Truthiness

Ian Lee toiled obscurely for a decade as a banker, a guy who ended up giving people mortgages at the Bank of Montreal. Then he went back to school, worked up a doctorate and reincarnated as a media-loving prof in Ottawa at the Sprott School of Business.

I’ve a lot of respect for people who are aggressive academics. Except the ones who murder facts to make a point.

Mr. Lee was just trotted out as the expert in a single-source column in the Toronto Star on ‘Why we won’t see a housing collapse’ in Canada. And, by the grace of Allah, maybe we won’t. You can read the piece for yourself – which fails to address the issues of housing speculation, household debt, demographics, unemployment and a few other nasties that will shape the future. All in all, the prof ranks a D on persuasiveness. But an A for untruthiness. Check this out:

American housing prices collapsed because of poor government policy, says Lee. U.S. mortgage lenders gave out mortgages to people for no money down and often didn’t check credit history.

That’s not what happens here. “It’s illegal to have a zero down payment in Canada,” Lee explains.

Of course, it’s not illegal. If you like, you can buy a house with an electric shaver, udder cream and a box of condoms (don’t ask), and you can certainly get one without money. Even if the professor meant to say you cannot obtain government-run mortgage insurance without a down payment, he’d still be wrong. In fact, our major banks offer not only liar loans they also fully fund mortgage brokers offering zero down. (Note: Mr. Lee responds to my criticism in the comments section of this post.)

Now, anyone can lie to a reporter (‘We will not run a deficit’ – S. Harper, 10/08). But most of us think it’s a reporter’s job to check facts instead of just being really good at typing. Apparently not this one. And that brings us to our cautionary tale of the day. After all, a premise of this troubled and twisted blog is most Canadians have no idea the economic reality we face, being gaseous and pie-eyed from all the sunshine pumped up their kilts, often by people posing as journalists.

Cut to Vancouver.

Some months ago I published a letter from an accountant who told us this tale:

“I went to visit a friend of mine whom I hadn’t seen for a few months. When I arrived, things seemed a bit tense around her household (she and her husband have a bunch of kids), even more than usual. When she and I were alone, she confessed to me that her husband, in his infinite wisdom, purchased one of those famed Olympic condos with the intent of making a quick flip. Ha! I’m sure you know where this story is going….The condo is now lingering on the market, and personally I doubt there is a chance in hell that it will sell.

“So now they are stuck with making mortgage payments of $2400/month on this bloody condo (that’s right, it cost nearly $500k!). That’s a big chunk of change for any family to come up with every month, on top of the usual household expenses. I think eventually they will have to ask family for help, or sell their current home. My advice to her: SELL!!! drop the price and SELL ASAP! But I think it’s too difficult to bear thinking about taking a big loss, which they would have to get a personal loan for, adding to whatever debt they already have. So they sit and wait. And pray.

“And this is just the tip of the iceberg…maybe it’s just my profession but I seem to know an awful lot of people with the same story: too much real estate, trying to sell, can’t drop the price because the mortgage will then exceed the selling price. And that’s not even mentioning the other consumer debt they have….

Since then, real estate sales in Vancouver (like Calgary and Toronto, Saskatoon and Edmonton) have declined from 2009 levels month after month after month. And the ultra high-profile Millennium Project – the former Olympic Village – has now collapsed into receivership. (Interestingly, that story never made it into the Toronto Star, or Global TV news, or the CBC.) Average prices in the Lower Mainland have increased at the same time the market’s seized up, a classic sign of distress.

Hours ago the accountant sent me this update:

“I finally worked up the courage to ask her “hey, what’s going on with your condo?” (I was really dreading her response). The good (somewhat) news – they’ve rented out the condo “but not for even close to what the mortgage is!” she told me. I was relieved to hear this, great, now they’re only in the hole by about $1200 a month, instead of $2400. But how can things go on like this?

“This can’t work over the long-term…once interest rates go up (I bet you anything they have a variable rate mortgage at some crazy rate like 2.15%!), they are going to be in serious trouble, even more than now. But for now, it’s a slow bleed, as opposed to taking a quick loss. I suspect they are waiting for the spring, thinking the market will “recover” and they can sell, maybe even for a gain! Right….just like in Florida, where now they’re expecting the market to “recover” in what, oh, 50 years from now? Maybe?  If we’re lucky?

“The good news is I bet her husband will never ask me ever again “Hey, how come you haven’t bought a place yet?” He undoubtedly now realizes that having a mortgage on some overpriced property is just flushing money down the toilet, as opposed to renting for at least $1000 less a month. Because real estate doesn’t always go up! Gee, who would have thought?”

The moral of this story is that there’s the news we’re being given, and the news we are living.

When the two part, journalism dies.

254 comments ↓

#1 mark on 11.19.10 at 8:35 pm

This continually feathering people with lies over what state markets are in will be the undoing of the public. Every time some goose is wheeled out, looking all authoritative and spouting some myth, it leaves people in the situation below, doubling down, believing more than ever that they’re safe, when they aren’t.

http://tasmanianrealestatetrouble.blogspot.com/2010/11/seeya-ii.html

#2 Jeff Smith on 11.19.10 at 8:38 pm

I read about him, he was all over the news today too. I wonder how he got his piece of paper and become a prof. I wonder now whether the university where he teaches have any credibility left, allowing one of there one to spew out this kind of manure.

#3 Jeff Smith on 11.19.10 at 8:42 pm

Don’t worry, he is assistant prof, probably not tenured. When the s* hits the fan and he is exposed for what he is, I am sure they will give him the paper to walk. I have seen it happens.

#4 AxeHead on 11.19.10 at 8:46 pm

“worth it” I’m guessing the end of her paint message.

She should scratch the s**t out of the car while she’s at it.

We’re being cheated on by the MSM just like this gal…but at some point the truth has to come out.

I love it when someone ‘gets’ my pix. — Garth

#5 TS on 11.19.10 at 8:50 pm

The bottom-line business interests of the media (i.e. advertising revenue and continually lower taxes) is all that seems to matter to the chosen few that own what we read, see and hear. The days of independent, investigative journalism have been long dead in Canada. That’s why the looming crisis in housing is papered over and that’s why all of the anti-democratic actions of the Harper Conservatives go unreported.

#6 Spiltbongwater on 11.19.10 at 8:56 pm

Garth, when Millenium Water comes out with new prices in new year, will that lower values of other condo units accordingly, or will prices not be affected too much as they are currently over priced, and just correcting prices to where they should be?

#7 Pr on 11.19.10 at 9:03 pm

There is no escape, people are fooling themselves. Those bying real estate this year, will soon get what they deserve.

#8 Lurkin'Shiny on 11.19.10 at 9:13 pm

Whoooooow!!! Buddy Garth…I sense a bit more angst than usual. I’m on your side all the way, and I feel your frustration. However, most/many of your loyal squirrel hunters are interested in solutions. Obviously, none are coming from government(no parties excluded). Do we just plant our heritage seeds and hunker down or should we get active and find a cooperative way out of this global screw up. I’m all for globalization and sharing the wealth. Many of the poeple in distant places(India, China, etc.) need income too(I’ve visited ,I know). However, the banksters are taking too big a cut. That needs to stop!!! Anybody! Ideas!

#9 Tripp on 11.19.10 at 9:20 pm

My family and I live in West end Ottawa, nice neighbourhood with a mix of towns, semis and detached between 5 and 40 years old.

Last year the houses sold in 2-8 weeks. Now we have almost zero RE activity in the neighborhood. Towns are up for mid 200k, semis for 300k and detached for 350 to 500k. Most of them have had the signs for more than 2 months with the record holder for almost half a year! At the other extreme, one of the towns got sold in less than 3 weeks last month and brought some hope to the other sellers. It proved to be the odd exception.

My neighbour across the street had an open house each Sunday for the past 3 months. Nobody knocked his door in October and November.

Statistics and press releases could sound rosy, but from the street level it starts to look bad.

#10 garth fan on 11.19.10 at 9:22 pm

garth,

you are a true canadian hero.

#11 squidly77 on 11.19.10 at 9:22 pm

Newspaper readership is down, not due to the internet, but due to damn awful reporting, buying a newspaper today is just a waste of money.

As a side note your readers might be interested to know that theres now over 50,000 unemployed Calgarians.

Things ain’t good here.

#12 DiGiacomo on 11.19.10 at 9:23 pm

interesting that your friend mr lee also has been quoted for true “hope she was worth it” insights such as:

we aren’t paying politicians enough
http://en.epochtimes.com/news/8-3-26/68094.html

biofuels are not to blame at all for food shortages
http://www.topcropmanager.com/content/view/1570/179/

and curiously, only 8 months ago being quoted almost completely opposite from today’s comments as saying “If interest rates go up just two or four per cent we could see a crisis,”

and

“But it could also simply be that we’re not as different from the Americans as we’d like to think when it comes to debt. “The Americans threw prudence out the window and drove off the cliff with their eyes wide open,” says Lee. “We’re just backing up to it.””
http://www2.macleans.ca/2010/02/02/awash-in-a-sea-of-debt/ (Garth, you’d probably like this article)

#13 Jsan on 11.19.10 at 9:37 pm

I have posted this many times on this blog and it’s worth repeating. During the initial stage of the US housing meltdown, I must have watched a dozen shows from the US. Shows like 60 minutes, 20/20, Dateline NBC, etc. They all did episodes on the crumbling Real Estate market and they all interviewed generally 20 and 30 somethings who purchased “investment” homes. This was at the very beginning of the collapse and every single one of the couples that purchased these houses all decided to rent their “investment” properties out until the market rebounded. They are all most likely financially wiped out today.

This is the problem with this 20 and 30 something generation, they have been so sucked in by the Real Estate industry, which is one of if not the least credible of any industries on this planet. They will foolishly ride the housing Titanic down believing that Real Estate is “always” a good investment or so they have been brainwashed to believe over and over again.

#14 Still Hunkering Down in Nanaimo on 11.19.10 at 9:42 pm

VI Funcanuck here in Nanaimo…..

Yeah there are sure lotsa folks who will spin you a yarn re: RE, investments,….

Interesting chat w/ a deluded RE agent the other week about the commission changes w/ MLS. He says that he will CONTINUE CHARGING FULLY COMMISSION to clients and that the “high end” clients will gladly pay his commission.

Talk about deluded. People who have money have money for a reason, duhhh!!!! I was too polite to argue w/ him.

If I bought a house and did most of the legwork myself, why on earth would I pay someone thousands of dollars if it is done quite easily!?

This whole RE arena needs a shakeup and RE agents and greedy homeowners will eventually wake up and smell the proverbial market.

Just another opinion of course.

#15 Jsan on 11.19.10 at 9:43 pm

Is this the next Chinese import? Instant construction? Bring it on, there is no reason why houses can’t be built prefab to order and put up in less than a week. I know they build prefab homes already on a very small scale but if done on a massive scale, the costs should drop immensely. They couldn’t be any worse than the leaking crap that we call new home construction today.

http://globaleconomicanalysis.blogspot.com/2010/11/china-builds-15-story-hotel-in-6-days.html

.

#16 wetcoaster on 11.19.10 at 10:04 pm

Was there not a day not too long ago that a journalist who wrote a piece of crap like that was turfed down the road ASAP ? Not in the day of the internet where stories can be re-worded or ommited on a simple keystroke.

Meanwhile in Victoria, the market is appearing to show major dysfunction with houses going below assessment and above and some with bidding wars. Is that not the best sign of a market that is about to go down the crapper ?

If it was a bull/balanced market there would be almost no “below” assessment sales, they would be all over. Psychology is clearly confused in Lotus Land where the writing is now on the wall.

#17 Thetruth on 11.19.10 at 10:11 pm

Mercedes and BMW have best October sales ever. Xbox Kinect sells 1 million units in record time. Check out the ultra luxury cruise ship ‘The World’ sold out.

On the other hand, the average Joe and below talk about impending doom and gloom.

The upper 20% of society will soon own the bottom 80% while the latter fight amongst themselves. It’s
happening right now!

Canadians will become economically stratified like people in India and China. Wait until public healthcare falls apart and you have to work until 69! …buts it’s happening now.

Exp

#18 T.O. Bubble Boy on 11.19.10 at 10:12 pm

CBC:
http://www.cbc.ca/canada/british-columbia/story/2010/11/17/bc-olympic-village-receivership.html?ref%3Drss

Toronto Star:
http://olympics.thestar.com/2010/article/892692–city-of-vancouver-puts-olympic-village-into-receivership

Global TV I’ll give you… closest I found was:
http://www.globalnews.ca/money/vancouver+olympic+village+condos+sale/3034051/story.html

#19 squidly77 on 11.19.10 at 10:15 pm

The Calgary herald took down the article I linked.
If you want to read some quotes from it you’ll have to endure my pathetic little blog.
http://albertabubbleblog.blogspot.com/2010/11/at-same-time-calgary-economic.html

But isn’t that so typical of today’s MSM, they are just pathetic.

#20 Tim on 11.19.10 at 10:18 pm

Journalism? Can West…say no more…
Harper lied about the deficit, if only that were the worst thing the weasel did. After whining for years about Senate reform, he packs the Senate with right wingers and then they defeat a private members bill on climate change. The Americans were dumb enough to vote for Bush, they deserve what they got, and I guess the majority of Canucks, being dumb enough to vote for Harper deserve what they got- a lying, weasel who is trying to erode democracy and who will do whatever he can to hang on to power

#21 T.O. Bubble Boy on 11.19.10 at 10:21 pm

Oh no!

I found what might have been the last buyer before the receivership:

http://kurtisstewart.com/blog/?p=509

So happy on his blog!
“Been going a little crazy shopping for furniture and seeing how far I can stretch my budget to justify getting an Eames Chair.”

#22 eddy on 11.19.10 at 10:23 pm

the Illuminati Toronto Star is the LAST place to look for information- it is just PROPAGANDA ! If Harper was an honest person he would notice the BLOOD ON HIS HANDS; but NO, it’s easier to kill young Canadian PATRIOTS and tell grieving parents that he is “making the world safe for democracy” ( WWI did that)

Here’s a song about the International Monetary Fund, lets all sing along:

Call It Democracy

Padded with power here they come International loan sharks backed by the guns Of market hungry military profiteers Whose word is a swamp and whose brow is smeared With the blood of the poor

Who rob life of its quality Who render rage a necessity By turning countries into labour camps Modern slavers in drag as champions of freedom

Sinister cynical instrument Who makes the gun into a sacrament — The only response to the deification Of tyranny by so-called “developed” nations’ Idolatry of ideology

North South East West Kill the best and buy the rest It’s just spend a buck to make a buck You don’t really give a flying fuck About the people in misery

IMF dirty MF Takes away everything it can get Always making certain that there’s one thing left Keep them on the hook with insupportable debt

See the paid-off local bottom feeders Passing themselves off as leaders Kiss the ladies shake hands with the fellows Open for business like a cheap bordello

And they call it democracy And they call it democracy And they call it democracy And they call it democracy

See the loaded eyes of the children too Trying to make the best of it the way kids do One day you’re going to rise from your habitual feast To find yourself staring down the throat of the beast They call the revolution

IMF dirty MF Takes away everything it can get Always making certain that there’s one thing left Keep them on the hook with insupportable debt

Bruce Cockburn, Toronto 1985

http://www.youtube.com/watch?v=_Fr6khzOskI

#23 T.O. Bubble Boy on 11.19.10 at 10:24 pm

Global TV has been covering certain aspects of the olympic village debacle:

http://www.citycaucus.com/2010/09/changes-are-coming-to-olympic-village-including-housing-protest

#24 Junius on 11.19.10 at 10:27 pm

Garth,

Amazing how poor journalism is in this country. Or in this case is it our University standards?

The poor lending standards did not cause the crash in the US. They were only exposed after the crash began. If prices had continued to rise no one would ever have know about all the mortgage fraud because there wouldn’t have been any victims.

The fundamental cause was too much cheap debt. Cheap credit allowed people access to larger mortgagees which in turn drove prices higher which created the cycle upwards that created the bubble.

The constant relaxation of credit became the tool by which the lending institutions continued to stimulate consumer demand.

This is the really important thing people don’t seem to understand. The fraud and the corruption are not the initial cause of the problem. However they become a necessary part of what keeps it going once it has becomes institutionalized.

Our bubble has been leaking for months. As soon as rates rise a few percentage points it will burst and we will see the impact. We will also see lots of fraud and crazy examples of cheap credit scams. These are not the cause but the result of a bubble economy.

#25 Tim on 11.19.10 at 10:28 pm

Olympic Village won’t recover. Look at how long it took Montreal to pay off the Stadium-over 30 years! If Quebecers didn’t smoke so much, it would have taken twice that time!

There is no greenspace in Olympic Village. The units are tiny, close together, and construction is questionable-like most condos built in the lower mainland. A friend of mine lives a bit west of there and pays over $400/mo in maintenance fees- almost half my rent. The big O Village is going down, just like Gordon Campbell. The only difference is Campbell will be forced to resign soon, the the Olympic Village will be a slow steady grinding decline. Thanks City Councillors, you really %$#$# up on this one. You’re lucky you are not held accountable

#26 RE Bear on 11.19.10 at 10:31 pm

I’m wondering if any RE Bulls would like to take the other leg on a RE derivative?

I pay you $1000/month, for a period of 5 years ($60,000), and if RE prices drop more than say 15% during this time frame, you owe me $250,000, or some type of sliding scale. I’d require collateral, say a house.

So, if there is a collapse, you owe me a quarter million, and you lose your house.

If things stay rosy, they’re even rosier for you as you net $60,000.

I’m honestly thinking about advertising in the paper and having a lawyer notarize such a contract.

#27 Contrarian Canuck on 11.19.10 at 10:32 pm

HAHA!

Same BS article dissected over at financial insights. Poor author won’t know what hit him

http://financialinsights.wordpress.com/2010/11/19/why-we-wont-see-a-housing-collapse-more-media-nonsense/

#28 Taxpayer like everyone else on 11.19.10 at 10:33 pm

11 squidly – i get “this story not available”!

#29 45north on 11.19.10 at 10:40 pm

there’s the news we’re being given, and the news we are living.

nice one

Lurkin your loyal squirrel hunters are interested in solutions.

you know Lurkin I just don’t think that there are any easy solutions, case in point is Garth who paid his way out to Regina and then drove himself to Weyburn to deliver the message to an “incredulous” crowd. Maybe the reason there were no questions is that the social dynamic in Weyburn is a lot more constrained than TO.

At this stage you’re going to pay a price to talk sense.

#30 T.O. Bubble Boy on 11.19.10 at 10:43 pm

I just re-read that “Why we won’t see a housing collapse” article, and it’s even worse the second time:

1)
the guy states that “it’s illegal to have zero down”, but then links to a CMHC site that actually states “additional sources of down payment, such as lender incentives and borrowed funds, are also permitted”

2)
the guy then makes a point that “The CMHC also charges people insurance if they put down less than 20 per cent. If there’s a default the lenders are covered”. Ummm… how does protecting the lenders who give out bad loans keep the lending standards high again?

3)
The guy quotes an affordability statistic from Q1 2010: “In the first quarter of 2010, the bank’s “affordability measure” for a typical Canadian bungalow was 41.1 per cent — much lower than the 54.2 per cent we saw in the 1990.” So, somehow it’s a positive factor that with the lowest mortgage rates in history, houses are still very unaffordable? We’re below a peak of 54.2 in 1990, but mortgage rates were between 12% and 14.2%.

So, when rates normalize, the $750,000 bungalow in Leaside won’t look so affordable anymore.

#31 This is Wonderland on 11.19.10 at 10:50 pm

People pay their mortgage first

When Lee was working at the Bank of Montreal, he saw time and time again that financially strapped Canadians would miss car and credit card payments before skipping out on the mortgage.
“I’ve see this face-to-face,” he says. “If someone doesn’t have the cash flow, they’ll default on another payment, but they won’t default on their mortgage.

OMG! Head Slap and a Scream!!!!

#32 EJ on 11.19.10 at 10:56 pm

Our MSM is a joke. In the US, the media pulled the same stunts, but there seemed to be far more information available to people who asked for it. Those folks then started up blogs and told the truth to those who would listen.

Just try getting some real data from CMHC. They’ll tell you their “portfolio is confidential”. They’re a fricken public corporation, the public deserves to know what they’re on the hook for.

These shysters have simply taken a page out of the Goebbel’s media modus operandi handbook.

#33 DJH on 11.19.10 at 11:03 pm

We won’t get the truth from our media until Canada gets its own version of MSNBC.

#34 Debtfree on 11.19.10 at 11:17 pm

Garth you crack me up . Yesterday sherry cooper and plucked bird in the same paragraph …. I still got tears in my eyes as I write this . Now journalists …. really garth when was the last time you meet one? I’ll see your sh liar and raise you our gordo ….. Mind you our liar doesn’t get anyone killed or maimed.

#35 april on 11.19.10 at 11:19 pm

Correct me if I’m wrong but as far as I remember Garth has said once sentiment changes low % rates make no difference to housing prices.

#36 Whistler Dude on 11.19.10 at 11:34 pm

Dear Garth.
I must have Vancouver envy. The Olympic Village in Whistler (which is now called Cheakamus Crossing), has become a bigger disaster per-capita (Whistler pop is 10,000), than the rainy city. Yet the TV net-works only want to talk about Vans OV ( which was financed by Fortress LLP- owner of Whistler til over a week ago ). The majority of that village was set aside for locals only housing. With $15 million worth of market RE set-aside that will fund the social housing.
Not one market townhouse has sold (called River Bend). In fact the local RE agent in charge of it (and president of the largest RE company) was quoted in the Pique newspaper saying they are discussing taking the properties off the market until prices rise again. Whistler is the most over heated RE market in Canada. Garth please drop by to see this first hand (ski season started today). This place needs a reality Realty check.

#37 Junius on 11.19.10 at 11:35 pm

#30 T.O. Bubble Boy,

Good post. Thanks for the work.

You don’t get enough credit for the background work you do. Just wanted to know that some of us appreciate it.

#38 groundzeropat on 11.19.10 at 11:49 pm

http://www.theprovince.com/business/City+likely+lose+160m+value+Millennium+land/3852541/story.html

Last part of article says if the real estate market goes up 40% then the shit stain Olympic Village will break even. Get real, those overpriced units range from $600,000.00 for the 2 car garage sized 500 sq/ft. unit and up to $4,700,000.00 for the huge mansion sized 2500 sq/ft. unit.

City of Vancouver not selling the units right now and are holding them until Feb. 2010 tells you how bad the market is. If there was even a slight pulse in the current market don’t you think the City of Vancouver will try to flog these hot corpses ASAP.

#39 Chimp, or Land Dolphin on 11.19.10 at 11:54 pm

#4 AxeHead

We’re all only human. Apes with big cerebral cortexes is all. No doubt he behaved badly, but then what has she been up to? But to wreck property over something as common as infidelity? No, she is in the wrong. It was only a matter of time until he was painting her car for the same reason, reversed. Plus she probably doesn’t put out, or he wouldn’t have had to stray. Why go through all the work required to cheat if things are being taken care of at home? Fact is you wouldn’t and you don’t.

So the answer is, “yes, she was worth it, and thanks for nothing, liar. Buy your own dinner if you aren’t in the mood.”

#40 Richard on 11.20.10 at 12:03 am

Thanks for the great blog Garth.

I’m from Vancouver, and most people I know are still thinking about buying a place. They all have the mentality that it’s a buy now or never market, that the asian population will support the housing prices, that zero downpayments and liar loans don’t exist, that a balanced porfolio of equities and bonds is too risky, that housing prices are guaranteed to be higher in the next 20 years, and that the value of having a “secure” home is more important than being financially secure.

My asian parents currently live in one house, and they have another house that they’re renting. They get $1900 a month for rent, and their mortgage payment is about $1600 with a fixed rate. I’ve been trying to suggest to them to sell the second house and invest in a balanced portfolio, but they won’t listen. They’re happy with the income they get from this rental property. I wouldn’t be so concerned, if it wasn’t for the fact that they’re going to retire in ten years or less, and real estate accounts for approximately 85% of their networth. They have the mentality that real estate has gone up in the last twenty years since they purchased their first home, and thus think it will continue to climb at the same rates.

#41 nonplused on 11.20.10 at 12:06 am

#13 Jsan

I’m renting right now because I can’t make the numbers work to indicate buying would be better. Sure, it’s throwing money at the landlord. But the alternative is throwing money at the bank or an opportunity cost calculation.

Now I will admit that rates are currently so low that there are no opportunities that provide much above housing without risk. But they haven’t been able to push rates down far enough where a 5 year bond won’t cover the rent, so we are at a stalemate. Yes, they probably will try. Yes, they may succeed. But so what? There are no new borrowers (well there are always a few, but the pool is mostly exhausted) who can push up prices based on lower rates. Everyone but a few contrarians is all in. There is no latent demand left. They ran through that already. No matter how many people they pay to pose as buyers with KittenBunny or whatever the girl is it doesn’t matter.

They were doing this 3 years ago. I live right across the street from a development that had “people camping out to get a property” 3 years ago and it still isn’t sold out, maybe 60% at this point. Those camp out line ups are all fake.

#42 Patz on 11.20.10 at 12:10 am

Sarah Palin’s only good line is the “lame stream media.” Journalism has been dead for awhile. I know a little of what I speak having been a news and documentary producer for more years than I care to say. Don’t do it anymore. Even 60 Minutes has taken to shilling.

In the same week that news went gaga over Wills and Kate it was reported that food bank usage in Canada has gone up 26% to an all–time record. Which story got more coverage? You know the answer and I doubt if you even saw the food bank story.

Flash back to 2002/03 did the media get the story that there were no WMD? Duh. But it was all over the Internet. Did any reporters in the US dig out the housing bubble in 2005/06? Double duh. But there were people like Peter Schiff who got it, tried to shout it out but got shut up, shut down and ridiculed.

And what do the media have to say about Garth now? According to Bill Good he can’t have him on his show because “[Garth’s] lost all credibility.”

Back in the day a few journalists I knew moved into public relations or became political press secretaries always with a bit of shame attached. Now your peers would think you a sucker if you practiced journalism.

#43 Phil Indablanque on 11.20.10 at 12:19 am

Everyone wants to move to Victoria because it’s different here

#44 Nostradamus Le Mad Vlad on 11.20.10 at 12:23 am


Actually, Mr. Lee is correct when he says ‘Why we won’t see a housing collapse’ in Canada (see links further down).

Instead, it will be a bloody disaster. Bloody in the sense that sheeple in North and Central America (re: Mexico) are going to vent their rage at official-dom; they are fed up with all the m$m’s clap-trap garbage being force fed to them, yet what is the first thing that most do in the morning?

Turn on the TV, listen to the radio or boot up the ‘net. Remember: Six individuals or companies (not sure which) control 94% of the m$m. That’s why papers, magazines and the like are good on the floor of a bird cage.

Global, CanWest, CTV and CBC are good for Wheel of Fortune, Jeopardy! and HNIC. Setanta is great for European and English soccer.

BTW, Pat and Vanna were discussing squirrels after the show Friday night. Neither of them knew what a baby squirrel is called. I think it’s a beluga, but I may be Lost In Space!
*
Twenty cities with the most underwater mtgs.

Human Cost of Irish crash, which most of us have seen in the US, UK, Europe and here.

One man discovered who owned his mortgage.

All You Ever Wanted To Know About QE2 But Were Afraid To Ask.

Hamtramck no bankrupt, Ham Sandwich default!

Not just RE Cities are likely to go bankrupt or be in default in 2011. Also — California Dreamin’. “Get ready for the domino effect, with bankrupt munis and pension funds!!”

Mr. Skull and Bones Plus the TSA.

How the Rothschilds destroyed the US (it’s no secret).

Science Pomegranate juice cures pathetic stupidity!

US Fed + Banxsters will be sent here!

Cdns. end fluoridation.

Macro countries with micro economies.

#45 Angela on 11.20.10 at 12:49 am

“If you like, you can buy a house with an electric shaver, udder cream and a box of condoms…”

Your mind goes to dark places, Mr. Turner. You make me laugh.

#46 dark sad person on 11.20.10 at 1:23 am

#8 Lurkin’Shiny on 11.19.10 at 9:13 pm

Do we just plant our heritage seeds and hunker down or should we get active and find a cooperative way out of this global screw up. I’m all for globalization and sharing the wealth. Many of the poeple in distant places(India, China, etc.) need income too(I’ve visited ,I know). However, the banksters are taking too big a cut. That needs to stop!!! Anybody! Ideas!

*********************

This isn’t an idea-it is a fact-

China et al have the majority of the worlds Industry and they have it because it costs Corporations less to operate from there-
Wages are 1/20th of what they are here and that is with zip for perks-Pensions/health care/vacation pay etc.-none of it–
Taxes are Corporation friendly
Environmental and labor laws are non existent-a huge cash bonus-

If we are to ever get out of this-we have to compete with China-we have to meet them somewhere-
Their wages will increase and ours will decrease-
They “have” to–
We have some advantage because we have most of the Resources in the ground and so delivery/extraction and we are not facing the pollution horror that will come to the forefront eventually and all of that weighs in our favor-but-until a balance is reached those jobs are not coming back-

The solution is simple-
Get the dumb ass power greedy Politicians to stay “out” of the Market and let the Market do what its meant to do–“Price discovery”

Stop printing money and stuffing it in crooked Bankers pockets-
Let “all” the Banks fail-that “need” to fail-
Stop bailing out Political buddies and their mismanaged dead dog Companies like GM-
Let them die-sell them on the open Market and then let them be restructured and run by private entrepreneurs-
Allow wages and prices to fall-
Allow dead bodies to float-
That-is the “only” solution–

We will go there-no matter what the Politicians think they can do-
They are delusional-
They are staring into the face of a one eyed Monster called the Market and it will blow away anything that stands in his path-when it’s ready-
Just keep in mind-the Market is the Peoples friend-
It’s not the Politicians or Bernanke or Carney and their ilks friend-
It wants to bring you lower prices-affordability and Jobs-

We can and probably will-fight this for years and become poorer and poorer-or we can let the Market work its magic-
The Market knows exactly what to do and will do it fast and efficient or Governments can try and stop it and delay the inevitable and prolong the pain–
Death by a Thousand cuts–

Just remember-the Market never loses-ever-

#47 Aussie Roy on 11.20.10 at 1:39 am

Aussie Update

Well if the RBA and Pollies wont say we have a bubble, then the Treasury Dept will have to – WELL DONE.

http://blogs.news.com.au/heraldsun/andrewbolt/index.php/heraldsun/comments/can_our_house_prices_really_stay_this_high/

http://www.news.com.au/money/property/treasury-sounds-the-alarm-on-property-bubble/story-e6frfmd0-1225956971546

Resources go BOOM BOOM, Interest rates go UP UP and Housing go DOWN DOWN.
http://www.theage.com.au/business/resources-go-boom-boom-20101118-17zc5.html

Yet another shortage – OF BUYERS.
http://tasmanianrealestatetrouble.blogspot.com/2010/11/seeya-ii.html

“Challenging to the Gold Coast is, among other factors, an overhang of property. “If nothing was listed from now on, it would take about two-and-a-half years to clear what is currently for sale.

http://www.goldcoast.com.au/article/2010/11/20/271755_gold-coast-real-estate.html

#48 Taking Stock on 11.20.10 at 1:41 am

I asked this question once before but no one responded. Here it is again.

If I take out a CMHC mortgage, pay the insurance fee to cover the lender, and then default and go into foreclosure, I assume the bank gets their money and I am no longer liable. Right?

#49 The Original Dave on 11.20.10 at 2:00 am

Like I saw on this blog a few days back (made me laugh because I remember this mentality all too well):

“Buy a house like an Italian, buy at any price and rent out for $1300.00 a month”

Hilarious. Like watching a train wreck unfold…

Welcome to Canada, the Ireland of tomorrow…
————————————————–

oh thanks. I made someone laugh! That is the truth though. Just last week another story from an Italian. Well, this guy was born in Toronto but his parents are Italian. Anyhow, he’s thinking of buying a townhouse for $450,000. Then wants to rent it out for $1,400. Annualized rental income vs home price is not even 3% I don’t think.

By the way, I’m of Italian background. My parents are Italian. I can’t believe how you people, all of you talk about the asians and associate them with real estate. I always read “the asians come with money” , or “the asians love real estate” etc. You give the asians too much praise. There’s no culture that worships bricks more than Italians….none, zero, zip. You can see saliva coming out of their mouths, like a rabid dog when they’re talking real estate. I think Italian craziness deserves a little more credit over here.

I don’t know, when I hear the sons and daughters of these Italians talk real estate religion, they sound primitive. A lot of them will like the nicer name brand goods and clothes, but they talk about land and it’s importance like they own a chicken farm. Their words and ideology doesn’t fit their appearance. I just find it strange seeing a clean cut guy in a tie talking about land and buying land. Looks presentable and classy but sounds like an idiot.

#50 The Original Dave on 11.20.10 at 2:15 am

I’m wondering if any RE Bulls would like to take the other leg on a RE derivative?

I pay you $1000/month, for a period of 5 years ($60,000), and if RE prices drop more than say 15% during this time frame, you owe me $250,000, or some type of sliding scale. I’d require collateral, say a house.

So, if there is a collapse, you owe me a quarter million, and you lose your house.

If things stay rosy, they’re even rosier for you as you net $60,000.

I’m honestly thinking about advertising in the paper and having a lawyer notarize such a contract.
——————————————————-

I don’t know if such a thing could work, but I like how the numbers look for sure. I’m as bearish as they come though in regards to real estate. I’d love to do something like that too.

#51 20% er on 11.20.10 at 2:46 am

I know people who have put nothing down on homes. We have our excesses. Let’s be honest.

Here’s a look at housing trends in Riverdale, Leslieville and the Beaches.

http://www.leslievillepost.com/2010/11/19/leslieville-riverdale-beaches-real-estate-trends/

#52 pablo on 11.20.10 at 3:33 am

“Of course, it’s not illegal. If you like, you can buy a house with an electric shaver, udder cream and a box of condoms (don’t ask), ” OK SO WE’RE ASKING!

“Ian Lee toiled obscurely for a decade as a banker, a guy who ended up giving people mortgages at the Bank of Montreal. ”
SO TELL ME, HOW DO U KNOW WHEN A BANKER IS LYING TO U? Easy, when his lips are moving.

Garth, I know for a fact that the lending at bmo and most if not all the other cdn banks wasn’t as wacko as it was south of the 49th parallel, but it wasn’t the bastion of stoic sober lending practices either.

First of all the banksters were all giddy about the fact the world didn’t end with y2k; remember that load of fecal fodder!
Secondly when the real estate prices were going higher every month, til it looked like it would never end(before 2007)and every mothers’ son was begging to buy in at any price, the banksters were orgasmic over the portfolio growth and increased market share they were all seeing; cause that’s what pays the bonuses, don’t ya know.
That’s when alot of due dilligence and sound lending practice went out the window, they were trying to rationalize every red flag on any application. Approval ratios were almost 100% at the big five banks and if you were a credit officer who wasn’t pimping out those numbers you had some splain’n to do, cause your ass was hauled on the carpet pdq by your supervisor and then the department manager if you didn’t get in line with everyone else. I learned a long time ago that morals, ethics, and banking don’t mix. Standing true to your own convictions will ruin a good career, but then you learned that one yourself, didn’t you.

#53 Dedmonton Boy on 11.20.10 at 4:44 am

Good Article. I am not sure exactly how other cities real estate is sitting, but here in Edmonton we are now slipping into early 2006 price levels. You can get a nice little two bedroom in the “Westmount Area” built in 1990 with ensuite Laundry, balcony, storage etc from $155,000. 2bedroom 2 bath houses from $199,000!

#54 betamax on 11.20.10 at 4:59 am

#6 Spiltbongwater: “when Millenium Water comes out with new prices in new year, will that lower values of other condo units accordingly”

Condos in nearby complexes are going for $600/sqft, while Millennium prices are currently $1,000/sqft. The premium price was based on sheer hype, which has obviously gone negative with receivership (not to mention a multitude of other problems).

Consequently, all Millennium unit prices are headed significantly downward — just to be competitive with other bubble prices. Factor in a bubble pop and Millennium prices will drop like Nortel.

#55 Brian1 on 11.20.10 at 6:01 am

Kevin O’leary said that the reason the Olympic Villiage failed was that the condos were spartanly built and small on Lang O’leary early this week.

#56 JO on 11.20.10 at 7:21 am

How much $ has this guy recieved from the bank of Canada for economic research ? How many Bank of Canada officials sit on the boards of university business schools ? It is a complete joke. The junk economics being “taught” to our future leaders is bought and paid for by none other than the debt counterfeiters. Banks have the whole thing under their control.

There are only about 4-5 economists I follow: Steve Keen from Australia (he will win a Nobel prize one day), David Rosenberg, mises.org (Austrian School) and a couple more.

The Star is an embarassment.
JO

#57 Just a Tech on 11.20.10 at 7:46 am

We won’t get truth from our media until it no longer depends on corporate advertising and/or is no longer corporate itself.

#58 Jack on 11.20.10 at 8:08 am

“Chinese Stoke Toronto’s Condo Boom”: Headline from the Globe and Mail, Nov 11, 2010. Here’s the link

http://www.theglobeandmail.com/real-estate/chinese-stoke-torontos-condo-boom/article1795047/print/

#59 Kevin on 11.20.10 at 8:11 am

Huge blowout sale in Saskatoon for condos in the Hamptons.
Save $78,780 on a unit that used to cost $337,680.
Save $66,180 on a unit that used to cost $290,080.
More at http://hamptoncondos.ca/index.html

Just think of all the equity the people who bought in the spring have now.

#60 allister on 11.20.10 at 8:23 am

I know the story is MSM vs on the ground reality, but I see the other story.

The renter gets this guys condo for 1/2 the owners cost. So the owner loses $14000/yr. and is getting no enjoyment from ownership. And – if the condo falls in value as it likely will, or interest rates increase the owner just keeps losing in a bigger way.

If the renter has some guy how likes loud parties move in beside him, he can just pack up and leave. The owner is trapped with the ball and chain of RE, he is now a debt slave.

Puts the rent vs buying debate into perspective. That is buying only makes sense when RE is in a bull run.

#61 bigrider on 11.20.10 at 8:29 am

#49 Original Dave.

You’re posts are my favorite.! I totally get the Italian religion of RE ! Worship land ! bricks . Talk about land importance like it’s a chicken farm.!

My associates are around middle age. All Italian. The indoctrination of RE is indelably imprinted in their brains. No Asian can match the sheer delusion for RE that Italians have. One RE agent who is Italian has even argued that if you buy a place and it drops over 100k that is ok because you are paying a mortgage instead of wasting money on rent. Also, he says ,if you rent it out even better because in 25 years it will be paid off.

No culture, no one nowhere equals an Italian in his lust for land and mortar…NO ONE !

#62 AM on 11.20.10 at 8:56 am

Speaking of honesty in the MSM, I sometimes listen to a local radio segment called ‘Ask the Experts’ which is nothing more than paid programming or an infomercial. Quite often they have a mortgage broker doing their “thing” and I often wonder how many people take this as expert advice. The call-in questions are always positive, so I don’t imagine you will ever hear a contrarian point of view. For all I know, it’s pre-recorded. I won’t use any names to protect the idiots, but anyone local to me will probably know who I am talking about.

So recently, during my Saturday morning tour of shopping, I tune in at the point of discussion where one of the ditz mortgage brokers (and she sounds like an old Ditz) is slamming the latest news releases that discussed our lust for mortgages, and how we were over a trillion in mortgage debt as a whole in Canada. Ditz went on to say that this just isn’t a problem for Canadians, and how we are nothing like the Americans in this regard. I must paraphrase from here, but this next part got to me….apparently Americans are culturally different from Canadians when it comes to purchasing and investing in real estate. In the US, people buy real estate primarily as an investment and often take out equity as their investment appreciates, whereas, in Canada, we buy real estate primarily as a place to live and we are great at paying off our mortgage.

Seriously, are we that much different from the US?

#63 T.O. Bubble Boy on 11.20.10 at 9:31 am

Another Global TV clip:
http://www.globaltoronto.com/money/Olympic+Village+costs+city+taxpayers+millions+dollars+monthly/3855566/story.html

#64 Northern_dirt on 11.20.10 at 10:08 am

#57 Just a Tech

“We won’t get truth from our media until it no longer depends on corporate advertising and/or is no longer corporate itself.”

I have a couple billion in my wallet, wanna go halfsies on a Major national television network?

#65 BrianT on 11.20.10 at 10:09 am

#61AM-I guess your question is rhetorical-basic math would ask-if we are so good at paying off the mortgage then why didn’t we pay it off? If we bought all these places for cash where did the gigantic mortgage debt come from? The reality is that, generally speaking, people who buy real estate will low or no down payments (a relatively recent popular phenomenom in Canada) are proficient at “paying down” the mortgage-their lack of ability to accumulate any size of down payment in advance points this out quite clearly.

#66 BrianT on 11.20.10 at 10:19 am

#60Big-Yes, Italians are into RE, but there were plenty of Italians in the GTA in 1989 and it did nothing to prevent a monster crash in RE (this one will be far larger).

#67 conf in T.O on 11.20.10 at 10:21 am

I was at the Macdonalds Drive through yesterday morn. They.re trying to give away Tor Stars with their coffees at the Drive Through. No takes for the guy in front nor myself!
They can’t gim-em away!!!

#68 Junius on 11.20.10 at 10:21 am

#55 Brian1,

The excuses just keep coming on the OV village here in Vancouver.

First it was because of the social housing element. Until they realized that both Yaletown and Coal Harbour had 20% social housing and it had no impact on prices.

Then it was location but that doesn’t hold up when other buildings nearby are selling.

Now it is bed bugs and an entire litany of silly excuses.

The simple fact is the units are too expensive for the market. They were designed and approved at a time when the market could only go up. By the time they were completed they needed more than $1,000 per sq ft on the units to break even.

The Vancouver condo market is now well below those prices and going down. Time for a fire sale!

#69 Junius on 11.20.10 at 10:25 am

#61 AM,

You asked, “Seriously, are we that much different from the US?”

The answer, of course, is no. Not the same but similar.

Had emergency interest rates not kicked in 2008 Canada’s market would have crashed then. Our timing is different but the fundamental problem of cheap debt fueling the boom remains.

#70 conf in T.O on 11.20.10 at 10:31 am

On my way home from work, I stopped in the E End T.O neighbourhood to look at houses.
Seen a nice house for sale, a little bigger than ours…Very Young couple drivng BMW and another kid (i guess Realtor) driving Acura. They all looked about 20ish. The realtor kid looked like a smug teenager with smoke in hand dark sunglasses, sharp suite, real cool cat.
I’m sure everthing there is financed to the nines!!!
But the banks let it happen….
I felt like stopping and telling them that I have the CASH to buy that house, but I won’t for real reasons!!! but what good would that do, thay would just smugly look at me like a fool…

#71 Chris no longer in England on 11.20.10 at 10:33 am

The truthiness about Ireland:

http://www.dailymail.co.uk/news/article-1331380/The-ghost-estates-exactly-Ireland-went-boom-bust.html

#72 lonely limey on 11.20.10 at 10:53 am

The ghost estates of luxury homes that show exactly why Ireland went from boom to bust.

http://tinyurl.com/2crnuwv

#73 Junius on 11.20.10 at 10:56 am

#46 Dark Sad Person,

Your view of economic fundamentals is decades old. The situation with China is much more complicated than simple wage disparity. As we found out with NAFTA and cheap Mexican wages it is not always the answer for business growth.

In almost all industries wages have been a declining portion of overall manufacturing costs for decades. Many companies have found that outsourcing to low cost countries contains hidden costs in poor quality causing returns, hidden costs, transportation issues and political problems, etc.

In focusing exclusively on wages we miss the real threat posed by China and India which comes from their growing entrepreneurs, research and eduction systems.

The economy of tomorrow will be powered by brain power and most specifically by creative brain power coming from groups or corporations that can harness collaboration and innovation. Look at few North American companies that continue to thrive like Apple, Google or Microsoft. They don’t worry as much about low cost wages as they do brainpower. Their significant investments in China and India are primarily in research labs and not sweat shops.

Successful German “middle companies” provide another example of companies that are highly successful, pay high wages and lead through innovation and productivity not by trying to win the “race to the bottom” through low wages.

Your notion of “get the politicians out of the economy” is naive. It plays right into the hands of our fat, lazy corporate elites who use the cry of “free market” every time they need a labour law or environmental standard relaxed but all the while fight tooth and nail to protect their cozy monopolies.

We need a competitive economy. There is no such thing as a free market. It is a myth fabricated by the corporate elites and their bought and paid for politicians.

A competitive economy forces companies to compete but also includes safeguards to ensure the companies operate within the “public good.”

Let’s not forget that it was financial deregulation that got the financial industry into its current mess. Without a stable and predictable legal framework the “free market” will allow companies to short change us in the long term for short term gains. Need we even discuss what a “free market” in the drug or food industry absent regulation would bring to us in the name of “health products.” It is bad enough already.

The failure in our economy over the past 3 or 4 decades is a failure of our corporate elites to invest in the long term growth of our industries. The need for positive quarterly reports has lead to outsourcing in order to save a dollar this quarter regardless of the long term impact. It has also spurred a strategy of merger and acquisition along with accounting fraud instead of building for the long term. Wall Street profits were traded at the expense of Main Street industry.

Government has to play a key role in moving us forward. However it has to be much different than the past. There is no such thing as free markets.

#74 Un-friggin-believable on 11.20.10 at 11:12 am

I find it pathetic and ridiculous how poorly the news has been and quite hushed in Vancouver, and most of Canada for the matter, concerning the failure of Millennium Water. The news articles are JUST now beginning to come in, but from areas not even close to Vancouver. As an “FYI,” this shit with Millennium Water has been going on for quite some time – not just in the past week or two. From an outsider’s perspective, it must be like living in North Korea to be living in Canada. Your news, sources, and and media integrity absolutely give new meaning to the word “SUCKS!” I doubt there is ANY unbiased media at all in Canada. Hell, even here in the U.S. we are more aware of your situation at hand than even Canadians themselves are. Un-friggin-believable how delusional your country is.

http://www.calgaryherald.com/business/Vancouver+taxpayers+stuck+with+Olympic+village+costs/3859982/story.html

#75 Ian Lee on 11.20.10 at 11:15 am

I enjoyed the comments, although the ad hominem attacks do not illuminate.

Allow me to respond with some factual background.

1. I was 9 years in financial services as a Consumer Loan Manager, Mortgage Manager and Commercial Loan Officer in Ottawa and Eastern Ontario. During that time, I lent millions and millions- mostly residential – but some commercial mortgages.
2. I have been tenured since 1995
3. from 1991 to 2004, I taught over 100 times around the developing world in Canadian and American MBA programs in China, Russia, Cuba, Iran, Poland, Ukraine, Mexico, Romania – and witnessed many corrupt countries with poor public policies.
4. I do not consult and have no investments of any kind in any industry
5. I lived and taught in California from 2001-2004 where I studied the US mortgage industry

Concerning forecast housing collapse, in my 1 hour conversation with the journalist, I said, in my judgment, a housing collapse is much less likely in Canada for a series of reasons that I laid out – not all of which were published, presumably due to space constraints. I provide the full exegesis and then you can reject each or all of them

1. we have only 6 banks in Canada – not the approximate 6,000 as in US – and which are regulated by a single authority (OSFI) and not the hodge podge of alphabet soup agencies in the US AND at state level
2. the Canadian Bank Act mandates that a bank may NOT make a mortgage with less than 20% down payment UNLESS insured by CMHC (please go look it up) – hence the “illegal” comment
3. CMHC required a minimum of 10% down payment throughout the 1960s, 70s, 80s and 90s. It was reduced to 5% in the late 1990s. In 2006, it was reduced to zero and when then Governor David Dodge learned of the change – as reported on the front page of the Globe and Mail in July or August of 2006, he went to CMHC Head office in person and objected very strongly. The policy was reversed shortly thereafter.
4. the 6 banks and CMHC have adopted common income standard ratios – called the Gross Debt Service Ratio (GDSR) and the Total Debt Service Ratio (TDSR). The monthly mortgage payment (GDSR) may NOT exceed 32% of the person or family’s gross monthly income and the TDSR (mortgage payment and all other debt payments including alimony) may NOT exceed 40% of gross monthly income. I noted that these equity and income standards did not prevail in the USA – indeed NINJA mortgages (no income, no job, no assets) were the norm in the US
5. in 1980-81 I was Mortgage Manager at Ottawa Main Office (opposite West Block, Parliament Hill and beside National Press Club), 4th largest branch of BMO at that time, when then Fed Gov Paul Volker ran interest rates from 10% through 20% and induced a deep recession. The housing market certainly dried up – but it did NOT collapse. Indeed, it was a remarkable time for any person willing to observe and learn about consumer behaviour by watching real Canadians struggle with very difficult decisions concerning tough choices – e.g. do I pay my car loan? do I pay my credit card? The 1980-81 recession was far more devastating than the recent 2008 recession – for Canadians. However, there was not a housing collapse nor a foreclosure crisis.
6. the national household balance sheet data provided by Bank of Canada reveals Canadians owe almost $1.5 Trillion – and many analysts have become become deeply concerned. However, they fail to focus in the same report on the data that Canadians OWN over $6 trillion in assets or a coverage ratio of 4:1 (see recent excellent analysis by BMO Economics of this data and they concluded a housing collapse is unlikely)
Given that the lion’s share of the $1.5 trillion owed (75% I recall) is mortgage debt, we should be less concerned. Why? Because 1. mortgage debt is amortized over long periods of 25,30,35 years and 2. is offset by a hard asset called a home, which can be sold and the debt liquidated.
7. the unemployment rate is substantially lower in Canada than the US (if the US calculated their unemployment rate the way we do, the US rate would be around 17% vs our 8%
8. IF – IF there were a substantial number of defaults and foreclosures in Canada, the banks would be immunized – because CMHC insures approximately 75% of all high ratio mortgages. CMHC is a 100% Govt of Canada owned corporation and the NO Minister of Finance would allow CMHC to dump all the foreclosures onto the market at once – thereby causing a housing crash – as did occur in the US with multiple independent agencies.
9. demographics – yes I did discuss it in the interview but it was cut out – I noted that we bring in over 300,000 immigrants annually and is scheduled to increase to 350,000 – the highest in the world as a percentage of pop. I also noted that our birth rate – well below breakeven at 1.6 – is not as low as e.g. Japan or Italy. In conjunction with our very high immigration, this produces a steady annual increase in demand for housing
10. aging of boomers – boomers are about 1/3 Cdn population. It is an extreme fantasy to believe that Canada is going to build seniors and nursing homes for most of these boomers. The vast majority of elders remain in their own home and will continue to do – as did my 91 year old mother who passed away in her own home last year.

Concerning my comment that the US housing crisis was caused – NOT by market failure or by government failure – but by what I called “Congressional failure”, I can provide the approximately 60 slides of a paper that I presented at a conference called “Financial Armageddon” at Carleton University in 2009. EVERY slide I presented was publicly sourced from the Federal Reserve or the US Treasury or from Fanny or Freddie or HUD or the US Census Bureau or quotes from the Congressional Record of Barney Franks or Chris Dodds. These slides are remarkably illuminating and demonstrate my hypothesis that Congressional policy caused the housing bubble and then the housing collapse.

John Meynard Keynes famously noted that wages are sticky downward – no one wants a pay cut and indeed strongly resist – which is why wages do not go down much if at all, during recessions.

My “insight” is that house prices are sticky downward as well. Setting aside deaths, marriage breakups and job relocation, most housing sales are discretionary within a city. Thus, the owner can always take the house off the market if he does not like the price offered.

I concluded that, going forward, we will experience what we experienced in the past with housing prices that overshoot. In the early 1980s, house prices went flat line for several years as they did again in the early 1990s.

I did agree with the US economist that predicts a housing collapse that interest rates will go up next year and that as Governor Carney noted in the MPC this spring, about 10% of mortgage borrowers will be “vulnerable” if interest rates increase by 3%.

However, I did not agree with the American economist from a Washington think tank that this will result in a housing collapse – for all the reasons provided above.

Ian Lee
Sprott School
Carleton University

Thanks for dropping by and for your contribution. Given the words you have penned, you must be disappointed at how the Toronto Star made you appear an industry fluffer. Next time write an op-ed piece. I hope you continue to come to this plebian blog. It will add to your scholarly depth. BTW, it is not illegal to buy a home with no down payment. — Garth

#76 Alex on 11.20.10 at 11:21 am

I am not expert on this but those who can please do so. Here is my question:
Interest rates in China is 5.56%. I don’t know for how much chineese bonds go now but I believe it is more solid investment to buy bonds from country that has a massive surplus then from US or Canada who are in massive debt?
And if so don’t the Chineese are just cornering US Fed and basically forcing them to abandon low interest rate policy?

#77 Ian Lee on 11.20.10 at 11:27 am

I forgot to provide the report URL for BMO Report Canadian Housing: Pricey, Not Dicey, by Earl Sweet and Sal Guatieri
http://www.bmonesbittburns.com/economics/focus/20101105/feature.pdf

For an excellent analysis of Canadian Consumer debt, see TD Special Report, October, 2010:
CANADIAN HOUSEHOLD DEBT – A CAUSE FOR CONCERN

http://www.td.com/economics/special/dp1010_household.pdf

Readers should check out Gov Carney’s recent speech:
http://www.bankofcanada.ca/en/speeches/2010/sp300910.html

#78 BrianT on 11.20.10 at 11:30 am

#67Junius-You put 20% social housing in a high price condo development and you can kiss any future price appreciation goodbye.

#79 Un-friggin-believable on 11.20.10 at 11:31 am

AT #61: If I would have heard that stupid, lying bitch, I would have called in on the show. Seriously, Canadians have speculated FAR MORE than American’s ever did. Per Capita, Canadians over-built more than Americans, meaning that stupid commentator was lying about how different Canadians are than Americans. Also, if the question has to continually be posed over and over and over and over and over again, “are we different than Americans?,” then it only means ONE THING – NO! You are not in any different kind of a situation than Americans, or your fellow countrymen wouldn’t keep posing the same damned question. The mere fact that the question itself is a major point of concern and contention is indicator enough that Canadians FEEL it coming, but it is like nobody really wants to admit it is here already.

#80 Amarillo on 11.20.10 at 11:33 am

Original Dave & Big Rider, you guys are great. No fear of those losers who work for the sadly misnamed Human Rights Commissions (… “you are hereby charged with defaming Italians …”). Right on dudes. Now, how do we get rid of those odious Commissions? We fought for freedom in WWII and now we have those HRC idiots to deal with? F!!!

#81 S.B. on 11.20.10 at 11:33 am

Just down the road from me, Freed’s unbuilt Fashion House condos (marketed to 20 & 30 yrs old range), a one bedroom APARTMENT err I mean condo for $589/square foot! Condo fees near $300/mo and certainly will rise.

I predict the common areas and hallways will become trashed due to partiers and scenesters.

345k for a small 1 bedroom apartment:

http://www.realtor.ca/propertyDetails.aspx?propertyId=10024441&PidKey=-123523739

How many 20-30yr olds have even 50k in downpayment saved? They will be stuck with a 300-320k mortgage for 30 years…for a 1 bedroom apartment (plus at least $600/mo for condo fees and taxes). Insane. Add Land Transfer tax(es), closing costs, HST…

#82 cecilhenry on 11.20.10 at 11:37 am

Garth:

With all this threat to the housing market, what do you think of REIT’s as investments right now.

I would assume they are bad investments if the housing market is so overinflated?

Thanks for your blog.

Good REITs have nothing to do with the housing market. — Garth

#83 garthfan on 11.20.10 at 11:41 am

Fleshing out Jsan #13’s post a minute since it’s focused on what the media reported. The part of the news I paid most attention to during the Golden State Collapse Part 1 were Alan Greenspan and Hank Paulson telling everybody that things were great. I really wanted to invite them both to dinner and a leisurely stroll through our neighborhood.

Most of the people I saw getting the riskiest mortgages were multiple families pooling their income and resources together just to get into “a house” because the perpetually rising prices made them fear being priced out of the housing market permanently. These were largely minority folks who traditionally wouldn’t have gotten loans.

The people I saw under the most stress initially were retired people who bought McMansions to flip so that they had a nice sized nest egg for their golden years. When the prices began dropping, they were adamantly against renting out their homes because that might lower their market value. Instead, they stubbornly sat on them.

Once the official word “recession” began being uttered in earnest these folks went out and grabbed up “for rent” signs to go with new curtains and welcome mats giving their property curbside appeal. Those houses were not the first ones to be foreclosed on, but each bank owned sign struck further fear into their heart.

The 20-30 somethings are the most job-market dependent. I think after having a baby a couple’s first thought should not be, “How much of our children’s future can we gamble with, honey?”

#84 Joe Realtor on 11.20.10 at 12:01 pm

I haven’t seen anything in the media about this, but changes to Legislation governing Tenancies is afoot…

Seems our government is considering changes to legislation that would among other things would provide for …

· Compensation to tenants up 3 months of rent where landlord wants possession for own use.

· Up to 2 years instead of one year for tenant’s to bring applications against landlords.

· Limited rent increase on turnover of pre-November 1st, 1991 rental units to statutory guideline.

· No applications allowed for rent increases above guideline for increases in utilities costs.

· Licensing of all residential rental units of 6 or more. Not allowed to rent or renew without having been approved for licensing.

#85 TBay Convert on 11.20.10 at 12:04 pm

Hi Garth, I have been following your blog for about a year now. In 2008 my wife and I were trying to sell our “flip” condo. We also had unrealistic price expectations. I was stuck on the idea that we would rent it until the price rebounds. Well guess what, there was no rebound. We were not going to sell into a down market until we priced our condo ahead of the price decline. It was not until a friend and blog dog beat it into me that I came to this realization. So we got rid of the renters, staged the condo and flogged it for a loss. I learned my lesson but it was difficult. The moment emotion and price are combined, danger and pain await. These people that are holding property thinking it will come back are delusional. If they want to sell they have to find out what similar properties have sold and price themselves lower. Good luck with that, it is a hard pill to swallow

#86 R1200C on 11.20.10 at 12:38 pm

And a few interesting listings are also starting to appear on the MLS…

Check out this forclosure in Edmonton:
http://www.realtor.ca/propertyDetails.aspx?propertyId=9943611&PidKey=-921978724

Laurier Heights is a very nice established upscale area by the Zoo in the West End… This one has been reduced to $379,900… it just happens to be accross the street from when I sold a year and a half ago for $440,000. Except mine was a tad smaller, needed a fence, needed a new floor in the similar one car garage, and had a lovely 70’s dusty rose counter top kitchen that needed total renovations…

This sucks since the other listings in the area are still looking to get $450,000 to $650,000 for similar houses…

Methinks a couple more like that – and no buyers – will “readjust” prices accross the board… but of course that will take a few months… isn’t that exactly what’s been forecasted here?

#87 S.B. on 11.20.10 at 12:41 pm

I think I have uncovered Van Olympic Village’s fatal flaw: they did not hire Ms. MissyBunny! She single handedly moved several hundred Calgary student dorms, err condo investment opportinuties, in one weekend not even breaking a sweat.
She is a RealPro (move over, Realtors(s) ), we have a real ringer here.

#88 The Original Dave on 11.20.10 at 12:44 pm

#49 Original Dave.

You’re posts are my favorite.! I totally get the Italian religion of RE ! Worship land ! bricks . Talk about land importance like it’s a chicken farm.!

My associates are around middle age. All Italian. The indoctrination of RE is indelably imprinted in their brains. No Asian can match the sheer delusion for RE that Italians have. One RE agent who is Italian has even argued that if you buy a place and it drops over 100k that is ok because you are paying a mortgage instead of wasting money on rent. Also, he says ,if you rent it out even better because in 25 years it will be paid off.

No culture, no one nowhere equals an Italian in his lust for land and mortar…NO ONE !
—————————————————–

Yes!! Italian stupidity DOES NOT get enough credit around here. Garth how can you neglect this? There’s no culture per capita that is more delusional than Italians in regards to real estate. I have friends/associates (Italian) in their late 20’s and early 30’s that confirm this. I feel like I’m listening to a 65 year old man from the old country when they speak. You’d think farming and cultivating land was how they made a living (this is in Toronto by the way).

The Chinese delusion is a speck compared to the Italians. Italians look at renters as degenerates. If you’re Italian and you rent, other Italians think you have mental issues. Real estate to them is a buy at any price. If prices are soft in area, they attribute it to a small land size (chicken farm factor I guess). Stock market is no good to Italians – in fact it is disgusting to them. Buying a house and renting it out is always a great idea. This idea is just the thing to do…like brushing your teeth in the morning. It’s a must to gain wealth. You buy at any price and you rent it out. They hope that the rent covers the mortgage yet they neglect all other costs like utilities, maintenance, insurance, opportunity cost of money put into the home.

If you don’t believe me, try taking a drive to Woodbridge. In fact, I’d pay to see Garth speak in front of 1000 Italians in Woodbridge. He’d definitely have better luck getting through to 1000 people in Markham. He’d have guys in their 30’s laughing and yelling at him about their dad’s real estate purchase in the 1960’s.

Ah well, I’m going on and on. The point of it all is: it’s about time Italian stupidity gets a little more credit around here. Us Italians worship land. We’ve got sheep to herd – literally.

#89 freedom_2008 on 11.20.10 at 12:46 pm

#43 said “Everyone wants to move to Victoria because it’s different here”

We did have snow here last night, but you only see a bit on the car top and the roof, nothing on the ground yet (it is zero C outside right now). We moved from Ottawa to Victoria in 2008, weather wise we do think here is the best in Canada.

Please pick something else to complain, but not snow (remember this is Canada!).

#90 Dorf on 11.20.10 at 12:53 pm

“she confessed to me that her husband, in his infinite wisdom, purchased one of those famed Olympic condos with the intent of making a quick flip.”

Here in BC, this story has been big news since they broke ground on the project, and certainly was THE talk of Vancouver throughout the building phase, the occupation phase, and now the ghost town phase.

Anybody that ignored the news and bought in to it, did so out of sheer, unabated greed. Not passion, bloodlust. Free money and lots of it. No work involved at all, a guaranteed lottery cheque.

In order for someone like me to be rewarded for good, prudent, well-though-out decisions… then people who ventured out into the Grand Banks in a leaky canoe with the elusive lure of instant millionaire status in mind, and a 1400 degree ball point pen in their itchy little hands to make it all come true, have to experience the utter tragedy of outright total failure in order not to breed careless, reckless financial practices in the rest of us.

If we all ran our finances this way, we would be worse than the USA. The guy had no business taking such a huge risk, without the capital to back him up. People who have $Mill’s in the bank speculate on expensive properties, not the average minion slugging it out at a salaried job.

The only way you’ll become an instant millionaire via your signature on a piece of paper is when you sign the back of the winning lottery ticket.

#91 Mark on 11.20.10 at 1:03 pm

#48 “I asked this question once before but no one responded. Here it is again.
If I take out a CMHC mortgage, pay the insurance fee to cover the lender, and then default and go into foreclosure, I assume the bank gets their money and I am no longer liable. Right?

Wrong. The bank gets their money, but you are liable for the deficiency (difference between selling price of house, and what you owe, plus interest) to the CMHC. The CMHC will pursue you for it, up to, and including, garnishing other assets/income or forcing you to file for bankruptcy.

Also, any mortgage that is CMHC insured becomes subject to federal lending laws, not provincial, so you are without the benefit of provincial laws that might facilitate a ‘non-recourse’ mortgage in provinces such as Alberta.

#92 Bill Gable on 11.20.10 at 1:12 pm

#48 In most Provinces you can’t walk from the Mortgage without severe consequences to your ability to draw credit, for years. Look up RECOURSE and NON-RECOURSE Mortgages.
Then you will learn why mort Gage in French means DEATH CONTRACT.
Read a few of Mr. Turner’s books, and get ready to grab the Gravol.

#93 The Original Dave on 11.20.10 at 1:18 pm

#60Big-Yes, Italians are into RE, but there were plenty of Italians in the GTA in 1989 and it did nothing to prevent a monster crash in RE (this one will be far larger).

—————————————

I think he gets the point but is just giving personal experience on the Italian delusion. The market won’t keep going up just because Italians are crazy obviously.

#94 Devil's Advocate on 11.20.10 at 1:25 pm

#118 KELOWNA IS GROUND ZERO on 11.19.10 at 8:31 pm
“DA: Are you wanting averages or means, list or sale, Kelowna wide or your specific neighbourhood? It does make a big difference you know”

Simply Kelowna general The average selling price. Can you make it simple like this:

Jan 2008 House +1.1%
Jan 2008 Condo +1.2%
Feb 2008 House -1.5%
Feb 2008 Condo -1.5%

With at the end of each year showing the chg in Value for the CALENDER year.

I woud be very interested in seeing the month over month move is text form for the last three years if its not too much work to post it.

I used to record that specfic informatio on a monthly basis in Excel and could easily retrieve it for you but it became apparent that it was a needless duplication of the stats the board keeps. I, of course, have access to that and would be happy to email you a pdf format of those stats and a whole lot more if you would like. Just flip me an email to [email protected].

I will caution you on a couple of things though. The numbers in the format you are seeking, unless seasonally adjusted (which throws it it’s own exagerated margin of error) will do little to demonstrate a trend. In Kelowna, as I expect is the case for most all of Canada, the market builds in Spring, falls in Summer, Builds again in Fall (but less so than Spring) and falls again in Winter. Of course that will impact volumes more than price. That being said with lower volumes one or two million dollar plus sales can grossly skew the “average” sale price of that month dramatically over that of the month before.

I find it is best to compare the quarter by quarter numbers year over year if not year over year numbers.

Given that here are some numbers for you;

SINGLE FAMILY RESIDENTIAL – Central Okanagan

November 21 2009 to November 20, 2010
Units Sold = 1,996
Average Price = $530,895
Ave Days to Sell = 81

November 21 2008 to November 20, 2009
Units Sold = 2,051
Average Price = $484,776
Ave Days to Sell = 90

November 21 2007 to November 20, 2008
Units Sold = 2,059
Average Pric,e = $540,001
Ave Days to Sell = 68

STRATA (APARTMENT) – Central Okanagan

November 21 2009 to November 20, 2010
Units Sold = 712
Average Price = $254,341
Ave Days to Sell = 113

November 21 2008 to November 20, 2009
Units Sold = 713
Average Price = $257,256
Ave Days to Sell = 106

November 21 2007 to November 20, 2008
Units Sold = 865
Average Price = $287,273
Ave Days to Sell = 71

So, based on the preceeding, you must agree that most apparently things are not nearly so bad as the Pups and Poodles profess. I am not suggesting that we are not in the midst of a market “SHIFT”, indeed we are. but that shift is more a return to “normal” than it is a punative clawback of recent equity gains.

I am sure we will continue to see prices fall marginally, largely mitigated by improved confidence in the marketplace. Again do not mistake me as saying there is reason for renewed confidence – people are not rational and certainly en masse more inclined to look for an easy way out than not.

People look for pleasure rather than satisfaction. Pleasure is addictive. Satisfaction is growth. Pleasure comes from entertainment. Satisfaction comes from results.

There are no quick fixes, we know that. But the people want a quick fix. They don’t want to sacrifice short term in order to fix the problem such that they can set about achieving sustainable results that provides satisfaction. They want to be entertained be it big screen TVs, Hummers, or granite, stainless and hardwood. Short term satisfaction rather than long term gain.

Most unfortunate is that our politic think this way too.

Personally I think we will get through this relatively unscathed just as we did the last economic failings. We are indeed postponing the inevitable and the price to be paid then will be greater as interest will have accrued along the way as it has for so many decades to now. Unfortunately it is “compound interest” and it does grow exponentially. But I seriously doubt it’s going to happen in this most recent cycle. Were it going to happen I think it would have by now. It almost did in the fall of 2008… but we averted that one didn’t we? And I seriously doubt many know just how close and catastrophic that one could have been.

#95 Junius on 11.20.10 at 1:33 pm

#76 BrianT,

Then explain Coal Harbour and Yaletown. Both neighbourhoods have 20% social housing. Both neighbourhoods have appreciated nicely. Same with False Creek.

You are flat out wrong. Show me an example – and don’t mention the OV because that is BS.

#96 Ian Lee on 11.20.10 at 1:34 pm

Garth,

You are absolutely corect that it is not illegal to buy a house with no down payment. I spoke too casually.

What I meant is that no bank can lawfully grant a mortgage with less than 20% down payment – per the Bank Act. If less than 20%, per the Bank Act, it must be insured by a recognized insurance firm.

In turn, the insurance firm i.e. CMHC requires a 5% down payment.

However, private people can lend their own money to someone with zero down payment.

The point of this that – unlike the US where there was little or zero equity in the homes of recent buyers, in Canada due to the Bank Act, and CMHC policies, there is more of a cushion to provide some “insurance” or equity against house declines.

Last winter and spring, I publicly advocated returning to a 10% down payment requirement for high ratio mortgages. Indeed, I argued that we should NEVER have reduced it to 5%. Canada did very well during the 1950s through the 1990s with a 10% down payment requirement with a 61% home ownership ratio. By reducing to 5%, ownership went to 67% – but these people are more “marginal” or at greater risk, as they are closer to the edge of what they can afford.

IF we are serious about protecting against property declines, we should urge Finance Minister Flaherty to restore the down payment to more prudent levels.

Garth – you are correct about an Op-Ed.

Indeed, I am drafting an Op-Ed arguing that the biggest threat to a housing collapse is IF the Govt expands the pension system – and increases the mandatory payroll deduction by a signfiicant amount. For example, the NDP and the CLC want to adopt a “big P CPP” that replaces all existing pensions. Jack Mintz estimates it would require a payroll deduction of 15% per pay in order to finance it.

IF IF this were to be adopted, it would devastate home ownership and cause a housing crisis – because most younger consumerss live close to the edge of their paycheques and taking 15% away each pay for increased pension contributions to CPP, would be far far worse than a 3% interest in interest rates – in terms of affordability of one’s mortgage.

THIS is what may cause a housing crisis in Canada – a much more generous pension system requiring much higher contributions – reducing the amount of discretionary income for mortgage payments and groceries etc.

Ian

#97 Timing is Everything on 11.20.10 at 1:34 pm

“If you like, you can buy a house with an electric shaver, udder cream and a box of condoms…”

The lending standards have been raised Garth, you will also require a pair of rubberboots (Saskatchewan Board of Health I think) in Weyburn anyway.

#98 BrianT on 11.20.10 at 1:49 pm

#74Ian-Your 91 yr old mother was not part of the huge baby boomer bulge and it is very unlikely the economy will be able to sustain future 91 yr olds in that manner-the money will simply not be there IMHO. These monstrous deficits are not illusory nor will they be easily dealt with, no matter how many MSM “economists” spin the yarn that they are.

#99 Love this Blog on 11.20.10 at 1:50 pm

@#$39,

Chimp,
I LIKE your style!

#100 BrianT on 11.20.10 at 1:52 pm

#87Freedom-no snow yet in Southern Ontario and if you get south for 3 months every winter you pretty miss the entire snow season.

#101 ralph on 11.20.10 at 1:53 pm

One big problem I see with Ian Lee’s diagnosis is what good are these assets when fewer and fewer are in a position to buy? As far as I am concerned the debt/equity ratio means nothing if there is no market left.

In other words people will be stuck with properties that won’t sell to cover their mortgages. It is called negative equity. That’s the killer.

#102 Debtfree on 11.20.10 at 2:06 pm

@ 74 ian when then Fed Gov Paul Volker ran interest rates from 10% through 20% and induced a deep recession. The housing market certainly dried up – but it did NOT collapse.

Well I guess collapse is relative . I bought a house in 82 for way less than half price a foreclosure .It had sat empty for a year .We had thousands to choose from. When we went into the bank looking to buy it they looked at us like we were from mars .No one was buying even when it was the bottom of the market and interest rates had only one way to go. It took three years to get a double .

#103 morfeus44 on 11.20.10 at 2:13 pm

#66 conf in T.O – TorStar started leaving the paper every day without our asking. I sent them an e-mail and asked them to please stop. Fully knowing the next step would be a bill, which 50% of people would pay.

To their credit, no paper this morning as promised.

maybe GT will take over the star and I could get greaterfool delivered to my door and ultimately tucked under arm to the loo.

#104 Got A Watch on 11.20.10 at 2:15 pm

Ian Lee – I am impressed that you bother to come to a lowly Blog to clarify your report.

However, I will also say that you did not in fact connect all the dots. And you conveniently ignore several key basic facts in some of your assertions:

“Setting aside deaths, marriage breakups and job relocation, most housing sales are discretionary within a city. Thus, the owner can always take the house off the market if he does not like the price offered.”

Nowhere in that did I see the words “job losses, tight employment market, falling household income (see first 2 reasons in this sentence) and falling consumer ‘confidence’ that they can in fact continue to successfully pay the mortgage (see first 3 reasons in this sentence). When those factors arise, it’s game over for real estate for a few years at least.

What you say is quite true in a ‘normal’ market, i e not one that is in a deep and long lasting recession, not overheated, not contracting, not after a bubbly peak, in a time when the economy is not in bad shape. The number 1 reason why real estate prices go down then is that when people lose their jobs, they are forced to move, because they eventually can’t continue to make their mortgage payments on the inflated house value that was pumped up during the directly preceding period.

All it takes is one unemployed or under-employed household on 1 street, who have to sell right now, not “next year when the market gets better” to destroy the “property values” in an area. After all, the “appraised value” is based on “comparable sales”. And when the house next door sold for 5%, 10%, 30% etc less than other recent sales, a new precedent has been established, in a realized negative gain situation. When another does it, and another, there is an ‘issue’.

If you were to study the history of how real estate bubbles develop, they are entirely similar to bubbles in internet stocks, South Seas properties or tulips. It’s never “different this time”, see This Time It Is Different about how it never in fact is. Past studies of historical real estate busts suggests they almost always happen during a Recession/Depression/economic hard time, and the average time period of the declining prices phase is about 4 1/2 years, with a couple flat years after that, before it starts to really “recover” as the term should be properly used. In the USA, this would be market price peak in ’06 most places, and the real bottom around 2013, probably 2014 due to the extreme size of the bubble blow. See Nevada or CA or Florida as prime examples, where “values” have fallen up to 70% in some areas, and are still looking down.

In the US, or UK, or Ireland, or…Canada, the decline in real estate “values” is always about job loss and falling consumer confidence that fuel falling prices. The cure for high prices is…high prices.

“In the early 1980s, house prices went flat line for several years as they did again in the early 1990s.” No they DID NOT “flat line” – THEY WENT DOWN, that’s D O W N in case you aren’t familiar with that word. The opposite of “up”. What part did you not understand, again? “Flat line” is not “down”, it sounds like realtor spin.

I can personally attest that I know people who bought at the peak of the then bubble in 1991 or so in Mississauga, in a nice area, and they did not see their home return to the price they paid until about 2003 or about 12 years later. Prices in fact FELL for a few years, bottoming around ’97 and then flat for a year or two and then gradually started to increase. Yes, fell.

I assume because you were in Ottawa, you did not see this situation as severely, Ottawa always exists in a “we work for the Government!” bubble of delusion anyway. I am sure real estate prices in Ottawa did not fall as much as other places in Canada, but Ottawa is not the country, and is in fact a very poor representative sample of what happens in other non-vampiric parts of the country.

I could continue on here at great length here to pick apart many of your somewhat vacuous assertions that Garth did not rebut. If I was a fellow academic, I’d say: you did not do enough basic research into the facts. I’ll leave it there for now. I’m sure many Blog Dawgs will respond with salient points.

The fact that it was published in a propaganda organ like the Toronto Star, the real estate industry Pravda, with a misleading headline (to some extent) does not exactly add to your credibility in this matter. After all, the MSM medias are captive to the “real estate industry”, one of their largest paying customers, and can’t really be expected to bite the hand that feeds until well after everyone knows real estate is declining in “value”, when they won’t lose any more business by saying so.

btw this is not a personal attack, take it as part of a spirited debate

#105 Junius on 11.20.10 at 2:18 pm

#74 Ian Lee,

3 comments.

1. CMHC may insulate the banks but it doesn’t insulate the tax payer. Instead of bailing out the banks the Canadian tax payer is just going to have to bail out the CMHC. Either way we are looking at tax increases which will drive down affordability.

2. The Canadian economy is currently in better shape than the US but as many analysts such as David Rosenberg have pointed out the entire difference is in housing. As this sector cools we will face similar issues in the US and overall slow down in our economy. Again, this will be a drag on the entire economy and, in particular, the housing sector.

3. What immigrants will be coming to Canada from countries with Real Estate prices as high as Canada? Almost none. These people will need a place to live but they are not going to come in and buy up properties at some of the World’s highest prices. In fact, it may be that high cost of living and poor economic conditions slow immigration over the next few years.

Food for thought.

#106 vinnythechin on 11.20.10 at 2:23 pm

The Original Dave, Bigrider – being of Italian descent and probably a bit older than yourselves, let me shed some light on the “House and Land” mentality most of the elders in our community seem to preach. It originates from the fact that in the old country, most of the immigrants owned very little. When they came to the “new world”, it provided them the opportunity to “own” their own home. Once they realized that prices continued to go up (inflation), they were convinced that it was the best investment that they could make. For most of them, it was the “only” investment that they ever made. Hence the reason
that they promote real estate with their children. Some people of our generation have become more “investment savvy” and dont consider real estate anything more than a place to live. In the words of a co-worker from many years ago, “I’d rent my socks, if I could”. (He was a multi-millionaire). It is an uphill battle explaining basic economics to many of the youth of today. My son (19 years old) asked me the other day what constitutes enogh of a down payment for a condo in downtown T.O. I told him at his age he should be enjoying life, worry about buying something when he actually needs to (like after getting married, having kids, etc.). You see, he is only nineteen, and bought the nonsense that he must eventually own his home. I told him to invest in some solid dividend paying stock.

#107 bigrider on 11.20.10 at 2:27 pm

#65-Brian T

Absolutely agree with you ! My previous post did not in anyway imply that Italians lust for RE will not implode in their face. Quite the contrary..I think a lot of them are going to get hurt in this flawed obsession of theirs

#108 a prairie dawg on 11.20.10 at 2:30 pm

@58 Kevin

Some condo’s may have dropped in price, but they are still building more, and housing starts in new subdivisions in still happening too. Some developers have overshot by building too many condos too fast, but that isn’t the sign it’s over there yet. No doubt it’s starting to hit lower sales numbers than the peak, but there are a few reasons for the growth in ‘Toon. It may continue for awhile too.

Saskatoon and Regina have grown by relatively huge numbers in the last decade. Mostly in the last 5 years.

There have been huge influxes of Alberta and BC homeowners selling high, and moving there to buy at a fraction of the price. (and pocket the difference) Plus you have the local crowd that’s trading up. Moving into the new areas and selling their old houses. (this includes the 30 and 40-something crowd, not just boomers) There isn’t a glut of houses on the market yet, and prices are maintaining about the same as last year.

IMO, the pain won’t arrive on the prairies until there is blood in the streets of the major centres. When Vancouver, Toronto, and Montreal crumble then the rest of the country will follow at a slightly slower pace.

But the pain will come.

So do as Garth says: Get liquid, keep interest producing assets, keep RE at 40% or lower of your net worth, and pay down debt as fast as you can.

It’s just a matter of time. “Something wicked this way comes.”

#109 virginhomebuyer on 11.20.10 at 2:31 pm

Ian Lee….thank you for your comment. I do not believe we are looking at a housing collapse and agree with everything you wrote.

#110 a prairie dawg on 11.20.10 at 2:45 pm

Slightly off topic.

-from the latest Dennis Miller special on HBO:

“So a buddy of mine is a realtor in Iran. He works for a company called Century 4.”

:)

#111 bigrider on 11.20.10 at 2:48 pm

#78 Amarillo.

Defaming Italians ?? Find one post where I used one derogatory word to describe Italians. Make sure you quote word for word.

I stand by my opinion that RE is a akin to a religious belief for Italians. I also believe this to be a delusion for them. I made no other comments other than that. Yes I do have strong personal experience in this area..the strongest.

I cannot speak for Original Dave, his beliefs are his but I do feel he “gets it” when it comes to the Italian community.

Your sarcasm is mis-placed if indeed that was your attempt

#112 bigrider on 11.20.10 at 2:51 pm

#74-Ian Lee.

I would like to thank you for your post. I would like to think that this is an open forum and all points of view are equally welcome.

As a non-believer in RE prices and a proponent of an impending decline, I still wish to see opposing side well argued.

Please visit us as often as you like.

#113 tran, Calgary on 11.20.10 at 3:01 pm

#89 “Also, any mortgage that is CMHC insured becomes subject to federal lending laws, not provincial, so you are without the benefit of provincial laws that might facilitate a ‘non-recourse’ mortgage in provinces such as Alberta.”

In Alberta, can one simply walk away from a
non-recourse mortgage?

#114 Coraline on 11.20.10 at 3:03 pm

Did anyone see that there’s a huge insider trading investigation about to break? Here’s a link to the WSJ:

http://tinyurl.com/29ahvwo

#115 john on 11.20.10 at 3:03 pm

While I agree with many comments about Italians and real estate it is also important to note that most italians are very debt adverse and have real savings.

#116 Timing is Everything on 11.20.10 at 3:03 pm

“The moral of this story is that there’s the news we’re being given, and the news we are living.” – Garth

True enough. But all is not lost. I have two kids. 15 and 20 years old. They do NOT listen/watch/absorb/swallow much, if any, M$M at all. They did not have the advantage(?) of ‘cable’ TV during their ‘school’ years. ;)
Just because you are given something is absolutely no reason to take it.

They are in their own world. Our (wife and I) and the kids lives intersect, but out side of that, there are two different worlds. Kinda like a Venn diagram…

http://www.nataliedee.com/102305/venn-diagram.jpg

This is a good thing, because the ‘kids’ will have to sort it all out…and they will. We have no map, no point by point instruction manual to give them. Just a very general guideline. They make their own decisions. They ask for guidance, when needed. The ‘old’ M$M will die on the vine, soon enough. M$M spew is irrelevant to the ‘kids’.
So, what will their world be like…It is for them to decide. The two worlds can intersect gracfully and not collide (too much)…if we bother to care.

http://www.youtube.com/watch?v=VrZ4sMRYimw
http://www.youtube.com/watch?v=xjgAu3GpGI0

http://www.youtube.com/watch?v=594WLzzb3JI

#117 OttawaMike on 11.20.10 at 3:06 pm

OK, No more Mr Nice Guy.
I used the humane trapless method to evict my attic squirrels yesterday and today I awoke to find the 3 of them gnawing at my soffit trying to get back in.
They actually hung on my soffit and watched me preparing coffee through the adjacent kitchen window during chewing rest breaks.

I have commissioned my licensed hunter friend to come over with his competition target pellet rifle on Tuesday.
To mitigate the untimely demise of my attic dwellers I plan to marinate them in butter milk for 24 hrs then prefry them in a oiled iron pan which will later provide a red wine, rasberry vinegar deglazed pan sauce. Final roasting in the oven left in the iron pan on 3/4″ slices of onion.
I hope the urban squirrel is OK to eat but I have nothing to compare it to since this is the first time trying that type of game.

#118 Karl Hungus on 11.20.10 at 3:06 pm

Ian Lee,

I agree with most of what you said but one thing throws out all the GDSR and TDSR ratios – stated income. The fact that self employed people can just “state” their income is kind of crazy. I know first hand because I did it and couldnt believe they let me do it.

#119 vreaa on 11.20.10 at 3:11 pm

How’s The Vancouver Economy?
“Things are not looking good in my industry”

How does the economy look from your vantage point?

http://wp.me/pcq1o-1yo

#120 Brian1 on 11.20.10 at 3:16 pm

Thanks for coming Mr. Lee, but for me the housing crisis has never been the issue. It is the future of American consumer spending. When it rears it’s ugly head all your real estate numbers will change.

#121 bigrider on 11.20.10 at 3:17 pm

Amarillo-

By the way, no similar charge for those who have “defamed” the asians on this blog?? How come?

#122 westcanguy on 11.20.10 at 3:18 pm

Wrong. The bank gets their money, but you are liable for the deficiency (difference between selling price of house, and what you owe, plus interest) to the CMHC. The CMHC will pursue you for it, up to, and including, garnishing other assets/income or forcing you to file for bankruptcy.
————————————————————

Interesting, so it’s kinda like paying life insurance premiums and when you die, the insurance company goes after your estate because your death caused them to pay out?
Yes, that’s tongue in cheek but it really does seem like a racket when you have to pay a fee for insurance coverage to a gov’t agency that you already fund through your tax dollars yet still are liable for the shortfall. What the hell is the fee or premium for?

#123 jess on 11.20.10 at 3:26 pm

Perhaps the Professor would help me understand this flow chart relating to the shadow banking system

….”Over the past decade, the shadow banking system provided sources of inexpensive funding for credit by converting opaque, risky, long-term assets into money-like and seemingly riskless short-term liabilities. Maturity and credit transformation in the shadow banking system thus contributed significantly to asset bubbles in residential and commercial real estate markets prior to the financial crisis.”

shadow banking system
Federal Reserve Bank of New York
Staff Reports
Shadow Banking
Zoltan Pozsar,Tobias Adrian,Adam Ashcraft
Hayley Boesky
Staff Report no. 458
July 2010
http://www.ny.frb.org
http://www.blacklistednews.com/Federal-Reserve-Bank-of-New-York-Shadow-Banking-System-Research-Report/11487/0/13/13/Y/M.html
=============

#124 Bill Grable on 11.20.10 at 3:26 pm

With Mr. Turner’s permission, I would like to post a teeny part of a brilliant chronicle of Home RENO in Vancouver.

Terrifying.

That might not even cover it.

Perhaps Mr. Turner can come up with one his skull benders – ready?

If you are thinking of a Vancouver Property?
(*The MOST over valued RE in THE WORLD, dawgies) –

Froogle Scott –

“Most mortal Vancouverites: “I notice a photo is hanging skew, I rise from the sofa and straighten it.”
Froogle Scott: “I rent a large rotary hammer drill to drill one-inch diameter holes fourteen inches deep in the concrete foundation walls.”
The result, of course, is that Froogle has ended up with a house where his sweat is quite literally part of the foundations, and that in itself is a unique reward.

Second thought: Froogle’s story is of a very, very diligent, meticulous, and industrious couple riding shotgun on the renovation of their house. One is amazed by the number of serious deficiencies they discovered in doing so.
It leads us to consider how many homes in Vancouver have substandard, shoddy, or even dangerous construction because they were built for clients who were not watching as closely.
Is such construction the norm rather than the exception?”.

http://tinyurl.com/2etv566

Mr. Turner scares the Lees off RE pumpers. I am very pleased that he has a growing Constituency out here that KNOW TRUTH when they read it.

I still get jacked when I think what you could be doing for us in Ottawa, sir – but, I guess I will just have to keep telling anyone who will listen – “Have you read Garth Turner, today?”.

Bravo Zulu. Over and out.

#125 betamax on 11.20.10 at 3:35 pm

#74 Ian Lee: “The 1980-81 recession was far more devastating than the recent 2008 recession – for Canadians. However, there was not a housing collapse”

Thanks only to current ‘pretend-and-extend’ measures. And there was a housing collapse in bubble markets then, which comprises most markets today.

“Given that the lion’s share of the $1.5 trillion owed (75% I recall) is mortgage debt, we should be less concerned.”

Right. Because it’s offset by bubble asset evaluations and housing can always be sold — until it can’t because of a moribund market and underwater mortgages.

“NO Minister of Finance would allow CMHC to dump all the foreclosures onto the market at once – thereby causing a housing crash – as did occur in the US”

Houses went into foreclosure BECAUSE the housing crash had already begun and houses couldn’t be sold for the money owed. Like many who didn’t predict the US collapse nor observe its beginnings, you’re now rewriting history and putting the cart before the horse.

“The vast majority of elders remain in their own home and will continue to do – as did my 91 year old mother”

Different generation. She could afford to stay.

“My “insight” is that house prices are sticky downward as well.”

That’s your “insight”??? Something considered common knowledge for anyone with an educated interest in RE???? Tenure comes cheap these days.

“In the early 1980s, house prices went flat line for several years”

Prices in Vancouver fell 50%. Flat line? Try again.

“as Governor Carney noted in the MPC this spring, about 10% of mortgage borrowers will be “vulnerable” if interest rates increase by 3%.”

Recent polls suggest many more are vulnerable to much smaller increases, but you quote political whitewash as ‘evidence’?

Here’s an “insight” for you: tenure is supposed to guarantee independent thought, not just provide job security for those willing to follow the party line.

#126 Burnt Norton on 11.20.10 at 3:56 pm

#74 Ian Lee

One of the most interesting contributions I have read here in months. Thank you.

The moral of that story is to avoid speaking on the record to an MSM journalist. Period. The whole business has been polluted by the same type of inherent bias as laid out by Chomsky in Manufacturing Consent. No individual(s) are to blame, rather, the system is not only broken but downright toxic because fiction is being accepted as fact. News publications are, in general, little more that marketing and advertising vectors.

Use twitter as a primary news source and use blogs like this for your secondary / analytic news sources.

#127 Patz on 11.20.10 at 4:16 pm

#95 Burnt, you had me until you said “use twitter as your primary news source,” unless you were being facetious. Do agree that Chomsky nailed it in Manufacturing Consent—a must read to understand how we are manipulated.

Re: anyone dreaming RE, Asians, Italians, Vancouverites. It’s all relative to the state of the market. In Canada we’re balanced now on the fulcrum point where sales are dropping, prices holding (for the most part). When prices fall like a US stone people’s ‘tudes will change quicker than a duck on a bread crumb.

#128 Mikey the Realtor on 11.20.10 at 4:17 pm

I know an Italian who doesnt own RE, how do I get him to become my client? it seem like Italians and Asian are the best prospects. I’m looking for advice from rider and Davey?

#129 Sail1 on 11.20.10 at 4:25 pm

#7 Pr

Such hate for people who have bought a home.
You really must be living in your parents basement.
Save the pennies and the dollars will grow.

#130 Sail1 on 11.20.10 at 4:28 pm

#10 garth fan

garth,

you are a true canadian hero.

That all depends which end of the political spectrum you sit on.

#131 Sail1 on 11.20.10 at 4:39 pm

#37 Junius

Bubble boy has a lot of time on his hands. I’m thinking, unemployed, wealthy, single or bored.

#132 bigrider on 11.20.10 at 4:55 pm

#104 Vinnythe chin.

Yes I totally understand the Italian immigrant mentality of owning a place of your own. My father explained it to me many years ago. I am sympathetic to it. My father explained that a man with no land back in Italy was a peasant ,if you had a little you could farm it and feed your family..make a living. I am respectful of that basic premise and respect all that the immigrant Italian has accomplished here. BUT

A little Tylenol can cure a headache, take the whole bottle and you die. I am afraid Italians have swallowed entire bottles of RE Tylenol.

You have a 19 year old son, I am old enough to have one as well so sounds like we have both been around the block.

Sounds to me you are giving your son good guidance.

My best to you.

#133 bigrider on 11.20.10 at 5:01 pm

#113 John. “Italians debt averse and have real savings”

You are definitely bang on with that generalization but mostly among the older ranks. The kids are just as piled high with debt as everyone else and rely on rich parents to fund expenses.

#134 Koz on 11.20.10 at 5:07 pm

#74 and #94: Ian Lee

Ian, thanks for your post.

Its nice to get another intelligent/educated post outside of Garths that does not a ‘media spin’.

Although i don’t agree with all your points, my idea of the next 5 year Cdn housing market falls somewhere between Garths and Your own.

When considering Investment Property, i now calculate that Capital Appreciation will be 0%/yr (Versus 1-3% gain). So now its a function of comparing the “Return on Investments of the capital cost within a portfolio” Vs. Cash flow from Rental Income….I have not found a property in Calgary in years that shows Rental Income is the better investment.

This obviously then coincides with whether a person should Buy or Rent. The numbers don’t jive that ownership is the answer right now.

Thanks for stopping by.

#135 Nostradamus Le Mad Vlad on 11.20.10 at 5:07 pm


Interesting report in the Kelowna Capital News yesterday, by Jane Muskens entitled “Study on baby-boomer retirements raises alarming stats”.

Of course, she didn’t take into account the reality that cycles are changing, whether people know it or not (most don’t).

The column is based on whether employers are going to replace present retirees or switch to new technology.

In the mid-’90s, when I was in the work force at the KDC (composing room), there were at least 25 full-time union members, getting great wages with overtime flying out of our ears.

Now, five full-timers at most, along with a handful or so of on-call substitutes, who barely make $15 / hr. with no benefits — new technology.

In the column, she writes “. . . 57% of Cdns. will not be working by 2026.” Allowing the transition of mfg. / industrial jobs to Chindia and other low-cost countries, a speed-up of computer technology and a declining birth rate, it means those who are going to replace us should have sufficient work to cover their lifecycles.
*
Retaliation “The three biggest problems with QE2 are:

“1) The potential for a US Dollar break-down; 2) Treasuries falling and pushing interest rates UP; 3) China retaliating.

“Of these, #3 is the most worrisome for the global financial markets.” Plus — Encircling Russia, targeting China. Don’t poke grizzly bears; they can become quite agitated when provoked.

History Lessons “Karl Marx said in the Communist Manifesto: “Money plays the largest part in determining the course of history.” The Rothschilds found out early that “. . . when you control the money you basically control everything else.” Obama and Soros follow Marx’s theories.

Could be the reason why twenty or so pacific rim countries are exploring their own free trade agreement, but it’s still not called Fair Trade. No such thing as a free lunch.

3:40 clip Govts. are not nice at all.

Link in. Food for thought. Map and small amount of info. in.

4:59 clip Link in. While sheeple the world over were peacefully chewing on their grass . . . Goes with the inflation video, esp. toward the end where he speaks about Obama’s mtge.-help policy.

#136 Chris in Langley on 11.20.10 at 5:09 pm

Devil’s Advocate,

You really are a chicken aren’t you?

The main point, you didn’t answer, won’t even try to answer.
This is now the 3rd time you’ve tried to side step it without doing anything but try to take the conversation down random bunny trails.

Here it is again. One singular point, one premise. You claim it’s incorrect, but haven’t the guts to back up your arguement.

You went to UBC right? You can argue a point.

#121 from 2 days ago.

How to become a Devil’s Advocate

Some might call it a freudian slip – the comment about “a woman’s womb being the biggest polluter of all.”

freudian slip- n. A verbal mistake that is thought to reveal a repressed belief, thought, or emotion.

So if you want to be a devil’s advocate like the man himself, all you need to do is repress deeply held anger and resentment. Put on a happy face. Think super positive. Lie to yourself about your feelings and then make a jackass of yourself in public forums. It also helps if you ignore the feedback people give and try to cover up your lack of emotional intelligence. This is done by striving to assert your intellectual abilities – it’s called over compensating for other areas of weakness. In males it’s called the “small dick, big mouth” syndrome.

#137 Burnt Norton on 11.20.10 at 5:11 pm

#125 Patz

What’s wrong with @BreakingNews?

My point is that there is a role for rapidly accessible global current event notification. How one goes about analyzing the potential bias in the broadcasting depends on how paranoid one is. For the most part, this kind of news is just news.

#138 JO on 11.20.10 at 5:19 pm

Ian Lee,

Thanks for clarifying your points. I too have years of lending experience and still work in a non-lending capacity for the last 5 yrs. Part of the reason I left was due to the long am and 0 / borrowed down payment options. In m view,this is the issuance of knowingly unaffordable debt – issued at the expense of savers and taxpayers.

I differ on many points you make:
1) Most the massive mountain of debt in this country is held in only six hands. This presents greater risk and virtually assures a taxpayer financed bailout one way or another. Banks do not have much of a buffer to survive a serious systemic crisis given the extreme leverage in the system. Banks know the gov’t will be forced to bail them out if SHTF. Only depositors should be bailed out – no one else.
2)CMHC,in conjunction with rates being set below the rate of inflation (i prefer rate of growth in credit and money, not CPI) acts as a massive subsidy to banks in return to make unaffordable loans to weak/speculative buyers. Most people can understand that most people with 10 % or less have no right to get such large mtgs at artifically low rates. Most of these buyers (HomeDEBTRENTERS) will face serious problems when rates rise.
3)/4) CMHC uses the questionable GDSR/TDSR system. Last time I checked, condo fees and utilities were factored at only half the amount actually payable / month. Tell me what happens if you pay only half of your bills. Banks / CMHC are still selling mtgs that allow people to pay posted rate on a 5 yr and the down payment is paid for by the bank with 5-7 % cash back.
The Ponzi scheme continues. Mr Dodge is also guilty of dropping rates too low for too long, which accelerated the Nasdaq style run up in debt.
5) I was a very young boy in the early 80’s, but suffice to say that when rates spike to even long term avgs, it is easy to build a case that the damage will be extraordinary. If I have it right,our current debt levels are far higher than the early 80s at all levels. The bond market has a noose on the real economy. Too slow and rates eventually go higher as creditors panic about repayment. If GDP surprises and grows, rates ought to shoot up very quickly as no one will want to hold gov’t bonds at 3.7 % with a huge amount of liquidity floating around. After a short burst of “improvement”, the rel economy weakens due to the rate surge.
6) We are in a stronger balance sheet position I agree and do not expect a Florida or Cali style collapse, but the asset # is inflated thanks for the explosive growth in debt and resulting asset price inflation. What would the coverage ratio look like with assets deflated by 25 % ? Still OK no doubt, but plenty of scope for a serious decline in home prices (20 % or more).
7) Good point. My question – due to the outsized growth in mostly subsidized debt in the last 18 mts,how sustainable is the unemployment rate (and GDP and house prices) WHEN the rate of growth in debt merely slows down and god forbid, go negative ? Very likely we will see a rapid rise in unemployment to well over 10 % in a short period of time.
8) When POS rates skyrocket as legions of 0-10 % buyers go underwater on a modest decline and/or rates merely rise to long term avgs at renewal time, expect extend and pretend nonsense by the gov’t. They are desperate to keep the Ponzi economy afloat at my expense.It is wrong. Since when is cheaper shelter a bad thing for middle class people ? I know it is bad for banks and gov’t, but do we really want to keep a RE fuelled Ponzi scheme going ?
9) Yes,I suppose if we allow 500K-1M of rich immigrants to come here and require them to buy homes, we may well avoid a decline. 300K for a nation of 33M will not have a serious impact nationally. Househol formation is forecast to drop steadily after 2015 – not good for national home prices.
10) some old folks will be able to stay. Many will not,unless they retired from the PS or are wealthy. For the rest, they will need to sell as their meagre pensions or retirment savings will not keep up with soaring bills and taxes.
11) The global housing crisis is mainly due to gov’t intervention/central bank intervention.CMHC subsidy, CDIC “guarantee”, artificially low rates, setting capital levels at levels that allow banks to counterfeit and finance enormous debts – leverage is said to be about 15-16 to 1. The greatest mountain of debt the world has ever seen will one way or another be paid down before we can start “growing” err borrowing again. The economy is unstable and due for a multi year “adjustment” thanks to the misguided policies -which only worked due to great demand for credit. Housing should be the worst asset over the next 5-7 years. Extreme optimism + Extreme debt = Massive correction. The debt based, extremely leveraged fractional reserve, fiat money system – an overly technical term for what is essentially a massive societal credit card, is designed to siphon off as much as possible for gov’ts and banks – but no entity can prosper in the long run when debt is growing much faster than GDP – the balance on the card will be brought down before we can rise.RE is going to be ugly while this happens.

Appreciate your comments. Mr. Sprott is one of my favourite managers.
JO

#139 Another Opinion on 11.20.10 at 5:19 pm

So he qoutes a prof and 2 bank employees about real estate…oh yah and the site is sponsered by Scotiabank.
Is this not deception at it’s worst. I feel pity for the people out there who don’t think (period or because they don’t have time which is a lame excuse) enough to realize they’re being scammed.
My wife and I sold our house summer 09 and it was the smartest decision we ever made…besides getting married – she reads the blog too :)

#140 S.B. on 11.20.10 at 5:35 pm

As if we really required more proof…these right wing think-tank “economists” with their gold-plated tenue, iron-clad pensions, chairmanships, and plum industry consulting positions (the revolving door of university-goverment-industry influence peddlers) are sooo out of touch with the harsh reality borne by us “little people”.

We are living The Industrial Revolution Part II. This time, the white collar craftsmen and women are seeing their livelihoods destroyed.
Many white collar jobs are ideal for outsourcing overseas.

#141 Chris in Langley on 11.20.10 at 5:43 pm

Definition of a “Devil’s Advocate”

•someone who takes the worse side just for the sake of argument

Therefore, if the website is called “Greater Fool” with the subtitle from the book being “The Troubled Future of Real Estate” then the logical position of a “devil’s advocate” is going to be “the wonderful future of real estate.”

The devil’s advocate handle is self explanatory in the context of this blog.

So, if a person has the handle of “devil’s advocate” yet claims to agree with the author’s premise of a real estate fall, are they not therefore a walking, talking contradiction? Some would say hypocrite.

Do they not lack self awareness regarding the mixed message they are sending out to the public?

Would it be “intelligent” to blame the readers of his/her writings for not understanding his mixed messages?

If they were to in fact change their mind, would their handle not need to change in order to reflect their new perspective?

#142 harry on 11.20.10 at 5:46 pm

Ian lee,
“I concluded that, going forward, we will experience what we experienced in the past with housing prices that overshoot. In the early 1980s, house prices went flat line for several years as they did again in the early 1990s.”

What saved housing in the eighties and nineties is that inflation was running at 5-10% per year and finally caught up to housing years later. Now the bond market is signaling low inflation for the future.

#143 concessionman on 11.20.10 at 5:56 pm

You sure know how to make friends…out a consultant, the pm, and a reporter in one post…luv it!

PS: Did the order of barbed wire for the bunker show up yet? :)

#144 Timing is Everything on 11.20.10 at 5:57 pm

#74 Ian Lee and Garth

I guess we all learned something today…

Bryan Borzykowski….Hey ‘Scoop’, care to comment?

#145 millbay on 11.20.10 at 6:01 pm

Fridays G&M story Global public debt puts wow.., Ireland and the U.S per capita public debt levels lower than ours here in Canada. Garth has told us that it is NOT different here we shouldn’t be so smug..,actually maybe it is different here.., worse much worse

#146 Ian Lee on 11.20.10 at 6:07 pm

96 BrianT on 11.20.10 at 1:49 pm
#74Ian-Your 91 yr old mother was not part of the huge baby boomer bulge and it is very unlikely the economy will be able to sustain future 91 yr olds in that manner-the money will simply not be there IMHO. These monstrous deficits are not illusory nor will they be easily dealt with, no matter how many MSM “economists” spin the yarn that they are.
Ian response: Brian: If you are referring to the monstrous deficits forecast by PBO starting in about 5 years from now when the boomers start to retire in large numbers, I agree with you. BUT you perhaps unwittingly made my point. BECAUSE the govt deficit will be so large, Canada will NOT be able to build enough seniors housing and boomers will be FORCED to remain in their homes – rather than these homes being dumped onto the market for sale.

#99 ralph on 11.20.10 at 1:53 pm
One big problem I see with Ian Lee’s diagnosis is what good are these assets when fewer and fewer are in a position to buy? As far as I am concerned the debt/equity ratio means nothing if there is no market left.
In other words people will be stuck with properties that won’t sell to cover their mortgages. It is called negative equity. That’s the killer.
Ian response: I agree – IF we accept your assumption there are fewer and fewer people that can afford homes. But Stats Can data does not show that. The most important metric is the unemployment rate and we are doing better than any other G7 country at 8%.
Ian response: In fact, Canadian home ownership is at the highest level in our history at 67%. AND the mortgage delinquency ratio – which must be reported to Bank of Canada by the banks is less than 1% (compared to the USA where 1 in 4 homes are under water OR in foreclosure)

#100 Debtfree on 11.20.10 at 2:06 pm
@ 74 ian when then Fed Gov Paul Volker ran interest rates from 10% through 20% and induced a deep recession. The housing market certainly dried up – but it did NOT collapse.
Well I guess collapse is relative . I bought a house in 82 for way less than half price a foreclosure .It had sat empty for a year .We had thousands to choose from. When we went into the bank looking to buy it they looked at us like we were from mars .No one was buying even when it was the bottom of the market and interest rates had only one way to go. It took three years to get a double.
Ian response: You raise an interesting issue. Real estate markets are local. Yet stats collected are often regional or provincial or national. Ottawa (yes I know, the Fed Govt stabilizes the Ottawa economy) did not suffer a decline while Toronto and Vancouver did. However, nationally, it was a wash.

Got A Watch on 11.20.10 at 2:15 pm
“Setting aside deaths, marriage breakups and job relocation, most housing sales are discretionary within a city. Thus, the owner can always take the house off the market if he does not like the price offered.”
Nowhere in that did I see the words “job losses, tight employment market, falling household income (see first 2 reasons in this sentence) and falling consumer ‘confidence’ that they can in fact continue to successfully pay the mortgage (see first 3 reasons in this sentence). When those factors arise, it’s game over for real estate for a few years at least.
Ian response: Yes, I spoke about the 8% unemployment in Canada vs other countries

What you say is quite true in a ‘normal’ market, i e not one that is in a deep and long lasting recession, not overheated, not contracting, not after a bubbly peak, in a time when the economy is not in bad shape. The number 1 reason why real estate prices go down then is that when people lose their jobs, they are forced to move, because they eventually can’t continue to make their mortgage payments on the inflated house value that was pumped up during the directly preceding period.
Ian response: House price shifts are more complex than that. Yes, in a very serious recession with very high unemployment, it will affect house prices. But you cannot say – as the data does not support it – that x percent increase in unemployment = y percent decrease in house prices.

All it takes is one unemployed or under-employed household on 1 street, who have to sell right now, not “next year when the market gets better” to destroy the “property values” in an area. After all, the “appraised value” is based on “comparable sales”. And when the house next door sold for 5%, 10%, 30% etc less than other recent sales, a new precedent has been established, in a realized negative gain situation. When another does it, and another, there is an ‘issue’.
Ian response: But you are assuming that because you lose your job, you immediately list your house for sale AND reduce your asking price. A large number of mortgages issued today are issued to two income households which diversifies risk for both the bank and the borrower. Even if you decide to list your house, you list it at what the real estate agent recommends AND if you are clever, you will NOT disclose your unemployed status to the broker, which would reduce your negotiating power

If you were to study the history of how real estate bubbles develop, they are entirely similar to bubbles in internet stocks, South Seas properties or tulips. It’s never “different this time”, see This Time It Is Different about how it never in fact is. Past studies of historical real estate busts suggests they almost always happen during a Recession/Depression/economic hard time, and the average time period of the declining prices phase is about 4 1/2 years, with a couple flat years after that, before it starts to really “recover” as the term should be properly used. In the USA, this would be market price peak in ’06 most places, and the real bottom around 2013, probably 2014 due to the extreme size of the bubble blow. See Nevada or CA or Florida as prime examples, where “values” have fallen up to 70% in some areas, and are still looking down.
Ian response: In my Financial Armageddon paper, I provided empirical data to show a large influx of new first time buyers into real estate, that upset the equilibrium or balance between supply and demand, causing a bubble to form i.e. excess demand chasing limited supply. It was caused by the US Congress watering down the mortgage eligibility rules e.g. zero down payment, which encouraged large numbers of low income people to buy homes. Then when these low income people realized they could not afford the new home, they walked away (no recourse in the US), turning the bubble into reverse – into a collapse.

In the US, or UK, or Ireland, or…Canada, the decline in real estate “values” is always about job loss and falling consumer confidence that fuel falling prices. The cure for high prices is…high prices.
“In the early 1980s, house prices went flat line for several years as they did again in the early 1990s.” No they DID NOT “flat line” – THEY WENT DOWN, that’s D O W N in case you aren’t familiar with that word. The opposite of “up”. What part did you not understand, again? “Flat line” is not “down”, it sounds like realtor spin.
Ian response: again, it depends on which real estate market you are using. Nationally, it was a wash – although yes, TO and VAN declined. No disrespect to anyone – but Toronto (3 million?) and Vancouver (2 million?) are not the totality of Canada’s 34 million residents.

I can personally attest that I know people who bought at the peak of the then bubble in 1991 or so in Mississauga, in a nice area, and they did not see their home return to the price they paid until about 2003 or about 12 years later. Prices in fact FELL for a few years, bottoming around ’97 and then flat for a year or two and then gradually started to increase. Yes, fell.
I assume because you were in Ottawa, you did not see this situation as severely, Ottawa always exists in a “we work for the Government!” bubble of delusion anyway.
Ian response: yes – Ottawa realty values do not experience the wide variations that TO and VAN have experienced.

Junius on 11.20.10 at 2:18 pm
#74 Ian Lee,
3 comments.
1. CMHC may insulate the banks but it doesn’t insulate the tax payer. Instead of bailing out the banks the Canadian tax payer is just going to have to bail out the CMHC. Either way we are looking at tax increases which will drive down affordability.
Ian response: Yes, CMHC will be stick with the tab – got to increase the down payment to 10% But NO, it will not affect affordability, as CMHC has built a large financial cushion from mortgage insurance fees (see their financial statements on their web site).
2. The Canadian economy is currently in better shape than the US but as many analysts such as David Rosenberg have pointed out the entire difference is in housing. As this sector cools we will face similar issues in the US and overall slow down in our economy. Again, this will be a drag on the entire economy and, in particular, the housing sector.
Ian response: Agreed – and Rosenberg is one of the most able economists around
3. What immigrants will be coming to Canada from countries with Real Estate prices as high as Canada? Almost none. These people will need a place to live but they are not going to come in and buy up properties at some of the World’s highest prices. In fact, it may be that high cost of living and poor economic conditions slow immigration over the next few years.
Ian response: I have taught around the third world many times. I have noticed over and over that the very longest emigration lines are outside two embassies: Canada and the USA – regardless of the state of the economy. In these “workers paradises” e.g. Cuba, Iran, life is very difficult and Canada is a dream for them, a beacon of hope. They do not care about house prices in Canada. They just want out of their hell hole.

Karl Hungus on 11.20.10 at 3:06 pm
Ian Lee,
I agree with most of what you said but one thing throws out all the GDSR and TDSR ratios – stated income. The fact that self employed people can just “state” their income is kind of crazy. I know first hand because I did it and couldnt believe they let me do it.
Ian response: Karl – I do not know how they validate income today. When I was Mtg Mgr, we required your income tax return or your financial statements for your business, as proof of income.

Brian1 on 11.20.10 at 3:16 pm
Thanks for coming Mr. Lee, but for me the housing crisis has never been the issue. It is the future of American consumer spending. When it rears it’s ugly head all your real estate numbers will change.
Ian response: Brian – I agree with you more than you may realize. The financial mess in US and EU scares the hell out of me. US state govt pensions have deficits of $1 to $3 trillion. US Fed Govt deficit is $1 trillion and entitlement programs are unsustainable.
South EU i.e. Greece, Portugal, Ireland are insolvent and owe billions to the big EU banks. If they default, the big EU banks default. Ireland alone owes $300 Billion to large UK and German banks. It is estimated that the EU South owes a total of $6 trillion – and they are insolvent.

jess on 11.20.10 at 3:26 pm
Perhaps the Professor would help me understand this flow chart relating to the shadow banking system
….”Over the past decade, the shadow banking system provided sources of inexpensive funding for credit by converting opaque, risky, long-term assets into money-like and seemingly riskless short-term liabilities. Maturity and credit transformation in the shadow banking system thus contributed significantly to asset bubbles in residential and commercial real estate markets prior to the financial crisis.”
Ian response: Jess – I was hoping that no one would raise this issue. This is a VERY serious issue.
Shadow banks are NOT regulated in Canada or US or Europe. They are financial institutions that look and act like a bank i.e. borrow funds and re-lend funds.
GMAC, Ford Credit, GE Capital, hedge funds, swap funds, derivatives, credit default swaps are all part of the vast shadow banking economy – sometimes called “near banks”
I am not referring to credit unions or insurance firms or pension funds – each of which have their own legislation.
For the past year, it was estimated that shadow banking was equal in size to regulated banking. The report Jess refers to shows it is BIGGER than regulated banking.
They MUST be regulated – as Governor Carney stated earlier this year.
So IF you all want to get angry – do not get angry at (commercial) banks for they are regulated up the wazoo. Get mad at the shadow banking sector – which is unregulated
It was shadow banking that almost brought down the US in 2008.

betamax on 11.20.10 at 3:35 pm
#74 Ian Lee: “The 1980-81 recession was far more devastating than the recent 2008 recession – for Canadians. However, there was not a housing collapse”
Thanks only to current ‘pretend-and-extend’ measures. And there was a housing collapse in bubble markets then, which comprises most markets today.
“Given that the lion’s share of the $1.5 trillion owed (75% I recall) is mortgage debt, we should be less concerned.”
Right. Because it’s offset by bubble asset evaluations and housing can always be sold — until it can’t because of a moribund market and underwater mortgages
Ian response: BETAMAX – you missed my point. CMHC and the govt can CONTROL the timing of foreclosed houses to the market – by simply sitting on them for a while and releasing them in a controlled way – so their actions do not drive the realty market into a downward spiral.
In any real estate market, MOST of the owners are not selling at the same time. Thus, it is important to control the flow i.e. of foreclosed properties if this were to happen.

“My “insight” is that house prices are sticky downward as well.”
That’s your “insight”??? Something considered common knowledge for anyone with an educated interest in RE????
Ian response: Not sure if you studied Intro Economics which teaches that ALL prices move up and down according to supply and demand – no stickiness suggested there.

“as Governor Carney noted in the MPC this spring, about 10% of mortgage borrowers will be “vulnerable” if interest rates increase by 3%.”
Recent polls suggest many more are vulnerable to much smaller increases, but you quote political whitewash as ‘evidence’?
Ian response: Gov Carney worked for 13 years in investment banking and completed a PhD at Oxford in Economics. You may call that “whitewash”. I do not.

Here’s an “insight” for you: tenure is supposed to guarantee independent thought, not just provide job security for those willing to follow the party line.
Ian response: I belong to no party and thus have no party line to follow. I follow the data and my analysis.

#147 kitchener1 on 11.20.10 at 6:12 pm

Junius, #73
China has always been about cheap wages, ALWAYS. Apple and Google do very well with their tax loopholes and in Apples case, cheap labour. Their profit margins are such because they can exploit cheap labour-raw materials in China and profit from a high priced item. If the Apple were to produce in the US, they would still have a healthy profit but there cap-networth would be 50% off.

If you havnt research FOXXCONN in China, they make the iphones and pretty much every other electronic device.

Ian Lee, thanks for your comments, much apprecitated.

Only issues I have in your logic is:

Discretionary sales, not true at all, RE is a makert , just like the stock market, when prices drop, people want to get out in front of the action, just like stock markets.

Mortgage rates, not once in your rebutal, did you mention mortgage rates and their effects on peoples ability to pay.

in 1980-81, the world was a different place, 7 out of 10 Canadians did not own a home, they were not in record debt etc..

Question for you is this– at what point does the market dynamics of supply/demand matter? is it when 8 or 9 families in canada own a home?

Seriously, immigration = RE increases is flawed logic, why did we not see the increase in home prices in the 90-00? Immigration was constant thru that period as well.

#148 Devil's Advocate on 11.20.10 at 6:14 pm

#134 Chris in Langley

You win Chris, you have me all figured out. I conceed… my emotionally unintelligent self, small dick and need to overcompensate for those failings pale in the shadow of your mere enormous manhood alone.

Can we now please move on to matters more relavent to the topics at hand and leave this petty posturing behind?

#149 slice on 11.20.10 at 6:25 pm

Toronto Star:
http://olympics.thestar.com/2010/article/892692–city-of-vancouver-puts-olympic-village-into-receivership

The Star has blocked people from commenting on this story.

#150 Taxpayer like everyone else on 11.20.10 at 6:40 pm

Ian Lee – thank you for your comments. Also thanks to Got a watch, Junius and Jo for your posts in response. All “good blog”.

#151 jess on 11.20.10 at 6:47 pm

LOL

Return on Reputation Indicator

http://www.apcoworldwide.com/content/viewpoints/reputation/index.aspx
=============================
http://www.pbs.org/moyers/journal/07102009/profile.html

Health Insurance Insider: ‘They Dump the Sick’
Retired Health Insurance Executive Blows the Whistle on His Former Industry

182 comments By ALICE GOMSTYN
ABC News Business Unit
June 24, 2009
As Wendell Potter explains, APCO ran their standard playbook, setting up something called “Health Care America.” Health Care America, according to Potter, “was received by mainstream reporters, including the New York Times, as a legitimate organization when it was nothing but a front group set up by APCO Worldwide. It was not anything approaching what it was reporting to be: a ‘grassroots organization.’ It was a sham group.”
==============

March 24 (Bloomberg) — One of Wall Street’s main lobbying groups is starting an image-improvement campaign aimed at showing the financial industry as trustworthy and a positive force after more than a year of being chastised in Washington. …

“The financial services industry is dedicated to earning back the trust of the American people, and is engaging in a comprehensive effort to communicate directly with them,” the Roundtable said earlier this year in a letter soliciting proposals from public relations firms. “Past experience in successful reputation enhancement campaigns is valued.”

The financial services industry is dedicated to earning back the trust of the American people, and is engaging in a comprehensive effort to communicate directly with them,” the Roundtable said earlier this year in a letter soliciting proposals from public relations firms. “Past experience in successful reputation enhancement campaigns is valued.”
http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aFb60nvnfyZM

#152 Timing is Everything on 11.20.10 at 6:52 pm

#106 a prairie dawg said – “Saskatoon and Regina have grown by relatively huge numbers in the last decade. Mostly in the last 5 years.”

Hmmm? But the population of the province has remained static. Net gain zero. The pop. has been around one million for a loong time. Maybe the farmers ‘sold-out’ and retired to VanIsl. ;)

http://upload.wikimedia.org/wikipedia/en/b/b8/Saskatchewan_population_growth.png

#153 dark sad person on 11.20.10 at 6:53 pm

#112 Coraline on 11.20.10 at 3:03 pm

Did anyone see that there’s a huge insider trading investigation about to break? Here’s a link to the WSJ:

***************

Federal authorities, capping a three-year investigation, are preparing insider-trading charges that could ensnare consultants, investment bankers, hedge-fund and mutual-fund traders and analysts across the nation, according to people familiar with the matter.

The criminal and civil probes, which authorities say could eclipse the impact on the financial industry of any previous such investigation, are examining whether multiple insider-trading rings reaped illegal profits totaling tens of millions of dollars, the people say. Some charges could be brought before year-end, they say.

***************

I had read that and see lots of talk about it and it’s no surprise about insider trading and leak outs prior to news releases and all the other ongoing corruption-Political and Finacial-
The part about it being the biggest insider trading scam uncovered and involving “tens of millions” of dollars-sounds odd and doesn’t fit the amount of hype it’s getting-imo-
Madoff-although a Ponzi and not insider trading was “tens of billions”

Of course-being a suspicious of everything Goldbug-maybe it’s just me-but-with Tens and even hundreds of Billions and hundreds of Trillions in the Shadow Banking system-containing who knows what real value ie: Commercial paper market/Hedge funds/Investment Banks–
This seems like a diversion away from “something else”
Kinda like what happened to poor Martha-
The poor Girl-was sent to Club 49 for “special” prisoner’s and had to wear an Ankle Bracelet for a year-
Tiffany’s $1800

Point being-
She had everyone’s “eyes” on her over a $60K inside tip-
Meanwhile–
Paulson-Dimon-Blankfiend-etc. in broad daylight-robbed the world-

#154 Rob now in Nova Scotia on 11.20.10 at 7:06 pm

@ #74 Ian.

I want to thank you for your informative post. You make some very compelling arguments for Canada not experiencing the housing bubble that the US has. My thoughts:

The CMHC has $473 Billion in liabilities and only $10.1 billion in assets against that liability. See here:

http://www.thestar.com/opinion/editorialopinion/article/816200–cmhc-canada-s-very-own-ticking-economic-time-bomb

If the economy declines further (and wouldn’t it when 75% of what we make is sold to the US)?, then the CMHC could quickly run out of money. The Gov. of Canada would then have to bail out the CMHC, right? So what would the difference be between the bailout of Fannie and Freddie and the CMHC?

You neglected to mention market sentiment. As prices of real estate begins to decline, buyers tend to wait, expecting further price drops. Sellers wonder where the buyers are and then lower their asking prices in order to sell homes. This causes deflation which makes consumers hold off spending. That’s why Bernanke is so afraid of deflation and will be the major factor in our coming decline.

Re: aging boomers. A certain percentage of boomers will be forced to sell their homes as some people will be simply unable to live by themselves. My 72 year father may have to sell his home because he fell and can’t walk, for example.

Something called “Peak Oil” is looming in the distant future that will increase energy costs to the point where it will cost as much to heat a home as the monthly mortgage payments. Sooner when the US attacks Iran. As energy costs rise, people on fixed income will be unable to heat their drafty 60’s McMansions and will be forced to sell their homes and downsize. With enough of this selling going on, there will be more supply and less demand for these homes. How large these sell pressures on the market will be is a matter of debate but the sell pressures are not a factor in the RE market now so it is safe to say that the sell pressure will be higher in the future. Higher supply or sell pressure means lower prices.

You pointed out the fact that Canada accepts the most immigrants as a % of pop. In fact, the US is very close to Canada as a % of pop and accepts 10 times the # of immigrants that we do. See here:

http://www.nationmaster.com/graph/imm_imm_pop_num_of_imm-immigration-immigrant-population-number-immigrants

All that immigration hasn’t helped the US real estate market so why would it help ours?

As a side note, Canada tends not to accept immigrants from more wealthy countries and slams the door on Europeans. The majority of our new Canadians come from India and China, which are developing rapidly. While many of the immigrants are well educated, not all of them can land good paying jobs because they don’t have “Canadian experience”. See this enlightening video:

http://www.youtube.com/watch?v=zLEwNZ6qkms

How are these working poor going to afford homes in Canada if the prices keep increasing?

Rob

#155 bigrider on 11.20.10 at 7:15 pm

Ian Lee

Do you feel that individuals are better served at this point in time, buying an investment property in T.O and renting it out at say, a cap rate of 4% which seems to be roughly what you can get at this time ,or investing in a diversified portfolio of financial assets?

Please elaborate and fill in all blanks as you wish. After all, this is what this blog is really about.

After all, this is what this blog is really about.

#156 T.O. Bubble Boy on 11.20.10 at 7:44 pm

@ Ian Lee:

Thanks for clarifying some of your points… I agree with others on the blog that you have provided more well-thought-out points than we often hear in several months.

What I’m realizing is that your defiintion of “collapse” is probably the issue here… from what I’m reading, you essentially define “collapse” as a drastic downturn like the U.S…

I agree that having fewer lenders and presumably less fraud in the mortgage lending process would make Canada’s housing market less likely to dive 50%+ in a couple of years.

However, I still believe that a significant correction is coming — 30%+ in Toronto, and probably 40%+ in Vancouver (over the next 5 years or so, as the ridiculous buying from 2006 until now is flushed out of the market). The national correction may stay in the -20% range, so that may not qualify as a “collapse”, but it is still a significant downturn.

As for your references to 1990, the one MAJOR difference between 1990 and 2010 is that the mortgage rates are at rock bottom today… they were at 12%-14% in 1990. So, there was plenty of room for rates to drop and help soften the decline.

Also — another major difference between 2010 and 1990: right after the housing downturn in 1990, the Y2K and dot-com boom began. I can’t imagine a similar boom happening this time.

And, on CMHC, they do not have siginificant cash reservces from insurance fees — a good portion of that money is spent on low-income housing an other projects. I believe that they have something like $8B-$9B in assets against $500B-600B in issued bonds (something around 1.5%).

Anyway – you come to a RE bear site like this one, you’re going to have some differences of opinion… but I respect your statements far more than most others, simply because you try to back them up with facts/references.

#157 RE Bear on 11.20.10 at 7:47 pm

I think Ian’s position is as simple as this, I believe that RE will not crash. I will argue my position in any way and can twist any argument with various logical fallacies to obtain my objective.

It’s as simple as this.

http://www.realtor.ca/propertyDetails.aspx?propertyId=10138352&PidKey=282488266

There is no logic behind that house price.

Second, Ian keeps spewing the ‘Canada’ is a dream crap. Well Ian, I grew UP behind the Iron Curtain and Immigrated to Canada. I haven’t bought a house because Canadians are mentally ill when it comes to house prices, it’s a bubble. My uncle just sold his house in Brampton that he bought in the early 2000’s because he needed a bigger home for his wife and two kids. Why? He bought for mid 400’s, sold for high 500’s. He couldn’t believe it– he was very upset when he had to pay mid 400’s for such a crappy house, a house that will last maybe 20-30 years. Now he lives in a tiny $900/month apartment with his wife and 2 kids, and is going to wait until the SHTF and build a new house to his liking. In Europe they build houses to last HUNDREDS of years. A house is not seen as an investment but as a depreciating asset and is based on the quality of construction, the length of duration, etc– much like a depreciating car is, not the Ponzi scheme that it is here. And immigrants do not come here and immediately buy real estate– most move to the ghettos and work in gas stations, sweep office buildings at night, and so forth. I did. So did my Uncle. So did everyone in my family.

#158 T.O. Bubble Boy on 11.20.10 at 7:52 pm

@ #131 Sail1:

“Bubble boy has a lot of time on his hands. I’m thinking, unemployed, wealthy, single or bored.”

Unemployed – nope.
Wealthy – nope (too young to be considered wealthy).
Single – nope.
Bored – sometimes… like everyone who regularly posts on a blog ;)

I came up with those earlier posts after a couple minutes of Google searches.

You could benefit from having some actual facts/data to back up your own opinions… simply trashing other posters really doesn’t offer much to the conversation.

#159 brainsail on 11.20.10 at 7:54 pm

#84 1200C

“Check out this forclosure in Edmonton:”

I’m having a really bad day now! A couple of hours before I read that my almost 90 year old mother who is hunkered down in her house a couple of hundred feet from that foreclosure that she has owned since 1958 and has never upgraded phoned to tell me that her 1973 wooden TV broke and wants me help get a new HD AND her first computer. Last week’s conversation was bad enough when I tried to explain to her that she should replace the original furnace and water heater for both safety and energy costs. I lost that argument. Never ever lose sight of technology!

#160 a prairie dawg on 11.20.10 at 8:12 pm

@152 Timing is Everything

“Hmmm? But the population of the province has remained static. Net gain zero. The pop. has been around one million for a loong time. Maybe the farmers ‘sold-out’ and retired to VanIsl.”

Wiki is not to be trusted. Everyone knows that. ;)

The province dropped to around 980,000 residents at one time not too long ago. Presently it’s hovering near 1,050,000 people, with “most” of the new people going to the larger centres. I’d guess 20-25 thousand new residents each to both Saskatoon and Regina, and the rest spread around to the smaller communities.

70,000 might not sound like much of an increase, but my original post did say “relatively” huge growth in Saskatoon and Regina. So I stand by my original statement.

Adding 25,000 people to a city of 220,000 is huge jump in 5 or so years. Percentage-wise that’s like Vancouver adding 150,000-200,000 in the same time frame. It’s all relative.

#161 dogman01 on 11.20.10 at 8:13 pm

#75 Ian Lee on 11.20.10 at 11:15 am

Bravo Ian! – a two way conversation. The MSM distorts; ever read a Calgary Herald article about a topic you know something about – you ask how can they get it so wrong? …extrapolate the MSM get it all wrong.

To all the Blog Dogs:

Trying to determine what is going on in the world by reading newspapers is like trying to tell the time by watching the second hand of a clock. – Ben Hecht

Garth thanks for the Blog….you are glib – I love it.

#162 miketheengineer on 11.20.10 at 8:13 pm

Garth et al:

Nostradamus le mad dude….this ones for you buddy.

Put on your tin foil hat and enjoy.

http://www.blogtalkradio.com/omegamanradio/2010/11/17/steve-quayle

Good 3 hours worth of stuff. The better part is the later part after about 1 hour. I don’t agree with everything here, but hey, it is a lot better than some books I have read.

Somethings that are interesting to me:

Steve Q says US RE will drop to about 10% of what it was at the peak in some areas.

The boats from China loaded with Goods for the good old USA may eventually stop. Walmart will go empty.

May have something to do with this story about a missile off coast of California.

http://www.infowars.com/wayne-madsen-china-fired-missile-seen-in-southern-california/

So some thoughts for the day:

1) Go to dollar store, get any items you normally use, and stock up.
I like things like scissors, needle, thread, comb, brush, can openers, potato peelers, matches, lighters, flashlights. You get the picture. Oh and those candles in the glass, you know the ones with Jesus and Mary on them.

2) Batteries….Giant Tiger 48 AA for 8 bucks. or Costco…best deals in town.

3) Socks and underwear.

4) Toilet paper

5) Soap products

6) Cooking oil. I noticed No Frills has no name extra virgin olive oil in 3 liter tins for about 13 bucks….lasts a long time in tins.

5) Bags of rice….Food Basics has it for 5.99 this week.

6) Loblaws has Catelli Pasta sauce for $1 a jar….regular 3.29.

#163 Nostradamus Le Mad Vlad on 11.20.10 at 8:14 pm


Soaring silver sales in the US. Could be time to stock up on some. However, what goes up must come down. At least that’s the theory!

Speaking of the US Fed, the IMF wants a Euro-style fed. Lucifer help them, as the US Fed is a total washout!

2:22 clip Here’s something with yer Wheaties later: ALL the banks are insolvent! Plus — 7:51 clip Money As Credit. So a debt has to be created somewhere.

Tent Cities Not limited to the US.

Someone woke up the tiger, but the grizzly is still being poked around. “Beijing is also building rockets, submarines and surface fleets to extend her dominance out to the third chain of islands, enabling the People’s Liberation Army to strike U.S. carriers and bases as far away as Guam.”

Mortgage securitizations. Or fraud.

2:58 clip Benny and The Bubbles!

Never have I seen a more accurate headline.

Change in the offing. ” It was also unrivaled as the world’s manufacturing powerhouse. Americans proudly regarded their country is a model, and many people around the world agreed.” Times and cycles change. Everything is in motion.

List of US politicos who accepted bribes to allow Bill S-510 to pass, which gives Monsanto free rein to do whatever it wants.

‘Net Censorship “It’s too early to say for sure, but Oregon Senator Ron Wyden could very well go down in the history books as the man who saved the Internet.” The nineteen senators who voted for ‘net censorship — “And I note more than a few of them are famed for being Israel’s pets on Capitol Hill!” wrh.com.

#164 Blitzkrieg on 11.20.10 at 8:30 pm

Mr. Lee,

Thanks for all the time you have put into answering the questions, appreciate it

#165 HouseBuster on 11.20.10 at 8:36 pm

So what is going to happen to the economy once real estate crashes?

That is the scary part out of all of this.

#166 RE Bear on 11.20.10 at 8:37 pm

Also another note I should add is that I know plenty of Serbians came here in the 90’s. One family was quite well off in Serbia, the mother a doctor and the father a Professor of Engineering. They have been on welfare since arriving due to not being able to get a related job (mother couldn’t get her credentials recognized), no University would hire him to due to his lack of English. Mother cleaned offices at night, Father delivered newspapers. A Doctor and Professor living in welfare housing surrounded by crack addicts and ghetto booty mothers.

So yeah… I think your illusion that immigrants come here with pockets full of cash, like $500K, to snap up real estate borders on schizophrenia. Wealthy Immigrants do not move here for economic opportunities, because they clearly had plenty back home.

#167 Devil's Advocate on 11.20.10 at 8:43 pm

#146 Ian Lee

Hooray Ian! Finally.

Please stick around; you have the pedigree and literary skill to teach the pups and poodles things I can not.

What a treat to watch you do the well balanced, objective, good work you do… keep it up… please.

These people are not beyond saving yet.

#168 Junius on 11.20.10 at 8:55 pm

#165 Housebuster,

You are correct. It is very scary.

It is easy enough to see the answer. Look south our look east to Ireland or Spain.

We will either fall back into recession or at best have many years of slow growth.

It is very discouraging.

#169 S.B. on 11.20.10 at 8:55 pm

Here’s an ancient slanted Leslieville semi on a so-so street (Jones Ave.) Only $1/2 million…

Look, even a slanted roof in the bedroom.

Gasp, but wait what does my eye spy, something shiney?
Granite and stainless to seal the deal!
(Since when did appliances become objects of lust? Have you ever drooled over an arc welder?)

http://www.realtor.ca/PropertyPhotos.aspx?propertyID=10115758&PhotoNum=9

http://www.realtor.ca/propertyDetails.aspx?propertyId=10115758&PidKey=-1910947487

#170 Chris in Langley on 11.20.10 at 9:00 pm

Devil’s Advocate,

You consider someone in authority (you) being challenged for their hypocrisy and arrogant ramblings petty?

The blog is about real estate, you’re the expert on real estate not me. You are the author of your entries. You are an authority on real estate, yet if someone challenges you, it’s petty?

How’s this for relevant… post #141 that you chose to not bring up…not because you didn’t see it.

Definition of a “Devil’s Advocate”

•someone who takes the worse side just for the sake of argument

Therefore, if the website is called “Greater Fool” with the subtitle from the book being “The Troubled Future of Real Estate” then the logical position of a “devil’s advocate” is going to be “the wonderful future of real estate.”

The devil’s advocate handle is self explanatory in the context of this blog.

So, if a person has the handle of “devil’s advocate” yet claims to agree with the author’s premise of a real estate fall, are they not therefore a walking, talking contradiction? Some would say hypocrite.

Do they not lack self awareness regarding the mixed message they are sending out to the public?

Would it be “intelligent” to blame the readers of his/her writings for not understanding his mixed messages?

If they were to in fact change their mind, would their handle not need to change in order to reflect their new perspective?

#171 Think Tank on 11.20.10 at 9:15 pm

is called a minibubble: (?)The best secret of RE is getting out , people are selling their overpriced condos in TO and heading out to Hamilton west, where a huge victorian house in good condition is still below 350 k, Off course in Hamilton west never was a bubble…till now.

#172 Timing is Everything on 11.20.10 at 9:17 pm

#160 a prairie dawg

Fair enough. I was born in SK and lived there until I was 27. Moved ‘out west’ in ’89 … We can trust the .gov.sk.ca, right? ;)

Go Riders!!

http://www.stats.gov.sk.ca/stats/population/pop2.pdf

#173 Cow Man on 11.20.10 at 9:40 pm

Ian Lee, I am sure, is grateful that Garth has this blog, to allow Mr. Lee to clarify the story. Great stuff. Thank you all.

#174 Devil's Advocate on 11.20.10 at 9:42 pm

#170 Chris in Langley

Chris I think you need to step back and think a bit. When I say “petty” it is in reference to this tirade of yours regarding your psychological assessment of me and irate insistence that I accept it as true not those disagreements we hold on matters of economics or real estate.

Why do you care so much? You’re scaring me Dude.

#175 45north on 11.20.10 at 9:45 pm

Randall Denley: Who’d have thought it possible, but Premier Dalton McGuinty’s government drifted a little farther away from reality this week with its plan to borrow money to artificially lower your electricity bills.

http://www.ottawacitizen.com/Denley+paying+hydro+savings/3858479/story.html#ixzz15sbkOfOY

Dalton still sends me Christmas cards. At least I think they are and not Wonderful Winter Solstice cards

#176 Junius on 11.20.10 at 9:49 pm

#158 TO Bubble Boy,

If I wasn’t clear I was being sincere in my compliment. I appreciate your work.

#177 DJ on 11.20.10 at 10:17 pm

Really great Blog, this time!

Garth, you have met your Moriarty.

#178 BrianT on 11.20.10 at 10:29 pm

#153DSP-LOL-the first thing I thought when I read the article was-they are going to get a few “Martha Stewarts”.

#179 Dirt Dog on 11.20.10 at 10:33 pm

Well Garth another interesting evening. Thank you.

Jo…if you are a girl I want to marry you.

DD

#180 Cashman on 11.20.10 at 10:38 pm

I’ll buy those Olympic Housing condo’s….just as soon as I get my tax break refund promised by Flaherty. Should I be holding my breath? lol.

#181 Dan in Victoria on 11.20.10 at 10:51 pm

Thanks for spending time here Mr. Lee
I found it very refreshing to read a bunch of well thought out replies and arguments, that were polite and informative.

#182 Dan in Victoria on 11.20.10 at 10:53 pm

80 % of Las Vegas mortgages ” Underwater”

http://www.businessinsider.com/the-20-cities-with-the-most-underwater-homes-2010-11?source=patrick.net&slop=1#slideshow-start#yui-main

#183 Dan in Victoria on 11.20.10 at 11:00 pm

Nostradamus Le Mad Vlad and Mike the engineer are you guys on to this one?
Gulf Blue Plague.

#184 BrianT on 11.20.10 at 11:08 pm

Wow-Alex Jones has actually forced Obama to respond publicly-the funniest line is the one about the pat down by the thug of the “same sex” as the passenger. Women don’t want to be felt up by TSA guys and men don’t want to be felt up by TSA guys. If the process was about safety, there would only be women employees doing the groping-it would appear the process is more about submission and humiliation of the public at large.

#185 T.O. Bubble Boy on 11.20.10 at 11:08 pm

@ #176 Junius:

thanks — I did take it as sincere… my response was 100% directed at Sail1

#186 BrianT on 11.20.10 at 11:09 pm

The link http://www.thestar.com/news/world/article/894271–obama-asks-about-less-intrusive-ways-to-screen-air-travellers?bn=1

#187 T.O. Bubble Boy on 11.20.10 at 11:17 pm

Most bizarre statistic of the day:

“Vancouver property values are also expected to appreciate by up to 40 percent over the next 10 to 30 years.”

http://english.peopledaily.com.cn/90001/90778/90860/7184399.html

So, properties will increase between 0% and 40%, anywhere from 10 to 30 years from now???

What’s the ROI on that?
(I guess 0.00% to 3.42%, since 40% in 10 years would be the best case scenario?)

#188 Kurt on 11.20.10 at 11:32 pm

Thanks, Ian!

#189 Almitra on 11.20.10 at 11:44 pm

I add my congratulations to Garth and to Ian for a more thorough airing of diverse opinion than one usually sees.

I am a short term pessimist and long term optimist. By this I mean that I believe that the Bernanke/Wall Street efforts to preserve the status quo will fail. Canada will not remain as isolated from impact on our middle class. But I also believe that the next way we organize ourselves will be an improvement on what I saw in my life time. The global village will not be utopian, but will be better balanced between rich and poor and between labour and capital. Our reliance on government will be much reduced.

#190 Got A Watch on 11.20.10 at 11:49 pm

Ian Lee – well thank you for the reply. But, I have to say, you did not really give a satisfactory response in many areas. While I can appreciate your sentiment in wanting to correct any misconceptions we may have here, most of your arguments are, shall we say, less than convincing. If I were you, I would just say thanks for the debate, and carry on, as you are probably highly unlikely to change many minds here on this Blog. Perhaps the Toronto Star is the correct outlet for you.

Let me respond to what you said most recently:

“Yes, I spoke about the 8% unemployment in Canada vs other countries” well, I did not see much about that in anything I read about what you said. And no, I did not read the original article in The Toronto Star, I really have no use for bird cage liners like the MSM.

I was referring to the situation in other places that have experienced actual real estate bubble collapses, like the USA or UK etc. For example, the real unemployment rate in the US is about 18% if the statistical manipulations are backed out of the numbers. That is when unemployment causes real estate prices to decline very quickly. Canada is lagging the US experience by a couple years, but I have no doubt foreclosures, “underwater mortgages”, “jingle mail” and poor economic prospects will take their toll here exactly like they did in the USA. Or Canada in the early ’90s. Canada may not experience the 70%+ declines of say Nevada, but we will see declines in “values”, as has happened many times before, and rising unemployment will be a driver. Our bubble is just bursting, patience.

“But you cannot say – as the data does not support it – that x percent increase in unemployment = y percent decrease in house prices.” I did not say that, you did. When unemployment becomes “high”, and the exact % number varies from country to country, region to region, recession to depression, it will have an effect. Look at it the other way, it takes low unemployment and a feeling that “real estate never goes down” to drive the full real estate bubble expansion, and when those factors are removed, the bubble bursts. You can wiggle around on that one all you want, it won’t change the fact. Try asking some unemployed people what they thing about buying real estate.

“In my Financial Armageddon paper, I provided empirical data to show a large influx of new first time buyers into real estate, that upset the equilibrium or balance between supply and demand, causing a bubble to form i.e….” No, completely wrong, and a fundamental misunderstanding of what happened in the USA. The main reason, perhaps the only reason, that the real estate bubble happened was…greed. One word sums it up “mortgage securitization” – once Banksters dreamed up that ‘advance’ in ‘creative financial engineering’ around ’03, the bubble was pre-ordained and inevitable. When a Bank can extend absurd kinds of credit in garbage mortgages, and then sell them to “investors” via the Fannie/Freddy pipeline to fraud known as “MBS”, they simply don’t care about following normal underwriting standards. “Countrywide Home Loans” is the poster child. If the overly easy and irresponsible credit was not offered to consumers, there would have been no bubble possible. Congress wanted more people to buy homes, yes, but somebody had to extend the credit. No credit bubble, no real estate bubble. The factors you cite were secondary. I see little recognition of this in your thesis, which pretty much invalidates the whole thing IMHO.

“again, it depends on which real estate market you are using” Areas that did not experience the rapid price rises during the blowing of the bubble, did not decline as much when it blew. Texas, in the US most recently, or more peripheral regions of Canada, in the ’90s. Pretty much common sense – if there was no big bubble, it can’t burst as hard. Does not disprove anything I said in any way. What goes up will come down. Gravity sucks.

“Ottawa realty values do not experience the wide variations that TO and VAN have experienced” yes, obviously because so many work for the Government there, and are not subject to the pressures most Canadians have to deal with. Ottawa is simply delusional. My solution would be to fire about 99% of the swivel servants, then they could experience what people in the real (non-Government/academic) world have to deal with every day, and a lot of wasted tax dollars would be saved.

I could carry on to dissect almost every point you have raised in that comment responding to others. However, I have to conclude there is little point debating these issues with you. Your mind is made up, as is mind, and neither side is prepared to be swayed in the least here.

“I have been tenured since 1995” I can’t really issue a response to that suitable for a family Blog. Let’s just say that “University Professors” could not, in general, buy a clue with an unlimited Budget. If I were you, I would not be overly proud of “academic achievement” as it tends to equate with reality detachment disorder IMHO. Let’s just say that if a resume from a student of “Sprott School Carleton University” were to cross my desk, it would be properly filed in the blue rectangular receptacle on the floor.

I can appreciate that being called a liar has motivated you to respond. But when in a deep hole, it is best to stop digging, and look for a ladder. Perhaps a wiser choice would be to not speak to MSM reporters from propaganda organs like the Toronto Star, as then they can’t twist your words.

“Gov Carney worked for 13 years in investment banking and completed a PhD at Oxford in Economics” Indeed, and his history of working with corrupt financial criminals like Goldman Sachs should have clearly ruled him out as a choice for his present position. A Phd from Oxford and 50 cents will buy you half a cup of coffee. He and his “qualifications” are a prime example of how and why we got into the present financial crisis. A pathetic choice, but what could you expect from a fellow “University trained economist” like Harper. The world would be a far better place without them in it.

#191 Mark on 11.20.10 at 11:57 pm

In Alberta, can one simply walk away from a
non-recourse mortgage?

Yes. With a hit to one’s credit record and ability to obtain a future loan, of course. That’s the definition of a non-recourse mortgage. It does not apply to all mortgages issued in Alberta, of course.

Interesting, so it’s kinda like paying life insurance premiums and when you die, the insurance company goes after your estate because your death caused them to pay out?
Yes, that’s tongue in cheek but it really does seem like a racket when you have to pay a fee for insurance coverage to a gov’t agency that you already fund through your tax dollars yet still are liable for the shortfall. What the hell is the fee or premium for?

Basically, most people who end up defaulting on CMHC-insured loans will end up filing for bankruptcy, so the premium is intended to pay for that. Of course, premiums are far too low for the risk posed (the CMHC is a 100X leveraged institution, and the assets consist of the poorest quality subprime debt that comprises the CMHC mortgage market!).

CMHC insurance is *not* a call option on the price of real estate, although, certainly, most buyers over the past decade have treated it as such.

#192 Basil Fawlty on 11.20.10 at 11:57 pm

#165 ” So what is going to happen to the economy once real estate crashes?

That is the scary part out of all of this.”

It is going to be a disaster once real estate crashes. The bulk of peoples savings are in their homes and with savings depressed they will consume less. This means less government revenues and therefore, increased taxes. Increased taxes spells less economic activity, which leads to political chaos and potential depression.
This real estate bubble was created by government and the banks made a fortune. As it goes bad, government bails out the banks and the people pay the price. Privatized profits and socialized costs, it’s a racket.

#193 Mark on 11.20.10 at 11:59 pm

So, properties will increase between 0% and 40%, anywhere from 10 to 30 years from now???

Even so, electric power will be ‘appreciating’ 46% in the next 5 years, according to the Ontario Liberal government. So certainly looks like house owners will be left behind.

With 8-10% rates of inflation pretty much baked into the cake for the next decade, anyone who buys a house today should be asking themselves why they won’t be renewing at 12% when the time comes? Or what house prices would look like under such an interest rate scenario.

#194 Jody on 11.21.10 at 12:04 am

I think we are also missing a major issue, Keynesian economics, well, it’s not really economics, it’s utter garbage, it doesn’t work and we are now seeing the results.

I think a major shift is coming and hardcore Austrianism will be adopted from the bottom up. I think there is a very real possibility of people just saying no to the current worldwide banking system. Europeons are trying to mobilize a continent wide bank run day on December 7th. There are lots of cool aid drinkers out there who actually think Keynesianism works, ha! However, there are lots of people who see the fiat system as broken and needing to be replaced. People tend to forget that less than 10% of the US population actually fought in the revolutionary war. The coming change won’t come from some dumb ass in the mainstream media, it will be a groundswell of pissed off people who do something which will cause mass panic. I’m predicting TSA officers in the USA will start getting thier heads kicked in when they keep touching peoples kids. There will be a straw that breaks the camels back, then the SWHTF big time.

#195 betamax on 11.21.10 at 12:13 am

#146 Ian Lee:

“Not sure if you studied Intro Economics which teaches that ALL prices move up and down according to supply and demand – no stickiness suggested there.”

Studied Econ for years, but that’s irrelevant. Google “sticky housing prices” and you’ll see a slew of links mentioning the same. It was a common topic of discussion in US housing forums 5 years ago or more. If you had this insight independently, then good for you, but such insularity in turn raises other questions.

“Carney worked for 13 years in investment banking and completed a PhD at Oxford in Economics. ”

Sure, so he knows how to blow sunshine and make it sound plausible. I’m surprised that anyone would mistake a politician’s public announcement for objective fact.

Anyone who didn’t predict the US housing crash and the current recession obviously has no credibility making predictions, no matter their credentials.

#196 Nostradamus Le Mad Vlad on 11.21.10 at 12:34 am


#160 a prairie dawg — “Wiki is not to be trusted. Everyone knows that. :-)

There isn’t much that can be trusted nowadays, except this blog and its canine yelping!

#162 miketheengineer — Hi Mike. How are you doing? Supposed to be sunny and -12C for the high Tuesday. Getting a little rough around the edges for this!

Thanks for the link. Lotsa stuff happening behind the scenes with the US and China. Figure that China will eventually snap and demand repayment of all its IOUs from Uncle Sam, who won’t be able to honor them. So TSHTF just about then. Also — China + Bernanke = Fireworks. Is the US$ about to lose reserve currency status?

Basically nullifies WalMart, who had a huge cargo boat built, loads up on stuff in Shanghai and berths off the California coast somewhere (too big to park in regular harbors). That is the only route it has.

Smaller ships then empties and transports stuff all over from there to various ports. If tensions increase greatly, that will force WalMart to buy their stuff from other places.

Keep toasty warm!

#183 Dan in Victoria — Hi Dan. Googled and Alta Vista’d GBP and came up with the following — GBP1 and GBP2. Second link from Alta Vista is slightly better. Yet another version of depopulation!
*
When JPM speaks, everyone snores. Might be on too something, ‘tho.

GM Mosquitoes Unable to successfully replicate. Another way of depopulation!

1:36 clip Squabble among two Irish banxsters.

All these naughty spy / bomb games. It is really pathetic how countries keep themselves amused.

Losing Grip “US (and Cdn.) workers are forced down the up escalator in job security, wages and benefits. Already, the assault on Social Security benefits continues via fake inflation statistics . . .”

#197 LB on 11.21.10 at 1:29 am

#8 Lurkin’ Shiny

An admirable goal, wanting to be proactive and in control of your own financial future, but not at the expense of third world countries and emerging economies. You have correctly pinpointed the middlemen and real culprits responsible for the current economic distress worldwide – global corporate and financial institutions,who, as we clearly see in their bailouts by taxpayers, also own the politicians. Events have proven that unbridled Capitalism has failed as dismally as unrestrained Communism.

To answer your question, some suggestions to regain individual financial independence:

1. Circumvent financial institutions altogether.
2. Don’t borrow from them.
3. Withdraw savings and DO NOT invest it.Keep it ON HAND or
4. Deposit or invest it in the financial institutions of emerging economies such as China, who, through better regulation, have increased banks’ capital ratio requirements, which results in higher interest rates paid to depositors and investors.
4. Never PAY interest on anything – loans,leases or credit cards.
5. Reduce your expenditures.
6. Reduce your stuff. Less is more.
7. Increase your income.
8. Barter or negotiate on all purchases.
9. Live beneath your means in all aspects.
10. Be flexible, liquid and mobile.
11. Keep housing costs (rent OR mortgage)under 30% of income AND total assets.
12.Produce some of your own food/staples/necessities or buy from local producers only.

Those who ascribe to the above actions will not only protect themselves from the vagaries of financial macro markets but will also position themselves to benefit from the deflationary effects resulting when engaged in by the majority of the population.

#198 Thanks Ian on 11.21.10 at 1:34 am

Hi Ian,

Thanks for giving another perspective on the situation.

What do your current analysis suggest in the future for markets like Vancouver where the prices have skyrocketed and takes more than 9X annual income to buy a home.

Would these so called “bubbly places” like Vancouver have a drop in price?

Or do you see immigration from rich Asians and other factors cushioning the real estate prices if the market drops.

Do you expect markets like Vancouver to drop or go up?

If so by how much, based on your analysis.

It’s always good to get another perspective.

Thank you!

#199 InvestX on 11.21.10 at 2:25 am

The Original Dave on 11.20.10 at 12:44 pm#49 Original Dave:

“There’s no culture per capita that is more delusional than Italians in regards to real estate.”

Source?

#200 Chris in Langley on 11.21.10 at 2:28 am

Devil’s Advocate,

So, if a person has the handle of “devil’s advocate” yet claims to agree with the author’s premise of a real estate fall, are they not therefore a walking, talking contradiction? Some would say hypocrite.

So a simple question about what you stand for…is petty? How so? Are you a devil’s advocate regarding the fall of real estate or not?

#201 warptweet on 11.21.10 at 2:28 am

Re #15 Jsan
I remember in the late 80’s just before the Japanese real estate collapse The Japanese touted their construction robot that made a small tower building automatically. It was so expensive to fabricate the parts to make it robot compatible that it was just another showcase of Japanese hubris to show off to the world. The Chinese building is no different. It makes no sense to fabricate all the parts off site. If and when it does make sense we will be doing it too!
It seems to be just another clue to the end of the Chinese real estate bubble.

#202 nonplused on 11.21.10 at 2:36 am

#48 Taking Stock

You are right about the part where the bank gets their money. Good luck with the other part.

#90 Dorf

Taking risks without capital is what the modern economy is all about! People who have capital are at a disadvantage, because they will be putting something up when they invest. So they can’t compete on price with the people who have nothing to loose but can get a big loan they will never pay back if things go wrong and don’t care.

Here is the dichotomy of things in the modern age: People who have money cannot afford to invest because if the investment turns sour the lenders will come after their assets. People who have no money can invest because they have nothing to loose. Lenders no longer differentiate between the 2 because of government policy. Thus, anyone can get a loan but only those with no money do. Anyone can invest but only those with no money do. We’re screwed.

Ian Lee (several posts)

I agree, no housing market collapse. But the US hasn’t had one either. A collapse is when natural gas prices go from $14 per mmbtu to $3.20 (how come nobody is talking about that???), or BreX or Nortel goes from $100/share to wall paper. Housing will not do that. But a 30% correction? All but guaranteed in some Canadian markets, especially anything west of Winnipeg. 30% is no big deal in the world of markets. Especially if the government is interfering on one side or the other. (PS: CMHC = government interference all on one side. It should not exist. It’s a subsidy to bankers, potentially unlimited, taxpayer backed although not funded to date. But that will change as it did with Fannie and Freddie state side. We cannot establish similar structures without expecting similar results.)

#203 jane54 on 11.21.10 at 3:19 am

Since I am married to an Italian with 100 Canadian-Italian in-laws, I totally agree that Italians are RE obsessed. The rest of their money is hidden in cash in the house, garage or buried in the garden. They don’t trust banks but have moved on from hiding it all under their mattress.
Strangely enough back in the old country they are happy to rent for life – so it may be a ‘look how good we made it in Canada’ thing.
So I think that the non-Italians should lay off us as we are perfectly entitled to ‘diss’ ourselves.

#204 GTA001 on 11.21.10 at 5:06 am

To Mr Lee:

Some Homework for You:

Why in 1974 did The US Treasury Department not allow the CFTC to regulate OTC Derivatives. If they were allowed to do so the laws and rules governing counterparty risk and insurance probably would have prevented the 1998 Long Term Capital Management crisis and the 2008 global financial crisis?

Why in 1993 was the Derivatives market valued at 27 Trillion Dollars. Why was no one including Brooksley Bern(not sure of the spelling) who practised securities law on Wall Street refuse to explain how OTC Derivatives came to be from 1974 to 1993.

Why did the Harper Conservative Government bail out Canadian Banks to the tune of $85 billion which was equivilent to the $850 billion TARP program recommended by President Bush former Secretary of the Treasury Hank Poulson.

Why did CIBC approached the Bank of Canada TWICE for a bailout and was refused. This was confirmed by an unnamed source by a rival Schedule A Bank.

Why did Lynden Larouche press releases indicate that CIBC was in the hole $13 billion due to investments in subprime loans in the US and NO ONE in Canada knew about it except the highest levels of the Canadian Government.

Why did CIBC took a write down of $3 billion just after the 2008 Federal Election

Why do all 6 Canadian banks hold $10 trillion in interest rate swaps and that as you reported they only have between $5-6 trillion in demand deposits or savings/chequeing accounts.

Will the Bank of Canada rescue the big 6 banks with a $1 trillion loan package if a derivatives crisis affects us?

Why is TD Bank agressively investing in US banks when they are aware of how bad the situation is in the US.

All the information that i have presented to you has been confirmed by independent sources.

Are you sure that our financial system in Canada is 100% safe. Think again

#205 GTA001 on 11.21.10 at 5:18 am

To Ian Lee:

One more point. A blog dog in this forum has indicated that CMHC liabilities is estimated to be between $500-600 billion. If they default is it not added to the national debt and wouldnt the interest payment be added to the annual deficit?

#206 Brian1 on 11.21.10 at 5:27 am

Ian; Even before you answered my comment I had concluded that you deserved your tenure. You have a sincere will to help others and I’m sure you realize this is a forum which provides the opportunity. It has been educational.

#207 The Original Dave on 11.21.10 at 5:28 am

While I agree with many comments about Italians and real estate it is also important to note that most italians are very debt adverse and have real savings.
———————————————–

folks, I am Italian!! I’ve been around thousands and thousands of italians for over 30 years. I know how they think.

Italians use to be big savers. The older ones who came from war were big savers. Now, the Italian culture has become more about the surface than any other culture. Everything is about what car that person drives, house size, and how much money they make. A lot of them are littered in debt. The ones that are 45 and under are the ones littered in debt but have all the toys. Their parents usually made huge sacrifices but their children are very different. The older Italians were humble and didn’t show off….not these ones.

Take my word people. I understand all the Italian dialects. I know Italians from ages 15-85. I know what they’re about.

#208 Pr on 11.21.10 at 7:11 am

129 Sail
Such hate for people who have bought a home.
You really must be living in your parents basement

No hate their! theirs is so many expert with red alert warning telling them: its not time to buy real estate! And for most of the pepole warn ,dont whant to check for them self are they are denial the facts with fervant passion. Dont have to live in a basement parents house, just rent a nice place and whait to see if theirs a storm coming. If you have sign a morgage this year, you will be responsible for decades and if your are happy, good for you! Right now the worl is up side down! In a time like that, its folish. Warnig pepole to stay out of harms way, is love. Dont whant to listen! good for you! Pepole get what they deserve! Simple! I still love you!

#209 Onemorething on 11.21.10 at 8:23 am

Well Ian, I would hope you continue your time here at G’s blog as it’s worth having you comment.

Your above the line review is valid, the behind the scenes and future direction of this country is another thing.

There is no place to go but down with what lies ahead of us based on all that Garth has posted for years now.

There may be a collapse depending on what shoe drops first, rates, jobs, taxes and demographical shift or could be ponzied over as usual to form a long drawn out muddle through correction which will suffer the same projected drop in RE that Garth and most of us see but over time.

Our governments quite simply can provide us with what we need to hear as they suck more wealth out of the middle class for the next decade however I’m leaning towards them having very little left to offer to manage any orchestrated solution.

As mentioned, please come back, share your views and take note of what Garth is sharing along with the extension of the blog dogs.

#210 miketheengineer on 11.21.10 at 8:44 am

Garth et al:

Date for the US Dollar Collapse from Leap 20/ 20.

http://www.leap2020.eu/GEAB-N-49-is-available-Warning-Global-systemic-crisis-First-quarter-2011-Breach-of-the-critical-threshold-of-global_a5458.html

“it will take place at the end of 2011 to the tune of major geopolitical conflict and the collapse of the US dollar (13)”

I think that after this time, anyone with hard assets, would be able to get their “Florida” property for Cents on the Dollar. The ultimate discount.

Wonder what happens in Canada at that time?

#211 JC on 11.21.10 at 8:59 am

Mr Ian Lee

In your defense of the magazine article, people do get a different impression. But Garth does have a great point in this blog and your insight is welcomed with open arms.
What I am noticing in the media, meaning paper, radio etc.. that housing is the best and safest investment, beating any investment out there in the market.
CREA , CMHC and the mortgage association are painting a fluff picture.
I know well to do people who lost money in Manhattan, and Florida big time.
Well here is a dose of reality from a realty investor and a stock investor, this housing market was always and is always built around debt. Canadians have high consumer debt , and mortgage debt is hitting $T numbers meaning trillions.
Garth is right if you can’t get a mortgage with no money down these days with stated income only from your mortgage facility your very blind of the market.
Its being done every day, via multiple un-advertised financial options.
This housing market is run by cheap money in Canada.
Also ,lets not forget our Conservative government had to take back some CMHC mortgages.
I do not know the full financial mechanics but as an investor that is called a helping hand .
I can use the favour as well !
Also the ABCP fiasco was another bailout of sorts.
So the BOC is punishing savers to the benefit of supporting the cheap money fluffing of real estate in Canada.
Just heard a 600 sqft condo in Ottawa sold for close to $420K hmm ? but was purchased for $490 K ? ??

Lets call this what it is Canada, has an issue and the issue is high consumer debt and mortgage debt and low savings.
So lets increase interest rates help savers, corporations will earn money on their capital hoarding, and yes this will contract house pricing but will make it more affordable with prudent financing going forward.
Mortgage brokers can stop being financial planners, Financial planners can start being financial planners and banks can start lending to corporations small and large
with the focus of being prudent by all !

From a Realist

#212 Personal – Readership Spike on 11.21.10 at 9:46 am

[…] I followed where all the visits came from and tracked them to a comment in this article: #21 T.O. Bubble Boy on 11.19.10 at 10:21 pm Oh no! I found what might have been the last buyer […]

#213 Blitzkrieg on 11.21.10 at 9:47 am

GTA001

Can you post links to your points, I would love to read a bit more about them
thanks in advance

#214 BrianT on 11.21.10 at 10:35 am

210Mike-might be prudent to avoid buying Florida gulf RE until we get more visibility on this Gulf Blue Plague thing-as already noted by an earlier poster http://farmwars.info/?p=3724

#215 garth fan on 11.21.10 at 10:38 am

#130 Sail:

Garth IS a Canadian hero, not because of his particular perspective–but simply because he has the courage and tenacity to (powerfully) SPEAK UP–advocating a unique contrarian politics.

He doesn’t hide; nor is he seemingly afraid of the elite powers against whom his conviction rallies, unlike you…or I.

#216 Devil's Advocate on 11.21.10 at 10:45 am

#190 Got A Watch

Ian Lee: …Your mind is made up, as is my mind, and neither side is prepared to be swayed in the least here.

Clearly you haven’t given up trying to convince Mr. Lee otherwise though have you?

Put your argument side by side his and you will see a lot more objectivity in Mr. Lees writing than yours. Such is the mind of an educated man “open” and “objective” compared to that “closed” mind of an uneducated man. Until you open your mind Got A Watch you will be relegated to that windowless office of yours with the “blue rectangular receptacle” in which you file any opinion or opportunity your closed mind is unwilling to embrace.

Think and you will come to the realization that the four walls of that windowless office with the desk and blue receptacle “in which you file” any opinion or opportunity your closed mind is unwilling to embrace is oh so analogous of your mind. In the meantime keep watching the clock (watch) waiting for the end of your work day Got A Watch.

Education is a bargain at any price…

“Don’t let your education get in the way of your learning” – Mark Twain

#192 Basil Fawlty
#165 ” So what is going to happen to the economy once real estate crashes?

It is not real estate which will causes the economy to crash it is the economy which causes real estate to crash and the economy will not be allowed to “crash”. Just as was done in the fall of 2008 our governments will postpone the inevitable.

When will the inevitable catch up with us? Read “#194 Jody” following;

#194 Jody

I think we are also missing a major issue, Keynesian economics, well, it’s not really economics, it’s utter garbage, it doesn’t work and we are now seeing the results….

I think a major shift is coming and hardcore Austrianism will be adopted from the bottom up….

The coming change won’t come from some dumb ass in the mainstream media, it will be a groundswell of pissed off people who do something which will cause mass panic. I’m predicting TSA officers in the USA will start getting thier heads kicked in when they keep touching peoples kids. There will be a straw that breaks the camels back, then the SWHTF big time.

I think you are on to something Jody although it is a long way off yet. Boomers still control things and things are not that bad for Boomers that they would want to change them. But there might be a stressful convergence of conflicting wants and needs when the Boomers are of such an age that they depend upon the next generation who struggle to keep their own heads above water under the monumental pressure of the debt which has been off loaded upon them all those generations before them. Will they have the sympathy and respect for us that we do our parents? I think not. Ya end up paying somewhere along the line.

I’m a big Austrian Economics fan… Keynes – not so much although he was not quite so as he is painted by the modern MSM.

#195 betamax

#146 Ian Lee:

“Not sure if you studied Intro Economics which teaches that ALL prices move up and down according to supply and demand – no stickiness suggested there.”

“Stickiness” refers to the reluctance of a supplier to deliver a product to the market for sale below cost. I see it every day in real estate. Two things are most prevalent in markets like this 1. A seller is reluctant to sell for less than his most recent neighbour did and 2. sellers are reluctant to sell for less than they paid for it. I would have to whole heartedly agree with Mr. Lee.

I don’t disagree with your explanation of Supply and Demand it’s just that there is a healthy peppering of psychology added to the serving of it in real life. Read Mr. Lees explanation again… he does continue to explain that eventually the market forces do prevail – it’s just that sellers (suppliers) are reluctant or “sticky” before conceding to those forces and many never do.
There are many who never will betamax as has been discussed on this blog before in that the inordinately large inventories right now will eventually subside as those sellers give up on their lofty price expectations and withdraw from the market. They are not a serious supply side of the equation. They are the “stickiest” of sticky sellers who will remain stuck and “hold off selling until the market returns” as they so often tell me in my business.

#200 Chris in LangleySo, if a person has the handle of “devil’s advocate” yet claims to agree with the author’s premise of a real estate fall, are they not therefore a walking, talking contradiction? Some would say hypocrite.

OK… ok just for you Chris I shall change my handle… tell me what you think would be a suitable name why don’t you?

#202 nonplused
But a 30% correction? All but guaranteed in some Canadian markets, especially anything west of Winnipeg.

Now why would you isolate Western Canada so? What is it you perceive as that different out here that the West is more susceptible than any other part of Canada to a 30% or greater price correction?

#217 BrianT on 11.21.10 at 10:51 am

Interesting video clip from Chicago O’hare penal colony http://www.youtube.com/watch?v=3fmw01mAvkw&feature=player_embedded

#218 jess on 11.21.10 at 10:56 am

scorecards from the past/present …

The Great Tax Cut Debate – Myths and Facts
Sunday 21 November 2010

Share The Great Tax Cut Debate – Myths and Facts
Sunday 21 November 2010

by: Robert Weiner and Varun Saxena, t r u t h o u t | News Analysis

….””Trickle-down” economics has not worked since Herbert Hoover tried it. Every dollar devoted to the middle class causes the economy to grow three times faster than a dollar for the rich, according to the Congressional Budget Office. Millionaires save more of their income gained by tax cuts. Middle-class families spend more. Lower taxes for the rich leave deficits that must be paid for by the middle class, taking the very money we’d give working families.
Since 1900, Democratic presidents have produced a 12.3 percent annual return on the S&P 500, Republicans only 8 percent. GDP growth since 1930 is 5.4 percent for Democratic presidents and 1.6 percent for Republicans.
President Bush inherited from Bill Clinton an annual federal budget surplus of $236 billion, the largest in American history. Clinton balanced the budget for the first time since 1969. Budget surpluses were expected to total $5.6 trillion between FY 2002 and 2011. Despite this, Bush transformed these surpluses into a $1.1 trillion annual deficit in just three years, because of Iraq and his relentless push for permanent tax cuts for wealthy Americans – a new iteration of Hoover’s equally catastrophic trickle-down theory. Bragging about a $239 billion deficit set such a low standard for excellence that he can claim horrific failure as a good thing for the country. The Bush annual loss of three-quarter trillion dollars is totally unprecedented.
..”

#219 prairie gal on 11.21.10 at 10:58 am

#160 prairie dawg: regarding the population increase in Sask cities. My take is this is mostly due to large-scale construction projects such as the ‘Global Transportation Hub’ west of Regina and the CCRL upgrader expansion. The CCRL expansion alone has 500+ contractors, mostly from the USA and Ontario/Alberta. Once the expansion is done, they go on to the next project. The GTH will create a few more jobs permanently.

Greenfield potash mine projects are on paper only and there is a glut of potash right now sitting – not sure if this is going to have a great deal of impact, aside from stock speculation.

Weyburn and Estevan have oil and gas – lots of expansion going on there. Its like Fort Mac south. More of a work site than a place people choose to live for the lifestyle. Nothing against those places, but generally Saskatchewan, like Alberta, is a place to make money (nowadays) in order to retire and spend it elsewhere.

#220 An Cat Dubh on 11.21.10 at 11:02 am

DJH- You were saying MSNBC in the US is truthful. With Marxists like Chris Mathews, are you joking. He would fit in with some of the CBC gang. Most people get their news from the internet now, which is why some western govts. are trying to “censor” the net. Real estate is way overvalued and overated and mortages if invented today would be illegal.

#221 CTO on 11.21.10 at 11:05 am

#146 Ian Lee

Ian

What response would you have for my nephew, who has purchased 2 condos, i believe with very little down, intendinding to flip when they are built next year fir a 25% profit because he listened to guys like you!!!

Would i expect a reply like “hold on to em kid, theyre goin up”! If prices drop, hust a lttle bit, he will be part of that 10%!!!!

Thanks, my educted, insitefull friend!!!!

#222 Devil's Advocate on 11.21.10 at 11:17 am

#209 Onemorething on 11.21.10 at 8:23 am
There is no place to go but down with what lies ahead of us based on all that Garth has posted for years now.
There may be a collapse depending on what shoe drops first, rates, jobs, taxes and demographical shift or could be ponzied over as usual to form a long drawn out muddle through correction which will suffer the same projected drop in RE that Garth and most of us see but over time.
Our governments quite simply can provide us with what we need to hear as they suck more wealth out of the middle class for the next decade however I’m leaning towards them having very little left to offer to manage any orchestrated solution.

I read your comment to Mr. Lee with a healthy dose of monotonous lack of inflection befitting a man so hopelessly pessimistic about any future opportunity.
You need to give yourself an attitude adjustment. Really life is way too short. Why are you wasting it having given up all hope. Of course there will be challenges ahead. There will be periods of BIG challenge which will require a BIG healthy attitude to overcome them. That is life.

While all you pups and poodles are yipping, yapping, barking and nipping there is a whole big world out there that keeps rolling along. Ya it hits a few bumps in the road here and there but it keeps rolling along and there isn’t a thing you can do about it. There are more serious things going on than the pricing of housing which the price of housing is a consequence of. It’s a house for crying out loud, a shelter from the elements.

Unfortunately, looking out my window this morning I see way too much black and white evidence that here in Canada we desperately need shelter from the elements. Right now I’m pretty thankful I have a roof over my head and a furnace belting out heat to make it feel like Mexico. That is worth something to me.
What has the world population done over the last 100 years? Look it up I think you will be amazed. And what do you think the consequences of that are? More demand for all things including shelter maybe? And how long do you think we can keep on packing more and more human bodies on the face of this planet before we get real pissed off with our neighbour constantly being in our face telling us what and what not to do, or gobbling up natural resources and spewing out plastic and shit (literally)?

I don’t know about you folks but me…. I’m going to continue to find a balance between living a good and happy life and being as responsible and optimistic a human being as I can. The rise and fall of the human race is a natural event over which we really have little control. But you can choose to be happy with what you have – life – and you can choose to spread a little cheer to make someone else’s day just a little better that they may choose to do the same and so on and so on and so on….

Who are we to condemn someone for being a greater fool. Greater fools, eventually, beget fewer greater fools. They who prey upon greater fools are doing one of two things; a.) teaching a greater fool a lesson and/or b.) committing a social crime… if a crime then that criminal act will, eventually, beget fewer such criminals as “crime does not pay” (well it may short term but ultimately it catches up with you). And such is the case of the petty economic crimes of the last decade – they will be caught up with one way or another. Madoff was caught and so too will the less obvious ponzi schemers of this current fiscal mess.
It’s cycles and equilibrium… all things shall pass and a new day will be borne. It’s all good – eventually. So why not enjoy the day… go outside and build a snowman… then come back into that warm house (rented or owned) and have a hot chocolate and enjoy what you do have.

#223 Jase on 11.21.10 at 11:22 am

“#96 Ian Lee on 11.20.10 at 1:34 pm

Garth,

You are absolutely corect that it is not illegal to buy a house with no down payment. I spoke too casually.

What I meant is that no bank can lawfully grant a mortgage with less than 20% down payment – per the Bank Act. If less than 20%, per the Bank Act, it must be insured by a recognized insurance firm.

In turn, the insurance firm i.e. CMHC requires a 5% down payment.

However, private people can lend their own money to someone with zero down payment.

The point of this that – unlike the US where there was little or zero equity in the homes of recent buyers, in Canada due to the Bank Act, and CMHC policies, there is more of a cushion to provide some “insurance” or equity against house declines.”

===================================

Ian, I can tell you of a couple of people I know of who purchased a home over the last couple of years even though they did not have a penny to their name. This was through the large banks also. What I was told, they went into the bank, the bank gave them a loan for an RRSP they than took the money from that RRSP through the very same bank and used it for their CMHC down payment. This was for all intents and purposes a zero down mortgage given to people who could not even scrape together the amount for the 5% down payment on their own.

When you have backdoor shenanigans like this going on, in what way are we different than the US? Also, take a look at the link below. The CMHC is handing out loans to people who barely have the means to pay at today’s rock bottom rates and they are giving out loans that leave absolutely zero wiggle room if interest or mortgage rates go even a tiny bit higher. Again, and you think we do not have the same reckless lending standards that the US had?

http://whispersfromtheedgeoftherainforest.blogspot.com/2010/05/pardon.html

#224 jess on 11.21.10 at 11:52 am

http://www.fiscalstrength.com/

Only 375,000 Americans have incomes of over $1,000,000

Between 1979 and 2007, incomes for the wealthiest 1% of Americans rose by 281%

During the Great Depression, millionaires had a top marginal rate of 68%

In 1963, millionaires had a top marginal tax rate of 91%

In 1976, millionaires had a top marginal tax rate of 70%

Today, millionaires have a top marginal tax rate of 35%

Reducing the income tax on top earners is one of the most inefficient ways to grow the economy according to the non-partisan Congressional Budget Office

44% of Congress people are millionaires

The tax cuts were never meant to be permanent

Letting tax cuts for the top 2% expire as schedule would pay down the debt by $700 billion over the next 10 years

#225 Timing is Everything on 11.21.10 at 12:00 pm

#202 nonplused – said “But a 30% correction? All but guaranteed in some Canadian markets, especially anything west of Winnipeg.”

….should read ‘especially anything west and east of Winnipeg.’ (smirk)

#226 Joseph on 11.21.10 at 12:01 pm

200 Chris in Langley…

What is wrong with you man? Why do you care so much? Even if Devils Advocate’s name is not perfectly logical why the hell do YOU CARE???

As Garth points out that “pathetic blog” is full of a tonne of crap, gold bugs, doomers, pumpers etc… And you are OBSESSED with the name Devils Advocate chose…

You seriously need help.

#227 Potato on 11.21.10 at 12:16 pm

@Ian Lee:

Thanks so much for coming here to engage in the debate and help clarify your points from the newspaper article.

Most of your points though seem to be arguing not why prices won’t go down, but why they won’t spiral down out of control and take the whole rest of the economy with them. Nothing you’ve said so far has made me reconsider that buying a house now, in Toronto, would be anything but a terrible idea for a first-time buyer like myself.

Anyway, on to picking at specific points:

“Ian response: In fact, Canadian home ownership is at the highest level in our history at 67%. AND the mortgage delinquency ratio – which must be reported to Bank of Canada by the banks is less than 1% (compared to the USA where 1 in 4 homes are under water OR in foreclosure)”

I think your numbers are a bit dated — the spike has been tremendous in the last few years and is closing in on 70% now. Either way, that rate of home ownership is several points higher than it ever has been in our history, and the same thing played out in the states: people who perhaps had no business owning homes ended up buying them anyway.

Furthermore, you must realize that foreclosures lag prices. The fact that foreclosures are as high as they are in Canada is an extremely troubling point. In many major markets prices have been increasing at a very decent clip for several years now. Even with a zero downpayment, a borrower in trouble should be able to sell their house and come out whole after just 7-10% increase in prices, which is just a year or two of appreciation these days. So if anyone is getting foreclosed on, it’s either due to extremely bad lending (where the homeowner can’t even forecast repayments a year into the future), or because the foreclosure rate is very high in the non-bubbly areas, making the national average rate look “normal”. Remember, in the US the foreclosure rate was also quite low even while trouble was brewing.

“Ian response: But you are assuming that because you lose your job, you immediately list your house for sale AND reduce your asking price. A large number of mortgages issued today are issued to two income households which diversifies risk for both the bank and the borrower. Even if you decide to list your house, you list it at what the real estate agent recommends AND if you are clever, you will NOT disclose your unemployed status to the broker, which would reduce your negotiating power”

This all depends on whether two incomes are needed to keep the property, and my understanding is that in the expensive markets (Toronto, Vancouver) they are. If that’s the case, having two incomes to afford the house increases risk. When you have two wage earners the odds of either one suffering a job loss is higher than the odds of just one person suffering a job loss. Basically, you’ve bought two tickets in the “unemployment lottery.” If only one income is needed to stay afloat, then yes, it adds redundancy… but that is not how it’s working in many cases these days. For many couples that second income is a requirement to keep the household operating, which means systematic risk has been increased by this demographic shift.

“Ian response: In my Financial Armageddon paper, I provided empirical data to show a large influx of new first time buyers into real estate, that upset the equilibrium or balance between supply and demand, causing a bubble to form i.e. excess demand chasing limited supply. It was caused by the US Congress watering down the mortgage eligibility rules e.g. zero down payment, which encouraged large numbers of low income people to buy homes. Then when these low income people realized they could not afford the new home, they walked away (no recourse in the US), turning the bubble into reverse – into a collapse.”

I’m so puzzled by your views… Except for the non-recourse part (which as we’ve seen with recourse States is a small factor), how is this different than the scenario where CMHC allows for low/no downpayment mortgages in Canada? We had a large influx of new buyers because of the rule changes. We shot our home ownership rate up 5% in 5 years in the midst of lowering interest rates. We had prices increase far beyond the historical norm for several consecutive years. How can you then conclude that our outcome is going to be so dramatically different than what the US experienced? [Yes, I will concede that it will not be as deep or as fast a correction, but house prices are going down, especially in TO and Van].

“Ian response: again, it depends on which real estate market you are using. Nationally, it was a wash – although yes, TO and VAN declined. No disrespect to anyone – but Toronto (3 million?) and Vancouver (2 million?) are not the totality of Canada’s 34 million residents.”

I’ll be the first to say that real estate is local, and that most of Canada will not be hurt too badly by what’s coming. But, those are huge local markets (their metro areas combined are 1/5th of Canada’s population). For me, I’m looking to move to Toronto, and chose to rent because the local market has gone insane. If you’re being interviewed for the TORONTO Star, it’s very disingenuous to say that Canada’s national average will be ok, but snicker behind your hand at the suckers in Toronto and Vancouver who are going to get wiped out.

[Ok, yes, that’s hyperbole — most people will not get wiped out, merely continue to make mortgage payments ~30% higher than their neighbours for years to come, kicking themselves for not waiting a few years to buy, wishing they never read the Star]

#228 Contrarian on 11.21.10 at 12:53 pm

Wow, I just want to thank Dr. Ian Lee for his comments. He raises the level of discussion here by several notches.

I wish this blog were using a much better format for discourse. It’s very difficult to follow the branches in Dr Lee’s responses, and responses to his responses. Garth, perhaps it’s time to chip in a little money for proper threading bulletin board? e.g. vBulletin?

#229 Mikey the Realtor on 11.21.10 at 12:55 pm

I’ve got an Italian on the hook folks, and I’m reeling him in furiously, it looks like a $30k commish. Davey, if you need a representative feel free to contact Mickey.

#230 BrianT on 11.21.10 at 1:07 pm

I don’t totally agree with Stoneleigh’s predictions, but where she is absolutely correct is in her analysis of how MSM economists are a joke in their disregard of the role of debt in a Ponzi scheme economic model-all the common metrics used are garbage. Example: go to any site and see countries listed by GDP per capita (the most commonly used metric for country standard of living or ave wealth). You will notice that many of the most “wealthy” countries are flat broke and need to beg for handouts (Iceland,Ireland,Greece and soon Portugal and Spain and then the USA etc.etc.etc.)-if this metric was useful, this would be IMPOSSIBLE. All the yrs of high GDP would be available as a SURPLUS to tide over any bad yrs-in reality the high GDP is to a very large extent a product of high debt/credit in relation to the size of the overall economy i.e. a credit bubble with Ponzi characteristics. No MSM “economist” will even admit to this even as these “rich” countries go bust one by one.

#231 Taxpayer like everyone else on 11.21.10 at 1:37 pm

106 – Mad Vald – not sure if the “emma Maersk” is the ship you refer to.

http://en.wikipedia.org/wiki/Emma_M%C3%A6rsk

Many hits on google for it as well. Conflicting claims as to whether it can go thru the Suez and the number of its crew. Also looks like it can dock in many ports (just like the Ipods it brings!) The Danish company that built it
supposedly is building 7 more.

Cristicisms include the high sulfur content of the bunker
oil it burns.

#232 canali on 11.21.10 at 1:38 pm

hey some realtors even going public with bets to prove otherwise that (in his op) vancouver RE is still fairly priced (mike stewart: a vancouver realtor…a nice guy too…have dealt with him when I was considering buying)

http://www.realestatetalks.com/viewtopic.php?f=8&t=58625&sid=f287e3cf9c1b11d058846c11b638e702

#233 Jake on 11.21.10 at 1:42 pm

Privatize any profits, socialize all the losses. The true American — and now Canadian — way.

#234 S.B. on 11.21.10 at 1:47 pm

1. Just one more reason why we should completely ignore the “news”. P.s. I rarely if ever watch tee-vee and have not turned it on for weeks now.

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

“Bernays’ public relations efforts helped to popularize Freud’s theories in the United States. Bernays also pioneered the PR industry’s use of psychology and other social sciences to design its public persuasion campaigns:

“If we understand the mechanism and motives of the group mind, is it not possible to control and regiment the masses according to our will without their knowing about it? The recent practice of propaganda has proved that it is possible, at least up to a certain point and within certain limits.”[5]

He called this scientific technique of opinion-molding the ‘engineering of consent’.”

2. Why we need to kick these “economist” types to the curb, exposing them as charlatans: We, the “little people”, are Price Takers.
We are forced to accept every inflated price that is thrust upon us: skyrocketing hydro, gas, food, taxes upon taxes. The means of production were long ago taken away for us. The home has become an economic and social prison: couples return home after logging 60+ hrs a week of work and commuting, the home is a place to eat, sleep, and fight. Bills!
The kids steel themselves away in an electronic mind cage of cell, computer, video games. The omnipresent tee-vee is like the prison warden watching over us. It tells us me should be happy happy. Look! This new liquid will get your clothes even whiter than before! Ask for it by name. We vanquish evil overseas, a terrible plot narrowly averted. Just in time! Ask not why, be grateful.
Hey the local sports team won! A bunch of millionaires paid to toss a ball around. Be happy happy. We live in freedom. Not happy? I’ll fix that. Take this pill. Ask your doctor for it by name.

Yet we live in a country blessed with boundless natural resources? Why are our streets not paved with gold? The robberbarrons will never let us see a penny of this money (see: afghanistan, iraq, et al).

The economists (stuck in the revolving door of industry/government/academia) work for the Price MAKERS. The Price Maker set our prices, and the trained “economists'” job is to invent reasons why we should pay these inflated prices.

The corporate controlled media will spin tale after tale of woe about soaring costs, green costs, taxes on thin air, whatever it takes. Just a distraction while more and more of our money is secreted away offshore.

Like I said: Middle Class R.I.P. 1946-2010 – just a footnote in history we hardly knew ya. :(

p.s. I am GLAD to be living in these times, the winding up of the greatest social experiement ever. Remember, the biggest lie ever told is that evil does not exist. Once you know this you have become empowered. Open your eyes. Make your choice. We only have one go-around in this game choose you side well!

#235 Dorf on 11.21.10 at 2:05 pm

I think that some of these bankers and economists and others in suits should exit the shiny tower and see how the MAJORITY of canadians live, merely blocks or miles away.

When you spend your days going from shiny home to shiny tower in a shiny new car, surrounded in architectural marvel and people in nice suits, I don’t believe for a minute that you have any kind of perspective on daily life for most people on the street. It looks to you like everything is warm and cozy. You can’t take a pulse from numbers on a sheet of paper on your desk.

Try being one of the people that makes companies make money (and I mean by toiling, not watching stock tickers). You all sit and watch it happen, striving to engineer the whole process to your benefit.

Try living the life of a blue collar. Try talking to people that live that life. They are the vast majority of canadians, and a lot of them are already not doing very well. These are the people you depend on. Without people to do the actual work, there is nothing to manage or make money from or write columns about.

When people at that level become disillusioned, discouraged, and perceive no benefit from their work, there is no incentive for them to perform. There is no incentive for them to get up in the morning.

There is already a huge amount of growing resentment towards the money hoarders, who continually find ways to reward the worker by clawing back on their wages and benefits.

People are already complaining that they can no longer afford to live any kind of lifestyle on the same money they have always been making. Let’s remember that for the past 10 years or more, there has always been one excuse or another for no wage increases, and when things go downhill, it is rollbacks.

My “Head Stuck Ferociously Up Ass” award goes to the comment that 91 year old people will be keeping their homes because the government can’t afford to build care homes for them.

Ha ha ha ha ! And they will magically be able to afford to keep their homes and keep them maintained, and they will magically be able to care for themselves and clean the house. They will magically have perfect health until they don’t wake up one morning.

Only a complete moron would not arrive at the conclusion that when the time comes, they will dump the house for whatever it sells for and move into my basement, because I don’t have the time to drive back and forth across town every day to look after them.

I guess if you have no abilities whatsoever and zero understanding of things around you, you can always knock off bullshit columns about what you see in the 10 foot circle around your desk, even if you have perceived everything totally incorrectly.

Working people….people with good jobs, are worried. Now speculate as to the sentiment of people who have not had a job in a year or three.

Ian’s World…Ian’s World…Party Time…..Excellent !

#236 betamax on 11.21.10 at 2:14 pm

Globe and Mail: Canada’s Dirty Subprime Secret

http://www.theglobeandmail.com/report-on-business/canadas-dirty-subprime-secret/article317737/

#237 The Apocalyptic One formerly Old is Gold on 11.21.10 at 2:34 pm

#234 S.B. on 11.21.10 at 1:47 pm
_____________________________________________
I am glad I skim through comments bottom up. This is one of the best analysis of our world I have read on this blog – hope it sinks into some whose minds are still stuck on bricks and mortar. Tin foil hats and behind the curtain wizards are all too real though Garth and others may continue to deny their existence. The results, meaning the long ago predicted death of the Middle Class, are all too real, and it is asinine for anyone to explain the demise away as stupid public policies or shortsightedness of politicians. But the Middle Class ain’t got anyone else to blame but themselves, even today, even on this blog there are more people waiting for prices to crash so they too can buy some hardwood and granite, rather than being worried about their freedom and that of their children. People deserve the government they get and what’s coming right here, right in America and Canada will make Stalin’s Russia look like Disneyland. By the time most people see it happening, it will already have happened! No need to worry – just get yourself a balanced portfolio, that will take care of all the problems!

#238 Confused in Victoria on 11.21.10 at 2:37 pm

My husband just got a raise. Works 12 hours a day. Great! Well this so-called raise flipped us up into another tax bracket – this raise counts for nothing. Hard to get ahead with a tax system like we have.

#239 Ian Lee on 11.21.10 at 3:00 pm

Garth,

Allow me to make some general comments that adddress some of the responses by some people on this blog

1. I am not recommending any type of investments to any person – including purchasing a home – I do not analyze specific investments as I am a macro analyst and academic – not an investor analyst
2. I am NOT making the claim that a house is a good investment in the short run
3. I am NOT stating that house prices can NOT collapse (which I define arbitrarily as an average decline of 15% or more) – merely that it is unlikely
4. I am NOT stating that the Canadian economy can NOT collapse – I merely note that by the numbers, by the metrics, Canada is in far better shape than the rest of the G7 (although that is not saying much)
5. I am NOT stating that Canadian banking is “100% safe” – merely that the Swiss and some other international organizations ranked Canada’s banks and financial regulatory system as superior to any other country

A residential home investment is unique because while you can NOT live in a T-Bill or a CSB or a stock, you can live in your house. Stated negatively, IF you do not own a home, you are NOT exempted from the need to live somewhere i.e. the rental market.
Thus many of the arguments concerning whether home ownership is a good or bad investment, seems to be beside the point – for me as a homeowner since 1976. I have to live somewhere – and thus I must buy or rent. I do not HAVE to buy a T-Bill or any financial investment.

In turn, this transforms what would otherwise be a straight forward financial inverstment into something that carries a lot of baggage – emotionally and psychologically. The house where you raise your children – and all the deep memories associated with this.

I witnessed this repeatedly as Mortgage Manager in 1980-81 when customers who had lost their job, showed up every month with the mortgage payment. How they did it, I do not know. But they did. My delinquency ratio barely changed during the worst recession since the Depression (and home ownership was not 30% in 1980 as someone suggested – it has been 60% of Cdn adults owning their home from the 1950s until the 1990s when it increased to 67%).
Canadians possess a deep, visceral and extraordinary attachment to their houses – measured by by very low delinquency ratios that rarely go over 1%
If one were to sell, one then has to move somewhere else. Why bother? Because an analyst predicts house prices are going down in the future. so what?

To #204 GTA001 on 11.21.10 at 5:06 am

Re derivatives, I agree with your larger sentiment that this instruyment – and unregulated instruments and bodies in the shadow banking or near banking system – must be brought under the financial regulatory umbrella.

Althgoug no one raised it, Basel 3 – the new G20 international agreement to regulate banks – is much more demanding than Basel 2, for it provides a leverage ratio max and introduces liquditiy standards for the first time.

The bad news is that the German Govt and German banks and other EU Govts and banks fought hard against it and delayed implementation until 2019.

As Gov Carney noted last week, Basel 3 will make the worlds banks look much more like Canadian banks.

The Govt of Canada did NOT bailout the banks when it approved a facility of $125 Billion in the February 2009 budget to purchase CMHC approved mortgages from the 6 Canadian banks. The Govt of Canada was already liable through the guarantees provided by CHMC. The Govt merely purchased some of these assets from the banks – no different than banks bundling mortgages into security packages and selling them to 3rd party investors.

The Govt bought the mortgages from the banks – who sold the mortgages to the govt. – a straight commercial transaction.

When I was Mortgage Mnaager we sold about 25% of our mortgages annually to life insurance and pension funds and we continued to administer them. Was that a bailout? of course not. Banks do this regularly and routinely.

I have no information concerning CIBC.

Re TD expansion into USA, this is a smart strategic move, for they are picking up bank assets in the depressed US economy very cheaply. You have all heard of “buy low – sell high).

Do I believe that the Canadian banking system is stronger than the US banking system or the EU banking system. Yes I do. Canadian banks have operated under a leverage ratio max of 20:1 – imposed by OSFI and in reality average 15:1.

Some of the large US banks were leveraged 25:1 to 30:1 during the last 2 years and some of the largest EU banks were in the high 30s and even 40s leverage ratio. Please google and you will find some metrics.

US banks were and are being bailed out. EU banks were and are being bailed out – have you heard about the Irish banking crisis? Canadian banks were not and are not being bailed out.

Re CMHC, note that CMHC is a separate legal entity owned 100% by the Govt of Canada. Per CMHC audited financial statements for 2009, Total assets are $272.8 Billion with liabilities of $263.5 Billion. Gross revenue for 2009 was $13.1 Billion and expenditures of $11.9 Billion for a net profit of $.9 Billion.

For CTO whose nephew bought two condos with little or no down payment, this merely demonstrates that we must demand and audit these standards to ensure that the down payment is real. when I was Mortgage Manager – it may be different today – we were REQUIRED to verify the source of the down payment.

And we need to increase the down payment requirement to 10% of purchase price – AND every bank should be required to verify that the down payment was not borrowed.

Ian

#240 OttawaMike on 11.21.10 at 3:07 pm

Wow. A lot of thought provoking posts this weekend.

Definitely some for a “Best of list” from this blog.

#241 S.B. on 11.21.10 at 3:24 pm

Appreciated, Old is Gold.

#238 Confused in Victoria: touché. Middle Class = middling incomes.

We must remember our human condition has been studied endlessly for years. They know a million ways to kill a man now, and a million more of how to break his soul.

We are living in a giant computer game, a computer model – they know, if they increase gas prices by 10% and tweak bad news up by 20% and decrease GST by 1% exactly how we will react.
Crank interest rates by 2%, cut CPP by 5%? Push a few buttons and here’s how it will play out.
Flood our markets with 25% more made-in-china goods? Main Street, you don’t stand a chance.
p.s. all my shirts say made in china or vietnam now.

Mom and apple pie were replaced by state-sponsored child care and Ritalin as the after school snack of choice.

What’s good for GM is good for USA? How’d that old slogan play out?

As a final thought, go to Google Video and watch: Power of Nightmares, at least the first 1/2 hour it. We see in the 1970’s they word for word used the same script to couch Russia in terms now used against the Middle East. Like I said this is all a model, a script. The outcome is a forgone conclusion.

Our jobs are to try and obeserve what is going on. And this is were Garth provides a great help.

p.s. I work in the heart of Bay St., (#235 Dorf!) I watch stock tickers all day because I can but I’m not a trader by profession.

#242 dark sad person on 11.21.10 at 3:27 pm

#237 The Apocalyptic One formerly Old is Gold on 11.21.10 at 2:34 pm

#234 S.B. on 11.21.10 at 1:47 pm

*******************

Someone who can “see”
Not at all like the blind here who stand back and chant “doomers and gold pumpers” at every chance to cover their fears-

The pessimist sees the future-
The optimist fears he is right-

#243 Sail1 on 11.21.10 at 4:02 pm

#158 T.O. Bubble Boy

You see it is thrashing I see it as balanced. Regardless of what is posted, anything to do with real estate that is remotely positive is quickly dismissed.

Most people do not want to rent. When given a slight opportunity, to purchase a home, foolish or not, they will take it. Sadly in Canada , the stigma of being a second class citizen if you are a renter, is very evident by the influx of buyers. Any amount of negative or positive stats generated, will not stop a two income family from purchasing a home. The only thing that will, are higher interest rates.

#244 Sail1 on 11.21.10 at 4:17 pm

#208 Pr

You are under the illusion that everyone that is purchasing a home is doomed to fail. Notice I have written Home not house. There is a difference. A home is where you raise your family and hopefully live, until your health tells you otherwise. If waiting suits you, then God bless you do as you wish. Why scorn and wish ill on those people who for better or for worst, seize an opportunity that they feel will never come again. Envy doesn’t become you.

#245 confused and a little crazed on 11.21.10 at 4:23 pm

Thanks Ian,

for you informative post …however given this era of financial Uncertaainty . I am sure everyone here agrees …no public bailouts. Not AIC, lehmans, countrywide, Olympic village, Hay helicopters for the fake ski hills.

sure people lose houses. people lose their pensions then sue/ fire the people who were responsible. instead they were given bonuses

these were investments not for public good and should be treated as such. No one bailed out the dot com fiasco. WHy now…how fair is it when you change the rules in the middle of the game.

there is a lot of unrest amongst the public , Europe/ ASia/ US…even here with the HST Crap…trying to slide one over on the taxpayer to cover for poor government money management and you know its bad… u better believe i’ll be be there to sign the referendum . heck i’ll even drive the carpool

#246 JamesinVancouver on 11.21.10 at 4:33 pm

Garth..

I have yet to see in my online travels a running tally somewhere of the economists who have commented publicly on the Canadian housing situation. Do you have any idea Garth of how many economists are in the “yes there is a Canadian housing bubble” or the “no there is not a Canadian housing bubble” camps? It would be very, very helpful and interesting to see them all lined up somewhere.
I personally believe your version Garth of the housing situation in Canada but it is a very long slow reveal. I have been actively watching the Metro Vancouver real estate market for 3 years now.
There is no doubt than many have made a lot of money in the real estate market and can afford to withold their properties from the market. I could provide a great many MLS example of all types of housing, from crack shacks to legitimate “new” builds that are still being marketed on and off again for several years now.
I was just doing some normal reading of the online Globe and Mail this morning when I came across this article once again…

http://www.theglobeandmail.com/report-on-business/canadas-dirty-subprime-secret/article317737/singlepage/#articlecontent

#236 betamax has referred to it as well above.
What is up with the truth? Why is this reappearing now?

Ian Lee above (#75, #77,#96 etc…) claims the opposite of the information provided in the G&M article. Although he appears to be shovelling madly with each additional post here on your blog.

Here is a story for you, absolutely true. I have been pre-qualified for a reasonable (completely affordable) mortgage at one of the big 5 banks for almost 2 years now. Originally, after approving my mortgage application the mortgage manager introduced me to the bank financial advisor in the branch. That fellow had a self-made 3’X4′ chart showing the evolution of housing prices in Canada and he told me that I should not buy (that was 2 years ago). I was puzzled when that same financial advisor was fired within a few weeks of my mortagage application. He left me a voice mail but by the time I returned his call all traces of him were gone from this Big 5 Canadian Bank branch.

Garth, it is completely disheartening to want a home in Canada right now. Lies and more lies are everywhere.

I am exercising the utmost restraint and continue to follow your blog and to research as best I can the opinions of the best economists that I can find.

But truly, this is all very, very disappointing and depressing.

This isn’t the Canada I grew up in.

And my personal opinion of Metro Vancouver is that it is a slimefest of the super rich, the super poor and a tightly squeazed middling class. My slimefest comment refers to the real eastate market and not to the human beings caught in the lower, harsher realms of the housing market.

So very un-Canadian.

Thank you for the effort you put into your blog Garth.

#247 Devil's Advocate on 11.21.10 at 5:27 pm

#235 Dorf

…you have no abilities whatsoever and zero understanding of things around you, you can always knock off bullshit columns about what you see in the 10 foot circle around your desk, even if you have perceived everything totally incorrectly.

Working people….people with good jobs, are worried. Now speculate as to the sentiment of people who have not had a job in a year or three.

Dorf, it sounds to me like you are caught in a challenging time in your life. I am not going to guess at what stage in life you are as life tends to have it’s challenges at any juncture. Best we learn to roll with the punches as early on as we can.

Rest assured Dorf things change. These trying times too shall pass, but not if you get too caught up in a web of self despair. I know at times it is hard to believe it but it is true. Hang in there and you will soon find this to be so… in the meantime I am sure, if you examine it, you have a lot to be thankful for. Trust me, as bad as it may seem for you, there are many for whom it is a lot worse – a whole lot worse – guaranteed.

I think it is you Dorf who is “seeing only in the 10 foot circle around you”. Don’t limit your vision. Above all, don’t give up Dorf. Too many do so just when things are about to change for the better. Thing of it is you just can’t know when your persistence is going to pay off. But one thing you can know for sure is that if you give up you have already lost.

Hang in there… you can do it. It is not what they can do that you can not… it is what they do that you do not. Just do it… you can do it too Dorf.

#248 Patz on 11.21.10 at 5:29 pm

I must admit I’m a little confounded by what’s going on in Vancouver RE. Sales are holding mo/mo and even advancing a bit. These stats are from agentwill.com and are Greater Vancouver only so don’t reflect the rest of the province, especially Victoria or Kelowna. Look at Weekly Unit Sales chart where he has the past three years performances. Look at 2010 week 37. It looked like sales were going to plummet through the lows of 2008 but then they spiked up again. They are still below (and mirroring 2009 somewhat) but nonetheless better than 2008.

Note that detached property prices are still climbing while attached are falling. To be expected prior to the whole market going down, I think.

I’m still betting on a crash in Vancouver prices but not sure when—who is really?

Link: http://agentwill.com/weekly-stats/

#249 Devil's Advocate on 11.21.10 at 5:42 pm

Dear Ian Lee;

Run… run while you can my friend…

RUN from these toxic blogs! Run like the wind and NEVER look back… never… if you do you will turn to a pillar of salt.

“Save yourselves with all haste. Look not behind you. Get as fast as you are able to the mountain, unless you be involved in the calamity of the city.”

#250 jess on 11.21.10 at 5:42 pm

Carney made the comments at the International Center for Monetary and Banking Studies, in Geneva, this week.

“Canadian banks were required to meet supervisory targets for the level and quality of capital, which more than exceeded international minimums,” he said. “Canadian capital requirements were set at 7% and 10% for Tier 1 and total capital ratios instead of the 4% and 8% prescribed in the (then applicable) Basel 2 capital accords.”

“As a supplement to Basel 2, (Canadian Banks) were required to ensure that the ratio of total assets to total capital reached no more than 20 times,” he added.

Carney said that leading up to the crisis, the principal-agent problems that developed in originate-to-distribute models were absent in Canada.

Banks retained underwriting risks because with Canadian securitizations mortgages remained on the balance sheet. “Banks obtained natural geographic diversification of their loan portfolios through their nationwide branch system, which eliminated one motivation for securitization.”…

“Only about 30% of mortgages in Canada are securitized. Moreover, securitization in Canada is dominated by government-guaranteed mortgage-backed securities, about 85% pre-crisis,” Carney said. “As a consequence, the mortgage-backed security market in Canada continued to function well during the crisis.”……
Carney speech in Geneva
http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=afK23ynh7cdk

#251 S.B. on 11.21.10 at 6:03 pm

Controlling us via fear: CBC says “Terrorists” could sneak in via Inuvik or somewhere…. roll:
Whatever happened to that Red Scare thingy??
The stuff of nightmares indeed. Please Mr. Politician keep us safe, as only your harsh new laws (aimed at us) and no-bid security contracts can accomplish.

As a further precaution all of Garth’s events will now require an Enhanced Patdown search upon entry. We’re talking a full, palm-down crevice search. Cannot be too careful these days, some Realtor(s) may have an axe to grind. :mrgreen: :mrgreen:

“Airport security may be tightening up across Canada, but people flying within the northern territories do not face any screening, worrying a security expert who warns terrorists could use the North as an entry point.”

http://www.cbc.ca/canada/north/story/2010/11/19/north-airport-security.html#ixzz15scULjVo

#252 confused and a little crazed on 11.21.10 at 6:05 pm

239 # IAN,

this is the no bailout program flaherty payout to the banks of $25 Billion

http://www.canada.com/windsorstar/news/story.html?id=6df3229b-9bca-453b-9b10-53b3c7386cba

i don’t seem him giving it to u or me . We can lend it out as well and receive a tiny profit in interest

tsk… No bailout??. Yeah like my parking ticket is no really a parking ticket. look on the bright side It just a convenient way to pay more taxes…i still lose money though

#253 jess on 11.21.10 at 7:11 pm

Mr. Rosen calls it the lost decade

no justice no lessons can be learned!
http://www.rosen-associates.com/pdf/10_Feb10_The%20lost%20decade%20that%20was%20too%20good%20to%20be%20true.pdf

#254 Devore on 11.21.10 at 8:16 pm

#239 Ian Lee

And we need to increase the down payment requirement to 10% of purchase price – AND every bank should be required to verify that the down payment was not borrowed.

Ah, now we are hitting the nail on the head.

Banks (business in general) will do what they are allowed to do (through regulations, laws, consumer preferences) that increases profits. When they are restrained by regulation, in our case, then it is clearly a failure of regulation.

This is not surprising. Regulators have been failing ever since they started regulating. They are only human after all, no different from us, although we often believe (or are lead to believe) they have special powers to do what we cannot. They can fail in any number of ways. They are corruptible. They do not like to act against their own (or their friends) interests. This is why I would rather trust a free market (regulated by basic common sense laws and consumer choices) than a micromanaged market; it creates a false sense of security, and when it fails to protect, you have very little recourse.

It’s not like this is a new phenomenon. Regulators have been continually failing to protect in critical ways for decades. There are a myriad of excuses, none of which I am the least bit interested in hearing. One of the big reasons (but not excuses) is the revolving door between the industry, and regulatory, legislative and judicial bodies, which creates a very high level of inherent conflict of interest and corruption, that we have failed to prevent from existing for a century. We’re simply putting people in positions where they MUST have a conflict of interest, and they MUST, sooner or later, make decisions against their own self-interest. How can we demand this of people, and then expect a positive outcome?

This is why by now we should know better than to implicitly and completely trust these guys. When someone shoves a pile of money in your hands and tells you it never goes down, you should be immediately suspicious. TANSTAAFL should be one of your guiding principles. If you have reason to believe you will become wealthy just by putting pen to paper, and doing nothing for a decade or two, you should slap yourself awake. Someone is trying to pull a fast one on you. That’s why I place so much of the blame for our present situation (and the situation to come) very squarely on OUR shoulders, collectively (for allowing it to develop over these decades) and individually (for partaking in the stupidity).

Here is the modern social contract, as I understand it. We The People, through increasing division of labour and increasing overall complexity of life, don’t have time to effectively manage every aspect of our lives. So we must delegate. We delegate to our government, both elected and bureaucratic. We give them the powers necessary to do so. We give them the monopoly to do so. The power is merely delegated, not inherent. The monopoly means when government fails to protect us, we have little recourse, because all the means to do so rest in government.

(We see this in effect everywhere, like when the government fails to prosecute or punish someone who committed a crime against your person or property, you’re just out of luck. I know people can still sue, but they settle only because it’s cheaper/less hassle, they do not admit any guilt when they do this, and it does not “go on their record”.)

As over the past decades we have delegated more and more powers over more and more aspects of our lives. What are we to do now when it is quite clear the level of protection we are getting is very low? It is so low, we simply accept it now, we’re no longer incensed at the failures, they’re just commonplace and to be expected.

It means that each person must take an increasingly more involved role and responsibility in their own lives, because we know how ineffective regulation is these days. It means that we must also work towards changing the system so that it works for US, like it is supposed to, not for special interests or for itself, through the ballot box, and personal and community involvement in the process.

Or, it may be time to decentralize much of the power in government, so that it is not so tempting, and effective! to corrupt it. The big red reset switch, as it were. It’s already common knowledge that when you give someone power, they will find a way to abuse it, sooner or later. It’s human nature to extract benefits from our situation. The extent of the damage caused by their abuse is directly proportional to the amount of power they have. Simple: don’t give them the power to begin with.

Ok, that’s my rant for the year.