The warning

“Interest rates are going up.” Did you catch that? Those words just blew from the lips of the finance minister. Whoa boy. Cue the condo crisis.

That elfin bruiser, F, was commenting on the latest salvo from the Bank of Canada, which is doing everything but setting its shorts on fire to alert people to what comes next. And it’s hard for anyone in government to make this more obvious.

Here’s exactly what the guy said when scrummed by reporters:

“People have to be wise in how they look at things. Interest rates are going to go up. They have nowhere to go but up. So people need to be sure that they can afford higher mortgage interest for example. It isn’t necessary for everyone to have the most expensive house they could possibly buy, maxing out the potential mortgage they could get from a financial institution. In fact, it’s probably easier on people if they do a little less of that and have more cash in their lives…”

There ya go. Parse that. Says F: (a) Mortgage rates will rise. (b) Your monthly could be a bitch. (c) You’ll regret all that damn granite. (d) So if you pigged out on a mortgage… (e) get liquid.

In case you don’t know how Ottawa works, the Bank of Canada governor (Brother blog dog Carney) cannot signal changes in interest rates, lest the bond market swoon and croak. But the finance minister sure can, and is. Because there’s supposed to be a Chinese wall (yeah, them again) between the central bank and the elected government, F can muse on monetary policy without it actually being policy. But it is.

Mortgage rates in Canada will rise before they move in the US. You’d best be ready.

All the reasons why were there in the BoC Review, released some hours ago. You’ve read them here in nauseating detail before. Now they’re being spit out as bullet points aimed straight at the heart of the Canadian middle class.

  • Canadians could “experience a significant shock if house prices were to reverse”.
  • Crazy housing prices are directly responsible for record piles of household debt.  So, lower real estate values equals personal crisis.
  • Like the Americans did six years ago (before they blew up), Canadians have been using their houses like ATMs. “The evidence indicates that a significant share of borrowed funds from home-equity extraction was used to finance consumption and home renovation in Canada from 1999 to 2010.”
  • Lines of credit backed by homes (HELOCs) made up almost 50% of all consumer credit last year, largely to finance home renovations, a surge from 11% in 1995. That’s smart – borrow from your home to invest in your home. Investing incest.
  • Houses need only fall in value by 10% to slash GDP by 1%. Remember, all it took was a 2% decline in GDP to start trashing America.
  • House horniness among the property virgins is indebting an entire generation. In 2010, the debt load of a typical household led by people aged 31-35 was $120,000, up from $75,000 in 1999. That’s a 60% increase.
  • And, of course, the average family in almost every major city cannot afford the average home.

This week, once again, the warning shots are coming from everywhere. Maclean’s has a cover story on the impending explosion of the housing bubble. Australian web site MacroBusiness has just posted a lengthy piece on the evils of CMHC and the dangerous thing called Canadian real estate. In today’s Globe, business prof and writer George Athanassakos looks at all the things this pathetic blog has been bleating on about and concludes:

“Canada’s high house prices in relation to incomes, combined with record household debt levels and overinvestment in residential construction, combined with a slowdown in demand, will cause a severe correction in the real estate market. This time it is not different. It never is.”

  Meanwhile, 80% of Toronto’s teeming condos are being bought by speculators. Our major banks scoff federal rules, giving borrowers downpayments in the guise of cash-back mortgages. CMHC is scraping the bottom of its $600 billion barrel. Personal debt now equals 92% of the economy. Crowds camp all night in February to buy $700,000 houses in a few minutes. And the government warns, warns and warns about what comes next.

How can anyone stay blinded to the reality of the moment?

F may have defined stupid when he pushed through 0/40 and helped ignite a fire he cannot now extinguish. But the little pecker has this right: “have more cash.”

Get liquid. Last call.

279 comments ↓

#1 Bottoms_Up on 02.23.12 at 9:50 pm

uno

#2 DoomedinSask on 02.23.12 at 9:50 pm

First!!! Oh yeaaaaaaaaaaaaah!!

#3 gladiator on 02.23.12 at 9:53 pm

2 days ago, Preciousss said assets will not fall in price. Garth, you didn’t get the memo, did you?
imho, they’ll fall and fall hard, which will drive down commodity prices, and with them – the Canadian economy. oopsie…

#4 Maxamillion on 02.23.12 at 9:53 pm

This isn’t Kansas anymore Toto, back to reality.

#5 TRT on 02.23.12 at 9:56 pm

..’the little pecker..’

Hahahaha… Could of used a few other synonyms??

#6 shanks on 02.23.12 at 9:56 pm

ohyeah first!

#7 Dim on 02.23.12 at 10:00 pm

first

#8 Arse on 02.23.12 at 10:00 pm

First???

#9 Steve on 02.23.12 at 10:03 pm

Third

#10 Ex-Ex-Pat on 02.23.12 at 10:04 pm

I am not a fan of F, but what he said today earned some respect.

#11 Smoking Man on 02.23.12 at 10:04 pm

Get liquid. Last call.

Bahahahahahahahah

My cyrstal ball is clearer than yours….Or it has been.

With all new trillions floating around, inflating our way out is the only way it’s going to happen.

Hard assets kids..

Buy Buy Buy, expect bonds.

#12 Dan on 02.23.12 at 10:04 pm

Is this the beginning
or the End

#13 Dan on 02.23.12 at 10:04 pm

First?

#14 T.O. Bubble Boy on 02.23.12 at 10:08 pm

seems like a re-run of Fall 2008…

Flaherty (August 2008): “there will not be a recession”
Flaherty (October 2008): “we’re screwed, bailout time”

Flaherty (2011): “we don’t see a housing bubble”
Flaherty (2012): “if you bought during that housing bubble, you’re screwed… and CMHC is laughing at you for taking out that giant mortgage”

#15 blase on 02.23.12 at 10:09 pm

“the little pecker” hehehehe.

That Maclean’s cover makes me so happy.

The Harper government has fundamentally screwed with Canadians by waving a carrot in front of their faces that most people simply could not refuse. Most people do not read books on finance when they are in their teens or twenties, and are called to action simply by what their friends are doing, or what they see on TV. I don’t fault them; people are good, and just want to live a good, happy life. It is the government’s job to regulate banking so that people do not borrow more money than they can afford.

This has been a heist to extract money from the middle class, and it has worked brilliantly. If it is any consolation, there will soon be hordes of Canucks wandering the suburbs and condo towers with hockey sticks and designer handbags bought with LOC’s, demanding the blood of F and H and the Big Banks.

The days of the unelectable federal Liberals will pale in comparison.

#16 sam.i.am on 02.23.12 at 10:10 pm

Another leading indicator … RONA closing stores.

#17 Observer on 02.23.12 at 10:10 pm

If F/C don’t stabilize the market soon, they’ll run the risk of hurting the futures of more young urban families as they borrow their brains out to buy at these levels.

#18 TaxHaven on 02.23.12 at 10:16 pm

“…lest the bond market swoon and croak…”

Might be a good thing if Carney DID let us know.

Might enable us to plan capital allocation more accurately and for better, bona fide investment purposes.

Interest rates would rise to levels where those who made silly borrowing decisions pay for them. Fixed-income earners would begin to see some return for their efforts at saving. Frugality and forbearance would again be desirable traits. Government borrowing and spending would of necessity be reined in…whole programs (fighter toys? helicopter junkets? social welfare spending?) might thus be canned.

Can’t see much downside to a rate rise at all…

#19 shanks on 02.23.12 at 10:17 pm

maybe it is different this time and this means we are all about to get raises! SPEND! SPEND!!

#20 Thomas on 02.23.12 at 10:20 pm

A friend recently got a mortgage. The bank said that in five years upon renewal, rates will most likely be lower! That should be illegal and the bank held liable for such advice.

Out the bank. — Garth

#21 M in Ottawa on 02.23.12 at 10:21 pm

Garth, what happens when people who took 30 or 35 with 5 down go to renew in 2 years at 5 or above and realize in order to get the same payment it would mean another 30 or 35 year amort?
If they say screw it and try to sell, with a house price drop they could be underwater and may not qualify for another mortgage especially if they decided to reno on a HELOC.
If they stay put and eat more mortgage payment and have less disposable income the economy tanks.
This would also mean probably having mortgage payments when they try to retire, with oas not coming soon enough.
Is it time to get the squirrel recipes out again?

#22 kenken on 02.23.12 at 10:22 pm

Warning warning … where are the actions???

Reminds me of Ben Bernanke, October 2005

http://www.washingtonpost.com/wp-dyn/content/article/2005/10/26/AR2005102602255.html

#23 Mr. Lee on 02.23.12 at 10:26 pm

For far too many it is already to late. No matter how a correction manifests itself, it will have dire consequences on consumer spending that will reverberate along the entire macroeconomic condition. Brace yourselves for what comes next. Many years of anaemic growth until the overextended pay down enough of their debt to have some sort of disposable spending. This could take better part of a decade or more though.

#24 John Ratadlin on 02.23.12 at 10:26 pm

Real estate will soon be called real devastate !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

#25 Dan on 02.23.12 at 10:28 pm

I’ve been saying this for a couple of years and that is the masses will borrow money until they go bankrupt. Went to visit a friend in a new area where homes cost 500-600 k. And higher. Anyhow the small driveway was packed with beaters and some cars were sticking out of the driveway. I seen cabs and you get the feeling that many got questionable mortgages. It’s obvious people are stupid and the masses will continue to borrow until action is taken. Borrowers will bankrupt Canada and Mark Carney and f are starting to get worried now? Canada has a bigger debt bubble then the US. Looks like f will have no choice but to make it 25 years and cap CHMC to 600billion or risk Canada going broke.

#26 darcy on 02.23.12 at 10:28 pm

So maybe this is a stupid question but……will corporate bonds be hit by raising interest rates the same way government bonds will?

Prices down,yields up. — Garth

#27 Island girl on 02.23.12 at 10:28 pm

Perhaps this is a stupid question, but if you bought a place and mortgaged for 40, and had to renew in a couple of years, would you be able to keep it at the 35 years it would be at or would it have to be refinanced at the current maximum length (25 or 30). I have some friends and family who are in that position.

#28 northerner on 02.23.12 at 10:30 pm

You’re winning!! check this out http://www.macrobusiness.com.au/2012/02/canadian-bubble-trouble-leith-van-onselen/?utm_source=Media+List&utm_campaign=c53b1df5ef-RSS_DAILY_MAILCHIMP_CAMPAIGN&utm_medium=email

#29 Suede on 02.23.12 at 10:33 pm

Mainstream media spin doctors. So the breakdown looks like this

– Majority of talking heads and media are saying “beware the deflating bubble”
– Pundits in the CREA or Big RE houses are saying “buy, buy, buy – it’s different here”
– Public is confused to status quo remains: Get loans, put minimum down, put money into RRSP’s and GIC’s

What realtors will say when:

Average housing prices deflate – “Now is a great time to buy, values have fallen X%, it’s like a back-to-school sale”

Prices continue to inch higher – “House prices will continue to go up. It’s the best long term investment.”

Ask someone in AZ,FL,NV etc… Long term is 10 years, they have 4 left to make up 70%

#30 Not Fooled By Property Spruikers Hype on 02.23.12 at 10:36 pm

Garth

You readers may like to look into the future here in Perth Western Australia. We are in the middle of a mining boom & yet receivers have been appointed to this Prime CBD Luxury apartment block, with $1 million dollar discounts to clear stocks.

http://nfbpsh.blogspot.com.au/2012/02/perth-apartment-fire-sale-starts.html

#31 Worried realtors on 02.23.12 at 10:42 pm

Canadians are in for a rude awakening. F has no choice to put a stop or face an even bigger crash. CHMC has what would be the US equivalent of 6 Trillion dollars worth of mortgages. Canadians have over 1 trillion dollars in mortgages which is like the US equivalent of 10 trillion dollars. Canada is in trouble now and the bubble should of been allowed to crash in 2008 which it would have. Mortgage buddy has told me stories that would blow your mind. The truth will come out.

#32 Thomas on 02.23.12 at 10:42 pm

When my friends tell me about throwing my money away on rent and building up equity, I say, “I build up equity every month, in my TFSA.” I then go on to say I prefer no equity over jumping into a hot market destined for negative equity.

#33 Tim on 02.23.12 at 10:48 pm

The interest rate differential between Canada and US will never be that significant, it never has. Our dollar would skyrocket. You think manufacturing sucks now…Canadian manufacturers would actually have to compete on quality and execution, instead of whining to the govt to keep our dollar low…how I digress…the rate in the US will not increase dramatically in the near future, so the CDN rate may go up a few percent, screwing people who are 95% leveraged, but a few percent increase will result in a rate still substantially below the average of 6%

#34 Timing is Everything on 02.23.12 at 10:54 pm

#12 Dan – “Is this the beginning
or the End”

Yes.

#35 mark on 02.23.12 at 10:56 pm

Thank god Kevin “I don’t see it happening” O’Leary wasn’t on tonight.

This dude actually spelt out the dangers, though he wasn’t given much time to do it.

http://www.cbc.ca/video/#/News/Business/1239849460/ID=2201141696

#36 Clockbike on 02.23.12 at 10:57 pm

Requesting source on F saying “Interest rates are going up.” please and thank you.

#37 FullofFear on 02.23.12 at 11:02 pm

So many people comment here about those fools that have borrowed so much money and how they are in so much trouble. But the people who are commenting here seem to think that they themselves will avoid any pain due to their wise real estate decisions (i.e. renting). But in the end the “fools” may have the last laugh. If there are enough of them, the government helps them out and then who is the real fool.

#38 Soylent Green is People on 02.23.12 at 11:04 pm

This could mean the end of the age of innocence in Canadian electoral campaigns.

Elections Canada stated these phoney phone calls deliberately disrupted the voting process.

How is this different from a bunch of goons with clubs blocking the door to a voter station as we’ve seen in Third World countries or the deep south of the United States?

http://www2.macleans.ca/2012/02/23/this-serious-bastardization-of-our-electoral-system/

.

Power and Politics Ballot Box Question results on
Harper stealing last few elections:

http://www.facebook.com/photo.php?fbid=361363963896968&set=o.280641265334545&type=1&theater

.
.
.
.

#39 Canadian Watchdog on 02.23.12 at 11:06 pm

F’s statement is nothing new and just another propaganda stunt to counter recent pessimism in the market; instead he’s playing the March 2011 card, only with a imaginary deadline to rush the herd into buying before it’s too late.

Let’s get one thing straight; F does not dictate interest rates, Carney does, and anyone who believes Carney will lift rates (making cash attractive) when the CAN is already at par with USD is quiet gullible in my opinion. Lifting rates anytime soon would hurt exports, business credit and create job losses that would put more homes into foreclosure.

Read the Bank of Canada Act and you will learn that the BOC’s mandate is i) provide liquidity when credit contracts ii) maintain exchange rate stability. That’s it. Carney has stated many times that the BoC will not act on household debt alone, rather it is monitored as one of many variables to determine policy decisions.

Sorry folks, this is just another bluff. The BoC’s decisions are already made; they will devalue the CAN to boost exports before every lifting rates.

Google ‘Bank of Canada FX Intervention’ to learn more.

#40 Randy on 02.23.12 at 11:09 pm

Our governments won’t let interest rates on their (OUR) debt rise….they’d have to stop their INSANE Spending…..

#41 };-) aka DA on 02.23.12 at 11:11 pm

#236JRoss on 02.23.12 at 8:13 pm
DA,

“As he is also quoted, “You miss 100% of the shots you don’t take”, I suspect he took the shots and made the moves that he might capitalize on his talent. He did miss a shot or two in his career you know.”

Great quote DA, because throwing a puck the net and hoping for a bounce is exactly the type of strategy people should employ with their life’s savings.

Give your head a shake. Seriously.

Life is a gamble JRoss.

#42 Ben Nevis on 02.23.12 at 11:12 pm

Way to go, Garth. But who finally let the mainstream media off the leash?Cannot believe how slow they’ve been on this one. Not a good reflection on Canadian investigative journalism generally and if you were a cynic you might think they’d been muffled to date….but nah! Not possible.

#43 Bench Warmer on 02.23.12 at 11:13 pm

” That’s smart – borrow from you home to invest in your home. Investing incest.” LOL! Brilliant!

It will be awhile yet before any of this starts sinking into 90% of Canadians thick skulls. Most will be left standing on the curb, scratching they’re heads wondering what the F%#* just happened? “This was Canada this wasn’t suppose to happen here”

#44 Alero01 on 02.23.12 at 11:14 pm

I would also like to see a response to the question posted in #27 from Island Girl.

#45 mikling on 02.23.12 at 11:14 pm

We’ve heard that tune before. Both from Carney and F. Cry wolf again. No guts everytime.

#46 Eli on 02.23.12 at 11:16 pm

you say don’t believe the media and we don’t now you say believe what they are say? I think you might have a new book coming out?

#47 Retired Boomer - WI on 02.23.12 at 11:17 pm

It would be great in interest rates SOAR!!! It would also have been great if the EU told Greece to go F themselves and refused the 2nd Annual Bailout, and sent a warning to all the other lackadaisical members of the EU no more bailouts!! Default you’re OUT!

Of course, that would have imperiled the European Banks who ate all those toxic sovereign Bonds, and nobody wants the speckers to profit on all the CDS written on sovereign debt! What a world.

Instead, created more fiat dough to bay & inflate our way to never never land. Gotta buy that oil field, that’s all there is to it. Oh, wait already own that sand property here.

Better stock up on real stuff, Korbel is going up!

#48 BPOE on 02.23.12 at 11:18 pm

Looks like Shiller is working for Macleans now. How pathetic. Nobody can stop the overseas money from buying in BPOE. Nobody

#49 Jon B on 02.23.12 at 11:22 pm

I’d say that about nails it.

#50 ozy - we need to call our MPs on 02.23.12 at 11:24 pm

We must use democratic levers, call MPs to ask for gov. head on a plater in the House of Commons. Stops must be put to block the foreign speculation, speculation, speculation, or we’ll end-up like asian crisis (bad, bad, bad) a decade ago. Don’t be lazy.

#51 martin9999 on 02.23.12 at 11:25 pm

“have more cash.” – good one but rates aint going up. when the canadian dollar hits0.90us then expect them to go up, wich surely can be in the next little while but just not yet

#52 LJ on 02.23.12 at 11:26 pm

The current Bank of Canada review, referenced above, can be found at:

http://www.bankofcanada.ca/wp-content/uploads/2012/02/review_winter11-12.pdf

Interesting read. Especially the last chapter on “Household Insolvency in Canada.”

However, the entire series of articles contained within the report deal with the bubblicious Canadian housing market and current implications of the elevated prices being experienced from coast to coast.

Link for the masses next time Garth, please. Although, the publication was not hard to find.

#53 BPOE on 02.23.12 at 11:26 pm

Folks, this is how it will unfold. Interest rates MIGHT be slightly raised for a few months THEN quickly lowered. You can bank on it. Now that the American has unveiled he is just a youngster who got lucky in the condo market his bravado is now crystal clear. It’s a generational thing. The rest of us being around for a whole lot longer can see whats going on. And folks it is looking better and better everyday. Oakridge Mall area on 41st a half block of houses just scooped up with sold signs. Omni furiously digging in Steveston ready to BUILD and buyers to BUY. These are facts folks. Come down to BPOE and see whats really going on or continue to believe in a young whippersnapper southerner

#54 jimmy on 02.23.12 at 11:26 pm

Condos not fit for humans. Fire department sends owners looking for other digs. Now they get to buy AND rent.

http://www.cbc.ca/news/canada/edmonton/story/2012/02/23/edmonton-leduc-condo-evacuation.html?cmp=rss

Heard interviews with tenants today on the local radio shows. Reporter asked a couple if they had gotten any advice when they were buying. “yeah” they said, “we got advise from our parents to buy”.

#55 City Slicker on 02.23.12 at 11:27 pm

The only explanation I have for all this debt gorging is people banking on forgiveness of a large portion of it. I think that trend is happening in Greece.

#56 Westsider on 02.23.12 at 11:29 pm

A lawyer knocked on the door of my rented house on the Westside of Vancouver this afternoon, and offered me $2.4 mil. He was going door to door asking if anyone wanted to sell. He said he could by-pass any realtors and left me his card. I am trying to think of a way to sell him this house!!!!!!LOL!!The insanity continues

#57 Ex-Cowtown on 02.23.12 at 11:30 pm

BPOE on 02.23.12 at 11:18 pm
Looks like Shiller is working for Macleans now. How pathetic. Nobody can stop the overseas money from buying in BPOE. Nobody

++++++++++++++++++++++++++++++++++++
Nobody will want to buy in BPOE. Nobody. Nobody from China will have $$ when the extent of their self-deceptive “boom” is realized. Nobody will lend them money. Nobody.

And nobody listens to BPOE. Nobody.

#58 Smoking Man on 02.23.12 at 11:31 pm

As the bubble heads dance tonight the fat lady just got a case of lerengitus. Did I spell that right. God I so wish for a major crash only way ill get my basement dweller offspring gone.

The insane voice inside my head is saying your screwed kids aare her for a long tiime

Please voice please be fking wrong for once

#59 Ozy - Rumors from upper echelons on 02.23.12 at 11:33 pm

Rumors from upper echelons (I won’t tell you the institution) is that housing will go down in spring-summer, and Fixed Rates will rise at same time, as bonds price continue go down since Octomber, fulled by rising stock market everywhere.

#60 kc on 02.23.12 at 11:38 pm

Today 2 houses on my street in Maple Ridge went on the market. toss a rock and hit them both; funny thing is they are both for sale by the 1% guys. No national RE Agents, I find this interesting that 2 on the same day with the same type of agents. Another house just had a roof replaced and I am curios as to if this one will be on the market soon also… bail now before the rush???

#61 Blue Monster Lover of Cookies on 02.23.12 at 11:38 pm

Westernman from yesterday, easy on the word liberalism, it’s actually a noble word that had been highjacked like so many other noble words, ex. conservative.

There’s a biography on Ludwig Von Mises called “The Last Knight of Liberalism”. It means freedom.

When you rail against the Marxists just call it what it is, socialism. Liberalism Good, Socialism BAD.

#62 Air on 02.23.12 at 11:41 pm

Finance Minister Jim Flaherty, meanwhile, said on Thursday in Toronto that authorities are keeping an eye on the hot condominium market in some cities, and urged borrowers to resist buying “the most expensive house they can possibly buy.”

#63 Ex-Cowtown on 02.23.12 at 11:41 pm

So G-man, should we be dumping our bonds and prefs if interest rates are going to climb?

Why sell something you bought for income? — Garth

#64 eagle eyes on 02.23.12 at 11:43 pm

Anyone noticed that F looked really flustered and almost apologetic during his speech?

#65 GTA House Hunter on 02.23.12 at 11:48 pm

It will just take a small sting operation and the sub prime crisis will be evident in Canada.
An acquaintance earning $17 and hour is buying a house for 362000 with $10000. The wife does not work.
The Mortgage Broker says he can get all the paperwork done for $2500 to get him the full loan amount.
I am amazed.
The day this will happed ( which is very soon) I’ll really doubt the Canadian Banking System.

I will keep you posted what happens rt now the file is under process.

#66 NFN_NLN on 02.23.12 at 11:51 pm

I know the bond prices down yields up mantra. But how about equities with a dividend component? Historically when interest rates go up do people start to flee those stocks driving the price down?

#67 Blue Monster Lover of Cookies on 02.23.12 at 11:53 pm

I know you like it hot, like to writhe in sweat.
If you think this feels good, you ain’t felt nothing yet.
Red hot lips in the palm of my hand, feel your body quake as we hit the promise land!
I’m heave duty.

We’ll rise inside ya till the power spits your head.
We’re gonna rock ya till your metal hunger’s fed.
Lets all join forces, with withered iron hands and prove to all the world Metal Rules The Earth!
We’re heavy duty.

Defenders of the Faith!

#68 Ozy - Why we’re in trouble if housing craters on 02.23.12 at 11:53 pm

Why we’re in trouble if housing craters

http://business.financialpost.com/2012/02/23/why-were-in-trouble-if-housing-craters/

#69 Ralph Cramdown on 02.23.12 at 11:54 pm

Here’s how the conversation went:
Carney: You have to DO SOMETHING. I’m trying to keep growth going and employment up with free money, but businesses won’t invest in productivity and all the cash just gets sucked into the housing bubble. I’ve ONLY got one lever, but YOU can tweak things with regulation.
Flaherty: No way, not on my watch. Having the bubble pop on me would be bad enough, but I’m not going to do anything to cause it.
Carney: Then I’ll raise rates, so help me God, be it on your head! Don’t make me do it!
F: Fine. I’ll tell the press. You can leave by the back stairs.

Here’s someone trying to get liquid:

C2217766 – M5P – 44 BURTON RD Toronto, Ontario
Price Change. Feb 23: $6,695,000 Oct 13: $7,995,000
Prestigious Forest Hill Cul-De-Sac! A Once In A Lifetime Opportunity

#70 Van guy on 02.23.12 at 11:59 pm

#52 BPOE on 02.23.12 at 11:26 pm
___________________________________________

Those homes on w 41 ave have bee sold for months now. See how fast the market can change? Did you know there are more blocks on Cambie st that needs to sell? And Granville st too? NO buyers now. The market has turned and you look more and more stupid everytime you post here. The last thing anyone should do here is build more attached properties.

#71 Preciousss on 02.24.12 at 12:05 am

#3gladiator

I could not agree less. ASSets (think pm’s, equities, commodities, OIL, NAT GAS,……………………..) will rise in the ocean of liquidity.

The sharks behind the big boy trading screens will ensure this outcome.

Houses are not traded from behind a big boy screen but the ground rules certainly are.

#72 RM in Oakville on 02.24.12 at 12:06 am

#24 John Ratadlin

A thousand exclamation points? Really? Have some pity for those of us on mobile devices that try to fit all that crap on one screen.

#73 Trailer Park Boys on 02.24.12 at 12:12 am

We’re thinking…(at least with 50% +1 majority..”no shirt” Randy has the tie breaking voter ..that Garth should get the Nobel Prize in Real Estate…..

#74 dd on 02.24.12 at 12:14 am

Governemnt stats on inflation are all lies. Inflation should be a lot higher than presented in the chart (1.5%) therefore disposable income is a lot less. Using the pre 1990 method (less screwing around with)inflation is running at least 7%.

The US FED new mandate is inflation rate (printing money) at a rate of 2% and above. This will affect how all other central banks conduct policy.

Still pissed about your PMs, eh? — Garth

#75 Chris L. on 02.24.12 at 12:22 am

When will rates rise?

#76 ShipsNGiggles on 02.24.12 at 12:25 am

Read the comments, most people on on the same page… also have a look at Mastercard and Visa stock, business is doing them very well!

http://www.theglobeandmail.com/report-on-business/economy/central-bank-targets-home-equity-credit-lines/article2347476/

#77 These pretzels are making me thirsty on 02.24.12 at 12:27 am

Suggested title for the next post:

What the F !

#78 ottawa pete on 02.24.12 at 12:29 am

I have asked for comment before, but received none so here is my prediction again:

Bond rates (and hence mortgage rates) will increase sharply over the next few years because as Europe stabilizes it will do so with high yield bonds that will be viewed as generally low risk and the CDN/US governments will have no choice but to offer competitive rates….nothing else matters when you are in debt and need to roll over billions/trillions. On the positive side, CDN/U.S exchange rate will likely remain stable as we are in the same boat debt wise with similar risk profile.

#79 Junius on 02.24.12 at 12:33 am

smoking man

you are wrong this time, my pet monkey has his mouth full or he would provide a comment as well.

#80 renters rule on 02.24.12 at 12:41 am

BPOE

bestest piece of excrement

#81 dd on 02.24.12 at 12:41 am

#74 Chris L.

Plenty of time Chris. The US will not raise them until late 2014. If Canadian raises rates the CDN $ will even go higher and choke exports. THe US has had low rates for four years and will prob have it for another four years. It is about saving the banks. Nothing else.

Rubbish. — Garth

#82 Young Old Fart on 02.24.12 at 12:44 am

#55 Westsider on 02.23.12 at 11:29 pm
A lawyer knocked on the door of my rented house on the Westside of Vancouver this afternoon, and offered me $2.4 mil. He was going door to door asking if anyone wanted to sell. He said he could by-pass any realtors and left me his card. I am trying to think of a way to sell him this house!!!!!!LOL!!The insanity continues

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

ask for a contract and 500K cash deposit….then RUN!!!

#83 Fifty Percent Correction Predictor on 02.24.12 at 12:54 am

77 ottawa pete on 02.24.12 at 12:29 am,

The day when Europe is fixed, the day the US gov bond bubble bursts. Rates will shoot up!

Lots of money is parked in US Gov bonds at this moment. It is a fear trade. Hence, watch Europe.

#84 Preciousss on 02.24.12 at 12:54 am

I see negative real rates far out along the curve. Nothing warm and fuzzy about the “twisted management” and sub 1% real rates on the 30 year.

Stagflation is a real cruel mother. Eye popping prices in a terrible business climate.

This stuff was evident in the early 2000’s. We are just warming up.

I gonna sit back until 2015 or so. We can talk more about gold at that time.

#85 dd on 02.24.12 at 12:55 am

#77ottawa pete

Bond rates (and hence mortgage rates) will increase sharply over the next few years because as Europe stabilizes it will do so with high yield bonds
—————————————————————–
I would agree with you, however, if the ECB keep stepping into the pictures to buy the bonds it will keep rates low. Take the 20 and 30 bonds in the US. 93% of all US bonds being auctioned today are being bought up by the FED. So the govenment IS the market.

#86 Trailer Park Boys on 02.24.12 at 12:55 am

WE are 69th !!!!

#87 Kalergie on 02.24.12 at 12:56 am

Garth,
What would rising inerest rates and a decline in residential RE value mean for the overall economy of Canada?
Thanks for your continuous efforts!

#88 Trailer Park Boys on 02.24.12 at 1:03 am

Listen…

The Mode-Ratter who “add judah gates ” these comments better get up two- sPeyd….or we’ll FWD them to the Nobel Prize commie -tea.

We are gettingk tired of waiting for happy hour ( 4 pitchers = $1 ) and Keno to wait fer Garths in – laws to censor these communts.

Delay affectx Global Warmink comrades !!!

#89 dd on 02.24.12 at 1:07 am

#83Preciousss

I see negative real rates far out along the curve. Nothing warm and fuzzy about the “twisted management” and sub 1% real rates on the 30 year.

Stagflation is a real cruel mother.
—————————————————————–
Read Jim Rickards – currency wars. He has a great take on all the cheap paper.

#90 Canadian Watchdog on 02.24.12 at 1:11 am

#51 LJ

Was a good read and goes to show how foreclosures have already been underway; people are defaulting on their CC, LOC or HELOC’s and filing for proposals that allows them to retain some equity while giving up their assets. This is the reason why CBA’s mortgages in arrears stats understates delinquency rates; simply because mortgage payments are a higher priority then CC, LOC or HELOC, so those in distress will default on other payments before a their mortgage.

Not to mention OSFI nor CBA discloses foreclosure stats for CMHC that holds mortgage ownership on behalf of MBS investors. That’s where most of the action is, but they’ll never disclose those stats.

#91 dd on 02.24.12 at 1:11 am

#82Fifty Percent Correction Predictor

Europe crises might be delayed but it will never be “fixed.” Inflate or default – the only two options at this point.

#92 Patiently Waiting on 02.24.12 at 1:15 am

How I wish it were true that Flaherty & Carney would put a stop to this madness that will make debt slaves out of so many young Canadians. My father always taught me to watch what someone does, not what he says . . . Flaherty & Carney’s track record speaks volumes . . . pun intended . . . just more jawboning I’m thinking . . .

#93 TaxHaven on 02.24.12 at 1:17 am

#74 Chris L.

When will rates rise?

The cost of REAL capital, be it gold, oil or commodities, has been rising for years and will continue to do so.

Interest rates in paper money won’t rise until we see the fabled “failed bond auction” scenario. But I don’t expect this anytime soon: bond buyers, foreign or domestic, have few alternatives as they are utterly dependent on fixed income payments, cannot speculate or take possession of commodities and have, as a result of trade, oceans of USD needing someplace to go.

What WILL happen, slowly and continuously, is price inflation in asic necessities coupled with devaluation/currency wars, as producers and sellers of real goods are realizing they hold the real stuff.

Nothing armageddon-ish, just more of the same speeded up a little…

#94 CHANGES on 02.24.12 at 1:17 am

Mortgage Fraud in Canada Up 150% Year on Year
According to Equifax, mortgage fraud is up 150%, $400 million in total, and that’s just what they found for their clients, meaning it’s a low estimate.

#95 Corban on 02.24.12 at 1:21 am

In the long run why should I personally care if the CDN dollar goes up. Doesn’t my purchasing power unequivocably go up due to everything I purchase having been imported? I mean less face it, as a consumer i don’t buy squat from canadian manufacturers, and personally my job is in no way affected by the rates (having survived all the offshoring already). The net benefit I see is that canadian manufacturing and resource sectors get a heck of a lot more efficient because they are forced to compete. Isn’t that a good thing in a macro sense?

#96 Corey on 02.24.12 at 1:33 am

“This time it is not different. It never is.”

That’s a nod to you. Who else says this as often or as well as you Garth? Someone’s been reading GreaterFool.
: )

#97 Robert Dudek on 02.24.12 at 1:39 am

<i?It would be great in interest rates SOAR!!! It would also have been great if the EU told Greece to go F themselves and refused the 2nd Annual Bailout, and sent a warning to all the other lackadaisical members of the EU no more bailouts!! Default you’re OUT!

Regarding Greece/E.U.: you have it completely backwards. EU/ECB/IMF are BEGGING Greece to take the bailout. A default and a new drachma would be a complete disaster for the European banks.

Greece would suffer, but just like Iceland they would be back on their feet in a couple of years. The only reason Greece hasn’t defaulted yet is that the technocratic “government” are lackeys of the troika. This is very similar to a Vichy France situation, where the country is being ruled by a band of traitors.

#98 Dr.NickRiviera on 02.24.12 at 1:40 am

Garth, here in Edmonton the consensus among everyone I talk to is that Alberta is immune to a correction because “it’s different here”. I have a few co-workers about to take the ownership plunge… I’ve been trying to warn them and advised they wait a year or two and buy at a discount. Should they be concerned, or am I over reacting? Is Alberta only going get hit with a 5-10% dip in prices unlike our neighbors to the east and west?

#99 Dan7 on 02.24.12 at 1:40 am

Garth

With interest rates on the rise soon would it be a good idea to overweight on the lifeco’s SLF, GWO, MLF? What other sectors should i pay attention to that will benefit from a rate increase?
TY

#100 Fifty Percent Correction Predictor on 02.24.12 at 1:48 am

#90 dd on 02.24.12 at 1:11 am
Europe crises might be delayed but it will never be “fixed.” Inflate or default – the only two options at this point.

—- Default IS one of the ways to get it fixed.

#101 Don on 02.24.12 at 1:51 am

FullofFear on 02.23.12 at 11:02 pm

But in the end the “fools” may have the last laugh. If there are enough of them, the government helps them out and then who is the real fool.

******************************************

oh you mean how the US government is helping out American mortgage holders – sometimes help doesn’t arrive soon enough even if it’s on the way. That is a lame argument, by the time any government reacts it’s always too late.

#102 };-) aka DA on 02.24.12 at 1:51 am

About time! We need realistic rates in the 7.0% plus range. Bring ’em on! Yabba dabba do!

Crank it!

#103 earlymidlifecrisis on 02.24.12 at 1:54 am

Great links today. The macro article was good, though very depressing. So if its a federal tax payer issue we all get singed in the end, regardless of whether we have stopped playing with matches or not. How utterly depressing. I wish they were more accountable for their decisions vs the entire country paying for them.

#104 noodles 79 on 02.24.12 at 1:56 am

Lets put aside statistics and talk experience.ln 1985, a freind and I bought a small fixer upper for 50k when the average house was around 80k.We renovated and rented it out.In the three months it took to renovate, the market started taking off.In 1987 my freind and his wife went through a divorce and we were forced to sell. It turned out ok because by then,house prices jumped drastically. We sold for 127k.What a buzz! I was on my way to retirement. Because I did so well. I had freinds wanting to invest with me.Before you know it I had two sets of partners. With one set we bought three townhouses that didnt need any work, with the other set of partners,we bought a fixer upper for 135k.We renovated and rented. In the time it took us to renovate, the house jumped to 200k. I wanted to keep the fixer upper because the cash flow was great, we could have refinanced and end up with the same money as we sold. But my partners tasted some money and wanted out. So we sold.With the money I made on the deal I bought a couple more properties with my townhouse parners.
Things were moving along realy good.I would calculate my net worth from time to time because prices kept going up.I was on cloud nine but all my cash was tied up.That was ok because according to the news, houses were going to keep going up. In mid 89 the partners who had abondend me wanted to invest with me again.But I had no ready cash.One of my freinds suggested I talk to my lawyer to see if he could do anything for us.I went to my lawyer with my plan and he said he’d become a partner and he’d handle all the financing.Wow! Even my lawyer likes my plan.I was realy on my way.We purchased a cosmetic reno and rented it out. In late1989 we purched two major reno properties that were side by side and all boarded up.A three month reno project with all the partners pitching in and the lawyer handling the finances. We purchased each prperty for 165k and spent 40k on each for renovation.All finaced with the help of my lawyer.I had a couple of partners who liked to roam around looking at properties, so a three month project took six months. This took us into 1990. By the time we finshed renovating the market was dead,nothing was moving. So if youve been keeping track,thats eight properties.Lets just say it took me over 15 years to get out of that hole.Fifteen years to get out of the hole at 1990 prices, how many years will it take to get out at 2012 prices.Im the most liquid person I know now.And Im sure people look down at me for that, but soon I’ll have a lot of people resenting me.There are people out there that just dont want you to be free.The herd doesnt like straglers. To bad for the herd, Im going on vacation soon and I wont have to use my line of credit.Ciao

#105 Fifty Percent Correction Predictor on 02.24.12 at 2:00 am

#84 dd on 02.24.12 at 12:55 am

#77ottawa pete

Bond rates (and hence mortgage rates) will increase sharply over the next few years because as Europe stabilizes it will do so with high yield bonds
—————————————————————–
I would agree with you, however, if the ECB keep stepping into the pictures to buy the bonds it will keep rates low. Take the 20 and 30 bonds in the US. 93% of all US bonds being auctioned today are being bought up by the FED. So the govenment IS the market.
_______________________________________

Guys,

I have to scream to make this point again. Sorry.

GOVERNMENT IS NOT BIGGER THAN THE MARKET! GOV IS NOT BIGGER THAN PHYSICS! IT IS ONLY AN ILLUSION!

If gov is bigger than the maket, then we would not have debt problem, real estate bubble, $5/gallon gas. We would have lived in Utopia!

Ask Greek gov, Spain gov, Italian gov etc if they can control their interest rates?!

#106 zman on 02.24.12 at 2:02 am

hi

all of us have heard both F and Carney say the same things for a long time but that is all what they do…..talk and talk and talk…why is it different this time around…the only way house prices will fall if rates go up and there is no indication that will happen…they were saying that reducing the amortization to 30 years will cause the prices to come down but they went up further…in toronto there was all this talk of house prices falling in a few years ago when mayor miller introduced another layer of land transfer tax but this did not happen..prices continued to escalate…

#107 Jimmy on 02.24.12 at 2:05 am

Thanks Garth. I love you man!

#108 Cato on 02.24.12 at 2:06 am

Last call sounds about right.

F. and gang gambled big and lost, now we all pay the price. The gamble was juice consumer spending while our largest trading partner was in the doldrums and hope a US recovery rides to our rescue. They opened the floodgates and turned Canadians into little debt piggies. Why curtail pet spending projects or deal with voter angst about a souring economy when a tantalizing majority was within reach. Why not just gamble the financial future of the next generation, after all whats the worst that can happen to a politician?

As the rest of the world has already shown it only takes a small group of bad apples to set this whole thing off. Just a few foreclosures in a neighborhood is all it takes to drag values down for the entire area. Pretty soon those barely hanging on find bankers are no longer their pals, HELOCs get pulled & traditional sources of credit start running dry. Now they get desperate and start turning to credit cards. Pretty soon they are using new debt to pay interest on existing debt and its all over. Thats when everybody cries, what was a healthy correction starts gaining momentum and turns into a full blown unstoppable crisis.

#109 Charles on 02.24.12 at 2:08 am

Garth, really enjoy reading your blog and the insightful articles. I live in Vancouver and have been renting the last 5 years (waiting for real estate prices to drop). Have saved close to 500k in cash so could theoretically buy a 500k condo without having to borrow a penny from the bank. Given this, would you still recommend renting? Is there any reason not to buy? Thanks, look forward to your advice!

#110 };-) aka DA on 02.24.12 at 2:13 am

But seriously… you really think it’s gonna happen that way? Seriously. Just imagine. Imagine all the fall-out. Think about it…

Ya they’ll go up, their bound to. But it will be in minuscule increments intended to scare the crap out of those who might otherwise continue their imprudent ways. Like raising a fist in a confrontational gesture you never intend to execute.

But keep on sensationalizing the idle threat. That’s exactly what they are hoping you will do.

#111 };-) aka DA on 02.24.12 at 2:14 am

they are, they’re not their };-) sorry

#112 Chaddywack on 02.24.12 at 2:15 am

Yeah, all I know is my neighbour down the street from me here in Vancouver listed his house for $690k and it sold for $800k. He had 19 offers and 10 had no conditions…..250 people estimated at the open house. Mostly all foreign investors.

$110k over ask and offers without conditions, we’ll see what happens but I’m not hopeful just yet…..still on the sidelines :)

#113 Nostradamus Le Mad Vlad on 02.24.12 at 2:17 am


#14 T.O. Bubble Boy — Great collection of F’s one liners!
— and —
#16 sam.i.am — “Another leading indicator … RONA closing stores.”
— and —
#24 John Ratadlin — “Real estate will soon be called real devastate”

Lead to #15 blase — “The Harper government has fundamentally screwed with Canadians . . . This has been a heist to extract money from the middle class, and it has worked brilliantly.”

Curious that today, of all days when F looked so sombre in making a speech re: the empty economy that H – F – C created, the robo signing escapade should appear. So who did this? It certainly wouldn’t have been the Bloc, Libs., Dippers or any of the fringe parties, which leaves only one.

H – F lied before, and will lie again. They are politicos, and they know what to do to stay in power. If there are any journalists out there who are not paid by the m$m, spend some time investigating, just like Woodward and Bernstein. They exposed the Rethuglicans and toppled Nixon.

More importantly, will Cdns. forget all this? Peoples’ memories have a short shelf life, so the crooks keep getting elected to defraud us, and we elect them again and again. Not for long, though. The cycle change takes precedent. — #37 Soylent Green is People — Good post and links.

#58 Ozy – Rumors from upper echelons — “. . . will go down in spring-summer, and Fixed Rates will rise at same time . . .” — Hmmm. Things are beginning to look more and more co-ordinated by TPTB.
*
Argentina to Greece — Default now! Taxes Small talk to make big headlines; Bonuses and Raises; Unpaid Overtime; Coupon Loving Cities; Inflation higher than it looks; Haywire A new term for economies that don’t know what they’re doing anymore; BDI and Copper; Greece and Europe Up or down? US Retirement Crisis Ending soon? Peasant Cooking; Karl Marx “There is only one way to kill capitalism — by taxes, taxes, and more taxes.” That is austerity, plain and simple.

No motivation to be employed; Sinking Yen; Pawning Fine Wine for quick cash; Wild Card Nice charts; Oil The ascent continues; Million Dollar Homes Rise in 4closures coming; Strong Selloff What goes up . . .; Flash Crash? Further reading Links in; Tesla Cars not a great investment.
*
Lockheed Martin “Tying this all together, it seems as though the government has implemented the United Nations’ plan to GPS mark all residences and this will make it possible to send in drones instead of personnel when the government chooses?”; Fukushima First para. is good, deals with facts and figures re: Tokyo; EMP attack on US this year? Nothing surprises anymore; Immigration Obomba closing one dept., so more illegals can come in; Journey To the bottom of the ocean.

Google How to remove google searches before new privacy policy takes effect (March 18); Marsquake! ‘Quake on Mars; Cooling Planet? Cloud levels lowering 1% a year; Artistic Creativity Creating crop circles in the snow; Were Libyans the last free people? SSmart Meters 144 mln. in the US, in BC next year.

#114 };-) aka DA on 02.24.12 at 2:20 am

And as always the threat will only motivate many to get in while rates are low for fear that if they do not they will be priced out of the market forever.

It begs the question; who really are the fools?

Looks to me like it might very well be a busy Spring for real estate and mortgages.

#115 };-) aka DA on 02.24.12 at 2:23 am

Ya, ya I know… but what you miss is they do not. As George Carlin said “Your average person is really quite stupid and half of them are dumber than that.”

Herds about to stampede.

#116 Milk Man on 02.24.12 at 2:31 am

Its almost March and its the same story every year. F has warned, next up Carney and both will do little things that are irrevalant. Then the crowd shows the finger and things will move on as usual.

#117 };-) aka DA on 02.24.12 at 2:34 am

And on top of all that it’s looking like we are going to have less inventory coming on this Spring judging from the feedback I am getting in the course of my business. I could be wrong but those I am talking to are holding off waiting for a more favourable market which they just might get – as short lived as it may be.

Less inventory = less supply in the face of more demand from those trying to beat those increasing rates… well you figure it out…

Good job Garth, you are doing a bang up job. Seriously… wonderful. EXACTLY what we need. Stoke the fire. Burn baby burn.

#118 Math is Fun on 02.24.12 at 2:45 am

A friend just signed for a sub $800k Vancouver box in the sky listed for 12 months. Garth – I tried, but the stunning 980 sq.ft (yes, less than 1,000), sans balcony and his realtress gf clearly had me out matched. But it gets worse…he bought before selling his current elevated box (listed for 6 mo – multiple open houses -no offers) and just used “equity”.

The greatest fool need not apply. Position has been filled.

#119 scib on 02.24.12 at 4:03 am

The engineers of the real estate bubble ruse will never see my vote again. ( I have always voted Conservative).
I will never forget what they have done.

#120 ZRH2YVR on 02.24.12 at 4:21 am

Hey – Just ran into 5 “younger” house horny people from my old office. 25-30 year olds. They wanted to know my views on buying a house as they are thinking there is a bubble and that renting is best. OMG . . the message is getting through. You may not be popular at parties but you will be better off in the end. Buying is the worst thing you can do right now if it is a material amount of your net worth.

#121 scib on 02.24.12 at 4:27 am

Money for Cashless 7-11 workers for a home…Plenty.
Money for Small Business… Ziltch.
Vote the bums out.

#122 blase on 02.24.12 at 4:55 am

Here’s a story from the NY Times about foreclosures in the declining entertainment industry. If it can happen to the stars, it can happen to you. http://www.nytimes.com/2012/02/23/opinion/foreclosure-story-untold-in-hollywood.html?_r=1

#123 Starving Artist on 02.24.12 at 5:08 am

I’ve had enough of waiting for the Canadian market to correct, hell will freeze over before I buy at these multiples. I’m seriously considering relocating to Pheonix (cheap, warm, hub) or Hawaii (not so cheap, warm, closer to Asia). Florida and LV aren’t really my scene.

Can anyone recommend some relatively unbiased blogs that publish regular data for those markets, AZ and HI?

#124 John on 02.24.12 at 5:49 am

“Get liquid”. That’s a good starting point. Liquidity right now is necessary. Housing is a ponzi scheme about to be exposed. The “value” taken out of a ponzi scheme and put into another part of the ponzi scheme is slightly better than not being harrassed by financial, legal, governmental and policing entities for debt.

It was time to start talking about the real situation of the liquid person quite a while ago. Now it’s high time.

#125 Deb on 02.24.12 at 5:58 am

Perhaps the most interesting thing is not necessarily what F is saying, but why he is saying it, and why he is saying it now.
Finally, the U.S. economy is showing the first signs of a patient in a strong recovery mode. The most encouraging signal is the performance of the major U.S. and Canadian stock markets since the beginning of the year. American corporate investment, in particular, has begun to move the $1-trillion in cash which has been sitting on the sidelines for so long now. In short, as U.S. growth surges, inflation will rise, resulting in interest rate increases by both the Federal Reserve and the Bank of Canada.
The outcome for consumers, of course, will depend on one’s personal financial situation. I can’t help thinking of an older gentleman who once said to me, “Failing to plan, is planning to fail.”

#126 eddy on 02.24.12 at 7:03 am

Harper’s team sure like to fear monger
‘rates will go up’ could also be a way to scare folks with variable rates to lock in for 5 yrs, then they can bring the rates down again and screw everyone,
look at the mortgage renewal form – the bank is a bookie!

re racist blog comments-

Low-intelligence adults tend to gravitate toward socially conservative ideologies
http://www.firetown.com/blog/2012/02/21/low-iq-linked-to-prejudice/

#127 House on 02.24.12 at 8:13 am

Rates will rise. IN YOUR DREAMS. If rates rose the dollar would rise with it. Then we wouid not be able to sell our export ,OIL, as noboby would pay a high price for it or so goes the government “thinking”. Remember they only think in their language Albertian. This would then uncover all the ways they have disguised the fact that we had a recession just like the US only Canada kept the housing market afloat so that we could keep borrowing and kept the construction jobs afloat. Its called Keynesian Economics Stevie’s hero.

#128 bubble head on 02.24.12 at 8:20 am

#104 ZMan

I agree, all those extra costs did not depress the housing prices. SUPPLY and EMPLOYMENT will be the factors that burst the bubble. There are several condo will 10-20 units for sale in the GTA and Ontario hasn’t added any new jobs for months for the hundred thousand new immigrants coming to the GTA every year. A few more months of this and something has got to give.

#129 yorel on 02.24.12 at 8:25 am

Whatever happened to personal responsibility?

#130 househornyhousewife on 02.24.12 at 8:38 am

Hi Garth,

Yes I am sure that interest rates will go up in the near future but we are probably talking about a 2% increase over the next few years I would think. This would mean renegotiating at a slight increase when the mortgage comes up for renewal. It is not armageddon for heaven’s sake.

If mortgage holders cannot weather this then they probably should not have purchased in the first place. If this is the case, this is why they have probably borrowed on the equity invested in their home in order to renovate or update (furnaces and hot water heaters need changing and paint / mortar needs retouching eventually or your house will fall apart). A lot of people obviously cannot afford to own a property.

Perhaps we need to bring all of those allegorical animal tales about patience and the wisdom of saving for a rainy day .. you remember those don’t you ? But maybe it’s too late for that.

HHHW

Renewing a 3% mortgage at 5% when you bought with 5% down is not a slight event. — Garth

#131 TO Virgin Couple on 02.24.12 at 8:43 am

We get the TO listings for 450k and under. Things are grim. You know what the new 400k “standard” is? Effing bungalows north of St. Clair. Ooohh but they have pot lights.

Crappy semis are now 450 and up, and they are still selling. Effing sheep.

#132 Incubus on 02.24.12 at 8:48 am

“How can anyone stay blinded to the reality of the moment?”

Stupidity

#133 Bottoms_Up on 02.24.12 at 8:54 am

#107 Charles on 02.24.12 at 2:08 am
—————————————
Your $500,000 condo turning into a $300,000 one is a pretty good reason not to by.

Garth has outlined here many times how you can invest your $500,000 to throw off monthly income that can be put toward rent. Thus you protect, and have access to, your $500,000.

#134 Bottoms_Up on 02.24.12 at 8:56 am

#98 Dan7 on 02.24.12 at 1:40 am
—————————————–
One would think that with interest rates on the rise that insurance companies would do poorly (due to the increase in life insurance payouts)? I’m just sayin’……

#135 Fred on 02.24.12 at 9:09 am

Individuals do have a choice whether to put themselves in hock over a house. But individuals have no say in whether F borrows, spends and kicks the can down the road to be paid with interest in the future.

This from a reader who no longer has any mortgage, but who will be on the hook to pay off F’s borrowing (to the tune of many thousands of dollars per Canadian), and who will likely have to work extra years because F and the gang put borrowing ahead of fiscal planning.

#136 tkid on 02.24.12 at 9:20 am

LOL at ‘elfin’

#137 tkid on 02.24.12 at 9:23 am

P.S. Waves hi to brother blog dog Carney

#138 Mr Buyer on 02.24.12 at 9:39 am

Hey did you here the latest. The passing of the top of the real estate bubble is good for sales of houses because people want to hurry up and get a mortgage at the low rates before they go up. Can you hear the thundering of the crowd of buyers clamoring to get into the bank to secure mortgages. There is no thundering herd because they can not sell their houses so they can buy up or flip up or what ever. BUYER BEWARE. THE BUBBLE HAS TOPPED. DO NOT BUY INTO A FALLING MARKET. BUYER BEWARE. THERE ARE NOT MANY BUYERS LEFT. BUYER BEWARE.

#139 Mr Buyer on 02.24.12 at 9:40 am

#110 Chaddywack…what was the MLS number?

#140 Curious! on 02.24.12 at 9:45 am

I’ll believe the rate increases/mortgage amort reduction when it actually happens.

I dont think F and C will change anything just yet. And even if they do in March/April, the housing correction won’t start overnight. It will take a good 3-4 months for noticable signs of this bubble/balloon popping/deflating.

#141 Stevenson on 02.24.12 at 9:49 am

Its interesting how we laught a speculators but yet people here are speculating about a crash itself? Its a warning about household debt. Yes another one… why is everyone getting carried away with it again? When F says something you don’t believe in everyone here goes haywire and call his BS irresponsible. Unbelievable. So finally we have a verdict.

We expecting a crash or correction in the next few months? We’ll see about that. If the market continues to head north by spring and summer. You guys are going to be so wrong.

Far from it. Market prices will return to the mean. They always do. The higher they inflate prior to that, the more impactful will be the correction. — Garth

#142 Work & Tumbel on 02.24.12 at 10:01 am

Best way to keep the people of Canada under controle. No time to Protest or Organise. Look around at all the sheep in big Debt, It is so sad. There so busy trying to pay for that Life Style. I have no Confidence in our Canadian Government it has become fat and in it self a drain on our citizens. The effects of this indebetedness will be with Canadians for many years.

(I have a heavy heart and take no joy is the suffering of my fellow Canadian, as many here seem to be)

#143 unbalanced on 02.24.12 at 10:07 am

All F is doing is trying to take away his comments on old age benefits. Don’t get the BOOMERS riled. The majority of boomers have their hosues paid for. They are p~ssed off about their benefits being threatened. Raise interest rates. Who knows, maybe savers will be rewarded. Sorry for ranting.

#144 };-) aka DA on 02.24.12 at 10:08 am

I am pleased to report, I am sure much to your glee, that I have been following the stats closely this year and it does appear as though prices have fallen.

So far this year (01/01/2012 to 23/02/2012) there have in the Central Okanagan Division of The Okanagan Mainline Real Estate Board bee 411 sales of all types of residential units including vacant lots, mobile homes, strata properties and single family homes. The average price of those properties combined has thus far been $353,903.00.

For the same period last year there were 409 sales of all residential type properties as stated above, however the average price was $382,351. This suggests a price drop of 7.44% year over year. I have been watching and am of the conclusion that this is consistent with what I have seen.

As far as inventory goes there are currently 4,100 residential properties of all types currently listed in the Central Okanagan, an area with a population of about 160,000. While that may seem a distressingly large number, I can tell you that each and every buyer I am working with is finding it difficult to find a suitable home. Put another way most of what is out there is garbage regardless of the price the seller is asking. Get past the fact most of the inventory is garbage and then you are faced with the predominance of overpriced properties.

the 400 or so properties which have sold thus far this year are by far a greater quality of property on average than those which languish on the market for days upon days. To demonstrate this the average asking price of those 4,100 properties still unsold on the market is $538,022 compared with the $353,963 which have successfully been sold. The average days on market of those still unsold properties is 158 days compared to the 106 of those which have sold. And those unsold still languish racking up day upon day!

Looking back on my posts of late last evening, I maintain that the threat of increasing interest rates is going to push a lot off the fence and into the market. They will buy those left-overs amongst that 4,100 of crappy inventory that remains. As a “HOT” new listing is introduced at a fair price it will be gobbled up quickly with multiple bids.

As we move further into the year I am growing more confident that we will see moderately higher sales volumes (good for me!) and somewhat lower prices (good for you! – unless of course you are are a seller). But that being said there will not likely be in my opinion anything too stellar to report either way at the end of the first half of this year. Beyond that it is anybodies guess as I am told the world will end in this year 2012.

#145 isabel - RRSP contr. on decline on 02.24.12 at 10:12 am

“The link between higher home prices and shrinking RRSP contributions, Ferley said, could also result from some people being forced to put a bigger share of their income into housing due to costs, rather than because of a deliberate investment strategy.”

http://business.financialpost.com/2012/02/23/rrsp-contributions-to-decline-to-levels-not-seen-since-1970s-rbc/

#146 peter on 02.24.12 at 10:16 am

IS SMOKING MAN=BPOE????????????

#147 45north on 02.24.12 at 10:28 am

Peter: is smoking man, BPOE?

no

#148 };-) aka DA on 02.24.12 at 10:29 am

anybody’s guess

#149 jess on 02.24.12 at 10:31 am

Behave the economists say or else!

More warnings to “nudge “the highly indebted Canadians . Is this a new form of conservativism – libertarian paternalism?

=======
Private public
3 Apr 2011

£1.4m-a-year welfare entrepreneur picked by Cameron to get Britons off benefits

The Guardian‎ –
Emma Harrison, the head of the A4e welfare-to-work group, appointed by the Prime Minister in 2010, has stepped down from her role as David Cameron’s personal adviser on problem families in the wake …A4E arrests put spotlight on private welfare-to-work

A4E funded by government contracts to help the unemployed find work.

The Undelivered Promise of Employment: a take on unpaid work schemes
http://www.iordanou.org/?p=2745

#150 Kris on 02.24.12 at 10:43 am

#22 kenken, #44 mikling.
Agree – If F means it, why doesn’t he just go ahead and do it, instead of warning us a dozen times?
Maybe Govt is hoping that a chunk of the population will take heed and lock-in to 5yr fixed rates now, so F can play with rates without triggering mass foreclosures?
Or maybe he’ll up rates as soon as the economy grows enough to allow some tightening – which may or may not happen?

#151 HouseBuster on 02.24.12 at 10:55 am

The market is on autopilot to the moon. It is going to take more than idle talk to bring it down.

It is beyond insanity.

#152 Dad on 02.24.12 at 10:55 am

Its me, Im the Bank of Canada Governor in this post.

#153 cramar on 02.24.12 at 11:10 am

Garth, at that peak in 1989 what was the media saying? A crash is imminent? Or that house prices are going to keep on going up? A RE bubble is the same as stock market bubble, which is the same as any bubble. I.e. at or near the top, the magazine covers tell you the market will keep going up—Dow 30,000 is coming! The “experts” tell you why the market will keep going up. Your next door neighbour will tell you he is fully invested and expects to make a fortune for retirement. Almost everyone is on the bandwagon. It is the same with the stock market and with RE.

The trouble is now the mainstream media is constantly telling us that the RE market in Canada will crash. Almost every day there is a story about the RE correction coming. But that never happens at the top! Everyone gets caught off guard. The South Sea Bubble, 1929, it is all the same. The majority cannot see it coming. The experts cannot see it coming. So I suspect the RE market will keep inflating until the magazine covers proclaim that it will keep going up. That Canada is happily defying the world! That RE will positively be higher next year! That will be at the top.

You just might be too early Garth!

#154 Daisy Mae on 02.24.12 at 11:12 am

10Ex-Ex-Pat on 02.23.12 at 10:04 pm
“I am not a fan of F, but what he said today earned some respect.”

**************************

It’s too little, too late.

#155 Tanya on 02.24.12 at 11:14 am

Flaherty said the same thing back in June.

http://www.ctv.ca/CTVNews/TopStories/20110626/flaherty-interest-rates-110626/

Quote: “interest rates have nowhere to go but up.”

I’d expect our rates to stay low for some time to come, at least as long as the FED keeps theirs low. That said, rising rates is only one of many reasons the housing market might correct. That people are spending 40% of their income on housing and first-time buyers are increasingly priced out of the market will eventually be enough to stop rising prices.

Disclosure: I rent.

My expectation is the BoC will move in advance of the Fed. — Garth

#156 The American on 02.24.12 at 11:16 am

BPOE, didn’t you say rates wil NEVER raise. Oh yes you did. You’ve said it in excess of 30 times in the past year. Now you’re retracting. You also professed for over a year that I am Schiller, of which I denied. Now, don’t you look like a pathetic fool for giving credit of such a highly-regarded economist like Schiller to a “youngster” like me. You’re a complete buffoon. Nobody is buying in Vancouver now. Period. Sales have fallen off a cliff and you have over 16 months of inventory sitting unsold in Richmond and even worse in downtown Vancouver. That example you provided about the homes on W 41st St is bogus. Those were sold months ago and the market has shifted significantly since then. They may be digging away, but I will guarantee you this – it will be a failed development without question. Oh, one more thing, as smart as Schiller is, he isn’t as smart as me – young or old. You still have no idea who I am, but I guarantee you do know me. Besides, obviously everything I write strikes a nerve with you. Otherwise, you wouldn’t have such a hard on for me. Talk about pathetic.

#157 };-) aka DA on 02.24.12 at 11:42 am

but further to my post at #141, you need to keep in mind that there are certain segments of the market which have borne a far greater burden of that price drop from last year to this. Specifically the condo market and vacant lots as there exists currently too high an inventory level of each.

Now consider vacant lots: lot values have dropped due to lack of building and so too have building costs as trades reduce their prices to garner what work they can. Yet still as many properties are being sold this year as last and of that inventory buyers have to choose from a lot of it is crap – seriously.

Does it not sound like a good market in which to build a well designed, well located spec home of reasonable price? Little competition, favourable costs and still a consistent demand.

But what am I doing telling you this. Ahhh because there is more to that good story – location, location, location. Economics is the backstory of all history and demographics is the backstory of all economics. There is about as much clue and free advice as I will give you for now. Want more? I have a B.R.A. with your name on it. };-)

#158 Daisy Mae on 02.24.12 at 11:45 am

Garth, while there’s nothing to laugh at we might say you get the ‘last laugh’ — it must give you a huge measure of satisfaction to know that you were right, after all….and the government was seriously wrong on all fronts.

Unfortunately, all Canadians will pay for their dumb ass decisions. Fortunately, it’ll cost them the next election.

You did your best to warn us. You’ve done an excellent job.

#159 sam.i.am on 02.24.12 at 12:03 pm

===
My expectation is the BoC will move in advance of the Fed. — Garth
===

That would be interesting. Perhaps we can get some discussion going on the likely effects of such a move.

One effect would be a rise in the value of the C$ which would hurt manufacturing exporters. Can the manufacturing economy really take the hit without increasing unemployment? Or does it depend on timing, say the C$ weakens a bit, then the window for a rate increase (to cool inflation?) kicks in.

That is a lame and meaningless argument with the dollar already at par. A quarter-point move in the bank rate has far less impact than higher commodity prices. I remind you that oil has gone from below $40 to over $100, and exports continue. — Garth

#160 };-) aka DA on 02.24.12 at 12:09 pm

I love the smell of change in the morning!

Grant me
the serenity to accept the things I can not change,
the courage to change the things I can,
and the wisedom to know the difference.

#161 Van guy on 02.24.12 at 12:13 pm

#114 Milk Man

Yes Flaherty says the same shit every year. But haven’t you noticed the warnings from Macleans, Canadian Business, and other reports around the globe. And now the MOI in the Lower Mainland has skyrocketed.

See, a Milk Man is best at delivering milk. My milk was not delivered yesterday. Shame on you.

#162 mark on 02.24.12 at 12:14 pm

It would not be so bad if all this new debt was incurred to build something of lasting value – preferably a factory but an architectural marvel would do!

Just drive through any North American city and ask yourself if what we have created is worth anything at all. Miles and miles of cheap housing, soaring hi-rises with nothing but “good views”, big box stores with massive parking lots, clogged roads, cheap strip malls and fast food joints as far as the eye can see. Vancouver, perhaps the smugest city in Canada these days, is beyond drab unless you take a photo from a helicopter with the snow-covered mountains as a back-drop to the downtown skyline. what a waste of such a great inheritance….

I get a good laugh when people smugly criticize the Indian reserves and their ill-kept gardens.

#163 truth hammer on 02.24.12 at 12:23 pm

Garth, you’re giving the F&C show too much credit…they are not that smart….when have either of them made what could be seen as a ‘smart move’? They have been around for a long tme now garth…Harper is moving into historical territory here as a serving PM.

F is ‘JAWBONING’…..C is ‘JAWBONING’ …..attempting to talk the market down without taking any action.

Think of the ramifications if they do raise rates……a disaster for the government…….they have too much money borrowed at the low end…they can’t support it now…they will do everything they can to go sideways by doing what BC has done recently and slashed the down to zero…after all its just paper that will expire long after these clown are riding the retirement train to the Bahama’s.

With a balance sheet that relies solely on real estate taxes for their day to day expenses a move to counter the boom will sink every city and municipality in Canada. These clowns are counting the dollars, believe me, not the worried appeals from the disenfranchised FTB’s. Who pays for the outrageous juice boxes they give away to the civil service?

There is only government and resources in Canada…resources get to write off the capital expenses….government must pay the bills….where is the money going to come from……..low rates allow government to print their own paper…currently 30% p/a….higher rates would sink this scam. After all government workers are a net drag on the economy as they create no capital…..ergo…only one thing left….property taxation and fee’s from all sources.

#164 Tanya on 02.24.12 at 12:29 pm

Do you think a quarter-point move will be enough to really affect the housing market, though? I agree with the previous comment that it will cause the CAD$ to rise overnight, but don’t see how it will *significantly* impact the housing market. Or maybe it’s wishful thinking on my part that mortgagees can handle a 1%(ish) increase in their financing terms. But maybe they can’t.

God help them if that’s the case.

When the bank starts moving it will be a quarter point after a quarter point until rates are doubled. Impact? You bet. — Garth

#165 eaglebay - Parksville on 02.24.12 at 12:30 pm

#126 yorel on 02.24.12 at 8:25 am
“Whatever happened to personal responsibility?”
———-
You’re kidding, right?
Read the blog again.
Most people on this blog are doomers. They blame and want the “government” to regulate, to make decisions for them and control all aspect of the economy.
RE and investing is simple math. 1+1=?.
Thinking and common sense is unknown though.
Some of us don’t have to worry. The doomers and non thinkers will loose.

#166 Kevin on 02.24.12 at 12:37 pm

@Island Girl:

“If you bought a place and mortgaged for 40, and had to renew in a couple of years, would you be able to keep it at the 35 years”

Yes, as long as you stay with the same lender.

You’d only have to take a shorter amortization (and do an appraisal, requalify, pay CMHC again, etc.) if you switch lenders. If you renew with the same bank, you just keep the same loan, with a new rate.

#167 Told-you-so-in-2007 on 02.24.12 at 12:40 pm

@House horny house wife,

“Yes I am sure that interest rates will go up in the near future but we are probably talking about a 2% increase over the next few years I would think.”

Actually, most mortgage-holders are totally ignorant of this fact, but every percentage increase in interest rates will raise your monthly payment by 9%.

So, if interest rates rise by a “trifling” 2%, payments will rise by 18%. If they rise by 3%, your payments are up by 27%.

That’s right. Ouch.

#168 Tanya on 02.24.12 at 12:43 pm

Kevin:

Further to your explanation if a borrower switches lenders when their terms are up … if they do so, and the appraised value is less than the principal balance, does the borrower have to raise cash to make up the difference?

#169 Snowboid on 02.24.12 at 12:43 pm

#121 Starving Artist on 02.24.12 at 5:08 am…

For AZ information a good start is the City Data forum for Phoenix – look for threads on RE at http://www.city-data.com/forum/phoenix-area/

Latest RE reports at http://www.city-data.com/forum/phoenix-area/1505363-phoenix-real-estate-report-mike-orr.html

Not sure if I would really want to be here in summer, with 40C days common, with a few at 44-45C to test your stamina.

#170 Sticky on 02.24.12 at 12:46 pm

If rates in CAD rise, it will be small and slow. My take is that a 1/4% rise in rates will lower bond prices a bit but not cause a large impact on house prices.

A bigger driver in lowering house prices (which will happen eventually) will be the realization that houses will not continue to appreciate as much, and will likely fall in the future.

Also the continued weakening of the CAD middle class as more work is off shored. Coprs need to constantly grow. CAD companies will need to reduce costs to maintain profitability due to a general slow economy and high CAD dollar.

Welcome to a declining standard of living.

#171 Tanya on 02.24.12 at 12:49 pm

I’d like to add that if Flaherty actually did give a rat’s arse about Canadian indebtedness, he could simply increase the downpayment requirements to 10%, increase the amount of insurance a high-risk borrower must pay, and of course reduce the amortization period to 25 years.

He wouldn’t even need to touch the interest rate (yet) and the housing market would cool significantly.

But he and Mark work for Goldman Sachs, not the Canadian people. Making a nation of debt slaves is the goal, not the problem.

#172 NewWorldPartyDotOrg on 02.24.12 at 12:55 pm

“evils of CMHC”

Read:

Housing, the most manipulated market in the world
http://www.newworldparty.org/2011/04/housing-most-manipulated-market-in.html

“TD explained that they were not taking any risk. Canadians are, through CMHC, which is owned by the government. CMHC insures these risky mortgages. If the borrower defaults, taxpayers would be on the hook. The banks do not take the risk, but get the reward. CMHC is Canada’s version of Fannie Mae and Freddie Mac.”

“CMHC has nine directors on its board. Seven directors make or made their livelihood from real estate. Even if they are no longer employed with real estate related companies, is it possible that they own more real estate than the average Canadian and therefore would benefit from ever increasing prices? These directors are:”

“Which of the following would the CMHC directors personally benefit from and be more interested in?:
– perpetually raising home prices, or
– lowering prices for first-time buyers
Would they care about making homes affordable for young or future Canadians?”

#173 coastal on 02.24.12 at 12:56 pm

“When the bank starts moving it will be a quarter point after a quarter point until rates are doubled. Impact? You bet. — Garth”

What’s shocking is the amount of young and dumb agents visiting this board and other well known real estate blogs that still do not see interest rates rising, and are calling the overdue MSM wake up call to out of control debt borrowing as some sort of media boredom thing and something that will pass in a few months. One agent went so far as to say $100-$150 K drop was no big deal for his clients. Totally fricking clueless.

#174 };-) aka DA on 02.24.12 at 12:58 pm

Why spend hundreds of thousand of taxpayer money when Garth will spread word of the idle threat on his own dime. And do it with a lot more zeal than any elected official would ever dare.

Keep it up, we’re likin’ it. };-)

#175 jess on 02.24.12 at 1:02 pm

so using a chainsaw rather than a scissors wasn’t such a good idea

… the heads of OTS and the FDIC pose along with banking industry representatives. cutting the “red tape” with a chain saw.

http://www.propublica.org/article/banks-favorite-toothless-regulator-

===========

Nueva Rumasa sold to ‘vulture fund’
Sunday 25 September 2011 by John Radford Be the first to comment
The financially-troubled Spanish food and drink group Nueva Rumasa has been sold for a reported €1.5bn.

http://economia.elpais.com/economia/2012/02/23/actualidad/1330010342_825847.html
New Rumasa used false invoices to borrow from banks
The owners used to 27 nominees to put in front of 149 companies
Ruiz-Mateos went to tax havens to avoid expropriation
Agencies Madrid 23 FEB 2012 – 22:34 CET

more information
Ruiz-Mateos, “I am a nobody and I do not regret anything”
The children of Ruiz-Mateos pay their mortgages with money from investors
Judge seizes 220 properties for the Ruiz-Mateos
Police search the house and the office of the Ruiz-Mateos
http://economia.elpais.com/economia/2012/02/23/actualidad/1330010342_825847.html#bloque_comentarios

#176 eddy on 02.24.12 at 1:13 pm

Ottawa loves fear mongering. Too many variable rate mortgages out there, this will get the gullible to lock in for five years, then the banks will reduce rates again.

‘fool me twice, shame on me’

Low-intelligence adults tend to gravitate toward socially conservative ideologies-

http://www.firetown.com/blog/2012/02/21/low-iq-linked-to-prejudice/

#177 };-) aka DA on 02.24.12 at 1:14 pm

Sell people sell, because you will not be able to afford those mortgage payments once the rate ratchets up on you. Sell before then. Sell even if you don’t have a mortgage because surely economics will dictate that with every rise in interest rates house prices must fall and believe me if rates rise prices will fall – they must.

What to do with that equity you crystalize into cash? Ask Garth. I’m sure he has some advice on that one too.

Sell, sell, sell. Sell now while the getting is good. There will be a crank in the market as it passes through that of a seller’s before quilibrium is sought and it turns once again to that of a buyer’s market.

This is that moment you have been waiting for. But the window will be open only for a very short time.

Buyers, if you are going to take advantage of low interest rates and low (comparatively) prices, you too had better act quickly before every other jumps in pushing those prices higher for a short time before interest rates take over and push them back down. Right now you can have your cake and eat it too – low interest rates and comparatively low prices. After this it will be high prices and then high interest rates when prices float back down somewhat again.

Take Nike’s advice and “JUST DO IT”!

#178 eddy on 02.24.12 at 1:22 pm

and anyone who has contemplated a mortgage renewal form will agree that such a monstrosity could only come from the MIND of a BOOKIE

#179 DonDWest on 02.24.12 at 1:30 pm

I truly have to laugh at the people who suggest the Canadian dollar will skyrocket at an interest rate increase. Can’t say I blame them though, our public education has done a number here.

Unlike what you were taught at school, interest rates and monetary inflation have small effects on the value of a currency. Often it’s a case of correlation rather than causation. When economies start to collapse, governments panic and counter with either extremely high interest rates or printing money at low interest rates. A familiar pattern is governments try depression (find it doesn’t work); then switch to inflation (still doesn’t work), or vice versa. Of course, the best course of action is for the government to do nothing, but governments feel compelled to act. Thus this mistake is repeated throughout history.

What determines the value of your currency is the strength of your nation’s economy. If our housing bubble starts to collapse; we lose 20% of our GDP. Do the math; the dollar won’t be going up even with an increase in interest rates. The dollar might rise the first few days after an increase in interest rates is announced (inertia), but I’ll give it no more than a month until the illusion is revealed.

#180 Bailing in BC on 02.24.12 at 1:32 pm

#163 Kevin

I guess this means that banks will have people over a barrel. What are the chances that they will be renewing these 35 year mortgages at attractive rates?

#181 Poorgoisie on 02.24.12 at 1:37 pm

Forget Re, GICs, RRSPs we need to invest in K’s. We just get a few million K’s, put them everywhere and when the bank comes collecting we can say “no that’s Canada with a “c”, they moved but if there’s anything Kanada with a “k” can do…

#182 DonDWest on 02.24.12 at 1:42 pm

By the way, F introduced the 0/40 rule. This travesty is unforgivable. Not even the Yanks with their sub-prime introduced something so financially stupid. After pulling the 0/40 I’ll never vote Conservative the rest of my natural life. Voting conservative today is inheriting the bad (mainly dealing with genuine “free marketeer” pumping assholes who cut social programs); while throwing out the good in the past conservatives used to offer (balanced budget and sound money).

Heck, if the government is going to break the budget, I would rather get something out of it than nothing. At the very least you can count on a Liberal government to give you a “free” (really just getting a portion of your taxes back) something. . .

#183 Kilby on 02.24.12 at 1:43 pm

#141 DA.

Good post, seems to be pretty accurate measure of what is going on out there. You are right, there is a lot of “garbage” on the market listed for far more than they could ever expect to get.

4,152 active listings with 45 new sales in the last 7 days.

#184 reasonfirst on 02.24.12 at 1:51 pm

Garth, your work is almost done. What’s your next crusade?

#185 disciple on 02.24.12 at 1:52 pm

WARNING! The 10-person board of the CMHC contains 3 developers, 1 CMHC paid employee, 1 real estate broker, and 1 partner in a plumbing/renovation company! I wonder who the remaining person is? Probably Satan himself… Can you look at me with a straight face and tell me that everything this ultra-secretive Crown corporation does is on the up and up?

Oh yeah, hey Junius, leave me alone, will ya? I’ve provided you with nothing short of intellectual counter argument to your unsubstantiated assertions and you continue to ignore those, but when I quote someone else’s controversial work/opinion, you are more than eager to cry to the adjudicators. You must be a lawyer.

#186 Preciousss on 02.24.12 at 1:55 pm

Speaking of being “over a barrel”…………………

http://www.mcclatchydc.com/2012/02/21/139521/once-again-speculators-behind.html

Stagflation is a real nasty beeatch.

#187 TRT on 02.24.12 at 1:57 pm

Where is the 25 year Amortization that was imminent??

…and no people, those that got 40 year mortgages will still renew at 35. All other things being EQUAL, they will have lower monthly payments if that’s what they want. Have many friends in professional schools and this suits them just fine until they can command salaries into the low to mid 6 figures.

#188 Stuck on the Island on 02.24.12 at 2:00 pm

“And as always the threat will only motivate many to get in while rates are low for fear that if they do not they will be priced out of the market forever.

It begs the question; who really are the fools?

Looks to me like it might very well be a busy Spring for real estate and mortgages.”

Really? Come check out the Island. It’s a ghost town. Listings are increasing but there are no buyers. This is the case in virtually every market across the country.

I have had one showing in the last 6 weeks, and given the fact that I am the lowest priced house in my particular segment of the market, that does not fare well for the rest of those trying to sell. It is DEAD.

You cannot give the houses away around here, no one will take them.

You’re the fool, really.

#189 FullofFear on 02.24.12 at 2:01 pm

100 Don on 02.24.12 at 1:51 am
oh you mean how the US government is helping out American mortgage holders – sometimes help doesn’t arrive soon enough even if it’s on the way. That is a lame argument, by the time any government reacts it’s always too late.
*********************************************
Are you sure you know what the argument is? You should before you call it lame? I was making two points. One, that when it’s time to pay the piper, those who have been dancing will not reach for their wallets … because they know they’re empty. However this mess plays out, the cost for cleaning it up will be borne by the Canadian taxpayer. So all those smug people on this blog who think that they can stand back and watch this are going to be involved financially. Two, those people who have taken on a lot of debt will get help … courtesy of those who are more financially responsible. This country is a lot more to the left than the U.S. and the government will not stand by and watch people lose there homes because of higher interest rates. People know this and act accordingly.

#190 noname on 02.24.12 at 2:18 pm

Does someone have any actual data on foreign investment in Canada as it relates to the personal RE market?

I’m in Vancouver, so I hear all of the stories, but I don’t ever see any evidence (other than anecdotal).

If foreign investment is skewing the market drastically, why are there not limits put on it?

I know no one wants to seem “racist” so they don’t walk about it but to me it is a simple economic argument.

While businesses can compete more easily on an international level, it is almost impossible for large groups of individuals to do so. I am being forced to compete for local housing with foreign salaries.

I once heard a stat that the top richest 1% from mainland China actually outnumber the entire population of Canada.

Now, I know this great country has been built on immigration, so I am not knocking that. This situation seems to be out of hand though and I don’t understand why the government is not limiting foreign investment somewhat in support of affordability for families who live AND earn an income here.

Anyone have any data on this issue? Thoughts?

#191 Daisy Mae on 02.24.12 at 2:21 pm

#52 BPOE: “Oakridge Mall area on 41st a half block of houses just scooped up with sold signs…”

*******************

Zoned commercial? So what’s the big deal?

#192 Vancouver_Bear on 02.24.12 at 2:23 pm

#35Clockbike on 02.23.12 at 10:57 pm

ever heard of GOOGLE?

here – http://www.montrealgazette.com/story_print.html?id=6201817

#193 René Kabis on 02.24.12 at 2:23 pm

#141 };-) aka DA

Ummm… Let me get this right…

You say that the average price of the average home in the Central Okanagan is now (as of 2012-01-01 to 2012-02-23) about $353,903.

The peak of our market was in April of 2008 with an average price for an average home of $552,831.

Doesn’t this represent a 36% drop from the peak of our market, in terms of a raw dollar value?

(Math: [552,831 – 353,903] ÷ 552,831 = 35.98%)

And once adjusted for inflation (http://tinyurl.com/3emkpgd), doesn’t this represent a 41% drop in value?

(MATH: $552,831 in 2008 would be 596,840 in 2012 dollars, [596,840 – 353,903] ÷ 596,840 = 40.7% drop)

Wow — a 41% drop in value since April of 2008 for homes in the Central Okanagan. I wonder what the bubble deniers on the Castanet.net site would say!!

#194 Vancouver_Bear on 02.24.12 at 2:29 pm

#180Kilby on 02.24.12 at 1:43 pm

“4,152 active listings with 45 new sales in the last 7 days.”

That’s almost 2 years of inventory, provided that sales remain at the same pace and there are no new listings for the next 2 years. By the spring listings will increase by and sales disappear. Perfect storm.

#195 Van guy on 02.24.12 at 2:29 pm

#163 Kevin on 02.24.12 at 12:37 pm

“If you renew with the same bank, you just keep the same loan, with a new rate.”
__________________________________________

What if you have little or no equity because of a correction? Do u still get the posted rate? There could be complications if this was the scenario eh?

#196 Van guy on 02.24.12 at 2:31 pm

#188 Daisy Mae on 02.24.12 at 2:21 pm
#52 BPOE: “Oakridge Mall area on 41st a half block of houses just scooped up with sold signs…”

*******************

Zoned commercial? So what’s the big deal?
———————————————

Zoned for townhomes

#197 raider on 02.24.12 at 2:32 pm

Lets throw in some more scare into the discussion. Anyone else seen this website…. Canada being one of the CCC-bubbles.
http://www.thebubblebubble.com/canada-bubble/

#198 Vancouver_Bear on 02.24.12 at 2:33 pm

#188Daisy Mae on 02.24.12 at 2:21 pm

it’s a big deal ’cause bpoe can now afford gas and blueberries for his wife. – http://www.youtube.com/watch?v=b5hKhZKSYw8

#199 Snowboid on 02.24.12 at 2:34 pm

#180 Kilby on 02.24.12 at 1:43 pm…

Interesting:

Central Okanagan – 162,000 people with 4152 listings
Maricopa County – 3,800,000 people with 25,025 listings

I know the Central Okanagan isn’t quite Maricopa County, AZ – but either Phoenix is rising from the ashes…

…or the Central Okanagan is cooked!

Maybe both!

#200 Oceanside on 02.24.12 at 2:39 pm

544 Dogwood Road, Qualicum Beach.

Sold June 23,2008 for $520,000, asking $585,000

Just listed today for $519,000.

This will be an interesting one to watch.

#201 Vancouver_Bear on 02.24.12 at 2:39 pm

#36FullofFear on 02.23.12 at 11:02 pm

When the government intervenes they always make things worse, always.
If you think that the Feds are there to protect house prices you are dead wrong, they are there to protect economy. They could not care less about some idiot who borrowed his brains out.

#202 };-) aka DA on 02.24.12 at 2:44 pm

#190René Kabis

No René, that average price of $353,903 which I quoted today for this year is for ALL residential types, vacant lots, mobile/modular homes, strata condos, strata townhomes, strata bare land properties and single family properties. That figure you quote of $552,831 from April 2008 (the peak of the market) is specifically single family residential and exclusive of vacant lots, mobile/modular homes, strata condos, strata townhomes. Of course the average of those excluded would be way less than that of single family residential alone and when combined with that of single family residential would heavily mitigate the results.

#203 Capilano on 02.24.12 at 2:49 pm

#187 Noname
“I once heard a stat that the top richest 1% from mainland China actually outnumber the entire population of Canada.”
———————————————————————-
According to this article, http://www.bloomberg.com/news/2011-05-31/china-s-millionaires-jump-past-one-million-on-savings-growth.html,

China has 1.11 million “millionaires” and is 3rd in numbers of millionaires behind the USA (5.22 million) and Japan (1.53 million).

“The Asian nation’s affluent class only holds about 5 percent of its wealth offshore.”

#204 };-) aka DA on 02.24.12 at 2:50 pm

#190René Kabis on 02.24.12 at 2:23 pm

But single family home values are, on average, down in excess of 15% since April 2008. There are areas like Lower Mission and Kelowna South however which still enjoy a strong demand and continuity of prices. Upper Mission (Kettle Valley) and those other newer subdivisions have been hit hard though. To quote Garth from some time back “ice cream melts from the outside in”.

I do believe we are experiencing a migration toward urban centers. It is largely a demographically influenced movement which I expect to continue. Hence we will see those more urban properties continue to fetch more lofty prices until such time as people start opting for those rural properties due to the increasingly attractiveness of their price.

#205 worried realtors on 02.24.12 at 3:08 pm

You have a lot of worried realtors and sellers who kick and scream Garth is wrong and tell you to forget about the facts and numbers. housing in Canada is now crashing. Sales have stalled in the GTA. Everywhere driving in the GTA I see one sold for every ten that has not sold. I’ve seen countless homes pulled from the market. I’ve seen many Homes and condos listed for sale or lease. Owners/mortgage renters are in a panic as many can no longer get HELOC to borrow off to survive . This has triggered the housing crash as many need to sell since they can not service their debts. Canada is going to have credit/housing crash.

#206 eaglebay - Parksville on 02.24.12 at 3:15 pm

#185 Stuck on the Island on 02.24.12 at 2:00 pm

You must be in the Victoria area or close by.
What’s your MLS #? I might make an offer.
You’re probably overpriced. Lower, lower.
There’s always a buyer at the right price.
Unstuck yourself.

#207 eaglebay - Parksville on 02.24.12 at 3:22 pm

#186 FullofFear on 02.24.12 at 2:01 pm
“Two, those people who have taken on a lot of debt will get help … courtesy of those who are more financially responsible.”
———-
The more financially responsible have already been paying through confiscation of savings with forced low interest rates.
More to come.

#208 Westernman on 02.24.12 at 3:26 pm

Blase @ # 15,
Wrong on all counts… it not the governments job to teach you financial restraint – it is YOURS and YOURS alone, period.
Secondly, Canadian sheeple will not retaliate in any way, shape or form… they will remain true to their preternatural nature and skulk away with their collective tails between their collective legs to suffer in silence … having learned absolutely nothing from their personal and national calamity…

#209 Matty on 02.24.12 at 3:27 pm

noname china has 1.3 billion people 1% of which is 13 million. ever heard of math? as to your question, sadly the government does not reaaly protect your health or well-being.

#210 45north on 02.24.12 at 3:27 pm

Daisy Mae: It’s too little, too late.

better late than never

young man in the blood donor clinic, on his cell phone: “yeah we’re not writing any 2nd mortgages at 12% anymore, but he (someone) is writing them at 17, 18%.”

He seemed quite impressed.

#211 Devore on 02.24.12 at 3:29 pm

http://www.cbc.ca/news/canada/story/2012/02/23/household-debt-house-prices.html

All kind of doom and gloom here.

And debt to household equity has risen as well even as home prices have soared.

Oh, has it? Well, so much for the responsible equity-based lending that dawg C has been warning about for the last year. He must be crapping his pants.

The majority of HELOC borrowing was to finance renovations and further real estate acquisitions. That debt:equity is rising is no surprise; in other words, Ponzi scheme!

#212 Island Girl on 02.24.12 at 3:36 pm

Thanks Kevin #163 makes sense. And I never thought of that Bailing in BC #177. No chance at all of negotiating, especially if your house goes down in value.

We’ve decided here that we’ll only buy if we can put down 25% or more and afford the payment based on 25 years or less. So not anytime soon, but still like to look! Every time I look though I notice that I can get more and more for the same amount of money. Perhaps when the time comes, we’ll scoop something nice!

#213 Deb on 02.24.12 at 3:37 pm

During the morning coffee break at work, a co-worker and I were discussing how the tea leaves looked regarding interest rates. We were joined by a third co-worker and she took the conversation to a new level when she said: “Oh, that guy, that Bank of Canada guy. I saw him on TV. Is he hot or what? You know, he looks just like a young George Clooney!”
My eyes rolled so far to the back of my head, I still haven’t recovered completely. It takes all kinds.

#214 Rene on 02.24.12 at 3:43 pm

I don’t know where people get the idea that 40 yr ams would renew any less than 35 yrs after a 5 yr term. When CMHC approved mortgages for 40 yrs, it was not only for a 5 yr term but for the life of the mortgage. There is no requirement to requalify and pay a 2nd premium for mortgage insurance.

That being said, the lender is not obligated to renew for a second term. If the borrower finds another lender, the CMHC terms can be transfered. The terms agreed to in the first place by CMHC remain.

#215 };-) aka DA on 02.24.12 at 3:44 pm

#202worried realtors on 02.24.12 at 3:08 pm

Man you are one sick little moron. You seem to have quite the fetish for all things morose. Fantasy is always so much better than reality isn’t it? Kodachrome…

If you took all the girls I knew when I was single
Brought ’em all together for one night
I know they’d never match my sweet imagination
Everything looks worse in black and white

But of course in your case it’s not from girls you get off but … creepy man, real creepy.

#216 Starving Artist on 02.24.12 at 3:46 pm

Thanks for the links Snowboid, lots of great data! That’s pretty hot in the summer, I guess there’s a reason all those Pheonix houses look pretty “sun baked”. Could always do the reverse-snowbird thing and live down there but escape to Canada in the summer when it’s nicest :)

#217 Don on 02.24.12 at 3:48 pm

#186 FullofFear on 02.24.12 at 2:01 pm 100 Don on 02.24.12 at 1:51 am
oh you mean how the US government is helping out American mortgage holders – sometimes help doesn’t arrive soon enough even if it’s on the way. That is a lame argument, by the time any government reacts it’s always too late.
*********************************************
Are you sure you know what the argument is? You should before you call it lame? I was making two points. One, that when it’s time to pay the piper, those who have been dancing will not reach for their wallets … because they know they’re empty. However this mess plays out, the cost for cleaning it up will be borne by the Canadian taxpayer. So all those smug people on this blog who think that they can stand back and watch this are going to be involved financially. Two, those people who have taken on a lot of debt will get help … courtesy of those who are more financially responsible. This country is a lot more to the left than the U.S. and the government will not stand by and watch people lose there homes because of higher interest rates. People know this and act accordingly.
******************************************

You need to explain your points better, and the majority of people on this blog are not doomers as the message is going mainstream now. Yes we will all bear the brunt in some form – But when prices revert back to the mean, I will benefit for one. When everyone else is tied to a large mortgage and unable to move for employment I will have an advantage, when all are declaring bankruptcy, I won’t be. Yes my taxes will be higher and just maybe people will start to look for substance in managers and politicians again. This is not only a correction in real estate it will also be one in principles.

#218 Timing is Everything on 02.24.12 at 3:49 pm

You ain’t seen nothin’ yet…

http://tinyurl.com/85bpuyz

Of course, most people couldn’t grow a radish if their life depended on it…

http://tinyurl.com/7xa68ap

What the hell. It’s Friday…

http://tinyurl.com/3o7t7z

#219 Daisy Mae on 02.24.12 at 3:58 pm

#117 scib on 02.24.12 at 4:03 am
“The engineers of the real estate bubble ruse will never see my vote again. ( I have always voted Conservative).
I will never forget what they have done.”

***************************

Haven’t heard a single word from the opposition parties since this all started unravelling….

#220 scaredsh!tless on 02.24.12 at 4:19 pm

Love reading your blog; very informative & real.

Ok, I need to rant!
A friend, almost 30yo, unemployed for a few months now bought an unbuilt condo on Marine Dr (near a dead river according to my mom) in Vancouver. Paid 440k with 100k down for a 995 sq ft. Good deal? Wake up dude. Mortgage is $2000/month and he’s relying on his gf (of 1 yr) to pay. I wonder how long that’s gonna last. I’m so scared for him!
Here are his reasons why he bought it (even though he’s living in a decent house w/ his parents, rent free):
1) if I don’t buy now, the price will only go up
2) 5% HST!
3) $10,000 new home buyer bonus (evil evil govt)
4) it’s near “water”

*pulling my hair out*

#221 worried realtors on 02.24.12 at 4:19 pm

#208 devore

Many worried realtors and sellers are in a panic as they know RE is a ponzi scheme bigger then the US bubble. People borrowed money on their HELOC to buy RE they could never afford or do reno’s with money they don’t have. People are good at borrowing money but not so good paying back. In 2008 credit ran out and Canada started crashing …why? People could no longer spend money they don’t have. Credit is now getting tight and thus the RE market has started its crash. RE will go back to its normal levels but that will take a 40-50 % drop off current levels. Cheap and easy credit only reason for fake boom.

#222 smartalox on 02.24.12 at 4:20 pm

#163 & #165:

There’s the pincher: you can stay with the same bank, and accept the rate they give you (based on the risk you NOW represent to them)

OR

you can go with a different lender, maybe get a better rate, but with a shorter amortization, and consequently higher payments. Oh, and you may have to pay your CMHC premiums again, if you sign with a new lender, and your Loan to value ratio is higher than 80%.

If they don’t get you one way, they’ll get you the other.

#223 eagle eyes on 02.24.12 at 4:20 pm

My landlord is selling and now we have to move. I am so sick of the unstable life of a renter, being at the mercy of my landlord. I am thinking about buying, but I know that this is the worst time to do this. Please someone help me be strong!!! My head says don’t do it, but my heart says the kids really don’t want to keep moving so BUY.

#224 spaceman on 02.24.12 at 4:22 pm

“Island girl on 02.23.12 at 10:28 pm Perhaps this is a stupid question, but if you bought a place and mortgaged for 40, and had to renew in a couple of years, would you be able to keep it at the 35 years it would be at or would it have to be refinanced at the current maximum length (25 or 30). I have some friends and family who are in that position.”

Not a stupid question at all, one that I asked last night. Had a mortgage specialist over to my house.

If you stay with the same lender, the contract is still the same, but you are renewing the contract, not refinancing, that is something completly different. BUT, if you want to change anything, take money out, lengthen the loan, change to a variable, that is refinancing and then, you are subject to the new rules. So people with an AMORT of 40, on a 5 year term, would renegotiate, with 35 years left, based on the interest rates of the day. Which will be 6% or more… (crystal balls are for sale, just call me)

#225 Devore on 02.24.12 at 4:30 pm

In Vancouver, you can now BUY your very own moldy basement suite:

http://www.thereferraladvantage.com/index.php?option=com_content&task=view&id=107&Itemid=125

Listed for $589,800, sold for probably around asking. Now you can live in someone’s basement, and pay twice the rental price for the privilege of dealing with the upstairs neighbors and sharing the yard.

#226 Oceanside on 02.24.12 at 4:35 pm

#188 Stuck on the Island

Where are you? Victoria, Nanaimo, Qualicum, Parksville, Courtenay, Comox or Campbell River?

#227 45north on 02.24.12 at 4:41 pm

Don: This is not only a correction in real estate it will also be one in principles.

which is why many are so afraid

#228 Lee on 02.24.12 at 4:56 pm

Looking at Victoria condos on MLS it’s amazing how many do not have parking spots. When they were building the Juliet I remember being told that there weren’t enough spots for all the units.

“We are trying to go eco-friendly” they said, ‘who buys a 300k condo and doesn’t have a car?’ I wondered.

The wait list in my building for parking has 15 names on it with the longest one having been there for 7 years and counting (I rent so have one as part of the deal). I do feel for all the people who hopped on the property ladder paying 300k for a 400sq ft no parking 2nd floor bachelor.

#229 maya on 02.24.12 at 5:06 pm

#190 noname on 02.24.12 at 2:18 pm

I think you should go to the open houses and presale offices to find it out. If you are interested, you should ask the potential buyers for their citizenship status and their occuptions etc, then you should have a clear pic about where the hot money came from….

#230 Coraline on 02.24.12 at 5:11 pm

You say elfin, I saw malevolent dwarf.

#231 Sh on 02.24.12 at 5:17 pm

Welcome to the age of deleveraging:

http://www.youtube.com/watch?v=5V3kpKzd-Yw
Kyle Bass on the new uncertainty of markets.

#232 peter on 02.24.12 at 5:19 pm

FORGET ABOUT STATISTICS, I WILL GIVE YOU MY REASONS WHY WE ARE IN BUBBLE TERRITORY.
TWO YEARS AGO, I WENT TO A BUILDER WHO OPEN NEW LOTS IN OVERPRICED WOODBRIDGE, WHEN I SAW KIDS, KIDS BUYING 750K-850K HOUSES, I SAID TO MYSELF THIS IS NOT GOOD.
WHEN PAY 450K AND UP FOR A SEMIDETACHED HOUSE IN OVERPRICED WOODBRIDGE AND HEAR YOUR NEIGHBOURS HAVING SEX…THAT IS A BUBBLE.
RARELY YOU SEE MY COWORKERS GOING FOR VACATIONS AND EVEN MORE EXTRANGE SEE PEOPLE PAYING VACATIONS FROM SAVINGS….PEOPLE HAVE NO MONEY LEFT FOR EATING OUT, VACATIONS, RETIREMENT THEY JUST HAVE TO MAX CREDIT CARDS IN ORDER TO DO SOME OF THE ABOVE.
WHEN YOU SEE PEOPLE MAKING 50k A YEAR AND THEY TALK LIKE INVESTORS FROM WALL STREET.
WHEN PEOPLE THINK WE HAVE BETTER REASONS FOR PAYING MORE THAN USA HOUSES…….SO FOLKS, FORGET ABOUT STATISTICS, BE LOGIC…..WE ARE NUTS.

#233 JRoss on 02.24.12 at 5:50 pm

DA

“Man you are one sick little moron”

Now what did worried realtor write to deserve this?

And in all your verbiage today confiming what other have been saying about Kelowna, there is no apology to those you called ‘dipshits’ for saying the same last week.

For all your projecting on to others you are seriously in need of some work looking inward.

BTW – Do you you tell your clients that ‘life is a gamble’ before or after you make them sign a document that assures your commission?

#234 Webcanto on 02.24.12 at 5:58 pm

Enough with the asian bashing. Most asians I know work their butt off, save, and they deal in CASH… especially immigrants. If it weren’t for immigrants buying up homes in Canada and filling the void that’s left by manufacturing jobs with construction jobs, what would we have left except joining the service and going to war.

#235 };-) aka DA on 02.24.12 at 6:02 pm

#223eagle eyes on 02.24.12 at 4:20 pm

If you have established a housing budget you can afford which includes all that goes with home ownership and can find a home to purchase within that budget and plan on staying a while… DO IT!!!

#236 LanceBass on 02.24.12 at 6:04 pm

#232 peter

First of all, WHY ARE YOU YELLING?
Secondly, can u translate what you said into English.

#237 };-) aka DA on 02.24.12 at 6:16 pm

#233JRoss on 02.24.12 at 5:50 pm
DA

“Man you are one sick little moron”

Now what did worried realtor write to deserve this?

And in all your verbiage today confiming what other have been saying about Kelowna, there is no apology to those you called ‘dipshits’ for saying the same last week.

For all your projecting on to others you are seriously in need of some work looking inward.

BTW – Do you you tell your clients that ‘life is a gamble’ before or after you make them sign a document that assures your commission?

I am well aware that you detest the DA just that much that you would find good in such an impish little twerp as “Worried Realtors” who adds absolutely no value what-so-ever to these discussions. Enjoy.

#238 Nicely said on 02.24.12 at 6:19 pm

#171 Tanya

Here here!

#239 Paul on 02.24.12 at 6:20 pm

#223 eagle eyes,

Selling or sold, big difference. You can stay till the end of your lease in BC, don’t know about other provinces. But for gods sake…DON’T BUY IT. Use a property management company and find another rental that isn’t planning on selling anytime soon. Get a one year with an option for 2. I can’t believe and was shocked to see so many empty houses out there while we were looking for a new rental. Got a great deal too.

#240 Mister Obvious on 02.24.12 at 6:31 pm

#213 Deb

“…she took the conversation to a new level when she said: “Oh, that guy, that Bank of Canada guy. I saw him on TV. Is he hot or what? You know, he looks just like a young George Clooney!”
————-

And nothing about Garth?….

#241 Mister Obvious on 02.24.12 at 6:43 pm

Wow. Check out the Parksville-Qualicum area on MLS. The worst case of “red-dot-itis” I’ve seen since I had measles in Grade three.

#242 Oceanside on 02.24.12 at 6:43 pm

#223 Eagle Eyes.
If you have to……Try and wait until late this fall then consider making an offer. Hopefully you aren’t in Vancouver or Victoria, although pricing and sales volume are changing, it may be awhile yet until vendors are convinced that their house is not worth what they thought (Thanks Global)
Good luck, be patient!

#232 peter.

keep it down will you, my eyes are smarting.

#243 I'm stupid on 02.24.12 at 6:43 pm

104 Noodles

Your story is similar to a family friend. He started flipping in 85, by 90 he had 18 properties on the go. When the market corrected he lost all of them. He was lucky to keep the one he was living in.

164 Tanya

The banks will move at the worst possible time for people that are mortgaged to the gills. Just like a drug dealer, once your hooked he has you. No matter how expensive the drug is a drug addict will buy it. What will someone who has heloc and max mortgage do if rates increase in a falling market? Two options either they sell at a loss or pay more in the hope the market recovers.

A question to all

Why is it if the market slumps 5-10% people dump but if homes decrease they hold in the hope of a recovery?

#244 Fabrega on 02.24.12 at 7:07 pm

So Garth corporate bonds are a good bet (down the road) and government bonds are not?

Where did I say that? — Garth

#245 Fabrega on 02.24.12 at 7:11 pm

# Webcanto

It is not bashing, dude. They started the *&^%$# buble.

#246 Timing is Everything on 02.24.12 at 7:19 pm

#223 eagle eyes
#239 Paul

Good times…

http://tinyurl.com/7jgkcg8
http://tinyurl.com/7kjugoe

Oh ya, there was talk about adding GST to residential rents (along with food etc.). Just thought I’d mention it.

#247 JRoss on 02.24.12 at 7:23 pm

DA

“impish little twerp”

Have you been drinking? You really are an impolite house guest.

“who adds absolutely no value what-so-ever to these discussions.”

Oh, the irony.

Back on point – I notice you neglected to comment on the dichotomy of advising other’s that ‘life is a gamble’ while requiring that your own interests are risk free as covered by a BRA. That discomforting sensation between your ears is called cogntitive dissonance.

#248 Fabrega on 02.24.12 at 7:25 pm

“So maybe this is a stupid question but……will corporate bonds be hit by raising interest rates the same way government bonds will?”

Prices down,yields up. — Garth

Maybe I did not understand your answer, Garth. Could you clarify?

We’ll do Bonds 101 again soon. — Garth

#249 Canadian Watchdog on 02.24.12 at 7:29 pm

#164 Tanya

“When the bank starts moving it will be a quarter point after a quarter point until rates are doubled. Impact? You bet. — Garth”

Nonsense. 1) Lifting rates 25 basis point would depreciate existing bond holders par value ($600 billion outstanding excluding municipal bonds) of which the BoC owns $60 billion of, therefore the BoC would be depreciating their own assets along with many pension fund bondholders. 2) A rate hike also means higher costs on new bonds issued; that would cost the government an additional $1 billion per year (compounding) for every 25 basis point move.

Essentially what you get by lifting rates is a negative feedback loop; increasing costs on borrowing payments (causing foreclosures and businesses to go bankrupt), will output less revenue for the government to pay its debt. Of course, the solution has always been to expand M2, issue more bonds (to pay maturing bonds) and so on.

By this method, it is mathematically doomed to fail by the biggest force no government can control; the exponential curve. We are obsessed with constant growth—that’s what got us here.

http://i40.tinypic.com/34orcrd.png

#250 Patiently Waiting on 02.24.12 at 7:42 pm

#182 DonDWest
By the way, F introduced the 0/40 rule. This travesty is unforgivable. Not even the Yanks with their sub-prime introduced something so financially stupid. After pulling the 0/40 I’ll never vote Conservative the rest of my natural life . . .
—————————————————————–
That makes two of us . . . hope fellow bolg dawgs F & brother Carney are checking in today . . .

#251 Paul on 02.24.12 at 7:56 pm

#246 Timing Is Everything,

No doubt but thats why I’ll never rent from a private landlord again. Property managers know the rules and they do what they have to to keep the property up to standards. It’s not their money their spending. They are much easier to deal with I find.

#252 “A lawyer knocked on the door of my rented house on the Westside of Vancouver this afternoon, and offered me $2.4M. He was going door to door asking if anyone wanted to sell.” | Vancouver Real Estate Anecdote Archive on 02.24.12 at 8:00 pm

[…] “A lawyer knocked on the door of my rented house on the Westside of Vancouver this afternoon, and offered me $2.4 mil. He was going door to door asking if anyone wanted to sell. He said he could by-pass any realtors and left me his card. I am trying to think of a way to sell him this house!!!!!!LOL!!The insanity continues” – Westsider at greaterfool.ca 23 Feb 2012 11:29pm […]

#253 };-) aka DA on 02.24.12 at 8:02 pm

JRoss

Actually, I probably would be inclined to advise clients that “life is a gamble” because it is. Of course you can mitigate the risk and so you should but never can you eliminate it.

And as far as being an impolite house guest, yes JRoss I do tent to call a spade a spade. I don’t “pretend” to have the fine social graces you do. Would you care to know my opinion of you? I am only too anxious to share them with you but I don’t think they would pass moderation.

“Oh the irony.”? Really? I will stack my contribution on this pathetic blog up against that of “Worried Realtors'” anytime. I mean get real… read his/her posts.. He is an adolescent at best “pumping his way into his adolescent hat…

With a boulder my shoulder,
feeling kinda older,
I tripped the merry-go-round
With this very unpleasin’, sneezin’ and wheezin,
the calliope crashed to the ground” – Springsteen

Anyway JRoss, take the advice of your Blog Dawg buddies and skip over my posts why don’t ya?

#254 jess on 02.24.12 at 8:08 pm

subprime” or “subprime like.”

http://www.nytimes.com/2011/12/20/opinion/nocera-an-inconvenient-truth.html?_r=1
By Bethany McLeanJanuary 17, 2012
http://blogs.reuters.com/bethany-mclean/2012/01/17/a-tale-of-two-sec-cases/

#255 john m on 02.24.12 at 8:14 pm

“But the little pecker has this right: “have more cash.”…………..omg hilarious! :-)

#256 Nostradamus Le Mad Vlad on 02.24.12 at 8:25 pm


2:44 clip “Note: watching this video whilst drinking coffee may result in a sprayed monitor”
*
Economy War is bad, profits are good for TPTB; MF Global Going ballistic; Money with lots of zeroes. Not counted are the CDS / Derivatives; USPS may cut 35K jobs. Where is Canada Post on job cuts? RBS Not very good with cash; Panic?<No. Just listen to govts. and all sheeples will be safely protected.
*
5:21 clip CIA;s and m$m complete failure in Syria; Kill Switch for PCs; The Power of Experiential Education Never heard of it; H5N1 Super Virus and big pharma; 1:13 clip Ron Paul — The Soviets lost because they went broke; South Carolina Iron Curtain checkpoints; Dow, Monsanto and Walmart The Axis of Evil; China More hoogla-boogla; Alaska vs. the TSA; 2:11 clip John Bolton has foot-in-mouth disease; ACTA 2.0 One way or another, our freedoms and rights are being whittled away.

#257 Daisy Mae on 02.24.12 at 8:32 pm

Coraline on 02.24.12 at 5:11 pm
“You say elfin, I saw malevolent dwarf.”

****************************

Yes, I agree. He and his government never gave a damn about the Canadian people…so it’s absolutely disgusting to see Flaherty feigning concern now.

#258 SaggyBotomBoomer on 02.24.12 at 8:35 pm

#223 eagle eyes

I don’t know if it’s an option where you live , but I signed a three year lease with a property management company. Excellent home in an upscale neighbourhood, that I couldn’t touch for three times the mortgage amount. Includes all utilities including internet and cable. I write one check a month, and if there are any issues they are resolved quickly and professionally. Much lower stress levels than owning a home which seems, via utility and tax increases, to have become an ATM for cash strapped governments at all levels. YMMV

#259 Snowboid on 02.24.12 at 8:45 pm

#216 Starving Artist on 02.24.12 at 3:46 pm…

That’s what we do, summer in the Okanagan, winter in Phoenix!

#260 Gord In Vancouver on 02.24.12 at 9:00 pm

Great post, Garth.

#261 vreaa on 02.24.12 at 9:11 pm

Basement Suite In East Vancouver Sells For $590K

http://wp.me/pcq1o-3JB

Can’t make this stuff up.
We just report what happens.

#262 };-) aka DA on 02.24.12 at 9:13 pm

As Thomas Edison said “ If a man will devote his time to securing facts in an impartial, objective way, his worries will usually evaporate in the light of knowledge.”

But what do most of us do? If we bother with facts at all – an Thomas Edison said in all seriousness “ There is no expedient to which a man will not resort to avoid the labour of thinking” – if we bother with facts at all, we hunt like bird dogs after the facts that bolster up what we already think – and ignore all the others! We want only the facts that justify our acts – the facts that fit in conveniently with our wishful thinking and justify our preconceived prejudices!

As Andre Maurois put it: “Everything that is in agreement with our personal desires seems true. Everything that is not puts us into a rage.”

– Dale Carnegie

#263 Marty on 02.24.12 at 9:19 pm

what problem ? at least in la Belle Province ???
http://lapresseaffaires.cyberpresse.ca/opinions/chroniques/michel-girard/201202/22/01-4498473-letonnante-accessibilite-a-la-propriete.php

#264 guava.ca on 02.24.12 at 9:21 pm

“Wow, that campaign is really impactful yeah, you understand what i mean yeah, yeah?”

http://www.urbandictionary.com/define.php?term=impactful

#265 noname on 02.24.12 at 9:58 pm

#209 Matty on 02.24.12 at 3:27 pm
noname china has 1.3 billion people 1% of which is 13 million. ever heard of math? as to your question, sadly the government does not reaaly protect your health or well-being.

^^ actually j**kass, no need for the sass (why do people feel the need to degrade others on small points – oh yes, to make themselves feel better – bet you monitor grammar too lol).

I have heard of math, but I’m sorry to report I actually don’t keep tabs on the exact population of China. It’s not something I felt like googling in terms of the figure I heard. It was the general principle of the differences between the sizes of our population that I thought was an interesting notion.

#266 Blog Dog Carney on 02.24.12 at 10:01 pm

213 Deb – thank your friend for the complment. I do try to dress the part of the sex symbol.

wrt rising rates. At some point the rise in rates wont adversely effect the US$ exchange rate. I will raise them 0.25% at a time and wait for any reaction to pass.

Finger on the trigger. Safety off….

#267 Kevin on 02.24.12 at 10:02 pm

@van guy:

The “equity” is moot because no appraisal is done. The bank doesn’t know/care. They just renew you at whatever the prevailing rate is when your term is up. You could be $100,000 underwater, and it doesn’t matter. Without an appraisal, “underwater” doesn’t mean anything. As long as you pay the monthly, they don’t care.

Now, as I said, if you wanted to *switch* lenders, then suddenly it becomes a brand-new mortgage. You’d have to get an appraisal, you’d have to pay CMHC again, you’d be limited to the new amortization rules, and everything else.

#268 maxx on 02.24.12 at 10:04 pm

#10 Ex-Ex-Pat on 02.23.12 at 10:04 pm

“I am not a fan of F, but what he said today earned some respect.”

I am reserving any respect for the time sensible action is actually implemented…and rates begin to rise to their normal levels. ZIRP has distorted the economy to extremely unhealthy levels, both qualitatively and quantitatively.

#269 noname on 02.24.12 at 10:05 pm

203 Capilano on 02.24.12 at 2:49 pm
#187 Noname
“I once heard a stat that the top richest 1% from mainland China actually outnumber the entire population of Canada.”
———————————————————————-
According to this article, http://www.bloomberg.com/news/2011-05-31/china-s-millionaires-jump-past-one-million-on-savings-growth.html,

China has 1.11 million “millionaires” and is 3rd in numbers of millionaires behind the USA (5.22 million) and Japan (1.53 million).

“The Asian nation’s affluent class only holds about 5 percent of its wealth offshore.”

^^ thanks. Interesting.

#270 Kevin on 02.24.12 at 10:05 pm

@Bailing in BC:

That’s a good point – lenders could conceivably charge you premium rates if they know you can’t easily just switch to another lender. In fact, when your term is up and your lender sends you the renewal papers, they routinely quote you above-market rates, even if you’re NOT in a high-risk mortgage.

When my own mortgage was up for renewal last summer, I got the renewal paperwork in the mail. The rate was 3.99%. I called them up and said “Thanks, but no thanks – ING has offered me 3.79%.” They said, “Oh, well as luck would have it, we JUST dropped our rates to 3.69% – it’s your lucky day!”

Had I not asked, of course, they would have quietly renewed me at 3.99%. Now, I was able to get 3.69% out of them because we’re a low-risk loan. You raise a good point as to questioning whether or not someone 5 years into a 40 would get the same concession.

#271 Timbo on 02.24.12 at 10:14 pm

word to the wise snowbird, sell both properties because rents are going to drop.

The number of vacant homes in the Valley – those that are not second homes or vacation properties – has climbed by nearly 200,000 since the last census in 2000

http://housingdoom.com/2012/02/24/phoenix-homownership-is-down-renting-is-up/
—————-
Foreclosures skyrocket across the Okanagan

http://www.chbcnews.ca/foreclosures+skyrocket+across+the+okanagan/6442582040/story.html

enjoy the market…

#272 45north on 02.24.12 at 10:32 pm

jess: from your link: the delinquency rate on all Fannie and Freddie guaranteed loans was 5.9 percent. By contrast, the national average was 9.11 percent.

This is important because Fannie and Freddie are the US equivalent to CMHC. Except that CMHC has a deeper and more pervasive role in the Canadian housing market. The delinquency rate for Canadian mortgages, I believe, is 0.5% which means at the moment CMHC is highly profitable. Which is what you would expect at the very top of the market.

#273 Webcanto on 02.24.12 at 10:34 pm

#245 Fabrega
Asians didn’t start the bubble, they pay in cash and they only have the cash because more jobs are now overseas and “global economy”. In the end we all started the bubble by not paying attention to the dumb policies we allow our government to implement.

#274 TurnerNation on 02.25.12 at 12:19 am

So we must ‘F’ F?

>:-( aka TurnerNation

#275 Snowboid on 02.25.12 at 12:29 am

#271 Timbo on 02.24.12 at 10:14 pm…

Our AZ home has appreciated by at least 10% since we bought, based on recent comp sales around us. We aren’t too worried since we spent less on the home and improvements than a single wide trailer on leased land in the Okanagan.

Renting is attractive down south when you have had your previous home foreclosed on, or can’t get a bank loan.

We rent in the Okanagan.

When you are in a $400K+ place where the rent is around $ 1300 that makes sense.

Looking at Phoenix where rents are about $ 900-1000 for a $ 150,000 home it doesn’t make sense to rent.

#276 Yuus bin Haad on 02.25.12 at 12:43 am

Pay attention kids: “F … helped ignite a fire he cannot now extinguish.” and it’s not just F. Learn to adjust … this is a predicament, not a problem.

p.s. Anyone other than Garth read down this far?

#277 Ogopogo on 02.25.12 at 1:41 pm

#276 Yuus bin Haad on 02.25.12 at 12:43 am

p.s. Anyone other than Garth read down this far?

I always do. Until Garth sets up a rating system for comments you never know where the gems will be.

Case in point: a few months ago someone here recommended investing in lithium stocks when they were at 0.43. Lithium’s now going at 0.70. I can think of at least a dozen other examples just off the top of my head. Keeping everything filed in a special folder.

Between Garth’s oracular posts and the wiser comments, I’ve learned more about finance here than in all my years at university.

#278 pablo on 02.26.12 at 4:27 pm

Interest rates will rise again, there’s no where to go but up, they’re at cyclical lows. Yeh, OK, so tell me when and why with U.S. economic conditions in the shitter, ie; high unemployment, large backlog of foreclosures, millions of properties, still in the system to work out, banks yet to deal with litigation exposure over mortgage backed securities sales. Interest rates aren’t going to increase in the u.s. for some time to come, granted the created jobs number has been good recently, but its an election year remember.

In Canada unemployment is higher than average levels, jobs being created are bullshit p/t min wage crap. Federal and provincial governments faced with huge deficits and austerity measures coming further deflating the economy. Businesses arent investing in hard assets, the only sector thats plowing ahead is banking and resources (oil/mining). There’s no hiring in manufacturing, and goods being shipped to u.s. markets is down in volume as americans arent buying like they did before. Harper didnt come home from china with any sweet deals for Canada, except the rental of a couple of panda bears. SO, again when and why will interest rates rise?
If canadian consumers are so overburdened with debt then demand for personal borrowing will wain, businesses cant borrow unless they dont need to given the climate in commercial banking these days, so again, no demand.
Europe and the UK are both in a huge mess called the e.u. with only germany on top, so where will demand come from to boost our economy to the point where F or C will need to increase rates to quell the fires of inflation, which as we all know bears no relation to reality, same as employment statistics put out by government.
Over the next few years; boomers retiring will be selling to fund retirement, as you said previously, prices will soften, markets will favour the buyers once again, but this will not cause rates to increase either given population demographics borrowing needs will decline as will house prices. Unless there’s a huge influx of wealthy immigrants that dont need new jobs;
I don’t expect to hear a pop or a boom but more of a phhttttt as the air slowly leaks out.

#279 Bubble News – 2/27/2012 | The Bubble Bubble on 02.27.12 at 4:52 am

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