The unforgiven

Lately there’ve been a few moans like this deposited in the comments section:

Garth, given the scenario with many people forced to sell or foreclose, how likely is it that our current government will somehow forgive debt or make some sort of concessions for these over-strapped ‘buy at the toppers’? Kind of seems like something Justin would do.

Fair question. There’s a new meme, especially among moisters, that government’s the solution to any problem, even one you bestowed upon yourself. With the odds now 94% that the Bank of Canada will begin a lengthy rate-hiking trend on Wednesday, and housing markets already wobbly, what would politicians do if real estate really cratered?

Will Canada forgive your mortgage debt? Will some loans be ‘modified’ as they were during the American housing crisis? Will the central bank choke at the sight of underwater owners and roll rates back again? Will Justin come along to save les derrieres of a generation used to helicopter parents, entitlement and prizes for showing up? Abd with 70% of Canadians now real estate owners, can any government withstand the political storm of not protecting people against their own bad choices?

The best example in our lifetimes of an activist, liberal-centrist government trying to rescue citizens from debt was with Obama. Well over a million mortgages were modified, with the average monthly payment reduced by $535. Eventually Washington would spend more than $2 trillion directly trying to shore up the real estate market. It didn’t work. Prices fell 32% – 70% in some cities and regions – and took eight years to crawl back by 15%. It was a disaster. Even the biggest, wealthiest economy in the world could not keep the wolf from the door.

Meanwhile the Fed dropped interest rates all the way down to zero and only months ago – nine years later – mustered the courage to start slithering them back again. And remember –  this is a country where people can lock in a rate for 30 years, then refinance it lower every time the cost of money falls. That’s impossible in Canada.

What’s our situation?

Well, we owe a touch over $2 trillion in household debt, of which two-thirds is mortgages. Another $211 billion is outstanding in lines of credit secured by houses. In Vancouver and (especially) Toronto, a majority of people who bought properties for $1 million or more last year had debt loads equal to 450% of their incomes. In general, we owe more money than ever and proportionately greater than Americans did when real estate there blew up in 2005.

Our central bank interest rate is at 0.5% and mortgages are the cheapest on record. The low cost of money has not encouraged people to pay loans off, but to borrow more. As a result, real estate prices are at historic levels. And now, as the pendulum starts to swing back, some people think their foolish debts will be wiped away.

Currently the federal government carries a debt of $645.9 billion, which is increasing on its own by $77.8 million per day (weekends included). There’s also a deficit – which is the amount Ottawa spends above its tax revenues – of about $2 billion per month. Over the four years of the current Trudeau administration, roughly $100 billion in deficits will be added to the debt. As interest rates normalize, the debt service costs will rise, increasing the deficit – which expands the debt. Sisyphus.

Other governments are indebted, too. Ontario is among the worst (per capita) in the world. Poor Alberta just got its credit rating whacked. It won’t take the NDP long to impact BC. Overall, then, it’s tough to understand how people think elected bodies could take the sting out of $1.4 trillion in residential mortgages if rates jump and houses crumble.

So why don’t central banks just leave stuff the way it is? Why risk it?

Low rates were put in place to rescue the economy from potential deflation flowing from the 2008 disaster, then the 2015 oil price collapse. They were not designed so people could carry $1 million houses with 5% down. Places like Toronto and Vancouver were allowed to run hot in order to rescue the oil patch, manufacturing and the export sector. The unintended consequence was the mother of all debt loads as house-horny Canadians couldn’t resist being swept up in real estate speculation. Not restoring normal rates would eventually lead to the disorganized destruction of the middle class. Seriously.

How close have we come?

Too close. A poll released Monday by accounting firm MNP found 30% would be faced with financial troubles if house prices decline (which they will), and 27% are “in over their heads with current mortgage payments”, even before rates start to rise. That’s way more than enough families to precipitate a US-style splat (where 8% of owners hit the wall).

Says the company:

“The vast majority of Canadians (77 %) would have difficulty absorbing an additional $130 per month in interest payments on debt. Many are borrowing against their homes and using them to finance lifestyles they simply can’t afford. What’s worse is that many are not making regular payments against the principal, and the threat of an increase in interest rates might make it even harder to make ends meet. Collectively we need to start looking critically at our debt loads and factoring in interest rate changes to see if the debt amassed is even affordable. For many, it already isn’t.”

Nobody knows where this is going or how it ends. The most likely scenario is that the indebted are forced to bail and asset values drop. Less likely is that policymakers relent and rates are stayed. Impossible is that bad things are simply forgiven. That was your mom’s job. Look where it got us.

 

232 comments ↓

#1 bdwy sktrn on 07.10.17 at 6:15 pm

hey , that’s my fur coat!

#2 Mike on 07.10.17 at 6:21 pm

Thanks Garth! Long time reader, first time commenter. Just wanted to say, as an old man of 43 who doesn’t yet own a home, that I’m both happy (for me) that prices will eventually decline, but terrified (for us all) about the consequences of all of this. I know that some of the commenters are rubbing their hands with glee thinking of all the ‘moisters’ that will get caught with their pants down here, but having lived in Montreal through the 80s and 90s, I know that a full blown recession is not pretty for anyone.

A question for you – I still live in Montreal, where everyone seems to think that over-valuation is a Toronto/Vancouver problem. What’s your view on La Belle Province? Do you think that we’ll be as impacted or will we weather the storm intact? Will AI save us all?

#3 InvestorsFriend on 07.10.17 at 6:22 pm

P.S. to my currency question, so is my gain in fact at step b of the example?

#4 Ian on 07.10.17 at 6:26 pm

‘Canadians are responsible borrowers and banks are prudent lenders’ LMFAO can’t wait till Happy Housing gets ahold of this one!!

http://www.cbc.ca/news/business/the-national-lust-for-home-equity-lines-of-credit-should-we-worry-1.3106533

#5 Fish on 07.10.17 at 6:32 pm

Those boots are made for walking

#6 nick on 07.10.17 at 6:32 pm

Its so sad that instead of using cheap credit to invest/expand/start businesses which will generate income to help pay back the debt in the future, people just used it to buy more real estate, a negative cash flow liability which provides no future income.

When I am in a discussion and I mention that a house is not an asset, people scratch their heads and think I am crazy. If we return to historical YOY growth rates (inflation based or slightly higher), owning a home with 20% down is generally a net expense each year. Obviously not every case is the same, but when you factor in opportunity costs, a house is often a suboptimal (and with today’s prices, a dumb) financial choice to make.

Welp, people borrowed a ton of debt which will take a lifetime to pay off, and then start scratching their heads and wonder why they have no cash, why they are house poor, and why their retirement savings is nil. Buying a house is just one step, but when you factor in everything life throws at you, throwing all of your eggs in one basket (mortgage) every month is going to catch up to you very fast, especially if you dont want to be a slave, or if you want to have some kids, or if you want to go on a trip once in a while.

#7 TrumpForTheAges on 07.10.17 at 6:34 pm

To compare Canada to the US situation shows either a bias to fear mongering or blatant ignorance. Even withinyerest rate increases in Canada the vast majority of homeowners have built up tremendous equity in their homes. Have some used a HELOC to leverage that equity? Perhaps a percentage but to suggest that it was used to fuel an extravagant lifestyle is baseless. Do we really want to use a MNP survey to make bold assertions?

The percentage of foreclosure in Canada have actually gone down and are nowhere near a concern. Unless housing values decline by a substantial value (greater than this blog has predicted) the banks have no reason to foreclose and people can flexibility to refinance. Sure there could be some casualties but the environment in the US encouraged people to walk away. Those conditions do not exist here in Canada.

Shame on you.

#8 I'M NOT POLOZ on 07.10.17 at 6:35 pm

Poloz should hike the overnight rate to 1.00% tomorrow if he is serious about not wanting a currency manipulator “boost exports” label attached to him ever since he vowed for a 50-cent Loonie.

I am not Donald Trump, but jobs aren’t coming back to Canada & 50-cent Loonies increase the cost of living while eroding our savings. We also need to build a wall around the city boundaries of Toronto using Pokemon like Mr.Mime to use some Pokemon move that builds walls.

Poloz should be serious that no Canadian saver wants their $100,000 savings to be valued less than $50,000 in American dollars. Donald Trump wants rich Canadians to bring back cash into America.

Not many SJWs in Toronto are investors, but Millennial spenders on $10 Guacamole and $115 monthly iPhone plans from a monopoly in telecom’s in Canada….If Carolyn Wilkins was 30 years younger, I’d think Donald Trump will want to date her.

#9 Gerry on 07.10.17 at 6:38 pm

Just look at NY, San Fran, Seattle, Boston. Their house prices are overvalued despite the carnage in the US, so why do you think Vancouver will be any different? You’ve been saying Vanocuver will crash for how many years now?

#10 Spock on 07.10.17 at 6:38 pm

To read the full story on the MNP Survey along with infograph:

http://www.marketwired.com/press-release/survey-canadians-concerned-about-impact-interest-rate-hikes-potential-housing-bubble-2225362.htm

Highlights:

– One quarter of Canadians with a mortgage agree they are ‘in over their head’ with their current mortgage payments.

– Three in ten homeowners agree they will face financial difficulties if the value of their home goes down. Two in three Canadians think we’re in a housing bubble.

– Almost half of Canadians agree they are concerned about the impact of rising interest rates.

– Over seventy percent of Canadians rate their ability to cope with a 1% interest rate increase as less than optimal.

Forget the Government – Not even God can save folks who have picked up all this debt

#11 dakkie on 07.10.17 at 6:40 pm

Canadian Housing Is Now In The Perfect Storm Trajectory, All The Indicators Are Lining Up For The Entire System To Come Crashing Down.

http://investmentwatchblog.com/canadian-housing-is-now-in-the-perfect-storm-trajectory-all-the-indicators-are-lining-up-for-the-entire-system-to-come-crashing-down/

#12 FreeBird on 07.10.17 at 6:40 pm

#2 Mike
I know that some of the commenters are rubbing their hands with glee thinking of all the ‘moisters’ that will get caught with their pants down here, but having lived in Montreal through the 80s and 90s, I know that a full blown recession is not pretty for anyone.
—————
Thank you. From Ontario but agree.

#13 Howard on 07.10.17 at 6:42 pm

Back in 2008, like many smug Canadians, I laughed at all those idiot Americans who went bankrupt because they didn’t understand the difference between interest and principle. Couldn’t happen here in Canada, I told myself – we’re frugal by nature.

Boy have I ever been schooled!!

Now that Canadians how shown themselves to be even stupider, more reckless, more financially ignorant, and more arrogant than the most house-horny California soccer mom out there, I beg forgiveness from my American friends.

What a humbling experience it is to realize that most of your compatriots are complete morons.

#14 Blacksheep on 07.10.17 at 6:46 pm

Winner, winner, chicken dinner!

“Less likely is that policymakers relent and rates are stayed.”

A CAN. rate move, is one and done anyways.

If GDP suffers, down….she….goes.

#15 YOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO on 07.10.17 at 6:46 pm

How likely is it that the A) the government takes all our money to shore up home owners OR B) The banks take all our money as a bail in.

Either way, home owner or not, If your Canadian, you just might be on the hook to pay for this shizznit. Hello Bitcoin!

#16 Pete on 07.10.17 at 6:48 pm

Ontario’s debt is not the worst per capita. It is simply the worst. Ontario has the largest debt in all sub-sovereign jurisdictions, meanings, provinces, states etc. Ontario’s current debt of C$340 billion is more than the debts of the states of California, Texas, New York, Michigan and Florida combined.

Yes, you read that right, Ontario has more debts than the five states combined. These 5 states have 10 times the population of Ontario and 15 times in GDP.

#17 crowdedelevatorfartz on 07.10.17 at 6:49 pm

As a former govt official once said and the molly coddled borrowers of today have taken to heart……..

” I’m entitled to my entitlements”

#18 Howard on 07.10.17 at 6:50 pm

“Over the four years of the current Trudeau administration, roughly $100 billion in deficits will be added to the debt.”

$100 billion be at the low end of estimates.

That total, over just 4 years, almost approximates the net $120 billion debt accumulated by Harper over a decade and through the worst recession in 80 years.

After McGuinty/Wynne and Trudeau, Liberals are never, ever allowed to criticize anyone else about fiscal responsibility.

#19 Sugarlips on 07.10.17 at 6:57 pm

Hi all, got the popcorn ready for the big splat

2 important questions please. 1 for the blog dogs: whats the best way to position ourselves to snag a bargain foreclosure in the GTA in 18-24 months? Clearly theres no jingle mail so are morgagee sales pushed through a back dòor? Is there a realtor that specialises in distressed sales?

And 1 for GT (you legend): if rates rise a lot, should the rule of 90 be adapted? For example if a genuine bargain house comes along in 2 years but mortgage rates are suddenly at 7% is that when the portfolio should be liquidated to minimise the mortgage (balanced investments rarely charge ahead more than 7% year on year)?

Thanks all :)

#20 Damifino on 07.10.17 at 6:58 pm

Think of what Jesus would do. It will be the opposite.

#21 Waiting for VREU on 07.10.17 at 6:58 pm

I am eagerly awaiting VREU’s explanation how we are in the midst of a ‘sales crash’ when prices are going through the roof in Victoria and the communities around it…

I have access to sold prices, and quality homes are flying off the shelf in a few days, no conditions, and over asking, some with bully bids.

Of course limited inventory could be the issue, but hey, that would not be as much fun as reading 18 paragraphs of irrelevant stats on ‘crashing sales.’

#22 Mark on 07.10.17 at 6:58 pm

A debt implosion screams “deflation”. CPI is chronically weak and actually is deflating month over month. Canadian consumers are already going into austerity mode. Not sure why rate hikes are even still on the table. The bubble has burst. The post-2013 plateau was fun, and let smart money sell and get out alive. Now its just downhill from here.

#23 Missus-hippi on 07.10.17 at 6:59 pm

I usually agree with Garth, but on this one I’m sticking to my guns. Look what happened when Fort Mac. burnt down. What happened? In swept JT and following him, some transfer payments.

When chocolate pudding hits the fan, Trudeau will feel compelled to lessen the onslaught on the herd of greater fools. Which in turn, really makes US the greater fools; that is, the ppl who are prudent with finances.

Discussion Questions
Is it a moral imperative for one to accept their comeuppance?
Is it wrong to feel schadenfreude?

#24 And I Quote on 07.10.17 at 7:04 pm

“Spoon feeding in the long run teaches us nothing but the shape of the spoon.”
― E.M. Forster

“Laughter and tears are both responses to frustration and exhaustion. I myself prefer to laugh, since there is less cleaning do to do afterward.”
― Kurt Vonnegut Jr.

#25 Ex-Cowtown on 07.10.17 at 7:06 pm

I think that the feds will bail out underwater home owners. For example, I recently got a cheque from the feds for all of my losses in Nortel, Bre-X, HCG and my small cap O&G stocks. And I got a unicorn for my stress and suffering.

*POP*

Oops sorry, it was all a dream. All I got was a tax bill when the flow through shares I bought blew up. Talk about rubbing salt in a wound.

Time to put on your grown up pants on and face the music. Reality is only uncomfortable to people who spend very little time there.

#26 Linda on 07.10.17 at 7:06 pm

‘30% would be faced with financial troubles if prices decline’. I presume that is because they used their HELOC as a way of allowing themselves to live the lifestyle they felt they deserved. So if their home is less valuable due to a price decline, then their ability to draw funds from that declining asset is reduced – they may even have to actually start paying in rather than taking out. So, how likely is it that banks may start demand payments of all these loans? What would trigger such an event & if whoever owes that money simply can’t pay, how long before foreclosure signs spring up like weeds?

#27 MNP $130/mo hard to believe on 07.10.17 at 7:08 pm

Per CMHC, average mortgage 2016Q4 in BC is about $366,700 and $310,200 in ON.

Assume 25 yr amort., 2.5% fixed rate and monthly payments are:

BC = $1,644
ON = $1,390

For the payments to increase by $130/mo, rates would have to be:

BC (to $1,774/mo) = 3.2%, a 0.7% increase.
ON (to $1,520/mo) = 3.3% a 0.8% increase.

I understand MNP said interest payments on debt, still, it is a $130 increase in cash outflows.

Hard to believe that 77% of Canadians would be in difficulty with such small rate increases (0.7% to 0.8%), which could transpire by the end of the year or early next year.

Surely, we cannot be on that fine an edge financially?

#28 The real Kip on 07.10.17 at 7:09 pm

Governments will intervene to stop a collapse. I could not believe that Kathleen Wynne opted to kill the goose that laid golden eggs. It’s going to be interesting for sure, glad I’m mortgage free for four months now.

#29 Doug t on 07.10.17 at 7:09 pm

people who live beyond their means can kiss my a** – you want the toys, you want the McMansion, you want the vacations, you want marble countertops, you want the rangerover – you want it all and you want someone to bail you out when things get tough? KISS MY A**

RATM

#30 Smartalox on 07.10.17 at 7:09 pm

I’m in no way eager for the Government to provide debt relief for idiots who have over-extended themselves with HELOCs and massive mortgages.

But that said, I would like the Government to be better prepared for the consequences of any coming real-estate crash, that they were when it all hit the fan in the US, back in 2007-2008.

Mortgage modifications, foreclosures, all of these had to be completed through the court system, with all the attendant errors, and ignorance. Debtors have legal rights, and those rights need to be protected (as much as some may relish, there’s no ‘throwing them to the wolves’) there are processes to be followed.

A lot of people were cast out of their homes by companies eager to collect, only to see the value of those homes diminish further while they were left to rot, or picked though by scavengers while the homes sat empty while the legal cases ground their way through the system.

In the end, whole neighbourhoods were laid waste, as the newly homeless were driven away, and those that were able to stay in their homes fled the devastation and decay. Entire blocks of houses were demolished in cities like Detroit and Cleveland, the value of the bricks and timber in those houses, and the intangible value in those neighbourhoods wasted.

IF the warning signs for a Canadian real estate bubble burst are as evident as we think that they are, I would hope for a more orderly progress here in Canada.

Just as having people ‘shelter in place’ in their homes is the main plan for following any natural disaster, it might be a wise strategy to keep Canadians in their homes while the consequences of lost value are worked out to their final conclusion.

Surely, debtors have to pay, and wealth that is to be re-distributed should be re-distributed accordingly, but there’s got to be a better way than how the Americans did it a decade ago.

#31 Raging Ranter on 07.10.17 at 7:12 pm

Geez, is it not possible anymore for a guy to take a walk in his furs and chastity belt without ending up on he Internet?

#32 Herald Jones on 07.10.17 at 7:14 pm

“Not restoring normal rates would eventually lead to the disorganized destruction of the middle class.”

How so Garth? They’ve held on for this long..seems like you could add more detail to this point.

#33 Socialist on 07.10.17 at 7:16 pm

Canada is a socialist country I would not put it by them to use tax money to bail out individual homeowners who got themselves into a mess by buying everything they can get their greasy, fat hands on. Vacations, new cars (Audi, BMW) every few years, eating out.

#34 Mark's Mixed Messages on 07.10.17 at 7:16 pm

For the ‘Mark’s’ out there still clinging to the notion that prices have not moved since 2013 and that foreign capital does not impact the market:

“Foreigners bought almost 24 per cent of West Vancouver real estate sold in the weeks before the province brought in its 15 per cent foreign buyers tax last summer.

That makes West Vancouver’s high-end real estate market an area with one of the highest proportions of foreign real estate sales prior to the imposition of the tax, just behind Richmond, where foreign buyers accounted for 27 per cent of sales volume, and Burnaby, where 24 per cent of sales went to foreigners during the same time period.”

http://www.nsnews.com/news/foreign-buyers-big-spenders-in-west-van-prior-to-15-tax-1.12485427

Everyone wanted data – you got data!

#35 It Ends Badly on 07.10.17 at 7:17 pm

This Canadian debt story ends badly. Ontario will take a massive hit to the chest when house values start declining, which is just a matter of time. The reality of higher interest rates hasn’t hit home yet. I was at Costco and the couple ahead of me were talking about their line of credit rate being hiked up after BOC raises rates this week. The husband looked stunned / terrified but the wife said, oh we should still be fine, let’s not worry about it. Of course their buggy was full of useless crap and she pulled out the old credit card to pay for everything. People are going to be in for a major wake up call in the not so near future.

#36 Socialist on 07.10.17 at 7:17 pm

Extremely unlikely but hey who knows anymore!

#37 Stone on 07.10.17 at 7:19 pm

And now, as the pendulum starts to swing back, some people think their foolish debts will be wiped away.

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

Can we change that to:

And now, as the pendulum starts to swing back, some foolish people think their debts will be wiped away.

Yes, now that looks right. LOL

#38 S.Bby on 07.10.17 at 7:21 pm

Are those some vacant Calgary condos in that picture?

#39 Happy Housing Crash Everyone! on 07.10.17 at 7:24 pm

It’s going to be a Happy HAPPY Housing Crash. Happy Housing Crash Everyone! :-)

#40 Doghouse Dweller on 07.10.17 at 7:27 pm

#2 Mike
La Belle Province?
“““““““““““““`
I don`t know about Montréal, but during the peak of the Toronto frenzy,
a few months ago, the prices in Ville De Quebec were actually dropping.
A city with quality housing stock and infrastructure Torontonians would envy.

#41 Cowtown cowboy on 07.10.17 at 7:29 pm

HAH! Just saw this pic in my fb feed yesterday, friend of a friend….long live the Stampede…at least the 10 day bender part of it!

#42 Leichendiener on 07.10.17 at 7:32 pm

Yes folks it’s happening. Good old crepe hanging Garth is on the money. We have seen the enemy and they are us. It’s just a matter of time before the ‘POWER OF SALE’ signs make their appearance.

This bubble isn’t just real estate but credit as a hole.

#43 Fake News on 07.10.17 at 7:34 pm

If Mr Selfie bails out the Vancouver Buying At The Toppers………its going to be pitch forks and torches.

#44 Fake News Again on 07.10.17 at 7:35 pm

If Mr Selfie bails out the Vancouver Buying At The Toppers……..its going to be pitch forks and torches.

#45 John on 07.10.17 at 7:37 pm

The penny drops when all of the folks who borrowed themselves silly wake up to catastrophe. And then the folks who borrowed against their homes value to play investment product roulette may add more misery to the misery file. Oh and it gets worse. Janet Yellen is not only bumping up interest rates BUT also drawing down her balance sheet drowning in trillions. It wasn’t just housing that got whacked in 2008. She’s squeezing liquidity. Everything got whacked, in 2008; everything will get walked this time. And now we’re fielding the Trumpster and our own buddy with the theme sock wardrobe. Doesn’t exactly spell confidence.

#46 Jas on 07.10.17 at 7:39 pm

Garth you said:
Low rates were put in place to rescue the economy from potential deflation flowing from the 2008 disaster, then the 2015 oil price collapse. They were not designed so people could carry $1 million houses with 5% down.
———————————————————————————-

And why did the govt./BOC not have the rule in place that there will be a lower rate for business loans and a much higher rate for residential mortgage? And why not even now have this rule? Why is the govt. Sleeping ? What is stopping them from such two tier lending rule to impose on lenders? We need a tough guy at the top who is not afraid of taking tough and realistic decisions to keep this country on the right path.

#47 No bail outs coming on 07.10.17 at 7:39 pm

Please people, wake up, the government is not going to bail you out because you bought too much crap and used your home as an ATM. Just like in any recession / depression many will get slaughtered. The rich will get richer, the middle class will get wiped out and the poor, poorer. The only thing that you may get access to is new social and food programs aimed at alleviating the stress of the miserable existence to grip Ontario over the next decade.

#48 Howard on 07.10.17 at 7:39 pm

Definitely not wild about my tax dollars funding Calgary’s annual Festival of Animal Cruelty.

#49 Made For TV Actor on 07.10.17 at 7:40 pm

Let’s say a “friend” of mine has a small amount of money that he has been waiting to invest. He reads your blog regularly and expects this crash to initially kick the stock market in the groin. He feels comfortable with his potential 60 40 balanced and diversified portfolio he’s put together with your blogs advice, tips, and suggestions. He knows you’ve been stating if your portfolio is balanced and diversified you’ll weather this storm just fine, and he believes you. But if he has no chips in the game yet, what and when would be a good time to jump in?

No debt
GenXer
TO renter

#50 MNP: 44 per cent finding themselves within $200 per month of financial insolvency on 07.10.17 at 7:40 pm

The subject above is what got to me and they go on to say:

If that amount is increased to $300 per month, a staggering 50% of Canadians would be on the verge of insolvency, with one in four (27 per cent) not making enough to cover their bills and debt payments.

I made some mortgage calcs. up above in #20. Here are the rate increases in BC and ON on average mortgage debt to get to the magic $300/mo increase in cash outflows:

BC (to $1,943/mo) = 4.07%, a 1.6% increase
ON (to $1,690/mo) = 4.34%, a 1.84% increase

When you consider what we were paying for mortgages in the early 80s and now, a mortgage rate of 4% to 4.3% is going to make 50% of Canadians near insolvent just boggles my mind.

I cannot believe it.

#51 squirrel on 07.10.17 at 7:47 pm

Can someone anecdotically confirm if investing in real estate is rampant amogst mortgage brokers?

I am in Calgary, curently renting my condo from a mortage broker with several investment rentals.
Found a new cheaper/better place…. and the new landlord is a mortgage broker who told me this condo is an investment property.

I have only met 2 mortgage brokers and both have investment rentals? WTF??

#52 dr. talc on 07.10.17 at 7:51 pm

RE is a confidence game. All the banks and governments have already shown that they will no longer support the game, so the confidence is gone- anyone who in the past may have bought with intent to re sell will leave the table: investors, specs, etc. That leaves end users -those who need a house as a long term residence, and builders and renovators. No one cares about specs, investors etc. because they just create inflation in the market while adding nothing of value to anyone or anything. It’s a return to a more normal market. My street hasn’t seen a listing or sale in well over a year, people like their homes.

#53 Mark on 07.10.17 at 7:54 pm

“http://www.nsnews.com/news/foreign-buyers-big-spenders-in-west-van-prior-to-15-tax-1.12485427
Everyone wanted data – you got data!”

I’m looking through that article, but I don’t see any sources, or even quotes. Just claims. Where is this ‘data’ coming from? I’m not questioning its validity (and certainly West Vancouver is just a very, very small chunk of the overall GVR), but there’s no mention of the source of the data.

Site barely loads as well, but that can be forgiven at least for the moment.

#54 When Will They Raise Rates? on 07.10.17 at 7:54 pm

#29 Doug t on 07.10.17 at 7:09 pm

people who live beyond their means can kiss my a** – you want the toys, you want the McMansion, you want the vacations, you want marble countertops, you want the rangerover – you want it all and you want someone to bail you out when things get tough? KISS MY A**

————————–

^ This

#55 ccc on 07.10.17 at 8:01 pm

Canadian’s worldwide only be known as “horny” in the RE front.
Kind of sad…Time to act ya’all beavers!

#56 Smoking Man on 07.10.17 at 8:06 pm

Amazing how everyone thinks we are in a full blown mealt down. Another month or so till the people stuck with two properties forced to discount are out of the market.

Wynee will panic repeal her 16 point program
Then the accent will continue.

#57 jerry bilton on 07.10.17 at 8:14 pm

Trudeau = No Bail Outs for you!

In the early 1980′ we had a liberal government run by fellow named Trudeau.

The same cry for help emerged in the early 1980’s has hapless house lusty couples locked in 18% with 4 and 5 year closed mortgages. When interest rates dropped, you couldn’t get loose or you had to pay a 6 month penalty at 18%.

Trying to sell your house with the mortgage at 18% being assumed was impossible.

Whatever was earned in equity got swallowed up in mortgage penalties.

In 2017 we have a Liberal government run by a fellow named Trudeau.

#58 bigtowne on 07.10.17 at 8:16 pm

In every town and city in Canada the PayDay loan shops are fixtures in working class areas but now they have gone mainstream and are in suburban and middle class neighborhoods. These outfits are allowed to suck the life out of the uninformed and ignorant thanks to financial regulators who are allowed and encouraged to sleep at the wheel.

Malfeasance rules in PayDay loans so getting all worked up over interest rates going up 25 basis points is like a millionaire unable to afford that $250 bottle of French wine.

Jeez this blog is so elitist.

#59 Ex-Cowtown on 07.10.17 at 8:18 pm

The meltdown that should have happened in 2009 would have been a walk in the park compared to what’s coming. Back then people carried a fraction of the debt load that they carry today. The risks are far higher now.

Sooner or later, everyone gets the enema that they deserve.

#60 Sebee on 07.10.17 at 8:20 pm

Let’s say this bubble pops hard and CMHC has to shore up those mortgages. How does that process work?

They take the house, sell it and pay out the difference to the bank to make them whole and buyer gets to walk away?

#61 Happy Housing Crash Everyone! on 07.10.17 at 8:22 pm

You realtor shysters are true garbage. You realtors have nothing to stop the coming crash. You realtors should be happy you are not jailed for your shyster crimes.

#62 SimplyPut7 on 07.10.17 at 8:26 pm

#46 No bail outs coming on 07.10.17 at 7:39 pm

Agreed.

#63 genbizx on 07.10.17 at 8:29 pm

….i think the last 10 years have really shaken my belief in the future of our current economic system. the success of our system hinged, in part, on a sort consensus in values. we lack that now and as a result no amount of monetary/fiscal policy or whatever tinkering will really make things work the way they once did when we weren’t as greedy, shady, self obsessed, and dumb….u can’t change the laws of life with financial machination…raise a generation who value themselves and their dreams too much and our society will soon resemble places we all left to start something better…what we believe matters …my philosophical rant..

#64 Julia on 07.10.17 at 8:36 pm

#26 Linda

My view is that it would be unlikely for banks to demand loans without continuing defaults. Would there be a reduction of availability? Possibly. But I would think that banks would try to work with borrowers to find a solution to pay down the loan to an acceptable level. Enforcement is a last resort.

#65 Mike on 07.10.17 at 8:42 pm

.
Prices at all time record HIGH, in Edmonton where there is supposed to be a recession.

Go figure!! This is Canada, special.

#66 Debtslavecreator on 07.10.17 at 8:44 pm

No bailouts for ANYONE !
Most of these idiots made bad financial CHOICES !
I am sick of dealing with so many financial illiterates who ignore advice to be cautious and avoid increasing leverage with record low rates and record high home prices
Most deserve what’s coming
But yes all of us will suffer as our loonie’s buying power dives
All I have to say – go to YouTube and watch 99 Homes
A pretty accurate account of the general environment coming our way

#67 Ret on 07.10.17 at 8:49 pm

#16 “Ontario’s current debt of C$340 billion is more than the debts of the states of California, Texas, New York, Michigan and Florida combined.”

With all due respect, no one in Ontario cares about the debt. It is an investment in infrastructure that will pay dividends for generations.

We have chosen to not be bound by the shackles of austerity but to set the stage for a bright future for all Ontarians. The schools, hospitals, rapid transit, wind turbines and bike lanes will move Ontario forward…if you are still reading this drivel, you must be a Liberal.

#68 ANON on 07.10.17 at 8:50 pm

Not restoring normal rates would eventually lead to the disorganized destruction of the middle class.

While this is true, it is worth mentioning, though, that restoring normal rates will do pretty much the same thing.
Worth mentioning also, that while true that people binged on debt with low interest, paying the debt back would have had the same disorganized destructive effect (probably some dust would have settled in 2000, a bit less in 2008, debatable if there will be any dust left to settle now).
There is no solution to trillions of non-existing promises, and when opposing points of view lead to no logical conclusion, the problem is surely elsewhere.
Could be that problem is the non-existence of promises is what makes them valuable, everything else being an effect, not a cause. :)

#69 Mark on 07.10.17 at 8:50 pm

“They take the house, sell it and pay out the difference to the bank to make them whole and buyer gets to walk away?”

The buyer doesn’t get to walk away. The CMHC obtains a judgement for the deficiency (ie: the CMHC’s loss), and that judgement becomes part of the usual multitude claims made against the borrower when the borrow inevitably declares personal bankruptcy.

Of course, if they’re a relative newcomer to Canada and obtained a subprime mortgage on which they’ve defaulted, simply giving up on Canada is a very attractive option rather than going through the personal bankruptcy. This has happened in previous episodes of Canadian housing price collapses.

#70 will on 07.10.17 at 8:52 pm

Sisyphus! Love it!

#71 A Reply to #3 InvestorsFriend on 07.10.17 at 8:52 pm

“P.S. to my currency question, so is my gain in fact at step b of the example?”

At step (a), it’s clear that the cost of the US$10,000 is C$10,000.

At step (b), the US$10,000 is used to purchase stocks in the Horizons U.S. Dollar Currency ETF. The Department considers a transaction resulting in the application of subsection 39(2) to have taken place (A) at the time of conversion of funds in a foreign currency into another foreign currency or into Canadian dollars, (B) at the time funds in a foreign currency are used to make a purchase or a payment, and (C) at the time of repayment of part or all of a capital debt obligation. In my opinion, (A), (B) and (C) do not apply at this step.

Further, foreign currency funds on deposit are not considered to be disposed of until they are converted into another currency or are used to purchase a negotiable instrument or some other asset, i.e. foreign funds on deposit may be moved from one form of deposit to another as long as such funds can continue to be viewed as “on deposit”. The U.S. dollars have not been converted into another currency, and stocks are not negotiable instruments. Hence, the US$10,000 have not been disposed of, so there’s no transaction, and thus there’s no gain at this step. (In your example, there is no bid-ask spread, and no fees.)

At step (c), the stocks have still not been disposed of, so there’s still no transaction, and thus no gain at this step.

At step (d), we sell the stocks for C$15,000. We now have a transaction; the US$10,000 have been converted to another currency; and now we recognize the capital gain. Proceeds = $15,000. Cost = $10,000. Gain = $5,000.

As I understand it, Norbert’s gambit is used simply to convert funds inexpensively using a discount brokerage account (rather than pay substantial fees, typically 1% or more).
http://www.finiki.org/wiki/Norbert%27s_gambit

#72 Bottoms_Up on 07.10.17 at 8:54 pm

People that borrow against their house have no clue what is coming. And people being allowed to refinance consumer debt into their mortgage, same deal. People will once again have to live within their means. Asset prices will definitely come down.

#73 The Deflation Story on 07.10.17 at 8:58 pm

They are raising the rates to fight deflation. This blog has some pretty good reasons why deflation is a long term risk. So if they stomp out deflation now, there are some pretty large headwinds in the near future. The demographic time bomb of more wrinklies who don’t spend money is one of them, as well as the robots taking jobs leaving milennials in basements.
http://pensionpulse.blogspot.ca/

#74 Frank Blood on 07.10.17 at 9:02 pm

Is that Garth in his codpiece?

#75 AGuyInVancouver on 07.10.17 at 9:03 pm

Can you blame Milelnials for expecting a bailout? They watched as the USA bailed out big banks. They watched as ON and the Feds bailed out GM for churning out decades of crappy product. They watched as Bombardier got special treatment. If corporate bailouts are OK, why not citizen bailouts?

#76 Reximus on 07.10.17 at 9:07 pm

#16 “Ontario’s current debt of C$340 billion is more than the debts of the states of California, Texas, New York, Michigan and Florida combined.”

—–

State and local debt in Cali is 460B, the state is hemmed in by law so the cities take on the real public debt

http://www.usdebtclock.org/state-debt-clocks/state-of-california-debt-clock.html

#77 Bottoms_Up on 07.10.17 at 9:10 pm

#48 Made For TV Actor on 07.10.17 at 7:40 pm
————————-
You jump in when there is “blood on the streets”. Who knows how long that is, and every market is different.

#78 Yuus bin Haad on 07.10.17 at 9:10 pm

Sisyphus? More like Prometheus.

#79 I thinks I know something on 07.10.17 at 9:10 pm

Temporary blimp. Prices will continue to rise again after a brief lull. Guaranteed that if there is a protracted and or severe correction, the super geniuses will reverse their policies including rising rates.

#80 n1tro on 07.10.17 at 9:10 pm

I’m all for anything that confirms my bias that people are indebted to their eyeballs but the MNP survey sampling is a bit suspect. One, it only took 2002 online results. Does that mean 2002 people were called and all 2002 people happened to answer the survey? Two, the surveyors admit to “approximating” the data to fit the population sample through use of weightings. Sounds like a fancy way of saying “we jigged the numbers but in a scientific way to confirm what we think the results would be”. Lastly, the survey was online only which I know does not approximate people with mortgages…. I go to my bank once in awhile and still see “certain” people still getting paper print outs for their bank books…yeah, that still happens…. so I doubt those people are represented in the survey.

#81 juno on 07.10.17 at 9:11 pm

The most I think they can do is let the people walk
and declare bankruptcy.

Therefore they don’t have to endure a lifetime of debt

Sieze all their current assets and people who co-signed for them. Therefore the entire line can start anew.

Worst is to hold them accountable for a lifetime of debt.

But in now way should they forgive the debt and give them a get out of Jail free card. Its not fair to the people who saved or sold and profit early.

#82 Ace Goodheart on 07.10.17 at 9:12 pm

Re responses to my yesterday’s post and also this interesting blog entry:

The Toronto market’s bottom and the mills. When I was in Germany back in 1996, on a scholarship I earned by surviving two years of undergrad paying for it by shovelling snow at 3:00am in Ottawa while my trust fund classmates slept off their hangovers I learned something.

I learned that people will buy what they can afford. If they want the item. It was a smorgasbord of selling, western Europe. The first thing was desire. The second, price.

Cue 2017 when I’m mortgage free, wealthy and I don’t care anymore. I watch people. They want houses. Give them a small break in price and they rush in.

Unfortunately Canada runs on people who don’t do things unless they post on Facebook first and get at least 10 likes so we have a bit of a block in the pipe but still if they are giving away shag pads on Queen for 25% off people will be buying.

So GTA central in hoods that aren’t sketch will likely start running again.

Oh if you bought a semi in the ‘shwa for 890k on speck hmmmm you are pooched as this fun blog likes to say

In the words of Grimes “I don’t care anymore….now you’ll never know….”

#83 Bottoms_Up on 07.10.17 at 9:15 pm

#27 MNP $130/mo hard to believe on 07.10.17 at 7:08 pm
——————
We ARE on that financial ledge IF people have been using home equity to fund lifestyles….

#84 broader mind on 07.10.17 at 9:15 pm

For sure the government is going to help out underwater homeowners and it will be at the insistence of the banks.All the work done setting the fishing nets can not be wasted . Amortizations will be stretched to one hundred years so that your children’s children will be paying for your mistakes. Nice orderly little debt slaved beavers .

#85 Bottoms_Up on 07.10.17 at 9:18 pm

#26 Linda on 07.10.17 at 7:06 pm
———————
Banks make money off mortgages and LoCs. Why call in a LoC (forcing a house sale) and lose two streams of income (LoC interest and moetgage interest). Would have to be dire straights for the banks to do that….

#86 Eastender on 07.10.17 at 9:19 pm

You asked for it:

Citigroup strategists say rising interest rates could be a negative for stocks.

#87 Pete from St. Cesaire on 07.10.17 at 9:21 pm

Can you blame Milelnials for expecting a bailout? They watched as the USA bailed out big banks. They watched as ON and the Feds bailed out GM for churning out decades of crappy product. They watched as Bombardier got special treatment. If corporate bailouts are OK, why not citizen bailouts?
——————————————————
Millennials are stupid. they don’t understand the bigger picture. They were raised to think of the state as their benevolent keeper. They don’t understand the overall gameplan of those who pull the strings.
There will be no forgivness for the average indebted Joe. But just like in 2008 if the too-big-too-fail want a bailout they will get it. Millenials must realize that the bailouts which were sold to the public as being the only to save the banks from disaster due to the US housing market collapse could have taken the form of bailouts directly to the homeowners to cover their mortgages, and that in turn would have saved the banks too; but NO, the bailouts went straight to the banks who continued to foreclose on the homes of people even though through the bailouts the banks had already been bailed out of any losses on the houses in question. The bail-out scheme was simply a wealth transfer under the guise of having been necessary for the survival of the system.

#88 Ace Goodheart on 07.10.17 at 9:22 pm

I run on snake oil, street talk and a little bit of intuition. Statistics?

What do you think I am? An economist? (Said Che Guevera)

#89 TurnerNation on 07.10.17 at 9:24 pm

If I were to be unemployed and in Calgary I’d get a day job as a commercial courier with its access to many businesses and people to source for leads.
Evenings valet cars at a high end hotel. Cash tips and get to know business owners/wealthy people over time.
Become ‘that guy’ everyone looks forward to seeing.

#90 El Jako on 07.10.17 at 9:26 pm

Hold on now, Garth.

I have to take issue with your claim that the Obama government was trying to prop up the housing market. There’s no evidence that the policies enacted had any goal of maintaining house price stability or purchase rates – certainly not at bubble levels.

Rather, the Obama moves you reference, in particular the interventions in mortgage payments, were designed to prevent a cascade failure of further mortgages and their related bonds. Also, most of the $2 trillion went to not-the-buyer types. Institutional investors, really.

#91 TurnerNation on 07.10.17 at 9:26 pm

Smoking man forget Wynne, buy just WYNN.US on the dips.

#92 Bobby on 07.10.17 at 9:26 pm

Unfortunately I’ve seen a number of housing downturns and they are not pretty. Your house is worth solely what someone is willing to pay, nothing more. It matters not that you paid $600k when the offer is only for $450k. Really it all boils down to whether you have to sell or can afford to wait it out.
The problem with overvalued property is it limits one’s options. It is difficult to move to a new job or perhaps downsize as the house becomes an albatross around your neck. For those who counted on their home to finance their retirement, it becomes a matter of resetting your expectations. For those who bought a new property based on what your house was supposedly worth, it could mean years of financial hardship.
A long time ago when I was looking at my first home, I saw one that had been on the market for months but hadn’t sold. It was originally listed for $109k but was now down to $69k. My concern was what was I missing that everyone else supposedly had seen. The reality was nothing. As the agent said, the seller followed the market down, always $10k behind. When it was originally listed at $109k, the seller turned down an offer of $99k and so on.
My point, when the market is heading down and you have to sell, the first offer is usually your best. Take it.

#93 Eastender on 07.10.17 at 9:27 pm

@Happy Housing Crash Everyone!

I’m sure you are immune to the crash that you have been touting all along!

No matter what your profession is, unless you are on OW/ODSP, you will be impacted. Let me recommend something to your taste, buy HVU….

#94 Mr.Buy on 07.10.17 at 9:30 pm

Good news realtors and follow speculators since change is coming and this change will save the housing market from crashing. We can all agree the housing market is in trouble and will crash if the status quo continues. I am hearing rumours that the Easter bunny with the coordination of Santa Claus will buy up all of the houses. Yes they will come out of no where to buy up the homes from the distressed masses. Santa said He does not care about the 15% foreign tax. The Easter Bunny is looking into whether he would be considered exempt. Can any realtor or mortgage broker here confirm this?

#95 Stone on 07.10.17 at 9:31 pm

#73

Yes, I can blame them. It’s time they flip the switch on that is their brain. Actually, I can blame all the sheeple who thought it was ok to overextend and take on so much debt just so they could show off or keep up with their neighbours who don’t actually care a stitch about them. Envy…one of the deadly sins. Since the beginning of humankind. How absolutely sad. And no, individual citizens are not too big to fail. Time to pay the piper.

#96 Mr.Buy on 07.10.17 at 9:32 pm

sorry realtors the government will not come to the rescue. Unless you are blind and dumb the government is crashing the market. Santa and the Easter bunny will save the GTA. I am a realtor and I approve this story.

#97 I thinks I know something on 07.10.17 at 9:33 pm

“Nobody knows where this is going or how it ends. The most likely scenario is that the indebted are forced to bail and asset values drop.” – Garth

———————————————————–

Asset values dropping for underwater owners that bail will likely be covered by CMHC in many cases. Same as effect as a bailout in that the taxpayer will have to foot the bill. Regardless, the Banks and their CEOs will be saved at all costs. Privatize the profits and socialize the losses.

#98 Eastender on 07.10.17 at 9:37 pm

Not restoring normal rates would eventually lead to the disorganized destruction of the middle class.
——
Above statement not based on facts..

#99 Linda on 07.10.17 at 9:38 pm

#71: ‘wrinkles who don’t spend money’. Well said, but it should be noted that there are reasons for that. The sad reason is that they haven’t any money to spend – are retired by choice (bad move if one has no money) or chance (not choice, due to layoffs/ill health or other unfortunate circumstances) & either way, no money means they can’t buy more than necessities, if that. For the ill informed, necessities are basic food/shelter/health care/clothing. No fancy designer need apply. The good reason they are not spending money – they already ‘have it all’. All the fancy stuff/toys they ever wanted & everything paid for/in good shape or brand new. For people in this position, their main problem is getting rid of stuff, not acquiring more of it.

#100 Curious on 07.10.17 at 9:41 pm

Are house prices going to drop all across Canada OR only in Toronto and Vancouver???

#101 Steerage Bilge on 07.10.17 at 9:42 pm

That’s a mighty fetching picture of yourself Garth – beard, cowboy boots, a confident stride.. didn’t think you were into gold though

#102 bigtowne on 07.10.17 at 9:45 pm

Try getting the govment to force the credit card companies to lower their rates….the govment does not mess with the untouchable persistent 19% level for credit card debt….why would the govment give a break to mortgage debt at an unreasonably low levels of 3%?

People on this blog are worry warts and should go and empty their closets and take the detrius in bags to Goodwill. If people want to hoard real estate….we dont control religeon and we are a capitalistic economy (never mind the protected 5 and the crowns) so people live in the land of the free and we buy houses. It’s not a crime.

#103 Grace on 07.10.17 at 9:45 pm

This post is way too gloomy. Should have been saved for when rates are up 0.75% from here!

Thought: Quebec employment rate is far far better than the one of Ontario, and their houses way way cheaper, so, when we read that 30% of Canadians are in a bad shape with their mortgage, it’s likely 20% in Quebec and 40% in Ontario, no?

Hmm.

#104 BS on 07.10.17 at 9:54 pm

The best example in our lifetimes of an activist, liberal-centrist government trying to rescue citizens from debt was with Obama… It was a disaster.

Well said. Obama was a disaster.

#105 GFD on 07.10.17 at 9:56 pm

#65 Ret on 07.10.17 at 8:49 pm
. . . . did you forget free electricity for all?

#106 Sunnyside on 07.10.17 at 9:58 pm

“Amazing how everyone thinks we are in a full blown mealt down. Another month or so till the people stuck with two properties forced to discount are out of the market.

Wynne will panic repeal her 16 point program
Then the accent will continue.”

– Smoking Man’s lost it. Dude, this one can’t be put back in the bottle no matter how much Wynne craps her pants and tries to waterdown the Ontario Fair Housing Act.

#107 People are Strange on 07.10.17 at 10:11 pm

Anyone under the age of 35 has no clue what real interest rates are. I paid 12.5 % on my first house in 1992. At the time, that was a good deal. I hope they never go that high but be prepared. We always follow the US rates. I don’t ever see that changing as we’re too closely tied. Get ready!

#108 Raging Ranter on 07.10.17 at 10:15 pm

House prices in Dublin fell by 56% from peak to trough. For all of Ireland it was 35%. Sounds like a decent approximation for what Toronto and Canada might expect. One day they were called the Celtic Tiger, and then the next day, just like that, they weren’t. I think many Canadians will be shocked at how fast things unravel. When exactly that will be I do not know.

#109 People are Strange on 07.10.17 at 10:16 pm

1 or 2 % is just the beginning. We have to position ourselves for another market decline. Part of that is bumping up rates to allow some movement. Again; get ready!

#110 People are Strange on 07.10.17 at 10:17 pm

Simple economics

#111 acdel on 07.10.17 at 10:18 pm

Best Picture Ever!

#112 S.Bby on 07.10.17 at 10:18 pm

#4 Ian
That article was from two years ago. I wonder how much more debt that couple has now.

#113 People are Strange on 07.10.17 at 10:18 pm

I take no joy in this. People will suffer.

#114 Smoking Man on 07.10.17 at 10:19 pm

The council on Nictonite is requesting an in person report.

Won’t end well for me. Since when is using the UCC not good enough.

Alot of things went wrong on this mission. I handled them perfectly. Yet they want me in front of the board. My crime. Telling the truth while on earth.

I can see how thats a problem. Bring it birch ass Aliens. The roswell files where outed today. Shape shifting Nictonites. Wasn’t my fault.

https://youtu.be/RwXaFH1nSro

#115 Pete on 07.10.17 at 10:22 pm

#74 Reximus on 07.10.17 at 9:07 pm

California local debts are not the responsibilities of the state. Cities can declare bankruptcy. Ontario cities also have large debts although no one knows how much.

The state of California has about $136 billion debts, or 5% of GDP. The province of Ontario has about $340 billion, or about 50% of GDP.

#116 M-cube on 07.10.17 at 10:25 pm

Looks like half the comments are counting chickens before they hatch. As if this housing bust is a done deal. Far from it.

Nothing is inevitable, and markets have a funny way of contradicting your logic.

In any market, a correction can happen in one of 2 ways: with price or with time. I predict the latter. So hardly anything to get horny about.

Markets have a funny habit of underwhelming you when you expect the overwhelming, and overwhelming when you expect the underwhelming.

Money Master Moister (aka M-cube)

#117 Pete on 07.10.17 at 10:25 pm

Also, the province of Ontario uses a ridiculous concept called “net debt”. Everyone else in the world uses “gross debt”.

#118 Moses71 on 07.10.17 at 10:29 pm

Ofcourse no one takes joy in putting people out of their misery. Too bad it’s a consequence.
How will they find new places with doorways wide enough to accommodate their big heads?

#119 Chaddywack on 07.10.17 at 10:35 pm

Justin Trudeau is by far the most financially irresponsible PM that this country has ever had. It sickens me how he just throws money (that is ours btw) and every little one of his “niche” causes.

What do you expect though. He’s a trust fund kid and was a millionaire the day he was born. When you’ve never had to work for anything in your life that’s just how you see money.

What a horrible example for the next generation.

#120 Mark on 07.10.17 at 10:42 pm

“Banks make money off mortgages and LoCs. Why call in a LoC (forcing a house sale) and lose two streams of income (LoC interest and moetgage interest). Would have to be dire straights for the banks to do that….”

Because there might be better investment opportunities elsewhere? For instance, if the economy were to get going again, I don’t think its a large stretch for Canada’s large-cap businesses to borrow a few billion at a time to pay dividends out to their shareholders. This sort of lending competes against residential RE mortgages. At some point, the overleveraged will have to be shaken out of their assets — the banking system will not perpetually maintain people at a standard of living above and beyond their means. In fact, this is the only way that banking works, that is, to extend credit, and then withdraw the credit such that a person lives structurally below their means, the surplus ending up in the hands of the bankers.

#121 the Jaguar on 07.10.17 at 10:50 pm

#38 SBby—–Calgary condos? Huh? Can’t recognize your own from the lower mainland of BC where they engage in their annual hatred of the Stampede? The wardrobe should have been a clue.
Or maybe you needed an orca or killer whale held in captivity for years in the background to complete the picture.
Calgary, unlike Vancouver and Montreal doesn’t burn, trash, or disrespect its city when the local team loses a hockey game. No broken windows in those condo towers in the background. That might have confused you as well. British Columbia and Alberta. Unfriendly neighbours.

#122 NoName on 07.10.17 at 11:02 pm

#87 TurnerNation on 07.10.17 at 9:24 pm

If I were to be unemployed and in Calgary I’d get a day job as a commercial courier with its access to many businesses and people to source for leads.
Evenings valet cars at a high end hotel. Cash tips and get to know business owners/wealthy people over time.
Become ‘that guy’ everyone looks forward to seeing.

—-

you might be on to something here, few yrs back i was in a rush droped my for some time now dearly departed civic that is in car haven now, (that car saved my life) at walet parking and told guy go easy on a gas lost of power…
So few hours later i came to pick car slip 10 to dude, he gave me my money back and car keys, and told me your car is just behind that wall, so it was, sandwiched between two bentlys…
Not pritty sight seeing me enterung in a car thru trunk, but on a brigth note i got my 10 back.

no word of the lie here.

#123 People are Strange on 07.10.17 at 11:04 pm

#114

Again, we hit sticker shock in March. Hold on to your dreams!

#124 People are Strange on 07.10.17 at 11:07 pm

The reality is we’re way past affordability. That is the bottom line. Speculators cannot keep this thing going.

#125 People are Strange on 07.10.17 at 11:08 pm

Time to be smart!

#126 Smoking man on 07.10.17 at 11:09 pm

Post modern liberalism

Welcome to the novel, narrative that really bad people with shit intensions wrote for you.

https://www.youtube.com/watch?v=7U2E-In0DDg

My book is better.

#127 People are Strange on 07.10.17 at 11:13 pm

I’m just glad I taught my kids about simple economics. In the end, they’ll still get all my Money

#128 InvestorsFriend on 07.10.17 at 11:14 pm

My currency gain question

#69 A Reply to #3 InvestorsFriend on 07.10.17 at 8:52 pm
“P.S. to my currency question, so is my gain in fact at step b of the example?”

****************************************
It seems that to my complete surprise I must report a currency gain or loss when I BUY a U.S. stock using U.S. dollars in the U.S. part of my taxable account.

AND as Mark was mentioning the other day that applies to using those dollars to pay ANY U.S. dollar expense be it interest on a U.S. margin loan or even used for a vacation.

I guess that is fair but I had no idea.

In the link I posted yesterday at 125 it states:

A capital gain or loss is also realized when the funds are used to purchase securities that trade in the foreign currency, or when the funds are used to pay expenses or make a purchase. In these cases a deemed disposition of the foreign funds is considered to have occurred, even though they may not have been converted into Canadian dollars.

Previously, I had thought if I purchased a U.S. stock in my U.S. dollar taxable account, the capital gain or loss came only when I sold the U.S. stock.

But, no I have to account for the gain or loss on the currency as I buy the U.S. stock.

This is probably all quite logical and fair but I for one had no idea. I will have to go back and do more calculations as this changes my gains on U.S. stocks and creates a gain on the cash itself.

Thank you to the several responders who helped me figure this out.

My one conclusion remains, it is quite complex to get all the capital gains a on U.S. stocks and on the currency itself correct and to maintain a cost basis for that U.S. currency. Maybe the tax accountants are all set up to do this. I doubt that many people doing it on their own are getting it right.

No wonder I love RRSP and TSFA investing!

#129 mouldyinYVR on 07.10.17 at 11:16 pm

https://www.youtube.com/watch?v=hqOn5XEm86A
…….a little outta date…but what the heck!

#130 Rates vs Capital on 07.10.17 at 11:28 pm

#51 Mark on 07.10.17 at 7:54 pm

I’m looking through that article, but I don’t see any sources, or even quotes. Just claims. Where is this ‘data’ coming from? I’m not questioning its validity (and certainly West Vancouver is just a very, very small chunk of the overall GVR), but there’s no mention of the source of the data.
——-

The referenced data is from the BC provincial government – data they were effectively pressured to collect when the mountain of evidence of foreign buyers was overwhelming.

Let me understand this correctly. You are trying to minimize the influence of foreign capital in Vancouver once an ENTIRE CITY has been shown to have a quarter of its sales go to foreign capital?

Lets spell this out:

* 24% sales in a West Vancouver with a population of 50k and the highest priced real estate anywhere in Canada (and also the city with one of the lowest reported incomes but highest child poverty rates, just above Richmond…shocker I know)

* 25% in the City of Burnaby with a population of 225k

* 27% in the City of Richmond with a population of 220k

Anyone who sees this hard, credible, accurate government stats – not the frankenumbers from the RE cartel – and still thinks that foreign capital has no influence must have their head in the largest sand box on earth…

There is no other accurate, timely, credible source of data on foreign buyers than the BC government data – period, full stop.

Here is another more ‘credible’ one reinforcing that over 20% of sales in Burnaby and Richmond came from foreign buyers

http://www.theglobeandmail.com/news/toronto/ontario-isnt-moving-fast-enough-to-track-foreign-buyers-observers/article34074430/?utm_content=buffer64ac7&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

#131 Smoking Man on 07.10.17 at 11:28 pm

All the shit you do in life is meaningless when you end.

Write a book. Dont go crazy its alot of work.
All you need is one dedicated fan. Who has a brain and can carry it forward.

Nothing else matters.

https://youtu.be/tAGnKpE4NCI

#132 Rates vs Capital on 07.10.17 at 11:47 pm

#114 M-cube on 07.10.17 at 10:25 pm
Looks like half the comments are counting chickens before they hatch. As if this housing bust is a done deal. Far from it.

Nothing is inevitable, and markets have a funny way of contradicting your logic.

In any market, a correction can happen in one of 2 ways: with price or with time. I predict the latter. So hardly anything to get horny about.

Markets have a funny habit of underwhelming you when you expect the overwhelming, and overwhelming when you expect the underwhelming.

Money Master Moister (aka M-cube)
——-

Exactly. Just like the ‘plunge’ in Vancouver sales was giddily heralded as the end of the Vancouver market many months ago.

Now, new highs are being reached in the condo and townhouse segment despite the new down payment rules, despite the 5 year qualifying ‘Millennial Stress Test’ killer, despite the foreign buyers tax, despite the NDP victory, despite the soon to be rising interest rates…

If anything, this blog jinxes the outcome.

#133 guru on 07.10.17 at 11:50 pm

A lot of clueless posters out here

#7 – Foreclosures have gone up significantly in the past few months within the GTA.
#14 – Rate increase is nothing that Poloz can dictate at this point, it’s driven by the big bad guys down south aka Trump.

We’ve had our bank meetings amongst all the heads here and the consensus is that the free fall with be quick and nasty (likely 50% by XMAS). The commuter towns of the GTA (Brampton, Newmarket, Guelph etc.) will hit harder than anywhere else. The rest of Canada will see modest declines of 20%. Prices will stagnate for the next decade which means it’s a negative investment if you factor in carrying cost of any property.

#134 Ret on 07.10.17 at 11:53 pm

#113 “Ontario cities also have large debts although no one knows how much.”

Hamilton is heading for $885M in debt. I defy any one to drive around this city and tell me where the money went. The roads and sewers are falling apart and the lower city is looking more like Detroit every day. Property taxes are sky high compared to Burlington.

https://www.thespec.com/news-story/5518058-hamilton-the-unaffordable-city/

#135 Smartalox on 07.10.17 at 11:55 pm

M-Cube #114:

“the correction can happen with price or time”

How about BOTH?

Prices get reduced, which means assets are worth less than you paid for them. Or what you owe for them. Sometimes a lot less.

Then the bank or lending institution, recognizing that your assets are no longer worth enough to cover the cost of the loan, calls on you to pay up your line of credit, right now. That’s your correction in time.

#136 Puzni on 07.11.17 at 12:07 am

Garth,

Japan has GDP to income ratio of 250% . We are so far away from that. We love borrowing and financing our future lifestyles. I think if a ” real ” housing correction would have happened the politicians would be singing like a canneries. I live in BC, liberal government wowed in their election promise( many elections ago) not to run deficit budgets( something previous NDP party was known for). Than 2008 happened and their speech went like this” these are extraordinary times ” and they spend and borrowed ” because of tough times”

#137 Tenugi0 on 07.11.17 at 12:13 am

Loving today’s picture Garth! Thanks for all you do!!

#138 paracho on 07.11.17 at 12:26 am

This has been a long time coming with many variables involved. Policies to tighten have come into effect over the last year ..especially in Toronto..1. the new rent control of properties built after 1990s. A big hit 2. The foreign buyers tax..3. New mortgage policies and stress tests..first in May and now this in the autumn ..4. Increaed interest rates .
Call it what you will, something is happeneing. The correction is starting and will continue. How much is specualtive..30%, 40% or more…time will tell .
Fact is there are way too many folks that are overindebted and wages and jobs are just not there . At least not the kind to covwer these mortgages and debt levels.

#139 Rav on 07.11.17 at 12:27 am

When I walk around South Vancouver several houses have been on the market for a couple of months. What people asking for an absolute dump of a house is astounding. Nothing seems to be moving for good reason.

#140 Long Branch Apprentice on 07.11.17 at 12:29 am

Most Millennials are too busy watching The Bachelor and setting up their fantasy hockey pools for next year to notice that rates are going up. If they do notice the MSM headlines about BoC they have zero clue about what it means.

All those international development students, too bad they don’t cover Rothschild banking systems in undergrad. Seriously though, Canadian Millennials have had their intelligence retarded by too many loser teachers who have never worked outside academia.

The way I see it, those with patience and capital just might find themselves with the spoils of this awful, low rate fuelled shit mix.

I’m coming for the ranch, Boomers.

Can’t beat young, hungry and a head for numbers.

#141 Entrepreneur on 07.11.17 at 12:38 am

This is all so sad. I say to anyone who is in debt and falling behind in payments or in any doubt is to seek a real estate lawyer. Seek out several to make sure.

If bankruptcy is the call it is for seven years and the government takes every asset to make up the
difference if any but the lawyer will explain it all. One thing that I do know is to put all your assets like vehicle, etc. put it in a name that is not on the deed before going into bankruptcy. And this this the tricky part: before you knew you going to file for bankruptcy or the CRA will go after you.

Correct me if I am wrong but this is what I have been hearing on the ground. And it is shitty at times but the will and strength be with you.

#142 True Story on 07.11.17 at 12:49 am

My lawyer buddy here in Vancouver tells me you wouldn’t believe stories all the time..ie the number of his clients using Heloc to pay for daycare, vacations property taxes. Also lately sales collapsing some getting stuck with 2 properties and using loan sharks to carry = mega interest payments.. he says you have no idea its nuts. Meanwhile listings are on the uptick here seems spring sprung a little late

#143 Dan.t on 07.11.17 at 12:55 am

BC doing fine and prices moving up with for sale signs and sold signs all over YVR and lower mainland. Soon houses in chilliwack will be 1 million and in Hope 800k.

Who is buying these homes? Read about YVR condo complex marketed overseas and sold out all but couple units before open up to locals… who of course could not buy any unit. Don’t have the link now but it is different in BC.

Nothing will change. The world knows where they can park their money. Or I guess Abbotsford and Chilliwack can justify 800-1 million dollar homes.

It’s like a virus. Starts with 2 mil homes and 800k condos in YVR and spreads across BC. Explain that please. Seems to me it’s just getting worse when 2 bedroom condos Poco are asking 500k. Pocket change i guess. Oh right, solution, just move further east. You only have to commute 3 hours a day then. Good times in BC for anyone trying to buy or rent. Mortgage yourself to the big banks or get abused paying insane rents.

And Ja, I bet Victoria is still on fire like all over BC.

This can’t end soon enough. But don’t think it will.

#144 mousey on 07.11.17 at 12:56 am

Just two questions: is a range rover a new kind of stove? and, is it just me or does that guy in the fur and boots look like one of the guys from ABBA?

#145 Bob dog on 07.11.17 at 1:09 am

Wouldn’t it be easier to just take care of the bond holders?

#146 paulo on 07.11.17 at 1:23 am

#26 linda:

Heloc’s Could be the detonator that sets off a big bomb.
keeping in mind that these loans are demand loans secured by a homes equity.
there is some 210 Billion dollars worth out there estimated that the average is 70K.
So lets create a example : dick and jane bought a home
in the gta for 1.2 million in November 2017 they had 20% down plus closing costs or put down 240K and took a 960k first mortgage. there friendly banker,and first mortgage holder offered a heloc at a interest rate of 3.25% for a amount of 70K . dick and are good dogs and planned to pay it off in 5 years they have good fico scores between 690-719 there payment to retire this debt in 60 month’s is about 1265.00 per month.
now we are looking at September 2017 with a .25 rate hike in the bank,and another coming soon. the real problem is that dick and janes dream house has lost 30% of its value since they purchased it with a full blown correction underway. there friendly banker is now wearing his bankers suite,and looking for ways to restore the banks profits is fully aware of dick and janes finances and the fact that the heloc is no longer secured by the market value of there home. so what to do?. well calling the heloc is not a good option,even though the banker could.however the heloc is effectively a unsecured personal loan. the terms of the loan require security, so adjust the interest accordingly
from being a secured loan to a unsecured personal loan.
dick and jane receive a letter advising of the above and also advising them that the interest rate they are required to pay has changed from 3.25% to 14.56% the current fair market rate for unsecured personal loans for persons with 690-719 fico scores, source nerdwallet
this adds 380 dollars per month to dick and janes heloc payment! the rest of the math is simple but the 10% bump that would be a disaster for many has been passed. bad dogs that have only paid interest on there helocs are heading to the pound quicker.

#147 paulo on 07.11.17 at 1:32 am

opps quick correction:dick and jane purchased in November 2016

#148 Austruck on 07.11.17 at 1:55 am

Garth,
Is that a picture of you. Lol

#149 Freedom First on 07.11.17 at 2:13 am

#39 Happy Housing Crash Everyone!

I don’t know why, Happy, but reading your Posts makes me smile.

And yet, I have never felt good seeing people getting financially f’d over.

Even when it is their own decisions that brought it on.

I also know that for myself, I must adhere to using reason for all of my decisions and actions, and to rightly be held accountable for them. For I am a man.

Freedom First
Master of Freedomonics
Its my life

#150 Myra Andrews on 07.11.17 at 2:20 am

Data for Vancouver for July (GVRD and Fraser Valley)

New Sold Sell to List %
July 10 588 224 38.1%
July 7 368 201 54.6%
July 6 374 225 60.2%
July 5 502 231 46.0%
July 4 696 195 28.0%

#151 Myra Andrews on 07.11.17 at 2:33 am

From realtor Paul Boenisch (Metro Vancouver only)

Inventory while not high is much higher than it has been in several years. It was under 6300 in the beginning of the year.

July 10
New 399
Price Change 58
Sold 147
TI: 9576

July 6 and 7
New 387
Price Change 82
Sold 273
TI: 9404

#152 MNP Sensationalist on 07.11.17 at 3:04 am

MNP also goes on to say that a $300/mo increase in expenditures will render about 50% of Canadians near insolvent (“If that amount is increased to $300 per month, a staggering fifty per cent of Canadians would be on the verge of insolvency”).

I ran the numbers in #27 above and to get to a $300/mo payment increase for the average ON and BC mortgage, the interest rate needs to increase to about:

4.1%

Come on, that’s UNDER the current stress test amount of 4.64%.

MNP numbers make no sense whatsoever. Sensationalist.

If they were CNN, it would be called Fake News.

#153 Ferrari321 on 07.11.17 at 3:05 am

Abd with 70% of Canadians now real estate owners …. abd? :)

#154 slick on 07.11.17 at 3:16 am

I spent sunday afternoon at Pottahawk Point, Lake Erie. A couple thousand people, hundreds and hundreds of boats, tons of young people drinking and whooping it up, all on discretionary money. {no one NEEDED to be there}. I have been stunned at the money floating around, but I guess I dont get off the ranch much. Boating is a stupidly expensive hobby, for 4 months of the year. That’s why I have a bike.

http://www.pottahawkpissup.ca/

http://www.cbc.ca/news/canada/london/hypothermia-danger-pottahawk-pissup-1.4196831

Anyhoo, there has to be a huuuge shift in mentality before this debt issue changes. 30 year olds, with a big house and mortgage, borrowed money on a 30 ft boat they think they ‘deserve’.

Im thinking the banks will extract their money out of any loans, and leave the crumbs for private lenders to fight over. Have the banks been so greedy to lend money that they leave themselves exposed to that much risk? Borrowing money for a small business loan is a demeaning experience.

#155 Coco Lopez on 07.11.17 at 6:16 am

Seems to me there’s a reason Kathleen has all the provinces’ public service pension plans buying up uninsured mortgage debt. Federal bail-out. You heard it here first.

#156 Millennial falcon on 07.11.17 at 6:54 am

For some reason I’ve been using the word shyster a lot lately. Not sure why

#157 Franco on 07.11.17 at 7:18 am

There will be no housing crash in the foreseeable future, only a small correction in the sense that we will no longer have 20%-30% price increases per year, things will go back to normal in the 3%-5% increases per year. There will be some pain for some, but not the majority, unless the economy tanks.

#158 renting story from WA state on 07.11.17 at 7:37 am

https://bellingham.craigslist.org/rnr/6213475650.html

Renting is impossible hide this posting
Not sure how people can find a place to rent if they are just starting out or have below average credit scores around here.

We have been trying to find anywhere that will take us for 10 months. Not even the most disgusting trailor park in ferndale will take us in.

My boyfriend said if we dont have a stable home by January hes going to kill himself. I dont doubt it. Being homeless is shitty.

I thought renting was supposed to be for people who were unable to own, but it seems like it’s harder to rent. I guess it wont matter when we’re dead.

Shame on the people that have turned us down. We are good, clean people with full time jobs. We’ve rented from private landlords for years without a single missed payment, and because our previous landlords never reported our lease to credit companies we have “no renters history”. I have great credit but my husband has a score of 540 from medical bills. This is all it takes to ruin or end someones life. Not that anyone cares.

#159 David McDonald on 07.11.17 at 7:39 am

I recall the early 1980’s when Volker, the head of the Federal Reserve raised rates to near 20%. The Bank of Canada had to follow the US lead. I recall seeing husbands with grim faces and wives quietly sobbing in mortgage broker offices. They were unable to renew their mortgages at that usurious rate and would have to sell their homes into a depressed housing market.

Bear in mind these were responsible people sideswiped by a government decision to halt inflation. It was like the decimation of a Roman legion; kill one in ten to encourage the others.

The Canadian government did nothing to help these people. It was powerless then and today it is even more constrained. Garth is right; don’t expect government intervention when the housing market crashes.

#160 Victor V on 07.11.17 at 7:53 am

HSBC forecasts Bank of Canada will raise rates in July and October

http://www.bnn.ca/hsbc-forecasts-bank-of-canada-rate-hikes-in-july-and-october-1.801625

#161 nick on 07.11.17 at 8:09 am

Its hilarious that people are actually saying “this is just a blip in the GTA, look at Vancouver!”.

I mean, its actually very sad that people cannot identify the large differences between what happened in Vancouver and what is happening in the GTA.

Either they are completely and utterly ignorant, or they are biased and grasping at straws to justify their own beliefs/choices/employment.

#162 Brian on 07.11.17 at 8:21 am

Back in the late 80’s / early 90’s when interst rates went really high people bailed and ran.

i looked at several dozen nice homes that were for sale due to foreclosure. They were vacant and quite a few had been heavily vandalized by the owner before they slinked off into the night.

I remember one nice home with dozens of holes punched in the walls of every room. Realtor explained that the defaulters often took hammers to the drywwall “to teach the banks a lesson”

So they did this because they considered it to be revenge against the bank.

The fact is they were stupidly in debt and by damaging the properties like they did, they reduced the amount that the homes eventuaĺly sold for in foreclosure.

The difference between the mortgage outstanding and the sell price in foreclosure was not forgiven!

So the damage that they did came out of their own pockets in the end.

People really ARE that stupid!

#163 Ret on 07.11.17 at 8:27 am

Helocs were stupid but what was even stupider was that they often went to fund down payments on more RE such as cottages, student rentals, Bank of Mom properties etc.

Lots of RE leverage on the way up will bite them on the way down times two. Rising carrying costs on a declining asset that is becoming more illiquid each month. Sure I feel sorry for them, just not very much.

The unthinkable is happening, price cuts in Burlington. Most are in the range of $10-20,000 which on a $600,000 semi or narrow lot single is a bit of a joke when there is usually an almost identical property on the next block listed for $549,000 and it has not sold either. I’d be thinking a number that starts with a “4” by Labour Day.

#164 Julia on 07.11.17 at 8:41 am

#139 Entrepreneur

Any assets transferred in a certain timeframe prior to bankruptcy must be disclosed to the trustee. Courts can void a transfer.

#165 SilverSon on 07.11.17 at 8:54 am

#150 MNP Sensationalist on 07.11.17 at 3:04 am

Not sure about your logic. Your math looks about right but I don’t understand how it suggests the MNP numbers make no sense and have been sensationalized as you are claiming. Sure, the interest rate of 4.1% would yield a $300 monthly increase in the example – so what. What’s that got to do with the mortgage stress test level of 4.64%? Perhaps they set the stress test at a level where they thought people would be in an insolvency danger zone in which case your math validates what MNP has reported. Responsible lenders should stress test their loans based on where they think the borrowers would be on the brink of insolvency otherwise their risk of the borrower going into default goes way up.

#166 Q2 Class 2-B-C-2 Duplex Drive on 07.11.17 at 9:00 am

‘…of a generation used to helicopter parents, entitlement and prizes for showing up?’

In other words, saving the butts of a sorry bunch of pampered snowflakes.

In recent years, I’ve started describing myself as ‘old school’. I rent, save my money, live simply and small without all the ‘absolute necessities’ like an iphone or internet or streaming. Remember flip-phones? They’re still available, cheap too, with NO CONTRACT either. Cable TV is great if you like paying lotsa money to watch adverts. Much better to buy DVDs, plenty available secondhand and, unlike streaming video, the cost is upfront. I could go on but, being 63, I’m just an over-the-hill cis-gen het-sex white male, so snowflakes ignore me. At their peril, it appears.

The collapse of the RE market here in the Big Lemon – where condos are going up like CRAZY at Yonge & Eligible – will prove a valuable life lesson to all those entitled snowflakes out there who, at the age of 23, think they have it all figured out. Unlike college, there aren’t any ‘safe spaces’ in the real world! This will be quite entertaining.

#167 Julia on 07.11.17 at 9:07 am

#163 SilverSon

The stress test at approval of the mortgage showed that the borrower could absorb a rate of 4.64% at the time, everything else remaining equal. If they can’t absorb a 4.1% rate now then something else has changed, likely higher overall debt.
If there had been no stress at origination then the 50% of people near insolvent at 4.1% might be higher.

#168 Kathleen O'Day Wynne on 07.11.17 at 9:08 am

#129 Smoking Man on 07.10.17 at 11:28 pm
All the shit you do in life is meaningless when you end.
Write a book. Dont go crazy its alot of work.
All you need is one dedicated fan. Who has a brain and can carry it forward.

Nothing else matters.

https://youtu.be/tAGnKpE4NCI
……………………………………………………………
I loved your book Smoky! It is a hit here in the Legislature! I’m your #1 fan.

#169 maxx on 07.11.17 at 9:08 am

#4 Ian on 07.10.17 at 6:26 pm

“‘Canadians are responsible borrowers and banks are prudent lenders’ LMFAO can’t wait till Happy Housing gets ahold of this one!!”

No kidding………Canuckleheads are an incredibly gullible lot who evidently swallow msm wholesale on a consistent basis.

Sympathy? Pas moi. Borrowers can suck it up and retool their “lifestyles” so as to carry on licking that pile of brick veneer, or be forced to sell. Either way, the cost of truly dumb borrowing will be faced.

Assistance from tptb would be a complete horror show and criminal waste of taxpayer revenue.

If that comes to pass, what will be underscored is that dumb-$hit beavers (except for most GF dawgs……fruit drink-slinging realtards on this blog don’t count) are completely unable to learn from the mistakes of others. They’re different, don’t ya know.

I keep saying this to the point of puking, but raising rates sloooowly, by ~10 bps per quarter, will give gfs a chance to adapt. The rest can scramble and do what they can – maybe the idiot bank of mom can advance more retirement funds to the kids, its self-proclaimed “royalty”.

25 bps here and there might work, but it leaves the door open to potential cb fiscal histrionics, stall and certainly heaps more useless msm activity.

The only path to fiscal health is restoring the value of money.

Gently.

Fly the craft Poloz!

#170 niagara on 07.11.17 at 9:13 am

It’s turning into a stand off in Niagara. Sales are a lot slower however sellers are still asking 50-100% over assessed values resulting in properties are just sitting there with no buyers in sight. I just read in the local paper that the unemployment keeps increasing in the area and is now @ 7.2% .. just a matter of time now before it all falls apart …

#171 SilverSon on 07.11.17 at 9:23 am

#160 Brian on 07.11.17 at 8:21 am

Wow, that’s crazy! Thanks for sharing. It reminds me of this Einstein quote:

“Two things are infinite: the universe and human stupidity; and I’m not sure about the universe.”

I was a little too young to remember the late 80’s/early 90’s RE correction but I think it’s tremendously valuable for reminders like this to show us what could easily happen this time around. Of course I have no idea what it will actually be this time around, but being in denial about it sure isn’t helping anything or anyone. Denial is a character trait of a greater fool. Instead of looking for someone else to clean up their messes whether that be mom or the government, people need to stop being so lazy and unaccountable. Learn as much as you can from what’s happened in the past and what’s going on now, relate that to where you stand (and be honest about it), and plan your way out of your mess. That’s what grown-ups do.

#172 SilverSon on 07.11.17 at 9:28 am

#139 Entrepreneur on 07.11.17 at 12:38 am

Seriously? People need to own up and be accountable for their actions. Playing games with moving assets purchased with borrowed into other names so that you can keep them after bankruptcy is stealing. Boy have we sunk to a new low if we’re actually recommending people do that.

#173 Wrk.dover on 07.11.17 at 9:48 am

According to organiser, every one lives cheque to cheque, so early bird $70 instead of $90 at door for weekend pass including camping is in effect all the way until July 20 for the July 29 event. ( smokin blues fest, Windsor NS. )

They will all find $90 to pay at the door somehow, rather than kick in the $70 sooner than later.

#174 n1tro on 07.11.17 at 10:07 am

Who runs the world? Girls!

http://www.dailymail.co.uk/news/article-4677186/Women-cleavage-seen-better-bosses.html

#175 Julia on 07.11.17 at 10:09 am

#170 SilverSon

Yep. Fraud.
http://www.rcmp-grc.gc.ca/en/news/2017/sharbot-lake-resident-charged-bankruptcy-offences

#176 DM in C on 07.11.17 at 10:17 am

#38 SBby—–Calgary condos? Huh? Can’t recognize your own from the lower mainland of BC where they engage in their annual hatred of the Stampede? The wardrobe should have been a clue.

******

Wrong. Wrong. Poor try at trolling.

This is literally two blocks from my work on 1st Street in Calgary. I work two blocks from the Stampede LRT station, and I can easily tell this is the location.

See for yourself.. https://www.google.ca/maps/@51.0388435,-114.0586305,3a,75y,331.94h,88.86t/data=!3m6!1e1!3m4!1sN06uQOb_F5mu9t4awwGSNA!2e0!7i13312!8i6656

#177 Ole Doberman on 07.11.17 at 10:23 am

Looks like top economists are giving the thumbs down to raising rates tomorrow. We’ll see if Poloz succumbs to the pressure:

http://www.bnn.ca/why-six-top-economists-think-the-bank-of-canada-should-hold-rates-1.800688

Market odds of an increase tomorrow: 94%. Don’t believe everything you read. — Garth

#178 DM in C on 07.11.17 at 10:26 am

Sorry I should reference to whom I replied: #119 The Jaguar — that is indeed Calgary, see my comment above.

#179 Ole Doberman on 07.11.17 at 10:34 am

#175 Ole Doberman on 07.11.17 at 10:23 am

Looks like top economists are giving the thumbs down to raising rates tomorrow. We’ll see if Poloz succumbs to the pressure:

http://www.bnn.ca/why-six-top-economists-think-the-bank-of-canada-should-hold-rates-1.800688

Market odds of an increase tomorrow: 94%. Don’t believe everything you read. — Garth
——————————————————–
I know you post odds regularly – where do you find these numbers, Vegas?

Swaps trading. — Garth

#180 Tony on 07.11.17 at 10:38 am

Re: #159 nick on 07.11.17 at 8:09 am

Vancouver is on the coast just like Seattle and San Fransisco. Vancouver is closer to China on a direct flight and has a warmer climate. Car insurance for high end cars is much, much less. The trend for the Chinese will always be to the coastal areas and areas with the lowest taxation.

#181 wow on 07.11.17 at 10:51 am

https://bellingham.craigslist.org/rnr/6213475650.html

Renting is impossible hide this posting
Not sure how people can find a place to rent if they are just starting out or have below average credit scores around here.

We have been trying to find anywhere that will take us for 10 months. Not even the most disgusting trailor park in ferndale will take us in.

My boyfriend said if we dont have a stable home by January hes going to kill himself. I dont doubt it. Being homeless is shitty.

I thought renting was supposed to be for people who were unable to own, but it seems like it’s harder to rent. I guess it wont matter when we’re dead.

Shame on the people that have turned us down. We are good, clean people with full time jobs. We’ve rented from private landlords for years without a single missed payment, and because our previous landlords never reported our lease to credit companies we have “no renters history”. I have great credit but my husband has a score of 540 from medical bills. This is all it takes to ruin or end someones life. Not that anyone cares.

…………

i thought renting was fun?

move to a different state?

#182 Asterix1 on 07.11.17 at 11:08 am

#177 Ole Doberman on 07.11.17 at 10:34 am
#175 Ole Doberman on 07.11.17 at 10:23 am

Market odds of an increase tomorrow: 94%. Don’t believe everything you read. — Garth
——————————————————–
I know you post odds regularly – where do you find these numbers, Vegas?

Swaps trading. — Garth
___________________________________________

Ole Doberman, this could be your cue to stop commenting!

#183 maxx on 07.11.17 at 11:10 am

#14 Blacksheep on 07.10.17 at 6:46 pm

“Winner, winner, chicken dinner!

“Less likely is that policymakers relent and rates are stayed.”

A CAN. rate move, is one and done anyways.

If GDP suffers, down….she….goes.”

Mmmmmm…..

I’m more inclined to think that any uptick in rates could be entirely eclipsed by potential long-term trade consequences of a $10.5MM payout last week.

#184 Victor V on 07.11.17 at 11:13 am

http://business.financialpost.com/personal-finance/mortgages-real-estate/uninsured-mortgages-are-greatest-risk-for-canadian-financial-institutions-dbrs-report-says/wcm/4c169bd0-473a-46e0-966e-dec0f678aaa5?preview_id=1403731

Uninsured mortgages, a new target of federal regulators, represent the greatest risk to the financial industry, especially Canada’s largest banks, according to a report out Monday from DBRS Inc.

The credit ratings agency says about 46 per cent of total mortgages in Canada are now uninsured with the big six banks holding 32 percentage points of that total. Credit unions have eight percentage points and six percentage points are held by small to medium-sized institutions, including mortgage investment corporations.

“It should help,” Sohail Ahmer, vice-president of DBRS, said about changes announced last week from the Office of the Superintendent of Financial Institutions (OSFI) that will require stress tests for uninsured mortgages. “When we talk to financial institutions we find some of the uninsured mortgages… they tend to have reduced scrutiny when it comes to lending standards.”

#185 Vince on 07.11.17 at 11:14 am

Would be useful to do a per-unit analysis of this:

“Well, we owe a touch over $2 trillion in household debt, of which two-thirds is mortgages. Another $211 billion is outstanding in lines of credit secured by houses.”

let’s use some statscan data and divide that by adults age: 25 to 49: 12.26 millio
and against family income, non-senior: $82,000/annum

for a married couple, you get $326,150 of debt, on average, against $82k of income ~ 398%. there will be others on the younger end with a much more severe ratio, and at the other end, more conservative. I forgot the line of credit, which works out to ~$34,000 per couple or $17,000/per adult. And this assumes 100% of the adult population from 25-49 owns a house which is overly conservative for the purposes of the example.

I’ve made the simplifying assumption that people 49+ are mortgage free to make the numbers a little easier to work with.

this says nothing of savings, but one would imagine that younger buyers would have much of their savings wrapped up in a downpayment.

There is probably a better comprehensive analysis, but the fact of the matter is that debt-loads are considerable, and prolonged increases in interest rates will have a money velocity blunting effect that will knock-on across the economy, and people that feel poor, don’t spend money.

Somebody can probably build out this analysis, but if you are on the sidelines with a pile of money, waiting for the fireworks is not a bad idea.

#186 Smoking Man on 07.11.17 at 11:16 am

#166 Kathleen O’Day Wynne on 07.11.17 at 9:08 am
#129 Smoking Man on 07.10.17 at 11:28 pm
All the shit you do in life is meaningless when you end.
Write a book. Dont go crazy its alot of work.
All you need is one dedicated fan. Who has a brain and can carry it forward.

Nothing else matters.

https://youtu.be/tAGnKpE4NCI
……………………………………………………………
I loved your book Smoky! It is a hit here in the Legislature! I’m your #1 fan.
….

Ah crap. Guess I got to be less hardon you.
Thanks for reading it.

#187 TheDood on 07.11.17 at 11:16 am

#140 True Story on 07.11.17 at 12:49 am
My lawyer buddy here in Vancouver tells me you wouldn’t believe stories all the time..ie the number of his clients using Heloc to pay for daycare, vacations property taxes. Also lately sales collapsing some getting stuck with 2 properties and using loan sharks to carry = mega interest payments.. he says you have no idea its nuts. Meanwhile listings are on the uptick here seems spring sprung a little late.
____________________________________

This situation is probably a lot more common in YVR than people realize. Salaries are low, prices are high, and lots of people with $$ in their eyes have way over leveraged themselves.

You can sense a pull-back by lots of prospective buyers due to the muddled government situation and talk of the rate hike. In our neighborhood alone, there are at least half a dozen for sale signs which have now been up for 30 days plus. 6 months ago, they would have been sold in a day or two.

#188 Smoking Man on 07.11.17 at 11:23 am

Any good commercial realtors out there. Rather give my business to a blog dog.

Looking at buying a commercial property with a seasonal buisness out of town?

[email protected]

#189 IHCTD9 on 07.11.17 at 11:36 am

http://www.macleans.ca/news/canada/drowning-in-debt-is-the-new-normal-in-canada/

“Here are some specifics that show how misaligned her lifestyle and business expenses were with the actual cash she was earning:

• Owns a townhouse: mortgage $600,000, estimated value $650,000

• Mortgage payments: $3,600/mo

• CRA lien against house for personal income tax owing: $98,000

• She had previously refinanced her house to help fund her business

• She had a prior bankruptcy 15 yrs ago—discharged

• Leased car: $51,000 owing

• Credit card debt: $75,000

• Business loan (personally guaranteed with a high interest rate): $45,000

• Outstanding debts to suppliers: $80,000

• Business rent owing (seven months behind): $11,000

• Net self-employment income: $3,500 per month, or $42,000 per year”

Lenders also really need to burn somehow if they are so comfortable that they keep lending to a financial basket case like the above woman.

More skin in the game required.

#190 OutHouse on 07.11.17 at 12:11 pm

If Obama is liberal-centre then I cannot call Garth centre-left.

I can still call Pink Mr. T moist-mercer left.

#191 TnT on 07.11.17 at 12:15 pm

#187 IHCTD9 on 07.11.17 at 11:36 am

When you owe someone $1000, it’s your problem…

When you owe the amount that this lady owes, it is not her problem… hahahaha

She can ride this for years and then pack it all in and move on.

Banks will spread the loss on the collective payers….

Makes you wonder who’s the smarter one here?

#192 Alex on 07.11.17 at 12:22 pm

#144, Paul
cool fiction story, bro
they had 20% down plus closing costs or put down 240K and took a 960k first mortgage. there friendly banker,and first mortgage holder offered a heloc

Except no bank will give you a HELOC with 80% mortgage. It has “zero” equity available for HELOC. At least in Canada. Not sure about USA from where you copypasted it (according to “FICO” and “nerdwallet” keywords)

#193 Stock Picker on 07.11.17 at 12:27 pm

FYI…..a new real estate web site to buy sell auction and access information will go live August 1st. I think it’s initially geared to Richmond BC. Just read about it in the Richmond News know little els…..will follow.

Suuty. com

Best of luck to the gutsy broad who’s starting it.

#194 OutHoos on 07.11.17 at 12:31 pm

Obama is moist-mercer-left, and so too is Pink Mr.T.

#195 Glengarry Girl on 07.11.17 at 12:32 pm

You can only imagine how many people are living the same lifestyle as the woman profiled in the Macleans article. These same people claimed to be Victims of the Housing Bubble in the US and they were bailed out. They cried that they lost their houses when in reality they never owned them in the first place. They filed bankruptcy while continuing to live for Free in foreclosed homes in some cases for years. Seven years later they are starting all over again after being cleared. This woman probably has a designer hand bag, high end car, and goes to Starbucks twice a day. Is she really loosing? It seems to me that I’ve seen countless people all around me for decades playing this Debt system. I’ve often thought “am I a bigger fool paying for things with Real Money?” I only can have faith and hope that things will return to fiscally responsible people like myself being able to be rewarded for playing by the rules. I’ve also taught my kids to live by my standards. They work hard, pay cash for school, don’t by things unless they can pay cash. They did not drive for 3 years after moving out. No cell phone plan until recently. Oldest two are almost done school with no Debt. We were told from most people that this is impossible. I basically have told my kids the truth, most people have spent money they will have no way to pay back. This will eventually catch up to them and your prudence and responsible living will be rewarded. I hope that this is True, it’s yet to be determined.

#196 Blobby on 07.11.17 at 12:34 pm

I dunno if it’s impossible the government will bail people out.

Whichever government is in power when this blows up, will get the blame for it by the public.. (people ALWAYS without fail blame the government for this sort of thing rather than themselves)

So this will cause a new government to rise up from ashes.. now all they have to do is run a campaign or promising to bail people out…

Etc etc.

#197 crossbordershopper on 07.11.17 at 12:36 pm

dont worry the bank of mom will step in, they did before. you think your mom is going to let her son loose his house? not a chance, they will fall on the knife for their children. I know some parents who wont, but there are many, many who will and keep up the appearances of the marry go round.

#198 Victor V on 07.11.17 at 12:38 pm

http://business.financialpost.com/personal-finance/mortgages-real-estate/canadian-home-buyers-losing-steam-and-cash-as-rate-hike-looms/wcm/9d1ba6c2-50b5-48ff-8309-495ef91f663d

Broker John Pasalis knew Canada’s hottest housing market was cooling but an email from desperate sellers showed him just how bad it was.

A young couple had been looking to cash in on their three-bedroom home in a Toronto suburb after prices rose 25 per cent in April from the prior year. They soon found first-time buyers who agreed to pay $900,000 and, assured of the deal, the couple bought another larger home further away from the city. But the market began to turn just before the closing date in June, and the buyers reneged on the deal, forfeiting their $40,000 deposit.

#199 Tazi Bnu on 07.11.17 at 12:43 pm

#92 Mr.Buy on 07.10.17 at 9:30 pm
Good news realtors and follow speculators since change is coming and this change will save the housing market from crashing. We can all agree the housing market is in trouble and will crash if the status quo continues. I am hearing rumours that the Easter bunny with the coordination of Santa Claus will buy up all of the houses. Yes they will come out of no where to buy up the homes from the distressed masses. Santa said He does not care about the 15% foreign tax. The Easter Bunny is looking into whether he would be considered exempt. Can any realtor or mortgage broker here confirm this?
_____________________________________________

Santa has a Canadian Citizenship (Harper gave him one) so he could create a corp to buy houses and sell shares to the Easter Bunny (from Easter Island), no stupid foreign buyers tax. However, the Easter Bunny would need to have his International Health Certificate up to date.

#200 M on 07.11.17 at 12:51 pm

“Nobody knows where this is going or how it ends. ”

LOL… I know.

Big. Smoking. Hole. In. the ground.

#201 InvestorsFriend on 07.11.17 at 1:07 pm

Ambiguous Request by Smoking Man

#186 Smoking Man on 07.11.17 at 11:23 am
Any good commercial realtors out there. Rather give my business to a blog dog.

Looking at buying a commercial property with a seasonal buisness out of town?

*************************************
The question mark here makes things ambiguous. If you are looking for a realtor then you are the one looking to buy or sell. If looking to buy that should be a statement not a question.

With the question mark it looks like you are seeking a buyer. But you said you wanted a realtor.

I don’t give much of a crap about grammar. What is far more important is that the meaning be clear. Its not.

I am not getting the meaning here.

(I left out the apostrophe above to bait the grammar police.)

#202 Dups on 07.11.17 at 1:17 pm

There will be no BOC rate increase tomorrow.

#203 Howard on 07.11.17 at 1:34 pm

#200 Dups on 07.11.17 at 1:17 pm
There will be no BOC rate increase tomorrow.

———————————-

That would signal to the market that Canada is in even bigger doodoo than previously thought, and that it’s leaders have the financial acumen of a…well, of a trust fund substitute drama teacher.

They must now raise or it will be open season for the short-sellers on anything to do with Canada.

#204 oncebittwiceshy on 07.11.17 at 1:34 pm

MNP Sensationalist: ” Come on, that’s UNDER the current stress test amount of 4.64%.”

Hmmm…..sounds like it is underestimated!!

http://www.cbc.ca/news/business/osfi-bundled-mortgage-loan-ban-1.4192727

Reuters reported in January that regulated mortgage providers were teaming up with unregulated rivals to circumvent rules limiting how much mortgage providers can lend against a property. The arrangements have proliferated as Canadian regulators have tightened lending standards to shield borrowers in case a decade-long housing boom goes bust.

“Bundled” or co-lending agreements with an unregulated entity can enable lenders to offer combined mortgages worth up to 90 per cent of a property’s value.

#205 Howard on 07.11.17 at 1:36 pm

#80 Ace Goodheart on 07.10.17 at 9:12 pm

So GTA central in hoods that aren’t sketch will likely start running again.

Oh if you bought a semi in the ‘shwa for 890k on speck hmmmm you are pooched as this fun blog likes to say

——————————

I don’t think anyone believes that the Annex or Yonge & Eglinton will lose much value.

But yes, Oshawa, Aurora, and my personal favourite, Milton (can barely even say the name without laughing) will be massacred.

#206 Wrk.dover on 07.11.17 at 1:38 pm

#189 TnT on 07.11.17 at 12:15 pm
#187 IHCTD9 on 07.11.17 at 11:36 am

When you owe someone $1000, it’s your problem…

When you owe the amount that this lady owes, it is not her problem… hahahaha

She can ride this for years and then pack it all in and move on.

Banks will spread the loss on the collective payers….

Makes you wonder who’s the smarter one here?

———————————————-

In our society the smarter one is the one in the most expensive car…

#207 oncebittwiceshy on 07.11.17 at 1:38 pm

#141 Dan.t on 07.11.17 at 12:55 am

Hmmm and this will last how long?

https://betterdwelling.com/city/vancouver/detached-real-estate-prices-falling-5-areas-vancouver/

#208 Entrepreneur on 07.11.17 at 2:05 pm

Looks like a stirred a little bees nest but learnt that stuff in school and btw, big business do this all the time but are more knowledgeable on the how, why, and where.

Also, be aware that big construction companies declare bankruptcy (who knows who gets paid), pick up another name and carry on.

Yep, the legal tricks of doing business. And it is all legal. Of course you have to know the rules.

#209 paulo on 07.11.17 at 2:18 pm

#190 Alex
up until about 60 days ago,banks where falling over themselves to hand out helocs regardless of the equity as they along with consumers believed houses would rise forever. all you needed was a good fico and payment record and of course a pulse.
how things have changed in a couple of month’s , now the banks are quietly advising appraisers to appraise 30% below current street price. mortgages are very difficult to obtain. interest rates are starting the slow but unstoppable march upward to normal historical levels ie free money days are over.
so dick and janes drama will play out apically for Canadian home owners that over borrowed and are pickled in debt. one other point this will be a effective tool to force over indebted home owners to liquidate and settle accounts, with out forcing a power of sale i am sure the big banks have figured out this one well in advance.

#210 Who is Mark? on 07.11.17 at 2:36 pm

Anyone know this guy: https://www.facebook.com/marknorman.amp?fref=ufi&rc=p

#211 AGuyInVancouver on 07.11.17 at 2:36 pm

#51 Mark – WRT to your questioning of foreign ownership stats, it helps if you read the quoted article:

“Figures on foreign real estate purchases on the North Shore were obtained by the North Shore News through a Freedom of Information request after the province previously refused to provide a breakdown of real estate transactions involving foreigners in North Vancouver and West Vancouver. “

#212 isuckless on 07.11.17 at 2:39 pm

If the following is true (and it’s not BTW) “The vast majority of Canadians (77 %) would have difficulty absorbing an additional $130 per month in interest payments on debt” than it is clear that the government will bail out these voters.
There is another financial vehicle that can be employed to allow homeowners to get their houses for peanuts:
INFLATION (yugee!) and that is fully under government control (savers will be pooched though)

#213 paulo on 07.11.17 at 2:42 pm

#187
i know a guy that delivers pizza and makes more per month than this woman,uses a beater car i think is paid for and has zero other debt! also says that he has a hard time making ends meet monthly. just shows what happens when credit is available essentially free i guess.

#214 yorkville renter on 07.11.17 at 2:55 pm

#203… all hoods will lose, just not as much as the burbs

#215 A Reply to #126 InvestorsFriend on 07.11.17 at 3:05 pm

I made a mistake in calculating the foreign exchange capital gain in your example: The gain is only $4,800 (not $5,000).

I overlooked comment 12 in IT-95R, which reads as follows: “Subsection 39(2) applies to any fluctuation after 1971 of a foreign currency relative to Canadian dollars that results in a gain being made or a loss being sustained. In the case of individuals the rules in that subsection provide that only the amount in excess of $200 of an individual’s net gain or loss on the disposition of foreign currency is taxable or deductible as a capital gain or loss.”

http://www.cra-arc.gc.ca/E/pub/tp/it95r/it95r-e.html

http://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-39.html

I never claimed to be a tax expert. :)

#216 dontcallmeshirley on 07.11.17 at 3:07 pm

A $3300 annual interest income is meaningless vs the default of a $100k HELOC.

That’s why a bank would call, or more likely, restructure a HELOC.

#83 Bottoms_Up on 07.10.17 at 9:18 pm
#26 Linda on 07.10.17 at 7:06 pm
———————
Banks make money off mortgages and LoCs. Why call in a LoC (forcing a house sale) and lose two streams of income (LoC interest and moetgage interest). Would have to be dire straights for the banks to do that….

#217 SimplyPut7 on 07.11.17 at 3:12 pm

Real estate analyst and author Alex Avery recently told CBC News that taking out $20,000 to pay for a new kitchen or bathroom may be a mistake — especially as home equity lines of credit come with their own risks.

“Generally speaking, the returns are negative from a financial perspective,” he said.

http://www.cbc.ca/news/business/interest-rate-hike-lines-of-credit-1.4198433

Oh! Now we think doing the latest and greatest reno we saw on HGTV is a bad idea!

The design will become dated, and no home buyer or seller will want that crap in their house in 10 years, nor will they have another $20,000 or more to redo the renovation when they realize how much they hate the design!

Isn’t funny how a little rate hike of 0.25% can cause a nation to become more prudent with their finances?

#218 Yuriy on 07.11.17 at 3:14 pm

Wife of one of my friends from Calgary told me this story. He’s lost his job and now they are desperately trying to sell their house and move to PEI to be mortgage free. Their friend’s lost his engineering job (was getting EI) and since they bought the house (wife’s not working) and they were unable to pay the bills he accepted an offer in Toronto. But when he came to Toronto he discovered that his boss was an ass and work environment was very toxic. So he’s got into an argument with his boss and then he’s left his job and got back to Calgary. But since he’s found job he was off EI and he had to move to Toronto again and live in cardboard box (I’m not kidding) to save money to pay for the house…

#219 Mr. Buy on 07.11.17 at 3:22 pm

#197 Tazi Bnu

Lmfao . Thanks

#220 soost on 07.11.17 at 3:29 pm

I love it when people thing that great metropolitan areas are protected.

“Nature abhors a vacuum.”

Smart people move toward value. Great areas may be last to go – but go they will.

#221 John of Grant on 07.11.17 at 3:31 pm

#177 Ole Doberman on 07.11.17 at 10:34 am
#175 Ole Doberman on 07.11.17 at 10:23 am

Market odds of an increase tomorrow: 94%. Don’t believe everything you read. — Garth
——————————————————–
I know you post odds regularly – where do you find these numbers, Vegas?

Swaps trading. — Garth
————————————–

A simple calc to find hike odds. put data in cells D1-D6 and use formula as written…..

Current BoC Rate: 0.500% D1
OIS Rate: 0.719% D2
Today: 07/11/2017 D3
Decision Date: 07/12/2017 D4
OIS Maturity Date: 07/20/2017 D5
Hike Amount: 0.25% D6

Prob of Hike: 98.525%

=((((1+D2*(D5-D3)/365)/(1+D1/365)^(D4-D3))^(1/(D5-D4))-1)*365-D1)/(D6)

#222 SilverSon on 07.11.17 at 4:12 pm

#165 Julia on 07.11.17 at 9:07 am

Thanks … hadn’t thought of it that way!

#223 Happy Housing Crash Everyone! on 07.11.17 at 4:29 pm

It’s common knowledge that the masses are MAXED OUT ON DEBT. The reality is many are bankrupt right now and only because of HELOC’s and LOC have they been able to avoid bankruptcy. RE in Canada is a house of cards built on debt. People who bought homes years ago CAN NOT afford the place or lifestyle they are in and have maxed out their HELOC’s and LOC. Realtors who say prices will not go down are either STUPID because they are high school drops outs or they are dirty shyster shills that deserve to suffer for a thousand years for their crimes in the housing bubble. Half the people you see on the street are sooooooooo stupid that it is scary. Just look how crazy, stupid , and delusional they have become
http://www.cbc.ca/news/business/the-national-lust-for-home-equity-lines-of-credit-should-we-worry-1.3106533
If the government does not crash this now the problems will be even bigger later on

http://www.macleans.ca/news/canada/drowning-in-debt-is-the-new-normal-in-canada/

Many are bankrupt like in the article above.

#224 Newcomer on 07.11.17 at 4:32 pm

#195 crossbordershopper on 07.11.17 at 12:36 pm
dont worry the bank of mom will step in, they did before. you think your mom is going to let her son loose his house? not a chance, they will fall on the knife for their children.

————
The problem with that idea is that, when prices fall, the BoM won’t be able to borrow any more to give to the kid. Remember, the BoM already financed the kid’s deposit, a few renos and some travel on Mom’s hard earned equity.

#225 CaMys on 07.11.17 at 4:38 pm

Hey Garth,

I read your blog regularly from California. Love it.
Great Blog. Keep it going.
The following passage made me laugh at the top of my lungs and i had to commend your work. Regards.
“Impossible is that bad things are simply forgiven. That was your mom’s job. Look where it got us.”

#226 browninsask on 07.11.17 at 4:40 pm

Hello Garth,

Is it possible to get your weekly call on a podcast list? It is great to listen to but hard to download a standalone copy and listen when out an about. Hope this is something your minions working in the background can do it easily.
Am I asking too much for the valuable info you throw out free?

\Cheers

The call is for clients, but is available weekly on my corporate site. Yeah, that’s a big ask. — Garth

#227 A Reply to #213 dontcallmeshirley on 07.11.17 at 4:48 pm

“Would have to be dire straits (not straights) for the banks to do that….”

#228 Dan on 07.11.17 at 5:01 pm

This is a class war. Havenots are celebrating potential disaster for haves or wannabe haves.
Comparison and tolerance, always at odds, right?

#229 SilverSon on 07.11.17 at 5:07 pm

#223 CaMys on 07.11.17 at 4:38 pm

I agree 100%. Took me a few minutes to stop laughing when I first read that passage as well. Totally on point. I laughed again when I read it in your comment and I’m laughing as I write this. HA!

#230 browninsask on 07.11.17 at 5:12 pm

The call is for clients, but is available weekly on my corporate site. Yeah, that’s a big ask. — Garth

Okay!!

#231 rainclouds on 07.12.17 at 11:03 am

this is getting interesting………

“In short, the LSBC had succeeded in showing the public it was tough on money laundering and Gurney’s reputation was a price it was willing to pay. The LSBC achieves success in the public eye while, at the same time, remains inactive about actual money laundering.”

http://vancouversun.com/news/local-news/ian-mulgrew-lawyers-clash-over-money-laundering-at-law-society-hearing

#232 InvestorsFriend on 07.12.17 at 6:02 pm

In Mark’s Weird World…

#257 Mark on 07.12.17 at 4:12 pm answered:
“Wouldnt people selling re and going into cdn $ actually strengthen the cdn$?”

Yes, RE price declines are deflationary, and deflation supports the CAD$ by creating buying demand for it for the repayment of debt.

************************************
In Mark’s world Canadians repay debt by buying Canadian dollars to do so. (I guess they sell off their mostly nonexistent U.S. dollar savings?)

In the real world Canadians pay off debt by trying to earn more income or by cutting back on spending. They might also sell some assets like stocks or a cottage to other Canadians. In a few cases they might have savings as well as debt and use the savings to pay the debt. Not clear how any of that creates a demand for Canadian dollars or changes the value of a Canadian dollar in terms of a U.S. dollar.

In fact paying off bank debt decreases the amount of Canadian dollars in existence just as borrowing increases the money supply. Will that increase the value of a Canadian dollar in terms of U.S. dollars? I don’t see why.