Subprimal

carney cartoon

Spin, spin, spin.

I listened to one of the Big Bank economists being asked by a reporter why the US housing market crashed and ours is still full of air. ‘Lending practices,’ she said. In Canada, mortgage lenders are ‘more responsible.’ No subprimes here, baby. Just good, honest, debt-fearing, practical, realistic lenders and humbled borrowers.

We now go directly to one of those lenders, a guy who this week lost a client. In this email, he tells me why:

The client wanted to purchase a new home for $320 000.  They owned their duplex clear title which had an assessed value of $220,000.  They’re a young couple with four children and an annual income from employment of $24,000. Government cheques for the children brings another $12000 into the household.

Reading your column daily Garth, I wanted to tell them to run the other way but they were referred to me by a builder and realtor who I have done business with over the years and I have bills to pay too.  Sounds like an impossible deal in this market, but not so…

The first lender approved an equity take out mortgage for the downpayment on the duplex for a mortgage of $160,000…no appraisal required. All info was disclosed to the lender with respect to the  intended use of the funds and the additional payment the  client would be making on the  mortgage for the 2nd home.  The rate offered 2.65%…5 year variable.

The 2nd application went to a different lender as a 50% loan to value ratio mortgage.  Due to the downpayment, no income verification is required. Both mortgages approved. Again, a $160,000. mortgage at 2.65%.

Unfortunately for me, the client sensed my reluctance to proceed and fired me….first time this has ever  happened to me.  She went to the same lender where I had arranged the mortgage for the purchase and proceeded with them directly.

Evidently reading your blog is bad for my business.   The reality is this,  The duplex assessed at $220,000 is probably worth 185,000 in today’s market.  The lender who offered the first commitment will have the mortgage insured by CMHC with no cost to the client.  The lender will pay the fee. Net monthly income for the client $1000 (government) $1500 (employment) $1000 (rental of duplex) = $3500.

Monthly payments Mortgage P & I are $1167.  Taxes $400  Hydro $125.  Gas $200. Phone $80. …and they have $1500 left over for  Groceries, school supplies, shoes, clothes, prescriptions, vehicle repairs, home repairs, cable TV,  internet, etc..per month for a family of six.   Take another $368 off that if prime goes up just 2%.  Or worse, have   the duplex vacant for a month and disaster will ensue

Evidently I should seek new employment…any suggestions?

Summary: A family of six with an income below the poverty line has just qualified for not one, but two mortgages of $160,000 – enabling them to buy a home they clearly can barely afford with a mortgage rate of 2.65%. Two separate lenders approved this family. No income verification. No appraisal.

Now, let’s review how this is different from subprimes in the US:

  • Of course, in that crazy country, mortgage loans were made to people with very low incomes who could never actually pay them back.
  • In the American real estate bubble, irresponsible lenders would dump money on borrowers based on what they were buying, not who was buying. The assumption was house prices would go up, so who cared if the schmucks were over their heads?
  • In the States, there were those cruel ‘teaser’ loan rates which meant people could afford to carry a home for a while until interest levels inevitably rose and they lost everything.
  • American lenders, greedy and myopic, considered mortgages to be assets, and pushed them out the door not even bothering to verify incomes or property values.
  • And subprimes flourished because lenders could transfer the mortgage risk to investors who bought the loans, thinking they were Triple A assets. In Canada, risk is transferred to taxpayers through CMHC.

So, see? No comparison.

I heard it on TV.

147 comments ↓

#1 Mikaroo on 08.11.09 at 10:03 pm

Question from the crowd about ‘recourse’ differences b/w states and provinces: in most states you can ‘walk-away’ from a mortgage gone bad, and the bank is stuck with the property. In Canada there is not the same freedom, but if CMHC insures the mortgage so the bank has their money (from us taxpayers) – what happens to the house title, and the owner that defaulted? Does the gov garnish future wages (like student loans, which dont disappear even with bankruptcy)? I’m still paying off my OSAP, so not looking for a house just yet, but wondering what the rules of the game are. (for fun, I also found that RBC was happy to preapprove me [email protected] with minimal fuss) Thanks in advance for any clarification.

#2 gold bugger on 08.11.09 at 10:06 pm

I swear if I end up on the hook for those mortgages through higher direct taxes (the indirect kind, through inflation, is a foregone conclusion) I will find both these houses and burn them down.

#3 conan on 08.11.09 at 10:22 pm

Does not sound the wisest move but I have a question. What does the family do for income? If one of the couple is skilled in building maintenance/ repair it changes the equation.

Does the building come with a long term tenent?

#4 $fromA$ia "Garths Nugget Boy" on 08.11.09 at 10:25 pm

U see Garth, clearly Canada is different, we’re still loose lending while the Yankees have woken up.

You know why? Conservatives will be ousted the minute RE corrects. Guaranteed! Like I said it would be upopular for the Liberals to call it like it is so now we wait.

I am so sick of our Prime minister and his fellow Meat head, they are both in serious need of a new hair piece.

Actually the PM looks Satanic.

#5 kc on 08.11.09 at 10:35 pm

And this surprises anyone?

Tonight on Global (la-la-land west coast) there was no mention in the news about the increasing personal bankruptcies… but wait…. they pump the above list pricings for houses being bought and sales records …. No reality check on the west coast… just dig a hole and bury the dead…

move along sheeple… nothing to see here.

cheers

#6 Real Estate Deal or No Deal on 08.11.09 at 10:38 pm

It just occurred to me that the variable rate mortgage and the ARM (adjustable rate ) mortgage in the states come from the same gene pool.

Huh, funny about that … maybe cause one starts with a v and the other a … guess, I shulda stuck width da foosbal.

Good for you mortgage broker, you have ethics … don’t worry deals will flow to your door regularly.

#7 Nostradamus jr. on 08.11.09 at 10:41 pm

It’s all simple really…

…It’s different in Vancouver.

Mortgage rates will never go up beyond affordability threshold here because people cannot afford the payments if rates rise too high.

Besides, 95% of residential property purchased here is foreign owned/bought…paid full in cash.

duhhh

#8 Bogdan on 08.11.09 at 11:01 pm

Garth, can you please write a post on what you think will happen when all this fools will have no money to pay the mortgages? What is the CMHC going to do? Cover the asses of all the <20% downpayment? If this is true, are not the sheeple like the one above… geniuses?

We can see in this video what happened in US ( http://www.youtube.com/watch?v=nBirV0Z_aXc )… people just walked away.

#9 Happy Renter in North Van on 08.11.09 at 11:03 pm

CMHC is financing the greatest ponzi scheme… It will all end badly… and guess who will pick up the bill… again… Poor Canadian Taxpayer Schmucks…

#10 Aizlynne on 08.11.09 at 11:39 pm

The only difference Garth is the lack of testicular fortitude exhibited by Canadians compared to the Americans who now seem to be finally waking up to the tax and spend (and spend and spend) Obama administration.

My wish when I grow up is to live in a democratic society and reduce government back to the dark ages of drunken railway building, fur trading and wagon run medicine clinics.

#11 Crash on 08.11.09 at 11:42 pm

Since the bailouts, nothing has changed structurally in the economy or in the lending community. All that’s happened is a thick layer of “quantitative easing” has been spread over the structural economic cracks, but the underlying economic infrastructure is still falling apart. This story is not done yet, and it’s going to be a real disaster when things finally crumble.

#12 dmr on 08.11.09 at 11:43 pm

This is equally as bad as the CPP “investors” diving into Mortgage Backed Securities in 2007/2008 when it was clear to those who understood the US situation that this was a doomed decision. Even fewer of us understood back then that the CPP purchases were actually an early bailout of the Big Canadian Banks by buying their toxic Mortgage “assets” with our CPP funds.

Being under 30, I know I will never see a dime from CPP, and I am preparing for that. However, it burns me to the core to see us Canadians get screwed so badly by a few criminal decision makers…we are no better off than the American Citizens who are currently being fleeced by their banking elite.

#13 Peter Coupland on 08.11.09 at 11:43 pm

Holy crap Batman….

As a single person with no children by choice I am flabergasted that this couple gets 12,000 a year for having children and destroying our environment even quicker?

Yeah not to mention the canadian subprime mortgage.

we are doomed

#14 Shawn Allen on 08.11.09 at 11:57 pm

Garth, no argument sub-prime existed here too.

But why has U.S. crashed and Canada not?

Like I commented a couple days ago in Underwater.
The reason for collaspe in the U.S. may be that they usually have the ability to walk away from mortages that are under water and we in Canda don’t usually. (I think we can on so called conventional (but rare) high down payment mortages but definitly not on insured mortages)

Be very glad that in Canada we can’t walk away from our mortgage obligations.

In U.S. walking away has had unintended consequences like Banks flooding the market with walked-away-from houses and driving prices down. Resulting in empty houses driving prices down. When owners ell they try for top dollar. Bank foreclosure process just wants to blow the house out the door and that lowers the price.

Walk aways benefit deadbeats and hurt other home owners.

Another difference, in the U.S. apparently a lot of homes were second homes. Imagine owning two houses each sitting emty an average of half time.

In Canada I am not sure CMHC would be so generaous with second homes.

In the U.S. too, a lot more people bough single faimly houses to rent out. I don’t think that is all that common in Canada. I mean on my street where I lived for the last 14 years in suburb of Edmonton there are 12 houses and none has been a rental in that time.

Thoughts anyone? (and facts would be appreciated too!)

#15 Shawn Allen on 08.11.09 at 11:58 pm

Re my last post.

I do actually know how to spell the word mortgage. But apparently my typing fingers don’t… (silly fingers)

#16 EJ on 08.12.09 at 12:16 am

I always roll my eyes when people brag about our “great lending standards” and scoff at how the US was so stupid and greedy. Just look some of the basics to see how bad it really is:

Peak Average Price:
US: $230,200USD July 2006
CA: $319,757CAD May 2009 (higher now?)

Homeownership:
US: 68.9% of the population (2005)
CA: 68.4% (2006. Probably higher by now)

Median income (PPP):
US: $50,233USD (2007)
CA: $53,634CAD/$44,000USD (2005)

Plus we have a higher taxation rate, which means less income to service a mortgage with. The US allows people to claim a deduction on their taxes for mortgage interest. No such deduction exists in Canada, increasing the cost of ownership.

It took a whole lot of shitty lending in the US to jack the housing metrics up to what they were, yet somehow Canada manages to outdo all those numbers with lower incomes AND prudent lending practices? I’d like an explanation from the lenders spouting this line as to how this is mathematically possible, especially after hearing stories like the one in today’s article.

#17 Tony on 08.12.09 at 12:39 am

The Canada the risk is transferred to the home buyer as the banks will sue countless millions when the true bite of the housing market decline kicks in. In America about 97 percent don’t get sued. The second round of foreclosures in America will kick start the big decline in Canadian real estate both residential and commercial. Canada has a lot of catching up to do as property values need to decline about another 50 to 60 percent to level the playfield with the declines in real estate worldwide. Canada is sitting in la-la land with the real wealth drain on the horizon.

#18 Jon B on 08.12.09 at 12:40 am

So us blog-dogs can see this one is going to probably end badly. A text book living beyond your means scenario. The Realtor knows it’ll probably end badly. The lending institution doesn’t really care how it ends because they don’t have any exposure to risk on this deal (thanks Canadian tax payers). Why can’t this family of six not see the train wreck coming? Perhaps ignorance and stupidity are the true market indicators.

#19 Munch on 08.12.09 at 12:46 am

Wow!

How sick is Canadian society?

How bad will it get?

As kunstler said in his missive on Monday …

“Now that Newsweek Magazine — along with the mendacious cretins at CNBC – have declared the “recession” officially over, it’s a sure thing that we are entering the zone of greatest danger. Some foul odour rides the late summer wind, as of a rough beast slouching toward the US Treasury. The stock markets have gathered in the critical mass of suckers needed to flush all remaining hope out of the system. The foreign holders of US promissory notes are sharpening their long knives in the humid darkness. The suburban householders are watching sharks swim in their driveways. The REIT executives are getting ready to gargle with Gillette blue blades.”

Very, very Bad Stuff coming our way, methinks!

Stay safe!

Regards, Munch

#20 Reality_Bites on 08.12.09 at 12:46 am

The real tragedy is the 12 thousand bucks of someone else’s tax money being shoveled into this domestic catastrophe, supporting overpopulation and suburbia.

#21 Ronaldo on 08.12.09 at 12:56 am

Garth, maybe its time you got on TV and said it like it is. More people need to know what kind of insanity is taking place out there. A family of 6 with poverty level income and they get two mortgages for $160,000 each, no questions asked, unfriggin believable.

#22 No Condo in the 604 on 08.12.09 at 12:56 am

two words on Garth’s latest post: HOLY CRAP. i mean, really: HOLY CRAP!

more words here:

“Personal bankruptcies soar 50%”
http://www.cbc.ca/consumer/story/2009/08/11/june-canada-bankruptcies235.html

“Housing starts in Canada decline in July”
http://www.cbc.ca/consumer/story/2009/08/11/housing-starts.html

“Vancity drops plan to hike line of credit rates”
http://www.cbc.ca/consumer/story/2009/08/11/bc-vancity-line-of-credit-rate-hike.html

and then on Global TV Vancouver tonight, bidding wars, house sells for $200K over asking, the boom is back.

this reckoning is going to be ugly, isn’t it?

#23 davers on 08.12.09 at 1:29 am

Something tells me this won’t end well…

#24 Dave on 08.12.09 at 2:01 am

oh man, we’re in for a disaster. I’m afraid for some people around me who are real nice, but just aren’t up to par when it comes to economics. I feel like saying “sell your fucking house, pocket the cash, and rent for a bit!!”.

#25 Blobby on 08.12.09 at 2:05 am

$1k from the government each month?

WOWZERS! I wish i’d listened to my ex wife and had kids now!

#26 Oh my on 08.12.09 at 2:42 am

OK so I have mortgages in both the U.S. and Canada. Some comments: Canadian Banks by and large stayed clear of buying American mortgage securities, and have a different mortgage lending system. Mortgages in the US (subprime or variable ) were often Libor based, which were heavily manipulated with teaser rates, derivatives, etc… etc…. On the other hand, solvent people there have been able to lock into 30 year rates between 5-6. High next to our variables, but there is not a comparable lock-in rate in Canada. There are hefty fines for breaking mortgages there and absolute headaches that simply don’t exist in the Canadian system, where five year renewals are customary. I agree that we must avoid being blind to “it can’t happen to us” mantra, but we must keep in mind the distinctions between the US and Canada, if we want to properly anticipate what is happening here. It is possibly worse in Canada for the following reasons:
1) People that want long term security are unable to find tenable mortgages despite historically low interest rates. We are simply staving off an inevitable decline for 4-5 years tops.
2)There are no cities comparable to NY to serve as an engine of the economy, it’s not clear if CMHC rescue funds will be comparable to Wall Street buyouts in the US or Fannie-Mae/Freddie Mac. That is, we don’t know how Bay Street would suffer from a Canadian-mortgage based melt-down. Perhaps the Feds can absorb CMHC insured mortgages, but they will hit back hard with taxes, etc… However they will not be able tax properties as this remains within the jurisdiction of municipalities…ie. cities. Again how strong are Canadian cities and their respective financial markets and local governments?
3) The property ladder functions a bit differently here…we have an unprecedented amount of first-time home buyers that are basically baby-boomer children and thus feel connected to a middle class sense of entitlement and affordability. The bubble in the US was in part produced by increasing incentives for minority buyers, as well as entrepreneurship based on a faith in continued raises in property value…again comparisons have to be made between CMHC and Fannie Mae/Freddie Mac.
Can we really compare a Canadian housing melt-down to an American housing melt-down? What does it mean for so many countries to be experiencing the same problem at once…not just the fallout from the American sub-prime crisis, but from their own domestically generated crisis? The answer remains in the oblique truth of how we as Canadians are on track toward generating our own housing melt-down.

#27 Munch on 08.12.09 at 6:30 am

I will say it again!

It will get as bad as it is stupid!

And that’s bad, cozz there’s some giant stupidity out there!

Look up the word “Scotoma” – that’s at the source of this madness!

Munch

#28 Herb on 08.12.09 at 6:50 am

“Loonie Tunes”?

You’ve nailed it again, Garth. Did I ever tell you that you have a way with words?

#29 David Bakody on 08.12.09 at 7:03 am

#2 gold bugger on 08.11.09 at 10:06 pm

Then what Sir/Madame vote Reform/Alliance/Conservative all over again?

On a serious note Garth ….. what say you on the Empire of Illusion by …. Chris Hedges?

My uneducated guess ( plse understand it was all those highly educated people who caused the mess the world is in) our false economy is based on governments spending money they do not have by printing it and giving it to those who can not pay it back and be collected by those who have more than than know what to do with. “The rich are getting richer even beyond their wildest dreams”

Ladies and gentlemen plse note: “Government is big business and big business is government” we (98% or less than world’s people) are mere foolish mortals or ponds in their view to be used as soldiers to fight the winds of war for profit, police the streets, guard their investments and serve there wishes …. nothing changes, nothing changes …. so when things go south this coming Spring ( Big Time with record lows) the middle class will take the hit …. and the ultra-rich will have first pick of anything worth value.

So I will go to Tim’s in my little Honda from my modest home and then for walk and sail on my little ode boat. All of which is paid for which totals less than the new duplex in question above. Did I mention the new shoes I bought on sale (cash) I will have on feet.

#30 Future Expatriate on 08.12.09 at 7:15 am

#2- not a good idea, beyond the criminal aspect of arson. Because, then you’ll STILL be on the hook when the gov bails out the insurance company, which they will do, because only companies “too big to fail” would ever dream on insuring such crap mortgages.

#31 Future Expatriate on 08.12.09 at 7:18 am

#4- What, Harper look satanic?

Why, Lucifer/Satan INVENTED Christianism, the perversion of Christianity by politics.

Bush had the same look. Obama, not so much as he’s an atheist like Cheney.

#32 Future Expatriate on 08.12.09 at 7:20 am

Garth’s next bestseller:

AFTER THE CRASH AFTER, THE CRASH

#33 JO on 08.12.09 at 7:25 am

The great ponzi scheme enabler that is CMHC/NHA and its twin sister CDIC will lead to the end for anyone who has bought a home in the last 4-5 yrs. More tragically, it will also destroy the equity of any homeBUYER who put down 20 % or more, and evaporate the built up equity of those homeowners who have paid off the home. This is the classic end result of blatant government intervention in the economy/markets. The prudent are hurt in order to facilitate the reckless.

Central banking, fractional reserve fiat money, combined with gov’t policy such as CMHC/CDIC, interfere with market functioning and lead to disaster.

This will evolve into a farce. Given the extreme optimisim toward housing among almost everybody, the fall will be harder and faster than anyone expects – think Nasdaq year 2000-2002.

The sad joke is played on savers and renters and prudent home buyers / homeowners. The biggest joke may be played on depositors who have savings or GICs at banks…althouth are banking system is in better shape for now, and probably will not get as bad as the US, we are still in for a serious scare in 2010 onward. I will be watching Cad banks very closely around mid 2010. Manulife, whose issues I did not expect to result in a major dividend cut until at least mid-2010, has provided us with a real red flag.

Short term gov’t of Canada treasuries, and some $ in foreign gov’t short term treasuries, along with some gold bullion, and a sprinkling of index puts is how i am getting ready for 2010-2012. Want safety – think short term treasuries – not savings accounts or GICs.
JO

#34 Samantha on 08.12.09 at 7:27 am

When the walls come tumblin’ down, will the banks sue legions of insolvent homeowners? And the financially challenged would be repaying this debt with what exactly? Goats and chickens? They don’t have money, baby — they have been living “high” on credit, mainlining consumption and getting their fix at big box stores.

Let’s review unemployment stats, wage cuts and the exchange of full time jobs for part time jobs. Oh, and let’s not forget “self-employed,” that wonderful burgeoning category of “no EI/no job/no income purgatory, which includes people who haven’t got a clue about the proper way (or time) to properly plan and set up a business. Who will renew their mortgages?

Do any of you really believe that the banks or other “lenders” involved in this debacle are actually going to lose money? It’s a con and has been from the beginning.

Lending. Bailouts. Numbers. It’s all numbers. I haven’t seen the stacks of cash supposedly hanging in the balance, have you? The bottom feeder elite who are at the head of this conga line are the ones making actual money off this scam.

So, all together now: One, big (sub)primal scream.

There, feel better now?

#35 Justin on 08.12.09 at 7:52 am

Traders Brace For September Collapse

Whether September or October the current rally will be over and round two of the recession\depression will begin.

http://www.businessinsider.com/traders-brace-for-september-collapse-2009-8

#36 POL-CAN on 08.12.09 at 7:54 am

Must watch:

Bob Prechter “Quite Sure” Next Wave Down Will Be Bigger and March Lows Will Break

http://finance.yahoo.com/tech-ticker/article/299205/Bob-Prechter-%22Quite-Sure%22-Next-Wave-Down-Will-Be-Bigger-and-March-Lows-Will-Break?tickers=%5EDJI,%5EGSPC,SPY,DIA,QQQQ,%5ERUT,BGZ&sec=topStories&pos=9&asset=&ccode=

#37 no risk risk on 08.12.09 at 8:02 am

These poor rats are actually shorting the market. They buy the houses with no money with assumption that houses will go up. Once the house value do go up they sell for a profit. It’s no different than shorting in a stock market; even worse this is naked shorting, they have no money at all. 0 down. The 5% recent change is garbage. The loop hole is the 5% is so little it doesn’t prevent anybody from taking a risk. Even the builders willing to give the buyers 5% to let them get a mortgage. Everybody can play innocence and say they didn’t know any better…Eventually in the end all tax payers get a thumb in the behind for standing still

If all we do is whine on this blog is no use. We need to go on a riot and show the government we are no REAL fools!

#38 Al on 08.12.09 at 8:02 am

I bet this couple makes some under-the-table income that will help balance the situation. They may not actually go under, but the kids will live in a very stressfull household. Think of the children! :)

#39 Justin on 08.12.09 at 8:11 am

#21 Ronaldo – Reposting from one of Garth’s earlier entries

It’s called an asset deflation trap.

i.e. It is a planned event by the globalist elitist banksters (B.ofC.) in conjunction with the Government of Canada. It is designed to destroy Canadians main asset class…the Home.

Unfortunately, the Greatest Fools which have recently purchased are ensuring that the collapse will be that much more devastating.

Note: Investors will again flee to liquidity this fall and the U.S. dollar will strengthen. Oil will move downward for the above two reasons although this is unlikely to benefit the economy very much especially here in Canada….things are getting very interesting!

#40 dd on 08.12.09 at 8:23 am

#7 Nostradamus jr.

“…It’s different in Vancouver.”

The clown speaks again.

#41 Jonathan on 08.12.09 at 8:34 am

Sounds like this couple is taking money under the table (unregistered income) and that way they continue to rake in government supplements. That’s great to know that our hard earned incomes are taxed and given to those who aren’t taxed.

Young couple earning 24K has a 220K property plus 160K downpayment… definitely doesn’t make sense. 100% they are in the black market with something.

#42 Fred on 08.12.09 at 8:42 am

Garth;

A question that maybe you can answer (or my statement that you can confirm)…I thought CMHC insured the value above the 25% point….so on a $200K house (let’s assume a 5% down-10K), with a $190K mortgage, CMHC (Gov Can, and by that meaning the Citizenry) insures $40K…..any loss from a precipitous drop in RE values above will hit the banks, investors and whoever holds the mortgage securities. Granted such a drop might seem unrealistic in some markets, but in others it’s highly possible and one can never estimate the value of a house when/if it gets to a POS situation.

???

In effect we seem to be setting the scene for our own Fannie Mae/Freddie Mac failure, and a possibility to drag a bank or 2 along over that cliff.

#43 Jonathan on 08.12.09 at 8:59 am

Shawn Allen,

US home prices are falling towards their historical average. Another 10-15% fall and they will be there. Having said that they could fall below the historical average given how damaged the market is. Foreclosures is the catalyst.

Canada just needs a catalyst to deflate but instead the fed upped the stimulus big time.

In the states foreclosures upped the supply of homes because people could walk away. That you are right. But one would think that if you could simply walk away from your house, that you would have no problems gambling by buying during a downturn. Afterall if your wrong and US home prices hadn’t hit bottom and you lose, then you can just walk away. So the banks ask for 30-35% down to prevent that from happening.

In Canada you can’t walk away. You have to go bankrupt. Total default. That too has issues if housing takes a similiar downturn. Thanks to CMHC, people may still be able to buy with 5% down during the downturn, but is that a good thing? (duh – no). They will go into negative equity much quicker than Americans. Furthermore, instead of 350,000 foreclosures each month, you’d see the equivalent of 200-300,000 bankruptcies (1/10th in Canada). That’s people with a bankruptcy on their record – that would kill the economy for years. They will be unable to be home buyers for years further deflating the market. Furthermore, Canadian buyers won’t step in to brake a downturn since they can’t simply walk away from the property if the market continues to decline. Therefore, as Canadians tout themselves as risk adverse, then the bottom in Canada would be much lower than the states.

#44 Grantmi on 08.12.09 at 9:08 am

NJ

“Besides, 95% of residential property purchased here is foreign owned/bought…paid full in cash.”

Are you on crack or what?

Please.. I live her in Vancouver… you keep confirming that people here are nuts! Please! Go to Dr. and get cleansed!

#45 Mathew Gibson on 08.12.09 at 9:24 am

I am disappointed (though perhaps not surprised) to see so much negativity against this family. They may be deluded into thinking this is a wise financial decision, but this doesn’t make them bad people. Having only one child I remain amazed by people who have the energy to raise four. Clearly, these are not meek people. They may, in fact, be raising their children extremely well (though likely without financial literacy, but then few of us are). The benefits they receive from fellow taxpayers represent a fraction of the expenses and lost income that the children represent to this couple, and these four children will grow up and become the future taxpayers we now all need to power our economies for when (if) we retire.

#46 Fortress on 08.12.09 at 9:44 am

RBC, summer, 2007:

Turned us down for $225,000.

We had $50,000 cash in the bank, no debt other than one car payment, my wife showed an annual income of $35,000, me $16,000 (I was a graduate student then). They would only do it if we put all the cash toward the mortgage.

TD bank, summer, 2009:

Qualified us for MAXIMUM $250,000 (with 35 yr-am, fixed rate only!).

We have $20,000 downpayment.

I make ~$65,000/yr, full time job, my wife on contract making ~$35,000/yr, with fabulous prospects (will soon be $50,000/yr full time).

FICO scores: 785 (her), 784 (me)

And you’re telling me the banks aren’t tight?

(btw, ING recently approved $280,000 for us, variable rate)

#47 LS on 08.12.09 at 10:13 am

@41, Johnathan

I’m surprised you’re the first one to notice this. It jumped out at me when I read their story. If they have no income, how the hell do they own their duplex? I suppose it could be from an inheritance though.

#48 Larry on 08.12.09 at 10:20 am

As i mentioned before, the financialy prudent will be screwed by this RE bubble. My ING savings account dropped from 3.5% to 1.2% and i know i will be paying for these idiots when the shit hits the fan. I have no respect for bankers, real estate agents and global media.

#49 Bill-Muskoka (NAM) on 08.12.09 at 10:28 am

Here is a concept from the Old Days that should be revived immediately.

Step back in time

Twenty cubby holes lining the wall of the slaughterhouse are a testament to the days it was run as a co-op with 20 families in the community of Eady.

“This is hopefully a learning centre,” said Wayne Scott. “The people who came before us had to work together. If they didn’t work together, they didn’t survive.”

Obviously before the ‘I’ and ‘Me First’ generation took over society. Funny how that is, eh?

#50 dontcallmeshirley on 08.12.09 at 10:31 am

Frustrating isn’t it?

What do these folks know that we don’t?

How about:

1. 9-10% unemployment hasn’t even scratched housing. It has to be something like 20% – not likely.

2. Canucks can’t casually walk away from a mortgage, or else they’d be garnished until crossing over to the other side (even longer, there’s probably legislation in the works). Meaning if you’re in the game, you’re in for life.

3. Interest rates need to move a lot to bust people or get them into bankruptcy. A lot = 10%+. Not anytime soon – you’ve all seen what CMHC and the BofC can do.

Unfortunately the best we can hope for is stagnant housing prices – a significant decline isn’t in the cards.

#51 confused and a little crazed on 08.12.09 at 10:32 am

hi guys,

what’s to prevent the govt from buying more mortgage securities from the banks and issuing another 50-60 billion bailout. Right now the US fed are talking an extending the historically low rates for the remainder of the year. CAN will follow …monkey see ..monkey do.

#52 crs on 08.12.09 at 11:13 am

I have to think the notion that interest rates will never go up because people won’t be able to afford them is absolute nonsense. I can appreciate that the politicians will try to keep them low for as long as possible, but the consequences for doing so are inevitable. Eventually we will pay, and we will pay dearly. Already I see many government programs being cut, and taxes being raised. Next up, interest rates, then the true Olympics bill. If I have to pay more taxes to bail out irresponsible homeowners I will leave Canada. What country is the best destination I wonder? Who was hit the least by the housing bubble? Who has a strong GDP and would hire a western technical professional?

#53 crs on 08.12.09 at 11:23 am

Oh, I have to add one more comment, I find it funny how people’s forecasts change so rapidly. Months ago, so many people were on board with the notion that the bubble had/will burst. Now the notion is that we have hit a bottom or even that we are on track to a recovery. The irrational upward motion is making it quite apparent to me that the worst has yet to come. Until attitudes change (and a lasting change, one that will last for generations) we haven’t hit the bottom.

#54 malbadon on 08.12.09 at 11:31 am

Well, I gotta give them props for having their 220k duplex paid off on an “income” of $36,000. Either they are the most amazingly frugal people on the planet, mommy and daddy bought it for them, or the other unit is their grow-op.

#55 miketheengineer on 08.12.09 at 11:39 am

I bet the real rate of the unemployed is more near 14% in ontario right now. I have never ever know as many people as I do now who are out of work. At this rate we should be at an effective unemployment rate of 20% by Xmas.

Sorry I don’t have numbers for this, and I don’t trust the government numbers, cause they don’t track the discouraged, and those dropped off EI.

Get your heads together, this is going to get interesting, before xmas.

A huge mess is starting to unfold States side. I don’t get half of this stuff, since I don’t really follow it all. But if even half of it is true, it is going to affect us too.

http://www.youtube.com/watch?v=URqfzU3PqOw&feature=channel_page

This will not be good for real estate.

Mike

#56 rory on 08.12.09 at 11:41 am

Hi all …just was at a blog site http://fairpensionsforall.blogspot.com/2009/08/pension-dust-up.html#comments.

We need to get this guy some more traffic on his site and raise the profile as this is a hugely important subject – pensions…he is also spot on about – “In reality the fight is public sector unions against the taxpayer”

This is another bit…

“The Toronto Star reported on unions in an article called Myths and reality of the union movement. The article cited a few myths that the unions live by.

unions do not represent the entire working world. They are only interested in defending the wages and benefits of their members, most of the time at the expense of other, non-unionized, workers.

even though they may claim to support the interests of children, students or patients, in reality there always is a demand for better wages or benefits behind almost every dispute.

they live in isolation. Most of the time, their demands are made with no consideration for the conditions of other workers in the same country, not to mention the reality in other parts of the world.

The unions cannot understand the anger that is directed at them?”

I have stated before on this site that the ‘haves’ will be coming to the ‘have nots’ looking for more money to keep the ‘haves’ pensions solvent and gold plated. The RE fight is us all against the economy. The pension fight will be between individuals…this fight will be ugly.

It has the potential to make the private class sub-servant to the public class…IMO.

#57 MenWithHats on 08.12.09 at 11:55 am

Laugh of the year :

Con-bots expect electorate to reward them with a majority for their masterful handling of the economy .
ROTFLMAO
And the Canadian ship of state has almost reached the bottom of the ocean as it sinks.

#58 Alberta Boom on 08.12.09 at 12:11 pm

Why aren’t we just congratulate them and wish them well instead of pity them? They’ve done well for what they got.

#59 john m on 08.12.09 at 12:31 pm

Actually this couple probably have no worries…4 kids giving them a government handout of $12,000 per year and the potential to increase that income every nine months by $3000 could certainly help them weather a mortgage rate increase (:-) ).Ah yes this is a great country to live in Harper’s vote buying schemes have been second to none.

#60 S on 08.12.09 at 12:37 pm

Okay I’m a little confused how these CMHC insured mortages work. Two years ago, an acquaintance bought a $505,000 house with $50,000 downpayment, so ~10% down. Does this mean he was CMHC insured? Two years later, the bank has foreclosed on the house since he’s been unemployed and unable to pay the mortgage (and being self-employed he, like thousands others, doesn’t show up in unemployment stats). The house isn’t worth as much anymore as it used to be (basically got destroyed) – will he be on the hook for the difference, or will CMHC cover it?

On another note, the lender who approved the mortgage should be shot. He didn’t have to verify any income when he got it, and never made much money to begin with. Was relying on rental income from roommates to help with the mortgage.

#61 john m on 08.12.09 at 12:42 pm

Curiously as is usually the case when things go bad one never had the opportunity to look at the future and the result of our actions.Today we can look to the US and see the result of subprime lending with little or no qualifying and see what our future has in store for us……….and people are gobbling up that easy money……that is stupidity beyond comprehension.

#62 MenWithHats on 08.12.09 at 12:43 pm

There is evidence to suggest that mortgage lenders in the US were lending up to one hundred and twenty four per cent of the mortgage value .
This allowed the victims to buy all the toys to fill theor new homes .

#63 Peter Wiener on 08.12.09 at 12:50 pm

#50 dontcallmeshirley

ya right, Canada is immune to everything that economically affects everyone else on the globe despite the fact that we participate in world pricing and markets.

Don’t worry, I wontcallyou shirley, I’ll just call you anillinformedeconomicsimpleton.

and don’t bother with a rebuttal ’cause it is awfully evident you can’t muster the intelligence to think critically and you will just end up embarassing yourself like you just did in your last posting.

you are like the guy who jumps from the 90th floor and when passing the 20th floor windows on your way down you are thinking …”so far, so good”

hope you haven’t reproduced and don’t plan on it

#64 Andrew toronto on 08.12.09 at 12:52 pm

It only gets Worse for the U.S

WASHINGTON — Stagnant unemployment, shrinking tax revenue and a struggling economy threaten to quadruple the size of last year’s federal budget deficit, raising more questions about the timing of costly proposals to overhaul health care.
As the White House and Congressional Budget Office (CBO) prepare to release new deficit estimates this month, several economists say the news is likely to be as bad as or worse than forecasts.

http://www.usatoday.com/news/washington/2009-08-10-deficit_N.htm

#65 Vancouver_bear on 08.12.09 at 12:59 pm

I personally know a FTHB family of 4 with 1 one source of income of 40k, they got a 300k mortgage….isn’t this nice? And they had no property and very shy downpayment. Mortgage they got was from one of the major banks. I tried warning them of the danger, but was treated like I was crazy…. 300k mortgage was so affordable for them. The time will show…And this is not different here in lower la-la-land.

Nostri, just for your info…. looks like you have never been farther then DT Hongcouver. The population of the state of California is greater than population of all of Canada. The “wealthy” asian population in California alone is 10 times of what we have here in the whole province of BC and almost 4 times greater than in all of Canada. Use google for self education and stop posting your nonsense. Wealthy ppl will not pay even 1 dollar over the price they should not pay, only stupid ones do. I know for the fact that wealthy ppl hate parting with their money and that’s why they are wealthy. Only fools pay the high prices we have here for shacks.
Anyway, as someone said that education is a bargain at any price.

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

http://www12.statcan.ca/english/census06/data/highlights/ethnic/pages/Page.cfm?Lang=E&Geo=PR&Code=59&Table=2&Data=Count&StartRec=1&Sort=3&Display=All

#66 Andrew toronto on 08.12.09 at 1:00 pm

Price Wars In Canada

The Globe and Mail is reporting Price wars grip Canada’s grocery stores

Inflation is unwinding and, according to the country’s largest grocer, sales volumes in the sector are starting to decline. Now Loblaw Cos. Ltd. has signalled it’s ready to drop prices on thousands of products to keep customers coming to its stores. Its rivals vow to remain competitive, which could spark a price war.

Last week, Loblaw slashed prices by between 10 and 25 per cent on about 3,000 products in its stores in Atlantic Canada. This week, Loblaw followed suit at its Zehrs stores in the hard-hit region of southwestern Ontario, while also providing a 10-per-cent break to unemployed people shopping at those outlets.

“We’re not prepared to lose market share,” Dalton Philips, chief operating officer at Loblaw, said in an interview Monday. “You’ve got to keep current and you’ve got to be prepared to fight to keep strong. We have no intention of backing down and not retaining our No. 1 place.”

http://globaleconomicanalysis.blogspot.com/2009/08/deflation-hits-porn-industry-canadian.html

#67 Peter Wiener on 08.12.09 at 1:00 pm

to #50 supplementary

have you never heard of the term “economic bubble”?

do you not realize what goods the the bubble is in doesn’t matter, that it is the resolution that is ALWAYS the same – collapse.

funny, you believe real estate always goes up (historically and factually disproved repeatedly), but you don’t believe that bubbles always burst (historically and factually proven repeatedly).

Guess you gotta believe and talk your book – sign of the truly desperate and intellectually inept.

#68 David on 08.12.09 at 1:07 pm

I just love those statements from Canadian bank economists that keep getting repeated in the media time and time again. Canada’s banking system is the envy of the world. Financial prudence here prevented the debacle now unfolding south of the border. If banks in other countries like Washington Mutual and the Royal Bank of Scotland had been as well behaved, none of the global financial crisis would have occurred. So far the rhetoric has not been tested against reality in any meaningful fashion.
A family unit of 6 souls subsisting on poverty level incomes should either not be buying a house or, if they do, then the house should be priced in the 5 digit range with a single mortgage. Instead they get two mortgages for a property ostensibly priced at nearly 10 times annual gross family income and 330 times monthly rent.
Through great foresight, the Canadian banks have managed to pre-nationalise this potentially toxic debt courtesy of CMHC. Nice to know that Joe Schmuck taxpayer is now a counterparty with an insurable interest on all these wonderful mortgage assets.

#69 Barb .. a reader in Calgary on 08.12.09 at 1:08 pm

So Garth, in the greater scheme of orchestrations, does this blind government think, in the disastrous fall-out of what they are causing, that they will later ‘come to the rescue’ with OUR tax dollars — and thereby ‘look good’ and therefore buy votes for themselves?
Or do they just dumbly still dream-on that free market everything still works? Or both?
How naive will Canadians continue to be? How many more naive animals will be caught by these trappers?

#70 JOJO on 08.12.09 at 1:11 pm

Welcome to Canada,
EJ on 08.12.09 at 12:16 am
I always roll my eyes when people brag about our “great lending standards” and scoff at how the US was so stupid and greedy. Just look some of the basics to see how bad it really is:

Peak Average Price:
US: $230,200USD July 2006
CA: $319,757CAD May 2009 (higher now?)

Median income (PPP):
US: $50,233USD (2007)
CA: $44,000USD (2005)

Plus we have a much,much higher taxation rate, which means less income to service a mortgage with. The US allows people to CLAIM a deduction on their taxes for mortgage interest. No such deduction exists in Canada, increasing the cost of ownership. In Canada MUCH HIGHER PROPERTY TAXES,INSURANCE, CAR INSURANCE is 3 times HIGHER in Toronto,Brampton Area than Buffalo,NY. Food,services and living expences
20% -30% higher than USA, and property price is 3-5 times more expencive in GTA than Detroit,Buffalo (USA). Currently US providing $ 4,500 cash for clunkers also the same program exist in Europe (Germany,Austria, etc ).
From ALL western world in 2009 Only in Canada we still have rising RE prices,property taxes (so what kind of recession and what benefit we got).
AND after overspending and goverment debt now we have to pay more taxes and higher interest rate, living expences much higher?
For what benifit canadian worker has to pay more taxes and interest to banks and goverment?
Did we get cheaper houses, or less taxes than USA, or any program as cash for clunkers?
Any benefit for Canadian worker ?
We are the biggest exporter of Oil to USA and why we have to pay more for gas than US consumers?
Huh, politicians and bankers in Canada are the “BEST”.
We don’t need new immigrants next 5 years we need
new economic standards to protect labour and middle class in Canada. Did you ever watch Australian or New Zealand immigration standards? Do you know how many years you should be resident in USA or Europe to obtain their citizenship?
Garth you are “proffesional” politician could explain why the Canadian worker should pay more in the future and why over 400,000 workers had lost jobs within 10 months? DO we need more immigrants in near future?
From 1988 we got over 5 million new immigrants mostly during recession 1988-1996? Why?
Because big guys need Cheap labour and higher housing prices? What you did as politician in Ottawa for protection of Canadian workers, seniors and people what builded this contry?

#71 MenWithHats on 08.12.09 at 1:44 pm

Statistics Canada says overall contractor prices for new homes fell 0.2 per cent on a month-to-month basis in June after a 0.1 per cent decline in May.

The agency’s New Housing Price Index was down 3.3 per cent from June 2008, with the largest declines registered in Western Canada

Vancouver saw the largest month-to-month drop — 0.9 per cent from May — as some builders cut prices to promote sales and clear inventories.

“When you wish upon a star”

#72 Dean on 08.12.09 at 1:46 pm

Let’s not forget the role the speculators and investors play in this. Long before you see homeowners defaulting you’re going to see these people trying to cut their losses and dump properties. Even the builders with fairly deep pockets have a point where they’re going to pack it in.

A lot of investors keep things highly leveraged on credit because they can write off the interest. It’s an encouraged practice to yank the equity out to invest in other properties. A lot of people have been convinced to buy a new house with their equity and rent out their existing one. It’s not really a bad idea, unless prices might drop. A sudden drop in price or increase in rates could cause a stampede for the exits. We may collectively be in denial about a US style meltdown, but I doubt it would be long before we see the sheep turn into bears.

#73 jube jube on 08.12.09 at 2:08 pm

CMHC wil end up like AIG. Too many bad loans. Canada’s lending is a bit tougher, but at the same time, no income qualifiers are still common, especially for the self employed. Big loans for people how in reality, make 1/8th of the money they disclose on the application. When rates jump 2 points, thats when itll get ugly!!

#74 Home prices fall a record 15.6% on 08.12.09 at 2:23 pm

http://money.cnn.com/2009/08/12/real_estate/record_home_price_fall/index.htm?postversion=2009081210

#75 Jeff Smith on 08.12.09 at 2:36 pm

Hey guys, Toronto home prices have found the bottom. So now its going to keep going up, right Mr. Wong!

http://www.yourhome.ca/homes/article/679977

#76 Herb on 08.12.09 at 2:46 pm

# 56,

er, Rory, there are a few questions you might have asked yourself (or that Star weekly columnist) before leaping on his anti-union horse and galloping off in all directions:

1. If unions “are only interested in defending the wages and benefits of their members”, how does this differ from corporate ownership/management that is interested only in inceasing or defending profits and value for shareholders (and itself)?

2. And if they defend their wages and benefits, how do they do so “most of the time at the expense of other, non-unionized, workers.” What wages and benefits would exist in the proivate sector if unionized workes had not led the way in securing them? For that matter, how do you explain the emergence of unions at all? Right on one point, though: unions “do not represent the entire working world”, but only 30% of non-agricultural workers, see http://www.hrsdc.gc.ca/eng/lp/wid/union_membership.shtml.

3. As to using the subterfuge of other interests (children etc.) to pursue their own, or having no consideration for others, it’s the way of the world, Rory, the way of the world. Just look at politics!

So we have corporations and unions pursuing their own interests without regard to the common good. Are you going to ensure the common good by abolishing unions? Would it perhaps be the job of government at all levels to look after the common good?

By the way, Rory, I do believe that workers with access to “gold-plated” public service pensions (including municipal workers) should not have the right to strike. Normal unions strike and affect business operations and profits. Public service strikes affect the common good. No one should have the right to hold the public hostage. Especially over bankable sick days.

#77 jess on 08.12.09 at 2:56 pm

the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to

$1.25 trillion of agency mortgage-backed securities
up to $200 billion of agency debt
buying $300 billion of Treasury securities.

by the end of the year. In addition, the Federal Reserve is in the process of To promote a smooth transition in markets as these purchases of Treasury securities are completed, the Committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.

#78 Mike Hunt on 08.12.09 at 3:20 pm

It ain’t gonna stop anytime soon either… not in Canada. Low interest rates for many more years. The weakening US dollar will give our gov’t even more reason to try to inflate our economy out of this malaise and debase our dollar.

Garth, I hate to say this, but I think you will be saying this crash is coming for many, many years to come as you have been for the last two (ish?) years. Our gov’t, banks, BoC, CMHC and other co-conspirators/contributors are all too coordinated and have have way too much power/control and will keep this charade going for a long time.

How? Just like they put another $74B on our tab last year without asking anyone, they will continue to do WHATEVER it takes. I see no convincing argument to the contrary, unfortunately…

#79 Nostradamus Le Mad Vlad on 08.12.09 at 3:35 pm

First, a very good and well-written spoof of life in the UK.

http://www.thedailymash.co.uk/news/environment/gm-food-could-devour-crows%2c-claims-benn-200908111971/
——
Sitting on a cornflake, waiting for the crash to come (John Lennon plagarized the lyrics from my song “Eye Iz Knot The Walrus), I vaguely contemplated a couple of issues, comparing e = mc2 to a reservoir full of frozen, botox-filled zombie-numbnuts.

Turns out there is little difference between anything at all down here, so I meandered along with a combo. of leafy green bamboo coconuts, canned Eskimo stew and scare tactics for the lions of this world, which slightly corresponds with these two:

http://www.youtube.com/watch?v=6B9gAdKGDsI&feature=related

http://www.youtube.com/watch?v=Lkm2WGTX220

“The HST.” More accurately referred to as the Happy Sex Tax!

“Until now. . . . But so much for economics.” — I ‘spose Snow White and the Thirteen Leprechauns are working elsewhere now, as Zombiewoofs are MPs of the day!

5:13 clip of hyperinflation, but forget the ‘hyper’ word. See the relation between precious metals, fiat currencies and the like. —
http://www.eclipptv.com/viewVideo.php?video_id=6800&title=Hyperinflation___Germany_1923
——
A new franchise opens today in Kelowna. Called Fatburger, it lends its’ name to Kelowna’s motto of: “Our Bubbles Are Bigger Than Your Bubbles!”

With all the economic fuddle-duddle happening so quickly now (one part of the overall mess), mass confusion leads to conspiracy theories galore (all taken from posters’ and my links, along with some other stuff):

“. . . International Swine Flu Conference that will be occurring in Washington, D.C. Aug 19 – Aug 21, 2009 . . .” — After this is over, life becomes quickly convoluted.

Following the Aug. 19-21 Conference, a major US and / or Cdn. bank starts singing the blues big time, then goes under which leads to the nine day “Bank Holiday” (Sat. – Sun. – Mon. – Fri. – Sat. – Sun.).

Really good time to have $5 – 10K in cash around the home, also have $20K (or so) in silver coins as a back-up.

During this govt.-induced panic, Martial Law is brought in to give them sweeping powers and full control over everything (incl. mandatory vaccinations).

Come Fall ’09 or Spring 2010 the “Surprise” (false flag) arrives. A new and contrived 9-11, which may lead to WW3, but take into account Sunday, Dec. 23, 2012 when the Mayan Calendar ends (the Axtec and Incan Calendars follow at later dates).

So, the poles become the equators and vice-versa in a shift that no one can figure out because of the speed it happens, ‘quakes, volcanoes etc. then pull ourselves up by our bootstraps to start all over again!

Further down, see what the US (and probably our) govts. are allowed to do.
http://www.freedomfiles.org/war/fema.htm

http://thehill.com/leading-the-news/governors-oppose-dod-emergency-powers-2009-08-10.html

http://www.roguegovernment.com/Army_National_Guard_Recruiting_FEMA_Camp_Or_%22Internment_Resettlement%22_Specialists/16714/0/13/13/Y/M.html

#80 Ontheshore on 08.12.09 at 3:53 pm

Where is the common sense ehh?

Robert Shiller seems to have a grass roots understanding too…I quote…

“During a boom, people considering getting into asset markets weigh the fear of regret if they don’t against the pain of possible loss if they do. There is no authoritative answer about what the “right” decision is, and no consensus among experts about the proper level of exposure to these markets. Should it be 30% in stocks and 70% in housing? Or the reverse? Who knows? So the ultimate human decision must be based on the relative salience of these discordant emotional factors. In a boom environment, the emotional factors are biased toward getting into the market.”

Shiller is worth reading…check out his postings on…

http://www.project-syndicate.org/contributor/498

#81 charles on 08.12.09 at 4:01 pm

Go on out and get yourself some lotery tickets but do not check them. Remember, you are still in the game until you know you’ve lost.

#82 North Van Dude on 08.12.09 at 4:07 pm

@ #78- dude, grow up and change your moniker- no one’s bloody laughing….for the umpteenth time, the govt may do “whatever it takes”, but it cannot do what is actually required. Please understand the difference. They will do all they can, but it will not be enough, because in the end, they do not decide what interests rates will be. The bond market does that, and the piddly interests of a 35m person country (the same size as California) will not influence how interest rates behave.

I think you and Hal Smith really need to go to wikipedia and study this before you post again about your friends riding to the rescue…

here’s a primer for you..
govts are broke-need to raise money- but too many of them are broke and need to raise money all at the same time. They raise money by issuing bonds and paying interest on the bond. Right now the interest is low….but the debts the govts have created need to be paid- so borrow more by issuing bonds. But prospective buyers for bonds will have many govts competing for their business- this will drive up the yield on the bond. ceteris paribus, the bonds with the highest yield will sell, forcing govts to keep pushing up the yields, or be faced with no buyers for their low-yield bonds and no way to pay the interest on their debt and to raise money.

Thus, Canada will be forced to raise the yield on its bonds. If the govt is forced to pay higher interest on their bonds (ie their debts), so too will Canadians pay higher interest on their debts . It is biological in its connection.

#83 jess on 08.12.09 at 4:11 pm

http://cop.senate.gov/reports/library/report-081109-cop.cfm
The Continued Risk of Troubled Assets

MORE STRESS TESTS COMING

#84 dontcallmeshirley on 08.12.09 at 4:25 pm

#63 Peter Wiener

Ouch! Hey pete, you really hurt my feelings. I finished grade 11 on the second try…summer school helped…nevermind…I don’t want to dwell on the past.

More pertinently, you epitomize the frustrated bubble hater.

The only weakness this current bubble is exposed to is interest rate. And it ain’t that much of a weakness.

The G can expand the money supply, just as they have for 20 years (look it up on the BofC site), and hold that pesky rate right where it is. Our dollar is ~90 cents so there’s plenty of room in the trunk if you catch my drift.

Yeah of course this sucker will burst, but it will be in years.

#85 Peter Wiener on 08.12.09 at 4:33 pm

# 78 Mike Hunt

Sure buddy, whatever you say. Do a little historical research about what you are talking about and base it on some facts, not your “feelings”.

There was no NASDAQ bubble, no Dot.com bubble. no property bubble in the Western world and no one lost a penny! Nah! The “GOVERNMENT” made it all better – ya, right!

You say the “GOVERNMENT” controls everything. If you believe that they are all powerful in this country, you’d better move out of Canada, cause what you are describing is FACISM pal and you can’t make much of a living under that system unless you are part of it. Hey, on the other hand, your level of historical economic ignorance should qualify you to be at least a thug in the new regime, should you not be able to find gainful employment elsewhere.

Get a grip Mike. Are you that profoundly stupid? Really?The boys in Ottawa are not like you ( I am assuming to your benefit that you are a decent human being who gives a shit). These lo-interest charades are a naked attempt at retaining power at all costs and you are empowering them in their quest by believing in them and theri ‘powers’. They just are are not that smart nor even competent enough to pull it off even if they knew what they were doing in the first place. Ever heard of the 2 BILLION dollar boondoggle called the ‘Gun Registry’ (now abandoned after spending 2+ BILLION and nothing to show for it). Same competence level.

But don’t take my word for it, ask Garth. There are few more loathesome occupations than that of a politician and particularly Canadian politicians. Too bad some of these shitbags didn’t end up on Picton’s pig farm. They may yet, God willing!

#86 hal smith on 08.12.09 at 4:38 pm

DO YOU GUYS REALLY THINK that the government will let interest rates rise far enough and fast enough to collapse this economy? NOT A CHANCE. They know EXACTLY what is going on and they will do WHATEVER IT TAKES to keep this bubble inflated. It is going to be painful only for the savers and for future generations but they WILL NOT LET THIS END because it would mean the DESTRUCTION OF THE ECONOMY and maybe even the country.

#87 rory on 08.12.09 at 4:44 pm

#76 Herb

First, let us divide unions backed by govt’s and those of corporations. As a shareholder I do not have to own a company I feel has uncontollable unions or benefits …as to govt’s I have no choice.

So, govt’s have no real fear of the general taxpayer as we are too fragmented to mount any credible attack …unions are not fragmented.

Therefore, when a union demands concessions or have its pension plan topped up in bad economic times what happens – govt’s cave because it is easier to rob Paul (us) and pay Mary (unions) + all the policy wonks will be looking out for #1 which also have gov’t pensions …jeez.

That is my biggest problem and us ‘Pauls” seem to be able to provide unlimited funds to the gov’ts for the benefit of not the people but of the employees and unions… while my RRSP is not topped up or guaranteed by anyone yet I am supposed to dig deeper to pay for bad investing of bad bargaining by some ‘goofs’ somewhere – give me a break.

Also, when times were good, gov’t gave it away as was easier than fighting …now that the economic pendulum has swung for the private sector the public sector just wants more.

Yes, the unions are doing what they are paid to do – get more for their members but look at the temper tantrum when it does not go there way …so I would welcome gov’t intervention to make defined pension and defined contribution plans equal + make up my short-falled RRSP…ya think that will happen.

Herb, dig deep, as you can count on it, they will rape you until no will or money is left.

Fairness to all.

#88 Denis on 08.12.09 at 4:48 pm

A view into the future? Anyone want to take bets that the Canadian Gov and/or CMHC will have to start a similar program? The US government’s solution to the the “Under water” post from 5 days ago.

http://freefrombroke.com/2009/08/underwater-refinancing-making-home-affordable.html

Another tool in CMHC’s future toolbox? http://makinghomeaffordable.gov/

#89 My_view on 08.12.09 at 4:48 pm

#70 JOJO

“In Canada MUCH HIGHER PROPERTY TAXES,INSURANCE, CAR INSURANCE is 3 times HIGHER in Toronto,Brampton Area than Buffalo,NY. Food,services and living expences
20% -30% higher than USA, and property price is 3-5 times more expencive in GTA than Detroit,Buffalo (USA).”

The GTA comparison is spot on, I’m packing and heading to Detroit! LMFAO

#90 Bill-Muskoka (NAM) on 08.12.09 at 4:58 pm

Go on out and get yourself some lotery tickets but do not check them. Remember, you are still in the game until you know you’ve lost.

#80 charles

Well said, and isn’t that the truth?

#91 Mike Hunt on 08.12.09 at 5:08 pm

@ #81, dude, with all due respect, put down the bong and get a clue. You are basing your argument on logic, which doesn’t work when the PTB can and will do illogical things. Things like steal from the future to for yesterday’s mistakes and today’s desires.

I agree that this will all come home to roost at some point, but it will be much later than we all expect, mainly because the PTB will continue to behave like we live in a banana republic with it’s own rules that they are more than willing to change on a dime. That, combined with the fact that Canada is full of complacency when it comes to voting in our “leaders”, they will continue treating us like a red-headed freckle-faced step child.

Re: my name, bite it. No need to get personal.

#92 Marc on 08.12.09 at 5:13 pm

Too bad some of these shitbags didn’t end up on Picton’s pig farm.

#84 Peter Wiener on 08.12.09 at 4:33 pm

Wishing people dead is pretty low. You can make a point without resorting to that kind of comments.

#93 Jeff Smith on 08.12.09 at 5:16 pm

#7 Nostradamus jr. on 08.11.09 at 10:41 pm

It’s all simple really…

…It’s different in Vancouver.

Mortgage rates will never go up beyond affordability threshold here because people cannot afford the payments if rates rise too high.

Besides, 95% of residential property purchased here is foreign owned/bought…paid full in cash.

duhhh
********************************************

I hope they didn’t rob their impoverished country’s treasury for that cash. Or worst, run a massive smuggling ring robbing their impoverished country of the needed tax revenue. So they can invest that money in your lalaland wankouver and drive up the price of real estate over there.

But wait, maybe it’s a good thing they are investing in wankouver. Because hey when the sh*t hits the fan and it surely will, all that ill-gotten money will be funneled back into the global economic system where is should belong. What goes around comes around.

#94 kc on 08.12.09 at 5:17 pm

Interesting breaking news today off the east coast…

Canada monitors Russian subs off East Coast

http://www.cbc.ca/canada/story/2009/08/12/russia-submarines-canada-surveillance025.html

Has anyone given much thought to what is going on in the rest of the world? Think about what was a missing staple during WW2… steel, iron, copper, rubber. they called it the war effort to scrap old metals for making ships and planes. these base metals are one of the needed ingredients for war. Now think about this, the talking heads say that China is hedging thier US dollars in base metals…. Somehow I am more in the leaning they are stock piling for bigger and better things than a new housing boom. Russia and eastern Europe are in some desprerate times. China is pretty much fed up with US policies. Food for thought.

#95 hal smith on 08.12.09 at 5:19 pm

#81 North Van Dude

Enough with your bond market already. You have no imagination. These guys will pour gasoline on your children and set them on fire to keep this thing inflated. Nobody want’s their bonds? Print more money and buy ’em yourself. The USA is already doing it if you haven’t noticed. We are all gonna do the same thing, it’s been agreed upon. If we all do it whose currency will fall into disfavor? All of them of course but none of them in particular so the beat goes on. Where you gonna go? The rupee? The yuan? The peso? Not likely. Who wins? We do. Who gets hosed? Bond holders like China, Russia, the rich gulf states…..and who gives a shit? What are they gonna do about it? Think about it dude it’s not as crazy at it sounds. These guys are DESPERATE.

#96 Justin on 08.12.09 at 5:24 pm

Hal smith # 85

Point well taken.

However, it isn’t the Government that dictates interest rates; it’s the Private Central Banks i.e. Bank of Canada, Federal Reserve, Bank of England etc., etc.

Rates will not have to rise very much to begin the carnage, perhaps 2 or 3 percentage points.

A rise in interest rates will be necessary to attract buyers to already “highly inflated fiat currency” in many nations (Remember. the currency is not backed by Gold or Silver…simply faith).

Also, all of the excess liquidity being created will have to be sopped up to avoid hyper-inflation once the deflatinary fears have expired. The timing of the above is the only thing in question but we could say….more sooner than later.

#97 jess on 08.12.09 at 5:34 pm

History Rhymes?

Rogers C. Caldwell founded Caldwell and Company in
September 1917 to market southern municipal bonds. Few investment houses considered southern bonds a good risk because of their historic default rate. This placed Caldwell and Company in a unique position to benefit from the dramatic demand for capital to finance southern construction projects in the post-World War I era. The firm grew rapidly and by 1930 was the largest investment banking house in the region. The firm’s abrupt collapse in November 1930 produced severe financial repercussions throughout the South.

A key factor in the expansion of Caldwell and Company was the Bank of Tennessee, founded by Rogers Caldwell in 1919. Under depository agreements with bond issuers, the company deposited proceeds from bond sales with banks it selected until the funds were actually needed to pay for construction costs. Caldwell and Company channeled the funds into the Bank of Tennessee and used this capital to finance expansion of the business into other areas.

With a ready supply of capital, Caldwell and Company grew dramatically. The firm opened numerous branch offices–there were fourteen by 1925–chiefly in the South. The firm entered other areas besides securities, buying insurance companies, banks, industrial concerns, retail businesses, oil companies, and other businesses. Caldwell and Company also expanded its bond operations into the private real estate market, underwriting construction of office buildings, apartments, and hotels.

By the late 1920s, however, Caldwell’s company was experiencing serious financial difficulties. Unknown to the public, the company had never followed normal financial and business practices. Caldwell charged off his lavish lifestyle and personal expenses to the company, and the firm had incurred massive debts with its acquisition program and had inadequate cash reserves.

As the company’s difficulties mounted, Caldwell became increasingly involved financially and politically with Luke Lea, owner of the Nashville Tennessean and a major force in state politics. Caldwell and Lea purchased controlling interests in Holston National Bank in Knoxville and the Memphis Commercial Appeal and the Knoxville Journal. As a result of Lea’s influence with Governor Henry Horton, Kentucky Rock and Asphalt, a Caldwell-owned company, bypassed competitive bidding and supplied building materials for state highway projects.

In the 1928 governor’s race between Horton and Hill McAlister, Lea’s and Caldwell’s relationship and business dealings with Horton’s administration became major campaign issues. Horton won the election, and Caldwell and Company continued to receive preferential treatment from state government. The company sold large numbers of bonds to finance state highway constructions and deposited the funds with the Bank of Tennessee.

After the stock market crash of October 1929, Caldwell and Company’s position became increasingly desperate. The firm remained afloat largely because it continued to receive state deposits. On November 7 state examiners audited the Bank of Tennessee and declared it insolvent. This action immediately brought down Caldwell and Company and unleashed runs on other Caldwell-controlled banks across Tennessee. On November 14, 1930, the company went into receivership.

Fred Colvin, Middle Tennessee State University
http://tennesseeencyclopedia.net/imagegallery.php?EntryID=C003

#98 Peter Wiener on 08.12.09 at 5:37 pm

#83 dontcallmeshirley

Hey buddy, no offense intended re your educational limitations, just trying to get you to think, that’s all.
And part of that thinking is that “…a little knowledge is dangerous…” – and you have just that, a little knowledge and no history of the context.

I am a developer and therefore, contrary to your assumptions, have not been frustrated in the least by this bubble, but rather have done well financially because of it.

I have SOLD every piece of RE I own in the past year and a half and have no intention of buying again EVER in the context we find our country in today.

I grew up in Canada and I’m afraid I’ll be leaving soon as I can’t abide what I see going on around me and I certainly don’t want my money supporting it. What you are detecting in my writing is my disgust and contempt for a country (Canada) being the biggest country in the world (by land mass) in which a person has to spend 7 times the average income to buy the average house and that no one buying a home in Canada understands how that math didn’t work in the US at even 5.3 times their average incomes (despite paying way less tax).

Hey, I get it, people are dumb.

Just don’t tell me that Cdn politicians can do anything they want and the rest of the world will play along.

Look at Dubai, where the government really and truly (scarily) controls EVERYTHING – their housing market average price is down 48% (not a typo) IN ONE YEAR. The Dubai government has been setting rates and doing even more things than what you allude Canada does to in your post! Didn’t stop their market from imploding now, did it?

I have 25 years in serious finance and asset markets -as a Prinicpal, not as a broker. That means I put my money, not someone else’s, on the line. When you do that day-in, day-out, you learn what reality is very quickly. The Cdn RE market ain’t reality right now for anyone prudent.

#99 Peter Wiener on 08.12.09 at 5:46 pm

#90 Marc

that is my point, dummy!

If and when you wake up and see the TREASON that has occured in this country by its leadership, you’ll want blood too.

#100 Peter Wiener on 08.12.09 at 5:47 pm

#80 charles

kudos
very well put

#101 Peter Wiener on 08.12.09 at 5:58 pm

#85 Hal Smith

Hey buddy what are you doing on this blog?

You have it all figured out now!
Borrow, beg or steal all you can and buy as much real estate as you can carry – it’s easy, you don’t need any downpayment.

JUST THINK – You’ll be rich!

(SARCASM OFF)

#102 nonplused on 08.12.09 at 6:07 pm

I realize there are always tangents on a blog response page, but rage against children? Come on folks. Who do you think is going to change your Depends in a few years?

So, to clarify a few things:

Canada is overpopulated with boomers, not kids.

The child credit is part of the plan to see that they aren’t starving. Assuming they become tax payers one day it should be a good investment.

People are part of the environment, not separate from it. We might be a bit of an infestation or plague, but like the grasshopper we have every right to exist.

Too many people been drinking the “down with humanity except for me” potion.

#103 Peter Wiener on 08.12.09 at 6:09 pm

#85 Hal Smith

DO YOU REALLY THINK……….at all !

Go out and party like the politicos want you too buddy!
Make sure you have a hell of a time, cause at the end – you- are stuck with the bill for it AND THE CLEANUP for the rest of your life. Sucker!

There, don’t you feel smart now?

#104 BRIAN on 08.12.09 at 6:12 pm

Has anyone given much thought to what is going on in the rest of the world? Think about what was a missing staple during WW2… steel, iron, copper, rubber. they called it the war effort to scrap old metals for making ships and planes. these base metals are one of the needed ingredients for war. Now think about this, the talking heads say that China is hedging thier US dollars in base metals…. Somehow I am more in the leaning they are stock piling for bigger and better things than a new housing boom. Russia and eastern Europe are in some desprerate times. China is pretty much fed up with US policies. Food for thought.

——————————————-
Hey kc #92,

cash for clunkers… scrap the old cars… melt em down and build some war machines!!!

or, maybe they’ll build a “great wall” of cubed cars to keep the russian subs from getting too close.

#105 wetcoaster on 08.12.09 at 6:12 pm

Garth,

I sent a request to the Michael Campbell show that they have you on as a guest versus the Ozzie Jurrock one sided “hot property in TimBuk2 ” pump talk they have every week, but they replied that they don’t think Mike’s a fan of yours. What a joke ! Didn’t know you had to be a fan of the host to get on the airwaves,now we know who calls the shots.

This shows has people on from both sides of the coin on all other world markets but apparently not when it comes to Vancouver real estate. No bubble there eh ? Just keep those $200,000 overbids coming folks, it’s La La Land after all and we got a few more ski jumps to build still.

#106 Peter Wiener on 08.12.09 at 6:22 pm

#93 Hal Smith

Who wins? Who gets hosed? What are they going to do about it?

Let me take a wild guess, you don’t have a clue about sovereign finance or much else do you? Why don’t you go back to watching American Idol, your brain is obviously not up anything more challenging right now.

#107 Scott on 08.12.09 at 6:30 pm

I’m generally impressed with the level of discussion on this board…but the antipathy toward this family is bizarre.

Simply because they own a house, they are assumed to be criminals? As someone mentioned, there are things called inheritances…or maybe a family member gave them the money.

To the poster who wants to start breeding to collect the $1000/month…if you think you can raise 4 kids on $1000 a month, you have no clue. And this amount is only available to families under a certain income threshold.

To the poster who complains that the government is supporting families….check out the concept of negative birth rate. If you would like to grow old in a society with no young people (and hence no economy or tax base), then by all means encourage government to make it even harder for families to get by.

#108 Barb .. a reader in Calgary on 08.12.09 at 6:37 pm

#76 Herb

Great post, Herb. Clear, fair, thoughtful, balanced and well written. I couldn’t agree with you more. It would be nice if more people would take in the bigger picture.

#109 David Bakody on 08.12.09 at 7:00 pm

Housing is fast becoming the Super Used Car deal for governments …. ever figured how much tax they collect on car a that has been sold over & over again? Hello it would seem once the tax is paid the first time that should be it!

#110 X on 08.12.09 at 7:02 pm

Where’s Le Mad Vlad?

#111 X on 08.12.09 at 7:05 pm

I heard Deflation happen somewhere….

http://www.financialpost.com/news-sectors/story.html?id=1885936

#112 john m on 08.12.09 at 7:05 pm

Some of the comments on this blog about how no matter what happens the Government won’t let the economy crash should really give their heads a shake! Reality is we are deeply in debt and going deeper by the second……….WE are all making the payments on this borrowed money—-the real economy is worse now than it was last October…….our government spent billions on bailout schemes to the very same people that are largely responsible for the state of the economy today and promoted the practices that got us here………..they failed dismally and they know it…but actually has anyone ever heard our one man government admit he made a mistake about anything? ……the days of the “tooth fairy” are rapidly coming to an end——things really aren’t that different in Canada with one exception we had an opportunity to make things different and recognize the mistakes of others –our powers that be did not!

#113 Dan in Victoria on 08.12.09 at 7:20 pm

…..Evidently I should seek new employment any suggestions?Don’t be too hard on yourself.I admire someone who has principals and sticks to them,thats a rare quality now a days.I’ll tell you a little story from 20 years ago.I had a half built spec house for sale,a young couple came to me and wanted to buy it.They wern’t really ready to grow up yet.They didn’t quite have enough for a down payment,etc etc so me being a soft touch and wanting to see a young couple “get ahead”I let them perform some sweat equity on the house,they had to paint it,landscape it,and a few other menial tasks,and I dropped the price by the real estate fee and the other work.So….I went over to get them started on the painting….Yikes…disaster 911 so ended up spraying and helping.And yes all the other things turned into a disaster.Well then they couldn’t keep up on the payments(was like 700-800 a month).Anyhow they ended up losing the place,I shouldn’t have “helped” them out cause 20 years later I still feel guilty about what happened.So, you can chalk that one up in the good column.Hey, don’t forget Garth got crapped on for what he thought was right.Nothing wrong with high moral standards.

#114 NKVD Black Raven on 08.12.09 at 7:26 pm

The parents are arrogant firing the mortgage broker. Clearly they have little understanding of what they could be getting themselves into. Perhaps too, they are just using the ‘child factor,’ to further their own cause. Pity the children then, thought of as dollars & cents and not as a precious investments of society..

#115 blueskies on 08.12.09 at 7:38 pm

ay off topic but oh so pertinent….

“Olympic Gold”

farther! faster! greedier!

Olympic rentals slow off the mark

The website “rent2010.net” has so far rented only 15 per cent of the 1,200 properties listed

sell your condo NOW!!!!

#116 jess on 08.12.09 at 7:40 pm

subsidies

August 12, 2009
By Frances Barrick, Record staff
A Waterloo regional program geared to helping low-to-middle-income earners become first-time homebuyers is continuing for two more years, with a twist…

“The significant change is, it cannot be resale homes. It has to be a new home,” said Deb Schlichter, regional director of housing

This is how the program works:

An eligible family will receive a loan for five per cent of the down payment to a maximum of $11,550.

A family who lives in the home for at least 20 years won’t have to repay the loan.

But homeowners who sell before then must repay the down payment, plus five per cent of the increased value of their homes.

To be eligible, applicants must:

Qualify for a mortgage.

Have a maximum household income of $69,500.

Be 18 or older and be a legal resident of Canada.

Not be a current homeowner.

Information about the program can also be obtained from the region’s website at http://www.region.waterloo.on.ca/aho.

#117 MenWithHats on 08.12.09 at 7:57 pm

Government cheques for the children brings another $12000 into the household.

Some one ? Any one ?

#118 The Great Gazoo on 08.12.09 at 8:06 pm

#93 – Hal
Hey man I am not an e”con”omist but I do remember the running joke in an eastern european communist country before it collapsed – after you make “dirt” it is cheaper to “wipe” yourself with paper money than actually go out and by toilet paper. Government debt driven by the cold war arms race is principal factor in demise of USSR.

In conclusion they got into too much debt, printed too much money for the same reasons as mentioned here and then next thing you know you’re going to the washroom with a handfull of paper bills.

Propaganda watch for today:

– Bernake: how are we in a recovery when you’re keeping interest rates low? Low interest rates are used to encourage consumer spending…

– my dearest Toronto Star: whats with the press release about housing recovery stabilizing (I thought this was established a week ago during the monthly real estate reports).. this release on the same day all media announced new housing prices are down despite recent propaganda about record sales..

#119 john m on 08.12.09 at 8:32 pm

#84 Peter Wiener on 08.12.09 at 4:33 pm ………..lmao

#120 Duane on 08.12.09 at 8:50 pm

Don’t forget that banks don’t report mortgages to the credit bureaus. It’s surprisingly easy to tell a lender that you have no other mortgage commitments when you’ve really got about 5 houses. 1 or 2 houses without the renters coming through for a couple months can crash everything for this speculator. Lenders have little way to find out if you have a mtg or not.

#121 confused and a little crazed on 08.12.09 at 8:58 pm

85 hal smath ,

The country won’t collapse nor will the econ. If the % rates go up, the real estate will suffer and their nice and cozy jobs will be gone. They don’t care about the long term costs…that’s the other guys problem They can ‘t find a creative solution that would involve understanding something…researching but that’s take work . Their only skill is talking and writing alot but saying nothing ( baffle gab). CAN has suffered war , recession and we will survive this but they are just making it much more painful and longterm.

just try to remember them as to not vote for them again

#122 lgre on 08.12.09 at 9:17 pm

I find it funny that some on here still believe that big bro is going to save the day, the government will try whatever it can..but, it’s not going to last. There are a lot of factors involved..printing money and incentives are a all fine and dandy for the short term, The disaster waiting to happen is growing larger, while the buffoons think that their stimulus packages are actually going to save the economy from a total cleansing.

#123 CalgaryRocks on 08.12.09 at 9:19 pm

1. If unions “are only interested in defending the wages and benefits of their members”, how does this differ from corporate ownership/management that is interested only in inceasing or defending profits and value for shareholders (and itself)?

Yeah, rory was refering to public sector unions. And the difference is that taxpayers are obligated to pay for the union workers’ inflated salaries, pensions and silly benefits through their taxes.

These same taxpayers work jobs that require much more education, longer hours and pay less with barely, if any, benefits.

Yes, I realize that we are now bailing out banksters so you don’t need to point that out, as 2 wrongs STILL do not make it right.

#124 Mike Hunt on 08.12.09 at 9:46 pm

@Wiener #84

Listen, Wiener – there’s no reason to get in a huff and become offensive. Grow up and learn how to make a point without being a horse’s arse.

Regarding your limited scope of understanding, you spew out all that textbook stuff like you completed your MBA last year and haven’t had time to fully appreciate how that textbook stuff plays out in the real world. (I did mine about 15 years ago, by the way, and have a relatively decent grasp of financial and economic “theory”, but, I’m always willing to learn something new).

Now, if there’s one thing that we all should have learned over the last while is that sometimes what is supposed to happen in “theory” doesn’t always happen in “practice”. This is one of those times because the people that we are letting control the economic and financial levers are not playing by conventional rules. Rather, they are breaking most of them and further contributing to this bubble by stealing from the future to pay for past mistakes and current desires.

I did not say anywhere that the gov’t controls everything or that there weren’t any bubbles in the past. Rather, what I am saying is that by intervening too much, the gov’t usually makes things worse than better in the long run. In our current example, the Canadian PTB are working together to reinflate our housing bubble further than it already was for their own self-serving interests (i.e., to get re-elected) and they will do it for as long as they can (or as long as we let them).

You must also remember that what happens in the markets is a result of what the participants in said markets think and do. Our governments are participants in the bond markets today more than ever and if you don’t believe they are contributing to the outcome, think again. The US Fed is doing it already by buying up their own treasury offerings. Heck, our gov’t did it indirectly by taking $74B of toxic mortgages off our banks’ books last year. What do you think would happen to bond yields if Bernanke’s Fed wasn’t there to sop up all that supply that Geitner’s treasury is putting out? These are examples of what you would expect to happen in “theory” being trumped by the “reality” of the PTB messing with the levers that shouldn’t be messed with.

If you think about it for a moment, you would realize that we actually agree with each other, we just disagree with the timing. You seem to think that interest rates will shoot up quickly. I think they will stay low for years as the PTB will continue with their shenanigans thereby delaying the inevitable. Interest rates will rise, just not for years to come…

#125 Don't Believe the Hype on 08.12.09 at 10:12 pm

We are in a deflationary period. Central banks fight this by increasing the money supply to create inflation, then hoping they can get it under control by cranking up interest rates. It is far easier to fight inflation than it is to fight deflation.
People should plan on paying 8% on their mortgages in a few years – if you are squeezing yourself into a 3% mortgage now, then you will get screwed.

#126 ottawa pete on 08.12.09 at 10:12 pm

Anyone with me to ban the phrase “Give your head a shake”?

#127 Boombust on 08.12.09 at 10:22 pm

“I sent a request to the Michael Campbell show that they have you on as a guest…”

Oh, puhleeze. Don’t waste your time! Silly!

#128 Pat G on 08.12.09 at 10:33 pm

Peter Coupland #13 and Reality Bites #20

Hi Guys,

Regardless of the efforts of the parents to improve their situation – maybe with a bit of myopia, their kids need some help to grow up eating healthy food and getting a decent education so they can pay taxes to take care of you in your declining years and to keep the economy going. What are you doing to help fill the coming deficit in the workforce? Are you under twenty-five?

#129 taxpayer like you on 08.12.09 at 10:42 pm

Barb/Herb

I don’t think Rory is against unions per se. He, like me, is deeply concerned about gold-plated public sector union pensions, and the confiscation of our wealth through
taxation to prop them up.

I believe the biggest myth of unions is that of “protecion”.
Unions cant protect their members from nonwork-related illness, they cant protect them from a fall in the price of their house, they cant protect them against their employer going bankrupt (GM and public sector excluded)
and they cant protect the value of their pension assets.

Union pension members already enjoy a huge advantage over non-union. There is constant drain in the range of 1-
2% on regular citizens RRSPs due to fees. These are either much lower in the case of large pension funds, or are paid by the employer. Compounded over 20-30 years, this can make a huge diff in the value of a pension.
But hey, I’m even willing to work a little harder and give
a little more to make up for that.

But they are certainly not entitled to special protection at my expense.

#130 Sanchez on 08.12.09 at 11:02 pm

Mike Hunt…just to expand on your point. The U.S. gov’t is buying Treasuries on the open market (part of their ‘quantitative easing’) on securities with longer maturities than the traditional maturities; it’s just part of their open market operations capability (through bids by their primary dealers). Whether or not this plays into future inflation is unknown and still too early. It’s an old monetarist notion that an increase in supply necessarily leads to inflation(or that it goes to prices). I agree that rates will be super low for a long time. Fed funds rates are at (near) zero (no action there). You can see some of the easing effects with providing banks with excess reserves (some claim are being used to buy longer term maturity notes…pushing down yields across the different terms).

#131 Peter Wiener on 08.12.09 at 11:25 pm

#122 Mike Hunt

1. I am not in a huff and if you are truly offended, then grow some thicker skin (just so you know, I am laughing most of the time I’m posting and enjoying it, otherwise I’d do something else).

2. None of what I have posted is ‘theory’. The fact that you obtained an MBa for business experience instead of starting a business tells me all I need to know. I have hired and fired many an Mba and all they knew was ‘theory’ (read post #96 re my backgound).

3. How long do you think QE (Quantitative Easing for all you old MBa’s out there)will go on? Bernanke today announced an end to it by October because of the punishing the US dollar has been taking. Why do you think China is pushing for a new ‘reserve currency’ – co-incidence? Why do you think the IMF is getting ready to get involved in the UK’s problems. See, there are consequences to fiscal and monetary stupidity, just give it a little time.

4. Currencies and economies do not operate in a vacuum, not even in China. As a result, do you not think that investors are aware of the central banks’ shenanigans and that is the reason these countries have to buy their own paper back? NO REAL INVESTORS WANT IT AT THOSE LOW RATES. THE MORE THEY PRINT, THE LESS IT IS WANTED. If the Fed continues to monetize, all demand disappears – lots of better places to put capital. Then what? Huh?

5. I have never mentioned anything about interest rates being a catalyst for anything or even commented on where I though rates would go or when. Don’t put words in my mouth, please. Interest rates are not the only pin available to prick the bubble and I for one, am not counting on that.

6. The US RE market imploded as interest rates DECREASED. The Fed has held rates to all time lows, there is an US $ 8,000 credit for first time buyers, all sorts of cheap financing available, all sorts of help to finance, no money down options,etc. AND STILL THE PRICES KEEP FALLING WITH RATES ACTUALLY LOWER!!!!!!!!!!!!!!! It isn’t about rates, its about the proportion of national income devoted to housing expense. Simply not sustainable in a modern economy to spend too much on shelter due to all the competing needs for that take home pay cash flow.

7. I don’t own and have no intention of owning a house even though I can quite literally buy ANYWHERE on this planet (I have the means and the ability). Ownership is just not commercially sensible at this time for me, though I suspect in a couple of years, I’ll be buying and at a LOT lower prices regardless of location.

Bottom line, if you disagree, that’s cool. It’s not about being right for me, its about the money and preserving it for aquiring better values. Accordingly, in good conscience, I won’t buy now as I personally think things will be much cheaper in future and many details affecting house pricing such as property tax hikes, interest rate expectations, etc. will be known. My belief is that there will be even less money left for shelter costs than before, making homes even less affordable.

A good way to look at it is this: – if house prices in Canada fail to fall nominally from here, then a McD’s burger goes to CDN $ 8.oo from approx CDN $ 4.oo within 5 years or less along with everything else except houses, prices of which should stagnate at best.

#132 Jason on 08.12.09 at 11:39 pm

#81 North Van Dude

Do you remember the big push for enrollment into the payroll deduction program for CSB’s late in October 2008?
http://csb.gc.ca/?page_id=69

I don’t recall hearing about this previous years, but my girlfriend and I both received emails from our respective employers the same week.

I think many Canadians were duped into this program at the most opportune time. Hats off to our kind and thoughtful government on that one.

#133 Davinci on 08.13.09 at 12:21 am

I see you deleted my comment, that’s cool if you read it Garth, what did you think?

Interesting, but too profane. I actually hear women read this blog. — Garth

#134 Mike Hunt on 08.13.09 at 9:14 am

#130 – you really are a Wiener, aren’t you? Regardless, I will respond to your points for the benefit of our fellow blog-dogs.

1. Your language suggests that you were in a huff and have trouble controlling your emotions. This behaviour makes sensible communication difficult as you needlessly try to offend people to try to establish superiority. Problem is: it always backfires and people just end up thinking you’re, well, a Wiener…

2. Wrong. Most of what you posted is theory. And nowhere did I say I got my MBA for business experience. I did my MBA after working for several years and decided to upgrade my education (always willing to listen and learn) – and it paid back in spades. I now own a merchant bank which owns and has owned many businesses and, unfortunately, I have fired many people, as well (some MBAs, some not). A key difference between you and me: it never made me feel good or more important and no one should derive pleasure from that. BTW, it is post #96, not #97 where you describe your background. Attention to detail is important, son. Pay attention, or you’re fired… ;-)

3. QE can last for a long, long time, kid. Especially when you live in Canada where the gov’t can do things without asking anyone any questions. Anything to get re-elected, it seems. And re: Bernanke’s comments from yesterday, ever heard of something called “spin”? Let’s talk again in October and see what happens in practice…

4. You keep ignoring the reality of the situation. Again, pay attention. Re-read my earlier post, and think this time.

5. You are contradicting yourself. This time, re-read YOUR earlier posts, and pay attention. You know what will happen if you don’t… ;-)

6. Agreed, it isn’t only about interest rates, but it sure makes people feel a whole lot wealthier and feel like they are able to afford way more house when interest rates are at all time lows. Keeping them there using unconventional methods only delays the inevitable.

7. Agreed, other than the fact that I likely couldn’t afford a house anywhere. There are limits to my financial resources. Congratulations to you for being wealthy enough to buy “literally ANYWHERE on this planet”. With all due respect, however, I find this hard to believe. (Free advice from me to you: cutting back on the hyperbole will actually help you make a better argument and make you look like less of a wank).

Bottom line, I don’t disagree with all of what you are saying, I just disagree with the TIMING (and your disrespectful tone – it brings out the worst in me). Again, re-read my prior posts and pay attention, Wiener, or else… ;-)

#135 taxpayer like you on 08.13.09 at 11:11 am

130 Peter said:

“A good way to look at it is this: – if house prices in
Canada fail to fall nominally from here, then a McD’s
burger goes to CDN $ 8.oo from approx CDN $ 4.oo
within 5 years or less along with everything else except
houses, prices of which should stagnate at best.”

Well after all your ranting, maybe you finally got Mike and Hals point.

I do agree with them that the government will try any and everything to inflate out of this bubble. How far can they take it? Not so sure.

#136 Peter Wiener on 08.13.09 at 2:02 pm

# 14 taxpayer like you

First of all, look up the definition of a rant.

Second, you should be thankful that well informed people like myself not only post, but take the time to flesh out ideas that foster thought and discussion and do it based on facts and not “feelings”.

Thirdly, neither Mike Hunt, Hal nor you for that matter seem to understand that if a McD’s burger doubles and wages and houses do not, that in fact houses have gone DOWN in relative value and due to these higher food prices, etc., houses are less affordable as less money is available for shelter.

Fourthly, you, like some others on this blog seem to react to my writing style in a very negative way, often missing the point and taking issue instead with my form of expression. I don’t take it personally. I guess some people are more interested in form than content.

After months of reading this blog and in good faith trying to add something to the susbstance of it from time to time, I realize that all I’m doing is inadvertantly antagonizing people who can’t comprehend or read what I’m writing and thereby wasting my time. Accordingly, I doubt I’ll bother posting again.

#137 Peter Wiener on 08.13.09 at 2:03 pm

sorry, should be for #134 taxpayer like you, not #14

#138 Peter Wiener on 08.13.09 at 2:46 pm

re # 133 Mike Hunt

Thank you very much for your post. I’ll explain later in this post.

Your comment #7 from post #133 brought it all home for me. I am in no way exaggerating my financial capacity, but you assume that I am for some reason. It was not bragging, just a statement of fact that preceeded my position that although I could afford it, I’m not buying now anywhere though I can. I post truthfully and in good faith as I expect others to do and it is not received that way nor respected. Perhaps I am too trusting and naive to think this way. Silly me.
I really can’t exchange well with people under that circumstance, so I simply won’t in future.

Also in point #2 you make an awful lot of assumptions about me. Factually, you know nothing about me, but put a lot of perjoratives out there throughout your post nonetheless that SPECULATE on the nature of my charachter.

If you own a SUCCESSFULL merchant bank, shouldn’t you be able to spend at least several million on a home even if you can’t pay cash? Yet you doubt you have the resources? Perhaps you’ve suffered a set back or two. Hmmm. Talk about hyperbole!

The reason I am grateful to you is that you have reminded me that I am wasting my time here. As you mention very late in your post “…..(and your disrespectful tone – it brings out the worst in me)…”; I am getting criticized for my ‘tone’ by a guy that admits he is hot under the collar while posting. It is a great endorsement for my decision to not post here anymore.

#139 Confused on 08.13.09 at 3:06 pm

We sold our home recently in Calgary. We have decided to rent and watch for now, but now we have this equity in our home that we need to do something with. We have been burned by an investment with Concrete Equities and must admit we are nervous about who is trustworthy out there. Any suggestions?

#140 taxpayer like you on 08.13.09 at 3:19 pm

137 Peter – Sorry if we lose you.

My interpretation to your comment 130 “with everything else except houses” was that wages would also increase
at least in part lessening the burden of existing personal debt.

Oh and if you are a developer – my hats off to you. You have more courage, vision and entreprenurial skill than I will ever have. Really. I run a small business that often
works for developers.

#141 RS Seattle on 08.13.09 at 4:36 pm

So I have homes in the US and Canada which gives me some experience and thus qualifies me to offer an opinion.

Some of the comments here are misinformed. One example is how Americans can just “walk away” from the houses/debt obligations. In the US there are purchase money loans (original loans when you buy). They are considered “non recourse” which means creditors can only come after your house if you default.

You can technically walk away, but you’ll still destroy your credit for the next 7-10 years like a bankruptcy.

If you refinance or have a HELOC in the US, it is a recourse loan which means creditors can go after all your assets over and above your homestead exemption including the house you walked away from to your savings, non qualified stocks accounts etc. So your credit is obliterated and your other assets are in jeopardy.

Canada banks don’t have any competition. The American ARM is the equivalent of the variable to “fixed” rate mortgage in Canada.

When one talks about fixed rates in the the US, you’re looking at 15 or 30 year fixed. Huge difference between those and the 5 year “teasers” there are in Canada.

So fellow Canucks, please don’t be too smug about how great the Canadian banking system is. The Canadian consumer/citizen will be left holding the bag and not the banks much like what is happening in the US banking system.

I was very young at the time, but I remember family friends and stories from Calgarians in the early 80’s after NEP was implemented and oil collasped. Many people left keys in the mailbox and walked away from their “staggering” 50 to 60K mortgages b/c they were so underwater from their house that went down in value to 20 to 30K.

Perspective, people. Inflation is human nature and time mitgates most risk. Not saying it won’t be rough but if you can afford the time, everything will be fine.

For every forclosure, there is a person who is lucky enough to be buying that forclosure relatively cheap.

#142 lili on 08.13.09 at 10:07 pm

#56 Rory…

If your anti-union sentiment is for real then you are being most effectively used a tool. No, the union rights are well deserved as they have been fought for and won. You have not been as successful because you negotiate your rights and wages in a non-collective fashion. The CEOs are the ones that do this effectively, not the regular working person.

The desire of the middle class to smash unions is a misplaced beligerence that is better aimed at the elite and ruling class. If you do not believe in an elite and ruling class, then you might consider reading something Canadian by Pierre Burton called the Great Depression; it will show you what kind of reality you are rooting for.

We are all regular working people. You deserve more pay perhaps, which is probably more viable than reducing others’ pay to suit your situation.

#143 Mike Hunt on 08.13.09 at 11:29 pm

#137 @Wiener

A quote from you: “I don’t own and have no intention of owning a house even though I can quite literally buy ANYWHERE on this planet (I have the means and the ability).”

So, like, that’s not an exaggeration at all? You could “quite literally buy ANYWHERE on this planet”? Do you know what that means?? I will help you understand: it means anywhere, as in here, there, anywhere! I bet we could go for a 15 minute drive from my current home (happily renting, for now) and find many, many properties in the $15 million to $20 million range – could you afford those homes??? How about a nice villa in Monaco for $50 million – could you afford that? Because, that’s what you said!

And trying to blame everyone else because they “can’t comprehend or read what [you’re] writing and thereby wasting [your] time” – well, that’s just childish. Grow a set and take some responsibility for yourself. It is not up to everyone else to interpret the things you write the way you interpret them in your own mind. Rather, it is your job to write in a comprehesible and cogent manner such that your point gets made. If it doesn’t, there’s only one person to blame (hint: it’s none of us).

Regarding my assumptions about your character, it is all based on what YOU have written – that’s all I have to go on after all. In this blog post alone, you:

1) called @dontcallmeshirley “[an ill informed economic simpleton]”
2) called @supplementary “truly desperate and intellectually inept”
3) wished people were murdered: “Too bad some of these shitbags didn’t end up on Picton’s pig farm”
4) called @marc a “dummy”
5) asked @Hal Smith “DO YOU REALLY THINK……….at all !”
6) suggested to @Hal Smith: “Why don’t you go back to watching American Idol, your brain is obviously not up anything more challenging right now”
7) had some choice condescending words for your truly, as well.

What am I supposed to think about the character of someone that writes these things to people he doesn’t even know? I’d hate to know how you treat people you do know. Are you married? Kids? I feel sorry for them if the answer is yes.

Regarding my SMALL merchant bank, we’re doing just fine, thanks. Some of our portfolio companies had their share of difficulties through this poor economic climate, but we will survive. I hope you don’t gain pleasure from my misfortunes, by the way – they say that schadenfreude is the eight deadly sin!

Good luck to you, sir.

#144 LB on 08.16.09 at 12:56 pm

Peter Weiner & Mike Hunt:

The exchanges between you two make this blog!

It is obvious that beneath the barbed repartee,you are kindred spirits who respect each other, albeit with differences that could be resolved over a beer.

So,hopefully, by establishing a few ground rules we all learned in kindergarten,you will BOTH continue to enlighten us with your obvious intellects and expertise to give we plebians a heads up on what to expect in our financial futures – we sure ain’t getting it from the politicians or financial “leadership”.

Unite,dudes.

#145 Peter Wiener on 08.16.09 at 6:55 pm

re #142 Mike Hunt

First off, let’s get this straight. One can buy a place in London, England anywhere from 500,000 to 125,000,000 pounds. If I bought a place in London for 500,000 pounds, I would have a place in London. One can buy a place in Monaco for as little as 650,000 euros, it doesn’t have to be a castle or villa -and voila you are an owner. Tokyo, Singapore, Mumbai -wherever you like, a couple million CDN $max gets you an abode.

Think about it for a minute, genius, how could anyone (other than very well-to-do) afford to live live there if it was otherwise? I travel regularly to major international cities and, as RE development is part of what I’ve done successfully in life, I generally notice RE prices when I travel.

Read what I wrote and stop wasting your time on trying to catch me out. I did not say that I could buy the MOST EXPENSIVE place, that would be boasting and possibly inaccurrate, depending on the market. What I did say was that I could buy a residence ANYWHERE and I stand by that.

Again, enough of your tedious and desperate bs trying to discredit me. That type of behaviour is really the last bastion of hope (or attack) for the small minded. You have no idea of my financial capacity and yes, as point of fact, I can afford rather a lot. So can a lottery winner-So what! My point was that I can buy anywhere, but I’m not buying anywhere right now based on my RE experience, that is all! I did not mention a price range nor put on a qualification of price- you did. Again, don’t try to put words in my mouth.

My posted comments were in no way meant to be boastful, but rather a personal opinion based on 25 years of land development experience, but perhaps inelegantly or awkwardly expressed on my part. I’m not a jounalist, never professed to be and , hey, I’m not being paid to post here!

Your inability to read, comprehend and be objective in a discussion of this nature – and with a complete stranger to boot – makes me more than a little suspicious about your business experience claims. Your ad hominem attacks, inability to discern attempts at humor or sarcasm (however bad they may be), assumptive reasoning and thin skin exacerbate my suspicions about your business acumen and social abilites as well.

But, enough about me and your attempts at charachter assasination. How about you hotshot? What qualifies are your OPINION or upon what experience are your OPINIONS based? Experience in the industry, the financial end, what? Great success? Pray tell.

As to my personal life, I enjoy it and have a real laugh being mischevious and getting dopes like you all riled up about a conversational topic.

Aside from my little jabs here and there which are not well received in some quarters on this blog, their purpose is to make people stop and think about what they post here and, perhaps while they are not the best way, to make people accountable for their (often faulty) thought processes and concepts.

Mike, face it, you are out of your depth here. You don’t address comments I make to your posting – you come out swinging like a hurt little boy and you sound pissed off, juvenile and insecure. Don’t worry fella – maybe one day your ship will come in! Till then wallow in whatever muck you have made of your life.

Gee, you sound really upset in some of your postings (and you have admitted it); – I sincerely hope things are looking up for you and yours. Sounds like you don’t handle adversity too well.

I await your inevitable diatribe.

#146 slmnv on 08.18.09 at 10:32 am

I am a fresh professional immigrant from developing world living in the east, renting now. I dream to see that RE bubble crash, but the new capitalists escaping from China and other developing countries reside in Canada (they like Vancouver as I learned) and drive the prices sky-high. I can leave Canada and start thinking about this. I would prefer the US where income price ratio is higher. So have nothing to loose so far except my small savings in stock market.

Talking to my fellow immigrants I know how louse lending standards are in Canada. Would it benefit me if I take mortgage that I can not repay, It’s like making a bet with taxpayers’ money, if I loose I do not pay (except small prepayment), if I win and prices go higher – it’s all mine.

Another feeling is that we will not see this long predicted Crash for soooo long that we all tear our hairs in rage for injustice of this world and dumb economy that does not follows the laws and logic.

Finally the crisis is more than subprime and lending. It’s about change of post Breton woods arrangements in the world and the end of free trade which is unsustainable anymore. 3 trillion per year were issue in the USA to finance its’ economy by foreign goods. This dollarization of the world has come to an end and the banks in the US will write down 15 trillion of bad loans, over the many years of course, So think big.

Nice dialect. Most credible. — Garth

#147 Mike Hunt on 08.21.09 at 8:26 am

#145 @wiener

Friend, get a clue (and a therapist). You get upset way too easily and exaggerate a bit too much, which doesn’t lend much credibility to your rants. Nobody believes you.

By the way, didn’t you post earlier that you were taking your toys and leaving this blog for good? Or did I misread that, too???

Good luck and best wishes for “continued” success…