The warning

There’s now a 100% chance interest rates will be going up. You read it here first. Actually you read it here when nobody believed it. So get ready.

No, it’s not going to happen June 5th, when the Bank of Canada again determines the cost of money. But between then and the day when the Amazons always dress up as naughty reindeer (little floppy tails and the whole deal) and cavort in the white stuff, it’ll happen.

The reasons are simple. Self-evident, really. I’m always surprised when deniers log on to tell us rates will be flat forever, or at least as long as Japan has had them (a fat lot of good it did for housing there – still down 60%). Surely they know better.

Rates have but one way to go. Further central bank reductions are impossible, only increases. As the global economy inches forward, rates will rise. For the same reason, so a sea of borrowed money doesn’t turn into an inflationary inferno, rates will also swell in the US. But first, they’ll snake higher here.

The primary reason (as this pathetic blog has also spelled out in aching detail) is the need to rein in a credit bubble which threatens to eat society. Last night the couple who own a pretty good house in the paunch of Toronto – two-storey, red-brick, no-garage, three-small-bedrooms, identical-to-its-neighbours – accepted offers at 6 pm. By noon there were four, by four there were nine and by six there were twelve. Offered at just over $1 million, it sold for a $200,000 premium. No conditions. No home inspection. No financing clause. All bidders were required to submit certified deposits cheques for at least $50,000.

This is what stupid-cheap money does. Blog dog Carney knows it. You know it. The couple who won the lottery last night know it. And the 11 unsuccessful bidders will borrow a little more to ensure it doesn’t happen when they do battle again in a few days.

So besides fighting inflation, moderating growth and demand, worrying about the monetary supply and the exchange rate, Carney’s in the hormone replacement business – seeking to squish horniness, curtail credit and prevent a far worse problem a year or two from now. The only thing bigger than the housing bubble – now deflating rapidly in key markets like Vancouver and Victoria – is this credit bubble. By every measure, we’ve been debt pigs. So rates will grow.

Hey, he said as much himself this week. For the first time in most of a year, the Bank of Canada’s top nob cited an improving economy (the IMF goosed its forecast yesterday, igniting stock markets), and even raised his forecast for Canada in 2012.

  I mean, listen to the dude: “The external headwinds facing Canada have abated somewhat, with the U.S. recovery more resilient and financial conditions more supportive than previously anticipated. In light of the reduced slack in the economy and firmer underlying inflation, some modest withdrawal of the present considerable monetary policy stimulus may become appropriate.”

‘Modest withdrawal of stimulus’ is used in a different context than is normal on this oversexed blog. I realize that. But calm yourself. In this case Carney means the stimulating effect of cheap money (like sending the house sellers into climax last night) is simply not needed to such a throbbing degree when the overall economy starts to puff up noticeably.

So, there will be a Bank of Canada rate increase by the end of the year. Not much – a quarter point to start. Maybe two. And then a steady drip higher in 2013, by the end of which the prime rate at the banks will have traveled from 3% to more than four, and on its way to five in the months beyond.

So what? Just two per cent? Who cares?

Apparently a lot of folks should. Eight weeks ago BeeMo asked people in a survey if they could hack adding two points to the rate on their mortgage. In answer, 43% said this would hamper their ability to make their payments or “leave them on unsure footing.” Forty-three per cent is a helluva big number, 400% larger than the estimated one-in-ten borrowers who are considered ‘alt-A’ or ‘subprime’. In other words, the impact on the real estate market would be palpable.

This is exactly the point. Raise rates slowly, almost unobtrusively, but relentlessly until debt becomes less comfortable and housing cools, not crashes. In concert with the new mortgage regs which the banking cop, OFSI, will impose later this year, it’s designed to deflate demand and values – and create that multi-year melt I keep telling you will be upon us.

The result may not be spectacular – a drop of 15% of so in national housing prices followed by a steady, dripping erosion – but the net effect will be the same. Lots of houses worth less in 2015 than they were in 2012, yet the debt stays untouched.

Nortel. RIM. LinkedIn. Bre-X. FB. Apple. Gold. T.O. condos. Van Specials.

Thankfully we never learn. I’d have to write fiction.

261 comments ↓

#1 Furst on 04.17.12 at 9:30 pm

Furst!!!!YEH!

#2 wendi1 on 04.17.12 at 9:33 pm

Actually, Garth – I’d buy your fiction.

As long as it featured Amazons.

#3 Can it be? on 04.17.12 at 9:37 pm

Good post tonight as usual.

#4 JT on 04.17.12 at 9:38 pm

The only annoying thing about this blog is the doughheads who keep saying “First”. Honestly.

#5 T.O. Bubble Boy on 04.17.12 at 9:39 pm

This is impressive… a new strategy to make sure you win your lawsuit:

http://www.bizjournals.com/jacksonville/news/2012/04/11/bank-of-america-sues-itself.html

#6 ozy - what a shame for fooled investors on 04.17.12 at 9:41 pm

Donald Trump and his brood descend on Toronto for ribbon-cutting ceremony at new Trump Tower

http://news.nationalpost.com/2012/04/16/donald-trump-and-his-brood-descend-on-toronto-for-ribbon-cutting-ceremony-at-new-trump-tower/

#7 FTP - First Time Poster on 04.17.12 at 9:42 pm

Not to rain on your parade Garth, your points are both important and timely, however, you said the exact same thing 2 years ago and rates dropped.

While I agree that low rates wont be around forever, Carney is handcuffed both to what US rates are and what is going on globally. Remember, the last time rates were set to rise, the Euro Crisis happened and Central Banks globally coordinated liquidity and lower rates. If Spain & France have problems, which they’re expected to, rates won’t rise.

Two years ago rates went up. But nice try. — Garth

#8 Paul on 04.17.12 at 9:44 pm

Why bother with RE agents when auctions work well.

#9 CoolEconomy on 04.17.12 at 9:49 pm

Interesting post Garth. But if the economy is steadily improving, how will that cause house prices to go down? Shouldn’t that mean house prices will stay steady?

#10 Mark "the talk" Carney on 04.17.12 at 9:49 pm

Come on garth no one in the world believe interest rates will go up. Oh no mark the talk Carney will rise rates 0.25 after four years of warnings people? Please… Rates should be 5% TODAY.

#11 Victor on 04.17.12 at 9:51 pm

Why Toronto’s overheated housing market is unsustainable

Apr 17, 2012

Craig Alexander, chief economist at the TD Bank, is so fascinated by the frenzy of condominium construction that he counts the number of projects as he drives through Toronto.

“I would feel a lot better if I were counting half as many cranes,” he says.

That’s understandable. Andrew calculates that Toronto now has 143 highrise condo projects under construction, more than in any other North American city, with more on the drawing boards.

“Is there enough demand for all those condos? It’s hard to imagine,” he says.

Worse, many purchasers appear to be foreign investors looking for rental properties as a haven from uncertainty in financial markets.

“When it’s an investment property, people are pretty quick to dump it when things get ugly,” Andrew points out.

That could presage a hard landing once the pool of tenants thins out and rising mortgage interest rates squeeze investment returns.

Douglas Porter, deputy chief economist at BMO Capital Markets, is similarly worried. While the national housing market looks increasingly stable, “I do think Toronto could have a fairly serious correction in the next couple of years,” he says.

http://business.financialpost.com/2012/04/17/why-torontos-overheated-housing-market-is-unsustainable/

#12 garth turner dinglehimersmit on 04.17.12 at 9:51 pm

GARTH you aleways say interest rates are going up and instead of raising them you can get a mortgage for 2.99 % when are you gonna realize that nothing is gonna happen till it all emplodes!

#13 Seven Stars and Orion on 04.17.12 at 9:52 pm

Anyone care to “speculate” if/when the average home in Greater Ottawa is priced at 2/3 of today? I was thinking fall of ’16.

#14 Maxamillion on 04.17.12 at 9:52 pm

No wonder MGM Resorts International eyes Toronto for a resort and casino. We have some of the biggest gamblers around with the highest debt to income ratio. I would be attracted too. Viva Las Vegas!

#15 Scalgary on 04.17.12 at 9:53 pm

Garth,

I am pretty sure the bankers will use to fuel ‘sucker rally’.

Very interesting to watch these herds…

Great post as usual …

#16 Kenken on 04.17.12 at 9:54 pm

Great Post!
but C will not raise rates…. not until the US is close to doing so too!
Raising rate in Canada will kill our Manufacturing sector (whatever left)
C has been crying wolf so many times but it’s all talk and no action!!
It will only reach a point where all will just crash and C, just like F, and the Bank Exec and Economists will say “We told you so. It’s not me, it’s them”

#17 Chumbo on 04.17.12 at 9:55 pm

Whaa?? Apple? Say it ain’t so, Joe!

#18 Makavelli on 04.17.12 at 9:55 pm

Don’t dis Apple. Your rim is garbage.

#19 charles on 04.17.12 at 9:57 pm

OMG!!!!FOURTHHH!!!! YEAH BABY!

#20 T.O. Bubble Boy on 04.17.12 at 10:00 pm

Here’s an idea:

Since the Total Canadian Mortgage Debt is well above $1T, and about $600B is backed by the government (CMHC), maybe we could try to arrange a swap of the entire Country’s mortgage books from the banks for:

Apple ($568B)
RIM ($7B)
and
GoldCorp ($33B)

(and, maybe throw in the HOMEQ Corporation, just because reverse mortgages are so cool)

#21 Bond junkie on 04.17.12 at 10:03 pm

Garth, curious if you can elaborate on the 3bdrm red brick enchantment that cleared 1.2? Summerhill, leaside, or bedford park? And how did you come about this information so quickly? You’d be happy to note that despite my efforts the past few weeks, I just couldn’t convince the wife to list. In the end it was simply impossible for her to accept the idea of uprooting our family to rent for an indefinite period of time.

This is now a nightly event in Toronto. I have ears everywhere. Tell your wife 70% of Europeans rent, which is why they had time to colonize. — Garth

#22 Marco on 04.17.12 at 10:06 pm

In toronto this week… Condo development after condo development. At 10 PM well over 70 % of the windows are not illuminated, when if bought as residences they should all be lit up as christmas trees with amazons dancing around…

You can’t swing a cat (don’t anyone start telling me you’re offended) without hitting some project presale billboard…

I mean, doesn’t anyone look beyond their need to feel they overpaid as a selfish statement of prowess, that there is a horizon where oversupply meets increasing debt servicing loads and a reduction of money supply, all at the same time as record ownership rates and rampant speculation?

What’s that if not a perfect storm? I’m sorry – it is about as obvious as can be. And who can be sane enough to think the condo market is not closely linked to the SFH market? How many of your friends who are SFH “owners” don’t have an investment CONdo bought on equity from the SFH? How many current CONdo owners form the pipeline to sustain the SFM pyramid in 2 years?

I’m recording this delusion to teach my kids in the event they live their teens and twenties in a new age of “limitless” growth and are tempted to believe “it is different now” – do any of the current 20-30 something’s remember the 80’s? It is not different now…

#23 Mark "the talk" Carney on 04.17.12 at 10:07 pm

Mark “the talk” Carney and CHMC have ruined Canada. Canada is now officially a debt slave country. Whats the point to stay here? Wait years for prices to get back to normal? Thanks. Put my life on hold because I am able to use a calculator and not willing to mortgage my life as a debt slave. Looking to see how much health insurance is in the US. I can buy a really nice $300k 3000 square foot house in Florida or work like a debt slave for a home in Canada ? Mark Carney should be arrested for financial crimes against Canadians. Silver spoon moron has no clue about running a country. Anyone could of dropped rates and do nothing. Hoping for a soft landing….well news flash mark the talk Carney no one in the world has done that. You ruined Canada you criminal moron.

#24 Canadian Watchdog on 04.17.12 at 10:09 pm

Financial Times: 5 Hours Ago. http://tinyurl.com/6w6rj3t

Mark Carney, the governor of Canada’s central bank, has been informally approached as a potential candidate to replace Sir Mervyn King as head of the Bank of England in June next year.

Now you know who dictates Canadian monetary policy.

#25 Calgaryrx on 04.17.12 at 10:11 pm

They haven’t tried negative interest rates yet – wouldn’t that be a great way to force spending… May not happen here, but in the US, heh, may as well toss in the kitchen sink.

#26 randman on 04.17.12 at 10:12 pm

Chris Martenson …makes you think!!!

“Times of great upheaval offer a gift — the chance to really sit down and rethink things. Certain fundamental questions can arise, such as Do I have the right job? and What should my kids study in college? and Should we really have increased total derivatives by $100 trillion after the financial crisis erupted in 2008?

When faced with the sort of predicament we currently find ourselves in, even more existential questions might dominate our thinking, such as Is there more to life than working hard, buying stuff, taking on debt, and getting older? or even What’s the meaning of life? The primary narrative telling us that we are supposed to work hard, consume harder, and keep ourselves centered on the treadmill that we seem to have been born upon is beginning to unravel.”

http://www.financialsense.com/contributors/chris-martenson/the-trouble-with-money

#27 99% on 04.17.12 at 10:13 pm

Was the note in the picture posted in the laundry room of a rented apartment? Renting does suck doesn’t it? The “neighbours” from rental buildings are usually a very angry working class group. How can you not want to run out and take out a mortgage?

I was at McDonalds getting a quick cup of coffee to go and overheard a conversation between a young couple saying that they were going to buy “something” fix it up and sell it for $1.8 million. What do you think they were talking about here in Vancouver? Its everyone’s one and only obsession, the sport of real estate. Next to the Canucks losing game 4, that’s the only thing anyone talks about. So sad. It’s ruined a lot of lives already (couples fighting about not getting into the market and winning the lottery they missed out on) and about to ruin many more. I want to see this bubble burst soon.
F – you have the means to burst the bubble – a tiny prick. It’s very unhealthy (the bubble I mean).

#28 Content Renter on 04.17.12 at 10:14 pm

Love the irony of the bandaid!
Classic photo!

#29 Not 1st on 04.17.12 at 10:15 pm

Rates not moving substantially until the US does so that’s 2014 probably. In that time there will be more QE so gold will not be lower, much more likely to be over 2k Canadian RE doesn’t need a rate change to crash. It will do it all by itself.

#30 mid-Ontario on 04.17.12 at 10:18 pm

Rates will go up a bit for sure; then housing prices will drop a bit.
The Fed will then lower the rates and print money; the little fed (Carney) will follow and housing prices will rise again.

Up and down the rates will go like a gentle wave on a small pond. A few speculative losers, lots of whiners and concerned politicians but no big change for several years.

I am afraid that Garth might not have the energy to keep this blog going while awaiting the rates to go up more than 1% without falling back.

Meanwhile, we will all think we are rich and life goes on.

#31 Mikey the Realtor on 04.17.12 at 10:19 pm

A rate increase is nothing but a pipe dream, lets assume you’re right and there is an increase of 25bp by year end. Hardly anything to talk about since it wont make a dent, the next rate increase after that will be 25bp again 12 months later. Low rates are here to stay for a very long time, I would say at least another 36 months if not longer.

#32 Marco on 04.17.12 at 10:20 pm

Can anyone help me understand how to figure out who the buyers of CHMC securitized mortgage products are?

The banks are off the hook and I know for a fact they have spent fortunes stress testing (I have sold them tons of software to help with that) with several mortgage default scenarios, from light to heavy and are safely padded as the vast majority of the risk burden is not on their books.

They are more worried of a drop in revenues from a reduction in the marketability other more lucrative debt products they can sell you once they land you as a mortgage customer – but not about stability or solvency.

I would speculate there may be a period of uncertainty should CHMC appear to potentially resort to government bailout in the event of increased mortgage defaults or the potential of it (eg increase in car repo’s as a leading indicator).

If the net buyers of these securities could be identified, and the impact the uncertainty may have on them quantified, there may be some shorting opportunities there, or buying opportunities if the ultimate government backing is a certain thing.

Anyone care to speculate on how to figure it out?

#33 zeeman on 04.17.12 at 10:22 pm

garth, no rate hike will happen…..come summer time,the world economy will fall apart…america will show weakness and spain will become last year greece problem…and all rate hikes off the table..and you know that all carney can do is just scare canadians with rate hikes….

#34 Derek R on 04.17.12 at 10:28 pm

Sadly you’re probably right about the interest rates, Garth.

However there is a superior alternative: property tax. If Flaherty were to reduce Income Tax and Corporation tax and make up the shortfall by introducing a Federal Land Value Tax, it would have much the same effect as Carney raising interest rates.

Except for two things.

Firstly the reduction in Income tax and Corporation tax would give people and small businesses the extra money they need to pay the increased Land tax. So Flaherty wouldn’t be bankrupting people who are already only just able to pay their current mortgage/property taxes the way that Carney will when he raises interest rates.

Secondly when Carney raises interest rates struggling businesses are going to start going down and people are going to start losing their jobs. Whereas if Flaherty were to reduce Income Tax and Corporation tax and replace the revenue with Land tax, things would balance out more for small businesses, so fewer people would lose their jobs.

But who am I kidding? Ain’t gonna happen. Like you say, Carney will increase interest rates. As a result unemployment will start to go up even faster than it is. People will start to lose their houses. House prices will start to fall. Just like the USA.

It’s just aggravating when it doesn’t have to be that way.

#35 johnny5z on 04.17.12 at 10:29 pm

If the Bank of Canada has a low interest rate policy when times are good, what plan does the bank have when the market goes pop and things get deflationary?

#36 City Slicker on 04.17.12 at 10:30 pm

Let’s not forget they started inching rates up slowly in the US even before the bubble exploded. Point is it was too slow and too little at time and nothing could stop the inevitable. Same will happen here only a question of when.

#37 Steevo on 04.17.12 at 10:30 pm

I agree with you Garth on most everything. One thing that will not go your way is interest rates. We are now fully entrenched in a Japan-style asset deflation environment. Rates may rise next year due to inflation, but it will be short lived due to various economic pressures.

Falling housing prices over the next 1-5 years and new capital requirements will put major pressure on banks. Yes, the vast majority of their credit portfolios are insured, but there will be defaults. But that’s not the real reason for falling revenues/profits – new mortgages will fall off the cliff.

So the banks may not need the bailouts we’ve seen in the U.S. and Europe, but they will suffer huge profit declines. And that will mean layoffs.

Furthermore, the continued low interest rate environment is a disaster for insurers in this country. We will likely see a major insurance failure in the next 2-3 years. If any blog dogs have Manulife or Sun Life stock – get out. They are shedding business like crazy because they are in serious trouble. Look at what Standard Life has just announced in terms of product closures.

Make no mistake. The major financial institutions in this country are terrified. I work for one – and we are now treating the next 12-24 months like we are in a 2008 scenario again.

We’ve been lauded by the world for how sound our banking sector has been over the past 5 years. And it’s true. We survived with only a major swap of mortgages off of our bank’s books through CMHC to increase liquidity. When our own housing market skids (like Ireland, Spain, the U.S. and now Australia), we will be part of the same conversation.

Keep your head up.

#38 johnny5z on 04.17.12 at 10:34 pm

Calgaryx: Take the interest rate, then deduct the tax effect, then deduct the inflation rate. No negative rates? This is the way that governments worked their way out of jams before – debase the currency through deflation. That’s why people need assets that earn $s higher than the inflation rates. Balanced funds anyone?

#39 MC on 04.17.12 at 10:34 pm

Time for a sell-off, thoughts?????

http://www.dailyfx.com/forex/technical/article/cot/2012/04/16/Positioning_in_Copper_Flashes_Warning_Signal_.html

#40 Ol' limey smella. on 04.17.12 at 10:36 pm

B of E. The elfin’s fall guy has an exit strategy.

#41 Investx on 04.17.12 at 10:41 pm

Rates finally going up later this year? Hooray. Lot later than expected here. Whatever happened to those bond market forces?

Bring on the melt!

#42 Ol' limey smella. on 04.17.12 at 10:42 pm

F needs a Drummond report.

#43 City Slicker on 04.17.12 at 10:42 pm

“I mean, listen to the dude: “The external headwinds facing Canada have abated somewhat, with the U.S. recovery more resilient and financial conditions more supportive than previously anticipated. In light of the reduced slack in the economy and firmer underlying inflation, some modest withdrawal of the present considerable monetary policy stimulus may become appropriate.”

Tell that to the continued suffering middle class, and wait till the Federal Reserve announces QE3.

#44 Canadian Watchdog on 04.17.12 at 10:43 pm

#32 Marco

This should help.

Source: Bloomberg http://i41.tinypic.com/2dbv6gg.png
Via http://www.newyorkfed.org/markets/pridealers_current.html

Nothing but banks flipping and hypothecating securities to each other. I recommend this must watch video on how the entire banking system works, Canada included.

http://www.youtube.com/watch?v=LKsZ1hqHBHU

It’s just a confidence game now. Capitalism is dead.

#45 Tripp on 04.17.12 at 10:45 pm

Two of my work colleagues are actively looking to buy, one a bigger detached, the other an investment condo. Both well educated and nice guys to work with but almost illiterate from a financial perspective.

I would like to email them some links but I did it before with other people and they replied with raised eyebrows and condescendent looks (I live below my means, in “only” a townhome).

It is disturbing to see that in one of the most developed countries in the world, with a democratic system in place that provides virtually unrestricted access to education, free media, internet and travelling there are so many people that strongly believe we are so damn special that nothing will ever happen to us!

#46 Skilled Immigrant Who doesn't Deliver Your Pizza on 04.17.12 at 10:45 pm

I am just watching this crazy house market. What scares me though even some hard working people are telling me you can buy and sell houses and make money for living.

House has 2 input for cost, land and cost of construction. Canada is the 2nd largest country, so is land expensive? Or overpaid and over-busy contractors who can’t keep up with demand? They sold new ass-sized condos next to us around 300K.
As a happy renter, I am no way into buying, just worried that when this blows up, it might push rents up due to increase in rental demand.

Annually I spend 30-40K more in Canada and still have half of the comfort and luxury I had in my home country. I guess that’s the cost of getting citizenship of convenience. Oh no, I wouldn’t ask to be evacuated to Canada, if overpriced life with no comfort goes on over years.

#47 Westernman on 04.17.12 at 10:47 pm

Investx @ # 41,
Rates are NOT going up – if they raise rates even a little this fake economy of Canada’s is going to come to a grinding halt – dead – and they know it…
This rate raising talk is just that – talk…

#48 T.O. Bubble Boy on 04.17.12 at 10:48 pm

@ #32 Marco

Can anyone help me understand how to figure out who the buyers of CHMC securitized mortgage products are?

Look at the holdings of almost every money market fund out there, and look for “Canada Housing Trust”. For example:

BMO:
http://www.theglobeandmail.com/globe-investor/funds-and-etfs/funds/summary/?id=17705

National Bank:
http://www.theglobeandmail.com/globe-investor/funds-and-etfs/funds/summary/?id=18103

Standard Life:
http://www.theglobeandmail.com/globe-investor/funds-and-etfs/funds/summary/?id=18275

Sun Life:
http://www.theglobeandmail.com/globe-investor/funds-and-etfs/funds/summary/?id=81942

and, many international funds as well.

#49 Dontcallmeshirley on 04.17.12 at 10:48 pm

Let’s quantify the impact of a 0.25% rate bump.

Total mortgage credit is 1 trillion, 0.25% more is $2.5 billion.

Not every mortgage is exposed to that quarter point immediately, but eventually all would be.

$2.5 billion more for the banks sounds like a lot to me.

#50 Onthesidelines on 04.17.12 at 10:55 pm

You’re speculating again, Garth. There is no reason at all at this point to think that the government or the BOC will finally do the right thing when they have consistently failed to do so over over again.

As for the poster who asked who buys CHMC bonds, the answer is anyone who buys Canadian crown backed bonds. I had quite a lot in those bonds in the last 10 years as they were paying 6% and were not taxable for non-residents. Even now, I still hold a chunk that matures in 2014. I don’ t know how you would short them….they are crown backed which means the tax payers are on the hook to investors.

#51 thinker on 04.17.12 at 10:57 pm

the unimaginable can happen. When I moved to the New York, late 90’s, the boom kept on going, high glosssy adverts, etc. Coming from Canada, I couldn’t believe the frenzy at open houses. A local pulled me aside, can you imagine a time when FOR SALE where on almost every brownstone in Manhattan? He showed me pictures and I almost dropped. Bidding wars today, many sellers tomorrow. It can happen, will happen and someone should keep a camera ready for when it happens in Canada.

If Carney the clown raises rates, he won’t keep out the marginal Chinese money, that is all cash. He won’t keep out the bank of mom and dad down payments, He won’t keep out Brampton living taxi guy who will use his life savings to punt a condo, he will simply just destroy consumer spending in Canada, destroy the economy and create a massive drag.

The punters, speculators always find a way to get in. He will not raise rates just to keep them out.

#52 amy on 04.17.12 at 10:58 pm

Um, did you hear that the central bank of Australia cut rates by 25 basis points this week? And, the central bank of India grumbled about interest rate cuts as well (25-50 basis points), though held off because inflation is running at 5-6% there. In the short term, the problem in the developed world is deflation, which will likely be exacerbated by the recession in Europe, and worsened if Spain, & Italy’s debt crises erupt. Since the crutch to jour of the central banks is monetary easing & money printing, and they haven’t been able to think up another plan for four years, the credit bubble is frothing up, and may burst again. If and when this happens, the governments won’t have any more quivers in their arsenal, unless they want to try below 0% interest rates (negative interest rates). In the longer term, there will be high inflation to inflate away/renege on their sovereign debt. Not a pretty picture, to be sure, but fortunes to be made by the hedge funds.

#53 chubster on 04.17.12 at 10:59 pm

the economy is getting worse, not better – what you see in nominal $s is just the printing/debasement. yields aren’t going to rise because central simon says. it will happen due to bonds breaking down – which will mean simon has lost control of the bond market. this is something markets are definitely not pricing in.

#54 Debtfree on 04.17.12 at 11:02 pm

So what you’re saying garth is that if I took a ferry all the way to Victoria or points north . Then put my retirement money into a house . That with rising rates on the horizon . Even if I was a smart guy from say alberta . That I just might be trying to catch a falling dagger . Nah all those genXers will be retiring in fifteen years and will be crawling all over themselves to trap themselves on an island with a falling population and rising ferry rates . With no industry except export logs and tourists two months a year.

#55 Harry in Saskatoon, no bust here, maybe next year, or the year after on 04.17.12 at 11:02 pm

Using a mortgage rate of 3.25%, a $400000 mortgage will be paid down to 343000 after 5 years. This is near the 15% downward projection envisioned on this blog. So at worst new home owners would barely keep their head above water after 5 years. But this is the case ONLY if this is the peak and the buyers have a low down payment.

But for many places the peak is not here yet. Vancouver, Toronto have bidding wars, you can also add Calgary and Saskatoon to taht list. The possibility exists for many markets to continue with higher house prices as most markets in the country are in a balanced or sellers market.

People laughed at me last year when I said that prices in Saskatoon would go up. Inventory was tight and the possibility of a shortage of developed land in this city would lead to higher house prices. What happened? House prices are up 11% from last year in Saskatoon.

As I have said before until first time buyers are priced out or the government makes it tougher for them to get mortgages, the “bubble” will not pop.

No bust here, maybe next year, or the year after.

The average Skatch price is $318K. A year ago it was $294K. Yawn. — Garth

#56 Cowboy_aka_My_View on 04.17.12 at 11:03 pm

Maybe 5-6% GIC’s will make a come back some day?

#57 $$$BPOE#1 on 04.17.12 at 11:07 pm

RichMan poised to soar as waterfalls of money pour in
***********************************
METRO VANCOUVER — Richmond’s population is expected to increase 40 per cent within the next 30 years as an almost unprecedented wave of developments are slated for the city, including an enormous 28-hectare destination shopping centre adjacent to the River Rock Casino, Mayor Malcolm Brodie announced Tuesday.

Details of the development were sparse, but Brodie said Jingon International Development Group’s vision for a former cement plant site on Duck Island is an international-sized shopping centre, the likes of which are only found in Shanghai or Los Angeles.

“You would have to go there to see anything on this scale,” Brodie told the Richmond Chamber of Commerce.

He said the development would include six hotels, more than four million square feet of retail, entertainment and office space, and a 450,000-square-foot trade and exhibition centre.

No price tag was put on the development, but Brodie said it was the single largest development proposal ever received by the city.

The proposal is still in its initial stage at city hall but it “illustrates the significant investment potential we are seeing in the City of Richmond right now,” Brodie said.

Up to $4 billion worth of new development is being proposed for Richmond, including 16 hotels totalling 2,500 rooms, 12,000 new residential units, 1.5 million square feet of office space and 2.5 million square feet of retail space.

Most of this development will be located near the Canada Line which, along with the Olympic oval, is responsible for kick-starting much of the development, Brodie said.

Richmond’s population was 150,000 in 1996 and 200,000 today. By 2041, it will increase to 280,000, he said.

#58 Bill Gable on 04.17.12 at 11:09 pm

When Donald Trump shows up – run.

#59 Frank on 04.17.12 at 11:10 pm

People have been saying RE is going to crash, it will slow down or go down a few percent or so. Interest rates will not go up before U.S. interest rates, if rates were to rise in Canada first, many U.S. companies would close up shop and move back state side, putting Canada on a road back to recession.

#60 $$$BPOE#1 on 04.17.12 at 11:11 pm

More great news here folks. And folks lets get clear. Carney is bluffing. Every 6 months comes out with the same song and dance. Too much debt yadda yadda yadda and never does anything. Onward and upwards folks it’s great out here and getting better and better everyday.
******************************************
VANCOUVER — For 100 years the Lee building at the corner of Main and Broadway has been the tallest building in Mount Pleasant, a seven-storey anchor in a sea of two-storey houses and businesses.

No more.

On Tuesday Vancouver council approved a controversial 19-storey tower development across the street at the corner of Kingsway that will see the construction of 241 condominiums and a massive amount of street-level commercial space.

#61 edmontonian on 04.17.12 at 11:12 pm

Oh god! It really is a turn down happening out west and Toronto. Overbuilding (just like in the USA) economic stability really based on massive consumer credit (specially in Alberta were they have the highest debt per capita anywhere in the world!). In Alberta i saw the conservatives still can’t balance their budget after a full year of $100 per barrel of oil since they are giving away the bitumen for practically free!
It’s scary to think of all the amount of jobs involved with importing the stuff fro houses made in China, the lumber sales here in canada for the massive overbuilding, and all the contraction, trade related & real-estate/lawyer fees that will “dry up”.
Hold on tight everyone, the bubble is going to burst!.

xxx

#62 Carney works for Goldman Sachs on 04.17.12 at 11:16 pm

People don’t trust government nowadays.

Who can blame them?

#63 wykidajlo on 04.17.12 at 11:21 pm

“Because Spain was part of the euro from the very start, mortgage rates dropped to all-time lows at the beginning of the last decade. Even blue-collar workers were able to buy their own homes and apartments for each of their children, but it was all done with borrowed funds.
About 800,000 new housing units were built each year until 2008. To cope with the boom, the Spaniards brought millions of immigrants into the country. It was a profitable time for people like José Ignacio Recoder, 66, who, until recently, ran a family business that makes industrial cutting machines for marble and other stones used in construction. In 2006, the company had 60 employees and €12 million in sales.
When the construction business collapsed during the real estate crisis, Recoder had to let 45 workers go and pay €2.8 million in severance payments. This was so hard on the Madrid native that he decided to retire. Today his youngest brother and Recoder’s eldest son are fighting for the company’s survival.”

This sounds familiar. Crazy Real Estate, Millions of Immigrants, Low Interest Rates, Cheap Loans for All ….

#64 $$$BPOE#1 on 04.17.12 at 11:26 pm

Looks like the recession has been declared over in Vancouver. Final hurdle is the HST. Super cheap deals here folks Down (yes I report FACTS) from $2300 a sq foot to dirt cheap $1500 a sq foot. Rennie the genius of real estate on board.
***************************************
A luxury condominium and hotel project planned for Vancouver’s West Georgia Street and cancelled during the recession is back on track, CBC News has learned.

Construction stopped suddenly in October 2008, leaving a gaping hole behind the hoardings between Thurlow and Bute streets. But buyers who’d bought did get their money back.

The 60-storey building, originally called the Ritz-Carlton, will now have a new name and a new configuration, but the design that twists 45 degrees from top to bottom will remain the same.

The Holborn Group, which is developing the project, is expected to get a permit by the end of the week that will allow the company to start building again.

But with the passage of time and a tighter economy, the market has dictated changes and although the building will still be on the high end, the building have been tamped down.

“Where the consumer is focusing is, ‘What is the end price and what are the amenities that come with it,’” said Jennifer Podmore Russell of Deloitte Touche.

In this case, less means more.

The number of condos goes from 163 to 290 and hotel rooms increase from 127 to 187.

Lowering the ceiling heights will help squeeze in eight more floors, but increasing the building’s overall height by just five metres.

Prices are expected to be in the $1,500-per-square-foot range, down from $2,300 earlier.

#65 Don on 04.17.12 at 11:26 pm

#22 Marco
do any of the current 20-30 something’s remember the 80′s? It is not different now…

Most likely not…but on another note most people can’t remember how things were 12 years ago. Without ignorance partying wouldn’t be that fun. It’s been a party in BC for the last 10 years, we capped it off by hosting a large expensive sporting event. Stand aside the herd is about to change direction.

#66 Mr Buyer on 04.17.12 at 11:29 pm

BUYER BEWARE. THE BUBBLE HAS TOPPED. Interest rates and cheap money are irrelevant at this stage of the game. SALES ARE FALLING ACROSS CANADA. There will be no melt but a CRASH as has followed all previous bubbles. Monetary policy has had little attenuating effect upon the bubble other than causing it in the first place and it will have little effect upon the bubble’s ultimate collapse (I hope I am wrong, but I likely am not, bubbles have their own life largely divorced from usual economic norms). The worst hit places around America have seen 50% declines on average in house values and Japan has seen many many instances of over 60% declines with Ireland posting an AVERAGE decline of 38%. Factor that into your melting purchases as the bubble collapses. BUYER BEWARE. STAY OUT OF THE MARKET FOR THE NEXT COUPLE OF YEARS. I personally know many many people who are now approaching retirement in Japan still paying huge amounts on mortgages entered into at the top of the Japanese bubble around 2 decades ago. While the house is a depreciating asset here in Japan, the land itself has lost huge amounts of value yet the mortgage is for bubble prices. This is at extremely low interest rates as well. Huge sums paid over huge amounts of time for an asset continually falling in value. NO BULL. Do you really want to go on that ride? Trust me you do not. Most of these families had steady income over the duration of their mortgages as well. We Canadians can not say the same thing. But hey if it is your only best chance, then I guess you are going to take it no matter what I say. BUYER BEWARE. There will not be a melt. There will be a CRASH.

#67 furst on 04.17.12 at 11:38 pm

#4 JT on 04.17.12 at 9:38 pm
The only annoying thing about this blog is the doughheads who keep saying “First”. Honestly.
_____________
I said ‘FURST’ not First so clearly I’m not annoying right JT?

#68 eaglebay - Parksville on 04.17.12 at 11:44 pm

#46 Skilled Immigrant Who doesn’t Deliver Your Pizza on 04.17.12 at 10:45 pm

Go home. Don’t take advantage of our goodwill.

#69 BC Bring Cash on 04.17.12 at 11:46 pm

A reality test for would-be home buyers. Globe and Mails Rob Carrick explains how Banks qualify people for bigger mortgage loans than they really can afford. Check out his affordability calculation. By the way his calculation does not include the cost of utilities every month and also the cost maintenance of your own house over the years. But he does have a good point.

http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/a-reality-test-for-would-be-home-buyers/article2404302/

#70 eaglebay - Parksville on 04.17.12 at 11:50 pm

#54 Debtfree on 04.17.12 at 11:02 pm

You don’t have a clue do you.
Stick to your own kind and stop pretending that you’re knowledgeable about Albertans and Vancouver Island. Duh…

#71 Canadian Watchdog on 04.17.12 at 11:52 pm

Vancouver HPI Heat-Map

Percent Range -/+

Light 0 – 4%
Mid 5 – 14%
Dark 15 – 25%

Positive Gain Y/Y http://i39.tinypic.com/b5h11s.png
Negative Loss Y/Y http://i44.tinypic.com/2ykm5oy.png

#72 eaglebay - Parksville on 04.17.12 at 11:52 pm

#56 Cowboy_aka_My_View on 04.17.12 at 11:03 pm
Maybe 5-6% GIC’s will make a come back some day?
____________
Don’t steal. The government hates competition.

#73 Idiot Mark "the talk" Carney on 04.17.12 at 11:54 pm

You idiot mark “the talk” carney Don’t you understand Canadians will borrow until they are bankrupt? People using their fake equity to buy “investment ” properties so they can flip to the next flipper/greaterfools.

#74 [email protected] on 04.17.12 at 11:56 pm

Garth, if Carney has to be so careful in raising rates, why not do it in smaller bits but more frequently, like a tenth percent per quarter instead of the scary quarter percent at once?

#75 John G. Young on 04.17.12 at 11:57 pm

#177 dad on 04.17.12 at 3:35 pm

“I think its rather crass to use the recent death of apolitical activist as some sort of wedge-issue on this blog, as if it has anything to do with houses. At this point, the alleged perpetrator is thought to be a psychiatric patient who had no idea who the guy even was. To see people like John here use that murder as a way to score political points in a debate is shameful.”

Hey dad, just saw the story for the first time on the CTV Evening News.
Thanks for accusing me of something I didn’t do. (Are you taking your meds?)
For that, you should at least let me have the car for a few days.

PS it was reported that a witness heard the killer yelling gay-hating words as he beat the guy to death.

#76 Idiot Mark "the talk" Carney on 04.18.12 at 12:04 am

Idiot mark don’t you know Canadians are borrowing from their fake equity to renovate their homes. This is money they don’t have. Driving around the city all you see is renovations and construction type work. That is a big % of our fake economy. Once RE goes down the well paying jobs disappear and the fake economy will crumble under the weight of this housing ponzi scheme which you helped create. The US housing crash won’t look as bad as to what will happen to canada. We have a fake economy built on money we don’t have so we can build houses/condos we don’t need. Smart idiot mark.

#77 waiting on 04.18.12 at 12:15 am

Although the latest reports have Chinese economic growth slowing to 8.1%, the notoriously suspect data may be overly optimistic.
It seems like many countries are hoping China will save their own economies,Canada included.
We’re pegging our hopes on them buying more of our copper, gas, lumber, gold,you name it.
This writer gives a good explanation of why China’s economic momentum is on the downside.
http://www.forbes.com/sites/gordonchang/2012/04/15/grim-fairy-tale-chinas-economy-grows-at-8-1/
and if you want to see what an economy fueled by a massive housing boom with nearly half of it’s GDP tied to property looks like,
http://news.sky.com/home/world-news/article/16117228
It gives an idea of what some of those GTA condo towers will be like in a few years.

#78 FTP - First Time Poster on 04.18.12 at 12:18 am

So, it appears that Carney has been offered an overseas posting:

http://www.zerohedge.com/news/goldman-path-complete-world-domination-mark-carney-his-way-head-bank-england

And just in time to avoid the housing meltdown he helped create here in Canada. Every one of these Goldman pricks should be tossed in jail for being the parasites they truly are.

#79 John G. Young on 04.18.12 at 12:20 am

#64 $$$BPOE#1 on 04.17.12 at 11:26 pm

“…Super cheap deals here folks down from $2300 a sq foot to dirt cheap $1500 a sq foot….”

When I bought my house in 1999 — downtown Toronto, detached, less than 10 years old, garage and parking bad, nice back yard — it cost me about $100 per square foot.
FIFTEEN TIMES that amount is “super cheap”???

You are certifiably insane.

#80 Form Man on 04.18.12 at 12:23 am

#70 eaglebay

I don’t at all diss the lifestyle Kelowna has to offer. I am an avid sailor and skier, and take full advantage of all the Okanagan has to offer. I thoroughly enjoy living here. What I do poke fun at is the pretentiousness.
The hummer-driving, frosted hair-tip realtor/developers ( now hummer-less as they wait their turn in bankruptcy court )
The misplaced belief that Kelowna need offer nothing more than scenery, and jobs would magically replicate themselves, has been a tragic miscalculation and led to some serious overbuilding.
You should know, real jobs come from harvesting resources, and manufacturing things people want. That is the lesson Kelowna is only beginning to learn.

p.s. debtfree is right

#81 Ex-Cowtown on 04.18.12 at 12:27 am

Interest rates are irrelevant. When your debt load exceeds your carrying capacity, you go tits up. This can happen just as easily at 2% as at 20% interest rates

The only difference is that at 20%, your rate is likely to fall in the future, giving you some breathing room.

At 2%, the rate is likely to rise, so you are hooped.

Also, when you get overextended, the bank starts asking you to pay it back (can you believe the gall of some people? wanting the money they lent you back??).

And at 150% debt to income Candians are a time bomb. And, as GT points out, it doesn’t take everyone to get in trouble. In the U.S. 10% of the people getting in trouble killed their housing market. We have 43% who think that they could have a problem.

Assuming half of them are correct, (conservative, as it’s more likely that people have more problems than they want to admit to) that still gives us more than twice as many problems as the U.S. had when they hit the iceberg.

And the CMHC lifeboats are already full (bankers first please; widders and orphans to the fantail)

#82 Inglorious Investor on 04.18.12 at 12:35 am

If/when Mark The Carny and the BoC actually do start to raise rates, it was sure nice of them to wait until home ownership by the banks reached an all-time high. Suck everyone into a (often) life-long debt commitment to the banks using the lure of cheap credit, and then raise rates. Like Garth says, the value of homes may drop, but the debt will remain. Yeah, nice trick. While I am not one of those who will suffer the aforementioned debt trap personally, I am one of millions who will have to pay the bill to clean up the mess that may result. Thank you, BoC.

#83 edmonton mortgage broker on 04.18.12 at 12:36 am

#66 Mr Buyer on 04.17.12 at 11:29 pm

I am genuinely curious as to the propensity to walk away from one’s mortgage due to the cultural differences between the japanese and the americans.

we know that in the US, there are some non recourse states and some recourse. there are a large number of strategic defaults occurring in the states from what i have heard.

i do not know the laws regarding default of one’s mortgage in japan, nor do i the faintest idea if strategic default even crosses the mind of the typical japanese mortgagee.

my suspicion is that due to the japanese culture of valuing honor and living up to one’s obligations, defaulting on a mortgage is quite rare and one would sooner commit seppuku than walk away from a mortgage. or maybe i’ve just watched black rain one too many times.

#84 TimV on 04.18.12 at 12:36 am

And how many of those BMO survey respondents can calculate how many dollars their monthly payment will change by if rates increase by two percent?

Less than 43% of’s respondents? I’d certainly have to think about it if I didn’t have ready access to my spreadsheets….

#85 Kilby on 04.18.12 at 12:36 am

#57 $$$BPOE#1 on 04.17.12 at 11:07 pm
RichMan poised to soar as waterfalls of money pour in
***********************************
Hot “Richman” market.

Richmond new sales last 2 weeks…..129

Price changes for the same time…..163

#86 DonDWest on 04.18.12 at 12:45 am

You’re wrong – Carney won’t raise interest rates, not now, not ever. He’s all talk; no action. What exactly is his job and what are we paying him to do by the way?

#87 Debtfree on 04.18.12 at 12:46 am

At eagle bay . I’ve worked out of edson . Met more morons there than anywhere else in my life.
I’ve worked highlead logging out of June landing that’s on quatseno inlet near port alice . And port McNeil that’s near port hardy . I’ve live in Victoria back in the 60s . I’ve had Barkley sound crab squirting out the sides of my mouth . And I bet I’ve forgotten more of van. Is. Than you will ever be able to afford to see . And as for sticking to my own kind . Which kind would that be ? I’m a blue eyed blond with a very hot French Canadien wife for 42 years . As far as I know that’s the only kind they make hot. I suffer the Scandinavian curse . Dark skin and spicy food . Ooooohhhh the suffering may it never end.

#88 john on 04.18.12 at 12:49 am

garth, when are you gonna tech-up on your blog so we can respond to other bloggers comments directly below there comment. This must be fairly cheap and available blog software by now.

#89 Nostradamus Le Mad Vlad on 04.18.12 at 12:49 am


“. . . the Amazons always dress up as naughty reindeer (little floppy tails and the whole deal) and cavort in the white stuff, . . .” — Can we play with them in your bunker? That would be the highlight of my wretched life!

“But first, they’ll snake higher here.” — So C and Bernanke are divorcing? We’re going on our own at last!

“. . . the exchange rate, . . .” — See link about UK pensioners who are getting clobbered by exchange rates.

“Modest withdrawal of stimulus is used in a throbbing degree when the overall economy starts to puff up noticeably. Surely they know better. Thankfully we never learn. I’d have to write fiction.” — Or one can use Monty Python’s ‘Run away! Run away!’ instead of the withdrawal method!
*
#51 thinker — “the unimaginable can happen.” — Correct, which is why a lot of sheeple have been lulled into a false sense of security of being in way over their heads, because ‘everyone else does it’. Not so.
*
This is new technology. After opening the link, type in the address you want slowly, letter by letter, space by space, and watch each time where it takes you. It works worldwide. Google based, but better than Google Earth. — http://showmystreet.com/
*
Exchange Rates OAPs who live away from Blighty are being hit hard; Commercial RE bubble in China; Getting Hosed via debit cards at gas stations; EU – US – Israel Convoluted mess; Japan Paying IMF to stay in the game; Spanish Banks Moving risk to taxpayers, much like CMHC; Lawyers spending money on EU bailout; Buy Silver and do the world a favor; Oil chart; IMF Die young, live much longer; Private Equity Funding There are trillions sitting on the sidelines; Banker resignations continue.

Gold Back To The Future; Green Jobs gone; Nomura Eight issues, and Nomura US in the crosshairs; Finance Guru Probably made a killing; Commodity Bubble Bursting at the seams; Ignore at your peril; Not quite dead, yet; Cdn. Home Ownership The true cost; The true Laffer Curve Incl. chart; IMF Oil up 10%? Student Debt and RE; Argentina Kinda goes with last night’s link about nationalizing their own oil and gas company.
*
Leegalizing Drugs Op-ed piece from The Sun which says the UK should look at legalizing drugs; Eight Limbs Birth defect and / or Monsanto? Sinking of Japan Constant change is part of life — birth, death, rebirth. Doesn’t say how long the movie clip is; The Population Control Holocaust; Gloggel backs CISPA, and this; 4:41 clip Paradigm shift on educaton (no universities, learn on the ‘net).

Two clips Herbalist speaks of curing cancer, and Chinese herb to restore and cut gray; Five Apocalypses We should be able to handle one; Renouncing Citizenship Just like the Brits., but where does everyone go? Galapagos Islands Free tour; American Shadow Power; US vs. China Cyber war.

#90 Roland on 04.18.12 at 12:51 am

#34 is on the right track. Think fiscal policy, not monetary!

Since we don’t want our currency to appreciate too much, we don’t have a lot of room to hike interest rates.

But the gov’t has a lot of fiscal tools at its disposal which it could use to limit over-investment in housing without affecting the cost of money for all other sorts of enterprise.

e.g. they could set a maximum value eligible for capital gains exemption on sale of a principal residence. Nothing like the old nasty word, “TAX,” to cool off some speculation!

e.g. they could set a maximum mortgage value for CMHC insurance eligibility.

Probably still to late for us, though. The unchecked infestation of globalist finance-crazed neoliberals has done too much damage already.

#91 Robert on 04.18.12 at 1:05 am

#70 Bagelboy in Peeksville.. He’s not that far off the mark. Just how will the Island fare with gas and ferry prices soaring, electricity costs doubling, taxes ramping up and hoards of wrinkly boomers filling every available hospital bed (and then some). Harper gov’t is reducing medical subsidies to BC just as the prairie geriatric tsunami is set to hammer the wet coast. Won’t be pretty. You better buy your bed at Nanaimo General now, there won’t be room when you need it.

#92 broadway skytrain on 04.18.12 at 1:08 am

#4 JT on 04.17.12 at 9:38 pm
The only annoying thing about this blog is the doughheads who keep saying “First”. Honestly.
_____________
I said ‘FURST’ not First so clearly I’m not annoying right JT?
———————————————————

no, you are childish AND annoying.

and… carney does nothing but more talk until us rates rise (2-3 yrs off)

#93 daystar on 04.18.12 at 1:12 am

This is what C had to say 10 days ago here on Greater fool:

“I will however warn everybody, as has Mr Turner, that I may well raise rates before the US fed, for several reasons. LIRP has not had the desired effect in some instances. Many domestic households have continued the debt binge. Rather than taking the opportunity to reduce interesest payments on existing debt, new debt has been added. I have also scolded businesses for holding cash as opposed to investing in plant/equipment. Thirdly, our dollar has reached parity with the US$, but much of the C$ strength comes from the commodity sector, so a rise in rates may have little effect.

Thank you again Garth for helping get the message out.” – Mark Carney

(Notice the manners at the end, it would be nice if it turned into a trend here at greaterfool)

I think it was the day before this quote, C mentioned that he still fears deflation and that these are not normal times. I can see keeping rates unchanged this week to help Nat Gas producers bunker in as best they can considering the literal depression they face. The U.S. had the warmest winter on record. Storage has swelled and we could very well be looking at hitting the limit by fall. I could get into fracking and the environmental risks now looked at but the simple truth is beyond a short timeframe to allow our natural gas industry the chance to restructure and consolidate, rates need to go up to change the consumer behavior that has us all worried (and some terrified) for reasons most can agree.

The thing we should be asking ourselves right now is… why is it that monetary policy should be fixing our bloated housing/credit bubble when it could so much more easily done fiscally through CMHC and OSFI regs for 6 years now? Why, our CEO from the Bank of Nova Scotia, says they can handle it!! (they’ve done a great job to keep credit growth moderate, there is no bloated credit bubble, just ask your friendly Bank of Nova Scotia CEO, with a steady hand at the tiller, they’ve got it all under control, business as usual, everything’s fine…)

Hmmm??

Yeah, its because its so different here. Oh, we’ll never repeat the U.S. experience. Remember? First it was denial, “there’s no bubble”. Then it was “the market is merely correcting”. “Then it was the greedy bankers bonus at fault. No, it was the homebuyer, the consumer for dumbly buying high. Oh no, it was the central banker for 3 years of unnecessary low rates. Nope, it was the regulators. Nope, thats not it, it’s fiscal policy from our lawmakers. Nope, that can’t be, its our past lawmakers before them. No, its the voters. Nope, thats not it, its everyone’s fault!”

Is it really everyone’s fault? Really? I really mean it now, really???? Do us blog dogs real feel like this is our fault?

Its oh so different here, right…

#94 daystar on 04.18.12 at 1:26 am

#49 Dontcallmeshirley on 04.17.12 at 10:48 pm

Household debt is 153% of 1.58 trillion (2011 GDP est) or 2.41 trillion. Public debt (intergovernmental) is roughly 84% of 1.58 trillion or 1.33 trillion. Corporate debt is a wild wild guess (meaning I have no real idea) but I’m coming in at 130% of 1.58 trillion, or 2 trillion for easy math for a total of 6 trillion worth of credit out there. A quarter point is a 15 billion dollar hit but you are right, it’s impacts aren’t immediate.

#95 B P O E ?? on 04.18.12 at 1:38 am

@ BPOE

Does this mean

Bubble
Popping
Overpriced
Everyone GET Out

Richmond crashing
BC Real Estate bad investment

You pump and pump, sooner or later your compressor no more worky!

#96 Van grrl on 04.18.12 at 1:38 am

#22 Marco
do any of the current 20-30 something’s remember the 80′s? It is not different now…

Of course not, they were either children or not born yet. I’ve had teen students ask me if WW2 ended in the 60s and if our movies “back in the 80s” were in black and white.

I highly doubt the average 25 yr old is well informed of what the economic situation was like in Canada in 1983. Most people who lived through it probably missed some of it. Although granted, there were fewer distractions back then.

#97 Mark on 04.18.12 at 1:40 am

I highly doubt Carney will make good on his “threat”. RE in Vancouver is deflating at a rapid rate. Toronto isn’t far behind, although we’re seeing the last gasps. Why would he add fuel to the price decline fire, when the 70% of Canadians with declining house prices aren’t likely to be doing a lot of spending? Carney makes for a decent “jawbone”, but if he was serious about this rate hike business, he would have done it already. Now its too late, the CMHC’s damage is done.

#98 Tron on 04.18.12 at 1:45 am

Many years ago I learned about the laws of supply and demand. Around the same time I was taught that most economists advocate independent central banks to limit the influence of politics on interest rates.

Clearly today we have a crisis of magnitude with low interest rates driving out of control borrowing. Those responsible for setting the rates should be available to answer to the people who are most affected by their actions; namely every working and contributing tax payer.

It will never happen but I believe it is the right thing to do.

#99 Mark on 04.18.12 at 1:47 am

#37 Steevo, “We survived with only a major swap of mortgages off of our bank’s books through CMHC to increase liquidity. “

Hardly, those were CMHC-insured mortgages. They would have fallen into liquidation otherwise, meaning that the banks would have been given the cash from the CMHC when a bunch of people defaulted from the higher “Prime” rates that would have been necessary to stem the short-term liquidity crisis in the Canadian banking system (global bank runs do that, you know…).

The swap kept the Prime rates from jumping 2-3%, and that’s about all. Hardly an event that posed any risk to the Canadian banking system, although certainly Prime going up 2-3% would have burned a lot of borrowers.

#100 Vancouver Mt Pleasant Renter on 04.18.12 at 2:49 am

$$$BPOE#1 on 04.17.12 at 11:11 pm
On Tuesday Vancouver council approved a controversial 19-storey tower development across the street at the corner of Kingsway that will see the construction of 241 condominiums and a massive amount of street-level commercial space.
================
The BPOE is only reserved for the rich or insanely in debt, and nothing in between.

In the past three years, there’s been two separate major fires which burned down multiple buildings to produce a huge vacant corner section of Main/Broadway/Kingsway, the very spot where this hideously ugly building is about to be built. It was obvious to me at the time that this was an act of controlled arson. This city is ripe with big money special interest groups and their real estate corruption, prompted by the easy credit of our times.

Main street and the neighbourhood has changed so much in the past ten years, it’s actually sickening to watch what’s been unfolding. Can you imagine previously cool unique independant business owners being squeezed out by unbelievably high rent and being replaced by Starbucks, Money Marts and Tim Hortons. Why is every developer in this city striving to build generic boring non cultured structures that does not represent community, but instead big business Corporations.

Can I conclude that I can look forward to a massively huge increase in my rent since the owner of the house I live in will reluctantely be paying loads more for property taxes. Perhaps after this building is finished, I can look forward to renting a 300 square foot apartment cell within it from an absentee speculator for hopefully charges something under $1500 a month.

#101 John Ratadlin on 04.18.12 at 3:33 am

In 1994 5 year fixed rate mortgages was 10.75% and now they are at most 3.49%. Even if they go to 5%-6% in a few years they are still cheap. We need to see at least 5 year fixed rate mortgages at year 2000 levels at 8%-8.50% range to see a real needed adjustment of at least 25% to give balance to the Canadian housing, condo market. This of course will not happen as the great manipulators always have their way. The last 15 years in Canadian real estate was so phoney based on robbing Peter to pay Paul. Peter was interest rates paid to investors and Paul was real estate agents, mortgage brokers, banks,mortgage lenders, companies and governments issued debt and finally real estate investors and sellers. The great heist still keeps going. Garth you sound like a broken record that never stops.

#102 Freedom first on 04.18.12 at 3:44 am

Let me see, what to do, what to do? Would I rather have $400,000 invested in diversified assets, the majority being income producing, or would I rather have $400,000 in a 500 sq. ft. condo during a renting positive/ owning negative cycle? (translation: RE bubble). For millions of people worldwide, including Canadians, this has been a difficult question. For the correct answer look South.

#103 daystar on 04.18.12 at 3:54 am

#70 eaglebay – Parksville on 04.17.12 at 11:50 pm

With all of your comments over the months and years, I can never recall you showing any form of empathy. That cut yesterday with you referring to women as rentals… bullying an immigrant just now… these incidents aren’t isolated. What happened to you?

http://www.youtube.com/watch?v=2oxJf9MXidY

#104 ANONYMOUS on 04.18.12 at 6:18 am

Sorry Garth, you are 100% wrong, Canada’s next move on interest rates will be a cut, not a raise.

They will be following the same steps as India is doing now, that is cutting rates , not raising them:

http://www.bloomberg.com/news/2012-04-17/india-cuts-key-rate-for-first-time-since-2009-to-aid-growth.html

I would bet my life on that.

#105 House on 04.18.12 at 6:38 am

Raise interest rates? But 2020 is so far away.

#106 House on 04.18.12 at 7:03 am

After yesterday’s annoucement the C Dollar rose one cent. F called Markie and told him to go sit in the corner and SHUT-UP! We have a “smart” Conservative government now.

#107 Market Bull on 04.18.12 at 7:10 am

I thought interest rates were irrelevant. Now, the mere thought of a 0.25 rise in the overnight rate is a big deal?

Distort all you want, but I clearly said a small increase will be a start, not a finish. — Garth

#108 T.O. Bubble Boy on 04.18.12 at 7:21 am

For all of the Carney naysayers… Just think about the scenario that you’re proposing:

– home ownership is already at 70% (all time high)
– prices are already in bubble territory
– manufacturing is already gutted (so the dollar rising a few points isn’t changing anything)
– boomers are 1 year closer to the magical 2015 year, when they all start hitting 65 and need income
– etc
– etc

Now, let’s say Carney drops rates by half a point… Which buyers “on the sidelines” would this encourage to jump into housing?

On the flip side, raising rates would automatically reduce the size of mortgage many people would qualify for, and that itself helps to slow debt growth.

As far as the rest of the economy, what business out there will suddenly decide to borrow their brains out with loans and target growth if rates fell half a point? Rates have been near zero for 3 years… What would suddenly change a business owner’s mind? Even if rates went up a point or two, what does that change for any business outside of housing?

#109 Canadian Watchdog on 04.18.12 at 7:27 am

#97 Mark

“Why would he add fuel to the price decline fire”

Because creating a crisis is the perfect excuse to print more money, and without one, he wouldn’t look like a hero. Same goes for the Fed.

#110 fancy_pants on 04.18.12 at 7:33 am

uh oh. more warnings from MC. Everyone take cover. LOL

#111 Canadian Watchdog on 04.18.12 at 7:52 am

#97 Mark

By the way, Carney doesn’t have to lift rates to target mortgages, he just needs to flatten the yield curve. http://i42.tinypic.com/214rq6e.png

#112 Ralph Cramdown on 04.18.12 at 8:09 am

Lowering the ceiling heights will help squeeze in eight more floors, but increasing the building’s overall height by just five metres.

That’s a cramdown! Not in the typical sense of the word, but I’ll take it.

#113 mythbuster on 04.18.12 at 8:20 am

Garth: “There’s now a 100% chance interest rates will be going up. You read it here first. Actually you read it here when nobody believed it. So get ready.”

For about one whole year you’ve been warning this blog readers of ‘rising interest rates’. They did not. And in the US they continue down.

I have some self-developed technical analysis skills, including chart reading. I also am of the opinion that central banks cannot fight the markets – except on a short-term basis. Generally, central banks follow the market, they do not lead it.

Every time you wrote about ‘rising interest rates’ – I checked the chart for Canadian Bankers’ Notes and Government of Canada Bonds.

Examination of those charts has generally shown that short-term interest rates were under pressure to DECLINE, while bonds prices were under some perceptible (but weak) pressure to decline – thus rising mortgage rates.

I checked the charts again and the ‘picture’ has not yet changed: Short term rates pointing down. Long term rates pointing up.

I summary. Bank of Canada does not lead the market. And therefore Mr. Carney’s statements do not pose a threat – unless he engages in buying and selling government bonds, in which case he would influence mortgage rates.

I don’t know how Bank of Canada funds government borrowing needs. All I can do is examine the charts. For now it seems Bank of Canada (or some other large holders) are more inclined to sell than buy government of Canada bonds. And that is what is to be watched. Not the short term rates and Mr. Carney’s announcements.

With all due respect, I had to write this because I think this is probably a useful educational read for this blog’s dowgs.

US rates have not gone down in the past year. They have remained unchanged. As for my words, I can only warn people. I can’t make them wise. — Garth

#114 househornyhousewife on 04.18.12 at 8:36 am

Garth,

I am not so sure that rates will rise by as much as you say, in light of the situation. If 2 points will cause such a huge collapse then I would imagine the government would take this into account when setting rates.

I cannot believe people would be irresponsible enough to opt into a situation where a couple of percentage points will essentially ruin them financially .. but this seems to be the case with many.

I guess we shall see what happens in the future and react accordingly.

Oh and by the way, one way to stop people from blogging “first” is simply not to post their entry … this should get rid of this immature and annoying habit since they probably won’t keep doing it if they know it will not be seen. Just a suggestion.

HHHW

The government does not set rates. — Garth

#115 Nonno Nicola on 04.18.12 at 8:42 am

“Tell your wife 70% of Europeans rent, which is why they had time to colonize.” — Garth

Not sure about other European countries but Nonno Nicola was in Italy in March to visit relatives in the lovely region of Campania. They are all farmers who own ancestral properties. They are as close to self sufficient as one came come. They produce olive oil, wine, cheese, make their own bread and have their own meat supply. The ones who are up the proverbial [email protected]#$%t creek without a paddle are the poor renters in the towns and cities of their region. My relatives have no debt and are master farmers and will be the last ones out of the room to turn out the lights if Europe completely implodes. “Hey Bigga Rider howa you a doing with da real estata and da investimenti in da stocka marcato. You needa updata Nonno Nicola. Grazia Bigga Rider.”

#116 Mr. Lahey, Sunnyvale Trailer Park Supervisor on 04.18.12 at 8:48 am

#104 Smoking Man

“Gartho, how are you getting the inside scoop on interest rates?”

Are you serious Smoking Man?? The mystic oracle, all knowing seer, crystal ball gazing guru from the east, financial tea leaf reading sage who runs this blog has a direct line to herr Carney. Do you not know that Carney and company consult our fearless leader before making their financial and fiscal decisions?? Sheeesh!

#117 Market Bull on 04.18.12 at 8:55 am

The BoC releases its Monetary Policy Report this morning.

Watch for a swing back in the OIS market today. As more details emerge, the economy will reveal that it still has plenty of slack.

http://www.bankofcanada.ca/

#118 daystar on 04.18.12 at 9:02 am

Readers, lets not stop with a label. If you just joined this blog for the first time, you will need to go back into the archives a few days or more to fully understand what’s happening. We are products of our own environments both macro and micro. Our brains literally developmentally grow (and it doesn’t stop with infancy/childhood, neurons replace themselves every 7 to 8 months, the networking of our brain is ongoing. Stroke recovery comes to mind, but thats for another time) Its not a perfect world and for some… it begins with abuse and/or neglect. For others, at childhood… adolescence… and as adults. We have to stop and ask ourselves why instead of react to it, its too prevalent in society now, we can’t run from this. We either deal with this now and everyone is better off because we are also a part of this environment… or we all suffer:

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

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

#119 Carnevour on 04.18.12 at 9:08 am

Seems like the gov has a plan for all the empty condos that continue to be build. When they go bust, the gov takes over and solves the housing problem in TO, maybe bring more immigrants that they lied to, in order of filling them quicker too.

#120 Idiot Mark "the talk" Carney on 04.18.12 at 9:16 am

You idiot mark ” the talk” carney go read the newspaper comments and the ones on this blog to see no Canadian respects or fears what you say. Idiot mark everyone just laughs at what you say so I have to ask Are you a stupid idiot or is your plan to bankrupt Canadians? Idiot mark even with the propaganda machine media backing you up no one cares. Even your buddy garth is trying to spin your uselessness and his followers don’t believe. Canada is ruined…thanks idiot mark “the talk”carney.

#121 C on 04.18.12 at 9:24 am

Carney’s a complete joke! He is from Goldman Sachs. All he cares about is keeping short term rates low to help cushion the Bank’s spread on their longer term loans. They pay 0% on bank deposits and lend out at 3%+. If those short term rates are raised poooof there goes the easy profits Canadian banks enjoy. Fox running the henhouse pretty much sums it up.

The argument a rising loonie will kill CDN manufacturing is nonsense. What about all the damage low short term rates are causing such as fuelling speculation in many markets, harming savers who do not like risk (is it a crime to shun risk?), and rising food and energy prices.

Carney is keeping rates essentially at an emergency level at 1%. We have one of the biggest housing bubbles in the world thanks to this nonsense. All he does is talk talk talk. Enough, raise the rates 1/4% and get on with it. Then people may take you seriously you hack.

Carney will go down as another Greenspan. He is highly regarded now because our housing market is on fire! When it comes crumbling down he will be picked apart as he should. He is way behind the curve.

Complete Joke!!!!

#122 Canadian Watchdog on 04.18.12 at 9:25 am

#118 Market Bull

Stick to RE analysis instead of trying to guess what the BOC will do next. Carney knew exactly what to do yesterday morning as he ordered 66 Wellington Street to dump 5yrs all over the market. http://i41.tinypic.com/2dbufjd.jpg

And here’s the target http://i41.tinypic.com/34e46kl.png

#123 eaglebay - Parksville on 04.18.12 at 9:26 am

#91 Bobby the tree hugger on 04.18.12 at 1:05 am

Everything that you mentioned in your post is government induced.
Visited my friend’s son at Nanaimo General and there were more young sick people there than boomers.
I must admit though that most of the staff were boomers or close to it.
The main ferries should be free as they are part of the Trans Canada highway.
Gas is as cheap if not cheaper than the Mainland.
The majority of the boomers live on their own, have money and support the Island’s economy.
Without the boomers there would only be Victoria left on the Island and again supported by the government.
BC is a rich province, rich in natural resources including the fisheries, agriculture and some very smart and hard working people.
Why are we in such a mess?
Maybe we need more people from outside BC including boomers and their money.
The only boomers moving to the Island and the Coast are the ones who can afford it.
BC needs a Wildrose not a phony tree hugging NDP.

#124 };-) aka DA on 04.18.12 at 9:35 am

As the lure of investment for speculative capital gains loses its lustre we return to the fundamental, more predictable and reliable albeit less sexy lure of investment for income. Investment income is interest so absolutely interest rates are poised to rise. We need interest rates to rise in order to steer the herd away from “speculative” gain to “real income” returns. The best thing that could happen to our economy is an increase of 2.0% in the bank rate even if it were implemented in one fell swoop. In so doing we would drive the remaining nails in the coffin of speculation and breathe life back into real investment for real income.

Word has it, in Kelowna where the average single family residence has a value of about $450,000, of those who actually do carry a mortgage the average is about $225,000. Now if mortgage interest rates were cranked up a whopping 2.0% in one fell swoop the average monthly mortgage payment of those with a mortgage would increase by about $250.00. Woop-de-do!?! If an additional $250.00 per month is going to break the financial back of someone who owns a $450,000 home with 50% equity we have a lot more pressing things to worry about. Of course I am generalizing and speaking in terms of the slut of all statistical quantifiers “averages”. And certainly no one want’s to spend another $250.00 a month for… nothing – that’s a couple decent meals a month with my svelte vixen babe of a spouse at The Keg – Chicago style baseball sirloin, martini and merlot included.

In terms of those who bought at the very peak of the market by means of a zero down 35 year amortized mortgage; well don’t they deserve their fate? Seriously, they were given what they did not deserve and while I do believe the lending banks in such cases should be made to share in the losses too it ain’t gonna happen and I’ll be damned if I’m going to step up to the plate and participate in the redemption of such greater fools both borrowers and banks. The fact of the matter is we are paying for that redemption now. That C and F are to a degree supressing interest increases is costing all of us and the reason they are doing it is, in great part, because of those Greater Fools. I think the benefits of an increase in rates would well offset the costs.

We need higher interest rates. Money is simply too cheap right now. We need to regard that wealth accumulated through the fruits of our labour and stored within the vehicle of our monetary system with a higher reverence and pay it it’s due worth when we employ it to do work for us. The dismal rate of return on capital investment these days is what is sorrowfully lacking in today’s economy. It’s no wonder that our economy is stalled. Who in their right mind would put their stored wealth at risk for a measly 3.0% or there-about return. Stuffing it in your mattress makes more sense but spending it on cheap trinkets like big screen tvs, granite, stainless and hardwood is a lot more fun.

A 6 or 7.0% bank rate makes a whole lot more sense. It would reward real investment while at the same time penalizing unwarranted speculation. Without an incentive for investment we’ll ultimately, eventually have none and nothing.

#125 45north on 04.18.12 at 9:40 am

anonymous: Sorry Garth, you are 100% wrong, Canada’s next move on interest rates will be a cut, not a raise.

I would bet my life on that.

anonymous posters are anonymous, there is no bet

#126 gladiator on 04.18.12 at 9:40 am

@104 SM: yuck! the guy is having a Bud Light in an aluminum bottle – the only beer I couldn’t make myself drink till the bottom. Never ever tasted a worse beer in my life.

#127 Form Man on 04.18.12 at 9:41 am

#124 eaglebay

Pull your head out of your ass and look around. BC has not had an NDP government in over 10 years. It is the Liberal/Social Credit right-wing party that has got us where we are. Not saying the NDP is the answer, just saying you don’t know what you are talking about.

#128 The Thing in the Basement on 04.18.12 at 10:00 am

87 Debtfree – that’s Juene Landing, Quatsino Sound and Port McNeill (Damn that Willie Mitchell).

#129 Dontcallmeshirley on 04.18.12 at 10:06 am

#94 daystar,

You’re right. A rate hike would touch more than just mortgage debt.

The critical point, that you and I can pat ourselves on the back for grasping, is that 0.25% is not a “small” move. It’s billions of dollars more in interest burden.

Some of the debt you mentioned is redundant, with interest costs being offset when debter and lender are the same entity…but i’m with you, i get what you’re saying.

#130 Tyredandboard on 04.18.12 at 10:16 am

“No, it’s not going to happen June 5th, when the Bank of Canada again determines the cost of money. But between then and the day when the Amazons always dress up as naughty reindeer (little floppy tails and the whole deal) and cavort in the white stuff, it’ll happen.

…Rates have but one way to go. Further central bank reductions are impossible, only increases. ”

Garth, wake up. Rates are not going up in Canada before the US fed raises rates, period. If they do, it might be a pawltry .25%, BIG DEAL. REAL rate increase, as in up 2% from here? No way it happens until US fed does a substantial increase, and don’t hold your breath for THAT. Don’t assume the Bank of “Canada” thinks like you. They don’t. They do not want this thing to end.

#131 };-) aka DA on 04.18.12 at 10:18 am

Unless you’ve been living under a rock, it’s now pretty difficult to get through a day without hearing a myriad of positive economic news reports. How long are you people going to keep denying that we have indeed turned that economic corner and admit that things are, in fact, improving? Will come a day, much sooner than you think, that you can no longer deny it. When that day comes you may have been left so far behind you’ll never catch up.

It (our economy) broke four years ago. Since then, rather than throwing our arms up in the air and giving up, we’ve been diligently working on fixing it. It’s not perfect and like a Lada engine in a yellow Cuban ‘54 Ford Sunliner Cab it’s got it’s quirks and hiccups but it’s moving forward in the direction we want to be and with vigilant maintenance it will get us there. It can’t help but do so as we each individually work on improving our lives and collectively move forward. Herd mentality has a purpose. Keep up with the herd or suffer the consequences for it is not the lead which is in peril so much as the stragglers who fall behind.

#132 Dontcallmeshirley on 04.18.12 at 10:23 am

Defaulting on a mortgage.

Wouldn’t it be fascinating to have someone explain exactly what happens in this process?

Not the conversational “…the bank will take all your money” nonsense, but a detailed description with time lines and limits.

1. How many months will a lender typically let a mortgage go delinquent before initiating foreclosure? Three or four, more?

2. Will a bank REALLY pursue a court judgement on a mortgagee for the difference if a loan isn’t fully recovered in a foreclosure sale? What’s the threshold for a bank just to take a write-off?

3. How much does a credit score drop because of a mortgage default?

4. Non-banks will still lend to a mortgage defaultor?

5. What can a bank do if a mortgage defaultor ignores a court judgement for recovery?

6. What mitigation does CHMC require a bank to undertake before paying out an insurance claim?

7. Assets in segregated funds are not exposed to a court judgement for recovery? I know seg funds are shielded from divorce proceedings.

Inquiring minds would like to know and are too lazy to google!

#133 TaxHaven on 04.18.12 at 10:29 am

I’d love to know where “Canada’s improving economy” is coming from…

All you have to do is walk down any street full of customer-desperate small businesses. See the shriveled profit margins elsewhere…and where are your twenty-somethings starting their careers?

If the supposed “economic growth” consists merely of GDP numbers and sales stats (and measured only in dollars!) with no mention of any other factor, well, yes – it would fool any number-cruncher.

But what about debt?

#134 Grantmi on 04.18.12 at 10:41 am

#88 john on 04.18.12 at 12:49 am

garth, when are you gonna tech-up on your blog so we can respond to other bloggers comments directly below there comment. This must be fairly cheap and available blog software by now.

I agree with John, Gartho. Time to move the Borg board to a more collective engagement.

Come Here! Go Away!

#135 John G. Young on 04.18.12 at 10:45 am

#88 john on 04.18.12 at 12:49 am

“garth, when are you gonna tech-up on your blog so we can respond to other bloggers comments directly below there comment. This must be fairly cheap and available blog software by now.”

Why would you want that?

#136 Heart of the World on 04.18.12 at 10:54 am

‘But between then and the day when the Amazons always dress up as naughty reindeer (little floppy tails and the whole deal) and cavort in the white stuff, it’ll happen.’

What is this ‘white stuff’ you and your Amazons cavort in? And you, a one time member of parliament…

Disgraceful!

#137 Dazzed and Confused on 04.18.12 at 10:58 am

Garth,

The more I analyze my first housing decision, the more I realize that I am missing part of the analysis. More specifically:

Let’s say that I buy into your view that housing in the GTA is ridiculously overpriced (I DO). Now let’s say that I also believe interest rates will rise (I DO). Here is the problem:

A $600,000 home with 20% down payment (i.e. $480,000 mortgage) at 3% interest results in a $2,272 mortgage, monthly.

Now forward say 2 years with a 15% correction and a 1.5% rise in interest rates. The same home would be $510,000 with 20% down payment (i.e. $408,000 mortgage) at a 4.5% interest rate results in payments of $2,258 monthly.

Setting aside the fact that for $600K I would probably get a small, 30-year old shack and with a lovely concrete sidewalk for a front yard for my kids to play, with these numbers, over 25 years, my payments for the price-corrected home would be $4,000 less in total ($681K vs $677K).

My intention is a longer term buy to raise a family, not to flip. What am I missing? Why rent two years waiting for a correction just to end up with roughly the same payment?

#138 jess on 04.18.12 at 10:59 am

“Badges of Fraud”

Do your critical eyes ever extend beyond the phony tree huggers?

Replace the “sharpies” of yesteryears with liar/fraudulent predatory lending of today.

http://law.yourdictionary.com/badge-of-fraud

sharpies vs new york state farmers
fraudulent conveyance

http://codes.lp.findlaw.com/nycode/DCD/10
companies vs corporate raiders

see employees vs. zell
if you borrow and replace equity with debt, carve up firm -downside , grab the pension funds and use it to pays the creditors

===========
The Politics of Restructuring
http://therealnews.com/t2/component/hwdvideoshare/?task=viewvideo&video_id=73457

============
Some banks are now offering cash incentives to homeowners to have them sell their homes at a loss—to forgive the debt and offer incentives yet still make a profit, because they usually purchase the loan from another bank at a discount.

http://livinglies.wordpress.com/

London chases holders of Swiss accounts
British tax authorities are using a CD of data stolen from a Geneva branch of bank HSBC to track down taxpayers who have hidden money in Switzerland.Apr 16, 2012 – 15:57 Paris court to investigate UBS France
A Paris court has opened a judicial investigation into the activities of UBS in France. The Swiss bank is suspected of helping French clients evade taxes.
=
Banks allowed to reveal staff names to US swissinfo
Apr 16 – “The Swiss government has authorised 11 banks under investigation by the United States over tax evasion issues to release names of employees involved.”
===========================
Sentencing of former Nigerian politician highlights role of British and US banks in money laundering
16th April 2012
Global Witness calls for a thorough investigation into HSBC, Barclays, Citibank and Abbey National (now owned by Santander) for their roles in the laundering of millions of pounds by James Ibori, former governor of Nigeria’s oil-rich Delta State. Ibori pleaded guilty to ten counts of money laundering and fraud in relation to an estimated $250 million of stolen state assets on 27 February; today was the first day of his sentencing hearing.
http://www.globalwitness.org/library/sentencing-former-nigerian-politician-highlights-role-british-and-us-banks-money-laundering

Leaked Gaddafi-era documents expose the need for urgent oil reforms
13th April 2012

#139 daystar on 04.18.12 at 11:00 am

#121 Idiot Mark “the talk” Carney on 04.18.12 at 9:16 am

Prove it. Research it and provide links. Educate yourself. Otherwise, all you will ever come across as is just another individual obsessed, foam mouthed (and abusive) name calling blogger who does nothing to add or contribute to the discussion. You offer nothing but noise, a penny a dozen people have to filter out, keeping their copper to themselves. C’mon, lets bring it up a notch.

#140 Makavelli on 04.18.12 at 11:05 am

Most blog dogs here think low rates are keeping prices from sliding. It’s because most of you don’t live in the west. Here in Van, listings have exploded and sales are down. Homes are sitting on the market and expiring. Prices down in some areas and prices sticky in others. But the longer this goes on, prices will start coming down even more. It’s simply supply and demand. And demand is withering while supply is building up. Eventually this will catch up to the rest of the country.

#141 Market Bull on 04.18.12 at 11:07 am

TREB reported 4,557 transactions through the TorontoMLS system during the first two weeks of April 2012. An increase of almost seven per cent in comparison to last year.

The average selling price during the first two weeks of April was $506,954 – up by five per cent Y/Y.

#142 getreal-tor on 04.18.12 at 11:09 am

This is now a nightly event in Toronto. I have ears everywhere. Tell your wife 70% of Europeans rent, which is why they had time to colonize. — Garth

What about Asians and East Asians?

@ Nonno Nicola

If Europe implodes then being a master farmer makes very little difference in the grand scheme of things.

#143 Makavelli on 04.18.12 at 11:09 am

#105 ANONYMOUS on 04.18.12 at 6:18 am

“I’d bet my life on it”

———————————————–

Your life will be shortened. Enjoy it sucker lol!!!

#144 John G. Young on 04.18.12 at 11:10 am

#103 daystar on 04.18.12 at 3:54 am

“With all of your comments over the months and years, I can never recall you showing any form of empathy…”

While I think that’s generally true — and I had a nasty series of exchanges with Mr. eaglebay-Parksville in the not-too-distant past — I have recently read some positive posts with him. (Telling a joke seems to help.)

He strikes me as a mass of contradictions. For example, this post:

#124 eaglebay – Parksville on 04.18.12 at 9:26 am: “BC needs a Wildrose…”

Wonder how his brother feels about that one…

I’m anticipating that now I’ll get a snarky response from Mr. E-P, something along the lines of “not sucking up to nobody”.

To borrow from Charlie Sheen, that’s just how he rolls…

#145 Daisy Mae on 04.18.12 at 11:14 am

#4 JT: “The only annoying thing about this blog is the doughheads who keep saying “First”. Honestly.”

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

Actually, they’re pitiful.

#146 Sticky on 04.18.12 at 11:21 am

@ #34 Derek R
>>Higher property taxes…yea retired people would love that.

If taxes need to be increased (IF), then higher consumption taxes on non essential items gets my vote. You want your Gucci, then pay more for it.

#147 Abitibi Doug on 04.18.12 at 11:21 am

@Van grrl, post #96:
You are right in what you say about a large part of the 20 to 30 crowd. You would thing the most connected generation in history, with all the tech gadgets they have and being regulars on sites like Facebook, they would be the most informed generation in history. However, that doesn’t appear to be the case as this technology is used for junk like keeping up with celebrity culture. I remember one 27 year old guy who thought I was a nerd (admitredly, I am quite nerdy) and social misfit because I knew little about who’s who in celebrity culture yet he knew practically nothing about economics and politics. I think many in this generation will reap what they sow, and will have no one to blame but themselves. Nature (or God, if you are the religious type) gave you a brain, and the government gave you an education to teach you how to use it. It’s all up to you.

In reading about how many Canadians used these low interest rates to rack up more debt I wonder, why didn’t more people use these low rates as an opportunity to renew loans at a lower rate so they can be paid off more swiftly?

#148 Daisy Mae on 04.18.12 at 11:24 am

#23 MARK: “Mark Carney should be arrested for financial crimes against Canadians. Silver spoon moron has no clue about running a country.”

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

He and Flaherty aren’t making any decisions without Dictator Harpers’ permission….

#149 };-) aka DA on 04.18.12 at 11:27 am

#124eaglebay – Parksville on 04.18.12 at 9:26 am
#91Robert on 04.18.12 at 1:05 am
#70eaglebay – Parksville on 04.17.12 at 11:50 pm
and
#54Debtfree on 04.17.12 at 11:02 pm

Hawaii, which really has nothing more than Vancouver Island but for 12 months of summer, seems to do quite well and so too will Vancouver Island. Check out the cedar shakes on the roofs of many a Hawaiian home. Sugar cane and pineapples vs. fish and timber hmmmm I’ll bet on the later.

Oh and the notion of perpetual summer doesn’t as often live up to those expectations one might have. I’ve many friends who moved back to BC from Hawaii because they missed the seasons. And really a venture on the West Coast Trail provides infinitely more visual wonder of flora and fauna than the Road to Hanna.

Beautiful British Columbia… truly THE BEST PLACE ON EARTH!

Oh and on real estate prices… have you checked out Maui lately?

#150 John G. Young on 04.18.12 at 11:29 am

#104 Smoking Man on 04.18.12 at 4:15 am

Impostor.

#151 foolsrushin on 04.18.12 at 11:31 am

C may raise rates in the short term by a 50 basis points but they know (as we know) the economy here and abroad, still stands on very week footing and they are not about to undo everything they tried to prevent by lowering rates in the first place. In Canada they just want to end idiots from further real estate stupidity. Guess what, its already to late.
Worldwide economies should be booming with full employment with the amount of cash infusion and low interest rates. If they thought the economy was truly getting better he wouldn’t be jawboning, he would be raising the rates. The economy isn’t getting better regardless of the BS the main stream media puts out.( I know I’m a dooooomer)
The fact of the matter is government is caught in a rock and a hard place and have trapped themselves just like they always do. They always come to the party too late and don’t know when to leave. They think they can steer economies like they are a train on rails and we are about to leave the tracks.
Why is it that governments through poor regulation and/or policy, who create these problems in the first place, think for a moment that they can make it all right by increasing interest rates or jawboning? Your supposed to stop the bubble before it occurs!
Rates will rise a little bit in the short term but this isn’t a trend. If they are successful in slowing RE they will swing the pendulum too far the other way and everything they have tried to prevent will come back into play.

#152 Devore on 04.18.12 at 11:36 am

#84 TimV

And how many of those BMO survey respondents can calculate how many dollars their monthly payment will change by if rates increase by two percent?

I have it on good authority the actual question asked was “are you praying interest rates do not go up?” but a focus group determined readers would be uncomfortable with that wording.

The number of people who could calculate, on the spot, while the pollster is on the phone, what a 2% interest rate increase would cost them, and then determine whether their budget could accommodate it, is probably somewhere around 0.

#153 Canadian Watchdog on 04.18.12 at 11:40 am

TREB’s mid-month report: http://www.torontorealestateboard.com/market_news/release_market_updates/news2012/nr_mid_month_0412.htm

All is well? or is it not?

#154 Kilby on 04.18.12 at 11:41 am

#91 Robert on 04.18.12 at 1:05 am
#70 Bagelboy in Peeksville.. He’s not that far off the mark. Just how will the Island fare with gas and ferry prices soaring, electricity costs doubling, taxes ramping up and hoards of wrinkly boomers filling every available hospital bed (and then some). Harper gov’t is reducing medical subsidies to BC just as the prairie geriatric tsunami is set to hammer the wet coast. Won’t be pretty. You better buy your bed at Nanaimo General now, there won’t be room when you need it.

#124 eaglebay – Parksville on 04.18.12 at 9:26 am

Maybe we need more people from outside BC including boomers and their money.
The only boomers moving to the Island and the Coast are the ones who can afford it.
——————————————————————
You are both right. Many negatives regarding moving to the Island are at play right now. After living in the Okanagan Valley for many years which used to be a popular spot for young retirees from Alberta, like Vancouver Island you hear a lot about where people like to go in BC. The conversations for the last few years now contain a lot of talk about the ferries and their costs, perceived ideas about health care availability and associated costs.

I have heard concern about taxes in some locations, Qualicum and Courtenay being two with taxes higher than surrounding communities, both these places will need infrastructure capital spending over the next decade which will be expensive for all residents.

Separation from children and grandchildren is a big factor with the many people in their 60’s that are contemplating retirement are having second thoughts about moving to BC (especially the Island)

Nanoose (especially Fairwinds) has, in the past been good for realtors as many have sold the same homes 3 or 4 times when the ex Albertans/Lower Mainlanders realize that they miss contact with their families left behind. There are now 216 homes for sale there and in the last month there have been only 5 sales….Pretty flat.

Eaglebay, you are right about one thing…The ferries and their associated costs are likely the biggest detriment to growth on the Island, with some changes to the fare structure and having a little PR from the province about what the Island has to offer would go a long way.

For us, the mid island has so much to offer, Nanaimo has all the retail one could need, skiing is 90 minutes away, Long Beach/Tofino and Victoria are just a couple of hours away and the Nanaimo ferry connections to the mainland are close and convenient.

#155 Debtfree on 04.18.12 at 12:00 pm

@124 ebpv you think you’re going to get a free ferry ride from the wildrose tea party alliance ? You must be kidding. The last time the figures were public for the BC ferries subsidies was in 1996 . At that time every man, woman and child living on the wrong end of a ferry was subsidized 13 hundred dollars per year . My bet is that it is three or four times that much . If the BC public knew how much it really costs us . You ‘ d be lucky to ever see the mainland again . Just wait till you find out what John Cummings has in store for you guys. You ever hear tha saying there is no free lunch. There is only one hope for van. Is. And that is what that reneging prick John A McDonald promised the province of BC 137 years ago . But sadly for all you guys on the wrong end of the ferry ,I have heard that harper has a picture of that drunken liar on his wall . An apt hero for him I am sure.

#156 refinow on 04.18.12 at 12:02 pm

Garth, No way on a 2.00% increase in the BOC rate.. A quarter or maybe a half, sure… but a steady escallation to 4.00%. Not going to happen.

There are easier ways to curb borrowing then nuking the entire housing market by raising rates by 2.00%

Canada continues to show evidence of a housing bubble, but raising rates by 2.00 would be like playing Housing Bubble catch with Edward Sissorhands.

Why does it always have to go to extremes with you.

i think the US really illustrates the effect of the bursting bubble, if we manage to avoid this bursting bubble til Dec, then I agree Santa will leave us a 1/4% increase in BoC rates in our stocking. If they can manage to get rates up to a half, then if values start to fall they will drop rates back down to give the perception of trying create a soft landing.. So rates will not be going on the 2.00% escallator ride…

.25 to .50 maximum…

Hey Chicken Little ! Stop trying to freak out the blog dogs.

#157 zeeman1 on 04.18.12 at 12:26 pm

#22 Marco.

I have noticed the same thing in all condos in all TO neighborhoods. No matter what time of night most of the windows are completely dark in any of the buildings. Drive through any house thick neighborhood and almost every house has some lights on.

Weird.

#158 Mitch on 04.18.12 at 12:42 pm

#83 edmonton mortgage broker on 04.18.12 at 12:36 am

Without a doubt you can never walk away from a debt in japan. Someone will hire the yakuza to off you in some remote forest.

After the tsunami happened all those who survived but lost their homes totally and completely were still expected to pay their debts, mortgage or otherwise, despite no longer having a physical building to go to work.

Don’t confuse ‘honour’ with a ‘lack of compassion’.

#159 Soggy Dreams on 04.18.12 at 12:45 pm

What is this?:
“The bottom has fallen out of Vancouver’s high-end homes,” according to immigration expert Richard Kurland. “When you have the high end blown apart, people who would buy a house for $2 million now wait. That has a cascading effect. That keeps trickling down. If that trend continues you will see $800,000 down to $600,000 and down and down.”

Kurland said foreign investors are fleeing the local market because the Canada Revenue Agency is on the verge of cracking down on overseas tax reporting and the Canadian government is seriously looking at 400 Chinese fugitives living in the country and attempting to send them home by July.

http://vancouver.24hrs.ca/News/local/2012/04/17/19645806.html

So Garth, was the criminal Chinese money real after all? BTW Kurland is an extremely credible source, so I’m taking his statements at face value. Huge changes coming.

#160 scib on 04.18.12 at 12:52 pm

#37 Steevo on 04.17.12 at 10:30 pm
I agree with you. Garth hasn’t got it quite right.
He is probably right that there will be small incremental increases in interest rates but it cannot veer off of US rates much at all.
The US cannot afford to pay more interest on its debt so it will remain low. I think for 20 years or until some major black swan event that causes them to clean house.
It will be suicide for anyone in the White House to deal with the deficit. They are waiting for the brick wall.
10 years of 10% inflation could slay the US debt, was mentioned by one pundit. Debase the currency to almost nothing and pay off debt with worthless electronic blips.

#161 scib on 04.18.12 at 12:57 pm

WE are already stealing the lifelong wealth of boomers and savers with low interest rates and inflation.
Those who dont have investment skills or advice are major losers.
Governments are the biggest thieves in this case. They prey on the weak. In this case it is akin to stealing purses form old ladies. Just theft in an upscale kind of way.

#162 Junius on 04.18.12 at 1:01 pm

#160 Soggy Dreams,

Everyone knows that the criminal element is real. We also know that much of the money would qualify as “dirty” depending on how you define these terms. We also know that it cannot last. This we have known for sometime.

We should remember that large segments of the Chinese community in this country is also strongly against letting more of this money in. Most of them are hard working, decent people who came here to make a better life and did not arrive with suitcases of cash. The racial tensions in this City that the dirty money is driving hurts them most of all.

#163 Bottoms_Up on 04.18.12 at 1:03 pm

#131 Dazzed and Confused on 04.18.12 at 10:58 am
—————————————————
This has been discussed on the blog before. Everyone’s situation is different (different city, life circumstances, job stability etc.), therefore one brush does not paint all.

If you can afford to buy (and pay off) a house, and you plan to live there your whole life, by all means do so.

But do remember that you may be able to get more house by renting. As in your example, you can assume $400/mo property tax and $500/mo maintenance, so what could you rent for $3100/mo?

#164 truth hammer on 04.18.12 at 1:07 pm

OK..even though it was posted just yesterday that Marc Carnage Carney’s ‘job offer’ was fake..we still have a number of people posting as if the offer actually happened..it didn’t. Again…this is how public relations works…..Carnage is getting so much negative commentary from the CDN public that Ottawa has begun a campaign to shore up public confidence in the BOC by placing bogus stories in the media. They want you to believe that Carnage Carney is a ‘desirable’ product……this is supposed to solicit a greed response from you…….Wake up my children….everything you read in the newspaper isn’t gospel.

#165 EB on 04.18.12 at 1:09 pm

#157 refinow – it’s fascinating how a modest interest rate increase to values still below historical norms is a “chicken little” scenario now. Telling.

#166 DJB on 04.18.12 at 1:09 pm

Garth did you watch C give his speech this morning?

I think he has painted himself into a corner on interest rates.

My take was as follows, Canadian manufacturing needs to get labor cost down to remain competitive but an interest rate hike will raise the looney and hurt exports.

HELOC growth is has fueled the economy to this point and is now in excessive debt danger. He said consumer spending has to be more in line with incomes. If we spend according to our incomes expect consumer spending to slow.

If housing prices fall the wealth effect will hurt consumer spending.

When asked about consumer spending slowing, interest rates going up and the housing market devaluing he deflected the question and basically said he has some bullets left and said NEXT!

All he can really do is wag his finger at the debters and threaten interest rate hikes.

As soon as he raises rates it will kill off the consumer and raise the looney and dent manufacturing, a double whammy to the economy.

It sounded to me like he is stuck in a corner.

#167 Devore on 04.18.12 at 1:15 pm

Hmm, maybe Genworth will not be picking up CMHC’s slack after all?

https://research.tdwaterhouse.ca/research/public/Markets/NewsArticle/1314-L3E8FI4MR-1

#168 Junius on 04.18.12 at 1:17 pm

#57 BPOE [$$$$$$],

A large shopping mall, gambling complex and a new convention centre. A sure sign of a bubble top. The US is littered with communities that over built big box retailers and mall and turned to casinos as a way out of financial troubles. Convention centres have proven to be a huge waste of tax payer dollars as white elephants have been built everywhere only to find the market is saturated and most centres are unattractive to the convention goers. Why would I want to go to Richmond for a Convention?

What I would like to see are headlines like, “Google moving to Richmond” or “Richmond leads the way in new “hi-tech” “bio-tech” “aerospace” “anything!!!” new jobs. All this will bring is some temporary construction jobs, low end retail and service jobs supported by a debt ridden society.

You call this progress?

#169 scib on 04.18.12 at 1:17 pm

#160 Soggy Dreams on 04.18.12 at 12:45 pm
You got it so right!
Our government pandered after these criminals and now its blowing up in their face. The thinking was why not let all this money into the country. Now the Voting citizenry can’t afford a home. So VOTE THEM OUT!
My son is a CA with a large firm. He knows first hand there is a lot of stolen money from China here. He just can’t say anything about it.
I say Deport these criminals now. But wait the lawyers say, not before our lawyers can appeal and suck them dry with legal fees first as is the standard procedure.
It will take decades to get rid of these 400.
Why is it in our country people who are not citizens have all the rights of citizens?
Why dont we have graduated citizenship? Just like graduated drivers licences?
If you are crime free for 10 years you get full citizenship. That sounds reasonable to me. Look how many come here and abuse our goodwill by immigrating gangsters and all manner of criminals who have resources to get in while deserving people languish in long lines in their home countries.

#170 Debtfree on 04.18.12 at 1:22 pm

@129 ttitb do you know how to turn this auto spell check off . It driving me crazy.

#171 Devore on 04.18.12 at 1:23 pm

#125 };-) aka DA

Now if mortgage interest rates were cranked up a whopping 2.0% in one fell swoop the average monthly mortgage payment of those with a mortgage would increase by about $250.00. Woop-de-do!?!

$250 is nothing? Wow DA, I know you must be rolling in money from all that Okanagan real estate activity, but do try to relate to the common man once in a while. BC’s negative savings rate says $250 is a big deal.

#172 spaceman on 04.18.12 at 1:27 pm

#12 Do your homework,

“GARTH you aleways say interest rates are going up and instead of raising them you can get a mortgage for 2.99 % when are you gonna realize that nothing is gonna happen till it all emplodes!”

The 2.99 was a con, and its gone, it lasted 2 weeks. The banks have been raising rates, trimming the incentives off variable rates, and BOC (as Garth stated) raised its base rate 2 years ago. C and F are telling us persistantly to pay down debt because rates are going to rise, you should listen to them, they are the people who set the rates. Don’t blame Garth…

#173 Junior Ape on 04.18.12 at 1:38 pm

#143 getreal-tor on 04.18.12 at 11:09 am

No getreal, I happen to agree with Nonno Nicola and see his point. My dad’s retired on an island in Greece working the land: olives, sheep and growing his own veggies. Sells some oil and meat and gets by with the simple life, happy as can be. It’s all agriculture there and he and the rest of the islanders are watching the rest of Athens burn with little concern. Sure property taxes will go up but it’s manageable. The problems are in the cities. Take note of that.

As I said, my dad is happier than I am and I love the bastard for that. Smoking man’s got it right to a point. We’ve all been chasing fool’s gold put there by governments to keep the hamsters running in their place. But as Daystar keeps reminding us, let’s not lose our humanity.

Cheers.

#174 steev on 04.18.12 at 1:46 pm

#138 Dazzed and Confused

If you vary your down payment in two scenarios, buying later will start to make much more sense. You should be setting your down payment, and resulting mortgage payments by your income and % of your net worth you are comfortable having in RE, respectively…not the 20% amount that you’d need to escape CMHC premiums.

Also, if you are purchasing two years down the line, your net worth should be higher (although the % of your net work you want to put in RE is lower, you should be growing your savings fast enough to offset this) so your down payment at the time of purchase higher, so you’d end up paying less interest and owning the place sooner.

#175 penpal on 04.18.12 at 1:48 pm

@ # 158 zeeman

Not weird.

Just empty.

And burning money in utilities, common (strata) fees, taxes and mortgage interest ( or opportunity cost of capital if already paid in full).

Tick tock, tick tock, tick tock……..

#176 Dom on 04.18.12 at 2:16 pm

#165 truth hammer on 04.18.12 at 1:07 pm
OK..even though it was posted just yesterday that Marc Carnage Carney’s ‘job offer’ was fake..we still have a number of people posting as if the offer actually happened..it didn’t. Again…this is how public relations works…..Carnage is getting so much negative commentary from the CDN public that Ottawa has begun a campaign to shore up public confidence in the BOC by placing bogus stories in the media. They want you to believe that Carnage Carney is a ‘desirable’ product……this is supposed to solicit a greed response from you…….Wake up my children….everything you read in the newspaper isn’t gospel.
——————————————————————

You are 100% correct. Mark Carney is a bum a useless bum at that and no one in the world wants or cares what he has to say or offer. A child of 5 years old could do want Mark Carney has done to Canada….Yes a 5 years old child would do no worse. The weak propaganda in the media may fool many working class puppet slaves who could not form an independent thought if their lives depended on it but many are still able to see through this obvious propaganda of lies. Mark Carney had to act four years ago. I know countless people who use their homes as ATM machines JUST LIKE they did in the US. Look for a US style CRASH in Canada.

#177 bill on 04.18.12 at 2:22 pm

”No matter what time of night most of the windows are completely dark in any of the buildings.”
false creek [ vancouver ] has a similar situation.
been like that for years now.

#178 JW on 04.18.12 at 2:26 pm

Garth, your a truth teller….it’s a time bomb in the horny corners of Van city and much of T/O. Can’t wait to hear Global TV tell us how they saw it coming….

But please don’t include Apple in the same group of swan divers…Apple is still an incredible dynamic success story.

#179 Mark "the Talk" Carney on 04.18.12 at 2:30 pm

Media Propaganda going crazy about Mark ” The Talk” Carney going to rise rates and to start paying down debt . It’s all TALK and everyone knows it. Mark has NO PULL and his word MEANS NOTHING since he has warned and warned and warned and yet here we are today after YEARS of warning and he comes out to WARN yet again? If the economy was doing well rates would be up. EVERYONE knows the economy is FAKE and running on cheap credit. Once the cheap credit stops USA housing crash starts in Canada. Its a fact and only going to get worse the longer they continue this stupidity. 2008 when Canada housing market was crashing Harper ,F and Carney should of let the FREE MARKETS correct prices back down to 2001 levels which would of happened and is still going to happen. Only now the pain will be much worse sa the house of cards comes crashing down.

#180 Debtfree on 04.18.12 at 2:33 pm

@ formman do you think that all the immigration offices that are closing in the ok due to federal job cuts are going to help or hurt the re market . They were very high paying jobs . 7 in kelowna . What’s the reason ? they voted for the neocons . Is it expected that fewer people are coming or do they just hate the ok? or are manipulating the market so they can buy cheap ? Strange days in deed.

#181 BC Bring Cash on 04.18.12 at 2:34 pm

Check out Mark Carney’s Resume. Its not hard to figure out who he really is working for. He is working for the international private BANKING CARTEL. His real job is obvious along with h and f. Its to sell Canadas assets to private global interests pennies on the dollar.

http://en.wikipedia.org/wiki/Mark_Carney

#182 penpal on 04.18.12 at 2:37 pm

@ # 170 scib

If your son knows of and has hard evidence of the proceeds of statute crimes, then he is obligated to report that to the RCMP and CRA.

In the absence of hard evidence, it is simply his opinion and you’d best tell him to not to open his mouth.

#183 bubble head on 04.18.12 at 2:40 pm

#59 Canadian Watchdog

Interesting, its cheaper to rent a three bedroom condo than it is a two bedroom condo, the same with townhomes.
Also TREB says that “The number of new listings grew over the same period, but by a lesser annual rate than sales, which means market conditions tightened compared to last year. However sales only increased by 25. and SFD didn’t increase at all.
No transparency.

#184 fancy_pants on 04.18.12 at 2:48 pm

#125 };-) aka DA on 04.18.12 at 9:35 am

great post

#185 Tyredandboard on 04.18.12 at 2:59 pm

#173 Spaceman

Uh, no sub 3% was not temporary, and has not gone anywhere. Might not be Royal Bank, but want well under 3% today?

http://www.bestratesbc.com/

#186 Tyredandboard on 04.18.12 at 3:03 pm

173 spaceman, no sub 3% mortgages were not temporary. Try best rates bc dot com, 2.75. Still way under 3% today. Another at manulifebankselect, 2.9 there. You can find rates under 3% everywhere, just open your eyes and type something into google, and you shall receive free money for housing bubbles.

#187 getreal-tor on 04.18.12 at 3:04 pm

#22 Marco and #158 Zeeman1

Electricity costs money and candles are more romantic anyways.

#188 jess on 04.18.12 at 3:07 pm

17. Australia: 139.9%
External debt (as % of GDP): 139.9%

Gross external debt: $1.283 trillion
2011 GDP (est.): $917.7 billion

External debt per capita: $58,322

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

16. Spain: 169.5%
External debt (as % of GDP): 169.5%

Gross external debt: $2.392 trillion
2011 GDP (est.): $1.411 trillion

External debt per capita: $50,868
==============
The Silence the “trash talkers”

economy leads the world

Sydney Morning Herald‎ – 14 minutes ago
Australia has the strongest economy in the developed world and it is expected to outperform all comers for at least the next two years, according to the International Monetary Fund. The Treasurer, Wayne Swan, said this …

=======
How quickly one can have the “highest living standard”

. Ireland: 1,239%
External debt (as % of GDP): 1,239%

Gross external debt: $2.26 trillion
2011 GDP (est.): $182.1 billion

External debt per capita: $478,087

==========

#189 Nonno Nicola on 04.18.12 at 3:14 pm

#143 Getreal-to

“If Europe implodes then being a master farmer makes very little difference in the grand scheme of things.”

In the end you are correct and I stated in my post that they would be the last ones to turn off the lights not survive the implosion. They are currently surviving much better than the renters in Italian society. That is my main point.

#190 $$$BPOE#1 on 04.18.12 at 3:14 pm

Junius, this is not the US we’re talkin creme de la creme here, that’s why all the renters are up in arms as they are being squeezed out of their City. Richmond for a convention? Oh maybe because its a 10 minute train ride from the airport to start or the Worlds best restaurants. BPOE does not jobs, it’s number one industry is International CASH. This is our Industry and no one does it better. every employer could leave tommorow and we would still soar. And that’s a FACT as the money pouring in to BPOE has no job here
*****************
BPOE [$$$$$$],
A large shopping mall, gambling complex and a new convention centre. A sure sign of a bubble top. The US is littered with communities that over built big box retailers and mall and turned to casinos as a way out of financial troubles. Convention centres have proven to be a huge waste of tax payer dollars as white elephants have been built everywhere only to find the market is saturated and most centres are unattractive to the convention goers. Why would I want to go to Richmond for a Convention?

What I would like to see are headlines like, “Google moving to Richmond” or “Richmond leads the way in new “hi-tech” “bio-tech” “aerospace” “anything!!!” new jobs. All this will bring is some temporary construction jobs, low end retail and service jobs supported by a debt ridden society.

You call this progress?

#191 ozy - Loved that, so let's read it again on 04.18.12 at 3:14 pm

ozy – Loved that

#23 Mark “the talk” Carney on 04.17.12 at 10:07 pm
Mark “the talk” Carney and CHMC have ruined Canada. Canada is now officially a debt slave country. Whats the point to stay here? Wait years for prices to get back to normal? Thanks. Put my life on hold because I am able to use a calculator and not willing to mortgage my life as a debt slave. Looking to see how much health insurance is in the US. I can buy a really nice $300k 3000 square foot house in Florida or work like a debt slave for a home in Canada ? Mark Carney should be arrested for financial crimes against Canadians. Silver spoon moron has no clue about running a country. Anyone could of dropped rates and do nothing. Hoping for a soft landing….well news flash mark the talk Carney no one in the world has done that. You ruined Canada you criminal moron.
.

#192 Derek R on 04.18.12 at 3:15 pm

#147 Sticky on 04.18.12 at 11:21 am wrote:
>>Higher property taxes…yea retired people would love that.

…and you’re saying that they’d hate lower income taxes too? I don’t think so.

The whole point is that you get a balance. Every $1.00 more in property tax would balanced by at least $1.10 less in income tax for the average Joe because property tax is much more difficult to avoid than income tax — plus foreign owners have to pay property tax too even if they don’t have to pay income tax. So extra cash in hand for most Canadians, retired or not.

Sure big property owners might lose out but then again they tend to be big income tax payers so maybe not.

For the rest of us it’s a straight win.

As for your idea of using consumption tax instead of property tax, explain to me again. How does that stop people paying ridiculous amounts of money for houses?

#193 penpal on 04.18.12 at 3:15 pm

@ # 105 Anon

Give your head a shake.

Some comparison;

India cut rates from 8.5% to 8%.
far cry from where our rates are and where inflation rates are in India

You personify the old adage

“A little knowledge is dangerous”

Do you even think before you post this crap?

#194 ozy - HAM $$$$ swaping Toronto on 04.18.12 at 3:17 pm

Kanatians in Taronto are too busy to observe, but one day Lawrence Park, Forest Hill and even Rosedale will have been bought slowly, quietly, then I will laugh my way to the bank! Give me 1 year

#195 getreal-tor on 04.18.12 at 3:22 pm

#174 Junior Ape on 04.18.12 at 1:38 pm

Junior, I don’t disagree with the simple life and it might not impact a retired farmer who needs very little to keep themselves fed… but what about the next generation or the farmer who depends on income to support his farm and family? Unless they are Marxists, you need money to pay for goods and services.

#196 Pr on 04.18.12 at 3:42 pm

Banque of Canada should be abolish as fast as possible. Some members of the gouvernement are more than suspisious, regarding their decision to apply some rules on real estate in Canada. Some investigations should start righ now.

#197 mac on 04.18.12 at 3:50 pm

“…some modest withdrawal of the present considerable monetary policy stimulus may become appropriate.” plus continued influx of foreign capital equals what? Priced out locals for the most demanded properties.

#198 jess on 04.18.12 at 4:02 pm

“the world’s oldest teenager has died of a heart attack Mr Dick Clark….

#199 getreal-tor on 04.18.12 at 4:10 pm

#189 Nonno Nicola on 04.18.12 at 3:14 pm

Renters in Italy; That I won’t disagree with… How I loved Italy when the lire was in effect. Scuse, 3 milliona lire for da pizza? No problema. Every tourist could be a paper millionaire during their stay.

Two years ago I almost had a heart attack when two cappuccino’s, one slice of cake, and tip set me back 30 Euros. Add insult to injury that I’ve had better coffee at Starbucks than the Roman sewer water they were passing off as cappuccino in the tourist districts.

Bada boom bada bing.

#200 Bottoms_Up on 04.18.12 at 4:11 pm

#125 };-) aka DA on 04.18.12 at 9:35 am
—————————————-
I know someone with 400k mortgage and 2% interest rate…so rates going up 2% would make the payment go from $1700/mo to $2100/mo…that’s a car payment, or property tax bill….quite significant.

#201 Derek R on 04.18.12 at 4:14 pm

#100 Vancouver Mt Pleasant Renter on 04.18.12 at 2:49 am wrote:
Can I conclude that I can look forward to a massively huge increase in my rent since the owner of the house I live in will reluctantly be paying loads more for property taxes?”

Doesn’t work that way, VMPR. If it did you’d expect a rent rise every time mortgage rates went up and a rent cut every time they went down. And once the landlord was mortgage-free he would drop the rent drastically.

Yeah right! In your dreams!

The rent is actually set by Mr Market and his good friends Supply and Demand. Any landlord who tries to charge more than Mr Market allows will have about as much luck as a tenant who tries to offer less than the going rate. In other words Not Much.

Oh yes, and he’ll still have to pay those high mortgage costs and property taxes.

So landlords take what tenants are willing to pay, no more no less. If they can’t make a profit on that, they have to sell up or suck it up.

#202 Canadian Watchdog on 04.18.12 at 4:17 pm

#184 bubble head

Remember TREB revises sales numbers. Below are recalculations using the original sales numbers from 2011.

http://i39.tinypic.com/34ngu2r.jpg

Whatever demand is left has shifted to 905, which is a major problem for 416.

#203 getreal-tor on 04.18.12 at 4:17 pm

#194 ozy – HAM $$$$ swaping Toronto on 04.18.12 at 3:17 pm

If you are going to fake an Engrish accent then at least stay in character.

By the way, if you have enough HAM then I can hook you up with 1 Wellington Street in Ottawa. Prime location for you develop a few condos. :)

#204 jess on 04.18.12 at 4:22 pm

Is Mr. Windy thinking about triggers

Moody’s Investors Service, mid-May threatening on ratings for 17 global financial companies. A high rating is written into trading agreements.

http://www.cnbc.com/id/47089537

=========================
“I am very sorry. The King said. I made a mistake. It won’t happen again.”
Although true thoughtfulness comes before one’s action.

#205 Junior Ape on 04.18.12 at 4:31 pm

#195 getreal-tor on 04.18.12 at 3:22 pm

Agreed. That’s why I’m here and he’s there. For now.

#206 X-cess on 04.18.12 at 4:36 pm

Worldwide recession clouds looming overhead.

12-18 months away…

What you doomers said 12-18 months ago. — Garth

#207 Junius on 04.18.12 at 4:36 pm

#190 BPOE,

You said, “BPOE does not jobs, it’s number one industry is International CASH. This is our Industry and no one does it better. every employer could leave tommorow and we would still soar.”

All in all an incredible statement. The depth of your delusion runs very deep. Money out of thin air. Good luck with that.

#208 Junius on 04.18.12 at 4:40 pm

#201 Derek R,

You said, “The rent is actually set by Mr Market and his good friends Supply and Demand.”

It is amazing that these people need to constantly reminded of this but you are so correct. Rents often have very little correlation to the cost of the house, the taxes and assessments or the greed of the landlord.

One wonders if this poster you are responding to is real or a troll. Every time I see the “I am a poor renter who should have bought……” stuff I figure it is a realtor in sheep’s clothing.

#209 Realtors in a Panic! on 04.18.12 at 4:49 pm

Canadian Watchdog on 04.18.12 at 4:17 pm
#184 bubble head

Remember TREB revises sales numbers. Below are recalculations using the original sales numbers from 2011.

http://i39.tinypic.com/34ngu2r.jpg

Whatever demand is left has shifted to 905, which is a major problem for 416.
——————————————————————

Looks like realtors like to inflate the sales numbers. Why don’t realtors revise their numbers in the media? I think we all know the answer to that. They don’t want to trigger a housing crash which is going to happen anyway. They want to fool people into ruining their lives. No wonder realtors are looked at like scum all over the world and soon to be in Canada.

#210 Men Who Stare At Sheeple on 04.18.12 at 4:59 pm

It amazes me how people continue to believe that the arsonist Mark Carney is going to put out the fire that the Bank of Canada started! “A central bank is an institution that manages a nation’s currency, money supply and interest rates”-Wikipedia. Basically central banks have absolute authority over the monetary policies of the country, not governments. This is a fact so forget about “F”. Not that I am defending Jim (BS artist) Flaherty but let’s put the blame where it ultimately belongs!

Are we to foolishly believe that central banks around the world mistakenly created and implemented the same destructive monetary policies? Not a chance!

People need to understand that Mark Carney and The Bank of Canada are 100% responsible for the economic and financial destruction that is occuring in Canada. As are all other central banks around the World. In particular the private US Federal Reserve. The global sovereign debt crisis is a manufactured crisis created by the private international banking cartel (Rothchild, Rockefeller, Warburg, Morgan, Shiff, Kuhn, Loeb, etc.) who have complete control over the global central banking system, IMF and World Bank.

The global sovereign debt crisis is not an accident or mistake but rather a planned demoltion of the current global financial and economic system. From the ashes of this old financial and economic system will rise their long awaited One World global financial and economic order.

Please read the following quotes and let it shink into your mind. By understanding these quotes you will begin to understand what is truly unfolding. Also understand that the following quotes are not conspiracy theories.

“The powers of financial capitalism had another far reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements, arrived at in frequent private meetings and conferences. The apex of the system was the Bank for International Settlements in Basle, Switzerland, a private bank owned and controlled by the worlds’ central banks which were themselves private corporations. The growth of financial capitalism made possible a centralization of world economic control and use of this power for the direct benefit of financiers and the indirect injury of all other economic groups.”- Tragedy and Hope: A History of The World in Our Time by Professor Carroll Quigley of Georgetown University

“We are grateful to the Washington Post, the New York Times, Time Magazine and other great publications whose directors have attended our meetings and respected their promises of discretion for almost 40 years……It would have been impossible for us to develop our plan for the world if we had been subjected to the lights of publicity during those years. But, the world is more sophisticated and prepared to march towards a world government. The supernational sovereignty of an intellectual elite and world bankers is surely preferable to the national autodetermination practiced in past centuries.”- David Rockefeller

“World events do not occur by accident. They are made to happen, whether it is to do with national issues or commerce; most of them are staged and managed by those who hold the purse string.”-Denis Healey, former British Secretary of Defense

It’s time to break away from the daily programming and brainwashing because the truth will not be televised! Stop swallowing the spoonfed government and corporate controlled MSM propaganda. Free your mind and think for yourself!

Now back to your regular programming!

#211 Arshes on 04.18.12 at 5:11 pm

#138 Dazzed and Confused

Interest rates can go higher than 4.5%. If your gonna be in that home fror decades, you will be dealing with decades worth of interest rate changes, not just a couple of points in the next few years.

Alos your circumstances can also change, job loss, sickness, etc. Are you married or single, if your married how do intend to pay the mortgage when the kids come along? Will you or the spouse be a stay home parent? Because that in itself can be pretty hard on a family.

#212 };-) aka DA on 04.18.12 at 5:26 pm

#172Devore on 04.18.12 at 1:23 pm

$250.00 today might be 5.0% of an average Canadian household budget. If a 5.0% increase is going to break them then they deserve to be broken as they have not been practicing prudent financial responsibility.

An education is a bargain at any price… the longer you wait to learn your lessons the more costly a price they extract when they come due on their time and not yours.

#213 Mike on 04.18.12 at 5:38 pm

Ahhh #55 Harry – You’re tone is starting to change. FYI everyone – Harry is the SRAR’s ex-executive, but still Saskatoon’s biggest house pumper around.

Show us all bidding wars in Saskatoon (or Calgary for that matter). HAHAHAAH. You’re so full of it. The only reason the ave house price in Saskatoon has risen is b/c more and more ppl are getting deeper and deeper into debt with $500k+ mcmansions. 5yrs ago those houses (Stonebridge, Willowgrove, etc) did not exist in Saskatoon! Median price has been completely flat for over a year now. And there’s far more inventory right now than this time last year. Go enjoy your retirement Harry. You’re doing nothing but harming the ppl of this great city!

#214 JRoss on 04.18.12 at 5:58 pm

“$250.00 today might be 5.0% of an average Canadian household budget. If a 5.0% increase is going to break them then they deserve to be broken as they have not been practicing prudent financial responsibility.”

And I’m sure you did your clients the service of warning them as such when they stretched to get into properties, right?

You seem awfully flippant with 5% of other’s people’s money. Just as seem to disregard the 5% of equity they are losing each year as inflation adjust prices continue to erode.

You may think yourself Donald Trump, but for regular folks 5% matters.

5% means saving for retirement or not
5% means vacation or not
5% means activities for the kids or not
5% means RESP or not

If you have such disregard for the money of the the people you supposedly respresent, exactly why should they trust you again? No wonder you need them to sign a BRA.

Perhaps one day you will slip up and provide your real name so I can warn my friends and family in Kelowna which realtor to avoid.

#215 JRoss on 04.18.12 at 6:01 pm

Clearly the above was meant for DA.

#216 John on 04.18.12 at 6:08 pm

Raise interest rates to impact Canadian housing? It isn’t Canadian debt, although the holders of it do have that passport. A whole bunch of stuff has to happen along with a substantial rise in interests rates ( whatever impacts those 43%).

Is there some kind of an idea that a “relatively normal” economy could exist with relatively normal interest rates?

The entire thing is thrown into question with raised interest rates, and all of the dynamics that mean anything aren’t happening within Canadian borders. If someone were to believe that the factors were actually Canadian, it’d be a great argument to hear.

#217 bubble head on 04.18.12 at 6:30 pm

#59 Canadian Watchdog

Thanks for that eye opener.

this mid April report has seen the lowest increase in price and sales in the last two years. Usually they have reported increases in the double digits for both price and sales.

#218 Nostradamus Le Mad Vlad on 04.18.12 at 6:32 pm

#119 daystar — “We are products of our own environments both macro and micro.” — Interesting sentence. It implies (rightly) that each individual is guaranteed the right to their own freedom of choice, to make mistakes in this classroom of a planet, then learn from those mistakes and better their own lives. Great post!

#160 Soggy Dreams — Comparing yours and BPOE’s posts re: RE, You get the nod, as your post is far clearer and much more realistic. BPOE is adequate for entertainment purposes, ‘tho.

#167 DJB — “As soon as he raises rates it will kill off the consumer and raise the looney and dent manufacturing, a double whammy to the economy.” — Pretty much the way H – F – C planned it, as it will crush what’s left of the economy. Then they can bring in their NWO which, in turn, will be wiped out by China and Russia.

#210 Men Who Stare At Sheeple — “The global sovereign debt crisis is not an accident or mistake but rather a planned demoltion of the current global financial and economic system.” — Hallelejuah! Another one who sees and knows the truth.

The one underlying reality is banxters, politicos, lobbyists, the m$m are only the front for those who actually run the world, and have lots of fun at our expense. Y’all know who they are . . .

#219 eaglebay - Parksville on 04.18.12 at 6:32 pm

128 Form Man on 04.18.12 at 9:41 am

Hey, concrete sniffer, what’s the difference?
Beside, 10 years is not enough to repair the damage done by the NDP.
Politics in BC suck. Voters don’t have a clue.
Have you hugged a tree today?

#220 thinker on 04.18.12 at 6:46 pm

DOES ANYONE HAVE A CLUE WHAT JUST HAPPENED?

VANCOUVER PRICES DROPPED BY $100,000 IN ONE MONTH???????????????? WHERE IS THE HOT CASH?

http://www.cbc.ca/news/interactives/housing-canada/

#221 Smoking Man on 04.18.12 at 6:59 pm

#151 John G. Young on 04.18.12 at 11:29 am

Correct John he’s a fake.

Don’t know who’s doing it but the fake Smoking Man is back on here. Out posting me 4 to 1

So I will validate all the Posts on my blog, just click on my name to see if it’s real

Fake guy’s not bad, but he could easily destroy my near perfect record of calling the markets.
This will not do, after all look at the brand I created.

O and that Video Fake SM posted, lame, You should see the real MaCoy in action.

#222 eaglebay - Parksville on 04.18.12 at 6:59 pm

#145 John G. Young on 04.18.12 at 11:10 am

Nothing snarky. My brother lives in Toronto and I don’t know how he votes and if he even knows anything about the Wildrose Party.
I don’t think the Wildrose is anti-gay.
Remember, I have no empathy.

#223 eaglebay - Parksville on 04.18.12 at 7:09 pm

#150 };-) aka DA on 04.18.12 at 11:27 am

Nice to appreciate our own Island.
But Hawaii isn’t summer for 12 months. The rainy season can be quite wet and can last for many months.
And be careful with the feral chickens and pigs.

#224 Two-thirds on 04.18.12 at 7:12 pm

#138 Dazzed and Confused

If you are wondering about why both scenarios lead to almost identical total cost, it is likely that the calculations for both assumed *a constant interest rate over the entire amortization period.*

If you agree that house prices will go down and rates will go up, a better comparison method would be to increase the interest rate at each loan renewal event (typically, every 5 years), for both the $480k loan and the $408k loans.

This exercise will be quite eye opening and can demonstrate why the larger loan taken out with an initially low rate (that rises over the 25 years) is the worst option.

#225 Smoking Man on 04.18.12 at 7:13 pm

#210 Men Who Stare At Sheeple on 04.18.12 at 4:59 pm
90% of the People Know 911 was probably some kind of Inside Job.

Anything Happen. Nope. And a great deal of people know what your post describes, any thing Happen. Nope

400 people a day squeeze and fight trough a narrow one set of stairs to line up on Track six at union station at 12:43, They know if they take Track 5 they will be first on the train choice seat. But the TV says Track 6. Anything Happen. Nope.

#226 Devore on 04.18.12 at 7:18 pm

#212 };-) aka DA

$250.00 today might be 5.0% of an average Canadian household budget. If a 5.0% increase is going to break them then they deserve to be broken as they have not been practicing prudent financial responsibility.

That’s great. But the question was whether a 2% increase will cause stress to household’s finances, not whether it should. 43% seem to think so. I agree the number should be 0%. Also, do not forget HELOCs, which your equity numbers do not show. Meanwhile, back in the real world…

#227 John on 04.18.12 at 7:20 pm

Worldwide recession clouds looming overhead.

12-18 months away…
————————–
What you doomers said 12-18 months ago. — Garth
————————-

When I read this exchange I feel like Paul “Bear” Vasquez in the super viral youtube video “Double Rainbow” where he exclaims…..”What does it mean???”

Maybe this has to do with a triple rainbow afterall. I mean with derivatives as a foundation, why not?

#228 eaglebay - Parksville on 04.18.12 at 7:24 pm

#156 Debtfree on 04.18.12 at 12:00 pm

There’s no need to take the ferry anywhere. What does Vancouver, the shit hole, has to offer that we cannot get on VI?
I hardly remember the last time I took the ferry. I fly. Public transit is for the paupers and the tree huggers.
Now, we will not solve the ferry problems or any other problems in BC until we solve the issue of good, responsible and accessible government.
The NDP sucks and so do the liberals. As for the conservatives I don’t see much difference from the others.
You tell me how do we get a real government in BC.
Losers.

#229 maxx on 04.18.12 at 7:29 pm

#48 T.O. Bubble Boy on 04.17.12 at 10:48 pm

Thanks for the insight….and Marco, great question.

To Garth and the blog dawgs who contribute their smarts, knowledge and experience daily, many thanks. I continue to learn from you every time I read the blog.

#230 };-) aka DA on 04.18.12 at 7:33 pm

#215JRoss on 04.18.12 at 5:58 pm

Yes, in fact, I do my clients the service of warning them as such when they stretch themselves to get into properties they ought not under terms they shouldn’t – that is my job. I advise that interest rates are at an uncharacteristically historical low and they might be wise determine their housing affordability based on an interest rate of around 7 to 8.0%. Error on the side of caution, use the excess to pay down the debt while rates remain low.

If saving for retirement is more important to you
or
if saving for a vacation is more important to you
or
if having a little more money for kid activities is more important to you
or
if an RESP is more important to you than having a big fancy house you really apparently can’t afford then you should consider that before you even look at such a home. If you made such a mistake as to buy a home you cannot afford and now must sacrifice those things above then you have no one to blame but your selfish self. Are you not an autonomous free thinking human being, then grow up and act like it.

#231 };-) aka DA on 04.18.12 at 7:37 pm

And by the way JRoss, I personal would agree 100% that

saving for retirement is more important than a house

traveling and learning about the world is more important than a house

a little more money for kid activities is more important
than a house

and

an RESP is more important than a house.

Too many place too much importance on a house and not enough of life itself.

#232 I'm stupid on 04.18.12 at 7:59 pm

The trap has already been set. The debt slaves have been created. When the rates rise the 43% will refinance their mortgage to keep the payments at an affordable rate. Just as long as they have less than the 30 year max. It’s the ones that had 40 year amortizations that will be screwed. Good luck paying that bitch off.

#233 };-) aka DA on 04.18.12 at 8:10 pm

You think interest rates will never get to 7 to 8.0%?

I remember when rates were well over 18%

and we bought our first house with a mortgage at 15%.

Anything less than 7% is a gift… or a fools trap.

#234 Nostradamus Le Mad Vlad on 04.18.12 at 8:11 pm


Great news! “With the exception of the British pound Sterling, no fiat currency has lasted longer than 42 years. In America, we are in year 41.”; 7:52 clip Paper oil barrel shock; Austerity 1 = Increase in food banks; Austerity 2 = Looting real assets from sheeple who are too blind to see it, and and Austerity 3 = Suicide; 19:40 clip Idea: “And scrap the IRS (and CRA) to increase revenues.” and 7:27 clip Not paying US (or Cdn.) taxes is great; Big Banks The higher one goes . . .; Collapsing IMF, The IMF Giveth . . . and the IMF taketh away and more IMF blarney; Eurocrats Spending money as if it’s going outta style (it is); See Headline “Is this a trick question?” wrh.com and the Criminal 1%.

Reality of Life “A homeless woman is living in our driveway. In a Volvo.”: Zurich and Brussels Playtime with other’s money; Oz collapsing RE New today; US$10K Lemonade Stand “And no doubt the Infernal Revenue Service will show up for their piece of the action, followed by OSHA to fine the kid for improper facilities, then the health inspector to get his fees… Isn’t life grand under a fascist dictatorship?” wrh.com.
*
#210 Men Who Stare At Sheeple — Remember Timothy McVeigh? Oklahoma City As with Lee H. Oswald, just another patsy used by the CIA for its own ends; #124 egowanker — Shitsville — “BC needs a Wildrose . . .” This Wildrose? Speaks volumes about your Type-A personality disorder; 0:49 clip Obomba says Ron Paul is right! CISPA Allow companies to block ‘net access; Blackpool Fracking causes ‘quakes, so it’s being expanded; Helium Heads, Edgar Cayce and The Devil’s Advocate; Ten Examples America’s improving, really it is; Two More Mac trojans; Mexican Volcano “There are also glaciers on the top of the mountain which if melted will trigger serious flooding.” wrh.com; Paralysis Bought to you by Bill Gates’ polio vaccines.

#235 Hicksville Alberta on 04.18.12 at 8:25 pm

#229 eaglebay – Parksville

The only Government you will get in B. C. will be an NDP shitstorm one that will make you want to go back to Next Year Country in Red Deer, Alberta if you are able to sell your property at all within a year after they get elected.

Just look back at the previous NDP Governments to see the kind of carnage they have dumped on B.C. only this time will be different and rightly so as they at least ought to give the Real Estate market in B.C. a real asshanding as it is so much more exponentially out of whack and the NDP’ers could actually benefit the 99 percenters for a change by wiping out so much of the Offshore Gambling and so called Safe Haven Investment Premiums that have helped to inflate things so badly out there.

#236 MrHulot on 04.18.12 at 8:25 pm

I had a meeting with my HSBC rep in West Van. She is Chinese BTW. She disclosed a few facts which surprised me. I use to think that the “immigrant Chinese” who were buying homes in West Van were buying with cash. Apparently that is not true. Most of them get big mortgages. Also, they had been getting their mortgages approved with MUCH MUCH less scrutiny than other Canadians. All that was done was a simple credit check. No three years income statements, T4s etc.

But that’s all changed now. HSBC and I assume the other banks are cracking down now. No more free passes. They will have to go through the same scrutiny as other Canadians which is why she’s telling that the new mortgages she is writing now for “immigrant Chinese” have slowed to a trickle.

#237 Daisy Mae on 04.18.12 at 8:25 pm

#34 DEREK: “It’s just aggravating when it doesn’t have to be that way.”

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

It IS a shame, isn’t it? We have a greedy government, greedy bankers, greedy realtors, greedy sellers.

And it didn’t have to be this way….

#238 Sticky on 04.18.12 at 8:28 pm

@ #192 Derek R

My 2 Cents…

Property taxes should be used to pay for services in the respective community, not as a policy item to encourage or discourage home ownership.

Retired people have lower income then when they were working…so lowering the income tax for them does not mean much in many cases.

Increasing property tax does (in a bad way). I know of communities where bubbling property values and their reassessed property taxes are forcing retirees to sell and move…they cant afford to pay the taxes on homes they have been in for a generation.

Raising consumption taxes encourages people to save…and if they choose to consume more, then they can, but pay more for it.

It puts control into the hands of the consumer.

#239 Dom on 04.18.12 at 8:34 pm

Men Who Stare At Sheeple #210

wow…. great post!

#240 Sticky on 04.18.12 at 8:46 pm

@ #192 Derek R –part 2

(I forgot to add)

Policies I like to stop the bubble:
1. Higher down payment requirements
2. Tougher criteria to qualify Gov’t mortgage insurance.

If you want to mess with taxes (i do not), then increase transfer taxes.

Dont mess with property taxes, or income taxes…those should be kept separate from bubble creation and management.

#241 Westernman on 04.18.12 at 8:50 pm

Daisy Mae @ # 238,
Greedy bankers, greedy government etc.
What did you think makes this world go round? Man’s preternatural desire to do good?
Maybe you should stop watching heartwarming CBC dramas and take a little closer look at the way things REALLY are…

#242 Form Man on 04.18.12 at 8:52 pm

#220 eaglebay

Actually I worked as a logger for a few years before I went into construction. I must say the smell of the woods in the morning beats the smell of concrete anyday.
The only government that has done more damage than the NDP are the Conservatives. That is why I am a Liberal ( not a provincial BC Liberal, they are former Socreds who have lost their way).
Problem for Albertans is they assume their affluence is due to the Conservative government. It is actually due to a geological lottery. If Alberta didn’t have oil and gas, they would be bankrupt.
Martin and Chretien pulled Canada back from the brink Mulroney had us perched on, put the books right, and started paying the debt down. Harper put a quick end to that. God only knows where we will end up now, but it won’t be as good as the situation Harper inherited and then squandered.
Harper is George Bush, but dumber and duller.

#243 Investx on 04.18.12 at 9:01 pm

#47 Westernman on 04.17.12 at 10:47 pm
Investx @ # 41,
Rates are NOT going up – if they raise rates even a little this fake economy of Canada’s is going to come to a grinding halt – dead – and they know it…
This rate raising talk is just that – talk…
————————————————————

I won’t be surprised either way. The will eventually rise. This blog expected them on their way by now and I had sincerely questioned why they couldn’t stay down longer. Japan had them down for a while. Oh, so in that aspect “it’s different here”? I’ve never said rates would stay low for that long, just suggested the possibility rates could stay lower than expected.

#244 Daisy Mae on 04.18.12 at 9:01 pm

#60 BPOE: “On Tuesday Vancouver council approved a controversial 19-storey tower development across the street at the corner of Kingsway that will see the construction of 241 condominiums and a massive amount of street-level commercial space.”

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

It was ‘controversial”? Kingsway & what?

#245 Westernman on 04.18.12 at 9:08 pm

Form Man @ # 243,
So you hacked at trees and flogged cement … not exactly high I.Q. professions.
I guess this explains the nonsense you post … and in regard to your ” I am a Liberal ” statement –
Liberalism is a mental disease – not a source of pride …

#246 Investx on 04.18.12 at 9:08 pm

#48T.O. Bubble Boy on 04.17.12 at 10:48 pm
@ #32 Marco

Can anyone help me understand how to figure out who the buyers of CHMC securitized mortgage products are?
————————————————————
Look at the holdings of almost every money market fund out there, and look for “Canada Housing Trust”.
———————————————————-

Awesome. I’ve always wondered about that too, hoping it would be addressed on this blog. Thanks.

I’ve just read the Canada Housing Trust was founded in 2001 and operates as a subsidiary of Canada Mortgage and Housing Corporation.

#247 Daisy Mae on 04.18.12 at 9:08 pm

The government does not set rates. — Garth

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

Doesn’t Carney represent the Bank of Canada…which sets rates?

No, the central bank is not a federal government department, and pursues autonomous monetary policy. — Garth

#248 John G. Young on 04.18.12 at 9:30 pm

#223 eaglebay – Parksville on 04.18.12 at 6:59 pm

“I don’t think the Wildrose is anti-gay.”

Well, that like-of-fire thing was pretty scary, but I guess that as long as that’s confined to the afterlife, it’s just an opinion.

Cheers.

#249 eaglebay - Parksville on 04.18.12 at 9:36 pm

#236 Hicksville Alberta on 04.18.12 at 8:25 pm

Ain’t that the truth.
Fortunately I rent so I’m very mobile and ready to take “advantage” of whatever may come up on the Island.
I do go back to Red Deer occasionally to complete and fulfill prior commitments and take care of my investments.
The people here don’t have any idea about government whether it’s NDP or liberals or conservative. These labels do not apply in this province. They’re all a bunch of wackos.
But the Island itself isn’t too bad as most people here are from somewhere else. And tons of stuff to do.

#250 eaglebay - Parksville on 04.18.12 at 9:50 pm

#243 Form Man on 04.18.12 at 8:52 pm

Logging is hard work, school of hard knocks.
Good for you.
Albertans don’t like any kind of government anymore than anybody else. They vote for the party that will be the least in their faces.
Provincially, in BC, it’s a mess. Federally we don’t have a choice.
Mulcair or what’s his name. The goofy guy.
Albertans do not assume that their good fortune is from the government. They know better. It’s hard work, skills and a willingness to better themselves. And so are the BC boys working in Alberta.

#251 Roland on 04.18.12 at 11:46 pm

Why is it that Canadians have such a hard time keeping touch with reality?

Alberta’s economy is about fossil fuel, and very little else. They can keep taxes relatively low only because of the currently high resource rents. Without oil and gas, Alberta would be almost as depressed as Saskatchewan was back in the 90’s.

Albertans remind a bit of Vancouverites. Talk to a Vancouverite and you’d think they put the mountains there themselves. Talk to an Albertan and you’d get the impression that natural resource endowments had nothing to do with their prosperity.

The sheer vanity and stupidity of these people are pretty staggering.

#252 Tony on 04.19.12 at 12:17 am

Re: #7 FTP – First Time Poster on 04.17.12 at 9:42 pm

Rates will drop this time again in Canada. America will see interest rates drop even further as unemployment rises in the coming months.

Not a chance. — Garth

#253 betamax on 04.19.12 at 2:57 am

Love the picture. Same thing happened to me back in my student days. As it wasn’t snowing, I made do by throwing the a–hole’s clothes in the garbage can. Good times.

#254 Derek R on 04.19.12 at 3:05 am

#240 Sticky on 04.18.12 at 8:28 pm wrote:
Property taxes should be used to pay for services in the respective community, not as a policy item to encourage or discourage home ownership.

I always love it when people say “should”. It shows that they know it’s a matter of opinion.

Fact is that lower property taxes encourage higher house prices. Doesn’t matter whether they “should” or not. They just do. And high house prices discourage ownership for anyone who doesn’t have access to a boatload of money. Areas with low property taxes tend to have higher house prices and more renters. It may not be a deliberate policy but it sure is an “unintended consequence”.

Retired people have lower income then when they were working…so lowering the income tax for them does not mean much in many cases.

Retired people also often have smaller houses than when they were working…so raising the property tax for them does not mean so much in many cases. I’ve just downsized myself for instance, saving a lot of future property tax payments. Anybody who doesn’t? Well, that’s their free choice freely made.

I know of communities where inflated prices and their reassessed property taxes are forcing retirees to sell and move…they cant afford to pay the taxes on homes they have been in for a generation.

Lucky them, being able to sell up and move to reduce their taxes. If they move to a rental, they can even cut their property taxes to zero.

If it was consumption taxes that had been raised there’s no way that many of them would have been able to do that. Sure they can cut their consumption to a certain point but once the minimum has been reached that’s it. And a lot of retired people are already at the minimum

Raising consumption taxes encourages people to save…and if they choose to consume more, then they can, but pay more for it.

It puts control into the hands of the consumer

Raising property taxes encourages people to downsize…and if they choose to have a bigger house, then they can, but pay more for it.

It puts control into the hands of the home-owner.

See! We’re not so far apart after all.

#255 Daisy Mae on 04.19.12 at 10:24 am

#181 DEBTFREE: “@ formman do you think that all the immigration offices that are closing in the ok due to federal job cuts are going to help or hurt the re market . They were very high paying jobs . 7 in kelowna.”

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These offices were always more a ‘want’ than a ‘need’….and now the government can’t afford to keep them open.

#256 Daisy Mae on 04.19.12 at 10:30 am

#243 WESTERNMAN: “Maybe you should stop watching heartwarming CBC dramas and take a little closer look at the way things REALLY are…”

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You ARE annoying, aren’t you?

#257 Sticky on 04.19.12 at 11:01 am

@#256 Derek R

“Raising property taxes encourages people to downsize…and if they choose to have a bigger house, then they can, but pay more for it.”

>> So your idea is to raise property taxes (to keep property prices lower and slower growing), impacting retired seniors that have lived in the same house for decades. This increase in taxes in not representative of cost of services in the community…only your “policy” to keep the bubble at bay.

So what…”they can downsize” (you say) which often means paying realtor commissions, and transfer taxes on their new smaller home (which just got smaller after those fees). Often the downsize means a totally different community, or town.

Sheesh…I hope you are never involved in policy making.

I also added in a later post (you may have missed):
Policies I like to stop the bubble:
1. Higher down payment requirements
2. Tougher criteria to qualify Gov’t mortgage insurance.

If you want to mess with taxes (i do not), then increase transfer taxes.

Dont mess with property taxes, or income taxes…those NEED TO BE be kept separate from bubble creation and management.

We are miles apart.

#258 $ on 04.19.12 at 11:28 am

Straight from TD’s new ‘mortgage hub’

Q: I have 5 investments properties generating a small positive cash flow each month. In the next few months, I will be leaving the country on spousal relocation. this means I will be loosing my well paid job for no to minimal earnings in the next 3-4 years. In the mean time, I will have to renew mortgages of theses properties. Will the borrowers accept to lend the money for another 5 year term?

Bank’s response: So long as you maintain your mortgage payments, property tax, maintenance fees (if applicable) and utility payments and do not increase your financing, at renewal most lenders will offer renewal options without the requirement to re-qualify for the mortgage. Before heading out I would recommend you seek out a qualified property manager who can manage your properties and tenants while you are away.
Good luck with your relocation!

#259 Highly Skiller Pizza Guy on 04.19.12 at 12:32 pm

#68 eaglebay – Parksville on 04.17.12 at 11:44 pm

#46 Skilled Immigrant Who doesn’t Deliver Your Pizza on 04.17.12 at 10:45 pm

Go home. Don’t take advantage of our goodwill.

I thought only smart people read it and comment on this forum. I earn my money out of Canada and yet pay taxes here, support economy by paying ridiculous cost to live. What do I take advantage of, briefly?

As StatsCan says, by 2030, there will be no natural pop growth in Canada, only with immigration. So instead of blaming skilled immigrants who are lied and invited here to do pizza delivery, go have some sex if you still have any sperm. That will help Feds prevent from inviting random refugees as well as skilled pizza delivery guys just to keep population at same levels and create some economy.

#260 M Chan on 04.19.12 at 2:04 pm

#125 aka DA
$250 more is going to break the financial back of someone in just 5 years. Because household expense, CPI, increases about 2% a year ($100 / months). 5 years is $500 add to the additional $250 in mortgage payments. So $750 per months more would mean about 15% raise in an average household income. Not going to happen. BC teachers can’t even get a raise.

#261 Mike on 04.19.12 at 5:54 pm

I am so tired of mark carney sing this song just raise the intrest rate already!! People who ate up cheap debt will have to deal with thier dumb actions!