This does not end well

Heard about the Montreal mansion? Eight bedrooms, 17,000 square feet, indoor pool, river frontage, mint. After sitting on the market for two years, it just sold at auction for 50% of the asking price. A unique property, of course. But the 70-year-old entrepreneur who built it figured he might be planted by the time the market recovered. Hence, the sale by gavel.

By the way, you know what an auction reveals in a hurry? Especially after 200 showings and 23 bidders? That’s right – fair market value.

Like the (formerly) house-horny old  mansion-lover, homeowners in Toronto and Vancouver are set for their own dose of reality. But this time the warning doesn’t come from this bleating blog – but a humongous bank which makes serious coin selling mortgages to the lusty masses.

So here’s TD, throwing another log on real estate’s pyre. Vancouver prices will trough 14.8% lower than they are now, it says, while Toronto will see a 11.7% drop in values and a 25% slide in sales. The bulk of the drop will happen in the next 24 months, but the stagnation could last much longer.

Hmm. Where have you heard that before?

The bank’s reasons for this carnage: a difficult economy, inevitably higher interest rates, a pullback by foreign buyers and deteriorating household debt. This will translate into far fewer first-time homebuyers. They’re also factors which defy quick fixes, which means the housing market may be peaking now in a period lasting a decade or more.

All of this has been covered here, in nauseating and shocking detail, for the last couple of years. Since the financial crisis of 2008-9, it’s been a train wreck waiting to happen, as cheap rates encouraged dumbass borrowing and irresponsible pricing. The Canadian housing market’s achieved a pinnacle of stupidity which all the world can see – matched only by the other sole remaining, wide-spread housing bubble, in Australia.

I mean, listen to blog dog Matt, who sends us this comparison:

Parallels with Canada are pretty eerie:

*         Booming commodities, but pretty much everything else black and crispy
*         Bloated currency as a result of the above
*         Houses that are basically oversized, cheaply-made dogboxes going for $1 million-plus
*         Everybody maxed out on private debt
*         Increasing mortgage stress and defaults
*         Rapidly building up property inventory
*         Lots of amateur speculators who call themselves “investors” and, disturbingly, don’t seem to be able to add up
*         House porn all over the TV
*         Mainstream press proving that denial is not just a river in Egypt
*         Government in so deep with the banks it’s sometimes hard to see where one stops and the other starts
*         House-hungry newbies getting into levels of debt they’ll never be able to repay
*         Hardly anyone with any real savings to speak of – they’d still rather have a “property portfolio” than a bank balance over 4 figures

The Oz market is a lot like Wile E. Coyote hanging in the air for that long, agonizing moment before the long, long, fall. Unbelievably sorry for all those folks who jumped in right at the top of the market, secure in the knowledge they’d clean up in 5-10 years. Exactly how they’re going to repay all that debt when they’re deep in negative equity and the economy goes into reverse, I have no idea.

So, please accept my heartfelt thanks, Garth. If I hadn’t come across your blog a year or so ago, I probably would’ve blindly jumped back into Sydney ownership without even thinking twice about it.

Of course, the comments section below will brim today with people saying things like, “So what? A 25% correction in Vancouver will just being us back to last year’s prices,” and  “What do I care, since I’m never going to move?” Poor souls. May their net worth rest in peace.

Of course, the TD Bank gives you the Pollyanna scenario. And, yes, a 15% decline – chopping about $200,000 off the average Vancouver SFH – is entirely plausible. But where the real implications come is in the ripple effect on the economy, and the likely decimation of consumer spending. Canadians have been such house porn addicts for the past few years that (as I detailed yesterday) we have eschewed saving and investing, and blown the load on real estate.

So, a 15% drop in Vancouver or a 12% fall in Toronto will wipe out the equity of most new buyers of the past two years. They’ll be underwater, with no prospect of getting out. Owing more than they own, will the newbies continue to pump out mortgage payments which, combined with property tax, condo fees and other occupancy costs, exceed the cost of leasing the same place? Once everybody knows their mother-in-law was an idiot (“why throw your money away on rent?”), and the illusion of equity is gone, will they stay? Walk? Bankrupt? Or just quit spending money on cars, iPads, Old Navy pants and tats?

And how would the outcome of this be so different from that in the States, where 26 million families have seen their house values drop below their mortgage amounts? Where the economy is so messed up it now lives off government?

Of course, being a bank and all, the TD can’t go there. But we can.

The housing correction will not stop with housing. Unlike in the States, it will not take a few banks down (these guys are ready, trust me). But it will nail consumer spending, which accounts for 64% of the economy. That means lost jobs and blown-up car dealerships. It probably also means a long, long recovery, during which those people with the bulk of their net worth in a house will wonder why the hell they didn’t cash out.

And here you felt sorry for the old geezer and his mansion.

Don’t.

168 comments ↓

#1 Hoof - Hearted on 07.13.11 at 8:42 pm

PPHHHHIIIRRRSSSZZTTTTTTTTTT!

#2 downtown t.o on 07.13.11 at 8:42 pm

Pop the champagne Garth!

The msm has finally caught up to you !

#3 T.O. Bubble Boy on 07.13.11 at 8:44 pm

There is at least 1 person in Toronto who can afford his house:

http://www.moneyville.ca/article/1024023–canada-s-richest-man-to-expand-rosedale-home

(he might be the only one with a reasonable price/income ratio)

#4 Priced_out on 07.13.11 at 8:46 pm

AM I first or not, does not matter.
Garth is the first one in Canada who predicted home devaluation

#5 Government Dude on 07.13.11 at 8:46 pm

I’ve heard enough!
I’m gonna sell the house- even if it means a divorce.
I’m gonna cash out the $175K in equity, buy camper/trailer and live off the land.
When the crash you promise arrives- can’t wait to laugh when all the 0% go bankrupt:)
I’ll be drinking beers in my trailer on crown land somewhere…

#6 willnotbill on 07.13.11 at 8:49 pm

Long time reader/ first time submitter { hope I am not first } Really like this post for the fall out effects of what surely will come. Still amazed at the deer in the headlight look, when trying to broach any of the topics, that Garth writes about. Rent/no debt/pension plan/precious metals, would not trade spots with any of the “smart” people I know.

#7 Dad on 07.13.11 at 8:52 pm

I love being a bankruptcy trustee.

#8 T.O. Bubble Boy on 07.13.11 at 8:53 pm

Anyone see any parallels here to the Vancouver housing market?

China Casino Revenue Growth Estimate for 2011 Revised Upward to 38%

#9 Mark on 07.13.11 at 8:55 pm

Banks are essentially ‘short’ the housing market, ie: they’ve bet against it, by taking positions in mortgages, rather than the houses themselves. These mortgages are redeemable, at 100 cents on the dollar, by the CMHC.

Receiving 100 cents on the dollar back when RE assets are in heavy deflation is a very powerful thing. First of all, banks will be able to re-invest the proceeds into much higher yielding mortgages when prices go down. Secondly, bank dividends should be able to expand dramatically as less capital will be needed on the banks’ balance sheets to carry these smaller (yet equally profitable) books of mortgage loans. Thirdly, in a depressed labour market, bank employees, law firms, and others involved will have very limited pricing power and very limited ability to scoop up the banks’ profits and excellent cashflow for themselves.

It all adds up to Canadian banks growing their returns to shareholders dramatically over the next decade, as we enter a deflationary period in housing. The federal government also desperately needs the tax revenue to make the CMHC payouts, so don’t see them fighting it too much. In fact, it is likely the BoC will keep policy rates low, but this won’t help homeowners who will see rates rise on their loans, the result of shifting credit preference on the part of lenders.

#10 Dave on 07.13.11 at 8:58 pm

When the EU falls, so will Canada!

Yesterday, the European contagion spread to Italy and Spain. The sovereign debt of those two countries swooned—for no discernible reason.

Gold hit new high of more than 1500/ounce!

QE3 on the way.

It doesnt look good

#11 Garry Charron on 07.13.11 at 8:59 pm

I have been watching the housing market myself and have been waiting for the explosion to hit. And its going to hit hard. Wages are stagnant. Government policy is keeping them that way because for some reason they want to please Big Corp more than the little guy. The USA is a complete mess with no end in sight. Canada is surviving by selling its resources but that doesnt help the consumer who is tapped out. Since almost all of us have most of our wealth in our homes, a housing “re-adjustment will hit the economy hard. A Japanese like stagnantion could be in the works (its already happening in the US) for Canada. Geez just when i thought i could retire …………………….

#12 Mark on 07.13.11 at 9:00 pm

Of course, the comments section below will brim today with people saying things like, “So what? A 25% correction in Vancouver will just being us back to last year’s prices,” and “What do I care, since I’m never going to move?” Poor souls. May their net worth rest in peace.

I think the tragedy here is that a lot of people are going to leave a lot of money on the table by being ‘married’ to a specific asset class.

Conservatively, the TSX could easily be at 50,000 by the middle or end of this decade, while housing, if we’re lucky, sits flat. What’s better, sitting on a $1M Vancouver house with huge on-going liabilities and depreciation, or having $4M in stock?

#13 squidly77 on 07.13.11 at 9:01 pm

Finally, and most interesting, Frédéric and Benoit agreed with me that the Canada bubble will burst and that Canada’s mortgage monster stands to lose billions and is in a very tenable position. “Too many people are way over-leveraged, are mortgaged to the hilt buying houses they can’t really afford, and they risk getting killed when they lose their job or if rates rise. If we suffer a slowdown that is just 20% of the US slump, we’re in big trouble. It’s simply not true that real estate prices won’t get hit in Canada; this isn’t the 1970s, and people are in for a shock in the coming decade.”zerohedge

Scroll down to the second last paragraph in the zerohedge post, and be sure to click on the 2 links as they hold some strong opinion on CMHC.

#14 JohnnyBravo on 07.13.11 at 9:01 pm

So just as the TD report is published, the federal government sees fit to resurrect the home reno tax credit, which would, just as before, help make up for the knock-on economic benefits lost during a general housing downturn. Is Harper trying to tell us something?

#15 Tim on 07.13.11 at 9:05 pm

“Of course, the TD Bank gives you the Pollyanna scenario. And, yes, a 25% decline – chopping about $300,000 off the average Vancouver SFH – is entirely plausible.”

What can you buy in Vancouver for that? A 400 square foot box in the sky? lol

#16 mkultra on 07.13.11 at 9:11 pm

“…and blown the load on real estate.” lol

#17 Cory on 07.13.11 at 9:14 pm

Houses for some is like gold for others…..it is like a cult mentality and it can never be broken. People think their houses are the ultimate investment and you CANNOT change their minds no matter what.

Almost every country in the world has raised rates except US and Canada. Even Thailand today?or yesterday did it again.

WTF Mark? the *emergency* is over!! Raise the fuggin rates already and end this stupidity. Jeezuz.

#18 Mark on 07.13.11 at 9:26 pm

#17 WTF Mark? the *emergency* is over!! Raise the fuggin rates already and end this stupidity. Jeezuz.

Emergency is over? Hardly. The Canadian private sector still isn’t growing, still hasn’t really created any jobs over the past decade, and is in desperate need of recapitalization. An entire decade worth of engineering grads are mostly under/unemployed in Canada. So much potential lost output exists because rates have been artificially too high on businesses for the past decade due to the CMHC’s credit preference towards consumer (ie: house) borrowing/lending.

Rates need to remain at 1%, if not lower, but consumers need to be cut off of the CMHC lending subsidy.

#19 Frank on 07.13.11 at 9:30 pm

I just showed up here in Peterborough tonight and all the houses that were for sale last week have a SOLD sign. So what the heck is happening? I read your posts regularly and I am perplexed at why you keep saying the RE market is going to go through a downturn when even during tough times people have the money to put down on houses. The RE market is just as hot as ever, even in Peterborough. Even if homes go down 12%, people that bought a few years ago are probably going to be still ahead.

#20 2deep on 07.13.11 at 9:30 pm

So in Saskatoon do I take and $8,000 hit to break my mortgage just to avoid the $22,000 property value loss (based on the TD forecast)? Especially since we really can’t stand where we live and don’t want to be there in 5 years. Mice nuts for most but big bucks for our family. Decisions…..

#21 Raj on 07.13.11 at 9:31 pm

Is Mark Carney Responsible for current housing bubble in Canada?

Should the Bank of Canada raise interest rates?

Vote For/Against at

http://www.wikiopine.com

#22 Steevo on 07.13.11 at 9:32 pm

Mark #12,

What are you smoking? The TSX is only 17% above the high where it was a decade ago and is probably going to test 2008 lows over the next year. So it’s going to be 275% up in the next four years?

Why don’t you check out the Nikkei’s performance….interesting what’s happened since the late 80’s, isn’t it?

#23 ottawa pete on 07.13.11 at 9:33 pm

Caught this on TV Ontario the other day:

“The Case Against Home Ownership” with guests Richard Florida, Jane Saber (Ryerson), Robert Shiller (Yale – Case Shiller Home Price Index fame), and Phil Soper (President and CEO Royal LePage):

http://tinyurl.com/6cwmasr

#24 Echo on 07.13.11 at 9:40 pm

People on this blog need to know that when the big Banks make announcements like this it’s after a very long trend of increasing delinquencies. Even you Garth baby, seem a bit in the dark about this. That’s ok, I’m an insider there, you’re an insider everywhere else. I bow.

I just want people to know that this dupe mentality, as if the Bank’s are just ‘preparing’ for such problems, is all a lie. At the point they make these announcements they are starting to fortify their collection teams because they can’t handle the overload of increasing delinquent files in CMHC backed mortgages (i.e. “conventional”) and in Collateral Mortgages (hugely common, in first place all over Ontario, and uninsured!, involving hundreds of millions of dollars, ooohhh, big elephant in the room, trust me), home equity loans (aka “Collateral Mortgages), overdraft issues, car repossessions, “unsecured” delinquent consumer loans and credit card delinquencies.

Add to this the job losses that the government is just starting to feed into the pipeline of the province’s psyche, digest it people, it’s going to be a drop in the bucket on top of so many other sectors that have been losing their jobs over the past couple of years. (hence, significant increase in delinquencies across all products in the major Banks, et al).

So, when you’re trying to digest what Garth is saying, and it’s a lot, and it’s also very valuable and relative, please make sure you add this info to your general picture of the scale of the economic disaster coming, and the domino effect it will have, and already is. The last place you’ll hear the truth will be via media announcements from the players involved, and it’s always been that way.

#25 specuskeptic on 07.13.11 at 9:53 pm

Very effective post – boils the arguments down to their essence.

Crusty parents (mine – god bless ’em, heart’s in right place, etc. etc.) will now get a peak behind the curtain when I send them to read it as I do not dig the snide backhanded comments I still get regarding the sale of my condo 3 years ago. Email subject heading will read, “Put this in your pipe…”

Too hostile? Freudian?

#26 TheFirstRick on 07.13.11 at 9:56 pm

“This time it’s TD, throwing another log on real estate’s pyre.”

Thus, would it be politically incorrect of me to suggest many mortgage owners will go up in smoke like a dowry bride?

#27 MO on 07.13.11 at 9:56 pm

Growth in anything is not infinite. Housing prices can’t grow faster than economy over the long run. The economy can’t grow forever.

http://www.planbeconomics.com/2011/07/13/growthbusters-hooked-on-growth/

#28 Lisa on 07.13.11 at 10:01 pm

The TD’s numbers are very conservative, especially for T.O.
Also, looks like property taxes in T.O. will be jacked up soon too…the city needs major cash and are slashing services & jobs as we speak. They already raised the cost of a parking ticket from $30 to $45…at least you can count on all the parking ticket “officers” keeping their
jobs. Rob Ford will go after homeowners next. More squeeeeeze.

#29 nonplused on 07.13.11 at 10:01 pm

Looks like TD is reading your blog now too, Garth! Here’s an article about the report you mention. Not a lot of extra detail, but the news is creeping out so it must be ‘after-the-fact”, i.e. the market is already toast.

http://www.cbc.ca/news/business/story/2011/07/13/housing-prices-fall-td.html?ref=rss

Only I don’t believe Carney has the guts to go to 3% by 2013. Even though he should, and probably higher. Emergency rates will prevail until the cows come home. (Mark, I know you’ve never been to a farm, so here is a hint: usually you have to go get them, unless they are dairy cows. Then they show up at the milker all by themselves twice a day. Well, most of them. But the saying involves cows being range fed. They might come home when the snow hits if they previously know of food being available there. Might. Some.)

#30 Mark on 07.13.11 at 10:01 pm

#18 Mark “What are you smoking? The TSX is only 17% above the high where it was a decade ago and is probably going to test 2008 lows over the next year. So it’s going to be 275% up in the next four years?”

I didn’t say ‘next four years’, but certainly, if you take a long-term average return of 9%/year, and start from the 11,000 index level of 2000, that puts the TSX at ~61,648 in 2020.

The Nortel bubble, being replaced, of course, with a bubble in gold stocks.

As for the TSX going back to 2008 lows, after all the monetary expansion and surging profits across the board, all I can say is, “not a chance”. That train left the station in 2008 and isn’t coming back.

#31 Kilt on 07.13.11 at 10:05 pm

You nailed it Garth.

A 25% correction brings Vancouver back to 2009 prices. And who cares, only the wealthy Chinese who could afford to buy will be hurt, and typically they don’t sell.

I doubt there will be a 25% in the next two years. Things are already slowing, but mostly in the attached listings. Location is becoming more and more important, by October you will see a definite pull back in apartment pricing. SFH are still going strong though, mainly from foreign money or developers. I’ve noticed lots of tear downs being replaced with 3 story modern triplex’s priced around $800,000 a unit. And they sell very quickly. Looks to be retired folks or Boomers (probably sold their old tear down in Richmond to some foreigner and are now living off the gains).

But 25% seems too steep, maybe 15% tops.

Kilt.

#32 Victoria on 07.13.11 at 10:10 pm

An Irish friend says that what he sees in Canada reminds him of Ireland – it is scary.

#33 I Pity the fool who drinks soy milk on 07.13.11 at 10:12 pm

#23 Echo

You’re scaring the $#!% out of the children!
I’m a little uneasy myself, matter of fact.

#34 Guy_in_Regina on 07.13.11 at 10:14 pm

Ben over at (the excellent)”The Economic Analyst” blog has done some great analysis on the knock-off effects of a housing correction (as well as on many other great Canadian housing related topics). Check it out if you haven’t yet:

http://www.theeconomicanalyst.com/

http://www.theeconomicanalyst.com/content/housing-and-employment-canada-why-housing-correction-would-really-suck

Echo #23 thanks for the post – I love it when insiders dish the inside scoop.

#35 CrowdedElevatorfartz on 07.13.11 at 10:17 pm

Just started a new job. (Couldnt maintain my lifestyle after selling BPOE to the Arabs).
Spoke to a few of the new staff and EVERY ONE of them has bought a new house or condo in the Vancouver Lower Mainland over the past years.
I quietly mentioned a possible drop in van housing prices over then next 12- 24 months and was roundly poo pooed by all and sundry. ” Vancouver’s special, its different here, blah blah blah…..”
Time will tell.
I miss “spooning” with BPOE but I’m sure the Arabs are treating him way better than I ……

#36 Brad in Cowtown on 07.13.11 at 10:19 pm

“This time it’s TD, throwing another log on real estate’s pyre. Vancouver prices will trough 25.4% lower than they are now, it says, while Toronto will see a 11.7% drop in values and a 25% slide in sales.”

Interesting how you zoom in on Vancouver and Toronto, Garth but fail to mention any of the optimism in the rest of the report. You must be taking lessons from “squidly” on cherry picking information which aligns with your beliefs, and intentionally casting away the rest.

Well, to give your loyal followers a more balanced review, let me add that the very same TD report called for Alberta to outperform and even see modest appreciation.

“Relatively strong employment and wage prospects and gradual increases to net in-migration numbers are expected to accompany the solid economic showing. These underlying fundamentalshelp support our call that the Calgary housing market will outperform most other urban centres. In fact, we are calling for moderate sales and price growth for the region over 2011-13.”

Like I told squid, if you’re going to act like realtors (with your selective dissemination) you’re going to be called out on it.

p.s. gold at 1586

Calgary peaked in 2007. Get over it. — Garth

#37 waterloo Resident on 07.13.11 at 10:24 pm

I don’t know why but Canadians seem to be living on a different planet. Even though they are in debt up to their eyeballs, each week they keep bidding homes up higher and higher, dramatically higher sometimes. I wonder how many more years this will continue. Soon all homes will cost $100 Million Dollars each, even though each worker will only be working at minimum wage levels.

#38 squidly77 on 07.13.11 at 10:32 pm

Calgary peaked in 2007. Get over it. — Garth

And every buyer since, all 90,000 of them are now underwater.

What a mess the Calgary realtors have created.

Wanna lose money, buy in Calgary.

#39 Derek on 07.13.11 at 10:39 pm

I look at the RE market in the GTA, Edmonton, Calgary, the lower mainland, and I see homes that are asking double what they are worth.

I hope the correction runs deeper than %20.

#40 siddelly on 07.13.11 at 10:46 pm

#11 Garry Charron

The manner in which Canadians are ” blowing the load on real estate ” is very much like the Japanese equivalent of Home Owner Bukkake in the late ’80s with the only difference being that after a full 20 years or more, both the RE market and stock market have still not recovered from all of that degradation.

#41 Utopia on 07.13.11 at 10:49 pm

“And how would the outcome of this be so different from that in the States, where 26 million families have seen their house values drop below their mortgage amounts? Where the economy is so messed up it now lives off government?”

Of course, being a bank and all, the TD can’t go there.

But we can” ~~Garth Turner
——————————————————-

Indeed we can. And we surely will.

So bring it Dawgs. What happens next is the issue now. Most of our banks, the CGA folks, major Realtor dude Phil Soper and even (God forbid) Ozzie Jurock of house pumping fame are now calling for a diaper change on the real estate scene.

You Dawgs already know the score in this sorry indebted country of ours, of course. The predictions cannot therefore really be that hard to make. We have plenty of good evidence to go by too.

Like in nearby countries similar to that spendthrift drunken sailor of a nation called the USA which lies just due South of our border.

Are we really like them? Or are we worse?

Might we actually be bigger debt bingers staggering blindly into one Mother of a debt hangover that will set our country back for a decade or more?

Be honest.

#42 Not 1st on 07.13.11 at 10:55 pm

Why do people build homes that only 0.01% of the population might be able to afford in re-sale. That was the idiot move right there. He could have built 20, mid range homes that he probably could have made a buck on than that oversized pretend palace he sunk it all in.

In Calgary, I see a lot of those mcmansions on the block now, many of which you can snatch for a mill or so. But one of the most disturbing things I see which portends for the economy is the slow down in retail activity. In the mall today, every store has signs out saying 70% sales and nobody in them. Some popular stores like Hilfigur have closed up.

#43 Utopia on 07.13.11 at 10:57 pm

#36 Brad in Cowtown

“Interesting how you zoom in on Vancouver and Toronto, Garth but fail to mention any of the optimism in the rest of the report.”
————————————————
I hate to add extra commentary to what was already stated Brad but….seriously man. Maybe you don’t realize that Vancouver (GVRD) and Toronto (GTA) comprise almost a quarter of the national population. That group also happens to represent a larger than normal share of national wealth distribution.

How the hell is that Cherry picking? And what optimism?

#44 Mr Buyer on 07.13.11 at 11:05 pm

10 and 15% is laughable even 25% is wishful thinking (you know, best case scenario). Now there are going to be hordes trying to sell for 10 to 15% less than expected and the bear trap is set. I think there now will be more bear buyers trapped at those inflated prices (really, 10 to 15% is nothing, it comes no where close to addressing the problem). Am I on crack or just hoping and dreaming too much for a decently priced house.

#45 45north on 07.13.11 at 11:08 pm

Echo: talking about the banks: they are starting to fortify their collection teams because they can’t handle the overload of increasing delinquent files

Mkultra: welcome back

#46 Larry on 07.13.11 at 11:09 pm

Garth, this blog seems to suggest taking profit now, but at the same time, it is discouraging people from buying. You cannot take profit when there is no buyer.

#47 TaxHaven on 07.13.11 at 11:11 pm

Even after 200 showings and 23 bidders, “fair market value” is never ultimately definable. The longer th time frame, the more showings and the more bidders over that time frame, the closer you are to finding objective “value”…

Housing goes up, and housing goes down, over decades. So it’s a bit dicey to assign “value” over just a short time like two years.

What you are talking about is PRICE. Like we always talk about the “gold price”; no one talks about the “value of gold”, even though perhaps they should…

OTOH, Canadians still RESOLUTELY REFUSE to see housing as a commodity. To them, it will always be a holder of “value”.

#48 Allison on 07.13.11 at 11:21 pm

And so we come back from overseas with seven figure savings and decide to rent. Everyone thinks we are crazy, but are we? How can you buy into this market right now and feel good about it? We could pay for a house outright but how do you do that and think you have gotten good value for your money. We’ll wait and see….

#49 kimi on 07.13.11 at 11:26 pm

Honestly … I think we’re worse. And when it starts to rain… it will be ‘front page of the Economist’.

#50 Kevin in Winnipeg on 07.13.11 at 11:38 pm

TD said the same thing 3 years ago. Where is the credibility now?? The report is their way of being “the good bank” and warning the public. I feel like opening a TD account now. Thanks for looking out for me TD.

#51 The Original Dave on 07.13.11 at 11:45 pm

Can anyone explain why the banksters talk down the market together? I doubt they’re looking after you and I. Maybe they haven’t written enough mortgages lately and need more listings to surface to do so. Maybe they want to entice the fence-sitters to list so there’s more sales.

I”ll be the first to say there’s a huge bubble here in canada, but can we truly believe these banks are trying to call what they see? Its funny how 2 banks come out in the past week calling a downturn. They might just be calling the fence-sitters. None the less, the bust is coming and 2005 prices at the very least will return

#52 rental monkey on 07.13.11 at 11:46 pm

$650 / 1br – Centrally Located – 1 bedroom suite (Victoria) (map)

——————————————————————————–
Date: 2011-07-13, 4:36PM PDT
——————————————————————————–

Approx 700 sq ft 1 bedroom suite above ground. Home has been on market for a few months, but there hasn’t been much activity. Therefore we would like to rent in the meantime at a cheaper rate. $650 plus 25% hydro. No pets. Month to month lease. Also no there is no laundry or oven in suite.

Available asap

Burnside Rd E at Manchster (google map) (yahoo map)
Location: Victoria

#53 April on 07.13.11 at 11:52 pm

Vancouver needs at least a 40% reduction in home prices. 15%/25% over the next two yrs, as suggested by the banks and some bloggers here, I think is playing it down, as Garth said “Pollyanna scenario”.

Brad in Cowtown, you need to pay more attention to that report if it’s the same one I heard.

#54 Fleabitten Monkey on 07.13.11 at 11:58 pm

So….when will, or why won’t, some of the other big bank economists come out with their reports of where they feel prices and sales will head within the next couple of years?

I would like to think there is some consistency of opinion or at least a consensus in the balance of probabilities one way or the other.

Anyone care to comment?

#55 Utopia on 07.14.11 at 12:14 am

So what does the TD report say in blunt terms? The CBC puts it this way….

“On a national basis, the report’s prediction of an average 10.2 per cent price decline translates into an average resale price of $329,000 in 2013, down $38,000 from its 2011 peak”.

What..!! Breaking news! Any hack can handle a 38k price decline without a sweat, Why worry now? It will come back, right?……Right?

But the report goes on..

“In the red-hot Vancouver market….the authors predict a drop of $118,000. Toronto’s forecast price drop will be dramatic….$55,000 lower than the current peak”.

Chump change you say? Nothing to worry about.

Or is it? Is this just the beginning of the correction?. TD being a “carrot up the butt” kind of bank cannot really spell it out any more clearly for the fools without hurting their own bottom line and share values. You have to think for yourself when it comes to the rest of the details.

Carrots aside, once a slide begins it does not usually end until a true “reversion to the mean” has been reached. These are not just some fancy pants words in banker-ease lingo to idly discuss over Frappe’s and Latte’s at Starbucks.

No, dear friends, it is a real concept and it is one that (sadly) proves itself time and time again. Get familiar with the idea. It means that if you bought at the peak you are now screwed. Officially.

That is the back-room bank toilet-talk. They know.

Now you do too.

#56 Kitchener1 on 07.14.11 at 12:28 am

#24 echo

thanks for your post.

Actually, thats a very bold statement from TD bank. And they themselves know that it will be worse. And you are correct, they are preparing for it.

Folks, its going to get ugly out there very soon. Canadians in record debt levels now with crazy low interest rates.

Just think of the mob type mentality that pushed up pricing. If prices start to drop, people will wait, pushing prices lower, etc…

just to make this real for all you blog dogs

average price of home in Toronto June 11

$512 879 – 12%= $61 545.48 over 24 months=

a loss of $2 564/month over the next 24 months.

now, add 5% commission to that drop, and lets say 2% of the price for closing costs-lawyer-mortgage penalty-moving etc.. and thats a 20% drop– adds up to more then 100k loss.

not good

WOW, renting just sounds better every day.

#57 Ravishing rick on 07.14.11 at 12:46 am

69th!

#58 hobbygirl on 07.14.11 at 12:51 am

I haven’t heard much of Toronto’s tall, bald and self proclaimed condo king lately. I wonder what kind of obnoxious spin he’s putting on the bad news msm is starting to wake up to.

#59 a prairie dawg on 07.14.11 at 1:05 am

#16 mkultra

“…and blown the load on real estate.” lol

– – –

And being property virgins, many will suffer from premature amortization.

#60 wes_coast on 07.14.11 at 1:27 am

The question to ask is this: when the shit hits the fan do we follow the US and Japan modle of printing money to get out or do we let the market purge and let things devalue until equalibrium is reached again. The latter will take alot of short term pain with quicker resolution. The Japan experiment has last 20+ years of zombie like existence – flatlining growth and massive debt caused by multiple attempts at stimulus. Where are we at Canada? Do we have what it takes to ride out the big purge and renew the economy or are we going to avoid pain at all costs – even if it means 3 or more lost decades? Garth, I would love to hear you point of view on this.

#61 Coho on 07.14.11 at 1:31 am

The net effect of these bubbles and busts is people are worse off. Forty years ago one income could support a family and now two incomes falls short and people rack up credit card debt to maintain a lifestyle once enjoyed on a single family income. This is the direction we continue to go and the downward curve is getting steeper. What kind of “recovery” can we expect when our labour has been buying less during the “good times”?

Indeed, it cannot end well as long as deficit spending means continued profits for central banks. Who are the owners, really? So long as the cost of running a country is designed to exceed its revenues, we are hostage to the secret owners of these privately held central banks who are only too glad to “lend money” (issue debt) to countries that will never be able to pay it back. And of course the “money” a central bank conjures up to lend its country, with interest no less, is backed by nothing.

Whether a 20 hour work week or a 100 hour work week is needed to support a family is directly proportional to the level of greed the usurpers who designed the system have. Free markets? Suuurre….

People are working harder and longer and are still “living beyond their means”. Where does it end? Will every man woman and child need to slave 16 hours a day to simply survive as to satiate the seemingly insatiable greed of those running world affairs? It is their policies and dictates obeyed by our elected representatives which are running families and countries into the ground — this while they enrich themselves. An indebted, unemployed, poor and desperate people translates to a weak and powerless people beholden to its government for handouts. This is what’s coming. Only half the people will have decent jobs and be taxed to the hilt, while the other half will have their hand out for the monthly peanuts. Neither group will be happy or hopeful.

IMO, unfortunately, investment strategies, number crunching, and retirement planning will ultimately serve more as a distraction away from the elephant in the room, than they will to help see people through this mess.

#62 Devore on 07.14.11 at 1:35 am

#24 Echo

they can’t handle the overload of increasing delinquent files in CMHC backed mortgages (i.e. “conventional”)

I have to wonder what kind of “insider” you are, when you do not know the difference between a conventional mortgage and a high-ratio mortgage. Guess we shouldn’t just trust everything we read on the internet, eh?

#63 Sumadartson jr. on 07.14.11 at 1:37 am

Please G-d, let the “End of the World’ers” on this blog, for once, be finally right.

#64 Vancouver_Bear on 07.14.11 at 1:41 am

#15 Tim on 07.13.11 at 9:05 pm

Did you have math at school?
If 300k is 25%, then 100% is 1.2mil. Thank me later.

#65 Jody on 07.14.11 at 1:44 am

We are so screwed. A melt down would be our best hope, I think it’s gonna be an all out crash. Below is a great article from the Guardian about Greece and the Euro, considering the Guardian is usually socialist crap this article was rather nice to read.

http://www.guardian.co.uk/world/2011/jul/13/eurozone-greek-debt-crisis-euro

Greek will pull an Argentina and eventually, so will the United State.

Taken from the Soverign Man:

http://www.sovereignman.com

“If the market is allowed to function, the consequent derivatives chain reaction from default will cause a wave of bankruptcies among a number of large financial institutions, triggering even more government intervention (read: taxpayer bailouts) and a deflationary sell-off in financial markets.

Barring a miraculous, no-strings-attached emergency bailout, I think we can expect the opening salvos within the next few months.

So why should you care if you’re not Greek? Because the ensuing capital controls, raids on public and private pensions, and social chaos met with overwhelming police brutality will be a preview of things to come when the rest of Europe and the United States arrive at their financial reckoning days.”

There will be a run on banks, in all countries, there will be lots of countries defaulting, there will be some kind of financial disaster – it may be a collapse but it may also be countries fighting each other – I’m thinking WW3 starting over the issue of debt. Although I am sure there will be a false flag terror attack, the web is saying it will be in Chicago. Russia today had some great photos from the Greek protests on Facebook, link below. Ask yourseelf why NONE of the MSM in North America even touched this. Why not? Who is telling them to not show it?

http://www.facebook.com/home.php?react=AQCVp0BOAzqSZ2kl#!/media/set/?set=a.10150246959509411.338227.326683984410

#66 Irrational Exuberance on 07.14.11 at 1:55 am

I hope F and C were watching “The Daily Show” with Jon Stewart tonight. Feature guest was Matthew Richardson, author of “Guaranteed to Fail” the story of Fannie Mae and Freddie Mac. Eerie how all the observations mirror the same woes the CMHC will soon face. Interesting fact, just before the collapse Fannie & Freddie were holding $5T of mortgage debt. I believe at last count the CHMC had recently hit $1 trillion (feel free to correct if I’m wrong). But based on relative size of market, wouldn’t that put us at about 200% of the exposure in the US before TSHTF??

As an aside, the daily list and sales for Vancouver have completely tanked the last week and a half. I guess some of the MSM reports are (finally) resonating with Vancouverites. Remember there need not be a mass shift in psychology, only an almost inperceptable shift at the margins. Still to early to say it’s finally here… but guess what…. it might just finally be here!

#67 Aussie Roy on 07.14.11 at 2:02 am

Aussie Update

I think it gives people the wrong impression talking about percentage declines from current prices. IMHO you just need to watch house prices versus annual incomes. The larger the current multiple the larger the price fall. Places like Van and parts of Australias Gold Coast, Sydney and Melbourne will see the largest corrections.

In the mean while perhaps we are both turning Japanese.

http://www.abc.net.au/news/2011-07-08/turning-japanese-in-2011-12/2786588

So we have been told and told and told, that even if prices fall rents will skyrocket because, you guessed it we have a shortage – GET REAL.

http://www.news.com.au/money/property/household-costs-keep-cap-on-rent-increases/story-e6frfmd0-1226094380119

More and more articles seem to carry this theme, don’t panic, its only a little fall in prices, sticky prices for the next 10 years is not so bad – LOL.

http://www.theage.com.au/business/house-prices-to-fall-over-next-year-survey-20110714-1hf1a.html

So what happened to the national housing shortage?. Beats me but land sales may tell part of the story.

http://news.smh.com.au/breaking-news-business/land-sales-at-lowest-level-in-10-years-20110714-1hf3v.html

#68 the Phantom on 07.14.11 at 2:31 am

Hi Garth & fellow bloggers:

I know a few have alluded here to the spectre of rising rates and declining house values especially within the context of Home Equity Line of Credit Loans. Granted I have a HELOC as well ($30,000) but it is being used for investment purposes currently and the interest is tax deductible.

Too many people I know have taken out HELOCS, second mortgages or lines of credit against their properties and essentially pissed the money away on trips, or fifth wheels and home renovations (which does increase property values to some extent but the equity would be better left untouched in my humble opinion).

My thoughts here suggest that HELOCS represent a huge liability for homeowners in the coming years. I know relatives and friends (one has one for over $130,000 from 2004) that have debt up the wazoo and don’t really seem all that concerned with the thought that they may NEVER pay off their debts…Curious and quirky mentality as something of that magnitude would have me up at night worrying about what is going to materialize when the chickens come home to roost…

‘night

the Phantom

#69 Aussie Roy on 07.14.11 at 2:46 am

I’m sure many in Canada just like Australia think without high unemployment house prices wont fall. Just like the US experience where house prices started their decline when unemployment was <6% its falling prices which lead to rising unemployment as those in the building industry and retail as demand falls.

This is just starting to appear in Australia with building at its lowest level in a decade and land sales (future house building demand) also in the sewer.

My guess is over the next few months most will be shocked at the increase in unemployment, further house price falls and many highly leveraged business going bust. The problem with ponzi schemes is they need ever increasing numbers of greaterfools and debt, from what I see both of these are now in very short supply.

http://www.abc.net.au/news/2011-07-14/real-estate-residential-property-decline/2795222?section=business

http://www.abc.net.au/news/2011-07-14/land-sales-hia-rp-data/2794972?section=business

The housing economists here have a new mantra, it wont change anything but bless their little hearts that wont stop them chanting the message.

"Talk of a fictitious housing bubble in Australia certainly doesn't do anything for home building confidence," Mr Dale – Housing Industry of Australia senior economist said.

#70 RoninBC on 07.14.11 at 3:01 am

Forget the % drops in home prices. Means nothing.

My only question is this. Garth, do you actually think the prices of Vancouver single family homes will EVER drop enough to be really affordable for new home buyers, ie, where the price to earnings ratio can make it possible?

I don’t.

#71 Been there, done that, wore out the t-shirt on 07.14.11 at 4:08 am

Being the guy in the Irony picture from the previous post I’ve pretty much had a one track mind since I was quite young. Asked my mom if I could be a drummer when I grew up, I’ll remember the reply “you can’t have both”.
Mom wasn’t exactly right though, although I did not succeed in my first couple of attempts at starting a business, third time was a charm. The benefit was not the making of money. It was having the time over a ten year stretch to do things like play drums all day, be Mr. Mom to the family, & develope skills I wanted in my life.
But it did all start with debt as a motivating factor.
Riding high in the beginning, making more money than I knew how to spend wisely, Pops took me aside one day in 1979 and said buy this guys’ house. A nice little cash cow which I still own (after paying off 4 mortages on it) and still milk monthly from the warm bodies occupying it.
So we’ve been through the eighties, waking up one morning to a mortgage renewal of 18%, three months later cashing EI cheques when the recession hit and took away both of the high paychecks. Working three or four part time jobs to climb the ladder again in face of wicked inflation/deflation finally stabilizing going into the nineties. A bump here, a leg up there, but rinse and repeat and another recession through the early/mid nineties.
Learning how to get the phone ringing instead of being one in two hundred applying for any jobs was the answer. Don’t think I did the same thing twice in a row, but found there are more people with a Do-it-for-me attitude, than people like myself as a DIY turned to Do it for Cash type of guy.
So the current musical chairs game coming to an end will show that some have been very lucky to make some $ from what’s going on. Some are going to be unlucky.
Some will be fortunate in what comes next, some will not. But there will never be a one size fits all solution, no matter what that clothiing tag from China says.
Difference is the defining detail of finding our way, not sameness.
On another note:
Utopia – I’ve got 25 years of no TV, my cell phone sits on a shelf 360 days of the year, and I prefer reading news from BRICK countries rather than the dribble that passes for info here. Why do we have the CBC when they won’t tell us anything? Well I guess it’s still a place to listen to the same classical music anyone else in Canada is listening to.
IMStupid-Steel-each layer should be twenty minutes of work or more for anyone to break through (see how they do it in Mexico or Trinidad). Skip the gun.

#72 SaraBeth on 07.14.11 at 4:19 am

Just and FYI ~ Apparently things are different in Hamilton… Nothing but sunshine and roses here….From the Hamilton Spectator:

Hamilton area real estate prices show steady growth
The local realtors association says a predicted bust in Canadian real estate prices won’t have a ripple effect here.

http://www.thespec.com/news/business/article/562276–hamilton-area-real-estate-prices-show-steady-growth

#73 House on 07.14.11 at 5:27 am

So a rate announcement is due on the 19th. What is the chicken shit going to do this time.

#74 Montrealer on 07.14.11 at 5:40 am

“Or just quit spending money on cars, iPads, Old Navy pants and tats?”
A study shows that people are willing to cut their food budget BEFORE cutting their cellphone/internet/tv/dataplans.
Check out one from the multiple example, she wants to cut her food to $100 per month, but pays $150 per month for telecom (and that’s special 6 months price): http://www.givemebackmyfivebucks.com/2011/07/04/july-2011-goals/

#75 Smoking Man on 07.14.11 at 6:05 am

Un like you bubble heads my belief system is perfect, as I don’t have one.

You all filter news, giving more weight to stories that reinforce what you want to have happen and ignore stories that contradict what you desire.

Very dangerous when it comes to investing. Like in poker falling in love with pocket aces and can’t lay em down for nothing.

I have been busting many of your [email protected] by saying you are to afraid of risk, Now that my sober head is much clearer I realize I was wrong, by sitting on the fence you are actually making a bet, and If you sold two year or where in the position to buy and did not you lost big time, your only hope for redemption is a big crash.

Fundamentals are not really that important, watching events and observing how the tax farm slaves reacted is where you find opportunity to make money.

Unfortunately for most of you, your belief system blinds you..

#76 BrianT on 07.14.11 at 6:18 am

#61Coho-You could count your blessings-roughly 85% of the global population is literally dirt poor and this % is rising each yr from the low reached 15 yrs ago. If true global democracy existed they might vote to eat us for lunch.

#77 T.O. Bubble Boy on 07.14.11 at 6:25 am

One thing that confuses me from the “Toronto passes Vancouver as most expensive city” articles: how is Fort McMurray not the most expensive?

http://www.edmontonjournal.com/opinion/Developer+sees+housing+boom+around+corner/5100340/story.html

“Rohit Group is both a land developer and a builder of single-family and multi-family homes. And since it plans to build on half the lots at its site in Fort McMurray -where a typical new 1,800-square-foot house with double-car garage goes for more than $800,000 -profit margins are attractive.”

#78 Shane on 07.14.11 at 6:58 am

Garth, still waiting for this correction to happen in markham?

Shane

#79 Darryl on 07.14.11 at 6:59 am

#45 Larry
“Garth, this blog seems to suggest taking profit now, but at the same time, it is discouraging people from buying. You cannot take profit when there is no buyer.

This blog will reach .001 percent of Canadians. The rest of us are there for your pleasure (profit). Sell em if you got em.

#80 Steven Rowlandson on 07.14.11 at 7:02 am

Garth a 15% hair cut does not make real estate more affordable. Since this economic greater depression is going to last another 15 to 20 years one should anticipate a constant erosion of the price of real estate at least until all the post WW2 gains have been wiped away. In that situation real estate will be a cash deal and bankers will hate real estate more than they hate gold and silver. As for former home owners I expect they will cringe when they hear the words: real estate or mortgage. Too grim a prediction? Wait and see!

#81 bigrider on 07.14.11 at 7:23 am

Bravo Matt. Great post Garth.

I spent last weekend listening to all the house humping addicts in my circle of well monied friends who believe T.O RE will never crack.

My only comment, the winds of change are starting to blow, finally.

#82 David B on 07.14.11 at 7:23 am

So here we go, but where? The mighty USA is about to test the will of their elected President and those who think he will cave just might be in for a shock that will rock the world. Then all bets are off in Canadian Real Estate as only those mortgage free will be kinda safe. Even a last minute deal will cause damage now that a bond downgrade threat has been issued.

#83 Lisa on 07.14.11 at 7:26 am

#72 Sarabeth

Hamilton area real estate prices show steady growth
The local realtors association says a predicted bust in Canadian real estate prices won’t have a ripple effect here.

That’s because the home prices in Hamilton are actually affordable already…we need to see the rest of the G.T.A. drop to match those kind of prices.

However, people are just as in debt there as anywhere else.

#84 robert in london on 07.14.11 at 8:12 am

#9 Mark

Good points however…when the tide goes out (and it has not yet for the Cdn banks) we will see who has been swimming without a bathing suit. For instance if the CMHC play morphs into a tax payer boat anchor and jobs and wages stagnate or decline the market for housing (regardless of how ‘cheap’) will be constrained and debt generally eschewed. There is also the little issue of the ability to meet those interest payments under a rising rate scenario. Look southward my friend where we now see some banks ‘forgiving’ up to 50% of mortgage principal as a ‘better than receiving nothing plus legal expenses in establishing non existent title’ strategy. Of course title is not at issue here however the relatively uniform amount of blood contained by turnips, regardless of their origin, certainly remains a factor.

Oh and the ‘not a chance’ comment on the potential for a significantly ‘southerly’ equities price destination was heard everywhere in ’06 and ’07 too.

What Echo (#24) said.

#85 Utopia on 07.14.11 at 8:30 am

#28 Lisa on 07.13.11 at 10:01 pm

“Also, looks like property taxes in T.O. will be jacked up soon too…the city needs major cash and are slashing services & jobs as we speak”.
——————————————-
Even here in Saskatoon there are discussions breaking out about how to save some civic coin. There is a suggestion to cut bus service after 10:00 PM to save money. This on the heels of giving away 5% down money to first time home buyers. Cities everywhere are going to run into trouble though as the reality of declining taxes comes face to face with the debts that are already committed. And it could get stressful as cities resort to increasing fines, fees and penalties to make up the shortfall in the revenue picture. It does seem amazing to me that cuts to bus service (hurts the poor, students and seniors) are on the agenda now when the city has long bragged about having one of the most buoyant economies in the country. So if cuts are coming while times are still good what might we expect as recession returns?

#86 Echo on 07.14.11 at 8:33 am

#51-Original Dave: The following is all just my humble, wee, opinion. You know, like on a blog.

It’s called PR.

You see, when there are really obvious signs down the road that people are not able to pay their debts, what has probably been brewing and beginning for ages starts to flow over into the public psyche then get much worse, Banks are forced to issue Notice of Sale on thousands of houses, take bigrigs off of truckers for non payment (yes, their livelihood, then their homes are repossessed but it’s ok, they can sleep in their trucks, oh wait, it’s gone too), issue statements of claim all day long for all sorts of products, endless bankruptcies are occurring, and the public backlash starts to rear it’s ugly head (caused BY the Conventional mortgage orgy that they intentionally went after because they have ZERO to lose with those products and don’t give a rat’s a** about the lives these mortgages destroy)…..they want to be able to have on record that an adjustment was expected by them (right, up in the towers they’ve known all along, that would be my guess, lol), and that they showed “concern”.

PEEEEEEEE ARRRRRRRRRR or CYA if you prefer.

Oh, and they all know each other. You know, play softball against each other, meet for drinks, share most of the properties as separate mortgagees so talk to each other all of the time when delinquencies occur because they share an interest/asset, which is all year round even in a ‘good’ economy, talk to each other often about the same property for other reasons (tax issues, discharges, etc), go to some of the same conventions, etc. Yes, they are in competition with each other, but there is so much money to go around, and so many Canadians to fool, that it’s really all one big love fest and no one is worried about losing market share to the other. They are just too damn rich, and have an extreme hold on their foolish customers, i.e. the average consumer, which is their bread and butter. You should also know, and if you don’t, please wake up, that they are all huge players in the US market, and this is old news. Very. Like, um, decades. They would have known exactly what was going on down there as well. Geez, it’s where they got the idea me thinks. You know, more greed = more money. How many lives ruined? Who cares! lol

In my opinion, with all of the US practices, i.e. private banking down there, and all that comes with it, our system up here makes them look like angels down there. My personal opinion is that ours is the most imbedded and disgusting example of a nation being conned, brainwashed, and totally dependent on the nice Banker lady. She’s whipped by Head Office. Tight tentacles those are, and she doesn’t mind one damn bit. It’s what she does. The powers that be have been getting you all to believe whatever they want you to believe. They have pulled off this con of the century for about a century. For me, the sickest part is just the enormous level of ignorance throughout the Canadian population. What an easy mark for a bunch of wolves.

And just to be clear about the basics, no matter what was/is “legal” or deemed “ethical”, lending huge amounts of money to people that will be burdened by it for the rest of their lives most likely, whether in this bubble or on it’s way up, (but especially in a bubble that they knew about, ah, but they’ll deny it of course) and leading them to believe that it’s ok to do this because of the fact that when they are sitting across a desk from this family in a position of assumed financial counsellor they know they have the floor and use that power to sell you a mortgage, and have to know the risks, is somehow ok? See, it just comes down to the rule book for me, and who wrote it, and for what purpose. They’re not loan sharks! They’re the BANK.

Look, they have ZERO to lose on the conventionals, will suck up the rest of the hits and have a nice chunk of write-offs for the tax man in the years to come, and if you’re dumb enough to pay because you are emotionally attached to that “home” and don’t care about investing for real, then hey, they win really big there because they also get that sick amount of compounded interest. You’re off each other’s radar. You have your little house, can’t afford to eat well, and they are nonchalantly playing in a pile of leaves, I mean cash. Bravo. You should have been more educated. You are equally to blame. Well, they are evil, you are just stupid, sorry, just trying to help.

Yes, they lend money when you need some, to buy a car, a boat, even a house, and if you pay it back, great. Just don’t lose sight of the fact that they, and the Fed government here, have made Goldman Sachs and the Lehman Brothers look like ethical places to work.

#87 Echo on 07.14.11 at 8:46 am

#62 Devore

It sounds like you need to get an education about Bank lending. A “high ratio mortgage” is not a product, it’s a formula with a higher LTV risk and can be attached to any mortgage in this country that are outside of CMHC lending criteria.

If you are insinuating that Collateral Mortgages are “high ratio mortgages” you are misinformed. Collaterals historically have healthy borrowers behind them as well, good properties, are in first position on endless amounts of homes in smaller cities, only because CMHC considers great homes in smaller towns “cottages”, and have normal lending rates. When the shite hits the fan, and just like conventionals, these go delinquent as well, the Banks will have to write off the shortfalls, i.e. millions and millions of dollars. They are also in first place on thousands of actual cottages, and there are even more in second place as second mortgages, most of which are not considered “high ratio” in that case either. If the numbers are too thin (i.e. not enough equity) then the homeowner will go to a private lender, usually via a Broker, and get a “high ratio” collateral mortgage from them, and pay a much higher interest rate.

Anyhoo, I’m not here to to teach some rude weirdo the ropes, so I’ll leave it at that.

Go pick on someone else, and get educated about how Banks work.

#88 disciple on 07.14.11 at 8:57 am

#81 Grip on power…I think this blog reaches quite a significant number of Canadians, possibly 4% or more. Most have turned off the TV, and get their info from the net. There are a few similar websites with the same message, but not the quality of posters, that’s for sure. I’ve learned much from the brilliant insights that appear here.

Some of the commenters are obvious shill mercenaries for the thought police, but the majority are genuinely worried about the future direction of our vast nation, and this gives me hope.

I see the banks are declaring that they will be starting to shift their massive economic weight around, and to use a hockey analogy, will soon ride us into the corner with an elbow. Yeah, thanks for the warning, TD. Much appreciated…..

I call them the financial parasite class. They suck off your labour, ingenuity, and wealth and funnel it into their evil pursuits. I don’t see any solution to this mess other than to stop playing their game.

#89 fancy_pants on 07.14.11 at 9:03 am

#19 Frank on 07.13.11 at 9:30 pm
The RE market is just as hot as ever, even in Peterborough.

Maybe the HAM has infiltrated Peterborough too?

nah. people need a place to live. It is the ‘status symbol’ housing that takes the first hit. I’m guessing these SOLD signs would be in front of entry level or moderate homes?

There is always some jockeying before a brewing storm. Plus, there are many views and opinions flying around as to what storm is brewing and people will act according to their belief; and the beliefs can be polar opposites: those concerned about hyperinflation, deflation, rising rates, rising RE prices, being priced out forever, being mortgaged forever, greed, fear etc etc.

either way, the orgasm shakes on

#90 Utopia on 07.14.11 at 9:05 am

#51 The Original Dave on 07.13.11 at 11:45 pm

“Can anyone explain why the banksters talk down the market together?”
———————————————

No problem Dave. There is a conflict between rate-setting and the current Governments agenda to end stimulus measures will simultaneously eliminating the deficit.

Can’t do it all without earning a hard landing in real estate and constricting economic growth.

As we have seen though, rule changes such as killing off the 35 year only drove speculation in real estate. Warnings of rate hikes coming and changes to CMHC qualifications also spurred on buying that brought us to where we are today.

Everyone, including the banks, sees the problem but few were willing to be the first to speak to the issue. Mark Carney drove the point home in Vancouver not long ago. The alarm bells started going off and the banks got on board.

The real estate industry meanwhile with their idiotic mantra claiming markets are “balanced” while issuing one-sided positive-spin news releases (that some of the media ate for breakfast), has done favours for nobody in this country.

What we are getting now instead is tough talk from all quarters in the hopes that the market will “cool” but not freeze. As policy changes and rate hikes have both resulted in negative outcomes that leaves stern warnings and finger wagging as a solution to calm the markets down.

Homeowners and new buyers should rightly take heed of the message though. These guys are finally sounding serious.

#91 kimi on 07.14.11 at 9:09 am

Coho… said People are working harder and longer and are still “living beyond their means”. Where does it end? Will every man woman and child need to slave 16 hours a day to simply survive as to satiate the seemingly insatiable greed of those running world affairs? ________________________________
You missed the point Coho: each person who borrowed to live the high life is at fault. Its about the greed and stupidity of the individual.
I’m not struggling, ”’I live within my means””, I’m not in debt. I’m single. I rent. I don’t own an SUV just a small diesel car and I have a big fat bundle of cash and I work an ‘average’ job.
What you explained is part true but come on, everyone is living the high life on debt and then they have the balls to complain about the life ‘they chose’ to live.
Please !! I have no pity for the gluttons. They did it to themselves. SUV’s, McMasions, Yoga, Cells, Hi-def, kids 8 with cell phones, Luis Vitton bags, hordes of clothing, storage units, four vehicles, a boat, holidays, droppin debt like its cash. This is what they are ‘surviving’ for?
I have no pity for the dumb as- families who find it so tough to live ‘thier’ lifestyle. BOOOO HOOOOO.

#92 Mr Lee on 07.14.11 at 9:16 am

“and the illusion of equity is gone, will they stay? Walk? Bankrupt? Or just quit spending money on cars, iPads, Old Navy pants and tats?”

I think we know the answer to the above Mr. Turner, and that is the people will pull back on soending as you stated in last part of the blog. This will not only have a negative effect on consumer sending but will also contribute a further decline in house values as the deflationary period sets in for all durables.

Mr Carney said it best where asset values go up and down but debt stays. We in Canada will learn this very shortly.

#93 Utopia on 07.14.11 at 9:19 am

#73 House on 07.14.11 at 5:27 am

“So a rate announcement is due on the 19th”
——————————————-

My bet. We get a surprise 25 basis points increase just to reinforce the point that personal debt levels are getting dangerously high. It will be about sending a signal to consumers to start thinking twice about their lines of credit and lack of savings.

We shall see what happens.

#94 Peakoilist on 07.14.11 at 9:25 am

Garth, can you feel those thousands of pats on your back..way to go ! (maybe a few on your butt too :) )

#95 The American on 07.14.11 at 9:39 am

Garth, well the half-truth is finally starting to trickle out. Of course, we all know a decline is inevitable in Canadian real estate, which will directly negatively impact the entire nation’s economy. But, the figures that TD Bank are now finally providing are, quite frankly, deliberately misleading as not to alarm consumers into a state of panic. Canada is mirroring the decline of that which happened in the U.S. seven to eight years ago. This is undeniable from everything from consumer spending patterns, house lust, creative loan programs out the ass (aka subprime lending), household indebtedness, and unadulterated denial. The challenge that Canada will have is managing consumers’ expectations and behaviors as the real estate bubble implodes. I personally think the Bank and Government are scared as hell as they have no idea what will come from its people.

The U.S. was at the forefront of this decline and the world has had the “luxury” of watching what happens so it can better prepare itself for the same patterns of economic demise. Being at the front of this global adjustment, most Americans had no idea what was coming (you don’t know what you don’t know), and neither did the world really for that matter. This “luxury,” however, is a dual-edged sword for countries like Canada and Australia. Having already witnessed what has happened to the likes of the U.S., U.K., and the European continent, it certainly does help better prepare Canadians for what comes next. However, the Canadian Government and Banks are going to have quite a challenge trying to keep the peace as they will certainly face heightened consumer scrutiny and back lash as the real estate market corrects. After all, the Canadian government and its banks alike have been telling consumers just how “safe” and “sound” and “conservative” (that one’s my favorite LOL) everything is for years. Not cool at all. And for years, they’ve known this was nothing more than a lame attempt to “rob Peter to pay Paul,” meaning living on borrowed time through measures of things like emergency interest rates, restructuring of taxes (HST, for example. Make no mistake this is partially in preparation for the downturn as a greater portion of this is certainly going toward funding CMHC), and grossly lackadaisical immigration policies to encourage infusions of fast cash, focusing primarily on the wealthy (these guidelines/”standards” are being reviewed and quickly restrained even as we speak. Apparently these policies aren’t working out very well for the greater good, and its really creating some tensions with Canadian-born citizens… go figure); hence these “Pollyanna” bullshit numbers the banks spew.

The banks figure the people are aware a correction is underway to some minor level, so it is okay to admit it, but only in a limited fashion. This will be part of their strategy. Once the correction has begun to surpass these most recent figures, they will issue new ones that demonstrate yet another small correction. This pattern of behavior will happen over several years until the true bottom has been reached. They figure it is easier to manage the masses this way and keep the people from going into complete shock and panic if truth were revealed. Also, its a great way to keep revolts of angry mobs of people at bay (but only for a time). Can’t say it won’t happen in Canada? Well, I just witnessed a “minor” reaction in Vancouver a few weeks ago over a hockey game loss that states otherwise. A friggin’ lame ass hockey game. So, yeah, I know there’s some anger in there somewhere in which to tap (thankfully). That’s child’s play, though, compared with possible end results in the annihilation of an entire nation’s economy.

Garth, you are absolutely correct. The Canadian Banks are most definitely prepared for this downturn from a financial perspective. Like I said before, they’ve known for years this is coming and they’ve been preparing for it in tandem with with the Canadian government. All the while, they’ve been lying to the Canadian public about the true state of affairs, continuing to encourage reckless spending through means of cheap credit and promotional loan programs for the sake of keeping the economic engine running – a real Catch22. My fear is its the Canadian people who are not ready for the downturn. This economic engine is now running on fumes and there’s no station in sight. If I were the government and banks, I’d do two things: 1. Get the world’s best Public Relations firm – they’re going to need it. They’re going to have a load of egg and shit on their faces after all the b.s. propaganda they’ve spewed for years. 2. Invest heavily in protection measures to keep these members that have been representing your interest safe and secure. This isn’t going to end well for many of them.

Oh, and back to the “Pollyanna” numbers TD put out… Let’s set the record straight; Its a 25%-30% correction in GTA and 45%-55% correction in Vancouver. See, that wasn’t so bad, was it? It was like ripping off a band-aid. There is simply no other way around it. Watch and wait.

#96 Anna on 07.14.11 at 9:43 am

Ron Paul grills Bernanke:

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/how-ron-paul-got-ben-bernanke-to-crack-a-smile/article2096493/

#97 Brad in Cowtown on 07.14.11 at 10:00 am

#43 Utopia – “How the hell is that Cherry picking? And what optimism?”

I quoted the optimism. QUOTED it. Maybe you should just read the report. They see no crash coming for Alberta. But no mention of that here because it contradicts the holy host. Yet, he plucks out the 2 worst predictions from the report? That is textbook cherry picking.

#53 April
“Brad in Cowtown, you need to pay more attention to that report if it’s the same one I heard.”

Maybe you should read the report April. Or at least find out which one we’re talking about first. And maybe you folks need to think for yourselves and not blindly follow everything you read on a bear blog, which has been wrong way more often than right. I like Garth as much as anyone – but he’s more of an entertainer than a forecaster.

I repeat – the same report (from which Garth plucked out rough numbers ahead for Toronto and Vancouver) predicted moderate sales and price growth for Calgary.

It’s from the same report!!!!
The point being – hey, maybe not all cities will necessarily see a housing correction. Stop painting the whole country with this doomer brush, when really only Vancouver and Toronto are overheated.

#98 Ret on 07.14.11 at 10:03 am

TD is setting a classic bear trap to assure those that have gone all in on RE that the downside will be minimal and brief! Who really cares about a 10% pullback when they have made 30-40% in the last 2-3 years?

Those who bought in after the first 15% drop in Florida, like my Floridiot BIL, got burned for another 50% in the “slow melt,” over the next 4 years.

His Sebring pile was Zillowed at $272,000 in 2005. He bought in 2007 and thought that he got a great buy at $210,000. His Zillow est. is now $98,000. The house around the corner just sold for $99,000.

SIL reports that central Forida is a dead zone. Golf courses are $20-25 a round, cart included, and they are still almost empty even on the weekends. People sell their gold rings and jewelry to pay vet bills for their pets. The pets are all they got left. No work. No money. No credit.

Floridians considering appealing/modifying the Homestead Act to lure out of state taxpayers into the thousands of vacant homes before municipalities have to default.

#99 Davyd on 07.14.11 at 10:19 am

here are my favourite movies in no particular order
1. avatar
2. avatar collector’s edition
3. alien vs predator 2
4. avatar director’s cut
5. return of the jedi

#100 Davyd on 07.14.11 at 10:21 am

Un like you bubble heads my belief system is perfect, as I don’t have one.

You all filter news, giving more weight to stories that reinforce what you want to have happen and ignore stories that contradict what you desire.

Very dangerous when it comes to investing. Like in poker falling in love with pocket aces and can’t lay em down for nothing. garth is a pooface

I have been busting many of your [email protected] by saying you are to afraid of risk, Now that my sober head is much clearer I realize I was wrong, by sitting on the fence you are actually making a bet, and If you sold two year or where in the position to buy and did not you lost big time, your only hope for redemption is a big crash.

Fundamentals are not really that important, watching events and observing how the tax farm slaves reacted is where you find opportunity to make money. garth is a pooface

Unfortunately for most of you, your belief system blinds you..

#101 Echo on 07.14.11 at 10:21 am

Re #24 Echo:

Just so you all don’t get too excited and think I’m sitting in my old Head Office office today and will be sharing my opinion from inside the walls of the beast, when I said “I’m an insider there”, “there” meant “on the subject”. I stopped selling my soul a long time ago.

#102 Live Under Your Means on 07.14.11 at 10:22 am

Thank you #146 brainsail & #146 jwkimba from yesterday’s post re CPP & OAS benefits. Recall reading an article in CARP magazine at a Dr.’s office many years ago that said Cdns would lose all CPP & OAS benefits if they lived outside of Canada for more than 6 mos. in a given year. IIRC, CARP also stated how Cdns ‘got around’ the system.

About 15 yrs ago I used to follow a site about life in Lake Chapala, Mexico – best climate year round and cheap. Mostly Cdn and American expats who retired there. Probably too expensive now.

#103 Ret on 07.14.11 at 10:23 am

Re: #72 Hamilton
That would be RE numbers from the Hamilton-BURLINGTON RE Board that are reported. Burlington and Hamilton RE are on different planets the last that I heard. (At least the Oakville-Milton RE Board separates out the numbers for each area.)

The real numbers for Hamilton excluding Burlington would be significantly lower and are not available on their website.

Hamilton is cheaper than Toronto. I get that piece. But why is Hamilton almost half price compared to Burlington which is only 8-10 km away?

You don’t really want to know. Trust me on this one.

#104 dave_in_TO on 07.14.11 at 10:40 am

Yahoo Canada business news just pulled an article off stating China accusing the US of already defaulting.

Here is the cached article but its available on many other sites as well.

http://74.6.238.254/search/srpcache?ei=UTF-8&p=ca+news+yahoo!+china+ratings+house+report&url=http%3A%2F%2Fca.news.yahoo.com%2Fchina-ratings-house-says-us-defaulting-report-054309883.html&u=http://cc.bingj.com/cache.aspx?q=ca+news+yahoo!+china+ratings+house+report&d=4690117400528010&mkt=en-US&setlang=en-US&w=71422e86,34eba6ae&icp=1&amp;.intl=us&sig=31Aq3mMCvBk3rJvR5KXtRQ–

#105 JoshL on 07.14.11 at 10:42 am

Brad in Cowtown,
The only reason why Calgary and Edmonton are scheduled for lower drops is because we haven’t rebounded like many other places. If you don’t go up to begin with, then you have less distance to fall when the bubble bursts. This is actually good news because there will be fewer people under water as a result.

Will Calgary fair better than many other places … yes … IF oil and gas hangs in there. Fortunately we have avoided any new real estate mania here since 2007, but we are still slightly over valued. That being said, a world economic slow down will hit commodities hard and Calgary hardest of all cities. We’re in good shape, but not invincible. And by good shape I mean we won’t drop as far as some.

#106 disciple on 07.14.11 at 10:44 am

If you bought gold in the past few years anywhere near $900 to $1500 per ounce, well, perhaps you need to take a look at this from Wikipedia:

Executive Order 6102 required U.S. citizens to deliver on or before May 1, 1933, all but a small amount of gold coin, gold bullion, and gold certificates owned by them to the Federal Reserve, in exchange for $20.67 per troy ounce. Under the Trading With the Enemy Act of October 6, 1917, as amended on March 9, 1933, violation of the order was punishable by fine up to $10,000 ($167,700 if adjusted for inflation as of 2010) or up to ten years in prison, or both. Most citizens who owned large amounts of gold had it transferred to countries such as Switzerland.

That would make the “true” price of gold about $350-$400 today, adjusted for inflation. But of course, the Fed would give you much less if you were forced to repeat history. Trading with the Enemy today would be translated as Terrorist, methinks.

#107 Live Under Your Means on 07.14.11 at 10:50 am

Dropped by neighbour y’day. She handed me a bunch of mail that she had found in our mail box the 2nd wk we were away. I paid about $37. to have our mail held by Canada Post until we returned as I did not want to bother our neighbours. Several have a key to our home, but one came into check our house every 3 days (insurance concerns) and move our cars. Unfortunately, when we arrived home our security system was off. Everyone makes mistakes & we are fortunate to have such great neighbours.

#108 cata on 07.14.11 at 10:55 am

sorry Garth, houses are still selling. Staying longer than what use to happen but selling. Nice, well maintained houses are the one’s to go faster.

I’d believe you better if you knew how to pluralize. — Garth

#109 kimi on 07.14.11 at 11:05 am

102 Dayvd… You don’t have a belief system?
Oh baby you should re-read your post, Sweetheart. You, the little wee pot calling the kettle Black. That’s okay Sweetie, we really need people like you. BAAAAA. BAAAAA. You pretty little fleecy white sheep.

#110 househunter on 07.14.11 at 11:14 am

Big component which will drive the slow down is interest rates. CARNEY IS NOT TOUCHING RATES if it slows down the economy. There will be no correction until rates rise. There is no motivation for him to raise them. The house pumpers will have at least another 6-12 months of excessive commisions. And then they’ll go back to their IT/Accounting/Manufacturing/Homemaker jobs.

#111 squidly77 on 07.14.11 at 11:28 am

Wow your blogs kicking some serious but today, thanks to all the posters that left some really really good comments.

The truth about the banks is a bit depressing but sadly it is the truth, they will suck the life out of Canadians.

The realtors and the MSM were there all to eager shills as they pumped RE to the hilt never caring one bit that all they were really selling was bank debt disguised as housing.

#112 The InvestorsFriend on 07.14.11 at 11:30 am

Nuber 59 A Prairie Dawg said:

And being property virgins, many will suffer from premature amortization.

Well, I think property virgins suffer from Premature Evaluation and Premature Exhultation.

But not Premature amortization. They will amortise their mortgages over 30 years and more. (They can get to 50 years by refinancing for renovations and such). Some were “lucky” enough to grab one of those 40 year jobs a while back.

A mortgage at 4 times income is almost immune from getting paid off early. That’s because if you somehow save an extra 5% of income to pay down on the mortgage that amounts to only an insignificant 1.25% of the initial amount owed. When I bought at 1 times earnings in 1995 and I found an extra 5% of earnings to apply to the mortgage that whacked 5% off the balance. Therefore it was possible for me to pay it off way early. Not so these four-times earnings virgins.

To bororw and adapt a saying:

saying “Yes” to a huge meal of mortgage Debt takes but a moment to pass over your lips but will weigh down your ass for a lifetime.

#113 Rocket Boy on 07.14.11 at 11:42 am

Just came back from holidays, the malls were packed with shoppers. Bags upon bags of “stuff” was being bought. What economic downturn. People are excited – no fear here.

Funny, as I scanned the comments in here this morning – its almost a carbon copy of last week, last month and last year. Some in here are like sharks that just had a scent of blood. Circling excitedly, waiting to devour it’s prey. But, the prey is average Canadian Citizens. Cheering on your neighbours financial demise is sad.

Some in here need to step back and realize that when the house of cards does fall – we all get clobbered.

Rah Rah – bring the house down – shish koom baaaaa!!

#114 disciple on 07.14.11 at 11:50 am

From the Globe and Mail, Feb 18:
Of the 9.5 million households in Canada, the Bank of Canada expects 2.5% of these to default on their debts.

That roughly translates into a million people directly affected and millions more indirectly affected in a land of 33 million people.

Report released by credit bureau TransUnion says that the average debt per person is $25,709, EXCLUSIVE of mortgage debt. Every child born into this debt slavery is a victim already.

We face an upcoming choice: lick the boots of the IMF, or jam an “Iceland icepick” in their knees. That way they’ll still be able to stumble back to wherever they came from and you don’t have to drag the body out yourself.

#115 Junius on 07.14.11 at 11:59 am

#102 Davyd,

You said, “Fundamentals are not really that important”.

Until they are. Kind of like oxygen or water.

Good luck with your home baked approach.

#116 Junius on 07.14.11 at 12:07 pm

#97 The American,

Great post. I agree.

You said, “After all, the Canadian government and its banks alike have been telling consumers just how “safe” and “sound” and “conservative” (that one’s my favorite LOL) everything is for years. Not cool at all.”

What you didn’t mention is that we had an election where the governing party ran on the premise that they were terrific stewards to the economy which gave them a majority gov’t. Now they are going to have to deal with the fall out as the economy begins to unravel.

It will be interesting to see how quickly Canadians catch on to the fact that they have been Conned.

#117 Mr. Plow on 07.14.11 at 12:15 pm

#43 Utopia

Its clearly cherry picking, not judging it just saying it was.

If this were academic writing, you can’t site a source and only pick out the information from that source that fit your argument.

I don’t think it makes the message any less relevant cause we all know that Van and TO have lead the increases so they will lead the decreases. But it also makes it sound like TD posted this report slamming all of Canadian RE when that wasn’t the case.

#118 Mr. Plow on 07.14.11 at 12:21 pm

#63 Sumadartson jr.

The irony of it, is it will never be enough. If the market corrects 10% they will want 20%, if it crashes 90% they will want 100%. If it goes up they will keep pontificating.

It is how they define themselves.

#119 Kitchener1 on 07.14.11 at 12:29 pm

IMO, the drop will be HUGE, more then most people can fathom.

Law of mean revision states that it must be.

we are going to go back to 2.5-3.0 times income before this bust is over.

From a math perspective, it must happen

RE: the American

From what i have seen, in the GOM fiasco and the Fukishma debacle as well there seems to be a very well, unwritten policy to follow on these issues regarding PR. The same is true of RE, EU issues, issues in the middle east etc..

basically its called keeping the hope alive

first- come out with something that is shocking– not the full truth but enough to shock most people (this TD press release is huge, most people put down 7%, a 12% drop with fees etc.. is a 20% loss)

Then come out and state the the problem is being worked on and looked at by the best experts, experts are meeting etc.. throw in a few fluff pieces about some hero’s, some emotional stories to sway people from the facts. Maybe some counter arguments reinforcing how things will be alright by some experts.

Drop some more bad news, things are not working out as we thought, BUT THERE IS HOPE because plan B and Plan C are in the works

Slowly wean people off the story, repeat cycle, things are worse then we thought, ohh whats this a tiny breakthrough, sorry didnt work out etc…

This takes a few weeks or can last for years, depending on the newsworthiness of the story.

People can take the truth in small doses, when mixed in with hope much better then the total truth at once.

Think GOM of Nuclear problem in Japan, if they would have told people the truth from day there would be panic and a very pissed off population control problem to deal with.

Just how news cycle works.

#120 fancy_pants on 07.14.11 at 1:07 pm

#101 Davyd on 07.14.11 at 10:19 am

garth is a pooface
Un like you bubble heads my belief system is perfect, as I don’t have one
Fundamentals are not really that important
Now that my sober head is much clearer I realize I was wrong

can you tell schools out? children creeping this blog

#121 garrulous squirrel on 07.14.11 at 1:15 pm

The local PID (pimps in denial) have been shouting at me to ‘prove’ that foriegn buyers aren’t affecting the Van (Rat) Couver market. A simple walk down any street will tell you all you need to know. In Richmond you only have to blink and you wouldn’t know Canada from Beijing.

And now the banks are agreeing with me? Say it ain’t so.

“The bank’s reasons for this carnage: a difficult economy, inevitably higher interest rates, a pullback by foreign buyers and deteriorating household debt.”

#122 Victor on 07.14.11 at 1:31 pm

MR. PAUL: But very quickly, if you could answer another question, because I’m curious about this – you know, the price of gold today is $1,580 [U.S.]. The dollar during these last three years was devalued almost 50 per cent. When you wake up in the morning, do you care about the price of gold?

MR. BERNANKE: Well, I pay attention to the price of gold, but I think it reflects a lot of things. It reflects global uncertainties. I think people are – the reason people hold gold is as a protection against what we call tail risk, really, really bad outcomes. And to the extent that the last few years have made people more worried about potential of a major crisis, then they have gold as a protection.

MR. PAUL: Do you think gold is money?

(Pause.)

MR. BERNANKE: No. It’s not money, it’s a precious metal…

MR. PAUL: Even if it has been money for 6,000 years, somebody reversed that and eliminated that economic law?

MR. BERNANKE: Well, it’s – you know, it’s an asset. I mean, it’s the same – would you say Treasury bills are money? I don’t think they’re money either, but they’re a financial asset.

MR. PAUL: Well, why do – why do – why do central banks hold it if it’s not –

MR. BERNANKE: Well, it’s a form of reserves. It’s a form –

MR. PAUL: Why don’t they hold diamonds?

MR. BERNANKE: Well, it’s tradition, long-term tradition.

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/how-ron-paul-got-ben-bernanke-to-crack-a-smile/article2096493/

#123 Cato on 07.14.11 at 1:34 pm

TD is overly optimistic. Its not the short term dip but rather long term trend the country needs to worry about. The country’s arrogance has blinded it to structural flaws that will weigh down the country for decades to come if things don’t change.

Canadians tolerate (and even welcome) government intrusion in our economic lives. This allowed central planners to put legislative frameworks in place that effectively pick winners and losers. Canadian entrepreneurs were forced to adapt and mold themselves to this centrally planned vision of the country. It wasn’t healthy – it gave us industries that are hard pressed to survive without a currency advantage. Gov’t removed incentive to add value to vast resources we extract by removing competition for access to those resources. As an example in BC we ship low value dimensional lumber into the US which ends up exported right back in form of a value added product like structural laminates. Guess who extracts the most value from the resource … Guess why Canadians with better idea for competing mill can’t get access to Canadian wood fibre …

The human capital picture is what is most worrying. There is probably no other country in the world that willingly watches its best and brightest walk out the door and makes no effort to stem the flow. Our answer to the brain drain seems to be even more gov’t involvement that does nothing but perpetuate greater bureaucracy. Its why when I look in my back yard most tech companies are surviving by sucking at teat of various gov’t welfare programs paid by my tax dollars. In effect I am subsidizing my competitors in the industry. They produce few jobs, little to no revenue and offer nothing to larger economy. Majority are flawed business models the free market would have killed long ago. But yet travel to silicon valley and you’ll be surrounded by Canadians building real companies, creating real jobs & real wealth outside Canada’s borders. Its where I, along with many other Canadians have been forced to migrate worthwhile ideas to. Yes, silicon valley tends to be a magnet for visionaries around the world and is bound to poach talent but you don’t see other countries experiencing the extreme brain drain Canada does. We’ve allowed a flawed vision of economic utopia to turn toxic for those with new ideas.

When comparing the US & Canada most Canadians would probably see Canada as the safe haven. I do not. The US will remake and transform itself, it has the tools and desire to do so. It’ll be a rough transition but there are already signs this process is occurring. On the other hand Canada is walking into an economic trap which revolves around selling resources to the highest bidder. In the long term its an economy that has few opportunities for population not tied to resource extraction. Canadians are in for a rude awakening, but we are just too damn arrogant to change our ways.

#124 Mr. Reality on 07.14.11 at 1:37 pm

“#86 Mikey the Realtor on 07.14.11 at 8:27 am
Get in while still available, folks!!

All this bubble talk is just getting tedious; this blog has been harping about this bubble since 08, while prices rose in the double digits all over Canada.

Houses are still selling well, sisters neighbour just put his house up for sale, gone in 2 days at 99.6% of asking. As I said, as the bubble train starts to overload with peeps like TD, the further prices rise.

Until rates rise, fugetaboutit!!! Carney will be leaving rates unchanged on the 19th, in the fall he will leave it again. He has no choice, even with an inflation rate hovering close to 4% (3.7%) he still has not raised rates.”

Mikey , Mikey , Mikey……Forget the Bank of Canada. The bond market has been in a 30 year bull market and the of lowering rates up until recently. Now you will see the inverse for the coming decades. Rates will rise regardless of the BoC does, they do not control the bond market. The bond market will dictate what the BoC does.

The bond market and its actions dictate what the realestate industry does. As interest rates decrease, housing prices rise as money becomes cheaper…….Guess where we are now? At the top, which means higher bond rates (corresponding interest rate increase) and deflating house prices.

Surely a realtor would understand this. But hey you become an “expert” after taking a 3 month course so really what do reaktors know anyways. They know how to feed off people’s emotions……at least drug dealers are forthright with the risks of the products they sell. Realtors hide the risk with lies.

Mr. R.

#125 Kevin in Winnipeg on 07.14.11 at 1:46 pm

http://www.winnipegfreepress.com/business/td-bank-says-winnipeg-housing-prices-will-drop-in-2012-125550658.html

My favorite quote of all…”I’ve been selling real estate for more than 30 years, and I can’t remember the last time I saw prices decline. It might have been in the late 1980s — ’88 or ’89 — and it was probably just at the high end of the market.” – WinnipegRealtors president Ralph Fyfe

#126 Bill Gable on 07.14.11 at 1:48 pm

Pollyanna – that’s the word of the day.

Vancouver is delusional.

I talked with a major Realtor and he said again “RE always goes up in Vancouver”.

I just about choked on my Chai/Soy/Maple Syrup/West Coast Cedar/ Latte.

Help me, Rhonda! (*BTW – listen to the last chorus of the song and hear one of the Beach Boys COUGH…just a bit of levity in a nasty situation).

Great post today, Mr. Turner.

#127 Aussie Roy on 07.14.11 at 1:50 pm

Aussie Update

David Jones (Big up market retailer) says carbon tax fears partly to blame for record fall in sales as PM spruiks policy

Aussie Roy says cost of living, house prices falling and an up to the eyeballs in debt consumer is tapped out.

http://www.news.com.au/business/tony-abbott-answer-questions-at-peoples-forum-after-julia-gillards-emotional-speech/story-e6frfm1i-1226094872844

AUSTRALIANS owe a record $49.4 billion on credit cards with households maxing their plastic to cover escalating living costs.

New Reserve Bank of Australia statistics shows total credit card balances have blown out by almost 45 per cent in the past five years to $49.4 billion in May, with $37 billion of this racking up interest.

http://www.news.com.au/money/australians-hooked-on-credit-cards-as-debt-climbs-to-almost-50-billion/story-e6frfmci-1226094646511#ixzz1S6bXd1sf

National Australia Bank latest property report is a shocker, falling prices and slow rental yield growth is just around the corner. – Ssssh its really been like that for a few months now, nice of you to finally notice NAB..

http://macrobusiness.com.au/2011/07/property-insiders-losing-faith/

#128 Devore on 07.14.11 at 2:12 pm

#50 Kevin in Winnipeg

TD said the same thing 3 years ago. Where is the credibility now??

What credibility do you have? You might want to take a look at a house price chart for the last decade, where you will see they were right. 2008 wasn’t that long ago.

#129 DM in C on 07.14.11 at 2:16 pm

Brad in Cowtown;

I’m in Calgary too, and I fail to see the optimism you speak of.

An ethereal comment on ‘optimism’ doesn’t support the existing numbers. I don’t think Garth is cherry picking — Calgary’s numbers do not look good at all.

http://www.findcalgary.ca the single family stats for July are not showing very well.

Anecdotally, in my ‘desirable’ NW community of Tuscany there are foreclosures and vacant homes for sale — I’ve toured a number of them, and wouldn’t even pay what the banks are asking. There are two houses on my street, one empty, on the market for more than a year, no buyers – sellers refuse to lower the price.

Spouse was laid off last week — of course no one is hiring during the drunk fest that Stampede has become, but the few conversations have mentioned a significant decrease in salary. Not a good sign.

We’re in a stalemate, not quite a buyer’s strike, but I think the pool of buyers is tapped out (not to mention their available credit).

#130 Devore on 07.14.11 at 2:23 pm

#66 Irrational Exuberance

I think that is why we’re all getting a little excited, because we know change happens at the margins, and does not get reflected in averages, benchmarks or public perception for quite some time. It’s definitely too early to call Vancouver busted, but one can sense the winds of change, much stronger than last year, with all manner of unlikely entities jumping on board.

#131 garrulous squirrel on 07.14.11 at 2:47 pm

An article in the Van(Rat) Couver Sun this morning about starving seniors in Vanc and across the nation. Lets face it the seniors are an easy target. They got raped on the income trusts because flaherty wanted the revenue paid directly to his department before it went out to the citizen….plain and simple.

The ZIRP was not designed to help the economy…it is in place to allow the government to issue large amounts of debt to itself at zero rates of repayment so that the government could buy its political gamble and gain a majority.

But the mayhem and desperation they have released is unconciousible. Seniors have drained their meagre savings because they had no income. They have run out of money decades earlier than expected when their retirement plans were put in place decades ago.

Remember those ads by the government supporting the savings plans of the 70’s 80’s and 90’s and the benchmark rates of return that were ‘promised’ would materialie at retirement?

Seniors have had the rug pulled over their heads and guys like Carney are kicking them to death. Women ( like the one in the article) has had her benefits slashed and her savings depleted. Meanwhile the things she consumes every day are skyrocketing in price.

Carney may be doing a good job taking full advantage of the Chinese manufacturers ability to move factories to low cost areas so as to keep the prices of auto parts, paint, Big Screen TV’s and computers so that he can say that ‘inflation is tame’. But down at the seniors level who just wants to eat and pay rent…these are desperate times indeed. Inflation for seniors is running at above 20% per annum…and all the while the income and benefits they receive are being slashed and taxed so that the seniors are officially below starvation. many have to decide to pay the rent late or eat.

Local service fee’s are also a killer to low income seniors…..Phone bills…heating…utilities…..fee’s of every kind are increasing at above 10% per year. In BC electricity is 20% higher over the last two years with more increases scheduled. The list go’s on.

‘F’…..you’re not fooling anyone except yourself if you think for a minute that people don’t know where the center of this evil lays.

#132 Echo on 07.14.11 at 2:48 pm

#97-The American:

Great post.

You might want to read post #88, from someone who was imbedded in a Canadian tower for years and knows the routine well. Enjoy. : )

#133 Dontcallmeshirley on 07.14.11 at 2:50 pm

Meanwhile back on Earth, the Royal Bank sold $1.6 billion of 2014 notes at a 2.313% yield.

Still plenty of cheap capital available to those seeking credit.

Lots of time remaining on the game clock, place your bets accordingly.

#134 disciple on 07.14.11 at 2:50 pm

#125 Cato…

I don’t favour government intrusion either, but here’s the reality: at the present moment, until technology can catch up to our greed for consumption, Canada needs price floors and price ceilings on most things we produce or import, otherwise, globally we are done like dinner. We can’t compete (on price). We can certainly export our resources like no tomorrow, but you may want to consider that the exporters and the retailers are two hands on the same person that slaps you left and right. That’s the scam. The trans-nationals are circumventing the wealth-creation process within our borders, and government lackeys are turning a blind eye. We have been betrayed. I watched the manufacturing sector get destroyed in the past two decades…from the inside.

There are piddly funds and grant money available for entrepreneurs but they seem to being collected mostly by companies involved with importing foreign-made products. Tax returns are loaded with information on helping these types of business owners. Where are the engineers? Where are the scientists? Where are the inventors? Where are the brave and courageous rebels who think outside the box? I dunno. Our educational system doesn’t produce these types of people. It turns out Obedient Workers. Zombies. Perfect Homeowners. Pure consumers. No builders. The country is rotting from within. Maybe we need a new tidal wave of more immigrants again, in the farmer or engineering classes only.

#135 Not 1st on 07.14.11 at 2:53 pm

I think sometimes the contrarian view is too easily overlooked in real estate.

People might see the rising costs of consumer goods eating away at their lifestyle and say hell with it, I can’t afford that stuff, so I might as well spend the money to feather my nest (home) where I spend time with my family and is a refuge – thus real estate stays solid.

Or, as the prices fall 5-10%, there are hordes of renters on the sidelines ready to pounce and finally get in, thus keeping real estate reasonably firm.

#136 Devore on 07.14.11 at 2:54 pm

#89 Echo

Anyhoo, I’m not here to to teach some rude weirdo the ropes, so I’ll leave it at that.

Go pick on someone else, and get educated about how Banks work.

I am not insinuating anything, nor was I talking about collateral loans. A high-ratio mortgage has nothing to with a collateral mortgage. A conventional mortgage is 80% or lower LTV. A high-ratio mortgage is anything higher, and must be insured. You were stating banks are worried about their conventional CMHC insured mortgages. I don’t know too many lenders who require insurance on conventional mortgages, and in any case, why would they be worried about them?

Not picking on you, just wondering how much you know about this banking business you speak so authoritatively and at length about.

You used “conventional”… perhaps you did not mean what this word normally means.

#137 Echo on 07.14.11 at 3:08 pm

#97 American:

You only saw a portion of the Vancouver mentality, trust me. (and they have nothing in common with the rest of Canada thankfully, except nasty Quebecers when they are even slightly pissed off.)

Vancouverites in general are a very unstable bunch. To paint a picture, a little while ago (2-3 yrs I think) they had a huge fresh water issue (very pathetic, don’t live there, yikes), people had to boil their water everywhere, including all over the city, and there was an increased desire for bottled water because of convenience only.

Well, in Vancouver, look out with a situation like that. Even though they still HAD WATER in their taps, there were several incidents where they got into fistacuffs at Safeway stores (mainstream grocery stores) over the bottled water on the shelves. As someone who used to live in that anti-depressant ridden, cold, damp, anti-business etiquette, infrastructure hell, downer ridden hellhole, when I heard that the middle class were beating each up for little bottles in the WEST SIDE, where I lived, I just shook my head and said, “oh yeah, I sure miss that city”.

As for the hockey riot, no doubt started by an agenda to disrupt by some bad apples, just don’t be fooled by the ones on camera afterwards saying that this is not what their city is all about. Ahhhh… The facts are that thousands of people stood around watching, drooling, and many others joined right in, others that weren’t the instigators. The young people there are scary too, so it wasn’t surprising. And the ones that aren’t aggressive are dumbed right down. There’s not much of a middle there. Oh joy.

p.s. As for the truth about the Banks here, you may also enjoy post #24. Another validation of your thoughts. Cheers. Love the USA, miss the USA, have to get back down to the USA, and will.

#138 garrulous squirrel on 07.14.11 at 3:08 pm

SE Asian Expat….you mentioned yesterday that you reside in BKK. Do you have a line on a good property agent who handles six month rentals?

Preferred areas would be from Sukhumvit soi 55 ( Thong Lo ) out to Bang Na ( including Wattana and On Nut)

#139 Sumadartson jr. on 07.14.11 at 3:08 pm

But the Canadian Dollar keeps climbing higher vs US Dollar.

No way Mortgage Interest rates going up.

TD sent out this scare tactic trying to slow or stop stampede R E Market because in fact, MTGE INTEREST RATES GOING BACK DOWN TO WEAKEN CANADIAN DOLLAR.

#140 poco on 07.14.11 at 3:09 pm

Echo—
People on this blog need to know that when the big Banks make announcements like this it’s after a very long trend of increasing delinquencies.
______________________________________________
The American—
Garth, well the half-truth is finally starting to trickle out. Of course, we all know a decline is inevitable in Canadian real estate, which will directly negatively impact the entire nation’s economy. But, the figures that TD Bank are now finally providing are, quite frankly, deliberately misleading as not to alarm consumers into a state of panic. Canada is mirroring the decline of that which happened in the U.S. seven to eight years ago.
______________________________________________

I think many of the naysayers should take these two comments to heart–many of the housing markets turned downward many months ago—hundreds of owners are underwater and are desperately trying to get out of their money pits–Carney —Flaherty—and the banks have known this for a long while

it’s amazing that one or two statements from the big banks can change the sentiment of some of the bloggers on here—what? Garth was right? –now i will sell because i got the “official word” that we’re going down.
For many it’s way too late!!!

As far as the ‘percentage’ of price drops in the next few years, it won’t really matter if you’re underwater and have to sell (for whatever reason)10% –15%–doesn’t matter –you’re still screwed and will be for years to come. Buy a property again in the near future–i don’t think so–bankruptcy—wait and see–a new breed out there.
Here’s a couple of recent sales in the tri-cities–these are only a few of the many properties listed for, or sold for less, or sold close to what the owner paid a few short years ago
V857724-#14-3965 Dayanee Spr.—bought June 08-519k
list Mar 2010–539k—-Sold-Mar 2011–504k–condo

V866389-#202-1438 Parkway Blvd.—bought Apr 2008-349k—–list Apr 2010-358.8k—Sold Mar 2011–330k-condo

V880553-#225-801 Klahanie–bought Apr 2008–369k
Sold Apr 2011–357k –condo

V870106-#7-65 Foxwood–bought June 2008–360k
Sold Apr 2011–343.5k–Townhouse

V871151-#45-1238 Eastern Dr–bought -Mar 2008-419.5k
Sold Apr 2011-416.5–Townhouse

even with the downturn in 2008 and the supposed recovery since, where has all the equity gone?

I know these mean nothing to those living in the GTA area and other cities across Canada, but this could be happening in your areas without you knowing–you’ve got to do some research–don’t rely on the CREA board for the true picture

#141 Mark on 07.14.11 at 3:29 pm

“Or, as the prices fall 5-10%, there are hordes of renters on the sidelines ready to pounce and finally get in, thus keeping real estate reasonably firm.

Hoardes of renters? Hardly. Homeownership rates in Canada are at a record high.

#142 It's different here on 07.14.11 at 3:30 pm

@Brad in Cowtown .. “Stop painting the whole country with this doomer brush, when really only Vancouver and Toronto are overheated.”

LOL. For sure Brad… Calgary’s got no “overheated” situation. It’s different there….. (plus you got Missy Bunny)

#143 Hoof- Hearted on 07.14.11 at 3:31 pm

Reporting from HAM-ville..aka Richmond BC

Eerie…and not even Hallowe-en yet.

More listings….more stagnant FOR SALE signs….

I think several long term owners waited….listed…too late…..stuck…retirement plans are screwed.

#144 Cory on 07.14.11 at 3:56 pm

#18 Mark on 07.13.11 at 9:26 pm

“Emergency is over? Hardly.The Canadian private sector still isn’t growing, still hasn’t really created any jobs over the past decade, and is in desperate need of recapitalization.”

ummmm, so what?? keywords are “private sector”. Business needs to figure this out or I guess the business doesn’t survive, pretty simple. And yes, the “emergency” is over.

“An entire decade worth of engineering grads are mostly under/unemployed in Canada.”

again, so what? so the market is saturated, move to where the work is then. Just because one goes to school for something, should the government/taxpayer guarantee a job? maybe people should study the career/market they plan to enter and see what supply/demand is and will be rather than going in blind??!!!!

“So much potential lost output exists because rates have been artificially too high on businesses for the past decade due to the CMHC’s credit preference towards consumer (ie: house) borrowing/lending.”

because the the “economy” is based on consumption and consumerism, where else should they focus? Funny, you don’t think unions sucking the life out of business has anything to do with high costs of doing business??

“Rates need to remain at 1%, if not lower, but consumers need to be cut off of the CMHC lending subsidy.”

Wrong again but to each their own.

#145 maxx on 07.14.11 at 4:02 pm

#13 Squiddly 77-
“Too many people are way over-leveraged, are mortgaged to the hilt buying houses they can’t really afford, and they risk getting killed when they lose their job or if rates rise…

Watching the evening news in the U.K. tonight- 750K middle-class jobs lost and counting- many now cleaning houses and doing whatever menial work they can manage to find. Money will increasingly become more and more difficult to acquire and more importantly, keep. Debt will become heavier and heavier. The house infatuation psychosis is ending.

#146 Junius on 07.14.11 at 4:53 pm

#141 Sumardston Jr.,

You said, “No way Mortgage Interest rates going up….MTGE INTEREST RATES GOING BACK DOWN TO WEAKEN CANADIAN DOLLAR.”

I see Nosty is back. What a ridiculous statement to make. I see your time away hasn’t been used on an education.

#147 Junius on 07.14.11 at 4:56 pm

#143 Mark,

“Homeownership rates in Canada are at a record high.”

Well said. You can add to it that demographics have shifted as boomers want to sell. Buyers market for years to come.

#148 triplenet on 07.14.11 at 5:02 pm

Mr. Reality – you wrote:
Surely a realtor would understand this. But hey you become an “expert” after taking a 3 month course so really what do reaktors know anyways. They know how to feed off people’s emotions……at least drug dealers are forthright with the risks of the products they sell. Realtors hide the risk with lies.

……..just had a labotomy did you?

Squidly77 – you wrote:
And every buyer since, all 90,000 of them are now underwater.
What a mess the Calgary realtors have created.

……include my son building houses and paying his way through university. Many of his school mates too.

Garth:
An auction does not necessarily reflect fair market value. Price emerges from every sale. Market value does not always emerge from every sale.
Fair market value – “Fair” market value is my determination, not yours. The BC Supreme Court in it’s summation addressing solicitors as to it’s decision. – stated case comment.

As far as the Montreal mansion is concerned: floodplain insurance and a geotech study – those two issues alone would cause me to walk. Do diligence.

#149 Junius on 07.14.11 at 5:04 pm

#126 Mr. Reality,

Good post. However you expect old Mick the Pumper to understand how the bond market sets interest rates? Because he is realtor? Isn’t that like asking your bank teller to explain the financial system? Not gonna happen.

#150 An Cat Dubh on 07.14.11 at 5:14 pm

I heard an interview on CBC radio this morning with the head of the Victoria Real Estate Assoc. or board. The interviewer did ask one or two somewhat intelligent questions concerning the housing bubble. The real estate guy tried to spin it and say there is no bubble and appeared to be trying to change the subject. Next time CBC get someone who isn’t afraid to ask the tough questions.
Who says stocks aren’t money makers. George Bush and a former Canadian PM made a killing on Bre-Ex according to this article.
http://gangstersout.blogspot.com/2011/04/bre-x-george-bush-and-brian-mulroney.html

Mulroney was a director of Barrick, not Bre-X, and made nothing. I hope he reads this and assigns a lawyer to boot your ass. — Garth

#151 Mark on 07.14.11 at 5:24 pm

#133, “Seniors have had the rug pulled over their heads “

Are you insane? Seniors get close to $20k/year of income guaranteed to them by the federal government (+ an entire healthcare system that mostly operates for their benefit), have enjoyed the past 40+ years of housing, stock, gold, and bond appreciation, yet here you are, claiming that seniors need more?

Seniors have never had it better in Canada or anywhere else in the world for that matter.

ZIRP is actually quite generous; interest rates probably should be negative to remove much of the excess ‘unearned’ wealth from seniors that they are irresponsibly hoarding in bank accounts and refusing to invest in economic growth.

#152 ballingsford on 07.14.11 at 5:31 pm

Read something about this on CNN yesterday, but couldn’t find it now.

Headline was that foreclosures in the US are in decline, but if you read the article or read this one, it’s not that the foreclosures are declining but the banks are swamped with them and are processing less of them at the moment.

http://www.wral.com/business/story/9863168/

The headline makes it seems like the US economy is turning around, but really it’s not.

News-media; Humbug!!! Sheeple shouldn’t just read the headlines.

#153 Scared Realtors are worried. on 07.14.11 at 5:42 pm

The current housing crash is getting worse. These realtors had two good months out of 13 months are now finished. People are maxed out and can not sell their homes unless they bring a check at closing. People have borrowed (LOC) to the point they are underwater. As home prices fall more and more will be screwed. As these people tighten up on spending (you are seeing this now) business will be cutting jobs. Driving around the GTA you can see increase in for lease signs as business stut their doors. Now the Government is starting to cut jobs so more people will pull back their spending. What you are seeing is the credit bubble in Canada starting to pop. Canadians are the MOST indebted in the G20 . This mean Canadians are #1 maxed out on debt that they can not pay back. You realtors sould be very worried with your lack of education. Lets face it your one month training is useless. Karma is coming for you realtors are you have a big bill to pay.

#154 Kim on 07.14.11 at 5:56 pm

Really is nice being debt free as everyone in the office worries about making payments. Has anyone else noticed people using credit for everyday living? Everyday stuck in a Tims line up watching these clowns pulling out their visa or master card to pay for their $5 tab. Really? $5 and you need a credit card? One guy at toy R Us was making a $115 purchase and had to use cash, debt and two credit cards since one of the cards were declined. The only good thing about everyone being maxed out are the sales. Happy shopping debt free bloggers.

#155 TurnerNation on 07.14.11 at 6:24 pm

Shocking video of American sheeple stampeding for their socialist handouts!! What a country. However I did not notice anyone who was skin and bones…they seem well fed to me…

http://www.wfaa.com/news/local/Hundreds-line-up-for-Dallas-County-Rental-Vouchers-125555383.html

DALLAS — At least eight people were hurt Thursday morning while scrambling to line up for a limited number of Dallas County rental vouchers — after waiting for hours in their cars.

#156 Mr. Reality on 07.14.11 at 6:50 pm

#12 Mark on 07.13.11 at 9:00 pm
Of course, the comments section below will brim today with people saying things like, “So what? A 25% correction in Vancouver will just being us back to last year’s prices,” and “What do I care, since I’m never going to move?” Poor souls. May their net worth rest in peace.

I think the tragedy here is that a lot of people are going to leave a lot of money on the table by being ‘married’ to a specific asset class.

Conservatively, the TSX could easily be at 50,000 by the middle or end of this decade, while housing, if we’re lucky, sits flat. What’s better, sitting on a $1M Vancouver house with huge on-going liabilities and depreciation, or having $4M in stock?

Please explain to me how you think the TSX can go to 50k? Talk about an arbitrary number……

Enlighten me.

Mr. R.

#157 Hoof- Hearted on 07.14.11 at 7:21 pm

Metro regional fees to soar 44 per cent over five years

Even if local city councils freeze their property tax rates, home owners across Metro Vancouver are in for years of steep increases in the regional taxes and utility fees they pay.

The typical home now pays Metro Vancouver $513 a year when the regional district’s property tax and fees for sewer, water and waste are all added up.

But that’s slated to rise to $600 by 2013 and hit $740 per home by 2016 – a 44 per cent increase over five years.

http://www.bclocalnews.com/richmond_southdelta/richmondreview/news/125601263.html

========

These people are out of control…

Time for a revolution

#158 vyw on 07.14.11 at 7:26 pm

It looks like QE3 is not happening after all: http://money.cnn.com/2011/07/14/markets/markets_newyork/index.htm?iid=HP_LN

The US Govt needs a massive jobs stimulus not austerity measures and dramatic writedowns of outstanding mortgages if they are to have any hope of reviving their economy.

#159 Onemorething on 07.14.11 at 7:30 pm

Moral of the Story, get out of Canada & AUS!

#160 Imstupid on 07.14.11 at 7:33 pm

#71 been their done that etc

I was talking out of anger. You are correct. I guess that’s the true danger of actually owning a weapon, emotion can get the better of you and cause anyone to do something they would never do. I looked at the bright side, no damage to cars and it was a $200-250 lesson. I spent more to learn less before.

#41 Utopia
Like in nearby countries similar to that spendthrift drunken sailor of a nation called the USA which lies just due South of our border.

That must be the line of the day.

#161 Ronaldo on 07.14.11 at 7:38 pm

What a difference 3 years makes. Just looking over the RE listings in the weekend edition in the Vernon area of the sunny Okanagan. 1970’s style houses (not even updated) would have been listed for $100,000 more than what they are right now and interest rates back then were much higher than they are today.

Tonnes of for sale signs all over. On one popular street I counted 13 for sale signs in a three block area. Prices appear to be down by over 100,000 in this area over 2008.

Chatting with a local RE Manager who was checking house across the street which is now vacant. Says the owner (who lives out of town) plans to rent it. Tells me that RE not moving very fast right now. That’s an understatement. House behind mine has been on the market for two years and no bites.

Expect there is going to be a rash of realtors looking for work shortly as in 2008. Hope they dumped their spec properties. Good luck finding a job anywhere around here paying more than $15.00 per hour. Sun tax remember. Certainly no future for car salesmen either. Oh well, going to go sit back on the veranda and enjoy the sun and have a nice cool one.

You were right all along Garth. It just took a little longer than you’d expected. Who would have thought that our dear great leaders on the hill would have re-ignited the bubble as they did and swamping dozens of young and gullible first time buyers in an ocean of debt.

Way to go boys. You are real winners indeed. Now the taxpayers will have to pick up the tab for your stupidity once these underwater homeowners start to walk away. I wonder what other tricks they have up their sleeve now that things are starting to unwind around them.

If houses aren’t selling in an area like the OKanagan where everyone wants to live and houses are a quarter of the price they are in Vancouver, I can’t imagine what’s going to happen to real estate in rain soaked Vancouver in the coming months. Does a 40% drop seem unreasonable? Not to me.

#162 KingBubbles on 07.14.11 at 7:47 pm

@ # 127 –

Nice – I also liked the

“I think they’re blowing smoke. I can’t see those numbers at all.”

#163 garrulous squirrel on 07.14.11 at 8:02 pm

#153 mark……you think it’s us thats created mountains of unearned wealth that should now be stripped away…………………..you’d be a fun guy if you were on planet Earth.

“In the twenty years leading up to the 2008 U.S. crisis, the U.S. money supply (M1) increased by 87% and the M2 money supply by 171%. By any past standards these were huge increases in money supply. In Europe the monetary expansion was even more, with M1 increasing by 145% in only 10 years leading up to 2008. The great western world industrial countries were awash in cash, money, credit and liquidity. ”

The cash they are talking about came from the government printing presses…not grandma’s sock drawer.

I’d like to post the same data for Canada but our government won’t release it…….too sensitive. Be assured that Canada has been lying down with every dog mentioned….our policy makers have rarely had a singular thought and have always kowtowed to outside policy.

You might like to think that seniors are living fat and hardy………..try drive by a food bank some time. Old people are the largest user group…..the single Moms and third are working families………..Oh Yeah….Canada is just sssssssooooooooooooooo rich.

#164 An Cat Dubh on 07.14.11 at 8:40 pm

Mulroney was a director of Barrick, not Bre-X, and made nothing. I hope he reads this and assigns a lawyer to boot your ass. — Garth

I’ll pass the info on to the author of the book and ask him to correct the info. Thanks for the feedback. As for lawyers, bring em on!

#165 echo on 07.14.11 at 8:51 pm

#138 Devore:

“You were stating banks are worried about their conventional CMHC insured mortgages”.

I said the exact opposite. Nice try.

As for the rest, I can’t even be bothered.

#166 brainsail on 07.14.11 at 9:11 pm

#153 mARK

“Are you insane? Seniors get close to $20k/year of income guaranteed to them by the federal government (+ an entire healthcare system that mostly operates for their benefit), have enjoyed the past 40+ years of housing, stock, gold, and bond appreciation, yet here you are, claiming that seniors need more?”

I don’t know where you got the $20K from. If you do some research you will find that the average CPP payment is presently $503. Add that to the $600 OAS and a couple gets about $26K a year. That is poverty level in today’s world.

#167 Mr Buyer on 07.14.11 at 11:29 pm

The a comment on the last post had a kind person suggest authoritative literature related to investing. I am wondering if anyone else has suggestions. I am beginning my financial education so very basic to very involved would be appropriate. In all honesty I would prefer to spend my time reading about molecular biology, programming, animation, teaching and editing but I acknowledge that the current lay of the land requires a more than surface understanding of investing and investment instruments. I will say this going in that I feel stocks, bonds, and whatever other instruments there may be, are highly suspect in my estimation and have/will be subject to manipulation (just another gamble really based often times on vapor and rigged by insider trading). I prefer production and service any day. Again, the present lay of the land requires an intimate understanding of the system, even if it brings me back to my original position. Any suggested readings?

#168 Mr Buyer on 07.14.11 at 11:57 pm

#146 Cory … unions are indeed a double edged sword but a necessary evil to counter balance the psychopaths lording over the unwashed masses (child labor, kids mangled and killed by machinery running with no safety guards, need I go on? It happened in the
UK and even in North america and is happening now in other parts of the world). Biz could not compete with cheap labor globalization introduced to the North American market. That was the death blow. $70 an hour in wages and benefits for high-school educated assembly line workers that spent most of their time trying to figure out ways of doing less and less to collect their paycheck, as bad as it is, is nothing more than a distraction and it is becoming tedious stating the obvious. We must manufacture our own goods as much as possible for sound strategic and economic reasons. Surely there must be creative strategies that could bring that vision about. We have to make a stand for our kids. My children as Canadians should not be facing a third world existence. There is no sane rationalization for it, yet here we are through step wise insanity over decades talking about austerity measures involving less health care and opportunity. We need only develop and implement a better vision, what ever it takes. We boomers talked big and walked small, maybe all our bluster was in fact meant for us to hear ourselves once we became the ‘man.’ Maybe we can and must change our world, not then, but now. Whatever is required.