Wipe out

Imagine you’re sitting home one night eating burritos and cream cheese waiting for The Biggest Loser or Canada’s Got Talent! when the TV newsguy comes on and tells you this:

“Homeowners beware! Canadian banks may soon force you to requalify your mortgage at the end of every term, if your circumstances change… say you lose your job or get divorced, you could risk losing your home.”

Well, he just did. CTV aired this:

Of course regular readers of this pathetic blog knew all this back in March, when we highlighted the changes that OSFI – the Office of the Superintendent of Financial Institutions (Ottawa’s bank cop) – is preparing to implement. The first stage was an announcement. The second was a discussion paper. The third will be regulation. By the end of the year it seems assured the feds will have a new set of regs for the banks aimed at squishing the credit bubble without having to jack up rates.

The changes would require far more scrutiny of a buyer’s finances, verification of a home’s true value (not the bidding-war price), elimination of cash-back mortgages and also test borrowers every time they renew a loan to ensure they still qualify. The key here is LTV – loan-to-value. If you bought a $400,000 place in 2010 with 5% down, then your mortgage is $380,000 and your LTV is 95%.

If the same place is worth $340,000 in 2015 (after a 15% correction) when the loan renews, then the LTV means the maximum loan is $323,000. If you took a 3% VRM when you bought, with a 30-year amortization and made 5 years worth of payments, then (counting in the mortgage insurance premium), you still owe $349,000 upon renewal. So, you’d have to come up with $26,000 in cash to maintain your home loan – after spending $101,457 on mortgage payments.

Let’s see, that’s a downpayment of $20,000, plus $101,457 in payments, plus a $26,000 mortgage renewal payment – or a total of $147,457 in cash for a home worth $340,000 on which you still owe $323,000. This is a nice, simple example of why all those horny young virgins with their 5% downpayments are at risk of being wiped out financially.

Perhaps you see the threat here.

It’s not just that the bank cop would bring in such a draconian change (and it will), but that the potential of its happening has hit the MSM. Your granite-loving mother-in-law can ignore this marginal, slightly diseased blog, of course, but when it’s on the TV it becomes just as real as The Bachelor.

So the big threat to all those recent purchasers is a market decline plunging them into negative equity event before OSFI gets all Nazi on us. Homeowners with 20% or 40% equity can withstand such an event (although they won’t be happy they’re less wealthy), but high-ratio, high-risk borrowers will end up with nothing but debt. Are they mentally prepared for that? Did the kids buying those townhomes and condos with cash-back downpayment money from TD Canada Trust really consider that they’d be, well, screwed?

Of course not. Never crossed their mind. And the nice loans officer at the bank skipped mentioning that part. In fact, homeownership has been sold by the banks, the real estate industry, the media and even governments as a risk-free strategy. So what happens in a couple of years when prices correct, lending rules tighten and equity leaves town? Will the kids just shrug and keep on with their monthlies? Or will they panic, bail at any cost, and drag down market values?

If you say it doesn’t matter much because there aren’t that many of them, think again. Consistently over the last three years, the majority of new mortgage originations have been for 5% down deals. In cities like Toronto, where 2,000 condos a month are flogged, you can bet the ratio’s dramatic.

In fact, even in a market where first-time buyers are a distinct minority, like Kelowna, the numbers give pause. First-time buyers accounted for 21% of all transactions in 2011, and of those about 90% used high-ratio financing, with downpayments of less than 20%.

So, if Kelowna prices correct by 20% (that seems like a no-brainer), a fifth of all the people who bought last year could be underwater. Is this likely to have a further dampening effect on the overall market? Are you kidding?

Finally, one more reason this real estate market is cooked. Especially in BC. Buyer disgust.

This past weekend one of the Vancouver papers ran pictures of the 35 cheapest houses currently for sale on the west side. I rest my case.






#1 TurnerNation on 05.13.12 at 7:39 pm


#2 armpit on 05.13.12 at 7:41 pm

furstttttttttt a second time…..keep up this great blog

#3 pathcontrolmonk on 05.13.12 at 7:42 pm

Is it legal for the banks to arbitrarily change their policies mid-way through a mortgage term?

No. Read your contract. It’s that paper thingy you got. — Garth

#4 Shane on 05.13.12 at 7:52 pm

Garth, 15% in a couple of years I thought it would be by the end of 2012 early 2013?

It was a mild example. — Garth

#5 jimboyyc on 05.13.12 at 7:52 pm

Requalification on renewal will never happen. CMHC insurance is valid for the length of the mortgage not just the length of the term.
Requiring requalification on an insured loan is not in the banks interest as long as payments are being made.
CMHC (backed by the government (well really you and I as the taxpayers), does not want to see lots of foreclosure because it’s bad for business (or political optics), and they can easily extend and pretend by renewing existing mortgages.

Insurance has nothing to do with it. And this is not a bank initiative, but one of the banks’ regulator. — Garth

#6 Maxamillion on 05.13.12 at 7:55 pm

OMG, let me understand this, if you lose pubic hair the bank might force you requalify your mortgage. Boy they are become strict now.

Only if, as with you, it circumnavigates your ears. — Garth

#7 Randy on 05.13.12 at 7:57 pm

I can only look at those 4 properties and laugh…I’ve under-estimated the stupidity of home buyers in Vancouver…

#8 mark on 05.13.12 at 7:57 pm

Where I live, those dumps would be 150k and that’s still too much!

#9 Jenna on 05.13.12 at 8:03 pm

Did you see the star today? 2015 15% less only?

#10 Jim Lahey, Sunnyvale Trailer Park Supervisor on 05.13.12 at 8:14 pm

The one listed at $1.29 million doesn`t look as good as Randy`s trailer and Randy is trying to dump his at $15k…

#11 Smoking Man on 05.13.12 at 8:15 pm

Gartho Smoking man is shit faced at woodbine why do I come here? Your drawing at strawes. Did I spell that right?

Beared one the machine needs to get more red dots on mls. The second it achives its goal the bubble talk will will end.

The machine knows all.t
The machine gave me an invite to virgina EOF. Garth did you get one.

Confession I run an other web site. Hint tyler. Guess I’ve pissed off enought usless zillionars they wana real me in

What’s cool they don’t know about greater fool and I’m here a trun coat.

#12 Gordeaux on 05.13.12 at 8:26 pm


#13 Luciano Leite on 05.13.12 at 8:27 pm

I went to see some houses yesterday in Burlington and Oakville. Prices are dropping slightly and I smelled desperation on the part of some sellers. Two years ago my wife and I were house hunting in the same area. It was a crazy bidding war then. Not exactly the same now. I feel for those with low equity if this re-qualification rule gets approved. I’m so happy for being a renter though. Mr. Turner, thanks for this blog.

#14 Bill Gable on 05.13.12 at 8:28 pm

Stunning – EVERYONE read what Mr. Turner has laid out here – and tell me that we have a soft landing ahead for the RE market.

Incredibly compelling, Mr. Turner.

Sobering, to be sure.

#15 Bob Copeland on 05.13.12 at 8:29 pm

Keep telling them. I lost a fortune in Indiana and I didn’t do anything wrong! 40% down and still lost everything!

#16 Signpost in the bushes on 05.13.12 at 8:31 pm

“When the man has got his house, he may not be the richer but the poorer for it, and it be the house that has got him.”
Henry David Thoreau

#17 JSS on 05.13.12 at 8:33 pm

Garth – does this requalification also apply to income properties as well?

One assumes regulated LTV ratios would affect all properties. — Garth

#18 wopaholic on 05.13.12 at 8:36 pm

Bubble will burrrrrrrrrrrrrsttttttttt!!!

#19 mark on 05.13.12 at 8:37 pm

So….if I wanted to scam the system….buy a house in Vancouver (or anywhere in Canada) then list it for sale. Have a deal with some shady HAM types to bid up the price by a few hundred thousand. Pocket the cash and head out of town…shady HAM winning bidder disappears (after getting their share of the profits). Canadian taxpayers bail out the bank that issued mortgage based on false documentation of offshore income.

Maybe while in town you could also arrange a car accident in some quiet spot, then the 6 occupants in each car all sue each other for back problems and emotional stress. ICBC pays out….maybe enough to pay for a new Mercedes for each family?

Not that anything like this would ever happen. But even if it did – it is still great for the economy, lawyers and realtors.

#20 X on 05.13.12 at 8:38 pm

“This is a nice, simple example of why all those horny young virgins with their 5% downpayments are at risk of being wiped out financially……Consistently over the last three years, the majority of new mortgage originations have been for 5% down deals.’ Garth

Would it not be alot simpler for OFSI to increase the minimum downpayment, eliminating 5% down, as well as eliminating borrowing for the down payment.

#21 thinker on 05.13.12 at 8:39 pm

This is a pipe dream, in reality the enforcement of this if it left people homeless and mass selling by banks of homes would not help anyone. Instead, the banks are so smart in Canada, they have embedded another fee opp – basically, you will have to pay some mortgage qualify admin fee, then they will give you a list of options, which will include paying say 150$ more month, etc and your mortgage might go from a CMHC backed to someother Canadian version of AIG. Great move by banks to make more money while all in the name of safe guarding to make sure mortgages stay bulletproof.

Another reason to rent

#22 live within your means on 05.13.12 at 8:39 pm

It continues to amaze me how stupid people can be not only about indenturing themselves for 30-35 years but living mo to mo on credit cards. DH and a friend went to a local pub (5 mins away) last night to see some bands. His called & asked if we had any Rum in the house – nada so he picked up a Mickey. When they got to the pub the friend didn’t have the $8 cover charge so DH paid for him. Times were tight for him, he said. He paid back DH by buying him a drink on his credit card. The friend is an automotive mechanic and makes good money, but he & his family live totally beyond their means – all the latest toys.

Anywho, I’m making lobster stock. Neighbour bought about 6 of them – sure some were 4 lbs. ea. & brought the shells & bodies to me this eve. Stock is delich to make seafood chowder, etc. I normally don’t brag, but many think I make one of the best seafood chowders & Paellas.

#23 Lisa on 05.13.12 at 8:49 pm

Nature took just over 7 months to recoup our investment in the ‘greatest place on earth’ weather. Good thing there are plenty of natural wonders for rec time; all the moolahs in the house.
How embarrasing and stupifying to see the dumps at those values. Hmmm anytown Canada is looking mighty fine, the rest of the time spent as a snow bird.

#24 T.O. Bubble Boy on 05.13.12 at 8:50 pm

Good to see that the $1,120,000 house come with a satellite TV dish… I was getting worried that these homes were all complete dumps!

#25 zeeman on 05.13.12 at 8:52 pm


Come on, those recommendations will not become law…there will be a lot of opposition and it will end up being thrown out…..
i talked to a realtor today at a open house and he said that the market has turned in gta….he said all the 2.99 crazy group are slowly leaving the market with their over paid houses and the biding wars are slowly cooling down….lets see where the market is by end of summer

De Nial is flowing tonight. — Garth

#26 Mark W on 05.13.12 at 8:54 pm

You forget to mention those people who put 0% down a few years ago.

Let’s assume a 25% market correction, throw in the standard multiplier effects, give it a year or two to really kick in … and what you are talking about is a total meltdown.

I think this is the scariest thing I have ever read on this blog … :-(

#27 I'm stupid on 05.13.12 at 8:54 pm

I would like to add two points tonight.

1 If I had to live in one of those homes I would shoot myself. If I had to pay over $1 million for the privilege I would take a bunch of prescription meds before I hung myself with a shot gun set to shoot me just to be sure I’m dead.

2 What’s wrong with a lender wanting to make sure the person they lent money to is in the same situation on renewal. It’s called being prudent, it should have never gotten to this point.

#28 live within your means on 05.13.12 at 8:56 pm

#8 mark on 05.13.12 at 7:57 pm
Where I live, those dumps would be 150k and that’s still too much!

Where we live – not sure if they’d get half that price.

Found out the other day that neighbour paid the down payment for her daughter’s home. (Daughter earns at the most $35K but was approved for a $500K loan.) She has a son & hubby (Electrical Engineer) who hasn’t worked for 8 yrs since he was laid of in calif or nia. They left all their stuff in a storage locker. Neighbour’s kids have always taken advantage of her and her late husband.

#29 wopaholic on 05.13.12 at 8:59 pm

I wouldn’t buy one of those condemned piles of shit for $50. This nation is on crack, especially that deluded swamp they call the lower mainland west coast. Was born and raised in this country and have lawfully lived and worked here my entire life. But I think I’m done. The market could correct by 70% and I still wouldn’t want to be surrounded by the morons that created this bloodbath.

#30 Industrial Guy on 05.13.12 at 9:01 pm

If this re-qualification process is implemented the banks are going to create a nightmare scenario for hundreds of thousands of Canadian mortgage holders. Once your underwater … will your mortgage lending institution demand you cover their exposure with cash?
How much does the the market drop before the banks call all the home equity lines of credit ? Who would be crazy enough to pull this trigger? How could this not become a free fall?
I know we have to reverse the growth of our debt to income ration but, seriously ….. blowing out the foundation of this house of cards is insanity.
Who will benefit from bringing all this financial hardship to so many? Which industry will rise to replace the losses in GDP a severe downturn in construction activity would create? What happened to a sharp initial drop with a long painful decline? It sure sounds like this decision was modeled on the bobsled track at Calgary Olympic Park.

#31 Canadian Watchdog on 05.13.12 at 9:03 pm

If inventories build up the banks will not pull the plug on a loan, since they’d rather have a payment with risk then properties sitting in REO. This is overhyped and nothing more then what OSFI already stated; self-regulating guidelines at the banks discretion, not rules.

No bank will be offside with OSFI, whatever it dictates. — Garth

#32 s on 05.13.12 at 9:05 pm

In 2015? I was hoping for a lot sooner

An example. Relax. — Garth

#33 Ben on 05.13.12 at 9:06 pm

Where I live those dumps would be 20K but I don’t live in Canada or Detroit.

#34 Skip Breakfast on 05.13.12 at 9:13 pm

Hm, this initiative has the smell of fear of it. Fear in the banking system, though. In fact, it seems a bit desperate. Because I can only see one up-side for the banks: the banks can start to grab prime assets from owners at will. After paying years of interest on a mortgage, a bank can eye your property and decide to force foreclosure based on some pretty arbitrary criteria, even if the owner has been making payments. For example, I can imagine a more adaptable owner who loses his job might start renting out rooms in his house to family and friends in order to keep making mortgage payments. So while he’s making payments, the bank can still say he’s out of a job and therefore refuse to renew.

The problem with the bankers’ plan is two-fold, as I see it: (1) such a blatantly manipulative grab of prime assets on any scale would truly send people out into the streets with pitchforks–the banks have to remain far more duplicitous in their grab for our money and assets than that; and (2) it seems that we’re far more likely to face a mass foreclosure scenario such as the U.S. has experienced, where the U.S. banks are more than happy to keep any deadbeat mortgagee in the home NO MATTER WHAT, because the bank doesn’t want to own hundreds of thousands of depreciating homes they can’t sell either. Keep in mind that when the bank takes the house, they have to pay up-keep, property taxes and marketing fees. In the U.S., some people have gone years without making a mortgage payment and the bank prefers to let them stay there (for now) until prices go up.

I suppose the banks could use it to gain some gound “in the middle” of these two problems. They can force foreclosure, gaining a bigger interest in the house (ownership essentially), but then “graciously” allow people to stay in the home, essentially becoming true “renters” to the landlord bank. Then if and when property prices improved, the bank would be able to boot them out and sell it.

In the end, seems like the banks are scared out of their pants and looking for any and all ways to shore up their defences.

This is not a bank initiative. It is the work of the bank regulator, a federal government agency. — Garth

#35 live within your means on 05.13.12 at 9:15 pm

Last post tonight.

Put in some veggie seeds today. Some family & friends think I’m out to lunch because I make all different kinds of stock from veggie peelings, chicken, beef bones, & lobsters. But, I can control the sodium content & all the other garbage that goes into purchased broths. I freeze some in quantities and also in ice cube trays & then label in freezer bags. I also do other similar things, but I have the time as I’m retarded :-)

#36 Onemorething on 05.13.12 at 9:15 pm

This plan is for a smooth shave on the high risk owners. Get them out of the market!

It also puts an initial scare into those of the above looking to buy now.

Its a smart plan but its too late as the major correction is already underway.

The government and banks have pow-wows all the time about this. Its not unlike the treasury sec, Fed Chairman and top bank CEO’s trying to figure out how to get around it in the US of A 3 year ago.

The banks will play with the T’s & C’s depending on how bad the situation becomes.

As Greenspan proclaimed recently, with all his knowlege he still had no idea what was coming and what to do and all is driven these days on sentiment!

Market sentiment is easier to track than economics and financial planning. This is why liquidity for even the most novice investor can be awesome moving forward.

Market swings are making the same people richer!

#37 gladiator on 05.13.12 at 9:20 pm

OK, Smoking Man, you went a bit too far. I understand you want to be as famous as Mr. Durden, but it ain’t so.
Now I will start discounting your words too. You just lost a follower…

#38 O.N.Goat on 05.13.12 at 9:22 pm

bopeep,sorry I mean bpoe . Did you tell anybody about the plane crash about 6 or7 years ago.right into 12 story condo unit.Luckily the specs were still living in china.The pilot was the only one killed.RICHMOND B.C.BPOE!

#39 Skip Breakfast on 05.13.12 at 9:25 pm

You mention that this is a bank regulator’s initiative and not from the banks. I guess I’m ultra-cynical, and don’t believe there’s much difference between the two. I mean, most bank regulations of the past decade have been the result of serious pressure from bank lobbies. And given that this “regulation” doesn’t seem to benefit the people and only the banks, in that it gives them more power, can you clarify how you see the distinction here, Garth? I’m curious what benefit the regulator sees in this that the banks would not.

The regulator has a clearly defined goal of making mortgage lending more prudent and protecting the integrity of the banking system. That is its job. — Garth

#40 Skip Breakfast on 05.13.12 at 9:34 pm

Hmmm. I don’t want to take up comment space, so this is my last here today, I promise. But I don’t yet see how this encourages “prudent lending”. The loan is made. The buyer is in the house. Allowing arbitrary refusal of renewal just seems to grant enormous power to the bank. When I sign a 25 year mortgage, I have 25 years to repay. As long as I repay, it’s no longer the bank’s business (nor the regulator’s) how I do that. I qualified for the loan, and we signed an agreement as to the terms. Now, this new regulation would provide the banks with power to essentially annull the agreement at every renewal date even if I’m making payments. The regulation only seems to create hardship for borrowers who might still be making payments. Failure to make payments is still grounds for foreclosure, and so I don’t see how the regulation would put “prudent lending” on any surer footing. It still sounds like a big power grab by banks. I’m interested to hear how this regulation adds to prudent lending, because I just can’t seem to think of any logical argument yet in its favour.

Read your contract. The lender is under no obligation to grant you renewal, and a good repayment record means nothing. This is meant to prevent our banks from carrying debt in excess of the security backing the loan. That is prudent. — Garth

#41 Nostradamus Le Mad Vlad on 05.13.12 at 9:35 pm

“Wipe out eating burritos and cream cheese . . .” — Yep, I could handle that with a pitcher of European lager! Dog has cute eyes.

“Perhaps you see the threat here. By the end of the year it seems assured the feds will have a new set of regs for the banks aimed at squishing the credit bubble without having to jack up rates.” — Rates rising or not? Unless TPTB are trying to weasel out of fiscal nukeageddon, ‘coz someone will have to pay the piper, and there aren’t too many of us old farts left.

“So what happens in a couple of years when prices correct, lending rules tighten and equity leaves town?” — See preceding para.
Magnificent day 2day. Far better being outside, doing nothing and baking oneself under a spring sun.

#26 Mark W — “. . . the scariest thing I have ever read on this blog …” — Good summary!
Greece Out of control salaries, bankruptcies soon to be followed by Spain, Italy, France etc.; California Deficit and austerity both increase; Merkel “Early results are that Merkel’s party has been hammered by the voters. The worshipers of the eleventh marble (debt) are falling, one by one.” wrh.com; Greece’s Syriza Headline is noteworthy, and the article after.
7:33 clip The EZone Spring; Water Shortages Interesting because April 2012 was the soggiest in a century in the UK; Pix of Iran What the paid-for and controlled m$m doesn’t want anyone to see; Build My Burger 2012 Alternative media, take a bow! China War “The last thing the US government needs right now is to be embroiled in a war in China.” wrh.com. Mainly because the US is broke, and the Chinese know it; The Emperor has got his knickers in a twist; US Immigrants Highest level since 1920; FFs, Domestic terror etc. FBI staged; Oligarchy vs. Democracy See for yourselves; ‘Net Snoopers Charter; Fake War on Terror “The neocon cabal of Zionist Christians and Jews behind 9/11 have tried to disguise their war on Islam as a ‘war on terror’.”

#42 Tron on 05.13.12 at 9:36 pm

It is highly unlikely that those shacks will be lived in by the owners; tear downs unless the owner rents it out.

#43 Elmer on 05.13.12 at 9:42 pm

This really only affects people who buy with less than 20% down. If you buy with at least 20% down and there’s even a moderate correction you will be ok. They should just abolish CMHC insurance and require all downpayments to be at least 20% and the market would take care of everything.

#44 Realtors in an all out PANIC tonight on 05.13.12 at 9:45 pm

Look at the realtors fearing the free market since it would crash Canadas housing ponzi by 50%. Yes 50% and every uneducated realtor knows that. Canada is beyond a bubble and reached ponzi scheme heights. Site back and watch the house of cards come crashing to the ground.

#45 northerner on 05.13.12 at 9:45 pm

What an unbelievable, video sounds more like renting, will you have to have 12 mo inspections? Will Mortgage brokers also be able to arrange the sale of one of your kidneys or a cornea, you know, just in case your so close but just 20k or 30k in negative equity? Once you’ve run out of organs you can always trade with the kids. Maybe that a good business plan!

A Sole & Sons Organ & Mortgage Brokers
We won’t take the shirt off your back

#46 Mr Buyer on 05.13.12 at 9:46 pm

verification of a home’s true value
This is a key line tonight. Imagine if house values such as those in the photos started getting verified to be of true value, over a million bucks for those hovels (if it is your hovel please forgive my rudeness, I am sure the houses are providing adequate shelter to you and your families). As for the the horrendous impact of said regulations, well lets just take another look at those photos and prices and just pause for a moment, take a deep breath and then say to yourself those homes are worth over a million bucks each. If that doesn’t make your mind explode, then yes, I can see how the bank regulator’s proposals would seem out of line to you.

#47 Realtors in an all out PANIC tonight on 05.13.12 at 9:54 pm

Canada is so overvalued with majority of loans are sub-prime as people with no money and maxed out on debt are unable to pay the piper. Realtors are kicking and screaming about the free market and don’t like the stress test of the ponzi scheme sub-primes loans. It’s going to crash real hard in Canada. If you can find a greater fool before the house of cards crashes back down to reality.

#48 Freedom First on 05.13.12 at 9:56 pm

It has been quite a while since I said anything to a horny young couple buying in this market. They just get upset. What do I know? However, I have passed along Garth’s blog……gently, but when I…..gently ask them if they read it, they don’t want to talk about it. And they are bothered by it too. The principles Garth teaches on his pathetic blog would keep people out of the financial misery so many horny young couples are demanding. The saving grace is that there is people who listen, and are grateful, because they learned they have dodged a bullet. Patience always wins……if you can’t listen to Garth, at least listen to the Americans and Europeans who post here about the ass-kicking they got the last few years, like the fellow posting today from Indiana, who put down 40%, and still got wiped out…….WIPE-OUT …….great title!

#49 Frank the skank on 05.13.12 at 9:59 pm

So OSFI went years with lax lending rules or lack of enforcement and now wants to look at tightening rules? It really makes no sense considering the impact. Has someone realized that there’s no saving real estate in Canada?

#50 Smoking Man's realtor on 05.13.12 at 10:03 pm

Not to worry..

As per your instructions, I have signed offers for 10% over peak list price.

All they want is one kidney for downpayment…

#51 unhappy house hunter on 05.13.12 at 10:04 pm

toronto star front page warning that toronto sfh will catch up to van due to lack of supply ! (maybe the leafs win the cup next year)

#52 Interesting Times on 05.13.12 at 10:07 pm

Crash has begun and many HGTV virgins will get crushed! Realtards and brokers are in full panic mode. If u are looking to buy start low balling by $100k or more! You virgins can do this from the comfort of your homes by just e-mailing the used car salesperson (RE agent) and putting in an offer. What r you waiting for start LOW BALLING!

#53 Smoking Man on 05.13.12 at 10:07 pm


#54 Sebee on 05.13.12 at 10:07 pm

Insurance has nothing to do with it. And this is not a bank initiative, but one of the banks’ regulator. — Garth

Don’t want to argue with you Garth because you know much more than I, but with OSFI now responsible for regulatong banks and CMHC jimboyys has a point. They may go a little more mild on the rules to hurt a smaller percentage of the debt slaves.

If prices decline, should people with no equity receive refinancing? — Garth

#55 jimboyyc on 05.13.12 at 10:08 pm

You are counting on OFSI to inject some sanity and moral hazard into the banks lending practices.
Regulations that will tighten things up may (and should)happen; regulations that would cause massive foreclosures and consequent losses to the banks and CMHC/taxpayers will be overruled by the government. Requalifying on mortgages that are not in arrears will result in massive foreclosures in a falling market which would excerbate the decline in the market. This won’t happen for political reasons: look at the way the US government has intervened through Freddie Mac, etc. to try and prevent foreclosures in every way possible.

Well, let’s wait and see. The immediate reality is that this talk is not conducive to any sane person buying with 5% down. — Garth

#56 Don't read his post on 05.13.12 at 10:08 pm

SMOKING MAN, I think you have a gambling problem as well as drinking while on medication

#57 Ex-Cowtown on 05.13.12 at 10:11 pm

#43 Elmer on 05.13.12 at 9:42 pm
This really only affects people who buy with less than 20% down. If you buy with at least 20% down and there’s even a moderate correction you will be ok. They should just abolish CMHC insurance and require all downpayments to be at least 20% and the market would take care of everything.


Using Garth’s #’s from Kelowna and your assertions, the drop in Canada should be about twice a severe as in the U.S. In the U.S. 10% of homeowners getting into trouble cratered the system. In Canada, we have 20% that will be in trouble.

The question is: do you feel lucky?

#58 Dude on 05.13.12 at 10:12 pm

It’s a big WARNING.

In the US, banks started foreclosing homes for no reasons at all, and a lot of people just gave up either outright or after trying to negotiate tirelessly. What you see in the video is a precautionary measure in case a crash happens and the Canadian government decides to buy toxic assets from banks at a high price.

This is what was done in the US: since the government decided to buy the toxic assets at a premium rather than at the post-crash price, banks had every reason in the world to foreclose anything they could to sell the houses to the government at a premium, instead of waiting for houses to gain in value enough so years later (which proved indeed to be the smart thing to do as prices are still going down). Balance sheets restored, stocks soar, everyone’s happy. Except the home owners.

So what you see in the CTV video is a first step taken to make sure that banks will be able to easily foreclose homes during a crash, in order to sell them to the Canadian government’s TALF-equivalent, at a premium, and restore their balance sheets.

These measures are needed to enable a future “bailout”-like action by the government if a real estate crash occurs.

Is it what MUST be done or not, I’ll leave that to others to figure out.

#59 jess on 05.13.12 at 10:19 pm

American Legislative Exchange Council (alec)
The questionable tax exempt charity.
Stand Your Ground laws based on the Florida law and Voter Identification laws .


one proposal is called the ALEC Attorney General Authority Act. And to really boil it down, it would give state legislatures more power to tell attorneys general when they can and cannot file lawsuits. Just for example, it says the attorneys general’s client is the state, not necessarily the people of the state.

This bill comes from a law firm in Mississippi. One of the firm’s clients is a big utility company, Entergy. And in Mississippi the Democratic attorney general has a three-year lawsuit going against Entergy. His question is whether Entergy manipulated prices and overcharged consumers. So this seems like the kind of case that could be reined in by the ALEC Attorney General Authority Act….”


. When Fragile becomes Friable: Endemic Control Fraud as a Cause of Economic Stagnation and Collapse (pdf),


#60 kmanvan on 05.13.12 at 10:20 pm

I personally don’t have a problem with this… anything that makes real estate get back to reality.

Now when are our fine conservative MPs going to get around to validating/monitoring/taxing all this offshore cash coming in from overseas. For flip sakes the government isn’t even tracking how much money is going into Canadian real estate this way. We’re just one big money laundering market.

Depressing… but glad I rent for now… but in Vancouver the rent is too d*** high.

#61 Mister Obvious on 05.13.12 at 10:20 pm

Nobody in Vancouver would deny those million dollar plus “homes” are dumps. The whacko asking prices are for the postage stamp sized rectangle of serviced land upon which they sit.

In most cases, the houses themselves are a fat liabilty against the land since the cost of demolition and
removal is now very high.

The discussion should center on whether a 33′ by 125′ building lot within Vancouver city limits should cost so much especially when there’s a heavy piece of crap on top.

Of course, the answer is still no, but when viewed in this way the asking price relects a new level of insanity.

#62 earlymidlifecrisis on 05.13.12 at 10:20 pm

So will we know in the fall exactly what the OSFI is doing? I’m worried they will drag out the uncertainty a little longer by also announcing that they may have (insert changes here) coming in the spring.

#63 Nick on 05.13.12 at 10:24 pm

That house with the satellite dish made me laugh out loud. Just add a Porta potty outside already — tada! Its a 2bed 2bath!

#64 BC Bring Cash on 05.13.12 at 10:32 pm

Not only do you need to qualify at the the end of the term of the mortgage but you may have to re qualify before the term is up. For example in my case my spouse co owner of our property passed away I was told that even if I could handle the said mortgage a new contract was needed due to the fact that my my spouse was deceased. In other words the contract was null and void. Something to think about.

#65 45north on 05.13.12 at 10:32 pm

Skip Breakfast: The problem with the bankers’ plan is two-fold:
(1) such a blatantly manipulative grab of prime assets on any scale would send people out into the streets with pitchforks

I’m only going to deal with the first point because I don’t want to be too long.

well let’s take Kelowna as an example, say that the regulations go into effect Jan 2013, say also that all mortgages are 5 year terms, also say that in 2008 19% of all buyers had high LTV mortgages ( same as 2011 ). The people who were first time buyers in 2008 now have to be re-approved so they should have at least some appreciation. I’m thinking 20%? Devil’s Advocate what do you think? Kelowna bought $200,000 in 2008 should now be worth $240,000? Assuming there was no home-equity line-of-credit the mortgagor is no longer high LTV. So I think we can say that the day the regulations go into effect there will not be pitchforks.

The banks will do their own analysis.

#66 jess on 05.13.12 at 10:32 pm

housing switzerland


money laundering via real estate

#67 Timbo on 05.13.12 at 10:35 pm


“Sensing what is coming, Citigroup’s chief economist Willem Buiter says global central banks have not yet exhausted their arsenal. They can “and should” crank up quantitative easing (QE), buy everything under the sun, and do “helicopter money drops”.

sorry Garth…could not resist, after all it is but a flesh wound…

#68 Kim on 05.13.12 at 10:37 pm

Wow……look at the reaction and fear from the realtors who post on garths blog 24/7/365. It seems obvious these realtors understand the housing market is just a house or cards which will easily fall apart in any type of stress test. From the amount liar loans,5% down, zero down or even cash back mortgage given out during the housing bubble there is no telling how hard the crash will be. I think Canada will have to match US housing prices( Averages) which is the historical average. That would put the housing crash to greater then 50%. Some would say that’s extreme but the housing crash in the US was just that and every expert said soft landing. Why would it be different for Canada ? Oh ya the same vested interest experts will make the same claim. LoL

#69 freddy the freshman on 05.13.12 at 10:38 pm

garth how would this affect someone who has a variable loan on bought a home with a line of credit ?

#70 jess on 05.13.12 at 10:42 pm

Do you think Mr. Dimon should resign his position as a director at the Federal Reserve Bank of New York.?

#71 freddy the freshman on 05.13.12 at 10:44 pm

OH besides they haven,t implemented anything yet it says they will deside at the end of the year and they dont wanna cause the bubble to burst anyway.

#72 Harry in Saskatoon, no bust here, maybe next year, or the year after on 05.13.12 at 10:44 pm

If this true, then why don’t first timers just get a 10 year term at 3.89%? This should mitigate any risk of being underwater at the end of the 10 year term.

A 360k mortgage will be paid down to 267k in 10 years at 3.89%. I wouldn’t worry about prices falling that much in most of the country.

#73 [email protected] on 05.13.12 at 10:49 pm

Vancouver Sun says to sell for profit! http://bit.ly/JhC2YY ; this can only mean that the peak price was 3 months ago due to MSM lagging reality.

#74 Dontcalmeshirley on 05.13.12 at 10:54 pm

The mortgage broker blogs speculate requalification on renewal will not result in real, prejudicial treatment of mortgage holders.

Instead, it will be a risk assessment procedure to evaluate a lender’s mortgage book and potentially impact capital requirements.

However, it’s scrutiny, and any scrutiny will alter lender behaviour today.

PS. Equitable Trust reported last week, they have backed way off of condo construction financing (because they no longer have access to covered bond financing).

#75 Can it be? on 05.13.12 at 10:55 pm

Didn’t see any people going into the open house in my neighborhood today. The listings however are exponentially going up. Interestingly some higher end homes in Mississauga have finally sold after being on the market for a long time. Oakville still has tonnes of listings! I guess the last of the greater fools are buying in. Houses are money pits and we are slaves to our homes. Keep it simple people… The bigger the house/property… The bigger the head Aches.

#76 Van grrl on 05.13.12 at 10:56 pm

Here’s the link to the ’35 houses’ article:


They’re all more or less the same price; the only thing they seem to have in common is that they are all situated west of Ontario street. Bizarre.

#77 Smoking Man on 05.13.12 at 11:02 pm

#57 Don’t read his post on 05.13.12 at 10:08 pm
SMOKING MAN, I think you have a gambling problem as well as drinking while on medication
U forgot hookers

#78 Smoking Man on 05.13.12 at 11:06 pm

my world


Nancy = track 6ers

#79 Canadian Watchdog on 05.13.12 at 11:09 pm

“Unfortunately, it is no point. OSFI is a very powerful regulatory agency, backed by federal legislation. Banks do not cross it. — Garth”

OSFI is a lame duck Garth. They can not mitigate the banks at this point because our banks have leveraged themselves to the tune of $20 trillion dollars in the OTC derivatives market. Can you grasp what that means when there’s god knows how many hundreds of billions in credit default swaps that will trigger should the bank (or CMHC) miss a payment from defaulted mortgages? Let me go a littler further and explain in laymen’s what a credit default swap is for the blog.

To analogize, you have a home and buy insurance. You pay a premium for that home to be covered for any losses or damage, and should the house burn down, the insurance company pays you (only) the covered value. Now in the derivatives world, you own a home and buy insurance, but guess what?..everyone in the god damn world can buy insurance on your home and if your house burns down, the insurer would have to pay everybody!

So, while our banks have been pooling all your mortgages into securities, they’ve also been making massive profits by selling credit default swaps to global investors. Credit default swaps are really insurance policies designed to avoid the insurance act [regulations] that would require them to hold more capital, as would an insurance company like Genworth.

Now one would think that OSFI (being a regulator that is suppose to protect the banks) would put an end to this hyper-casino, but as it turns out, they sided with the BoC, CBA, OFA and the banks to kill the one rule that would have banned banks from prop trading (a la JPMorgan $2bil loss) with customers deposits, aka The Volcker Rule.

This was all lead by Mark Carney, your sociopathic central banker.

BOC http://tinyurl.com/c7achu2
CBA http://tinyurl.com/c9cts2u
OFA http://tinyurl.com/7h9mulg
OSFI http://tinyurl.com/cpwnz84
Banks http://tinyurl.com/85tvjm8

Rules Garth? Pffft. Who raised the allowable LTV limit in 2007? OSFI. Who deregulated stated income loans in 2007? CMHC. Who created assignment contracts to allow the developers to sell condos like a future contract? OREA. Just a few examples of many from the very same people that are still in charge, who absolutely no interest to change the status quo for the purpose their own interest.

Who you kidding Garth? There are no rules. This is political nihilism.

#80 FullofFear on 05.13.12 at 11:14 pm

The CTV story focused on a young couple, a demographic that this blog (including those who make comments) say is highly in debt and so screwed. Recently the Financial Post ran a story entitled “Student debt: U.S. students finding leniency”. The government is limiting the payments, keeping the interest rate low, and forgiving debt for those having trouble paying. Not so screwed after all. That’s the U.S. government. Can you see ours being less charitable? The people who are really screwed … are those people who don’t have debt, and have lots of savings to tax (to pay off other people’s debts).

#81 Muther on 05.13.12 at 11:14 pm

Banks usually offer to do the mortgage appraisals! So what is the problem? Also the value of any home is the market value which is determined by what one is willing to pay regardless if there was a bidding war or a private deal! Your prediction of a 15% correction will have to wait a little while longer yet. Renters and people that sold their homes to early have been crying for a correction for years. When we do get a pullback not crash these same renters will be crying prices are still too high! Don’t wait for a US style crash because it is different here because the Feds are being proactive.

#82 Stevenson on 05.13.12 at 11:17 pm

Wow no correction yet again? now we push it for another 2 years? After that push it for a few more?

What if these so called recommendations don’t happen? We will continue to wait for it to happen?

So I am assuming the idea here is to force the majority of homeowners into foreclosure. This way we can protect the economy and bank loans? Very interesting.

#83 Smoking Man's realtor on 05.13.12 at 11:19 pm

Sorry S. man…

The banks are tightening up…like a sphincter

Kidney’s not good enough.

They want more UNused organs as collateral..

That leaves below the belly button and/or above the neck.

Hurry …..or be priced out forever…

#84 wopaholic on 05.13.12 at 11:21 pm

#73 Harry in Saskatoon, no bust here, maybe next year, or the year after on 05.13.12 at 10:44 pm
If this true, then why don’t first timers just get a 10 year term at 3.89%? This should mitigate any risk of being underwater at the end of the 10 year term.

A 360k mortgage will be paid down to 267k in 10 years at 3.89%. I wouldn’t worry about prices falling that much in most of the country.

The $3700 per month mortgage payments on a 10 year term might pose just a liiiiiiittle stress on most buyers of a home of that price.

#85 Smoking Man on 05.13.12 at 11:21 pm

bubble heads what can you do about this


chock let want some .

#86 condopoor on 05.13.12 at 11:21 pm

has anyone noticed a correlation between these kind of houses and satellite dishes?

#87 Smoking Man on 05.13.12 at 11:26 pm

#37 gladiator on 05.13.12 at 9:20 pm
OK, Smoking Man, you went a bit too far. I understand you want to be as famous as Mr. Durden, but it ain’t so.
Now I will start discounting your words too. You just lost a follower…

Ya you outed me the epic lying fk cant speel it.

to shit faced

Im a homeless dude

Know nothing . take a bow you exposed little old me.

Faking it

#88 DaBull on 05.13.12 at 11:27 pm

So now the OSFI is trying to engineer a residential real estate market collapse like they had in the US…….

#89 Smoking Man on 05.13.12 at 11:32 pm

A beauty


#90 waiting on 05.13.12 at 11:36 pm

This morning’s Vancouver Province paper has a full page article on “Where it’s cheaper to buy (or, more likely, rent)” with the magic formula to calculate the price to rent ratio.
The end result (there was a map of the lower mainland in the actual paper – but it doesn’t show up on-line) is that basically there isn’t anywhere in BC where it makes sense to buy …
Some pages further on is a full page condo ad saying “Do mom a favour and move out” and “ask Dad for help with the deposit”

#91 Banks' interest overrides homebuyer's on 05.13.12 at 11:38 pm

why in the first place the banks lend money to insane persons buying with 5% down/cash back insured by tax payers, and government just let it go?

#92 Ronaldo on 05.13.12 at 11:42 pm

#71 Jess – ”Do you think Mr. Dimon should resign his position as a director at the Federal Reserve Bank of New York.?”

No. I think maybe he should get a bonus. Don’t you?

#93 Nostradamus Le Mad Vlad on 05.13.12 at 11:43 pm

JPM and Derivatives More than meets the eye; Child Care Skyrocketing costs; Far-fetched? Not anymore these days, but there’s always the other side; Peak Oil? Business Insider said a few days ago there were 15 countries sitting on vast reserves. Which is it? Gas Pricesaround the world; Germany A hint to Greece? Lotsa links in;
China buying US This goes with the current cycle change; Annulment only; High Priced Oil; Dividends Stocks better / worse than funds? US$46 trillion The perfect storm? Irish They’re already under austerity.
Indullgences Are Back Bribery and corruption? Plus Bonobo vs. Gorilla Sex There are only two sexes to choose from — male and / or female. Plus a host of combinations in between! This is the way western govts. are acting toward their citizens; Kim Jong Un Don’t forget that ABC is the mouthpiece of the WH, so they may be making this up to discredit NKorea and China; Pix of life in rural China; Harper Sneakier with a majority; Monowai Pacific underwater ‘cano, rising and falling, and Mexico’s Popocatepetl delivers more hot ash.

#94 Smoking Man on 05.13.12 at 11:45 pm

Gig in the sky perfection

Clair what has become of you?

Nails track 4 dark side of the moon


I’m on a quest to find Clair Tory Magical wordless death cry.

It was playing at cannonball at my near death experience . i hear it’s closing down. i might buy it.

Before I toke a trip to the other side , was at the cannonball. the dry ice smoke was filling the room

I met Becky stripper angel , the angle that took me on the tour of the universe, when I died at the cannonball.

I got revived came back as the Smoking Man.

#95 $$$BPOE#1 on 05.13.12 at 11:46 pm

Anyone notice the pie chart of ALL CASH. Folks, in the not too distant future this part of the chart will be over 75%. The world changed when the renter blinked his eyes. See those dumps on the West Side? Priced to Sell and folks yes they will sell this ain’t Seattle folks it’s BPOE and its destined to be the richest place on earth. You heard it here first. ALL CASH PURCHASES TO BE THE NORM over the next decade. Did I mention I’m Lovin It

#96 Furst on 05.13.12 at 11:47 pm

FURST!! It’s going to be hard when one’s Furst mortgage term ends and renewal is not approved. At that point, one will wish they had never bought in the Furst place.

#97 Jen on 05.13.12 at 11:52 pm

Private financing will become the norm if this happens and the banks will be pissy losing out!

#98 Bobby on 05.13.12 at 11:52 pm

This is nothing new….the requirement to requalify for a mortgage.
I looked at a home over 12 years ago here in Victoria where the owners were on the verge of foreclosing. The home had fallen in value and the bank wanted some equity so demanded cash upfront to remortgage. There was no cash so the home sold at a fire sale price.
Oh yes, they had bought the house on the high side on the advice of a realtor.

#99 house burden on 05.13.12 at 11:55 pm

Ouch!!! get out the vaseline, cause this is going to hurt.

Humm, didn’t europe just go through something like this?

#100 Mr Buyer on 05.13.12 at 11:59 pm

#73 Harry in Saskatoon, no bust here, maybe next year, or the year after on 05.13.12 at 10:44 pm
If this true, then why don’t first timers just get a 10 year term at 3.89%? This should mitigate any risk of being underwater at the end of the 10 year term.

A 360k mortgage will be paid down to 267k in 10 years at 3.89%. I wouldn’t worry about prices falling that much in most of the country.
Go back ten or eleven years or so and find house prices then. This will be the likely place at which house prices will be (just a guess) if we are lucky. It is not possible to wait out a bubble collapse, good luck if that is your strategy (that is a 9 high all in bet). Never mind the holding until prices return to these values strategies expressed here from time to time. Just look at the pictures of the houses and the prices under them.

#101 Chris on 05.13.12 at 11:59 pm

Garth, if the bank fails to renew the mortgage won’t some other bank just come in and bid on the renewal? Could a competitor exploit this situation to set itself up as a high interest renewal saviour? If banks were willing to drop rates to historic lows to compete with each other on the 5 year business won’t they just adapt to the new rules and compete further? I believe I see your point though that no matter how you slice it, the uncredit worthy/over mortgaged types are going to be toast in either outcome.

#102 meslippery on 05.14.12 at 12:00 am

BC Bring Cash #65
I am now thinking Life insurance on spouse for
mortgage balance. If the bank wants a new contract
you should be able to pay it off with No penalty.

#103 house burden on 05.14.12 at 12:00 am

I went to see some houses yesterday in Burlington and Oakville. Prices are dropping slightly and I smelled desperation on the part of some sellers. Two years ago my wife and I were house hunting in the same area. It was a crazy bidding war then. Not exactly the same now. I feel for those with low equity if this re-qualification rule gets approved. I’m so happy for being a renter though. Mr. Turner, thanks for this blog.

We sold our houses in 2008 and 2010, just last week, we had the same agents call us from out of the blues asking if we were interested in buying.

Ontop of that, we got phone calls from 5 other agents. I wonder where they got our number. I smell desperation!!!

#104 brainsail on 05.14.12 at 12:01 am

“The changes would require far more scrutiny of a buyer’s finances, verification of a home’s true value (not the bidding-war price)”

Are you saying that Canadian banks presently do not do a comprehensive appraisal of a property’s true market value before the mortgage approval? That buyers are automatically allowed to get a mortgage based on their pre-approved amount without verifying the true market property value?

Now that we know that Canada does not have sub-prime mortgages like the US did but instead they are known as non-prime mortgages what is the difference between a US conventional mortgage vs. a Canadian conventional mortgage?

As ex-pats we know the differences between the two countries and are tired of the almost daily conversations with family and friends from Canada who tell us that we are idiots for staying in the US and that we should return or face total financial destruction. They all express great interest and knowledge about the coming US elections and when I ask them if they what know about what is happening in Canada these days I get “The Sounds of Silence!”

#105 fiendish Thingy on 05.14.12 at 12:05 am

Is it just me, or have the rents in the Lower Mainland been creeping up the past 6 mos.?
I’ve been looking at 3bd/2ba 1800-2000 sqft houses(not suites) in the Maple Ridge/Tricities area, and they used to run $1600-1800 about 6 mos. ago, and are now $2000-2200 on average. More renters, fewer buyers?
Maybe you’re getting through to some of ’em Garth…

#106 Country Girl on 05.14.12 at 12:19 am

Could this be a scare tactic used to encourage people to lock into very long term mortgages (i.e., 10 yrs) and minimize risk for the banks?

#107 Joe_blown_away_by_high _housing_costs on 05.14.12 at 12:22 am

The house with the satellite also has a basement suite with bars in the windows.

#108 TimV on 05.14.12 at 12:24 am

Interestingly, wife and I have been looking (GTA area) since December. For the first time in one month (and we’re only half through the month), three properties we were interested in all failed to sell at the appointed time. Two were reasonably priced and should have generated a bidding war — don’t know what happened with them, but following up on one. A third was about 70k overpriced but apparently (according to the listing realtor) generated two offers; unfortunately the offer the seller accepted fell through on the financing clause; don’t know what happened to the second offer (was it even a real offer –best not to ask!)

Of course, we also saw a couple go for more than we expected, so it doesn’t necessarily imply a trend….

#109 cash is king on 05.14.12 at 12:25 am

This is all about the banks and profit, think about it? you have a mortgage and the term is up, the bank can see that you are a higher risk ( market depreciation,kids,job whatever) so they now have reason to up the rates and you pay more because you are a higher risk. Should have gone down like this years ago, that way people with high risks would qualify for less.
This will not end well .

#110 D-dawg on 05.14.12 at 12:29 am

Julie Dickenson, the Superintendent of the OFSI reports to Flaherty. If this goes down as is being suggested he will take the heat. C’maann, we think, F will back this call by the OFSI?

G, I called you out on this before. The mid-mortgage LTV call the loan scenario if fear mongering. Even you know this will not happen the way the MSM is reporting, even you.

#21 Thinker is on the right track. If this, in some way comes to fruition, the banks will use it to extract more money from the marginal borrowers.

People losing thier home over a mid-mortgage LTV calculation….The BS-O-meter is riding high on this prediction.

#111 patsan on 05.14.12 at 12:34 am

Everyone who thinks that OSFI rules are a jock and banks can surely find some workaround, think again.
If you are a bank and you hold a mortgage that were extended braking these rules, what is the chance of getting CMHC to cover the loss should the mortgagor defaults? Do you truly believe that banks are going to take such risk?

One scenario is that the individuals that would not qualify for mortgage at the bank are likely to be seeking for private mortgages and paying hefty premium for the privilege to swim underwater but in “their own” house. Those smart enough would probably bail at any price tanking the market. And good luck to those thinking their dwelling still cost 600 grand after the neighbour next door bailed at 450.

#112 Debtfree on 05.14.12 at 12:43 am

@ smoking man geez I thought your problems were superficial but Lenard cohen ! Man you need more help than anyone here can give . That’s the kind of music for the suicidal . Don’t stop thinking about tomorrow . For the sake of the blog get help quick . We need you . Duck Dunn died today . Please don’t you give up too.

#113 Alberta Ed on 05.14.12 at 12:44 am

CBC tonight aired a segment on how difficult it is to find reasonable rents in a couple of metro areas (Vancouver, Toronto), featuring several realtors who breathlessly described bidding wars for condos. (My BS meter immediately pegged into the red zone.) No mention of spec condos going up all over the place. And now OSFI regs… hmm… this is getting really interesting.

#114 TaxHaven on 05.14.12 at 12:45 am

Government meddling in the marketplace is a Canadian tradition…

Student loans should not be backed by taxpayers. Watch college costs come down!

Dental work for welfare recipients and the elderly should not be government subsidized. Watch dental costs come down!

Government medical insurance should be ended. Pay as you go. Watch healthcare costs come down!

Car drivers should be roadtaxed by mileage driven. Watch car prices come back to earth!

Government should stop borrowing, issuing bonds and printing. Watch big government shrink!

And CMHC and the Bank of Canada should be put to death. Watch house prices return to sanity…!

It’s that easy.

#115 99% on 05.14.12 at 12:50 am

Pa-leese. Why blame the realtors? Let’s stop and think. They were the tools (literally) or pawns in the game. The real masterminds of the whole scam are the mortgage brokers, bankers, lenders, financial specialists, credit brokers. They were able to “get” creative with financing. They were the ones that pre-qualified the buyers to go in and bid up the house. They were the ones that told the 25 year old that they could bid more than $100,000 over asking and run up the market. Lets see what these geniuses are going to do next. Aren’t these “professionals” paid by commissions? The higher the mortgage amount, the more they earn? Don’t they get paid for renewals and refinancing too? I hope they reap what they sowed in the last 10 years. These “loyal” clients will be staring at them with puppy eyes saying “bbbbut you told me that I qualified for 10 million dollars and that’s why I bought this house for 10.1 million dollars, what’s changed? Why are you showing me my contract without feeding me alcohol like you did before? Yikes, with the help of this handy magnifying glass you handed me, it says that the banks have the power to take my first born and my testicles without any written notice?”

Am I the renter with the pitch fork and torch? You bet. Just don’t get in my way.

#116 TRT on 05.14.12 at 12:57 am

For those that believe this will go through for existing homebuyers are the true definition of “Greaterfool”.

unbelievable….so people believe this ‘news’ but not other pumping ‘news’…unbelievable!

#117 Smartalox on 05.14.12 at 12:57 am

It’s not just the LTV that you may require a lump sum adjustment. You will also need to prove your ability to service your debt. Therefore, if you rack up a fat HELOC,or other debts when your mortgage is up for renewal, you can be sure the bank will take that into account too.

It’s not so much that your bank will deny your application to renew, but you can be damned sure that you won’t get a deal at the low, low rates they offer the first timers. You’ll get a rate that reflects your true risk to the bank.

Oh, and if you balk at the rate that the bank offers you, you ‘ll be free to take your business elsewhere. Of course in that case you’ll have to re-qualify for mortgage insurance, and your original lender will probably call your HELOC if you switch.

But don’t worry about the banks. They’ve already sold your mortgage at low low rates for the long term. They’ll make a bundle on the difference between what they sold your loan for, and the rates that they’ll charge you, and best of all, they’ll look good doing it, since they’re prudent, and it’s your own fault that you’re a bad credit risk!

#118 ANONYMOUS on 05.14.12 at 1:00 am

So the new OSFI regulations will require mortgage holders to requalify for their mortgage at the end of every term?


Oh-oh, that’s not good.

Just imagine it this way: If ‘JOE’ has just bought a house in 2010 because he’s a house-framer, making big money, then in 2013 the housing market stalls and he has a difficult time finding framing jobs here in Ontario, then what happens at the end of 3 years when he returns to the back to refinance his house, even at the same rates as they are now?
And his wife, ‘Susan’, who works as a home decorator gets laid off because there is just no work for her as people are cutting back on spending — well, its not pretty for Joe and Susan. They will lose their house.

#119 LB on 05.14.12 at 1:05 am

#3 pathcontrolmonk

Term, no. Amortization, yes.

#120 DondWest on 05.14.12 at 1:08 am

There was a time owners were happy to relinquish houses like those in the photographs FOR FREE. After all, who ever gets such a house is merely inherting a lot of hard labour that’s unpaid. The thought of paying one million to the owner of such a home makes me sick to the stomach. If anything, the person trying to sell such homes should be paying the buyers 1 million for all the hard work. . .

#121 $$$BPOE#1 on 05.14.12 at 1:09 am

RBC indirectly supporting what BPOE has been saying for a long time. The weak bids aka Canadians about to get mopped up. Bought with CASH folks. Sit back and watch the pros at work. On the bright side at least Canadians in BPOE have turned a great profit as opposed to buying in the U.S taking advantage of people’s misery. Onwards and upwards folks. Next time the renter blinks he won’t believe the changes. You thought 2002 to 2012 brought housing changes and unaffordability TO CANADIANS in the past decade. You an’t seen nothing yet. 2012 – 2022 the MASTER PLAN unfolds in all it’s glory. Watch and Learn. Livin It and Lovin It everyday. Please check out the VREAA website for the best in PRO Real Estate news from BPOE. Love this site as it backs everything I say
RBC Poll – “45% of British Columbians are relying on selling their home to pay for their retirement.”
**************OF CANADIANS************(my notes)
“People in B.C. are the least optimistic of Canadians across the country about their retirement, a new poll by RBC found. …
Nearly half — 45 per cent — said they are relying on selling their home to pay for their retirement.”

#122 Riding the Pine on 05.14.12 at 1:13 am

IF banks enforced the guidelines, they could force their slaves (clients) to lose their home and stop making payments to them? Why would they do that? If a homeowner turns up as negative equity at re-mortgage time, the banks will simply offer them a loan to make up the difference, and make even more money from them.

If people started losing their homes on any significant scale, it would turn the banks into real estate companies….and they don’t want that. They prefer to collect the drippings from the roasting debtors on the RE spit! Easy money.

#123 Crash Callaway on 05.14.12 at 1:34 am

#87 Condopoor
“has anyone noticed a correlation between these kind of houses and satellite dishes?”

Yes, the satellite dishes attract Alien interest.
The Pit Bulls & Rottweilers usually on those porches signal superior owner intelligence.
The contract between the owners and the Banks however halt any possibility for abduction as the Aliens sense the owners have already been anally probed by the money lenders

#124 Chaos on 05.14.12 at 1:38 am

Wow, I think that I used to deliver a newspaper to that last house pictured back in the day… before kids got driven to school and cell phones resembled a pay phone at the drug store.

Oh yeah, I’m as old as dirt.

That house is located on 41st Avenue just west of Ontario Street. It’s just barely on the west side. I’d bet my old 10 speed that it’s an old second world war house on a 33 foot lot with no basement. Lots of kids that I went to school with lived in houses like that. Their parents weren’t millionaires, their parents worked at the post office.

To get to that house from the street I only had two options, well maybe 3. I could walk to the house starting at Ontario street on the sidewalk behind the chain link fence or I could walk to the house via Manitoba street by way of the sidewalk behind the chain link fence. The third option was to stand on the sidewalk down by the road and just fire the paper at the door.(this was never attempted)(but it was tempting)

Back in 1970, you could probably pick up a place like this for 10 grand. But really, you still weren’t really legit. The west side really doesn’t kick in for a least 2 more blocks, until you get closer to Cambie street. That’s a bubble address to anyone that really knows. Your kid is still probably going to what is now a ghetto school. John Oliver. It used to be a good school, but not anymore.

I guess the upside is that it’s a good location if you’re afraid of a drive by shooting.

You know what they say…Location, location, location.

#125 Devore on 05.14.12 at 1:49 am

#40 Skip Breakfast

Allowing arbitrary refusal of renewal just seems to grant enormous power to the bank. When I sign a 25 year mortgage, I have 25 years to repay. As long as I repay, it’s no longer the bank’s business (nor the regulator’s) how I do that.

You’re thinking about this way too hard.

You don’t have a 25 year mortgage, you have a 5 year mortgage, amortized over 25 years. No bank is obligated to renew your term. And if your mortgage is insured, damn right it’s the regulator’s business.

#126 Vancouver2012 on 05.14.12 at 1:51 am

Hey Garth,

A friend of mine called me this evening to plan a bbq for next weekend. She is a very established relator… in the biz for the past 20 years. Anyway she shared that the banks are gone nuts. None of her Asian investors can get qualified for a mortgage unless they supply an income statement! Looks like the new regulations are starting to take effect. I’m looking forward to a 20% correction in Vancity. We took your advise a couple of years back and have been renting since … oh happy days :o)

#127 LB on 05.14.12 at 2:12 am


Who would benefit? The banks of course.

When owners can’t qualify upon renewal they will have to sell and repay the mortgage to the bank, or if owners can’t make their mortgage payments, banks will collect from CMHC AND collect proceeds from a foreclosure sale.

A no-lose situation for them. This, along with the corporate and financial bailouts, have been a highly orchestrated global tactic, with the specific intent of gaining access to taxpayer funds via governments who are representative of these sectors, not the general electorate. Did you really think that your vote, of ANY political persuasion, changes this? That is an illusion created to distract and placate the masses from what is in reality, a flawed and broken democratic system that has reverted to one that is no longer representative of its collective citizens, but of an elite.

Having reaped their intended profits in this way, the corporate and financial sectors are now trying, by again influencing Governments, to offload the resulting deficits through implementing “austerity” programs onto populations worldwide, and who we are now witnessing resisting this.

Evolutionary times are upon us.


#128 martin9999 on 05.14.12 at 3:08 am

How about Justin Bieber ?!?!

#129 betamax on 05.14.12 at 4:19 am

#5 jimboyyc: “Requalification on renewal will never happen….requalification on an insured loan is not in the banks interest as long as payments are being made.”

Regardless, it was done in the 1980’s when prices fell. I know of people to whom it happened, and there were many more stories in the news. They were asked to come up with the difference and couldn’t, and they lost their houses. Leverage is a b**** on the way down.

#130 GTA Girl on 05.14.12 at 4:24 am

Drove by the Trump Tower in Toronto.

What a disappointment. The service entrance directly on Bay street is a big yawning whole with dumpsters, garbage. The size of the service entrance is half the length of the building. Whereas the main entrance is small, lack imagination. Badly designed.

Condos everywhere, it’s as though the last year has gone ballistic. I’m still amazed that there seems to be no life around these condos. Bay street being a perfect example of miles of condos, with no amenities. Just cheap printing shops, odd fast food joint and empty retail.

Drove into the west end condo explosion near Park Lawn. Backed up with cars, no amenities…nothing to do except stroll along the lake…must be barren in -20.

Where’s the quality of life? Watch TV? Drive your car to Ikea? Drive your car to a grocery store?….fight your way out of the parking garage onto a street with 10 other condos?

If you look closely many units are empty. Some with cheap window coverings, like bed sheets. Yet sold at $250k+?

Makes no sense.

Sunday afternoon, Toronto streets were gridlocked with cars. I just don’t see the attraction with a badly designed city, bare minimum transit, and boring green glass structures of hotel room sized cubicles. The roads in rough shape, bicyclists dodging cars. Let’s not even mention an inept city council.

Toronto is beginning to show the ignorance of its leaders over the last 20 years.

It’s only going to get worse.

#131 99% on 05.14.12 at 4:32 am


In an article titled ” Brokers ain’t lying down for OSFI”

“While CAAMP supports a thorough underwriting structure for residential mortgages, it cautions the regulator from going too far in five areas: loan documentation; debt service charges; loan-to-value ratios; HELOCs; and down payments.”

Ummm….what’s left? Oh yes….

“Broker eyebrows have also been raised by the OSFI suggestion it wants lenders to consider a borrower’s age in relation to retirement during the underwriting process.”

Mortgage brokers are not pleased with any of these recommendations and will try their darndest to put an end to this tomfoolery. People should be allowed to borrow to the max and beyond without oversight or fear of rejection, even with one foot in the grave. This is all crazy talk and the mortgage industry will not have it. Will not have it. Do ya hear? We will not lie down. Now bend over.

#132 P & T S on 05.14.12 at 5:57 am

Almost tempted to go for this as a “Holiday Home” in Australia – cold in the winter (by Aussie standards) but well located. “Open to negotiation” too – we offered $100K below the “list price” and the RE Agent was keen to negotiate with the vendors . . . . .

Seems things HAVE started to change in Australia after all.


Or how about this one – been “on the Market” for over a year now, and the sellers are “Highly motivated”.


Maybe Toronto’s wonderful, but I’ll go for the 13 PRODUCTIVE Ha anyday over “those interesting properties” any day!!

#133 Rob now in Nova Scotia on 05.14.12 at 6:43 am

People, relax. These new proposals soon to be become law will not mean property virgins dump a $350,000 home because they need to come up with $26,000 when they renew. You underestimate the financial whizkids. These banksters will simply offer a nice, super high interest bridge loan (think Citifinancial type of rates) and thank the OSFI for handing them more money. Virgins stay in their homes and the banks make even more interest. Splendid, simply splendid.

You just made that up, didn’t you? — Garth

#134 Nick on 05.14.12 at 6:56 am

Please do not rest your case!

#135 SaraBeth on 05.14.12 at 6:59 am

As I watched this report from CBC early this morning, I thought of you Garth…

Rental Bidding Wars

#136 2centsCdn on 05.14.12 at 7:05 am

Your example of the compounding of equity evaporating is so right on the money. You would have $470K of payments and “still owe-ings” on a place worth $340K (tough to brag at the family functions and soccer fields about that). I have two sons (23 and 25) who say they’ll never be able to afford a home (we live 40k north of TO). I tell them to save save save …… because in a few years years there will be deals deals deals. It’s actually a great time for the 20 somethings who have given up.

If there’s any blame here it’s just that people don’t know math (and leave zero room for error in their financial lives). And just because a bank will lend you a million doesn’t mean you should take it. You wouldn’t let a 1 year old play with a knife and you shouldn’t give families making (a claimed) $150K a year a million dollar mortgage. Bad things will eventually happen.

#137 Q on 05.14.12 at 7:06 am

Of all the forms of wisdom, hindsight is by general consent the least merciful, the most unforgiving.


#138 futureexpatriate on 05.14.12 at 7:09 am

You can’t even FIND a house like those in Las Vegas or Florida. Those hovels were all bulldozed, utterly worthless.

By 1971.

“This Old House” and its child networks… Krokodil for anyone with a pulse.

#139 Q on 05.14.12 at 7:13 am

The things you own end up owning you.

#140 Kevin on 05.14.12 at 7:49 am

“You’d have to come up with $26,000 in cash to maintain your home loan”

Or else what? The bank will call the loan and force you to sell your home? Never gonna happen, Garth. But it certainly makes for some compelling, frightening rhetoric.

I guarantee you that the rules will be written such that nobody will have to come up with $xx,000 or be forced to sell. There will be other provisions (can renew, but have to stay with the same lender, maybe face a small interest rate premium to reflect the increased risk, or whatever), but the doomsday scenario you’re trying to suggest will simply never happen.

The bank will not renew your mortgage (there will be lots of notice), and you have to find another lender. Duh. Nobody is ‘forced to sell’ unless they live in a house they can’t afford. — Garth

#141 Darlene on 05.14.12 at 7:51 am

TRT on 05.14.12 at 12:57 am

Exactly my thoughts. Going by the examples of the 40 and 35 year mortgages, leads me to believe that the changes will be no different and apply to only new mortgages after the date of implementation.

#142 PopGoesTheBubble on 05.14.12 at 7:52 am


#143 Onemorething on 05.14.12 at 7:53 am

Read your contract. The lender is under no obligation to grant you renewal, and a good repayment record means nothing. This is meant to prevent our banks from carrying debt in excess of the security backing the loan. That is prudent. — Garth

Exactly, that fine print is there for a reason and while your at it see the bit on recourse either in your loan doc from the bank OR via the high ratio your doomed by via CHMC.

In Canada, mortgages are typically “full-recourse” loans, which means the borrower continues to be responsible for repaying the loan even in the case of foreclosure. Lenders can take legal action to recoup money from the homeowner if a foreclosed home is sold for less than the amount owing on the mortgage, plus many of the costs incurred by the lender. In many U.S. jurisdictions, mortgages are “non-recourse,” which means that borrowers can often walk away from their homes and the associated mortgage debt, leaving lenders with no recourse beyond the property.

#144 Dontcallmeshirley on 05.14.12 at 8:00 am

Hey mortgage brokers, another of your alternate lenders is on death row. Resmor will be liquidated as part of Rescap’s US bankruptcy:


#145 Dontcallmeshirley on 05.14.12 at 8:02 am

Another, more interesting OSFI reg is that amort periods be limited by a mortgagee’s age.

It happens in life insurance, why not mortgages too?

Take a look around your workplace, are there many 60+ year old folks?

#146 Fun For the Realtors While it Lasted on 05.14.12 at 8:16 am

Like Bruce McNall’s book, Fun While it Lasted, this will be the epitaph for the realtor industry, DA’s protestations notwithstanding. Hey, for a good decade, some realtors made out like bandits in a “profession” that requires less training than almost any other that I can think of. Hopefully they banked their earnings from this bubble and can retrain in a real profession. Hats off to them for pulling it off. I also know that the majority of the realtors I know didn’t bank their earnings very well because they thought the bubble would go on forever. Enter the current reality… In the internet age, realtors have really become dinosaurs yet the gullible public still shells over a massive commission when selling their homes. With a little effort and a lawyer, anyone can sell their home privately. Even if an agent approaches you about your private home for sale, you can offer the agent a flat fee for bringing an offer, versus the 5% they will try to get for listing on the MLS.

#147 Canuck Abroad on 05.14.12 at 8:30 am

Wow, so many defensive posters. This is good news people. The regulators have to control the banks; otherwise they take too much risk and do all kinds of stupid things. Banks need to be protected from themselves. So this move by the OSFI is good for the overall health of the Canadian financial system.

Nobody should be buying with less than 20% down anyway, and you will probably see a trend towards bigger down payments to protect against losing your home when prices fall which they will do. If you are stupid enough to buy when prices are high and positioned to fall, fine. At least you will have a good cushion so you don’t have to write a check at re-fin time.

This legislation should help focus buyers minds. So many say “I don’t care if prices fall because I plan to stay there 20 years”. Now these people will have to put their money where their mouth is.

#148 Skip Breakfast on 05.14.12 at 8:30 am

Regarding “read my contract”–fortunately I don’t have a contract. I got rid of my mortgage years ago. And the house is now sold off too.

But it raises another question for me–because something about this “regulatory” proposal is spooky. If the lender has always had the option not to renew for any reason (as per the contract you suggest I read), then why do they need the new regulation? I’m curious what the new regulation is forcing banks to do that they would not otherwise do? Thanks for any clarification.

Maintain LTV and adopt more prudent lending criteria. How is that difficult to understand? — Garth

#149 TurnerNation on 05.14.12 at 8:32 am

For doomers:


Overview of PIGS/PIIGS and other (Euro) bond yields, aka “The State of the Euro Meltdown” ;)
Greece, Ireland, and Portugal were already forced to ask for EU/IMF rescue because of their high bond yields.
See below for what countries might be up next, putting the Euro increasingly in jeopardy.

#150 Daisy Mae on 05.14.12 at 8:42 am

CBC, May 14th — “Prospective home buyers are not the only ones battling it out in bidding wars across Canada — increasingly, those looking to rent are upping the ante and fighting hard for the ideal, if impermanent, home.”

Manufactured story. Likely one CBC editor had trouble finding a rental. — Garth

#151 Mortgage brokers and realtors in a PANIC on 05.14.12 at 8:44 am

Look at this blog filled with mortgage brokers and realtors kicking and screaming about the free market. What are you guys afraid of the free markets? Oh that’s right you cash cow ponzi scheme would be over as it all comes crashing back down to economic reality. Look at these two vested interest group complain about not being able to rip off Canadian using Canadian taxpayer money. The problem is the government is not going to back stop the ponzi scheme any longer and thus BANKS will being taking the risk and will actually Look at the paper work. Ah..that is what the brokers are worried about. Crimes against canada have been committed by mortgage brokers and realtors. The law is now watching you . It’s going to be one huge housing crash in Canada.

#152 Skip Breakfast on 05.14.12 at 8:55 am

…unless you’re saying this regulation says that bank MUST refuse renewal if the borrower isn’t satisfying the criteria? Maybe that’s the rub? Because clearly I’m missing something. I should go do my homework and figure out how this regulation is intended to work.

#153 Dom on 05.14.12 at 8:56 am

Popgoesthebubble. #143

That article is pure propaganda . There are thousands of empty Condos and houses all over Toronto that sit empty. Bidding wars for rentals is a joke. Sold my house in the Annex and then had my pick of rental units I got what would be a $900k house for $2500 and I told the landlord his $2750 was to much and I would pay only $2500. With the overbuilding and countless empty Condos the article is pure made up.

#154 Q on 05.14.12 at 9:02 am

Just a thought, but….why is it that in order to sell you $10 worth of stock, a broker must first pass the securities exam (which is extremely tough) and then find someone willing to hire them (almost impossible without at least your BA..aka “bugger all”), yet to sell you (while presenting yourself as an expert) the largest investment (real estate) that 99% of the populous will ever own, all that is required is a 3rd grade education (not actually a requirement) and write a Micky Duck “open book” exam upon completion of a course that my dog could complete in half the time allowed?

#155 Market Bull on 05.14.12 at 9:10 am

Our banks do not want to own houses. They only want to own the loan for the house.

It. Will. Never. Happen.

They do not want a loan valued higher than the security, nor to be offside with the regulator. Your denial is amusing. — Garth

#156 Canuck Abroad on 05.14.12 at 9:11 am

And to those who think the government won’t let the individual homebuyer suffer, you are being naive. The banking problems in Ireland resulted from a burst housing bubble. The current bank problems in Spain are due to a bust housing bubble. Ditto for USA. The Canadian government with this regulation is trying to avoid similar banking problems and protect they system. That is infinitely more important than a few tens of thousand homebuyers losing their homes because they overreached.

#157 Daisy Mae on 05.14.12 at 9:14 am

“The key here is LTV – loan-to-value.”


I forgot this little fact when I posted yesterday. Nothing is ever as simple as it seems….

#158 Sebee on 05.14.12 at 9:24 am

#114 Alberta Ed on 05.14.12 at 12:44 am
CBC tonight aired a segment on how difficult it is to find reasonable rents in a couple of metro areas (Vancouver, Toronto), featuring several realtors who breathlessly described bidding wars for condos. (My BS meter immediately pegged into the red zone.)

Hope you noticed that blonde in heels with her lowly entry level 328 BMW, basic white a no charge option. I think she was a worker bee for Mr. Lamb, no?

That kid in the story seemed really happy to get the pleasure to pay $2700 a month with a $2K upfront loss on his old rental to get that new terrace. Who cares that he’ll have to have a room-mate to listen to all his noisy sessions with the girlfriend.

It’s funny how little material things matter. Yet to reach that conclusion it seems one must go through the process of “mine, mine, mine” greed.

Perhaps sanity will return one day. Perhaps we’re insane for thinking it will.

#159 Steven Rowlandson on 05.14.12 at 9:28 am

If I wanted Canada to fail and go to hell in a hand basket I would not change a thing.

#160 bigrider on 05.14.12 at 9:35 am

Wow, censorship for no absolutely no reason.

I always thought you were fair. My bad.

You say the same thing over and again. I endeavour to keep this blog interesting to all. — Garth

#161 Stevenson on 05.14.12 at 9:56 am

Bidding wars still taking place. Market is slowing down? 800K for a 50 year house with street parking.


It’s not always about affordability. Just because it is expensive to you or the average Canadian doesn’t mean there isn’t relative demand for the lack of supply. You must remember anyone in that has cash can buy a place here. If you choose to you could purchase real estate in Hong Kong, Singapore, New York, Dubai too.

Canadians are spoiled by their bubble wrapping government.

#162 disciple on 05.14.12 at 9:58 am

So, the banksters always had the noose ready when you signed the death-pledge. Are you surprised?

Come on now, who do you, who do you, who do you, who do you think you are,
Ha ha ha bless your soul
You really think you’re in control

Well, I think you’re crazy
I think you’re crazy
I think you’re crazy
Just like me


#163 The Thing in the Basement on 05.14.12 at 10:01 am

85 wopaholic – if the owners paid $3700/mo with the given numbers, the mortgage would be paid off in 10 yrs. Are you using different numbers or are you confusing mortgage term with amortization?

#164 Ex-Cowtown on 05.14.12 at 10:05 am

The bank will not renew your mortgage (there will be lots of notice), and you have to find another lender. Duh. Nobody is ‘forced to sell’ unless they live in a house they can’t afford. — Garth


Not being able to re-finance your house sounds to me like the definition of living in a house you can’t afford. As a friend of mine once said “It’s easy to buy a Ferrari, lots of people can do it. Affording one is another matter.”

If you can’t afford bank rates, going to a second or third tier lender will mean far higher rates and likely a demand for a larger lump sum payment. It would make the house even harder to afford, not easier.

#165 torontorocks on 05.14.12 at 10:10 am

GTA Girl #131. I know exactly what you mean. I work in TO, grew up and born here. Yonge Street had more zest, life and a scene back in the 80’s and 90’s than now.

Now its all residential and then, on the weekends, the 905ers come in with disposable cash, blow out the clubs/lounges/bars on King/Peter/Dundas/Ossington, then head home. Shoppers on Queen do the same thing – get in cars and move on. Harbourfront is awesome for 3 months then barren.

I got off at York street on Saturday night, drove through the Cityplace area there and man, was it boring. sitting on park benches like a bunch of 70 year olds, then go back to the shoebox and watch tv til sleep comes in.


#166 disciple on 05.14.12 at 10:16 am

#131 GTA Girl… What is your obsession with cheap window coverings? Not everyone can live among the artists in Kleinberg… What amenities are you referring to? I can’t make out whether you are trashing the condo industry or the entire city itself? Either way, I don’t think you understand the younger crowd. They view their condo as a place to crash, not a place to spend their waking hours as would someone your age perhaps? Nothing to do? You can take public transit and get anywhere within the city limits in no time. But perhaps you’ve never done that? Of course, I’m not defending anything or anyone, but I think your angle of attack is vague at best and at the same time, narrow and pointless and lacking in some depth. Oops… I don’t mean to be harsh, but I’m just sayin… because I love my glorious city, and it’s not clear to me what you are sayin…

#167 bill on 05.14.12 at 10:26 am

Duck Dunn died today? Bummer.
for those who may be interested:


#168 DOM MIA on 05.14.12 at 10:32 am

My last real estate agent still sends me stratus reports for listings in the Vaughan area weekly to keep me updated in case I see a property I like. I’ve noticed that as of a couple weeks backs the DOM (days on market) is no longer listed, in fact ‘DOM’ as a data field is no longer on the report for any homes. Is it because properties are sitting too long on the market? Kinda deceptive in my opinion because that # is important in determining whether the property is over valued or if you can go in at a lower offer. Additionally I would like to add that York region cities (woodbridge, maple, richmond hill, king city) are ridiculously over priced when it comes to real estate. Sometimes I think the suburbs are crazier than the city, at least your close to everything in the city, in the ‘burbs your paying over inflated prices to have to drive miles to run the simplest errand.

#169 Dupcheck on 05.14.12 at 10:37 am

Those 4 properties shown from Vanpoover are yuuuk, and they are trying to sell them for a million something, wow.
Even if that was a house in the Bahamas it would be overpriced and plain ugly. How blind are these buyers? What is so good about Vanpoover that gives homes like these the opportunity to market themselves at such horrid prices. The RE agent is probably laughing their ass off with the idiot that would buy such shaks with that price tag. It seems like money has no more value in cities like Vanpoover and Torunto. Watch out for blind people driving their financial lives to a ditch.

#170 B P O E ?? on 05.14.12 at 10:51 am

Confirmed Folks BPOE is Scared, listings are at record highs for this time of year, and sales have fallen significantly. No ones buying my Vancouver home even after several price drops, no one buys with cash here, not even their morning coffee, everyones tapped out, all the Merc and Beamer lease payments are due, gotta pay for the RE sign installer, mega listings, no sales = no income.

Mr BPOE you really are grasping for straws.

#171 SydCixel on 05.14.12 at 10:54 am

When the Office of the Superintendent of Financial Institutions brings in stricter borrowing requirements, housing prices will tank. The OFSI will get blamed. However, PMSH and F will deflect any blame by pointing to the supposed independence of the OSFI. Such institutions have a facade of independence incorporated into their charters for a reason.

#172 Herb on 05.14.12 at 11:03 am

#136 SaraBeth,

what I thought when watching the same thing last night would be unprintable even on this degenerate blog.

I can see the FIRE industry getting desperate and fomenting a rental panic to get people to reconsider and buy rather than rent. What really got to me was the Mother Corp giving two tarted-up realturds air time, a smiling Wendy Mesley serving up powder-puff slow balls, and the whole thing being disguised as “The National” news reporting vice RE advertorial.

Proof enough that Canadian real estate is as dead as Canadian journalism!

#173 Dontcallmeshirley on 05.14.12 at 11:05 am

Folks over-estimate the “full recourse” aspect of Canadian mortgages as a deterrent to defaulting.

If your personal affairs are strategically organized mortgage default is not a problem.

How do you think those guys with rental condo empires are setup? You honestly believe they’re personally liable for 10+ properties?

Not being married to your partner , and setting up segregated funds with an insurer are two basic steps to limit exposure from lender recovery actions.

You should become a comedian. Love your routine. — Garth

#174 45north on 05.14.12 at 11:06 am

Patsan: what is the chance of getting CMHC to cover the loss should the mortgagor default?

yeah the banks don’t want to explain to CMHC why they broke the rules

Warren Buffet: “you don’t know who is swimming naked until the tide goes out”. Since we on this blog are talking about OSFI, the banks are running a few “what if” scenarios against their data bases.

Smartalox: If a borrower takes out a HELOC , does the bank who holds the first mortgage know about it?

#175 Linda Pearson on 05.14.12 at 11:17 am

#166Ex-Cowtown on 05.14.12 at 10:05 am
“It’s easy to buy a Ferrari, lots of people can do it. Affording one is another matter.”

In a different context, I once heard someone say, “We ain’t got it long but we got it first!” All that granite and stainless and millwork seems like it would qualify for that comment, don’t you think?

#176 truth hammer on 05.14.12 at 11:29 am

Obviously….the rush to sell has already begun. Those who have profited are joining the cue od resellers in the semi orderly line up to the door. With new product being dumped and still more being created….any addition to the already fat listings pool will certainly flood the backyard in very short order. The fact is that anyone who bought in the last 24 months is already underwater….the new rules rebringing the refi standards in line with the Bank Act where zero equity loans are a big no no……..is going to put the listings and development community at each others throats.

Heres the reality….the market is already failing…the perception that it is healthy is a mere chimera supported by the real estate pimps who are either dependant on sales or the revenue sales generate….and who does the most advertising…nay may I say ALL the advertising…..yes my child….it’s the real estate pimps who fear reality as much as a junkie fears a heroin bust on the docks that may choke off the juice. Think of fiscal reality as the police department……slow….flat footed….but never absent


#177 Steve on 05.14.12 at 11:32 am

Garth, why find more useful uses for our minds when we have others to think for us? If we stop the lemming mentality, what will become of the society we have come to know and love? More on topic, what will become of the RE world when we all stop participating in the frenzy?

Buyer Disgust? Here? The Buyers At The Gate photo says it all…

#178 getreal-tor on 05.14.12 at 11:46 am

#131 GTA Girl on 05.14.12 at 4:24 am

Is quality of life any better in the burbs? Let’s be honest, Vaughan isn’t much better. In Woodbridge I see the elderly going for walks or entertaining their grand children while their children are most likely at the mall sipping ice lattes.

Life styles are rapidly changing from when everyone used to work to live, and now everyone lives to work and to keep up with the Rossi, Cohen, Chan, Gupta,

While I don’t see myself living downtown, I do understand why some people are drawn to it and the weekends are usually gridlocked because all the folks from the burbs descend into the core.

#179 getreal-tor on 05.14.12 at 11:55 am


Luxury condo glut about to flood Toronto housing market

The debate about who is buying them dogs Toronto’s condo boom. There are no figures for foreign buyers in Canada, which is seen as a financial safe haven amid global woes, but talk of affluent Asian, European and Middle Eastern investors abounds.

Janice Fox, director of sales at the Four Seasons, estimates 30 to 40% of buyers there have been foreign, but she said they intend to live in the units, at least part of the year.

Some 90% of the Four Seasons 210 condos have been sold, including one last year for $28-million, the highest price ever paid for a Canadian condominium. That buyer is foreign, but the family intends to move to Toronto, Fox said.

The resale market may be a gold mine for early buyers, as some prices have doubled since the first investors signed on in 2004 or 2007.

#180 daystar on 05.14.12 at 12:04 pm

#14 Bill Gable on 05.13.12 at 8:28 pm

Seems to me that the govy is trying to engineer a “soft landing”, Bill. Its the reason why they want to leave mortgage terms alone (amortizations, size of downpayment) which I think is ludicrous. The way I perceive it is that Canada has become addicted to housing due to government policy that has been so pro housing, its spurred overdevelopment, bloated valuations and a monster credit bubble and our financial institutions have forgotten how to make real money in the process. The only way to tame the beast is to kill it but they don’t want to or still think they don’t have to and the numbers of future victims from such assinine duncical fiscal policies continues to mount from delusional indecision.

CMHC is now at $550 million worth of insuranc in force. They have $50 billion worth of bullets left to spend. Do they really want to max it? Looks like F does and what this means is a household debt to GDP ratio of 160% if they try, exactly what the max is that Mark Carney said we would reach if current policies remain unchanged (without really calling it fiscal policy for past stated reasons) and exactly what Mark Carney said we should avoid. When CMHC hits $600 billion, its over. This bloated RE/credit bubble deflates fast and it won’t matter what Europe does or doesn’t do, or what happens to China or the U.S., we will have screwed ourselves in our own back yard.

Its beyond stupid to me as to why this government bent over backwards to appaise our banks and developers the way they did these last 6 years. I get the “re-election” thingy but what has the Harper government done to engineer a soft landing over the last year with a majority government? Readers should dial into the reality that 40 year nothing down mortgages were actually more expensive than 30 year cash back towards nothing down mortages with rates where they are today in a climate where the youth can buy homes with a credit card thanks to the lax lending regs brought in by F. Tighter credit? Really? For F to bleat on about how he’s tightened CMHC regs 3 times, it didn’t increase monthly payments any but under this chronically record low interest rate environment that was utterly predictable, actually lowered monthly payments exposing F’s fraudulent claims for what they are. Good God, what F did actually do should have revealed to Canadians just how deregulated CMHC was by F himself, the father of deregulation.

Banks will always go after the easy money regardless of systemic risk. Its up to our elected governments to shut them down, to say no to RE/credit bubbles especially so, because federal governments need to protect banks from their own greed. This hasn’t been done since the Harper government took power and a case can be made that this also occurred with the Martin government but certainly not the extremes we’ve witnessed under Harper. Changing 40 year nothing down CMHC regs in 06′ from 25/10’s couldn’t have made the contrast more clear, juicing housing at a time when it was least needed. Wreckless policy it was and has been this whole time so why stop now?

OSFI scares… while Garth makes huge points concerning the impacts current drafts will have once they become regs, at the end of the day it comes down to engineering a soft landing. The Harper government doesn’t want to touch CMHC regs for fear that it will lead to a hard landing so they do nothing… but tinker with OSFI and will our banks inform new mortgage holders of the changes to come when buying a home? Garth has again told us the answer (nice piece by the way Garth). At their discretion… all in the attempt to engineer a “soft landing”. What fools they are and anyone who follows or believes them concerning this market being healthy enough to buy into.

Look at the organized overall main stream media hush now on bubble talk. Numbers are off, so media in concert controls the message to boost confidence in the market, however falsely placed. The media, banks, government, developers, realtors, anyone who stands to gain from a market not falling to pieces promotes the false message that things are still fine when the market teeters towards doom. The longer this Harper government does nothing, the worse it will be going forward. What an incredibly sad, grossly inept government we’ve had these last 6 years to have bent over backwards to Bay St. the way F & H has and nothing has changed still with all of the self interests shilling they way through risk driving forward with PR fixated on the rear view mirror. Next year is the year of pain for the industry, its fate sealed by Household debt levels, CMHC hitting their limit and crazy high valuations supported only by mirage, stupidity, greed and phisod suddenly exposed for all to see.

#181 Dontcallmeshirley on 05.14.12 at 12:09 pm

You should become a comedian. Love your routine. — Garth


Egads, is that an ad hominem?

Garth, in your day job you tell folks that seg funds are not exposed to bankruptcy proceedings right?

There are a few caveats, but that is a truthful characterization of seg funds, yes?

I don’t deal in seg funds. For good reason. — Garth

#182 DML on 05.14.12 at 12:10 pm

You say the same thing over and again. I endeavour to keep this blog interesting to all. — Garth

And well done,this blog is a lot of things,but dull ain’t
one of them.

#183 Industrial Guy on 05.14.12 at 12:16 pm

Important names to remember … Yes, these brilliant (don’t think for a second they’re not) faceless bureaucrats actually do have names. Interesting milestones in their careers too.

Julie Dickson is the current Superintendent of the Office of the Superintendent of Financial Institutions. She was appointed to the position in 2007, for a seven-year term.

Ok, so some of the blog dogs may be laughing after reading that piece from Report on Business. No bank bailout in Canada, eh…

Karen Kinsley, CEO of the Canada Mortgage and Housing Corp….. “Prior to joining CMHC, Ms. Kinsley was Vice-President and Treasurer with two real estate development companies.”

An industry insider …. good choice for the job …

Did you know that private mortgage insurer Genworth is backstopped by CMHC? The federal government would cover 90% of any claims if it went under.


#184 daystar on 05.14.12 at 12:22 pm

#158 Daisy Mae on 05.14.12 at 9:14 am

Garth, maybe you have some answers here for me too? When I think about OSFI’s draft proposals, LTV’s only effect those who refinance terms on renewal. What about those who float with VRM’s? They don’t have terms coming up for renewal so does this mean LTV’s don’t get adjusted for them? What about terms that come up for renewal and current mortgage holders don’t requalify for new terms… can they go with VRM’s to avoid default? I get LTV’s and their effect on term mortgages but what about LTV’s on VRM’s, are VRM’s effected in the same way as term mortgages? If they aren’t… then its not much more than noise to engineer that so called “soft landing” the industry so preciously desires but at some point reality, higher interest rates or CMHC running out of money ushering in risk will be the end of this RE/credit bubble and as valuations drop does the government/financials really want to engineer unnecessary mortgage defaults? My thoughts are that OSFI will force negative equity holders to be cut off from future HELOC’s and force them to sweat it out with VRM’s. Opinions?

VRMs certainly do have terms. — Garth

#185 Canadian Watchdog on 05.14.12 at 12:23 pm

Urbanation says:

“Perhaps we are reading too much into it, but there appears to be a hatred for condominium investors, with commenters hoping for these people to “crash and burn”. If you take extreme pleasure in the financial failure of others and actively root for the explosion of your own housing market (so you can afford a unit), then we think there is seriously something wrong with you! If the housing market crashes, there will be a lot of misery, a lot of lost jobs and a lot of losses in the financial markets that would likely hurt these people as well. Be careful what you wish far, not all people that are successful had it handed to them, some worked very hard to get there.”


When it all goes down they’re going to blame this pathetic blog.

#186 Mooguy on 05.14.12 at 12:30 pm

Hi Garth.
I have been reading your “pathetic blog” daily for the last several years but this is the very first time I have felt compelled to write in.

I am shocked by what the banks, politicians, realtors, and CMHC have done over the last few years to manipulate and inflate the economy. That said, if someone is making their payments on time and are in good standing then it’s none of the bank’s damn business. Does this mean that if I won the lottery and have been making huge extra payments to get rid of my mortgage and then all of a sudden lost my job 2 months before my renewal then I am screwed? Who cares if they have to get the payments from the bank of Mom & Dad? If the payments are being made and they are in good standing then there is no threat to the banks or the taxpayers and therefore no one elses concern.

This credit bubble must end but rising interet rates will send the dollar soaring and result in a pounding for our exports. I believe that a far more reasonable alternative is for CMHC to only lend out the amount of the assesed value of the house by the City for the current tax year.

Assesed values are almost uniformally over asking and selling prices anywhere from 10% to even 50% and the one’s that are most over assesed value are the ones where they are sold to horny and irresponsible buyers who engage in price wars. CMHC should only provide mortgages for amounts that are 5% less than assesed value with their downpayment making up the remainder. If they are stupid enough to pay more than it is on their dime and not the taxpayers.

This would greatly inhibit any bidding wars which warp the market and it only provide mortgages that reflect the value of the property in that particular area. In short, you are getting a mortgage for what truly reflects the value of the home as opposed to what the house can sell for.

#187 GTA Girl on 05.14.12 at 12:30 pm

Dear Disciple:

Cheap window coverings & 40 storey balconies used as storage areas are indicative of the people living there and the out-of-control condo boards slapped together.

If I spent $400k on a box in the sky, I’d be hopeful that neighbors would be home proud and not hang a water stained bedsheets up as window covers to block the sun in their floor to ceiling green glass ‘lofts’.

I’d also hope not to see storage bins, old furniture on the balconies of the trendy new condos that asked $800/sqft.

Condo developers sell a life style at premium amounts that do not reflect the bad planning, tiny unliveable spaces within. When you have to close the dishwasher door to access the living cubicle, and have spent $350k to do it…then you know you’ve been robbed.

Don’t trash Kleinburg, Disciple….home of Pierre Berton and McMichael art community…it may be the last bastion of taste and culture in the newly debt slave city that is Toronto.

#188 GTA Girl on 05.14.12 at 12:45 pm


My anger is directed at the bad corrupt city planners who bend over for bad design, and go for the cheapest route possible that the builders push.

No, the suburbs are no longer ‘suburbs’. Gone are quiet streets where kids play, people walk and road hockey. Instead we have crowded townhouses, semis, cheaply built. Subdivisions with no sidewalks. 6 lane roads loop around areas making crossing as a pedestrian at risk of death.

And yet, people still buy this sh*t. They line up for it. It’s been 15 years of deteriorating craftmanship, bendable building by-laws, and municipal politicians who have their hands open for envelopes.

This bubble needs to burst. The mania with it will be the ruin of many over the next few years. This is just in bad construction alone. Ghettos are being built with a stucco facade. People pushed together like sardines in enormous fields of former farm land.

No, the suburbs are dead ends. There are still gems like parts of Etobicoke, scarborough, where it was possible to walk to transit, stores and schools.

We need the consumer to be King again. Not made to be feel ‘lucky’ to be #122 in line at the condo sales office.

We need a purging.

#189 Mooguy on 05.14.12 at 12:50 pm

I forgot to mention in my above post {remember I do say it was my first post} is that only providing mortages at 5% less than assesed value also has the very important result of providing LONG-TERM stability of the markey so we don’t get wild fluckuations in the market.

Assesed values increases can vary in different parts of a city but overall in the city as a whole they tend to rise at the rate of inflation. This is because large increases result in the wrath of the voters and politicians know that hefty increases in assesments is a one way ticket to the unemployment line at the next civic election.

Any changes in CMHC and the resulting mortgages must not only put an end to these obsurd price wars but must also provide a balanced long term solution so we don’t have huge corrections every 10 years with the economic and social harship that they leave in their wake.

#190 pop on 05.14.12 at 12:55 pm

Five-year fixed rates are still offered in the 3.29% range for conventional borrowers who have down payments of at least 20% of the value of their property.*** High-ratio borrowers who have down payments of less than 20% can now find five-year fixed rates as low as 3.14%***

#191 Mooguy on 05.14.12 at 12:56 pm

I can’t believe I screwed up again…………I meant to say assesed values are uniformally 10% to 50% UNDER asking and selling prices. In my defense, you must know that I got my degree from Carleton in Ottawa and the long time honoured tradition of Ottawa being the home of fudging numbers still effects me 25 years later.

#192 leo on 05.14.12 at 12:58 pm

The rental bidding war must be an illusion just like this housing market. With all the inventory coming up, why is there a bidding war on the rentals? Are there a lot of inventory that is purposely left vacant like in Vancouver?

#193 Buy? Curious? on 05.14.12 at 1:00 pm

I’m scared Garth, really scared. All I’ve been reading about real estate is coming across as if the bubble is about to burst! Even people that I spoke to during the few open houses I attended are starting to show their hesitation to buying in the next few months. (I guess all of us were just trying to some market research on a personal level) I know you’ve predicted a decline both on a national level and at the city level (Toronto down 35% and Vancouver down 50%) and have joked that people will have survive by eating squirrels but do you think Canadians will go through what the Poor and the soon-to-be Poor Middle Class has gone through? Will see a surge in homeless kids, people using food banks and massive unemployment?

This is starting to feel like the economic version of the Blair Witch Project.


#194 Buy? Curious? on 05.14.12 at 1:03 pm

Poor people and the Middle Class in the USA.

#195 Devore on 05.14.12 at 1:07 pm


Nearly half — 45 per cent — said they are relying on selling their home to pay for their retirement, while 37 per cent said they have an insurance policy or other personal investments they can use, and 11 per cent said they will be relying on their families to care for them in retirement. Forty per cent say they will be worse off in retirement than their parents, and just 44 per cent of British Columbians make an annual registered retirement contribution, the poll found.

What could possibly go wrong?

#196 Bottoms_Up on 05.14.12 at 1:27 pm

#111 D-dawg on 05.14.12 at 12:29 am
Good point, the Ottawa market would have to drop >25% for me to have to pony up money for renewal (and I bought at the end of 2009, 8% down, 35 yr am.).

What is sad and unbelievable is that if someone bought my house today with a 20% dp…their mortgage would be higher than mine is. And, they would have had to save $1000/mo for 6 years…

That person would have been better off buying with a 0/40 in 2006…and that $1000/mo would have just been gravy money for them…we do live in a sad time where merely renting money from the bank puts one on a path to financial success, whereas being prudent and saving $$ offers little reward…but I’m sure this truth is currently in the process of reversing…

#197 Bottoms_Up on 05.14.12 at 1:39 pm

#137 2centsCdn on 05.14.12 at 7:05 am
I think you are giving your kids sound advice.

And, it could probably be argued a family making 150k shouldn’t even be given 1/2 million….after all, they are a family, and you know how much kids cost. ; )

#198 FTP - First Time Poster on 05.14.12 at 1:43 pm


#199 daystar on 05.14.12 at 1:45 pm

#80 Canadian Watchdog on 05.13.12 at 11:09 pm


I thought the professor in question was an idiot until the 2nd… 3rd minute in so give the link a chance. Myron makes some strong points concerning accounting later on but ultimately, I think he misses the nature of the beast when it comes to his own ideology of the markets self regulating and board rooms making the right calls under a deregulated environment, especially with too big too fail corps. Greed is blinding to put it lightly and it needs regulation.

Unless insurance is backstopped by government which is the ultimate insurer, the pressures from defaults on too big to fail insurance corporations is too much to handle as shorts placed on corporations like Genworth are covered when things unwind in a downturn market. Overnight the shorts insurance corps have to cover outside of too much risk taken on by insurance corps themselves in market downturns are their undoing. I believe caps need to be placed based on capital myself. No one wants to encourage regulations or limits as credit is in an expansionary stage but when the worm turns and it always does, it only goes to show that expansions don’t last forever and when there is contraction it reveals why regulations are so badly needed in the first place.

You make strong points with insurance relating to housing but your premise relies on the government refusing to bail out CMHC or private insurers in Canada. That won’t happen. Canada isn’t like the U.S. with AIG when their RE/credit bubble burst with government being reactionary only after corporate bankrupcies emerged, in my way of thinking, way too late to calm market fears. The Canadian federal government backstops everyone in the mortgage sector. IF CMHC goes bankrupt or more accurately “nears” bankrupcy, the feds bail out CMHC and there is no risk of default. Private insurers like Genworth are also 90% insured by CMHC so this talk of CMHC being privatized makes me nervous unless they will still offer 100% insurance for mortgages in force that have 100% insurance now and I think its a way’s away. When this bubble blows, the feds will have to step in with bailouts should recourse loans have little effect on bankrupcy rates. We shall see.

Just so you know, the BoC also argues the same way as the professor does in the link above, that accounting practices need to change to make risk more transparent but I’m also a Volker rule supporter in the sense that the only way the system can truly safeguard against CDS’s forming their own bubble of sorts when markets experience a downturn (housing isn’t like commodity futures, the numbers can quickly become an elephant and as a result risk has to be dealt with in such a way, crippling as it is on liquidity) is through changes that the Volker rule impliments. This will have an impact on liquidity of course and I think it will ultimately effect government bond yields, of course, but its needed. Multiples on capital are too high and its driven by speculation so regulate it and reduce the risk. Let the risk be priced in in the form of higher rates if need be regardless of its impacts on credit growth.

One final point. Have you read the BoC’s link you provide and what the BoC objects to with the Volker rule in current form? I have no issues whatsoever with Mark Carney challenging rule #122 the way the Volker rule currently stands. Do you understand why that is?

My thoughts anyway.

#200 triplenet on 05.14.12 at 2:25 pm

#17 – Garth – does this requalification also apply to income properties as well?

If your real estate investment (income property) is leveraged and your term is up (or not), you may/will experience your own little “inquisition”. Be ready.
Be very ready.

With regard to residential mortgages, if your amortization is 20 years (who would go longer) and your term is 5 years, you renegotiate your mortgage (or contract) upon the 5 year term expiry.
Your mortgage is over at the end of the term. Period.
If the bank determines you are now over leveraged (for OFSI oversight OR CMHC risk insurance qualification) you must re-qualify, either by equity contribution, finding another lender or selling. There may be some other creative solutions that evolve however they must pass the OFSI/CMHC stress test.

So what is new?
All players in the real estate market who game the system with “creativity” and who have historically never been scrutinized……will be.
Flaherty warned everybody a while ago by saying – play nice, play legal and play safe. He meant it.

For those of us who don’t/didn’t “game” – no big deal.

#201 Aussie Roy on 05.14.12 at 2:28 pm

Muther on 05.13.12 at 11:14 pm

The value of any home is the market value which is determined by what one is willing to pay regardless if there was a bidding war or a private deal!


LOL, no that is the current market price not value. Just like other bubbled markets ther are times when people pay a much higher price than a properties value.

Value is determined by the properties income producing capacity or savings made from NOT renting.

Price is what you pay, value is what you get.

House prices are driven by emotion and debt, house values are driven by wages.

Let me guess, you are still in denial about the link between house prices and household incomes because this time it’s different.

Good Luck

#202 W-Hat on 05.14.12 at 2:28 pm

#131 GTA Girl – No one who lives in the city drives a car around regularly. It’s a bunch of crap to say the city sucks because a particularly suburban mode of getting around doesnt work in it. I rode my bike into work today along the Don Valley trail. It was a beautiful morning, took 20 minutes and I stopped at my favourtie local coffee shop for some conversation and a cup of joe. I got some sun and exercise, and tut-tutted at all those poor suburban types stuck on the DVP.

Regarding Bay street, for sure the condo explosion is overdone and in many cases not what I would call great architecture, however, Bay street is minutes from a hundred other streets where there is loads of things to do that you’d never see in the big box world of the suburbs.

Toronto is still a great city and it will continue to be. If it wasnt, why did you come? Why did everyone else come down on Mother’s Day too? It’s because it’s awesome here.

#203 Live it up on 05.14.12 at 2:34 pm

#73 Agree #85 Wopahotic you are incorrect about $3500 monthly payments. for 30 years length of Mortgage, it’s only $1690 per month (add property taxes and heating cost). All you need is about $76,000 annual family income to qualify. Much less income to re-qualify when principal drops below $300,000 after 10 years.

#204 Aussie Roy on 05.14.12 at 2:36 pm

Aussie Headlines

Even Bank CEO’s don’t know that bursting house bubbles create high unemployment.

National Australia Bank chief executive Cameron Clyne says house prices could decline further, but he expects the Reserve Bank of Australia to cut interest rates by another 0.5 of a percentage point this year.

Mr Clyne said yesterday that unemployment, which dropped to 4.9 per cent last month, was the key to future house price movements.

“They might fall slightly,” he said. “We’re not seeing a precipitous decline at this point, absent potentially rising unemployment.

* Current rate of price decline is on track with that of the US.


RBA (Central bank) admits. “we haven’t got a clue”

The Deputy put the missed forecasts down to three factors. Exports were weaker than expected, especially for coal. Housing construction was weaker than expected and private investment outside of mining was weaker than expected because more of the mining boom is imported than anticipated.


Cheap debt fixes all, no it doesn’t its emotion and debt that drives house prices. You need both.

Heard the old sexist joke about how many men it takes to change a light bulb? None … it’s a women’s job. Or was it clean the toilet? No matter, it illustrates a point.

How many rate cuts will it take to boost the property market? None … it’s a confidence job.


Another bubble about to POP, it’s global and it’s different everywhere until, it isn’t.


France faces 40pc house price slump

France faces a property slump of Anglo-Saxon proportions as the frothiest boom in French history finally tips over, threatening the country with an economic shock just as austerity hits.


#205 Canadian Watchdog on 05.14.12 at 2:49 pm

Video: TD’s Clark: Speculation Puts Banking System at Risk http://www.bloomberg.com/video/92590887/

Suuuure Clark. You’re all in favor of higher capital rules and no speculative prop trading. Wink*Wink* http://tinyurl.com/85tvjm8

#206 The real Kip on 05.14.12 at 3:06 pm

All my posts are on auto-delete?

#207 Ozy - Very Well on 05.14.12 at 3:19 pm

Say Garth, how long now until the consumerist type in debt up to the ears, is finally forced to sell the cardboard McMansion and goes back to the McCockRoach apartment?

#208 GTA Girl on 05.14.12 at 3:30 pm


I came downtown to drop off a friend who cannot access decent transit from a celebration in Mississauga without it taking her 4hours of bus transfers to get to a Sunday service transit system.

At that point bumper to bumper traffic is better than hitching a ride along Dundas street.

Toronto was once great, or had the possibility to be great. It isn’t anymore. Years of bad management, failures of the government, proliferation of greedy development community and lack of vision has rendered it stagnant.

Go to Boston, visit Barcelona…see what vision truly is. And ask why Toronto abandoned so many visionaries and great plans. Ask why you don’t have proper transit, beautiful boulevards, parks, street art, and roads that aren’t in decay.

Instead of being happy with the little being given…why not demand what our tax dollars should be going to. Torontonians need to take off their rose glasses and look who/what is screwing them, and demand better.

#209 Spiltbongwater on 05.14.12 at 3:41 pm

This blog should be called First World Problems, instead of Greaterfool.

#210 Mikey the Realtor on 05.14.12 at 3:42 pm

you’re full of if, just spoke to a banker and hes saying that the whole thing is a dog and pony show…just a topic for your blog but bullshit none the less.

Is that the banker in charge of GICs at the Kenora branch? — Garth

#211 TaxHaven on 05.14.12 at 3:53 pm

It’s incredible. The entire economy has deep fundamental structural problems which cannot be solved and which have a long way down to run, yet most commenters here are still stuck chattering about their latest scheme for somehow “investing” in yet more real estate…

#212 brainsail on 05.14.12 at 4:03 pm

#207 Live it up

“Much less income to re-qualify when principal drops below $300,000 after 10 years.”

So, in ten years you will be able quit your part time job on the weekends that presently supplements your full time income in order to make payments today and life will be good. By then interest rates will be same or lower, the equity on your house will be more than the principle remaining and your full time job wages have increased more than inflation. You must be one hell of a surfer and never…

#213 truth hammer on 05.14.12 at 4:10 pm

One minor point being missed on the seg fund argument is that they are enshrined under the Insurance Act and as such are exempt from CRA and legal liability issues that may arise. Seg funds,as part of an investment strategy for self employed persons is a viable avenue to entertain if you want to make sure that a bad business decision or tax ruling ( 100% in CRA’s favor) won’t wipe out any savings you’d like to leave to your wife and kid(s) before you pull the trigger. Yes the fee structure is higher…but….as with all/most insurance muts there is an ability to ‘sector select’ your investment profile as with any other product offerings. Of course the worst performers over time will be your ‘balanced’ and ‘bond’ funds…..dut that with the disclaimer that you have time to invest in a macro concept ( gold and equities) rather than short term micro strategies.

SEG funds with an MER of 5% make money for the insurance company, not for you. Just don’t be a crook. — Garth

#214 J.I.M. on 05.14.12 at 4:13 pm

@205 Aussi Roy

Good One!
As someone pointed out, the purchase price of a house is determined by what someone else is willing to pay. The rental price of a house is determined by what YOU are willing to pay.
That is why my sister is paying 2500/month rent for a bungalow in Toronto that could sell in this market for 750,000. Every bank out there would happily give my sister $750000 to buy that house, but wouldn’t give her $75 to pay the rent!

So my sister is renting with her money, not the bank’s, and 2500/month is all she, or any other potential tenant in Toronto , is going to pay to rent that house.

#215 stickler on 05.14.12 at 4:24 pm

@ #214 GTA Girl
>> Imagine the G Toronto area 10 years from now, with 1 million + more people….ick.

#216 99% on 05.14.12 at 4:24 pm

#216 Mikey the Realtor

So your banker friend says that this whole “thing” is bulls**t? Well, thanks for clearing that up. I thought that CTV had nothing better to report, so perhaps they started making up stories. Of course this has to go a lot deeper – they’d have ask F and C to keep warning the consumers about the out of control consumer debt, then plant a mole in the OSFI to announce that they are restructuring bank regs. Your banker must be the only person to know of this entire false conspiracy.

#217 Nostradamus Le Mad Vlad on 05.14.12 at 4:34 pm

#88 Smoking Man — “Before I toke a trip to the other side , Faking it” — A drunken or financial orgasm? See you on the other side for The Great Gig in the Sky!

#106 fiendish Thingy — “Maybe you’re getting through to some of ‘em Garth…” — About bloody time! Some young ‘uns who don’t fall for the contrived m$m trash.

#186 Industrial Guy — “Did you know that private mortgage insurer Genworth is backstopped by CMHC? The federal government would cover 90% of any claims if it went under.” — Which means taxpayers (us) would be on the hook if both sank.

I’m beginning to understand what Harper meant when he said you won’t even recognize this place. No wonder — we’ll all be broke and in the new jails.

#216 Mikey the Realtor — Hi Mikey! Mikey likes it! How is the left coast doing? Been wiped out by Fukushima yet? We’re all gonna to be Glow In The Dark Zombiewoofs! Keep the ‘conomy going, Mikey — Your Country needs U!

#218 Industrial Guy on 05.14.12 at 4:53 pm

Yes, Nostradamus Le Mad Vlad ….. That would be us, the taxpayers. That’s the Government of Canada’s preferred source of cash. There’s a certain irony in renters paying higher income taxes to cover the losses of over leveraged home owners.

#219 Devore on 05.14.12 at 5:14 pm

The rental bidding war is, am I sure, real, buy by itself not meaningful. Bidding wars happen all the time for all kinds of things not normally auctioned off.

It it typical in a real estate bubble market for the rental stock to suffer. It is simply a sign of a distressed and distorted market, when flash bidding occurs over something that is normally a drawn out and well considered process. Shelter, whether bought or rented, represents a significant portion of the household budget. These kinds of extremes tell us things are not well.

As a would-be renter, it means you have to spend a little more time and effort to find a nice place at a good price, and be the first one to get to it. And occasionally, it will mean having to out-muscle someone else.

#220 Koolaid Drinker on 05.14.12 at 5:31 pm

Whoa.. I’ve been to out houses that look nicer than these $1 mil plus shacks

#221 Dontcallmeshirley on 05.14.12 at 5:51 pm

@ #219 truth hammer,

One minor point being missed on the seg fund argument is that they are enshrined under the Insurance Act and as such are exempt from CRA and legal liability issues that may arise.



Seg funds are also shielded from divorce proceedings.

In the right circumstances the MER is well worth it.

Like bad judgment? — Garth

#222 Dontcallmeshirley on 05.14.12 at 5:54 pm

When loans are made to “big corporations” those corporations are typically bound by various covenants with their lender.

Periodic reporting of sales and income, balance sheet ratios, restrictions on purchases and sales of particular assets, and many others.

Is it so strange that residential mortgages be re-qualified at term?

#223 jess on 05.14.12 at 5:59 pm

Sounds like 90’s Ontario
Gov. brown idea for the four day work week
Whose anti business?
When there seems to be many egregious examples ,
Joseph Cassano (AIG ) ,Charles Prince

Mr. Dimon. said he believed in an equitable society and higher taxes.

Boris Johnson: next BBC boss must be Tory
London mayor calls BBC ‘statist, corporatist, defeatist, anti-business, Europhile and overwhelmingly biased to the left’

Boris Johnson said the next head of the BBC should be ‘free-market’ and ‘pro-business’. Photograph: Christopher Lee/Getty Images

Johnson had a well-publicised run-in with a BBC reporter during the mayoral election campaign. He was caught on camera accusing Tim Donovan, BBC London’s political editor, of talking “fucking bollocks” after he questioned Johnson’s attempts to secure commercial deals with News International while the company was being investigated over phone-hacking.
(guardian uk)

Gaddafi: Oil is like drugs. Find the commodity smugglers. Many are adventurous; they will buy from you at a discount and they don’t care about embargoes.

Al-Mahmoudi: I will look into East Asia. We should send people to Malaysia, Indonesia, Singapore.

Gaddafi: This is a commodity. It can’t be stopped.

Al-Mahmoudi: It can be sold, but we don’t want to appear as a state. We are trying through businessmen and brokers. Ras Lanuf and Brega must be operating.

In another conversation, Gaddafi and his prime minister express frustration with Spain, which has long had close ties with Libya. Before the embargo, Spain imported roughly 13 per cent of its oil from Libyan refineries. Gaddafi owned a multimillion-dollar estate on the Costa del Sol, and his son was enrolled in business school in Spain.

The Spanish king, Juan Carlos, visited Libya as recently as 2009, in part to promote business deals between the two countries.

Gaddafi: What’s wrong with the Spanish?

Al-Mahmoudi:I really don’t know. Especially the prime minister, he’s so distant now. I don’t know why. We supported them during their economic crisis and we deposited our money there. But they turned their back on us.

Gaddafi: Tell them they do not appreciate their own interests. Tell them we will recognise the Basques. Threaten them with this, and recognise Andalusia.


#224 Mr Buyer on 05.14.12 at 6:49 pm

#225 Devore on 05.14.12 at 5:14 pm
The rental bidding war
Rents will crumble as well as house prices. They are both unsustainable and products of this Real Estate bubble

#225 Mr Buyer on 05.14.12 at 7:03 pm

#222 99% on 05.14.12 at 4:24 pm
#216 Mikey the Realtor

So your banker friend says that this whole “thing” is bulls**t? Well, thanks for clearing that up. I thought that CTV had nothing better to report
I like how it was cited as being just another hoop. Nice try at minimization. LOSE YOUR HOME kind of rang at least a little bell

#226 Mr Buyer on 05.14.12 at 7:10 pm

#192 Mooguy on 05.14.12 at 12:50 pm
Any changes in CMHC and the resulting mortgages must not only put an end to these obsurd price wars but must also provide a balanced long term solution so we don’t have huge corrections every 10 years with the economic and social harship that they leave in their wake.
The idea that this bubble is part of a larger cycle is another aspect of minimization that I see from time to time (cycles are cyclical and we have passed through many so everything will be okay bedtime story). This BUBBLE is not part of a greater cycle. It is historic and of epic proportions that will likely never be eclipsed. Just take another look at the houses and price tags under them. This is not part of a cycle and the crash is not either.

#227 Mr Buyer on 05.14.12 at 7:21 pm

#189 Mooguy on 05.14.12 at 12:30 pm
Assesed values
I like the term bring stability to the market that is being bandied about with the term assesed values. It suggests that now is the time to bring stability to the market after a ten year run up in prices. Assesed values are yet another number that can be used to legitimize the prices associated with the houses posted in the blog. While we have passed into the irrelevent stage now, there is still the potential to rope in more people and that is not a good thing. BUYER BEWARE. THE BUBBLE HAS TOPPED. NOW IS NOT THE TIME TO BUY A HOUSE (no matter how quaint and rustic they may be). SALES ARE FALLING ACROSS CANADA.

#228 Mr Buyer on 05.14.12 at 7:28 pm

#188 Canadian Watchdog on 05.14.12 at 12:23 pm
Urbanation says:
If you take extreme pleasure in the financial failure of others and actively root for the explosion of your own housing market
I would invite you to take another look at the houses posted today and their asking prices. If upon re-inspection it does not come to you that our housing market has already exploded causing widespread misery then what I have to say will be of little or any impact and I will leave you to your assertion.

#229 Mr Buyer on 05.14.12 at 7:33 pm

#183 daystar on 05.14.12 at 12:04 pm
#14 Bill Gable on 05.13.12 at 8:28 pm
at the end of the day it comes down to engineering a soft landing.
A soft landing is another term that serves to minimize the dire straights we all are in. Again I refer to the houses posted today and their prices. I will further add that no bubble in history has had a soft landing as the ensuing crash is part of the definition of a bubble. Just ponder the logic for a moment. Imagine forking out huge sums of borrowed cash for a house that is falling in value. This is a prerequisite for a soft landing.

#230 Mr Buyer on 05.14.12 at 7:38 pm

#174 SydCixel on 05.14.12 at 10:54 am
When the Office of the Superintendent of Financial Institutions brings in stricter borrowing requirements, housing prices will tank. The OFSI will get blamed. However, PMSH and F will deflect any blame by pointing to the supposed independence of the OSFI. Such institutions have a facade of independence incorporated into their charters for a reason.
In the next election the policies that brought us the prices of the houses posted today will be the focus and it will spell the end of the conservative party for a generation or two. I can come up with 40 or so damning sound bites just off the top of my head. I would not want to be a conservative next election.

#231 Mr Buyer on 05.14.12 at 7:43 pm

I have a feeling that all our new real estate profiteers and members of the conservative party are going to wish they went into video game programming and development come next election.

#232 Devore on 05.14.12 at 7:44 pm

#230 Mr Buyer

Rents will crumble as well as house prices. They are both unsustainable and products of this Real Estate bubble

They will, but meanwhile we all need to live somewhere, this means paying market rents and prices.

#233 Devore on 05.14.12 at 7:51 pm

#188 Canadian Watchdog

If you take extreme pleasure in the financial failure of others and actively root for the explosion of your own housing market (so you can afford a unit), then we think there is seriously something wrong with you! If the housing market crashes, there will be a lot of misery, a lot of lost jobs and a lot of losses in the financial markets that would likely hurt these people as well.

To echo Mr Buyer’s comments, and because it bears repeating every few weeks.

What will happen will happen. Wishing the bubble doesn’t burst will not change the reality. The market just doesn’t care how you feel.

The market has already exploded. The damage phase of the bubble happens not during the crash, but during the run up. It is during the run up when resources (money, materials, environmental, time, effort, human talent, energy, opportunity costs) are misallocated and misspent. The bubble brings them back into alignment. The bubble and the bubble excesses bring a veneer of prosperity and wealth to support and lend credibility to the misallocation of resources, but it is fake prosperity. The crash reveals it as such.

However, history shows it is much easier to attack and shoot the messenger, rather than work to out the man behind the curtain.

#234 Tony on 05.14.12 at 7:54 pm

Re: #188 Canadian Watchdog on 05.14.12 at 12:23 pm

Explode usually refers to prices rising not falling. Implosion usually refers to falling prices.

#235 disciple on 05.14.12 at 7:59 pm

#190 GTA Girl… I wasn’t trashing Kleinberg at all. I have a number of clients I visit there each month. It is quaint but if you’re going to use this “village” as a model against which to compare with Toronto, then you’re off your rockers. Like I said, we can’t all live in Kleinberg, can we?

#236 Junius on 05.14.12 at 8:11 pm

#228 dontcallmeshirley,

Exactly. The realtors on this Blog are embarrassing themselves as usual. The fact that these rule changes are even necessary is what is really shocking.

How dare they actually verify income! How can people say we have a conservative banking system when they rules are not already in place? Or is conservative the new euphemism for stupid? Or lazy? Or fraudulent?

#237 dormator on 05.14.12 at 8:33 pm



#238 eddy on 05.14.12 at 8:38 pm

Maybe the banks just want dupes to sign up for their seven year terms?

#239 Johnny5 on 05.14.12 at 8:44 pm

#73 Harry in Saskatoon, no bust here, maybe next year, or the year after on 05.13.12 at 10:44 pm
If this true, then why don’t first timers just get a 10 year term at 3.89%? This should mitigate any risk of being underwater at the end of the 10 year term.

A 360k mortgage will be paid down to 267k in 10 years at 3.89%. I wouldn’t worry about prices falling that much in most of the country.

As someone living in Saskatchewan, I can safely say that most people here have their heads further up their asses than anywhere else in Canada, and Harry in S’toon is proof. Most people here are brainwashed in thinking that a $360,000 mortgage is no big deal, either in the long run or for the monthly payments. Anybody who thinks this way is:
1. Already a home owner and bought when prices made sense.

2. Really, really, really, really stupid and has no financial instinct.

Thanks for representing Saskatchewan Harry. Please don’t talk next time.

#240 disciple on 05.14.12 at 8:47 pm

#206 W-Hat…. Hear, hear! There is a place for everyone in Toronto, that is the single most redeeming quality that makes it great. As Ford’s men have found, divide and conquer doesn’t work here, Toronto is the unconquerable city-state. The same CANNOT be said for the rest of the Canadian wetlands (swamp), which Harper has turned into a banana republic.

#241 Canadian Watchdog on 05.14.12 at 8:58 pm

#203 daystar

“Myron makes some strong points concerning accounting later on but ultimately,”

Hard to take points from a man whose own fund when bankrupt and lost billions of investor’s money on speculative bets. Myron Scholes’ infamous Black—Scholes Formula crashed the stock market in 1997 during Russia’s collapse. Watch it here here http://www.youtube.com/watch?v=o_UxB6EEqWo

If you have no issues with #122, then you certainly don’t mind your deposits (earning no interest) to be used for waging speculative bank profits.

#239 Devore

I tweeted them today with this: @Urbanation takes extreme pleasure in pension funds losing money to low interest rates; life savings lost is not misery according to them.

#240 Tony

Their words not mine.

#242 Daisy Mae on 05.14.12 at 9:01 pm

#103 MeSlippery: “If the bank wants a new contract
you should be able to pay it off with No penalty.”


You can. When it’s time for renewal. A new contract is drawn up…and you can certainly pay out the old.

#243 jess on 05.14.12 at 9:12 pm

Does anyone know if the cbc pays Mr.O’leary ? Or does he do the show for free to self promote?

#244 lookoutbelow on 05.15.12 at 12:46 am

While I am on board with a severe correction in the Lower Mainland, would the Feds really allow the OSFI to implement a plan to “requalify” the customer at the end of each mortgage term?

Maybe, BUT would they really have the intestinal fortitude to have the housing market effectively crash when the whole industry is such a HUGE part of the Canadian GDP? I think NOT.

Here in Lotusland, the BC Liberal Government in their 2012/13 budget, gave first time homebuyers who purchase a new home a tidy sum of $10,000 tax free, to help keep the construction industry (i.e. the bubble) going. They have become too dependent on the property transfer tax revenues.

All that said, the Single Family Home Sales are down nearly 40% from 2011 levels and listings are up.

#245 daystar on 05.15.12 at 1:27 am

#247 Canadian Watchdog on 05.14.12 at 8:58 pm

The Volker rule being implimented by the U.S. will shrink access to liquidity not just in the U.S. but in other nations that rely on external buyers particularly in the area of corporate bonds at a time when corporate america is flush with cash. Some might see that as… loading the deck in your favor just a little?

#246 Skip Breakfast on 05.15.12 at 4:50 am

“Maintain LTV and adopt more prudent lending criteria. How is that difficult to understand? — Garth”

I think it was the way the article was written. The gist was lost. I think more than one of your readers may have missed the upshot, by the way. I’ve done some more reading, and now understand what the regulation is supposed to accomplish. Sheesh, I think a lot of years defending yourself against a lot of non-believers is turning you into a mighty prickly curmudgeon. Not that we don’t need our curmudgeons in these times.

#247 Tim on 05.15.12 at 9:14 am

Vancouver is China’s foothold in North America. If it weren’t for the Chinese buying up all the properties at “beyond insane” prices those dumps would never sell. It won’t be long until BC belongs to the Chinese and they’ll move more military into area and start their campaign. The Canadian government must know already, they probably just cant do anything “legally” to stop it. There is seriously something wrong when average salaries are a fraction of what average home sale prices are. Vancouver… one of, if not the, most unaffordable places to live in the world. GOD help us all.