It could be worse

In response to recent comments accusing this blog of being unnecessarily negative about residential real estate, we are pleased to announce our newest occasional feature:

 The GTA Housing Deathwatch

 First up, Derek. You may recall this blog dog sold his North GTA McMansion at the height of the frenzy prior to Easter, received multiple bids, and picked the highest one – $2.25 million, more than he expected. Days later, with the market starting to turn, the buyers balked. They begged to be let out of the deal, then the mean lawyers were called in. Ultimately Derek relisted (for $2.25), later dropping the price to $1.9.

Meanwhile he sued the purchasers (one of whom is a real estate agent) for breach of contract. The claimed damages amount to $1 million plus costs, and the defendants have until the end of the month to file a statement of defence. But they ‘ve chosen to disappear. No communication. Nada.

“Stress,” says Derek. “We are steeped in it.”

Word from their agent is that an offer might possibly, maybe, perhaps be in the works for a max of $1.6. “I’ll take it,” says D, who meanwhile has rented a new place with possession on August 1st – the date the house deal was supposed to close. So all of the costs of his original place – mortgage payments, property taxes, insurance, maintenance from that day on – will be added to the claim.

Comments a lawyer working on similar cases in the area: “This is endemic. We are swamped with actions involving collapsed deals, and the effect seems to be one of dominoes. I’m starting to think the entire move-up market is collapsing as buyers elect to default, or find they cannot finance at the prices they paid. Good for us, though.”

 Close by, in York Region – where some of the frothiest house prices in the entire country occurred during the winter – there is buyer remorse and seller panic. Between April and the end of June sales of detached houses collapsed more than 55% while condo deals declined 20%. The price of an average house fell more than 11% while apartments gave up 19.3% of their value – all in the space of eight weeks.

Year/year sales are down 60% while listings are up by almost half. Meanwhile greed has become fear, and the speculators have turned tail and left town. Said a veteran realtor to the local paper: “The supply increased by 47 per cent. Everybody was waiting and wanted to cash out but some waited too long. Where before you only had one house, now you’ve got 10 on the market and now you can’t sell that house.”

  As Rate Day in Canada dawns, financial markets indicate a 98% chance the Bank of Canada will commence a tightening cycle.  It probably couldn’t happen at a worse time – just like the news that all borrowers will be “stress-tested” starting later this year, required to qualify for loans 2% more expensive than offered.

Is the central bank making a big mistake? Not according to Derek Holt, one of Bay Street’s sexier economists. On Tuesday he published his Top 10 List of why the Bank of Canada is about to goose rates multiple times. “Call it an economist’s attempt at late night comedy, minus the part about being funny of course because this is about monetary policy,” he said, correctly.

Among this reasons: This is not 2009 anymore – the economy is alive and there’s no need for emergency rates. And, besides, what’s wrong with a housing correction? “A cooler market for affordability is welcome to a point,” he says. Derek also says it’s “seriously misinformed” for people to think what happened in the US when the housing market ate the middle class will take place here.

 You bet, says veteran real estate broker Alex Prikhodko, it could be worse. “There are plenty of reasons to believe that this is just the beginning of a long and, for a lot of people, painful down spiral,” says the Toronto realtor. Particularly crushed, he surmises, will be three groups:

“1. Amateur builders (flippers). They are the most vulnerable to price drops, as they are carrying significant debt which they will no longer be able to service and will be forced to sell for whatever they can get.
2. Amateur landlords. Currently rent covers around 45% of a mortgage payment with 20% down. These people were willing to take a hit on mortgage/rent discrepancy for as long as their properties were rising in value, since they would have easily recovered the losses upon resale. This is no longer the case and they are not likely going to keep taking losses by holding onto their depreciating assets.
3. Mortgage renewals. Anyone who bought in the last 2 years with 20% down or less have already lost their entire down payment and are de facto in underwater mortgage situation will be denied mortgage upon renewal on appraisal.”

“I personally know a lot of people in all 3 types of scenarios,” says Alex, “who are seriously freaking out. To make things worse (or better), Bank of Canada is about to raise interest rates. The actual increase won’t be much, but it will send a powerful message, much like the foreign tax did. Let’s face it, foreign tax was only a psychological signal and had no economic impact whatsoever. All asset bubbles are psychological and this one is no exception.”

 So what will be the impact of three or four rate increases by the end of next year? Adding three-quarters of a point or a full 1% to mortgages would eliminate 6 to 8% of all potential homebuyers, says the chief economist to the mortgage business. It’s worth noting the American housing bubble blew up when 8% of homeowners became distressed.

“Right now people are staying away from buying,” Will Dunning just told Bloomberg. “If they stay away over a longer period of time, that could become dangerous, that could become deflationary.”

Tomorrow this blog begins a series on puppies and tummy rubs. Come early. Bring a blanket.

282 comments ↓

#1 TheSpangler on 07.11.17 at 4:55 pm

Please please please let the effects above hit the lower mainland BC area!

#2 Full Name Mail Website on 07.11.17 at 5:01 pm

It could be worse.

One factor I believe is under reported is the potential impact of inflation in everything BUT home ownership. Surveys ask homeowners how much interest rate increase they can tolerate and it comes out to something like $150 a month will bury some people. Well, what if their grocery bills, taxes, insurance, entertainment, what-have-you increases by $150 a month instead?

It is only a matter of time before the liberals ballooning deficits (building upon the Conservatives’ emergency deficits dodging the ’08 recession) start costing Canadians real money instead of Sunshine Points.

Governments may bury the necessary tax hikes in corporate taxation (probably a bad move, speaking from an international competitiveness point of view), but that WILL get passed on to consumers in the form of higher prices.

Canadians are truly boned, but their ruin won’t come at the hands of points on their mortgage. They won’t be able to afford yesterday’s mortgage after we get pinned into austerity taxation mode.

#3 chris martin on 07.11.17 at 5:02 pm

Interest rate hikes, quantitative tightening, a popping housing bubble… I’ve gone to 75% cash. I have no fear of missing out thank you very much. When you win the game, stop playing.

#4 Daveyboy on 07.11.17 at 5:05 pm

Love the skull and bones. Lol

#5 Sam the Sham on 07.11.17 at 5:10 pm

Instead of everyone panic selling their home, I think the average person will simply take their house off the market and wait to see how things sort out. Those who are under water and can still make their payments will just continue to do so (gritting their teeth). There will be a few people with the figurative gun to their head who have to sell at any price, but they will be relatively few. Let’s not get carried away predicting a massive crash.

#6 Derek R on 07.11.17 at 5:11 pm

Worrying. New mortgages add a lot of money to the economy. Old mortgage repayments take a lot out. So when house sales drop, it tilts the balance and money suddenly disappears. That’s not good news for profits or for jobs in Canada during the next few months.

#7 Stone on 07.11.17 at 5:11 pm

I like tummy rubs. I look forward to tomorrow’s post. I think many other sheeple are going to need more than a tummy rub in the very near future though. Oh well.

#8 Fluorine on 07.11.17 at 5:14 pm

Wow… that’s really kicking the bee’s nest!
Can’t wait to see the fallout from this one in the comments and media.

When they cry nobody warned them, point over to the right and the 9 years of posts heralding this very thing.

#9 Happy Housing Crash Everyone! on 07.11.17 at 5:17 pm

GTA is a house of cards and everyone knows it. I love the REALTOR shill walking from a Deal. Can you believe that even a realtors does want to buy. the amount of debt people have borrowed is mind blowing. you have dirty shyster realtors not even paying their taxes. realtors are true dirty shyster scum who should suffer for a thousand years. HappyHousing Crash Everyone! :-)

#10 Roland Porter on 07.11.17 at 5:21 pm

To the buyers facing buyers remorse: Should have bought preferred shares!

#11 Happy Housing Crash Everyone! on 07.11.17 at 5:21 pm

#5 Sam the Sham

people are bankrupt. you don’t get it. Many are trying to sell before they go bust. they have no money. Most people don’t have a penny to their name and only debt. There is a panic since without buyers the market will continue to crash. we could see 30% by end of year and 20-30% the next year as one posters seems to have predicted. HappyHousing Crash Everyone! :-)

#12 YUPKIME on 07.11.17 at 5:21 pm

For anyone wanting some related yet light reading these long summer days I would recommend this book as the title of today’s post is very true. It could always be worse and today’s generation view of adversity pales in comparison of what it was like 80 years ago.

Ten Lost Years, 1929-1939: Memories of the Canadians Who Survived the Depression – Barry Broadfoot

#13 Booze Hag on 07.11.17 at 5:25 pm

Reading your blog is like reading related type blogs here in Auckland New Zealand, and I suspect Australia and UK and who knows where else….. It appears that the inevitable slope downward is appearing more steeper than anticipated by market commentators and participants, and it is happening simultaneously in several parts of the world, with all of these countries central banks facing the same dilemmas. Whats next I wonder….

#14 The Great Gazoo on 07.11.17 at 5:28 pm

3. Mortgage renewals. Anyone who bought in the last 2 years with 20% down or less have already lost their entire down payment and are de facto in underwater mortgage situation will be denied mortgage upon renewal on appraisal.”

Now that would be really distressing for anyone in that situation – in a flash, no house and no equity. And it does look prices will decline further over the coming months.

#15 Danny on 07.11.17 at 5:29 pm

Thank you Garth for bringing out comments from Derek Holt…..”besides, what’s wrong with a housing correction? “A cooler market for affordability is welcome to a point,”…bringing back some sanity in the housing market is good for most people’s health…too bad what is being slowly revealed about the corrupt family in the White House is taking so long …..we can all benefit from a return to honestly and sanity in the White House….not while the Trump Family continues to spin their spider Web……as they did in their private business dealings.

#16 Penny Henny on 07.11.17 at 5:29 pm

Comments a lawyer working on similar cases in the area: “This is endemic. We are swamped with actions involving collapsed deals, and the effect seems to be one of dominoes. I’m starting to think the entire move-up market is collapsing as buyers elect to default, or find they cannot finance at the prices they paid. Good for us, though.”

???????????

Good for us, though.

C’mon Garth. Lawyers don’t talk like that.

This one does. He has a Carrera. — Garth

#17 Doug t on 07.11.17 at 5:30 pm

Caveat Emptor B*tches

There’s a reason you should not put all your eggs in one basket – the fools that think the market isn’t going cold are the same type of people that believe that the government is their friend.

RATM

#18 Fran Deck Jr. on 07.11.17 at 5:30 pm

Hi Garth … as previously stated, I love your blog. I don’t go to websites for the CBC or the Globe or even the Financial Post … I read Greater Fool every day and every day I learn something new …

I have a rhetorical question; who’s buying condos in downtown Toronto? Seriously, who is buying those condos that are built 6 feet from the Gardiner Expressway? Who would pay $550K + for a coffin sized condo just a few feet away from the worst traffic in North America? They’ve done studies and living in congested cities will kill you faster than a diet of red meat and Jack Daniels … who is buying condos in downtown Toronto? I just recently returned to TO (for a visit) and I cannot believe the amount of development in the GTA … it can’t be sustainable and if the predictions of this remarkable blog are correct, the outcome will be absolute economic devastation. Toronto will soon look like that city in Blade Runner.

My dark side is looking forward to the meltdown.

#19 Mike on 07.11.17 at 5:33 pm

Nothing will happen. All will be up again.

Anyone care to comment why SFH prices are UP in (supposedly recession) Edmonton/Calgary?

Answer: because this is Canada. Special. RE never crash crash here. 2014 prices – Never ever again. Buy Buy.

#20 Prairieboy43 on 07.11.17 at 5:34 pm

Cowboys are ready. Let her buck. Let’s see what she (Economy), will do.
PB43

#21 2 cents Canadian on 07.11.17 at 5:35 pm

Everything talked about on here for the last bunch of years is FINALLY playing put. This went years further than I thought it would and prices went 25% above what I thought was the quivering peak ….. ridiculous!
As a servivor of the 89-93 crash (by the skin of my teeth) I knew this would implode. Back then I was a “buy a principal residence, fix it up, sell the it within 18-24 months …. move up a notch and repeat” guy. And when the thing tanked …. becuse much fewer people were in “the spec game” they just fried (never any talk of help or bail-outs then). I had doctor and lawyer people I knew going bankrupt. And smart people …. greed is gruesome. But you can prosper from it.
Well it’s finally happening again ….. my girl friend and I cashed out of York Region homes 6 months ago (deals closed, money in the bank). We moved into a nice little rental two bedroom place I bought 14 years ago. We probably missed the “peak peak” by 2-3 months. But like I always say (and after witnessing how 1989 stopped on a dime and stayed stopped) ” better to list your house 6 months too early than 1 week too late.
BTW .. I’ve been following Garths advice since the early 80’s (I forget which paper he wrote in back then). And you CAN make 6-7% net of fee’s on a balanced boring portfolio (7.2 % for me for the last 6 years). Just pay a (good) money manager their 1% (ish) …. do what they say …. and get on with your life.
I never went past high school, I never worked for anyone else and I retired at 55 (4 years ago). It can be done.
I will get back into real estate when and if it makes economics sense. But my gut tells me we have 3-4 years of agony to witness before a new bottom is established. No rush. So some traveling, some bike riding, some skiing, some Florida (bought a few places there In 2010 when prices were super cheap and our dollar was at par) and helping my two sons gets sorted in this new wacky world we live in.
Pain is going to felt for a few years. Clean up your mess (if your mess is messy) or just settle in and wait for opportunity.

#22 Penny Henny on 07.11.17 at 5:36 pm

3. Mortgage renewals. Anyone who bought in the last 2 years with 20% down or less have already lost their entire down payment and are de facto in underwater mortgage situation will be denied mortgage upon renewal on appraisal.”-Alex Prik

sorry but Alex is clearly wrong. If you bought two years ago you have in no way lost their down payment. Prices are still up from two years ago. Maybe even 15-20%

#23 yorkville renter on 07.11.17 at 5:36 pm

If 1 in 12 sellers is in full panic mode we’ll equal the US % in 2008

#24 Penny Henny on 07.11.17 at 5:41 pm

#13 Booze Hag on 07.11.17 at 5:25 pm
Reading your blog is like reading related type blogs here in Auckland New Zealand, and I suspect Australia and UK and who knows where else….. It appears that the inevitable slope downward is appearing more steeper than anticipated by market commentators and participants, and it is happening simultaneously in several parts of the world
/////////////////

Haven’t you heard? It’s getting tougher getting funds out of China.

#25 Penny Henny on 07.11.17 at 5:42 pm

C’mon Garth. Lawyers don’t talk like that.

This one does. He has a Carrera. — Garth

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

I thought Doug had the Carrers, or was it Ryan?

#26 The Technical Analyst, CSTA, CPD on 07.11.17 at 5:44 pm

Derek (the victim of his own greed) tried to sell at $2.25mil but wants to ruin the life of a family for his pocketbook since they won’t be greater fools, now the victim of his own demise, Derek sells for a $650,000 loss from fear. A fool and his money are soon parted.

We should setup a legal fund to fight those like Derek who try to destroy family for money. Can’t buy good Karma like that!

Families matter.

#27 SilverSon on 07.11.17 at 5:47 pm

House crashing guy is too funny!! Keep it up!

I know many realtors evading taxes and whatnot. They have ample motive and opportunity to do it. Heck they’d even put a picture of their dog on their business cards and signage so they can justify writing off the cost to buy a designer pure-breed and the prime rib & caviar that they claim to feed it 7 times a week. But I’m pretty sure the CRA would have a goldmine if they would just conduct an audit all of the realtors in ON and BC going back 5 years. With such an insanely high number of realtors in those provinces compounded by the ludicrous RE prices of late, I would think the CRA’s tax revenues would increase by at least half a billion from such an audit.

#28 Chris on 07.11.17 at 5:48 pm

“And don’t lie and and say you won’t do it again.”

#29 SilverSon on 07.11.17 at 5:50 pm

“This one does. He has a Carrera. — Garth”

I fell out of my chair when I read that. Totally worth it though.

#30 yorkville renter on 07.11.17 at 5:54 pm

#14 – I dont buy the argument that buying with 20% dowm 2 years ago is a loss… you’re attributing 100% of the recent loss and 0% of gains for two years.

If the suggestion is last 2 months, then I’d agree

#31 lol on 07.11.17 at 5:54 pm

affordable housing in certain areas of Canada is GONE for good

ship sailed. Sorry

#32 Reximus on 07.11.17 at 5:55 pm

“sorry but Alex is clearly wrong.”

—–

Alex called the 2012 RE bubble burst, and also all the RE bubbles that burst every year since then…so he’s got that going for him

#33 Penny Henny on 07.11.17 at 5:56 pm

They’ve done studies and living in congested cities will kill you faster than a diet of red meat and Jack Daniels -Franny

That is complete crap! Red meat is good for you

#34 Island Girl on 07.11.17 at 5:56 pm

Well we were some of those buyers who bought in the last 2 years with less than 20% down. It wasn’t the plan, but we couldn’t find anything to rent so finally gave up and bought. We thankfully stuck to our budget (less than $300000) and mortgaged for only 25 years (we could have gotten 30 years we were told). Since buying our house has gone up almost $50000 and we see it as the cushion to absorb when the prices revert back to reasonable. We also stuck to spending no more than 3 times our annual income so we could absorb any rate increases so I’m not worried, but it’s insane out there. A house up the street is listed for more than 2x what we paid. Craziness, it will not end well.

#35 Dan.t on 07.11.17 at 5:58 pm

#1 TheSpangler
I hear you. The insanity I find is much worse out in BC than anywhere in Canada. Problem is that it doesn’t seem to be stopping.

I see it everywhere now since it has moved out of YVR, to Langley, to Abbotsford, now to Chilliwack. Even Merrit (middle of nowhere) wants nearly half million for a home. I guess I really have been away from BC too long. It seems that 500k is pocket change to BC residence. Must be nice.

BC people really believe their s*** don’t stink. That is how 2 million POS tear downs are justified in YVR and Million dollar homes are justified all over the lower mainland. It’s hitting Okanagan too with average house prices at 750+k in an area where I would love to see what the average worker makes…believe me fundamentals don’t apply if you look at wages and affordability.

Same all over BC, rents insane and buying even worse. Good thing there are no outside influences at play in BC. Ya right.

Still think it is all locals?

I dream rates rise 2% tomorrow but no rate hike would not surprise me. Housing is now a full blown speculative commodity in BC. Either you participate or get screwed royally trying to find a half decent place as a rental.

All I ever hear is how people would just love to leave the city.Traffic, congestion, prices simply beyond affordable. I’ve been to many very nice cities and never had that impression. Maybe the locals thought the same thing?

Anyhow, hope it ends soon and casual conversations stop reverting to Real Estate and how much of a super smart investor all BC owners are. It really is extremely annoying. That is one thing I wont miss but I do notice it has gotten much worse. Only Real Estate talk 24/7. House horniness is off the charts here. Not gonna change anytime soon and forget about price drops, simply unheard of to lose money in BC real estate so I guess, get used to it.

#36 oncebittwiceshy on 07.11.17 at 6:02 pm

“In the bond market, prices move inversely to yields. When investors perceive that inflation risk or credit risk is rising they demand higher yields to compensate for the added risk. As a result, bond prices fall and yields rise, which increases the net cost of borrowing.”

For all of those naive “players” that think the Bank of Canada will just reverse course, you need to understand where mortgage rates originate.

Bond yields will continue to rise or the billions of dollars that came into Canada during the GFC will find a better home.

http://www.theglobeandmail.com/globe-investor/investment-ideas/global-appeal-of-canadian-bonds-could-falter-report-says/article28571403/

“Canadian bond holdings by non-residents now total $1-trillion, representing one-third of the domestic fixed-income market. And foreign investors now hold 40 per cent of outstanding Government of Canada bonds – a share that has more than doubled since before the financial crisis.”

Please remember, all of those foreign bond purchases were made because Canada was considered a “safe haven” having escaped the housing crisis that befell a host of countries.

Our Government will not allow those bonds to chase better yield because Canada actually needs that money for infrastructure spending, etc. Therefore, Canadian bond yields will rise. They may even rise quicker if Bond Traders sense risk in the economy (housing market).

The Bank of Canada can only affect the prime rate. Mortgages will follow the bond market as evidenced by the increases that we’ve already experienced this past week.

So, was it the mean banks raising mortgage rates to capitalize on poor Canadians? No, stupid. They are responding to the changes in the bond yields. You would never ever consider a bank charitable so don’t expect them to discount their profit margin for you.

Canada’s interest rates follow the U.S. interest rates for more than the sake of camaraderie. Wake up.

#37 Same Same No Change on 07.11.17 at 6:02 pm

#9
GTA is a house of cards and everyone knows it. I love the REALTOR shill walking from a Deal. Can you believe that even a realtors does want to buy. the amount of debt people have borrowed is mind blowing. you have dirty shyster realtors not even paying their taxes. realtors are true dirty shyster scum who should suffer for a thousand years. HappyHousing Crash Everyone! :-)

———-

I bet that same realtor told her buying clients, ‘now is the best time to buy’; and told her selling clients, ‘list now and take the price cut.’

Ask a realtor when its NOT a good time to buy or sell – and you will hear crickets

#38 Keith in Calgary on 07.11.17 at 6:05 pm

Don’t diss red meat and Jack Daniels until you’ve tried it.

#39 Same Same No Change on 07.11.17 at 6:06 pm

#21 2 cents Canadian on 07.11.17 at 5:35 pm
Everything talked about on here for the last bunch of years is FINALLY playing put. …
———

#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)
——-
#130 Rates vs Capital on 07.10.17 at 11:47 pm

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.

#40 Mark on 07.11.17 at 6:09 pm

“Anyone care to comment why SFH prices are UP in (supposedly recession) Edmonton/Calgary?”

They aren’t. Edmonton is still beneath the 2007 peak. Calgary is ~20-25% off the 2011 peak.

As for tomorrow, buckle up, with deflation in Canada on a month over month basis, and oil prices very weak, the Bank of Canada governor could very well pull a fast one. A relatively illiquid swaps market’s implied odds doesn’t make for a certainty of a rate hike, especially when the data (employment, GDP, deflation, etc.) is more strongly screaming “rate cut”.

#41 rainclouds on 07.11.17 at 6:10 pm

#19 Mike “Nothing will happen. All will be up again.”

R U the realtor hiding from Derek?

Ontario is imploding and you provide feckless prattle with O supporting data.

I think Happy Housing Crash has something to say to you……………

#42 Curious on 07.11.17 at 6:12 pm

“3. Mortgage renewals. Anyone who bought in the last 2 years with 20% down or less have already lost their entire down payment and are de facto in underwater mortgage situation will be denied mortgage upon renewal on appraisal.”

Why would banks do this? And how can they do it, do all mortgages work this way, that the bank can re-neg at any time?

Seems like it would cause an even more massive tank in the market and further hurt their books.

#43 FOUR FINGERS WATSON on 07.11.17 at 6:12 pm

When people see how puny the rate hikes are “they’ll be bock”! Full speed ahead in the fall folks, light ’em up and enjoy the summer !

#44 Freedom First on 07.11.17 at 6:13 pm

Confessions. I understand the concept. I have a few mentors I converse with about different matters, and in depth. It is important to have mentors for every area of my life. Garth, while I don’t speak with him in person, is definitely one of my mentors.

When I am right with myself and the world, which is always, it makes it easy to see who the Toxic people are in my life and remove them, no matter who they are. Giving them any time is fruitless, as they cannot be taught.

Garth has taken the time, on his Blog, to even name a number of various Toxic business people for us, who are well known to the media and the public.

Freedom First
Master of Freedomonics
Its my life

#45 WUL on 07.11.17 at 6:13 pm

Garth:

With your level of class, you won’t say it. I am not so hampered.

You told us so.

#46 Randy on 07.11.17 at 6:24 pm

I only go to confession so I can brag anyway.

#47 HM on 07.11.17 at 6:24 pm

T2 election promise of national affordable housing strategy will be one of few promised that will realize.

#48 GTA housing Crash on 07.11.17 at 6:31 pm

Hey realtors, Why would a realtor walk away from buying D’s house for 2.25 Million? I thought RE only goes up? Now D is lucky to sell for 1.6 Million? That sounds like a MONSTER housing crash in just 9 weeks. $625000.00 drop in price. That’s about $70g’s a week drop. Would like to hear from you loud mouth realtors, who on average have only managed to pass elementary school successfully. HHCE! :-)

#49 SimplyPut7 on 07.11.17 at 6:32 pm

Loving the skull and crossbones.

#50 Ace Goodheart on 07.11.17 at 6:38 pm

Frank Gallagher. Consume while you’re being consumed. Or at least don’t be the only one who’s not munching.

Why do I laugh when my house “loses” 300k in “equity”?

Because my property tax goes down and the govt thinks I’m poor. Win win. Maybe they’ll figure my neighbourhood is priority and throw some of my taxes back at me. Life is good.

When they installed the 350k art project at the end of my street I was pleased. The whole world knows us now. We have tourists. Necrophilia. Imagine.

Just eat them more than they eat you.

#51 Smartalox on 07.11.17 at 6:38 pm

Two million dollar tear-downs are the result of ‘investors’ thinking that if they pay $2M, they can re-build and re-sell the property for $5M.

And by ‘investors’ I mean groups of people pooling money from HELOCs on their own houses to trying to make some tax-free cash.

The problem is that each ‘investor’ with their HELOC can’t cash out until the investment property gets sold to a greater fool.

Now with rising rates, falling house prices, and the big banks getting ready to call those ‘On Demand’ HELOC loans, these investment clubs had better hope that all the members supporting a project stay solvent, and don’t have their loans called. Nobody wants to be the one who’s blamed for bringing the house of cards down.

Take out one or two of the supporters, and the whole scheme might come crashing down. Cue the stress, the fights, the hurt feelings, the calls to the CRA.

Some are going to lose, and someone’s going to be left holding the bag.

On the upside, someone’s going to get a sweet property for cheap!

#52 Robert White on 07.11.17 at 6:39 pm

CANADA’s Minsky Moment, methinks!

#53 Shawn on 07.11.17 at 6:39 pm

#40 Mark

How do you figure the data is “screaming rate cut”? Annualized GDP growth is running >3%.

Growth would have to stall and go negative before the BOC cut rates.

#54 april on 07.11.17 at 6:41 pm

# 19 Everyone knows your being an idiot.

#55 Franco on 07.11.17 at 6:42 pm

#40 Mark

Have you got links to your data? For starters, Calgary’s peak was not 2011, but rather 2013-2014. And any SFH put on the market right now AT LEAST at those prices will sell quickly. It is incorrect that prices have gone down at all, and certainly not 20-25%.

#56 Tony on 07.11.17 at 6:46 pm

What if prices don’t crash and go higher by fall? There’s bidding wars again in woodbridge and homes are still selling for high prices just not as quick. I don’t see a significant correction on the horizon. My realtor said people are buying again ahead of rate increase and stress test changes. IT NEVER ENDS. PRICES KEEP GOING UP NO MATTER WHAT. ITS THE NEW NORMAL GARTH. JUST ACCEPT IT.

It would the first time in human history. In Woodbridge, yet. A miracle. — Garth

#57 Nonplused on 07.11.17 at 6:50 pm

The problem with debt forgiveness (yesterday’s topic) is that it rewards the sinners and punishes the saints. It robs Peter to pay Paul. It transfers risks from lenders who entered into that risk for profit motives to taxpayers who had no potential for profiting from the loan. It’s all around a bad idea.

When the Americans tried it, only people that couldn’t pay their mortgages got modifications. So some people started defaulting just to qualify. After all, why should your neighbor get all this free money and not you? It would be like if the city paved the road in front of everyone’s house but yours and then sent you a notice that you had to pave it yourself because you have too much money in their opinion. In essence this is what they already to with “progressive” tax policies but enough is enough.

Also learned from the American experiment was that an alarmingly high number of people who got modifications defaulted again anyway.

What should happen in a just society is that people who can’t pay their loans should declare bankruptcy (that’s what it’s for) and the people who risked those loans incorrectly should suffer their losses. But governments are not “just”, they are at best “pragmatic”. They are perfectly willing to steal from some people so they can give to others if it floats them through another election cycle. That’s why the world works the way it does.

I have argued here before that the combination of excessive taxation, inflation, immigration, high energy costs, and automation have had a serious affects on the price of labor and purchasing power, forcing it down. This is why so many households now have to borrow to pay for Johnny’s soccer fees and the gas to get there. How long can that be sustainable? The answer is that most people just don’t ask. They keep doing it as long as they have to in the hopes a solution will present itself at some point in the future. But tomorrow never comes.

And in some ways technology is only making matters worse. You pretty much can’t live anymore without a computer, internet, a cell phone, and a data plan, for each member of the family over the age of 12. That adds up. Sure you can share the internet connection but that’s it. Now your car has to have “lane correction” and all these other gizmos on it, adding to the cost. Oh plus a carbon tax on the gasoline. The car, the phones, and the computers all need to be replaced ever so many years because of designed obsolescence. All of this presents additional family expenses that just keep rising while wages stay stagnant. So of course the savings rate crashed and the borrowing went up. The choice is that or give up the cell phones, which nobody is going to do.

This is why I think the next correction is going to be much worse than anyone is expecting. One the average consumer has to stop borrowing because either he can’t afford it or the lenders cut him off, there will be a serious reduction in consumer spending. Phone bills won’t be paid. Cable will be disconnected. Vacations will stop happening. Costco won’t be so busy. The malls will be empty. This is already happening in many parts of the US.

When the housing bubble bursts in Canada, it’s going to wipe out part of the economy with it. Not all of it, but certainly the part that was being financed with HELOC’s. Vancouver will be particularly hard hit because many people there cannot afford groceries after their mortgage payment. As ludicrous as it seems that there were borrowers and lenders alike in Vancouver that assumed it was reasonable to engage in such behavior, they did. They assumed they had to, and that it would all be ok as long as houses kept going up faster than they were borrowing to buy groceries.

#58 mouldyinYVR on 07.11.17 at 6:57 pm

http://www.cbc.ca/news/business/interest-rates-helocs-canada-debt-1.4192847
The problem ‘we’ will have is not the actual mortgages we hold. Most Canadians will manage to continue paying their mortgages. The bigger problem, as many Garth devotees know, is non-mortgage debt, specifically HELOCS.
Following the ‘You’re richer than you think’ philosophy, Canadians have deluded themselves, imagining they are millionaires/ perhaps billionaires, while using their homes as ATM machines and living vastly beyond their means.
I know many of Garth’s followers are waiting with baited breath for the collapse of real estate in YVR. However, be careful what you wish for. Along with the real estate ‘crash’ (if and when) will come major job loss, extreme mortgage restrictions (you think you’ll get a mortgage under ‘new’ qualification guidelines-think again!) and general community angst.
Having experienced major real estate downturns/ economic collapses in more than one country in the last 40 years, I can say it is an experience you will probably not enjoy living through.

#59 VICTORIA TEA PARTY on 07.11.17 at 7:01 pm

1980-81 REVISITED. REAL ESTATE THEN AND NOW.

I remember, in 1981, when we “renegotiated” the mortgage for our small house in Calgary.

We bought it for $45K and the $35K amount that needed remortgaging came at an interest rate of: 22.75 per cent for ONE year. We got rid of the dump later that year, broke even. We were lucky.

The next year we were in Victoria where the 60K mortgage on an $80K house was 17.6 per cent for a FIVE year variable-rate term. I remember the monthly amount due was more than $1,700.00!

Now debt-free, and having sold our valuable real estate for a rental place, we look upon the real estate landscape and see “ships” (homes and real estate deals) all steaming headlong, at flank speed, into various ugly looking “icebergs” and rocky shorelines (higher rates of all kinds and bankrupcies).

As you have been writing for eons this uniquely Canadian real estate catastrophe will not end well.

How can it?

Even leaving the bank rate untouched still condemns those moisters, as you describe them, to the briney financial deeps because other financial roadblocks are at play. An abyss if ever.

It makes the cliff-jumping lemmings look like professional-grade deep-thinking mathematical theorists who’ve studied every nook and cranny in their craniums, and concluded that nirvana actually exists at the bottom of said cliff.

Buying real estate is 100 percent emotion and zero percent everything else. And there is a lot of everything else, isn’t there that doesn’t get factored in, especially the shackles-of-borrowed-money factor.

To all real estate indebted Millennials out there:

You will be meeting your financial maker shortly. As you review your young lives in financial purgatory, the bank manager’s office, try and find out exactly what went wrong and why you are sitting on the wrong side of the desk.

At least you will live to struggle another day, many days, actually.

#60 JimboSlim on 07.11.17 at 7:01 pm

After watching what happened in Vancouver last year I wish I’d bought in December after the tax. Homes weren’t moving at all and people were scared. Now a short while later a 2bdrm condo is $200K more than it was only six months ago – if you can somehow avoid the huge bidding war.
To those who live in Toronto right now – find a nice place that you could hold long-term and go make some lowball offers. One might just get taken up.

#61 paul on 07.11.17 at 7:02 pm

48 GTA housing Crash on 07.11.17 at 6:31 pm
Hey realtors, Why would a realtor walk away from buying D’s house for 2.25 Million? I thought RE only goes up? Now D is lucky to sell for 1.6 Million? That sounds like a MONSTER housing crash in just 9 weeks. $625000.00 drop in price. That’s about $70g’s a week drop. Would like to hear from you loud mouth realtors, who on average have only managed to pass elementary school successfully. HHCE! :-)
—————————————————————–
Hey Jar head.
Didn’t you get the memo, new strategy list and sell now the market is only going down. See it’s a win win for us !

#62 mouldyinYVR on 07.11.17 at 7:02 pm

http://www.cbc.ca/news/business/the-national-lust-for-home-equity-lines-of-credit-should-we-worry-1.3106533
Dont’ want to sleep tonight – read this!( and it’s from June 10, 2015) Just imagine where we are now…….

#63 earthboundmisfit on 07.11.17 at 7:06 pm

@55 april. Grammar is the difference between knowing your shit and knowing you’re shit.

#64 Mark on 07.11.17 at 7:07 pm

“Why would banks do this? And how can they do it, do all mortgages work this way, that the bank can re-neg at any time?”

Technically, yes, most residential mortgages in Canada have clauses which allow for the mortgages to be called, even fixed term mortgages, if, in the opinion of the bank, the value of the property has dropped sufficiently so that it no longer fully secures the loan. In other words, a fixed term mortgage in Canada, in a time of profound distress, isn’t worth the paper its printed on.

However, the chances of this happening are low. The bigger ‘problem’ that highly leveraged homeowners face is that when they go to renew, the only ‘rate’ that’s actually accessible to them is the non-discounted ‘posted’ rate. Given how many Canadian families are vulnerable to the impact of even modest interest rate increases, being forced to pay the ‘posted rate’ instead of the heavily discounted rates that have been handed out like candy would be financially calamitous.

Seems like it would cause an even more massive tank in the market and further hurt their books.

The Canadian banks don’t particularly care about that, as they have nearly all of their at-risk paper fully insured through the CMHC subprime mortgage insurance program. So they can apply a pretty extreme squeeze across their residential retail mortgage-backed lending portfolios, and churn out some crazy profits before defaults really start being an issue.

This is how bank stocks could do a repeat of the 1990s and quadruple even in a declining housing market. But at some point, they have to be careful not to cast themselves as an overly convenient political target of government. Government that’s going to be desperate for tax revenue over the next few years on account of revenue loss and increased outflows due to all the unemployment the RE collapse will create in the RE sector.

#65 crdt on 07.11.17 at 7:12 pm

#35 Dan.t on 07.11.17 at 5:58 pm

So amazingly totally agree with you on that. People ’round here think they could actually earn the “equity” in their houses, and a large percentage are taking full credit for their brilliance. With kids, payments, ….. very few can save as much as they can finance. It has literally gone to their heads, suddenly comparing their hood, to places they could only dream of visiting imagining it must be as awesome here if it costs so much. All topics lead to real estate, I think people are trying to get some sense of this whole mess, it is bewildering how a “Stumble F**ck” bedroom town in Nowhere Ville could ever actually have throngs throwing millions at these shacks and check clears.

#66 -=jwk=- on 07.11.17 at 7:12 pm

We moved out of rental house in GTA (800k value, $1600/mo rent at the time) in fall 2015. Bought in Ottawa with 23% down – 100k down on 430k property. At 2.05% variable we are down to 310k owed already. We’ll be fine. Did not get a rate lock on a fixie because thought the first increase would be september. We’ll be OK with .25 raise, we’re already on the accelerated bi weekly and that will absorb the rate increase. Our monthly principal payments will drop from $1000 to $940. Shrug.

So happy to have gotten out in time, and not worred about the crash.

Wanted to warn you all that you will not be able to vulch unless you ave cash. Banks stop loaning whenvalues are dropping fast. So I hope all hose gloating here have lots of cash on hand, because buying will be difficult otherwise. it was lack of financing that really killed the US market and drove it to cash basis based on rental value valuation levels. SO ask yourself, what would a ration investor pay cash for an asset? 5% return? OK, so your property is worth only annual rent/0.05.

So my $1600/mo house (prolly at a million now) would be worth to a cash investor 384,000 at the most. might want to subtract taxes and expense from that rent. So lets say you net 1200. Now the house is worth $288,000….

#67 A question on 07.11.17 at 7:15 pm

If houses come down in price in a region, I take it that annual municipal valuations will come down too, or at least homo owners can file requests for this in case they notice that the sales prices of houses in their street have come down a lot – correct? And what are the implications for renters in provinces with rent control laws (any others than Quebec?): can tenants request a lowering of their rent, or are they out of luck in that respect?

#68 A question on 07.11.17 at 7:17 pm

I have no idea what homo owners are, unlike my auto spell checker. Perhaps it refers to some devious sexual slave trade. Regardless, I counter with the word “homeowners” – hopefully my Ipad will not contest this time.

#69 A Reply to #40 Mark on 07.11.17 at 7:19 pm

“A relatively illiquid swaps market’s implied odds doesn’t make for a certainty of a rate hike, especially when the data (employment, GDP, deflation, etc.) is more strongly screaming ‘rate cut’.”

Will you take even odds, Mark? I won’t have time to arbitrage. So far, I’ve had no takers.

#70 Down and Out on 07.11.17 at 7:23 pm

Another factor is Heloc loans making this a different downturn. How big a factor is yet to be seen .Burying down a fixed mortgage is a Canadian trait but a rising rate Heloc is more than brutal and some folks have both.

#71 I type, therefore I am on 07.11.17 at 7:25 pm

What’s the address of Derek’s famous house?

#72 GFD on 07.11.17 at 7:32 pm

I am so excited with good weather lately, I wet my plants.

http://www.huffingtonpost.ca/2017/07/11/canadians-real-wages-are-shrinking-is-that-why-were-falling-i_a_23025302/?utm_campaign=canada_newsletter

#73 Bob on 07.11.17 at 7:35 pm

So, now that the Great Housing Armageddon is upon us in the Great White North, what next for this blog?

Continue as is or change focus?

#74 Ian on 07.11.17 at 7:37 pm

Happy Bank of Canada day tomorrow people!!! The Plozzer and his sidekick the Wilcko are taking us on a little monetary trip north to the tune of 1.25% in a year and a half.

Mark, there is TONS of inflation. Follow Peter Schiff on YouTube, you’ll learn a tremendous amount.

#75 YM on 07.11.17 at 7:43 pm

There have been a few mentions here about the USA modifying a million or so mortgages. The modifications lowered priced for 5 years and were added back in then. They also did some tricky qualifying. Folks in Canada should also remember that 5 million homes went through foreclosure, and there are another 2 million working their way through foreclosure who are so far behind they can catch up. And Nonplused is right, jobs cratered here and will in Canada as all the realty related industries die too.

#76 96Tears on 07.11.17 at 7:44 pm

Spoke tonight with a west coast professor familiar with the matter who says there is a very good chance the Liberals in BC are about to embarrass the new coalition over reneging on their promise to raise the 15% speculators tax to 30%

#77 Rate Hike = Price Hike on 07.11.17 at 7:49 pm

What if prices don’t crash and go higher by fall? There’s bidding wars again in woodbridge and homes are still selling for high prices just not as quick. I don’t see a significant correction on the horizon. My realtor said people are buying again ahead of rate increase and stress test changes. IT NEVER ENDS. PRICES KEEP GOING UP NO MATTER WHAT. ITS THE NEW NORMAL GARTH. JUST ACCEPT IT.

It would the first time in human history. In Woodbridge, yet. A miracle. — Garth

——-
Yes, our history shows that whenever a measure is introduced to cool a market, prices do the opposite, and go up!

Feds increase the down payment rules in Feb 2016 – prices go up.

Feds introduce new 5 year stress test in October – prices go up.

New rate hike – fools rush in – and prices go up.

Expect the prices to keep going up before each and every rate hike to ‘beat’ the increase. Just ignore the fact that buyers will be paying more for the house to just beat a 0.25% increase. Buyers ignore it or are oblivious – because banks, realtors, and Mom and Dad all tell them to buy before the increase – and because the average buyer cannot do basic math!

Guaranteed that prices will be up by the end of October, when 4 month pre-approvals expire. Remember this post…

#78 Rate Hike = Price Hike on 07.11.17 at 7:55 pm

#76 96Tears on 07.11.17 at 7:44 pm
Spoke tonight with a west coast professor familiar with the matter who says there is a very good chance the Liberals in BC are about to embarrass the new coalition over reneging on their promise to raise the 15% speculators tax to 30%
——-

The 30% was a Green Party commitment, not an NDP commitment….and its a minority government, not a coalition – very different animals.

#79 dakkie on 07.11.17 at 7:55 pm

Could 27% of Canada Mortgage Holders Be In Over Their Heads? Ross Kay

http://investmentwatchblog.com/could-27-of-canada-mortgage-holders-be-in-over-their-heads-ross-kay/

#80 Hope you're right Garth on 07.11.17 at 7:57 pm

I want to see more skull and crossbones tomorrow and not a white flag.

Like it or not, the bad economic players will be taken out of the economy for quite some time, and that’s a good thing. Good money in the hands of Zombie investors diminishes the economy.

BC probably next if GreenDP do as they say.

Regardless, YVR listing price drops outnumber price increases by 2:1 and the average price change has been negative since at least Oct. 2016.

People there are either unaware what is going in their RE market or do not want to face up to reality. Flop’s posts confirm the price drop to increase ratio with actual selling prices.

Then there is OSFI in fall coming.

What a mess this will be by Oct/Nov of this year. I predict fear as people see their single asset strategy come apart with huge consequences to the economy.

#81 Bob on 07.11.17 at 7:58 pm

Post#31 at 5:54PM by lol

“affordable housing in certain areas of Canada is GONE for good

ship sailed. Sorry”
——————————————————————
Agreed. Living in TO or on the West Coast (Vancouver)for many of us only achievable in our dreams….

#82 RW_Z on 07.11.17 at 7:58 pm

Best post in recent memory. Love the skulls.

#83 Bob Loblaw on 07.11.17 at 8:01 pm

I bet that same realtor told her buying clients, ‘now is the best time to buy’; and told her selling clients, ‘list now and take the price cut.’

Ask a realtor when its NOT a good time to buy or sell – and you will hear crickets
————————————————————————————

#37 Same Same No Change

Their favorite term to describe a collapsing market is to call it “balanced”

When you hear that word, its supposed to evoke a sense of stability and strength. A balanced market is safe! Like everything has worked itself out and levelled off….certainly not falling off a cliff with no end in sight.

Maybe Happy Housing Crash guy is right. These realtors deserve to suffer horrible financial pain

#84 Asterix1 on 07.11.17 at 8:10 pm

I was reading an article mentioning that Sotheby’s Canadian president expects a September recovery in sales of 1M$+ properties in GTA.

Hilarious! This guy makes a living thanks to Canadian and foreign speculators, clueless debt fools and some truly rich people.

At this point in time, I would have more trust in Satan telling me that Hell is very cold.

Massive correction is on its way! Already started..

#85 Grantmi on 07.11.17 at 8:11 pm

#5 Sam the Sham on 07.11.17 at 5:10 pm
Instead of everyone panic selling their home, I think the average person will simply take their house off the market and wait to see how things sort out. Those who are under water and can still make their payments will just continue to do so (gritting their teeth). There will be a few people with the figurative gun to their head who have to sell at any price, but they will be relatively few. Let’s not get carried away predicting a massive crash.

You miss the point.. banks or their lending agent will be calling in their loan or ask the home owner to top up their equity if homes tumble in price. You can’t expect to keep a mortgage on a $350,000 loan for the home, when the home is only worth $310,000 now.

#86 Ace Goodheart on 07.11.17 at 8:13 pm

Pay down your debts peeps. Everything else you’re doing is pointless and stupid.

Pay…..down…..your….debts.

When you’re done doing that, you get to start loaning money to other people. That’s when life gets really fun. Power. Control. You hold the knife over someone else’s head.

Pay down your debts

#87 Ret on 07.11.17 at 8:15 pm

A family member is a long time lawyer in Calgary. When businesses started to fold, legal work initially dwindled and lawyers were fearful of layoffs and downsizing. Six months later, they were working night and day. Totally unexpected.

Businesses started litigation about commercial contracts, franchise fees, lease renewals, and had to deal with wrongful dismissals and termination lawsuits.

On the personal side, criminal activity ramped up, divorces, non payment of child support, RE sales as people left town, bankruptcy etc.

In short, demand for every legal service took off. Rapid changes in the local economy left people with fewer assests and emotionally wounded. They lawyered up.
—————————————————————
“He has a Carrera”- That is all I need to know. He is my kind of lawyer. Aggressive, casual manner but always in control. Appears to take risks but only to head fake his opponents. Never gets diverted by what he drives, but fixates on what truly drives him -the big win.

#88 Al on 07.11.17 at 8:21 pm

Still negative garthosaurus.

This is not that big of a deal. Your sensationalizing it which might bring all the dogs to the yard but it’s a very negativery slanted view.

Things will settle..those who bought in toronto at the top were naive but they will learn their lessons the hard way.

Humanity will go on and society will continue to advance. Even if the gains are just 3% yoy (they were actually still 6% yoy price gains in June in Toronto) that is still ahead of inflation and good and you have a nice house to live in that your enjoy.

Take a chill pill on the doomsday gartherific

Al

#89 Interstellar Old Yeller on 07.11.17 at 8:32 pm

Love the “GTA Housing Deathwatch” feature. So dramatically descriptive.

We have a handful of acquaintances who have all bought in recent months due to growing families. Hopefully they’re not overextended (and don’t read this blog. If I saw that something comparable to my new home was now six-figures less to buy I would be PISSED.)

#90 Raj on 07.11.17 at 8:41 pm

Garth

You once said that blogdog will be the first to hear from you when it’s time to buy

Waiting for your signal

#91 Tony on 07.11.17 at 8:42 pm

Re: #3 chris martin on 07.11.17 at 5:02 pm

I’m all cash and just day trade. Collectibles look to have been supplanted by the bitcoin. I’ve got a lot of cash just waiting for all the margin calls to roll in.

#92 For those about to flop... on 07.11.17 at 8:44 pm

I probably won’t post much this week as I am busy researching for my scathing exposé on a much maligned Richmond real estate brokerage.

Not really, I will probably do the soft porn version so Thor Turner and myself can stay out of the clink.

The weather is much too nice now to spend anytime in the big house.

I prefer to do my jail time in the winter,cuts down on heating expenses and such as well.

I am a hardened criminal, I once did a 25 year stretch in the penal colony of Tasmania…

M43BC

#93 cd on 07.11.17 at 8:53 pm

Of the 3 scenarios, I am quite concerned about #2. There are a lot of people out there who rent. I know of a few families who want a backyard so their kids can play and the only possible way for them in TO is to rent. I don’t know anything about their landlord’s finances but it really sucks for any renters since its totally out of their hands.

#94 Asterix1 on 07.11.17 at 8:57 pm

#88 Al on 07.11.17 at 8:21 pm

This is not that big of a deal. Your sensationalizing it which might bring all the dogs to the yard but it’s a very negativery slanted view.
____________________________________________

Seriously! You are calling Garth’s articles “a very negatively view”. Wake up amigo!

It’s not his “view”, its an analysis of present day realities, well researched thorough all the financial/regulations/policies info available to come up with such a judgement.

Keep sticking your head in the sand!

#95 ANON on 07.11.17 at 8:59 pm

It could be worse?!

#96 Millennial falcon on 07.11.17 at 8:59 pm

Dirty shysters will feel the pain for a thousand years!!! LMAO

#97 Tony on 07.11.17 at 9:00 pm

Re: #60 JimboSlim on 07.11.17 at 7:01 pm

The Millennials in Canada are in dire need of economic and financial education.

#98 Oakville stinks on 07.11.17 at 9:16 pm

Garth you should NOT stop your housing crash play by play blogs. Keep saying it as it is… this is what made you popular.

Besides, you should be going on a field trip on the housing crash because you’ve been saying it was going to happen for so long and now it’s finally happening!

#99 Tony on 07.11.17 at 9:17 pm

Re: #55 Franco on 07.11.17 at 6:42 pm

Calgary resale prices on mls are down 20 to 25 percent from the November 2014 peak. Edmonton peaked way back in the summer of 2007 and like Calgary has been falling fast since November 2014.

#100 Alex on 07.11.17 at 9:18 pm

I fondly remember a term that was regularly used on a Vancouver real estate bear blog about 10 years ago:

DDT’s, or deaths, divorces and transfers. Sellers who are not merely motivated, but forced to sell in a hurry. They provide some liquidity lube even when most sellers are unmotivated.

Death: sell grandma’s house and split the proceeds amongst the heirs
Divorce: sell and split between exes
Transfer: job has moved to another city

#101 TnT on 07.11.17 at 9:18 pm

#21 2 cents Canadian on 07.11.17 at 5:35 pm

Nice post, Thanks

#102 Pete from St. Cesaire on 07.11.17 at 9:25 pm

“He has a Carrera”- That is all I need to know. He is my kind of lawyer. Aggressive, casual manner but always in control. Appears to take risks but only to head fake his opponents. Never gets diverted by what he drives, but fixates on what truly drives him -the big win.
———————————————————–
Carrera guys are just yuppies for the most part. The best lawyers are the most expensive, experienced, connected and exclusive ones. They’re the ones who have the ‘dirt’ on the judge; but it will cost you more than your whole extended family is likely to earn in a lifetime to get them to play that card for your case.

#103 Linda on 07.11.17 at 9:25 pm

Like the skull & crossbones – looking forward to the next installation of ‘death watch housing’. Also looking forward to puppies & tummy rubs. Can we have episodes of ‘death watch housing’ while cuddling puppies & giving them tummy rubs? Add in a nice glass of wine & I’m ready to settle in:)

#104 Mark on 07.11.17 at 9:34 pm

“Calgary resale prices on mls are down 20 to 25 percent from the November 2014 peak. Edmonton peaked way back in the summer of 2007 and like Calgary has been falling fast since November 2014.”

The proprietary sales-mix-adjusted figures I’ve seen point to a much earlier peak in Calgary, 2011. That coincided roughly with when a significant number of decisions against going ahead with new oilsands capacity were made, and the people associated with the front-end design engineering, feasibility studies, etc., were laid off. Mix adjustments became extremely prominent thereafter.

Edmonton, yes, much later (but still not to the crazy of 2007), but only because Edmonton is far less exposed to the front-loaded aspects of that industry than is Calgary.

Toronto/Vancouver, 2013, of course, in keeping with the national peak of the Canadian RE market coinciding with CMHC subprime mortgage changes made by Finance Minister Flaherty.

#105 Mark on 07.11.17 at 9:39 pm

“You can’t expect to keep a mortgage on a $350,000 loan for the home, when the home is only worth $310,000 now.”

In a scenario like that, the borrower would probably not have a problem renewing the mortgage, but they certainly aren’t going to get a bargain basement discount rate on it. That’s actually quite a desirable scenario for the lenders — someone in that situation probably will keep themselves in the home, and pay the higher (subprime) rate, rather than defaulting over a measly $40k equity deficiency, upending their lives, etc.

The end result being, 20 years from now, the 30-year-old borrower in a loan like that, for instance, turns 50, and has no retirement savings, can’t send the kids to college, etc. Or maybe the loan ends up swallowing an inheritance they receive. Etc. Its very hard to accumulate much of equity when you’re paying subprime mortgage interest rates!

#106 Moses71 on 07.11.17 at 9:50 pm

Hey Happy Housing Crash, feel like a little friendly company tonight over a beer
We can send your Milton for sale wannabe sellers at asking haters some cream pies with sticky notes in the middle saying “Place nose here” lol

#107 AK on 07.11.17 at 9:52 pm

#24 Penny Henny on 07.11.17 at 5:41 pm
“Haven’t you heard? It’s getting tougher getting funds out of China.”
——————————————————————
Not according to the following article.

Total foreign real estate investment by ‘Mainland China buyers in 2017 is projected at $106 billion’

#108 Bottoms_Up on 07.11.17 at 9:57 pm

Who remembers this from a short 3 months ago? $500,000 mcmansions in Shelburne…won’t be seeing those prices ever again.
http://www.cbc.ca/news/business/i-m-shaking-my-head-hot-toronto-housing-market-driving-prices-up-in-small-town-ontario-1.4077117

#109 the Jaguar on 07.11.17 at 10:04 pm

#56 Tony. Italians love real estate! Don’t ever change. The mangia cakes would be so disappointed.

#110 And I Quote on 07.11.17 at 10:09 pm

“Life is full of misery, loneliness, and suffering – and it’s all over much too soon.”
― Woody Allen

#111 young & foolish on 07.11.17 at 10:13 pm

Grandad has still refused to sell any of his slanted-semis … When I mentioned that prices maybe falling, his response was: “OK, let them, the GTA is still a growing region, RE is a long distance game, and you get well paid to wait”.

#112 Kothar on 07.11.17 at 10:22 pm

What’s wrong with deflationary? Gov are demanding lower drug prices and that is deflationary.

#113 Smoking Man on 07.11.17 at 10:37 pm

It Could be worse?

You can die at birth. Never to have a photon hit your eyeball.

You come into existence when your dad sniffs moms disregarded smelly stilettos after a night of dancing, boom 30 seconds later and the cells split.

Life is a journey to death, why not take out a pen and paper and record your experience.

Hunter S Thompson, Ernest Hemming took the easy way out. Not looking forward to pain in joints, lost fans. they didn’t even get to hear the bullet that smashes their brains on the walls to write about it.

Me I’m doing it the hard way, self-induced total self-destruction with pain and agony, play by play.

That’s what a true writer does.

If I don’t get any happy birthdays shit tomorrow.

130 book sales, no respect.

I’m done one here.

Figure it out for yourselves.

#114 Livin Large on 07.11.17 at 10:43 pm

I knew Hunter and you’re no Hunter.

#115 waiting on the westcoast on 07.11.17 at 10:49 pm

Mark – Steve Jobs also had a reality distortion field… But his worked on others and he was mostly right… ;-)

#116 Stock picker on 07.11.17 at 10:55 pm

DELETED

#117 Lee on 07.11.17 at 10:59 pm

Sotheby’s says no worries because the rich will keep buying houses.

#118 Reximus on 07.11.17 at 11:01 pm

Who remembers this from a short 3 months ago? $500,000 mcmansions in Shelburne…won’t be seeing those prices ever again.

——

LOL you still need a LOT more than 500k to get anything decent in Shelburne

#119 mathman on 07.11.17 at 11:05 pm

Rates rise = cash crunch

the first to go are the toys – check Kijjii listings for boats, quads, expensive bikes etc. People will take any bid on these items, especially if they have had to sell the cottage. Cash becomes king quickly

Next go the leased cars – watch Leasebusters explode with low end luxury cars.

Then go all the unsecured credit lines followed by the 2nd, 3rd, 4thh etc credit cards. People will keep one as a lifeline

Then goes the house. The house is the last – people will leave kicking and screaming – the real challenge is that well before this their ability to consume evaporated and the economy gets crushed – we will already been in a free fall economically by the time the poop really hits the fan in housing.

Stay liquid my friends.

Math

#120 will on 07.11.17 at 11:06 pm

re #3: “When you win the game, stop playing.”

Excellent advice. Never heard it put that way before. Let’s say that again in caps:

WHEN YOU WIN THE GAME, STOP PLAYING.

(sorry for shouting Garth).

#121 M on 07.11.17 at 11:08 pm

I don’t think Poloz will raise crap. Rates stay. T2 is already wet in the pants since he gave Buffet the moon in exchange to prop HCG.

#122 Lee on 07.11.17 at 11:16 pm

Cp24 shows someone tonight who says an extra $125 a month on your mortgage is no prob so who cares if rates go up tomorrow. See: nothing to worry about. No ones panicking.

#123 cat luver on 07.11.17 at 11:21 pm

The GTA Housing Deathwatch: almost spewed my chardonnay : )

Thanks again Garth.

#124 Glen B on 07.11.17 at 11:28 pm

Hey Happy Housing Crash Everyone
Your posts always put a smile on my face. This housing bubble has been painful to watch. I’ve got my popcorn ready to watch as thing thing finally goes boom. Its going to be epic.

#125 David T Michaels on 07.11.17 at 11:32 pm

Damages for aborted sales should be the deposit money. Sellers will demand larger deposits and buyers will not have to worry about a sudden crash before the deal closes and they get financing.

I think that the crash will be temporary and the market will be back up within a year or two. Canada is inviting enough rich immigrants to prop up the housing market in the long run.

#126 BS on 07.11.17 at 11:44 pm

26 The Technical Analyst, CSTA, CPD on 07.11.17 at 5:44 pm

Derek (the victim of his own greed) tried to sell at $2.25mil but wants to ruin the life of a family for his pocketbook since they won’t be greater fools, now the victim of his own demise, Derek sells for a $650,000 loss from fear. A fool and his money are soon parted.

We should setup a legal fund to fight those like Derek who try to destroy family for money. Can’t buy good Karma like that!

Families matter.

Foolish comment. Derek turned down other offers to accept the one he did. A deal is a deal and a contract is a contract. There are two families here. Why should Derek’s family take the loss because the other family decides to back out of the deal and break the contract which prevented Derek from making another deal? Now those deals are gone. Who is to say Derek can afford to lose the money any more than the buyer?

#127 Carrera Guy on 07.11.17 at 11:56 pm

Carrera guys are just yuppies for the most part.
================================

There’s two kinds of Porsche drivers; those who wave to other Porsche drivers and those who don’t. The ones who wave understand the pure driving pleasure that comes from a fine machine and are excited to share and acknowledge the experience with other enthusiasts.

The ones who don’t wave think that a Porsche is a bauble and just don’t get it. They might as well be driving a 1982 Ford Zephyr for all the good it does them.

Unfortunately, unless you drive a Porsche you don’t really get to see who’s a hero and who’s a poseur. It’s quite enlightening actually.

#128 Newcomer on 07.11.17 at 11:58 pm

#5 Sam the Sham on 07.11.17 at 5:10 pm
Instead of everyone panic selling their home, I think the average person will simply take their house off the market and wait to see how things sort out. Those who are under water and can still make their payments will just continue to do so (gritting their teeth). There will be a few people with the figurative gun to their head who have to sell at any price, but they will be relatively few. Let’s not get carried away predicting a massive crash.
————

You are right, up until the last sentence. What you are overlooking is that those people who take their houses off the market are no longer market participants. As such they have zero impact on the market. They might as well not exist. Those people with the guns to their heads, no matter how few they are, will be the entire market. Sales by people with guns to their heads will set the prices, all the way down, through the massive crash.

#129 My Wife Loves Garth on 07.12.17 at 12:06 am

Toronto news tonight lead with headline “luxury condo sales up 98%”. The media really wants to keep this party rolling.

#130 Great on 07.12.17 at 12:16 am

The first few sentences and skull and crossbones made me laugh really hard. Thank you so much for this, made a difference on a really bad, trying, brutal day.

#131 Tesalien on 07.12.17 at 12:24 am

#113 Smoking Man on 07.11.17 at 10:37 pm
It Could be worse?

You can die at birth. Never to have a photon hit your eyeball.

You come into existence when your dad sniffs moms disregarded smelly stilettos after a night of dancing, boom 30 seconds later and the cells split.

Life is a journey to death, why not take out a pen and paper and record your experience.

Hunter S Thompson, Ernest Hemming took the easy way out. Not looking forward to pain in joints, lost fans. they didn’t even get to hear the bullet that smashes their brains on the walls to write about it.

Me I’m doing it the hard way, self-induced total self-destruction with pain and agony, play by play.

That’s what a true writer does.

If I don’t get any happy birthdays shit tomorrow.

130 book sales, no respect.

I’m done one here.

Figure it out for yourselves.

130!!! Yeah right….

“A writer’s job is to write, not to prance his ass on stage, not to hope to get laid by … idiotic groupies.” – Charles Bukowski

#132 Stella on 07.12.17 at 12:37 am

“Happy Housing Crash Everyone”, you need to be placed in a straight jacket and thrown down a condominium fire exit stairwell. Your posts are nauseating.

#133 lol on 07.12.17 at 12:47 am

#55 Franco on 07.11.17 at 6:42 pm
#40 Mark

Have you got links to your data? For starters, Calgary’s peak was not 2011, but rather 2013-2014. And any SFH put on the market right now AT LEAST at those prices will sell quickly. It is incorrect that prices have gone down at all, and certainly not 20-25%.

Dude, don’t ask this idiot a question, he will say he has stats and never show them. He’s the same fool who said GTA peaked in 4 years ago and kept saying it for 4 years. What a tool.

#134 Catalyst on 07.12.17 at 12:51 am

Anyone who bought in the last 2 years with 20% down or less have already lost their entire down payment and are de facto in underwater mortgage situation will be denied mortgage upon renewal on appraisal.”

That is not an accurate statement – not yet anyway. Places are still selling above what they got end of CY16, it just might take a few weeks instead of hours.

#135 Myra Andrews on 07.12.17 at 12:54 am

Data for Vancouver for July (GVRD and Fraser Valley)

New Sold Sell to List %
July 11 444 251 56.5%
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%

#136 Myra Andrews on 07.12.17 at 12:56 am

From realtor Paul Boenisch (Metro Vancouver only)

Inventory was under 6300 in the beginning of the year.

July 11
New 282
Price Change 76
Sold 148
TI: 9635

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

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

#137 InvestorsFriend on 07.12.17 at 12:58 am

Hilariously, Mark has sales mix data but he can’t share

#104 Mark on 07.11.17 at 9:34 pm said:

The proprietary sales-mix-adjusted figures I’ve seen point to a much earlier peak in Calgary, 2011.

*************************************
Hilarious! Anyone can torture data until it confesses to whatever they want. Mark has the good data but can’t share. Too funny (if it were’nt so sad.)

#138 Jon B on 07.12.17 at 1:08 am

C’mon GT, enough of this side show about the GTA. It’s time for the feature presentation: the Vancouver Housing Deathwatch. It’ll be funner.

#139 Freedom First on 07.12.17 at 1:16 am

#113 Smoking Man

No respect?

Just wait. Smoke, you already know that in Canada you will soon not only get no respect, but you will be deemed an illegal alien. I know you know what I’m talking about.

Also, while I’m on the subject, to bad your escape plan was thwarted. A coming Grandmother, Grandchildren, JT, and then possibly prison. Keep writing.

Fan #33

#140 julie in vancouver on 07.12.17 at 1:36 am

Garth, what the f*ck is going on in BC. I saw a crappy little townhouse listed on MLS today for $890k, that was listed for $670k only a few months ago!!

The crash has not hit here. Things are still crazy. I don’t know what to do. I am contemplating buying something in Montreal as I think that’s the next victim to this housing craze. I don’t think prices will return to normal anytime soon and I’ll be f*cked.

Sincerely,

Concerned Millenial

#141 Dee on 07.12.17 at 1:44 am

Speaking to quite a few people in the business from the gta tonight. Lots & lots & lots of deals falling through. Guys that were very certain 6 months ago are confused and scared.

#142 slippery cricket on 07.12.17 at 2:12 am

Prices will go down but there will be no vulching. When the hype is gone people lose interest. It will not be the “thing” to buy anymore.Rents will also go down and people will be happy renting agian.
The stock market is another story.

#143 John Titor on 07.12.17 at 3:00 am

Garth, make sure to give the go signal when it is time to pounce.

In the meantime, I will be moving to my old 2 bedroom apartment. $950 3 years ago, got a discount from my bachelor land lord. Snagged it for $900 a month near downsview station. I mean the newly renamed Sheppard west station. I feel like a winner!

#144 Ponzius Pilatus on 07.12.17 at 3:09 am

According to Der Spiegel, Trump will replace Yellen with a Cohen guy.

#145 Ray Skunk on 07.12.17 at 6:28 am

#127 Carrera Guy

Absolutely right. You can tell between those who are in it for the car, and those who are in it for the label.

Mine is 31 years old; you can probably guess which category I belong to.

#146 Dharma Bum on 07.12.17 at 6:40 am

Tomorrow this blog begins a series on puppies and tummy rubs. Come early.
——————————————————————–
Come early?

Will tummy rubs have happy ending?

Me-want-you-love-me-long-time!

Housing crash tooooooooo scary for me.

#147 IHCTD9 on 07.12.17 at 7:18 am

#97 Tony on 07.11.17 at 9:00 pm
Re: #60 JimboSlim on 07.11.17 at 7:01 pm

The Millennials in Canada are in dire need of economic and financial education.
__________________________

They’re about to get it.

#148 MF on 07.12.17 at 7:39 am

Well here we go. BoC day. Let’s see if these idiots can do the right thing and start raising the interest rate beyond “emergency” levels. I’m already hearing some moaning:

-inflation is too low (for anybody who believes the core inflation statistic, which should be nobody)
-oil prices are too soft
-debt levels are too high

Today we get a some insight. If the rate does not go up it’s puny .25%, it means this economy is in much worse condition than we thought.

I’m honestly 50/50, despite all the rhetoric. Very very little confidence in this “institution”.

MF

#149 IHCTD9 on 07.12.17 at 7:44 am

I popped open the local MLS a few days back just to do a little browsing. There were definitely a lot more houses up for sale than usual. A couple local to me houses went through some significant exterior upgrades before getting listed.

It’s kind of funny – it appears to be a little version of the same thing going on in the GTA. Lot’s of folks sniffed the breeze this spring, listed; and made out like bandits as the GTA winners came in looking to “downsize”.

Now everyone is listing and trying to cash in, but if the party is over in Toronto, it’s over here too. Shows you how quick on the draw you need to be.

I’ll be watching a few 650-750K+ houses that are up for sale nearby. I’m betting they are just “fishing” for the big number. I expect if their price expectations are not met, they’re just going to pull it off the market.

The most over priced IMHO are the 500-600K houses, they’re pretty much 400K houses that have been fluffed, staged and then tossed a line in.

#150 reality 1 on 07.12.17 at 7:56 am

Perhaps much of the recent job creation and other positive economic metrics in Canada are reflective of the last mad dash upward in housing prices.

The recent gains were large, which allowed HELOCS , LOCs and other forms of credit to be further enlarged , and quickly, by home owners that were emboldened by the rapid increase in their “equity”.

Some of that borrowing would have kept people ‘making ends meet’ as they borrowed even to make mortgage payments.

Canadian vehicle sales reached a record in the first 6 months of this year – over 1 million for the first time ever – and at the longest average financing periods. These are major ‘purchases’ . This might be an indicator of such credit expansion resulting from this rapid home price escalation.

Ergo, this last multi month surge in RE home pricing delivered a great deal of 3 % plus growth Canada experienced and it is not due to a ‘healing’ in the economy, but rather, a relatively short term boost.

If that is the case, then I would posit that economic activity and the metrics used to measure it will reflect the downturn in house pricing in the coming months should prices even just stagnate here.

In other words, the confidence, motivation and means to borrow a lot of money will be gone and we will return, faster than most think, to a sub-par economy.

In an economy so tied to the expansion of consumer credit through RE lending, absent a major rally in resource prices or a big drop in the Cdn dollar, will spell a rapid decline in economic activity.

As the average HELOC / LOC is about $ 70,000 per household and involves large expenditures usually ( cars , boats, cottage and offspring down payments, renovations, exotic travel, etc. ) , then removal of such expenditures will be noticed in a matter of months.

This will become a self fulfilling prophecy as forced austerity in personal budgets become entrenched, leading to a downward spiral and certain deflation throughout the economy.

Then, look out below !

#151 Jas on 07.12.17 at 8:03 am

Garth
In America what was the interest rate at the time of 8% owners in distress and what the rate will be in Canada at the end of next yr?
I don’t think the camparion made by the economists is quite right. And as we know economists are usually eat off the mark anyway.

#152 Wrk.dover on 07.12.17 at 8:05 am

http://www.ebay.com/itm/253040390257?rmvSB=true

If this is what 2/3 of Canadians cannot afford with out some sort of financing assistance.

Then there is a housing crisis!

#153 Jas on 07.12.17 at 8:05 am

Garth
In America what was the interest rate at the time of 8% owners in distress and what the rate will be in Canada at the end of next yr?
I don’t think the camparion made by the economists is quite right. And as we know economists are usually way off the mark anyway.

#154 crowdedelevatorfartz on 07.12.17 at 8:16 am

@#87 Ret
““He has a Carrera”- That is all I need to know. He is my kind of lawyer. Aggressive, casual manner but always in control….”
******

Funny I was thinking the opposite.
Expensive, impractical (for 6 months or more in Canada), leased , “poser car” designed to show off “wealth” .
All paid for by “loser clients” out there that are bent over to pay for that expensive lifestyle…..and the speeding tickets

#155 Asterix1 on 07.12.17 at 8:25 am

Question: What happens to past monthly RE stats when deals fall through or buyers demand cashback at the last minute?

I do believe TREB stats are transaction reported. Are those stats then retrograded and kept accurate?

#156 willworkforpickles on 07.12.17 at 8:28 am

So who’s buying now ?
Only the greater fools of all time thinking they”re getting a deal today at the lower prices being had.
Just starting .
This fatal thinking and trend will prevail through the rest of 2017.

#157 crowdedelevatorfartz on 07.12.17 at 8:28 am

@#127 Carrera guy
“Unfortunately, unless you drive a Porsche you don’t really get to see who’s a hero and who’s a poseur. It’s quite enlightening actually….”
*****

Yes, yes it is.
Thank you. You’ve just confirmed everything I’ve thought about Carrera owners.
How DO you stand driving on the same roads as Ford Zephyr owners?
Just curious.
Does the arrogant attitude work for you when the police in their grubby, proletarian Fords pull you over for your umpteenth speeding ticket?
Or do you just suck it up and grovel?
The shame, the horror……

#158 Incubus on 07.12.17 at 8:30 am

“The claimed damages amount to $1 million plus costs, and the defendants have until the end of the month to file a statement of defence. ”

They will fill for bankruptcy, this is their only escape.

#159 maxx on 07.12.17 at 8:30 am

#5 Sam the Sham on 07.11.17 at 5:10 pm

“Instead of everyone panic selling their home, I think the average person will simply take their house off the market and wait to see how things sort out. Those who are under water and can still make their payments will just continue to do so (gritting their teeth). There will be a few people with the figurative gun to their head who have to sell at any price, but they will be relatively few. Let’s not get carried away predicting a massive crash.”

Too late for “keep calm, all is well”. Far too late.
RE is done like spent BBQ charcoal and is losing its mind-addling, hormonal influence to become a simple commodity, which it is.
Economic fundamentals, especially in the arena of good jobs with benefits that solidly sustain long-term debt obligations, don’t support a 70% ownership rate and are very nearly a thing of the past.

I also never bought the bs that Canadians are prudent and wise when it comes to money. The average Canuck goes through its store flyers and coupon clips, but when it comes to re, it goes looney tunes and gallops full bore into re. Most stupid of all, bidding wars.
Bidding wars……idiots that realtards have loved to manipulate. How often have buyers gotten close to a property that has been on the market for months or years only to suddenly find that another buyer just happens to show up on the scene?

Like a side of rent with that service-industry job or zero-hour contract? Perhaps multiple family member occupation or room and basement rentals? Don’t forget to pay the tax man, by the way.

Those who haven’t already crystallized gains by selling WILL unquestionably lose equity.

#160 Cici on 07.12.17 at 8:35 am

# 130 Tesalien

:-)

#161 crowdedelevatorfartz on 07.12.17 at 8:37 am

@#130 Teslalien
“A writer’s job is to write, not to prance his ass on stage, not to hope to get laid by … idiotic groupies.” – Charles Bukowski’
++++++

My favorite quote was by an author who, when asked by a reporter during the Charles Manson trial, why there were so many crazy people in California, had this to say…..

” On the eighth day. God tipped the North American continent on its side and all the fruits and nuts rolled West…..Studs Terkel”

#162 willworkforpickles on 07.12.17 at 8:42 am

2018 will be the year of the freeze.
A year of property holders who wanted to sell at the top gone deep into shock and denial….frozen with fear ….pulling their listings or not listing at all.
The delusion that this can’t happen to me syndrome in full swing eating them away from the inside out.
Things will get better next year they will surmise.
No
It they won’t be better in 2019.
In 2019 the breaking point will come and the bottom will fall out.
From thence the market will decline steadily until the end of the current real estate cycle in 2023.

#163 GFD on 07.12.17 at 8:51 am

#126 BS on 07.11.17 at 11:44 pm
Who is to say Derek can afford to lose the money any more than the buyer?

Check here. Many answers to your, yet rhetorical question.

https://www.youtube.com/watch?v=tgrJ4C2mJ4w&t=2682s

#164 Carrera Guy on 07.12.17 at 8:57 am

144 Ray Skunk on 07.12.17 at 6:28 am
#127 Carrera Guy

Absolutely right. You can tell between those who are in it for the car, and those who are in it for the label.

Mine is 31 years old; you can probably guess which category I belong to.

+++++++++++++++++++++++++++++++++

A 1986? Be still, my beating heart. Built like a tank, easy to work on, abundant aftermarket parts. And you can still lose your license and be in jail in less than six seconds should you put that flat thing to the floor and hold it there. Classic!!

Yeah, I wave too.

#165 Neutral Dave on 07.12.17 at 8:58 am

Dovish Comments from Yellen. BoC to hold rates today in shocker?

#166 Dissident on 07.12.17 at 9:11 am

FYI, all the speculators who bought new builds $800K -$1,000M way north of the city, like in Vaughan, they are not selling, nobody is buying, so they are now having to rent them out for $2,750/mo. Nobody wants to rent in Vaughan for that much. However, different story in Toronto/Etobicoke. Prices are still inching up. $675K semi detached near longbranch, built 1967, sold $735K after 3 days on the market. Its the million dollar houses that are not selling. Anything under a mil, and in a good area, near the core, is definitely going to sell.

Bottom line, this phenomenon is region-specific and very specific to the margins of the houses that are for sale/rent, and when they were bought to be flipped.

#167 maxx on 07.12.17 at 9:12 am

#26 The Technical Analyst, CSTA, CPD on 07.11.17 at 5:44 pm

“Derek (the victim of his own greed) tried to sell at $2.25mil but wants to ruin the life of a family for his pocketbook since they won’t be greater fools, now the victim of his own demise, Derek sells for a $650,000 loss from fear. A fool and his money are soon parted.

We should setup a legal fund to fight those like Derek who try to destroy family for money. Can’t buy good Karma like that!

Families matter.”

No question that families matter. However, nothing Derek did was illegal. The house was priced for the market, however nutz it (still) is. The market was not created by him – for that, look to tptb and the well-manicured hands that push and pull on interest rate levers.

But when someone, most especially a realtard, puts its name to a legal document and subsequently backs out, they certainly ought to expect a legal challenge. The worse the market becomes, the less tolerance for backing out of a legal sale. You can’t force someone to complete the sale, but you certainly can sue for damages.

“Taking it to the streets” clanging wooden spoons and pans and calling for a legal fund for this or that is just silly and goes against the grain of free markets.
Good luck with that.

I absolutely agree that re markets are crazy, but I also think that as a society, we have migrated into the realm of taking little responsibility for our actions.

You sign the document, you deal with the fallout.

#168 Dissident on 07.12.17 at 9:17 am

And BTW, there is less inventory that is under a mil this year in Etobicoke than there was last year. So this whole “surplus of properties for sale” is again, very region-specific, i.e. north of the city. And has everything to do with the flippers and speculators. Regular folk are delaying selling their houses now. So there is actually a shortage in some areas.

Again, you can’t put out blanket statements and expect them to apply to all parts of GTA.

#169 Scientific proof of Chaos on 07.12.17 at 9:20 am

#113 Smoking Man on 07.11.17 at 10:37 pm
It Could be worse?
You can die at birth. Never to have a photon hit your eyeball.
You come into existence when your dad sniffs moms disregarded smelly stilettos after a night of dancing, boom 30 seconds later and the cells split.
Life is a journey to death, why not take out a pen and paper and record your experience.
Hunter S Thompson, Ernest Hemming took the easy way out. Not looking forward to pain in joints, lost fans. they didn’t even get to hear the bullet that smashes their brains on the walls to write about it.
Me I’m doing it the hard way, self-induced total self-destruction with pain and agony, play by play.
That’s what a true writer does.
If I don’t get any happy birthdays shit tomorrow.
130 book sales, no respect.
I’m done one here.
Figure it out for yourselves
……………………………………………………..
Not sure what cell division you are talking about Smoking Man? There are two types of cell division: mitosis and meiosis. Most of the time when people refer to “cell division,” they mean mitosis, the process of making new body cells. Meiosis is the type of cell division that creates egg and sperm cells.
Mitosis is a fundamental process for life. During mitosis, a cell duplicates all of its contents, including its chromosomes, and splits to form two identical daughter cells. Because this process is so critical, the steps of mitosis are carefully controlled by a number of genes. When mitosis is not regulated correctly, health problems such as cancer can result.
The other type of cell division, meiosis, ensures that humans have the same number of chromosomes in each generation. It is a two-step process that reduces the chromosome number by half—from 46 to 23—to form sperm and egg cells. When the sperm and egg cells unite at conception, each contributes 23 chromosomes so the resulting embryo will have the usual 46. Meiosis also allows genetic variation through a process of DNA shuffling while the cells are dividing. Actually after Meiosis the opposite occurs at the moment of conception and cells meld. Have you considered that your life was a phenomenon of the Chaos Theory? Perhaps you’re Self-Similarity. The unveiling of Self-Similarity allows people a glimpse of the magical mechanisms that shape our world, and perhaps even ourselves… think about this: A snow flake is an object composed of water molecules. These molecules do not have a common nerve system, DNA or a chief molecule that calls the shots. How do these molecules know where to go and hang in order to form a six pointed star? And where do they get the audacity to form a different one every time? How does one molecule in one leg of the flake know which private design the rest of the gang is cruising for, in other legs of the flake, for the tiny molecule a million miles away? Why are you here?
As for no respect, it is earned! Not bestowed freely without merit!
buon compleanno

#170 LS in Arbutus on 07.12.17 at 9:21 am

For those of you watching the Vancouver market (Flop) etc. You need to go onto Twitter and follow:

Hutchyman @ Hutchyman
Mortimer @ Mortimer_1

They are both showing lots of attempted flips, listings listed below what was paid last year or assessed and listings that have expired. Quite illuminating. (And hard to believe the level of speculation too. That is, bought in 2016, trying to sell now. Lots of these.) Flop, you’ve got some competition! :-)

#171 FLHTK on 07.12.17 at 9:26 am

Wow 1% increase will deter 6 to 8% of buyers…..time to buy!

#172 GFD on 07.12.17 at 9:32 am

#157 Incubus on 07.12.17 at 8:30 am

Not necessarily true. If they own other assets or have cash. The way you suggest it would work for someone living in low income housing with maxed out credit cards.

#173 Scientific proof of Chaos on 07.12.17 at 9:35 am

#156 crowdedelevatorfartz on 07.12.17 at 8:28 am

@#127 Carrera guy
“Unfortunately, unless you drive a Porsche you don’t really get to see who’s a hero and who’s a poseur. It’s quite enlightening actually….”
*****

Yes, yes it is.
Thank you. You’ve just confirmed everything I’ve thought about Carrera owners.
How DO you stand driving on the same roads as Ford Zephyr owners?
Just curious.
Does the arrogant attitude work for you when the police in their grubby, proletarian Fords pull you over for your umpteenth speeding ticket?
Or do you just suck it up and grovel?
The shame, the horror……
…………………………………………………………………
Ha,ha,ha a Carerra…… Jesus did you need to wast all of that money on a peace of metal to get laid by some dumb glory chasing groupie?
BTW I had the pleasure of driving a friends clunky 2005 Ford once, it would have left a Carerra in the dust, choking and coughing all the way.
https://www.youtube.com/watch?v=ptTlrmbgFQY

#174 Dale Unheart on 07.12.17 at 9:36 am

” #21 2 cents Canadian ”

Impressive, who’s your advisor?

#175 doom and gloomers on 07.12.17 at 9:41 am

U.S. stocks opened higher on Wednesday, after Federal Reserve Chairwoman Janet Yellen, in prepared congressional testimony, said interest rate increases would be gradual and that they wouldn’t need to rise much further

………..

The Queen has spoken

That is not what her statement said. She spelled out clearly that tightening will continue on a gradualist basis. Absolutely as expected. — Garth

#176 Smoking Man on 07.12.17 at 9:53 am

#147 MF on 07.12.17 at 7:39 am
Well here we go. BoC day. Let’s see if these idiots can do the right thing and start raising the interest rate beyond “emergency” levels. I’m already hearing some moaning:

-inflation is too low (for anybody who believes the core inflation statistic, which should be nobody)
-oil prices are too soft
-debt levels are too high

Today we get a some insight. If the rate does not go up it’s puny .25%, it means this economy is in much worse condition than we thought.

I’m honestly 50/50, despite all the rhetoric. Very very little confidence in this “institution”.

MF
……

Rates are never based on inflation, never have been, never will be. Its all based on labour pool.

Based on the huge job gains. 100% rates will go up.

#177 Jack BeNimble on 07.12.17 at 9:54 am

The Boston Consulting Group report might be of interest to you blog dogs:

http://www.checkpointmarketing.net/n.cfm/page/e120/key/362277970G723J6783973N9N210394P0P3233T2/

“The Bank for International Settlements notes that the gap between credit consumption and economic output (gross domestic product) has reached a critical 14.1 level in Canada.” …” and “anything above 10 to be a critical warning. Breaching 10 results in a banking crisis in two-thirds of economies within three years.”

(Source is a newsletter from a group of Toronto accountants)

#178 Alistair McLaughlin on 07.12.17 at 9:59 am

I feel no sympathy for both Derek and no sympathy for the buyer who backed out. Both greedy fools. A greedy seller who refused to renegotiate an obviously ridiculous price. Cash-backs are suddenly common; why didn’t Derek consider that instead of going directly to the lawsuit option? His refusal to budge will cost him a lot more than a cash back of $300K or so that might have enticed the buyers to follow through.

As for the buyer, boo hoo. A realtor who believed her own BS and drank her own Kool-Aid and bought right at the top of the bubble, almost to the day. “Never get high on your own supply.” Most drug dealers know that. Why not realtors?

#179 Andrew t on 07.12.17 at 10:01 am

#90 Raj on 07.11.17 at 8:41 pm
Garth

You once said that blogdog will be the first to hear from you when it’s time to buy

Waiting for your signal

Wait five years. Put it back of mind, invest elsewhere, go live life. Unless you really really want to buy a house, in which case just buy a damn house.

#180 Victor V on 07.12.17 at 10:02 am

BANK OF CANADA RAISES RATES FOR FIRST TIME SINCE 2010

http://www.bnn.ca/bank-of-canada-raises-rates-for-first-time-since-2010-1.802721

#181 Paul Stokes on 07.12.17 at 10:07 am

1/4 point higher…

#182 Happy Housing Crash Everyone! on 07.12.17 at 10:10 am

interest rates went UP!

Happy Happy Housing Crash Everyone! :-)

BOC will make up stories on the upside like they did on the downside of interest rates. :-)

#183 For those about to flop... on 07.12.17 at 10:10 am

LS 17 at 9:21 am
For those of you watching the Vancouver market (Flop) etc. You need to go onto Twitter and follow:

Hutchyman @ Hutchyman
Mortimer @ Mortimer_1

They are both showing lots of attempted flips, listings listed below what was paid last year or assessed and listings that have expired. Quite illuminating. (And hard to believe the level of speculation too. That is, bought in 2016, trying to sell now. Lots of these.) Flop, you’ve got some competition! :-)

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

Hey LS,yeah I think I remember hutchyman from when I used to watch Vancouver daily review of Twitter.
If it’s the guy I’m thinking of he is a realtor and so I can’t do the sort of magic he can do but I do my best to show people what’s going on.

Not only do I have lots of 2016 flips in trouble, as this year wears on I am adding 2017 attempted flips as well as the majority of people in this city seem to think the official line of business as usual continues.

I just don’t have the time anymore to keep a track of everything now that I am back at work trying to scramble and find a way to salvage the year and make 30k in the last half of the year.

Anyway, I will probably drive by your house on the way to work in the next half hour or so maybe we can high five…

M43BC

#184 Contrarian Coyote on 07.12.17 at 10:11 am

#148 IHCTD9 on 07.12.17 at 7:44 am
I popped open the local MLS a few days back just to do a little browsing. There were definitely a lot more houses up for sale than usual. A couple local to me houses went through some significant exterior upgrades before getting listed.

It’s kind of funny – it appears to be a little version of the same thing going on in the GTA. Lot’s of folks sniffed the breeze this spring, listed; and made out like bandits as the GTA winners came in looking to “downsize”.

Now everyone is listing and trying to cash in, but if the party is over in Toronto, it’s over here too. Shows you how quick on the draw you need to be.

I’ll be watching a few 650-750K+ houses that are up for sale nearby. I’m betting they are just “fishing” for the big number. I expect if their price expectations are not met, they’re just going to pull it off the market.

The most over priced IMHO are the 500-600K houses, they’re pretty much 400K houses that have been fluffed, staged and then tossed a line in.

===

I see some like that here up in the Kawarthas. Although not as high as where you are, but still high relative to the area. What would normally be pre-war, wood houses that were barely 150K 5~10 years ago are now listing for 250K.

No doubt the seller’s RE agent has convinced them the seller’s to slap some new siding on the houses and fluffed them up. It’s craziness. Most of there houses are all wood, 2-bedroom, built in the 1930s and 1940s. Listings are staying longer on the market nowadays though.

Peterpatch has the 2nd highest official unemployment rate (hurray us!) after Calgary and I have no idea how the locals are buying other than BoM and leveraged to the hilt.

#185 S.Bby on 07.12.17 at 10:11 am

Carrera Guy:

Drives a fuel injected Volkswagen.

#186 Dups on 07.12.17 at 10:13 am

I was wrong the BOC did increase the rates by .25

http://www.econoday.com/economic-calendar.aspx?link=http://global-premium.econoday.com/

Let see its effect by the end of the day.

#187 I'm a believer on 07.12.17 at 10:14 am

I’ve been reading your blog for years and have never commented. But your Deathwatch posting today is off the chain funny. This is dog chow’s finest hour lol.

#188 Leo Trollstoy on 07.12.17 at 10:16 am

Ppl realizing Mark is a troll

Just ask for data. His response is te same 1) will present no data and 2) will deflect or ignore

I called it here first. I’m always right lol

#189 Victor V on 07.12.17 at 10:19 am

The official PR from the Bank of Canada:

http://www.bankofcanada.ca/2017/07/fad-press-release-2017-07-12/

#190 Stan Broock on 07.12.17 at 10:23 am

https://ca.finance.yahoo.com/news/bank-canada-rate-decision-coming-080004252.html

Bank of Canada hikes interest rate to 0.75%, first increase in seven years

#191 TnT on 07.12.17 at 10:23 am

#177 Alistair McLaughlin on 07.12.17 at 9:59 am

How frustrating…

Derek put his house up for sale.  period

Our real estate laws are highest bid = Winner.  period

Real Estate agent and husband goes in guns blazing, plays “The Big Man” and buys the house with no conditions beating all other offers.  period

Then Real Estate agent and wimp backs out, cries and runs away leaving the seller high and dry.  period

The bleeding heart wimps on this blog is the perfect example of why this generation of Canadians are such weak kneed push overs ripe for culture takeover….

Have fun asking your future overlords if they want any fries with that…..

#192 IHCTD9 on 07.12.17 at 10:25 am

I feel bad for Derek, he did everything right and ended up with deadbeat wannabe spec’ers on the hook instead of someone who actually needed a place to live.

The spec’ers need to burn
The lenders need to burn
The Politicians need to be scared sleepless

So let it be written, so let it be done.

#193 Alistair McLaughlin on 07.12.17 at 10:26 am

#5 Sam the Sham on 07.11.17 at 5:10 pm
Instead of everyone panic selling their home, I think the average person will simply take their house off the market and wait to see how things sort out…….. Let’s not get carried away predicting a massive crash.

I’ve seen this argument again and again. There seems to exist this belief that homeowners themselves will choose if and when a crash happens. Since when does homeowner refusal to accept falling prices prevent prices from falling?

In fact, drastic decreases in sales go hand in hand with drastic reductions in price. Your refusal to sell will not prevent the market value of your home from tanking.

Some people need to sell. Divorce. Job loss. Job relocation. Business failure. Illness. Death. Houses sell for all kinds of reasons, not all of them voluntary. Of course, those homeowners who can hang on will. Those who can’t, sell at whatever the market will bear.

Maybe only two houses on your street will change hands each year instead of 10 or 12 . But those 2 comparables will determine the market price of every home on the street just as effectively.

#194 10 yr fixed on 07.12.17 at 10:27 am

Garth with 5 yr fixed mortgage in the 2.5 range and 10 yrs in the 3.3 range isn’t a 10 yr a no brainer seeing whats coming? Thanks

#195 NorthOf49 on 07.12.17 at 10:33 am

#164 Neutral Dave on 07.12.17 at 8:58 am

Dovish Comments from Yellen. BoC to hold rates today in shocker?
—————————————————-

Not today Dave, the hammer has fallen. No more coasting in neutral, time to put ‘er in drive.

#196 Game Over on 07.12.17 at 10:34 am

You know who the Porsche posers are when you see them in the winter driving their 911 Carrera covered in salt and they still got their Pilot Super Sports on. If you got that kind of money and you truly appreciate that car, you would have a winter beater.

Rates up!

#197 Yellen on 07.12.17 at 10:44 am

Fuels the markets today

It appears rates aren’t rising much

Preferred shares still a buy ?

#198 Dissident on 07.12.17 at 10:45 am

Ba ba boom. 0.75%

http://business.financialpost.com/news/economy/bank-of-canada-raises-rate-for-first-time-in-7-years/wcm/626f99ad-789b-4c77-a85d-d7a24ab8ff88

#199 Lillooet, BC on 07.12.17 at 11:14 am

#56 Tony on 07.11.17 at 6:46 pm
What if prices don’t crash and go higher by fall? There’s bidding wars again in woodbridge and homes are still selling for high

***

It would the first time in human history. In Woodbridge, yet. A miracle. — Garth
*************************

Like Garth’s witty response!

Have never been to Woodbridge. Is Woodbridge in Toronto similar to the west side in Vancouver?

#200 Asterix1 on 07.12.17 at 11:19 am

**********KABOOM**********

Next steps for GTA:

CORRECTION (Already happened)
CRASH (Happening in some areas of GTA)
CAPITULATION (Coming to same areas soon enough)

#201 n1tro on 07.12.17 at 11:23 am

@#26 The Technical Analyst, CSTA, CPD

It wasn’t a family that was overbidding on Derek’s house but a greedy realtor trying to flip. Either way, both are greedy and deserve the consequences. At the first sign of trouble, Derek should have settled with the buyer to keep some or all of the deposit as a penalty and relisted. The “law” is on Derek’s side but getting “justice” is a different story.

#202 n1tro on 07.12.17 at 11:30 am

3. Mortgage renewals. Anyone who bought in the last 2 years with 20% down or less have already lost their entire down payment and are de facto in underwater mortgage situation will be denied mortgage upon renewal on appraisal.” – Alex P

Coming from the clown who was laughing at the misery of both the seller and buyer a few days back with another real estate agent? Now you are a mortgage renewal expert?? That 3 month real estate course must be chalk full of knowledge.

#203 still learning on 07.12.17 at 11:41 am

I love today’s picture. I’m getting a total rise out of it on Facebook…

btw I kinda have to agree with Dan.t – BC is royally messed up – something has to be propping us up still…

#204 hmmm on 07.12.17 at 11:42 am

“In my view, the neutral level of the federal funds rate is likely to remain close to zero in real terms over the medium term,” Brainard said. “If that is the case, we would not have much more additional work to do on moving to a neutral stance.”

“I will want to monitor inflation developments carefully, and to move cautiously on further increases in the federal funds rate, so as to help guide inflation back up around our symmetric target,” she added.

…….

:)

#205 Dups on 07.12.17 at 11:49 am

So far the BOC rate increase did not do much to the CAD vs USD. Same with the stock indexes. Do not bet against the US of A.

#206 CJBob on 07.12.17 at 11:55 am

Looking forward to all the blog experts and a certain host who are going to claim to know with certainty if/when the next rate hike will be after this (and those who claim they knew this one was coming months ago).

Here’s a tip for you. No one knows. Not even the BOC knows – it depends on the data over the upcoming months.

With wildfires in BC, oil price down for AB and SK and real estate a shrinking portion of GDP over the coming months my GUESS is no further increase for a while as these factors all will cause a hit to GDP and job growth.

Admit you’re not certain. It’s good for your mind to be able to see both sides of any argument and to understand the future is not preordained.

#207 Victor V on 07.12.17 at 11:55 am

Canadian dollar spikes to 78 cents after interest rate hike

http://business.financialpost.com/news/economy/canadian-dollar-rallies-as-boc-hikes-interest-rate-for-the-first-time-in-7-years/wcm/896e8bea-b7b8-46bd-8bfe-7da4f1beb20d

#208 Long-Time Lurker on 07.12.17 at 12:06 pm

Janet Yellen changed her tune. US Fed policy reverses. Take note.

Did not happen. — Garth

#209 Fake News Again on 07.12.17 at 12:12 pm

0.25%

wow – wake me up when its up 1.5% in two years from now.

#210 CAD$ on 07.12.17 at 12:18 pm

where r the folks calling it to go as low as 65?

lol….can’t make this kind of stuff up.

#211 Ponzius Pilatus on 07.12.17 at 12:31 pm

Bring a blanket.
Yoga mat okay?

#212 Alistair McLaughlin on 07.12.17 at 12:31 pm

@ #190 TnT, you sound a lot like Derek. You think the legalities of dotted ‘i’s’ and crossed ‘t’s’ are iron-clad guarantors that a deal will go through. A legal agreement is nothing against ability to pay. You can’t squeeze blood from a stone, no matter how solid or enforceable the agreement. Derek should have recognized that sooner instead of writing to Garth to cry about his predicament.

I’m not a Millennial by the way (assuming that’s what you meant by “this generation”). I’m in my late forties. Nor am I a bleeding heart liberal. My heart never bleeds for the likes of Derek, who 3 months later is still crying, “But we had an AGREEMENT, wah!” Greedy fool sold to greedier fool and it went sideways for both of them. He held the hammer. He could have been flexible and at least tried to salvage the deal and most of his gains. Nope. He had an AGREEMENT! And down he goes with the ship. Likely end result? Bankruptcy for one set of fools, and a very expensive life lesson for the other.

And I shouldn’t have to explain this, but here it goes: I’m not saying Derek is greedy for accepting the highest bid. That was perfectly rational, in fact the only reasonable thing to do. His greediness was only evident later, when it prevented him from assessing accurately just how fast the market changed, and accepting that he needed to consider other options. He should have reacted more rationally and tried to make the deal work. That big lottery win of an offer is ancient history, regardless of his emotional attachment to the dollar figure he thought he was getting. The couple probably can’t get the financing, and certainly won’t get financing to pay off a big lawsuit. But if you feel sorry for him, you’re free to make an offer on his house to make him whole again. I hear it’s back on the market.

#213 bdwy sktrn on 07.12.17 at 12:37 pm

#204 Dups on 07.12.17 at 11:49 am
So far the BOC rate increase did not do much to the CAD vs USD. Same with the stock indexes. Do not bet against the US of A.
——————–
??????????
heading to 79 now as it explodes upward.

must be something to do with yellen moving the goalposts so no further us hikes are coming soon.

0 more in 2017
1 in 2018
1 in 2019

#214 bdwy sktrn on 07.12.17 at 12:38 pm

https://www.investing.com/currencies/cad-usd

uppa she goes.

#215 nubbers on 07.12.17 at 12:40 pm

So Derek expects his (admittedly stupid and possibly greedy) buyers to pay him ~1 million + interest, after tax, and for which they will get nothing. They would still have to pay for somewhere to live, and the estate agent is not going to be earning much for a few years.

I guess the buyers’ best option was to run away until the statute of limitations is up, and somehow, I don’t think they will be the only ones to do so.

The ironic thing about all this is that I’ll bet the value of the house corrects to less than the amount that Derek is suing them for.

#216 PokerCat on 07.12.17 at 12:46 pm

#73 Bob on 07.11.17 at 7:35 pm
So, now that the Great Housing Armageddon is upon us in the Great White North, what next for this blog?

Continue as is or change focus?

– Change focus.

I’m pretty sure there’s a yoga instructor under all that RE gloom.

Namaste Garth!!!!

#217 Victor V on 07.12.17 at 12:49 pm

#208 Fake News Again on 07.12.17 at 12:12 pm

0.25%

wow – wake me up when its up 1.5% in two years from now.

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

There are more than 700,000 Canadians who might be watching the next Bank of Canada decision very closely, because even a modest interest rate increase could push them over the financial edge.

A new study out Tuesday from credit agency TransUnion shows that of the 26 million credit-active Canadians in the country, 718,000 can’t absorb a 25-basis point increase or they won’t have enough cash flow to cover their debts. Raise rates one percentage point, something not likely to happen overnight, and 971,000 Canadians end up in a cash crunch.

http://business.financialpost.com/personal-finance/debt/it-wont-take-much-to-drive-canadian-borrowers-over-the-edge-new-study-says/wcm/afa376f5-784e-4773-a6b2-b920dbf38812

#218 TnT on 07.12.17 at 1:01 pm

#210 Alistair McLaughlin on 07.12.17 at 12:31 pm

So your argument is Derek’s contract with Wimp buyer should be forgiven because Wimp buyer decided after killing all other offers that they no longer want the house.

So I decide to buy your car in an auction, kill all other offers with highest bid then renege and your OK with that?

Where would you NOT be OK with this way of negotiating?

Our whole society is based on law and contracts – you want to rip them up too?

“Gold Star” generation is exactly your age bracket.

Everyone gets a Win sticker to make it all fair.

#219 Ogopogo on 07.12.17 at 1:01 pm

Rate raisin’ parties everywhere among blog dawgs and the cognoscenti. So much for the slack-jawed, lobotomized predictions of no rate increases this year, if ever.

“And so the tide begins to turn,” Mr. Porter said in a research note. “We would expect the next rate hike in October . . . and then a brief pause before some modest follow-up moves in 2018.”

https://www.theglobeandmail.com/report-on-business/economy/bank-of-canada-interest-rate-decision/article35662991/

Skid marks in realtors’ undergarments everywhere!

I’m laughing maniacally in my office right now. Sweet baby Jesus, amen!

#220 Capt. Serious on 07.12.17 at 1:03 pm

I thought rates couldn’t rise? The deplorables told me they’d never rise… Sad!

#221 Quebec is Great on 07.12.17 at 1:04 pm

#190, #192 You are exactly bang on.

#26 – The Technical Analyst, CSTA, CPD: You are either a troll or a moron.

#222 Tazi Bnu on 07.12.17 at 1:06 pm

#157 Incubus on 07.12.17 at 8:30 am
“The claimed damages amount to $1 million plus costs, and the defendants have until the end of the month to file a statement of defence. ”

They will fill for bankruptcy, this is their only escape.
_____________________________________________

Bankruptcy isn’t a magic wand that lets you just “forget about it.”
One, all your assets become subject to the whims of a Bankruptcy Trustee and the courts. They decide who gets paid what and how much you get to keep.They only have to make sure you have a simple place to live and can get to work.
Two, your credit rating is destroyed for seven years. You may lose your job if you deal with money, ie. a real estate agent, or a nice lady at a bank.
Three, Not all your debts are cleared through bankruptcy. If a debt occurred through fraud, it won’t be cleared. A real estate agent backing out of a real estate contract with no cause or alternative to mitigate damages, may be construed to say that they never intended to follow through with the contract as originally agreed to. This would be fraud.
So this couple could be screwed for a long time and most likely heading for divorce.

#223 n1tro on 07.12.17 at 1:12 pm

@#210 Alistair McLaughlin

Don’t mind TnT, she has blinders on.

TnT wrote…

“The bleeding heart wimps on this blog is the perfect example of why this generation of Canadians are such weak kneed push overs ripe for culture takeover….”

Doesn’t this play into what you want? You post a lot about FORCING change on people whether they want it or not because in your eyes it is for the good of mankind.

“Have fun asking your future overlords if they want any fries with that…..”

This is probably a reference to Trump being the next Hitler and being our overlord…but it’s all good if said overlord is George Soros right?

LoL!

#224 tkid on 07.12.17 at 1:14 pm

There go all the ‘they will never raise rates in Canada’ posts.

If you had a rate of 2.75% on a mortgage of $240,000, an increase of 0.25% would increase your payment from $1105 to $1136 monthly. Hardly worth fussing about, surely.

https://www.ratehub.ca/mortgage-payment-calculator?gclid=EAIaIQobChMIm5zViJ6E1QIVDGt-Ch3f3wZ8EAAYAiAAEgJaI_D_BwE if you want to plug your own numbers in.

#225 Wrk.dover on 07.12.17 at 1:15 pm

#177 Alistair McLaughlin on 07.12.17 at 9:59 am

As for the buyer, boo hoo. A realtor who believed her own BS and drank her own Kool-Aid and bought right at the top of the bubble, almost to the day. “Never get high on your own supply.” Most drug dealers know that. Why not realtors?

—————————————————-

Best comment since the story broke.
Worth repeating.
Anyone that watched Miami Vice knows this one too.

#226 A Reply to #201 n1tro on 07.12.17 at 1:17 pm

“That … real estate course must be chock-full or chuck-full or choke-full (but not chalk-full) of knowledge.”

#227 Tazi Bnu on 07.12.17 at 1:22 pm

#210 Alistair McLaughlin on 07.12.17 at 12:31 pm
The couple probably can’t get the financing, and certainly won’t get financing to pay off a big lawsuit.
_____________________________________________

It was never said if the couple couldn’t get financing. If they never disclosed that or any other justifiable reason to the seller; the seller is justified in trying to enforce the contract. Having cold feet is not reason enough for an adult to walk away from contract responsibilities without giving compensations, like finding another buyer to take their place in the contract.

If we live in your world the seller would have the right to ask the buyer for more money, and if they didn’t pay up, to not follow through with the contract.

The buyer was a real estate agent and should’ve known better.

#228 bdwy sktrn on 07.12.17 at 1:24 pm

need a slice of BC paradise?

try this…250k for 3.8ac oceanfront

https://www.realtor.ca/Residential/Vacant-Land/18363154/Lot-5-KEATS-ISLAND-BEACH-Keats-Island-British-Columbia-V0N1V0

possibly the best views anywhere on the south coast
(realtor used a pic of a different lot!)

it takes under an hour from van.
pure nature/wild/ocean , so close yet isolated. you can leave your cabin/boats/tools unlocked, the (mostly rich) neighbours are the only ones who will ever walk by.

bonus – on the lee side of the island – calmest water in lower howe sound for a dock/swim/ski/etc.
also on the water taxi route.

you supply the boat and chainsaw. 20-25 min from horseshoebay (where moorage is relatively cheap)

———–

#229 Smartalox on 07.12.17 at 1:27 pm

B of C rates go up 0.25%

What does that mean for the BofC 5-year fixed mortgage rate that people are supposed to qualify at under the stress-test conditions (4.61%) when attempting to qualify for insured, and soon enough, uninsured mortgages?

Does that rate go up to 4.86% now?

I’d like to know, I have some spreadsheets to update.

Thanks!

#230 maxx on 07.12.17 at 1:30 pm

#57 Nonplused on 07.11.17 at 6:50 pm

…..”This is why so many households now have to borrow to pay for Johnny’s soccer fees and the gas to get there. How long can that be sustainable? The answer is that most people just don’t ask. They keep doing it as long as they have to in the hopes a solution will present itself at some point in the future. But tomorrow never comes.”

Guess they learned that one from the cb’s, LOL!

#231 Kim on 07.12.17 at 1:33 pm

#209 CAD$ on 07.12.17 at 12:18 pm
where r the folks calling it to go as low as 65?

lol….can’t make this kind of stuff up.


We’re still here. Don’t know about the others but we all said that there were two scenarios: either rates go up (and loonie goes up), or rates diverge from US and loonie goes down. Either way we are screwed. It seems like the first scenario is playing out. tick tock tick tock.

#232 Victor V on 07.12.17 at 1:34 pm

RBC follows Bank of Canada with quarter point hike to prime lending rate

http://business.financialpost.com/news/fp-street/rbc-raises-prime-rate-by-25-basis-points-following-rate-hike-from-central-bank/wcm/2531d640-21b5-4bb9-9835-8e848dd6cd73

#233 The markets rejoice as... on 07.12.17 at 1:42 pm

Yellem is for 2017. Obviously trending cautiously …here we thought it’s all grand south of the border .NOT

#234 CH on 07.12.17 at 1:49 pm

cant wait for Vancouver correction to start. Vancouver correction will be BRUTAL b/c Chinese buyers are barely 5% of market, right Garth?

#235 CJBob on 07.12.17 at 1:57 pm

#204 Dups on 07.12.17 at 11:49 am
So far the BOC rate increase did not do much to the CAD vs USD. Same with the stock indexes. Do not bet against the US of A.
_________________
Wow, that was premature. Hopefully that’s not a problem for you on a regular basis. Currently up 1.20 in just a few hours.

#236 James on 07.12.17 at 2:00 pm

It could be worse?
How coincidental a confession!
…………………………………………………..
Dear God, I really, really need some help right now. Please make the Russian hacking and assistance I received from them go away now.

http://www.cnn.com/2017/07/12/politics/trump-prayer-photo/index.html

#237 Phil on 07.12.17 at 2:01 pm

Do we know what the typical mortgage size is for Toronto semi-detached houses? On the radio, they say that on a 550k mortgage it adds $120 per month to the mortgage.

Would love to see a breakdown of mortgage sizes in Toronto:
– Under 200k
– Between 200-500k
– Over 500k

#238 MF on 07.12.17 at 2:05 pm

Congratulations to the BoC for doing the right thing (for once).

The horror of having cheaper food and goods with a strong currency.

MF

#239 bdwy sktrn on 07.12.17 at 2:08 pm

https://www.realtor.ca/Residential/Single-Family/18406660/2021-GRAVELEY-STREET-Vancouver-British-Columbia-V5L3B6

assessment 1.53
ask 2.0 mil

we finally got a new listing in the hood!
i give it 2 weeks to sell. (times are tough these days)
it’s a very nicely redone bung on 33′ lot.

i believe it sold at 1.7 a few years ago (which was unbelievable at the time)

#240 Yuus bin Haad on 07.12.17 at 2:32 pm

Borrow? Sorry, we meant “save”.

#241 SimplyPut7 on 07.12.17 at 2:35 pm

#222 tkid on 07.12.17 at 1:14 pm

Nothing in the Toronto area sells for that and it is not because the city is filled with people who make a lot of money.

Time will tell how badly did the mortgage brokers fudge those applications to get people who could not handle a few rate hikes into very expensive homes.

RBC already hiked their prime rate.

http://www.cbc.ca/news/business/prime-interest-rate-increases-1.4201403

#242 Dee on 07.12.17 at 2:48 pm

Wouldnt people selling re and going into cdn $ actually strengthen the cdn$? Maybe using the u.s experience is incorrect. I dont know

#243 TnT on 07.12.17 at 2:51 pm

#221 n1tro on 07.12.17 at 1:12 pm

Funny… you thought I was female when I am male.

This explains a lot from your past rebuttals and how it obviously affected your manly ego.

My suggestion is to take up reading, this will help get your blinders lifted.

Cheers!

#244 SilverSon on 07.12.17 at 2:56 pm

#222 tkid on 07.12.17 at 1:14 pm

Sure, it’s no problem if your mortgage is that small. But a lot of people that bought in ON and BC recently don’t have a mortgage as small as $240,000. Try 5 or 6 times that with HELOCs rolled into the equation. Thus the monthly increases for those people would be over $200 which combined with increases in cost of food, property tax, energy, services and whatnot will push a many of them over the edge, especially those that are already within that $130 of not being able to pay their monthly bills.

It only takes a few small chunks of ice to fall in order to start an avalanche.

#245 poly on 07.12.17 at 3:06 pm

We currently only have Derek’s side of the story. It will be interesting to see what happens. Derek has money incoming with the potential 1.6M offer to find out what the real story is.

#246 Stan Broock on 07.12.17 at 3:14 pm

there are too options here:

1. either In his eagerness to earn a bonus Poloz probably miss-reported to his bosses at BIS on how much Canadians can be squeezed further.

2. it is time to further extend the federal debt load to max so the time is now to intentionally flash crash the whole ponzi scheme and have the feds borrow further 300-400 billions to cover CHMC losses/to be paid by future generations.

No explanation otherwise for the Poloz’s idiotic behavior lately.

He is just the puppet on a string.

#247 n1tro on 07.12.17 at 3:18 pm

@TnT

“Funny… you thought I was female when I am male.”

Just because you are biologically male doesn’t make your gender to be male as per forward thinking liberals would put it.

So my statement still stands.

#248 rates and misconceptions on 07.12.17 at 3:21 pm

There go all the ‘they will never raise rates in Canada’ posts.
If you had a rate of 2.75% on a mortgage of $240,000, an increase of 0.25% would increase your payment from $1105 to $1136 monthly. Hardly worth fussing about, surely.
https://www.ratehub.ca/mortgage-payment-calculator?gclid=EAIaIQobChMIm5zViJ6E1QIVDGt-Ch3f3wZ8EAAYAiAAEgJaI_D_BwE if you want to plug your own numbers in.

****************

banks don’t necessarily pass on every increase 1:1
they may juice it up higher as they see fit

what if we’re looking at 3x increases or more?

another .5 on top of the .25 today is a double from the .75 we are at now

numbers, numbers and don’t forget emotions…

#249 Stan Broock on 07.12.17 at 3:21 pm

If Poloz simply disappears from the public scene in 2 – 3 years after resigning from BOC that means his services were well appreciated.

Otherwise he could suffer a sudden hearth attack. i.e. follow in the footsteps of the big Jim F.

#250 Mark on 07.12.17 at 3:29 pm

Poloz probably made a giant mistake here, as it is almost a certainty that CPI YoY will be at or below zero shortly with the sort of currency appreciation and demand truncation caused by the interest rate hike.

The Bank of Canada claims that they’re setting monetary policy not for the moment, but rather, for 12-18 months out. But in light of the acceleration towards deflation, its a wonder if Poloz really even understands the battle he’s fighting (or even up against!).

#251 Steveo on 07.12.17 at 3:30 pm

Mortgage renewals. Anyone who bought in the last 2 years with 20% down or less have already lost their entire down payment and are de facto in underwater mortgage situation will be denied mortgage upon renewal on appraisal.”

Umm, I don’t think so…some places have risen in value 40-50% during this time frame..

#252 Tony on 07.12.17 at 3:39 pm

Re: #232 CH on 07.12.17 at 1:49 pm

Probably more like not 5 percent of the market instead of just 5 percent of the market. All Canadians can do is pray the NDP and Green Party gets elected and turns the Chinese market into roadkill.

#253 Tony on 07.12.17 at 3:42 pm

Re: #230 Victor V on 07.12.17 at 1:34 pm

A half a point would have been a nice surprise to correct the two mistakes in 2015.

#254 Wrk.dover on 07.12.17 at 3:48 pm

Attention Snowbirds:

Don’t post on here about how expensive the US $ is next winter, buy now, this week, and save big!

#255 Alistair McLaughlin on 07.12.17 at 3:50 pm

@#221 n1tro, I see what you mean. I was going to reply to TnT’s latest unhinged response, but why bother? She intentionally misreads my posts in order to create straw man arguments that she can then heroically knock down, presumably in defense of some noble principle known only to her. There’s clearly something not quite right with her.

Consider that I said this of the buyer:

As for the buyer, boo hoo. A realtor who believed her own BS and drank her own Kool-Aid and bought right at the top of the bubble, almost to the day. “Never get high on your own supply.” Most drug dealers know that. Why not realtors?

But apparently I am arguing that the buyer should be handed a gold star and forgiven! You can’t fix that kind of psychosis. So I won’t try.

#256 Victor V on 07.12.17 at 3:50 pm

BMO, BNS, TD and CIBC join RBC to raise their prime rates today.

http://www.bnn.ca/three-of-big-five-banks-up-prime-mortgage-rates-1.803123

#257 SPY vs TSX on 07.12.17 at 3:58 pm

did someone say decrease US weighting?…..:)

#258 Happy Housing Crash Everyone! on 07.12.17 at 3:58 pm

I see people ragging on Derek as if he is to blame for trying to sell for top dollar . Yes he was greedy but all sellers try to be greedy. The real criminal is the realtor scumbag for walking. These realtors DO NOT BELIEVE THEIR OWN LIES. That’s what makes realtors the scum of the earth shyster POGarbage, who should suffer for a thousand years. Realtors should be jailed for their financial crimes and rolls in creating the biggest housing bubble in Canadian history. You had to have been even more of a shyster then the past realtor shysters to have created a bubble this big. I have other words to describe realtor scum but Garth would have to delete my posts.

You know we are in a housing crash when even realtors want out of the housing bubble. Happy Housing Crash Everyone! :-)

#259 Mark on 07.12.17 at 4:12 pm

“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.

The big question now is just how negative does CPI have to go before Poloz realizes that a mistake was made today? How high does the CAD$ have to go until he’s back at the table with a rate *cut*, and maybe a second one thrown in for good measure to reverse this mistake?

With the Canadian economy so incredibly weak, its going to be a real uphill battle to find something to take up the slack with RE decelerating so quickly.

You lost. Please cringe away with dignity. — Garth

#260 TCContrarian on 07.12.17 at 4:21 pm

#57 Nonplused on 07.11.17 at 6:50 pm

—————————————————————–

Thank you! I appreciate your insights here.

TCC

#261 InvestorsFriend on 07.12.17 at 4:26 pm

Selling Real Estate Will NOt Impact the Canadian Dollar

#240 Dee on 07.12.17 at 2:48 pm asked:

Wouldnt people selling re and going into cdn $ actually strengthen the cdn$? Maybe using the u.s experience is incorrect. I dont know

*****************************************
One Canadian selling real estate to another does not create any demand for Canadian dollars.

If Canadian real estate is sold to foreign buyers that would create demand for the Canadian dollar on foreign exchange markets.

Imagine a sale of a fully paid for $ million home to someone who will finance the home.

Step one. The buyer will contract with a bank who will create a mortgage loan due from the buyer and a deposit account payable to the customer. This will create new money. The bank will need to have sufficient equity capital to do this and will need sufficient cash on hand (because the depoist will soon be withdrawn to buy the house) but that is seldom an issue.

Step two the seller gets the cash (a cheque) and deposits in his own bank. Two parties have increased cash as a result of this. The seller’s bank and the seller. The buyer’s bank has increased its loan assets and decreased its cash asset. No party’s net worth has changed here (setting aside transaction costs). The sellers bank’s assets and liabilities have both increased.

The seller may spend the money on anything he or she wants and incremental this is positive for consumer spending.

This could add to inflation but should not change the exchange value of the Canadian dollar.

#262 Looney Baloney on 07.12.17 at 4:27 pm

#88 AI reminds me of Alan Reed from the Beverly hillbillies. I can just about picture him calling Mr. G “Big Daddy” lol
https://m.youtube.com/watch?v=geJYceRXvVI

#263 Asterix1 on 07.12.17 at 4:27 pm

#56 Tony on 07.11.17 at 6:46 pm
There’s bidding wars again in woodbridge and homes are still selling for high prices just not as quick. I don’t see a significant correction on the horizon. My realtor said people are buying again ahead of rate increase and stress test changes. IT NEVER ENDS. PRICES KEEP GOING UP NO MATTER WHAT. ITS THE NEW NORMAL GARTH. JUST ACCEPT IT.
____________________________________________

I checked ZOLO:

West Woodbridge =Down -26% (Average) and -31% (Median) since the highs.

East Woodbridge = Down -16% (Average) and -18% (Median) since the highs.

Sales are also dropping like flies and inventory is way up.

PS: No need to look in the horizon, look in back of you, a correction has already happened. Might want to look in the horizon for the coming crash.

https://www.zolo.ca/vaughan-real-estate/west-woodbridge/trends
https://www.zolo.ca/vaughan-real-estate/east-woodbridge/trends

#264 InvestorsFriend on 07.12.17 at 4:32 pm

Can’t he be both?

#26 – The Technical Analyst, CSTA, CPD: You are either a troll or a moron.

*********************************
Or both. But I don’t like the term troll as it has no real agreed meaning. Mostly it just means you disagree with the content.

Is everyone baiting others for a response a troll? If so a lot of us are or have been trolls.

#265 Guy in Calgary on 07.12.17 at 4:39 pm

With regards to renewals, if you have been paying A-1 on your mortgage, having your mortgage renewed should not be an issue. It would only be tricky if you wanted to switch banks and had to qualify again. All this talk of people getting screwed at renewal is completely false.

#266 SilverSon on 07.12.17 at 4:47 pm

#249 Steveo on 07.12.17 at 3:30 pm

“Umm, I don’t think so…some places have risen in value 40-50% during this time frame..”

A $500k house rising 40% is worth $700k. A $700k house falling 20% is worth $560k. Back out RE fees @ $560k sell price and you can see how equity from a 20% down payment can be wiped out by a 20% drop in value. It’s called math.

#267 Fed-up on 07.12.17 at 4:53 pm

The last time the Fed raised rates, the USD did nothing just prior and then lost a cent the day they actually raised it, ridiculous. Our worthless loonie has had a 5 cent ride in the past month (all over the roomer of a rate hike and BS economic and jobs numbers) and pops over a cent the day they raise rates 1 measly time when there was a 98% expectation they would do so. You’d think it was priced in and then some.

The money markets are a sad joke.

#268 SilverSon on 07.12.17 at 5:04 pm

#263 SilverSon on 07.12.17 at 4:47 pm

Further to my last comment, I wanted to highlight that the numbers I used were just for illustration purposes. I realize that if someone bought at $500k and put 20% down, they’d have to net out at $400k upon sale to have lost the whole down-payment. A 20% reduction in value after a 40% increase wouldn’t get quite that low obviously.

Nevertheless, my point was that expressing a change in a value as a percentage is always relative to the base value. So when a number goes up 50% it only has to drop 33% to end up back at the same number. Or if it goes up 40% it only has to drop to 28% to end up at the same number. And then there’s closing costs to consider.

#269 MarketPundit on 07.12.17 at 5:17 pm

#265 Fed-up
I, totally, agree with on the money market being an absolute joke. For any currency to fluctuate like this in such a short period of time is completely insane.
But this markets can be moved quite easily too. All it took for BoC to announce a possible rate hike at, interestingly, the same time when the market was most bearish (rightfully so, imo) with a record number short positions for CAD. So, what we got is a short squeeze. This is taking place everywhere now a days. Oil is one great example of such market manipulation.

#270 jess on 07.12.17 at 5:25 pm

The FHFA penalty relates to the way that $32bn of mortgages were packaged up and sold as residential mortgage-backed securities (RMBS) between 2005 and 2007, when RBS was the largest non-US bank engaged in this practice

Ross McEwan, chief executive of RBS, said: “This settlement is a stark reminder of what happened to this bank before the financial crisis, and the heavy price paid for its pursuit of global ambitions. This bank and British taxpayers have paid a high price for these poor decisions.

RBS to pay $5.5bn fine over US loan misselling scandal

Settlement with Federal Housing Finance Agency is part of multibillion-pound penalty it faces from US authorities

https://www.theguardian.com/business/2017/jul/12/rbs-fine-us-loan-misselling-scandal-federal-housing-finance-agency

#271 Renter's Revenge! on 07.12.17 at 5:43 pm

TIL that “dyslexia” is an anagram for “daily sex”

#272 TnT on 07.12.17 at 5:50 pm

#253 Alistair McLaughlin on 07.12.17 at 3:50 pm

This comment cowers from the obvious statement you made with forgiving the buyer.

Weak sauce bro…

My points at #190 and #216 speak for themselves.

#273 Reximus on 07.12.17 at 5:50 pm

So, what we got is a short squeeze. This is taking place everywhere now a days. Oil is one great example of such market manipulation.

====

Geez louise, that’s brilliant…a basic market move is now’manipulation’? By what imaginary spook, Soros?

#274 Raging Ranter on 07.12.17 at 6:00 pm

@ Fed up, so money markets are a “sad joke” because they don’t move in rational and predictable ways that allow you to anticipate them in advance so you can make money? What market in history has ever behaved like that? Here’s the thing; if they really “made sense” to you, they’d make sense to everyone else too and you still wouldn’t make any money.

#275 Mark on 07.12.17 at 6:11 pm

“With regards to renewals, if you have been paying A-1 on your mortgage, having your mortgage renewed should not be an issue.”

At the posted rate, sure. But in a minimal or negative equity situation, don’t expect to get one of those highly discounted rates that one has become accustomed to.

A major rate comparison shopping site says 2.39% fixed for 5 years is the best available today. TD’s posted rate is 4.64% over that term. That’s an extraordinary almost doubling of the interest servicing expense simply if a borrower is backed into the corner and unable to shop around. In an economy that is likely in a mild deflation at such a point, that’s a very significant real return for the lender.

#276 Steveo on 07.12.17 at 6:22 pm

#264 SilverSon on 07.12.17 at 4:47 pm

Better do your ‘Math’ again bud

#277 Mark on 07.12.17 at 6:25 pm

“One Canadian selling real estate to another does not create any demand for Canadian dollars.”

Sort of. You described the math of the initial loan, which is basically how I would have done it. However, in the aftermath of writing the loan, interest must be paid on the loan. Thus, there is demand by the borrower to obtain CAD$ to pay the interest. Usually a borrower will trade his labour for CAD$ to come up with the CAD$ to pay the interest.

When the real interest rate on the actual obligation is low, there’s not a lot of reason to trade a lot of labour for CAD$ to pay the interest. However, if the real interest rate rises, due to expanding risk premia or deflation (for instance), then there is a much greater demand for CAD$ to pay the interest on such obligation. This demand may come from a person offering more of their labour into the market at a similar or lower price (which, if such occurs systemically, can deflate the entire labour market!). Or this demand may come from a person cutting back on their sales of CAD$ to fund the purchase of other goods and services including imported stuff like vacations.

Additionally, in the case where equity declines due to falling prices on an asset, lenders have the tendency to accelerate the required repayments into equity, further amplifying demand for CAD$ to repay principal, and consequently, lessening demand on foreign currencies like the USD$ for discretionary imports.

This is why a RE decline in Canada and the expansion of real interest rates as applicable specifically to RE and consumer-backed loans will act as ‘rocket fuel’ for the value of the Canadian dollar. Not to harp on the same point too often, but the BoC doesn’t appear to really understand the battle they’re up against here, in fighting deflation.

#278 Alex k on 07.12.17 at 6:40 pm

#274 Steveo on 07.12.17 at 6:22PM

You obviously never took math, did you now?
Perhaps changing batteries in your calculator may help, eh

#279 SimplyPut7 on 07.12.17 at 6:53 pm

#261 Asterix1 on 07.12.17 at 4:27 pm

Thanks for the update!

—————————

#56 Tony on 07.11.17 at 6:46 pm

I don’t know why realtors lie so much, we have access to so much more data now than we did a few years ago. We can easily tell (and see in our neighbourhoods) when they are not telling us the truth.

As soon as this housing bubble starts to unravel more, I’m sure access to sold prices and listing history data will be readily available like it is in Nova Scotia on viewpoint.ca and in the US on sites such as Zillow.

More rate hikes are coming and the banks are all happy about it.

http://www.bnn.ca/video/more-boc-rate-hikes-likely-this-year-economist~1165840

#280 Fed-up on 07.12.17 at 8:13 pm

#272 Raging Ranter on 07.12.17 at 6:00 pm
@ Fed up, so money markets are a “sad joke” because they don’t move in rational and predictable ways that allow you to anticipate them in advance so you can make money? What market in history has ever behaved like that? Here’s the thing; if they really “made sense” to you, they’d make sense to everyone else too and you still wouldn’t make any money.

—————————————————————–

Chill out dude, was just making a point and most people who don’t have your ummm ‘temperament” would agree . Sounds like rent isn’t the only thing that gets you going.

#281 AAA on 07.12.17 at 8:22 pm

Derek also says it’s “seriously misinformed” for people to think what happened in the US when the housing market ate the middle class will take place here.
======================
That Derek guy is funny. The crash is going to eat the Canadian middle class, the Canadian Stock Market, and the Canadian economy too! It’s gonna be a barrel of laughs!

#282 maxx on 07.12.17 at 8:51 pm

#119 mathman on 07.11.17 at 11:05 pm

“Rates rise = cash crunch

the first to go are the toys – check Kijjii listings for boats, quads, expensive bikes etc.”…….

Agreed, but also check second-hand shops for super bargains. Financial stress causes break-ups I’m afraid and sometimes the last one out of the pile of bricks shoves a pile of great stuff in bags to give to charity. True gold mines.
3 weeks ago, I scored 3, yes 3, CASIO G-Shock Titanium Frogman watches……for $1.75 apiece, no tax. Didn’t even need batteries. Mind blowing.

Sad, but happens on a very regular basis.