Diversification

Doug has two friends who both bought houses, go to different bank branches, even live in different cities. But they had the same experience shopping for a mortgage. “The nice person at the bank talked them into only putting 10% down, instead of the 20% they’d planned,” he says. “So the bank is shifting any responsibility off itself and onto the backs of taxpayers (CMHC). No risk there for banks.” BTW, it was the same bank in both cities, which shall go nameless but really likes green.

Of course when you nail a house and offer up less than 20% of the price, the loan must be insured. This is the case with over 95% of new mortgages, and almost all of the buyers add the hefty insurance premium to their loans (bad move). Of course, the insurance doesn’t protect them if they can’t make the payments. It saves the bank’s ass.

But with an uninsured loan (one that’s not high-ratio) if the borrower walks, the bank’s on the hook – especially if the homeowners opts for bankruptcy.

This isn’t much of a problem today, although defaults – still a minuscule portion of any bank’s lending portfolio – are rising. Still,  stories like Doug’s make you wonder. Especially after we heard CMHC’s lending ceiling of $600 billion is almost tapped, in part because banks have been actively insuring even conventional loans, so they can be securitized and sold as covered bonds. In other words, let somebody else worry about over-extended homeowners blowing up.

More evidence why you should own the banks, instead of putting money there.

This hinky blog has warned about the concentration of wealth in residential real estate for the past four years. Nobody listens, of course. And now the concentration is drawing gasps around the world. We’re more indebted than the Americans, whom we scorn. Only three in ten families here don’t have a house. And yet homes cost more than ever, and exceed the average family’s ability to afford in most big cities. This is unsustainable. The bankers know this, and have been preparing.

But most people around you are not. Some even drop by this site to say profound stuff, like this (received from a realtor on Saturday): “RE is hot and will remain so how about the people that listened to your garbage for the last 4 years and missed out on MASSIVE opportunities? Of course that matters none. The money that people have lost out on because of your propaganda is in the millions. You disgust me, you sleazy scummy hater.”

I average a message like this every two hours. They make me feel so wanted. The world needs more Garth.

In fact, I don’t hate real estate. I just mourn for it. Houses used to be shelter. Now they’re structural anxieties. Mostly I worry for all the people who – like the delusionals who lined up for Calgary condos on the weekend or Richmond Hill McMansions ten days ago – have bought into this, lock, stock and barrel.

With such a concentration of wealth now in one asset, we’ve entered the red zone. It’s the same one the USA rolled into during the summer of 2005, when home ownership levels approached those of Canada now, and real estate was the only thing middle class people would dream of investing in. All those billions dragged out of stocks and equity mutual funds after Nine Eleven went straight into suburban palaces and real estate speculation, as mortgage rates and lending standards sank.

The comparison with Canada after the GFC is uncanny. We, too, dragged bags of money out of liquid assets as interest rates plopped, and inflated the biggest housing bubble in living memory. In many places, the inflation continues, even as most reasonable folks grow nagging doubts.

So here’s the message: do what the banks are. Take a lesson from the smart people, not your house-horny, granite-loving relatives. Get some insurance against the inevitable bust. Diversify.

Remember my rule of 90. Deduct your age, and that should be the extent of your net worth in a house. If a 50-year-old has less than 60% of her wealth in liquid assets, then she’s at risk when real estate values normalize. And where to put this money? Simple, in the future.

Since last autumn stock markets, for example,  have risen by about a third. Why? Because the doomers were utterly wrong. The Chinese economy did not take a dump (growth expected to be 7.5% this year). America didn’t default or slide into a new recession. Europe did not fall apart. Bond yields came down. Nobody defaulted. Hundreds of thousands of US citizens got new jobs. Corporate profits romped higher. In fact, they’ve doubled since 2009 and are forecast to increase 13% next year. Stocks are cheaper in comparison than at any time since 1989. These are facts.

More important, though, is what’s brewing in the human mind.

It’s easier to scare the crap out of people than it is to make them confident. So when scary stuff happens, accentuated by an idiot media, worried people flock to the default asset, which is housing. In the midst of volatile times, when the economy’s restructuring, an enormous amount of wealth has concentrated into one thing. Sadly, that thing can turn nasty, as it did in America. You’d think we would learn.

The bottom line is simple. If you need mortgage insurance to buy a house, don’t buy. Even the bank’s scared.

186 comments ↓

#1 TurnerNation on 03.05.12 at 10:25 pm

First?

#2 V on 03.05.12 at 10:26 pm

First again!!
I hope

#3 not 1st on 03.05.12 at 10:27 pm

U.S. debt ceiling = non event

ergo

CMHC debt ceiling is also non event. Its just digital numbers on a computer not backed by anything but the faith and word of the canadian tax payer, just like the U.S. debt.

The US will never default. Can’t say the same for 5%-down condo virgins. — Garth

#4 Smoking Man on 03.05.12 at 10:33 pm

Anyone seen the Singing Big Fat lady in Toronto, I have been looking but she is nowhere to be found.

I seen big fat F blowing his mouth off about House price to income.

What is alarming about that? There is no “natural” ratio for those two things. Just because it has had one value in the past has no bearing on what is a reasonable value now or in the future. 6 years of income to buy a home instead of 3-4? What makes 3-4 magic numbers but 6 a crisis?

When you consider the cost of funds when 3-4 was the rave. I paid 18% in the 3-4 days

Many of you can’t think for yourselves, you read stats that reinforces a want and a bet and swallow like Linda love lace, except she had the sense to close her eyes.

Sadly as the bubble heads fence sit in Toronto, with marshmallows on sticks waiting to do the bubble head campfire dance, this year they will miss another 10 to 15% of free money. I love how all you guys come in here and proudly state I sold, I’m Liquid and I’m renting. Wo-Hooooooooooo

If you sold in Toronto, you’re the Greater fool……….

GTA bubble will burst but not for a while. 2014 is my call.

Now Vancouver, that’s a different story…….But don’t know or care about that market.

Las Vegas on Easter weekend anyone?

#5 zman on 03.05.12 at 10:33 pm

first…..again

#6 T.O. Bubble Boy on 03.05.12 at 10:34 pm

Here’s my “Rule of 90”:

A) Take 100 “investment condos” in downtown Toronto
B) Ask the owners how many lose money every month

#7 TnT on 03.05.12 at 10:36 pm

Repost from yesterday – Is it possible that there are enough millionaire new Canadians from Asia that it could keep the middle class of GTA from competing in a decent home? 1.3 billion in population could mean thousands of Millionaires coming to GTA and that’s way more buyers than middle class Canadians trying to get in this market.

#8 Smoking Man on 03.05.12 at 10:36 pm

Couple Lives In $1.3 Million, 4,900 Square Foot Home For Five Years Without Making A Single Mortgage Payment

Love it :)

http://www.zerohedge.com/news/couple-lives-13-million-4900-square-foot-home-five-years-without-making-single-mortgage-payment

#9 Fabrega on 03.05.12 at 10:36 pm

Garth,

Where is the bond 101, dude?
There are some people here that do not know what they are talking about specially bonds.

#10 Network Admin on 03.05.12 at 10:40 pm

Even mortgage brokers don’t like this

…The net effect in that case is that many smaller lenders may not be able to price as aggressively on mortgages with 20%+ equity. How counter-intuitive is that?

http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2012/03/the-scramble-for-insured-quick-closes.html

#11 Victor on 03.05.12 at 10:45 pm

Flaherty, economists optimistic, but warn of overheated housing market

Postmedia News Mar 5, 2012

Mr. Flaherty and a handful of the economists said they continue to be concerned about household debt levels in Canada and a somewhat overheated housing market — especially on condominiums. The Minister was also cautioned about cutting more than $4-billion in annual spending that the government first identified last year.

Some of the big banks are suggesting the federal government also consider implementing “measured actions,” such as reducing the maximum amortization period for mortgages back to 25 years and increasing the minimum down payment, possibly to 10%.

“There has been some moderation in the housing market. I remain concerned about the condo market, quite frankly,” Mr. Flaherty told reporters after his one-hour meeting in Ottawa.

“I again encourage Canadians to be careful in the amount of debt they take on in terms of residential mortgages because (interest) rates will go up some day.”

http://business.financialpost.com/2012/03/05/canada-on-track-fiscally-flaherty/

#12 Chaddywack on 03.05.12 at 10:47 pm

I mentioned the possibility of F changing the mortgage qualification rules and a coworker (Parents are Mainland Chinese and he lives alone in Vancouver) said to me “Good, all that’s going to do is price Canadians out. The Chinese come here with all cash, so mortgage rules don’t affect them at all. Basically Chinese will still buy and everyone else will still be priced out.”

I looked around the room at work at the nodding heads and almost puked…..I guess he knows what he’s talking about though, after all he is Mainland Chinese ;)

#13 Loan money to anyone on 03.05.12 at 10:48 pm

There’s an interesting article on the front page of today’s (March 5) Calgary Herald about a residential property investor who was forced to shut down two of his suites after someone reported them to City Hall. Just one complaint is all it takes. Anyone thinking about buying a residential property as an investment and renting out suites might want to reconsider.

#14 T.O. Bubble Boy on 03.05.12 at 10:49 pm

From the Flaherty “secret meeting” with economists:
http://www.vancouversun.com/business/Flaherty+economists+warn+overheating+housing+market/6252767/story.html

“I again encourage Canadians to be careful in the amount of debt they take on in terms of residential mortgages because (interest) rates will go up some day.”

They must have left out this part:
“Unless it is between the years 2006-2011, in which case I encourage Canadians to be as uncareful as possible in the amount of debt they take on, because I would like to create a housing ponzi scheme to provide a fake economy for myself and Mr. Harper to promote in endless television advertisements (at the expense of the taxpayer).”

Also – if stated income mortgages are getting eliminated, what will happen to all of the contractors H and F love so much? They ran ads all the way back in the mid-2000’s talking about going to college and learning a trade, then doubled down on the “home renovation economy” by giving tax breaks, AND they give Federal and Provincial dollars to the production companies that make TV shows like Homes Inspection, Love It or List It, and Property Brothers.

http://www.pch.gc.ca/eng/1268752355851/1268755942629

http://www.omdc.on.ca/Page3399.aspx

#15 wateveruwant on 03.05.12 at 10:50 pm

Canada’s 75 Billion Dollar Bank Bailout (via the CHMC)

http://www.globalresearch.ca/index.php?context=va&aid=12007

It’s really not that different here.

#16 Math Challenged on 03.05.12 at 10:50 pm

“Remember my rule of 90. Deduct your age, and that should be the extent of your net worth in a house.”

Ok, dumb question time. How do you calculate the percent of your net worth that’s in a house?

If I have $1 in the bank, a 500K house and a 500K mortgage my net worth is $1 (assuming assets minus liabilities and a house is an asset.) In this case I have 100% of my net worth in liquid assets and life is great.(but clearly not. . . )

Or should I exclude the value of the house in the net worth calculation? So my net worth is -$599999 and thats 99.99% in a house.

Any help?

#17 Jon on 03.05.12 at 10:50 pm

The other day you were very coy when you said a buying opportunity was coming. Expand?

I’m just a coy guy. Soon. — Garth

#18 $$$BPOE$$$ on 03.05.12 at 10:57 pm

Looking great folks
Douglas Porter, deputy chief economist with BMO Capital Markets, cautioned the government against searching for more than the $4 billion in annual savings the Conservatives first mentioned last year.
The Harper government’s program review is hunting for a minimum $4 billion — and up to $8 billion — in annual savings over the next few years, but Porter said the government should tread carefully.
“I would not advocate for the federal government to ramp up the pace” of cuts, Porter said, noting federal finances are now in better shape.
“There is not a push from the financial markets for the federal government to do any more than what’s already scheduled.”
Porter, however, isn’t as concerned about the Canadian housing situation, saying the markets remain fairly well balanced across the country.
“I really do not get the impression whatsoever that the housing market has particularly overdone it,” he said.

#19 truth hammer on 03.05.12 at 10:58 pm

“Own the banks’…quite right. people don’t understand that CDN banks have no skin in the game of real estate…they are as the old saw goes…’safe as houses’…..preferreds pay well and though they do bend in a strong economic wind they continue to pay and recover over time. Real Estate collapse will not dent the banks paper at all.

Joe Averge should buy the stocks of the products he detests….oil companies and trusts are a hedge against the rising fuel costs….so if you don’t like rising gas costs..hedge your money and get a good stock that pays… Same goes for heat , light, consumer goods, restaurantsd etc etc etc . Buy bread makers not the bread….Tim Hortins…not the coffee……you get the idea…these co’s are all doing well….look at a five year chart on Saputo……..get it?

#20 $$$BPOE$$$ on 03.05.12 at 10:58 pm

Just a smidge under 40 million. One day all houses will cost this much in BPOE
http://www.househunting.ca/vancouversun/homes/6253837/story.html?tab=PHOT

#21 Air on 03.05.12 at 11:05 pm

See this funny local flyer in Mississauga…
Sizzling Hot. Burning USD. Looks like a copy paste from US realtor.
May be he is paying rent in USD in Canada and burning his own USD by printing and sending this flyer in the mailbox.

http://masalatize.com/flyer.jpg

#22 Sir Lumpy Rutherford on 03.05.12 at 11:11 pm

Yeah .. the economy in the US is so good that they have to put lipstick on a pig .. and you buy it come on its a election year and the media is just pumping to get your dark lord , barry soetoro elected we all now that …

Are those lumps on your head? — Garth

#23 Al on 03.05.12 at 11:15 pm

@13, I know someone who has several basement suites all illegal. A neighbour reported her to Calgary City Hall. They give notice before coming to do an inspection, so she took out the stove for the inspection date. As long as there is no stove, its not deemed a rental suite. She put the stove back in the next day. She even started a petition for affordable housing, while throwing her pregnant tenant out for missing a payment!

#24 Joe The Plumber on 03.05.12 at 11:15 pm

What does the fineprint on the dude’s placard says?

#25 Sebee on 03.05.12 at 11:20 pm

U.S. debt ceiling = non event

ergo

CMHC debt ceiling is also non event. Its just digital numbers on a computer not backed by anything but the faith and word of the canadian tax payer, just like the U.S. debt.

The US will never default. Can’t say the same for 5%-down condo virgins. — Garth

————
not 1st – you should have compared to Mac and May. Still RE went down in US. Garth preaches reason, these are not reasonable times however.

You can’t blame the banks for insuring their liabilities. I would. Especially since borrower pays for it.

#26 Don on 03.05.12 at 11:22 pm

Chaddywack on 03.05.12 at 10:47 pm

I mentioned the possibility of F changing the mortgage qualification rules and a coworker (Parents are Mainland Chinese and he lives alone in Vancouver) said to me “Good, all that’s going to do is price Canadians out. The Chinese come here with all cash, so mortgage rules don’t affect them at all. Basically Chinese will still buy and everyone else will still be priced out.”

I looked around the room at work at the nodding heads and almost puked…..I guess he knows what he’s talking about though, after all he is Mainland Chinese ;)******************************************

Makes you wonder how your office colleagues got their jobs – I guess they are edumuncated. Silly delusional boys and girls. Garth said it a week or two back…people suffer from recency. I remember a young financial person told me that a house is the best investment ever…I guess if you were matured in the last 10 years a person might believe that. What happened to learning from past mistakes.

#27 vyw on 03.05.12 at 11:28 pm

Detached housing in Vancouver is up YoY in February. It may continue to climb one more leg.

Re the stock market – there are signs that markets are overbought and may trend down over the spring til June, when QE3 is announced.

What signs? — Garth

#28 Mr Buyer on 03.05.12 at 11:29 pm

#4Smoking Man on 03.05.12 at 10:33 pm … If you sold in Toronto, you’re the Greater fool……….

GTA bubble will burst but not for a while. 2014 is my call.
…………………………………………………………………….
You are to be consigned from this point forward to the bubble cultivator camp. I suspect a vested interest at work in your assertions. All the way from the feined capitulation to the “oh a new metric nullifies my previuos capitulation.” It is all romper room psy-ops. The bubble has topped. BUYER BEWARE.

#29 Fifty Percent Correction Predictor on 03.05.12 at 11:30 pm

Can someone here tell F just to STFU?!

Within a mile of radius from where I live, there are 13 condos are in pre-construction sale. They all promise to be built before 2014.
I want to choose of them for myself… after they are finished.

#30 vyw on 03.05.12 at 11:32 pm

Vancouver market data:
http://www.rebgv.org/home-price-index?region=all&type=all&date=2012-02-01

Detached housing up 36% since the trough 3 years ago. Ergo a 25% drop from today’s lofty levels brings us back to the trough of Feb 2009.

If you held on for the past year, the index SFH house (sort of like a median value) went up by 10.5%. So the market (prices) may still have some momentum for 2012.

#31 Anonymous on 03.05.12 at 11:34 pm

#12 Chaddywack on 03.05.12 at 10:47 pm

“Good, all that’s going to do is price Canadians out. The Chinese come here with all cash, so mortgage rules don’t affect them at all. Basically Chinese will still buy and everyone else will still be priced out.”

Hehe, unfortunately when people hit hard times they need to find a scapegoat. During the crash in the 1930’s it was easy to blame the Jews because they had lots of wealth. The same happened in Zimbabwe more recently and the middle east even now.

It’s good to be on top until the native population snaps and starts a genocide campaign.

#32 T.O. Bubble Boy on 03.05.12 at 11:42 pm

@ #20 $$$BPOE$$$:

Those sure are some pretty pictures… but it looks like that house only exists on some architect’s computer.

#33 Mister Obvious on 03.05.12 at 11:44 pm

“There has been some moderation in the housing market. I remain concerned about the condo market, quite frankly,” Mr. Flaherty told reporters after his one-hour meeting in Ottawa.
————–

As the finance minister makes clear, condos are not housing. They are in fact speculation units.

#34 Mr Buyer on 03.05.12 at 11:44 pm

The party is over. Last one to leave turn off the lights.

#35 bubble head on 03.05.12 at 11:48 pm

GTA Market Update – Feb Stats -TREB website

Detached sales up 12% price up 13%
Condo sales up 7% price up 4%

The average selling price in the TREB market area was $502,508 in February – up 11 per cent compared to February 2011.

Active listing 14546 unchanged from last year and DOM is 24. Until we hit around 19000 active listings NO bubble bursting. DOM would have to be in the high 30s.

Insane that prices are able to go 10% higher y/y for the last three years. Who can afford to pay these prices???

#36 Deano on 03.05.12 at 11:54 pm

Hundreds of thousands got “Mcjobs”. You see, you forgot the “Mc” prefix. Sorry if I’m being pedantic.

You’re being wrong. — Garth

#37 Randman on 03.06.12 at 12:00 am

Hey Taxhaven! From yesterday on Taiwan

Great place…spent 5 years there …..
How are you handling the reverse culture shock?
It was brutal for me ..I still think about returning!

Cheers

#38 TurnerNation on 03.06.12 at 12:01 am

Hate email, every two hours? Sounds like a Harpercon Robo-email system. They’re trying to break our spirits.

I have a robo-delete button. — Garth

#39 harden on 03.06.12 at 12:05 am

#4 smoking man

let me fill you in on vancouver- any flipper who bought in the last year is busily trying to b/e in this ‘hot spring market’ lol. the quiet dash to the exits is underway – check back in july/august for YOY

and richmond, they’re trying to cap losses at $100M give or take

#40 a prairie dawg on 03.06.12 at 12:06 am

#24 Joe The Plumber

-What does the fine print on the dude’s placard says?

– — –

No worries Joe. No one in Canada reads the fine print…

#41 Onthesidelines on 03.06.12 at 12:06 am

There is something terribly perverse about pointing out the scumbag behaviour of banks while at the same time encouraging the public to invest in the very same banks precisely because that very same scumbag behaviour will insulate such investors from the consequences of such scumbag behaviour.

In other words, invest in banks because they will be doing very well after screwing most of society.

A perfect picture of humanity screwing itself.

If you believe the insurance of mortgages is scumbag behaviour, then go after the government which invented 5% down and backs the scheme, not the banks who are protecting shareholders. What a puerile comment. — Garth

#42 not 1st on 03.06.12 at 12:08 am

How can cash flow from REITs not go down. If mortgages drop to 25 years and interest rates go up 1 point, doesn’t matter if they own malls or apartments, rental income takes a haircut doesn’t it? The G&M is saying this is what will happen.

REITs have benefited from low rates by extending financing at the most favourable terms in history. If housing prices plop, rental demand grows. Meanwhile commercial properties are throwing off record cash flow. Good REITs have a place in balanced, diversified portfolios. — Garth

#43 Ian - Ottawa on 03.06.12 at 12:10 am

I was on this path of renting and investing for years before I found this pathetic blog. I think however you were right that it might be years before we see ” houses ” a consumer good, become “homes” a place for family and shelter. I’ll own when it makes sense, if ever… keep it up !

#44 squidly77 on 03.06.12 at 12:12 am

There’s an interesting article on the front page of today’s (March 5) Calgary Herald about a residential property investor who was forced to shut down two of his suites after someone reported them to City Hall. Just one complaint is all it takes. Anyone thinking about buying a residential property as an investment and renting out suites might want to reconsider.

Think CRA

#45 Tony on 03.06.12 at 12:15 am

Stocks have never been more overvalued in almost every stock exchange on Earth today. If you’ve traded stocks and futures for the last sixty or so years on a daily basis you get what’s known as “a feel” for all the world markets as well as all the commodities. Pump and dump never gets old and when the world markets all tank 80 plus percent to the downside you can keep on reciting pump and dump never gets old. Wall street has roped all the suckers in and the hedge funds and bankers are ready to unload.

Try alcohol. It helps. — Garth

#46 Observer on 03.06.12 at 12:16 am

@Chaddywack

I mentioned the possibility of F changing the mortgage qualification rules……Basically Chinese will still buy and everyone else will still be priced out.”

Not true. Many people (like me) refuse to buy RE at these valuations, so I’ll sit on the sidelines until the numbers add up. Until this bubble is popped, positive cash flow on properties I’m considering, is impossible. My money will wait in other, more rewarding places.

#47 squidly77 on 03.06.12 at 12:19 am

Most if not all of these REIN clowns are avoiding paying taxes. Thats a dirty word.
http://www.cra-arc.gc.ca/E/pub/tg/t4036/

#48 a prairie dawg on 03.06.12 at 12:21 am

“I average a message like this every two hours. They make me feel so wanted.”

– — –

A) Realtards are worried that people are missing out by not buying property that will keep rising in value indefinitely

B) Realtards are starting to feel the pinch, and you’re not helping them get more sales commissions

Given the choices, I’ll go with the latter.

And I wonder how many of those ‘new friends’ will still be emailing you after the crash?

Global might also end up blaming you for the crash too. You’re bound to hurt their main source of advertising revenue at some point.

***Breaking news on Global***

Housing downturn in Canada not caused by consumer overspending or loose lending standards. It’s all Garth Turners fault…

#49 SophieZombie on 03.06.12 at 12:23 am

In 2007, it was luxurious homes tour.
In 2009, it was the investment circle homes tour.
In 2012, it is foreclosure homes tour.

http://nanaimo.kijiji.ca/c-real-estate-houses-for-sale-FORCLOSURE-SUNDAY-TOUR-OF-HOMES-W0QQAdIdZ360110854

#50 Alpha Bravo on 03.06.12 at 12:36 am

Hmmmmm… Do I buy that Vaughan bungalow or Paula Abdul’s mansion? Decisions, decisions….

http://fmlistings.tumblr.com/

#51 MJG on 03.06.12 at 12:43 am

@#8: “Couple Lives In $1.3 Million, 4,900 Square Foot Home For Five Years ”

Why on earth would “a couple” need 4,900 sq ft?? Are they mad collectors of gigantic art pieces? My wife and I floated (literally) a very comfortable, convivial, social lifestyle in about 250 sq feet for well over ten years. Greed and stupidity comes in all flavours I guess.

#52 HDJ on 03.06.12 at 12:50 am

Garth, Generally I agree with your views and have learned much from your blogs. However, the crazy RE agent you quoted above wasn’t far off the truth in one part of his rant – “…how about the people that listened to your ******** for the last 4 years and missed out on MASSIVE opportunities?” Anyone who sold real estate a few years ago, in order to escape the downturn you’ve been predicting, acted too soon and lost out on two, three or four years worth of price increases – in Vancouver and Toronto that’s quite a few bucks. Isn’t this obviously correct? Everyone knows that timing market changes is difficult. You did your best, but missed the mark by a few years. And those who sold prematurely, on the basis of your suggestions, are ultimately responsible for their own decisions. Isn’t it time for a little humility, and an admission that your timing has been off? We’ll still love ya.

Attitudes like your have been pivotal in creating a casino environment for residential housing. It’s evident when average families cannot afford average homes that markets will correct, as they have already in much of the country. Knowing that allows people who listen to avoid the inevitable woes of a downturn, especially if they bought when you have suggested, and have done so with little or no equity. I will not apologize for my work here. — Garth

#53 Bottoms_Up on 03.06.12 at 1:01 am

Yes, CMHC insurance sucks.

As many here know, I bought a house 2.5 years ago with 8% down, and have only now paid down the insurance. Not really a nice feeling to know all those ‘mortgage’ payments actually just went to pay off the CMHC fee and interest.

And that agent that wrote in to you Garth, it makes me sick when they say things like ‘people have missed out on millions’….what does that actually mean? Is money falling out of the sky? No, the money comes from somewhere, and is really someone else’s debt/liability. If they stopped hard to think about it, rising real estate prices benefit only those that were first in (hence, like a pyramid scheme). Someone has to pay off all that debt. Getting into real estate in the past four years means that you are very late to the party (as I am) and likely will not do all that well (if I were to sell now I would just break even).

#54 Smart Blonde on 03.06.12 at 1:02 am

We are down in North Scottsdale, Arizona looking at real estate to buy a vacation home. Just thought I’d send everyone some interesting information. We are renting a place in Desert Mountain, beautiful, 6 golf courses, private club with memberships down to $130,000 (were $150,000) plus $1100 per month and HOA Fees $700 and up. The place we are staying in, is beautiful Garth’s fave, granite stainless etc. etc. Anyhow, the part you’ll find interesting! The place we are renting is for sale, a short sale (an American term for sell it before its foreclosed on!). Anyhow, they bought the place for 1.1 million and there is a mortgage on it for $850,000. and it is short saled for $699 000. That isn’t the topper, this is their second unit and they just sold one similar, also a short sale same deal. Well here is the absolute topper, they have a home in the same area, listed for $2,995,000. With all the mortgages against the properties they owe $3.5 million. Don’t own any of it! Guess their profession?? I’ll let you fill in the blank! When we were out looking at homes we arrived at one home that is a short sale, pretty sad really, mom walks out with her head hung low with young boy and little dog as we go into their family home. The house is listed at $750,000 (short sale) mortgaged to the tune of $1.1. I think the sad part is walking into the kids rooms all decorated to the nines, beautiful pool and hot tub, guest house and thinking wow, sad but stupid! Don’t get it, can they not pull out a calculator and do the math before signing on the dotted line? What a mess it has created for families and the country. This area I’d compare to West Vancouver, wealthy, high end homes, and people living beyond their means. If we are hit the same, we are in for a serious ride down, and I don’t think it will be much different. One house that was just sold at Auction to a flipper in Troon North, $620,000, sold for 1.7 million in the height and they are flipping it for $849,000, right now. The house is unbelievable, hard to find something comparable in West Van, and if you did it would be in the $5 million + range, an absolute mansion. I wouldn’t say this is a common reduction, but 50% less than 2006/2007 is very common. Anyhow, thought I’d share this with everyone that wonders if it could happen in the wealthy neighborhoods, and I’d say yes! Seems to take a little longer, but they definitely get it too!

#55 Puzni on 03.06.12 at 1:04 am

Report says BC prices to drop sharply in 2012 but to rise slightly in 2013, interesting article:

http://www.vancouversun.com/business/prices+drop+sharply+this+year+report/6254346/story.html

#56 Andres on 03.06.12 at 1:04 am

All the price rise in stock and oil is not due to the inflation in the US? Big brother is printing a lot of new US dollars, so I think the economy is not recovering the dollar is less valuable and the prices are going up.

#57 Bottoms_Up on 03.06.12 at 1:07 am

#16 Math Challenged on 03.05.12 at 10:50 pm
———————————————-
I think Garth’s rule is meant for people with substantial equity in their homes.

#58 T. on 03.06.12 at 1:12 am

Will the big banks feel any pain when the virgins start to default or do tax payers carry all the risk?

#59 Banking Innocence on 03.06.12 at 1:12 am

This sounds like rationalizing to me.

Garth makes it seem as if the banks themselves have no influence over governmental policies; they are simply “protecting shareholders”.

I find this hard to believe.

The line is blurry.

Carney himself worked as a high-level Goldman Sachs executive for many years before “entering” politics.

————————

#40 Onthesidelines on 03.06.12 at 12:06 am

There is something terribly perverse about pointing out the scumbag behaviour of banks while at the same time encouraging the public to invest in the very same banks precisely because that very same scumbag behaviour will insulate such investors from the consequences of such scumbag behaviour.

In other words, invest in banks because they will be doing very well after screwing most of society.

A perfect picture of humanity screwing itself.

If you believe the insurance of mortgages is scumbag behaviour, then go after the government which invented 5% down and backs the scheme, not the banks who are protecting shareholders. What a puerile comment. — Garth

#60 From kits on 03.06.12 at 1:13 am

Garth – I wonder how many people on this blog understand what you mean by securitizing the mortgage debt…. I just made sense of it after watching “inside job.”

Such an important concept for the basics of today’s finance …..

#61 $$$BPOE$$$ on 03.06.12 at 1:19 am

People are too hung up on the Asian influence. The riches coming to BPOE are from all over the world. And yes mortgage rules have absolutely NO AFFECT on purchasing. Changes in mortgage rates will send the Vancouver market to dizzying heights. Bring on the 25 year amortization, all the pros are waiting in the wings ready to clean up big time
*****************************************
Chaddywack on 03.05.12 at 10:47 pm
I mentioned the possibility of F changing the mortgage qualification rules and a coworker (Parents are Mainland Chinese and he lives alone in Vancouver) said to me “Good, all that’s going to do is price Canadians out. The Chinese come here with all cash, so mortgage rules don’t affect them at all. Basically Chinese will still buy and everyone else will still be priced out.”

I looked around the room at work at the nodding heads and almost puked…..I guess he knows what he’s talking about though, after all he is Mainland Chinese ;)

#62 From kits on 03.06.12 at 1:20 am

@onthesidelines:

I think you missed the major point…it’s not the banks fault. They are managing their own risk properly by using the taxpayers (CMHC) to take on their risk or by selling their mortgages to the bond market. The banks are only playing with the rules of the Canadian market.

We need to raise a stink about any CMHC debt limit increase….not curse the banks. Hopefully Canada will begin to pay attention.

#63 Victor on 03.06.12 at 1:25 am

Time to panic about the housing market

By Tamsin McMahon | Maclean’s – 7 hours ago

“It may be those times are past and we need to take another look at the whole of housing policy,” says economist David Laidler, a professor emeritus at the University of Western Ontario. “It’s something you need to think about as a major policy issue on the same level of health care.”

Of course, it may be too late for such a discussion. As the U.S. showed in 2005, no matter how loud the alarm bells and how long they’ve been ringing, a housing crash always comes as a surprise to the people paying the mortgage.

Or as John McCallum puts it: “The thing with household debt is it’s not a problem until it’s a problem. But when it becomes a problem, it’s usually a really big problem.”

http://ca.news.yahoo.com/time-to-panic-about-the-housing-market.html

#64 syd on 03.06.12 at 1:25 am

http://www.cp24.com/servlet/an/local/CTVNews/20120305/120305_housing_outlook/20120305/?hub=CP24Home

#65 Uh Oh Canada on 03.06.12 at 1:25 am

Sadly, Detroit is only hours away from Canada and yet we still haven’t learned from Big Brother’s mistakes. The whole ‘Canada is different’ has been served up by the presstitutes and RE industry, who have a monetary motive. People have bought into the lie. Our superiority, greed, and fear have brought us to this point. Unfortunately, there is no where to go but down.

Although I can afford a house, I have chosen not to buy. My reasons have changed from prudence to principles. I am no longer part of the 99% that either own or want to own. I am the 1%!

#66 Van guy on 03.06.12 at 1:34 am

Vancouver average home price is 10.6 x the median income. So at a 50% correction, will bring it down to 5.3. Even at that kind of discount, it’s still considered unaffordable. But if you say that we will survive this correction, 50% is unlikely. So Vancouver will always be expensive unless there is a crash and everyone is out of a job and ends up like that dude in the picture above. Btw, I think that picture is kinda racist.

#67 wollyone on 03.06.12 at 1:35 am

57th………..

#68 Mel on 03.06.12 at 1:37 am

We will see if Bank stocks will be a good investment in the future. Investors will sell first, and ask questions later.

Forget it! I will not touch Banks stocks. I want to see proof that all that debt will be paid. Not included housing mortgage of course. But that too, will have issues CMHC or not.

#69 Chaddywack on 03.06.12 at 1:40 am

@ #45 Observer

I agree with you and I’m sitting on the sidelines as well. I guess his theory was that there are enough Mainland Chinese buying now in Vancouver that all a mortgage rule change will do is price out people who “need” a mortgage (e.g. Canadians).

So essentially the Chinese will keep coming and buying in cash and prices will continue to rise. Minimum amortizations could go to 5 years but it doesn’t matter because the Chinese are all cash.

His theory is I should buy at least a condo…something…anything because there are enough offshore buyers in Vancouver that local residents are irrelevant to the market now.

In that same conversation a coworker believed that offshore Chinese are “At least 50% to 80% of the market in Vancouver.”

Like I said, I don’t agree with him at all, but I don’t see prices softening either!

#70 lookoutbelow on 03.06.12 at 2:04 am

The Big Canadian Banks (hell, any Canadian Bank) covering their posterior 100% with CMHC insurance, paid for by the “stupid” buyer. What a deal, for the bank !

Of course, when insurance is just pennies on the dollar (funded by the Taxpayer, in case of default), why not pay the few pennies and cover your posterior for any risk associated with the non-high ratio mortgages as well. Again, this beautiful “bargain” brought to you by your loyal Canadian Taxpayer.

This bulk insurance behaviour, coupled with looser lending standards, equal just two words, well known by our southern neighbours:

********** MORAL HAZARD **************

#71 Nostradamus Le Mad Vlad on 03.06.12 at 2:07 am


“. . . and exceed the average family’s ability to afford in most big cities.” — See first link about some UK families living on two pounds a day.

“Even the bank’s scared. The bankers know this, and have been preparing. It saves the bank’s ass. In other words, let somebody else worry about over-extended homeowners blowing up. Get some insurance against the inevitable bust. Diversify.”

Hallelujah! Preach self-responsibility and you are guaranteed to be shunned by the masses. We are the fortunate few here.

Banks and banxters know full well what’s going on, and what the fall out will be like. Great time to come into an unexpected windfall, buy bank preferreds, REITs and the usual. Selling the home, even breaking even, and renting removes a mountain from a person’s back. TFSAs can help enormously, as well.
*
#4 Smoking Man — “GTA bubble will burst but not for a while. 2014 is my call.” — Possibly. will it be a repeat the late 80s – early 90s? Probably. 2014 downer?

#25 Sebee — “. . . these are not reasonable times however.” — Correct, very uncertain times (by design) would be a better title, and RE is a small part of it. There is a whole lotta unknowns happening throughout the world.
*
Two Pounds a Day Families in UK barely getting by, and this may have something to do with it; Employment Not a bad idea; Mediterranean Bonanza One possible reason for putting Greece into the poorhouse is that someone else can take their wealth; Unforseen Consequences Spain’s revolution? Poor and Elderly The five worst states to grow old in, but what of Canada?

Revealed Apple’s TV dream; Lamborghini Last week, a brand new Ferrari was shown. Now, a Lamborghini; Coke and Pepsi Better choices than them; Road to Hades We’re walking it, and Re-electing Obama could be disastrous; Compared to Garth’s take on the US, another POV; Putin and The Economist; 2060 At least we won’t be here; Note Me 20 richest people in world; The Real McCoy From a leaked memo; Default Alert! Don’t understand a word of it; ECRI Does it make their figures up new each day?
*
Dad’s Army Does anyone remember the 1970s BBC-1 sitcom Dad’s Army? One of them toddled off over the weekend (short clip in), and Ronnie Barker’s limerick book found; disciple — Haven’t seen Chaos for a while, but many changes coming to this physical earth, and Mass Mind Control; Invisibility Cloak Militaries have had it for some years, now moving to Mercedes; UK Govt. Turning the police force into a private enterprise? Here they are Well, some of them, anyway. Iran’s military weapons. Note: Nuke WMD not shown as they don’t have any.

#72 Timing is Everything on 03.06.12 at 2:20 am

#57 Banking Innocence – The line is blurry.

There’s a line?

#73 mad vancouver on 03.06.12 at 2:31 am

A little present for BPOE:

http://www.canada.com/business/Flaherty+economists+warn+overheating+housing+market/6252767/story.html#ixzz1oJ27KIs2

http://www.vancouversun.com/business/prices+drop+sharply+this+year+report/6254346/story.html#ixzz1oJ0QGhRE

http://www.vancouversun.com/business/prices+drop+sharply+this+year+report/6254346/story.html#ixzz1oIzv9rtr

http://www.globalnews.ca/canada/home+sales+now+expected+to+outpace+2011+vancouver+will+push+down+average+price/6442594464/story.htm

http://www.news1130.com/news/local/article/337770–bc-home-sales-not-expected-to-repeat-2011

I finally understand how good he felt when the media was always on his side :)

#74 T.O. Bubble Boy on 03.06.12 at 2:43 am

GTA February numbers are about as bubbly as they come:
http://www.torontorealestateboard.com/market_news/release_market_updates/news2012/nr_market_watch_0212.htm

The bubbliest sector has to be detached homes in the 416, rising 13% YOY to $818,815!!!

That’s a lot of 8s in the average price — is HAM moving East?

#75 a prairie dawg on 03.06.12 at 2:57 am

At least the ‘entertainment’ industry won’t suffer.

The current Property Virgins show can just morph directly into Bankruptcy Virgins.

And Flip This House can change to Foreclose This House.

In advertising, life goes on.

#76 T.O. Bubble Boy on 03.06.12 at 3:16 am

Oh, and in case you were wondering what that $819k “average” detached house looks like:

Sometimes it’s a “charming” 1.5 storey house near train tracks (in Garth’s favourite hood, Leaside)

Sometimes it’s a haunted house

And, sometimes it’s an old Thai restaurant

And, if the average price keeps heading up, I guess the average buyer can dream of picking up a giant house like this for a low low price of $850k:
http://www.realtor.ca/propertyDetails.aspx?propertyId=11552312&PidKey=360469461

#77 Duckworth on 03.06.12 at 4:00 am

All you sad-sack doomer losers … i wish prices will go up forever just to see you dust mites start blaming and whining about something else. Seriously , dont know how Garth puts up with some of you losers.
On another note, the Chinese will keep buying here as long as they are allowed so get used to it. If you live in TO or VAN then you better learn Chinese !!!

#78 Pat on 03.06.12 at 4:06 am

@ #52 Smart Blonde,

Yeah, the lack of paragraphs underscores the oxymoron.

#79 T.C. on 03.06.12 at 4:08 am

…and then there are those who see opportunity in every crisis:

http://www.zerohedge.com/news/couple-lives-13-million-4900-square-foot-home-five-years-without-making-single-mortgage-payment

#80 bcpaul on 03.06.12 at 4:17 am

I prefered the sign that said “Need money for alcohol research”, or “See if you can hit me with a loonie”.

BTW: Bottom of the sign says: http://www.smallchange.thanks.???/godblessu

#81 eagle eyes on 03.06.12 at 4:39 am

Chaddywack on 03.05.12 at 10:47 pm

I mentioned the possibility of F changing the mortgage qualification rules and a coworker (Parents are Mainland Chinese and he lives alone in Vancouver) said to me “Good, all that’s going to do is price Canadians out. The Chinese come here with all cash, so mortgage rules don’t affect them at all. Basically Chinese will still buy and everyone else will still be priced out.”

I looked around the room at work at the nodding heads and almost puked…..I guess he knows what he’s talking about though, after all he is Mainland Chinese ;)******************************************
That is so not true. Even if the Mainland chinese have money, they cannot take it out of the country legally. Therefore, they sneak little bits out illegally. Therefore, they do not have enough to buy properties outright without liar loans. Most of them have to take out stated income mortgages. New mortgage restrictions will affect them THE MOST!!

#82 eagle eyes on 03.06.12 at 4:41 am

#52 Smart Blonde

What profession are they in?

#83 ANONYMOUS on 03.06.12 at 4:49 am

That’s good advise !

I feel the same way about car insurance, I know that if I have an accident and I make a small claim then the next year my insurance rate will go up to more than offset what little I claimed from the insurance company, and that higher rate will stay with me forever, so what I do now is for car insurance I buy a much cheaper / smaller car with 100% cash (instead of financing a larger more expensive luxury car) and I only buy ‘LIABILITY’ insurance with no collision or comprehensive coverage. This saves me a fortune over 10 years !

Same thing goes with houses: put down 20%, save a fortune on the extra costs of insurance over the life of the mortgage. I just wish everyone knew of this trick.

——–
Now a heads-up to what’s going on lately:

My lady-friend who WAS going to buy a condo in Toronto; she just got in trouble at work, something about a fight with a co-worker, and now she is not too sure of her employment future, so she is re-thinking her condo purchase. I am trying to convince her to rent for a year and just wait to make sure her career is secure before signing on the dotted line for a condo. So she’s probably NOT going to be buying anything, not yet, and I think that is a good thing !

here is the HUGE NEGATIVE of buying a house today: that’s the issue of ‘LIQUIDITY’ !

Right now it is easy to sell a house within minutes of placing it for sale (Toronto area, not Kelowna BC ). But if the economy cools as i fear it will, and you have to move to a new city for your new job then what happens then if you cannot sell after 6, 9, 12 months of having it listed on the market, what then? Will you commute 300 kms a day to and from your house to your new job, or try to rent out the house and rent a new house closer to where your job is located? That’s the big negative of owning a house in a falling housing market and falling job market, its that you cannot move to follow the jobs when you need to.

#84 View on 03.06.12 at 4:49 am

Are We That Certain Canada is Different?

The Zero Interest Rate Policies (“ZIRP”) being pursued by the Bank of Canada are just as likely to have the same dramatic results for the Canadian FIRE sectors (Finance, Insurance and Real Estate) as they did for the US. Does anyone truly believe that real estate operates on different principles in Canada?

http://www.safehaven.com/article/24599/are-we-that-certain-canada-is-different

#85 martin9999 on 03.06.12 at 6:39 am

I’m just a coy guy. Soon. — Garth

you are good, stock are due for a correction. but little, as confidence its still there.

corrections like this kind that i am forecasting comes only from the futures market, people harvesting their gains.

#86 Barry on 03.06.12 at 7:08 am

Garth, first time commenter here and I thank you for the ongoing commentary on the underbelly of the Canadian housing phenomenon.

However, I think you might live to regret this post. Europe is hardly fixed, trust me I live here. To say something so dismissive right before the big CDS shakeout occurs in Greece on March 20th is either very bold or ignorant. Time will only answer that one.

“They say” that roughly 40% of current trading volume is due to HFTs, likely to big guys front running trades or trying to cover positions. So to trumpet the stock market rally without acknowledging the manipulation occurring, the effects of helicopter Ben’s actions or Mario Draghi’s LTRO, is disingenuous at best.

I also might be a little hesitant to rely on US government statistics if I was you. To be honest I find it perplexing that in the past you decried the practices of the Canadian realtors of no longer revealing raw data on the housing market but rather statistically manipulated indices, and at the same time are willing to believe the US unemployment data, which is certainly the most manipulated index on earth. It seems your scepticism of official sources should be more equally applied.

#87 SE Asian Expat on 03.06.12 at 8:16 am

Living in SE Asia, it’s interesting to compare two markets:

The prices of big city property are a lot cheaper in Canada than they are in Hong Kong.

However, the legal loan to value ratio for mortgages are much higher in Canada. For example in Hong Kong, the maximum loan to value ratio was lowered to 50% for residential properties with a value between HKD10m (USD1.3m) and HKD12m. In addition, the maximum loan-to-value ratio for residential properties with a value between HKD7m and HKD10m will be lowered to 60% with limits to how much they can borrow.

So, HK banks have to ensure people can actually afford the property they’re buying, whereas in Canada, banks apparently do not have this legal responsibility.

My conclusion is that the price of RE in HK is probably sustainable at a comparatively high level, whereas in Canada… probably not. Canadians can’t afford their digs.

It seems as Garth has pointed out, that the burden through CMHC will fall on tax payers.

As much as I would like to move back to Canada, the impending tax burden is one of the reasons why I continue to be non-resident Canadian.

The economic future here looks bleak.

#88 TurnerNation on 03.06.12 at 8:52 am

Lately this weblog sends me scurrying to Urbandictionary.com instead of Dictionary.com.

#89 fancy_pants on 03.06.12 at 9:00 am

Hmm. Doomers on one side and Garth on the other? I’m hanging out by the fence.

Sure the herd appears relaxed. But is it a facade? Just ask the media. um, no. don’t do that. grizzled, savvy, political veterans might know better. or not?

Israel strikes Iran and presto… down that familiar road we scatter again.

#90 tony whitaker on 03.06.12 at 9:01 am

98% of the Richmond Hill McMansions were bought with HAM. I know. I was there!
Draw your own conclusions…

#91 TurnerNation on 03.06.12 at 9:06 am

Well traders, pretty clear TSX and commodities are rolling over in s.t. I mentioned ZSL.US short silver ETF when it was closer to 9; now at $10; hedged it off a bit using 10 strike covered calls yesterday (these leveraged ETFs are toxic and must be treated as hot potatos).

TLT.US bond ETF still above 115, so I’m still overweight bonds in work RSP. As mentioned, during true rallies it is <100. Not this time.

#92 Tadpole on 03.06.12 at 9:28 am

Why is there no mention of Winnipeg or Sask.I have got friends there that say , it is booming there. Lots of jobs affordable housing .booming? Are they full of bs ?

#93 tf on 03.06.12 at 9:44 am

Garth
You’re always knocking the doomers, but you have never addressed the debt/cds/derivative problem that zerohedge.com is always talking about. Are the banks, and Europe and the U.S. insolvent? Is there a sovereign debt problem? What happens if Spain, Ireland and Greece default? Is Apple overvalued? etc.

Ask the zero guy. But whatever he says, a sovereign debt default – even if it happened – would change nothing. BTW, the US will never renege on federal debts. — Garth

#94 HAM = BAM ( BORROWED ASIAN MONEY) on 03.06.12 at 9:51 am

This is a fact any mortgage broker will tell you. When prices were crashing in 2008 since CREDIT was all gone HAM didn’t buy since they are really BAM. Realtors on this blog want to spread lies about the current ill health of the housing market as being strong when in reality the market is coughing on its last breath. Realtors know it and so will everyone in a few months when it sinks in Canada housing bubble is going to crash so hard. Why else is the banks protecting themselves? Realtors wouldn’t be here if they were not scared.

#95 Halifornia on 03.06.12 at 9:59 am

Re the stock market – there are signs that markets are overbought and may trend down over the spring til June, when QE3 is announced.

What signs? — Garth
———————————————————

Don’t bother Garth with technical analysis, he’s a fundamentals guy. :)

First, the technicals look fine to me. Second, QE3 is so far a myth. Third, I’m right. — Garth

#96 Realtors in a PANIC! on 03.06.12 at 10:07 am

Been here for a year and the number of worried stressed out and out of work realtors has never been higher. If the housing bubble wasn’t in trouble they would not spends hours a day spreading misinformation and lies. The housing crash ia going to wipe Canadians out. You know it a bubble when bankers are calling it a balloon.

#97 Stevenson on 03.06.12 at 10:08 am

It sounds like you think that Canada RE market will ultimately end up like the US? Crash, gloom and doom? Fear spreads fast but are people illogical enough to sell their shelter and move onto the streets? We can’t buy easily access multiple mortgages that we can not afford and can not just walk away from RE without liability. Debt to income ratio is approx. 1:1.5? Is it really that bad? How much of it is on credit card? If someone makes 100K and signs up for a 1.5K mortgage…. we doomed?

The average SFH in 416 is now $819,000. No, everything’s just fine. — Garth

#98 Tanya on 03.06.12 at 10:26 am

Garth,

If someone defaults on their mortgage, but had CMHC insurance, what exactly is paid to the bank? Just the remaining principal or is the bank compensated for life-of-the-mortgage interest and/or penalties as well?

Thanks.

The principal amount is insured. — Garth

#99 neo on 03.06.12 at 10:27 am

Hmmmm…Almost a month ago I posted a chart that had the 200 Day, 100 Day and 50 Day moving average and how they were about to do their death cross and said that within a month the market would turn over (March 12th to be exact). I also showed that it allllmost happened last fall but didn’t, which was why among other things I said that particular volatility was much to do about nothing. I also stated that 13,000 would prove to be the resistance level (Blueballs is how I crudely put it). Well well well, what have we here this morning.

No worries, I’m sure NFP will give it a kick save on Friday. Garth states that Greece’s economy doesn’t matter in the grand scheme of things, which is true, but their debt protected by CDS does. Why else would the ISDA which is in charge of declaring such events refuses to acknowledge a “credit event” in a country with a 1000% one year bond. If Greece doesn’t matter, let it fail right? Wrong, the ISDA is made up of the same banks holding the CDS trash. Those same banks have been loading up on LTRO1 and LTRO2 to protect themselves and buy time…

Oh what a tangle web we weave…

This isn’t actually where the bottom falls out. But it’s coming…

Tempus Fugit…

#100 gladiator on 03.06.12 at 10:46 am

why should we be worried about CMHC? If a home “owner” is foreclosed on, the bank takes ownership of the house, sells it and then CMHC reimburses the bank the shortfall between the balance of the loan and the amount the bank received from selling the house.
CMHC does not pay the bank 100% of the loan balance. I figure, the 600 billion is the value of all mortgage loans given out (correct me if I’m wrong, please), but CMHC really will have to pay a fraction of it as described above.
Any comments? Am I wrong, Garth and fellow dawgs?

#101 };-) aka DA on 03.06.12 at 10:58 am

Why would a rank and file bank employee, not one but two each at different bank locations, care what amount the client put down on their mortgage? Do you think the bank has structured a bonus to incentivize the bank employees to carry out some devious master bank plan?

Why would a rank and file bank employee care if the bank collateralized and securitized a portfolio of bank mortgages?

If a borrower has the capacity to put 20% or more down on a purchase but still has an otherwise unworthy credit rating why wouldn’t a bank undertake to mitigate the risk by having the mortgage insured? If not they would probably just turn away the business. Why would a borrower incur the heft expense of CMHC insuring their mortgage if they didn’t have to because their credit rating was good and they had 20% or more to put down?

It is almost impossible for people to believe something they don’t want to believe. You feed them information which perpetuates that which they want to believe not necessarily what they ought to believe.

“The bottom line is simple. If you need mortgage insurance to buy a house, don’t buy.” – Garth

While I agree with that statement for anyone over the age of 40 I do not, according to your “Age 90 formula”, for anyone under 35. How many First Time Buyers have, or can save after paying monthly rent, a down payment of 20% or more regardless of market conditions? 250 to 30% of homes are bought by First Time Buyers. Do you mean to exclude the bulk of them from ever owning a home? I have been in this game one way or another for over 30 years and practically every First Time Buyer needs CMHC insurance because they don’t have the down payment to do otherwise.

Garth I would love nothing more for the matter to change that more and more and more people opted to rent instead of own. As surely as the present disproportionate hordes of homeowner will abate over time the vast majority of Canadians will always seek to own no matter what.

The primary reason this blog is as popular as it is; is because of the resentment of the so many who feel excluded from owning a home who come here to vent their frustration by not telling of their want but their condemnation of those who have what they want.

#102 So Ronery on 03.06.12 at 10:59 am

When buying or selling a house, it’s about looking at several variables, planning long term financial goals and figuring what kind of lifestyle you want. Garth has some good points, and some of you have good ones of your own too. But I think I found the best way to decide if it’s the right time to buy.

http://www.youtube.com/watch?v=yzC4hFK5P3g&feature=related

#103 Grantmi on 03.06.12 at 11:04 am

#24 Joe The Plumber on 03.05.12 at 11:15 pm

What does the fineprint on the dude’s placard says?

It’s his copyright notice.

#104 disciple on 03.06.12 at 11:18 am

If you believe the insurance of mortgages is scumbag behaviour, then go after the government which invented 5% down and backs the scheme, not the banks who are protecting shareholders. What a puerile comment. — Garth

A somewhat naive statement. The government is overrun with banker puppets. Money talks, and there will always be the subhuman covetous greedy pompous peacocks who will listen to it talk.

Any number of changes could be made overnight, but they are not made. Figure it out. You disappoint me, Garth Vader. How do we “go after the government” anyway? I’m all ears…oops, this isn’t an ear blog…

#105 };-) aka DA on 03.06.12 at 11:29 am

BTW: For those who may have read in the local Kelowna paper that real estate sales volumes are up 16.0%, I question that as my research says more like 1.60%. Maybe there was a typo in the delivery of the statistics. None-the-less there does appear to be more confidence in the market this year than last.

FYI: My research does suggests though that prices are down, on average across the city for all residential types including condos, mobiles, lots and single family residential, 7% over the same period last year. Beware however that some neighbourhoods have enjoyed a consistent demand and prices remain stable and yet others where prices have risen. “Location, location, location” are the buzz-words once again – not “hardwood, granite and stainless” anymore.

#106 Kits on 03.06.12 at 11:35 am

Yup, the world is now financially safe … invest away. Ignore those pesky facts. Europe stable? Absolutely. Slower growth in China. No problem. Addiction to QE in the US? We have a drug for that. Oh and by the way, if you do not exhibit signs of irrational exuberance then clearly you are a squirrel eating doomer.

Clearly Europe is far more stable than five months ago. Chinese growth downgraded from 8% to 7.5% is an excellent development – softer landing. And the Fed just said no QE, as unemployment has dropped eight-tenths of a point. I think the drugs are all yours. — Garth

#107 Sebee on 03.06.12 at 11:36 am

I’m going to speculate that F will go to 25 year mortgage, but it won’t take effect until sometime in the fall at earliest if not in 2013.

Everyone seems scared to take any drastic steps without significant warning. Factory jobs are going south, so construction is what we have left and must keep going.

#108 Snowboid on 03.06.12 at 11:38 am

#53 Smart Blonde on 03.06.12 at 1:02 am…

Welcome to the Valley of the Sun!

Technically a short sale is when the seller is authorized by the mortgage holder to list the home for less than they owe. Sometimes the process of accepting an offer can take a few months, and there is no guarantee the bank will accept the short sale price.

The seller is often on the hook for part of the remaining balance. But unlike a foreclosure they usually stay in the home and maintain it, where foreclosures are often trashed.

We have friends in Anthem that scored a great deal on a short sale in the Country Club section, but they were in limbo for 5 months waiting for a decision from the bank.

A running list of higher end home flippers and their possible losses is at:

http://phoenixflippers.blogspot.com/

#109 neo on 03.06.12 at 11:41 am

The US will never default. Can’t say the same for 5%-down condo virgins. — Garth

Garth is correct. However, he isn’t telling the entire story. Simply put. Their ability to just print money through the Fed gives them and Garth the security that they will never hard default. The problem is right now only the Fed is participating in bonds sales past 10 years for the most part. So technically when you are the only buyer. You have already defaulted. At least in a free market. Unfortunately, a free market doesn’t exist and bonds yields which should be at least twice what they are now, are not, and Garth and the U.S. can pretend that they are solvent until the bond vigilanties in Europe are done picking the bones over there. This could be months away or years away. The problem is debt saturation has already occurred in the U.S. so the addition of more debt will continue to be a drag and GDP which is already over 100% debt:GDP.

Printing money is not growth. If printing money solved all government spending/revenue issues why collect the $1 trillion in taxes every year. Why not just print it. Why save your income and invest it in the bond market as a free market would. Just have the government print the dollars needed which weren’t the result of actual economic activity.

Labour and physical capital produce wealth, not printing fiat paper.

#110 bill on 03.06.12 at 11:45 am

102 Grantmi on 03.06.12 at 11:04 am

#24 Joe The Plumber on 03.05.12 at 11:15 pm

What does the fineprint on the dude’s placard says?

It’s his copyright notice.

or his ”seeks safe harbour” statement….

#111 maxx on 03.06.12 at 12:17 pm

Brilliant post Garth, as per normal.
I too feel that banks are scared and hedging risk whilst they still can. They win at least two ways with 10% down: they get CMHC coverage and they also have larger loans on their books. It seems like they’re trying to make the biggest meal they can during this Spring market as they know that many people are beginning to shake the fog out.

F’s budget should be very interesting- of note are the squeaky noises made about it being “understandable” and not of major proportion, with details being left up to the ministers…….I’d parse this one very carefully! Very carefully indeed. As Kevin O’Leary is wont to say: “cut-cut-cut-cut-cut!!!!”.

#112 Smart Blonde on 03.06.12 at 12:18 pm

#81 – Eagle Eyes – Their profession starts with Real!

#113 a prairie dawg on 03.06.12 at 12:22 pm

#16 Math Challenged

“How do you calculate the percent of your net worth that’s in a house?”

– — –

It’s always assets minus liabilities.

The house/property is a asset (500K market value)
The mortgage is a liability (500K debt)

They cancel each other out to = 0

So your $1 in the bank is your total net worth.

#114 Mister Obvious on 03.06.12 at 12:25 pm

#100 };-) aka DA

“The primary reason this blog is as popular as it is; is because of the resentment of the so many who feel excluded from owning a home who come here to vent their frustration by not telling of their want but their condemnation of those who have what they want.”

——————
What utter nonsense. I considered the source of the statement and thought maybe I shouldn’t bother to respond. But here goes anyway…’

I sold all of my real estate by the spring of 2010 (what I consider the market peak where I lived) and became completely liquid. That money is now invested
in much the same way as recommended by Mr. Turner.

It generates a comfortable income that certainly allows me to pay my rent, enjoy life and sleep comfortably at night. I think there are many like me here and more coming on board every day.

I don’t visit this blog to vent anger. I come here because Garth is a great writer and he knows more about things that interest me than I do. He puts out an informative and entertaining blog six days a week like clockwork.

The ‘comments section’ is the far lesser component of this blog. Its where I go to kill a bit of time after the main feature. I don’t expect too much and usually I’m not dissappointed. Guys like DA see to that.

#115 GTA watcher on 03.06.12 at 12:28 pm

Did anyone here the new advertisement by the realtors of the GTA. Make sure you sign a BRA before buying. Someone wants to make sure the agents get paid no matter what you decide to do. A sign of concern from realtors in my opinion…. times will get tougher. With respect to some of the comments that people on this blog are just bitter. I don’t agree… rather I think that there may be some bitter people, the rest of us just see the obvious and how unrealistic things are. We are definitely in a bubble… the question is how much bigger the bubble gets before it pops. I am hearing more and more from people that the lifestyle they have chosen is currently unsustainable… interesting changes lie ahead when the realtors earn less money every year, the average worker is unemployed or earns less, government employees earn less, and many expensive/inexpensive properties go on the market because their owners cannot sustain the expenses. The inevitable will happen. Flaherty was begging people to stop buying real estate yesterday… lol… but obviously people will continue to buy as evidenced by february numbers. My question is… if the numbers are so great… why am I hearing complaints from agents? Why am I hearing complaints from buyers… something is off…

#116 HDJ on 03.06.12 at 12:43 pm

Attitudes like your have been pivotal in creating a casino environment for residential housing. It’s evident when average families cannot afford average homes that markets will correct, as they have already in much of the country. Knowing that allows people who listen to avoid the inevitable woes of a downturn, especially if they bought when you have suggested, and have done so with little or no equity. I will not apologize for my work here. — Garth

Garth, You avoided the point of my comment. I said nothing about buying. I made reference to your premature suggestions about selling, and their negative consequences for those who listened, sold homes a few years ago and have rented since then. They lost a bundle, especially if they lived in Vancouver or Toronto. They should have held off and sold last year. I think you’re correct about everything else, but your timing was off.

No difference. In real estate market timers usually get slaughtered. — Garth

#117 Van guy on 03.06.12 at 12:48 pm

The average SFH in 416 is now $819,000. No, everything’s just fine. — Garth
———————————————————-

Average price in Van is 1.2 mil. I think you guys are doing fine.

But you’re doomed. — Garth

#118 Buy Low Sell High on 03.06.12 at 12:55 pm

Here’s a little house sales history that I found from the last RE bubble in Toronto. The house is located on Gibson Ave. in the GTA:

sold April, 1989 for $440k
sold April, 1992 for $330k
sold June, 1996 $212k
sold August, 1997 $415k
sold October, 1999 $475k
sold April, 2001 $530k
sold August ,2004 $641.5k

If you knew house prices would soften somewhat, why buy today?

#119 Jan Meyer on 03.06.12 at 1:06 pm

What is your take on farmland as an investment as it is not a difficult process renting quality grain land to working farmers. Will farmland also be hit with decreases in value?

#120 Form Man on 03.06.12 at 1:06 pm

#104 DA

OMREB stats show there was indeed a 16% increase in February 2012 total sales vs. Feb 2011. 289 units sold as compared to 249 in 2011.
Inventory climbed to 4500 units ( up 1.4% vs same month in 2011 ). This means there is 15.6 MOI…..firmly a buyers market, and steadily declining prices until MOI reaches 5 to 6 months.
The Okanagan market seems to have bottomed as far as total sales are concerned, but bottom for prices is a ways away yet

#121 Cheryl on 03.06.12 at 1:31 pm

Garth

How far do you think the market will fall this time around? (looking to buy stocks)

Thank you

#122 TaxHaven on 03.06.12 at 1:45 pm

@#36 Randman,

You must be a South African…!

It’s always amazing how little the people of any country know about life in other countries, isn’t it? Even so, Canadians do seem to excel in pompous self-congratulatory navel-gazing…

Yes, life WAS easier there. And the air was equally clean and fresh.

Here ? Taxes, utilities, governments-up-your-ass, obsequious rule-following and regulations. And constant sunshine, lollipops and rainbows about how “wonderful” Canadian Living(TM) is…

#123 Kits on 03.06.12 at 1:53 pm

Yup, sitting back enjoying the financial market view with my drug of choice: caffeine

BTW, here are a few tidbits for you:

1. This Thursday is a potentially VERY BIG day for the markets. I hear it has something to do with Greece. March 8th is the deadline for private bondholders to ‘voluntarily’ exchange their current Greek government bonds for new ones worth about 30% of the old bonds. If the rumor mill is correct, lots of hedge funds are gaming this hoping that the CAC will be triggered which will likely then trigger the CDS insurance payments … and viola, they get 100 cents on the dollar. If that happens, there is a good chance you will be crying in your coffee in the weeks to come as the ramifications reverberate through the financial markets. But clearly, it is only a risk. Let’s see, does the upside risk favor heavy equity investment? Not that you said to invest heavily in equity securities.

2. Austerity is a wonderful thing. Pull up your socks! Pay off your debt! … or more appropriately reduce those nasty deficits (which need to be funded with, gosh darn, more debt). A wonderful side effect of austerity is a reduction in spending, reduction in tax base and all kinds of great social implications. Did anyone mention that only way out is through growth and Europe is contracting? Let’s not worry about a recession or squirrel eating depression. Oh, and Europe is the biggest consumer of Chinese manufactured goods. I guess the philosophy is let the Europeans eat cake or perhaps let the Greeks eat baklava.

3. Yes, Chinese growth will save the world. Growth slipping from 8.0% to 7.5% – no problem, since that is such a small decline. Did anyone mention it is the lowest growth rate in 10 years (I could have sworn growth has been at or above 10% year after year) and growth below 9% creates social unrest … but not to worry … why not build more roads to nowhere … indefinitely.

Now, I am gosh darn sure that a balanced portfolio will do well over the LONG TERM. I am not betting my squirrel sushi it will do well in the SHORT TERM.

#124 Kits on 03.06.12 at 2:01 pm

OH, THE HORROR

Is that RED, lots and lots of RED, that I see on my trading screen today?

#125 Poorgoisie on 03.06.12 at 2:05 pm

Maybe the bubble already popped and we won’t find out for a couple years…
http://www.cnbc.com/id/45659547/Realtors_We_Overcounted_Home_Sales_for_Five_Years

We are different, just keep the hockey game on while you plough our tender bums.

#126 HDJ on 03.06.12 at 2:06 pm

“No difference. In real estate market timers usually get slaughtered.” — Garth

Feels like I’m conversing with a politician – just can’t get a straight answer to a straightforward question.

Ask a worthy question and you’ll get a similar answer. — Garth

#127 Freedom 55 on 03.06.12 at 2:18 pm

Diversification

Since when has average middle class joe not had the majority of his worth tied up in his house.
LOL

This could be why most people are headed for a cliff. — Garth

#128 neo on 03.06.12 at 2:25 pm

Clearly Europe is far more stable than five months ago. Chinese growth downgraded from 8% to 7.5% is an excellent development – softer landing. And the Fed just said no QE, as unemployment has dropped eight-tenths of a point. I think the drugs are all yours. — Garth

1.) Europe isn’t any more stable because they have put on more debt to solve the problem of debt that is unsustainable. That goes against your entire thesis on the problems in Canadian housing.

2.) Brazil has been attempting a “soft landing” as well and they announced GDP at 2.7% in Q4 when in 2010 it was 10% and people expect it to be a global growth engine in the 7.5-8.0% range. Central planning targets looks great on paper until it doesn’t. Far too many moving parts outside of their control. China will find that out as well.

3.) The Fed hasn’t explicitly said no to QE3. They are just waiting for conditions to worsen to warrant it. Given they don’t believe in the traction the U.S.’ data has indicated so far. QE3 is far from off the table. If it was they would be raising interest rates this year not 2014.

4.) The drop in unemployment is a result of people leaving the labour force not a strength in it. The total civilian labour force is the same in 2012 as it was in 1999, which I believe is 131.7 million.

So be scared. Just as you were last autumn, and missed a 30% market advance. Or in 2009, and missed a 50% gain. Some strategy. — Garth

#129 Kris on 03.06.12 at 2:26 pm

Realtors Expect Home Prices to Fall (CBC News)

http://finance.sympatico.ca/home/contentposting_reuters/realtors_expect_home_prices_to_fall/e3dcfefe

More MSM coming over to this side of the divide.. like defectors from the Syrian army? (I’m being facetious – Not meant to trivialize what’s happening in Syria; not meant to offend anybody, either, except maybe really obnoxious realtors)

#130 John saccy on 03.06.12 at 2:27 pm

The market should bottom out around 1340 and if that does not hold then 1290 by Friday. In any case we should see a brief relief rally by tomorrow.

Market always goes up. remember that ;) wink wink

#131 Cato on 03.06.12 at 2:28 pm

#86 SE Asian Expat

Good assessment.

Frankly I’m quickly losing confidence. I have little faith in politicians but I expected more from the Canadian people. All I hear from leaders I deal with is Canada’s deteriorating economic conditions are due to the europeans, or slowing US recovery … blah, blah, blah. Not one admission of responsibility in our own actions .

I’ve always paid my pound of flesh, unlike many politicians in this country I’ve never availed myself to offshore tax vehicles to avoid taxation. In return I don’t think its unreasonable to expect a minor amount of leadership in the face of an impending crisis. I’m not seeing it, all I see encounter is outright ineptitude. I often find myself thinking when dealing with high level bureaucrats in the trade missions or finance “Are you really this stupid or is it just an act?” Lets face it, its the bureaucrats that really control the country and they aren’t exactly confidence inspiring.

I’m about ready to give em all the middle finger, park myself in a place like Monaco and relax on a boat with a few supercars for the next 10 years.

#132 Doug in Victoria on 03.06.12 at 2:29 pm

#16 Math Challenged

In your example your net worth is $1. Your home is worth $500,000. Your home should be no more than 90-[your age] percent of net worth, say 50% if you are 40, but in this scenario your home is 500,000% of your net worth. A little high I think!

#133 Nostradamus Le Mad Vlad on 03.06.12 at 2:30 pm


Potty Training, or Why I’m Just Too Sexy For My Body

A tough looking group of bikers were riding when they saw a woman about to jump off a bridge, so they stopped.

The leader, a big burly man, gets off his bike and says, “What are you doing?”

“I’m going to commit suicide,” she says.

While he didn’t want to appear insensitive, he didn’t want to miss an opportunity either, so he asked . . .

“Well, before you jump why don’t you give me a kiss?”

So she does. And it was a long, deep, passionate, lingering kiss.

After she’s finished, the biker says,

“Wow! That was the best kiss I’ve ever had! That’s a real talent you are wasting. You could be famous. Why in the world would you want to commit suicide?”

“My parents don’t like me dressing up like a girl . . .”
*
#85 Barry — “. . . before the big CDS shakeout occurs in Greece on March 20th . . .”
— and —
#98 neo — “. . . about to do their death cross and said that within a month the market would turn over (March 12th to be exact).”
— and —
#122 Kits — “1. This Thursday is a potentially VERY BIG day for the markets.”

Ahhhh yes, TPTB are tightening the noose now.

Time for a bucketload of aliens to come pay us a visit? Soon, all will be well!

Beware the Ides of March (it’s spring cleaning time, when all the trash is taken out to the dumpsters).

#134 TaxHaven on 03.06.12 at 2:37 pm

#123 Kits,

Yes, that’s red. With real interest rates at less than zero, massive losses from 2008-2009 still to recoup, dividends paying more than bank accounts and rsource stocks going for pennies, the lemmings all rush to cash when they should be backing up the truck.

Sometimes the market gets its head stuck up its rear and can’t get it out.

#135 eaglebay - Parksville on 03.06.12 at 2:54 pm

#123 Kits on 03.06.12 at 2:01 pm
“OH, THE HORROR
Is that RED, lots and lots of RED, that I see on my trading screen today?”

It means opportunity.
You need a new screen.

#136 TT on 03.06.12 at 2:57 pm

@#52 Once I asked a bank mortgage broker whether I can pay the CMHC fees up front vs. rolling into the mortgage. She said she’s never been asked before, check with the manager and confirmed- yes. Obvisouly, they will make more $$ if you combine it and let it componded over the life of the mortgage.

#137 HDJ on 03.06.12 at 3:19 pm

“Ask a worthy question and you’ll get a similar answer. “— Garth

In my opinion, my initial question about the appropriate time to sell in places like Vancouver and Toronto was clear and worthy. Your quote above is an arrogant and dismissive response. Is this the real GT? If so, I’m disappointed.

Ah, wanna hug? — Garth

#138 TheBigLebowski on 03.06.12 at 3:26 pm

Funny how you chose the exact same pose in your header as the nazis were famous for using in their propaganda aryan posters .

Now I’m a Nazi? — Garth

#139 Harlee on 03.06.12 at 3:31 pm

#70 Nostradamus
I don’t have the time or inclination to click-on all those links you list but thank you for the one about Ronnie Barker’s book. I liked the Two Ronnies show and like old books so that one was interesting to read.

#113 Mister Obvious
A very good answer and a well-written post. Thanks for writing it as it sums up my reasons for coming to this site too.

#140 Nemesis on 03.06.12 at 3:45 pm

“US will never renege on federal debts.” — Garth

True, in a literal sense… Then again…

http://tinyurl.com/qpbptc

Meaningless. — Garth

#141 AG Sage on 03.06.12 at 4:03 pm

Awesome. By arguing for 10% down the banks aren’t so much passing on the risk (that’s gravy) they are assuring themselves a slice of that shrinking pool of CMHC goodness, at the buyer’s expense, so they can still securitize the mortgage.

What a racket.

#142 Kits on 03.06.12 at 4:03 pm

TaxHaven and eaglebay.

Please feel free to try to catch this falling knife. I would wait for the market to shake out before I back up my truck … good luck betting this market before the Thursday Greek tragedy curtain is raised.

Good analysts don’t market time. And Garth, they sure don’t cry over missed paper gains if the investment backdrop is negative (markets have recently risen on very thin trading … not a good sign). If you are disciplined then you will make money over the long term … it means on occasion missing paper gains and at other times avoiding actual losses (so you can buy more discounted stock with the same amount of $). In this environment, avoiding ACTUAL losses is a reasonable strategy if the down risks outweigh the upside potential.

Good luck folks.

#143 EdmontonJim on 03.06.12 at 4:05 pm

I think people undervalue diversification because the human tendency is for superlatives. We want the BEST stocks and the HIGHEST returns, or the LOWEST risk. We hope for BEST case scenarios, and get hung up on WORST case scenarios.

But the market – the whole global market – does not work that way. It is not a zero-sum game. If a cell phone company does well, while a car company does poorly, it doesn’t mean the cell phone company ‘beat’ the car company. They aren’t even competitors. Even competitors aren’t really competitors if they are different enough companies.

Everyone wants to win the lottery, and sometimes the jackpots get big enough that it even makes the risk-reward parity threshold. A wise man might bet an egg on a long shot, but only a greater fool bets the farm on a sure thing.

#144 Guan-Di on 03.06.12 at 4:06 pm

#131: Doung in Victoria

his ratio is 500,000 to 1, which represents 50,000,000%

#145 Devil's Advocate on 03.06.12 at 4:10 pm

#113 Mister Obvious on 03.06.12 at 12:25 pm

Might you not be more the exception than the rule?

Admittedly I was generalizing but I suspect with and for good reason. It is not hard to find posters on this blog who clearly express their want to own but are precluded, for reasons beyond or within their own control, due to the “perceived” current state of affairs. I say “perceived” because a good number really haven’t s clue. They might be making decisions, or not as the case may be, without knowing all that they should. This can be said as rightfully for bears as it can bulls.

Good luck with yourdecision to do what you did Mister Obvious. I did much the same selling revenue propert ag the very peak of the market yet I have come to regret having done so. Fortunately I did not dispose of all of my property.

#146 Oz- Sell Sell SELL on 03.06.12 at 4:14 pm

Sell Sell SELL, SEEEEEEEEEEEEEEEEEL

#147 Bigrider on 03.06.12 at 4:16 pm

Ugly day on the markets.

Equity mutual funds in net redemptions for over 14 months as markets have continued to rise.

Good time to buy RE. Toronto ONLY however as all other areas in decline.

The new normal is abnormal.

Good day to buy equities. — Garth

#148 gmc on 03.06.12 at 4:33 pm

Ya I got the short stick sold 4 years ago, Garth is correct but the timing was off, cost me my everything, the old lady took it all. But maybe she will get burnt, she did go out and buy another house, did not want to believe and hell we miss out, if we bought 4 years ago … bla bla bla, . she couldn’t stand renting
wow what a life ….too much…..

I caused your divorce? — Garth

#149 RealIsMaName on 03.06.12 at 4:33 pm

Time to panic about the housing market:
http://www2.macleans.ca/2012/02/28/youre-about-to-get-burned/

#150 AKatz on 03.06.12 at 4:37 pm

This housing market is artificially kept hot and nobody can do anything about it other than the Government. When Garth and others predicted the burst, it was correctly based on economic principles (when they are not manipulated with artificial mortgage rates, home-related incentives, etc.). But when someone with power decides to intervene in these natural routes we have to wait longer until it saturates and then burst… and then more people are hurt… sadly…

#151 robert james on 03.06.12 at 4:59 pm

cxcroney I can`t begin to tell you how much I enjoyed your post #151 from yesterday regarding the old guy sitting in oceanside stroking his keyboard thinking about Steven Harper in a dress.. That was bloody hilarious !! LOL I am looking forward to you hammering the old bugger again in your next post !! If you need a little incentive perhaps you could watch this short vid of Rush Limbaugh.. And how would Rush look in a dress ?? Between him and Harper it might be a toss up,,who knows !!! http://politicalticker.blogs.cnn.com/2012/03/06/more-limbaugh-stations-advertisers-jump-ship/?hpt=hp_t3

#152 Randman on 03.06.12 at 5:51 pm

Taxhaven!

No, I’m Canadian …..

Good observation..there are a lot of EXPERTS on other cultures and countries who have never set foot

I was teaching there …..picked up some Mandarin and
a hot Taiwanese girlfriend ( unfortunately afflicted with a similar house hornyness disease) your Mandarine must be terrific! I want to go back to study it some more….the odd trip to Philippines and Thailand!
Away from the arrogant pompous self absorved and entittled attitude that permeates our lifestyle here..

I’ll give you a year before you head back! LOL!

#153 Randman on 03.06.12 at 5:57 pm

“Meaningless. — Garth”

Garth everything is meaningless that doesn’t conform to your prediction

I’m 100% behind you on real estate, and diversification but…

The US is on a long steady slow decline it will never regain it’s former lifestyle in our lifetime. it comes because of a degradation of it’s money,morals and constitution …goodbye to “father knows best” mentality

Spoken like a true Canadian. The US of the 1950s may not re-emerge, but this will remain the largest and dominant economy on the planet for the rest of your life. Don’t bet against it. — Garth

#154 Freedom 55 on 03.06.12 at 6:09 pm

Good day to buy equities. — Garth
———————————————

Yup…

CPIC
.98 cents close
+.07 cents
O/S 9,134,956 as of Dec 31, 2011
Float 6,667,920 as of Dec 31, 2011
A/O 16,000,000 as of Jan 16, 2012
52 week high $23.00

#155 Devore on 03.06.12 at 6:19 pm

RE is hot and will remain so how about the people that listened to your garbage for the last 4 years and missed out on MASSIVE opportunities? Of course that matters none. The money that people have lost out on because of your propaganda is in the millions.

This is the kind of thinking why you should not be buying a house, if you only want it to live in. Real estate has become an investment account, a savings plan, an ATM, a retirement plan, a speculative vehicle, a place to launder dirty money, a religion and a way of life, all rolled into one. I will think about buying a house when it has become a place to live in again. Shelter. It may never happen, and I’m ok with that.

This kind of abuse, vitriol and intensity is strictly reserved for real estate. No one rages on about the losers who did not buy AAPL and missed out on millions of dollars in gains (in a productive company, with real income, assets and growth), even though they would have done better than buying a house or a skybox.

But that is how speculation works. Players win, until they stop winning and all become losers. When that happens, it will not be their fault, everyone will tell us. They did everything right.

Yeah, right. The only unknown about speculative manias is when the plug is pulled and how deep the drain goes.

#156 Devore on 03.06.12 at 6:21 pm

And because the mania is in housing, something everyone needs, as opposed to, say, gold, the fallout is going to be epic, and everyone will get whacked.

Congratulations, pumpers and pushers.

#157 neo on 03.06.12 at 6:26 pm

So be scared. Just as you were last autumn, and missed a 30% market advance. Or in 2009, and missed a 50% gain. Some strategy. — Garth

Oh please. I said all last year the U.S. markets never really had any kind of correction. The rest of the global indices did, but not the U.S. The U.S. was flat. The rest of the globe was 10-20% down. You could look at the charts and see that the U.S.’ correction didn’t have any true conviction behind it. Let’s not get all carried away with that 30% rise from the October lows. We could just as easily lose that 30% for a whole host of reasons going forward. Then you will be on here saying it’s a great time to BUY BUY BUY again, yet we continue in the long run to be trading sideways. That is where I agree with you that Mutual Funds is dead money. You need to be personally active and nimble in this trading range environment. I’m not scared, I am just informed and not drinking the Kool-aid.

#158 Fabrega on 03.06.12 at 6:45 pm

#76 Duckworth

What is your problem, dude? Are you chinese?

#159 AKatz on 03.06.12 at 6:45 pm

#147 gmc

I would assume she does not like me.
——
I don`t understand why people blame others for their own decisions. This is a free country and a free blog. Nobody is forcing you to do anything. You read, listen or not, at your own risk. This is *your* decision, *your* choice and *your* responsibility.

If you make a decision – like selling a house – not because you are convinced to (based on abundant data and information), but because someone told you to do so, that`s a dangerous attitude…

#160 Milk Man on 03.06.12 at 6:57 pm

Mortgage approval is easy when downpayment is less than 20%. If it is more than 20% the application is extra scrutinized. Its never quite what it seems !

#161 jess on 03.06.12 at 7:01 pm

more Chapter 22?
http://newsandinsight.thomsonreuters.com/Legal/News/2012/03_-_March/U_S__companies_turn_to_bankruptcy_again_-_and_again/.

More corporate crime charges coming – U.S. AG3/6/2012
“Holder said that fines against companies are not enough of a deterrent and that in the coming months more action will be taken against those involved in corporate fraud.”

Stanford goes to prison …meanwhile

“Consider the case of Leyla Wydler, a broker who, back in 2003, sent a letter to the Securities and Exchange Commission (SEC) about her former employer, the Stanford Financial Group. A year earlier, it had fired her for refusing to sell certificates of deposit that she rightly suspected were being misleadingly advertised to investors. The company, Wydler warned in her letter, “is the subject of a lingering corporate fraud scandal perpetrated as a ‘massive Ponzi scheme’ that will destroy the life savings of many, damage the reputation of all associated parties, ridicule securities and banking authorities, and shame the United States of America.”
http://www.tomdispatch.com/archive/175512/

=
The
According to the SEC, the coding error was introduced in 2007 and was “material” to investors because it effectively eliminated from AXA Rosenberg’s quantitative investment model a key component to control risk. SEC said Rosenberg learned of the error when it was discovered in June 2009, but directed others to keep quiet and not to fix it

#162 Devore on 03.06.12 at 7:16 pm

#12 Chaddywack

I mentioned the possibility of F changing the mortgage qualification rules and a coworker (Parents are Mainland Chinese and he lives alone in Vancouver) said to me “Good, all that’s going to do is price Canadians out. The Chinese come here with all cash, so mortgage rules don’t affect them at all. Basically Chinese will still buy and everyone else will still be priced out.”

So then we can agree Chinese will keep buying (or not) regardless of what happens to mortgages or house prices for Canadians, and we can now stop talking about them?

#163 Math Challenged on 03.06.12 at 7:54 pm

#131 Doug in Victoria

That clears it up – much appreciated!

#164 Onemorething on 03.06.12 at 8:06 pm

Higher USD, Lower Oil (at least contained) and no QE3 until Obama is re-elected. Bad news for stocks, blame game Europe.

CHMC was simply a cash grab creation to drive the economy politially and protect and advance the banks.

The value of insurance is having it there when you need it. The problem is the potentially pandemic of the payout! Tax payers on the hook whether you call it QE or hide it in 660M of potentially defaulting mortgages.

Buy Banks, YES! You will need the returns to offset the tax-man!

#165 HDJ on 03.06.12 at 8:17 pm

Hmm…sneaking off, eh?

#166 TurnerNation on 03.06.12 at 8:33 pm

If Americans are such hardworking folks then why are 40 million on food stamps (a concept unknown in Canada)?

Oh, snap. Don’t answer that…

We call it ‘welfare’ or ‘social assistance’ and plenty of people here are in the same boat. — Garth

#167 TurnerNation on 03.06.12 at 8:37 pm

Hello, this is an important message from the Government of Canada.

French mesage will follow.

The way you access weblog http://www.greaterfool.ca is changing to better serve you. Beginning tomorrow, the new internet address will become
http://www.Sh!tHarperSays.com.

Please update your browser’s bookmarks.

#168 NoName on 03.06.12 at 8:38 pm

Soup nazi

http://www.youtube.com/watch?v=M2lfZg-apSA

#169 comfortably numb on 03.06.12 at 8:46 pm

DA #100 “The primary reason this blog is as popular as it is; is because of the resentment of the so many who feel excluded from owning a home who come here to vent their frustration by not telling of their want but their condemnation of those who have what they want.”

Typical nonsense from DA. If you’re not with me, you’re against me and therefore wrong. Don’t pretend to know the people that come to this blog. Your continued under estimation of people is your Achilles heel and will someday come back to bite you in the ass.

#170 Daisy Mae on 03.06.12 at 8:47 pm

#100 };-) aka DA

“The primary reason this blog is as popular as it is; is because of the resentment of the so many who feel excluded from owning a home who come here to vent their frustration by not telling of their want but their condemnation of those who have what they want.”

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

This is an utterly stupid comment.

#171 Nostradamus Le Mad Vlad on 03.06.12 at 8:48 pm


Coconut Chicken Curry with rice and veggies. Gorgeous! Beats the stock markets any day! Not too hot, ‘tho.
*
#138 Harlee — The Two Ronnies were damn funny, in that era of no political correctness and new age garbage. In general, I find people have become scared wimps these days/
*
9:10 clip Good description of Greece, Canada and others; The Crazy House See, we’re all in it; Wall St. “It was a letter that should have woken the dead and, as it happened, couldn’t have been more on target.”; Central Bank party Enjoy it while it lasts; BoA Negative earnings forecast, so print more QE; Silver and Comex (they are inseparable); Iceland Former PM starts trial; Ben Bernanke’s Third Lie; EU Oil Sanctions are working, but not the way intended;
Ten Countries that would get hurt if Iran’s oil shipments are stopped.
*
Iran Allows IAEA to see for themselves. When was the last time Israel ever let anyone into Dimona? and the BBC also says the same; Ron Paul “If Romney wins the nomination in August, it might make it easier for Paul to work with the Republican establishment . . .”; US Navy firings Almost a record this year, but ‘owzaboud politico firings? Panetta Verbal diarrhea; AI, a.k.a. Artificial Intelligence; Syria The m$m proves its worthlessness once more; Af’stan Child hunger worst in world; Balkanization “This balkanization of Libya is precisely what Western powers wanted to have happen.” wrh.com, and Libya The UK attacked Libya for BP, helping them out of a deep fuzz from the GoM; 4:29 clip Putin ready to take on Obomba; Monsanto’s Roundup Ravaging butterflies.

#172 jess on 03.06.12 at 8:58 pm

turner nation
Mary Franson, MNGOP Rep., compares food stamp recipients to wild animal
Here’s a Transcript:
“Last week, we worked on some welfare reform bills.

And here, it’s kind of ironic, I’ll read you this little funny clipped that we got from a friend. It says, ‘Is’t it ironic that the food stamp program, part of the Department of Agriculture, is pleased to be distributing the greatest amount of food stamps ever.

Meanwhile, the Park Service, also part of the Department of Agriculture, asks us to please not feed the animals, because the animals may grow dependent and not learn to take care of themselves.

Our reform bills are meant to bring people up out of the clutches of poverty. We want to provide a safety net, no longer a safety hammock. In one of the bills Representative Kurt Daudt authored would reduce the amount of time that you could stay on welfare from five years to three years…

http://www.youtube.com/watch?v=ijWu7lK7Hss&feature=colike

GOP pulled the video as she compares feeding the animals

#173 Canadian Watchdog on 03.06.12 at 9:01 pm

TD dumping all those soon to be toxic mortgages:

TD Bank pockets US$3-billion in covered mortgage bond deal http://business.financialpost.com/2012/03/05/td-bank-pockets-us3-billion-in-covered-bond-deal/

TD to Halt Non-Prime Mortgage Lending http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2012/03/tdfs-to-halt-non-prime-mortgage-lending.html

Good to know our banks are good and what they do.

#174 jess on 03.06.12 at 9:03 pm

Trans-Pacific Partnership

“Australia’s rejection of investor-state
March 2, 2012 by Common Dreams Crikey! Australia Shocks Corporate America on Trade
by Sarah Anderson

Philip Morris sues Australia over packaging plan November 21, 2011.

http://www.canberratimes.com.au/business/philip-morris-sues-australia-over-packaging-plan-20111121-1nqhz.html#ixzz1oHsLkVryP
Marlboro empire, filed a suit against Australia last year, demanding compensation for that country’s plain packaging laws for cigarettes. While Australia had kept investor-state out of the U.S.-Australia trade deal, it allowed it in some other treaties. Philip Morris simply used a subsidiary in Hong Kong to file the claim under a bilateral treaty between that nation and Australia.

Investor-state dispute resolution
“Some countries have sought to insert investor-state dispute resolution clauses into trade agreements. Typically these clauses empower businesses from one country to take international legal action against the government of another country for alleged breaches of the agreement, such as for policies that allegedly discriminate against those businesses and in favour of the country’s domestic businesses…
http://www.dfat.gov.au/publications/trade/trading-our-way-to-more-jobs-and-prosperity.html#investor-state
http://www.uscib.org/docs/2012_02_27_tpp_enforcement.pdf

#175 truth hammer on 03.06.12 at 9:11 pm

DELETED

#176 John on 03.06.12 at 9:38 pm

Hi Garth.
Do not I understand something? Could you give some comments?
I have calculated year over year percent increase based on TREB’s Feb 2012 and Feb 2011 reports. TREB’s numbers are higher than mine….

http://i42.tinypic.com/1zlsxae.jpg

Comment: you have way too much time on your hands. — Garth

#177 eaglebay - Parksville on 03.06.12 at 9:45 pm

#150 robert dame on 03.06.12 at 4:59 pm
“cxphoney I can`t begin to tell you how much I enjoyed your post #151 from yesterday regarding the old guy sitting in oceanside stroking his keyboard thinking about Steven Harper in a dress.. That was bloody hilarious !! LOL I am looking forward to you hammering the old bugger again in your next post !! If you need a little incentive perhaps you could watch this short vid of Rush Limbaugh.. And how would Rush look in a dress ??”
……….
You girls are too much.
You should be living on Jarvis St, south of Bloor in Toronto. I used to live there before the girls took over.
Rush Limbaugh is my hero. He makes more sense than the two of you.
Really, listen to him. Nothing but the truth.

#178 Form Man on 03.06.12 at 9:56 pm

#163 onemorething

CMHC was created at the end of the second world war to assist returning soldiers to buy/build a home. There was a severe housing shortage at that time. Many decades later, there does not appear to be either a surplus of unhoused soldiers, or a shortage of housing. As you point out, CMHC appears to have become a political grease gun.

#179 Randman on 03.06.12 at 10:34 pm

“There will be crescendo of consequences as these stores are closed down. The rotting hulks of thousands of Sears and Kmarts will slowly decay; blighting the suburban landscape and beckoning criminals and the homeless. Retailers will be forced to lay-off hundreds of thousands of workers. Property taxes paid to local governments will dry up, resulting in worsening budget deficits. Sales taxes paid to state governments will plummet, forcing more government cutbacks and higher taxes. Mall owners and real estate developers will see their rental income dissipate. They will then proceed to default on their loans. Bankers will be stuck with billions in loan losses, at least until they are able to shift them to the American taxpayer – again. No politician, media pundit, Federal Reserve banker, retail CEO, or willfully ignorant mindless consumer wants to admit the truth that the last three decades of debt delusion are coming to a tragic bitter end. The smarmy acolytes of Edward Bernays on Wall Street and in corporate America have successfully used propaganda and misinformation to lure generations of weak minded people into debt servitude. But, at the end of the day, you need cash to service the debt. Mind control doesn’t pay the bills. We will eventually return to normal, just not the normal many had in mind.”

The real future for America…sorry Garth

http://www.theburningplatform.com/?p=30405

I’m sorry you have fallen for such dark nonsense. — Garth

#180 Herb on 03.06.12 at 10:41 pm

#176 eaglebay-Parksville,

of course Rush Limbaugh is your hero. I would expect nothing less from you. As to the “Nothing but the truth”, O.M.G.!!!

#181 The Thing in the Basement on 03.06.12 at 10:42 pm

169 Daisy – are you disagreeing with the blogger formerly known as DA in that it is the primary reason, or
are you disagreeing with him regarding the existance of that condition on this blog?

#182 Form Man on 03.06.12 at 10:57 pm

#176 eaglebay

your hero is a drug addicted right wing wacko…….good for you !

#183 eaglebay - Parksville on 03.06.12 at 11:18 pm

#181 Form Man on 03.06.12 at 10:57 pm
#176 eaglebay
“your hero is a drug addicted right wing wacko…….good for you !”

Commie.

#184 Deano on 03.06.12 at 11:23 pm

Uhm, a little late I know, but re: McJobs comment, are you kidding? Do you think London just lost 400 high paying jobs because Indiana is a nice state to bring up kids? No, they did it because labour is broken there and wages are low. Yes, housing prices are low, but that isn’t the only expense in life, particularly when you think that sending kids to college now involves loans that surpass mortgage amounts in some cases.
Your blue roots are showing, better grab the “Just For Men”!

#185 bill on 03.08.12 at 12:16 am

“your hero is a drug addicted right wing wacko Commie…..[did you really mean that noot-eagle?]”

and may I add-serial adulterer…

#186 bubble head on 03.08.12 at 6:54 pm

still waiting for the update on mortgage rules