It’s obscene

BITE modified

There are three ways to buy a condo these days in Toronto, Mississauga, K-W, Kingston or other urban areas in the most populated swath of the country. (a) You line up, camp out or weasel your way into sales office and get a pre-sale – securing a unit to be finished in two or three years; or (b) you buy an existing resale from the person who owns it; or (c) you purchase an assignment.

What was once difficult is now commonplace. Developers are smart guys. When they understood real estate had become a speculative commodity like oil, bitcoins or Beyoncé tickets, the builders and marketers started adding assignment clauses into agreements as a matter of course. At first they charged a price – up to five thousand – to include this paragraph. Now, it’s just there. It’s the license to trade, flip, speculate, potentially profit and play the game – suddenly de rigeur in our house-horny world.

In case you didn’t realize, there are realtors who do nothing but trade assignments. Whole brokerages are heavily engaged in them. There are assignment web sites. And just check out Kijiji if you doubt that this thriving marketplace in paper-based real estate exists (click below to enlarge).

ASSIGN

On Saturday morning this pathetic blog lit up when scores of people rushed to link a Globe story on the use of assignment clauses in Vancouver. It was kinda cute. YVR takes another step towards maturity, it seems, as the mainstream media catches up to a practice which has been in pace, and functioning, for years.

“Assignment clauses are an obscure but increasingly ubiquitous feature of domestic real estate transactions in B.C.’s Lower Mainland,” the Globe said, darkly, “where feverish real estate prices have triggered a frenzy of buying and selling, and a national debate about the risks of an overheated market and the role of foreign investment.”

Assigning houses works similarly to assigning condos or any other property. A vendor accepts an offer containing a clause allowing the buyer to sell the property again prior to closing it himself. In a hot market rife with speculation, flipping and greed, where listings are scarce and citizens obsessed with real estate, the buyer (who has no intention of closing) is willing to accept the risk involved.

If successful, the buyer (often a realtor with deep market knowledge) is able to sell the offer to a new purchaser for a profit before closing. That second buyer may even be a player, too, who resells the paper to a third party – made easier if the closing period is long (three to six months). So, on the day of closing the original vendor gets his or her cash per the agreement, and yet the ultimate purchaser assumes title, having willingly paid a greater price. Like a futures contract.

Nothing new here. Thirty years ago, in the last Canadian real estate orgy, it was common for a single home to close multiple times on the same day, with the offer to purchase flipped four or six times after the original deal had been inked. (By the way, this kind of activity in the late 1980s also preceded, by just a few months, a market dive which ultimately shaved more than 30% off the value of GTA real estate. It would take 14 years for the average price to recover.)

Assignments increase prices within a market, but are not responsible for the speculative fever which makes their success possible. Realtors who are also assignors may reap more commission on the pass-through, but profits trading clauses do not go untaxed. In fact, CRA will levy capital gains taxes on the profits and possibly HST on the sale price, or worse. Gains made through trading clauses are routinely classified as income, so the flippers are taxed at their marginal rates, without the 50% break they’d get with cap gains.

What the Globe piece did, by not providing any context, was suggest Chinese buyers had found a shady, likely unethical, way to suck up houses from unsuspecting Van sellers through multiple grey market deals. “It’s obscene,” one seller was reported to have said. “I had no idea our house was going to be resold. We were shocked when it was flipped.”

The obscene part, of course, was that the house closed for more money than the first seller received, after the buyer took a risk and resold the deal. Greed has a funny way of pulling the needle on your moral compass.

While assignment-clause sales in Van are a small fraction of those in the GTA, they constitute one more log on the pyre of a stable market. The other day some dingdong paid six figures more than the asking price on the $2.4 million piece of crap featured here in Point Grey. Bidding wars have erupted in the wastelands of Langley, Surrey and PoCo, far from the lights of downtown. In the burbs, realtors are claiming ‘average’ houses are appreciating $30,000 a month. Real estate has gone parabolic, as is always the case when euphoria wins. But it never stays.

EMOTIONS

Source: Blackrock

The chart look vaguely familiar? Check out the Van real estate board price graph published here in the previous post. Or the Case-Shiller graph of real estate values in major US markets city  reproduced below. They thought it was different there, too.

ScreenHunter_01-Nov.-03-21.38

Some things never change, as they result from human nature. But apparently we have to learn them all over again, every few years.

267 comments ↓

#1 Randy on 02.07.16 at 10:18 am

Rocky Balboa told me to invest in condominiums

#2 Randy Randerson on 02.07.16 at 10:21 am

War, war never changes. Just like RE maniacs.

#3 Trey on 02.07.16 at 10:26 am

Why is this “pyramid scheme” sales technique even legal?
Should not the property be relisted if the purchaser wants to re-sell?

#4 Paul on 02.07.16 at 10:27 am

It never ends well 1980’s big flip.

http://www.csmonitor.com/1987/0710/fraud.html

#5 common sense on 02.07.16 at 10:29 am

It’s called reality and gravity people.

What goes up, must come down.

Kinda like the scene at musical chairs….that tense rush to find a seat when the music stops…

WOW….cash out and run.

#6 AlRam on 02.07.16 at 10:30 am

Love your blog. Read it every day. Thanks Garth!

#7 Bose on 02.07.16 at 10:30 am

I don’t understand, how the fundamentals are so scewed in such a short period of ie last 5 years, moreover seems like whatever the govt does to cool down ends up stoking the flame even more !

#8 Ret on 02.07.16 at 10:44 am

Update of Phoenix home price graph.

http://ca.spindices.com/indices/real-estate/sp-case-shiller-az-phoenix-home-price-index

Peak of $227,000 to trough of$100,000.

Very similar to SIL’s place in Sebring, Florida. They bought for $211,000 in 2007 in the “cars” survey, went down to $104,000, and is now Zillowed at $149,000 this month.

So much for soft landings.

#9 Leo Trollstoy on 02.07.16 at 10:44 am

yay assignments. vancouver is nutz

#10 the unpreferred on 02.07.16 at 10:49 am

Garth

When will preferreds bounce back….you have been championing these for a while, whereas it seems the smart money has sat on the sidelines while watch the market find new lows….timing is everything inni?

#11 pathcontrolmonk on 02.07.16 at 10:49 am

Garth, could you please start some campaign or something enlisting your blogdogs to petition the feckless govt in to do something. This is no longer comical, it is the wholesale destruction of one of Canada’s major cities while the govt stands idly by. To quote Ms. Yang in the G&M article, “Poor Canadians – they just don’t understand.”

#12 Fine Wild Roasted Gonads on 02.07.16 at 10:51 am

It looks just like the S&P 500 since before the dot.com.. but yeah I get your point! house lust people are nutz!

#13 MeesterMike on 02.07.16 at 10:52 am

Yeah, I had the same reaction to that article. Strange to see the flipping being portrayed as the problem rather than as an obvious symptom of a speculative bubble. It actually made me feel sympathetic towards foreign buyers. Here they seem like dumb money being exploited by the locals.

That said, I do understand why some of those sellers were pissed off. If my realtor was involved in reselling my house for a big chunk of change more than the ‘best price’ that they claimed to have negotiated for me, I’d feel exploited no matter how well I had made out.

#14 Pricedoutfornow on 02.07.16 at 10:52 am

Sign of a sick market. Nothing new though. When I told my mom what was happening (a boomer), her reaction was ‘So? Nothing new there, people did this in the 80s.’ We know what happened to the market then. Except nobody believes me when I say this won’t end well, and it’s not different this time. Especially my friemds in their thirties. This is the new normal, they say. Buy now or be priced out forever!

#15 ron B on 02.07.16 at 10:53 am

Thanks, Garth.

I’m a bit of a slow learner myself and appreciate your posts to understand some of this stuff.

#16 RimJabba on 02.07.16 at 10:58 am

Foreign buyers being suckered into over paying for Canadian real estate by scammy agents trading assignment. The Globe and Mail article is eye opening!

Foreign investment is playing a part of the bubble, but it isn’t the single cause.

Parabolic moves always crash, look at Smoking Man who lost $5 million betting on the USDCAD. That thing went parabolic last month, and it has fallen off a cliff.

The lesson is, when it goes parabolic run. I have seen this in action over and over, lost a bit of money too. Parabolic moves end in a crash, almost every time. Look up silver, USDCAD, oil, etc. It is one of the most reliable and consistent of the patterns.

#17 John Grasnot on 02.07.16 at 11:01 am

First!!!!

#18 Dewflicker on 02.07.16 at 11:02 am

“The obscene part, of course, was that the house closed for more money than the first seller received, after the buyer took a risk and resold the deal. Greed has a funny way of pulling the needle on your moral compass.”

If there is an issue here it is transparency and the potential for a conflict on the part of an agent. If an agent knows he can get more for your house why would he/she not pay you what you want and turn around and sell it to the higher bidder, pocketing the difference? The ‘risk’ you allude to under these circumstances appears to be non-existent. Such behaviour would seem to fly in the face of the requirement to act in the best interests of the seller you are representing. What am I missing here?

#19 Keith in Calgary on 02.07.16 at 11:13 am

In the fiat paper world this could be called front running. Highly illegal.

Hardly. This is more akin to the bought deal, which is common practice – a broker buys shares from the issuer at a set price and then tries to market them for more, carrying all the risk. Front running, on the other hand, is the practice of dealing on advance information before the clients have been given that info. — Garth

#20 Ret on 02.07.16 at 11:15 am

If I buy an assignment that is the first, second or third assignment downstream from the original purchaser and I lose huge on my coin toss bet for the Superbowl today and have to declare bankruptcy, how will this all work out legally?

Just wondering, not that anyone would be stewpit enough to bet on a Superbowl coin toss.

The one ending up with the paper takes the risk. Simple. — Garth

#21 NoName on 02.07.16 at 11:19 am

Bit older but interesting read.
OIL, OPEC, FRACKING, OIL SANDS
http://www.bp.com/content/dam/bp/pdf/speeches/2015/new-economics-of-oil-spencer-dale.pdf
~~~~~~~~~~~~~~~~~~~~~~~~~
Uber lost $1.7bn while booking $1.2bn in revenue. whouse money UBER is burning?

http://www.theguardian.com/commentisfree/2016/jan/31/cheap-cab-ride-uber-true-cost-google-wealth-taxation
~~~~~~~~~~~~~~~~~~~~~~~~~

Take China for example, where the strategist sees the oil plunge helping to fuel a boom in SUV sales: “Moreover, the low oil price is encouraging Chinese consumers to buy increasingly larger cars. Sales of SUVs, the heaviest passenger vehicles category, are up 60 percent year-on-year in the last three months, while overall passenger vehicle sales are growing robustly at 22 percent.”

http://www.bloomberg.com/news/articles/2016-02-01/bofa-the-oil-crash-is-kicking-off-one-of-the-largest-wealth-transfers-in-human-history

~~~~~~~~~~~~~~~~~~~~~~~

Interesting read. Tax on chickens!

http://www.bloomberg.com/news/articles/2016-02-03/zervos-the-beauty-of-monetary-policy-it-s-a-tax-on-the-risk-averse

~~~~~~~~~~~~~~~~~~~~~~

Straight from London Mathematical Laboratory, where they say:
“Life is more fun if we feel free to do the things we’re bad at,”.
We have a warped perception of reality, according to Peters, in that we focus on the rare successful exceptions, like Bill Gates or Warren Buffet, rather than the people we interact with on a daily basis, like teachers, bus drivers, or salespeople. We focus on excellence and reward rare fluctuations. We shouldn’t, Peters advised, because if you combine that warped perspective with steep inequality, the result is higher levels of anxiety and depression in society at large.

http://www.gizmodo.co.uk/2016/02/why-assuming-youre-mediocre-could-save-you-from-financial-ruin/

~~~~~~~~~~~~~~~~~~~~~~~

Data, data, data. Not location, location, location advice of the day don’t buy German, French and Japanese produce!

http://ourworldindata.org/data/food-agriculture/fertilizer-and-pesticides/

http://ourworldindata.org/

~~~~~~~~~~~~~~~~~~~~~~~

Remember him?

http://www.theguardian.com/business/2016/jan/31/bank-of-england-governor-bluffing-interest-rates

#BadPokerPlayer
~~~~~~~~~~~~~~~~~~~~~~~~

Interesting concept Maximum Wage, just a different way of saying minimum wage…

https://howwegettonext.com/maximum-wage-3e21048fc107#.czdtoq3xg

~~~~~~~~~~~~~~~~~~~~~~~

GenComplain better read this!

http://www.weforum.org/agenda/2016/01/what-is-the-future-of-your-job

~~~~~~~~~~~~~~~~~~~

Interesting read.

http://www.bloombergview.com/articles/2016-01-26/free-trade-with-china-wasn-t-such-a-great-idea

#22 DaveDorf on 02.07.16 at 11:25 am

@ #1 Randy

Actually – Gazzo said to invest in condominiums … Rocky “never use(s) them”

#23 For those about to flop... on 02.07.16 at 11:28 am

I’ve got five million dollars burning a hole in my pocket.
I just need to decide whether to spend it on a house in Westside Vancouver or on a 30 second ad during the Super Bowl.
I’m leaning towards taking out a 30 second ad warning people that real estate in Vancouver is overpriced…

M41BC

#24 Realist on 02.07.16 at 11:31 am

this. will. not. end. well.

#25 Keith in Calgary on 02.07.16 at 11:31 am

Garth……

Realtor A undersells the house at list to his client B knowing that he can flip it to someone else via an assignment….and maybe even having client C waiting in the wings (as that is how I would do it).

He has illegally deprived his initial client of the increased profits and himself benefitted twice with a double commission and a split of the spread on the assignment price bump.

If you can tell me where his original clients were aware of the increased upside then we’re in agreement. But they weren’t.

How can you not understand that future conditions are unknown? And realtors do not ‘undersell’ a house in Van these days. The market is the market – speculative and frothy. All sellers are winners. — Garth

#26 Don't Believe The Hype on 02.07.16 at 11:33 am

This guy is doing it right:

https://ca.news.yahoo.com/how-one-man-curbed-his-extreme-spending-and-will-retire-by-35-to-travel-230550308.html

#27 Keith in Calgary on 02.07.16 at 11:34 am

My point is basically that it all comes down to word splitting semantics and more proof that the criminal real estate industry needs overwhelmingly strong and police like regulation.

#28 crossbordershopper on 02.07.16 at 11:41 am

simply come to smaller town saskatchewan, get a place for 90 grand. no mortgage no worries. sure you dont have 500K in equity in your home, but low cost of living, low downside, no traffic, and yes you have all the doctors, hospitals, schools, etc that every bigger city has except selection, you have 1. keeps things simple
you can still make good money, but not in your house, go get a business or job or travel. your not tied down to your drywall.
different, but overall a better strategy, diversification, you have the upside, not just one, flexible, etc.
food for thought for many.

#29 Penny Henny on 02.07.16 at 11:41 am

There are three ways of buying a condo these days in Toronto, Mississauga, K-W, Kingston or most other urban areas in the most populated swath of the country. (a) You line up, camp out or luck into a quiet sales office and get a pre-sale-GT

You luck into?
For a pre-sale you must unluck into.

#30 Retired Boomer WI on 02.07.16 at 11:42 am

Whether it is Real Estate, Dot.com companies, Beanie Babies, Hot Stocks, Gold, Oil…. they were all reaching for the heavens at one time, or another.

All reverted to the mean (or even overshot for awhile) before reaching ‘normalcy’ again. A GREAT way to have made money- assuming you got in early, and got out in time. BIG hurdles there, much like market timing. We all love it when it works, curse it when it fails.

When will we ever learn. Age old song too….

Maybe someday old Boomers will be a valuable commodity?

#31 ww1 on 02.07.16 at 11:45 am

The issue revealed in that article was not so much about assignment clauses as it was about the betrayal of trust by some real estate professionals.

Most people only sell a few houses in their lifetime and so depend on a professional to assist and advise them. When an agent accepts a commission, he/she has a duty to fully inform the seller of the options and opportunities and to represent their best interests. If the agent purposely causes the house to sell at a lower price so they can flip it, or does not advise the client about current market circumstances and practice, then there are likely grounds for a civil suit. But once all that is clearly explained, flipping assignments is fair game.

There is no evidence any agent ‘purposefully caused the house to sell at a lower price.’ Lower in relation to what? Market conditions in the future? No grounds for a suit. — Garth

#32 bigrider on 02.07.16 at 11:45 am

Absolutely the best post I have seen in a while. All true and the largest reason why we have the frenzied RE market we have today.

I know of first hand , entire condo buildings whose units have been sold to insiders, family members, employees and business associates of the builder. All of them by the way Canadians , not foreigners. I know of builders who pay their sub contractors of buildings in condo units of same building.

It would be nice for you Garth to write about the enormous goliath that the dark ,sub prime, private mortgage business has become in the GTA. The amount of private lenders I know of ,who have lent on 1st and 2nd mortgages astounds me. Usually lent to people who report no income, due to their cash only businesses almost always in the housing construction business itself.

Incestuous and ugly.

#33 Panhead on 02.07.16 at 11:52 am

And now for something completely “604 delusional” …

http://www.buzzfeed.com/tanyachen/garbage-million-dollars-homes-in-vancouver?bffbcanada&utm_term=.hnV8p3drA#.ordZKlN9R

Kinda brings tears to your eyes (especially if you are looking to buy) … can you top this 416? Go Broncos …

#34 TurnerNation on 02.07.16 at 12:01 pm

It’s simple (Kanadians):

– Stock market is seen as “risky”.
– GICs as “safe”
– Housing as “safe”
– Social rewards: congrats on your first house!
– Almost free money : 2% mortgages.
– Housing always goes Uppa up.

This trend will continue until rates rise (if ever).

#35 Caught In The Grip on 02.07.16 at 12:01 pm

Great explanation of assignment clauses & what they indicate about where we are in the housing market. We’re probably past the top.

But why throw that Blackrock sentiment chart of the S&P 500 in there? It’s basically suggesting we’ve past a major market top…

#36 Chaddywack on 02.07.16 at 12:04 pm

As a seller I would just put a “no assignment” clause in the accepted offer. I’m surprised the sellers would not do this if they felt this was obscene.

Surely it would be acceptable for a seller to insert that into the contract.

Why would a rational seller care? A sale at the price you wanted is a sale at the price you wanted. — Garth

#37 AB Boxster on 02.07.16 at 12:07 pm

There is one main difference between the US experience and what will likely happen in Canada.

This is not in any way to support the ‘but it’s different in Canada’ silliness.

The difference is the level of intervention in the economy that the government is willing to take, and that citizens are willing to allow.

In the US , the free market tends to have more influence and be more embraced. You take a risk, you either succeed or you fail. Should you fail, you pick yourself up and try again. Government does not protect you from your stupid or brilliant decisions.

Canada seems to be very different.
Firstly, government in Canada is far more interventionist in the real estate market and economy as a whole.
Secondly, people are far more accepting of this.

So, yes, the housing market in Canada is certainly in a massive bubble.
But whereas in the US, after the bubble formed, the policies of govt’s were (generally ) not enabling, maintaining and furthering the bubble.
The bubble burst and the gov’t let it happen.

In Canada, as I have mentioned before, govt’s will (and are) doing as much as the possibly can
to keep this inflated market buoyant.

Low rates will hurt savers but keeps real estate bubbly. – Too bad savers. ‘We must protect the equity’.

Policies that could impact foreign money are decried as racist. – Canadians hate to be called racist. Lets ignore this possible issue.

Transactions that are designed to pump RE prices, and game the system, are ignored by policy makers.
– this is what is know as the free market in Canada.

Sales tactics that make it easy to buy with essentially 0% down payment are ignored.
– This is called creative financing

Rules (RRSP funds to buy house, cash back mortgages, funding the down payment through over assessed sale prices and ‘rebates’) that allow anyone that can fog a mirror to buy a home.
– This is an example of our robust marketing tactics

CMHC insurance rules that put ‘no’ risk on the lender, and then lead to stupid lending practices. (eg VanCity)
– Canada’s social safety net at its best.

Real estate data that is obvious fraudulent, but which is used and abused by policy makers.
– why would they lie? Assuming so is so un-Canadian.

Unfortunately, there is too much govt intervention, and unchallenged fraudulent or suspect process, to allow the actual free market to burst the bubble.

If fact, the real estate market in Canada is now ‘Too Big to Fail’.

We must protect the Equity!

You are incorrect. Washington spent trillions trying to mitigate the housing collapse. — Garth

#38 Rainclouds on 02.07.16 at 12:12 pm

#28 cross border “simply come to smaller town saskatchewan, get a place for 90 grand”

Dear Premier Wall,

Thanks for the laugh!

Those of us who like features such as water, trees, the odd hill, maybe a mall, and a winter temp above -80 are not exactly pining to relocate to your fair province. There is a reason that places sell for 90Gs……………….seek help:-)

#39 Too Much Debt on 02.07.16 at 12:13 pm

No foreign buyers driving up the market in Vancouver at all, there is no such thing as HAM. Whatever…this is going to end so badly..

http://www.theglobeandmail.com/news/investigations/the-real-estate-technique-fuelling-vancouvers-housing-market/article28634868/

Try reading the post before you comment. — Garth

#40 crowdedelevatorfartz on 02.07.16 at 12:16 pm

I guess while not illegal.
Assignment clauses open the door for realtors to “double or triple dip” on commissions.
If I’m a realtor and I sign a seller to a sales agreement knowing full well that I can flip the sale to another one or possibly two other “marks” waiting in the wings……
Havent I relinquished my “duty” to the first seller to get the best price possible for their house?

This may be a legal grey area and very hard to “prove” conflict of interest on the part of the realtor but it stinks to high heaven.

#41 Dewflicker on 02.07.16 at 12:28 pm

“This is more akin to the bought deal, which is common practice – a broker buys shares from the issuer at a set price and then tries to market them for more, carrying all the risk.”

This practice is nothing like a bought deal. In a BD the buyer and seller are clear on the terms of the transaction. The seller recognises the buyer is taking the deal on risk on the understanding that they believe they will achieve a higher price selling the deal in the market.

The assignment process is much less transparent. The seller engages a realtor on the understanding that said realtor will seek to achieve the best price for their property in the open market. If that realtor believes a higher price is available they can secure this price and make a spread on what the seller gets and what they, the realtor, is able to achieve selling it on. It is essentially a risk free transaction if the realtor has done their homework.

The difference is transparency.

An assignment clause is completely transparent. Get a lawyer. — Garth

#42 Shirley Valentine on 02.07.16 at 12:32 pm

Garth’s right. Total non issue. You get what you pay for.

Now where is that studly alien smokey man… must have been a seneca and rentals weekend..

#43 cmj on 02.07.16 at 12:34 pm

Assignments are risky. However, what happens when real estate goes down and the last person who is left with the final assignment has to cover the costs. Previous buyers of the real estate will be so glad they got out. Greed….

Traders do the same thing in the stock market with puts and options. They project into the future, take the risk and hope for the best.

#44 Sideshow Rob on 02.07.16 at 12:35 pm

That chart of Vancouver real estate prices….looks exactly like the s&p 500 chart. Amazing what easy money will do! Peaks in 2000, 2008 and now. I’m sure this time it’s different. Heads up. QE to infinity is on the tee. Might be announced this week if the market action is deemed to be unfavorable.

#45 Arfmooocat on 02.07.16 at 12:40 pm

https://ca.finance.yahoo.com/video/anger-grows-over-vancouvers-vacant-025451999.html?nhp=1

#46 It’s obscene - Realties.ca on 02.07.16 at 12:40 pm

[…] Source: http://www.greaterfool.ca/2016/02/07/its-obscene/ […]

#47 Bram on 02.07.16 at 12:45 pm

Hardly. This is more akin to the bought deal, which is common practice – a broker buys shares from the issuer at a set price and then tries to market them for more, carrying all the risk. Front running, on the other hand, is the practice of dealing on advance information before the clients have been given that info. — Garth

It wouldn’t surprise me that in many cases, there was advance information in the form of an Asian buyer already lined up, and booked to fly into YVR next week to seal a deal.

The broker knows what the yvr house will do in the Asian market, and the seller in Vancouver has no access to these buyers in Asia.

I think it will be worth a try for a prosecutor to see if that can be made stick.

Realtors playing market-makers is a dangerous thing. It will go wrong.

Bram

#48 GenX on 02.07.16 at 12:50 pm

How about considering the scenario that all these people buying houses may be right in the end?
What if the debt situation becomes so bad that the government decides to let currency go into hyperinflation?

Or the angels might come. — Garth

#49 Bram on 02.07.16 at 12:59 pm

#8 Ret on 02.07.16 at 10:44 am
Update of Phoenix home price graph.

http://ca.spindices.com/indices/real-estate/sp-case-shiller-az-phoenix-home-price-index

Interesting.
Buying Phoenix in the yr 2000, would have yielded long term, after 16 years, a measly +2.8% per annum. (+56% over 16 yrs)

Still positive, in the long term, mind you.
But not very much.

Bram

#50 tundra pete on 02.07.16 at 1:01 pm

It’s all fun and games till someone loses an investment. Then the whole thing will hemorrhage all over. There will be one triggering factor, and the whole scheme will be sucked into itself. Shock will overcome the naive.

The gubermints will say they never saw it coming but it is okay because jo taxpayer will be able to save the bank from damage. New legislation will be drafted within hours protecting the banks from losses by the new tax implementation. A crowd of taxpayers will bitch but most will not notice as they are too busy on facebook talking about the latest dancing with the stars episode.

#51 Paul on 02.07.16 at 1:06 pm

#36 Chaddywack on 02.07.16 at 12:04 pm

As a seller I would just put a “no assignment” clause in the accepted offer. I’m surprised the sellers would not do this if they felt this was obscene.

Surely it would be acceptable for a seller to insert that into the contract.

Why would a rational seller care? A sale at the price you wanted is a sale at the price you wanted. — Garth
———————————————————-
Assignment clause mans nothing if you enter into a deal and come closing your deal closes and five mins. later the property gets registered to new new buyer what then.
Years ago in the GTA. people were putting down deposits on 10 properties with long closing dates and trying to sell the agreement, worked great till the bottom fell out. Most just walked away leaving the sellers high and dry.

#52 Vampire Studies GMST 454 on 02.07.16 at 1:07 pm

26 Hype – pasted from the article

“The result has been a smashing success—last year Steve and Courtney saved 70% of their income, and
lived off the remaining after-tax income of $54,000
(A$76,000).”

Which gives them something like a $300-400k income to start with. And $54k after tax isnt starving either.

So they are indeed doing it right if early retirement is their goal. I actually have a couple of acquaintances who have managed this in their 40s.

But most of us dont make $300k per year…….

#53 A Canadian Abroad on 02.07.16 at 1:09 pm

Thank you Garth for posting this explanation today! I agree, it’s easy to jump to conclusions.

I’m glad to see these gains are taxed.

Assignment clauses appear to be for speculators. It’s how the realtor finds the speculators and what they tell them. Not telling any buyer the real facts should be legally liable.

In my opinion, the CREA needs to be regulated not by themselves, but like the model used by the CSA:

“the Canadian Securities Administrators (CSA). The CSA protects Canadian investors from unfair, improper, or fraudulent practices and fosters fair and efficient capital markets”

#54 TurnerNation on 02.07.16 at 1:10 pm

And rising down payment reqs? Big deal when you simply can borrow this spread at 2% or from parents. About as effective as laws against drugs. It’s an addiction.

Every six months both my credit cards send 0% balance transfer cheques for six month period. 1% upfront fee. Write cheque to self. One could grab
20-40k toward a DP and keep it rolling over. Money is FREE these days.

I’m just maxing TFSA and RSP each year and watching it grow.

#55 Phoenix vs Vancouver on 02.07.16 at 1:36 pm

The problem with assignments is your deposit. Minimize that and if your willing to take a hot to your credit, it’s a win win situation.

#56 Brazil ex-pat on 02.07.16 at 1:37 pm

#39 Too Much Debt on 02.07.16 at 12:13 pm
No foreign buyers driving up the market in Vancouver at all, there is no such thing as HAM. Whatever…this is going to end so badly..

http://www.theglobeandmail.com/news/investigations/the-real-estate-technique-fuelling-vancouvers-housing-market/article28634868/

Try reading the post before you comment. — Garth

++++++++++++++++++++++++++++++++++

I read the entire page. Foreign buyers is mentioned 9 times and what I got out of it also was” This USED to be the prettiest block and now has been a construction zone for 2 years”.

#57 Craig on 02.07.16 at 1:39 pm

Noticed that Conrad Black’s mansion is coming up for sale. On May 1, 2012 after his release from jail in the US he was granted a 1 year temporary residency visa in Canada. Since he previously gave up his Canadian citizenship, wouldn’t this make him a convicted British felon? There has been virtually no information that I can find after the expiry of this 1 year temporary residency visa that he was granted. How is he LEGALLY still allowed to live in Canada ? Perhaps Garth or someone in the know could enlighten me. Thank you.

https://ca.finance.yahoo.com/photos/tour-conrad-black-s-22m-nine-bedroom-mansion-slideshow/conrad-black-mansion-up-for-sale-photo-1454685847513.html

#58 ROCK BEATS PAPER on 02.07.16 at 1:40 pm

Is the first chart actually related to real estate, or is that an overlay for the S&P 500?

#59 Mark on 02.07.16 at 1:40 pm

“What if the debt situation becomes so bad that the government decides to let currency go into hyperinflation?”

Hyperinflation, like significant deflation, destroys lending. The destruction of lending reverts house prices to very low levels. Neither hyperinflation, nor deflation, are any good for the price of housing. The only scenario in which housing, as an asset class, does well is in periods of monetary stability with falling long-term interest rates. Interest rates have effectively hit a floor at this point, and further decreases are likely to see a contraction of lending.

Additionally, the past few decades of prices increasing far faster than inflation in most markets has stimulated large amounts of oversupply — some of which has been taken up by unsustainable demographic trends (ie: those towards smaller “families”), and some of which has been subject to hoarding (ie: the trend towards families owning more property than they formerly would, ie: single people owning SFH’s, etc.).

So, no, monetary instability will not bail houseowners out, even if the monetary system does become unstable. If hyperinflation were being ‘predicted’, why aren’t other asset classes with better long-term performance in strong inflation doing better?

#60 paddler on 02.07.16 at 1:50 pm

It will be interesting to see how this “legal” scam will affect the market. In my view this is downright fraud.

#61 We have no data on 02.07.16 at 1:59 pm

We have no data that it’s local or Asians causing this madness in Vancouver.

We need more studies ;)

#62 Ronaldo on 02.07.16 at 2:01 pm

As the saying goes, ‘Greed is a bitch.’ And she will come back and bite you in the butt. Happens every time. It will not be different this time. Just different players.

#63 Sixtyfourk on 02.07.16 at 2:08 pm

Take a look at the chart for the S&P 500 from 2002 – 2009. And then look at the chart today.

The growth of the S&P has been as parabolic as the growth in housing. S&P and housing growth driven by unprecedented monetary policy.

They are both just as likely to “correct”. And this time, what will the central banks do, when interest rates are already at 0?

People that are diversified will be hurt the least. People that are concentrated into one or two asset classes will hurt the most.

#64 Ronaldo on 02.07.16 at 2:13 pm

#34 Turner Nation

”This trend will continue until rates rise (if ever).”

When prices have risen to the point where it is no longer affordable even at zero interest rates. We have arrived.

#65 Ryan on 02.07.16 at 2:33 pm

Here’s an investment strategy take the Panthers to win over Denver. Good day.

#66 BS on 02.07.16 at 2:37 pm

The chart look vaguely familiar? Check out the Van real estate board price graph published here in the previous post. Or the Case-Shiller graph of real estate values in another bubble city – Phoenix – reproduced below. They thought it was different there, too.

Looking the charts Phoenix’s bubble took about 13 years from pre bubble to peak. The index went up 3.3 times then crashed close to 55% over 3 years (note interest rates went from 5% to 0% over that period). In the end Phoenix RE only went up at about inflation (less than 3%) over that 16 years (pre bubble to trough).

In Vancouver the bubble started about 13 years ago as well. Over that 13 years a SFH is Vancouver is up 4.5 times but condos are only up 2.5 times and townhouses up somewhere in the middle. Blended Vancouver is in the exact same spot as Phoenix near peak at about 3.5 times the prices pre bubble. As they say history doesn’t repeat itself but it often rhymes. A 55% average crash is inevitable over the next few years in Vancouver. More for a SFH and less for a condo. Pricing will go back to inflation just like Phoenix.

There was the same euphoria in Phoenix when RE was going parabolic too. It wasn’t different there and it won’t be different in Vancouver. Except the BoC does not have the option to drop rates by 5% in Canada. By the time the crash starts the BoC may already be at zero.

#67 Ace Goodheart on 02.07.16 at 2:38 pm

Difference between Vancouver and Phoenix is that in Phoenix, people were buying houses with borrowed cash made available by credit default swaps and the structuring of junk debt into triple “A” credit.

In Vancouver, for whatever reason, people buying houses seem to be doing so with cash.

#68 Andrii on 02.07.16 at 2:40 pm

Red today from Edmonton sun ” NDP plans some green for solar project ” . They expect to invest 5 mil $ to solar panels and get 13,000 MWt annually , enough to power 18,000 homes ! So 50$ per month for power bill for month , 12 month , 18,000 homes give us 10mil 800 k return for 5 mil invested in one year ! Don’t bet against Alberta . We can invest 5 bill and power States !

#69 kommykim on 02.07.16 at 2:43 pm

RE:

#18 Dewflicker on 02.07.16 at 11:02 am
If there is an issue here it is transparency and the potential for a conflict on the part of an agent.

I agree. As long as the agent makes it 100% clear to the buyer and the seller what an assignment entails, then there is nothing wrong with this. The issue arises when you have a shifty agent who uses pressure on either party to act quickly without reading the fine print.

#70 Ponzius Pilatus on 02.07.16 at 2:44 pm

There’s a rumour that Nelson Skalbania is behind all this, again.

#71 Ontario's Left Coast on 02.07.16 at 2:45 pm

Thanks Garth, I learned something here. I’ll gladly keep my comfy, paid-for 3-bedder that I’ve owned here in rural Ontario for the last 20 years. And the crazies in these hotbed markets can keep their euphoria… I wouldn’t wish this kind of risk on my worst enemy.

#72 TurnerNation on 02.07.16 at 2:48 pm

pathcontrolmonk surely you get that this all is planned, computer simulated.
Social engineering, like CIA handing out free LSD in the 60s. Our cultural revolution.

Question is if/when we get Icelanded.

#73 The Great Gazoo on 02.07.16 at 2:50 pm

“Greed has a funny way of pulling the needle on your moral compass.”

Great line.

#74 acdel on 02.07.16 at 2:51 pm

Good pathetic post!

Just insane; what I do not get is how Vancouver will be able to sustain itself in the near future. The city is pricing itself out of all the workers that keep a city and economy going. If you are close to retirement cash out and move to the Island or elsewhere.

#75 Daisy Mae on 02.07.16 at 2:56 pm

“In fact, CRA will levy capital gains taxes on the profits and possibly HST on the sale price, or worse. Gains made through trading clauses are routinely classified as income, so the flippers are taxed at their marginal rates…”

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

So it’s in the governments best interest to keep this scheme going — the feds collect capital gains/HST from ALL the realtors involved in a single assignment….and they collect land transfer fees (in Toronto, this involves selling/buying) from ALL the ‘buyers’? And the greater fools are, of course, we Canadians…..

#76 Randy on 02.07.16 at 3:01 pm

DaveDorf…It was from Rocky 12 when he becomes an astronaut.

#77 Mark on 02.07.16 at 3:07 pm

“In Vancouver, for whatever reason, people buying houses seem to be doing so with cash.”

Not even close. Most studies indicate that Vancouver housing is being bought with large amounts of credit. The ‘cash buyer’ myth of Vancouver has been thoroughly debunked.

Difference between Vancouver and Phoenix is that in Phoenix, people were buying houses with borrowed cash made available by credit default swaps and the structuring of junk debt into triple “A” credit.

What do you think the CMHC has been doing with its subprime mortgage insurance operations? Turning junky mortgages into the equivalent of AAA sovereign credit (ie: GoC bonds). Canada doesn’t have a vibrant marketplace in subprime mortgage securitization on account of the CMHC actually being such a behemoth in the market and largely accomplishing the same. Scarily, with sovereign backing.

#78 Investx on 02.07.16 at 3:08 pm

So “Real estate has gone parabolic, as is always the case when euphoria wins”, but no crash expected in Vancouver?

Why is it different there?

#79 joblo on 02.07.16 at 3:08 pm

#28 crossbordershopper on 02.07.16 at 11:41 am

“simply come to smaller town saskatchewan, get a place for 90 grand. no mortgage no worries. sure you dont have 500K in equity in your home, but low cost of living, low downside, no traffic, and yes you have all the doctors, hospitals, schools, etc that every bigger city has except selection”

But where do you go as your name suggests? Seems bleak around the border.

What the heck is a living sky anyways?

#80 bigrider on 02.07.16 at 3:09 pm

#34 TurnerNation on 02.07.16 at 12:01 pm

It’s simple (Kanadians):

– Stock market is seen as “risky”.
– GICs as “safe”
– Housing as “safe”
– Social rewards: congrats on your first house!
– Almost free money : 2% mortgages.
– Housing always goes Uppa up.

This trend will continue until rates rise (if ever).
———————-

If you are going to use my word “Uppa” then at least ask for permission Turner.

By the way, it’s uppa , Uppa ,UPPA !!!

#81 For those about to flop... on 02.07.16 at 3:19 pm

16 at 2:45 pm
Thanks Garth, I learned something here. I’ll gladly keep my comfy, paid-for 3-bedder that I’ve owned here in rural Ontario for the last 20 years. And the crazies in these hotbed markets can keep their euphoria… I wouldn’t wish this kind of risk on my worst enemy.

/////////////////////////
Hey OLC ,I’ve been meaning to ask you this for awhile…
Where abouts roughly do you live ,I like learning about new places.
Thanks brother.

M41BC

#82 Capt. Obvious on 02.07.16 at 3:22 pm

Do we have a mortgage bond market here? Would assume yes. Are CDOs a thing of the past, or is that game still open?
Would love to know at what point people will start missing mortgage payments en masse. I don’t think we’ll see a Phoenix – like crash unless we see a high default rate. But a slow sloppy melt over several years seems our destiny at this point.

#83 crowdedelevatorfartz on 02.07.16 at 3:22 pm

@#42 Shirley Valentine @ 02/07/16

One more week til the “big day”.

Are you paying attention Smokey?
Shirley wants red roses and red wine delivered to the Seneca hotel room on Valentines Day……….the JD on ice is optional….. depending on how “frisky” you’re feeling.

#84 Mike in Toronto on 02.07.16 at 3:25 pm

Taking a long closing with a small deposit is stupid or desperate.

If the market tanks and you’re left holding the deposit and the property… who cares? You couldn’t predict that, you could predict the value of the deposit.

But yeah greed. “they sold it for more!”, whatever. They may not have, and holding the property probably wasn’t their plan.

#85 Siva on 02.07.16 at 3:40 pm

My landlord just sold the condo I live in. He bought it for 330k in 2011 and sold it last week for 340k. Original listing was for 355k and I thought he would get the asking because similar units in the same building are listed for 369k. So what is the fair maketvalue is anybody’s guess. The new owners are also buying it as investment property and they are young couples in their 30s.

#86 tom on 02.07.16 at 3:44 pm

Andhttp://www.zerohedge.com/news/2016-02-05/these-vancouver-homes-sold-millions-2011-and-have-been-vacant-and-rotting-heres-why

we all wonder why YVR is blaming foreigners. Zero hedge is adding full to the fire.

#87 AB Boxster on 02.07.16 at 3:44 pm


You are incorrect. Washington spent trillions trying to mitigate the housing collapse. — Garth

——————————————————
Washington may have spent money after the fact, to try to mitigate the pain, after the bubble burst.

Once the bubble burst, in hindsight, it was easy to see all of the systematic policy and regulatory issues, as well as outright fraud by lending companies, that contributed to the whole mess.

One can perhaps forgive the Americans for not seeing the consequences of the policy, and lending practices.

In Canada, we are all watching the bubble grow.
Governments and citizens.
Governments know it exists, but will not admit it for fear of popping it. Or because individually they benefit from it.
The citizens think that they are getting wealthier as equity increases.

The mistakes of the Americans are being repeated in Canada, and in fact are even worse due to our unique mortgage insurance rules, and the monopolistic control that real estate boards have over data.

But in Canada there can be no excuse.
No ‘Golly we didn’t see that coming!’

This issue has been allowed to progress through Conservative and now Liberal govt’s with only token effort.

The solutions they present is to allow, and even encourage the beast to grow.

It’s like the national debt. No govt can really tackle it because to do so would be massively politically unpopular, and economically painful. So it gets kicked down the road. Perhaps forever. Never to be repaid.
Should anyone care?

No one seems worried about the debt.
Perhaps no one should be worrying about the bubble.

Maybe the best strategy, is to see how long things can continue, and how best to individually profit from the ‘bull market’ in real estate.

Your government says its a great investment.
How can this fail?

#88 Westcoaster on 02.07.16 at 3:49 pm

Basically this is classic “Greater Fool” principle in hyperdrive. I read the article and it made me ill but at the same time recognized that, although highly distasteful, it is evidently legal.
Coincidentally, currently reading “The Investment Zoo” written in 2005 by S. Jarislowsky. A couple of things of interest: he is remarkably prescient in terms of some of his warnings/dark thoughts re: real estate and the equities market. He also seems to frequently be on the same page as our dear host. I would recommend the book – Mr. J. is also quite entertaining in his candid writing style – very direct, not one to pull punches in his critique of his colleagues. Somewhere between Andy Rooney and Bernie Sanders at times.

#89 Dewflicker on 02.07.16 at 4:00 pm

“An assignment clause is completely transparent. Get a lawyer. — Garth”

Probably good advice. The truth is however that the process itself is not as transparent as you pretend. From the article:

“”Many sellers, though, don’t even know these clauses exist – let alone that they agreed to one in their sales contracts. “A properly advised seller would insist on a no-assignment clause in the contract – but I have never seen that on a house sale,” said Ron Usher, a lawyer with the association representing B.C. notaries.””

#90 A Yank in BC on 02.07.16 at 4:14 pm

Yes indeed.. the Van chart does look vaguely familiar. If you chart the S&P500 over the same timeframe (25 years), they are almost exactly the same.

#91 Big Dipper on 02.07.16 at 4:17 pm

Nowhere does the G&M article contradict Garth in saying that the assignment clauses are either new or illegal. The real question is: does the clause contribute to, or even cause the distortion of the Vancouver housing market?

The assignment clause provides the buyer an option to sell the contract before closing. No different to buying a futures contract of a commodity (oil, wheat, pork bellies..) with a set delivery date. In fact, as Garth identifies, the Vancouver housing market now resembles a commodity market where actual home occupants get into the way of a clean active trade. Mom and Dad with 2 kids need not apply.

The house seller is guaranteed a price at delivery – closing date. I do not understand the belly aching by the sellers; they did choose to sell with long delivery dates for a guaranteed price. No different to a farmer selling his crop at a fixed priced in the spring for delivery in the fall, and the buyer taking all the pricing risks – up or down – from there on.

The difference with the farmers crop analogy is that the Vancouver house contract holders are only betting that the market will go up. They’re all one-way bets! Nobody is (yet) going short on Vancouver housing. With no countervailing bets it becomes a self fulfilling prophesy. The contract price will increase because they, seemingly, always do increase. This the Golden Goose!

What strikes me is that a lot of these transactions come from unsolicited offers. Seems nice to the sellers, because they avoid sellers agent commissions. Of course, they also avoid sellers agent advice and representation. The assignment clause has real tangible value. From the article it appears that the option itself trades for $20-50K – with the price obviously diminishing for shorter deliveries (closing). The point is that the sellers are giving the buyers a valuable freebie.

The ultimate buyers of the house have to firmly believe that the Vancouver house prices will up forever and also have the means to sustain that belief. This eliminates the notion that it these are local mom and pops ($70k combined income) who are a bit overextended on their LOC’s. The G&M identifies the Realtor process of identifying, managing and milking off-shore buyers who ultimately feed the frenzy. But even those buyers have limits. What are those limits? Who knows.

My view is that there will be no soft landing. History shows this process repeated too many times. The question is not if, but when.

#92 Ronaldo on 02.07.16 at 4:19 pm

#52 Vampire Studies GMST 454 on 02.07.16 at 1:07 pm

”But most of us don’t make $300k per year…….”

Yep. Only .7% make over $250,000.

http://www.financialpost.com/personal-finance/taxes/much+Canadians+make/4497362/story.html

#93 Snowboid on 02.07.16 at 4:23 pm

#49 Bram on 02.07.16 at 12:59 pm…

Or in our case buying in Dec 2010 we have realized about 46% based on the index, based on Zillow and recent comp sales it’s well over 50% in five years.

A couple of weeks ago we contemplated selling, but still haven’t decided. Sitting on the deck in 26C sunshine, flipping steaks on the BBQ and sipping some sweet Southern Comfort kinda fogs the brain.

BTW based on the Canadian event yesterday there are still a large majority of Albertans comprising the winter snowboids in Phoenix. Notable in the sea of red and white plates was one from Newfoundland and Labrador – that’s a long drive!

#94 Doug Saunders on 02.07.16 at 4:34 pm

These condo flippers and speculators and other real estate junkies are the same people laughing for 20 years now that interest rates kept dropping and at so low now.

They cheer negative interest rates and very low interest rates and think it is done to benefit them. It is a financial trap mired with high debt and a life of risk, speculation and no savings, investments to have a cushion to fall back on.

This is why each generation is going to have to learn the hard way.

#95 Mark on 02.07.16 at 4:44 pm

“My landlord just sold the condo I live in. He bought it for 330k in 2011 and sold it last week for 340k.”

Sounds about right. Basically pricing hasn’t moved up much since the 2013 apex, and has actually moved down in many markets. Don’t let the claimed extravagances of a few very high end markets in GVR/GTA which are mostly only changing ‘prices’ on account of the shifting sales mix fool you — prices have been on the stagnation, if not minor decline in Canada since the 2013 apex coinciding with Budget 2013’s measures to crack down on CMHC subprime mortgage insurance.

Its really unfortunate that a once reputable publication in the Globe and Mail has fallen for the ruse and has attempted to generalize the shifted sales mix over a much wider swath of property. They’re really doing their readers and the public a disservice.

They cheer negative interest rates and very low interest rates and think it is done to benefit them.

Good point. The stimulation of additional supply of collateral through low rates is actually, over the longer term, destroying rents and the economic value of RE. RE investors now have few, if any realistic re-investment opportunities in the sector. RE investors will look back upon the era of abnormally prices and heap scorn upon those who made it happen.

#96 Ronaldo on 02.07.16 at 4:44 pm

From the Real Estate Council of B.C.

http://www.recbc.ca/psm/assignment-of-contracts/

#97 Ronaldo on 02.07.16 at 4:48 pm

This is what old retired boomers do.

http://i.imgur.com/2SvpTAA.gifv

#98 For those about to flop... on 02.07.16 at 4:59 pm

Hey Snowboid,crazy crowds at the Phoenix Open huh!
Do you ever go?

M41BC

#99 I'm stupid on 02.07.16 at 5:00 pm

I read the globe article and it sounds like greedy people wishing they got more. The comment section of this blog sounds the same. As long as the cheque clears at closing who care who bought the house. The original home owner relinquished their rights at an agreed price. If the property sold for less should the original buyer ask for money back from the seller?

#100 For those about to flop... on 02.07.16 at 5:12 pm

Hey Ronaldo at 97.
It was a pity Mark was not on that log …it might have knocked some sense into him!

#keeplyingtoyourself

M41BC

#101 NoName on 02.07.16 at 5:17 pm

#48 GenX on 02.07.16 at 12:50 pm

Hyperinflation at its best/worst. inflation of 240% per day, inflation of 10ish percent an hour. (if i got numbers right). assuming that bills were printed smaller in jan and bigger one in dec.

http://tinypic.com/r/2lnihs6/9

khan academy hyperinf video
http://www.khanacademy.org/video?v=AC_kjcuHpZw

ex-Yu hyperinf…
https://www.youtube.com/watch?v=q9AFqCZWVHM&ab_channel=FinancialFreedomSilver

#102 Love my Kia on 02.07.16 at 5:22 pm

I don’t always agree on your political slant or your views on the US recovery, but I always learn something here.

Your integrity and desire to help others always keeps me coming back as a daily part of my reading ritual.

Thanks for not giving up and keeping the rest of us informed.

#103 Ontario's Left Coast on 02.07.16 at 5:23 pm

#81 For Those About to Flop

Hey Flop, cheers and I hope things are good. Me, the wife and the youngn’s are just outside of the beautiful town of Goderich, right on the shore of Lake Huron (hence my handle). It’s a beauty spot; in fact Queen Elizabeth 2 called it the “…prettiest town in Canada.”

Take care dude!
M48ON

#104 suede on 02.07.16 at 5:28 pm

#5 common sense

dude,

“What goes up must come down. Its gravity”

unless it goes to the stratosphere where gravity weakens , then its liftoff

#105 Keith in Calgary on 02.07.16 at 5:59 pm

Been renting the same inner city condo here in YYC for 5 years now. They were listed for $249-259K when we moved in, and today they are still listed for $249-259K. 2 years ago owners of one bedrooms got hit with a $14K special assessment, and two bedroom owners had to pay around $20K.

Anyone wanna run the numbers……LOL !!!

My rent hasn’t gone up a penny. And I’ve made about 5 times as much on my forex/bond portfolio after tax (and that’s “not” counting the cash we have also saved and added to it each month as a return) as I would have on the mortgage principal paydown, etc, over the same period.

Sucks to be a renter eh ??……..the clearance in the underground parkade isn’t high enough for the Brinks truck I drive to the bank on a daily basis.

#106 For those about to flop... on 02.07.16 at 6:08 pm

#103 Ontario’s Left Coast on 02.07.16 at 5:23 pm
#81 For Those About to Flop

Hey Flop, cheers and I hope things are good. Me, the wife and the youngn’s are just outside of the beautiful town of Goderich, right on the shore of Lake Huron (hence my handle). It’s a beauty spot; in fact Queen Elizabeth 2 called it the “…prettiest town in Canada.”

Take care dude!
M48ON

////////////////////////////

Hey OLC ,I just went to google maps and checked out Courthouse square and a few other areas.
It certainly is a pretty looking town.
I guess you get a lot of snow in winter though?
I am allergic to snow but maybe with climate change ,its a possibility that I live in Ontario one day.

M41BC

#107 jess on 02.07.16 at 6:13 pm

obscene abuses

Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Friday, February 5, 2016
Justice Department Reaches $470 Million Joint State-Federal Settlement with HSBC to Address Mortgage Loan Origination, Servicing and Foreclosure Abuses

HSBC will pay $100 million: $40.5 million to be paid to the settling federal parties; $59.3 million to be paid into an escrow fund administered by the states to make payments to borrowers who lost their homes to foreclosure between 2008 and 2012; and $200,000 to be paid into an escrow fund to reimburse the state attorneys general for investigation costs.
By July 2016, HSBC will complete $370 million in creditable consumer relief directly to borrowers and homeowners in the form of reducing the principal on mortgages for borrowers who are at risk of default, reducing mortgage interest rates, forgiving forbearance and other forms of relief. The relief to homeowners has been underway and will likely provide more than $370 million in direct benefits to borrowers because HSBC will not be permitted to claim credit for every dollar spent on the required consumer relief.
HSBC will be required to implement standards for the servicing of mortgage loans, the handling of foreclosures and for ensuring the accuracy of information provided in federal bankruptcy court. These standards are designed to prevent foreclosure abuses of the past, such as robo-signing, improper documentation and lost paperwork, and create new consumer protections. The standards provide for oversight of foreclosure processing, including third-party vendors, and new requirements to undertake pre-filing reviews of certain documents filed in bankruptcy court. The servicing standards ensure that foreclosure is a last resort by requiring HSBC to evaluate homeowners for other loss-mitigation options first. In addition, the standards restrict HSBC from foreclosing while the homeowner is being considered for a loan modification.

http://www.justice.gov/opa/pr/justice-department-reaches-470-million-joint-state-federal-settlement-hsbc-address-mortgage

#108 jim on 02.07.16 at 6:17 pm

what about citi’s statement

#109 Leo Trollstoy on 02.07.16 at 6:28 pm

My landlord just sold the condo I live in. He bought it for 330k in 2011 and sold it last week for 340k.

5 yrs of profit for an asset with probably little or no money out of the landlords pocket. this re market is insane.

#110 Snowboid on 02.07.16 at 6:41 pm

#98 For those about to flop… on 02.07.16 at 4:59 pm…

200,000 is a bit too big a crowd for me, but our sons plan to come down next year for the WMO so who knows.

I’m more of a car-nut so Barrett-Jackson is more my style!

#111 fishman on 02.07.16 at 6:44 pm

We used to do something similar with used cars. It was called curbing. This being pre-internet we’d sit in front of the Buy&Sell publisher, grab the 1st. issues, run to a land phone(thats all we had then) & contact the seller. Rush over & get a signature on the transfer papers. Give a story about doing paperwork later; hand over the cash; drive away. Then resell using the original transfer paper for the end buyers name . Assignment was just a big legalese word smarter people used in front of a judge.

I guess we were lucky growing up in B.C. Our business mentors were Jimmy Pattison on Kingsway as a used car salesman. Howe st. cowboys like Murray Pezim & Harry Moll, yea old pump & dump lore, Peter(the Rabbit, first in the hole;first out) Canarim founder. Zen & Aquiline throwing lefty students & old people in the street while building a R/E empire on “rent controls”. After a short stint as idealists anyone with brains figured believing in govmt. making things right, whether Dipper or Socred would leave you a poor man.

There will always be useful idiots, but by our late twenties we knew the sun rises late but still rises in the east, all used car salesmen, stockbrokers & R/E salesmen are kinky, the drugs potent & the criminals smooth. Graduate degrees in “street smarts” for young men heading into the eighties in a province unbelievably rich in natural resources with a port city on the Pacific, street scape copied from Manhattan Island, adjacent to an almost limitless supply of the best potable water in the world. How we would proceeded are stories. Blog dogs can learn from our stories but always remember that history rhymes it never copies.

#112 Walter Safety on 02.07.16 at 6:54 pm

Garth , in defending assignments you forget to mention what happened in the last real estate crash . The downstream assignee’s bailed ,putting the problem back on the vendor if the deal had not yet closed.
If a widow doesn’t know the value of her deceased husbands car and you buy it under the money that’s fair.
Realtor’s are paid to represent the seller ,not exploit their lack of market knowledge .Shamefull behaviour.

#113 jess on 02.07.16 at 6:59 pm

From at least the 1990s through 2009, Julius Baer helped many of its U.S. taxpayer-clients evade their U.S. tax obligations, file false federal tax returns with the IRS and otherwise hide accounts held at Julius Baer from the IRS (hereinafter, undeclared accounts).

=======
Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Thursday, February 4, 2016
Criminal Charges Filed Against Bank Julius Baer of Switzerland with Deferred Prosecution Agreement Requiring Payment of $547 Million, as Well as Guilty Pleas …

Bank Admits to Helping U.S. Taxpayer-Clients Hide Billions of Dollars in Offshore Accounts

http://www.justice.gov/opa/pr/criminal-charges-filed-against-bank-julius-baer-switzerland-deferred-prosecution-agreement

==========
A US judge has ordered the publication of a secret report detailing HSBC’s attempt to crack down on money-laundering, in a stunning victory for a disgruntled customer.

HSBC sold his mortgage debt to another bank without telling him. — a violation of federal laws

Hubert Dean Moore Jr, a 52-year-old chemist from a suburb of Philadelphia, had demanded to see the money-laundering report after HSBC sold his mortgage debt to another bank without telling him. Read Full Article On http://www.dailymail.co.uk.

#114 Marlene from Victoria on 02.07.16 at 7:14 pm

I can tell you that at my law firm’s office in the lower mainland the voicemail is full and we are getting all kinds of email enquiries about the Globe article. The partners had a conference call today and are calling a special meeting this week to discuss individual enquiries and possible class actions.

What you don’t quite seem to get, Garth, is that realtors actually owe a high standard of avoidance of conflict of interest, as well as fiduciary duties to their clients. These kinds of assignment games simply flout that legal duty.

The civil standard of ‘balance of probabilities’ will destroy any realtor trying to lie that the second and third “assigned” sales were not on the horizon when he closed the first one. Reasonable people, especially judges, won’t buy it.

Law has been slow lately, for many reasons, slowing economy especially. This is a gift from heaven. And yes, this should nicely boost my income starting this year, too :)

Lawyers are smelling blood, be forewarned realtors!!

#115 For those about to flop... on 02.07.16 at 7:15 pm

Well just like I hoped yesterday the Broncos got off to a faster start than O.J Simpson in his Bronco in his failed run to the Mexican border…

M41BC

#iloveunderdogs

#116 Retired Boomer WI on 02.07.16 at 7:17 pm

#97 Ronaldo

Love the clip! Why would a gaggle of geezers even do that is beyond me. Maybe some fun there, but it is hard to follow.

Well, time yet to get the car serviced before we head off to defrost in Florida next week. Still have to decide what I’m going to do with that defective 3 tooth bridge…
And ‘Maggie’ our 19 year old tortoise shell kitty has been having health issues.

Always something. That is what makes this life interesting, if not always a challenge. (sigh)…

#117 Bram on 02.07.16 at 7:26 pm

#66 BS on 02.07.16 at 2:37 pm
…crash is inevitable over the next few years in Vancouver. More for a SFH and less for a condo. Pricing will go back to inflation just like Phoenix.

I think condos will crash harder, not less than SFH.
You are forgetting about supply.

Every year, a SFH in Vancouver gets more rare:

If a house gets torn down, it is replaced by another house or a condo.

If a condo building gets torn down, it is replaced by another condominium complex, never by a house.

It’s like a house in Manhattan: it used to be common, now pretty much impossible due to obscene land values.

Bram

#118 AfterTheHouseSold on 02.07.16 at 7:53 pm

OT but another auto announcement today.
“Mexican production to grow 53% to 5.2 million vehicles by 2019 as the share of production in the U.S. and Canada falls.”

http://www.wsj.com/articles/ford-to-more-than-double-mexico-production-capacity-in-2018-1454857923

#119 Leo Trollstoy on 02.07.16 at 7:55 pm

#114 Marlene from Victoria on 02.07.16 at 7:14 pm

good luck going up against the real estate board lawyers and their assignment contracts. there’s no avoidance of conflicts of interest. it’s all there in black and white. u guys will just be taking money from the people. it’s called churn.

#120 I'm stupid on 02.07.16 at 8:02 pm

#114 Marlene from Victoria

The buyers agent has no duties to the seller. He represents the buyer. Remember that these listings are made public and advertised. Have you ever thought that they’re pulling a scam? If I had a bunch of cash I needed to burn that’s how I’d do it. Use someone to buy a home then inflate the “price” to get the cash into the system. Just saying

#121 Herb on 02.07.16 at 8:04 pm

#114 Marlene from Victoria,

thank you! I was beginning to wonder if there was some sort of common sense left in the system somewhere.

An obvious case to be made is whether an agent proposing a listing price (or negotiating one with the client) had, or would or could have had, reason to assume a higher listing or assignment price was achievable. And agents involved in “flipping” an assignment would seem to establish that there indeed was an expectation of a price higher than the one negotiated with the client, ergo, negligence in the performance of a fiduciary duty.

Go get ’em, lawyers!

#122 Shaggy Dog on 02.07.16 at 8:20 pm

“There is no evidence any agent ‘purposefully caused the house to sell at a lower price.’ Lower in relation to what? Market conditions in the future? No grounds for a suit. — Garth”

**** You are so naive mate. If the agent didn’t anticipate a higher sale immediately no one would take on a short term assignment. Been there done that. The agent would literally have the second buyer waiting in his car. Been there done that.

#123 Bram on 02.07.16 at 8:23 pm

It seems like America has learned nothing from the 2008 subprime mortgage crisis.

Look at what aired today during Super Bowl no less:
https://youtu.be/QlRm6Y5iVfw

Bram

#124 Mark on 02.07.16 at 8:36 pm

“. If the agent didn’t anticipate a higher sale immediately no one would take on a short term assignment. Been there done that. The agent would literally have the second buyer waiting in his car. Been there done that.”

See my quote of that Globe and Mail article in Friday’s blog post comments, where a Re/Max Realtor confesses to holding 15-20 houses in anticipation of being able to flip them.

So its not risk-free. It probably will be the end of that Realtor’s personal-finances wise with the losses that are piling up on Vancouver/Toronto RE at the moment.

#125 Scully on 02.07.16 at 8:38 pm

Thank you Garth. You hit the nail on the head and have an amazing way of explaining this current activity so everyone can understand the extreme risk they are taking if they feel the need to get some skin in the game.

#126 Leo Trollstoy on 02.07.16 at 8:56 pm

Go get ’em, lawyers!

naive. of course the lawyers will go get it. the money from the pockets of the original seller. that’s where the money will come from. the real estate board and their agents will be unaffected. go get em indeed

#127 Ontario's Left Coast on 02.07.16 at 9:09 pm

106 For Those About to Flop

Right you are about the weather… The lake-effect snow off Mother Huron is absolutely brutal! That being said, we’re having a really light winter this year.

Take care for now!
M48ON

#128 46 and 2 on 02.07.16 at 9:12 pm

Another year to 18 months of “this” and Alberta is back to the 80’s. I lived through the 80’s in Alberta and honestly never thought I would see us in that crapper again. With some luck at the revenue craps table and cost slashing only Klein could pull off it still took the Province 10 years to dig out of that mess.

#129 Marlene from Victoria on 02.07.16 at 9:13 pm

#121 Herb – you said:

And agents involved in “flipping” an assignment would seem to establish that there indeed was an expectation of a price higher than the one negotiated with the client, ergo, negligence in the performance of a fiduciary duty.

—————————–

Exactly, Herb. A common sense conclusion in a civil court. Of course there could indeed be assignments that appeared “clean”, not involving an agent at all on the seller’s side. But how many are so pristine, really?

My experience and what I know secondhand is that there is a huge amount of insider chatter among agents, all kinds of deals and fixes and arrangements made to push quick closings and benefit realtors, including lots of “finders’ fees”.

A lot of this, rather clumsily, is captured on text messages and emails, all open to subpoena. Realtors, unfortunately, average about six weeks of education in their field and seem to think such improvisation is just fine. Lawyers spend much more time learning their profession and will be ready to jump on this :)

On a related note, talking with our teams the last few weeks, it is worth noting how much real estate law has slowed down, here and in Toronto and elsewhere, the last few months. Just not enough deals being done, plus not much in the other courts to sustain many law firms. Too many people just cannot afford lawyers anymore and self-reps are going hockey stick. A sign of the times, and lots of people are losing positions in firms across the country. Yet another reason there will be some real enthusiasm to take up a cause like this.

And to Leo Trollstoy, who said “good luck!” going up against the real estate board lawyers….

We have. Here and in Ontario and Alberta. Let’s just say, kindly, they are not the sharpest knives in the drawer. Kind of like the firms they represent.

Good lawyers, hungry ones, meanwhile, are paying close attention to what is developing.

More to come soon. Stay tuned.

#130 Rational Optimist on 02.07.16 at 9:16 pm

Perish the thought that, one day, everyone somehow realizes that the Vancouver real estate market can not continue up forever, and the people who agreed to purchase properties in the hopes of assigning those agreements, can’t. How quickly can it turn and how many sales with these long closes simply won’t be completed?

I think about that agent in the Globe who currently has commitments to purchase “15 or 20” properties. Do the sellers understand the risk of non-completion if the assignments don’t go according to plan, or the bottom falls out of the market?

It’s a lot different when someone’s buying your house with the intent of taking possession, rather than flipping the agreement to someone else. Sellers should be compensated for including an assignment clause in the agreement; assignment does increase risk for them.

I agree that it’s greedy on the part of a seller who agreed to a price to then begrudge the purchaser his profit assigning the agreement to someone else. But when the market turns, this practice will mean some sellers are left high and dry by purchasers who never intended to take possession.

#131 Harden on 02.07.16 at 9:20 pm

Sherry Cooper Super Bowl mortgage ad!! Could this be the top of the market?!

#132 SWL1976 on 02.07.16 at 9:38 pm

#123 Bram

It seems like America has learned nothing from the 2008 subprime mortgage crisis.

Look at what aired today during Super Bowl no less:
https://youtu.be/QlRm6Y5iVfw

Bram

——————

America has every sign and symptom of an empire collapsing.

Don’t dis the messenger here. I love what America once stood for, but that America is long long gone

#133 JSS on 02.07.16 at 9:51 pm

You want to read a depressing story of job hunters in Calgary, read this.

http://calgaryherald.com/news/local-news/calgarians-tell-of-jobs-shed-shredded-expectations

Hope these folks get a job soon. This is depressing.

#134 Bottoms_Up on 02.07.16 at 9:55 pm

#30 Retired Boomer WI on 02.07.16 at 11:42 am
———————-
I’ve got a cabbage patch doll I’ll sell you for $750, to recoup what I paid (plus inflation) back in the 80’s.

#135 For those about to flop... on 02.07.16 at 10:03 pm

#116 Retired Boomer WI on 02.07.16 at 7:17

Well, time yet to get the car serviced before we head off to defrost in Florida next week. Still have to decide what I’m going to do with that defective 3 tooth bridge…
And ‘Maggie’ our 19 year old tortoise shell kitty has been having health issues.

///////////////////////
Hey Boom, last year I went to Orlando for spring break and I always wanted to try a Brazillian drink called Caipirinha which is made from a sugar cane based booze called Cachaca.
I mention this because sometimes you talk about having cocktails and I love citrusy type drinks and I loved this drink… I saw Anthony Bordain get sizzled on them on CNN and I said to myself that’s gonna be me when I grow up.
Try one and get back to me…. I tried 3 or 4 different flavours but I like the original the best.
Enjoy your trip, and worry about your problems when you get back.

M41BC

#136 paul on 02.07.16 at 10:05 pm

Here is the deal,get an agent (I would say good but on this blog they don’t exist) List the house at or close to market hold back on offers 5-7 days get the best at that time and S T F up be happy!

#137 paul on 02.07.16 at 10:09 pm

#114 Marlene from Victoria on 02.07.16 at 7:14 pm

I can tell you that at my law firm’s office in the lower mainland the voicemail is full and we are getting all kinds of email enquiries about the Globe article. The partners had a conference call today and are calling a special meeting this week to discuss individual enquiries and possible class actions.

What you don’t quite seem to get, Garth, is that realtors actually owe a high standard of avoidance of conflict of interest, as well as fiduciary duties to their clients. These kinds of assignment games simply flout that legal duty.

The civil standard of ‘balance of probabilities’ will destroy any realtor trying to lie that the second and third “assigned” sales were not on the horizon when he closed the first one. Reasonable people, especially judges, won’t buy it.

Law has been slow lately, for many reasons, slowing economy especially. This is a gift from heaven. And yes, this should nicely boost my income starting this year, too :)

Lawyers are smelling blood, be forewarned realtors!
———————————————————-
Sometimes Lawyers are afraid to smell blood every now and again it’s there blood!

#138 GenX on 02.07.16 at 10:21 pm

Hi Mark,

You are right, hyperinflation will make ‘real’ prices of houses low, but debt is nominal.
Let’s examine some facts:
– most provincial governments cannot repay their debt
– federal government is on its way to the same situation
– banks will be against hyperinflating, but due to all the machinations currently being done by them, they may not be able to get the necessary support
– why it did not happen in the past? – perhaps because in the past Canada owned about 1000 tones of gold, giving it the means to bail itself out. Nowadays the reserve is about 2 tones and dwindling
– the majority of the population may ask for it once the debt becomes too painful

The possibility of hyperinflation is 100% since all fiat currencies fail, no exceptions.
The big question is when. My guestimate in 45% for the next 15 years.

The possibility of hyperinflation in your lifetime is zero. — Garth

#139 46 and 2 on 02.07.16 at 10:24 pm

Regardless of what all of you think, Vancouver real estate is going nowhere but up. Vancouver is the San Francisco of Canadian real estate and like the bay area and operates on rules governed by world wide real estate valuations not local valuations. You can throw all of the numbers around that you want….the fact is that the weaker the canuck buck gets the higher the sales volume in Vancouver.

#140 Smartalox on 02.07.16 at 10:40 pm

That Globe and Mail article has been up all weekend, and now CTV BC has just run a promo ad for a ‘special report’ on the matter of flipping assignments, to air Monday.

That’s a lot of core market eyeballs. Not the kind that can tell that the real losers are the ones left holding the inflated paper, but sure enough the audience is going to come away feeling like they’re being cheated – even if they’re not.

How will this wind up? Could the BCREA, under pressure, knee-jerk and remove the assignment clause from real estate contracts?

That would solve the present problem, but blow a gaping hole in the condo economy, where assignment flipping is the name of the game.

#141 Retired Boomer WI on 02.07.16 at 10:41 pm

#132 SWL1976

America IS an empire in its later stages. (See Rome)…

Funny even after their collapse Italy survived until this day. So what if the present regime goes tits up?

We break into state nations, like our neighbors with a weak central government. Where I live we have great water, good land, and few people. Without gas to get the city hordes here, who would need care too much?

Don’t worry the power seats crash the hinterlands not so much.

Besides, I don’t expect a total upset anytime…. soon.

#134 What’s the Cabbage Patch doll going for these days?

#135 Hi Flopper- I’ll ask for one of those and report back on it. Maybe two… If they’re like a Long Island iced Tea two would be plenty…

Wish us luck!

#142 45north on 02.07.16 at 10:54 pm

BS: There was the same euphoria in Phoenix when RE was going parabolic too. It wasn’t different there and it won’t be different in Vancouver. Except the Bank of Canada does not have the option to drop rates by 5%

and except the standard mortgage in the US is 30 years as opposed to Canada where it is 5 years.

Vancouver’s real estate prices now resemble those of Phoenix 2004 and 2005! As far as I can see Vancouver is going to be hit harder than Phoenix. Which means the middle class in BC is going to be hit harder.

people voted for Justin Trudeau because he said he would help the middle class

If you think people get upset when the Chinese buy property, wait until they sell

So the answer: raise interest rates and tighten lending standards. Paradoxically. These measure will stop the rise in prices and add structural stability which will make the market more attractive to foreign investment.

or you could just wait

#143 Big Dipper on 02.07.16 at 10:56 pm

#114 Marlene from Victoria on 02.07.16 at 7:14 pm

“What you don’t quite seem to get, Garth, is that realtors actually owe a high standard of avoidance of conflict of interest, as well as fiduciary duties to their clients. These kinds of assignment games simply flout that legal duty.”

——————————————

I get the impression from the G&M article that a number, maybe the majority, of these deals are the result of unsolicited offers. The sellers likely have no realtor representation.

The buyers realtors have no fiduciary duties to the sellers.

#144 Ace Goodheart on 02.07.16 at 11:05 pm

Just went hunting around for some good small cap resource companies to purchase as potential take over targets in the oil sands. I don’t know if any of you have actually had a close look at what has happened out there but I suggest that you do, as it is like looking at a city after a hurricane has come through.

It is an absolute brutal bloodbath out there. The red ink is unbelievable. In the oil sands small cap sector, I found company after company, with share prices that have decreased from the $60 to $70 range in 2012, down to penny stock status. I found companies trading at cents on the dollar (price to book value). Companies completely controlled by creditors, with profit margins in the negative hundreds of percents. It is really, really bad out there folks. Canadians are very good at keeping a smiley face when their lives and industries are being destroyed. If this was happening in the States it would be international news. I have never seen anything like this. It is worse than the Great Depression.

#145 Freedom First on 02.07.16 at 11:06 pm

I just finished watching the Super Bowl, and it was super, just like me. I always put my freedom first.

#146 Greatestfools on 02.07.16 at 11:24 pm

Prices in Vancouver have gone up over 400% in about 15 years and “don’t expect a crash”???

Who are the greater fools here? And as Investx has stated, what is different here?

#credibility

#147 Ray Skunk on 02.07.16 at 11:46 pm

#139

Behave.

San Francisco and the Bay area is where the biggest IT companies in the world call home. It’s where innovation happens; where the best and brightest congregate. The cost of living there is ridiculous, but it’s not surprising given the earnings that support it.

Conversely, Vancouver has nothing by way of industry other than RE flipping.

San Fran and Vancouver are both based on the west coast, and that’s where the similarities end.

#148 wtf on 02.08.16 at 12:03 am

Who cares about this assignment stuff? Flipping is not new and now people are protesting in front of a house as the owner wants to make a new one? This all creates jobs and makes the prices go higher for everyone?

Why can we all with it takes to make stocks go up but not houses? If you want to be short houses, rent.

Always a buyer and seller – in the case of the 2.4M house in point grey. A family was raised for over 30 years in the house and now they will settle into retirement – A CANADIAN got the money and who knows who bought, but it should not matter – money has no colour or race…

#149 WUL on 02.08.16 at 12:04 am

Why are people in B.C. still talking about the possibility of an LNG industry on the coast? Is there no internet out there?

#150 jane 24 on 02.08.16 at 12:17 am

Love the photo and the surprised look on the Corgi’s face.

I am going to Crufts the world’s top dog show next month and one of the best features are exhibits of every dog breed that exists. The Corgis are always cute although apparently endangered as a breed as they are no longer fashionable. At the fashion end of must-have dogs, pugs (who can’t breathe) have been replaced by miniature dachshunds (with bad backs). Mutts are best, healthwise.

Anyway I know I am not perfect but please Garth can we have a blog on basic English grammar and start with the different meanings of:

their
there
and they’re

Drives me crazy to see so many adults who think they are all the same word.

#151 Leo Trollstoy on 02.08.16 at 12:39 am

The possibility of hyperinflation in your lifetime is zero. — Garth

gartho is right. genx is wrong. and WalMark is wrong again.

#152 Leo Trollstoy on 02.08.16 at 12:41 am

#139 46 and 2 on 02.07.16 at 10:24 pm

vancouver re prices seem to go up every day. im starting to believe its unstoppable. ok I don’t really believe it’s unstoppable but it’s still a good show

#153 Ronaldo on 02.08.16 at 12:46 am

#139 46 and 2 on 02.07.16 at 10:24 pm

”Regardless of what all of you think, Vancouver real estate is going nowhere but up. Vancouver is the San Francisco of Canadian real estate and like the bay area and operates on rules governed by world wide real estate valuations not local valuations. You can throw all of the numbers around that you want….the fact is that the weaker the canuck buck gets the higher the sales volume in Vancouver.”

Vancouver will suffer the same fate as San Francisco. Just not sure which one will suffer first. They’re both ripe for a major correction. Just a matter of time. And by the way, the CAD is on its way back up.

http://www.marketwatch.com/story/san-francisco-real-estate-looking-like-it-did-before-dotcom-crash-in-2000-2015-11-20

#154 Entrepreneur on 02.08.16 at 1:20 am

When we sold property the realtor discussed with us the right price to sell. So the realtor does have a lot of influence on the price for the seller. Thinking the realtor is in the best interest of the seller is beyond naïve.

#114 Marlene from Victoria…good and I will vote for them in the next election (not Christy Clark), if only possible. Right on and more power to them.

#155 Tiger1960 on 02.08.16 at 1:25 am

The new engineer drives the new train, and after all the years of driving , the engineer forgot about that dead engineer and all the other dead people on that wreck a mistake he made years ago !

#156 Tiger1960 on 02.08.16 at 1:45 am

There could be people thinking I’m like fending thirst !
No way!!!!!
I’m the Tiger , black belt judo!
And I think Mac to Tim Hortons and in between is going to kill you !
I ment freedom first!

#157 Vundo on 02.08.16 at 1:48 am

#139 46 and 2: what, exactly, are you hoping to accomplish here? Asserting that position without offering new evidence will convert exactly zero people who read this blog, even if you somehow turn out to be right.

#158 Vancouver 2011 on 02.08.16 at 1:57 am

I give up…. It’s sad.
I really give up…
For every boomer and realtor who has gotten rich off all of this, there is a family in shambles.

#159 Mark on 02.08.16 at 2:16 am

“why it did not happen in the past? – perhaps because in the past Canada owned about 1000 tones of gold, giving it the means to bail itself out. Nowadays the reserve is about 2 tones and dwindling”

Actually Canada and its provinces have huge gold reserves. But not in the way you might think initially. They have the ability to tax a good chunk of the profits from the world’s production of gold on account of a significant number of worldwide gold firms being Canadian-domiciled. And shareholders of the same.

So let’s imagine for a moment that the goldbugs’ fantasy of $10k/ounce gold comes true. Barrick would likely be a trillion dollar company (figure 10 million ounces/year * $7000/ounce margin ~= $40B/annum after-tax profit @ P/E of 25 ~= $1T market cap). Think that federal/provincial coffers wouldn’t be overflowing with tax revenue from people selling those shares at a profit?

Multiply the tax collected on such by a few firms….and there’d not be much federal or provincial debt in Canada. So the *last* thing that Canadians should be worried about is not having official Bank of Canada gold reserves in such a (unlikely to occur) scenario.

#160 Vanecdotal on 02.08.16 at 2:16 am

#114 Marlene from Victoria

“This is a gift from heaven… Lawyers are smelling blood, be forewarned realtors!!”

This ^ made me smile. :)

#161 Mark on 02.08.16 at 2:48 am

“5 yrs of profit for an asset with probably little or no money out of the landlords pocket. this re market is insane.”

Profit? Carrying, transactional, and opportunity costs swallowed up pretty much everything. The capital would’ve done just as well parked in a 5-year GIC issued 5 years ago.

#162 Nexgen trader on 02.08.16 at 3:20 am

“. If the agent didn’t anticipate a higher sale immediately no one would take on a short term assignment. Been there done that. The agent would literally have the second buyer waiting in his car. Been there done that.”

See my quote of that Globe and Mail article in Friday’s blog post comments, where a Re/Max Realtor confesses to holding 15-20 houses in anticipation of being able to flip them.

So its not risk-free. It probably will be the end of that Realtor’s personal-finances wise with the losses that are piling up on Vancouver/Toronto RE at the moment.”

******Nope, entirely risk free, agents write the closing dates as far out as the sellers can stand so there’s plenty time to flip and flip and flip from one non existent buyer to the final assignee. Don’t even suggest that the agent has to have a real buyer on hand if he just wants to flip. The naive seller “trusts” the realtor to bona fide the buyer, when often there isn’t one. Ever ask to see the buyers DL or passport? Nope. Bottom line, Caveat Emptor.

#163 nubbers on 02.08.16 at 4:12 am

There is something very smelly about this whole assignment clause business. It seems that the Canadian realtor might have morphed into something else.

When I buy property, I would expect a realtor to simply broker a transaction for a fee. However, when I work as a contractor through a contract agent for an end client, the agent makes his or her money on the difference between what the end client pays the agent and what the agent pays me.

Needless to say, even my most trusted contract agents lie to me about their percentage. If it weren’t for the fact that I often have access to the relevant systems (or sneakily ask someone who does), I would be none the wiser.

The point is, that it is in my contract agent’s interest to keep me in the dark as to what he can actually sell my services for. Similarly, if the realtor can hide the real ‘value’ of a property from the seller, then working with another party there is scope to either:
1. benefit from more than one transaction fee (minimal risk), or
2. make money on the difference between 2 transactions (much more risk).

Given the total lack of transparency in Canadian real estate, you might expect dodgy practices to emerge. I have popcorn at the ready to watch the show hinted at by Marlene from Victoria.

#164 Jay Currie on 02.08.16 at 4:28 am

Late to the party…

A simple clause stating that “in the event of any and all assignments of this contract the seller shall be entitled to a fee of $xx, xxx per assignment plus 30 percent of the difference between sale price and assignment price” properly vetted by a lawyer might avoid seller’s remorse. If the putative buyer doesn’t like the clause they can up the offer to get rid of it.

#165 George S on 02.08.16 at 7:03 am

“Andrii on 02.07.16 at 2:40 pm
Red today from Edmonton sun ” NDP plans some green for solar project ” . They expect to invest 5 mil $ to solar panels and get 13,000 MWt annually , enough to power 18,000 homes !”

Assuming 2.5 people per home…..

Took out my calculator: $5M to power 18,000 homes with solar means that with about 1.6 M homes in AB (4.1M people / 2.5 people per home) that by these calculations a solar power development costing $460 Million would power all the homes in Alberta.
And ….. a solar development costing 3.9 Billion Dollars would power all the homes in Canada.
Someone missed a few zeros somewhere.

#166 Place Your Bets on 02.08.16 at 7:35 am

Will YVR politicians actually do something about it??

http://www.theglobeandmail.com/news/investigations/vancouver-area-home-flipping-leads-to-call-for-inquiry/article28641828/

The use of assignment clauses is legal and well-established. Sellers get the money they expect. Buyers are willing participants. What do you want politicians to ‘do’? — Garth

#167 A nobody on 02.08.16 at 8:05 am

Your thoughts Garth on the bloodbath that these financial markets are?

Also , why do you think rates in the U.S will rise when you yourself have said many times that we are fighting global deflationary forces not inflation?

This year the TSX is down less than 2% and the S&P is off 8%. That’s a ‘bloodbath’? If you are a short-term guy, don’t invest. — Garth

#168 Place Your Bets pt 2 on 02.08.16 at 8:29 am

“The use of assignment clauses is legal and well-established. Sellers get the money they expect. Buyers are willing participants. What do you want politicians to ‘do’? — Garth”

Maybe start taxing the hell out of foreign buyers, assignment flips , realtor flips, etc? Actually try something different for a change so your city doesn’t turn into the 2000 dot com crash one day?

Wow Garth, sounds like you’re all for speculation on RE in YVR rather than against it. Guess you own some properties there?

The greatest speculation goes on among the people playing the game and creating the market – local residents. Taxing speculators (who are already heavily taxed) won’t solve that. — Garth

#169 Big Dipper on 02.08.16 at 8:57 am

“The use of assignment clauses is legal and well-established. Sellers get the money they expect. Buyers are willing participants. What do you want politicians to ‘do’? — Garth”

—————————————-

The assignment clause allows what used to be called a “Free Ride”.

Free Rides used to be a trading practice when IPO buyers required no up front cash until settlement and could trade their interest before the settlement date.

Equity market regulators eliminated Free Rides decades ago.

#170 Leo Trollstoy on 02.08.16 at 9:12 am

#160 WalMark on 02.08.16 at 2:48 am

u shud focus on getting corporate hr to answer yor application instead of making investing comparisons. it would be more directly beneficial. gud luck!

#171 Millmech on 02.08.16 at 9:41 am

All being fair I guess,you will probably see assignment contracts that will reimburse the buy for losses if the market goes down between offer and possesion date.That way everybody will be protected and this would be fair as everyone believes in a rising market their getting screwed out of more money right.BTW on every sale and purchase before I signed anything I took the paperwork to my own independent lawyer who went through the whole contract with me and made sure I was happy with it.People need to realize contract law and what they are signing just like with a BRA(I make sure before I sign one my lawyer goes through it to protect my interests.

#172 Julia on 02.08.16 at 9:44 am

“Jingle mail” starting.
http://www.cbc.ca/news/canada/calgary/jingle-mail-alberta-housing-1.3430867

#173 45north on 02.08.16 at 9:54 am

Ace Goodheart: It is an absolute brutal bloodbath out there. The red ink is unbelievable. In the oil sands small cap sector, I found company after company, with share prices that have decreased from the $60 to $70 range in 2012, down to penny stock status. I found companies trading at cents on the dollar (price to book value). Companies completely controlled by creditors, with profit margins in the negative hundreds of percents. It is really, really bad out there folks. Canadians are very good at keeping a smiley face when their lives and industries are being destroyed. If this was happening in the States it would be international news. I have never seen anything like this. It is worse than the Great Depression.

that got my attention

#174 Rational Optimist on 02.08.16 at 10:00 am

Jingle mail in Calgary: http://www.cbc.ca/news/canada/calgary/jingle-mail-alberta-housing-1.3430867

By the way, there are plenty of de facto non-recourse loans in other parts of the country. When someone has no other assets besides the house, what (practical) recourse does the bank have if he decides to mail in his keys?

#175 Unhinged Loon on 02.08.16 at 10:00 am

My prediction of a real estate exchange where property deeds and pre-sale rights are traded like financial securities is becoming a reality.

I’ll give Garth the nod for second.

How do we monetize this?

#176 AB Boxster on 02.08.16 at 10:03 am

Jingle Mail back in Alberta.

#177 Ronaldo on 02.08.16 at 10:04 am

#149 jane 24 on 02.08.16 at 12:17 am

”Drives me crazy to see so many adults who think they are all the same word.”

U my az wl gt usd 2 it Jn, ‘texting’ s hvn a bg efct n th nglsh lngwg.

#178 cramar on 02.08.16 at 10:10 am

We watched the Super Bowl on CBS and you get U.S. commercials. The “Rocket Mortgage” one shocked me. Get your mortgage on your cell phone! The commercial showed every person everywhere in America getting their mortgages instantly via phone and this would boom the economy with everyone also needing to buy furnishings for their homes. Total insanity!

The commercial is getting a lot of flak:

http://www.marketwatch.com/story/super-bowl-ad-or-not-its-pretty-hard-to-get-a-mortgage-in-8-minutes-2016-02-05

The above link also contains the commercial. Blog Dawgs gotta see it. It is insane! “Push button. Get mortgage.”

#179 Move to Sask LOL on 02.08.16 at 10:29 am

You are DELUSIONAL move to Sask and pay 90K for a house that isn’t worth 20K. Believe me I’ve checked this out! No jobs, Doctors move in and out before you even get to know them. Drive at least 60 miles to a town to be able to shop! it’s paradise, if you like to live your life driving and Internet is poor at best! I’m no fan of Toronto or Van either so don’t get me wrong what I’m saying even small town Sask is way over-priced for what you get!

#180 WallOfWorry on 02.08.16 at 10:38 am

Garth….interested in your perspective on this one? It is a Bloomberg article supported by fact (filing with NY State).

http://www.bloomberg.com/news/articles/2016-02-08/geithner-gets-jpmorgan-credit-line-to-invest-with-warburg-pincus

#181 Siva on 02.08.16 at 10:45 am

//Ever ask to see the buyers DL or passport? Nope. Bottom line, Caveat Emptor.// – legal status of the buyer/seller is verified during closing by attorneys. Attorneys will take a photo copy of DL, PR card and/or PPT. If the seller is not a permanent resident/citizen of Canada certain percentage of sales proceeds is withheld for tax purposes by the attorney. This is in place at least since 2012 that I know of.

#182 salonist on 02.08.16 at 10:46 am

assignment clauses

somebody is going to get spanked?

seems the lawyers will be aggressive as there is potential for monies to be had should they prevail

#183 Siva on 02.08.16 at 10:49 am

Note: My above comment was regarding foreign investors fleeing without paying taxes, not RE agents flipping condos.

#184 Smoking Man on 02.08.16 at 10:56 am

It’s now official in forecast terms.

Look at March 9th BOC Rate at o.25%
http://www.tradingeconomics.com/canada/calendar

#185 IHCTD9 on 02.08.16 at 10:59 am

#149 jane 24 on 02.08.16 at 12:17 am

Anyway I know I am not perfect but please Garth can we have a blog on basic English grammar and start with the different meanings of:

their
there
and they’re

Drives me crazy to see so many adults who think they are all the same word.
____________________________________________

Agreed, they’re really out there with their grammar. :)

#186 Siva on 02.08.16 at 11:04 am

//Regardless of what all of you think, Vancouver real estate is going nowhere but up. Vancouver is the San Francisco of Canadian real estate and like the bay area and operates on rules governed by world wide real estate valuations not local valuations. You can throw all of the numbers around that you want….the fact is that the weaker the canuck buck gets the higher the sales volume in Vancouver.”// – I personally know someone (a software engineer) who lost 300,000 in a single San Francisco house in 2008 melt down. Purchsed for $650k in 2006, when the markets crashed he lost his job, couldn’t pay mortgage, couldn’t sell it either as the house was worth only 300k. So the bank kicked his family out of the house. Same house may have recovered all its last value now but whoever was the owner in 2008/09 did lose the house and a whole lot of money. It all comes down to one’s ability to ride out the storm. If not numbers matter to those folks and they are the ones who are in a majority.

#187 IHCTD9 on 02.08.16 at 11:05 am

That graph is bloody scary.

It is high time to GTFO of Van/GTA, if a guy never heard of Vancouver, that chart would be all he needs to see to move along.

I have to wonder what percentage of the Van market is just pure speculation. I’d have to assume most of it for starters.

#188 IHCTD9 on 02.08.16 at 11:17 am

#173 Rational Optimist on 02.08.16 at 10:00 am
Jingle mail in Calgary: http://www.cbc.ca/news/canada/calgary/jingle-mail-alberta-housing-1.3430867

By the way, there are plenty of de facto non-recourse loans in other parts of the country. When someone has no other assets besides the house, what (practical) recourse does the bank have if he decides to mail in his keys?
________________________________________

Garnishment – but seems like a long, long road unless they can take 50+% of what the guy makes.

#189 Julia on 02.08.16 at 11:22 am

“By the way, there are plenty of de facto non-recourse loans in other parts of the country.”

Explain?

“When someone has no other assets besides the house, what (practical) recourse does the bank have if he decides to mail in his keys?”

Petitioning into bankruptcy.

#190 Siva on 02.08.16 at 11:25 am

One thing I noticed watching Love It or List It Vancouver is folks buying million plus fixer upper drive a beat up minivan. Without CMHC I will not be giving a million dollar loan to anyone who drives a beat up minivan.

#191 salonist on 02.08.16 at 11:26 am

#184 IHCTD9

Garth can we have a blog on basic English grammar

can is a function
may is a permission

#192 Pre-Retiree on 02.08.16 at 11:57 am

To the lawyers and knowlegeable people out there, could the seller put a clause in their contract stating that if the house re-sells at a higher price within a certain amount of time (let’s say one month), they could get a cut of the difference between what they received and the final price? Like a seller’s agreement with the real estate agent, but in reverse?

Would they also agree to take less if the property declined in value? — Garth

#193 Snowboid on 02.08.16 at 12:03 pm

Latest from our Harris Bank (BMO) manager, they are offering a new service called CBB (Cross Border Banking).

Previously they had told us we could get a LOC based on our Canadian credit score. Now they are offering mortgages as well.

Looks like we may have to look into a USD account up north – especially if their rates are comparable to the currency exchange we use now.

The news this am was lamenting the big increases in rent down here ($ 1250 for a 3 bdrm house) based on the relatively large increases in RE sale prices over the last few years.

#194 Frank on 02.08.16 at 12:11 pm

I don’t feel bad for sellers, they agreed to a price. Although it’s hard not to see the incentive for agents, the more transactions, the more they make. So I wouldn’t be surprised if they push for closing knowing a flip is possible. Transaction count favours them.

#195 Rick on 02.08.16 at 12:11 pm

Jane 24; I agree. Three friends I know, went on all day about an apostrophe; they were wrong.

#196 common sense on 02.08.16 at 12:14 pm

March rate hike?

I don’t think so…………………………

#197 Ace Goodheart on 02.08.16 at 12:14 pm

This situation is interesting in that it has exposed a “shadow market” where sales contracts for houses are being traded as some form of commercial paper, by related parties. What I mean by that is that the buyer of a Vancouver house, and his or her real estate agent, are actually two related parties in a commercial paper enterprise, neither of whom plan to own or live in the house, and they are purchasing the sales contract for resale. It is like trading house sales contracts as if they were some form of stock, on an unregulated market, where only insiders can participate, and then selling the end unit to the public.

What may be wrong with the situation, is that the question needs to be asked, whether or not the public is now able to purchase houses, without having to purchase an assignment. IE, would a seller’s agent be willing to sell a house directly to a purchaser who planned to live in the house? If the answer is no, then what you have is essentially sellers agents and related third parties acting as underwriters for a house sales contract, and taking a piece of the spread before the sales contract “goes public”. It is very odd, and I expect the legislation and regulations designed for this particular market, were not written with this situation in mind.

#198 Puzni on 02.08.16 at 12:16 pm

” assignment clause ” , than how do you know that your real estate agent had ” your ” best interest when you have hired him? Shocking that this is even legal

#199 Pre-Retiree on 02.08.16 at 12:17 pm

Would they also agree to take less if the property declined in value? — Garth

But nobody in their right minds would re-sell at a loss in a short amount of time after the first sale. The whole precept of fiduciary trust brought forward in previous posts should apply. You expect your RE agent to get the best price out there, not to make you agree to a price, knowing full well he or she can get more in the next 2 weeks after the sale.

#200 Julie K. on 02.08.16 at 12:21 pm

#189 Siva ~

Could it be some people simply do not believe in or prioritize putting $$$ into a depreciating asset and/or do not value vehicles as a prestige buy or social indicator?

Personally, I know many “millionaires” who happily drive sh!t box, older cars by CHOICE.

#201 TurnerNation on 02.08.16 at 12:23 pm

Shut this market down boys. Wake me for RSP deadline.

Say what happened to those propaganda stories about Canadians running off to join “IS”.
Result was yet more restrictions on our travel rights, locations. Problem reaction solution. Script works.

If you are anti govt Twitter might judge you a VeryBadMan and crimp you
I know someone whose anti war Facebook post was removed.
You are free to leave at any time.

We are so free that every Friday and Saturday night millions get wasted and f-ed up out of their minds just to forget we are living in this paradise.

#202 Smoking Man on 02.08.16 at 12:27 pm

How to short Climate Change

http://www.spectator.co.uk/2016/01/im-putting-my-money-where-my-mouth-is-and-betting-against-climate-change/

#203 Retired Boomer WI on 02.08.16 at 12:30 pm

Love stock market days like today!!!

Got my buy price on another quality dividend payer!

Strangely out there, fear is overblown, but oh, so much fun.

BOO!!!!

#204 S.Bby on 02.08.16 at 12:32 pm

Super bowl Rocket mortgage.
Up, up and away!

#205 pinstripe on 02.08.16 at 12:33 pm

The effects of the harpo policies are coming forward.

http://www.cbc.ca/news/canada/calgary/jingle-mail-alberta-housing-1.3430867

#206 Herb on 02.08.16 at 12:35 pm

#191 Pre-Retiree,

you can insert any clause that is not illegal in any contract, as long as the other party agrees and signs it.

#207 Vampire Studies GMST 454 on 02.08.16 at 12:40 pm

164 George – it’s not 13000 megawatts (a measure of power) but 13000 megawatthours (a measure of total energy). It will power those homes for one hour, assuming all other calculations are correct.

#208 bdy sktrn on 02.08.16 at 12:43 pm

#189 Siva on 02.08.16 at 11:25 am
One thing I noticed watching Love It or List It Vancouver is folks buying million plus fixer upper drive a beat up minivan. Without CMHC I will not be giving a million dollar loan to anyone who drives a beat up minivan.
————————
and you are not giving mtgs to anyone, rightfully so.

i drive a ‘beater’ truck, got it for pennies, runs great and takes filthy dogs, tools etc without stress.
am also looking for a fourth 604 property (others are paid off)
don’t judge a book….

shiny new high end cars are usually just a penis extension for those who can’t afford to buy land.

#209 Noel on 02.08.16 at 12:48 pm

I find it ridiculous that you’re defending this practice Garth. Surely you can’t think its ethical for an agent to represent both the seller and the buyer within days of a sale.

#210 joe on 02.08.16 at 12:51 pm

Vitol ,one of the world’s largest oil trader’s predicting low oil price for a decade,will the last person leaving Alberta turn off the light’s.Wow!

#211 A nobody on 02.08.16 at 12:59 pm

am
Your thoughts Garth on the bloodbath that these financial markets are?

Also , why do you think rates in the U.S will rise when you yourself have said many times that we are fighting global deflationary forces not inflation?

This year the TSX is down less than 2% and the S&P is off 8%. That’s a ‘bloodbath’? If you are a short-term guy, don’t invest. — Garth
———-
Fine but what about second part to my question , that is your belief that the U.S will raise? Seems to me that we are fighting very powerful deflationary forces.

#212 conan on 02.08.16 at 1:02 pm

Today’s European markets look nasty. Makes me think the dead cat has bounced and another round of institutional selling will follow shortly.

#213 bdy sktrn on 02.08.16 at 1:06 pm

Fine but what about second part to my question , that is your belief that the U.S will raise?
——————
us 10yr at 1.76

rates falling fast.

#214 bdy sktrn on 02.08.16 at 1:11 pm

#164 George S on 02.08.16 at 7:03 am
“Andrii on 02.07.16 at 2:40 pm
Red today from Edmonton sun ” NDP plans some green for solar project ” . They expect to invest 5 mil $ to solar panels and get 13,000 MWt annually , enough to power 18,000 homes !”
—————————
delusion of greenwashed weak minds.

50k buys just enough solar for ONE home if conditions are favorable.
5M would cover 100 homes, not 18000.

greenies are known for their complete lack of math/science skills.

#215 BS on 02.08.16 at 1:18 pm

Pre-Retiree on 02.08.16 at 12:17 pm

The whole precept of fiduciary trust brought forward in previous posts should apply. You expect your RE agent to get the best price out there, not to make you agree to a price, knowing full well he or she can get more in the next 2 weeks after the sale.

A realtor’s job is not necessarily getting you the highest selling price. Their job is to present an offer acceptable to you. There are many parts to an offer, not just the price.

To get the ‘best price’ you would need to get the property ready (cleaning it up, stage it, repairs, etc), list the place on the MLS, have showings and then take offers. Many offers will be subject to inspection and renegotiating the price after the inspection if it finds deficiencies. You also have to agree with the buyer on a closing date which may not give you enough time if you still need to find place to live. All this takes time, effort and additional risk compared to accepting an offer from someone who walks up to your door with a deposit ready and a flexible or long closing date.

If anyone thinks accepting an unsolicited offer for anything is likely to be the highest offer with respect to price they are naive. It almost never will be. They are taking the easy way of selling, with many benefits, and for that they have to take a lower price. There is no free lunch as they say.

#216 bigM on 02.08.16 at 1:20 pm

@183SM It’s now official in forecast terms.
Look at March 9th BOC Rate at o.25%

So when is the time to get back in ?

#217 Stoopid Idiot on 02.08.16 at 1:21 pm

As bad as the month of January was for the global economy, the truth is that the rest of 2016 promises to be much worse. Layoffs are increasing at a pace that we haven’t seen since the last recession, major retailers are shutting down hundreds of locations, corporate profit margins are plunging, global trade is slowing down dramatically, and several major European banks are in the process of completely imploding. I am about to share some numbers with you that are truly eye-popping. Each one by itself would be reason for concern, but when you put all of the pieces together it creates a picture that is hard to deny. The global economy is in crisis, and this is going to have very serious implications for the financial markets moving forward. U.S. stocks just had their worst January in seven years, and if I am right much worse is still yet to come this year. The following are 22 signs that the global economic turmoil that we have seen so far in 2016 is just the beginning…

http://theeconomiccollapseblog.com/archives/22-signs-that-the-global-economic-turmoil-we-have-seen-so-far-in-2016-is-just-the-beginning

#218 fancy_pants on 02.08.16 at 1:23 pm

Garth is soon becoming an island on his own in terms of ‘normal’ rate expectations. It is evident to most everyone else, the system is past the point of ‘historical means’.

http://www.theglobeandmail.com/report-on-business/economy/higher-rates-not-first-choice-in-tackling-high-debt-levels-boc-official/article28645314/

#219 bdy sktrn on 02.08.16 at 1:25 pm

NASDAQ just a breath away from bear market.
Could ‘achieve’ the bear today.

#220 Dups on 02.08.16 at 1:26 pm

The market laid another egg today. Time to buy more.

#221 dontcallmeshirley on 02.08.16 at 1:26 pm

#188 Julia on 02.08.16 at 11:22 am

“Petitioning into bankruptcy.”

Having a bankruptcy judgement in hand is distant from actually recovering any monies.

An order of seizure and sale requires first that assets be identified and free of joint ownership.

A garnish order can be beaten by simply moving and/or changing employers.

It is the creditors burden to maintain a debtor’s whereabouts.

A successful bankruptcy judgement is merely the first round of a long 15 round match.

#222 bdy sktrn on 02.08.16 at 1:31 pm

sp500 off nearly 15 % from highs.

SMASHES through the previous lows.

more to come, don’t buy yet.

#223 IHCTD9 on 02.08.16 at 1:46 pm

#200 pinstripe on 02.08.16 at 12:33 pm
The effects of the harpo policies are coming forward.

http://www.cbc.ca/news/canada/calgary/jingle-mail-alberta-housing-1.3430867

___________________________________________

Indeed, Harpers’ “World Oil markets shall crash at my Command” policy is really screwing Alberta…

I am waiting for his “Vancouver and GTA housing markets shall crash at my Command” policy so you can blame him for that too – even though he’s not running the show any more…

#224 IHCTD9 on 02.08.16 at 1:51 pm

#190 salonist on 02.08.16 at 11:26 am
#184 IHCTD9

Garth can we have a blog on basic English grammar

can is a function
may is a permission
_______________________________________

Thanks, but you may want to check who said what re 184

#225 robert james on 02.08.16 at 1:51 pm

After the “Globe and Mail ” article this weekend on Vancouver real estate,could the hot topic be ,, ” WOW,, I sold my house for XXX millions ” or,, ” class action ,,you betcha,,here I come “,, in Vancouver in the coming weeks ,LOL?? Thanks for bringing this to our attention,, Marlene !

#226 CJBob on 02.08.16 at 1:52 pm

Your agents interest isn’t the same as your. Let’s take a home worth $510,000 with 5% commission. Your agent takes half which is 2.5%

So if you get an offer for $500,000 the agent’s take is $12,500. If the house is really worth $510,000 they would get an extra $250. So they aren’t going to tell you to hold out for the extra $10,000 they will tell you to sell at $500,000 and it’s a “fair” offer. The don’t want another weeks worth of work for $250.

It’s similar to another important life lesson: Never ask a barber if you need a haircut.

#227 understood by few on 02.08.16 at 1:54 pm

The greatest speculation goes on among the people playing the game and creating the market – local residents. Taxing speculators (who are already heavily taxed) won’t solve that. — Garth

But your average person doesn’t understand that Garth. To them speculators are boogeymen. These mysterious people in dark rooms sitting behind computer screens controlling the market with their greed.

Reality being anyone who participates is a speculator. People buying realty in YVR are putting money at risk in the hopes of making a profit, and they are highly leveraged. That’s a speculator. Same as buying long on margin, except a broker won’t let you leverage yourself like the banks will (brokers don’t have a CMHC safety net).

And still comments about assignments? Don’t want that to happen? Don’t allow that clause in the purchase agreement. Of course that may result in a sale falling through or less offers (at least in the hot YVR market). Or you can negotiate more money for including it. Anyhow, that’s on you and your lawyer. I gotta call BS on Marlene. Just another person on the internet claiming to be a lawyer. If she is a lawyer (doubtful), the only blood she’ll be sucking is that of her greedy clients that feel hard done by for signing a contract that allowed the buyer to sell again before closing. Guarantee you no lawyer will take on such a case on contingency. Retainer and prompt payments then you’ll get a lot of, “We’re making great progress.. oh and I have another invoice for you.”

#228 Capt. Obvious on 02.08.16 at 1:58 pm

Also , why do you think rates in the U.S will rise when you yourself have said many times that we are fighting global deflationary forces not inflation?

I think that they’ll take a wait and see approach to raising further, but currently trends are towards lower unemployment and wage growth, which ultimately become inflationary. The question is not if, but when.

#229 Drake Hayes on 02.08.16 at 2:03 pm

Canada’s 10 year bond is 1.04% today as well as Canada’s 30 year bond is 1.87%.

I remember 10 year Canada bonds broke through 4.00% back in 2005 and 30 year Canada bonds broke through 4.75% the same year.

Garth, when will rates, bond yields rise to these again. It looks like governments and central banks want free money and set now a precedent, perception that this is normal and justified.

#230 Rexx Rock on 02.08.16 at 2:03 pm

Looks great for shorting,TVIX AND UVXY!!I can see another dead cat bounce again very soon.Enjoy the volatility and if your down over 30% in your balanced portfolio just ride it out and it will come back just like the housing market.Wow its a trader’s wet dream,so much oppertunity.
Another topic,housing.Toronto,Vancouver and Victoria just ride the wave.High immigration,lax money laundering laws and foreign investors wanting to park money like crazy.It all adds up to easy money for homeowners.If your mortgage free,it could be freedom 55 or even 45 for some people.Enjoy and just say a big thanks to our BOC and the government.Enjoy your riches homeowners!!

#231 Millmech on 02.08.16 at 2:05 pm

Good to see the market on sale,hopefully stocks keep going on sale for the next decade,just keep loading up every time it goes down.

#232 Debtfree on 02.08.16 at 2:07 pm

@#210 the cheap money was not immediately gobbled up by only the house horny . We had cheap money and high oil prices . The oil companies also borrowed massively ( trillions ) to mine , drill and frack expensive sources . Now they are caught in the vicious circle of diminishing returns and have no choice but to keep pumping to service their debt . Good article in the tyee today but don’t read it , you’ll sleep better .

#233 Sideshow Rob on 02.08.16 at 2:21 pm

#199
“Could it be some people simply do not believe in or prioritize putting $$$ into a depreciating asset and/or do not value vehicles as a prestige buy or social indicator?

Personally, I know many “millionaires” who happily drive sh!t box, older cars by CHOICE.”

///////////

Ain’t that the truth! 1999 Toyota 4 Runner with 300 thousand kms in my driveway. Easily the crappiest vehicle in my neighborhood. It’s well maintained and I expect to get another 2 years out of it. By then Alberta’s vehicle market will really be set for vulching. My neighbors would fall out their chairs if they knew what I was worth. lol

#234 Drake Hayes on 02.08.16 at 2:21 pm

I guess not getting answer means what I suspect is true. Just like a 2008 financial, global crisis is not coming back said by many analysts. It will be worse than that.

Equities and stock markets increased too much from 1982 to 2000 and now we are paying for it.

The same goes for bond yields, interest rates, they fell too far, too fast and we are paying for it too.

#235 Fine Wild Roasted Gonads on 02.08.16 at 2:24 pm

#231 Debtfree on 02.08.16 at 2:07 pm

@#210 the cheap money was not immediately gobbled up by only the house horny . We had cheap money and high oil prices . The oil companies also borrowed massively ( trillions ) to mine , drill and frack expensive sources . Now they are caught in the vicious circle of diminishing returns and have no choice but to keep pumping to service their debt . Good article in the tyee today but don’t read it , you’ll sleep better .

__
Fun article until I read this whopper!!. wow, hope those windmills don’t use up all the wind!

“Diminishing returns also dog forms of renewable energy. You can only build so many wind farms, for example, before those turbines remove more and more of the energy from atmospheric motion and eventually reduce wind speeds.”

#236 Ronaldo on 02.08.16 at 2:29 pm

So we are going to go from ‘realtors’ going door to door to ‘ambulance chasers’ going door to door looking for business. Expect to see lots of flyers in the mailboxes soon. LoL Interesting times ahead.

#237 Big Dipper on 02.08.16 at 2:39 pm

I fail to understand the complaints of the Vancouver house sellers on their re-sold properties.

There is nothing illegal or even unethical about the buyer re-selling a house for more than the seller sold it. Even if the buyer planned it, and knew ahead that it could be sold for more. It’s called business. This is just sellers remorse. I’m a Dipper and even I know that.

Different story if the seller had an agent who was in cahoots with the buyer/agent and defrauded the seller. But that does not seems the be the case here.

How did a craven socialist become so sensible? Are you feeling okay? — Garth

#238 Julia on 02.08.16 at 2:53 pm

# 220 dontcallmeshirley

“Having a bankruptcy judgement in hand is distant from actually recovering any monies.

An order of seizure and sale requires first that assets be identified and free of joint ownership.

A garnish order can be beaten by simply moving and/or changing employers.

It is the creditors burden to maintain a debtor’s whereabouts.

A successful bankruptcy judgement is merely the first round of a long 15 round match.”

Just oppose any discharge, automatic or otherwise and
leave him/her an undischarged bankrupt and unable to borrow for as long as it takes.

#239 acdel on 02.08.16 at 3:41 pm

Anybody else care to speculate on what is going down in the Middle East? Saudi’s want to send troops to Syria, Iran will not stand for that, Russia has a beef with Turkey, the West?? Could make interesting times in the near future. Will oil go up???

#240 fishman on 02.08.16 at 3:43 pm

So somebody here says that they wouldn’t give a million dollar mortg. to somebody driving a beater van. Just so happens I show up as the landlord to my paid off west side properties in a 13 year old small SUV. With coveralls (dirty) in case of small repairs. The older & wealthier one gets the more one seeks anonymity while among the masses. Check out the old Cantonese downtown Pender Street. Unless your in the know, you’d never figure that the old Chinese guy sweeping the sidewalk with food stains on his shirt owns half the damn block.

#241 Rational Optimist on 02.08.16 at 3:47 pm

237 Julia on 02.08.16 at 2:53 pm

“Just oppose any discharge, automatic or otherwise and
leave him/her an undischarged bankrupt and unable to borrow for as long as it takes.”

“Just”? Is it really that easy?

No question a lender might get a judgement resulting from a bankruptcy. What if there are no other assets to seize? What if, as suggested by Don’tcallmeshirlie, the debtor changes jobs- or has lost a job?

I was being flip in saying that there are de facto non-recourse loans in other provinces. I bet that there are a certain number of borrowers who would both mail in keys if their home prices diminished in any significant way, and from whom their lenders who would not be able to recover their debt. No question they will be hooped as far as credit goes for a while, or possibly undischarged from bankruptcy for an extended period. But I bet there are people who have so little that conditions don’t need to change much for this to no longer deter them from default.

#242 Leo Trollstoy on 02.08.16 at 3:55 pm

canadians so predictable. NDP to preside over the collapse of alberta economy and now citizens are throwing them under the bus lol

http://calgaryherald.com/news/politics/ndp-slide-to-third-place-as-premiers-approval-rating-falls-poll

the same will happen to the libs as they will also preside over the collapse of the national economy.

amazing timing for the cpc to hand over alberta and canada and watch the downfall of their respective economies destroy the political parties that inherited them. sucks to be them. cpc just sit back and watch the drama unfold

#243 IHCTD9 on 02.08.16 at 3:59 pm

#236 Big Dipper on 02.08.16 at 2:39 pm

How did a craven socialist become so sensible? Are you feeling okay? — Garth
____________________________________

I have noticed as well – I think I’ve largely agreed with everything BD has posted in the last week!

If this keeps up, Herb and I will begin agreeing that both Harper and Trudeau are great!

#244 Big Dipper on 02.08.16 at 4:01 pm

“How did a craven socialist become so sensible? Are you feeling okay? — Garth”

——————————————-

Just checking if you’re paying attention…

I’m just a pragmatic Social Democrat. You need to check with the Libs for craven socialism.

#245 Tony on 02.08.16 at 4:07 pm

The impervious DOW 16,000 line in the sand holds once again. Looks like another up day tomorrow before Janet speaks Wednesday.

#246 jess on 02.08.16 at 4:27 pm

the “sharing” economy

1099 businesses that don’t “employ people directly”
http://www.latimes.com/business/technology/la-fi-tn-homejoy-shuts-down-20150717-story.html

http://www.fastcompany.com/3048804/fast-feed/homejoy-is-shutting-down-after-one-too-
many-lawsuits-from-workers

“…Many new on-demand services, meanwhile, are opting out of contract work altogether in favor of traditional employment—hoping to provide better customer service, maintain good workers…

=====
crash in frac sand?

http://www.philly.com/inquirer/business/20160206_How_Marcellus_Shale_drilling_keeps_falling_in_Pa_.html

http://www.nationalobserver.com/2016/02/05/news/transcanada-dismissed-whistleblower-then-their-pipeline-blew

With the order, the regulator, the Calgary-based National Energy Board, confirmed that the whistleblower, former TransCanada engineer Evan Vokes, had correctly identified a safety issue that contributed to a rupture within a few hundred metres of a hunting cabin owned by a Cree family in northern Alberta.

#247 Siva on 02.08.16 at 4:34 pm

Buying million dollar, income generating commercial property Vs million dollar house that generates no income are two different things. People could very well be thrifty, drive beat up van while being multi millionaires. I have also read a story of one beggar having a considerable balance in his bank account. Those are all exemptions, not norm. In the same episode I was referring to the couple couldn’t come up with $2000 to cover an unexpected repair. If someone don’t have $2000 for rainy day but buys a million dollar house it will be considered as extreme leverage in many countries.

#248 Danoc86 on 02.08.16 at 4:35 pm

a lot of good value in the markets

preferred shares
reits
emerging markets
high yield bonds

#249 Brazil ex-pat on 02.08.16 at 4:42 pm

#216 Stoopid Idiot on 02.08.16 at 1:21 pm
As bad as the month of January was for the global economy, the truth is that the rest of 2016 promises to be much worse. Layoffs are increasing at a pace that we haven’t seen since the last recession, major retailers are shutting down hundreds of locations, corporate profit margins are plunging, global trade is slowing down dramatically, and several major European banks are in the process of completely imploding. I am about to share some numbers with you that are truly eye-popping. Each one by itself would be reason for concern, but when you put all of the pieces together it creates a picture that is hard to deny. The global economy is in crisis, and this is going to have very serious implications for the financial markets moving forward. U.S. stocks just had their worst January in seven years, and if I am right much worse is still yet to come this year. The following are 22 signs that the global economic turmoil that we have seen so far in 2016 is just the beginning…

http://theeconomiccollapseblog.com/archives/22-signs-that-the-global-economic-turmoil-we-have-seen-so-far-in-2016-is-just-the-beginning

+++++++++++++++++++++++++++++++++++

I’m with you. So why do so many people on this blog thing the USA is booming?

#250 jess on 02.08.16 at 4:44 pm

Barclays shares suspended as markets slump
Turmoil in financial markets in Europe has hit Barclays harder than its UK-focused rivals

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/12146963/Barclays-shares-suspended-as-markets-crash.html

#251 Retired Boomer WI on 02.08.16 at 4:45 pm

Whee!!! The market was on a roller coaster ride today!

Bought four dividend payers for my price or less.

By days end everything was up from those dam, cheap “buy” prices. Even XOM appeared up on the day. (Hey, it’s an oil should be in the tank, right??)

Feel like a realtor in Raincouver… no just playing.

#252 bank-of-canada on 02.08.16 at 4:45 pm

http://globalnews.ca/news/2504112/interest-rates-alone-cant-safeguard-economy-bank-of-canada-says/

When the Bank of Canada is fearing the addictive nature of the people. Watch out

#253 triplenet on 02.08.16 at 4:54 pm

#129 Marlene from Victoria

Go to law school.

#254 Mark on 02.08.16 at 5:06 pm

““Just”? Is it really that easy?”

Nope. Absent an effort to mislead, conceal, deceive, or not co-operate, discharge from bankruptcy is pretty much automatic for the first time around. And even for subsequent occurrences, absent the commission of bankruptcy offenses, discharge is granted in a similar fashion.

And that’s the whole point of bankruptcy — its an orderly resolution of debt through liquidation of assets and a pro-rata distribution of any residues to unsecured creditors. Which is why, as you point out, there is almost no likelihood of recovery for the holder of a deficiency judgement arising from a default on underwater leveraged real estate.

Lenders knew at the outset that this sort of thing would happen. That’s why CMHC insurance has been so popular.

#255 conan on 02.08.16 at 5:12 pm

RE: #238 acdel on 02.08.16 at 3:41 pm

My take:

There are 35 thousand “rebel” soldiers trapped in Aleppo.
A combined force of Russian, Syrian and “Shia” forces have encircled the city.
It is going to be a bloodbath unless they surrender.

USA debating setting up a no-fly zone but the Russians will ignore it.

Turkey and SA debating sending in relief forces but they would be going against the Russians.

Basically, Putin snookered everyone who invested dollars into the “rebel forces”. Putin waited until they were “Pot Committed” and then crushed them.

Talk to most Syrians and they will take Assad over any alternative that has been presented so far. They just want peace.

#256 understood by few on 02.08.16 at 5:14 pm

#252 triplenet

Go to law school.

Or take a first year contract law course. I’d encourage anyone that is crying “fraud” to learn a bit about business law in Canada.

It should really be part of the high school curriculum. As should be basic finances (obviously Career and Personal Planning isn’t cutting it) and some kind of intro logic (propositional calculus anyone?).

The majority of our nation is financially illiterate, legally ignorant and can’t follow a simple line of logic. Dog help us.

#257 Snowboid on 02.08.16 at 5:35 pm

From a Phoenix blog that tracks ‘flips’

6858 N 4th Ave Phoenix: Sold 2005 $ 875,000 Sold 2015 $ 325,000
431 W Wisteria Pl Chandler: Sold 2006 $ 698,969 Sold 2015 $ 342,300

Here’s a prime example of how risky flips can be as the market peaks:

41719 N Golf Crest Rd Anthem:

Sold on 2004-06-18 for $289,000
Sold on 2004-10-05 for $325,000
Sold on 2005-11-07 for $510,000
Sold on 2006-02-27 for $600,000
Sold on 2015-08-14 for $297,000

The homes’ sale price doubled from June 2004 to February 2006, then nine years later was still less than half of that 2006 sale price.

Scary thing is this could happen in Canada too, especially in Vancouver and Toronto.

#258 You're Nuts on 02.08.16 at 5:40 pm

Great comparison Garth.

It’s worth pointing out the difference in the magnitude of the peak vs. the trough.

The US FHFA chart shows that prices increased by 2 to 2.5 times between 2000 and 2007.

In Vancouver, detached houses increased by 2 to 2.5 times from 2000 to 2007, and have nearly quintupled as of today.

Admittedly this is a single product type in a single local market, but as a comparison Apple stock has increased tenfold since 2000. Apple invented a device which revolutionized telecommunications, and sparked a major change in the way that humans interact… and makes billions and billions of dollars. Vancouver is a pretty boring city near some mountains with a lot of people who can’t afford houses (and I guess some kind of industry to employ them all… Starbucks maybe?). I’m not sold.

#259 acdel on 02.08.16 at 5:51 pm

#254 conan
RE: #238 acdel on 02.08.16 at 3:41 pm

My take:

There are 35 thousand “rebel” soldiers trapped in Aleppo.
A combined force of Russian, Syrian and “Shia” forces have encircled the city.
It is going to be a bloodbath unless they surrender.

USA debating setting up a no-fly zone but the Russians will ignore it.

Turkey and SA debating sending in relief forces but they would be going against the Russians.

Basically, Putin snookered everyone who invested dollars into the “rebel forces”. Putin waited until they were “Pot Committed” and then crushed them.

Talk to most Syrians and they will take Assad over any alternative that has been presented so far. They just want peace.
—————————————————————–
I get that; I did not ask this question from an opportunistic side. I think it is fair to say that we are all tired of this and all wish peace. I asked the question because I fear what is going to happen!

#260 Julia on 02.08.16 at 6:25 pm

#240 Rational Optimist
““Just”? Is it really that easy?”

As a major creditor, yes. Attend creditors’ meeting, get appointed as inspector.

#261 Ronaldo on 02.08.16 at 6:27 pm

Fresh off the press. NDP on flipping.

http://www.comoxvalleyrecord.com/national/vancouver/368090821.html

#262 Herb on 02.08.16 at 6:44 pm

#242 IHCTD9,

If this keeps up, Herb and I will begin agreeing that both Harper and Trudeau are great!

The day I declare Harper to be great is the day I lost my mind and kindly ask to be committed. While I was in possession of my faculties I saw nothing in his reign that I would have classified as “great”.

As to Trudeau, unlike some parties on this blog, I will wait to judge him, great or otherwise.

And I have no quarrel with Big Dipper’s apparent conversion on the road to Damascus at #236. I too know the difference between availing oneself of a legitimate arms-length business opportunity and the machinations of real estate “professionals”.

#263 Gregory Saulson on 02.08.16 at 7:49 pm

Now ask Big Dipper when he sells that house for $1,000,000 capital gains and gets only $100,000, $900,000 confiscated in taxes.

This is what socialists like their 90% tax rate for high income earners and those that get big capital gains like hedge fund managers and investors.

Then with the $100,000 left, pay another 23% sales tax or VAT like in Europe.

Socialism is such a greater economic model and that is why China, Cuba, India and many others had no choice and opened to trade and could not stay 100% socialist anymore. More like socialshits.

#264 liquidincalgary on 02.09.16 at 1:25 am

NoName on 02.07.16 at 11:19 am

~~~~~~~~~~~~~~~~~~~~~~~~~

Take China for example, where the strategist sees the oil plunge helping to fuel a boom in SUV sales: “Moreover, the low oil price is encouraging Chinese consumers to buy increasingly larger cars.

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

groovy! does this mean the Lamborghini LM002 is due for a comeback?

#265 SJme on 02.09.16 at 2:45 am

How exactly is an assignment clause transparent if the buyer is not obligated to notify the seller of his reassigninment? And no public record as it’s a private contract. Please enlighten us.

#266 jess on 02.09.16 at 8:05 am

177 cramar on 02.08.16 at 10:10 am

re: Quicken Loans’ Super Bowl ad sparks backlash

false appraisals?
http://mfi-miami.com/2015/02/quicken-loans-contribute-to-blight/

#267 local9999 on 02.10.16 at 2:44 am

I think a lot of people tend to forget that the geography of Vancouver has a lot to do with what is going on. There is not a lot of room left in the city and there will always be a demand to live near the hub. This combined with all of the overseas money has allowed the market to continue to trend up.