Entries Tagged 'Book Updates' ↓

April fools

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What’s the government hoping you’ll forget about on the day before the first nice-weather, beer-swilling, Harley-riding long weekend of the year?

The budget, of course. Just when you thought the economy sucked so much the feds would never get around to telling us what they’re doing, it looks like Joe Owe can wait no longer. Word has it he’ll pop the date Thursday at 9 am EDT when he holds a presser at a Toronto manufacturing company.

And how appropriate is this? It’s the Canada Goose facility. So bend over, and pucker.

It won’t be easy on the guys running the country. Six years after the wheels came off things are still scary in the land. Maybe worse. Emergency interest rates have taken a massive toll – house prices have essentially doubled in a few major markets, while family incomes haven’t kept up. Our household debt level is epic. Off the charts. That’s because so many people, gorged on that cheap money, have been chasing prices higher. So houses are worth more, but we owe more and aren’t earning more. Bad combo.

Meanwhile the economy as a whole is losing air. The dollar was worth $1.04 US four years ago. Now it’s 78 cents. Our exports have tumbled into deficit. The global oil plunge is taking a ferocious toll. The government has been spending more than it takes in for six straight years. Over $170 billion has been added to the national debt during Mr. Harper’s watch. The new job creation rate is the worst in 40 years. The Bank of Canada was spooked into another rate drop a few weeks ago and just said things are “atrocious.” We’ve got 108,000 realtors now and only 60,000 workers in the oil and gas sector. In fact, we’ve allowed the real estate component of the economy to get bigger than all of manufacturing combined. And, as you know this week, the economy got smaller in January, with more to come.

Hell, no wonder Joe was paralyzed. No wonder he caved when the banks sliced and diced mortgage rates and sucked in a new cohort of dewy virgins. No wonder he’s been silent on the toll oil’s taking, the collapse of the dollar or the central bank’s desperation. This man is no towering elfin deity. (And, yes, I miss the little pecker.)

Well, seems most citizens get it. They’re seeing right through this new government message (since the energy plop began) that you should be more afraid of terrorists than the economy. Sure, people have strong opinions on ISIS recruits from Calgary, niqabs, our war jets in Syria or mythical guys shooting up West Edmonton Mall. But they’re more afraid of job loss. Especially now that we’re all pickled in debt and sorely need the work.

The latest Nik Nanos poll kills it. Over 90% of respondents said the economy is their major concern, while just 4% cited terrorism.

And remember that budget surplus Joe was yakking about eight months ago? It’s probably non-existent at the moment, or miniscule and manipulated – but the poll contains another surprise. If a surplus exists, people say, then spend it on infrastructure, creating jobs. The second most popular choice is paying down the national debt ($614 billion). After that it’s enhancing social programs, then tax cuts.

Too bad. The government already announced a watered-down form of income splitting to take effect this summer – a tax cut of $5 billion for middle-class families that critics argue are the last ones who need more. Says Nanos: “This poll actually should be a wake-up call for all the parties in terms of what they’re talking about and what Canadians want to hear about.”

The election’s in October. Sounds like the campaign starts now. With a goose.

By the way, if you have any doubts that this blog is as omniscient as it is omnivorous, lay them to rest. Back in January when the goofs at the central bank dropped rates I told you it would do nothing but increase debts and inflate houses. We now know this to be true. Mortgage borrowing has increased by 5.5% with $80 billion in additional loans taken out. And there’s evidence all this money just got tacked onto the price of houses, and therefore the debt of the buyers.

Bad boy ex-realtor and housing consultant Ross Kay says the Bank of Canada has added $5,000 to prices. Poof. Like that. He just sent this to me:

“What happened is that within 45 days of the Bank of Canada reducing interest rates by 1/4 point and the subsequent fallout as banks reduced their mortgage rates accordingly? The purchase price PAID for a first-time home in Canada increased by the exact same amount of the lowered payments that resulted from that decrease.  What the Bank of Canada did was cause the exact same fear they warned about (taking on additional debt) to be recorded in the selling prices of homes.”

Kay says before the rate cut that the maximum average price virgins would shell out for a house was $238,000, based on prevailing rates. By March 12th that had increased to $243,000, as mortgages were pushed lower. What does this mean? The same house cost the same buyer more money but a lower mortgage rate meant the kid could get a bigger mortgage and have the same payment.

Yes, realtor math. Pay more and assume a fatter loan to acquire the same asset – all because mortgages are cheaper so the monthly stays the same. And these kidults went to university. We’re doomed.

Adds Kay: “Nationally, the median list price for a home in Canada has also increased from $300,000 on February 12th to $305,000 on March 12th over that 30 day window. In effect what the bank unknowingly did was set the stage for a wider range in average price deflation being recorded in the coming months. Although this will not impact the current 22.9% of sales by first time purchases present in the sales mix, it has already affected the rise in reported average selling price.”

The Bank of Canada thinks it can fool us.

They got that right.

Mayhem

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We’re heading into the final five or six weeks of the spring real estate rutting season. This one, as you know, is memorable for having the lowest five-year fixed mortgage rates ever. Money is available for as low as 2.49%, if you don’t mind dealing with lenders you’ve never heard about before. But even with the big guys, 2.6% is totally doable. The result in the GTA and YVR is predictable. Mayhem. It’s a debt orgy.

Last week I told you the regulator in Ontario is about to crack down on the way bidding wars are being run, which is beyond overdue. These blind auctions totally disadvantage potential buyers, ensure the ‘winner’ pays too much and are open to realtor abuse. Bidders never actually know what the competing offers contained, or if they even existed. It’s the last way normal people would ever buy anything – and yet thousands get sucked into this when it comes to the biggest purchase of their lives. Go figure.

What can you do? Simple. Walk away from any property with panting buyers, a scuzzy realtor who holds back offers, or where the listed price seems below market value. You can also (at least in Ontario) make a Form 109 request to ensure other bidders actually existed, and the agent wasn’t just making them up.

Not so in BC, says realtor Greg Dent. He also admits to reading this pathetic drivel.

“I don’t have a lot of time to debate the pros/cons of most of your blog and while I disagree with some of it, you clearly have some valid points too (and while I know some of my colleagues are scum, there are a large number who are honest, hard-working professionals).  Regardless, I wanted to drop you a line around the RECO/Form 109 portion.  You’ll be interested to know (likely terrified to know) that there exists no such form/process either through the licensing body in BC (which as I’m sure you know is the Real Estate Council of BC) or the Real Estate Board (the board has very specific rules).  In BC, the only ways to confirm the presence of another offer is to either be presenting in person (which is what any good realtor should probably be doing for their client anyway) or ask to see the top half of Page 4 of the other offer (which contains no personal information other than the other buyer’s realtors’ name).”

Well, there you go. Another reason to move to Lillooet. No bidding wars there. Except for the bus to leave.

Speaking of Vancouver house prices, there may be another group to blame if you’re tired of mindlessly bashing people from China. And these folks are easier because they’re slower!

Yup, wrinklies. Specifically, millionaire home owning wrinklies who don’t feel like paying their property taxes any more. They’ve started to cost taxpayers a bundle, thanks to a weirdo program BC has to capriciously punish the young at the expense of the old. It’s called the BC Property Tax Deferment Program, and it more or less legalizes tax evasion on the local level.

Here’s the deal: if you’re 55 or older, you can stop paying the taxes on your Vancouver house, even though it’s worth a million or two and you’ve benefited from a windfall gain in property values, spiraling your net worth. You have the right to waive the tax bill and instead pay just 1% annual interest on what you owe. YVR’s property tax rate is $3.68 per thousand bucks of assessed value, which equals about $4,000 on the average house. But if you’re a crafty wrinklie who expects a full range of services you don’t want to pay for, and you feel like hoarding your cash, just say so. Now you only shell out $40 a year. The province has to make up the $3,960 and pay it to the city.

Only when the property is sold does the tax bill come due, but the outstanding amount does not attract compounding interest. It’s a gift to the greedy – since there’s no means test involved. Those with the ability to pay don’t have to, once they hit the double nickel. Ageism at its finest.

As you might imagine, this is spreading. Last year almost 39,000 people in BC didn’t pay their taxes – up 35% in the past four years. It’s costing about $17 million a year in Vancouver, and an equal amount in the burbs. That might not be a massive amount in a delusional market like this, but it should sure stick in the craw of all those moist millennials and lusty virgins who already feel shut out.

And it’s another fine example of the way politics feeds real estate, thanks to do-gooder elected nimrods who end up subverting the market. Like in Hamilton, where a renter making $70,000 can apply for a down payment loan that’s payment-free and interest-free for 20 years, so long as she buys a house in a specific hood. Hamilton house prices, by the way, have jumped 10% in a year and sales increased 13.9% last month, as the refugees from Toronto stream down the QEW.

And remember the federal RRSP Home Buyer’s Plan, allowing first-timer couples to raid their retirement funds for $50,000 in house-buying money? The number of kids who have abandoned paying anything back has risen to about 60%, which means the money is added back to their incomes over 15 years and taxed. It also means most of them have been borrowing to the max, buying so much house that they can’t find the cash flow to repay an average of $1,200 a year. Sad.

Meanwhile the plan has pumped an extra two billion into housing, making it more expensive for everyone, creating bidding wars, inflating household debt levels, leading to subsidy programs for former renters and grossly padding the equity of millionaire geezers who then legally refuse to pay their taxes.

You can’t make this stuff up.