Not good

This got Dan’s attention.

“My wife works at one of the big five banks,” he says. “Front lines. She has, by the clients’ requests, transferred mortgages to HELOCs, so they can pay interest-only. I can’t find any data or charts on this, but it definitely has the potential to become a worrying trend. Scary. This tells me one thing. It can be done.”

You bet. It’s one of the current hot tricks for dealing with debt you can’t service, especially since the great real estate escalation is kaput. Buying more house than you could ever afford (because ‘prices always go up’) is so 2016. This year, with markets flatlining, B20 landed and mortgage rates rising, debt’s toxic. Especially amortized debt, which forces principal repayment.

Background: HELOCs, or home equity lines of credit, are loans made by bankers and secured (on title) by your real estate. In effect, you’re reaching into the property’s equity and pulling it out to spend. Being secured, the rate is low – usually prime plus a half point (bank prime is now 3.45%, so HELOCs sit at 3.95% or higher).

These lines are normally set up as demand loans, meaning repayment can be demanded at any time, plus they have variable rates – rising each time the Bank of Canada rate increases, as it did last month. But borrowers need only make simple interest payments. No amortization. So they can (a) just pay the interest on the outstanding balance for that month, or (b) make no payment and let the debt grow to reflect the accumulated interest.

By the way, you can borrow up to 65% of the equity in your home through a HELOC, or  expand that to 80%, with the remaining hunk treated as a conventional mortgage. Most people, of course, go for the interest-only basic amount.

Here’s the math. A $400,000 conventional mortgage amortized over 25 years with a five-year rate of 3.4%, has a monthly of $1,900. If it’s converted to a $400,000 HELOC, even at the higher rate of 3.95%, interest-only payments equal $1,300. You have the same debt. You dwell in the same house. You deal with the same lender. But you pay 30% less.

For people living on the edge, it’s a huge saving. Of course, they have zero protection from rising rates and the lender can cream them at will. But, it’s cheaper. If you have no other options, it’s an easy one – even as risk is elevated dramatically.

Here’s the very scary part.

 In 2016 outstanding HELOC balances reached $211 billion and are estimated to be $220 billion at the moment, owed by more than 3,000,000 families. According to the Financial Consumer Agency of Canada (a federal government body), “many are making the minimum payment (i.e., interest-only payments) or making only occasional efforts to reduce the principal.

“Research indicates that roughly 4 in 10 consumers do not make a regular payment against their outstanding HELOC principal, and 1 in 4 only cover the interest or make the minimum payment. HELOC borrowers can find themselves in a “home equity extraction debt spiral,” particularly during periods of financial distress. When consumers borrow against their home equity to make ends meet, they run the risk of having to extract more equity down the road just to cover the minimum payments on their HELOC. This pattern of behaviour may lead consumers to add to their debt burden during periods of financial distress rather than reigning in discretionary spending.”

These numbers are incredible. But apparently true. They’ve been confirmed by the Chartered Professional Accountants of Canada, which discovered that 41% of all HELOC borrowers are making no regular payments that cover interest or principal, while 27% make pay the minimum monthly interest.

Okay, so we have some evidence that not only is HELOC borrowing huge and growing huger, but that banks are letting clients turn amortized mortgages into simple-interest demand lines of credit – just as the real estate market starts into an inevitable corrective phase. We also know interest-only mortgages played a key role in helping to blow up the American real estate market, sending the world into the 2008-9 credit crisis. US homeowners took OIMs for houses they could not really afford on the expectation rising property values would let them eventually convert to traditional loans. But when the wheels fell off, home equity was wiped out, the refinancing option evaporated, and owners began to default.

In Canada, walking away from a mortgage is a no-go in most provinces. Thus, a likely outcome of rising rates and falling prices is a wave of listings as the HELOCers bail. Meanwhile, every month that 40% of them fail to make payments, their indebtedness grows. The federal government pointed out a year ago if interest rates were to rise 1%, one million families would be in trouble. Since then, rates have increased three-quarters of that amount.

Gulp.

239 comments ↓

#1 mitzerboy aka queencitykidd on 02.01.18 at 5:02 pm

Holy Cow

#2 mark on 02.01.18 at 5:07 pm

Just noticed a realtor I know in Prince George putting up a hell of a lot of expensive (for PG) listings over the last week. Some aren’t even finished. Who is paying 800k for a place in Prince George? More relevant, why are these all suddenly being listed?

#3 Stefan on 02.01.18 at 5:18 pm

Hey Garth,

If this is the case, how in the heck do we (the balanced investor) hedge against this?

Thanks

Stay the course. It will be over-leveraged families that are torn up, not the economy. – Garth

#4 Dan.t on 02.01.18 at 5:20 pm

Houses never go down, so it will be all good. And seriously it’s only debt. And since everyone is doing it, it must be ok because I think most Canadians are financial gurus….

…even if like 40-50% don’t realize how debt and interest rates are correlated, they still bought a house and that house acts like a giant ATM machine- it’s genius.

There are zero delinquencies. That has noting to do with the fact that houses only every go up right? Actually, that statement is true until prices don’t go up anymore… It also probably has nothing to do with the fact government policies:

-zero down- 40 years
-free money to buy real estate (liar loans, no checks, cheating, on mortgages, mortgage fraud, real estate agent fraud— it’s all good).
-Tax free housing gains

-never before seen 2% mortgages

-Tax credits to buy and buy and flip and buy and flip and…

-Can real estate selling and being marketed overseas

-The Vancouver model of washing dirty money into RE (it’s also all good- said Christy Clark and the other criminal liberal party- lets just leave it alone- can’t mess with peoples hard earned equity)

-15 years of “news” pumping only real estate (hamster poop would be considered gold by now if it was marketed that way for 16 years in every paid for “news” outlet in Canada- like housing is NOW the end all and be all of Canada life, yes, at any price).

– and many more dumb policies but I m pressed for time.

were designed to get little beavers to spend on one asset class and one asset class alone to get the economy going…I mean what else is there in Canada besides Canadians selling houses to each other and to other foreign buyers.

So economics don’t apply to Canada real estate. 700k to 1 Million$ is peanuts to Canadians. They all make like 200k take home and I’m still not sure where stupid stats Canada comes up with like 70-85k average Canadian family income.

Just relax, everything will just keep chugging along. They will never raise rates and the government will never let housing come down and housing is definitely not correlated to the amount of credit available at any given time, after all you shouldn’t need money in order to buy a house.

Anyhow, I hope the Happy Housing Crash guy chimes in soon.

#5 InvestorsFriend on 02.01.18 at 5:23 pm

Mark Straightens me out as he quotes me and responds:

157 Mark on 02.01.18 at 2:46 pm
“The U.S. unemployment rate is 4.1%! They show nine occupation categories with unemployment rates below 3%.”

Nonsense… (Mark then explains why the Fortune article that I referenced is all wrong.)

**********************************
Thanks Mark. You’re the smartest. This has been clear for years now on this blog as you have schooled everyone over and over and over.

And, it’s impressive that you almost always do so with off the top of your head claims and very seldom any references or links.

You have often also lamented the tough job market in your field. People that know you probably don’t want to hire you because you are just so smart and it would make them and the other employees feel bad. Unfair!

Too bad you are not in the U.S. so you could see if the job market is hot enough that you would get hired.

#6 Ex-Cowtown on 02.01.18 at 5:24 pm

My sleepy little part of the world thinks that it’s all good. It’s different here; everyone wants to move here; RE will never drop; buy now or get shut out forever.

Such quaint thoughts…… reminds me of the small northern Alberta town that I grew up in. The 70’s never showed up until 1980. And then it was too late.

#7 CHERRY BLOSSOM on 02.01.18 at 5:24 pm

Shameful useless government that cannot even lead a country. T2 ad sneaky Morneau you are bad people.

#8 neverlearn on 02.01.18 at 5:27 pm

We really are a pathetic lot to let this happen. The Americans even give us a preview 10 years ago and what do we do, the exact same thing except worse since tax payers will have to foot the bill via CMHC instead of the banks. Simply pathetic.

#9 SimplyPut7 on 02.01.18 at 5:27 pm

If you move your mortgage to the HELOC and home values continue to fall as they have in the GTA; doesn’t that mean if the bank asks you to move your HELOC back to a mortgage, that you may not qualify for a mortgage that covers the entire amount outstanding due to rising rates and B20?

Or is that what banks and credit unions are hoping for so they can reduce their mortgage risk/losses and make you get all or part of the large mortgage with a private lender at 8% – 9% to clear the debt on your HELOC?

#10 darkselling on 02.01.18 at 5:31 pm

Hmm, would be interesting to hear more details on this switching amortizing mortgages to HELOCs. Somehow I think this is either untrue or lacking in details. If these people are so poor to need the 30% discount on monthly payments they’re not going to have the cash to pay the break fee unless it’s tacked on to the HELOC. If it isn’t tacked onto the HELOC what a great way to break a mortgage if you have the means, switch without penalty, pretend you’re cash strapped and just pay it out shortly after.

#11 Linda on 02.01.18 at 5:33 pm

The HELOC issue is concerning, particularly as so many are not even making the monthly interest payment, let alone trying to reduce the principal. However, the current estimated ‘owed debt’ HELOC of 220 billion divided by 3 million is $73,333 per household. Obviously some owe more & others owe less of that average debt.

If the banks are allowing clients to transfer their conventional mortgages to HELOCs, it seems to me that they are colluding with their clients to avoid having to have them go through (& potentially fail) the stress test. From the bank point of view, less paperwork & more guaranteed interest income. What they do not want is to actually end up calling in the demand loan & ending up with an asset that may be falling in value.

If however the banks are forced to call in the loans, they still have an asset they can sell. There is also the little issue of HELOC insurance. I would bet most HELOC’s have that insurance & that banks who allow their clients to move their conventional mortgages over to a HELOC only do so if insurance is on the HELOC. Thus even if the bottom falls out of the market, the risk is actually carried by the insurer & not the bank.

While the parallels between the USA housing crash & Canada are clear, a Canadian housing crash will not affect markets the same way. What boggles me is how Canadians moved from prudence to financial idiocy when we had a front row seat to what happened in the USA. One could of course blame the banks for allowing clients to mire themselves in debt, but the clients are doing this of their own free will so I can’t really feel that much sympathy. For those who’d say ‘they didn’t have a choice’ I’d reply ‘Yes, they did. Their choice was to retrench, give up the lifestyle they could not afford but they chose instead to continue living above their means.’

#12 Damifino on 02.01.18 at 5:39 pm

Home Equity Extraction Debt Spiral
———————————–

What a nasty place to end up. Makes one nauseous just to think of it.

#13 Don't Believe The Hype on 02.01.18 at 5:42 pm

Wow…. this is freakin’ scary…..imagine: not being to cover your monthly expenses and having to dip into your home equity LOC every month to make ends meet. And if you have no other savings/income/assets, your ONLY asset, i.e your house becomes your bank. Some people are royally screwed.

#14 Buyers market on 02.01.18 at 5:54 pm

Some good deals coming up in the most liquid markets in the world. NQ, DJ and SP giving back gains and offering bargains soon?
Are they pulling the plug again? It’s been a helluva ride up since 2009.

#15 Stan Brooks on 02.01.18 at 5:58 pm

I said interest only mortgages are in the cards.
I had been proven correct again.

Now waiting the amortization period to start increasing to 40, 50, 100 years.

Here comes 5, then 10 million + GTA SFH.

The price is what buyer can pay with creative adjustment of fundamental concepts like:
– what money is and who issues and controls it.
– what cost of money/aka interest is and how is determined.
– who takes the risks for the loans.
– what market and price discovery is.
– what inflation is and how to measure it.

with the sole purpose of keeping the key Ponzi players/ enterprises aka banks churning profit out of nothing and with no risk.

No hyperinflation, we will redefine that as well when time comes.

Did they call it a game of monopoly?

#16 TheSpangler on 02.01.18 at 6:01 pm

Houses always go up, why are you renting that’s throwing money away, debt doesn’t matter, ya it’s maxed out it doesn’t matter, what is a TFSA, huh stocks?

Things I hear daily.

#17 Mark on 02.01.18 at 6:01 pm

Subprime lending is a lot more profitable than merely writing loans to pristine quality borrowers. Even after you adjust for default rates.

If anyone wants a great illustration of this, go check out the reports on the Glacier Credit Card Trusts, aka the Canadian Tire Credit Cards, available on the CTFS website. Its amazing the sort of effective yields that are achieved on such products, even with write-off rates approaching 8-10% of the portfolio annually.

If you generalize such expansion in effective yield to the mortgage books of the big-5, there’s absolutely enormous profits to come and lots of blow-out earnings in the future. As Canadian RE-backed borrowers are increasingly cast as subprime creditors as their credit-worthiness diminishes.

Realtors generally have been ensconced in the view that if RE goes down, so does the entire economy, therefore RE is the only asset class worth owning. However, there is plenty of evidence, including that of the Canadian experience in the 1990s, that directly contradicts that.

Those who went whole-hog into RE in 1989, for example, were not able to participate in the vibrant stock market of the 1990s. They made payments, occasionally at interest rates into the double digits, and didn’t really start to accumulate much of any real paid-in equity until 2003-2004 rolled around.

This time around, the relationship between the value of the stock market and the housing market is even more extreme than seen in the early 1990s. The TSX is priced at a mere 1/6th to 1/10th (depending on numbers used) as GVR/GTA RE at current quoted prices. It logically follows that a cash down-payment of 1/6th to 1/10th of the current cost of a GVR/GTA property of interest, invested in an index fund as plain as XIU, could, in the next decade or two, be sufficient to purchase the property of interest completely in cash.

There is no proven correlation between Canadian stocks and house prices in the GTA or YVR. Stop making stuff up. – Garth

#18 LivinLarge on 02.01.18 at 6:04 pm

Linda, “I would bet most HELOC’s have that insurance & that banks who allow their clients to move their conventional mortgages over to a HELOC only do so if insurance is on the HELOC. Thus even if the bottom falls out of the market, the risk is actually carried by the insurer & not the bank.”…guess what? …you would be wrong. No lender may force any borrower to buy life or disability insurance on a HELOC and if you were thinking mortgage default insurance like CMHC, then no as well. I guess that’s why there’s the 65% of equity limit on HELOCs.

#19 Kelsey on 02.01.18 at 6:04 pm

The last paragraph really got me thinking…as Canadians we always say that a Housing Crash won’t be as bad here as it was in the US, because we don’t have non-recourse mortgages. But could the opposite actually be true? If an individual homeowner can just walk away from his mortgage, then the bank will ultimately be the Seller. A few large banks with a large inventory of homes to sell will try to do so in an orderly fashion to avoid tanking the market further. However, in a disorderly crash scenario, individual Canadians with mortgages underwater would all be incentivized to try and sell at the same time as quickly as possible, which could create a very vicious negative feedback loop.

#20 John Dough on 02.01.18 at 6:05 pm

When a bank transfers a mortgage to a Heloc doesn’t the CMHC insurance lapse? Sounds like a win for the taxpayer. It could be the banks that get Royally screwed. Yay!

#21 Love This Blog on 02.01.18 at 6:07 pm

The crash can’t come soon enough for me.

Salivating at watching everyone I know crash and burn, while living the high life and saving nothing

I hope this doesn’t make me a bad personality?

Lol

#22 Smoking Man on 02.01.18 at 6:07 pm

With GDP surging in the USA you bet rates will rise and fast. Canada will follow. Get out of real estate now!!!!
Discount and run as fast as you can.

#23 Mark on 02.01.18 at 6:08 pm

” I would bet most HELOC’s have that insurance “

Its my understanding that the CMHC does not write subprime mortgage insurance agains HELOCs. So the banks themselves have to perform supervision of their quality, and tighten them up if they perceive the collateral is no longer sufficient to back the loans.

In a way, they’ve already sort of been doing this on a systemic basis by increasing the spreads. But as time goes on and prices continue to fall across Canada, we may very well be approaching an era of lots of letters arriving in the mailboxes either freezing HELOCs at lower levels of credit, or increasing the rates substantially in an implicit reflection of the increasingly not-fully-secured-by-real-property nature of such loans with falling prices.

It’ll be a shock to a lot of families, who might be planning a vacation on their HELOC, thinking they’re in a good position with $100k of available credit, to get a letter in the mail with their HELOC reduced to $3000 available credit, and the interest rate hiked to 8%.

This is why the CAD$ is due to go much higher. With the consumer tapped out, just who is going to be consuming imported discretionary goods and services (foreign vacations are considered imports, BTW!).

#24 Reality is stark on 02.01.18 at 6:08 pm

What is the real meaning of no means no. It means teaching your son that if she wants a house you say no.
Your future prosperity depends on your ability to say no. Use the current state of affairs to teach this valuable lesson. Emotions are for them, not you.

#25 millmech on 02.01.18 at 6:10 pm

#3 Mark
Your correct the two markets I am currently monitoring I am watching more listings coming up and starting to see price reductions of 10% now.

The one smaller market has almost 250 listings and there is now apartments and townhouses under $100,000, houses are now listing for less than $300,000 and sitting for over six months on the market. A one acre serviced building lot is going for less than $80,000, it is getting interesting now.

#26 common sense on 02.01.18 at 6:15 pm

#3 Mr. Turner

Question:

If over leveraged families do not have the money to spend anywhere, home builders start falling and less disposable income is not in the economy, how does that not affect the overall economy?

Add in a stronger CDN $ which surely affects exports and imports alike and what do you have?

#27 common sense on 02.01.18 at 6:17 pm

#24 Reality

Your no fun.

This is 2018, we can have it all, as long as we go into debt to have it. Just say YES !

Consequences are so old fashioned.

#28 Guy in Calgary on 02.01.18 at 6:17 pm

The FI I work at, we do not even allow fixed mortgages to be converted into HELOC’s, only HELOC’s can be converted into fixed mortgages.

The HELOC would have to be re-registered on title and they would have to go through the qualifying process, appraisal etc. There could also be penalties for breaking the mortgage. Also to note, the qualifying payment for a new HELOC is based on the BOC rate at 5y/25y, not an interest only payment.

To date, I have not yet encountered anyone asking to do this. Mostly people are looking to lock in a good rate. Maybe that’s just because of where I live.

#29 Cdn Mom on 02.01.18 at 6:19 pm

I have to wonder how many transferring from mortgage to HELOC have plans to sell in 5 years or less. If you are due to renew, rates are rising so variable rate mortgage is not as appealing, and your mortgage balance is beliw your HELOC limit, why the hell WOULDN’T you do this? Prepayment limitations, early payout penalties…I would do it.

In fact, the last time our mortgage term was ending, and up for renewal, I considered doing this. Not to avoid making payments or avoid paying principal, but to AVOID BANK-IMPOSED PENALTIES for paying the damned thing off!

#30 Guy in Calgary on 02.01.18 at 6:21 pm

“#9 SimplyPut7 on 02.01.18 at 5:27 pm
If you move your mortgage to the HELOC and home values continue to fall as they have in the GTA; doesn’t that mean if the bank asks you to move your HELOC back to a mortgage, that you may not qualify for a mortgage that covers the entire amount outstanding due to rising rates and B20?

Or is that what banks and credit unions are hoping for so they can reduce their mortgage risk/losses and make you get all or part of the large mortgage with a private lender at 8% – 9% to clear the debt on your HELOC?”

You would be able to convert your HELOC into a fixed mortgage without issues. The bank would prefer it that way. No stress test. Same as at renewal assuming it has been paid as agreed.

#31 ANON on 02.01.18 at 6:21 pm

Interesting how this becomes important all of a sudden, like the narrative has somehow changed. Next, you’ll hear someone with a certified sheepskin or credentials looks deeper into what the consequences could be.
What was the first prophecy of BigD rising ? Was it falling demand (the forgotten concept of what you can afford)?

#32 dakkie on 02.01.18 at 6:22 pm

The real estate market has been supported by one very important factor: Interest rates. They are SLOWLY climbing. Just a bit more and you will hear “TIMBERRRRRR” as it comes crashing down.

http://investmentwatchblog.com/the-real-estate-market-has-been-supported-by-one-very-important-factor-interest-rates-they-are-slowly-climbing-just-a-bit-more-and-you-will-hear-timberrrrrr-as-it-comes-crashing-d/

#33 Mark on 02.01.18 at 6:28 pm

“There is no proven correlation between Canadian stocks and house prices in the GTA or YVR. Stop making stuff up. – Garth”

The negative correlation between Canadian RE and the TSX is absolutely provable. Heres a chart of various Canadian RE market prices expressed relative to the TSX index.

http://i40.tinypic.com/4puw5l.png

That is hilarious, and seven years old. – Garth

#34 Nick B on 02.01.18 at 6:30 pm

I wonder which portion of these HELOC borrowers has taken the money and invested it in the equity markets. It’s a great way to convert a portion of your home equity into tax deductible interest expense. Assuming you have equity in your home to do this with. This could create an interesting feedback loop if some people start selling their investments in order to pay down their HELOCs. Margin debt in the US is at all time highs along with debt taken out against portfolios (Non-Margin, Margin debt, basically). Lots of debt sloshing around these days and yet so little real income growth.

#35 Willy H on 02.01.18 at 6:30 pm

Innisfil, Ontario wedged between the grid-locked 400 Highway and Lake Simcoe south of Barrie (the armpit of Ontario) has seen a rather steep price correction on new detached builds.

Houses listing for $850-$950K March 2016 are now listed for $650-$750K

“The Villages of Killarney Beach” built by Ballymore Homes have dropped prices by $150K+ year over year on many elevations for the most recent phase released.

Apparently “small town charm” and a 1 hour commute into the GTA is officially on sale!

This does appear to a serious housing correction, no soft-landing here, this is the real deal folks.

Looks like we are headed for a 30-40% price drop unless Phil Soper is appointed Ontario’s Minister of Finance under Premier Ford!

#36 BlogDog123 on 02.01.18 at 6:31 pm

Those folks on the “Capital Direct” TV commercials are so happy and friendly. Of course I’ll take that HELOC so I can build a nice rec room, go to Cuba a few times a year and buy that motorcycle. All financed by the friendly folks on the TV. And if that doesn’t work, Harold the Jewellery Buyer will buy my Cartier watches.

#37 Frustrated Renter on 02.01.18 at 6:35 pm

Hoping this is the final kick to the bucket before housing prices collapse entirely. People who gambled and way over leveraged deserve what’s coming. Time for those whom are cautious savers to catch a break.

I will add that renting has not been pleasant or easy. I’ve been waiting patiently for a correction, meanwhile rents just keep skyrocketing. Rents in the GTA have been impacted greatly by this housing madness (Mississauga and Oakville rents are almost comparable now to Toronto).

In 2017 I had barely rented for a year (and was an A+ tenant) only to have my landlord kick me out under the false premise that he was “moving in”. He ended up just re-list the unit for a much higher rent. This all happened right before the new tenant protections came in to effect Sept 2017. Some friends of mine also experienced similar scenarios where their landlord falsely claimed they were “moving in” only to re-list the unit at a maximized rent increase. Time for this housing gluttony and greed to come to an end.

#38 Jorge on 02.01.18 at 6:36 pm

Things are still plenty hot in Montreal.

6 Rue de la Châtelaine, Kirkland, QC,

2008: Sold for 363k
2018: Listed at 548k and sold at 583k (35k over ask, and nope, the buyers weren’t Chinese although there are a LOT of articles about them in the local newspapers these days).

Higher interest rates and B20 aren’t deterring anyone here.

#39 Zapstrap on 02.01.18 at 6:37 pm

#2 mark on 02.01.18 at 5:07 pm

Just noticed a realtor I know in Prince George putting up a hell of a lot of expensive (for PG) listings over the last week. Some aren’t even finished. Who is paying 800k for a place in Prince George? More relevant, why are these all suddenly being listed?

As I remember it’s pretty prime moose habitat.

#40 Smartalox on 02.01.18 at 6:38 pm

New Acronym Alert;

Home Equity Extraction Death Spiral = HEEDS

Wow. I have to admit, putting your mortgage into a HELOC is breathtaking in a three-car-collision followed by a landslide kind of way.

On the surface, it’s brilliant: if you have 35% equity, the bank will allegedly let you put the rest on a HELOC. No term, no periodic renegotiation, no B20, and substantial monthly savings no penalties for skipping a payment, or for paying down a lump sum. Also, no CMHC insurance for HELOCs.

On the other hand: the mortgage becomes a demand loan; if market moves reduce your 35% equity to 25% (i.E.: a 10% drop in values), or 15%, (a 20% drop) the lender can call the loan for any portion of the amount owing, including all of it. At least with a mortgage, if your house is worth less than you owe, you can maintain a status quo until the end of your term – waiting for the market to go back up, or at least sell at the best possible time.

In this situation, once the value drops, the bank can call in your HELOC the next day!

There’s actually a lot of protections in law around mortgages, particularly with regard to bankruptcy and foreclosure. But I’d suspect not much protection for HELOCs.

Maybe your lender will Jack interest rates with 30 days notice. I’ve seen these letters before: the contain language like “we intend to raise your interest rate by 1.5% effective Feb 01n 2018.” not, “we would like to offer you this rate, should you choose to renew with us, when we re-negotiate in six months”. So much for all those sensitive to interest rate hikes – and don’t think the bank doesn’t know who you are.

Maybe once the bank seizes the property, they’ll rent it back to you while they figure out how to sell it.

But yeah, going from a mortgage to a HELOC Is like going from juggling knives, to juggling live hand grenades. If you’re doing it to save a few bucks, it is truly an act of desperation.

The only think that will save many from this folly is that their HELOCs are already at their limits, after paying for all the other crap, that they don’t have the credit to dump the mortgage in there, too.

Is ANYONE From OSFI listening out there?

#41 SmarterSquirrel on 02.01.18 at 6:40 pm

Garth,

As interest rates are rising, many stocks on the Canadian markets are pulling back, particularly dividend paying stocks.

I believe in an earlier article you may have mentioned that the Canadian markets may be more attractively valued with this dynamic happening.

Curious to get your thoughts on this. Does this mean you are becoming more active now in rebalancing as the Canadian portion of a portfolio declines, to bring the Canadian ETF portion of portfolios back to your target levels?

#42 Long Branch Apprentice on 02.01.18 at 6:41 pm

Hahaha we are so dumb as a nation. Couldn’t do math to save ourselves if our double doubles depended on it.

How is semi-rural RE near Niagara? Might have a dam.job there soon.

Peace.

#43 FOUR FINGERS WATSON on 02.01.18 at 6:41 pm

The government and the banks did everything humanly possible to create the bubble. They will do everything humanly possible to keep the bubble from deflating. I really can’t see interest rates going up significantly from here……and people will walk away from mortgages this time because the debts are so enormous.

#44 Peter Pan on 02.01.18 at 6:44 pm

I am one of those 1 in 4 making only interest payment to my HELOC. I put all the borrowed money into the stock market follow your advice in the beginning of 2017. The dividend I collect from it is double the interest I am paying for the loan. At moment i am reinvesting the dividend after interest payment back to the ETFs. I am still not sure if i should go against the principle at the moment.

#45 This owner and/or real estate agent is loonie .... on 02.01.18 at 6:45 pm

For Vancouver Check out
https://www.myrealtycheck.ca/

1436 Price Changes for January, 2018.

Average Change: -2.56%
Up:340
Down:1161
Overall $ Change: -157,583,850.00
Average Change Amount:-104,985.91

While the stats are interesting and altogether useful, keep in mind it contains alot of stupid things like:

903 – 6282 Kathleen Avenue, Burnaby
Jan 9:$675,000
Jan 31: $674,999
Change: – 1.00 -0%

This owner and/or real estate agent is loonie ….

#46 Penny Henny on 02.01.18 at 6:51 pm

Hey Garth,
based on your above assessment maybe Canada is a place where you don’t want to be over exposed.

#47 april on 02.01.18 at 6:51 pm

#25 – Location?

#48 Ustabe on 02.01.18 at 6:53 pm

Don’t worry about the “taxpayer” holding the bag for CMHC. They have in and around 50% of their mortgage totals in liquid investments, paid for by individuals and lenders in the form of premiums.

Now when a mortgagor defaults and the lender makes a claim to CMHC, CHMC is only responsible for the difference between what the house sells for and the mortgage remaining.

Evan Siddall is a smart man and since his appoinment to head CMHC he has really made constructive and beneficial improvements to the system.

So an insured mortgage now has the down payment removed, any principle payments removed and now sits at $200,000 owing. The house sells for 201…no involvement from CMHC. The house sells for 190,000, CMHC comes up with $10,000.

Relax, be happy. You won’t be called upon to help your fellow citizen.

#49 Penny Henny on 02.01.18 at 6:58 pm

#5 InvestorsFriend on 02.01.18 at 5:23 pm
Mark Straightens me out as he quotes me and responds:

157 Mark on 02.01.18 at 2:46 pm
“The U.S. unemployment rate is 4.1%! They show nine occupation categories with unemployment rates below 3%.”

Nonsense… (Mark then explains why the Fortune article that I referenced is all wrong.)

**********************************
Thanks Mark. You’re the smartest. This has been clear for years now on this blog as you have schooled everyone over and over and over.

And, it’s impressive that you almost always do so with off the top of your head claims and very seldom any references or links.

You have often also lamented the tough job market in your field. People that know you probably don’t want to hire you because you are just so smart and it would make them and the other employees feel bad. Unfair!

Too bad you are not in the U.S. so you could see if the job market is hot enough that you would get hired.

///

Loving it.

Although Investor’s friend remember the Mark always references a job board that only has ONE tech job available. Presumably there is only ONE job board in Mark’s world.
Or maybe that is what he show’s his parents every time they ask why he hasn’t moved out of the basement yet.

#50 Elle on 02.01.18 at 7:04 pm

Funny I talked to a client service rep at one of the big banks two days ago. Needed to clean up a few things. Said there was a notification I was pre-approved for a line of credit and should take it. Said they are getting lots of people calling right now and asking for credit lines but not all getting approved for them. Thought it was just sales talk but maybe people really are that desperate.

#51 crowdedelevatorfartz on 02.01.18 at 7:08 pm

@#21 Love this blog
“I hope this doesn’t make me a bad personality?”
+++++

Nah. Just a bad person

#52 Randy on 02.01.18 at 7:17 pm

Where do we go when all the bubbles start exploding ?

#53 For those about to flop... on 02.01.18 at 7:20 pm

That is hilarious, and seven years old. – Garth

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

The article……or the person…

M43BC

#54 Doug t on 02.01.18 at 7:21 pm

Many people these days do not understand or even care about “debt” as long as they can find vehicles like HELOC’s – hell they even believe that the government will step in if necessary and save them from financial ruin – and in the mean time they just keep spending and consuming – idiots

RATM

#55 Hugh Janus on 02.01.18 at 7:24 pm

Most of these people are real estate investors so they know what they are doing right?

#56 Brains on 02.01.18 at 7:24 pm

Come on Garth, you know the answer. Of course people aren’t paying off their HELOC – why would anyone pay off a debt that up until recently was in the 3% range?

You’re the one always going on about the 7% annualized return you can achieve on a balanced portfolio. Whats the inventive o pay off a 3% HELOC when you can get 7% on that same money?

Those numbers are meaningless without stats about investments and the total amount people have in equity in their homes. But I guess being alarmist drives blog hits.

#57 Maggie the Tech Writer on 02.01.18 at 7:27 pm

#24 Reality is Stark

Thank God not all men are so constipated.

#58 millmech on 02.01.18 at 7:30 pm

#9 SimplyPut 7
The bank will not send them to a second tier lender, the bank themselves will charge them a higher mortgage rate because they are a greater credit risk. Since they are a higher credit risk on the mortgage up goes the Heloc rate too, what are they going to do?
They can not go somewhere else because of B20 stress test.

The realtors I deal with in the smaller communities are seeing places come up for sale that were purchased for investment properties and are now starting to be unloaded. I have seen this before, buyers flush with cash picking up properties to be negative cash flow landlords, cash gets tight and the first thing that is jettisoned is the “income” properties.
They are starting to reduce prices by 10% now, if the property does not move in three months they will go another 10%. If interest rates rise at a steady pace expect to see price reductions of more than 10% and at a quicker pace than 3 months.
To me this is the canary in the coal mine!

#59 BobDog on 02.01.18 at 7:35 pm

Recently looked into home prices in Ontario. I was astonished at the insane valuations. At least BC can point to some pretty mountains, clean water, solar powered hydro dams, Orcas and Teddy Bears. Ontario? Lets face it. Without the expenditure of vast amounts of energy, Ontario isn’t fit for human habitation. I have told people from India about the -40c to +40c temperature swings and they would not believe me. I didn’t even bring up the mosquito infestation.

#60 Timberr on 02.01.18 at 7:38 pm

Canada 5 yr bond yield peaked 2.158 today closing 2.141
Canada 10 yr yield up too closing 2.364

I wonder when the next fixed rate mortgage bumps will take place. 2018 will certainly be the year of reckoning for many.

Our beloved CPD continues the slow ascent as well. :)

#61 Nonplused on 02.01.18 at 7:47 pm

Well, from a certain point of view maybe a HELOC makes sense if it cuts your payment by 30%. Many people never expect to pay off their mortgage anyways. If they do build up a little equity in there they refinance and renovate or buy a new car.

If the strategy is to never pay off the mortgage anyway, because it will be covered and then some when you sell, why not save $30% a month? Well, you aren’t really saving anything because that money was going into equity by paying down the loan, but it makes the cash available for current expenses. With so many people unable to pay the bills, it is a last ditch effort I could see many people going for. I remember the days when people used to throw parties to celebrate paying off their mortgage. We don’t live in that era anymore.

#23 Mark on 02.01.18 at 6:08 pm
” I would bet most HELOC’s have that insurance “

“Its my understanding that the CMHC does not write subprime mortgage insurance against HELOCs.”

You are correct, CMHC does not insure HELOC’s. If they did they would have to charge a premium for them, and that would be complicated as the actual amount to be borrowed is seldom decided when the loan is approved, just the maximum amount. That is why the banks will typically only go to 60-65% of the appraised value of the house. That way if they have to foreclose it and liquidate there is a cushion to pay expenses and absorb some market loss. They have to pay you actual sales price – amount owed – expenses but don’t expect that number to be pretty, they don’t hang around waiting for the best possible offer they just make “reasonable efforts”. If they are selling into a down market they don’t just hang onto the property hoping for better days, they liquidate. So if you have a 60% HELOC and get foreclosed (or power of sale, whatever applies) expect to receive a number pretty close to zero on your supposed equity, especially in a down market. However this is no different than what happens with a regular mortgage so I can see why so many people are opting for this route. However if your see foreclosure in your future, whether it is a conventional mortgage or a HELOC, you are best off to try and sell the house yourself before it happens, if you can.

I don’t see HELOC’s as nearly as dangerous to the banking sector as the interest only mortgages we saw state side because the banks here insist on significant equity in the 40% range. That should insulate them through even a substantial correction. The SHTF scenario might present them with some loses but if things get that bad we all have lots more to worry about than that.

But I think this trend points to larger issues facing the 99%. The fact is even with better employment numbers wages are still failing to keep up with inflation and won’t until “full employment” is reached, whatever that means. People are being squeezed left and right. And into the mix governments at all levels are trying to raise taxes.

My favorite “squeeze” is the new carbon taxes from the Nutley government here is right wing Alberta (how did that happen?). Last month I paid $75 for the commodity (natural gas) to heat my house and $42 in carbon taxes. That’s a 56% increase to keep my pipes from freezing when it’s -20 outside. Criminal if you ask me. (I did not include “transportation” in the calculation but the tax isn’t on the transportation.) Maybe $42 a month doesn’t seem like a lot, and I can probably cover it by reducing my RRSP contributions, but that means I have to work longer before I can retire. However not everyone will be able to do it so they go to their HELOC. And it’s worse, because I pay an equal amount on my power bill! So it’s $84 a month! And since I spend about as much on gasoline in a month I assume the carbon tax in there is about the same, so it’s $126 a month! Plus it raises the cost of food, clothing, everything because even Costco has to pay the carbon taxes to keep the store warm but the frozen goods cold. So I wouldn’t be surprised if the average family is seeing an increase in costs of $252 a month because of this tax alone! So of course if you are on the wire and can use a HELOC and “save” $500 a month, what else are you going to do? You certainly aren’t going to get a raise big enough to cover it.

The whole thing is so hypocritical because most of the carbon based resources produced in Alberta are exported to regions that don’t have carbon taxes, primarily the US. Why didn’t they put the carbon tax at the source and ding those guys too? Well, we are already pretty uncompetitive as a supplier, so raising prices of exports wouldn’t help. But it shows how hypocritical the whole thing is. And it is regressive, because the 99% don’t have the option of spending $40,000 on solar panels and buying a Tesla.

Even our water co-op is jacking rates. The reasons they cite are a depleted capital account do to rising expenses and higher operating expenses, in part because they have to pay the carbon tax too and they use a lot of electricity to pump the water around. It’s a tax on water! Un-flipping-believable! They also cite the fact that they need to expand a couple of lines and do installations in new communities, but I thought that was supposed to be covered by connection fees. Apparently the developers managed to get part of their required infrastructure put on my back but that is a different issue involving corruption at the lowest levels of government. Yes it does happen. Anyway it means the cost of everything is going up and up and up and the higher it rises, the more people can’t afford to make ends meet.

Oh and this should all get even more fun with the new $15 dollar minimum wage, which is just a tax on the working poor. First, it result in a 5x increase in the tax those workers themselves have to pay (the real goal), but the knock on effect will be that people who drive UPS trucks or require child care will be the ones that actually pay the new higher salary. Where are they supposed to get the money? They’ve already been kicked in the balls by the carbon taxes!

So expect the use of HELOC’s to go up. The more the government raises taxes and artificially sets prices, the more people who will have no choice.

#62 For those about to flop... on 02.01.18 at 7:47 pm

CONFIRMED PINK SNOW.

This one is only a faint dusting of Pink Snow ,but I will put it up because it is yet another case in the Ora Complex in Richmond.

This is the six or seventh case now from that complex that has failed to flip a condo for a profit ranging from 20% / 100k losses after expenses, down to minor ones like this one.

The details…

6011-5511 Hollybridge Way ,Richmond.

Paid 806k February 2015

Sold 840k September 2017

So like a couple of the other units they got more than they paid but it wasn’t enough for a multi-year investment and it is not unreasonable to suggest that they lost 30k after expenses and a little for opportunities lost.

One thing that we will never know for sure ,but going forward will be a consideration is how much more money is pumped into these properties,detached in particular at the request of the realtors to help gloss over the properties shortcomings to try and make a sale.

Likely it will only pay off for a small percentage.

Don’t dump any more money into these pits.

It’s not your property that is the problem,it’s the market.

A can of paint can’t fix that…

M43BC

#63 Mark on 02.01.18 at 7:54 pm

“Don’t worry about the “taxpayer” holding the bag for CMHC. They have in and around 50% of their mortgage totals in liquid investments, paid for by individuals and lenders in the form of premiums.”

Please explain further. Last time I took a look at CMHC’s reporting, they had approximately $25B of equity to backstop a mortgage guarantee portfolio closing in on approximately $1T including re-insurance.

Even more significant, a good chunk of CMHC’s assets that comprise its “equity” is itself highly correlated to the housing market.

That much effective leverage into subprime mortgage guarantees and into RE is a disaster waiting to happen. But so far CMHC has cheated death. But how much longer such can last is anyone’s guess.

#64 8102 on 02.01.18 at 7:57 pm

The Provincially regulated Credit Unions are picking up the slack from from the Federally regulated Banks so the affect of the new Federal regulations on the housing market and Mortgage rules here in BC will be somewhat muted and the Realtor’s here are saying the prices here in BC will never go down because all the retirees want to move here (Victoria) and, wait for it, government is hiring right here in Victoria so young people are flocking to Victoria for these jobs and all of those high paying Tech Sector Jobs that have appeared.

And now Landlords are jacking the collective rent, what a greed filled mess we have created.

#65 Guy in Calgary on 02.01.18 at 7:58 pm

#29 Cdn Mom on 02.01.18 at 6:19 pm

You would pay the pre payment penalty when you break the fixed mortgage and convert it into a HELOC. Banks are not that stupid :D

#66 Mark on 02.01.18 at 7:58 pm

“That is hilarious, and seven years old. – Garth”

Yeah couldn’t find a newer graph. But if you follow, say, Toronto from 1990-2000, for instance, you see that Toronto RE goes from being priced at roughly 120% of the price of the TSE, to only 40% of the TSE. IOW, a tripling of the TSE relative to housing.

Add in dividends, and in that instance, your 25% down-payment invested in the index became 100% of a housing purchase.

The ratios are even more extreme this time around in favour of housing, and the graph as presented is ample evidence of the inverse correlation Canadian RE has to the Canadian stock market.

Nope. Fake news. The inevitable correction will be localized, not general. – Garth

#67 Lower Mainland on 02.01.18 at 8:03 pm

Banks are 100% behind this and sure they want to keep it going…PG homes for 800k (which seems outrageous)…Langley homes listing around 1.2M…and every person on the street in the Lower Mainland fed up and/or leaving…mission accomplished…debt slavery forever of future generation for the profits of today…what a great country we have.

Everyone should max out debt and really roil the banks by never being able to pay them back…oh wait…that is already happening.

Would love to see it crash but doubt it will happen quick and fast…just sloooowwwww melt as the under 45 people live financially malnurished, house poor and thinking they live in the best place on Earth…broken down homes for 1M plus is a clear sign of corruption on all levels.

#68 Linda on 02.01.18 at 8:03 pm

#18 Living Large – ‘no lender may force any borrower to buy life or disability insurance on a HELOC’. Maybe not. But any lender can refuse to accommodate any borrower who does not agree to the terms offered, just like in any other negotiation. Bank says ‘insurance, please’, borrower says ‘no way’ & bank then says ‘in that case, your request to move your mortgage to a HELOC is denied because (fill in reason here)’. No force, just negotiation & insofar as I am aware, the bank is within its rights to say no.

#69 Lower Mainland on 02.01.18 at 8:05 pm

RE: #61 Longest post ever.

#70 Mark on 02.01.18 at 8:06 pm

“Too bad you are not in the U.S. so you could see if the job market is hot enough that you would get hired.”

I am in the US frequently. Too bad you didn’t really understand anything I wrote and instead have chosen to believe the fake news claims of the US having a hot economy.

The job market is perhaps hot for low-end service labour (which I’ve seen ample evidence of, at least in my time in central Florida) — a bum wipers, bartenders, and fast food workers’ paradise, but actual jobs for professionals at livable wages — very anemic.

“Although Investor’s friend remember the Mark always references a job board that only has ONE tech job available. Presumably there is only ONE job board in Mark’s world.”

There’s certainly lots of job boards out there, but a lot of the positions as advertised are fake, replicated by 3rd parties, or otherwise really aren’t jobs at all. The links I’ve given in previous posts were of some of the higher quality boards, at least for Canadian professionals, which were pretty unequivocal in their lack of positions for tech professionals.

Perhaps employers who are complaining of being unable to find workers just need to go to the sort of job boards that actual real professionals use? Or actually send staff to professional conferences to recruit? Employers often say that workers “need to go where the jobs are”, yet the employers also bear some responsibility when they don’t recruit in venues in which they are to be taken seriously. That is, if there’s actually any shortages at all, which seems very unlikely.

#71 down and out on 02.01.18 at 8:06 pm

Wow ,old timer here says math is a exact science and these HELOC loans are big trouble ,good thing the millenniums learned that new math in school and show no fear.I almost get physically dizzy looking at home prices and thinking where does a young couple start ,old fixer upper or debt for life new one ,most cities will not allow you to build a 800 square foot starter home anymore which is a big part of the problem plus crazy land prices and development fees .My youth no HELOC was available we called it a second mortgage and people were kind of ostracized by friends because we knew it would not end well ,now it is like necessity to play house. Sad times a coming.

#72 Steve on 02.01.18 at 8:11 pm

I wonder what role nihilistic thinking has played in this debacle. When my wife worked as a teller she was told by a loans manager that people are acting financially reckless because they felt they were “already dead”. Let us eat and drink for tomorrow we shall die, is the basis of their desicion making. It’s understandable I guess. The obvious hitch in that plan is that you probably won’t die young enough to avoid all the pain you’re storing up for yourself. Nihilism is creating a subset of humanity that has been plowed under by foul ideas. Sitting discouraged in a drunken stupor most nights covered in unfinished tattoos and Dorito dust. Watching the ever widening sink hole in the living room floor subsiding under 1970’s green shag. So hopelessly in debt. Weighed down by derelict purchases, moldering into an obsolescent scunge of clutter that fills your periphery. What does tommorow hold? Low wages, unpaid bills, ferocious ex-spouse’s and a re run of Green Acres on a floor model television. I have lots of friends like this.

#73 Lost...but not leased on 02.01.18 at 8:21 pm

Re Risk..

Banks don’t care…aren’t they insured by CMHC ?

The banks simply pushed/stretched the envelope to maximize their DEBT = A$$ET.

“Big Brother” Federal Gov’t has stepped in to wean them off credit addicts , so when(not if) SHTF…..its business as usual.

Harken back to the late 1970’s/ early 1980’s….the RE collapse and the 20+% interest rates..it wasn’t the banks that suffered…they came out just fine.

Simply history repeating(neither repenting nor repealing) itself.

#74 Reality is stark on 02.01.18 at 8:28 pm

#57 Maggie May
Stick to tech writing. Serious financial mistakes result in high levels of male suicide.
Don’t allow social pressure to influence any of your financial decisions.

#75 crossbordershopper on 02.01.18 at 8:29 pm

HELOC is the best thing for most people. skip the mortgage entirely, the whole thing is a scam, mortgage insurance is a scam,
only pay interest at the lowest rate, have your paycheque directly go into your HELOC, the extra cash you have at the end of the month after you pay all your bills out of your heloc(no banking fees, and get rid of your current chequeing account).
say you can squeeze out 1000 a month after your bills and your mortgage, but it will be more, since no amortization, straight low rate of interest.
so you are paying down directly, daily your current debt on your home, do the numbers in 7 years making the same payments you are now on a mortgage your entire mortgage is or debt on your house is free and clear.
mortgages are structured due to high fees to banks, they tie you up for a lifetime with payments so they can match them against liabilities,
HELOC are simple and straight forward. the key is not to abuse it, you have to pay it down asap, have every dollar go to debt payment every day, dont double dip and buy crap made in china you dont need.
so if you are dedicated, interest only house purchases are quite normal in many far east countries, and australia etc.
Canadians are sheep, top dollar with after tax income to buy particle board paper mache houses, with crazy heating and property tax for a lifetime.
remember, you are here to support the natives. nothing has changed in 150 years.

#76 palebird on 02.01.18 at 8:32 pm

#59 Bobdog

Solar powered hydro dam??? Sounds like an oxymoron to me. Used to know a guy went by Bob the Dog. He didn’t like it but he was..

#77 millmech on 02.01.18 at 8:34 pm

#47 April
Vernon BC

#78 Lost...but not leased on 02.01.18 at 8:39 pm

#62 Flop….

Re: “ORA” development…
The developers are”ONNI”..

An intriguing bunch….not very highly rated by customers that actually LIVE in their units. LOTS of complaints by UNpaid contractors as well.

They often “lead” a given area…often the first developers in.

#79 Yorkville Renter on 02.01.18 at 8:43 pm

#38 – let me introduce you to a concept called ‘compounding’.

a home that sold for $363k in 2008, and resells again in 2018 for $583k, grew less tham 5% a year… which after inflation, isnt that great. It’s certainly not ‘on fire’.

you’re welcome

#80 Homeless Trillionaire on 02.01.18 at 8:45 pm

Ontario isn’t fit for human habitation. I have told people from India about the -40c to +40c temperature swings and they would not believe me. I didn’t even bring up the mosquito infestation.

What do you expect when you’re competing against a Billion dollar Public Relations industry in Canada to spread an image of Canada as the land of milk and honey to the world so immigrants can live under the pretense of a better life?

Back in 2005, a couple from UK, originally from India created a website NotCanada.com to complain that Canada is a very difficult country for professionals to integrate. After a few news reports and releases to the Canadian government, the website was mysteriously taken down, and it’s not even accessible at the Wayback machine.

#81 Bob Dog on 02.01.18 at 8:46 pm

It’s frightening to thing that you privacy, your wealth, the future of humility hangs on the strength of someone’s password.

#82 millmech on 02.01.18 at 8:48 pm

#47 April
Forgot to add watch Penticton, Salmon Arm, any of the smaller towns in the interior, these small towns have been bought up by people cashing out on their homes in Vancouver. You can buy an established winery in Naramata for $1,850,000, Ledlin Winery I believe or a kennel in North Van.

#83 Fiendish Thingy on 02.01.18 at 8:55 pm

So, if HELOCs aren’t insured, and banks are on the hook, then surely there must be a trigger mechanism for when borrowers reach the 65/80% limit, and their homes have not increased in value, so they can’t extract anymore equity- they must start making payments, no?

I’m very curious about how often banks “call” HELOCs and demand payment in full- any links to stats or data?

Flop, or someone, would be doing this blog a favour by listing sales of bank owned/repo’ed/distressed sales…

#84 Blacksheep on 02.01.18 at 9:02 pm

OK, lets get this out of the way, right up front:

I can be a prick…

Now that that has been cleared up, I must gloat.

My initial RE investment (personal res) circa Jan/2014 of $ 425K has now officially gone ballistic.

My neighbor two doors down is selling his place, (same lot size as mine) now subdivided into two lots for $ 599K, PER lot.

Thank you, Abby city planners for rezoning.

I will of course get ahead of the critics and pretend these prices drop a full 20% from current levels.

This means my RE investment while sheltering me and my family, only returned $450K (25K home renos) over four years. Consider this a public service notice to the relevant Dogs to think for them selves and set aside the groupthink I see repeated here on a nightly basis.

Life’s short, best get on with livin it.

Unless you sell, you have made nothing. Gloat then. – Garth

#85 Rooster on 02.01.18 at 9:05 pm

#48 Ustabe on 02.01.18 at 6:53 pm

Don’t worry about the “taxpayer” holding the bag for CMHC. They have in and around 50% of their mortgage totals in liquid investments, paid for by individuals and lenders in the form of premiums……..

Evan Siddall is a smart man and since his appoinment to head CMHC he has really made constructive and beneficial improvements to the system……..

Relax, be happy. You won’t be called upon to help your fellow citizen.
**************
I must have missed something in my glance at their Q3 report, and I stand to be corrected, but one of us is an idiot.

It looks like they have in and around $500B in insured loans , $25B in investments, and $225B in outstanding bonds (that are owed, not owned by CMHC). So they are actually levered 20:1. The bonds are packaged as mortgage-backed securities by the CHC, a subsidiary of CMHC. Sound familiar? And since 2017, they have to pay the Feds a “Dividend” on any extra money they haven’t squandered. Don’t worry, be happy? Please tell me I am wrong.

#86 The Boulder on 02.01.18 at 9:25 pm

A property in Brampton sold for 859k last year, buyer ran away from firm deal. Relisted for 835k and then 825k. I put an offer last night for 725k and got a counter for 799k. It is a detached 2800 sqft 10 year old house. And I can push seller for another 15-20k. No buyer’s agent, doing my homework myself.
Poor realtor from seller have to deal with all arguments I learn from this blog. Today he almost cried, when I told that open information about sold properties will crush their business, same way as uber crushed the taxis. Feel sorry for the chap.

#87 Ben Dover on 02.01.18 at 9:34 pm

benz, bmw, rover, Audi & lexus…dime a dozen.

#88 Lead Paint on 02.01.18 at 9:36 pm

#5 InvestorsFriend on 02.01.18 at 5:23 pm

LOL you got Mark’s number. Aside from being pedantic, and full of BS, he’s a good guy.

#89 Lisa on 02.01.18 at 9:40 pm

Has anyone seen this “debate” between Scott Mcgillivray and Kevin O’Leary? Kevin O’Leary does a great job explaining his point, while Mr. Mcgillivray calls his advice “cute” and tries to sound smart in response.
I really, really can’t stand Scott Mcgillivray. He makes O’Leary look humble in comparison.

http://dai.ly/x3nas01

I hope this link works!

#90 Lost...but not leased on 02.01.18 at 9:42 pm

Our realtor called the other day…..

BTW..as I noted previously, I was Executor for my Father’s estate/home. His property’s market value literally doubled in 2 years… we sold last Oct. 2017. ..no regrets. The area has multi family zoning in the OCP….a minimum of 3 lots are req’d for assembly..we sold to a developer that already own a neighbouring one.

Our realtor was excellent….she has another property listed in the neighbourhood for slightly more than we sold for.

Problem? Her current listing(another estate situation) is not attracting much interest unless neighbours either side sell as an assembly to developers.

ALSO:Another realtor has a listing nearby asking 25% more.

So…one neighbour to estate property (who I know personally and in their 80’s )won’t sell for market price….they think they should get what the other listed property is asking aka 25% premium…which also sits UNsold. The other neighbour on the other side says don’t bother us…THUS no assembly is possible.

The market appears to have peaked….only sharp pencils seem to be around…no spekkers or HAM on horizon.

IMHO, the time to hold ’em is gone….our realtor said the market is very slow, but her current listing if sold will likely compromise the futures and market value of the stubborn neighbours….everyone thinks they know better till its too late.

#91 bsallergy on 02.01.18 at 9:46 pm

I’m getting the impression that people are blaming the current government for the housing bubble blown by the previous government when it was searching for a majority.

Much as I dislike liveralls that just ain’t fair.

#92 Lisa on 02.01.18 at 9:46 pm

Note on the link:
I should say that the debate is over real estate, so of course Scott M. loves it and O’Leary is preaching caution as he should being the better business man out of the two.
Scotty M is out of a job if people stop buying.

#93 akashic record on 02.01.18 at 9:49 pm

#68 Linda on 02.01.18 at 8:03 pm

#18 Living Large – ‘no lender may force any borrower to buy life or disability insurance on a HELOC

Maybe not. But any lender can refuse to accommodate any borrower who does not agree to the terms offered, just like in any other negotiation. Bank says ‘insurance, please’, borrower says ‘no way’ & bank then says ‘in that case, your request to move your mortgage to a HELOC is denied because (fill in reason here)’. No force, just negotiation & insofar as I am aware, the bank is within its rights to say no.

===

It would be surprising if in the highly regulated banking industry this would be left for the discretion of the banks.

#94 Lost...but not leased on 02.01.18 at 9:55 pm

“Affordable housing”

For those familiar with BC Gulf Islands and Island Trust…

Many of the Islands are anti development and sparsely populated most of the year.

Many locals have been squeezed by housing crunch, as many mainlanders bought properties, put up expensive homes , and into AirBnB as opposed to long term renters.

One Gulf Island…Pender Island..has committed to an affordable housing strategy as a means to support locals and avoid the hollowing out that plagues major urban cities. May serve as a template, if not a worthy experiment.

GOOGLE:
“Galiano’s ingenious affordable home ownership initiative”

#95 ShawnG in TO on 02.01.18 at 10:05 pm

when is A. Farber going to ipo?
that’s 1 stock i would like to own a lot of

#96 Blessed Canadian Millenial on 02.01.18 at 10:14 pm

#83 Fiendish Thingy on 02.01.18 at 8:55 pm
So, if HELOCs aren’t insured, and banks are on the hook, then surely there must be a trigger mechanism for when borrowers reach the 65/80% limit, and their homes have not increased in value, so they can’t extract anymore equity- they must start making payments, no?

I’m very curious about how often banks “call” HELOCs and demand payment in full- any links to stats or data?

Flop, or someone, would be doing this blog a favour by listing sales of bank owned/repo’ed/distressed sales…

——————-

I’d like more information on this as well. Mr. T has indicated that it’s a call loan, but how often is it called? Under what circumstances?

I doubt that the calling of HELOC is as widespread.

BTW, is SCM banned? Haven’t heard from her in a while…

Shamed self-exile. – Garth

#97 LivinLarge on 02.01.18 at 10:15 pm

Fiendish :”then surely there must be a trigger mechanism for when borrowers reach the 65/80% limit, and their homes have not increased in value, so they can’t extract anymore equity- they must start making payments, no?” basically you are correct but and it’s a huge but, the bank doesn’t actually know when the sellable value of your home has dropped below the magic 65% or so percent. It’s a demand loan but not exactly like a margin account where the brokerage knows instantly where your margin loan and your portfolio stands and can make the margin call.

As long as you make your payments AND the whole local market hasn’t crashed by 30% they have the incentive to sit tight and let you run. The HELOC has a preset max allowable so you can’t dig your real dollar hole any deeper, just your loan to value ratio takes a hit. And at the end of the day, they will normally have enough buffer to ride with you. No obligation to ride but banks do not want a suddenly swelling portfolio of properties to try and sell in a bad market. They really aren’t well staffed to have the capacity to suddenly start selling homes en masse. Sure they can but they just don’t want to. As long as you continue to make your minimum payments they still have the security and you are maintaining the property for them.

So, there is no benchmark for them swooping but if the local market actually does tank by 30% or more then there’s going to be some dicey meetings at the banks. But, if the market really tanks 30% then start looking for some calls if the borrowers aren’t at least making minimum payments.

#98 BCWally on 02.01.18 at 10:17 pm

Thanks again Garth for covering the HELOC issue, or I should say upcoming crisis. The HELOC is the hidden instrument converting mortgages into subprime loans.
In the US it was the grouping of bad loans with medium to great loans that enabled AAA ratings on the whole pile, with a gradual percentage increase of bad loans over time. The ratings agencies had no idea how to properly rate those loans.
In Canada we have a half decent process covered by a taxpayer insurance on the mortgage initially. As time passed and home equity grew the HELOC has become the new way of undermining the quality of the loans and blinding the banks to the deteriorating ability of the homeowners to repay all their debts.
I believe at this point Garth you see the clear and present danger to our financial system as I have for several years.
What is interesting is taking the average HELOC debt and calculating the monthly payment. Then add 2% to the loan rate…..this thing isn’t an ATM, it’s a credit card.

#99 Expat on 02.01.18 at 10:20 pm

#70 Mark: “fake news claims of the US having a hot economy … The job market is perhaps hot for low-end service labour”

What do you do for a living? I’m in Seattle and the last 5 people we hired are from Canada, England, Puerto Rico and two from California. It’s impossible to find people and I’m in property management, not tech. Amazon had something like 9000 tech jobs listed here last year until they finally gave up and decided to just open another HQ in a different city because it’s so hard to find people.

And the cost of living here is half what is was for me in B.C. You need to look harder if you think there’s no jobs here. If you’re qualified to move here and be hired by a U.S. employer I can assure you you’ll make way more than whatever you could earn in Canada right now. And I’m not even counting the lower taxes or stronger dollar. Plus no state income tax in Washington!

#100 Leo Trollstoy on 02.01.18 at 10:23 pm

#5 InvestorsFriend on 02.01.18 at 5:23 pm

Lol

[ ] not rekt
[x] rekt
[x] really rekt
[x] tyrannosaurus rekt
[x] parks and rekt
[x] star trekt
[x] school of rekt
[x] catcher in the rekt
[x] great rektspectations
[x] rekt it ralph
[x] the shawshank rektemption
[x] forrekt gump
[x] finding rekt
[x] rektal exam
[x] shrekt
[x] rektium for a dream
[x] The Mummy Rekturns
[x] Pride and Prektudice
[x] erektile dysfunction
[x] rektroom
[x] continental brektfast
[x] Brektzit
[x] rektipe for success

#101 cultural elitist on 02.01.18 at 10:28 pm

@72 – Steve
Thanks for the vivid and hilarious picture Steve. :-)
Wait till your friends break out the handheld vaccuum to suck up last year’s residue dorito dust. Paaarrrty!
Ever stop and think it might be a good idea to get some new friends? LOL

#102 LivinLarge on 02.01.18 at 10:35 pm

Linda:”Bank says ‘insurance, please’, borrower says ‘no way’ & bank then says ‘in that case, your request to move your mortgage to a HELOC is denied because (fill in reason here)’. No force, just negotiation & insofar as I am aware, the bank is within its rights to say no.”…ignore the word “force”. The banks are prohibited from doing this and frankly they just don’t do it. You only get a HELOC to cover your fixed term mortgage at renewal and when you have a shit load of current equity so they aren’t pushing mortgage insurance. They are allowed to require fire insurance but not default insurance when they are lending a max 65% loan to value ratio. Since CMHC etc do not insure HELOCs, where would this insurance come from. Sure many banks own insurance companies but there are statutes that make requiring someone to buy one of your products in order to qualify for another product, a crime. It’s called “Tied Selling” and seriously verboten.

“Lost”…you nailed it with “the banks don’t lose”. They make a spread and they charge egregious fees so no matter what happens, a well capitalized Canadian bank always wins. And they have incredible risk management teams.

#103 InvestorsFriend on 02.01.18 at 10:36 pm

How NOT to Win Friends and Influence People

At 70, Mark complains that I did not understand what he wrote. He refers to when he schooled me yesterday that the official U.S. unemployment rate of 4.1% is fake or whatever. I was referencing official data and a Fortune magazine article about how high tech companies can’t find enough employees.

Mark, in a very very typical display of his interpersonal skills started off his response to me with the word “nonsense”.

I have tried to point out in the past that constantly coming across as a complete know-it-all is not a good way to win friends and influence people or to gain / keep employment.

Nor is starting off a response with an insult a good way to get someone to read much less understand said response.

When it comes to not always being mindful not to insult others, I am not without guilt myself. But my days of needing paid employment are over.

I just wonder to what degree Mark’s approach has held him back.

#104 LivinLarge on 02.01.18 at 10:52 pm

John Dough: “When a bank transfers a mortgage to a Heloc doesn’t the CMHC insurance lapse? Sounds like a win for the taxpayer.” You are aware aren’t you that the CMHC premium has been paid upfront and forms a part of your original principal upon which you have been paying interest on every day of the mortgage? So, A. you don’t get a HELOC until you are well below the minimum equity that you are required to have CMHC coverage and B. when you did require coverage it was added to your principal so the consumer isn’t coming out a head with the insurance.

#105 Leo Trollstoy on 02.01.18 at 10:56 pm

Nope. Fake news. The inevitable correction will be localized, not general. – Garth

I feel badly for mark

I hope he finds work soon but likely not qualified if he can’t during tech boom era

#106 LivinLarge on 02.01.18 at 10:57 pm

“I have tried to point out in the past that constantly coming across as a complete know-it-all is not a good way to win friends and influence people or to gain / keep employment.

Nor is starting off a response with an insult a good way to get someone to read much less understand said response.”…LOL, mighty white of ya pator.

Has it occured to you that he neither cares what you think nor whether you read or ignore his writing? Maybe he’s just not in your congregation.

#107 Leo Trollstoy on 02.01.18 at 10:58 pm

After we colonize Mars mark will still be talking about nortel

Lolol

Sad

#108 Duke on 02.01.18 at 10:59 pm

I’ve been telling people years ago about how HELOC will crash Canadian housing market. They all treated me like a crazy man.

I have many friensd with $200k in HELOC, and they all apend the money on BMW’s and fancy trips. Now, it is the time for them to pay the price. I have zero sympathy on them.

#109 Newcomer on 02.01.18 at 11:01 pm

#43 FOUR FINGERS WATSON on 02.01.18 at 6:41 pm
The government and the banks did everything humanly possible to create the bubble. They will do everything humanly possible to keep the bubble from deflating.
——

How’d that work out in, Japan, US, Spain, and every other place with a bubble, including past Canadian bubbles? Have you noticed that governments are successful in keeping bubbles from popping? (Here, I will concede that the Harper government did a great job, but only because it was unnecessary.)

#110 Newcomer on 02.01.18 at 11:34 pm

The inevitable correction will be localized, not general. – Garth
—–

Why would that be? The same thing is happening in most of the country. There are obvious examples like Lindsey and Penticton, but it’s not limited to places you can drive to from a center of craziness. Check out prices in Manitoba and Saskatchewan.

I get it that you can buy a place in NS for 50K, but chances are it wouldn’t have fetched 25K a few years back.

Canada is a small player in big international markets, so I don’t see the bust taking down the whole economy, but are you telling us that when the 220 billion dollar punch bowl gets taken away, the hangover will not be felt far outside the 416 and 604?

#111 Trying to understand on 02.01.18 at 11:47 pm

So, if 400k mortgage is converted to 400k heloc and only interest payments are made, how does the 400k loan decrease? You keep on owing 400k until you start paying loan principal, right? or I am missing something? I am totally confused.

#112 Lost...but not leased on 02.02.18 at 12:23 am

Life is simple….

We have:

-Gov’t
-Central Banks
-Private Banks

Then the rest of US

aka Its “THEM”(can’t lose/rigged game) vs “US”.

#113 Financial Orchid on 02.02.18 at 12:25 am

Expensive realty is driving millennials who can do math out of Canadian cities into more lucrative career opts south of the border. Everyday I still see real estate hungry coworkers trying to get another piece of 604 property as their retirement income stream. Can’t blame them when real estate outpaced their salaries long ago. How can you get ahead with stagnant wages and volatile realty?

Garth, do you have stats for unemployed Vancouver realtors similar to the Toronto ones? Where did u get the nums?

#114 waiting on the westcoast on 02.02.18 at 12:51 am

#70 Mark on 02.01.18 at 8:06 pm says…

~~~~~~~~

I can’t even repeat it… ;-)

Garth – rather than a number of us bashing him periodically for some very bizarre assumptions, theories or job board choices, maybe you should have a bot that adds a warning to every post he puts up. It will save time and heartache and protect any Noobs who are unaware of his erroneous diatribes… ;-)

#115 waiting on the westcoast on 02.02.18 at 12:53 am

Actually, you could come up with some cheeky warning for each of us.. ;-)

#116 Midnights on 02.02.18 at 1:08 am

First to your article, WOW‼️
Secondly…

Canadian Housing Update
5 predictions for Canada’s Housing Market in 2018
https://www.dundurn.com/news/5-Predictions-Canadas-Housing-Market-2018

#117 Yup on 02.02.18 at 1:19 am

Yup my buddies In Vancouver use HELOC for daycare/vacations renos etc…..they are getting worried now that housing no going up anymore

#118 Smoking Man on 02.02.18 at 1:37 am

Every time I look at the mirror naked and see my short comings.

I flip the basterd my middle finger.

Only hard core drunk will appreciate this post.

#119 Kenny on 02.02.18 at 1:52 am

Kinda like going to a big dollar restaurant with a group and taking everyone’s cash at bill time… put it all on your credit card and you have cash for the minimum payment! Voila!

#120 Smoking Man on 02.02.18 at 2:02 am

Zero friends, what amazing island to say what’s on your mind.

Jack inspired

#121 Pete from St. Cesaire on 02.02.18 at 2:06 am

Stay the course. It will be over-leveraged families that are torn up, not the economy. – Garth
—————————————————————-
Nothing to worry about? Steady as she goes? 3 million families with overextended HELOC’s. That’s like one-third of the population that will be torn-up. The real (main-street) economy is toast. Perhaps the fictional Bay/Wall St. economy can continue for a while longer.

#122 Nonplused on 02.02.18 at 2:14 am

#69 Lower Mainland on 02.01.18 at 8:05 pm
RE: #61 Longest post ever.

Nope I’ve done longer ones. You don’t have to read them and I’d like to be more concise but that actually takes a lot more time than you would think.

#123 Dolce Vita on 02.02.18 at 2:45 am

#12 Damifino

So true.

THIS is THE ticking time bomb and as RE values correct this year and rates go up…well, THE “buck up” letter is soon to follow from [email protected]

This as [email protected] tries to “balance” her “books” (a.k.a., increase Cash quick on the Asset side of the Balance Sheet to offset the declining RE Asset values the [email protected] holds).

No dung Sherlock.

#124 Tony on 02.02.18 at 2:47 am

Taking a shot at the U.S. jobs report. 158 thousand jobs created. March rate hike probably off the table.

#125 Ray on 02.02.18 at 3:25 am

My wife and I of 44 yrs. bought our first new house in 1978. At that time interest rates were 10.5% and were rising quickly. We thought there would be a good chance we would not be able to make the monthly payments at renewal time in 1983. The only solution we had was save up enough capital so that at the 5-year renewal, we could pay off a half of the principle. With the interest rate almost doubling to 18%. We were able to keep the monthly payment about the same. We paid the remaining principle off in another 5 years, so became mortgage free by 40. WE then used the mortgage payment we were using to invest in Mutual Funds because that was what was available then. WE have been diligent, not reckless with our monies. We do not smoke, drink gamble and purchase modest vehicle and small houses. WE are comfortable financially, but we are not ‘Wealthy” in our minds.
I read Garth blogs too often, and I am coming away with the feeling that the reckless financially challenged who have bought house within the past 3 years will be suffering. I hope I am wrong. But I also get the feeling The Liberal will solve these people’s problem by demonizing the folks who did it correctly, we will be call somehow corrupt or entitled, and they will change the taxation system to strip us of any independence in the name of fairness. (A Liberal look to everyone else to solve his problem, a conservative looks to himself to solve his problem)
Maybe I read this pathetic blog too much, maybe I should stop this self- abuse and take up the hobby of being a “Connoisseur of Fine Weed! “

#126 Karma on 02.02.18 at 3:44 am

I have been patiently waiting for bitcoin to crash through the $10,000 floor. That happened two days ago. Now it just fell to $8,500. That’s a whopping 57% below it’s peak.

This bubble is deflating fast. All those who cakes for $100,000 price by the end of 2018 must be shaking their head and hoping/praying more greater fools appear.

Funnily enough, the Financial Post had an article about the CRA wanting to tax crypto asset holders for capital gains.

#127 Karma on 02.02.18 at 3:47 am

Ripple is sub 75 cents now, dropping about 75% from its peak. Ethereum is sub $1000 for the first time in a while. It’s actually sub $900 now.

https://coinmarketcap.com

#128 Where's The Money Guido? on 02.02.18 at 3:50 am

Re: #40 Smartalox on 02.01.18 at 6:38 pm
New Acronym Alert;

Home Equity Extraction Death Spiral = HEEDS

Is ANYONE From OSFI listening out there?
++++++++++++++++++++++++++++++++++++++++++++

Coast Capital Savings hired a Director from OSFI, along with a former BC Hydro Legal Compliance Director in the fall of 2016, just prior to launching their move to go federal. This Hydro lawyer got hired by former BC Preme Guido Campbell in 2001 to start the privatization of Hydro and start IPPs, for their insiders. They will “oversee”, ahem, er… orchestrate, the change from provincial Credit Union to federal Credit Union.
The Credit Union will no longer have to cover $1 million in deposits (CUIDC), just the $100k that the banks have to cover (CIDC). I guess they were reading Garth as to the over-exposure of CUs to mortgage debt.
From the track record of what happens to a Credit Union after this is done; in Australia in the early-mid 2000s, an Aussie Credit Union went this way, the Directors set up 3 levels of shares, took it to the stock market, got bought out. The members were left holding the bag while the insiders and the Directors, who voted themselves Class A shares, instantly became multi-millionaires. Real sleazy work, just like BC Hydro.
The former BC Hydro Director, now Coast Director of Legal Compliance, is from Australia and was hand picked by Guido himself I understand.
All in La Familia ……..

#129 Stan Brooks on 02.02.18 at 4:02 am

Fantastic news.

Canada moves to make its national anthem gender-neutral.

https://edition.cnn.com/2018/02/01/americas/canada-gender-neutral-national-anthem-trnd/index.html

When should we expect the apology by the PM, maybe some tears are due?

Is there a process to claim damages for having to live under sexist anthem for so long by non-males?

#130 Vincent van Dough on 02.02.18 at 6:24 am

#104 LivinLarge on 02.01.18 at 10:52 pm

John Dough: “When a bank transfers a mortgage to a Heloc doesn’t the CMHC insurance lapse? Sounds like a win for the taxpayer.”
You are aware aren’t you that the CMHC premium has been paid upfront and forms a part of your original principal upon which you have been paying interest on every day of the mortgage? So, A. you don’t get a HELOC until you are well below the minimum equity that you are required to have CMHC coverage and B. when you did require coverage it was added to your principal so the consumer isn’t coming out a head with the insurance.
*************
Apologies, I didn’t paint a clear enough picture.

Please revise to: “Sounds like a win for the TAXpayer, who no longer has to backstop the CMHC, which despite rumours to the contrary, is leveraged up the ying yang – see Rooster’s timely exposé @#85.”

#131 Howard on 02.02.18 at 7:00 am

#37 Frustrated Renter on 02.01.18 at 6:35 pm

Hoping this is the final kick to the bucket before housing prices collapse entirely. People who gambled and way over leveraged deserve what’s coming. Time for those whom are cautious savers to catch a break.

I will add that renting has not been pleasant or easy. I’ve been waiting patiently for a correction, meanwhile rents just keep skyrocketing. Rents in the GTA have been impacted greatly by this housing madness (Mississauga and Oakville rents are almost comparable now to Toronto).

—————————————–

Toronto rents were pretty static from 2007/08 through to 2015 and then suddenly exploded.

Before I left Canada in 2014 I was renting an apartment at Yonge & St. Clair for $1325/month. That same apartment is now renting for $1675/month. A 26% hike in just a little over 3 years.

#132 Victor V on 02.02.18 at 7:02 am

Bitcoin slides further, headed for worst week since 2013

https://www.bnn.ca/bitcoin-slides-further-headed-for-worst-week-since-2013-1.986270

#133 Yoohoo, Bitcoinnaire? on 02.02.18 at 7:06 am

When he said BTC 100,000 by June, did he mean 100,000 pennies?

#134 I’m stupid on 02.02.18 at 7:21 am

Bitcoin down to $7900 on its way to it’s true value of 0.

#135 Yoohoo, Bitcoinnaire? on 02.02.18 at 7:21 am

Christine Elliott and Caroline Mulroney have now formally launched. Add in Doug Ford and this is becoming quite the leadership race.

I can’t imagine why Christine wants to go through this and risking losing for a THIRD time.

http://www.cbc.ca/news/canada/toronto/mulroney-elliott-ontario-pc-leadership-1.4515394?cmp=rss

#136 The Lone Danger Ranger on 02.02.18 at 7:25 am

The chart of BTC is forming a stalagmite pattern on a dandruff base. Will this be the needle that pricks the non-virtual equity bubble ? Or will it be the record low cash levels at TD Ameritrade? It wasn’t the fees, it is simply that investors are all in, pulled by a force stronger than common sense, FOMO.

The US Fed is now stress testing the big banks under an extreme scenario, using a 65% drop in equities.
Are they being too optimistic? If you want to buy the dips you might want to stock up on sake, a Japanese rice wine currently on sale at your local LCBO.

The dogies are lowing, but the horses are spooked, and this cowpoke is cooling his heels at the Double D ranch.

#137 under the radar on 02.02.18 at 7:27 am

35 – No surprise there. Unless your lakefront, Innisfil is another fetid dump with overburden paycheque to paycheque borrowers with financed pick up trucks and a 14 year old beater in the driveway on blocks. The prices in those cheap subdivisions were wishful thinking at best, snaring a few obese speculators from Toronto thinking they could do a quick flip or become Landlords as a plan B. This time the Toronto based builders who were last in are going to lose money and so are the empire builder wannabies.
Last-The sky maybe falling commuter hell , but don’t think that includes the City of Toronto, it does not.

#138 I’m stupid on 02.02.18 at 7:31 am

#125 Ray

It sounds like you’re happy in your life and that’s great. Having balance in ones life usually leads to happiness.

The things Garth talks about (balance, diversification etc) were common sense to your generation. I’m 38, some in my generation have some common sense but it’s rapidly deteriorating with the younger generations.

#139 PastThePeak on 02.02.18 at 7:40 am

#127 Karma on 02.02.18 at 3:47 am
Ripple is sub 75 cents now, dropping about 75% from its peak. Ethereum is sub $1000 for the first time in a while. It’s actually sub $900 now.
==============================

Wonder if Bitcoinnaire is getting worried. Ripple was to be the next best thing (after all the others…). Bitcoin at $7800. The “crypto market” has lost $100B in market cap in the last 24 hours.

#140 Eyestrain on 02.02.18 at 7:43 am

#129 Stan Brooks on 02.02.18 at 4:02 am

Fantastic news.
Canada moves to make its national anthem gender-neutral.
Is there a process to claim damages for having to live under sexist anthem for so long by non-males?
***********

When was the last time you sang any song, Stan? Come out from under your cloud, it’s a bright beautiful world out here.

“Make every song (you sing) your favorite tune.”
M. Jagger

#141 crowdedelevatorfartz on 02.02.18 at 7:47 am

@#96 Blessed Canuck Millenial
“BTW, is SCM banned? Haven’t heard from her in a while…”
+++++

Count your Blessed-ings…..

#142 IHCTD9 on 02.02.18 at 7:54 am

I’ll be watching this meltdown from the sidelines as anyone who stayed out of massive debt will be.

There are few reasons I can dream up to explain why one would willfully drive themselves into a financial peat bog.

I hate to say it, but what seems most likely to me is lots of folks who want to live (or project) a lifestyle that they can’t afford.

#143 Rooster on 02.02.18 at 8:20 am

#61 Nonplused on 02.01.18 at 7:47 pm

My favorite “squeeze” is the new carbon taxes from the Nutley government here is right wing Alberta (how did that happen?). Last month I paid $75 for the commodity (natural gas) to heat my house and $42 in carbon taxes.
**************
I was just doing a word count to see if it is indeed the record,(yes) and noticed your rant on carbon taxes.
I did a quick research project (5 min) and found Jason Kenney was up to his old tricks again.

The carbon tax is $1.51 per Gigajoule.
“The average Albertan household uses about 120 GJs of natural gas a year.”*

Unless your house is huge?? you will pay $15.10 more per month for the carbon tax. Figure out where you went wrong in your gazintas and write a “brief” note to Jason.

*http://www.energy.alberta.ca/NaturalGas/726.asp

#144 Screwed Canadian Millenial on 02.02.18 at 8:24 am

I have a statement to make but all you do is delete/remove my comments when I defend myself against your accusations and false charges.

I’ve been nothing but respectful towards you but all you do is hurl empty accusations that I’m racist or xenophobic or obscene and then when I try to respectfully defend myself, you just scrub my comments.

You don’t act in good faith.

Yeah it’s your blog but you ban me because I defend my positions well, stir up honest debate, hold my own, and challenge your views/ideology in an intellectual fashion. It’s easy to cast aside some loony millennial SJW screaming about gender fluids and micro-aggressions. But look how you behave when faced with a millennial who knows what he’s talking about and backs it up with facts/sources/data.

Anyways that’s it.

Thanks to all the supporters and people who voted yes. I was surprised I won that vote and I’m sure Garth was shocked and that was not the results he expected when he called for the vote.

Get over yourself, kid. You were banned for extreme poor taste and attempting to post a profane picture. You are not special. – Garth

#145 akashic record on 02.02.18 at 8:40 am

#143 Rooster

Or just put the cost of the carbon tax on the bill, like every other item.

How transparent would that be?

#146 Old Ron the Realtor on 02.02.18 at 8:41 am

“Neither a borrower nor a lender be; / For loan oft loses both itself and friend.” –Polonius, (my old friend).

#147 maxx on 02.02.18 at 8:56 am

The stupidity of Canuckleheads when it comes to handling money is beyond comprehension. We all get what they’re doing with HELOCs, but rather than finding ways to cut the fat, they’re blithely carrying on with the same habits that got them to the brink in the first place. A few days ago, at a supermarket check-out, I asked someone if the organic carrots he had were on special……he just shrugged and said he didn’t care.

Boundless egos of the “I deserve it” variety, coupled with the CB hormone of idiotic low rates propelled them to reach for castles in the air. M’lord and M’lady if you please. Canadian borrowers are so full of it.

Most of these fools could be sitting on mountains of equity, but are now losing sleep, compromising their longevity big time and literally standing on a tiny rock at the edge of Niagara Falls. And the prevailing winds of macroeconomic trends blow in from the west.

Getting rich is rarely ever sexy, but actually attaining the goal is. It takes unrelenting, pit bull determination and time. The vast majority of the wealthy didn’t get there via lotto winnings, nor T2-like inheritance. They also mostly don’t look the part.

I couldn’t stand the living nightmare of owing money to anyone.

Next stop: payday lenders……they dropped their rates, don’t ya know.

#148 Wayne & Shoestore on 02.02.18 at 8:57 am

#135 Yoohoo, Bitcoinnaire? on 02.02.18 at 7:21 am

Christine Elliott and Caroline Mulroney have now formally launched. Add in Doug Ford and this is becoming quite the leadership race.
*************

A has-been, a neophyte, and a guy who likes to pick fights ? Please tell me there’s more on the way.
The widow Elliott already played the sympathy cards, and everybody knows Caroline never had to take the airbus to school. And Dougie? All his support moved to Alberta years ago.

There must be somebody sensible in the PC Party willing to take a shot. The Liberals are counting on you. We will even pay the fees! Is Vic just being coy?

#149 Curious George on 02.02.18 at 9:02 am

Hi Garth you stated “In Canada, walking away from a mortgage is a no-go in most provinces.”
Curious what provinces is walking away not such of a no go?

#150 crowdedelevatorfartz on 02.02.18 at 9:06 am

@#144 SCM
“Anyways that’s it.”
+++++

Promise?

P.S.
Your shrill, incessant whining is becoming more strident.
Lose your meds again?

#151 akashic record on 02.02.18 at 9:13 am

Get over yourself, kid. You were banned for extreme poor taste and attempting to post a profane picture. You are not special. – Garth

Profane pictures must pass rich, or at least middle-class taste test.

#152 Rooster on 02.02.18 at 9:13 am

#145 akashic record on 02.02.18 at 8:40 am
#143 Rooster

Or just put the cost of the carbon tax on the bill, like every other item.

How transparent would that be?
*********

Because Albertan’s can’t multiply ?
I blame the Gubmint for lettin in all those Ontario boat people. They’ll be driving electric cars in Cuba before Alberta figgers out what’s happening in the world.

#153 Tater on 02.02.18 at 9:14 am

#38 Jorge on 02.01.18 at 6:36 pm
Things are still plenty hot in Montreal.

6 Rue de la Châtelaine, Kirkland, QC,

2008: Sold for 363k
2018: Listed at 548k and sold at 583k (35k over ask, and nope, the buyers weren’t Chinese although there are a LOT of articles about them in the local newspapers these days).

Higher interest rates and B20 aren’t deterring anyone here.
—————————————————————–
That’s 5.4% a year. Hardly hot. More like lukewarm.

#154 Spectacle on 02.02.18 at 9:15 am

“those about to flop… on 02.01.18 at 7:20 pm
That is hilarious, and seven years old. – Garth

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

The article……or the person…

M43BC ”

Um, and that is in Dog Years.

#155 Bytor the Snow Dog on 02.02.18 at 9:19 am

Ray at 125 sez:

“We do not smoke, drink, gamble…..”

Sounds pretty boring Ray. Only missionary at happy time too?

#156 Electoral College on 02.02.18 at 9:27 am

Dear SCM, We’re doing a recount – not sure you won the popularity vote.

Free advice:
You can only hit people with a hammer once.
Change your name (often ;-), and come in soft and low.
The old man’s vision is going, so make it short and sweet and you won’t attract attention.

If you have something to say, either be polite, or rude and funny. The Cons CAN laugh at themselves sometimes……..

#157 Jorge on 02.02.18 at 9:31 am

#79

My point isn’t about the growth rate. My point is that in spite of whatever changes, the market appears hotter than it did 1 or 2 years ago, people are having NO problems selling their homes, and the prices are quite high given the local purchasing power (though not as high as Toronto or especially Vancouver, I’ll give you that).

BTW, these same houses were also under 200k in the early 2000s. That gives me a CAGR of 7% on an asset that doesn’t produce anything, on an asset that historically has grown much closer to inflation. The difference between 7% and inflation over that period of time is HUGE.

#158 MortgageMark on 02.02.18 at 9:31 am

As long as there’s still decent equity and private lenders still exist, the sell time may be pushed further ahead. Most will take a private 2nd as a bandaid fix, thus delaying the inevitable. Another reason the market takes longer to correct. The scary part is, when it does become crunch time, then it’s REALLY an issue

#159 Chico on 02.02.18 at 9:50 am

#144 Screwed Canadian Millenial on 02.02.18 at 8:24 am

I have a statement to make but all you do is delete/remove my comments when I defend myself against your accusations and false charges.

I’ve been nothing but respectful towards you but all you do is hurl empty accusations that I’m racist or xenophobic or obscene and then when I try to respectfully defend myself, you just scrub my comments.

You don’t act in good faith.

Yeah it’s your blog but you ban me because I defend my positions well, stir up honest debate, hold my own, and challenge your views/ideology in an intellectual fashion. It’s easy to cast aside some loony millennial SJW screaming about gender fluids and micro-aggressions. But look how you behave when faced with a millennial who knows what he’s talking about and backs it up with facts/sources/data.

Anyways that’s it.

Thanks to all the supporters and people who voted yes. I was surprised I won that vote and I’m sure Garth was shocked and that was not the results he expected when he called for the vote.

Get over yourself, kid. You were banned for extreme poor taste and attempting to post a profane picture. You are not special. – Garth

——————————————————

OK, so you’ve got no life. Why announce that to the world via this blog? Take some time, figure out what you want to do with your life, make a plan, work the plan, have a life. The need to endlessly argue with people is a clear sign that you are detached from reality and you don’t want to admit your life sucks, and it’s your fault your life sucks. Stop sucking, think with your mouth closed, get a life.

#160 Tater on 02.02.18 at 9:52 am

#68 Linda on 02.01.18 at 8:03 pm
#18 Living Large – ‘no lender may force any borrower to buy life or disability insurance on a HELOC’. Maybe not. But any lender can refuse to accommodate any borrower who does not agree to the terms offered, just like in any other negotiation. Bank says ‘insurance, please’, borrower says ‘no way’ & bank then says ‘in that case, your request to move your mortgage to a HELOC is denied because (fill in reason here)’. No force, just negotiation & insofar as I am aware, the bank is within its rights to say no.
—————————————————————
I believe the prohibitions on tied selling make this a no-no.

#161 LivinLarge on 02.02.18 at 9:55 am

“Get over yourself, kid. You were banned for extreme poor taste and attempting to post a profane picture. You are not special. – Garth”… Do you need any more proof that a leopard can’t change their spot????

Anyone who feel this aggrieved yet keeps comming back for more is either masochistic or just a scat disturber. It seems to me either just let them post unfettered and we the readers can scroll past or stop them entirely. There just doesn’t seem to be a middle ground.

Do you really want to spend your time monitoring a child?

#162 LivinLarge on 02.02.18 at 10:01 am

“Neither a borrower nor a lender be; / For loan oft loses both itself and friend.” –Polonius, (my old friend).”…curious sentiment.

When I was a child in the ’60s I was taught, interest is something you earn not something you pay. Well, I learned better after reading Fearless Leader’s newspaper columns a few years back. Interest is definitely not something you really want to earn if you can help it.

#163 Darryl on 02.02.18 at 10:03 am

#144 Screwed Canadian Millenial on 02.02.18 at 8:24 am

Suck it up snowflake. Who said this blog was a safe space ?

BTW did anyone count the numbers ? It didn’t look like she won .

#164 LivinLarge on 02.02.18 at 10:08 am

Dough et al, “Apologies, I didn’t paint a clear enough picture.” cool, I did read it to mean you were referring to the individual consumer/individual deal rather than the broader context.

While I haven’t given CMHC any thought for decades, I will say that considering when and why it was created solved a problem at that time but right now it seems to be fueling another and maybe more devastating problem.

#165 LivinLarge on 02.02.18 at 10:14 am

Lost “So, if 400k mortgage is converted to 400k heloc and only interest payments are made, how does the 400k loan decrease? You keep on owing 400k until you start paying loan principal, right? or I am missing something? I am totally confused.” Yes, the principal won’t decline unless you pay directly to it.

#166 Vasa on 02.02.18 at 10:15 am

#131 Howard on 02.02.18 at 7:00 am Before I left Canada in 2014 I was renting an apartment at Yonge & St. Clair for $1325/month. That same apartment is now renting for $1675/month. A 26% hike in just a little over 3 years.

Howard, in that time most properties values have gone up by 50-60%. So rents, while raising, still haven’t kept pace with the values. So at $1675 that landlord is still subsidizing the the tenant and making meager 2% yield on current values. Renting in GTA has been a financially prudent option from 2013/14 and even more so now.

Only the genius (Extremely lucky is more like it) “RE-
Investors” (market timers) that bought before 2014 and sold before April 2017 escaped with a sizable enough reward for the extreme risks they have taken. Others are now saddled with huge mortgages and extreme negative cash-flow “Assets” that they cannot offload quickly enough.

#167 Mattl on 02.02.18 at 10:19 am

Unless you sell, you have made nothing. Gloat then. – Garth

Of course this is true. And the opposite is also true, RE losses can only happen at sale. You’ve been making a big deal about all the loses owners are taking in the downturn, how people that bought recently are already down, have lost their deposit/equity etc. Canadians have lost billions in equity, etc. Most folks, like 95 percent plus, will hold through a downturn. I know how bad you need to be right on RE but please try and be consistent on gains/losses.

Actually I have not written of losses sustained in real estate, but simply reinforced that people who buy at peak house take peak risk. Those who do not sell at peak house are peak fools. with no right to gloat. – Garth

#168 Leo Trollstoy on 02.02.18 at 10:46 am

Trump’s State of the Union addresses use too many “we”s as opposed to Obama’s “I”

Weird

https://www.lifezette.com/polizette/state-of-the-union-was-trumps-we-vs-obamas-i/

#169 Smoking Man on 02.02.18 at 10:49 am

Happy memo day yall.

SCM the only reason you got more y than n is because I endorsed you with an Y.

Do I still think your bat shit crazy. Hell yeah.

What I like about you. Your happy in the skin your in.
You love yourself. That’s a good thing. Just don’t tell other progressives. That feeling is crime against humanity in the millenials mind space.

#170 Victor V on 02.02.18 at 10:52 am

Ontario watchdog revokes licence of Fortress’ lead mortgage broker BDMC

http://business.financialpost.com/real-estate/mortgages/update-1-ontario-regulator-revokes-mortgage-broker-bdmc-license-after-probe

TORONTO — Ontario’s financial regulator said on Friday it has revoked the licence of mortgage brokerage Building Development and Mortgages Canada Inc (BDMC) and Vince Petrozza, a co-founder of a related firm, Fortress Real Developments, following an investigation into risky syndicated mortgage investments.

FSCO said BDMC, the lead broker for Fortress projects, and three mortgage brokers — FDS Broker Services Inc, FFM Capital Inc and FMP Mortgage Investments Inc — which marketed Fortress products as their primary or sole line of business – were fined a total of $1.1 billion.

In a special report published in November, Reuters revealed the Financial Services Commission of Ontario (FSCO) had been investigating brokers raising funds for projects associated with Fortress since 2011 but had failed to take action despite repeated warnings of the risky investments that broke provincial laws.

#171 Howard on 02.02.18 at 10:53 am

163 Darryl on 02.02.18 at 10:03 am

#144 Screwed Canadian Millenial on 02.02.18 at 8:24 am

Suck it up snowflake. Who said this blog was a safe space ?

——————————-

That doesn’t make any sense. SCM wasn’t arguing for others to be kicked out, so how is he a snowflake seeking a safe space?

Critical thinking is hard.

#172 What are people thinking? on 02.02.18 at 10:53 am

So going by the numbers in this post, 40 percent of the three million families who have HELOCs are not paying off the principle. That is 1,200,000 families; assuming an average size of say four people per family, this means a total of 4,800,000 people. Let’s call it five million. A lot of children are going to suffer if the course events continues to unfold as the Oracle of Belfountain has predicted (and yes, he probably is right).

This is about 14 percent of the population. It would be interesting to see if this cohort of the damned is also that same group that have debt to income ratios in the 450 percent range. Maybe not all of them fall into the two groups but I have a hunch it is a fairly high percentage.

Not good is the title of the post. Taking a page out of George Orwell’s book 1984, perhaps it should have been titled Double Plus Not Good.

As an aside, the banks at one time offered their employees the use of HELOC into which said employee could transfer their mortgage. Perhaps this gave the banks enough insight into how people used this facility to gain practical experience as a guide for offering it to their clients.

#173 Another Deckchair on 02.02.18 at 11:01 am

@144 SCM:

Feel like a broken record.

ONCE AGAIN, START YOUR OWN BLOG.

You’ve got a LOT to say, then say it. But, not on Garths’ dime – he’s responsible for what gets posted here, not you, nor I, so quit complaining.

If you can’t figure out how to start your own blog, then ask someone.

#174 HowDeepThePain? on 02.02.18 at 11:05 am

#35 Willy H on 02.01.18 at 6:30 pm
Innisfil, Ontario wedged between the grid-locked 400 Highway and Lake Simcoe south of Barrie (the armpit of Ontario) has seen a rather steep price correction on new detached builds.
Houses listing for $850-$950K March 2016 are now listed for $650-$750K
“The Villages of Killarney Beach” built by Ballymore Homes have dropped prices by $150K+ year over year on many elevations for the most recent phase released.
Apparently “small town charm” and a 1 hour commute into the GTA is officially on sale!
This does appear to a serious housing correction, no soft-landing here, this is the real deal folks.
Looks like we are headed for a 30-40% price drop unless Phil Soper is appointed Ontario’s Minister of Finance under Premier Ford!

I would like to hear more about this, I did a search but nothing in the media yet…

I see a lot of new listings in the Vaughan, King, Caledon region, seems like the switch flipped on February 1st

#175 Capt. Serious on 02.02.18 at 11:08 am

Converting people to HELOCs from mortgages seems like a dream to banks. People paying interest forever without ever paying off the principal is ideal for a bank. They don’t want the principal back, they want the interest. Of course, assuming the borrower can make the interest payments.

#176 For those about to flop... on 02.02.18 at 11:09 am

There’s no swearing in healthcare…

M43BC

“Every State Medicaid Spending, in One Map.

Now that tax reform has passed and Americans are about to see higher paychecks, Republicans in Congress are starting to talk about making changes to social welfare programs, specifically Medicare and Medicaid. There’s a lot of confusion and misinformation about these programs, depending on which side of the political aisle you sit. We decided to simplify things and crunched the numbers to create this map of Medicaid expenditures by state.

We got the data directly from the Medicaid and CHIP Payment Access Commission (MACPAC). We adjusted the size of each state according to the relative size of its Medicaid expenses, color-coding each one (dark red for over $50B, dark blue for under $1B). Our map quickly demonstrates where the highest- and lowest-spending states are across the country.
Let’s back up for one second. Medicare and Medicaid are two programs that sound similar, but they work differently. Medicare works like Social Security—it covers anyone over 65 regardless of income. Medicaid, on the other hand, specifically provides health coverage to vulnerable people, like the poor. The federal government pays about half the cost of Medicaid depending on the state. Obamacare encouraged states to expand Medicaid by footing most of the bill. But 19 states didn’t go along, meaning state governments fund Medicare at different levels, which creates wide disparities in the program around the country.

How wide? Several red states immediately jump off the map. There are two main groups: a band stretching along the South from California to Texas and Florida, and a second cluster in the Northeast extending as far West as Illinois. Population size explains most of these numbers, but not all of them. For example, the five largest states by population are California, Texas, Florida, New York and Pennsylvania. These are the top-five Medicaid-spending states too, but in a slightly different order (see the list below). But the 8th biggest in the country, Georgia ($10.28), falls to the 17th place in terms of Medicaid expenditures. We suspect state politics probably play a role in keeping things relatively inexpensive.

The map also has two groups of low expenditure states. The first, concentrated primarily in the Deep South, has many states spending between $5B and $10B on an annual basis. The exceptions are places with several large cities, like Texas ($41.07B) and Florida ($22.46B). Another obvious trend is a massive gap running across the middle of the country, from North Dakota ($1.3B) down to New Mexico ($5.54B). These states appear small on our map because they spend so little money on Medicaid, typically not more than a few billion dollars.

It’s worth pausing for just a second to consider how vastly different Medicaid expenditures are between California ($88.69B) and Wyoming ($637M). No, that isn’t a typo. California spends more on Medicaid than the bottom 25 states in the Union combined. That single budget item is bigger than the entire GDP of Bolivia ($83.5B).

Top 10 States with the Highest Medicaid Expenditures ($ mln)
1. California, $88,694

2. New York, $62,910

3. Texas, $41,068

4. Pennsylvania, $28,220

5. Florida, $22,459

6. Ohio, $22,388

7. Illinois, $20,171

8. Massachusetts, $17,865

9. Michigan, $17,439

10. New Jersey, $15,080

Top 10 States with the Lowest Medicaid Expenditures ($ mln)
1. Wyoming, $637

2. South Dakota, $875

3. North Dakota, $1,303

4. Montana, $1,446

5. Vermont, $1,768

6. Idaho, $1,795

7. Alaska, $1,929

8. Delaware, $2,003

9. New Hampshire, $2,077

10. Nebraska, $2,093

The most important takeaway from all this information is that Medicaid has 50 different implementations, depending on the state. It might be a massive part of the budget, or it could be a minor allocation worth only several hundred million dollars.”

#177 Duke on 02.02.18 at 11:10 am

#167 Mattl on 02.02.18 at 10:19 am
Unless you sell, you have made nothing. Gloat then. – Garth

Of course this is true. And the opposite is also true, RE losses can only happen at sale. You’ve been making a big deal about all the loses owners are taking in the downturn, how people that bought recently are already down, have lost their deposit/equity etc. Canadians have lost billions in equity, etc. Most folks, like 95 percent plus, will hold through a downturn. I know how bad you need to be right on RE but please try and be consistent on gains/losses.

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

That may not be true. If the equity of your house goes underwater or even when it goes below 20%, the lender has right to request collateral to make it above water. Banks are very cautious about risk management of their assets.

#178 Play Dough on 02.02.18 at 11:18 am

#164 LivinLarge on 02.02.18 at 10:08 am
Dough et al, “Apologies, I didn’t paint a clear enough picture.” cool, I did read it to mean you were referring to the individual consumer/individual deal rather than the broader context.
While I haven’t given CMHC any thought for decades, I will say that considering when and why it was created solved a problem at that time but right now it seems to be fueling another and maybe more devastating problem.
**********

I haven’t thought about them either, maybe that’s how they slipped this in:
[In 1986, CMHC introduced Mortgaged Backed Securities as an alternative to investing in individual residential mortgages. MBS helped to ensure a ready supply of low-cost funds for housing finance and to keep mortgage lending costs as low as possible for homeowners.]*

I have (almost) no issues with them insuring mortgages so people of limited means don’t have to go to the loan sharks, or even subsidizing low-cost housing. I just don’t get how they can float bonds at 4% for mortgages at 3%, and pay income tax and a dividend to the Fed.
Sure, their exposure is only the balance of the mortgage less the auction price, but all of their book is less than 20% down. BTC can drop that much in the time it takes to read this. Houses are next.
Anybody here with any insights, other than Ustabe ?

*https://www.cmhc-schl.gc.ca/en/corp/about/hi/index.cfm

#179 Play Dough II on 02.02.18 at 11:26 am

Should have said:
“..all of their book AT RISK at risk is less than 20% down”

#180 fancy_pants on 02.02.18 at 11:35 am

don’t worry, the metro sexual messiah will bail them… with your dollars without you even realizing. because we are all equal

#181 fancy_pants on 02.02.18 at 11:40 am

Garth, if this isn’t a wordpress site I don’t know what is. you should enable like buttons on comments and nest them so you can reply to comments. also, if you ice cream parlour isn’t paying the bills this winter, sign up for adsense or something. you’re leaving $ on the table

Actually I keep hoping this site will fail so I can goof off. No such luck.- Garth

#182 NoName on 02.02.18 at 11:43 am

#176 For those about to flop… on 02.02.18 at 11:09 am
There’s no swearing in healthcare…

M43BC

—-
yeah, but…

This suggests they had an emotional response to swearing and an activation of the fight or flight response: a natural defence mechanism that not only releases adrenalin and quickens the pulse, but also includes a natural pain relief known as stress-induced analgesia.

https://www.sciencealert.com/swearing-is-a-sign-of-more-intelligence-not-less-say-scientists

#183 SunShowers on 02.02.18 at 11:44 am

#121 Pete from St. Cesaire on 02.02.18 at 2:06 am

Nothing to worry about? Steady as she goes? 3 million families with overextended HELOC’s. That’s like one-third of the population that will be torn-up. The real (main-street) economy is toast. Perhaps the fictional Bay/Wall St. economy can continue for a while longer.

—————————————————————

Yep. How much of the Canadian economy revolves around combined real-estate transactions and consumer spending again? You can’t clobber those two sectors and expect the financial underpinnings of everything else to not wobble.

And while the most severe real-estate woes will indeed be localized to the areas that saw the greatest gains as Garth says, I’m sure even he knows that people won’t react accordingly.

Just as the anti-foreigner tax neutered the Vancouver market not because of any actual effect but because of PERCEIVED effect, people’s perceptions and biases (and the media constantly reporting on the “Canadian housing crash” and “Canada’s housing bubble finally popping” won’t help either) will depress prices from Brampton to Brandon.

#184 Guy in Calgary on 02.02.18 at 11:59 am

“Equities getting their ques from the bond market”

Good job numbers made yields spike now the Dow is below 26k. Should be interesting to see what happens Monday if this continues.

Buy the dip!?

#185 Guy in Calgary on 02.02.18 at 12:03 pm

#68 Linda on 02.01.18 at 8:03 pm
#18 Living Large – ‘no lender may force any borrower to buy life or disability insurance on a HELOC’. Maybe not. But any lender can refuse to accommodate any borrower who does not agree to the terms offered, just like in any other negotiation. Bank says ‘insurance, please’, borrower says ‘no way’ & bank then says ‘in that case, your request to move your mortgage to a HELOC is denied because (fill in reason here)’. No force, just negotiation & insofar as I am aware, the bank is within its rights to say no.”

Incorrect. That is tied selling and is not allowed. The home owner bust maintain adequate insurance on the home however creditor insurance is never a condition to a mortgage.

#186 Howard on 02.02.18 at 12:04 pm

Actually I keep hoping this site will fail so I can goof off. No such luck.- Garth

——————————-

You could be in the middle of a hernia operation. We’d still expect our daily fix.

#187 Thought Cleansing on 02.02.18 at 12:06 pm

#169 Smoking Man on 02.02.18 at 10:49 am
Happy memo day yall.
SCM the only reason you got more y than n is because I endorsed you with an Y.
Do I still think your bat shit crazy. Hell yeah.
What I like about you. Your happy in the skin your in.
You love yourself. That’s a good thing. Just don’t tell other progressives. That feeling is crime against humanity in the millenials mind space
******

Don’t they have brain enemas available in SoCal now?

#188 Giver - AB on 02.02.18 at 12:17 pm

I’m not a big fan of the carbon tax and I do appreciate the odd rant based on ideology and void of fact. But if there is to be a discussion, shouldn’t it be based on facts?

$42 in carbon taxes means 28GJ (@$1.50/GJ) of natural gas used to heat your home. That’s more than 25% of all the natural gas I used to heat my home in 2017. My house is 2500 sqft, built in the 60’s and I believe it was insulated primarily with old newspapers and hopes and dreams. I don’t dispute your number but it is likely to be a high water mark for the whole year and shouldn’t be used as an example of ‘monthly cost’.

Carbon taxes aren’t applied to electricity. The electricity generators already paid an industrial carbon levy before the carbon tax was implemented. New costs are offset by government subsidies, so no increase in electricity was expected. The carbon tax isn’t applied to electricity at the consumer level. This is backed up by my own data – I paid an average of $0.049/kWh in 2016 and $0.0405/kWh in 2017.

http://www.cbc.ca/news/canada/calgary/alberta-carbon-tax-electricity-bill-impact-1.3901367

You know what they say about assuming? The carbon tax on gas in AB is 0.0675/L. $42 in carbon tax would mean using 622L of gas in January. My family doesn’t drive much but that’s 1/3 of what my family of 3 used all last year. At $1.00/L (this is AB afterall – we bitch hard at >$1.00/L) that’s ~$600/mo on gas. Seems like maybe it isn’t the carbon tax blowing a hole in your budget here.

If you really believe that’s true, then it seems like you face a world of opportunity to save yourself money by making your home more energy efficient.

As I stated here a while back I tracked my families carbon tax costs and we paid $100.94 in carbon taxes to heat the house and keep our water hot for all of 2017 (again 1960’s house with crappy insulation). On gasoline we paid $69 in carbon taxes on ~1600L of gas for all of 2017. With the carbon tax increasing by 50% this year we’re looking at around $260 for the whole year.

While your natural gas and gasoline use my vary from my own, it looks like your estimate of the monthly cost of the carbon tax is off by about a factor of 12.

#189 Art Vandelay on 02.02.18 at 12:48 pm

Don’t people understand how there’s no easy money? No such thing as a free lunch, isn’t that how the saying goes? I can’t get my head around these Canadians that are spending with their HELOC money and acting like it’s a gift they don’t have to pay back. It’s debt no matter how you slice it. Where’s the exit strategy? As of right now I think it’s shrugging your shoulders. Maybe things have changed since I was in high school but I can remember no courses on personal finance were offered when I was in highschool. This is the starting point of poor spending habits. Despite not having personal finance offered in school I was fortunate enough to have parents teach me how to be responsible..at least financially

#190 Maggie the Tech Writer on 02.02.18 at 12:52 pm

#74 Reality is Stark

As a value investor and renter, I never let social pressure influence my actions. I was even somewhat successful at limited my partner’s spendthrift tendencies. But thank you for your advice, which is sound.

What moved me to post was your statement that “emotion is for her, not you…” That alarmed me.

If he’s a robot man who doesn’t feel anything, I won’t feel anything, and that would be a waste. As Dorothy Parker observed, “There’s nothing more fun than a man”…potentially.

If men made more of an effort to be delightful companions, their wives might not care at all about becoming home owners. I recommend this to blog dogs in a relationship as a strategy that might reduce the male suicide rate.

#191 conan on 02.02.18 at 12:54 pm

Sill looking for that promised #metoo bombshell from “Powerful Government.”

My take:

W.K. was earning his pay check with sUn MeDiA. He created a “pretty solid” deflection from the M.O.A.B. that just took out the Ontario PC’s.

My other take:

It is all true, prepare to be blown away!

https://www.youtube.com/watch?v=Zri1IsOwdfg

#192 InvestorsFriend on 02.02.18 at 12:56 pm

Unsolicited Advice on blogging

#181 fancy_pants on 02.02.18 at 11:40 am advised:

Garth, if this isn’t a wordpress site I don’t know what is. you should enable like buttons on comments and nest them so you can reply to comments.

***************************************
For some ten years now, since its inception, Garth’s blog format has been highly addictive and highly successful. Why mess with success? Are there any other blogs with this kind of following?

Others should be trying to copy the format and approach as it could be used for other topics. People are strange though, they often don’t like to copy or at least to be seen to copy.

#193 LivinLarge on 02.02.18 at 1:00 pm

Guy in Calgary : “Incorrect. That is tied selling and is not allowed. The home owner bust maintain adequate insurance on the home however creditor insurance is never a condition to a mortgage.”…are you agreeing with me? My quote and comment to linda was precisely what you just said. Requiring a borrower to engage another product in order to obtain the first product is the principle behind the prohibition against tied selling.

#194 Joblo on 02.02.18 at 1:09 pm

Hey Albertans, you goona take this lying down?
Come on, boycott all that is B.C.
Start buy sellin all your overpriced Okanoggan RE,
No more wine, no wine tours, no sunripe, Savenothing foods, anything pattysun, crappy frut, salmonilla farmed or wild…. you get the point.

#195 LivinLarge on 02.02.18 at 1:11 pm

“Converting people to HELOCs from mortgages seems like a dream to banks. People paying interest forever without ever paying off the principal is ideal for a bank. ” …precisely!!! Banks are money spinners and interest on the full principal every month, month in and month out is pretty much a license to print money and at some point in time the original principal does get paid so they’re cookin’ with gas no matter what happens. Even if the RE world comes to an screeching halt they haven’t lent more than 65% ish and if they have to they sell the property POS at a bit under the market price and try to chase the borrower for any weird shortfall.

There’s a wonderful quote from FDR : “The banks are XXXX. They’ll only lend you money when you can prove you don’t need it”.

#196 InvestorsFriend on 02.02.18 at 1:13 pm

Warren Buffett – Housing Hero

I will admit to being a huge fan of Buffett’s. That’s becasue he has earned my greatest respect many times over.

Consider the following tidbits from last year’s annual letter where he talks about his Clayton Homes subsidiary.

Clayton manufactures and sells modular homes. Customers separately buy or rent the land and prepare a foundation for the modular home to sit on. Clayton earns most of its money from financing the homes it sells as well as financing manufactured homes built and sold by others.

Clayton has come under some criticism regarding foreclosures and lending practices. But Buffett has previously rebutted that criticism and basically shredded his opponents with actual facts.

Anyhow, consider:

Berkshire subsidiary Clayton Homes is the largest new home builder in the U.S. delivering 42,075 units in 2016, 5% of all new homes built in the U.S.

Clayton alone accounts for 35% of all new homes costing under $150,000.

Buffett bought Clayton in 2003 when it employed 6,731 people and was third in its industry. Now it by far leads its industry and employs 14,677.

Clayton has about 332,000 homeowners making mortgage payments to it. The average payment is $587. And that includes property insurance and property tax. Let that sink in! That’s mortgage, insurance and property taxes for what looks more like a car payment!

The point is, Clayton is a highly efficient company and is able to make strong profits while offering low low prices that benefit buyers.

To me, that makes Buffett a housing hero. I doubt that there is any government policy do-gooder who has done anything close to this in achieving affordable houses.

#197 chopstix on 02.02.18 at 1:19 pm

RE:
”Love This Blog on 02.01.18 at 6:07 pm
The crash can’t come soon enough for me.

Salivating at watching everyone I know crash and burn, while living the high life and saving nothing

I hope this doesn’t make me a bad personality?

Lol ”
————————————————
why wish such on anyone? and it’s a massive generalization, to boot. i rent and envy those who got in on time…but i know we’re all fked if a massive meltdown was to occur with job losses etc….

#198 jess on 02.02.18 at 1:54 pm

#52 Randy on 02.01.18 at 7:17 pm

Where do we go when all the bubbles start exploding
===
go to: satire- if dislike popcorn and have an allergy to tin
Jesus Coin ICO – sorry couldn’t resist lol

#199 Newcomer on 02.02.18 at 1:58 pm

#142 IHCTD9 on 02.02.18 at 7:54 am

There are few reasons I can dream up to explain why one would willfully drive themselves into a financial peat bog.

I hate to say it, but what seems most likely to me is lots of folks who want to live (or project) a lifestyle that they can’t afford.
————-
That will sometimes be the case, I’m sure. But people can take on debt for lots of reasons. I took on debt so I could keep paying my employee’s salaries by giving up my own because I believed the company was going to grow. People take on debt when illness stops them from working, or stops a family member from working. People take on debt because they didn’t have a rainy day fund when a rainy day arrived. It’s not the best option (I can’t imagine that I will ever use debt again) but it’s not always about showing off.

#200 Damifino on 02.02.18 at 1:59 pm

#181 fancy_pants

Garth, if this isn’t a wordpress site I don’t know what is. you should enable like buttons on comments and nest them so you can reply to comments
——————————-

Extremely bad idea, especially for a blog that’s refreshed daily in a significant way. ‘Like’ buttons and nested comments are what useless ‘blogs’ like VCI use to mask the fact they aren’t blogs at all. That place is a dog’s breakfast, and they don’t even feature canines.

It’s not Garth’s job to make it convenient for blowhards to argue with each other. In fact, he does us a service by making that harder to do. It helps us to think more and comment less.

#201 jess on 02.02.18 at 2:04 pm

196 InvestorsFriend on 02.02.18 at 1:13 pm
efficient?

Key findings:

Clayton Homes, owned by Warren Buffett’s Berkshire Hathaway, makes more mobile home loans than any competitor by a factor of six.
Warren Buffett’s Clayton Homes operates under at least 18 names, leading many buyers to think they’re shopping around.
Warren Buffett’s Clayton Homes lends at interest rates that can top 15 percent, and often adds thousands in fees to borrowers’ loans.
Clayton customers report deceptive and predatory deals including loan terms that changed abruptly, surprise fees and pressure to take on excessive payments.
Former dealers said Clayton Homes encouraged them to steer buyers to finance with Clayton’s own high-interest lenders.

Warren Buffett’s mobile home empire preys on the poor
Billionaire profits at every step, from building to selling to high cost lending
By Daniel WagnerMike Baker 12:30 am, April 3, 2015 Updated: 8:57 pm, April 6, 2015

https://www.publicintegrity.org/2015/04/03/17024/warren-buffetts-mobile-home-empire-preys-poor

#202 soost on 02.02.18 at 2:07 pm

I know that these are demand loans – but its not in the best interest of banks to recall them and hasten a crisis.

What’s more I think the rise of the Provincially Regulated Credit Union is around the corner – giving a few more chest compressions to the unqualified borrower.

That’s not to say that I don’t think this crisis is coming – it most definitely is…. It’s just that its got the e-brake on. Forever being mitigated. Delaying the inevitable.

Its tough for my millenial ass to keep sitting on the sidelines here in the GTA. You know…. life milestones and such.

#203 Convexity event risk on on 02.02.18 at 2:14 pm

Fed speak for ” oops, we did it again”

Powell starts on Monday!

#204 Lost...but not leased on 02.02.18 at 2:18 pm

I agree with chopstix…”why wish such on anyone”?

A lot of smugness on this site. Many of us read and appreciate Garth’s advice…..we know RE market will correct…WHEN…not if.

There will be a lot of carnage, perhaps of biblical proportions…but no man is an island…we who may have avoided the pitfalls will still be immersed in it.

What’s the advantage if you are safe when majority are SOL?..the usual solution was “ALL WARS ARE BANKERS WARS”

Lots of Twilight Zone episodes and their plots apply as cautionary tales…Recall the one with Burgess Meredith as a bookworm, ….his world was immersed in books. Then a nuclear attack which he survives. He is overjoyed that he was now alone to indulge in his books…then drops his only set of glasses and they break…

#205 Screwed Canadian Millenial on 02.02.18 at 2:27 pm

Get over yourself, kid. You were banned for extreme poor taste and attempting to post a profane picture. You are not special. – Garth

—————–

Lol you cut off the top of my previous post. That’s a new one. I haven’t seen that before. I didn’t know you had that kind of editing capability. Don’t worry Garth I won’t bring that up again. It’s between you and me.

As far as what you said… what do you do when Smokey posts a profane comment? You DELETE it. I see it, we all see it happen everyday. You don’t claim that he’s trying to bring down your blog and BANNED him. I, one time, post a funny pic in poor taste and you ban me for it. Not to mention, as you know, I immediately apologized for it.

Far from bringing down your blog, I frequently recommend it to friends and on social media like Reddit so I don’t know why you would even say such a thing.

Anyways, looks like my 2 posts are up. Please let me know if it’s 2 posts per day or 2 posts per thread. Do I have a built up bank considering I didn’t post all week? I’m happy to follow the rules, I just want to make sure I’m clear on my comrade quota for my new Stalinist free speech restrictions.

——–

Dow down 500 points and counting. Was the nothing burger memo really worth it? Looks like the Trump economy is finally kicking in now and the last vestiges of the booming Obama economy are gone. Looks like a Stormy ride.

#206 Lost...but not leased on 02.02.18 at 2:35 pm

Re Warren Buffet…

People like him make their own economic weather…

They also fund the “controlled opposition”..George Soros is notorious for this.

Keystone Pipeline….?
Buffet owns BNSF railway…which charged $30/barrel to transport oil..whereas Keystone would have charged $10/barrel.Thus it makes ” business ” sense to fund pipeline protestors.

Vancouver Mayor Gregor Robertson has a fascinating background.. a polished act groomed by the wealthy elite..GOOGLE ” TIDES FOUNDATION ” and ” HOLLYHOCKS “

#207 InvestorsFriend on 02.02.18 at 2:45 pm

No Good Deed Gets Universal Praise

#201 jess on 02.02.18 at 2:04 pm said:

“Warren Buffett’s mobile home empire preys on the poor”

*******************************
You are dead wrong and Buffett is a paragon of virtue. But you can’t please everyone. That does not mean Berkshire is above criticism. In its huge operations there are a few things to legitimately critize I am sure. Clayton Homes is a first rate operator that has benefited hundreds of thousands of homeowners.

You see a LOT of bad in the world. Balance your reading diet by reading Buffett’s annual letters and you will feel better that there are some very good people in this world.

#208 Lost...but not leased on 02.02.18 at 3:00 pm

Carbon Tax…

Simply an offering imposed by the” Church of Climatology”…Rev. Al Gore…..runner up the George Bush.

Unfortunately , unlike other religions where donations are optional and discretionary, politicians have swallowed the Kool – Aid because it is the zeitgeist du jour..logic means nothing. Only Junk Science supports Carbon Tax.

Seems politicians have to hang their hat and mandates on demonizing some man made “costs of existence” and impact on Mother Earth.

The world’s population could be adequately housed in a region the size of Ontario., for impact perspective.

If truth be known…THE largest contributor of GHG aka Carbon Dioxide is the worlds oceans.

Carbon Dioxide is PLANT FOOD..which creates OXYGEN…vital for the rest of us.

Bring it on Reverend Al Gore…

#209 jess on 02.02.18 at 3:00 pm

rent- a- bank payday and its cousin installment loans
https://www.marketwatch.com/story/think-finance-bankruptcy-exposes-messy-business-2017-10-24

https://www.publicintegrity.org/2017/12/22/21441/congress-expanding-credit-poor-or-enabling-high-interest-lenders

#210 InvestorsFriend on 02.02.18 at 3:09 pm

Buffett’s Clayton Homes DOES indeed charge higher mortgage interest rates than is typical.

That’s because the borrowers are low income with as Buffett calls it “mediocre” credit scores. AND, importantly it is because manufactured homes do not qualify for government backed mortgage insurance a restriction Buffett has railed against.

Anyhow, it’s amazing that a company can sell homes for under $100k in many cases and have these mortgage, property insurance and property tax payments totaling $587 per month. If that does not deserve praise, I don’t know what does.

Instead of criticism, I’d like to see someone figure out how to replicate it in Canada. The door should be wide open for Clayton to come to Canada if it would like.

#211 InvestorsFriend on 02.02.18 at 3:19 pm

Buffett and Keystone

Lost but not leased just above said:

Keystone Pipeline….?

Buffet owns BNSF railway…which charged $30/barrel to transport oil..whereas Keystone would have charged $10/barrel.Thus it makes ” business ” sense to fund pipeline protestors.

*************************************
Presumably oil shippers were glad to pay the freight on BNSF since the cheaper Keystone alternative did not exist. BNSF is not a charity of course.

Berkshire’s Marmon Inc. makes rail oil tank cars. Next time you see a tank car train watch for the procor name. That’s Buffett helping bring oil to market.

Buffett mostly kept out of the Keystone debate because he said he had a conflict of interest.

If you think Buffett / Berkshire funded protesters you are dead wrong.

#212 Linda on 02.02.18 at 3:30 pm

#176 ‘Flop’ – the Medicare stats are interesting, but I think the variation in spending between the highest spending states & the lowest spending states can be directly tied to population as well as climate. North & South Dakota, Wyoming, Alaska etc. have much lower populations than California, New York, Texas & Florida. Plus the high Medicaid spending states appear to fall in the warmer climate zones of the country overall.

#213 Lillooet, BC on 02.02.18 at 3:54 pm

interest read from HuffPost: http://www.huffingtonpost.ca/2018/02/02/vancouver-single-family-homes-are-now-in-a-buyers-market_a_23351506/

#214 millmech on 02.02.18 at 4:01 pm

#205 SCM
Another buying opportunity presents itself again, hoping for another 2000 point drop, the bigger the better.
You do know that the GFCs of 2000&2008 were the best buying opportunities of a generation, bring on another one( I would love for the markets to go on sale 5o% off and more) we are overdue!

#215 Guy in Calgary on 02.02.18 at 4:06 pm

#193 LivinLarge on 02.02.18 at 1:00 pm

I was referring to this part:

But any lender can refuse to accommodate any borrower who does not agree to the terms offered, just like in any other negotiation. Bank says ‘insurance, please’, borrower says ‘no way’ & bank then says ‘in that case, your request to move your mortgage to a HELOC is denied because (fill in reason here)’.

I should stop posting, do not want to get cut off!

#216 Wont you be my friend? on 02.02.18 at 4:06 pm

#120 Smoking Man on 02.02.18 at 2:02 am
Zero friends, what amazing island to say what’s on your mind.
Jack inspired
____________________________________________
Not quite sure who the hell would want to be your friend but here goes.
https://www.youtube.com/watch?v=LWxDQIhDmdE

#217 Blacksheep on 02.02.18 at 4:09 pm

Blacksheep # 84,

“This means my RE investment while sheltering me and my family, only returned $450K (25K home renos) over four years. Consider this a public service notice to the relevant Dogs to think for them selves and set aside the groupthink I see repeated here on a nightly basis.”
“Life’s short, best get on with livin it.”
————————————————-
“Unless you sell, you have made nothing. Gloat then. – Garth”

Same rational applies to your balanced portfolio.

Sure, you get dividends and state 8% returns on your $’s invested, but my rent /mortgage is coverd, meaning free accommodation, totals about the same $ value.
I get to do whatever I want to my living accommodations and have no risk of eviction.
————————————————–
Mattl # 167,

“Those who do not sell at peak house are peak fools. with no right to gloat. – Garth”

The Dow index is off almost 1000 point in just a few days from its recent peak. Are you dumping all Dow related investments, based on a so far, modest correction?

Of course not.

How many times have we heard that selling when values drop, IS the failure of the novice emotional investor? Like you have advised about RE, buy at price you can comfortably afford. I believe you can forget about the small market corrections as inflation will deal with that over the years owned.

Anyways, I thought we hit peak RE values 4 years ago?
That’s when I chose to go against almost all opinions on this blog, buying RE. Fortunately, my investments have worked out very nicely….

Only if you sell and crystallize the gain, Until then, it’s just man talk. – Garth

#218 Long-Time Lurker on 02.02.18 at 4:09 pm

Here BillyBob. I thought you might like this. A pilot’s photographs:

Pilot’s spectacular photos taken from an airplane cockpit
Francesca Street, CNN Updated 31st January 2018

(CNN) — Purple lightning, psychedelic sunsets, glowing clouds and swirling Northern Lights — when it comes to crazily beautiful natural phenomena, airplane pilots have a front row seat. For the rest of us wanting a glimpse of what life is like in the cockpit 30,000 feet above the planet, there are the incredible photos taken by Dutch pilot Christiaan van Heijst.

http://www.cnn.com/travel/article/pilot-cockpit-photos-christiaan-van-heijst/

https://www.instagram.com/jpcvanheijst/?hl=en

#219 For those about to flop... on 02.02.18 at 4:11 pm

#212 Linda on 02.02.18 at 3:30 pm
#176 ‘Flop’ – the Medicare stats are interesting, but I think the variation in spending between the highest spending states & the lowest spending states can be directly tied to population as well as climate. North & South Dakota, Wyoming, Alaska etc. have much lower populations than California, New York, Texas & Florida. Plus the high Medicaid spending states appear to fall in the warmer climate zones of the country overall.

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

Hey Linda,yes been reading articles from howmuch for a while now and it’s very rare that either California,NewYork or Texas aren’t up the top of the tree.

The main exception I can think of is a couple of articles on cost of living and I think one on new tech start ups which had some surprising locales…

M43BC

#220 bonds and stocks on 02.02.18 at 4:20 pm

not acting inversely….that’s not good

#221 ben on 02.02.18 at 4:25 pm

I will be *fuming* if they bail the banks out explicitly or implicitly.

If I can’t make my payments these banks will not only want their money, they will exploit the situation to their advantage.

When TD et al hit the wall I want to be able to buy the CEOs car at a knock down price as his wife weeps next to him.

They have it coming.

#222 saskatoon on 02.02.18 at 4:26 pm

wow!

just caught up on scm drama.

what a seriously dangerous and psychologically messed up dude.

just…wow!

#223 I’m stupid on 02.02.18 at 4:27 pm

Let’s recap the day;

Bitcoin blows up
Marijuana stocks blow up
Markets finally begin to blow off some steam

One is a healthy pullback. Can you guess which one that is?

#224 Midnights on 02.02.18 at 4:31 pm

For anyone interested…
https://www.armstrongeconomics.com/international-news/canada/2018-canadian-outlook-report-150/

And its worth the read.

#225 Midnights on 02.02.18 at 4:32 pm

Ps…Where are the Trump haters now…lol?
Memo released!

#226 SimplyPut7 on 02.02.18 at 4:32 pm

Ontario revokes BDMC broker licence over risky syndicated mortgage investments

An investor outcry about the products has focused public and government attention on FSCO’s lax regulation of the market. In the past decade, more than 20,000 retail investors have put as much as $1.5 billion into syndicated mortgages, mostly in Ontario, according to regulatory sources.

Roughly 90 per cent of those investments, the sources said, have ended in a loss or are at risk of doing so, and Fortress projects make up more than half of the investments.

https://www.bnn.ca/ontario-revokes-bdmc-broker-licence-over-risky-syndicated-mortgage-investments-1.986537

———————————-
Is this going to be the new ABCP crisis?

#227 SimplyPut7 on 02.02.18 at 4:38 pm

#215 Guy in Calgary on 02.02.18 at 4:06 pm

Keep posting, this is interesting.

#228 Ray on 02.02.18 at 4:41 pm

#155 Bytor the Snow Dog on 02.02.18 at 9:19 am
Ray at 125 sez:
“We do not smoke, drink, gamble…..”
Sounds pretty boring Ray. Only missionary at happy time too?

—————————————————-
Yha ,Well , when the trapeze broke,………..
BTW, I do not consider Buying Calls as gambling ..8/10 go green.

#229 Blacksheep on 02.02.18 at 4:51 pm

Blacksheep # 217,

“Only if you sell and crystallize the gain, Until then, it’s just man talk. – Garth”
————————————————-
Ditto.

I acknowledged you get 8%, on your $’s invested.

I get a proportional $ value, in home accommodations.

Neither of us gets our principle investment back until WE, liquidate said investments.

Please challenge my rational, not just keep repeating the same line. Thanks for the reasonable discussion.

My portfolio pays me dividends, interest and regular cap gains. Your house costs you financing, property tax, maintenance and insurance. You pay to live there. My investments pay me. – Garth

#230 ALFRED E. NEUMAN on 02.02.18 at 5:33 pm

Garth, I’m worried.

I really think you should consider either ending SCM’s participation on your blog, or just let him loose to be who he is.

For, all the rapid wit, rhetorical retorts, and rancour over his pending status are not helping him, or us, or you, to enjoy the day.

I sense SCM to be the kind of person who at first blush, gives you the impression he could become a friend. We’ve all met one.

And then when “smart”, becomes “smarmy”, becomes “snarky”, you learn how mistaken you were.

“Navelotomy” is a proven medical condition, the result of overthinking things over one’s own navel, to the point where it begins to wink and stare back at you.

SCM, check your navel. See your doctor.

#231 jess on 02.02.18 at 5:39 pm

investors friend
yes, i do try to read for balance which requires reading the WHOLE and try not to cherry pick for e.g.
============================
Talking about how the FBI got the information is a distraction from what agents found, Jens David Ohlin, a dean at Cornell Law University, told The Fix earlier this week: “Consider an analogy. Say there’s a murder in a small town, and the police aren’t making any progress. In frustration, the family of the victim hires a private investigator who turns up evidence and gives it to the police. What should the police do? Answer: They should act on it if there’s something there.”
==========

#232 45north on 02.02.18 at 5:54 pm

Karma: Ripple is sub 75 cents now, dropping about 75% from its peak. Ethereum is sub $1000 for the first time in a while. It’s actually sub $900 now.

I posted this two days ago:

Every Bitcoin Investor:

https://www.youtube.com/watch?v=lQegMA_kY9Y

“I’m down $80,000, I’m in deep man”

#233 45north on 02.02.18 at 5:56 pm

LivinLarge: So, there is no benchmark for them swooping but if the local market actually does tank by 30% or more then there’s going to be some dicey meetings at the banks. But, if the market really tanks 30% then start looking for some calls if the borrowers aren’t at least making minimum payments.

talking about insurance on HELOC defaults:
The banks are prohibited from doing this and frankly they just don’t do it.

a peck of knowledge is worth more than a bushel of speculation

https://www.merriam-webster.com/table/collegiate/weight.htm

#234 45north on 02.02.18 at 5:57 pm

Smoking Man: With GDP surging in the USA you bet rates will rise and fast. Canada will follow. Get out of real estate now!
Discount and run as fast as you can.

lucky you sold already

and I’m thinking Canadian real estate will have no influence on US rates

#235 45north on 02.02.18 at 5:58 pm

Nonplused: I remember the days when people used to throw parties to celebrate paying off their mortgage.

I remember my parents paid off their mortgage in 1970.

Lower Mainland: referring to Nonplused: Longest post ever.

still lots of good stuff

#236 45north on 02.02.18 at 5:59 pm

Steve: Nihilism is creating a subset of humanity that has been plowed under by foul ideas. Sitting discouraged in a drunken stupor most nights covered in unfinished tattoos and Dorito dust. Watching the ever widening sink hole in the living room floor subsiding under 1970’s green shag. So hopelessly in debt. Weighed down by derelict purchases, moldering into an obsolescent scunge of clutter that fills your periphery. What does tomorrow hold? Low wages, unpaid bills, ferocious ex-spouse’s and a re run of Green Acres on a floor model television. I have lots of friends like this.

good writing!

#237 maxx on 02.02.18 at 6:31 pm

#4 Dan.t on 02.01.18 at 5:20 pm

“……were designed to get little beavers to spend on one asset class and one asset class alone…..”

Little beaver dens…….under water?
Gooood beavers! Lenders luv ya – come what may.

#238 M on 02.02.18 at 11:42 pm

…and when they sell to cover the HELOC..they’ll sell for the amount they owe… so here goes the 800K house…for 200K.
Of course..there is always the bankruptcy …
In any case… the best trade is shorting the banks on a long range horizon. T2 will bail them in/out and will be a joy to by cibc at 5 bucks

#239 D Apostrophe on 02.03.18 at 10:19 am

A front row seat for the meltdown in 2008. And what do Canadians do? Yup.. rinse and repeat. Oh well. Many deals for the smart kids coming up.