Silent spring

“So,” Raj says, “we all know that average prices are rising and people are getting priced out of the market (me included).  That explains the demand side of the equation, but what about the supply side.  No one is selling (at least in the GTA – Mississauga in particular), which is creating tight supply. Question is, why is no one selling? Why aren’t they putting their properties on the market, this is the time it usually happens during the year isn’t it?”

You’re right, Raj. Spring is usually real estate’s rutting season, when rivers of hormones make the streets slick, buyers thrust their offers and sellers lustily receive them. But this year, it’s all turned icky cold – and not just in the GTA – with both sales and listing down in many markets, as prices squirt higher.

In godless Toronto, for example, we’ve had almost a year of year-over-year sales drops, while the price of an average house has jumped by many times the inflation rate. As I mentioned recently, the average SFH in 416 is now one Hyundai away from $800,000.

But this is nothing compared to the sales slaughter and price romp taking place in BC’s Fraser Valley – distant burbs of Vancouver (where zombie Chinese lurch through the streets suffocating the locals in bales of currency). In fact, as the local paper reported days ago: “Realtors in the Fraser Valley are warning people in Abbotsford and Mission not to panic after property sales in the two communities dropped substantially in April.”


Actually, digs these stats: Sales of detached houses dropped in Abbotsford last month by 33%. In Mission, down 42%. In fact, in that community deals collapsed by almost 50% from just the month before. Townhouse sales crumbled by 78% and condos tanked 71%. But prices, incredibly, have now soared 11.5% in a single year.

This experience is being repeated elsewhere across the country, as sales and the number of available houses shrink and average sales prices swell. It seems incongruous, but there are solid and disturbing reasons behind the phenom.

Demand? No wonder it’s down. And about to fall further. Unemployment is still way too high (8.5% in the GTA, for example), while household incomes are barely crawling ahead. Household debt’s now higher than in the profligate US of A. Corporate taxes may be falling, but not those slapped on families. In fact, it’s this tax fatigue in BC that has the new preem fighting for her political life, about to hack the HST and up the levy on small businesses.

Everybody knows rates will be rising this year. We also know the Harper feds will be cutting spending and probably the public service. We know Europe is toast, the US faces crippling debt, and Sarah Palin will soon run for president. The 35-year mortgage is dead, banks are finally tightening up on credit and 70% of us already have a house. So, why wouldn’t demand go flaccid?

As for supply, two reasons most people are staying put. The first I just spelled out – financial anxiety. The world is a scary place right now, with wars, bankrupt countries, earthquakes, killer twisters, floods, rogue nukes, no Oprah, street riots and mounting debts. It takes confidence to sell your house, then worry about moving and finding another one. And that’s the second reason. Most people are so bummed out over house prices – thanks to the numbnuts real estate industry constantly pumping them – they fear they can’t replace what they might sell. And as I mentioned some days ago, most sellers would never dream of shelling out for their own homes what they think somebody else should pay.

So, they sit. And this is human nature. People quiver and stall when they can get the highest price, then gush the market with listings as values start to plunge. Go figure.

Finally, price. Weak demand may be chasing weaker supply, but there are sufficient idiots left to punch average prices higher, be they Asian idiots or our beloved Canadian ones. They continue to be gassed by low mortgage rates, and believe Phil Soper and Don Campbell have been sent here to lead the rapture.

So, Raj, the best strategy is to chill. Take off the antlers, dude, and just wait. This will all make a lot more sense in the months to come. Even the OECD is reading this oversexed blog. It’s now warning of a weaker economy due to a litany of global crises, “combined with reduced spending from heavily indebted households dealing with softening housing markets.”

The best strategy is to invest in liquid assets within a balanced portfolio (I’ve already told you how), and get horny on when the annual juices flow again a year from now.

In the meantime, zip it.


#1 ballingsford on 05.26.11 at 8:45 pm

I must be firsf this time!

#2 D in BC on 05.26.11 at 8:46 pm

Are you kidding me? First….?

#3 T.O. Bubble Boy on 05.26.11 at 8:47 pm

Lots of “sold” signs in Toronto, but I’m still thinking that May 2011 will be 13 straight months of YOY sales declines (the YOY declines started with May 2010 falling below May 2009).

#4 D in BC on 05.26.11 at 8:51 pm

Now that that’s out of the way, I have to say that yes, Garth, your message is going mainstream. The kool-aid drinking blue-collar types that I work with here in the Okanagan are giving up the sickly sweet stuff and returning to to the sanity restoring 6-pack. Funny enough, I was the heretic only 6 months ago.

Thanks for your work, always thankful for it here.


#5 JO on 05.26.11 at 8:57 pm

Everyone should check out the article on G&M re Carney’s private “off the record” remarks to a group of Bay st heavy hitters…in a nutshell, he is pretty bearish on the economy and stated the financial crisis is not over. Good to see the Governor actually has guts to say that even in public.

The rate of credit growth continues its has been declining YOY (personal credit that is – including mtgs)…it ought to go negative at some point in the next 12-18 months…shortly after that (6 mts ) house prices should come down quite hard.

The national credit card, which has created the illusion of a strong economy in the last 8-9 yrs, needs to be paid down. GDP growth and hence income, will take a hit in the next couple of years at least. A nasty recession is quite likely at some point and the inevitable fiscal contraction in the US will certainly contribute to the next crisis.

Amazing that we still have “emergency” rates with savers and pensioners facing financial repression through inflation and negative rates. The truth of the matter is that artificially low rates played a major role in creating the debt monster that now plaques this nation. Add in CMHC policies and all you have now is a massive credit card balance that is siphoning off huge amounts of income via servicing each month. There is no room for higher rates but they will come.

Those stupid enough to have bought RE in the last few years (maybe not those who bought at the temp bottom in 09) on small DP at a time of record low rates will reach the point of recognition that bankruptcy is what awaits them. A 15 % decline (highly likely) will seal the deal for many.

A home is shelter – a homebuyer is effectively pre paying the outstanding rent for the rest of their lives, so why would you pay 25-30 % more than what it is worth and borrow to do it ?


#6 Mean Gene on 05.26.11 at 9:00 pm

Enjoyed the video, I think I’ll hide under my bed now.

#7 Mr, Lee on 05.26.11 at 9:01 pm

Although I fully agree with Mr Turner’s position on home prices, one can never for see the future. However current events form future trends. So what current events have lead to this home frenzy. 1. low interest rate policy 2. Lucrative purchasing terms in the form of the now defunct 0/40 3. Teaser incentives by the banks in the form of cash back incentives 4. CMHC insurance which assumes the risks that the banks should in a true free market 5 impressionable home buyers that lust for granite and ss 6 high debt loads.

All of the above are th current events that have propelled home values to the heights they are. Mr Turner discussed on yesterday’s blog the effect of interest on said home prices……….now, all other things being equal………..what does anyone in their right mind think the future trend on house prices is going to be?

#8 Hoof - Hearted on 05.26.11 at 9:12 pm

BC 6 PM Global News

Hot Asian money now flowing to West Van.

Property selling for $1/2 million over list.

Interview an Asian lady..talks about China’s clampdown which is forcing more HAM to BC

Why West Van ?
Some Caucasian realtor talks about roads and lanes are better ?


I think this is simply a stunt like Cam Good’s helicopter …there is no demand…its an old trick of “new area” undervalue…..all rigged to get the herd mentality going.

#9 Lisa on 05.26.11 at 9:18 pm

How much better will it really be a year from now? Prices may go down a bit but if interest rates rise, it will work out pretty much the same. Wouldn’t it be better to buy now and lock in at a good interst rate and pay a good chunk of the mortgage/principal?
Nobody can market time. Nobody really knows what’s coming and how exactly it will play out.

And nobody buys now below their financial means so they can ‘pay a good chunk of the mortgage.’ Higher rates bring lower prices and less debt – two large benefits. — Garth

#10 Devore on 05.26.11 at 9:32 pm

Clearly Garth’s plan B is writing steamy romance novels.

#11 Calculon The Mighty on 05.26.11 at 9:37 pm

Hello Garth,

Re: your response yesterday to my comment about inflation and average wages:

“Absurd”. To what are you referring? The Bank of Canada inflation calculator?

The wage of 7,200 in 1972 I cited corresponds to about 40,000 in 2011 dollars, which is in the ballpark for the average per annum wage. If you were making 28,000 at the time, you had a pretty healthy income, at somewhere in the 150,000 range in 2011 dollars. Or have you forgotten like many of your Baby Boomer ilk? ;-)

Do you think this calculator is reflective of reality?

#12 bah on 05.26.11 at 9:41 pm

I saw a good sale on toilet paper. After watching the video, stocking up sounds like a plan.

#13 DML on 05.26.11 at 9:45 pm

Great video,here’s one on debt management.

#14 cendrine on 05.26.11 at 9:52 pm

Re: the World Collapse in 3 minutes

Isn’t this the type of thing one would find on The Automatic Earth?

Have you changed your mind on the possibility of another major financial collapse?

If it occurs (and I think it will, possibly by July if I believe the latest GEAB) how do you think this will affect Canada?

No, I do not see a major financial collapse. However, there is a lot of surprise coming. — Garth

#15 Bill Gable on 05.26.11 at 9:55 pm

The Video is brilliant – simply astonishing, really.

Today – the shortest Annual meeting in this Building’s History. So many empty suites, owned by “Investors” – that the building contingency fund is going down, and people are not fixing anything.
The multi zillions these people paid for a leaky west coast building is absolutely stupendous – and many of them are terrified. They are losing value by the hour!

They can’t sell.
They can’t afford to by (*as Mr. Turner points out) and so – there are going to be a lot of unhappy people in this burg.


Greed kills, baby.

#16 Toon Town Boomer on 05.26.11 at 9:58 pm

This still doesn’t make any sense. Sales are down, because people are priced out of the market, yet prices continue to rise. Go figure, does anything make sense these days?

#17 Tigger on 05.26.11 at 9:59 pm

Lots of sold signs??? Please… Riddle me this: if you were selling I dunno say 4 juicy houses a week (not likely, but humor a fellow dog, eh?) and likely ushering dozens of brats to open houses etc…tell me, why would you feel the need (or have the time) to even think about posting a sold sign???
-When you are stupid busy you let the little things go, no matter who you are. Ergo, seeing dozens of sold signs now after years of sub-prime loans is smoke n’ mirrors. Realtors are trying to stir-up the herd; shake owners into a selling/posting frenzy (which would atleast lock’em into a contract for a few months and maybe produce some listing fees) or buyers to buy.

#18 Grooby on 05.26.11 at 10:06 pm

Those guys from ABC are simply hilarious. On weekly, too!

#19 Publius Enigma on 05.26.11 at 10:07 pm

#5 JO on 05.26.11 at 8:57 pm

“The truth of the matter is that artificially low rates played a major role in creating the debt monster that now plagues this nation.”


And I will add that in a decade from now, the ultra low interest rate policy implemented during the Great Recession will come to be viewed as one of the most destructive policies on a societal level that this country has ever experienced.

#20 JohnnyBGood on 05.26.11 at 10:08 pm

@ #193 BondGuy on 05.25.11 at 9:15 pm

You’re right that Canadian banks don’t have reserve requirements anymore. They were phased out in the ’90s, right? American banks still have reserve requirements (at least officially).

But reserve requirements and capital ratios are two different things.

Reserve ratios are used as a monetary policy tool by central banks. Capital ratios basically measure an individual bank’s ability to absorb losses in the value of their assets.

While I did touch on the leverage issue, my real point was to show how the banking system in fact does create “money” out of thin air.

If you think about it, they have to in a debt money system. Debt derives its value from future wealth. This means the economy, and thus the money supply, must grow in order for debts to be serviced. This means there must always be more debt money in the system than the actual aggregate value of goods and services.

Therefore the money must be created first, then the economy catches up. Due to the exponential function (which gives us the “miracle” of compound interest), the rate of money growth and economic growth must be forever accelerating. This is why The Bernank hates deflation. Deflation in a debt money system is like carbon dioxide in your scuba tanks.

Obviously, this can’t actually go on forever because the real-world wealth that collateralizes all that debt can’t grow at the same rate. At some point, the debts can’t even be serviced and the system crashes. Like how American housing brought down their banks.

If you are interested, google Modern Monetary Theory (MMT) to understand how money works in a debt fiat money system with floating exchange rates (particularly in the US), and you’ll also understand why austerity in the US, unlike in Europe, is not a fiscal or monetary issue, but a political one.

#21 grantmi on 05.26.11 at 10:16 pm

#1 ballingsford on 05.26.11 at 8:45 pm

I must be firsf this time!

#2 D in BC on 05.26.11 at 8:46 pm

Are you kidding me? First….?

First Idiots Squared!!!!

#22 OkanaganInvestor on 05.26.11 at 10:19 pm

Dr Willie explains the World collapse in one paragraph:

“One should constantly remember that no solution to the financial crisis has been installed, nothing fixed, no big banks liquidated, no end to monetary inflation, no end to outsized USGovt deficits, no end to secretive subterranean support of stocks and bonds, no revival of the housing market, no discharge of big bank home inventory, no return of US industry from Asia, no interruption to the endless costly wars, no end to the propaganda obediently pumped out by the US press & media networks, and no change of Goldman Sachs running the USGovt finance ministry. Expect no change in anything that you believe in. Expect no change to the 0% policy (ZIRP) with no change to the heavy monetary inflation (QE), as the path to ruin is set, and the policy of Inflate to Infinity cannot be stopped. Gold will not stop until it surpasses at least $5000 to $7000 in price. Silver will not stop until it surpasses at least $150 to $200 in price. Such forecasts invite mockery, but in two years they will seem prescient.”

#23 Hopeful in Vancouver on 05.26.11 at 10:21 pm

Until the HAM coming into the city disappears Vancouver’s real estate prices will continue to go up. I continually hear from our realtor friends that their Chinese clients say there are many more coming. If that is correct then we won’t be seeing a correction in Vancouver for some time.
Garth, when do you anticipate a change in the purchasing patterns of the Chinese?

#24 BrianT on 05.26.11 at 10:31 pm

#20Johnny-That is only part of the US situation-the reality is that the productive US economy has never been a smaller percentage of the overall economy. The latest stat is that 59% of the US population is supported by the taxpayer. That number actually increases when you factor in all the US businesses which exist only because the guv is the main customer for their service or product. The overall economy is a giant Ponzi, or game of musical chairs. When the music periodically stops more “money” must be magically created to soothe the sheep.

#25 Aussie Roy on 05.26.11 at 10:40 pm

Garth nice to see some Aussies grace your page, Clarke and Dawe are a riot. (video above)

Aussie Update.

No links today, so a summary.

Most people still think housing is a one way street to riches with no risks.

Prices are falling, listings are rising, mortgage demand is at 20 year lows.

Mortgage arrears are growing so are defaults.

Cost of living presures are growing (fuel food etc) State govts have just increased many of their taxes and pay for service enterprises run by govt are also signalling higher comsumer prices will be announced shortly. Dont forget they always tell us “it’s user pays”.

To rub salt into the wounds, in my state house valuations (which are used to calculate many annual taxes) jumped 6% although prices have fallen 3%.

Govts, local, state and federal are all searching for new ways to raise revenues (especially local and state) as many have large debts on their books. They have counted on ever increasing revenues from ever rising house prices. Pity most they have spent this windfall before it materialised.

Aussie banks have been caught out by international investors (hedge funds) who are currently shorting bank shares. They simply dont buy that Australia is different and our house prices represent reality.

So in short, no problems here say banks and the RE industry house prices are rock solid. I would hate to see a market where they consider there is a problem.

Oh did I mention although listings are at an all time high and buying interest at all time low, we have a shortage according to those schooled in Kanga-nomics.

Only shortage I see is a shortage of buyers (greater-fools). Of course a shortage of peolpe that know just a little about how markets work doesn’t help, you listening “no bubble here” RBA?.

#26 Neo on 05.26.11 at 10:50 pm


For the love of the baby Jesus. It has already been 12 straight months of sales declines in Toronto(GTA) went over this 12 articles ago and you still say “close” to 12 months. This May will be lucky number 13 in a row…It started with sales down 1% last May (-:

#27 this is wonderland on 05.26.11 at 10:52 pm

No, I do not see a major financial collapse. However, there is a lot of surprise coming. — Garth

Oh Come On!!! What surprise, What’s coming….Stop being so coy your killing me.

#28 JohnnyBGood on 05.26.11 at 10:56 pm

I’ve seen anecdotal evidence that in the midst of this real estate ‘boom’, where bidders battle over a relatively shrinking supply, realtors in T.O. have been having an increasingly harder time for a few years now.

There may not be a glut of houses for sale, but there sure seems to be a glut of people who make their living selling them. Why? Low barriers to entry, perhaps? And what’s 2.5% of a million again? And don’t forget the games listers play to turn that 2.5% into 5%, all for themselves. There’s a reason they don’t call them “agents” anymore.

I’ve seen, and felt, their crooked games first-hand. In 2008/09 many realtors were on the brink. When the bust comes for real, I won’t cry for them. (No ill will to the honest realtors out there. Wherever you may actually be.)

#29 Tim on 05.26.11 at 11:03 pm

Frosty Woolridge on Detroit

“That’s because the story of Detroit is not simply one of a great city’s collapse. It’s also about the erosion of the industries that helped build the country we know today. The ultimate fate of Detroit will reveal much about the character of America in the 21st century. If what was once the most prosperous manufacturing city in the nation has been brought to its knees, what does that say about our recent past? And if it can’t find a way to get up, what does that say about our future?”

#30 Raul on 05.26.11 at 11:10 pm

Hi, thanks for your monumental efforts over the last few years. I have been entertained by the discourse, and had fun learning at the same time. I watched a video (a “TED Talk”) the other day that nicely summarizes, in two words, the entire situation with respect to insane sellers, and equally insane buyers in the Canadian market. The two words I speak of:

Cognitive Dissonance

For the video that explains what this is, and the effect it has on our choices:


#31 Tim on 05.26.11 at 11:22 pm

So when will we be able to buy property in the south of France?

#32 Bottoms_Up on 05.26.11 at 11:23 pm

#5 JO on 05.26.11 at 8:57 pm

I was one of those that bought my first home in lofty ’09 with 8% down and about a 32 year amortization (the choice was to rent similar digs for $1800/mo–including having to pay for heat/water/electricity, or buy and pay $1600/mo in mortgage and property taxes).

The value of my home is up ~12% since then. Therefore a 15% correction would not wipe me out, it would actually put the value of my home close to what I owe on the mortgage (yes I do realize in this situation that renewing the mortgage could be difficult and I would then be bringing a cheque to closing day if needing to sell).

Anyway, a much bigger correction would be needed, in a fairly quick time frame, in order for bankruptcy to be an option.

#33 Hashnugs Inthebong on 05.26.11 at 11:26 pm

Ignore these four words.

#34 Aussie Roy on 05.26.11 at 11:26 pm

Aussie Update

Peter Jonson – ex RBA

Speaks about history, booms, bust and current conditions.

Sure seems much more on the ball than the current RBA staff.

#35 nonplused on 05.26.11 at 11:35 pm

Always loved that clip. “2 Johns” isn’t it?

Good post today too.

I think there are a couple of other reasons listing are off so much. First, squidly77 might be right that people won’t list for less than mortgage + line of credit + realty + moving expenses + 5% down on new (smaller) house. For some people in Canada (like Calgary) that number is decidedly below what other comparables are being listed at and not selling.

A bunch of others probably drank the CREA Kool-Aid and think their house really is appreciating at 11% per year right now, which is even better than Garth’s portfolio is designed to do, and tax free!

And there is the small problem that even with the reduced listings, the demand just isn’t there at these prices. Listings are off, but there is still inventory. If there was a real boom goi8ng on we’d be seeing that inventory disappear. So a lot of potential sellers are waiting for “a better market”. Unlikely now that so many have been raptured.

Oh and by the way, the rapture did happen as scheduled on May 24th, but there were some time zone issues. So if you are reading this….

(you got left behind!)

#36 domain on 05.26.11 at 11:41 pm

Leased a beautiful piece of property for a year. With any luck I can get 2 years out of it, then pull out some cash and slaughter the sheep. I’ll be waiting for them…

#37 Hovering on 05.26.11 at 11:44 pm

no more Oprah


#38 jas on 05.26.11 at 11:52 pm

with so much budget deficit and trade deficit, why do people still run to buy US$ at the sightest hint of uncertainty in the world?
Is it another example of herd mentality?

#39 realpaul on 05.26.11 at 11:55 pm

A portfolio of banks and utilities currently yields about 4.5%. If you’d been unlucky enough to own the wrong ones you’d be sitting on a capital loss…with the booby prize going to CIBC…….down $3.20……Ouch !! Too much of that and your ROI sinks to zero.

Risk …in all asset classes…is growing….making for another speculative round in……..commodities…..who’d a thunk it eh? Gold takes another run past $15K and not a peep from the naysayers and the media? Wasn’t the metals complex supposed to have been in full retreat? The video was exactly right on the mark. The only way any of these Ponzi bucks can be reshuffled around the table is to print a lot more of them. The US buck…..a haven?////of course….everyone else is in worse shape.

Obama said to the Brits during his speech…”Who will replace us? Could you imagine a world under the economic domination of the Chinese Communists? That would be like Hitler getting hold of the atomic bomb first.

But aside from the incontrovertible fact that there really is no alternative to the buck………it’s value has continued to erode in the face of real economic problems within the US of A and a structural deficit of well past 100% of GDP. They can only pay themselves by printing huge amount of paper promises……by osmosis…..hard and soft assets will continue to inflate.

A safe portfolio of Utilities and Banks will seem like a very unsafe place to keep cash safe. At this point its all about risk…………how much can you manage… well will you sleep? In the scenario where inflation will out run security…..the rich will be the sleepless and the well rested will be awfully hungry.

#40 Aussie Roy on 05.26.11 at 11:58 pm

Aussie Update – Same In Canada?.

What is being called two-speed economy is reality an economy that appears to be slowing down significantly. Ordinarily, this would clearly include the mining. However, in the case of Australia a great deal of mining has — for a time — become integrated into the Chinese economy. Therefore, once China’s boom comes to an end our mining industry will contract. In other words, what might be called the “high-speed” part of our economy is in fact part of the Chinese economy.

Right now everything points to the resource sector as the raft that is keeping the economy afloat, irrespective of what the esteemed Ken Henry, Treasury head, thinks.

Does the BRW rich list point to commodities topping out?.

Mixed messages from the RBA?.

“The rise in house prices is driven by the fact that households were able, due to financial deregulation, to access almost unlimited amounts of credit if they wanted to and, probably even more importantly, the fact that interest rates came down to much lower levels through the 1990s than they had been in the ‘70s and the ‘80s, and that just gave households much more borrowing capacity.”

Spoken by Reserve Bank of Australia (RBA) deputy governor, Ric Battellino.

MMM, but we don’t have a price bubble, thank goodness.

#41 Nostradamus Le Mad Vlad on 05.27.11 at 12:06 am

“Silent Spring Panic? Sure! Demand? No wonder it’s down. And about to fall further. Unemployment is still way too high . . .” — Enter The Dragon (not the Bruce Lee movie), but the one which will rip the world to shreds, then slowly piece everything together again but in a new formation.

“. . . and Sarah Palin will soon run for president.” — Vs. HC, BO or Ron Paul. Whoever gets the nod from TPTB, that will be the one.
#152 Onemorething on 05.26.11 at 8:02 pm — Hi OMT! Stick around, as life is about to become a lot more juicier than previously experienced!
Super-sized Storm coming to Fukushima, and Chernobyl vs. Fukushima. Possible 94% meltdown in reactor 3.

PDF file This is a major one (if, or when it occurs) in the Canary Islands. 1:29 clip HAARP in Ireland. Anything to do with the Canary Islands?

Why? Islam hasn’t done anything to the west. These are The Unholy Crusades #4, and will play a role in WW3.

LaRouche on Derivatives Not too sure of the accuracy, but nevertheless, and another day, another Greece must go column. More on the gold confiscation system, started by PIIGS. Inflation Farmland might be a better hedge against inflation than gold.

Aid to Detroit (US govt. handouts) is what helped destroy it. Euro Stuff One and Euro Stuff Two.

Wasn’t Sarkozy after DSK’s job, to be in charge of the whole can of worms? Napoleon #2, and here.

3:10 clip Zombies are created from vaccines. Hence, a Zombie Apocalypse — avoid vaccines!

Link in. Good round-up of what is going on at present.

#42 Burnt Norton on 05.27.11 at 12:08 am

#9 Lisa on 05.26.11 at 9:18 pm


I hear this kind of “logic” all the time from friends with $1M mortgages, along with lines like “we are going to be living here for the rest of our lives so we won’t worry if prices go down” In fact, one guy even said “it wouldn’t matter to me if our house value went down by half or up by 100%” and I know that there is still a significant mortgage outstanding on his property. Are you kidding me? You wouldn’t care if you were servicing a $600K mortgage on a place worth only $400K. I know I would care.

Look, we screwed ourselves in 2008 on an over-hyped investment property in an area that is now toxic, so we are taking our lumps and fortunately we have a good tenant who is in for the long term (we hope). On the other hand, we have recently been able to sell our primary home in a strong market and we are now happily renting a great place for a fraction of what it would cost to rent from the bank / maintain / pay taxes on, etc…

The main lesson we have learned in going through a major loss of equity on a property is that, even if you love (working on) your home, it still sucks to know that your equity is melting instead of growing. We are basically out by the amount of our significant down payment. I can only imagine how much worse it would be if the mortgage exceeded the value of the property (regardless of the cash flow considerations in terms of the monthly mortgage payments themselves).

I can’t tell you how liberating it has been to sell and pay off at least one of the mortgages. We learned our lesson the hard way. It’s not about “timing the market” as you suggest, it’s about reducing risk by diversifying assets and avoiding debt in times of global uncertainty and boomer demographics.

Please think hard before you buy into the realtor / banker / mortgage broker hyperbole that is espoused in your post.

Low rates = cheese in a mouse trap.

#43 Blacksheep on 05.27.11 at 12:19 am

#20 JohnnyBGood wrote,
“If you are interested, google Modern Monetary Theory (MMT) to understand how money works in a debt fiat money system with floating exchange rates (particularly in the US), and you’ll also understand why austerity in the US, unlike in Europe, is not a fiscal or monetary issue, but a political one”
I don’t know why no one talks about MMT.

There will NEVER be a US GOV. debt default, unless its intentional.

A sovereigns [CANADA] actual tax revenue has NO relevance to GOV. spending beyond the public’s perception of debt and supply /demand driven inflation.

A sovereigns ability to tax creates demand for fiat dollars.

Most can not get their head around MMT.

Many would Shite their pants if they found out the truth.

Garth in a MMT denier [last I checked] got to keep the peeps fooled.

take care,

#44 Hoof - Hearted on 05.27.11 at 12:29 am

Peter Ladner – Restrictions on Foreign Ownership

Excellent video

Ladner is an ex COV Councillor

Reaaly meaty parts are around 9:50 – 12:50 minutes

IMHO….I sense people are waking up and are sick of HAM $$$’s.

I agree with other countries and provinces solutions, if don’t live and work here, tax them heavily.

Why are we accepting the converse ?

#45 Brett on 05.27.11 at 12:48 am

This isn’t directly related to the post today but what I find interesting is every article out there speaks of wage increases that will allow people to keep pace with the many different factors eating away at people’s incomes. So here is a question for everyone out there…have you got a raise or do you expect one in the coming year? Further to that, do you know anyone who has got raise recently or expects one in the coming year? I suppose that I should say that this excludes anyone who is government employed.

#46 Timing is Everything on 05.27.11 at 12:59 am


So, ‘the RE market’ is doing what it does. So it goes. This is not rocket science. I would not buy now, that is for sure. However, we are not selling now either, and not out of fear. We do not want to sell…But even more importantly, we do not need to sell. Ya, we could list and make mo’ $$$, but we are content. It is good.

Remember….people may be selling because they have to (gun to head, so to speak). No one ever buys because they have to (no gun to head, so to speak)

Agreed. Raj…Chill.

BTW, Garth…Good pic. Not uncool. ;)

#47 Kim on 05.27.11 at 1:16 am

My girlfriends mother is now in a bidding war over a ground level condo in Langley. I just rub my head… thinking … “thank god my parents taught me about money before I was 11” because only now I realize how many people missed out on that.
Hey I never made a huge income… but I am richer than most people that earn five times as much as me .. and… I believe… the turtle wins. Thank god for that…because everyday and that is ‘Every Damn Day! I get in my car .. completely debt free and investment paying my rent I think… “god … ya cant put a price on that… how free am I ”
And then… I breathe… full breath.

#48 Uh Oh on 05.27.11 at 1:54 am

It seems the Chinese are purchasing in the Million plus range in certain areas. This is negligable to the impact the multitude of factors discussed in this blog will inevitably result in. Inextricably tied to the US, perhaps a soft impact is possible, but increased amortization, and a decline in housing prices must surely result for most households, no?!?

#49 Daystar on 05.27.11 at 2:18 am

#5 JO on 05.26.11 at 8:57 pm

Not all that surprised upon reading Mark Carney’s remarks in the link JO, now that the election has passed. What surprises me is the percentage of voters who likely fell for Conservative rhetoric. (I wanna believe in Santa too, but…)

#50 six-figure-renter on 05.27.11 at 3:38 am

saw this video on global about how much people spend on there homes in Vancouver. The people that live in this city are idiots.

#51 Ralph Cramdown on 05.27.11 at 5:22 am

How much better will it really be a year from now? Prices may go down a bit but if interest rates rise, it will work out pretty much the same. Wouldn’t it be better to buy now and lock in at a good interst rate and pay a good chunk of the mortgage/principal?

This presupposes being in a position to buy much less house than you qualify for and pay far more than the minimum, because otherwise you haven’t paid down much after 5 years.

Higher rates will have a bigger effect on the minimum-money-down wonders than on those who’ve saved up a substantial down payment, and a bigger effect on house poor 5/35 or 0/40 mortgagors at their first renewal than others.

Overpaying for an asset, permanently, because of temporarily low interest rates is unwise.

#52 Wait to die another day on 05.27.11 at 5:27 am

5 houses for sale on my street, one sold in a week, mine sold in one day for asking. lets all wait another year?

I would not have a balanced portfolio in the markets right now as once the PIIGS start to default, the markets will plunge 50% or more.

My point No-one can predict the future.

#53 Ralph Cramdown on 05.27.11 at 5:32 am

MMT is nuts. It posits a country which one day created a currency which wasn’t backed by gold or other assets and wasn’t pegged to another currency. In order to give the currency value, it taxed its residents.

If you can get past believing that first bit of utter insanity, some of the rest of the theory fits with the real world, but so do many reality based economic models.

#54 Pr on 05.27.11 at 5:49 am

Anyone who is buying a home in this atmosphere doesn’t understand at all what is going on.

#55 ottawan on 05.27.11 at 6:30 am

This is just what I have noticed in Ottawa. I have tracked every listed home on MLS in the areas we are interested in. VERY few new listings means lower priced ones are selling for much more than they are worth. I sold my semi 2 years ago for around $200,000 and I see the same model is now asking around $330,000. BUT once you get above $400,000 very few are sold in our area. Copy and paste listings to a word document and you can see how long it takes a house to disappear. One just lowered it’s price and there was snow on the ground in the picture! Also there are lots of foolish owners putting their house up for rent. Fat chance of getting enough rental. We pay $1300 and have a 3 bed 1 1/2 bath bungalow which would list around $350,000. These ARE bubble times!

#56 Fractional Reserve on 05.27.11 at 8:16 am

A must watch video on the real state of affairs by Marc Faber. May 25, 2011. Not for the weak of heart.

#57 Fractional Reserve on 05.27.11 at 8:20 am

More Marc Faber from May 26, 2012.

#58 Cowboy on 05.27.11 at 8:29 am

I have been a long time reader/fan of Garth (5 YEARs!),
and I do believe he knows what he is talking about.
Who knew the #@$%^ in power would have delayed the day of reckoning so long!? I have been waiting and talking about the crash for so long, people must think it is never coming. I believe it is coming but I can’t believe how much longer our bubble has gone in comparison to the States. Anyone know how long these bubbles typically go down for? Isn’t it as long as the bubble took to run up? I want to buy in Canmore and it is obviously way overpriced.
How long must we wait?!!

#59 charles on 05.27.11 at 8:39 am

I think we should buy more real state NOW!…. Give me just one reason the STUPIDITY that happen in BC wont happen here?
“Two things are infinite: the universe and human stupidity; and I’m not sure about the the universe.” Albert E.

#60 Crazy on 05.27.11 at 8:43 am–canadians-to-get-rate-hike-reprieve?bn=1

No rate hike. Like I said. Not this year even. Money is worth less and less.

Surely this blog will be prognosticating the night before this month’s rate announcement that no rate hike will be taking place, while for at least a year now (since I have been reading here), rate hikes have been predicted to support the theory that real estate will crash.

Statistics do not lie. Prices are UP, supply is down. All is normal.

Canada is the best country in the world, living next door to the MOST bankrupt country in the world, who still is our biggest trading partner.

So go figure, rates will stay low for years to come.

Hopefully, folks who are buying now will take advantage and pay down their loans quickly, as this period has been the best opportunity in a lifetime to take on debt to acquire housing, and pay it off in record time.

Sorry Garth. Someday, I am sure you will be right, but not yet. Not yet.

Maybe you should more than the headline: “One per cent is not normal. Everybody realizes that. Rates will go up,” said Krishen Rangasamy, economist at CIBC World Markets.” BTW, the housing correction is already taking place, and rates are not one part of the equation. — Garth

#61 bigrider on 05.27.11 at 8:43 am

#52 -Wait to die another day-

Ya ,Ya ya, houses are better investments than financial assets… right.

The mentality never ends.

#62 JohnnyBGood on 05.27.11 at 8:48 am

@ 34 Aussie Roy

I find the work by Aussie economist Steve Keen very interesting. If you haven’t checked him out yet, I’d recommend it.

What’s more, one can draw parallels between the housing markets in Australia and Canada, so his real estate-specific work should be of interest to Canadians.

#63 Lisa on 05.27.11 at 8:52 am

Buying should not be a bad thing if you are buying a home you can truly afford (i.e. Within your means) and lock in at a low interest rate for 5 years…should it???

#64 StrugglinginSK on 05.27.11 at 9:03 am

Great video Garth! Gave me a good laugh to start my day.

#65 TS on 05.27.11 at 9:12 am

It has become apparent to me that the Federal and Provincial Governments will continue and promote purchasing a home for two very simple reasons.
1) Revenues
2) Employment
Market demand is slowing in most outlying areas of our major metropolitan areas. If prices begin to drop significantly than we are all in deep do do. Our Federal and Provincial governments love high housing prices.
Just imagine the increased land transfer tax increase Ontario has received thanks to the last 10 years. F loves the additional G.S.T. Our loss of manufacturing jobs has been replaced by construction jobs. Federal infrastructure programs are over and so is the positive outlook in that construction sector.
We are on a very slippery slope.
F must really dislike you Garth…

#66 Brad in Cowtown on 05.27.11 at 9:18 am

“No, I do not see a major financial collapse. However, there is a lot of surprise coming. — Garth ”

Garth – my question to you would be “why not?” i.e. what has really improved since the financial crisis a few years ago? Other than government intervention (bandaid measureS), the problems which preceded that collapse are still rampant, are they not?

#67 Junius on 05.27.11 at 9:22 am

#60 Crazy,

You said, “So go figure, rates will stay low for years to come.”

Yes, you are crazy. Yet another poster who does not understand how rates are set.

RBC says that the overnight will be more than 2% higher this time next year. And that is a conservative estimate.

You are clueless along with being crazy.

#68 Junius on 05.27.11 at 9:30 am

#49 Daystar,

What is fascinating and disgusting about Carney’s remarks is that they demonstrate how little regard our leadership has for our general population. Essentially he is telling the “financial elites” (aka the idiots who created this mess) that things are much worse than he says in public. Officially known in Canada as “The Con Job”.

This sort of arrogance recently leaked out in Europe as well when the EU rep from Luxembourg admitted they were just BS’ing the public about how bad things where but what did people expect. The so-called Noble Lie.

Great thing the G20 leaders are getting together this week for yet another costly and pre-scripted circle jerk. Waste of money and waste of time.

#69 Basil Fawlty on 05.27.11 at 9:36 am

“No, I do not see a major financial collapse. However, there is a lot of surprise coming. — Garth”
Any chance of a minor financial collapse?

#70 JohnnyBGood on 05.27.11 at 9:45 am

@ 43 Blacksheep

MMT is an interesting theory that makes a lot of sense to me, though I can’t say I agree with all of it. I’m still learning. I’m not sure about the whole gov debt equals the people’s money thing–at least not as the whole story. But again, I’m still learning.

Some people interpret MMT as some kind of free lunch. However, whether a currency is backed by gold or the “full faith and credit” of a sovereign, it derives its true value from a productive economy in a stable polity with a growing population.

While a US default in the form of non-payment or restructured payments of US obligations would have to be intentional rather than forced by fiscal pressures, they could, in theory, “default” the other way, via high inflation caused by so-called “money printing”, which could lead to hyperinflation if the dollar loses its reserve status. In the end, default/deflation or hyperinflation, the underlying cause is the same: too much debt.

Before one argues over which end-game scenario is better, one would hope that the bond market would be able to prevent either, while real economic growth allows the balance sheet to be repaired.

In 1980 (or thereabouts) the Fed and gov were forced to capitulate to the bond markets and officially raise rates to kill inflation and stop a run on the dollar. Today, it seems they are trapped by debt, a bankrupt banking system, and a stagnant economy. Not to mention the brewing social problems. It’s just ugly, MMT or no MMT.

#71 bigrider on 05.27.11 at 9:51 am

#63 Lisa.

It sure will be a bad thing if you pay 800k for a home that you lock in at a low interest rate for 5 years only to have to renew in 5 years at a higher interest rate and realize that the home is now worth 600k.

Lose the house obsession for your own good.

#72 GregW, Oakville on 05.27.11 at 10:08 am

Hi #41 Nostra, Thanks for the updated info on the Japan GE-reactor issue and the coming tropical storm.

#73 GregW, Oakville on 05.27.11 at 10:19 am

Hi Garth, Thanks for the video. I believe there was something profound in it.
Might it be used in the remake of the Dr. Strange Love movie?

#74 Gary in Alberta on 05.27.11 at 10:23 am

#56 & #57 Fractional Reserve – Great Marc Faber interviews, especially the one on #57. Thanks.

Seems like TPTB in all countries are gaming everyone’s savings/capital with paper money and credit debasement and that is likely to continue for the foreseeable future.

I wouldn’t put a dime in any of these Ponzi markets literally anywhere as if even if you are lucky enough to get a transitory gain somewhere and at sometime you could lose it in a heartbeat with all the volatility and embedded shenanigans.

I also ain’t particularly interested in chasing yield as the fundamental risks to capital appear too high and again even if you win, your (not so) silent “partner” (who is the instigator of the Ponzi in the first place) gets to take about 40% or more from taxation while you get to eat the capital losses if you get harpooned.

It just seems like a mug’s game everywhere and thus i will take the risk of the precious metals for now and just drop out of the whole crap game till there is some kind of compelling reason to change like honesty and integrity.

#75 BrianT on 05.27.11 at 10:29 am

#68Junius-Very surprising that a guy from Goldman Sachs would have contempt for the public.

#76 Abitibidoug on 05.27.11 at 10:36 am

That’s interesting about the shortage of listings in the Toronto area. If I had a house in the Toronto area, it would have been sold by now. If not, I would drop what I’m doing (sign off this blog) and LIST THE HOUSE RIGHT NOW. What’s coming and how a person should respond reminds me of 2 stories. One is the Indian Ocean tsunami in December 2004. On one island, the local people had been trained to seek higher ground every time they felt the ground shake. There were very few casualties there when the tsunami hit as they took the window of opportunity to get to safety. The other story is of a gold mine in Kirkland Lake, Ontario where the shift boss heard this high frequency sound (in his word, the rocks were singing) so he ordered the mine be evacuated. Later that day there was a rock burst which caused a collapse of some tunnels underground. There were no casualties, but there could have been many.

As for the video, it reminds me of the saying that there are 3 ways a government should deal with a deficit namely: cut spending, cut spending, and cut spending.

#77 JohnnyBGood on 05.27.11 at 10:41 am

#53 Ralph Cramdown: “MMT is nuts…”

I’m not here to defend MMT, but…

Anything (gold, houses, Justin Bieber, a currency) only has market value if there is demand for it, right? The surest way to create demand for a fiat currency is via taxes, legal tender laws, and regulations.

“Money” is a social agreement. The idea that a government can create laws that force society to use its currency as money makes perfect sense.

#78 RentinginRosedale on 05.27.11 at 10:45 am

“BTW, the housing correction is already taking place, and rates are not one part of the equation. — Garth”

Garth, how can anyone describe the current situation as a housing correction? You can talk all you want about peripheral data like inventory, sales volumes, interest rates. But the big gauge in the centre of the dashboard says price. And prices have risen steadily for over 10 years, with 2011 increases among the largest as you’ve said yourself.

While I agree that prices may eventually correct, the housing correction most certainly has not yet begun

Sorry, but I fundamentally disagree. There is a correction in full flower in many parts of the country (even if not in navel-gazing Rosedale), and it’s impossible to look at sales reductions and supply-demand imbalances in the GTA and call this a normal market. Price is a function of buyer emotion and cheap money. A smart renter like you should see that. — Garth

#79 disciple on 05.27.11 at 10:46 am

Who benefits from increasing house prices? Let’s see:
Municipal government via taxes
Realtors through MLS monopoly
Builder investors
Big Box Retailers
Construction and Tradesmen
Big Business and Small Business
Jobseekers in general
Banks that create an asset-backed security out of your mort(death)-gage(pledge) which is supposed to be a liability.

Who benefits from decreasing house prices?
Nobody, except banks that take your house and other assets that you bought on credit and sell them to the highest bidder. What’s that you say? The banks lose because they lent out money and got back less? Fools! The bank never lent out any of its money, it never suffered a loss, it simply created it out of thin air. They get your asset, they still have that debt on their books that you have to repay short of declaring bankruptcy and they also control the flow of credit. They are your masters no matter what happens.

It’s time to face the truth. You have been lied to all your lives. Stop being cows on a farm. Escape the farm or continue to be slaughtered, and allow your posterity to be slaughtered just like you. If you don’t care enough to do anything about it for your own sakes, would you care about your children and grand-children? You have a moral duty to educate them and let them decide on what they want to do with the financial parasite class.

#80 American Werewolf on 05.27.11 at 10:49 am

@ Lisa

If you are only going to buy 3X your income and put 20%+ down, then no problem. Its not a “bad” thing. Then again, you may be shelling out 30-50% more than you may need to if you wait a bit, but if its your dream home and you can carry it at 8% interest, go ahead.

Back in the US bubble heyday, I found a deal and I did the same (wasn’t my dream home though). I did sell it after a reno. Took over 3 years to move it. If you don’t consider interest/closing costs/realtor commission, I broke even. It was only because I bought within my means that I didn’t lose the shirt off my back. But I most certainly didn’t gain a shred of wealth. Of course, if you were planning to live there long term, then no biggie I guess.

#81 disciple on 05.27.11 at 10:52 am

Income taxes are criminal and unlawful. They DO NOT go to pay for roads and schools. Property taxes pay for schools, and gasoline taxes pay for roads. Income taxes go directly to the private banking families as pure interest on the money you were forced by your traitor government to borrow from them.

Taxes, Interest, Fines and Fees, these are what keep you poor.

There are easy ways to defeat the parasite class and bring prosperity for all, but you must face your own greed and fear and defeat those aspects of your psyche FIRST. The battle is really in the mystery of your own mind. The battle is for your mind, always has been.

#82 kevman on 05.27.11 at 11:04 am

#67 Junius:

If rates are going up 2% at the minimum in the next year with more increases to follow, why are banks offering 10 year fixed mortgages at 5%? What about 5 year fixed mortgages at 3.66% when variable is 2.25%?

Why would they offer a 5 year mortgage at a rate where they’re guaranteed to loose money for 4 of those 5 years?

The banks can’t be that scared of sky high interest rates if they’re willing to lock you in for 10 years at 5%…

No really, please educate me. I’m probably overlooking something?

#83 ant_626 on 05.27.11 at 11:11 am

Garth, I know that you’ve tired of all this pumpers, but this is now on the top page of Yahoo Finance:
How Canada Beats the U.S.

All the usual lies, like Canadian banks do not have any subprime (0/40 or 5/25 do not count), lack of securitization (about 90% of all mortgages), did not receive help from the government (40 billion of EAP and close to 70 billion of purchases via EFF by CMHC from Big Five are obviously forgotten), and matching current US homeownership rate (62%) to the Canadian one (that was reported 69% in Sep 2010). Tipping point?

#84 April on 05.27.11 at 11:13 am

#23 Hopeful in Van
You believe what realtors tell you?

#85 eltabarnacos on 05.27.11 at 11:19 am

Lisa on 05.27.11 at 8:52 am
Buying should not be a bad thing if you are buying a home you can truly afford (i.e. Within your means) and lock in at a low interest rate for 5 years…should it???

Is this the lady that commanded Smokin man MUST BE BAN??
Well no its not a bad thing to buy right now…. you really should get in for a big 5 years VERY LOW interest! Even better go buy right now and lock it for 10 years locked low interests!
What are you waiting for????

#86 Devore on 05.27.11 at 11:45 am

#30 Raul

I think cognitive dissonance drives much (maybe even most) human behaviour.

Take for example why beliefs of all sorts become so entrenched. Once you have sunk time, money, effort, reputation into an idea, when you come across something that contradicts those ideas, even if it is scientific fact and evidence, you will attack it. This is because of that very uneasy feeling you have. That feeling is cognitive dissonance. That your beliefs may in fact be false. But to admit so, would be to admit personal failure. That you have been wrong. Duped. Cheated. Willingly participated in a fantasy. Even converted others close to you to it.

It takes a big man (or woman) to set aside long held beliefs to truly look at something objectively.

#87 disciple on 05.27.11 at 11:47 am

Be nice to Lisa. If she can virtually pay down her mortgage in the next 5 years, living within her means, then I say go for it. But I don’t think it is wise to throw away 50% equity just to have a place to call “your own”. Just wait a while and purchase when prices plummet. Comparing mortgage rates:

NOW: 3% of 400,000 is 12,500 annual interest
After Crash: 10% of 200,000 is 20,000 interest

But, here is the caveat: It will realistically take less time to pay back 200,000 than 400,000 I don’t care what your income is…

#88 Devore on 05.27.11 at 11:52 am

#38 jas

with so much budget deficit and trade deficit, why do people still run to buy US$ at the sightest hint of uncertainty in the world?

It is still the safest currency out there. No matter how much the US prints, the USD is world’s reserve currency. All international trade and commodities are priced in USD. Everyone will take a USD. Because everyone holds USD, every country must reprice its currency relative to it in order to remain competitive. So in effect, the US is able to export its inflation, indefinitely and in unlimited amounts. (Until it can’t, a topic for another post.)

So the US really IS different when it comes to monetary policy. What the US can do to save itself financially, Canada cannot.

#89 American Werewolf on 05.27.11 at 11:55 am

@ eltabarnacos

“you really should get in for a big 5 years VERY LOW interest!”

Honestly, I feel that “buying within ones means” should currently be calculated based upon the total home value, rather than the temporarily low carrying costs (which will increase). If you are committing to something that is reasonable for the next 5-10 years, but may not be so thereafter, that is not within your means. That is buying on the assumption that your income will increase during that time to match the eventually increased interest rate, in the face of an impeding housing crisis that will spark unemployment and deflation/stagflation that may stretch out longer than a decade.

When everyone has a decent job at the height of the bubble, its tough to figure out what is in your means. Imagine what you could carry with 8% interest rate, working 2 part times jobs in a disaster of an economy. If you can do it, and simply cannot wait, go ahead. Remember….no more than 3 times income and at least 20% down, and don’t assume your 120K+ job a year is anymore permanent than the stale bread in your kitchen

#90 Sunny on 05.27.11 at 11:56 am

#91 Abitibidoug on 05.27.11 at 11:56 am

@79 by disciple:
Who gains from decreasing house prices? I’m not in the market right now, but suppose I was looking at a house that lists for $300,000. A correction occurs and in the future I buy that house, or one like it, for $200,000. That means I have an extra $100,000 available to spend on goods and services at those Big Box retailers, renovators that employ Construction and Tradesmen, other retailers like car dealers (my old 1993 beater should really be replaced with a newer model) which not only puts money in the sellers pocket but also helps the bank if I borrow the money and all the above creates employment which helps job seekers in general. How can that be bad for the economy?

#92 Devore on 05.27.11 at 12:04 pm

#68 Junius

Ah! I caught that story too, wish I had saved a link.

The upshot was that the EU leaders basically flat out admitted they were lying about the Greece, etc, Eurozone troubles, but hey that’s ok, they had to, really, for everyone’s good. Oh, and for the children. Are these people really incompetent, or do they just pretend so?

#93 Timing is Everything on 05.27.11 at 12:25 pm

This should be entertaining…

“Competition Bureau to sue Toronto real estate board”[CBC]

#94 Timing is Everything on 05.27.11 at 12:29 pm

TREB – Here’s a bit more…Sno-cones in the morning…but at least it’s Friday…

#95 Junius on 05.27.11 at 12:37 pm

#82 kevman,

If you read my post I was referring to an RBC Report. You can argue with them.

Here is a direct quote from the report that is easy enough to find online:

“It now expects that the BoC will maintain its policy rate at 1.00% at its fixed action date next week, “with an eye to restarting the process to lessen the amount of policy stimulus in September”.

“Our forecast for the overnight rate at the end of 2011, therefore, is reduced to 1.75% from 2.00%. We maintain our call that the overnight rate will be 2.5% in mid 2012 as the economy reaches its productive capacity,” it says.

I indicated it was conservative (my opinion) because there is a general contraction of credit on a global basis right now. US QE2 and much of the stimulus is over. As the Central Banks stop buying up their own debt and lending at ultra low rates to each other it should tighten up interest rates globally.

#96 American Werewolf on 05.27.11 at 12:37 pm

@ #67 Junius:

“The banks can’t be that scared of sky high interest rates if they’re willing to lock you in for 10 years at 5%…

No really, please educate me. I’m probably overlooking something?”

It could be a lot of things. Maybe its a competitive rush to the bottom to lock in high risk buyers. Maybe banks figure these mortgages will go into default before the interest rate puts them on the losing side (they are insured after all). Maybe the are trying to boost short-term stock prices for shareholders, with no long term foresight.

With the knowledge that all these homes could be underwater within a few years, it could all be a play for CMHC payouts. And then again, maybe its just downright stupidity and exuberant optimism

If you gaze South for a moment you realize that banks in America are not omniscient and infallible. Hell, every Friday a handful of them go into government receivership. But….”it can’t happen here”. LOL

#97 Junius on 05.27.11 at 12:39 pm

#75 BrianT,

My thoughts exactly. Have you read the new book on Goldman Sachs? Chilling. It will make you want to dry vomit.

#98 Thetruth on 05.27.11 at 12:53 pm

Interest rates are not going up this year. Maybe only a quarter point token increase for the blog dwellers here.

Don’t take my word for it, look at the bond market!!!!

#99 Thetruth on 05.27.11 at 12:57 pm

To all the delusional blog dawgs:

Interest rates are not going up this year. Dont take my word for it, take a look at the bond yields!!!!

Now que… Let’s get emotional and respond accordingly.

#100 brainsail on 05.27.11 at 1:00 pm

#83 ant_626 on 05.27.11 at 11:11 am

Thanks for the link.

I hope people will take the time to read some of the comments. The hatred towards the US and the “we’re different ” attitudes were very overwhelming to the point I got disgusted. Most Canadians are disconnected from the real world.

#101 Junius on 05.27.11 at 1:00 pm

#96 American Werewolf,

Yes but most Canadians refuse to look South for an example. Many even think the US economy could completely tank and Canada could sail along fine regardless.

Most Canadians believe what the MSM prints here daily. It is different here. We are on a different planet where the normal rules of economics does not apply.

Of course, some of know how it will really end. However we will remain the minority until it does.

#102 jess on 05.27.11 at 1:01 pm

action:words or weasel?


For example, attempts last year to introduce the concept of country-by-country reporting into the OECD guidelines for multinational enterprises ??????????

Guidelines for Multinational Enterprises:Department – OECDUpdating the Guidelines for MNEs · Due diligence in the mining and minerals ……/0,2688,en_2649_34889_1_1_1_1_1,00.html – Cached

..”One of them, put forward by Global Witness, an anti-corruption group based in London, calls for better regulation by international banks, which often fail to do due diligence on high-ranking or flush clients.

Existing rules designed to block money laundering and terrorist financing may be enough, but bankers must do more to check up on clients with connections to known shady regimes, says Anthea Lawson, a Global Witness campaigner, who testified last month before the U.S. House Committee on Financial Services. ”

Published: June 2, 2009

#103 not asian on 05.27.11 at 1:09 pm

So everything comes down to and back to…..China. The whole world is holding it’s breath for…..China. The US is dependent on…..China.
Our real estate is fuelled by….China.
The other day I heard kids in Africa are learning Mandarin.
This can’t be good.

#104 disciple on 05.27.11 at 1:09 pm

91 Abittydoo:
Where does your 100,000 come from? Your back pocket? Realistically, you do not have it unless the bank fictitiously gives it to you. And that is the heart of the problem in a debt-fiat system.

#105 Junius on 05.27.11 at 1:13 pm

#92 Devore,

You asked, “Are these people really incompetent, or do they just pretend so?”

My view is that there is a collective agreement to “extend and pretend” that is prevailing at most senior levels of gov’t throughout the Western World. There is no real leadership that is not drawn from the ranks of the banks or is essentially controlled by them – from Obama to Harper through Europe. They bailed out the banks with public debt and now are just hoping it works itself out.

John Mauldin deals with this extensively in his writings and his book, “The Endgame.” I agree with his conclusion which is that as we move from bank defaults to Sovereign defaults there will have to be an end to this pretence that economic growth will allow us to work our way out of this.

Eventually there will have to be defaults, write-downs, write-offs and significant pain before we can move beyond this.

What is terrible is that we did not take advantage of the first crisis to effect the changes necessary to reign in the financial system. A crisis is a terrible thing to waste. This one was wasted ensuring it will happen again. Probably sooner than we think.

#106 disciple on 05.27.11 at 1:15 pm

Etymology moment: The word “bank” comes from the Latin “banco” meaning the bank of a river. The “currency” is what flows in that river. The parasite judicial system employs the “bench” from the same root word, implying the double meaning that the judge sits on the bank of a river controlling the flow of the currency. There is no true justice in the Western World, what happens is the judge decides on who gets what money, or who is allowed to get some of the flow or currency. And what is even more astounding is that the currency is actually….YOU!

#107 American Werewolf on 05.27.11 at 1:16 pm

@ Abitibidoug

“it reminds me of the saying that there are 3 ways a government should deal with a deficit namely: cut spending, cut spending, and cut spending.”

Does it ever cross anyone’s mind that when outflow exceeds inflow, another useful tactic is to increase inflow? It could work wonders in combination.

When people concern themselves with the deficit but only see a single possible solution to the problem, then they are not really concerned about the deficit–they just want to cut social services.

If that is your stance, then fine. Debate it on its own merits. But hiding behind the deficit monster to promote your Laissez faire utopia cowardly at best, and intellectually void at its core.

#108 City Slicker on 05.27.11 at 1:16 pm

Garth what happens if everyone holds for the price they want. And if rates go up and they can’t afford the mortgage they can just rent a room in the basement. This seems to be everyone’s answer in Calgary and Alberta.
What does history tell us about people holding and renting a room to brave the storm? Is it different this time?
Thanks mang. Always enjoy you’re blog.

#109 disciple on 05.27.11 at 1:19 pm

So with this understanding, it is easy to see why for example, at the Supreme Court level, no reference to Law of the Land or Human Rights or the Constitution or Fair Working Class Wages or anything that concerns the affairs of TRUE justice. The only concern is directing the “flow” of the “currency” or current. Totally warped.

#110 BDG-YYC on 05.27.11 at 1:28 pm

Lisa on 05.27.11 at 8:52 am
Buying should not be a bad thing if you are buying a home you can truly afford (i.e. Within your means) and lock in at a low interest rate for 5 years…should it???

Let’s explore that imaginary concept with some imaginary numbers …

John and Jane are typical 25-ish first time buyers with a combinerd income of $80K looking to “buy within thier means” to nest and start a fimily. They are looking to go the modest route … $400K (if they can find it). They have 5% to put down – they’ll go the 30 year amortization route to keep the payments affordable of course so they can stay “within thier means”.

They realize rates are low so they are doing thier budgeting realistically expecting that rates will average 6% over the 30 years and get set 6 different times over the period … sometimes higher and sometimes lower.

Bingo … they slide into a 20 year old house in a decent neighbourhood in need of a little tlc for $400K slap down the 5% which basically covers their CMHC fees and closing costs and start out on thier 30 year journey “living the dream within thier means”.

@ 6% They will pay about $450K in interest before the house is paid for so the total out of pocket cost of the house purchaser will be $850K by the end of the 30 years. Taxes are $3K/yr. so that’s $90K out of pocket. Insurance is about $500/yr so that’s another $15K. The place has some age on it so there will be some maintenance costs etc. so say that’s going to work out to … who knows … guess … um say about what the taxes are … that’s another $100K. Utilities O.K. lets say $3,500/year should cover phone, cable, heating, lighting … to that’s another $100K over 30 years. Kid’s are cheap … say $100K each for 1Boychild and 1Girlchild – so cute … total $200K. Transportation … $8K per year is $240K. Food 10K/year allowing for the occaional meal out is … $300K. And … vacations, miscellaneous, and SAVINGS can come out of whatever is left over.

Total cost over 30 years …
Purchase Price (Principal) …. $400K
Interest $450K
Taxes $ 90K
Insurance $ 15K
Maintenance/Upkeep $100K
Utilities $100K
Transportation $240K
Food and stuff $300K
Girlchild $100K
Boychild $100K

TOTAL Expenses …. $1,895,000

Income is $80K per year … may be able to bring 75% of that home … so that’s $60K per year X 30 years … is

$1,800,000 WTF ????

In 25 years John and Jane will be 55 be the proud owners of a Paid For (?) 50 year old house (likely in a run down neighbouthood) with $95K in various debt and 2 – 25-ish year old kids (hopefully out of the house). No savings at all and no memory of a vacation (that was coming out of what was left over as was the miscellaneous) with 10 years to age 65. 100% of thier $305K net worth will be tied up in thier home. They’ll have $2,500 a month (no mortgage payment) to start throwing at paying off the debt and stuffing into savings … but unfortunately no clue when it comes to managing investable savings since they’ve never before had any.

Looks like buying a “typical” home on a “typical” income might not pass the “within your means test” right now.

Fortunately Vancouver and Toronto are different :-) .

#111 Devore on 05.27.11 at 1:37 pm

#91 Abitibidoug

Doug, the truth is everyone benefits from falling prices, which is as it should be in a healthy free economy. We have been trained to believe otherwise; cognitive dissonance strikes again! However, in an inflationary debt economy, deflating assets and prices are death.

So, compounding interest or bust it is!

#112 Daystar on 05.27.11 at 1:39 pm

#78 RentinginRosedale on 05.27.11 at 10:45 am

Garth is on the money. Just to add to what he’s saying, the values of the average home have been going up due to the large number of high end homes being bought and sold. Sales of homes of much less value have fallen off a serious cliff. Who in their right mind wants to pay gobs of money for a shack that is likely fit for a dozer in 20 years or less? The increased sales numbers of high end homes followed by decreased sales numbers of low end homes due more than any other reason to unaffordability are skewing the numbers, the reason why home values have risen annually. Its not low inventory. Nearly seven of 10 adults own a home in this nation, a very high percentage. We have aging boomers looking to move down and tighter CMHC regs have seriously dampened credit affordability. It has to get priced in and this doesn’t happen overnight.

There is a sequence to it and if you are smart, you won’t take my word for it, look for the sequence of real estate bubbles that went bust elsewhere in the world (there are plenty of examples) and see the wisdom in renting because its not only cheaper… the last place one wants their money right now is an illiquid asset who’s value is for more than any reason decided by the ease/difficulty of credit which will only get tighter. These are not normal rates, and at some point they will go up.

The U.S. economy went through 12 consecutive quarters of 1% central bank rates or less before rates surged and their bubble went bust. Currently, we are in our 10th consecutive 1% or less quarter. This can’t and won’t last forever. There are two things to watch, both of them huge indicators of where rates will go next in the U.S/Canada. Evidence of a housing bottom in the U.S. (where negative equity homeowners there drop from 25% to say…. 15%? I know, 01′ valuation numbers, just throwing it out there), and some kind of recussitation in U.S. manufacturing of which currency valuations world wide play a huge role and take my word for it, if commodities takes a plunge the inflationary pressures of a rapidly falling loonie force government to look for a sacrificial lamb. In Canada’s case, its real estate as they will need deflation somewhere. In reality, its already begun through tighter CMHC regs.

#113 Daystar on 05.27.11 at 1:48 pm

#68 Junius on 05.27.11 at 9:30 am
#49 Daystar,

“What is fascinating and disgusting about Carney’s remarks is that they demonstrate how little regard our leadership has for our general population.”

Yes and no. Carney understands the need to keep his mouth shut with sensitive information for tons of reasons of which I’ll get into a couple. One is, that his position is not one which should openly undermine the public the people’s confidence of the feds to do their job. Its up to the media to do it and I know media is quite bias when it comes to politics, but its up to the general public to see through propaganda as well and sadly, often, the general public fails to do so.

For the people who see past the propaganda and political fluff, these same people are also smart enough to know Carney’s words before he said them. All he’s done is assure us of what some of us already know and yes, he could have said stuff like this earlier, but to the general public what has he been saying? “We have a household debt problem that must be addressed. Don’t borrow what one cannot afford to pay back under a higher interest rate scenario. Productivity is a major concern in this nation (a big reason to keep the flow of immigrants into this nation, if I’ve ever heard one, 38% of the population are aging boomers, we need some fresh blood in this nation whether our petty prejudices like it or not). There are risks from Europe, inflationary pressures in China and emerging markets and risks now from Japan that could jepardize our recovery.” (naturally, I’m paraphrasing) Again… he isn’t really telling the ones with the eye on the ball anything we don’t already know and he’s gone public with a bundle.

“Essentially he is telling the “financial elites” (aka the idiots who created this mess) that things are much worse than he says in public. Officially known in Canada as “The Con Job”.” – Junius

No… more like affirming what the “financial elites” already know. It goes back to U.S. housing. My lil’ peice on U.S. bankrupcies should have rung some bells. 2.1 million bankrupcies (closer to 3 million individual’s going bankrupt or 1% of the U.S. population) was enough when the writedowns hit the books to exit Bear Stearns, AIG, Washington Mutual and Leman Bros. All the U.S. could do (or any president for that matter) with a bubble bursting like that is stretch out the the length of the destined future bankrupcies/writedowns through several years or more in an attempt for the financial sector to make enough profit through services to put against future losses and stablize the bond markets… which they have done, but its not over.

The U.S. housing market is still finding its bottom and until it actually hits, interest rates will continue to stay low there. It has to stay low cause if there is a rise in rates, another wave of bankrupcies/writedowns hit an already exhausted financial market. Its hard to predict when the financial system is healthy enough to face the jolt of higher interest rates, but I’d bet on Mark Carney being right with his assertions that it goes past Obama’s presidency (and this, in truth, 3 years ago, I wouldn’t have predicted take so long but thats how serious the U.S. housing meltdown was and further emphasizes why we should have not allowed the Harper government to create a housing bubble here, valuations must be driven by earnings not credit and we will all now dearly pay. People need to know the risks even now which only emphasizes just how valuable a tool this blog remains to the general public. Its all to easy to personally thank Garth again for his tireless efforts because he knows and has always known what this will do to the average homeowner with a mortage so I take the time myself as all us blog dogs do, to make our case plain beyond simple thanks). ;)

“This sort of arrogance recently leaked out in Europe as well when the EU rep from Luxembourg admitted they were just BS’ing the public about how bad things where but what did people expect. The so-called Noble Lie.

Great thing the G20 leaders are getting together this week for yet another costly and pre-scripted circle jerk. Waste of money and waste of time.” – Junius

Its hard to defend our worlds leaders with what you have to say (probably because I don’t really want to) but… if you were any one of them, how would you handle it? Would you singlehandedly “roil” the markets with the words dripping of doom and gloom, or would you hesitate, maybe not painting a rosy picture as a market pumper but not painting a poor one either…? People still need to dream at night.

Its not like I’m pro Harper here, don’t get me wrong. We could be far more socially responsible than the current examples we have now. Our file on native affairs is appalling, there is broad weakness in our food/drug regulation causing a huge drag on healthcare spending and environmentally we’ve gone backward by a decade and are poised to go quickly backward several decades with: property rights, political campaign donation regs and gag laws, lobby influences, access to information to name a few, all for dark reasons.

Still, economically, maybe if you were leader of a nation you’d leave the ugly doses of medicine up to guys like this (and cut government spending/raise taxes more quietly, if possible) and keep them closer to your ear.

Enjoying your input to contemplate as always whether pos or neg old friend! :-D

#114 vreaa on 05.27.11 at 2:14 pm

Peter Ladner on Over-expensive Vancouver RE –
Correct Concerns, Questionable Attributions –
“Is it always a good thing that property values go up?”

Partial transcription, and discussion, of recent interview.

#115 maxx on 05.27.11 at 2:29 pm

#47 Kim-

Bravo Kim and once again Bravo!! Would that there were more like you. YOU control your money, not others. You’ve made my day!

#116 bigrider on 05.27.11 at 2:36 pm

My theory around HAM in Vancouver has nothing to do with what most have espoused on this blog.

My theory is that because of their odd dietary habits, the need for regular colon cleasings are a must and no better place to get one than the prolific options in Vancouver. Starbucks used grinds=coffee enemas.

#117 jess on 05.27.11 at 2:56 pm

70:30 ratio (paper barrels) in reverse

WikiLeaks: Saudis Often Warned US About Oil Speculators
Friday 27 May 2011
by: Kevin G. Hall and Paul Jay, The Real News Network

#118 TS on 05.27.11 at 2:57 pm

Canadian banks feeling margin pressure

I wonder if the thought ever enters the executives minds that they could possibly cut their bonus’s.
I also wonder how much the Banker’s Association spent in convincing the reporters this is true?

#119 Vancouver_Bear on 05.27.11 at 3:01 pm

Smart Asians and Canadians are buying in US, stupid are buying in Vancouver –

#120 Gord In Vancouver on 05.27.11 at 3:04 pm

More Vancouver desperation…….

** Warning ** – do NOT read this while you are consuming a beverage.

#121 SMOKING MAN on 05.27.11 at 3:05 pm

Royal Bank lowers residential mortgage rates

I called it :)

#122 SMOKING MAN on 05.27.11 at 3:09 pm

WOW CDN Bonds are getting eaten alive, as I predicted. Yeilds are a tanking.= CHEAP MONEY

Silent Spring eh Garth we shall see.

#123 Vancouver_Bear on 05.27.11 at 3:09 pm

#8 Hoof – Hearted on 05.26.11 at 9:12 pm

it’s a dirty old realturd’s trick….just ignore it.

#124 BPOE on 05.27.11 at 3:34 pm

Mortgage rates going down folks. Gold going UP and Bank of Canada lowering rates. Stay tuned.
TORONTO – Two big Canadian banks have lowered their mortgage rates by up a tenth of a point.

The Royal Bank and TD Canada Trust say they are cutting their house loans by a tenth of a point, effective Saturday.

#125 jess on 05.27.11 at 3:37 pm

The National Council – the lower chamber of Swiss parliament – has passed a resolution, requesting the government to undertake new measures to restrict immigration. Starting July 1 2011, Bulgarians and Romanians as well as foreigners from outside the EU will only be granted a work permit in the Netherlands under “exceptional cases,” as the Dutch parliament is expected to back Social Affairs Minister Henk Kamp’s proposal to this effect.

“Over one million (Dutch) people aged below 65 are without work and sidelined on social benefit,” the Minister pointed out, as cited by Euractive.

#126 Abitibidoug on 05.27.11 at 4:22 pm

@discipleydoo 104:
For some people who previously sold a house they have the cash on hand. Otherwise you borrow the money from a bank. Still, the money saved by buying a cheaper house can go elsewhere in the economy.
@American Werewolf 107:
I agree that increasing inflow can also go a long way to reducing or elimination a deficit. You Americans could greatly decrease, or even eliminate, the deficit by following Canada’s example of higher taxes on fuels, alcohol, and tobacco and getting rid of the deduction of mortgage payments on income tax. However, based on what I know of Americans, no politician has the balls of steel to even suggest such a thing and if they did it would be political suicide. Aren’t Republicans like Sarah Palin calling for even bigger tax cuts, especially to people who need them the least? In today’s environment where most people, including economists are scared to death of even modest tax increases, the only other way to reduce the deficit is with spending cuts. That’s why I, in your words, suggested the Laissez faire utopia cowardly at best, and intellectually void at its core idea of spending cuts. Maybe you should run for public office on a platform of big tax increases. I wish you the best of luck, you’ll need it.

#127 Abitibidoug on 05.27.11 at 4:35 pm

@American Werewolf 107:
Further to my above comments, I should add that even though on average we Canadians are less tax averse than you Americans, we just voted in a Conservative government with a majority that believes in (and will implement) further tax cuts to corporations. The other parties wanted to eliminate this insanity and one of those parties (the Liberals) got slaughtered in the last election. For better or worse, the voting public has no appetite for tax increases so there WILL need to be cutbacks.

#128 eltabarnacos on 05.27.11 at 4:51 pm

Abitibidoug on 05.27.11 at 11:56 am
@79 by disciple:
Who gains from decreasing house prices? I’m not in the market right now, but suppose I was looking at a house that lists for $300,000. A correction occurs and in the future I buy that house, or one like it, for $200,000. That means I have an extra $100,000 available to spend on goods and services at those Big Box retailers, renovators that employ Construction and Tradesmen, other retailers like car dealers (my old 1993 beater should really be replaced with a newer model) which not only puts money in the sellers pocket but also helps the bank if I borrow the money and all the above creates employment which helps job seekers in general. How can that be bad for the economy?
Ummm, I tough you were not a newbie here Abitibidoug…
Simply because its unsustainable (boom and bust) and the market gets dried up of buyers which then leads to a CRASH!!!
Which crashes the economy!!! (The US is not recovered at all now but only worst after 3 long years of a depression)

Got it now??

#129 Imstupid on 05.27.11 at 4:59 pm

you haven’t considered the 5% realtor fee for selling plus legal plus penalty for breaking mortgage early. That will be at least 20% drop from what you paid. This will almost certainly wipe you out. Even with a 15% increase that you claim you still haven’t made a net profit if you sell right now. Your trying to rastionalize a losing situation. Let’s assume your 15% gain that will be a realtor fee of 5% for what you paid plus 5% of the 15% gain that will chop your 15% profit to about 6.5% then you paid 2 years of property tax that will erode profit and you still have legal fees to close plus insurance premiums for two years and a penalty for getting out of your mortgage. I haven’t even mentioned the fee you paid to chmc for having a down payment of less than 20%. with a 15% increase you would still have to bring a cheque to close your home if you sold.

#130 Junius on 05.27.11 at 4:59 pm

#113 Daystar,

I strongly disagree. In fact, I think your argument is nonsense. You have fallen for the “noble lie” BS.

If Carney wants to keep a public face then that is fine. However if he gets together with private groups and delivers a different message that is off side. I pay taxes just like they do (oops – or maybe they don’t) and I deserve to hear anything he says to them.

This is the problem in our society. Our “elites” in the financial world live in a “Too Big To Fail” bubble while the rest of us have to work for a living to pay their gambling debts.

#131 Junius on 05.27.11 at 5:06 pm

#99 thetruth,

You said, “Interest rates are not going up this year. Dont take my word for it, take a look at the bond yields!!!!”


QE2 just ended as did most of the economic stimulus. The bond yields will change. Rates will begin to rise in the Fall. They start going up in September and go up for many years.

#132 C on 05.27.11 at 5:15 pm

@ #82 – For a fixed rate loan, the bank will match their asset (the loan) with a liability of similar maturity. They can lend you money for 10 years locked in at 5% today provided they can borrow for 10 years locked in at less than 5% today. What happens tomorrow with rates doesn’t matter. The arrangement fails if there is a default. CMHC insures the default.

For 5 year fixed at 3.66%, same principle applies. As long as the bank can find an investor/lender willing to accept less than 3.66%, they’ll make their spread.

Managing duration, rather than interest rate risk, is the key.

The reason the fixed rate is higher than the variable rate is because they need an investor/lender will to accept a fixed rate for a period of time. A variable rate loan than is adjusted as rates rise or decrease does not have duration risk. Your cost of funds will be less than your interest received and again, you make your spread. It is relatively easy to match a variable rate asset with a variable rate liability.

#133 Vindicated on 05.27.11 at 5:28 pm


Absolutely correct! RBC announced today that all of their mortgage rates dropped again – for the second time in 9 days.

#134 Kaganovich on 05.27.11 at 5:58 pm

#113 Daystar

You sound like a Straussian. Junius makes a valid point. Sheldon Wolin has convincingly fleshed that same point out in Democracy Inc.

#135 Sunny on 05.27.11 at 5:58 pm

this is a great explanation of what’s happening right now!

#136 Vindicated on 05.27.11 at 6:02 pm

MLS listings in my GTA ‘hood (Brampton) surged this week.

Coud it be a late spring real estate market, what with all of the crappy damp weather discouraging potential home- sellers from listing thus far?

#137 caro on 05.27.11 at 6:08 pm

LOL has anyone checked out Barrie lately, prices are dropping like hot cakes. Plenty of inventory – no buyers… $350 will buy you a 5-10 year old 3,000 sq.ft fully finished family home.

#138 Abitibidoug on 05.27.11 at 6:11 pm

@eltabarnacos #128:
Are you suggesting it’s better for the economy if prices stay perpetually high and price a lot of people, especially younger people out of the market? Prices of houses got artificially high in 1989, a correction occured, and by the mid 1990’s another boom cycle was under way. As a poster commented in the previous topic, corrections are to the economy are what fire is to the boreal forest. A fire clears out dead wood, releases nutrients back into the soil, and paves the way for new growth in the future. Some trees like the Jack Pine need fire to open the cones to disperse seeds, and allow new growth. Similarly, corrections are a normal part of the capitalist system that clean out the excesses of a bubble (like outrageously high prices) and pave the way for the growth and prosperity in the future. Would we be better off now if governments borrowed heavily to prop up past bubbles like gold in 1980, real estate in 1989, or tech stocks in 2000? Got it now??

#139 BPOE on 05.27.11 at 6:14 pm

Another WINNER!!! Folks, with mortgage rates dropping and the soon to be announced lowering of interest rates the winning is just going to keep going and going. JUNIUS=FAIL__________________________________________
When Terry Vato listed a two-storey house in Burnaby late last month, he knew the sticker price would attract hundreds of prospective buyers.
At just under a million dollars, the 87-year-old, four-bedroom home was a bargain compared to houses 20 minutes away in Vancouver, the ReMax Central agent said. He was right. A week and one open house later, the property sold for $1.5-million – 50-per-cent more than the owners were asking.
“Some people hear this and say ‘Wow, what a crazy price,’” he said. “But I think the new buyers will do very well in coming years. This area has been undervalued.”

#140 Cato on 05.27.11 at 6:16 pm

Regardless of where rates are heading consumer is showing clear signs of stress – its now time to start entering what is going to be a prolonged end game. Garth is right, market is exhibiting classic bubble top pattern before a correction. I’m sure gov’t will attempt to run interference but opportunity to intervene has long since past.

We are currently witnessing demand destruction phase. Next phase will be the start of the bloodletting as inventory swells when forced sellers enter the market. Folks who are overleveraged that just can’t manage the debt. They won’t want to sell, at the moment they are hoping their financial world turns around – for most its not going to happen. The ones who have some equity left will be the first to drop prices and set tone for downward trend. Buyers will see price decline as sign to go back on fence and wait for further declines. Sellers who have no room to negotiate will keep their asking price high praying a sucker comes along and makes them whole – it won’t happen and they’ll enter into foreclosure. Once foreclosures starting hitting market en masse its game over – the blood will really be flowing. Supply will far outweigh demand and prices will shoot below trend. Might be good time to buy for anyone who realizes a house is not an investment but a place to live and still has a few pennies to rub together. At that point banks will probably be downright snarly after getting spanked by Gov’t looking to lay blame on anyone but the CMHC. That will be the point, like other times in history, when cash becomes king and the well prepared make the buy of a lifetime.

#141 Love this Blog on 05.27.11 at 6:31 pm

#139 Cato,
I like the way you think!! And fingers crossed you are correct. I guess I am less forgiving than some here, but I want the leveraged-to-the-hilt types to crash and crash HARD. It is BECAUSE they are willing to be leveraged to the nuts, that house prices are through the roof, and responsible people are priced out. I say raise rates, let the blood run, and sanity return.
Am I wrong to feel this way?? LOL

#142 ballingsford on 05.27.11 at 6:53 pm

#21 grantmi on 05.26.11 at 10:16 pm

#1 ballingsford on 05.26.11 at 8:45 pm

I must be first this time!

#2 D in BC on 05.26.11 at 8:46 pm

Are you kidding me? First….?

First Idiots Squared!!!!

Jealousy will get you nowhere! Actually, it feels pretty good to post ‘first’. I think it’s the first time that I made first.
The intelligent contribution that I made to this site by posting first may have sparked a lot of intellectual thought!

#143 Onemorething on 05.27.11 at 6:56 pm

#41 NOS LMV my friend. Wouldnt miss the unraveling! Sitting on Sidelines calmly and patiently as the cover up unfolds!

Actually, it was ideal, took the time to right size the busines in HK, aim at key markets, watch that Swissy and MYR continue to stregthen and my Air Asia stock go from 0.30 to 1.00!

Continue your commentary, one of the last sane one’s around on this Prolific Blog!

#144 Nostradamus Le Mad Vlad on 05.27.11 at 6:57 pm

#72 GregW, Oakville — G’day Greg. Curious as to why and how all these events are happening so frequently, and with such ferocity.

Fukushima, the volcano in Iceland, tornadoes in the US, the Slave Lake fire, etc., then all the wars on top of that — getting too much for an old fart like me!

One question remains: If ObL is dead and buried, why is the TSA, Homeland Security and the like still in effect? Should they not be discontinued as well? he real terrorists are in the WH, Pentagon, 24 Sussex Drive, 10 Downing Street, etc. — you get the picture.
BP would like the GoM to go away (nicely). Actually, the Canary Islands volcano would do nicely, as the ensuing tsunami should put a dent in it.

Follow The Money The Four Horsepoops of the Economy. 3:36 clip Economic ignorance is bliss. NOT! 5:49 clip Wall St.’s War on America. What happened to the War on Terror? Ahh yes, that was an imaginary fake orgasm! Various Clips Cancel Timmy’s bailouts and an 8-year-old girl knows finance better than Benny.

QE3 Coming soon to bankroll a broke country near you! 3:33 clip Bob Woodward (Watergate) asks Timmy about the debt-ceiling plan. Iceland “Apparently throwing out the Government and jailing the banksters works!” So let’s get rid of the US Fed, BoC and affiliates thruout the world!

Hmmm. Sumtin’ duzzent jive here. Economic Assassination The more wars Obama involves the US in militarily, the further stretched they will become, making further ‘Nams and Af’stan’s more and more likely — can’t win situations. Iran – Iraq “Welcome to the Mother of All Unintended Consequences, courtesy of the White House, Pentagon, and the US State Department!”, which probably stems from this.

GF (Global Freezing) It’s at least ten below normal here in the Brrrrrrokanagan. Show on the Coquihalla this morning, the Connector and north Okanagan, and 3:51 clip “It’s nothing more than a giant money-making scheme for the investment banks and Al “I got a ‘D’ in natural sciences at Harvard” Gore. Carbon trading is complete and utter bullshit.”

Sea Level Descending, just like everything else, and Ripped Up Cloned meat and milk allowed. Aspartame Like vaccines, avoid it.

#145 Devore on 05.27.11 at 7:09 pm

#120 Gord In Vancouver

Are we in a bubble? Time will tell.

Ya, time will tell. Meanwhile, you can decide for yourself:

#146 TurnerNation on 05.27.11 at 7:11 pm


More than half of Canadians who are carrying debt are uncomfortable with it, and some expect they’ll have to delay retirement in order to pay down their debts, according to a recent survey by Investors Group.

In a survey of 1,020 Canadians, conducted in late April and early May, 75% said they are in debt. More than 50% said purchasing property is the main reason they’re carrying debt, while 37% have used it to invest in home renovations, 28% have borrowed to make a financial investment and 18% took on debt to invest in their education.

Debt is also commonly used towards impulse purchases, travel and vacation costs, financial support for parents and children, and day-to-day living expenses such as gas, the survey shows.

As large debt loads become more common, however, so too does the stress associated with owing money. Of those surveyed, 58% said they feel uncomfortable with their debt – even though they acknowledge they can live with it – and 30% are outright embarrassed by it.

One-in-three Canadians with debt admit to losing sleep over their debt load and 25% say it’s triggered disagreements with their partners.

#147 Devore on 05.27.11 at 7:19 pm

#129 Imstupid

Even I forget about the added cost of mortgage insurance, often rolled into the mortgage or lent by the bank as cashback, good catch. And what about interest and property taxes? Those add no value to your property. That’s REALLY throwing your money away (like rent, eh?). Looking at only the price of an investment you must shovel money into is rather misleading. But whatever helps people sleep at night. No one seems to care about the carrying costs, only the sticker price. Right in line with the monthly payment mentality.

#148 45north on 05.27.11 at 7:20 pm

Cato: Once foreclosures starting hitting market en masse its game over

in the US, the banks are holding on to the foreclosures mostly because they’re in no hurry to declare a loss. The downside is that the longer the banks wait to foreclose the less the house is worth. I’m guessing that unlike in the US, the Canadian banks will foreclose expeditiously.

Daystar: talking about Mark Carney: but to the general public what has he been saying? “We have a household debt problem that must be addressed. Don’t borrow what one cannot afford to pay back under a higher interest rate scenario.

Here’s his own words: Low rates today do not necessarily mean low rates tomorrow,” he reminded. “Risk reversals, when they happen can be fierce; the greater the complacency, the more brutal the reckoning

#149 Patsan on 05.27.11 at 7:22 pm

#82, maybe the following will partially address your concerns:

TD Bank Monthly Pay Step-Up Extendible Notes December 8, 2011 to June 8, 2021

Short Description: Offering of Extendible (at Issuer’s Option) Step-Up Notes
Maturity: December 08, 2011
Coupon: Year 1 @ 4.00%
Year 2 @ 4.00%
Year 3 @ 4.10%
Year 4 @ 4.10%
Year 5 @ 4.20%
Year 6 @ 4.20%
Year 7 @ 4.40%
Year 8 @ 4.40%
Year 9 @ 4.50%
Year 10 @ 4.50%
Price: $100.00 CDN per $100 par value.
Yield to Maturity: 4.26% semi-annual; 4.30% annual
Settlement: June 8, 2011.

#150 Daisy Mae on 05.27.11 at 7:25 pm

Lisa on 05.27.11 at 8:52 am

“Buying should not be a bad thing if you are buying a home you can truly afford (i.e. Within your means) and lock in at a low interest rate for 5 years…should it???”

Not if that price is inflated…and falling.

#151 45north on 05.27.11 at 7:37 pm

that should be here are his own words

#152 Vegas 24 hour Wedding Chapel on 05.27.11 at 7:38 pm


Where is BPOE and CrowdedElevatorFartz.

The cheque bounced, “union” is null and void.

The Elvis singer is pissed off too.

Assh*le Canadians

#153 Junius on 05.27.11 at 7:38 pm

#121 Smoking Man and #124 BPOE,

You are both idiots. This means nothing the banks need the business. The only thing it says about the economy is that the housing market is so weak they need to shave their rates to bring in business.

You think this is a trend and it is going to change the market? Forget it. This is just a blip.

The real action begins at the end of the summer and into the Fall when the BofC overnights start their steady climb. Buckle up.

#154 Imstupid on 05.27.11 at 7:40 pm

Here is the problem with the market right now, people like me who earn way more than average household must compete with people who have nothing. I have always been a cash guy. I buy everything with money I have I never bough or use credit. I’m an anomaly I guess being 31 years old and having never used credit for anything. So here I am with my annual salary of nearly 200k plenty saved for retirement investments in all kinds of places and refusing to buy because the state of the market is not rational. Most buyers have no idea what 700k looks like they have nothing and never had anything. So it is easy for someone who doesn’t even have two nickels to rub together to go into a bank and ask for credit. They figure why not if I lose everything it’s not like I had much to begin with so why not. It’s like what the banks are doing with chmc backing all these loans. The majority of the 5/40 buyers want to show the appearance of wealth. My friend assumes his bungalow he paid 300k for in a crack head neighborhood will be worth 600k someday. Ya in 50 years. Come on people, this is why I have all my hair and pearly white teeth and I don’t look a day over 25 and the majority of people look like they have been run over by an 18 wheeler. I buy things with money I actually have today I pay for it and forget about it. No stress no problems.

#155 Hoof - Hearted on 05.27.11 at 7:51 pm

#79 disciple

The Peter Ladner video I posted (above) alluded to as much.

He made some very valid points.

If someone sells to HAM $’s..they will move. The HAM may buy more than one house and they sit empty.

The local businesses suffer because the old clientele that sold to HAM is gone. The dreaded ripple effect.

Good paying jobs leave because company recruiters find potential employees say F*ck it…too expensive to live here.
Ladner called it a ” hollowing out” of the local economy, which puts this HAM thing in its best perspective.

If the grassroots of the economy is killed off…its only a matter of time till the bubble is only sustained by voodoo economics.

#156 penpal on 05.27.11 at 7:59 pm

#153 Imstupid

Well I must be stupid too, maybe even more stupid as I started “all cash” from about age 20 after a “credit problem” woke me up.

You hit the nail on the head in your post re competing with people who have no money experience. It is also why I have refused to buy residential RE.

Thanks for posting this!

#157 penpal on 05.27.11 at 8:22 pm

# 122

Yeah, you called it alright, just like you “call” lots of things on various GTA blogs.

Now I’m calling you a dyslexic piece of shit.
I know I’m right and not the only one “calling” it this way.

Go back to the Globe and Mail with your pathetic attempts to garner some attention to your miseablr existence.

No wonder your kids hate you.

#158 sick_of_waiting_to_buy on 05.27.11 at 8:44 pm

Hey Garth, what happened? where did my comment go?Did your conservative instincts kicked in?

When you have something of value to add, let us know. — Garth

#159 Cash is king on 05.27.11 at 9:22 pm

The Canadian Government has lowered the Immigration numbers from 120000 to 20000 per
year because immigrants have high unemployment
rate , some thing like 20% according to stats Canada.
Lower immigration should slow Real Estate Sales . Hold on to your cash….

#160 Abitibidoug on 05.27.11 at 10:27 pm

@Imstupid post #153:
I don’t make anywhere near the 200 grand you do, but agree with your ideas fully. Congratulations on being one of a minority that’s sensible. What surprises me even more is being that way at your age, as most younger people (especially the 20 something crowd) appear to be the reckless spending type. I think it’s a result of being raised in a time of far more money and prosperity than old fogies like me at age 50. Your sensibility and patience will pay off when the chickens come home to roost and the housing market implodes. Didn’t I say above that there are some positives to cheaper house prices?