Ya think?

Big news: Royal Bank says housing boom is ‘over’

Canada’s long-running housing boom has ended, with the formerly bubbling markets of Calgary and Edmonton already having gone from hot to not, and with the current hot spots of Saskatoon and Regina to follow, a major Canadian bank says.

Mortgage-market innovation delayed the inevitable but couldn’t prevent it, Royal Bank of Canada said in its analysis of major urban real estate markets Thursday.

“After yet another blockbuster year for Canada’s housing markets in 2007, the much-anticipated housing market slowdown in Canada has arrived,” RBC said.

“The delayed arrival of softer housing markets can be partly attributed to recent mortgage innovation that has seeped into the Canadian market during the last two years,” it said, citing higher loan-to-value ratios and longer amortization periods of up to 40 years, which opened the market to a wider range of buyers and prolonged the housing boom.

The mortgage-market innovations, which make housing more affordable in the short term, also heighten the risk of default in the long term, it said.

Markets in the West, which have risen the furthest above their underlying values, are the most at risk of an increase in defaults as a result of recent mortgage innovations, the report’s author, RBC economist Amy Goldbloom, said in an interview.

However, there will not be a U.S.-style correction, despite such concerns in markets like Calgary and Edmonton, said the report, released amidst further evidence of the depth of the U.S. housing market meltdown – a record drop in a government index of housing prices in the first quarter of this year.

“Canada’s housing market is on much firmer footing than the U.S. market,” it said, citing more conservative mortgage lending practices, healthy household finances, tight labour markets, and a manageable supply of homes on the market.

Still, after six years of 10 per cent or better house price increases in major markets and four years of annual construction starts of more than 220,000, Canadian housing markets are now on a clear cooling path with resales last month being down six per cent from a year earlier, price gains from a year earlier slumping to the three per cent range, and the number of homes being listed for sale surging by 18 per cent.

“For the year ahead, we’re looking at price gains to converge across the country to a much slower pace, with the West cooling off from double digits and central Canada cooling off further to the low single digit range,” Goldbloom said. “By year end we expect most markets will be eking out mild price gains.”

“The markets that soared well above their underlying economic fundamentals are the very ones with the most downside potential,” the report said. “Calgary and Edmonton have moved from chart-toppers to bottom-of-the heap in only a matter of months on a range of key housing market indicators, including house prices and sales.”

Saskatchewan has since jumped into the housing market spotlight as its commodity-led economic expansion has attracted an influx of migrants and led to a major housing market boom, it said.

“Regina and Saskatoon continue to clock year-over-year price gains that are several multiples above the pace of their local wage growth,” it noted. “This lends evidence that current momentum is unsustainable, with a similar fate to Alberta’s likely for both of these cities in a year’s time.”

Meanwhile, many of the middle-of-the-pack markets, such as Toronto, Ottawa and Montreal, are maintaining their slow and steady growth, with housing prices across much of central and eastern Canada still five to 10 per cent above year-earlier levels, it said. However, more moderation is in the cards for those markets as well this year as sales slow, prices continue to cool, and new-home construction levels off from extremely elevated levels.

The bottom line is that while prices will still post modest gains this year, after a six-year run sellers will lose some bargaining power with the degree of power lost varying from region to region, RBC said.

55 comments ↓

#1 JB on 05.23.08 at 10:45 am

“Regina and Saskatoon continue to clock year-over-year price gains that are several multiples above the pace of their local wage growth,” it noted. “This lends evidence that current momentum is unsustainable, with a similar fate to Alberta’s likely for both of these cities in a year’s time.”

Hasn’t this been the case in ALL markets over the past few years? Nice of them to admit it now.

#2 Ed Sager on 05.23.08 at 10:46 am

I suppose that half-truths are as close as one can expect the RB to come.

#3 newguy vancouver on 05.23.08 at 10:57 am

The RBC report is titled “Housing Market Froth finally Evaporating”. This is so ironic because, in 2005, when Greenspan was asked if he saw a bubble in US housing, he said that he didn’t see one, but he did see “froth”. Of course, history now shows that it was actually a bubble, and Greenspan, despite being retired, is still taking a lot of flack for that one.

Yet RBC, just as the Canadian housing bubble is starting to burst, goes ahead and says no bubble – just froth.

Well, you can put lipstick on the pig…

#4 SMWhite on 05.23.08 at 11:20 am

Anticipated my ass, by whom? If you read any of the media propaganda from the banks and organizations with vested interests in real estate over the last couple of years there wasn’t anyone coming out and saying anything to even hint as possible trouble, it was the David Lereah “soft, fluffy landing” theorem.

Sounds like it still is, I guess you can’t scream run to the hills…

The more I think about it the more trouble Canada is in, if CMHC and CREA had have just accepted the fact the market all over the world was slowly in 2005 and hadn’t implemented the 40 year mortgage, or what I like to call “life long rent”, Canada might have actually been able to have a soft landing with minimal declines in even some of the more bubbly markets.

Instead any gains that have been incurred since 2006 will be wiped off the books. Mark my words…

Garth, I know its not about getting pleasure out of seeing the “honest and gullible” herd suffer, I’m more sure now that the average one-dwelling purchaser did it out of fear and not greed, but are you ready to get the “I told you so” speech ready for the banks and RE industry?

If you ever here the line “Get into the market now or you will never be able to” tap your feet and say, there’s no place like home, and repeat.

#5 Samuel on 05.23.08 at 11:26 am

“Meanwhile, many of the middle-of-the-pack markets, such as Toronto, Ottawa and Montreal, are maintaining their slow and steady growth, with housing prices across much of central and eastern Canada still five to 10 per cent above year-earlier levels, it said. However, more moderation is in the cards for those markets as well this year as sales slow, prices continue to cool, and new-home construction levels off from extremely elevated levels.”

Hi I live in Ottawa and I can’t quite understand what there saying here, are pricing gonna keep going up here but slower or will they start declining as they will start to in other parts of Canada?.

Thanks

#6 Paul W. on 05.23.08 at 11:32 am

I don’t believe this time is different than any other time in our history. My bet is that Toronto, Ottawa and Montreal are going to go down with the rest of the ship. We here in central and eastern Canada are already getting our toes wet… It’s just a matter of time…

I haven’t seen any reasoning yet that in my opinion, justifies the position that we will not suffer the same fate as the US. We are not different, history has proven that. Over-priced and unaffordable markets know no boundaries…

#7 jalarmo on 05.23.08 at 11:39 am

Where’s the full disclosure?

“DISCLOSURE: RBC holds XXX.X billion dollars CAD in housing-backed securities, loans, lines of credit, and mortgages. We’re the ones who issued those “innovative” mortgages, meaning we’re the ones who will be left holding the bag if housing prices fall even a little bit and people start flooding the markets with their overvalued speculative gambles that they don’t even really own. This report, like all RBC reports, has to try to convince people that their houses are not about to hemorrhage equity like pigs being bled out. Because we’re completely fucked if people start selling.”

#8 peter on 05.23.08 at 11:41 am

I live in Saskatoon where in April of 2006 the average price was 155k, this April it was just over 300k. I believe we were not undervalued two years ago, everybody else was way overvalued. We were right where we should have been. Yes, we have experienced the biggest wage increase over the last year and our diversified economy is red hot. Jobs everywhere, but nothing to justify the increase in house prices over the last couple of years.

The help stop speculation, the city has implemented a policy that if you sell a new house within 4 years, you have to pay the city 50,000 and can never have a lot again. There are some exceptions, like moving to a new city.

It seems that in every housing boom, speculation and overbuilding played a huge role. Speculation is here like everywhere else but our boom has only lasted a couple of years, not enough time to have too much overbuiding. Until last year, the city only developed 500 lots every year. Last year and this year they developed 2000 each. With the provincial campaign of bringing people to the province because of the economy, it does not take too many people to fill those houses. I hope to see a significant pull back in prices to make it affordable for people like me. Garth, you mentioned that most of the gains Regina and Saskatoon made are likely to stay, are you sure?

#9 wayne on 05.23.08 at 12:19 pm

What ever pressures the bank’s economists face on a daily basis it must be comforting for them to know they never have to worry about being wrong.
I know diddly about the black art of economics. That is why I’m having such a tough time fathoming the fact that listings are up by double digits and apparently not selling yet Canadians can still count on house prices going up, according to the banks. I feel like an idiot.

#10 wilbur on 05.23.08 at 12:26 pm

The delayed arrival of softer housing markets can be partly attributed to recent mortgage innovation that has seeped into the Canadian market during the last two years,” it said, citing higher loan-to-value ratios and longer amortization periods of up to 40 years, which opened the market to a wider range of buyers and prolonged the housing boom.

The mortgage-market innovations, which make housing more affordable in the short term, also heighten the risk of default in the long term, it said.”
.
.
.
duhhhhh! it doesn’t take a rocket scientist to figure this out. leverage is a double-edged sword.

#11 TBJ on 05.23.08 at 12:29 pm

How can this report not even mention Vancouver? I guess we are excluded from the ‘soft landing’ designation?

Uh oh…

#12 EJ on 05.23.08 at 12:29 pm

” “Canada’s housing market is on much firmer footing than the U.S. market,” it said, citing more conservative mortgage lending practices, healthy household finances, tight labour markets, and a manageable supply of homes on the market. ”

0% down at 40 years is conservative? Strange definition..

Healthy household finances? There’s a mainstream news article almost every week about the record high debt to income ratios that people are barely sustaining. Contradictory?

Tight labor markets? Go tell the one to the manufacturing industry in Ontario. And if housing drops, watch what happens to construction related industry.

Manageable supply of homes is also a vague definition.

How can make these comments with a straight face?

#13 wilbur on 05.23.08 at 12:30 pm

double post:

gee i wonder if this will happen when the zero downpayment, 40-year amortization mortgage turns around and bites you in the ass.

http://www.reportonbusiness.com/servlet/story/RTGAM.20080523.whomesales0523/BNStory/Business/home

#14 Crikey on 05.23.08 at 12:32 pm

Canadians are not prepared for economic downturn, bank warns
Eric Beauchesne, Canwest News Service
Published: Wednesday, May 21, 2008

http://www.financialpost.com/most_popular/story.html?id=530187

OTTAWA — Canadians are not prepared — and not preparing — for a rainy day, like an economic downturn, a major bank is warning.

The vast majority of Canadians admit they’re poor savers, with barely one-half having a rainy-day account. And of those, only half have enough to cover a month’s expenses, RBC said Wednesday in releasing results of a spring survey of the saving and spending habits of Canadians.

Well, since RE always appreciates, one can always get that HELOC to cover any adversity, right? Besides, Canada is immune from any GLOBAL economic downturn, because we’re different, right?!

DUH.

#15 leatherdale on 05.23.08 at 12:48 pm

good luck trying to find/renogiate your high loan-to-value mortgage

http://www.torontosun.com/Money/2008/05/23/5646306-sun.html

#16 David on 05.23.08 at 12:54 pm

Saskatoon is definitely booming these days no question. The level of commercial and residential housing construction is amazing as are the traffic jams. Until about three years ago, the market there was stable and possibly a tad undervalued with respect to real estate. The bubble is still in its formative stages in Saskatoon.
Saskatoon is a pretty nice city and people there are hard core die hard Oiler fans.

#17 Sold Out of Cowtown on 05.23.08 at 12:57 pm

I read in the Edmonton Sun last week that Canadians are expecting interest rates to go up according to a recent poll. If they do, how high will the rate go? How will this affect people that are all ready on the bubble, if say interest rates climb 2, 3, or 4%? I’m too young to remember, but rates were at 20% at one time too, could this happen again?

#18 vultur on 05.23.08 at 1:06 pm

I don’t believe this time is different than any other time in our history. My bet is that Toronto, Ottawa and Montreal are going to go down with the rest of the ship. We here in central and eastern Canada are already getting our toes wet… It’s just a matter of time…

I haven’t seen any reasoning yet that in my opinion, justifies the position that we will not suffer the same fate as the US. We are not different, history has proven that. Over-priced and unaffordable markets know no boundaries…

____________
If interest rates remain low, credit remains available, and employment remains high, your local market should experience stable real estate prices. Windsor is in a heap of trouble for obvious reasons, and Vancouver appears to be driven by highly unusual, unstable and unsustainable factors (illicit funds flowing into the city from foreign sources). Ottawa doesn’t appear to be experiencing any major issues but if the inventory is building then you’d expect some softening to occur.

Calgary is probably show a moderate decline in single family home prices but rebound quickly.

Every market is different! Do your own due diligence and do whatever it takes to pay down your mortgage as fast as possible even if it means sacrificing other purchases.

#19 Bob on 05.23.08 at 1:41 pm

I think Garth is wrong about Saskatewan. The province reminds me of a slow, dumpy version of Alberta. I was out there last summer. Saskatoon is going to bust hard. The slowdown will begin this fall. They are exactly one year behind Edmonton.

#20 sourgrapes on 05.23.08 at 2:54 pm

Garth, What about BC???????

Pray tell

#21 Crikey on 05.23.08 at 2:57 pm

David…. “The bubble is still in its formative stages in Saskatoon.”

Is that why listings have risen by a whopping 121 per cent in Saskatoon from the year before, the biggest increase of any city in Canada? Is that why sales have slowed incredibly?? Oh, that makes sense.

Thanks for enlightening us.

If you don’t believe me, look it up. Just don’t ask a real estate agent.

#22 Wealthy Renter on 05.23.08 at 3:08 pm

Wilbur, great article.

http://www.reportonbusiness.com/servlet/story/RTGAM.20080523.whomesales0523/BNStory/Business/home

“Surprisingly” two-thirds consider their line of credit and credit cards to be their backup in case of an emergency, it said. Meanwhile, 60% of the more than one million Canadians who keep $1,000 or more in their bank account each month, consider that money to be their safety net.”

WHAT? Or more crudely, “WTF?”

Only 1 million Canadians have a $1000 or more in the bank? That has to be wrong. My wealthy renter handle was supposed to be tongue-in-cheek, but I think I should change it to super-wealthy-renter.

Even when we decide to buy a home, I couldn’t sleep at night if we didn’t have savings to tide us over for several years of hardship.

Cost of living is expensive, but some people need a lot fewer toys and a little more sense.

There are more than 1 million mortgages in Canada. Who would give a mortgage to somebody with no savings?

#23 Sphinx on 05.23.08 at 3:23 pm

The “much-anticipated…slowdown”, “delayed arrival of softer…”, so RBC saw it coming and kept hush about it, even participated in this scheme….what a corrupt organization. The writing was on the wall for the last 2 years, for those to read!

With “higher loan-to-value ratios” = near zero down payment, this “wide range” of buyers have no skin in the game WILL just default…I wouldn’t be surprised to see record defaults in western/central canada, for ontario the job loses will add to the fire. our system can’t handle it, and bank of canada will be bailing out banks and homedebtors next year, canada is much more socialist than Hillary Clinton. way to go…

Sphinx.

#24 Michelle on 05.23.08 at 4:17 pm

Could some one enlighten me about what happend in the 70’s and the oil crissis, and stagflation, and what happend? Sorry I was in preschool at the time and had my face glued to the TV over Matt and Jenny and Littlest Hobo. Thanks.

#25 David on 05.23.08 at 4:20 pm

Crikey, I agree that listings are probably way up in Saskatoon. The trouble is that new home construction is continuing at a rapid pace. Reality has not set in at this point or no one seems to notice. The effects of massive over building will not hit there for another year at least.

#26 Michael on 05.23.08 at 4:40 pm

I tend to disagree with this article. While I agree that others markets are showing signs of peaking, others like Saskatoon and Regina, are just beginning to hit their stride. From everything I have heard and read, the stage is set for the former have not province of Saskatchewan to become the main economic hub of Canada. Wages are increasingly at prevously unheard of rates, their economy is booming, and people around the world have their eyes on what is being called the Paris of the prairies. If I had money I wanted to invest with an almost sure-fire guarantee of a good return, I would invest in this province. Home ownership cost are still a relative bargain, with prices only starting to catch up to with rest of Canada , and all sources point to housing prices going much, much MUCH higher. From the people I have talked to, in the next couple of years prices are likely to appreciate in the range of $100,000 for even a meagre starter bungalow property!!! Like their slogan says, the sky is wide open to the opportunity this previously overlooked jewel of a province offers. If you are looking to invest in a near sure thing, Saskatchewan is your best bet.

#27 Dawn in Calgary on 05.23.08 at 4:53 pm

http://www.canada.com/calgaryherald/news/story.html?id=8fab8fd6-28ae-4769-a801-227a7097f2ec

Average sale price of Alberta homes down from 2007
Mario Toneguzzi, Calgary Herald
Published: Friday, May 23, 2008
CALGARY – A sign of the cooling housing market in Alberta was evident in numbers released by the Canadian Real Estate Association today showing the average MLS sales price in the province in April actually declining compared with a year ago.

“There are more listings on the market which means more choice for the buyers. That also means sellers have to pay more attention to how they price their home.”

The association’s chief economist, Gregory Klump, said new listings are trending higher in Calgary, Vancouver, Edmonton, Toronto and Montreal – the country’s five most active markets.

“New listings are forecast to rise further as sales activity continues retreating from the peak last year, resulting in an increasingly balanced resale housing market and smaller home price increases,” he said.

Increasingly balanced. Sure. There are three properties for sale within a stone’s throw of my place, and lo and behold, they aren’t selling. Now those places can be found in the rental listings. And guess what? They are so overpriced, they aren’t renting out either.

We’re moving the end of June because our landlord decided to increase the rent again, now to $1800 for a modest 1200 ft two level. It’s not worth it, and I told him that. His response? “House prices will be going up by an estimated 8% to 12% this year in Calgary between Jan 1 and June 30th, (they have already increased 2.89% from the end of December 2007) ….
So if you are planning on purchasing….now is the time to do it….and take possession on July 1st when your lease runs out……”

Not friggin likely. I’m no one’s fool.

#28 Crikey on 05.23.08 at 5:25 pm

Michael,

Let me guess- you just “invested” in a condo or two in Saskatchewan, and now you’re hoping like hell you’re not going to be left suspended in mid-air, grinning unconvincingly, like Wile E. Coyote thirteen yards beyond the edge of the mesa, with a sputtering grenade in each hand and an anvil tied to his ankles.

Good luck to ya.

#29 Future Expatriate on 05.23.08 at 5:34 pm

Michael sez “From everything I have heard and read”…

Don’t hit your head too hard on the floor when you keel over from the Kool-aid, Michael. Everything you have heard, read, and written?

Lies. All lies. Wait and see…

#30 EssGee on 05.23.08 at 5:38 pm

Wages are increasingly at prevously unheard of rates, their economy is booming, and people around the world have their eyes on what is being called the Paris of the prairies.
_____________________________________
haha! That’s the funniest thing I’ve read so far on this post.
That’s like saying the “New York of Nigeria”.
If real estate is local, stop making comparisons between any city in Canada and places like New York, Paris, London etc… Canada is a nice place, but you can’t compare it to any of the cities listed above…not by a long shot!

#31 Terry on 05.23.08 at 5:47 pm

To anyone who went through the 1980’s when interest rates hit 20%+ we saw what can happen to global economies. Inflation is once again raising it’s ugly head as soaring oil prices will increase almost every part of our lives. If you filled your tank, flown on a plane, bought food we all have seen prices rise. What is going to hit the world over the next few years is inflation creeping back up to double digits forcing central banks around the world to increase interest rates. Try to re mortgage your house when prime rates hit 8%+. Stop thinking in terms of a few months, start looking at the next couple of years. If you mortgage is up for renewal is the next 2-3 years start to work out an interest rate 9-12%. Lets see 425,000 at 10%………………………….

#32 peter on 05.23.08 at 5:59 pm

Yikes, I wouldn’t touch a condo in Saskatoon with a ten foot pole. Way, way overvalued and with over 1000 condo conversion units coming onto the market plus new construction, condos will flood the market here. As for new homes, they start at 375,000 for the ones on the small lots and then go up. None of the new stuff is affordable for people like me. Once first time buyers are priced out of a market it is only a matter of time before things come crashing down. The only houses that will sell are between the 275,000 to 400,000 ranges. By this fall and even more so next spring there will be huge glut of condos and higher priced homes on the market.

Michael,
if you believe that a small meager bungalow in Saskatoon will rise 100k in a couple of years, you are looking at almost 400,000 for that bungalow because small bungalows are selling for about 300,000 right now.

Just so you know and everybody else has an idea of what is going on here. The average household income is about 75,000 right now. Average house is about 4 times average income ( household). Since affordability has eroded to levels of Edmonton and Calgary (same % of income goes towards house) the only way this increase of 100k in a couple of years is possible is if the average household goes from $75,000 to $100,000 in a couple of years. Not gonna happen, pal.

#33 Terry on 05.23.08 at 6:12 pm

Saskatoon and Regina the Paris of the prairies? Ah Regina in February, the warmth of the noon day sun. If a house was $10,000 in Regina most sane people still would not move. Best laugh I’ve had in a long time, thanks.

#34 Another Albertan on 05.23.08 at 6:30 pm

@Wealthy Renter – Do you now understand the need for many people to have a perpetually-increasing market? This point is one of the root causes behind people’s denial or inability to see downward market changes. Not only do people like an upward market, they NEED an upward market – both psychologically AND financially. This is why the downward moves in markets are especially fraught with peril – because people are even more emotional in their decision-making.

#35 Another Albertan on 05.23.08 at 6:55 pm

@Sphinx – The banks have an excellent idea of their “positions”. Even in the sub-prime meltdowns, the banks knew where their exposure was. They will argue that “they didn’t know what assets they had.” No, they knew full-well the entire expanse of their books. What they did not know was the extent of the holdings of all the other market players. Once they understood the counter-party risk, they all knew they were hooped if anyone had a hair trigger response, so everyone knew to shut up and started to step back slowly. The “shut up ” part that all banks use is to prevent the classic “run on the bank” by the public and by their major institutional investors. They’ll do anything to avoid redemption notices.

It’s a variation of Mutually-Assured Destruction or a Mexican Standoff.

We saw the demise of Bear Stearns a few months ago. What has not been widely reported is that other major US banks have been close to the edge. It was reported that Lehman was levered close to 40-to-1 at its maximum last summer. They have since VERY quietly re-structured products and sold portfolio positions so that their aggregate leverage is apparently 12 to 14-to-1 now. Had the market swung downward across Lehman’s breadth of holdings, it would have taken under a 3% drop to have wiped out the bank. Lehman shut their traps tight through this whole period because they knew they could be the next ones asking for a bail-out.

And though all of this, the banks still continued to try to drum up business… my cousin works for RBC in their bond group. When paper in North America seized up and was dropping in value, he was sent on multiple trips to South America to investigate what new business could be opened up, post-haste.

Many people haven’t realized that “engineering a soft landing” also means allowing those who are in precarious positions to try to right the ship. Soft landings are only partially meant for the public at large.

#36 3rdman on 05.23.08 at 7:43 pm

Could some one enlighten me about what happend in the 70’s and the oil crissis, and stagflation, and what happend? Sorry I was in preschool at the time and had my face glued to the TV over Matt and Jenny and Littlest Hobo. Thanks.

Oil crisis: Detroit downsized product and CAFE [corporate average fuel economy] was born.

Stagflation brought about the wages & prices freeze.

What happened?
CAFE was later undone while wages & prices remains absolutely unforgiven by Wall Street.

#37 Terry on 05.23.08 at 10:02 pm

The worsening household debt problem in Canada. A must read about debt and saving in Canada.

http://www.vifamily.ca/commentary/senate.html

“About a year ago, The Current State of Canadian Family Finances1 report concluded that a growing number of households were “living on the edge” and that they needed to act now before it was too late. In our new report2, released last week, we continue to hold that view. Even more so than a year ago, we believe that households need to reign-in some of their spending, pay off some debt and build a bigger cushion against the possibility of a slower economy and/or rising interest rates. This is not a doomsday scenario but one of caution and reassessment.”

REAL INCOMES HAVE STALLED

#38 lor on 05.23.08 at 10:27 pm

regina and saskatoon, the paris’ of the prairies? Is paris the murder and violent crime capitol of europe too? Saskatoon leads the nation in violent crimes per capita and regina is 2nd of all major canadian cities. couple that with 8 months of frigid winter and freeze your willie off weather and oh yeah what a bargain! next are you going to try and sell me on the virtues of the nigerian stock exchange?

#39 lor on 05.23.08 at 10:29 pm

look at statscanada for info on violent canadian cities before listening to a real estate agent about anything they are trying to pitch.

#40 wayne on 05.23.08 at 10:53 pm

Michael said:
‘and people around the world have their eyes on what is being called the Paris of the prairies.’
No offense Michael (unless you’re a realtor in Sask, in which case……..), no one who has ever been there is calling Regina the ‘Paris’ of the prairies. That’s a hoot. Maybe you have your cities mixed up, Saskatoon has a river in the middle of it, maybe Saskatoon is the Paris of the prairies, or maybe Moose Jaw, or Eyebrow.
There is a very funny Canadian classic written in 1947, Sarah Binks, by Paul Hiebert. In the story he refers, tongue in cheek, to Regina as the ‘Venice’ of Saskatchewan. For those who haven’t read it and enjoy satire, give it a try.

#41 Sold Out of Cowtown on 05.23.08 at 11:40 pm

Michael, Paris of the prairies in Saskabush? are you for real lol?

#42 Bruce on 05.24.08 at 12:17 am

Terry,

I’ve been saying this for years. Nobody was listening. Thanks for a great article… Canadians are in debt over $1 trillion dollars. Our savings rate plunged into negative territory for this first time ever in 2005. Most people are only two paychecks away from financial disaster. We’ve borrowed and exhausted all the equity we can out of our already over-inflated homes. Our credit cards are maxed-out, inflation is soaring, gas, oil, groceries, and everything keeps going up and up. I liken this whole scenario to a rubber band. How much more stress can it take before the whole thing just breaks??

Tick Tock Tick Tock Tick Tock.

#43 eric on 05.24.08 at 12:15 pm

http://www.torontosun.com/Money/2008/05/23/5646306-sun.html

#44 jalarmo on 05.24.08 at 1:43 pm

Umm, not to nitpick but “Paris of the Prairies” has been around for a long time. It’s even in a Tragically Hip song. (Wheat Kings.)

The poster has definitely had too much Saskatchewan Kool Aid, though: the Saskatchewan correction was just a correction. If you want it to boom to unaffordable levels, as you posted, then don’t be surprised to find a hostile reception on this blog.

If you’re new here, the gist is that speculators like you are screwing up our cities and our economy.

Stop doing that please.

#45 Ted on 05.24.08 at 2:30 pm

Condo crack in Vancouver

Rent for $2400/month
http://vancouver.en.craigslist.ca/apa/689042133.html

or buy for $829,000
http://www.mls.ca/PropertyDetails.aspx?PropertyID=7005503

#46 My_view on 05.24.08 at 3:05 pm

Terry,

10 % x 425,000 = scarrrrrrrrrrrrrrrrrrrrrrrrry.

#47 Terry on 05.24.08 at 6:24 pm

Re: Condo on crack

$829,000 at 10% down
Mortgage of $750,000.00 6.0% over 30 years
Mortgage Summary Including 2% CMHC Insurance Premium
Monthly Payment $5,503.23
First year interest 2009 $59,773.58
First year principal 2009 $6,265.23
Add in BC property transfer tax
1% 200,000.00=$2,000.00
2% 629,000.00=$12,580.00
Add in condo fees ?
Add in property tax ?

Just guessing but I think renting may be cheaper.

#48 Jas on 05.24.08 at 10:28 pm

Hi folks:
When do you think we’ll hit the point of max pessimism in fraser valley real estate becuase I would then like to pick up one for investment.
If I can pick one now, at approx. 10% below the current market value, do you folks think that is good move or not?

#49 chris on 05.25.08 at 7:19 am

HELP ME!!! PLEASE

http://vancouver.en.craigslist.ca/apa/689042133.html

i have to close June 1 , 2008and now i’m screwed ‘cuz i can’t make the the payments

#50 chrisko on 05.25.08 at 7:26 am

HELP ME PLEASE!

my condo isn’t rented and i’m scredwed because i can’t make the mortgage payments.

http://vancouver.en.craigslist.ca/apa/689042133.html

#51 Jas on 05.25.08 at 10:02 am

Chris/Chrisko:
Sorry buddy, you won’t find a greater fool here.
You obviously bought it as an investment and not for your own use.

In times like these your options can be as follows:

if no substantial downpayment then just walk away
else lower the rent enough to attract tenant and fund the difference from your pocket.

I wonder why the herds are attracted to condos in downtown areas of cities when you can get far more value for your money in communities located at commutable distance to downtown.

#52 David on 05.25.08 at 4:02 pm

Jas, the market is so grossly over priced a 10% correction is really nothing of consequence. A 75% correction is in order so just keep waiting while the market goes up in flames.

#53 Peter on 05.26.08 at 12:58 pm

I feel sick for those people who still wish on buying overpriced homes and condos when they keep saying they can flip them 2 years later or saying they are long term hard asset investor when they can hold onto their homes as a long term investment tool…Those who take this theory will eventually suffers once they find out they are outta a job due to downsizing or plant shut down or they wont be able to ride on debts….My friend recently bought a big 20 years built home for close $ 600,000, they took the home during a crazy bidding war from 10 offers (so they really bought it overvalued and they dont know who put those bid on these offers), once they went in, they found that home were full of smell, major clean up and renovations is needed (over 50K more need to put in) but they are out of CASH, now they are stuck, wife plan to save money to renovate it by eating cheap instant noodles everyday, husband need to save money by not going out to eat…All I can say is they are really POOR couple now, no savings, no insurance…if their home price went down, i am sure they would cry hell out of it…this is how sad a couple took possession of a home when price is overvalued !!!

#54 Jeannie on 05.27.08 at 9:30 pm

I can’t recall so much pessimism and gloom, and I’ve lived through several Alberta booms and Busts.

Do the so-called ‘survivalists have it right, and is this the time to practise a simpler lifestyle ?
Is anyone moving to a smaller community, and going back to the land?
Or..could one still make it in the big city with a good support group?

#55 sss on 06.12.08 at 4:43 pm

Peter, Your friends simly mistaken, buying unaffordable property from the very first payment. It is nothing to do with the RE bubble. Why they not buy, lets say, 400K property? Even it would be overpriced, it would be affordable, though. Most of people buy affordable homes in terms of mortgage payments. If those folks went with theirs given limit – that means the “bubble” exists in theirs heads.
Another thing. Most people taking mortgage for a five years, so the market fluctuations do not affect their payment plan for that period. So, what the hell, people decided to sell their homes after 1-2 years from the purchase date, if most of them still have the same income and same mortgage payments? I guess those ones are flippers, who did not plan and can not keep the property for a long run. But for those I don’t feel sorry.