100 days

A few more words on Ottawa’s decision to finish off the real estate market.

As Jim Flaherty’s officials were announcing changes to restrict mortgage credit in Canada late last week, the US was hours away from its second-biggest bank failure. Indymac, a major southern California-based lender, went down on Friday, just a couple of days after suspending mortgage loans and laying off half its staff, almost 4,000 people.

This is the fifth bank to fail recently, not counting the spectacular investment bank collapse of Bear Stearns. There are more to come. Indymac staggered and fell after loaning tens of billions in mortgages which have suffered massive defaults. This is due to a collapse in area real estate values of up to 40%.

At the same time, of course, the two largest mortgage enterprises in America, Fannie Mae and Freddie Mac, together owning $5 trillion worth of home loans, are on the verge of nationalization by Washington. The shareholder-owned and publicly-traded companies have lost about 80% of their market value and the US Treasury Secretary was forced to make a rare Sunday afternoon pronouncement that Washington won’t let them fail. That was to prevent a total meltdown on the stock market come Monday.

US real estate is clearly still descending, with a bottom not expected now until sometime next year. That will make this housing bust at least four years in length. It will also be the most significant one since the Great Depression.

In Canada, well, this is all having an impact. Not the giant bank failures and stumbles, but the inevitable bursting of the housing bubble. In one of the most in-demand neighbourhoods in the 6-million-person GTA, Leaside, sales have declined this year by 77%. In Canada’s most expensive city, Vancouver, transactions are down 42% and listings up almost 20%. In the most coveted cottage area, Muskoka, deals have tumbled this summer by 50%.

This was bound to happen since average Canadians can no longer afford average homes. The fact it’s accelerating, and being made worse by the energy crisis, should surprise nobody. People like me have been trying to get Flaherty’s attention on this file for more than a year.

While I knew that real estate would have this fate befall it, taking the economy along for the ride, I did not anticipate $145 oil. But then, unlike Mr. Flaherty, I don’t have a tall white building full of economists on O’Connor in downtown Ottawa. I’m sure his experts are telling our finance minister there’s a honking big chance the housing fizzle and gas attack will impact consumer confidence here the way it has in the States. Why would it not? And since consumer spending is far, far larger than anything else in the economy (yeah, even Suncor, or God) this strongly suggests recession. Not that this matters in places like Windsor, Ontario, where there’s already an industrially-induced quasi-depression.

So, what does our finance guy do?

He bans those tools young couples have been using to keep the homebuilders and condo guys busy. In 100 days, 40-year mortgages and zero-down payments will be gone. In fact, they are drying up now by the moment. And while Mr. Flaherty should never, ever have allowed this stuff to come into existence in his 2006 budget, turning off the tap like this will not solve a thing. In fact, obviously, it will accelerate the real estate decline.

For three years now we have been watching this disaster unfold in slow motion to the south of us. During that time, when it could have made a difference, the government did not prepare. Did you?

If not, do so now. It gets worse.

105 comments ↓

#1 WetCoaster on 07.14.08 at 12:03 am

I wish I could say this is shocking news. But it’s not. This has been one big sucker punch coming in for at least 3 years. (For anyone that has been paying attention.)

It’s not a consolation that bears were right…nobody wanted to see ordinary people get wiped out financially. The reason we don’t want to see booms – is because we don’t want to see the inevitable bust.

#2 calgary on 07.14.08 at 12:08 am

Garth,

How do you prepare for this?

I have an umbrella, but it’s raining boulders and soon it will be raining cement trucks.

#3 Chincy on 07.14.08 at 12:09 am

This is all going to get ugly very quick…Freddie and Fannie are in deep doo doo and some type of panic is going to ensue…all i got to say is, folks, got GOLD.
I read some of Peter Schiff’s stuff and he say one ounce of GOLD will one day buy one share of the DOWJ Index…Comments?

#4 William Azaroff on 07.14.08 at 12:10 am

Hi Garth. I just got turned onto your blog, and am enjoying your POV and direct writing style a lot.

Living in Vancouver and watching housing prices get out of control, and listening to people sound a lot like investors did during the dot.com boom, a huge decrease of prices and a lot of turmoil seems inevitable.

Thanks for the posts!

#5 ??? on 07.14.08 at 12:18 am

Garth,
what do you suggest us poor ol’ average folk do? Which would you say is more important to purchase and store for the coming storm,
canned beans, or bullets?

Regards,
-your everyday average shmuck and soccer mom.

ps…is Canadian tires Gun department open after 4pm?, because I can’t miss Opra tomorrow, this episode is all about how there are more over weight people than starving people in the world now! Food crises? Food shortage?

#6 mike on 07.14.08 at 12:19 am

A fairly high end financial consultant had sent me a chart of US GDP vs US debt from 1900 to present. From 1920 till 1929 the graph showed a steady decline ie a dip to insolvency… In 1929 of course it plunged In 2008 the graph is actually lower than it was in ’29. However that wad b4 Bear Sterns and freddie & fannie. If the US does bail out the two biggest lenders than the ensuing turmoil worldwide will be ugly beyond comprehension.
The question is did flaherty know something days before the rest of us to prompt the removal of the 40 year monster? Safe to say he did

#7 prairie gopher on 07.14.08 at 12:20 am

I have a question for Garth and anyone else who wants to jump in. I sold my house and have several hundred thousnad dollars on deposit. If things go to hell how secure am I? Any suggestions?

#8 Mike.slob on 07.14.08 at 12:33 am

From Statistics Canada ,July 11/08:
In June, employment declined by 24,000 in Ontario, pushing the unemployment rate up 0.3 percentage points to 6.7%.
The unemployment rate in Canada edged up 0.1 percentage points to 6.2%.

“After 15th October, the new rules will likely contribute to the cooling of the housing market.”said TD Bank deputy chief economist Craig Alexander.
What,Again cooling after Millers’ new Tax in Toronto?
Remember, we are still at record inventory levels.
Toronto building permits down 12.2% in May/08.
Oil hit $ 147.27.
This is the worst of all possible storms at the worst time. Or if you watching CP24 channel than is best time to buy,because real estate is best investment from
1996 to 2008, avg. return in GTA is 123% ?
Yes,it’s true but not any more….

My Real Estate prediction for July 2008:
Sales volume in GTA will be down between
18% and 23%.

#9 Mike.slob on 07.14.08 at 12:59 am

Fannie Mae collapsing! Paulson, Bernanke in despair!

Last week’s plunge in the Dow — driven by the collapse of Fannie’s and Freddie’s shares — is just the first act of an unfolding tragedy.

Next, expect massive losses — and loss of confidence — at the world’s largest financial institutions that have stuffed their portfolios with Fannie and Freddie stocks and bonds.
The reality: Fannie Mae’s and Freddie Mac’s liabilities and contingent liabilities are far, far too large for their meager capital. And this house of cards is built on the quicksand of millions of mortgages that cannot be repaid.

Treasury Secretary Paulson predicts 2.5 million home foreclosures in 2008; and Fed Chairman Bernanke has testified that the crisis will continue deep into 2009. So, in combination, these two high officials are warning of potentially millions more foreclosures in 2009.

That leaves Washington with just two choices:

Let them fail … allow the U.S. housing market to freeze up … and invite a deep depression. Or …

Bail them out with taxpayer money … double the public debt overnight … bust the government’s finances … and gut the value of U.S. Treasury securities.
The big dilemma:

If Fannie Mae and Freddie Mac fail, international investors — loaded with Fannie and Freddie securities — will dump them in an avalanche.

But if the U.S. Treasury tries to absorb the impact of this disaster, those same investors will dump their Treasury securities in an equally large avalanche.

In EITHER scenario, foreign investors must sell their U.S. dollars.And either way, the dollar will crash.
Also Billionaire Warren Buffett said that US can expect
the worst possible recession after great depression.
If this depression hit again US than you can see what will be Canada…..

http://en.wikipedia.org/wiki/Great_Depression_in_Canada

#10 Mike.slob on 07.14.08 at 1:22 am

And either way,if the US dollar will crash than the Oil price will be over $ 200 and gold over $ 1,200 to the end of year….

#11 Al on 07.14.08 at 1:29 am

Good post Garth. Just giving you an update from the land of the newly wed and nearly dead, Victoria, where sales have flat lined. It’s a good thing a Realtor can make a living shorting the hell out of the stock market, or else I’d be living off reserves right now! Bye bye Lehman, Freddie and Fannie.

#12 David on 07.14.08 at 1:32 am

American bureaucrats are just as hilarious as their good Canadian neighbours. The Office of Thrift Supervision finally declares that Indymac has insufficient capitalisation. It really begs the question as to how this mighty engine of bum mortgages will find sufficient funds to increase its cap. Shares were trading in the 70 cent range this week, so a new share issue would not make traders tumescent with excitement. Selling off worthless assets that no one in his right mind would want does not look like a path to salvation either. A rebound in the housing markets looks impossible. For those who believe in the resurrection of poor Lazarus, maybe Indymac has a chance, but most likely the company will not survive the next two quarters. These days its always a liquidity problem and never a solvency issue according to the official propaganda.
I seriously doubt there were many dissenting voices among the economic advisers surrounding Flaherty. Not much point in tanking their careers by telling the truth. Again this makes a huge assumption that there were actually a few honest individuals that knew better and could see the consequences of bad policy choices.

#13 R. Moer on 07.14.08 at 2:11 am

My bet is the first Canuk bank to bite it (a-la- Indy Mac) is CIBC. Give it 18 months with National a close second. By then Canadian house prices will be down 38 to 43% from today’s levels. And those houses, at the new reset price, are the ones that are close to a gas station and a functioning urban core. Can you spell “homeowner financing offered” — “please take my home…anyone?…anyone?”

#14 Vancover realtor on 07.14.08 at 5:21 am

There are some points in your post that I can agree with. The real estate bubble was really to burst one day, and prices were bound to fall. However, I do think that the majority of Vancouverites can still afford to buy a home – if not a luxury townhouse but maybe just a condo. As a Vancouver realtor I also experienced the significant fall in the number of transactions. But some of my fellow realtors still think the bubble has not bursted. We’ll see.
Jay

#15 islander on 07.14.08 at 5:39 am

So Flaherty was wrong to introduce 0/40 and, er, wronger to kill it?
Garth, your logic is a mobius strip.

#16 George Popovic on 07.14.08 at 8:04 am

I bought a few puts on Indymac a while back and I wish I bought a lot more. I agree that this party is just starting with many more financial institutions at risk.

We just returned from a vacation that took us to northern Ontario and here are a few interesting notes. We stayed at a beautiful resort on the shores of Lake Superior and the owner made a comment that last year they were full in July, this time we were the only guests. Little Current on Manitoulin Island has seen an 80% decline in boating traffic. Friday evening traffic up Hwy 69 was very thin. Cottage listings are way up. The pain being experienced by the tourism industry has not yet hit the news but it will.

This is going to be an ugly winter. We are about to be introduced to a much more modest existence in Canada.

#17 hal5001 on 07.14.08 at 8:35 am

So, what exactly do you mean by prepare? Canned goods? Cash doesnt seem to be that strong an option.

#18 Marky Mark and the funky bunch on 07.14.08 at 8:37 am

Garth, I don’t quiet get your stance on ending of the zero down/40 year mortgage. Reason says the real estate market is in a bubble, it will have to burst at some point (already is)……….so what difference does it make? Turning off the tap is by far a better option then letting it get so ugly like is happening in the US……….they denied a problem for years. Yes, this type of mortgage should have never existed, but keeping them going makes absolutely no sense either.

In fact there is just a strong of an argument that banning this type of mortgage might just save many people from a life of housing rental payments…….can’t it be looked at this way.

Those already tied down to zero down/40 year mortgages are going to get hurt when interest rates rise regardless and they are going to rise. Does that mean when this happens to combat high gas, food and cost of living inflation the Bank of Canada will be evil doers in your eyes too. Not matter how you look at it, this is the calm before the storm, its going to happen regardless of the trigger and it has to happen.

I am certain that if the Liberals were in power and saw the books they would be announcing the same news, this isn’t about Conservative stupidity, its about preventing the government from running up a debt it can’t afford to cover when these loans start defaulting.

Not everyone has a mortgage in Canada Garth by choice and not everyone jumped at a chance to buy into an over priced, hyped real estate market. I am happy they got rid of this type of mortgage; people who are financial responsible, have avoided these mortgages and avoided buying at the height of the bubble should not have to be burdened by other people’s irresponsibility……….but as a tax payer I am sure I’ll be asked to bail out CHMC in the near future…….how is that fair again?
Short term pain for long term gain of the country and its people……..why can’t any politician think about what’s best for the country.
Garth I really respect what you’ve done with Greaterfool, but this time you really are talking from both sides of your mouth……you can’t have it both ways and I have no clue how you keep the zero down/40 mortgage going without making things worse long term!

#19 outtacontrol on 07.14.08 at 10:08 am

Flaherty killed the 40 yr so that he could claim to have done something to prevent the creation of a US-style real estate bubble. The fact that Canada already has a bubble – and that it has already begun to burst – will be a PC spindoctor’s wet dream of revisionism.

#20 EssGee on 07.14.08 at 10:16 am

prairie gopher – put it in any CIPF member firm and at least it’s insured up to $1 mil instead of the $100K in protection that you get under CDIC. I would never keep anything over $100K in a bank account.

http://www.cipf.ca/

#21 Mylene on 07.14.08 at 11:05 am

This explains the entire banking collapse

It’s not the first time and it’s calculated.

Get through the philosophical part of the movie at the beginning and you’ll get the meat and bones. It blew my mind!

Explains the stock/real estate crisis as predicted before because it was all calculated. IT’s a free online movie.

http://www.zeitgeistmovie.com/

#22 Mylene on 07.14.08 at 11:35 am

Watch as of 1:20/2:02 after you click on play

http://www.zeitgeistmovie.com/main.htm

#23 anonymous on 07.14.08 at 11:52 am

A lot of you people (who apparenty seem to have a lot of cash) don’t know what to do with your money.

1. The US dollar is very weak. Convert some of your overpriced Canadian money to US dollars.

2. Biotech seems to be in bullmode right now. It’s not sensitive to commodity prices and is catching fire with large mutual fund buyers.

3. I suppose you could short the Canadian banks; there are ETF’s out there to bet against the financial institutions in Canada (look them up). Don’t bet against the US financials as they have been very beat up and could rebound right back in your face.

4. Talk to someone about bonds, treasuries. I’m a stock guy.

Remember, keep your cash ready. In about two years, you will be able to buy any house you want and name your price. The problem will be the banks. Nobody will want to lend to you UNLESS you have a sizable downpayment and your credit is clean. A rare thing indeed two years from now.

The global economy is contracting. That means cash is king. Do not borrow money.

— I should tell you that I am shorting Canadian banks via an ETF at this time.

#24 smwhite on 07.14.08 at 11:58 am

Chincy,

I’ve been a student of Schiffs for a couple years(His book “Crash Proof” is filled with excellent info and not all on housing, a lot of good info on how GDP and CPI skew the true statistics, he’s been incredibly correct on all accounts, I still have trouble believing gold will be worth $8000 to $10000 an ounce, but if you look at the following charts, it starts to make since that there could be at minimum a 2 – 5 times relationship to the DOW and gold, easily. We’re at 12 right now. I can see 5000K gold possibly, but that would mean the DOW would have to hit 5000. (Then again, I never imagined oil being over 100 for any real length of time)

Check out youtube and search for Peter Schiff by date and you’ll receive some excellent insight on the state US housing and stock market’s future.

If you look at the oil/gold and dow/gold ratio, I think you can see why many are still very bullish on real money aka gold and silver.

http://www.zealllc.com/2005/gorex3.htm

http://home.earthlink.net/~intelligentbear/com-dow-au.htm

If you consider the past and look at the present, gold should probably be in the 1200 – 1400 range at this point. Factor in the herd hasn’t even considered “technical” recession (which totally kills me seeing as we’re dropping banks and mortgage insurers like they’re worthless penny DOT COM stock) gold has a only one direction over the next year…

#10 Mike, my opinion exactly, Think your getting at least a 20% deal on the yellow metal right now. Gold has built up a base at $850 to $900 which it won’t go under anytime soon.

No matter how bad the Wall Street bulls want people to believe the US stock market is in “excellent” shape, they keep focusing on the much its gone up in “dollars” forgetting the dollar is dropping like a rock.

#25 kabloona on 07.14.08 at 12:01 pm

I wouldn’t panic over Freddie and Fannie, ‘cuz Paulson announced Sunday they would be backed by the US Treasury….too big to fail, too big to bail (?). That’s $US 5 trillion in liabilities…..ouch!

As far as Flaherty’s move to kill the 0/40 mortgages, it’s just a political play. He allowed CMHC to back these dodgy practices in 2006 – thereby adding gasoline to the fire of rising house prices – and now that the chickens are coming home to roost he’s going to claim “prudence” on his part by canning them….

#26 Anonymous on 07.14.08 at 12:57 pm

So I am a little concerned as I bank at CIBC…what does everyone think will happen with our banks. I have a large investment at CIBC and am concerned if they go belly up….what does everyone think are the chances of us loosing one of the large banks?

#27 mattbg on 07.14.08 at 12:57 pm

The problems with Freddie Mac and Fannie Mae provide some backing to what some of Garth says in his book around the idea that the US housing problem is not specifically subprime-related.

These two corporations did not guarantee risky subprime mortgages; they guaranteed conforming mortgages, which have lending limits, require employment and income documentation, and have debt/income ratio limits.

#28 confused and a little crazed on 07.14.08 at 12:57 pm

R. Moer ,

As for CIBC, i don’t think it will fall like Indymac. Its exposure isn’t as great… I believe it will drop about another 20- 30 % and level off. You have seen it’s share price haven’t you…it’s already 55 % off it’s high

islander..

“So Flaherty was wrong to introduce 0/40 and, er, wronger to kill it?
Garth, your logic is a mobius strip”

garth is just explaining his viewpoint. yes it was wrong to intro 0/ 40 but Killing it will not prevent the damage it will and have already caused.
as an analogy…how useful would it be to buy a firealram after a house is already burned down…not very. It’s a good idea to have one but not very useful at this point..see?

#29 jrochest on 07.14.08 at 1:53 pm

Calgary — that’s spot on. On the Housing Bubble Blog there’s a post titled “I did the right thing, not buying a house — now what?”

That seems to be the question. A housing bust is one thing: a banking meltdown, quite another. On an individual level, “preparing” for this is a bit like the difference between preparing for a possible house fire (smoke alarms, extinguishers in kitchens & workshops, ladders and planned escape routes, drills) and ‘preparing for’ the firebombing of Dresden.

Just a whole different level of danger, and something none of use can do diddly-do about.

#30 jrochest on 07.14.08 at 1:56 pm

I’m not suggesting canned beans, guns and bunkers in the basement, BTW. Just that I suspect that this may effect a great many of us in ways that we can’t even fathom.

Although ya know, if CIBC goes under, d’ya think my student loan debt would go with them?

Hum…every cloud has a silver lining….

#31 Al on 07.14.08 at 2:14 pm

confused and a little crazed, it’s a bad analogy

“as an analogy…how useful would it be to buy a firealram after a house is already burned down…not very. It’s a good idea to have one but not very useful at this point..see?”

Better analogy, 40/0s are fuel. Turning off the fuel is a good idea, both for bubbles and fires.

If 40/0s are harmful, then getting rid of them is helpful. Killing them may not repair the damage, but can prevent further damage. Keeping them around only allows for more greater fools to get in this faltering game.

I’ve appreciated almost everything that you’ve said Garth, but recently you seem to have gone off the mark with statements like,

“So, what does our finance guy do? He bans those tools young couples have been using to keep the homebuilders and condo guys busy.”

Those young couples are the greater fools are they not?

#32 EssGee on 07.14.08 at 2:16 pm

If CIBC goes under, your student loan or mortgage would still be owed. That doesn’t change.

What would happen is that you would lose any deposits you have in excess of $100,000. There is a slight chance that you would get some amount for a deposit in excess of $100K (IndyMac is paying out at 50%), but there is no guarantee whatsoever of that happening.

#33 smwhite on 07.14.08 at 2:22 pm

Ah, I don’t understand where some of you are getting the idea ANY Canadian bank will go under, its ludicrous.

It simply won’t happen, all loans are insured by you and I via CMHC.

Good thing we live in a free-market society where responsible corporations are rewarded for sensible investments and decisions and irresponsible ones are rewarded with bailouts from the public…

I can see that 2% GST getting padded back on as a “housing stabilization tax”…

Sounds lovely!

What was that video again Mylene? :)

#34 jp on 07.14.08 at 2:29 pm

Garth is so funny.

He keeps on using US housing crisis news to propagandize about Canada’s housing crash. He has to do this because there continues to be no negative news to confirm his “made in Canada crash” thesis.

That’s all right Garth. You’re a politician and you need to bend reality to the truth for the votes. This is too bad for all the poor shmucks taking housing advice from you, since they don’t realize you’re playing politics, not running a business that must live or die by the quality of its advice.

Maybe you should read comments here. You might change that out-of-touch attitude. — Garth

#35 smwhite on 07.14.08 at 2:45 pm

anonymous

1. The US dollar is very weak. Convert some of your overpriced Canadian money to US dollars…

That’s funny… US dollars! Might as well buy the Mexican pesos…

If you think its weak now, wait till this time next year…

How do you think they are “bailing out” (or attempting too) the USA public? I’m pretty sure Bernake and Paulson plan on having that printing press working even more overtime, creating more money, creating more inflation. US dollar go bust, price of oil, go boom…

$2 a litre gasoline isn’t that far off here in Canada.

Diversify, cash, bonds, (European, Asian and Canadian) blue chip stocks and precious metals…

Actually a couple awesome reads to prepare for this type of bear market are from Benjamin Graham(if you don’t know how he is, he was a notable financial professor/investor:

The Intelligent Investor
Security Analysis

http://en.wikipedia.org/wiki/Benjamin_Graham

I was in awe listening to some of his comments and concerns on investing during the Great Depression, very enlightening…

http://books.google.ca/books?id=Lv3VAQAACAAJ&dq=Benjamin+Graham&hl=en&sa=X&oi=book_result&resnum=1&ct=result

http://books.google.ca/books?id=pDBZ0j4Vc-4C&dq=Benjamin+Graham&pg=PP1&ots=D1fnGCcWl1&sig=RA1ll-s1KZCqUFm1fB2rFfCqJjE&hl=en&sa=X&oi=book_result&resnum=2&ct=result

#36 jrochest on 07.14.08 at 3:13 pm

“If CIBC goes under, your student loan or mortgage would still be owed. That doesn’t change.”

Actually, I assumed that was the case. Indeed, that’s pretty much ALWAYS the case :)

I guess I finish paying it off, then.

#37 smwhite on 07.14.08 at 3:40 pm

JP,

How do you figure that by Garth presenting this side of the RE argument, that he is doing this for political gain?

Maybe after the hit shits the fan he can say I told you so, but it hasn’t yet and I don’t think people want to here I told you so as they watch their net worth plummet.

The majority of voters are the 30+ “I have a mortgage” crowd and do not like to hear that their most priced possession is in danger of faltering, especially with the amount of boomers planning on using the equity in their homes to fund retirement… I would think if he wasn’t sure on this, it would be political suicide.

Please explain how “insulting” or being a “wet blanket” to the majority of Canadians home owners will get him more votes?

The fact you lack the concepts of how the worlds economies interchange and effect one another proves your out of touch with the impending housing and credit crisis sitting on the couch of Americans and knocking on the doorsteps of every Canadian.

Let me guess JP, you bought at the top of the icy peak of the Mt. Everest of housing fiscals?

#38 Shifty on 07.14.08 at 3:45 pm

The Canadian and American banking institutions function with identical operational protocol – creating money from debt. Anticipate further modification of credit practices and Canadian bank solvency issues.

#39 mattbg on 07.14.08 at 3:58 pm

smwhite, “It simply won’t happen, all loans are insured by you and I via CMHC.”

While I agree with you that it won’t happen here, the CMHC backing doesn’t absolutely guarantee anything.

Freddie Mac and Fannie Mae provide a similar service in the US as CMHC does here, and they are possibly in trouble now. When the losses exceed the “reasonable” provisions and the unexpected happens, it’s not as if these insurers have a license to print money that doesn’t exist.

#40 Sam on 07.14.08 at 4:20 pm

Mylene,

Nice video links. Most people already know about the ‘ conspiracy 911’. type the word on google and you will be more amazed. Media belongs to George Bush and cronies.

#41 ed_p3t on 07.14.08 at 4:28 pm

har, har, har….
here what they said, in retrospect
funny enough, the dude in the case was making waves regarding the us side of story ( or so it seems) in 2006

http://ezinearticles.com/?Real-Estate-Bubble—The-End&id=189078

while there is some pain to come, and a few (2-4)years of stagflation (reccession), things will keep going, and some other wrongs might be corrected ( new energy, etc)

#42 nearmilton on 07.14.08 at 4:56 pm

I received the following postcard from my neighborly RE sales rep.

“Save Thousands of $$$!

Thinking of selling your home and buying another? While prices for homes have remained strong the inventory of homes listed for sale is growing. This is resulting in many homes being on the market longer than in recent years.

My recommendation to you is selling your current home first with a long closing before buying another. You do no want to get caught in a financial squeeze with two mortgages and feeling pressured to sell your home below market value.

With the amount of inventory on the market you should easily find that dream home after you sell your current house.

Whether you are buying or selling call me. I can help save you money.”

-It’s a lovely spin however if you sell your home first and then buy, as advised, how does that reduce the inventory of homes ?outstanding? What if you do not sell, doesn’t the inventory of homes increase +1? Keep digging…

#43 Crikey on 07.14.08 at 4:57 pm

Bank Scorecard

Washington Mutual(WM) -26% at $ 3.64
Wachovia Bank (WB) -10% at $10.36
Bank United (BKUNA) -17% at $ .64
Lehman (LEH) -05% at $13.72
Merrill Lynch (MER) -07% at $25.50
Fannie Mae (FNM) -03% at $10.00
Freddie Mac (FRE) -09% at $ 6.99
CIT Group (CIT) -11% at $ 6.30
National City (NCC) -32% at $ 3.00

How Many Bullets Are Left?

Take a good look at the institutions in the table above.

The question of the day is “How many of those financial institutions can the Fed possibly bail out?”

Scary.

#44 Fliprbaby on 07.14.08 at 5:49 pm

By the end of 2009 the US housing crash will have rebounded, and will pull Canadian house prices up with it. The end of the 40 year mortgage will cause a mini-crash in Canada, spooking everyone, and allowing the flippers to buy low, and then sell high in the Great Housing Rebound of 2009. Genworth will find a way around the 35 year limit, and let customers extend mortgages to 40, 45 and 50 years.

#45 brazer on 07.14.08 at 5:56 pm

#12 David

“Shares were trading in the 70 cent range this week…”

closed today at $0.12.
http://finance.yahoo.com/q?s=IMB

IMB = R.I.P

#46 Sam on 07.14.08 at 6:15 pm

Mylene, I saw the full video now. second link. Amazing stuff! This the reality of the world’s ugliest nation on earth called U.S.A !

Fliprbaby , How much you charge me to have a peek at the crystal ball you have ?

#47 Future Expatriate on 07.14.08 at 6:17 pm

Legislate to get the Loonie back on to the gold standard? Can the gov afford to buy back all the gold it sold off? Or at least as much as possible?

I’m completely ignorant as to the chances of this happening or even how it would happen, but it seems to me it’s going to be the only hope of any country in the world keeping the value of its currency and wealth up and riding high as the rest of the world of fiat money crashes and burns.

#48 jrochest on 07.14.08 at 6:21 pm

Fliprbaby — what *are* you drinking?

All real estate corrections in history have taken about the same amount of time to fall from peak to trough as they took to rise from base to peak.

There’s not going to be a massive rebound in 2009 in US housing prices, or Canadian housing prices, or European housing prices, or ANY housing prices.

The party’s over. The candles flicker and dim. Go home, and sober up.

#49 jo on 07.14.08 at 6:54 pm

It may not be a crash. When inventory stops selling agents reduce and then they reduce, reduce etc. until it sells. It may be a slow process. In the boom banks have been doing mls appraisals from a computer, maybe a drive-by, sometimes a site visit. If a deal is conditional on financing and the banks get cautious and appraise the property lower than the contract price, the buyer may want a price adjustment before he firms up.

#50 smwhite on 07.14.08 at 7:00 pm

mattbg,

Where were you earlier in the spring when I had that exact argument on this site with a delusion RE bull and on this site that Fanny And Freddy provided that service to Americans? :) Same person BRAGGED about buying USA RE and believed inflation wasn’t an issue.

I think the bigger problem for America is the ability of their federal reserve TO continue to print obscene amounts of money with no “repercussions”(minus their dollar going to shit and causing the price of oil and commodities to shoot to the moon aka inflation). The current administration is doing their best to turn the USA into a third world shit hole.

But in the end as we’ve seen in the last couple of day and mattbg, I have to agree,whats different between CMHC and Canadian treasuries guaranteeing mortgages for the Canadian banks and the ability of the Federal Reserve to turn on the money tap, in the end its the tax payer for both countries bailing out the banks. I can’t see a visible difference now(Yes RE bulls, the ones that claimed Canada is different, our DNA is looking awfully similar).

Mylene this is for you, I can see more American banks evaporating and being sucked up by the Rockerfellers and Morgans after all is said and done. I’m guessing the Morgans and Rockerfellers are going to get a sweet deal on the remaining US banks(then watch rates hit 20%)

For anyone with an IQ in double digits or older then 5, please close your eyes,

Fliprbaby, I think you should run out and leverage everything you possibly can and take advantage of the current cheap interest rates and potential riches that are your future aka the great real estate boom of 2009.

(1.) Go adjustable rate mortgage

(2.) Extract as much credit as possible

(3.) Buy cyanide capsules just in case things don’t work out

#51 smwhite on 07.14.08 at 7:03 pm

jrochest,

He’s not drinking anything, he’s flipping flin flon manitoba real estate.

#52 jrochest on 07.14.08 at 7:20 pm

“he’s flipping flin flon manitoba real estate.”

Now you’ve gone and made me feel sorry for him, drat you…

#53 brazer on 07.14.08 at 8:27 pm

Investment in home ownership is not for everyone
http://www.financialpost.com/story.html?id=654307

“Because, while buying a home may be the best investment many of us will ever make, it is never a sure thing. And there are times when people are better off not owning a home.”

#54 crashing yuppy on 07.14.08 at 8:46 pm

I just heard the most hilarious interview with the head of the Toronto Real Estate Board on AM 640.

The premise of the interview was that the host had been house hunting over the weekend and agents had told him that the market had fallen off a cliff in the last 2-3 weeks.

Her final word, things will pick up in the Fall.

Asking a RE Agent for an objective opinion is useless.

If you want or need to sell list now, list 10-20 grand under current market and bail. Or wait until fall or spring anf take 20-30% less.

Her response: “Its all about the new Toronto Land Transfer Tax” . “Market is getting more balance ect and other RE Salesperson spin.

#55 vultur on 07.14.08 at 9:42 pm

Garth,

I think you’ve got it wrong- the government is tightening up on lending standards to same their own butts- not the homeowners!

They are increasing the requirements to get a mortgage because they don’t want CMHC to absorb additional losses from defaulted mortgages that they will inevitably have to cover.

This is a wise move- it will limit CHMCs and ultimately the taxpayers exposure to mortgage losses.

#56 My_view on 07.14.08 at 9:54 pm

brazer

Thanks for the link.

Good read…………

#57 Daigo on 07.14.08 at 10:29 pm

This is an amazing study in human behaviour. My family has been in the development business on the west coast for 4 decades. As such my father has seen the cycles over and over. We have been predicting the inevitable crash for 3 years. Comments made by anyone who has a vested interest in the market are the only ones who are out to lunch continuing to talk about a market that can only go up. Note the two comments above from realtors. “However, I do think that the majority of Vancouverites can still afford to buy a home – if not a luxury townhouse but maybe just a condo.” This is the thinking that has gotten so many people in trouble. Average household income in Vancouver dedicated to home payments has risen to 73%!!!! Garth is right on.

#58 RR on 07.14.08 at 10:50 pm

You actually told Canadians they shouldn’t buy residential real estate. Where are they going to live Garth, in your living room . I know, General Motors is going to turn their Oshawa plant in to lake front rental condos for all those families that the UAW put out of work.Were do you profess Canadians live exactly? Do you think that people can hide behind rent controls. I know, you must be a slum lord as well as a wind bag. I’m sure you have some run down, flea bitten, bed bug infested flop houses in downtown Toronto that you can rent out by the day. Heaven forbid that most intelligent Canadians listen to your rhetoric and dooms day preaching. They should rename you Chicken Little.The sky is falling. You’re an idiot. Has this grand standing and wind bagging managed to sell more books for you? I think I started my fire with it to roast my weenies. Soon to be on the best seller list.

A proud mortgage broker
Calgary Alta.

#59 pete on 07.14.08 at 11:05 pm

looks like “a proud mortgage broker” from Calgary is going to need to look for new work. After reading his rant it seems biz must be really slow as the housing crash continues. mortgage broker you will soon be saying “would you like fries with that?” .

#60 Re-diculous on 07.14.08 at 11:07 pm

RR, you certainly sound like a very worried bull in denial.

#61 rationalnational on 07.14.08 at 11:31 pm

RR, it’s far easier to criticize and/or attack on a personal level than actually make a point yourself. I’m sure you are just venting, as you are coming to the realization that your profession has a very limited life span. Don’t tell me you really thought it would go on forever?!?

Why would a person buy when there are plenty of nice places to rent – heck, 40% of the 13000 or so listings in Calgary are vacant. And renting them for a few years would basically be free as the losses one would incur by buying now would almost certainly offset the cost of renting.

Stand proud. Be a man. Then be the man who serves me a big mac and asks me if I’d like fries with that. Bahahaha

#62 RR on 07.14.08 at 11:39 pm

How much do you pay the folks at CTV to actually put you on the air to plug your book. Do you actually think you’ll be able to retire on the proceeds from the sale of that piece of crap. I’m sure they can find a good use for it in the back woods of rural Ontario where there’s no indoor plumbing.

A peoud mortgage broker
Calgary Alta.

#63 Canadianoil on 07.14.08 at 11:43 pm

Mr. Turner you have been correct.
Canadian housing prices are falling.

As in all markets, prices will stop falling, level out and rise again.

However, if I decide to sell, the question arisies, ‘Where do I put the cash?’
In a bank? Not likely.
Invest in the stock market? No.
Play the commodity cycle? I am not that sure.

Mr. Turner, you wrote recently, ‘If you can keep your house for the next four years, you need not worry.’

If you can pay your monthly mortgage principle and interest, keep your house.

If you have children, keep them where they are.
Moving your family is not adventageous.

I sympathize for those that have no other choice.

We are witnessing a complete deconstruction of the financial industry not felt since the depression.

What is going to hold families, neighbourhoods and communities together?

The house has always been the nucleous of a family unit.

We want them, and we must be able to afford them.

In order to keep my house, I will have to take in boarders.

I will have to take a second job.
My children will have to make do with what they have.

I will do everything possible to keep my house.

#64 David on 07.14.08 at 11:49 pm

RR, that was some post or should it be called rant. Book burning is a common practise among religious and political fanatics, so you are following in line with a 3000 year old tradition.
If you can not accept that there was a real estate bubble, that the bubble was fueled by unsustainable debt or that house prices must be in line with family incomes, then you are one who is totally wrong.
Feel free to read the archived articles from the Calgary Herald in 1985. You might learn a lot in short space of time. There was some great reportage on the bust and if you choose not to learn from history too bad.
Did you ever ask yourself why there are no more independent small trust companies in Canada anymore? How about the failure of two Schedule A chartered banks in Alberta in the 1985? Did you have money on deposit with CCB or Northland Bank? My 25% down payment on a house barely cleared the bank. It is called skin in the game lad. Behavior changes a whole lot once a family has actual skin in the game.
No skin in the game and 100% leverage really works well in a rising market.
Most of the 0/40 idiots will quietly mail in their keys very soon. You have jingle mail. Nothing risked and nothing lost.

#65 smwhite on 07.15.08 at 12:02 am

#55 Vultur, your 100% bang on, this is about grabbing a chair before the music stops…

Party is over, homes will be limited to those that can actually afford them today, not ten years down the road.

#66 smwhite on 07.15.08 at 12:10 am

RR, I’m a peoud to say that I don’t listen to “experts” like yourself…

You’ll have lots of practice peddling over priced real estate over the next 5 years, maybe you can pick up an English or economics class or two at Calgary U during the down turn…

If your so proud put your money where your mouth is, name, corporation, phone number, email, etc etc…

Oh, your just another ass-mouth RE agent that doesn’t know shit from Shinola.

Contact Fliprbaby and pool your resources, start buying all that value RE thats become available this summer.

#67 smwhite on 07.15.08 at 12:13 am

Rational National, RR has hit stage five of the Kubler Ross model, welcome to anger… :)

#68 patriotz on 07.15.08 at 12:17 am

Business is that bad is it?

“While I agree with you that it won’t happen here, the CMHC backing doesn’t absolutely guarantee anything.”

Yes it does actually, CMHC is a Crown Corporation. That ‘s “Crown” as in what the lady on the $20 bill wears, and CMHC will get as many of those $20 bills as it needs to meet its obligations. Ultimately the cost will be borne by you and me of course.

#69 smwhite on 07.15.08 at 12:21 am

From your friends at Altimira( I’d actually consider those son of a guns funds after this one…)

http://www.altamira.com/altamira_en/education-guidance/investment+education/investmentmyths/myth6.htm

Frightened youngsters, speculators, has been and never was RE agents read my 1s and 0s… I quote the above link…

“If you’re not comfortable borrowing to invest in a stock, you should think twice about whether you’re comfortable investing in real estate.”

Then again, what does Altimira know?

#70 pjwlk on 07.15.08 at 12:23 am

#55 Vultur: I think you’ve hit the nail on the head. The government knows what coming and is covering their own asses by limiting future losses.

#71 PKS on 07.15.08 at 12:25 am

Uh, RR, is there a point in there somewhere that you’re making?

If Garth is so wrong, and is just a “chicken little”, making up doom and gloom predictions to sell more books, then it should be pretty easy for you to defeat his arguments. So anytime you wanna get to that, we’re listening.

You seem to be suggesting that Turner is not telling the truth, or is distorting the facts because, as he gets paid for book sales, he has a conflict of interest.

And you’re a MORTGAGE BROKER? Certainly no conflict of interest on this stuff for you.

Kettle, meet pot. Notice your chromatic similarity?

#72 Rick on 07.15.08 at 12:35 am

RR – RELAX!!! No need to fret! Timmy’s pays over 10 bucks an hour in your neck of the woods!!

#73 smwhite on 07.15.08 at 12:37 am

Garth a little levity for ya,

Garth’s book the “Greater Fool” as of July 15th priced in:

GOLD: $21.95 / $974 =44.37 to 1

DOW: $21.95 / 11055 = 503.64 to 1

TSX: $21.95 / 13740 = 625.97 to 1

All joking aside, is there is still any doubt we are in a world wide bull market?

#74 EJ on 07.15.08 at 12:53 am

Hey RR, the use of the hackneyed “chicken little” and “sky is falling” phrases makes you sound like this guy:

http://www.hks.harvard.edu/news-events/news/op-eds/housing-downturn-will-ease

Do all of you RE people get those two phrases from the same propaganda classes? There’s nothing wrong with renting, and in today’s markets, it makes far more sense than buying. Bank the saved money and grab something for a good deal when it’s a buyer’s market.

Oh, and I guess we all know how Nicholas Retsina’s predictions turned out down South…

#75 ??? on 07.15.08 at 1:26 am

RR,
I know you meant to hit the “r” when you hit the “e”. Still, you look like a fool. Some professional.

Ok, I cant resist. Since you MUST have your thumb on the top, most current information regarding the economy and the mortgage industry, lets have it, in a nice and polite well thought out argument for why things are going to be Ok….ok? btw tell us all how long you have been mortgage broker.

Tell us all how many families who were on the edge of qualifying for a mortgage did you let a few details slip so they could get into that crap quality, poorly located, OVER PRICED cardboardbox or sh!t condo on a 40 year mortgage with zero down? How may people did you doom to financial ruin?

And guess what?

Im a realtor. Since the party was over in late 2007, I sold a LOT of properties still, because I work hard. Many of these buyer clients the buyers agents are bringing are zero down, or only $5000-$10,000 down. Add in CMHC and many are underwater before they move in.
But, I focus on being a listing agent. I can’t really stomach being the buyers agent right now, as I dont want any phone calls a year from now from my clients who would hate me when they are waaaay underwater, like, you know, yours will.

#76 Sam on 07.15.08 at 2:32 am

RR,

I like my whopper with onion rings :)

#77 pitte on 07.15.08 at 2:34 am

RR’s logic: Buy a home (at any price, even if it’s beyond your means) or be condemned to rent in a slum.

He presents two choices. His way, or doom. Pick one or the other.

His simplistic logic reminds me how George Bush coerced his country into a disastrous war with Iraq: “You’re with me or you’re against me” and “… the alternative is a mushroom cloud over one of our cities”.

Like rationalnational says, there are always other choices.

And supersize mine also.

#78 confused and a little crazed on 07.15.08 at 2:53 am

RR,

You don’t need to listen to Garth…none of us do. But personally I am renting 1 basement suite (after selling my place 2006) with a relatively large living room. My rent is $300 dollars more than the maintenance cost of a similar place , Condo. Although my place is older it is , quiet ,clean and well built. Yes..it took a lot of searching and a little luck but i think I am doing quite well because if you add the insurance , energy cost ( heat, lighting) it is pretty close to the same. In other words, the operationaal costs of owning …which I don’t get back is almost the same as renting. With just a conservative investment strategy… i was able to get a good return these last 2 years. I sold most of my stocks during mid 2007 and bought more in beginning 2008.. . though it is not a lot …I am making respectable gains and the capital gains are taxed 50 %. I am not smarter than anyone here. anyone can do this really. But if you do your homework and you act with due diligence you will do better than just putting it in a bank. History has proven time and time again. Nothing lasts forever and having flexibilty gives you better chance for success. First it was Tech, then finances and housing related companies…now it commodities… what next? Life is constantly changing and we all will have to change. Being stagnant, stubborn just closes your eyes to opportunity.

good luck with that mortgage thing

#79 Calgary on 07.15.08 at 3:23 am

RR, You make no good points whatsoever.
Stop wasting intelligent, thoughtful peoples’ dialogue.
Just because you do not want something to happen does not warrant attacking a person and calling them
an idiot, hardly something YOU should be harping on.
People should skip anything you say as your comments are very juvenile as well as dull. I know I will.
Change the record!
A person who reads and thinks a lot more
than you do…
Calgary, Alberta

#80 Future Expatriate on 07.15.08 at 5:11 am

I think Fliprbaby has been yanking our chains. Those posts HAVE to be satire. Especially now, when no one in their right mind could possibly believe them. A parody of the realtor-speak that’s propped up the Canadian market for two years while the US market tanked.

Either that or the LSD in Canada is a heckuva lot stronger than in the US.

#81 Brent on 07.15.08 at 9:13 am

What blows me away is the Alberta perma bulls belief there is a direct relationship between oil and housing in Alberta.
There’s no correlation what so ever, a barrel of oil has doubled in price over the last year and keeps setting new highs almost daily and the average house price has dropped 80K.
The Alberta Bubble has burst, the pyramid game is over!

#82 Mylene on 07.15.08 at 9:47 am

The movie links go beyond 911 or Bush’s agenda. It’s really about a social and economic construct that’s been in the works for the last 50 years. It’s a 2 hour documentary covering the entire banking system and the banking crisis of 20’s all the way up to the manipulation of the late 80’s. If you watch the video you’ll see the connection to the CURRENT banking crisis and the absorption of most lending institutions by the large banking firms. It’s calculated as I’ve said before. This video provides an explanation to the average guy/girl who may not be aware of social economics and the desguise of a “financial system”. The beginning of the movie was most important to me with the mass brain washing via religion and social oppressions. It continues on to 911, banking system is the US, taxing ploys, state control on freedoms. It is the US. But ultimately we will be affected. It’s all linked and it’s a great synopsis for someone without a financial background…for the janitor, construction worker, cashier, teenage dreamer thinking about bling coming easy, factory worker…your blue collar guys. It’s unfortunate that the information is only accessible to the educated crowds.

#83 Mylene on 07.15.08 at 9:57 am

I take back one thing. It’s not just for the blue collar guys. My friends who are successful professionals watched the video were enlightened too, just as I was. I urge people to pass on the video and recommend it to those who may not have access to this type of knowledge. It is 2 hours that you are investing of your time. However, based on what I am reading on this blog, I am almost certain that everyone on this board would be offered a positioning they have not heard before.

#84 Mike on 07.15.08 at 10:31 am

Yes Mylene…. the brief portion of the video/documentary was very enlightening.. I assume the information on the video has been corroborated.. I was unaware of the depiction of the fed bank as outside of the US… Don’t they answer to the US government and controlled by the US government?? The Bush thing was very interesting indeed. But even if you knew little about history most know that George W has basically bankrupted any company he was put in charge of save for the Texas Rangers. Now he has deep sixed the US completely … at least that is more efficient

#85 Calgary overpriced on 07.15.08 at 11:38 am

This blog is interesting.

The really bad part about Calgary real estate is that it went up so fast without tangible value to support it.

The common person will suffer, either the renter or the person who has just bought, either way it sucks.

This in part is due to fraudulent advertisements in the local paper and the bull attitude of many who live in Calgary.

The unfortunate reality is that by promoting ridiculous prices, people who are the working class choose to live elsewhere. The inevitable result is that prices plummet.

The homeowner has the option of panic selling or just wait for 20 years for the price to come back. The renter like myself can then buy when prices are reasonable.

I personally despise what I have seen in the papers here in Calgary and the lack of rental controls. I am fortunate to have a great landlord, many dont.

RR, you are in big trouble. Has nothing to do with me, or Garth. People dont want to pay $500,000 for a home that is worth $200,000 at best. And they wont. As I have told Mario T. at the Calgary Herald be prepared for a HEAVY correction to this bullshit that has happened here over the last couple years. I was one of the persons who moved here at the end of the boom because of work in this vibrant city. Condo ownership is a joke. I make around $100,000 a year and I am overstretched at home ownership. How fucked is that? So to you and all your colleagues, along with Ed Jensen, prices are “stabilizing”, the market isnt “just around the corner”, its going down fast, which will ultimately be good for you because then many people will buy again.

And to the homeowners, just wait it out, you’ll be ok because your home value will rebound eventually. At least you have a home to live in, homes arent stocks. And to speculators, go buy a mutual fund instead of a house!!

#86 The Mole on 07.15.08 at 11:58 am

Why is everyone here so opposed to optimism when it comes to real estate? I think with 40 year options gone, we’ll see a return to a balanced market that will again begin to appreciate due to beter fundamentals.

Fliprbaby – I think you’re on to something here. 2009 might indeed be a strong year of real estate gains after a sobering up of the market in 2007/2008. If Mexico can continue unaffected by the US slump, Canada might also avoid the crisis:

http://www.ampisancarlos.org/Mexican_Housing_Boom_Despite_US_Crisis.pdf

That link is to an article written 7 months ago. At that time, Re/Max was saying the same about Canada. — Garth

#87 Brent on 07.15.08 at 12:10 pm

It seems RR’s income depends on the housing industry being a mortgage broker. He post’s like he’s pissed off that his job is in the tank. He’s probably on the layoff list. LOL

#88 Mike.slob on 07.15.08 at 12:12 pm

http://www.economicnews.ca/cepnews/wire/article/99674

#89 Sam on 07.15.08 at 1:24 pm

The Mole,

You are way out of sync with the current economic environment.

#90 From G&M on 07.15.08 at 1:34 pm

http://www.reportonbusiness.com/servlet/story/RTGAM.20080715.whousing0715/BNStory/Business/home

#91 Crikey on 07.15.08 at 1:59 pm

Article today (based on a report from the CREA):

Home prices slip for first time in nine years:

http://www.reportonbusiness.com/servlet/story/RTGAM.20080715.whousing0715/BNStory/Business/home

Gregory Klump a few months ago: “Price increases are expected to be modest in the second half of 2008, as sales continue easing and new listings remain high”

WHAAA???

#92 $fromaSia on 07.15.08 at 2:09 pm

Minister of finance should resign with no further pay.

Garth, I have no confidence in MP’s.

Look at the guy who was BC NDP Premier who left the party go Federal Liberal.

The Canadian public should get a thorough explanation for the change in their personal political fundamental values.

#93 Urban myth on 07.15.08 at 3:36 pm

And so it starts…

I heard it from a friend, who heard it from a sister in-law…ect…
A large home builder in Calgary is laying off due to lack of work, and contractors are leaving for Regina.
As Alberta is the leading edge of the boom, the rest of Canada can surely take note.
I cannot varify the “rumors”, but this is the first time I heard of a company actually trimming staff in a long time.
The motto in Calgary used to be, “A bad employee is better than no employee”.

#94 David on 07.15.08 at 4:04 pm

Mr. Turner:

I caught your brief segment on CTV Newsnet yesterday. You pouring cold
water on people who want to be property owners shows a callousness that is
most unbecoming.

What do people have to show for their money when they rent? At least when
money is put towards a mortgage, it counts as equity.

David
Edmonton, Alberta

#95 $fromaSia on 07.15.08 at 4:10 pm

Dave your input is fair but people instead of renting are paying into negative equity over 40 years.

Theres a right time to purchase, it’s not now.

#96 Sam on 07.15.08 at 4:11 pm

Garth,

I would love to see your footage on T.V. Many people will remember you and the service you are doing for it’s citizens. Thanks so much for saving the behind of many would be homeowners.

#97 David on 07.15.08 at 4:15 pm

It appears that someone in Ottawa finally decided enough potential high risk mortgages had been kited to support the real estate bubble. CMHC like any other insurance agency makes money by NOT having to pay out claims. At this point, neither the banks nor CMHC really wish to see falling prices and unaffordable housing is really in their best interest. When bankers and insurers forget to price risk all of us are aware of the potential outcomes. Trying to democratise home ownership through massive debt expansion now in retrospect looks like a horrible mistake. One of the unfortunate side effects will be that banks will at some point in the future start assigning risk premiums in the form of rising interest rates and sure as the sun rises in the east house prices will have to drop.

#98 Crikey on 07.15.08 at 4:24 pm

“At least when
money is put towards a mortgage, it counts as equity.”

FALSE. Equity is just money. Renters are actually in a better position to build equity through investing in anything but housing. Renters can get rich much faster than owners, just by investing in conservatively.
Owers (not a typo) are losing every month by paying much more for interest than they would pay for rent. The tax deduction does not come close to making owing competitive with renting.

Owers are losing principal in a leveraged way as prices decline. A 14% decline completely wipes out all the equity of “owners” who actually own only 20% of their house. Remember that the agents will take about 6%.
Owers must pay taxes simply to own a house. That is not true of stocks, bonds, or any other asset that can build equity. Only houses are such a guaranteed drain on cash.

Owers must insure a house, but not most other investments.

Owers must pay to repair a house, but not a stock or a bond.

Renting is now much cheaper per month than owning. If you don’t rent, you either:

Have a mortgage, in which case you are throwing away money on interest, tax, insurance, maintenance, costs that increase forever.

Own outright, in which case you are throwing away the extra income you could get by converting your house to cash, investing in bonds, and renting a similar place to live for much less money. This extra income could be 50% to 200% beyond rent costs forever, and for many is enough to retire right now.

Either way, owners lose much more money every month than renters and that’s assuming prices stop falling!

#99 Another Albertan on 07.15.08 at 5:08 pm

Urban Myth – This is old news. If you had talked to anyone affiliated with a carpenter union hall, you would have discovered that many able-bodies who work the residential side left Alberta back in February and March. They followed the money… and it is no longer in this province… hasn’t been in quite a few months.

#100 jrochest on 07.15.08 at 5:30 pm

“Renting is throwing your money away”

:) :) :)

Oh David, that’s delightful. I’ve not heard that for *months*.

How ’bout some of the other oldies-but-goodies?

“They’re not making any more land!”

“Real Estate always goes UP!”

And finally:

“It’s DIFFERENT here!”

#101 smwhite on 07.15.08 at 5:31 pm

#94 David,

– What do people have to show for their money when they rent? –

Hopefully they are saving a good portion of the difference and it becomes a substantial down payment…

Young people whom have recently purchased homes with a 35 – 40 year mortgage and little to no money down with affordability stretched like the skin on Joan River’s face have been deceived into thinking home ownership is the true path to riches.

If they had been patient and invested in bonds and/or blue chip stocks, even just a GIC, they would be able to save a down payment that would actually eat away the principal and not chip away at interest.

Its the difference between retiring in your 50s and retiring in your 60s.

Some bulls here have used the argument that these 40 year no money down mortgages were a way to help those young persons that knew they would make more money with the mass exodus of boomers out of the work force get into a home today betting on your larger income in the future.

It is/was gambling, and the rules and odds are always stacked in the houses favor. And if you don’t know who the house is then you have no business making that kind of gamble on your future based on some mythological housing dragon that keeps getting bigger.

The 40 was a shortcut that led to nowhere but financial pain and possibly ruin.

#102 brazer on 07.15.08 at 8:21 pm

#98 Crikey

“Owers must pay taxes simply to own a house. That is not true of stocks, bonds, or any other asset that can build equity.”

capital gains are taxable…dividend income is taxable…interest income is taxable.

your statement is false.

#103 Nick on 07.15.08 at 8:34 pm

“Renting is throwing your money away”

:)

Oh David, that’s delightful. I’ve not heard that for *months*.

How ’bout some of the other oldies-but-goodies?

“They’re not making any more land!”

“Real Estate always goes UP!”

And finally:

“It’s DIFFERENT here!”
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You forgot about all the immigrants buying homes!

#104 Blacksheep on 07.16.08 at 12:56 am

The Mole & RR,

Eight weeks ago i listed my home in langley B.C. on the M.L.S. at the tax assesed valued of 460 K.

Two weeks later dropped to 439K, no offers.

Two weeks later down to 429k,
week later,got an offer of 405K
countered at 410k and sold.

Homes in great area,Put 10K of renos
just to help it sell.

bought home in 1996 for 216K, so were in the black,
did not take equity loans for boat or Rv,
completes end of July.

Any one who thinks prices are not coming down is
in denial.

55K price drop on 460K home, do the math,
and things are just getting started.

Watching the banking system implode in the U.S.

Makes me damn glad the house is sold preserving
our equity.

Just need to find tagable assets to park the
funds in, Can. dollar suddenly seems linked to the U.S.
dollar[ bad]

We are renting a large 1960s home on five acres
for $400 less a month than my accelerated monthly morg. payments

When most people found out we were renting to watch
the prices for a while, they could not comprehend prices falling, cant see whats coming, to bad, will be
fortunes lost following the herd.

#105 Mike on 07.16.08 at 11:22 am

The Vacouver real estate market has far too many with vested interests …. and unfortunately they pay the bills for the media. Can anyone take Cameron Muir (of the VREB) seriously. The man is in denial. His “slight of hand” with respect to defining statistics is fabulous ! Cameron… the market is “tubing”…. not stabilizing”. GOT IT ! The rollercoaster is at the top of the hill…. but the first car is pointed down and already enroute. My prediction… market down 15-20% by mid 2010. A quick analysis of the VREB’s own graphs supports this ..
Vancouver is a great place to live, but describing us as a “world class” city puts us in Toronto “headspace” …. no thanx