Next?

Rate Day plus one, and fallout’s still raining down upon us. It sure looks like the cost of money is going up and the cost of a house is coming down. How far and how fast for each is the question. But not the only one. All this has blog dog Ross, in Toronto, scratching his head and staring meekly into his wife’s narrowing eyes.

“Why is expensive money on a low priced house better than cheap money on a high price house?” he asks. “Will house prices adjust enough to be affordable even with higher interest mortgages?

“I’ve been renting for the last 17 years, or all of my adult life, which is fine with me but not for my wife. We’ve saved up over a half million in cash and funds, but really have been turned off from buying even though we’ve been looking for the last 4 years. Anyway, this is the type of questioning my wife is asking me, that I don’t have an answer to.

“P.S. If you use this question on your blog, please don’t use my name, my wife reads your blog too.”

Oops. Sorry, pal. You might want to arrive home tonight drenched in Axe…

We’ll get to this quandary in a minute, but let’s start with an update on what’s been going down since Gov. Poloz dropped the hammer. First, the bond market is on steroids. Two-year Government of Canada debt has soared to the highest level in five years. The benchmark five-year bond is above 1.5% – an epic move from the 0.9% where it sat a few months ago. Meanwhile the dollar rallied bigly on the rate news and remains above 78.5 cents.

What’s it all mean? Probably that there’s more to come, with markets buying the story the economy can take it (even if real estate can’t). The odds of another rate increase this year went from dust a few weeks ago to 74% on Thursday, which would completely erase the two cuts Poloz shocked us with in 2015 as oil cascaded lower.

By the way, those moves two years ago not only crashed bond yields (and mortgage rates) but also torpedoed the value of preferred shares, since the Canadian pref market is dominated by rate-reset issues which are, like me, overly sensitive. So 2015 proved to be a hard year to have preferreds, even as they kicked out a 5% dividend for just owning them. But, as you have been told on this blog many times, that was a mama of a buying opportunity – and today prefs have soared right back to their pre-crash glory. More to come, too. Plus a 4% tax-efficient divvy. Sweet.

A central bank rate increase in 2017 was not even on the radar six months ago, let alone two hikes. “I still think he’ll go further and faster than markets expect,” says Bay Street economist Derek Holt.

Meanwhile a Boston-based hedge fund set up with the intent of shorting the poop out of Canada is now seeing this latest interest-rate news as a big piece of its Beaver-Aramgeddon scenario. Here is the soothing cover of its report this week:

_________________________________________________________

This is the sell-Canada argument of the JKD Capital fund (and here’s the link to its report):

We wrote in our 2016 year-end letter that we believed that Q4/16 marked the top for the Canadian housing market. We believe that events over the past six months have confirmed our thesis. To recap:

  • Government regulatory changes to the mortgage markets in Q4/16 and again this past week have significantly tightened credit and mortgage availability, which should lead to a national housing correction, increasing foreclosures, and a recession;
  • the largest publicly traded subprime lender in Canada suffered a run on the bank in what will likely prove to be a harbinger for the coming crash;
  • Canadian interest rates spiked as the BoC has taken a more hawkish stance amidst a backdrop of apparently coordinated central bank tightening talk;
  • the Toronto housing market—the lynchpin for the Canadian economy—has finally cracked;
  • the Vancouver housing market, while bifurcated, generally continues to be soft (except for condos) as a result of the foreigner tax and Chinese capital controls;
  • the recent coalition between the NDP and the Greens in B.C. likely bodes ill for housing in the region; and
  • the sell-off in oil should result in another leg down in Alberta.

In short, this is the perfect storm for the Canadian housing market and economy.

So far, by the way, the fund’s performance has sucked – down 40% since inception four years ago. But as this blog has proven, you can be premature but still manly!

Now, what about Ross? (Damn, sorry…)

In a world where real estate gains are no longer certain nor predictable, debt gets uglier. Property declines could turn mortgages into wealth-eating parasites. Rates may rise for years to come, making renewals painful experiences. Higher rates mean more of every monthly payment goes for interest and less for principal repayment. Getting rid of a loan gets harder. Takes longer. Costs more. This is the bad, old world people lived in before anyone heard of selfies and phones had wires. It may come back.

So if higher rates mean cheaper houses (which they do), then debt is lessened even if the monthly cost rises. This is not the way Millennials think, of course. So just tell your wife to grow up. Should work well.

202 comments ↓

#1 TortyPapa on 07.13.17 at 6:13 pm

I know of at least three people who make $40K a year who live at home yet has a condo for rent. They brag about ownership and how they ‘made’ so much money in the last year doing nothing. I was jealous. But now I am educated. Thanks Garth!

#2 Livin Large on 07.13.17 at 6:15 pm

I’m just guessing here but there isn’t going to be any “good” news here for a while is there?

#3 jay on 07.13.17 at 6:20 pm

Interest rates use to fluctuate up or down 1% monthly in the 1980’s https://www.ratehub.ca/5-year-fixed-mortgage-rate-history

#4 Big English on 07.13.17 at 6:22 pm

This blog is both educational, I had to look up the word “bifurcated”

and entertaining, “by the way, the fund’s performance has sucked – down 40% since inception four years ago. But as this blog has proven, you can be premature but still manly!”

Comedy gold!

#5 Gerry on 07.13.17 at 6:27 pm

This blog has been premature Garth? You are the master of understatement!

#6 zee on 07.13.17 at 6:31 pm

Garth Poloz has no credibility. He can easily undo all of this rate hike talk with just one weak data and talk about cutting rates. This has been shown in the past by him.

#7 Is That Sooo? on 07.13.17 at 6:33 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. And also suggesting they are ready to relax mortgage rules again if rates increase further. // They did. Numerous times. — Garth

Well, it is true that they made it harder as rates were lowered, but my point was that they did NOT do so anywhere near enough to prevent the bubble that formed. That is, if they did not want this bubble, they would have tightened mortgage eligibility to the point of countering the bubbly effects of rate increases. I am most interested in your opinion why they did not do so!

#8 Debtslavecreator on 07.13.17 at 6:38 pm

The 5 year cost of funds is 2.65
The 5 year fixed is going up to 2.79
But I am pretty sure the 5 year fixed will jump at least .3-.4 within the next 2-3 weeks if the 5 year Canada yield stays close to where it is now
Looking out 3-5 years many a borrower will wish they never had a mortgage
Much of the changes made and the environment moving forward will strengthen the banks leverage over borrowers
My oh my
Once the 5 year fixed goes over 4 it is lights out for many

#9 TCContrarian on 07.13.17 at 6:44 pm

So just tell your wife to grow up. Should work well. -GT

Or you can tell her this:

“growing OLD is mandatory; growing UP is optional.”

Should work better!

TCC

#10 Tony on 07.13.17 at 6:47 pm

I dunno man. House prices are back up and more homes dropping of realtor.ca. Each day I read your blog. Decade of hoping. Nothing. Just higher prices even when folks are calling doom and gloom. Don’t buy it. But I’m buying a house just so I can stop worrying and reading these blogs. Tired of it.

#11 tomohawk52 on 07.13.17 at 6:48 pm

Apples go on sale and people want to buy more apples. Houses go on sale and people start worrying.

#12 Mark on 07.13.17 at 6:50 pm

“Garth Poloz has no credibility. He can easily undo all of this rate hike talk with just one weak data and talk about cutting rates. This has been shown in the past by him”

Not only that, but there are plenty of people who wonder basically what planet he’s on, with so many data points showing that the Canadian economy is very weak and weakening due to the collapse of the housing market and weakening consumer spending.

For instance, Hilliard McBeth makes comments along those lines in this TalkDigitalNetwork interview:

https://www.youtube.com/watch?v=65wNoiLbvH8

As does Ted Dixon:

https://www.youtube.com/watch?v=8qWsj0Le_Sw

With month over month CPI in deflation, with YoY deflation likely as the CAD$ rockets higher, its bizarre that Poloz thinks that the Canadian economy needs rate hikes. Basically only one data point, and that was, YoY GDP, supported the rate hike thesis.

Unemployment in Canada is horrifically high with large numbers of the unemployed not being accounted for in the official statistics. Wages in sectors that are associated with economic growth such as the Scientific, Professional and Technical services group, are in a multi-year deflation. Job boards are largely devoid of quality postings. And that barometer of the Canadian economy, the TSX, is still at levels of 9 years ago. Hardly anything to give confidence to the suggestion that Canada has an economy that needs to be cooled down.

#13 Josh in Calgary on 07.13.17 at 6:54 pm

I think the piece that many people are “missing” is that you are not signing a 25 year rental agreement at a set monthly payment. The debt is REAL. Sure if you sit there an make payments for 25 years it doesn’t actually matter if it’s an expensive house bought with cheap money vs. a cheap house bought with expensive money. But let’s say you have some extra cash sitting around. You can pay off a cheap house early. Or let’s say you want to move or get layed off. You can sell the house and recoup the capital if it was cheap … not so if it was expensive and then went down.

It’s all of the “what if” scenarios that change if you bought an expensive house with cheap money. Your only hope then is that things stay the same or get better for 25 years in a row … and you’re hooped if things get worse.

#14 Time Will Tell on 07.13.17 at 6:56 pm

Wait and see as to what will happen.

I think we should know with the September & October reports about declining RE and its effect, if any, on economic activity (Aug/Sept Labour Force Surveys & July/Aug GDP).

BoC already expects some negative effect of rate increases on the economy with a 2.5% GDP forecast for this year and 1.9% for next year. 2017 Q1 was 3.7%.

Suffice to say, people with a RE single asset diminishing in value will feel less wealthy and spend less. If you believe TransUnion about Canadian debt holders, 700,000 or so are in trouble now, 900,000 with further increases; still, a far cry from the 28 million in total.

I hope the BoC are correct and that a correcting/crashing? 416 RE market and a soft YVR RE market do not make the economy worse than the BoC has projected.

As for Ross, keep renting until the market bottoms out, then decide, and in the meantime take your wife to the beach and enjoy summer.

#15 Serfin' Safari on 07.13.17 at 6:57 pm

no offence, but renting for 17 years= loser
no offence, but looking for a house for 4 years = loser

his wife has my sympathy
and now he comes here looking for free advice over the internet before making his next big move

#16 I'M NOT POLOZ on 07.13.17 at 7:01 pm

Excuse me Dr. Garth Turner, Canadian interest rates do not affect foreign real estate speculation. A lower Loonie does.

Poloz 68 cent to 73 cent Loonie average is correlated to spikes in house prices in Toronto and Vancouver.

Any time the Loonie goes above 80 cents this year, will reduce foreign buyers, which lowers speculation locally, and I base this argument from reading Donald Trump’s tweets which is my source of information.

@Mark: Poloz is not credible these days because he is Hot and Cold, Yes and No, In and Out, Up and Down (Lyrics from Katy Perry for anyone over age 25).

One day he wants a 50-cent loonie to boost exports, and the next day he hikes rates after Trump tells Carolyn Wilkins something that she wanted to hear.

#17 InvestorsFriend on 07.13.17 at 7:02 pm

The 5 year fixed mortage rate

#7 Debtslavecreator on 07.13.17 at 6:38 pm observed:
The 5 year cost of funds is 2.65
The 5 year fixed is going up to 2.79

*******************************************
Where is that 5 year cost of funds from? The yield on a bank bond? To what extent do banks fund 5 year mortgages with short-term deposits on which they pay nothing?

#18 YVR - 60% crash on 07.13.17 at 7:03 pm

I’m going to stock up more on popcorn for this one. …

#19 Post on 07.13.17 at 7:04 pm

….sorry, phones will never again have wires ☹️

#20 Guy in Calgary on 07.13.17 at 7:04 pm

Oh no mortgage rates are going up to what they were LAST YEAR and those with variable rate mortgages are still getting a discount. I think there is a lot of jumping the gun here. We have a 30% commercial vacancy rate here in Calgary, almost 10% unemployment and no recovery in sight for crude. The downtown is a ghost town after 8pm. Foreclosures increased and people left the province in droves. Housing went down slightly, but nothing drastic. Stampede is rammed.

BOC rate still has a zero at the front of it and there are still 5 year fixed rates at 2.49%. Wake me up when this actually gets interesting which, let’s be honest, will probably take a while

#21 The real Kip on 07.13.17 at 7:12 pm

I just read that hedge fund report. Down 40% since inception and it seems they are waiting for a US style meltdown in Canada. Even quotes the zero guy, great but, ain’t gonna happen.

Canadians don’t get to use jingle mail, can’t do a strategic default and we are not seeing a Canadian equivalent of 8-million jobs lost that set off the meltdown there in 2008. Canadians will grumble and ultimately eat the interest rate increases but as long as they’re working, they won’t throw the keys to their houses back to the bank.

#22 SimplyPut7 on 07.13.17 at 7:14 pm

#7 Debtslavecreator on 07.13.17 at 6:38 pm

When no variable mortgage is below 3%, even the ones offered by mortgage brokers, and when OFSI goes after unregulated mortgages from mortgage insurance companies (MICs) later this year, then people will start to get into real trouble.

#23 ...more homes dropping of realtor.ca on 07.13.17 at 7:17 pm

Listings drop in the summer time, as always. People go on vacation.

Spring and Fall peak selling months.

You must not live in YVR or 416, #9 Tony to be thinking about buying at a time like this. If in 416, you may well find yourself in an underwater mortgage by 2018 if you buy now.

___________________________

Unlikely “Once the 5 year fixed goes over 4 it is lights out for many” when the current mortgage stress test is at 4.65% there #7 Debtslavecreator.

#24 Happy Housing Crash Everyone! on 07.13.17 at 7:20 pm

#9 Tony , zee #6

Tony you realtor shyster are fooling no one. prices and sales crashing and you going to buy? yeah ok realtor shyster. btw you Ask your fellow realtor shyster why they refuse to close on the deal with Dereck ? prices always go up? Lol

Zee if you going on HOPE the interest rates are going down then you are beyond clueless. the elite who run the world are increasing rates world wide. Mr ponzi puppet is following orders and going to raise rates again and again.
Happy Housing Crash Everyone! :-)

zee

#25 Adrian on 07.13.17 at 7:20 pm

Japan has spent the past 20 years trying to raise rates but being unable to because their demographics are unfavourable for ending aggregate debt deflation without policy intervention.

Professor Steve Keen explains how most of the industrialized world turned Japanese around 2008-9, while Canada, Australia, South Korea, Norway, China and others are set to follow suit in the next 1-3 years.

Rates may go up for a while, but they will not have ‘normalized’ by the next recession. Nor will they again until the debt-to-GDP ratios of industrialized countries return to the 50%-of-GDP levels last seen at the end of WW2. Those low levels enabled credit (= yoy change in debt) to contribute 5-10% of GDP to total demand for the past 2+ generations.

However, getting private debt levels down from their peak during the Great Depression took wartime spending levels (deficits peaking at 25-40% of GDP) to achieve. Though, if we do it without the war it could probably be achieved more cost-effectively…

See the following:

https://www.macrobusiness.com.au/2017/06/steve-keen-on-the-secret-source-of-eternal-australian-growth/

#26 BC_Doc on 07.13.17 at 7:21 pm

I’m about to head Point Roberts, WA for the weekend.
Though part of the United States, Point Roberts is geographically closer to the BC Lower Mainland. Coming from the US, unless you have a boat or airplane, travel is through Canada by car (two border crossings). Point Roberts is next to Tsawassen. If you worked in Vancouver and were inclined, you could reasonably live in and commute from Point Roberts. In terms of RE cost, you would save a bundle:

http://www.pointroberts.com/homes/

These prices reinforce my conviction that Vancouver RE prices are up in nosebleed territory.

#27 Ace Goodheart on 07.13.17 at 7:23 pm

Or you could just tell blog dog Ross that what is about to occur is the mother of all buying opportunities for Toronto area houses.

Real estate goes up as well as down.

Purchase all assets in a down turn, never on the upward cycle (that is when you sell).

If his portfolio is full of CDN rate reset preferreds (like it should have been if he was watching the news this past two years, and was a properly functioning contrarian) then he has just made a lot of money.

Now all he has to do is call the bottom of the Toronto housing market, and buy in.

The market is currently in free fall, so it’s not time yet. I figure max 30% decline and it finds its legs. Some neighbourhoods will be worse than others.

Rentals, on the other hand, are about to become very expensive. Why? What is the one thing a recently bankrupt, power of sale’d former home owner needs more than anything? Answer: a place to live.

Those who are sitting on wads of cash are about to become queens and kings.

#28 Renting for 17 years ? on 07.13.17 at 7:34 pm

Boy oh boy did you ever miss the boat …

That’s funny. He has $500,000 liquid. — Garth

#29 T on 07.13.17 at 7:37 pm

#11 Mark on 07.13.17 at 6:50 pm

You again…

Please find something productive to do with your time. Chanting the same schtick daily must be getting boring by now. I know I’m tired of it, and I’m only skimming through your countless nonsensical posts.

Anyways. Just know that at least 1 person is completely skipping all posts by you or in response to you from here on out. Complete waste of time.

#30 Mattl on 07.13.17 at 7:46 pm

Ross definately effed up renting for 17 years. There were golden opps over those 17 years when money was cheap AND homes were affordable. All great that he has 500k but jesus he should have put 50 down on a detached 10 years ago and he would be miles ahead. He still could have saved. Thats whats lost in all the glee about the coming correction, there is almost no reasonable RE crash that will hurt folks that have been in forever, and most of those rubbing their hands in anticipation are going to be disappointed when homes only go back to 2011 or 12 levels with tightened lending and more expensive mortages.

The guys that are going to really win in a correction are the ones that were in early AND saved. The guys that just saved are going to be immensely dissapointed when they realize what the new economics look like.

Correction or not, the last 15 years was the greatest wealth creation opportunity the Canadian middle class may ever see. Yes the guys that got in the last few years will feel some pain but the large majority of Canadians that got in early – and there are millions of them – made out like bandits.

#31 John Titor on 07.13.17 at 7:47 pm

I moved back with my parents a year and a half ago to save for a house downpayment. I thought that’s what I wanted to do because everybody was doing it. I found this pathetic blog the same time I moved back with my folks and it changed my perspective, At 28yo back then I didn’t even know about an investment porfolio.

Today, I told my parents that I am moving to a $900/month 2 bedroom apartment near downsview station. They told me it’s either I buy or just stay in the basement

#32 Help on 07.13.17 at 7:49 pm

We sold our house on April 20th and the closing date is on August 15th. Since then, wife has been feeling insecure for not having a house. We plan to rent for a year. She is looking at houses every night on zolo and is determined to buy a house in November. It just made me crinch at the thought of diving headlong into the RE market this soon. Also we are not even sure if the buyer will bail on us (the buyer has been complaining that she bought at the peak) What should I tell her?

#33 mouldyinYVR on 07.13.17 at 7:58 pm

‘Oops. Sorry, pal. You might want to arrive home tonight drenched in Axe…’

Hey, Garth …..not sure that would work anymore!

#34 Mark on 07.13.17 at 8:04 pm

“there is almost no reasonable RE crash that will hurt folks that have been in forever, and most of those rubbing their hands in anticipation are going to be disappointed when homes only go back to 2011 or 12 levels with tightened lending and more expensive mortages.”

Prices on individual identical units are already back to 2011/2012 levels, so that boat has already sailed. If the US housing collapse is a model to go by, prices could very well return to those of the mid 1990s. Perhaps even below that because of the near universal use of adjustable rate and short-term financing in Canada and higher ownership ratios, rather than the comparatively lower ownership ratios and long-term financing used in the USA.

As for opportunity costs, the US stock market has what, close to doubled since 2008? While housing hasn’t even recovered to peak 2005 levels? So there has been a massive redistribution of wealth from overleveraged owners of housing, to those who owned equities, gold, or bonds.

#35 Gator Phelps on 07.13.17 at 8:05 pm

Garth, much risk in taking preferreds from 20% up to 25% of the portfolio? Are you keeping the 20% benchmark for your clients? Thanks Ohe Great One!

#36 Milton Realtor on 07.13.17 at 8:10 pm

Now calm down everyone, I happen to be one of those “shyster” sleazy, Audi leasing realtors you speak of. Please, no need to worry if you recently overpaid or want to buy – you can’t loose – everyone wants to own a house in Milton! Why the time to buy is now, now, now. We have homes with a lot of character such as puke beige aluminum siding (very modern) and yes, under that 25 oz milky beige carpet is high grade particle board, glued down of course, who really needs screws? The creaking noise add instant charm and character. Why we have the mega CN rail track and 400 acre depot yard right in the heart of our great community. We have limited GO services that always run late and heck, parking is always there for those who wake up at dawn. We have 32 foot lots (really who needs more than that?) we have resturants that are below mediocre. And what about our schools that rank way below provincial standards? How can you loose? People come on, don’t forget about the lush gardens at the Halton Municipal waste dump, where the rich folks from Oakville come to dump their old beat up couches. Like seriously, now is a GREAT time to buy, just blend and extend, common you know you want to? And if you could do so soon, I for one would appreciate it as my next lease payment is at the end of the month.

See you at the open house this weekend :-)

#37 Blobby on 07.13.17 at 8:11 pm

I’m owed a lot of usd, around $200k. It was due two weeks ago, but likely now to get next week.

In just one week, I’ve lost 10% on it!

Damn!

So thoughts.. when I get it.. do I hold, and see if cad falls? Or sell, as it looks like the loony is heading back to parity again?

Thoughts?

#38 yorkville renter on 07.13.17 at 8:12 pm

Got extra $$$?

It’s WAY easier to pay down a $400k mortgage versus $800k with that extra scratch.

#39 Smoking Man on 07.13.17 at 8:17 pm

Next?

http://century21-stmaarten.com/property/philipsburg-boardwalk-beach-bar-business-for-sale-htm

#40 Wheretonow on 07.13.17 at 8:18 pm

Getting tough to relax in the west, the B.C. interior first had flooding then mosquitoes now the place is burning up, the rocky mountain national parks are completely overrun by touristas, and now tornados and the price of oil on the prairies is sinking. Wonder if the value of real estate and quality of life (yum seafood!) would work out on the east coast….??

#41 Pete from St. Cesaire on 07.13.17 at 8:20 pm

no offence, but renting for 17 years= loser
———————————————————
The Swiss are mostly renters. Home ownership there is very low compared to here. So…..

#42 Ahhhhhh Ahhhhhh on 07.13.17 at 8:21 pm

I’m writhing in pain, wiggling from the shear magnitude of this collapsing market. They’ve come to take my Audi. The bills are pilling up, my wife is asking what’s happening, I told her a few months ago, “it’s different this time” and “they’ll never raise rates.” She is starting to figure out I am an idiot. What will I do with my high school diploma and cheap suits that shine when the sun hits them at an odd angle? Oh who am I kidding, Milton, bites, it blows, it sucks eggs. People from Toronto are laughing at us! We thought we were so cool, so hip? What happened? Why have you stopped buying the BS we were shovelling a few months ago? Please come back buyer, maybe we will be the New Vancouver? Yes? Please come to my open house this weekend. The semi I have listed has a beautiful view of the dump site? Think of the train noise like the shores of the sea, gently crashing into your window at night. The smell – that’s just methane – 100% safe and natural, honest! Come on, rates are cheap? Please buy here, PLEASE! ahahahahahhhhhhhh

#43 Yaroslav on 07.13.17 at 8:24 pm

http://www.cbc.ca/news/business/royal-lepage-housing-prices-1.4202665

Nuff said.

#44 Embrace Steel Town! on 07.13.17 at 8:30 pm

Hello I am from Hamilton, we love our polluted city. Please continue to buy our rundown crack homes. Where else can you buy a crack shack and turn it into a modern hipster abode? Why we don’t even need to wash our cars here, the layer of smog creates a nice protective barrier that inhibits rust. Embrace pollution, make it your friend and please continue to buy our homes.

Thank you for your time.

Hippy the Hipster

#45 Jimbo on 07.13.17 at 8:31 pm

Is it just me or are realtors keeping up the SOLD signs on those front lawns for an excessively long time?

#46 waiting on the westcoast on 07.13.17 at 8:38 pm

Mark – since all you ever do is regurgitate the same arguments over and over, why don’t you just make a WordPress page with your arguments and number them. Then you can just write the numbers go forward with the link to your page.

#47 JustMe on 07.13.17 at 8:38 pm

#24 Adrian on 07.13.17 at 7:20 pm

Professor Steve Keen explains how most of the industrialized world turned Japanese around 2008-9, while Canada, Australia, South Korea, Norway, China and others are set to follow suit in the next 1-3 years.

See the following:

https://www.macrobusiness.com.au/2017/06/steve-keen-on-the-secret-source-of-eternal-australian-growth/

——————————————————————–

In figure 10 at the link you can see that the growth in private debt in China parallels the rise in Vancouver house prices.

#48 I Love Homes That Are Held Together With Glue! on 07.13.17 at 8:40 pm

I think particle board homes have gotten a bad wrap, I myself find them charming. Think of the texture? And hot glue, a nice modern touch. And just think if something starts falling apart in your new Milton home, you can just whip out your hot glue gun and PRESTO, problem fixed. I also love the Halton Dump site, those trees they put around the perimeter to hide all municipal waste are really very nice to look at. Mr sleazy Milton realtor, I will come to look at your lovely semi and glossy suit because who really needs adequate school ratings for their children? Not me! Please put in some of those yummy Pillsbury cookies in the oven, I love the nauseating smell.

#49 Leo Trollstoy on 07.13.17 at 8:42 pm

CAD isn’t going to 50 cents. Not sure why posters say this. Canadian economy is solid. Tech jobs and jobs in general are plentiful. Only caveat is that the employee is competent. Inflation is healthy. That’s why gold sucks and BoC is jacking rates up

Not rocket science. Too Easy.

#50 Leo Trollstoy on 07.13.17 at 8:44 pm

Toronto home prices are solid. Just ask anyone to find a reasonably priced home in North York or Markham or Toronto proper. Forget it. Link me something in Toronto real estate that is reasonable. Lol

#51 Deplorable Dude on 07.13.17 at 8:47 pm

Love me some Preferreds….my original 2015 purchase of ZPR is now almost back to breakeven….and my top-up I brought in the dip is up 17%…..all the while churning out a nice divi…

In other news……expecting the Trumpster to drop the hammer big time this month…high level arrests?….various Twitterverse rumblings of something big coming……one journalist referred to it as ‘Christmas in July’

Hilarious to watch the latest ‘muh Russia’ blow up in the Dem’ faces…..DT Jr emails….turns out the failed entrapment by the Russian Operative, was let into the country specially by Obama’s DoJ Loretta Lynch…oh what a tangled web they weave…

#52 waiting on the westcoast on 07.13.17 at 8:48 pm

Help says… “We sold our house on April 20th and the closing date is on August 15th. Since then, wife has been feeling insecure for not having a house. We plan to rent for a year. She is looking at houses every night on zolo and is determined to buy a house in November. It just made me crinch at the thought of diving headlong into the RE market this soon. Also we are not even sure if the buyer will bail on us (the buyer has been complaining that she bought at the peak) What should I tell her?”

To the Buyer – ask her how much she thinks it dropped. Then tell her to pay you half the difference and you will let her walk from the deal.

To your wife – assuming the buyer cannot cope with your suggestion. Tell her to ManUp. The ride down is going to take around 3 years. Rent a place nicer than what you lived in… The gap will make the nesting instinct a little more subdued.

#53 JustMe on 07.13.17 at 8:54 pm

“I’ve been renting for the last 17 years, or all of my adult life, which is fine with me but not for my wife. We’ve saved up over a half million in cash and funds”

————————————————————————-

David Chilton wrote a successful book called “The Wealthy Barber”. Garth should write a book called “The Wealthy Renter”. That should sell when the housing crash starts.

#54 Kim on 07.13.17 at 8:55 pm

#39 Jimbo on 07.13.17 at 8:31 pm

Is it just me or are realtors keeping up the SOLD signs on those front lawns for an excessively long time?
—-

I have one on my townhouse complex for over a year.

#55 17 renting !?!? on 07.13.17 at 8:56 pm

he should be grateful his wife didn’t leave him. No balls . Too late now ……2nd longest bull market ever . This poor guy is likely to watch that $500,000 get chopped . Don’t sell in a panic or the wife will surely leave you

#56 yorkville renter on 07.13.17 at 8:56 pm

#37 – Yaroslav – you quote a report from Royal LePage and think it’s authoritative?

News Flash – Service Provider releases report that says their service is needed now more than ever! Details at 11

#57 JustMe on 07.13.17 at 9:05 pm

#24 Adrian on 07.13.17 at 7:20 pm
Japan has spent the past 20 years trying to raise rates but being unable to because their demographics are unfavourable for ending aggregate debt deflation without policy intervention.

Professor Steve Keen explains how most of the industrialized world turned Japanese around 2008-9, while Canada, Australia, South Korea, Norway, China and others are set to follow suit in the next 1-3 years.

————————————————————————-

Japan’s population is declining. see graph

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/02/24/20160227_japanpop.jpg

China’s population will decline due to their previous one child policy. Europe’s population was projected to decline, though that is now in doubt due to immigration. The US population was projected to increase, though that is now in doubt due to their new president. see graph

https://populyst.files.wordpress.com/2015/09/screen-shot-2015-09-25-at-1-05-26-pm1.jpg

Perhaps Canada’s population will continue to grow. That might keep the Canadian Ponzi economy going.

#58 Debtslavecreator on 07.13.17 at 9:07 pm

Cost of funds is based on several factors including the 5 year bond yield , liquidity premium, costs such as operating and defaults
It can vary modestly between FIs
The 4.64 insured mtg qualifying rate is only for insured mortgages done since last fall
Vast majority of borrowers were qualified at the much lower contract rate and a large number of recent mortgages done in Toronto recently are not insured (ie at least 20% down)
A lot of people who bought in the last 3-4 years and /or who refi’d and now have large mortgages will be in trouble once the rates get to 4 or so
Payment jumps 4-600 for many

#59 White Crock BC on 07.13.17 at 9:10 pm

I’M NOT POLOZ on 07.13.17 at 7:01 pm

One day he wants a 50-cent loonie to boost exports, and the next day he hikes rates after Trump tells Carolyn Wilkins something that she wanted to hear.
===============================

Still no proof or source that he wants a 50 cent loonie.

Give it up.

#60 White Crock BC on 07.13.17 at 9:12 pm

Dow hits new record while TSX is at 2007 levels.

Ten wasted years.

Ever heard of rebalancing? — Garth

#61 where do you find these people? on 07.13.17 at 9:13 pm

Ross is asking someone when to buy after renting for 17 years in Toronto?

this can’t be real.

#62 Flinging Monkey on 07.13.17 at 9:23 pm

“I’ve been renting for the last 17 years, or all of my adult life, which is fine with me but not for my wife. We’ve saved up over a half million in cash and funds, but really have been turned off from buying even though we’ve been looking for the last 4 years. Anyway, this is the type of questioning my wife is asking me, that I don’t have an answer to.”

HUGE RED FLAG! Your wife wanted you to buy in Toronto because she can Snapchat or Instagram pics and selfies of her home (not yours, but she will own it once the unexpected happens).

Toronto is a city where men have to fulfill traditional roles like Men from the 1950s, while women don’t have to. DO NOT BUY A HOME.

I’m giving you the best advice. Do not let your wife force you to buy a home. She is not acting in your, or your relationship’s best interests.

One day you will find out the truth about the system in Toronto….

#63 jess on 07.13.17 at 9:30 pm

Bermuda and Curacao funds used to launder $125M fraud proceeds …
https://www.offshorealert.com/adg-absolute-diversified-global-fund-enterprise-emergi

Jun 21, 2017 – EEMF and Cistenique Investment Fund handled $1.4B for Malaysia’s 1MDB & are biggest shareholders in insolvent Russian bank whose boss embezzled $2B … Breaking News Affecting Offshore Financial Centers; Largest Searchable Database of Offshore Information; Blogs by Leading Industry

#64 Wrk.dover on 07.13.17 at 9:30 pm

#58 White Crock BC on 07.13.17 at 9:10 pm
I’M NOT POLOZ on 07.13.17 at 7:01 pm

One day he wants a 50-cent loonie to boost exports, and the next day he hikes rates after Trump tells Carolyn Wilkins something that she wanted to hear.
===============================

Still no proof or source that he wants a 50 cent loonie.

ooooooooooooooooooooooooooooooooooh

You can’t handle the truth!

#65 Like Father, Like Son on 07.13.17 at 9:31 pm

Could one of the deplorables tell me if little Donny Trump Jr. (and his Tweets) are now part of the “fake news”?

#66 acdel on 07.13.17 at 9:52 pm

#14 Serfin’ Safari

What a stupid statement by you; obviously you have learned nothing.

To each their own, who are you to judge???

#67 Joe on 07.13.17 at 9:53 pm

My money is on the Hedge Fund, and in a few years we will all be seeing a new movie: The Big Short 2 – Canuckistan.

#68 yorkville renter on 07.13.17 at 9:59 pm

turns out the failed entrapment by the Russian Operative, was let into the country specially by Obama’s DoJ Loretta Lynch…oh what a tangled web they weave…

You don’t actually believe that do you? Because DJT said it, it’s true? When did this lawyer get into the US?

#69 The end is near on 07.13.17 at 10:00 pm

A buddy realtor listed 4 condos all in the same building, he owns them all. He sold two immediately and the other two nothing, not a showing, not a phone call absolutely nothing. Two condos in the $350,000 range sit idle. He says the market is dead…..What’s next?

#70 yorkville renter on 07.13.17 at 10:01 pm

#52 David Chilton wrote a successful book called “The Wealthy Barber”. Garth should write a book called “The Wealthy Renter”. That should sell when the housing crash starts.

That book exists already.

https://www.dundurn.com/books/Wealthy-Renter

#71 waiting on the westcoast on 07.13.17 at 10:03 pm

#9 Tony… My experience is that 90% of people blow their brains out just as the light is about to appear at the end of the tunnel. Patience…

#72 crowdedelevatorfartz on 07.13.17 at 10:04 pm

@#35 Milton Realtor

THAT was hilarious !

#73 paulo on 07.13.17 at 10:05 pm

Still holding my call on mortgage rates:
1) four percent (4.0%) first mtg not later than December
2018
2) five years out minimum seven percent (7.0%) First mtgs both rates only for well qualified and documented
debtors.
3) The days of sub prime mortgages anywhere close to standard bank rates are gone expect a 5% premium if you can even source one
4) the bulk of the correction or crash depending where you live will be in the book in 24 month’s time from now.
5) expect a recovery with modest yearly increases likely in line with core inflation numbers , the massive run of greed and debt stupidity that is coming to pass presently will likely not been seen again in most peoples lives that are reading this blog!

#74 crowdedelevatorfartz on 07.13.17 at 10:07 pm

@#41 ahhhhhh ahhhhhh

OMG ! Milton Realtor is schizophenic !
My hero !

#75 Smoking Man on 07.13.17 at 10:08 pm

You bugger’s all know in your heart, Im a gifted writer of sorts.

I have 11 books that I haven’t published yet. Makes deplorables the one you know about look like a kittens litter box.

Folks who bought my place, I”m leaving a present for their little kid. My gazibo and my drinking writing chair. Will be worth a fortune when my books out sell that wanker from England. JK something.

But I can’t publish while a resident of Canada. No way in China im sharing my future windfall with the communist govt of Canada.

I hate T2. He donated 20 million of our hard earned tax dollars to the Clinton foundation.

Leftes are crooks and vindictive ass holes.

#76 SoggyShorts on 07.13.17 at 10:09 pm

#14 Serfin’ Safari on 07.13.17 at 6:57 pm
no offence, but renting for 17 years= loser
—————————————————–
Why? I could liquidate my portfolio and buy a house cash, would that make me a winner? Just so I have to make my own repairs, pay property taxes, and sink a huge chunk of my networth into one asset?
No thanks.
I plan to rent for life. Even if my portfolio were 10x the size it is I would still rent.

#77 crowdedelevatorfartz on 07.13.17 at 10:10 pm

@#47 I love Glue !

For the love of GOD stop it!
I’m laughing so hard my stomach hurts…
I cant stop farting….my underwear is ruined.
Go AWAY!

#78 S.Bby on 07.13.17 at 10:13 pm

#27 & #54
Same poster.
Likely is a realtor.

#79 Good for a laugh on 07.13.17 at 10:24 pm

I come here many for a chuckle but also to see happy housing crash guy write screaming in financial pain everyday. I have to think some people bought intelligently. Here’s my scenario, bought a condo earlier this year for 340k (at Peak units shot up to 409k) first time home buyers. Wife and I combined income is around 140k a year. Still able to save over a thousand a month. Plan on renting it out in 4 or 5 years and buying something else. Curious on what you bears think. As I said there has to be other people who bought some what intelligently.

#80 Lifexprt on 07.13.17 at 10:27 pm

Smokey

its more like $241 million as that is the overall funding package and Clintons manage the entire slush fund

As for real estate, crickets, Mississauga is quiet, there are sales here and there but at least 20% down from the March peak

#81 Hans on 07.13.17 at 10:29 pm

Out of curiosity….why dont we have 25 term mortgages in Canada? At first glance, I would imagine that it would remove a lot of the renewal risks that exist in the market today. Especially with rock bottom rates – who wouldn’t want to lock in the entire term of their repayment at today’s rates?

Garth, I’m not in the know on this one….how did that play out in the US during the housing crisis?

#82 Mountain Dew on 07.13.17 at 10:29 pm

Meanwhile, the Vancouver condo market remains on fire. A 41 year old 2 bedroom apt in ORIGINAL condition (no updates, ever), just sold for more than 150K over ask in Kitsilano. It was listed for $889K and the realtor said it sold for $1,070,000. There is a disconnect between the gloomy outlook of this blog and the continued craziness happening in Vangroovy.

#83 Serfin' Safari on 07.13.17 at 10:29 pm

#75 SoggyShorts on 07.13.17 at 10:09 pm
#14 Serfin’ Safari on 07.13.17 at 6:57 pm
no offence, but renting for 17 years= loser
—————————————————–
Why? I could liquidate my portfolio and buy a house cash, would that make me a winner? Just so I have to make my own repairs, pay property taxes, and sink a huge chunk of my networth into one asset?
No thanks.
I plan to rent for life. Even if my portfolio were 10x the size it is I would still rent.

money is not wealth
assets are
i wouldn’t call a person a loser

#84 SoggyShorts on 07.13.17 at 10:30 pm

#29 Mattl on 07.13.17 at 7:46 pm
Ross definately effed up renting for 17 years. There were golden opps over those 17 years when money was cheap AND homes were affordable. All great that he has 500k but jesus he should have put 50 down on a detached 10 years ago and he would be miles ahead.
————————————————-
There are huge gaps in our knowledge about “Ross”
Maybe he just started making good money recently, and that portfolio is relatively new. Maybe he was just scraping by 17 years ago. Also housing hasn’t gone up that much everywhere.
For example in Calgary buying a house 17 years ago and selling today might mean a 300K increase. Then you have to deduct all taxes and repairs and other expenses you paid those 17 years. Only then can you compare it to a well balanced portfolio.

Of course everyone who didn’t buy and sell a house in Van or TO at the right time “missed out”, but the same could be said of virtually every stock in the world.

#85 Smoking Man on 07.13.17 at 10:32 pm

I’m to old to fight commies, I was young once and on side. Eat the rich.

I grew a brain and some wealth.

Now I got to get out of this place.

https://youtu.be/TpNWSW49IBM

#86 Serfin' Safari on 07.13.17 at 10:39 pm

@soggyshorts

tragedy and hope:

Money and Goods Are Different

Thus, clearly, money and goods are not the same thing but are, on the contrary, exactly opposite things. Most confusion in economic thinking arises from failure to recognize this fact. Goods are wealth which you have, while money is a claim on wealth which you do not have. Thus goods are an asset; money is a debt. If goods are wealth; money is not wealth, or negative wealth, or even anti-wealth. They always behave in opposite ways, just as they usually move in opposite directions. If the value of one goes up, the value of the other goes down, and in the same proportion. The value of goods, expressed in money, is called “prices,” while the value of money, expressed in goods, is called “value.”

#87 crowdedelevatorfartz on 07.13.17 at 10:41 pm

@381 Mountain Doo
‘There is a disconnect between the gloomy outlook of this blog and the continued craziness happening in Vangroovy”
+++++

total agreement.
It will just take a bit longer and the fall will be uglier

#88 InvestorsFriend on 07.13.17 at 10:41 pm

Volatility is the Friend of the Inteeligent Investor

#59 White Crock BC on 07.13.17 at 9:12 pm…

Dow hits new record while TSX is at 2007 levels.

Ten wasted years.

Ever heard of rebalancing? — Garth

*******************************************
Indeed not to mention try doing the calculation of the return made by someone who started at the peak in 2007 and who invested equal amounts annual from then until now. It will definitely not be zero. Then add in dividends.

U.S. stock market bashers chanted for years that nobody has made any money since the year 2000. (Which was not true anyhow.) But then the U.S. stock market finally took out the all the old highs sometime in 2012 and has never looked back. The “nobody has made any money in the rigged stock market crowd” seem to have fallen silent.

Pointing out that the TSX is at 2007 levels should be done to suggest it is a bargain now, not something to avoid.

To the (intelligently) brave go the spoils. The meek shall inherit nothing, actually.

#89 Smoking Man on 07.13.17 at 10:45 pm

The wife she dont look like that anymore.
But when I look at her eyes she still looks like this.

Talk about luck.
https://youtu.be/1l0xpkk0yaQ

#90 sound like a gambler rather than an... on 07.13.17 at 10:47 pm

To the (intelligently) brave go the spoils. The meek shall inherit nothing, actually.

…….

investor. ‘Brave’? lol

#91 Cici on 07.13.17 at 10:47 pm

Apparently, they intend to keep this one-trick pony in the race, broken legs and all:

http://business.financialpost.com/news/economy/imf-warns-canada-on-housing-trade-urges-caution-on-rate-hikes/wcm/4c8fa903-dc1a-4e5a-99a9-5b6ec806708c

http://globalnews.ca/news/3593610/home-prices-in-canada-will-keep-rising-despite-interest-rate-hike-royal-lepage/

Of course, that probably won’t end well either, as said horse will at some point have to be put out of its misery :-(

#92 Raging Ranter on 07.13.17 at 10:50 pm

@#78, my wife and I have a similar combined income. No way would we buy a condo for $340K. A detached house, were such a thing available for that price, yes, but not a condo. The condo we’re in (3BR townhome in Orleans) we could buy for $300K. Won’t touch it at that price, we’ll keep renting. Wake me up when it’s $250K. You spent $340K for a condo, you never said what kind, but I assume it’s not a 3BR town. Probably a 2BR stack of worse, a box in the sky. You’ve said nothing of closing costs, property taxes, condo fees, opportunity costs due to foregone investment income on the down payment, or anything like that. Because if you did, your “intelligent” purchase wouldn’t sound so intelligent. You want to know what we think? I think you blew it, and you’re here hoping we will tell you otherwise.

#93 Mark on 07.13.17 at 10:50 pm

“Out of curiosity….why dont we have 25 term mortgages in Canada?”

Technically the reason is found in the Interest Act, which effectively forbids banks from fixing the rate of interest on a mortgage loan longer than 5 years (or precludes liquidated damages associated with cancelling such a loan).

I’m not sure of the exact reason why such provisions were added to the Interest Act. However, it is worthy to note that in the United States, Fannie Mae and Freddie Mac, “Government Sponsored Enterprises”, effectively underwrite the long-term mortgage bond market, facilitating the transformation of shorter-term deposits into longer-term loans. So in the United States, there really isn’t an organic match between deposits and long-term (ie: 30-year term) mortgages that exists truly in the private sector. Thus, the US financial system inherently runs duration mismatched and is highly vulnerable to unfavourable shifts in long-term interest rates.

For instance, in 2008, long-term interest rates on mortgage debt exploded, as a result of the loss of market confidence in Fannie Mae/Freddie Mac’s solvency. Most of the US financial sector was thus decapitalized. Only the the purchase of trillions in long-term mortgage bonds by the Federal Reserve, as well as Congress passing legislation to increase the guarantee of Fannie Mae/Freddie Mac was confidence restored. But the US financial system basically faces decades of poor performance going forward as long-term interest rates rise and maturity transformation becomes an Achilles’ heal, not a benefit.

Contrast this with Canada, where borrowers, not lenders, take interest rate risk. As interest rates go up, bank loan volumes and balance sheets may shrink, but its quite manageable. Canadian banks do not face losses due to duration mismatch in their portfolios as interest rates change. It leads to a more stable financial system overall. People who want long-term stability as to their housing costs can do things the old fashioned way — save up and buy their houses in cash, rather than taking on large amounts of credit for their purchase. As Canadian RE collapses, saving up and buying Canadian RE at a reasonable age will be more realistic than ever before.

#94 Pete on 07.13.17 at 10:52 pm

Flinging Monkey

One day you will find out the truth about the system in Toronto….

I have my theories on “Toronto women” and “the system in Toronto”. It’s a terrible place for men and now I think I’m not alone.

#95 InvestorsFriend on 07.13.17 at 10:53 pm

Why no (affordable) 25 year mortgages in Canada?

#80 Hans on 07.13.17 at 10:29 pm asked:

Out of curiosity….why dont we have 25 term mortgages in Canada?

*****************************************
That is an excellent question. I tried very hard to find an answer to that some years ago.

Banks cannot take the risk of holding 25 year mortgages on their books as they fund with much shorter term deposits (generally max five years as in GICs). But same applies in the U.S..

In the U.S. the solution was to securitise the mortgages and pass the interest rate risk on to investors. It works very well in the U.S. (and was not the cause of the financial crisis).

In Canada banks face rules around securitising CMHC mortgages. I believe only CMHC can securities those. For whatever complex reasons they simply don’t offer and then securitize 25 year fixed mortgages (and FULLY OPEN to prepayments upon paying a minor fee as in the U.S.).

I was never able to find any reason after contacting CMHC and others. Almost like we don’t do it because we just don’t. There was a claim with no proof that fixed income investors in Canada would never buy the securitized mortgages.

#96 Stock Picker on 07.13.17 at 10:58 pm

Good call on the prefs. Making out like a bandit on that file. Bought at $11…holding at $14……plus……plus the divvie…..very sweet…..thx. But……what’s next? As I’ve said….I think the numbers are dummies up in EU for political reasons…..circle the wagon……but phony none the les….so that’s out. EM……too freaking dicey as rates rising will suck liquidity out like a Hoover on steroids. They are enormously credit heavy here as there are few investment opportunities outside real estate and luxury auto. ……people in Asia have generally no access to foreign markets or local…..very restricted.

They’ve imported inflation here to beat the band and a mini crash is not only likely…..it’s necessary. You might be following the rapid expansion of the industrial reits e commerce function…..growing…..paying great divs……and have much upside as space is squeezed both in Canada and the US. AAR.un up 50% ytd……..and likely ginormous upside……trading low p/e…..

FYI.

#97 Smoking Man on 07.13.17 at 11:04 pm

When the machine nukes you over area 51.
Its all in the Deplorable book that no one bought.

https://youtu.be/R044sleOW6I

#98 Raging Ranter on 07.13.17 at 11:14 pm

Serfin’ Safari, so by your “logic”, a person with $10 M in liquid wealth is not wealthy, but a person with $0 in liquid wealth but a $10 M house is? And you typed how many words to make such a foolish argument?

#99 TS on 07.13.17 at 11:41 pm

#91 Raging Renter:

What do you mean there’s no detached houses in Orleans for under 340K?

I just found at least 20 of them north of Innes Road in all types of neighbourhoods.

https://www.remax.ca/on/ottawa-real-estate/na-596-deancourt-crescent-na-crea_id17892824-lst/

The listing is so old there’s still snow in the picture.

There’s no 3 bedroom condo townhouses in Orleans that sell for 300k. Maybe freehold townhouses

#100 SoggyShorts on 07.13.17 at 11:51 pm

@Serfin’ Safari

Perhaps that is how you and some book define wealth, but I think having total financial freedom is what being wealthy means.
There’s a reason they call it “house poor” not “house wealthy”

What’s the point in being tied to one place and shovelling money into it? Just so you have something tangible to show how much you have amassed?
I can touch my home too.

If the price:rent ratio favours renting……

One of the basic keys to investing is diversification, and a one asset strategy is the opposite of that.

#101 you stab'em we slab'em on 07.14.17 at 12:01 am

waiting for the other shoe to drop….

#102 april on 07.14.17 at 12:18 am

So Vancouver/Lowermainland condo prices keep rising, does this mean they’re also going to be soon out of reach of first time buyers?

#103 yorkville renter on 07.14.17 at 12:32 am

#99 If the price:rent ratio favours renting……

Ive said here before that my condo fees + taxes is about 40% of my rent… i was wrong, it’s more. A similar layout, unrenovated unit, in my building is for sale and their condo fee is just north of $1000 (I also have a terrace, which I think increases the monthly fee). Taxes would be another $300+ a month. $1300 is over 50% of my rent.

FWIW, the place downstairs is listed for $800k… and has a tenant until July 2018 at $2800 (also more than what I pay!). For that rent to cover the maintenance fee + taxes at that price you’re looking to drop $500k plus closing costs… which is insane to break even.

#104 Calgary Catastrophe on 07.14.17 at 1:17 am

No 30 year mortgages in Canada because Lobbying by entrenched banking cartels in canada.

#105 Nonplused on 07.14.17 at 1:32 am

“Should work well.” should be “should work as well” If your wife doesn’t work, you don’t have to either. Get a motorcycle, not a wife.

#106 Deplorable Dude on 07.14.17 at 1:47 am

#67 Yorkville Renter – ‘You don’t actually believe that do you? Because DJT said it, it’s true? When did this lawyer get into the US?’

Public knowledge….now….

http://thehill.com/homenews/administration/341788-exclusive-doj-let-russian-lawyer-into-us-before-she-met-with-trump

#107 Tony on 07.14.17 at 2:11 am

Re: #72 paulo on 07.13.17 at 10:05 pm

The Canadian dollar would have to crash and burn down to 30 cents U.S. for that scenario to take place. Mortgage rates will probably be about the same as they are today at the end of 2018. Around 2.5 percent for a 5 year mortgage and probably around 1.75 percent for a 5 year mortgage 5 years later.

#108 Tony on 07.14.17 at 2:13 am

Re: #23 Happy Housing Crash Everyone! on 07.13.17 at 7:20 pm

I’m giving up my job and telling everyone I know to sell their house as soon as they can. There will never be a better time to sell a house than today.

#109 jane24 on 07.14.17 at 2:24 am

Wen I fly I buy the Economist magazine for in-flight entertainment. Just back from Lyons ,France so read this premium British economical magazine. Articles on both the death of the Cdn RE market and suspected fall-out. Also the worse death of BC RE with the Liberals out and the NDP in. It is always illuminating to get out of the local media fog, no matter where you are in the world and read more independent thought.

#110 Tony on 07.14.17 at 2:26 am

Re: #66 Joe on 07.13.17 at 9:53 pm

You’re probably confusing hedge funds with bear funds. Hedge funds may or may not make money in a down market. The goal of a hedge fund is not to lose money. It looks like the goal of the central bankers the past 6 or 7 years has been to put hedge funds out of business to better monopolize the entire stock market for themselves.

#111 Adrian on 07.14.17 at 3:01 am

#46 & #56 Just Me

If you read & watch more of Professor Keen’s lectures (available on YouTube), he makes it quite clear that price changes correlate very strongly with *domestic* private debt acceleration in every country he has crunched the numbers. He even discusses a paper he has written with colleagues (not yet published) in which they demonstrate causality: price changes follow debt acceleration by ~3 months. Whether China is contributing to our RE insanity is largely besides the point, as we have done this almost entirely to ourselves.

(China’s exploding debt levels have led to their own RE bubble, especially in Tier 1 cities, so I expect any spillover effects in YVR, San Francisco, Sydney, etc. is more about their richer citizens trying to consolidate some wealth outside of China before *their* bubble bursts.)

As for population, I basically agree. Short of mass immigration to boost the population of soon-to-be-indebted, aggregate debt can’t keep accelerating, which means prices can’t keep rising. With private debt-to-GDP this high, credit will soon turn negative, which will subtract from total monetary demand and create debt deflation. Boosting population is one way to raise the upper limit on aggregate private debt and keep the music playing for a while longer…

#112 nubbers on 07.14.17 at 3:06 am

“Why is expensive money on a low priced house better than cheap money on a high price house?”

Because the debt that you take on is fixed at the time of purchase (as has been pointed out by Garth many times), whereas over the time of your mortgage, the cost of money and the price of houses will tend to revert towards the mean.

Expensive money, low priced house -> the cost of the mortgage is more likely become cheaper, while the house is more likely to gain value (only a benefit if you sell up).

Cheap money, high priced house -> the mortgage will tend to become more expensive, whereas the house will lose value. Some argue that a house losing value is no problem, but just try moving house when you have significant -ve equity.

‘Ross’ has the perfect opportunity in sight. I hope he’s man enough to ignore the realtors goading him in the comments, while they hide behind the anonymity afforded here.

#113 nubbers on 07.14.17 at 3:36 am

I am going to disagree with my earlier comment.

The ‘perfect’ opportunity (for buying a house) is still a few years off and it’s not perfect. Even if interest rates are 5% in a few years time, that is still low historically (unless it is different this time?). interest rates vary over decades and reverting to the mean might be expected to be upwards.

Let’s just say, anyone buying in a few years time is going to be much less worse off than those who bought in Toronto earlier this year, who are totally doomed.

#114 The Great Gazoo on 07.14.17 at 5:33 am

Stunning article from David Rosenberg; suggests we are going to see a few more rate hikes. Here is the headliner and a key excerpt below. Wow what a shift in such a short period.

http://business.financialpost.com/investing/david-rosenberg-the-bank-of-canada-is-behind-the-curve-so-get-ready-for-more-rate-hikes/wcm/e813f4d6-7511-43dd-98a2-698dc97911b0

David Rosenberg: The Bank of Canada is behind the curve, so get ready for more rate hikes

The BoC not only raised its GDP forecast for this year and next, but sharply bolstered its confidence level in these projections

………

“That means that the Bank is not stopping at one, or even two more hikes.”

#115 Nick on 07.14.17 at 6:30 am

If you have a strong income and minimal expenses (save a good chunk every month) higher interest and lower prices is preferable to what we have now.

#116 Nick on 07.14.17 at 6:44 am

Penal is the upside for ZPR at this point? Will it settle around here or are we expecting share price appreciation over the next little while?

#117 Raging Ranter on 07.14.17 at 6:49 am

I live in a hybrid condo townhouse which is actually freehold. This is a very common arrangement. There are strata fees, but they are low. The owner owns the actual condo unit freehold (owner owns the yard and is responsible for all exterior maintenance) but the complex is still governed by a condo corporation. The deed is freehold, but they all answer to the condo corporation just the same, including a litany of rules. So I consider this a condo, even though the units are actually freehold. And every single one of them in my complex that sold this spring – 4 so far – went over $300k, including one that went for 309 last week. Some went as high as 329. And I should have been more specific – yes there are detached available in Orléans for under $340k, but none I’m interested in. The ones I’d be willing to pay $340 for are all in the $400 and up range.

#118 maxx on 07.14.17 at 7:32 am

#3 jay on 07.13.17 at 6:20 pm

“Interest rates use to fluctuate up or down 1% monthly in the 1980’s https://www.ratehub.ca/5-year-fixed-mortgage-rate-history

Bought our first house in the 80’s…..given those rates, we paid that sucker (literally) off in 4 years. Rinse and repeat with the cottage, 2 years.

Debt is such a destructive force. Destroys the present, causes untold stress thereby destroying health, eats up extremely precious wealth-building time that could have resulted in a fabulous retirement……..

#119 maxx on 07.14.17 at 7:43 am

#10 tomohawk52 on 07.13.17 at 6:48 pm

“Apples go on sale and people want to buy more apples. Houses go on sale and people start worrying.”

That’s because they’re nowhere near “on sale” yet. Anyone buying now will overpay and contribute to putting a floor under realtard-set, phoney-baloney “values”……..until the next rate hike.

#120 Could not agree more... on 07.14.17 at 7:52 am

#108 jane24

Agreed!

Live in the EU. Read this Blog daily.

RE in Canada: CULT & OBSESSION capture it best.

Many will be very upset as prices set to go down substantially.

Interesting to read The Economist then, after it has happened (and of course, Comments on this Blog).

#121 Good for a laugh on 07.14.17 at 7:54 am

@raging renter
I’m talking gta, but buddy you gota relax. Ur angry it’s ok. I’m hoping prices do come down too so I can buy something else. Real estate is a long term game. Also 340k for detached anywhere near the gta will never happen again.

#122 Smoking Man on 07.14.17 at 8:07 am

Hey Bottoms Up.

Care to comment on this.? The plan being exicuted before your eyes. 16 step crush real estate plan followed by a cycle of rate hikes.

The on purpose destruction of our way of life.

Here is why.

https://www.spencerfernando.com/2017/07/13/insanity-meeting-climate-goals-destroy-standard-living/

#123 John on 07.14.17 at 8:27 am

Times Up. What’s next?
Yesterday a big report was issued on Canada’s situation by the IMF. They cautioned that we’re vulnerable not just on housing but on oil price decline and trade wars. They reported that our banks are solid but vulnerable if a recession hits and so on. They cautioned on raising interest rates too much.
So why did Poloz raise rates when measures to control the house buying frenzy we’re having an impact and out of nowhere the odds he would raise rates jumped from small to 100%?
Friday the 14th is Bastille Day. So Saturday is the 15th. Obviously. The big deal is that July 15th is the 100 day end point Trump gave Chins to get North Korea under control. The 100 day window is right out of Trumps Art of the Deal playbook. Trump recently noted that China has failed on the North Korea file. Next? Expect China to be labelled a currency manipulator and trade bad boy by Trump’s Cabinet team.
So how does this relate to a summer rate hike in Canada, despite the IMF’s caution? Simple: NAFTA. For the first time Canada hikes rate in many, many years…. thus raising the value of the Loonie and reducing US claims that Canada too is a currency manipulator and in need of NAFTA bashing.

Apparently, Mulroney’s advice to Trudeau on NAFTA and Trump was for Trudeau to keep his head down and shut up. The Poloz hike fits nicely inside that advice. Raising the value of the Loonie at this vulnerable point was a strategic move.
What’s next? Trump takes off the gloves with China. Standby.

#124 Asterix1 on 07.14.17 at 8:45 am

AMERICA RUNS ON DUNKIN

CANADA RUNS ON DEBT

#125 };-) aka Devil's Advocate on 07.14.17 at 9:01 am

What Causes Housing Shortages

#126 Raging Ranter on 07.14.17 at 9:06 am

@98, I have to admit, that house you linked doesn’t look all that bad. I’m almost tempted to look at it. But I’ve got a year left on my lease and since I believe prices have peaked here as well, or at least close to peaking, I will resist. Such a house might be available for $300 in a couple years, in which case I would buy. That is my hope anyway. I’ve been disappointed before waiting for a correction (like for the past 12 years) so who knows?

#127 Smoking Man on 07.14.17 at 9:30 am

people walking away from their mortgages like they did in the states I don’t think that will happen here so prices will not dive 30% I can’t see it no one’s going to walk away from a house because they can’t come up with $200 a month more

Nobody needs to ‘walk away’ from a house for real estate values in general to decline. Only sales need to slow and demand wane, because higher carrying costs enable fewer people to qualify. — Garth

#128 Contrarian Coyote on 07.14.17 at 9:41 am

#52 JustMe on 07.13.17 at 8:54 pm
“I’ve been renting for the last 17 years, or all of my adult life, which is fine with me but not for my wife. We’ve saved up over a half million in cash and funds”

————————————————————————-

David Chilton wrote a successful book called “The Wealthy Barber”. Garth should write a book called “The Wealthy Renter”. That should sell when the housing crash starts.

===

Excellent idea! Please Garth – seriously think about this idea. I’d be a up for a dozen copies – need several for family members and friends who are about to buy.

#129 yup on 07.14.17 at 9:45 am

Also 340k for detached anywhere near the gta will never happen again.

………

Rather anything decent……don’t tell Ross….lol

#130 Eks dee Sipal on 07.14.17 at 9:49 am

#120 Good for a laugh….”Also 340k for detached anywhere near the gta will never happen again.”…

Are you ever in for a surprise! You won’t be having a good laugh then.

ManuLife fined 69 million for ‘administrative reporting violations’ by FINTRAC. Yeah, okay, I guess that’s the current doublespeak for money laundering.

http://business.financialpost.com/news/fp-street/manulife-says-its-banking-unit-was-fined-by-money-laundering-watchdog-fintrac-for-administrative-lapses/wcm/15f8c3ba-63f8-4bd0-81fb-65e760522413

Looks like Home Capital has profited from money laundering through GTA real-estate:

https://www.stockwatch.com/News/Item.aspx?bid=Z-C:HCG-2479444&symbol=HCG&region=C

#131 Mattl on 07.14.17 at 10:11 am

Raging Renter you’ve been waiting for 300k homes to correct for 12 years? 12 years ago median home price was 260k in ottawa and money has been cheap this whole time.

Like my earlier comment, there is no correction that will make the guys waiting on the sidelines the last decade whole. In 12 years a 250k home would be nearly paid off. More folks got beat by RE but standing on the sidelines than will get beat by a correction. Guys like Happy Housing Correction show that anxiety every day.

And lest anyone think I’m a RE shill our FV SFH closes. next Thursday. We agree this market is insane and are cashing our cheque and joining the rental underclass.

#132 Ole Doberman on 07.14.17 at 10:11 am

“So far, by the way, the fund’s performance has sucked – down 40% since inception four years ago. But as this blog has proven, you can be premature but still manly!”
————————————————————
This is what happened in the movie the Big Short – guy was down a pile leading into the housing bust in the US, then of course made a fortune when the sheet finally hit the fan.

#133 InvestorsFriend on 07.14.17 at 10:14 am

David Rosenburg

The Great Gazoo on 07.14.17 at 5:33 am said:

Stunning article from David Rosenberg; suggests we are going to see a few more rate hikes.

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

I started becoming aware of David Rosenburg sometime around the financial crisis. He was spectacularly wrong as a perma-bear for years after that. Finally changed his tune more recently in time for flat to down on TSX as I recall.

Famous for being famous.

He is paid to make predictions and so predict he must. But he has no ability to forecast the future as I believe his record shows.

#134 Eks dee Sipal on 07.14.17 at 10:14 am

Anyone who doesn’t believe that there are conspiracies afoot, has a small mind indeed. History itself, is a history of competing conspiracies.

Here’s my theory: Most old school pension funds, hedge funds, trust funds, investment funds, etc… in Canada are heavily weighted with Mortgage and Housing related funds that they give all sorts of deceptive names. Those in power have done a good job to keep this RE Ponzi propped up for the last several years while they allowed their friends to unwind their investments in these.

As soon as this process was finished up, Poloz flip-flops and begins the rate hikes and down she goes. Those holding the bag were not wise to this. We’re only getting started. Prices have already ‘corrected’ by the magical 15% in the bubble markets in just about a month’s time. I thought that was the number that officially defined a ‘crash’? Correct me if I am wrong.

Do I feel empathy for all of the innocent families who simply were misinformed by agents, media and government? Of course. But most of the run-up in prices was caused by domestic speculators/flippers, domestic money launderers, and evil outfits like HCG and the other Mortgage Syndicates (crime syndicates).

Canada is a Banana Republic wonderland for fraudsters. Oops, looks like HCG shares are lower than when the WB white knight supposedly came to save it. I sincerely hope that CDIC will cover all the bad investment advice that was given to invest in HCG GICs, I really do.

#135 crossbordershopper on 07.14.17 at 10:15 am

people in southern ontario are different then americans. the psycho framework they work within is completely different. if things get difficult, they can hope on a plane and go home. real home, not this Canada has been very good for me, till its not then i go back home.
i wish i had a bunny whole, i am married to this god forsaken country.
I have spoken to a few, and when the topicc of collapse comes up, they think about it for a bit , and they all came to the conclusion, go live with my family back in croatia, serbia, romania, phillipines, etc etc, its all about i came here i tried, i am up a bit in equity, lived a little of my life, and if it is that i retire back home, due to circumstances, no problem, you fly home, get off the plane and back home.
for the milllions of old stock canadians well, we have no bunny whole, were stuck. the days of kissing your mother by the dock a hundred years ago in dublin and saying wish me luck mom, here i go. never to return, now the planes will bring you anywhere in the world within 24 hours, sometimes for dinner.
soooo, i am not married to this place, because others are not. simple as that, i am looking at mexico, cuba, florida etc. who cares about dividend tax credits and generic pills. like really.

#136 InvestorsFriend on 07.14.17 at 10:27 am

Mark, that is wrong.

#92 Mark on 07.13.17 at 10:50 pm said:

“Out of curiosity….why dont we have 25 term mortgages in Canada?”

Technically the reason is found in the Interest Act, which effectively forbids banks from fixing the rate of interest on a mortgage loan longer than 5 years (or precludes liquidated damages associated with cancelling such a loan).

*************************************
The 30 year mortgages in the U.S. are OPEN from the git-go. Minimal fees apply to refinance if rates go lower.

The fact that Canadian mortgages MUST be OPEN after five years cannot logically be the reason why we can’t have the U.S. system of locked in 30 year rates that are always OPEN at the option of the borrower.

We don’t want 30 year closed rates. The question is why can’t we have the U.S. style mortgages?

I believe there is a law that all FANNIE/ FREDDY mortgages are open and U.S. consumers do not pay the horrific interest rate differentials that Canadians face.

No one seems to have the answer as to why Canada can not have this system. And the open U.S. mortgages were NOT the reason for the banking crisis. (That was about poor qualifying of borrowers although yes there was some relation to the securitisation system). Today the U.S. has no banking crisis and STILL has 30 year open mortgages.

#137 mike from mtl on 07.14.17 at 10:30 am

#119 Could not agree more… on 07.14.17 at 7:52 am

RE in Canada: CULT & OBSESSION capture it best.

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

Yep totally, all the MSM keeps talking about is now how ‘higher’ rates affect housing and affordability. Spin on that this makes no difference.. prices will be higher.. right? Of course now that the holy GTA is starting to crack oh only NOW it is a crisis. Oh dear prices might be actually declining.. national emergency!

Cult of RE is super strong here, nobody can talk about their weekend minus anecdotes about some garbage about their house. Frig does anybody have a life?

#138 InvestorsFriend on 07.14.17 at 10:33 am

Mark, the interest rate risk in the U.S. banks is passed on to investors through securitization. Banks do not need to hold mortgages on their books there.

You may be right that the system is more unstable there.

I don’t think there is any proof that 30 year open mortgages with securitization is an inherently unstable system. The U.S. still has that system.

#139 SW on 07.14.17 at 10:57 am

#28 T on 07.13.17 at 7:37 pm
“#11 Mark on 07.13.17 at 6:50 pm
You again…
Please find something productive to do with your time. Chanting the same schtick daily must be getting boring by now. I know I’m tired of it, and I’m only skimming through your countless nonsensical posts. Anyways. Just know that at least 1 person is completely skipping all posts by you or in response to you from here on out. Complete waste of time.”

+1

#140 TnT on 07.14.17 at 11:03 am

#121 Smoking Man on 07.14.17 at 8:07 am

Give your UCC a kick because you miss the big picture here… again

Our society and economic growth is based on cheap Oil.

Oil is a finite resource.

The West has benefited immensely from cheap energy that Oil provided which makes it hard for our economic system to adopt new innovated ways for an alternative energy source.

We need to get off of an oil based economy and advance our technology beyond oil otherwise will be stuck in a never ending war for resources and stagnate human technology development.

Climate Change is just the necessary scare tactic to get people to move and apply pressure to the oil dominated economic power levers that have been dictating our lives for the last 100 years.

Riddle me this humans…

”At first there is only one Smoking Man posting, but the next day it doubles, and thereafter each of its descendants doubles.
The Blog completely fills up with Smoking Men in 30 days and we all get shut down forever.”

When is the Blog exactly half full?

Once you understand the answer you see the need to act is now…

#141 TheDood on 07.14.17 at 11:10 am

#14 Serfin’ Safari on 07.13.17 at 6:57 pm
no offence, but renting for 17 years= loser
no offence, but looking for a house for 4 years = loser

his wife has my sympathy
and now he comes here looking for free advice over the internet before making his next big move
_________________________________

Really? Half a mil in the bank and just because he’s not a lemming and doesn’t own real estate, he’s a loser?

He’s certainly not going to lose sleep over the declining value of an asset he paid WAY WAY too much for, like most other idiot canadians.

#142 Victor V on 07.14.17 at 11:29 am

Philip Cross: Years of record low interest rates have pushed Canada’s ratio of debt to GDP to 354.5% — and we should be seriously concerned

http://business.financialpost.com/opinion/philip-cross-if-canadas-easy-money-partys-over-the-debt-hangover-looks-brutal/wcm/75885fab-e40a-4fd8-aedc-c4251ac7340b

#143 Smoking Man on 07.14.17 at 11:31 am

#126 Smoking Man on 07.14.17 at 9:30 am
people walking away from their mortgages like they did in the states I don’t think that will happen here so prices will not dive 30% I can’t see it no one’s going to walk away from a house because they can’t come up with $200 a month more

Nobody needs to ‘walk away’ from a house for real estate values in general to decline. Only sales need to slow and demand wane, because higher carrying costs enable fewer people to qualify. — Garth
…..

This was not my post…. But I aggree with G-Man

#144 Shortymac on 07.14.17 at 11:35 am

John Titor on 07.13.17 at 7:47 pm
I moved back with my parents a year and a half ago to save for a house downpayment. I thought that’s what I wanted to do because everybody was doing it. I found this pathetic blog the same time I moved back with my folks and it changed my perspective, At 28yo back then I didn’t even know about an investment porfolio.

Today, I told my parents that I am moving to a $900/month 2 bedroom apartment near downsview station. They told me it’s either I buy or just stay in the basement

————————————————————–

Can I have a link to that rental? Friend of mine is looking to move into the area to be closer to work and 900/mon is within their budget. The friend has a wife and baby so they really want a 2 bedroom.

#145 Smoking Man on 07.14.17 at 11:35 am

#105 Deplorable Dude on 07.14.17 at 1:47 am
#67 Yorkville Renter – ‘You don’t actually believe that do you? Because DJT said it, it’s true? When did this lawyer get into the US?’

Public knowledge….now….

http://thehill.com/homenews/administration/341788-exclusive-doj-let-russian-lawyer-into-us-before-she-met-with-trump
……

And Lynch ordered a wire tap of the meeting, complete setup from the get go.

I think she’s going to prison.

#146 InvestorsFriend on 07.14.17 at 11:44 am

Why no (affordable) 25 year OPEN mortgages in Canada? (like in the USA)

#80 Hans on 07.13.17 at 10:29 pm asked:

Out of curiosity….why dont we have 25 term mortgages in Canada?

**************************************
Further to my comments at 94 and 135 and 137.

I jumped at Mark a bit prematurely (apparently common on this blog) as I disagreed with his first paragraph abut the interest rate act but he did have some good technical info on how open mortgages were inconsistent with the Canadian system as it stands.

At the end of the day, the reason we don’t have such arrangements in Canada is probably because the government has not faced pressure to protect home buyers from rising rates. We have not had problems with rising rates for at least 30 years.

AFTER rates rise and if they rise a lot and many Canadian home owners get roasted alive on mortgage renewals only then someone will call for a study to see if Canada could have a system of long-term fixed rate mortgages that are still open to the borrower to refinance or pay off at minimal penalty fees. Such a solution will likely involve securitization.

There will pros and cons to such a system. But AFTER tens of thousands or hundreds of thousands of Canadians lose their homes if interest rates rise a lot and if this pushes home prices way down due to forced selling THEN the government will look into it, I predict.

There are no long mortgages because of the Canada Interest Act. It was passed over a century ago to protect consumers by limiting a fixed-rate obligation to a maximum of 60 months. In that way nobody would become trapped for most of their adult life in a high-rate situation. It’s that simple. — Garth

#147 Mattl on 07.14.17 at 11:50 am

#140 – guys that bought in the GTA in the last year may have overpaid but the vast majority of Canadians have done very well on RE. And most have bought homes when they were affordable. The idea that every home owner is getting crushed by a correction is ludicrous. As if people just started buying homes in 2016.

Speculators that came in late in bubble markets will have overpaid but the other 98% of us will be just fine.

And the guy better have 500k now be because he will need close to double that to pay his rent at a safe withdrawl rate for the next 40 years. He is def not a fool and thats a good chunck of change but surely being 8 years away from a paid off house worth 700 to a mil would be a better financial place to be. He obviously has good income and could have bought AND saved.

Your err in assuming continuous and eternal real estate appreciation. You will learn. — Garth

#148 Raging Ranter on 07.14.17 at 11:59 am

@130 Mattl, don’t you think I wish I had bought 12 years ago when I first moved here? I would now be half way through a 25 year mortgage, and I’d have renewed twice at five year intervals, both times at lower rates. But I didn’t. It was, in hindsight, a colossal and costly blunder. That doesn’t mean I should buy now. I can’t erase one mis-timing mistake by making another. I never tried to portray my own past actions as the right ones. I merely took issue with the kid’s description of his purchase of a $340K condo as an “intelligent” purchase. Today, rent vs. buy metrics strongly favour renting, even in Orleans. I assume that’s why you are cashing out.

#149 Raging Ranter on 07.14.17 at 12:06 pm

@120 you bought a condo in the GTA within a year of the peak. I’m not angry, I’m laughing at your description of it as buying intelligently. I made my mistakes in the past and am more than happy to own up to them (see my prior comment). But I never made a $340k mistake. Now that would make me angry.

#150 Mark on 07.14.17 at 12:16 pm

“Mark, the interest rate risk in the U.S. banks is passed on to investors through securitization. Banks do not need to hold mortgages on their books there.”

A lot of it was on the books of the banks and insurers during the 2007-2008 episode. Whether directly or indirectly. For instance, a bank could originate and sell loans into Fannie/Freddie-backed MBS through their mortgage origination department, and then MBS as investments through their investment banking department. When confidence in Fannie/Freddie was lost, all hell broke loose.

I don’t think there is any proof that 30 year open mortgages with securitization is an inherently unstable system. The U.S. still has that system.

The point I perhaps didn’t fully make was that 30-year fixed term loans with such generous embedded optionality concentrated the interest rate risk amongst thinly capitalized institutions (the banks) which obviously didn’t price the risk correctly.

Contrast this with Canada, where interest rate risk is spread over a dramatically larger number of participants, homeowners themselves.

The 30 year mortgages in the U.S. are OPEN from the git-go. Minimal fees apply to refinance if rates go lower.

I believe that if you take Fannie/Freddie out of the picture and the services they offer the market, that there is really no market for 30-year loans with such generous pre-payment options (skewed in favour of the borrower).

As the interest rate cycle persistently turns, Fannie/Freddie are going to be left massively offside due to their role. Just like the CMHC, albeit the CMHC will suffer not due to interest rate risk, but rather due to the high LTV of loans originated heavily to risky borrowers.

#151 poypoy on 07.14.17 at 12:17 pm

todays hsbc 5 year variable rate 1.99 after the rate hike.
new buyers can still afford so its hard to forsee a crash if banks keep posting these deals

#152 Johnny Boy on 07.14.17 at 12:27 pm

#38 Smoking Man on 07.13.17 at 8:17 pm
Next?
http://century21-stmaarten.com/property/philipsburg-boardwalk-beach-bar-business-for-sale-htm
……………………………………………………………………
So what are you waiting for Mr Hemingway? Don’t forget to serve a New York strip steak, baked potato, Caesar salad, and a healthy pour of Bordeaux.

#153 Pierre Tramulent on 07.14.17 at 12:37 pm

I give it tops 18 to 30 months and we will have lower interest rates and possibly negative interest rates the next recession.

Poloz is a liar as such was Carney. It is a requirement for politicians and central bankers.

#154 TurnerNation on 07.14.17 at 12:37 pm

134 crossbordershopper I always enjoy your postings.

Btw seems the fastest way into guaranteed poverty is to hang around the poor people? !

#155 SilverSon on 07.14.17 at 12:38 pm

Wow, all these comments about renters being losers is pathetic. I have rented, owned, owned 2 properties at once, and rented one while I owned another in both Canada and the US. I’ve explored both spectra probably more than the average Joe but admit that I have no experience being a landlord. Anyway, at the moment I own but to me the only losers are the ones calling renters losers. Even as an owner of a house in good condition with few problems, I would say that renting is absolutely fantastic. If you’re a homeowner, imagine the freedom you would have if your mortgage was fully paid off. Then imagine also having $2-3k per month of mad money to do whatever you want with. That’s how renting feels if you simply ditch all the home ownership FOMO nonsense and ignore all the BS about paying someone else’s mortgage or throwing your money away. Thinking that way is extremely narrow-minded from a financial standpoint. No wonder so many people make comments about Canadians being financially illiterate.

I have an uncle that has rented for 30 years at Bay & Bloor downtown Toronto followed by 15 years renting in Irvine California. He continues to rent now. You know where that got him? Retirement (7 years ago) at the age of 60 in Newport Beach CA with a rental house at $6k per month, a 45-ft yacht on the Pacific, and $10-mil liquid all from non-RE investments. If he bought a house in Toronto 35 years ago (1982) and sold at the peak a few months ago, he’s gain on that would have been $1-2 million and his non-recoverable carrying costs would have been $400,000 to $500,000 between mortgage interest, property taxes, insurance, and upkeep. When I talk to him about his old stomping grounds of Toronto, he think’s the RE situation up here is both scary and dangerous from a financial standpoint.

As I’ve said before, I think owning a house should be a lifestyle choice, not an investment choice. I think houses solely as an investment are dumb because financial gains are purely opportunistic as a result of house values being determined by the most unpredictable market factor of all: human emotion. And lots of humans are really dumb.

#156 Julia on 07.14.17 at 12:50 pm

#145 InvestorsFriend

There are no long mortgages because of the Canada Interest Act. It was passed over a century ago to protect consumers by limiting a fixed-rate obligation to a maximum of 60 months. In that way nobody would become trapped for most of their adult life in a high-rate situation. It’s that simple. — Garth

So banks that offer 7 and 10 year fixed rates have them reset after 5 years?

They become open. — Garth

#157 Chinese Dude on 07.14.17 at 12:51 pm

Buckle up guys..

http://torontorealestatecharts.com/

Sales down 43%, listings up 91% YoY City of Toronto detached home prices have been rising YoY in excess of 20% since mid-2016 until April 2017 when price growth slowed to the 10-15% range

Oakville detached home sales down 46%, listings up 96% YoY A rapid decline in sales/increase in supply resulted in MoM price declines of approximately 7-16% and YoY price growth falling from 20-25%

Markham detached home sales down 66%, listings up 116% YoY A rapid decline in sales/increase in supply resulted in MoM price declines of approximately 10-11% and YoY price growth falling from 30-40%

#158 SilverSon on 07.14.17 at 12:55 pm

#44 Jimbo on 07.13.17 at 8:31 pm

I’ve noticed that too. The realtor SOLD signs seem to be on lawns for 6+ months. I’m kinda wondering if those are the deals that are in the midst of falling through. Sure are a lot of them around.

#159 Bob on 07.14.17 at 12:57 pm

Poloz said before that interest rate have nothing to do with House price going up. This is the guy running Canada’s central bank.

“When you’re borrowing money to buy a house and you think you’re going to make 20 percent over the next year, I don’t think it’s going to make a difference if the interest rate you’re paying is 2 percent, 4 percent or 6 percent,” Poloz said.

So I guess house price will continue to go up up up. Vancouver 500 sqft 1 bedroom condo in 35 years old building 1 million soon!!!

up up up… it is different this time!!!!

#160 Victor V on 07.14.17 at 1:03 pm

Gold stocks lead TSX index higher as loonie approaches 79 cents U.S.

https://www.thestar.com/business/2017/07/14/gold-stocks-lead-tsx-index-higher-as-loonie-approaches-79-cents-us.html

#161 Smartalox on 07.14.17 at 1:05 pm

Why is expensive money with a low-priced house better than cheap money and high priced houses?

Because the true cost of a mortgage is mainly driven by the principal amount borrowed (i.e.: to cover the selling price of the house).

First and foremost, if you have cash saved for a down payment, that down payment takes a bigger bite out of the principal of the loan. For example, if you have $200k saved, and a high-priced home is worth $1.5M, your mortgage is at least $1.3M.

If you have the same amount of cash (assuming you’ve been renting and investing) $200k, but prices fall 25%, that house is now selling for $1.125M, but after your down payment, your mortgage is only $925k.

That’s $375k less in the loan that you have to pay interest on – plus all the other costs that are calculated as a % of the selling price.

Now, say that the 25% drop in the house price coincides by a 25% increase in interest rates from an average of 2.29% to an average of 2.86%, over the life (20 years) of a loan.

Even at the higher average interest rate, the reduction in the price of the home nets the buyer a savings of over $31k in interest paid (so much for ‘expensive’ money!) and over $418k in overall payments over the life of the loan.

Obviously, most of that savings comes from the reduction in principal – i.e.: the cost of the house.

Of course, as rates go higher (i.e.: above 5%) the higher interest costs begin eat into the savings from modest price reductions (25%).

But at those rates, I’d expect prices to fall further.

A 60% reduction in the price cited in this example still saves money over current rates and prices – even if the average interest rate is as high as 5% (almost $100k in interest saved, and more than $1M saved over the life of the loan).

Imagine what that $1M in savings could be worth if invested in a retirement account, compounded over 20 years – and you’d STILL have the house!

Also, for those interest rate disbelievers, when I had a mortgage from 2007 to 2010 (just before the US crash, and ’emergency rates’), my fixed interest rate was 5.07%.

The catch is that in order to unlock these savings and make ‘expensive’ money worthwhile, house prices have to fall, first.

And as long as greater fools keep throwing gobs of cheap money at houses, house prices won’t fall.

#162 SilverSon on 07.14.17 at 1:07 pm

#135 InvestorsFriend on 07.14.17 at 10:27 am

You are pretty much correct about US mortgages. In most states it is illegal for financial institutions to charge a prepayment penalty on a loan, which means they’re all open. When I was in NY that even applied to car loans. The only exception I found was in California just before the DOT BOMB where there was a prepayment penalty for the first two years (but it was cheap). But that was 16 years ago so prepayment penalties might be illegal nowadays.

I also found that the cost to re-finance was about $2k give or take. My bank told me the $2k was the total of about 3 or 4 different tasks each of which had a fee, but in reality I think the $2k was really to deter people from re-financing every time there’s a 25 basis-point drop in rates.

#163 Wrk.dover on 07.14.17 at 1:18 pm

So, the IMF is scolding upper management here. The world is pretending that there is more than enough oil. Our housing ponzi economy is on an overdue downward trajectory.

It looks to me that the current uptick in our dollarette with a .25% interest rate gain earning a 5% rise in value is a one last chance rig for the upper echelon to jump ship and swap out their CDN currency.

Of course TNLB will make 6.5 cents total if little me purchases $US to swap back to $CDN later no matter what the prevailing rates are during either transaction.

I suppose the way to win, is pay the 3.25 cent ransom buying $US today, and spend it online in USA down the road, when we hit the ditch.

Any of the afternoon crew got a better strategy for their deferred spending money when we know that the $CDN is aiming downward even as it moves upward?

I won’t dabble with stocks, I really don’t want to be a part of the culture that is presently eating Sears severances for top end bonuses.

That is not how I roll.

#164 Guerilla Marketer on 07.14.17 at 1:20 pm

#44 Jimbo on 07.13.17 at 8:31 pm

I’ve noticed that too. The realtor SOLD signs seem to be on lawns for 6+ months. I’m kinda wondering if those are the deals that are in the midst of falling through. Sure are a lot of them around.

————

In my community, if the sold sign is up for any length of time, I go and take the sold sticker off or pull the whole sign out of the ground (as long as its not on private property).

Its called guerrilla marketing – realtors want you to think the market is hot, and I want you know that it is not…

Stop complaining about things and do something.

#165 Guerilla Marketer on 07.14.17 at 1:24 pm

David Rosenburg

The Great Gazoo on 07.14.17 at 5:33 am said:

Stunning article from David Rosenberg; suggests we are going to see a few more rate hikes.

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

I started becoming aware of David Rosenburg sometime around the financial crisis. He was spectacularly wrong as a perma-bear for years after that. Finally changed his tune more recently in time for flat to down on TSX as I recall.

Famous for being famous.

He is paid to make predictions and so predict he must. But he has no ability to forecast the future as I believe his record shows.

——
Who cares if he is right or wrong – his predictions, which capture the media’s attention, help change the narrative on housing and dispel the realtor’s myths that rates will always be low.

I still see front page articles today – 48 hour news cycle -on how crushing interest rate hikes will be. This will help get the herd thinking and hopefully scared. That fear changes the market mentality….which helps eliminate FOMO.

#166 Wrk.dover on 07.14.17 at 1:37 pm

Speaking of long term Cdn Mortgages, in 1981 Nova Scotia Housing gave my wife and I, a 25 year locked rate of 11% because, we were under a certain yearly income at date of application.

It was open though, and voluntarily paid off in eight years. Also of note, the property taxes were paid through the monthly mortgage payment.

#167 PokerCat on 07.14.17 at 1:39 pm

#118 maxx on 07.14.17 at 7:43 am

“That’s because they’re nowhere near “on sale” yet. Anyone buying now will overpay and contribute to putting a floor under realtard-set, phoney-baloney “values”……..until the next rate hike.”

Exactly.

Only buy when the prices either crater, or stagnate for years.

You’ll know you’re on the right track when you decide to buy, and all your family and friends stage an intervention to “save” you from your mistake.

#168 Mattl on 07.14.17 at 1:48 pm

Your err in assuming continuous and eternal real estate appreciation. You will learn. — Garth

Not at all, our house closes in a week. Moving to an el cheapo rental and investing the tax free profits of our sale.

I think you and others err on what the lifetime costs are to renting. Is a paid off house not worth anything?

How much does a renter have to have in investments to maintain a safe withdrawl rate and pay 2-4k a month in rent? At 4% safe withdrawl, a guy that retires at 60 needs almost 900k just to pay 3k month on rent. If the plan is to live in Mex, small appartments or the Maritimes for life then renting makes sense. If the plan is to live near your family in a major city renters need to save a boat load of money to cover 20-30 years of post retirement rent. It’s disingenuous to avoid this part of the housing equation. A paid off property should be a part of most Canadians retirement. If you are rich, or poor, its a non issue but I’d love to see the math on how a middle class Canadian with a family is better off paying rent post retirement.

Why should a renter’s investments pay all of her living costs when an owner’s salary is pillaged by ownership costs – deposit, closing fees, property taxes, insurance, condo fees, maintenance and sales commission? Suck and blow. In normal markets (which we are entering) real estate ownership is not a wealth-builder. — Garth

#169 Mattl on 07.14.17 at 1:59 pm

Renter – I agree now is not the time to buy. And we cashed out for the same reason. We also got lucky, no doubt, I’ve never considered my house an investment, plan was always to pay it off as quick as possible. In retrospect I could have made a fortune buying the biggest house we could afford, multiple properties etc but way to conservative and just happy to have a smallish win. Now that I’m out of the market it will probably take right off again lol

#170 SilverSon on 07.14.17 at 2:04 pm

#130 Mattl on 07.14.17 at 10:11 am

“Like my earlier comment, there is no correction that will make the guys waiting on the sidelines the last decade whole.”

Yes there is. The correction that started in 1988/89 was one of those corrections. So was the one about a decade before that, as well as the one about a decade before that. The next one will be too. It seems to me that the only people here that think RE values can’t go down were either too young or didn’t exist when the last one (or any of those before it) occurred. You know, it really doesn’t take very much effort to get this information, especially when contemplating as huge a decision as buying a house. Just set aside the social media for an hour and Google it. Or forget the house, rent a place, and diversify your investments. Then you can go back to using the Internet for its original purpose of watching porn and epic fail videos.

#171 froggy on 07.14.17 at 2:04 pm

I,m sorry everyone that thinks poloz is trying to cool
things down he’s not he’s just taking taking away emergency rate’s which don’t make sense anymore,those
that can get out of over leverage and see it on time will
either make a little lose a little or break even that’s what
l can and we can get back to a normal economy where
were not paying 50 percent more for housing at the mean
but in a correction it goes below the mean

#172 InvestorsFriend on 07.14.17 at 2:05 pm

No 25 year fixed rate mortages

There are no long mortgages because of the Canada Interest Act. It was passed over a century ago to protect consumers by limiting a fixed-rate obligation to a maximum of 60 months. In that way nobody would become trapped for most of their adult life in a high-rate situation. It’s that simple. — Garth

*************************************
I am sure that is true… But…

How does that explain why we can’t have the U.S. mortgages are both locked in for 30 years and OPEN at the option of the borrower to pay off or refinance at any time.

As Mark said the banks would face a big interest risk on mortgages that were fixed rate but open after five years at the borrower’s option to prepay. The U.S. solved that problem as I understand it by having the banks securitise the loans so that the pre-payment risk is born by investors who were willing to take that risk.

The U.S. system is still in place post-crisis (and did not directly cause the crisis – that was poor loan application vetting).

A mortgage that fixed a rate for 25 years but was open from the customer’s perspective either immediately or after five years would seem to be fully compliant with the Interest Act that requires it to be open after five years.

It’s easy to say something can’t be done. If someone had made these mortgages possible a few years ago we would not have people living in fear of the renewal which does not happen in the U.S.

If there is a barrier, it would not seem to be the Interest Act. Rather it appears to be rules around securitisation of CMHC mortgages and possibly a lack of investors willing to take the prepayment risk.

Forget it. Will never occur. There is no way lenders now can match deposits and loans over a quarter century. — Garth

#173 WUL on 07.14.17 at 2:05 pm

“Failed forestry company Sino-Forest and several former executives “engaged in deceitful or dishonest conduct” in connection with the company’s timber assets and revenue that “they knew constituted fraud” and violated securities law, the Ontario Securities Commission ruled Friday.”

https://www.theglobeandmail.com/report-on-business/osc-rules-sino-forest-defrauded-investors-misled-investigators/article35689941/

Maybe the execs can spend their time in the big house back home where things might be more comfortable than Milhaven or Kingston.

One certainty is that Canucks will not lose their fondness for selling out this country lock, stock and barrel to foreign state owned enterprises. We love doing that.

The shorts have been vindicated and the suit by Sino-Forest against Muddy Waters is now dead in the water.

#174 SilverSon on 07.14.17 at 2:17 pm

#163 Guerilla Marketer on 07.14.17 at 1:20 pm

“Stop complaining about things and do something.”

That was an observation, not a complaint. And I am doing something to help keep the people I know and care about away from RE trouble but I’m not about to go ripping out signs that I do not own. I know several RE agents who own and pay for signs like that – be careful you don’t get caught and charged with vandalism. Wear dark clothing, gloves and a mask –
their cell phones take video.

#175 rainclouds on 07.14.17 at 2:23 pm

Party Over in Canukistan?

In his recent book The Rise and Fall of Nations, Ruchir Sharma, Morgan Stanley’s chief global strategist, concludes that the single most reliable indicator of periods of economic weakness was “the kiss of debt rule, which shows that a major economic slowdown has always materialized when a nation’s debt has grown more than 40 percentage points faster than GDP over a five-year period.” If he’s right, we’ve got a big problem: Canada’s ratio of debt to GDP rose from 294.9 per cent in 2011 to 354.5 in 2016 — an increase of 59.6 percentage points in the last five years. That easily surpasses Sharma’s threshold.

http://business.financialpost.com/opinion/philip-cross-if-canadas-easy-money-partys-over-the-debt-hangover-looks-brutal/wcm/75885fab-e40a-4fd8-aedc-c4251ac7340b

#176 n1tro on 07.14.17 at 2:30 pm

@#169 WUL

I really don’t think these executives will be punished at all, just like how N.American executives get slaps on the wrists for similar offenses. As long as they didn’t defraud the Chinese government while amassing their wealth, they are in the clear. The current system rewards unethical risk taking.

#177 InvestorsFriend on 07.14.17 at 2:32 pm

Long term open mortages

Forget it. Will never occur. There is no way lenders now can match deposits and loans over a quarter century. — Garth

*********************************************
Agreed banks cannot match deposits with loans over 25 years. That’s where securitisation would be needed to hand the interest rate risk to those fixed income investors willing to take the prepayment risk. That’s what happens in the U.S. as I understand it.

It may never happen, it should have been looked at these past few years. I suspect it will be looked into when rates rise and the damage is done to borrowers.

#178 InvestorsFriend on 07.14.17 at 2:37 pm

Silverson is a man of intelligence it seems

#161 SilverSon on 07.14.17 at 1:07 pm
#135 InvestorsFriend on 07.14.17 at 10:27 am said:

You are pretty much correct about US mortgages. In most states it is illegal for financial institutions to charge a prepayment penalty on a loan, which means they’re all open.

**************************************
Interesting to know that is a State law. I thought it was universal across the USA. But I have never seen the law mentioned. It must date back many years.

And as Mark alluded it does not apply I think to all mortgages. But it seems to apply to the vast majority of standard 30 year mortgages.

Years ago USA homeowners were making out like bandits on refinancings. And the banks were generally not hurt they actually get a small fee. It was seldom mentioned who was on the losing end. I believe it was those who invested in mortgage backed securities.

As Mark also mentioned sometimes the banks even invest in those which I do find weird, especially the real garbage ones. They bought their own junk, refused to smell their own scat in some cases.

#179 InvestorsFriend on 07.14.17 at 2:43 pm

Trudeau speech on free trade

I just listened to most of Trudeau’s speech to U.S. governors on free trade.

I found it to have great content and that his delivery and speaking skills were excellent in this case. Teleprompter, maybe but it was a great speech.

I used to be a stauch conservative but Harper had to go and Trudeau looks very impressive to me. I am not sure about his deficit spending but we shall see how that turns out. Trudeau is highly intelligent and extremely accomplished in my view. He does Canada proud on the world stage.

Also I may as well say, the conservatives had to go in Alberta (even more so) and the NDP are doing okay as far as I am concerned. Again that deficit thing is a worry though. Need to get back to balance at some point.

Please tell me you do not believe he wrote the speech. — Garth

#180 SilverSon on 07.14.17 at 2:56 pm

#166 PokerCat on 07.14.17 at 1:39 pm

“Only buy when the prices either crater, or stagnate for years.”

Respectfully disagree. How is it that so many people that think of houses as investments completely dismiss their high carrying costs? Mortgage interest, property tax, insurance, and upkeep must be paid yet they add zero value to the house. Buying on the way down when values are “cratering” is expensive because you don’t know where the bottom will be and you could be waiting 5-10 years to get back to your starting point, all the while bearing the high carrying costs. Buying when prices are stagnant is expensive too, again, because of the high carrying costs.

Based on the houses I’ve owned over the years, the safest time I ever bought was on the way up. It was after about a year of solid month-over-month gains after 7 years of declining values. When I did that I realize I paid slightly more than bottom, but at least I was fairly certain that I was past the bottom. Only then did it make sense to bear the high carrying costs – because the value was actively going up at the same time.

But again, this is why it doesn’t make sense to me to have a house as an investment. Unless you have enough cash to buy a house outright and therefore have no mortgage interest to pay, the carrying costs make it a risky investment. Sure a bunch of people that sold prior to April did really well, but when the next correction occurs, a ton of people are going to take it in the stones financially. Except the banks – they always win because they’re extremely good at manipulating people.

#181 Ross..... on 07.14.17 at 3:07 pm

ya blew it. You aint buying anything in Toronto now or in the near future. Keep the $500,000 and keep renting…tell your wife that renting is cool, masculine

#182 SilverSon on 07.14.17 at 3:23 pm

#171 InvestorsFriend on 07.14.17 at 2:05 pm

“Forget it. Will never occur. There is no way lenders now can match deposits and loans over a quarter century. — Garth”

Gotta agree with Garth on this one. Besides, what’s in it for the lenders to offer an option to lock in for 30 years anyway? The way things are now, they have five opportunities to capitalize on rate increases throughout a 30-year term. Good for the bank and good for the government – why would they give that up? Nobody’s hiding what mortgages are around here. Don’t like it then don’t get one. I think a lot of people are under the impression that the government cares about them and that they’re special. Sorry but they don’t and they’re not. Nobody is owed anything just because they exist. Have to do a little more than that.

#183 Nick on 07.14.17 at 3:47 pm

#167 Mattl

A mortgage is a forced savings vehicle. Having a paid off house means you “saved” over 25 years to pay back the debts owed and it is now sitting in your house instead of a bank account.

“Building equity” is really just “forced savings”.

Whether or not you make money on your home at the end of the day solely relies on appreciation outpacing all of the many other significant costs that you incur, including opportunity cost of the money in your house.

There are easier ways to save – without forking over huge amounts of amortized interest. — Garth

#184 SilverSon on 07.14.17 at 3:54 pm

#167 Mattl on 07.14.17 at 1:48 pm

“Not at all, our house closes in a week. Moving to an el cheapo rental and investing the tax free profits of our sale.”

Wait a sec … are you concerned that your buyer might read this blog? Your posts have been biased in favour of home ownership and you’ve mentioned many times about recently selling your SFH. If it doesn’t close for another week then I have a new understanding of why you’ve written what you’ve written. I’d be nervous too. Congrats on the sale and I hope it closes as scheduled. You’ll feel better once the money’s in your hands.

#185 Serfin' Safari on 07.14.17 at 3:55 pm

#140 TheDood on 07.14.17 at 11:10 am
#14 Serfin’ Safari on 07.13.17 at 6:57 pm
no offence, but renting for 17 years= loser
no offence, but looking for a house for 4 years = loser

his wife has my sympathy
and now he comes here looking for free advice over the internet before making his next big move
_________________________________

Really? Half a mil in the bank and just because he’s not a lemming and doesn’t own real estate, he’s a loser?

He’s certainly not going to lose sleep over the declining value of an asset he paid WAY WAY too much for, like most other idiot canadians.

—-

Most Canadians did not overpay for their houses. I can only speak for myself, but I bought a freehold house in may 2016 for below replacement cost, it’s about an hour drive from Toronto with good traffic flow. Anything you can get for below replacement cost is not paying too much IMO, if you dont know how to calculate replacement cost you can call any insurance agent

#186 Good for a laugh on 07.14.17 at 4:12 pm

@148 raging renter

You make it sound as if 340k is poof gone. I’m young, real estate is a long term game. I’ll be perfectly fine with even a cashflow neutral property with a renter paying down the mortgage. Are there better investment opportunities right now? Yes. I also have other investments. I’m just curious why you didn’t buy 12 years ago? Were the metrics better for renting then too?

#187 Mark on 07.14.17 at 4:23 pm

Investorsfriend, I basically agree with your thesis, in that, why would the government stand in the way of willing borrowers taking loans from willing lenders? If depositors/insurance companies/etc., want to buy 30-year mortgages, they will bid according to the sort of interest rate they desire on such instruments. It is then for the borrower to decide whether that interest rate is an acceptable premium for not having interest rate risk.

As it stands, a borrower could enter into a separate swap arrangement with their bank, if they so desired, to have a fixed 30-year rate. So its not like a determined Canadian mortgage borrower couldn’t access such financing if that was truly their desire.

The Interest Act provisions appear to be archaic and not rooted in a contemporary analysis of the markets. Yes, Garth’s point, that there may be little market desire for 30-year mortgage paper is quite valid. But it should be the market, not government, that determines that.

BTW Investorsfriend, securitization basically doesn’t do anything to the nature of the mortgage or the obligation. Its just a fancy way of matching savers to borrowers.

#188 maxx on 07.14.17 at 4:34 pm

#29 Mattl on 07.13.17 at 7:46 pm

“The guys that are going to really win in a correction are the ones that were in early AND saved. The guys that just saved are going to be immensely dissapointed when they realize what the new economics look like.”

The winners are the ones who saved AND crystallized their gains, or, the ones who rented and saved like mad.
Too late for the many who held fast to cull more loot. (cue the violins….not)
The New Economics sounds like a real hoot – I think it’ll be just a wee tad longer before all of those ooey-gooey, yummy ideals supplant the current general methodology for doing business and moving money about the blue planet.
I don’t doubt that the NEF will have some (maybe a lot) of influence on global finance, but it ain’t going to start in earnest on Monday morning.

“Correction or not, the last 15 years was the greatest wealth creation opportunity the Canadian middle class may ever see. Yes the guys that got in the last few years will feel some pain but the large majority of Canadians that got in early – and there are millions of them – made out like bandits.”

Many did, but certainly not the majority. Whether or not they had the ability to crystallize, hang onto and grow that windfall is another matter.
More importantly, lotsa money or notsa money, we all have to live in the real world and prices for much of the stuff we need to stay alive are not going to the next galaxy just ’cause some made money with re.
So, those with cash will do very well. Those who are crushed under the weight of elephantine mortgages, not so much.

#189 jess on 07.14.17 at 4:39 pm

#172 WUL on 07.14.17 at 2:05 pm

https://www.bloomberg.com/features/2016-benjamin-wey/

=======
‘Fontgate’: Microsoft, Wikipedia and the scandal threatening the Pakistani PM

Court finds that Nawaz Sharif’s daughter in 2006 disclosed link to firm named in Panama Papers, but disclosure was typed in font not available until 2007

https://www.theguardian.com/world/2017/jul/13/fontgate-microsoft-wikipedia-and-the-scandal-threatening-the-pakistani-pm?CMP=share_btn_tw

#190 Wrk.dover on 07.14.17 at 5:02 pm

A point about Sears and their final payout. When I do pay people to work for me, I pay the oarsmen as much as the helmsman who, after all, is only there for the glory of the ride.

Too bad the helmsmen there, stopped letting the oarsmen there, sell things I buy, to me. I bought most of everything there, until I couldn’t.

#191 Smoking Man on 07.14.17 at 5:12 pm

#180 Ross….. on 07.14.17 at 3:07 pm
ya blew it. You aint buying anything in Toronto now or in the near future. Keep the $500,000 and keep renting…tell your wife that renting is cool, masculine.
…….
Wrong. Now is the time to vulch. Put in low ball offeres till you find a sucker that bought before they sold. Once those sellers are gone, prices will continue to climb.

Huge demand sitting on the sidelines. When this thing turns, thinking Sept you will go from nothing back to bidding wars.

Put this on the fridge.

#192 Freedom First on 07.14.17 at 5:24 pm

#190 Smoking Man

Bought before they sold. I know of people in the B.C. fire zone who bought houses in other places to live in who have not moved yet and they are in the fire zones.

Deal is off because the buyers can’t get insurance and the sellers have moved to a safer place waiting to see if their house burns down or not.

Life changes can come out of nowhere in an instant.

Never make assumptions. Freedom First 101

Freedom First
Master of Freedomonics.

#193 Fish on 07.14.17 at 5:35 pm

I feel what goes up, will eventually come down. Just patients, that I do have, works for me

#194 InvestorsFriend on 07.14.17 at 5:36 pm

Trudeau Speech

Please tell me you do not believe he wrote the speech. — Garth

****************************************
I imagine he had a great deal of help and had some input. It was a great speech very well delivered. He had a lot of very specific examples when it came to the benefits of trade. That hits home with the audience.

Trudeau would be re-elected with a majority today. He is well respected on the world stage. Unlike the world-class stooge to the south of us.

#195 jess on 07.14.17 at 5:39 pm

..”Beyond the Panama papers scandal, global audit giant PwC is also currently being investigated by UK regulators over a scandal involving broadcaster BT Italia, which over recent months has bombarded by allegations of inappropriate management behaviour, and accusations of historic accounting errors. The Financial Reporting Council (FRC) subsequently announced it had commenced investigating audits by PwC, which the firm had performed on BT’s financial statements from 2015 to 2017, correlating in particular to the scandal surrounding telecommunication giant BT’s Italian division.
Global scandals

BT replaced PwC as its auditor in June 2017 with the fellow Big Four auditing firm KPMG – a firm which was itself the subject of a probe from the UK’s Serious Fraud Office and the UK’s accountancy watchdog over its audits of Rolls-Royce’s accounts during a period in which the British engineering company admitted it committed a string of bribery and corruption offences.

The FRC investigation into KPMG’s audits of Rolls-Royce’s financial statements from 2010 to 2013 came shortly after the firm was hit by another scandal in the United States, taking it upon itself to fire six employees, including its head of US audit practice, after they improperly received advance warnings about forthcoming inspections by the separate US accounting watchdog. The UK watchdog also recently fined Deloitte £4m for its audits of Aero and imposed more than £3m in fines and costs on PwC for its audits of subprime lender Cattles….” read more @

http://www.consultancy.uk/news/13682/european-report-calls-on-greater-regulation-of-big-four-auditors

#196 Toronto1 on 07.14.17 at 5:41 pm

#190 Smokie

No way Jose, there is no sideline demand, just a massive aupply of over capacity that will take years to absorb. The exonomic fundamentals in Canada are already maxed out, not everyone can be a homeowner sorry.

Everyone that pulled their listings will reliat again in Sept, add in the foreclosures and banks tightining up their credit availability and it will be a massacre by jan-feb.

First rule of housing is your house is only worth what someone is willing to lend you to buy it.

The people holding out for make beleive prices will chase the market down selling at lower values then if they would have sold now.

Those new lows in places will become the max the banks are willing to lend out chasing prices down.

#197 InvestorsFriend on 07.14.17 at 5:43 pm

Mark, regarding your response to me at 186

Congratulations on the consistency of your approach to myself and others. There was some excellent feedback posted about your approach a couple of days ago and how a potential employer might view you. Sincerely I suggest that you reflect upon it.

I even gave you credit today in my posts (after the first one) and yet you now come back with theoretical crap and lecture me. The question was why we don’t have 25 year fixed rate (and open) mortgages like the U.S. and your final point here is well, in theory we DO with swaps. Just amazing.

#198 jess on 07.14.17 at 5:59 pm

in reverse and round about

https://www.sec.gov/litigation/complaints/2015/comp-pr2015-189.pdf

#199 Smoking Man on 07.14.17 at 6:00 pm

#195 Toronto1 on 07.14.17 at 5:41 pm
#190 Smokie

No way Jose, there is no sideline demand, just a massive aupply of over capacity that will take years to absorb. The exonomic fundamentals in Canada are already maxed out, not everyone can be a homeowner sorry.

Everyone that pulled their listings will reliat again in Sept, add in the foreclosures and banks tightining up their credit availability and it will be a massacre by jan-feb.

First rule of housing is your house is only worth what someone is willing to lend you to buy it.

The people holding out for make beleive prices will chase the market down selling at lower values then if they would have sold now.

Those new lows in places will become the max the banks are willing to lend out chasing prices down.
….

Jobs are here. My email exploding with recruiters request to represent. 2000 people a week come to GTA.

Only reason I sold is im running away from communism.

#200 A Reply to #192 Fish on 07.14.17 at 6:26 pm

“Just patience (not patients) … works for me [unless, of course, you’re a doctor].” :)

#201 I am not Polotz on 07.14.17 at 11:53 pm

Please stop posting!

#202 @I am not Polotz on 07.14.17 at 11:57 pm

You’re very annoying