06.pdf&noredirect=1&sf=1

#121 Mike S on 08.08.14 at 2:40 pm

“cash (ie: very low risk)”

Do you really see cash (CAD) as a low risk asset right now?
10 yr government debt yielding 2.05% before tax right now, this is 0.35% then both the 10 yr US debt, and the Canadian inflation figure. How did they even get to that low inflation number? I sure can feel inflation in the department store … well maybe I need to study that hedonic regression thing

“to accumulate most of one’s funds in cash (ie: very low risk), and then jump into an extremely risky long-term investment (ie: a leveraged house)”

It would be sure better than getting one risky asset right away and plan to jump to another risky asset after a very short period of time

Why do you call a house an investment? If I would want to invest in housing, at the minimum I would go and pick a nice rental property south of the border. Not for me though, my long term investments preference goes to 60% / 40% portfolio

Truth is that a primary residence house is a liability, it always has been. It just carries too much taxes, maintenance etc, and average return is not that great. Average Joe just should’t be talking ROI and risk when it comes to his residence place. The fact that anybody even mention this just highlights how seriously this country is screwed

#122 dumb as you look on 08.08.14 at 2:46 pm

RT News Huh? Where the anchors keep quitting because they can’t tell those Putin lies anymore.

#123 Dual Citizen In Canada on 08.08.14 at 3:08 pm

#47 dan on 08.07.14 at 9:03 pm
I have email CP 24 twice requesting that they bring different guest speaker on their show. To-date, I have not received any response from them.

And you never will. The sponsors won’t allow someone to come on their show and topple their house of cards. Best bet is to call in, have them screen you as someone looking to purchase a property, and then let loose with how their agenda is just to sell and keep making bucks, to the benefit of the real estate industry. I bet they will cut you off as if your acceptance speech was going too long.

#124 Big Brother on 08.08.14 at 3:18 pm

#97 CP on 08.08.14 at 11:32 am
Gotta say, next to Garth’s posts I come here for Nosty’s replies.
…………………………………………………………………………

MKULTRA says what about our Smoking Man, we programmed him to make those comments. Check him out tonight at his Casino Seneca where he will tell you the truth about our experiments!

#125 Mark on 08.08.14 at 3:48 pm

“Sorry I should have made it more clear. Everyone except for know it all Mark, who is delusional in thinking prices have been dropping in Toronto the past year and couldn’t be more wrong.”

Sounds like you have a few troubles on the delusion front, along with the RE boards who are pushing this nonsense of “prices are going up”, even though prices on identical properties have been going down for the past year. The data is very clear. I don’t know if you’re bought into the hype or what, but if you actually spent any time in the GTA, looking at listings, actually observing the increasingly desperate RE vendors (especially at the lower-end) the situation is quite apparent.

The Calgary market IS NOT going down.

Wrong again. Same deal as the GTA, the sales mix has shifted significantly, giving the allusion of rising prices. When in fact all that has shifted was the sales mix.

#126 Big Ed on 08.08.14 at 3:52 pm

The decline I showed is for May, June and July. Even the rich people were working for most of it. Fail. — Garth

Fair enough. But every year we see a peak usually in April or May, followed by lower prices in summer and then sales prices rise again in Sept/Oct. The recent exception to that rule was 2009.

http://guava.ca/indicators.htm

Riddle me that Garthman.

(a) The Guava chart shows no precipitous drop over such a short period, (b) my chart is 416 SFDs, yours is all properties in all of the GTA. Invalid. — Garth

#127 Mark on 08.08.14 at 3:52 pm

“Bottomline, 1Million cap by CMHC will have the unintended consequence of creating under the table deals.”

The $1M CMHC insurance limit refers to the maximum size of loan the CMHC guarantees, does it not? Not the maximum property price?

So if you have $500k in equity, you can still obtain a CMHC subprime mortgage for $999,999 to buy a $1.5M property. The people who are proverbially ‘screwed’ by the CMHC subprime mortgage guarantee limit are those who bring minimal down payments to the table, yet want to buy the million dollar property. A very small segment of the market.

IOW, I don’t see how an ‘under-the-table’ deal would help. CMHC will guarantee a subprime mortgage loan up to $1M. Whether its a $1.05M property, or a $10M property, really doesn’t matter.

#128 Mark on 08.08.14 at 4:00 pm

“How did they even get to that low inflation number? “

I’m wondering how they even figured inflation was as high as they’re claiming personally. As all I see around me is deflation, and prices getting cheaper. I cleaned out my car the other day, found some old receipts from 2007. Gas is still cheaper today. Chicken is somewhat cheaper at the grocery store. Computers, electronics, Internet, etc., all significantly cheaper. Travel is cheaper. Financing expense has dropped significantly. Car prices are cheaper. Even restaurant meals are dropping in price as there’s an onslaught of new chain restaurants opening up.

Obviously the bond market has complete confidence in the inflation numbers as well, as participants are willing to lend on the basis of inflation being well below even 2%.

With RE going down across the country, layoffs really getting started in earnest in the RE sector, and home equity melting away, it is likely that the BoC is behind the curve in lowering policy rates. Just look at the sort of heroics the US Fed has been forced into to create a partial revival of the US RE market. We’ve barely even begun our decline in Canada, and much of the same will be required here as well.

#129 devore on 08.08.14 at 4:11 pm

New ad on radio for home equity money floggers. This time the hook is “if you need some money for taxes or school this fall”… I have some bad news for you: if you need to borrow money to pay taxes, or buy kids school supplies, you are living waaaaay above your means.

#130 Mark on 08.08.14 at 4:13 pm

““Melt” is a much better description of what has started and what is coming than “crash”.

There sometimes appears to be a mistaken notion that housing in the USA “crashed”; as if the drop was extremely sudden and catastrophic.

In fact, decline (“melt” if you will) in the major US
housing markets took 3-4 years or more from the peak. Some markets are still in decline and many are flat-lining at or slightly above the latest bottom.”

Precisely. And the evidence is fairly strong that early last year was the peak in Canada. Much like, in hindsight, 2005-2006 was the peak in the United States.

The interlude between a systemic freak-out and revulsion to housing debt, was quite filled with denial. Realtor types even in 2006-2007 were claiming a rising housing market, and expended an enormous amount of intellectual capital trying to ram that down peoples’ throats. David Lereah, NAR “economist” wrote a book. Even the famous Ben Bernanke didn’t really understand what was going on and was in public denial.

I’m not sure what form the freak-out in Canada will be once it is widely realized that the CMHC is on the hook for tens of billions worth of subprime mortgage guarantees going bad. But it will be interesting to watch, to say the least, and the enormous political ramifications that flow from such. These things have a habit of toppling governments in power, BTW.

#131 rosie "moving forward" in the knowledge that, "this won't end well" on 08.08.14 at 4:15 pm

From an ethics point of view, she’s the perfect candidate. A stumble but still moving forward.

http://www.tampabay.com/news/should-financial-stumbles-derail-realtor-pursuing-top-real-estate/2192014

#132 Ogopogo on 08.08.14 at 4:26 pm

#35 JOe on 08.07.14 at 8:19 pm
Garth I have a question…

What is your business in this RE….People have free will what they are doing….and take consequences…

It is not your business to judge it..!!!!

Let it go….what you want to prove ? that you are genius and people who buy RE are idiots???

What the difference that makes….think about it…

and do something else….than this blog

Your comments are more idiotic than you could possibly imagine.

#133 Alan Smith on 08.08.14 at 4:39 pm

#129 Mark

According to Bank Of Canada
http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/econ07-eng.htm
M2 grows at a rate of 6 billions + per month.
Expansion of money supply = inflation. There is no deflation when credit grows.

There could be theoretical deflation whenever credit starts shrinking but then, hey the government will jump in to support ‘aggregate demand’ and start running deficits.

There would be no deflation, the big brother south will take of that.

Ben Bernanke:
Deflation: Making Sure “It” Doesn’t Happen Here
http://www.federalreserve.gov/BOARDDOCS/Speeches/2002/20021121/default.htm

#134 bigrider on 08.08.14 at 4:40 pm

#89 JL.

You did not think your comment through too much did you ?

The talking heads on BNN and CNBC you mention, all have different opinions on the direction of financial markets, up ,down,sideways and all extremes in between. They all have a different opinion on the direction of an individual security, for example, buy sell hold.What’s even better ,is the fact that the financial products industry allows you to invest in a plethora of products ,for example ETFS ,that allow you to take a bet in whatever direction you believe the market, or a particular asset class is going to move. If you feel prices are going down because you listened to a talking head who said so, then by all means , invest in a short ETF, or 2X short ETF. Skies the limit on what you can do in the financial markets. ” you place your bets and you take your chances”

Compare that with an RE industry and their talking heads , that count on rising prices to lure in more and more suckers, who pay more and more for the same item and you should get the idea that there is a world of difference between the two.

In an earlier post, I made the analogy that comparing the financial industry to the RE industry is like comparing quantum physics to dinosaur fossils.

Well, if the financial industry is full of oncologists ,each with a different treatment approach on how to treat your particular form of cancer, then the RE industry is full of carnival hucksters trying to sell you a bottle of elixir all telling you that it will cure all your ailments.

#135 Alan Smith on 08.08.14 at 4:47 pm

The West on the wrong path

http://www.handelsblatt.com/meinung/kommentare/essay-in-englisch-the-west-on-the-wrong-path/10308406.html

#136 Mike S on 08.08.14 at 4:48 pm

“cheaper at the grocery store. Computers, electronics, Internet, etc., all significantly cheaper. Travel is cheaper. Financing expense has dropped significantly. Car prices are cheaper. Even restaurant meals are dropping in price as there’s an onslaught of new chain restaurants opening up.”

Not sure where you live, relative to last year all is up here
I agree prices might go lower in a deflating RE environment, but going forward, I also see lower CAD so some upward pressure on imports

#137 coastal on 08.08.14 at 5:09 pm

#50 Bobby,

“Here in Victoria, lots of properties just sitting with New Price stickers on the signs. Many have been on the market forever. Some of the houses haven’t been updated in decades.”

I was noticing the same in Victoria the past couple weeks, more “reduced price” signs, especially on the waterfront properties. The high sales have to be mainly
those already in the market and limited new buyers. Even saw the “Rent to Own” sign on one. Usually the top of the market when you have to resort to that in Victoria.

#138 TheManwhoStaresatSheeple on 08.08.14 at 5:13 pm

Regarding the multiple posts about today’s dismal job reports:

People ought to know that this is:
1. Survey
2. It is for July – and July is the month when many of our future Barons to be (aka Shawns, aka 2x DB public pensions) also know as “public servants” but future “public masters and barons” take their very long and very well deserved vacations and thus are not counted in the full time jobs…

Ends result – July’s will always show “decrease of the FT jobs and increase in the PT jobs”;
July 2014 – http://www.statcan.gc.ca/daily-quotidien/140808/dq140808a-eng.htm
July 2013 – http://www.statcan.gc.ca/daily-quotidien/130809/dq130809a-eng.htm
July 2012 – http://www.statcan.gc.ca/daily-quotidien/120810/dq120810a-eng.htm
….
July 2004 – http://www.statcan.gc.ca/daily-quotidien/040806/dq040806a-eng.htm

See the report for that 2004 – when the RE was put in overdrive – “In July, an increase of 48,000 part-time jobs was mostly offset by full-time losses of 39,000”

Or in real numbers – Public sector employment (CANSIM table 282-0011)
June / July / Oct.
2012 – 3,686,000 / 3,479,000 / …3,683,000
2013 – 3,743,000 / 3,460,000 / …3,665,000
2014 – 3,732,000 / 3,506,000 / … na now

Our labour participation rate is the lowest in 13 years and economists expect less than 1% growth for the entire year, the worst performance since the recession. So far in 2014, we have added just 0.4% net new full-time positions. It’s not just July, dude. — Garth

#139 Blacksheep on 08.08.14 at 5:20 pm

“The minister of finance does not set interest rates. — Garth”
———————————————
“The minister of finance holds the entire share capital issued by the bank. Ultimately, the Bank is owned by the Minister of Finance on behalf of Her Majesty in right of Canada.”

http://en.wikipedia.org/wiki/Minister_of_Finance_(Canada)

I figured cause Joe O. is responsible for “overseeing” the bank of canada, he just may have some target rate influence, even though the bank of canada itself, sets the “policy interest rate”.

But, whom exactly, sets the target rate in canada is actually irrelevant.

What’s become obvious is we have painted ourselves into a corner. The tool box is almost empty other than that big hammer that says QE # 2 on it. The US did it for years and are recovering more every day (right?)

All we need to do is get Belgium to buy our debt and we will be golden!

#140 Mark on 08.08.14 at 5:37 pm

“Expansion of money supply = inflation. There is no deflation when credit grows.”

No, that’s not the definition of inflation. Inflation is the change in consumer prices.

If the money supply grows at, for instance, 6%, but the stock of goods available in the economy grows at, for instance, 6%, then the net change in the CPI comes out to around zero. “Inflation” only rears its ugly head when the money supply consistently grows much faster than production. Additionally, velocity is an important component — if velocity drops, and the newly created money is merely hoarded, then there is no impact on consumer prices.

#141 Mark on 08.08.14 at 5:45 pm

“Well, if the financial industry is full of oncologists ,each with a different treatment approach on how to treat your particular form of cancer, then the RE industry is full of carnival hucksters trying to sell you a bottle of elixir all telling you that it will cure all your ailments.”

Well in fairness, if you look at the whole realm of ‘technical analysis’, it isn’t really removed from the whole thing of carnival hucksterism.

One thing the Realtors/RE types really, really hate though is if you do a rigorous calculation of the P/E of housing as an investment. If you do this, you come to a number somewhere between 35 and 40 for Canada, and much higher for the GTA and Vancouver. Compare and contrast this with, for instance, the stock market which trades at 15X earnings, and its not too hard to justify a 60-70% drop.

#142 Facts, that's what we're interested in here Mark, just facts on 08.08.14 at 5:59 pm

Mark typed this about 416:

“even though prices on identical properties have been going down for the past year”

So what are the addresses and the prices of the identical houses your are typing about Mark?

#143 CJ on 08.08.14 at 6:01 pm

Hey everyone. Mark has this all figured out.

Really, he should write his own blog or something.

#144 JimH on 08.08.14 at 7:07 pm

#141 Mark #134 Alan Smith
“Expansion of money supply = inflation. There is no deflation when credit grows.”
===================================
Were this statement always true, the huge expansion of the monetary base 2008-2010 (and beyond) certainly would have resulted in runaway inflation in the US, and the much maligned “inflationistas” (not to mention Ron Paul and Peter Schiff) would have been proven right.

But there was obviously a huge store of excess capacity and unemployed workers sitting idle in the US economy. (Velocity, or the ratio between GNP and money supply, was in the toilet as Mark suggests)

Had we been at full employment and full capacity, the outcome would have been different. Hence the taper as the US economy improves.

Although some say it was a very close call, I don’t think inflation was ever a factor. What is clear is that a deflationary spiral was averted; at least temporarily. This good, as deflation is not as easily ‘cured’ as inflation.

Are we out of the woods yet? Doubt it.

The issue is further clouded by the many ways “inflation” is defined; as Mish Shedlock pointed out long ago, these ‘definitions’ have included each of these or combinations of them:
rising prices,
decline in purchasing power,
rising PPI,
rising CPI
rising prices due to expansion of money supply
rising prices due to expansion of money supply and credit
simple expansion of money supply
simple expansion of money supply and credit

So, not all increases in the money supply are inflationary, and not all decreases in prices are deflationary.

It all depends on what causes the moves.