Here we go again

While I said recently I would not get political (much) on this blog, I will now change that for a few paras. The prime minister is totally wrong to start priming the real estate pump, like he did this week.

The Conservatives, in the heat of an election campaign, unveiled a new plan to give a tax credit to first-time homebuyers on up to $5,000 worth of closing costs. The plan is aimed at wiping away up to 15% of those costs, to a maximum of $750, and will be phased in over four years. The cost of this to taxpayers will be $200 million.

Why is this a stupid idea from an economic, financial and societal point of view?

Duh.

This is from the same people who brought you the Canadian subprime, a.k.a. the 0/40 mortgage. That had the effect of turning a strong housing market into a frothy bubblette which was destined to explode with the same dire consequences we saw in the United States. Both financial ‘reforms’ were attempts to paper over a slowing economy with more consumer debt – debt which young buyers walked in to gladly, star-struck by the thought of having their own home, and prodded on by their lawmakers.

In fact, we already have far too much coddling of homeowners. Consider that Americans can write off mortgage interest and local taxes against income. Consider that Canadians can pocket all of the gains they make, totally free of capital gains tax. Consider that we allow dewey young kids to buy $500,000 homes with just $25,000 down, and yet experienced 50-year-old investors cannot margin their blue chip investment portfolios to the same extent.

And now the government is proposing to pay a chunk of your closing costs? Give me a break.

This is yet another example of government screwing up the marketplace, damming the natural forces of supply and demand and making the ultimate correction far worse. This is the same fuzzy vote-sucking logic  which led to the traumatic collapse of Lehman and Merrill and (almost) AIG this week on Wall Street. Politicians created the conditions under which bad business practices flourished, then panicked and fretted and dabbled when the crap hit the fan.

We don’t need housing stimulus right now. We need housing cleansing. We still have excessive expectations in the system which have to be wrung out. We still have average families who cannot afford average homes. We have supply exploding and demand contracting, which is the necessary purge for a market that went terminally obese on greed and speculation and Mike Holmes fantasy. We still have idiot young couple buying homes they do not need and cannot justify, complete with debt they’ll never repay.

Sorry, but Mr. Harper’s hard hat is obviously too tight. And you know I love the guy.

136 comments ↓

#1 Dr Phil, you can call me Uncle on 09.17.08 at 7:48 am

To further extend to longevity of the housing bubble/stimulate the housing market at this point in time is foolish and irresponsible indeed. Or even reducing interest rates will do little to stimulate the economy as far as consumer spending is concerned. Consumer debt too far gone for any recovery as it is at an all time high in Canada as well as the US (No we are not different….!) Most consumers can’t take on more debt, and if they do they truly are greater than greater fools.

No matter what the governments do there will still be a rebalancing in the housing market and the economy in general. They can try to postpone it but it will still happen. A correction is part of the normal economic cycle. Be it the stock market or housing market if price continues to grow far beyond true value there comes appoint where the price can go no further due to deterioration in affordability or ultimate pricing well over the net worth.

The housing prices in Canada are way out of whack when comparing average household income with average house price for a house suitable for that family. By a house suitable for a family I don’t mean the 500 sqft shoe box for a family with kids. The average house price is skewed by the shoe box farms all over a given metro area.

No matter what the RE folks spin the correction has started and will continue well into 2009 and possibly beyond, all through our great nation (including Toronto, and the surrounding area). We are not different from our friends from the south.

#2 homebuyers on 09.17.08 at 8:07 am

homebuyers also want their agents to know the inside scoop on the real estate market, according to 36 % of the respondents in the Coldwell Banker’s survey. Seventeen percent of the sales associates surveyed indicated that one of the necessary skills for real estate professionals working with affluent customers was the ability to provide emotional support to their clients.

#3 Jeff Waklker on 09.17.08 at 8:09 am

This reminds me of Paul Martin in 2000 dropping the capital gains tax from 75% taxable to 66.66% taxable to 50% taxable. Easy to look like a hero doing something like that…. but it was right at the exact time that the market cratered bigtime, so it didn’t really cost that much, as nobody had many capital gains anyways. Not to be cynical, but I’m sure Martin knew exactly what was coming.
Maybe Harper knows exactly what’s coming in this instance, and this may be a promise that ultimately won’t cost a lot anyways? Don’t forget the timing of this election… he probably DOES know what’s coming

#4 Jeff Waklker on 09.17.08 at 8:10 am

pleas let me change my name?!!!!

#5 Jeff Waklker on 09.17.08 at 8:13 am

and remove my website?

change my name to ” Surfer “

#6 CC: Ottawa on 09.17.08 at 8:32 am

“Morgan Stanley” the next…..exit the door ASAP.

#7 Chris L on 09.17.08 at 8:51 am

It wont actually come to fruition. It’s politics after all. You blame a politician and I blame the voters. Okay, so I’ll blame both in equal share. The people for wanting the policy and the voters for wishing it. Only fools vote for the return of their money, it’s the intelligent that vote to keep their money. It’s just sad that the voters don’t reclaim their soul and destiny from their government. Do they not realize that it is their money that government returns to them? Why do we vote for such issues? Why do we not vote to keep what is rightfully ours instead of suckling from the money of other tax payers? Lower taxes, shrink government, PLEASE! I’ll do what’s best for me; with my money. I promise.

#8 dd on 09.17.08 at 8:55 am

Well Said.

#9 RJT on 09.17.08 at 8:58 am

Garth.

I agree that this is a stupid idea. however, I would argue that a max $750 tax credit to buy a house is not going to stimulate the market. It’s just a stupid election ploy which will have little to no effect on the market. First time buyers are tapped out, and $750 isn’t going to change that.

#10 Peter in TO on 09.17.08 at 9:23 am

It is appaling what is going on in the US.

I can’t believe the government let Lehman fall then propped up AIG.

The pain is going to be long lasting due to that bonehead.

I wonder if they are going to start voiding CDS in order to not get swallowed whole by the system.

It looks like the taxpayer is going to take a bath down there or inflation is going to go skyrocketing.

This is good for CDN market stability as it means that all of the risk RBC and the others farmed out will be backed….. for now

#11 Jed on 09.17.08 at 9:25 am

And based on Harper’s comments in the media yesterday he really loves you too Garth

#12 JB-ott on 09.17.08 at 9:46 am

RJT, while you’re probably right, the people that are blaming David Miller’s land transfer tax increase for reducing sales in the GTA won’t agree.

House prices go up 100%, but Miller’s 1-2% is the problem…

#13 anon - GTA on 09.17.08 at 10:10 am

Hmmm, How much and what kind of affect will this have on falling house prices?

#14 David on 09.17.08 at 10:26 am

If Harper was honest, he would call this a government funded make fake work project for property conveyancers and mortgage brokers. The pool of first time buyers dried up with all the 0/40 mortgages on houses sold at inflated asset values.The people that should not have purchased in the first place are already in the game. This smacks of a late game Hail Mary pass.

#15 PETER_FROM_WPG on 09.17.08 at 10:50 am

This kind of reminds me about last election when Harper promised a cut to capital gains tax but never ended up living up to his promise.

As Canadians I believe we are taxed way too much, so any tax break that we are entitled to I like. I will be a home buyer sometime in the future once prices are attractive again. But I would never base my buying decision on a $750 tax credit. I do not believe that this will have ANY EFFECT AT ALL on the market.

I think that this is a good policy, nobody likes to pay lawyer fees and closing costs.

#16 Mike B formerly just Mike on 09.17.08 at 11:06 am

Talk about scam artist. Harper appeals to the young couples and offers them some nickels to essentially buy their votes. Cheap votes I call it… He leaves the tough topics to his back room closed cabinet to make … say goodbye to universal healthcare …. say goodbye to alot of social programmes if this dork gets in. And smear tactics… this guy is the worst… can’t even play the game properly… Do people actually take this guy seriously..

As for AIG getting a bailout… beyond F&%# belief… A private company that has a board of directors making bag loads of cash tanks the company and then goes begging to the fed for cash who in turns passes the bill to the taxpayer. Free market system….NOT… no matter how much fallout would have ensued from their demise this solution is bogus. This will solve nothing and the shareholders are left holding nothing. Scandalous indeed….

#17 Dave on 09.17.08 at 11:14 am

#9 PeterinTo,

Lehman and AIG are in different situations.

While both are major players in the CDS market, Lehman partipates on both sides of the transactions, and thus their net position is minimal.

In contrast, AIG is almost exlusively an end player in the CDS market. Thus, if AIG fails, there are dozens of banks worldwide who lose their CDS insurance which they are presently taking credit for in their disclosed sub-prime exposures.

This initiates numerous public restatements of exposure, and creates a cluster**ck of global financial institution squabbling amongst themselves.

In short, AIG’s bankruptcy had the potential to create a global panic.

In contrast, as an ongoing operation it allows the system to continue to chug through the toxic CDS sludge in an orderly manner.

Dave

#18 Calgary_rip_off on 09.17.08 at 11:17 am

What’s the hurry to buy houses? Why not wait until you can afford the down payment on a 25 year loan? I really dont understand why you HAVE to own a home. What are you going to do with it anyway? Its not like its a coffin!!!

In Calgary, why would you want to buy now anyway? The prices are still double what most houses are worth!! This “incentive” is a bunch of garbage.

Hopefully the far left gets in. Canada is supposed to be socialist, similar to Sweden, remember? Why the hell doesnt Harper go emigrate along with the other conservatives to the United States if he thinks it is so great?

#19 Peter Schiff on 09.17.08 at 11:19 am

Hi, I am going to do the opposite to most young people. I have paid off all my consumer debt. I am going to buy a used car cash. I am going to pay off my student loan in the next 8 months. I am going to rent a over priced condo from one of theses real estate flippers. I am going to buy gold, silver, and dividend paying stocks. That’s how you beat the central bankers.

#20 smwhite on 09.17.08 at 11:23 am

Great, more “gimmicks” for mortgage “innovation”.

RJT, I agree, when you consider the average house is 315K, really how much will $750 help,

Popcorn and beer anyone? :)

I’ve never been one to compare our leadership to that of the American’s (the right to the right) but Harper really has his eyes closed, or keeping his mouth shut, like McCain, on whats happening south of the border(or in a broader sense world-wide).

Obama ain’t much better at this point, what’s really scary is this American monetary policy that is creating money out of thin air.

As I watch the last couple of spikes and declines in gasoline across North America, is it because of hurricanes or really because of the money being thrown into the system to bail out irresponsible corporations. I know there is talk of deflation, but it won’t happen until America stops devaluing their dollar and driving up dollar denominated assets and commodities.

We’ve just watched the “socialization” of the two largest housing insurers in America, now the largest personal insurance company in America, smells like socialism/communism… They now have mass-socialized housing… Makes sense, they’re turning themselves into a police state anyways.

Maybe a common currency can help stabilize the North American stock markets and make them stronger? :)

Maybe?

In these kinds of markets, it how much you don’t loose that makes you a winner, mind you the yellow metal is going to get very popular very soon, probably right after Q4 and the end of the American soap opera they call the Presidential race.

Its sad watching the TSX bleed like it is… So which candidate or party actually has their finger on the pulse of the Canadian economy and not the Canadian voter? I’m already tired of watching these vote buying games from all sides.

#21 zloy on 09.17.08 at 11:31 am

Sorry Garth, but I fail to see how making $5000 tax-deductible to first-time buyer would prolong any housing bubble. One still has to pay the mortgage and interest, which isn’t tax-deductible.

Lower personal taxes to allow first time buyer to collect enough money for down payment and closing costs! And then you won’t need to give any tax credits!

#22 Downsized and Delighted on 09.17.08 at 11:48 am

Some of us actually DID lose money when the capital gains exemption was lowered. As I recall, there was a mad scramble to get an inflated property assessment (in a market that had already fallen by about 30%), so that when you did eventually sell, your taxable capital gains would be reduced. But I did lose money. And it took away the little incentive there was at the time to buy commercial property, so that added to the loss.

As for Harper’s incentive to first time buyers, it clearly is an attempt to reach young voters. I doubt that many would actually want to use that incentive in a falling real estate market. I don’t see it as anything that would “overheat” a market. At least Harper is attempting to reach young voters. I’d sure like to see the Liberals come up with a logical platform soon. I’m still ticked off that Bob Rae didn’t win the leadership. What do the Liberals have in mind for young voters? The carbon tax?

#23 Ski Goddess on 09.17.08 at 11:59 am

The UK has done a similar thing by reducing the levels that “stamp duty” is payable. Did nothing to stop the slide over there.

You’re right, it’s a ploy to instill some sort of warm fuzzy feeling to win votes.

And good job helping Joe Normal understand how these recent events will affect them, so many people hear these banks are going under etc. but have no idea what it means for them.

#24 Noz on 09.17.08 at 12:16 pm

This is from the same people who brought you the Canadian subprime, a.k.a. the 0/40 mortgage. That had the effect of turning a strong housing market into a frothy bubblette which was destined to explode with the same dire consequences we saw in the United States. Both financial ‘reforms’ were attempts to paper over a slowing economy with more consumer debt – debt which young buyers walked in to gladly, star-struck by the thought of having their own home, and prodded on by their lawmakers.

Wait a minute…over at Rob Chipman’s blog, all the zealots were shouting at the top of their lungs that things were different in Canada…“We don’t have subprime and funny loans here…so therefore we are safe…”

WTF.

#25 Keith in Calgary on 09.17.08 at 12:36 pm

Yeah right…….a $5K tax credit that potentially nets you $750 max in your pocket. Whoopee…..

“Any” government could even give me a $5,000 cheque, not a tax credit, but a cheque…..and I still wouldn’t buy an overpriced cardboard box that is being passed of as “housing”.

#26 brazer on 09.17.08 at 1:14 pm

Must see video clip re: economic collapse and subprime

http://www.youtube.com/watch?v=mzJmTCYmo9g

#27 i'm debt free 2 on 09.17.08 at 1:47 pm

economics lesson:
http://www.iht.com/articles/2008/08/15/business/wbroubini.1.php?page=1

who’s laughinh now?

#28 AM on 09.17.08 at 2:17 pm

This $5,000 tax credit is no different from all the other incentives the conservatives have been pushing. It appears that most of Harper’s worshippers see the sticker value of these tax breaks and don’t do the math. As noted above, $5,000 works out to $750. I have 4 kids and I feel like I got burned on the child fitness tax credit; the actual value of these incentives (other than your children staying fit) works out to peanuts based on what you have to spend to receive the greatest amount in return (which isn’t much).

For the two examples given, if you can’t afford to buy a house or put your children into sports, you will receive no tax break. How does this help the lower income families?

Back to the 0/40 mortgage…I saw a young lady in the news the other day shopping for a condo. She said she was anxious to get into the market before the 0/40 policy is dropped. Does anybody do their research or watch the news??

#29 JHO on 09.17.08 at 2:20 pm

God, why do I get that feeling of bile being pushed to the tip of my tongue everytime i see or hear Harper. I heard this BS as a radio commercial on the way to work the other day, and I couldn’t believe my ears (and my gag reflex). How unbelievably f’n socially irresponsible for him to come out with this tax-credit at a time like this. What an f’n joke.

#30 pjwlk on 09.17.08 at 2:21 pm

We all know that this “incentive” is stupid, but we should also all know that people are going to go for it and that’s the reason it’s being done.

Now if we could just get Dion off of his goofy “Green Shift” crap… Now that’s a hard sell.

#31 Andrew toronto on 09.17.08 at 2:42 pm

I couldn’t resist .. check the image of hank

Don’t Worry, The Banking System Is Sound

http://globaleconomicanalysis.blogspot.com/

#32 Andrew toronto on 09.17.08 at 2:50 pm

from elliott wave , those that follow charts..

Today is Not Like 1929! No, It’s Worse

http://www.elliottwave.com/freeupdates/archives/2008/09/12/Today-is-Not-Like-1929.aspx

By Editorial Staff
Fri, 12 Sep 2008 15:00:00 ET Email | Print | RSS | My Updates Bookmark and share It!

Bob Prechter has explained his view that the U.S. economy is heading for a depression many times over the years. Now, with the Dow in decline and the current meltdown of Fannie Mae, Freddie Mac, and Lehman on the front pages, more people may want to know exactly what Prechter has forecast. Here’s a brief Q&A with a reporter, which summarizes his point that what we’re heading for will be worse than the Great Depression – and then it will be time to turn bullish.

* * * * *
Excerpted from Prechter’s Perspective, 2004

Q: There are valid reasons to expect excess capacity [in the U.S. economy] to be consumed this time. Eastern Europe, India and China, for example. Those markets weren’t even open to U.S. manufacturers in 1966.

Bob Prechter: First, it is just such hopes that create the psychological environment for a top. But like all such arguments based on so-called fundamentals, it has two sides. In your example, those countries are not only consumers, but they are also becoming producers. Very cheap producers, too. Won’t that be a negative influence on U.S. wage rates and profit margins, at least temporarily?

Q: The majority of pundits is saying that positive changes in the worldwide outlook for capitalism and other favorable “fundamentals” are bullish for stocks.

Bob Prechter: Of course they’re saying that. How else could the global stock market make a top? The worldwide outlook for capitalism in 1942 was terrible, so it was a great stock-buying opportunity. In the coming bear market, the public’s image of capitalism will suffer again.
——————————————————————————–

The “Impossible” is Happening, writes Bob Prechter in his just-published Elliott Wave Theorist. He goes on to elaborate under these headings: The Fed’s “Uncle” Point is in View; The Last Bastion Against Deflation: TheFederal Government; and a Q&A about Righting Some Misconceptions About the Latest Bailout. Get more information about this Theorist and how to subscribe here.
——————————————————————————–

Q: You say that the coming stock crash will lead to a depression. If so, wasn’t the 1987 crash wrong? The economy has gone on to record activity and new highs.

Bob Prechter: Not all crashes lead to depressions. The 1962 crash, for instance, which was Primary wave 4 of Cycle wave III. The 1987 crash was in almost the same position as that one: Primary wave 4 of Cycle wave V, although because of its large price movement, I didn’t realize it at the time. That corrective pattern did lead to a recession, though, in 1990-91. But the coming crash will be different. It will be much larger, part of a grand Supercycle bear market.

Q: What time period does the current long-term pattern in the markets have the most in common with?

Bob Prechter: The 1720 peak. That’s when the investment manias associated with the South Sea Bubble in England and the Mississippi Scheme in France ended.

Q: Will the bear market be similar to the one that followed that peak?

Bob Prechter: Similar, yes, but while the bear market of the 1700s produced 64 years of a zigzag pattern, a very simple down-up-down shape, this one is likely to be a sideways pattern, which will manifest as plummeting major declines punctuated by tremendous rallies back to near or slightly past the old highs. If you take a look at the Dow Jones Industrial Average chart from 1966 to 1982, you can get an idea of what I’m expecting. But it will occur on a larger scale.

Q: What about the accompanying economic turmoil? How quickly will depression arrive?

Bob Prechter: Because the economic changes that are occurring are of such a very large degree, they will occur in a fashion different from the slam-bang progression of typical recessions of the past 50 years. I think the economic expansion in force since 1991 is ending, and we will then have another contraction, which is deeper than the last. After it’s gone on for a while and economists actually recognize it, you will undoubtedly hear continual reiterations that it’s just a “mild recession.” Any recoveries will be met with fanfare and assurances that a new boom is under way. But any bounce will just be a bear-market rally against the larger trend. When the bottom is reached, the economic devastation will be front-page news, just as it was in 1933.

Q: Do you see the same thing happening globally?

Bob Prechter: A Grand Supercycle bear market and depression will be worldwide, for sure. That’s too big a degree to have only local implications.

Q: Many people would indignantly say, “Today is not like 1929.”

Bob Prechter: They’re right. It’s worse.

Q: Worse than in 1929. Why?

Bob Prechter: Because it seems better, of course. People are more optimistic than ever before, at least as far back as our data go. And look at the results. When but at a major top in worldwide social mood would you ever have had the Berlin Wall come down, communism rejected, sanctions lifted on South Africa and the idea of a “new world order”? This type of psychologically induced event on the world stage, including Mideast, IRA-English and Bosnian peace agreements, 20 American free trade agreements in 34 months and, in October 1995, a photograph commemorating the largest gathering of national leaders in world history, has continued right through today with the normalization of trade ties with China.

Q: This is bad news?

Bob Prechter: It’s a huge top. At the bottom, international tensions will be high and include active conflict, as always. That will be bullish … which means for the future.

Q: What will be the prime indication that the great economic contraction is about to start?

Bob Prechter: The stock market will be the main indication. When the Dow heads down in a big way, we’ll be off the cliff.
——————————————————————————–

The “Impossible” is Happening, writes Bob Prechter in his just-published Elliott Wave Theorist. He goes on to elaborate under these headings: The Fed’s “Uncle” Point is in View; The Last Bastion Against Deflation: TheFederal Government; and a Q&A about Righting Some Misconceptions About the Latest Bailout. Get more information about this Theorist and how to subscribe here.

#33 NO fool... on 09.17.08 at 2:50 pm

Garth, I was on here a few days ago mocking your leader only a bit and I appreciate you not Editing the post. I have to say, this move by Harper/PCs is about as dumb as it gets. When I heard about it the other day I couldn’t believe my ears. I sincerely doubt that it doesn’t motivate idiots to go and buy a house in this market.

#34 Andrew toronto on 09.17.08 at 2:52 pm

Today is Not Like 1929! No, It’s Worse

http://www.elliottwave.com/freeupdates/archives/2008/09/12/Today-is-Not-Like-1929.aspx

interesting times indeed

#35 Cash is King on 09.17.08 at 3:10 pm

#21 “At least Harper is attempting to reach young voters”

True enough, every little bit helps starting out… But the odds are any new buyers here near the peak may suffer extreme losses as we slide back to more normal valuations.

Young people would be better advised to build up a sizeable downpayment over a few years .
Any kind of tax break is always welcome of course, but it might be smarter to take advantage of it 3 years from now instead.

#36 islander on 09.17.08 at 3:46 pm

Calgary ripoff said: Hopefully the far left gets in. Canada is supposed to be socialist, similar to Sweden, remember?

Luckily for the rest of us, not enough voters in Canada are naive, desperate or dimwitted enough to follow your lead.

#37 So what on 09.17.08 at 4:26 pm

Gold is 100$ since yesterday, okay people are really panicking already and looks like everybody is running for Gold as fast as they can.
But isn’t the Canadian economy is resource based and the CDN dollar is classified as a resources currency meaning it should be safe to have your savings in CDN $, I read it once in some article that the safest currencies are the CDN and the Australian ones.

#38 Dave in Calgary on 09.17.08 at 5:07 pm

“Canada is supposed to be socialist, similar to Sweden, remember?”

According to whom? I thought Canada is a democracy where people can vote from whomever they wish to vote for. I lean pretty far left out of my own choice, not because Canada is supposed to be like Sweden, lol…

#39 i'm debt free on 09.17.08 at 5:09 pm

I read it once in some article that the safest currencies are the CDN and the Australian ones.

i’ve got Euros

#40 David on 09.17.08 at 5:19 pm

Harper might regret the prospect of getting a majority someday in the very near future. In the USA and the UK the governments have effectively chosen to nationalise banks and financial institutions to prevent total market collapse.
Get your majority Stephen Harper and nationalise your first Schedule A Canadian bank!!
Hey Islander, are you calling me a dimwit too?

#41 B on 09.17.08 at 5:28 pm

Harper must really be getting sick and tired of trying to appear like he cares. He knows the economic shitstorm is coming and that why the election was called in the first place.

#42 BBC on 09.17.08 at 5:30 pm

Promises, Promises…..does anyone ever believe the crap that comes out of these politicians mouths at election time???? I am going to have to vote for the lesser of the EVILS! It would be refreshing if someone would actually call a spade a spade regarding our economy and come up with practical, realistic solutions. We Canadians need to have a govt. that is going to implement ‘damage control’ not help us deeper into a debt hole. It would be interesting to see what sort of personal financial planning these candidates have in place? You know that they sure as hell aren’t going to let their personal finances go to the DOGS.

#43 Jinxy on 09.17.08 at 5:46 pm

#23 Noz

“Wait a minute…over at Rob Chipman’s blog, all the zealots were shouting at the top of their lungs that things were different in Canada…“We don’t have subprime and funny loans here…so therefore we are safe…WTF”

There is a big difference between a subprime loan and a 0/40 mortgage. Comparing apples and oranges, guys.

See subprime web definitions below:

A loan made to a borrower who does not qualify for the lowest market interest rates due to credit problems or other underwriting deficiencies. …

A loan to a borrower with poor credit, income or assets that are hard to document, or other circumstances that would hinder loans

A loan granted to a subprime borrower (an individual with less-than-perfect credit). The interest rate charged is higher than the prime rate …

A loan for a borrower with a less-than-perfect credit report; subprime borrowers have either missed payments on a debt or have been late with payments…

A loan offered to applicants with less than top-quality credit ratings…

A subprime home loan is designed for clients with credit problems. These loans are borrowed from pools of private investors with slightly higher interest rates to offer those financing who normally could not get a loan…

#44 Rick on 09.17.08 at 6:10 pm

#32 islander on 09.17.08 at 3:46 pm Calgary ripoff said: Hopefully the far left gets in. Canada is supposed to be socialist, similar to Sweden, remember?

Luckily for the rest of us, not enough voters in Canada are naive, desperate or dimwitted enough to follow your lead
———————–
More bitter Realturds on this blog than bitter renters these days.

#45 Bob on 09.17.08 at 6:22 pm

Today news:
September 17, 2008

The Toronto stock market TSX, closed at a two-year low at 11,877.69 and down -349.30 ponts, with bank and insurance stocks taking it on the chin as investors found it hard to be confident in the wake of the U.S. Federal Reserve’s rescue of insurer American International Group(AIG).
U.S. government steps in again, bails out AIG with US$85 billion.

http://ca.news.finance.yahoo.com/s/17092008/2/biz-finance-u-s-government-steps-bails-aig-85-billion.html

*Again GTA Resale Housing Moderate in September!

With 2,726 sales during the first half of this month, activity has declined 16 per cent from the 3,236 recorded during same time period a year ago.
At $366,158 the average price of housing in the GTA has increased marginally from the $364,364 recorded a year ago.
The 26,299 properties listed for sale on the TorontoMLS system have increased 26 per cent from a year ago when 20,841 homes were available. The time that homes remain on the market has increased as well, to an average of 37 days compared to 31 days a year ago.
The Greater Toronto Areaís autumn resale housing market began with moderate activity, Toronto Real Estate Board President Maureen OíNeill announced today.

http://www.torontorealestateboard.com/consumer_info/market_news/news2008/nr091708.htm

#46 KS on 09.17.08 at 6:52 pm

Another Condo Project halted in Calgary.

http://www.cbc.ca/canada/calgary/story/2008/09/17/condos-calgary-halt.html

#47 Anon - GTA on 09.17.08 at 6:58 pm

Surprise Surprise – Canadian banks face exposure !!!

http://www.financialpost.com/news/story.html?id=794968

#48 Jinxy on 09.17.08 at 7:06 pm

Not sure is this video (ahem…) “presentation” has been posted here before…subprime crisis in a nutshell.

http://docs.google.com/TeamPresent?docid=ddp4zq7n_0cdjsr4fn&skipauth=true&pli=1

#49 3rdman on 09.17.08 at 7:39 pm

AIG is now a nationalized institution (crown corp) owned by Washington. What’s the shift on that..?

What’s King Harper up to with costing the Afghan mission? Something going on there. Is he trying to show the professor he can budget taxpayer dollars while the carbon tax can’t?

#50 dotava on 09.17.08 at 8:08 pm

#32 islander on 09.17.08 at 3:46 pm

Do you know where Sweden is located on the glob and what standard they have there?

#51 brazer on 09.17.08 at 8:18 pm

TSX closes at two-year low; Wall Street also stumbles
http://www.thestar.com/article/500627

“I thought it was a bear market eons ago,” said David Chapman, a technical strategist with Union Securities Ltd. “The fear is still palpable out there. We are probably at – or near – a temporary low … The events of this past couple weeks or so have just been mind-spinning.”

The TSX has fallen 21.19 per cent from its June 18 record high of 15,073.13, meeting the definition of a bear market.

#52 dd on 09.17.08 at 8:22 pm

Deflation? One Investment Analysis says Hyperinflation!

http://www.sprott.com/pdf/investorsdigest/09_2008_ID_U.S.%20on%20cusp%20of%20its%20biggest%20bailout%20ever.pdf

#53 brazer on 09.17.08 at 8:24 pm

Credit crisis pushing up vacancy rates
http://www.thestar.com/Business/article/500517

“Downtown Toronto is driven by banks, insurance and investment firms who are the most directly connected to the credit crunch,” says Ian MacCulloch, vice-president of research, with Colliers, in an interview. “They’re concerned about future revenue and all that turmoil filters down to the law and accounting firms, and that has an impact on future employment and office demand.”

As a result, overall vacancy rates in the office market will rise over the next year from a low of 5 per cent to about 7 per cent with a moderate decrease in asking rents, Collier forecasts.

#54 dd on 09.17.08 at 8:37 pm

#9 Peter in TO,

Peter I don’t like the Fed bailing out AIG either. But what can they do? Let the banks and insurance companies fail today and watch the unemployment rate around the world climb to 30% tomorrow. It is that serious. The people that made the money were out the door a long time ago.

Calgary Rip-off, what will you complain about when house prices are $80k in Calgary after this blowup?

#55 dd on 09.17.08 at 8:42 pm

Quote of the Day

Nouriel Roubini | Sep 17, 2008
Last week we argued that, with the nationalization of Fannie and Freddie, comrades Bush, Paulson and Bernanke had started transforming the USA into the USSRA (United Socialist State Republic of America). This transformation of the USA into a country where there is socialism for the rich, the well connected and Wall Street (i.e. where profits are privatized and losses are socialized) continues today with the nationalization of AIG.

This latest action on AIG follows a variety of many other policy actions that imply a massive – and often flawed – government intervention in the financial markets and the economy: the bailout of the Bear Stearns creditors; the bailout of Fannie and Freddie; the use of the Fed balance sheet (hundreds of billions of safe US Treasuries swapped for junk toxic illiquid private securities); the use of the other GSEs (the Federal Home Loan Bank system) to provide hundreds of billions of dollars of “liquidity” to distressed, illiquid and insolvent mortgage lenders; the use of the SEC to manipulate the stock market (restrictions on short sales); the use of the US Treasury to manipulate the mortgage market (Treasury will now for the first time outright buy agency MBS to manipulate and prop up this market); the creation of a whole host of new bailout facilities (TAF, TSLF, PDCF) to prop and rescue banks and, for the first time since the Great Depression, to bail out non-bank financial institutions; the recent extension of the collateral available for the TSLF and PDCF facilities to a much wider range of toxic securities including equities and thus allowing the Fed to effectively manipulate even the stock market; and a whole range of other executive and legislative actions (including the recent bill to provide a public guarantee to mortgages for banks willing to reduce their face value).

#56 dd on 09.17.08 at 9:26 pm

Nouriel Roubini …. total house price decline in the US = 40%

http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vmUV7PR4JGX8.asf

#57 wealthy renter on 09.17.08 at 9:55 pm

Brazer,

Thanks for article link. It is the first MSM article I have seen which states specifically that the financial services industry in Toronto is under stress.

What a change in sentiment from this recent article which essentially argues that Ontario’s economy will be saved by the growth of financial & other service jobs.

http://www.thestar.com/Business/article/309406

At the same time, the media is now awash with oil-related projects in Alberta that might be shelved (i.e. Petro Canada) due to cost overruns and lower prices.

http://www.theglobeandmail.com/servlet/story/LAC.20080917.RBANKSOIL17/TPStory/Business

The next few years will be hard for more than just real estate.

#58 JO on 09.17.08 at 10:02 pm

Gold appears to have followed through so far tonite on the huge rally earlier today..Wow..I would rather not own this thing yet but considering the panic move into it, in addition to the difficulty of getting coins, it could be a final blow off top before a big drawdown. I have to say however, if gold breaks the former high of $1033, it behoves anyone with savings in US $ to look at adding some exposure before something bizzare happens. The announcment today by the Treasury / Fed that the Treasury is going to sell 40B in TBills and then give the money to the Fed to expand it’s balance sheet does not seem to be printing; in fact, if this goes through as indicated, a huge amount of cash is being sucked out of the system..which does not support the hyperinflationary conditions..it seems gold is exploding higher mostly on an emerging lack of confidence in US authorities. Much of what is happening on the economic/monetary side does still support deflation in the next year or so. Either way, if gold breaks its former high, I would take that as a signal an ominous phase is upon us. Most currencies will likely be affected, save the Swiss Franc if you are lucky. Expect to see more government gimmicks to grab some votes and try to keep the bubble inflated. As long as the NDP or Green party does not win, I can live with the other two.

#59 dd on 09.17.08 at 10:09 pm

Again more good stuff on Nouriel:

http://www.youtube.com/watch?v=51SxmcaKJIw

#60 Jinxy on 09.17.08 at 10:20 pm

I guess I’m missing something. Everything I’ve read today states that the US Government bailed out AIG. I thought it was the Federal Reserve that came to the rescue. Is the Federal Reserve not a private corporation? Did the Federal Reserve do this based on the US Governments directive?

Confused…

#61 Calgary rip off on 09.17.08 at 10:25 pm

DD:

I will be quite happy when prices are $80,000 in Calgary, IF that happens. Thats what them thar shacks are worth. 8 feet between you and your neighbour for $400,000? Nah, not interested in buying.

I hope the market does exactly that DD. Then all the speculator bastards will be in crap. People who bought their homes to live in them wont be in trouble. Just ride ‘er out.

You only need one house anyway. Even if houses were $80,000 I would only want one. Buy the damn thing and get it over with. Then I can go play my piano/electric guitar/over the top neoclassical heavy metal and not worry about all the disgusting greed/lust that permeates much of Calgary. The bills will be paid. What the hell are you going to do on a granite countertop anyway? Knock up your wife?

The worse thing that could happen to anybody is that they lose their home. So just go rent a damn property. The housing industry isnt a death sentence. Just a place to live. And again, when your dead all you can take with you is the skills and ideas you have gained, and maybe not even that, cause you’re dead. So why worry about it?

I hope all those losers get screwed that capitalized on that boom.

#62 T-Bill on 09.17.08 at 10:59 pm

Good link Jinxy #43! I saw that one a while back and it covers the situation well.

It also looks like the Democrats have a big hand in this mess and it goes back a long time:

http://online.wsj.com/article/SB122161010874845645.html?mod=googlenews_wsj

http://ibdeditorial.com/IBDArticles.aspx?id=306370789279709

#63 David on 09.17.08 at 11:20 pm

Give Harper credit for putting on a good game face. The decision to call a premature election that no one really wanted was predicated on getting that coveted majority before fear and panic gripped the financial markets and skeptical voters became prone to sober second thoughts.
The AIG bailout in the USA is causing a great deal of financial disturbance unquestionably. In 2000 AIG had a market cap of $217 billion and this week, before the Federal reserve bailout a market cap of $7 billion, a decline of almost 97%. In other words the shares of the world’s largest insurer had been reduced to worthless bum wipe. Lehman had about $475 billion in short term and intermediate term debt and the required short term liquidity injection was simply too big even for the US Federal Reserve leading to the biggest bankruptcy in history.
I have sitting on my kitchen counter an unopened mailer from AIG Assurance 60 Younge Street Toronto with some bold face type which says “Something you can count on….GUARANTEED-LIFE PLUS”. Below that is a little personalised reminder, “DAVID PLEASE REPLY BY SEPTEMBER 16, 2008”.Talk about impeccable timing!!!

#64 The Tallyman on 09.17.08 at 11:41 pm

Hey Garth,

Doesn’t Harper kinda look like the Pope in your pic.
and the caption might read:

Holy Harper addressing the flock ” Consume! Consume! why do you think God made you”

#65 Adil Burney on 09.18.08 at 12:11 am

http://canadahousingcrash.blogspot.com/

Harper did the “smart” thing by calling an election before the economy went it the crapper (technically a recession probably started months ago but the average person didn’t feel it because of the commodity bubble and strong Canadian dollar). After the past few weeks of tanking stock markets, his decision doesn’t look so smart anymore.

I agree with Garth that this is bad economics and cheap politics. Shameful ploy to get reelected. Hopefully the electorate sees past these targeted tax credits this time.

http://canadahousingcrash.blogspot.com/

#66 anonymous on 09.18.08 at 12:48 am

Jinxy,

It was an 85 billion dollar loan. They took big equity stake (70% or something) in the company and are charging AIG 12% interest on that money.

It’s not a “bailout”.

Loan sharks don’t get that good of a deal.

It was a good move and may have prevented the largest stock market crash in history.

#67 Jinxy on 09.18.08 at 1:01 am

Ahhh, I see … a bridge (loan) to nowhere.

(CNN) — “The U.S. Treasury Department will begin selling bonds Wednesday to help the Federal Reserve, which has had to loan out an unprecedented amount of money to businesses because of the credit crisis.

The Fed announced Tuesday it would authorize the Federal Reserve Bank of New York to lend up to $85 billion over two years to insurance giant American International Group. In return, the government will receive a 79.9 percent stake in the company, which has 74 million clients in 130 countries.”

#68 Brad on 09.18.08 at 2:05 am

Doesn’t anyone find it rather strange that Harper calls an election right before all this shit hit the fan? And isn’t it amusing how Bank of Canada governor Mark Carney has been curiously silent these last few days? Isn’t it funny how I read in the TO Star yesterday that Flaherty keeps insisting and maintaining that our economy is “fundamentally sound”, much like the same rhetoric they’ve been spouting off in the US for the past year?

And am I the only one who sees the possibility of a not a recession, but indeed a DEPRESSION hitting the global economy very soon? Well gosh-darn-it, you gotta admit folks the party was fun while it lasted… I hope the Libs enjoyed their “beer and popcorn”…

Good luck to everyone out there who has money tied up in the markets. A shovel and a glass jar never looked attractive at this point… I’ve got about 6 months worth of food here… May God help us all.

#69 Mike.Slob on 09.18.08 at 3:41 am

Ouch
September 17/2008

-Again GTA Resale Housing Moderate in September!

With 2,726 sales during the first half of this month, activity has declined 16 per cent from the 3,236 recorded during same time period a year ago.
At $366,158 the average price of housing in the GTA has increased marginally from the $364,364 recorded a year ago.
The 26,299 properties listed for sale on the TorontoMLS system have increased 26 per cent from a year ago when 20,841 homes were available. The time that homes remain on the market has increased as well, to an average of 37 days compared to 31 days a year ago.
The Greater Toronto Areaís autumn resale housing market began with moderate activity, Toronto Real Estate Board President Maureen OíNeill announced today.

http://www.torontorealestateboard.com/consumer_info/market_news/news2008/nr091708.htm

-The Toronto stock market TSX, closed at a two-year low at 11,877.69 and down -349.30 ponts, with bank and insurance stocks taking it on the chin as investors found it hard to be confident in the wake of the U.S. Federal Reserve’s rescue of insurer American International Group(AIG).
U.S. government steps in again, bails out AIG with US$85 billion.

http://ca.news.finance.yahoo.com/s/17092008/2/biz-finance-u-s-government-steps-bails-aig-85-billion.html

Morgan Stanley has proven to be Wall Street’s next potential casualty, as the company’s stocks plunged by over 24% Wednesday and rumours were spread that the bank was hunting for buyers.

#70 Robert on 09.18.08 at 3:43 am

September 17, 2008

-Again GTA Resale Housing Moderate in September!

With 2,726 sales during the first half of this month, activity has declined 16 per cent from the 3,236 recorded during same time period a year ago.
At $366,158 the average price of housing in the GTA has increased marginally from the $364,364 recorded a year ago.
The 26,299 properties listed for sale on the TorontoMLS system have increased 26 per cent from a year ago when 20,841 homes were available. The time that homes remain on the market has increased as well, to an average of 37 days compared to 31 days a year ago.
The Greater Toronto Areaís autumn resale housing market began with moderate activity, Toronto Real Estate Board President Maureen OíNeill announced today.

http://www.torontorealestateboard.com/consumer_info/market_news/news2008/nr091708.htm

-The Toronto stock market TSX, closed at a two-year low at 11,877.69 and down -349.30 ponts, with bank and insurance stocks taking it on the chin as investors found it hard to be confident in the wake of the U.S. Federal Reserve’s rescue of insurer American International Group(AIG).
U.S. government steps in again, bails out AIG with US$85 billion.

http://ca.news.finance.yahoo.com/s/17092008/2/biz-finance-u-s-government-steps-bails-aig-85-billion.html

Morgan Stanley has proven to be Wall Street’s next potential casualty, as the company’s stocks plunged by over 24% Wednesday and rumours were spread that the bank was hunting for buyers.

#71 POL-CAN on 09.18.08 at 9:23 am

All…. I read two blogs on a daily basis:

http://globaleconomicanalysis.blogspot.com/

http://theautomaticearth.blogspot.com/

There are many others but the two above are by far the most informative imho.

This is a global problem and a consequence of loose credit, ever growing debt, and stalled wage increases.

Some say global recession. Others a global depression.

To think Canada will somehow escape is silly. Housing prices are the least of our problems right now, but will come down along with all other assets.

#72 George Popovic on 09.18.08 at 9:31 am

Interesting news item on CBC this morning…
A homeowner in Leslieville with his house on the market for some time and a 20k price drop has had little interest and no offers on his house.
Now the story is on the morning news.
Also, 25% in sales from last year.

#73 jeremy on 09.18.08 at 10:04 am

Big toys filling repo business floor

http://www.cbc.ca/canada/calgary/story/2008/09/17/big-toys-alberta.html

“An increasing number of Calgarians can’t afford to make payments on some of the big toys that have come to symbolize wealth in the province, says one local repo company.”

#74 Keith in Calgary on 09.18.08 at 10:32 am

#39…..

Subprime also defines loans given to people who cannot afford them within the standard loan terms.

Thus we have the government allowing the CMHC to make the loans suddenly become affordable, in order to keep the house of cards from falling.

Ie: 25 now becomes 40 years…..it is still subprime.

Not having equity in the transaction is also subprime and outside the normal lending terms.

0 down….5% down….10% down…cash back….all subprime. And all underwater right now…..every single one of those mortgages.

#75 POL-CAN on 09.18.08 at 11:02 am

Interesting and scary clip on the credit bubble and possible consequences

http://www.youtube.com/watch?v=iMqwJc_EXnc

#76 POL-CAN on 09.18.08 at 11:06 am

It seems that even our central bank is getting ready for something…. Central banks all over the world are pumping billions into the markets this week trying to prop them up… Not working very well is it?

Bank of Canada Action

The Bank of Canada and the Federal Reserve have agreed on a US$10 billion swap facility (reciprocal currency arrangement) to be accessed, should the need arise, to provide U.S.-dollar liquidity in Canada. If drawn on by the Bank of Canada, the swap would provide liquidity facilities for use by financial institutions in Canada that are similar in nature to those being announced today by the other central banks. This swap facility expires on 30 January 2009.

This agreement provides the Bank of Canada with additional flexibility to address rapidly evolving developments in financial markets. The Bank judges that it is not necessary for it to draw on this swap facility at this time, but that it is prudent to have the agreement in place. Should the swap be drawn on, the details of the liquidity facilities provided would depend on the specific market circumstances at the time.

The Bank of Canada continues to closely monitor global market developments and remains committed to providing liquidity as required to support the stability of the Canadian financial system and the functioning of financial markets.

http://globaleconomicanalysis.blogspot.com/2008/09/central-bank-global-coordinated.html

#77 Andrew toronto on 09.18.08 at 11:41 am

The FED already paid USD 900 billion (900.000.000.000) to keep everything going!!!

AIG 85 billion
Fannie and Freddie 200 billion
(Re)financing home owners 300 billion
Morgan Chase 116 billion
Liquidity into the financial markets 200 billion

Why don´t you hear this kind of information on CNN, Fortune or CNBC????

Who is going to pay for all this????

Where is this money coming from????

The world isn´t stupid you just can´t keep making free dollars! The whole financial system will cease up when China and The Middle East stop buying these wortless debt papers. Or better yet start selling it

#78 dotava on 09.18.08 at 11:50 am

#25 brazer on 09.17.08 at 1:14 pm

As “brazer” said – MUST BE SEEN – truth told on satiric way.

#79 Mark on 09.18.08 at 11:52 am

Im not economic expert. But surely the best thing to do right now is to LET house prices fall, and subsequently let the economy collapse?

Surely the worst thing for us is to have all the other countries around us collapse and we stay strong.. Because all we’re doing is delaying the inevitable- When our prices drop (and by keeping them up artificially high, that’ll be an EVEN BIGGER drop), and our economy tanks – we surely dont want it to be late in the day when the rest of the world has recovered?

Surely it’s better to have everyone collapse at once (for a level playing field) than it is to wait and have us collapse later when everyone else is recovering?

#80 Dawn in Calgary on 09.18.08 at 11:56 am

Big toys filling repo business floor

CBC News
Marvin Boman, owner of Calgary Repo Sales, says business is booming.Marvin Boman, owner of Calgary Repo Sales, says business is booming. (CBC)

An increasing number of Calgarians can’t afford to make payments on some of the big toys that have come to symbolize wealth in the province, says one local repo company.

More and more motorcycles, snowmobiles and high-end SUVs seized from Alberta owners who couldn’t pay the bills are up for sale at Calgary Repo Sales, said owner Marvin Boman.

“We’ve experienced a huge influx in business in the past two months,” he said. “We’re absolutely over-capacity as far as square footage to park repossessed assets, foreclosed assets.”

For whole article, see here
http://www.cbc.ca/canada/calgary/story/2008/09/17/big-toys-alberta.html?ref=rss

#81 confused and a little crazed on 09.18.08 at 12:00 pm

Hi Guys,

I know many of you here believe the global collaapse of the stock market…real estate and such….But it won’t happen because the collective govt around the worldd won’t let it happen. They will print money , loan credit…pool whatever resources they have to keep it from crashing mainly to keep their polictical supporters, lobbyists in power. If it would help…they’d sleep with someone’s butt ugly sister/ brother; however they would arrange so the taxpayer would have to pay the bill or do the act for the benefit of all ( public good). if you look at the stuation objectively did any CEO have to liquidate their assets after receiving the multitude of bonuses or the politicans who maade the regulations which got everyone in this mess…no.

if this was a true free markret society ..yes your predictions would ring true but it’s not…It is just a slight of hand magic trick. Now you see it…now you don’t.

Yes I have bought stocks after it dropped 30-40 % and they have fallen further to 50 -60 % . Now some have come up …that the way it is.

But I do agree the realestate maarket will have a signifigant correction. It is illiquid ASSet..getting it sold is tough in a downturn econ…especially when the govt “NOW” business model is the economy is good when the consumer spending is driving it. Not consumers are spending because the econ is good. See the difference?

#82 Strataman on 09.18.08 at 12:02 pm

Garth! I think you’re underestimating Harper, I would guess he believes exactly what you do and has called this election because he know’s shi** will hit the fan soon. And as others have said he likely won’t have that many claims for the tax credit. I have a question; what do you think Dion (really) believes in relation to your ongoing prognosis? Personally I believe whoever gets in in this next election will be unceremoniously turfed in the next one after because whether true or not; the general population will blame who currently is in power at that time (next two years) for what looks to be a major recession and housing bust. So! Is this a good time to win an election? :-)

#83 $fromA$ia on 09.18.08 at 12:05 pm

Whats wrong here?

Harper is baiting us for votes.

I dont think the bait is very healthy for Canadians.

Can Canadians tell the difference between healthy and not?

I really have yet to have faith in the rest of the Canadian people. Especially after buying in an supporting this stupid housing boom. Ultimatley it’s the Canadian Taxpayer that has to pay for the governments lending mistakes. We all owe in the end regardless.

Unless the media can educate Canadians about how the Conservatives are responsible for the pending economic and housing downturn, the Conservative will win again in this election.

I will vote for the strongest #2 party because if I go green or what ever, that might still allow the Conervatives another minority Government.

#84 y3maxx on 09.18.08 at 1:32 pm

…..Vancouver will be the new North American Financial Capital…..

Vancouver is already the trading gateway to Asia.

“A new projection shows Wall Street’s meltdown will likely cost New York state up to 40,000 private sector jobs and $3-billion (U.S.) in tax revenues over the next two years, two state officials said Thursday.”

TDWaterhouse

#85 brazer on 09.18.08 at 1:48 pm

http://www.cbc.ca/consumer/story/2008/09/18/house-sales.html

House sales fall in GTA
Last Updated: Thursday, September 18, 2008

House sales in the Greater Toronto Area decreased sharply during the first half of September, according to the Toronto Real Estate Board.

They’re down 16 per cent compared to the same period in 2007.

Real estate agent Richard Silver says homes are simply taking longer to sell. While he won’t call it a buyer’s market, Silver says the field has levelled.

“We are dealing with a purchaser who has an option, whereas a year ago he had to buy anything that came on the market, because there would have been four or five bids on the property. Today he’s in a situation where he can cherry pick,” said Silver.

Paul Canning, who is trying to sell his house in Leslieville, has lowered his price by $20,000, but so far he has no takers.

“It’s been on the market about two months now. Maybe about 30 showings, no offers.”

Numbers released this week by the Toronto board show that in the city itself, transactions are down 23 per cent in the first half of September, compared to last year,

The numbers are the same in the 905 area-code region, where sales were down 11 per cent.

This shift is changing the way real estate is sold in the GTA.

Agent Rosanna Mastendrea says the days of bidding wars appear to be over.

“I make sure that I explain the market to the sellers and explain to them that we are not in the same market as were last year, so not to expect to get $40,000 or $50,000 over asking.”

As for house seller Paul Canning, he says he’ll wait a few more weeks and then he’s taking down his for-sale sign.

#86 The Tallyman on 09.18.08 at 2:15 pm

To #72 Dawn in Calgary

Re: Big Toy Repo

Another area not in the equation is gambling addiction.
Over the past few yrs you couldn’t change a TV channel without seeing a table full of card gambling stooges.

Looks like the propaganda machine has been very successful in churning out risk takers.

Gotta wonder how many put their home in jeopardy in the pursuit of an instant jackpot.
Hope I’m wrong, but have a feeling this problem runs deep.

#87 Andrew toronto on 09.18.08 at 2:58 pm

There’s just too much going on to keep track off.

The credit markets, WaMu, Morgan, Goldman, AIG, moscow share slump, asian shares in freefall,TED spreads and LIBOR. House building permits tumbling, gold’s biggest spike in 28 years, t-bills at record lows. Phew!

All this and we’re still in the early stages according to Roubini.

YET CANADA is untouchable Humm..I see those storm clouds coming and pretty sure harper did too.

#88 Calgary_rip_off on 09.18.08 at 3:00 pm

Dawn:

Nice posts on the repo’s in Alberta. Part of the reason person’s overspend is because they want something to have pride in. The problem is, the consumption is never fulfilling. What makes those toys fun is the intangibles, the thought processes that make those things viewed as valuable.

True wealth should be a freeing agent. More time to develop skills, ideas, relationships. Instead, time and money is wasted on distractions.

Coming ahead is the shift from gasoline motor vehicles to electric. Once these cars are adequate and easier to fix, I will obtain one. I am tired of the oil gouging, wars, etc regarding motoring. It will be so enjoyable to let the Middle East and Saudia Arabia die. Those places are hellholes on Earth. The only focus on those places is where you dont want to be. Period. Once alternative energy is started, oils in Alberta can be used to make plastics, and the dependency on foreign oil will be crushed.

Time to vote NDP. Go Jack Layton.

#89 dd on 09.18.08 at 3:24 pm

#56 56 Calgary rip off

Interesting take on life

#90 tounguestump on 09.18.08 at 3:31 pm

Watching Canadian Real Estate go into unwind but not sure if it can outlive the US dollar. Doesn’t it make sense to pull the trigger on over-priced real estate before best before date on the greenback? Isn’t it a game of hunker down in the illiquid? Hyperinflation might be just about to turn North America upside down and shake the purchasing power out from its pockets.

#91 Bruce on 09.18.08 at 4:11 pm

World slipping into recession:

http://tinyurl.com/48ogvu

#92 neutral on 09.18.08 at 5:07 pm

I bet, Calgary rip off was same screaming about RE ten years ago, when the RE was 80K (as per his current dream), but at that time he/she was dreaming about buying 10K property. After another ten years from now his dream will be to buy 400K, but as usual the price will be far advanced from that number.

#93 Calgary_rip_off on 09.18.08 at 5:32 pm

neutral:

Assumptions, huh?

Ten years ago I lived in Seattle Washington, you idiot. I was 25 years old and not worrying about property.

Unlike you, my house isnt my coffin. Enjoy.

By the way, a house is something to live in, not speculate about. Do you go to the grocery and buy stock in muffins? Nah? Didnt think so.

So if the houses are priced around $80,000 more people would be motivated to stay in Calgary.

Here I am making $80,000 g’s a year and cant buy a decent house. Sorry buddy, but there is something WRONG with that picture.

So take that shack and shove it.

#94 smwhite on 09.18.08 at 5:39 pm

#76 y3maxx,

Vancouver is already “the” trading gateway to Asia.

Replace the with “A”!

We get it, you bought in Vancouver at its peak, your fantastic fantasy projections with no basis reek of cow dung and are based on nothing.

Just a reminder for you for you…

http://www.greaterfool.ca/2008/08/22/rip-2/#comment-4654

“Hain’t we got all the fools in town on our side? And ain’t that a big enough majority in any town?”

#95 The Tallyman on 09.18.08 at 5:58 pm

Neutral said:
“I bet, Calgary rip off was same screaming about RE ten years ago, when the RE was 80K (as per his current dream), but at that time he/she was dreaming about buying 10K property. After another ten years from now his dream will be to buy 400K, but as usual the price will be far advanced from that number.”

Don’t know about Calgary rip off…
But I have to admit to being a screamer & dreamer.
you’re right.
10 yrs ago I was bitchin that 100k houses
were only worth 60k.
And yes I’m still looking for the 10K palace…
Drove all the way from Calgary to Hartney Manitoba a few months ago to look at a Church listed at 19k.

The Church was not as illustrated…
damn gotta fantasize 10 more yrs.

#96 Dawn in Calgary on 09.18.08 at 6:01 pm

#78 Tallyman “Gotta wonder how many put their home in jeopardy in the pursuit of an instant jackpot.”

Problem is too many people figured their instant home equity was their instant jackpot……. that’s what got alot of ppl where they are today.

#97 Chincy on 09.18.08 at 6:53 pm

#81 tounguestump

Think Deflation not hyperinflation.

http://globaleconomicanalysis.blogspot.com/2008/03/now-presenting-deflation.html

#98 3rdman on 09.18.08 at 8:01 pm

#76

…Vancouver will be the new North American Financial Capital…..

B.S. You must be an RE flake… Wall Street’s Vancouver branches will take a hit.
Leaving Vancouver more out of it…

#99 rob on 09.18.08 at 8:07 pm

Unless the media can educate Canadians about how the Conservatives are responsible for the pending economic and housing downturn, the Conservative will win again in this election.

#75 $fromA$ia, are you on crack? blaming the economic and housing downturn on the Conservatives? Give your head a shake.

#100 Bruce on 09.18.08 at 9:13 pm

Crisis Now Out of Control: “Nobody Knows What to Do”…

http://www.marketoracle.co.uk/Article6320.html

#101 dd on 09.18.08 at 9:13 pm

#69 Andrew toronto,

Who is China going to sell their US Bonds (dollars) to?
Saudis? They aready have a lot of US debt. That is why the US dollar will keep on decreasing.

#102 dd on 09.18.08 at 9:52 pm

Roubini … this is only the start of things …

http://www.pointbite.com/2008/04/19/nouriel-roubini-visits-canada-to-talk-depression/

#103 $fromA$ia on 09.18.08 at 10:12 pm

Neutral, I doubt that in ten years the property will be worth much more than $400k if that.

We’ve gone way beyond rational pricing for the next ten years that is.

#104 $fromA$ia on 09.18.08 at 10:13 pm

My if inflation devalues our money enough and with a market drop well see $400k.

#105 $fromA$ia on 09.18.08 at 10:13 pm

In ten years. Sorry

#106 dotava on 09.18.08 at 10:31 pm

Hearing about “free market” (the biggest lie in NA). In free market – small and medium size business do well (because of flexibility). If GM was producing electrical vehicles “EV” and owners where happy and tries to buy after lease period expired, big question is why GM didn’t sell those cars? I can accept part of explanation that was “wrong business decision” – but if my intention is to minimize business loss – most likely those cars will be on market – not shredded.

#107 Calgary Rocks on 09.18.08 at 10:46 pm

The Church was not as illustrated…
damn gotta fantasize 10 more yrs.
==================================

The problem is that most people only have a limited lifetime and even more limited time frame where they can establish themselves, have a family etc….

I used to have a neighbor in his 60’s that was telling me how ‘someday’ he’ll do this or he’ll do that. Duh!

#108 Calgary Rocks on 09.18.08 at 10:49 pm

Ten years ago I lived in Seattle Washington, you idiot. I was 25 years old and not worrying about property.
=================================

I guess you’re not one of those ‘wealthy renters’ that saved millions by renting well in your 30’s rather than buying.

#109 dotava on 09.18.08 at 10:52 pm

#84 Calgary_rip_off on 09.18.08 at 5:32 pm
It is unfortunate that from center to the left all three parties are divided. What we can do – support your idea to have NDP instead of Conservatives. If they do well we are OK (anyway greens & liberals & ndp are close), if not – on next election we can go back to Liberals and blame on NDP. ->ABC

#110 dotava on 09.18.08 at 10:55 pm

#89 rob on 09.18.08 at 8:07 pm

Good idea – but to do that we have to invest in our kids education.

#111 POL-CAN on 09.18.08 at 11:00 pm

# 92 dd

Thanks for that link…… That was recorded just post Bear Stearns in April….. wow….

Roubini and a few others have been almost dead on in predicting this systemic meltdown….

It is only going to get worse as the bail outs and bks are occuring at shorter intervals now…. No stopping this run away train…. Sad, but the system needs a reset…. We can not continue living of off credit like we have been for the last 30 plus years….

#112 POL-CAN on 09.18.08 at 11:03 pm

You can read more from Roubini at:

http://www.rgemonitor.com/blog/roubini/

#113 prairiegopher on 09.19.08 at 1:00 am

Question for all? I sold my house last fall. I have the money sitting in the bank. House prices here are falling. In the event the s*%$ hits the fan am I better to have the cash in the bank or into some real estate that may decrease in value??

#114 The Tallyman on 09.19.08 at 2:42 am

To Calgary Rocks:

“The Church was not as illustrated…
damn gotta fantasize 10 more yrs.”

I can’t complain, I sold a half duplex in Calgary back in 2002, just before the prices went mental.
Sold it for 130k,
so now you all know… either I’m not greedy or have no business savvy whatsoever.

Anyway, I immediately bought a condo (paid cash) in Elkford BC for an unbelievable 32k.
So in hindsight yes I missed the big payoff by selling early, but no amount of $ could replace spending time in the mountain paradise these last 7 yrs.

For the present… still renting in Calgary but if I can resist the temptation to buy when prices plunge,
I’ll be retiring to Elkford in a few yrs.

No I’m not a realtor… just passing along a little advice to the adventurous young. You don’t have to stay trapped in high rent places. Still a few great places left in Canada with sane house prices., but you have to keep digging & be persistent.

#115 Mike.Slob on 09.19.08 at 3:52 am

Is Mr.Neutral maybe Mr.Vultur!

#116 Jinxy on 09.19.08 at 4:27 am

#66 Keith in Calgary

“Subprime also defines loans given to people who cannot afford them within the standard loan terms.

Thus we have the government allowing the CMHC to make the loans suddenly become affordable, in order to keep the house of cards from falling.

Ie: 25 now becomes 40 years…..it is still subprime.

Not having equity in the transaction is also subprime and outside the normal lending terms.”

Keith in Calgary:
I will continue to “disagree” with you (humbly) on the definition of sub-prime (the sub-prime sector refers to borrowers who have a history of “bad credit” or “lack of credit” -nothing more. This can include poor debt to income ratios, large credit card debt, or high loan to value ratios (eg. you “own” something out right but have a loan against 90% of it’s “value”). These borrowers are at greater risk for default…as a result, “higher” aka “sub-prime” interest rates can be charged. Giving these sub-prime borrowers “too much rope” (ie. 0 equity, “glorified” income statements) increased the default risk even more. I agree that the CMHC’s lending practices over the last few years will “most likely” prove to be a mistake ( ie. 0 down, 40 years). And a costly one at that. At least “some” corrective action is being taken ( re: October 15th).

#117 dd on 09.19.08 at 7:42 am

Wow … the US … A socialist state

Nationalizing mortgages

http://www.reportonbusiness.com/servlet/story/RTGAM.20080919.wfinancialwrap0919/BNStory/Business/home

#118 Canadian Real Estate Crash on 09.19.08 at 8:23 am

The new landscape of the housing market

As mortgage companies pull back, listings surge, sales plunge and prices cool throughout Canada

LORI MCLEOD AND PAUL WALDIE

September 19, 2008

When Heidi Samuda listed her three-bedroom townhouse in Vancouver for sale last month at $829,000, she thought it might take a couple of weeks to sell.

But the property still hasn’t sold and Ms. Samuda has dropped the price to $799,000.

“When I listed I think things had just sort of started to shift,” Ms. Samuda said yesterday.

She’s confident she’ll get her price, but she’s also trying to remain calm in the midst of a slumping real estate market that’s now being sideswiped by turmoil in the financial sector. “I think it’s just a matter of not freaking out,” she said.

The property market has been slowing for months across much of Canada and the recent turmoil in the financial sector could slow things even more. Banks are toughening lending practices, fewer discounts are being offered on posted mortgage rates and several players have pulled out altogether.
Back in January, real estate sales were still so hot that one big lender sent more than 100 mortgage brokers to Paradise Island in the Bahamas for a three-day trip at the island’s exclusive Atlantis resort. All bets are off for a similar trip next year.

Already the number of companies jostling for customers is shrinking.

In July, General Electric Co. became the latest in a series of niche lenders to announce it would stop taking residential mortgage applications in Canada, joining PMI Group Inc.

For many borrowers, the days of getting quick approval are over.

“If you have bad credit, no down payment and a good job, you can’t get a mortgage in Canada any more,” said Alex Haditaghi, chief executive officer of mortgagebrokers.com, a Toronto-area mortgage broker. “Two years ago you could say ‘Let me work on it,’ and one of the alternative lenders would have done it for you.”

Such is the new landscape of the housing market as listings surge, sales plunge, prices cool – and the final sparks fizzle out on one of the country’s strongest-ever residential real estate booms.

Vancouver is the latest housing market to show dramatic signs of weakening. The number of listings in that city has doubled from a year ago while sales have been cut in half. It’s also taking up to three times as long to sell. “Deals that were going through last year aren’t going through this year,” said Ian Martin who runs Erealty.ca, an online Vancouver realtor.

Added Lorne Goldman, a broker of residential and commercial real estate in the city: “As one [commercial property] lender said to me, ‘If a deal has hair on it, we don’t look at it.’ ”

The Calgary market has given ample warning of the slowdown that was to come.

During the peak of its housing boom early last year, most homes were subject to bidding wars and selling at well above the asking price in less than two weeks, said Jim Sparrow, real estate agent at Calgary-based Keller Williams Realty.

Now prices have drifted 10 per cent lower, the average time on the market is 52 days, and sellers are being told to price their properties competitively or face the prospect of not finding anyone who even wants to peek inside the door.

“I’m being brutally honest with my clients. The reality is there are fewer buyers out there, and the only way to attract an offer is to have a property that is competitively priced,” Mr. Sparrow said.

In the past 14 days, 1,903 new listings have hit the Calgary market and during that time there have been 1,637 price reductions, according to information on Mr. Sparrow’s website. There were 802 sales.

While it’s tough to see the market slow, most Canadians are still well ahead in terms of their home values, said Gary Siegle, regional manager for Alberta and south Saskatchewan at mortgage broker Invis.

It’s people who bought in cities like Calgary at the peak last year, either for capital gains or with a “now or never” attitude, that may now be struggling, he added.

http://www.theglobeandmail.com/servlet/story/LAC.20080919.REALTOR19/TPStory/National

#119 lgre on 09.19.08 at 8:53 am

Jinxy – who cares what the definition is? the bottom line is that subprime means that you cant afford what you borrowed. If you have to borrow under the 0/40 term then YOU CANT AFFORD IT, period. If you cant save a dollar how do you expect to pay off hundreds of thousands of dollars? Stop beating a dead horse, I’m starting to feel it.

#120 pjwlk on 09.19.08 at 9:08 am

Some of you may have read my post a couple of weeks ago where I said that my Real Estate friend was stationed at a builder’s sales office in Whitby (Ontario) and that not one person had come in over the labour day long weekend. The builder was said to have launched a massive ad campaign… well guess what?… She still hasn’t sold any homes.

As you can imagine, after shooting her mouth off about this being the second best year for sales according to TREB and her making record income last year, and that there is not going to be any “crash” stupid, I could barely contain myself. Trying to be civil is a bitch… I hate to say it but I’ve got a real deep desire to phone her back and needle her for a little bit… just a little bit…lol

#121 pjwlk on 09.19.08 at 9:34 am

#73 confused and a little crazed:
You said: “I know many of you here believe the global collaapse of the stock market…real estate and such….But it won’t happen because the collective govt around the worldd won’t let it happen. ”

What are you basing that theory on? Certainly not historical eveidence. There is no amount of government interaction that can halt something like that. Initiatives may change things slightly but at the end of the day history has shown that the true outcome is nearly aways the same.

#122 Calgary Rip Off on 09.19.08 at 9:57 am

Calgary Rocks:

Are you another one of those slow individuals living in Calgary? Oxygen debt to the cerebral vessels?

Housing should not be like stocks. It is just a place to live. I have enough money to survive.

The central problem is that people want comfort. Unfortunately, there isnt any. Modern days are no different than the days when man hunted and gathered. The only difference is the criteria are more subtle now. There are office politics, politics on the freeway, everywhere.

So fortunately no Im not one of those “wealthy” renters. If I were, do you think I would be a fan of Garth and his website? Probably not. But unlike many, Im not willing to sell my soul for sanctity in this life. I consider the Earth a prison, time to learn from lessons here, and build skills and valuable relationships. Material things while needed, provide valuable tools to manifest skills to survive and prosper.

#123 canuck99 on 09.19.08 at 9:57 am

Hey Garth,

What’s your take on these latest moves to ban short-selling in the UK and US?

Bye-bye, deflation — Comprehensive bailout in the works
http://www.reuters.com/article/gc06/idUSN1831183820080918

P.S. Hope you’re kicking butt in Halton!

#124 pjwlk on 09.19.08 at 10:01 am

#79 Calgary_rip_off:

“True wealth should be a freeing agent. More time to develop skills, ideas, relationships. Instead, time and money is wasted on distractions.”

Amen brother. I don’t think too many people on their death bed wish they had more money or a bigger house or more snowmobiles…

“Coming ahead is the shift from gasoline motor vehicles to electric. Once these cars are adequate and easier to fix, I will obtain one.”

Don’t count on that anytime soon. The technology is already here. Check out this car to see what I mean http://www.teslamotors.com There is simply too much industry and financial livelyhood dependant on oil and cars. My bet is that nothing will change until we are extremely close to running out of oil for real and prices are truly beyond affordability.

#125 G on 09.19.08 at 10:39 am

103 – may decrease in value? Try WILL decrease in value. Lending standards are becoming a lot tighter, no 0/40 down BS, houses are way overvalued, economy running poorly.

RE markets all over the place are tanking, I wouldn’t put a single dime into a place.

#126 MikeB on 09.19.08 at 10:57 am

Recent bailout plan by US… can you say DESPERATE.. Hellllooooo Free Market System… NOT … The US has just pulled the wool over the collective eyes of the world by now taking on the toxic debts of every major institution so the little guys carry the burden and the big guys just enjoy the profits. This is RETARDED… Not only smacks of desperation but it flies in the face of what the US is supposed to be about….a free market.. you can win and you can loose but the rules are there.
NOW….NO RULES… YOU go bankrupt maybe we bail you out or maybe not… if not we put it into some pit and bury it and call it something nice like a repository and then hand the bill to US tax payers who in turn hand it to the rest of the world.. Are people around the world this stupid.. I hope not.
Canadian real estate will still be hurt in the coming years IMO regardless of the US changing the rules of the game half way through the first quarter. BOGUS

#127 Calgary_rip_off on 09.19.08 at 11:45 am

pjwlk:

Tesla makes a fine motor vehicle, but cost and repair stations makes owning one somewhat prohibitive. Additionally, the battery drains quite rapidly if the full power of that automobile is exploited.

Yes oil is a tool used to manipulate the masses. It would probably be wise to use finite oil sources for parts truly needed instead of combusting it. Medical supplies, computers, much of anything is made out of oil. This is easier said than done, as myself and many others are unwilling to spend the time to cycle to work from NW Calgary. It could be done, but it would take about 1.5 hours to and then 2-3 from work. That’s a lot of time.

Mike B: The “recent bailout plan” is what makes the United States so retarded. As a person born in the United States, I love Canada as my country. Canada is a breath of fresh hair. The culture, the political system, everything is so much better here. This bailout plan looks like socialism in action. Ironically, many Americans oppose socialism. I dont really understand why. Look at Sweden, its one of the best countries in the world, and is totally socialist. Their culture, people, and music are top notch. Sweden was my first pick before I hooked up with a Canadian lady. Be thankful that you have more than the two party option and people are more liberal for the most part in Canada than in the USA.

#128 smwhite on 09.19.08 at 11:49 am

Sub-prime was a financial vehicle that many speculators/investors used to increase their profit margins for their house flipping enterprises.

Many people that could afford prime mortgages took out these loans as well, to save a little $, don’t let the talking heads let you think you need to have had a grade 5 education and a crack-pipe to have to have resorted to sub-prime… Many people poisoned their own balance sheets gambling on ever increasing housing prices…

#129 The Other David on 09.19.08 at 11:55 am

Well what really is going on in Oakville?

A 4 bdrm in L6M was selling for over 400k 2 yrs ago, now they can be had for 359K “asking”

also there is about 440 listing just for L6M, is the whole subdivision selling out?

#130 doom and gloom on 09.19.08 at 12:50 pm

Well what really is going on in Oakville?

A 4 bdrm in L6M was selling for over 400k 2 yrs ago, now they can be had for 359K “asking”

also there is about 440 listing just for L6M, is the whole subdivision selling out?
____________________________________________
I have noticed allot of price reductions and homes on the market for longer periods of time in Oakville. Just down the road in Alton village new homes on 36ft lots are still selling and the larger homes are not moving.

#131 confused and a little crazed on 09.19.08 at 1:07 pm

Hi PJWLK
post 111#

I see why my early assessment is poorly explained. I stand corrected. Canadian Govt has not participlated in any bailouts. Only canadian banks pooled their resourcres to better their balance sheets

Bank of Montreal, Canadian Imperial Bank of Commerce and Canada’s four other biggest banks agreed to work together to ensure that the C$120 billion ($113 billion) market for asset-backed commercial paper continues to “perform satisfactorily.”

The banks’ chief executive officers held discussions today, and reiterated their commitment to provide “liquidity” for their commercial paper when it comes due, according to a joint statement. The Bank of Canada said the move was a “positive step.”

http://financialsector.blogspot.com/2007/08/banks-exposure-to-asset-backed.html

However Govt of their respective ccountries are changing policies to help their banks and stock market deal with the credit crunch. ie Russia_ freeze stockmarket and loaned $44 billion to banks
http://news.bbc.co.uk/2/hi/europe/7623476.stm.

I ‘m sorry I don’t have a link for Japan and China. I recall reading from
http://thehousingbubbleblog.com/index.html
because China and Japan hould about $800 Million in mortgage securities from Fannie / freddie. They also needed a little liquidity.

So in short the Govt are supporting their own banks to survive this mess

#132 wake up people on 09.19.08 at 5:31 pm

come on people wake up!! i have been in the realestate market for a while i can look at a price of a home and almost instantly tell you if its over priced or not the problem is most people are listing there home prices 50k-150k more after 2 yrs they buy a home. thinking they will get it and in some cases they do but if you know the market most people will not buy at these prices.

#133 The Other David on 09.20.08 at 3:34 am

Canada needs a service like http://www.zillow.com, this current depend on RE agents, buy pig in bag scheme is out dated

#134 Ray MacDonald on 09.23.08 at 10:40 am

Augh!
Just got my latest tax assessment in Ontario. It’s up 24 % in 3 years.
It’s “phased in” of course, so my taxes will only go up 6% per year regardless of what the municipal authorities do with the millrate.
Tell me how this mindless price inflation benefits anybody. All I want to do is live here.

#135 pbrasseur on 09.24.08 at 2:43 pm

Canada may see U.S.-style housing meltdown: report

http://toronto.ctv.ca/servlet/an/local/CTVNews/20080924/mortgage_meltdown_080924/20080924/?hub=TorontoNewHome

#136 Calgary_rip_off on 09.24.08 at 5:20 pm

Garth what is your view on Stephen Harper’s current announcement that Merrill Lynch Canada is incorrect on the state of Canada’s housing?(They said it is not rosy, but Harper rejected this)

PM rejects Merrill housing-market warning
Reuters
Published: Wednesday, September 24, 2008
VANCOUVER (Reuters) – Canada’s housing market is in good shape and there is no risk that it will collapse, Prime Minister Stephen Harper said on Wednesday after a report from Merrill Lynch Canada suggested otherwise.