Too big to care

In the shadows of the financial crisis two years ago, Ottawa quietly allowed for more than a hundred billion in toxic mortgages from Canadian banks to be sold to Canada Mortgage and Housing Corporation. Not long afterward, CHMC – accountable to the taxpayers – was allowed to raise its debt ceiling to $600 billion. Without this body there would be no housing bubble today. Mortgage rates would be higher. Lending more restrictive. Young couples without money would not be buying homes. No bidding wars. And boring houses in Leaside and East Van would not cost more than a million dollars.

Days ago Barack Obama took the first steps towards dismantling the state’s role in insuring, subsidizing and pimping mortgages. Five years after the real estate apocalypse hit, it’s clear house values were inflated by the existence of cheap credit and quasi-government agencies ready to suck off the risk from bankers, making them crazy fearless.

Some people in Canada say it’s impossible for home prices to plunge here, merely because the feds now back half a trillion dollars in high-ratio loans. But if it did not work in the States, then why here?

Any person buying a house in this country with less than 20% to put down must purchase mortgage insurance. This does not insure the owner or the house, but it protects the lender against loss if the borrower defaults. The homeowner pays the premium – as high as 2.75% of the mortgage – and the lender gets the coverage.

The fact such insurance exists means the lender does not charge more interest to dodgy borrowers, or reduce the loan amount when down payments are tiny. Why should a bank care, when the insurance company is taking the risk? So is it any wonder that 90% of all new mortgages in Canada last year were to people who had just 5% to put down? Does this make us incredibly vulnerable to the next financial shock? Can Lady Gaga start fires with her bra?

That insurer is CHMC. There is no other single institution more responsible for runaway house prices. State-owned mortgage insurance is, as Barack Obama has decided, a real bad idea.

While this pathetic blog has been saying such unpatriotic things for a couple of years, recently others have joined the chorus. CMHC is now fighting back with a letter defending its practices. The big argument that its vice-president of policy and planning, Doug Stewart, is making is this:  “Most importantly, the Canadian model withstood the test of the economic downturn, when housing markets in the U.S., United Kingdom, and Ireland failed.”

To which I would say, wait. Our housing downturn is just licking at our shorts. And when factors like higher rates and exiting Boomers bring the inevitable, the fact CMHC even exists could turn a correction into a rout. Those who bought with scant deposits and hefty insurance premiums over the last couple of years could be underwater in just weeks. And while taxpayer money may save the banks who made the loans, nothing will save the value of all homes.

But I digress. I really wanted to talk about Valerie.

She’s a Scottish lass who came to the Big Smoke more than a decade ago and found herself working for a swanky North Toronto real estate operation. That part of the godless metropolis, as you may know, is where you’ll find whole neighbourhoods of seven-figure houses and matching attitudes. So it may be a sign of the times that a seasoned agent like Valerie has decided to go into the no-money-down business.

She just fired off this email blast:


Buying a Home with Little or No Down Payment

Do you find yourself wondering how your children will ever be able to take their first step onto the property ladder?  Maybe a Cash Back Mortgage is right for them.

With a cash back mortgage the financial institution gives you the money to be used as a down payment for your home purchase.  So if you get a cash back mortgage for $250,000 the lender will provide you with the minimum 5% down payment needed, in this case $12,500.  You then pay back only the remaining $237,500.  In exchange for the down payment, the lender will typically charge you a mortgage interest rate that is 1.0% to 1.5% higher than the traditional mortgage rates available at the given time.  Once the initial term on your mortgage (typically 5 years) ends however, you are free to shop around for the best mortgage rates available like everyone else.

There are many considerations that should be taken into account when deciding whether a cash back mortgage is right for you.  Your ability to save for a down payment; how quickly house prices are rising in the neighbourhood you are looking to purchase a house in; and how likely you are to stay in the house for at least 5 years.  There is no question however, that for those with little or no down payment, cash back mortgages can provide a viable solution for making dreams of home ownership a reality.

Of course, buying real estate anywhere – but especially in a pricey place like Toronto – with 100% leverage is a high-risk venture. There’s no guarantee that, as Val says, home prices will only rise. In fact, if they fall even slightly, the young ex-property virgin is nicely screwed. And you’d think after we all watched the sub-prime, teaser-rates, NINJA, liar loans thing happen in the States we wouldn’t allow inexperienced buyers to jump without chutes.

You might even think an experienced realtor working for a big company like Royal LePage would be unethical putting this stuff in writing. Or that the firm itself would be negligent. Or the major banks who offer cash-back mortgages as a way around federal guidelines would be incredibly irresponsible. Or the parents who encourage 100% financing for their kids are epic tools.

But I’m sure we can all agree the shareholders of the company that insured this fool and suicidal transaction from loss are the greatest fools.



#1 HouseBuster on 02.14.11 at 11:38 pm

2003 prices are on their way and there’s nothing Royal LePage can do about that.

#2 Soylent Green is People on 02.14.11 at 11:39 pm

Guess what? Polls are just as dirty as the MSM and neocon politicians. I just knew there was something wrong when Harper is supposedly polling above the Liberals when he’s had all this negative press how could it be possible. Now I know.


Politcial Polls out themselves as worthless

OTTAWA – Canada’s notoriously competitive pollsters have some surprisingly uniform advice about the parade of confusing and conflicting numbers they’re about to toss at voters ahead of a possible spring election: Take political horse race polls with a small boulder of salt.

“Pay attention if you want to but, frankly, they don’t really mean anything,” sums up Andre Turcotte, a pollster and communications professsor at Carleton University.

He has even more pointed advice for news organizations that breathlessly report minor fluctuations in polling numbers: “You should really consider what is the basis for your addiction and maybe enter a ten-step program.”

And for fellow pollsters who provide the almost daily fix for media junkies: “I think pollsters should reflect on what this does to our industry. It cheapens it.”

Turcotte’s blunt assessment is widely shared by fellow pollsters, including those who help feed the media addiction to political horse race numbers.

Polls skewed towards the elderly, less educated and rural Canadians

“The dirty little secret of the polling business . . . is our ability to yield results accurately from samples that reflect the total population has probably never been worse in the 30 to 35 years that the discipline has been active in Canada,” says veteran pollster Allan Gregg, chairman of Harris-Decima which provides political polling for The Canadian Press.

For a poll to be considered an accurate random sample of the population, everyone must have an equal chance to participate in it. Telephone surveys used to provide that but, with more and more people giving up land lines for cell phones, screening their calls or just hanging up, response rates have plummeted to as little as 15 per cent.

Gregg says that means phone polls are skewing disproportionately towards the elderly, less educated and rural Canadians. Pollsters will weight their samples to compensate but that inevitably means “messing around with random probability theory” on which the entire discipline is based.

You get what you pay for:

Pollsters submit free polls in hopes of getting published

When Gregg started polling in the 1970s, there were only a handful of public opinion research companies. Polls were expensive so media outlets bought them judiciously.

Now, Gregg laments almost anyone can profess to be a pollster, with little or no methodological training. There is so much competition that political polls are given free to the media, in hopes the attendant publicity will boost business.

Turcotte says political polls for the media are “not research anymore” so much as marketing and promotional tools. Because they’re not paid, pollsters don’t put much care into the quality of the product, often throwing a couple of questions about party preference into the middle of an omnibus survey on other subjects which could taint results.

The problem is exacerbated by what Gregg calls an “unholy alliance” with the media. Reporters have “an inherent bias in creating news out of what is methodologically not news.” And pollsters have little interest in taming the media’s penchant for hype because they won’t get quoted repeatedly saying their data shows no statistically significant change.

“In fact, they do the exact opposite. They will give quotes, chapter and verse, and basically reverse and eat themselves the next week,” says Gregg.

Take a poll that suggests Tory support stands at 35 per cent, the Liberals at 30. If the MOE is, say, 2 percentage points, that means Tory support could be as high as 37 and the Liberals as low as 28, a nine point gap. Or the Tories could be as low as 33 and the Liberals as high as 32, a one point gap.

Happy ♥ Day

#3 mefirst on 02.14.11 at 11:48 pm

For sure….me first! oh yeah!

#4 Moneta on 02.14.11 at 11:58 pm


#5 Jsan on 02.15.11 at 12:10 am

I can remember the proud talk a year or two ago about how the Pacific Northwest was “different”. About how Seattle and area dodged the housing bubble. The one thing that so many do not realize about a bubble is it always eventually comes crashing down. Nobody can ever really predict when but it is very easy to understand why.

“In the U.S. housing crash, no one’s immune”

“In the last year, Seattle homeowners experienced a bigger price decline than in Las Vegas. Minneapolis dropped more than Miami, and Atlanta fared worse than Phoenix.”

“When I go out and talk to people around town, they say, ‘Wow, I thought we were going to have a 12 per cent correction and call it a day,’ ” said Stan Humphries, chief economist for the housing site Zillow, which is based in Seattle. “But this thing just keeps on going.”

Seattle is down about 31 per cent from its mid-2007 peak and, according to Zillow’s calculations, still has as much as 10 per cent to fall. ”


#6 zara on 02.15.11 at 12:17 am

Poor little bugger !!

#7 Jsan on 02.15.11 at 12:19 am

Add to the already debt stretched Canadian households higher consumer staples coming to a store near you in the future. Dozens of major companies have announced higher prices heading our way from food to clothing as Inflation begins to take hold. Add to this increase in household expenses higher mortgage rates which are all but guaranteed as Central banks begin to ratchet up rates and the bond market begins to demand higher returns to offset inflation driving mortgage rates higher and higher.

“Clothing prices to rise 10 pct starting in spring”

“Higher food prices ahead after corn reserves sink”

“McDonald’s to raise prices”

“Costs drive up Kellogg’s prices”

#8 Cyrus on 02.15.11 at 12:21 am

Here she is Scottish lass.

#9 JamesBC on 02.15.11 at 12:25 am

It makes perfect financial sense to buy a home with no down payment. Say, a home is worth $1M. If the market price goes up to $2M, I make $1M; if the market price goes down to $100,000, I will declare bankruptcy and walk away, however, for those who paid $1M with their own money, they lose $900,000. Who wouldn’t want to gamble with other people’s money?!
Garth, you’re the greatest fool.

#10 somecatchphrase on 02.15.11 at 12:26 am

If you want to understand the “big picture,” 50,000 foot view of the housing bubble and the financial crisis of 2008, you NEED to read this article. In short, you can blame it all on the birth control pill. (and the boomers, and the Fed, and the CMHC) From the article –

“wealth depends ultimately on the natural order of human life. Failing to rear a new generation in sufficient numbers to replace the present one violates that order, and it has consequences for wealth, among many other things. Americans who rejected the mild yoke of family responsibility in pursuit of atavistic enjoyment will find at last that this is not to be theirs, either.”

Full link-

“Housing Prices and Demographics” by David Goldman at Seeking Alpha

#11 Torchwood1979 on 02.15.11 at 2:14 am

What are you worrying about? If they can’t afford the loan they can just refinance because house prices only go up nowdays. I mean, it worked in the US. Didn’t it?

#12 john on 02.15.11 at 2:24 am

6 for 6

Just drove through my neighbourhood and the six homes listed last week all have sold stickers.

This is getting really frustrating. When will this train stop.

#13 LS on 02.15.11 at 2:26 am

I think CMHC on the defense is incredibly interesting.

I think that the US dismantling Freddie and Fannie makes sense.

Someone with less than 20% down and requiring CMHC insurance is not dealt with as rigorously as someone getting a conventional mortgage. Common sense tells you that insurance or not, it doesn’t make sense that baring paying for “insurance” these borrowers pay the same interest rate as a conventional borrower. It tells you that the bank lending the money doesn’t really care as they don’t hold the risk. So who’s looking out for CMHC’s interests (and the taxpayer?)

This is really NOT a good scenario as evident in how it played out in the US. In the end, all monies given over to prop up Freddie and Fannie were NOT paid back to the government.

CMHC (and Canadian taxpayers by extension) will find themselves in the same mess. And ironically the institution that made housing more accessible to the masses, has in fact made it more expensive and put the whole system at risk.

If a conventional bank doesn’t want your credit risk, why should the Canadian taxpayer?

#14 shayre on 02.15.11 at 2:31 am

But those with jobs will not be able to walk away as most mortgages are not non-recourse. Therefore, house prices will collapse but those with jobs will not have an out. Only those that lose their jobs will have an out. And therefore, the government has provided social housing for all those that no longer have work as the houses they “lose” would never have been built in the first place.

#15 TryingToGetOutAlive on 02.15.11 at 2:32 am

well, we may feel like fools. but i can’t help but think that most of us were suckered/blindsided by this CMHC thing.

the more i read garth’s blog the more i realize banks and government have succeeded in gaining the people’s trust. when in actual truth there is no one else we should be more leary of.

i mean, if there were people who knew how badly CMHC would throw our RE market out of whack i’m sure there would have been some stink raised about it’s inception. well played, government.

#16 Burnt Norton on 02.15.11 at 2:39 am

I see the emperor (of Kitsilano) has no clothes.

Or maybe you mean to illustrate the odd nature of the Asian factor (camcorder in hand).

Surely it’s not the horrified young European nouveau-riche realizing that, indeed, it is simply all just lipstick on a hog.

#17 realityguy on 02.15.11 at 2:42 am

Its very simple garth.

No regulations for realitors. Take a 3 month course which any dumbass with a grade 8 education can do and your a realitor.

Look at the Investment Advisors, Stock Brokers, CA’s. They are heavily regulated and can’t do crap like the realitors.

Look at CMHC printing very questionable ads on the vancouver sun. Lying about Chinese investors flying over langley.

CMHC should be responsible to the tax payer shouldn’t be printing off crap like they do as freely as diareaha is flowing out of my (trap)

BTW love todays Picture.

They are only doing their jobs.

#18 westCoastRoller on 02.15.11 at 2:43 am


Can you explain CMHC insurance. What exactly does CMHC insure. Is is the whole value of the loan or just the first 20%? If you default on the loan, does CMHC try and recover the value of the loan through sale of the asset and just make up the difference with its reserve funds? Does CMHC have a big pile of cash it holds in reserve to cover its obligations or does it basically operate month to month with premiums = to payouts and the feds back them up when the shit hits the fan. How big could the feds obligation be? Whats the risk for the bank, does it get all of its money back or just part if a CHMC insured mortgage defaults. If there is zero risk for the bank, then what mechanisms restrict a bank from providing a loan other than meeting CHMC’s requirements. Isnt a system with no risk sort of some quasi communist centrally planned system… it doesnt sound very market orientated to me if the gov covers all the risk. Could any of us get a loan if CHMC didnt exist? How much would rates rise? When CHMC started loosening its rules (ie zero/40) did they adjust their rates upwards to compensate for the additional risk of those loans. Since i assume they are playing with the publics money, are they required to match their charges for insurance to the risk of the loan and publish the method/assumptions used. Do they have any oversight?

If you have time id love for you to do a post on CMHC b/c i dont think most of us have a full understanding of what they do and what happens when too many people start to default on their payments. Garth I know thats a lot of questions but im sure im not the only one who is wondering.

#19 cognizant on 02.15.11 at 2:48 am

Excellent post…CMHC is a ticking time bomb. The only reason the Canadian financial institutions came through looking so good in the 2008 financial crisis is because of CMHC. In the US the taxpayers stepped in and absorbed the GSE’s after the fact, in Canada the taxpayers are absorbed the bad loans up front and are on the hook for up to $480B of bad loans. The Canadian mortgage market is overwhelmingly sub-prime:

#20 Jas Girn on 02.15.11 at 2:50 am

This is the best blog post I have read so far from Garth. Pure, unapologetic truth – not like the nonsense you hear from RE agents and the general public. Ever since I came to Canada, I knew I would never buy a house. It’s a PRISON!

BTW, “Soylent Green is People”, I love some of your posts, but this one above is out of topic.

#21 Coho on 02.15.11 at 2:59 am

There is a decreasing enrolment in minor hockey. The article doesn’t venture to guess why, though. I’d imagine part of the reason is people can’t afford it because of rising “home ownership” costs. Got a house but no money left for kids to play hockey…?

Victoria Tea Party,

From yesterday: You’ve made some good points, too. Indeed, democracy, if this will in fact eventuate in Egypt and other parts of the Middle East doesn’t automatically mean freedom. Voting puppets in whose first priority is to keep themselves and their party in power is technically a democracy but doesn‘t necessarily translate to “freedom“ or true representation of the people. It can be argued that leaders who set traps rather than examples for their people are reducing the financial freedom and thus the quality of life for many. Traps, ball and chains come in many different forms and disguises including housing bubbles, 0/40, 5/35, HELOC, CC and all other kinds of debt.

Sure, we’re each accountable for our actions, but unfortunately too many people do not listen to what their conscience tells them and rationalize poor decisions because the banks tell them they qualify for a 400K mortgage. From a young adult’s perspective, mom and dad and the in-laws are pushing for him/her/them to buy a house. And there are the realtors whose advice and “expertise” they trust. Surely the newscasters, parents, banks, and realtors know better, so why not acquiesce to their “better judgement“.

On the subject of freedom: How does one define freedom? I guess it means different things to different people. Perhaps Thomas Jefferson defined it best by his contention that people have a right to Life, Liberty and the pursuit of Happiness.

It is not about dollars and cents for many people. Yes, having enough money to live decently helps one attain some comfort and quality of life. When people get squeezed financially and treated with disrespect they can begin to die a slow death spiritually. And when things get bad enough, self respecting men and women who desperately seek to retain whatever hope, aspirations, and dignity they have left, will try to better their lot regardless of the risk of failure and paying a price for their “insolence”.

Religious zealots aside, the people of the middle east seem more spiritual than westerners. This spiritual anchor, or faith if you will, could be a major reason why they have been able to endure poverty and repression (from our perspective). And it is also the reason which has helped them confront tyranny. While they’re in the process of cutting their shackles and chains, we (particularly our youngsters) are doing the opposite by burying ourselves in debt with blessings from our leaders, realtors, and bankers.

#22 smartalox on 02.15.11 at 3:02 am

Interesting. Does the miracle of no-money mortgages include the CMHC premium, or the cosing costs, transfer tax, and title registry? Nope.

Somebody else’s problem, I guess.

#23 West Coast Woman on 02.15.11 at 3:08 am

Originally, CMHC was in the business of insuring only those new homes which it, itself, had inspected. Their rigorous inspections throughout the home building process ensured that all new homes were built to the building codes.

In the 1970’s or early 80’s CMHC dropped the home inspection process and handed it over to the municipalities. BIG MISTAKE. I don’t know why they did this, because now they insure every bit of garbage that comes on the market. The “leaky building crisis” would never be occurring out here in Vancouver if the CMHC’s qualified inspectors were still on the job. In Vancouver, nobody inspects anything – they just OK everything the builder says. Buyer beware. After all, What do you expect when the City’s fire inspections are run by a structural engineer?

Once CMHC dropped its inspections, it merely became a facilitator to overpriced bad building practices by developers and municipalities. It should be disbanded, as it no longer serves any useful function.

#24 LG on 02.15.11 at 3:17 am

I bought in Yellowknife in August last year mainly because the rental market is horrific. NPREIT has a stranglehold on most places and the rents reflect that.

I did find a little trailer that works for me; I do feel that it was overpriced but I paid for the ‘intangibles’ – location (15 minute walk to work), access to green space (place to walk the dogs off lease) and an already established garden (with greenhouse).

And I have been watching the real estate values here to see how they reflect the changes that are in the wind. I certainly could get more bathrooms, more stainless appliances and more hardwood floors if I bought now (in a neighborhood that wouldn’t provide the ‘intangibles’ I have here).

I do sense a bit of desperation in some of the ‘sale by owner’ ads, but on the whole I think we are affected by the subsidized transfer in and out of the military and RCMP who have a large presence here. In such a small market they do have a large impact.

#25 Peter Pan on 02.15.11 at 3:18 am

“There is no question however, that for those with little or no down payment, cash back mortgages can provide a viable solution for making dreams of home ownership a reality.”
And Canadians have the temerity to suggest that our mortgage financing “schemes” are so much more “responsible” than those which caused the financial collapse in the US. Real estate agents counselling hormonal first buyers (and their parents) on ways to game the system. Our hubris knows no bounds…

#26 Zamphir on 02.15.11 at 3:20 am

I’m curious about this $600 billion CMHC is allowed to insure. How much of this is sitting under their mattress, and how much of it is funded by the people who are paying in to it?

BTW, great blog.

#27 AxeHead on 02.15.11 at 3:23 am

My photo interpretation:

Unlike Seatle, where real estate was NOT supposed to crash, and certainly not down 31 % because hey, it’s home to Boeing, Microsoft, Costco, Weyerhaeuser, Starbucks, Amazon, etc….

Vancouver is ‘different’ and this bubble will continue because, hey, it’s home to flacid, crinkled, and decrepid old ex-hippy, draft dodging, vegan, marxist nudists who produce…well…nothing.

#28 westCoastRoller on 02.15.11 at 3:26 am

garth did i read this right
at almost 1 trillion worth of liabilities could it be possible that CHMC liabilities are almost double the entire federal debt (559 billion) ?

#29 westCoastRoller on 02.15.11 at 3:28 am

oh and they have a buffer of 26 billion.. or a healthy 2.5% in reserve…..

garth this crazy tell me its not true b/c if it is were all screwed :(

#30 pablo on 02.15.11 at 3:36 am

That kid’s expression is hilarious. What a pic. Imagine the psychological damage being wrought in his psyche while seeing his flaccid drooping future staring back at him!
As for Valarie; well a girl’s gotta eat, she’s just out there trolling for fools

#31 pablo on 02.15.11 at 3:38 am

Here’s what $100k will get u in Ontariairyairyo!!

#32 Thetruth on 02.15.11 at 3:49 am

Seattle home prices from peak -31%!

Vancouver at record high!

200 km separation

Gov policies are really screwing over the younger generation at the benefit of most boomers….. future looks financially ugly any way you look at it! Wonder what a shock it will be for seniors in the near future when younger people refuse to fund the retirees free medicare in old age!

#33 Pining for the Fjords on 02.15.11 at 4:18 am

If things start going sour, what’s stopping the government of the day from dictating that – once the Chartered Banks pocket the cash and the bad paper is on the CMHCs books – mortgagees don’t actually owe the money or only owe some fraction of it?
If more votes lie with debtors than savers, can’t we all see this coming?
Canuckistanis like to tut-tut about the U.S., but they are taking the bad medicine right now. Before long, confidence will return to the market and working families will have affordable homes to choose from. Meanwhile, up here, the government will be running around trying to keep air in the balloon.
Why is our government pursuing this strategy?

#34 SquareNinja on 02.15.11 at 4:41 am

@DumFukCanuk… Look, I’m not saying Seattle is a bad place, or that Vancouver’s the greatest. Both are nice and have their advantages/disadvantages.

However, you can’t be sour on a city just because its residential real estate prices are sky-high; in that case, you would not enjoy many of the world’s nice cities.

I rent and I don’t mind renting… I can and have picked up and left the country, moved from city to city, etc. It’s great freedom! Vancouver rental prices are very fair, too.

As for food… Vancouver’s food is excellent, man. There’s no denying it. I’ve been to the countries where many of the foods originate… and I can say first-hand that it’s very authentic.

A Mercer survey in 2010 ranked Vancouver as having the 4th highest quality of living of any city on Earth. But yes, Forbes says it’s the 6th most overpriced real estate market…

#35 SquareNinja on 02.15.11 at 4:44 am

… Oh, that same Mercer survey ranked Seattle as 50th in terms of quality of living…

#36 Susanne on 02.15.11 at 4:45 am

Floating mortgages at 2.5% interest rates equals Canada’s very own version of Sub-prime. There is no difference. In the US, those that could least afford or barely afford their overpriced Real Estate were foolishly buying houses based on 2 to 4% “Teaser rates” as they called them. Than, after a couple of years those rates reset to 5,6,7%. We are no different. Our “Teaser rates” are named floating mortgage rates and they are also pulling in the suckers.

#37 Billy Bob on 02.15.11 at 4:46 am

I had an \”oh-my-gosh\” moment when I realized just how big and dangerous this real estate bubble is here in Vancouver. It happened last summer.

I was riding my bike in a beautiful suburb south of Seattle. I would have guessed that I was in West Vancouver, with sleepy windy streets hugging the sunny shoreline. The birds were singing in the mature trees. BMWs and Porsches populated the the driveways of classy houses.

I took note of two properties for sale. One was a small high-bank waterfront building lot while the other was a quaint well-maintained older home bordering a small nicely-landscaped ocean-front park with a lighthouse. Both properties enjoyed stunning views.

I thought to myself, \”Wow. I would love to live here. It\’s just gorgeous. But I\’d never be able to afford it.\” I put on my Vancouver real-estate price calculator and made a guess… For the waterfront building lot in a West Van like location, say, $1M -$2M? Not sure. For the little house adjacent to a picture postcard lighthouse park and steps from a stunning pebble beach, say, $1M-$1.5M?

Later in the day, I looked them up on the Internet. The asking prices? $50K and $120K, respectively. I had guessed over 10 times too much. When I showed my wife her immediate response was, \”Oh, that can\’t be right.\” But it was right.

That\’s what Vancouver real-estate insanity does to you over time. You start thinking that $750K is a pretty good deal for a tear down starter house in the suburbs. It takes a dose of reality to make you realize just how wrong Vancouver prices are and how far Vancouver has to fall. That applies to all of Canada, for that matter.

#38 Brian1 on 02.15.11 at 4:55 am

First…….. I remember a trip to the States I had and where, in the motel, the weather station on tv showed a picture of North America and Canada was completly blacked out (and I remember asking myself aren’t there a lot of Americans who drive trucks and such who could use the information?) Anyway, up here the real estate industry uses the reverse procedure where the States are completly blacked out.
Second: when this blows up we should have an Egyptian style uprising and force the banks to take back their responsibilities for the losses because they knew better and I wouldn’t buy otherwise. Of course, if we did, unlike in Egypt, there would be blood in the streets and, possibly, men in black visiting the bloggers on this site.

#39 Mortgage girl on 02.15.11 at 5:35 am

I am very curious about the statistic in your blog that 90 percent of all mortgages in the last year were 95 percent loan to value. I specialize in private lending and I do not know too many lenders who will go that high. So I think your right about cMHC unduly influencing the market. We saw this happen down south. I have been researching thing policys of the central bank buying treasury bills and putting more money in the market…this is what your talking about when cmhc buys 100 mill of toxic assets. Yet cmhc was created to stimulate our economy as per the national housing act.

#40 Jeff Smith on 02.15.11 at 6:40 am

Garth, how dare you criticize CMHC. They think they are doing a great job. Here they are firing back at the critics. The way you behave, no wonder the enemies are trying to bring down your sight. Go go CMHC, please inflate the bubble some more, we love ya for it.

#41 Jeff Smith on 02.15.11 at 6:53 am

Babad here thinks housing market is in the “goldilock” moment, just the right time to buy. Hope this guy isn’t working as a part time realty professional. That would be self serving and bad, right mr. Babad?

#42 gmcccc on 02.15.11 at 7:06 am

I still can’t believe people think it is different here, our government are lying to us just like Washington is and Wall Street , the fraud and lying is incredible, why would the Chinese come here to buy when the weather is much nicer to the south and SO IS THE HOUSE prices.
It is all about the confidence game, and when it dries up so will the housing market, but hey I can’t even convince my wife NOT TO BUY RIGHT NOW AAAAAAAAAh!!! I sold my house 2.5 years ago and though I was in the perfect spot, renting etc…. unfortunately it is not our home honey, the world is not going to end, and by the way the worst part is the landlord just sold his place, third one now and we have to move in 60 days, and we will not go through that again….unfortunately the area that I live in has always had not too many places to rent and so I am going to buy something…..Screwed

#43 House on 02.15.11 at 7:31 am

But I guess we should not blame Doug Stewart and the economists because they have great personalities and that trumps all.

#44 London Calling on 02.15.11 at 7:41 am


Is’t it ironic that CHMC was created to make housing more affordable and today is doing the opposite.

This is the issue with greed today that wasn’t present back in the 1950’s. To get a mortgage in the 50’s I believe you had to have 50% down (anyone?) and mortgages were first issued for bungalows. (thus I think this is the reason so many 50’s bungalows are around today).

We need to dismantle and/or tighten the rules of the CHMC to make homes affordable again for all. There is no reason a bank should be lending at the same rates to different borrowing risks.

It would be interesting to hear what a bank says on a 5yr fixed rate if:

A. You ask for the best rate putting 5% down.
B. You ask for the best rate putting 50% down.

I would bet you get the same rate even though B risk is much less for the bank.

#45 Toddington on 02.15.11 at 7:49 am

As an Edmontonian who has spent the last 6 years living in Dubai I have watched the rise and fall of one of the most spectacular property bubbles in history first hand. What has been most amazing and shocking is my summer trips back to the Chuck. I have seen the exact same prevailing attitudes that drove the market frenzy in Dubai mirrored in Edmonton, complete and utter refusal to even consider things may not be sustainable. “Alberta is an anomaly”, “The Alberta advantage”, “the market was way undervalued”, “Oil price is above $80”. I dont wish harm on anyone but if the correction in Canada is even a fraction of what it has been here it will take a generation to sort out.

#46 Jeff Jones on 02.15.11 at 7:53 am

In the shadows of the financial crisis two years ago, Ottawa quietly allowed for more than a hundred billion in toxic mortgages from Canadian banks to be sold to Canada Mortgage and Housing Corporation. Not long afterward, CHMC – accountable to the taxpayers – was allowed to raise its debt ceiling to $600 billion. Without this body there would be no housing bubble today. Mortgage rates would be higher. Lending more restrictive. Young couples without money would not be buying homes. No bidding wars. And boring houses in Leaside and East Van would not cost more than a million dollars.

Amen! You nailed it.

#47 DW on 02.15.11 at 8:14 am

Here’s one of the items (MERs) I mentioned to be careful about in the US if you want to bottom-pick (which still has a few years yet to go to the downside – about 3 to 7)

Link —>
Judge Finds MERS Has No Right To Transfer Mortgages, Finds Entire MERS Process Illegal

Link —>
Merscorp Lacks Right to Transfer Mortgages, Judge Says


#48 Hamilton Guy on 02.15.11 at 8:27 am

your CMHC top rate is a little low.

see –

for the rate table which has a little increases for 30 and 35 years amortizations and cash back incentives (“non traditional down payment”).

So a 35 year cash back mtge borrower is paying a CMHC fee of 3.5%. But the independent business man who has “unvalidated” income can only get a 90% mortgage and pays 7% – of course his employee can get a 35 year cash back loan at 3.5%. This is apparently based on the premise that the employees job is safer than the business owners or on the other hand may be a method of preserving small businesses by keeping their owners renting until the owners can do a big cash down payment protecting the owners somewhat more from the vagaries of the housing market place (isn’t CMHC wonderful trying to protect small business owners?).

Cash back is not free – there is usually a 1% or more higher interest rate charged than the borrower would otherwise have paid.

By the way Realtors don’t make people either start the buying process nor the selling of their property process. People have to come to the realtor by taking a positive step on their own. They may stir the pot through the media and advertising but so does the automobile industry (the second biggest asset purchased?) and the new auto goes down by 20 to 25% the moment it is driven off the lot. And there are lots of people driving $40k to $60k financed vehicles with 5 year or greater loans/leases (if available) knowing they are just throwing their money down the toilet.

The psychologists would probably say it is more important for the masses to establish appearances of wealth rather than real wealth as real wealth (but not big time wealth) in the masses is disguised by modest, unpretentious and inconspicuous living because that is how many accumulate real assets. (That and being a bit of a contrarian at the right times ie buy before the lemmings start and sell and liquefy just before they go over the cliff.)

You should probably outfit the Hummer with a money toilet and drive it around to various new car/truck dealers and “new release” builder sites with a sign that says “If you want to throw your money away , throw it into the money toilet and watch it disappear even faster”. Of course you would have a trap door to capture it in order to donate it to your favorite charity.

Both of these assets power our economy to a great extent – so it appears the economy is based to some degree upon the somewhat irrational behavior of the populous (which is a part of the freedom we still enjoy). Irrational behavior etc

#49 Bottoms_Up on 02.15.11 at 9:05 am

My CMHC insurance premium was actually 3.15%. An additional charge that was added to the 2.75%.

#50 Moneta on 02.15.11 at 9:09 am

It takes a dose of reality to make you realize just how wrong Vancouver prices are and how far Vancouver has to fall. That applies to all of Canada, for that matter.
When I sold my house in the West Island the demand was huge. All the visits and offers we got were from boomers downsizing and young couples. Many of the younger couples were off-island looking to move back on because of the insane traffic. Of course that meant taking on huge debt.

I felt so bad for them because while our answer to the traffic insanity was to change cities, theirs was to shackle themselves with huge debt.

We only see what we know.
– Goethe

#51 HouseBuster on 02.15.11 at 9:28 am

Was doing a random search of Florida and found this:

I have no idea where Weeki Wachee is but $229,000 doesn’t seem like a bad price compared to anything in Canada.

#52 TS on 02.15.11 at 9:32 am

Doug Stewart should shut up. H, F and C are not going to be happy with the added negative attention.

CMHC lost its purpose when it was decided that zero or 5% down payments and longer amortizations were a good idea. This in turn opened up demand, which in fact forced housing values higher. I suspect some involved new this and did it anyway. Increasing the amortizations alone increased borrowing power 14% which of course ignited the whole housing price envy and greed thing in growth areas.
Here is the National Housing Act purpose.
3. The purpose of this Act, in relation to financing for housing, is to promote housing affordability and choice, to facilitate access to, and competition and efficiency in the provision of, housing finance, to protect the availability of adequate funding for housing at low cost, and generally to contribute to the well-being of the housing sector in the national economy.

They blew the last sentence and those responsible for the implementation of those risky policies knew it. Unstable as hell now. In the meantime quite a few people involved in the decisions got real rich.
I guess we eventually do a national inquiry if this turns into the disaster they have down in the States. Lots of people to put on the stand and sweat their conscious.
Just another example of Wall Street thinking hitting our institutions. Short term thinking.

#53 TS on 02.15.11 at 10:06 am

Two basic principles CMHC failed to implement.

Putting a cap on loan amounts would of been prudent. Who they lend to (not speculators) would of been wise.
Do not allow flips for 10 years.

But of course they would worry about that later. Well later is almost upon us. I guess that is why Mr. Stewart is attempting to rationalize the past and present behavior. That is yesterday Mr. Stewart, where was your thinking?
Affordable housing was destroyed courtesy of CMHC.
The exact opposite of their guiding principle.
Greed, greed, greed….

#54 jen on 02.15.11 at 10:06 am

I don’t recall hearing criticism from these think tanks when the major decisions surrounding CMHC were made in 2006. Now suddenly they are changing tune. The higher ups are clearly getting worried when their favorite right wing think tanks/pr firms start covering up their own tracks.

#55 Cookie Monster on 02.15.11 at 10:14 am

#21 Coho on 02.15.11 at 2:59 am
Freedom is first and foremost about property rights. The right to earn, create, retain and dispose of property how every you choose. Confiscation of property, coercion, extortion and taxation are all invasions of property rights.

Money is just an intermediary, we work for money because we know we can then obtain needed/desired goods and services in the market. Government taxation and inflation is theft and oppressive.

Small limited government run by laws that concerns itself only with law and order, domestic police and national defense is the ideal model for freedom. Nothing more. Including no involvement in money and banking, or any form of public goods or services.

#56 Robo Monkey on 02.15.11 at 10:14 am

2003 prices have been coming since about 2002.

#57 MikeT on 02.15.11 at 10:18 am

@13 LS:
because nobody asks the taxpayer. It’s the quiet sheep that will endure anything that the govt will throw at it. Once in a while this sheep votes for “change” but it gets the same sh|t all over again. Realize: you don’t have any say in what is done to you by the politicians and the big corporations through these “lobbied” (=bought) politicians, your kids’ future. The government of today can borrow any amount it pleases and spend it to “stimulate the economy” at the expense of future governments that will be left to deal with paying back the debt. No govt official was thrown in jail for the time that he/she was in charge and borrowed/spent money uncontrollably, that’s why they feel like they can do whatever they can.

@29 westCoastRoller:
that’s exactly the situation we’re all in! Screwed! I am glad more and more people come to understand it. And it’s not because I may be a pessimist – looka that the numbers, for they don’t lie. We_are_on_the_hook_for_1 _trillion_CAD!

#58 Ex-Cowtown on 02.15.11 at 10:21 am

#51 HouseBuster on 02.15.11 at 9:28 am
Was doing a random search of Florida and found this:

I have no idea where Weeki Wachee is but $229,000 doesn’t seem like a bad price compared to anything in Canada.


Unbelievable. If only I could get my commute sorted out, I’d be all over this!

#59 MikeT on 02.15.11 at 10:27 am

@51 HouseBuster:
please don’t post such things anymore. I’ve salivated all over my monitor.

#60 Utopia on 02.15.11 at 10:36 am

#9 JamesBC

“Who wouldn’t want to gamble with other people’s money”?!

Well, at least you are acknowledging that buying homes is a crap shoot and a gamble so I can’t suggest you are under any illusions James.

Admitting there is a problem is the first step in the recovery process. I hear the withdrawals from HGTV are a real bitch though.

#61 Paul on 02.15.11 at 10:54 am

#62 john m on 02.15.11 at 10:56 am

#26 Zamphir on 02.15.11 at 3:20 am

I’m curious about this $600 billion CMHC is allowed to insure. How much of this is sitting under their mattress, and how much of it is funded by the people who are paying in to it?<<<<<< well at a maximum cost of around 3% to the borrower (which equals a total of 18 billion on 600 billion) minus salaries,bonuses etc it sure scares the hell out of me…no wonder Mr Stewart is on the defensive—sure like to have Sheila Fraser take a look at their books…

#63 Buyer on 02.15.11 at 10:59 am

I’ve read this blog for 2 or 3 years now and still decided to buy in Calgary during the past few weeks. Prices have come down already in Calgary.. another 10-15% is possible and we can live with that vs renting another year. We snuck in just before the first rise in 5 year fixed rates. At current prices we easily qualified with only one of our 2 incomes and I would consider my income fairly average in Calgary. Our payments are less than the rent we were paying for a slightly better house and neighborhood.

#64 MikeT on 02.15.11 at 11:01 am

I promise to proofread my comments before submitting them. :(

#65 john m on 02.15.11 at 11:08 am

#29 westCoastRoller on 02.15.11 at 3:28 am

oh and they have a buffer of 26 billion.. or a healthy 2.5% in reserve…..2.5% of 600 billion is actually 15 billion but nevertheless i find it hard to believe they have 26 billion in reserve considering they have only taken in around 18 billion before costs on 600 billion?

#66 SK on 02.15.11 at 11:10 am

May I present article A, a nice 850 sq ft bungalow in pristine Regina for only $184,900.

Now, you may be thinking what a deal, however this house is located in North Central Regina, you may remember this area from a article in McClean’s Magazine, which voted this the worst neighbourhood in Canada. And one more thing, in 2003 this house would of been worth $40,000 max. Trust me, the neighbourhood is not coming up.

Or you could just look at this:

#67 Sid on 02.15.11 at 11:13 am

Very interesting. So I guess the future of real estate lies in senior housing and low income apartments in urban settings for single moms. Mcmansion suburbs will be the new ghettos and ghost towns.

#68 David on 02.15.11 at 11:18 am

The U.S. capital markets facilitated their mortgage bubble, but they also brought them back to Earth. In Canada, we have neither the mechanism that proved to be the heroin (securitization) nor the mechanism that ultimately brought on the inevitable correction (derivatives). Our banks just toss all their mortgages onto the heap at CMHC and let a bunch of unaccountable government employees worry about it.

For some reason, that seems to make most Canadians feel good and safe. If anythnig, we should be completely terrified.

#69 Carpe Diem on 02.15.11 at 11:26 am

Re: JamesBC makes a claim that why not buy a $1M house with no money down, prices go up – you score big (true) but if prices drop bigtime, well you just waltz into a bankruptcy office and file away – wipe your hands and laugh at garth.

Guy – first, give your head a shake. I work in a Bankruptcy Office – you file amounts over $250K on both a secured and unsecured debt – you will likely be opposed by a creditor come discharge – and have a “friendly date in bankruptcy court”- good luck in conviencing a judge that your a victim of circumstances…geez … the [email protected] who talks about filing as if they actually know the rules – credit may be free flowing now – but as I noted in a previous post – credit taps turned off – good luck getting any credit – remember, a bankruptcy is on your credit history for a 1st timer (7 years) if you met all the conditions and didn’t have and conditional orders attached to it –

There was a reason many years ago why people feared filing – cause it just could leave a forever lasting mark! JamesBC – think before you speak –

#70 David B on 02.15.11 at 11:31 am

Canada is on a roll baby ….. buy now and buy often ….how could you possibly loose?

Home sales pace hits 9-month high

Vancouver, Toronto lead increase in Jan. as national average reaches $343,67

Read more:

#71 leopotato on 02.15.11 at 11:35 am

Hi Shayre:
All you need is $1000.00 in debt that is not attached to the house (not a HELOC) to declare bankruptcy in BC. Lets say credit card debt. Then you can declare bankruptcy and the trustee will be able to take the house and HELOC as part of the debt. You can definitely work. If you make over a certain amount then the trustee can take 1/2 of your excess income (above $3,062.00 for a family of three) for the time you are in bankruptcy. That doesn’t amount to much when you have been busy paying 4 times as much as you should for a roof over your head instead of renting. You can even keep your RRSP. They will take back any payments made into it in the last 12 months though.

For anyone close to retirement, come to Miramichi, New Brunswick. We left BC and we will never be back. Our rent at the retirement centre (3 bedroom house, original hardwood floors, any size pet you want, garden, etc. for the cost of your condo fees in BC) – $500.00. They throw us a Xmas party, a strawberry social and a corn bake party each year. Who else has a landlord that does that. All snowplowing is free and done instantly every day it snows. We live at the old army base in Chatham in a totally redone company house. Now a non-profit org called Retirement Miramichi. They want people with money to come here. We contribute a lot to the economy of Miramichi.

We do have a few problems with living here. It’s the festival capital of Canada so there are way to many fun things to do in the summer. We have no idea how we are going to spend all our money now. I’ve had to become a wine snob. Oh ya, and we don’t have to eat squirrel. We have all the lobster we can eat!

#72 Kitchener1 on 02.15.11 at 11:53 am

Basic math tell us that the RE market is doomed.

Here is why

1. Law of mean revivision
2. Peak credit
3. cheap money that will never again be seen- home prices are a reflection of cheap interest rates
3. mortgage rules getting strict. Those who purchased with 0/40 or 5/35 and went to the max are out of the game. These people will have no one to sell too
4. 70% home ownership rate– not many buyers left.
5. we are going for a lax to strict lending enviroment.

For a very similar story, look at the domestic auto market. People that had no money were buying brand new cars, breaking sales records YoY.

The big 3 autoworkers were pulling in 100-150k a year with overtime to keep up with demand.

Now, after tens of thousands of layoffs, they are still way off their previous production numbers and out tens of thousands of jobs.

Will those pre recession numbers ever return– maybe but not for at least 10 years.

Same story, as far as market dynamics go.

#73 C on 02.15.11 at 11:59 am

Interesting article by Gonzalo Lira on He takes a South American perspective on how rising inflation could/will result in rising interest rates which will completely clobber real estate.

It is so true. When you have the vast majority of homebuyers in Canada purchasing with only 0%-10%, any increase in rates will choke off real estate demand in a hurry. The whole thing is a ponzi scheme. He is worried about major inflation and not just slight upticks up in the variable rate kind of thing.

As Garth has pounded into our heads, the bond market controls long term rates, not the Bank of Canada. So if we continue to see prices accelerate in energy, wheat, rice, you name it… look out.

I had thought that the GTA real estate market could correct 20%-30% from the June 2010 highs, but if we do get some serious inflation and rates really go up quick I’m now thinking a 25%-50% collapse is very realistic.

If real estate’s survival is 100% reliant on cheap money and that money goes up dramatically in price, we will have major engine failure! F could bring in 100 year amortizations and it wouldn’t do a thing.

Keep up the great work Garth!

#74 DW on 02.15.11 at 12:01 pm

Link —>

See this YouTube —>

1st part: Bernanke in summer 2005
2nd part: Bernanke February 3, 2011

Excerpt: “… The simple, historically proven, translation for Ben Bernanke’s “I guess I don’t agree with your premise,” and, or, “I’m not sure I accept your premise” is this: ‘It’s an effing certainty.’ ‘Bank on it.’ ‘Bet on it.’ ‘It [hyperinflation as the result of a currency I made totally worthless by monetizing debt] will happen.’ …”

Australian RE ad:
Link —>
* Don’t view with your wife around & might not be ‘work-safe’.

A good “Mish” post:

Link —>


#75 Kitchener1 on 02.15.11 at 12:02 pm

#69 Carpe Diem

You work in the system so you should know first hand, lets say a person buys a house, value goes up 300k, they take it out in a HELOC, wire it oversea’s and then in a few months or one year declare bankrupcty.

Yes the it won;t be an easy discharge as the client may still have to repay– saw 30-40k of that. Even less if there is some sort of “addiction” involved like drugs/alcohol/gambling etc…

For a lot of people, 300k is huge money overseas.

Im not saying its common, but it does happen a lot.

#76 Not Wondering Anymore on 02.15.11 at 12:06 pm

Focusing on “the government” as the culprit in escalating taxpayers risk by authorizing the billions in CMHC giveaways to the banks is not recognizing the larger reality here, which is that government is currently OWNED by the corporate and financial sector and represents THEM, not the Canadian people.

As such, they have done EXACTLY what they have been bought and put in power to do. ie empty the public coffers across the board (not just via CMHC) as current deficits show.

This is their Fait accompli.

We have a lot to learn from the people of Egypt,Greece,Ireland and elsewhere in pursuing true democracy, and Canadians may be following their lead shortly as awareness of this misprepresentation grows and as our declining standard of living and increased wealth divide becomes more and more evident.

#77 London Calling on 02.15.11 at 12:07 pm

#67 Sid “So I guess the future of real estate lies in senior housing and low income apartments in urban settings for single moms. Mcmansion suburbs will be the new ghettos and ghost towns.”

Here in London, UK. Those McMansion’s are mostly turned into rooming homes now as no one wants them (or could afford the property tax).

There are serious limits to demand on how big a home people want and need.

#78 London Calling on 02.15.11 at 12:12 pm

#63 Buyer “I’ve read this blog for 2 or 3 years now and still decided to buy in Calgary during the past few weeks. Prices have come down already in Calgary”

Best of luck to you with that risk/reward. You will know if you made a “good decision” by the end of this year. Calgary as you may know is a boom and bust town and NG makes up 70% of that prov revenue, not oil.

Could you not afford to wait a few months and make the extra 10-15% (40-50k) by not buying?

#79 Cognizant on 02.15.11 at 12:17 pm

Can someone tell me if CMHC has a secured interest registered against a property title when the insure a mortgage? When it comes time to foreclose do they have legal standing? If not who does?

#80 The American on 02.15.11 at 12:24 pm

AT #19: The Canadian market is THE most “sub-prime” of all markets in the G-20. Absolutely no doubt about that, especially when over 70% of the population owns a home. Simply, it isn’t sustainable. And clearly, most of these people shouldn’t have been given loans. It really is only a matter of time (probably shorter amount than people see) before Canadians get nailed and realize the banking system there is a fraud. I truly feel horribly for Canadians and what is about to unravel. If you look at the way the CMHC is TRYING to hedge and the amounts they’re using, it significantly exceeds the bail out the American tax payer made, per capita. It is an enormous amount for a country of 36MM people, several times that the size of the U.S. bail out. I’ve crunched numbers a million ways, and I cannot figure out how this will play out. I know this much, though, and it won’t play out well.

At #27: Axe Head, you nailed it better than probably anyone I’ve ever read on this blog! Way to go!

At #32: TheTruth, exactly!

At #33: Pining for Fjords, what is it today? It seems like everyone is nailing it right on the head. I’m impressed and glad to see not everyone is void of common sense. I have friends in Canada, however, who don’t recognize the five-year delay between Canada and the U.S. right now. Well, funny, because I got a phone call two days ago and he was starting to put that knife and fork in that crow he is about to choke down. He came clean and told me his NEW take on the Canadian market and where it is headed. Remarkably similar to the U.S., in fact.

At #37: Billy Bob, that’s my point. Although the properties you saw really DO sound on the low side, the point is for similar properties only 120 miles apart, the market is completely different. Pair that with a healthier economy of Seattle in a similar setting, and Vancouver makes no sense. What has proven time and time again in this global collapse is that when it doesn’t make sense, it too will fall.

Seattle prices have taken a 25%+ haircut since peak. I do feel we’ll drop somewhere between another 7%-10%. I’m not sure if you have Trulia in Canada, but if you do, it is a VERY powerful tool that provides a lot of transparency into your markets. We use it all the time in the States. Transparency is a good thing, believe me. If you don’t have transparency to this degree, you should DEMAND it. Here’s a link that shows condos for sale in my neighborhood in downtown Seattle. Most all of these have come down in price by about 25%. This site is awesome as it give you complete statistical market data, heat maps, and listing within your search criteria.,new_homes_lt/

Oh, I hear Fairmont Pacific Rim reduced prices on all remaining inventory by about 40%!!!!! Now why would they go and do something like that? Hmmmmmm……

#81 jim on 02.15.11 at 12:33 pm

Amazing how many Egyptians were protesting and the police were not called in. Imagine if this happened in Vancouver the patience would have. Worn thin and you would have torture (taserings) left right and centre. I noticed that the Egyptians were lighting fireworks in the crowd. That would never happen in Vancouver because they are banned and illegal.

Things won’t end well if their is a housing collapse in NO FUN VANCOUVER

#82 P F Murphy on 02.15.11 at 12:34 pm

Now that our economy is doing so well, it would make sense to me to pass legislation to transfer the $100 billion of risk back to our solid banks that are once again making a $billion per quarter and paying out $10 million bonuses to their CEOs. Surely all 4 parties would readily agree to that. Return unto Caesar that which belongs to Caesar – Smaller government – Government staying out of the business of business. You know stuff like that!

#83 AG Sage on 02.15.11 at 12:35 pm

>#28 westCoastRoller on 02.15.11 at 3:26 am

My very rough estimate of CMHC’s total *exposure* is $84 Billion. Some commenters had their own estimates. CMHC, as bad as they are for the market, does not appear ready to break the bank.

Look at it this way, they’ll probably need a $30 billion dollar bailout, and then that will be the political end of them. Or it should be. If they take the next round of bad mortgages onto their books like last time, you’ll be stuck with CMHC forever. A bailout, in that way, is a better thing, since it turns into leverage that can be used against them. If they are seen as a political saviour, that would be worse.

#84 DW on 02.15.11 at 12:42 pm

@ #69 Carpe Diem

I’ve seen quite a few people do it. Max out all loans including credit & department store cards, then head to Asia or elsewhere where the money is worth much more (leverage). They might also buy as much as they can on deferred payment plans and ship the goods over. Basically they have ‘made’ more than they could earn the honest way in many, many lifetimes.

I saw people in the US ca$h out that way in 2005/2006 near the RE peak. IMO, it’s far more common than you think.


#85 Jack on 02.15.11 at 12:43 pm

Nice quote by Bob Rennie referring to the Olympic Village


Rennie said he wasn’t worried that the small number of test sales were done without multiple bids.

“I know where you’re going. You’re asking why wouldn’t I want a bidding war. I’ve got 480 units to sell in an absolute disaster where nobody wants them. The least of my worries is a bidding war on one unit.”


#86 AG Sage on 02.15.11 at 12:48 pm

>#34 SquareNinja on 02.15.11 at 4:41 am
>As for food… Vancouver’s food is excellent, man. There’s no denying it. I’ve been to the countries where many of the foods originate… and I can say first-hand that it’s very authentic.

Where the heck are you eating? I have the worst time with restaurants in Vancouver. Other than the Ethiopian place, Salt Tasting, and some piano bar like place on Denman (I think), I’ve had some astoundingly mediocre meals. I mostly cook when I visit as a result.

And on that note I have to add that the produce at Urban Fare is a pretty sad affair.

#87 Carlyle on 02.15.11 at 12:48 pm

How much do you guys think prices will drop in Toronto?

#88 Stevermt on 02.15.11 at 12:52 pm

#8 Cyrus…I guess Valerie slept through the ethics class at university..wasn’t important..! But she does give her clients Full service .

#89 Stevermt on 02.15.11 at 1:00 pm

#30 pablo…thank you for my belly laugh today !

#90 JamesBc on 02.15.11 at 1:02 pm

Re: #69 Carpe Diem
Don’t make assumption that I need credit. I have been using cash all my life. Buying a home is just the only thing that I need credit. 7 years is a very short time in life. With bankruptcy, I will be in a much stronger financial position in 7 years. Who’s so stupid to carry $900,000 debt, when he can walk away. If one can gamble with other people’s money, why not?! If I am totally broke, what can the creditor do about it? There is no debt prison in Canada. Besides, I get to keep $30,000 of assets in BC, if I do go bankrupt.

#91 AG Sage on 02.15.11 at 1:08 pm

>#82 P F Murphy on 02.15.11 at 12:34 pm

I like the way you think, man/lady.

>#87 Carlyle on 02.15.11 at 12:48 pm
>How much do you guys think prices will drop in Toronto?

I’ll bite. My absolutely meaningless estimate is 2004 prices. Depends heavily on overhang (so condos will fall more, presumably) and how many of your neighbors are making some of their current mortgage payments using a HELOC (that dope dealer is due to get shipped up river in March, which I’m beginning to think is a more significant rule change than the 30 year limit.)

#92 OttawaMike on 02.15.11 at 1:10 pm

Garth scribed,
Days ago Barack Obama took the first steps towards dismantling the state’s role in insuring, subsidizing and pimping mortgages. Five years after the real estate apocalypse hit, it’s clear house values were inflated by the existence of cheap credit and quasi-government agencies ready to suck off the risk from bankers, making them crazy fearless.Some people in Canada say it’s impossible for home prices to plunge here, merely because the feds now back half a trillion dollars in high-ratio loans. But if it did not work in the States, then why here?

I think that question was kind of answered in your own statement. CMHC is a 100% govt. backed agency without any shareholders on the TSX. Fannie/Freddie were a curious hybrid of public – private ownership and Obama didn’t come to the rescue until the 08 crisis hit. The horses were already long gone as the barn didn’t even have any doors.
As long as CHINDIA continues to rise and strive for an intermediate socioeconomic society also known as middle class status, we will be the blue eyed Arabs supplying the oil, fertilizer, timber, metals and food. Our rust belt will never go back to its manufacturing halcion days and our unemployment will stubbornly remain at 6-10% but we will supply the world with inovative niche manufacturing and design. Central Canada’s educated and skilled workerforce will still thrive in the new economy. Sir Wilfred Laurier was only off by one century when he said the 20th century belongs to Canada.

Canadian housing will not collapse for these reasons alone. Look at the effect in the US that the $8k grants had in holding up values. It did work until the money was withdrawn. Here they can bring similar in at the first sign of trouble. With 20% of our economy dependant on housing, stimulus would be self funding by keeping those tax payers working and contributing. Add to that a power hungry govt. that will steer housing through incremental policy changes and stimulus where and when required and we will maintain flat values through the next 4-5 years.

Anyway nevermind that, riding season is in the air.
I hope you’ve prepared by installing even higher ape hangers and longer handgrip tassels.

#93 OttawaMike on 02.15.11 at 1:11 pm

Incompetent Vs. Competent Realtors,
I have been toying with the idea of listing my place for the spring. Last fall a direct comparable listed one street over. I happened to be visiting a friend next door to it when an agent was bringing prospects through the furniture less listing.
Asking if I could take a quick look the agent agreed and while going through I explained the upgrades on mine and my intention to list spring ’11. I also expressed curiosity as to the actual market value of my house. Normally this is like chumming the water for sharks but this didn’t even elicit a response. No card, no can I meet you later. I left wondering how somebody that lazy can earn a living. I was actually angry enough to want to go back out to her car and tell her she was indeed a screw up but my motto has always been to not tell a bad service provider their misdeeds and let marketplace Darwin take care of them.

Last night I was working away installing a new electrical service panel when I heard a knock. At the door is an older realtor who looks and manner reminded me of an old elementary school teacher. She introduced herself as having 35 yrs. in the racket and reminded me that we had spoken on the phone last fall when I inquired about one of her listings. She handed me a ½” thick stack of comparables all sorted by sold over asking, sold under asking, expired and still for sale. I also got her promotional trinkets and card plus samples of a few examples of her feature sheets, very thorough work without me even requesting it. As she went through the house she provided brilliant staging tips. What really impressed me about this lady though was her admission that the market is precariously high and she has lately been warning new buyers to exercise caution. She even went on to talk about the Ottawa market’s dip from ’94-’96 whereas most of the “Ernst Zündel” realtors here still deny that ever took place.

It kind of renewed my faith that there is the odd good apple still in the barrel although by warning me of an impending correction, it also serves her since I will have more urgency to list.

#94 SquareNinja on 02.15.11 at 1:20 pm

@AG Sage… Either you’re a 5-star chef, or you’re just eating at the wrong places. Certainly, there are disgusting places around, but there are amazing ones, too.

For Japanese food, try the area around Robson/Denman. For Middle Eastern, there are a couple good places on Denman, near Davie. For Korean, Taiwanese, or Chinese… go to Richmond. For Indian… go to Surrey!

#95 VICTORIA TEA PARTY on 02.15.11 at 1:20 pm

#21 coho

I agree with your opinions. Yes. I hope that those hundreds of millions of Middle Easterners will be able to sort things out and move to a “place” where they believe their freedoms will exist and can be further emboldened.

It is interesting to note that today the Muslim Brotherhood is edging its way into Egypt’s constitutional debate more aggressively.

Thought to be mainly a burnt-out group of badly treated mainly old guys, it turns out that the group has considerable fire in its belly and is beginning to make things shake a little more over there.

My main issue with all of these disparate demos taking place from Algeria to Iran is this: Where is the leader? Or should that be leaders in each jurisdiction? No leaders no so-called “freedoms” or any other “reforms”. So whatever is going on over there is early days. Spurred by outragous food inflation these protests will have legs if the people showing up for them keep on doing so.

I believe the larger picture is that those demos could only occur when enough people sense that the American Empire is in huge trouble, mainly due to its catastrophic internal financial corruption, more than at any time in its history, the Civil War included.

Mr. Obama, also a victim of the empirical greed that preceded him, hangs on grimly atop an economically-sick monster raging bull of an empire that threatens to unseat, one day, maybe even America’s vaunted and unbeatable elites!

As an aside, you mention Jefferson’s “pursuit of happiness” comment. The key word here is “pursuit”. There is no mention of “attainment”, quite another ball of wax to be sure.

Americans (and not a few Canadians) have been confused over this word “pursuit” for decades.

One result is the never-ending current financial disaster and its after-effects, namely unmet and unspoken desires and assumptions driven by the “wealth effect” thanks to endless credit availability.

For many Canadians, those urges were “satisfied” but will soon be broken by failed 0/40s and 5/35s because of a government that still seeks a majority; perhaps itself an unreasonable goal, at this time?

#96 shayre on 02.15.11 at 1:23 pm


Thanks for the info. I am trying to get my head around why the government let the housing bubble happen and how things play out. I just don’t buy into the “government is just dumb” explanation. Too many things were changed in regards to allow people who never should have been able to get into debt to do so. So, there has to be a bigger plan.
My thinking has been that this was the only way to get social housing built. Eventually, there will be pain, and middle-class taxpayers will bear the brunt of it, but the reality is, these are the same people who got rich, at least on paper, one way or another, from the housing bubble. Therefore, when they get wiped out, they are only losing “wealth” that would never have been created had the bubble not been allowed to happen. For the last 10 years, we would have been no different than every other country with a very high unemployment rate. We will get that now, but at least we have housing in place that otherwise would not have been built.

#97 Carlyle on 02.15.11 at 1:26 pm

#91 AGSage …

And how do you think that these lowering of prices will affect overall rents? (I’m hoping pressure downward across the board — rents and purchase prices)

#98 AG Sage on 02.15.11 at 1:30 pm

On the topic of the post. Fannie and Freddie were much less of the problem than lax lending at private lenders due to the pull from wall street for any paper to slice and dice and fraudulently resell around the world.

Fannie Freddie’s market share plummeted during the boom

Their foreclosure rate was half that of the private lenders. As bad as they got, they couldn’t actually keep up with the massive theft going on in the purely capitalist market. Sure, getting them cleaned up is good, but it’s really just further bread and circus to avoid cleaning up the real sleaze in the system.

#99 Coraline on 02.15.11 at 1:31 pm

I don’t know if anyone else noticed, but as far as I can tell the CREA has now stopped reporting actual sales numbers alongside its “seasonally adjusted” numbers. It sickens me how little access there is to good real estate data in Canada.

#100 realityguy on 02.15.11 at 1:31 pm

mortgage girl

My brother in law works at the banks and they are told to sell sell sell.

If it has a heartbeat sell.
The more they sell the more they make because the banks
are not on the hook if the borrower goes belly up

#101 Buyer on 02.15.11 at 1:33 pm

” #63 Buyer “I’ve read this blog for 2 or 3 years now and still decided to buy in Calgary during the past few weeks. Prices have come down already in Calgary”

Best of luck to you with that risk/reward. You will know if you made a “good decision” by the end of this year. Calgary as you may know is a boom and bust town and NG makes up 70% of that prov revenue, not oil.

Could you not afford to wait a few months and make the extra 10-15% (40-50k) by not buying?”

If I waited 6 months when 5 year rates are significantly higher I would lose a majority of that 10% in interest anyway. Obviously i’d prefer a higher rate, low mortgage but the low mortgage part is not guaranteed.

#102 Lynn on 02.15.11 at 1:37 pm

Are you being funny or are you a dufuss? Gamble with other people’s money? Other people’s money is the taxpayer’s money. You are a taxpayer aren’t you? May I suggest you re-read Garth’s blog. Garth, you aren’t a fool. You are BRILLIANT, oh and I love the pictures!

#103 Mike B formerly just Mike on 02.15.11 at 1:50 pm

In the year or so we took to look for a house in Toronto I can tell you that at least 50% of the homes we saw were owned by people who had huge leverage. The other 50% were just old koots looking to unload their sad excuse for a home. One couple got cold feet about having so much debt and wanted to sell their property that had a 680K first mortgage and a 80K second mortgage. They had rented out the joint for a year but it needed work badly so they dropped another 80 k on mediocre reno and then realized that no rent would even come close to paying off the mortgages. They panicked and tried to sell.. Got two offers. Took neither.. Refinanced by their bank once the bank saw the offers and now rent out the rat hole for 3K a month which , although is alot, does not come close to covering costs.
SO in reality high leverage in Toronto is not that much of a gamble unless of course you want to make a profit.

#104 DW on 02.15.11 at 1:56 pm

#87 Carlyle:

Here in TO prices last peaked around 1989 then dropped to until 1995. A house bought in 1989 didn’t get back to it’s peak-price until after 2002. I remember SFHs down about 40%, condos down about 50 – 60% at the bottom. Prices in ’95 were very low but of course the post-NAFTA job market sucked (most people were happy just to have a good job). A-lot of industry moved out – Magna was going bankrupt and most cylindrical markets (ie Ford, GM..) tanked, went bankrupt, cut-back or moved to places like Mexico.

This bubble is far, far, far worse. In TO a huge oversupply of condos. The world financial situation is far worse too – huge bubbles & busts all over, food issues, riots and so forth. China (huge RE bubble), Australia (huge RE bubble), the US, spreading Middle East riots, and many EU nations in serious trouble. Then there is a-lot in the other things in the pipeline — MERs, ponzi retirement plans, bond market and so forth. Even the cycles are ‘against’ – Kress, Elliot, Generation (Fourth Turning), K-cycles.

Considering the US R-RE market peaked in 2006 and the correction has many years yet to go (it won’t bottom in the US until AFTER 2014) I think gives us Canuks a clue just how long a RE ‘bust’ here can last. This won’t be a wait a year or two and get 5% off corrections — it will be long and brutal and then remain flatlined for quite some time afterwards. Keep your eyes on the US as they are a few years ahead of us on this. When the reach the bottom there will be *DESPAIR* – they are not even close to that yet.

While I’m not calling for the 80-90% drop like the Automatic Earth (blog) is I am estimating far more significant drops than the last time ’round and for the decline (bust) to last twice as long time-wise. Their estimates might not be that far off on some RE around TO. Again I expect prices to remain flat for quite some time afterwards such as happened in Japan (18 years and counting).

Link —>


#105 Bill Grable on 02.15.11 at 1:57 pm

> James gets it wrong, like a LOT of Canadians.

Hey Jimmy this ain’t The Excited States:

Ever hear of Non-Recouse versus Recourse loans?

Obviously not:

“I will declare bankruptcy and walk away, however, for those who paid $1M with their own money, they lose $900,000. Who wouldn’t want to gamble with other people’s money?!
Garth, you’re the greatest fool.”

No Jim – that would be you.

#106 john m on 02.15.11 at 1:59 pm

“In the shadows of the financial crisis two years ago, Ottawa quietly allowed for more than a hundred billion in toxic mortgages from Canadian banks to be sold to Canada Mortgage and Housing Corporation.”……<<<<< oh yes things are different in Canada..out 0f 600 billion in liabilities we were already in trouble with 100 billion the moment Ottawa made that decision… this won't end well…

#107 Another Albertan on 02.15.11 at 2:09 pm


Fail. It’s obvious you haven’t run the math.

Presuming a 10% reduction in the size of the loan, a 115 basis point increase in the 5-year fixed would put your payments essentially equal (+/- a couple of bucks) to today. This assumes a 5.5% starting point.

I won’t even address your assertion of losing “a majority of that 10% in interest anyway”, as it is clear you can’t operate an online mortgage calculator, never mind Excel or an HP-12c financial calculator.

If you want to buy, please do so… by all means. But don’t start to publically rationalize your assertions when they cannot be backed up by any form of reasonable data set. It’s a disservice to everyone who tries to make decisions on the level without extraneous noise from others.

Everyone else’s mileage may vary.

#108 Form Man on 02.15.11 at 2:26 pm

# 96 Shayre

The reason Harper and Flaherty presided over the greatest housing bubble in Canadian history is twofold :
1) politics….deregulating the mortgage industry in 2006 juiced the economy, and they hoped to buy a majority government.
2) idealogy….by 2007 it was obvious in the U.S. that deregulation was a mistake, but the Harperites have never been known to put facts ahead of idealogy. They have steadfastly maintained that there is no housing bubble in Canada because of their careful stewardship, and Canada’s cautious bankers. Harper and Flaherty are definitely the ‘smartest men in the room’

#109 Jan Etter on 02.15.11 at 2:36 pm

“#77 London Calling on 02.15.11 at 12:07 pm
#67 Sid “So I guess the future of real estate lies in senior housing and low income apartments in urban settings for single moms. Mcmansion suburbs will be the new ghettos and ghost towns.”

Here in London, UK. Those McMansion’s are mostly turned into rooming homes now as no one wants them (or could afford the property tax).

There are serious limits to demand on how big a home people want and need.”

In the Toronto 905 Region, certain areas of larger suburban homes without viable infrastructure (transportation, cultural, commercial) may end up transforming from middle-class suburb to low-income suburb like Scarborough has evolved into: (

We probably won’t see rooming houses as in the Great Depression days with a widowed woman cooking meals for the boarders, but more likely a proliferation of multi-family or fully tenanted properties divided into apartments.

#110 Roial1 on 02.15.11 at 2:38 pm

Just figured it out. The “Firsters”‘ they gotta be the “War room” boys. Yup! them torys are at it again. Only they could be so small minded and stupid at the same time.
Now I know that an election is just around the corner.

#111 .9999 Silver on 02.15.11 at 2:50 pm

Greeting from history

take a look at the savings and loan bust way back.
now make that every major bank, and financial structure, mortgage backed related financial vehicle’s(based on inflated value’s, add munie bonds built on inflated real estate prices, real gdp job evaporation, government tax supported employment the only growth industry(a non gdp value)…..
now take it global….

ah shit,whose fooling who… just stand back and watch now…
there’s no stopping this one. and it won’t be kind nor polite.

sitting in downtown east-side vancouver…no place to run anymore anyway.

lot’s of empty industrial for sale or rent here, stuffs not selling not renting. two buildings my block in excess 1 year, they cant even rent them…

3.75 commercial mortgage on a warehouse, doubled bi weekly payments on $315,000.00($1,200.00 a month), $75,000.00 down…180 currently outstanding. in a pinch could reduce to $649.00 month. 6000 sq artist live work, inside all built in red fur,and 2500 garden courtyard. structure very sound but needed a ton of work. doing myself.

property tax’s increasing at+- 18% a year due to BC Assessment( a Private Crown Incorporation) done sight unseen 18% evaluation increase yearly over the last 10 years. property tax structure starts blowing me up in 5 years. as the mil rate is based on assessed claimed value (a hidden tax increase).

my property tax’s are currently higher than my mortgage rate…

it should be interesting by the end of the year.
history has many example’s of paper’s success over time….not, becha can’t find one, not one !!!!

as you may have guess’d. i’m still sitting on real silver…no slv’s for this idiot…and a years food supplies
…grow 70% of our veggies.


#112 BrianT on 02.15.11 at 3:00 pm

#96Shayre-Classic-Goldman’s secret plan to build housing for the poor.

#113 jess on 02.15.11 at 3:07 pm

Condo hell

“When I saw it, I thought what a lovely place to be in,” says Gadd, now 67. “But after just eight or nine months I felt I’d made a mistake. It was grim.”

It wasn’t the property that was a let-down. It was the huge service and maintenance charges Gadd was being forced to pay out of his modest pension. The bill hit £4,400 a year for a run of four maisonettes with no common parts. This year, after taking on the agents, he will pay just £200.

Gadd’s story is one of despair both at the lack of service and excessive costs for things such as buildings insurance. And his tale may not be unfamiliar to leaseholders and flat dwellers around the country.

His managing agent was a firm called Solitaire Property Management, which in 2008 became part of the Peverel group of companies. Peverel is one of Britain’s most controversial property companies. It owns or manages hundreds of thousands of properties across Britain, under brand names such as OM, Consort and Pembertons Property Management. It looks after 65,000 retirement homes, largely at McCarthy & Stone developments. It runs security company Cirrus, which installs CCTV and entry systems for flats, and Kingsborough, which organises buildings insurance.

Behind Peverel and a web of connected companies stands multimillionaire property tycoon Vincent Tchenguiz, whose flamboyant spending – before the credit crunch at least – was legendary…..
How Kaupthing’s dance of debt with Tchenguiz brothers ended in £2bn ruinAt one point Kaupthing loans to the ill-fated

Tchenguiz property empire were equivalent to more than half of the bank’s capital base.

Simon Bowers, Monday 14 February 2011 21.08 GMT Article history

As reported in Saturday’s Guardian Money, recent years have seen a groundswell of frustration among tenants, variously

claiming unreasonable rises in service charges, buildings insurance charges and leasehold transfer fees.

Some disgruntled tenants claim Peverel companies have also failed to adequately carry out maintenance and repairs. A

website,, set up by angry tenants, has had almost 160,000 visitors in the last 16 months.

Solitaire Property Management is part of Peverel.

Meanwhile, residents at St George Wharf, a 900-apartment luxury riverside development overlooking Parliament, have

for years been in dispute with landlord companies, including Tchenguiz-linked firms, and Peverel group service

companies. A claim for £2.6m in alleged overcharging, supported by more than 300 residents, is to go before the

leasehold valuation tribunal in May

#114 rory on 02.15.11 at 3:08 pm

#2 Soylent Green is People you said:

“Guess what? Polls are just as dirty as the MSM and neocon politicians”

You should have said – Polls are just as dirty as the MSM and any politician, including your flamed Libs and NDP

You also quote Gregg in that “Reporters have an inherent bias in creating news out of what is methodologically not news.

Substitute ‘Soylent Green’ for ‘Reporter’ and you basically get Soylents’ repeated posts.

#115 Shane on 02.15.11 at 3:11 pm

Garth, I’m tired of hearing the market saying a balanced market from the nesw out today on the housing market.

#116 Dodged-A-Bullit-in Alberta on 02.15.11 at 3:18 pm

Greetings: I watched an interesting interview on BBC this morning. They were talking to a German business man whose company makes high tech, handmade, expensive sound equipment. He said that a large part of his market is into China. What was real interesting is that he stated the Company would not allow any production in China for fear that the processes and techniques would be copied. Sure a different story from that of North America.

#117 Scalgary on 02.15.11 at 3:24 pm


Couldnt see your reply for the comments from yesterday…

Hope everything is ok…

Warm Regards…

#118 jess on 02.15.11 at 3:25 pm

The “I am right” crowd belief system

So those soldiers are fighting /dying for ??????
‘I lied about WMD to topple Saddam’
Exclusive: Iraqi codenamed Curveball, whose testimony was used by White House to justify invasion, says he invented tales of bio-weapons

Curveball admissions vindicate suspicions of CIA’s former Europe chiefTyler Drumheller says he warned agency director George Tenet over intelligence supplied by Iraqi defector in 2003
It gave Powell the feeling that there was something solid

#119 Smoking Man on 02.15.11 at 3:27 pm

What you basement dwellers and bubble heads don’t understand is this.

The 50+ crowd(Movers and shakers) don’t know who Garth Turner is, they think twitter is restless leg syndrome. House prices are set by sellers, not buyers.

Now this 50+ crowd gets there into from watching Peter Mansbridge, or Lloyd Robertson, so whenever a negative story comes out about real estate, Peter and Lloyd like clock work will have a much rosier story with in two days, Papers and TV make a large portion of revenue from the RE market.

So you can come on here AND SCREEM FOUL all you want. It’s not going to do squat. It like yelling at the mirror.



#120 trinotuta on 02.15.11 at 3:28 pm

“The Canadian Real Estate Association cautioned the federal government to stay out of the mortgage market until the effects of recent changes can be gauged, as it suggested buyers raced to secure 35-year mortgages in January before they are banned in late March.”

“Overall, she added, the housing market is still in a “well balanced position with little price pressures on the horizon.”


#121 Live Within Your Means on 02.15.11 at 3:28 pm

I can’t believe that it was the CMHC bureaucrats who who made these decisions. The onus is on SH & Flim Flam who dictated this policy. They were the ones, when in opposition, who wanted to deregulate the banks and, when the crisis hit, went on the world stage trying to take credit for our ‘secure’ banking system. At least there are a few in the MSM who have ‘finally’ brought this to the attention of a few who actually pay attention. There were blogs and non-MSM writing about this 2 yrs ago.

#122 Bill on 02.15.11 at 3:34 pm

i have no faith that the current government in power can manage the coming housing bubble in Canada. The government is full of incompetency. Notice the minister lying to Parliament. Jason Kenney the Immigration Minister lecturing and telling the federal court judges what they should be doing (This is not normal in a democracy for the executive to tell the judiciary what to do, the judiciary needs to independent of government). In today’s age its not about ideology but competency. Please can I have a competent government.

#123 AG Sage on 02.15.11 at 3:39 pm

>#97 Carlyle on 02.15.11 at 1:26 pm

Rents? Hm. There can be some tricky stuff with rents. Now we are getting into the price of gas as a factor. (Low commute houses would gain, even as the burbs were falling.) I don’t think that the condo overhang will help reduce house rents, given the distinctive demand for one vs. the other.

I’m also still getting my mind around the impact of all of this being recourse. In LA rents fell (accidental landlords trying to hold out), then went up (houses went empty because banks make terrible landlords), then fell again (investors started scooping up and renovating).

I don’t have a definitive sense for TO. Get a high mileage car so your choices are broader. That’s my only thought.

#124 Mikey the Realtor on 02.15.11 at 3:40 pm

The Scot has a got it right, no money down, nothing to lose and gamble like hell. Today anyone putting money down on RE is the greater fool. If you had money the best thing to do it hide it and gamble with banker /taxpayer money, if it fails then bankrupt and you still get to keep your dough.

#125 Soylent Green is People on 02.15.11 at 3:45 pm

Re #114 rory on 02.15.11 at 3:08 pm

Is your real name Ray Novak… by any chance :)


Ray Novak: Steve Harper’s Closet Confidant

He used to live above Steve Harper’s garage. Now he may be the second most powerful man in Ottawa.

“Ray is effectively the Prime Minister’s closest confidant,” enthuses one government official. “Not only as a member of his staff, but as a personal and intimate member of the Prime Minister’s life.”

For nearly four years while Harper was opposition leader, Novak, then with the title of executive assistant, lived in a small loft above the detached garage at Stornoway—the opposition leader’s official residence—eating meals with the family and growing close to Harper’s two young children.

This is the detail that has come to define an aide who, by some tellings, knows Harper better than all but the Prime Minister’s wife and mother. “Ray was with him more than anybody else for years and years and years,” says Brodie, who served as Harper’s chief of staff for three years. “They were literally hardly ever apart.”

In addition to living with the Harper family at Stornoway, he oversaw Harper’s tour operations, coordinated with his security detail and served as the Prime Minister’s envoy to the families of the Air India bombing. “Ray will get it done,” says a former member of the PMO. “And he will do so with total discretion.”

When Harper returned to federal politics in 2001 to pursue the Alliance leadership, he tabbed Novak as his assistant.

As principal secretary, Novak travels with the Prime Minister abroad…

(Pls note no actual broads were used in the entirety of above story).



#126 Mikey the Realtor on 02.15.11 at 3:48 pm

Carpe Diem

“remember, a bankruptcy is on your credit history for a 1st timer (7 years) if you met all the conditions and didn’t have and conditional orders attached to it ”

how long its on your credit is irrelevant, I know a couple of peeps who had bankruptcies and within a year had a CC and a mortgage, yes the mortgage rate was a couple of percentage points higher for the term of 2 years and after it was market. Another great story Carp, but reality really is different.

#127 Mortgage girl on 02.15.11 at 3:48 pm

For 100 banks are not on the hook because cmhc insures all these deals. With the recent changes made by Flaherty helocs are no longer insurable. Just a matter of time before banks start slashing these lines of credit. If u have a heloc you should hang onto it. You can’t port them because they are a collateral charge. I specialize in construction financing and I only deal in private money. Private lenders are very careful and we won’t do 90 percent unless the construction financing significantly increases the value. Even then we only advance in draws to a max of 65 percent as is completed. Borrow has to have at least 25 percent skin in the deal before the first draw unless the property is highly marketable.

#128 Devore on 02.15.11 at 3:51 pm

#96 shayre

For the last 10 years, we would have been no different than every other country with a very high unemployment rate. We will get that now, but at least we have housing in place that otherwise would not have been built.

Tanking the entire economy is an expensive way to build housing.

#129 Irrational Exuberance on 02.15.11 at 4:01 pm

Just heard today that a colleague in my line of work is moving back to the Maritimes from Vancouver due to the unaffordability of our RE. Have heard a number of similar anecdotes of professional people leaving Van city due to the same reason. I don’t think anyone has given serious thought to the “brain drain” problems that our lofty RE will create in the long-term.

Hate to say it, but I’ve grown increasingly disenfranchised with Vancouver, even though it is the only place I’ve ever known as home. If it wasn’t for my great job and family constraints, I would be long outta’ here (just about anywhere in Canada would be a step up from this place). The city has taken such a turn for the worse…. ugly city that is teaming with poor building quality, gangsters & grow-ops, and an absurd bull hubris that permeates from every pore. Oh yeah… did I mention that it rains here A LOT…
But here is the kicker… for the ponzi scheme to keep running here, they will need those very people that are now high-tailing back to whatever part of Canada they first came from. Without these essential “greater fools” who will keep this whole thing going? And as for the brain drain, I don’t think the “wealthy asians” will be willing or able to fill that void.
Even IF RE fell 40% here, I don’t think it would make this city any more livable. If anything, having to listen to a non-stop chorus of “why did this happen to me” will only add to the gloom and despair that will one day become the trademark of THE BEST PLACE ON EARTH.

#130 bill on 02.15.11 at 4:02 pm

ag sage
hard to say what kind of a budget your on…
for japanese try fujiya or sakanaya or if you got the bux dan

indian …atithis , akbars own , or head out to surrey lots of mom and pop resto’s
chinese? richmond marpole , chinatown lots of them for sure
ask people in vancouver about their favorite place to eat .

‘heart attack and vine’ a coffee shop that becomes a thai restaurant after five. if you like it really hot ask the proprietress for the homemade chili sauce.

#131 London Calling on 02.15.11 at 4:06 pm

#101 Buyer “If I waited 6 months when 5 year rates are significantly higher I would lose a majority of that 10% in interest anyway. Obviously i’d prefer a higher rate, low mortgage but the low mortgage part is not guaranteed.”

I do see your point. Just keep in mind if you are looking for guarantees the total obligational debt you took out (mortgage) is guaranteed as well. While interest rates will rise you’ll have to work longer to pay off a bigger debt. (did I explain that right)

Thus, if you make $50k a year and take out $400k that’s 8 years of gross income. If you take out $300k that’s 6 years or 2 less years of gross income.

Throw everything you can at that new mortgage, the next 5 year am may not be so low in rates.

#132 Buyer on 02.15.11 at 4:12 pm

#107 Another Albertan

A 10% drop in house values and only a 115 basis point increase? The rates already increased a 25 basis points since I purchased 2 weeks ago.. Garth is talking about much higher increases closer to historical norms of 7-8% on 5 year fixed vs the 3.69 rate i’m at. This would easily eat up a 10 and the majority of a 15% price decrease. As i said, the rates going up are definite where house prices dropping 15% is not. I locked in the known variable and will wait to see the unknown.

#133 good luck on 02.15.11 at 4:13 pm

Great post.

It doesn’t seem like agents are bound by fiduciary duty like financial advisors…but they often deal with a bigger portion (and less liquid portion) of a client’s net worth. So WTF? How are these guys allowed to push product that may not be right for clients?

…here is another case of a property boom about to go bust.

Chinese Ghost Malls:

#134 Form Man on 02.15.11 at 4:23 pm

wow. this is great spin. Vancouver listings double last month, meaning strength ?

#135 Otto Doppelganger on 02.15.11 at 4:23 pm


“The Canadian Real Estate Association cautioned the federal government to stay out of the mortgage market until the effects of recent changes can be gauged, as it suggested buyers raced to secure 35-year mortgages in January before they are banned in late March.”

or, in layman’s terms, ‘get out of our pool, ‘cuz once people find out we’ve been peeing in it, no one will want to play in it’

#136 Live Within Your Means on 02.15.11 at 4:24 pm

Love how these libertarians like Cookie Monster who says “Small limited government run by laws that concerns itself only with law and order, domestic police and national defense is the ideal model for freedom. Nothing more. Including no involvement in money and banking, or any form of public goods or services.”

And Rory, IIRC, from some of his previous posts, would agree with him. I’d be curious to know how each of them would feel if they had a child, sibling, parent who died because there were no laws to protect citizens from the multitude of ‘sh*t’ stuff put out there by corporations. It seems to me their view of the world is dog eat dog – let the fittest survive. Screw the rest. I thought we humans had progressed beyond that. They seem to have no compassion/understanding for/or anyone other than themselves. Real Harpie sheeple.

#137 tmg on 02.15.11 at 4:25 pm

ok fellow bloggers…you’re all (most) smart people…I’m looking for suggestions. I live in Vancouver and am currently renting a house with a mold problem. We have a 1 yr lease…moved in last July. We had a sewer back up 3 days after the move, a basement flood 6 weeks later and more recently, a big split in the dining room ceiling with water dropping down. We have an Order from the tenancy board that requires them to repair, but one month later, nothing’s been done. The owner (overseas) has offered us 2 months rent to move so he doesn’t have to fix, but we would be required to sign a waiver stating that we will never sue him for health problems arising from the mold exposure. We would love to take him up on the 2 months rent, but refuse to sign the waiver. I’m not sure where to go from here. I feel painted into a corner. We do have respiratory problems, probably relating to the mold and would love to leave, but if we do, we would be responsible for the rent at “Fawlty Towers” until July. Does anyone out there have any suggestions????? I’m feeling terribly resentful that we let people from overseas buy here as my experience is that they treat us badly.

Are you for real? Move and sue. — Garth

#138 palebird on 02.15.11 at 4:42 pm

#34 who cares what the mercer survey says, vancouver is mediocre at best.. people should get out more..

#139 Timing is Everything on 02.15.11 at 4:46 pm

#9 JamesBC

You have a good point. You can not get blood from stone.
However, the bankruptcy rules can/should be changed to prevent some of this behavior.

#140 Herb on 02.15.11 at 4:54 pm

… the shareholders of the company that insured this fool and suicidal transaction from loss are the greatest fools.

There you go again, Garth, adding insult to injury by reminding us of the facts. The “Board” not only didn’t ask the” shareholders”, but pulled an Enron – remember “as solid as the Canadian shield”?.

Nothing new. Those who can, enjoy the benefit and pass the bill to everyone else. Every other aspect of politics is eyewash to keep that process going.

#141 TheBigLebowski on 02.15.11 at 5:01 pm

#179 Temple

“What specific point are you trying to make about stocks?”

When the dow hit 12,000 back in 2000/2001 you could buy 50 ounces of gold with the dow aka the dow divided by one once of gold. Today you can only buy 8.5 ounces of gold with the dow. Gold is unchanging over time, its the purchasing power of currencies and stocks that fluctuate. My point is people have lost purchasing power if they have held the dow over the last decade. History shows the ratio of gold to the dow will revert to 1 to 1. That could be dow 5000 and gold 5000 or dow 10,000 and gold 10,000. My question is where was the best place to be over the past ten years, gold or the dow. Gold has returned 17% on average priced in the nine major currencies while the dow has given a negative return when considering inflation.

Nobody holds an index for 10 years. What kind of investor are you? — Garth

#142 doctore on 02.15.11 at 5:01 pm

Have you ever heard of such nonsense from the CREA cartel, these people are now begging F to not do anything more to the mortgage terms.

#143 Herb on 02.15.11 at 5:05 pm

#114 Rory,

shouldn’t you be out there defending Bev Oda or your government’s record in finance, foreign affairs, or how it changed the way government does business?

#144 Carlyle on 02.15.11 at 5:13 pm

#123 AG Sage
We actually have to move into downtown Toronto and will be going to rent a condo. Just not sure what’s the “right” rent to look for … So far decent places have ranged between 1300 – 1500 a month.

I’m just trying to get a sense if the existing and incoming mass of speculator units will drive down rents (guessing yes).

Don’t want to overpay heh.

#145 Carlyle on 02.15.11 at 5:16 pm

#119 Smoking Man said “House prices are set by sellers, not buyers.”

And what if nobody is buying?

#146 Another Albertan on 02.15.11 at 5:23 pm


I already gave you a 181bp margin with 5.5 versus 3.69, never mind the 115 of padding on top of it. That’s nearly 3 full percentage points. If you honestly believe that interest rates on a 5-year fixed 6 months out are going to be nearly double without an associated drop in the number of qualified buyers and without a drop in the amount for which they’d qualify, then have at ‘er.

Unfortunately, the arithmetic in the real world isn’t as simple as just holding one variable constant as it is in your model.

If fixed rates double in the next six months, there are much bigger issues afoot. On that time scale, it would imply the immediate pseudo-seizing of any marketplace requiring debt to consummate the transaction, knocking out many parties, but the most sophisticated.

But the bills come to your address, not mine… spend your money as you please.

Everyone else’s mileage may vary.

#147 tmg on 02.15.11 at 5:26 pm

Garth, do know how much a lawyer costs?? We would end up spending more on lawyer’s fees than we would collect!

Don’t count on it. The LL will have to settle. — Garth

#148 Devore on 02.15.11 at 5:44 pm

#136 Live Within Your Means

Real Harpie sheeple.

Harpie is a libertarian? I think your labels have gotten a bit dusty.

#149 Devore on 02.15.11 at 5:49 pm

#119 Smoking Man

House prices are set by sellers, not buyers.

Things are only worth what someone is willing and able to pay for them. Doesn’t sound like sellers setting prices to me. You should re-read your Econ 101 textbook.

#150 borrowedcarbon on 02.15.11 at 6:35 pm

The youth who are supposed to keep our housing market afloat in the future owe 13 billion in student loans.

#151 borrowedcarbon on 02.15.11 at 6:38 pm

Make that 19 billion to governments plus what they owe to banks for the non-government loans.

#152 David B on 02.15.11 at 6:48 pm

Food for thought…..

Should there be an American style drop in home prices here in Canada there will hard times for many. But for those who waited it will be like winning a lotto! Those people will not require CHMC funding & lower overall monthly payments which could easily equal a 20 to 30% pay raise! These same people could afford a good saving plan plus a drip or two to Home Depot fueling our economy. For those sad Greater Fools with ants in their pants will pay the piper for many years perhaps moving into rental property left vacant by those who could wait.

What comes around goes around eh……..

#153 betamax on 02.15.11 at 6:52 pm

#126 Mikey the Realtor: “I know a couple of peeps [sic] who had bankruptcies and within a year had a CC and a mortgage”

Recent penalties for bankruptcy have been distorted by the credit bubble. Just as borrowing has been free an easy, so have bankrupts had an easy time of it. Once credit tightens again, it’ll be a different matter.

In the 90’s, I knew people who went bankrupt who couldn’t even get a chequing account afterward. The banks wouldn’t trust them to write cheques. And even *after* 7 years, they still had a very difficult time getting even a single credit card, and when they did it was at a very high rate. Forget about a mortgage.

The credit bubble is going to be followed by a credit crunch, and bankrupts can look forward to some old-fashioned repercussions for insolvency.

#154 Kitchener1 on 02.15.11 at 6:56 pm

#119 Smoking man

LOL at sellers setting the price.

Sorry buddy but the market sets the price.

Hows that seller setting the price thingy working out in the US? Spain?Ireland????

#155 big_cheese on 02.15.11 at 7:10 pm

Pimco’s Gross slashes U.S. debt holdings

The US and Barry better hope this doesn’t become a trend.
Mabey the Chinese will do the same. Then who’s going to buy your debt?

Gee Large debt, artifically keeping interest rates low. Humm wonder what other country has that problem

#156 Live Within Your Means on 02.15.11 at 7:24 pm

#148 Devore on 02.15.11 at 5:44 pm
#136 Live Within Your Means

Real Harpie sheeple.

Harpie is a libertarian? I think your labels have gotten a bit dusty.


He is, but won’t show his true colours until he get’s his majority. He’s a charlatan.

#157 BrianT on 02.15.11 at 7:25 pm

Great video using bourbon to explain what they have done to the USA

#158 john m on 02.15.11 at 7:34 pm

What a sad state our country is in……We can not believe the news,we can not believe the fact we really do not even know how bad our countries finances are in–“H” makes sure of that! ……….. In fact the only truthful statement to my knowledge he has ever made is “you won’t know Canada when i am done with it” —–BANG ON!…………..anyone who thinks he is not pushing full time for an election right now is dreaming–the day of reckoning is fast approaching and he needs to be in a position of power to swamp the media with propaganda blaming someone else (with funding from our tax dollars) he has from day one!…bad management is one thing,the total destruction of a wealthy countries economy is another…and believe it or not the actions of our present leadership have the potential to do exactly that.

#159 bridgepigeon on 02.15.11 at 8:07 pm

tell me you don’t have children living there…

#160 S.B. on 02.15.11 at 8:19 pm

Food prices: if you wonder about the precision weather attacks on our key food supply regions in the past 2 years, google search for “weather warfare”.

We cannot even imagine the technology in use. After all I am writing this on 3 decades old technology! Yes, the Internet was developed in 1969 as military technology.

Weather Warfare: Beware the US military’s experiments with climatic warfare
‘Climatic warfare’ has been excluded from the agenda on climate change.

by Prof. Michel Chossudovsky

#161 jess on 02.15.11 at 8:21 pm

Execution issues?

Ben-Ezra & Katz lays off 236

I guess that title ,”Lawyer of the Year” will be adding a few words or two?
Mr. Stern saw no problem with routinely “fixing” such problems by backdating assignments, changing case chronologies, robo signers etc So much for an association policing it’s members.

On Thursday, Fannie Mae cited document “execution issues” as the reason it terminated the law firm

Fort Lauderdale law firm Ben-Ezra & Katz confirmed Tuesday that it had laid off 236 employees on Monday. The layoffs come after Fannie Mae terminated its …South Florida Business Journal – 7 related articles

Lawyer held in contempt over ‘fraud’ in foreclosure filing
Palm Beach Post –

#162 r on 02.15.11 at 8:28 pm

When they come to the taxpayer explaining the need to backstop the bad debt with billions in bailouts, we MUST say NO! Let us learn at least SOMETHING from our American cousins. Better still let’s learn something from Iceland, who told their government no effin’ way.

#163 Nostradamus Le Mad Vlad on 02.15.11 at 8:28 pm

#20 Jas Girn — “BTW, “Soylent Green is People”, I love some of your posts, but this one above is out of topic.”

Disagree. Forewarned is forearmed. Those who are well-informed beforehand will be quite willing to spread the truth about Harper and the CPC, before and during the upcoming election.

If nothing else, Iggy and Layton are the lesser of two evils, so it would change (and muddle things up) to see them running the show for a while.

Major changes happening worldwide over the next few years, and one here is (somewhat) welcome.

See Do Politicians speak from both sides of their mouths? Do bears crap in the woods and birds fly? YouTube link in.

#67 Sid — “Mcmansion suburbs will be the new ghettos and ghost towns.”

Just like Detroit, Cleveland and Philadelphia.

#73 C — “. . . how rising inflation could/will result in rising interest rates which will completely clobber real estate.”

Rerun of the ’80s and ’90s, except there’s a new generation in town who have never seen the results for themselves.

There’s a first time for everything; that’s why they are referred to as “Property Virgins”.

#120 trinotuta — “. . . as it suggested buyers raced to secure 35-year mortgages in January before they are banned in late March.”

Hmm. Is this around the time when the election will be held? If so, it could be called in the next week or two, to allow for an end-of-March first couple of weeks in April election.

#124 Mikey the Realtor — “If you had money . . .”

If I had money, I would buy penny stocks on-line, wait a few months before they hit $10-$25 then cash out. Oh, and I would also be renting. No need to own something that is constantly deteriorating.

#137 tmg — Move and sue. — Garth (ASAP).

#150 borrowedcarbon — Combine that with the US student tuition loans set to bubble over (like too much new champagne in a small glass), realistic and practical boomers, like us here, see the futility of what is going on.

There is a much larger canvas to be painted, and we’re part of that paint.

#156 Live Within Your Means — “He is, but won’t show his true colours until he get’s his majority.”

Two chances of that — none and less than none. Even with a minority, he can still cause enormous damage. He is dangerous.
Japan slips back into recession, but Dow ready to hit 25K — NOT!

Inflation lie. Well, they’re govt., and they lie about everything else.

Pentagon Now one can see why America is crumbling, but Spending more for less. Say, aren’t those people protesting about something there?

3:40 clip “Backwardation” and the fall of banxters.

Elites Creating new wars against Muslims and Chinese?

Parkinson’s Disease Pesticides possible cause.

4:17 clip Your life according to the govt. which means we’re all screwed up.

New week, another IMF call for a new SDR. Nice chart further down.

Provocation in Iran.

Redefining Dickhead a.k.a. John Neocon Bolton.

Next Invasion? Venezuela has lots of oil, plus they don’t like wot’s-his-name.

Soros Not sure what he has to cry about; he bankrolled Obama and calls the shots in the WH.

#164 Herb on 02.15.11 at 8:34 pm

The Harper Government’s “new way of doing business” in a nutshell:

… concede nothing, explain nothing, claim exactly the opposite of what you are accused of doing. It is never not remarkable to behold.

– Aaron Wherry,

#165 yt on 02.15.11 at 8:45 pm

The big numbers we should be looking at right now are those from China. Food has gone up 10% since christmas day and 4% in the last ten days alone!!!!!

Real estate in Canada will not matter if China’s “controlled” economy i.e. high growth, low wages and little increase in internal markets explodes like it should into a serious round of high inflation. Toss in the possibility of a popping property bubble as well and the coming times will be interesting indeed.

Mish has a good peice on this earlier today.

#166 AG Sage on 02.15.11 at 8:47 pm

>House prices are set by sellers, not buyers.

Not to nitpick, but if the seller lists for less than the buyer is willing to pay, then the seller will have set the price. Almost certainly not the meaning intended, however.

>#152 David B on 02.15.11 at 6:48 pm
>Food for thought…..

>Should there be an American style drop in home prices here in Canada there will hard times for many. But for those who waited it will be like winning a lotto!

It’s only fun until someone jumps too soon and catches a knife. In the U.S. many many of the cash-rich renters did. And now that they have pulled their own demand forward through their impatience, we are in another decline.

#167 ballingsford on 02.15.11 at 8:50 pm

This topic about CREA advising the gov’t not to screw around with mortgage rules was all over the place this morning, but I had to do some searching to find this evening. Someone tried to hide it!

#168 Devore on 02.15.11 at 8:54 pm

#156 Live Within Your Means

I think the term you are looking for is “crony capitalist”. You know, of the kind they have in the US and all over the world, giving corporations free reign to do whatever they like while pretending to look out for the people.

Again, be like Santa, check those labels twice before handing them out to people.

#169 Cookie Monster on 02.15.11 at 9:04 pm

Live Within Your Means (And if that’s insufficient other peoples too)

I was explaining what freedom was which happens to be a libertarian ideology, true.

Of course I care about other people and if a child of mine or myself needs health care I want to have a host of free market competition for profit choices for treatment to choose from. Not our overburdened, laden, one size fits all black hole money pit where people often go to die while it kills the rest of society as a side effect.

Now check yourself, I think your heart is bleeding all over!

#170 Roial1 on 02.15.11 at 9:06 pm

#55 Cookie Monster on 02.15.11 at 10:14 am
Small limited government run by laws that concerns itself only with law and order, domestic police and national defense is the ideal model for freedom. Nothing more. Including no involvement in money and banking, or any form of public goods or services.

Oh YA! thats the mantra.
Just what did you think of the poisoned meat that killed those old folks?
I don’t think that removing meat inspecters had any affect on this??? Do you???
Yup! put the “Free market” out there to govern itself and all will be well.
Just like the banksters, “they” will never do anything to hurt the economy. Give them their freedom.

Every time I see that mantra I think there is a VERY stupid person.

You must be a great friend of Ben B.

Thats his motto too.

Oh, don’t get me wrong, I believe in “free markets” too. Just with FAIR limits.
Fraudsters are just finantial free marketers too!

#171 AG Sage on 02.15.11 at 9:09 pm

>#144 Carlyle on 02.15.11 at 5:13 pm
>#123 AG Sage
>We actually have to move into downtown Toronto and will be going to rent a condo. Just not sure what’s the “right” rent to look for … So far decent places have ranged between 1300 – 1500 a month.

Certainly looks like oversupply, but YMMV. In the U.S. you would have to worry about committing to rent in any new project that failed to sell enough units to qualify for FHA backing of the mortgages, without which the whole project converts to rental apartments, you hope. (Because, I guess, the purely capitalist market for mortgages won’t touch a condo . . .). No idea if you need to worry about this sort of thing in Canada.

I too have been looking at condos along the waterfront. Spouse has been on again-off again prospecting for a job there. The layouts vary in utility rather a lot. I know from staying in friends’ places that solar load on a water view place is big issue. I’d be sorely tempted to put racks of black stones in front of the windows to hold the heat overnight in the winter. Seriously.

#172 Elmer on 02.15.11 at 9:28 pm

Two guys, we’ll call them Brayden and Tyler, were walking down the street when they came upon a pile of shit. Tyler said to Brayden, “I’ll give you a million dollars to eat it.” Brayden thought “wow a million bucks, that’s totally worth it” and ate it. As they continued walking, both felt unsatisfied, Tyler because he just lost a million dollars and didn’t gain anything from it, and Brayden because he just ate a pile of shit. They came upon another pile of shit, and this time Brayden said to Tyler, “I’ll give you one million dollars if you eat it”, thinking that he’d no longer feel bad about eating the last pile of shit if Tyler ate shit too. Tyler saw this as an opportunity to earn his million dollars back, so he ate it. As they continued walking, neither felt satisfied, because they were both no richer, yet they had each eaten shit. So they decided to talk to an economics professor. The professor said, “You should both be very happy, because you just increased your country’s GDP by two million dollars!”

#173 SRV ES339 on 02.15.11 at 9:33 pm

Thanks for another great read Garth!

Do you have any explaination for why on earth the Liberals and NDP aren’t all over the backroom games the PCs played in support of the financial elite… are they just as beholden to big money, or simply brain dead?

Maybe you could send Mr Ignatief a link to your blog!

#174 john m on 02.15.11 at 9:44 pm

Get ready people…”H” is sending out his sheeple for town hall meetings (the one in my riding has not been seen or heard from since “H” got elected) now he’s coming out to speak to the people (wow would i ever love to see his instruction sheet)…anyone think “H” is not pushing for an election is dreaming and don’t think he is not watching the polls…….if he has trouble and thinks the other parties will back off he will add to his budget elimination of political party funding….he has already laid the groundwork for that…….but he desperately needs to keep control of the taxpayers coffers because even the CRAP party with all their oil company contributors do not have the funds to support the propaganda he will need to send out to cover his ass for the mess he has made……methinks :-)

#175 Timing is Everything on 02.15.11 at 9:48 pm

Losing Control….

“There is a genuine concern that Parliament is losing control of its fiduciary responsibilities of approving financial authorities of public monies as afforded in the Constitution”

It’s a bad thing.

#176 bridgepigeon on 02.15.11 at 9:56 pm

136 Live Within Your Means
I do disagree, especially as the line between corporations and government is not even blurred any longer, but that’s a long discussion.
One example to the contrary, I’m personally dealing with, was the recent death of my father in law due to asbestos in his lungs. Harper continues, against the UN, groups representing millions of workers, and 50 countries that have outlawed asbestos, to fund and promote this export. The Canadian government is directly responsible for millions of multi generational deaths, mostly third world, naturally.

#177 john m on 02.15.11 at 10:06 pm

152 David B on 02.15.11 at 6:48 pm

Food for thought…..

Should there be an American style drop in home prices here in Canada there will hard times for many. But for those who waited it will be like winning a lotto!<<<<<<<<<<<<< are you serious? There will be no winners..hundreds of thousands of people will be financially destroyed..and the remainder of us will be picking up the tab….there are no bargains when there are no buyers!

#178 Jacen on 02.15.11 at 10:07 pm

#34 SquareNinja,

The Mercer report isn’t solely about ‘the city’ in question. Vancouver is high up there because of a number of other benefits that are due to being a Canadian city, not just Vancouver. That’s also why Canadian (and Australian and Swiss) cities are almost always higher than the U.S.; they’re generally safer & have universal health care access.

As for cuisine… I lived in Vancouver (& Calgary) prior to living in Melbourne, and I honestly don’t see what there is to brag about in Vancouver cuisine.

#179 Timing is Everything on 02.15.11 at 10:10 pm

#163 Nostradamus Le Mad Vlad – said “#67 Sid — “Mcmansion suburbs will be the new ghettos and ghost towns.”
Just like Detroit, Cleveland and Philadelphia.

…and Victoria and Ottawa and Quebec City. ;)

#180 Hoof-Hearted on 02.15.11 at 10:18 pm

I know an Asain fellow who tells me good pithy quotes

One of them is apparently Confuscion….”if you are going to get raped…simply sit back and try to enjoy it”.

Don’t delay the inevitable….let the crash happen.

Get a new friend. — Garth

#181 HouseBuster on 02.15.11 at 10:41 pm

Excellent cuisine in Vancouver? Is that a joke?

Spain has 4 for the top 10 restaurants in the world and that didn’t stop their housing from collapsing. They also have a better healthcare system, better weather, lifestyle, culture, etc. None of this stopped fall.

#182 Cookie Monster on 02.15.11 at 11:53 pm

#170 Roial1 on 02.15.11 at 9:06 pm
Obviously a business will not stay in business long if it kills its customers with food poisoning. Bare in mind it was an accident. Also, this function may be allowed in my system covered under the order section of law and order.

Is that the best you got? Is that all you’re worried about? Food poisoning? Next!

#183 Soylent Green is People on 02.15.11 at 11:59 pm

Reasons why the Liberals and NDP haven’t shut Harper down yet:

– the billionaire owned mass media in Canada support Harper as he represents the rich elite corporations and they help him by running false stories and polls for Harper and against Ig

– why are we blaming Liberals and NDP for the sins of Harper?

– Harper spends millions of your tax dollars every week attacking Liberals and NDP; not even Jesus or Mother Theresa could withstand that American style of dirty mud slinging politics

– maybe because Canadians didn’t support Liberals and NDP trying to shut down Harper’s evil ways. Big Ig tried to call an election to get rid of King Harper in September 2009 and Canadians BLOODY screamed they didn’t want another election. Blame your freaking selves for the disaster that is Herr Harper.

‘Mr. Harper, your time is up’
Liberals vow no-confidence vote in next sitting of House
Last Updated: September 2, 2009 5:13am




#184 Utopia on 02.16.11 at 12:43 am

#80 The American

“AT #19: The Canadian market is THE most “sub-prime” of all markets in the G-20. Absolutely no doubt about that, especially when over 70% of the population owns a home. Simply, it isn’t sustainable”.

Well, it certainly is good to see those South of the border weigh in on our real estate situation here in Canada. Open dialogue is often helpful. Cheerleading for a crash is a bit like wishing bad luck on your friends though.

In any case, I am no longer sure I agree with many of the sentiments expressed on this site. In the past weeks I have made one or two comments suggesting my own doubts that a major correction might materialize.

I am not a perfect angel in that claim though as I periodically slip back into old habits and get into a negative funk while anticipating the worst outcomes, even a disaster. Just like almost everyone else here.

But why would I say that I now have doubts about a US style correction? Well, in short, circumstances have changed. Much of the global financial markets risk has evaporated at the same time that the economy is improving and most of the rest of the globe has gone inflationary while it experiences a growth phase.

Many of the changes have happened in just the past six of eight months and so it has taken me time to adjust to new surroundings and the different landscape. But change is coming and some of our old assumptions, fears and worst case scenarios no longer make sense.

As a person who has been part of this blog since pretty much forever and is familiar with all the risks to our domestic markets I have continually puzzled over the resistance of our Canadian housing sector to the much anticipated correction. A correction which is by almost every metric inevitable and unavoidable.

You who read this site daily already know all the reasons why we should fall so there is no need for me to repeat the details here.

Nonetheless, after having reviewed some of the basics I have come to other conclusions. Namely, that employment levels are improving along with GDP while incomes have not declined in any measurable way. That our governments here are acting responsibly to cut debt and deficit levels. That manufacturing output is on the rise, auto sales are up and consumption numbers improving. That inflation is once again a concern for many in this country and that it is a very real threat.

We may indeed have all of the makings for a real estate correction in this country and all of the prime reasons to facilitate that correction are in place, yet if the above mentioned considerations do not show significant housing-adverse deterioration then there will not be major or rapid price declines.

That event just can’t happen easily under those conditions. Even high levels of indebtedness will not harm housing prices in a rising economy.

This is not to say I believe prices will rise a great deal more, only that I do not see a major correction to the downside anymore either.

As I have expressed once before, it now appears to me more likely that we will see a soft landing, a long slow decline rather than any sharp price changes. This is consistent with Mr turners own conclusions that a melt versus a crash is the most likely of outcomes. I concur.

Those who are mortgaged heavily will simply carry the debt loads for years (as intended) without significant capital appreciation while the forces of inflation slowly but surely equalize the excess payments of today to make them manageable debts in the future.

That is to say that home prices may well decline, albeit mildly, but will eventually meet up with the natural (persistent) level of inflation as expressed by decades until the system is finally back in balance. Certainly that is the hope. No sane person in this country wants ot experience what Americans have lived through these past few years.

We would much rather prefer to just pay the bills without having all the social, political and economic discord to contend with.

In the meantime we need to understand that there are sacrifices to be paid. If we are collectively saddled with high housing debt payments and related obligations then we need to appreciate that there will be offsetting spending reductions in other parts of the economy. These are naturally negatives and represent a drag on economic growth over the long term.

Canadians have already escaped most of the worst impacts of the credit crisis. Through the tool of CMHC insurance we now find ourselves in the unusual position of being relatively high risk debtors supported by an economy that typically responds strongly during commodity booms. Some are call this period in time a commodity-supercycle and suggest that our economy will be rewarded for many, many years to come.

Furthermore, we are now three full quarters into what appears to be an economic recovery (albeit an aenemic one) and the signals that are coming from developing and emerging markets are telling us that both inflation and growth are on the horizon. In the US, we can already see that a bottom to their own housing correction is on the horizon.

No recession lasts forever. This one is no different and that should be readily apparent to all by surging stock markets and commodity prices where the money is reflecting inflation concerns in higher asset values. If history is a guide, should we not also eventually see a major price recovery in US real estate values too as one example?

I mean that in the most serious way. Every bottom is matched with a bounce and it is now my feeling that real estate in your country could well be lining up for a significant recovery that will come as a surprise to most pundits.

So after nearly 5 long years of expecting the very worst of outcomes for Canadian housing (that have never yet fully materialized), it is time we re-examined our theories and did so honestly, by the numbers and by the facts.

All I am saying here is, let’s look at the big picture and keep our minds open. Times are changing. Nothing is written in stone.

#185 Roial1 on 02.16.11 at 1:19 am

#182 Cookie Monster on 02.15.11 at 11:53 pm

Is that the best you got? Is that all you’re worried about? Food poisoning?

Easy to see that it was NOT one of YOUR relatives.

PS. there are somany examples that I was not willing to go on and on but if you want I can. Starting with the housing inspecters and the results of letting the builders free reign. The costs to home owners is a disgrace to Canada.

No, there are too many places that cutbacks have been a disaster due to greedand no oversight.

It’s like Greenspan said, I thought that the markets would self police.—-YA! RIGHT! Psst, wan’a buy a bridge? I can get yu a good deal.

#186 SquareNinja on 02.16.11 at 7:10 am

Nobody said good cuisine would stop the real estate bust! I’m just saying Vancouver is a nice place; and of course part of the reason is because it’s in Canada. Your head is not tall on its own… it depends on your body…

@tmg… Garth’s advice is good; when you sue, there’s an initial process between the parties to see if matters can be settled out of court (discovery). Most issues indeed are settled outside of court… like in the movie, “The Social Network”.

You should seek s lawyer’s advice; it’ll cost you $200 maybe, but will be well worth it.

#187 Cookie Monster on 02.16.11 at 10:03 am

#185 Roial1 on 02.16.11 at 1:19 am
If it happened to me I would sue them, that’s what the courts are for, to sue for damages. Mistakes and accidents will happen with or without government regulators and inspectors. My position is people and business have to take the bulk of the responsibility for their own actions and reputation, not government.

When it makes sense for government to set standards and regulations for industry and construction and issues of safety or human rights, that’s fine, these things must be followed and adhered to or business will be charged or sued for damages. A world of law and order is a world of courts, claims and lawyers. But at least it’s civil.

My point is that government has WAY overstepped its bounds and is meddling in WAY too many aspects of society. So lets get them out of our lives so we can be free. They are costing us a fortune and obviously not delivering enforcement of their mandates since you have so many examples. They are just driving up costs of and aggravation for everyone, while quality suffers.

#188 The InvestorsFriend on 02.16.11 at 5:18 pm

Further to my comment on CMHC at 122.

It’s worst than I thought.

OMG it’s right there at page 37 of the CMHC annual Report

Retained earnings related to the insurance activity are appropriated in
accordance with guidelines set out by the Office of the Superintendent of
Financial Institutions (OSFI). CMHC’s target for capitalization is 150 per cent
of the minimum capital test recommended by OSFI. Under these standards,
the insurance activity is fully capitalized. Currently, CMHC maintains
approximately twice the level of capital reserves recommended by OSFI.
In 2009, retained earnings set aside for capitalization represent 1.3 per cent
of the total insurance-in-force of $473 billion. Retained earnings set aside for
capitalization in 2008 also represented 1.3 per cent of the total insurance-in force
of $408 billion.

They have capital levels of 1.3% almost twice what OSFI recomends.

Now remember banks need equity capital of close to 8% and total capital of well over 10% and this pig has 1.3%!!!

The heads of CMHC and OSFI should both be fired for gross incompetence.

This is like those muni bond insuers called monolines that a couple years back were insuring hundreds of billions in muni bonds but had basically no capital like this. They went broke.

#189 Jimmy on 02.16.11 at 10:03 pm

I am voting conservative NOT