Bubbleless

bubble modified

Let’s review.

In order to buy an average detached house in Vancouver with a super-sized 25% deposit, the average family would have to spend 119.5% of their gross income on carrying costs. Yes, that’s 20% more than a couple earns even before paying income tax, CPP, EI or making a company RRSP contribution. So, it’s likely 140% of what they net.

In Toronto, says RBC, the average SFD house requires 72% of gross income, or about 90% of net. It leaves basically zippo to live on. These numbers, the bank adds, have never been this high. Not even when mortgages cost 20%.

It’s a crisis, says the prime minister. So as a result we now have a federal task force studying what to do about this:

VAN CHART modified

As you have been told here, a majority of buyers of million-dollar-plus houses in the GTA are now taking 30 or 35-year amortizations, in an attempt to keep monthly payments within their strained budgets. Four in ten (and six in ten in YVR) have debt equal to 450% or more of disposable income. These kinds of numbers have never previously existed.

Then there’s this. Mortgage debt in total has been hockey-sticking right along with house prices in Vancouver. Credit continues to expand even as the economy does not. The amount of borrowing is also at an historic level. And just look at the trend…

Residential Mortgages 1990-2015

The reason people are borrowing their brains out is simple. They want to own more than they can afford to buy. The average weekly earnings this year are up just 0.4% from last year, while the inflation rate is 1.5%. In fact, average wages are lower now than they were at the end of 2015 – thanks to a crappy economy, a collapse in oil prices, decline of the dollar and Justin Bieber sucking off too much of the GDP.

This chart is a few years old, but I am sure you get the drift…

WAGES

It probably doesn’t take an economist to tell you this is a recipe for potential disaster. Either people in general have to earn a lot more money, borrow a lot less of it, or quit spending $1.3 million on a house which doubled in value over the past decade of tepid growth and flowering angst. Any kind of economic shock would obviously cause chaos, but the danger extends beyond that. This is a house of cards likely to topple inwards from its own bloated weight. No asset goes up forever. All booms end badly. Every bubble bursts.

Unless, of course, this ain’t no bubble. What if it’s all normal, and God intended for Vancouverites to be enslaved and Torontonians to be gelded? If you believe that, you must be a mortgage broker. Like this honest guy just helping bankrupt people buy properties…

BROKER

The Mortgage Professionals Canada has issued a fat report, authored by chief economist Will Dunning, saying no housing bubble exists in Canada and that it would be “tragic” for Ottawa to try and reduce prices by curtailing demand. “There is a risk that changes in policies of lenders or mortgage insurers that reduce access to mortgages could cause an unnecessary drop in housing demand and housing prices, and bring consequent economic damage,” the brokers say. “At this time, we are hearing calls for more changes to macro-prudential regulation. The proponents want to make mortgage finance more difficult to obtain. That will result in reduced housing activity and, thereby, slow the growth rate for mortgage indebtedness.”

Like that – slowing the rate of indebtedness – is bad thing. Certainly to the people who lend the money it is. But not to the nation or the economy as a whole.

Despite all of the above (which Will well knows), why’s there no bubble in Canada? Even when average families in major markets can no longer afford average homes, and house prices have soared uncontrollably as mortgage rates snaked lower?

Because, say the brokers, a bubble only happens when “expectations of price growth… are self-fulfilling.” In other words, people start buying houses because they think they’ll continue to go up, which breeds higher prices partly because of the higher prices they just paid. To Dunning, careening house values detached from the economy indicate everything is cool. So buzz off. “Housing bubbles do not exist in Canada… Price growth in Canada, even in Vancouver and Toronto, is still consistent with the economic fundamental of interest rates and affordability.”

There is it. The official position of an 11,000-member regulated organization made up of people who sit across the desk from hopeful buyers, whether young, unemployed, without savings, bankrupt, with horrible cash flow or poor credit, and give them money to buy what they cannot afford. Because houses always go up. No risk. Just gains. And, above all, there’s no bubble.

God help us.

204 comments ↓

#1 Paul on 06.29.16 at 7:09 pm

Thank goodness our Government is on top of all the important issues, Go Wynne Go

https://www.thestar.com/news/canada/2016/06/29/ontario-to-introduce-gender-neutral-drivers-licences-health-cards-in-2017.html

#2 manderson on 06.29.16 at 7:10 pm

First!

#3 WalMark of Sadkatoon on 06.29.16 at 7:14 pm

i wonder how this will end. esp in yvr and yyz. bubblicious. prices keep going up. can’t wait for splat

whats better than owning us rental real estate right now? nothing baby!

time for a trip to the uk?

#4 Suede on 06.29.16 at 7:14 pm

That Vancouver SFH price chart is hockey sticking for sure.

But the mortgage debt chart is not. More like an uptrend with no signs of slowing down.

Just sold my place for a bidding war.

Let’s see if the winning bidder flips it in 1 year for 150k more. I bet a yoga mat on it.

#5 Paul on 06.29.16 at 7:16 pm

But ,who in the hell is doing the qualifying and approving these loans?

#6 Olive on 06.29.16 at 7:17 pm

Thanks for post Garth !

#7 crowdedelevatorfartz on 06.29.16 at 7:18 pm

Hmmmm .
Greater Vancouver just had a house “auction” and the seller pulled the house when it didnt even meet the “reserve bid” of 1.7 million……perhaps the days of bidding wars are over? We can only hope….

http://www.google.ca/url?url=http://bc.ctvnews.ca/tear-down-up-for-auction-burnaby-home-for-sale-to-highest-bidder-1.2964138&rct=j&frm=1&q=&esrc=s&sa=U&ved=0ahUKEwjzjbf5rs7NAhVD02MKHXtxDAAQFggZMAE&usg=AFQjCNGnpyjKHqiLEwdrKi8QH4YLRktuvQ

All on the same day that our Preem-ier announces what everyone already knew…..The BC Real Estate industry cant be trusted to self regulate so the govt will appoint a govt regulator. All while she continues to use the top realtor in BC as her campaign fund raising chairman for an election in 11 months…
Smoke and mirrors?

https://www.google.ca/url?url=https://www.thestar.com/business/2016/06/29/bc-to-end-self-regulation-of-the-real-estate-industry.html&rct=j&frm=1&q=&esrc=s&sa=U&ved=0ahUKEwjj2Mijr87NAhVX6mMKHT2jBXEQqQIILzAJ&usg=AFQjCNGpqZG6DpOAavcNr90WnsdKGF5osw

Its all ending Devils Advocate….the good times are over.

#8 RentYVR on 06.29.16 at 7:18 pm

Garth, you really should do a piece on the scam that is rent-to-own. Having spent the better part of the past two months searching for a new rental in downtown YVR, I came across numerous postings online that were trying to entice people to sign up to these terrible agreements.

#9 common sense on 06.29.16 at 7:21 pm

And I wonder what The Mortgage brokers professionals would say if they worked on salary only and not commission?

Oi vey.

#10 Gabe on 06.29.16 at 7:22 pm

‘We are going to end the right of the B.C. real estate sector to self regulate,’ premier says

http://www.cbc.ca/news/canada/british-columbia/christy-clark-real-estate-report-1.3658442

Cautiously optimistic….

#11 No bubbles on 06.29.16 at 7:22 pm

A jumbo loan is one way to buy a high-priced or luxury home. If you have a lower debt-to-income ratio, a higher credit score, and a larger down payment, a jumbo loan may be right for you. The limit on conforming loans is $417,000 in most areas of the country, but jumbo mortgages can exceed these limits.

Jumbo is not enough in Canada, we need dumbo loan here

#12 David McDonald on 06.29.16 at 7:24 pm

Garth’s logic is unassailable but timing is the big issue. Here in Ottawa there is some cooling especially for condos but single family house prices are still climbing. Maybe it’s a knock on effect from rising prices in Toronto.

I watched Obama in the House of Commons this evening. How can somebody talk cogently, remembering names and forgetting nobody, for 45 minutes without notes or a teleprompter? He is amazing.

#13 Andrew Woburn on 06.29.16 at 7:28 pm

“It is difficult to get a man to understand something, when his salary depends upon his not understanding it!”

Upton Sinclair

#14 MF on 06.29.16 at 7:28 pm

#206 Shawn on 06.29.16 at 12:33 pm

Solid response. Thank you.

MF

#15 Vote: The one quick way to cool the GTA housing market: Mayers on 06.29.16 at 7:29 pm

https://www.thestar.com/business/personal_finance/2016/06/29/the-one-quick-way-to-cool-the-gta-housing-market-mayers.html

#16 DILLIGAS on 06.29.16 at 7:32 pm

Some mortgage professionals are the “douche” in fiduciary duty.

#17 paulo on 06.29.16 at 7:34 pm

well so there she blows, admitted buy the “mortgage Professionals” vis a vie please don’t spoil our house of dominoes by making banks more responsible for advancing funds to idiots that have neither the income or realistic ability to maintain or repay there debt obligation save for the fact that the mortgage granted is likely insured / backstopped by you guessed it YOU the tax payer, by way of the CHMC. time to force banks to do
“due diligence” personally i don’t want to fund some other “greater Fools” stupidity Signed Tax Payer

#18 Carlyle on 06.29.16 at 7:34 pm

Rent to Own posters are all over Red Deer AB too I’ve noticed.

How does it work?

#19 jay on 06.29.16 at 7:37 pm

I work in the condo construction industry in Vancouver and you should see the furniture or lack of it in these birdhouse’s ,what a joke.Most of them just have a couple of chair’s and a ragtag bunch of junk in these half million dollar and up boxes.Also ,a lot of them hang their clothes on drying rack’s in their bedroom’s so they don’t use their dryer.Stinky !!! I guess that’s what take’s to live in the B.P.O.E.

#20 Rexx Rock on 06.29.16 at 7:37 pm

Thanks for the info on a good mortgage broker.I’m going to give him a call and see what he can do for me.Cheers Garth!!

#21 Scumop on 06.29.16 at 7:38 pm

“The Mortgage Professionals Canada … no housing bubble … ”

No self interest there. Obviously a completely unbiased source. Which reminds me I’m having a sale on BS. 5kg for $100, delivery extra.

Based on the first chart, and the inevitability of the bubble bursting, potential opportunity. Seems like a smart move might be to buy up apartments at around 1/5th the house price and soak it to the sub-primers when things go poof and they lose the drywall. Assuming they can afford rents. For those that cannot, set up a protection racket, errrr I mean rental system, for good sleeping locations under bridges.

#22 TRON on 06.29.16 at 7:39 pm

But at these mortgage rates you’d be a fool to waste your money on rent.

Besides, parents want to give their kids money today for down payments otherwise they’d have kids who are underachieving.

Prices will never come down.

You’ve obviously never experienced the sunset at English Bay. No other place in the world has sunsets like those.

Why would you want to live in any other city than Vancouver?

Prices have always gone up and will always over the long term.

I’ve heard every single one of those rationalizations and none have anything to do with financial literacy. It’s an emotion driven purchase like buying a fully loaded Benz for a first car. You believe you’ll look good behind the wheel and do for the first 2 weeks. After 6 payments you start feeling the hurt and by year 2 you wonder why you put yourself in this predicament. At year 3 you just want to unload it but it’s dropped so much in value you wished you’d done a closed lease. But hey, you own a Benz right

#23 Nero on 06.29.16 at 7:40 pm

This tinder pile is ripe for a good burn…

Pass me my fiddle.

PS. Garth, you ROCK!

#24 Victoria Real Estate Update on 06.29.16 at 7:40 pm

If you believe there’s no housing bubble in Canada then you probably also believe the Bogeyman is real, along with the Tooth Fairy and Batman.

I’ve posted data several times on this blog in that past that clearly shows that Canada’s housing bubble was the same size as that of the US by 2006.

This data includes overall increase in house prices in Canada and the US, increase in price to income and price to rent ratios, increase in household debt to income ratios, increases in construction as percent of GDP, increase in real estate investment as percent of GDP, etc.

I’ll post this data again soon.

These are the things that define whether or not a housing bubble exists and all of these metrics clearly show that Canada’s housing bubble was as big as the American bubble by 2006.

There were reports put together at around that time that show the same thing.

By 2011, the Economist wrote that Canada’s housing market was more overvalued than the US at its peak. That was 5 years ago and Canada’s bubble has been blown much bigger since then.

The no bubble argument put forward by these mortgage brokers is self-serving and unsubstantiated by facts.

#25 Darren on 06.29.16 at 7:41 pm

So when the man the New York Times once called “the highest-profile short-seller on Wall Street” decided to come out of retirement, we were dying to get in contact with him to see what he was betting against – turns out it’s the Canadian housing market.

https://betterdwelling.com/city/toronto/marc-cohodes-short-canadian-real-estate/

#26 Up $h!tZ creek on 06.29.16 at 7:43 pm

Who in their right mind would lend someone 1.5 million dollars and expect them to pay it back with 120% of their income! Over the next 35 years yet!
This is completely screwed up!

Oh yeah, I forgot the loans are guaranteed by taxpayers through CMHC

#27 Caught on 06.29.16 at 7:46 pm

One would think we’ve got to be close to a top. If home prices fell 40% in the GTA, they would only be back to 2010 levels…

#28 AK on 06.29.16 at 7:47 pm

#5 Paul on 06.29.16 at 7:16 pm
“But ,who in the hell is doing the qualifying and approving these loans?”
====================================
There is no need to qualify. They are all cash transactions in Vacouver and Toronto now…

#29 paulo on 06.29.16 at 7:48 pm

as a add on : there needs to be strict rules concerning down payments, and source of funds, maybe a regulation prohibiting the registration of 2nd 3rd mortgages on a new mortgage origination for a period of 24 months, this would give jimmy at joeys pool with 30% or worse juice something to think about

#30 Chris in Nanaimo on 06.29.16 at 7:49 pm

DELETED

#31 Hana Smits on 06.29.16 at 7:49 pm

Let the Canadian housing take its time and play out. The star article above of letting interest rates rise is too little too late.

They cut interest rates from 10%+ 5 year fixed rate mortgages n 1994 to 1995 to today’s, 2016 2.25% to 2.5% 5 year fixed mortgages. They artificially made interest rates fall over the last 20 years plus to help them lift up the big real estate crash in the 1989 to 1990’s.

They knew that most Canadians would be suckered into a life of debt trap with cheap mortgage rates and other real estate debt.

You think it is by accident that the deep drop in mortgage rates falling by 3 times resulted in 300%+ rise in Canadian real estate prices in many cities in Canada.

They can’t cool off something that is already 90% burned.

#32 dosouth on 06.29.16 at 7:49 pm

Poor BC Real Estate council….no more self babysitting. Start in the right direction so let’s hope they implement the no BRA and same agent representing two clients.

Self regulation gone in BC – Hurrah!

#33 Boomtobust on 06.29.16 at 7:49 pm

Awesome job Garth!Keep up the great info!

#34 mould in YVR on 06.29.16 at 7:51 pm

‘Set the fox to guard the henhouse’: “The official position of an 11,000-member regulated organization made up of people who sit across the desk from hopeful buyers, whether young, unemployed, without savings, bankrupt, with horrible cash flow or poor credit, and give them money to buy what they cannot afford. “

#35 For those about to flop... on 06.29.16 at 7:52 pm

Lead paint at 117
You are being emotional and not thinking straight. If you shut down the blog or comments, how will we learn of every stray thought that passes through Floppy’s mind?

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

Hey Rapunzel, come down from your tower just long enough to check out this chart.

Today’s “stray” thought.

I wonder how the younger generation in Europe are doing?

Turns out that less than 5% in Scandinavia are still living with their parents in the 25/34 year age bracket.

From memory I think some of these countries pay students to go to university which would help get you on your own two feet.

Compare that with countries like Greece and Bulgaria,which have percentages over 50 and you’ve got a wide disparity between nations.

Next time I’ll try to fit in with your agenda…

M42BC

http://imgur.com/M78ie2U

#36 Md on 06.29.16 at 7:54 pm

I was reading the same report from the brokers earlier today. I had to stop half way through because I couldn’t believe how stupid it was. There’s no bubble…my ass.
The only reason people are buying and paying these insane prices is because they believe their house will go up in value. So what’s this will guy smoking?

#37 Mr. Frugal on 06.29.16 at 7:54 pm

#12 David McDonald on 06.29.16 at 7:24 pm
Garth’s logic is unassailable but timing is the big issue. Here in Ottawa there is some cooling especially for condos but single family house prices are still climbing. Maybe it’s a knock on effect from rising prices in Toronto.

I watched Obama in the House of Commons this evening. How can somebody talk cogently, remembering names and forgetting nobody, for 45 minutes without notes or a teleprompter? He is amazing.

—————————————————-

What’s even more amazing is that anyone would spend 45 minutes listening to Obama.

#38 dr Talc on 06.29.16 at 7:54 pm

No one in Toronto who owns a house wants the market to cool, only those who have been priced out of the market.

Anything the ‘government’ does to cool things will only hurt those trying to get into the market because They will be shut out further by more hoops to jump through.
everyone else, the people with actual money, will continue
There will be no ‘correction’
People. it’s over.

#39 Randy Belwood on 06.29.16 at 7:54 pm

https://misfit120.files.wordpress.com/2014/06/alf1.jpg?w=640

#40 rainclouds on 06.29.16 at 7:56 pm

#12 david”I watched Obama in the House of Commons this evening. How can somebody talk cogently, remembering names and forgetting nobody, for 45 minutes without notes or a teleprompter? He is amazing”

In a Chicago bar few yrs back. Started talking to a couple of young lawyers from Arkansas. One of them had met Governor B. Clinton as a youngster some yrs prior. Met him again briefly as President Clinton.He remembered his name without prompting. This lawyer was a dyed in the wool republican but still begrudgingly admitted Clinton was inhuman smart.

Then there is the rest of us……

#41 Keith on 06.29.16 at 8:09 pm

#7 Crowded:

A house and your retirement now cost seven figures + each in Vancouver. Both are currently self regulated industries. How’s that working for the average consumer?

How about agents/financial planners carry seven figures in professional liability insurance subject to government regulation and oversight with the power to impose actual and punitive damages. Watch both those industries clean up their act and start self policing in a huge hurry.

#42 BOOM! on 06.29.16 at 8:14 pm

Bubble..???? I don’t know….

What I DO know is, buying a home, or a stock, after prices have risen, poses more RISK.

Buying RE for your home, or a rental, after the real estate bust in the US made good sense.

We built in 1997 well before the big run up in RE, but we also sold an older existing home in a different locale. That locale had seen prices rising 8% a year for 7 years prior to the sale.

(The 90’s remember… RE 8% but.. stocks did even better for the millennial crowd).

Look at the statistics of where prices have been… decide if you think there is more ‘upside’ or -not. ONE of those decisions will be ultimately correct.

Same advice applies with any other item.

M64WI

#43 Confused Investor on 06.29.16 at 8:16 pm

Biggest bubbles

1)Bond Market, lowest yields in history. Returns never been lower and prices never higher. Cdn Gov 10 yr at 1.12 %. There probably is still some money to be made in the short term before the market blows up.

2) Canadian Real Estate (Van/TO)

3) Stocks, S&P 500 is at a cyclically adjusted P/E of 25. Earning are coming down and market prices are going up. The market is losing momentum and buyers are getting scared.

The only things driving all these markets is cheap money and greed. Everything is in a bubble, fundamentals are terrible in all markets. What does an investor do? I appreciate any thoughts.

My thoughts are to hold larger cash portion then usual (50%) , I see gold as a form of currency. The bargains can’t be too far off. I considering bringing my stock allocation down to 50 %. Btw I’m a value investor looking to maximize long term returns.

Garth, thanks for the blog. I enjoy reading and hearing everyones opinion.

#44 Mark on 06.29.16 at 8:16 pm

A theory that is highly supported by the evidence and facts available is that you have “landlord families”, typically first-generation Canadians who have been disadvantaged by the labour market, who acquire 10, 20, sometimes even 30-40 houses on large amounts of credit. And operate them as rentals. An ordinarily honourable occupation when the labour market has unfortunately excluded them from “normal” jobs for which they might even possess the requisite, but not “Canadian” training.

When house prices were actually rising, and cashflows reasonably positive, it was perfectly possible, with lots of work, to employ an extended family and eke out a good living this way. These “landlord families” did fairly well 1996-2013 on account of rising house prices, and a bit of rental inflation along with lower interest rates. Extravagant weddings, BMW’s in the driveways, college for the kids, etc., was all made possible through positive cashflow and serial refinancings of property.

Then 2013 hit. The Canadian RE market peaked on account of Flaherty cracking down on CMHC subprime. Cashflow went negative on account of physical oversupply and high prices. No longer could many of these landlords sustain their extravagant “family” lifestyles with such paltry rental property returns net of financing expenses.

So what did these people do to keep their bankers happy (ie: not foreclosing), and to create the allusion of rising prices in an environment of price drops and stagnation? Assignment flipping. Non-arms length transactions disguised as arms-length transactions between family members and associates. Anything, and I mean, literally anything to keep the banks believing, if not deluding that the RE market hadn’t peaked in 2013.

So that brings us to 2016. The commoner picks up the newspaper and is told that “YVR prices increase by 30% in one year”, yet when they call their Realtor to take advantage of the windfall that the papers claim exists, they are basically laughed at. Realtors like “Khalid” brag to the Globe and Mail of being intermediaries in “15 to 20 houses, primarily for resale” in this game of fake price discovery. The GVR and GTA RE markets resemble something more akin to the old VSE boiler rooms of yester-year that were notorious for giving Vancouver’s junior mining sector a bad name.

The “landlord families” will probably go through bankruptcy, spend a few years as ex-patriates, and come back with a clean slate as the housing market collapse accelerates. Its the young mortgaged Canadians who will see every last discretionary dime sucked away that will suffer the most. Its the retirees who will have to deal with at least the next decade of ZIRP who will suffer. Its the economy generally that has suffered on account of significant misallocation of capital, with so many of our innovators unable to obtain financing for their ideas on account of Canada’s comatose venture capital sector. Due to the RE bubble no less.

#45 WynneSpendThrift on 06.29.16 at 8:17 pm

Yes, Wynne-bag keeps burning cash:
1) lot’s of TV advertising saying how great their education, road building or climate change plan is, paid for by taxpayers instead of the Liberal Party of Ontario.
2) Ribbon cutting ceremonies shovelling cash to big tech companies that don’t need any wage subsidies.
3) Obfuscation, distracting everyone with a new beer/liquor policy, sex ed curriculum or some other expensive tinkering of public policy.

When will the insanity end???

#46 crowdedelevatorfartz on 06.29.16 at 8:25 pm

@#2 manderson
‘first”
*******************************************

Seriously?
This is your reason for commenting?
Do you post on Facebook that you were “first” on Garths’ Blog comment section?
Brag to the co-workers around the lunchtable?
Tell your InLaws?
Spray paint it in technicolor on an overpass somewhere on the 401? Bathroom stalls par chance?

Inquiring minds want to know!

News Flash.
You weren’t “first” on the comment section and I dare say you come in second on a lot of other situations as well…..
Its a financial advisory blog….not a highschool urination contest.

News to me. — Garth

#47 Lea on 06.29.16 at 8:42 pm

3rd mortgage! Wow.just.wow.

Speaking of crazy, a friend in Vancouver just cashed out his 401(k) and used the proceeds to put a deposit down on a house. To avoid taxes, he gave up his and his family’s green cards. But wait, there’s more, he is British.

Bubbles make people do irrational things. I have a tulip or two I could sell you…

#48 crowdedelevatorfartz on 06.29.16 at 8:44 pm

@#20 Keith
“Watch both those industries clean up their act and start self policing in a huge hurry…..”
*******************************************

Ummmmm. Keith?

What part of Christy Clarks statement “10 years of self regulation in the real estate industry…… epic fail” did you not get?
Christy Clark (whom I loathe with every fibre of my being) has been forced to finally acknowledge that this industry is totally out of hand ( possibly because she’s slumping in the polls and heading into an election next year?)……
All while her main campaign contributors are realtors and housing construction magnates…..
She is “knee jerking’ the voters with what they want to hear. Promising change 11 months before an election. It will take months to choose a regulator ( gee, someone with real estate “experience” no doubt when a lawyer / forensic accountant would do?) This announcement is to try and take the wind out of the sails of the NDP who are gaining “legs” with the voters/buyers fury at what has been happening in Vancouver and BC.
She( and her campaign contributors ) couldnt give a rats ass about the grubby little plebes that want a place to live.
I think the last straw has been the unavailability of rental suites while thousands of homes/condos sit empty or are only available on Airbnb……… Total bullshit.

Either way. I’ll go out on a limb and say …today(11 months before the election).
Christy Clark is toast as Premier.
She may be replaced by her own party before the final vote or the “Bolsheviks” may actually start campaigning and beat her.
Either way she’s political poison and she drank from the Real Estate chalice far, far too long.
If my correct prediction about the Brexit vote 4 months ago is any indication……….you can bank on it.

#49 Jeff Christ on 06.29.16 at 8:44 pm

There ain’t no monorail and there never was.

#50 credentials on 06.29.16 at 8:47 pm

#46 crowdedelevatorfartz

Its a financial advisory blog….not a highschool urination contest.

===

Yeah, and your nick is the proof.

#51 Greg Shoesmith on 06.29.16 at 8:52 pm

So, someone who goes by the handle ‘crowdedelevatorfartz’ has decided some people aren’t taking this blog seriously enough.
Garth, how do you do it? Your commentary is always informative and appreciated, but the response posts can be really funny.
It’s 10:50 here just outside Sydney, Aus. Always enjoy reading this blog as a window into my hometown of Toronto.

#52 Brian on 06.29.16 at 8:54 pm

Welcome to the world of 5 year mortgages at 2.2%. This is the new norm in this low yield world. Now let’s see a chart showing % of income payed to mortgage interest since 1980?

#53 F.dover on 06.29.16 at 8:55 pm

I left GTA at 25 in ’80, bought an excellent $3000. lot with panoramic view in rural N.S., married a teacher and built an $18,000 R-2000 house at 23% interest. Borrowed another $20,000 for a work shop and tools a little later for 14%.

Got permanently out of debt and retired with out income at 35. I build and hoard custom classic cars for fun. Have seven of them indoors. We have spent $100/week on property upgrades, additions and maintenance for 35 years. Place is worth only all of that with no return on labour ever to come.

Wife worked till 55, a decade ago. Took 3.5 years total of deffered salary leaves prior to that and we saw all of North America in a hot rod camper van, twice.

We can only save $1000./month on her pension and my $97./month CPP, because of our annual twice a winter 10-14 day trips to a Jamaica 4 star, and her trip to Cuba with the girls, is getting pricey.

When my OAS kicks in it will actually cover all of our fixed annual expenses by its self

I really, really, really wonder what the long term plan these GTA hold outs have is. Payments till when?

#54 Unemployed on 06.29.16 at 8:58 pm

I’m unemployed and I got a mortgage. No joke. I was unemployed at the time I applied and unemployed at the time it was approved. No other names on the mortgage.

This isn’t just a situation where people are making up fake info. I straight up told them I had no job and they said no problem.

#55 Smoking Man on 06.29.16 at 9:07 pm

Formation of Hockey Stick Vancouver yes
http://www.housepriceindex.ca/default.aspx

Toronto no Hockey Stick yet. That pig has a way to go.
http://www.housepriceindex.ca/default.aspx

#56 Say What? on 06.29.16 at 9:08 pm

“They want to own more than they can afford to buy.” – Garth

—————————————

For most cases, no they don’t. They just want an average detached SFH home. Unfortunately, that SFH now cost a massive amount. Trudeau is not going to do anything to change that. Doesn’t matter how much tax payers money he spends on a task force, or any resultant bureaucracy. Haven’t they wasted enough already on CMHC?

#57 Trojan House on 06.29.16 at 9:08 pm

Surprised nobody has brought up the PK Subban for Shea Weber deal yet.

#58 Entrepreneur on 06.29.16 at 9:15 pm

In Vancouver, Toronto, and other areas looks like our leaders are Not looking out for the people there. Gregory Robertson, Christy Clark did not do their job. Why would anyone vote for either? What a mess! Not good all round for everyone and everything.

Ex-Mark Carney pushed the interest rates down; people around him told him to raise the interest rates. Stephen Poloz is correct in saying raise the interest rate, #15 Vote.

#12 David McDonald…Obama is a great speaker, must have a photographic memory or close to one or trained . I watched his speech that he made on Parliament Hill, nicely done. I will respect the honour and remain silent on my views for now.

In a normal business (big or small) world we would be toast if played this kind of game. Like the old saying “it is not what you know it is who you know.”

#59 Leaders and followers on 06.29.16 at 9:18 pm

MITT ROMNEY: My son emailed me yesterday telling me to run for president.

“The door is closed unless both candidates come up to me and say please save them,” Romney said.

An other great businessman and leader of globalism is ready to serve the world. Hallelujah…

#60 salonist on 06.29.16 at 9:26 pm

“#20 Jackie DiAngelis on 07.12.15 at 3:59 pm
What CMHC should do is sell off their mortgages to private investors worldwide. What is it $600, $700 billion.

These private investors like MICs, mortgage investment companies can charge higher interest rates and we can finally have a decent real estate correction and Canadian taxpayers will not be responsible for all the misguided mortgagees and their lenders.

This way the Bank of Canada’s rate cuts will not”

#61 ShowbiZZa on 06.29.16 at 9:26 pm

Was chilling at the millcroft spa in caledon and decided to head over to the Bellfountain General Store. Garth may not be able to predict interest rates but he makes a hell of a soup and sandwich! We had tequila chicken soup, Montreal brisket, and a grilled chicken on chiabatta and finished it off with an ice cream cone. As a blog dawg for the past 4 years I have learned a lot from this blog but have only posted twice. For all you other blog dawgs may I suggest visiting his store and getting some good eats. Btw – Garth was standing on the porch chatting on his cellphone. I almost yelled out ‘Brexit’ but thought he might ban me from the store.

Thanks for all the free financial education and for those hating – go somewhere else. Cheers.

#62 Mark on 06.29.16 at 9:27 pm

“I’m unemployed and I got a mortgage. No joke. I was unemployed at the time I applied and unemployed at the time it was approved. No other names on the mortgage.”

Did you bring anything else to the table, like equity or a down-payment? Mortgages are made against the strength of the collateral brought to the table, so income/employment isn’t all that relevant.

Where the real problems arise is when lenders lend against properties for which there is little to no equity cushion to fall back upon. The very definition of subprime. And we know that’s been quite rampant in Canada as evidenced by the proliferation of the use of CMHC’s subprime mortgage insurance, a program ordinarily reserved for lower-class Canadians.

#63 waiting on the westcoast on 06.29.16 at 9:29 pm

#55 Smoking Man on 06.29.16 at 9:07 pm says “Formation of Hockey Stick Vancouver yes
http://www.housepriceindex.ca/default.aspx

Toronto no Hockey Stick yet. That pig has a way to go.
http://www.housepriceindex.ca/default.aspx

Did you look at Calgary… classic top. Tons of volume and price not moving.

#64 conan on 06.29.16 at 9:31 pm

RE: #57 Trojan House on 06.29.16 at 9:08 pm

My guess is a falling out of some kind between MTL and their star defense man. This was not common news among the plebes , but obviously known among the insiders. MTL had to ship him out and this the best they could do.

Kind of like the Yashin deal with Ottawa and NYI, except this time there is no public knowledge that a problem exists.

So whatever the problem is, MTL kept it very quiet and that shows class.

#65 waiting on the westcoast on 06.29.16 at 9:32 pm

#44 Mark on 06.29.16 at 8:16 pm says ” ”

Thanks for playing Mark! Really enjoy your theories! ;-)

#66 Charles Ponzi on 06.29.16 at 9:33 pm

No wonder people are pissed off with politicians and bankers. Real estate bubbles do not happen by accident.

Now savers are hurting with low interest rates. When prices eventually crash, savers will be punished with bail-ins (legalised theft).

Iceland had the right idea. Jail the bankers and get rid of corrupt politicians.

#67 meslippery on 06.29.16 at 9:34 pm

Garth you once told me as I moved in and out of stock
the same day, Thats gambling and I said yes it was.
But selling your home on the plan its a bubble then what?
Lots of costs if you plan to buy back? Pick a place to live
for the long run and love it.

#68 ANON on 06.29.16 at 9:36 pm

#5 Paul on 06.29.16 at 7:16 pm

But ,who in the hell is doing the qualifying and approving these loans?

Linda Green, VP Robosigner.

#69 waiting on the westcoast on 06.29.16 at 9:37 pm

#60 Charles Ponzi on 06.29.16 at 9:33 pm says “No wonder people are pissed off with politicians and bankers. Real estate bubbles do not happen by accident.”

While the bubble has been assisted by the politicians, the fact is that people chose to participate. Ultimately, people need to take responsibility for their decisions…

#70 meslippery on 06.29.16 at 9:40 pm

Like maybe today was a good day to buy Empire ? sell on
tomorrows pop??? lets see?

#71 toronto1 on 06.29.16 at 9:41 pm

When the average family income cannot purchase an average family home, its over– just a matter of time.

The Feds are getting involved which means more barriers to entry. The banks will probely be told to start to enforce the lending ratios or be held out of CMHC mortgages.
New CMHC mortgages may need a verification mechanism via the CRA to verify income.

Expect the cap gains tax to rise to 75% from the current 50%.

The feds along with the big 5 banks are in an out right panic, their stress models are showing a major decline with only a tiny blip in the economic picture. These new regulations are there to save and cushion the market.

#72 Scully on 06.29.16 at 9:42 pm

#46 Crowdedelevatorfartz, “it’s a financial blog. Not a high school urination contest.”
Ha ha ha, by some of the comments on here I would beg to differ! Actually many of the Garth Insulters I would call retarded but that’s an insult to the mentally challenged.
For those mystified by how easy it is to get a mortgage look no further than the ad on Garth’s post. There are many, many mortgage brokers ready “assist” your approval. We can only hope for tighter regulations.

#73 Humvee Trickrider on 06.29.16 at 9:43 pm

Why has the government ‘given’ free $500 cheques to each child? Care to guess?

“In order to buy an average detached house in Vancouver with a super-sized 25% deposit, the average family would have to spend 119.5% of their gross income on carrying costs. Yes, that’s 20% more than a couple earns even before paying income tax, CPP, EI or making a company RRSP contribution. So, it’s likely 140% of what they net.”

What this situation doesn’t explain is how well the payday loan shops are doing…how large the credit card bills qre getting and how huge the HELOC market has expandeed.

Obviously no one can live on 140% of income going to housing…so where is the money coming from? There’s another massive bubble expanding in personal debt. The Trudy-Moroneau carpet baggers know this and that’s why they’re giving out $500 per child to kick the protests down the road a few years ( actually just one past the next election) before the children pass the age where the cheques stop coming.

#74 Keith on 06.29.16 at 9:44 pm

#48 Crowded:

1. Christy Clark, Canada’s best retail politician. I hate what she purports to stand for, and she is a toady to the .001 percent, but she won the last election holding a losing hand and John Horgan is not a match

2. B.C. Liberal election war chest = 10 million. Money doesn’t talk, it screams

3. People who own homes in B.C. vote, in much larger numbers than those who don’t. For the folks who have skin in the game, will they vote for someone who promises to make homes affordable? I doubt it.

4. Her own party will replace her? She’s leading in the polls right now, despite her dismal and corrupt record. Teflon Christie will repeat as premier, her party has no internal reason to get rid of her so close to an election, and the left wing has never been more divided. Andrew Weaver will siphon enough votes to split the left, and the Liberals will fear monger enough votes to get a majority.

5. A week is a long time in politics. All of the above can change in a heartbeat.

#75 X on 06.29.16 at 9:45 pm

If people in the financial services industry sold a nice young couple a financial product under these circumstances, the financial services rep would actually have repercussions to giving poor financial service.

In the RE industry there are no repercussions. Which is a shame as most Canadians, have most of their wealth in RE.

Somebody really needs to man up and slap the RE industry with a wake up call. Morneau should publicly call Dunnings paper BS.

Whatever the gov’t does to protect the public from themselves, that is another thing. I am preparing to be underwhelmed with their measures.

A return to max 25 year amortization would be welcome by me. Would hit the more expensive homes, that people with (or without) equity are trading up to, which seems to be the gov’t target/concern.

Off loading some loan responsibility to the lenders also seems the be a reasonable thing to do for the average Joe, as that who is ultimately responsible for the CMHC debts.

Foreign owners, tax them, don’t tax them, I don’t care. If there really is that many foreign owners, they will be the first ones to bail at the slightest sign of a bubble.

Funny in a way, the gov’t (over time, and not the current gov’t) relaxes rules, downpayments, amortization periods, borrow from RRSP etc….and are somewhat concerned that the RE market got out of hand. Like Greenspan who assumed lenders would be prudent lenders, and did not interfere. So familiar. Yet here it is different.

I had a patient the other day who works for Molly Maid, and she is buying an investment property in Bowmanville. Said she had to hold it for 1 year before selling for ‘tax reasons’. She can’t make $30,000 a year. I provide health care, not investment services. None of my business.

Tough politically to make housing more expensive, to make it more affordable, which is what needs to occur. Lay the blame thick on the RE industry. A pre-emptive strike, before the bubble hits, tell everyone it would have been far worse had they not stepped in when they did….implement some needed changes in the RE industry at the same time too. Strict rules on RE advertising, no promises of riches, etc. Agents should be responsible for doing financial analysis of their clients, not just shuffling the responsiblities onto the banks.

It’s gonna pop. Just get one with it already. It’s getting old already.

#76 I love real estate on 06.29.16 at 9:49 pm

Sadly, the greatest tragedy is in the smashed hopes and dreams of those who have been heeding the ill-founded doomerism for nearly a decade now in Canada.

Waiting on the sidelines and in their parents’ basements, they are now frozen out forever. They are now in their late thirties and even Starbucks won’t hire them. They’ll be renting from slumlords until they retire on crappy CPP, no home equity to draw from.

This is the real tragedy. Doomerism, a cult that is now a decade old and completely ignorant of economic and demographic realities, has cost thousands of Canadians their chance at home ownership and security.

People can be so gullible.

The price these poor followers will pay makes me want to cry.

#77 decency on 06.29.16 at 9:53 pm

MITT ROMNEY: My son emailed me yesterday telling me to run for president.

—-

Now The Mortgage Professionals Canada and Hari Sreedharan Associated Broker does not look that bad suddenly.

At least they are happy to make an honest dollar and they are grounded enough for not wanting to run to “lead” the country.

#78 Damifino on 06.29.16 at 9:55 pm

#56 Say What?

“They want to own more than they can afford to buy.” – Garth
—————————————
For most cases, no they don’t. They just want an average detached SFH home. Unfortunately, that SFH now cost a massive amount.
——————————–

So… isn’t that exactly what Garth just said?

#79 context on 06.29.16 at 9:57 pm

I’m unemployed and I got a mortgage.

That tells a lot about average wages.

#80 WalMark of Sadkatoon on 06.29.16 at 10:02 pm

When will the insanity end???

in YVR and YYZ prolly never

but I hope it does

and I hope I’m alive to witness

#81 Be part of Ontario's climate change plan on 06.29.16 at 10:03 pm

I am… bought the most energy efficient pump for the pool.

If I lived in the US, I would get rebate for saving energy.

In Ontario I can watch and pay for the ads to Be part of…

#82 Debt free on 06.29.16 at 10:04 pm

Regarding the explosion on 4201 Hickory Drive in Mississauga yesterday
It is interesting to note what is written in a letter found near the explosion. It may be unrelated, but it shows the story of someone in financial distress. How many people out there feeling the same as in the letter below.
( taken from the Toronto Star)

A man with whom the Star spoke at the police tape line, but who didn’t want to be identified, showed the Star images of handwritten letters he said a friend recovered on the street immediately following the blast.

According to a text message conversation, these pieces of paper were collected by the friend on the street in front of the destroyed house, put in a grocery bag and handed off to police.

“Dear God, as of next week everything will fall apart for us,” begins the note.

It goes on to say: “We owe mortgage, company, house taxes, water bill, gas bill, hydro bill” and “our outside looks like crap, unkept lawn, overgrown plants, bricks on wall cracking.”

The note concludes: “The upstairs bathroom electricity is off, the back bathroom shower has problems and we have No Money to fix or pay anyone.”

The note’s author is unknown. It is also unclear whether it is related to the explosion.

#83 White Crock BC on 06.29.16 at 10:15 pm

Re: Obama

He did use a teleprompter.

Is it just me, or was it embarrassing watching all the MPs with their phones out, taking pics of Obama?

BTW.. best friend and ally? Seriously?

#84 The American on 06.29.16 at 10:17 pm

No expensive committees needed. The answers are so obvious. Three things 1) Provide full transparency to histories surrounding properties, including tax, days on market, previous listings, and access for buyers to review the so-called “multiple offers” the realtors are claiming (trust me, it’s bullshit. Sure, there are some, but none to the degree they are leading the market to believe). 2) Stricter standards on lending, including higher down payments, stop allowing no-doc closings. 3) Obtain better socio-demographic information on the buyers and sellers who are closing, and make this information public as well. DUH! See. Millions saved. I’ll send my bill later.

#85 Smoking Man on 06.29.16 at 10:32 pm

Bubbles, and bubble heads.

For years and years I’ve been telling the basement dwellers to buy in Shlong Branch…

I picked up a shit bungalow for under 400 k not five years ago. 21 Min train ride to Bay and front. Oakville to far away.

I always pushed sfh.

16 Forty First St
Toronto Ontario M8W3N5
Sold:$975,000 List:$899,000 Toronto W06 Long Branch Toronto 11

And that my bitches is tax free. Next spring this puppy will go for 1.1

And when BOC goes to zero rates mid summer 2017 after Trump wins. 2 million.

#86 crowdedelevatorfartz on 06.29.16 at 10:32 pm

@#50 credentials.

Deep down.
Admit it.
You love me.

Haiku over

#87 Smoking Man on 06.29.16 at 10:42 pm

#63 waiting on the westcoast on 06.29.16 at 9:29 pm
#55 Smoking Man on 06.29.16 at 9:07 pm says “Formation of Hockey Stick Vancouver yes
http://www.housepriceindex.ca/default.aspx

Toronto no Hockey Stick yet. That pig has a way to go.
http://www.housepriceindex.ca/default.aspx”

Did you look at Calgary… classic top. Tons of volume and price not moving.
….

Calgary real estate is a derivative of oil. It’s doomed.

Communist tree huggers with rains of power in charge.

They should separate and be the next USA state now. T2 is so stupid he would allow it to please his urban progressive pyhcopatics in Toronto.

Yes my flock we ditched the oil sands. Pat’s on the back to David Suzuki…

#88 PeterfromCalgary on 06.29.16 at 10:50 pm

Relax, Mark Carney will come back from the UK and fix everything.

http://www.bloomberg.com/news/videos/2016-06-28/nigel-farage-why-mark-carney-should-resign

#89 Smoking Man on 06.29.16 at 10:51 pm

What the hell can T2 do to derail the real estate madness in Toronto. Christ that his following. Do you think he’s going to hurt home owners that work for the Toronto Star or CBC.

Ha jokes on you. Become a conservative, build a business or two and give no shit. Put your feet up, eat popcorn and watch the schooled SJW go ape shit.

Dr Smokey
PhD Herdonomics

#90 Herb on 06.29.16 at 10:53 pm

#37 Mr. Frugal,

pity that your frugality does not extend to your ideological pronouncements.

#91 Charles Ponzi on 06.29.16 at 11:02 pm

@#69 waiting on the west coast

Ultimately, people need to take responsibility for their decisions… but it is perfectly fine to bail out bankers who are too big to fail and receive huge bonuses on top of their high salaries.

My point is that people who have been responsible with their finances by saving money and choosing to stay out of the real estate bubble are being punished with low interest rates–and when it comes crashing down it is the savers who will be punished again with bail-ins.

We don’t even hold the media and newspapers responsible fuelling the real estate bubble.

What really pisses me off is that anyone who thinks differently from the herd is mocked and ridiculed as right wing lunatic. We are supposed to blindly believe the newspapers, our politicians and bankers–they are better educated and know what is best for us plebes. We mustn’t disagree with our superiors!

#92 Joe2.0 on 06.29.16 at 11:04 pm

Interest rates aren’t going anywhere significantly for quite a while in Canada

The more property values sky rocket the more the banks books expand with their holdings or investments (loans)
Then they leverage that(derivatives)

It’s the golden rule”those who print the gold rule”
It’s the ultimate Ponzi.
Rinse & repeat.

#93 Realtor and mortgage brokers are deluded on 06.29.16 at 11:05 pm

Realtor and mortgage brokers sound demented and deluded to reality. The Harper government allowed these high school dropouts the keys to a trillion dollar vault where they can manipulate and lend to anyone regardless of their ability to service or repay back the mortgage. No banks would risk a penny in this environment. Mortgage brokers and realtors along with the Harper government should be charged with financial crimes and jailed. The amount of out right fraud would be stunning if the books were opened.

#94 BOOM! on 06.29.16 at 11:12 pm

#43 Confused Investor

I would think so. You don’t say how old you are, or how long you have been in the market.

60% Equities 40% Fixed Income (I use REITS & “preferred” as well as Bonds) in my 40% mix. 0-5% cash.

Forget gold that pays NADA.

Since this IS a financial blog, search the earlier posts.

If you “know” where interest rates, the business cycle, or RE is going your crystal ball works better than mine.

As for ‘me’ I’ll just keep doing what I have been doing, it seems to deliver a reasonable & consistent return, without regard to all the DRAMA in the financial media.

#95 Smoking Man on 06.29.16 at 11:24 pm

How my number one son reacts to his third wave feminists wife. Personally I would murder her.

His face book post.

“Life is like a flower in bloom. We would die without sun, with out rain we can’t grow. ”

Two out of three kids ain’t bad.

#96 Chris on 06.29.16 at 11:26 pm

All of this is due to low interest rate and more influx of people. It is hitting the affordability ceiling now. God knows who can still afford tjese houses.

#97 mortgagebroker on 06.29.16 at 11:27 pm

hey mortgage brokers independent of banks, what is the deal with bashing the brokers? If it wasn’t for brokers td and rbc etc would have zero competition. and borrowers would be paying 4-5% interest rates now !!! Don’t hate the players, hate the game!!!! based on low interest rates that will never go up…… sorry Garth, we are in a Japanese economy, demographics…. canada is aging…….People can afford to pay off their principal residence in 25-35 years on 2.5-3.5 interest rates…… Asset prices do go up and down true…. but alot of principal is getting paid off on these mortgages… People are right brained with real estate,,,, they are emotionally involved in real estate…. house horniness…. It is real life monopoly, they want to buy buy and hold… In monopoly they sell only when forced……… I personally think houses are at peak values now and the bargains are gone!!!! However stock prices are high too……. Where is the value for the bargain hunter these days?????

#98 Mark on 06.29.16 at 11:33 pm

“Calgary real estate is a derivative of oil. It’s doomed. “

Actually you’d be surprised at just how little oil has to do with Calgary RE. There aren’t all that many oil and gas industry workers in Calgary, and certainly no oil or gas fields in the nearby vicinity. Calgary benefitted primarily from a speculative bubble in RE, and the low tax environment that oil and gas-based prosperity brang. With the loss of both (Calgary’s RE prices started declining roughly a year before the CMHC-induced 2013 peak in the rest of Canada), of course its a long ways down. But even without the collapse in oil prices, Calgary was well on its way to suffering significant declines.

Houston Texas is a similar analogue, yet its RE prices are generally half that of Calgary’s, even adjusted for currency. So is oil really that influential? I find that hard to believe.

Unfortunately in that orgy of over-reliance on the RE industry for economic development in Calgary, a lot of good wholesome businesses, particularly in the high tech sector, were chased away. Secretaries were demanding (and often receiving) pay packages greater than that of engineers. Hardly a sustainable state of affairs if you’re trying to run a business.

#99 S.Bby on 06.29.16 at 11:36 pm

I drive past 5 empty houses on my way to work each day. Just sayin. They are not hard to spot.

#100 Mark on 06.29.16 at 11:37 pm

“Expect the cap gains tax to rise to 75% from the current 50%.”

In a market desperately in need of investment in equity (ie: a lowered cost of capital) to revive the economy? I highly doubt they would tinker with the inclusion rate. Your blog comment is the first time I’ve heard of such a preposterous idea. It certainly has no acknowledged place in the public discourse.

Personally, on the topic of banks, I expect them to be ‘punished’ by means of quid pro quos involving insolvent credit unions (heavily involved in uninsured subprime and a disaster waiting to happen, particularly on the west coast), and perhaps by a special bank surtax to “help” with the cost of the required CMHC bailouts. But I hardly think that the Feds would risk systemic crisis by being belligerent towards the banks when they go to make CMHC subprime mortgage insurance claims unless the circumstances are blatantly fraudulent.

#101 rainclouds on 06.29.16 at 11:42 pm

#84 American

All great suggestions.

The problem? Lack of political courage.

No doubt the Politicians here were hoping Yellen raising interest rates would keep them blameless. Now that is off the table, somebody has to lead….uh oh Houston, we got a huge problem!

#102 Say What? on 06.29.16 at 11:43 pm

#78 Damifino on 06.29.16 at 9:55 pm

I believe there is an implication in the words “more than they can afford” that is not valid in most cases. They are not reaching for something that is ostentatious or ultra luxurious. They just want housing that has been the norm for more than a generation.

#103 Winston Smith on 06.29.16 at 11:46 pm

Responsible lending practices would have prevented the real estate bubble from forming in the first place.

Politicians should have been held accountable for not properly regulating banks and allowing irresponsible lending practices to continue unchecked for years.

Central Bankers should be held accountable for destabilising the entire global economy with ultra low interest rates and easy credit.

The fact that the political elite and bankers have benefitted from the current system suggests to me that the destruction of the economy was intentional.

Sadly, everyone but the bankers will be blamed when the economy collapses–savers will be blamed for not spending more than they earn, home buyers will be blamed for borrowing too much money at low interest rates and the Brits will be blamed for voting in favour of Brexit.

#104 Mark on 06.29.16 at 11:47 pm

“but alot of principal is getting paid off on these mortgages… ”

And then extracted as HELOCs, or refinanced to cover the credit cards. Because that’s what the data shows us — that personal indebtedness continues to rise. Instead of using the low rate environment to retire debt, Canadians have done quite the opposite.

“This is the real tragedy. Doomerism, a cult that is now a decade old and completely ignorant of economic and demographic realities, has cost thousands of Canadians their chance at home ownership and security.”

A “doomer” (as you would term some of us) who took their down-payment funds in Toronto in 1990, and instead of buying at the peak of the then-bubble (much smaller statistically speaking than today’s bubble), merely bought the TSE/TSX ETF (at the time, the TIPS), by the end of the decade, with re-invested dividends, had enough of an investment account to buy a house entirely in cash. Without putting even a dime extra into the account.

So much for doomerism. Smart ‘doomers’ by the end of the decade had a paid-off house in their brokerage account. Those who bought were sweating bullets and paying double digit interest rates for much of the 1990s, and only paid a minimal chunk of their mortgage down.

I know whom I’d rather be. But just here to present some facts last time we had a RE bubble in Toronto.

#105 Nobody on 06.29.16 at 11:50 pm

To the above:
The reason people make loans of 120% of net salary – is that they don’t. People making average salary don’t buy $2M homes.

It’s like saying the reason that Bombardier is going bust is that it would cost the average Canadian 1000 years of salary to buy a Lear jet. People on average salaries don’t buy Lear jets and people on average salaries don’t buy SFH in Vancouver.

Why do they take out 35year mortgages? Because anyone who managed to get $2-3M to pay cash can invest it to earn more than the 2.1% they are paying to the bank.

#106 Silent Observer on 06.30.16 at 12:04 am

Man oh man people. Even in the worst case scenario, how much of a drop could a bubble burst inflict on YVR. Even GT over the 8 years of this blog has said it would not be a major drop. So what, 20%? 30%? That would only be a loss of a 3 year gain. Our stocks see that often and we’re told not to panic.
I’m not a home owner, I’m a renter. And as much as I’d like to see affordable housing again in my hometown, it’s never going to happen in my lifetime in YVR. I’ve been saying that for years on this blog and I’ll say it again, next year at this time, YVR prices will be up.

#107 45north on 06.30.16 at 12:11 am

Will Dunning: I’m a huge fan of “evidence-based” decision making. But, sometimes we don’t have good data and our only evidence is opinions. This is one of those situations.

http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2016/06/hot-markets-lets-keep-cool-heads.html

we don’t have good data because the real estate boards hide it. We don’t know days-on-market, selling price, selling history.

It’s a crisis, says the prime minister.

so what to do? tighten CMHC regulations? by region? certain rules for Vancouver, other rules for Saskatoon? No, think only of Vancouver. What do you do to stabilize housing in Vancouver? Tighten CMHC regulations. Raise interest rates.

#108 conan on 06.30.16 at 12:38 am

RE: #98 Mark on 06.29.16 at 11:33 pm

“Secretaries were demanding (and often receiving) pay packages greater than that of engineers.”

I have seen this happen before. It depends on the secretary and it depends on the engineer. In this case, the secretary was awesome at closing deals and soon became partner. The engineer was still learning how to groom themselves.

So, yeah ….it happens.

#109 BS on 06.30.16 at 12:42 am

#12 David McDonald on 06.29.16 at 7:24 pm

…I watched Obama in the House of Commons this evening. How can somebody talk cogently, remembering names and forgetting nobody, for 45 minutes without notes or a teleprompter? He is amazing.

You have a low threshold for amazing. Check this out. Bumbling fool is more like it.

“Barack Obama is completely helpless and hopeless when his teleprompter breaks”

https://www.youtube.com/watch?v=RczG-uTBplc

#110 YVR update on 06.30.16 at 12:43 am

Great post! Over 1000 words about real estate but NO mention of foreign money or rampant temporary inmigration into the city.

#111 Ponzius Pilatus on 06.30.16 at 12:44 am

#12
I watched Obama in the House of Commons this evening. How can somebody talk cogently, remembering names and forgetting nobody, for 45 minutes without notes or a teleprompter? He is amazing.
———-
Rain man, for sure.

#112 Wussmode on 06.30.16 at 12:53 am

Garth, keep up the good work with this blog. You do us all a great service, but you should give praise to us doomers since we hit the nail on the head. No rate increases in the US for 2016 as expected, gold continues to climb, real estate will pump until there’s a catalyst to let the air out.

#113 BS on 06.30.16 at 12:57 am

#97 mortgagebroker on 06.29.16 at 11:27 pm
hey mortgage brokers independent of banks, what is the deal with bashing the brokers? If it wasn’t for brokers td and rbc etc would have zero competition. and borrowers would be paying 4-5% interest rates now !!! Don’t hate the players, hate the game!!!! based on low interest rates that will never go up…… sorry Garth, we are in a Japanese economy, demographics…. canada is aging…….People can afford to pay off their principal residence in 25-35 years on 2.5-3.5 interest rates…… Asset prices do go up and down true…. but alot of principal is getting paid off on these mortgages… People are right brained with real estate,,,, they are emotionally involved in real estate…. house horniness…. It is real life monopoly, they want to buy buy and hold… In monopoly they sell only when forced……… I personally think houses are at peak values now and the bargains are gone!!!! However stock prices are high too……. Where is the value for the bargain hunter these days?????

Is there a special english class designed just for realtors and mortgage brokers? It is like they write in a different language.

#114 Vanreal on 06.30.16 at 1:01 am

What amazes me is that people think that a first time buyer should be able to afford a sfh in the city of Vancouver. Are you people crazy? They’re are lots of affordable condos and even some houses in the Vancouver area but not in the city. Our dingbat mayor needs to listen to Bob Rennie and give up on this idea of making sfh affordable in the city.

#115 Tony on 06.30.16 at 1:15 am

Re: #18 Carlyle on 06.29.16 at 7:34 pm

All of Alberta housing is in a free fall. No one in that province is stupid enough to rent to own.

#116 Greg on 06.30.16 at 1:19 am

Alberta insolvency rate up 52.9% ROC up 5%

http://www.cbc.ca/news/canada/calgary/insolvency-rates-bankruptcies-proposals-spike-alberta-1.3658211

#117 millenial1982 on 06.30.16 at 1:29 am

Smokey…did you refer to this a couple days sgo? From a corporate point of view this move makes little sense, no?? Doesn’t seem to pass the smell test….

http://business.financialpost.com/fp-tech-desk/facebook-inc-revamping-news-feed-to-prioritize-posts-from-friends-over-media-brand-pages?__lsa=3d02-b59a

#118 Okanagan Man on 06.30.16 at 1:40 am

Hey VREU, Victoria market is on fire !

No longer in denial? i guess the major correction that you said could begin in April also never happened.

Vancouver likely a bubble, but Victoria and Kelowna, over priced, hot markets, yes…..a bubble, don’t think so.

#119 David on 06.30.16 at 1:45 am

I’m just wild about Hari. Thank you Peggy Lee for that inspirational torch song!
Hari forgot to include individuals on life support and people serving life sentences in correctional facilities on his business card.
My question is where is this grey market mortgage money coming from and why are the normal mortgage underwriting standards so invisible?

#120 Gentle MeFerhson on 06.30.16 at 2:29 am

How shameful of our Parliamentarians to applaud Barack Obama, an enemy of Canada, in the House of Commons yesterday. Obama has cynically caused the unemployment of thousands of Canadian workers by using his bully pulpit to bolster his own legacy, and admitted shoving Canada’s face in the toilet because he could and because he was politically inclined to do so. What an ass he has been to Canada during every day of his mandate…and what asses all braying asses were to applaud that stinking whore…shame on you all for the barking seals you’ve been.

“Four more years” you cried….parroting Democrat sycophants in the US? Obama has done nothing for Canada and it’s highly debatable that his rape of the US Constitution will stand after this goofball is shown the door. Good riddance to bad rubbish.

Shocking behavior for Canadians of any stripe…pitiful.

#121 Femdom Fist on 06.30.16 at 2:43 am

I don’t think ‘brang’ is a word, even in Calgary.

#122 It will correct... on 06.30.16 at 2:53 am

Interest rate increase arguement gone…at least you admit that.

A few more months of 0 or negative GDP/Job reports, ongoing Brexit/Trump rebel against the elites uncertainty ought to give pause not only to the global economy but to the RE obssesed of Canada.

All we need is another economic shock and watch a depression unfold with the state of the average indebted Cdn. consumer.

#123 Herb on 06.30.16 at 6:33 am

We have people commenting on this site who don’t know about teleprompters, even when they have been in plain sight on TV practically forever. And Farage tells the EU that Britain wants to be free to pursue “global ambitions”!

Ignorance truly is the life blood of politics. Throw in self-interest and good will to none, and we are where we are.

#124 Scott Cordier on 06.30.16 at 6:47 am

To Mortgagebroker

Well they are going to have to pay, pay, pay every year, year, year. What this means is hydro, water, gas, repairs and maintenance, H.S.T. on all this stuff, home insurance, property taxes etc.

Easily after say 30 to 35 years a mortgage is paid off their $20,000 a year in 2016, today costing in all these taxes, expenses, insurance etc. will be $110,000 to $120,000 a year.

Remember, they have to have no mortgage, credit cards, car loans and other debts too.

By the way, $120,000 is after tax money needed to pay these annual taxes, expenses, insurance etc. You would need anywhere from $170,000 to $200,000 in annual income to just pay for all this stuff.

This means you still need to buy food, pay for other expenses like car insurance, car repairs and maintenance, clothing, medical, maybe transportation of other sorts etc.

Most people will be in debt when they retire like nowadays so what are they going to need, $350,000, $400,000, $450,000 etc. a year just to keep this stuff.

Besides all the accumulated annual increases in property taxes, home insurance, utilities, repairs and maintenance etc., multiple forms of new taxes and duplicate taxes come up every decade or so with a vengeance. This will wipe out people even more.

This if they can last the 30, 35 years, U.S. style foreclosures was never in any ones plans in 2008 and beyond for tens of millions of Americans but it happened.

Good luck too all living on borrowed money!

#125 Smoking Man on 06.30.16 at 6:51 am

Reality
https://youtu.be/HM7bZx5av3A

Fantasy
https://www.youtube.com/watch?v=VdFDH8RBH9I

#126 SueP on 06.30.16 at 6:55 am

I thought Obama’s speech was very good. He has great delivery of the material. I saw the promoter on the CNBC coverage. I couldn’t imagine anyone giving that length of speech without you one.

#127 nubbers on 06.30.16 at 7:10 am

I guess brokers make money when you over extend yourself to buy a house, and then again when you default and someone else buys the same house from the bank?

It is never going to be in the broker’s interest to tell you it is a bad time to buy.

#128 maxx on 06.30.16 at 7:44 am

Hobble CMHC immediately.
Flush this bloated, archaic and useless org as it’s no longer helping people acquire homes nearly as much as it is enabling banks to freeload on debt slaves.
This is continuously contributing to an already debt-damaged economy.

#129 maxx on 06.30.16 at 7:59 am

Overheard the most amazing comment in a condo building yesterday:

To a contractor: “Can you finish my unit today? I’ve been waiting a long time now.”
Again to the contractor: “….with all these special assessments, when you leave this place, you’re rich.”

Yikes.

#130 CJBob on 06.30.16 at 8:11 am

#96 Chris on 06.29.16 at 11:26 pm
All of this is due to low interest rate and more influx of people.
_____________________________
The demand side of things doesn’t get enough attention. I don’t go into Toronto often but I was there on Monday night. I’ve lived in the GTA for 50 years and it’s incredible to see how many more people there are on the streets, roads, subways. People keep moving here and they have to live somewhere. Increased demand.

#131 Exilled on 06.30.16 at 8:22 am

Sir Garth:

Max Keiser, is in Toronto!!! Did you meet him???
He is doing a special on the housing bubble here.
If you want to see his report on this, go to ” rt/news” then to ” shows ” then click on ” Max Kieser ” episode ” 934″ . If you don’t want to share this its alright! But you two are on the same page, on this!

Max is even more irrelevant than this blog. Quite an accomplishment. — Garth

#132 crowdedelevatorfartz on 06.30.16 at 8:32 am

@#74 Keith

Agreed.

I particularly like the recent quotation from an Italian judge involved in a corruption trial.

“Some Politicians were always corrupt. Now they’ve just stopped being ashamed of it.”

Preem-ier Clark has no shame.

#133 Balmuto on 06.30.16 at 8:50 am

Brexit = OXI. The machine wins again. Thanks for playing.

http://www.bloomberg.com/news/articles/2016-06-30/boris-johnson-says-he-won-t-run-for-u-k-tory-leadership

#134 young & foolish on 06.30.16 at 8:50 am

Debt, debt, and more debt …. there is no going back.

#135 Ace Goodheart on 06.30.16 at 8:56 am

RE: “In Toronto, says RBC, the average SFD house requires 72% of gross income, or about 90% of net. It leaves basically zippo to live on. These numbers, the bank adds, have never been this high. Not even when mortgages cost 20%.”

This assumes that everyone purchasing a house in Toronto, is doing so with the minimum required down payment and mortgaging the rest.

In reality this is just not true. In a high demand marketplace like Toronto, people come into the game for the most part buying condos. Some smart people buy cheap detached houses in “not so prime” neighbourhoods (there are still many available). People build their equity and then purchase a house when they can make a larger down payment and carry the mortgage.

That is how larger urban centres tend to work, real estate wise. A detached house is a “step up” purchase. First time buyers, using 25% down and huge mortgages, should not be buying detached houses in Toronto. If they do, then I wish them luck (because they’ll need it). Yes they will be subjected to all sorts of forces beyond their control and likely a large number of them will not make it. This is called “biting off more than you can chew”.

Be smart, start with a condo, or buy a house within commuting distance (check out the Go train schedule, it is amazing how many places you can purchase a house, for very little, hop on a Go train in the morning and be downtown in less than an hour). When you build equity and decide you want to move into the inner city, then buy a house in Toronto.

It assumes nothing of the sort. The index is a measure of market affordability. Of course every situation is unique, but this gives us a standardized snapshot of whether the average family on the average family income can afford the average detached house. In these markets they cannot. — Garth

#136 Wild albertan gonads on 06.30.16 at 8:57 am

#98 Mark on 06.29.16 at 11:33 pm
“Calgary real estate is a derivative of oil. It’s doomed. “

Actually you’d be surprised at just how little oil has to do with Calgary RE. There aren’t all that many oil and gas industry workers in Calgary, and certainly no oil or gas fields in the nearby vicinity. Calgary benefitted primarily from a speculative bubble in RE, and the low tax environment that oil and gas-based prosperity brang. With the loss of both (Calgary’s RE prices started declining roughly a year before the CMHC-induced 2013 peak in the rest of Canada), of course its a long ways down. But even without the collapse in oil prices, Calgary was well on its way to suffering significant declines.

Houston Texas is a similar analogue, yet its RE prices are generally half that of Calgary’s, even adjusted for currency. So is oil really that influential? I find that hard to believe.

Unfortunately in that orgy of over-reliance on the RE industry for economic development in Calgary, a lot of good wholesome businesses, particularly in the high tech sector, were chased away. Secretaries were demanding (and often receiving) pay packages greater than that of engineers. Hardly a sustainable state of affairs if you’re trying to run a business


Where the hell do you come up with this stuff. Speaking here as an engineer in Calgary. Complete bullocks. Want to buy my house?

#137 young & foolish on 06.30.16 at 9:02 am

Governments are running economies today …. the part about free markets finding honest valuations …. it’s over!

You continue to embarrass yourself. New height today. — Garth

#138 John on 06.30.16 at 9:36 am

How the hell is that only 450% of disposable income if families with 80k disposable, have 600k in mortgage? These days I see people who pay 50-65% of their disposable income for the mortgage, and eat God knows what. And there are A LOT of them. It’s ridiculous…

#139 young & foolish on 06.30.16 at 9:42 am

We are not going back to the “golden age” of yesteryear ….

It wasn’t that great, kid. — Garth

#140 Ace Goodheart on 06.30.16 at 9:43 am

RE: It assumes nothing of the sort. The index is a measure of market affordability. Of course every situation is unique, but this gives us a standardized snapshot of whether the average family on the average family income can afford the average detached house. In these markets they cannot. — Garth

– the average family is an abstract concept that doesn’t exist anywhere other than on a graph.

Income has very little to do with whether or not a family can afford a house. I have met persons earning upwards of 600,000 per year, who cannot afford a house, because they are idiots and spend like drunken sailors. I have met persons earning 70K per year, who could easily afford a million dollar house (because they have worked for 20 years and been smart with their money).

Just as a general statement, to make my point clear, anyone who uses their yearly income to determine whether or not they can afford a house, is making a very large and potentially extremely costly mistake. The idea with house buying, is you pay as much cash as possible, and get rid of the debt as soon as possible. You then move your way up the ladder, buying better houses, as you can afford them (with mostly cash).

If you looked at myself and my wife for example, you could say that we cannot afford the house we live in. By your metrics, you would be right. We could not afford to carry a mortgage representing 75% of the current market value of this house, on our incomes.

But we don’t have to. The house was purchased for cash. There is no mortgage.

#141 Capt. Serious on 06.30.16 at 9:48 am

I watched Obama in the House of Commons this evening. How can somebody talk cogently, remembering names and forgetting nobody, for 45 minutes without notes or a teleprompter? He is amazing.

He had a teleprompter. Actually, two. My wife, who works in comms, pointed out the set-up. They were clear screens but from his angle scrolled the text of his speech (like a heads up display). One slightly to the left and one slightly to the right in front of him, allowing him to look to the left or right side of the house and still glance. Takes nothing away though; he’s an excellent orator.

#142 Randy Belwood on 06.30.16 at 10:04 am

Every Market and every Political System is rigged. Those are the fundamentals.

#143 For those about to flop... on 06.30.16 at 10:14 am

1st quarter final today. Euro 2016.

Jimmy / Poland vs Portugal/ Brazil expat.

Good luck guys.

Found a chart last night with the median age in Europe.
Will post tonight….Germany at 46 years is a surprise…

M42BC

#144 LL on 06.30.16 at 10:32 am

It probably doesn’t take an economist to tell you this is a recipe for potential disaster.

We hear that all the time but nothing happen!
When will we see the disaster?

Not much personal bankrupcy, travel agency sell cruise full blow, restaurants are full…la vie est belle!

Since 2000 RE is crazy..and the show must go on!

#145 Herb on 06.30.16 at 10:32 am

#120 Gentle Merhson,

The above comment was a paid political announcement brought to you by the Silly Names Blogging Brigade of the Conservative Party of Canada on behalf of its Republican ideological twin.

Darn, I can’t say that because posting on “Greater Fool” is free.

#146 LL on 06.30.16 at 10:35 am

Which banks authorize mortgage like the business card show us?

Government don’t offer and authorize mortgage…

#147 Silent Observer on 06.30.16 at 10:35 am

We are not going back to the “golden age” of yesteryear ….

It wasn’t that great, kid. — Garth

So very true! Funny to compare my day to day activities as a child with those of the Xers, Yers, and the millennials.

#148 fancy_pants on 06.30.16 at 10:38 am

or the reason people are shoving $ into RE is they know inflation is on it’s way. Hard assets are your best friend in such times. And it’s something they can touch and feel that has wildly rewarded a great many. They know gov’ts are swimming in debt and can’t raise rates and thus know they can only create more debt to service the debt. That spells inflation that at some point will start too peek out from under the cover they have so carefully laid.

#149 WalMark of Sadkatoon on 06.30.16 at 10:53 am

Gartho u need to educate ppl on MICs and their relationship to some HISAs

#150 AB Boxster on 06.30.16 at 11:06 am

http://www.investorsfriend.com/canadian-gdp-canadian-imports-and-exports/

Real estate related activities make up the largest sector of GDP in Canada.

There is no way that this bubble will be allowed to pop.

There is far too much government interference in this sector, too much risk held by CMHC (eg. taxpayers) and Canada is mostly run by socialist governments that believe they can spend their way out of any mess.

The buying and selling of overinflated real estate is the only sector actually keeping Canada’s growth positive.

Why would we need old fashioned pipelines to sell oil or natural gas, when Canadians can get rich on real estate flipping?

It’s called ‘resourcefulness’ people.

Sunny days ahead.

#151 Steerage Bilge on 06.30.16 at 11:07 am

Well so much for PM MopTop Boris.. what a spectacular clusterf’k!!!

#152 Trex on 06.30.16 at 11:26 am

Mark #98
Regarding your quote of “certainly no oil fields near Calgary”.
Why do you just make stuff up and then post it as factual?

The reality is Southern Alberta is awash in small volume
oil fields and pools.
And lots of them are near or even in Calgary city limits.
Every time you land at Calgary International you roll out past a pumping oil well.
Here is a quote from the ERCB ( Gov of Alberta):

On Dec. 20, 2011 Kaiser Exploration Ltd., was issued a license by the Energy Resources Conservation Board (ERCB) to drill a sweet-oil well approximately half a kilometre from the nearest residence, and 250 metres behind the Royal Oak Shopping Centre at 85th street and Country Hills Boulevard in the city’s northwest.

According to Kara Tobin, a spokesperson for ERCB, there are currently 16 producing oil wells within Calgary city limits.

#153 Devin Martin on 06.30.16 at 11:55 am

DELETED

#154 RentYVR on 06.30.16 at 12:04 pm

Marc Carney just announced more QE! Sorry Garth, rates around the world ain’t going anywhere but down…of course that doesn’t mean that these will get passed onto the end consumer or that the YVR/YYZ bubbles won’t pop, but it does mean that the bubbles won’t end due to higher interest rates.

#155 Ole Doberman on 06.30.16 at 12:04 pm

Gartho was right again – Carney getting ready for some QE:

http://beta.bnn.ca/bank-of-england-s-mark-carney-says-more-stimulus-needed-after-brexit-shock-1.518403

This Bernanke model will be used going forward – but unless your an investor main street doesn’t benefit, only wallstreet.

#156 Ole Doberman on 06.30.16 at 12:07 pm

#148 fancy_pants on 06.30.16 at 10:38 am

or the reason people are shoving $ into RE is they know inflation is on it’s way. Hard assets are your best friend in such times. And it’s something they can touch and feel that has wildly rewarded a great many. They know gov’ts are swimming in debt and can’t raise rates and thus know they can only create more debt to service the debt. That spells inflation that at some point will start too peek out from under the cover they have so carefully laid.
———————————————————
And I thought we already had our inflation, in RE anyway.
I think there comes a point where the market says – nope price is wrong.
Only alternative then is stocks and gold.

#157 Carla Sangina on 06.30.16 at 12:15 pm

Bond yields are crashing with the 30 year Canada at 1.71%.

Even the Greek debt crisis could not push 30 year Canada bond yields below 1.79% as brief as it was.

#158 Ace Goodheart on 06.30.16 at 12:15 pm

RE: #142 Randy Belwood: “Every Market and every Political System is rigged. Those are the fundamentals.”

-have a look at this: basically says what you’re saying (and very interesting to note that getting rid of, or restricting Democracy, is always the goal). This is very interesting to watch:

https://www.youtube.com/watch?v=zI_Ik7OppEI

#159 Jeff on 06.30.16 at 12:23 pm

I wonder if they will approve a mortgage for my dog or my cat ?

#160 Willdaman on 06.30.16 at 12:36 pm

#140 Ace
“The idea with house buying, is you pay as much cash as possible, and get rid of the debt as soon as possible.”

In this low interest rate environment, I’d rather invest my free cash for a 7% return and pay 2.5% on my mortgage.

#161 ronh on 06.30.16 at 12:52 pm

Isn’t credit expansion how the economy grows? Fractional reserve banking and all that. Mark? Anyone?

#162 jess on 06.30.16 at 12:55 pm

a bubble only happens when “expectations of price growth… are self-fulfilling.”
===================
i guess that economist doesn’t follow
Minsky’s model of the credit cycle: displacement, boom, euphoria, profit taking, and panic.

…”policymakers ought to be discussing how to reform the financial system so that it serves the rest of the economy, instead of feeding off it and destabilizing it….As Minsky believed, “Economies evolve, and so, too, must economic policy.”

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=161024

#163 Bytor the Snow Dog on 06.30.16 at 12:58 pm

#49 Jeff Christ sez:

“There ain’t no monorail and there never was.”

I know, eh Jeff. People who think like that have one-track minds…

#164 TurnerNation on 06.30.16 at 1:12 pm

Toronto condo oversupply or?

Acquaintance searched for condo to rent in downtown core. Even worked with a realtor.
He tried bidding up rent by $50/mo and offering to pay a year rent up front. Still lost out on many units. Yes bidding wars on rentals.

Near me King st W was $1500-1600/mo now at $1800-1850. Newer buildings.

#165 jess on 06.30.16 at 1:20 pm

Feds: Stop driving these Honda models right now
by Chris Isidore

300,000 Hondas and Acuras that they should not drive their cars until their Takata airbags are replaced.
The National Highway Traffic Safety Administration said new tests show these airbags have a much higher risk of exploding and killing a driver or passenger. The risk for these particular cars is now greater than 50%

#166 Noel on 06.30.16 at 1:25 pm

https://newrepublic.com/article/134667/conservatives-groomed-perfect-suckers-trumps-epic-scam

For all the Trump supporters.

Great article, applicable to Canadian (CPC) politics too.

“The anti-intellectualism that has been a mainstay of the conservative movement for decades also makes its members easy marks. After all, if you are taught to believe that the reigning scientific consensuses on evolution and climate change are lies, then you will lack the elementary logical skills that will set your alarm bells ringing when you hear a flim-flam artist like Trump. The Republican “war on science” is also a war on the intellectual habits needed to detect lies.”

#167 Shawn on 06.30.16 at 1:27 pm

Credit equals Grease (no Greece)

#161 ronh on 06.30.16 at 12:52 pm asked:

Isn’t credit expansion how the economy grows? Fractional reserve banking and all that. Mark? Anyone?

*************************************
Yes, credit is the grease of the economy without which it would barely move at all. (Think 99% drop in trade and transactions).

Fractional Reserve simply means that a bank would not keep all the cash (or gold) in the vault and instead lends it out but maintains a small fraction of deposits on hand for withdrawals and transfers to other bank.

Fractional reserve banking also existed when currency was backed by gold and even when currency WAS gold (and silver).

Fractional Reserve banking is part of the credit system to which we all owe (along with technology and accumulated knowledge and accumulated human improvements to the earth – buildings and other infrastructure) our incredibly increased standard of living compared to generations past.

There sometimes comes a point where too much credit is given. When defaults get too high the supply of credit declines and this can really slow the economy. Think 2008.

In the current system I worry that defaults are sometimes very low simply because it is now so very easy to borrow new money to pay old debts. When the credit taps are tightened things can get ugly in a hurry. Will this happen? I don’t know.

#168 Lee on 06.30.16 at 1:38 pm

#164,

You’re full of crap.

#169 Shawn on 06.30.16 at 1:40 pm

Log Scale Charts versus Normal Arithmetic Scale Charts

It’s not Garth’s chart but I have previously pointed out a concern with the above hockey stick chart.

The normal arithmetic scale does a GREAT job of showing the total increase from start to finish. Looks like from about 60 to 1800 since 1977 in this case. Staggering indeed. But there were some high inflation years and so perhaps in fairness it should be inflation adjusted.

Of more concern, an arithmetic scale does a very POOR job of illustrating the change in the rate of growth. A steady 5% growth since 1977 will hockey stick on an arithmetic scale.

On an arithmetic scale with a lot of growth and a lot of years, the early years will always look smooth as say a 20% variation looks tiny. Check any long term stock market chart on an arithmetic scale. The depression years now look tame.

A log scale would show a steady 5% growth as a straight line. If one wants to see if prices have truly “hockey sticked” one MUST use a log scale. But a log scale does make it harder to see the huge increase from start to finish.

Unfortunately, the real estate board may have chosen the non-inflation indexed arithmetic scale in order to promote a particular message.

Best practice would be to show the data on both scales and also both inflation adjusted and non-inflation adjusted.

Math majors may be able to confirm or deny what I am saying here.

I believe Vancouver house prices certainly have “hockey sticked”. But I can’t judge that properly from anything other than a log chart.

#170 Nemesis on 06.30.16 at 1:41 pm

#SpeakingOfOfficialPositions… #It’sProbablyNothing,But…

[CBC] – Chinese bought $1.3B of Canadian commercial real estate this year: A handful of big deals pushed investment from China and Hong Kong to 65% of [total] market

…”This year’s $1.3 billion in investment in the first six months from China and Hong Kong compares to $309 million last year and is a marked difference from the previous five years, when investment from Hong Kong and China represented just four per cent of the market.

So far this year, Chinese investors represent 65.4 per cent of more than $2 billion in total deals across the country in the first six months of this year.”…

http://www.cbc.ca/news/business/cbre-commercial-real-estate-chinese-1.3659847

#171 jess on 06.30.16 at 1:47 pm

Trump is yelling at the wrong illegals

Illegal ghost workers are lining their bosses’ pockets in a whole new way Ana Campoy
“it’s supervisors at the employer who provide the fraudulent documents..”
http://qz.com/720135/illegal-ghost-workers-are-lining-their-bosses-pockets-in-a-whole-new-way/

Based on interviews and fieldwork in a migrant farmworking community in California’s Central Valley, this article examines the phenomenon of “identity masking” and its implications for workers’ labor conditions. It shows that labor supervisors often take advantage of unauthorized migrants’ and minors’ legal ineligibility for employment by making their employment contingent upon working a set of loaned identity documents. In doing so, employers render these groups “ghost workers”—that is, they simultaneously obscure their presence from the state and federal governments while benefitting from the wage deductions associated with such prohibited workers’ labor. By calling attention to on-the-ground practices of document circulation, this article thus critiques the charges of “identity theft” often levied against unauthorized migrants during worksite raids. Yet the common practice of “identity masking” not only directly benefits supervisors as individuals, but also makes injured “ghost workers” disappear. As employers wield the threat of implicating such workers in “identity theft” to suppress their workers’ compensation claims, this article illustrates the implications of the trend towards “governing immigration through crime” (Dowling and Inda 2013) on the migrant labor force.”

#172 Dragonslayer on 06.30.16 at 2:45 pm

This morning Hab management is furiously googling Shea Weber, and asking for a second chance to opt out of the trade saying they did not fully know what they were getting into….

#173 family beagle on 06.30.16 at 3:05 pm

#161 ronh on 06.30.16 at 12:52 pm
Isn’t credit expansion how the economy grows? Fractional reserve banking and all that. Mark? Anyone?

2¢… Credit is just a substitute for productivity, ie, If you can clear land and build a house, you don’t need credit. Banking artificially creates competition. There’s no reason for banking, other than juicing consumption.

#174 Paul on 06.30.16 at 3:08 pm

Well it’s a good thing Carney is there to fix this mess.

http://www.ft.com/cms/s/0/ec42a3ba-3ed3-11e6-8716-a4a71e8140b0.html#axzz4D5UZiMop

#175 Shawn on 06.30.16 at 3:10 pm

What Causes China to Buy North American Real Estate

Warren Buffett explained years ago that if North America runs a large trade deficit with china then china accumulates North America dollars. They can then invest those in North American bonds (which they have, big time) or they can invest in stocks or directly buy companies and real estate.

Buffett, said don’t blame the Chinese. If we force feed them currency they have to invest it in some North America asset or other. They have no choice.

Well, a bit of choice, if they spent those American or Canadian dollars in Europe then the Europeans would have the dollars that can only be spent in America or Canada respectively.

Obviously Buffet spoke only of American dollars but it applies equally to Canadian dollars and Canadian assets.

Buffett proposed a system whereby trade would be kept in precise balance. Every dollar of exports would generate a license to import a dollar’s worth. The license could be traded and sold to an importer. No licence, no import.

#176 Ping Liu on 06.30.16 at 3:11 pm

Garth says:

“In order to buy an average detached house in Vancouver with a super-sized 25% deposit, the average family would have to spend 119.5% of their gross income on carrying costs. Yes, that’s 20% more than a couple earns even before paying income tax, CPP, EI or making a company RRSP contribution. So, it’s likely 140% of what they net.”

This is illogical. The average family (i.e. income earning) is not buying the average detached house.

To repeat: average families are not accessing the 50,000 or so detached houses in Vancouver. Average incomes are accessing rental units and condos/townhouses.

This doesn’t have to be that complicated.

Of course it’s illogical. It’s a bubble. — Garth

#177 DQ on 06.30.16 at 3:16 pm

Anyone else catch Ian Young’s latest SCMP blog outlining his one-point plan to burst the YVR housing bubble? Kill the QIIP.

His plan is unlikely to ever see the light of day, but he does raise some interesting points, anecdotal as they may be.

Seems like the drumbeat in the media for someone, anyone, to do something about the affordability crisis is steadily getting louder. So far the proposed empty-home tax and cancellation of self-regulation in the BC RE industry is mostly just optics. Moonbeam and Christy want to appear to be doing something, without actually doing something that would have a meaningful impact. After all, deliberately bursting a bubble is no way to get re-elected.

http://www.scmp.com/news/world/united-states-canada/article/1983336/one-point-plan-tackle-vancouvers-housing

#178 jay on 06.30.16 at 3:41 pm

http://theprovince.com/news/local-news/european-campers-snap-up-sites-in-sold-out-b-c-parks Everything is for sale in B.C. Bye bye Chrusty!!!

#179 Smoking Man on 06.30.16 at 3:48 pm

Make you go Hum??????

http://www.cknw.com/2016/06/29/lynda-steele-are-b-c-government-issued-panda-bonds-funneling-chinese-cash-into-the-country/

#180 Smoking Man on 06.30.16 at 4:08 pm

Alberta NO PIPE LINE FOR YOU !!!!!!

I see a speratest party starting up

#181 Smoking Man on 06.30.16 at 4:08 pm

#180 Smoking Man on 06.30.16 at 4:08 pm
Alberta NO PIPE LINE FOR YOU !!!!!!

I see a speratest party starting up

Your comment is awaiting moderation.

http://www.cbc.ca/news/canada/british-columbia/northern-gateway-pipeline-federal-court-of-appeal-1.3659561

#182 Herb on 06.30.16 at 4:09 pm

Looks like the former Worshipful Mayor of London has more sense than most people in Brexit land.

First, there was his rather subdued jubilation when the results came in, and now we have his stepping back from the requirement to make it work.

In the key of Churchill, “I have will not become the King’s Queen’s First Minister in order to preside over the liquidation of the British Empire United Kingdom. For that task … some one else would will have to be found … British Empire United Kingdom.” (Mansion House Speech, November 10, 1942.)

#183 Herb on 06.30.16 at 4:16 pm

Sorry about the HTML in the last para, but you get the idea.

#184 @Ping Lui on 06.30.16 at 4:17 pm

DELETED

#185 Doctor Fierce on 06.30.16 at 4:23 pm

Let the market sort it out. When every non-wealthy ration decision maker has emigrated from these places the resulting civic dysfunction will decrease demand. I’m a 32 year old health care professional (vet) – I left van in 2010. When there are no teachers policemen firemen doctors lawyers or small business owners that town is going to feel like an urban resort, which of course is what it is becoming.

#186 Ping Liu on 06.30.16 at 4:27 pm

@169 – Sean

Thats another thing the amateur analyst always confused.

By using linear chart, like in this chart above, it gives confused impression that leads to illogical analysis.

for certain, for multi-decade trends should use a log chart.

I even saw another crash website doing trend analysis on a 40 year linear chart. these people are so confused.

#187 Raincouver on 06.30.16 at 4:45 pm

Please listen:

http://omnyapp.com/shows/lynda-steele-show/how-big-of-an-issue-is-money-laundering-in-vancouv

#188 Ace Goodheart on 06.30.16 at 4:52 pm

RE: #164 Turner Nation: “Acquaintance searched for condo to rent in downtown core. Even worked with a realtor.
He tried bidding up rent by $50/mo and offering to pay a year rent up front. Still lost out on many units. Yes bidding wars on rentals.”

This is very true. We own a three unit rental building. Finding tenants is similar to being given a small bucket, full of thousands of fish, and a strainer and being told “catch one”. You likely get a few hundred.

Last time we had a vacancy, the following happened: Third unit was coming on line after renovations. Upstairs tenant got news of this as we let her know the renovations were completed. We had a line of people (we did not advertise) coming to the door, while we were finishing up and removing renovation debris, asking if the unit was available. This was on a Sunday at about 4pm. Literally, about 15 people showed up in under an hour, basically as soon as we arrived at the door and opened up the unit (you can see the front door from the street, so everyone knew we were there). These folks must have staked out the place or something, it was unbelievable. At any rate it was rented within an hour of the renovations being completed, to one of the 15 folks who showed up, uninvited, to apply.

I have never seen anything like this in my life. I have rented buildings before. It used to be hard to get tenants. You had to advertise. I don’t know what’s happening in Toronto, but it is nuts out there. I would not want to be looking for a property to buy or to rent right now.

#189 Shawn on 06.30.16 at 5:05 pm

Credit and Banking Not Needed?

#173 family beagle on 06.30.16 at 3:05 pm gave his two cents worth on ronh’s question. Ronh will want his money back

#161 ronh on 06.30.16 at 12:52 pm
Isn’t credit expansion how the economy grows? Fractional reserve banking and all that. Mark? Anyone?
*******************
Said the Beagle:

2¢… Credit is just a substitute for productivity, ie, If you can clear land and build a house, you don’t need credit. Banking artificially creates competition. There’s no reason for banking, other than juicing consumption.

*************************************
The 1760 western frontier called and wants its opinion back.

What kind of neuter site did you get that from.

You say “juicing consumption” like that is a bad thing. The definition of a high standard of living is consuming high levels of goods and services of all kinds.

Without credit, those with excess cannot share with those without except by gifting which they are no wont to do. Without credit the poor would be held back far more than today.

It is incredible that anyone could think that there is no reason for banking. You have been misled. You’s been had.

But by all means go and find a frontier and live outside the money and credit economy if you want to.

And actually, speaking of your example, borrowing on credit to buy seeds is one of the oldest and most beneficial forms of borrowing which can repay the loan many times over. Imagine the harm done if a framer with land ready to plant could not get the credit to plant the field.

#190 Shawn on 06.30.16 at 5:05 pm

Nutter site, but neuter may work too…

#191 Balmuto on 06.30.16 at 5:06 pm

“#164 TurnerNation on 06.30.16 at 1:12 pm
Toronto condo oversupply or?

Acquaintance searched for condo to rent in downtown core. Even worked with a realtor.
He tried bidding up rent by $50/mo and offering to pay a year rent up front. Still lost out on many units. Yes bidding wars on rentals.

Near me King st W was $1500-1600/mo now at $1800-1850. Newer buildings.”

Yep. Rock. Hard place. Don’t look to the Toronto condo market for any rent-vs-own bargains.

#192 jess on 06.30.16 at 5:10 pm

#170 Nemesis on 06.30.16 at 1:41 pm

…chinese off the balance sheet wealth management products?

=
was Boris usurped by Gove who said on many occasion “he was not fit to run?”

#193 Bill Gable on 06.30.16 at 5:26 pm

Headline:

Billion Dollar Fund Manager Comes Out Of Retirement To Bet Against Canadian Real Estate

You have a story that people laugh at, a college aged girl buys a $31 million dollar place to live in, she didn’t earn that money herself. She said it was her father’s, when they asked what her father does she said she doesn’t know.” While he didn’t specify the specific story he was referring too, he does appear to be referencing Tianyu Zhou, a “student” at UBC that was able to purchase a $31.1 million mansion in Vancouver’s Point Grey. As a student, Zhou was able to obtain a $9 million dollar mortgage from CIBC. Interestingly enough, her LinkedIn says she worked at the UBC cafeteria in her first year – a gig typically reserved for low income students.

“It’s international money laundering coming into Canada…regulations are very lax”, he further explained. “China has capital controls on their money, and Canada does not have respect for a nation that has capital controls”. Bloomberg estimates that US$500 billion in capital has been moved out of China by mostly individuals, with a significant portion of it landing in Canada. Much of that has been moved into the Toronto and Vancouver housing markets.

*Clark had to make a move on this.

Now, waiting for the next shoe to drop.

Link: http://tinyurl.com/jzzv2xr

#194 conan on 06.30.16 at 5:51 pm

RE #182 Herb on 06.30.16 at 4:09 pm

Conspiracy theory alert

Brexit saved the Empire IMHO. Just watch what happens.

The EU is going to go rogue and demand complete subjugation from its members. No armies, no say, no anything. EU is now the Man, and the Might.

Once Germany told the world that it did not agree with NATO’s strategy in Eastern Europe, a new plan for England was urgently needed.

The government no longer wanted Stexit, but must appear to all concerned that it does want it. If that means Cameron resigning as a complete and utter failure , then so be it.

Brexit now had to win and it did.

Tin Foil hat (off)

#195 Broker on 06.30.16 at 5:56 pm

Let’s leave the minority brokers alone Garth. I’m sure you could have found another to display.

Looks straight to me. — Garth

#196 NoMoreTaxes on 06.30.16 at 6:12 pm

Ha-ha:”we now have a federal task force studying what to do about this”
I don’t think so.
Government is busy with more important issues, because they know what is coming: http://news.gc.ca/web/article-en.do?mthd=index&crtr.page=1&nid=1092419

#197 NoMoreTaxes on 06.30.16 at 6:14 pm

So they will spend your money on bogus “In conformity with electoral commitments, Canada will become a state party to the Arms Trade Treaty [ATT]”

#198 Michael Hwang on 06.30.16 at 7:15 pm

My colleagues and I here in Calgary are amazed at the fact that house prices have not really moved much since the economic challenges started affecting our city. Although supply far exceeds demand, sellers are very unwilling to let properties go for much less than they paid. It will be interesting to see how things go in 2017 if the economy doesn’t show some signs of recovery.

#199 family beagle on 06.30.16 at 7:39 pm

#189 Shawn on 06.30.16 at 5:05 pm

Credit is a substitute for productivity. A good farmer holds back seed to replant. Your little snit was entertaining.

#200 Jim on 07.01.16 at 2:51 am

Yup, brang’s a word.

#201 Andrew Woburn on 07.01.16 at 2:07 pm

As a regular reader of the British press, this is my take on the Boris Johnson ouster.

Boris Johnson has always been a populist clown with great communication skills. Michael Gove has always been seen as a competent pair of hands but too much of a wonk to appeal to the public. Together they made a supportable package with Gove as the likely brains behind the throne.

Boris may have only jumped on the “Brexit” bandwagon as an opportunistic way of reaching for the top job. He was as probably as stunned as anyone by the referendum result. It is likely that his lack of preparation and leadership became painfully apparent since the vote.

To me the telling event was his instant loss of support from fellow MP’s the moment they found they could have Gove without Boris and this is what ended Boris’s run.

We don’t know if Gove is really a “House of Cards” class conspirator or just a man who panicked as he saw his Brexit victory potentially collapse before his eyes. But the instant desertion of most of Boris’s support group tells us all we need to know about they rated his ability to deal with the coming challenges on his own. Gove may be labelled as a Judas and lose to Teresa May but he will probably play an important role in the background anyway.

In an amusing aside, Tony Blair has just penned an article asking where the skilled statesmen are going to come from to handle the complex EU negotiations. File under “infomercial”.

#202 Garden of Eden on 07.01.16 at 9:22 pm

When you can borrow money at 2.9% its virtually free. If you’re going to play in a market as volatile as global equities you should plan on years where your return is going to provide you a return that is a multiple of this rate. If you pay attention this should be every year.

#203 Greg Farrell on 07.02.16 at 4:21 pm

I find considerable repetition over the last few years – I have a few points:
– real estate is all about timing now is not the time to invest.
– silver / gold precious metals are going to 25.00 – 1400 before August 2016
– interest rates will rise Jan 2017
– buy a farm and raise produce
– forget about Fiat Currency it is going down take not 10% – but 15% net worth and buy physical it is not too late.
– Condos in Toronto are still relatively good value, but just buy one to live in. Sell investment condos if you have a 2nd, 3rd, 4th etc before things drop 10-15%.
– Protect yourself from investments that are going to do poorly with market uncertainty. When big World Bank Stocks start hurting the small (Big) Cdn. banks hurt too. So move some money out of Big Cdn Banks (20%) and hold cash for 6 month or buy physical silver / gold (give 10 % now to your kids if they are responsible).
– Nothing changes even if things go bad – we are living in the best Country in the World, we have it all. Just make the right choices.

Garth – keep going your the best ! Everyday I check on new info… I am hooked. Enjoy every article.

GF
TF

#204 TRUMP on 07.03.16 at 9:09 am

HEY…..Leave Justin Bieber out of this!!