Buckle up

For weeks there was little doubt rates would rise Wednesday. The poohbahs at the Bank of Canada did everything but send out a Tweet announcing it. They’ve wanted to start plumping the cost of money for at least a year, but needed to wait for the economy to buck up. The fact so many people on this pathetic blog and elsewhere said rates would never rise again, “because nobody can afford it” should give an indication of how many oxen are about to be gored. Wear your hip waders.

Here are three things to ponder. First, the yield on Government of Canada five-year bonds…

So much for all those wasted comments about the bond market being at odds with the central bank. Yields on government debt have soared and bond prices have crumbled. In fact the yield on two-year Canada bonds has surged more than those of any other developed country. Why? Because we’re now on a tightening path that’s expected to last for years.

By the way, this is where mortgages are priced. Not by the government, not by the Bank of Canada and not even by the lenders. Instead, it’s the bond market that dictates what people pay for fixed rate loans. So, that chart tells you why they went up last week, and why there’s more to come.

Second fact to realize is this little itsy, quarter-point rate bump signals the end of an era of emergency rates that people started to think was normal. It’s wasn’t. Nor are bidding wars, bully offers, blind auctions or rock star realtors.

Canada is the second G7 country (after that one run by deporables) to embark on a course of higher interest rates. That has led to speculation central banks globally will start backing away from the ridiculously-cheap money and Kardashian-sized stimulus that’s characterized the world since 2009. No other country’s monetary policy is more joined at the hip with that of the US than Canada. As this blog has reminded routinely, over 90% of the time our bond market follows America’s, as does our rate policy. It’s not different now.

So expect more. Like the economists at Scotiabank and a bunch of their Bay Street colleagues who see another hike this year, one more in the Spring and probably several after that. Meanwhile the US Fed indicated Wednesday that nothing’s changed – a slow and steady return to normal rates is the path ahead.

Third, what’s the impact?

Immediately the bank prime rose to 2.95%, and most secured lines of credit jumped to 3.45%. Variable-rate mortgages increased and fixed-rate home loans already plumped late last week. This may cause some buyers with pre-approved mortgages to make offers before their deals expire, but it’ll end up simply scaring most off. There’s no way to put lipstick on this pig. What happened Wednesday will help pooch the market.

If you need any further proof, here it is:

“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.”

Yes, rates are going up 1%. We should be there by this time next year, unless the economy starts to tank. As stated here a few weeks ago, 2.5% five-year mortgages are so gone. Even HSBC with its predatory 2.36% offering has seriously started to backtrack. Now the loan’s available only for small-dollar deals. Soon, extinct. Over the course of the next two or three years millions of people will be renewing their cheapo mortgages for more than they imagined on houses that are worth less. That sucks.

The only surprising thing is that anyone should be surprised. The 2008-9 credit crisis was a once-in-a-generation event. Rates crashed to rescue the world. Now it’s over.

Here, this may help…

239 comments ↓

#1 Frank on 07.12.17 at 6:22 pm

Yes, rates are going up 1%. We should be there by this time next year, unless the economy starts to tank.

If rates go up the economy will tank. If the economy tanks rates won’t go up.

Sounds like a chicken and egg scenario.

Of course a 100 basis point increase will not tank the economy. Maybe just you. — Garth

#2 GeniusMoney on 07.12.17 at 6:24 pm

Meanwhile, during Yellen’s possible last congressional hearing today… (don’t blink in last 2 seconds)

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

#3 HoweStreet.com on 07.12.17 at 6:27 pm

Ross Kay on HoweStreet.com Radio:
Could 27% of Canada Mortgage Holders Be In Over Their Heads?
Why Real Estate Board stats are so misleading.

http://www.howestreet.com/2017/07/10/canada-mortgage-holders-over-their-heads/

#4 Happy Housing Crash Everyone! on 07.12.17 at 6:27 pm

rates will go up and up and up while BOC will say bla bla bla just like they did on the way down. Happy Housing Crash Everyone! :-)

#5 I'M NOT POLOZ on 07.12.17 at 6:29 pm

Did Trump threaten Poloz or did he flirt with Carolyn Wilkins assuring her that even if she was 40 years younger, and 40 years older, he will still date her?

It was only in May that Poloz was upset at a 72-cent Loonie because he wanted it lower to boost his exports.

Will housing crash in Toronto and Vancouver now? Poloz is one unpredictable Conservative.

#6 Still Employed in AB on 07.12.17 at 6:33 pm

I guess rates went up for everyone but me. Got an offer good till Labour Day from [email protected] to lock in my unsecured line of credit at 2.99%…yes 2.99% not prime+2.99% LETS KEEP THIS PARTY GOING!!!

#7 Happy Housing Crash Everyone! on 07.12.17 at 6:34 pm

I am loving the financial screams from maxed out speculators and out of work Realtors. I am not including the maxed out screams from over their heads home owners. Sometimes I can’t even hear myself think. We will see and hear even more screams every rate hike as buyer pull back in fear now. Bye Bye housing bubble. Sorry realtors you can’t even collect EI. HAPPY Happy Housing Crash Everyone! :-)

#8 Ian on 07.12.17 at 6:35 pm

Happy Bank of Canada Day dogs!!! The Plozzer and the Wilko have struck!!! Four more raises coming

#9 crossbordershopper on 07.12.17 at 6:36 pm

rates inching higher will be a higher cost of capital, reduce speculation and bring sanity to a previous overheated marketplace. As things go, things overshoot, i think people have been spinning their wheels for years now. I see people who owe me like a few hundred bucks having to wait till payday, i am thinking payday? next friday he gets paid and thats when i will get paid. I thought, what goes through peoples heads everyday as they drive to work with this crazy wheel their in, working to pay bills. the stress must be crazy. Like no room on their credit card etc, no emergency savings, no nothing, no rrsp investments, no nothing, they get paid next friday and my little emergency thing that came up will be paid up then. Why do people stay in this country and live like this. The employers and bankers etc have truely created a debt slave, who would of thought. Pretty smart people.

#10 Fran Deck Jr on 07.12.17 at 6:37 pm

The experts are predicting an epic meltdown of seismic proportions …

http://www.zerohedge.com/news/2017-07-12/canada-serious-trouble-again-and-time-its-real

#11 Kurt on 07.12.17 at 6:38 pm

Awww! They’re so cute!

#12 Sam the Sham on 07.12.17 at 6:38 pm

Great pic!! Labrador retrievers are the best dogs in the world, bar none!!

#13 paul on 07.12.17 at 6:38 pm

Well this one finally sold,

W3830410
7 Dalbeattie Ave

[municipality]:Toronto

[zip]:M9N2Y4
Sold:$792,000
List:$799,000

#14 Sugarlips on 07.12.17 at 6:39 pm

Well played Garth congrats.

Your thoughts on the other G7 countries, are they all heading up 100 basis points in the next year or more also?

#15 Bassybaby on 07.12.17 at 6:39 pm

Garth, great guidance on the rate increase.
Canada will raise rates because our economy has recovered.
The FED will rise rates to normalize their rates. Their economy hasn’t recovered. But what would happen if they have to chase the US equity market by rising rates to slow the equities increase. The US equity markets are not letting up.

#16 Reximus on 07.12.17 at 6:40 pm

Uh oh (again)

“Canadian home prices rose in June as the cities of Toronto and Hamilton led the way with record increases despite provincial government efforts to rein in demand in the hot markets, data showed on Wednesday.”

https://www.theglobeandmail.com/real-estate/the-market/canadian-home-prices-rise-in-june-as-toronto-keeps-climbing/article35663107/

#17 Fake News Again on 07.12.17 at 6:42 pm

Wake me up in 2 years when raising rates finally starts to have some effect.

#18 Fish on 07.12.17 at 6:44 pm

Garth, it does VERY MUCH help Thankyou

#19 Debtslavecreator on 07.12.17 at 6:45 pm

Frank- hold that thought about the rates going lower if the economy tanks …
By the early 2020s we may very well see rising nominal and real rates as the economy stays depressed
Watch Europe then Japan from late this year through to 2020
If the euro economy tanks and the rates spike up just as 2010-2012 then you know
Rates can and do rise sharply when a recession leads to heavily indebted govts and corporations to default or leave that impression on the bond market and the loss of confidence drives capital away from bonds
Question your assumptions
Rates can and have risen in the past during tough times

#20 TortyPapa on 07.12.17 at 6:46 pm

1% on a 1 million dollar mortgage is an extra $10,000. Just POOF! annually. Doesn’t seem like a lot until you work out that is $10,000 after tax!!!!! I assume that’s what most are owing on a townhouse here in Vancouver.

#21 espressobob on 07.12.17 at 6:47 pm

Rate reset prefs like ZPR are showing signs of serious upside. Glad I bought me some. Still buying more.

Fear can be a wonderful friend for those that back up the truck when nobody else would.

#22 Guy in Calgary on 07.12.17 at 6:48 pm

Blend and extend your existing mortgage and convert your HELOC into a fixed mortgage while you still have equity. That’s what everyone here is doing. There you’ll be fine for 5 years.

The over extended will be squished, the specs will be crushed, the realtors will slow down. If you bought within your means and have a long term plan, it’s business as usual. As with all things in life balance is key.

If you rent in the GTA and affordability is preventing you from entering the market, that is unlikely to change for a decent amount of time. Even with these recent declines, T.O houses are still up 10% on the year. Probably a sharp correction to say, mid 2016 levels then a slow melt from there. The market will adjust and people will go about their lives. People on this blog thought it was too expensive to buy in 2014 as there was a bubble forming and now it is 2017 and we expect houses to go down below 2014 levels? It is possible but it will take a long time in my opinion since house values are sticky.

Lastly, as I see this posted here quite often, if you’ve paid your mortgage as agreed, renewing the mortgage with your existing bank should not be an issue. If you are underwater and have been delinquent, well, that’s a different story. If you want to switch banks, be aware you’ll need an appraisal.

Should be interesting to see what happens but there is more to life.

#23 mitzerboy aka queencitykidd on 07.12.17 at 6:48 pm

that pic is why i like most dogs over some people

#24 Lefty on 07.12.17 at 6:48 pm

“Canada is in serious trouble”, again

http://www.zerohedge.com/news/2017-07-12/canada-serious-trouble-again-and-time-its-real

#25 n1tro on 07.12.17 at 6:50 pm

I’m shorting the CAD here. Too fast of a rise in too short of a period. I wonder if people long the CAD know of our housing bubble. Should be interesting.

#26 Pete on 07.12.17 at 6:51 pm

Of course a 100 basis point increase will not tank the economy. Maybe just you. — Garth

Hi, Garth, can you give me one example before in history where a huge housing bubble burst, but the economy is doing perfectly fine?

#27 Chico on 07.12.17 at 6:51 pm

I want the one on the left…no…the one on the right…no…the one on the left…no…I’LL TAKE THEM BOTH!!!!!!!!!!!!!

#28 FOUR FINGERS WATSON on 07.12.17 at 6:51 pm

Now now Garth, let’s not panic the herd, we don’t want to start a stampede. I know it’s hard for u not to chortle over the rate hike but it is tiny and won’t make a difference. If rates ever get to 1% that will give The Ploz room to cut again when the economy crashes. Light ’em up folks, smoke ’em if ya got ’em, enjoy the summer.

#29 broader mind on 07.12.17 at 6:52 pm

Imagine the good old day’s when you could make 10% on a safe fixed income portfolio. That’s something to look forward to. Can’t wait. Only those with cash need apply.

You will not live that long. — Garth

#30 JustMe on 07.12.17 at 6:52 pm

Detached Real Estate Prices Are Falling In These 5 Areas Of Greater Vancouver

Numbers from the Real Estate Board of Greater Vancouver (REBGV) show that some suburbs are showing year-over-year declines. Benchmark prices represent the price of a typical home, so we’re going to use these.

Ladner – 6.4% decline from the same time last year

West Vancouver – 4.4% decline from the year prior, 7% decline from peak

Tsawwassen – 4.1% decline from the same time last year

Burnaby North – 3.5% decline from the same month last year

Richmond – 2.8% decline from the same time last year, 3.9% drop from the all-time high

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

#31 Wait Until October... on 07.12.17 at 6:54 pm

I think another rate increase in October and stricter OSFI rules on mortgage bundled loans and uninsured mortgage stress testing by mid-August will exacerbate the RE correction in YVR and 416, maybe turn them into crashes.

YVR lost about 25% in average price last year per Ross Kay and others, MyRealtyCheck shows constant list price drops since Oct. 2016 and the only thing moving there is condos (cheapest RE)…despite singular examples by some YVR RE pumpers here, your market will only get worse.

416 from everything said here and data provided, could crash and not correct.

I think this will affect spending in the end as rate increases hit pocket books and/or people feel less wealthy on paper (they already are, well except for YVR they still think they are doing well).

We’ll see by October/November just how bad a shape Canadians are really in financially.

I have to say the TransUnion data is chilling even though it only affects 2.8% of Canadians currently with credit (at a 25-basis point increase) – still, 718,000 is a lot of people in trouble.

Wait until October/November…

#32 Warren Buffet Does CMHS on 07.12.17 at 6:55 pm

Me being in IT/Technology sector employment is extremely in bad shape here in GTA.

Gart referred few posts ago that “we cannot all be coders” which means that he believes that IT/Tech sector is doing good..

It is not !

Tech bust 2.0 is very well on the way.

#33 Rexx Rock on 07.12.17 at 6:56 pm

Hgher rates won’t really affect the majority of homeowners in GTA ,YVR and Victoria because of the higher family income of $80,000 to $120,000.Yes it will hurt the lower income families but that is minimal.A 1% to 2% 0n a five year tem is peanuts.

#34 paul on 07.12.17 at 6:57 pm

Well caulk another one up, received a lawyers letter buyers walking on a firm deal from April, can’t sell there house.

#35 Pete on 07.12.17 at 6:59 pm

#12 paul on 07.12.17 at 6:38 pm
Well this one finally sold,

Thanks for sharing that information, Paul. Didn’t this guy pass on a $950k offer in April? Now $792k. Wow, that is like a few years pay down the drain.

#36 Reximus on 07.12.17 at 6:59 pm

“Canada is in serious trouble”, again

—-

Drunk, Stupid and Zerohedge as a financial guide is no way to go through life, Son

#37 Lulu on 07.12.17 at 7:01 pm

I’ll take the black one, just so cute, like those fools that think rate can never be raise…. How can you not like them.

#38 Rate Watcher on 07.12.17 at 7:03 pm

“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.”
——

The one thing I have learned from 10 years of analyzing this unstoppable RE market is that the average person neither follows nor cares about interest rates. They do not understand them – they only know that they are ‘low’ and ‘should get in before they rise’ like their Mom and realtor tell them. They think if interest rates go from 1% to 2%, then the amount they pay is 1% more….a couple of bucks on a mortgage.

So, no, 700k are not ‘watching’ the interest rates. This one will not even register with the 700k potentially affected by the increases, let alone the rest of the population. Only when there are 8 or more 0.25% increases will the population take notice – which means this thing will still be on fire for a few years.

The only ones watching the rate hike today were the bears, ever hopeful that this minuscule increase will translate into a decrease in prices in a timely manner. But alas, the will be waiting for a few more years at least – pending an actual consistent rate normalization….

#39 Notso Sure on 07.12.17 at 7:13 pm

Remember those four mortgage-cheapening measures that Flaherty pushed through in 2009 to prevent a US-style melt? A few years later, he gradually undid those. Why? So they can be reintroduced once again if needed. So as rates go up ever so slightly and slowly, watch for those measures to be reintroduced; downpayments going back to zero again, forty-year amortizations, etc. In short, housing prices will not substantialky go down. In fact, think abput it, if they do, government tax revenue tanks; unles they raise taxes to meet their goals, which would squeeze home owners to the hilt, accelerating the inevitable recession. So, no, it will not happen.

#40 .25%? on 07.12.17 at 7:13 pm

Lol

How pathetically fragile is this country ?

What sector to bail the dramatic decrease in housing revenue ? There is none .

‘This will not end well ‘…..how’s the TSX? Lol

#41 JustMe on 07.12.17 at 7:16 pm

City of Vancouver buys houses and leaves them empty

The lovingly restored character house at 3030 Victoria Drive is one of an estimated 25,000 empty homes in the city. And it is owned by the City of Vancouver. The city will demolish the house, which is zoned for two families. There is no plan to build.

It says the property is to be used as an extension to John Hendry Park across the lane. However, the house sits in the middle of a row of eight houses, separated by a laneway. If it is to join the park, it won’t be any time soon, because the other homeowners haven’t sold.

It raises questions. Why would the city leave a perfectly good house empty for a year and a half, only to tear it down to hold as a vacant lot – amid a housing crisis?

https://www.theglobeandmail.com/real-estate/vancouver/amid-a-housing-crisis-vancouver-buys-houses-and-leaves-them-empty/article35513761/

#42 Newbie on 07.12.17 at 7:17 pm

http://www.cbc.ca/news/business/bank-canada-interest-rate-monetary-policy-1.4200814
A funny statement from BoC: “In a statement accompanying the rate decision, the central bank said the Canadian economy has been robust, fuelled by household spending.” They must be kidding )))

#43 BoC Already Factored in Slowdown on 07.12.17 at 7:19 pm

For all you Realtor and RE Pumpers posting here and hoping the economy will crash so that rates are lowered to save your sorry skins, good luck with that.

GDP currently at a 3.5% growth rate.

BoC forecasting 2.7% for 2017 and 1.9% next year.

So, they are expecting a slow down in spending as credit tightens and already have impounded that drop in spending into their rate increase plans (i.e., rates will continue to go up).

Better you hope for an Act of God to save your skins instead (e.g., Asteroid Hit, Alien Invasion).

#44 Darryl on 07.12.17 at 7:20 pm

Puppy pics always help

#45 Reximus on 07.12.17 at 7:21 pm

Rate increases are only bad for Boston Pizza, not housing itself

#46 Keith on 07.12.17 at 7:22 pm

“A typical subprime mortgage had the rate go from 7.5% to 11.4%, increasing payments by more than half” It’s a quarter point so far. The sky is not falling – yet.

https://ftalphaville.ft.com/2014/10/20/2003182/floating-rate-debt-is-great-when-interest-rates-go-down/

#47 Cheekmonster on 07.12.17 at 7:22 pm

There’s actually a RE company called Rock Star :)
http://www.rockstarbrokerage.com/

#48 Amazongirl on 07.12.17 at 7:26 pm

Amazon girl to Smokey man… happy birthday many years with us thank for what you did. Fan 51

#49 Unstoppable RE Market? on 07.12.17 at 7:29 pm

Where have you been #38 Rate Watcher?

YVR has tanked 25% in price last year alone, list prices continue to decline and the only thing moving there is condos, the cheapest RE going.

Read the last month’s worth of Garth posts about how unstoppable the 416 RE market is.

As for people not paying attention to rate increases, I can tell you I did…you kind of get the point when your bank account begins to shrink and you have less cash in your pocket to spend. You must think people are brain dead.

#50 Oncebittwiceshy on 07.12.17 at 7:32 pm

Rate Watcher: “This one will not even register with the 700k potentially affected by the increases, let alone the rest of the population.”

Well, my friend, I can assure you that their creditors are watching. I’ll assume that your 10 yrs. of study meant watching Global TV.

You do however seem to tap into the herd behaviour. You would have been especially good at leading cattle through the slaughterhouse.

I find it interesting how often the bulls come to this blog to counter bad news regarding real estate. If things are going so well the market wouldn’t need your support. Lol.

#51 LMAO!!!!!!!!! on 07.12.17 at 7:33 pm

Imagine the good old day’s when you could make 10% on a safe fixed income portfolio.

……

bro, that ship sailed ……..

#52 Pete on 07.12.17 at 7:34 pm

The crooks at Real estate boards in Canada like to use “benchmark price” so that they can bend the price anyway they like it.

Average price may not be accurate 100%, but for a large pool like the GTA or GVA, it is good enough. And it can’t be manipulated.

Don’t help those crooks. Don’t use their “benchmark price”.

#53 Gentle ,Loving Kindness on 07.12.17 at 7:38 pm

5 I’M NOT POLOZ on 07.12.17 at 6:29 pm
Did Trump threaten Poloz or did he flirt with Carolyn Wilkins assuring her that even if she was 40 years younger, and 40 years older, he will still date her?
It was only in May that Poloz was upset at a 72-cent Loonie because he wanted it lower to boost his exports.
Will housing crash in Toronto and Vancouver now? Poloz is one unpredictable Conservative.
———————————————–
The $US/$CDN has shown weakness in the first half of the year in 2015, 2016 & 2017. I believe this cyclical trend will continue and the $CDN will start to weaken soon against the $US in the latter half of 2017. Superimposed on this cycle, the $US is secularly growing stronger against the $CDN, and the charts indicate it will be in the 1.40$CDN by 2018. I think now is an opportunity to buy $US.

#54 Realtor & Pumper Flash: Rates will keep going up on 07.12.17 at 7:43 pm

Spending will slow down and the BoC knows that, so stop praying for a miracle rate drop to save your sorry behinds.

Q1 GDP grew at a seasonally adjusted rate of 3.7%.

BoC forecasting 2.6% for 2017 and 1.9% in 2018.

They know spending will go down as credit tightens and that is in their calculations already, per the above.

So that means rates will continue to rise and no, Canada’s GDP will not come to an end because RE prices are going down and fewer sales.

In fact, rate increases are a good thing as Zombie reckless single asset investors are purged from the economy for a decade or more and that is good news for Canadian GDP, good money will no longer chase bad investments.

#55 Raging Ranter on 07.12.17 at 7:44 pm

@# 39 Not so sure, you’ve got your timeline all screwed up. Flaherty loosened mortgage standards in 2006, way before the crisis. In November 2008, when the crisis started, he started tightening them again. The zero and forty mortgages were gone by the end of 2008. If you’re going to predict the future, at least get your recent history straight.

#56 Chaddywack on 07.12.17 at 7:44 pm

Funny thought, I’m seeing offerings at TD and local credit unions in Vancouver for 1.99% 5 year CMHC secured….

Not fixed. — Garth

#57 I believe everything on television on 07.12.17 at 7:50 pm

What a bunch of losers….people come here and applaud higher interest rates.
That’s why the ruling elite will tax you more, you deserve it.
Less money in circulation, that’s all you need to know.

#58 Sultan of Sudbury on 07.12.17 at 7:50 pm

#1 Frank

“If rates go up the economy will tank. If the economy tanks rates won’t go up.”

Rates going up, will allow Wild Bill to pull the lever on fiscal stim. to keep the real economy alive, and simultaneously kill the Zombie/Arb economy.

#59 SimplyPut7 on 07.12.17 at 7:53 pm

Where are all of those people who used to think rates will never increase and banks cared about them now?

I think I said it several times on this blog: banks don’t care if you have money for vacations, entertainment or savings. They don’t make money if you are happy and can afford your lifestyle. They only care about getting as much money from you as possible.

I hope you enjoyed those lovely introductory rates they used to get you dependent on their bank services. You need to pass several stress tests including proving you can afford your mortgage at a rate of 4.64% to be able to go to their competitor offering a lower rate. I knew banks were up to no good when they helped the federal government pass those new mortgage rules last year.

Now they can charge any mortgage rate they want and you can’t easily leave them. Good luck to all the people who used their home as an ATM.

#60 White Crock BC on 07.12.17 at 7:58 pm

I’M NOT POLOZ on 07.12.17 at 6:29 pm

It was only in May that Poloz was upset at a 72-cent Loonie because he wanted it lower to boost his exports.

————————–

Proof? Link?

#61 joblo on 07.12.17 at 8:01 pm

Is America Great Again yet?

#62 Long-Time Lurker on 07.12.17 at 8:02 pm

#207 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

Sorry about that. I got it from a trusted source and didn’t confirm it.

Yeah, gradual rate rises and continued balanced sheet normalization.

The trader was so excited over it that I thought I had to put out the info quickly.

#63 Happy Housing Crash Everyone! on 07.12.17 at 8:02 pm

39 Notso Sure

LOL this housing crash is going to be hard on you. Hoping for a miracle as you struggle to stay afloat until the day hits and you are forced to go bankrupt. Happy Housing Crash Everyone Everyone! :-)

#64 crowdedelevatorfartz on 07.12.17 at 8:05 pm

@#41 Just me
“It raises questions. Why would the city leave a perfectly good house empty for a year and a half, only to tear it down to hold as a vacant lot – amid a housing crisis?”
*****

Because the city is run by idiots, who then hire lickspittle, politically correct, bigger idiots to run to and fro spewing forth drivel such as “empowering the homeless” and empathising with the disadvantaged” all while arguing the benefits of the proper signage for a hideously expemsive LGBTTQ washroom in all parks citywide.
As the homeless increase in number.
The “Priorities” of the intellectually stunted, common sense devoid, Vancouver municipal govt and its surly, arrogant, socialist sloths never cease to amaze.
Amusing if it wasnt so sad.
Well, lets see what a housing price meltdown and rising municipal taxes bring……..

#65 Happy Housing Crash Everyone! on 07.12.17 at 8:11 pm

#38 Rate Watcher
The only ones watching the rate hike today were the bears, ever hopeful that this minuscule increase will translate into a decrease in prices in a timely manner. But alas, the will be waiting for a few more years at least – pending an actual consistent rate normalization….

LMFAO Oh you delusional and financial hurting fool. Was it the bears who had article after article and economist after economist kicking and screaming about the tiny rate hike? The fact is the ones screaming in horrible financial pain are the ones deluding themselves that everything is still ok. with housing prices and sales crashing while rates for mortgages , HELOCs , and LOC go up on maxed out Canadians by the hundreds of thousands and you think everything will be ok? LOL HAPPY Happy Housing Crash Everyone! Everything will somehow be ok! lol :-)

#66 The Real Deal on 07.12.17 at 8:13 pm

You all make the mistake thinking Central Banks set interest rates. They don’t, the bond market does and the CB’s just play follow the leader. Now that QE has come to an end yields are going to have to go a hell of a lot higher to attract any kind of honest money into Government debt. The future is Illinois, Hartford Connecticut, or Greece. Some would argue rates could never go up in a deflation and I would argue that is exactly how they will go up. Not because of inflation, or even growth, but because of RISK. Nobody sees the next Black Swan until it $hits on their head. It starts now and will consume the western hemisphere over the next five years.

#67 TCContrarian on 07.12.17 at 8:14 pm

#29 broader mind on 07.12.17 at 6:52 pm
Imagine the good old day’s when you could make 10% on a safe fixed income portfolio. That’s something to look forward to. Can’t wait. Only those with cash need apply.
————————————-
You will not live that long. — Garth
**********************************************
Not nice of you Garth to wish one an early ‘exit’!

Double-digit rates very likely within a decade. It’s not different this time.

TCC

#68 CL on 07.12.17 at 8:14 pm

awww cute widdle itty bitty puppies……….I forgot, what was your blog about today?? :)

#69 Smoking Man on 07.12.17 at 8:15 pm

Home school your kids. To get an idea on whats taking place in schools.
Watch this clip from rising canadian internet investigative journalist. Oh a blog dog too.

https://youtu.be/4a6vD3Gytps

#70 For those about to flop... on 07.12.17 at 8:17 pm

But I thought that the market was screaming for a rate cut.

Ah well, at least I can still be certain the Vancouver peaked in 2013…

M43BC

#71 Happy Housing Crash Everyone! on 07.12.17 at 8:18 pm

#57 Sultan of Sudbury on 07.12.17 at 7:50 pm
#1 Frank

“If rates go up the economy will tank. If the economy tanks rates won’t go up.”

Rates going up, will allow Wild Bill to pull the lever on fiscal stim. to keep the real economy alive, and simultaneously kill the Zombie/Arb economy.

excellent post as interest rates are going to normalize all over the world. Canada is going to crash housing prices and keep the economy floating with all those announced projects as mentioned above. RE will crash back to the mean average. Happy Housing Crash Everyone! :-)

#72 dan on 07.12.17 at 8:22 pm

When all those mortgage renewals start to occur the banks will be rubbing their palms. They won’t reassess home values if you stick with them but they know customers won’t have a choice. Take the rate we offer or try another bank which triggers a new assessment, and come up with the shortfall to switch banks. Unlikely.

#73 Reddit0r_Anonymous on 07.12.17 at 8:23 pm

>Me being in IT/Technology sector employment is extremely in bad shape here in GTA.

Total B.S. It’s time to update your skills. I hope you have not abandoned IT to become a realtor. LOL

#74 Tony on 07.12.17 at 8:24 pm

Re: #7 Happy Housing Crash Everyone! on 07.12.17 at 6:34 pm

What I’d like to see the most is the parents who quote lent their children money for a down payment go insolvent and they themselves and their children jointly file for bankruptcy protection at the same time. The daft parents were a large contributor to the housing bubble.

#75 TurnerNation on 07.12.17 at 8:26 pm

Furrrrst rate hike.

Whack! Thank you BofC. May we have another? :-(

#76 windsor guy on 07.12.17 at 8:28 pm

Very informative weekly call this week Garth.. I know you suggested that we increase our international holdings to around 23 %, Ryan also recommended VGK in our portfolios to cover Europe. What % would u suggest to hold that ETF in our portfolios to cover Europe?

#77 ANON on 07.12.17 at 8:30 pm

Sure, no lolcats. Figures :)

#78 Just the Facts on 07.12.17 at 8:31 pm

#16 Reximus

Uh oh (again)

“Canadian home prices rose in June as the cities of Toronto and Hamilton led the way with record increases despite provincial government efforts to rein in demand in the hot markets, data showed on Wednesday.”

https://www.theglobeandmail.com/real-estate/the-market/canadian-home-prices-rise-in-june-as-toronto-keeps-climbing/article35663107/

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

How many times do you need to be reminded that “The Teranet-National Bank Composite House Price Index” is based on the property records of public land registries? There is a time lag of about 60 days due to closing of property sales. The June 2017 figure basically represents the pricing top in April 2017.

You really need to educate yourself.

#79 [email protected] on 07.12.17 at 8:31 pm

It’s about fricken time! One has to be mindful as to where,why, what, when etc on how technology and other unforeseen actions in this wonky world will force millions out of the economy unless we elect or I should say beleive in a leader with vision that will not bankrupt us all. For example a leader who truly appreciates small business’s.

For the savers this is a step upwards, for those who believed this could never happen, good-luck!

#80 Glen B on 07.12.17 at 8:31 pm

Smokey, I wish you a very happy birthday bud.
Your posts always brighten my day.

#81 Doug t on 07.12.17 at 8:32 pm

Pump up the jam pump it up lets get this party started

RATM

#82 TransUnion and Higher Family Income on 07.12.17 at 8:38 pm

It would appear “high family income” = more reckless spending, even as of last year according to TransUnion:

The people with the best credit and scores in the 830-900 range — who make up the largest segment of the credit-holding population unable to absorb a small increase.

Of super prime customers, TransUnion says a 25 basis point increase to interest rates would cause cash-flow trouble for 239,000.

Only 101,000 Canadians borrowing with sub-prime ratings, in the range of 300-599, would face the same cash crunch under those circumstances.

Super-prime customers are far more leveraged and therefore more vulnerable to an interest rate increase. If rates rose one percentage point, 298,000 super-prime customers would face cash flow problems.

Latest info. per Garth today shows the above numbers are way worse than a year ago, so much for higher family income…

#83 Tony on 07.12.17 at 8:38 pm

Re: #65 The Real Deal on 07.12.17 at 8:13 pm

They could artificially raise interest rates like Paul Volcker did back in the late 1970’s. Even if the economy can’t stand higher interest rates the goal unless it’s some sort of a ruse is to deflate all the asset bubbles except of course the stock market.

#84 Steve French on 07.12.17 at 8:43 pm

Happy birthday to Smoking Man!!

Keep up the writing.. even though you suck at it.

Here’s some inspiration,

– Steve F.

“I am a dangerous man when turned loose with a typewriter,” said Charles Bukowski, the author of more than 40 books of poetry, prose and novels, including Ham on Rye and Post Office. Bukowski, who died on March 9, 1994, aged 73, used his poetry and prose to depict the depravity of urban life in America. He was also an avid reader. The book Charles Bukowski: On Writing features previously unpublished letters. Here are 12 things we learned from them….”

http://www.telegraph.co.uk/books/what-to-read/charles-bukowskis-guide-to-writing-and-life/

#85 Re., Happy Housing Crash Everyone on 07.12.17 at 8:43 pm

Are you a mental patient ? An angry drunk
?

#86 Victor Y on 07.12.17 at 8:45 pm

Soft landing?

#87 yorkville renter on 07.12.17 at 8:46 pm

Notso Sure on 07.12.17 at 7:13 pm
Remember those four mortgage-cheapening measures that Flaherty pushed through in 2009 to prevent a US-style melt? A few years later, he gradually undid those. Why? So they can be reintroduced once again if needed

No. The measures were reversed because they were irresponsible.

#88 Suede on 07.12.17 at 8:51 pm

Settle down people.

People are bidding 100k over asking for 800sf condos in the burbs around Vancouver.

They rather cash in RRSP’s than be a renter.

Yes, they’ll be screwed for the next 10 years but at least they’ll learn.

#89 millmech on 07.12.17 at 8:53 pm

#55 Chaddywack
Yup, real in the last of the herd. In five years time with mortgages between 6%-8% how can they lose as the people locking in now at maximum house price will need 30 to 40 years to pay off their bills. Just look at the trillions of debt Canadians carry and have to pay back with ever rising rates.
The banks do not care about people just profits, and as for competition between banks not a chance, notice how they will all be increasing rates in lockstep, leaving the consumer no where to turn for a better deal. Load up on bank stocks as they will be increasing dividends for decades off the backs of homeowners.

#90 The Sky is Falling... on 07.12.17 at 8:55 pm

Read about Transnion report from Sept. of last year (link below). And I quote:

Laurie Campbell, executive director of Credit Canada, said high quality customers have been building up debt because they’re attracted to low rates that never seem to rise.

“There is an assumption that those with better income and good (credit ratings) are in good financial shape,” Campbell said. “It’s not the case at all. We see people in our offices all the time that should be managing well that are not due to a number of factors. One is over extension, they’re biting off more than they can chew.”

I would sooner believe TransUnion and Credit Canada than 8 hacks “spread between New York, London and also Mumbai” from FT Alphaville.

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

#91 Mark on 07.12.17 at 8:58 pm

“Some would argue rates could never go up in a deflation and I would argue that is exactly how they will go up. Not because of inflation, or even growth, but because of RISK. “

That’s basically what I’ve been arguing. Policy rates, ie: what the Bank of Canada sets at the short term, will go down in a deflation in response to deflation and falling prices. However actual rates charged to actual retail, non-sovereign borrowers will go up due to the elevated risk of default in the case where incomes and prices are falling.

Hence, I was able to come to this blog, almost every day, and agree with Garth, that mortgage rates were on the way up, but also disagree with those who claim that short-term policy rates, or even GoC yields across the entire curve would be going up.

Whether I’m right or wrong remains to be seen, of course, but it does appear strongly that Poloz appears to be fighting the wrong battle. He sees inflation in Canada’s future, yet the long-term bond market is implying minimal inflation. The stock market, the TSX, is stagnating implying relatively low prospects for future growth. Current CPI is negative month over month. Poloz obviously has some sort of crystal ball and thinks that the Canadian economy will magically heat up enough in the future, but I’d really like to know where he got that crystal ball from. Maybe the dollar store? $1.25 store? Because this move is so disconnected with the actual reality of what’s happening in Canada that he risks major and unnecessary calamity to Canada’s economic participants through a central bank induced suppression of output.

#92 TurnerNation on 07.12.17 at 9:01 pm

There you have it – a gender neutral rate hike delivered by gender parity.
Debt slavery never felt so good right?

‘You’ve come a long way baby…’

#93 M-cube on 07.12.17 at 9:08 pm

@ “I’m Not Poloz”

50-cent dollar eh?

You ready to publicly admit that you were terrible wrong and beg for our forgiveness?

#94 paulo on 07.12.17 at 9:16 pm

its a well known fact that central bankers world wide
work in unison . the us federal reserve was the first to telegraph that change was coming by clearly indicating
prior to pulling the trigger on rate changes that they where going to clear there balance sheet = fed saying that QE was over and debt instruments and emergency rate adjusts now having out lived there usefulness would be terminated.the bank of England,
Canada,EU to name a few have clearly said that rates are and will be increasing, so no surprise here. plenty more to come!
long and short: the western worlds bankers will be raising

#95 Mark on 07.12.17 at 9:17 pm

“There is a time lag of about 60 days due to closing of property sales. The June 2017 figure basically represents the pricing top in April 2017.”

Its actually far, far worse than that. The Teranet methodology is basically a low-pass filter which creates so much lag that it can lag literally years behind reality due to its methodology of geometrically averaging the price change on a property over the entire period of ownership. To use it for month-to-month changes is completely and utterly inappropriate as even a cursory study of its methodology would indicate.

Adjusted for sales mix changes and all of that, most Canadian RE peaked in 2013, although some places, particularly Calgary, peaked earlier.

#96 The Real Deal on 07.12.17 at 9:17 pm

@ Mark #74

Ten year yield doubled in the last year. Bottom was last year. If the ten year heads up like I suspect its not because of inflation or growth, its because of RISK. I couldn’t put it plainer, would you lend Junior (Trudeau) money at 2% for ten years? We both know the answer. Would you lend Wynne money at 2% for ten years? What about Notley? Clarke, or whoever runs the left coast? And it is not just Canada, its throughout the western hemisphere. Two decades of low interest rates have fooled a new generation of politician that there is no end to the borrowing and that the taxpayer will always be there to bail them out.

Game over.

#97 The Real Deal on 07.12.17 at 9:18 pm

Last post should read Mark @ #90

#98 Mark on 07.12.17 at 9:20 pm

“Total B.S. It’s time to update your skills. I hope you have not abandoned IT to become a realtor. LOL”

Skills don’t particularly matter when there’s a hundred resumes chasing a single position. Which is the case in the contemporary IT sector. The best ‘skill’ in that case is to understand that the sector is an intractable glut, and get out. At least Realtors, if they sell 50-100 houses at 5% commission, taxes, etc., should have a decent shot at buying and paying for a house of their own. On an IT salary these days, good luck ever affording a property in a major city in Canada.

#99 Flatlander on 07.12.17 at 9:27 pm

I spent a recent afternoon in a flatland provincial court (that gap between Winnipeg and Calgary) on a work related manner. While waiting, this deplorable renter was subjected to watching 4 “Average Canadians” plead their cases regarding mortgage defaults. Apparently this has become a daily ritual…I can’t imagine YYZ right now.

#100 acdel on 07.12.17 at 9:28 pm

#79 Glen B

Smoking Man, I hear rumours that today is your Birthday then we share a special date. My late mother, gone way too soon, had the same special date, another year wiser! Happy Birthday!

Garth, great blog as usual, thanks.

#101 GFD on 07.12.17 at 9:30 pm

Correction is when your neighbor sells his house at loss. Crash is when you sell your’s at loss.

#102 bubu on 07.12.17 at 9:32 pm

guys.. you are sick if you think 0.25% to 1% increase will change something…. don’t forget the salaries will also go up and cover these small increments….

#103 When the Whip Comes Down on 07.12.17 at 9:36 pm

#33 Rexx – higher rates and the new stress test proposed by osfi if adopted will most certainly affect new buyers moving into the market within that income range you reference Let me guess – you failed arithmetic?

#104 Wrk.dover on 07.12.17 at 9:39 pm

So like, people will be jumping off of condo roof tops because of the first hike, or the tenth? I will stay tuned to see.

My bottom 6 figure GIC’s will afford me another daily donut for all of this pain to be inflicted on the nation.

I feel like Mr Burns already.

#105 Reddit0r_Anonymous on 07.12.17 at 9:42 pm

>Mark Skills don’t particularly matter when there’s a hundred resumes chasing a single position. Which is the case in the contemporary IT sector.

It’s a lie. Amazon is hiring 200 people in Toronto. I am getting spammed by recruiters all the time. If you are a Cobol or C++ developer incapable learning modern technologies, then yes, it sucks to be you.

#106 Pete from St. Cesaire on 07.12.17 at 9:43 pm

What I’d like to see the most is the parents who quote lent their children money for a down payment go insolvent and they themselves and their children jointly file for bankruptcy protection at the same time. The daft parents were a large contributor to the housing bubble.
—————————————————–
Hear! Hear! I’m a strong proponent of people learning lessons.

#107 Pete from St. Cesaire on 07.12.17 at 9:45 pm

Happy birthday Smokey!

#108 TurnerNation on 07.12.17 at 9:46 pm

Didn’t see Smoking at annual Duke of Devon pub patio party last night.

#109 Toronto1 on 07.12.17 at 9:46 pm

The pain is starting to get real, looks like its spreading south from Brampton into Mississagua.

The specers and flippers have an approx 30-40 day. Window to get out and maybe break even after Sept the free fall begins

Happy birthday Smokie. Take it easy and youll have many more to enjoy:)

#110 GFD on 07.12.17 at 9:51 pm

#101 bubu on 07.12.17 at 9:32 pm

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

#111 Smoking Man on 07.12.17 at 9:54 pm

Ha, thanks for the birthday wishes dogs and bitches. But its just another day closer to death. I celebrated hard last night. It was good.

On one of my postes tonight that linked to a video, if you have school aged kids. Especially boys. Watch the clip and pay attention to its content. Keep on top of whats going on.

For all you other ungratefull dogs who did not wish me happy birthday after years of entertainment.

Die!!

#112 Ron on 07.12.17 at 9:58 pm

#97 Mark on 07.12.17 at 9:20 pm
“Total B.S. It’s time to update your skills. I hope you have not abandoned IT to become a realtor. LOL”

On an IT salary these days, good luck ever affording a property in a major city in Canada.

—————————————–

Depends what you mean by ‘IT’.

Are you a coder lacking social skills? Good luck, unless you can undercut Bangalore.

On the other hand, if you are presentable, articulate, resourceful and organized (generally if you can get sh*t done) then there are no shortage of six figure jobs for IT managers/analysts/consultants with major corporations in any big city.

#113 Shortymac on 07.12.17 at 9:59 pm

News from the front lines of the rental market:

I’ve seen a bunch of houses in the downsview and bathurst manor area, I’ve run into at least 2 houses where the Landlord is only “temporarily” renting out the place because they can’t afford to knock the old house down and build their mansion.

One guy even bought a property without looking at it, somehow he can afford a 2 million dollar mortgage plus another mortgage (presumably) but can’t afford to build the house. Very strange and I’ve never seen anything like it.

I’ve also noticed that landlords are asking for a LOT to apply for a rental, you have to have pay stubs and a letter of employment, personal references, credit check at your own expense, etc. It’s a definite change from 5 years ago.

Wish me luck, and if you know of anyone renting a 3-bed from wilson-keele to Yonge-Finch area leave a comment.

#114 yorkville renter on 07.12.17 at 10:00 pm

bubu on 07.12.17 at 9:32 pm
guys.. you are sick if you think 0.25% to 1% increase will change something…. don’t forget the salaries will also go up and cover these small increments….

Have you actually done the math?
I know how I would calculate it – how woyld you do it?

#115 Ray Skunk on 07.12.17 at 10:01 pm

Mark, once again I see you’re the expert in sweeping generalizations.

“On an IT salary these days, good luck ever affording a property in a major city in Canada.”

I work in IT. For a very good company, it has to be said.
I don’t really want to disclose how much I make, but many would be surprised given my non-“managerial” title. In order to deflect from my income, allow me to use another example.

A close colleague is thirteen years my junior, who – at 25 years old – grossed $175k last year (plus a ton of other perks and benefits). It helped contribute towards his $1.2m house purchase. (I choose to rent, FWIW)

He’s one of dozens of twentysomethings I could point to grossing six figures – yet he’s not even top of the ladder in his org. He is not an outlier.

Somehow I don’t think we should be listening to you and getting out of IT just yet. Certainly not to join the tens of thousands of Realtors about to get their asses handed to them.

#116 Ian on 07.12.17 at 10:02 pm

OK for those of you who keep saying there’s deflation…you really need to do some reading. Or just simply go to the grocery store.

When you go to get your groceries, does your brain go ‘wow I’m so thankful for deflation’ or does your brain go ‘holy f why am I paying so much money for this shit?!’

Before the 2016 US election, there were polls done where the biggest concern people had was RISING PRICES. Not Obamacare, not jobs, not any other factor. RISING PRICES. Inflation is not measured correctly, governments have an interest in underreporting it and that is done in the US and Canada.

https://www.google.ca/amp/s/schiffgold.com/videos/peter-schiff-spars-liberal-economists-inflation/amp/

Please follow Peter Schiff on YouTube. I’ve been in equities for 25 years and he is BY FAR the smartest analyst in the world.

#117 Tesalien on 07.12.17 at 10:04 pm

#110 Smoking Man on 07.12.17 at 9:54 pm

Ha, thanks for the birthday wishes dogs and bitches. But its just another day closer to death. I celebrated hard last night. It was good.

On one of my postes tonight that linked to a video, if you have school aged kids. Especially boys. Watch the clip and pay attention to its content. Keep on top of whats going on.

For all you other ungratefull dogs who did not wish me happy birthday after years of entertainment.

Die!!
..
You first!

#118 Leo Trollstoy on 07.12.17 at 10:05 pm

#134 Mark on 06.20.17 at 6:55 am
“Inflation solid. Deflation nonexistent.”

As it stands, even before housing started falling recently (from its plateau), the Bank of Canada was chronically undershooting its 2% inflation target. With the recent strengthening of the CAD$/USD$ pair, and the taps of credit tightening down on mortgage borrowers, deflationary pressures are growing.

Next BoC policy move will be a rate cut. Mark my words.

[ ] not rekt
[x] rekt
[x] really rekt
[x] tyrannosaurus rekt
[x] parks and rekt
[x] star trekt
[x] school of rekt
[x] catcher in the rekt
[x] great rektspectations
[x] rekt it ralph
[x] the shawshank rektemption
[x] forrekt gump
[x] finding rekt
[x] rektal exam
[x] shrekt
[x] rektium for a dream
[x] erektile dysfunction

#119 Leo Trollstoy on 07.12.17 at 10:07 pm

#104 Reddit0r_Anonymous on 07.12.17 at 9:42 pm
Mark Skills don’t particularly matter when there’s a hundred resumes chasing a single position. Which is the case in the contemporary IT sector.

It’s a lie. Amazon is hiring 200 people in Toronto. I am getting spammed by recruiters all the time. If you are a Cobol or C++ developer incapable learning modern technologies, then yes, it sucks to be you.

It’s always a rude awakening for him to realize that his skills suck deja vu all over again

#120 Leo Trollstoy on 07.12.17 at 10:10 pm

The biggest problem with tech in canada is that there isn’t enough talent to fill the positions

http://www.huffingtonpost.ca/2016/03/12/it-jobs-skills-shortage-canada_n_9440872.html

#121 Joe on 07.12.17 at 10:11 pm

Interest rates will continue going up, housing will continue crashing, but what about the bond and stock markets?

#122 Sunnyside on 07.12.17 at 10:11 pm

Yellen/ Trump: We’re sick of your currency jawboning and competitive advantage. You got solid GDP growth and it’s time to follow our interest rate move. I don’t give a rat’s ass about your super low inflation or housing market. Raise your rates or we’ll make softwood lumber look like a pony ride.

Poloz/ Trudeau: Uh, yes ma’am. But did you know 35 states, including battleground Ohio and Wisconsin rely on Canada for…

Trump: Shut up.

Poloz: Sorry sir. But can you at least help me out in some way? I’m gonna look like a dink.

Yellen: Fine. Look, in July you got a meeting and I’m giving testimony. The same day! You up for some role reversal?

Trudeau: Sure, I’m into that.

Yellen: Cool. Markets are expecting me to be hawkish and your boy to be dovish. Let’s throw ‘em a curve. I’ll put them in rally mode (again), which will also soften the blow on your end when you kill your exports and housing market. At least your stock market investors won’t get hammered. The dust will settle and your bonehead electorate will move on.

Trudeau: Got it. Promise no tariffs? A deal’s a deal, right?

Yellen: Promise. Jul 12, 10am sharp! Don’t forget. Hugs and kisses.

P.S. Steve, you and your gal gotta start talking before then. Trust me, I know.
We’ll talk more in Sep ;)

#123 acdel on 07.12.17 at 10:12 pm

Garth or others that wish to answer this simple question.

For so many of us that are confused about the fundamentals. Although very petty, how is it a country can start to raise interest rates when our overall debt exceeds our GDP? How is this normal? What should people really do to protect themselves from the inevitable; is cash the answer?

I understand balancing out and wait; but these days, these are conditions where one can rarely trust on what one says due to they have no idea what will happen one month from now never mind one year, I am not asking (well somewhat) for myself but for all. Love to hear on all others are planning for this very uncertain future, thanks all. Pay off your debt first!

#124 Quebec is Great on 07.12.17 at 10:13 pm

Ok Smoking Man, Happy Birthday you cranky old codger.

Thank you for the many great comments – never found a better read over the years – seriously.

#125 acdel on 07.12.17 at 10:28 pm

#115 Ian

Yep, big fan of him and others out there including Garth, the more one knows or listens, hey, the better for all..

#126 Mark on 07.12.17 at 10:30 pm

“The biggest problem with tech in canada is that there isn’t enough talent to fill the positions”

Nothing could be further from the truth. In fact, large amounts of talent goes un-noticed in Canada as it is stuck in the mountains of applications firms receive for a few scarce jobs. A minimally advertised job in IT can receive a hundred applications, the applicants not even accorded the very basic professional courtesy of a response.

What you’re most likely reading there is a puff piece intended to curry favour for more foreign worker visas. Canadian talent not only exists in abundance, but is in such abundance that compensation and opportunities, even for the brightest, have been driven into the ground. Even top grads from top schools find obtaining even the very basic professional courtesies from Canadian employers rather difficult. The OSPE found that 2/3rds of Canada’s engineering talent unemployed or underemployed in a comprehensive study of the issue:

https://www.ospe.on.ca/public/documents/advocacy/2015-crisis-in-engineering-labour-market.pdf

#127 Mark on 07.12.17 at 10:33 pm

“He’s one of dozens of twentysomethings I could point to grossing six figures – yet he’s not even top of the ladder in his org. He is not an outlier.”

Not terribly useful discussing severe outliers (sometimes known as out[I]liars[/I]). If an organization was paying that kind of money to a 25-year old Canadian in IT, the job boards at the universities would be ablaze with jobs. Yet that’s not happening.

Yes, occasionally someone can get lucky, or they can get a job in a family business where their opportunity was not based on a tight market. But for most in Canadian IT, the opportunities are incredibly poor, and lots of very high spec talent has been frozen out of the sector due to the poor state of the market. Not for lack of skills, but simply for lack of opportunities.

#128 Freedom First on 07.12.17 at 10:35 pm

I don’t want to die yet. Happy Birthday Smoke!

Fan #33

#129 Mark on 07.12.17 at 10:37 pm

“On the other hand, if you are presentable, articulate, resourceful and organized (generally if you can get sh*t done) then there are no shortage of six figure jobs for IT managers/analysts/consultants with major corporations in any big city.”

Not true at all. Those sort of jobs are scarce. Employers just aren’t stepping up and hiring in quantities sufficient relative to the available supply of people. As a result, IT salaries have gone nowhere, and the broader Scientific, Professional and Technical services sector has been in a multi-year salary deflation (see StatsCan data).

If anything, the employers have been looking for those coders with poor social skills because they can work ’em to death and pay ’em little. Its the high end talent not in demand.

Here, have a look at what the OSPE found. Horrifically high unemployment/underemployment in the engineering sector, and while they found the Computer/IT sector to be slightly better, engineering talent did not really fare any better. Certainly not into the six figures:

https://www.ospe.on.ca/public/documents/advocacy/2015-crisis-in-engineering-labour-market.pdf

#130 VanIsle Chris on 07.12.17 at 10:43 pm

Sooo..what IT skills are needed? Within the next 3 years, Where are the shortages? IT is a big subject!

Asking for my son who has no idea what he wants to do after graduating highschool.

#131 Dan.t on 07.12.17 at 10:47 pm

True story.

Been outside BC for pretty much the whole (imo, but could be wrong)biggest housing bubble ever seen.

Being back now for a bit over few weeks and it is super annoying to see prices still exploding, for sale signs all over, and with sold stickers slapped on most of them, and the only topic ever being discussed being real estate. And worse doesn’t even seem close to slowing down.

Im starting to think the rest of the world has it wrong and real estate is all that matters in life. I guess incomes and money are really no object in BC but…

point of the story, seems most people I speak to have of course a principle residence (because if you live here and rent the pity looks alone would probably make you want to cry), and of course an investment condo or another investment house etc.

So speaking to a friend haven’t seen in long time, within 4 1/2 minutes, had to talk real estate and with in 6 minutes I got to hear how great of an investment it is and how he just closed on a pre-sale in Poco that will be built in 2018.

Basically, prices only ever go up and there is no supply. I said, “well there is no supply because everyone out here has 5 investment properties”. The look on his face was kind of funny.

Add in foreign buyers and it doesn’t look like much is going to slow BC down.

His response when I said based on long term rate cycles, we are going to be on slow upward trajectory for a long long time….was, ja, doesn’t matter, its only .25%…and no biggie, people will still pay their mortgage and prices will just keep going up.

Sad thing is, I’m to the point of believing him. It is seriously messed up in BC.

The building in unreal. Everywhere condos and new subdivision are going up.

I’ve learned in my short time here not to even caution people on Real estate (it’s like dissing a religious fanatic’s god).

And honestly why would you! prices just go up and up and up, surrounding areas within 1 hours drive to YVR are close to a million and 90 minutes going up and closing in on that mark.

If something is not over 600+k east of Vancouver, the speculators or who ever is buying push prices up fast. Or maybe the world just discovered Chilliwack, Hope BC, and soon Merrit . In Merrit, Super affordable. Get a home for 490k if you are lucky. I bet that won’t last long.

Obviously no one in BC cares what the Greater Fool says.

Watching for years from the outside I thought BC people are f***ing insane. Now, I feel like I am the one who is insane. I have a serious urge to buy a condo or townhouse. It is contagious in BC.

You realize how much of a loser you are if you don’t own BC property and aren’t making massive tax free profits year to year and moving up the property ladder. It seems it’s just what people do here.

#132 aa3 on 07.12.17 at 10:58 pm

On the other side of a housing bust, countries have to re-orient their economies to actual productive enterprise. See Ireland & Spain for examples.

They are carrying out tough economic reforms to become competitive, because they simply have no other choice.

While the powerful like unions or oligopoly license holders of various kinds are going to fight the reforms kicking and screaming, if the government has no other choice it will do what must be done.

On the other hand if the government does have other choices, like creating desperation credit bubbles, it will do that, it has done that in Canada.

#133 My eyes hurt on 07.12.17 at 11:06 pm

Hey Garth! time to put a character limit on the comments I think. Some of the long posts are so boring I’m creating a groove in my cell phone glass swiping to scroll past!!
Help improve comment quality! 2000 characters max!!

#134 Buddy O' Pal on 07.12.17 at 11:07 pm

#68 SM

Definitely more to worry about than rising rates…

Indoctrination of our children. Great. What’s the plan SM?

https://m.youtube.com/watch?feature=youtu.be&v=4a6vD3Gytps

#135 Smoking Man on 07.12.17 at 11:12 pm

My Wyatt, little autistic Poodle weighing 7 lbs.

He ate a water bottle, crying like an SJW, I had to take action, I reached up into his ass, and pulled out the thing cutting into his feeling of making a good happy dog. It was a bit of plastic mixed with a milk bone.

He bit me, I loved it, I’m making real progress here.

But as a true, truth teller, I got a shit load of Craft Dinner hold up in a storage unit.

Truth tellers today, are not allowed to have jobs, especially on Bay Street, regardless of how good you are. The rainbow warriors have the real estate covered.

Shlong Zumanga, He’s in my book. He thinks he won.

Not while this mental case is around, you would kill me under normal circumstance, but you too are addicted to my writing.

#136 For those about to flop... on 07.12.17 at 11:17 pm

Pink Lemonade stand in Richmond.

O.k so I alluded the other day that I have been following this development and a few others in Richmond and was going to do a more in depth post on the weekend but things have just changed as one of them sold, and so I will now ask a realtor on here to show me what it sold for.

5003 -5511 Hollybridge Way was for sale for 569 after being bought for 593 way back in November 2014

Sold two days ago after being relisted.

If it went close to ask they waited close to three years for the market to catch up but it did not.

They simply overpaid by a large margin.
Maybe a realtor got stuck in their own syrup?

Like I said the other day I’m doing the soft porn version because I am just guessing what is going on so all I can do is insinuate.

5001-5511 Hollybridge Way is still for sale for 578 and was purchased for the exact same dollar amount as the first one in October 2014.

These two units have been on and off the market a few times recently, always in tandem ,same thing this time back on the same time so it’s either the same person(owner) or a realtor is speculating on them.

Same dollar amount
Same realtors
Same listing pattern
Same result?

5001-5511 Hollybridge Way, Richmond

Dec 18:$689,000
Jul 10: $578,000
Change: – 111000.00 -16%

5003-5511 Hollybridge Way, Richmond SOLD.

Dec 18:$689,000
Jul 10: $569,000
Change: – 120000.00 -17%

https://www.zolo.ca/richmond-real-estate/5511-hollybridge-way/5003

https://evaluebc.bcassessment.ca/property.aspx?_oa=RDAwMDBOQjRVQw==

https://www.zolo.ca/richmond-real-estate/5511-hollybridge-way/5001

https://evaluebc.bcassessment.ca/property.aspx?_oa=RDAwMDBOQjRVOQ==

Like I said I am watching this development closely because it has already had some CONFIRMED PINK SNOW in the building.

Here is the proof…

M43BC

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

These guys bought this condo for 643k in July 2016 and must of gotten spooked and offloaded it for 658k in December 2.8%

6003-5511 HOLLYBRIDGE WAY RICH.

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

Confirmed Pink Snow.

This is one of the cases that I already new that they took a big loss ,but now we have official confirmation.

Feb 2016 paid 685k

April 2017 sold 600k

So that’s approximately a 12.5% loss and by the time you throw in the closing costs you are probably pretty close to 20%

I have other cases in the exact same building…

6019-5511 HOLLYBRIDGE WAY RICHMOND

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

#137 marty mcfly on 07.12.17 at 11:21 pm

I guess the flippers aren’t even going to wait to finish the job

https://www.zolo.ca/mississauga-real-estate/1601-bramsey-drive

#138 Leo Kolivakis on 07.12.17 at 11:32 pm

Garth,

The Fed won’t raise again this year and neither will the Bank of Canada. Mark my words, a US recession is coming and the macro gods will finally get a much needed break:

#139 Smoking Man on 07.12.17 at 11:40 pm

https://www.youtube.com/watch?v=zO2TrhKqRa4

Makes a case for not living anymore

#140 TnT on 07.12.17 at 11:42 pm

Ha!!

Happy Dirt Day Smoking Scrub!!

Go try something new you old goat, like read a book…

Mmm… Gin Martini night, feeling friendly…

#141 Just the Facts on 07.13.17 at 12:01 am

Mark,

“Canadian RE peaked in 2013…” Is that a joke?

Even in USD term, the peak was not in 2013.

#142 oncebittwiceshy on 07.13.17 at 12:03 am

#130 Dan.t on 07.12.17 at 10:47 pm
True story.

Been outside BC for pretty much the whole (imo, but could be wrong)biggest housing bubble ever seen.

I don’t know about the rest of the blog dawgs but I get a little bit tired of “bulls” pretending to be naive “bears” realizing how all of their friends are making huge bucks in Vancouver or Toronto real estate and they missed out.

The”bears” here actually read the blog and they realize that the tide has turned and the “bulls” are on the run.

Give it a rest or at least try to read the various posts outlining the dropping value of real estate in Vancouver.

There have been several posts with links and Flop provides examples that just make your post look ridiculous.

Think about it, you’re trying to convince “bears” that they are missing out or perhaps you’re trying to push a string up hill and convince a million readers that you are seeing what nobody else is.

Sell your koolaid somewhere else.

#143 ACDC rulez on 07.13.17 at 12:13 am

Smokey…happy birthday!!

#144 Tony on 07.13.17 at 12:17 am

Re: #120 Joe on 07.12.17 at 10:11 pm

It looks like with the QE unwind they want to implode all the bubbles except the stock market. The bankers seem to be able to keep it afloat as they have since around 2010.

#145 Drinking Man on 07.13.17 at 12:22 am

I remember a mortgage in the 90’s of 9.3/4 %

I have no sympathy for these woosie assed millennials.

Time to grow up b#tch#s

Ya…I have been drinking….

Doesn’t change anything…

Hard times are coming. P#ssy’s can wither by the wayside…

Or….

You can smarten up and pay attention to what Garth is saying’….

He may save you yet….

#146 aa3 on 07.13.17 at 12:23 am

acdel #122: Where to put money. When Greece, Ireland & Spain were going through their inevitable housing busts, where did the smart money in those countries go..

The answer is many of the super rich in those countries moved their money to places like London, England. In a highly unstable situation of a credit unwind, I don’t think its possible to predict how things will play out, especially when things will play out.

Canada could go into a hyper-inflation as an example. Then any cash you have in CAD would be getting wiped out, and instead the best would be to have massive amounts of debt.

On the other hand, Canada may be backstopped by someone like the IMF, and go through an austerity program.

I think you want to put your money in a foreign, stable country, and have great liquidity. The most obvious example is the US stock exchange.

When the dust settles in Canada and the pathway forward is clear, then you can start looking at opportunities that arise in Canada.

Personally I am not sure Canada will come back anytime soon. For example places like Nova Scotia started declining a long time ago, and don’t look like they will reverse course anytime soon.

#147 bubu on 07.13.17 at 12:23 am

#109 GFD on 07.12.17 at 9:51 pm

Thanks for the link.. did you read it?

“But Alexander doesn’t believe the wage situation in Canada will remain as negative as it is right now. Wage growth tends to lag job growth, he said, and the large job growth in Canada over the past year should translate into better wages in the future”

#148 Drinking Man on 07.13.17 at 12:25 am

“…In Merrit, Super affordable. Get a home for 490k if you are lucky.”

OK….we are seriously screwed…..

#149 Joe2.0 on 07.13.17 at 12:54 am

The world wasn’t rescued, unless you consider putting a bandage on a severed artery a fix.

#150 Pete from St. Cesaire on 07.13.17 at 1:15 am

Sooo..what IT skills are needed? Within the next 3 years, Where are the shortages? IT is a big subject!
Asking for my son who has no idea what he wants to do after graduating highschool.
———————————————————
In this collapsing economy a penny saved is a pound earned. Don’t let him get into debt, they’ll treat him like a criminal (it used to be that only criminals who had embezzeled money couldn’t have their debts dismissed through bankruptcy – now that applies to student debt). Don’t waste your money on a university education unless he is certain to become a doctor. Tell him to learn a trade (hydro-electric linesman for instance), something that is applicable and in demand all around the world. The time may soon come when you realize that he would be better starting his life over in a foreign land.

#151 Newcomer on 07.13.17 at 1:48 am

Credit is tightening. Today BMO Mastercard told me the rate for cash advances would double to 22% and the service charge for cash advances would go up 50%. I have a credit score in the mid 800s, no debt, and accounts that are a million years old, and I have never used a cash advance, so I doubt I was singled out for this. People who use cash advances are, of course, the least creditworthy and they are the first to be skewered but it’s not hard to imagine that more is coming.

#152 Widening Gyre on 07.13.17 at 1:50 am

Winter is coming…

Is Westeros in a housing bubble?

#153 Mark on 07.13.17 at 1:52 am

“On the other side of a housing bust, countries have to re-orient their economies to actual productive enterprise.”

Fortunately Canada has an impressive stable of actual productive enterprises. Canada is not an empty suit, so to speak, it generates enormous volumes of exports. If not for the housing bubble that ramped up imports so dramatically, particularly on consumer stuff like foreign vacations (yes, vacations are considered imports!) and manufactured goods to fill those newly constructed pieces of RE, Canada would have easily run a nice trade surplus over the past number of years.

The fear of higher interest rates is that there are sectors of the Canadian economy that are starving for capital, particularly in R&D, technology, and even basic infrastructure such as railways and telecoms. When Poloz raises the policy rate, he’s essentially knee-capping the natural process of cyclical rotation away from excess housing speculation, and towards those sectors in desperate need. Both sectors could easily absorb $100B a piece in new investment to modernize and update their infrastructure. Billions more are needed to revitalize Canada’s R&D sector, not only companies that are explicitly in the business of R&D, but also the embedded R&D function of operating business itself. Recently we witnessed the spectacle of Canada’s largest aircraft engineering company being unable to recapitalize itself in the private marketplace and had to turn to government for a measly few billion.

Yes, those investments eventually will be made, but if the BoC artificially increases the cost of capital, the ‘hurdle rate’ for investment will end up being higher. Human capital, already very slack and abundant in supply, will remain underutilized for much longer than necessary until a business case for the incrementally higher hurdle rates are achieved. The end result is lost economic potential and lost efficiency.

As I’ve noted on this blog many times, the housing market was naturally taking care of itself with price declines in the face of emerging severe overcapacity. Spreads were expanding in retail RE-backed credit in response to falling prices and higher risk. Poloz, however, thinks he knows better, and is fighting a boogeyman, inflation, that not only doesn’t exist, but as the deflationary trends amplify, will actually be desperately desired to give the yield curve at least some slope, and a reasonable long-term return for fixed income investors.

“The Fed won’t raise again this year and neither will the Bank of Canada. Mark my words, a US recession is coming and the macro gods will finally get a much needed break”

I’d generally agree, but with the way that Poloz/Yellens’ heads are screwed on these days, they seem to be acting without deference to the data.

#154 Jason Bliers on 07.13.17 at 1:53 am

Moister here and hoping you have some fresh advice.

I recently bought a condo in the big smoke and fear I will be losing money on it, or already lost a lot. Condos are currently selling about 100k below what I bought mine for.

I’m wondering, if housing does “collapse” what are the odds Trudeau will pass a law or something or do something to protect people like me? I understand that pensions are often safe because government can set in to help, but what are the measures to help people underwater on mortgages and is it too late for me, is there even a remote chance of a recovery? Should I be nervous?

#155 Brydle604 on 07.13.17 at 1:57 am

Happy Birthday Smokey.

110 Ha, thanks for the birthday wishes dogs and bitches. But its just another day closer to death. I celebrated hard last night. It was good.

On the brighter side the more birthdays you have the longer you live!

#156 Myra Andrews on 07.13.17 at 2:08 am

Data for Vancouver for July (GVRD and Fraser Valley)

New Sold Sell List %
July 12 448 243 54.2%
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%

#157 Myra Andrews on 07.13.17 at 2:11 am

Inventory has climbed every day this month. This is for the Vancouver area but not the Fraser Valley

July 12
New 288
Price Change 81
Sold 184
TI: 9702

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

#158 Leo Trollstoy on 07.13.17 at 3:05 am

#129 VanIsle Chris on 07.12.17 at 10:43 pm
Sooo..what IT skills are needed? Within the next 3 years, Where are the shortages? IT is a big subject!

Asking for my son who has no idea what he wants to do after graduating highschool.

https://www.fosster.com/industry-reports/2017_RHT_salary-guide.pdf

#159 Leo Trollstoy on 07.13.17 at 3:09 am

In Canada there is too much tech opportunity not enough candidates

I wonder if Canada will ever have more tech candidates compared to tech jobs

Prolly never in my lifetime

#160 Boots on the Ground in Ptown on 07.13.17 at 4:33 am

#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
————————————————————–
Ace or anyone else: Not participating in market(s) or real estate until something blows. Recommendations for private capital lending? (but not for real estate) I like the idea of loaning if the risk isn’t too high.

Thanks all, favorite daily read. Trying to cut it down to once a week was a joke-practically withdrawals.
Keep calm and carry on

Garth pic on 7/11 = best yet. John 10:13

#161 Adrian on 07.13.17 at 5:10 am

“The 2008-9 credit crisis was a once-in-a-generation event. Rates crashed to rescue the world. Now it’s over.”

I’m afraid it isn’t over by half. Higher interest rates will create the conditions for debt deflation. Professor Steve Keen explains this phenomenon quite well.

#162 Wrk.dover on 07.13.17 at 7:08 am

#145 aa3 on 07.13.17 at 12:23 am

Personally I am not sure Canada will come back anytime soon. For example places like Nova Scotia started declining a long time ago, and don’t look like they will reverse course anytime soon.

——————————————

It has only been since the advent of steamships, but really started with confedertion in 1867.

Been around much?

#163 Stone on 07.13.17 at 7:09 am

#153, are you for real? You know you did something stupid and now you want a bailout? OMG! Suck it up butter cup! It’s gonna hurt real bad! LOL

#164 Wrk.dover on 07.13.17 at 7:10 am

Confederation…same as NAFTA to NS

#165 Conspiratard on 07.13.17 at 7:21 am

Reports coming in that Trump surrogates are meeting secretly with North Koreans this week.

They are trying to create a pretext for North Korea to launch a nuclear missile against the US.

Not a direct strike, but close enough to create a conflict, giving Trump grounds to interrupt domestic politics and civil rights enough to avoid the Russian sh*tstorm.

Kim Jong-un gets to live, part of the deal. His army, not so much.

Clever. War, the perfect distraction.

Listen to Coast to Coast this week for more.

#166 Stan Broock on 07.13.17 at 7:28 am

If we look at macro level, ignoring record household debt and the biggest real estate bubble in history, then rate increase is justified.
CAD rates actually (considering the inflation) should be around 4-5 %.

Considering the debt and the fact that housing and related services are probably over half of the economy (actually closer to 70 % construction, taxes, financials, insurance, services driven by these) this will backfire with absolute certainty with a depression style contraction in fake economic activity.

Considering ‘Poloz’s past stand on rates, his lack of qualifications for the job, it is clear to me that he was forced by his supervisors to start increasing rates.

Every sane person would expect this to be just the beginning of the great unwinding of the biggest real estate bubble in history which for sure will include:
– drastic house prices crash to the tune of 70 % + in Vancouver and Toronto
– silent and hidden actions by CMHC/bailouts to hide the situation
– government action to prevent total meltdown
– sale of government bonds to cover the holes in the CMHC balance sheet.
– potential reversal of the direction with another round of rate cuts.

The Canadian economy has very little substance with declining commodities, dead manufacturing sector and huge household indebtedness.

The rise of the CAD does not make any sense whatsoever and is most likely only temporary. CAD is very expensive compared to the Euro with the Euro zone having an actual economy.

Any shorting of the CAD should exclude leveraged instruments as forex trade for CAD would be heavily volatile.

In short term CAD can rally.
In long run it it toast.

Even the financial elites do not think that the unwinding will be graceful. It will be ugly.

#167 Job Seekers and Career Changers on 07.13.17 at 7:41 am

#32 Warren Buffet Does CMHS on 07.12.17 at 6:55 pm
#97 Mark on 07.12.17 at 9:20 pm
#125 Mark on 07.12.17 at 10:30 pm
#126 Mark on 07.12.17 at 10:33 pm
#128 Mark on 07.12.17 at 10:37 pm
#129 VanIsle Chris on 07.12.17 at 10:43 pm

A book I read over two decades ago saved my life! It’s called What Color is Your Parachute? by Dick Bolles. It was written in 1970, but it’s updated yearly. The author is a genius!

For those looking for a job in their field, thinking about changing careers, or just starting out in life with “no idea what [they] want to do” with their lives, I highly recommend this book!

https://en.m.wikipedia.org/wiki/What_Color_is_Your_Parachute%3F

#168 maxx on 07.13.17 at 7:53 am

#7 Happy Housing Crash Everyone! on 07.12.17 at 6:34 pm

“I am loving the financial screams from maxed out speculators and out of work Realtors.”….

Certainly “rock star realtors” ought to have great voices to scream with. They’ve been practicing for years shilling, peddling and shoving GMO stats down the throat of society via msm…………they and greedy sellers (most especially “specuvestors”, the “tart ’em up, price ’em up, stage that sucker” carrot danglers) deserve the bulk of rate rise pain.

#169 Pepito on 07.13.17 at 8:12 am

“The 2008-9 credit crisis was a once-in-a-generation event. Rates crashed to rescue the world. Now it’s over.”
_____________________

Delusional proclamations all. Voodoo economics akin to the bloodletting of ages past. Nothing has changed. The high priests of central banks don’t have a clue. All smoke and mirrors. You will eat your words in time.

#170 GFD on 07.13.17 at 8:14 am

#146 bubu on 07.13.17 at 12:23 am
Yes, Bubu, should and would.

#171 Asterix1 on 07.13.17 at 8:24 am

#153 Jason Bliers on 07.13.17 at 1:53 am
Moister here and hoping you have some fresh advice.

I recently bought a condo in the big smoke and fear I will be losing money on it, or already lost a lot. Condos are currently selling about 100k below what I bought mine for.

I’m wondering, if housing does “collapse” what are the odds Trudeau will pass a law or something or do something to protect people like me? I understand that pensions are often safe because government can set in to help, but what are the measures to help people underwater on mortgages and is it too late for me, is there even a remote chance of a recovery? Should I be nervous?
____________________________________________

http://www.greaterfool.ca/2017/07/10/the-unforgiven/

#172 nick on 07.13.17 at 8:32 am

OLD NEWS QUOTE, PRETTY FUNNY:

_______________________________________

The average cost of a resale home in the Toronto area will increase 6 per cent by the end of 1990 to $289,000 from $273,000 this year, the realtor said yesterday.

“We don’t expect the price of homes in Toronto to drop dramatically in the future; in fact, we don’t expect them to drop at all,” said Gino Romanese, vice-president of Royal LePage’s residential real estate division.

Royal LePage chart: Metro Toronto housing sales and prices, 1988-1990 (forecast)

_______________________________________

Remind you of anything we’ve seen from the TREB recently? LOL.

#173 maxx on 07.13.17 at 8:39 am

#57 Sultan of Sudbury on 07.12.17 at 7:50 pm

Realtards don’t (want to) get that.

#174 crowdedelevatorfartz on 07.13.17 at 8:42 am

Sears pensioners one step closer to welfare?

http://www.google.ca/url?url=http://www.cbc.ca/news/business/sears-mike-myers-ad-restructuring-lay-offs-1.4199261&rct=j&frm=1&q=&esrc=s&sa=U&ved=0ahUKEwjf79aHpIbVAhVP3WMKHT-FDigQqQIIFzAA&usg=AFQjCNHDpKuqc16bxwLlcAQEHB_THzoQ6Q

#175 Notso Sure on 07.13.17 at 8:45 am

#54 Raging Ranter, I stand corrected – thanks. But the bigger point still stand, I believe: why would the govt not reintroduce some of these measures as rates go up? Because they are irresponsible? But what about a major meltdown in housing prices, taking our economy into a severe recession possibly, is that too not irresponsible?

PS found this article with details in Flaherty’s various measures and unwinding of then:
https://www.theglobeandmail.com/real-estate/the-market/flaherty-details-new-mortgage-rules/article562562/?arc404=true

#176 Johnny Boy on 07.13.17 at 8:51 am

#110 Smoking Man on 07.12.17 at 9:54 pm

Ha, thanks for the birthday wishes dogs and bitches. But its just another day closer to death. I celebrated hard last night. It was good.

On one of my postes tonight that linked to a video, if you have school aged kids. Especially boys. Watch the clip and pay attention to its content. Keep on top of whats going on.

For all you other ungratefull dogs who did not wish me happy birthday after years of entertainment.

Die!!
………………………………………………………………
Shit I missed your special day, sorry I was out last night with a gorgeous woman having a great time. OK but before I go and die I just wanted to share this tidbit with you. Smoking Man take heed on this special day.

http://www.abajournal.com/magazine/article/july_12_1957_surgeon_general_links_smoking_and_lung_cancer

#177 Wack on 07.13.17 at 9:04 am

The main victim of a rate increase will be eatery’s!
Doesnt anyone eat at home anymore?
Parking lots are full everyday of the week, that’ll change!

#178 Nuke on 07.13.17 at 9:07 am

Got my company pension statement. Inflation adjustment is the % over 1-3 year Canada Bond rate minus 4%. Still a little ways to go back to normal returns.

#179 Another Deckchair on 07.13.17 at 9:14 am

@166 Job Changers

I had never bothered to read that book, but, I’d 100% agree with the review statement that one should figure out what you are best at and like most. (thanks for the link)

Two parts here:

1) My latest gig came from talking (physically in same room) with someone, saying something like “have you ever thought of doing XX”.

The someones’ eyes went wide and said “CAN YOU DO THAT??” A 2 minute phone call, the deal was set; getting it through the contracting process took a bit of time (paperwork…).

I’m providing an interesting application for them that fills in a niche, the only feedback I get is along the lines of “it only gets better and better” so, the client appears to be very happy.

2) Some people (lots of people??) look at the salary first, then try to do the job. If you don’t live it and love it, what a waste of YOUR time, and your employers. People don’t seem to get that. 40 prime-of-life years hating the job, not producing much (if anything) then they get to retire, if not laid off first. 40 years wasted!

#180 Victor V on 07.13.17 at 9:17 am

http://www.bnn.ca/we-need-to-be-very-cautious-poloz-on-next-rate-move-nafta-and-housing-1.803671

The implied probability of another 25-basis-point rate increase at the bank’s October meeting reached 48.5 per cent Thursday morning, compared with 37.3 per cent before the bank’s decision.

#181 yorkville renter on 07.13.17 at 9:18 am

#153… the odds are 0.

why would the government protect you for a financial decision you made? has that ever happened in the past? why is housing different than stocks, bonds, cars, hockey cards, beanie babies?

#182 Asterix1 on 07.13.17 at 9:21 am

Toronto Star publishing more propaganda pieces for the GTA’s “Real estate-Non Industrial complex”.

https://www.thestar.com/business/2017/07/13/correction-to-soften-toronto-home-prices-report.html

– “Royal Lepage predicting an 18.5 per cent year-end price increase in the Toronto housing market this year”
– “TREB revised expectation of a year-end 13- to 18-per-cent increase”
– “The report predicts that consumers, who have been waiting to see if sellers drop their prices substantially, will re-enter the market once they recognize that isn’t going to happen”

Oh boy! These views are completely biased and are completely ignoring the realities on the ground. Are there any real journalists out there? At least brand that article as “Sponsored”.

#183 Poloz Said... on 07.13.17 at 9:25 am

Quoting from yesterday’s speech by Poloz: “The economy may be more sensitive to higher interest rates than in the past, given the accumulation of household debt. We will need to gauge carefully the effects of higher interest rates on the economy.” That strongly suggests that interest rates are unlikely to go higher in case mortgage-holders start to experience problems – which as Garth reported, is likely to happen already with yesterday’s rate increase or another .25% at the most. Sounds like Poloz is committed to not significantly cooling off the housing market…

Of course he is. An overvalued housing market is that last thing policymakers want. Rates will continue to normalize into 2018 and you should expect another .75% between now and this time next year. — Garth

#184 Victor V on 07.13.17 at 10:12 am

http://business.financialpost.com/news/economy/bank-of-canada-rate-hike-spurs-expectations-for-more-to-come/wcm/ec4080db-cae9-46b3-bb13-d6cafdf453d7

“While the next steps obviously depend on the growth and inflation data in coming weeks, and oil prices, we would expect the next rate hike in October (with a more-than-slim chance of September),” Douglas Porter, chief economist with BMO Financial Group, said in a note.

BMO expects further modest rate increases next year, he added. “For now, we remain comfortable with looking for a 1.50 per cent overnight rate by end-2018.”

“We believe that another rate hike is likely at the Bank of Canada’s October monetary policy decision, but a slightly slower pace of one 25-basis-point hike every six months or so is likely thereafter,” said Brian DePratto, senior economist with TD.

#185 Hello All on 07.13.17 at 10:24 am

According Royal LePage, “In Vancouver and Toronto, we have buoyant economies that are attracting thousands of new residents each year. These people will need a place to live and no amount of initiatives aimed at quelling demand will change that”. Price will skyrocket again? Hope not.

http://www.bnn.ca/sanity-has-begun-to-return-to-toronto-housing-royal-lepage-1.803641

#186 Doug in London on 07.13.17 at 10:43 am

So much for all the geniuses here who said the Bank of Canada would NEVER increase interest rates. All the while I went about my business and scooped up dirt cheap CPD and XPF during the world’s longest Boxing Week sale.

#187 MB on 07.13.17 at 10:58 am

No worries… once the mortgages get too much for joe average, the decision makers will just extend amortization duration to offer some relief. Just make mortgages the new inheritance :)

Along with the property …

#188 T on 07.13.17 at 11:03 am

#125 Mark on 07.12.17 at 10:30 pm

Mark, you are so unbelievably incorrect. Please stop with this nonsense about the tech sector. If you can’t find a job, and you are a coder, try updating your skills to a newer tech stack. If you are more infrastructure, get a few cloud services management certifications.

I suspect your inability to find a good paying IT job is more about your personality then the market. Personality does ring through on resumes, much like it does in comments online. I wouldn’t hire you; know it all attitude and no ability to see any side but yours. I wouldn’t want you to poison the culture of my business.

#189 AB Boxster on 07.13.17 at 11:07 am

So, with a 5 year fixed mortgage (TD website) at about 5% is it time to consider self directed mortgages again?
That is holding a mortgage in an RRSP?

5% is a pretty good risk free return for the fixed income portion of a portfolio.

#190 FLHTK on 07.13.17 at 11:10 am

I don’t think housing will come crashing down it will just slow the market and normalize prices back to where they should be…..however I do think people who bought million dollar homes are in for a surprise when it goes up 1% by the end of the year! that will be $10,000 more after tax income a year, divided by 12 months is $833.33333 added to the house every month!!! Thats huge…..and that will most definitely sink a few families for sure.

#191 Stan Broock on 07.13.17 at 11:11 am

#158 Leo Trollstoy on 07.13.17 at 3:09 am
In Canada there is too much tech opportunity not enough candidates

I wonder if Canada will ever have more tech candidates compared to tech jobs

Prolly never in my lifetime.

———————————
Correction:
In Canada there is too much tech opportunities, not enough candidates as the pay stinks.

If you really need quality professionals, be prepared to pay them properly.

An IT professional in US will have twice the standard of living when compared to Canada, considering the whole package – pay, taxes, lifestyle, crowd of over-leveraged idiots to compete with in housing etc.

#192 InvestorsFriend on 07.13.17 at 11:25 am

Understanding Imports Exports and Trade Deficits

In popular opinion imports are always bad and exports are always good.

One of the best lines I have read on the matter came from a book set in Cambridge England the year 1170.

A Cambridge leader bragged to a foreign visitor from Naples Italy that although inland on a river its port was busy. “There are few countries of the world that do not come to our quays with goods that are then passed on by mule trains to all parts of England along the roman roads that bisect the town.”

This statement highlights the importance of ports and roads as trade infrastructure.

And then the foreign visitor asked a question that I found to be very insightful. “And what do you send back?”

The answer was wool and fish and the Cambridge leader said that Cambridge was prosperous in trade.

The excellent question “And what do you send back” illustrates in a picturesque way that trade should be balanced.

A country can (in theory) have a fabulous economy without ANY exports. (For example the earth as a whole exports nothing) But if a country exports nothing then it must import basically nothing.

If imports are greater than exports then something else has to go out of balance such as increased debt to the rest of the world. Or the foreigners HAVE to to take the money they received from imports and come to that country and buy things like land and buildings including houses. Sound familiar?

BALANCED trade with the rest of the world (it does not have to balance with each foreign country) is likely to be highly beneficial since it let’s each country produce what they are most efficient at producing which increases world-wide production. Unbalanced trade leads to problems.

It’s never good to be unbalanced!

Even in your own household, trade should balance. You should not consume more value from others outside of your house than the value you earn from others through wages or other income. But you would be very poor if you decided to avoid all trade with anyone outside your house.

#193 Dan.t on 07.13.17 at 11:29 am

See how this was and is all by design. Problem is most people took it to extremes.

http://www.bnn.ca/we-need-to-be-very-cautious-poloz-on-next-rate-move-nafta-and-housing-1.803671

POLOZ “In fact, I would expect the housing market to continue to grow, to contribute to GDP — but to contribute less to GDP growth than it has during the extraordinary period where it was doing most of the heavy lifting.”

The heavy lifting was supposed to happen and was encourage so that Canadians can buy houses at all costs. And the economy could grow at all costs and any costs.

Lower down payments, government subsidies to buy houses, longer amortization, extremely lax lending rules, all fraud and self regulatory body infringements and broken rules forgiven (real estate related only), interest rates dropped to the floor,

I mean look at all the incentives to run out and buy a house, or 10 houses. All tax free gains and I see in BC first hand & word of mouth, some undocumented rental units where tax is not being paid (tax fraud) and other tax rules being skirted, but all ignored in the name of housing.

Plus foreign buying being downplayed or ignored in BC, in my opinion. Who cares where the money comes from as long as it is invested in Real Estate.

Point being, read between the lines. The government doesn’t want you buying as many houses right now. Maybe limit your housing purchases to 2-3 per person please.

I guess I leaned my lesson. When the “powers that be” want you to do something, do it. Because they will help you and let a lot slide as long as you are in line with what they are selling. In the end housing saved the Canadian economy. Even though it has turned housing into a commodity in major cities.

Buy a house, take out line of credit, reno house, buy new condo or another house, flip houses, realtors get paid, businesses get business, trades people get work, etc… All by design.

Lets see how this plays out. But reading between the lines, the goal is still to have people buying so they hope no crash. Because we can’t mess with peoples “hard earned” equity.

#194 Dave on 07.13.17 at 11:33 am

Do you think the popularity of bond ETFs, and people selling bond ETFs in fear of rising interest rates, will drive rates higher — and faster than in decades past?

No. — Garth

#195 SilverSon on 07.13.17 at 11:35 am

#39 Notso Sure on 07.12.17 at 7:13 pm

“In short, housing prices will not substantialky go down. In fact, think abput it, if they do, government tax revenue tanks; unles they raise taxes to meet their goals, which would squeeze home owners to the hilt, accelerating the inevitable recession. So, no, it will not happen.”

Why would government tax revenues tank if house values go down? The only government that collects tax from me based on my house value is my municipal government. If that’s what you’re talking about (property taxes) then that’s not how they work. For property, the amount of tax one pays is relative to the percentage tax rate, which the municipal government sets based on the municipality’s annual expenses. As such if your assessed value goes down 20% but the tax rate increases by 30% your tax payments will actually increase even though your property value went down. It’s done that way because the costs of garbage removal, schools, road maintenance, etc are in no way related to the market value of the houses within the municipality. The municipality has no control over house prices so they must have a way to continue to pay for road maintenance, garbage collection, schools, police, fire, etc. regardless of what houses cost.

#196 Victor V on 07.13.17 at 11:39 am

http://www.bnn.ca/loonie-edges-lower-after-wednesday-s-rate-rally-1.803804

Chances of another interest rate hike by October have increased to nearly 70 per cent from roughly one-in-two before the rate decision, data from the overnight index swaps market shows.

#197 WaitingForNextRateIncrease on 07.13.17 at 11:52 am

@John of Grant

How do you get the OIS rate and maturity date, where is this data updated?

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

Prob of Hike: 98.525%

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

#198 Damifino on 07.13.17 at 11:59 am

#153 Jason Bliers

I’m wondering, if housing does “collapse” what are the odds Trudeau will pass a law or something or do something to protect people like me?
————————————-

The odds are about the same as winning the LOTTO 649 jackpot 5 times in a row.

#199 A Reply to #191 InvestorsFriend on 07.13.17 at 1:01 pm

Here are some links you may find of interest:

https://en.m.wikipedia.org/wiki/Absolute_advantage

https://en.m.wikipedia.org/wiki/Comparative_advantage

https://en.m.wikipedia.org/wiki/Heckscher–Ohlin_model

https://en.m.wikipedia.org/wiki/International_trade

https://en.m.wikipedia.org/wiki/International_trade_theory

#200 Hot tip on 07.13.17 at 1:16 pm

Just got my shoes shined today… I heard now is a good time to invest in realestate. Just passing on the tip.

#201 Chaddywack on 07.13.17 at 1:28 pm

@184

I read that Royal LePage advertorial this morning. Good for a laugh. Vancouver is not hot right now, not even close. There are a few suckers still buying, but the mood seems to have changed.

Also they quote 2.6% YOY, which will surely go negative over the fall.

I don’t know why media outlets are allowed to present real estate company new releases as fact. That has to conflict with some broadcast standards.

#202 Leo Trollstoy on 07.13.17 at 1:34 pm

Tech is booming … GLOBALLY!

http://www.businessinsider.com/worldwide-it-spending-2017-7

Sorry to those who aren’t good enuff at tech to find a job. Perhaps do something else?

#203 soost on 07.13.17 at 1:35 pm

Can Phil Soper mystify you with Y/Y stats?

Can Benjie Tal achieve greatness as Monday Morning QB?

THIS AND MORE AT 11!

#204 Dissident on 07.13.17 at 1:35 pm

Just overheard in Millennial workplace – “Yeah, I would rather have a mortgage on a cottage than on anything down here (Toronto central)”.

Its the new normal.

#205 yorkville renter on 07.13.17 at 1:39 pm

189 – I don’t think housing will come crashing down it will just slow the market and normalize prices back to where they should be.

Um… if prices are to normalize “back to where they should be” then that is a crash. Prices have to go down 40% (as a guess) to revert to the mean.

#206 Leo Trollstoy on 07.13.17 at 1:39 pm

#187 T on 07.13.17 at 11:03 am
#125 Mark on 07.12.17 at 10:30 pm

I suspect your inability to find a good paying IT job is more about your personality then the market. Personality does ring through on resumes, much like it does in comments online. I wouldn’t hire you; know it all attitude and no ability to see any side but yours. I wouldn’t want you to poison the culture of my business.

Rekt

#207 Entrepreneur on 07.13.17 at 1:56 pm

So true #191 InvestorsFriend on “that trade should be balanced” and “Unbalanced will lead to problems.”

My mind goes to the canola trade with China but China did not want our GMO canola. T2 must have done some kind of deal as China finally agreed. All so controlled and orchestrated. Trade accomplished but if look at it in detail not so great.

I don’t buy GMO foods or try not to and most people do not that are in the know. Consumers control what should be grown or not but that is taken out of our hands/power when controlled trades are orchestrated.

#208 Crissa on 07.13.17 at 2:05 pm

Media is spinning how Real Estate has changed forever in Vancouver here in YVR this morning!! Feels like there’s a bit of panic mania in the air! Noticed while driving around the outer burbs yesterday the SOLD signs aren’t happening like they were a couple weeks ago!! But I’m sure the RE board will explain its because everyone is away on Holiday!! Please let this be over!

#209 Incubus on 07.13.17 at 2:15 pm

According to this graph, houses would have to correct by 50%

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/07/05/canada%20home%20prices%20dallas%20afed.png

This is huge!

People will be prisoner of their house for decades before they can sell without taking a loss.

#210 Happy Housing Crash Everyone! on 07.13.17 at 2:15 pm

Dissident on 07.13.17 at 1:35 pm
Just overheard in Millennial workplace – “Yeah, I would rather have a mortgage on a cottage than on anything down here (Toronto central)”.

Its the new normal.

you just over heard nothing. you are spewing realtor fake news. I over heard realtors screaming in horrible financial pain.
Its the new normal.
Happy Housing Crash Everyone! :-)
HappyHousing Crash realtor shills! :-)

#211 Newcomer on 07.13.17 at 2:22 pm

Garth:
“An overvalued housing market is that last thing policymakers want.”

Clearly not, or we wouldn’t have one. Policymakers have consistently shown that, if they don’t actually want crazy house prices, they are at least willing to tolerate them in exchange for other policy benefits. Why would their priorities change now?

Inflated real estate was an unintended consequence. — Garth

#212 You overheard that and felt .. on 07.13.17 at 2:25 pm

Compelled to post that here?

Do you get a lot of people looking at you oddly ?

#213 bdwy sktrn on 07.13.17 at 2:44 pm

#187 T on 07.13.17 at 11:03 am
#125 Mark on 07.12.17 at 10:30 pm

I wouldn’t hire you; know it all attitude and no ability to see any side but yours. I wouldn’t want you to poison the culture of my business.
——————————
nailed it.

#214 ponerology on 07.13.17 at 2:51 pm

I admit it. I follow this blog for the cute animal pictures:)

#215 Gobsmacked on 07.13.17 at 3:11 pm

Anyone buying into the real estate market right now either has money they can afford to lose or is utterly mad. If buying a house in today’s market means you may be driven suicidal in a few years due to a ‘correction’, then you better stay out. Do the risk/benefit analysis of your own particular situation. If you CANNOT handle a major downturn, for the love of God, DON’T BUY A HOUSE at this moment in history!

#216 InvestorsFriend on 07.13.17 at 3:24 pm

Someone Responded to me:

#198 A Reply to #191 InvestorsFriend on 07.13.17 at 1:01 pm
Here are some links you may find of interest:

**********************************
Well thank you. But I would be more interested in your own thoughts on trade (especially if you would use a consistent real or screen name).

I said balanced trade was a good thing and unbalanced trade is problematic. Do YOU disagree?

#217 InvestorsFriend on 07.13.17 at 3:29 pm

Prisoners in Their Own House?

#208 Incubus on 07.13.17 at 2:15 pm said:

People will be prisoner of their house for decades before they can sell without taking a loss.

***********************************
At first I thought you are saying that people would remain prisoner before they would agree to sell and take a loss. A large group of people refusing to sell at a loss could help to hold prices up somewhat. Simple laws of supply and demand. But there is always some people who HAVE to sell for whatever reason and if buyer demand shrinks then prices must fall.

#218 Rates vs Capital on 07.13.17 at 3:34 pm

Foreign Buyers Bought 9.1% of Homes In Toronto Area Market

http://globe2go.newspaperdirect.com/epaper/viewer.aspx

Oh, my, say it isn’t so! Could everything I have written about the impact of foreign capital influencing prices be true?

Could all my posts outlining that the GTA went up astronomically just after the imposition of the BC Foreign Buyers Tax be true? Could the graphs that showed declining sales in Vancouver at the same time as a massive sales and price spikes in the GTA after the BC foreign buyer’s tax be true?

Nah, I mean, who could have predicted that…

I mean, after all, the realtors told us it was only around 5% right? And we should trust the realtor franken numbers right…or maybe we just question them on price data but trust them on foreign data….

Apparently, 8% of the marginal US buyers moved the US market, prompting a 32% decline in prices nationally.

But let me get this straight – 9% of marginal buyers – being foreign buyers – have no impact on the market whatsoever right? Foreign capital is not a market marker….

Ah, sweet and utter validation.

From this point forward, anyone trying to minimize or dismiss the impact of foreign capital either has their head in the sand or an agenda…

Canada’s two most expensive markets – TO and Vancouver – both now have official and credible provincial government data that proves foreign capital is a significant player in the market. End of story. No more cries of xenophobia or calls for ‘more data’ before we can make any claims about the impact of foreign purchases….

No validation here. The 9% number was for one area only, north of 416 – where folks of a common background like to move. The number for Toronto is 7% and for the region it is 4.8%. Not enough to move prices, or the market. — Garth

#219 CJBob on 07.13.17 at 3:41 pm

I’m surprised there has been no discussion on the impact of the strengthening CAD on foreign investments. I’ve got 1/2 of mine hedged which is looking pretty wise right now.

#220 The Limited Sage on 07.13.17 at 4:06 pm

I’m posting this super late and will probably be read by next to none, but Tess Kalinowski continues to lead the way in setting the bar for lower journalistic standards…

Title: “‘Correction’ to soften Toronto home prices: Report”

Opening two paragraphs: “One of the country’s biggest real estate companies is predicting an 18.5 per cent year-end price increase in the Toronto housing market this year, compared to a 13.8 per cent national year-over-year rise.

Given the significant gains of the first half of 2017, the company expects a year-end home price average of $862,264, up from $837,232 at the end of the second quarter.”

What filth the Star has become.

#221 Reximus on 07.13.17 at 4:07 pm

I know a family that was trying to buy a place in Markham and had to be at quite a few offer nights while they were looking.

They noticed that there was, on more than a few occasions, a group of Asians in a brand new S-class parked outside the residence, and they would lower the car windows so people could see them, talking on cell phones, looking interested in the property.

Turns out they were paid to look like well-heeled HK investors, the idea that locals would get psyched out and that would incite even more frenzied bidding. It may have worked.

#222 Asterix1 on 07.13.17 at 4:15 pm

#217 Rates vs Capital on 07.13.17 at 3:34 pm
Foreign Buyers Bought 9.1% of Homes In Toronto Area Market

From this point forward, anyone trying to minimize or dismiss the impact of foreign capital either has their head in the sand or an agenda…

No validation here. The 9% number was for one area only, north of 416 – where folks of a common background like to move. The number for Toronto is 7% and for the region it is 4.8%. Not enough to move prices, or the market. — Garth

____________________________________________

I’m sure the real numbers are much higher than 7.2% (Toronto) and 9.1% (York)! There are numerous avenues that can be taken by foreign buyers to get around this and avoid getting counted (and taxed) in the “official” stats.

I have to agree with Rates vs Capital on this one.

If you have ‘real numbers’ as opposed to data collected by the government and the real estate industry, deliver. — Garth

#223 Tazi Bnu on 07.13.17 at 4:19 pm

#95 The Real Deal on 07.12.17 at 9:17 pm
@ Mark #74

Ten year yield doubled in the last year. Bottom was last year. If the ten year heads up like I suspect its not because of inflation or growth, its because of RISK. I couldn’t put it plainer, would you lend Junior (Trudeau) money at 2% for ten years? We both know the answer. Would you lend Wynne money at 2% for ten years? What about Notley? Clarke, or whoever runs the left coast? And it is not just Canada, its throughout the western hemisphere. Two decades of low interest rates have fooled a new generation of politician that there is no end to the borrowing and that the taxpayer will always be there to bail them out.

Game over.
____________________________________________

Exactly, I would also add Opportunity Cost as another reason. Would you lend to Trudeau at 1.8%( was 1.2% at the end of last year) if you could lend to New York City at 2.9% or the US at 2.3%. These are immensely more powerful and credit worthy places. If the US rates go up a 1% in a year and Canada doesn’t, then it could becomes very difficult to get buyers of Canadian debt. This means the Canadian rates will move higher whether The BOC want’s it to or not, so might as well look like you’re in control and take the blame instead of looking powerless and inept. Also who cares if it’s in US dollars, for Canadians they’re just as easy to spend.

#224 Mark on 07.13.17 at 4:41 pm

“Mark,
“Canadian RE peaked in 2013…” Is that a joke? “

Not a joke at all. On individual identical properties, the peak was in 2013, roughly coinciding with Flaherty’s Budget 2013 crackdown at the CMHC.

Pretty much all the Realtor-claimed “appreciation” since has been sales mix driven. Particularly in the cities where there’s been an onslaught of brand new high-end supply, such as Toronto/Vancouver. When you throw in the sheer numbers of brand new, un-depreciated units into the mix, and heavily higher-end units, that alone is going to cause a significant change to the mix.

Now that the sales mix adjustments have run out of steam, the Realtor numbers are falling rapidly. However, the fall is probably exaggerated at this point as a reversion to a normal sales mix from a mix statistically skewed to the upper quartile would have the effect of exaggerating the downfall.

#225 Mark on 07.13.17 at 4:46 pm

“Exactly, I would also add Opportunity Cost as another reason. Would you lend to Trudeau at 1.8%( was 1.2% at the end of last year) if you could lend to New York City at 2.9% or the US at 2.3%.”

The interest rate on an obligation does not determine its total return. I’d gladly lend to “Trudeau” (I presume you mean the Government of Canada) at a lesser rate, if I believed that there’d be currency appreciation and deflation down the road. I’d be less reluctant to lend to “New York” (I presume you mean the US government) if I believed that they’d inflate their obligations away.

The bond market prices these things on a real-time basis, and Canada’s favourable fiscal position, higher per capita availability of natural resources, as well as a whole litany of superiorities over the United States in many matters business, socially, and financially bodes well for the value of GoC-issued debt and that of the Canadian dollar.

So yeah, don’t get too caught up on the “interest rate”. If interest rates were actually relevant, places like India, Mexico, etc., with historically double-digit “interest rates” should be some of the richest, most capital-attracting, and highest returning bond markets in the world. Yet they aren’t, for the simple reason that the higher interest is needed to overcome the significant inflation and depreciation of their currencies.

#226 Entrepreneur on 07.13.17 at 4:46 pm

And not only the leaders taken international trade out of the consumer’s hands/power in that nation this also means that the people cannot say/control their surroundings. So our-of-whack!

#227 Is That So on 07.13.17 at 4:46 pm

#210 “Inflated real estate was an unintended consequence. — Garth”

If that was the case, they could have gradually made it harder to qualify for a mortgage as rates gradually decreased. They did not, suggesting they welcomed the housing bubble. Snd also suggesting they are ready to relax mortgage rules again if rates increase further.

They did. Numerous times. — Garth

#228 Darryl on 07.13.17 at 4:53 pm

#209 Happy Housing Crash Everyone! on 07.13.17 at 2:15 pm
Dissident on 07.13.17 at 1:35 pm
Just overheard in Millennial workplace – “Yeah, I would rather have a mortgage on a cottage than on anything down here (Toronto central)”.
Its the new normal.
you just over heard nothing. you are spewing realtor fake news. I over heard realtors screaming in horrible financial pain.
Its the new normal.
Happy Housing Crash Everyone! :-)
HappyHousing Crash realtor shills! :-)
————————————————————–

Another Classic HHCE line . LOL :)

#229 Mark on 07.13.17 at 4:54 pm

“I’m wondering, if housing does “collapse” what are the odds Trudeau will pass a law or something or do something to protect people like me?”

In the most extreme of cases, I could see the CMHC taking loans (presuming a loan is under CMHC subprime mortgage insurance, whether you paid the premium, or if the bank paid the premium on your behalf), and offering to finance them, on a locked-in basis, for 25- years, at the prevailing GoC finance rate. Thus cutting the banks out of being able to predate on underwater borrowers. Only the most extreme of speculators, ie: the “landlord families”, will actually suffer foreclosure, IMHO.

The problem is, while people in your situation are stuck paying on mortgage loans, other asset classes are likely to be the beneficiaries of an overall cyclical rotation in the economy. So while over-leveraged homeowners are sitting there making payments for the next 20-30 years, their under-leveraged, more responsible peers are enjoying extravagant gains in other asset classes.

This is why Garth et al preach balance, not just in “investment” portfolios, but in the whole range of asset allocation an individual will have including their personal real estate.

#230 rates vs capital on 07.13.17 at 4:56 pm

#217 Rates vs Capital on 07.13.17 at 3:34 pm

‘The 9% number was for one area only, north of 416 – where folks of a common background like to move. The number for Toronto is 7% and for the region it is 4.8%. Not enough to move prices, or the market. — Garth

———-

If prices are set on the margin, and 8% of marginal buyers were enough to cause a 32% crash in US prices, why wouldn’t 7.2% of GTA foreign buyers cause price movements?

Why wouldn’t 9% in a region with a population of 1 million cause price movements?

Its hard to accept that 8% in one case can be a market maker on the way down but 7% and 9% in another market cannot be a market maker on the way up.

Seriously asking the question that many blog dogs will be asking…

In the US the 8% were systemic. In north GTA the 9% were concentrated. The only pervasive influence foreign buyers have here is on impressionable people like you. — Garth

#231 oncebittwiceshy on 07.13.17 at 5:06 pm

Rates vs Capital: “From this point forward, anyone trying to minimize or dismiss the impact of foreign capital either has their head in the sand or an agenda…”

… as you have exposed yours.

However let’s assume that Chinese buyers came into Toronto/Vancouver and purchased 50% of the high end homes and one of those was yours and you made a cool $1,000,000.

So, do you suddenly get stupid? Seriously, are you going to move to the suburbs and overbid on a home just to make that sellers day? How about if you feel philanthropic and downsize to a condo and overbid for that? The whole concept of trickle down stupidity is ridiculous.

Now, if you wanted to move up in Toronto I could understand your frustration having to bid against all of those foreigners. It’s the same frustration that many people who have money feel when all of these people with monopoly money (subprime leverage) are bidding against them. Hmmm.

The very real concept of Real Estate agents promoting foreign buyers as a fear factor to induce fomo in new and upgrading home buyers appears to be consistent, though.

#232 waiting on the westcoast on 07.13.17 at 5:53 pm

#230 oncebittwiceshy on 07.13.17 at 5:06 pm says… “Now, if you wanted to move up in Toronto I could understand your frustration having to bid against all of those foreigners. It’s the same frustration that many people who have money feel when all of these people with monopoly money (subprime leverage) are bidding against them. Hmmm.”

Exactly. I saw the same thing when moving to Victoria. I checked out 15 houses to lease when I arrived. Every one of the landlords saying that foreign money was now pushing into Victoria. Most of the landlords had just purchased 2nd, 3rd and/or 4th homes and were locals. I only met one Asian family and they were from Vancouver and this was their first investment property (they felt Vancouver was way overpriced).

I find it funny how people say that 5, 10 or even 15% make the market. The market is decided by the transaction. If the 85, 90 or 95% decided not to pay those prices, the market would move down… They bought into the BS is all!

#233 Ed on 07.13.17 at 5:57 pm

5% mortgage is still cheap money. Seems these days all news need to include end of world talk to be popular.

#234 Dan.t on 07.13.17 at 5:59 pm

#207 Crissa
I hope so too! Believe me. Problem is they are now all out in Chililwack and Hope because they can still speculate with Bank money or actually maybe get something with 20% down. Once price move up too much, look out Merrit BC :-)

But seriously, end the madness. Everyone is so brainwashed out here. And for the poster that thinks I m a bull- I m annoyed at the stupidity that Canadians show in regards to investing and real estate.

In that regard, Canadians really are world class! But still super nice people.

#235 Scared on 07.13.17 at 6:18 pm

The 2008-9 credit crisis was a once-in-a-generation event.

You will be wrong about this one…. wait whose generation are you talking about?

#236 Asterix1 on 07.13.17 at 6:23 pm

I guess The Economist are also impressionable!

https://www.economist.com/news/leaders/21723418-demand-safe-assets-emerging-markets-creates-headache-policymakers-lessons

“Canada’s housing market thus opens a window on a tragic flaw in the global economy. In only a few decades China has mastered the manufacture of high-quality goods. But it takes far longer to be able to manufacture safe stores of value. Instead, their affluent citizens seek out rich-country assets, including houses. This fundamental mismatch limits the ability of policymakers to stop bubbles from inflating.”

#237 BC on 07.13.17 at 6:33 pm

#197 Damifino on 07.13.17 at 11:59 am
#153 Jason Bliers

I’m wondering, if housing does “collapse” what are the odds Trudeau will pass a law or something or do something to protect people like me?
————————————-

The odds are about the same as winning the LOTTO 649 jackpot 5 times in a row.

REALLY?
I GUESS I’D BETTER GET ME SOME TICKETS.

#238 curiousity_killed_the_cat on 07.13.17 at 7:10 pm

Garth, the economy recorded strong gains in Canadian economy – thus the interest rate hike – but how big is the part of housing associated with that? If housing is collapsing, then the report is just a lagging indicator. Are you really betting on that “economic strength report”?

#239 A Reply to #215 InvestorsFriend on 07.14.17 at 11:10 am

“I said balanced trade was a good thing and unbalanced trade is problematic. Do YOU disagree?”

I am not an economist, and am more of a student of economics (than a teacher).

I presume you know that your position is based on Keynesian (rather then Monetarist) theory (see link below).
https://en.m.wikipedia.org/wiki/Balance_of_trade

I believe a trade surplus is generally a positive economic indicator; however, a government may try to influence or control certain economic events or variables using macroeconomic policies resulting in a trade deficit.

I believe in free trade (not protectionism).
https://en.m.wikipedia.org/wiki/Free_trade

I may change my mind on certain issues as I continue to learn. I try to avoid pomposity and dogmatism, and prefer reading to pontificating. I contribute to this blog in order to assist others with problems I have encountered myself.