Entries from February 2016 ↓

Are we there yet?

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Hopped up on Starbucks and mold, Vancouverites are an excitable bunch. Especially when it comes to the local obsession, real estate. But lately this fetish is off the charts. Makes one think we may be nearing the end game.

Last week a delusional dink paid $4.23 million for a Kitsilano house. But not just any house. A normal one, on a regular lot – only 33 feet wide. Renovated? Sure. Palatial? Nah. Worse, the greedy sellers had asked for only $3.495 million, so the dink threw an extra $735,000 on the pile. More bizarre, the house has a rental apartment in the basement, so some person will end up sharing your $4-million digs while paying the same as if it were a $1 million shack.

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The house, by the way, is not in the best hood. A good one, absolutely. But not where the rich people live. Oh yeah, and it’s made of wood and 104 years old.

From far away – in Maple Ridge (50 km inland, an hour’s drive into the wilderness) – Jerry sends us this report:

“This past summer we noticed a vacant house up for sale down the street from ours.  Out of curiosity we engaged an independent realtor and viewed the property extensively; it was not pretty, and had a long list of required DIY fixes.  The price was listed at $450k, but given the work it needed I told the realtor I would be interested in the $350-400k range.  He refused to even put in an offer unless I was willing to hit at least $400k, so I pulled the plug and walked away (laughing).  It sat on the market all summer and was eventually pulled from the market with no successful bids.

“Well, this same house was relisted this week, with the same realtor. Nothing new has been done to it . . . in fact, the fence is now collapsing (someone DROVE THROUGH IT) and the yard is hideously overgrown.  All of the pictures in the listing are the same ones used last summer.  The asking price now?  $550k!!!!!  Given how the property has actually deteriorated since we last saw it just over 6 months ago, I am not sure how they might hope to justify their 22% ($100k) price hike?

“The saddest/craziest part?  We actually think it might sell this time.  The fever in the YVR market is SO high right now that people are making stupid, highly-emotional moves; we are seeing people around us begging for leads on houses for sale so that they can stay in our area (they sold their house and now need a new one!).  Sellers are delusional and buyers are gullible – put them together and they’ll just end up pulling each other off a cliff.  I just cannot wrap my head around this.  It’s madness, and it’s maddening.  We like to think there is a limited number of Greater Fools out there and the market will have to normalize to the mean at some point . . . but, at least in YVR, there appears to be no end in sight.  The Greater Fools are multiplying!”

Well, down on the US border is the weird little enclave of White Rock – also about 50 km away from the bright lights, bike paths and hookers of downtown YVR. (If you ever go there be prepared for a shock. The signature honking big white rock is actually just painted white, and flaking.)

“We bought a small 50’s era rancher here in 2014,” says Troy. “Every week now I get notes in my mailbox asking me if I want to sell my house. Some are written in colourful felt pens like a 16 year old girl wrote them, and some have such bad grammar, it seems a waste to have them professionally printed.

“Our neighbour sold her house in a 30 hour bidding war for $100k+ over asking.”

So here is what Troy received. Good realtor porn, and bad realtor porn:

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It’s interesting an Angus Reid poll released Friday in a nation where people are more house-horny than any other place on earth showed fear is starting to stalk the streets. Two-thirds of people (65%) said they think the government should intervene in the housing market to increase fairness. That’s code for saying house prices are stupid high and affordability has collapsed.

In fact 56% of respondents who live in cities volunteered that real estate prices are now “unreasonable,” and measures need to be taken to rein them in. And it’s not just citizens of the bubbly places spouting that. “No fewer than 45 per cent in Edmonton, Calgary, Winnipeg, Montreal or Halifax view prices as either high or unreasonably high,” reported the pollster. As you might expect from the media blitz, folks are particularly up in arms these days about assignment clauses and realtor tactics (plus foreigners) since nobody ever wants to accept blame themselves.

Nothing new here, though. This blog’s told you repeatedly how Canadians are trading savings for mortgage debt, retiring with fat mortgages, unable to cope with any increase in monthly bills, and racking up unprecedented levels of household borrowing. The very fact only 7% of us maxed out TFSA contributions, with no public outrage when the government slashed the tax shelter by 50% is all the proof required that real estate’s warped a nation’s collective mind. It’s a one-asset country now. And that commodity is bouncing off the ceiling.

It doesn’t actually matter if interest rates stay put for another year or two, if commodity prices inch back or the new gang in Ottawa becomes more popular than weed. Real estate cannot continue to rise when the average family can’t afford the average home. When two-thirds of people think it’s so out of control that politicians must intervene, and more than half say prices are bananas, the fix is in.

Besides, we all want the Kits guy to get smoked. Am I right?

The Donald

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The most startling thing many Canadians may know about Donald Trump is his wonky antenna.

For two days last autumn traffic in the epicenter of downtown Toronto’s financial core ground to an angry halt when the spire atop the Trump Tower looked like it was swaying in the breeze. “In a big city like this, people have to be responsible for their buildings and their actions,” said a pissed-off mayor.

After 48 hours of relative chaos, the pointy thing was declared safe and life went on. So did the lawsuits. The Donald is being flamed by the tower’s developers, who want out of a deal forcing them to use his name. Meanwhile that company’s battling owners in the hotel-condo edifice suing because their investments went south. For them, the Trump tag carried no magic.

The guy with the large hair and outsized ambition has done similar branding deals around the world. He’s made and lost fortunes. Been a financial star and a bankrupt. Yes, he’s worth a few billion, but usually leaves a debris trail of controversy behind him. In the last few days, mainstream media dudes have been dissecting the entire Trump empire looking for issues, like the Toronto project, because suddenly this man matters.

And he does. So pay attention. The anti-Trudeau may next week take a giant leap towards the White House.

As you know, Trump’s romping towards the Republican nomination. With big wins under his belt in three primaries and caucuses, huge voter turnout and broad demographic support, he’s set up to dominate Super Tuesday’s polling – a mini version of a national vote. Marco Rubio and Ted Cruz are toast. This is the year of the outsider in US politics, and not just for the neocons.

On the left Hillary Clinton’s in a wholly shocking battle with lefty Bernie Sanders, and while she will likely emerge the Democratic nominee, it’ll be as a wounded one. What the November presidential election will bring is eight months away, and unknown. However, markets are starting to factor President Trump into their risk equations.

What does this mean for you?

On the surface, our two countries continue to cleave, despite being glued together. The US economy’s been expanding with robust labour force growth, rising GDP, plumping average wages, falling federal deficit, reduced household debt levels and swelling interest rates. Us? Not so much. Low oil helps America but clobbers Alberta. Our rates are stuck in the ditch and Ottawa’s about to plunge back into red ink. Job creation here sucks and we’ll be lucky to see a 1% economic advance this year. Half the country’s households would be up the creek if they faced an extra $200 monthly bill. And just peruse the moany comments here yesterday about Canadians’ inability to use (or want) a great tax shelter – we’re turning into a passel of governmentaholics.

We chose T2, and a big swing to a left-of-centre, tax-and-spend majority administration with a gender-parity leaning that Trump’s already called silly. Moreover, he’s accused his rival Ted Cruz of being unfit for office because he likes Nickleback and Justin Beiber (hard to see that as a negative), being born of a Canadian mom. Hmm. This may not go well.

But what might President Trump do to the markets – or even the hint of it happening?

It adds uncertainty and will likely spike volatility. China, oil, Brexit, the Fed and corporate earnings are already enough to focus on. Adding a rebel to the Oval Office is just one more thing to consider when assessing risk. Markets hate unpredictability. Trump defines it. As one money manager put it to Bloomberg yesterday: “This political cycle is filled with more drama than usual. The extremity of a Trump or Cruz or Bernie creates the illusion that the winner is going to be more of an extreme character.”

While Prez Donald might goose the fortunes of defence contractors, infrastructure companies and consumer-focused corporations (due to a promised tax cut), he would be toxic for financials (Trump wants to break up the banks) and bad news for Canuckistan. The Republican would not only shut out Canadian companies from bidding on US projects, but stress energy independence (bye-bye AB crude) and even abrogate the North American Free Trade Agreement. The worst news if you build cars in Oshawa or Windsor.

Trump would also likely harden the US border, affecting trade, make it more of a pain for some people (like Muslims) to cross, police snowbirds more carefully (182 days or pay) and exert huge pressure on Ottawa to get back into the fight against ISIS.

Of course, it’s all speculation. The guy could blow up. Hillary could dominate.

Then again, Trump’s appeal to the disenfranchised, the dispirited middle class, the underdogs, the angry, the free-enterprisers and the core conservatives is magnetic, and growing. Disgust with the political class and Wall Street has turned a billionaire with a trophy wife, a collection of skyscrapers and a personal air force into a populist folk hero.

As we’ve learned in Canada, sometimes there’s no accounting for how people vote. Only consequences.