First-timers

It’s been about four months now since Jim and Vesha listed their semi for sale. That was when F declared he was going to kill off the 35-year mortgage, after it led to massive overborrowing and an orgy of house-buying by people without money. Like Jim and Vesha.

“Like you, I predicted this would further erode (artificial) affordability,” Jim tells me, “be the last nail in the coffin for house-porn addicted first time buyers, and kick of the slow price decline to god-knows-where.” And he had cause to worry. In the dying days of 2008, in the middle of the financial crisis, they bought the Victoria property for $442,000 with a mortgage for $433,000 and 5% down. That was a deal – $40,000 less than the other half of the house had sold for six months earlier.

But what they found is that buying any property in Canada with 5% is a financial death sentence. Despite making $130,000 between them, “it had become increasingly obvious over the past 3 years that this place was really dragging us down, we weren’t saving a dime outside of my defined pension contributions.” Life would be much better as renters. Besides, the neighbours sucked.

They listed at $475,000 – which Jim says “severely pissed off the neighbours (similar houses) who were all certain that since their tax assessment ranged from $475,000 to $508,000 I was severely low-balling.” But, not low enough.

Here’s the rest of his story:

“Time passed, we had maybe 8 showings by the time the funeral procession for the 35 year am passed us. We lowered the price another $10k, we picked up another 5 showings over a month, then we dropped another $15k and have had one showing since. The spring market has clearly not done much for us, we are now at $449,000 – 6 grand away from starting to throw away our measly 5% downpayment (well, in reality that is unavoidable since we’ll be paying a real estate commission) and more than $25,000 less than our $475,000 property tax assessment (which really pisses me off, I can’t believe I am paying tax on value that clearly does not exist). Our place is mint, we are super tidy, it has to be one of the nicer places people see – and yet nothing.

“We are starting to get worried, some of my friends in similar situations are worried too – but most of the idiots out there still seem to think prices are rising. We had this idea that if we had sold at our initial asking price we’d walk away with $50k or so, could tuck that away into some investments and search far and wide with more time this time until we found something to rent for awhile, probably saving ourselves $1500 a month.

“I was glad when I stumbled across your blog because it validated my feelings about selling as soon as possible, I just wish it was working out for us better because this is getting worse and worse by the day.”

Anyone telling you the housing market is rising, sellers are in control or conditions are getting better is lying through their teeth. The death of the long mortgage is having exactly the effect I suggested it would – carving the heart out of the first-time buyer market and removing the fuel which had helped fire real estate for the last two years.

By stopping this idiocy – buying a $442,000 house with $433,000 in financing – we’ve only proven we were as good at subprime lending as the Yanks. Why did house prices erupt? Because we lowered the bar so far anyone with a valid credit card could get one. Banks showered financing on people with no savings and no real estate experience. Ingénues started bidding wars, lined up all night to get into new home sales trailers and paid whatever it took to fondle granite and stainless. All has been documented on this depraved blog.

So, how could there be any doubt what would happen when credit dried? Or when interest rates start marching higher this summer? Or as the economy bogs down, hobbled by the dollar, structural unemployment and a mama lode of personal debt?

How much evidence do we need that the correction has started? As I have documented in the last two posts, sales have dived again in Calgary, Vancouver and Victoria. Now we have numbers from Edmonton – where sales in April were off 14.5% from last year and 8% from the previous month. And in Toronto, with a 17% year-over-year plunge in deals.

In the case of Vancouver and Toronto listings have also collapsed by more than 20% while prices have risen. Many people know not what this means. Sadly. They think a hike in average values means rising times. In reality, supply is falling faster than declining demand – about as clear a sign as you can have of a sick market. Potential sellers are unwilling to list since they’re freaked out over finding another house. After all, with prices as they are now – bubblicized by too low rates and too many hormones – most people would never pay for their own house what they think someone else must.

BTW, the average SFH in Vancouver is now over $1 million and in Toronto it’s $760,000

This will not be the case by September.

239 comments ↓

#1 Mr. Reality on 05.04.11 at 9:09 pm

Double Dip folks. Household debt mixed with a commodity crash and house value decline = perfect storm. Canada is different from the states, and it will be much worse once China stops buying our commodities.

Mr. R.

#2 Rafa on 05.04.11 at 9:10 pm

First????

#3 Grooby on 05.04.11 at 9:15 pm

I had hoped that the collapse would occur during HarperCo’s time, since they inflated the thing in the first place yet didn’t appear they would have to deal with the fallout.
Now it appears it’s happening sooner than I expected. Bye bye middle class…!

#4 Tim on 05.04.11 at 9:16 pm

BTW, the average SFH in Vancouver is now over $1 million and in Toronto it’s $760,000

————————
So if we get a 20 percent correction the avg home will be only $800,000. What a deal!

#5 T.O. Bubble Boy on 05.04.11 at 9:18 pm

Another interesting stat from those GTA numbers: sales actually fell from March to April! (9262 down to 9041)

Given the seasonality of real estate — you know, because people don’t like walking through the snow to get to open houses — this almost never happens.

This was likely because of the 35-yr amortization being taken away in March (and some demand being brought forward), but it is still something to watch.

If GTA sales were to fall again from April to May, this would mean:
– that it was the worst May of the past 8+ years
– that it would be over 12 months of YOY sales declines
– that March would have been the peak for the entire year (sales normally peak in May or June)

#6 Kevin on 05.04.11 at 9:20 pm

Every major center in Canada has experienced major population and housing growth over the last half decade, one would expect that sales should be stronger in 2011 than in 2006. But this is not the case. This should be raising alarm bells for the industry.

The Canadian housing market is not “strong, stabilized, stable or healthy”. For many areas in BC, Victoria and Edmonton the bust has started. Other places like Calgary, Saskatoon are hanging on by the skin of their teeth.

#7 not 1st on 05.04.11 at 9:22 pm

If real estate went up because it was greased with easy credit, low rates and long mortgages, then the U.S. equities market is the mirror image with TARP and QE greasing those wheels as well.

The result is that equities will take a plunge as well at some moment not too far in the future. But of course, the rich already know this. They have been selling their positions quietly for the past 2 years and investing in PM and commodities. The average joe will be left holding paper worth nothing.

Wrong. Corporate earnings, along with demand, move equity prices. Greed and fear alone move real estate values. About 11% of us own stocks. Almost 70% own houses. There is no comparison. — Garth

#8 jas on 05.04.11 at 9:22 pm

Hong Kong Home Sales Fall to 2-Year Low

http://www.bloomberg.com/news/2011-05-04/hong-kong-s-home-sales-decline-to-two-year-low-on-interest-rate-concerns.html

How the Fed made the rich richer

http://money.msn.com/investment-advice/how-the-fed-made-the-rich-richer-mirhaydari.aspx

#9 Chaddywack on 05.04.11 at 9:22 pm

What about the first time MPs elected to the House of Commons? With a $157,000 salary at age 19 they could afford some real estate even in Vancouver. What a dream job! I’m jealous.

#10 Soylent Green is People on 05.04.11 at 9:28 pm

I’m not going to let 20% to 30% conbot zombies ruin my country.

……………………………

To: Info Avaaz
Date: 2011
Subject: Election Reform in Canada

Dear Avaaz,

Canada is very interested if you would run a campaign based on the below:

Canada needs election reform as the majority of voters are not represented after voting. IRV is a slight modification to the current system. People are already familiar with strategic voting and it is essentially automatic strategic voting. It’s already used in some US municipal elections. There’s a referendum coming up on it in the UK (called Alternative Vote there.) If we win IRV we can try PR next round. It’s the practical choice.

IRV is automatic strategic voting. It allows you to rank candidates. If there is a second instant runoff ballot, one of your choices will make it on. This system is superior to strategic voting because it:
a) takes the guess work out;
b) doesn’t require any recruitment; and
c) stops vote-splitting 100%.

Although PR is used in almost all developed countries, there is fierce opposition to it in Canada and other Anglo-Saxon countries. It is portrayed as radical here. The mainstream media hates it. Even the Toronto Star is rabidly anti-PR. It has lost in 5 provincial designed-to-fail referendums. It is toast here. A better bet is a Layton majority. If we go “all in” on PR, we will end up with nothing and can look forward to many neo-Con majorities in the future.

I think the safer route is to got for moderate gains with IRV first, which will be hard for the media to kill. Then after Canadians get a taste for electoral reform we go for PR. IRV, although not perfect, will get us to where we want to go. If we risk all on PR and lose — which has happened 5 times already — then electoral reform is dead as dirt. Papers like the Toronto Star are already claiming electoral reform is a settled issue: “the people have spoken loudly and clearly and rightfully rejected it.” (to paraphrase Torstar corp.)

…………………………………………

Electoral reform for Canada Petition
http://electoral-reformcanada.weebly.com/index.html

Lead Now Petition re Electoral Reform
Tell Prime Minister Harper:
We will hold you accountable and push for electoral reform.
http://www.leadnow.ca/majority

…………………………………………

Animal Kingdom – 6 min. long
The Problems with First Past the Post Voting Explained
http://youtu.be/s7tWHJfhiyo

.
.
.

#11 mellowracer on 05.04.11 at 9:30 pm

What will happen to people with 150k/year who just bought house on Mississauga road and 3 apartments that they are currently renting now? Will the apartments be worth renting out? Will the house on mississauga road be affected? (It is a very affluent neighbourhood) right now anways… I know this is a broad question, but what to do in such a cluster-frack?

#12 The Original Dave on 05.04.11 at 9:39 pm

still “sold” signs in Toronto. I drive by people going to look at houses (while they salivate) and almost yell “idiots!”.

The Toronto market is crazy. So many self-professed real estate geniuses out there.

#13 Maxamillion on 05.04.11 at 9:43 pm

I’m just worried about the people who will buy this $18 million dollar condo in downtown Toronto.

http://www.realtor.ca/propertyDetails.aspx?propertyId=10422007&PidKey=1874629717

#14 Howdy There on 05.04.11 at 9:46 pm

The US had a concurrent buyers and sellers strike too, while prices crept up. It is not different here.

#15 Mr. Lee on 05.04.11 at 9:48 pm

I applaud you sir. Thanks for telling the truth. Many may not want to hear it and are in denial, some of us know that you are corrct. 2006, started the housing craze with 0 down 40 year loans. That is now long gone…….so people do the math.

#16 BC Bring Cash on 05.04.11 at 9:49 pm

Sarah Daniels on BC’s Global TV admitted today that the Vancouver area RE market has taken a turn for the worst. Especially the Condo market. However she is trying to blow some more hot air into the deflating bubble by proclaiming that now is a great time to buy because you got lots to choose from and you can submit low ball offers. How interesting! A few short months ago at the height of the RE euphoria she proclaimed “now is the best time to buy in so you won’t be priced out of the market forever. Look at the Fraser Valley. Its surrounded by the ocean and mountains, they’re not making more land you know” Seems like according to RE pumpers its always a good time to buy whether the market is going up, down, sideways or other wise. How can the RE industry give advise like that and get away with it. Millions of people have been led to slaughter without any consequences to the RE Con Artists. SAD!

#17 Jim on 05.04.11 at 9:51 pm

“it will be much worse once China stops buying our commodities.”

and our houses.
If Vancouver crashes it will be a mirror image of its ascention.

#18 OttawaLive on 05.04.11 at 9:55 pm

With Public sector looking to shrink in Ottawa,probably reset of realestate prices is coming to this city…any take on this Garth?

#19 The Phantom on 05.04.11 at 9:56 pm

Hi Garth (and fellow blog dogs):

The stats you present tonight aren’t entirely surprising Garth since there were many predictions made regarding the death of the 5/35 and how that would pull demand forward leaving a vacuum of sorts in its wake. Moreover, I recall all too well the examples you portrayed of RE agents enticing people to jump in to “save money” or “purchase a nicer home before the end of the present 5/35 arrangement.

I know Garth that there are some who visit here that firmly believe that mortgage rates will remain the same or else drop further in the immediate future. I am no economist but historically I know that higher rates were employed effectively to dampen inflationary pressures in the late 70’s, again in the mid 90’s (although by a much smaller margin) and that even a modest rise by a couple of points is going to sink A LOT of households. Carrying mortgages of $300,000 to $400,000 means that even a 2% increase is going to add an additional $6,000 to $8,000/yr in interest costs at a time when the same increases are going to cool demand for homes and quite possibly result in lower values as a result.

Consider now people that decided to sell; folks like Jim and Vesha who realized they were “spinning their wheels” and that they would only pay off their mortgage when they would be a gazillion years old. As an overlay, try and imagine the same type of people who apprehend a like realization a few years hence and also get saddled with an extra $500 to $700/month interest premium…Then of course you won’t see any corollaries to the present environment. Rather, those times will be characterized by people driven to financial desperation; drowning in a sea of debt and struggling against the millstones of illiquidity hung about their necks as they come to rue the days when they frivolously and carelessly indulged themselves in a years long orgy of instant gratification.

I guess it all comes down to the fact that if you believe interest rates will remain the same for the next 30 to 35 years (or however long it will take to get the balance outstanding down to an amount where higher rates really aren’t felt as profoundly) then, by all means continue on your merry way and take no thought for tomorrow as it is all love for today. I would liken it however to the sage and august response Billy Graham once gave to someone that told him he was an atheist and asked the Evangelist why he continued to believe…After considering the question for a few moments, the preacher replied, “If I am wrong and you are right, I’ve lost nothing but if I am right and you are wrong, then you’ve lost everything.” IF interest rates rise 2% to 3% (or more) how many people in Canada will lose everything? I wonder how many people in the USA have already lost everything and that without any substantial increase in rates to date.

Different concepts, unrelated ideals but some transferrable applications as they pertain to our belief about what interest rates will do during the next three decades…it is an awfully long time to presuppose that nothing will change with respect to prime until 2041…

I wonder what the bar graph will resemble when we look back in 2040 as far as interest rates are concerned

the Phantom

#20 renters rule on 05.04.11 at 9:57 pm

Regarding the reference in the previous comments thread re the spectacular nature of the fire of the condo under construction in Richmond this morning….. the cause of the massiveness of the infernal was likely not accelerent, but rather more likely due to the fact that this is one of the first wood structures being built under the new building code rules allowing a woodframe building to be built up to 6 stories high. Apparently it really was quite a sight (and hopefully may make people re-think allowing woodframes to be any higher than 4 stories…..?) I won’t be renting in one, that’s for sure!

#21 Min in Mission on 05.04.11 at 10:01 pm

If I can borrow a phrase used many times by others: “this will not end well.”

Talking at lunch today, two of the guys both said that they “will have to work until they die”. Both in their fifties, amazingly they both have lived in their respective homes for many, many years. Both still have mortgages and much other debt. Both have worked as skilled tradesmen for most of their lives. Both have no real savings or RRSP/TFSA.

But, they have new cars and lots of toys!!

#22 nonplused on 05.04.11 at 10:06 pm

September eh? Ol’ Garth has given us a time line.

Maybe we should start a pool as to what house prices will be in September. Just one city or maybe we could do three pools, one for Toronto, one for Calgary, and one for Vancouver. Average price for a single detached.

Here are my entries:

Toronto: $750
Calgary: $450
Vancouver: Still $1m but no sales

I bet BPOE will take $2m for Raincouver.

Also, I think listings are off so much because realtors are telling people not to list until “the market improves”. They know they aren’t going to move the house at the asking price so why bother to do all that work. But I don’t see house prices have much room to run given all the factors Garth has detailed including rising cost of living, stagnant wages, and financing costs which have only one way they can go.

Now that we will have 4 years without an election, I wouldn’t be surprised to see Carney act aggressively to rein in borrowing and get the pain out of the way as early as possible.

#23 mid-Ontario on 05.04.11 at 10:07 pm

Gee Garth; are we likely to see a sell-off in real estate like silver?
Down 25% in 2 days.
What if that happened to RE????
Good thing only the handful of bullion lickers are affected.

#24 City Slicker on 05.04.11 at 10:08 pm

Garth, if sales are dropping doesn’t that mean people are excersizing a hold and wait until homes go up strategy, or wait until they get the price they want?
How does owner psychology work in this case?
Thx

People sell into declining markets and buy into rising ones. Greater fools. — Garth

#25 Cognizant on 05.04.11 at 10:11 pm

Another great post.
Mrs cog. (who is a bit more house horny than I am) is getting links to this blog forwarded on an almost daily basis now. You are saving my marriage dude! Thanks!
And as far as comparisons to subprime in the USA, in some ways we are even more subprime, with almost every single mortgage in Canada an ARM.

#26 Chris on 05.04.11 at 10:12 pm

Garth, I have a question for you. When a person’s mortgage is worth more than the value of their property, what does the lender base that on? Is it based on the property assessment from the municipality? Or is it based on the average sale price or median sale price in the neighbourhood? How does this work?

What exactly determines if your equity is about to go negative? How often a year does that determination get made and remade?

If the amoun your municipality assesses the property at is more than the mortgage, can you still get hosed when trying to refinance?

One other question. Do you know if most lenders charge you a penalty if you are already in, say a five year fixed, and you choose to extend that with the same lender to say a 7 year or a 10 year fixed? Just curious. Is it feasible to time renewing your mortgage so that you can avoid negative equity and having to show up with a cheque at the bank?

Keep paying your mortgage and the bank doesn’t care what your house is worth. Stop paying your mortgage and you owe the whole amount, plus costs. They win or, on the other hand, they win. As for extending your term, you cannot do so without breaking the mortgage contract, and paying for that action. In this rare instance, the bank wins. — Garth

#27 Joe on 05.04.11 at 10:20 pm

Garth,

With the prices being what they are today in the GTA for single family homes , how does any single person or single income afford one ?? It seems the only choice is an overpriced shoebox condo or an overpriced townhouse unless you want a SFH in a crappy neighbourhood….

I make around 100k per year and that doesn’t do much nowadays once you throw in car payments, other expenses, saving money for investments , etc. Buying a home is just ridculous now and I want to throw up everytime I think I should buy a house. Besides the idea of a SFH , thinking of moving into a condo for around 350k doesn’t make me very excited either.

Flipping through MLS pages just makes me depressed these days…

Yours Truly,

Frustrated Toronto Buyer

Why would you buy what you can’t afford? Stop looking. — Garth

#28 Devore on 05.04.11 at 10:21 pm

#4 Tim

So if we get a 20 percent correction the avg home will be only $800,000. What a deal!

Better deal than $1M!

And who said only 20% in Vancouver?

#29 xyz on 05.04.11 at 10:22 pm

Moral of the story: the bank ALWAYS wins

#30 JohnnyBGood on 05.04.11 at 10:23 pm

“…most people would never pay for their own house what they think someone else must.”

Yes, that’s the ‘greed’ side of the ‘greed and fear’ binary sentiment.

Over the past three years or so, there has been a predictable contraction in listings whenever owners smell the slightest whiff of price declines. And as Garth has repeatedly pointed out, the result has been higher prices on lower (sales) volume.

In 2008, just before the S&P/TSX all-time peak, you could count on one hand the number of TSX-listed stocks primarily responsible for the last bit of that giddy climb. Which was one reason I reduced my exposure to stocks at that time. I was so sure the market was going to decline at some near point that I was more than willing to give up any further potential gains into the peak.

Timing the market is very difficult and catching the top (or bottom) is nigh impossible, barring great luck. But if you just look at the fundamentals of today’s Canadian housing market, I would be getting out if that’s a possibility.

If I were a retired Vancouver, free-and-clear homeowner, with a desire to retire down south, I would be selling my house as fast as I could say “Mickey Mouse”, take my million or two, buy a nice little place under the Florida or Arizona sun, and live high on the hog with my profits, which I would invest for income.

Even the dollar is currently working in your favour. It’s arbitrage heaven. Not even Walt Disney himself could devise something so heart warming.

#31 Howdy There on 05.04.11 at 10:23 pm

“Wrong. Corporate earnings, along with demand, move equity prices.”

So let’s do a little predicting. We’ve heard about cash strapped boomers and overextended newbies. They won’t be buying much. The price of oil is shooting up as are food prices. Taxes will go up, but wages won’t. Not looking so good for demand and corporate profits, or equity prices.

So buy banks, energy and ag companies. — Garth

#32 Howdy There on 05.04.11 at 10:25 pm

On the bright side for equities, I’m sure the banks will do wonderfully once people decide to eschew debt and fees.

#33 Cellar Dwellar on 05.04.11 at 10:26 pm

@#20 Renters rule
Interesting. I forgot about the new Richmond building code. A six story wood frame building would be a fun “ride” in a major earthquake! Since Richmond is all bog.
But I digress.
I still wanna know where BPOE was when the fire started.

#34 Howdy There on 05.04.11 at 10:27 pm

Please remember everyone, the damage to the economy will be ‘contained’ to housing. No need to worry about debt, equities, preferreds or REITs. They’ve done well in the last couple of years, so there is no reason to expect they won’t do well in the future.

House prices can easily correct without destroying the wider economy. Do you really believe organizations like banks are not already prepared? — Garth

#35 Steven Rowlandson on 05.04.11 at 10:30 pm

Let me guess. The zombies are home and condo buyers? They couldn’t be gold and silver buyers as there is no bubble in that market.

Steven

#36 Howdy There on 05.04.11 at 10:32 pm

“With the prices being what they are today in the GTA for single family homes , how does any single person or single income afford one ??”

Joe, if you’re single, rent a room or a basement. Live like a student. A few years will pay off.

#37 Brett on 05.04.11 at 10:38 pm

Good article, loved the line:
“most people would never pay for their own house what they think someone else must.”

I think this line sums it up best. Good luck to you all.

#38 Nixter on 05.04.11 at 10:39 pm

So long Canada nice knowing ya.

http://www.thenewamerican.com/world-mainmenu-26/north-america-mainmenu-36/7336-wikileaks-exposes-north-american-integration-plot

#39 Howdy There on 05.04.11 at 10:41 pm

Re #34.

Garth, it’s not just about housing prices. It’s about cashed strapped boomers and over leveraged newbies not spending. It’s about retailers closing locations and commercial RE taking a hit. It’s about hotels not renting rooms because people are cutting back on vacations. It’s about builders not building (and laying off staff) because there are enough houses for the next decade. It’s about banks not being able to lend to people who won’t borrow, people refuse to pay fees, and people who default on debt that isn’t insured by CMHC. It’s about people spending less on everything else because food, fuel and taxes are eating their budget.

The same stuff that hurts housing sales will hurt other parts of the economy too.

#40 JohnnyBGood on 05.04.11 at 10:43 pm

“Corporate earnings, along with demand, move equity prices.”

Makes sense, but it can be very difficult to predict a change in demand. In 2008, Potash Corp. stock fell off a cliff the very day they reported record earnings (to that point). And management was claiming POT was a good value at over $200. Almost three years later, the stock has still not reached its all-time 2008 peak (even adjusted for the most recent split).

#41 USinvestor on 05.04.11 at 10:44 pm

#25 – Bingo!

Starting now loans made in 2006 in Canada are starting to re-set. If interest rates go up even a little over the next 5 years – there will be blood.

CMHC is going to get hit hard.

As I have mentioned on this blog before, when the market turned in So Cal it did so very quickly, since 2007 no one, and I mean no one, has spoken the words “real estate” and “investment” in the same breath. RE is not even on young peoples radar these days, even the ones that have jobs and see the good deals. It is actually really nice, you don’t have to go to dinner parties and talk about how smart the guy is for making 5 large on flipping this and that – the topic just does not come up. I have to come to this depraved far away blog to get my RE fix!

#42 45north on 05.04.11 at 10:45 pm

And in Toronto, with a 17% year-over-year plunge in deals.

you know I see Toronto as the barometer of real estate in Canada

BC Bring Cash: A few short months ago at the height of the RE euphoria she proclaimed “Look at the Fraser Valley. It’s surrounded by the ocean and mountains”

it still is

Phantom: As an overlay, try and imagine the same type of people who are also get saddled with an extra $500 to $700/month interest premium…

here’s a post from Utopia that rang a bell: I met a gal and her husband yesterday who just arrived in Saskatoon from the United States.

I asked her casually if things were really as bad in the States as we see in the news. “Worse” she said in a thick Southern drawl “you really have no idea”.

http://www.greaterfool.ca/2011/03/31/grow-a-set/#comments

#43 T.O. Bubble Boy on 05.04.11 at 10:49 pm

This is insane:
Home Capital ramps up uninsured mortgage lending

Uninsured loans – offered to those who don’t meet the more stringent requirements of the big banks such as the self-employed and recent immigrants – accounted for 58 per cent of the Toronto-based company’s $1.3-billion in new loans in the first quarter.

So, these guys gave out over $750M in *uninsured* home loans to home buyers who failed to qualify for mortgages from “traditional” lenders.

scary.

#44 Howdy There on 05.04.11 at 10:49 pm

“The Wealth Effect”

This is where people spend more because they feel wealthy, because their investments (most commonly their house) has gone up in value.

The wealth effect shouldn’t exist. You should spend against income, not wealth. The only reason the wealth effect exists is because people could borrow against increasing house prices using HELOCs or by refinanciing. But debt is debt and it remains regardless what happens to asset prices, and it has to be paid back.

So what does this mean? Any part of the economy that was supported by “the wealth effect” will retrench. This does not bode well for GDP, taxes or equities.

#45 USinvestor on 05.04.11 at 10:50 pm

And on the phenomena of rising prices and falling supply / demand – markets crumble from the bottom up, not top down. There are a disproportionate number of sales at the high end (I would guess) presenting themselves in the perverse numbers. Prices don’t matter much for the uber wealthy, they do for the rest of us.

Funny thing is, the exact thing happened here in So Cal! Which is really weird because all my Canadian brethren tell me it’s different there.

#46 Dark Sad Monster Bunny on 05.04.11 at 10:51 pm

OK, I will play a little contrarian here. Jim + sigoth make $130k a year and bought at about 3.5 times income. Just
a little high, but maxed their mortgage. So I’m estimating
$30k/yr in mortgage, or about 23% gross. Seems within
suggested limits. Jim has a DB pension – increasing rarity
these days – govt job? All in all sounds much better than many. They should be able to make ends meet.

So what’s the issue? Is he just freakin’ because he is losing equity? Did he buy only because he saw it as an investment with future gains? Seems he is speculating X
2 with the family home. You know what mama said……

#47 brent on 05.04.11 at 10:54 pm

Question – if Harper follows the America lead and drops prime to 0.25%, can he reinflate the bubble for another 2 years?

That would peak it again late in 2013, instead of a crash by then, and if he calls an early election in 2015 he might be able to squeak in another majority. If he lets the market fail and bails out the banks he will get booted in 2015 (imho).

#48 Kuwaiti on 05.04.11 at 10:55 pm

@ #36

Hear hear… 100K a year salary with a student lifestyle for 4 or 5 years will have you laughing for the rest of your life.

#49 Cato on 05.04.11 at 10:57 pm

Sept. sounds about right. The sugar high from stimulus spending is showing signs of quickly wearing off, especially in the US (stimulus from both govt’s goosed Canada as well). Employment indicators aren’t looking healthy, throw in sticker shock of basic goods along with threat of interest rate hike and you’ve got the perfect storm to take housing down hard.

#50 Min in Mission on 05.04.11 at 11:00 pm

Keep paying your mortgage and the bank doesn’t care what your house is worth. Stop paying your mortgage and you owe the whole amount, plus costs. They win or, on the other hand, they win. As for extending your term, you cannot do so without breaking the mortgage contract, and paying for that action. In this rare instance, the bank wins. — Garth

Thanks!! As long as everything is fair.

#51 JohnnyBGood on 05.04.11 at 11:02 pm

“With the prices being what they are today in the GTA for single family homes , how does any single person or single income afford one ??”

Who says it’s a given that you should? In so many countries around this planet (such as the European variety) most average people in urban areas rent. Owning had long ago gone beyond their reach. I think the same thing will happen here in time.

Living will become less affordable for the average person. It’s simple math. Think of the earth as a pie. Today, more an more people want their slice. Unless the pie gets very much bigger, each of us will be making due with a smaller piece.

That’s the rosy picture. The not-so-rosy picture points to the Pentagon planning for long-term resource wars as the planet approaches 10 billion by 2050 (if I remember correctly).

Perhaps in the future the most valuable real estate will be under the ground, not on it.

#52 Sticky-wicket on 05.04.11 at 11:12 pm

So for a first time buyer, when will be a “good” time to buy a home? The way things are now, it costs just as much to rent a crummy 2 bdrm apt. per month as buying a 3 bdrm townhome.

And What’s the difference between buying in now when the prices are high and interest low, OR waiting a while hoping that prices will go down but at the same time interest rates will go up? How much difference will there really be?

#53 renters rule on 05.04.11 at 11:15 pm

http://www.vancouversun.com/news/Photos+Fiery+blaze+destroys+storey+wood+building+Richmond/4723468/story.html

WOW, it was massive……

#54 Gordeaux on 05.04.11 at 11:17 pm

Can I ask for a bit further clarification on this please Garth?

“House prices can easily correct without destroying the wider economy. Do you really believe organizations like banks are not already prepared? — Garth”

Can I ask why you think the banks are prepared? If we accept that it’s really not different here, we have to accept that the banks weren’t prepared there — so why do we think they would be here?

As you’ve pointed out again and again, they’ve been playing fast and loose with the mortgage requirements with money-back offers and the like. So we have hard evidence that they’re already willing to engage in a little light rule avoidance. That makes me a little hesitant to just accept that they must be prepared.

In your opinion, what can we look at to see which banks have in fact best protected themselves?

CHMC absorbs most of the risk. There will be no bank meltdown. — Garth

#55 wetcoaster on 05.04.11 at 11:17 pm

Victoria real estate agents on the CHEK news tonite are showing major desperation for reasons to buy here trying to spin the “Vancouver owners should sell and move here” mantra.

Can you believe they even actually know someone who sold for $1.2 million and moved here and bought cheaper ? Isn’t that simply amazing ? Like no one has ever thought of that, what salesmanship skills that one took to suck in CHEK to run that garbage.

They forgot to mention that no one in Vancouver will probably see this segment and think of making the move to the “little town that could” with it’s limited employment opportunities, boring nightlife and psycho homeless.

#56 Investx on 05.04.11 at 11:24 pm

“House prices can easily correct without destroying the wider economy. Do you really believe organizations like banks are not already prepared? — Garth”

Better prepared than the US banks? It’s different here?

In that regard, absolutely. — Garth

#57 Yawbawdy on 05.04.11 at 11:27 pm

Wrong. Corporate earnings, along with demand, move equity prices. Greed and fear alone move real estate values. About 11% of us own stocks. Almost 70% own houses. There is no comparison. — Garth

Greed and fear move all markets.

Corporate earnings are currently meaningless. QE2 is the only thing sustaining the world markets.

#58 Jetfixer on 05.04.11 at 11:29 pm

A few observation in the field;

1) starting to see more & more house for sale out in the durham region. some are selling quick, others not so much.

2) To validate your point about listing declines, I know someone at work who wants to sell but is complaining about the high prices, hoping they would go down, yet maintain the value of his house. (not going to happen).

3) I got a numbnuts friend who bought a house and just because he reads someone wants to put a crate and barrell downtown in the club district, real estate will endlessly rise. Biased I know…

But… I did just hear a BMO report saying 1/5 houses sold are sold in price wars. They didn’t give details obviously, could be two offers total. But, what gives?

#59 TheFirstRick on 05.04.11 at 11:31 pm

“…..and more than $25,000 less than our $475,000 property tax assessment (which really pisses me off, I can’t believe I am paying tax on value that clearly does not exist). ”

LOL

“B.C. Premier Gordon Campbell says he’ll freeze property assessments at 2007 levels to help people cope with what he calls the turbulence in property values”

http://www.cbc.ca/news/canada/british-columbia/story/2008/11/01/bc-campbell-pledge.html

I heard not ONE person in the media, real estate industry, etc complain about this freeze. Jim, don’t complain now.

#60 Comrade on 05.04.11 at 11:32 pm

Is it just me, or we are going through deja vu? Didn’t we have elections in 2008, and major meltdown in commodities, and correction in real estate. Elections in 2011, and probably early to make any conclusions, but the signs are already there.

Not sure if this was in the planning of conservative or pure luck, however it gave them another 4 years of riding and majority. Keeping the interest rates low, with addition of stimulus packages created an image of healthy economy. It will be interesting to see how it unfolds.

One is for sure, taxpayers will pay the bill few years from now.

#61 eltabarnacos on 05.04.11 at 11:44 pm

Just bought a couple hundred dollars worth of real physical silver on sale today…
Seems like coin shops dont have much silver for sale, one coin shop sell all its silver to europeans who are more “aware” then us in the west, the other coin shop couldnt deliver the canadian maple leafs silverdollars as the mint stopped production, now its weird they’ve been waiting for months for the new order from the mint.

Buy the dips!
Crash the evil banksters of the Jp Morgue likes!

#62 Whistle punk on 05.04.11 at 11:48 pm

This will be the theme song when people start loosing their houses

http://www.youtube.com/watch?v=NeMrttj8Ucg

#63 Adam on 05.04.11 at 11:54 pm

Here is what is going on in Oakville, ON:

From the Oakville Real Estate Board
—————–

May 4, 2011 – Oakville – Milton, Ontario – As the number of new listings dropped during the month of April, so too did resale housing sales, according to figures released by the Oakville, Milton and District Real Estate Board today. New listings declined from 1,764 in April 2010 to 1,558 last month, a drop of 11.6 percent year over year. April sales* in the Oakville – Milton area dropped by 16.2 percent from 1,066 in 2010 to 893 in 2011. Dollar volume of sales** was $389,910,524 last month down 12.7 percent from $446,690,816 in April 2010.
“In part, the drop in listings has created a situation where buyers’ choices are limited,” comments Jack McCrudden, OMDREB President. “and that translates into a decline in sales and as well as an increase in the average price of a home, with buyers competing for fewer properties. The unusually rainy spring has slowed the usual increase in listings but the higher prices and good weather should bring more sellers into the market next month. Meanwhile buyers attracted by historically low interest rates remain enthusiastic about homeownership, so spring could see an upswing in sales.”
The average price in Oakville was $625,900 in April 2011, up 14 percent from $551,187 for the same month last year. In Milton, the average price increased 5 percent to $411,819 from $392,466 in April 2010. Fifteen homes in the $1.5 million to $2 million plus range were sold in April 2011, compared to 10 during the same period last year. This may in part account for the higher average price last month.
“Sales of luxury homes did increase in April 2011 over the same month last year,” says McCrudden.”And this does tend to skew the average price. That said, it remains a good market for sellers and hopefully the better weather will encourage more listings.”

#64 BuBu on 05.04.11 at 11:56 pm

ups:)
http://www.theglobeandmail.com/report-on-business/albertas-delinquent-homeowners-lead-the-pack/article2010293/

#65 reality guy on 05.05.11 at 12:00 am

What people don’t realize is when the USA gets back on their feet they will begin to raise interest rates probably back to about 4 to 7 percent on a Money market or GIC.

When that happens you’ll going see canadian moving their money to the US , therefore devaluing our canadian dollar and causing inflations. If Canadian interest rates remain the same.

That is why interest rates will eventually have to rise.

Look at India, China, etc, Just the past months they all raised their rates. We didn’t follow because of the election, but we soon will that is a given.

#66 John on 05.05.11 at 12:06 am

Mid-Ontario

Silver prices are bound to rise soon. The crooked comex increase in margins is the only reason for the fall in prices. This may hurt for a short time. But fundamentals have not changed and US will have to initiate QE3 soon. If not equities tank, taking the stock market for a 25% ore more plunge.

US dollar will devalue thereby fueling inflation.

#67 Burnt Norton on 05.05.11 at 12:11 am

Most days I jog by this 900 sqft 1 bedroom house in Point Grey & noticed that it sold for around $1M a few weeks ago. Now the genius buyer has it up for rent – only $3500 monthly. LOL.

http://vancouver.en.craigslist.ca/van/apa/2359871126.html

#68 jas on 05.05.11 at 12:16 am

#16 BC Bring Cash

RE Con Artists.
Right on! that is exactly what they are.
Beware of them.

They don’t have any ethics…sick of them. SICK! SICK! SICK!!
Look for house for sale by owners and buy direct.
Keep these thieves out.

#69 Peter on 05.05.11 at 12:42 am

I heard things are so desperate that if you buy Osama Bin Laden’s old house the Realtor will throw in a couple of Osama’s wives to sweeten the deal.

#70 Einsam Solo on 05.05.11 at 12:42 am

@ #16 BC Bring Cash
“Sarah Daniels on BC’s Global TV admitted today…”

Ms. Daniels and her ilk are the reason the MUTE button was invented.

#71 Benjamin on 05.05.11 at 12:44 am

http://www.theglobeandmail.com/report-on-business/albertas-delinquent-homeowners-lead-the-pack/article2010293/

#72 BPOE on 05.05.11 at 12:45 am

Average SFH in Vancouver over a million you say. Pity the fool renters of the past 10 years. First time buyers=Canadians= Weak Bids. Folks, weak bids will be mopped up. No one is stopping this juggernaut of fame and glory. Vancooouuuuuvvveer oh yeah :))))

#73 Keith Elliott on 05.05.11 at 12:49 am

@13 Max…I don’t think I would be too worried about that $18.8 million condo. At $60K a year in fees, not to mention taxes, it will likely be a wealthy foreigner who only drops by occasionally anyway.

#74 Chaos on 05.05.11 at 12:50 am

Daystar

Thanks for showing up and chewing out some puppy dawg ass.

Respectfully
Chaos

#75 wes_coast on 05.05.11 at 12:57 am

#10 says we need to change the system because his party lost. The system works just fine. In fact, the Canadian electorate should be commended for making the system work better than intended. When the PC’s (one of the oldest parties in our history) rammed GST down our throats – the party got decimated. Perhaps we thought that was a one time phenominon – until May 2nd 2011 where we saw the other oldest party in Canada get wiped out for falling out of touch with the electorate. While not as old, even the Bloc who played on Quebecer’s fears got wiped out. The message ‘we the people’ have sent to all the parties is loud and clear. Represent us or we will wipe your party out of existence. PM Harper acknowledge this in his victory speach. We hired Stephen Harper to represent the majority and if he fails to do so his party will not survive. The only fix the system needs is a voter turn out the shows respect for those that gave their lives so that we might have the privilege to vote in the first place.

#76 BB on 05.05.11 at 1:04 am

“People sell into declining markets and buy into rising ones. Greater fools. — Garth”

Well, you’re 50% correct.

Double that. — Garth

#77 Devore on 05.05.11 at 1:10 am

#27 Joe

You get frustrated also cause you can’t buy a Ferrari?

#78 Peter on 05.05.11 at 1:16 am

The basic issue is affordability. If interest rates rise as most people think they will monthly payments go up and fewer people can afford houses.

If interest rates normalize say at around 6% fewer people are going to afford a mortgage of 400 K for 30 year. 400k cost 1902 monthly at 4% interest will cost $2379 at 6% interest. If interest rates increase to 8% then that mortgage will now cost you $2898 per month. That’s more then a lot of people take home in pay.

Try running the numbers yourself and you will see how these housing prices are unsustainable in a normal mortgage rate environment.

Mortgage Calculator

https://www.rbcroyalbank.com/cgi-bin/mortgage/mpc/start.cgi/start

#79 tran,Calgary on 05.05.11 at 1:36 am

http://endoftheamericandream.com/archives/should-you-buy-a-home-in-2011-check-out-these-29-absolutely-crazy-statistics-about-the-housing-crisis

Is Canada uniquely different from the U.S.?

#80 Digo on 05.05.11 at 1:54 am

So check out this article that blames the hst for sales declines. http://www.ottawasun.com/2011/05/04/hst-bites-deep-into-ottawa-resale-housing-market

Grasping at straws? Also I wrote an email to the bank of Canada expressing my concerns about low interest rates and this was their reply

I am responding to your email of 29 April 2011 on the subject of interest rates.

On a number of occasions, the Bank of Canada has indeed discussed the risks that growing household indebtedness poses to Canada’s financial stability. Household financial health matters to the Bank because it affects both the conduct of monetary policy and the stability of the financial system. Sound household finances are vitally important for a balanced economy.

The cornerstone of the Bank’s monetary policy is its inflation-control agreement, the goal of which is to keep inflation near 2 per cent. In setting interest rates to achieve the inflation target, developments in household finances need to be weighed along with all the other factors influencing economic activity and inflation. Canadian monetary policy is set for overall macroeconomic conditions in Canada.

The Bank’s advice to Canadians has been consistent. We have weathered a severe crisis—one that required extraordinary fiscal and monetary measures. Extraordinary measures are only a means to an end. Ordinary times will eventually return and, with them, more normal interest rates and costs of borrowing.

Ultimately, it is the responsibility of households to ensure that in the future they can service the debts they take on today. Similarly, financial institutions are responsible for ensuring that their clients can service their debts.

Please refer to our 12 April 2011 announcement on interest rates. (http://www.bankofcanada.ca/en/fixed-dates/2011/rate_120411.html)

For more information on the Bank’s outlook for the economy, you may refer to our April Monetary Policy Report.

Sincerely,

Linda Groulx

Public Information Office/Service de l’information publique

Communications

Bank of Canada/Banque du Canada

234 Wellington

Ottawa, Ontario

K1A 0G9

[email protected]

T: 1 800 303-1282

F: 613 782-7713

#81 tran,Calgary on 05.05.11 at 2:13 am

http://www.cbc.ca/news/canada/british-columbia/story/2011/05/04/bc-richmond-fire.html?sms_ss=twitter&at_xt=4dc1694c40d78971,0

Richmond condo project still hot……..very hot indeed.

#82 realpaul on 05.05.11 at 2:16 am

Good call Jim. Too bad about your 5% …there may be more….and those nasty asshole real estate whores really need a good kick in the crotch on the subject of commissions. I would suggest than whenever possible you seek the services of the lowest sales medium out there and list…….the brand name organizations are such bullshit and you can get exactly the same services with a discounter….however the ‘full service’ shops will try and tell you differant. They’re all bozo’s…you may as well use a cheap one if you absolutley have to.

The majority of homebuyers on this Flaherty induced fantasy of 5% down are already underwater taking the commish into account…..many don’t like to admit it as Jim has pointed out….there are way too many people with their head in the clouds while the sewer has backed up to the first stair.

The vast majority are less than 1% away from going equity negative on the first mortgage..total debt….taking the ‘flimsily hidden second mortgage aka HELOC) has already swallowed the ‘equity’ that was never there in the first place because the 5%downpayment was the HELOC in the first place and the zero down deal ( by any other name) is all that was ever in place.

So sad that entire ruse has been hung around the taxpayers neck by way of banks and credit unions mis-using the facility of the CMHC to ditch the risk themselves.

And yet,,the Credit Unions are now the enemy of the people by offering artificially lower than market teaser rates to FTB’s so that they can rake in a commish and flog the paper on the CMHC. This is shameful and outrageous behaviour….especially for organizations that advertise themselves as ‘socially concious’. Shame beyond shame….by people who know better but bowed down to Gods of Greed anyway.

#83 Thetruth on 05.05.11 at 2:17 am

FYI

Canada’s real inflation rate for the year ending March, 2011 was 6.19%. That was the increase in the M3 money supply.

#84 Thetruth on 05.05.11 at 2:23 am

From 2011 – 2021,

Wages will grow much less than inflation (M3 money supply increase). Currently 6+% annual inflation of canadian dollars.

Result: That money needs to be put into assets. We see that already with bubbles everywhere. It isn’t going to end folks. Watch the income to RE price ratios in 2021.

The newly created vast amounts of money every year needs to end up somewhere: commodities, equities, metals, RE. Now, which is in the biggest ‘bubble’ right now?

Garth guesses it’s the equities turn next! Could be.

#85 betamax on 05.05.11 at 2:26 am

#4 Tim: “So if we get a 20 percent correction the avg home will be only $800,000. What a deal!”

So 20% will just be the beginning…

#86 Jody on 05.05.11 at 2:53 am

The banks always win, thanks to previous federal governments that back them up. I expect the melt will stop for a bit, the CONservatives will do whatever they have to to keep the bubble inflated, then we’ll end up crashing instead of slowy deflating.

I’ll be interested to see how all the CONservative lovers react when Comrade Harper decides to create a Canadian version of the TSA which goes around touching up children or when dozens of prisons get built so Harpers buddies can make some money. The corruption and greed knows no bounds, its sick and just cements my belief that federal governments are an outdated institution that needs to go away. I don’t use them on a day to day basis. I interact daily with the services and departments of the municipal and provincial governments, the feds give me nothing, do nothing for me. No country is going to march over the tundra and invade us and I don’t need any rules or regulations the feds have created to protect their friends corporations from competition.

Now that Che Harper has his majority expect the police state to grow, after all corporations need to be protected and all the peons can’t be trusted to make a decision for themselves. TSA touching up kids, like they are terrorists, totally stupid and frankly, sick and disgusting. The Israelies don’t do this, they profile, and it works very well for them.

http://www.youtube.com/watch?v=SWExPhyPeZw&feature=player_embedded

http://www.youtube.com/watch?v=lFoa0LsqVbQ&feature=related

http://www.youtube.com/watch?v=XSQTz1bccL4&feature=related

TSA Bullied, Groped a Pregnant First Grade Teacher

http://www.networkworld.com/community/blog/tsa-bullied-groped-pregnant-first-grade-teach

Arrested For “Taxes=Theft” Sign / Filming Police

http://www.youtube.com/watch?v=sG0rAkTJDmQ

Feds sting Amish farmer selling raw milk locally

http://www.washingtontimes.com/news/2011/apr/28/feds-sting-amish-farmer-selling-raw-milk-locally/?page=all#pagebreak

Woman arrested for questioning Medicare cuts at Town Hall meeting

http://www.allvoices.com/contributed-news/8924209-video-woman-arrested-for-questioning-medicare-cuts-at-town-hall-meeting

#87 BigAl (Original) on 05.05.11 at 3:14 am

Corporate Earnings

Can one really trust the accounting and reporting practices of public corporations anymore.

We seem to have taken Reagan’s “Greed is Good” to the extreme now, where lying and cheating is good, and the bigger the lie/cheat, the better a capitalist you are. It’s not only accepted practise, it’s praised, adored.

Sure it’s always been there for the most part, but not openly praised like today.

#88 rp on 05.05.11 at 3:16 am

Oh… *election*. We’ve got four years with no election. I thought: “Jesus, guy on the news, why are you telling me this?!”

#89 Howdy There on 05.05.11 at 5:07 am

The banks may have CMHC backing their mortgages, but not everything else. And Canada is different in that the majority of our mortgages are recourse. So us over leveraged Canadians with our record levels of debt are more likely to quit paying the credit card bill, the lines of credit, etc before they stop paying their mortgage.

How exactly have the banks prepared for that?

Give it up. You have not a single fact to support your argument. — Garth

#90 bcc on 05.05.11 at 5:47 am

Re: #71 Benjamin
thanks for the article, from it:
“…The Canadian Association of Accredited Mortgage Professionals found that 84 per cent of homeowners could afford at least another $300 increase in their monthly payments before falling behind.There is more than $1-trillion of mortgages outstanding in Canada…”

translation: 16% of homeowners CAN’T afford another $300 increase in mortgage payment increase… hope all of them are using fixed rate. or else 16% for $1 trillion = $160 000 000 000

#91 bcc on 05.05.11 at 5:54 am

you know what, just did a simple math:
$160000000000/30000000=just a bit more than $5000 per capita, which is the troubled house value caused by a $300 increase in mortgage we gotta absorb.

not too bad, eh?

#92 Skyce on 05.05.11 at 6:18 am

Albertas delinquent home owners lead the pack

A growing number of homeowners in Alberta are struggling to meet their mortgage payments as Calgary suffers a six-year real estate decline that is only recently showing signs of improvement.

Homeowners in the province are nearly twice as likely to fall behind than those in the rest of Canada. And the proportion struggling to make mortgage payments is the highest it has been since at least 1990, according to fresh data from the Canadian Bankers Association.

http://m.theglobeandmail.com/report-on-business/albertas-delinquent-homeowners-lead-the-pack/article2010293/?service=mobile

#93 Mortgage girl on 05.05.11 at 6:43 am

I see in the Toronto Star Treb stats showing sales are down 17 percent. What about the actual sold price versus list price? That’s would be interesting.

#94 S-J on 05.05.11 at 7:07 am

Over now to Nova Scotia, which has always been the hare to the tortoise in real estate. Someone said the other day that real estate has been in a recession here for the last fifty years!

Funny thing happening here – over the last few weeks, sales are taking off like a rocket. I have never seen so many sold signs before. From talking to realtors and others, it seems a lot of the clients who are buying are from out West, or from the those who are delighted to escape from the UK.

We have just got an offer on a property which has been on the market for two years. Last week, we were going to look at two other properties, but both just got accepted offers on them. It is so unusual, you can normally mosey around and take your sweet time when looking for property to buy around here.

I believe Garth is absolutely right – having left Victoria in 2006 ourselves, we look on with wonder at how it has managed to continue on…and on…and on over there.

I wonder if this is just a blip for Nova Scotia…or are the prices too tempting over here, and the baby boomers who were looking West have just realised that the real opportunities are over on the “right” coast??

#95 Dr. WAYNE on 05.05.11 at 7:08 am

Stories like this that you present of people with such ridiculously high mortgages always reminds me of that quote by John Wayne … “Life is difficult, and made more difficult when you’re stupid”.

#96 Apsalar on 05.05.11 at 7:18 am

It’s happening in Ottawa too. In a commuter newspaper this morning, there was an article that said that home sales in the Ottawa/National Capital region had fallen 16% in the past year. It too mentioned that a huge upsurge in buying last April happened because buyers weren’t sure of the impact of the HST on costs for things like home inspections, legal fees and real estate commissions.

#97 MikeT on 05.05.11 at 7:28 am

Best combination of picture and headline – EVER!
Can’t stop laughing :D

#98 bigrider on 05.05.11 at 7:32 am

Garth how about an update on your portfolios performance given decline in markets.

I’m guessing zero to minus 2% so far this year.

#99 S-J on 05.05.11 at 7:36 am

S-J – Sorry, that was meant to be “tortoise to the hare” – too early in the morning!!

#100 ex-owner on 05.05.11 at 7:50 am

“…Life would be much better as renters. Besides, the neighbors sucked.”

Just want to confirm. They did. Yes, and life surprisingly, is better as renters. You live in a nice place with many faults and do not get upset about any. Freedom in all aspects.
PS: No intentions to persuade anybody, knowing that “people only see what they are prepared to see”

#101 Enjoy that... on 05.05.11 at 8:11 am

“We had this idea that if we had sold at our initial asking price we’d walk away with $50k or so”

I wish Jim and Vesha read this blog a year or two ago when I was spouting “If you are going to sell, sell as low as you can”, “cutting the asking price to what you would drop it 3 months later if your home didn’t sell off the bat and you’ll walk away with more $$”

I’ll still spout the same to ANY SELLERS right now. LIST YOUR HOME AT THE LOWEST PRICE YOU ARE WILLING TO ACCEPT.

It’s not about making profit anymore, it’s about getting out now to save your money.

#102 Enjoy that... on 05.05.11 at 8:20 am

#4 Tim: “So if we get a 20 percent correction the avg home will be only $800,000. What a deal!”

Actually, it’s MUCH MORE than saving $200k, it’s:

$200 x mortgage rate x am years:

$200k @ 6% x 30 years = $431,676.38

Thus, waiting for a 20% correction would save your Total Payment: $ 431,676.38 not $200,000.

Well worth the wait.

#103 AM on 05.05.11 at 8:25 am

Heard a news story on the radio this morning regarding RE sales in my area; apparently sales are down YOY for the 5th straight month. The local cartel blames it on the HSTand the bad spring weather.

Anybody buying that?

#104 MikeT on 05.05.11 at 8:29 am

@69 Peter:
I got another joke on this:
“The bad guy is dead, the prince got married – it’s a Disney weekend on Earth!”

#105 Alex on 05.05.11 at 8:36 am

“In the case of Vancouver and Toronto listings have also collapsed by more than 20% while prices have risen. Many people know not what this means.”

Just wondering whether this 20% collapse can be attributed to sellers switching to Kijiji and Craigslist?
Any thoughts?

#106 AACI-Okanagan on 05.05.11 at 8:40 am

#12 The Original Dave on 05.04.11 at 9:39 pm

still “sold” signs in Toronto. I drive by people going to look at houses (while they salivate) and almost yell “idiots!”.

The Toronto market is crazy. So many self-professed real estate geniuses out there.

This made me chuckle so I thought I would correct the last line “So many self-professed real estate geniuses ON HERE”

#107 Who's the Greater Fool? on 05.05.11 at 8:42 am

I enjoyed seeing the house I sold in Victoria for $386k in 2004 sell for $750k last year. This is what I’ve seen while waiting for the bubble to burst. Now I’m in the Windsor area, the real estate market just keeps trucking head here.

Starting to think there’s a flaw in the economic logic of the Canadian real estate market bubble. There must be, since the bubble bursting is always just around the corner.

#108 Howdy There on 05.05.11 at 8:44 am

“Give it up. You have not a single fact to support your argument. — Garth” #89

I’ve pulled a lot of the factors in my analysis from this blog. I’m applying it the broader economy instead of just housing.

But let’s assume people won’t give up paying other bills before the mortgage. We know that being underwater is a major determinant of default, but in Canada you have to declare bankruptcy to get away from the mortgage. That means defaulting on other non-CMHC insured debt. I’m hardly stretching here Garth.

#109 Aussie Roy on 05.05.11 at 8:45 am

Aussie Update

Over the past few weeks receivers have sold 27 of Mr Harding’s units in the Noosa Blue complex for about $4.5 million, implying a price of about $166,000 each.

Fifteen years ago, the same properties sold for about $320,000, sources said.

Analysts estimate Noosa’s property values have fallen by 40 per cent since the peak of the market.

http://www.theaustralian.com.au/business/property/the-holidays-over-for-noosa-property-values-receivers-are-getting-diminished-returns-as-the-market-tumbles/story-e6frg9gx-1226050072796

Mr Twigg is now selling his house at 199 Hedges Avenue for less than $8m after buying it for $17.5m — with a further $1m-plus in stamp duty and other taxes — in 2007, meaning his investment has fallen in price by about $50,000 a week for four years.

http://www.theaustralian.com.au/news/nation/racing-driver-burns-up-10m-in-property-scam/story-e6frg6nf-1226050090103

FIGURES released yesterday have revealed the volume of house sales across Tasmania is at its lowest point in two decades.

REIT President Adrian Kelly said while house sales in Tasmania had increased during the March quarter by 3.1%, the figures were still down 18% on the previous March quarter.

Mr Kelly said the reason for the low number of sales is not due to a lack of houses on the market, but the fact that many properties are overpriced. – LOL

http://www.theadvocate.com.au/news/local/news/general/overpriced-homes-contributing-to-low-house-sales/2153210.aspx

AFG CALLS ON GOVERNMENT TO BOOST CONSUMER

CONFIDENCE AFTER ANOTHER FLAT MONTH: APRIL FIGURES

AFG, Australia’s largest mortgage broker, has called on the Government to address weak consumer confidence, after figures for April showed mortgage sales fell by nearly 10% compared to April 2010. AFG processed $2.1 billion in mortgages in April 2011 compared to $2.3 billion in April last year and $2.8 billion in April 2009.

http://corporate.afgonline.com.au/news/MAY11-MORTGAGEINDEX.html

Surprise drop in retail – Surprise to who?.

http://www.smh.com.au/business/surprise-drop-in-retail-sales-20110505-1e98b.html

#110 Enjoy that... on 05.05.11 at 8:45 am

#52 Sticky-wicket “So for a first time buyer, when will be a “good” time to buy a home? …And What’s the difference between buying in now when the prices are high and interest low, OR waiting a while hoping that prices will go down but at the same time interest rates will go up? How much difference will there really be?”

Well, a lot of difference. How much do you make a year? The total debt is TOTAL debt. Buy a home today at $400k and YOU OWE $400k, wait till it’s $300k and you just made $100k + less interest + less years to work (time) + faster to pay back.

Wouldn’t you rather have a $150k debt than a $200k one?

When is the best time to buy? When people don’t see a home as an investment but as a debt. When renting is favoured over owning.

#111 45north on 05.05.11 at 8:51 am

Enjoy that: It’s not about making a profit anymore, it’s about getting out now to save your money.

sellers are “chasing the market down”

my sisters and I sold the family home in Toronto last year, better a year too soon than a day too late

#112 Wilde_at_heart on 05.05.11 at 8:53 am

@Jody: WHY would the Conservatives keep the bubble inflated now? They have their majority.

#113 AG Sage on 05.05.11 at 9:10 am

>#41 USinvestor on 05.04.11 at 10:44 pm
>#25 – Bingo!

>Starting now loans made in 2006 in Canada are starting to re-set. If interest rates go up even a little over the next 5 years – there will be blood.

I did a very rough analysis of this. The scale is off (total mortgages are too low) but the shape I’m pretty confident of up until 2015 (please see the notes on the chart)
http://worldhousingbubble.blogspot.com/2011/04/toward-subprime-reset-chart-for-canada.html
The main reset/recast pain due to 40 and 35 year amortizations will be in 2013.

BTW, if anyone knows a source for the total new mortgages issued each year 2006 on, I can adjust the chart’s scale.

#114 Brad in Van on 05.05.11 at 9:16 am

OASIS? HELLO? Look at that! The CAD continues to slide against the USD. Of course Oasis is nowhere to be found.

#115 Mikey the Realtor on 05.05.11 at 9:34 am

The frenzy continues, first time buyers camping out and cant get enough of the fresh housing air.

http://www.torontosun.com/2011/05/04/warmington-aberrant-sideshow-to-home-sales

#116 Toon Town Boomer on 05.05.11 at 9:34 am

Kevin#6
What are your thoughts on Saskatoon housing Market?
Do you think listings are down? I know prices aren’t. In fact they have gone up compared to last summer anyway. What are you hearing from people in saskatoon?

#117 Jim on 05.05.11 at 9:40 am

Richmond real estate is off because the Chinese have stopped buying and few whites are buying there.
Westside and West Van will soften in June as the last of the Asian driven frenzy peters out.
Of course it will be back on the boil next year.

#118 The American on 05.05.11 at 9:43 am

At #4: Tim, this is why Vancouver will have at LEAST a 40% correction. I feel even that number is quite conservative. When values begin slipping in a correction, and they are now, the slide will gain momentum (much like a landslide). This is seen time and time again from areas across the U.S., Hong Kong, mainland China, Europe, and Japan. Values A L W A Y S return to the mean. With a 40% correction in Vancouver/Richmond, this would place average SFH values around $600,000, which is still probably too high for the “mean.” No amount of HAM is going to stop it, especially when the HAM stops, and it is stopping. As China is greatly cooling off right now, the HAM that was once abundant to prop values in Vancouver and Richmond will come to a trickle. Frankly, the faucet of HAM is already being turned off in these areas. This will have significant negative impact on BC RE values.

May I direct your attention to areas like Miami and San Diego. Both markets had a flood of international buyers during the boom years, propping values in markets that “never will go down!” Since the bust, Miami has experienced nearly 50% correction in values and San Diego is about 40%. Mind you, these two cities are highly-desirable due to their climates, everyday livability, population, infrastructure, density, shopping, and cuisine. All the positives that were once working in favor of these higher values had no impact on stopping the slide.

#119 SMOKING MAN on 05.05.11 at 9:46 am

Why I am so bullish of Toronto Real Estate.

Bonds yields dropping, Fixed Rate mortgages set to drop.
No spike in Jobs, then no Interest overnight rate hike.

No Inventory

Most people don’t understand money, in fact most of the people in this chat room don’t know how to buy a bond, or trade equities with out a broker, most people don’t trust investment advisors. The only thing most people understand is Real estate.

The main stream media will always pump RE.

So with a stable job markets, and rates staying put, no crash.

Now are people in debt up to there eyeballs, ya, do fundamentals suck prices to income, yup. Does the herd know or understand that. Nope.

Bubble Heads my kids are priced out of the market, I am loaded and can easily with stand a huge crash, knowing this possible scenario I still don’t care, I love my house and location I aint going anywhere. I would love a crash so I could unload 2 of the remaining offspring.

But its going to be a while till that happens.

#120 Cowboy on 05.05.11 at 9:47 am

Anyone know anything about Kootenay area (Radium, Invermere, Windermere etc)?
It just seems like prices have come down a lot from a few yrs ago but I never hear anyone talking about it.
Friend of a friend has been trying to sell a huge bed and breakfast for a mil for YEARS. Kind of strange that places seem ‘affordable’ for a touristy nice place.
However, I did notice Castle Rock condos (built in a flood plain!) advertised at 50% off.

Anyone?

#121 Bigrider on 05.05.11 at 9:52 am

The number of new Canadian millionaires expected to increase by 40% over next nine years according to what I read on CP24. Any chance this is what is fueling the absurdity in the RE market here in T.O?

#122 Kevin on 05.05.11 at 10:02 am

Toon Town Boomer on 05.05.11 at 9:34 am
re: Saskatoon’s housing market.
Listings are up year over year but sales are down. But listing growth does seem like it is petering out. The average price is up but that is because there is a bigger percentage of move up buyers that is skewing the average price up. There are fewer first time buyers because that pool of buyers is emptying out.

According to stats can the average weekly wage increased by a total 19% from 2006 to 2010 in Saskatchewan. This is while houses doubled. TD bank just said that this about Saskatchewan “the share of vulnerable households is currently higher than in all other regions.”

The housing market in Saskatoon is definitely in a bubble. Check out my blog.

Saskatoon housing bubble charts to study
http://saskatoonhousingbubble.blogspot.com/2011/02/saskatoon-housing-bubble-charts-to.html

#123 Duncan on 05.05.11 at 10:03 am

Here’s what $830,000.00 gets you in Richmond, BC. Wow, what a steal! No bubble here!

http://www.realtylink.org/prop_search/Detail.cfm?areatitle=&ARPK=&ComID=&agentid=&MLS=V882281&rowc=1&rowp=1&BCD=GV&imdp=13&RSPP=5&AIDL=923&SRTB=P_Price&ERTA=False&MNAGE=0&MXAGE=200&MNBT=0&MNBD=0&PTYTID=5&MNPRC=200000&MXPRC=900000000&SCTP=RS

#124 Kevin on 05.05.11 at 10:08 am

@ThePhantom

I don’t think anybody expects interest rates to “stay the same.” We all recognize that they’re going to rise in the upcoming months and years. The only question is how high will they rise.

That said, I think you’re overstating the hazard that rising rates pose to homeowners. People with variable-rate mortgages will not see their payments change one penny. Of course, we all know that with variable rate mortgages, your payment stays the same. Rising rates simply serve to extend your amortization. In this respect, variable-rate mortgage holders are no more at risk than fixed-rate holders.

The “chickens come home to roost” at renewal. Renewing in an environment of higher rates – and keeping the same amortization – will indeed result in an increased mortgage monthly payment. However, financially-strapped homeowners still have an out: simply extend the amortization.

If I currently have a 25-year mortgage, and rates rise, then when I renew, I would simply renew for 25 years again, to keep my payment manageable. I’d be renewing a lower balance, and I’d still be eroding away the principal, albeit at a slower pace (due to the higher rates).

The only people facing a potentially catastrophic situation are those who originally financed at 35 years. Once they come up for renewal, and rates have risen, refinancing for 35 years is no longer an option for them. They’ll HAVE to re-fi for 30 years (at most), and face a higher monthly. If that higher monthly crushes their budget, then I expect that will show up as an increase in foreclosures. But it remains to be seen whether this will be a significant number of borrowers, or merely a minor blip in the market.

#125 CalgaryRocks on 05.05.11 at 10:23 am

#113 AG Sage on 05.05.11 at 9:10 am
>#41 USinvestor on 05.04.11 at 10:44 pm
>#25 – Bingo!

>Starting now loans made in 2006 in Canada are starting to re-set. If interest rates go up even a little over the next 5 years – there will be blood.

Reset to what? Interest rates are either the same or lower than 5 years ago. Not to mention that you can lock in for another 5-7-10 years a full 6 months before your term expiration without a penalty.

What’s more likely, that a homeowner will lose his house over an extra 300$/month or that he will cut something else out of his budget to make up the difference.

If there’s a crash it won’t be because of these so called ‘resets’.

#126 Junius on 05.05.11 at 10:39 am

#125 Calgary Rocks,

You underestimate the depth of the current debt situation if you think most people can just cut expenses by $300 per month and move on. First of all, a 2-3% change in interest rates will cause many of them more pain that $300 per month. However with Canadian debt levels already at 150% many are already broke.

Prices are set on the margins. Only a fraction of the housing inventory is on the market at any time but if even 10% of the population must sell there homes it will bring the market down. That is what happened in the US, UK, Ireland, etc. Now in Canada.

#127 Chris on 05.05.11 at 10:40 am

Anyone have the link to the actual Canadian Banker’s Association report on Alberta delinquencies?

#128 Junius on 05.05.11 at 10:41 am

#124 Kevin,

The problem is that no only will rates be higher at the resets but values will be lower. Many people will realize that they have a depreciating asset that is going to cost more to keep. That is the coming trap for many Canadians. Then they realize they still have 25-30 years left on their term which is not a life sentence of debt.

#129 Hoof - Hearted on 05.05.11 at 10:55 am

Well….a builder told me this strategy years ago when things look like they are tanking;

Chase the market down, cut the price below the competition “act like that woulded bird” keep the fingers crossed.

The main thing is to sense it is not going back up….GET OUT ASAP

#130 SK on 05.05.11 at 10:59 am

Globe and Mail Article:
Alberta’s delinquent homeowners lead the pack
http://www.theglobeandmail.com/report-on-business/albertas-delinquent-homeowners-lead-the-pack/article2010293/

Quote of the day: “We had expected that 2011 could see a positive correction, but that hasn’t happened. I believe it’s just delayed – there isn’t any fundamental reason house prices shouldn’t be improving.”

– Phil Soper, Royal LePage

Wow.

#131 Hoof - Hearted on 05.05.11 at 11:06 am

Precious metal:

If you have a gold bar…..and I have a .375 Magnum with about $2 in brass shells…which metal is more precious?

#132 Utopia on 05.05.11 at 11:10 am

And then we had this quote from Phil Soper this morning in the Globe article about Alberta’s delinquent home owners.

“…said Phil Soper, president of Royal LePage. “We had expected that 2011 could see a positive correction, but that hasn’t happened. I believe it’s just delayed – there isn’t any fundamental reason house prices shouldn’t be improving.”
———————————————————-

Groan. Apparently Phil Soper does not read this blog. I can think of thirty reasons why prices should not be improving without even breaking a sweat.

Hey Phil, how about the debt loads the average Canuck is carrying already? Maybe that is a good fundamental reason for prices to remain where they are at. Or how about this, if you read the article (wherein you were quoted) you will note how rapidly prices increased in just a handful of years in the past.

Guys like Phil just get funnier every single day. They can’t really expect anyone to take them seriously, can they?

#133 Cellar Dwellar on 05.05.11 at 11:14 am

@#72 BPOE – How long did it take to scrub the smell of gas off your hands?

@#86 Jody – The only thing more frightening than your right to vote is your lack of cognitive reasoning skills.
Your paranoid rants are pathetic. Police are all bad, Get rid of big govt., Cons are A##holes… Jayzuz! Grow up!
Get a job! Live a little before spewing your paranoid, childish rants. No one but you cares.

@#109 Aussie Roy- Thanks for the “view” from down under. Its interesting to see whats coming here. Keep it up.

@#120 Cowboy- Dont forget the main industry in the Radium/Invermere/Windemere Valley is Tourism. The majority of the owners are absentee calgarians(like you perhaps?) and the first thing to go is Recreational property.
Its funny though. I also have a friend that owns a B&B in Windemere. He aint selling. His family LOVES it there.

#134 Fools buy houses, wise live in them on 05.05.11 at 11:17 am

Fellow Bloggers,
Any opinion on FIE.TO and DFN.TO – they pay good dividend every month but how safe is the investment?

#135 LS on 05.05.11 at 11:26 am

#55 Wetcoast – HILARIOUS!!

Can you believe they even actually know someone who sold for $1.2 million and moved here and bought cheaper ? Isn’t that simply amazing ? Like no one has ever thought of that, what salesmanship skills that one took to suck in CHEK to run that garbage.

#136 Howdy There on 05.05.11 at 11:27 am

One last thought on equities. Many of us are expecting a period of deleveraging which, with or without defaults, represent reduced revenue and profits for the banks. The recent run up in debt has allowed the general populace to spend above their level of income. Paying down debt will decrease spending, which will affect the bottom lines of the vast majority of businesses. Will it cause a meltdown? Probably not, but to the extent that fundamentals matter to equity prices, a bearish outlook is warranted.

So be bearish. But the banks are insulated by government, and would be the last pillars to fall, not the first. — Garth

#137 kilby on 05.05.11 at 11:27 am

Canadian silver Maple Leafs are down from $46.12 0n May 2nd to $38.98 this morning…over 15%. Any speculation as to what will happen in the next 3 days?

#138 Cellar Dwellar on 05.05.11 at 11:28 am

@#123 Duncan- Hilarious ! A crack house selling for $830k and the realtors name is McCraken.
Bwahahahahahahahaa

#139 eaglebay on 05.05.11 at 11:30 am

Higher Alberta mortgage delinquencies.
Could it be because Alberta is a non-recourse Province?
Just walk away eventually.

#140 Pat on 05.05.11 at 11:33 am

@ #94 S-J,

Based on prices/income and prices/rent, I think NS is overpriced too. There’s no immigration of working-age people either (since there are no jobs, since the province is underpopulated, and so on).

But I know people who think NS is cheap because it is cheaper than BC, ON, etc. I wonder what will happen in NS when the correction out west starts.

#141 Utopia on 05.05.11 at 11:34 am

Also in todays Globe is a survey. The question posed is this: Is it a good time to buy a home? Have a look and then vote. I am curious to see if readers here can sway the results by the end of the day.

Currently the outcome stands at:

23% say YES. Interest rates will only go higher.
41% say MAYBE. It depends where you are buying (location location, location folks)
36% say NO. Prices are bound to fall.

http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/vote-is-it-a-good-time-to-buy-a-home/article2009430/?from=sec358

#142 Victoria on 05.05.11 at 11:41 am

123 Duncan,

People in Victoria are living in homes like that. Seriously – people are actually living in homes like that. I never saw that until we moved here 9 years ago and my eyes almost fell out of my head.

#143 Devore on 05.05.11 at 11:42 am

#46 Dark Sad Monster Bunny

So what’s the issue?

The issue is that affordability is one dimension you look at. Just because you CAN afford something, does not mean it’s ok to buy.

#144 Victoria on 05.05.11 at 11:42 am

#121 – Millionaires to increase by 40%.

How?

#145 The American on 05.05.11 at 11:44 am

At #121: Bridger, those stats are “all things remaining constant.” Of course, we know this not to be the case. These stats do not take into consideration the real estate correction that is now taking place.

#146 Devore on 05.05.11 at 11:47 am

#52 Sticky-wicket

And What’s the difference between buying in now when the prices are high and interest low, OR waiting a while hoping that prices will go down but at the same time interest rates will go up? How much difference will there really be?

Typical fallacy people arrive at when only looking at the monthly payment.

If you buy when prices are high and rates low, rates will go up, making your payments larger, while the monster debt remains. If you buy when prices are lower and rates higher, rates won’t go up (or will go down) and you have less principle to pay off.

#147 DaBull on 05.05.11 at 11:49 am

#138 eaglebay on 05.05.11 at 11:30 am

Alberta may have recourse mortgages, but I would bet most, if not all, arrears are the high ratio CMHC insured type, so walking away is not an option.

#148 April Showers on 05.05.11 at 11:59 am

Could The American be right? He said the effects of our slide would be undeniable by August of this year. At this rate there are people who deny and people who pander and people who believe the correction is here. I suspect by August of this year though the correction will be undeniable. That is very interesting.

I also recall The American saying our Dollar will go down in value by end of May and it is definitely going down right now compared to the US Dollar. He also said we would have a slight rate increase by end of March which also happened.

The American said China would be correcting by this time and reports would surface which have now happened. He said Chinese money would stop in Vancouver when this happens and I will tell you I think they are not buying nearly as much as what they were just 8 months ago.

I also remember The American said prices would probably fall more noticeably in the East and then more toward the West. This looks like it could be happening too.

It is hard to argue with a person who seems to be correct with his predictions, so I am with him. So far what he is saying is happening within the timeframes he has said it would. If he were right only a time or two I would have my doubts. Being right all the time makes me wonder where he is getting his information.

The American can you tell me what the weather will be tomorrow?

#149 Junius on 05.05.11 at 12:11 pm

#143 Victoria,

The millionaires stuff is complete crap. It is all about housing prices increasing. More pump from the MSM.

To be ignored.

#150 Kitchener1 on 05.05.11 at 12:13 pm

Classic market top, in the real world when this happens, investors flood the exits. RE is illquid but it will happen none the less.

The tide is turning, there are simply no more first time buyers left. Look at the GTA numbers in the under 500k range– the usual top in affordable for first time buyers, major RED in those numbers.

This solwdown in volume is 100x more important then average price because without first time buyers the property ladder stops. Watch for some major RED in the 1 million plus home numbers in the GTA starting in July/August numbers.

#151 SMOKING MAN on 05.05.11 at 12:21 pm

In the last 20 days 5 year benchmark bond has dropped 40 bacis points.

Expect an 1/4 point drop in fixed rate 5 year mortgages. any day now

Lower rates will have no impact in this market. Higher rates will have a dramatic one. — Garth

#152 Vic on 05.05.11 at 12:29 pm

“Victoria trails the group” Even the overly optimistic Conference Board puts Victoria’s economy in last place for all of Canada next few years.

http://www.winnipegfreepress.com/business/breakingnews/western-cities-to-best-the-rest-in-economic-growth-for-next-few-years-121319079.html

#153 AG Sage on 05.05.11 at 12:30 pm

#125 CalgaryRocks on 05.05.11 at 10:23 am

>Reset to what? Interest rates are either the same or lower than 5 years ago. Not to mention that you can lock in for another 5-7-10 years a full 6 months before your term expiration without a penalty.

>What’s more likely, that a homeowner will lose his house over an extra 300$/month or that he will cut something else out of his budget to make up the difference.

From the most recent CAAMP survey:
Just 2% indicated that they have no room (the affordable increase is $0).
A further 2% indicated their room is $1 to $99.
5% indicated that their room is $100 to $199.
6% reported room in the range of $200 to $299.

So, with a 1% hike, 16% of households get into trouble. In total, 575,000 households cannot handle an interest rate hike of 1.5%

Imagine that many households selling because they have to.

If you believe Canada will have historically low interest rates forever, then sure, these households will only need to sell out only for the usual three Ds. It’s possible a perfect storm of global economic conditions will keep rates low, but I doubt it. Especially not by 2013.

And no, it’s not going to cause a crash/sharp decline, it will just be piling on at that point.

#154 Dinner by 7 on 05.05.11 at 12:56 pm

I am in the camp that things are nuts – and in due time this whole house of cards will sadly collaspe and engulfing everyone and everything in its path – I am a homeowner – bought in 2002 – but from the day the ink dried on my official closing – I have focused on putting every extra penny against the mortgage beast – the blog today states he makes $130,000 a year – what gives buddy – that kind of income – should have made a serious dent in the mortgage – do double up payments, accelerated weekly payments, yearly one time payments..the list goes on to kill the mortgage monster – we are nearly there after 9 years and we just took the moderate route…

As for nothing moving – 2 houses on our street, north of Toronto, listed – sold, all within 13 days…. nothing special about the prices, actually I thought they were over-valued…last Saturday in the Woodbridge area, new sales office – I counted 11 cars (and nice looking ones to boot) at the sales office – and a giant billboard quoting from the mid $400’s…I bet that’s a semi with approx 1300sq.ft….The world has gone mad – actually sad that a family like ours, who tried to be as careful as possible and worked the numbers over and over – while others just walk into a situation that will cost us all –

Thanks Garth for this site – for such a long time I thought I was the only one wondering where everyone was getting this money to buy these homes – its just wood, bricks, shingles ontop of some dirt – big deal, but I guess we have reached the saturation

#155 Big D on 05.05.11 at 12:57 pm

@Howdy There

The recourse mortgage thing is a red herring. There are only 12 states that have non-recourse mortgage laws. Even in those states, it’s only purchase money that’s non-recourse. If you ever refi or get a HELOC after closing, you’re on the hook.

Guess what? People in the other 38 states aren’t behaving any differently than the non-recourse. You can’t think of the “pay or don’t pay” decision as a real choice. When you have to refi at the end of your term, you may not have enough to pay all your bills. Add to that a job loss or a significant decline in prices that puts you into negative equity, and you no longer have any choices. You probably won’t have the $100K cash you need to bring to closing. In this situation, recourse is irrelevant. You don’t have any choices to make.

#156 Jebus on 05.05.11 at 1:09 pm

Wrong. Corporate earnings, along with demand, move equity prices. Greed and fear alone move real estate values. About 11% of us own stocks. Almost 70% own houses. There is no comparison. — Garth

So all these greater fools who will lose everything will be stuffing corporate pockets with money they don’t have?

#157 King Bubbles on 05.05.11 at 1:11 pm

@ #115,

Interesting story about Mississauga.

In Winnipeg, developers are starting to put flyers under the doors of folks who live in apartments offering a $20,000 price reduction on new condo units in the area provided people sign in the next week. I got one yesterday.

A big change from a year ago.

:-)

#158 AG Sage on 05.05.11 at 1:18 pm

#125 CalgaryRocks on 05.05.11 at 10:23 am

>Reset to what? Interest rates are either the same or lower than 5 years ago. Not to mention that you can lock in for another 5-7-10 years a full 6 months before your term expiration without a penalty.

One other thing. You sound complacent based on the assumption that rates for folks are bound to be going down or staying the same. If you look at this mortgage rate chart:
http://www.mississauga4sale.com/rates.htm
it might look as if all is well, given those pools of mortgages issued around 7%. Except that there was record refinancing going on in 2009 and 2010, those 7% rate pools are much thinner than you might be imagining and far more households are in the 4% pools, which in the short term is good, the medium term, less so. 30% of fixed rate mortgages are 1-4 year terms (7 and 10 are rare) so those <5 year refinances from 2009 are really the first wave at issue. Especially the 35 and 40 year amortizations where (to a first order approximation) the entire original principal is going to roll into a new mortgage.

#159 Utopia on 05.05.11 at 1:27 pm

#152 AG Sage

Good post. I was meaning to get onto the issue of the 300 dollar increase pushing many into delinquency that was mentioned in the Globe article today.

What is that ratio again? I think Garth has pointed out that each one percentage point increase in interest rates results in as much as a 9% increase in mortgage payments on renewal.

I am not 100% certain of the ratio right now though. Perhaps one of the blawg-dawgs who keep data on those details will be kind enough to refresh my memory.

Anyway, it would certainly suggest that even a small increase in interest rates over the period of a year or so (like a simple and expected 1.25% rise) could easily add 300 dollars to the monthly costs of any mortgage in excess of 300,000 dollars. Right?

There are thousands upon thousands of mortgages larger than 300k of course. Especially in our major cities..the so-called ground zero of R/E debts where housing prices are now at eye-popping levels.

Many of them are 5% down and held by Doe-eyed virginal newbie buyers who are in for the shock of their lives when renewal comes up to bite them on their sorry arses.

Three hundred bucks is peanuts though. Any fool can find that extra money every month. Well maybe not. Unfortunately for the kids (and a lot of their foolish parents too), they have built their lives around low interest payments.

They have committed the resources that might otherwise go to the extra burden of debt repayment to a whole raft of other priorities and so they now have little in the way of latitude or wriggle-room. There is not extra money sitting around in mattresses waiting to be deployed against higher monthly payments.

Wriggle-room, for those not familiar with the term is that little tiny bit of space necessary for stunt performers to get out of chains and a barrel after being tied up and throw in the water.

Without wriggle-room you just drown. Here, have a look at the predicament of those greater fools who have mortgaged themselves to the eyeballs and now await the fates of the coming rates.

http://en.wikipedia.org/wiki/File:HarryHoudini1899.jpg

#160 Junius on 05.05.11 at 1:31 pm

#151 Vic,

You have to love the Confidence Bored of Canada. These jokers have been wrong so many times in their predictions you could hire a wheel spinning monkey to do better.

Note – as usual – that there is no analysis or reasons for the numbers. Just the usual predictions in the 2-4% range across the “survey.” What crap.

#161 Another Albertan on 05.05.11 at 1:37 pm

120/Cowboy:

I know a number of Calgarians who bought in BC who are underwater. All are dual-income professional families in their late 30s to mid 40s. One bought a townhouse in the fall of 07 in Invermere for $550k with 10% down. Comps right now would be a maximum of $375k. I’m guessing it’s about $2750 per month to cover the mortgage, insurance, utilities, etc.

Another couple decided to go in for half on a lakefront house construction in Invermere. At least 250k over budget (on a 1M+ job) and the two couples are suing each other now. So much for doing a deal with friends.

The stories I hear about recreational property bought by Albertans are always qualified with “we/they know we/they overpaid, but we’re confident it will pay off in the long run”. No one wavers from the party line. That’s why you’re not hearing much.

127/Chris:

http://www.cba.ca/index.php?option=com_content&view=publication&id=69&Itemid=56&lang=en

Everyone else’s mileage may vary.

#162 Utopia on 05.05.11 at 1:40 pm

I hope you all clicked on the link I left above. It says it all. The picture is worth a thousand words really. It says…Oh God…I am so screwed. Why didn’t I listen to all the sensible warnings before I signed my sorry life away for granite and stainless.

#163 Two-thirds on 05.05.11 at 1:44 pm

Regarding mortgage arrears in Alberta:

Good to see that after a few years, the MSM has finally chosen to report this.

The report can be found at:

http://www.cba.ca/contents/files/statistics/stat_mortgage_db050_en.pdf

#164 Cold Mixer on 05.05.11 at 1:46 pm

@ #94 S-J
@ #139 Pat

I agree with Pat – RE in most of the Halifax Regional Municipality seems overpriced and if you watch the Viewpoint site there seems to be a lot of price reduction going on. Certainly appears to be a buyer’s market right now. Yet, people of modest means are still throwing down $300K + for “rural” lots on the suburban fringe, where wells are running dry and rising energy costs (and interest rates) will soon take a huge bite out of already squeezed budgets.

With nothing to offer immigrants except a springboard to places with an economic heartbeat and workers/students leaving in droves, it might indeed be retired money-flush refugees from the West and other parts who keep prices afloat–for now. NS seems destined to be nothing more than a pasture for boomers and seniors. Nice place to graze, but not really for those with a hearty appetite.

#165 45north on 05.05.11 at 1:46 pm

Gordeaux: Can I ask why you think the banks are prepared?

because it’s in their interests.

In the US the biggest problem for the banks is that in some cases they cannot prove they own the mortgages. Mortgages were bundled, securized and resold. In many cases it is impossible to say who the owners are. Service companies cannot modify the terms because the only agreement they have is the current terms of the mortgage. Further the banks decided to by-pass traditional registration of mortgages at county offices by creating MERS. The legality of MERS is open to challenge. Further there is the issue of robo-signing where bank officers signed as many certificates of ownership as they could in a day without doing any checking.

Now I don’t work for a bank or CMHC, I have learned this stuff just by reading the American housing blogs.

So how hard would it be for a bank to hire a law firm to review 1000 mortgages. To check that it had the original signed documents? That the mortgages were properly registered in municipal land records. That notices were properly sent to the mortgagor (the homeowner)? That in the case of mortgages that were bought that the bank has a clear record of ownership? To identify individual branches, bank officers where there were problems? How much would the banks pay for this kind of review?

I expect these kinds of reviews would be conducted without fanfare. Not exactly secret but with discretion.

#166 April on 05.05.11 at 2:08 pm

Even Micheal Levy on CKNW this morning , in answer to Bill Good’s question, how is Real Estate doing, said “It’s stopped”. ” The activity that was there is no longer”.

#167 BPOE on 05.05.11 at 2:21 pm

Pro Renter The American has been dead wrong. Vancouver Real Estate has exploded with incredible returns and pride of ownership whereas renting is a one way street to the welfare state. Do your own due diligence and learn the FACTS. The American is no less than Shiller himself desperately posting lies to support his cause. The desperation is sad. He focuses on grammar and punctuation rather than accepting the FACT Vancouver Real Estate is worth significantly more today than it was 10 years ago
_______________________________
147 April Showers on 05.05.11 at 11:59 am
Could The American be right? He said the effects of our slide would be undeniable by August of this year. At this rate there are people who deny and people who pander and people who believe the correction is here. I suspect by August of this year though the correction will be undeniable. That is very interesting.

#168 Junius on 05.05.11 at 2:27 pm

#158 Utopia,

You are correct. The ratio is roughly every 1% of interest rate hikes push the monthly payment up 9% on a mortgage.

#169 Junius on 05.05.11 at 2:29 pm

#166 BPOE,

We all know Vancouver Real Estate is worth more now than it was 10 years ago. However we also know it will be worth less in 2 years and less again in 5 than it is now.

That is the difference between us.

But keep pumping. It is entertainment. Low brow entertainment but entertainment all the same.

#170 Gordeaux on 05.05.11 at 2:32 pm

Hi Garth,

Thanks for your reply, I appreciate it. I did know that the CMHC picks up the risk from the banks. But I guess I’m wondering how we can be sure that backstop will always be?

For example, from the “I’m no lawyer” file, I wonder if the banks are playing fast and loose with eligibility standards, aren’t they then also opening themselves up to more liability? If I enter into a contract, then discover that right from the outset, the counterparty in the agreement was violating the agreement, does the agreement still have legal force? Or do the banks then take all that risk back?

Likewise, I was once told that following the commodity boom in the 70s and subsequent bust in the 80s, the banks were all forced to take a haircut on property out here — and the CMCH was in place at the time, wasn’t it? (I’m 42, so my memory of this is all pretty sketchy).

I guess what I’m saying is that there’s been a heck of a lot of unprecedented things happen south of the line since their RE crash — can we be absolutely certain we won’t see something similar here?

Thanks for any response.

Gord

#171 CrowdedElevatorFartz on 05.05.11 at 2:34 pm

@166 BPOE
Sorry about that little “gas explosion” the other night in Richmond my little realtor muffin. But next time pick a building elevator with a sprinkler system

#172 bystander on 05.05.11 at 2:37 pm

Markets adsorb some new insider information today.

Commodities take a bloodbath, and I guess interest rates is the answer. Large wall street players already know the date and act upon this information. Not surprising.

#173 Silver selloff on 05.05.11 at 2:38 pm

@mid-Ontario the silver “sell off” was a forced one. Margin requirements were raised over night forcing automatic sell offs of positions to force the price down by market manipulators. Silver will rise again to highs never before seen. Go long and stay strong, it will be a bumpy ride.

#174 Patiently Waiting on 05.05.11 at 2:38 pm

Sticky-wicket on 05.04.11 at 11:12 pm
So for a first time buyer, when will be a “good” time to buy a home? The way things are now, it costs just as much to rent a crummy 2 bdrm apt. per month as buying a 3 bdrm townhome.

And What’s the difference between buying in now when the prices are high and interest low, OR waiting a while hoping that prices will go down but at the same time interest rates will go up? How much difference will there really be?
_____________________________________________

The difference is this: keep in mind that interest rates move in cycles as well, and the current low interest rate environment will not last much longer.

if you buy your home at a high price with low interest rates, the next stop is higher interest rates and lower home value = lost equity but the debt is still the same = you loose.

If you wait for interest rates to rise & home prices to fall, the next stop in the interest rate cycle will be lower rates & higher home prices = increased equity you win :-)

#175 bigrider on 05.05.11 at 2:43 pm

Silver and Gold..Yikes !

And Silver and Gold Stocks…Holy Shit !

Can’t believe another screaming buy opportunity has emerged in this incredibly bullish sector.

#176 bystander on 05.05.11 at 2:51 pm

#121 Bigrider on 05.05.11 at 9:52 am

” The number of new Canadian millionaires expected to increase by 40% over next nine years according to what I read on CP24. Any chance this is what is fueling the absurdity in the RE market here in T.O?”

Same old story to reinforce the believe of the innocent herd and create a supply of fools to BUY !

#177 April on 05.05.11 at 2:54 pm

I forgot to mention re #165 , for people who might not know, that Michael Levy is referring to the Vancouver area.

#178 vanrant on 05.05.11 at 3:03 pm

Housing Bubble 101
Lets review why houses prices went up 300% in the last few years
– Carney drop interest rates to 1%
– CMHC relaxed lending standard for home buyers
– Conservative increased CMHC lending limits to 600 Billions
– Removal of ceilings for loans from CMHC
– CMHC increased amortization up to 40 years
– CMHC decrease of down payments to 5%
– Liberal immigration policies & increases in immigration
– News network shows realtors in helicopters flying over WR and speculators lining up for day to buy presales
Results: Houses Price going through the moon!

#179 Pat on 05.05.11 at 3:06 pm

@ #163 Cold Mixer,
I didn’t know the Viewpoint site. Thanks.

#180 Mr. Reality on 05.05.11 at 3:13 pm

BPOE and all you perma-bulls. I bet you won’t even bother posting on this site a month from now. Commodities are dropping off a cliff and your precious realestate is located within a country that operates exporting commodities. Don’t think for a second that everything is ok. High debt, tanking commodities and double dips destroy any hopes of retaining your house value.

Renting feels great! Buying at the bottom feels even better! Watching real estate agents begging for money on every street corner in this country would be a dream come true. The gig is up.

Mr. R.

#181 kilby on 05.05.11 at 3:15 pm

Maple Leaf now $37.20….Another $1.78 in 3 hours. Be interesting to see where precious metals are by tomorrow afternoon close.

#182 Bill Grable on 05.05.11 at 3:21 pm

Today: a classic.
Owner desperate to sell, while we have a 2 year lease, at a discount.
Agent for owner by, and we set up a showing schedule. While we were chatting, I casually asked her what she thought of the current market.
“NUTS”.
That was it.

Vancouver is already starting the landslide to correction.

They have had opens in this high end building and even agents didn’t both showing on ‘agent’ open houses!

So – even more fun for our silly owner (in CHINA), she doesn’t know that we have a new place all set to go, and in a while she gets the 30 day notice = and she will wind up with a 1.2 million condo = empty and not able to rent, because she drops to the bottom of the rental pool.

Greed kills.

So does leverage.

Oh – Sarah Daniels competency as a Real estate expert is based on her years as a traffic reporter on Radio and TV. Yup – a real expert.
Everything she says is always wrong footed.
Of course, Global wants the ton of money flooding in from RE companies, as so they have become shills.

Like I mentioned yesterday – the Olympic Village suites are being GIVEN to people – as Vancouver lost it’s AAA rating and we have seen our debt go parabolic.

Most of my contemporaries are weighted with huge mortages, all the toys and the maxed cards, and they think I’m nuts. Rent?

Yup.

#183 Nostradamus Le Mad Vlad on 05.05.11 at 3:24 pm


‘Tho I have been thoroughly engrossed by the UEFA Champions League semi-finals for the past two days (Man. United v. Barcelona in the final May 28), the lead pic brought back memories of what happened in those two houses in Maryland and Louisiana, in 1949 here.

The first two Jesuit priests were the absolute last resort as the boy had been through all the psychological, psychiatric and psychobabble stuff, none of which worked.

Although the demonic possession didn’t last very long, it is obvious why the first Jesuit priest, the main exorcist was carted off to a mental hospital, talking on about things the likes of which he had never seen before.
*
#65 reality guy — “Look at India, China, etc, Just the past months they all raised their rates.” — and — #147 April Showers — “Could The American be right? by August of this year . . .” plus #153 Dinner by 7 — “. . . that things are nuts – and in due time this whole house of cards will sadly collaspe . . .”

Give or take, timing is just about bang on.

#79 tran,Calgary — “Is Canada uniquely different from the U.S.?”

No, it’s exactly the same. See this.

#86 Jody — “The banks always win, thanks to previous federal governments that back them up.”

Mostly due to the US Fed, created quietly and without debate Xmas Eve 1913. A link a few days ago stated the US debt increases US$1.89 bln. each hour. Can anyone say what goes up must come down?
*
9:51 clip NDP says pix of ObL don’t even exist, leading to this. “Which explains why there was never any live video from a SEAL helmet-cam.” wrh.com. Obama’s re-election campaign has begun.

‘Quake Predictor for Tues. or Wed., the third and fourth of May. Actually, it happened Today.

Horses and Carts and Back To The Future. 1:52 clip.

Vitamin D can cure MS.

#184 SMOKING MAN on 05.05.11 at 3:39 pm

Ok going out on a limb here. made another small fortune today shorting, but looks like we are heading for a new bear market in equities and in the spring, that’s bad hope it’s just a hick up, but if not and a big self hits. This is not felling good, hoping a Goldman can prop it up.

I say Rates will Drop again…….
While the rest predicted a spike. We shall see.

Kind a like saying you are going to win with 7 2 in poker. It happens.

#185 CrowdedElevatorFartz evil twin on 05.05.11 at 3:42 pm

Bwawawawawa

Its free taco and burrito night…

I am going to wear my fireproof suit and let er rip just as the door closes

#186 DM in C on 05.05.11 at 3:49 pm

#163 “Good to see that after a few years, the MSM has finally chosen to report this.”

It was mentioned on the 24 hour news radio in Calgary this morning, but try finding that story at the Calgary Herald, CTV or CBC sites. I tried (not that hard, admittedly).

They’re still slaves to advertisers and scared to report the truth.

#187 bigrider on 05.05.11 at 3:51 pm

#173 Silver selloff- Clear and straight to the point. Well said.

Silver is going much higher from here. Shame on those who increased contract margin requirements for silver 4 fold overnight..dirty trick…can you imagine what doing same would do to RE? Lets see, instead of 10% down to secure a mortgage now you need 40%..instant 50% slide in the value of all these bricks…and the demise of the brick humpers.

Anyway, paper market is not real market. Silver going to 60 easy by years end with or without artificial paper market(comex what a joke) manipulation.

Gamble, gamble, gamble. — Garth

#188 bigrider on 05.05.11 at 3:53 pm

Crowded elevator fartz and evil twin.

Love your jokes. Keep them coming ! BPOE and Smoking man, inhaling your human methane for sure..fryin their brain cells. LOL

#189 Hoof - Hearted on 05.05.11 at 3:54 pm

Hey precious Metal fools

Get out while you can…its going to be a clusterf*ck as everyone HAS to cash out to pay off other bad investments.

#190 GregW, Oakville on 05.05.11 at 4:05 pm

Hi Garth, The picture of the Japan reactor, insides of building, in this link doesn’t look very good at all. And no I don’t believe the orange glow is from Mr. Jack Layton group, or that other orange guy.
http://spectrum.ieee.org/energywise/energy/policy/fukushimas-collateral-effects

#191 VICTORIA TEA PARTY on 05.05.11 at 4:06 pm

VICTORIA REAL ESTATE: LIKE DINNER — IT’S DONE “WILL THAT BE CROW, WELL DONE, TODAY, MADAM?”

The US dollar Index is way up; the US bond market, same yarn.

In these tossing seas of economic chaos the global economic slowdown makes strange, but entirely predictably, bed fellows.

The creaking and leaking so-called “safe haven” US reserve currency lifeboat gives it some cred. FOR NOW. Tomorrow could be a different story.

Here at home, the collateral damage to Canada’s investor class today was huge: our resource-driven stock markets were shredded along with gold, silver, oil, natty gas — all the usual victims/suspects. When you supp with the devil, you should have a long spoon!

The US-based blog, Market Ticker, run by Karl Denninger, observed today that cheap money deployed in margin accounts helped to exaggerate market actions that saw the Dow plunge more than 150 points, along with those commodities:

‘ “Cheap money” – that is, unlimited leverage – will drive markets higher. For a while. It creates speculative manias. It creates the feeling of wealth. It creates a “high”, much like an addictive drug.

But it is not wealth. It is not prosperity. And it is not sustainable.

The real economy, on the other hand, continues to suck. Gas prices have reached the point of demand destruction….GDP was soft as well. And the jobless claims numbers today? Horrible. Then there’s all the “great news” over in Europe – Ireland, Greece, German production number misses and Trichet claiming “We have this guys. Really, we have this.” Uh huh…’

Denninger says market could go higher from here but danger lurks:

‘Are markets going higher? Based on what? Expectations on a forward basis and general bullishness are ridiculously high. Profit projections are for $100 on the SPX for the year. Really?…Traders blow up in this fashion all the time…It happened to real estate speculators during the real estate bubble, it happened to tech speculators during the 1990s and now it’s happening again…Go ahead folks, buy the dip.’

His advice of the day:

‘Just be aware that you’re buying into a margin liquidation, and if the “Cheap Money” disappears, you’re going to be dealing with a lot of sleepless nights.’

HERE IN VICTORIA

Back to Victoria real estate. Being that real estate is also a commodity, it is subject to the same brutal forces that demolished other investors today. Some locals are finding that out now.

Be very careful. “Cheap” money is taking on a very costly air after this particularly very bad fundamental and technical market close…

Note that when money becomes more expensive, with higher interest rates soon, a whole new set of parameters take effect!

#192 CrowdedElevatorFartz evil twin on 05.05.11 at 4:11 pm

Here pull my finger…any one…their all primed and ready to go.

Next week Ted Kaczynski will bring his Canadian Tire tool kit and set my big toes up too

#193 bystander on 05.05.11 at 4:14 pm

Silver is abundant on this planet.
SELL

#194 Hoof - Hearted on 05.05.11 at 4:26 pm

Last week heard an interesting anecdote;

An elderly lady had sold her home and was planning to move into a condo.

The Offshore buyers bailed and all she had was the deposit , her old house and the condo.

I wonder how much of this has gone one? and if it will become epidemic ?

#195 The Hunt Brothers on 05.05.11 at 4:41 pm

No no

Buy Silver

lots and lots of it too

Its like Real Estate…they don’t make any more of it and the price always goes up !!!!!

Trust us

#196 Janie on 05.05.11 at 4:42 pm

#194 My understanding is that the ‘old lady’ doesn’t get the deposit; The realtors keep it to cover their lost commissions

Wrong. It is normally returned to the purchasers unless the agreement specifically states otherwise. — Garth

#197 Oh! Canada on 05.05.11 at 4:45 pm

Proof! – That it is never the same as the last time.

I have never seen a real estate market like this one in the GTA.

Incredibly high prices, yet remarkably low inventory.

It is the ‘Bizzaro-World’ of existential real-estate philosophy.

#198 jess on 05.05.11 at 4:50 pm

..this is the sickest thing going on this planet
and the world should ban and not trade with countries that have this type of shit going on.

Added On May 5, 2011
A small boy uncovers a big ring forcing children to beg, maiming them for profit in Bangladesh. CNN’s Sara Sidner reports.
The CNN Freedom Project: Ending Modern-Day Slavery – CNN.com Blogs

sick sick sick
child mutilated for refusing to beg
the attorney is facing death threats

http://www.cnn.com/video/#/video/world/2011/05/02/cfp.sidner.begging.boy.cnn?iref=allsearch&hpt=C2

#199 April Showers on 05.05.11 at 4:51 pm

Okay I just reviewed some more of The American’s previous posts. He also said that commodity prices were going to fall and the dollar would strengthen just this past week. HE WAS RIGHT.

The American, WHO ARE YOU? Where are you getting all of your info to be this accurate? I want to know your take on Kelowna and Victoria too.

#200 not asian on 05.05.11 at 4:51 pm

#194 Hoof Hearted – I’ve heard many similar stories in Richmond. But I also heard that the Buyers can try to claim the deposit – it’s held “in trust” for a long time. The lawyers need to determine if there is any clauses that allow the buyers to “get out”, loss suffered by the Seller, etc. It’s not that easy for the Seller to get the deposit.

#201 April Showers on 05.05.11 at 4:55 pm

BPOE you are dead wrong. The American said Vancouver would be correcting about this time. He is RIGHT. We all know Vancouver real estate has been going up. That is not a surprise to anyone. He predicted the correction would start around now and would be noticeable by August where it won’t be deniable. His points have been the market will adjust and correct and it is! Sorry, dickie, but you are dead wrong. You are a freaking idiot! Your inability to be forthright with information is your biggest problem to your credibility. How do we know when you are lying? When you start typing!

#202 jess on 05.05.11 at 5:04 pm

From the agents view

buy and bail

http://www.contracostatimes.com/california/ci_17969497?nclick_check=1

#203 April Showers on 05.05.11 at 5:04 pm

Hey idiot, BPOE. Did you know U.S. properties like New York, Florida, California, Nevada, and Arizona also had some of the greatest returns for their investors? That is, until the market turned sour. That’s what’s happening here right now! Everywhere I look are “For Sale” signs!!!! Good luck because you are going to need it.

#204 Musical Jimmy on 05.05.11 at 5:04 pm

To #167 BPOE
I rent. I have no intention of buying. Why would I, when I would just have to sink a huge amount of time and money into a property when, for a smaller fee, I can have someone else look after it for me, and I can put the difference into saving for the future?
I could buy, if I wanted to. No one has ever explained to me, in any reasonable fashion, why I would ever want to. Any time anyone says to me that “a house is an investment,” my immediate (not always vocalized) response is: “no, it isn’t, it’s a place to live.” Property costs money over time in taxes, maintenance, improvements and the like. When renting, all you pay is the rent, and I then get to put my money into actual investments instead.
My lifestyle is (obviously) different from yours. I rent. I’m nowhere near welfare. I’m not going to be. And, if I continue to be as lucky as I have been with work and the like, I will be able to retire without having a massive debt load on my shoulders. I don’t need the “pride of ownership” to feel like a complete human being.

A final thought, though, from one who does not have a great understanding of finance and investment (which is why I appreciate this blog): why, if I were looking to buy, would I ever buy when the market is “worth significantly more today than it was ten years ago”? Wouldn’t you prefer to invest in something with proven long-term returns when it’s at a low point in its cycle, rather than at a high point? Even if real estate does continually rise, why shouldn’t I wait until it at least slows in its meteoric ascent so I can buy before it takes off again?

#205 jess on 05.05.11 at 5:07 pm

muni fraud…4 years later

The case has revealed that Wall Street, during the same years when it was sowing the seeds of the financial crisis, was also cheating cities, states and school districts across the U.S. and using the unregulated derivatives markets to hide the kickbacks paid in the schemes.

http://noir.bloomberg.com/apps/news?pid=20601087&sid=aTx7lcUP.390&pos=3

#206 smw on 05.05.11 at 5:09 pm

#193 bystander

Not as abundant as American dollars…

#207 Burnt Norton on 05.05.11 at 5:25 pm

#182 Bill Grable on 05.05.11 at 3:21 pm

Most of my contemporaries are weighted with huge mortgages, all the toys and the maxed cards, and they think I’m nuts. Rent?

Yup.

——————————————————

Ditto and ditto.

#208 The Hunt Brothers on 05.05.11 at 5:29 pm

Yes…
buy lots of Silver
…lots and lots of Silver

Silver is like Real Estate..they don’t make anymore and the price always goes up

Trust us ….

#209 Hoof - Hearted on 05.05.11 at 5:34 pm

#199 not asian

Yes, but if the buyers are say from China…and have bailed back to China….I doubt you can do much. the law won’t reach that far…

The deposit is held in trust by the realtor…no ?
Then what….forfeit to the seller and then realtor gets their “cut”?

I think this going to unravel HUGE and Big Time in places like Richmond…. In addition.

Lots of those pre-sales will simply collapse…developers left on the hook . This looks like the1980’s part II

#210 Timing is Everything on 05.05.11 at 5:36 pm

A bit off topic…

Just did the Canada 2011 census on-line. Very short, easy, simple. Also, the end of the survey message…”Your household has been selected to participate in the National Household Survey…..Your participation in this survey is voluntary….” blah, blah…

The NHS is voluntary ; the Census is ‘required by law.’ So, I filled out the Census and not the NHS. If they call me about the NHS, I will firmly, but politely, tell them MY choice.

Boo!
———————————————————-
“However, since the survey [NHS] is voluntary, all they can really do is ask nicely.”

http://tinyurl.com/66myye8

#211 arctodus on 05.05.11 at 5:37 pm

#189: you are a poster child for greater foolism…

#175: bang on brother…gift from the gods I tell you..

#161: The entire east kootenays from cranbrook to radium is a fools paradise. It is a fricking desert with pine trees and skinny elk and good for exactly nothing going forward. The tourist industry will face extinction over the next decade as the reality of true cost economics takes hold across the western world.

There is nothing more pathetic than seeing a “million dollar” house built on a place that cannot even grow a good crop of bunch grass….they are usually oriented for “the view”….

#212 Hoof - Hearted on 05.05.11 at 6:02 pm

Re that Richmond fire:

Re REMY development fire

http://www.bclocalnews.com/richmond_southdelta/richmondreview/news/121234163.html

QUOTE:

” The province and federal government each contributed $4.75 million to the project, constructed by Oris Developments, while the city chipped in with $900,000 and the province $500,000 toward a daycare for 50 to 60 children.”

Given the quote above, I was unaware of the significant public investment in this project via all 3 levels of Gov’t.

Something really stinks here….

#213 S.B. on 05.05.11 at 6:18 pm

Yup, Yup on the newswires today:

“The delivery portion of natural gas rates is what FortisBC charges to deliver natural gas service to customers and is the portion that will be affected if the revenue requirement application is approved. It enables the company to recover its costs, and make investments in its business that will benefit the evolving needs of customers and communities served.

The cost of natural gas service varies from region to region, and if the application is approved, residential customers in the Lower Mainland, Fraser Valley, Interior, North and Kootenays would see their total annual gas bill increase by 2.8 per cent, or approximately $28, in 2012 and 3 per cent, or approximately $31 in 2013, depending on consumption. Customer Choice program participants will also see the same changes in their delivery rates.

If the application is approved, residential customers in Whistler will see an increase to their total annual gas bill of 4.7 per cent, or approximately $69, in 2012 and 7.1 per cent, or approximately $115, in 2013, depending on consumption.

Residential customers in Fort Nelson would see their total annual gas bill increase by 1.8 per cent, or approximately $20, in 2012 and 0.6 per cent, or approximately $7, in 2013, depending on consumption. ”

And:

“Nova Scotia Power Inc. met with customer representatives today to discuss a plan that would stabilize growth in electricity prices for three years. The proposed rate stabilization plan would hold rate increases to 4 per cent per year for 2012 to 2014 for each customer class. “

#214 45north on 05.05.11 at 6:41 pm

GregW Oakville: the Japan reactor

Arnie Gunderson has detailed knowledge of nuclear reactors. He provides clear explanations of what happened at Fukushima.

I am shocked and deeply saddened. May God help the Japanese people.

http://www.fairewinds.com/home

#215 BPOE evil twin on 05.05.11 at 6:41 pm

CrowdedElevatorFartz

http://www.beanogas.com/FAQ.aspx

This is your Kryptonite…it will render you powerless.

You will become the Bloc Quebecois of methane…….silent and non deadly

bwhahahahaha

#216 S.B. on 05.05.11 at 6:52 pm

Garth is warning about higher taxes in the future:

Fund Industry News
Release Date: 02-May-11 04:00 PM

Think tank conjures massive tax burden

Steven Lamb

The average Canadian family pays more in taxes than it does on the necessities of life, according to a study released by the Fraser Institute. Of course, this depends on what you consider a tax-and how you define “necessity.”

According to the study, the average family had an income of $72,393 in 2010, and spent 41.3% of that income on its overall tax bill. The total spent on food, clothing and shelter accounted for 34% of the average income.

“Taxes have grown over the past 49 years to the point that government is now the largest expenditure facing a family,” said Niels Veldhuis, Fraser Institute senior economist and co-author of the Canadian Consumer Tax Index 2011.

Adding these separately managed social programs to the tax total, the Fraser Institute study concluded that the average Canadian family¿s tax burden increased 1,686% since 1961, while shelter costs increased 1,175%, and food and clothing costs increased by 498% and 510%, respectively. Meanwhile, the Consumer Price Index increased by 642%.

#217 Nostradamus Le Mad Vlad on 05.05.11 at 6:59 pm


10:39 clip Hyperinflation? Economy similar to 1930s Germany.

JPM and 3:46 clip on Silver “The question is why would the Rockefellers (owners of Chase Manhattan) and the Rothschilds (JP Morgan) want low silver prices at this very moment in time?”

Mexican Bank buys 100 tons of tungsten-filled gold, and How the US Fed, via QE2, triggered the ME uprisings.

UK Lending Rates down by 60%, but BoE doesn’t want to raise rates.

Bovine Excrometer courtesy Obama.

Maid of the Mist Latest-ever launch due to GW.

TPTB are loving every second of this, while US and Rumania get cozy. Egypt Making a move away from the US?

4:53 clip ObL vs. Globalists. Globalists have a chance, as ObL has been persona non gratis for a decade or so. Poortugal Prof. says crisis countries should be dropped from Euro. That’s just about all of them.

Obama Tax sex, tax illegal drugs, tax and pox on govts. thruout the world.

0:16 clip Freudian slip? Stealing the Land Typical govt. interference.

Giant Asteroid Are these the same dipshits who predicted RE would go up 4ever?

Agreed Hillary Clinton should be dumped ASAP. She is a major threat to TROTW, mainly because she doesn’t have the slightest concept of reality.

Borderless Europe Seems like it’s not going to happen.

#218 SilentButDeadly Escalator Fumes on 05.05.11 at 7:04 pm

Got my 8% return in a week already.
Shorting the SLV.

#219 jess on 05.05.11 at 7:13 pm

…hum what what the markup is on those jets?

Boeing Charged Army $1,679 for Helicopter Part Worth $7.71 – Thursday, May 05, 2011Boeing has returned $1.6 million so far to the federal government for overcharging the U.S. Army for helicopter parts.

The refund was initiated by an audit from the inspector general of the Department of Defense, which uncovered extraordinary markups on Boeing’s parts.

#220 jess on 05.05.11 at 7:17 pm

U.S. Freezes $32 Billion in Gaddafi Bank Accounts; U.K. Adds $19 Billion
Thursday, May 05, 2011

stashed away in Western banks,
When the U.S. government began searching for Gaddafi’s money in American banks, it was estimating it would find around $100 million. Instead, Treasury officials found $32 billion, all of which was frozen to prevent Gaddafi from using it to pay for his war against rebels seeking his overthrow. Most of the money was in one, as yet unnamed, bank.

In addition, the United Kingdom seized more than $19 billion in Libyan assets, and officials in Switzerland grabbed $416 million. Austria froze another $1.8 billion linked to Gaddafi and his inner circle.

The seizure of more than $53 billion represents a tremendous blow to Libya, whose economy in 2009 was only $62 billion in size.
-Noel Brinkerhoff

Sanctions in 72 Hours: How the U.S. Pulled Off a Major Freeze of Libyan Assets (by Robert O’Harrow Jr., James V. Grimaldi and Brady Dennis, Washington Post)
Gaddafi, Other Leaders Had Almost $1 Billion in Swiss Banks (by James V. Grimaldi, Washington Post)
About 1.2 Bln Eur in Libyan Funds Frozen in Austria (Reuters)

#221 The Original Dave on 05.05.11 at 7:50 pm

I’ve said it here before, ‘The American’ is one of the best posters on this blog.

I love his analysis on Canadian real estate. Lots of insight.

#222 kilby on 05.05.11 at 7:51 pm

If BPOE is a realtor….How would you like to trust him as YOUR realtor, with your best interests at heart? Silver down a bit more at end of day…What will tomorrow bring?

#223 Steven Rowlandson on 05.05.11 at 7:56 pm

I expect this is the start of a long agonizing slide for real estate with its desparate fans for in denial all the way to the bottom. The trouble in the silver market is basicly related to paper silver and buying on margin.
Paper silver is not silver and buying it on credit is foolish. At the gold-eagle discussion forum today some were talking about a price target for silver(paper) of between $3.30 and $0.00 per ounce and $250 for gold.
The banksters think any old number will do in their paper trading world. Physical metal holders will just have to grow some balls and state what they want and say pay it or go without. At that point there will be two different markets with different prices. Based on what I have been reading and hearing most of the sell transactions for silver are paper silver. Most of the physical trades are purchases. For those intent on gold or silver investing the best approach is cash and carry.

#224 BraveSirRobin on 05.05.11 at 8:01 pm

Building permits up the most since 2007, led by residential permits in Ontario. WTF? I read this on the CBC website today.

#225 john m on 05.05.11 at 8:03 pm

A very frightening future for our country methinks? The real estate crash is inevitable..however bad it is it will still be a tremendous loss of wealth (sound familiar?).The old budget which never got to be voted on included a sweet little clause that they were going to borrow another 35 billion (doubt me?..check the facts) ..and i betchya it will be included in the next one……so much for restraints annnnnnnnnd lets not forget about the Mackenzie Valley pipeline which will cost billions to supply the tar sands with natural gas (no federal money was committed before the election ..hmmmmm what do you think about now? ). ………. as the old saying goes “barefoot,broke and pregnant” gives total submission…………….

#226 The Original Dave on 05.05.11 at 8:07 pm

A lot of times people come here and question Garth Turner’s motives. Here’s a question I have for those people:

Why would Garth take the difficult road and go against the popular opinion? It would be much easier for him to say “buy real estate” like everyone else and make big dollars the much easier way.

People, in droves, don’t pay attention to what they should in markets. Two years ago, at the stock market bottom, the only books that were selling were “Great Depression” books. People assume the same trend will always exist and don’t look at what could be coming. Anyone that tried to sell a book about a massive stock market rally coming two years ago, wouldn’t have sold any copies!!!!!

Markets are so funny. Garth is contrary….and he’s right. It must be a battle for the guy. The Soper’s of the world have chosen a much easier (and sleazier) route.

#227 ballingsford on 05.05.11 at 8:07 pm

How would you explain this?

Actual truth from a Co-Worker. True Story.

Nice condo in Toronto lists for 1.3 Million (note:1650 a month in condo fees plus $64,000 a year in property taxes).

Low baller comes in under $1 million and the Real Estate agent mentions to another bidder that there is an offer on the property, but doesn’t disclose the amount.

Bidder then increases the bid by $70,000 over asking. So the 2nd bidder bids on the property with a $70,000 amount over the asking price.

WTF is going on? Who has this kind of money?!?!?!

#228 Debtfree on 05.05.11 at 8:21 pm

@ 219 jess …… http://english.aljazeera.net/

#229 Tony on 05.05.11 at 8:39 pm

It would seem interest rates are on the decline and may cascade into a freefall after the job numbers come out in America tomorrow. Canada seems destined to slip back into recession late this year or early 2012 at the latest. America should follow if they finally end quantitative easing.

#230 Robert Dudek on 05.05.11 at 9:07 pm

“If you have a gold bar…..and I have a .375 Magnum with about $2 in brass shells…which metal is more precious?”

If I have enough gold bars I can buy a pretty effective private army.

#231 The American on 05.05.11 at 9:18 pm

At #220: The Original Dave, I must say your words are far too kind! I am really taking from my own real-life experiences with the real estate market in the U.S. over the past 7 years and applying them to the Canadian market. I’ve studied the similarities between the U.S. and Europe and I am clearly seeing the same behaviors in Canada as well. It all boils down to the fundamentals of economics. In markets that receive a “bubble” denotation, the fundamentals of economics did not apply for a time. But, economics proves throughout history that values in all things always return to the mean.

I really wish it were not true for Canada. I honestly do. As I’ve mentioned before I do have friends and family there, some of whom got caught up in the frenzy. Thankfully, most did not and witnessed what happened here and listened to me.

Posters and posers like BPOE don’t get under my skin in the least. They MUST hold onto the belief that the market will always go up. Their unfortunate living depends on it. What is frustrating is they lie and use deceitful marketing tactics to catch consumers in vulnerable positions. Consumers rely on these “professionals” to guide them. Real Estate Agency Law REQUIRES the Agent act in the BEST confidence to their client, keeping at heart a fiduciary responsibility. By definition, this would mean they, the Agents, should also understand the markets in which they are selling/buying and act in the best interest of their client’s wallet. As we all know, they do not. In the U.S., this is law as well. As was witnessed, most agents did not behave and act accordingly.

What is shocking to me, however, is the abundantly lacking controls and transparency to the consumer in the Canadian MLS, public records of previous sales history, and contract negotiation processes. For example, Canadian agents can simply “tell” their client the home received a higher offer and there is no proof of that required. So, the Agent’s clients get swept into unfortunate situation where they are, in fact, not bidding against ANYONE but themselves. It is of my opinion that this, coupled with artificially low rates have only added fuel to the fire and a correction of significant proportions lies ahead. For everyone’s sake, I honestly hope I am wrong. Fundamentals of economics would say otherwise when one considers Canadian have slightly salaries, much higher taxes, much higher affordability ratios, negative savings rates, and incredibly high household debt that exceeds Americans’. All of these factors have actually surpassed the Americans when we were at peak, which lays a road ahead that would indicate an even greater correction is forthcoming.

#232 The American on 05.05.11 at 9:19 pm

One last note… For every “rich” Chinese person purchasing real estate in Vancouver, I could show you TWENTY that did in the U.S. This will not save it.

#233 The American on 05.05.11 at 10:16 pm

BPOE, if you’d like to think I am Shiller, then so be it. You’re entitled to what you believe. My identity really isn’t relevant. Much like your identity as a realturd isn’t pertinent to the fact you screw people daily by falsifying data and making false claims, like calling me a “pro renter.” I am “pro” anything that makes sound fiscal sense. I, for one, own as I purchased several years ago at reasonable prices and made good purchases with investment properties that penciled out with a good cap rate by means of “vulching” from the foreclosures. This you cannot do with rent rates where they are in Vancouver when compared to purchase price – it does not pencil as most anyone would be underwater every month. I also realize owning and purchasing at today’s prices in Vancouver does not make any sound fiscal sense as prices are declining and inventory is sitting longer.

#234 Tony on 05.05.11 at 10:18 pm

#124 Kevin on 05.05.11 at 10:08 am

Tell a big enough lie and everyone including you believes it. Fact is rates are heading not only lower but sharply lower especially in Canada. Around the end of this year Canada will be back in recession with America to follow.

#235 The American on 05.05.11 at 10:19 pm

And a final thought – “Renting” is not a dirty word. Get used to it because you’re going to see a lot more of it in the future. It is now the “in” thing with the younger crowd in the U.S. Those who purchase when the ratio is 4:1 or higher (the loan is four times an individual’s yearly salary) are now looked upon as “idiots” or “dumb” or “uncool.” For all intensive purposes, these are the people who epitomize “douche baggery.”

#236 Utopia on 05.06.11 at 11:24 am

#168 Junius

Many Thanks for the confirmation Junius.
—————————————————-

And by the way, for those fools who keep saying FIRST I have just one comment for you. LAST (see, I can be an idiot too)

#237 Victor on 05.06.11 at 12:56 pm

#206 Burnt Norton on 05.05.11 at 5:25 pm
#182 Bill Grable on 05.05.11 at 3:21 pm

Most of my contemporaries are weighted with huge mortgages, all the toys and the maxed cards, and they think I’m nuts. Rent?

Yup.

——————————————————

Ditto and ditto.

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

Ditto here too.

#238 GregW, Oakville on 05.06.11 at 1:59 pm

Hi #213 45north, I’m very thankfull that the Canadian CANDU reactor design is so much different than the GE Japan ones are!!

I like the EC-6 CANDU design myself.
Glade we are having a review of the safety design just in case we over looked something. I hope they have taken into account the possiblity of a very very large solar flare???

For more information about the CANDU reactor design.
http://www.aecl.ca/Default.aspx
and
Canadian Nuclear Safety Commission
http://www.nuclearsafety.gc.ca/eng/

#239 pjwlk on 05.06.11 at 4:54 pm

#22 nonplused: [I think listings are off so much because realtors are telling people not to list until “the market improves”]

I doubt that. Realtors are probably starving enough already. I can’t imagine them deferring income to an even later date.