Surprise!

On Saturday I told you the feds would trash 35-year mortgages and try to prick the housing gasbag. On Monday F did just that. Now I will tell you what it means.

This is one of two moves the real estate and mortgage businesses feared the most. It’s why they’ve lied about the numbers, downplayed the effect of long mortgages and shot up anyone (like me) who suggested otherwise. In reality, nine out of ten new mortgages taken out in Canada by first-time buyers in the past year were 5/35 – the minimum 5% down, with the maximum 35-year amortization. This allowed people without money to buy houses. These are Canada’s sub-primes.

Such mortgages are called “high ratio” and require taxpayer-backed mortgage insurance (as does any home purchase with less than 20% down). That also makes them high-risk. Should the housing market suddenly deflate, these folks are under water. We have no experience with what happens next, but we do have a model: the collapse of the US middle class.

F and central banker Mark Carney know this. They also know the industry’s desperately been trying to paint another picture. For example, a CAAMP industry survey taken last year claimed. “Among new mortgages initiated in the past year 53% have 20% or more equity and 47% have less than 20%.” If that were in fact the case, then the federal government would never have resorted to the far-reaching action it just took. The jig’s up.

So here is the context: this move heralds the next phase in the market. After a brief buying binge fueled by an irresponsible industry, housing in Canada begins the long decline. Everybody in a position of knowledge knows this. They’re just hoping the damn wheels don’t come off.

  • It may sound like a small change, dropping long mortgages from 35 to 30 years, but the impact is profound. It means somebody who was preapproved to finance a $340,000 house with a 4% mortgage can now only afford one priced at $325,000. So, houses in that price range just lost 4.5% of their value.
  • The impact will be most devastating where it was intended to be. Vancouver and the Lower Mainland are ground zero for falling sales and eroding prices. Monday’s move will eliminate at least a third of all first-time buyers who were massively over-stretched with a 35-year-long debt. This is the straw. Now they’re toast.
  • Expect lots of near-empty Home Depots across the land. There will be an economic ripple effect exacerbating the impact on real estate. Housing construction will be hit, as will home renovation – largely fueled by home equity loans which are also in the crosshairs. Almost 3% of the entire economy is made up of renos, while real estate itself accounts for 20% of GDP. Suddenly you can see the scope of the problem the feds faced: let us borrow our way into unrepayable oblivion, risking deflation, or take the drugs away and pray for a different result.
  • After six months of sales declines everywhere, falling prices across Alberta, tumbling values in the Okanagan and the Sunshine Coast, misery in Brampton and scorched earth in SW Ontario, could this be the event that tips sentiment? Will the popular myth that real estate always goes up, that declines are just buying opportunities, be shattered? Will young couples understand how much sunshine has been pumped up their butts by the real estate industry and the smiley-faced vacuous reporters who support them? I mean, what will Global TV have to report on now?
  • Make no mistake, credit just got tighter in Canada. CMHC will no longer let banks pool lines of credit and then obtain mortgage insurance, shielding them from risk. That means lenders will be on the hook for 100% of any losses – leading directly to more scrutiny of borrowers, higher rates and fewer loans, especially when the money is used for consumer spending on a secured line of credit. In fact, F mentioned that directly, dissing those who want to use their equity to buy a boat or a hi-def TV. More reasons to expect less consumer spending, a slower economy and cheaper houses.
  • And this is but the start. Today the Bank of Canada will leave interest rates unchanged. That may not be the case next time, in March. Certainly as the year progresses, both variable rate mortgages and five-year money will become more expensive. Carney will goose the short end to further dampen consumer spending while the bond market handles the rest.

How does the current housing market survive this?

It doesn’t. CREA lobbied furiously against these changes and lost. The mortgage brokers did all they could to fudge reality, and lost. The media pumpers who turned every piece of Royal LePage or Re/Max fluff into a breathless news story, lost. The bank-paid economists who were trotted out days ago to trumpet a ‘soft landing’ for real estate, lost.

And there are two more.

Potential sellers waiting for even higher prices in the spring, just took a bullet. Young couples who bought in lust, but without money, are now the detritus of an industry they trusted.

Surprise. It isn’t different here anymore.

266 comments ↓

#1 HouseBuster on 01.18.11 at 12:27 am

F will make 2003 prices a reality!

#2 bsallergy on 01.18.11 at 12:29 am

Awwwww … come on Garth it is different here … it took longer to happen.

#3 Kilby on 01.18.11 at 12:31 am

Mortgage broker from Vancouver on Global news was positively giddy about all the 35 year mortgages that were going to go out the door in the next two months. She seemed excited about the big boom in sales as everybody scrambles to borrow as much as they can quickly……go figure.

#4 dave_regina on 01.18.11 at 12:36 am

It’s kinda refreshing that its hapening now and now built to higher levels- no? I’m not findng solice in the pains of others, but it’s about time.

Have you looked at what a home in Regina near the airport goes for?
$818,000 for a 1700 sq ft home, finished nice but not crazy. Is that right? At 4.5% reduction – losing more than $36,000 of paper value.

I thought only cars lost money after purchase.

#5 Serge on 01.18.11 at 12:40 am

Actually 30 years is still too long! If you had 300,000$ to invest wouldn’t the LAST place to put it be: lending it to a “young couple”, for 30 years 5% down on a house worth 300K?

We won’t even buy Irish bonds for 10 years at 7%!

The incentive is still there to loan and we (tax payers) are ultimately responsible!

#6 LJ on 01.18.11 at 12:43 am

Too bad it takes 60 days for the new rules to take effect.

That move just gave the realtors and brokers a late Christmas present before a spring pink slip.

Should be fun to watch the gyrations.

#7 Soylent Green is People on 01.18.11 at 12:43 am

Did you see old snake eyes on t.v. tonight. I swear to God I puked my guts out every time I saw his weasel face. God, why did you put that man/corporation in charge of my Canada?
.
.
.
.
.

“Canada appears content to become a second-tier socialistic country, boasting ever more loudly about its economy and social services to mask its second-rate status.”
~ Steve Mad Hatter Tea Party

On December 8, 2000 Harper became President of National Citizens Coalition, the most right wing lobby group in the country (motto: “More freedom through less government”),

which was formed in the late 1960s to fight Medicare.

He condemned Canadians efforts at egalitarianism, its social programs, its wealth redistribution, its peacekeeping history internationally, and its attempts at promoting and preserving its unique culture.

http://www.harperindex.ca/ViewArticle.cfm?Ref=0027
.
.
.
.
.

#8 Gord In Vancouver on 01.18.11 at 12:46 am

CREA lobbied furiously against these changes and lost.
_____________________________________

….but CREA successfully lobbied to keep the minimum down payment at 5% down.

#9 kc on 01.18.11 at 12:52 am

3 Kilby on 01.18.11 at 12:31 am

Even better…. didn’t you catch the “reno” pumping that went on to let everyone know that this is now the time to dump your “free equity gains” back into your house…..

About the reno workings…. GF hasn’t had a painting call for over 3 months now. not even a call for a price quote…. the tide is changing fast. (bc, greater Vancouver)

If you are in the “reno” – “trades” end of things… drop a note about how things are for you and what area….??

thanks

#10 Jsan on 01.18.11 at 12:53 am

There is talk about how this might make a short term spike in sales as people rush to buy their house at the utter most top of the bubble. Go figure, we are not talking financial geniuses here buying at what are probably price peaks. I’m wondering if this might also cause allot of people that were holding out and not listing their houses to put them on the market to try to sell before the 35 year gravy train ends? Time and numbers will tell I guess.

I am curious why 60 days notice? I read somewhere that this is the minimum amount of time that the government can set after an announcement like this? At the least it will probably pull some of the spring time sales into the winter.

#11 nonplused on 01.18.11 at 12:54 am

And immediately that bastion of fair and balance real estate reporting, the Globe and Mail, predicted a housing boom as people ran to the bank to get the last of the 35 year mortgages. They have no shame. You are right to use pictures of “working girls” as a lead in to your posts on the media.

#12 andrewS on 01.18.11 at 12:54 am

This will probably bump activity and prices in the short term.

I can only imagine how the Real Estate lobby will spin that one. (look! it’s still going up despite the new rules! Buy now or be priced out forever!)

Now what happens? All that inventory sitting on the sidelines waiting for the better market will be listed when the short-term bump in activity becomes apparent. This dumping of inventory will occur right when the new rules kick in, removing the buyers. Things will happen hard and fast come Spring.

#13 northshore on 01.18.11 at 12:54 am

Finally, some sanity.

“In reality, nine out of ten new mortgages taken out in Canada by first-time buyers in the past year were 5/35 – the minimum 5% down, with the maximum 35-year amortization.”

Garth, where did you find these stats?

No-one believes me when I regurgitate your facts.

#14 Peter Pan on 01.18.11 at 12:55 am

Kilby, That mortgage broker exhibits typical RE Vancouver thinking and behaviour… They can’t believe the gold rush has lasted so long…

Now it’s time to loot the banks, steal the whiskey and get out of Dodge before the sherrif comes back into town and throws everyone in the clink.

Can’t wait for the “Buy now or be priced out forever” chorus to start”…

This is going to be the speculative blowout everyone has been waiting for.

#15 Another Albertan on 01.18.11 at 1:01 am

As with all my anecdotal posts, take this for what it’s worth.

I talked with my new Chief Financial Officer this morning. “New” in the sense that he’s been on the job since January 3. He’s an ex-banker from two big firms (and a heavy hitter at that… heck, he may have even crossed paths with Garth back in his Toronto days.). He ran a LOT of money for number of years.

Garth said “Everybody in a position of knowledge knows this. They’re just hoping the damn wheels don’t come off.” Garth is absolutely correct.

My CFO tacitly concurred with “We’ve done an especially good job of convincing the world we have the most stable and conservative banking system. ‘Everything’ (a.k.a. the policy changes, the signatures, etc) has been done quite quietly.” I noted he used the term ‘we’.

“Oh, so like how the government took on bank debt probably to the tune of $100B during the crisis two years ago to aide in liquidity and that it was never really reported in the media?” I asked.

I received but a smile in return. His summary statement was essentially “it never should have gotten this far.”

Everyone else’s mileage may vary.

#16 chris on 01.18.11 at 1:01 am

What are the odds that F tightens to 25 years?

#17 Jane on 01.18.11 at 1:01 am

The perfect storm is brewing.

#18 Brian on 01.18.11 at 1:05 am

Actually I feel a little sorry for all the folks that were snowed by the relentless media barrage and bought in because that’s what everyone else was doing.

As a renter, never mind that I rent a small castle, (yes a real castle), have well above average income, and significant non-real estate assets, when people hear that I don’t own a house, well it’s like I am a dog or some kind of second class citizen or pariah or something.

And if I have the temerity to suggest that quite aside from all the rationals and explanations, (its different here, Vancouver has no land etc. etc.) maybe it is indeed just a garden variety bubble that is going to pop just like all the others. And all these explanations are just the same as in all the garden variety bubbles that have come before.

Well, my goodness, the emotion is amazing with raised voices and arguments – it is just unbelievable.

#19 Junius on 01.18.11 at 1:05 am

I think we are going to see listings explode over the next few months. January and February could be record months. It is going to be very interesting to watch.

#20 AxeHead on 01.18.11 at 1:11 am

That kid is a Romulan, creepy.

We’ll need to wait 8 weeks for part 1 to take effect. I’m not comming down from my perch until well after that.

#21 Ricky on 01.18.11 at 1:12 am

How will you pay your share, your $500.00 towards the Ontario $2.4 BILLION Corporate Tax Cut? Enjoy.

http://www.peopleforcorporatetaxcuts.ca/

#22 Mean Gene on 01.18.11 at 1:13 am

The gravy train is gonna run out of steam.

#23 Roy Stacey on 01.18.11 at 1:15 am

Welcome Canada to the 2011 Real Estate Reality Show, now bend over, grab your ankles, uncle Sam is gonna show you how its done…….

But, but, you AS/kED for

#24 Tim on 01.18.11 at 1:15 am

With over 70% of the population already homeowners, the majority of people who wanted to buy, bought. This move should have happened years ago before the bubble inflated. Because rates will continue to be low, many who already have mortgages will continue to benefit from low rates-even if they increase slightly, they’re well below long term averages, while those who rent are stuck with small apartments, due to a limited rental stock. I’d like to know your source for the percentage of high ratio mortgages, as CBC reported that the last few years only about 30% of the mortgages were high ratio. How many would try and sell if their place drops 5-10 percent, when many have seen it increase 50-100 percent?

#25 Roy Stacey on 01.18.11 at 1:16 am

Welcome Canada to the 2011 Real Estate Reality Show, now bend over, grab your ankles, uncle Sam is gonna show you how its done…….

But, but, you AS/kED

#26 InvestorsFriend (Shawn Allen) on 01.18.11 at 1:16 am

It’s not hard to mis-lead with figures.

Garth disputes the validity of – a CAAMP industry survey taken last year that claimed. “Among new mortgages initiated in the past year 53% have 20% or more equity and 47% have less than 20%.”

Okay, but what do we mean by a new mortgage? Assuredly all new mortgages are not first-time buyers.

Not all home buyers are first timers and these second and third-timers and old-timers tend to have more equity.

A mortgage transferred from one institution to another is “new” but not in the sense of being a house purchase.

Is a renewal after 5 years a “new” mortgage? You would think not, but it is a new contract, so maybe.

So the above statemnent could be correct and at the same time Garth could be correct that 90% of first time buyers are 35 year and 5% down.

Most assuredly many and probbaly most first-timers are 35 year. What they can afford has just gone down.

#27 Paolo on 01.18.11 at 1:20 am

“God bless America!”
The days of reckoning have begun.

As in all these cases, no one really can predict how it will work itself out. In my experience ‘disasters’ like this one will be worse than imagined. And we are only in the 4th week of 2011 and the beginning of a decade that will alter the middle class in Canada.

#28 Roy Stacey on 01.18.11 at 1:21 am

Welcome Canada to the 2011 Real Estate Reality Show, now bend over, grab your ankles, uncle Sam is gonna show you how we did it here…..HOW its done…….

But, but, you ASkED for this Credit Binge, right?

Unwinding really sucks, yet you will survive it.

I was looking at Bank owned repos in the mid 20’s like $24,900 today. Who could believe they were 10 times that just three years ago?

Cash IS KING today, long live that monarchy.

#29 Nostradamus Le Mad Vlad on 01.18.11 at 1:22 am


“Surprise. It isn’t different here anymore.” — The more things change, the more they stay the same. Pigs lining up, happily waiting to be slaughtered, squealing with delight until he trigger is pulled. Then they mosey on to Baconater Land.

“. . . require taxpayer-backed mortgage insurance . . .” — I am an individual taxpayer, but have no intention of being on the hook for someone else’s mistakes. Just as I have screwed up throughout life, no one bailed me out. If they did, I wouldn’t have learnt anything.

“. . . the collapse of the US middle class. F and central banker Mark Carney know this. They’re just hoping the damn wheels don’t come off.” — So does Harper. At last you used the C word! Unless the majority of Cdns. can learn to think and act for themselves, we’re next.
*
Nudemen Clock. Wotever tickles yer fancy. iPhone app as well.

China “In its latest step to make the renminbi a competing global reserve currency, China’s predominantly state-owned Bank of China will now let individuals open renminbi savings accounts… in the United States.” Plus — Hu says the US$ is nearly gone; is this why US citizens can now buy remnibis in the US?

Explosive food prices lead to people exploding with rage.

Utah Way to go, Utah!

4:12 clip Cash vs. gold bullion (with or without tungsten). Money, Silver and Gold — The truth.

EMU Policies Who controls the EMU? It is not the Irish, that’s fer sure.

Asteroids Not quite hemmorhoids, but can be substituted for them.

Pathological Liar (Obama) — “We’re digging ourselves out of a hole . . .”

Floods One; Floods Two; and
Floods Three. HAARP and the CERN Hadron Collider are working overtime.

2:44 clip Depopulation confirmed, as if we didn’t already know. Agenda 21 stuff.

Antimatter being flung into space during and after t’storms (pix). Can this be done with politicos and their appointees as well?

GS Trying to prevent a mass conviction list. May all those money-sucking assholes burn forever in hell, along with their ill-gotten money.

#30 gutcheck on 01.18.11 at 1:26 am

Garth,
Some suggest that there may be a 60 day mini-boom. Any thoughts?

#31 Tim on 01.18.11 at 1:28 am

Vancouver’s Olympic Village up False Creek- The Economist

http://www.economist.com/node/17906069

Who say’s we’re a backwater town? We’ve just made the Economist , lol!, thanks to those inept boobs over at City Hall who’s colossal %^&@! up has resulted in a ghost town and a huge bill to taxpayers.

“But a bigger drawback was the property boom of the mid-2000s: this prompted the developer to bid too high for the site, causing it to price many of the flats at well over C$1m each. And then recession struck.”

#32 Jeff Smith on 01.18.11 at 1:28 am

For a second, I thought that was the cover page of a Stephen King novel, (ala Chucky!) Scary for a second!

#33 Nostradamus Le Mad Vlad on 01.18.11 at 1:28 am


“Surprise. It isn’t different here anymore.” — The more things change, the more they stay the same. Pigs lining up, happily waiting to be slaughtered, squealing with delight until the trigger is pulled. Then they mosey on to Baconater Land.

“. . . require taxpayer-backed mortgage insurance . . .” — I am an individual taxpayer, but have no intention of being on the hook for someone else’s mistakes. Just as I have screwed up throughout life, no one bailed me out. If they did, I wouldn’t have learnt anything.

“. . . the collapse of the US middle class. F and central banker Mark Carney know this. They’re just hoping the damn wheels don’t come off.” — So does Harper. At last you used the C word! Unless the majority of Cdns. can learn to think and act for themselves, we’re next.
*
Nudemen Clock. Wotever tickles yer fancy. iPhone app as well.

China “In its latest step to make the renminbi a competing global reserve currency, China’s predominantly state-owned Bank of China will now let individuals open renminbi savings accounts… in the United States.” Plus — Hu says the US$ is nearly gone; is this why US citizens can now buy remnibis in the US?

Explosive food prices lead to people exploding with rage.

Utah Way to go, Utah!

4:12 clip Cash vs. gold bullion (with or without tungsten). Money, Silver and Gold — The truth.

EMU Policies Who controls the EMU? It is not the Irish, that’s fer sure.

Asteroids Not quite hemmorhoids, but can be substituted for them.

Pathological Liar (Obama) — “We’re digging ourselves out of a hole . . .”

Floods One; Floods Two; and
Floods Three. HAARP and the CERN Hadron Collider are working overtime.

2:44 clip Depopulation confirmed, as if we didn’t already know. Agenda 21 stuff.

Antimatter being flung into space during and after t’storms (pix). Can this be done with politicos and their appointees as well?

GS Trying to prevent a mass conviction list. May all those money-sucking assholes burn forever in hell, along with their ill-gotten money.

#34 eMan on 01.18.11 at 1:28 am

The move from 40 year to 35 year mortgages didn’t seem to have an effect. Perhaps 25 year mortgages should be the limit.

#35 TheBestPlaceOnEarth on 01.18.11 at 1:28 am

Todays Non Announcement. Folks this is NO BIG DEAL. You need to read between the lines to see whats going on. For quite awhile now I have been preaching that Canadians have no business being in the Canadian Real Estate Market. Offshore investors buy with cash or have cahs on the sidelines to make payment in FULL. This MINOR news will affect a FEW Canadians. These weak bids have offshore investors licking their chops because it means they might save a few thousand mopping up the weak bids. In fact for offshore investors the news has never been better. Now let’s really see whats going on here by reading between the lines.

VANCOUVER — Tighter mortgage rules announced Monday by the federal government will have a disproportionate effect on the purchasing power of homebuyers in Metro Vancouver.
(Talks cheap let’s see what really happens)

Amid rising concern about increased household debt in Canada, Federal Finance Minister Jim Flaherty cut the maximum amortization period from 35 years to 30 years and tightened the rules for mortgage-backed lines of credit. Canadians will only be able to borrow up to 85 per cent of the value of their homes, down from 90 per cent. And Ottawa will no longer insure the popular home equity lines of credit.
(KEY Word is Canadians folks. Offshore investors couldn’t care less about 35 year loans. For those paranoid about Canadians being in debt big whoop they can still borrow UP TO 85%!)

The amortization change, which affects purchases with a down payment of lower than 20 per cent, means somebody with a four-per-cent rate on a $300,000 mortgage would pay about $100 a month more.
(Offshore investors buy with Cash)

The new rules will disproportionately affect first-time homebuyers and people who live in B.C., home to the country’s highest housing prices, said Tsur Somerville, director of the UBC Centre for Urban Economics and Real Estate.
(1 billion banging on the door. No worries folks these units will all get mopped up along with higher prices)

“The sense is, there are more first-time buyers in the Lower Mainland who have been using the 35-year mortgage,” he said in a phone interview. “Either those people have to come up with a slightly higher down payment, or they just can’t bid the same price on a house.”
(Slightly higher no big deal Canadians)

The longer amortization periods have become popular among Canadians since they were introduced.
(Vancouver market is not moved by Canadians)

As of November, 30 per cent of all new mortgages in Canada had a 35-year amortization period, according to the Canadian Association of Accredited Mortgage Professionals. While B.C. numbers are not available, that percentage is undoubtedly higher here, Somerville said.
(So what has no affect)

Ottawa discontinued the 40-year mortgage amortization and the zero down payment in October 2008, two years after the controversial features were introduced. About six per cent of existing mortgages have a 40-year amortization.
(YAAAWWWNNNNNNNNNN)
The mortgage changes come at the worst possible time for Guy Pearson. The Surrey resident, who lives with his wife and three children in his mother-in-law’s house, has been looking to buy a house with a suite and was pre-approved for a purchase price of $340,000. The reduction in the maximum amortization period means Pearson now only qualifies for a $325,000 purchase.
(So this Canadian can only afford $325000 instead of $340,000 Stop the Presses folks NO BIG DEAL)

“It’s not a ton, but it’s enough for me to go, ‘Oh my goodness, I’m not going to really get what I want now,’ “ said Pearson. He is now looking at staying put or house-hunting in Langley.
(Deal with it. Get a part time job and come up with the additional 15 grand)

In addition to reducing purchasing power, the UBC associate professor also expects the rule changes to dampen upward pressure on housing prices and cut into renovation work funded by home equity.
(How and When. Tsur is not stopping China nor anyone else for that matter)

“We’ve had a lot of house price appreciation, so people use the home equity line of credit,” said Somerville. “It’s not going to be as big a piggy bank.”
(Key word “as big” but still big folks BUY!!!)

Feisal Panjwani, senior mortgage consultant with Invis-Feisal & Associates in Cloverdale, described the changes as “prudent” and said reducing maximum amortization was a better option than hiking the minimum down payment (now five per cent).
(YAAAWWNNNNNNNNNNNNN)

“The government is trying to ensure that people don’t get in over their heads,” Panjwani said.
(Canadians are over their heads not the pros. Easy to generalize.)

BMO Bank of Montreal also applauded the “measured and timely” moves.
(Sketchy comments at best)

But Vancouver mortgage broker Angela Calla described the rule changes as “misguided” because they will hurt people who have been using home equity lines of credit to pay down higher-interest debt. They will also hinder people who need to dip into their home equity because of unforeseen life events such as health issues. The new amortization and refinancing limits take effect on March 18. The withdrawal of government insurance on home equity lines of credit takes effect on April 18.
(Got debt your going to be taken out)

Household debt measured as a ratio of money owed to disposable income was near 150 per cent as of the third quarter of last year. That surpasses the level of debt held by U.S. households, whose appetite for borrowing helped stoke the financial crisis of 2008.
(I can guarantee you offshore investors don’t live this kind of trumped up lifestyle. They’ve got powder on hand and ready to buy)

The Bank of Canada recently warned debt levels are growing faster than income, adding the risk posed by consumer indebtedness to the domestic economy would continue to escalate without a “significant change” in how consumers borrow and banks lend.
(F did essentially nothing to curb this supposed problem)

Changing mortgage rules allows the Bank of Canada to tackle household debt while avoiding an interest rate hike.
(F did nothing, small moves. If your serious you raise interest rates)

Folks Vancouver is holding strong. Please join us in the BestPlaceOnEarth. Vancouver God shine His light on Thee

With files from Postmedia News

Read more: http://www.vancouversun.com/business/Tighter+mortgage+rules+will+hardest/4117984/story.html#ixzz1BMMAnBPW

#36 Roy Stacey on 01.18.11 at 1:29 am

Welcome to the 2011 Real Estate Reality Show.

Now, grab yoyr ankles, and watch Uncle Sam show you how it’s done!!!

You ASkED for this CREDIT Hang over. You begged for the EZ sleazy terms, now PAY IT UP, Dummies.

Sure unwinding REDIT always ends badly, and is painfull.

Cash is king now. Our real Estate keeps getting cheaper, and cheaper. I was looking at Bank owned Junk today., single families from $24,900 to $150,000 Hard to believe they were selling for 10 times those numbers just 3 short years ago. Inflation, my Ars.

#37 sluggo on 01.18.11 at 1:32 am

In 2007 Canwest buys Alliance Atlantis thanks to a financing by Goldman Sachs just before the ABCP markets freeze and in Canada anyway are swapped for NHA CMHC MBS.

In Feb 2009, pre melt up, Canwest(the Aspers and all their papers and media outlets) has a serious debt problem and need to restructure before Halloween. We all know how that turned out and in the securitization circle jerk, Remax becomes one of the biggest advertisers on Global to aid in the sales pitch for all the money flow required on all the pools of housing debt that was swapped in for commercial paper. Maybe some of Carney’s alumni held some of those senior notes.

As the original ABCP debt was never marked to market due to new questionable accounting methods post AIG(like FASB) and the lawyering surrounding the Montreal accord and the NHA swap, Canadian taxpayers were forced through CMHC’s equity of Canada BS, to make whole any unit holders of frozen paper.

This is the bigger issue, and just as partisan politics and voting are the working man’s opium, now so too is “home ownership”. The current regime has elected to bailout senior debt holders on paper that didn’t even originate as housing debt. This is a morally and ethically corrupt organization and they are now attempting to reign in liquidity and call back the bombers after 95% of all the bombs have been dropped.

There will be casualties, unfortunately they will all be civilian.

#38 InvestX on 01.18.11 at 1:33 am

It will be interesting to see if the default rates rise and see if we’re any different there too.

#39 Debt's Dark Embrace on 01.18.11 at 1:33 am

#3 Kilby

Yep, more air in the bubble. Another mad rush to get in before the new rules take effect. Then in March the bubble will be further inflated when BOC threatens to raise rates again. Then in June some other threat to turn off the taps will scare more people into rushing in and buying before they are priced out forever. On and on it goes………

#40 604genX on 01.18.11 at 1:34 am

I think you’re offside Garth. News of F acting prudently are greatly exaggerated:

1. Implementation of the new rules is phased over 60 and 90 days so these rules pull forward more buyers and refinancings into the Spring busy season. This will cause a mini bubble for a few months – just like last year’s CMHC changes, and just as things were starting to slow. They are bailing out the industry…..exploiting the suckers who need 35 year ams.

2. You can still buy a house with 5% deposit. The 85% rule only applies to REfinancings.

3. The 30 year amortization rule applies to *new* mortgages. This suggests a loophole or grandfathering of existing mortgages when they renew. If you have 35 year amortization then you may be able to keep it.

4. It seems pretty easy to roll at HELOC onto the mortgaged/secured portion of the loan (which is guaranteed). Since MoF have not released detailed guidance it wont take long for brokers and bankers to parse wording and exploit ambiguity.

F and the Conservatives are only interested in appearing to take action. These changes are about optics and spin, not action. They are too terrified to do anything that would actually stop the bubble. The the Liberals remain deafeningly silent.

#41 Brad on 01.18.11 at 1:35 am

Surprise surprise the party’s over now that the ugly lights have come on. I can’t think of a surer way to lose money than in Canadian real estate right now.

#42 smartalox on 01.18.11 at 1:38 am

Does this also mean that someone with a 35 year mortgage that is up for renewal, can only be renewed for a 30year term or less?

#43 bruce corell on 01.18.11 at 1:39 am

6 months ago I replied to this blog about the governments concern for a bubble. As a member of the Toronto Board of Trade I was privy to info that many new this personal debt problem was too large to correct.
Its too late. What we will experience in Canada will be worse than the U.S. Even Garth doesnt understand we are a country relying on a PETRO DOLLAR. The Conservatives want an election quickly. They are lobbying for support as we speak. The Real Estate crash will destroy them and you will now see an election this spring. For those of you relying on real estate to retire. Sorry you lost. Its not an asset just paper that will be deflated hundreds of thousands…
Take this to the bank..ITS HERE……

#44 CalgaryBoy on 01.18.11 at 1:47 am

I’m very excited about the changes! I wished they would implement higher down payments as well…maybe that’s next.

I’m surprised to hear some people want to rush to purchase a house and that there is speculation of a surge. People don’t even hear the messages yet…too much debt…too much spending!

If they wait, they save thousands and thousands of dollars on interest over the years with a shorter amortization period; prices will come down like you indicated; and we all know interest rates will rise, which equals lower prices!

Here’s to realistic, affordable house prices!

Cheers!

Keep up the good work, Garth! I LOVE your blog!

#45 Kevin in Winnipeg on 01.18.11 at 1:50 am

I think this may have a larger impact on Winnipeg than people think. I don’t know too many people who have a mortgage of less than 35 years. Could be scary times ahead.

http://www.cbc.ca/canada/manitoba/story/2011/01/17/mb-mortgage-regulations-cool-market-manitoba.html

#46 john on 01.18.11 at 2:00 am

Hi Garth, I am wondering if young couples waited to buy in a year or 2, ok the prices might be lower but the interest rates will be higher, so their monthly payments will all go to interest rates, why is it better this way than buying now where monthly payments are low coz of low rates?

#47 Tiffa on 01.18.11 at 2:10 am

This is all well and good, but I’m pretty sure the ultimate sign of the apocalypse is, in actuality, the fact that Vanilla Ice has a new property renovation show starting in February.

Vanilla Ice.
On HGTV, in case there was any doubt.

I think that’s going to be my new response when people ask why I’m renting. “Why are you renting??” “Well, Vanilla Ice has a fucking reno show on HGTV, and that’s all I have to say about that.”

#48 Calgary Rent Goin' Up! on 01.18.11 at 2:11 am

Wow. 9 of 10 first time buyers took on 5/35s in the past year. Anyone know what percentage of the total mortgages taken out in Canada in the past year this equals?
That would paint a clearer picture for me.
Anyone?

#49 Brad in Cowtown on 01.18.11 at 2:12 am

“After a brief buying binge fueled by an irresponsible industry, housing in Canada begins the long decline.”

I am curious to see how brief, and how profound is the binge.

I think newbies are going to pile in now and drive prices up quite a bit before the summer. At that point, the catalyst will have long been forgotten… it will only be noticed that prices seem to have recovered and that will spur on more of the “better get in now” mentality.

Should be an interesting year.

#50 boomer62 on 01.18.11 at 2:15 am

#9 Jane on 01.18.11 at 1:01 am

The fog is already in. Incredible political theatre except the well being of so many Canadians is hanging in the balance.

Ref: The Fog of War: Eleven Lessons from the Life of Robert S. McNamara (2003)

#51 Crabman on 01.18.11 at 2:19 am

Thank God they did something before a bubble developed!

/sarcasm off

#52 Soper Eats Babies on 01.18.11 at 2:22 am

A watched pot never boils.

Garth, the dogs are frothing with excitement. As if they’ve never seen this particular F doggie treat before.

The switch in summer ’08 from 40 to 35 years maximum amortization was supposed to be the straw that broke the camel’s back. Then the changes in Feb ’10 forcing consumers to qualify at the 5 year fixed rate–even if they wanted to go variable–was supposed to be the proverbial fork in the dog chow.

Why do I get the feeling that today’s announcement of a move from 35 to 30 years, while apparently intended to do the opposite, will somehow manage to increase both resale sales and prices between now and June? That’s just how patently absurd the Canadian real estate market has been since Garth started, in his words, “this pathetic blog” that never fails to disappoint.

All this to say: I’m afraid that until Mr. Carney resumes his rate hike program, I suspect F’s actions will have next to no impact on cooling the market.

When the RE horsecakes do eventually hit the fan in this country, let’s say in the fall of 2018 when the average single family home in Saskatoon has eclipsed the $1M mark, F will at least be able to look back and say “we took action in January 2011 to protect Canadians…” from the damage his own infuriating policies created in the first place.

Yes, today’s announcement was the PERFECT example of government as a disease that masquerades as its own cure.

#53 Jeff Smith on 01.18.11 at 2:23 am

>#10 Junius on 01.18.11 at 1:05 am
>I think we are going to see listings explode over the
>next few months. January and February could be record
>months. It is going to be very interesting to watch.

No it wont. Real Estate movement is similar to that of “Frogs in a slowly boiling pot of water”. The frogs don’t realize the water has been boiling until the proteins in their body has already cooked. I am willing to waiger that next year listing stays down while prices on the few houses that do make it to make has “gone up another 25%” (realturd trademark). Then probably 2012, you will see the frogs try to jump out of the steaming hot boiling pot of water that has the cover tightly shut.

#54 Silentblogger on 01.18.11 at 2:26 am

Not perfect but fitting considering todays news…

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

#55 Mike on 01.18.11 at 2:26 am

time to party like it’s 2002.

#56 TaxHaven on 01.18.11 at 2:27 am

Hard to believe that such a piddling small change to mortgage requirements can have ANY effect at all…which only goes to show how desperately overleveraged Canadians really are.

That such a tiny tinker can create hardship shows how tenuous and credit-dependent today’s house prices – and economy! -are.

To truly be able to carry a 30- or 35-year mortgage one has to be an incredible optimist! Realistically, one would need to have a well-paid career-long position with a large, established company (or a government job, it seems…) and be prepared to forgo having much discretionary income, or building savings, for YEARS.

Get real. How many people can aspire to do that now? Most people I know spent their twenties and thirties looking for any career at all, changing jobs, periods of unemployment, back to school, part-time work, moving back home, travelling, or collecting social welfare payments, UIC or something…

From yesterday’s post, the U.S. WILL default.

However, we have to expand our idea of what constitutes a default. There won’t be a sudden Presidential TV speech, an announcement or a day of mourning for social programs lost. There will NEVER be a day when the U.S. actually is admitted as being in comprehensive default.

It could happen many ways: social program cuts, military cuts, layoffs. Or a declining dollar, haircuts for bondholders ( a big one!), higher payments to bondholders or even by maintainance of QE and of artificially-low interest rates for too long.

Bill Gross, head of bond fund PIMCO:

“We are looking at a currency that almost certainly will depreciate relative to other, stronger currencies in developing countries that have lower levels of debt and higher growth potential. And, on the short end of the yield curve, we are looking at creditors receiving negative real interest rates for a long, long time. That, in effect, is a default. Ultimately, creditors and investors are at the behest of a central bank and policymakers that will rob them of their money.”

It’s a PROCESS, not an event. So, in fact, I’d say default has already started…with any luck Canada will eventually follow and sanity be restored to monetary policy.

#57 specuskeptic on 01.18.11 at 2:29 am

To add to Garth’s statement that “In reality, nine out of ten new mortgages taken out in Canada by first-time buyers in the past year were 5/35 – the minimum 5% down, with the maximum 35-year amortization.”, Amanda Laing pointed out tonight that 8% of all mortgages are 5/35s and 30% of those over the last year were 5/35s. Wow – a third of last year’s market. Those with hormones kicking rushing to buy before the deadline will notice white foam at the crest of the wave heading their way.

She parroted official industry numbers, which do not match actual originations experience. Any broker will tell you 9 of 10 new first-time buyer deals are 5/35. It is why Ottawa acted. — Garth

#58 InvestorsFriend (Shawn Allen) on 01.18.11 at 2:33 am

Of course a 40 year amortization and a 35 year amortization taken out a few years ago will still be allowed to be renewed now even if the amortization remaining is over 30 years.

Those people already paid a CMHC insurance fee that covers the full 35 or 40 years of their mortgage – as long as they stay with the same bank.

If those people have made their payments, it would be idiotic and unfair and just plain mean to not let them renew.

Now, if they are four months behind on payments that is a different story.

But anyone with a 40 year or a 35 year amortization that has played by the rules and needs to renew should be (and I am sure will be) allowed to renew even if the remaining amortization is past 30 years.

Anyone who suggests otherwise is probably just bitter at the world.

And yes we taxpayers are on the hook to insure that mortgage. That is the deal CMHC made on our behalf. And we will honor that deal.

#59 Bogdan on 01.18.11 at 2:42 am

Garth, what are you going to do next? Today, F’s decision did the following:
1) Made your predictions come true;
2) Killed the baby boomers;
3) Killed greaterfool.ca.

What’s your next project going to be? Bitching the realtors for a year or two, and after that the politicos during the next election? Write some books?

I think that you’d do great if you open your own investment/economic blog and maybe a paid newsletter :-)… Of course, it wouldn’t go so well with the porn pictures :-)

Have fun!

I’ve decided to start a new business – Royal LeVultch Re/Mix. Are you in? — Garth

#60 Bogdan on 01.18.11 at 2:45 am

I mean, what will Global TV have to report on now?
I just realized what the answer to the above questions is… for the next decade you’ll be busy doing interviews :-)

#61 Wise Guy on 01.18.11 at 2:51 am

#3 Kilby

Just to follow up what you stated in your comment. I was watching CTV news here in Toronto and they interviewed a few people.

A couple of people, whom I’m sure had to be plants by some real estate agency, stated and I quote, “This just means that I’m going to have to get in the market that much further to avoid the bidding wars in the spring”.

I couldn’t believe what I was hearing….

#62 wetcoaster on 01.18.11 at 2:53 am

What’s coming next from Global TV Garth is how the young and dumb will blow all those HELOC’s on reno’s.

Global BCTV managed to take an interview with a top Vancouver credit counsellor who stated they just had just broke their records for phone calls inquiring how to get help in what is usually the slowest week of the year, then spun it into some pregnant housewife whose reno’d a new bedroom as the alternate to selling.

While pumping record reno numbers from just showing the bankruptcy potential seconds before was quite the spin job….. of course with a smile on Big Chris’s mug.

#63 tran, Calgary on 01.18.11 at 2:55 am

From 35 to 30 is not enuff.
CHMC should return back all
the insured mortgages to the
banks. 20% down with 20-year amort.

#64 tran, Calgary on 01.18.11 at 3:08 am

Housing Market Plunge Passes Depression’s

http://www.cbsnews.com/stories/2011/01/13/earlyshow/main7243135.shtml

#65 Utopia on 01.18.11 at 3:29 am

#24 TheBestPlaceOnEarth
———————————————————-

I have never actually read a single one of your posts. I skipped them all. Do you know why? I simply trusted the instincts of some of my favourite dawgs when they said you were an idiot and a waste of time.

But today I broke my own rules. I actually read one of your commentaries and guess what……?

My fellow dawgs were 100% right. You are an idiot.

#66 bologney boy on 01.18.11 at 3:37 am

gotta say Garth you are right about the realestate the whole world prices on housing is dropping pretty much everywhere but canada is different (oh ok) just want to say one thing regarding gold and investments of paper nature real simple DOW IN 2000 was around 11000 gold was 250 DOW IN 2011 is 11700 gold is 1365 my financial advisor told me then that gold is in a bubble only fools buy gold . I would be a millionare today in gold had I went with my own instinct about money printing . Well 2years ago when I harvested the equity in my house I walked away with 100 000 cash profit and this time I purchased physical silver and went all in at $10.00 an ounce would I harvest the gains like i did with my home ,not for money that is just a piece of paper backed by nothing I will when its gold backed the us stops printing money and canada and us actually start producing real exportable goods and create around 20 million jobs then I will until then I’ll say no thanks to any paper investments people fail to realize that when the treasury bonds crash (and they will) its game over it is not precious metals in a bubble but the us dollar via qe1 qe2 and soon qe3 the stock market is propped up with debased dollars so what if you made 20% on your paper investments your grocery bills are up 25% from a year ago look at price of fuel its up considerably commodities are up drastically as a result of printing money but what do I know I m just the idiot whos invested in precious metals in a bubble just like in year 2000 . Alright thats enough out of me everybody just go back to watching dancing with the stars its different in canada lol

#67 Ronaldo on 01.18.11 at 3:40 am

#4 dave_regina 1700 s.f. x 180 s.f. = $306,000. That makes the fictional value underneath the house about $512,000. My estimate is that about $352,000 of that will disappear within 2 years…….and that would be conservative.

#68 freedom_2008 on 01.18.11 at 3:51 am

Hi Garth,

I thought the 35yr-> 30yr change and the two other ones are all for CMHC insured mortgages/HLOCs which the borrowers borrow more than 80% of the house purchase price. Not for mortgages or HLOCs that are less than 80% and so have no need of CMHC insurance, correct?

If so, people should be clear about the directly impacted mortgages and HLOCs types first, before jumping into conclusions.

#69 kansai_92 on 01.18.11 at 3:52 am

#24 – wow, bravo.
I’m starting to think you actually believe your own distorted view of the world.

If the market is being moved by foreigners buying
with cash, explain why the mortgage debt chart
exploded alongside the rise in housing prices.

Fact is, this is but the first volley of credit tightening.
With each tightening turn of the bolt, several thousands of buyers get shut out of the market.
Prices move at the margin. It only takes a few thousand homes moving at lower prices to pull
down the entire benchmark.

But ya, keep playing that music as the Titanic sinks.
The rest of us will be on the lifeboats watching in awe.

#70 Devil's Advocate on 01.18.11 at 3:52 am

:-)

#71 Shawn on 01.18.11 at 3:53 am

that will barely make a dent. last time i check, vancouver is up like 9% from last year. what gives?

#72 Professor on 01.18.11 at 3:58 am

What an ugly kid. Be a good parent and put that kid down.

#73 Utopia on 01.18.11 at 4:06 am

#181 dark sad person on 01.17.11 said…..

“I’m done here-

Oh and don’t worry-I know enough not to let the door hit me in the ass on the way out”–
———————————————————-

Are you kidding me!!

You get on my nerves buddy but I almost always appreciate your perspective. Like I said before,…nobody here does their homework like you do.

Hope to hear from you tomorrow. Barbs and retorts as usual.

#74 GTAInsider on 01.18.11 at 4:12 am

Anyways, they are still too slow on this, the deadline of March 18th means people will be rushing in to buy at whatever price on the market before the ship sails out. F should put these rules onto the banks and lenders immediately (like end of the month) without due so that locks in everyone from squeezing onto the boat to make it tank…

#75 GTAInsider on 01.18.11 at 4:17 am

Tell F and Mr.Carney to research at redflagdeals and those house porn forums and look at how many 23, 24 years old making so called 35K, 50K, 60K, 70K salary are all tempting to buy no matter what sizes of house/condo they can get out of the market…These virgins are not believing in paying off early because they believe they will have nice salary increase, job security is not a concern for them..Thats why they consider “MORTGAGE” to be “PAYMENTS” like leasing a car, drive a few years, upgrade to a luxury model will tell you why banks and lenders are making loads of money on these virgins forever until 75 or 80 years old…

#76 Utopia on 01.18.11 at 4:49 am

To Dark Sad and the Devil, Mr Advocate.

I may owe you guys both an apology. I lose my temper with both of you too often. The thing is I happen to think both of you are assets here and despite my denials I always read your comments. Good stuff too, lots of interesting thoughts, plenty of insights.

I hope you can forgive my bad temper.

#77 Brian1 on 01.18.11 at 5:14 am

It may be that many media outfits will soon be courting you. Should you accept? I don’t know. It might be interesting to see you as a regular on Hot Property.

#78 antonio on 01.18.11 at 5:29 am

Garth I am sceptical. I don’t think that F would do anything to risk popping the bubble. He wants his boss re-elected. This may.not turn out as you suggest

#79 New Era on 01.18.11 at 5:51 am

If fools can find greater fools to desperate enough buy in the next 60 days thats great.

Lets hope it causes the Debt to shoot through the roof. Then mabey interest rates will be forced to rise.

For me, I’m going to sit on the sidelines for now and watch the show.

I expect a large number of listing in the next few weeks as the wise ones realized the “GAME HAS CHANGED”. And cash in on their profits.

When you read into the news story, It appears F is saying he’s laying out the foundations to prepare for a rise in rates.

I think he’s going take baby steps first, next I expect a larger down payment, then the rates will start rising.

No more loan for reno, and probably construction to slow with fewer housing starts and cancelled projects. I expect to see more of the 80’s when construction companies laid off their workers.

Add the Baby boomers retiring and a broke government and the US in dire straights and you have the formula for a total train wreck.

But I’m sure CREA and the media will put a spin on this one to make it look good too.

Remember you can only paint so much lipstick on a pig!

#80 Bruce on 01.18.11 at 6:43 am

HAHA! Perhaps our friends Carney and Flaherty will care to read this for good measure. Ain’t seen nothing yet, folks:

http://www.leap2020.eu/GEAB-N-51-is-available-Systemic-global-crisis-2011-The-ruthless-year-at-the-crossroads-of-three-roads-of-global-chaos_a5775.html

#81 Barrie profit taker on 01.18.11 at 7:49 am

Why not do this immediatly?
Won’t a March start date send people running to the bank to get under the wire and goose the spring market?

#82 This is window dressing on 01.18.11 at 7:54 am

Like #29 pointed out, this is all just window dressing for Harpo and Flatulently to be able to say they did something to “prevent” a bubble from forming; reality is, they want nothing else but for it to continue bubbling. People can be so easily duped, even Garth, it seems…

#83 Montrealer on 01.18.11 at 8:05 am

I think they should’ve raised the minimum to at least 10%. And do something against cash back and workarounds.

And I’m saying this as someone that not that long (few years) ago was looking into these ridiculous mortgages to but but is now renting happily a nice new house that’s been for sale for 2 years at 22 times my rent…

#84 Moneta on 01.18.11 at 8:33 am

Woke up to CBC news this morning, talking about new mortgage rules.

Interviewer asks financial commentator what will happen to 40 year mortgages, promoted by current government BTW, at renewal time.

Commentator said they’d have to play by the new rules and of course banks would not touch then unless they refied with a 30 year term.

If not, then they’d have to see a discount…mumble jumble. Why can’t anyone call a spade a spade. A SUBPRIME LENDER!

Non, non… there is no subprime in Canada. We’re in real estate heaven, everybody wants our deep freeze and our rain.

#85 Oasis on 01.18.11 at 8:35 am

ah yes. inflation everywhere.. look at the USdollar continuing it’s collapse.. the last 3 months uptrend is done, and we’re going right back to the all time lows..
(http://charts.insidestocks.com/chart.asp?sym=DXH1&data=A&jav=adv&vol=Y&divd=Y&evnt=adv&grid=Y&code=BSTK&org=stk&fix=)

look at the collapse in the Dollar over the last 10 years (http://charts.insidestocks.com/chart.asp?vol=Y&jav=adv&grid=Y&divd=Y&org=stk&sym=DXH1&data=H&code=BSTK&evnt=adv). we’re about to see a vaccum sucking out the air from the dollar. 60 here we come.

anybody eat these days? like a good steak? new all time high in beef.. (http://charts.insidestocks.com/chart.asp?vol=Y&jav=adv&grid=Y&divd=Y&org=stk&sym=LEG1&data=H&code=BSTK&evnt=adv) that steak just got a lot more expensive.

Corn? (http://charts.insidestocks.com/chart.asp?vol=Y&jav=adv&grid=Y&divd=Y&org=stk&sym=ZCH1&data=H&code=BSTK&evnt=adv)

Cotton? (http://charts.insidestocks.com/chart.asp?vol=Y&jav=adv&grid=Y&divd=Y&org=stk&sym=CTH1&data=H&code=BSTK&evnt=adv)

Coffee? look for timmy’s and starbucks to raise prices again. (http://charts.insidestocks.com/chart.asp?vol=Y&jav=adv&grid=Y&divd=Y&org=stk&sym=KCH1&data=H&code=BSTK&evnt=adv)

anyone drive a car? gasoline prices $1.14/l now? wait until we get to $1.25/l, $1.40/l… (http://charts.insidestocks.com/chart.asp?vol=Y&jav=adv&grid=Y&divd=Y&org=stk&sym=RBG1&data=H&code=BSTK&evnt=adv)

inflation is rampant everywhere…

#86 Moneta on 01.18.11 at 8:43 am

In the US, they used FNM and FRE until the end. The Fed has been picking up MBSs and putting them on their books.

It will be interesting to see how the government reacts to the crash…. because I think it will be a crash.

It’s hard to believe they won’t use CMHC to do some other dirty work. Time will tell.

#87 pbrasseur on 01.18.11 at 9:05 am

I think it is too late and certainely too little.

It’s still possible to buy with only 5% down, which can still be supplied by the banks.

These new measures may affect the hotter markets like BC but in other places such as Montreal the debt binge goes on.

#88 Moneta on 01.18.11 at 9:09 am

The the Liberals remain deafeningly silent.
————
You can’t say anything that is leftist in this day and age without being ridiculed or bulldozered.

#89 Joe Q. on 01.18.11 at 9:19 am

Garth, I wish there were a link or a source for your comment about fraction of first-time buyers who have gone with “5-35” mortgages. None of the reports I have looked through (CAAMP, CMHC, etc.) break the stats down into first-time vs. repeat buyers.

Not that I don’t believe you, but the RE bulls I know will unfortunately not take “Garth Turner said so” as an answer.

So? — Garth

#90 Cookie Monster on 01.18.11 at 9:38 am

Resorting to childhood photos I see.
Nice bowl cut there Garth, your mom’s pretty!

#91 Moneta on 01.18.11 at 9:40 am

“We are looking at a currency that almost certainly will depreciate relative to other, stronger currencies in developing countries that have lower levels of debt and higher growth potential
——–
Depreciate vs. which currency? All developed countries are in the same dire situation. Plus the US is forcing us to follow in its footsteps. It’s a race to the bottom.

Maybe the US dollar will fall relative to emerging currencies but certainly not relative to other currencies in the developed world.

#92 Carpe Diem on 01.18.11 at 9:40 am

G-Man, just wanted to thank you for providing another side of the story! I am so sick of hearing all these fairy tale good things are coming stories – [barf]. It doesn’t matter what degree you agree with Garth – but at least he provides another side of the coin –

Great Work Garth – we all appreciate your providing the truth that our mass media tries so hard to hide!!

Cheers to all the bloggers!

#93 Sad on 01.18.11 at 9:47 am

Young couples who bought in lust, but without money, are now the detritus of an industry they trusted.

Nice way of expressing how the Industry views new home buyers. Fecal material.
You have a way with words Mr. Turner.

Detritus
From Wikipedia, the free encyclopedia
For other uses, see Detritus (disambiguation).
In biology, detritus is non-living particulate organic material (as opposed to dissolved organic material). It typically includes the bodies or fragments of dead organisms as well as fecal material. Detritus is typically colonized by communities of microorganisms which act to decompose (or remineralize) the material. In terrestrial ecosystems, it is encountered as leaf litter and other organic matter intermixed with soil, which is referred to as humus. Detritus of aquatic ecosystems is organic material suspended in water, which is referred to as marine snow.

#94 Sad on 01.18.11 at 10:00 am

The 60 day rule will just make the correction to a healthy market longer as fools rush to grab a 35 year mortgage.
One very short and last Dead Cat bounce.
Fed election will take place within the next two months.
This rule change will prove that the rules that F and CMHC dreamed up back in 2003 were short term gain and long term pain.
Now I wonder what rabbit H, F and C are going to pull out of their hat to deal with the unemployment of construction workers and related industries later in the year.
Perhaps another infrastructure spending binge next spring. And the beat goes on.

#95 T.O. Bubble Boy on 01.18.11 at 10:00 am

*** Once and for all, I will settle the “is there a bubble in Canada” debate:

This, ladies and gentlemen, is Barack Obama’s house in Chicago:

http://www.zillow.com/homedetails/5046-S-Greenwood-Ave-Chicago-IL-60615/50904051_zpid/

This 10,000 sqft house is currently valued at approximately $879,500.

These are a few houses in Toronto and Vancouver that are “valued” about the same a THE PRESIDENT OF THE UNITED STATES’ HOUSE:

Toronto #1:
A $870k 2 bedroom bungalow

Toronto #2:
A $895k Leaside house with no picture of the interior!

Vancouver #1:
A $850k tear-down (“potential townhome site”)

Vancouver #2:
A $888k banana-coloured house with no pictures of the interior

Vancouver #3:
A $890k 2-bedroom teardown

Vancouver #4:
A $880k tear-down near the highways in Richmond

Vancouver #5:
A $888k teardown, also a stone’s throw from the highwat in Richmond

So, seriously people, if the Obamas live in a house that is valued at $879,500 — the same price as a tiny bungalow in Toronto or a teardown near the highway in Richmond BC — tell me again how there isn’t a correction coming to the Canadian housing market???

#96 Smoking Man on 01.18.11 at 10:01 am

Everybody is dancing here but the fat lady hasen’t started singing just yet….

We shall see.

#97 fancy_pants on 01.18.11 at 10:12 am

At long last! Heros have arrived!

“We have been waiting and longing!” the children exclaim.

“Better late than never,” chirp the heros.

“Well”, replied one of the children, “my momma always said ‘better never late.'”

“Right, of course,” reply the heros, “but a couple years late is nothing for a group like us. We are super heros. Just look at our shiny suits and tight tushies. We will prevail!”

*interjection*
at his point in the story we give the heros the benefit of the doubt as they were likely trapped in their own web of bureaucracy. Or they simply ordered suits from their normal supplier and they were very unaffordable, the wrong size and and terribly late in arriving.
*back to story*

“Eat your heart out Batman, Robin, Beiber and other heros. We are the REAL heros in town and we are called…

wait for it…

drum roll please….

wait…

… the “ESTATE, NEVER LATE, ALWAYS GREAT” super hero group.

“Oooooooh, Ahhhhhhh” chorus all the wide eyed children in awe.

“Yes, we are here and we will quash greed and unrighteousness from all the land.”

“Hurray!” all the children cheer as the grown ups run for cover.

#98 Willa on 01.18.11 at 10:15 am

The news keeps reporting that there will be a mini housing boom as newbies rush out to buy a house under the old rules.

As if the media is supposed to encourage them to do something collosally stupid.

So sad. These are the very youngsters that are going to lose the most. They’re buying at what’s obviously the pinnacle of prices, just before they’re guaranteed to fall.

Media has to take responsibility for manipulating them. And yet how can we make media more responsible?

(And is it just me, or has anyone else noticed that no media reported anywhere in these stories that F created the subprime mortgages in the first place?)

#99 Worldwide on 01.18.11 at 10:24 am

LOWER HOUSE PRICES GREAT NEWS FOR OWNERS AND BUYERS

Lower prices are a very good thing for the economy in the long run and for buyers and sellers of homes. Lower prices = lower mortgages = more spending money and less debt.

Yes, in the short term it sucks, but after a few years, the economy will be helped by lower home prices vs higher home prices.

If I can save $500 a month from my mortgage that’s $500 I can use to invest, buy stuff, hire trades to do work for me, pay a realtor to sell my home, etc….

Good all around.

Thanks Jim Flaherty and Mark Carney for doing the RIGHT THING. Please start raising the prime rate soon to slow the debt problem.

#100 dandy on 01.18.11 at 10:25 am

Why must so many of you, Garth included, get so excited when a piece of news like this comes out. So many claim to know the future, see what will happen. No one predicts with any degree of accuracy the future, sure some things may seem obvious but does it make you so clever to ‘predict’ it was going to happen.

Sure many of you are dreaming that one day you’ll be able to buy your little home. We’ll see but there’s still a long long long way to go.

Truth is anyone who didn’t buy a home before 2008 is bitter that they missed their opportunity. This blog warned everyone not to buy in 2008!

I predict house prices will come back down to the same price they were in 2008!!! looking forward to telling everyone how I saw that coming! :)

You have few friends, don’t you? — Garth

#101 Medic on 01.18.11 at 10:29 am

That picture would be even better if the kid in the back seat had a butcher knife.

With these new rules in place, do you think we’ll see fewer middle-class people gutting their five year old kitchens?

#102 Herb on 01.18.11 at 10:40 am

Why 18 March?

Because this will give hopeful buyers a chance to beat the clock/system and encourage them to jump off the fence. That will give sellers a shot in the arm, and everything will be hunky-dory until then.

It will be a much tighter ballgame after the “Ides of March Plus Three”, but it will take a little while for the negative effects to become apparent and future sellers and buyers to realize that they are the losers of this government move.

Harper must have an election before then (say, early spring) or he will be toast. Harper would not like being toast, so …

#103 Don on 01.18.11 at 10:41 am

#11 nonplused, #38 Debt’s Dark Embrace, #48 Brad in Cowtown, #51 Soper Eats Babies:

I wonder. I was thinking the same thing, not only about pulling demand forward on mortgages, but on HELoCs now as well. But the question deserves to be asked about the mortgages, anyway: is there any demand left to be pulled forward? There may be a few left out there like me, who are interested in home ownership one day if price and circumstances are right, but who are clearly not in any hurry (or we would have jumped on during the last rule change and interest scare). There must be some who just don’t want the immobility and responsibility of home ownership, and are happy to pay rent to have others worry about maintenance and repairs. Greater fools or otherwise, how many potential home owners does this country really have?

#104 Rusty1 on 01.18.11 at 10:41 am

Too little, too late, IMHO. The gubment should have poured cold water on this fire long ago.

I don’t want to see housing crash, I’d rather a ‘soft landing’ or slow deflation. If it crashes hard, we’re all going to feel the pain – even those of us living in our parents’ basements…

#105 Carson on 01.18.11 at 10:43 am

Garth,

What does this mean for Toronto’s real estate picture?

Carson

#106 Devil's Advocate on 01.18.11 at 10:48 am

Will it?

Won’t it?

Guess we’ll just have to wait and see… ;-)

the game of life goes on…

#107 Calgary Rent Goin' Up! on 01.18.11 at 10:52 am

What the hell is “actual originations experience”?
8% of all mortgages being 5/35s just doesn’t sound like panic territory.
Please explain…..

8% is wrong. I ask any mortgage brokers reading this to verify, through their own actual experience with new first-buyer originations. — Garth

#108 boomer62 on 01.18.11 at 10:52 am

#76 antonio on 01.18.11 at 5:29 am

Agreed, little if any specific data was given. No mortgage debt cap was provided. We don’t know if we were already near an inflection point in the household debt rate vs time curve.

The F policy makes room for more government backed house debt (albiet with tighter rules) while shifting the riskier debt to lending institutions. Sounds generally house price-neutral except in some speculative locations.

#109 Kris on 01.18.11 at 10:55 am

Anyone thinking there will be mini boom until the new 30 year max takes effect is essentially saying that buyers are complete idiots. One thing I believe is that the price isn’t the main issue for people, interest rates aren’t the main issue for people, what is the main issue is comes down to WHAT IS THE MONTHLY payment. I think in this housing boom/bubble the “house lusting” people have maxed out their monthly payments. Thus as Garth states, when the new rules come into effect the monthly payments will stay the same, but the price will come down. Thus anyone who buys with a 35 is essentially just flushing 5 years of payments down the toilet.

That said, there will be a flurry of new listing. In my area of Regina the vast majority of listings expired with no buyer and were not re-listed. I expect to see lots of For Sale signs put up in the next couple of weeks. It will truly be a test of just how dumb we are. If lots of them do sell my remaining sliver of hope in Canadians will be dashed.

#110 Kevin on 01.18.11 at 11:02 am

Down the road, it is changes like this that will leave more money in the pockets of new buyers.

With more money in their pockets, it is one step toward solving a retirement crisis. Many more steps are needed.

I don’t think the Government is done with mortgage tightening. If debt is still outgrowing income this time next year, there could be more changes.

#111 Mike on 01.18.11 at 11:03 am

I am a young first time buyer with 20/30 mortgage.

Most of my friends who are first time buyers have gone with 20/25 to eliminate CMHC.

Where do you get the stat that 9 out of 10 new buyers went with 5/35?

Lets see the proof……

The average down payment in Canada (says CMHC) is 7%. And all your young friends had more than 20% to put down? I think you are the one who needs to convince us. — Garth

#112 boomer62 on 01.18.11 at 11:04 am

#94 Worldwide on 01.18.11 at 10:24 am

Are you some kind of idiot? or

A sadomasocist hoping Mommy and Daddy will make your world make sense?

#113 45north on 01.18.11 at 11:06 am

It means somebody who was preapproved to finance a $340,000 house with a 4% mortgage can now only afford one priced at $325,000. So, houses in that price range just lost 4.5% of their value.

well I guess if he (somebody is a singular noun) was preapproved he has 60 days to consumate a deal. The heat is on.

The Citizen Editorial this morning: if the public isn’t behind the effort, the legislation won’t work.

Read more: http://www.ottawacitizen.com/business/home+market+rules/4123787/story.html#ixzz1BOkGRpT5

but unlike running a stop sign, getting a mortgage is not a solitary effort. Speaking of solitary efforts the Citizen is sounding rather narcissistic.

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

Another Albertan: I received but a smile in return. His summary statement was essentially “it never should have gotten this far.”

I take that as a warning.

#114 boomer62 on 01.18.11 at 11:07 am

#102 Carson on 01.18.11 at 10:43 am

If you have to ask, its already to late for you to get in.

#115 Herb on 01.18.11 at 11:09 am

#85 Moneta,

because “You can’t say anything that is leftist in this day and age without being ridiculed or bulldozered” is all the more reason to speak out – if one has something to say.

#116 boomer62 on 01.18.11 at 11:09 am

#103 Devil’s Advocate on 01.18.11 at 10:48 am

The Fog will take a while to clear.

#117 bill on 01.18.11 at 11:12 am

or an xenomorph xt is about to burst from the childs chest ala alien….. much to the suprise of all

#118 tired vulture on 01.18.11 at 11:21 am

I agree some people bought over-priced homes. I agree many people borrow more money than they should, I agree it is crazy what we pay in Canada for a box call house….however I dont think there is going to be caos or record listing of houses this spring. It is stupid to list your house because a possible lost of 10-20% when for most people the value have rised 50-80%. Very similar to stock market, long term view. Feel sorry for the people who bought last 2 years!

#119 Cory on 01.18.11 at 11:21 am

I am completely shocked!!!!!! I had no idea CMHC backed HELOC’s.!!!

” what will Global TV have to report on now?”

I watched Global lastnight report on this. They showed a nice young girl who was out with her all knowing realtor looking to buy a house. The girl said ” I do not want the government telling me how to spend my money”………or thereabouts. I guess the nice young lady doesn’t realize that the government is backing her high risk motgage and yes, yes they can tell you exactly what to do because of it.

GLobal ended the report saying “in this red hot market” !!!!!!!!!I almost choked on my mouthfull of food!!!!!!!!

Anyways, it’s about time……but not soon enough.

#120 hobbitt on 01.18.11 at 11:22 am

7 Soylent Green is People on 01.18.11 at 12:43 am
Did you see old snake eyes on t.v. tonight. I swear to God I puked my guts out every time I saw his weasel face. God, why did you put that man/corporation in charge of my Canada?
.
————————————————————-

Man, if the mere sight of a person’s face can make you violently ill, you need mental help NOW, SERIOUSLY! your obsession is is way out of line with reality.

#121 David B on 01.18.11 at 11:24 am

Stiing in Tim’s I heard this mentioned … more costs for the home owner ….. A Migration Certificate .. What next!~

http://www.sandyhines.com/landreg.htm
____________________

Did F explain how this will effect their ability to right other such moves as a taking a $13 Billion + surplus and spending over $100 Billion giving Canada the largest debt in our history,

I suspect the crunch will come sooner rather than later as both the Fed’s and provincial governments nickle and dime us to right Mr. Harper’s wrongs.

#122 Medic on 01.18.11 at 11:41 am

http://www.theglobeandmail.com/globe-investor/personal-finance/rob-carrick/why-one-mortgage-broker-backs-the-crackdown-on-debt/article1873635/

Here is one broker who says that 9 out of 10 new buyers in his office are 35ers. Yes, I know this is just one office.

#123 Joe Q. on 01.18.11 at 11:57 am

Garth writes: “The average down payment in Canada (says CMHC) is 7%.”

Again, on scouring the CMHC website and reading their most recent reports (March 2010 housing and renovation survey) I can’t find this number anywhere.

The CMHC DOES provide a rough distribution of down-payment values among all 2009 buyers for the big cities. Typically about half of these 2009 buyers put down less than 20% and a surprising number put down zilch — but there isn’t enough info, as far as I can tell, to calculate the average down-payment from the data CMHC presents.

It is not that I doubt the number — I very much believe it — but I would love to see the data.

I’m not your librarian, dude. — Garth

#124 Devil's Advocate on 01.18.11 at 12:06 pm

#120 Joe Q. on 01.18.11 at 11:57 am

Garth writes: “The average down payment in Canada (says CMHC) is 7%.”

Again, on scouring the CMHC website and reading their most recent reports (March 2010 housing and renovation survey) I can’t find this number anywhere.

That is average down payment of high ratio mortgages Joe Q. Does not take into consideration those who pay cash in full for their homes or those who finance through conventional means. That is the average of downpayment of those who finance 80% or more of their purchase is 7%.

#125 Now nun on 01.18.11 at 12:08 pm

HELOC – I know of people who borrowed at “Prime+1%” to invest in far-far away lands earning as much as 10% return. How does this affect us tax-payers? Are we on the hook?

#126 Mike B on 01.18.11 at 12:10 pm

As the bulk of new homes in T.O. are condos and they are well under 300K mostly I suspect the impact from the 35 to 30 year amort will be minimal if any. In the very high end 1 million plus properties there will very likely be a slide which should ripple down to the sub million and so on properties.
In the short term prices will likely go up as inventory is limited and those on the credit knife edge will jump sooner than later into a new home. Sadly this will take place for some months ahead as we approach the introduction of these new policies later this year.
In the long term when we are past the start date of the new policies we will see a big impact on homes in Toronto that are plus 800K and over. Anything below will likely moderate in price as is usual with seasonality. A big drop you say? No not likely IMO.

As for Harpo’s brilliant political maneuver on CBC last night one can only laugh at his compunction. To actually take credit for the state of the Canadian economy WITHOUT mentioning the massive debt created by him is utterly hilarious. The very reason our economy is intact is due to regs over the banks from being overly greed, more greedy than the A-holes already are . Regs forbidding them from doing stupid things. These were not put in place by Harper Conservatives. HOWEVER the massive Government debt WAS put in place by Harper . Pity he does not the credit for it. Guess he had a bout of dimentia/

#127 VICTORIA TEA PARTY on 01.18.11 at 12:10 pm

PARSING AND PICKING, OVER AND OVER…

It’s all very well to parse and fudget and fidget and dust off the conspiracy-theory worry-beads and wonder what effect “F’s” big decision really means.

Checking out the transcript, of PM Harper’s CBC interview of the other night, comes up with a possible answer; the decision is an insurance policy against the effects of international sovereign default.

First off, Mr. Harper said the 2008-09 financial debacle was something “that I thought I would never see in my lifetime…That was the sitution we were in in the 1930s.”

That situation, therefore, justified the government’s decision to “bring forward” various capital projects (stimulus), he added.

One of those projects, he did not mention, as far as I’m concerned, was the loosening of lending rules to boost that other great infrastructure project, the real estate industry and it various related components including the renos.

TURNING WORMS…

But the worm has turned for the worse since then, because of the huge resulting debts (including Canada’s BTW) from numerous stimulus programs in several countries.

Now Canadians face a new budget in March, apparently, and await the possible further dropping of more economic shoes.

In the background lurks the Bank of Canada. Today its decision was to hold the line on interest rates.

STRATEGY CHANGER…

I see the upcoming big picture changing from one of playing an economically-defensive strategy to an offensive one.

Two words will drive this agenda: Sovereign Debt. This is a primarily industrial world problem. And default will probably be the final outcome for the likes of downtown Europe, the UK (where inflation today was pegged a nearly 4 per cent thanks to jacked up commodity prices caused by the printing up of too many USDs by the US Fed’s QE2 disaster) and even the US.

These countries will be beggering their neighbours during this process while China, whose economy is obviously slowing down, will still be holding a lot of cash.

Some of that will be used to buy up the bankruptcies of our world permitting China to eventually becoming the world’s banker (lender) of last resort.

BATTEN DOWN THE HATCHES…

The PM, I believe, has figured that out, and he is in a hurry to find a way to protect us from the fall-out.

Hence, some fiscal rectitude, battening down the hatches: so the government pushes its new strategy all the way down the line to the HELOC holders, credit card crazies, real estate virgins and other lesser breeds.

As Garth has written from time to time, the folks at Finance know the big picture, what’s coming.

And parsing from that I believe a lot of bad stuff is coming.

And a small, but significant economy like Canada’s can either wind up being a victim or a survivor. I believe the government chooses to go the latter route.

But is clamping down on the real estate industry the right strategy at this time?

We wait for the Rites of Spring to be contained in the next federal budget.

#128 Devil's Advocate on 01.18.11 at 12:13 pm

#119 Medic on 01.18.11 at 11:41 am

Here is one broker who says that 9 out of 10 new buyers in his office are 35ers. Yes, I know this is just one office.

No doubt. No big surprise there. And now it will change to 9 out of 10 new buyers in his office will be 30ers. Yes just one office but, as you imply, typical.

Do you own a home? How much did you put down when you first bought? If you put more than the minimum you are not the norm… not by a long shot. Be honest people how much down payment were you able to save for your first home. Did that you did not save 25%
(the old threshold of conventional) or 20% stop you from buying? Of course it didn’t! (and shame on you for that BTW ;-) )

#129 Lonely Limey on 01.18.11 at 12:15 pm

@ 104

“8% is wrong. I ask any mortgage brokers reading this to verify, through their own actual experience with new first-buyer originations. — Garth”

………………………………………………………………………

All the first time buyer mortgages I have arranged since becoming a Broker last year have been 35 year ams. Anything less doesn’t even exist in their minds.

#130 Stevermt on 01.18.11 at 12:16 pm

#93 Smoking man
Well I guess it might depend on what you define as “over”.
the Housing melt south of us ain’t ever yet, so that lady ain’t singin either. but anyway just keep dancing over there, apparently it’s great for boosting your happiness index.

#131 Western Canadian on 01.18.11 at 12:16 pm

“8% is wrong. I ask any mortgage brokers reading this to verify, through their own actual experience with new first-buyer originations. — Garth”

I’m no mortgage broker but I know a couple and they tell me that the vast majority of first time buyers ARE doing the 35 year ammortization as Garth says.

HOWEVER, its not because they cannot afford the 30 year. In fact according to the brokers I talk to most of the people who take the 35 ammortization can qualify at a 30.

The reason they take the 35 year ammortization?

1. Because why wouldn’t you take the lower payment and then simply adjust your payment schedule to turn it into a 30 or 25 year mortgage. That way you have flexibility if you need some extra cash one month.

2. WHY WHY WHY would you not maximize the leverage when mortgage rates are 2.3% for variable and 3.7% for fixed. I could have paid off a tonne of my mortgage over the past year, but why would you when you can invest that money instead?

3. What Garth knows and does not tell you is that in the first 5 years of either a 30 or 35 year mortgage that the extra interest in negligible. In Flaherty’s speech when he said that this change would save Canadians $56xxx thousand in interest or whatever it was, the bulk of that savings (like 95%) is over years 10-35. The first 5 to 10 years is barely noticable in interest expense.

#132 Devil's Advocate on 01.18.11 at 12:17 pm

Who is this going to hurt most?

Those first time buyers of 2 to 4 years ago. Nice… real nice… fatten up those pigs to slaughter.

Good intention, wrong plan Flaherty.

#133 David B on 01.18.11 at 12:26 pm

Did we not chat about this as part of sub prime cycle?

Is Canada next? … some think inflation is rising now!

Inflation hits 3.7% after record monthly increase

http://www.guardian.co.uk/business/2011/jan/18/inflation-december-2010-record-monthly-increase

#134 Daisy Mae on 01.18.11 at 12:26 pm

Wow! THAT takes my breath away…..

#135 cxcroney on 01.18.11 at 12:28 pm

SIXTY DAYS to take effect. Perfectly thought out by the Grand Wizard Stephen so that the resulting upward bump in RE sales over the next 2 months can be turned into pre-election good news stats for the Conservatives going into their majority GVT push. Tell me I am wrong!

#136 AACI-Okanagan on 01.18.11 at 12:30 pm

It was stupid when they brought in the 40 year amortization, all they did was prolong the real estate “boom”market by one year. Here in BC we should of peaked in 2006 rather than 2007. With few minor exceptions to the new rules we are generally back to the old way of a few years ago, all of which is great news.

#137 Kilby on 01.18.11 at 12:41 pm

BestPlaceonEarth Doesn’t seem to care about the city he lives in or what it becomes if his dream of selling it all of to “Offshore” buyers is his idea of the “Best Place on Earth”. It’s sorry to see Vancouver being over developed so fast. We just leased a 583 sq ft condo in North Vancouver that is owned by people in China. They paid nearly $500k for it and the quality is pretty spotty to say the least. Great place to spend a year while the market “adjusts” Three building complex been for sale for around a year and is 70% empty eight suites on our floor and only 3 occupied so the offshore buyers are obviously waiting as well.

#138 Got A Watch on 01.18.11 at 12:49 pm

Probably nobody stupider in Canada than the “real estate bull”. They were brilliant once, in ’97… today, not so much. After 13 years, the party is over, the lights are on, you can’t stay here any more.

If a stock that had risen in price every year since ’98, you might think that today is not the best time to buy, and that you shouldn’t lever up 20:1 on it now. Probably best to buy it after it corrects in price closer to the mean. If you like to buy low, and sell high, of course. So many like to do the opposite. Timing is everything.

But in the twilight zone know as “real estate”, today’s buyers just love to chase history. And lever up, and take 30 years to pay for it. Why not? It “can’t/won’t/it’s different/here/this time/in Canada” – of course it is, after drinking deep of the kool-aid.

In the delusional part of the economy known as “real estate”, brain dead pumpers say things like “”Yes and good luck trying to convince sellers of that”. LOL. Apparently the definition of a ‘market’ does not mesh with pumpers. Absent mania symptons like “bidders war” which always appear only near the end of the blowoff top (also explained under ‘morons’ in the dictionary), the buyer offers, the seller is not in control.

Perhaps the recent history of “real estate markets” in the USA has entirely escaped many. They will realize the errors of their ways, when a “buyer” offers a lot less than they “thought our house was worth” – newsflash, the “worth” is what someone will pay for it, now. In a rising market, that might be more than last year. In a falling market, it will be less, maybe a lot less. What the seller feels about that is irrelevant.

Some ‘Greater Fools’ may still over-pay on the offer, but then they will hit the rocks on the “appraisal value”, when somebody has to put a “value” on the property for the lender. And that “market value” is lower than the Fool tried to overpay, and the lender declines to finance the mortgage. A real Fool will include no ’10 Day financing clause’ in their offer, to make it more “acceptable”. The sellers lawyer will find that quite acceptable too, and happily sue them.

Real estate in Canada has now entered the decline phase of the price cycle. Prices should bottom by 2016 or so, then be flat for a while. Spring, 2018 will be a good time to go out looking.

#139 Blobby on 01.18.11 at 12:51 pm

Garth – When people renew their mortgages now, will they have to fit in with these new rules? My understanding is “yes”.

If that’s the case we’re about to have a fair few people who bought with 0 down 40 year mortgages 4 years ago realise what a mistake only paying off interest on your mortgage for 5 years was…

Or am i mistaken on how this works?

#140 kitchener1 on 01.18.11 at 12:58 pm

Garth is correct that most mortgages are 5/35.

My friends in the biz have told me this over and over again.

People, you do realize the F has access to all the numbers that us “commoners” will never see.

Banks were lobbying for this change– whats that tell you?

There will not be a buyers rush.

sales volumes have decline month of month for the last 6 months– soon to be 7 when the Jan stats come out.

Even before the rules changed, people were not jumping in.

#141 Kaganovich on 01.18.11 at 1:07 pm

#85 Moneta
#112 Herb

Your observation about the muzzling/stifling of left-wing views and criticism is the subject of a growing discussion amongst some prominent progressives in the blogoshere:

http://lhote.blogspot.com/2011/01/blindspot.html

and some responses:

http://www.nakedcapitalism.com/2011/01/on-the-lack-of-left-wing-discourse-in-the-blogosphere.html

http://my.firedoglake.com/cernig/2011/01/17/the-liberal-blogosphere-is-a-neoliberal-blogosphere-unfortunately/

They too feel your pain, as do I.

#142 Joe Q. on 01.18.11 at 1:18 pm

Garth writes: “I’m not your librarian, dude.”

Point taken, but my request for the source of the data is not made out of laziness. If you have number at hand, can’t you at least provide the title of the report it appeared in?

#143 Brandon on 01.18.11 at 1:32 pm

So I guess if you had 34 years left on your mortgage and wanted to lock in right now they probably wouldn’t let you?

#144 Dismayed on 01.18.11 at 1:39 pm

@ 106, Kris “Anyone thinking there will be mini boom until the new 30 year max takes effect is essentially saying that buyers are complete idiots.”

I have a friend who’s now scrambling to buy a 250K condo in Edmonton. I’ve warned that prices here have fallen at least 12% in the past 6 months and that just about every indicator (tightening mortgage rules, raising interest rates, rapid declines in new construction, a tripling in the number of mortgages now in arrears, a slowing economy, etc.) points to further declines and it’s all like water off of a duck’s back. She can’t see past the low interest rates and I imagine that’s the same story for a lot of other buyers as well.

She’s putting down 20% and I figure she’ll be kissing most, if not all, of that money goodbye.

#145 BurnabyMike on 01.18.11 at 1:44 pm

Have you seen this chart on the Guardian website? it shows Canadas share of us Treasuries increasing over 700% yes 700

http://www.guardian.co.uk/news/datablog/2011/jan/18/us-federal-deficit-china-america-debt

Garth love the blog but there will be a larger correction than expected, sadly

#146 UrbanCowboy on 01.18.11 at 1:45 pm

#138 kitchener1 on 01.18.11 at 12:58 pmGarth is correct that most mortgages are 5/35.

My friends in the biz have told me this over and over again.

People, you do realize the F has access to all the numbers that us “commoners” will never see.

Banks were lobbying for this change– whats that tell you?

There will not be a buyers rush.

sales volumes have decline month of month for the last 6 months– soon to be 7 when the Jan stats come out.

Even before the rules changed, people were not jumping in.
———————————————————-
If homeownership is 70% who is left to jump in? This alone spells disaster for real estate, thats why I agree with those above who say 35 to 30 change won’t spark a buying freenzy, how many left to buy, and out of those how many are greater fools?

#147 Devore on 01.18.11 at 1:46 pm

#45 john

Hi Garth, I am wondering if young couples waited to buy in a year or 2, ok the prices might be lower but the interest rates will be higher, so their monthly payments will all go to interest rates, why is it better this way than buying now where monthly payments are low coz of low rates?

It is much better to buy when rates are high and prices low than to buy when rates are low and prices high, even if the monthly payment is the same.

#148 X on 01.18.11 at 1:48 pm

Mortgage Broker quotes same stats as Garth:

http://www.theglobeandmail.com/globe-investor/personal-finance/rob-carrick/why-one-mortgage-broker-backs-the-crackdown-on-debt/article1873635/

#149 Jon B on 01.18.11 at 1:56 pm

Great summary Garth.

#150 Devore on 01.18.11 at 2:02 pm

#86 Moneta

You can’t say anything that is leftist in this day and age without being ridiculed or bulldozered.

Leftist? How about just plain common sense? Fact is, the opposition has done squat about this credit situation except cheer on.

#151 Fred on 01.18.11 at 2:12 pm

It’s a step in the right direction but should have been done years ago.

I’m in Kelowna and there are for sale signs everywhere. This whole town is run by the real estate industry. Probably more realtors per capita than anywhere else in the world. I see the realtors sitting in the coffee shops crying in their grande caramel macchiatos.

However, with the exception of the condo market, prices haven’t really budged. I know because I have been watching and waiting for a few years now and still prices are no closer to coming down to earth and probably won’t be for some time to come.

#152 ??wth?? on 01.18.11 at 2:17 pm

I have been coming here for about a month now. From what I gather, there are mainly 3 types of people who post on this blog…

1. Those who missed the boat on buying a home pre 2003.
These folks are very deluded and use this blog as a form of a support group to make themselves feel better about not owning property. They think that by reading the banter which is repeated over and over here in the comments section will actually make the market drop to what they think it should be.
” I’m going to wait it out and save myself a couple hundred thousand dollars on a house. Yep, I’m still waiting…any day now, the market is going to crash…yep, should be any day now…”

2. Those who are in the market pre ’03 and/or have many property and investments.
These people post here to make themselves feel good about their situations. Some even like to brag about how fortunate they are.
” I sure am glad I am not like those people who bought post ’03. Why do I always feel so good about myself after reading this blog? ”

3. Those who like to challenge each other on stats and to have some kind of written proof incase they make a prediction which happenes to come true.
It’s like watching from a distance a group of of alpha males hashing it out and trying to proove to each other how smart and worthy they are and who is going to be right.

I think that there are some good points made here and I always take this stuff at face value. I just wanted to say thanks to all of the animated characters that post here. It is usually very obvious as to which posters fit into these categories. It does take all sorts to make the world go round.

#153 Western Canadian on 01.18.11 at 2:21 pm

From Carney’s speech:

“Any further reduction in monetary policy stimulus would need to be carefully considered,”

Sounds to me like rates aren’t going up anytime soon..

#154 BigAl (Original) on 01.18.11 at 2:27 pm

Real Estate Appraisers

I am wondering if anyone knows much about the Real Estate Appraisal industry, and their role in bubbles and the RE market in general.

Apparently, CMHC uses an automated computer program for most of its appraisals, but the banks/mrtg companies still use actual accredited appraisers.

So do appraisers contribute to bubbles, or is their effect neutral?
Do they just compare other similar transactions (geography, size, condition), and just rubber stamp any old price that’s given?

Seems like this is one group of players that is seldom mentioned.

#155 It's Time on 01.18.11 at 2:34 pm

Garth is right… Eight friends i know bought houses in the past 2 years….and guess what….each one of them have 5 down ,35 years mortgages.

#156 jess on 01.18.11 at 2:35 pm

20 Ricky
That is too funny…

Aristophanes is laughing. Although, I hope for the executioner of change rather than the burning of the “thinkery.”

#157 kitchener1 on 01.18.11 at 2:38 pm

#142 UrbanCowboy

I agree, i dont see a buyers frenzy in the pipeline. More of a sellers frenzy.

The one important thing about these changes is that the higher the price, the greater the diff between 30-35 years.

BC- Van city to be precise is going to see a huge drop as thats were the average prices for SFH are the highest.

GTA, pretty much any house in the 450-500K and up will drop as a result.

#158 It's Time on 01.18.11 at 2:38 pm

I think everyone who holds a 40 year mortgage might have to cut a huge check while renewing their mortgages in a year or two….or face foreclosure.

#159 Williston Geo on 01.18.11 at 2:40 pm

The conversation seems to be concentrating on first time buyers and rightfully so. However, I would bet my last nickel most speculators/flippers are using 5/35 and the new rules will make there margins much tighter. Good news for future buyers IMHO.

#160 anonymous on 01.18.11 at 2:41 pm

This will not have an effect on the Vancouver or Richmond markets at all. Immigrants have no income, so they’ve been paying 35% down anyway. The 5/35 ppl have long been out of the market here. I keep seeing sold.signs in my neighborhood, single family homes are only lasting a week most.

#161 Original Bear on 01.18.11 at 2:44 pm

Oh bears….

You just don’t get it…

You constantly grasp at straws…

You analyze the crap out of micro policy changes, that are simply window dressing at best…

When bears cheer any government changes, it usually results in the opposite of what they want…

Bears cheered on the recession, thinking that it would scare buyers from getting some lucrative Vancouver RE…but those low interest rates simply goosed the market…

The elimination of the 40 year amortization period was supposed to herald the culling of the buyer herd…but prices continued to go up….

Those April 2010 mortgage changes, designed to “target” the bubble markets of TO and Vancouver, were supposed to hurt those buyers dependent upon rental suites in their primary residences…and that sure panned out…

And now bears think that tweaking the amortization period will hurt both prospective buyers and those that took out the 40 and 35 year mortgages…good luck with that…

So when bears are cheering, I know that real estate will still go strong…

At least the record to date proves this last point…

#162 Mister Obvious on 01.18.11 at 2:48 pm

#107 Kris:

“One thing I believe is that the price isn’t the main issue for people, interest rates aren’t the main issue for people, what is the main issue is comes down to WHAT IS THE MONTHLY payment.

That statement almost describes the correct way of thinking but it needs modification. The real question is:

“What will be the monthly payment in subsequent years and what fraction of my income will that represent?”

#163 Junius on 01.18.11 at 2:56 pm

#52 Jeff Smith,

You said, “I am willing to waiger that next year listing stays down while prices on the few houses that do make it to make has “gone up another 25%” (realturd trademark).”

I don’t agree (obviously). I think the last half of 2010 was the transition period. Slow sales and lots of listing removed.

Remember I said a flood of listings will come on. I also think many will come off as well leaving those that have to sell having to lower prices.

And it begins.

#164 Sad on 01.18.11 at 3:00 pm

Lots of wiggle room for the Financial Institutions in the Rules. Check out the exceptions below. Wink, wink…
Moving to the New Framework
The adjustments to the maximum amortization period and the maximum refinancing amount will come into force on March 18, 2011. The withdrawal of government insurance backing on lines of credit secured by homes will come into force on April 18, 2011. Exceptions would be allowed after the new measures come into force where they are needed to satisfy a binding purchase and sale, financing or refinancing agreement entered into before the corresponding coming into force dates.

#165 kitchener1 on 01.18.11 at 3:02 pm

Just to give a numbers example.

Lets assume you have a couple that has 25K down and can qualify for a max monthly mortgage payment of $2000. Lets assume that 25K is after CMHC fees. Thats max

Right now before the rules change they will qualify for a
mortgage of:
473K @ 3.7% over 35Y purchase price 498K
($ 2002.24) month

with the new changes- same couple
437k @ 3.7% over 35Y purchase price 462K ($2004.47) monthly payment.

Purchase price drop of 36K or 7%.

thats on a 500k house. The higher up you go, the bigger the % drop.

The market will move to were the first time buyers are. It moved up because lending was lax, it will move down because lending is getting stricter

#166 Ottawa S on 01.18.11 at 3:11 pm

#34 TheBestPlaceOnEarth

To quote: “YAAAAAWWWWWWNNNNN”. Your posts are too long. Get to the point if you want people to read the whole thing. That said, do you have any reports on all of these offshore investors buying up Canadian real estate? Buying rental properties no longer pays an ROI worth considering, and most people don’t buy assets that are at risk of depreciating. So, who/where are these offshore investors?

#167 Hoof Hearted on 01.18.11 at 3:17 pm

Ahhhh……tale of the shite pumper (NO not the RE industry, politicians et al.)

On Friday, I here ” beep beep beep”…the sound af a vehicle backing up. Look out the window at my neighbours driveway, then observe its a septic tank cleaning truck .

I e-mail my neighbour , and ask who is the contractor (contact info)and what the person is charging.

My neighbour says $200 CASH/No receipt.
I thanked him for the info….because usually I was paying over $300 when all the taxes etc get added up.

Welcome to the new economy…..(No Shite !!!)

#168 Blobby on 01.18.11 at 3:17 pm

#45 john

Yes – if you buy in a few years, prices will be lower, but rates higher. But it doesnt follow that you should therefor buy now as rates are low and prices are high.

Use the thing attached to your shoulders by your neck.. If you buy now while prices are high, you’re also going to have the high rates in a few years too. So then you have a property of high price WITH high rates attached to it.

See?

(maybe i didnt explain this simply enough – do you need pictures?)

#169 UrbanCowboy on 01.18.11 at 3:23 pm

If homeownership is 70% who is left to jump in? This alone spells disaster for real estate, thats why I agree with those above who say 35 to 30 change won’t spark a buying freenzy, how many left to buy, and out of those how many are greater fools?
———————————————————-
Also to add to this after the US housing bubble went pop, and interest rates were brought back down there is still no life in the market, which goes to show you you don’t necessarily need significant changes in lending rules to stop the carnage once it starts.

#170 Moneta on 01.18.11 at 3:23 pm

so·cial·ism: 

– a theory or system of social organization that advocates the vesting of the ownership and control of the means of production and distribution, of capital, land, etc., in the community as a whole.

– (in Marxist theory) the stage following capitalism in the transition of a society to communism, characterized by the imperfect implementation of collectivist principles.

cap·i·tal·ism: 
– an economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations, esp. as contrasted to cooperatively or state-owned means of wealth.

————

lib·er·al :  

1. favorable to progress or reform, as in political or religious affairs.
2. ( often initial capital letter ) noting or pertaining to a political party advocating measures of progressive political reform.
3. of, pertaining to, based on, or advocating liberalism.
4. favorable to or in accord with concepts of maximum individual freedom possible, esp. as guaranteed by law and secured by governmental protection of civil liberties.
5. favoring or permitting freedom of action, esp. with respect to matters of personal belief or expression: a liberal policy toward dissident artists and writers.
6. of or pertaining to representational forms of government rather than aristocracies and monarchies.
7. free from prejudice or bigotry; tolerant: a liberal attitude toward foreigners.
8. open-minded or tolerant, esp. free of or not bound by traditional or conventional ideas, values, etc.
9. characterized by generosity and willingness to give in large amounts: a liberal donor.
10. given freely or abundantly; generous: a liberal donation.
11. not strict or rigorous; free; not literal: a liberal interpretation of a rule.
12. of, pertaining to, or based on the liberal arts.

con·serv·a·tive:

1. disposed to preserve existing conditions, institutions, etc., or to restore traditional ones, and to limit change.
2. cautiously moderate or purposefully low: a conservative estimate.
3. traditional in style or manner; avoiding novelty or showiness: conservative suit.
4. ( often initial capital letter ) of or pertaining to the Conservative party.
5. ( initial capital letter ) of, pertaining to, or characteristic of Conservative Jews or Conservative Judaism.
6. having the power or tendency to conserve; preservative.

—————

It’s such a jumble. Can someone tell me concisely what the difference is between a leftist and a rightist in today’s world? It just seems to me that liberals and conservatives are all mixed up in their beliefs. It’s the tower of babel.

In my world, the rightists are usually the ones with property, rights and wealth. Their economic views tend to focus on material goods and they want to make sure they hold onto the biggest piece of the pie and they are deciding how it is cut and eaten by others.

The ones who are disenfranchised and want the rules to change so they can have a chance at prosperity are the liberals. They often believe that economically it’s not all about material goods and that the pie can get bigger if everyone works together.

In today’s world, it just seems to me that the right has convinced the disenfranchised to shoot themselves in the foot and vote conservative.

#171 David_Ricardo on 01.18.11 at 3:26 pm

#140 Joe Q. on 01.18.11 at 1:18 pm

I agree with you. However, Garth probably has pretty good “unofficial” sources of information and probably speaks to lots of people in the industry to make educated guesses. Besides do you really believe the “official” numbers?

#172 prollywrong on 01.18.11 at 3:27 pm

#45 John
Hi Garth, I am wondering if young couples waited to buy in a year or 2, ok the prices might be lower but the interest rates will be higher, so their monthly payments will all go to interest rates, why is it better this way than buying now where monthly payments are low coz of low rates?

_______________________________________

There are several factors to consider other than monthly payments. Monthly payment calculations are what bankers and realtors will use to show you how much home you can ‘afford’ because they know you will lowball all your other monthly expenses in order to max out your Mcmansion.

1) Lets assume for a moment that the market is somewhere near a peak. You buy at 350,000 with ten grand down. In a few years you go to renew, and your home is now valued at 300,000. Not only have you lost the ten grand down, you’ve lost whatever realtor and transaction fees you paid, and your home has lost serious value. Your bank, once so friendly and accomodating, would like you to cough up twenty or so grand just to renew the mortgage, because the value of the asset they are lending against is now worth less than the loan. No fun.

Or, lets say you go to renew and find interest rates have returned to historic norms. Did you do your monthly payment calculations with interest rates at 8%? How about 10%? Things may look a little tighter…

Even worse, lets say you need to move. I know everyone says they will stay in their homes for forty years, etc, but statistically people move out of their first home after just five years. Now you have the joy of selling for less than you paid, in a slow buyers market, waiting, etc.

2) Buying when home prices have shot up for a decade means you are more likely to take on a 35 (or thirty) year amortization, which means that – even at historical low interest rates – you will likely still be paying much more in interest *over the term of the loan* than someone who bought a home priced for less and paid it off in 15 or 20 years.

3) In some areas right now, renting is *significantly* cheaper than owning. Speaking of costs of home ownership, you have added property tax and monthly maintenance to the price of your home, right? If not, I would google something like “hidden costs of home ownership” to see how the real expenses add up.

So, why does it matter that renting is significantly cheaper? Renters are losers, right? Sure, if they spend their free cash on booze and big wheels. But renting may allow you to save, say, another 1500.00 a month. Which puts you in a much stronger position in a few years because:
a) You will have a larger down and maybe not need CMHC insurance…which is expensive.
b) You may qualify for a shorter am period, saving you a boatload of interest.
c) House prices may have declined, so you get more bang for your buck.
d) In a down market with a good chunk of cash you will be a bad-ass negotiating mofo, as opposed to going in with little down and a big am period, where you will be a little guppie.

4) If you can’t afford the house on a 25 year am and *that you intend to pay off in even less* it’s a soul sucking disaster. Think about it: a 30 (or 35 or 40) year am is a tool to allow you pile on more debt. Is this in the best interest of you and yours? Want to travel? Tough. You or your significant other want to take a year off with the little one? Tough. There are various terms for this position: debt slave; house poor, etc.

5) People say it over and over again on this site, but I’ll say it, too: “buying” a home with little down and a long am period is not home ownership: it is renting money from the bank. Do you like banks? Trust them? I hope so, because you will be completely at their whim.

So yeah, monthly payment calculations are an absolute baseline indicator of affordability. Oh, and as my tag indicates, there is a good chance that some or all of this info is prollywrong.

#173 Hoof Hearted on 01.18.11 at 3:30 pm

BC’s economy , at least in the Metro Vancouver area, will either collpase…or have enough air in the bubble a while longer , depending on the Asian market.

I am rather tired of the denialist who try to ignore the local RE fate/future is intimalely tied to offshore $$$….either brand new investors (apparently 3 year waiting list under old investment rules) or they have established families who invest while they are newly minted citizens.

If” F” bomb does gor mushroom….what this may do is fight off the local buyer market, but leave it wide open for the pent up offshore demand, which ” may ” , like a tsunami, creates a lull…..then an enourmous wave . …then nothing.

OR events in Mainland China may shift this variable…ie if China’s western customers start dying off, or protectionism kicks in, the Chinese tap may dry up.

Our local idiots in office claim they must ramp up construction (higher density) so that they can use this taxation base to help build more affordable housing.

OMG……

#174 Coraline on 01.18.11 at 3:30 pm

I’m thinking that the Toronto resale numbers are even worse than the last few months. Generally, TREB would have issued its mid-month press release by now. Whenever they are bad, they stall.

#175 Jebus on 01.18.11 at 3:33 pm

So.. the average down payment for high ratio ( > 80%) mortgages is 7%.

What is the percentage of high ratio to conventional mortgages?

If this number is low…who gives a crap? Why freak out when you don’t have all the facts/numbers?

That is the average down payment. Period. Not just for high-ratio borrowers. — Garth

#176 Jen on 01.18.11 at 3:33 pm

I suspected that we might follow the states to some regard with mortgages.

The upside to this is that there are going to be lots of people looking for places to rent!

#177 Hoof Hearted on 01.18.11 at 3:41 pm

#138 kitchener1 on 01.18.11 at 12:58 pmGarth is correct that most mortgages are 5/35.

My friends in the biz have told me this over and over again.

People, you do realize the F has access to all the numbers that us “commoners” will never see.

Banks were lobbying for this change– whats that tell you?

=============================

Exactly…do people think a OUIJA board and burnt squirrel offerings is used ?

Go Re Rent TITANIC…..”unsinkbale” according to the senior designer…..except when they asked him one on one he said basically its over..this ship is toast.

These parties have intimate pulse on the relevant data….with probably the most sophisticated data tracking, tabulation, calculation , extrapolation systems that exists(excpet maybe the ones Goldman Sachs bastards own ).

Their hearld was the PR of consumer debt is rising…(duuhhh)..this gave them the window to make a move. Metro Vancouver is probably the last bastion of BS….if and when it goes…”faith” will be shattered….hence the “F” bomb as a pre-emptive strike.

#178 Mikey the Realtor on 01.18.11 at 3:46 pm

“Expect lots of near-empty Home Depots across the land. There will be an economic ripple effect exacerbating the impact on real estate”

Did I just log into The Automatic Earth? Garth you are starting to sound like Betty next door. There will be a mini boom, F knows that his announcement will get a rally going, hence why he didn’t use all ammunition ( dp increase) that’s for next time, they know how the sheeple mind works. A little verbal diarrhea here and there keeps the market even.

#179 GenXer on 01.18.11 at 3:53 pm

#13 Northshore – check out this article that supports Garth’s figures:

http://www.theglobeandmail.com/globe-investor/personal-finance/rob-carrick/why-one-mortgage-broker-backs-the-crackdown-on-debt/article1873635/

At Mr. Cocomile’s office, nine of 10 new home buyers have been choosing to pay off their mortgage over 35 years. Starting March 18, 30 years will be the new ceiling for people with down payments of less than 20 per cent.

The extra interest charges resulting from an amortization period of 35 years as compared with 30 years can amount to tens of thousands of dollars. Mr. Cocomile said clients who are informed of this typically say they intend to start paying down their mortgage at the earliest opportunity. Does that actually happen?

“No,” Mr. Cocomile said. “I’ll follow up with them and say, ‘Why don’t we ramp up payments?’ They say, ‘Oh, we have a car loan now, or we spent some money on renovations, or we’re trying to get rid of credit card debt.’ Credit’s so easy – everyone’s using it.”

#180 Pr on 01.18.11 at 3:59 pm

CMHC has been in existence for almost 65 years. For the first 60 of those years, they never insured mortgages with amortizations greater than 25 years. In 2006 they start 0 cash 40 years amortization, because of that, the prices of real estate fly straight up to the sky. If you are a buyer right now, go read history. Its going down!

#181 AG Sage on 01.18.11 at 4:08 pm

#34 NoGreaterPlaceInTheUniverse,

I really enjoy your posts. I try to feel badly for you, but instead, your words are all gravy.

#182 Wally on 01.18.11 at 4:10 pm

WikiGarth! It’s about time those losers laid their cards down and fed you some redemption! So so sad that stating the obvious is such an anomaly in this country.

p.s. If “WikiGarth” could get some legs out there in the dumbed down herd maybe more people could be saved from financial collapse.

#183 TAPPER on 01.18.11 at 4:12 pm

So, by my read, I hope that I still have enough time to sell before it’s too late. I’ve had my house on the market in the Ottawa region since last August. No bites… Not a single one. And listed with a reputable agent. I can only hope that relisting with another agent at the end of this month will bear more fruit, so I can get out while I still can….

#184 househunter on 01.18.11 at 4:38 pm

Fringe buyers will be out. Big deal. I doubt anything is going to happen except increased listings. BoC is too scared to raise rates too high. No one knows what will happen. A minor rise in rates? Minor correction? Eventual rebounded economy? Doomer bears are wishing a massive correction. Righty, off shore guys want to see home prices rise to the sky. If you wish hard enough it may come true!

#185 DARLENE on 01.18.11 at 4:49 pm

Willa on 01.18.11 at 10:15 am

(And is it just me, or has anyone else noticed that no media reported anywhere in these stories that F created the subprime mortgages in the first place?)
***************************************

No, it’s not just you who noticed. Everything I read yesterday except for the link from yesterdays post mentioned nothing about that. Hey what more do you expect from our glorious MSM?

As for the Liberals deadly silence, again we can blame the MSM. The new attack ads took precedence over what Ignatieff actually had to say about this. The only link I can provide is this:
http://www.thestar.com/news/canada/article/923189–conservative-ads-are-lowball-attacks-ignatieff-says

Way down at the bottom of the article is this quote from Ignatieff:

Of Finance Minister Jim Flaherty’s announcement early Monday that the government is tightening mortgage rules, Ignatieff said Liberals have long been sounding the warning on debt.

“It should have happened a long time ago,” Ignatieff told reporters, adding Liberals were opposed to Flaherty’s decision in the first place to increase the amortization period to 40 years.

“There are concerns about high and unsustainable levels of personal debt and I’ve been saying everywhere I go that for $1 Canadians earn, they owe $1.50,” said Ignatieff. “That means every single Canadian family is vulnerable to an interest rate shock.”

#186 RickOShea on 01.18.11 at 4:50 pm

It should be called Surreal Estate…

#187 Tom from Mississauga on 01.18.11 at 4:55 pm

So somebody with 350,000 relaxing on a HELOC at 3% used to get a kitchen/bathroom reno, flat panel in every room, i-phones for the kids, a deposit on a condo flip and a forced condo possession will need to amortize that now at 30 years to avoid paying 7.25% interest on an unsecured loan? Am I close?

#188 jess on 01.18.11 at 5:02 pm

Monday, March 14, 2005
Study: Canadian direct investment in offshore financial centers
1990 to 2003
From 1990 to 2003, Canadian enterprises invested substantial and growing amounts in countries known as “Offshore Financial Centers” (OFCs), many of them in the Caribbean.

Between 1990 and 2003, Canadian assets in OFCs increased eight-fold, from $11 billion to $88 billion. These centres include countries that are often referred to as “tax havens”, as well as those with an especially important financial sector, such as Switzerland.

OFCs accounted for more than one-fifth of all Canadian direct investment abroad in 2003, double the proportion 13 years earlier.

Among them, the largest growth in Canadian direct investment during this time occurred in Barbados, Bermuda, the Cayman Islands, the Bahamas and Ireland. By 2003, these 5 were among the 11 nations with the most Canadian assets….”

#189 Devore on 01.18.11 at 5:08 pm

#172 Jen

The upside to this is that there are going to be lots of people looking for places to rent!

And lots of people looking to rent their place, so everyone’s gonna be happy! Right?

#190 Nostradamus Le Mad Vlad on 01.18.11 at 5:09 pm


Several posters have mentioned sixty days, and that sounds about right. Two following links, but until then . . .

#42 bruce corell — “It’s too late. ..ITS HERE……”
plus
#55 TaxHaven — “It’s a PROCESS, not an event. So, in fact, I’d say default has already started…”
plus
#58 Bogdan — “I’ve decided to start a new business – Royal LeVultch Re/Mix. Are you in? — Garth” — ABSOLUTELY YES! I’ll flog whatever you’ve got in The Bering Sea, and take 25% off as my management fee!
plus
#78 Bruce — Great link and so accurate — that’s where F’s 60 days (+ / -) comes from.
plus
#89 Moneta — “Depreciate vs. which currency? All developed countries are in the same dire situation. Plus the US is forcing us to follow in its footsteps. It’s a race to the bottom.”

The way this continent is speeding up, the race is all but over. See last two links for further info.
plus
#94 Smoking Man — “Everybody is dancing here but the fat lady hasen’t started singing just yet….” — As above — sixty days + / -.
plus
#98 dandy — Joke of the day! C-H-F probably supplied you with that. Thanks for the laugh!
plus
#104 Devil’s Advocate — “the game of life goes on…” — Never ending. Some win, many choke and lose.
plus
#131 David B — “Inflation hits 3.7% after record monthly increase” — Combined with QE2 and deflation, that should give us an unhealthy dose of stag- and hyperinflation.

BTW, isn’t The Ides of March coming soon? Possibly time to switch to a RRSP Mortgage and hold it for as long, and make it as expensive as possible.

Add a nice TFSA with penny stocks growing and one would be nicely set up to enjoy Freedom 55!
*
Ch-ch-ch-ch-ch-changes . . . US Navy Map of the new coastlines. Change, in more ways than one, is in the offing.

Globalization The rise of the new elite.

#191 Junius on 01.18.11 at 5:09 pm

#169 Hoof Hearted,

You said, “I am rather tired of the denialist who try to ignore the local RE fate/future is intimalely tied to offshore $$$.”

Then try educated all of us with more than anecdotes and hyperbole. Show us some statistics that prove your point.

How much of a factor in Vancouver Real Estate are Chinese immigrants?

I am certain they exist but I am one who thinks in much smaller numbers than you seem to feel and certainly not enough to have the kind of sweeping impact you and the other pumpers say.

Prove it.

#192 Devil's Advocate on 01.18.11 at 5:10 pm

Fact: I can still get some clients a 40 year amortization.

Fact: I can still get some clients 90%, 95% and 100% financing.

Fact: If those who have a 40 year ammortization come up for renewal and don’t change lenders or make any other changes they will renew with no problems.

This is more about the message than anything else and, judging from the comments posted, it is having it’s desired effect.

Yes some will be sacrificed at the alter however most will be fine… just fine… actually better off for it all.

#193 Devore on 01.18.11 at 5:15 pm

#175 GenXer

“No,” Mr. Cocomile said. “I’ll follow up with them and say, ‘Why don’t we ramp up payments?’ They say, ‘Oh, we have a car loan now, or we spent some money on renovations, or we’re trying to get rid of credit card debt.’ Credit’s so easy – everyone’s using it.”

Am I just imagining it, or were people far more debt averse not too long ago? Some 20, 25 years ago, taking out a HELOC (used to be called a second mortgage, for us commoners) was shameful. People would talk about it behind your back. “Oh, they’re having money issues, I heard they had to take out a second mortgage.” It was a mark of poor financial planning.

In a generation we’re gone to what we have today. Aversion to saving and frugality, easy credit, financing everything, extreme leverage, and very high debt ratios.

Or did I just grow up around a weird set of people?

#194 Duke on 01.18.11 at 5:31 pm

Hey Garth,

Just an update to my last post about gold. Thanks for getting me to think about it. I knew that gold production reached a peak in 2001 and was decling til 2008-2009. But in late 2009 and early 2010 new supplies have as if by magic reappeared and production is rising and will flood the market with “new gold.” We both know what happened in 2005-2008 in the USA when too many “new homes” came on the market. The article below backs up my words.

http://www.financialpost.com/news/investing/Peak+gold+just/4106807/story.html

Cheers,
Duke

#195 anonymous on 01.18.11 at 5:59 pm

#187 Junius

You said, “I am rather tired of the denialist who try to ignore the local RE fate/future is intimalely tied to offshore $$$.”

Then try educated all of us with more than anecdotes and hyperbole. Show us some statistics that prove your point.

How much of a factor in Vancouver Real Estate are Chinese immigrants?

I am certain they exist but I am one who thinks in much smaller numbers than you seem to feel and certainly not enough to have the kind of sweeping impact you and the other pumpers say.

Prove it.

===========

I’m not speaking for Hoof Hearted….but I just want to point out that there aren’t any evidence to the contrary either. I haven’t seen any statistics that show that Asians are not driving the market higher in the Greater Vancouver area. No evidence as well that disprove offshore money is the one pumping up local RE.

In the absence of numbers, all we really have are anecdotes…reporting what we see out there.

I, for one, would like to see the Asian myth debunked too.

#196 betamax on 01.18.11 at 5:59 pm

#98 dandy “No one predicts with any degree of accuracy the future….I predict house prices will come back down to the same price they were in 2008!!!”

My ‘irony meter’ just melted.

Yes, prices will come down to 2008 levels…but there’s no lower rates & untapped credit left to provide a floor at those levels, so prices will keep falling further. Hope you enjoy telling people you predicted it, because you’ll only have a couple of minutes to do so.

#197 Moneta on 01.18.11 at 6:10 pm

People would talk about it behind your back. “Oh, they’re having money issues, I heard they had to take out a second mortgage.” It was a mark of poor financial planning.
———-
If you don’t use it today, people talk behind your back… you’re a loser for not taking advantage of cheap money to invest in manipulated markets or to buy some condos that will pay for your retirment.

#198 Dave in Victoria on 01.18.11 at 6:16 pm

#64 Utopia on 01.18.11 at 3:29 am

X2

#199 T.O. Bubble Boy on 01.18.11 at 6:17 pm

As a correction to my #93 post… Barack Obama’s 6,200 sqft home in Chicago actually dropped $8k in value… it is now valued at $871,500 by zillow.com:

http://www.zillow.com/homedetails/5046-S-Greenwood-Ave-Chicago-IL-60615/50904051_zpid/

So, this $868k / 2100 sqft place in Burnaby BC would have a comparable price:

http://www.realtor.ca/propertyDetails.aspx?propertyId=10245924&PidKey=-1130582054

(well, same price, except that Barack can write off his mortgage interest)

I’m sure that the Obamas would love to have the 2 extra rental suites in the basement — perfect for when Sasha and Malia need more space!

#200 David on 01.18.11 at 6:19 pm

#189 Nope, I remember those days. You could often hear someone say such insane things as: “I’m saving up for a vacation.”, or “I’m saving up for a car.”

Those phrases will get you nothing but scorn, ridicule, or pity now…..so I’m careful not to say them.

#201 calgary81 on 01.18.11 at 6:32 pm

just talked to a friend and she is franetically house shopping in order to beat new regulations. so much for weaker demand and falling prices :-)

#202 Ret on 01.18.11 at 6:42 pm

$340,000 5/35 mortgage=$1498.73 per month
Total interest $289,464

$340,000 5/30 mortgage= $1616.76 per month
Total interest $242,034

Looks like $118 month difference. If that’s the deal breaker and you can’t trim latte budget by $4 a day, you can’t afford it.

The $47,000 in reduced interest over 360 monthly payments is $130 after tax money saved every month.

Still want a 5/35 mortgage?

#203 Live Within Your Means on 01.18.11 at 6:47 pm

#96 Willa on 01.18.11 at 10:15 am

(And is it just me, or has anyone else noticed that no media reported anywhere in these stories that F created the subprime mortgages in the first place?)
…………….

Definitely not the MSM which are mostly controlled by con supporters. All it takes is a visit to National Newswatch.

#204 terry D on 01.18.11 at 6:53 pm

There will be a FED. Election this spring Its now a sure thing. Conservatives know they will be back in power but cannot wait till fall because Bubble will kill them.
After election Real Estate Fallout will be devasting.
Miss Foss may be right about 90% Meltdown.
http://www.youtube.com/watch?v=_acwahNKjNU

#205 Live Within Your Means on 01.18.11 at 6:54 pm

#97 Worldwide on 01.18.11 at 10:24 am

Thanks Jim Flaherty and Mark Carney for doing the RIGHT THING. Please start raising the prime rate soon to slow the debt problem.

………………

About time isn’t it, after all it what F that created the problem in the first place. But, it’s a pre-election ploy – see our responsible we are, how we are looking out for Cdns’ best interests, etc. etc. But very little is said in the MSM they were the ones who created this fiasco.

#206 OttawaMike on 01.18.11 at 6:59 pm

#166 Moneta on 01.18.11 at 3:23 pm
Right vs left. It all really boils down to is what you said.
Nobody is a total conservative or liberal, well Ok maybe Dick Cheney and Jack Layton are but..
Reasonable, intelligent people vary their world views depending on the subject at hand be it abortion, fiscal restraint and social spending, gun control, role of govt. and so on.

Anybody who blindly follows a political ideology because they are “conservative” and that’s what conservatives do or “liberal” because it must be good should not be taken seriously.

#207 Devil's Advocate on 01.18.11 at 7:02 pm

#189 Devore

I grew up in the same credit adverse world as you. But then I grew up in a world where most had a stay at home parent (won’t say which it was as today such a comment might be considered sexist) , most had one car, and one TV. The world I grew up in I shared a bedroom with my brother as did my sisters and in the morning we all waited our turn to use the bathroom. I grew up in a world where people were held accountable for their actions such that if you threw a lawn dart straight up in the air to watch it come down well… is it any wonder the world these days has so many more Greater Fools?

#208 canali on 01.18.11 at 7:06 pm

couldn’t believe the globe and mail would publish a more balanced perspective by some banking analysts (right up your ally, garth):
http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/consumers-maxed-out-housing-tapped-out/article1873020/

#209 john m on 01.18.11 at 7:10 pm

“Incompetent” is a very mild description of H.F.C. and company….now they are hitting the news trying to be responsible trying to correct a problem they created! What kind of a bunch of damn fools would adopt the policies that caused a global recession??…short term heroism?..stupidity?…or hope their flip flopping bullshit would be swallowed by the sheeple?………While the US recovers we will be still be on a downward slide and the destruction of a generation perhaps more than one.

#210 ballingsford on 01.18.11 at 7:13 pm

#64 Utopia

You are the idiot! You must be a 20 something pampered by your parents spoiled child. Good luck with the rest of your life!!!

#211 Herb on 01.18.11 at 7:14 pm

181 Darlene,

“As for the Liberals deadly silence, again we can blame the MSM.”

Hardly, Darlene. If Ignatieff (or any Liberal) said or did anything significant, it would be reported.

I want Harper gone, like, yesterday. (Actually, since the Cabinet swearing in on 6 Feb 06.) But with this inept opposition (I was going to say “hapless “, but that only means “unlucky”, and this is worse) I might as well get used to him.

#212 Thetruth on 01.18.11 at 7:15 pm

#187 Junius

Ever wonder why we can’t prove things on this blog…, why we can’t get back to you in a timely manner…

if only we had ur email addy…

#213 ballingsford on 01.18.11 at 7:16 pm

#64 Utopia

Sorry I misinterpreted your comment. I thought you were referring to Garth, but you were referring to Best Place on Earth. My bad. I agree with you about Best Place on Earth and that is why he received my vote in the New Year. I’m surprised he or she hasn’t been booted off this site yet.

#214 ballingsford on 01.18.11 at 7:21 pm

#88

It’s not the bowl cut that’s the highlight of the picture, but young Garth is showing that he’s grown a set. Agree with you though that his Mom is pretty!

#215 realpaul on 01.18.11 at 7:36 pm

Hee hee, thx for making me your ‘poster child’ for the Liberal’s Lament…..I know the truth is hard to take for the general population…….It will suck to wake up one day and realize you’ve been duped by a self interested government and the douchebag parasites who’ve sucked the taxpayer dry.

However, in the midst of my deep paranoia I have manged to trade up well over 100% across the portfolio’s that I manage. My clarity of vision comes from the delusion that I see things as they are and not how I’d hope they could be. Oh….wait…….theres a cloud in the sky….it’s a bunny….how nice.

The fact that terrible things exist does not mean that these same things may not be exposed.

I call the SLOC the ‘meltdown’ btw. It’s a very good strategy…not for the stupid…but tax efficient and profitable.

I bought more gold juniors. Even though we ‘gold bugs’ are typecast as loons the profits from gold above $1000 for production potential is leverage that you can’t get anywhere else…except for uranium prospects that is. ( check out some of the junior U’s- up hundreds of percent since late fall ’10. Yum! I own a universe of 20 issues that have all more than tripled.

The fact is that gold stocks will pop nicely prior to Q1 earnings when it becomes obvious that the group is wildly profitable. Input energy costs can rise 50% at this point and still have black on the ledger.

I think you’re doing a good job btw……..someone has to say something. I have found that the unadultered truth is just too uncomfortable for the sheeple to handle. GLTY

#216 ballingsford on 01.18.11 at 7:39 pm

Glad to hear that the HELOC isn’t going to be insured by CMHC anymore. Maybe the Jones trying to up the Jones won’t be as vocal about their new Mercedes, lavish trips, granite countertops and stainless appliances when the banks turn them down for their HELOCs in the future.

Anyway, some of the folks who are or will be in trouble with their 0/40, 5/35 year mortgages could probably file a class action lawsuit?

#217 jess on 01.18.11 at 7:43 pm

who needs the education?
rule of law plus simple math
…4YEARS later and You have to get the lawyer

A Chase official tells NBC News that 4,000 U.S. service members may have been illegally overcharged on their mortgages and that as many as 14 military families were wrongly foreclosed on.

http://dailybail.com/home/its-been-a-living-nightmare-jpmorgan-admits-to-illegally-ove.html
==========================

Maryland successfully got over 10,000 foreclosure cases managed by GMAC Mortgage tossed out, because affidavits in the cases were signed by Jeffrey Stephan, the infamous GMAC “robo-signer” who attested to the authenticity of foreclosure documents without any knowledge about them, as well as signing other false statements.

The University of Maryland Consumer Protection Clinic and Civil Justice, Inc., a nonprofit, filed the class action lawsuit, arguing that any case using Jeffrey Stephan as a signer was illegitimate and must be dismissed. In court Friday, GMAC agreed to dismiss every case in Maryland relying on a Stephan affidavit. They can refile foreclosure actions on the close to 10,000 homes, but only at their own expense, and subject to new Maryland regulations which require mandatory mediation between borrower and lender before moving to foreclosure. Civil Justice and the Consumer Protection Clinic also want any cases with affidavits from Xee Moua of Wells Fargo, who has also admitted to robo-signing, thrown out, but that case has not yet been settled…
http://news.firedoglake.com/2011/01/16/10000-gmac-foreclosures-stopped-in-maryland/
===============================

English Libel/Privacy Laws
George Monbiot The Guardian, Tuesday 15 July 2008 Article history
A national disgrace, a global menace, and a pre-democratic anachronism Britain’s libel laws are a gift to the censorious and powerful. It’s better to be caught mugging than to be caught speaking freely
===================

The public watchdog
European Court pulls rug from underneath funding for libel and privacy cases
18th January 2011

“Media Legal Defence Initiative, the Open Society Justice Initiative, Index on Censorship, English PEN, Global Witness and Human Rights Watch jointly intervened in the case to express serious concern about the costs of defending libel and privacy claims in the UK. NGOs and small publishers – including bloggers- are extremely vulnerable to the threat of a costly libel or privacy actions in the UK. They simply do not have the means to defend themselves, and are easily forced to apologise and retract allegations even when they know them to be true. ”

Darian Pavli, Senior Attorney at the Open Society Justice Initiative, said:

“The Court confirmed that legal fees awarded in England and Wales for libel and privacy cases are disproportionate and dramatically out of line with the rest of Europe. With London having become the world’s libel capital, this is a victory for free speech that goes well beyond Fleet Street.”

Patrick Alley, Director, Global Witness, said:

“It’s perverse that one of the biggest risks we face in exposing the corrupt and sometimes bloody trade in natural resources, such as blood diamonds, is legal attack in the UK by powerful people who can afford to use the legal system, with its punitive costs, to launder their reputations and protect their vested interests, regardless of the merits of their case. This judgement sends a clear signal that publication of information in the public interest is important. I hope it’s a signal that is received by the UK government.”…
===============

http://pcmlp.socleg.ox.ac.uk/sites/pcmlp.socleg.ox.ac.uk/files/defamationreport.pdf

#218 Thetruth on 01.18.11 at 7:44 pm

Secured LOCs:

Banks will raise rates on secured lines of credit since banks don’t want to undertake risk now that they will be uninsured (Banks did this to unsecured LOC’s a year back) ….. forcing people to pay off the LOC by refinancing at up to 85% of value of their home.

This is the big change folks! not 30 yr amortizations.

Results:

1) not as easy to take money out of your home at a moments notice, especially when you would have to refinance every time to get more of it, and especially when people are locking into 5 year fixed rates.

2) This is where Garth’s prediction about higher interest rates that he’s been harping about comes true. It’s on the LOC’s ( cars, boats, rv’s, vacations, condos, home construction, etc)… But NOT on mortgages. The Banks will raise their rates for whatever is riskier for them!

3) Not much will happen to prices in Vancouver, Toronto. Demand from non-permanent residents (that didnt exist before 2004) drives this market.

#219 Leanne on 01.18.11 at 7:46 pm

I know this is off topic, but where does one go in GTA to sell gold jewelry? I just have one item I want to get rid of, for sentimental reasons.

#220 Edmontonian on 01.18.11 at 7:58 pm

Have friends here in Edmonton living on the SW end of the city. They saw their $220,000 newer home soar to $550,000 in a few limited housing sales in their nieghbourhood. The were waiting for prices to come closer to $750,000 and in a nutshell “missed the boat”. Now they want to downsize and sell since prices won’t go up for many years. They want to list their house this week, but again may have missed the boat. My friend just called to say 3 homes on their block have been list for under $400,000, $50,000 less than they needed to sell as they both put upgrades & a new BMW X5 on the mortgage in the past 2 years.
Live & learn. I think we will see a glut of listings soon, sellers holding out for their dream prices, and then a huge down turn in prices by late summer, or early fall…

#221 Hoof Hearted on 01.18.11 at 8:07 pm

#188 Junius on 01.18.11 at 5:09 pm#169 Hoof Hearted,

You said, “I am rather tired of the denialist who try to ignore the local RE fate/future is intimalely tied to offshore $$$.”

Then try educated all of us with more than anecdotes and hyperbole. Show us some statistics that prove your point.

How much of a factor in Vancouver Real Estate are Chinese immigrants?

I am certain they exist but I am one who thinks in much smaller numbers than you seem to feel and certainly not enough to have the kind of sweeping impact you and the other pumpers say.

Prove it.

===========
Junius

Before I answer …….WHERE do you live …….I mean in general Vancouver …….West Side?…..Burnaby North….Surrey…..Nova Scotia…Really…..

Didn’t you see the UBC Hospice story…….how the Asians in the Hi-Rises at UBC came out in droves to protest the bad luck a Hospice will bring ?

This ain’t racist…its FACT

#222 Bill Grable on 01.18.11 at 8:11 pm

Best Place on Earth drives me to distraction.

Reminds me of a Bill O’Reilly type. Dumb as a bag of hammers, and loud and proud.

Sitting here, on Ka’anapali Beach, looking at what has happened to what Americans used to call the Best Place on Earth – Maui, it is a MESS. Sad doesn’t cover it.

Listings that have been on for over 600 days (!!) = nothing is selling, and yet people here in “Paradise” are still listing Tommy Bahama outfitted crap for over a million and they wonder why they aren’t selling.

The Jr. State Senator from Hawaii – was speaking on Maui last night (*he’s a trained economist) and he basically came out and said despite the collapse of Real Estate, jobs, and the massive tax increases to be added to the already staggering bills people have to eat – that the party has only just begun, and “we won’t ever go back to the way it was”.
The Chamber got very quiet when he said that we ‘will all have to work together’ to preserve what we can.

My American friends who were with me were silent, and sullen.

Then the killer – my U of W Frat Brother from all those years ago…..

“How can I sell my $798,000 two bedroom condo, now?”. My Broker can’t find out who owns the mortgage, and so I am stuck paying for something, I want to sell, and can’t”.

Power bills here? You would NOT believe.
Taxes, are through the roof.

No one is buying here, unless they are either drunk or delusional.

So – Vancouver – take a look at Maui and get ready, because we will see the last of the suckers rush in and try and get a dump before the F induced deadline, and lose even more money.

Listen to Mr. Turner = his ONLY agenda is saving your A**.

#223 bridgepigeon on 01.18.11 at 8:16 pm

9 kc The roofing trade in TO took a hit this year for sure. All year long the supply outlets were quiet. Some mornings in the summer and fall when there were usually line ups it was like a ghost town. Some cab drivers I talked to said they’ve never seen it this bad.
Anyone notice how the Home Depots are, in general, slower also? Service used to be practically non-existant
there, now everyone’s so friendly and helpful. Could be due to Lowes et al cutting their grass now also. Most of the small operation general contractors I know are still getting by for now in the prime neighbourhoods.

#224 Devore on 01.18.11 at 8:33 pm

#196 T.O. Bubble Boy

(well, same price, except that Barack can write off his mortgage interest)

Oh yeah? How much do they pay in property taxes?

#225 Devil's Advocate on 01.18.11 at 8:34 pm

#213 ballingsford on 01.18.11 at 7:39 pm
Glad to hear that the HELOC isn’t going to be insured by CMHC anymore…

If you were to check it out you would find that so very, very few ever were in the first place it really is/was a non-issue.

#215 Thetruth on 01.18.11 at 7:44 pm
Secured LOCs:
Banks will raise rates on secured lines of credit since banks don’t want to undertake risk now that they will be uninsured

Read my comment in response to ballingsford’s>/b> post above.

Really you’d be hard pressed to find much of that that went on, so it’s highly improbable the banks will find need to respond to something that really is a non-issue. Oh they will adjust their lending practices where need be to ensure safeguard against losses but the CMHC insured HELOC concern is hardly worth the press it’s getting.

Really who this is going to hurt most is those who most recent First Time Buyers who bought at the peak of the market and are now finding themselves precariously close to the edge. These are the ones who might have refied seeking to consolidate that $20,000 worth of credit card debt they’re wrestling with into their mortgage thus reducing payments by three quarters or so. They won’t be able to do that now. An expensive lesson for them. Most all others will hardly notice… for them (conventional borrowers) the 40 year amortization, zero down are still options and for the fresh batch of First Time Buyers – well they will just buy a little more modest but still with as little down as they can and as long an amortization as is available to them.

#226 doctore on 01.18.11 at 8:34 pm

Everyone talks about CHMC but what about GENWORTH back mortgages. My mortgage was insured through them originally 10/25. Now I have 11 yrs left to pay down my mortgage. What happens with GENWORTH mortgages?

#227 Devil's Advocate on 01.18.11 at 8:34 pm

didn’t mean to bold all that.

#228 Kurt on 01.18.11 at 8:38 pm

Hoof Hearted:

A fact is something that looks like “last year, according to sales reports from ABC real estate board, foreign purchasers were responsible for xyz million dollars in purchases in the DEF region. This is rs% of total sales volume last year.”

What you have cited is a story or anecdote that would lend credence to your position, but it is not a fact. Do you have any *facts?*

#229 Mr. Plow on 01.18.11 at 8:39 pm

#188 Junius on 01.18.11 at 5:09 pm#169 Hoof Hearted

In all fairness, you are asking the pumpers to prove it, but the non-pumpers offer up their fair share of anecdotal evidence as well.

#230 Devil's Advocate on 01.18.11 at 8:39 pm

#213 ballingsford on 01.18.11 at 7:39 pm
Glad to hear that the HELOC isn’t going to be insured by CMHC anymore…

If you were to check it out you would find that so very, very few ever were in the first place it really is/was a non-issue.

#215 Thetruth on 01.18.11 at 7:44 pm
Secured LOCs:
Banks will raise rates on secured lines of credit since banks don’t want to undertake risk now that they will be uninsured

Read my comment in response to ballingsford’s post above.

Really you’d be hard pressed to find much of that that went on, so it’s highly improbable the banks will find need to respond to something that really is a non-issue. Oh they will adjust their lending practices where need be to ensure safeguard against losses but the CMHC insured HELOC concern is hardly worth the press it’s getting.

Really those this is going to hurt most is those who most recent First Time Buyers who bought at the peak of the market and are now finding themselves precariously close to the edge. These are the ones who might have refied seeking to consolidate that $20,000 worth of credit card debt they’re wrestling with into their mortgage thus reducing payments by three quarters or so. They won’t be able to do that now. An expensive lesson for them. Most all others will hardly notice… for them (conventional borrowers) the 40 year amortization, zero down are still options and for the fresh batch of First Time Buyers – well they will just buy a little more modest but still with as little down as they can and as long an amortization as is available to them.

#231 a prairie dawg on 01.18.11 at 8:40 pm

@ #216 Leanne

Check yellow pages. Try the larger coin shops/jewelers. Don’t expect retail prices though. You could also try a consignment sale at one of those same jewelers. (and hope for a greater fool) No offense intended.

#232 Kurt on 01.18.11 at 8:42 pm

Leane:

If you are turfing it for sentimental reasons, consider visiting a custom goldsmith and having it reworked into a permanent reminder of something positive in your life. It’s an expensive way to go, but in some situations it is more emotionally powerful than just simply disposing of the item.

#233 Mr. Plow on 01.18.11 at 8:51 pm

Junius….

Check these posts for non-pumpers anecdotal evidence:

#217 Edmontonian
#198 calgary81
#180 TAPPER
#153 It’s Time

Four examples out of 64 posts, you get the idea.

I’m not taking sides, just making a point because you seemed a little harsh in your assessment of the “other side”

#234 Mr. Plow on 01.18.11 at 8:54 pm

#156 It’s Time

Keep dreaming. Do your research.

Most banks, providing a client is making their payments, will just send renewal papers.

If they change banks, or want a different product then they might reappraise but very few major banks reappraise at renewal. In fact they might even get to keep their 35 or 40 year amort schedule. (that I have to ask still)

#235 Roial1 on 01.18.11 at 9:03 pm

I’ve decided to start a new business – Royal LeVultch Re/Mix. Are you in? — Garth

Can I put it in my TFSA account????
(Always wanted to be rich.)

#236 The Analyst on 01.18.11 at 9:07 pm

#171 Coraline
– I’m thinking that the Toronto resale numbers are even worse than the last few months. Generally, TREB would have issued its mid-month press release by now. Whenever they are bad, they stall.

I was thinking the same thing today when viewing their site… usually on the 16th the numbers are posted…must be really poor numbers so far!

#237 groundzeropat on 01.18.11 at 9:17 pm

Too funny to read people that say it’s ok if I lose 50% off my property now cause I just made 100% from when I bought in.

500,000 * 100% = 1,000,000 less 50% = 500,000

Lets do a 360 degree turn and get the hell outta here!

Our school system pounds us to learn calculus, algebra, etc. but seriously lacks emphasis of basic math skills such as figuring out compound interest on a 40 year mortgage or 28.8% interest on credit cards and that has gotten all these people into this mess.

My best friend’s wife is a mortgage broker and she says 90% of her business is 35 year terms regardless if it is a new buyer or not. So there you have it–straight from the front lines!.

#238 Western Canadian on 01.18.11 at 9:23 pm

“the minimum 5% down, with the maximum 35-year amortization. This allowed people without money to buy houses. These are Canada’s sub-primes.”

Honestly Garth, how on earth can you compare 5/35’s to the subprime debacle that occured in the U.S.?

I am NOT saying that 5/35’s are not irresponsible, or that they aren’t risky, but there is no freaking way that you can compare them to the loans in the U.S.

I don’t care what you say, its a ludicrous comparison.

#239 tired vulture on 01.18.11 at 9:35 pm

5/35 of 380K…..still fine, 5/35 of 650K basically you are screw!

#240 Nostradamus Le Mad Vlad on 01.18.11 at 9:36 pm


A politically incorrect joke from Mama Maxine The Great . . .

“As You Slide Down the Bannister of Life in 2011, remember

“Jim Baker and Jimmy Swaggert have written an impressive new book. It’s called . . .

“Ministers Do More Than Lay People.”
*
1:29 clip Further to the new US Navy Borders link posted earlier, Comet Elenin buzzes us around Oct.

Cinnamon Oil Better than Bills S-510 and C-36.

JPM Bullshitting bafflegab (doublespeak), something they’re really good at.

Citigroup Bailout Based on Fear and Loathing in Las Vegas, nothing concrete.

Down Home Inflation “Wall Street and Washington DC will blame the farmers. The rest of us know who is really the authors of our current disaster.” wrh.com.

10:50 clip Nigel Farage on Eurozone monster bailout. Wonder who profits from all these bailouts?

Dangerous anti-govt. revolutionaries. Dangerous to whom? The terrorists are all inside 1600 Pennsylvania Ave.

High Food Prices have an effect on oil prices?

7:46 clip Jim Rogers says it’s easy to blame China for America’s fiscal woes.

Mag. 7.2 HAARP in the right place, at the right time for the right reason? Worked in Haiti, why not Pakistan?

US Fed balance chart update. Singing the high notes.

Freezing Vietnam China is pretty damn cold too. So was that 66-year-old lady who froze to death in Toronto. Also — 2:25 clip.

2:22 clip US is mathematically certain to go broke.

Camden, NJ — Almost half the police force laid off.

Economy More affectionately referred to A Sack Of Shit.

Stuxnet Confirmed “And the possibility of releasing a Chernobyl-like radiation disaster by tinkering with other people’s nuclear facilities was apparently never a concern.” wrh.com.

Home Non-Heating “Just think about all that fuel burned up racing around Iraq and Afghanistan and how many homes that could have heated.” wrh.com.

Creating a global food crisis so the elite control the food, money, oil, depopulation, weather, etc.

US$2 Trillion pension shortfall for states. What of the provinces and feds.?

5:49 clip Riots spreading after Tunisia.

GW Cult Calling for a world dictatorship (Obama via Soros?) to deal with non-existent GW and bring in a new carbon tax.

#241 Jeff Smith on 01.18.11 at 9:48 pm

http://money.cnn.com/2011/01/18/news/international/thebuzz/

the author of this article states that if you owe the bank $900billion then you better be nice to the bank. I beg to differ, in fact, I bet the bank is now nervous as hell. Ever heard of the saying “if you owe the bank $100, it’s your problem”, “if you owe the bank $1billion, it’s bank’s problem”. I think the USA can pull a default on the loan without as much as a scath.

#242 Junius on 01.18.11 at 10:00 pm

#226 Mr. Plow,

I did not say that there is not evidence of immigrants including wealthy Chinese buying properties in Canada. However I am pointing out that this evidence always comes in the form of anecdote and not in the form of objective evidence.

Immigration numbers have not changed significantly in Canada over the past few decades. We have seen a general shift from Europe to Asia. The number of economic immigrants also appears to be stable. These numbers have remained consistent in rises in the market and falls.

Rich immigrants have been buying properties in all major cities for years. It comes with the territory. This includes Vegas, Miami, LA, etc.

Everyone agrees the cause of the current rises is excessive debt. No one said it was immigration. Meanwhile immigration is yet to save a single market in the US or Europe. Not one.

Here is my question.

If wealthy immigrants didn’t cause the bubble then how is that they are now the reason it will be sustained in Vancouver or Toronto?

#243 Hoof Hearted on 01.18.11 at 10:06 pm

#225 Kurt

Let’s see….

Extremely familiar with town that sounds like “Rich Man”, as well as Vancouver.

(2) of son’s best friends are Asian….never see their Dad…they are in Asia working.

Drive by any local High School….” Wheres Waldo” is where’s CAUCasians. Pedestrians, drivers same thing.

Don’t see pre-sale line-ups….more and more developers admit they sell them “off -shore”.

Any way , this is probably just a master-baiting exercise by the termianlly clueless. Some of you probaby think those aren’t Asians…you think they are people from Southern Mediterranean countries looking into the sun..

#244 brainsail on 01.18.11 at 10:07 pm

#221 Devore

“Oh yeah? How much do they pay in property taxes?”

Don’t forget that you can also write-off property taxes in the US.

#245 Hoof Hearted on 01.18.11 at 10:10 pm

Full page Ad in PROVINCE has some guy named Glenn Purdy “ex banker” flogging Florida and Las Vegas RE.

” U.S has become a nation of tenants , leaving Canadian investors to buy Real Estate at deep discounts and great cash flow ”

2 BR 2 Bath Condos around $30,000

When they have to travel this far to sell them…..YIKES

#246 DARLENE on 01.18.11 at 10:13 pm

Herb, don’t shoot the messenger. My comment was about the MSM. I read a ton of articles yesterday. It was a bitch for me to find the quote again. No wonder I had a problem finding it. The last place I was looking for it was in an article about the attack ads. Good thing The Star is still a liberal rag or else the question wouldn’t have even been asked by the rest of our glorious journalists. At least I do some research and provide a link. Every article I read yesterday had the same stuff in it over and over again. When was the last time a journalist actually researched something instead or regurgitating the same shit over and over.

#247 Coraline on 01.18.11 at 10:20 pm

Analyst: It’s true that the 15th was a Saturday, so I’m willing to cut TREB some slack. But they usually don’t need two working days to get the mid-month numbers out.

Alternatively, maybe they’re working on a new way to report the stats so that year-over-year comparisons will be harder!

#248 edmonton mortgage broker on 01.18.11 at 10:25 pm

i can’t remember the last time i did a 25 yr am mortgage. i’d say at least 90% of the mortgages i place are 35 yrs. even those who know and understand the long term savings of a 25 yr am, can’t do it cause they wouldn’t qualify….

#249 Leanne on 01.18.11 at 10:27 pm

Thanks #228 a prairie dawg ~ will follow up on your suggestion.

Thanks for the great idea #229 Kurt. If I was into jewelry, I would consider it. If I could melt it into a brick, I know some people here who would be all over it.

Thanks for the quick response guys ~ I appreciate my G-fam.

#250 groundzeropat on 01.18.11 at 10:59 pm

In 1998, when the leaking condo crisis hit the “New Home Warranty” program went out of business. Many leaking condo owners incl. myself were screwed. My building was 2 years old and my share to fix the exterior walls was 40K.

12 years later the “CHMC” program is loaded with the burden of 1 trillion in mortgage debt. So the banks can see this and they know if “CMHC” goes down it leaves them holding the bag. That is why the banks are the ones lobby for 30 year Ams. instead of 35.

Remember the banks only look after themselves. My banker said the same for “CDIC” on your bank deposits under $100,000.00. In an REAL emergency there isn’t enough money to cover all of us. It’s just a false sense of security.

#251 Devore on 01.18.11 at 11:07 pm

#216 Leanne

I know this is off topic, but where does one go in GTA to sell gold jewelry? I just have one item I want to get rid of, for sentimental reasons.

This won’t be exciting, but try the obvious: shop a few jewelers (not the chains, just local stores), see what they quote you. Take the best offer and try to haggle a few extra bucks. Don’t expect anything near retail, unless you have a very high end heirloom piece. Gem stones, diamonds in particular, will fetch very underwhelming prices. I’d stay away from pawnshops (for what I hope are obvious reasons), and gold/silver/rare coin stores can’t do anything with non-coin non-bullion metals except pass it on to a jeweler anyways.

#252 Aizlynne on 01.18.11 at 11:15 pm

I manage retail strips in Calgary and 2011 has me dealing with 3 lease terminations already. In typical years, we may have one termination… possibly two, but I am dealing with 3 just in my first two weeks of 2011.

If this is a sign of things to come my malls will be half empty soon.

#253 walter safety on 01.18.11 at 11:16 pm

We know financial institutions will be allowed to break their promises if they can convince the powers they need to do that. So how many people actually read their mortgage documents ? Many mortgages are callable or not guaranteed to renew . Any Manulife One mortgages out there? Its not just CHMC the banks want ,its that they want their money back when they want it and it may be for many business/banking reasons other than having the debt onside with CHMC. They would never do it ? If your not a first time buyer you know better.

#254 Devore on 01.18.11 at 11:19 pm

#239 Junius

Everyone agrees the cause of the current rises is excessive debt. No one said it was immigration. Meanwhile immigration is yet to save a single market in the US or Europe. Not one.

There were plenty of asian buyers in Florida, Nevada and California, which did not prevent the decline, and neither did drug money, btw, so there goes the other popular theory.

In Vancouver, asian buyers did not stop the market from falling off a cliff in 2008, or in previous Vancouver crashes. Why they would this time, is forever a mystery. Neither will they levitate local micro-markets; how likely is it a couple square kilometers smack in the middle of the city will be immune from a market-wide decline?

Asian buyers have their reasons for buying, maybe even buying into a declining market. The Chinese currency is pegged to US dollar, so for them just simply holding any asset denominated in Canadian dollars has brought huge returns on an FX basis alone in the last 8-10 years.

#255 goldenfox on 01.18.11 at 11:27 pm

Duke on 01.18.11 at 5:31 pm

“”It seems we’ve broken away from the flat-to-down trend of the last decade,” GFMS executive chairman Philip Klapwijk said in a presentation in Toronto as the company released its latest gold survey update.”

I wouldnt put to much stock in what GFMS says. Their figures have been totally discredited by many serious gold analysts. Philip Klapwijk has won a moron of the year award, as has Jon Nadler. both have a vested interest in the status quo.

https://marketforceanalysis.com/article/latest_article_123110.html

#256 John on 01.18.11 at 11:37 pm

Wait, wait, wait just a minute!

Over the past two years or so the gov seems to have been doing everything possible to keep the real estate bubble as bubbly as possible (the 125 billion dollar “bailout” via CMHC, low rates, stimulus tax breaks for renos, etc.)

Now all of a sudden they become responsible in an attempt to avoid catastrophe? Surely they were aware back in ’08/09 that their actions could lead to “unrepayable oblivion” given the experience is the US.

Mr. Turner, please, what’s changed all of a sudden? Did the bank heads come to their senses and collectively “advise” the gov to change the rules of the game in order to save them from themselves?

#257 Leanne on 01.19.11 at 12:00 am

#248 – Good information, Devore. Unfortunately no diamonds or valuable heirlooms – just a gold band.

One time I did trade a ring with diamonds for something of lesser value but far better especially without the memory of a jerk attached to it), so will give it a try…Thanks for your help.

#258 prairie gal on 01.19.11 at 12:14 am

#207 ballingsford wrote:
#64 Utopia

You are the idiot! You must be a 20 something pampered by your parents spoiled child. Good luck with the rest of your life!!!
________

Wow, ballingsford you couldn’t be more wrong. lol!

#259 jess on 01.19.11 at 1:57 pm

234 groundzeropat

Would you consider that blaming younger or a school system — on a generation’s lack of basic understanding of math not the complete answer ?

Not that I am an expert but I have seen plenty poorly written /flawed word problems but that is another story.

Where’s the education on HOW to read misleading mouse print and how does one recognize a predator? Bernie seemed nice.

If you follow what Ms. Warren has been saying for years you will understand why she advocates for consumer protection and as a professor/lawyer, she couldn’t understand the english either.

#260 allisun on 01.19.11 at 2:14 pm

#128 Stermt
Too late to reply on last essay, but Re#32/33 LATOC (r.i.p.), you will find us at theoilage.com, if you’re into it. This site is for Real Estate/Investing information and opinion and not for the bigger picture of PO. Love Garth’s writing and insights.

#261 jess on 01.19.11 at 2:48 pm

stock market security bubble terrorist industrial complex. Watch this and you will see why catholic nuns are now considered terrorists.

…fusion centers (security) boom in real estate. Hey those buildings are like icebergs …four stories above with most of the skyscraper below.

http://www.pbs.org/wgbh/pages/frontline/are-we-safer/?utm_campaign=homepage&utm_medium=bigimage&utm_source=bigimage

#262 Larry T. on 01.19.11 at 3:23 pm

Excellent post yet again Mr. Turner. An injection of realism is just what these realtors need. Numbers in from Ireland show a drop in property prices of 38% since the bubble burst there. That’s a text book property bubble if every there was one: http://www.vancouverpropertynews.com/a-text-book-property-bubble/36/
When is our bubble going to burst?

#263 Mr. Plow on 01.19.11 at 6:11 pm

#239 Junius…

Oh I hear you. Trust me I was not arguing a point in favor of the other poster.

I was just pointing out that the non-pumpers use a lot of anecdotal evidence as well without proof, because you were slamming the “pumper” for doing the same.

#264 Al on 01.19.11 at 6:50 pm

CREA and the provincial Real Estate Boards instructed their Agents to email F & H and lobby against the mortgage changes, but lost !

#265 Hoof Hearted on 01.19.11 at 8:48 pm

I’ve decided to start a new business – Royal LeVultch Re/Mix. Are you in? — Garth

====================

Squirrels are an invasive species.

However, duly noted is a dramatic decline in their numbers…seriously. Visually…less road pizza etc.

Are low squirrel numbers an economic “canary in the mine” ?

#266 Hoof Hearted on 01.19.11 at 8:56 pm

93 T.O. Bubble Boy

So, seriously people, if the Obamas live in a house that is valued at $879,500 — the same price as a tiny bungalow in Toronto or a teardown near the highway in Richmond BC — tell me again how there isn’t a correction coming to the Canadian housing market???

====================

Just remember…..
Obama has not ever stated he would not move to BC…and in theory he could become Mayor,Premier or even Prime Minister in Canada if and when he moves here.

Schwarzenneger plateaued at Calif. Gov.via he was not born in US.

Harper should lobby the U.N. over this one way discrimination