Time after time

Matt sent me this newspaper article. “Thought you’d find it interesting,” he said.

I do.

“Absolutely everyone from cab drivers to chief executives has a story about Toronto’s crazy housing market. Politicians and tenants’ groups have declared a housing ‘affordability crisis’ – again – and have called for a tax on speculators’ profits to cool down the frenzy. Dark words are muttered about how foreign money is to blame.

“In fact, the price explosion has occurred for simpler reasons. Mortgage rates are low… Residents of this huge, rich, expensive urban conglomeration have taken somewhat hopefully to calling their city ‘world class.’ But the price of being world class is ‘Manhattanization.’ Torontonians are getting a taste of the housing problems of the world’s major cities.

“Owning a house is now the investment of choice for most of the middle class. Because inflation has outpaced wage gains for most of the decade, salary earners feel they can gain ground only by possessing property. The equity in a house provides – tax free – a major portion of most people’s retirement nest egg. To cope with the high costs, it’s become standard practice for house-poor owners to build and rent out a self-contained apartment.

“For many Torontonians, the North American dream of home ownership has already faded, and they’ve joined the ranks of renters, probably for good. Those intent on owning will find themselves forced to think small.”

Not a bad assessment of  the situation, right? But wait. This was published in the Toronto Star (when people read newspapers) in July of 1988. Back then, by the way, I was a daily columnist at another Toronto paper, had a rock-hard body plus long sexy hair  and was warning readers the bubble would soon burst.

It did.

Here’s exactly what happened – which could be exactly what happens again. In a speculative, house-horny frenzy, Toronto house prices raced ahead 44.7% in just three years, peaking in 1989. (The average price in the last three years has gained 54.5%.) This was unsustainable, because nobody’s wages had increased by forty per cent and debt was getting out of control. So the market withered. It didn’t crash, but melted away.

It took seven years of annual declines for a bottom to be reached, and over that time prices gave up 28%. So a Toronto house in 1996 was worth the same as in 1987 – despite the boom. It ended up a lost decade for homeowners. Then six more years were required for prices to restore to the 1989 peak (that happened in 2002). So from peak to trough to peak again was a 12-year process. Hmm.

The lesson here?

Well, back in 1989 folks thought it was different this time because of global demand for Canadian real estate, the fact everyone wanted to live there, and the belief the government would never allow the market to shrivel like a gelding because citizens were so incredibly invested in it. But it wasn’t different. Never is. Get used to it.

Second, the market did not crash. Like Calgary and Vancouver these days, it just started to fade, and kept fading. Buyers are lusty when prices rise and reluctant when they fall. So reduced activity inevitably brought house prices lower, even though real estate values are notoriously sticky.

Third, there’s nothing quick or decisive about corrections. When it comes to property, they span a huge amount of time – usually twice the period it takes for values to rise. This is human nature at work – sheer denial that what has recently happened won’t continue, and a mistaken belief markets will quickly ‘come back’ after they’ve peaked. But they never do – not without scraping a distant bottom first.

Interesting that a similar pattern was at play in the US housing crash which started in earnedst in 2006. Prices rapidly rose over 36 months, then melted away over five years, losing 32% of their value. It took exactly a decade for values to restore – although many US markets are still below 2005 levels despite cheap mortgages and booming job creation. What history tells us is that once properties start to decline, after a period of rapid price acceleration, they tend to keep falling. Few buyers dare to catch a falling knife.

You might wish to share this with your hipster kids.

It's official: federal budget March 22

Drowning in an estimated $100 billion in fresh, steamy new debt over this mandate, the T2 gang is about to lower the boom once again on the perceived rich in its second federal budget to be unveiled in two weeks. Will there be a small-biz-busting Doctors Tax? A slashing of the capital gains tax advantage? Diddling with dividends? New measures to tame Toronto’s runaway real estate market? More Hoovering of the 1%ers? An anti-Trump economic strategy?

Check here daily for the latest wild, groundless, scary speculation, then tune in on Budget Night for a full report. A prayer vigil will follow.

186 comments ↓

#1 When Will They Raise Rates? on 03.07.17 at 5:55 pm

WIKILEAKS VAULT 7

The CIA hacks iphones, androids, windows, linux, routers, even smart TVs, steal private data, emails, messages, communications – turns devices into open cameras and microphones, spying on EVERYONE – ALL OF US. Can remotely control cars, airplanes to silently assinate political adversaries abroad (Farage – survived car crash, plane crash. Freescale Semiconductor builds chips for all of the devices the CIA has been able to access. 4/5 owners and 16 employees were on flight MH370 when it disappeared leaving Rothschild the sole owner) AND Americans (Hastings – died in car crash). CIA changes the digital fingerprint of hacking attacks to make it look like the RUSSIANS did it (LOL).

This is THE story of the year – And not a damned word reported about it on CNN and the MSM?

#Fakenews

#2 pathcontrolmonk on 03.07.17 at 6:01 pm

But with UBER being given the green light for YVR, now everyone can supplement their incomes to pay that $8k/month mortgage.

#3 not 1st on 03.07.17 at 6:14 pm

Garth, please tell me where and what the 100 billion in stimulus went to? Where are the national projects that will usher in a 21st century economy here? or at least increase the efficiency of the economy we have and grow that base?

right..I thought so. Vote buying right?

#4 dsw on 03.07.17 at 6:18 pm

This analysis is not really instructive, as the “1980s” has little bearing on today.

The global economy is going parabolic. Read up on Gartner Trends, for example. 3-4 years now is the entire decade of the 1980s then.

China/India’s consumer economy is still in its early days. Cities like Vancouver have global desirability and limited land.

You can expect the average house in Vancouver to be worth 4M in 2025 and the DJIA to be at 35k.

Sorry Garth, no amount of wordsmithing can replace the parabolic growth trendline.

When human behaviour changes, I will pay attention. — Garth

#5 Shane on 03.07.17 at 6:21 pm

Vancouver inventory at a record low for the start of spring.

Wonder what that will do to prices with foreign money pouring in.

#6 Long-Time Lurker on 03.07.17 at 6:21 pm

Limited Sage:

“History doesn’t repeat itself but it does rhyme.”

-attributed to Mark Twain

#7 Long-Time Lurker on 03.07.17 at 6:22 pm

First!

#8 When Will They Raise Rates? on 03.07.17 at 6:23 pm

DELETED

#9 Shane on 03.07.17 at 6:23 pm

Adding to the above post, Need a 100% capital gains inclusion tax on 2nd homes (Federal initiative) and 2x the property tax on 2nd homes (Provincial initiative).

#10 The Technical Analyst, CSTA, CPD on 03.07.17 at 6:24 pm

There is nothing more disheartening then trying to sell your home in a down market. No one wants it. No one will bail you out. No one wants to pay what you did.

In other news:

Chinese inquiries in Toronto, Montreal, Calgary real estate spiked with Vancouver tax

“The top reason why foreign buyers from China want to get into the Canadian housing market is education, not investment”

No connection here. And in fact, Canadians are completely oblivious to this fact:

Spike in asylum seekers at Southern Ontario border crossings
CBC.ca-Feb 25, 2017
“In January alone, 433 refugees showed up at Ontario border”

So, the Trump wall is a bad idea? Only till YOU need one yourself. 433 a month, up from 19 (yes 19!) in all 2016… and think of poor Texas at 80,000 per month. Maybe you’ll understand.

#11 Andrewski on 03.07.17 at 6:26 pm

Yet, the sheeple keep piling all their money in to a single asset. I had a conversation with someone who was quite happy to have his TFSA maxed out, unfortunately all of it locked in to laddered GIC’s!

#12 Penny Henny on 03.07.17 at 6:30 pm

The average price in the last three years has gained 54.5%.) This was unsustainable, because nobody’s wages had increased by forty per cent-Garth

————————————

Sorry to say Garth but this statement is not entirely right.
Real estate agents have had their commissions rise at the same rate as Toronto real estate prices.

7 more weeks is all I nee. (rubbing hands together).

#13 When Will They Raise Rates? on 03.07.17 at 6:30 pm

A link to the Star article would be great… I would love to share it. (couldn’t find it on google)

#14 Mike on 03.07.17 at 6:31 pm

Here in Edmonton(recession??), SFHs are having no issues selling…

Homes are expensive due to lack of land in Canada. Prices are justified and people should pay for them as realtors tell. Salaries are great.

#15 Penny Henny on 03.07.17 at 6:32 pm

(The average price in the last three years has gained 54.5%.)_Garth

——————————————–

For those that care. In my hood (Etobicoke central W8) the average price has gone up over 30% in the last 9 months.

#16 dsw on 03.07.17 at 6:39 pm

“When human behaviour changes, I will pay attention. — Garth”

The biggest productivity driver over the coming decades will come from non-humans. Applied AI, dynamic software, intelligent Apps, and machine learning.

Humans will increasingly live off the spoils of non-human productivity, which will create massive, unprecedented, concentrated wealth.

This will be immensely bullish for Vancouver SFD housing, for example, as well as the stock markets.

So folks must buy when they can, as early as they can, and take calculated risks…because its only going to get harder.

#17 Maj on 03.07.17 at 6:41 pm

#1 When Will They Raise Rates? on 03.07.17 at 5:55 pm

WikiLeaks Vault 7

Not news if you watched the documentary, Snowden, 2016.

#18 Can't_Vancouver_Anymore on 03.07.17 at 6:42 pm

“I was a daily columnist at another Toronto paper, had a rock-hard body plus long sexy hair ”

Pics or stop teasing us Mr. Turner.

#19 Basil Exposition on 03.07.17 at 6:44 pm

I recall the real estate frenzied days of 1989\90. When your column photo could easily be mistaken for the sunshine boy (mandatory suck up). As a young newly-wed couple, we were priced out of a market that made no sense to us. Real estate agents at the time said much of the same sales lines as today. Then the market turned cold over the winter of 1990. With a sizable down payment, we went shopping. Looked at several vacant properties under power of sale. Likely a result of speculators stuck with multiple properties. During the spring of 1992, we bought a quaint little bungalow in West Whitby previously listed for 210,000. Paid 156,000 for the vacant property on 75 feet of frontage with grass growing a foot high. Is it different this time. I don’t know, but what is different is that the interest rate was over 11% then and declined steadily during the course of our mortgage. Present day buyers should only expect rates to rise. Thanks for the great advice. Then and now.

#20 Yup on 03.07.17 at 6:45 pm

Been saying this ad nauseum : welcome to the big city club Toronto

Ask people in New York, London , Hong Kong , shanghai, Paris etc about a ‘housing crisis ‘….lol

Ship has sailed . Sorry

#21 When Will They Raise Rates? on 03.07.17 at 6:49 pm

#4 dsw on 03.07.17 at 6:18 pm

This analysis is not really instructive, as the “1980s” has little bearing on today.

The global economy is going parabolic. Read up on Gartner Trends, for example. 3-4 years now is the entire decade of the 1980s then.

China/India’s consumer economy is still in its early days. Cities like Vancouver have global desirability and limited land.

You can expect the average house in Vancouver to be worth 4M in 2025 and the DJIA to be at 35k.

Sorry Garth, no amount of wordsmithing can replace the parabolic growth trendline.

———————-

The global economy is not going parabolic, in fact global economic growth is slowing due to demographic trends. If you meant global debt is going parabolic, then yes you have a point. But that is unsustainable unless currencies are devalued/hyperinflated – But that will end in a global monetary crisis and would ultimately lead to a loss of faith in central banks and the abandonment of all fiat currencies, in which case, it really won’t matter how much your house is priced in dollars.

What happened in the 1980s is relevant, because as Garth points out, back then house appreciation had wildly decoupled from wage growth making the rate of house price appreciation unsustainable in the GTA, just like now. The same arguments were also made back then, as per the article. It’s a carbon copy of what is happening now, but it’s different this time? Right.

#22 Theo on 03.07.17 at 6:52 pm

The world of 1989 is nothing like the world of 2017, this is the new paradigm. Yes I know about the “chart of bubbles” but sometimes things really do change in a permanent and irrecoverable way. Augustulus can testify to that.

Oh, you mean it’s different this time? — Garth

#23 Millenial on 03.07.17 at 7:00 pm

Garth,

Nice post tonight. Interesting how history repeats itself. Well, hopefully.

However, you wrote: “Second, the market did not crash.”

I was only eight years old in 1989, but I thought it did kind of crash. My evidence is old-timer real estate agents who have posted in the comments section of this blog. I think i’ve read a few that were like: “one day people just stopped bidding on houses.”

That is not a crash. — Garth

#24 TurnerNation on 03.07.17 at 7:05 pm

Talking with my younger co workers living downtown, all say their rental condo has an overseas and absent owner.
Will the “foreigners” be swayed as interest rates hike (which direction?).

CAD is low going lower but technically the higher rate should prop up the currency.

Any dip will unleash pent up demand. Also heard 1500 people lined up for a small new development in North York.

#25 When Will They Raise Rates? on 03.07.17 at 7:06 pm

#11 Andrewski on 03.07.17 at 6:26 pm

Yet, the sheeple keep piling all their money in to a single asset.

——–

Yup, and when the ponzi ends – and it will – the sheeple will turn to the gubmint for solutions. Got my online biz’s, cash, muh cryptos and passport ready. Will of course keep a couple of nice vultched residential and recreational properties here to visit.

#26 Home owners on 03.07.17 at 7:06 pm

Rents are rising in Toronto . Consider using your basement to rent . Ya got a small gold mind there ! People can’t afford to buy they WILL rent , they have no choice

#27 rainclouds on 03.07.17 at 7:11 pm

#180 dsw “Im not confused at all. I just call out casual racism, in all forms.Good luck over the 8 years ~ you’ll need it”

I will be fine over the next 8 years.

Regarding “casual racism” I hereby apologize to all cheeto’s that may have been offended by my characterizations.

Baseless hysterical assertions dredged up from the simplistic inner workings of a passive aggressive self appointed arbiter of language simply undermine legitimate racial problems.

Carry on, the world depends on you

#28 turn of the tide on 03.07.17 at 7:11 pm

What I want to know is:

Where’s my interest-free loan for investing?

Christy Clark using our tax $s to subsidize housing loans for people who cannot afford to buy a home.

I cannot afford a bunch of Berkshire Hathaway stocks. Where the HECK is my interest-free loan??

I’ll be making sure my vote is not for her.

#29 Victoria Real Estate Update on 03.07.17 at 7:13 pm

From Garth’s blog in 2008:

“This year Canadian MP and author Garth Turner released his cautionary outlook for Canada’s real estate market titled Greater Fool. Garth Turner warns Canadians that Canada is poised for a housing crash similar to the one taking place in the US.” – August 20, 2008

From August 2008 to January 2017, house prices in Toronto almost doubled (gained 85%).

Now, after Toronto home prices have almost doubled since 2008, Garth writes: “Third, there’s nothing quick or decisive about corrections. When it comes to property, they span a huge amount of time – usually twice the period it takes for values to rise.”

Note that I’ve stated no opinion as to how much or how fast I think house prices will decline, but deep and rapid corrections are common when it comes to housing bubbles. Examples from all over the world prove this.

Example: San Francisco

From January 2000 to March 2006 (more than 6 years), house prices increased 116% (approximately doubling) at the peak.

From March 2006 to May 2009 (slightly more than 3 years), houses lost 45%, almost half of their value.

San Francisco’s correction took house prices back to 2000 levels (slightly higher).

#30 I'm stupid on 03.07.17 at 7:14 pm

#4 DSW or anyone else that thinks it’s different!

What would you do? Imagine yourself with $2million and a choice to live anywhere? Would you choose Toronto or Vancouver? What benefit would have by living here? If you’re looking to increase net worth the US is much better and less taxed pulse cheaper to buy housing. If you’re looking to retire the Caribbean offers great weather and beautiful beaches, Europe offers culture and amazing food.

Toronto is as it has always been, a working class city. Vancouver is as it has always been, delusional. No one wants to retire there!

It’s very difficult to identify a bubble from within because your perception is distorted. You see rising property values and want some too. Remove price increases from the equation and tell me if you would want to buy property in those two markets? Would you become house poor now with 90% leverage or wait 2-3 years if you knew values would be the same?

Can prices keep rising because of debt? Sure but only until the households can continue to take on ever increasing debt. Using debt to finance living will have a major impact on the Economy in the future. We’ve taken from the future to party today but the bill is going to need to be paid and almost everyone had a declined credit card. Policy makers know this and are trying to stop it but greed is a hard thing to stop, until it becomes tears!

#31 Smartalox on 03.07.17 at 7:15 pm

Yeah, but back in July of 1988, a 5-year fixed mortgage rate was set at 11.75%! And those were the ’emergency interest rates’ of the time, after the stock market crash in October 1987.

Of course, rates at 11.75% must have seemed like a huge deal, compared to what 5-year fixed mortgage rates were (22% to 24%!) circa 1982. Who wouldn’t be tempted to up-size their mortgage when faced with the opportunity to cut interest costs in half? No wonder that a speculative bubble formed.

https://www.ratehub.ca/5-year-fixed-mortgage-rate-history

The high rates were actually manageable because homes sold for $250,000 or less. High rates = low prices. Low rates = houses nobody can afford. — Garth

#32 Foreign Capital In Victoria on 03.07.17 at 7:17 pm

Seems like the press if finally picking up on what I have been warning VREU for a year about – the impact of foreign capital on markets in general, and Victoria particularly.

I warned everyone of the domino impact of cashed out Vancouverites (who sold to foreign capital) or families priced out of the Metro Vancouver, fleeing to other parts of BC, bidding prices up. And of course, since the BC Foreign Buyer’s Tax only applies to Metro Vancouver, that capital was diverted to other parts of BC and the GTA.

And of course, we saw a corresponding decrease in sales and prices with the tax in Metro – and to my shock – a corresponding massive increase in prices in the GTA, Victoria, and Kelowna. In Victoria, foreign buyers went from 0.68% officially to 4.7% officially.

As for the current situation in the GTA, lets just remember the numerous years where everyone – the realtors, developers, local politicians, provincial politicians, the media – all denied the influence of foreign capital in Vancouver.

First, it was ‘racist’ to talk about foreign money (not sure how, since a foreign buyer is not a race); then it was touted that at most 5% of the market was impacted; then it was acknowledged that maybe, foreign capital really impacted particular neighbourhoods, and then only certain cities; and then a 180 took place at the local and provincial elected official level and the media.

Suddenly, everyone acknowledged the impact of foreign capital.

All of a sudden, provincial data – not franken numbers from the RE industry or self-reporting data from CMHC – showed foreign purchases were in excess of 15% and in communities like Richmond and Burnaby over 20%. Oh my, what a difference between 5% and 20%…

Does anyone seriously think that prices in Victoria, Kelowna and the GTA all going up 15-25% in a year stems from a sudden realization that we have low rates or a booming economy? We have had low rates for 8 years and a stagnant economy for many (hence the 1% increases in average wages right).

For those that want to deny the influence of foreign capital, be sure to keep this post, and revisit it in a year as prices keep going up with the 3 US interest rate hikes in a year.

We will soon see if those much anticipated interest rate hikes actually cool the market – if 2 cuts in Canada apparently spiked prices, I trust 3 potential increases (when the come) will cool the market.

If rate increases do not cool things, then you know what the driver of the market is. In one year, we will know…

#33 Bobby Carjack on 03.07.17 at 7:18 pm

Prices in Vancouver are slowly falling on properties above $2M, but under 1M, where regular Joe is forced to buy is still a healthy market.
Under 700k, bidding wars again. And on top, very low inventory under 700k, so regular working people must pay more, or…. keep on renting.

#34 No relief coming anytime soon on 03.07.17 at 7:21 pm

I was a young pup back in 89, okay maybe not that young, but I do remember interest rates were really high. These days interest rates are really low, and the population in the Van and TO (and GTA), have significantly risen. Just look at the number and size of our malls, schools and hospitals now vs. 1989. Different variables. I believe, there are many who took advantage of low rates, and purchased multiple properties. Foreign investment may be higher than we think (no meaningful data available unfortunately)……. More of a global economy vs. ’89. Immigration is also high, and we do have a merit based immigration system. So for the most part, there are many who are educated or have $$ coming into Canada and can afford to purchase homes. Also, as Garth says in all his blogs, houses are too expensive to move. So,combine all these factors, and yes, there is lack of supply and definitely a big demand. House lust and demand seem to be the only similarity between the 80s and the current situation. The housing market seems to be gaining new historical peaks, despite how leveraged everyone seems to be. Interest rates won’t be going up significantly any time soon. The banks keep saying they will be more strict on mortgages, but they are making too much money to filter applicants in a meaningful way. So, if the government doesn’t intervene, its just going to keep going up, up and up…in the next 5 years at least. Like New York, renting in Toronto may be a new reality as many are or will be priced out of the market.

#35 Sebee on 03.07.17 at 7:22 pm

Canadian Real Estate is perverted.

#36 Tony on 03.07.17 at 7:26 pm

Will put the under/over on the Canadian dollar at four-fifths of a cent lower at the market open the day after budget day. The odds of the Canadian dollar rising the day after budget day are less than one in a million.

#37 DBB on 03.07.17 at 7:28 pm

Can we impeach Trudeau if he jacks capital gains and diddles with our dividends?

#38 prairie person on 03.07.17 at 7:31 pm

Went for a ride around Victoria on this rainy day in March. Was shocked by the amount of destruction and construction. Entire city blocks torn down, dug up, being readied for building. Condos seem to be sprouting like mushrooms. Big developments. None of these mom and pop, three or four plexes. You can see the money that must be going into these holes in the ground or into the half finished condos. Big development on one of the main roads, Quadra. Density and prices are increasing. The demand seems insatiable. Interesting side note. A friend of mine is a minister for a religious denomination. He took time off and, now, he says, he can’t get a parish because so many ministers from the USA have applied. They all want to cross that border legally. It may be that part of what we are seeing in Victoria is people creating a bolt hole. We’re only less than two months into Trump’s presidency. There are most of four years left. It all may work out fine but US dollars buy a lot of real estate in Canada and it isn’t such a bad idea to have a place here. It isn’t just the people walking through the snow in Manitoba, crossing from ND and Minnesota.

#39 Darryl on 03.07.17 at 7:33 pm

Where is all the money being spent ???

I have been in construction in the GTA for over 30 years and have a good idea of what the jobs market is like . At this point there are far far less large institutional construction jobs on the books . And I don’t see many in the pipeline . The projects I do see in line were already in the works before the Liberals got in .

In comparison , just after the GFC the conservative government opened up the economic action plan and quickly brought on new large jobs . Very quickly . I remember that many of these jobs started off poorly engineered ( at first ) due to the speed and necessity of quick injection of funds into the economy . Huge money went into new schools , universities , Hospitals and other important institutional facilities over several years .

So I have no clue where the Liberals are spending this money . I don’t see much happening out there . I think we’re getting robbed. I’m very concerned about this .

#40 Seattlelight on 03.07.17 at 7:35 pm

Thanks Garth. I just spit out my coffee all over the desk. Hopefully my keyboard can be salvaged.

#41 Nonplused on 03.07.17 at 7:40 pm

A 28% price correction is actually pretty devastating. It all has to do with the way these things are typically measured. Price gains are usually measured from where they were low to the top, whereas corrections are measured from the top to the bottom. So what that means is that a 50% correction can wipe out a 100% gain. I chose 50-100 because that’s where the math is easiest, but a 28% correction will also wipe out somewhere around a 56% gain.

This is why there is the old saying in the investment industry, “Return of investment is more important than return on investment.”

Garth gives sage advice on staying with good investments through tough times and I think he’s right, no one really knows how to time the market, but they have to be solid investments or well diversified funds. I know a lot of people that lost all the money they invested buying Nortel or Air Canada for pennies but in size because they thought the stock “must” return to something like it’s former value. Or I know another guy who bought Yellow Pages in the sub $2 range because “it’s a $10 stock!” I told him Google was eating them alive but he wouldn’t listen. Well, he got his $10 price again after a 10-1 reverse split. Unfortunately that still amounted to a round about 50% loss. At $2 he would say “look at the dividend!” I would say “they are over-paying the dividend to manipulate the stock price, which is unsustainable!” But no matter to him, it looked like a 20% dividend and by the end of the year the dividend and half his principle was gone. Don’t know how he closed out, he won’t talk to me anymore because my investment advice is “bad”.

#42 Everything has changed on 03.07.17 at 7:40 pm

Marc Hanson: “Everything has changed. And the housing market will always and forever be drawn to fundamental, end-user, economics and demand, regardless of how diverged it gets during extraordinary economic, credit, or monetary policy cycles, such as Bubble 1.0 and now.”

http://www.zerohedge.com/news/2017-03-07/marc-hanson-everything-has-changed-housing

#43 crowdedelevatorfartz on 03.07.17 at 7:41 pm

@#4 dsw
“You can expect the average house in Vancouver to be worth 4M in 2025 and the DJIA to be at 35k.
Sorry Garth, no amount of wordsmithing can replace the parabolic growth trendline.
********************************************

I’m sorry but mocking “Wordsmiths” is denigrating to all those involved in the wordsmith industry and your passive agressive mocking tones arent appreciated and make all of us feel uncomfortable.
Im reporting you to the Hotline for Casual Racism and Inferred Bullying.
You should expect to recieve a Facebook, Twitter and Snapchat update warning you of your online depravities.

Or you can go for a ride in an elevator with Moi…..take your pick

#44 Tony on 03.07.17 at 7:43 pm

If the budget day is the 22nd of March the odds of the hike in the capital gains tax being April 01, 2017 just took a big, big jump. Still can’t believe the budget day wasn’t slated for March 31st.

#45 The Limited Sage on 03.07.17 at 7:43 pm

Was there a government response to this then? And would we think it would differ from their response this time around? (Born in ’89, so I wouldn’t know).

I ask because everyone seems entitled to go looking for government hand outs these days. And let’s be honest, do we really expect this government to allow people to be tossed out of their homes, a la our neighbours to the South?

I’ve grown up in an age of entitlement and tax increases, why would I suddenly expect that to change regardless of where home prices go now?

#46 1% Prepper on 03.07.17 at 7:50 pm

I’ve grown up in Van and spent a lot of time in TO. Also lived and worked in Europe and in SE Asia.

The only people who think Either Van or TO is comparable to NY or Paris are completely inbred and have never left their sleepy, frigid part of Canada. 2 week Vacations don’t count, I mean live and work in a true world class city. Give me $2 Mil and I am out of here. For good.

No coincidence that the rest of the world also think we are crazy for calling Timmy’s “coffee” It sure doesn’t taste like coffee I’ve had anywhere else in this world.

#47 Funky on 03.07.17 at 7:53 pm

Nice piece yet again. Thank you. Where’s the vigil running?

#48 MF on 03.07.17 at 7:55 pm

38 Darryl on 03.07.17 at 7:33 pm

Simple. It was given away to worthless UN “causes” so Trudeau can get a seat at a worthless UN council. He is totally out to lunch with what Canadians are thinking.

Lol at at the idiots that voted Liberal last election. Why are they so quiet now?? Pathetic.

MF

#49 Cervelo on 03.07.17 at 7:59 pm

Yeah this resonates with me.

I graduated in 1989 and got a job in the big city – so my wife who was pregnant at the time and I had to make a decision.

I lived with a friend in the distant ‘burbs and commuted to TO for a few months. We looked at ‘burbian homes that we could afford and gave up on the miserable commute idea (it’s worse now). We couldn’t afford a house in the city, so I drew a circle on a map 1 mile wide of my office and we rented for a year or two. We made good money on the savings we had, and after prices dropped 30-50% we bought a house in the same neighbourhood.

Best decision of our lives!

#50 not 1st on 03.07.17 at 7:59 pm

Why doesnt T2 get a clue and announce some tax strategy to get investment and companies working again. Stealing from the rich to give to the poor isnt going to create any economic rebound.

Capital equipment purchases are the lowest since 1981 when Garth really had long hair.

#51 no on 03.07.17 at 8:00 pm

“Owning a house is now the investment of choice for most of the middle class.’

this is incorrect. The average bloke is looking for a place to call HOME, a nice neighborhood to raise a family. Unfortunately, for some timing is yucky. For those that bought in 2005ish, obviously, they have won. Dont have to hope for a ‘crash’.

kinda like those that were ready for a retirement at 2008 happened– saw their portofolios get hammered. Some HAD to dip into capital……sometimes life’s about luck

That statement was from an article written 28 years ago. — Garth

#52 Smoking Man on 03.07.17 at 8:03 pm

#45 MF on 03.07.17 at 7:55 pm
38 Darryl on 03.07.17 at 7:33 pm

Simple. It was given away to worthless UN “causes” so Trudeau can get a seat at a worthless UN council. He is totally out to lunch with what Canadians are thinking.

Lol at at the idiots that voted Liberal last election. Why are they so quiet now?? Pathetic.

MF
…..

He wasn’t ready…he is getting bitch slapped all over facebook. Way worce than Hillary was. Let’s see how the bi elections go.

I calling a few suprised faces when that’s done.

#53 not 1st on 03.07.17 at 8:10 pm

When Chretien and crew were in power, they announced an infrastructure program to upgrade sewer, water, streets and roads in hundreds of towns and cities and reserves across canada. I remember because I worked on some of them.

Those programs really worked. I remember coming out of the early 90s recession pretty fast. Then at the same time these guys balanced the budget and tamed the debt.

Pretty sad that I am pining for Chretian. Harper looking pretty good too. Sorry Canadians ran him off now.

#54 Pot will mitigate the CDN deficit on 03.07.17 at 8:16 pm

How will T2 stimulate the economy. Legalizing the Ganga!
If we look at the US states who legalized pot, they did quite well in paying off their debts eg. Colorado

So T2 has a plan to stimulate the economy, tax the rich, tax the carbon, and legalize pot. thats the extent of it. Great job to those who voted liberal.

#55 Slim on 03.07.17 at 8:23 pm

http://www.castanet.net/news/Kelowna/190916/Demand-up-inventory-not

#56 Jimbo on 03.07.17 at 8:28 pm

#13 When Will They Raise Rates?

Link to original article
https://www.scribd.com/book/314505251

#57 been_there done_that on 03.07.17 at 8:36 pm

Yeah, bought my 1st house in 1990. A bungalow in Scarbourough, with a 12% mortgage. Then the market crashed. Everyone was losing their houses. I toughed it out, built a 2 bedroom bsmt apt, moved out to a small bachelor apt, and then rented the upstairs and downstairs . Covered the mortgage and also gave me some +ve cashflow. A landlord was born. I saw that cash flow was king and RE rental was lucrative, so I bought more. RE has always increased in value, just like the stock markets. Pick and chose what you want to put your spare cash into.

#58 Garth for PM on 03.07.17 at 8:47 pm

Hey Garth,

Have you ever considered going back to politics and running for PM? I’ll vote for you!

#59 millmech on 03.07.17 at 8:49 pm

How come no one discusses they monthly amount to maintain their house. In the lunch room today it was complain about home upkeep bills. These home owners are paying (according to them) between $1000-$1400 a month just to keep their place up, no renos or major repairs, property taxes, that is just upkeep.
The newest homeowner of the bunch who bought in December is trying to figure out how to afford major foundation repair(no inspection, bully offer had the winning bid thanks to bank of mom ponying up an extra $100,000).He was renting with positive cash flow before but has now signed up for all on call shifts/overtime, his wife has had to take on a part-time job on the weekends to help keep them afloat. He is now selling all his toys(quads , boat, truck) to pay for all the work he needs done to his house.
They gave up a stress free life with lots of trips and adventures to now grind out a life of servitude to the banks for the next twenty years.

#60 right on 03.07.17 at 8:50 pm

#30 I’m stupid on 03.07.17 at 7:14 pm

markham or

https://www.realtor.ca/Residential/Single-Family/17860104/91-WILLIAM-BARTLETT-Drive-Markham-Ontario-L6C0P9-Berczy

beverley hills

https://www.trulia.com/property/3260648761-2781-Hutton-Dr-Beverly-Hills-CA-90210

https://www.trulia.com/property/6872912-1611-Ferrari-Dr-Beverly-Hills-CA-90210

https://www.trulia.com/property/3218963517-2520-Benedict-Canyon-Dr-Beverly-Hills-CA-90210

https://www.trulia.com/property/3259157304-1537-Benedict-Canyon-Dr-Beverly-Hills-CA-90210

https://www.trulia.com/property/3259962531-9743-Elderidge-Dr-Beverly-Hills-CA-90210

yeah the currency conversion is not the same, but let’s say someone that makes the same currency is the buyer

wake up canadians, the banks are stealing our money.

#61 Fiendish Thingy on 03.07.17 at 8:51 pm

So since the YVR market bubble has inflated almost undeterred for the past 10+ years, does that mean it will take 20+ years to unravel?

Also, Garth, what happened in the outlying GTA areas while Toronto was on its 7year melt- did the burbs fare better or worse than the big city?

#62 to_be_frank on 03.07.17 at 8:51 pm

Garth, you missed a golden opportunity to make a bad story worse. When you mentioned that Toronto housing prices faded and recovered between 1989 and 2002, the CPI had inflated over that period such that the purchasing power of a dollar had declined by 25.2%. So anyone who bought a house in 1989 was still way down in 2002 in terms of the purchasing power of their equity, even though prices had recovered in nominal terms. This in addition to acquisition, holding, and sale costs over the period.

#63 in 89/90 it did CrASh! on 03.07.17 at 8:52 pm

Please Garth, the market crashed in the winter of 90. My family almost lost everything. I have never seen my Dad stressed, like he was during those long painful years. The only thing that saved us, was my father, a hard working Italian immigrant would not let himself fail. He was mortagages up to his eyeballs on multiple properties unable to liquidate anything because he was underwater on what he owed. To say the market didn’t crash is ridiculous. You could not sell a property and not be under water in those days. Bubbles burst – try pricking an enflated ballon with a needle, that’s what happened in the 89/90 housing crash.

Actually a market ‘crash’ refers to prices, not sales. And prices did not cascade lower – rather it was the melt I described, backed up by actual average price data. — Garth

#64 Brian Ripley on 03.07.17 at 8:58 pm

Based on total inventory vs total sales the absorption rate in Toronto is nuts, my chart:
http://www.chpc.biz/mar-moi.html

Vancouver is at least showing some moderation.

#65 leebow on 03.07.17 at 9:09 pm

According to the BoC, cumulative inflation from 1989 to 1996 was over 21%. That means houses lost 55% in real value from top to trough.

A couple of days ago someone posted a quote of Poloz about 8%, or 720,000 households that have outstanding mortgage over 350% of their annual income.

If Poloz’s intention was to put everyone at ease, he failed.

Are those 720,000 households evenly scattered between Vancouver and Halifax?
What’s the profile of that tail?
Is that TRUE income or SELF-DECLARED income?
Is that income today or income at the time when the mtge was issued?

It appears that people over-stretched themselves insanely. I don’t know how it was back in 1989 but today the tension seems very high.

#66 Charles on 03.07.17 at 9:10 pm

In case T2 does diddle with dividends, would it be prudent to issue dividends to my spouse ahead of the federal budget date?

#67 Diversification on 03.07.17 at 9:17 pm

Keeping the house.

If the price price crashes the kids can buy one for themselves. If it doesn’t they can inherit one.

#68 I'm stupid on 03.07.17 at 9:18 pm

#60 right

I laughed… thank you!!

#69 Freedom First on 03.07.17 at 9:23 pm

#43 crowdedelevatorfartz

Now that’s funny!

#70 Smoking Man on 03.07.17 at 9:35 pm

Garth not trying to be a smart ass but…..

The pick. BOYS & GIRLS

Are you out of your mind…you’re not allowed to use that laungage anymore. You will have an army of sjw track you down and have a cry in.

You’re so old…
.

#71 Smoking Man on 03.07.17 at 9:37 pm

#58 Garth for PM on 03.07.17 at 8:47 pm
Hey Garth,

Have you ever considered going back to politics and running for PM? I’ll vote for you!
….

He would win if he gave me the Canadian equivalent of Steve Bannon Job.

I would work for free just to smirick at BUTTS.

#72 Alex on 03.07.17 at 9:37 pm

There is no way real estate can crash in Canada. Interests rates will never rise significantly or to normal levels as that would be catastrophic. As well the money coming in from foreigners and speculators is too good why would government do anything to stop it. More people with money want to live in Canada and they outnumber the properties available for sale. History only repeats itself when conditions are similar. Too much is different now. Face it Garth and all other doomsdayers, economic fundamentals do not matter here. Mortgages will stay cheap and people will live off high debt. Rich folks can keep buying properties and sit on them and flip them and make a ton while all others can’t even get into the market. Interest rates won’t go up in Canada, no new single detached homes will be built in gta and foreigners have way Moreno money than locals with stagnanting incomes and high debt. This party can keep going for a long long time

#73 cd on 03.07.17 at 9:38 pm

#60… those are nice places.

I recently posted this one going for about 1/3 the price. I know its Detroit vs Beverly hills, but its a nice place if you like the historic, wood filled types of places. Its not about buying a place for 2M, but one for less so you can have money left over to travel a bit.

http://detroit.curbed.com/2017/3/3/14805372/indian-village-mansion-for-sale

#74 suburban coyote and pup on 03.07.17 at 9:41 pm

great post tonight Garth. some interesting parallels from 1989 and some differences as well. Global economy, astronaut families and hard to measure impact of well heeled immigrants vis a vis the 10 year student visa, quebec immigrant investor program.

Still the fundamentals look horribly awry….careful Penny Henny why not list now with a long close?

I would rather be a year early than a day late in terms of exiting this sector.

Onf52

#75 toronto1 on 03.07.17 at 9:47 pm

Was at a party on the weekend and of course housing came up, with the same mantra as always- can never go down.

remember when the price of crude was going $80-$100-$120 etc… and everyone was all in but then it dropped?

remember when people were lining up to by silver at $40-$50 an ounce then in dumped.

soon everyone is going to be saying remember when GTA house prices were 1 million plus etc..

my prediction is that in the next 6 months the dynamic will change- right now everyone is in a state of shock and awe with these monthly price increases– by May/June, lots of folks will not be able to resist the temptation to cash out- the inventory supply will change and so will the market.

I looked at the Ireland/Spain/Miami/San Fran/New York housing charts over the weekend, the similarities in each are stunning in terms of time to run up- time to bottom etc…

#76 HogtownIndebted on 03.07.17 at 9:48 pm

A poignant reminder of the impact of the 1990s correction, Garth.

If I may, I’d like to share again a reflection I made about that time on this blog, three years ago:
——————————————————–

They say when your shoe shine boy says ‘buy’, it’s time to sell.

What about barbers? I’ve always enjoyed talking to barbers, to get a unique sense of collected local street knowledge. (Much more grounded in reality and local specifics than cab drivers, no offence intended)

Today my Italian barber, whose shop is along the house horny St. Clair west strip (MLS C2 area – Wychwood, Hillcrest and Corso Italia) talked with me about real estate.

In short, he is filled with apprehension as he surveys the scene. He sees a recession and major real estate problem right around the corner. And he has seen this all before.

He tells me he once jumped into Toronto real estate, buying a slice of a commercial building, typical of the St. Clair strip. Main floor shop, apartments upstairs.

In 1988.

For $585,000

In 1996, the bank would not renew the mortgage. The property had to be sold at market value.

For $270,000.

His total (+transaction) losses were nearly $400,000. It crushed his family, and the effects still linger.

Today he owns one smaller, similar building, calls it his future “pension”. Mortgaged, though. But he still has to work for now, he said sadly.

He is 75.

Bad timing sometimes cannot be overcome in one lifetime.

He also told me of major condo screw-ups happening in the area.

For example, developers spent $5 million to buy the old Hungarian centre at St. Clair and Winona two years ago, and tore down that old character building. Today it sits empty, with a lonely townhouse project sales office on the site, selling townhouses two miles away. No traffic there at all most days. They can’t even get approved for a designated driveway on the sales/future condo site, not enough room the city says. They have to share a driveway with a bank. Awkward.

What’s worse, the developers have been told the property sits above the historic water course, Garrison Creek. Therefore, no excavation permit will be issued under current rules. (Ouch! Where was the due diligence?) Local residents are lobbying city hall loudly to stop any future work.

Can’t wait to grow some more hair and have another chat.
—————————–

I saw my barber again recently. He is 79 later this year, 80 next year. Still working. A little infirm, and he has some family members helping out some days. But he won’t be retiring yet. He can’t. He does like his work, which is a saving grace. But his six day workweek will have to carry on. Not much retirement fun yet for him, maybe when he is 85.

This is the still living aftermath of the 1989 bubble.

And now? Hundreds of thousands of Canadians will spend the next thirty years of their own lives in similar situations, I expect.

(Interestingly, the sales centre on St Clair West that I mentioned in this old post is the now-closed sales office for bankrupt developer Urbancorp, just a derelict site now, a symbol of dozens of desperate buyers hoping to get their deposits back)

The suffering that lies ahead will be profound as this all deflates around us. Much will be mostly silent, like my barber’s, but it will be there,

#77 Alex S on 03.07.17 at 9:53 pm

Recent stock market disruptions will lead to another boom in the Toronto area housing market, predicts Garth Turner, Conservative M.P. for Halton-Peel.

Turner, chairman of the House of Commons’ standing committee on Consumer and Corporate Affairs, told a Toronto home buyers’ seminar that nervous stock investors will be looking to Metro real estate as a safe haven for their money.

http://pqasb.pqarchiver.com/thestar/doc/436056499.html?FMT=ABS&FMTS=ABS:FT&type=current&date=Oct+28%2C+1989&author=Licia+Corbella+Special+to+The+Star&pub=Toronto+Star&edition=&startpage=E.2&desc=Conservative+MP+predicts+another+housing+boom

#78 Basement_Dweller on 03.07.17 at 9:59 pm

Hey Garth,
Yes, we know that there are lots of moisters obsessed with real estate, but can they be the reason for average detached home reaching 1.5 mil. in Toronto?
I thought the Bank of Mom is helping them get into the condo market.

#79 Former BC Guy Now NS Guy on 03.07.17 at 10:08 pm

In 1990, the Bob Rae NDP got control in Ontario, racked up massive government debts, increased corporate taxes dramatically at the same time as NAFTA was signed. Iraq invaded Kuwait and the price of oil doubled from $17/barrel to $36/barrel (very high in those days and was called a price shock).

The result was companies across Canada and especially Ontario layed off workers, closed, moved south to the USA and Mexico.

Mortgage rates in 1990 were 12%.

That’s why real estate collapsed in Canada in the early 90’s.

Today, there are massive amounts of wealth coming from China, Russia, India, Europe buying up real estate in Canada (30% cheaper than US dollars). And mortgages are 2%.

Doesn’t matter that real estate prices have increased much faster than wages, because the people buying real estate don’t earn wages, they are the super-rich, just parking a small percentage of their portfolio in Canadian real estate. This bubble can go on a long time.

Of course Poloz could fix this immediately by raising interest rates a percent or two, and the Boy Wonder could also fix this by imposing 15% HST on all foreign buyers who are non-residents and tighten mortgage lending rules even further, but the Boy Wonder is a 1%er who thinks trade deals create jobs and pretends to understand the Middle Class, but he was born with a silver spoon and doesn’t have a clue what he’s doing.

#80 I'm stupid on 03.07.17 at 10:12 pm

You might like this one…

https://mobile.nytimes.com/2005/12/25/business/yourmoney/take-it-from-japan-bubbles-hurt.html

No one ever knows how bad a bursting of a bubble can be!

#81 Barb on 03.07.17 at 10:22 pm

#3 not 1st on 03.07.17 at 6:14 pm

“Garth, please tell me where and what the 100 billion in stimulus went to? Where are the national projects…”

——————————————

No new bridges or highways here.
Must be a lot of $3,000 hammers.

#82 Smoking Man on 03.07.17 at 10:31 pm

An email from my drunken kid. I did something right I think. SMOKEYS #1 SON

The horrible sleep

No dreams, but still I awake to nightmares. Those cold dark thoughts in the softest peaceful mornings. I emerge one day older, and two days behind my ambition. I can no longer make myself cry, I can no longer feel the soft warm tears streaming down my face. What torture my mundane repetitive life is. This agony is soft and dull is this why I pretend I can bear it?
I fantasize about being a leader, and speaking stronger than a bullet in the back of injustice. However in reality I am a soft sound mocked and laughed at, inferior in my presentation and to complex to show strength in my reasons.
Time to emerge from this sleep and enter the world of today feeling like many yesterdays. I barely have the empathy to wipe away the dull crust in my eyes before I choose to open them. I see light in the dark spots of my process. When this occurs I despise all of my yesterdays reasons.
Ever questioning, never answering the questions that bound me. I was never taught to find solutions , I was never taught to believe in them, only taught to fight for reason, or at least to believe in someone elses.
I shave my face with my Gillette razors scrub my body with dove, and brush with crest. Looks like I am ready to make a difference for someone else’s pocket book. For the heavier the wallet the louder the sound, and the stronger the faith the more vulnerable we become.
When did sharing my hope and dreams become a sign of weakness? When did sharing our vulnerabilities make us illogical. When did faith stop strengthening our characters and start weakening our vote and damaging our minds?

#83 Duddles McDoodle on 03.07.17 at 10:39 pm

I suspect housing goes higher in TO due to less immigrants moving to the USA and just going North instead. Oil recovery will also help Canadian Housing.

Interesting to see in Russia they built a $10k house in 24 hours with a 3D printer. Imagine if they did that here!

#84 it's not beverly hills on 03.07.17 at 10:46 pm

#73 cd on 03.07.17 at 9:38 pm

yes, detroit mansion is very nice. and agreed about having money left over. personally, even at these low rates, i would spend the least possible to have a decent shelter and enjoy the rest. 700k is still too much imo.

however, the point was not to compare two million dollar properties, it was to take a mediocre house in a mediocre suburb and compare it to a zipcode that is well known for its poshness. Although, truth be told those were the lower priced homes in the famed 90210.

#85 Smoking Man on 03.07.17 at 10:51 pm

If hunter s thompson and hemimingway had twitter I dont think they would have offed them selves.

They would have tweed there vissions on moraine drip.

I’ll be there soon.. enjoy the ride. Take the pill .

#86 Smoking Man on 03.07.17 at 10:58 pm

When you realize no one loves you.
https://www.youtube.com/shared?ci=m2gyydaVjTw

#87 jane24 on 03.07.17 at 10:59 pm

For new readers of this blog, I was a TO RE agent in 1989. In April we had a busy weekend of open houses and then on the Monday, the phones stopped ringing. The market decided on mass on a single day that RE was a poor investment and that prices would drop. They did. The herd got frightened. Prices may have slowly melted over a decade but the sales fell off an immediate cliff.

A lot of folk lost everything but the current generation of house buyers know nothing of this history. Sadly they will learn the hard way.

#88 or if you prefer to hang out with the fresh prince on 03.07.17 at 11:13 pm

https://www.trulia.com/property/3254305745-2931-Tiffany-Cir-Los-Angeles-CA-90077

#89 The Wet Coast on 03.07.17 at 11:16 pm

For all the folks thinking Chinese money is going to bail out this RE mess. You might want to Google “Chinese Capital Controls”. As Chinese foreign reserves fall below 3 trillion, they have ratcheted up scrutiny of any money leaving the country. My neighbors (main land Chinese) are clearly worried as they have mortgages they have to pay. This story is playing out world wide as Chinese buyers are walking away from deposits in Australia as they can’t get money out, and locals are worried they can’t make the mortgage payments. Oh and by the way and mortgage held by a Chinese national, is by definition non-recourse. The problem the Chinese have is they cannot allow foreign reserves to fall, as the currency would fall as well. A falling currency would give Trump all he needs to prove the Chinese are currency manipulators. Even companies trying to get money out for legit deals, are running into a wall.

#90 Property Accountant on 03.07.17 at 11:22 pm

This post makes comparisons to current situation from years of 1990 and onwards in Canada nad 2006 -2007 in USA. 1990’s real estate buble in Canada burst due to the raising interest rates to 12-14%.
Is it possible now?
We are still in “supply shock” (economical term) in which every thing is produced at the fraction of the dolar in China and India. We have Dollarama, 50c hammers, 1$ t-Shirts, that would normally cost 12-20$ to produce in North America. Food manufacturing and cheap imports from Mexico will keep our favourit 99c tomatoes on the table. Manufacturing jobs almost gone. Inflation almost non-existent, artificially stimulated by “helicopter money” and 2.2% mortgages and money supply growing 7-8% per year. So my thesis is – as long as Chinese, Mexican or Indian workers earn a fraction of Canadian wage and free trade exists, inflation will be contained by cheap goods and no rate hikes on the horizon.

USA real estate blew in 2007-2009 due to defaults on subprime mortgages, people walking off their homes then followed by damage done by credit default swaps on big institutions and contagion spread over by securitization of mortgages. In Canada people cannot walk off their homes, subprime lending exists but mortgages are not securitized, they are carried on bank books and mostly insured by taxpayers, Canadians, through CMHC. Great system, in which the taxpayers guarantee the payment of the mortgage to the bank, in case borrower defaults. Because there are no possible victims here, financial system is safe.

In Japan they have interest rates between 0-0.5% for the last 20 years. Now they are negative 0.1%. Denmark, Sweden and Switzerland have also negative rates. It is possible here as well, but we have USA south of us and their policies affect 75% of our exports and demand for goods, which impacts on our workers wages eventually.

Trump through protectionist policies wants to disrupt “free trade” and remove the effect of “supply shock” and cause the demand line for workers to go up, causing wages increase. If he accomplishes inflation through those means (unlike helicopter Ben), Fed will raise rates, boost US$ value and canadian exports will soar, canadian bonds will likely go up and mortgages as well. That might mean begining of the end of the real estate bubble in GTA.

So all eyes on USA Non-farm payroll this Friday 1.30PM.

#91 Victor V on 03.07.17 at 11:26 pm

Is the new 1.99% 18-month fixed mortgage rate a good buy?

https://beta.theglobeandmail.com/globe-investor/personal-finance/household-finances/is-the-new-199-18-month-fixed-mortgage-rate-a-good-buy/article34228214/

#92 Yuus bin Haad on 03.07.17 at 11:30 pm

World-class cities don’t leave traffic signals on “random”.

#93 WUL on 03.07.17 at 11:43 pm

I am a fan of the small house movement. Small, not tiny. Comes in part from 7 of us in a 1300 sq. ft. bungie growing up in SW Cowtown 1960 – 1980. Happy times.

These days folks whine about carbon taxes while they heat 3000 sq. ft. faux estates with soaring entries and vaulted ceilings that impress no one. Makes little sense to heat air 6 feet above your head.

Anyway, back to small homes. There have been 3 home builders expos in Ft. Mac since last May 3. Natch, 2000 have to be rebuilt.

I’m impressed with Novhaus out of Edmonton. Shipping containers. Leeds certified. $140 – $180 per foot squared (beats $280 per sq. ft.). Placed on a foundation in three months. Beautiful homes.

Check out their website. Not unique in the biz. A few former oilfield trash engineers behind the venture.

#94 DON on 03.07.17 at 11:57 pm

#17 Maj on 03.07.17 at 6:41 pm
#1 When Will They Raise Rates? on 03.07.17 at 5:55 pm

WikiLeaks Vault 7

Not news if you watched the documentary, Snowden, 2016.

*****************
Thank you Maj…

More research required @When will they raise rates. Snowden doc will make you think twice about any tv,computer, personal phone etc. If it can be used for good it can surely be used for bad.

#95 DON on 03.08.17 at 12:04 am

#26 Home owners on 03.07.17 at 7:06 pm
Rents are rising in Toronto . Consider using your basement to rent . Ya got a small gold mind there ! People can’t afford to buy they WILL rent , they have no choice

************************
Or people will stay with their parents longer. How is that not obvious. The power of critical thinking is lost on you.

#96 DON on 03.08.17 at 12:09 am

#31 Smartalox on 03.07.17 at 7:15 pm
Yeah, but back in July of 1988, a 5-year fixed mortgage rate was set at 11.75%! And those were the ’emergency interest rates’ of the time, after the stock market crash in October 1987.

Of course, rates at 11.75% must have seemed like a huge deal, compared to what 5-year fixed mortgage rates were (22% to 24%!) circa 1982. Who wouldn’t be tempted to up-size their mortgage when faced with the opportunity to cut interest costs in half? No wonder that a speculative bubble formed.

https://www.ratehub.ca/5-year-fixed-mortgage-rate-history

The high rates were actually manageable because homes sold for $250,000 or less. High rates = low prices. Low rates = houses nobody can afford. — Garth

*********************
Exactly. I would rather have a smaller principle amount with a high interest rate (that obviously went down). Why can people not see the 1 million dollar principle at 2 % as a danger sign. The difference between now and then is utter greed, stupidity for those left without a greaterfool. I will sit and wait for a foreclosure to come my way and come it will.

#97 WUL on 03.08.17 at 12:17 am

Also, another feature of the lovely homes Novhaus builds is that you don’t need a basement. Avoids the idiocy of starting off with a hole in the ground. That is where water flows and energy leaks. Slab on grade will do. Worried about heave with the freeze/thaw cycle in the Taiga? Use concrete posts. Drawback to no basement? No place to practice shooting pucks. Plus to a lack of a basement? Kids have to move out.

#98 MF on 03.08.17 at 12:19 am

#76 HogtownIndebted on 03.07.17 at 9:48 pm

I remember reading that post.

Can’t believe it’s three years!

MF

#99 Smoking Man on 03.08.17 at 12:20 am

Story of humanity

Go forward when you are not loved.

#100 boonerator on 03.08.17 at 12:21 am

#76 HogtownIndebted on 03.07.17 at 9:48 pm

A poignant reminder of the impact of the 1990s correction, Garth.

If I may, I’d like to share again a reflection I made about that time on this blog, three years ago:

————————————————————-

Best comment I’ve read here in a long time.

#101 DON on 03.08.17 at 12:38 am

#72 Alex on 03.07.17 at 9:37 pm
There is no way real estate can crash in Canada. Interests rates will never rise significantly or to normal levels as that would be catastrophic. As well the money coming in from foreigners and speculators is too good why would government do anything to stop it. More people with money want to live in Canada and they outnumber the properties available for sale. History only repeats itself when conditions are similar. Too much is different now. Face it Garth and all other doomsdayers, economic fundamentals do not matter here. Mortgages will stay cheap and people will live off high debt. Rich folks can keep buying properties and sit on them and flip them and make a ton while all others can’t even get into the market. Interest rates won’t go up in Canada, no new single detached homes will be built in gta and foreigners have way Moreno money than locals with stagnanting incomes and high debt. This party can keep going for a long long time

******************
Do you know what/who determines how Canadian fixed mortgage rates are set? The market can run out of steam as the bottom end gets priced out – have you been watching Vancouver or is Toronto still the center of the Universe?

Toronto and Vancouver are not world class cities…NOT. As anyone who has lived or traveled. My wife would like to go to Paris, Rome, etc. Weird because she and my BIL were born in Toronto and they never go back.

I went to Toronto once, left the airport and headed right to the country side. Same with Vancouver – it is a traffic nightmare and only has the mountains – if you can get to them or see them through the grey clouds. Come on people lift the veil of delusion.

#102 Long-Time Lurker on 03.08.17 at 12:54 am

#45, Limited Sage

From memory, there was no government intervention to bail out homeowners during the correction. You should never expect the government to bail you out: Some of them can’t even keep their own books balanced.

Limited Sage, you should read responses: #49 (this one especially), #63, #75, #19, #76.

The housing market is overheating because of speculators and fools. When interest rates go up people are going to start defaulting on their mortgages. The prices are going to drop considerably because they weren’t sustainable in the first place.

————-

I sure do remember businesses closing down because of NAFTA. They were dropping like flies.

#103 rjrt81 on 03.08.17 at 1:13 am

#48 MF on 03.07.17 at 7:55 pm
38 Darryl on 03.07.17 at 7:33 pm

Simple. It was given away to worthless UN “causes” so Trudeau can get a seat at a worthless UN council. He is totally out to lunch with what Canadians are thinking.

Lol at at the idiots that voted Liberal last election. Why are they so quiet now?? Pathetic.

MF
——————————————————————–

its like your trying to win an imaginary contest of lamest comment. your doing a good job of it if you are.

#104 Spaccone on 03.08.17 at 1:15 am

#76 HogtownIndebted on 03.07.17 at 9:48 pm
A poignant reminder of the impact of the 1990s correction, Garth.

[…]
Today he owns one smaller, similar building, calls it his future “pension”. Mortgaged, though. But he still has to work for now, he said sadly.

He is 75.
[…]
He is 79 later this year, 80 next year.
————————————————————————

Yikes The average life expectancy for native Italian males is 80 years old. Other thing too, he wouldn’t have been able to play real estate games as I think people there are forced to live more modestly; “CPP” contributions between employer and employee are ~33% (total around 40% in social security contributions) instead of 9.9% like in Canada. I think this effectively also makes them more likely to be able to continue their lifestyle, unlike someone who only relies on the CPP.

#105 Tony on 03.08.17 at 1:34 am

Re: #61 Fiendish Thingy on 03.07.17 at 8:51 pm

Georgetown became a ghost town all that was left was a few gas stations a few banks and a couple of pool halls. John Boddy homes in Pickering fell 40 percent in two years. Cottage country as always was the first to fall. Every crash has been from the fringe areas inward to the core of Toronto. This upcoming crash will probably be the very first of its kind with the crash emanating from the core of Toronto outward toward the fringe areas.

#106 Mark on 03.08.17 at 1:35 am

Mark here, just checking in. I’m still alive.

#107 When Will They Raise Rates? on 03.08.17 at 2:06 am

#56 Jimbo on 03.07.17 at 8:28 pm

Link to original article
https://www.scribd.com/book/314505251
————-

Thanks!

#108 Bad Boy Furniture on 03.08.17 at 4:10 am

Loads of stories on FB group Toronto Housing Woes

#109 Fortune500 on 03.08.17 at 4:26 am

Canada, where we pay our mortgage broker’s $500,000 a year.

https://www.reddit.com/r/PersonalFinanceCanada/comments/5y47go/mortgage_secrets_from_a_mortgage_broker_ama/?st=j00r98g4&sh=46f327d9

#110 Government as Voyeur on 03.08.17 at 4:28 am

CIAs own brand of Reality TV straight from your living room Smart TV cam to their offices.

Now, if only the CIA could text me a Shopping List from my Smart Refrigerator, I’d almost be on board.

#111 CBC better than CRA on 03.08.17 at 4:32 am

Speaking of tax increases, CBC has uncovered what appears to be an accomplice Judiciary, illegal KPMG offshore tax havens and multi-millionaire/billionaire tax dodging felons.

Nice. Where is the CRA in all this? MIA it would appear.

And here he is, Tax Court of Canada Chief Justice Eugene Rossiter addresses tax accountants and lawyers at a national tax conference in Calgary last fall:

http://www.cbc.ca/player/play/891411523785/

And we worry about Trump.

#112 NoName on 03.08.17 at 5:49 am

#82 Smoking Man on 03.07.17 at 10:31 pm

It’s like my life, except tears and fantasy’s about leadership. I steel have them, sometimes I cry in shower and if wife cat me crying, I pun blame on shampoo in my eyes. Crying in shower so underrated.

#113 Ontario's Left Coast on 03.08.17 at 6:51 am

Uggghh… On the bright side, I’m really looking forward to the prayer vigil!

https://www.bloomberg.com/news/features/2017-03-08/desperation-sets-in-for-house-hunters-in-toronto-s-red-hot-market

#114 I'm stupid on 03.08.17 at 6:54 am

#76 Hogtownindebted

You should get your facts straight before you tell a story. Your barber and mine has no need to work. The building he lost money on was a 3 person partnership. He continues to work because he enjoys talking to people and his barbershop is like a social club. I’ve been going to him for a haircut since I was 14. His family doesn’t go there to help out. They use the space to cut hair for their own clients.

#115 pBrasseur on 03.08.17 at 7:22 am

Investment is comatose in Canada

http://business.financialpost.com/fp-comment/jack-mintz-the-federal-liberals-want-more-innovation-fix-our-disastrous-investment-climate

If this government had any brains they would completely abolish capital gains taxes. Unlikely from them, but only a matter of time IMO. In the long run Canada cannot compete with the US without a more efficient fiscal environment.

#116 MF on 03.08.17 at 7:38 am

#103 rjrt81 on 03.08.17 at 1:13 am

“its like your trying to win an imaginary contest of lamest comment. your doing a good job of it if you are.”

Haha. Nice “edgy” comment.

You are right. We should have given away even more billions of taxpayer money to the corrupt UN with no oversight and no public input. What was our government thinking? All that matters is we get a seat at the useless and corrupt UN so our delusional trust fund wannabe JFK PM can pretend that it means something to his non existent “legacy”.

On top of that, when someone speaks out against it, let’s make sure we attack THEM on an internet forum and ignore the issue.

Classy.

MF

#117 quack..quack....ribbit ribbit on 03.08.17 at 8:03 am

In 1989 there was no greenbelt act 2005
Blame Dalton McGuinty and the UN
Its different this time

http://www.greenbelt.ca/greenbelt_plan_detailed_map_overview

#118 pBrasseur on 03.08.17 at 8:20 am

@Mark #106 «Mark here, just checking in. I’m still alive.»

Yeah, I’m sure everyone was worried ;-)

#119 Jetfixer on 03.08.17 at 8:28 am

U.S. killed it on jobs in Feb. Another .25% coming this way.

http://www.cnbc.com/2017/03/08/private-sector-jobs-february-2017-adp.html

#120 Momo on 03.08.17 at 8:37 am

Something I believe is “fueling” the madness, along with everything else, is the price of gas. Five years ago, when gas was over $1.30 in the gta, people would shudder at the idea of purchasing suburban real estate and the high costs of driving long distances. Media coverage was abound. Now its not on anyones radar, and resultantly, the highest housing price gains in the gta have been in suburban areas. The suburbs will fall as soon as oil/gas prices rise – it will not take interest rates or any other factor to create that effect.

#121 Contrarian Coyote on 03.08.17 at 8:52 am

#105 Tony on 03.08.17 at 1:34 am
Re: #61 Fiendish Thingy on 03.07.17 at 8:51 pm

Georgetown became a ghost town all that was left was a few gas stations a few banks and a couple of pool halls. John Boddy homes in Pickering fell 40 percent in two years. Cottage country as always was the first to fall. Every crash has been from the fringe areas inward to the core of Toronto. This upcoming crash will probably be the very first of its kind with the crash emanating from the core of Toronto outward toward the fringe areas.

This can’t happen soon enough. Out here in the Kawarthas, real estate is still moving. After a decade abroad and I come back to this and see literal shacks selling for $200K plus.

https://www.zolo.ca/peterborough-real-estate/625-aylmer-street

A decade ago a place like that would be lucky to go for $100K. Some of these old wood shacks were built along former railway lines that moved stuff from the mines up near Marmora & Havelock and the GE plant here in Peterpatch. Some of these clunkers just get dressed up with some new siding.

Happily renting (H&H included!) and eagerly awaiting for a slow melt in prices. Once that GTA money spigot gets turned off, I have a sense the local market is going to dry up fairly quickly. A lot of local RE offices in for a world of hurt as they have been expanding their hiring quite aggressively in the past 3 years.

#122 crowdedelevatorfartz on 03.08.17 at 8:53 am

@#106 Mark
Whew! Was getting worried.
Now that you’re here could you perhaps talk to dsw about their passive aggressive musings about wordsmiths? dsw is constantly belittleing and bullying them and it si really becoming a concern with the folks at the Bullying a Casual Racism Hotline.
It makes us all feel uncomfortable and we would like dsw to either leave or take gender rebalancing sessions to alleviate the deep down frustrations they seem to be having about their own identity issues.
Sad but curable.
OR they can meet me at Trump Tower on Georgia St and we’ll take a 69 floor elevator ride and discuss it.

#123 Penny Henny on 03.08.17 at 9:24 am

#74 suburban coyote and pup on 03.07.17 at 9:41 pm

Still the fundamentals look horribly awry….careful Penny Henny why not list now with a long close?

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

We can’t vacate the house for a week , but will be able to mid April. A so/so house that just sold had over 200 viewings in a weeks time. So it’s not as if you can live in the house while trying to sell it. Plus we have two doggies. Also we have a great outdoor space which will add lots of value and it will show so much better in spring.

#124 Wrk.dover on 03.08.17 at 9:27 am

So, country’s don’t retire debt. It is looking more and more like people are don’t plan to retire debt.

Follow the leader, and eventually the million you owe is going to be a days pay.

Meanwhile carry that debt for….wait for another short period…then bingo, carry a million in debt for free.

How do I know this? Because I have cash, no debt, and there is no lobby group that gives a god damn about me. Never was, never will be.

Stock holders…well plenty of support for those not so victim on the other hand.

If the market tanks by 2/3 print some more $, all over again. And give it to the folks that caused the slump, then appoint them to cabinet positions.

Leave the original money supply undiluted at fair market value for borrowing…with demand determining the fair price ? Not in this brave new world.

Wrk.dover, yup.

#125 IHCTD9 on 03.08.17 at 9:35 am

#181 Ace Goodheart on 03.07.17 at 6:34 pm

This is particularly true for the Province of Ontario which, with rock bottom interest rates and massive yearly deficit spending, cannot balance the Provincial budget.
_______________________________________

Ontario’s leadership has the reverse Midas touch. Look at Wynne, who fearing for her chances at re-election suddenly agrees that hydro is way too expensive and she needs to step in with her almighty hand of justice. Does she look at cutting costs, gained efficiencies, reductions in numbers/compensation for the OPG lords and ladies? Nope, re-finance, to lower the monthly, and simultaneously pile a billion or two in additional interest costs onto our backs.

She set out to lower costs and ended up raising them. Good grief, I wish this woman would just stop. Just go home and sit. Stop trying to help. Go take a global tour with the wife untill 2018. The longer she is M.I.A. the better off we’ll all be.

All things economic considered – Ontario is pounding itself into the dirt of its own free will. Revenues HAVE to be dropping. Black market HAS to be expanding. Looks like debt service costs will start to rise along with the debt itself. Trump will eventually get around to dealing with the Ontario auto sector. The vast majority of our exports are to Trumpland. Commodities are still pretty cheap. I don’t see a single potential redeemer anywhere, not POT, not immigration, not increased taxation or fees, none of that stuff puts people to work earning a decent living, nor does it serve those that still have a job in any way.

#126 Paul on 03.08.17 at 9:40 am

27 Penny Henny on 03.08.17 at 9:24 am

#74 suburban coyote and pup on 03.07.17 at 9:41 pm

Still the fundamentals look horribly awry….careful Penny Henny why not list now with a long close?

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

We can’t vacate the house for a week , but will be able to mid April. A so/so house that just sold had over 200 viewings in a weeks time. So it’s not as if you can live in the house while trying to sell it. Plus we have two doggies. Also we have a great outdoor space which will add lots of value and it will show so much better in spring.
———————————————————-

Spoken like a typical Vendor, squeeze the lemon just don’t drop it. wishing you the best.

#127 Tony on 03.08.17 at 9:44 am

Re: #124 Euro Observer on 03.08.17 at 9:00 am

BCE should have an all out sell recommendation on it. Manitoba Telecom is just too small and the utility sector looks like the last sector you’d want to buy into. Like in America eons ago you always buy the cable companies and sell the dsl companies. Conversely if you were a day trader Rogers should and will have a blowout first quarter this year.

#128 pBrasseur on 03.08.17 at 9:54 am

Now, I understand that the drama teacher does not have a clue, but the wild Billl?
Are these people really that stupid? – #126 Euro Observer

I think Canadian politicians (among many others) have proven that fact a long time ago. As a result, we could/should be the most prosperous nation on earth, instead of that we are standing on the edge of a cliff with a ticking time bomb in our hands!

Now the big question is will they remain that stupid with the evidence in plain sight?

Very likely, but this budget is interesting precisely because it will provide key information on that subject. If they don’t get it now they never will and you might as well take your last dollar out of here.

#129 Tony on 03.08.17 at 10:06 am

Re: #122 Contrarian Coyote on 03.08.17 at 8:52 am

Peterborough and Belleville in that order would be the two cities to buy real estate. It’s very simple you go to https://www.padmapper.com/apartments/on and look at the places for rent. If the vacancy rate is low and going lower real estate will likely push higher. Case in point was Lindsay where no one would buy but there was next to nothing to rent even in the summer the past couple of years. The rental situation is always the tip-off to where real estate prices are headed.

#130 Ole Doberman on 03.08.17 at 10:17 am

Great read Garth! The part about 1988

#131 Ummm on 03.08.17 at 10:18 am

Canada’s BoC interest rates like they used to. The two countries have diverged in all policies more than ever as Canada moves in the exact opposite direction to that of the USA’s. Therefore interest rates in the US will go up while ours goes down.
Canada will feel the “Trump Shock” in the future. “The Trump Shock” will be the reason why Poloz will keep interest rates the same in the next little while. Interest rates will go down again next year followed by a major recession. There is nothing to celebrate in Canada’s economy these days.

#132 Ole Doberman on 03.08.17 at 10:19 am

#10 The Technical Analyst, CSTA, CPD on 03.07.17 at 6:24 pm

There is nothing more disheartening then trying to sell your home in a down market. No one wants it. No one will bail you out. No one wants to pay what you did.

In other news:

Chinese inquiries in Toronto, Montreal, Calgary real estate spiked with Vancouver tax

“The top reason why foreign buyers from China want to get into the Canadian housing market is education, not investment”

No connection here. And in fact, Canadians are completely oblivious to this fact:

Spike in asylum seekers at Southern Ontario border crossings
CBC.ca-Feb 25, 2017
“In January alone, 433 refugees showed up at Ontario border”

So, the Trump wall is a bad idea? Only till YOU need one yourself. 433 a month, up from 19 (yes 19!) in all 2016… and think of poor Texas at 80,000 per month. Maybe you’ll understand.
——————————————————–
What is your source regarding the Chinese inquiries??

Or was this just a RE agents cunning way to massage a misleading message subliminally?

#133 traderJim on 03.08.17 at 10:32 am

#93 WUL

I’m with you on the small house movement. Agree also the tiny houses are ridiculous…who wants to have their toilet in the shower stall? Yuck.

And I am pretty sure towing your house with you as you travel the country is not doing the environment any favours.

But I am not a fan of the shipping container trend either. False economy if you ask me. Steel is extremely difficult to work with, not to mention hot and ugly as sin.

The only reason I can think of that containers are popular is that people think they are helping the environment by building with something used. Not exactly scientific. And I believe a lot of builds are now using new containers. Why? What a waste of steel. Just go with a normal pre-fab.

Wood, on the other hand, is about as good a material as you can get to work with, anyone can learn to build with it, it’s renewable and relatively cheap.

My preference for small houses is not because I want to virtue signal and be ‘green’, it’s because they are simply better in every way.

A small house can be better quality, savings can be put towards a better lot (perhaps the most important factor in any property), and you don’t have to waste energy cleaning, maintaining, heating, cooling, insuring etc etc space that never gets used.

Small houses are just more efficient.

Ties in with the minimalism trend which also makes your life better in pretty much every way.

Some people fantasize about having a huge mansion, with staff to cook and clean.

Sounds like a freaking nightmare not to mention a lot of work to me.

#134 Herb on 03.08.17 at 10:35 am

#111 CBC …,

there is nothing wrong with the Chief Justice, or any Justice, of the Tax Court of Canada addressing an “industry” conference and, for instance, telling tax lawyers and accountants what does and does not work in court.

Going on a corporate junket would be quite another matter.

#135 Rob on 03.08.17 at 10:37 am

I lecture at York University on a part-time basis teaching accounting to third and fourth year undergraduate students.

Now, I know everyone in the GTA seems to be talking about real estate. However, something extremely bizarre occurred subsequent to one of my classes on Monday evening.

I noticed a group of 4 students who had gathered at the front of class and I overhead their conversation.

I wish I was making this up but unfortunately I overheard the following “Did you hear how much house prices have risen in the last year? 30%, the first thing I am going to do when I graduate is buy a house”

I immediately interjected by asking “What are you guys talking about? You are still full-time students with no job security and you are talking about buying houses?”

I told them how my wife and I purchased a home about a year ago and sure we have done extremely well but it is merely a paper gain and that since buying our house a year ago we have probably spent in or around $60,000 on furniture, repairs and general upkeep. A lot of things needed replacing, furnace, a/c, water heater, pool pump, pool cover and generally just the cost of furnishing a large home.

We were prepared to buy a home, we have enough money set aside to afford these expenses and still have a nice amount invested with Garth. But to hear full-time students talk about a ‘fear of missing out’

It is complete house mania in the GTA!

Rob

#136 JimH on 03.08.17 at 10:41 am

#120 Jetfixer on 03.08.17 at 8:28 am
“U.S. killed it on jobs in Feb. Another .25% coming this way.”
====================================
You’re probably correct!
For those interested, here is the guts of the ADP release:
“Private businesses in the United States hired 298 thousand workers in February of 2017 compared to an upwardly revised 261 thousand in January and well above market expectations of 190 thousand. It is the biggest job gain since December of 2015. The service-providing sector added 193 thousand jobs, boosted by professional and business (66 thousand); education and health (40 thousand); leisure and hospitality (40 thousand); information (25 thousand); trade, transportation and utilities (9 thousand) and other services (9 thousand). Meanwhile, the goods-producing sector added 106 thousand jobs, the biggest gain on record, boosted by construction (66 thousand); manufacturing (32 thousand) and natural resources and mining (8 thousand). Midsized companies were the ones hiring more (122 thousand), followed by small (104 thousand) and large (72 thousand). ADP Employment Change in the United States averaged 62.79 Thousand from 2001 until 2017, reaching an all time high of 384 Thousand in February of 2006 and a record low of -846 Thousand in February of 2009.”

Rates are going up. — Garth

#137 IHCTD9 on 03.08.17 at 10:51 am

#118 Julia on 03.08.17 at 8:14 am
#59 millmech

“How come no one discusses they monthly amount to maintain their house.”

That is my biggest issue with people arguing that buying is better because their mortgage payment is lower than rent. That “every dollar put in the house increases the value”. Every other additional cost gets ignored.
____________________________________________

It’s a long held tradition for a homeowner to live in a house for 20 years, sell it for double or triple what he paid, and then claim a 2-3X profit.

I live in a normal RE market, in a normal house. If I sold it today, I’d pocket maybe 1% after 16 years of ownership. I will likely be irreversibly in the red in the next few years as I continue to pay to maintain, and pay ever increasing taxes and insurance on my property. I expect the interest alone paid on my 14 year 1.5-6.4% mortgage wiped out most of any profit ever to be made. My house puts zero dollars in my pocket every month, quite the opposite (as it should be). I NEVER take anyone seriously who borrowed to buy a house and claimed a profit after selling 10+ years later – no way.

Playing the RE game in a bubble market and winning is a matter of plain dumb luck, or high stakes gambling. Most winners are just lucky – bought decades ago and had zero expectation their house would one day be worth 1 mil+.

My area if full of blue hairs who sold out of the GTA and retired out here after working 30-40 years. They all probably made money on RE just due to their timing, cheap houses, good job availability, security, and wages. They won – they were lucky.

Now if you want to win, you need to sit at the roulette table in Vegas with Lucky Luciano and Dutch Schultz and pray you don’t get stuffed in a hole out in the desert.

#138 soost on 03.08.17 at 10:53 am

Remember that as soon as RE starts falling, all of the speculators and flipper/renovators are OUT.

Immediately.

That is a huge speculative contingent. You don’t know how many wool pea-coat wearing audi driving speculators with plaster covered contractors I have seen in my open house outings.

#139 Damifino on 03.08.17 at 11:29 am

#97 WUL

Drawback to no basement? No place to practice shooting pucks.
——————————————

Here’s another one: No place to set up and play your drums, and other rock and roll gear with your aging buddies trying to re-live the dreams of the 1970’s.

#140 AK on 03.08.17 at 11:39 am

“The high rates were actually manageable because homes sold for $250,000 or less. High rates = low prices.
——————————————————————-
Low rates = houses nobody can afford. — Garth”
——————————————————————-

Who is buying these houses ?

#141 Victor V on 03.08.17 at 12:01 pm

‘It’s terrible, it’s just discouraging’: Desperation sets in for house hunters in red-hot Toronto market

http://business.financialpost.com/personal-finance/mortgages-real-estate/its-terrible-its-just-discouraging-desperation-sets-in-for-house-hunters-in-red-hot-toronto-market

#142 Victor V on 03.08.17 at 12:05 pm

Loonie falls to lowest level of year against U.S. dollar; TSX rises: The Canadian dollar was trading at 74.24 cents U.S. late this morning, down 0.30 of a U.S. cent from Tuesday’s close.

https://www.thestar.com/business/2017/03/08/loonie-falls-to-lowest-level-of-year-against-us-dollar-tsx-rises.html

#143 Damifino on 03.08.17 at 12:12 pm

#144 AK

Low rates = houses nobody can afford. — Garth”

Who is buying these houses ?
——————————————

Buying a house is not the problem. It’s affording one.

#144 Victor V on 03.08.17 at 12:24 pm

As of Wednesday, the implied probability of the Fed raising rates at its March 15 meeting is 100 per cent. One month ago, the probability was just 24 per cent.

http://www.bnn.ca/loonie-falls-to-lowest-level-of-2017-amid-vicious-swing-in-fed-expectations-1.690899

#145 Age and Wisdom on 03.08.17 at 12:46 pm

“Age is a hell of a price to pay for wisdom.” ― George Carlin

“With age comes wisdom, but sometimes age comes alone.” ― Oscar Wilde

#146 cramar on 03.08.17 at 1:09 pm

How to afford a GTA house? Find a classic car in a junkyard! Find of a lifetime:

http://www.marketwatch.com/story/steve-mcqueens-bullitt-mustang-found-in-mexico-junk-yard-2017-03-08

#147 Vic Update on 03.08.17 at 1:18 pm

#29 VREU

Its cute how VREU has had to go silent with the whole the correction/crash in Victoria is around the corner meme as prices skyrocket amidst foreign capital purchases.

What is wrong VREU – those ‘collapsing sales’ have not translated into price reductions yet; those old 0.68% foreign buyer stats not holding this year, as they are now 4.7% and prices have jumped; that stagnant economy is ticking upwards with tech growth.

I think someone has come out of the darkness of the parent’s basement and seen the light..

That usually happens when people realize that economic fundamentals and ‘the market should operate this way’ frameworks of understanding things don’t mesh with reality.

Better late then never VREU.

#148 Boots on the Ground in Ptown on 03.08.17 at 1:29 pm

#142 soost on 03.08.17 at 10:53 am

Remember that as soon as RE starts falling, all of the speculators and flipper/renovators are OUT.

Immediately.

That is a huge speculative contingent. You don’t know how many wool pea-coat wearing audi driving speculators with plaster covered contractors I have seen in my open house outings.
————————————————————–
Yep.

“In my client note this morning, I harped on investors and speculators making up over 35% of all US home sales last year, which is astounding in itself. There is little doubt this is what a bubble looks like this time around.”………………………

https://www.mhanson.com/37-hanson-years-vacant-housing-supply/

#149 TurnerNation on 03.08.17 at 1:46 pm

Today’s Toronto Prices have been released. Per Kommunist price kontrols:

– 2 bedroom condo: 800k
– Semi detached 800-1.2m
– SFH 1.5 and up.

Stand by for tomorrow’s central pricing decree.
You’ve come a long way baby.

#150 jess on 03.08.17 at 1:55 pm

Long-Time Lurker on 03.07.17 at 6:21 pm

fake history ?
e.g slaves are now immigrants who wanted to have the “american dream” ben carson
Steve Bannon praising Sen. Joseph McCarthy’s ?

how unamerican

..”Posobilov, as well as ten other individuals and two corporations – ARC Electronics, Inc. (ARC) and Apex System, L.L.C. (Apex) – were indicted in October 2012. Posobilov and two co-conspirators were subsequently convicted at trial on all counts in October 2015. Of the remaining defendants, five pleaded guilty and three remain at large. ARC is now defunct, and Apex, a Russian-based procurement firm, failed to appear in court.

Posobilov joined ARC in 2004, where he ascended to become the procurement manager and day-to-day director of the company. Between approximately October 2008 and October 2012, Posobilov managed a team of employees who worked to obtain advanced, technologically cutting-edge microelectronics from manufacturers and suppliers located within the U.S. and to export those high-tech goods to in Russia, while evading the government licensing system set up to control such exports. These commodities have applications and are frequently used in a wide range of military systems, including radar and surveillance systems, missile guidance systems and detonation triggers. Russia was not capable of producing many of these sophisticated goods domestically. Between 2002 and 2012, ARC shipped approximately $50,000,000 worth of microelectronics and other technologies to Russia. ARC’s largest clients were certified suppliers of military equipment for the Russian Ministry of Defense.

To induce manufacturers and suppliers to sell these high-tech goods to ARC, and to evade applicable export controls, Posobilov and his co-conspirators provided false end user information in connection with the purchase of the goods, concealed the fact that they were exporters and falsely classified the goods they exported on export records submitted to the Department of Commerce.

Ultimate recipients of ARC’s products included a research unit for the Russian FSB internal security agency, a Russian entity that builds air and missile defense systems and another that produces electronic warfare systems for the Russian Ministry of Defense.,,
https://www.justice.gov/opa/pr/exporter-microelectronics-russian-military-sentenced-135-months-prison-following-convictions

#151 For those about to flop... on 03.08.17 at 2:03 pm

Pink Snow falling in Burnaby.

These guys bought this place for 1.5m last February and are now fighting to get the bulk of their money back…

M42BC

5325 Ivar Place, Burnaby

Nov 22:$1,618,000
Mar 7: $1,595,0000

Change 23k -1%

https://evaluebc.bcassessment.ca/Property.aspx?_oa=QTAwMDAzVzRIWA==

#152 For those about to flop... on 03.08.17 at 2:14 pm

Pink Snow falling in Surrey.

Just like the last guys ,these people bought in during the run up last February,paying 700k for this one.

They don’t have much wiggle room left but if they take the first decent offer before the market deteriorates much more they might be o.k…

M42BC

9378 123a Street, Surrey

Oct 11:$829,000
Mar 7: $719,000
Change: – 110000.00 -13%

https://evaluebc.bcassessment.ca/Property.aspx?_oa=QTAwMDA3ODNRNg==

#153 NoName on 03.08.17 at 2:24 pm

D I Y Herdometar

http://jamesbvaughan.com/python-twilio-scraping/

DYI “step buy step” how to use python to mine for “free” food, but with with some small rework and right or left keywords can look to “lateral” movement of needle on herdometar.

#154 Dan on 03.08.17 at 2:25 pm

All that money laundering is going on for ages in capital city of British empire, so time is that provincial cities catch up too

#155 Cheap Houses on 03.08.17 at 2:26 pm

#5 Shane on 03.07.17 at 6:21 pm
Vancouver inventory at a record low for the start of spring.

Wonder what that will do to prices with foreign money pouring in.
******************************************

And 65,000 empty houses paid for with money laundering.

#156 For those about to flop... on 03.08.17 at 2:27 pm

Pink Snow falling in Coquitlam.

It seems like the theme of the day,these guys got carried away last February paying 1.4m for this house ,a number even the current bloated assessment doesn’t come close to supporting…

M42BC

2227 Sorrento Drive, Coquitlam

Oct 18:$1,488,000
Mar 7: $1,450,000
Change: – 38000.00 -3%

https://evaluebc.bcassessment.ca/Property.aspx?_oa=QTAwMDAzWEJFMg==

#157 NoName on 03.08.17 at 2:41 pm

Everything after last comma in paragraph above is bs, but its interesting read.

Even before Mr. Trump took office, America’s taste for free trade was fading. While China protects many more of its industries than the United States does, China has also been moving faster to liberalize.

https://www.nytimes.com/interactive/2017/business/trade-china-protectionism.html

#158 Rainclouds on 03.08.17 at 2:43 pm

#160 “5 Shane on 03.07.17 at 6:21 pm
Vancouver inventory at a record low for the start of spring.”

******************************************
Errr, Actually the Shanester is incorrect:

https://betterdwelling.com/city/vancouver/

The number of new listings decreased, but the total inventory remains higher year over year. February saw 3,666 new listings, a 36.9% decrease. Media reports played up that fact that there might be an “inventory shortage,” but they neglected to mention the total number of properties listed for sale is 7,299 – a full 4.9% higher than last year. Despite the slower year over year growth of listings, it appears that inventory is still building.

#159 For those about to flop... on 03.08.17 at 2:49 pm

Pink Snow falling in North Vancouver.

This one is a little different ,but a scenario I have seen a few times mainly on the Westside of Vancouver.

They paid 1.537 for this block of land and had plans to build a new house but have decided to try and bail and pass the transaction costs onto the next guy as the profit margins are probably too slim in this declining market.

It probably doesn’t help that the listing states ” sleep and contemporary home”as opposed to sleek…

M42BC

845 Drayton st.North Vancouver

Oct 26:$1,749,000
Mar 7: $1,649,000
Change: – 100000.00 -6%

https://www.zolo.ca/north-vancouver-real-estate/845-drayton-street

https://evaluebc.bcassessment.ca/Property.aspx?_oa=QTAwMDAyOEZaUQ==

#160 Ole Doberman on 03.08.17 at 3:07 pm

Oil down $3 today and fighting to hold critical support at $50.

Not surprising since the smart money shorted the sector big last couple weeks:

http://shortdata.ca/sectors/

#161 Oil on 03.08.17 at 3:33 pm

Poor tsx .

At a potential housing tipping and commodities to decline ? Commodities IS the only hope for the index.

#162 LTL_FTC on 03.08.17 at 3:41 pm

Hi Garth,

It’s worth noting for the mathematically challenged that a 44.7% increase followed by a 28% decrease leaves a property valued at 104.2% of the starting value (several years later to boot, i.e. ignoring the time-value of money).

I know you know this, but I suspect some readers are thinking that at least they’re still 17% ahead. Not!

Math is hard. — Garth

#163 CJBob on 03.08.17 at 3:48 pm

#151 Vic Update on 03.08.17 at 1:18 pm
Its cute how VREU has had to go silent with the whole the correction/crash in Victoria is around the corner meme as prices skyrocket amidst foreign capital purchases.
___________________________

When the data changes it’s a good idea to consider changing your opinion instead of holding on to an outdated belief. Not everyone can do this. Clearly.

For example I agree now that rates in the U.S. will be going up at least twice and possibly 3 times this year. I didn’t believe that 6 months ago.

I still don’t see rates rising in Canada this year, however I’m opening to seeing evidence that will change my mind on that.

#164 Entrepreneur on 03.08.17 at 3:50 pm

The world is in a different place now: more older people, more debt, less jobs, less manufacturing, etc.

What caught my attention was #102 Long-Time Lurker and his comment…”I do remember businesses closing down because of NAFTD. They were dropping like flies!” Same here, closing or moving to Alberta/U.S. Everyone was scared and wondering what to do.

As Maude Barlow, Council of Canadians, said that “NAFTA has favoured the interest of corporations over the masses” and agrees with Trumps on free trade that it has hurt the middle class with “fewer work hours and weaker wage growth.” Is this the thorn or the missing link to our problems or one of them, a major one.

Barlow also mentions that the Canada/EU deals “will bring greater benefits to corporations at the expense of the people.”

Oh my, the control and the manipulation with words and agreements. All legal binding to benefit the few.

Thank goodness they can’t take away the voting system.

#165 AGuyInVancouver on 03.08.17 at 3:59 pm

Garth, like others here I would argue the difference between 1989 and now is the influx of Chinese money. For prices to rise so steeply compared to local incomes, one must look to external forces.

#166 For those about to flop... on 03.08.17 at 4:00 pm

O.k so just to put a bow on price reductions in for the first week of March.

My Motivated Sellers Index shows …

March 1st- 7th

Number of price reductions in Greater Vancouver

390

Number of these sellers that purchased these properties in the last 3 years

108

This continues the trend of around 30% that was seen during February…

M42BC

#167 poly on 03.08.17 at 4:10 pm

http://www.zerohedge.com/news/2017-03-08/whose-banks-are-riskiest-surprising-answer-bis

If you dont want to read the article, the answer from BIS, “the central banks’ central bank” is…

Canada. From BIS, “the central banks’ central bank”

#168 Self Directed on 03.08.17 at 4:59 pm

#161 For those about to flop… on 03.08.17 at 2:27 pm

Pink Snow falling in Coquitlam.

It seems like the theme of the day,these guys got carried away last February paying 1.4m for this house ,a number even the current bloated assessment doesn’t come close to supporting…

M42BC

2227 Sorrento Drive, Coquitlam

Oct 18:$1,488,000
Mar 7: $1,450,000
Change: – 38000.00 -3%

https://evaluebc.bcassessment.ca/Property.aspx?_oa=QTAwMDAzWEJFMg==
………………………
I’m reading your PSR’s to get an understanding what is going on in the RE market place.

It’s no surprise to see homes bought last year back on the market. But they are not reno-flipped. Just trying to “get their money back”.

Different story out in Mission, where homes are back on the market after a substantial renovation (windows, fixtures, flooring, paint, kitchens, bath), and they are turning profits of $150-200K+ before expenses.

I suspect the reno-flip days are coming to an end even in Mission. I can’t see a 70’s split level going much farther past 550K. Not with rising interest rates… not in a bedroom community. The fundamentals can’t support it.

#169 Porsche on 03.08.17 at 5:16 pm

Crude was in a nosedive today. Looks like sub $50 is back

#170 45north on 03.08.17 at 5:32 pm

It took seven years of annual declines for a bottom to be reached, and over that time prices gave up 28%.

Lesson: the market did not crash

Millmech: The newest homeowner of the bunch who bought in December is trying to figure out how to afford major foundation repair (no inspection, bully offer had the winning bid thanks to bank of mom ponying up an extra $100,000).

Whether the market is going to crash depends on the newest homeowners. Compared to the people who bought in 1989, the people who are buying now have made reckless choices and imperiled their finances. There’s a compounding effect, more reckless choices imperils the whole housing market.

What does the bank know? It would have a very good idea that there was no inspection, it was a bully offer and the bank of Mom handed over $100,000. I mean the fact that the selling price is way over the assessed valued pretty much tells the story. The bank would also be in a good position to give odds on the foundation needing work and if it wanted to know for sure, it could order an inspection and charge the homeowner.

#171 Millenial on 03.08.17 at 5:40 pm

#145 Victor V on 03.08.17 at 12:01 pm
‘It’s terrible, it’s just discouraging’: Desperation sets in for house hunters in red-hot Toronto market

http://business.financialpost.com/personal-finance/mortgages-real-estate/its-terrible-its-just-discouraging-desperation-sets-in-for-house-hunters-in-red-hot-toronto-market

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‘It’s terrible, it’s just discouraging’ says Dana Kayali, 27-year-old pension fund manager.

LOL. What an effed-up world we live in right now.

#172 I love today's housing market !! on 03.08.17 at 5:46 pm

Go higher !! Why r people crying ?

TSX is flat !! Haha !!! Bonds yielding 2%!!

#173 Smoking Man on 03.08.17 at 7:08 pm

Today on international woman’s day, I solute remale entrepreneurs and stay at home moms.

Two of the toughest and unappreciated jobs around.

#174 Hogtown Indebted on 03.08.17 at 7:43 pm

#114 I’m stupid

I would suggest you are the one who needs to get your facts straight. Whatever/whoever you are talking about is not the same person I was reflecting on, I can guarantee that for reasons I won’t disclose here, to preserve another’s privacy.

But it is intriguing that you share yet another story of someone similarly occupied getting caught in a real estate bubble. Certainly underscores the prevalence of the problems that are created.

#175 A Reply to #41 Nonplused on 03.09.17 at 7:55 am

“So what that means is that a 50% correction can wipe out a 100% gain.” (This is correct.)

“. . . [B]ut a 28% correction will also wipe out somewhere around a 56% gain.” No, that’s not right. Not even close. It wipes out a 39% gain.

Here’s the math: If the gain is 1/x, a correction of 1/(x+1) would wipe it out (for x > 0).

#176 Contrarian Coyote on 03.09.17 at 10:27 am

#133 Tony on 03.08.17 at 10:06 am
Re: #122 Contrarian Coyote on 03.08.17 at 8:52 am

Peterborough and Belleville in that order would be the two cities to buy real estate. It’s very simple you go to https://www.padmapper.com/apartments/on and look at the places for rent. If the vacancy rate is low and going lower real estate will likely push higher. Case in point was Lindsay where no one would buy but there was next to nothing to rent even in the summer the past couple of years. The rental situation is always the tip-off to where real estate prices are headed.

Interesting points, Tony. I hadn’t considered Lindsay. The wife and I are looking at places North & East of Peterborough in about 4~5 years (Lakefield, Norwood, Youngs Point)…now balancing out our investments and in no hurry to buy to be honest.

Belleville would be alright as well. I’ve got family in the area all the way up the river from Belleville to Cornwall. It’d be nice to be near them.

Thanks for the link to padmapper – I’ll check it out.

#177 Tina Z. on 03.09.17 at 11:22 am

Whatever happens to the housing market, one thing is for sure…the world we live in today, is certainly not comparable to the one back in 1989. People fail to realize that not only do people nowadays have more money, there are way more people living in the city, if worst comes to worst, house owners will rent out their basements in order to fulfill the monthly mortgage payments. I bought a new house last year against many people’s advice because they said it was going to crash soon, my house is now worth 200k more than the day I bought it. If a crash were to happen, I foresee a 20-30% decline…but hubby & I got a 5 year interest fixed at a very low rate, the amount we pay for mortgage each month is equivalent to our friends’ rent for a 600 sq ft condo downtown. 2200 sq ft house ownership vs. 600 sq ft condo rental…I think I will take the 1st choice.

Self-justification is a wondrous thing. — Garth

#178 AGuyInVancouver on 03.09.17 at 2:08 pm

@#173 Euro Observer – low interest rates and CMHC backstopping explain the resilience of the condo market, even as prices slowly climb. It does not explain the movement of thousands of single family homes into the Million+ club, where incomes are still a factor in what the banks will lend.

#179 Piet on 03.09.17 at 2:14 pm

@#93 WUL

“…they heat 3000 sq. ft. faux estates with soaring entries and vaulted ceilings that impress no one. Makes little sense to heat air 6 feet above your head.”

The preceding is a good description of our 3400 sq. ft. house. Another thing that sucks out the heat in winter is extensive glass. Fortunately we live on the west coast, so it’s usually not that cold in the winter (although this winter has been brutal). Our solution is to heat the place only minimally. During the daytime we permit a maximum temp of 14C, lower at night. We wear layers of fleece all the time. It’s invigorating and healthy to live in the cold. Spending time in other overheated buildings is unpleasant by comparison. Wouldn’t trade the feeling of spaciousness for a smaller house, even though we are empty nesters.

@#97 WUL
“…the idiocy of starting off with a hole in the ground. That is where water flows and energy leaks.”

Solution to water issues is to live at the top of a hill. Nice views, too.