The shaming

John Pasalis is a smart guy. The realtor-broker looked around him in April of this year, when real estate values galloping higher by an insane measure every month, and concluded…

“People are buying 100 per cent on debt. They are refinancing their homes. They don’t care if they are cash-flow negative. People just think they’re going to make money. Everybody wants another property. I’m talking friends, aunts.”

History will show, after we go through the difficult days ahead for our indebted brethren, just what happened. It was not Chinese dudes, Russian oligarchs or Iranians that spiked house prices. It wasn’t immigration. Nor did restrictive government land policies explain it. Bidding wars, multiple offers, bully deals, flips and assignments were not responsible. Plus you can rule out greedy, unethical, aggressive or plain incompetent realtors. Even the moisters get a pass.

Low mortgage rates and dumb pro-housing policies like free RRSP loans played a key role in explaining things, but those merely greased the way for the real cause of a gasbag that will end up wounding the middle class. That, of course, is speculation.

As the bubble bursts, one in seven families in the GTA own multiple properties. Mortgage debt has been increasing by three times the inflation rate. The debt-to-income ratio among the majority of those buying seven-figure homes is 450% or greater. At one point earlier this year some developers estimated 80% of sales in new condo buildings were to people with no intention of moving in.

Pasalis was quite correct. Real estate became a cult, an obsession and then a disease. Speckers and flippers replaced the FOMOers as the driving force in markets in Vancouver, Victoria, Toronto, Hamilton, the Lower Mainland and southern Ontario right through to Niagara, London and north of Barrie where the drywallers and pilots live.

As the Americans discovered a decade ago, this is about as dangerous as a real estate disaster gets. ‘Investors’ with multiple properties, who borrowed against inflated principal residences to buy more, or stuffed down payments in the hands of their spawn, used 100% debt to do so. When prices decline and the equity in all properties falls, panic sets in. Condos or detacheds with negative cash flows – which made sense when prices were inflating – turn into financial sinkholes.

Even worse is the impact of rising mortgage rates. Not only do they scare buyers and depress values, but the higher cost of money immediately impacts variable rate mortgages, which are the loans of choice for most speculators. Those VRMs have now jumped twice in two months, and given the latest GDP and jobs stats, more increases are to come. The economics of buying properties for short-term gain, or rental cash flow, just blew up.

In case you missed it, the Yanks have recently discovered it was speculation by upper middle-class families that created a housing monster which ended up eating them. Forget the common belief that deplorables hopped up on NINJA (no-job, no-income) subprime loans caused the crisis by defaulting in droves on mortgages they could not afford. Nope, says a paper authored by several university economists. Never happened.

Analyzing credit data, they conclude the biggest snoflers of new mortgage debt during the housing bubble were those with scores in the middle and top of the credit score distribution. People at the bottom didn’t actually borrow more, with their debt levels remaining constant. Their default rates did not spike when crisis hit, either. It was the wealthier people freaking, selling and walking.

This suggests lower-income, worse-credit people who bought houses were doing so because they wanted to live there. When the bubble popped, they stayed. It was home. The richer folks, meanwhile, succumbed to the silly notion real estate would go up forever, profits were essentially guaranteed, debt used to get property was good debt, and leverage was the best possible tool to magically manufacture wealth. So they used low rates and willing lenders to chase drive valuations to levels unsupported by the economy, incomes or population growth.

Being better off, these folks qualified to borrow more, based on their cash flow or the equity accumulating in their principal residences. But it could not last. It didn’t. Just like here. The researchers reached this conclusion: “The rise in mortgage delinquencies is virtually exclusively accounted for by real estate investors.”

Well, Canada is not the US. We have no history of widespread mortgage defaults. Our lenders are better protected against mortgage portfolio declines. There’s no reason to expect what the housing crash did to Wall Street will be replicated on Bay Street. But there are common themes, suggesting common outcomes. If so, the descent in Canada may only have begun.

House porn. Just as healthy as the regular kind.

155 comments ↓

#1 Royal City Dweller on 09.08.17 at 6:23 pm

Furst, Yeah!

#2 PK on 09.08.17 at 6:28 pm

Finakkt firsassasssst

#3 mortgageman on 09.08.17 at 6:28 pm

it is a crapstorm out there right now, and this article is bang on …… today was doing a mortgage for someone who bought a house firm and was trying to sell his. A realtor and doctor wife bought it….. 480,000…… well appraisal came in 445,000……. get this … the realtor and doctor wife only have 5% downpayment….. so the house sold for the lower amount…….

#4 mortgageman on 09.08.17 at 6:29 pm

it is a second house for the realtor and his wife as they are keeping their other one…… hoooo boy

#5 dakkie on 09.08.17 at 6:31 pm

Toronto’s Housing Sales Bubble Bursts as Bank of Canada Raises Rates

http://investmentwatchblog.com/torontos-housing-sales-bubble-bursts-as-bank-of-canada-raises-rates/

#6 Oakville Sucks on 09.08.17 at 6:31 pm

You guys should have seen the faces of my coworkers who are all millenials when I told them yesterday that interest rates went up again …. some went pail while others got a worried blank stare!

#7 Nick on 09.08.17 at 6:34 pm

Do I make you house horney baybay?

#8 Suport Mark DEFLATION in Canada! on 09.08.17 at 6:48 pm

In other words, this supports the theory from Mark and (Pitz from Zerohedge), that deflation is around the corner, and that our Loonies will be valued at above par to the falling American dollar?

#9 Millenials on 09.08.17 at 6:49 pm

As you point out Garth the Canadian market is very different than the US. In the US what created the financial calamity was financial instruments (derivatives) that was based upon voodoo mortgages and a system where people could just walk away from their investment. This is what caused the bubble to burst.

No such circumstances exist in Canada. We could see a healthy correction….we may see a blip in defaults and foreclosures.

However the attention on this blog creates a lot of fear mongering and bluster. The reality is the vast majority of people who bought since this blog has been warning about a real estate bubble have made significant capital appreciation in their purchase of a property and will be fine. Additionally….these investment properties you speak of that were purchased by moisters are seeing healthy rents- have you looked at the vacancy rate in TO?

#10 joblo on 09.08.17 at 6:51 pm

HaHaHa has it right.
We need to see how crazy this can get before anything improves.
So as of today, vote Liberal, NDP, Green whatever floats your boat. Work less, play more, think work arounds.
Milk the system as much as you can.

#11 Tony on 09.08.17 at 6:54 pm

Yup, and speculation is by the middle class is why it costs $600 K for a one bedroom condo in Vancouver, yeah right. lol

#12 Travis Bickle on 09.08.17 at 6:55 pm

I am certain that prices of houses and condos in Vancouver will keep going up, as long as mortgage rates stay below 8%.
And I don’t see mortgage rates being close to 8% in the next 5 years (too many folks would be ruined and government would never allow that to happen).

Therefore, I predict RE prices going up in Vancouver until the nature intervenes (meaning the big earthquake).

#13 AJM on 09.08.17 at 6:59 pm

Here’s a fun on from my neck of the woods:

1427 19th Street West Vancouver
Sold in Feb 2016 for 2.3M

Listed in April 2017 for 2.5M
Reduced in June to 2.3M

or… available to rent for 3,200 per month!

https://www.zolo.ca/west-vancouver-real-estate/1427-19th-street

https://vancouver.craigslist.ca/nvn/apa/d/an-older-4-bedoom-and-2-bath/6265940416.html

#14 Guy in Calgary on 09.08.17 at 7:00 pm

There are more important things to worry about then GTA real estate but boy is it tough to not pay attention to… kinda like a car accident.

#15 AGuyInVancouver on 09.08.17 at 7:01 pm

I still contend that you underestimate the effect of HAM in Metro Vancouver. Up to 20% of the properties being outright by Chinese buyers in Richmond before August 2016 is a significant distortion.

#16 Ian on 09.08.17 at 7:03 pm

It’s always been fascinating for me to see how people react to a bear market. This one in GTA housing is particularly fascinating as the bull went on for 21 years, so thousands of participants and recent buyers today haven’t even SEEN a property bear. The couple people on here who have mentioned the 89-96 bear and how awful it was have likely been ignored. This one will be WAY worse.

Other than this blog, I have yet to come across ONE person in real life who is even CLOSE to bearish, which is why I think this blog is so important in terms of educating people.

Most recent example: I play chess online and last night I notice a Canadian flag by the opponent name, so in the chat I say ‘where do you live’ and he goes ‘Richmond Hill’ so I bring up the topic of housing.

He goes ‘my house is fully paid for so I’m not worried. But a neighbour’s house has lost 400k in value. That’s ok though, this is just temporary and it will bounce back.’

Fascinating.

These next three months will be WAY more bearish than April – now. When OSFI drops the bomb on subprime, that will be the mother of all bear factors.

M48ON

#17 Andrewski on 09.08.17 at 7:04 pm

Re: Royal City Dweller & Pk, That’s what she said, you came first again.

#18 Howard on 09.08.17 at 7:07 pm

I am worried that Justin will force savers to pay for the fallout.

Let’s not forget this vomit-inducing June op-ed in Macleans : “Why Ottawa should bail out homebuyers if house prices tank” http://www.macleans.ca/economy/economicanalysis/why-ottawa-should-bail-out-homebuyers-if-house-prices-tank/

This is a very real danger and one must be on the lookout for federal policy changes intended to socialize the losses resulting from rampant speculation.

I would rather bail out the banks than homeowners.

#19 2 cents canadian on 09.08.17 at 7:14 pm

I saw all this in 89-94. This thing is going to play out for years (plural). There are so many people currently in trouble, thousands of deals in place (new places being built in 1,2,3 years with names committed to them and deposits who may or may not be able to scrape up the $ for a place that won’t be worth what they signed for) ….. and then there are the thousands and thousands of new projects just breaking ground with the ” register now” signs in place. Who in their right mind is going to buy these. Anyway ….. there is so much inventory (sh!t) in the pipe it will take years to clear. This isn’t even counting the existing people wanting to cash out or just good old fashion “move up or down”. Yup ……. years and years of mess to clean up. I think for sure there will be some economical back lash when this all grinds to a halt …. some sort of recession for sure. A few Days ago someone on here calculated how much fewer dollar sales happened in the last few months. Just in the GTA in 2 months there were tens of millions less RE agent commission, which is millions and millions less income tax paid to CRAA, tens of millions less land transfer tax, millions less Lawyer RE lawyer billings etc, etc. And this just with a few months declines. This thing is going to last a while.

#20 For those about to flop... on 09.08.17 at 7:21 pm

Any guy that buys a high end condo in Vancouver and Toronto right now is making the same sort of mistake that all the guys that I went to high school with in the late 1980’s that lost their minds and got perms.

You will think you’re cool for about 5 minutes and then you will realize that you have to wear that mistake for quite sometime…

M43BC

#21 Howard on 09.08.17 at 7:22 pm

#15 AGuyInVancouver on 09.08.17 at 7:01 pm
I still contend that you underestimate the effect of HAM in Metro Vancouver. Up to 20% of the properties being outright by Chinese buyers in Richmond before August 2016 is a significant distortion.

—————————-

Meh. Who cares anymore. It’s Vancouver. A dull resort town for zillionaires, sort of like Monaco. Not really a part of Canada anymore. No huge loss imo.

#22 Ripple Effect on 09.08.17 at 7:30 pm

#21 Howard on 09.08.17 at 7:22 pm
#15 AGuyInVancouver on 09.08.17 at 7:01 pm
I still contend that you underestimate the effect of HAM in Metro Vancouver. Up to 20% of the properties being outright by Chinese buyers in Richmond before August 2016 is a significant distortion.

—————————-

Meh. Who cares anymore. It’s Vancouver. A dull resort town for zillionaires, sort of like Monaco. Not really a part of Canada anymore. No huge loss imo.

———-

You do realize that there is a ripple effect from Vancouver’s high prices right?

As prices go higher, people and capital get pushed out to surrounding areas, driving up prices, and causing the same sort of economic problems in those communities – challenges recruiting and retaining staff; reduction in volunteer hours as people are hustling to pay bigger mortgages; growth of homelessness and petty crime; and so on…

Your opinion is so 2012 when other communities brushed off Vancouver’s high prices as not impacting them. Now tell that to all of Metro Vancouver communities, the Fraser Valley communities and the Interior communities who are seeing the impact of that flight of capital and families….they finally get that what happens in Vancouver impacts them.

#23 angela on 09.08.17 at 7:31 pm

The report Garth referred to is here: http://www.nber.org/papers/w23740

#24 jim on 09.08.17 at 7:39 pm

#9

“No such circumstances exist in Canada. We could see a healthy correction….we may see a blip in defaults and foreclosures.”

yes, and you might get a midnight visit from the Swedish women’s volleyball team, asking to spend a night at your house because their bus broke down.

Can you name me a market in history where massive, exponential increases in prices were followed by a nice plateau, or even a gentle denouement?

“.these investment properties you speak of that were purchased by moisters are seeing healthy rents- have you looked at the vacancy rate in TO?”

Vacancy rates are not evidence of ‘healthy’ rents at all. I fear you are either being glib or not capable of understanding alternative hypotheses. People can take losses on monthly rents in the belief that capital gains will win out over time. In fact, some units sit completely empty without renters at all. Just walk around downtown Toronto at night and then walk around downtown Seattle. One city has lights on in apartments, the other does not.

Absent some sort of survey, you don’t have evidence to support any of the claims that you are making.

“In the US what created the financial calamity was financial instruments (derivatives) that was based upon voodoo mortgages and a system where people could just walk away from their investment.”

Voodoo. That’s your explanation?

Not all US provinces allow homeowners to walk away. Nor do all Canadian provinces prohibit it.

Do you really think that personal debt levels in Canada are sustainable? Have you never read any of the economics research that studies the relation between high housing costs and employment opportunities?

There is a piper to be paid.

#25 FOUR FINGERS WATSON on 09.08.17 at 7:44 pm

#15 AGuyInVancouver on 09.08.17 at 7:01 pm
I still contend that you underestimate the effect of HAM in Metro Vancouver. Up to 20% of the properties being outright by Chinese buyers in Richmond before August 2016 is a significant distortion.
…………………………….
Garth has his mind made up on this one . Don’t confuse him with facts.

#26 TurnerNation on 09.08.17 at 7:45 pm

Realtor I that saying Trade what you see not what you think. Teck Wrek.B

And upper middle I know with 1.5m house with 500k of renos into it is shopping now for an
Investment Condo [sic].

And I’m listening to S Wonder’z Signed Sealed & Delivered, now. To whom though. ..

#27 mousey on 09.08.17 at 7:47 pm

RBC fixed mortgage rates go up tomorrow, so unless you papered it today, you will be paying the higher rate as of tomorrow. As for variables, I’m at prime minus .5, so 2.7% – which I acknowledge is pretty amazing. With new hikes now actually being implemented, I’ll be locking in for 3, 4 or 5 year term probably next week. Any news among the dogs about bank rates (not brokers) for these terms? Everything seems north of 3% except the 3 year which is only marginally under. Thanks for sharing any rate info you have.

#28 crdt on 09.08.17 at 7:49 pm

The legend of financial prudence lives on. On one of the most famous charts comparing US and CDN property values, we are now almost double of what our friends down south achieved. Garth has changed his stance on a few issues over the years, no doubt, this could be one of them. Soft or hard landing? Coming from 2x the altitude, my guess is uncomfortably jarring landing.

#29 When Will They Raise Rates? on 09.08.17 at 7:50 pm

… And when the speculators capitulate, look out below.

(Right now they’re holding onto their properties because they’ve been assured by the RE cartel that prices are going back up this fall.)

This is the calm before the storm.

https://media.giphy.com/media/GjYjLvGErsggg/200.gif

#30 Smoking Man on 09.08.17 at 7:51 pm

Canadians, weak and void of creativity.

Mom and dad talk through their things, look at my big house, it means I’m smart with out even taking the time to write a book to prove it.

Having things, It’s a lazy ass way to get koodoos.

Mom and dad, loving parents go deep into Helocks so their kids don’t need to create to seem smart, just buy the big house and enjoy your rivals jealousy.

That’s basically what has driven the Canadian Housing market.

Never was that cruel my kids, find your own voice if you want to eat.

Everyone is afraid to be themselves, they all live behind a mask. Fear of judgment deep inside the brain.

Me, If I’m into the sun and humidity too long, the coconuts get sweaty, I’m going to scratch them right there and then, and give no shit who looks or who judges.

I’m homeless, just like all the homeless bastards in T2 Toronto, yes a libtard city the virtue signals everything but at Union station, no one gives to the homeless, but stand up and make speeches at United way events.

Screw you all.

I’m Smoking Man and I’m free of the fear of judgment. Nothing else matters.

That makes me very dangerous to the machine. They just want the school system to pump out compliance and a consensus grouped gang that they totally control.

Long live individualism, when I sober up I’m coming after you communist. Be afraid.

#31 Howard on 09.08.17 at 7:52 pm

#22 Ripple Effect on 09.08.17 at 7:30 pm
#21 Howard on 09.08.17 at 7:22 pm
#15 AGuyInVancouver on 09.08.17 at 7:01 pm
I still contend that you underestimate the effect of HAM in Metro Vancouver. Up to 20% of the properties being outright by Chinese buyers in Richmond before August 2016 is a significant distortion.

—————————-

Meh. Who cares anymore. It’s Vancouver. A dull resort town for zillionaires, sort of like Monaco. Not really a part of Canada anymore. No huge loss imo.

———-

You do realize that there is a ripple effect from Vancouver’s high prices right?

As prices go higher, people and capital get pushed out to surrounding areas, driving up prices, and causing the same sort of economic problems in those communities – challenges recruiting and retaining staff; reduction in volunteer hours as people are hustling to pay bigger mortgages; growth of homelessness and petty crime; and so on…

——————————————–

I do realize that. I just don’t care. Either BC’s Lower Mainland will eventually collapse under the weight of everything you describe, or it will keep bubbling forever. I don’t think the place will ever be normal again.

I think this presents a huge opportunity for Kelowna and Kamloops. If they could snag a few regional HQs from the LM, and the white collar professional class jobs that come with them, I can easily see the LM’s educated young people flocking there in droves.

#32 King Dong Redux on 09.08.17 at 7:53 pm

@22 Ripple Effect

You are so correct. Prices do not live in isolation. Peterborough, Ontario is suffering from the highest unemployment in the province (8.3%), yet the home prices have rocketed skyward. This is all from the price pressures of Toronto flowing outwards.

Speaking of ripples and rockets…I need a blogdog (or two) to rip my clothes off send me on a rocket!

F38ON
37-28-35

#33 Nonplused on 09.08.17 at 8:01 pm

Don’t forget all the people who have been using HELOC’s like a reverse mortgage to bridge the gap between their income and cost of living. Sure, they should have reduced their living standards, but why? If your house goes up in value every year more than the accumulating interest then it’s a no-brainer to spend the difference so little Johnny doesn’t have to withdraw from hockey. However rising interest rates and falling property values could put an end to that trend too.

Speaking of hockey, there is one bubble I don’t understand. Sure it’s fun, I used to play when I wore a younger man’s jock-strap, but wow what a pile of money! Estimates are that it can cost up to $100,000 to get your kid to AAA. And that’s all after tax money. One of the things I didn’t like about hockey when my son played is that the teams are constantly fund raising. They have to, because otherwise it would be prohibitively expensive. Well it already is, but it would be more so. You don’t see that so much with soccer or baseball teams.

And this is despite the fact that the government has heavily subsidized hockey (and figure skating) through the building of an indoor rink in every town that had more than 50 houses across the land.

My son played “rep” hockey for a while so I got to see many of those rinks in many towns some of which didn’t even have a gas station or grocery store. Every second weekend those “rep” players and their families load up the SUV and drive up to 3 hours each way for a game. And tournaments fees, hotels, eating out, equipment, and all the rest and it’s one heck of an expensive way to get the kids 20 minutes of physical activity a day for 4 months out of the year. If there ever was a bubble, this is one. But it is one I expect won’t go away because Canadians love hockey like nothing else on this blue planet.

How do I know it’s a bubble? When you enroll little Johnny in hockey at the tender age of 4 he has less than a 1 in 10,000 chance of playing 1 single game in the NHL, and probably won’t get on the ice. But you have a 1 in 1 chance of paying about $20,000 in fees, hotel rooms, equipment, camps, elite training (what a scam) and the rest by the time he quits hockey at age 12 because he is still tier 3 or lower and clearly isn’t going to the show. And it’s after tax money, so you have to earn quite a bit more than that. But I don’t think it’s ever going away because the people that love hockey really love it and yes they will take out a HELOC to pay for that elite training. They have to.

But there are plenty of other ways to blow your kid’s tuition funds so I shouldn’t be too hard on hockey. Other amazingly expensive pastimes we engage in include golf, downhill skiing, owning a boat (perhaps one of the most expensive per hour of use), owning a cabin (why wouldn’t you rent?), heck some people even buy little airplanes so they can do loops at the local airport.

I have a little boat I bought used about 15 years ago and I think my cost to own after repairs, fuel (they go through that in plentious amounts), insurance and the like I think my cost of ownership is finally getting down to about $200 per hour the bottom is wet. If I could turn back time I never would have bought the thing.

So comparing boating with a little (17.5 foot 135 hp) used boat to downhill skiing, when i take my family skiing for the day it probably runs $600 plus what we have invested in gear. But it’s a 6 -8 hour day, thus about half the cost of boating. Sure you have to deal with snowboarders but that isn’t nearly as dangerous as the jet skis that want to ride along behind your boat and jump the wake especially if you have a kid in a tube back there.

My “cost to own” my V-Star 1300 per hour is probably right up there with stupid as well, but not so bad as the Harley I used to own and rightly disposed of while it was still worth something.

So, just some musings I suppose on all the stupid ways we burn through our cash instead of investing it. I guess you got to live as they say. And I suppose it keeps the economy going around it is the free market way of redistributing earnings from the people who work downtown to the greens keepers and caddies and lift operators and boat salesmen. In a socialist economy nobody gets a boat and the should be lift operators don’t have to work.

#34 Victor V on 09.08.17 at 8:13 pm

Vancouver condo developer cancels Langara West on Cambie

http://vancouversun.com/business/commercial-real-estate/vancouver-condo-developer-blames-city-hall-for-cancellation-of-langara-west-on-cambie

#35 Darryl on 09.08.17 at 8:14 pm

Mortgageman
Maybe I read that wrong but doesn’t that men they got 95% finance on an income property . I thought they needed 20% down for a second property ?

#36 Smartalox on 09.08.17 at 8:15 pm

@ Millennials #9:

The derivatives mess was a consequence of people taking on too much debt. When the dot-com crash happened in 2001 – 2002, the US government modified it’s home lending rules to allow companies to set ‘introductory’ interest rates that were much lower than prime rates at the time.

In the US, when you get a mortgage, the terms of the deal (amount, interest rate, duration) are usually set for 25 years. In the years leading up to the housing crash in the US, the rules were changed to allow low, low introductory rates for the first five years, that would re-set much higher (2x to 5x as high) after that for the rest of the 25 year term.

So, this encouraged speculation, as people bought houses at low, low rates, with the hope of flipping them and paying off their new mortgages before rates re-set, it encouraged poor people to buy homes that they could afford at low rates, but not at higher rates, and it encouraged people to re-finance their homes at low rates, to unlock equity (for spending money) or pay off their homes faster.

When the rates for these mortgages began to re-set 5 years after 2002 (2007) people started to balk at the suddenly higher payments. Speculators walked away from their second third or additional properties, as they found themselves unable to keep up with the payments. The poor couldn’t afford their principal residences, and so were foreclosed and evicted.

If the US government had passed a law keeping mortgage rates low (say around 2%), things might have been ok. People would have struggled, but most wold have stayed in their homes. But instead, as mortgage rates rose in 2007 (to around 7%) through 2009, the whole mess accelerated: more waled away, got evicted, lost their equity, and property values crashed as a result.

The ‘crash’ happened when the banks started cashing in the ‘insurance policies’ the derivatives that were written against defaults on the mortgage loans. As mortgages went into default, the insurance policies were payable, but the insurance companies (and the banks that backed them) could not afford to pay them.

Global interest rates were then lowered to stimulate corporate borrowing, to try to get the economy going again. Most large companies borrow against customers’ unpaid debts, to fund operations and payroll. When banks couldn’t lend, because of the crash, prime rates were dropped to prevent businesses from collapsing due being unable to pay their workers. A ton of workers lost their jobs anyway, but things would have been exponentially worse if EVERYONE else had lost their jobs, too.

In Canada, it may take 25 years to pay off your mortgage, but the terms (interest rate, fixed or variable, etc) of the deal are re-negotiated every five (or two, or whatever the ‘term’ is) years. In a Canadian mortgage, the terms may change, and the market value of the property may change, but the amount borrowed is only reduced by repayments of the principal – or the amount of money borrowed to buy the house.

The super-low interest rates of the last 7 years are just like the super-low ‘teaser’ rates that US mortgage banks offered 15 years ago. But instead of re-setting quickly and drastically after five years, the speculative frenzy in Canada was allowed to go on longer (driving prices higher, relative to the economy) and rates are going up more slowly, compared to the US.

But a potential 3x increase within a single year (from 0.5% to 1.5%) might still be a heck of a shock, especially since the outstanding balances (the prices paid) were so high, and the bank’s rates are always a little higher.

Property values start falling because demand is drying up: stress-testing disqualifies more and more buyers, making it harder to sell. Those that make an offer, can’t close, because they can’t get financing at the agreed-upon price.

Falling property values start to eat into equity, and make it harder for ANY mortgage holder to get a new term on that million dollar mortgage from five years ago. Maybe you have to write a cheque to cover the difference, or pay a higher interest rate to reflect the risk. Suddenly you default to the Bank of Mom!

But even then, you’re stuck with a property that is worth less (maybe a lot less) than you owe on the loan that you used to buy it. You can’t walk away from that loan and that home in this country, like they can in the US.

Maybe you can try to sell, but find that there are dozens of properties on the market just like yours, and nobody’s buying. Maybe yo manage to sell, and get thousands less than you still owe on the mortgage, and have to pay every month to settle the difference.

#37 Victor V on 09.08.17 at 8:22 pm

According to this mortgage broker, “all lenders” are raising their rates this Monday.

https://twitter.com/JasonAnbaranbc/status/906309210958417920

#38 Renter's Repentance on 09.08.17 at 8:23 pm

Pride goeth before destruction, and an haughty spirit before a fall.

#39 Betting on the house on 09.08.17 at 8:23 pm

Betting on the house – Australia but might as well be Canada

https://www.youtube.com/watch?v=hYMiTlZ9iN4

#40 Ace Goodheart on 09.08.17 at 8:27 pm

Nice dog pic.

Speckers aren’t the reason the US market blew up in 2008 and they also were not the reason for the 1990s Canadian bust.

US crash was caused by something called the credit default swap, which was a symptom of the bull run in the bond market.

Bond traders had made billions on the spread between what a bond’s rate was set at and the rate at which you could borrow. The former was always higher than the latter. Easy money. They literally bought control of companies with cheap credit, buying up debt with interest rates higher than the rates they were paying to borrow the money.

Well, when you let bond traders rule the world, guess what happens? The world becomes a giant interest rate spread.

A brilliant bond traders discovered that you could separate credit risk from the investment. You could sell the risk of default only, without selling the underlying loan, so that the person who takes the hit in the event of default is not the same person who loaned the money.

You could then bundle all of these individual credit risk bets into securities, and sell them. These were known as collateralized debt obligations.

What does this mean for a bond trader? Simple. They could now purchase the entire world, with other people’s money, and then sell the default risk back to the same people that they were both borrowing from, and lending to. The ultimate rate spread play. With zero risk to themselves.

The people who did this were brilliant. The best and the brightest minds figured this out.

They applied it to the housing market. All of a sudden it was very easy to qualify for a mortgage. Why? No one knew whose money it was that was being loaned and everyone believed that someone else was taking the default risk. The cash flowed freely.

Resulting in the largest residential real estate bubble anywhere on the planet.

And sparing no developed nation ……except Canada. We had the peculiar distinction of being unaffected by this financial arbitrage. Why? Because it was not allowed here.

Our banking system is different from that of most developed nations. Have a look and you’ll see why.

What we have right now is interest rate risk combined with a controlled deflation of an overheated real estate market being orchestrated by our government.

Yes. The feds and the provinces are pulling the strings, deliberately decreasing residential property values. This is not an epic US style explosion.

Our governments threw water on the fire.

Welcome to Canada. Where everything is planned. Even real estate crashes.

Peace, order and good government.

The US housing market caved, then swaps failed. But nice try. — Garth

#41 april on 09.08.17 at 8:28 pm

$20 – Flop what about a low end lower Mainland condo?

#42 NoName on 09.08.17 at 8:30 pm

Off topic

Now that ninja is mentioned, I grew up reading novels about an american who become ninja and lived in SF where hi and his 2 frends where they fought crime as vigilantys.

Interesting chart price ninja novels vs Yugo inflation.

#43 NoName on 09.08.17 at 8:31 pm

Link
https://sites.google.com/site/vinkozlatic/Vinko_Zlatic_homepage/fun-1

#44 BlogDog123 on 09.08.17 at 8:40 pm

The ol’ plunge-o-meter website says another 58% drop to go… Maybe 20-25%, but 58% seems steep.

http://www.chpc.biz/plunge-o-meter.html

#45 common sense on 09.08.17 at 8:43 pm

#20 Flop

Confession…..I got a 1 time perm first year of Uni 1979…

After being called Shirley Temple or Daryl Sittler so many yimes, once was enough….

Thanks for the memory…I think

M56ON

#46 n1tro on 09.08.17 at 8:44 pm

Quite a shame that it isn’t like the US. Quite a few people on this blog would be popping the champagne (or twisting the cap off) if they heard that filthy doctors and business owners are left holding the bag on inflated homes.

#47 Doug t on 09.08.17 at 8:45 pm

Whoa there Gartho – there is nuttin wrong with decent adult porn now – it can be healthy dude

RATM

#48 FOUR FINGERS WATSON on 09.08.17 at 8:48 pm

#31 Howard
I think this presents a huge opportunity for Kelowna and Kamloops. If they could snag a few regional HQs from the LM, and the white collar professional class jobs that come with them, I can easily see the LM’s educated young people flocking there in droves.
………………………..
They would be crazy to come to Kelowna. Third highest home prices in Canada, average SFH is 650k. A nothing economy. Overcast with smoke for about 2 months now, it was so bad today even I had to stay indoors. Summer is fire season is smoke in the valley season here. It’s awful for the very young, the elderly, and those with cardio/pulmonary/breathing issues. And no end in sight. I would never advise anyone to move to the Okanagan. And i have real estate here ! I’m killin’ my own property values !

#49 Ace Goodheart on 09.08.17 at 8:49 pm

Re: “the US housing market caved, then swaps failed”

True. The swaps were tied to residential mortgages. The US market failed when the money stopped coming out of the pipe.

The only thing stronger than fear is hope.

In an overheated market you have hope pushing people to do stupid things (like buy assets with inflated prices). There has to be hope that someone else will come along and buy the asset at a higher price. As long as that hope is there, the fear is overcome.

If the money stops flowing then hope immediately disappears and is replaced with fear. You get a sell off. Stock markets run on this principle. So do housing markets.

In the USA the money ran out. Then people realized there was no one to sell to. The market collapsed and the credit default swaps were called in. It became apparent at that point that no one was holding the bag.

#50 DON on 09.08.17 at 8:52 pm

#34 Smartalox on 09.08.17 at 8:15 pm

Must read: Nicely Put!

#51 acdel on 09.08.17 at 8:55 pm

Hey Garth, there are so many things that I could or have said in the past including links but you get it! Things will never change until it is forced to. I find it absolutely amazing on how people do not learn from the past.

What any new government should do is to create a mandatory course for all Canadian’s to learn from the past, it would be a great investment for people who are interested but a lousy investment for the media, governments, and our friendly neighborhood soul suck!ng real-estate agents and corps, kidding of course or maybe not such a bad idea! :)

Anyways all the best to the people in Mexico and Florida; stay safe if you can!

#52 Screwed Canadian Millenial on 09.08.17 at 8:55 pm

DELETED

#53 mike from mtl on 09.08.17 at 8:59 pm

#11 Tony on 09.08.17 at 6:54 pm
Yup, and speculation is by the middle class is why it costs $600 K for a one bedroom condo in Vancouver, yeah right. lol

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

Yes it does, because you idiots have no regional culture and need another pastime other than imported ones and RE.

All these fastidious posts from you left coasters following sales and travelling to open houses just to tyre kick is insane. Get a life!

Whatever became of this ‘natural wilderness’ you all boast about?

#54 For those about to flop... on 09.08.17 at 8:59 pm

1 april on 09.08.17 at 8:28 pm
$20 – Flop what about a low end lower Mainland condo?

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

All I can say in your case, if I remember correctly you were looking for a condo in New Westminster for a while.

Back when you first asked people on here if it was a good time to buy and for whatever reason you couldn’t afford to buy in one of the cheapest areas suggests that your finances would have been extremely stretched and prices have skyrocketed on condos out that way recently.

What is your budget?

I’m pretty sure I saw some in the 200-300k price point, might have been Surrey or Abby last week that had to lower their prices and it made me think that it was odd but I went down a different path researching something else.

And so unless something dramatic has changed with your situation I think you know that you should just stay out of it or look further out.

I see some vulnerability in the Richmond condo market at the moment and I will do some more research on things in the winter time…

M43BC

#55 FLHTK on 09.08.17 at 9:07 pm

This is going to get interesting.

#56 Millenials on 09.08.17 at 9:20 pm

#36…..Smartalox,

I agree and you are supporting my point. Yes…there could be a regression to the mean type affect with Canadian housing….with some dislocation. But if you read a lot of the comments on this blog…..including some of the posts from Garth….the argument is not balanced.

The irony is that the strength of Garth’s point (diversity and balanced approach to markets) becomes muted due to the extent of the bluster and singular focus. Do we really need to have a multi-post chronology on poor Derek?

#57 Stone on 09.08.17 at 9:22 pm

#6 Oakville Sucks

Yup, same issue in my office. Colleague came over and told me yesterday he finally made up his mind and would buy a condo in downtown Toronto now that real estate has hit bottom. I then told him about OSFI and the B-20 regulations that are coming though not confirmed as a done deal yet.

I think I could see his appendix when his jaw dropped as low as it did. Too funny. Make big decisions without knowing what’s going on. He didn’t think OSFI would do something like that. That it would not be right or fair. Unbelievable. I told him I hope they implement it as currently presented. No mercy for the daft! LOL

Like I said yesterday, renting is the new black.

#58 Ponzius Pilatus on 09.08.17 at 9:29 pm

Garth,
The picture is discraseful.
Stop putting words into animals mouth.

#59 Stone on 09.08.17 at 9:39 pm

#20 For those about to flop… on 09.08.17 at 7:21 pm

Well said Flop. Purchase, feel the high. It’s all downhill thereafter and it’s a big hill.

I prefer having a high everytime my dividends come in. Like today. Thanks ZPR. The gift that keeps on giving, and giving, and giving. Yeah, baby!

#60 joblo on 09.08.17 at 9:43 pm

So Energy East is Dead?
Keep up the good work Kanada, the country continues to fail.
Keep getting crazier, so entertaining.

https://beta.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/transcanada-urged-to-continue-with-energy-east-pipeline-plan/article36216676/?ref=http://www.theglobeandmail.com&

#61 Stone on 09.08.17 at 9:43 pm

#32 King Dong Redux on 09.08.17 at 7:53 pm

I’ve got to think about that. How do you compare to my lovely dividends? They’re pretty fantastic.

#62 BS on 09.08.17 at 9:44 pm

40 Ace Goodheart on 09.08.17 at 8:27 pm

Speckers aren’t the reason the US market blew up in 2008 and they also were not the reason for the 1990s Canadian bust.

US crash was caused by something called the credit default swap, which was a symptom of the bull run in the bond market.

CDS collapsed AFTER the underlying assets collapsed (houses). CDS provided fuel to the fire on the way up but the CDS collapse was a symptom of the bubble popping. Then after the bubble popped and the CDS were all but worthless it eliminated that fuel to the fire to force housing down further as lending dried up. We will see the same thing here just with different acronyms.

#63 Lost.. BUT NOT LEASED on 09.08.17 at 9:45 pm

NOTE:While old enough to be Garth younger sibling…will reflect back on the post WW2 GVRD Real Estate market.

As a late blooming “Boomer”..may be good to look at Dr E Michael Jones book “The Slaughter Of Cities”or simply watch his YOUTUBE lectures as a summary.

The premise is the post WW2 culture was being insidiously molded by creating the suburbs…to create flight from the cities not so much as to create an independent lifestyle..but to hollow out urban centers from creating strong ethno centered voting blocks…ie dilute these threats to the powers that be.

In the US..they would place housing projects via eminent domain laws…and people would flee to the new suburbs.

In sparsely populated Canada..the tactic was more expdited via the CMHC funding. In Richmond BC..huge parcels of land often quarter sections (160 acres)of farmland were developed by large developers .ie the ‘Mores..the ‘Monds..etc etc.

Back then…prior to mega inflation..many people in middle class could invest in real estate by making a downpayment,and rent covered the mortgage…many built up a sizeable portfolio.

THEN..$HTF…when Nixon de-linked US $$$ from Gold in early 1970’s….and rampant inflation ever since.

In Canada..in the late 1970’s, a transition in the economy saw that labour was not at a premium, and unions became targets. Many of us can recall the real estate market going crazy in late 1970’s then the 20+% interest rates.

BC economy was in rut…many of us can recall EXPO 86.. and how the prime real estate it sat on was literally given away to a Chinese billionaire. The first wave was billions in scared Hong Kong $$$….till about late 1990’s…then a bit of a lull. I can recall a nice SFH in Richmond BC could be had for around $250,000.

Then millions from Mainland China began to enter the market…that $250,000 SFH is now $1.5 Million +

Point is…our Gov’t ..at least in BC…have long ago given up on encouraging, facilitating and promoting amore independent domestic economy…the international $$$ investment “teat” has been their prime focus.

I really get tired of pundits that try to negate the major impact ie cataly$t that offshore $$have…if this was never allowed we in Canada would NEVER have had this mess..

This has been a disastrous economic achille$ heal that is terminal…they have run out tricks.

To be Continued

#64 tccontrarian on 09.08.17 at 9:55 pm

“In case you missed it, the Yanks have recently discovered it was speculation by upper middle-class families that created a housing monster which ended up eating them. Forget the common belief that deplorables hopped up on NINJA (no-job, no-income) subprime loans caused the crisis by defaulting in droves on mortgages they could not afford. Nope, says a paper authored by several university economists. Never happened.
Analyzing credit data, they conclude the biggest snoflers of new mortgage debt during the housing bubble were those with scores in the middle and top of the credit score distribution. People at the bottom didn’t actually borrow more, with their debt levels remaining constant. Their default rates did not spike when crisis hit, either. It was the wealthier people freaking, selling and walking.”-GT
—————————————————————-
Would like to read this – source? Thx

No matter how we analyze this, Canadians are going to become familiar with a couple ‘new’ terms/phrases:
a. upside down mortgage
b. negative equity
c. Oh $hit, I’m f*kt
d. lease return (on Audi…etc)
.
.
.

I’m sure there’s more.

TCC

#65 FOUR FINGERS WATSON on 09.08.17 at 10:08 pm

#63 Lost.. BUT NOT LEASED

Bingo. You nailed it.

#66 Rates vs Capital on 09.08.17 at 10:11 pm

Oh my bears, it seems the much awaited BC NDP plan to tackle the housing crisis will ignore the role of foreign capital and foreign domestic speculation.

Today’s Throne Speech says it all!

Despite already having concrete recommendations in their election platform to tackle speculation, such as a 2% Speculators Tax, they are simply going to ‘examine options to curb speculation.’

Despite clamouring for years about measures to address the affordability crisis, they do not have the appetite to implement any changes that will rock the boat. Perhaps after looking at the books they realized what a boon RE is to the provincial economy.

As I said, those on the sidelines in YVR waiting for NDP measures, interest rates, or B20 rules to change the market will soon be disappointed.

In a few months, we will know if rates and lending practices, or foreign capital, is the real driver of the housing prices…and I think the evidence to date points to the latter.

#67 Trumpocalypse2017 on 09.08.17 at 10:14 pm

A dreadful time upon us now, beginning this weekend.

Floridians are out of time to prepare. You still have some.

Don’t waste it.

#68 OttawaMike on 09.08.17 at 10:15 pm

Another CCPC spreadsheet:
https://docs.google.com/spreadsheets/d/1KCIT9_N7GWuCf0NBlhSfC4pEvL0nEEYZMSJ8R2dKYkY/edit#gid=422559956

For corporations $250k and under the difference is $5% extra tax over 25 years.

For the really high earners that are bringing in millions per year the difference is huge.

Anybody still wonder why the uber wealthy are rallying the hardest against this tax change??

#69 Deleted Canadian Millenial on 09.08.17 at 10:20 pm

Really Garth? I posted a story about how Canadian workers are suffering in this country (including a lot of recent immigrants btw) and you delete it?

I went undercover in a Toronto factory where a temp agency worker was killed. This is what I found.
http://projects.thestar.com/temp-employment-agencies/index.html

You were deleted for language. — Garth

#70 Debtslavecreator on 09.08.17 at 10:24 pm

For many who bought and/ or refinanced in the last 4-5 years I suggest you watch 99 Homes
It will make sense what we are about to experience over the next 4-5 years
Then watch what’s happened in Greece, Portugal and Spain /Ireland in the government bond market as that is more or less our situation 2020-2021
Good luck to all

#71 Smoking Man on 09.08.17 at 10:34 pm

#68 OttawaMike on 09.08.17 at 10:15 pm
Another CCPC spreadsheet:
https://docs.google.com/spreadsheets/d/1KCIT9_N7GWuCf0NBlhSfC4pEvL0nEEYZMSJ8R2dKYkY/edit#gid=422559956

For corporations $250k and under the difference is $5% extra tax over 25 years.

For the really high earners that are bringing in millions per year the difference is huge.

Anybody still wonder why the uber wealthy are rallying the hardest against this tax change??
..

You know I love you.

When DN gets dinged on his 26% on stock options talk to me.

I’m a little fly and your pay check is coming after me with vengeance.

Still love you fan.

#72 45north on 09.08.17 at 10:42 pm

Lost but not leased: The premise is the post WW2 culture was being insidiously molded by creating the suburbs…to create flight from the cities not so much as to create an independent lifestyle..but to hollow out urban centers from creating strong ethno centered voting blocks…ie dilute these threats to the powers that be.

so in Toronto, the suburbs were created to dilute the power of ethno centered voting blocks such as Greeks, Irish, Jews, Polish? I grew up in the fifties (1950s) in Toronto. The premise just doesn’t feel right.

The premise should also apply to New York City. Tammany Hall:

https://en.wikipedia.org/wiki/Tammany_Hall

I don’t think it does.

#73 the Jaguar on 09.08.17 at 10:44 pm

It’s possible the Jaguar has some exposure (certainly not in any “personal relationship” kind of way) with those people who are unable to resist the urge to run with the herd. Instead, straight into the “debt pit” they go, in an unrequited attempt to bolster their self esteem, sense of security, and more or less puff themselves up like peacocks. A blight on the landscape mostly. Conspicuous consumption everywhere you look. Hand me my protective ear and eyewear, please. Fly me to the moon.
Like everyone else I like nice things. A little luxury from time to time when I feel I have earned it. A tasteful and comfortable environment. Less is more, and a meaningful life filled with relationships and big and small everyday adventures. That is what really matters. Ditch that stupid, ugly coffee maker which is an environmental disaster ( you know the one with the pods) and get a stovetop expresso maker. Free yourself from the tyranny of Madison Avenue. This relentless and exhausting pursuit of more and bigger houses, bigger SUV, best BarBQ or most elaborate patio furniture on the street, better cottage, better vacation, _–the list is endless. As Garth says, all fueled by debt, refinance of debt, all in an environment of change and disruption is gaining on us like Hurricane Irma on Florida. Mercy.
Speaking of mother nature, pretty sure there will be a massive earthquake in early to mid October. Around the time of the World Series. Hope it isn’t coastal BC since they have been so mean about pipelines. The offer to airlift victims to Alberta may need to be rescinded.

#74 Tony on 09.08.17 at 10:48 pm

I still think it was the first time buyers. The people with the NINJA loans were almost all first time buyers. Without first time buyers it usually is next to impossible to have a rising housing market. The base of the housing pyramid is the first time buyer. The difference in Canada unlike in America will be the first time buyers payed far too much. The same first time buyers in both America and in Canada but different circumstances.

#75 Lost.. BUT NOT LEASED on 09.08.17 at 10:55 pm

FewTure Shock:

As $HTF….is this a logical conclusion? (See Below)

Regardless of such trivial things as OSFI…Stress Tests…interest rates….

We have such a glut of RE via VOLUME..much of it kept like a collectible ….”.mint” condition…. UNused..ready for flip. My premise is the dam is about to burst onto the market….reality is a beatch.

IMHO…one way or another…this will ultimately end up in the more realistic market…”use it or lose it”…spekkers can’t/won’t hold on anymore….ie
with CRA breathing down their necks??? ..dropping RE prices???..etc.

This will result in major haircut$…and drag ALL comparable RE down…especially and unfortunately those who bought for good old -fashioned “principal residence”.

Our banksters will be fine..like the US banks in 2008 crash..the CANUCKISTAN Gov’t and Central Banks will perform their maple- syrup and poutine -dipped ” le Quantitative Easing ” …..in both official languages.

Provincial Gov’t’s???…..who knows…???

Local Govt’s???? …… will ultimately have a glut of properties delinquent in property taxes…and we will see major growth in “tax auctions”.

via the vicious circle….increasing volume of RE will depreciate ALL similar Real Estate…and we will see what refer to as certain fiscal benchmarks of depreciation that will target and entrap quantifiable groups…ie if your mortgaged RE holding was “$ X”….and say it appreciated to ” $ 2X “..if , via my above premise of tax and mortgage default, to < " $ X "…etc etc. this ends up an economic black hole of epic proportions of which no one is immune.

Walk away from a mortgage ???…NO!!! in Canada???? BULLSH*T…it happened in the 1980's but on a lesser scale..but people walked…..once any such predictable volumes of litigation becomes tsunami the courts cannot handle it..the laws WILL be revamped.

A given….GOV'TS are vampire$
..they could end up THE major owners of RE via mass defaults…..but desperate for cash flow to meet their annual budget projections… via taxation that could take down mortgage- free RE holders as the only $tones with non red-ink blood to give.

Historically…..There is a metric that to create "change" in a given society(ie various form of revolution)..you only need to motivate about 3% of the population. In a RE meltdown???….that metric gets scary !!!

I think we are in the midst of an unprecedented fiscal Tsunami ..a combination of (i)Gov't desperation meets and targets(ii) Citizen kool -aid swallowing/greed…and few if any will get out unscathed..ironically( and especially those who never participated in these nouveau inflation-driven economic models )….at least in the short term….the only solution may be "Jubilee" type fiscal amnesty.

PS..if you think this is a joke…an anecdote:
Met a fellow who told me he was married during the Depression. Told me he had a choice of wedding presents..
(i)a bare building lot in East Vancouver OR
(ii) a toaster

…guess which he took?
…………..(pass the butter)

#76 OttawaMike on 09.08.17 at 10:55 pm

#69 Deleted Canadian Millenial on 09.08.17 at 10:20 pm

Great work. Congratulations.
The type of journalism that is sadly disappearing.

#77 Vanecdotal on 09.08.17 at 10:57 pm

#15

Completely agree. Worth noting that the 20% calculation was arrived at solely by self-declaration, and in a short time-frame. Numbered co.’s, blind trusts and resident proxies “relatives” are not captured in that data.

Musing that the metro Van > $1.5 sfd market may be the perfect anti-speculation (tax) whipping boy. Easy tax grab on non-productive unoccupied shelter on those with deep pockets, and a high percentage of owners who don’t vote. Political catnip for the priced-out yvr masses.

#78 Danny on 09.08.17 at 11:06 pm

Great how honest assessments can bring out the light on speculators. Guess the greedy did not count on the Provincial Government stand up for the ones who could not afford to buy but rent…..and bring in rent control for all. These speculators thought they could play all kinds of games and gouge tenants to make the less fortunate pay the speculators ridiculously high mortgage.
How about those thousands of Canadians who shored up the Florida housing market when Florida’s housing prices burned and crashed…..and bought in droves….I know at least 3.
After the Hurricanes hit Florida in waves this year……..what will happen to those Canadian investments in real estate in the US?
Will they be repaired if they stay intact …and again be sold ….at a bargain again?
Interesting how the Canadian housing investment went south to US…reminds me of vultures ..and not just by the Snowbirds.

#79 maka on 09.08.17 at 11:18 pm

#34 Smartalox on 09.08.17 at 8:15 pm

Well explained!

#80 Cursing Canadian Millenial on 09.08.17 at 11:41 pm

Fair enough Garth. I thought the boomers could handle a 4 letter alternative word for crap that starts with ‘s’ but apparently not. Anyways I would highly recommend that you read the article. Like I said, the reporter did an amazing job on that story. Those immigrants work in abysmal conditions. Don’t you think we should be doing better than that as a country? Not keeping millions of WORKING Canadians living in poverty. Half of Canadians make under $30k a year. While corporate profits are at all time highs, and the Big 5 combined make $50B a year in profits.

Something’s not right man. So many working people these days, in this country, are screwed and don’t stand a chance.

The F word got you tossed. — Garth

#81 Cursing Canadian Millenial on 09.08.17 at 11:47 pm

@#76 OttawaMike

Yep couldn’t agree more. The destruction of job quality and decent wages in this country over the past few decades should be the #1 political issue imo. I don’t care what political party or ideology one comes from. That reporter Sara Mojtehedzadeh did an amazing job. I read her previous work and she’s done some great reporting on the disastrous labour market in this country. There needs to be a lot more light shone on this issue. IMO it would start with abolishing the TFW program (and all its sister program) as it is borderline human trafficking.

#82 Ian on 09.08.17 at 11:49 pm

USD is having its worst year since 1985. And when that happened in 1985, it marked the start of a ten year bear market.

The bill for these two weather disasters might do half a tril comfortably in cost.

When the US removes their debt ceiling…I could hardly think of a clearer signal to creditors that they should end the party.

The bear pack has emerged from the woods and is about to attack the campsite!

#83 Sold out in Vancouver on 09.09.17 at 12:01 am

141 Assignment sales listed on Craigslist Vancouver currently.
Seems like a lot ? I dunno… some folks getting cold feet. Glad I sold my 2 condos in April and May, Freedom 55 just around the corner.

M54BC

#84 Lost.. BUT NOT LEASED on 09.09.17 at 12:17 am

More future shock…Richmond BC as canary in the mine

Richmond should be major thesis material for numerous academic disciplines.

If RE was a drug Richmond City Hall would put Pablo Escobar to shame.

Evidence.at least circumstantial..deduces that the intent is to turn the City into an Upscale Ghost City…..cater to spekkers..etc…thus max taxes and zero demands on paid for city services.

As noted in my earlier post..Richmond had a lull in property price appreciation in late 1990’s- early 2000’s.

In 2004,..Richmond RiverRock casino opened…which ultimately became a cash cow which the City dictatorially towards various white elephant projects..such as the Olympic Oval…or to engage in massive upgrades of existing public facilities(Every Firehall, aquatic facilities…)……aka money is no object as like RE….casino $$$ can only go up..right???

Big ooooppp$$$$
….as they casino revenues have been on the decrease(due to such nuisances as RCMP and CRA rules on money laundering and greater transparency on $$$ sources. aka did this golden goose of casino$$$ (PEAKED AT $21 MILLION)dry up..having obligated the citizens to be obligated to pay for what can be called a large number of ‘shiny new civic projects” …..to help market Richmond RE ???…and thus perpetuate the RE beast?

Like many urban centers…theplanners..err”planwhores”morphed the rational that build rapid transit(ie Skytrain.Canada Line) FIRST…then the spekkers and money launderers will come..especially the absolute fluke that these rapid transit lines converge at…you guess..River Rock casino.

The common thread is that hi density is planned along these routes…BUT another “OMG! -meets-wtf ?”coincidence is that they re-zone commercial and industrial land to drumm rollll “residential”..create an increasing ill advised , dubious and permanent tax base shift to the residential RE orgy.

This ultimately affects the job base….increasing the Ghost City aka future residential real estate glut(sayonara Principal Residence Capital Gains…your RE soon ain’t worth squat)

WTF?= it appears that…across the board…EVERYONE has increased property taxes….WHY?…
.In Richmond…new construction , whether it be SFH or hi density continues to ADD millions to the tax base..Shouldn’t this buffer any tax increases???…something stinks…..is this simply a plan to entrap and enslave the masses…via the adage “all wars are bankers wars”

My humble attempt at trying to deduce and summarize this chaos is Gov’t is NOT this benevolent altruistic entity…it is ,….. reducto ad absurdum..a quasi private corporation but one that has far less accountability than GM….McDonalds …. GE….McCains….etc. They have morphed from their original mandate into ego- driven power -hungry minions to the elite and who are totally blind to long term thinking and the oh so predictable consequences of the RE Ponzi scheme.

#85 Ponzius Pilatus on 09.09.17 at 12:31 am

#168 Smoking Man on 09.08.17 at 8:29 am
#142 Ponzius Pilatus on 09.08.17 at 12:54 am
Branson’s and Trump’s estates in the Caribeans wiped out.
God’s message to these capitalist assholes.
Nature always wins.
….

Free renovations. It’s called Insurance.
————
Harvy, Irma, Hose and Kita will break them.
Can you say bancrupsy, Mr. Insurance Man.

#86 Well on 09.09.17 at 12:32 am

This is getting scary. Re: the US study I have a vague recollection of a TransUnion survey that found some quantity (total debt? debt service ratio?) was clustered near the top of the credit score distribution. Does anyone remember the details?

I have no problem believing it. Everyone I know over w certain Net Worth has multiple properties. When people say “the average mortgage load is only $300,000” they forget that these wealthier ppl are probably drawing on their HELOC to finance the 2nd home. Wasn’t there another survey showing a 20%/year explosion in HELOC balances?

I hope Trudeau and his team are ready to work overtime, the aspirational “middle class” seems ready to fuck itself all the way back to the feudal age.

#87 M-cube on 09.09.17 at 12:35 am

It really disgusts me how economic folktales that blame the poor in society (NINJA mortgage takers in this case) always seem to get solid coverage in the media so that the general populations accepts it as truth.

They do the same with poor people migrating into this country through the USA border. Those people are completely harmless to our economy yet the media has a clever way of imply that they are straining our social systems.

It is the immigration of the wealthy class into our country that damaging the economy for local people but the media never speaks of this – never.

Wealthy migrants make good neighbors but the poor migrants only consume our beloved social services and jobs — total bullsh*t. The exact opposite is the truth.

#88 Dolce Vita on 09.09.17 at 1:23 am

Flop tried to warn you YVR RE Cultists in a nice way today, I will not.

Firstly, you have not monetized, all you are worth is your debt.

Secondly, go see how Condo resales in units are doing in the last quarter at Zolo, ya, down at least 30%…so few to sell to and for about the same price 3 months ago…good luck monetizing.

Thirdly, OSF-B20 reduces the number of buyers. Insured mortg. stress test reduced YVR mortgages by 30%.

Finally, repeated warnings here by obvious lenders (and Garth) how over extended and financially reckless people are and will end up a giant dug show of financial pain.

Normally, I hate to see people crater financially as happened in YVR early 80s but from the smug YVR Cult Comments here, you deserve what have coming to you.

#89 Frank on 09.09.17 at 1:23 am

#69 Deleted Canadian Millenial – Its a great story. I’m sure CRA will be reading, and interested in a lifestyle audit of the temp agencies. And deemed employees, because of the control exercised. So still liable for the usual deductions. Cash payments just make it more interesting. There’s always working backwards from bank records.

#90 Vancouver on 09.09.17 at 1:27 am

http://vancouversun.com/business/commercial-real-estate/vancouver-condo-developer-blames-city-hall-for-cancellation-of-langara-west-on-cambie

Chinese developer canceling project and blaming City of Vancouve for being late and inefficient… ???? How about the price per foot went from $700/900 to $1200/1400 and developer is looking for a way out

#91 Tony on 09.09.17 at 2:58 am

I still think it was the first time buyers. The people with the NINJA loans were almost all first time buyers. Without first time buyers it usually is next to impossible to have a rising housing market. The base of the housing pyramid is the first time buyer. The difference in Canada unlike in America will be the first time buyers payed far too much. The same first time buyers in both America and in Canada but different circumstances.

#92 steerage steward on 09.09.17 at 3:45 am

In our live lives, times, biggest storm

https://www.youtube.com/watch?v=Zsatre6lPPI

https://www.nytimes.com/2017/09/08/us/hurricane-irma-florida.htm

https://www.youtube.com/watch?v=VVYZ2J2sshw

Have friends in Florida, they are standing fast

#93 juno on 09.09.17 at 3:53 am

A bank buddy of mine, said they had a meeting to prepare for the Stress test.

looking at the biggest loans to downpayment first slowly making it the list.

He says its going to take time to process, but I believe mail will be sent to have people fax their last 3 years income

#94 steerage steward on 09.09.17 at 4:27 am

I Want To cry, but Instead I laugh. Two trillion this year the Banks bought

Glad I invested in the “market”, and still rent

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

#95 steerage steward on 09.09.17 at 5:04 am

https://www.nytimes.com/2017/09/07/world/asia/north-korea-missile-test-us-options.html

https://www.youtube.com/watch?v=83tnWFojtcY

#96 steerage steward on 09.09.17 at 5:12 am

Linging up for toilet paper in a god forscan world

#97 steerage steward on 09.09.17 at 5:16 am

Kinda cool, the freedom we have in Canada

#98 Under the Radar on 09.09.17 at 6:01 am

Of course speculators fuelled the market. Conditions were a perfect storm, low interest rates ,easy credit etc. the tide is no longer rising and some boats are starting to sink. But, that will not cause the nuclear implosion a lot here are cheering for. Of course, the mania we saw could not last and pity the poor and now really poor person who paid over a million for their 16 ft danforth semi, as it’s now underwater and will be for along time.
Being an investor , the last real estate purchase i made was in 2010 , paid 560k central Toronto semi, i own the other half, and did not want a chain smoking hoarder to be attached, steps from new subway, last offer i received from a builder was 2 million. So today my pair of semi detached homes are worth less, than the 2 m i was offered, (for each) makes no difference to me . You see my friends, real estate has made a lot of not very smart people look like Midas . Time and no debt has a way of doing that. Make no mistake , i worked very hard and had a plan. All real estate i have purchased with debt has been repaid. I used all my rental income and other employment income to take advantage of nearly free money. 11 year amortizations , paying double twice a month etc. Yes, the people who loaded up on more house then they could afford are cash strapped and unhappy. The house i live in i bought 28 years ago and is modest and paid for. I could care less about market swings in its value because its the place that gives me shelter and is not part of my financial plan. So i’ll keep flying low. One more thing , i have said to my friends when asked , i really do not want more real estate. Why, because I am not a crazed narcissist empire builder, only to flame out and lose everything. Like Dirty Harry said, “A man has got to know his limitations”

#99 Nick on 09.09.17 at 6:58 am

“House porn. Just as healthy as the regular kind.”

** mic drop **

#100 maxx on 09.09.17 at 7:16 am

#18 Howard on 09.08.17 at 7:07 pm

“I am worried that Justin will force savers to pay for the fallout.”

That would be as well reasoned as one-handed pushups in the wrong place at the wrong time, etc, etc.
ALL of society would pay, not simply the “savers”. At any rate, “savers” have and always will ride out any lump of crap tptb “force” down river. Just another workaround on the road to more wealth. It’s the losers with debt that couldn’t balance a cheque book if their lives depended on it that should be forced to repay debt at whatever rate prevails. If they were that house horny, they should be able to find the means to pay for their stupid hormones. Just as they must if those hormones produce a human being.

“Let’s not forget this vomit-inducing June op-ed in Macleans : “Why Ottawa should bail out homebuyers if house prices tank” http://www.macleans.ca/economy/economicanalysis/why-ottawa-should-bail-out-homebuyers-if-house-prices-tank/

Junk article, laced with wrong-headed thinking, designed to encourage fiscal idiots to carry on distorting the market.

“This is a very real danger and one must be on the lookout for federal policy changes intended to socialize the losses resulting from rampant speculation.”

Given the selfie brigade, awareness on that score is probably worth a few seconds of distraction.

“I would rather bail out the banks than homeowners.”

They can all eat their debt. Bailing out these fools is the biggest incentive to moral hazard. Question is, just how stupid can decision makers be?

Raising rates slowly and relentlessly is the only way to correct the mess of economic distortion we currently find ourselves in. This mess, underpinned by cheap money only serves to keep Canada globally less competitive and less able to cope with macro-economic changes we have little or no control over.

Hey! Precisely the difference between “savers” and losers, who can’t cope with the rise in a basket of groceries.

#101 ArcticOutback on 09.09.17 at 7:38 am

#33 Nonplused on 09.08.17 at 8:01 pm RE: Competitive Hockey Bubble

I totally agree. Now that my 2 boys are becoming more involved in competitive hockey I am dumbfounded at the amount of money that folks of modest means are spending now on their kids hockey and other competitive sports in general. I am sure that for some their low-interest HELOC is funding this.

Although people were always crazy for youth hockey when I was growing up it is certainly at a whole new level of craziness.

#102 ArcticOutback on 09.09.17 at 7:43 am

Interesting article…Sunny Ways is actually much more cloudy:

‘It’s amazing the difference in how Justin Trudeau and his Liberals treat different groups depending on how they see you. Are you a friend or an easy target?’

http://brianlilley.com/for-trudeau-its-all-about-helping-his-friends/

#103 Dharma Bum on 09.09.17 at 7:43 am

#30 Smoking Man

“That makes me very dangerous to the machine. They just want the school system to pump out compliance and a consensus grouped gang that they totally control.”
——————————————————————–
Ha ha – you are so right Smoking Man!

When I quit my job to take a couple of years off to travel the world, the owner of the company flew into Toronto to speak with me.

He wanted to find out what was really going on. He couldn’t believe an employee could just up and leave, just because he felt like taking a break. He suspected that I was really going to work for a competitor.

I told him that I just want to live a little, see the world, relax, and enjoy life.

When we wrapped up the little chat, he said that I had just now taught him a valuable lesson. He said: “From now on I need to make sure that I only hire financially desperate and indebted people.”

So, yeah, if you are one of the “sheeple” masses, you are most likely desperate and indebted. Up to your yin-yang in houses, cars, and other stuff, but endlessly slaving away for your masters to hang on to all of it.

Me? I am a Dharma Bum. If I wanna work, I’ll work. If I wanna play, I’ll play.

Shun debt. Shun stuff. Be free. Live life.

#104 Ponzius Pilatus on 09.09.17 at 8:06 am

#97 steerage steward on 09.09.17 at 5:16 am
Kinda cool, the freedom we have in Canada
—————-
Yeah, they hate our freedoms.

#105 Ponzius Pilatus on 09.09.17 at 8:13 am

Lost…. But not leased.
Shouldn’t this handle get some kind of reward for creativity?

#106 Ponzius Pilatus on 09.09.17 at 8:22 am

Just thinking.
If the severity of hurricanes has increased due to human activities, is the term Act of God still applicable?
What about the insurance policies?
As I said, just thinking.

#107 Canadian Expat on 09.09.17 at 8:28 am

I don’t get it. Why do drywallers and pilots live north of Barrie?

#108 No loopholes here on 09.09.17 at 8:29 am

http://www.cbc.ca/news/business/zero-income-tax-high-income-canada-1.4087033
Wow..Kinda re-enforces JT and BM’s plan to level the playing field..Read another article from a doctor who threatens to leave Canada if these changes are introduced…Well…don’t forget your stethescope on your way out of the clinic…as you walk by all those patients you are so concernd about…

#109 Canadian Expat on 09.09.17 at 8:40 am

Fake news articles like these make my
blood boil:

http://www.cbc.ca/news/canada/calgary/raising-interest-rates-drives-prices-higher-says-real-estate-investment-analyst-don-campbell-1.4279244

https://beta.theglobeandmail.com/real-estate/toronto/the-buyers-are-back-in-torontos-housing-market/article36184927/?ref=https://www.theglobeandmail.com&service=mobile

#110 Old Ron the Realtor on 09.09.17 at 9:09 am

@ Nick & Under Radar

Reading these comments makes me think that a lot of folks here are into “Doom Porn”

It is not very exciting, but “Under Radar” (a few post above) has it right. Buy and hold. Get rich slow.

I could add, do not buy into a bubble, when everyone is hot for houses. On the other hand don’t wait to steal a house, because it probably won’t happen.

#111 dont sweat it on 09.09.17 at 9:15 am

it is a crapstorm out there right now, and this article is bang on …… today was doing a mortgage for someone who bought a house firm and was trying to sell his. A realtor and doctor wife bought it….. 480,000…… well appraisal came in 445,000……. get this … the realtor and doctor wife only have 5% downpayment….. so the house sold for the lower amount…….

……

with that combined household income they’re good. Likely have a portfolio as well and are diversifying with real estate. With rates so stupid low, i’d put as little down as possible as well. remember– there will be losers AND …winners with every cycle. It is what it is….

#112 Ace Goodheart on 09.09.17 at 9:31 am

Re 62 BS: completely agree with you.

The situation in the USA was however very different than the situation in Canada.

The USA was permitting “teaser rate” mortgages that had a very low interest rate for six months to a year and then a much higher rate thereafter.

People were buying with the intention of selling in six months for a huge profit. Most had no ability to pay the higher interest rate.

In Canada we are looking at folks having to renew in five years at a higher rate. These folks might also have to come up with a bit of capital to bring themselves back to 20% equity if the value has gone down.

But they have five years to figure that out. There’ll be some pain but nothing like what happened in the USA

#113 Terrence on 09.09.17 at 9:45 am

Hahahaha “several UNIVERSITY ECONOMISTS” now thats funny!!! Seriously?

Where do you think they teach economics? — Garth

#114 Ace Goodheart on 09.09.17 at 9:45 am

Probably the worst thing about to happen to people in the outlying GTA who did buy on speculation is the experience of selling a house.

Perhaps it is like welcoming home Roxy Carmichael.

It is the event that doesn’t happen. You get a very excited realtor who takes a lot of pictures, talks about your house being released on the market and how amazing an experience this will be. The excitement and anticipation is pumped to the max.

Then…nothing. A sign on the lawn and an ad on MLS. That’s it. You wait for a buyer.

It can take a long time. If you are selling a cottage it usually takes years (multiple summers – no one buys cottages in the winter).

There is nothing fun about selling a house.

#115 WUL on 09.09.17 at 9:47 am

So, we have Canadian cities lining up for the beauty pageant to win the crown of the $5 billion Amazon second headquarters.

My predictions for the segment winners:

1. Bathing Suit – Vancouver
2. Evening Gown – Toronto
3. Talent – Calgary
4. Miss Congeniality – Edmonton*

And the winner is….?

* Could surprise if she gets all gussied up.

#116 Ian on 09.09.17 at 9:56 am

#44 BlogDog123 on 09.08.17 at 8:40 pm

The ol’ plunge-o-meter website says another 58% drop to go… Maybe 20-25%, but 58% seems steep.
http://www.chpc.biz/plunge-o-meter.html
————————————-

Thanks for sharing that! I was not aware of this site. Interesting stuff.

#117 Gravy Train on 09.09.17 at 10:17 am

#32 King Dong Redux on 09.08.17 at 7:53 pm

“Speaking of ripples and rockets…I need a blogdog (or two) to rip my clothes off send me on a rocket!

“F38ON
37-28-35”

A ménage à trois! Uh, no—unless it’s with you and a girlfriend! :)

Out of the blue, Garth, you have a dating Web site! Well done! :)

#118 InvestorsFriend on 09.09.17 at 10:35 am

There is no we. You are on your own. Get on with it. Every policy hurts someone and helps others. No such thing as a public interest because you all have different interests. Characteristic of our semi free non communist society.

#119 Howard on 09.09.17 at 10:44 am

#48 FOUR FINGERS WATSON on 09.08.17 at 8:48 pm
#31 Howard

They would be crazy to come to Kelowna. Third highest home prices in Canada, average SFH is 650k. A nothing economy. Overcast with smoke for about 2 months now, it was so bad today even I had to stay indoors. Summer is fire season is smoke in the valley season here. It’s awful for the very young, the elderly, and those with cardio/pulmonary/breathing issues. And no end in sight. I would never advise anyone to move to the Okanagan. And i have real estate here ! I’m killin’ my own property values !

——————————————

re: “nothing economy”, well yes that’s why I said that Kelowna should focus on luring some regional offices from Vancouver and Calgary in order to build up a critical mass of professional-class jobs. Couple that with some downtown intensification to build some condos (yes, Kelowna is a place that could actually use a bunch of condo buildings) and integrate the amenities that young Millennials want, and you have the makings of a mid-sized city where highly skilled individuals would actually envision moving. Sort of like Kitchener-Waterloo. We badly more cities that offer people a future so that everyone doesn’t have to crowd into Toronto, Vancouver or Calgary (during boom times).

#120 Howard on 09.09.17 at 11:03 am

#81 Cursing Canadian Millenial on 09.08.17 at 11:47 pm
@#76 OttawaMike

Yep couldn’t agree more. The destruction of job quality and decent wages in this country over the past few decades should be the #1 political issue imo. I don’t care what political party or ideology one comes from. That reporter Sara Mojtehedzadeh did an amazing job. I read her previous work and she’s done some great reporting on the disastrous labour market in this country. There needs to be a lot more light shone on this issue. IMO it would start with abolishing the TFW program (and all its sister program) as it is borderline human trafficking.

—————————————

And to add insult to injury. Millions of doddering Boomers who REFUSE to retire even if they can afford to do so. Why? “Routine”. Like children they need to have their lives regimented and don’t know what to do with themselves otherwise. Do volunteer work? Not in their ungiving nature.

I wonder how many Boomers, when they were in their 20s or 30s, had to compete for jobs with their parents or even their GRANDparents!

#121 oncebittwiceshy on 09.09.17 at 11:21 am

Under the radar:”But, that will not cause the nuclear implosion a lot here are cheering for.”

… and if everyone was like you there wouldn’t be a problem, obviously. Now everyone that copied you, without a clue … whoops

…. and that is why there will be a catastrophic crash in several markets.

#122 Keith in Calgary on 09.09.17 at 11:24 am

Had a doctor’s appt Friday afternoon. Been using the same guy for 17 years…….he’s my age (mid 50’s) and a convowns a walk in clinic where he employs 3 others doctors as well as about 5 support staff/nurses. He owns a small paid for bungalow in a regular middle class area of YYC and drives a 10 year old Jeep Cherokee. None of his family work in the business.

As you can imagine we spend more time talking BS than the other reason I was there. He’s a conservative like me and has no issue with the tax changes.

Yes…….you read that right.

His exact quote to me was “when you’ve got my colleagues ripping off the system by income sprinkling, that’s fraud…….plain and simple……..no wonder they’re going after it”. On the subject of taxing retained earnings in a corp at a level equal to salaried income…….”it’s the same thing”……..

He said he didn’t go into business to make the same amount of money as if he went to work for someone in a clinic or in a hospital………so while he enjoys the freedom that being a small business owner gives you…….he also s making way more money. Which was exactly my experience as well during the 6 years I ran my company.

Those who whine are nothing more than pigs suckling at the trough of entitlement and in many cases…….tax cheats.

#123 TSX on 09.09.17 at 11:42 am

a year ago discussions with colleagues would end with them smiling as the TSX was soaring. I told them its nonsensical, wait until the bubble starts to unwind. Because I wasnt with the crowd, frowned upon

and here we are today…..:)

in the red, and the party has just started…

#124 paul on 09.09.17 at 12:00 pm

122 Keith in Calgary on 09.09.17 at 11:24 am

Maybe the biggest tax cheat is the Government ?

#125 Damifino on 09.09.17 at 12:08 pm

#106 Keith in Calgary

Those who whine are nothing more than pigs suckling at the trough of entitlement and in many cases…….tax cheats.
————————————

Ignorant statement, as you will discover if you’re ever desperately need of a suckling pig’s services.

It’s a special brand of tax cheat that follows the existing laws. If only the rest of the cheaters in Canada were so well mannered.

Are the provincial governments themselves also tax cheats? It is they, after all, who strongly encouraged the formation of private corporations to avoid paying medical professionals money from their own coffers.

Will T2 nail them too?

#126 Toronto on 09.09.17 at 12:25 pm

One possible scenario for Toronto homeowners….
Ride out the storm of a depressed market.

The pay out could be big: Toronto is the front runner to get 50,000 new jobs with six figure salaries. No need to spell out what that would do to RE.

https://www.bloomberg.com/view/articles/2017-09-07/few-cities-could-accommodate-amazon-s-new-headquarters

#127 Crazy on 09.09.17 at 12:28 pm

Nothing like a little granite and stainless to get the juices flowing

#128 oncebittwiceshy on 09.09.17 at 12:46 pm

TSX: “a year ago discussions with colleagues would end with them smiling as the TSX was soaring.”
<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<

You must be in elite company because the rest of Canada is invested in the housing market.

I would think that realtors, mortgage brokers and specuvestors would get a little more imaginative.

#129 Ian on 09.09.17 at 12:47 pm

#117 – Garth’s new dating site:

Plenty of (empty) Houses

Tumble…instead of Bumble

#130 Lost ..but not leased on 09.09.17 at 1:25 pm

To 45 north…re comment on post 73.

You may be right…the premise may not apply to Canadian cities per se

Dr E Michael Jones “Slaughter Of Cities” made reference to Detroit’s downfall. What apparently happened was much of the original workforce was fighting WW2…and this created a massive labour shortage that was filled by blacks from the south. This massive and relatively expeditious demographic shift apparently had whites vacating Detroit..that’s just a sign of the times.(NOTE:I am NOT trying to incite bigotry).

This Detroit phenomenon was duly noted by Gov’ts and academics. HUD was created in 1965 by LBJ…they would build these social housing projects in established areas, knowing the results via the Detroit example.

You may ask “Why?”….well then we get into all sort of interesting socio-economics on a global scale.

*****If you understand “ALL WARS ARE BANKERS WARS” you are on the road to epiphany.****** GOOGLE “Battle of Waterloo” and how Rothschild made a major part of his vast fortune.

It is quite obvious to deduce that Gov’ts do not want peace and stability, that allows people think for themselves and challenge the status quo.

Back to Canada….they paralleled the U.S. example via CMHC….and created the suburbs….which many of us grew up in. I do recall after WW2 parts of Vancouver had ethnic enclaves of white Europeans….many WW2 refugees..but they became dispersed by early 1970’s..and infilled by Non Europeans,…ie South Fraser had a lot of German businesses and is now almost entirely East Indian. Pierre Trudeau’s policies in the 1970’s favoured an influx that eerily paralled the Detroit example cited above.

So what do I observe on a daily basis in 2017 her in Richmond BC?( Again objective observation…not bigotry ). Schools from K-12 where Caucasian children are literally the exception.

OR…. 99% of SFH being constructed by East Indian trades and sold to offshore buyers.

….Or multi family residential Ghost Cities being built by parties on work visas

Did any of us have a say ?
.But if we even question it…we are labelled all sorts of ways?

Regardless….many of us can see what the future holds…and we are increasingly being detached from it.

All some of ask is that our intelligence not be insulted that the aforementioned is not part of some grander scheme by the powers that be…there is no evidence to the contrary.

#131 Millmech on 09.09.17 at 1:25 pm

#122
So by taking part in a government program that allowed income sprinkling they are guilty of fraud?
Can you explain how this is?
I guess if they ever disallow rrsps and close that government program you will vilify every Canadian who was allowed to participate in it as a tax cheat and fraudster as well.

#132 DON on 09.09.17 at 1:45 pm

#73 the Jaguar on 09.08.17 at 10:44 pm

Hope it isn’t coastal BC since they have been so mean about pipelines. The offer to airlift victims to Alberta may need to be rescinded.
*********

Wouldn’t need to ship Bitumen that sinks to the bottom on the ocean if oil was refined in Alberta and lower prices for Canadians – competitive advantage.

And pipelines don’t do well in Earth quake zones and lots of retired parents from Alberta now living on the fault line BC.

But I do agree one is coming, pressure needs to release after the 8.0 along south western Mexico this past week.

#133 Lost ..but not leased on 09.09.17 at 1:58 pm

On a lighter side….”Hockey Parents”…

(been there …done that).

Recommended for all to try…

Our son played for over 10 seasons..the last 5 at REP level. Lots of mostly good memories. One aspect was the “multicultural” model that should be the norm…quite the spectrum of ethnicity yet teamwork. Built lasting friendships with many teammates.

Musing on what I saw then and perhaps moreso now…is that perhaps adults and amateur sports is perhaps as delusional as RE…ie parents pressure on their children to get athletic scholarships and perhaps even pro sports?

We’ve seen it all…and the vast majority FAIL….or plateau at some Junior level. Full Scholarships…say..to some US school. Actually…there are a lot of other costs ..it ain’t a free ride. In addition….I hear that often your child often meets their future spouse…and then ends up living in the US.

Tournaments are a lot of fun…especially out of town.

Don’t waste your money on a Private Club(ie BWC or NSWC….the facilities are dumps). What happens is that while they are often better than Public teams early on…due to private coaching…but then the Public teams catch up and exceed them.

Odds of going pro are astronomical. ONE kid in our pool made PRO..broke in late in season….(Canucks)but he’s an only child who lived and breathed hockey. If he can make a career out of it is anyone’s guess.

Hockey or RE…..don’t bet the house on it…

#134 FOUR FINGERS WATSON on 09.09.17 at 2:00 pm

Hahahaha “several UNIVERSITY ECONOMISTS” now thats funny!!! Seriously?
Where do you think they teach economics? — Garth
……………………………

They should be handing out refunds for the educations since no one was seeing the GFG or the housing bubbles.

Idiot comment. — Garth

#135 Buyer on 09.09.17 at 2:09 pm

I have been monitoring the blog since this summer and despite the two interest rate hike, listing prices in Mississauga and Oakville haven’t gone down. Wondering if the sale price is close to the listing price for properties in these cities?

#136 Lost ..but not leased on 09.09.17 at 2:10 pm

Kelowna and Okanagan..

Earlier I noted EXPO 86 and the subsequent Hong Kong $$$$.

The Coquihalla highway was built and opened around the same time.
IMHO, there is a connection…

This highway was built as a means to encourage Greater Vancouver homeowners to cash out and retire to Kelowna – Okanagan area……given the existing highway was not much better than a goat trail.

The SHTF in GVRD..but Kelowna RE is dependent on GVRD Real Estate evacuees…is it not?

#137 Jon on 09.09.17 at 2:28 pm

#30 pure poetry smoking man

#138 Lost ..but not leased on 09.09.17 at 2:31 pm

# 90 Vancouver

Re Cambie Street and High Density

Fascinating background..
If you remember the Canada Line and the Arbutus corridor fight…and how the “self deemed” creme de la creme kept rapid transit out of their neighbourhood..even though it had a pre-existing rail right of way.

A Vancouver Sun reporter in mid 2000’s noted that Cambie Street was chosen to facilitate the Canada Line based on its demographics at the time..which as predominantly Chinese and non English speaking. (ie low risk of protest) .Concurrent with this was the need for land to rezone to higher density residential…ie build rapid transit and they will come.

Much of Cambie and other main streets in Vancouver now look like Detroit…boarded up homes behind temporary fences fronted by rezoning application signs.
Many have sat for years, and likely engaged in pre-sales.

As the SHTF and the RE market tanks…you can bet many of these sites(and there are plenty of them) will sit for years.

Welcome to Detroit” West”..

#139 the ryguy on 09.09.17 at 2:48 pm

#119 Howard on 09.09.17 at 10:44 am

_______________________________

It will never happen in Kelowna. The geniuses that be when they designed that city have a major Highway going right through the middle of town. Even in the ridiculously unlikely scenario where they could expand the highway, all the other roads off of it are 1 or 2 lanes with no room for expansion.

You want to talk about a place thats due for the mother of all crashes…Jesus christ. A literal nothing economy is correct. I went to university in Kelowna, and I have no idea how people there make it work. EVERYONE I know there is either a realtor, in food & beverage, or they grow pot. Its unreal.

That being said I love the city, with my companies I can work from anywhere, and will be ready to gobble up something nice once it happens.

#140 Pete on 09.09.17 at 2:49 pm

#122 Keith in Calgary

I know people who did own businesses laughing and bragging how little tax they pay. One buddy of mine said his accountant asked him ” how much tax do you want to pay?”. Government has to close these loopholes since Everyone is now doing it.

#141 Brian on 09.09.17 at 2:53 pm

#112 Ace Goodheart on 09.09.17 at 9:31 am

Re 62 BS: completely agree with you.

The situation in the USA was however very different than the situation in Canada.

The USA was permitting “teaser rate” mortgages that had a very low interest rate for six months to a year and then a much higher rate thereafter.

People were buying with the intention of selling in six months for a huge profit. Most had no ability to pay the higher interest rate.

In Canada we are looking at folks having to renew in five years at a higher rate. These folks might also have to come up with a bit of capital to bring themselves back to 20% equity if the value has gone down.

But they have five years to figure that out. There’ll be some pain but nothing like what happened in the USA
—-

Teaser rates? The biggest teaser rate is the 0% rate that Christy Clarke gave to first time home buyers up to a house of 750K. After five years, if they haven’t paid it off, they will need to pay that back at the full rate. Now, maybe all these first time home buyers are going to be frugal and budget accordingly, but I somehow doubt it.

#142 Gravy Train on 09.09.17 at 3:01 pm

#106 Ponzius Pilatus on 09.09.17 at 8:22 am

“If the severity of hurricanes has increased due to human activities, is the term Act of God still applicable?”

Are atheists allowed to strike out those clauses in the insurance contracts referring to acts of God, insisting on all-perils coverage? These days, who in their right mind would study to become an insurance actuary?
http://time.com/4933743/hurricane-irma-climate-change-global-warming/

#143 Ben on 09.09.17 at 3:01 pm

#122 Keith in Calgary on 09.09.17 at 11:24 am

Had a doctor’s appt Friday afternoon. Been using the same guy for 17 years…….he’s my age (mid 50’s) and a convowns a walk in clinic where he employs 3 others doctors as well as about 5 support staff/nurses. He owns a small paid for bungalow in a regular middle class area of YYC and drives a 10 year old Jeep Cherokee. None of his family work in the business.

As you can imagine we spend more time talking BS than the other reason I was there. He’s a conservative like me and has no issue with the tax changes.

Yes…….you read that right.

His exact quote to me was “when you’ve got my colleagues ripping off the system by income sprinkling, that’s fraud…….plain and simple……..no wonder they’re going after it”. On the subject of taxing retained earnings in a corp at a level equal to salaried income…….”it’s the same thing”……..

He said he didn’t go into business to make the same amount of money as if he went to work for someone in a clinic or in a hospital………so while he enjoys the freedom that being a small business owner gives you…….he also s making way more money. Which was exactly my experience as well during the 6 years I ran my company.

Those who whine are nothing more than pigs suckling at the trough of entitlement and in many cases…….tax cheats.

—-

As a doctor who is salaried with a full db pension and who also works in a clinic and am incorporated I tend to agree with you. At the end of the day, if you play by the rules (the old rules), to take out your money from your corp to do anything useful with it (buy a house, for instance) will require you to pay a lot of taxes anyway. I never use the income sprinkling in that I never pay my wife or kid an income but I would use it to give dividends to other family members who are shareholders in my company, which is legit. The only downside is that the money can no longer grow at a lower tax rate and you are due to pay your taxes right away.

For me, saving for retirement isn’t an issue as I have a db pension. If you’re talking about fairness, I would like T2 to go after real estate flippers/speculators who contribute nothing to the economy. I would also like them to go after the obscenely wealthy who buy multimillion dollar mansions and claim zero income. Then I’d be happy to pay my fair share.

#144 Jas on 09.09.17 at 3:15 pm

Garth,
will stress apply to new mortgage only or to renewal as well?

#145 rainclouds on 09.09.17 at 3:49 pm

#120 Howard “I wonder how many Boomers, when they were in their 20s or 30s, had to compete for jobs with their parents or even their GRANDparents!”

No idea about that Howard but when I was 20 the unemployment rate in Nova Scotia was 15% Moved to Van BC. first job was $8 per hour in a bottle factory. Double anything I made in Halifax . 33 yrs later. forced retired “moving in a different direction” and presumably a moister replaced me.I was still productive and could generally complete complex tasks much more quickly and accurately than a new hire. But I was a high cost. Old dude must go…..fair enough I was ready. Many aren’t and still contribute.

I did watch the millenials whilst still employed. Great kids, eager to learn and contribute. But no plans to stick around. Can’t blame them though.What did shock me was how easily they were manipulated . Didn’t occur to them that perhaps they were being taken advantage of? So much to learn grasshopper. We all have challenges, Overcome them.

#146 Manitoba Whale on 09.09.17 at 4:49 pm

#102 ArcticOutback on 09.09.17 at 7:43 am
Interesting article…Sunny Ways is actually much more cloudy…
*****

Two trust fund kids, the ultimate sprinkling, telling me that I am a tax cheat. I have never sprinkled, but I do pay divvies. Thanks a lot bozos.

#147 AGuyInVancouver on 09.09.17 at 5:25 pm

#90 Vancouver on 09.09.17 at 1:27 am
http://vancouversun.com/business/commercial-real-estate/vancouver-condo-developer-blames-city-hall-for-cancellation-of-langara-west-on-cambie

Chinese developer canceling project and blaming City of Vancouve for being late and inefficient… ???? How about the price per foot went from $700/900 to $1200/1400 and developer is looking for a way out
_ _ _
Yep, we’ve sunk to new low point where the specubuilders don’t even have to build their boxes to reap a handsome return on their project. Just cancel contracts and resell the land to another speculator apparently. Shameful.

#148 T on 09.09.17 at 6:37 pm

#56 Millenials on 09.08.17 at 9:20 pm

Yes we do. It’s called journalism.

This blog, Garth, has enlightened many and kept them from making massive financial mistakes. Show some respect.

#149 T on 09.09.17 at 6:44 pm

#91 Tony on 09.09.17 at 2:58 am
I still think it was the first time buyers. The people with the NINJA loans were almost all first time buyers. Without first time buyers it usually is next to impossible to have a rising housing market. The base of the housing pyramid is the first time buyer. The difference in Canada unlike in America will be the first time buyers payed far too much. The same first time buyers in both America and in Canada but different circumstances.

—-

Care to back up your thoughts with supporting data? All this you posted is absolute nonsense.

#150 Where's The Money Guido? on 09.09.17 at 10:08 pm

Re: #136 Lost ..but not leased on 09.09.17 at 2:10 pm
Kelowna and Okanagan..

Earlier I noted EXPO 86 and the subsequent Hong Kong $$$$.

The Coquihalla highway was built and opened around the same time.
IMHO, there is a connection…

This highway was built as a means to encourage Greater Vancouver homeowners to cash out and retire to Kelowna – Okanagan area……given the existing highway was not much better than a goat trail.

The SHTF in GVRD..but Kelowna RE is dependent on GVRD Real Estate evacuees…is it not?

If you do move there expect to pay 25% more than Scamcouver and area for most stuff, except the Superstore, as it is a resort town….And it is a town, after two weeks and not into boating or skiing, absolutely nothing there…..But the traffic is horrendous….

#151 jess on 09.10.17 at 12:27 am

Competition and Crisis in Mortgage Securitization
Michael Simkovic

USC Gould School of Law; Harvard Law School – John M. Olin Center for Law and Economics
Date Written: October 8, 2011
Abstract

U.S. policymakers often treat market competition as a panacea. However, in the case of mortgage securitization, policymakers’ faith in competition is misplaced. Competitive mortgage securitization has been tried three times in U.S. history – during the 1880s, the 1920s, and the 2000s – and every time it has failed. Most recently, competition between mortgage securitizers led to a race to the bottom on mortgage underwriting standards that ended in the late 2000s financial crisis. This article provides original evidence that when competition was less intense and securitizers had more market power, securitizers acted to monitor mortgage originators and to maintain prudent underwriting. However, securitizers’ ability to monitor originators and maintain high standards was undermined as competition shifted market power away from securitizers and toward originators…
Simkovic, Michael, Competition and Crisis in Mortgage Securitization (September 15, 2011). Canadian Law & Economics Association Conference, September 2011. Available at SSRN: https://ssrn.com/abstract=1936656
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1936656

Would like to read this – source?
64 tccontrarian on 09.08.17 at 9:55 pm
https://qz.com/1064061/house-flippers-triggered-the-us-housing-market-crash-not-poor-subprime-borrowers-a-new-study-shows/
http://www.nber.org/papers/w23740

#152 Nick on 09.10.17 at 10:30 am

#108 No loopholes here on 09.09.17 at 8:29 am
http://www.cbc.ca/news/business/zero-income-tax-high-income-canada-1.4087033

What an absolutely stupid article. Using RRSPs and losses to reduce income is now “fraud”? So someone that didn’t contribute to RRSPS for 10 years and paid tax back then and now does a lump sum contribution is somehow cheating? The article does say “legal”, but what is the intent of this rant? To enrage the unwashed masses that have zero clue as to how the tax system legally works against the “wealthy”?

This article actually pissed me off. Must have been a slow day at the CBC, and/or class warfare is clearly in play.

#153 not 1st on 09.10.17 at 12:30 pm

Garth has missed one big thing here. If passive investments like equities will not be able to be held in a company anymore, then that is less capital available to the markets and a potential drag on the TSX returns. 200,000 small business corps in the country.

Of course they can be held in corporate accounts, now and forever. — Garth

#154 Jerry on 09.10.17 at 12:57 pm

Wow- not a whisper about btc. Deleting any comments about it- up to this point. We are un the EVERTHING bubble as the central bank printing press has hyperinflated everything. Crypto currencies are the future of currency. These are the beggining stages of a 10 yearrun un crypto’s that will have huge swings up and down but will always be in a uptrend.
Roses are red violets are blue- taxation is theft and inflation is to.

#155 westcdn on 09.10.17 at 3:14 pm

#88 akashic record on 09.07.17 at 9:15 pm
Re: Bitcoin wallet

Thank you for the insights. I have made disparaging remarks about Bitcoin previously and thought I should have the decency to understand what I was criticizing. I may change my mind about owning Bitcoin.