Mortgage moves mean chaos?

Celebrity foreclosures. Read about it here.

Well, just when you needed some proof that the Canadian housing market is in serious trouble, here it is. Closing the barn door after the livestock is already out of the country, Ottawa is nixing 40-year amortizations, which are really rent, reducing the allowable and insurable term by 5 years. In addition, CMHC will no longer be in the no-money-down real estate business, insisting on 5% downpayments to qualify.

Also kaput are interest-only loans, liar loans (made without enough proof of a borrower’s ability to repay) and – here’s the blockbuster – a max of 45% for a borrower’s debt-service ratio. This is not the best news in, say, Vancouver, where people have routinely been forking over 70% of their income for the privilege of living in a deflating bubble.

The reforms are welcome, of course. But we needed them two years ago. No point now.

Be aware, though, the impact could be dramatic. Expect a surge of interest and activity between now and Armageddon on October 15th, likely followed by a housing wasteland. This will remove fuel (new buyers) from the fire, which is what the market needs to return to earth, but it comes just as natural forces are dousing the flames on their own. Conclusion: Any one who bought in the last year (at least) is toast if they need to sell in the next year (at least).

Also, big consequences for owners with loans coming up for renewal – which will also baloon listings and depress prices. All in all, about the worst time possible, I’d say, to do the right thing.

Here’s the media story:

OTTAWA — Canada tightened the rules on government-backed mortgages Wednesday to try to avoid the sort of housing meltdown that has damaged the U.S. economy. The Finance Department said it was reducing the maximum amortization period for new government-backed mortgages to 35 years from 40 years.

It will also require a minimum down payment of 5 per cent for such mortgages; previously, government insurance was available for up to 100 per cent of the value of a house. “Today’s announcement marks a responsible and measured approach by the government to ensure Canada’s housing market remains strong and to reduce the risk of a U.S.-style housing bubble developing in Canada,” the department said, adding that the measures would take effect on Oct. 15.

The government hastened to emphasize that Canada’s housing and mortgage markets were performing much better than in the United States. Canadian housing prices are in line with economic factors such as low interest rates, rising incomes and a growing population and the demand for residential housing remains buoyant at more than 200,000 housing starts a year, it said. The percentage of bank mortgages in arrears is also stable at 0.27 per cent, the lowest levels experienced since 1990 and well below the highs of 0.65 per cent in 1992 and 1997.

“The historically prudent and cautious approach taken by Canadian financial institutions to mortgage lending, combined with a sound supervisory regime, has allowed Canada to maintain strong and secure housing and mortgage markets,” it said. It nonetheless noted “accelerated financial innovation” in the mortgage markets since the fall of 2006, for example, allowing loans up to 100 per cent of the value of the house and increasing amortization periods to 40 years from 25 years.

The government will now require a consistent credit score for mortgages it backs, and a minimum level of loan documentation standards to ensure evidence of the reasonableness of property values and the borrowers’ income. In addition, government guarantees will not be allowed for high-ratio mortgages where amortization is not required in the first few years – e.g., mortgages that begin with interest-only payments.

Finally, it will set a maximum of 45 per cent on a borrower’s debt-service ratio – the proportion of gross income that is spent on debt service and housing-related fixed or essential payments.


#1 Ald, GTA on 07.09.08 at 4:42 pm

So what happens to these borrowers with 70% debt-service ratio when their mortagages come up for renewal in < 5 years? Would credit institutions still keep granting them 35+ years “rental” mortages?

#2 jrochest on 07.09.08 at 4:42 pm

Oh *fabulous*.

This is surprising, but very good, news.

#3 Chris H on 07.09.08 at 4:44 pm

When did the previous rules go into effect? 40yr mortgages were a Conservative idea, but who allowed no-money down and “liar loans” to be issued in Canada?

And how many of these loans are out therE?

#4 Mike on 07.09.08 at 4:47 pm

Just saw an interview on Yahoo finance dot com'Close-to-a-Joke'-Corcoran-Says?tickers=FNM,FRE

The US bailout there will not even make a dent in the problem there. There is a sentiment down in the States that why should the tax payer bail out the guy who got in over his head.
It seems that Canada has finally nipped this problem in the bud albeit way too late. I for one don’t want to pay taxes to bail out someone who went to far into debt and are loosing their homes.

#5 Rob M on 07.09.08 at 4:48 pm

shock and awe, RE market-style.

#6 Grant on 07.09.08 at 4:49 pm

Who says renewal!

Banks can call in their loans ANYTIME they want!!! One hick up in your mortgage payment. they’ll just call you up and say.. eh… we need to do another look at your debt ratio. COUNT ON IT!!!!

They’ll be calling this the CN Real Estate Collapse of 2008/2009!!

#7 jrochest on 07.09.08 at 4:55 pm

But, of course, before Oct 15 everyone will RUSH to get in on the fabulous opportunity to borrow more money than they can afford on income that they don’t actually earn for longer than they’ll possibly be alive…before it’s all gone.

So this might goose the market, too.

And now, work. Enough of housing blogs…

#8 jalarmo on 07.09.08 at 5:02 pm



#9 $fromaSia on 07.09.08 at 5:11 pm

Whats the diff between 35 or 40?

Whats the diff between 0 and 5% down?

The Government will move again to 30 year ammortizations and 10% min down… Just wait and see.

#10 smwhite on 07.09.08 at 5:15 pm

Needless to say, this is exactly like closing the barn door after the horses get out…

If you have a no money down, 40 year mortgage AND you’ve been silly enough to beat it up with a HELC, its time to practice your sad face…

You’ve just inherited 5 years of interest for poops and giggles! Good luck on that principal, Ottawa officially has called last year the top of the market(or made it) last summer!

#11 Crikey on 07.09.08 at 5:19 pm

“The Finance Department said Wednesday in a news release that the government will guarantee no mortgages with durations longer than 35 years. The government also will demand a minimum down payment equal to 5 per cent of the value of the home”

The horse is out of the barn now, but a modicum of sense is better than none, I suppose.

Great question by Ald, GTA.

#12 Kevin in Winnipeg on 07.09.08 at 5:21 pm

What was the debt-service ratio before??

#13 Michael on 07.09.08 at 5:23 pm

I can’t help but feel this will fuel another huge housing boom as people will compete with each other to take advantage of the fourty year mortgage to buy further properties before it is axed. I don’t see any reason why the government should be changing the rules at this point in the game. Houses are still more than affordable by world standards, and like I have said before anybody with a part time job who is responsible with their money can easily get themselves and their family into a nice home. The forty year mortgage just made this a little more manageable for these families.

A lot of poor families are going to be hurt by this new legislation, and because of these new rules they are going to now be forever denied the chance to gain equity in a home. Very sad that the conservatives have done this Canadians. Our market was fine as was, and didn’t require any government meddling. Unlike the states, the Canadian housing market was still growing exponentially in some places like Saskatoon and had a lot of momentum left before they come anywhere close to slowing down. It will be interesting to see how this new set of rules will affect these markets. Like I said at the top of my post, I predict this will cause prices to spike higher than ever as people hurry to take advantage of innovative forty year mortgage before it is killed off by the doom sayer government. So if you are looking to buy into the market, I would advise you to be very motivated and get out there before word of unfortunate happening gets out. With these new rules killing longer ammortization periods and zero down loans, home ownership will now be exclusive to only the very wealthy. It’s a damn tragedy and I can’t believe the government is doing this to Canadians.

#14 aiyah on 07.09.08 at 5:26 pm

Great, no more qualified buyers in Vancouver. It is so over.

#15 Calgary Rip Off on 07.09.08 at 5:30 pm

Bad news for Calgary realtors. Now you have even less working folks who will qualify to buy those overpriced houses. Hopefully this will level off the prices and more people actually then can afford to buy. It is best if realtors want the market to drop, that way they can earn a paycheck, and the buyer and the seller both benefit. Hopefully this government measure will help everyone.

#16 pbrasseur on 07.09.08 at 5:33 pm

Well if I read this correctly this is going to help burst the bubble sooner. This is a good thing obviously since it was going to burst anyways, better sooner than later.

#17 Brian on 07.09.08 at 5:48 pm

I just ran some cursory numbers.

To buy the average Vancouver detached home in Vancouver I would need about $750 000.

Under the new rules, that would work out to:

1) a bare minimum downpayment of $37 500 (up from $0)
2) monthly payments on a 35-year mortgage @ 6% $4027
3) the monthly take-home income required for a family to qualify for that mortgage: $8949

The average take-home for a Vancouver family? Something like $2500.


#18 Rob M on 07.09.08 at 5:59 pm

One little detail in there … rules don’t take effect until Oct 15.

Still 3 months for liars to get loaned – there’s never been a better time to buy! :>

#19 EJ on 07.09.08 at 6:04 pm

Folks with vested interests in high RE prices see this as a bad decision. However, it’s a very good decision for the overall economy. When every last dime of people’s income is tied up in housing, that leaves nothing else for other industries. Combine this with record-high energy costs and rising food prices, and you’ve got a recipe for stagflation.

They should have axed ALL of these crazy, “innovative” mortgages and went back to what has worked for decades. These never made housing more affordable for anyone, they just raised prices and dragged people into life-long debt.

#20 Crikey on 07.09.08 at 6:04 pm

Give it up with Saskatoon, Michael! You’re reeking desperation out of every pore, now that your specuflipper fantasies have been hosed down by some common sense.

Sell- SELL NOW!!!

#21 Constantine on 07.09.08 at 6:10 pm

I think this announcement will support the market through to mid fall. Bearish for next spring though.

#22 Mr.Simpleton on 07.09.08 at 6:11 pm

Michael Said:
Houses are still more than affordable by world standards, and like I have said before anybody with a part time job who is responsible with their money can easily get themselves and their family into a nice home.

Say Whaaaa???
I guess you’ve never lived in Vancouver, Michael.
Where are you from anyway?
And can I have that part-time job you’re talking about?

#23 lgre on 07.09.08 at 6:17 pm

I have to agree with Michael on this, I think this news will fuel the RE industry in the next couple of months and will increase prices and sales.. This is ammunition for RE agents and bankers to sucker more buyers into buying.

#24 Cam on 07.09.08 at 6:18 pm

45% of gross income = ~$2600 mortgage for the average Vancouver family (assuming $70,000 annual household income). At 6% interest and 5% down for 35 years that’s about a $500,000. Wow, that’s quite a gap from the current housing prices.

#25 Mr.Simpleton on 07.09.08 at 6:30 pm

That’s 45% TOTAL DEBT LOAD, not just mortgage.
If you have a visa bill or car payment, you’re royally screwed in Vancouver.

#26 Rick on 07.09.08 at 6:30 pm

I just can’t wait to read VULTUR’s delluded comment on this one.

#27 David on 07.09.08 at 6:31 pm

Talk about finding religion on the deathbed. The asset bubble inflation has already peaked and so has credit expansion. The structural problems in the housing market are cribbed on an already crumbling foundation. This minimalist policy tweaking is at this point so irrelevant and in fact might even accelerate the collapse by moving the goal posts, as it were. A little more mortgage and a little less voodoo in 2008 is some minor acknowledgment that mistakes were made in the past. That is about all these changes are doing. This certainly will not at this late juncture clean up the wreckage the housing market faces down the road.

#28 EssGee on 07.09.08 at 6:33 pm

Michael – post #13 wrote:
“With these new rules killing longer ammortization periods and zero down loans, home ownership will now be exclusive to only the very wealthy. It’s a damn tragedy and I can’t believe the government is doing this to Canadians.”

– Really it’s hard to read this with a straight face!
Home ownership is not a right, it’s a privilege. People need to get that fact straight. It’s a privilege earned by people who are financially responsible and don’t get in over their heads in debt.
If you can not afford a home with a 25 year amortization, then you should NOT own a home. If you can not afford to put even a measly 5% of the value as a down payment, then you should NOT own a home.

Trust me, I wouldn’t exactly refer to those who, over the years, have taken out conservative, reasonable mortgages as “wealthy”. I believe a better terms would be “Sane”.

Anyhow, glad to see that this 40year/0% charade has finally been axed. I would have liked to see the max amortization reduced to 30 years but this is a good start!

#29 Brian on 07.09.08 at 6:39 pm


As of October, basically NONE of those people qualify for mortgages anymore. And most of the people they were planning to flip their presales to don’t qualify anymore either.

So all the speculators will actually have earn their money instead of spending their days watching little boys take showers at the Y while they wait for God and Bob Rennie to make them rich.

#30 Brian on 07.09.08 at 6:47 pm

Michael: how can the tightening of lending standards fuel price *increases*?

Do you think that people are going to rush to bid UP the price of a house, knowing that when they want to flip it it’s going to be substanially HARDER for the next owner to get a loan?

Anyone who wants to flip, or divest, or move, or upgrade after October now knows that THE POOL OF POTENTIAL BUYERS WILL BE DRAMATICALLY REDUCED — AS WILL THE POOL OF AVAILABLE CREDIT.

Those don’t sound like “boom” conditions to me.

#31 Cam on 07.09.08 at 6:50 pm

Look for inventories to start rising at even higher rates in speculative places as people holding investment properties realize they have 90 days to find a greater fool.

#32 My_view on 07.09.08 at 6:52 pm

So what the next three months will be more sales. ITS OVER, NO MORE FREE $$$$$. Hmm can you say credit crunch has washed ashore. I predict BOC % rates going up. Most people dont even have 5 % for a car down payment.

#33 kabloona on 07.09.08 at 6:57 pm

I think “Michael” is pulling everybody’s collective leg….


Hey, Mike….try the other one, it’s got bells on it!

#34 Chincy on 07.09.08 at 7:04 pm

Government being a little proactive a little too late…it will be interesting to see what the news shows say about how this wil affect RE…it will kill the condo market (not that it wasnt in for a sacrifice), which kills the upward food chain. SHould b interesting too watch the next 12 months here in Vancouver…

#35 David on 07.09.08 at 7:10 pm

The real estate bubble was entirely fueled by cheap money and irresponsible lending practices. Far too many of the new mortgages written in places like Calgary during the bubble were 0/40. Pretty much anyone who was not incarcerated in Drumheller Federal Penitentiary or earned a slightly better income than working at Tim Horton’s got qualified. This can in no way be construed in any rational sense as making housing affordable to new market entrants or poorer folks. The bubble was fueled by debt expansion and not income growth. The discontinuity between these two non intersecting lines will become quite apparent over the next few years.

#36 My_view on 07.09.08 at 7:13 pm

Nicely said David.

#37 crashing yuppy on 07.09.08 at 7:45 pm

It is now officially over people.


Why, because now everybody with a clue knows that they have until Oct 15 to get out. The pool of potential buyers is dramatically reduced by this news.

As Garth said the 0/40 crowd was the fuel driving drving this bubble for the last year and a half.

This is Government has just poured water on the flames.

The herd has just been spooked and I can hear the stampede starting. It will start in Van then Cal and then wash into the centre of the universe.

#38 liverless on 07.09.08 at 8:10 pm

The Dept. of Finance cannot not blind to what is happening to Freddie Mac and Fannie Mae in the US. Take a look at the stock chart of Freddie:;range=1y;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

Freddie and Fannie fill a similar function to the CMHC. They insure prime mortgages. The stock market is signalling that these institutions have serious problems. Maybe a bailout is coming.

This has to be a concern for the Canadian government, who at the end of the day will be responsible for CMHC loans.

Its worth noting that the CMHC has had looser lending standards then Freddie or Fannie, who until recently had a limit on loan size of $417K, and did not accept 40 year mortgages.

This is a huge development.

#39 jrochest on 07.09.08 at 8:29 pm

It might also cause panic buying — for the last tiny ragged remnant of “Greater Fools”TM who are terrified that they’ll never get a mortgage under the new rules.

So there might be a spike — loathe though I am to agree with Michael-from-Saskatoon — but it’ll be followed, yes, by a plummet.

#40 rocker guy on 07.09.08 at 8:35 pm

Michael: keep in mind that the government is only taking away the cookie jar on publicly insured mortgages. You can still get a 40/0 mortgage privately – although the private option might also disappear if the pool of greater fool lenders dries up!

Burn baby burn!

#41 dumb dude on 07.09.08 at 8:38 pm

what happens if i have a 0%/40 yr mortgaeg that comes up for renewal on Nov. 1? Am I Greeked up the ass and now don’t qualify for a mortgage renewal?
is the bank going to require me to pay back 5% of the mortgage to meet my 5% equity?

worry wart in Calgary :-(

#42 JB on 07.09.08 at 8:43 pm

Typical of all credit cycles, lend and speculate on the way up, tighten and retrench on the way down. Is it a wonder why markets overshoot on both sides.

#43 smwhite on 07.09.08 at 8:48 pm

The difference in your monthly payment between the 40ym and the 35ym is about 4% a payment.

Ald, GTA, I think we all know the answer to your question. The banks are going to get the five years of rent and try to recoup what that doesn’t cover on the principal via bankruptcy/foreclosure sales if the “owner” can’t cough up the mortgage payment.

There will be some that think this is one last chance to get in, if you still have a glass half full on real estate in todays market, I pity the fool…

If your glass is half emtpy, it sounds like the admittance of a mistake in economic policy and an attempt to bail water out of a slowly sinking ship that rhymes with mi-man-ic.

I do know the window for speculators to exit is shrinking. Actually the drop dead date is October 15th, about the same time corporate year end numbers come out and the admittance of more mortgage write downs from the major banks are divulged to the public. There is also the off chance the USA with stage another “event”, my guess for a party local is the Straight of Hormuz.

If I were in Vancouver sitting on some of this wonderful speculative downtown condo real estate, I’d be writing a letter to my friends at the Olympics and suggesting to them that they start awarding large cash prizes or condo credits from the EBGV.

#44 jo on 07.09.08 at 8:52 pm

Yes, this will help kill the market. Here in Toronto, our illustrious Mayor David Miller tried to kill the market with his duplicate home buying tax. But even he is smart enough to know that if you kill it dead, there is nothing left to tax. Mayor Miller even took our tax dollars and paid for big adds on buses telling us that he wanted Harper to give Toronto 1 cent of the GST. Can you believe it? Excuse me I’ve got to go now and call the Prime Minister, after I finish throwing garbage at the garbage truck that doesn’t want to pick up my garbage

#45 Jon B on 07.09.08 at 9:06 pm

I welcome a return to the good ol’ days when only those that could genuinely afford a home were the only ones buying them.

#46 calgary on 07.09.08 at 9:08 pm

Please if you have family/friends who want to get in quick before the 40 year 0 down is gone. Plead, beg and shout at them what the future pit falls could be. I can see it being very tempting for first time buyers that will not qualify after the change.
Micheal may be correct. Prices may hic-“up” while naive buyers panic to buy while they can.
With advice like ” no better time to buy” “get in while you can” these optimistic persuasions of easy money is very seductive, as we have seen… Now its on a 90 day steroid.

#47 jrochest on 07.09.08 at 9:18 pm

Hey Garth — I don’t have my copy of Greater Fool sitting here, but I know you mentioned this stat. What’s the percentage of 40 year mortgages a) in the market as a whole and b) in entry-level mortgages?

The only stat I know is valid is that 40-years now account for 45% of all new originations. Astonishing after two years. — Garth

#48 mike on 07.09.08 at 10:04 pm

Can’t see a flood of people lining up at cmhc thinking they should get in under the wire. CMHC will not just let things go crazy and boom on oct 15 turn off the tap. If you are on the edge they should err on the side of caution and deny any borderline cases even before oct 15. Besides aren’t these higher interest mortgages anyway so who would be attracted to paying extra just to beat the deadline. Now the realtors may use this to coax some and get those multi offers going but if you are just scraping by you may be more interested in playing it safe in case you loose your job than leaping into ahuge 40 year committment. I would like Garths opinion? Spawn a frenzy or quicken the cooling?

#49 patriotz on 07.09.08 at 11:00 pm

what happens if i have a 0%/40 yr mortgage that comes up for renewal on Nov. 1?

CMHC insurance is paid for once at purchase time and is valid for the entire amortization period of the mortgage, regardless of renewals. So the banks will be quite happy to renew.

Remember the banks aren’t holding the bag for insured mortgages so as long as the buyer keeps paying, they’re more than happy to keep renewing.

#50 Keith in Calgary on 07.09.08 at 11:17 pm

CMHC is Canada’s subprime lender……..plain and simple……imagine the horror, making CMHC ask for a down payment, decent credit, and supporting documentation. Didn’t all the REIC talking heads say we never had subprime here in the first place ? Why are they doing this then ? LOL !!!

And if things weren’t in the sh*tter in the first place, none of this posturing would have been necessary.
35 or 40 years, it does not matter….this is a typical case of a government trying to “look like” it is doing something about a problem (and being way to late to the party I must add) without actually accomplishing anything concrete.

Sort of like the BoC and the Fed as it regards their action on inflation….which is out of control. They do nothing and lie to us…….

#51 Tom on 07.10.08 at 12:07 am

Looks to me like the retraction of 40 year notes is offset by an increase in the debt service ratio to 45%.

My guess is that there is no longer any MBS market for CMHC to sell it’s 40 year paper into so they are putting the best face they can on failure and arguably loosening standards even more.

Now, between now and Oct, can I get a 40 year mortgage AND the new 45% debt service? There could be a bigger spike than people think here depending on how this all works out.

#52 simon on 07.10.08 at 12:16 am

Unless I am mistaken, this only affects principle residence buyers. High ratio mortgages are not available to investors, correct?

Most lenders have their own lending criterion, irrespective of the CMHC. Even if the CMHC eventually reimburses them, the hassle of having to deal with a buyer not making payments/etc is a serious consideration for any lender.

Also, many people who used the 40 yr option did so in the interest (no pun intended) of having greater flexibility in paying down their principle. And not because they were unable to qualify for a 35 yr (or less) amortization.

I make no prediction on the future. But wanted to contribute to the dialogue.

#53 Jeff Riverdale on 07.10.08 at 12:49 am

For # 13 Michael:

‘Our market was fine as was, and didn’t require any government meddling’

Michael I largely agree to what you said. Of course
CMHC is a government organization and if it weren’t for CMHC people would have had to qualify for mortgages like they did in the old days with 25-30% down and a 25 year amortization. Not necessarily a bad thing. The government is now reducing its role in the housing market. Just like you wanted :)

#54 Peter on 07.10.08 at 12:54 am

Yeah, see what is the interest rate would be next year when you see all these VARIABLE guys and gals will be threading water when they decide to RENEW to a FIXED term…@ 6.5, 7.5, 8 % or higher…and their monthly payments would increase $ 200 – $ 300 / month so I am sure they will be walking away from their homes (new mortgage payment amount PLUS Property tax increase) and condos (new mortgage payment amount PLUS maintenance Property tax increase)…!!Needless to say, $ 1.40 / L of GAS, 30 – 40% increase in heating cost…PLUS unprecedented increase in FOOD !!! What will you see ?? I can’t say anything when all these INFLATION factors KILLS every new boys and gals who dream of home ownership with 0 /40, 5/35 5 % second loan..

#55 Peter on 07.10.08 at 12:59 am

This 5/35 will eventually brings back to 0/40 in a double edge sword way because banks always have ways to put this 5 % as a secured line of credit (balked at your GIC or your mutual funds) or unsecured line of credit (with floating rate – prime + %) or some kind of second mortgage or fixed rate loans (7 or 8 or 10 % interest) which will be very scary for homeowners…but will they learn a lesson, I AM SURE NOT !!! Because these guys and gals will take high interest loans no matter what until they cant afford to pay it and start to default the loans and mortgages when they see all these bills coming in !!! Lastly, MAKE it a FINAL BLOW with some 0%, 24 or 36 months financing from your FURNITURE of APPLIANCE store and oops..missed 4 out of 24 month payment, interest went from 0 % to 28.8 % or 36.6 % from your financing company (GE Money, CITI Financial, Wells Fargo, HSBC Consumer named it) !!!

#56 Andrew on 07.10.08 at 1:10 am

Well I guess I will start house hunting sometime after October 16. No reason to rush. I pity my poor ex-neighbour who bought a condo in March though. Ouch that monthly payment and condo fee are definitely going to start hurting abit more in October when the slide in prices begins to take hold. Although even in Winnipeg I have seen prices already starting to fall by thousands. I imagine I will have real estate brokers falling all over themselves trying too sell me a house toward the end of the year. It will be entertaining to watch…

Thanks Garth for writing a eye opening book.

#57 Mike.slob on 07.10.08 at 1:32 am

Also From October 2008 we can expect BOC to increase interest at least 0.25% and to next June/09 you can expect increased interest to 0.75%.
If this situation with 5% down and 35 years mortgages results too many foreclosures (plus pressure on homeowners with fuel price,higher property tax,inflation and unemploement rate in Sept.2009 will be about 6.9% (in Feb/2008 was 5.8%) Than the Government will move again to 30 year ammortizations and 10% down….
Real Estate Collapse in Vancouver,Alberta and GTA will be 2009/2010. And when will can see real buyers market? In 2010 after the Olimpics in Vancouver you can expect between 20% to 40% reduced prices in Vancouver….
The same story will be in Alberta with reduced prices about 15% to 25%.
And in GTA we can expect reduced prices between
10% to 20% till end of 2010…..
My advice is ” no better time to buy house than 2010” ,
but if you buy a house in 2008 than you are naive and greaterfool….


#58 Mike.slob on 07.10.08 at 2:04 am

“The large Canadian cities are seeing slower activity, with sales in Toronto decreasing by 14% since the beginning of the year, by 32% in Calgary and Edmonton, by 20% in Vancouver and by 3% in Montreal.” Can you believe it?
And now from October with 35 years and 5% down,and
BOC 0.25% rates going up will be again REAL ESTATE BOOM!

#59 confused and a little crazed on 07.10.08 at 2:06 am


you keep promoting the 40 year 0 % down mortgage. So what are doing about it. You keep telling it a good thing …people should get into it before it to late.

If you believe in it so strongly you should utilise it to the max buy everything you can get your hands on. all of those presales…regardless if it’s a townhouse or condo.

Prove these Bears are wrong and when you have your picture in Canadian Business or Macleans then you can have the last laugh.

at least these bears are sticking to what they are saying by not buying property…can you say the same. are you backing up your tough talk on how 40 year debt is a good thing.

Does a 18 year old with a part time dairyqueen job deserves to get in on a house? the govt is doing a bad thing with restrictions. The govt should actually lower to the interest rate .05%. That is the right thing to promote real estate. Buy now because the economy is always good. buy now because the interest rate never increases..Buy now because nothing bad ever happens unexpected like radiator busts in your car or my loan for tuition get cuts off or delayed. As long as I can make the payments now.

good luck with that

#60 confused and a little crazed on 07.10.08 at 2:09 am


you keep promoting the 40 year 0 % down mortgage. So what are you doing about it. You keep telling it a good thing …people should get into it before it to late.

If you believe in it so strongly you should utilise it to the max by buy everything you can get your hands on. all of those presales…regardless if it’s a townhouse or condo.

Prove these Bears are wrong and when you have your picture in Canadian Business or Macleans as one Canadian’s best business minds…then you can have the last laugh.

at least these bears are sticking to what they are saying by not buying property…can you say the same. are you backing up your tough talk on how 40 year debt is a good thing.

Does a 18 year old with a part time dairyqueen job deserves to get in on a house? the govt is doing a bad thing with restrictions? The govt should actually lower to the interest rate .05%. That is the right thing to promote real estate. Buy now because the economy is always good. buy now because the interest rate never increases..Buy now because nothing bad ever happens unexpected like radiator busts in your car or my loan for tuition get cuts off or delayed. I don’t need a financial buffer.As long as I can make the payments now.

good luck with that

#61 Future Expatriate on 07.10.08 at 2:33 am

Hallelujah!!! At least they’re closing the barn door.

In the States they’re STILL trying to figure out how to bail out everyone to KEEP IT GOING….

#62 David on 07.10.08 at 5:42 am

These idiots dropped napalm on a three alarm fire and finally decide it might be a good idea to call 911. This last minute attempt at instant salvation is meaningless. CMHC decides to change the rules about two minutes before a total market collapse. Not going to happen here and this time it is different right? My children are just itching to pay the tax bill for the big real estate party.

#63 Ouch on 07.10.08 at 7:58 am

Speaking from experiience as a person who watched their father battle 22% interest rates in 1980 and battled the 1990 crash personally. I believe people have also lost their eye on the ball. Jeff Rubin of CIBC was the only bank economist over the last 10 years to call for this drastic decline in interest rates. He is now calling for at least a 200 basis point increase in prime sooner than latter. Combine this with the inflation we are having and folks very quickly we will revisit 1980. 5 year mortgage in 16 months back to 13%. God’s Speed John Glen.

#64 Mylene on 07.10.08 at 10:03 am

It’s all about population control and eliminating the middle class. The middle class is pissing off the upper class and the striving poor of the slums is envious. The government creates systems and controls to ensure the middle class doesn’t move up and enter the exclusive group kept by the rich for so many decades. There is an agenda in place. It’s about weeding out the middle class, killing the illusion of the dream and the Rich Dad Poor Dad mentality of everyone can get rich on real estate.

The secrets of Canada’s world-leading middle-class success
From Saturday’s Globe and Mail
August 4, 2007 at 12:00 AM EDT

LONDON — This long weekend, as Canadian highways fill with lakeside-bound cars and airports with resort-bound families, it is hard to believe that we are anything but a middle-class nation.

After years of full employment and impressive economic growth, you’d think the entire country had been elevated into the secure world of home ownership, retirement savings and weekends on the dock. There’s some truth to this vision – but it’s a lot stranger than you’d think.

The middle class, around the world, is in trouble. As my articles from India in the past two weeks have shown, poor countries are seeing stunning growth without producing the sort of big, sustainable middle class that leads to peace and long-term stability. There are too many barriers to prevent people from leaving poverty.

But what about countries such as ours, which have had big middle classes for decades? Here, we see a surprising version of the same effect – with notable exceptions. A comprehensive look at the workings of the world’s middle class has just been published by Steven Pressman, an economist at Monmouth University in New Jersey. In his The Decline of the Middle Class: An International Perspective, Canada plays a fascinating role.

From 1980 to 2000, a period of explosive economic growth and expanding wealth, most major Western nations actually saw their middle classes shrink in size. The middle-income ranks (earning 75 to 125 per cent of the median income) in Britain shrank by 4.5 percentage points; in Sweden by 7.1 points; and in the U.S. by 2.4 points. These numbers represent tens of millions of people.

Were all these people disappearing from the middle class because they got rich? Or had they failed to find a place on the economic escalator and slipped to the ground floor?

“There was both upward and downward mobility,” Mr. Pressman told me, “but downward mobility exceeded upward mobility by around two to one.”

But there are exceptions to this trend. Switzerland’s and Germany’s middle classes stayed roughly the same size. And two countries – Norway and Canada – saw their middle classes grow substantially. In Canada, it grew to 37 per cent of the population from 33 per cent, the equivalent of a whole mid-sized province joining the station-wagon brigade, moving Canada into the league of Scandinavian nations in the size of its middle class.

Some of this came from wealthier Canadians being humbled: During the same 20 years, the upper class shrank by 1.9 percentage points, to 33.3 per cent of the population. But more came from poor families moving up. Canada is a middle-class success story, especially compared with the slouching United States. But the story doesn’t end there.

Mr. Pressman set out to learn what is making the middle class collapse in many countries but expand in others. Some have attributed these changes to an aging population, the number of working women or divorce rates. He used statistical methods to remove age and gender from the picture, but the patterns remained the same.

Then he looked at unemployment: Were countries with rising employment rates experiencing a growing middle class? Nope. Britain has far lower unemployment than Canada, but a shrinking middle class: “While jobs were being added, households were not moving into the middle class.” In the Netherlands, unemployment fell dramatically, but the middle class declined.

Then Mr. Pressman took his data and subtracted everything except salary and wage earnings. That is, he looked at what would be happening if people lived off only the money paid by their employers.

Suddenly, everything changed. Canada’s great middle-class boom turned into an enormous decline: If people were forced to live off their earnings alone, our middle class would have shrunk by a staggering six percentage points. The same was true in Germany. In Britain, the middle class would have contracted even more dramatically.

What had Mr. Pressman subtracted? In short, government: All the handouts, tax benefits, subsidies and rebates that transfer money into middle-class pockets (not including pensions). Without government help, Canada’s middle class would be endangered.

In a modern economy, Mr. Pressman told me, “I am not sure that the middle class can be self-sustaining. It seems to require active government policies. The market tends to produce great inequalities in income; these inequalities seem greater in a global economy.” Contrary to earlier economic belief, the countries that are most competitive in a globalized economy are those with the most robust tax-and-spend programs. But they have to be aimed at the right places.

Many Canadian families wouldn’t be middle-class if it weren’t for government handouts. One key example is the thousands of dollars that Ottawa reimburses parents for child-care expenses each year: Without it, many women wouldn’t be able to work, so their families would be deprived of one income and may slide into the lower-class bracket. Tax-funded aid for education savings, first-time home buying, retirement savings plans and medical coverage add up: If you gave up all these breaks, would you still be in the middle class?

I compared these findings to information on the money governments actually spend on different classes and got a surprising result: The countries doing well are the ones that don’t just help out the middle class, but do so at the expense of the poor.

Canada hands a comparatively paltry 22 per cent of its spending to the poorest three-10ths of the population and a generous 64 per cent to the middle four-10ths, according to the Organization for Economic Co-operation and Development. Germany, one of the few other countries with a non-shrinking middle, gives only 22.3 per cent to the poor.

Compare that with Britain, whose Labour government spent the 1990s changing social programs so that the money went to the poor rather than the middle class; in Britain today, 34.7 per cent of social spending goes to the lowest-income third – and yet the British middle class has shrunk. In Sweden, where almost 30 per cent of spending goes to the poor, the middle class was clobbered.

(An exception is Norway, which spends a record-breaking 43.8 per cent on its poorest third and saw middle-class gains even bigger than Canada’s. But Norway’s economy consists largely of oil revenues, allowing taxes and spending levels that, in other countries, would probably destroy the very economy that makes the welfare state possible.)

However, countries that saw middle-class gains also tend to be ones that don’t tax the poor heavily. Sweden, surprisingly, does. Canada doesn’t. Arguably, governments gain more by making middle-class life easier than by simply aiding the poor. The poorest third are doing a lot better now than they did 20 years ago; unlike the middle class, they saw formidable income gains. But not enough to shift many of them into the secure middle.

It may be that traditional welfare-state programs do more to keep people in poverty than to guide them out – a criticism that has been levelled from both the left and the right. Or perhaps there’s a new sub-class of “precarious” casual workers, who never are quite poor enough to qualify for welfare or prosperous enough to earn the state benefits of the comfortable middle. Such workers, key to our new national wealth, could be in serious trouble.

Herein lies the paradox of the modern middle class: Its existence is reliant on a thriving and open market economy, but its size and sustainability are equally dependent on the tax-and-spend mechanisms of the modern welfare state – which, it turns out, are even more important in globalized, high-competition economies.

The countries that are doing best are those that spend serious money on cultivating and maintaining a middle class. Many poor countries, despite having developed booming economies during the past 15 years, fail to join the middle-class club because they can’t afford to erect government-supported stepladders to success. And countries such as Canada, which can and do spend that money, have done the best at surviving the social turmoil of our age.…ernational/home

#65 Mike on 07.10.08 at 10:52 am

David’s posts 27, 35, 62 are not only hilariously well constructed but so bang on the money. As usual Ottawa is so far behind the curve that it is a joke. As David points out though, we and our kids may end up paying for the fallout.

#66 mattbg on 07.10.08 at 12:05 pm

I like this move, because it will make houses cheaper for people that are more qualified to buy a house. It doesn’t go as far as I’d like, but it sends a message.

I’m not sure what Mylene is on about. Letting 0/40 continue is more likely to hurt the middle class than is 5/35 because more of your money is going into someone else’s pocket over the term. It might look middle class to you to “own a house”, but when you barely have 10% equity after 10 years, you don’t own very much: you’ve just spent 10 years putting a large amount of money into someone else’s pocket.

Of course, if you’re a speculator who holds properties, or one of those people with too much of their investment portfolio tied into an existing house, it’s not good for you. But those are the costs of speculation or not having a balanced portfolio. It’s not a secret that both of those things are risky.

#67 $fromaSia on 07.10.08 at 12:18 pm

Home inspection alert.

V718343 Garth look at the photo of the downstairs bathroom. It has a breaker panel above the tiolet code states that any switch be no closer than 3 feet from bath/shower, this is a breaker!!!

Anybody can do it yourself but do they respect or know about building codes?

#68 WetCoaster on 07.10.08 at 12:35 pm

we and our kids may end up paying for the fallout.>/i>

May end up paying? It’s a certainty. That was the plan all along. Banks won’t take a hit, people will. Anyone with a couple brain cells to rub together could see where these lunatic lending practices were heading. This didn’t just happen by accident.

#69 Westcoaster on 07.10.08 at 1:04 pm

Back in the day people were given a range of, I think, 30-35% of income as a wise guideline (and stipulation) for investing/spending on a home. Those days are obviously long past. My impression from this gov’t missive is that it’s too little too late but a low-caffeine wakeup call nevertheless.

#70 Mr.Simpleton on 07.10.08 at 1:57 pm

I long for the days when a house was a dream you had to work for and not an investment asset you can get with no money down. We will never go back in time though… or won’t we?

#71 kabloona on 07.10.08 at 2:29 pm

I bought my first place in ’91…..I had $50k down, a full-time gig with the Feds – and they balked at giving me a $117k mortgage!

Fast forward to 2008: my Sister was telling me about some 24-year old fireman who got approved for $500k mortgage and just bought his first house in Victoria….her comment was that they’re leading the kid down the garden path by giving him that much money. She thought it was “immoral”….. ;-)

All I can say is I guess the bank laid the risk off onto CMHC…..i.e. the taxpayer!

#72 David_#3 on 07.10.08 at 2:49 pm

kabloona wrote “All I can say is I guess the bank laid the risk off onto CMHC…..i.e. the taxpayer!”

Back then (meaning a couple months ago…) there was no risk, because obviously RE would always go up!


#73 dotava on 07.10.08 at 3:33 pm

smwhite #43

“The difference in your monthly payment between the 40ym and the 35ym is about 4% a payment…”

Your math is incorrect – difference should be around 14%.

#74 smwhite on 07.10.08 at 3:41 pm

I don’t want to turn this into a side-circus but I’ve been watching this train wreck happen in slow motion for what seems like forever with my distrust in mainstream media and government statistics, ever so increasing with each GDP and inflation report.

This interest rate event was purposely staged, not for the good of western society; so entry level corner store clerks and such could afford a home, this is about a purging of your possession/assets back to those whom you originally obtained them from…

Move the video to 8:25(unless your into listening to NWO rhetoric) and listen to Canadian journalist Daniel Estulin talk about the credit crisis and the Bilderberg group’s influence on banks(The Bilderberg Group is the central banks!)

Also I’ve attached an interview with Daniel from May 2005 and he predicted/reports that the Bilderberg members were planning on aggressively raising the price of oil, a la demand destruction. The guy is 100% bang on, which is scary considering what he has been uncovering about Bilderberg.

DE: I mean this is one of the most terrifying conferences I think in history at least the 13 years that I’ve been covering it. One of the biggest concerns that these people have is needless to say energy and you can expect over the next couple of years the price of oil to up to about $120 to $150 a barrel —

That was from May 2005, when we were all on top of the world, or should I say, the bubble.

#75 smwhite on 07.10.08 at 4:57 pm

#73 dotava…

The difference in your monthly payment is NOT 14%,

The difference in the “AMOUNT OF INTEREST YOU PAY OVER THE LIFE OF THE LOAN” is approximately 15%…

You pay about $437,650 interest on a 300K home over 40 years.

You pay about $370,500 interest on a 300K home over 35 years.

You pay an extra $67K.

370500K / 437650 = .847 or 85% – 100% = 15%

The monthly payment on a 300K home @ 5.5% on a 40ym is: $1535

The monthly payment on a 300K home @ 5.5% on a 35ym is: $1600

Really quickly we can see that its $65 in the difference which doesn’t equate to 14% or $1535, its actually about 4.5% if I round up…

But its a good point that to save $65 a month(which is 5 years extra payments “saving” you $4000 short term) it will cost you 67K in interest.

Here are a couple mortgage calculators for everyone to practice your with.

#76 nonplused on 07.10.08 at 5:08 pm

Blogs are fun, especially the comments section!

Garth’s blogs are relatively consistent that Real Estate is over valued and due to correct and so far he’s been able to compile a significant number of articles to support that thesis.

But if you look at the comments, it seems people are nearly split on the affect of CMHC tightening their standards from “should reduce demand/lower prices”, to “most people with a 40 year amortization could afford shorter amortizations, they just want the flexibility” to finally “tighter standards will cause a mad rush to get in while you can!!!!”

I say it’s mathematical, looser standards and lower interest rates caused (that’s right, it was the primary driving factor, not scarcity) the real estate boom, so tighter standards and higher rates should it seems have the opposite effect. What happens for 100 days until the standards are implemented is just a speed bump.

Also, it doesn’t make much sense to me that there could be a panic buy up at the last minute, for 2 reasons:

If tighter standards down the line could cause a panic buy up, why not just increase the standards every 6 months with a nice 3 month grace period? For example, if the reduction to 35 years causes a panic buy and drives up prices, why not reduce it to 30 years in March ’09? Then the following October back to 25 years? Long about 2010 they can announce the final reduction in allowed amortization from 5 years to 0 years and really drive up those prices!!! No, I don’t think so. Lowering the amortization will drive the highest risk, least able to afford marginal buyers out of the market, which lowers demand.

Also, Speculators. People who specialize in buying distressed properties and selling them on the increase or those who have been profiting “flipping” houses have a significant amount of inventory right now and it’s not moving. Ottawa seems to have said: “Hey, we’ve got a solution to the housing market for you! How about this: we are going to gradually reduce the artificial stimulus of lax lending standards and low rates! How do you like those apples??? We are going to try and save our own sorry, er, campaign platforms, from having to bail out CMHC! Ha, ha, the joke is on you! Besides, we looked State side and so far as we can tell bailouts don’t work anyway, so you are on your own.” My guess is this is not what the specuvestors want to hear. The RE industry was hoping for a US style attempted bailout to save their sorry, er, speculative positions, not to be thrown to the mercy of the markets. They will panic now, and avoid the rush.

Side story: I was in to see my lawyer the other day to discuss 2 or 3 of my many problems for which I need his services, and mentioned that I’d sold my house and had lined up a rental for now. His response “Good for you. Prices are falling.” We are talking the Calgary market and a good portion of his business is land title transfers and such, so he sees it every day.

Another side story: I flew from Seattle to Portland (and back) the other day, which is a fairly low altitude fight due to the short distance (they actually have to fly around Mt. St. Helen’s). I was surprised by the number of available subdivisions (roads paved, sidewalks in) on the outskirts of every major town with absolutely no construction activity what so ever. Just grass growing. I know, the bulls hate US stories because they have no relevance to God’s chosen children of the North, but I thought it was interesting.

#77 The Mole on 07.10.08 at 5:16 pm

Finally the government is doing the right thing – limiting the market and bringing demand back in line to where it belongs longer time. This is what you’ve all been commenting needs to happen – why the animosity against government that is doing the right thing.

Too many conspiracy theorists here! Get a grip.

#78 Rob M on 07.10.08 at 5:38 pm

ok now, Daniel Estulin … uh huh

I really don’t think there’s much room for conspiracy theories, it’s just greed that runs amok as it always seems to when times are ripe for it.

#79 Rob M on 07.10.08 at 6:34 pm

The Mole writes:
“…- why the animosity against government that is doing the right thing.”

well because they allowed the 0/40 and accompanying easy credit mentality to flourish in the first place when they could’ve had some backbone and done the opposite. Too little, too late – must agree with that.

#80 dotava on 07.10.08 at 7:07 pm

#74 smwhite

My point was that 4% is way off – I did the math by hart and 40 years (480 month) divide by 35 years (360 month) you getting something over 14% – what is just rough since paying interest on interest for longer period of time exceeding that.

#81 dotava on 07.10.08 at 7:09 pm

sory my bad 35 years is 420 months. :-)

#82 dotava on 07.10.08 at 7:13 pm

but math is still on – 40/35 or 480/420 = 1.142857143

#83 Don't understand the problem on 07.10.08 at 7:15 pm

I am perplexed by all the complaining about the CMHC tightening the rules.

Readers of this Blog aren’t in over their head with mortgage debt.

So what’s the big deal.

#84 David on 07.10.08 at 7:31 pm

Mole you are missing the target very badly. In less than a decade Canada has had an unprecedented two wealth destroying asset bubbles, tech and now real estate. Saying the government is now doing the right thing now is questionable and even if it is the right thing as you say, the timing is way out of line. Think of it as sailing into uncharted waters with no map and no navigational devices. Think of it like a doctor finally coming with a diagnosis for a dying patient.
There was no conspiracy, because at the very minimum a proper conspiracy requires a certain amount brains, planning and unity of purpose, things that escape most normal mortals. A partial admission of a cardinal sin is better than nothing.

#85 michael-you lose on 07.10.08 at 8:30 pm

read my name, over and over and over and over…..

I know you are not real, because you are the only “person” on here who when you get slammed (by everyone) you say nothing. Totally against human nature, so yeah, what you are as someone previously stated after your first and equally laughable post was that you are performance art. Quite good actually. None the less, your comments frazzle us all, and I just cannot help but say…you are an idiot. Although, the “real” person who is behind Michael is a genius!

#86 Islander on 07.10.08 at 9:04 pm

……why the animosity against government that is doing the right thing……

Better add some bandwidth if you’re going to ask that question because it’s a long answer.

#87 Gord In Vancouver on 07.10.08 at 9:28 pm

The Vancouver real estate bulls are already nervous !!!

They’re now coming up with all sorts of outlandish comments such as:

“40 year mortgages are not a big deal – people are living longer nowadays.”

“You’re renting – you missed the boat !!!”

“Wealthy Asians will keep Vancouver’s real estate market from plummeting.”

“40 years to 35 years – only an extra $50 bucks/month – What’s the big deal?”

It’s interesting how Global BC didn’t make ONE reference to this significant news item today. The strong winds were the top story.

#88 smwhite on 07.11.08 at 12:09 am

Rob 78 read Gord 87 last para… It was on CTV last night but only after a dose of Henry M. and the order of Canada [email protected] and a story on Jon Beniot Ramsey, then G8, Gord, I bet Global didn’t miss the Ramsey story…

Point, watching 30 minutes of TV a day doesn’t make you informed or help you make informed decisions, especially when the deck is stacked against you. For a society that is so heavily educated we continue to do and believe a lot of stupid things based on what “experts” tell the us the herd to do. I don’t mind being that troublesome cattle that goes against the grain.

No conspiracy… all fact. The again some out there want you to believe that we’re all different, special and unique, only on your social insurance card…

My money and faith has always been and always be on the little guy; and its nice to have a politician (or any other person like the many on this blog questioning the facts and figures from those in power) look out for somebody besides them self for a change(except for the billions of dollars Garth with receive from royalty from this book! ha ha ha)

Dotava, as I stated your right on the approximate for the life of the loan, but the bank judges your affordibility on your monthly/yearly cash flow; as there is no way in heaven they can guess where you’ll be financially in 20 years, although sub-prime loans were pretty close. :)

#89 WetCoaster on 07.11.08 at 12:42 am

The Mole says…
Too many conspiracy theorists here! Get a grip.

A ‘conspiracy’ indicates something hidden, something secret and unseen. There is absolutely no conspiracy if you’re being jacked around right in front of your face…obvious and in broad daylight.

Just because you refuse to look at it, doesn’t mean it isn’t happening. There is no conspiracy, it’s too blatent to ignore.

#90 Gord In Vancouver on 07.11.08 at 1:31 am

smwhite 88………….

If you look at Global’s archives, you’ll see that most of the other Global outlets (Edmonton, Calgary) covered today’s policy change.

Yesterday evening, Global BC did a report on Vancouver’s leaky condo crisis, which has raised its ugly head again.

Things that make you say hmmmmm…..

#91 mattbg on 07.11.08 at 7:51 am

#83, re: “I am perplexed by all the complaining about the CMHC tightening the rules. Readers of this Blog aren’t in over their head with mortgage debt. So what’s the big deal.”

A lot of people that already own a house may see a decline in its value. If you were counting on it for your retirement, or have a HELOC, those plans may be affected.

#92 Rob M on 07.11.08 at 11:17 am

No conspiracy… all fact. The again some out there want you to believe that we’re all different, special and unique, only on your social insurance card…

>> I don’t mean to throw around the ‘C’ word as it loaded I realize and yes I know the herd mentality is alive and well [and it always will]. I just find ‘plots’ are just usually a lot simpler and more banal than you’d think. The ‘little guy’ will also hoodwink you in a second too :>.

I’m not going to debate the quality of infotainment we all get – I’m well aware as are many who are active posters here. I’m just skeptical enough to know that my own views can be leaky as anyone else’s – it’s a constant process. Many ‘Estulin’ have a product to sell themselves and are being selective and dogmatic in their assessments. That’s not to say there isn’t some value to their contribution …

Caveat emptor

#93 smwhite on 07.11.08 at 4:24 pm

Touche Rob,

The difference is the big guy won’t get caught with his under-roos around his ankles, the little guy, not so much.

There have been lots of little guys playing flip that shack(and some just buying into the hype and stretching their wallet way to far because of fear).

Guess it comes full circle back to the “greater fool” theory and who is going to get caught without a chair when the music stops.