Causation

American stocks are over-valued by about 20%. So, a correction could carve 4,000 or 5,000 points from the Dow. Gulp. But, it’s not going to happen. At least not soon. There’s much more to come – great for those with careful US exposure and gnarly for the value of your house.

US corporations are on a role with robust, rising profits. Given the expectations for earnings in early ’18, stocks don’t look so nose-bleed after all. Then there’s the Trump tax cut. If business taxes fall from 35% to 20%, roughly 10% is added to the bottom lines of most organizations. Yep, up she goes. Then there’s unemployment, as we used to call it. Now its name is “full employment” – exactly how economists define it when 96% of the people who want jobs find them. In fact there are currently more vacant job openings in American than jobless Americans to fill them.

This gets better, says Goldman Sachs economists. The 4.1% rate will actually wither to 3.5% by the end of 2018. We haven’t seen that for almost 60 years, when people drove four-ton cars with fins on them. Meanwhile, inflation’s back. After the quasi-deflation and huge central bank bail-outs of the Obama years, prices and wages are rising again. So the Fed is cutting back on monetary stimulus.

What it means: US interest rates have increased four times in 12 months and will likely go up again in December. In 2018 (which starts in a few weeks) the consensus opinion is for three more increases, although Goldman said on Friday it sees four. The Fed rate – which was at zero little more than a year ago – will be 2% or more. Yes, a big deal. But a growing, robust, broad-based economy like that of the US can absorb higher inflation and rising rates when wages are also growing along with the job market.

What it means to investors: All good, basically. As the largest economy in the world expands in an orderly fashion, with rising corporate profits, broadening employment and buoyant consumer confidence, Americans continue to stuff equities into the 401k accounts (RRSP equivalents) and markets advance. Could the Dow ever hit 30,000? Of course. Expect some corrections along the way, but there’s nothing on the radar now to signal a crash, reversal, crisis or general OMG moment. In other words, a 20% drop between now and 2018 would be a big surprise. And a bigger buying opportunity.

Meanwhile it’s no serious coincidence most other markets – the UK, Britain, emerging nations, Japan, for example – are also bouncing around at record levels. The wusses among us recoil and say, “everything is in a bubble. We’re truly pooched this time.” But in reality the deflationary low-rate, low-growth, low-inflation switch was flipped about a year ago (yes, with Trump), and we’re now into the next phase. Higher prices. Improving incomes, at least in the States. Fatter equity values. A return to inflation. And swelling  interest rates.

What it means to houses: There’s no way the Fed hikes rates three or four times in 2018 (plus once next month) and our guys stay idle. The Bank of Canada rate will increase at least twice and more likely three times in the next 12 months. That will add at half or three-quarters of a point to all loans. HELOCs (about $280 billion are outstanding, most of them variable rate) will cost about 4%, as will five-year mortgages. Given the universal stress test, in place in about two weeks, buyers must qualify a year from now (or sooner) at about 6%. This is a 300% increase from early 2017.

If you don’t think that matters because your spouse is still house-lusty, immigrants are teeming in with bags of money, there’s no more land and everybody wants to live exactly where you are, look at this chart:

BMO economics simply charted the start of interest rate increases earlier this year, and the net impact on real estate values. The chart also shows you what happened to housing hormones back in 2015 when the Bank of Canada rashly chopped rates twice. As this pathetic blog has been yapping about the past few years, the correlation between the cost of money and property values is absolute and irrefutable. So guess what happens when people have to qualify at 6%?

It was instructive a couple of weeks ago when CMHC exec Michel Tremblay said, “the dream of home ownership may be fading for many Canadians.” Tremblay did not stop there. He suggested long-term renting might be a better option. CHMC. Imagine.

Maybe it’s started. Mid-November resale numbers in the GTA were awful. And new house sales have plunged by two-thirds as the price of a freshly-built home in the distant burbs soars past $1.1 million. The people rushing to ‘beat’ the stress test, to borrow more now than they’ll qualify for next year, give this blog its name. 2018 could be epic.

 

123 comments ↓

#1 katie on 11.19.17 at 4:43 pm

first

#2 DG on 11.19.17 at 4:44 pm

The current Price-Earnings Ratio (P/E Ratio) for the S&P 500 is above 30 which historically suggested negative returns over a long term horizon (10 years). Is there a risk that someone overly investing in the US marked at the moment will see negative returns in the long run?

Over-invest in anything and increase risk. A balanced approach is the only sane one. Besides the S&P p/e ratio is around 23 and is slightly lower than a year ago. Looks like it’s going lower still even as the index rises. — Garth

#3 JSS on 11.19.17 at 4:46 pm

If the Dow is anticipated to have a healthy long-term run in the future, what can we expect from the Tsx?

#4 Terry on 11.19.17 at 4:48 pm

“Could the Dow ever hit 30,000? Of course.”

Dow 30,000+ will be a reality by the end of 2018! After that it’s DOW 40,000+ & the TSX at 20,000+ into 2020-2021!

Stay invested folks ……… I’m all in …… thanks Garth!

#5 AK on 11.19.17 at 5:14 pm

Goldman Sachs Sees Four 2018 Fed Rate Hikes as U.S. Growth Gains

#6 Safety Dan on 11.19.17 at 5:22 pm

Now that Garth has claimed that a correction / recession isn’t going to happen anytime soon, it almost certainly will before the year is done. Hope everyone’s ramping up their cash position!

#7 AK on 11.19.17 at 5:28 pm

#2 DG on 11.19.17 at 4:44 pm
“The current Price-Earnings Ratio (P/E Ratio) for the S&P 500 is above 30 which historically suggested negative returns over a long term horizon (10 years).”
——————————————————————-
Not even close to 30.

P/E’s and Yields : Major Indexes

#8 Jamie Dimon on 11.19.17 at 5:29 pm

Phew! Just the post I needed as my cursor slowly was gravitating towards realtor.ca. Thanks for the slap Garth…I needed that

#9 Freebird on 11.19.17 at 5:36 pm

Always learning so I did a quick search for current S&P P/E and found this (close to Garth’s value of ~23 and Im sure his sources are even more accurate):

http://www.wsj.com/mdc/public/page/2_3021-peyield.html?mod=topnav_2_3002

Interesting.

#10 Lore on 11.19.17 at 5:37 pm

It’s a stubborn muddle, confusing debtflation with a healthy productive economy. The American markets are being propped up by debt-based central bank monetary policy, margin, index manipulation and buybacks. Full stop.

It’s very hard to reconcile a “growing, robust, broad-based economy like that of the US” with all the financialization, corruption and DEBT. And how about this: a third of the population of the United States is on welfare, and record numbers are forced to live on the streets.

Let’s hope that Mr. Turner is right in more than a nominal inflationary sense, because the alternative is disastrous for the economy and your savings.

#11 Mark on 11.19.17 at 5:41 pm

In fact there are currently more vacant job openings in American than jobless Americans to fill them.

That’s a claim that some make, but when you look at ‘job postings’ these days, its quite apparent, at least in the IT/STEM sector, that large numbers of them are either completely fake, or the employers have absolutely no intention of filling them. Worse, some companies leave up large numbers of postings simply to create the impression of a growing company, even when they’re laying people off.

For instance, I am familiar with an outfit in Calgary a few years ago that was on the verge of failing. They advertised for a very specific kind of engineer.

No fewer than 20 different independent headhunter firms replicated the job ad, many under their own branding, to various job boards.

In the end — nobody was hired. The company packed up and moved the remnants of its Calgary operation to Atlanta, Georgia laying off most of its Calgary staff. Meanwhile 20 “jobs” appeared on the online job boards as ‘openings’.

In the tech sector, in particular, lots of ‘jobs’ are posted only for immigration compliance purposes. The result of legal requirements emanating from the H-1B visa and Green Card PERM process. In such cases, the advertised job has already been given to, or promised to a foreign national, but appears indistinguishable from an “opening” for a domestic candidate.

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

The result of all of this is that the “job opening” statistics are simply not credible, and are severely exaggerated. Wage growth data is far more credible, and its not showing much of any of that. The election of a certifiable nutjob to the Office of the President also shows severe dissatisfaction with the state of the economy — not a late 1990s-like “full employment” schema as posited.

#12 hybrid Mortgage Specialist on 11.19.17 at 5:51 pm

6 weeks, let’s not start with that #Fakenews #numberskewing

#13 MSM-Free Zone on 11.19.17 at 5:59 pm

Keep in mind that the U.S. financial world, under the stewardship of the very same financial people from whom Trump is currently taking advice (aka lobbying), blew its brains out under a ‘deregulated’ Republican watch and took down the rest of the world with it.

The guy from Hawaii (or Kenya, depending upon your news feed) was elected to clean up the mess.

Once again, the current President of the Alternative Facts of America is, with classic Republican fanfare, fertilizing the land with the very same culture and mindset that brought us the rapid rise toward GFC v2008.

For those with no social conscience, bags of money will be made over the next few years riding on the coat-tails of the corrupt and well-connected. For those who want to sleep at night, the trick will be to know which train station to get off before the whole show once again goes off the rails.

#14 Doug t on 11.19.17 at 6:00 pm

The Canuck buck is gone get slaughtered in 2018 – the bubble bond market is going to implode at some point and that will bring the next correction

RATM

#15 Chico on 11.19.17 at 6:07 pm

#8 Jamie Dimon on 11.19.17 at 5:29 pm

Phew! Just the post I needed as my cursor slowly was gravitating towards realtor.ca. Thanks for the slap Garth…I needed that

———–

I’ll give you a free slap, if you want. Sometimes it’s a lot better than a free hug. In fact…I bet there are a bunch random strangers on this blog that would be willing you help you out! :)

#16 Alberta Farmer on 11.19.17 at 6:19 pm

#14, where do I vote for a US$0.45 loonie? I’m a farmer and collector of oil royalties living in Alberta. I need our dollar to be valued at 40 to 50 cents so I can boost my exports to the States. Thank you.

#17 Purple Line on 11.19.17 at 6:20 pm

Please note that the purple line is above zero over the entire range.

#18 Penny Henny on 11.19.17 at 6:33 pm

#137 EV expert on 11.19.17 at 5:08 pm

You have less range in the winter because of the cold weather (same as gas cars), but by charging at night, you can start each day with nearly a full charge (I almost never charge it to 100% because I want to leave some room to store the energy from regenerative braking).
????????????????

Do you live on the top of a big hill?
How is it possible the the regenerated energy would exceed the energy you need to move the vehicle in the first place?

#19 Penny Henny on 11.19.17 at 6:40 pm

In other words, a 20% drop between now and 2018 would be a big surprise. And a bigger buying opportunity.-Garth
/////////////////

Did you mean to write something a little different or does your statement seem to predict that there will be no 20% drop in the next six weeks?

Why would there be? — Garth

#20 VICTORIA TEA PARTY on 11.19.17 at 6:52 pm

ADVENTURES IN VICTORIA’S CONDO-LAND, AND ETC.

Maybe it’s just the time of year or whatever, but some condo for-sale signs have been up for a very long time.

In particular I’m looking at a new 32-suite project in a local neighbourhood which is sporting seven unsold units.

They’ve been awaiting new owners for nearly the last five months, when the entire project went on the market.

“Too expensive,” one realtor told me. “So we’re recommending offers at 10 per cent less than asking.”

That means a 650 square foot one-bedroom with a view of an iffy local park next door would entertain a $485k offer.

That’s unheard of in these parts for some long time.

Another condo for sale in attractive Oak Bay has been featured for nearly the last two months; asking more than 260k for 700 SF.

And there are other examples.

I don’t really care if SFDs are being affected by whatever prices are being demanded by greedy owners, but I sense locals are tired of the high-priced BS and are wondering what to do. We’ll see.

About time.

Meanwhile the RENTAL MARKET is just plain CRUEL.

Examples abound where one greedy landlord’s demanding $1,450.00 a month for a tacky one-bedroom on a noisy street peopled with plenty of wandering homeless.

Meanwhile in the downtown there is a concrete tower building frenzy of 400 square footers and more and less.

Apparently it’s kind of like orgasmic real estate heaven there, say well-sculpted realtor types.

Looks like a future concrete slum in the making to me.

In the near future, I can just imagine new condo owners tripping over the sleeping street people every morning in their rush to line-up outside an “in” restaurant for breakfast.

Maybe someone could teach these folks how to boil water and make their own coffee.

The local city council has decided to turn our downtown into a mini “big” city.

Why?

To increase tax revenues for a “growing” potential “world-class city”.

God help us!

Council never ever thinks of cutting costs. Or no, the local union and management ‘crats wouldn’t like that very much now would they?

One result of this insanity is as follows, just about daily:

Creepy-looking people doing drug deals, street beggars with their baseball hats sitting on the sidewalks, drug-addled hookers lookin’ for work, huge snorting pick-up trucks trying to beat red lights and regular folks walking fast and pretending “there’s nothing to see here.”

Yes, there is.

Poverty is there right now.

But soon it will be juxtaposed by the “wealthy” condo owners: new hip environmentally sensitive millennials and what-the-hell ageing boomers.

The wealth/poverty gap will be visible to tourists and the rest.

Bad.

COMING RATE HIKES

So just what will our real estate market look like a year from now. And what effect will it have on all of the above.

For the street people, nothing.

For the condo-crew, a lot. Interesting to see.

Good, bad or ugly, It’ll be a show that the local real state folks and city council will be hard-pressed to “take control of”.

Monetary policy going “up” takes out the weak and leaves the strong to pick over the bones.

Experienced investors reading this have seen this movie before where they live.

Another but distant Victoria suburb, any small town in southwestern Alberta near the rock pile. is starting to look mighty inviting.

#21 For those about to flop... on 11.19.17 at 6:57 pm

#186 Old Bird on 11.19.17 at 4:13 pm

Flop…

I was sure you posted about 14069 28th Avenue, Surrey today if not recently, but I can’t find it now. Could you please direct me to the post…

Thanks!

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

#30 For those about to flop… on 11.18.17 at 6:00 pm

Pink Pumpkins being carved in Surrey.

These guys thought that it was a good idea to pay 2.72 for this ten y.o. house back in March 2016.

Just took the axe to the beanstalk for a 900k reduction

We will see what happens, but it could amount to roughly a 400k loss after expenses.

Ain’t no magic beans in this one…

M43BC

14069 28 Avenue, Surrey

Jun 6:$3,388,000
Nov 17: $2,499,000
Change: – 889000.00 -26%

https://www.zolo.ca/surrey-real-estate/14069-28-avenue

https://www.bcassessment.ca/Property/Info/RDAwMDAxN1A5Qw==

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

Hey Old Bird,I owe you a favour or two so here it is.

You were looking one day over.

Actually, now that I am writing you the last time we corresponded you misunderstood my message as I wanted you to send the entire message via Garth as I am wary about outing myself.

I am a big boy and will handle my business if the cartel comes after me ,but I my wife works for the school board and I don’t want her to suffer career wise for my extracurricular activities.

Also, while I am posting ,b.c assessment has changed its links and so I have to go back through every house and update everything .

It will take me a few weeks to update everything but I will handle it.

What piqued your interest in this listing?

Was it the massive price reduction or just the amazement at some dickhead talking about beanstalks when the focus should be on the case.

I am easily distracted…

M43BC

#22 AGuyInVancouver on 11.19.17 at 6:58 pm

Wish I could be as optimistic that the BoC will find backbone but given Poloz’s prevarication and Wilkins recent dovish statements I’m not holding my breath.

Renting is not an easy option in Vancouver. Rates have skyrocketed over the last couple years as landlords realize potential tenants don’t have any more options now that they’ve been priced out of buying. Add to that BC weak rent control, sucks at protecting tenants and is largely biased towards landlords.

#23 Tony on 11.19.17 at 6:58 pm

Re: #6 Safety Dan on 11.19.17 at 5:22 pm

Don’t count on any correction until the next bear market. Ask yourself do ponzi’s correct?

#24 Tony on 11.19.17 at 7:00 pm

It will be interesting to see what happens with the B20 OSFI rules starting next year. Who will budge first in a Mexican standoff with fewer buyers and a lot less listings?

#25 Ace Goodheart on 11.19.17 at 7:22 pm

“So guess what happens when people have to qualify at 6%?”

-We all start selling bitcoins to each other (you can still borrow on the margin to buy them and there’s no stress test)

#26 Victoria Mill on 11.19.17 at 7:26 pm

Come September, I’ll probably be moving out of my current rental that I’m sharing with a bunch of friends, and in anticipation, decided to give the local classifieds a quick browse for what the rental market looks like in sleep ol’ Victoria.

Ouch.

Maybe I shouldn’t have looked. Now I’m thinking of ways to creatively live, like convert an old school bus into a livable dwelling on wheels that I can sightsee my way through Canada in between months away at work on a ship on the Great Lakes.

#27 Tbone on 11.19.17 at 7:49 pm

Best pic ever !

#28 dr. talc on 11.19.17 at 7:50 pm

“the dream of home ownership may be fading for many Canadians.”

That’s right, and every action by every level of government, and the banks and their employee of the month Jeremy Rudin has done one thing: make it harder for the majority of Canadians to buy. But it’s easier for the financially established minority, those who have good incomes, professions, etc. everyone else can suck air.
When proven liars like Rudin, Trudeau and Morneau use expressions like ‘average Canadians’ and ‘middle class’, the majority may think they are included in that group, they’re not, because the average is low and an actual ‘middle class’ income is high

#29 Lorenzo on 11.19.17 at 7:52 pm

So for someone like myself, with a detached home around Lawrence and Yonge in Toronto, where prices are slightly down from Apr. 2017 but still have remained stable and going up a bit (but ever so slightly, and still slightly up YoY) and haven’t really had a correction in 40 years, is it too late to sell? Or better now than later?

Or is there such a thing as “prime locations” when no matter what, your investment is safe? Perhaps for a while.it won’t go up 10 or 20 percent a year, but that’s ok given that the location means safe (I.e. Less risk, which naturally means less potential rewards)?

#30 Leo Trollstoy on 11.19.17 at 7:55 pm

I enjoy all the thank you letters from investors who benefited from my call that the US IS BOOOOMING

I don’t do it for the accolades. It’s a charity thing. Philanthropy. Giving back. I’m a good person

I give thanks for the amazing tech sector that has a plethora of jobs and rising wages. Stable and healthy inflation with no deflation in soght. And a range bound CADUSD

It’s all in a years work for me. It’s worth it.

You’re welcome!

#31 not 1st on 11.19.17 at 7:56 pm

Garth, shouldnt we be drastically increasing our US holdings. I mean with tax reform and and infrastructure spending, the US should rock like its 1950 again, Non?

#32 Deplorable Dude on 11.19.17 at 8:00 pm

I must admit I don’t understand where Bitcoin gets it value from? It’s a virtual currency with a ridiculous exchange rate….but unlike other currencies that are backstopped by an entire countries economy…what’s deciding Bitcoin’s value?

#33 TRUMP on 11.19.17 at 8:05 pm

“Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future.”

Warren Buffett.

#34 Leo Trollstoy on 11.19.17 at 8:05 pm

TECH IS BOOOMING!

Just a hint. Devops engineer. $110k MEDIAN income. Go get em tiger!

http://www.marketwatch.com/story/the-most-sought-after-job-in-america-pays-110000-but-you-will-need-this-skill-2017-09-21

You’re welcome.

Can’t find a job in tech? You prolly suck. Sorry.

#35 X on 11.19.17 at 8:10 pm

Isn’t a 6% mortgage rate around the historical norm? Kinda telling about the RE market if average rates (or qualification at those rates) is what brings the market down.

Not that I want a crash, just a return to reality.

#36 tulips on 11.19.17 at 8:22 pm

#17 Purple Line on 11.19.17 at 6:20 pm
Please note that the purple line is above zero over the entire range.
————————————————————-
Math is hard… So is reading charts. Look again.

#37 Ronaldo on 11.19.17 at 8:23 pm

#32 Deplorable Dude on 11.19.17 at 8:00 pm

I must admit I don’t understand where Bitcoin gets it value from? It’s a virtual currency with a ridiculous exchange rate….but unlike other currencies that are backstopped by an entire countries economy…what’s deciding Bitcoin’s value?
————————————————————-
What decided what tulip bulbs were worth?

#38 Whacked on 11.19.17 at 8:24 pm

Lorenzo posted:

So for someone like myself, with a detached home around Lawrence and Yonge in Toronto, where prices are slightly down from Apr. 2017 but still have remained stable and going up a bit (but ever so slightly, and still slightly up YoY) and haven’t really had a correction in 40 years, is it too late to sell? Or better now than later?

Or is there such a thing as “prime locations” when no matter what, your investment is safe? Perhaps for a while.it won’t go up 10 or 20 percent a year, but that’s ok given that the location means safe (I.e. Less risk, which naturally means less potential rewards)?

#39 45north on 11.19.17 at 8:26 pm

Lorenzo: So for someone like myself, with a detached house around Lawrence and Yonge in Toronto, is it too late to sell? Or better now than later?

I’d say Lawrence and Yonge is safe but are you? My first impression was that you own the house outright with no mortgage but in that case why are you asking? I mean what do you care if the house drops by 50%? You still walk over to Yonge Street, have breakfast and read the newspaper. No, for someone like yourself, a 10% drop means that you don’t sleep, you cannot do your job.

Investment starts with self knowledge.

#40 Whacked on 11.19.17 at 8:38 pm

Lorenzo posted:

So for someone like myself, with a detached home around Lawrence and Yonge in Toronto, where prices are slightly down from Apr. 2017 but still have remained stable and going up a bit (but ever so slightly, and still slightly up YoY) and haven’t really had a correction in 40 years, is it too late to sell? Or better now than later?

Or is there such a thing as “prime locations” when no matter what, your investment is safe? Perhaps for a while.it won’t go up 10 or 20 percent a year, but that’s ok given that the location means safe (I.e. Less risk, which naturally means less potential rewards)?


Dear Lorenzo,

Yonge and Lawrence is a good area (anywhere within walking distance to a subway is) – but it’s not immune to a correction. You say there hasn’t been a correction there in 40 years but I distinctly remember prices there (in C10 and C4) did sink in the crash of ’89.

We bought in 1991 – the price of our detached had come down from $379K to $325K (or 14%) in just 4 months we spent looking. Two years later we tried to sell it and were offered $277K. So from $379K to $277K = drop of 27%.

From that I learned a boom can lift all ships, but a bust can sink them all too. In the end though you have to live somewhere – and that little house is now worth $1.7M. Depends on your timeline and no one can predict anything 100% accurately. But for sure no area can escape a general downturn. JMHO.

#41 For those about to flop... on 11.19.17 at 8:43 pm

For those wondering what I was talking about b.c assessment making changes recently I will use a Pink Snow case I showed yesterday as a demonstration.

Anyone who has visited the site in the last week or so will notice a vast difference in appearance.

Check out the two links below for the same house, most of the code is the same but a little different at the front and so now the old one is burnt.

As I said I will go through in due time and update my folder but part of the reason I am bummed is because I wanted to step up to the plate and have a record on this blog of this correction that is currently engulfing Vancouver ,no matter how mild or malicious in nature…

A lot of things have changed in the last year or so and I take the criticism onboard and try to modify my posting to keep as many people informed who wish to be.

Unfortunately ,some people on this blog tried to shame me and make it personal and at times I thought seriously about pulling the plug and then I realized that one of the reasons I started this project was to support the blog when the boss was musing about shuttering it multiple times in short succession.

I chose instead to no longer communicate with those people.They can obviously still read my posts but I will no longer be generous with my time and personalize a post for them.

Some people will look back on these times with fondness,others with anger and regret.

Whatever happens,let’s share the journey and try to help each other out.

Peace,Flopper.

M43BC

https://www.bcassessment.ca/Property/Info/QTAwMDAzVlNMNg==

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

#42 Go Kart Mozart on 11.19.17 at 8:45 pm

Do demographics support the optimism for the U.S. economy?

“Between 2000 and 2050, census data suggest, the U.S. 15-to-64 age group is expected to grow 42 percent.”

https://www.smithsonianmag.com/travel/the-changing-demographics-of-america-538284/

#43 down_boy on 11.19.17 at 8:57 pm

#32 Deplorable Dude on 11.19.17 at 8:00 pm
I must admit I don’t understand where Bitcoin gets it value from? It’s a virtual currency with a ridiculous exchange rate….but unlike other currencies that are backstopped by an entire countries economy…what’s deciding Bitcoin’s value?
….
When you think about it like a shared bank account it all makes sense. But I dont have just one, I have a diversified basket of cryptos.

#44 Smoking Man on 11.19.17 at 9:00 pm

Huge long USDCAD

No guts no glory.

#45 NoName on 11.19.17 at 9:10 pm

@ EV expert on 11.19.17 at 5:08 pm

how many km per year you drive you an average on all vehicles?

#46 NoName on 11.19.17 at 9:14 pm

#42 Go Kart Mozart on 11.19.17 at 8:45 pm
Do demographics support the optimism for the U.S. economy?

“Between 2000 and 2050, census data suggest, the U.S. 15-to-64 age group is expected to grow 42 percent.”

https://www.smithsonianmag.com/travel/the-changing-demographics-of-america-538284/

That nothing in same time frame in china “non working” people will account for close to 60% of population. Wonders of low natality rate and one child policy, and new 2 children policy will probably make things worst.

#47 somebody needs a hug on 11.19.17 at 9:17 pm

I enjoy all the thank you letters from investors who benefited from my call that the US IS BOOOOMING

I don’t do it for the accolades. It’s a charity thing. Philanthropy. Giving back. I’m a good person

I give thanks for the amazing tech sector that has a plethora of jobs and rising wages. Stable and healthy inflation with no deflation in soght. And a range bound CADUSD

It’s all in a years work for me. It’s worth it.

You’re welcome!

………………..

Seeking love from anonymous posters?

buy a dog, bro.

#48 Lost..but not leased on 11.19.17 at 9:32 pm

#41 for those about to flop

Please don’t feel unappreciated, I and many others find your info invaluable.

Why anyone would claim otherwise should best stay on the sidelines.

#49 C7.R on 11.19.17 at 9:39 pm

#18 Penny Henny on 11.19.17 at 6:33 pm

#137 EV expert on 11.19.17 at 5:08 pm

You have less range in the winter because of the cold weather (same as gas cars), but by charging at night, you can start each day with nearly a full charge (I almost never charge it to 100% because I want to leave some room to store the energy from regenerative braking).

???????????????
Do you live on the top of a big hill?
How is it possible the the regenerated energy would exceed the energy you need to move the vehicle in the first place?

Penny Henny, that’s gravity for you. Same reason a gas car accelerates down a large hill even though you are off the go-pedal. In a hybrid or electric car, you can regeneratively brake down the hill to re-coupe a portion of that gravitational-turned-kinetic energy and charge your battery, which would otherwise have been lost to heat through fiction braking.

GM was smart enough realize this and developed a neat feature for any Bolt EV owner who lives on a hill. Engage “Hill Top Reserve” and the car will not charge to full state of charge during the overnight plug-in to save some capacity to ‘regen down the hill the next morning.

#50 Penny Henny on 11.19.17 at 9:45 pm

#19 Penny Henny on 11.19.17 at 6:40 pm
In other words, a 20% drop between now and 2018 would be a big surprise. And a bigger buying opportunity.-Garth
/////////////////

Did you mean to write something a little different or does your statement seem to predict that there will be no 20% drop in the next six weeks?

Why would there be? — Garth

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

Heck, even my crystal ball will predict 8 weeks into the future.

#51 Leo Trollstoy on 11.19.17 at 9:49 pm

#44 Smoking Man on 11.19.17 at 9:00 pm
Huge long USDCAD

No guts no glory

You are a savage!

I luv u

#52 PastThePeak on 11.19.17 at 9:52 pm

Don’t disagree on the near / intermediate term for US stocks. Not until some further unwinding of the massive QE credit will the potential for a significant decline likely appear.

BTW forward pe is a guess while 12 months trailing pe is fact. And it is quite high and close to 2000 peak. Anyways, if the tax cuts come I think at least 12 months of further growth – maybe more.

I don’t think the Fed will increase as much as Garth thinks. Some stories around that new Fed wants to let the economy run hotter. Let inflation rise more than Janet Yellen would have (and I considered her a dove). That is why Trump replaced Yellen – he wants someone that will let ‘er ride…

#53 Dmitry on 11.19.17 at 10:08 pm

#32 Deplorable Dude

Nowhere.
Pure speculation.

#54 The Technical Analyst, CSTA, CPD on 11.19.17 at 10:10 pm

PLEASE, You need to add a disclaimer:

Declines in the stock market are NORMAL and HEALTHY.

Decline/Frequency/Average Length

5% or more, 3x a year, 47 days
10% or more, 1x a year, 115 days
15% or more, 1 every 2 years, 216 days
20% or more, 1 every 3.5 years, 338 days

“But, it’s not going to happen.” Great, way to jinx it! Or are you handing out free portfolio insurance?

#55 Buddy on 11.19.17 at 10:23 pm

Garth, you are hypocrite! You and your minions talk about the stock market, in the same manner that these real estate scum keep promoting the real estate market. Pathetic! The only advise you give is advise that suits you. In addition, you have a number of follower’s that are ass kissing and boot liking individuals. No intelligence, just follower’s.

The real estate market in the GTA is finished and the stock market’s will follow.

Also, anyone who calls Toronto a world class city and compares “it” to New York City is delusional. You don’t come close!

The blog is about balance, whether in housing, investing or life. Sounds like you need some. – Garth

#56 Vampire studies GMST on 11.19.17 at 10:23 pm

So is the P/E ratio also cap-weighted? If it is, can anyone tell us what the P/E for the S&P 500 is once we take say the 10 biggest caps out of the equation? If it’s
not, how about taking the 10 highest P/E ratios out of
it.

What I am wondering of course is whether a small percentage of stocks skew the average or is it more broad-based.

#57 Whipster on 11.19.17 at 10:26 pm

For flop…. your work will always be appreciated. Here’s another one I found, it is interesting to see things change. Still too rich for our blood but hopefully it’s more insight regarding prices declining.

899 50b st tsawwassen
Sold 28-Nov-2016 for $1,325,000.
Listed this year and recently reduced by
190k.
Asking 1.2 million now. Less than purchase price.

Let’s see where this goes. I’m not sure if anyone has lived here it always appears empty.

#58 Hotdogs from Heaven on 11.19.17 at 10:32 pm

#11 Mark on 11.19.17 at 5:41 pm

In fact there are currently more vacant job openings in American than jobless Americans to fill them.

That’s a claim that some make, but when you look at ‘job postings’ these days, its quite apparent, at least in the IT/STEM sector, that large numbers of them are either completely fake, or the employers have absolutely no intention of filling them. Worse, some companies leave up large numbers of postings simply to create the impression of a growing company, even when they’re laying people off.
————————————–

CGI is a good example of that. They just laid off 1,600 people in September including hundreds here in Canada. At the same time they run job fairs that often look for the exact same skill sets as those experienced middle age folks that they are laying off.

Why? So they can tell the government that they can’t find “the appropriate” people and must either outsource jobs to India or bring in Indian TFWs to do the work at minimum wage.

#59 Jeremy on 11.19.17 at 10:37 pm

I bought a house in Toronto this week – all comparables over a million and purchased for $850k. I’m confident, playing the long game, that I’ll never loose on this. I’ll bet that I double my money over ten years.

#60 Lost...but not leased on 11.19.17 at 10:42 pm

To Flop…

Out of curiousity…
…….are there many/any examples of RE sales that go against the tide of what you are outlining (ie any selling prices going over asking ?)

#61 rknusa on 11.19.17 at 10:54 pm

re: It was instructive a couple of weeks ago when CMHC exec Michel Tremblay said, “the dream of home ownership may be fading for many Canadians.” Tremblay did not stop there. He suggested long-term renting might be a better option. CHMC.

so there you have it, it is official, the so called “Canadian dream” is dead for many Canadians

from the agency that was supposed to ensure Canadians can afford housing now announce it is no longer affordable and they are in large part to blame by keeping the market primed for the last ten years with 95% leveraged loans in a stupid market when they should have not have

great work

am hoping the whole shaky deck of cards they created collapses

#62 For those about to flop... on 11.19.17 at 11:06 pm

Hey Whip,yeah I already run that one a few days ago but see how we can create a bit of a net by having a few people reporting from certain areas.

Didn’t mean to sound downtrodden in any of my posts,just felt with the explanation about bc assessment I might as well explain why I no longer waste time with certain people and also explain that why I might be fair game my wife is off limits.

Thanks to Lost as well.

I know that there are 20/30 people interested in what I am doing.

In an ideal world we would all be in Halifax and all interested in what’s going on in one somewhat manageable size city,but we are strewn all across the country and to certain extent ,the globe.

Not everyone is interested in Vancouver real estate but at least people should acknowledge an effort has been made to hold the real estate boards responsible with their selection of statistics and bring some transparency to the market.

I am not going to change much in this country, but I can at least show a few people on this blog another side of the story.

The Vancouver market is multifaceted and I am accused of being overly negative , but I am trying to share information that is little harder to find in this city.

It is there but you have to dig for it.

Positive news? Bus stop,Barber,Work,Pub,Sporting events….wherever,you are surrounded by it ,no escape.

Even now with people taking serious losses,try to spend a day without someone blabbing on about how much money is being made in real estate.

I lived within a mania before but that one was tolerable.

Tasmania

M43BC

Whipster pm
For flop…. your work will always be appreciated. Here’s another one I found, it is interesting to see things change. Still too rich for our blood but hopefully it’s more insight regarding prices declining.

899 50b st tsawwassen
Sold 28-Nov-2016 for $1,325,000.
Listed this year and recently reduced by
190k.
Asking 1.2 million now. Less than purchase price.

Let’s see where this goes. I’m not sure if anyone has lived here it always appears empty.

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

899 50b Street, Delta paid 1.32 ass1.31 asking 1.29

Aug 30:$1,550,000
Oct 25: $1,490,000
Change: – 60000.00 -4%

https://www.zolo.ca/delta-real-estate/899-50b-street

https://evaluebc.bcassessment.ca/Property.aspx?_oa=QTAwMDA1VlBMUQ==

#63 Canlearntoinvest on 11.19.17 at 11:29 pm

Happy to have just sold our second house in less than 6 months – both at more than double their purchase price 5 years ago. We paid off all Helocs & have no debt but a loan on a rental house under construction. We’ve downsized to weather higher interest rates while also custom building our own unit within the rental house. Will end up with 5 units and our own spread over 2 houses downtown. Markets have been slow but we bought when prices were ridiculously cheap here – financing our own construction site hasn’t been easy but we will have tiny mortgages & decent rental income. Hopefully we’re on track & can look forward to some R&R by April (construction finished & loan turns into ‘real mortgage’ with a bank) it’s quite the ride!

#64 Jon on 11.19.17 at 11:38 pm

Earnings are still way to solid for a big 4000 point mov down 2018 will be good just watch, the yield curve may be flattening but until it inverts probably 6-12 mo after that until a recession it’s a ways off without some big political upset turning the tide… stay invested

#65 Fortune500 on 11.19.17 at 11:44 pm

‘on a role’ Garth? I think someone has taken the editor for a walk …

#66 DG on 11.19.17 at 11:59 pm

#7 AK on 11.19.17 at 5:28 pm
#9 Freebird on 11.19.17 at 5:36 pm

I should have been more clear – I was referinng to the Price earnings ratio based on average inflation-adjusted earnings from the previous 10 years, known as the Cyclically Adjusted PE Ratio (CAPE Ratio), Shiller PE Ratio, or PE 10, which is currently just above 30.

http://www.multpl.com/shiller-pe/

The 23 P/E ratio, noted correctly by Garth, refers to the P/E ratio based on trailing twelve month “as reported” earnings.

Shiller’s study was based on the first formula…

http://www.multpl.com/shiller-pe/

#67 Growth on 11.20.17 at 1:36 am

So, who where truly understands the concept of steady growth?

https://topdocumentaryfilms.com/arithmetic-population-and-energy-lecture/

#68 Dolce Vita on 11.20.17 at 1:42 am

Well, bully for America Garth.

As for Canada, no such thing. A nation of RE speculation, tax cheating, illegal activities, etc., to get ahead and mostly fueled by debt.

A service based economy that doesn’t make anything anymore, yet, relies on making things to bring in surplus cash from outside its borders (except for cars, we are hewers and drawers for foreigners, August 2017, $ millions):

Goods $515,556
Services $1,226,698
https://en.wikipedia.org/wiki/File:What_did_Canada_export_in_2014.png

Oh and the fabled MSM darling, Information and communication technologies industries, 4.3% of GDP, wow:

$75,638

which is trounced by the Public Sector that makes nothing of value but vacuums up a lot of cash:

$314,075

And they wonder why the TSE is not doing well.

Probably why Canadians resorting to get rich quick schemes like RE.

Within the year, the day of reckoning will come for the Canadian economy and its house of cards built on debt. The more I read what people post here, the more confident I become.

#69 april on 11.20.17 at 3:04 am

#41. Flop we really appreciate your work. Don’t stop what you’ve been doing. Some of the bloggers here are also unappreciative of the great work Garth does, and for free, so don’t let them get to you. Some people just have to find fault.

#70 Big Daddy on 11.20.17 at 3:29 am

#57 whip…..there’s a case of mega proportion money laundering the RCMP exposed where casino’s were used as the bath tub. The billions then flowed through individuals buying multiples of properties all over the metro. The money once cleaned can now be sold, whether to lose a few hundred thousand is of no significance to the money launderer, they have freed the money from China and now it is cashy cash cash once the properties are sold/flipped in Vancouver. The money crooks bought dozens of homes each to resell as honest cash in Canada. This happened thousands of times. Remember the case of Mayor Moonbeams girlfriends mother who was caught selling off government buildings in Harbin and buying dozens of homes in Vancouver, she’s doing time in China, but still hasn’t been forced to repatriate the loot to China. If she sells the money is cashy cash to her proxy here in Canada. The RCMzp isn’t trying to be racist here, it is just that this is an enterprise washing over Canada like. Tsunami with Chinese crooks owning tens of thousands of properties with illegal loot that magically becomes free cash once in Canada. Very few of the looters have been caught. Chinese says that 40% of its most wanted criminals reside in Canada and that approx 140 billion dollars has gone missing.

So, sometimes you don’t have to wonder why a property can suddenly drop a few hundred thousand in price….it’s just a money launderer cashing in on ill gotten gains and he considers the slice a cost of doing business…..like a cheap haircut.

#71 Tony on 11.20.17 at 4:05 am

Re: #31 not 1st on 11.19.17 at 7:56 pm

The Canadian dollar should come under heavy, heavy selling pressure.

#72 Howard on 11.20.17 at 4:50 am

I don’t care about falling sales, except to chuckle at the fact that realtor shysters are starving for lack of commission sales.

I care about falling PRICES and aside from a teeny tiny correction following the March/April mania, prices have been stickier than tree sap. I predict it will stay that way. Between Boomers sitting on mortgage-less properties who can wait things out and mass immigration, GTA prices will at best remain stagnant a few years before rising once more.

#73 Howard on 11.20.17 at 4:57 am

#46 NoName on 11.19.17 at 9:14 pm

#42 Go Kart Mozart on 11.19.17 at 8:45 pm
Do demographics support the optimism for the U.S. economy?

“Between 2000 and 2050, census data suggest, the U.S. 15-to-64 age group is expected to grow 42 percent.”

https://www.smithsonianmag.com/travel/the-changing-demographics-of-america-538284/

That nothing in same time frame in china “non working” people will account for close to 60% of population. Wonders of low natality rate and one child policy, and new 2 children policy will probably make things worst.

———————————————

China will become old before it joins the developed world on a per capita basis. The notion that China will one day overtake the USA is fanciful nonsense in the minds of leftist dreamers.

Nobody wants to move to China. Everyone wants to move to the USA. (Not *literally* everyone, but you get the idea).

#74 Howard on 11.20.17 at 5:18 am

#29 Lorenzo on 11.19.17 at 7:52 pm

So for someone like myself, with a detached home around Lawrence and Yonge in Toronto, where prices are slightly down from Apr. 2017 but still have remained stable and going up a bit (but ever so slightly, and still slightly up YoY) and haven’t really had a correction in 40 years, is it too late to sell? Or better now than later?

Or is there such a thing as “prime locations” when no matter what, your investment is safe? Perhaps for a while.it won’t go up 10 or 20 percent a year, but that’s ok given that the location means safe (I.e. Less risk, which naturally means less potential rewards)?

——————————————-

Yonge & Lawrence?? Please, you’re golden.

Your house price will never do any worse than stay the same as it is now. Maybe a tiny “correction” of 2-3% if things really get bad.

Relax and give thanks for your exceptionally good fortune.

#75 Wrk.dover on 11.20.17 at 6:27 am

Here is a snippet for the start of your week Garth.

My wife bought a bit of NSP when they went public about twenty years ago. Reinvests dividends.

Paid $250, now returns $160 yearly.

50 grand then would be paying $87/day now.

#76 Crazy millennial on 11.20.17 at 6:43 am

Could be epic, but won’t be.

#77 Sir Realist on 11.20.17 at 7:40 am

#2 DG on 11.19.17 at 4:44 pm
The current Price-Earnings Ratio (P/E Ratio) for the S&P 500 is above 30 which historically suggested negative returns over a long term horizon (10 years).

……. Besides the S&P p/e ratio is around 23 and is slightly lower than a year ago. Looks like it’s going lower still even as the index rises. — Garth
—————————–
I think DG meant the cyclically-adjusted price/earnings ratio developed by a Nobel economist. It is currently at 31.5 and was higher only once before (in 1999), and was slightly lower in 1929.
The US economy is looking good if you ignore the debt, which, in dollars, is equal to the number of neurons in 200 average American brains (data extrapolated from primates, so some margin of error, (Azevedo, 2009)). Despite record debt (2.5 x GDP) Japan is doing very well, arigatou very much. The Nikkei is almost back to the peak of 30 years ago.
The weekend Nationalist Post had a piece by Lord Black, apologist for the rich and infamous. He claims Trump is the best POTUS since Nancy Reagan. Pretty much the rest of the world disagrees.
My radar is flashing “Threats Detected”, but I read for pleasure.

#78 crowdedelevatorfartz on 11.20.17 at 8:15 am

@#55 Buddy.
“In addition, you have a number of follower’s that are ass kissing and boot liking individuals. No intelligence, just follower’s….”
+++++++

Wow! A trifecta!
Your age, your IQ and your comment number all coincided on this blog…..
Amazing.
Time to hurry to “one a dem dare” Green Gables stores Buddy By’ and purchase a lotto ticket….. since that seems to be the only retirement plan you seem to have.

#79 Howard on 11.20.17 at 8:38 am

That will add at half or three-quarters of a point to all loans.

——————————–

Victory. You correctly used percentage point and not %.

I knew I’d get through :-)

I also said the price of a mortgage has risen 300% since April. — Garth

#80 crowdedelevatorfartz on 11.20.17 at 8:44 am

Newsflash !
Charles Manson dead!
Dictator Bobby Mugabe undecide whether he will attend funeral or create his own demise facing the “Impeachment Mob”.
His wife, Grace Mugabe(affectionately known in Zimbabwe as “Dis Grace” for embarrasing the Nation) doesnt want to flee to South Africa due to awaiting assault charges ( seems even if you’re the wife of an Afican Dictator, whipping a woman repeatedly in the face with a lamp cord is illegal in South Africa….who knew).
Options for diplomatic flight are dwindling. Switzerland is so cold this time of year and Panama is …… not Paradise.
Anywho.
The next few hours will tell.
Will Bobby Mugabe stay and face the music?
Or will he run like so many other dictators the world over , an obscenely rich pariah, shunned by all but his bodyguards……..
Still, even a gilded cage is gilded…..

#81 Mattl on 11.20.17 at 9:10 am

Long term renting probably is better at these prices but overall its terrible for middle class Canadians. At 6 percent you will need 600k in saving just to cover your rent in 20 or 30 years. Most older folks that are renting today sold a house to cover the cost of renting or assisted care.

The rent forever crowd better save up a ton of money or be prepared to live in B markets or 1 bedrooms. You really going to have 30-50k a month your last 25 years to cover rent in a decent place?

Being extreme may assist you in selling houses, but it doesn’t help average families, who cannot afford average home prices, to make good choices. Real estate values will ebb and flow. There will be many advantageous moments to buy in the future. This is not one of them, and renting is a viable, rational option until then. — Garth

#82 John Dough on 11.20.17 at 9:24 am

#70 Figured it Out on 11.17.17 at 8:30 pm
#4 John Dough:
The guy with the bag full of cash and the guy who gave it to him. Really, nobody else gets these?

#167 TurnerNation on 11.18.17 at 1:39 pm
#4 John Dough are you posting from Toronto’s new safe injection site? How is it? Only possible explanation.

Firstly, #70 thank you! for exposing the imbalance here, and #167, your expose on my perceived imbalance is unwelcome. I have often been told to turn the other cheek, but if I had a Satoshi for every time I heard that I could buy your mother’s house of ill-repute and bail out your dad. Your paranoid posts are puerile. Please stop. Sincerely,

#83 Chillnthemost on 11.20.17 at 9:32 am

Just when you thought the pumpers had a new reason to rejoice… Vancouver ranked dead last in list of 64 possible cities for Amazon HQ2 http://dailyhive.com/vancouver/vancouver-amazon-hq2-ranking

#84 Scutel on 11.20.17 at 9:54 am

Boys, I spent the whole weekend at the Gentlemen’s Club. My Realtoress showed me some fine lookin’ crack houses, but all were over are budget. She keeps tellin’ me to hurry up, but I cain’t decide. Should we look outside the 416? Your thoughts? Cletus

#85 R. Vanzo on 11.20.17 at 11:27 am

Trump, so far, has been even better than I expected. I moved to Canada (from Brazil) a few years ago and I confess that Canada is even better than I anticipated. The only two bad things is the crushing taxes and the healthcare system (I used to have private health insurance and it was simply superior in every sense). But taxes is something that may motivate me to move again, this time South the border. There are four very strong factors that motivates me: housing prices, higher paying jobs (for those qualified), much lower taxes and the ability to go back to a private healthcare market. The things holding me back is that Canada (other than the 4 things) is awesome and is the place that first allowed me to have a decent life (I was shot in Brazil in a robbery and that kind of broke the country to me, plus all the living in fear, chaos etc) and the immigration system in America is simply broken (it’s geared toward accepting unqualified immigrants with family ties instead of being merit based like the Canadá system). If Trump
Manages to get a merit based system there not only will he be winning a new taxpayer, but a reliable republican voter.

#86 45north on 11.20.17 at 11:30 am

John Ivison: The Liberals will make public their long-awaited National Housing Strategy this week – specifically, how they will spend the $11.2 billion earmarked in the last federal budget.

http://nationalpost.com/news/politics/john-ivison-the-liberals-housing-plan-unlikely-to-help-first-time-buyers

“Affordable housing” is the most expensive housing there is – government built, government maintained.

#87 FOUR FINGERS WATSON on 11.20.17 at 11:45 am

I also said the price of a mortgage has risen 300% since April. — Garth

…………………..

Does that mean that the inflation rate is now more than 1.5% ?

#88 joblo on 11.20.17 at 11:51 am

“Then there’s unemployment, as we used to call it. Now its name is “full employment” – exactly how economists define it when 96% of the people who want jobs find them. In fact there are currently more vacant job openings in American than jobless Americans to fill them.”

Hey Alberta, now’s the chance….. join em.
Secede.

#89 I thinks I know something on 11.20.17 at 12:07 pm

#72 Howard on 11.20.17 at 4:50 am

I don’t care about falling sales, except to chuckle at the fact that realtor shysters are starving for lack of commission sales.

I care about falling PRICES and aside from a teeny tiny correction following the March/April mania, prices have been stickier than tree sap. I predict it will stay that way. Between Boomers sitting on mortgage-less properties who can wait things out and mass immigration, GTA prices will at best remain stagnant a few years before rising once more.

———————————————————-

Couldn’t agree more. Add continued low interest rates as well as they will not rise much. They can’t.

#90 Doug in London on 11.20.17 at 12:12 pm

Will a stock market correction occur any time soon? I don’t know, my crystal ball is made of black ebony and is thus totally useless. However, what I can say is that as long as a lot of people are skittish and worried about one occurring, it probably means there’s more room for markets to go up. It’s when most people throw caution to the wind and believe the market’s going up forever and ever, it’s time to take a more defensive stance.

For example I remember in 2006 reading an article where some “expert” said: the economy is better managed nowadays so recessions are a thing of the past. After breaking into a fit of hysterical laughter, I decided to take a more defensive position. Traditionally your age is about the amount you should have in fixed income investments. In 2006 or 2007 I read an article that said that rule was obsolete and you should have a greater percentage of equities in your portfolio, another sign it was time to take a more defensive position. Another was where many analysts said there would be a massive labour shortage with all those baby Boomers soon to retire. The last times I heard that idea were in 1989 and 1999-2000. Coincidence? I think not. So far I haven’t heard or read anything that suggests a lot of overconfidence recently, but keep your eyes open and ears tuned. It’s bound to happen sooner or later during this economic recovery.

#91 Lost...but not leased on 11.20.17 at 12:15 pm

Brisbane Australia condo market crashing…

Brisbane is a city of almost 2 million.

Chinese buyers are increasingly defaulting on their condo purchases.

Apparently they are now bussing in potential buyers via “Vulture Tours” to purchase properties at 20% haircuts.

This the canary in the mine for RE globally?

#92 Ed. on 11.20.17 at 12:20 pm

#80 crowdedelevatorfartz
Tip: Brevity leaves them wanting more…

After hearing of Charles Manson’s demise, Truman Capote has finally completed his unfinished novel “Answered Prayers”.

#93 Stan Brooks on 11.20.17 at 12:33 pm

Here it is, the future and the end of oil:

https://www.theverge.com/2017/11/20/16678578/uber-volvo-xc90-suv-driverless-cars

Uber is buying 24,000 Volvo XC90 SUVs to form a fleet of driverless cars.

They’ll be delivered between 2019 and 2021

#94 Penny Henny on 11.20.17 at 12:39 pm

#90 Doug in London on 11.20.17 at 12:12 pm
Will a stock market correction occur any time soon? I don’t know, my crystal ball is made of black ebony and is thus totally useless.

????????????????

Does your crystal ball have 3 holes for your thumb and two fingers?

#95 Asterix1 on 11.20.17 at 12:44 pm

#89 I thinks I know something on 11.20.17 at 12:07
#72 Howard on 11.20.17 at 4:50 am

I care about falling PRICES and aside from a teeny tiny correction following the March/April mania, prices have been stickier than tree sap. I predict it will stay that way. Between Boomers sitting on mortgage-less properties who can wait things out and mass immigration.

———
Couldn’t agree more. Add continued low interest rates as well as they will not rise much. They can’t.

____________________________________________

Wow! seems we have our very own Beavis and Butt-head on this blog!

1. A “teeny tiny correction” you say, give me a break! Are you a realtor? This is just the start of a long drop. There is nothing left to sustain the bubble anymore, the canisters are out of air, they have been repossessed.

Ex: Single detached (since highs)
Toronto = -18% Average -22% Median
Mississauga = – 17% -20%
Richmond Hill = -29% -28%
Markham = -15% -24%

2. Immigration does not sustain or influence high real estate prices in GTA. There are numerous articles and research done on this topic. It’s just another big lie from the RE industry to get people to buy.

3. Interest rates are heading up, stop hiding your head in the sand.

#96 SoggyShorts on 11.20.17 at 12:45 pm

#59 Jeremy on 11.19.17 at 10:37 pm
I bought a house in Toronto this week – all comparables over a million and purchased for $850k. I’m confident, playing the long game, that I’ll never loose on this. I’ll bet that I double my money over ten years.
************************************
A portfolio at 7% will also double in ten years.
With property taxes, mortgage interest, and maintenance etc. how much will your house need to go up in value to net you 7% per year?

On a 10 year investment plan the first couple of years are really important. If this is going to be a great year for US companies with tax cuts, and a bad one for RE with B20 and rising rates you may struggle to come close to a portfolio.

#97 aa3 on 11.20.17 at 12:50 pm

The Winter for our economy has come to an end. And now we are enjoying the growing heat of the Sun as Spring emerges from the cold.

#98 Mattl on 11.20.17 at 1:02 pm

Being extreme may assist you in selling houses, but it doesn’t help average families, who cannot afford average home prices, to make good choices. Real estate values will ebb and flow. There will be many advantageous moments to buy in the future. This is not one of them, and renting is a viable, rational option until then. — Garth

I’m not in the business of selling houses and frankly don’t care who owns and who doesn’t. Agree that renting is a viable option now and would take it further and say those on the sidelines will likely never get in. When the market corrects RE will be picked up by those already in, or the folks that have significant cash and or income.

You really think the guy on the sidelines in Van since 2009 that is paying 3k a month rent is going to benefit from buying on 2022 at 2014 prices? All of a sudden at 50 yo an 800k instead of a million dollar mortage makes sense? At 2-3 times the cost of borrowing?

These long term renters will be permanent renters and they are going to need to save double what a guy with a paid off house will to service their rent payments. The rental math never seems to include what portion of retirement savings rents will eat up

#99 tccontrarian on 11.20.17 at 1:13 pm

“Expect some corrections along the way, but there’s nothing on the radar now to signal a crash, reversal, crisis or general OMG moment. In other words, a 20% drop between now and 2018 would be a big surprise. And a bigger buying opportunity.”-GT
**********************************************
Question:
Was the crash of 2008-9 ‘advertised’ so that the average investor (or the average portfolio manager) could avoid it? No!
So, is the next bear market going to alert every investor out there so that they can exit (or otherwise ‘prepare’)?
No.

There are plenty of signals to indicate that the present 8-year bull market is on its last gasp. The thing is, very few are noticing or willing to do anything about it. Recency bias.

BTW, was there anything to indicate the bull market in the GTA RE market was to reach its peak in April this year? No, not really. But here we are a few months later and there’s no denial that the party is over.

Bubbles are ‘obvious’ only AFTER they’ve popped.
ALL bubbles.

TCC

With a balanced portfolio, those who snoozed through 2008-10 lost nothing. They actually made 5% a year. — Garth

#100 Lost...but not leased on 11.20.17 at 1:23 pm

What is the purpose of a driverless car ?

#101 Stan Brooks on 11.20.17 at 1:28 pm

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

J2 at the top of his intelligence,

#102 crowdedelevatorfartz on 11.20.17 at 2:04 pm

@#92 Ed
” Brevity leaves them wanting more…”
+++++++
Charlie Don’t Surf…. no more.

#103 Victor V on 11.20.17 at 2:16 pm

Economic impact of mortgage stress test nothing to ‘laugh at’: Veritas

http://www.bnn.ca/economic-impact-of-mortgage-stress-test-nothing-to-laugh-at-veritas-1.920355

The head of one of Canada’s largest independent equity research firms is warning Canadians may be underestimating the economic impact of tighter mortgage regulations.

In an interview on BNN, Veritas Investment Research President and CEO Anthony Scilipoti said the impact of the Office of the Superintendent of Financial Institutions’ move to stress test uninsured mortgages, known as B-20, may deliver a significant hit to economic growth.

“We’ve done a lot of work looking at the impact of B-20 on the mortgage growth and its impact on GDP, and we think it’s going to be significant,” he said. “This is not something we should just laugh at. We think it’s going to hit [the purchasing power of] all buyers who are putting 20 per cent or more by 25 per cent.”

#104 Capt. Serious on 11.20.17 at 2:18 pm

#99 tccontrarian on 11.20.17 at 1:13 pm

Question:
Was the crash of 2008-9 ‘advertised’ so that the average investor (or the average portfolio manager) could avoid it? No!

It is the duty of every long term investor to live through nasty bear markets that may shed as much as 50% from the equity portion of one’s portfolio. For, one can only attain a higher expected – note! not guaranteed return by holding the higher risk asset. If the asset were not risky it would not offer a higher return.

S&P500 PE is high, but not extreme. Is 10 year return from here going to be 10% annualized? Probably not based on the historical record when the PE is over 20. However, on average the market rises, and a very small percentage of trading days make up most of the excess return one gets from equities. You need to be there to get those returns. Trying to time the market is the loser’s game.

#105 IHCTD9 on 11.20.17 at 2:45 pm

#59 Jeremy on 11.19.17 at 10:37 pm
I bought a house in Toronto this week – all comparables over a million and purchased for $850k. I’m confident, playing the long game, that I’ll never loose on this. I’ll bet that I double my money over ten years.
_______________________________________

Have you done the math?
25 Years principal payments – 850,000.00
25 years @ 4.0 average interest payment – 492,000.00
25 years insurance – 90,000.00
25 years maintenance – 75,000.00
25 years taxes – 75,000.00
25 years renos and updates – 50,000.00 (super lowball if you hope to sell (at top dollar) a fresh looking updated house in 25 years)

Yuge Lowball total – 1,632,000.00 “break even”. Real life math would advise a 2 million break even point to account for 2.5 decades worth of cost increases and uncertainties.

Now lets look at dumping the same financial effort into a portfolio averaging 5.0% for the same 25 years. $5440.00/month x 25 years at 5.0 average will gross $3,218,000.00. 1.58 Million of that would be interest only.

Take 750,000.00 off that for 25 years worth of rent, and you are ahead by $836,000.00

Take that 1,632,000.00 and add 200G’s for stuff I never mentioned and 25 years worth of unknowns and then add 836K and you are at a 2,668,000.00 sell point for the house to do the same as a 5.0 portfolio.

That’s a 314% increase in 25 years – that could happen – but that’s a big maybe. There’s no way in hades you will “double your money in ten years” just forget you ever said that out loud in public. You can see it’s going to take a ton of work (I counted your sweat as free) and even after 25 years of “appreciation” you still aren’t doubling your money.

IMHO, getting 5.0 in the markets is a lot less sweat, time, and anxiety than trying to make a long shot 25 year bet that your house will be in a good selling market, and in great shape, such that you might make the same dollars as investing cash.

Houses get more expensive with time (ask me, my tax bill and deed says 1870). You’ll need to do a roof two or three times, windows once, a furnace at least once, the entire interior will need to be updated wall to wall, floor to ceiling at least once. walkways, driveways, gardens, sump pumps, toilets, sinks, fixtures, washers, dryers, YOU NAME IT. I’ll bet your “cheap” house at 850K probably needs a bunch of work right off the bat.

I have a paid for house in a low cost area, and I do all, and I mean ALL; the maintenance myself, and buy most materials tax free, and it STILL costs me 7-800.00/month to live in my paid for house. My old house has “appreciated” ~228% in 16 years, but being totally realistic about all costs involved, I’d consider myself lucky to break even in the real world non fantasy land of Canadian RE when I sell. Good thing for our portfolio, I actually post gains there – the future house sale would be great to just get what I put into back out again.

#106 crowdedelevatorfartz on 11.20.17 at 3:20 pm

@#100 Lost the lease
“What is the purpose of a driverless car ?”

+++++++
To commute me to work then return home thus avoiding parking fees?
To drop the rug rats at daycare?
To pick the rugs rats up?
To drive me home from the bar?
To drive kids to the movies?
To drive me to the grocery store when my aging watery boomer eyes cant focus any more?
Anything you use a car for?

#107 tccontrarian on 11.20.17 at 3:21 pm

Capt. Serious, you say this:

“It is the duty of every long term investor to live through nasty bear markets that may shed as much as 50% from the equity portion of one’s portfolio.”

I see ‘my duty’ as: doing everything I can to avoid a 50% drawdown, if possible.

TCC

#108 Fake News Again on 11.20.17 at 3:37 pm

Does anyone really think that foreigners wiring billions of dollars into Greater Vancouver so they can pay 0 taxes in their home countries really care about a 10 or 20 percent drop in housing?

#109 MediOgre on 11.20.17 at 4:05 pm

The stress test will push buyers toward variable interest rates in a raising interest rate environment to maximize purchasing power (TD variable 2.3% / TD 5 Yr. Fixed 5%)……. adding more fuel to the bonfire beautifully set to ignite in 2022 alongside elections in Canada then the US.

#110 yup on 11.20.17 at 4:13 pm

Long term renting probably is better at these prices but overall its terrible for middle class Canadians. At 6 percent you will need 600k in saving just to cover your rent in 20 or 30 years. Most older folks that are renting today sold a house to cover the cost of renting or assisted care.

The rent forever crowd better save up a ton of money or be prepared to live in B markets or 1 bedrooms. You really going to have 30-50k a month your last 25 years to cover rent in a decent place?

………………

poured some cash into our basement. We rent it now; when listed had no problem with viewers. Went quickly.

sad what’s happened to this country!!

#111 Asterix1 on 11.20.17 at 4:16 pm

#59 Jeremy on 11.19.17 at 10:37 pm
I bought a house in Toronto this week – all comparables over a million and purchased for $850k. I’m confident, playing the long game, that I’ll never loose on this. I’ll bet that I double my money over ten years.
_________________________

Congratulations! You bought at the worst possible time. Your house will probably be worth -15% in the next 6 months. As mentioned above, you will not double your money after all of your expenses + renovations + interest on debt.

#112 re., 105 on 11.20.17 at 4:19 pm

pity you didn’t rent your basement

we do;

$1600 /month……yummy…….:)

#113 devore on 11.20.17 at 4:28 pm

#93 Stan Brooks

Electric, driverless cars are certainly the future. Electric, because diversification in energy sources is making fossil fuels more expensive and less competitve, and because it is the superior drivetrain for performance and efficiency. Today, I would say we are still very much in the early adopter phases of this trend. People buying EVs are getting immature, experimental technology, and a subpar experience vs ICE due to technological limitations and poor infrastructure. Only select geographies and lifestyles need apply. I think the EV market is still waiting for some battery tech to drop that will bring charge times well below 1 hour.

Self driving cars are a pipedream for the short term. Very select and specific applications (mostly industrial), sure, but even under the best conditions self-driving is a dubious proposition. Self driving still requires large gains in vision technology and processing, but that’s the easy stuff. The bigger challenge is, again, and infrastructure. To enable full time self driving, ie, removing the driver entirely, requires everything traffic related to be networked, talking together, and functioning 100% of the time. Roads, lanes, signs, lights, intersections, ramps, traffic cones, construction equipment, emergency vehicles and all other vehicles, all need to be instrumented, for 24×7, year round self driving in all locations, all conditions. We’ll get there, eventually, but none of that work is even theoretically started yet, so as long as a dusting of snow or some fog grounds entire fleets of cars, ‘self driving’ is just marketing.

#114 Blacksheep on 11.20.17 at 4:37 pm

Asterix1 # 111

#59 Jeremy on 11.19.17 at 10:37 pm

“I bought a house in Toronto this week – all comparables over a million and purchased for $850k. I’m confident, playing the long game, that I’ll never loose on this. I’ll bet that I double my money over ten years.”
_________________________
“Congratulations! You bought at the worst possible time. Your house will probably be worth -15% in the next 6 months. As mentioned above, you will not double your money after all of your expenses + renovations + interest on debt.”
——————————————–
Jeremy, I’ve been in my place less than 4 years, paid $425K.

Two doors over, same size 1/4 lot with a shitty old house and no $100K shop, is listed just under $1200K.

This happened as commenter’s on this blog, continued to predict a hard correction, just around the corner. RE doom Is always, just around the corner here.

If your staying for 10 years you will make out just fine.

Good Job….

#115 jeff on 11.20.17 at 4:42 pm

The RateSpy guy just tweeted:

@FSCOTweets is hiking ON broker licence fees 51%!
Says “existing fees are not sufficient to cover..compliance and enforcement activities”

Why is there suddenly a realization that enforcement was not sufficient? I call a rise of 51% “suddent”.

#116 Raincouver on 11.20.17 at 4:43 pm

“Speculation rampant in Vancouver’s red-hot condominium market”, South China Morning Post

http://www.scmp.com/property/international/article/2120734/speculation-rampant-vancouvers-red-hot-condominium-market

“The flipping fever is a sign of creeping speculation in the city’s condo market, a trend experts said further chipped away at affordability and which could lead to a crash if market conditions changed.”

#117 Tony on 11.20.17 at 5:08 pm

Re: #100 Lost…but not leased on 11.20.17 at 1:23 pm

Less smashups. If insurance rates fall it could also spur more car sales.

#118 Tony on 11.20.17 at 5:16 pm

Re: #91 Lost…but not leased on 11.20.17 at 12:15 pm

The Chinese all do the same thing so you get exaggerated moves upwards as well as downwards. I wouldn’t want to be in the locals’ shoes at least the ones who own.

#119 crowdedelevatorfartz on 11.20.17 at 5:21 pm

@#112 re 105

pity you didn’t rent your basement

we do;

$1600 /month……yummy…….:)

+++++++++

“Hello Canada Revenue? I have neighbor that……”

#120 Mattl on 11.20.17 at 5:26 pm

IHCTD9 – I get where you are going with that, and there are costs to maintaining homes. I also do – and for the most part enjoy – most of my own maintenance. But lets be real, in a city where a home is 850k, rents are 3-4k for a sfh. In my city, Kelowna,a nice home for my family and dogs is going to be 40k a year rent plus utilities. And I will still need to ensure my belongings – renters insurance is not cheap if you actually own stuff.

By contrast a 25 year mortage on a similar house with 100k down will be around the same 40k per annum. Yes, property taxes – which are obscene here – plus other carrying costs add up but at the end of the day the guy that can afford to put 40k into rent AND 40k into his portfolio is rare. For most its a one or the other thing. This blog has endless examples of renters sitting on wads of cash they saved up from not owning. Personally I have never met a family that leaped ahead and for most families the numbers don’t work, homes are far too expensive to rent for the typicaly family to drop 30k a year into investments and pay rent on a nice home in a nice neighbourhood. Yes there are lots of places in Canada where rents are cheap but home prices are as well.

Imdon’t envy the young family today, just starting to make some cash and get ahead. Not a lot of good options in the cities where most of the population lives. I agree with your usual advice, get out of the city.

#121 HowDeepThePain? on 11.20.17 at 6:03 pm

IHCTD9 – I get where you are going with that, and there are costs to maintaining homes. I also do – and for the most part enjoy – most of my own maintenance. But lets be real, in a city where a home is 850k, rents are 3-4k for a sfh. In my city, Kelowna,a nice home for my family and dogs is going to be 40k a year rent plus utilities. And I will still need to ensure my belongings – renters insurance is not cheap if you actually own stuff.

Interesting…just signed a home lease last month for $2,100 monthly. The home sold for $850K May 2017. North GTA area. This works out to a 3% yield before the landlord pays property tax and the common theory of maintenance cost of 1-3%.

In 2002 (I know, it was years ago) I bought a home with two rental units with combined income of $2,400 monthly (though, utilities were included) for $225K.

Of course, no one ‘gets it’ when you tell them you’ve moved and that you are renting and didn’t buy…

#122 Doug in London on 11.20.17 at 8:23 pm

@Penny Henny, post #94:
How did you know that? I should add it has the name Brunswick on it and looks suspiciously like one that went missing at a local bowling alley years ago. For the record, it fell off a lorry!

#123 For those about to flop... on 11.20.17 at 10:40 pm

#60 Lost…but not leased on 11.19.17 at 10:42 pm
To Flop…

Out of curiousity…
…….are there many/any examples of RE sales that go against the tide of what you are outlining (ie any selling prices going over asking ?)

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

Hey Lost,I finally found some time to try and answer your question.

As I just wrote in a post , the market is multifaceted and I spend the bulk of my time documenting the negative side because that is the side that is a lot harder to get information on.

To answer your question you see people state ask is only a starting point.For the bulk of the last 15 years you were expected to go above and beyond this number to secure the property even if the ask was already outrageous.

That has now changed,sure properties still go over asking,mainly condos but there is definitely a cooling in the market.

If you go to Zolo and look at the sales to list column for detached,for the first time in a long time you will see some numbers in the early 90%s and even one in the late 80s for the mansions.

There has been a few sales recently around the 15 million mark that has distorted a few numbers but none of the ones I saw got any near ask and that is probably why the numbers that column are in the 80s

Condos are still going strong but I have located pockets of weakness and reported losses on here despite spending the bulk of my time trying to concentrate on 1/2 million dollar homes as that is the bottom rung in the city proper and if I can identify weakness there you know that it is happening further up.I also do this because I get the impression a few people on the blog would like to buy in this price range and will most likely get in over their head and suffer a calamitous loss.

Even when Vancouver y.o.y was up in the twenty percent range a month or so ago I did not lose faith that my research was out of whack and actually expected to be chirped harshly by my critics when I wrote recently that I expected large swaths of the city to be negative y.o.y by January.

Vancouver has come back down to basically even quicker than I thought but the numbers are only “pro rated” at this stage. In other words ,nothing official.

If you go to realtycheck.ca this will confirm that the downward trend is in.

What I do is take it a couple of steps further a track a portion of the market and follow them down and see what the house actually sold for or in a lot of cases gets removed because the owner knows that if they sell now there is a good chance that they will take a loss.

I guess that’s kind of what my Pink Posts are all about.

These guys need to get a certain number,can they get it?

To finish up, i wrote a post recently where I follow houses trying to find a comparable and see what happens with the both of them.

Like I wrote in Vancouver in the moment if you have two similar houses asking and assessed at roughly 1.5 million you will most likely see two different outcomes depending on when they were purchased.

The people that bought in Spring 2016 need to get 1.65m give or take to walk away with all the skin on their fingers.

Their neighbours that bought 10 years ago can afford their asking price down to the where the market is basically at this moment to 1.35 to get the deal done and so you will see a 300k difference in this hypothetical example.

I showed actual real examples of this in my neighbourhood this Spring and Summer.

I will try and find time to post some more CONFIRMED PINK SNOW next weekend…

M43BC