2010

20101

Did you enjoy the housing boom of 2009?

Hope so. She’s done.

Oh, there may be hyperbole & hormones for a few months yet, but come the federal budget of 2010 – that would be in March, about 90 days from now – it looks like the hammer is coming down. This is because we’ve just received the clearest sign yet that the government has awoken with horror to the consequences of its actions. Worse, these guys are now understanding they could well be blamed for making a home into an unaffordable commodity.

So, what’s up?

Well, remember how the 2008 budget at a stroke ended the 0/40 house rush by mandating minimum insurable downpayments of at least 5% and ams no longer than 35 years? Sure ya do. It was a dramatic reversal of policies put in place just two years earlier which had given federal blessing to people with no money who wanted to buy houses. (And in so doing put a lie to the myth we’re any different than the subprime-toting Yanks.)

Looks like it will happen again. Said the finance minister on Friday: “If we have to, we’ll do what we did last year and limit the rate of amortization further than we already did, and require higher down payments.”

JF Jim Flaherty also – for the first time, as far as I can tell – used the ‘B’ word. Upward pressure on housing is to be expected because of cheap mortgage rates, he said, “as long as it doesn’t become a bubble. We’re watching that.”

I’ll bet. It doesn’t exactly square with Conservative-supporting middle class voters being priced out of the real estate market by a flipped-out central bank keeping rates at one quarter of one per cent. Or by young couples with diddly saved who are able to fight bidding wars because they have loans at 2%, thereby jacking valuations to historic levels.

In fact, it’s getting tough to see who benefits in the long run as housing becomes overvalued and buyers get overextended, as household debt races to a new high and mortgage indebtedness explodes. Especially now when a chastened BoC has made it clear interest rates have nowhere to go but up – spelling out disaster when the 5/35 crowd comes up for renewal.

So, Ottawa now gets it. Too late, of course. Horse. Barn. Not to mention the average $931,000 SFH in YVR.

So, this is why, if Carney’s rate-thumping doomer talk doesn’t kill the property drive, Flaherty’s new rules will.

Just imagine if the minimum was 10% down and a 25-year am, combined with Carney’s expected 2010 rate increase of about 1.5%.  That would mean the average home in Toronto, at $450,000, would require a down of $45,000, insurance of $12,000 and LTT of $11,000 for $78,000 cash at closing plus an income of $75,000 to carry it at the cheapest VRM rate.

But then, it wouldn’t be $450,000 anymore, would it?

145 comments ↓

#1 Real Estate Deal or No Deal on 12.18.09 at 9:00 pm

Mirror, Mirror on the wall … when will the bubble burst and give us a great show to watch and vulch … if at all?

#2 Justin on 12.18.09 at 9:01 pm

CIBC’s Avery Shenfeld says fears of consumer debt is exaggerated. Can you believe this crap?

http://ca.news.yahoo.com/s/capress/091218/national/economy_housing

#3 Forbear on 12.18.09 at 9:01 pm

A really interesting look at Canada`s demographics and the coming boomer exodus Garth has been warning us about.

http://edmontonhousingbust.blogspot.com/2009/12/boom-bust-and-echo.html

God help us when all those boomers shift from being major tax payers to racking up health care costs. We`re in a lot of trouble. Taxes are going up or services cut, or more likely, both.

#4 SWM on 12.18.09 at 9:09 pm

If the 5/35 rules were changed to 10/25, what would happen at renewal time?

Could the 5/35’s continue with the rules they signed up for? or would they need to come up with money to bump their 5%down payment upto 10% and then to increase monthly payments?
?

#5 West Coast on 12.18.09 at 9:15 pm

“But then, it wouldn’t be $450,000 anymore, would it?”

And that really is the point isn’t it. There are people making a lot of money with the housing and mortgage situation precisely as it stands and it is not in their best interest to see property values drop.

I is amazing how rarely we look to the most obvious source of a problem – that is who has the most $$$ o gain from the “problem”

#6 T.O. Bubble Boy on 12.18.09 at 9:40 pm

Garth – even with fixed rates, your scenario is impressive:

$405,000 @ 35-yr amortization w/ 4% = $1785/month
$405,000 @ 25-yr amotization w/ 5.5% = $2472/month

Only $700 more per month (after tax), or over $1000/month pre-tax. I’m sure that the $75k/yr earner will magically get a $12k raise in 2010 to buy the same house.

I highly doubt Flaherty will eliminate the 35-yr amortizations, since that would automatically cause a crisis as thousands of mortgage holders try to dump their properties before the 5-year renewal comes due.

I see the increase to 10% down as a more likely scenario, since that only impacts new buyers. Those already in @ 5%/35-yr should have 10% equity after their first 5-year term.

This all assumes that our Finance Minister thinks that far ahead. Since most of his 6-month and 12-month forecasts are so far off, it’s not very likely that he’s got a 5-year plan figured out.

#7 Rich in Calgary on 12.18.09 at 9:51 pm

Garth,

I’m interested in your opinion on whether you think that Flaherty would take the ams down to 30 year max., or would he actually grow a pair and drop it back to 25 years (where it should have always remained)?

By the way, keep up the great work. The blog is one of my favourite daily rituals.

#8 Gord In Vancouver on 12.18.09 at 10:06 pm

I’m disappointed and PO’ed.

I wanted Flaherty to keep his mouth shut and let the market/bubble inflate to a point where it would make the the 2003 to 2008 spike look like a minor blip. Mark Carney ruined my day on Wednesday when he warned Canadians about rising debt.

Let’s all hope that Flaherty’s talk was all hot air and that real estate sales volumes/prices continue their upwards trend.

I say this as the faster real estate prices go up, the greater the carnage/bargains will be when interest rates go up.

#9 Bottoms_Up on 12.18.09 at 10:09 pm

My predictions:
1) Canada’s real estate market remains bubbly in 2010
2) They drop the max amortization to 30 years, but 5% down is still OK
3) The change listed in #2 doesn’t do much because variable rates stay low and people continue to buy houses with 1.5-2% money
4) 2011: variable rates begin to move up significantly, attenuating price appreciation
5) 2012: the Leafs win the Stanley cup
6) 2013: Garth throws in the towel, and the title of his last blog entry is “it IS different in Canada”; Garth then writes a book on how to build a bunker (because of the impending nuclear war with Iran) with a chapter on how to prepare a mean squirrel stew (jj) 8o)

#10 Bottoms_Up on 12.18.09 at 10:14 pm

#3 Forbear on 12.18.09 at 9:01 pm
———————————————-
A friend of mine is a young family doc in small town Ontario. I’ve asked him about our aging population, and the reluctance to increase spots in med school. He basically said we’re Pucked. I’ve done some thinking on this, I think health in the future will largely be a personal decision (where possible), one will have to choose to lead a healthy lifestyle in order to be healthy; the taxpayer/resources just won’t be there to help. We can look to Japan as a model, the most healthy geriatric population than anywhere else in the world (they eat healthy and exercise).

#11 Steady Eddie on 12.18.09 at 10:18 pm

I’ve been waiting to buy a condo in downtown Toronto for 5 years now…. hopefully the wait is almost over.

If Flaherty can make REITS less attractive hopefully he can succeed in the popping the housing bubble too.

On an unrelated note… Max Keiser’s Unified Inflation Deflation Theory… it’s a video (hang in there until the end):
http://maxkeiser1.blogspot.com/2009/10/max-keiser-s-unified-theory-of.html

#12 Too Good To Be True on 12.18.09 at 10:40 pm

I think its somewhat wishful thinking that the mentioned changes will materializ – a one two punch of changed lending criteria, changed amortization periods, and rising interest rates. Sounds like the perfect storm, so you know its too good to be true.

#13 Emma on 12.18.09 at 11:06 pm

#4 SWM

Presumably, they’ll have to come up with the difference since the contracts are signed for a term, rather than the full amortization period. Maybe something will be put in place to help them out.

I am even more worried for the 0/40 crowd – they were available from 2006 to 2008 so they’ll pop up for renewal between 2011 and 13 expecting a 35 year am. Instead they will be facing 25 or 30 year ams AND requiring a 10% down. With no equity, it’ll be a no brainer what their move will be.

#14 Calgary_rip_off on 12.18.09 at 11:18 pm

Hey Garth,

I was standing in the operating room today at work setting up for the procedure and the radiology supervisor was saying that they were saying that housing was gonna keep going up in Calgary. I didnt have the nerve to tell her what I really thought. I simply said oh, yah, the median for Calgary will be $1 million next year, and a 1200 sq. foot shack will be $1.2 million. Amazingly, she didnt argue. I then said that I would likely be a serf forever to a landlord in Calgary and that I was priced out forever. Still no argument. She’s a Harper supporter, no doubt.

And how exactly will it be bad if interest rates skyrocket? Oh, people might need to save a little bit more to put down on a house that is so much less principal? And that is horrible? It’s only horrible for the tools and fools that bought shacks that are overpriced. Some would argue that a house is priced at what people think it should cost. Which people? Idiots? Yes. As a renter I dont have to care when the mortgage owners go under. My wife thinks 2012 when the renewals come up. Even right now in Calgary somewhere someone is eating Macaroni and cheese in their shack after having driven home on summer tires. That is the reality, not the crap being promoted as silver lining and nonsense.

In Alberta, Ed Stelmach, the conservatives, and all the other idol worshipping house worshippers are all on crack.

#15 casanova on 12.18.09 at 11:22 pm

Interest rates going up?
I dont care , I will keep paying my morgage as long as my basement grow op keeps blooming. And I will continue doing my duty to this great country as a consumer, especially during the coming holidays. I love my vancouver lifestyle, what a great country I live in. Life is good. Happy holidays.

#16 T.O. Bubble Boy on 12.18.09 at 11:25 pm

@ #11 Steady Eddie: wait 6-12 months, and there will be tens of thousands of condos for you to pick from. There are a whole slew of new developments getting completed in 2010 and 2011, HST in July 2010, and tons of folks itching to get out at the peak.

This time next year you could probably save 20% on the same condo.

#17 Future Expatriate on 12.18.09 at 11:45 pm

#3 “God help us when all those boomers shift from being major tax payers to racking up health care costs. We’re in a lot of trouble. Taxes are going up or services cut, or more likely, both.”

Nah. What do you think they dug up the 1918 flu bug for?

#18 Joe Realtor on 12.18.09 at 11:50 pm

#8 Gord wrote: “Mark Carney ruined my day on Wednesday when he warned Canadians about rising debt.”

Don’t worry Gord, I don’t think too many people are listening to him, or anyone else. Not the people that should be listening anyway.

You know the type. Banks won’t lend to them so they’ll go to an “alternative” lender who will, or to a mortgage broker who likes a challenge.

I know one couple (who I’m not working with) with 2 teenagers who are setting themselves up for disaster. Despite my advising them against it, they’re hellbent on buying a place they can’t afford, that they’ll never pay off, when they have a place now that is almost paid off, and would really sparkle if one of the 4 of them picked up a broom or vacuum once in a while.

Classic case in the making of buying something due to R1E1(tm) fever and eventually owing more on it than it’s worth.

Some people won’t listen.

#19 $fromA$ia ( o Y o ) on 12.19.09 at 12:04 am

Harper, Flaherty to blame for housing bubble, and another election is is looming.

#20 Peter Pan on 12.19.09 at 12:19 am

For whose benefit is this bubble being created? Personally, I think this bubble is being inflated for the benefit of the Baby Boomers… They have embodied the “Live for Today” Ethos… They have one sole asset – housing… They haven’t bothered saving for retirement… This is their one last gasp at financial redemption before retirement… Harper et al. know it… They don’t want to face the wrath of this large demographic when they run out of money… They still vote after all… The Conservatives are hoping to give a financial exit strategy to the Boomers. You can only assure high housing prices if you have a willing pool of young, naive, but creditworthy home buyers combined with the trap of artifically cheap money.

#21 Peter Pan on 12.19.09 at 12:35 am

#2 Justin… You should take this CIBC Econoflak’s “What me Worry?” pronouncements with a grain of salt. When Canada’s most accident-prone bank doesn’t see a problem, you know there’s a high probability of a major “excrement hits rotary appliance” event…

#22 JOS on 12.19.09 at 12:36 am

Garth, what is it about this blog? Its reality, and so refreshing. Seems we’re living in a reality bubble as well and you are one of my stops on my daily economic rounds,
Best of Holidays to you and all those that visit this blog!

#23 Davinci on 12.19.09 at 1:22 am

The housing boom is not over if we get High inflation or hyper inflation. Next year.

Man I’m still mad at the price of Kraft Dinner. That’s just wrong this summer it was less than a dollar now 1.42 WTF. Oh yeah the printing press.

Got Gold.

#24 Nostradamus Le Mad Vlad on 12.19.09 at 1:35 am

The 2010 Waste of Taxpayer’s Money happens around Feb. or so. The HST kicks in around July. Nostradamus Jr.’s 30- to 180-day prediction of an “event” holds water, possibly around Victoria Day, as the west is screwed something awful.

“. . . the government has awoken with horror to the consequences of its actions.” Garth foretells of an Easter Bunny appearing on Christmas Day — how quaint! Is this the Winter Surprise?

Listening to Flaherty and Carney drone on and on and on in monotonously boring voice-overs reminds me of The Big Bad Wolf, who huffed and puffed till he had his way with the pigs, all of whom squealed in uproarious laughter and delight.
——
#9 Bottoms_Up — “. . . the impending nuclear war with Iran . . .” — Iran, like Iraq doesn’t have or build any WMD.

Russia and Iran do have oil and gas, and plenty of it. Israel, with no oil, gas and very little drinking water, has roughly 200 – 650 WMD, all of which would wipe out most of the Middle and possibly some of the Far East, along with the Meditteranean. Built in Dimona which is approx. 50 miles from Gaza.

Israel is, and remains a very large thorn in the side of the world. Happy Christmas.
——
It will be very interesting to see the Cdn. budget / reaction, as Canada seems to be getting extra-large debts / deficits. Same as here?

To the poster kash is king, first sentence may interest you.

From TAE’s Forecasting — Top 10 Trends

If this was a super-volcano, like Yellowstone how many ‘quake lines would be doing The Funky Chicken just about now?

57 sec. clip of David (Global Governance) Rothschild. Note the last line (or thereabouts): “. . . the solutions WE have at hand.”

For those who are contemplating on whether or not to get a swine flu shot, this may be of <a href="http://www.telegraph.co.uk/healthSame as here?
/swine-flu/6834606/Natural-swine-flu-defence-found.html”>interest.

#25 Soju on 12.19.09 at 1:53 am

Yeah 10% down… Let’s make the poor feel even better.

#26 Dan in Victoria on 12.19.09 at 1:55 am

And you wonder why people in Victoria keep buying houses? This is going to be a mess when it unwinds. http://www.timescolonist.com/Carney+debt+worries+seem+premature/2360576/story.html

#27 Dan in Victoria on 12.19.09 at 2:08 am

“The charges relate to fraudulent documents presented for mortgage applications” Hey, didn’t that happen down south?http://www.timescolonist.com/news/Fraud+charges+laid+mortgage+case/2355640/story.html

#28 Blobby on 12.19.09 at 2:32 am

I think they should adopt a “you cant borrow more than 3 times your income” rule… Thatd sort the problem out right there.

#29 Vanman on 12.19.09 at 2:41 am

Hey Garth, do you think banks will start offering longer term fixed rates than 10 years like they do in the U.S.?

#30 Nanaimo Dude on 12.19.09 at 2:52 am

Is this true!!!! what you say, or is this what you hope is going to happen? Or is this inside information. I don’t know what to believe anymore. All I know is that I would never ever consider taking on a 35 year mortgage. If I was ever to take on a 35 year mortgage I would have to teach my kids to say “who owns your daddy?” “the Bank owns your daddy”

Cheers,

Nanaimo Dude

#31 Amy on 12.19.09 at 3:57 am

A red-hot housing market fuelled by cheap money has helped Canada climb out of recession, but fears are growing that it could be a bubble much like the one that brought the US to its knees.
……
http://canadabubble.com/bubble-articles/216–canadian-housing-boom-spurs-bubble-fears.html

#32 EJ on 12.19.09 at 4:18 am

I’d like to say that I’m amazed that the powers-that-be have convinced the general public that high housing prices are a good thing, but sadly, I’m not. I’ve learned over the years that people, in general, will believe whatever authority figures tell them, whether it’s an insane lie or the truth.

Truth is, low prices for housing benefits nearly everyone. Just imaging being able to pay of your mortgage in 10 or 15 years (maybe even 5!). Would you care if the house was worth a whole lot more when you were done? Think of what you’d be able to do with the money you’d saved. The trips you could take, the retirement money you could save, the education you could give your kids, the stress you’d relieve yourself of.

It would be more of your hard-earned money in your pocket, and less in the bank’s. How is that not a good thing?

#33 Rog on 12.19.09 at 5:00 am

What I don’t understand is why there talking about making itore difficult to get in?

I do understand and believe you should have a 25% downpayment and 25 year mortgage.

But why don’t they punish the speculatiors? Why don’t they charge a hefty tax on realestate gains where the seller owns more that say 2 properties? That is the main reason we are I’m this mess in the first place speculation. Or how bout another hefty tax on purchasing a 2nd 3rd or 10th property that compounds expodentially.

Oh right I forgot…..the people who own all those properties are mostly boomers, and the Feds want to be elected again.

#34 omg on 12.19.09 at 7:35 am

No worries – no near term bubble pop.

The federal government will do nothing to stop the frothyness of the market – it would just be too unpopular. They may tinker around the edges but it will not bring prices down appreciably in the near term.

BTW – I thought CMHC mortgage insurance could be rolled into the mortgage – that is, you did not have to pay it up front, so it does add to closing costs?

#35 Not gonna happen on 12.19.09 at 7:49 am

Be real Garth – if you believe a word this Flaherty guy says, you got another thing comin…

This guy will say anything with a straight face, if it serves him. Kinda like when he and Harper promised no deficit weeks before being elected and then making an about-face and dropping a big steaming pile of projected deficit on us all like we were meaningless idiots meant to be lied to.

This is all window dressing – just like Carney’s recent comments. The fact that you (or anyone else) believes this crap is more news that the fact Flaherty said it – the latter is to be expected from politicians like Flaherty…

The government did exactly this in 2008. — Garth

#36 HK canuck on 12.19.09 at 9:37 am

#15 casanova

Do you realize that with each idiotic self incriminating message you post, there goes a long with it a little packet of information containing your IP address and if the RCMP technician nerd knows anything about spoofing, and you’re reading this message right now, they’ve just read your MAC address as well.

#37 CalgaryRocks on 12.19.09 at 10:04 am

What will happen to Canada if Quebec & Ontario get their way?

http://tinyurl.com/yjye9sa

Licia is a fact-stressed journalist. — Garth

#38 Michael on 12.19.09 at 10:06 am

Inflation in Canada, where? Real estate.

I find it hard to believe that our government off-load mortgages from banks and creates record deficits with risk of imminent rate increases. For now, I suspect rate increase warning(s) is just rhetoric.

#39 Investor on 12.19.09 at 10:16 am

Who is holding the bag of real estate goodies?

http://www.getrichslowly.org/blog/2007/07/16/renting-vs-buying-the-realities-of-home-buying/

#40 billy on 12.19.09 at 10:23 am

Garth,

What is your response to Benjamin Tal (no fool) who says that there is no correlation to default rates and mortgage rates, and never has been in Canada. Default rate was less than 2% when mortgage rates jumped to 21% in the 80’s. Unlike the US, in Canada you can’t just walk away from a mortgage . . .

http://research.cibcwm.com/interdept/download/wmi-1218.pdf

Who cares? That is irrelevant information since the threat here is negative equity. That report is inconsequential and does not suggest in any way the market is sustainable. It’s utterly self-serving in that the intention is to protect the banks’ lending regimen. — Garth

#41 Investor on 12.19.09 at 10:24 am

Well the real estate bubble is/was global phenomenon. In some places the prices popped quicker than others as people finally realized that paying enormous price for boxes in the sky is not worth it. Once the crowd is gone watch out.

In the past 3 years these record number of transactions in Canada I would suspect there will be a lot of less buyers in the future. This looks very similar to what happened in the US in 2004, 2005, 2006 as there were record number of transactions.

#42 Investor on 12.19.09 at 10:38 am

Who benefits from over inflated real estate prices? Very simple. The bankers in form of higher interest payments and towns receiving higher property tax payments.

#43 CalgaryRocks on 12.19.09 at 10:38 am

Who is holding the bag of real estate goodies?

http://www.getrichslowly.org/blog/2007/07/16/renting-vs-buying-the-realities-of-home-buying/

Renting is always marginally cheaper than owning in the short term. Just like leasing a car is cheaper than buying.

I’ve seen tons of secretaries running around in leased BMWs while I was driving my paid-for Mazda. I guess that makes them financial geniuses and me some poor dumb shit with 2 paid for cars, no debts an almost paid for house cash in the bank and no stress in my life.

I can live with that.

#44 OttawaMike on 12.19.09 at 10:42 am

It seems that Jim Flaherty is working in tandem with the Chinese finance minister as they are embarking on the same speculation curbs:
http://www.financialpost.com/story.html?id=2361903

#45 Investor on 12.19.09 at 10:43 am

“The lessons for the U.S. were not that an extended period of low rates caused a mortgage and housing blow-up. It was a massive failure to supervise the worst excess of the American mortgage market that caused the trouble.”

Dead wrong. I need to laugh at this one. That is exactly why the US real estate market blew up. Low interest rates opened the door to people who could not afford real estate in the first place. Obviously there were other problems, but usually rates determine the entry point in my opinion.

#46 Oakville Owner on 12.19.09 at 10:46 am

So, this is why, if Carney’s rate-thumping doomer talk doesn’t kill the property drive, Flaherty’s new rules will.

Garth- All Carney can do is his rate-thumping doomer talk to “try” to talk down the housing boom. His mandate is to keep inflation at or below 2% and we are no where near that to date. With a CDN $ at or near $0.95 US, any major increase of prime by more then 1/2 % will kill off any of our remaining exports ( not popular with the business crowd). Take a look at the below link. Prime has not “increased” by more then 1/2 % at a time over the last decade. I think the last 10 yrs will be a better prediction of the future as all the boomers are in their saving years now and not puting a strain on the $$ supply like they did in the 80’s. Japan style deflation is what is coming as long as the Federal printing presses are slowed down.

http://www.bankofcanada.ca/cgi-bin/famecgi_fdps

#47 T.O. Bubble Boy on 12.19.09 at 10:50 am

For anyone who doubts that the media can spin the same story 2 ways:

December 11th (Reuters): “Canada’s Flaherty says won’t put brakes on housing”
http://www.reuters.com/article/idUSN1113759920091211

December 18th (National Post): “Federal government ready to deflate any housing bubble: Flaherty”
http://www.nationalpost.com/news/story.html?id=2359788

Unless I’m missing something here, these 2 stories (7 days apart) are based on the same comments from Flaherty from his event in Quebec on December 11th. The National Post is spinning this as “Flaherty on top of this bubble” vs. the original story stating “Flaherty doesn’t think there’s a bubble yet”.

No wonder people like Jon Stewart have an endless supply of clips showing politicians contradicting themselves!

I wonder which news agency (Reuters vs. National Post) ran a bigger article when Flaherty won his ironic Finance Minister of the Year award?

#48 Investor on 12.19.09 at 10:57 am

This report from RBC is classic. Is there an up to date version?

http://www.rbc.com/economics/market/pdf/myths.pdf

#49 Investor on 12.19.09 at 11:00 am

This one is interesting. I like the solvency isssue.

http://www.uofaweb.ualberta.ca/economics2/pdfs/Econ341-Beesley-Gregory-Canada-Better-Off.pdf

Canada’s mortgage insurers are fully or nearly completely guaranteed by the Government
of Canada. Canada Mortgage and Housing Corporation (CMHC, with roughly two-thirds of
the market) is a 100%-backed crown corporation. The private insurers are 90%
backstopped by the government. Genworth Financial (with roughly one-third of the
market) is the dominant private participant. The solvency of mortgage insurers is not an
issue in Canada, unlike the U.S.

Well wouldn’t there be a solvency issue for the gov’t?

#50 CalgaryRocks on 12.19.09 at 11:01 am

What will happen to Canada if Quebec & Ontario get their way?

http://tinyurl.com/yjye9sa

Licia is a fact-stressed journalist. — Garth

Classy people don’t wash their dirty laundry in public like Ontario & Quebec have done.

No need to agree with Licia, all you have to do is to be true to your principles; stop taking our money, and go away.

Alberta doesn’t care about your approval nor does it want the advice of a parasitic province nor one that’s been run into the ditch by incompetent self-serving morons.

Sounds like a bad case of P.E. — Garth

#51 billy on 12.19.09 at 11:02 am

And his conclusion on prices?

“To the extent that current activity is simply a redistribution of sales from the future to the present, the housing market of tomorrow may be in store for a more muted level of activity. Housing starts will also catch up with the sudden spurt in demand, with the increase in supply helping to moderate price trends. Rather than plunging, house prices are more likely to stagnate in coming years (or fall modestly in the most overheated markets) as fundamentals catch up with a market that has gotten ahead of itself.”

#52 Dave on 12.19.09 at 11:17 am

Garth, why don’t you run for mayor? Have you seen some of the guys that are saying they’re going to run? George Mammoliti! lol….I think you’d win

#53 Dawn in Calgary on 12.19.09 at 11:26 am

But who’s going to stop the banks from lending the under 10% crowd the remainder of the down payment?

Unless there’s a caveat that the buyers have to independently have that down payment (recall back to 1999 for that, a short 10 years ago), shenanigans will still ensue.

#54 Gord In Vancouver on 12.19.09 at 11:29 am

#18 Joe Realtor

Some people won’t listen.
________________________________

……………..until it’s too late.

#55 ruraldude on 12.19.09 at 11:59 am

In picture above I see two ships navigated by swindlers. The first one navigated be Bernie Madoff which has gone over and ruined many. Now the second one is close to going over and it is navigated by Al Gore.
In both instances people got suckered in to either quick riches or a false religion. Global warming is becoming a religion. Its because people don’t research that they get swept away by popular (politically Correct) ideas or we get caught up in a get rich quick mentality that prevails in our society.
The world has always had these pied pipers who swindle and lie to enhance their own twisted agendas. It is only in looking back that we shake our heads and wonder at how easily we were duped.
This real estate boom is following much the same course as these ill fated ships. There are a lot of people who for what ever reasons will get off at the right time and count their blessings. How ever for most it will end in heart ache and maybe even ruin. It seems as a society we have to keep relearning the hard lessons of the past.

#56 David Bakody on 12.19.09 at 12:19 pm

#4 SWM on 12.18.09 at 9:09 pm

Simple …. the Banks just jack up payments, take it or leave it and suffer. Add to this a lost five years or write it off as high price rental. Selling will be out of question, it’s just that simple.

A fool and his/her/their money are soon parted …. and there are no fools like Greater Fools who wear Flaherty T Shirts ….. and to think 40% plus Canadians are sending him Christmas Cards wanting another chance to buy into his financial genius!

The real sad news is all Canadians will pay for it. It seems like yesterday Mr. Harper said, just give me a chance ….. Merry Christmas Alberta BC and Manitoba you gave us a gift we all just might never be able to repay.

#57 BDG YYC - on 12.19.09 at 12:29 pm

The smell of seathing hatred is such a comfort. That, and the knowledge we have each other.

#58 Not likely any time soon... on 12.19.09 at 12:54 pm

I repeat: Flaherty, Harper et al will not let this bubble pop on their watch.

Think about it – if they do, there is no chance in helll they will ever get re-elected. The voters that matter, because they vote, (i.e., boomers) need for this bubble to stay inflated and politictians will say/do whatever they need to say/do (n.b. What they say and do have little to do with each other).

Expect Flaherty, Harper, Carney and Co. to continue to say whatever will upease the masses like Flaherty did this week and Carney did a few before that, but don’t expect them to follow thru.

On another note, I think we should put a blog/site together listing all the trite that spews out of Flaherty/Harper/Carney’s mouths that end up being bold face lies. I’ll start the list – please add at your leisure:

1) Harper/Flaherty promising no deficit weeks before being elected then announcing the exact opposite weeks after being elected.

2) Harper/Flaherty et al saying there were no bailouts in Canada after spending more per capita on bailouts than the US (recall gov’t buys $74 billion of sub’ish prime mortgages from the banks)

3) Harper/Flaherty et al saying there were no sub prime mortgages in Canada (after 0/40 ran for several quarters and others still getting 0/35 with known lending shenanigans re: the 5% down)

4) Harper/Flaherty et al saying that our banking system is sounder than any other on the planet (read points 2 and 3… nuff said.)

5) There must be many more!

#59 Kash is king on 12.19.09 at 1:09 pm

#24 Mad Vlad, thanks for the link.

Seems to jive with the Fulford link I posted yesterday.

Us little peons can only ever hope to pick up enough crumbs to identify whatever sandwich it is that the big guys are eating at any given time… and try not to get squished.

GL

#60 BDG YYC - on 12.19.09 at 1:11 pm

I feel your pain Garth … but …

Which topic …

The Prime Minister, Taxes, Afghanistan, Israel, Zionism, Nazis, Islamofascism, Terroists (in Canada), Our barbaric ancestry, morality, history, Canadians as occupiers, Canada’s history of genocide, illegal occupations, Canada a joke of history, the dissappearance of Canada, Soviet Canada ….

• All comments are held a short time for moderation before being published. Please submit only once!
• Respectful, wide-ranging discussion on the topic of the posting is encouraged, and will not be censored.
• Abusive, obscene or disrespectful commenters will not be published, and are subject to banning from this forum.

Suggest you remove the posts altogether and tighten and clarify your posting rules. Or clarify exactly which topic you are referring to that is “off limits”.

Quite the can of worms …

#61 OnlyTheBankersLaugh on 12.19.09 at 1:19 pm

This unwinding will take a lot longer than we think. If you’re out of the market, it will be a difficult decision to jump into a slowly decreasing market over many years. Then, there will be the boomer exodus from housing after these many years which will cause another deflation. Boomers slurping up health care and these deficits continuing to grow as we’re fooling ourselves if we think that we’re out of this recession.

Governments will hold onto deeply discounted rates as long as they can and in the USA, that will be a long time if dollar becomes a safe haven again. USA can thumb their noses at foreign debtors for quie some time. Problem is, in my estimation, income and long term jobs here. I guess with all the boomers retiring, we will need less high paying jobs (?!) but I work for a diversified multinational engineering company and this company and all of its competitors have systematically offshored 80% of local Western high paying jobs to India, China and Malaysia and now to new low cost areas over past 10 years similar to most other major companies. This is engineering, finance, accounting, strategic marketing, etc, etc jobs gone and they ain’t coming back. What are our kids to do unless we begin investing in education instead of putting that out of reach. 35 year mortgages just sink these kids further into oblivion. I just don’t get it except when viewed thru pure greed of these guys who will sacrifice their young for their power.

“Lighten up Francis”, my inner big thumb, Sergeant Hulka, says. However, this is one realistic scenario … except in North Vancouver where houses will go up to $3MM for Nostra in his dream world.

#62 Taxpayer like everyone else on 12.19.09 at 1:32 pm

46 Investor: I think that’s a chicken-egg debate. We have to remember that the term “sub-prime” described
the borrowers, not the rates. There was a deliberate political move to increase the level of homeownership in America by including income/social groups who had not
previously owned real estate. One way to do so is of course lower borrowing costs. Even so, in many instances these were only teaser rates with re-sets that were considerable higher.

Thank you for the links. Will check them.

Oh yes and slight change to my moniker. Rather than
trying to “buddy-up” by being “like you” now I’m just “like everybody else”.

‘Sub-prime’ described the products, not the borrowers. Sheesh. — Garth

#63 Sluggo on 12.19.09 at 1:46 pm

When interest rate swaps go bad. Another Larry Summers connection and no it has nothing to do with Nouriel Roubini.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aHQ2Xh55jI.Q

Hopefully the $183 billion of interest rate swaps on CMHC’s books don’t turn into a toxic sludge.

#64 lgre on 12.19.09 at 1:48 pm

“Garth,

What is your response to Benjamin Tal (no fool) who says that there is no correlation to default rates and mortgage rates, and never has been in Canada. Default rate was less than 2% when mortgage rates jumped to 21% in the 80’s. Unlike the US, in Canada you can’t just walk away from a mortgage . . .”

Sorry to burst your bubble but Tal IS a FOOL, this guy flip flops like no other, 0 credibilty when it comes to financials or economics..

#65 DaBull on 12.19.09 at 2:08 pm

#37 HK canuck

If you don’t want anyone to know your IP address use a proxy server. Google it to find out what it is.

#66 Sluggo on 12.19.09 at 2:19 pm

“Harper, Flaherty to blame for housing bubble, and another election is is looming.”

CMHC’s problems started before those idiots came to power. CMHC MBS really took off after the events in New York with those planes and I believe Chretien had the reins back then and David Dodge was head of the cheque book as a recent hire from the CMHC.

Bi partisan politics is a misnomer at this point and we have become like our socialist neighbours to the south.

#67 The Vulture on 12.19.09 at 2:27 pm

IT’S NOTHING PERSONAL, IT’S JUST BUSINESS

EJ #32 –

Unfortunately for the general public, it is in the bank’s interest to keep their mortgage portfolios as packed and at extremely high dollar amounts as possible and for the longest possible durations to amass huge net profits every quarter (RECORD PROFITS I MIGHT ADD!!)and to “trap” customers for life with no hope of EVER paying off their mortgage.

Great business to be in if it is your business and you can trap customers and give them the gears. Bad situation if you are trapped by this business and a financial slave for the rest of your life. Shine your bankers shoes with your tongue.

#68 Blobby on 12.19.09 at 3:12 pm

@23 : quote “The housing boom is not over if we get High inflation or hyper inflation. Next year.”

Inflation means higher rates, higher rates means crash.. sheesh what a numb nuts.

#69 Coho on 12.19.09 at 3:22 pm

#64 Taxpayer like everyon eelse wrote,

“46 Investor: I think that’s a chicken-egg debate. We have to remember that the term “sub-prime” described
the borrowers, not the rates….”

‘Sub-prime’ described the products, not the borrowers. Sheesh. — Garth
______________________________

Indeed; the rates were referred to as “sub-prime” and the borrowers as the “Sub-Primates”. :)

#70 West Coast on 12.19.09 at 3:34 pm

Assuming people like Flaherty and Bernanke are not idiots for a moment and are in fact smarter even than the typical blog poster like us…

Then who is benefiting from this high personal and government debt situation? Who is in fact making a great deal of money?

More people are asking the really obvious questions:

http://market-ticker.denninger.net/archives/1752-There-Is-No-Way-Out-Of-This-Box…..html

or like our Garth:

“Just imagine if the minimum was 10% down and a 25-year am, combined with Carney’s expected 2010 rate increase of about 1.5%. That would mean the average home in Toronto, at $450,000, would require a down of $45,000, insurance of $12,000 and LTT of $11,000 for $78,000 cash at closing plus an income of $75,000 to carry it at the cheapest VRM rate.

But then, it wouldn’t be $450,000 anymore, would it?”

It’s not a conspiracy when it’s bloody obvious.

#71 Einsam Solo on 12.19.09 at 4:39 pm

I appreciate the image juxtaposition of Mr. Flaherty and the foolish belief in ships sailing over the edge of a flat earth.

#72 Sean on 12.19.09 at 5:03 pm

#54 Peter

Garth, in fairness, please delete #54 if you do not want responses to it… It is one of the most phenomenally objectionable bits of garbage that I have read in some time.

#73 Steady Eddie on 12.19.09 at 5:03 pm

@ T.O. Bubble Boy:

Just 20%? Houses/condos can be a money pit. I was thinking about buying a couple of condos for rental income… but I wonder if I’m better off with REITs outside of Canada.

#74 T.O. Bubble Boy on 12.19.09 at 5:17 pm

@ #68 Sluggo:

I’m pretty sure that all recent CMHC shenanigans are 100% Flaherty and Harper, including 2 of the worst:

1. Allowing 0% / 40-year in 2006

2. Buying $100B+ of the banks’ riskiest mortgages through the IMPP in 2008-2009

You can’t tell me that Paul Martin and Chretien somehow inroduced 0%/40-yr mortgages, and you definitely can’t be saying that Governments from 4+ years ago somehow came up with the IMPP idea.

#75 Grantmi on 12.19.09 at 5:29 pm

I still think this is the best pic to explain the next year!!

http://bit.ly/7McSRd

#76 kc on 12.19.09 at 5:35 pm

ruraldude on 12.19.09 at 11:59 am

“”The world has always had these pied pipers who swindle and lie to enhance their own twisted agendas. It is only in looking back that we shake our heads and wonder at how easily we were duped.””

LOL… how correct… think back.. not all that long ago… remember the end of the world? it was this secret magical opening UP of the OZONE layer… FEAR the hole was the manta cry… I have NOT heard one word about that BS in ages… it seemed to died a quiet death long ago… Today’s mantra… Global warming will kill us off in 10000’s of years…. save the planet from climate change… NEWS flash… under the oceans of our world are MASSIVE volcanoes that spew billions of gallons gases and HOT water/sulfers… oceans really heating up and we are going to flood the world over??? I truely think NOT…

global warming is a hoax… get over it….

cheers

#77 prairie gal on 12.19.09 at 5:36 pm

CalgaryRocks: that piece of hyperbolic ‘journalism’ just goes to show how threatened and desperate some people want you to be in Alberta. If the tar sands (oh, sorry OIL sands) in Alberta were to cease operation today, there are plenty of other sources of CLEANER conventional oil right next door in Saskatchewan and North Dakota from the Bakkan formation. Plenty.

Alberta can no longer hold the “we provide royalties and oil for the rest of the continent” bag over North America’s head. That ship sailed long ago. Alberta quite simply is a has-been province, the residents are realizing that they must resort to scare tactics and unbelievably destructive industry to maintain their ‘status’. Its quite pathetic, really.

Oh, you’ll still be able to poison the odd aquifer with sour gas wells and make good money doing so, but there’s a lot of competition out there, with cleaner gas too.

Imagine, the horror, when one day Albertans will wake up and realize there’s nothing left to dig out of the ground (aside from the crud from sand where a boreal forest used to be) and they’ll realize that a sustainable economy does not consist solely of harvesting nonrenewable resources. Then the farmers and ranchers will once again rule the prairies. This time with windmills.

#78 kc on 12.19.09 at 5:37 pm

added… fear more global nucular war….. than global warming

#79 Taxpayer like everyone else on 12.19.09 at 6:18 pm

‘Sub-prime’ described the products, not the borrowers. Sheesh. — Garth

No, it describes the creditworthiness of the borrowers.

So ironically Garth, neither you or I could get a “sub-
prime” loan. We didnt qualify!

http://useconomy.about.com/od/glossary/g/subprime_mortg.htm

In fact a host of mortgage products totally unrelated to the creditworthiness of the borrowers are classified as ‘subprime.’ They include negative amortization, interest-only and teaser rates as well as the more-famous Ninja loans. Canadian banks also offer subprimes, by the same definition, such as the ‘liar loan’ at CIBC (the Self Recognition Mortgage) and the current teaser rates which will be reset soon. It’s about the products, not the people. — Garth

#80 Dan on 12.19.09 at 7:16 pm

1…….2 the bubble is coming for you. 3…………….4 going to lose your home. 5…………6 debtors prison awaits (This should be law). 7……………8 going to rent again.

The it’s diferent crowd are going to feel financial pain and will be forced to become financial terrorists and go bankrupt. How people can believe housing can go up in a recession when unemployment is high and incomes have went down without sub-prime in Canada. The banks will give a loan to anyone. Just goto the bank and see. The bank wanted to give us $700,000 and we make $115000 together. The BUBBLE in Canada is BIGGER then the US and that is a FACT. The housing CRASH will CRUSH all you foolish bubble heads with financial pain.

#81 Sluggo on 12.19.09 at 7:19 pm

“@ #68 Sluggo:

I’m pretty sure that all recent CMHC shenanigans are 100% Flaherty and Harper, including 2 of the worst:”

I’m pretty sure the Liberals set the bar. % wise, the biggest increase in CMHC MBS came in 2002. The program was so successful and carried out under the cover of affordable housing that the central bankers of all colours abused it.

The result would have been the same regardless of which party was in. Goldman Sachs still would have controlled our bank.

http://www.cmhc-schl.gc.ca/en/hoficlincl/mobase/upload/r303a-english.pdf

Try to keep up. The issue is not MBS but debt ceilings. The current government has doubled it from the $300B range to $600B. — Garth

#82 ATP on 12.19.09 at 7:28 pm

Two reasons why Harper and Co. will not want the housing bubble to burst:

1. Much boomer wealth tied to real estate
2. Much employment tied to real estate, with an economy not diversified enough to absorb job losses resulting from bursting of the bubble

Nevertheless, they are powerless against bubble-bursting factors like demographics, global wage arbitrage and overcapacity.

#83 Taxpayer like everyone else on 12.19.09 at 7:28 pm

Garth – Google “sub-prime mortgage definition” and every link I checked refers to the credit-worthiness of the borrower. One link did say the definition has become blurred.

The reason I think its important in discussion is to
separate these types of mortgages from the other ones
you referred to (NINJA, liar etc) to better pinpoint the
particular product.

Thanks again for a great blog.

#84 Azda on 12.19.09 at 7:49 pm

Garth! I bought my 1st house in 2002 only after reading your articles in Toronto Star. It proved a good decision. I was on Variable until around 2006 0r 7 when interests rate seem going up and up. I did close mine @ 5.49 for 5year. Then came the recession along with, the lowest rates. My broker demanded $18000.00 as a penalty to switch. Sure that was not an option for me. However what I did I refinanced my mortgage with an amalgamated interest rate of 5.09.

Still it is markedly higher then existing rates. I tried to figure out my options.
1st one is to sell this house and buy a new one to avail the existing rates. In this case the lender has told me that I will pay $9000.00. This along with LTT, plus the cut for Real Estate agent fee etc will make this option expensive and eat away the advantage I am looking for the lower interest rates.

2nd option is to wait until late 2012 when my terms expires. That options bring in the possibility of facing expected steep rate at that time. B/C of that possibility of crashing of bubble will eliminate the equity in the house and thus difficult to get new mortgage.

I’m sure there must be large numbers of your reader in this situation and will like your opinion. I live in York south west in greater Toronto area. Thaks

#85 john m on 12.19.09 at 8:07 pm

Is it not curious that the people who created this impending disaster (Harper,Flaherty and Carney) and encouraged it are now warning people after the fact???Lets not forget they are responsible!

#86 Wondering on 12.19.09 at 8:19 pm

For the bubble to pop, it will entail that there is no one willing to purchase a property for the asking price. In my neighborhood, the Asians are buying all the properties and are pricing the Canadians out of the market. When will prices correct themselves if the Asians keep buying all the properties and leave us Canadians to the rental market?

I think my next move should be to open a Chinese Restaurant and then purchase a property.

Don’t bother coming back. — Garth

#87 Paul on 12.19.09 at 8:29 pm

http://www.timescolonist.com/business/Mansion+sells+after+price+slashed+million+from+million/2360916/story.html

#88 Nostramadus Le Mad Vlad on 12.19.09 at 8:46 pm

#78 kc — “. . . global nucular war”

I don’t fear nuke wars or anything, as The Grim Steambath comes for all at our Best By dates.

However, I didn’t particularly care for the following two links, as I thoroughly enjoy all kinds of different and tantalising foods.

Now the real reasons for depopulation become clear. Going hungry worldwide in 2010.

Monsanto is helping with its’ poisoned wheat.

#89 Kurt on 12.19.09 at 8:55 pm

Garth – re: # 72 Sean and # 54 Peter. Thanks for posting # 54 with an absolute statement of what is considered acceptable. The problem with moderating inappropriate content such that it never appears at all is that as a I reader can’t verify that I can trust your judgement. Seeing examples of what is over the line every once in a while raises my level of confidence that all opinions that meet the basic standards of being more-or-less on topic, respectful and even marginally coherent are heard. I’m equally happy not to have to sift through invective regarding the Israel-Palestine issue – there are plenty of other forums for that, and it pleases me to see you maintaining the character of this blog. Thanks for putting # 54 Peter up, and thank you for deleting it.

#90 Nostradamus jr. on 12.19.09 at 9:00 pm

Good idea for Garth.

…Before you become Premier of Ontario, then Prime Minister of the New Eastern Canada, you win and become Mayor of Toronto.

Bloomberg in New York…Turner in Toronto.

…You have an excellent chance to win…

Actually, I predicted nearly 500 years ago you would throw your hat in the ring.

…I know the outcome ofcourse, I can’t let it out, would not be fair to all the other candidates.

Nostradamus jr.

#91 T.O. Bubble Boy on 12.19.09 at 9:19 pm

@ #81 Sluggo:

You’re saying that the Liberals were abusing CMHC for the fees in 2002 (i.e. to get homebuyer insurance dollars to pay for new low income housing). That is an entirely different area than what anyone on this blog is concerned about. Using your logic, 1988-1989 was also a Liberal scam year (since there was almost 3x increase in CMHC MBS back then)… oh, wait, Mulroney was PM from ’84-’93.

Also, back in 2002, the main complaint about CMHC was that those fees seemed like a giant scam – basically a housing tax. That’s what realtors and others in the industry used to lobby against before this insane bubble. The issue now is CMHC acting as an enabler for risky and unqualified home purchases, and causing the bubble that we have today.

Look at 2005-2009 (The Flaherty/Harper Years)… CMHC has gone from a small niche to owning almost the entire new mortgage market. No coincidence that 2005 to now represents the extreme part of the rise in real estate prices.

I’m not trying to make this a Liberal vs. Conservative argument: it’s really just an anti-whoever-made-these-ridiculous-economic-decisions argument (and it happens to be Jim & Stevie).

#92 Gord In Vancouver on 12.19.09 at 9:38 pm

#82 ATP

Two reasons why Harper and Co. will not want the housing bubble to burst:

1. Much boomer wealth tied to real estate
2. Much employment tied to real estate, with an economy not diversified enough to absorb job losses resulting from bursting of the bubble

_______________________________________

3. Property tax bonanza for provinces during tough economic times.
4. Property transfer tax bonanza for provinces during tough economic times.
5. Political ties to realtors and real estate developers.

#93 Siberta on 12.19.09 at 9:47 pm

Vacancy rate for city offices up 40% in year

http://www.edmontonjournal.com/business/Vacancy+rate+city+offices+year/2362569/story.html#Comments

#94 Habs 76-79 on 12.19.09 at 11:30 pm

#82 ATP

Two reasons why Harper and Co. will not want the housing bubble to burst:

_________________

They won’t be able to stop it. Think about it, if the good ole USA by example was unable to stop their housing crash, why would anyone thnk Harper and Co. will be able to in Canada?

The whole system, was myopically set up to fail. Government , bureaucracy and a corporatism from the banks created this and it’s all ultimately based on the phony fiat monetary system of the western world, that has been heavily stoked since especially Ronny Raygun’s days some 30 years ago.

The crash will happen, those who bought into it especially too late will pay a heavier price but we all will no matter what and for that we should learn a lesson on greed and myopic ideals on our corrupted monetary and economic idealism. SORRY but reality bites!

#95 Dave on 12.20.09 at 12:11 am

66 Sluggo on 12.19.09 at 2:19 pm

“Harper, Flaherty to blame for housing bubble, and another election is is looming.”

CMHC’s problems started before those idiots came to power. CMHC MBS really took off after the events in New York with those planes and I believe Chretien had the reins back then and David Dodge was head of the cheque book as a recent hire from the CMHC.

Bi partisan politics is a misnomer at this point and we have become like our socialist neighbours to the south.
———————————

are you Sluggo from the leaf boards? ….tank nation, draft top 5 etc etc

#96 debtfree on 12.20.09 at 12:46 am

After fifty odd years of listening to msm and now G.T. I find it amusing ….Whom all ways get the last word .

#97 Jeff Smith on 12.20.09 at 1:13 am

>#9 Bottoms_Up on 12.18.09 at 10:09 pm
>My predictions:
>1) Canada’s real estate market remains bubbly in 2010
>2) They drop the max amortization to 30 years, but 5% down is still OK
>3) The change listed in #2 doesn’t do much because variable rates stay low and people continue to buy houses with 1.5-2% money

Seriously though, I would not be even a bit surprised that rates will remain low, and real estate will continue to go up. We just can’t predict the future. Lots of things can happen. We could be in the beginning phase of a long (decades?) drawn out deflation.

#98 Nostramadus Le Mad Vlad on 12.20.09 at 1:18 am

Strictly hypothetical, nothing proven as yet. With the 6.4 ‘quake in Taiwan Fri. / Sat., the undersea volcano I posted yesterday (occurred in May ’09) it seems only fitting that these two should stand up and be counted — Ol’ Yeller. As it is way past time now for another eruption, Global Governance, Monsanto, Big Oil & Pharma may end up getting what they wished for — depopulation without peoples’ consent!

This is from the second link in the last entry I posted: “Five years after scrapping its trials, Monsanto calculates that the time is now ripe for GM wheat to make a comeback”

If Yellowstone does get hot ‘n’ nasty, pretty much all forms of transportation will effectively be shut down for a while. It could trigger Mt. St. Helens, Mt. Rainier and the like to blow off steam, add into the mix the underground nuke facilities at Hanford, southern Oregon, SAF line west of Vancouver Island, it may well be time to have a really good overall change. It happened before in Lemuria and Atlantis, and will happen again. We just happen to be in the thick of things!
——
One way or the other, we will live with the above (or die from it), but this is an alternative. In any event, we’re screwed.
——
Silver. Like The Funny Energizer Bunny, it keeps going and going.

#99 Coquitguy on 12.20.09 at 1:18 am

Here in Vancouver the only industry we have is construction and real estate speculation.
If that was not here we do not get enough from film, forestry, respources or tourism. If they let the air out this place is going down down down and unemploymet everywhere in Canada will climb as all the workers go home.

#100 Jeff Smith on 12.20.09 at 1:20 am

>#3 “God help us when all those boomers shift from
>being major tax payers to racking up health care
>costs. We’re in a lot of trouble. Taxes are going up or
>services cut, or more likely, both.”

I think boomer are ok. There are still plenty of money in the coffer. By and large, the boomer’s retirement and cost associated with it has been planned out quite well. I am more worried about the X & Y generation’s retirement because it appears the whole system would be bust by the time they retire.

#101 hal smith on 12.20.09 at 1:20 am

#92 Gord in Vancouver.

We have a BINGO! You are exactly right and they will do WHATEVER it takes to keep it inflated.

#102 dd on 12.20.09 at 2:11 am

#90 Nostradamus jr.

“Actually, I predicted nearly 500 years ago you would throw your hat in the ring…I know the outcome ofcourse, I can’t let it out, would not be fair to all the other candidates”

You are such a clown.

#103 Garth Vader on 12.20.09 at 2:19 am

#79

‘Sub-prime’ described the products, not the borrowers. Sheesh. — Garth
______________________________

Eh?

What would you say of a couple that bought a home at 1.2 x gross income, both with a 750+ FICO score, on a 0/40?
Would this be a sub-prime mortgage?

A ‘sub-prime loan’ refers to borrower’s ability to repay said loan.

You’re wrong, but who possibly cares? — Garth

#104 jr on 12.20.09 at 3:14 am

77 prairie gal on 12.19.09 at 5:36 pm

CalgaryRocks: that piece of hyperbolic ‘journalism’ just goes to show how threatened and desperate some people want you to be in Alberta. If the tar sands (oh, sorry OIL sands) in Alberta were to cease operation today, there are plenty of other sources of CLEANER conventional oil right next door in Saskatchewan and North Dakota from the Bakkan formation.

Ummm–Guess what?

The Bakken is a high pressure shale gas–
As in—no oil–
Of course-you- not being from Alberta–one can understand,your confusion–
NG looks like it might be heading no bid at this rate–
The US is going to be self sufficient in NG before long–
They have some monster gas wells in the deep south–

#105 CalgaryBoy on 12.20.09 at 5:11 am

#80 Dan

Yeah, the bank also wanted to give me $458, 000 and I make $68, 000 a year. I walked out of there thinking there is absolutely no way I can carry that big of a mortgage. People I know were all happy for me the bank gave me such a figure, the same people telling me to buy buy buy. I told them about this website. They told me to keep dreaming.

#106 CalgaryRocks on 12.20.09 at 7:52 am

#77 prairie gal on 12.19.09 at 5:36 pm
CalgaryRocks: that piece of hyperbolic ‘journalism’ just goes to show how threatened and desperate some people want you to be in Alberta.

Well, what ‘Albertan’ Lisa wrote was also said by other ‘non-Albertan journalists’ accross Canada including some very well known ‘journalists’ in Quebec.

When you dig a bit deeper and read the comments, you’ll see that a majority of people commenting also agree. (Yes, even in Quebec newspapers)

You seem to be suffering from a severe case of Stokholm syndome. Perhaps you live in Saskatchewan and are looking for approval fom the ‘big’ provinces. I assure you that you’ll be better off looking out west rather than with the real ‘has-been’ provinces out east.

And who are we kidding, the future for Canada is west, not east everyone that is not in denial already knows this.

If you only had modesty you’d be perfect. — Garth

#107 AJ on 12.20.09 at 8:48 am

HI Garth- Thanks for the excellent articles as usual. I have told all my friends to check you out. Consensus is – you rock.

#108 CalgaryRocks on 12.20.09 at 9:04 am

The US is going to be self sufficient in NG before long–
They have some monster gas wells in the deep south–

My first car was a hybrid. It took regular gas as well as natural gas. It was an old fleet car from Gaz Metropolitain.

Great system, my dad even had the same installed in his van. The future looks like so 20 years ago!

#109 Bottoms_Up on 12.20.09 at 9:13 am

#84 Azda on 12.19.09 at 7:49 pm
————————————————-
Be happy with your historically-low rate. Pay off as much of your mortgage as you can. Then renewal in 3 years won’t be all that bad.

#110 jr on 12.20.09 at 10:24 am

Another characteristically deep comment from the gold lobby. — Garth

Seems to be a dislike for the “gold lobby” here–

Here’s what a very popular US blogger has to say about gold in deflation–

Mish is an Austrian thinker–he was one of the few who called deflation a long time ago–
Bet against him and you’ll get your head handed to you-

http://globaleconomicanalysis.blogspot.com/2007/01/gold-and-k-cycle.html

Two years old. — Garth

#111 OttawaMike on 12.20.09 at 10:32 am

The subject of banks resetting HELOC’s and even calling lines of credit came up on this blog a few times in past.
This week I heard from 3 people who were hit. One colleague has an I.T. consulting firm with 5 employees and lots of work in the pipeline.
The bank arbitrarily called his LOC and left him scrambling. 2 other home owners i know had their HELOC rates increased 1 1/4%.

All these individuals are low risk high equity customers but i guess CMHC won’t backstop those products.

#112 Ronaldo on 12.20.09 at 10:50 am

In February of 2006 my son called me to say that he was looking at buying a house in the NW part of Calgary in a newer development. The house he was looking to buy was selling for $249,000. It was a basic 1100 s.f. two level w/unfinished basement, nothing fancy. It had sold for $175,000 a year earlier. The bank rate had risen from 2.50 in June of 05 to 4.25 in Feb. of 06. The bank was offering a VRM at prime minus 1 which meant a mortgage of around 5.5 so his interest expense was approx $14000 on a $249,000 mortgage. At the time, I thought this was an outrageou price but the way prices were going up, he felt he had better get in before prices went higher, so he did. He was making decent money in his arborist business and his wife worked as well so they were able to manage ok but there was not an excess of cash after all the other things that go along with owning a house. Well, prices did continue to rise and by the spring of 2007 (1 year later), they sold it for $345,000 and moved north to a nice place near Red Deer where they puchased a home for around $275,000 privately. Similar house listed for $289,000 at the time. He was once again able to get a mortgage at prime -1% or about 5.5% which would have made the interest expense once again around $14000 on $250,000 mortgage which they were able to handle but once again not much left after all other things taken into account and they were both working as well. Prices began to fall and lots of homes for sale in 2008 but then when rates dropped in late 2008 and beginning of 2009, prices rose back up to around the $289,000 level where they seem to be at today so they have just gone back to the 2007 levels and there are still lots of homes for sale. Where they are benefiting is the fact that they took out a VRM at prime minus 1 so they are now sitting comfortably with a mortgage of 1.5% and stashing a lot of cash into the principle. I wonder now how many other people who bought from 2005 to 2008 with VRM’s such as this. For these people, they are capitalizing immensely by paying down their mortgages and even if the rates were to increase another 4% from where they are at now, they would still be better off than they were when they first bought as their mortgages have been greatly reduced and they could still carry the mortage. It doesn’t appear in this case that the low interest rates have caused real estate in this area to rise tremendously because of the economic situation in that province. It would seem to me that the problems the banks may have is that there are too many people who bought between 2005 and 2008 sitting on these extremely low mortgages and it would be in their best interests if they could get them scared into locking in at double or more the rate they are presently paying. For those that purchased homes and drove the prices up from beginning of January 2009 who are sitting in VRM’s, big trouble. For the others prior to that, not really that much of a problem as they can absorb a fair increase in their mortgage. I believe that this is one of the main problems the banks have right now, too many people in too low of mortgages. If you look at the RBC’s posted rates, they are certainly not cheap and some institutions are already starting to lower their 5 year rates to below 4% to coax people into locking in long term. They aren’t happy with those 1.5% mortgages that are still locked in for 2 to 3 years. Can you blame them? As for what is going on in other areas like Toronto and Vancouver, that’s a whole different story.

#113 junius on 12.20.09 at 11:34 am

Canada is not the only country that is still in bubble territory with Real Estate. Take a look at this from Shanghai and compare the approach (or lack thereof) of dealing with the problem from the Chinese gov’t. Sound familiar?

http://www.bloomberg.com/apps/news?pid=20601109&sid=aqiNuxetDZbg&pos=15

#114 Taxpayer like everyone else on 12.20.09 at 11:48 am

103 Vader

Garths blog, Garths definition. (See inflation and bi-weekly payment debates from long ago)

But I do agree with your analysis. Also, my
understanding is that a NINJA loan is based solely on credit score. Thus, the ‘sub prime’ borrower could not get one, but the ‘prime’ borrower who had just lost his job and had no other assets would qualify. Basically just a bad idea asking to be abused.

Being self-employed, the ‘liar loan’ strikes close to home
for me. I’ve had issues with the bank before, and my account manager says that was pretty normal. Accountants are always worried about reducing tax, so your verifiable income in any year can seem low, but your assets are often over-stated. Still though, self-stated income is asking for trouble.

Here’s a good one. Never tried it myself. If you are an employee of your own corporation, you can pay yourself a wage and issue a T4 for it. Now lets say you’ve got some cash to live on for awhile, but business sucks, and it only generates $20K of profit that year. ‘Pay’ yourself
$65K and use the $20K for CPP and tax. Your corp now has a year loss of $45K, resulting in a shareholders of the same amount, and your T4 says $65K.

Twice I’ve got mortgages (local CU, National bank) based
on T4s with no further documentation.

#115 dawson on 12.20.09 at 12:00 pm

How these people got the second mortgage ? Don’t tell they saved for a downpaiment.. look at their income and what they spend.

http://www.theglobeandmail.com/globe-investor/personal-finance/financial-facelift/a-special-challenge-needs-a-special-plan/article1402924/

Everybody is a milionare in Canada.. good country:)

#116 Cory on 12.20.09 at 12:02 pm

I can’t see any of this expected crash coming to fruition. Reality says it should definitely happen and should have by now but as I said before, the politicos have too much power to change the rules as time passes and they will to suit their never ending quest for absolute power (i.e majority). Until then look for real estate to stay at these levels and potentially creep ever higher.

#117 jr on 12.20.09 at 12:04 pm

Two years old. — Garth

His call still stands–I didn’t post it for any other reason then to explain gold in deflation–which it does–
Feel free to rebut the contents–
His main reason for holding gold is,because of crackpot politicians–

“You Can’t Fool Gold “

#118 Mike (Authentic) on 12.20.09 at 12:06 pm

“If we have to, we’ll do what we did last year and limit the rate of amortization further than we already did, and require higher down payments.”

Thank god, or in fact, thank you Jim Flaherty and the CDN Gov’t for coming to your senses. Please put a “RUSH DELIVERY” on that order.

Mike

#119 Taxpayer like everyone else on 12.20.09 at 12:16 pm

Sorry, should read:

“Your corp now has a year loss of $45K, resulting in a
shareholders LOAN of the same amount, and your T4
says $65K.”

#120 Jonas on 12.20.09 at 1:18 pm

Hongcouver is fueled by easy immigration buying their way in and the Asians are pushing out Canadians without a doubt. It’s easy money for the Province and the Fed and it helps to keep the bubble inflated. What the short sighted officials don’t seem to care about is that soon there will be more of “them” than “us” and “they” will soon be electing their own to new and changed governments making it a lot less pleasant to live here for “us” thereby changing Canada into the dreadfull place “they” fled from in the first place.

Garth – I’m not sure where your dislike for gold stems from, it seems counterintuitive to your overall premise. The fact that gold is doing so well is indicative of a failed financial system. A failed financial system will in fact crater the real estate market after low rates which cant’ got any lower fail to prop the market. If the financial system was in good order gold would be mid triple digits.

Don’t know how many times I have to repeat this, or publish it in books: My position is that gold should form 10-15% of a portfolio since it gives inflation and currency protection. Above that is overweight. I do not dislike gold. I do have problems with the myopia, fixation and condescension of the gold lobby. — Garth

#121 Oakville Owner on 12.20.09 at 1:38 pm

112- Ronaldo

This is how things have worked out for my family. Some of it has been luck, yes and some of it has been education. Spoke to our banker the other week and she was not to happy with the idea that we wanted to pay an additional $100 bi weekly on our 1.75% open mortgage. My thought was to pay down the principal as fast as possible before they raise rates,if they do! It also gets us use to paying the higher rate in case they do go up. Even if they go up 250 BP we will only be back to what we started at 1 year ago and I think we will just ride out the rest of the 4yrs at these historic low rates. Our 20 amort is already down to approx 13 yrs so if we can get it paid off in the next 15 yrs with rates moving a bit higher over this time it would be a great savings.

#122 Barb the proof reader on 12.20.09 at 1:56 pm

#77 prairie gal:
"Alberta can no longer hold the “we provide royalties and oil for the rest of the continent” bag over North America’s head. That ship sailed long ago. Alberta quite simply is a has-been province, the residents are realizing that they must resort to scare tactics and unbelievably destructive industry to maintain their ’status’. Its quite pathetic, really."

Good comment, Prairie Gal, but I think you’ll agree that Alberta having a ‘propaganda mentality’ and being a mean little bully is not new behaviour.

Alberta is all about ‘short term gain’ — ‘regardless of outcome’. The use of blatant lies and manipulation in Alberta is the norm. This government and it’s cronies simply, and always, act like children to get their way. Alberta politicians never look to the long term, except as regards to what’s on the horizon for their own personal fortune. I used to be involved with the hiring for Alsands c1981.. I remember it all too well. Alberta politicians have always used lies, scare tactics, temper tantrums, manipulation and blackmail. It’s as though Alberta politicians think it’s just a lovely innocent game to act like traitors..

ALBERTA GIVES OTTAWA CUT BACK NOTICE

The tar sands is the worse human-caused-yet-human-stoppable environment threat and disaster in history. Yet we all know that their ‘lipstick’ — even coupled with deodorant & toothpaste — won’t fix what is actively being created here — yet Alberta simply diverts attention from it’s horrible underbelly.

#123 Jojo on 12.20.09 at 2:37 pm

Now I’ll use your words:
Garth said “I think the Fed, Geithner, Bernanke and Obama are smarter than you (or me). This will not happen.”
WHY do you think that ours leaders are not better:
“Carney,Flaherty and Harper are smarter than you
(or me). This will not happen”

Different topics — control of hyperinflation and mortgage insurance requirements. You cannot cut and paste an answer and maintain any creds on this site. — Garth

#124 prairie gal on 12.20.09 at 2:44 pm

jr: “Ummm–Guess what?

The Bakken is a high pressure shale gas–
As in—no oil–”

Really? Wow then what are all those OIL wells pumping? You may not want to admit this but for those who wish to know the truth:

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

“An April 2008 USGS report estimated the amount of technically recoverable oil in the Bakken Formation at 3.0 to 4.3 billion barrels (680,000,000 m3), with a mean of 3.65 billion.[4] The state of North Dakota also released a report that month which estimated that there are 2.1 billion barrels (330,000,000 m3) of technically recoverable oil in the Bakken.[5]”

Sad that some Albertans are so deluded and desperate they deny reality.

#125 jr on 12.20.09 at 3:18 pm

My position is that gold should form 10-15% of a portfolio since it gives inflation and currency protection. Above that is overweight. I do not dislike gold. I do have problems with the myopia, fixation and condescension of the gold lobby. — Garth

ZAP!

Your wrong Garth–
Gold is not a hedge against inflation–
Gold is a horrible position in inflation–
Although it does protect against devaluation,as an investment,”price gain” it does poorly–
Pull a gold chart from 1987 to 2001–we had high inflation all through that period–what did gold do?
Assets ie houses–do well in inflation–
Gold does well in deflation–hyper-inflation and political uncertainty–
Want to know why i think gold broke out in 01?
For the same reason the long bond wouldn’t follow the Fed rate–
Remember Greenspans conundrum?

Here’s what i believe was happening–
The 30yr and gold could both see the hyper-inflation of the credit market through housing and the subsequent levering up,through CDO’s and all other forms of debt instruments,to what? 30-90-1
What does gold see today?
Political uncertainty and a major credit upheaval–
Think Dubai as harbinger–

btw Garth–Not all of us are raging gold to the moon gold morons,in fact i shorted gold at 1188 and am long USD–for a hedge off–i think gold “could” retest 870 or so–unless of course something major blows up in the meantime–
I’ll always be net long gold-through this mess–jmo

#126 vreaa on 12.20.09 at 3:26 pm

re #115 dawson (& this week’s G&M Facelift)

The Globe & Mail’s Financial Facelift 18 Dec 2009 describes a couple aged 36 & 39 from ‘central Canada’ who are admirably planning for their retirement and for their disabled daughter’s future. Here are some details of their finances –

Annual combined income: $66,670

Assets Total: $792,000
(House $250,000; Rental property $468,000; RRSPs $70,095; RESP $1,000; RDSP $3,517)

Liabilities Total: $438,000
(Mortgage on principal residence $70,000; mortgage on rental property $318,000; family loan $50,000)

vreaa comment:
Net worth is $354,000.
Total RE being carried is $718,000.
Leverage of net_worth to RE is >2:1.
If housing prices pullback by 15%, this couple will see their paper net_worth drop by >30%.
If RE prices drop 35% (the high end of David Rosenberg’s recent estimate) then this couple will see their paper net_worth plummet from $354,000 to $102,000. For a couple with an annual gross income of $66K, this would be devastating.

http://tinyurl.com/y8rmkw4

#127 Taxpayer like everyone else on 12.20.09 at 3:37 pm

124 Prairie gal

A 3Bb reserve represents 35 days of world consumption
and about 5 months of US consumption.

Estimates for Alberta Oil sands with current technology, and a 2006(?) price is about 170Bb – roughly equivalent to proven world reserves.

I’m not debating your other points, just wanted to show
the math.

#128 CalgaryRocks on 12.20.09 at 3:40 pm

Alberta is all about ’short term gain’ — ‘regardless of outcome’. The use of blatant lies and manipulation in Alberta is the norm

Barb, aren’t you the one that lied to your neighbours about the Reno tax credit? Just asking.

#129 jr on 12.20.09 at 4:18 pm

124 Prairie gal

Sad that some Albertans are so deluded and desperate they deny reality

My bad–thought you said Barnett–apologies —

Maybe owe you a beer for that-
Guess we’ll all be in Saskatchewan later anyways–Working there as our province dies–
Sorta like how all the Saskatchewan boys and girls came to Alberta and helped us kill it–ya know,over the last 50 years when nothing much was happening there–
Beer has to be recession grade though (:

#130 Barb the proof reader on 12.20.09 at 4:29 pm

#128 “aren’t you the one that lied to your neighbours about the Reno tax credit?”

— CalgaryRocks”

Hmm. As usual, Rocks, what the hell are you talking about? Better stated, what the hell are you making up now? The way you pounce and pretend some sort of innuendo — is no longer weird, it’s just plain revealing about you. I agree with someone on something about the Alberta government — and you pounce with false innuendo.. Hmm? .. Pattern! That shows us who you are, a scrambling gov’t pounce boy. “With ’em!” eh?

#131 TJ on 12.20.09 at 4:59 pm

From Internationalforecaster.com –

“Just to give you an idea of how much debt has been created, the average G-20 budget deficits are 10.2% of GDP, when 3% is normal. Greece, which is on the edge of bankruptcy, will be 12.5% in 2010.
Yet, the US is already at 13.5%.
Close behind are the UK and Japan at 11.6% and 10.3%.
The erosion of confidence and trust will soon manifest itself as lenders stop lending to these nations. This has already happened to the US with the Fed monetizing more than half of Treasury issuance.
This is proof the dollar will crash and be devalued, as debt goes into default.

Foreign nations are understandably concerned, as the dollar now only makes up 37% of new foreign reserve holdings.

That is about a 50% reduction in holdings.”

> In the past few days, Obama has been snubbed by the Chinese and then only to hear a Top Chinese Bank official say basically, that the appetite for US Treasuries is sated.

Next?

Well – have you been reading what Garth has been yelling himself hoarse about?

I walked by a condo on a main drag in D/T YVR – open house – $549,000.

That gets you a slot over a Starbucks and a Movie Theatre.

People have lost their minds.

#132 Ronaldo on 12.20.09 at 5:22 pm

Here’s an interesting chart on Variable vs 5 Yr. Fixed over the past 10 years:

http://www.canequity.com/mortgage_rate_history.stm

#133 Rene on 12.20.09 at 5:49 pm

In regards to post #4 and #13, upon renewal of a mortgage written 5/35, the original terms remain. Therefore, if the mortgagee signed for a 5-year term, he’ll have 30 years remaining upon renewal. The bank will take into consideration the new rate, remaining balance and 30 year amortization to determine the periodic payment. Search for any standard mortgage calculator to figure it out.

Sadly you are wrong. The mortgage contract is for five years only (or three, or one, as the case may be), and the amortization period is irrelevant. The lender has every right to refuse renewal, which is a situation happening now. — Garth

#134 OttawaMike on 12.20.09 at 6:32 pm

Here are 10 US housing markets that never took part in the bubble. The interesting stat shown is the high employment and low foreclosure rates. A stable affordible housing market does really bode well for the economy. It is one reason Texas has largely escaped the hardship of the neighbour “sand states”.

http://realestate.yahoo.com/promo/10-housing-markets-where-prices-have-gone-up.html

#135 BearClaw on 12.20.09 at 6:47 pm

Sadly you are wrong. The mortgage contract is for five years only (or three, or one, as the case may be), and the amortization period is irrelevant. The lender has every right to refuse renewal, which is a situation happening now. — Garth

Rene’s point is that generally after 5 years the mortgage will be renewed with a reduced amortization. So someone who had a 40-year loan will be able to renew with 35-year with no change in amortization schedule. All the posts were discussing CMHC insured mortgages, which have so far been renewed. The loans you are referring to not being renewed are subprime, as in not CMHC insured, and account for a small percentage of outstanding mortgages.

She is still wrong. Amortization periods have nothing to do with the legal term of the mortgage contract. We have yet to see how Canadian lenders will deal at renewal time with properties in negative equity or for which the owner no longer qualifies for the level of financing originally extended. — Garth

#136 Nostradamus jr. on 12.20.09 at 7:07 pm

“””Hongcouver is fueled by easy immigration buying their way in and the Asians are pushing out Canadians without a doubt……. soon there will be more of “them” than “us”.”””

….Excellent point # 120 Jonas….

Yes, Soon, Hongcouver R E Prices will be on Par w/ Hong Kong R E Prices.

and what’s wrong with that?……NOTHING!

…Except of course for all you cry babies from Ontario and our locals who sold too early, and now who “wax jealous” in various forms, ad infinitem.

Nostradamus jr.

#137 Siberta on 12.20.09 at 7:21 pm

Sadly you are wrong. The mortgage contract is for five years only (or three, or one, as the case may be), and the amortization period is irrelevant. The lender has every right to refuse renewal, which is a situation happening now. — Garth

“refuse renewal, which is a situation happening now” Can you elaborate on that, I thought lenders were falling over themselves to sign you up to a life time of debt.

Check out media reports (including Globe & Mail) already linked here. Many people with perfect payment records are being refused renewals by lenders. — Garth

#138 CalgaryRocks on 12.20.09 at 7:28 pm

Pattern! That shows us who you are, a scrambling gov’t pounce boy. “With ‘em!” eh?

Yeah, I’m sure Harper loses so much sleep over what Barb the proof reader thinks that he’s hired me to keep an eye out on you. I wish.

#139 Taxpayer like everyone else on 12.20.09 at 8:01 pm

Ottawa Mike @134

Interesting list! We find army/air force bases, energy including refining, Texas A & M, healthcare, Verizon wireless. All relatively recession proof – only a minor
manufacturing component. And what recession proofs
them may also boom-proof them to a certain extent.

I think Texas was brought up in previous blogs as having affordable real estate. Demographia.com presents theories as to why this is.

But Texas was bitten bad in the Savings and Loans crisis in the 80s.

#140 DaBull on 12.20.09 at 9:12 pm

#129 jr

Look up the Cardium oil play in Alberta, same as the Sask Bakkan play only a little heavier oil. This play can be bigger than the Sask Bakkan play, but only if “Not So Steady Eddy” properly rejigs the “new royalty debacle” so Alberta is once again competative against other jurisdictions.

#141 Daystar on 12.20.09 at 9:16 pm

After reading the comments, sadly, there are way too many of us who still aren’t getting it.

Those who think this housing bubble will not pop on a Conservative watch are dead wrong. It doesn’t matter who is in government now, folks. The damage of irresponsible mortgage regulations bought in by the Conservatives since the spring of 2006 have run their course and must now be accounted for. Its a question of time that is measured in months now and when this bubble pops, so with it, will follow a collapse in financials, in the markets, in real estate, in housing construction, in retail and wholesale, and in the economy as a whole for years to come.

For those of you who have the daft belief that this housing bubble will not pop within a year, you are all clinging onto a belief that mortgage regulations will either be expanded to the loose 40 year nothing down or mabye even 50 year nothing down amortizations to “continue to inflate an already grotesque housing bubble”, combined with “record low interest rates” that somehow must stay at record lows eternally because the government has no choice. Dummies… when interest rates climbed on GWB and kicked off subprime causing the U.S. to spiral into a recession that they are still in now, its because GWB HAD NO CHOICE.

WAKE UP PEOPLE!!!

If the U.S. dollar shows any kind of stability at all, our own dollar will fall (along with gold) due to record govermental deficits and interest rates will rise as the only reason interest rates are so low now is to keep the loonie below the greenback. For those who don’t believe this to be true, those same people have virtually no clue as to how bond markets work.

The belief that interest rates will stay at record lows eternally, is false. The belief that Canada is not in a bubble or that the housing bubble is not directly caused by government policies concerning mortgage regulations (40/0’s, 35/5’s) and deregulation of CMHC, is also sadly false. The belief that this Conservative government can now soften the landing of a deflated bubble is also false.

Its a bubble! All bubbles pop!! And when they do, it hits the fan folks and is about as poisonous as a heater car misting antifreeze in your car. The smell won’t leave you. It won’t dry off until there is a cleansing and that cleansing can only come with interest rates and mortgage regulations that are actually sane. Unfortunately for us all, it will have to be priced in.

Don’t the rest of you get tired of corrupt politicans buying your votes with unsustainable mortage regs and interest rates that expand credit to the point of no return at the full expense of us all?

Is it not the Harper government that has created a bubble to which ALL of us will suffer when it bursts as those who cling to the belief that they will benefit financially from a broad recession that last years from incompetant policy is also false? Absolutely and they will be held accountable for it. For the dummies who cheer on bubble inflation so that the misery to follow becomes more extreme, it appears to me to be obvious that those same people who cheer on such extremes appreciate recessions that last years, that drive up divorce rates and ruin families and their children… for years if not lifetimes and are most obviously thinking once again, only of their selfish selves. It will effect everyone’s families and friends for years to come. It will stunt the growth and prosperity of Canada for years if not decades from governmental debt, tanked markets, a falling currency and bankrupcies that we as taxpayers cannot escape and will leave a lifetime bad taste in peoples mouths reminding them to pay attention to the reasons why we shouldn’t elect governments who clearly have no clue as to what they are doing. Stupid is, folks, as stupid does. Y’all thought Stephane Dion was a bit slow? Check out this moron below.

http://www.youtube.com/watch?v=rm29cgVXJTk

#142 Dan in Victoria on 12.20.09 at 9:16 pm

Post#131 Tom, Take a look at this graph, I didn’t do any research to back the claim up. But if this is true its pretty sobering. And with us living next door and acting like them…. and they are our biggest trading partner…..I wonder how thats going to work out for us? http://www.doomers.us/forum2/index.php?PHPSESSID=48fc71df320b2a7ef3e7f8725a88db61&topic=58779.0

#143 Uncle Joe Pipe Smoke on the Volga on 12.20.09 at 9:17 pm

Next Fed Budget’s a Bismark rudder.

#144 Cory on 12.20.09 at 9:55 pm

Garth is correct…lenders are not under obligation to renew your mortgage….it is in the contract that nobody reads, except for yours truly. In my last mortgage, it actually reads that I was not allowed to do any reno’s etc unless approved by my lender (sound like a landlord??lol) …I would assume this is the same for all. The contract is 110% written in favor of the lender to do as they please, and they will if the situation calls for it.

I agree lenders will opt not to renew on many mortgages for reasons stated and will also start calling “callable” debt, (i.e. HELOC) prior to renewals.

#145 jr on 12.20.09 at 11:28 pm

WAKE UP PEOPLE!!!

If the U.S. dollar shows any kind of stability at all, our own dollar will fall (along with gold) due to record govermental deficits and interest rates will rise as the only reason interest rates are so low now is to keep the loonie below the greenback. For those who don’t believe this to be true, those same people have virtually no clue as to how bond markets work”

I think interest rates are low because Carney wants to try and expand the bubble–to try and maintain credit velocity–to “not”pop the bubble–

If interest rates are increased,it will strengthen the looonie,unless of course the US raises at the same time–
True–they can’t control the long bond rates,–
QE has proven ineffective other then short term blips,from government buying,but that can’t continue indefinitely and the results are poor at best–
I think the USD could easily go into the high 80’s and if equity markets crash,maybe higher–

I also suspect gold will fall initially,then as the safehaven play intensifies,I think gold and the miners will decouple and gold will trade with the dollar and compete as a safehaven currency,as it did for most of 2005 and again in part of 2008–
I also think gold will kick all currency’s asses before this is over–
We have a host of currency’s in danger of collapse–
GBP–Yen are two that look real shaky–
Yaun–if they ever dropped their USD peg–
Lots of smaller currency’s are on shky ground as well–
If one of these majors starts to fall uncontrollably,I’m thinking,Central banks will have no choice but to step into the gold market and buy,in order to stop a run,raising rates at that point,”might” not be enough and would for sure,implode their economy’s and “could” start a chain reaction,flight to gold–
Central Banks buying gold in a panic would cause a massive short squeeze,that could really spike the price–

In the long run,the $ price of gold is irrelevant–
If it gets close to its historic 1-1 with the Dow,even at 1000,the buying power will be what one needs to look at–
No different then dollars,its never really how many dollars you hold–its what the dollars you hold, can buy–jmo