Mr. Market

“We decided,” Alyssa said, “to let the market decide.” It did. Nobody went home happy.

Another day this week, and another example in the personal life of this blog that real estate in the nation’s housing heartland is starting to roll. The property in question is a small rental townhouse, identical to one which sold last month for $730,000. A’s realtor thought he’d try the tactic of listing low to stir the loins of waiting buyers, engendering a fierce bidding war and ultimately a high sale price. So, it went to market more than a hundred thousand below what she was hoping for (to beat the neighbour’s sale price, naturally).

Listed for a week. Last evening was Offer Night, after a busy few days of showings. When the dust settled this was the score. No. of offers: 1. Offering price: $660,000. Mr. Market had spoken.

As you might imagine, Alyssa was dismayed and disappointed. The realtor immediately canceled the listing, and says he’ll now go to market for a hundred more, accepting any offers as they come in. Sadly, however, the property’s effectively been devalued. By not signing back the only offer received, trying to massage a few more bucks out of the buyers (who, after all, coughed up more than was asked) the outcome could be worse.

Here are a few reasons (on top of those detailed yesterday…and the day before) why the lady may regret this week. With every day that passes it looks like peak house – even in the centre of the civilized world (416) and amid orgiastic media (Houses up 33%!) – is in the rear view. This is not March any more. The switch flipped two weeks ago. Here’s today’s new evidence why you should believe it:

So much for a rate cut.

The next move by the Bank of Canada will be up, not down. All that talk by Gov. Poloz about fearing Trump was just that – talk. Our economy’s crushed it lately, creating more jobs and more inflation. The guv now says we’ll have full economic capacity around the middle of 2018 – a dozen months or so away. That’s when the rate hikes will begin, driving variable mortgages higher. Between now and then, three increases by the Fed will boost fixed-rate mortgages in Canada. Gulp.

Hammer down on April 27th.

That’s the expected date of the Ontario budget, and every day lately the politicians in charge have been warning that real estate’s in the crosshairs. If you doubt this, listen to the finance minister: “We’re going to be taking action on the housing affordability issue soon. It’s too urgent a matter… I want to go after . . . what I call ‘property scalpers’ looking at taking advantage of speculation in the marketplace. We need to curb that activity… All things are being considered.” Yes, Alyssa, that means taxes. Taxes scare buyers, and when 50% of all condo sales in the GTA have been to speculators, guess what the impact will be?

Escape from Toronto? Don’t count on it.

Anti-bubble measures from the geniuses running the government may not be contained within the GTA borders. The contagion leapt over the boundary rivers months ago, and has been running rampant through the hinterland. National Bank economists this week concluded that fully half of urban market in Canada – and 67% of all communities in Ontario – are seeing double-digit increases in house values. In fact, this is all very reminiscent of conditions in the States just before real estate blew up and created a global credit crisis. Says chief economist Stefane Marion: “This record proportion is very similar to that observed in the United States in 2005 at the peak of the market.” To remind you, after the American bubble burst, average prices declined 32% across the US, and up to 70% in areas where the greatest speculative activity had taken place.

Source: National Bank, Click to enlarge

Could this be the future?

The BC election happens May 9th, and if polls are to be believed a majority of people (56%) say it’s time for another political party to take over. That could be the NDP, with a sprinkling of Greens. The dippers have been at the forefront of lobbying for fat taxes on foreign buyers and want to see way more government involvement in the housing market, forcing the creation of ‘affordable’ real estate. Meanwhile the Green platform includes a 400% increase in land transfer taxes ($236,000 on a $3.5 million shack), a doubling of the Chinese dudes tax (to 30%), big jumps in property tax rates, and a capital gains tax to be levied on all home sales after a lifetime exemption of $750,000.

Not a list you wanna be on.

There are only four countries in the developed world where a major housing correction seems likely, says rating agency Moody’s. Yup. On the list (along with Australia, NZ and Sweden). And here’s that odious comparison again: “The Moody’s report likens real estate price increases in Canada and the other three countries to the gains seen in the United States, Spain and Ireland in the years leading up to their housing peaks in the mid-2000s, prior to major market corrections.” Because of runaway household debt, Moody’s concludes: “In Canada a housing downturn would involve sizable spillovers to the broader economy through the supply chain and impact on employment and consumption. “

So, Alyssa, why would anyone buy now? Would you?

 

166 comments ↓

#1 Laughing my socks off on 04.12.17 at 6:35 pm

Soon be able to pickup a nice Audi on the cheap in GTR. Realtor s will be dropping like flies by the summer once the market stagnates and deals dry up. Shame!

#2 When Will They Raise Rates? on 04.12.17 at 6:37 pm

So, Alyssa, why would anyone buy now? Would you?

Exactly.

It seems the speculators are quietly beginning to exit stage left… Soon it will be a stampede once price begin to drop.

I feel sorry for anyone who get in recently, especially as an “investment”. LOL

https://www.youtube.com/watch?v=A_sY2rjxq6M

Great post btw Garth.

#3 common sense on 04.12.17 at 6:37 pm

So let me get this straight.

“Rate hikes in Canada likely begin mid 2018”, yet “a sizeable spillover to the broader economy through the supply chain and impact on employment and consumption.”

Mid 2018 is a lifetime away. Lots of guesses as to interest hikes here and the USA.

How can anyone raise rates if there is a negative impact on employment and consumption and wouldn’t higher rates = higher costs which result in more job loss and less consumption?

Once again, where is the growth coming from?

#4 Debtslavecreator on 04.12.17 at 6:38 pm

Crash has finally started
I cannot believe how more Canadians don’t point the finger at the bank of Canada along with all homeDEBTRENTERS who have been refinancing their homes to renovate or speculate on more RE
No tears from me – the level of stupidity is crazy
We will now face a real chance at an even more radical left wing government within 10 years as the greatest debt bubble in history unwinds
Hopefully Maxine Bernier can pull it off but after him maybe we go full Pinko

#5 I'm stupid on 04.12.17 at 6:40 pm

To put this bubble into perspective;

You could have been a stay at home home owner. The average price increase was something like $600 a day tax free. We’ll look back at this and shake our heads at how stupid some people are. Housing is not a retirement plan since you need to sell to access the gains. You can’t sell one brick at a time as you need income to live. It’s dead equity.

#6 OttawaMike on 04.12.17 at 6:42 pm

The other day you concluded in a comment that most markets in Canada have contracted save Toronto and Van.

Now you recite Moody’s report that the entire market is inflated.

Which is it??

#7 Not a worry on 04.12.17 at 6:46 pm

I was blue, just as blue as I could be
Ev’ry day was a cloudy day for me
Then good luck came a-knocking at my door
Skies were gray but they’re not gray anymore

Blue skies
Smiling at me
Nothing but blue skies
Do I see

Bluebirds
Singing a song
Nothing but bluebirds
All day long

Never saw the sun shining so bright
Never saw things going so right
Noticing the days hurrying by
When you’re in love, my how they fly

Blue days
All of them gone
Nothing but blue skies
From now on

I should care if the wind blows east or west
I should fret if the worst looks like the best
I should mind if they say it can’t be true
I should smile, that’s exactly what I do

#8 Big English on 04.12.17 at 6:46 pm

Ouch, another quality post, although frightening

#9 Christo on 04.12.17 at 6:47 pm

Unfortunately, I think that any corrective steps taken by Ontario or Ottawa are too little too late. Suppose there is a pull back of 10-20% as a result. This would barely put a dent in the increases homes have seen over the last years alone (33%). Another example of reactive rather than proactive action by our politicians.

#10 crowdedelevatorfartz on 04.12.17 at 6:49 pm

I’m renting!
The fact that my building has elevators is just the icing on the cake.

#11 I'm Not Poloz on 04.12.17 at 6:50 pm

Toronto is the SJW capital of the world for privileged white women, no one wants to purchase there unless they are a Greater Fool into thinking Toronto is world class like Paris, Manhattan Los Angeles or those European cities rich in history.

But yes, Canada is complaining about immigrants that they resort to massacring them in Quebec City while cities like Paris and Berlin have their fair share of immigration, but you don’t see them murdering immigrants while they are praying or sleeping.

You’d have to be stupider than Poloz to believe that Toronto real estate is a worthwhile investment.

At least Vancouver has those Hippy Liberals, though that is changing with the influx of Hipsters who complain about capitalism, yet purchase the latest I-Phone that was manufactured by a deceased worker who later jumped off the top of his/her workplace after assembling the phone in a factory in China.

Don’t even get me started on the criticism of social life in Toronto. You’re not going to find your true love in Toronto. You will find out why.

#12 Shawn on 04.12.17 at 6:50 pm

You called the Vancouver top almost to the week. I hope you’re right about the GTA. Do you think the direction of $CAD will favor inflation and interest rates (i.e. up) negative economic spillover from housing (i.e. down)?

#13 Raj on 04.12.17 at 6:52 pm

Political leaders will do more towards the benefits of common people provided these leaders live in same conditions which common man faces. They should be highly respected by society but given only same level of salary ,home and other benefits as a common citizen. Once this is done they will work towards lifting the common man to lift themselves and our country will become truly a noble place to live in.

#14 Paul on 04.12.17 at 6:54 pm

So, Alyssa, why would anyone buy now? Would you?
——————————————————————–
She did for $660,001 by not taking the offer she Out bid the buyer !!

#15 When Will They Raise Rates? on 04.12.17 at 6:56 pm

*prices
*got in

#16 Post on 04.12.17 at 6:56 pm

CONFIRMED: Poloz is an idiot. He says that even a 5% increase in rates wouldn’t slow down the housing market in Canada.

#17 zap on 04.12.17 at 6:58 pm

Yes,I made an offer for $100k over asking price last week and today my agent said the listing has been cancelled (due to technical issues)

#18 nubbers on 04.12.17 at 7:01 pm

Popcorn ready. I’m looking forward to Vit’s eloquent and entertaining reasoning as to why house prices are going to continue upwards.

#19 Shawn on 04.12.17 at 7:01 pm

Or perhaps we stay in the area of 75 cents for years…

#20 Tim on 04.12.17 at 7:03 pm

If you are even thinking of voting for crooked Christy, read this: 117 BC Liberal Falsehoods, Boondoggles and Scandals: The Complete List

Show Clark’s unbelievable incompetence and lack of integrity

https://thetyee.ca/Opinion/2017/04/10/BC-Liberal-Falsehoods-Scandals-Whole-List/

#21 The Fat Lady on 04.12.17 at 7:13 pm

LLLLLLLaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa!!!!

#22 crdt on 04.12.17 at 7:16 pm

Imagine, no Tony Robbins coaching buyers to buy Alyssa’s property. Poor real estate professional could not get people to fight each other to see who could hemorrhage more future dollars for their delight… What is happening, how could buyers become so stupid so quickly. In my hood, realtors are urging “home owners” to sell because “demand” is high and listings are “scarce”… I had a real estate agent try to get me into a bidding war on a car, inviting me to bid on his vehicle, wasting everyone’s freaking time. Can’t wait to see these marketing geniuses get their well deserved reality check..

#23 Ret on 04.12.17 at 7:16 pm

We will be at full economic capacity mid-2018. Why then will RE be dropping? Now I’m really confused.

#24 rainclouds on 04.12.17 at 7:16 pm

Just checked. Poloz will be with us for 3 more years. Lots of time to make the Cdn economy a complete shambles.

There is a mechanism for turfing tubbys hapless minion. Albeit unlikely….

————————————————————————————

The Governor is appointed for a fixed term of seven years.

If a profound disagreement on the conduct of monetary policy were to occur, the Minister of Finance, with the Cabinet’s authorization, can issue a written directive to the Governor specifying a change in policy. No directive has ever been issued.

#25 Carlyle on 04.12.17 at 7:29 pm

My landlord lives in Dubai with son in Vancouver. Wife and I have lived in CityPlace for 6 years since 2011, all of the sudden landlord wants to sell. They even offered us $1000 to move out by June which we turned down – our current rent is $250/mth under market rates and locked in until March 2018.

The condo has been listed at $440,000. The identical unit above us sold for $379,000 in December. 1BR with den (nook in wall) 570 sq ft with parking. No locker.

The place will show TERRIBLY with us living in it. We are bursting at the seams … would have moved long ago if not for amazing rent rate.

Debating if we should move (slightly bigge places are 1900), or hope the place doesn’t sell …

#26 umm... on 04.12.17 at 7:30 pm

“In Canada a housing downturn would involve sizable spillovers to the broader economy through the supply chain and impact on employment and consumption. “

…….

ugh, TSX look out below…oil to the rescue?

#27 TrumpForTheAges on 04.12.17 at 7:31 pm

I like the evidence based approach.

A counter view however in looking at the data is we are entering a period of stagflation. Low interest rates for too long hasn’t kick started the growth required to service the debt taken on. The US is a glaring example…..GDP growth continues to decline with Q1 forecasted at 0.6%. I believe Garth in reference to Canada having a similar quarter last year you called it pathetic. There are now legitimate concerns whether Trump will get any of his pro growth initiatives through. And as we know the US is the bellwhether for Canadian growth projections.

#28 Andrew Woburn on 04.12.17 at 7:34 pm

Cheap money is the prime reason for the urban RE bubble but another big factor has to be, that’s where the jobs are. What happens to long term prices when the jobs melt away?

“Chinese firm halves worker costs by hiring army of robots to sort out 200,000 packages a day”

http://www.scmp.com/news/china/society/article/2086662/chinese-firm-cuts-costs-hiring-army-robots-sort-out-200000

#29 The Wet Coast on 04.12.17 at 7:44 pm

I like Ross Kay’s explanation using phases of a bubble burst. In Vancouver, we’ve gone through phase 1 where sellers can’t get what they thought they could. We are in Phase 2 is where they pull them of the market and wait for the euphoria to return, Phase 3 is panic and prices fall hard, that likely starts this fall. Toronto your a year behind us. But look for the pattern.

#30 905er on 04.12.17 at 7:46 pm

Carlyle,
A landlord cannot force a tenant to move because the house/condo is being sold. Only if a family member is moving in does the tenant have to move and even that can only occur at the end of the tenancy.

#31 Poloz aka mr.ponzi on 04.12.17 at 7:51 pm

Write to Sousa, T2 , Kathleen and lets these CONservatives shills know you are not happy and want them to take action. Ive written to all three many times. We can complain here but maybe complaining to them might help.

#32 WUL on 04.12.17 at 7:54 pm

Thank you Garth.

Speaking of The Imminent Troubles, in my humble estimation, this is the best article I have seen on the aftermath of our wildfire in Ft. Mac of a year ago. A little powerhouse one horse town.

No sooner than oil prices pounded our future, Mother Nature showed up with the “… magnitude of her fury and her power.” (Jackson Browne)

We have been handed what might be a near mortal wounds.

http://www.macleans.ca/news/canada/why-fort-mcmurray-will-never-be-the-same/

#33 Northwind on 04.12.17 at 8:12 pm

For your record, Poloz is the idiot who just two weeks ago argued that GTA’s hot housing market fueled by strong economy: http://www.cbc.ca/news/canada/toronto/stephen-poloz-toronto-housing-1.4044206 and shot down any suggestion the Bank’s easy money policy is responsible for home prices in cities like Toronto and Vancouver rising at double-digit annual rates – http://www.macleans.ca/economy/economicanalysis/the-bank-of-canadas-muddled-message-on-house-prices/

Now the damage of his policy is too big to hide, and his tone changed. He is so stupid that he cannot even see things under his nose, how can he be a qualified governor?

#34 Robert on 04.12.17 at 8:15 pm

3 weeks ago my neighbour sold Richmond Hill townhome center unit for 975k. Up 500k from 18 months ago. I listed same design house town for 799k. Offer night was tonight: crickets. Upping price to 900k on a relist – any greater fools out there?

#35 Stone on 04.12.17 at 8:16 pm

So Garth,
Should everything finally crumble and tank for real estate, how will this impact your blog. You’ve had a good run but what’s next?

#36 NS Guy on 04.12.17 at 8:23 pm

Poloz warns of speculation in the Toronto (and other) housing markets. But then he keeps interest rates unchanged.

Time to FIRE Poloz, outsource his $600k/year job, replace him with an AI robot. Seriously.

#37 sky is falling on 04.12.17 at 8:24 pm

ok so one idiot pays 730K for some crappy townhouse and because the masses don’t follow suit that means real estate is crashing? what if that guy who paid 730 had an IQ of -4?

meaningless..

#38 NS Guy on 04.12.17 at 8:24 pm

“…the Green platform includes a 400% increase in land transfer taxes ($236,000 on a $3.5 million shack), a doubling of the Chinese dudes tax (to 30%), big jumps in property tax rates, and a capital gains tax to be levied on all home sales after a lifetime exemption of $750,000…”

Oh yes, BABY! Bring it ON! Should have happened 15 years ago.

#39 bdwy sktrn on 04.12.17 at 8:27 pm

#5 I’m stupid on 04.12.17 at 6:40 pm
you need to sell to access the gains. You can’t sell one brick at a time as you need income to live. It’s dead equity

—————-
in dirty east van a home owner could do this;
main/upstairs – 3500/month
2br basmt – 1600/month
lg. garage – 350/month
(less costs 450/month)

oceanfront rental in mx. 750/month

net +4250/month for iced drinks, ceviche and tacos.

#40 The Smaller Fool TM on 04.12.17 at 8:32 pm

The scenario happens every year. I can give you examples from 2-3 years ago when soft patches in the market led to sales well below market value and tod you before that smart buyers should take advantage of these, rather than sellers panicking.

Foolish sellers who were conned by agents into taking the only offer they got. That is not the ‘market speaking’.. just some anomaly. As we speak, the market is VERY hot in some areas. Driving by a house for sale in the neighborhood last night , there were countless >100k cars lined up for what most likely will be an epic bidding war. Nice 3 bdrm bungalow, asking $1.588 mil..I’ll let you know how much it’ll go over, my guess is at least 1 mil. With the looming ‘bad’ budget coming, it’s a sure sign many buyers don’t care, they are loaded and ready to unload.

The more modest homes, going to buyers who are actually stretching, are in the doldrums. for now.. I could have told you this even 3 weeks ago.. but it’ll pass, as sure as my name is….The Smaller Fool TM

#41 Ace Goodheart on 04.12.17 at 8:34 pm

“So, Alyssa, why would anyone buy now? Would you?”

Now might actually be the best time, between today and April 27th (or whenever the Ontario government releases its new “market cooling” measures) to purchase a detached house in Toronto.

Remember, be fearful when others are greedy, and greedy when others are fearful. TO houses just took a multi 100K hit due to people being afraid of what the Provincial government is going to do to make houses more affordable.

Reality is, the government is going to do very little, likely and not nearly as much as everyone is afraid they will. Their measures will not have much of an effect on Toronto house prices.

People are also afraid as to what a rise in interest rates could do to home values. Again, the fear is likely quite a bit over wrought and the reality will be far less earth shattering.

Now likely is the best time to slide into a cool detached in the 6ix, for a price that is likely several hundred grand less than it will be come summer.

The best motivator, by far and wide, for low prices and mis-pricing of assets, is fear.

#42 mathman on 04.12.17 at 8:35 pm

the smart people I know think our real estate market is a bubble. The smartest people I know think it is the largest real estate bubble in our countries history.

the reality is, if our country was a bell curve the absolute right tail is this blog. The median is the sheep who have all bought the RE BS hook line and sinker and who will be slaughtered.

you have people making 40k driving 50k cars, facebook millonaires are everywhere. The streets are paved with gold in this country.

its a shame, a decade of potential investment and entreprenurship wasted on RE. We have become a joke to those outside our borders.

stay liquid and apply for your US visa’s my friends.

Math

#43 bdwy sktrn on 04.12.17 at 8:37 pm

#29 The Wet Coast on 04.12.17 at 7:44 pm
I like Ross Kay’s explanation using phases of a bubble burst. In Vancouver, we’ve gone through phase 1 where sellers can’t get what they thought they could. We are in Phase 2 is where they pull them of the market and wait for the euphoria to return…

———————–
ross and/or you are just shitting us, right?

2316 GRAVELEY STREET

Just sold (this week) – less than a week to sell. sold over a quarter million above ask.
Over 2m.
Way too close to busy nanaimo st.

high as ever, maybe higher.

VAN had it’s ‘bust’ and now prices are still going up.

if this is any indication long branch bungs are headed to 2m. less overseas $$ in 416 so they may stop at 1.75.

#44 45north on 04.12.17 at 8:39 pm

With every day that passes it looks like peak house is in the rear view.

here’s a campaign slogan for Christy Clark: your mortgage stays the same

– 400% increase in land transfer tax : your mortgage stays the same

– doubling of foreign buyers tax: your mortgage stays the same

– big jumps in property tax rates: your mortgage stays the same

– capital gains tax on all home sales: your mortgage stays the same

© 45north

#45 Ray Skunk on 04.12.17 at 8:43 pm

It should be made law that any offer at, or above, listing price (should it be the only offer) be accepted.

That should cut out the bullshit.

#46 The Smaller Fool TM on 04.12.17 at 8:48 pm

Ross Kay is a fool, maybe the greatest. What he is describing is some variation of a corrective Elliot wave. If he was half as smart as he think he is, he;d recognize that a corrective phase is followed, necessarily, by another impulsive move higher. Either that, or he has his whole terminology wrong and he is even more confused that he appears. EVERY move in price, either up or down, is the result of someone panicking. No panic = buyers bid below market, sellers demand above = no deal.

#47 bigtowne on 04.12.17 at 8:54 pm

Today in Parliament we witnessed Malala….such a singular beauty. She made a joke about her “honorary Canadian citizenship” regarding the requirement of a “Visa” for this timely visit. Give this angel a passport.

#48 Chaddywack on 04.12.17 at 8:56 pm

I don’t understand how the house in this example was devalued because she didn’t sign the offer back?

This was happening in Vancouver before too and they would just re-list higher and usually sell for that price. If an offer wasn’t accepted before at a list of $630k it should be clear to a potential buyer that it was far too low to be acceptable to the seller.

#49 Gasbag Boomer on 04.12.17 at 9:03 pm

The Greater Fool Blog bubble has burst! Nothing to talk about now…..

#50 Vit on 04.12.17 at 9:03 pm

Worth reading ,what we can expect in a coming budget

https://www.thestar.com/news/queenspark/2017/04/12/wynne-wants-to-cool-frantic-greater-toronto-real-estate-market.html

#51 A Reply to #27 TrumpForTheAges on 04.12.17 at 9:07 pm

… bellwether (not bellwhether)…. D’oh!

#52 Christopher Spavins on 04.12.17 at 9:09 pm

Your B head in Mr. Market reminded me of a tune from the 80’s entitled, “Is this the future?” by Fatback

https://www.youtube.com/watch?v=v89zYN2oLDY

#53 The Smaller Fool TM on 04.12.17 at 9:17 pm

People need to listen closer to what Poloz is saying: he’s not worried, because there’s no big credit expansion. There’s real money backing the deals ie not his problem.

#54 WUL on 04.12.17 at 9:23 pm

#47 bigtowne

I concur. Was thinking the same and was going to comment along same lines. Artfully expressed by you. Grace must be her middle name.

#55 Irrational Thinker on 04.12.17 at 9:31 pm

It’s quit clear who owners are, vs renters in tonight’s comments section.

Note to Fat Lady. One syllable song has no melody.

#56 I'm stupid on 04.12.17 at 9:32 pm

#39 bdwy sktrn

Or bail have 2million making over 100k while drinking in Mexico. If my home represented the majority of my net worth (especially if I was over 55 and had no dependants) I’d bail.

I’ve had rental homes in the past. They’re always more headache then their worth. I’m a very punctual and honest person so I get really upset when rent was late or have my time wasted. I would always be upset for one reason or another so I decided it wasn’t worth the aggravation. I recently started entertaining the idea of doing it again if the numbers make sense but I would do commercial buildings only with property manager. It’s easy to count money on a spreadsheet but reality is always different.

#57 Sean on 04.12.17 at 9:35 pm

Man, it’s been a while since I read your posts Garth.

It’s been years of reading and nothing happening. Now you even you gotta admit, you can’t feel good about the I told you so moment anymore.

We are so screwed if this bursts. Everyone thinks they are a millionaire and have been living lavish lifestyles based on what their homes are worth. They took out debt to their eyeballs to afford shacks. Sure foreigners fanned the flames, but A LOT of people are going to be feeling it. This is going to be felt everywhere if it bursts. This has boosted every sector of the economy. It’s gotten way outta control. Everyone is going to suffer in this mania and the government just watched it happen.

Can anyone even engineer a soft landing anymore?

I rather rent for the rest of my life than see this thing burst so I can afford a home. We will all lose.

#58 Mud on 04.12.17 at 9:41 pm

905er. You’re wrong. Landlord can absolutely terminate a tenancy by selling their property to a non relative.

#59 Leo Trollstoy on 04.12.17 at 9:43 pm

Putzlutz won’t raise rates by any meaningful amount. The rise will add like $50 to your monthly bill. The Canadian economy is getting stronger, inflation is healthy and things are looking good.

#60 Pete from St. cesaire on 04.12.17 at 9:43 pm

Driving by a house for sale in the neighborhood last night , there were countless >100k cars lined up for what most likely will be an epic bidding war.
—————————————————
Typical stupid behaviour. None of these people can truly afford those cars. Nor can they afford that house. The wealthy don’t enter into bidding wars against John Q. Public. The aspirational 14% along with rest of the ‘moisters’ will be in for a rude shock shortly when they suddenly realize that they have NO money at all, and that their epic debt will follow them forever.

#61 Leo Trollstoy on 04.12.17 at 9:47 pm

#23 Ret on 04.12.17 at 7:16 pm
We will be at full economic capacity mid-2018. Why then will RE be dropping? Now I’m really confused.

Exactly.

#62 Dr. Bob on 04.12.17 at 9:49 pm

Peak houses prices may have passed in Toronto, but not yet in Hamilton. Neighbor just sold way over asking. The prospective house hunters were all from the Toronto area.

#63 Self Directed on 04.12.17 at 10:02 pm

A recipe for sustained house price increases:

1. Canadian economy is crushin’ it lately
2. More jobs
3. More inflation
4. Full economic capacity in 2018
5. A 0.25 rate hike (whoop!)

Garth, your argument for a rate hike supports the housing bubble. A couple of rate hikes (if it even happens) will do nothing to lower housing prices. Sticky. Remember?

#64 WUL on 04.12.17 at 10:03 pm

And Hon. Honcho Host, if I may, and then I will shuddup.

Re the Taiga:

I might have added, anecdotally, that the Nova Scotian that drove me north in the evac last year is feeling the effects of the suppression of costs, salaries etc. by the diggers of bitumen. With a simple shift change and wage reductions, his salary is $60,000 less this year than last.

#65 Eastend on 04.12.17 at 10:05 pm

Famous builder sold new phase, 50 houses in two hours -location Cambridge, ON. Email came around 4.50 pm, sales office opened @ 5.00.
All gone in 60 min..
Many of the people standing in the line were first time home buyers…go figure…

#66 Self Directed on 04.12.17 at 10:05 pm

#59 Pete from St. cesaire on 04.12.17 at 9:43 pm

Driving by a house for sale in the neighborhood last night , there were countless >100k cars lined up for what most likely will be an epic bidding war.
—————————————————
Typical stupid behaviour. None of these people can truly afford those cars. Nor can they afford that house. The wealthy don’t enter into bidding wars against John Q. Public. The aspirational 14% along with rest of the ‘moisters’ will be in for a rude shock shortly when they suddenly realize that they have NO money at all, and that their epic debt will follow them forever.

Uhh… Pete… those A7’s and Beemers were the realtors. On possession day, there will be a KIA in the drive. Bet on it.

#67 Tony on 04.12.17 at 10:13 pm

Re: #41 Ace Goodheart on 04.12.17 at 8:34 pm

All they have to do is tax the idiots who pay 5 times what a house is worth to the eyeballs and they’ll head for the hills never to return ever again. The Chinese will all flood into Seattle real estate driving the average house price from 150,000 dollars to 15 million dollars.

#68 Bank of Millenial on 04.12.17 at 10:14 pm

#52 The Smaller Fool TM

We all watched Poloz and his predecessors say a lot of conjecture. Look into the data yourself and you can find roughly the answers you are seeking.

Perhaps credit isn’t expanding as quickly because private citizens and businesses willing to borrow are maxed out at current rates, or the economic conditions going forward appears less certain.

That doesn’t really align with everyone else Poloz talked about though, there are many contradictions in the sound-bytes I’ve seen.

#69 OttawaGuyRenting on 04.12.17 at 10:22 pm

Nice use of paragraph headers man. Diggin it

#70 bdwy sktrn on 04.12.17 at 10:23 pm

w8th, false creek, nice 1br, views, tasteful

my friend (a bad [email protected]) listed it last night , sold it today.

700k
one bedroom.

#71 rainclouds on 04.12.17 at 10:23 pm

#39

don’t forget the tax on the rental income. Not to mention being a landlord……been there, no thx!

Assuming the hacienda in east van is worth 2 million(for now) @6% that’s 10k per month. =very nice place anywhere in the world

No tenants. Mo money. Me happy.

#72 Smoking Man on 04.12.17 at 10:39 pm

None of you have it right.

A book in six words.

Keys, A beamer, tow truck, Gone.

#73 traderJim on 04.12.17 at 10:52 pm

Well if you can’t beat ’em…

Let’s just tax everything. Tax people who pay too much for houses. Tax people who pay too little. Tax people for working, not working, buying, selling, renovating, cutting the lawn.

We could tax fast food, sugary food, fatty food, coffee, chocolate cake, brownies and ice cream.

We could have a tax on tall people, people we don’t like, ugly people , attractive people.

Why not tax water use, air use, road use? We should tax people who are more active as they use more resources. And we could tax fat people for using too much healthcare.

Let’s have an orgy of taxes (we should tax orgies too of course).

Yup, taxes are the answer to everything, always.

(Until the people paying the taxes wise up of course)

#74 Ponzius Pilatus on 04.12.17 at 11:00 pm

Due the relentless rain and long winter BC has been blessed with record breaking snow packs in the mountains.
Once the weather warms up, areas close to the Fraser may be blessed with record flooding.
Potentially affected home owners in Ditchmond may wanna contact their insurance advis(e,o)r.
I always wondered why people would build 4 million dollar homes on a floodplain.

#75 BossLady on 04.12.17 at 11:00 pm

Market is still sizzling. This latest blog entry with one or two far flung examples as signs of a possible market decline is just nonsense.

#76 Ponzius Pilatus on 04.12.17 at 11:03 pm

Can’t wait to see the Kristy bimbo being kicked out.

#77 Sparky55 on 04.12.17 at 11:08 pm

Wild Bill’s getting slammed around
—————————————–
Bill Morneau’s worrying detachment from economic reality

http://business.financialpost.com/fp-comment/bill-morneaus-worrying-detachment-from-economic-reality

#78 Lexie on 04.12.17 at 11:19 pm

#25 Carlyle:
A landlord must compensate you with one months rent and give you two months notice but only if you are on a month to month lease. If you are in a fixed lease as you stated you do not have to leave until your lease is up regardless of the unit being sold. Buyer must assume the tenant.

http://www2.gov.bc.ca/gov/content/housing-tenancy/residential-tenancies/ending-a-tenancy/landlord-notice/two-month

#79 NOTHING SURPRISES on 04.12.17 at 11:20 pm

Canadian Snowbird Observations Update:

To compound the content of the blog, consider the following.

– The U.S. banking system is in serious trouble.
May be in the early stages of a major banking crisis.

– Companies borrowing money at a far slower rate then a couple years ago.

– Banks issuing new loans and leases at a slower rate than a year ago.

– Real estate loan growth has slowed to a crawl.

– Just like commercial, industrial, and real estate loans, consumer loan growth has plummeted in recent months.

If this continues, the U.S. economy is going to have BIG problems.
Credit is the oil that runs the economy. When credit is flowing, the economy fires on all cylinders. When it dries up, the economy can grind to a halt.

#80 waiting on the westcoast on 04.12.17 at 11:21 pm

Caught cab to YVR today… Driver tells me he wants to get his real estate license and start making some big money.

#81 Alex on 04.12.17 at 11:21 pm

Garth, I got these stats from Carson Horner Real Estate Group over email today. Property prices are pushing upwards again in Vancouver. This situation will last 2-3 years at minimum since there is no catalyst to revert it.

DETACHED HOMES
Sales▲ = 1,150 (54% increase from Feb.)
Benchmark Price▲ = $1,489,400 (10.9% increase from Feb.)

CONDOS/APARTMENTS
Sales▲ = 1,841 (44% increase from Feb.)
Benchmark Price ▲ = $537,400 (2.1% increase from Feb.)

TOWNHOMES
Sales▲ = 588 (46% increase from Feb.)
Benchmark Price▲ = $685,100 (1.4% increase from Feb.)

#82 Vit on 04.12.17 at 11:22 pm

From TheStar——
Sousa cautioned that going after average families buying and selling homes or the system of real estate agents taking bids is not the answer.

“We don’t want to interfere terribly in these matters . . . this is a free market after all,” said the treasurer, whose measures will come in a budget expected as early as April 27.

#83 Vit on 04.12.17 at 11:26 pm

Ones public learn that no changes coming to real estate market I expect a shrinking inventory and another price jump by the and of May .

#84 NOTHING SURPRISES on 04.12.17 at 11:27 pm

Watch the U.S.

The MSM is telling the full economic story!!

#85 AfterTheHouseSold on 04.12.17 at 11:34 pm

#35 Stone
“Should everything finally crumble and tank for real estate, how will this impact your blog. You’ve had a good run but what’s next?”

Squirrel recipes.

#86 NOTHING SURPRISES on 04.12.17 at 11:35 pm

Watch the U.S.

The MSM is not paying attention to the real economic situation developing!!

I was talking to the Canadian Snowbird in Florida that sometimes posts on the blog and he has very realistic information that will only add to the problems facing Canucks.

#87 Gold Member on 04.12.17 at 11:39 pm

Forget bricks and mortar….should be dumping stocks and real estate and buying Gold….Fed’s hands are tied to slow growth

#88 GTA 905 on 04.12.17 at 11:45 pm

Does anyone know how low did the house prices drop in last few housing bubble burst or soft landing (in terms of percent and when)?

#89 Popeye the Sailor Man on 04.12.17 at 11:47 pm

Hi Garth or Blog dogs,

If they implement Capital gains on our principle residence will they have to treat losses the same as investments and grant capital losses.

It seems to me this would be the worst time to do this since we are likely going to see losses for many folk in the next couple of years. This may back fire and drain coffers not fill them.

This is our leaders also thinking real-estate can’t go down at least not by much or reaching deep into our pockets of the gains over the last 5 years.

THOUGHTS?

#90 Popeye the Sailor Man on 04.13.17 at 12:00 am

The first thing I would do is get as high an assessment of my home the day they pass this tax to protect myself, and likely show a loss if I sell in a few years. I have spent money on improvements and repairs and did not track it because it is not deductible.

This would be quite the mess to implement fairly and changes the market drastically.

I have said before they have made investments complicated for most people. The simple investments like savings bonds and GICs and Mutual funds under perform and give only -1% to +3% if lucky after fees and inflation. So people will leverage there debt on a house maybe two because they can understand that better. Once you start making housing a mind-field to navigate to make a buck it will take out a lot of buyers that won’t bother.

Maybe they will ask for more money off there pay for even more CPP since most don’t understand things like risk, investments and wont bother to learn.

#91 Jas on 04.13.17 at 12:05 am

Garth,
as you said in one of your earlier posts, the govt. doesn’t have the ‘stones’ to take action to fix RE problem; otherwise what is there to think about? It can be fixed in a day…IN A DAY….alas ! no ‘stones’
Kick the idiots out at the next general election.
But I am worried about my province (BC) if the orange color comes in few weeks…not good.

#92 AisA on 04.13.17 at 12:33 am

A pox on all your houses!

LOL !!!

#93 Engineering bubbles on 04.13.17 at 12:36 am

why of all things was it housing that was in the center of the exuberance on Wall Street?
There are a bunch of nice things about housing. First, nobody feels bad when prices go up: Neither the banker nor the households nor the politician. That’s also true for a stock market boom but a housing boom is easier to engineer by expanding credit. Second, a housing boom creates a whole lot of construction activity. It creates moderately skilled jobs like work for the bricklayer or for the guy setting up the foundation. So it provides a lot of employment for people who were being laid off and that’s very good because it takes pressure off of the system. If this goes on forever it’s fantastic. But how many houses can you build in an industrial country? At some point it reaches an end and that’s the problem.

http://www.zerohedge.com/news/2017-04-12/rajan-warns-fundamental-problems-financial-crisis-are-still-us

#94 mouldyinYVR on 04.13.17 at 12:38 am

Always a fun video to watch –
https://www.youtube.com/watch?v=hqOn5XEm86A
but as it says – the ride ain’t over yet!!

#95 AisA on 04.13.17 at 12:38 am

The best part of today’s BOC conference was when Poloz said (in not so few words) Toronto buyers are bat poop nutzo. Don’t tell me I’m the only one who caught that on this astute blog.

#96 Jas on 04.13.17 at 12:40 am

Here is what I think is going to happen before the slide begins in RE prices:
As the prime/fixed rate starts inching up in Canada, those sitting on the sidelines will start entering the market because it is the only way they can lock-in their rate. And that, I think will cause one last push up in RE prices. From then on….it will be a smooth and perhaps rough slide….

And how long will the prices slide for and then how long will it take for the prices to reach again to 2017 level? Anyone want to share their thoughts with reasoning?

#97 paulo on 04.13.17 at 12:44 am

#45 Ray Skunk
I think you are absolutely correct, There is no doubt in my mind that the real estate marketing cartels in this country get away with all kinds of crap, and despite consumer rights manage to horde information and in the end put purchasers and sellers at a disadvantage.
Maybe we should adopt the system used in my native new Zealand: most sales of residential homes are done by way of public auction. a seller retains a auctioneer, whom advertises the property and auction. there is usually a couple of weeks where potential bidders are able to inspect the property or have professional inspections performed, than the auction is held on the front lawn of the property, usually on a Saturday morning. the bidders are able to bid in person or by way of a professional bidders agent. the successful bidder is normally required to place a 10% deposit that day and complete within 5 business days, most bidders have there financing commitments in place or are cash
All local auction results are public information and usually reported in the next Thursdays local paper or you can get disclosure at the town hall. the process is completely transparent the bidders can access all recent sales information and prices so as to be able to make informed fair market value bids

#98 diharv on 04.13.17 at 12:54 am

Greedy sellers passing up offers in hopes of more as values decrease . Love it . This not accepting an offer that is equal or greater than asking is BS and should be illegal.

#99 paulo on 04.13.17 at 1:16 am

#84 GTA
In response to your question having been through 3 corrections 1989/90 in Toronto the correction was about
30% down when done,took a couple of years and a decade to recover
in the USA 2008 the correction was national and varied from 30% mostly NE east coast up to 70% in overheated markets such as NV,CA Etc- Similar to Toronto & Vancouver , my RI Property declined about 30%. In Spain 2000/2001 my spouses condo in Barcelona lost 60% and our house in Maliga (southern Spain) lost 45% fortunately in our case all properties had at least a 50% equity position so it was paper loss for the most part
Based on my first hand experience 3 times around on 2 continents and 3 countries the correction that will hit the GTA will be epic as the debt and numbers are off the chart and both significantly higher than 2008!
out lying areas around the GTA will be decimated draw a 200 km circle using downtown Toronto as the center

I assume you are in Mississauga or close by, My Advice:
time to get out,yesterday in fact grab your tax free capitol gain and rent for a year or two,look to get back in after the dust (fall out) has setteled. GOOD LUCK!

#100 CH on 04.13.17 at 1:23 am

“Our economy’s crushed it lately”

Lol, Heck yeah!!! Vancouver is the number 1 resort city in the world. Nothing but locals shopping in the luxury car district and the new luxury watch district. you can keep your progressive balanced economy Germany, you suck.

#101 CH on 04.13.17 at 1:28 am

“There are only four countries in the developed world where a major housing correction seems likely, says rating agency Moody’s”

If you believe Moodys I have a derivative made from a basket of loans I’d like to sell you, rated AAA by Moodys

#102 Lots of worried shysters on here on 04.13.17 at 1:48 am

Look how many shyster realtors on here posting their nonsense. They are worried as they should be. The game is over . Happy Housing Crash Everyone! :-)

#103 A Yank in BC on 04.13.17 at 2:01 am

Call me old fashioned if you want.. but if someone agrees to pay your formal advertised asking price for something, doesn’t that mean it’s sold?

#104 Karma on 04.13.17 at 2:44 am

#57 Mud on 04.12.17 at 9:41 pm
“905er. You’re wrong. Landlord can absolutely terminate a tenancy by selling their property to a non relative.”

No they can not. They can sell it, but it will be occupied until the end of the lease term.

#105 Dan.t on 04.13.17 at 3:32 am

Wait a minute. I read it in the Vancouver Sun that every thing is cool.

Then the Vancouver Province news also said it’s all good and always a great time to buy and ran a story about how to buy and live in a 200 square foot garage for only 399k or actually buy a livable and hip 1 bedroom for ONLY 488K!

Then one of the Banks told me that ” I am richer than I think” and if I get Mom to give me a down payment, I can afford that 399K garage (just to get a piece of real estate and be all “growed” up and a smart “investor” )

And the Real Estate Professional who must have a at least a bachelor or maybe even a Masters degree in economics told me that real estate only EVER EVER goes up,

So I can just flip it for 699k if my 40k gross salary a year can’t cover the costs anymore…or I can use my credit card until I want to cash out…simple! Easy money- just buy and do nothing and make 200+k.

Then my co-workers all told me how awesome that is, and they look at me now like I finally get it. That is the best part!

Now we are all super smart investors…even the part-time workers, they pooled their money and are even smarter because they own like 4 “investment properties”.

Now when I go to Starbucks, grocery store, Tim Hortons, and especially Home Depot, I can join in the real estate conversations, because seriously, what else is there to talk about in Canada?

There you go, that above is why this mess was created.

-Real estate sponsored news since 2004 brainwashing the masses

-Government policies to encourage borrowing and to actively inflate housing and spur growth in only one sector.

-massive group think, reinforced by insane house gains and still the belief housing only ever goes up.

-Super lax lending practices, fraud, deceptive marketing and massive speculation with zero regulation or consequences ….

-can go on but not enough time.

SO, the masses in Canada now have to get slapped in the face by real estate to even wake up to the fact that maybe something is not right.

Then they have to get punched in the nose so they will start to take note that massive debt just to buy overinflated properties might not have been the best idea in the face of falling or stagnant prices.

Finally they have to get kicked hard in the groin, then maybe they will see falling prices and the massive bubble they are living in and rush to the exits…most likely all at the same time.

Real estate is now culturally ingrained in Canada society. It is the be all and end all of success so it’s gonna take lots of hurt to change it. Thank god it looks like it’s coming. Like a freight train barrelling down especially on the highly leveraged and heavily indebted buyers but it’s gonna hit everyone to some degree.

It can’t happen soon enough. But then again, affordable housing is totally overrated (sarcasm again).

#106 Stock Picker on 04.13.17 at 4:01 am

An additional tax on capital gain for real estate is wildly off the mark since people have zero mortgage deductibility. Only when we catch up to the US and not have to pay mortgages with after tax dollars will the concept become viable. It’s our governments own fault they dug themselves into a deep hole, borrowing because money is cheap, that an explosion in personal debt has occurred. Governments must take their own medicine and stop deficit spending, its corrupt.

But….bwahahahahahaha……Trudeau has other ideas and the Liberal lap dog Poloz will deny deny deny until the country is already off a cliff…..as long as the Libtards can keep spending on pandering.

#107 Mike in Toronto on 04.13.17 at 5:53 am

A friend of ours just bought a house in Whitby.

Single income, $70k per year. $20k deposit, no permanent residency, little Canadian work history, minimum downpayment, $700k mortgage approved by one of the big banks.

It seems having a pulse will still get you a mortgage. This is going to continue a long time.

#108 KOOL AID on 04.13.17 at 6:51 am

# 42

“stay liquid and apply for your US visa’s my friends”

Top tax bracket 54%, hydro rates double, carbon taxes and now Liberals want to put additional burdens & taxes on our homes! It’s too all too much, these misaligned policy moves from this government will likely prompt the most skilled, educated, well capitalized & experienced Canadians to earn & live outside of our borders.

#109 Jason on 04.13.17 at 7:10 am

The main indicator of a housing correction is on the way would be the default/foreclosure rate, which at the moment is extremely low. Maybe those future interest rate increases will push defaults up but a couple .25% increases next year is way too little to produce a significant correction.

History proves you incorrect. Default rates are a poor indicator of economic distress. — Garth

#110 down and out on 04.13.17 at 7:44 am

I believe Poloz missed an opportunity to tap the brakes on the market and check if it has any effect at all .The BofC could end up chasing the inflation rate never controlling when the masses realizes the BofC is spineless.Rinse and repeat.

#111 A Reply to #41 Ace Goodheart on 04.13.17 at 7:48 am

None of your financial or economic decisions are affected by market interest rates, are they?

Let me ask you this: Do you think interest rates will rise 5%, maybe even 10%, over the next 35 years. Hint: I’ve seen 22% (Aug. 1981).

Homeowners with modest household incomes and high debt levels will struggle with debt servicing if and when interest rates rise. (It won’t be pretty.)

#112 FLHTK on 04.13.17 at 8:17 am

oh ya the housing market will cool off, prices will fall abit and then people will be house horny all over for the lower prices driving the market up again…..this isn’t cooling anytime soon, interest rates need to climb in order for that to happen. Especially with the comment above mine…doesn’t even have permanent residence, 70k/yr and approved for 700k….wow!

#113 };-) aka Devil's Advocate on 04.13.17 at 8:27 am

#16 Post on 04.12.17 at 6:56 pm
CONFIRMED: Poloz is an idiot. He says that even a 5% increase in rates wouldn’t slow down the housing market in Canada.

Poloz is right, it wouldn’t slow down the markets. The markets would merely adjust and resume. Real estate prices would take a bit of a hit in the short term, but not nearly what you might expect.

It’s about supply and demand. It’s about the supply side… there is little to none.

On the demand side… look at it, EVERYTHING it seems is real estate. I can’t take a minute off to relax without being bombarded with house porn. HGTV this, MSN that… on the street all people want to talk about is houses, houses, houses or real estate this and that.

I would love for this market to tank, but I just don’t see it happening no matter what any level of government does. And really what business do they have trying to tamper with such free markets? Especially given their track record of results – NOT.

#114 Londoner on 04.13.17 at 8:38 am

So Moody’s says:

“In Canada a housing downturn would involve sizable spillovers to the broader economy through the supply chain and impact on employment and consumption. “

and Poloz says:

“we’ll have full economic capacity around the middle of 2018”

And this blog is calling “peak house” a few weeks ago. Uh, hello?

#115 Grey Dog on 04.13.17 at 8:48 am

Homes here in my enclave in Unionville, peaked when Donna (Garth noted her last fall) sold for 2.3. Since then the 4 to 6 homes SOLD just cannot touch 2M$ mark.

#116 TurnerNation on 04.13.17 at 8:50 am

The post, below unfortunately is more instructive than today’s weblog entry.
All which matters: 2.5% mortgages and Uppa Up.

Print this and stick to fridge and just Buya Da House :-(

————————–
#64 Eastend on 04.12.17 at 10:05 pm
Famous builder sold new phase, 50 houses in two hours -location Cambridge, ON. Email came around 4.50 pm, sales office opened @ 5.00.
All gone in 60 min..
Many of the people standing in the line were first time home buyers…go figure

#117 Londoner on 04.13.17 at 9:10 am

#103 Mike in Toronto

Oh really? $20k down on a $700k+ purchase = less than 3%. Min required for CMHC is 5%. Someone is telling porkies.

#118 Vit on 04.13.17 at 9:18 am

Looking for some advise from investors -landlords. Im looking for a some investment property in Barry . They still have free hold town homes for 380K. So its looks like a cash positive investment . Plus Barry has a strong price growth as well . So any cons and pros of buying property in Barry .???
Thanks in advance

#119 Londoner on 04.13.17 at 9:22 am

#107 A Reply to #41 Ace Goodheart

Central banks around the globe have stated their target is to maintain a 2% inflation rate. Do you know what kind of inflation is needed for 22% interest rates? If we ever get that kind of economic growth your last concern will be paying off the debt you incurred today.

Btw – 10% rise in rates = 5 bps, which is 5.5%

#120 Tater on 04.13.17 at 9:33 am

#109 };-) aka Devil’s Advocate on 04.13.17 at 8:27 am
#16 Post on 04.12.17 at 6:56 pm
CONFIRMED: Poloz is an idiot. He says that even a 5% increase in rates wouldn’t slow down the housing market in Canada.

Poloz is right, it wouldn’t slow down the markets. The markets would merely adjust and resume. Real estate prices would take a bit of a hit in the short term, but not nearly what you might expect.

It’s about supply and demand. It’s about the supply side… there is little to none.

On the demand side… look at it, EVERYTHING it seems is real estate. I can’t take a minute off to relax without being bombarded with house porn. HGTV this, MSN that… on the street all people want to talk about is houses, houses, houses or real estate this and that.

I would love for this market to tank, but I just don’t see it happening no matter what any level of government does. And really what business do they have trying to tamper with such free markets? Especially given their track record of results – NOT.
——————————————————————–
Remember the dot-com bust? Same thing. Everywhere you went people were talking about stocks. That’s part of the mania at the peak of bubbles.

#121 Ole Doberman on 04.13.17 at 9:34 am

Check out the New Brunswick government taxing people to the cajones:

https://www.armstrongeconomics.com/markets-by-sector/real_estate/why-real-estate-should-never-be-the-majority-of-your-portfolio/

“One woman they simply took the money out of her account sending her into overdraft conditions when they claimed she did $79,780 in renovations to her tiny 860 square foot home when no work was ever done.”

“This is why I rank property in the last category for investment. It should NEVER be everything. It is not movable. The population of Rome collapsed from 180AD because taxes kept rising and people were just forced to walk away.”

Doberman P.I does it again

#122 bigrider on 04.13.17 at 9:51 am

The house humping zombie apocalypse is on us and in its zenith here in the GTA. Too late to stop it as everyone is infected with the H1N1 (house number 1) Gottahumpahoma virus. Think movie World War Z.

Hate to say it but its my ethnicity that imported it back in the 1950’s and 60’s along with homemade tomato sauce , backyard garden/farms and veal “sangwiches”.

So be it.

#123 traderJim on 04.13.17 at 9:56 am

#107 re Interest rates

I also remember the periods of high rates (I would have thought that Paul Volcker’s example would have led other central bankers to have a backbone, but nooooo).

However, it would not be possible now for rates to rise more than a couple points (and even that is pushing it), since consumer and government debt is already at the breaking point.

If rates go to 6%, all hell breaks loose and the economy will tank. I just don’t see it happening.

Much more likely that after a few 25 bp increases, central banks are forced to reverse course, or at very best, stand pat.

#124 Bat Flipper on 04.13.17 at 10:00 am

Bad News:
Let’s compare Toronto housing market to Shipping. Back in 2008, there was a shipping Boom due the commodities boom, every bulk shipper had so much demand, they ordered tons of ships to meet demand on massive levels of debt. Then one day the shipping demand plummeted with commodities. The Bulk Shippers had already bought so many boats, but most were sitting around having to accept cheap contracts to pay the bills.

This is similar to Condos in Toronto. Huge housing demand, so speculators are going out and buying 3,4,5,7, 10 units on paper. Putting down a measly 5% deposit and hoping to trade before or shortly after completion and make a tidy sum. This has been going on for years and is the reason for the condo boom in Toronto. Problem is when all these condos eventually come to market, we should have ghost towers built within out city.

Good News:
Market is picking up, full employment expected by 2018. Interest rates may rise sooner than later, but people will be working more and making more money. People still dream of that house with a garage and driveway, and we just don’t have enough, so Mills will still provide resistance to falling prices. Don’t expect anything dramatic on the single detached front.

What’s some possible outcomes:
– cheap rent in condos in the future. High condo vacancy rates as units either get sold or put up for rent at a loss.
– Homes with dirt will still be in high demand, but prices may flatline or decline a bit. The cost to build a home is still pretty expensive.
– As always, no one in Ontario is safe if the government makes changes.
– Somehow, I figure they will negatively impact the wrong group with the changes. Paper/Vacant investors/speculators are the biggest risk to the property values.

#125 N on 04.13.17 at 10:05 am

Trump and Interest Rates….

http://www.theglobeandmail.com/report-on-business/international-business/us-business/trump-says-dollar-getting-too-strong-report/article34688206/

#126 Samantha on 04.13.17 at 10:24 am

Why should not accepting an offer be illegal? Because you don’t like it maybe? While you are at it maybe you should abolish private property altogether?

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

#94 diharv on 04.13.17 at 12:54 am

Greedy sellers passing up offers in hopes of more as values decrease . Love it . This not accepting an offer that is equal or greater than asking is BS and should be illegal.

#127 Editrix on 04.13.17 at 10:39 am

Add this to the bottom of the sign in the picture:

“P.S. He’s 28.”

#128 TurnerNation on 04.13.17 at 10:40 am

Well well on TSX Genworth and Home Crapital stock prices are bloodening. Disclosure I bot long term Kaputs on MIC.TO few weeks ago.

#129 Ponzius Pilatus on 04.13.17 at 10:43 am

NDP proposes $ 400 rental subsidy.
The BC Marie Antoinette responds:
Christy Clark is disturbed by the idea of money going to “wealthy renters”
“That isn’t right,” Clark said. “We shouldn’t be redistributing our tax money to the very rich. We should be making sure that we spend our resources supporting people who are having trouble staying in their homes.”

#130 Rentin on 04.13.17 at 10:59 am

An offer of 660K with an ask south of 630K. Doesn’t sound like the fat lady has sung yet. So Alyssa missed the top by 10%, big deal. Garth missed it by 100%. He was crying wolf in 2009, it did dip with the US, but then rocketed towards almost a 300% gain normalized from the year 2000. So if Alyssa missed the top by 10% or 30% on the graph that Garth supplied, she would have done better than investing in any other asset class, especially if she had leveraged with a mortgage. If she had lived in it for any period of time, some of that would have been tax free to boot.

Definitely a risky “eggs in one basket” approach, but with risk behind her, she should have taken the profits off the table.

She could have even thumbed her nose at her personal investor and asked what kind of return he achieved during the same period…..

I think people have become disconnected on what a good annualized rate of return is.

But alas, she decides to hold and if there is one thing that people are worse at doing than investing in the right asset classes, it is failing to take the gains when they are right for the picking. You could have faulted her for waiting, but with a 730K-630K reduction and a 660K offer, I don’t know how many more signals are necessary.

#131 Ponzius Pilatus on 04.13.17 at 11:04 am

Another rainy day in The Best Place on Earth.
Now into 6 1/2 month of Permawinter.
As for RE:
As in Hotel California, they just can’t kill the beast.
You can check out any time but you can never leave.
Or: Hanging on in quiet desperation is the BC way.
Parked outside of Burnaby’s City Hall:
South Asian developers, blue prints rolled under their arm pits exit their luxury cars in an endless stream of profiteering.
No end in sight.

#132 Ned Flanders on 04.13.17 at 11:07 am

Who knows if the market will falter but there seems to be a lot more listings about to hit the market in Mississauga.

Last weekend, I angrily trod over to my neighbors house at 11.30 PM to complain about the construction noise (Sold for stupid money last fall and nobody moved in until the contractors showed up in Feb).

The contractor was a friendly enough guy and apologized and said he’s keep the noise down. We got to chatting and he said that the developer was promising a big bonus if all 9 properties they we’re working on we’re on the market by end of April. The original plan was to stagger them with a small crew until the end of the year.

Buyer beware by the way – they looked to be doing a pretty slap dash job.

#133 Paul on 04.13.17 at 11:14 am

#105 Jason on 04.13.17 at 7:10 am

The main indicator of a housing correction is on the way would be the default/foreclosure rate, which at the moment is extremely low. Maybe those future interest rate increases will push defaults up but a couple .25% increases next year is way too little to produce a significant correction.

History proves you incorrect. Default rates are a poor indicator of economic distress. — Garth
—————————————————————–
It’s almost impossible to default on a mortgage.
With prices rising double digits people under financial stress people sell before the bank steps in.

#134 Paul on 04.13.17 at 11:21 am

#94 diharv on 04.13.17 at 12:54 am

Greedy sellers passing up offers in hopes of more as values decrease . Love it . This not accepting an offer that is equal or greater than asking is BS and should be illegal
——————————————————————–Why is the answer to all problems. THERE SHOULD BE A LAW AGAINST THAT, we have too many laws and politicians that this there lot in life is to make more.

#135 FarSyd on 04.13.17 at 11:35 am

Garth, maybe the rollover is happening. Could be that Wynne’s words have cooled buyers short term. When her useless policies are announced and shown to have no effect, the double digit onslaught could resume. If so, right now could be the best time to buy in years. Or is that overthinking it ;)

#136 Damifino on 04.13.17 at 11:41 am

#99 A Yank in BC

Call me old fashioned if you want.. but if someone agrees to pay your formal advertised asking price for something, doesn’t that mean it’s sold?
————————————

A reasonable person might think so, wouldn’t they?

I guess I’m old fashioned too. As I recall from my high school law class (we’re going way back here). For a contract to become binding there has to be two things: offer and acceptance.

I don’t recall anything about offer, acceptance followed by ‘whoops, wait a minute… new offer’. What gives?

#137 Reply to #101 Dan T. on 04.13.17 at 11:56 am

Reply to #101 – Dan T.

You sir have hit the nail on the head. The reckoning cannot come soon enough. It will be sad for many, but vindicating for many others wise enough to exercise financial self-discipline and not buy the RE equivalent of a 1981 Toyota Corolla for $482,189.

#138 Steve on 04.13.17 at 12:21 pm

#113 Londoner

He said $20k deposit, not down.

#139 Brydle604 on 04.13.17 at 12:22 pm

Why Real Estate Should NEVER be the Majority of Your Portfolio
https://www.armstrongeconomics.com/markets-by-sector/real_estate/why-real-estate-should-never-be-the-majority-of-your-portfolio/
Why the New Brunswick government invented over $50M in renovations
http://www.cbc.ca/news/canada/new-brunswick/tax-scandal-service-new-brunswick-1.4052233

#140 Man of the Cloth on 04.13.17 at 1:08 pm

I remember back in 1989, early 1990, there were many real estate agents buying houses, quickly flipping them, trying to get rich quick. Suddenly, without anyone really appreciating what was happening, the market was in the process of collapsing. Many of these agents were left holding the bag on the houses they had not yet moved. It was a bloodbath in 1991. So many of them went breasts up. Doesn’t matter if you think you know the market or not, it will happen again, to the agents who are gamblers, and everyone else who doesn’t get out before the fat lady takes the stage. Govern yourself accordingly.

#141 When Will They Raise Rates? on 04.13.17 at 1:12 pm

#118 bigrider on 04.13.17 at 9:51 am

Hate to say it but its my ethnicity that imported it back in the 1950’s and 60’s along with homemade tomato sauce , backyard garden/farms and veal “sangwiches”.

So be it.
—————————–

Lemme guess… You are of the same ethnicity of this guy:

https://www.youtube.com/watch?v=jZeCpaxn3PM

:)

#142 TurnerNation on 04.13.17 at 1:19 pm

I wonder if new mortgage or housing regs leaked out??
Genworth and Home Crapital down 4 and 6% today on TSX

#143 James on 04.13.17 at 1:26 pm

#106 down and out on 04.13.17 at 7:44 am
I believe Poloz missed an opportunity to tap the brakes on the market and check if it has any effect at all .The BofC could end up chasing the inflation rate never controlling when the masses realizes the BofC is spineless. Rinse and repeat.
………………………………………………………………….
Don’t worry I glorious Liberal Leader Herr Wynn has offered to step in and intervene in the name of humanity. Wynn will enact legislation to put the brakes on the market and save us all. How convenient and just in time for Easter. Is that a last ditch effort to save her miserable ass? Humm What would Jesus Do?

#144 Jake Hammond on 04.13.17 at 1:46 pm

remember when interest rates were supposed to go higher. Well, they are falling fast, 5, 10 and 30 year Canadas are 1.04%, 1.49%, 2.16%.

It seems going below 2% on the 30 year is coming soon. BREXIT pushed them down to 1.56% on the 30 year. This probably is just months away.

#145 SilverSon on 04.13.17 at 1:48 pm

#104

“stay liquid and apply for your US visa’s my friends”

Top tax bracket 54%, hydro rates double, carbon taxes and now Liberals want to put additional burdens & taxes on our homes! It’s too all too much, these misaligned policy moves from this government will likely prompt the most skilled, educated, well capitalized & experienced Canadians to earn & live outside of our borders.

Well put. Furthermore how many skilled, educated, well capitalized & experienced people are ever going to want to move here? I’m a dual citizen and moved here five years ago but I’m not sticking around to continue paying for this economic disaster that I had no part in creating.

#146 Lee on 04.13.17 at 1:48 pm

#136, Man of the Cloth

I would guess that those agents that get left holding the bag on one, maybe two, properties are probably agents who over the last fifteen years made wads of money flipping 30-40 properties for a profit. They will then write off the losses on the last two, and be way ahead of the game. You rarely lose gambling on real estate in this manner. Trust me on this one.

#147 mike from mtl on 04.13.17 at 1:52 pm

Garth, rather than another old hat residential RE, how about a post about commercial RE like REITs.

In general they’re just as leveraged as the populace plus some aspects like malls and retail as they operate today have a grim future.

Office spaces, warehouses, apartment blocks at least have some enduring fundamentals…

#148 A Reply to #115 Londoner on 04.13.17 at 1:52 pm

Very good, Londoner. You caught an error I made.

I meant to write, “Do you suppose we’ll see interest rates of 5%, or even 10%, over the next 35 years?”

(I saw 22% interest 35 years ago, and I saw 5% interest 10 years ago.)

Tell me, Londoner: Do you think interest rates will stay below 3% for the next 35 years? Do you agree with Ace that buying a house in Toronto before April 27 is the best time? Enlighten me.

#149 AACI Home-Dog on 04.13.17 at 1:55 pm

#16: Post
CONFIRMED: Poloz is an idiot. He says that even a 5% increase in rates wouldn’t slow down the housing market in Canada.

Poloz may be correct. A 5% increase would put 5 year rates at from say 2.5% to 2.625%…which may indeed have little effect. Did you think he meant to 7.5% ?
could take awhile !

#150 Larry Dickman on 04.13.17 at 2:34 pm

The real estate bubble in the GTA is a direct consequnce of money laundering and our government knows it. Canada is a corrupt third world country run by marxist ideologues and organized crime.

Any normal law abiding person who would take out a million dollar mortgage to live in Toronto is crazy which is to be expected in a city full of people with mental health issues. Toronto is a terrible place to live. It sucks, just like the Leafs.

#151 Bigrider on 04.13.17 at 3:15 pm

I love my nonna.

To quote her recently ” See, see ,evena dat Stephen Piazza saysa data evena if I raisa da intereso rate to 5 percento ,no way dat dis slowadown da real estata marketo “. ” what I tella you, da price ofa da real estata she’sa go uppa Uppa UPPA ! You no listena to me stupido”

I repiled ” His name is Stephen Poloz and he did say that speculation in the housing market is a threat”

My nonna replied ” speculation my pommodore, is he sella hisa houses, maybe he have a coupla investment cottages in a da Muffa too ”

Me ” its called Muskoka nonna ” . Its all I could muster.

#152 TurnerNation on 04.13.17 at 3:32 pm

Ok something big is up with mortgages. HCG.TO crashing on ‘no’ news.

#153 jess on 04.13.17 at 4:05 pm

central bank lie in wait as the mop.

==
bubble in alpacas? who knew!

Flake Releases “Tax Rackets” Oversight Report
Highlights as much as $50 billion in outlandish loopholes for alpacas, telemarketing, chicken poop, gambling trips, and more
Posted on Apr 05 2017

#154 A Reply to #145 AACI Home-Dog on 04.13.17 at 4:10 pm

Boy, we sure have some sticklers for accuracy.

Here’s the exact quote by Poloz: “The fact is, when you’re looking at making an investment that you think will make you 20 per cent or more over the next 12 months, and you have to borrow the money to make that investment, is a quarter point or a half point going to make a difference to that decision?” he said. “I don’t think even a five percentage point difference would take you away from that.”

Maybe reporters when questioning the governor need to say something like “an increase of interest rates to (not by) 5%” or “a rise of interest rates from 0.5% to 5.5%.”

You be the judge, but it doesn’t seem to me that he’s referring to basis points.

#155 TurnerNation on 04.13.17 at 4:19 pm

Bigarider are you sure that just wasn’t you talking after a few stiff glasses of JD?

When’s your book coming out….

#156 n1tro on 04.13.17 at 4:26 pm

@Damifino regarding contract law

You forgot the 3rd component of a contract…1. offer 2. acceptance and 3. consideration. It is the “consideration” part that allows either party to change their minds.

Consideration takes into account that there is no detriment to either parties entering into the contract.

In the real estate example, it is a detriment for the seller to not take a higher offer or sell at a lesser price to what he/she thinks the house is worth.

Not a lawyer but that’s what I remember from my highschool law class.

#157 AB Boxster on 04.13.17 at 4:50 pm

#99 A Yank in BC on 04.13.17 at 2:01 am

————————–
That’s why the whole real estate process from start to end is one massive scam.

I mean how many times, when you have sold or bought anything, will someone try to talk you up on the offered price.

Buyer – ‘Hi I see have a used car for sale at $5,000. That seems a fair price, so i’ll take it.

Seller – Will you give me $7,000 for it?

Buyer – F You.

Like, it never happens, and if it did, nothing would ever be sold on the used market.

Gee, I wonder if it could possibly be because of the unsavory and fraudulent tactics of the middle man (ie The ‘Professional’ Real Estate Agent) that distorts the transaction, so as to screw the buyer to the nth degree.

DO YOU THINK SO?

#158 Vanecdotal on 04.13.17 at 4:57 pm

#125 Ponzius

Our #1 muppet Chrusty’s favourite musical is ‘Les Miserables’. :)

http://globalnews.ca/news/3371625/christy-clark-has-a-sweet-tooth-for-b-c-politics/

Let them eat cake!

#159 Ole Doberman on 04.13.17 at 5:19 pm

Ok something big is up with mortgages. HCG.TO crashing on ‘no’ news.
——————————————————-
Subprime is coming to light, Fannie Mae and Freddie take 2.

#160 mud on 04.13.17 at 5:20 pm

Karma,

Once you have a closing date for the sale of the property, you serve a notice to end tenancy. N12. Plain and simple. Followed by application to evict if they don’t leave.

#161 jess on 04.13.17 at 5:30 pm

ridiculous

Alpaca Tax Fleece – With no significant market for alpaca wool in the United States, these pet-like animals are being advertised and sold as walking tax shelters. Owners are able to deduct the cost of the alpacas, and because they are low-maintenance and require little space, the animals are also ideal for claiming a home with a small backyard as a farm. Some anecdotal examples of the alpaca tax fleece highlighted in the report include step-by-step tax deduction guides from alpaca associations, reports of individuals buying alpacas for tax breaks while still “boarding” the animals with the sellers, and one individual who zeroed out her taxable income by purchasing and deducting $300,000 worth of “college fund alpacas” which, in turn, allowed her children to collect $680,000 in grant money to attend top-tier universities

Chicken Poop Tax Credit – Congress amended Section 45 of the code in 1999 to make energy produced from poultry manure and other organic waste (generally referred to as open-loop biomass) eligible for federal tax credits. The idea for the tax credit was hatched by a flock of politicians representing the Delmarva Peninsula, an area comprised of Delaware, the eastern shore of Maryland, and the peninsula of Virginia, which produces more than 500 tons of chicken droppings every year. The manure has long been used as fertilizer, but the run-off is causing pollution in the Chesapeake Bay, prompting a search for alternative uses. However, because the power is generated by burning the chicken waste, many environmentalists have criticized the process as simply turning water pollution into air pollution. While the IRS does not track the specific amount paid for poultry poop power, all open-loop biomass sources receive $200 million in tax subsidies a year and that cost is expected to increase.

Telemarketing Tax Break – A carve-out in the tax code allows publishers to deduct as a current business expense the costs of establishing, maintaining, or increasing the circulation of a newspaper, magazine, or other periodical – including the cost of hiring extra employees for a limited time to get new subscriptions through telephone calls. This preferential treatment in the tax code allows publishers to deduct the full cost of these expenses in just a single year. Conversely, this provision of the tax code does not apply to other subscription-reliant business such as software companies and streaming entertainment services, which must classify these same expenses as “capitol expenses” and the spread deduction for them over multiple years. The Joint Committee on Taxations estimates the exemption for publishers will cost $300 million over five years.

Lucky Loophole – Not only can “professional gamblers” deduct gambling losses, they can also deduct the cost of gambling trips as businesses expenses incurred as part of their job. This allows them to deduct the cost of travel to a casino or racetrack, meals, entertainment, fees for race handicapping information, and “other expenses associated with the activity of gambling.” Generous deductions for gambling losses have also created a black market for losing lottery tickets, which are bundled in the hundreds and even thousands, and sold online under such headers as “Tax Write Off” and “TAX REFUND TIME!!!” The Congressional Research Service estimates that the loss in tax revenue resulting from the gambling loss write-off could be more than $2.8 billion annually

https://www.flake.senate.gov/public/index.cfm/2017/4/flake-releases-tax-rackets-oversight-report

#162 When Will They Raise Rates? on 04.13.17 at 5:32 pm

#148 TurnerNation on 04.13.17 at 3:32 pm

Ok something big is up with mortgages. HCG.TO crashing on ‘no’ news.
——————–

And not just HCG:

https://i.imgur.com/3VNAJ2m.png

#163 The Smaller Fool TM on 04.13.17 at 6:43 pm

The lies and disinformation on this site are so thick, that I feel compelled to spend a few minutes here and there to tell you the truth. Take that chart that show prices in US and Canada starting from (magically) same level in 2000. Nice starting point for somebody who wants to totally distort the truth that recovery in real estate after the early 90’s bust started 5 years earlier in the US vs Canada. In early 2000’s you could buy similar house in like area in Toronto for less than half price as you would in a major city in the US. Maybe normal for one who thinks New York is the center of the Universe, but an anomaly to the normals.

#164 full employment 2018 on 04.13.17 at 6:58 pm

where are the jobs going to be?

industry 4.0 is here and requires less and less organic labor force

it’s probably just another statistical .gov propaganda to keep people happy

new trade barriers, tightening of belts and employment reductions all around the industrial world but Canada is different somehow?

#165 crowdedelevatorfartz on 04.13.17 at 7:02 pm

@#147 bigrider

I’m sorry but ANY adult male that still refers to their mother or grandmother as “nonna” or “gammy” shouldnt be allowed to call themselves “bigrider”

Unless of course, THIS is what you ride.

https://www.google.ca/url?url=https://www.youtube.com/watch%3Fv%3DgzX9iRKrVvU&rct=j&frm=1&q=&esrc=s&sa=U&ved=0ahUKEwjBg9f_xKLTAhUU_mMKHey5CM4QtwIIRDAL&usg=AFQjCNGZT3fkIuRi70I0osKLWKot1cZzIg

#166 When The Whip Comes Down on 04.13.17 at 7:10 pm

Victoria Mr. Market – Friend just about places an offer on a townhouse in Gordon Head near the University of Vic. Ask price is $639,900. Previous sale was September 1, 2016 for $600,000. Sold this week for $735,000 with no conditions. Well, real estate markets are local aren’t they.