Media release

‘Inevitable’ housing mess inches closer, MP-author claims

Wednesday Sept 24 – After warning in a best-selling book published six months ago that Canada’s real estate market was ripe for a tumble, author and MP Garth Turner says a US-style housing mess could now be just around the corner.

Canadians should prepare for a drop in average home prices of between 15% and 40%, depending on the market, he says. Turner also points out prices in some markets, such as Calgary and Edmonton, have already plunged by more than $40,000, while the number of homeowners trying to unload their properties has soared.

“Today’s report by Merrill Lynch economists David Wolf and Carolyn Kwan is just further tangible evidence,” Turner says. “Canadians have taken on a personal debt load which is simply unsustainable, and has been encouraged by government policies in this country no better than those which allowed the subprime mess and the credit crisis in the States to develop.”

Turner outlines in his book, “Greater Fool, The Troubled Future of Real Estate” and again today that Ottawa’s decision to allow a relaxing of mortgage rules, resulting in 40-year mortgages and zero down payments had “a pivotal role” in turning a strong housing market into a bubble, now bursting. The federal government moved hastily several weeks ago to outlaw the longer amortizations, and zero-down loans, which allow first-time buyers with little or no cash to purchase homes. They will no longer be available after October 15th.

“While these practices should be ended, of course, the abrupt cut-off is just serving to accelerate housing’s decline,” Turner says. “Jim Flaherty could not have picked a worse time – as the United States teeters on the edge of the financial abyss – to have taken such an action. I warned of harsh consequences when it occurred, and they are now here.”

The average home price in Canada has dropped for the past three months, and is now 5% below year-ago levels. Turner says this decline will at least triple over the next year. At the same time, the number of resale homes on the market, as reported by the Canadian Real Estate Association, has hit an all-time high. Average prices are now dropping in virtually every major Canadian city, reflecting a US trend currently three years old.

American home prices are lower by an average of 18%, and the drop in some markets, such as California and Florida, has been in the 40% range.

“The American middle class has been walloped by the housing collapse,” Turner say , “and those who claim Canada is no different – including Stephen Harper – are simply misleading people. Canadians are carrying more personal and household debt than ever in history – even more overextended than families in the US or Britain. And our average home price has increased to the point where the average family cannot afford it.

“It is simply irresponsible for Mr. Harper to be sugarcoating a serious situation simply because there’s an election to win,” Turner says. “The last thing young couples thinking about a house purchase should hear is that everything is normal, and this is a great time to walk into debt that might end up being unrepayable.”

Turner also lays blame at the feet of the federal government for increasing middle class financial stress by refusing to consider income tax cuts, knowing what was brewing south of the border.

“The American housing disaster started in September of 2005, and was well-known to everyone who cared to look by the Spring of 2006 when Mr. Harper was forming a government. That mess has worsened for three years, and has now infected the entire banking system. For our government not to have prepared better, lowered income taxes and assured the integrity of the mortgage system was simply dangerous.

“Every Canadian family owning a home should be paying attention,” Turner says. “In this election, they should be demanding an action plan from everyone knocking on their door.”

Garth Turner is a best-selling financial author, Member of Parliament for Halton, and Liberal candidate.

For more information:
(905) 399-5114

– 30 –

94 comments ↓

#1 No Fool.... on 09.24.08 at 6:40 pm

And here we go:

Don’t count out housing crash in Canada: Merrill

http://www.financialpost.com/most_popular/story.html?id=828503

#2 The end is not nigh on 09.24.08 at 6:57 pm

Seems like ING still have lots of cash they want me to borrow, they are even sending me emails now…. one might suspect that borrowing has slowed and it is now time to market the “unmortgage” to any fools still willing to bite….. it’s a limitied time offer, better hurry folks!

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#3 prairiegopher on 09.24.08 at 7:05 pm

Call the number on the poster 1-888-379-4360 ext 21. You can get a zero down loan on a 200-500k home. All you need is a combined income of 50k. Isn’t this a great country? The U.S. Titanic is sinking and on this side of the border Polly Anna and the Muppets are singing merrily-we-roll-along. Better jump on board and get one of those great no money down mortgages before this ship sails!!!!

#4 nearmilton on 09.24.08 at 7:24 pm

25B bailout for us automakers

A $25 Billion Lifeline for GM, Ford, and Chrysler

http://www.usnews.com/blogs/flowchart/2008/09/24/a-25-billion-lifeline-for-gm-ford-and-chrysler.html#Comments

25B is chump change these days – Barely in the news.

#5 Kash is King on 09.24.08 at 7:27 pm

Great blog Garth, and I agree with you about where Canadian housing is headed.
I had a sense also that something like this was on it’s way and wanted to sell our paid-for house last summer, but personal considerations meant that we couldn’t. Things changed, and we set about getting ready to sell this summer…. we did in mid-August thankfully… and rented a nice place.
I have to admit the few times in the summer I checked your blog, and similar ones, I was thinking ” Oh man, STFU ’til we get our place sold!” but it was obvious the tide was going to turn even then. So I stopped reading lol.
I think a part of the reason that the Canadian market held up longer than the American one, is that many Canadians have a bit of arrogance about them, that somehow we are superior to the Americans, and “there’s no way something like that could happen up here!” etc.. and they kept plunging headlong into debt thinking our market could never crash because “our fundamentals are so much better “etc..

Truth is, we still are affected by what happens to our friends to the south.

Of course, we’ve now gotten all this recent turmoil, and I wonder (and feel sorry for) what kind of stress people who are trying to sell a house now must feel ?

My advise is : price it sharp, and don’t be greedy. If you don’t you could be listed for a long time, resulting in no sale or a stale listing with the usual price drops.

As for buyers, I just cannot imagine how someone would even consider becoming a fresh debtor given the financial backdrop… just boggles my mind!

#6 Jim on 09.24.08 at 7:36 pm

Wasn’t it Merrill, who recently in their ‘Peaked: Canada’s housing market in-depth’ report, stated for instance Edmonton was 25% overvalued (Chart 40)? I just find it amusing how their report compares to say the UBC’s Sauder School of Business research (a few weeks ago) concluding Edmonton’s market was 8 % undervalued.
I hope home buyers/sellers don’t place too much value on these often biased, poorly researched conclusions, without knowing how the ‘economists’ arrived at those conclusions and the motivation behind them.
I can’t wait to send correspondence to the Merrill economists (David Wolf) along the lines of “how could your in-depth research have been so wrong?”
One last thought… I wonder what hyperinflation (a few trillion in bailouts added to the money supply) over the next five years will do to things like real estate and energy prices? …hmm, that’s a tough one!

#7 brazer on 09.24.08 at 7:49 pm

Don’t count out housing crash in Canada: Merrill
http://www.financialpost.com/story.html?id=828503

David Wolf, Canadian economist at Merrill Lynch, said Canadians are just as personally indebted as their other Anglo Saxon cousins.

“We believe that markets remain overly sanguine with respect to the prospects for the Canadian housing market, the financial sector and the overall economy,” Mr. Wolf said in a note.

#8 Aaron on 09.24.08 at 8:01 pm

Are “judicial listings” the same things as foreclosures?

I am seeing a couple pop up in Edmonton recently. As well as numerous price decreases, yet some sellers still are up in the sky as far as asking values.

I am looking to get into the market, but am definitely going to wait and see how things play out with the US, and how things fare up here.

Really appreciate all the updates and posts on the blog!

#9 brazer on 09.24.08 at 8:27 pm

“By a combination of good management and good fortune, Canada is a shelter from the storm. While venerable American investment banks disappear from one day to the next, Canadian investment banks and brokerages have enjoyed the protection of being owned by the larger commercial banks since the Mulroney government took out the pillars that separated banks from trust companies and brokerage houses in 1989. In the Canadian housing market, you actually have to make a down payment on a house, so there is no liquidity crisis.”

http://network.nationalpost.com/np/blogs/fullcomment/archive/2008/09/24/l-ian-macdonald-dion-offers-change-to-a-country-clutching-at-stability.aspx

now, that is as blatant a lie as i’ve read in a while…

#10 Calgary rip off on 09.24.08 at 8:59 pm

Garth, how is $40,000 a plunge in a housing market in which the middle price is $400,000 on a house that in reality is worth half that? $40,000 is nothing. $200,000 off of $400,000 would be a “plunge”. Hopefully the $200,000 drop occurs, as it is needed to get Calgary back in line with reality.

#11 crashing yuppy on 09.24.08 at 9:14 pm

Garth,

You are finally getting some media cred.

Its starting. Like a storm on the horizon I can feel the rumblings.

There are a lot of nervous homeowners out there. Its amazing how many MLS listings you see with last spring’s snow still on the ground.

Either 1.) list -10% of current market, and hope like hell, or 2.) take your property off the market and hunker down for 5-6 yrs but, for the love of God, dont insult everybodie’s intelligence and time by keeping your top priced dreamer listing on the market.

I am still seeing Leaside shoeboxes for 799,000 Hello……Earth to Yuppy!…its over

Garth am I right?

#12 Brent on 09.24.08 at 10:14 pm

$40,000 is $40,000… that’s a shit load of money let’s get real. If you bought for 80,000 and sold for 40,000 you still lose …..drumroll please….$40,000!! Doesn’t matter how overpriced the market is.

calgary rip off how can you say that much money is nothing?

#13 Brent on 09.24.08 at 10:53 pm

http://www.msnbc.msn.com/id/26871338/?GT1=43001

yikes

#14 dd on 09.24.08 at 11:00 pm

Garth,

After reading your book and doing my own market study I sold my house in August of this year. All my research concluded that house prices were extremely overvalued and the house that I was living in was just another commodity in suburbs of endless suburbs.

The research was the easy part. The decision to actually put the home up for sale was hard. From research to move out date took about four months. However the hard work has paid off.

I do not take comfort in seeing peoples dreams disappear with the value of their assets decreasing everyday. We all have been told for years that “housing prices always go up.”
However when a new family cannot afford a small house to raise a family you know that the fundamentals do not support the current structure.

Thousand of new homeowners are now at the water-line or under (mortgage > value of home) and this will have a huge impact on spending. The big credit deflate is underway.

Again, thanks for your timely book

#15 Keith in Calgary on 09.24.08 at 11:16 pm

Facts…..

http://www.findcalgary.ca

Calgary SFH are off by $60K (12%) from their peak…….condos are off $44K (15%) from their peak……..

Now……imagine if you had to sell….subtract another 7/3% fee for the property pimp….plus at least a 7-10% discount, which is what it seems to take these days to get a deal done.

Under that scenario……that is roughly a 30% haircut…..on a house that used to have an average price of $505K…..

$150K just went down the drain.

#16 dd on 09.24.08 at 11:17 pm

Great take on what is happening in debt

http://watch.bnn.ca/#clip95684

#17 islander on 09.24.08 at 11:44 pm

$40K is a catastrophe when you consider it’s likely the entire equity of most people who bought in the past three years at 10% down or less.

As we’ve already seen in the U.S., even people who were able to make payments started walking away, because they couldn’t see the point of paying for a mortgage that as higher than the home’s market value.

It happened in Alberta before. It’ll happen again.

#18 richmond renter on 09.24.08 at 11:56 pm

Brent: $40,000 is $40,000…it’s not a “shit load of money”

when you consider that people on the west coast cannot afford to buy a crappy 800sq ft war-time house in Vancouver! $40,000 off of the 1 million asking price WILL hardly make a dent!

Brent how can you be serious?

#19 The Tallyman on 09.24.08 at 11:59 pm

The end is not nigh said:
“Seems like ING still have lots of cash they want me to borrow, they are even sending me emails now…. one might suspect that borrowing has slowed and it is now time to market the “unmortgage” to any fools still willing to bite…..”
——————–
Geez, that ING guy is walking around in the rain with that stupid orange umbrella…. no office, no home , no brains.
Apparently his bank vault exists in thin air.
Try and make a run on that bank!

#20 Rasputin on 09.25.08 at 12:11 am

RE the $700 billion supposed non bailout. Of course it’s a bailout. The crap loans that the US taxpayers are buying are unsellable in the real world. That’s why the banks are going to the government with their hands out. Let me get this straight…the market says the “assets” are worth $.10 on the dollar so the goverment wants to buy this crap at full price and then call it a good deal for the taxpayers? Please! You remember the old Wiley E Coyote cartoons? He would run off the cliff but would never fall until he looked down. The US economy ran off the cliff right around 1997. They just looked down. The party is over.

#21 The Tallyman on 09.25.08 at 12:13 am

To #8 Aaron

Judicial listings could be for unpaid taxes, someone got sued etc…

#22 The Tallyman on 09.25.08 at 12:15 am

Other possible Judicial listings.

And then there are those grow op houses we keep hearing about.

#23 richmond renter on 09.25.08 at 12:19 am

and now for some comic relief…..even 50% down is not enough.

http://mlsr.realtylink.org/mlsrframes/res_sale_result_detail.cfm?region=1&area=9999&subarea=9999&pt=5&mnprc=200000&mxprc=1000000&mnbd=0&mxbd=9&mnbt=0&mxbt=9&mnage=0&mxage=99&ltsz=0&sqft=sizeAll&mxrw=5&PTAR=Vancouver%20West&CID=1025898&SCTP=MAP&AIDL=21,22,23,24,26,27,28,29,30,31,32,33,34,35,36,37,39,40,41,42,43,44,10105,853&BCD=GV&ERTA=True&TMPL=1&MLS=V724149

#24 Peter on 09.25.08 at 12:32 am

Now, with AIG getting NATIONALIZED by the US government..with all these financials and economy in trouble , do you think we are fine ..Seems Mr. Harper want to tell us that we are living in this CINDERELLA world where there is no pain in having debt, our workers keep working, grease will keep going…What a NICE FAIRY TALE that the PC Gov told us…What does it make a difference with what Mr.Bush down south is telling people 4 years ago…while now their crap hits the fan and never in so many years, Mr Bush admits damn serious recession and pain going forward while he is on TV tonight..I guess it must be HARD for him to say recession 2 years ago and drag his emotions until NOW >>>I hope Mr. Harper are not doing the same old story like Bush…

#25 Crikey on 09.25.08 at 12:32 am

Fraud hits home:

SEC plans action against Royal Bank

RBC top of the list for federal regulators in auction-rate securities probe

http://tinyurl.com/4yotey

#26 David on 09.25.08 at 12:53 am

Garth, spot on about the action plan for the upcoming financial crash.
When the collapse does come, all of us can rest assured that Bay Street financiers will be howling for life jackets and floatation devices from the Canadian taxpayer. The people who saw the least benefit will be asked to make many altruistic sacrifices for the benefit of the engineers of this train wreck.
Inevitably there will be a bailout, rest assured. First off, Ottawa should require mark to market write-downs on all the garbage mortgages thus requiring shareholders to eat the real losses for this Ponzi scheme. In exchange for recapitalisation or nationalisation of these financial institutions Ottawa should demand fair market value preferred shares with a fixed dividend rate, fair market value marked to market common shares and exercisable warrants.
When times are better and the correction has run its course, those financial instruments can be sold at a profit for taxpayers.
The Alberta 1980’s model was offload crap assets on the taxpayers and let the villains retire to Palm Springs. One can hope there is better sense exercised in Canada when the crunch comes than what is now happening in the USA. Giving the financial gurus of Bay Street a blank cheque is too much to ask of taxpayers.

#27 Downsized and Delighted on 09.25.08 at 12:54 am

A $40,000 drop in value hurts the guy who bought at the market peak and who has to sell. If he’s moving up and those prices are down as well, he will probably make money anyway. Price drops don’t hurt everybody equally. Mostly they just make real estate less liquid.

I think the point of this blog is to protect yourself from doing something stupid like: buying at the peak of the market, owning two houses when prices are going down, over leveraging yourself and buying more than you really need. I would hope that everyone knows to sell first before buying something else in this market.

Now is obviously not the time to jump into the market for the first time, but if you already own a home that suits you I wouldn’t be too concerned about the ups and downs. Better to be living in a nice home than to be waiting for prices to drop by 50% so you can get into the market – cause that ain’t gonna happen – and if it did, you wouldn’t buy then either!

#28 Vancouver Real Estate Blog » Blog Archive » Vancouver Real Estate - Swami’s Crystall Ball on 09.25.08 at 3:20 am

[…] the UBC Prof., the Vancouver Sun and our Liberal Friend tell us that housing prices and mortgages are down the drain. Yet the man of sweaters, Mr. Harper, […]

#29 Real Estate Agent Scam on 09.25.08 at 8:41 am

I am looking at condo rentals in Toronto. I found this studio condo for $800 per month. Last month it was going for $850 per month. I contacted the ad and check out the reply below. It’s selling for $117,000, it’s only worth $96,000 to the owner (Gross rent $800 x 12 = $96000) even lower if using net income. It’s cheaper to rent and offer $80,000 when the time comes around.

“Please call me to make an appointment for veiwng.

Also avalable for Rent $800 per month

0 down you can own it for approx $550 per month mortgage payment + maint. fee and prop taxes.

Makes much more sense to buy.

Thanks for your interest”

#30 Peter in Toronto on 09.25.08 at 8:46 am

Hey Garth,

I am curious why you are not focusing on the risk to the taxpayer that the government has incurred by instituting the 0% down?

I would imagine would the decrease in values and the increase in deriative devaluation the CMHC has lost billions and probably is in the negative zone.

That would be my guess why Harper is now stopping 0% down mortgages.

#31 y3maxx on 09.25.08 at 9:18 am

“”Turner also lays blame at the feet of the federal government for increasing middle class financial stress by refusing to consider income tax cuts, knowing what was brewing south of the border.””

Garth, so as a Politician,have you finally come up with your first solution/idea on this blog site or are you here simply to pump your book?

Sheesh, we all know the troubles in the U.S. and around the world for pete’s sake…we need solutions.

Garth Turner…I challenge you to become the Warren Buffet of Canadian Politics and to start coming out with solutions instead of “see, I told you so”…..many many people saw this coming…not just you.

…Read my earlier posts…I have come up with ideas…now I’m adding that Eastern Canada is inflicted with a recession….sounds like Eastern Canada wants to bring Western Canada down with them.

If you dont’ come up with solutions….my new solution will be for Western Canada, (Saskatchewan, Alberta and BC to secede from Canada).

I’m a transplanted BC westerner (from Ontario, 20 years ago,) and I’m proud of it, no more crap & BS from Eastern Canada, the perceived Centre of the Earth.

jmo

Oh, the bash-the-east argument. Nation-building at its best. — Garth

#32 y3maxx on 09.25.08 at 9:24 am

Brilliant…repost of #27 “downsized and delighted”….

“”A $40,000 drop in value hurts the guy who bought at the market peak and who has to sell. If he’s moving up and those prices are down as well, he will probably make money anyway. Price drops don’t hurt everybody equally. Mostly they just make real estate less liquid.

I think the point of this blog is to protect yourself from doing something stupid like: buying at the peak of the market, owning two houses when prices are going down, over leveraging yourself and buying more than you really need. I would hope that everyone knows to sell first before buying something else in this market.

Now is obviously not the time to jump into the market for the first time, but if you already own a home that suits you I wouldn’t be too concerned about the ups and downs. Better to be living in a nice home than to be waiting for prices to drop by 50% so you can get into the market – cause that ain’t gonna happen – and if it did, you wouldn’t buy then either!””

#33 y3maxx on 09.25.08 at 9:30 am

Garth Turner a journalist first, politician second…he is a sensasionalist, always has been too.

Prove me wrong Garth….start coming out with ideas, we already know the sky is falling.

HEY…WHY DONT YOU WRITE A BOOK WITH IDEAS HOW TO IMPROVE AND RECOVER FROM THIS MESS?

“”Turner also lays blame at the feet of the federal government for increasing middle class financial stress by refusing to consider income tax cuts, knowing what was brewing south of the border.””

that is your first idea!….a good start…finally!, how about some more ideas.

You call’em the way you see’em, so can I.

There will come a point in time that your ongoing sky is falling routine will stop working and start pissing off your average Canadian reader.

jmo

Actually, I couldn’t care less if you are angry at me. Start getting pissed at the people who form the government. Demand answers and solutions from them, rather than speeches on child care and locking up 14-year-olds. If I annoy you, I am an astounding success. — Garth

#34 The Other David on 09.25.08 at 9:33 am

$40k regardless how you twist it and spin it, it is a hell of alot of money. Alot of people living in a $400k house are making less than $100K gross annually. Imagine how long they have to save to get $40k.

That sign on the post is nothing new, I know of brokers that was offering those kinds of mortgages a long time now.

In the spring I went to “look” at some condos, I had/have no intention of purchasing. The sales rep saw we were a bit hesitant, she offered her advice by saying that if the downpayment was a problem, that how the bank they were dealing with would lend us the down payment.

This was also “common” practice with some mortgage brokers I spoke to.

Many people say that those funny mortgages were only available stateside, I say think again.

As for our environment being more “conservative”, the only reason that we appear more conservative is because we would allow people like Conrad Black to run amok here, and only the US have the balls to nail them.

Consider Nortel and all those other companies that did funny stuff with their books in Canada, none were penalised for their misdeeds, so not because we have a system that covers up these deeds, mean our system is better.

…go figure.

#35 Calgary_rip_off on 09.25.08 at 9:59 am

Brent:

$40,000 is only a worry when you bought the house and wanted to flip it for a profit. People with solid credit, 25 year mortgages, with cash down, and who intend to actually live in the place dont have anything to worry about.

Its truly disgusting that housing goes up and down. Supply and demand of course, but do oranges and apples go up and down at your grocer’s that much? No. If this yo yo crap were eliminated all this mess in the Usa and Canada would be eliminated. Greed would no longer be a factor.

I laugh when I watch these individuals lose on their homes, stocks, whatever. They’re really like a bunch of children, really. Instead of focusing on skills and what they can actually bring to the world they are instead focused on their vacations, nice houses, nice vehicles, etc. The grim reality is that when they are about to die they wont be worried too much about all of that. What will be of concern was what was actually done with the time they had here.

So, I hope it drops $200,000 off the market value in Calgary. If the people are there to live in the damn property, they dont have anything to worry about, unless they bought with a precarious loan in the first place. If their financial income(what they actually earn) is enough they will do just fine. But if greed was a factor, they will lose it all. :)

#36 lgre on 09.25.08 at 10:22 am

calgary rip off – i can understand your frustration but i think that you are fooling yourself if you think that prices will drop from 400 to 200, there has to be a massive job collapse in calgary for that to happen, Alot of people are making alot of money there and so i dont see that kind of decline, but then again I could be wrong.nobody knows for sure..as we seen many times with article writers and economist constantly flip flopping

#37 Calgary Rip Off on 09.25.08 at 11:02 am

Igre:

I dont see that type of decline happening either. But it should happen. Part of the reason essential services are a disaster is due to high housing costs in Calgary. Its ridiculous. Its also crazy that people who earn $100,000 per year are unable to purchase what they should be able to in Calgary. Something unethical about that picture. So what to do? Sit tight, wait, either to move somewhere else, or to buy. The bottom line is that the problems occurring in the news are due to greed and lust for consumption. Truly disgusting. Its one thing to want to have a decent property for $275,000 which is entirely reasonable. Its quite another to have a house that is 5000 square feet and $800,000(if you are lucky). What are you going to do with that house anyway, hire a heavy metal band to shred in the basement while caligula goes on upstairs? Thats what it looks like. So I dont believe its wrong to consider restraint a virtue-constraint is required to pace oneself in developing skills, and yet constraint and thought was lacking in the development of problems. And now these children are looking to a socialist mommy or daddy to save themselves. Pathethic.

#38 anon - GTA on 09.25.08 at 11:26 am

Money markets not safe either????? Only govt. guaranteed investements protected… and thats only the banks!!! Yikes….
What if you have Money Market funds in RRSP… Is that protected??? I am guessing NOT….

http://watch.bnn.ca/squeezeplay/september-2008/squeezeplay-september-24-2008/#clip95686

#39 My_View on 09.25.08 at 11:28 am

40k is a lot of money. Is 3k off a 30k new car a deal? Of course. What amuses me is now more of the media is reporting the Maybe Canadian Financial Woes. And the first response from the bull economists is Canada has no zero down mortgage. Yes we do and we had it for a lot longer than just the 3 years. I remember being offered zero down back in 2003 from a broker.

Last time I checked our system is the same like all western societies, built on growth & greed. The Americans, Brits, and Spaniards are human just like us Canucks. However we have been spending and continue like drunken sailors while we watch the mess unravel in high definition.

#40 lgre on 09.25.08 at 11:42 am

y3maxx – get over yourself, your post are truly wasting my prescious time. I come on here to read other peoples opinions and I constntly see the same exact post from you time and time again. You want something done? start knocking on doors my friend.

#41 kc on 09.25.08 at 12:24 pm

I would like to add to this blog something that happened to me and my girlfriend last summer. It is very important to the aditudes towards the (canada subprime) that we keep on hearing Doesn’t exsist here.

(Jel, I will try and keep the dictionary handy, and dust off my grade 12 grammar books for you and your red pencil)

With all the hype last year about “buying in now” ect. ect… we went out looking at houses…. Our combined income placed us roughly 70K. The RE agent we seen had a mortgage broker also set up in the office. Before we were shown any houses we sat in the broker’s office as she punched in all the finacial information. With 50K as a down payment and the combined 70K income, we were approved for a purchase price in upwards of 420K.

Sitting down with a pen and doing the math, the payments on any type of loan would be greater than we could afford. even looking at houses in the 350K range we figured that no matter the hype of the RE pushers, there was no way that we could live after the monthly payments were made. Glad to say the cash is still in the bank and glad to not bought into the hype.

Today we are so glad that we didn’t buy into the market place, however with that said, and with what is happening today, we have to wonder how many people have bought into the hype and went with the mortgage brokers and not thru a chartered banking institution? Even today a person can still get into the market with 0/35-40…… I hope these people still have a back up plan.

The spin doctors say that canadain banks are in better shape, however, are we being lied to? If banks in other countries packaged debt and sold it off, is it a smoke and mirrors plan and we are to believe that this practice was only an american scam? If one bank is making millions, wouldn’t all banks get on the same band wagon?

garth, are Canadians being lied to? And who is watching the mortgage brokers?

#42 Edmonton Appraiser on 09.25.08 at 12:38 pm

Greater Edmonton Area Average House Price

May07 – $426k (Peak Avg Price in boom here)

2008
Apr – $386k
May – $383k
Jun – $381k
Jul – $379k
Aug – $369k
Sep – $360k (as of 09/25)

Each month in the spring market dropped an avg of 1/2% over the previous month (Prices usually go up in the spring market).

August over July, down about 2.5%
September over August, down about 2.5%

These are month over month decreases, not year over year.

Too many listings, too many vacant listings, too many new condos coming on the market.

And they still want to build more condos downtown…

http://www.liveaurora.ca/ – Presale on right now.
http://www.qcondos.com/ – Hole is being dug.

Oh dear!

#43 smwhite on 09.25.08 at 1:19 pm

Inflation Deflation debate…

http://www.youtube.com/watch?v=R8STuvRHPfI

#44 Whattodo? on 09.25.08 at 1:20 pm

I am by no means an economist and will not even begin to predict what is going to happen, but I ask the question:

Is Meryll Lynch not one of the greedy companies in the US that went bankrupt over this whole sub-prime mess?

I think I would take any advice from an economist that works for a company that just bankrupted itself with a grain of salt? No?

#45 jelly on 09.25.08 at 1:46 pm

Y3maxx,
Why do you keep challenging Garth to change things and offer solutions? It is not his mess that he made,
he is warning people and causing discussion to occur.
Do you actually think it would matter if he came up with some brilliant “solutions”?
Come on, you are very naive if you think Garth or any of us for that matter can change the real estate dilemma in Canada, or the US.
There are people in control that have a lot of money and self interest that are simply wanting the general population to take a hit, while they get rich.
There is nothing we can do about it, the system and greed is too corrupt.
The only positive is that house prices should correct so it is a more balanced system.
Leave Garth alone, he doesn’t have to defend himself to you, the guy is freaking busy, hello, election?
You’re lucky he is even posting blogs.
Ymaxx,
your getting off track- focus on the real issues, it is too late, it is already in the works.
Stop obsessing and repeating yourself, if Garth wanted to answer you he would have by now…

#46 dd on 09.25.08 at 2:05 pm

Igre and Calgary Roff,

Long-term the houses prices have to come down. The general public in Calgary only partly participates in the oil and gas boom. Reasonable house prices I predict will come in line with medium household income x 3 (a realistic mulitple to pay for a house).

So medium household income in Calgary is: $90,000
and therefore a house would be around $270,000.

#47 smwhite on 09.25.08 at 2:08 pm

#31 y3maxx,

Man you have your head up your a$$, seriously, take it out and get some fresh air, please! Your solution is to separate? Get a life you POS. And when I’m using the term “POS” I’m not using the RE term.

The conservative government was only too happy to jump on the housing bubble bandwagon and try and ride it through the next election, so why don’t you yourself step up to the plate and ask Flaherty or Harper what their solution is, oh, I forgot, those two won’t even admit a problem is festering. Place the blame on the right set of shoulders, not on the Liberals because your partisan views. I’m sick of your whining on this blog.

What happens when the credit available for funding new mining and energy projects in the west comes to a halt because we’ve chewed up all our credit selling overvalued McMansions? Liberal’s fault I suppose eh?

Oil isn’t going to protect Alberta any more then lumber protected BC or auto manufacturing protected Ontario(which BTW oil and auto work hand in hand), in fact, the oil patch is more susceptible to economic pain as we’ve seen with all these price fluctuations. When prices drop so do the profit margins.

Its the 80’s all over again so prepare, will we get Volker type rates to match?

#25 Crikey, thanks for the post, I love any chance I get to see how different our banks(and banking system) are from the rest of the world’s. Canadian banks aren’t in business to make money, just friends they loan money to.

CTV Had a segment on the Merrill Lynch story last night and used TD’s Don Drummond as the one to refute the claims in which he stated sideways movement(thats his “rosy” picture, sideways), even CIBC’s Tal has admitted prices are two high in housing and he was one of the biggest cheerleaders of Canadian mortgage innovation.

What was really grand about this CTV piece is they went to the street and asked two random men in suits(I guess being in a suit makes you “smart”, yeah right eh Wall Street) about what they thought, of course they said, “We’re Different”.

Talk about smoke and mirrors from MSM.

#48 dd on 09.25.08 at 2:17 pm

#10 Calgary rip off ,

Again, if house prices were $200,000 for a house in Calgary then that would be a multiple of 2. If the long-term trend was to pay 2x salary I could see house prices falling to these levels. However other information proves otherwise.

Prices could fall to these levels short term because of job losses. However with commodity starved China and India just starting to pick up Western Canada will be the place to live.

http://calgaryrealestatemarketblog.files.wordpress.com/2008/02/long_term_relationship_between_calgary_house_prices_and_alberta_economic_activity_diverge_large.png

#49 The Tallyman on 09.25.08 at 2:27 pm

#36 Igre said:
“i think that you are fooling yourself if you think that prices will drop from 400 to 200, there has to be a massive job collapse in calgary for that to happen, Alot of people are making alot of money there and so i dont see that kind of decline”
—————
Job collapse?
Hey this is Calgary… they are as frequent as Chinooks in this town.
I remember during the bust in the 80’s where almost every other day you’d see an executive on the news complaining about having to stand in block long line ups to compete with teenagers for that job flipping burgers.

Many lost their castles.
And that was during an era where houses prices were sensible.
A couple where both earned minimum wage could not get a mortgage for a 100k house back then…. take it from someone who had to settle for a half duplex and had a five dog owner for a neighbor.

The possibility of prices falling from 400 to 200k?
The over valuation of the housing is as fictional as the junk paper threatening to bring down the economy.

The high house price is the fast fading lame excuse/justification for being a fool.

Those daily stroke fests around the water cooler to discuss square footage and financial mastery are over.

But nah… it couldn’t happen in Calgary.

#50 brazer on 09.25.08 at 2:28 pm

U.S. new home sales plummet
http://www.thestar.com/Business/article/505857

“The average price of a new home sold in August dropped by a record amount of 11.8 per cent to $263,900, compared to the July average of $299,100. The median price was also down, falling 5.5 per ent to $221,900.”

yikes.

#51 brazer on 09.25.08 at 2:29 pm

U.S. jobless claims hit 7-year high
http://www.thestar.com/Business/article/505819

“The financial crisis, falling home prices and slowing consumer spending continue to apply the brakes to the U.S. economy. The unemployment rate jumped unexpectedly to 6.1 per cent in August, the highest level in five years.”

not good.

#52 Mark on 09.25.08 at 2:29 pm

Hi Garth.

Whats your take on this?

http://www.canada.com/vancouversun/news/story.html?id=292e9598-68f2-4b58-b31c-579768e771bb

“U.S. regulators plan $1 billion action against Royal Bank Of Canada”

#53 brazer on 09.25.08 at 2:31 pm

Luxury home sales to slow, Re/Max says
http://www.yourhome.ca/homes/article/505817

“The market for luxury homes is usually the first to show pressure cracks, but the reverse is actually true this year,” Polzler added.

“That being said, we feel uncertainty in financial markets both here and abroad will give purchasers cause for concern in the immediate future.

ie: sales are going tank soon.

#54 TorontoBull on 09.25.08 at 2:52 pm

things are getting really ugly down there…

Stabilization in the U.S. housing sector is not yet in sight: inventories and vacancies are still at a record high and continue to put downward pressure on home prices which continue to fall translating into trillions of real wealth losses for the engine of the economy: the U.S. consumer

New Home Sales (August 2008): at 469K, 17 year low and down 67% from the peak the July 2005 (1.389 million). This is 11.5% below the revised July rate of 520k and is 34.5% below the August 2007 estimate of 702K
Aug 2008: starts at a SAAR of 895K, this is 6.2% below July and 61% below the peak of January 2006 (2.292 million); permits at a SAAR of 854K, 9.8% below the rate of July and 62% below the peak of September 2005 (2.263 million); completions at a SAAR of 961 million, this is 9.8% below the July estimate and 57% below the peak of March 2006 (2.229 million)
Mortgage applications in the U.S. declined last week to the lowest level since December 2000 as fewer homeowners sought to refinance their loans
MBA: New foreclosures increased to 1.19% in Q2 2008, rising above 1% for the first time in the survey’s 29 years. The total inventory of homes in foreclosure reached 2.75%.
RealtyTrack: Nationwide home foreclosures rose by 26.7% y/y in August to 304k units, building on a strong 55.1% y/y increase in July
Existing home sales fell by 2.2% m/m to an annual rate of 4.91mn units in August. On a y/y basis, existing home sales were still contracting by around 16% in August, but their pace of decline has slowed significantly in recent months, after peaking at -24% y/y last February. Median home prices fell 3.4% last month after a downwardly revised 2.2% drop during July(5.02mn units in July, the median price dropped 7.1% from July 2007. Two-thirds of the July sales gain took place on the West Coast (mostly California). Merrill Lynch (not available online): at least 40% of the sales in California are forced foreclosure activity as the banks moved to unload their jingle-mailed properties to investors at fire-sale prices)
NAR: the Pending Home Sales Index, a forward-looking indicator based on contracts signed in July, fell 3.2% to 86.5 from an upwardly revised reading of 89.4 in June, which had risen 5.8% from May
Toll Brothers cancellation rate running around 24.9% (CEPR)

from
http://www.rgemonitor.com/

#55 T.O. Girl on 09.25.08 at 3:03 pm

Well this are pretty good here in Toronto 80 yr old bungalows that are unlivable are selling for $600 000 three days after they are listed.
Two storey detached original are still at $800 000
What kind of idiots are still stupid enough to buy these homes. I shake my head in wonder!!!!!!
these are truly greater fools
Are they still buying them high to beat the Oct 15 cancellation of the 40 yr
IDIOTS!!!!!!

#56 Peter in TO on 09.25.08 at 3:15 pm

Garth no comment on CMHC?

It would make for great play with the media right now.

It would also make Harper look like the ass he is.

#57 Calgary_rip_off on 09.25.08 at 3:20 pm

DD:

One would hope that houses in Calgary are 3x the median income. There is no equation though that determines this. Price determination is determined by what people are willing and able to pay. Even if I were able to, I cannot see purchasing homes listed at $400,000 that in reality are only worth $200,000. It doesnt make sense to waste that type of fundage. If enough persons dont purchase homes, prices will drop. Yes, $270,000 is pretty reasonable, still a bit much, but reasonable.

What’s with the Jelly trolls? That’s the type of person you need to get the hell away from.

#58 dd on 09.25.08 at 4:14 pm

Calgary rip off,

Yes, valuation is based on current or future belief in the asset. 3x salary is only historical value. Nothing says that it will go back to this pricing model.

A year ago a $400k house was worth more than $400k because the general public thought prices would keep on increasing at 20% a year.

People that can stand back and value the house in ordinary markets have a better idea what the house is actually worth. Who knows, prices might be $200k in a year or two.

I guess the true worth of a house can be based on rental income or cash flow over the long-term.

#59 anonymous on 09.25.08 at 4:46 pm

Whattodo?,

Yeah you should because they are right. So stop trying to be a smartass.

#60 dave on 09.25.08 at 4:49 pm

check out the 2nd bullet point in todays canadamortgagetrends blog (ie about the rush for the 100% mortgages)

http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2008/09/mortgage-bytes.html

#61 JO on 09.25.08 at 5:33 pm

Way to go Garth. Great Article.
JO

#62 JO on 09.25.08 at 5:35 pm

Update on Bailout: We need to keep an eye on this here from Canada as it will have major implications for our economy. I do not see any mention of the pricing formula or strategy? This is huge. If they buy at a reasonable discount and take equity in return, the potential losses might be mitigated although by the looks of this updated plan, it is still very likely to fail and result in hude losses as there is no concrete pricing strategy. As for helping homeowners via changing judges’ authority to modify loans and also other plans being discussed such as a freeze on foreclosures or balance paydowns (freezing foreclosures and reducing balances not part of bailout i realize) the only thing this will do is increase mortgage rates and reduce credit. How is it that the hard working, prudent people of America (and by extension the World) who pay their mortgages on time, live within their means, and are better at managing their money have to pay higher taxes, higher mortages rates in the future, and suffer from collapsing home prices due to the stupidity of Government (fuelling rise of houses through FRE/FNM and FHA, , CMHC in Canada, etc), Central Banks rate policies, the Banks’s execs who set credit policy, and the many borrowers who were reckless and stupid with their money ? That is the real tragedy here. In fact, most of this intervention (markets not really free to begin with) provides an incentive to default on your mortgage and / or walk away, spend like crazy, and be reckless. Things will only recover when house prices reach their market led “fair” value which is what the average buyer will afford. Add in a good job market. So it is likely we will continue to see governments and friends of certain top government people continue to implement programs to take money from the innocent (savers/depositors/private shareholders) via taxation and inflation in order to transfer it to those who have been gaming the system and engaging in stupdid behaviour (bank execs / counterparties and bondholders). Must be helpful to have a lobbyist or two working on your behalf, or better yet, make huge campaign donations and have some politicians in your pocket. The end is near for the debt based, fiat money foundation that is the American and world economy. Say hi to deflation and then at some point high inflation or a combo of both, so that in 3-4 years, most average citizens will be poor. US Citizens must keep up the fight.
JO

#63 Rick on 09.25.08 at 5:52 pm

11 crashing yuppy on 09.24.08 at 9:14 pm Garth,

You are finally getting some media cred.

————————————

JRock, from The Trailer Park Boys?!?!

#64 CalgaryRocks on 09.25.08 at 5:53 pm

Yikes….
What if you have Money Market funds in RRSP… Is that protected??? I am guessing NOT….
=================================

In the US the gov now guarantees those and in Canada it’s only happened once during the ABCP debacle that a money market fund was worth less than 1$. I am not sure which bank was involved but they replaced the bad stuff and brought the value back to par at their expense.

And of course, technically, money market funds have never been guaranteed. Read your prospectus.

#65 islander on 09.25.08 at 5:58 pm

The “true” worth of a house is what a willing buyer and a willing seller agree is a fair exchange of CONSIDERATION for the property.

3x median income is not some immutable law of economics.
Nor is implied rent.
Nor is premium over assessed value.

When optimism reigns, people pay for houses an amount that appears to be crazy relative to fundamentals. People who prefer to let number-crunching or fear guide their purchase decisions refuse to accept that houses cost what they cost; therefore, they don’t buy one.

Yet plenty of houses still get sold.

When the market tips, as most of us can see it has, it doesn’t mean all sellers are suddenly going to acknowledge it. Most sellers believe the market crash is for “the other guy; my house is special.”

If they purchased, had an appraisal and/or borrowed against the house in the past 3 years or so, there is tremendous “price stickiness.” Nobody wants to feel like the idiot who took a $100K kick in the nards on his house, on top of losing his job or his wife, or whatever.

Yet plenty, if admittedly fewer, houses still get sold.

In other words, just as stone-cold buyers couldn’t believe prices on the way up, deluded sellers can’t believe prices on the way down.

Nonetheless, buyers and sellers come together hundreds of times a day across Canada and agree on sales prices for properties.

Those properties are neither over-priced nor under-priced. There is no such thing as “true value” other than the price paid. That is the value of the property on THAT PARTICULAR DAY to the PRINCIPALS involved in the transaction.

If we were taught economics in school, we would easily recognize this fundamental truth. Unfortunately, we’re too busy learning spelling from the phonics monkey or being indoctrinated that all cultures are equal, or whatever nonsense they’re peddling in public schools these days.

#66 y3maxx on 09.25.08 at 6:09 pm

The U.S. is now a Facist state…the govt own the banks and banks control the people.

Google Thomas Jefferson/Manifest Destiny.

…Alberta, Saskatchewan and BC would be wise to secede from Canada…before the U.S. simply takes over Canada’s West by way of “Manifest Destiny”.

Eastern Canada is worthless…just as Detroit and New York is….I wont even bogther mentioning the Quebecois or Atlantic Canada.

…just connect the dots

#67 brazer on 09.25.08 at 6:39 pm

Wall Street meltdown a threat to Canada: Carney
http://www.reportonbusiness.com/servlet/story/RTGAM.20080925.wcarney0925/BNStory/Business/home

“Any slowdown in the U.S. economy would have consequences for Canada,” Mr. Carney said in the speech, copies of which were distributed to reporters in advance in Ottawa.

b of c somtimes points out the obvious.

#68 dd on 09.25.08 at 6:57 pm

#45 Jelly,

I disagree. It is clear the regulations of some type have be put in place. Buying and selling mortgages, credit swaps, and the like to the tune of billion of leveraged dollars without any regard for investors money is robbery.

All out capitalism just doesn’t work. There has to be some kind of restraint put on the system. If the market cannot regulate itself then someone has to regulate it.

Futhermore people need to be educated about money too. People that carry credit card debt and that buy houses with 40 year amortizations should have their head examined.

Yes, more paper, more rules, and more regulations. I hate it. But do we just stand by and do nothing?

#69 McSteve on 09.25.08 at 7:40 pm

Homes, cars and many consumer items are insanely overpriced but I don’t think that bothers most consumers.

Downturns/Recession labels are meaningless – until job losses pile up. Canadians have proven they will spend every penny they have (and then some) on consumer items, houses, cars, big screen TV, etc. and not worry about debt. It would seem as long as someone has a job, they will go into hock for anything. It doesn’t make sense, but the consumption marketing machine has been highly successful in seperating people from their money.

I’d be watching employment numbers – if they take a significant downturn, LOOK OUT…

#70 My_view on 09.25.08 at 7:49 pm

Ah……..its time for the Scotia bulls spin…………

http://www.reportonbusiness.com/servlet/story/RTGAM.20080925.wmortgage0925/BNStory/Business/home

#71 brazer on 09.25.08 at 7:56 pm

Slump will hurt Canada: TD
http://www.thestar.com/Business/article/505980

“He predicts the U.S. recession will be at its worst this winter and it will be a year before the growth of Canada’s economy’s will begin to recover.”

tough winter coming.

#72 Schroedinger's Bull on 09.25.08 at 8:22 pm

I qualified for a $280K mortgage on one income roughly $50K with 20K in debt through a mortgage broker that my realtor referred me to. That was three years ago. (and I would have been borrowing my downpayment. That’s basically the definition of subprime lending.

At the bank, I qualified for just under $200K, so something was screwy back then. I don’t see how a mortgage broker could get me an extra $80K using the same information. Interest rate was lower too…gotta wonder how exposed all those lenders are right now, given that they weren’t pricing in the risk at all (at least anecdotally).

Should be an interesting year of fence sitting.

#73 Rick on 09.25.08 at 8:33 pm

#41 kc on 09.25.08 at 12:24 pm

snippage

Today we are so glad that we didn’t buy into the market place, however with that said, and with what is happening today, we have to wonder how many people have bought into the hype and went with the mortgage brokers and not thru a chartered banking institution? Even today a person can still get into the market with 0/35-40…… I hope these people still have a back up plan

snippage

—————

Backup plan? I know of a huge one in British Columbia. Read my lips; G-R-O-W O-P

Probably both the biggest precursor and protagonist to this provinces retarded real estate market. If it wasn’t for the Realturds and thier brokerage buddies in the next cubicle, housing might be a bit more affordable as those with “sketchy” income sources wouldn’t have qualified through conventional means.

#74 Zebedee on 09.25.08 at 8:34 pm

Houses are absolutely valued by how much the rental market is willing and ABLE to pay to rent them. In general terms this is 1/100th of the house value per month. This is not a hard and fast rule, but it’s a decent rule of thumb. So if you can get $1,500 per month for the home then its value is around $150,000. An oversupply of homes, as Alberta has, means that both of those prices will fall. In Calgary right now you can rent a place for $1,500 per month that is on the market for $500,000, which shows that the sale prices are way out of whack and will adjust.

#75 dotava on 09.25.08 at 8:48 pm

#67 dd on 09.25.08 at 6:57 pm

Sorry dd but your sentence “If the market cannot regulate itself then someone has to regulate it” sounds nonsensical same as “If criminals can’t control themselves we need police”.

#76 dotava on 09.25.08 at 9:14 pm

#67 dd on 09.25.08 at 6:57 pm

Part of your message related to education “Futhermore people need to be educated about money too” is exactly what we are missing in our school system.
Let’s stop brain-washing (TV) machinery.

#77 Rick on 09.25.08 at 9:35 pm

>#64 islander on 09.25.08 at 5:58 pm
>The “true” worth of a house is what a willing buyer >and a willing seller agree is a fair exchange of >CONSIDERATION for the property.
—————————————
Without the misinformation, deception and deceit by the Realturd industry, this would be an accurate statement. Eliminate real estate commissions and have a set fee for selling a house, regardless of it’s value, and your argument may actually hold water.
—————————————–
>3x median income is not some immutable law of >economics.
>Nor is implied rent.
>Nor is premium over assessed value.
—————————————–
Nor are the lies perpetuated by the Realturd industry. A block from my home, a house listed two months ago for $625K now reduced to $499K boasting “fabulous ocean views.” On MLS.ca beautiful pictures of the ocean! Unfortuately the pictures were taken at the top of the street about 150ft from the house because from the house the only view is the back of an apartment building. (Mine! LOL)
THIS, Mr Islander is why I despise your industry and people like you who defend it. In my business, if I used these tactics I would be on W-5. I’m sure you will argue, “let the buyer beware” and the same rhetoric you have been spewing here for quite sometime. I argue something much simpler; grow a conscious and accept that you work in a filthy, filthy business that preys on peoples emotions, ignorance and lack of available honest information.
——————————————
>When optimism reigns, people pay for houses an >amount that appears to be crazy relative to >fundamentals. People who prefer to let number->crunching or fear guide their purchase decisions >refuse to accept that houses cost what they cost; >therefore, they don’t buy one.
————————————————
Not always, some of us sell at the top, rent and wait while despising what has become of home ownership and what it does to families and communities to primarily benefit those, like yourself, who add absolutely no intrinsic value to the process.
———————————————–
>Yet plenty of houses still get sold.
———————————————-
Not for long.
———————————————-
>When the market tips, as most of us can see it has, it >doesn’t mean all sellers are suddenly going to >acknowledge it. Most sellers believe the market crash >is for “the other guy; my house is special.”
———————————————
Can I scan and email you the 3 Realturd flyers I received in my mailbox in the last week? THEY say exactly that!!! That your house *is* special OR we can get you the best deal when selling. How in the hell can one industry do both? Liars, cheats and weasels in need of some serious reform. When the seller or buyer actually parrot your rhetoric, you stand back and say “caveat emptor.” (Always after the transaction, of course.) Are you starting to get it Mr. Islander? I doubt it.
———————————————–
>If they purchased, had an appraisal and/or borrowed >against the house in the past 3 years or so, there is >tremendous “price stickiness.” Nobody wants to feel >like the idiot who took a $100K kick in the nards on his >house, on top of losing his job or his wife, or >whatever. Yet plenty, if admittedly fewer, houses still >get sold.
—————————————
The Realturd industy, which trumpeted that price drops were virtually impossible, should at minimum, be forced to refund this percentage of the sales commission. Simply based on the fact that virtually every Realturd lied through his/her teeth OR is completely ignorant of economics and past history. Hey, YOU claim to be the professional, shouldn’t this information been part of your service? Profession, my ass, Realturd isn’t even a vocation for christ’s sakes.
———————————————
>In other words, just as stone-cold buyers couldn’t >believe prices on the way up, deluded sellers can’t >believe prices on the way down.
———————————————
Again, can I scan and email you the recent flyers?? Your industry still claims it “ain’t happin’ ” The truck and SUV industry has clearly indicated that “prices are comming down!!” What is the difference? I suggest less of a monopoly and more competition combined with a more savvy consumer purchasing vehicles.
———————————————–
>Nonetheless, buyers and sellers come together >hundreds of times a day across Canada and agree on >sales prices for properties.
>Those properties are neither over-priced nor under->priced. There is no such thing as “true value” other >than the price paid. That is the value of the property >on THAT PARTICULAR DAY to the PRINCIPALS involved >in the transaction.
————————————–
True, you can apply this argument to anything. I don’t have a problem with free market economics, I have a problem with manipulative, self serving interference masquerading as a service.
————————————–
>……. or being indoctrinated that all cultures are equal, >or whatever nonsense they’re peddling in public >schools these days.
————————————-
Not only are you a Realturd, you are a bigot. Good work Islander. Your smugness, aloofness, arrogance has come across loud and clear in the past and has done so once again. The public school I went to certainly didn’t teach me that I was somehow superior because I took a 6 month Realturd course, drive a Bimmer and think I look good in a suit.

I am grateful that I don’t have to live with either your conscious or deluded view of the world.

#78 GrandePrairiegirl on 09.25.08 at 9:43 pm

Gangster – Bankster, it’s all the same.
As most or all know Paulson is a former CEO of the investment bank Goldman Sachs. Therefore I view his bailout plan as being typical of what any greedy,opportunistic bankster would serve up as a solution. I believe the bailout will fail to solve anything in the long term. And the final fall will be that much more spectacular for it.
A news blurb from Reuters today announces that the China Banking Regulatory Commission have told domestic banks to stop interbank lending to U.S. financial institutions.
I’d be interested in knowing what sort of dollar volume this might be. Would anyone here have the answer to that? Thank you.

http://www.reuters.com/article/marketsNews/idUSPEK16693720080925

#79 anonymous on 09.25.08 at 9:56 pm

y3maxx,

I connected the dots and you’re still a moron.

By the way, you left your tin-foil hat and Zeitgeist DVD at Ron Paul’s house the other day. He wants you to come get it. And you owe him 1 gold piece for the pizza that he ordered.

#80 Researcher on 09.25.08 at 10:00 pm

Just a few facts.

In 2006 Median Household Income in Calgary was $55,858. The link to that info is

http://www.census2006.ca/english/census06/data/trends/Table_1.cfm?T=CMA&PRCODE=48&GEOCODE=825&GEOLVL=CMA

According to the Frontier Center for Public Policy a median multiple to median household income is considered affordable at 3.0 or less. The link to that info is

http://www.fcpp.org/main/publication_detail.php?PubID=2036

So if you do the math, and if you suppose Calgary median household income has risen to 60,000 since 2006, with a median multiple of 3 – that would mean the median house price in Calgary should fall back to $180,000 in order to be considered affordable. A quote from the above link:

“In recent decades, the Median Multiple has been remarkably similar among the nations surveyed, with median house prices being generally 3.0 or less times median household incomes.”

Who said prices in Calgary can’t fall from 400 to 200?

#81 GrandePrairiegirl on 09.25.08 at 10:09 pm

Another setback.

http://www.mytelus.com/money/news/article.do?pageID=ex_business/home&articleID=3002752

#82 y3maxx on 09.25.08 at 10:57 pm

Insight: Reserve judgment on the dollar
By John Plender
Financial Times September 23 2008 16:34

A combination of negative real interest rates and an exploding budget deficit as the US government takes on the “bad” assets of the banking system looks awful for the dollar. If the worst has yet to happen, it is because the crisis-driven homing instinct of Americans has led to substantial repatriation of overseas investments.

There is nonetheless a groundswell of comment about the viability of a reserve currency attached to a broken financial system, a persistent current account deficit and a fiscal nightmare. With the euro taking a growing chunk of official reserves, and panic in the air, is dollar hegemony at an end?

In the extreme circumstances now prevailing, nothing can be ruled out.

But if sterling’s history is any guide, it is risky to forecast the instant demise of a reserve currency. For while the US outgrew the UK economy from the 1870s, it took two world wars, a botched return to the gold standard and a subsequent devaluation, before the dollar definitively replaced sterling in 1945.

There are good reasons for the protracted lag, not least the incumbency advantage stemming from network effects. Because everyone now uses the dollar it offers a degree of liquidity and acceptability that others cannot match until such time as the US makes so great a hash of policy that these benefits are outweighed by costs. Maybe the latest financial crisis will do the trick, but I doubt it.

The first reason, forcefully advanced by Adam Posen of the Peterson Institute for International Economics, is that the dollar’s status is not purely about economics. For many countries security considerations are paramount. It seems inconceivable that Japan, Korea, Taiwan or Saudi Arabia would wish to junk the dollar given their current security relationships with the US.

How far China sees its huge dollar reserves as a potential foreign policy weapon is unclear. What is clear is that the economic cost of using the weapon would be high and with reserves piling up at an annual rate of $500bn it is becoming ever higher.

Charles Dumas of Lombard Street Research estimates that China makes 1-2 per cent on its (largely) dollar reserves. It then loses up to 10 per cent on the exchange rate and suffers a Chinese inflation rate of 6 per cent for a total real return in renminbi of about minus 15 per cent. That is a loss of $270bn a year, or a stunning 7-8 per cent of gross domestic product.

How long this can continue is moot. Yet interdependence on this scale means that selling dollar reserves would be an economic catastrophe. Diversifying new flows would make more sense and would not finish the dollar.

To return to the analogy with sterling, the euro is not the only candidate to displace the dollar. Those who like to extrapolate China’s current growth rate could argue that the shift of power to Asia will ultimately turn the renminbi into a reserve currency. In the very long term there may be something in this, but I am suspicious of mechanistic extrapolations. And, would an undemocratic developing country command sufficient confidence for its currency to achieve such status?

The euro is another matter. Inside and outside Europe it has been a notable success and it has taken a growing share of foreign exchange reserves at the dollar’s expense. Yet those who expect the euro to dethrone the dollar before long are taking much about the integrity of monetary union for granted. This is because the pressures of adjustment to internal divergence as the euro soars will be exceptionally difficult to handle.

The north-south divide in the eurozone in terms of relative unit labour costs requires a huge effort by the south, and Italy in particular, to address a serious loss of competitiveness. Countries such as Spain are also struggling with cyclical problems arising from the divergence in real interest rates in Europe. Before assuming the euro will topple the dollar, you have to be utterly confident that these problems will be well managed. I am not

Copyright The Financial Times Limited 2008

#83 T-Bill on 09.25.08 at 11:36 pm

Newt Gingrich has some very interesting thoughts on the bailout as it stood last night. Excerpts follow:

I think this is an appallingly bad plan. I think it will be an engine of corruption.

I think that the — if you read the fine print, the idea that the secretary of the treasury intends to buy back — buy assets at above their market value means that — one of two things. Either the current snapshot model of market to market is wrong, and we ought to replace it with a rolling market to market, in which case we’d know the true value; or the secretary of treasury intends to enrich some people by paying them more than they can get while not enriching other people.

And I think this is going to be a nightmare to implement, and I believe it is about as bad as anything I’ve seen in economic policy… since I’ve been active in public life.

I think, first of all, they should replace the current snapshot to market with a rolling three-year average.

I think, second, they should change the current loan reserve pattern so it’s not pro-cyclical.

I think, third, they should zero capital gains.

I think, fourth, they need to adopt an energy plan to keep about $500 billion a year here at home instead of going overseas.

But on a practical level, if they need to open up a window to loan money to treasury plus 2 percent, and people want to come in and borrow the money and the responsibility (ph) of a workout not a bailout, and those people want to work their way out over the next three to five years. I’m comfortable saying this is a liquidity crisis; let’s meet it; let’s loan the money. But let’s make sure they are responsible for their bad debt, and they’re going to work their way out.

This idea that we’re going to buy the paper and some bureaucrat in Washington is going to be responsible for $700 billion in bad paper, I think, is socialism at its worst. I can’t imagine why this administration is doing it. I think it is profoundly wrong, and I hope it is defeated if it comes to the floor in this form.

http://www.foxnews.com/story/0,2933,427904,00.html

#84 canadarocks69 on 09.26.08 at 12:06 am

I was watching a video on ytube.It was the show 60 mins and they were interviewing people who had or were in the process of losing their homes and were having to just walk away from them.There was one couple on there who said that they could afford the mortgage but they didn’t want to continue paying for it as the mortgage payment was higher than what it was assessed at.Do you think that because people here in canada can’t just walk away and would be on hook for the mortgage regardless, that it won’t be as bad for canada if we do have a meltdown because the average canadian won’t have to pay for a bailout like what is going down in the USA?

#85 Rasputin on 09.26.08 at 12:19 am

The game just changed again…Washington Mutual just failed. That’s the biggest bank failure in history. Nope nothing to see here folks, just move along!

#86 nonplused on 09.26.08 at 12:23 am

I think the US bailout plan is a perfect example of what is to come. All the bad debts the banksters are stuck with are going to be sold to the government at face value even though a vulture fund wouldn’t touch that stuff with a ten foot pole. So the people (taxpayers) who got ripped off by fraudulent lending will also get to pay for the bailout. It’s truly brilliant in a mad scientist sort of way.

No deflation though. Oh, sure, deflation in home prices and no money for the middle class as they pay outstanding taxes to cover the bailouts, but the rich will have more money than ever and the Saudies, Chinese and Russians are going to convert all thier US dollar assets into hard assets as they know the US taxpayer cannot meet thier mortgage and bail out the mortgage lender at the same time. That equals hyperinflation in tangible assests even as general deflation of paper assets continues in earnest along side it. Most of the money in the world isn’t here anymore, and if we don’t want to buy stuff, well, they do.

Both deflation and inflation are monetary phenomena created by the central banks through monetary policy, nothing more. Raising the supply of money rewards debtors and punishes savers through inflation. Reducing the supply of money rewards savers and punishes debtors through deflation. They are both just wealth transfer mechanisms. You can be sure no long term policy punishing debtors and rewarding savers will be adopted in North America, as the savers are all abroad and the debtors all vote. But the average man isn’t going to see any of that. His bank account and house will be worthless and his gas and food unaffordable.

#87 Sam on 09.26.08 at 12:56 am

hey Garth,

they have a story on today’s mcleans cover and it also mentions about you too. a must see

#88 David on 09.26.08 at 2:58 am

Posts like those from Islander and Y3Maxx certainly have entertainment value attached to them.
Did it ever occur to you Islander, that the fraudsters and criminals who profited from the housing bubble went the best MBA and Law Schools, all top of the class graduates, more than likely? So if the greedy “experts” on finance were so wrong, why should Joe Lunchbucket be asked to finance so called free market failure? He needs economics classes right? Joe is to blame.
Y3Maxx are you declaring certain Canadian citizens worthless? Shame on you. Albertans are worth more than whom? In the 1930’s Albertans were boiling gophers for food. What is the point of picking on certain regions of Canada?

#89 The Tallyman on 09.26.08 at 3:26 am

GrandePrairiegirl said:
“Gangster – Bankster, it’s all the same”

Instead of allowing the govt to drag them further into debt, I hope people in the USA start making citizen arresests on the crooks and bring them to justice.
Doesn’t look like the govt ever will.

#90 mike on 09.26.08 at 5:20 am

77 prairie girl How right you are. Keep in mind OUR bank govenor Carney also worked for Goldman. Makes you wonder who is really calling the shots. Not the people. What is happening in the US will go down in history as the biggest public swindle of all time. I doubt socialist China would ever do what the US is doing to its
people in a democratic country.

#91 Cave Spot on 09.26.08 at 7:13 am

Many people are quickly becoming aware of the housing slowdown in Canada. A 9.4% drop in average prices and a 6.4% drop in median prices for August 2008 (compared to August 2007) in Milton is a bit of a shock.

http://www.omdreb.on.ca/News/Files/Sept%20Milton.pdf

#92 smwhite on 09.26.08 at 10:43 am

#87 David, thats a beauty!

– Albertans are worth more than whom? In the 1930’s Albertans were boiling gophers for food. What is the point of picking on certain regions of Canada? –

Nobody in the west was crying when Windsor and Oshawa were pumping out automobiles at break-neck speed in the 50’s and carrying the ENTIRE Canadian economy, the real “Canadians” are showing their colors aren’t you?

Islander, there are three types in this world, there are the sheep, the wolfs, and the big fluffy sheep dogs, that protect the herd and ward off the wolves….

Your a wolf that has apparently stuck his head up in a blog full of sheep dogs, go away. People like you are a black spot on the RE industry.

ITS YOUR JOB TO BE PROFESSIONAL AND ADVISE YOUR CLIENTS IN A MATTER THAT SUITS THEIR NEEDS, NOT YOUR OWN YOU ASS. ITS NOT BUYER BEWARE. THAT’S WHY THEY GO TO YOU, ISN’T THAT RIGHT? YOU KNOW YOUR INDUSTRY AND ITS BENEFITS AND PITFALLS?

Goes double for the banking and investment industry, not everyone has the want or ability to spend hours a day going through statistics and new releases, they use EXPERTS as a proxy, that’s why you get a commission.

Put your money where your mouth is Mr. Islander Real Estate, so the people in your community know who to avoid. If you stand by your name and your words, tell us, who are you and who do you work for?

I know you won’t because your just an ass-mouth with nothing to back up your shit talk.

Your industry and the financial industry are going to go through a metamorphose and you stinking attitudes of self entitlement will be history.

PS Take a peak south of the border to see your fate…

#93 Rasputin on 09.26.08 at 10:17 pm

MMMM. All this talk of boiled gophers is making me hungry! Seriously this sure looks like the start of something very big and very bad. House prices may end up being our smallest concern. On the bright side, here in Alberta, we do have lots of gophers. At least we will eat this winter.

#94 Downsized and Delighted on 09.28.08 at 2:26 pm

kc 41: I am probably alot older than you, but I can remember past markets where I wondered “who is going to rent all the commercial office space being built in Mississauga town centre at $20.00 per ft?” Because I was young, I assumed the pros knew better. But it turned out the answer was NOBODY, and that market fell into the dumpster (1990). It didn’t really recover until 2002. So…….your observations about the current market are absolutely right. If brokers/agents are pushing you to over-leverage, they are doing it to everyone else also. Everyone is leveraged to the max here in Canada also. Good for you for not buying into the hype. Mortage brokers don’t care if you have to give up your life to own a house – and neither do real estate agents.

One thing I have observed about the current market is that younger people are entering into it than in the past.
That makes for a busy market now, but it also borrows from the future and adds fuel to the fire of any slowdowns in the market.