F-bomb 2

BOMB

It took Paul Sethi about four seconds to smell a marketing opportunity.

The Toronto mortgage broker was thumbing up a storm on his Twitter account as news outlets across the country were disseminating the latest F-bomb. As you may have heard, CMHC has told mortgage lenders it’s capping the amount of money available to them (through the National Housing Act Mortgage-Backed Securities program). While economists were pondering what the fallout might be, Sethi had it all figured out:

CMHC

So, is he right? Will mortgage rates pop as a result of this?

Lots of people think so, like National Bank economist Peter Routledge. He’s convinced mortgages could rise .15% to .45%. Others are chiming in with forecasts of up to .65% – or more than half a point. That would push a five-year fixed-rate mortgage which bottomed at 2.69% three months ago to above 4% at all the major banks. As jumps go, it’s a big mudder  – an increase of about 49%.

But that’s not the only news throwing another storm cloud over the housing market. The Fed’s at it again. After a strong trade number in the States, two poohbahs at the US central bank stoked rumours Tuesday that stimulus spending there (called ‘QE’) will probably start to taper away – as early as next month.

That means less money soaking up government bonds, which means lower bond prices, which means higher bond yields, which means Paul Sethi may be an unwitting genius. Canadian 10-year benchmark bonds have been sitting near a two-year high (about 2.55%), expecting exactly this. And it’s the bond market, remember, than dictates long-term rates, not the Bank of Canada.

Canada 10-year bond

Now, back to CHMC for a minute. Why are these guys setting a new limit for the banks (other than F told them to)?

Because we’re house horny again. Piggy, in fact. The level of mortgage borrowing lately has been what CMHC calls ‘unexpected.’  Of the $85 billion set aside for this program this year, almost 80% had been gobbled up by the end of July. So by restricting the banks’ access to these preferred (cheap) funds, the feds are signalling if the lenders want to keep lending, they’ll have to shoulder more of the risk.

And you know what more risk means. Yup. Higher rates.

Besides, F’s a little miffed his elfin deity pixie dust has not done the job in flaccidifying the housing market. Last month’s boffo numbers (as suspect as some of them were) showing sales and price gains in Sodom & Gomorrah were enough to dethrone the little guy. Said Doug Porter, BMO’s chief egghead:  “I think this step is being taken because we have seen some signs in recent weeks that the market is not cooling as much as had been expected. All the debate has been whether we will have a soft or hard landing and I would question whether the market had any landing whatsoever.”

So the fact this happened at the same time bond yields are swollen should make things clear for anyone considering a house purchase . Don’t. You’ll pay too much.

A reviving market is not what the government wants, or will ultimately allow. Prices in most major cities have stayed sticky even while sales fluctuate. Weakness has developed at the bottom (condo) and top (faux baronial) ends of the spectrum, but average prices haven’t retreated. That means mortgage lending grows, and with it household debt.

If you’re the finance minister, this blows. Just when you need more exports and manufacturing jobs, you get a condo economy with most families soaked in debt, pensionless and buying houses at record prices. You already killed 30-year mortgages. You squished cash-back loans. You punted insurance on million-dollar listings. You goosed debt ratios. What’s left? Two bullets, maybe. First you throttle back on CMHC funds to hike loan costs. If that fails, well, you go nuclear.

That’s right. No more buying houses with 95% taxpayer-insured mortgages. It would be the end of civilization as we know it as down payments swell like a blowfish on Botox.

But we’re not close yet. This is your last chance. For the love of God, call Paul.

219 comments ↓

#1 TurnerNation on 08.06.13 at 6:31 pm

Agree with Cdn Watchdog’s post re. bonds in short term.

#2 Randy on 08.06.13 at 6:34 pm

Please sell off CMHC and save the Canadian Taxpayers a lot of pain…

#3 Smoking Man on 08.06.13 at 6:51 pm

The headlines all the rage, Boom in housing,

As I have said a million times on this pathetic blog.

It’s the herd, fundamentals mean nothing, what happens in USA don’t mean a thing, population growth, jobs, low rates.

My next million dollar invention.

Are you all ready for Smoking Man’s Herdometer.

Working on it right now, honestly I feel bad for you bubble heads, who’s identity is dependant on a crash, do you have any idea how stupid your friends and family think you are for pumping doom at thus point. You bet against a smoking man who talks to the universe…

Calling me a loon every chance you get. HA

Fundamentals are there, but, herd is the market.

And the herd is never wrong….

Lucky for you redemption is not that far away, but, after the huge spike, bottom will be right about we where market is now.

#4 Bob on 08.06.13 at 6:52 pm

“elfin deity pixie dust” – love it

#5 yeahsowhat on 08.06.13 at 6:56 pm

that won’t stop rich investors, foreign and domestic from paying cash and continuing to price local residents out of the market. You have two options, buy or rent. In Calgary you can buy, or pay $2000/month for a crappy apartment in downtown. The rental market is so tight that people will be forced to rent at high prices from investors that pay cash to buy up condos in the $300-$800 range

Delusional Calgarians, not rich foreigners, created those prices. — Garth

#6 neo on 08.06.13 at 7:00 pm

This is pure Chinese water torture with this nibbling around the edges when it comes to the CMHC. Get serious about it and raise the down payment to 10% and/or reduce the cap from $1,000,000 to $750,000 or $600,000 which is still twice as high as it was previously in 2003 I believe.

Down payment 10%.

Mortgage cap of $600,000.

The average schmuck gets that right away. If you have to explain how the change affects them in a paragraph you aren’t going to get the desired result.

#7 eddy on 08.06.13 at 7:01 pm

lie #1- secured, collateral mortgages are in anyway ‘risky’ to a bank, irregardless of down payment

lie #2- fake ‘risk’ needs to be lessened by insurance

add to this the fact that most banks are in the insurance business and are capable of providing an equivalent bullshit product to CMHC. Or, just let the low down payment crowd get 2nd mortgages. I agree with Randy, abolish CMHC

#8 Canadian house of cards on 08.06.13 at 7:06 pm

Canadians will borrow until they are bankrupt and that situation is well past that. The economy is falling apart as businesses are feeling the pinch of a tapped out consumer. For Lease signs are everywhere as more and more businesses close down. The big box stores are hurting real bad. People don’t have money to spend as all their income is going into the housing bubble. Look out below many will lose their job which is tied to the RE ponzi bubble and then lose their houses right after. Everyone in the RE industry knows housing prices are beyond a bubble but they have to lie or the game is over.

#9 astalavista baby on 08.06.13 at 7:08 pm

Looking forward to see the tapering. It will cause interest rates to skyrocket and will be quickly reversed.

As for CMHC – this monster has to be shut down. I positively refuse to pay for the fallout of F the hemorrhoid face.

#10 Gor Gon Lin on 08.06.13 at 7:09 pm

I just don’t get it. People in Canada honestly think our housing is worth what it is worth???

Our US office wants to move some of our operations to the States as they can hire staff at 20% to 30% less than what Canadian employees in our industry are demanding. I keep being told that we are pricing ourselves out of jobs. Well, how else can anyone afford a house in this country unless they make a whackload of money?

This will end badly…

#11 high in the 28th floor on 08.06.13 at 7:13 pm

From here the view is not so good! My condo doesn’t sell ( 6 months listed ) and value dropping like flies… Garth is having a great time today …and F is not realizing what he has done.
For you on the ground…Let the party begin… have the pop corn ready.

#12 astalavista baby on 08.06.13 at 7:13 pm

Obama pitches plan to shut down Fannie and Freddie

http://ca.finance.yahoo.com/news/obama-pitches-plan-shut-down-fannie-freddie-164126289.html
—————————————-
I have an idea here for F as he is apparently frequently reading this blog: Let’s insure the whole US and the all the world, galaxy, universe mortgages through CMHC.

#13 PokerCat on 08.06.13 at 7:13 pm

#2 Randy on 08.06.13 at 6:34 pm

” Please sell off CMHC and save the Canadian Taxpayers a lot of pain…”

Oh Please.

The Americans did that in good times to Fannie and Freddie, and look what that got them.

#14 JR on 08.06.13 at 7:14 pm

How will this affect my balanced diversified portfolio?

#15 mortgagebrokeron on 08.06.13 at 7:16 pm

spent weekend in pennsylvania, america is back…. shopping like crazy, help wanted adds everywhere, real estate is moving…

garth mentions this will make our interest rates go up and it will….

most people in order to get a variable rate mortgage or 1,2,3 or 4 yr fixed qualify on posted rate of 5.14% to get a five yr you qualify on current 5 yr rate .. now 3.39%

when that goes up to 4% it will lower amount you can borrow…

translation —- prices will keep going down

#16 PeterfromCalgary on 08.06.13 at 7:18 pm

If housing prices fall it will knock the wind out of our economy. I am worried about another more long term risk. Environmentalism is something which could destroy our prosperity in the long term. Crazies who blame everything from floods to earthquakes on man made climate change are stopping needed infrastructure projects like Keystone XL and the Northern Gateway pipeline.

This despite growing evidence that our climate is less sensitive to CO2 then most Climate computer models assumed.

Adding to Canada’s risk is the fact that China and India’s economies are slowing down. Canada needs to figure a way to counter these environmental crazies and hope that China and India’s economies pick up.

Read about reduced climate sensitivity here:

http://www.economist.com/news/science-and-technology/21574461-climate-may-be-heating-up-less-response-greenhouse-gas-emissions

Read about China’s and India slowing economies here:

http://www.nytimes.com/2013/07/15/opinion/the-slowing-of-two-economic-giants.html?pagewanted=all&_r=0

#17 An Cat Dubh on 08.06.13 at 7:20 pm

My niece and her fiancé want to buy a house. Both are in their early twenties. I always mention this blog and for them to read it before buying a house as prices are declining in the Brokanagan and many places for sale.

#18 joe on 08.06.13 at 7:25 pm

haha, this is hilarious. I don’t think people will stop bying until they are prevented from bying. I know ppl in Calgary in their 20s, with decent jobs buing their second properties as investments. There is a myth out there that house prices can’t go down, and everyone has the attitued that I will buy if I can, and to the government: “whats you gonna do about it?? ha?” haha…well I guess will see how far the govenment will have to go, I have a feeling that it will be nuclear :)

#19 Form Man on 08.06.13 at 7:28 pm

If the Feds kill the 5% down payment, then they will have backtracked on every single change they made to the mortgage market after gaining power in 2006. Perhaps someone in the opposition parties will point this out some day.

http://www.huffingtonpost.ca/2013/08/06/canada-us-gdp-recession_n_3714560.html

#20 luckyluke on 08.06.13 at 7:34 pm

The canadian housing bubble is bursting. Too late to exit now…

#21 Van guy on 08.06.13 at 7:37 pm

How does this affect preferred shares? Funds like cpd are getting shit kicked already.

So buy some more. Yield 4.55%. — Garth

#22 Rob on 08.06.13 at 7:39 pm

Those who can not borrow money or have any money for down payments will be out of the RE market but others will continue to buy, take on more risk and debt regardless of the rules. Whats it going to take is a sharp drop in RE value and a sudden increase in unemployment. Either way, they are screwed and cant be saved, we the savers or inversors are screwed when the economy tanks.

#23 Turd Durden on 08.06.13 at 7:44 pm

The license plate on that monster truck has a wheelchair on it. I wonder what handicap the owner has?

#24 Sideline Sitter on 08.06.13 at 7:47 pm

“irregardless” is not a word… and SO annoying.

#25 Babblemaster on 08.06.13 at 7:49 pm

“So the fact this happened at the same time bond yields are swollen should make things clear for anyone considering a house purchase. Don’t. You’ll pay too much.” – Garth

——————————————————–

This is really the same mantra repeated ad nauseum for the past 4 years. The uninformed house horny piggies that didn’t listen and bought Canadian RE, have made out like bandits.

My point is that nobody, without a crystal ball, knows what’s going to happen. Not even the flatulent one. Maybe, he knows even less than anyone else. The current insane RE situation is a great example of the unintended consequences of his actions.

Nobody has ‘made out like a bandit’ unless they sold and pocketed a capital gain. And to overcome entry (land transfer tax etc) and exit (commission etc) costs, it had to have been a substantial one. — Garth

#26 USA retired guy on 08.06.13 at 7:55 pm

The “bull” market is long in the tooth, debt has grown, and Bernanke is throttling back “QE” time to take a breather, and sell near the top (for half of the holdings).

Trees, stocks, and REITS don’t grow mean bound forever.

The US is near a debt ceiling, and terrified republicans are afraid of being “tea-partied” in the primaries for not being nuts enough, trying to work with the opposition democrats. So, they stall a solution, while the country burns.

Can Canada be far behind? No, same idiots, different label.

#27 Daisy Mae on 08.06.13 at 7:57 pm

“Sethi had it all figured out….”

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

Yeah? Just WHAT does he have ‘all figured out’?

“Buy now or be priced out forever”?

Truly pathetic.

#28 Van Isle Renter on 08.06.13 at 7:57 pm

This is hilarious… the more the CREA lies and says everything is great, the tighter F turns the screws.

What a bunch of maroons!

#29 Realtor #1 on 08.06.13 at 8:00 pm

The Housing Bubble is indestructible!
Lower the amortization No Problem
Debt ratio still nothing!
Look at all the changes that you guys are trying to pop this bubble. Ridiculous.

#30 DreaminginTechnicolour on 08.06.13 at 8:03 pm

When the [email protected] hits the fan in the market- there should be more good lease take-over deals for high end cars and suv’s having to be off-loaded by realtors:

http://www.leasebusters.com/en/default.asp

#31 Adrian on 08.06.13 at 8:11 pm

Naive question but: Will a possible rise in interest rates related to today’s news be a result of a prime rate hike or simply a higher retail rate at the bank as they take on more risk?

The BoC will not raise its rate this year, as the economy is too weak to sustain it. — Garth

#32 TurnerNation on 08.06.13 at 8:21 pm

When walking by my co-workers’ areas I most often am seeing them surfing MLS! Why – they have houses, already?
Circa 2000: everyone was checking stocks during the day. Commodities: what goes up…

Here’s a corker. Leslieville Special – semi. Hear your neighbours peeing?
With closing taxes call it 700,000. No parking. (Street fighting, only.) The local druggies and rubbies will break in. Likely requires another 50 in renos. Let’s call it a 3/4 mill all in. For this? It’s not even one of the desirable streets.

http://www.realtor.ca/propertyDetails.aspx?propertyId=13226761&PidKey=-1821392349

#33 jess on 08.06.13 at 8:21 pm

mr. f. must be reading about all those liar loans
850m.

http://www.forbes.com/sites/halahtouryalai/2013/08/06/bank-of-america-hit-with-fraud-suits-over-855m-in-mortgage-securities/

=======

#34 Daisy Mae on 08.06.13 at 8:22 pm

“Besides, F’s a little miffed his elfin deity pixie dust has not done the job in flaccidifying the housing market. Last month’s boffo numbers (as suspect as some of them were) showing sales and price gains in Sodom & Gomorrah were enough to dethrone the little guy.’

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

You mean there’s HOPE?

#35 RealtorsPanicking on 08.06.13 at 8:25 pm

Morons like Mikey the Realtard will probably need someone to explain what the news means. Welfare line getting longer every month now.

#36 Smoking Man on 08.06.13 at 8:29 pm

The BoC will not raise its rate this year, as the economy is too weak to sustain it. — Garth

Let’s not forget the all important trade balance, as long as trade is flat or or low, our new BOC governor x export development dude, he won’t touch the over night rate.

#37 Ret on 08.06.13 at 8:33 pm

The banks are going to do great with this. They have the perfect excuse to raise rates for both new mortgages and renewals even though renewals are already insured by CMHC.

Not much time left for all those multiple property “investors” to get to the exits.

#38 Smartalox on 08.06.13 at 8:34 pm

Boy, I bet the real estate cartels are kicking themselves: one day after they paint a glowing picture (though thoroughly debunked) of the state of the major real estate markets in Canada, F turns around and says ‘Not so fast!’.

Makes me wonder: if the cartels had been a little more ‘balanced’ in their reporting, would the finance minister have moved so quickly? If the cartels’ spin had been a little less rosy, might a case be made to hold off trimming CHMC?

#39 Smoking Man on 08.06.13 at 8:36 pm

#35 RealtorsPanicking on 08.06.13 at 8:25 pm

Morons like Mikey the Realtard will probably need someone to explain what the news means. Welfare line getting longer every month now.

……..

Your a suck, sore loser. Why pick on Mikey, not his fault the Herd is dumb.

There is nothing un ethical 9 to 5 taking financial advantage over the dumb. It’s called business.

So some sales pitches are over embellished, it creates jobs for all those idiots that think jobs are cool.

Jobs suck, just as easy, or easier to be an owner.

Slave away we grasshopper, and chirp me or Mikey if it makes you feel better.

Learn to lie, cheat and scam a bit… You will not be so angry.

#40 farmboy on 08.06.13 at 8:44 pm

I signed last week on a remort,3.69% ,10 yrs.Oh ya baby!Had to take [email protected] for dinner though…..

#41 CrowdedElevatorfartz on 08.06.13 at 8:56 pm

That photo reminds me of a truck parked on Robson St. in Vancouver a few years ago.
It had Alberta plates and was MASSIVE.
It was a Ford 4X4 F-650 gasoline engine pick up truck. I waited until the owner came back and asked him WHY he needed the truck? Then HOW much it cost to drive it to Vancouver.
He was self employed welder in Ft. Mac and it was for pure status. It cost $250 to fill and he filled it 6 times from Edmonton to Vancouver.

And people wonder why sheeple flock to buy $1,000,000 mouldy teardowns.

I have a one word explanation.

Insanity

#42 jaguar on 08.06.13 at 8:58 pm

“For the love of god call Paul”. Fun. I wonder what Paul Martin would have to say about this messy housing debacle the country is in…..
Why doesn’t some intelligent person who works in media call him up and ask/interview him?
Oh never mind, think you covered that one off on yesterdays blog, Garth.

#43 The end is nigh on 08.06.13 at 8:58 pm

Well, the house horny maybe up to their ying yangs in mortgage debt, but the signs are their wallets are stretched as far as they can be.

Here in Cookiecutterville, the food aisles in Giant Tiger and Dollarama are busier because people are finding Walmart too expenses.

But today I witnessed the ultimate. An older guy drove into the gas station and put three (3) dollars worth of gas in his gas guzzler …………..and paid by credit card!

#44 Victor V on 08.06.13 at 8:59 pm

The Globe and Mail’s Tara Perkins discusses CMHC’s new limit on guarantees for mortgage-backed securities and what it means for Canadian home buyers

http://www.theglobeandmail.com/report-on-business/video/home-buyers-affected-cmhc-cooling-measure/article13615586/

#45 neo on 08.06.13 at 9:00 pm

At #8 Canadian house of cards on 08.06.13 at 7:06 pm
Canadians will borrow until they are bankrupt and that situation is well past that. The economy is falling apart as businesses are feeling the pinch of a tapped out consumer. For Lease signs are everywhere as more and more businesses close down. The big box stores are hurting real bad. People don’t have money to spend as all their income is going into the housing bubble. Look out below many will lose their job which is tied to the RE ponzi bubble and then lose their houses right after. Everyone in the RE industry knows housing prices are beyond a bubble but they have to lie or the game is over.

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

I have an idea for you. Drive down the 401 west and try to exit Trafalgar in Milton/Halton Hills. Yesterday it was backed up all the way to Mavis. Why? A new shopping centre opened up. The police actually had to close off that exit at one point. I couldn’t believe the traffic. Whether it is REAL money or credit, there is a ton of it to still spend apparently and plenty of lemmings.

#46 Freedom First on 08.06.13 at 9:12 pm

Smoking man. We all know you are a liar. You tell us that on a regular basis. Maybe I have been reading Garth for too long, because lately I have been laughingly/amused at some of your posts.

On a serious note, everybody out there, follow Garth’s advice, balance, diversify, and liquidity. His % formula for investing/diversifying your portfolio will keep you out of trouble, and financially healthy over the long term.

People buying anything at record prices always always always leads to a cliff, and many will go over the edge. Happens every time. No exception.

#47 Devore on 08.06.13 at 9:17 pm

#2 Randy

Please sell off CMHC and save the Canadian Taxpayers a lot of pain…

No can do. CMHC is chock full of CMHC guarantees, that cannot be reassigned to a private entity. Nor would anyone pay anything close to par for the CMHC portfolio.

If you want to get rid of the CMHC, the only way to do it is to wind it down. And that is not a politically popular answer. No one complained about “government intervention” on the way up. There were plenty of hands out. But there will be bitter opposition every inch on the way out.

#48 Mikey the Realtor on 08.06.13 at 9:17 pm

#35 RealtorsPanicking on 08.06.13 at 8:25 pm

Morons like Mikey the Realtard will probably need someone to explain what the news means. Welfare line getting longer every month now.
——————————————-

Nothing to explain as it’s clear as water, people want houses and are buying them, the government is trying to repair their own screw up (40yo amorts and cheap rates). As for you, stay in your moms basement as long as you can and utilize your bong a bit more for that anger issue you have there.

#49 renters rule on 08.06.13 at 9:20 pm

@#7 Eddy (and agreeing with #24 Sideline Sitter)

for the love of gawd, use:

regardless OR irrespective

#50 Observer on 08.06.13 at 9:22 pm

Just when I think I can safely take a bit of a summer break from greaterfool.ca, there’s the headline today in the business page and I’m right back here…

#51 Nosty in Vladmania on 08.06.13 at 9:28 pm

#3 Smoking Man — “My next million dollar invention. Are you all ready for Smoking Man’s Herdometer.”

“. . . flaccidifying boffo Sodom & Gomorrah Herdometer . . .” — Is this a brief description of an octopus having cheese on toast for lunch?

#52 prefshares on 08.06.13 at 9:29 pm

So buy some more. Yield 4.55%. — Garth

Preferreds have lost face value recently…..yields have increased…long holders get screwed and take capital losses ..new buyers get better yields but increase risk…whats the alpha oh wise one?

Losses are only losses when realized. If you buy preferreds for yield, why sell? Amateur mistake. Over time all dips will erase. — Garth

#53 Notta Sheeple on 08.06.13 at 9:32 pm

“……If you’re the finance minister, this blows….”
=======================

What is it about arsonists always wanting to portray themselves as heroes when they return to extinguish their crimes?

#54 prefshares on 08.06.13 at 9:36 pm

#24….. SS……Irregardless is a word regardless.

ir·re·gard·less
adverb \ˌir-i-ˈgärd-ləs\
Definition of IRREGARDLESS
nonstandard
: regardless
Usage Discussion of IRREGARDLESS
Irregardless originated in dialectal American speech in the early 20th century. Its fairly widespread use in speech called it to the attention of usage commentators as early as 1927. The most frequently repeated remark about it is that “there is no such word.” There is such a word, however. It is still used primarily in speech, although it can be found from time to time in edited prose. Its reputation has not risen over the years, and it is still a long way from general acceptance. Use regardless instead.
Examples of IRREGARDLESS

I told them that irregardless of what you read in books, they’s some members of the theatrical profession that occasionally visits the place where they sleep. —Ring Lardner, The Big Town, 1921

#55 Chickenlittle on 08.06.13 at 9:40 pm

#45 Neo:

I live right off of James Snow, and yes it was SO busy! apparently we needed ANOTHER Banana Republic and/or GAP store in the GTA. That outlet mall stinks. It’s all the same crap, different location.

Canadian housing is like a 50’s zombie movie. Canadians are the damsel in distress and the zombie is chasing him/her. She can’t kill that zombie no matter how hard she tries.

Actually, F is the boyfriend that tries to save his girlfriend. He shoots at it, throws stuff at it, calls the army, but nothing works.

#56 astalavista baby on 08.06.13 at 9:44 pm

# 47 devore.

If you want to get rid of the CMHC, the only way to do it is to wind it down. And that is not a politically popular answer. No one complained about “government intervention” on the way up.
——————————————
I did complain. And I intend not to support the fallout of the CMHC. If that happens by paying taxes somewhere else so be it.

#57 Devore on 08.06.13 at 9:51 pm

#41 CrowdedElevatorfartz

Ah, the F650… it’s hard to imagine any city folk or suburbanite having a legitimate use for such a machine, but you gotta scroll down to at least image 25 to see it.

#58 kilby on 08.06.13 at 10:06 pm

F started this mess, at least he is trying to do damage control on the bad old decisions. It is about time, even Global may report this story…….

#59 Notta Sheeple on 08.06.13 at 10:07 pm

#39 Smoking Man on 08.06.13 at 8:36 pm

“…..There is nothing un ethical 9 to 5 taking financial advantage over the dumb. It’s called business……Learn to lie, cheat and scam a bit……”
=======================

Seems to me that strategy didn’t work out so well for our neighbors to the south.

#60 NotAGreaterFool on 08.06.13 at 10:07 pm

So with QE waning, fixed rates moving up, FIs now needing to put some skin into the game…any bold predictions anyone for the Sept real estate market?

I think the 1st week the market is back, will set the tone.

#61 NotAGreaterFool on 08.06.13 at 10:10 pm

I was expecting the next shoe that would drop to have been: wiping away (completely) the 30-year mortgages.

#62 dosouth on 08.06.13 at 10:11 pm

Might want to read the comment section of this article – Refinancing is creating home losses and bankruptcy – Where did I read that before….hhmmm (Especially the comment from EagleOne)

Banks ask for more equity

#63 Smoking Man on 08.06.13 at 10:13 pm

Had Son1 work with Son 2

Son 1 is opening up shop in the east cost in Sept. He’s going make 500k plus, not bad for a 27 year old.

Being a seasoned door to door salesmen brought him to onto town to work with Son 3 selling my software, 3 has been struggling.

They went out late this afternoon noon. 4 cold calls 4 kills, ha….. Love it.

The secret. Found his cheat sheet.

Fear of loss, prices going up
Sense of Urgency, now or never.
Join effect, don’t be left out.
Indifference, don’t care if you buy, lots of smarter business men than you how will take advantage of this opportunity.

I’m thinking real estate works same way.

3 f’s feel felt, found. Not sure what that means.

Asked my son 1 about this, he said don’t you remember telling me this stuff.

I said oh ya.

Truth, obviously booze frying my brain, I had no recollection.

But the 4 points of selling, all made up, all lies.

But the suckers bite every time.

Later was talking with son 3. I hate insurance companies, said why don’t you start a Facebook page.

He says can’t beat the machine, to much effort, too focused on making my first million.

If I could only figure out 2 and get him back on the road. Even a dirt road, His honesty, his sense of fairness, and his lack of I’m special is really tough on him.

#64 Shawn on 08.06.13 at 10:17 pm

IRREGARDLESS…?

Sideline Sitter says: irregardless” is not a word… and SO annoying

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

Well, irregardless of whether it is a word or not, people use it a lot… which as pointed out above … makes it a word… irregardless of your annoyance.

The purpose of words is communication, not kowtowing to the machine and excessive adherence to standard spelling and definitions, am I right SMOKING MAN?

#65 not 1st on 08.06.13 at 10:18 pm

“Losses are only losses when realized. If you buy preferreds for yield, why sell? Amateur mistake. Over time all dips will erase.”

This is exactly what my friend is saying if his condos fall by 50%. Why doesn’t the same analogy apply across all asset classes?

Prefs don’t cost 300K each, aren’t illiquid, have no condo fees or priority tax, require no tenants or maintenance and yield better with returns taxed at half the rate. Otherwise, same. — Garth

#66 Garden Maven on 08.06.13 at 10:22 pm

And here my husband always thought that I had coined the term “faux baronial”. Here’s a terrific example in my neighborhood: $1,399,000.00, 30 RAVINA CRES, ANCASTER, ON. Apparently on the market, but doesn’t have a sign up. http://www.royallepage.ca/en/property/ontario/ancaster/30-ravina-cres/1002680/mlsh3110881/#.UgGuvG0kgyY

#67 takla on 08.06.13 at 10:23 pm

I see lots of these extreme vehicles being driven on our streets by what seem to be 20-something yr old kids at all times of the day,I guess thier handicap is the inability to hold a full time job,dealing dope pays way more,how else could they afford these vehicles??moving on…this cmhc thing will be another nail in the coffin of over inflated canadian realestate…..the sheeple have to be PROTECTED from themselves,,,,bout time

#68 Mel on 08.06.13 at 10:24 pm

Okay Peter from Calgary:

You want more pipelines, since you do not believe in climate change. You are hoping that China and India will be in a position soon to buy more of our oil…

You know what is the problem in this country, it is the dependency on commodities and real estate. You take one, or both, and you do not have much economy left.

I fear, that our Harper government is once again looking for a short term gain through commodities based economy, and not where the future economies of the world are heading.

We Canadians are going to get poorer as a result.

#69 James on 08.06.13 at 10:26 pm

@ #13 PokerCat on 08.06.13 at 7:13 pm

Sorry, Randy is absolutely right. Fannie and Freddie were not truly private, as it was understood by all they were backed by gov. This assumption, proved to be true, was exactly why risky loans were given….because the risk was assumed to be on gov.

This is exactly what we have in Canada, except we are honest about the taxpayer (CMHC) backing the loans.

Lowering amortization, increasing down payment, capping secured loans, etc is addressing the symptoms. The cause is the CMHC. Get rid of it, and the government would not need to dance around trying to control the monster it created. Remove the reactor, and you don’t need to worry about constantly tending the fuel rods.

#70 Smoking Man on 08.06.13 at 10:27 pm

#63 Shawn on 08.06.13 at 10:17 pm

You nailed man. Don’t feed the machine, make up your own words, who the F does the machine thinks it is telling you what to write how to rite, irregardless of what ever obedient diploma towers say.

I call them

Shafiggers.

#71 Dom on 08.06.13 at 10:28 pm

Neo#45

I’ve noticed the malls are full of people who WALK around and window shop. The only real business I’ve noticed was the food court. Walk around the mall and people walking and getting in my way. Walk into a store and it mainly empty as sales people run to you. I hate malls . If you have no money don’t goto the mall. That would eliminate 60-70% of the windows shoppers.

#72 Sideline Sitter on 08.06.13 at 10:35 pm

#63 Shawn — happy I struck a chord… think about the word to understand why it’s useless and annoying — whomever uses it is saying the opposite of a negative (a positive).

The prefix “Ir” means “not” or “the opposite”.

The opposite of regardless is “with regard” (no ‘S’!)

Using “irregardless” as “regardless” is incorrect.
I dun care who uses it, it be dum soundin, ain’t that tru?

#73 Julia on 08.06.13 at 10:38 pm

I had lunch today with a relatively new immigrant living in Toronto who told me she is obsessed with buying a house. She said since moving to Toronto she’s never felt any connection to any neighbourhood she’s lived in and blames renting. After hearing my 10 thousand and one reasons for not buying, and she didn’t argue with any of them, her obsession remained undented. Her one saviour is she can’t affor to buy right now. Hopefully for her prices will have dropped by the time she saves enough for a down paymant.

#74 Amazon on 08.06.13 at 10:38 pm

#3 Smoking Man, “And the herd is never wrong…” ROFL, tell that to the buffalo at Head Smashed In Buffalo Jump…

#75 Hh on 08.06.13 at 10:50 pm

Fact – How do you make the US economy grow? Revised Q1 2013 US GDP from 2.4 to 1.1%. Q2 at 1.7%.

Fact – 75% of the 900k jobs created since January are parttime.

Wow. Great recovery.

Growth is growth. The recovery continues. Just ask gold. — Garth

#76 OK123 on 08.06.13 at 10:52 pm

Not enough people understand the correlation between bond markets and mortgage rates.

#77 Doug in London on 08.06.13 at 11:10 pm

Why would anyone want to buy grossly overpriced houses (largely with borrowed money in most cases) when they could buy cheap REITs, preferred shares, or ETFs that invest in them? Although off their low, utility stocks are also still cheap (such as NPI, CSE, RDZ, TA, and AQN), which ultimately translates to a higher yield.

#78 daystar on 08.06.13 at 11:20 pm

For full blown bag bloat, we need more gas! CMHC is near the $600 billion mark and that’s it folks, she’s up for sale, enjoy the deflation that follows. Rates are going up, bring 20% down or else, CMHC might not be around in the near future. How can CMHC (Harper never liked crown corps anyhow) survive when the government has allowed valuations to soar so high and cheap credit to saturate for so long, when CMHC as an institution has been so badly abused? Debt has shot way, way past incomes here and there is no easy way out.

Hearts out to the families that will get destroyed by what is to come, and for what.

#79 T.O. Bubble Boy on 08.06.13 at 11:29 pm

No mention of Obama & co. proposing to eliminate Fannie and Freddie?
http://www.nytimes.com/2013/08/07/us/politics/obama-fannie-mae-freddie-mac.html

How long until F + Harper pick up a paper and read about this? If the 0% down / 40-year mortgage party was introduced to compete with U.S. lenders, you’ve got to think that CMHC will get the Fannie and Freddie treatment too.

(or, even more likely, maybe OFSI has already told F that if he wants to sell CMHC, they need to stop backing so many liar loans at below-market rates?)

#80 Devore on 08.06.13 at 11:32 pm

#71 Sideline Sitter

The prefix “Ir” means “not” or “the opposite”.

The opposite of regardless is “with regard” (no ‘S’!)

Conclusion: people love being ironic hipsters.

#81 standatdesk on 08.06.13 at 11:35 pm

How does this affect reits? Do they have another 5% to fall?

#82 will on 08.06.13 at 11:43 pm

Prefs don’t cost 300K each, aren’t illiquid, have no condo fees or priority tax, require no tenants or maintenance and yield better with returns taxed at half the rate. Otherwise, same. — Garth

LOLOLOLOL! Good one Garth!

#83 daystar on 08.06.13 at 11:49 pm

This is going to hit the market ugly. We are talking about 66 Billion going out the door in the first 6 months of this year vs roughly $15 billion for the last 6 months. At $350 million per bank in Canada plus credit unions, there is going to be around $2.5 billion approved monthly through CMHC as opposed to the $11 billion monthly in the first half of the year. Credit volume approved by CMHC is likely to shrink by 75% or more and that’s bad as every buyer wanting to buy a house with less than 20% down, or buy a house with less than 750 square feet on the main floor, needs CMHC approval by law. Y’all know what that means, its means buyers who don’t bring buckets of persuasion (20% down or more) won’t be buying and that will crush approvals and later, RE valuations. How can it not? Oh, and just add higher rates. Bye, bye, bubble.

We all knew it was coming but did we all think it was going to be as badly managed as this? Y’know, like the way the Harper government has managed CMHC and housing in general for 7 years now leading up to this mess? We tried to tell ya…

#84 KommyKim on 08.06.13 at 11:53 pm

RE: #23 Turd Durden on 08.06.13 at 7:44 pm
The license plate on that monster truck has a wheelchair on it. I wonder what handicap the owner has?

Mental.

#85 takla on 08.06.13 at 11:54 pm

re #74 garth”the recovery continues just ask gold” your hitting that nerve again garth,you seem to continually give au a bad rap.It has just recovered over 100.00 per oz in the last few weeks and has just been hit again by the bernanks suggestion of easing around the corner.tell me if gold is such a bad bet why does the usa hold over 8000 tons of it?Why are the emerging economies of the east china,India and others buying gold hand over fist at these prices ?

#86 Snowboid on 08.06.13 at 11:57 pm

Interesting analysis of how median price values can be skewed – in Victoria:

http://househuntvictoria.blogspot.ca/2013/08/skewmorphism.html

#87 bob on 08.07.13 at 12:04 am

Really Garth… the headlines are used to grab attention (much like your previous posts about media). This is more like a spit than a bomb. A rise of .15%-.45%? This ain’t no hunker down in the bomb shelter.

#88 pathcontrolmonk on 08.07.13 at 12:04 am

In this morning talk show with Prett Banerjee, even Global Toronto is propagating the message of sell now and rent because of an inevitable crash. Funny how they title it with a headline that will appeal to RE bulls.

http://globalnews.ca/video/763974/hot-gta-real-estate-market-in-july

#89 Chaddywack on 08.07.13 at 12:05 am

Garth there’s no way they’ll can CMHC…..that would be political suicide!

C’mon you were once a politician, don’t tell me you don’t know all about that ;)

#90 Cory on 08.07.13 at 12:14 am

As I said numerous times,the only thing required here are higher rates. And 2, as I’ve also said numerous times, if realtors were smart, it’s obvious they’re not, they’d stop the pumping and stay below the radar instead of taunting F like they are.

#91 lookoutbelow on 08.07.13 at 12:36 am

As I have said before many times on this pathetic blog:

CMHC + Banks = MORAL HAZARD

Take away the CMHC guarantees and the Banks’ lending behaviour will change in a an instant. Suddenly the Banks will have to charge (higher interest rates) more commensurate with the risk that THEY are taking.

#92 Julie on 08.07.13 at 12:50 am

Fact – 75% of the 900k jobs created since January are parttime.

Wow. Great recovery.

Growth is growth. The recovery continues. Just ask gold. — Garth

—————-

Yeah…..growth like green grass growing in moldcouver with 0.5 degree weather (global warming) and rain/clouds for six straight months.

#93 Dienekes on 08.07.13 at 12:55 am

How anyone thinks we will have a ‘soft landing’ in housing is beyond me. Oh wait, the government is managing it, nobody manages things as well as the government, especially money.
F is bent over a barrel of gasoline, trying to ignite a slowdown with two pieces of flint. Everyone is convinced it will burn softly.

#94 Carpe Diem on 08.07.13 at 12:58 am

Smoking Man,

In terms of your #2 … you are dealing with a middle child.

These are the kids that are and will be independent since in the early years focus was on the first, then the baby (#3). The middle child ends up being your independent and probably your most successful. Just let him be free.

#95 Just TDot on 08.07.13 at 1:47 am

#45 neo

I was at the outlet yesterday. Yes lots of people but most comes out empty handed. The deals were terrible or perhaps we are too broke.

#96 van fan on 08.07.13 at 1:57 am

Garth,

Have been a fan for years. In Vancouver, you can see on the ground very quickly the effect of mainland Chinese buying, particularly in the high end. It is not a racist thing to say. It is a fact. The best I have seen for empirical evidence is the following article. I have ben advising people for years to cash in on this wave of buying, mostly in a few west side areas, and cannot believe it is still going on, albeit more slowly. Prices have gone down maybe 10% in the last year, but are still ridiculous. Would be interested in your views of what may happen to these vancouver areas over the next few years as more mainland Chinese arrive, but rates go up (realtors wil tell you many buy with cash) and incomes stagnate (many work in China). If you live out here, in one of the areas attractive to these buyers, maybe half the houses on your block are already owned by them. Again not racist. Fact.

#97 van fan on 08.07.13 at 1:58 am

Oops..Here is the link to the article.

http://www.scmp.com/news/china/article/1213977/how-mainland-chinese-immigrants-are-transforming-vancouver

#98 Peter on 08.07.13 at 2:05 am

Hi Garth,

with F clamping down on CMHC risk , and expecting the banks to assume more risk (good thing). I own rental properties with 2 mortgages coming due within a year. I have an opportunity to sell one only , I can only sell one because two capital gains taxes in the same year would not make sense.

When you talk about REITS being on sale and providing decent yields, which I agree, should not be sold.

With my investment properties making a similar or slightly greater yield, both legal duplexes with empty basements and garages and parking for my own use (not counted in yield but worth about 800mo for each house )

I was planning on selling in early 2014, regardless of a slight downturn , for personal preference reasons , I do not think SFH in downtown Toronto will suffer much because the high demand and little supply of such. In my area there are constantly people asking my tenants ( I have excellent tenants, thank you !) for my number so they can ask if I want to sell. (realtor may not be required)

Given your advice for REITS, is the wise financial move to keep the rentals and yield?

I am currently paying 3.79 on a closed 5 year collateral mortgage (no CMHC), and I could switch to 5yr closed at 2.6% variable (increasing my yield) or another 5 year closed at 3.79 (still way cheap).

I currently have a buyer at about 10% below market value , when you factor in not paying a realtor , and a 25000 saving to my Capital Gains Tax, it is an easy out and that was my plan.

All the important stuff is new (roof , furnace, electric, yard, basement, ac) and I do my own maintenance and my tenants do not want me to sell, and they would now be forced to pay market rent , as they should not and could not buy, currently they are paying way below market rent , and they deserve it, having paid and respectfully used my space for years.

Garth you are making me question whether or not I should sell . I am already fairly liquid but not diversified and if I sell , I do not envision buying another investment property again, had a lot of fun but I have also had my fill. I can also provide the new mortgage to the new owner at 3.5%-4% and make less yield with little risk. Should I follow your REIT advice?? I have already given my tenants an honest heads up of my intentions , they would be thrilled if I changed my mind. Thank you

#99 Dean Mason on 08.07.13 at 2:14 am

My local federal MP Liberal here from 1993 to 2010 kept sending me newsletters about how he was responsible for dropping mortgage rates from 11.00% to 9%, 7%,6%,5%,4% etc.

The Liberal party was saving me $1,500,$2,000 a month and he was for the middle class and low interest rates. It was the bond market and Greenspan,Bernake U.S. Federal Reserve that manipulated mortgage rates to the bottom of the Barrel.He was taking credit.

This has been going on for a long time at least 18 years.It was not Jim Flaherty’s master plan to make consumers be in huge debt buying real estate like it’s water.The Liberals have alot to do with this was well.

#100 Rob aka Captian and Mrs Slow on 08.07.13 at 4:48 am

“How does this affect preferred shares? Funds like cpd are getting shit kicked already”

Just love how people panic when the market puts good shares on sale.

Here’s Andrew Hallans take on it

a href=”http://andrewhallam.com/2012/11/i-really-love-it-when-stock-markets-fall/”>I really love it when stock markets fall

#101 Rob aka Captian and Mrs Slow on 08.07.13 at 4:49 am

sorry

a href=” http://andrewhallam.com/2012/11/i-really-love-it-when-stock-markets-fall/“>I really love it when stock markets fall

#102 drydock on 08.07.13 at 5:14 am

Smoking man.

————————————————————-
The herd is never wrong eh.
Ever hear of lemmings?

#103 The real Kip on 08.07.13 at 5:47 am

I learn something every day. Today I learned that Me Flaherty seems comfortable with CMHC lending out 85-billion annually. He seems able to turn the heat up or down as required to maintain that number. Sounds good and really, they should get rid of 95% financing, it wasn’t that long ago we did not have it.

These are bad times to be a basement dweller waiting to ‘vultch’ eh?

#104 Smoking Man on 08.07.13 at 6:28 am

#90 drydock on 08.07.13 at 5:14 amSmoking man.————————————————————-The herd is never wrong eh.Ever hear of lemmings?

A lemmings-o-meter, doesn’t quite have the same tone as a Herdomoter

I have abandoned the project, to many variables, can’t point my computer to the universal consciousness consolidator. Compute doesn’t have legs, can not get the mandatory 2 years of door to door knocking sales for a true picture of its prey.

That’s why I successfully make the right choices.

A Herdomoter, what was I thinking..

#105 neo on 08.07.13 at 6:33 am

At #94 Just TDot on 08.07.13 at 1:47 am
#45 neo

I was at the outlet yesterday. Yes lots of people but most comes out empty handed. The deals were terrible or perhaps we are too broke.

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

I’ll say the same to you…

So you sat in traffic for hours so you could get to an outlet mall in the middle of nowhere so you could stare at thousands of people not buying anything? Ummmmm ok.

Outlets 20 years ago had real deals. They had excess inventory of high end products at deep discounts. All outlets are now are outdoor malls that are cheaper to contruct and give people the illusion of saving money.

#106 T.O. Bubble Boy on 08.07.13 at 7:05 am

@ #88 Chaddywack on 08.07.13 at 12:05 am
Garth there’s no way they’ll can CMHC…..that would be political suicide!

C’mon you were once a politician, don’t tell me you don’t know all about that ;)
—————————–

Again – check out the news on Obama’s proposed end to Fannie and Freddie… if a Democrat can propose to kill government-backed mortgage insurance, surely an Income-Trust-killing Conservative could as well?
(unless they are already trying, and they couldn’t polish the turd enough to get the Teacher’s Pension Plan or the Banks interested)

#107 T.O. Bubble Boy on 08.07.13 at 7:07 am

It will be hilarious if/when CMHC finally does go up for sale, and all of the Big Banks run away because they KNOW what kind of crap has been thrown over the fence.

#108 Angelo on 08.07.13 at 7:18 am

#25 Babblemaster

Great post

Nobody has ‘made out like a bandit’ unless they sold and pocketed a capital gain….. — Garth

Lame argument, as that exact logic applies to the balanced diversified portfolio.

Houses do not provide income in the form of (tax-efficient) dividends, interest or distributions. Portfolios do. Both provide capital gains – hopefully – but only when realized. — Garth

#109 fancy_pants on 08.07.13 at 7:33 am

Yep, F can keep shuffling the chairs. At least he has succumb to the reality we are sinking. MC, being the savvy seaman, already left in lifeboat #1.
Remember, the last half sinks much quicker than the first.

If the economy tanks and F finds himself out of a job he can fall to plan B; Costa Cruises is always on the lookout for good sailors.

#110 Stoopid Idiot on 08.07.13 at 7:37 am

Everybody knows that the dice are loaded
Everybody rolls with their fingers crossed
Everybody knows that the war is over
Everybody knows the good guys lost
Everybody knows the fight was fixed
The poor stay poor, the rich get rich
That’s how it goes
Everybody knows

Everybody knows that the boat is leaking
Everybody knows that the captain lied
Everybody got this broken feeling
Like their father or their dog just died

Everybody talking to their pockets
Everybody wants a box of chocolates
And a long stem rose
Everybody knows

Everybody knows that you love me baby
Everybody knows that you really do
Everybody knows that you’ve been faithful
Ah give or take a night or two
Everybody knows you’ve been discreet
But there were so many people you just had to meet
Without your clothes
And everybody knows

Everybody knows, everybody knows
That’s how it goes
Everybody knows

Everybody knows, everybody knows
That’s how it goes
Everybody knows

And everybody knows that it’s now or never
Everybody knows that it’s me or you
And everybody knows that you live forever
Ah when you’ve done a line or two
Everybody knows the deal is rotten
Old black joe’s still pickin’ cotton
For your ribbons and bows
And everybody knows

And everybody knows that the plague is coming
Everybody knows that it’s moving fast
Everybody knows that the naked man and woman
Are just a shining artifact of the past
Everybody knows the scene is dead
But there’s gonna be a meter on your bed
That will disclose
What everybody knows

And everybody knows that you’re in trouble
Everybody knows what you’ve been through
From the bloody cross on top of calvary
To the beach of malibu
Everybody knows it’s coming apart
Take one last look at this sacred heart
Before it blows
And everybody knows

Everybody knows, everybody knows
That’s how it goes
Everybody knows

Oh everybody knows, everybody knows
That’s how it goes
Everybody knows

Everybody knows

http://www.youtube.com/watch?v=Lin-a2lTelg

#111 Evangeline on 08.07.13 at 7:42 am

#90 Take away the CMHC guarantees and the Banks’ lending behaviour will change in a an instant. Suddenly the Banks will have to charge (higher interest rates) more commensurate with the risk that THEY are taking.

It’s not that simple. #61 dosouth’s link was illuminating. The real game is that the banks package all the guaranteed mortgages into triple-A rated securities which which are then purchased by government, pension plans, even the CMHC as income investments. Shutting down that lucrative game would have a far-reaching negative effect on pensions and other payouts that depend on the income.

#112 Mr Buyer on 08.07.13 at 7:46 am

As long as money is available sellers will hold out. There is money available to carry massive debt in the form of Helocs and the like and there is money available to willing buyers. I cannot see how this will stop without making money unavailable which in turn would bring about the hard landing that all this tapering off is trying to avoid. We will be saddled with crazy housing costs for generations as a result of this bubble if something is not done about the availability of huge sums of borrowed money.

#113 fancy_pants on 08.07.13 at 7:54 am

Speak of the devil…
http://www.dailymail.co.uk/news/article-2385923/Relief-mortgage-payers-Bank-England-unveils-plan-rates-0-5-unemployment-falls.html
ROFL, who would have guessed this strategy?

#114 2CentsCndn on 08.07.13 at 8:06 am

Smoking man.
————————————————————-
“The herd is never wrong”.
SM! …. by your own admission you make money betting against herds. No herd was ever number one (the podium only holds one person). If everyone’s home is worth a mill or two mill who cares? So many are day to day broke. You can’t have a million and spend it too. Oh wait … yes you can …. it’s called a home equity loan. It’s all false ….. dept is relentless. So if this gov’t slowly pinching off of no risk lending for the banks is going to create another mini rush by fools for houses …. it gives people who know economics realities another chance to sell their house for a good buck. But the entire GTA can not sell their homes the same month and retire to Coboconk or Wawa. This CMHC capping will only delay the inevitable … not end it.

#115 Evangeline on 08.07.13 at 8:26 am

can we have him back?

LONDON (CNNMoney)

“The Bank of England said Wednesday it would not raise interest rates until U.K. unemployment falls to 7%, a level it doesn’t expect to see for about three years.

Issuing detailed “forward guidance” on monetary policy for the first time under new Governor Mark Carney, the central bank said it wanted to avoid a premature rise in market rates of interest — the cost of borrowing for businesses and consumers.”

http://money.cnn.com/2013/08/07/news/economy/uk-economy-rates/

#116 maxx on 08.07.13 at 8:36 am

#8 Canadian house of cards on 08.06.13 at 7:06 pm

Absolutely true- and big box stores are now going smaller.
Walk into ANY second-hand store and see how busy it is. Dollar stores are (as usual) also doing a roaring trade. Regular retail is so passé- just check out the cars in the second-hand parking lots: high-end aplenty, looking for deals. And charity shops have the added advantage of charging NO tax.
One second-hand shop employee said that every Thursday, a group of female lawyers comes in to scan for bargains. Legions of people protecting their assets.
Re-sizing the RE pie by raising rates 10 basis points per quarter to normal would see retail (tax stream) spending resume. RE has skewed the entire economy to illness and there is no overnight fix.
Sorry central bankers- you’ll have to leave your superhero capes in the box for now.

#117 Jeff in Moose Jaw on 08.07.13 at 8:43 am

Even the government can’t afford to keep supplying this party with unlimited cheap booze.
85 billion in guaranteed alcohol this year, okay? Not a drop more.

What the consumer thinks: “whatever man, I’m so tipsy I don’t even know what I’m doing”

#118 Ret on 08.07.13 at 8:43 am

If banks had any skin in the game on a mortgage, they wouldn’t be loaning money to lots of buyers with poor credit and low paying jobs and minimal down payments.

Also homes in sketchy areas or in decline would be paying higher mortgage rates as they do in the US banking system. Condo financing in Toronto would certainly cost more due to the risk the lender faces due to over supply.

Home inspections would also be more thorough. Few banks would be lending a mortgage on an 80+ year old home filled with knob and tube wiring, asbestos, and unpermitted illegal apartments.

As it is now, everyone is paying just about the same mortgage rate regardless of their income, debt utilization or the property that they buy. It is so Canadian!

#119 Stoopid Idiot on 08.07.13 at 8:47 am

#41CrowdedElevatorfartz

Your concern for the Albertan from Mcmurray sort of baffles me. Your definition of insanity does not affect his reality. What do you care how he spends his money? This is the tenets to socialism, to take from those that have to give to those that don’t (Fanny & Freddy come to mind). Again he earned his money to freely spend it as he see fit. Who cares that this truck is his catalyst for getting out of bed in the morning, or only represents 10% of his net worth. At the very least it’s only your insanity as you have possibly not reached his level of income. Possibly maybe you have… so what. We should all be free from listening to others misguide perceptions or expectations (conformity). The very fact that you waited around to glean from him pearls of wisdom into his stupidity was only lost on you… this is his normal, not yours. I own a humble home in Calgary but guess what… I have another in Comox both paid for and still only thirty five percent of my net worth. I have no margin on any of my investments but I do have a secured line of credit on both homes for no other reason than title will never be challenged by anyone but the bank. (not sure if I have explained this well or if you would understand my reasoning) After thirty years in Mcmurray and at 54 years of age, I continue to work because I enjoy it. Now for someone who can appreciate the offensiveness of passing gas in confined spaces tomorrow I will start my Dodge Diesel warm it up a little longer than usual with my oversized 40 horse injectors (you know what that means.. un burnt fuel or black exhaust) and do my part in turning the Canadian country into a tropic paradise just in time to retire on the Island… I also support the idea of clubbing seals

http://wiki.answers.com/Q/Tenets_of_socialism

#120 gotthardbahn on 08.07.13 at 8:48 am

Hey Garth –

Excellent column, but no one is paying heed. Condo construction continues apace at Yonge & Eglinton in Muddy York and lots more to come! The shopping mall on the SW corner is being gutted and renovated in anticipation of WAY more traffic in the near future. I just hope the tube station is expanded too. The crowds there are getting out of hand!

#121 Angelo on 08.07.13 at 8:48 am

SM what a great line and sums it up perfectly!

$100,000’s lost in the last 5 years.

“”honestly I feel bad for you bubble heads, who’s identity is dependant on a crash, do you have any idea how stupid your friends and family think you are for pumping doom at thus point.

This is the fourth name you have used in two days, Marco. Bye. — Garth

#122 piccaso on 08.07.13 at 8:49 am

POLL
Should every American get help buying a home?

Yes, lower lending standards (6990)
8%
Maybe, if federal and state programs can help (8087)
9%
No, only those who have money and credit (71678)
83%

http://finance.yahoo.com/

#123 economictsunami on 08.07.13 at 8:53 am

Perhaps the unbelievable, residential RE industry franken-numbers may have had the unexpected consequence of driving policy, in the opposite direction they were hoping for.

Dim wits…

#124 The real Kip on 08.07.13 at 8:55 am

So how are the mortgage brokers taking all this good er, bad news? Are they still worried about the 150,000 unemployed construction workers coming soon to a street corner near you? No eh?

The CAAMP report cited a job loss of 190,000 in the financial industry. Apparently nobody cares about crane operators. — Garth

#125 Berniebee on 08.07.13 at 9:00 am

Yes, the drop in real estate prices will be painful for a while.
But it’s all for the good, long term.

No one would say that high prices for eggs and ham are good. But somehow we’ve been conditioned to think that high prices for shelter are a good thing. Seriously?
Your home is a place to live, period. It does not produce anything, and it is not intrinsically more valuable 10 years later. Shelter is an expense, not an investment. (For those of you who think that Gucci purses are an “investment”, you can go back to the mall now.)

High real estate prices are a huge drag on our economy. Money that is sucked away by mortgage payments is money that is NOT used to invest in a business, save for retirement, or purchase goods.

The average Vancouverite earns no more than anywhere else in Canada. Yet, he must pay on average 3 times as high a mortgage payment, compared to most Canadians And because his local grocery store must also pay an exorbitant rent, a Vancouverites grocery bill is also higher. Pretty well all his purchases of goods and services are more expensive, for the same reasons. That is why many Vancouver area teachers, cops, and nurses (ie: reasonably well paid, solid jobs holders.) live in rented basements. The “best place on earth”, indeed.

#126 CrowdedElevatorfartz on 08.07.13 at 9:15 am

@#109 &118 Stoopid Idiot

re #109 Gawd I hate Leonard Cohen! Another over rated Canadian “icon”. ( What’s with the Globe and Mails love affair with Margaret Attwood anyway? She could vomit on a piece of paper and call it a novel and the Globe would be prostrating themselves before her. But I digress.)

re#118. Your socialism vs capitalism rant was rather amusing but I think it just comes down to , ” Men with massive trucks have latent feelings of inadequacy”. Freud may have been wrong about a lot of things but this time he wasnt.
Either way, just keep clubbing seals and buying new “Bumper balls” for your honourary “newfie truck” up in Ft. Mac. ( or should I refer to it as “Site”?)

Gotta go “fumigate” an elevator……….

#127 Toronto_CA on 08.07.13 at 9:23 am

http://www.thestar.com/business/2013/08/07/toronto_condo_market_normalizing_report_says.html

Some interesting stats in this new puff piece from Miss Piggy.

Combined with the F-bomb 2.0 you gotta mourn the house horny virgins buying GTA condos. So the majority are renting them out because they think they will increase in value? They can’t be earning them positive cash flow factoring in (ridiculously absurdly high in Toronto) condo fees, property taxes (low in Toronto), and mortgage interest. Rents just haven’t climbed high enough. Once these mortgages reset at 5+%, people will be forced to sell their rental “investments” at a loss or shovel cash into the pit every month. Jacking rents won’t work because then the unit will just be vacant.

Scary times ahead.

#128 The real Kip on 08.07.13 at 9:24 am

Aww, nobody cares about crane operators, I’m crushed! Is there any way to find out where those 190,000 people unemployed financial industry workers live? I wanna ‘vulch’!

#129 Penny Henny on 08.07.13 at 9:26 am

truck in the picture has handicap plates.
wonder what the handicap is, too tall?

#130 Raginnn on 08.07.13 at 9:33 am

Smart move

Obama pitches plan to overhaul mortgage finance system

U.S. President Barack Obama has outlined his plan to completely overhaul the mortgage business by winding down the government-backed Fannie Mae and Freddie Mac bodies and replacing them with a system in which the private sector is responsible for mortgage defaults.

In an afternoon speech in Phoenix, Ariz., one of the hardest hit housing markets during the recession, the U.S. president said taxpayers should never again be left “holding the bag” for the mortgage giants’ bad bets.

“For too long, these companies were allowed to make big profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag,” Obama told a crowd at a Phoenix-area high school.

Obama’s plan calls for the phasing out of the Federal National Mortgage Association (with the acronym FNMA or popularly known as Fannie Mae) and the Federal Home Loan Mortgage Corporation (known as Freddie Mac) two government-backed housing agencies which together have backstopped the entire American housing market for the better part of the last half-century.

The two agencies function much like the CMHC does in Canada, except that they collectively needed $187-billion worth of government bailout cash in 2008 when the American housing market imploded.

Fannie and Freddie don’t make loans directly, but buy mortgages from lenders, package them as bonds, guarantee them against default and sell them to investors. Fannie Mae and Freddie Mac take existing mortgages off the balance sheets of banks, allowing the latter to go out and loan out new money to new homebuyers. Together, they currently own or guarantee half of all U.S. mortgages and back nearly 90 per cent of new ones.

The president’s plan to wind them down has bipartisan support.

http://www.cbc.ca/news/business/story/2013/08/06/business-obama-mortgage.html

#131 Buy? Curious? on 08.07.13 at 9:36 am

Aw sheet! Another reference to “This won’t end well” What exactly are people referring to as The End? And when they say they’re getting the popcorn ready to watch some impending destruction of their fellow citizens’ wealth, is that not the typical smugness that everyone around the world hate about Canadians?

Please, everything is cyclical ie. Life, real estate, menstrural, etc. Don’t say it’s the end, ya goddamn moron. And if you need a snack to enjoy the slowest moving act next to paint drying, do the proverbial herd a favour and move to Orillia.

Garth, you’re the Pablo Escobar of financial reasoning. I’m addicted to this blog. Smoking Man’s posts are like LSD.

#132 Bigrider on 08.07.13 at 9:43 am

The amount of builders and land speculation companies that now have clearance to exploit ” accredited investors” through the use of exempt market investment products continues to grow.

What’s worse is the ability for these investors to use their RRSP’s to invest in these exempt products due to the loosening of standards by the securities commission and the sleazy tactics to which the promotors of these exempt products will go through to convince potential investors that ” real estate always wins” and the stock markets are ” rigged” for failure.

Too bad Garth , but regardless of your knowledge, licensing or any and all accredations you will lose to te first slimy RE guy with none of the above pumping these builders wares.

#133 mel eager on 08.07.13 at 9:45 am

How long before CMHC enacts these new rules?

Mel

In effect as of August 1. More guidelines to come at the end of the month. — Garth

#134 Dad on 08.07.13 at 9:51 am

#118 Stoopid Idiot on 08.07.13 at 8:47 am

Watch less Fox news. ~Socialism~ isn’t viewed as the scary boogeyman coming to steal your daughter with the majority of Canadians.

#135 Evangeline on 08.07.13 at 10:05 am

encouragment for buy and holders …

Alabama Shakes – Hold On

http://www.youtube.com/watch?v=Le-3MIBxQTw

#136 Infused with Opiates on 08.07.13 at 10:05 am

124 Berniebee

“Money that is sucked away by mortgage payments is
money that is NOT used to invest in a business, save for
retirement, or purchase goods. ”

The owner of the house that was sold and mortgaged can
do all those things with the proceeds.

#137 adan robinson on 08.07.13 at 10:08 am

Hello Garth

Thank you for this almost daily effort to teach and inform the community about the real estate.

I’d like to see in the near future one of your posts explaining in details the relation between the macro economic concepts like bonds, interest rate, etc.
Please imagine that you will explain it to somebody who doesn’t know anything about them.

Honestly I do my best to understand these relations and I cannot completely grasp it.

It’s been long time since I wanted to include this request for you.

#138 GTAHouseHunter on 08.07.13 at 10:12 am

Would you be able to give your top 5 points to really cool this housing markets.You have to really go to suburban GTA. Markham,Mississauga,Milton,Brampton,Oakville show absolutely no sign of a cooldown,slowdown etc.
Prices are going up and up.
I am amazed how much demand we have even after a 70% home ownership rate.The so called slowdown is really not happening or have I lost the patience.
I have been on this blog for almost 4 years now and seems if there would be a slowdown ……it will be minimal for the GTA.

#139 The RE industry paying for propaganda again on 08.07.13 at 10:15 am

Which is it RE industry everything is going great or everything is not? Just a day after the government changed their support for the Canadian housing Ponzi scheme the RE industry pays the soon to be bankrupt Torontostar to print out this? The HOUSING CRASH IS GOING TO BE EPIC!

http://www.thestar.com/business/2013/08/07/toronto_condo_market_normalizing_report_says.html

#140 Cory on 08.07.13 at 10:16 am

I’m not sure why so many cheer that banks will have to shoulder more risk. Either way, the public pays. Banks are using your money in any deposit or investment account you have, and also creating money from thin air to do so, leveraging off of these same deposits/dollars. Read up on fractional reserve banking.

If the banks get into serious trouble, the government will simply do a “bail in” (i.e. steal your money) and save the banks. Banking is the best business on the planet to be in. Let’s open up a “Greater Fool” bank on every corner.

Ya ya I know, the government would never let this happen but they also said they would never touch income trusts either.

#141 John on 08.07.13 at 10:16 am

Smoking Man developing software? That’s a good one!

#142 Musty Basement Dweller on 08.07.13 at 10:18 am

The CMHC pullout on the banks is only for the rest of this year no? Might be a quiet fall that will require the best spin doctors the Real Estate Agent Cartel can find. Then next year we will see a huge SURGE according to the cartel. LOL

#143 brainsail on 08.07.13 at 10:20 am

“Banks got $114B from governments during recession”

“Support for banks ‘more substantial than Canadians were led to believe’: CCPA report”

http://www.cbc.ca/news/business/story/2012/04/30/bank-bailout-ccpa.html

http://www2.macleans.ca/2012/05/24/the-real-canadian-bank-bailout/

#144 Grantmi on 08.07.13 at 10:35 am

#114 Evangeline on 08.07.13 at 8:26 am

can we have him back?

LONDON (CNNMoney)

“The Bank of England said Wednesday it would not raise interest rates until U.K. unemployment falls to 7%, a level it doesn’t expect to see for about three years.

Issuing detailed “forward guidance” on monetary policy for the first time under new Governor Mark Carney, the central bank said it wanted to avoid a premature rise in market rates of interest — the cost of borrowing for businesses and consumers.”

Doesn’t matter if Carney keeps the BANK rates at historical low levels in the UK or not. (like Uncle Ben is doing in the U.S. or “F” is doing in Canada.)

haven’t you been listening…. Bank Rate doesn’t affect the MORTGAGE RATES! Haven’t you been listening or watching.

#145 rosie "moving forward" on 08.07.13 at 10:41 am

That pig woman says the condo market is down, but going up. Excellent timing from F. http://www.thestar.com/business/2013/08/07/toronto_condo_market_normalizing_report_says.html

#146 Dupcheck on 08.07.13 at 10:46 am

When two or more people are at fault there is no one’s fault. How do you get out of a mess? Make a more complicated mess that no one can understand. CHMC and Canadian housing theology.

#147 raisemyrent on 08.07.13 at 10:49 am

Look at this crap, Garth. They only part of it they had to type was the title and they messed that up:
http://www.cbc.ca/news/business/story/2013/08/07/business-royal-lepage-housing.html

Business advice and predictions from REALTORS. That’s like asking the used-car salesman for mechanical advice…

#148 TnT on 08.07.13 at 10:50 am

#138 GTAHouseHunter

You will not see a crash in the GTA. Bidding wars are gone, seller accepting conditions are back. Prices are still inflated but negotiations are acceptable.

If you have a down payment larger than 20% AND you are not in any rental lease AND you apply the rule of 90 then feel confident in making your house purchase IF you are buying in a often sought after neighborhood AND you are not going to sell it with in the next 10 years.

Have fun and enjoy the process.

#149 rosie "moving forward" on 08.07.13 at 10:50 am

Again, excellent timing F. http://ca.reuters.com/article/businessNews/idCABRE9760M920130807

#150 Happity on 08.07.13 at 10:57 am

Pimco, the global bond leader:

“Gross: So #QE 1, 2 & 3 lifted stock prices by nearly unanimous agreement. When the #Fed #tapers, stocks will keep climbing?”

Gross continually tries to lead investors to where he will profit to the maximum. — Garth

#151 Babblemaster on 08.07.13 at 10:58 am

#111 Mr Buyer

“We will be saddled with crazy housing costs for generations as a result of this bubble if something is not done about the availability of huge sums of borrowed money.”

—————————————————————

Absolutely right that it’s mostly the easy availability of large sums of cheap money causing the bubble. Money that doesn’t even really exist. Things won’t change as long as the easy and cheap CHMC subsidized availability is there.

Will it go on for generations? I think the whole financial system will break if this insanity goes on for too much longer. However, Garth says that the central bankers have the situation well in hand and that there has never been this level of global co-operation before. I think that creating debt that can never be repaid is a recipe for disaster, but I’m just basing that on common sense.

Wish I had a crystal ball.

#152 Daisy Mae on 08.07.13 at 11:00 am

#70 DOM: “I’ve noticed the malls are full of people who WALK around and window shop. The only real business I’ve noticed was the food court.”

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

That’s what I find, also — malls filled with window shoppers. Stores are empty. Food courts are busy. Shoplifting increases at Walmart.

#153 Ballingsford on 08.07.13 at 11:02 am

Royal Lepage is repoting today that sales are still strong but condo sales are flat. That was the headline in the globe today but I couldn’t read the full article because I already used up my 10 free views this month.

Guess ill have to wait until tomorrow to read the article o the CBC website as they are usually a day behind in posting news.

Anyone know how to go incognito when surfing from an android (samsung galaxy 3) so I won’t be recognized by the globe and mail?

I know how to do it from my computer but not my phone.

#154 Evangeline on 08.07.13 at 11:06 am

#144 “haven’t you been listening…. Bank Rate doesn’t affect the MORTGAGE RATES! Haven’t you been listening or watching.”

so?

I’d still like to have him back.

#155 Ballingsford on 08.07.13 at 11:19 am

My apologies to my previous post, the royal lepage article is now under cbc business. I couldn’t find it again at the globe. It says the market is in an upswing.

#156 Bigrider on 08.07.13 at 11:21 am

As if the sucking sound coming from condo unit investments from the likes of Brad Lamb wasn’t enough now we have mortgage syndication deals from deep pocketed racketeers targeting newbie virgin wannabee builders.

When does the sickness for RE that has gripped T.O come to an end.. One way or another.

#157 Old Man on 08.07.13 at 11:28 am

#152 Daisy Mae – Guess who is being caught daily doing all the shoplifting? Now this takes place usually in the grocery stores, but it is the senior citizens, as see them all the time being taken to the office, and sometimes the cops are called to lay charges.

#158 Grantmi on 08.07.13 at 11:34 am

#154 Evangeline on 08.07.13 at 11:06 am

#144 “haven’t you been listening…. Bank Rate doesn’t affect the MORTGAGE RATES! Haven’t you been listening or watching.”

so?

I’d still like to have him back.

So what! No! Good riddance! Let the Limmeis have him now.

#159 CalgaryFloodboomAndrewABandrewMartin on 08.07.13 at 11:36 am

Mikey the Realtor,

Hate to join the chorus but have to mention that you are now crying on FirstPlaceBob’s blog because you can’t get any play here.

I actually thought you were joking with your comments because they are so ridiculous(though not in Smoking Man’s class).

Ask yourself this, you and FirstPlace are so hung up on Garth because he supposedly called a crash 2 or 3 years ago, BUT does it matter when it comes? If it comes this year or next or 5 years from now, a whack of people are going to be crushed.

Kind of like drunk gamblers who sat at the table too long and not only lost their winnings when they were up, but everything they came with and everything they borrowed from [email protected]

You and Bob what a pair, but nothing is going to change what is coming.

#160 another buyer on hold on 08.07.13 at 11:41 am

#137 adan robinson

Garth, I really support the request made by #137 adan robinson, and I’m pretty sure there are many like me.

The average person does not understand the relation between bonds and interest rates when you say “it’s the bond market, remember, that dictates long-term rates, not the Bank of Canada”.

Yeah, I know it’s my fault to stay in the brainwashed crowd with so much financial illiteracy… but at least can you point us to some sort of resource, web link or book where to understand that relationship???

Thanks for the great work

#161 calgaryPhantom on 08.07.13 at 12:00 pm

In my naive and innocent few years of studying equities market. I have come to a very cute conclusion. Usually, markets adjust for an event 1-2 months before the event happens. And then when the event actually happens, there is little affect on the markets. ( baring shocking news)

So with REITs and Preferreds, i innocently think that currently markets have adjusted for a 1% increase in bond yields. And when QE is tapered, and bond yields shoot, i highly doubt we will see another 5% drop in these asset classes.

But,but, but. It is just one innocent and cute logic on my part.

#162 kabloona on 08.07.13 at 12:04 pm

Ballingsford #153:

Can you not use “incognito browsing” feature with Google Chrome….?

http://howto.cnet.com/8301-11310_39-57372756-285/how-to-browse-incognito-with-chrome-beta-for-android/

Just tried this on my android tablet and it works fine with Globe & Mail website…

#163 Old Man on 08.07.13 at 12:26 pm

The Real Estate downturn is well in place, and those who are buying homes now are in for a surprise. It will be a slow death, and the complete destruction of their downpayment with no way out. The bubble is massive, and the dream of ownership will quickly turn into a nightmare, as they bought debt that on any renewal might require more money or will be out of luck. So they break the piggy bank to man up for the banks to go for another round at a higher rate with hope that all will be well. This is like being in a hole with a shovel trying to dig out, and throwing more savings to buy some time. Yep, we are down but not out and in a few years all will come back; this will not happen because earnings will not rise fast enough to jump start a falling Real Estate market going forward for many years to come. This is not going to end well!

#164 father on 08.07.13 at 12:36 pm

aug 1 that’s great and no more marco even better hopefully we have some more good news today. life is good

#165 HAWK on 08.07.13 at 12:37 pm

#161 calgaryPhantom on 08.07.13 at 12:00 pm

when QE is tapered

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

I doubt QE can be tapered. The amount of real growth in the US economy relative to QE is small, end the QE and growth will likely end.

Meanwhile the debt clock is nearly $17 trillion…………

Looks like QE will start next month. — Garth

#166 Herb on 08.07.13 at 12:42 pm

Here is the article mentioned by Ballingsford in #153 and 155 –

http://www.cbc.ca/news/business/story/2013/08/07/business-royal-lepage-housing.html

Incredible what “marketing” gets away with.

#167 Bob on 08.07.13 at 12:42 pm

Garth, can you comment on how the more retirement centric communities like Kelowna/Okanagan or Victoria/Vancouver Island prices will fare if a real estate decline in the future takes place.

Most of your arguments lately, that real estate being at dangerously high levels and due for a tumble, have been centered around rising interest rates and tightening mortgages rules.

It seems to me that retirement areas are less vulnerable as there is more equity in the homes. As well, demographics seemingly would support these areas. As folks grow older, they sell their homes in Calgary, Edmonton, Vancouver, Ontario…. and buy more real estate in these areas.

I’d appreciate your comments.

Those areas are already in decline. It is but a glimpse of the future. — Garth

#168 altavistababy on 08.07.13 at 12:45 pm

nterest rates are determined long term by the bond market, not by the central banks.

If QE stops we are looking at double digits, plus bankruptcies and defaults at all levels. if QE continues then all the savers are screwed as zero interest is almost guaranteed in short to mid term at the cost of significant or potential hyper inflation.

The solution is really to move ALL your assets out of countries with aggressive monetary policies except maybe leaving some good multinational and international players and some commodities including big oil.

Some western countries are burning their citizen savings and the price to pay later will be horrendous.

Looking at crappy bungalows in North York at cost of 1-1.5 mln. you can see what a dollar is worth – actually it is worth almost nothing these days. The need to guarantee risk free profits for the banks will kill the economy, crushing the savers and retirees in the process.
In 10 years retirement in North America would be mission impossible.

#169 Ballingsford on 08.07.13 at 12:49 pm

#163 Kabloon

Thanks for that! I took a quick peek and it says it only works on Ice cream sandwich. I got lost there. The article was written in Feb 2012 so that’s probably not true anymore.

I’ll look into it further! I owe you a beer or two.

#170 Ballingsford on 08.07.13 at 12:55 pm

#162

Cool too that you have the tablet too; so do I.

Have you got yourself a jambox jawbone yef? Awesome way to play music, youtube, etc from your android, iphone, devices. Just need bluetooth capabilities.

#171 Devore on 08.07.13 at 1:02 pm

#136 Infused with Opiates

The owner of the house that was sold and mortgaged can
do all those things with the proceeds.

That’s great, for the last few years of your life you’re gonna invest your house proceeds, as your retirement and end of life expenses accelerate?

Fact is, expensive housing is a net drain on the economy. Huge debt means people are raiding their savings for pay for it, both current and future savings, and this means investments of all kinds, equity, bonds, education, small business, entrepreneurial activities. That extra $50 or $100 a month that buyers seem so glib about throwing on the housing pile as they stretch themselves to get into an overpriced market adds up over time.

These are the intangible costs of an expensive housing market. But I guess meanwhile it’s great for realtors and crane operators.

#172 Old Man on 08.07.13 at 1:03 pm

The one thing none of you are thinking about in terms of your gross income, when it comes to a Real Estate purchase, or any other payment you make in life for a good or service is thus. All money spent for anything is done with after tax money, so the net becomes the key. Equate your personal life to a corporation with gross sales of $3 million with a net profit of $50,000.

Years ago went golfing weekly with a Lawyer in Port Credit, and his buddy who was the Chief Administrator for Peel Region, as they both graduated from Queens University together; they were both clients of mine. I went to the Peel Office, and gave Mr. X a detailed budget format that he and his wife filled out one night, and they had no clue where all their money was going, as nothing added up. Perhaps it is time for all to sit down one night and formulate an after tax budget, as you must take control of your cashflow.

#173 magilla on 08.07.13 at 1:09 pm

Prefs don’t cost 300K each, aren’t illiquid, have no condo fees or priority tax, require no tenants or maintenance and yield better with returns taxed at half the rate. Otherwise, same. — Garth

LOLOLOLOL! Good one Garth!
______

Yeah, but just to play devil’s advocate a bit, if one is comparing preferreds to one’s principal residence (rather than an investment property), preferreds require no tenants (other than yourself), have a much MUCH better tax rate (0%) than anything else including preferreds, and do not allow you the huge advantage of not paying the mortgage of your evil landlord.

Now let’s compare kittens with Kias. — Garth

#174 bill on 08.07.13 at 1:23 pm

#23 Turd Durden on 08.06.13 at 7:44 pm

The license plate on that monster truck has a wheelchair on it. I wonder what handicap the owner has?

it looks like there may be a hydraulic wheelchair lift that is also a step for the more agile.
it would seem to function like the kind you see on taxis .
scary descent tho’

#175 calgaryPhantom on 08.07.13 at 1:29 pm

Now let’s compare kittens with Kias. — Garth

——————————————
both need insurance.
both need maintenance.
both consume energy.
both stimulate high emotions.
both are useless in practical terms.

#176 Old Man on 08.07.13 at 1:48 pm

Caesar Watch – this has gone under the radar, as there is something afoot, whereby, he wants to abolish the Senate, and throw it all under the bus. This is complex as needs to change a paragraph in the Charter of Rights and Freedoms in order for all to be done, so he is fronting the problems with the Senate which we all know about for public approval, but this means the establishment of a precedent to destroy the Charter, and don’t let him get away with this.

#177 Ballingsford on 08.07.13 at 1:49 pm

#162

Yah, I just discvered I have an easier way to go incognito. I just click the incognito tab when I’m leaving a browser session. I just read my first globe article today without paying the 99 cents.

I’m not cheap or thrifty but the thought of paying the 99 cents irks me for some reason I can’t understand.

I’d buy all you blog dogs a beer if we were together somewhere, but to pay the 99 cents; no thanks. I’d rather through a loonie out a window.

#178 Ballingsford on 08.07.13 at 1:52 pm

Meant ‘throw’. Damn predictive text and fat fingers.

#179 refinow on 08.07.13 at 2:12 pm

Best part of that photo is the handicap sign on the license plate.

#180 Gideon on 08.07.13 at 2:12 pm

One lady from our church just sold her 1-bdr condo on Yonge/Sheppard. Asking price was 300,000, selling price – 260,000. Condo was bought 5 years ago for 240,000. In order to sell they had to purchase parking (30,000) and locker (3,000).

#181 Edge of Insanity on 08.07.13 at 2:21 pm

“Because we’re house horny again.”

Please. The only thing a guy should get that way about is another woman(nothing against gays). Seriously housing is about buying a place to live. Investment comes LAST, not first. How about, the guy didnt want to pay rent anymore because he will be working until he dies, possibly 2050? So does it make sense to pay rent the next 40 years?

At the same time, #18 “I know ppl in Calgary in their 20s, with decent jobs buying their second properties as investments.” It’s common sense that the majority of the general populace is a bunch of A holes.

#182 daystar on 08.07.13 at 2:32 pm

#126 Shawn on 08.07.13 at 9:18 am

“Daystar at 82 you are wrong to suggest that CMHC is cutting back on insured mortgages with this move.” – Shawn

I’m not sure how else to take it Shawn, even with your explanation. CMHC is hitting a $600 billion wall of mortgage insurance in force and the only way to handle it if government doesn’t raise the ceiling, is to limit what they 100% insure by putting monetary ceilings to the banks which they have just done.

There are laws in this nation, 2 of which home buyers who put less than 20% down need CMHC insurance which 100% insures banks in case of default. Same goes for homes with less than 750sq ft on main floors, needs CMHC approval. If CMHC puts monetary limits on what they 100% insure like they just did, banks will be turning away buyers with less than 20% down left and right. Home buyers buying a house with less than 750 sq ft on main floors would presumably take precedence (if they bring cash), but what I understand, because of the laws in this country being what they are, banks are going to refuse home buyers who try buying homes in this nation with less than 20% down, in droves.

You sound like you have a good understanding of how bond markets work and how MBS’s raise capital in Canada. You should also know then, what MBS yields are at with mortgages that aren’t 100% insured by CMHC. Those yields are our “new normal” or higher as supply for 90% securitization soars.

CMHC is still 90% insuring all other mortgages in this nation from what I am aware and lets not forget that. Its that 10% that isn’t insured that banks and MBS investors are on the hook for in case of default and in order to mitigate this risk, there is only one way. Higher rates. Naturally, there will be tougher in house lending by individual banks (larger deposits). And of course, tougher government regs but changes have come late over a 7 year timeline (Harper) and there is a segment of mortgage holders, I’m thinking around 15%, that are newer large mortgage holders, ultra sensitive to renewing into 8%+ mortgage rates in the future as their terms expire. Couple much higher debt service with jobs that evaporate with a tanking RE industry and that’s my big worry for Canada. This ugly one two punch is what breeds multi year recessions in any nation. Lets remember, RE bubbles and their deflations aren’t new to the world, just newish to Canada.

Nevertheless, rates are going up in Canada in the bond markets, of this I have no doubt as risk is “passed on”. Most home buyers will have to put up 20% down to buy a home as I understand it, because of the ceilings CMHC has placed on banks this week. Put these 2 together and affordability for real estate plummets in this nation. How many home buyers out there have 20% down and can afford higher rates than we see today? Take 3 of 4 home buyers that need CMHC insurance out of the equation and what happens to valuations? This is bad for the industry Shawn, no matter how one slices it from what I can tell and I doubt that government can fix this. CMHC has approached a level of risk that shouldn’t be breached unless Canadians want to take a new level of risk national and I highly doubt that we are collectively foolish enough to support it. Its the kind of risk that makes governments fall with true systemic damage, Shawn and seriously, we should be questioning if $600 billion is too high a number to begin with (I think it is, big time).
We have ugly financial problems in Canada. Household debt has soared way past incomes and it won’t be fixed in months or even years. It will take a decade to heal from the path the Harper government and our financial institutions have taken Canada and RE isn’t our only worry. There’s damage elsewhere as well.

#183 Sebee on 08.07.13 at 2:38 pm

#23 Turd Durden

Since it’s on this blog, obviously the handicap is financial. Instead of diversified portfolio, this guy put his entire fortune into this custom monstrosity that also sucks his wallet dry each month at 2.6 MPG. But hey…at least he has AirRide.

#184 Doug in London on 08.07.13 at 2:39 pm

@CalgaryPhanton, post #161:
I also think this recent pullback is a good time to buy REITs and preferred shares. Isn’t it odd that these assets, many of which pay 5% yield or more at today’s cheap prices, have taken a 10 to 20% drop in value while companies that pay paltry yields like 2% or less (such as CNR) have dropped in value under 10%?

#185 daystar on 08.07.13 at 2:46 pm

#165 HAWK on 08.07.13 at 12:37 pm

There is growth, there will be more tax revenues coming in from the uber rich and payroll side, as well as spending cuts and there will be greater increases in tax receipts as the economy improves, however incremental. The die was cast over the winter as to when these tax increases and spending cuts would kick in. The need for Q.E. will be reduced, without question. The question that remains is by how much over how many months. 20% over 6 months? 25%? 33%? I’m thinking 20%.

#186 bigrider on 08.07.13 at 2:48 pm

Price fluctuations for real estate have always been very inelastic ,whereas prices for equities/bonds and most financial instruments are very elastic.

This simple fact would ,if properly explained, cease the comments as to why prices for RE have remained un affected thus far.

It would also go far in explaining the illusion of safety within the confines of a real estate investment

#187 calgaryPhantom on 08.07.13 at 3:15 pm

#183 Doug in London

I have been loading these. Not because they might rise/fall in value, but i like their current % yield for my portfolio in making.

#188 abraxas on 08.07.13 at 3:19 pm

Garth, your ‘liquid’ assets are quickly turning less so unless one is willing to lock in losses. REITs and Preferreds down more than 10% ytd with no end in sight to the bloodletting. And it’s just getting started. Yield chasers are getting mauled.

Why would you sell something bought for income? You need some investing lessons. — Garth

#189 Stoopid Idiot on 08.07.13 at 3:20 pm

125CrowdedElevatorfartz

e #109 Gawd I hate Leonard Cohen! Another over rated Canadian “icon”. ( What’s with the Globe and Mails love affair with Margaret Attwood anyway? She could vomit on a piece of paper and call it a novel and the Globe would be prostrating themselves before her. But I digress.)

Hahahaha… Good one. And yes I’m over compensating but rather than support a Ph.D. I’d rather foster this inadequacy and see where it will take me as I address and continue to throw fuel on the fire (purely experimental), in the meantime I’m going to build a LNG in Campbell River but use my beforehand knowledge to cherry pick locale real estate and then sell it later. In the meantime I’ll work with your crazy provincial government for a right of way passage to smash a pipeline thru your northern corridor to Kitimat, clearing the way for Enbridge. Then we’ll use a small loophole to close the corridor. Retirement will come shortly after platforms float of the mouth of Quatsino Sound (early 2021) and the B.C. carbon foot print facilitates a 6% increase to support modeled requirements to reduce Island precipitation to tolerate those wet winters … geoengineering is so fun. Please continue to support our efforts for the XL pipeline as we really need a valid reason to back out as the NAFTA agreement as it applies to Canadians suggest this pipeline truly is not in Canada’s best interest. For now I’m late for lunch a Banker’s Hall… I think I’ll take the stairs…. Who is John Galt.

P.S.

Dad… you can have the granddaughter I’m concerned only for my wealth

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

#190 Mwerk on 08.07.13 at 3:21 pm

Every morning a fool and a clever leaves the house, when they meet, business is done.
I guess this is happening quite often.

#191 Ogopogo on 08.07.13 at 3:25 pm

#167 Bob on 08.07.13 at 12:42 pm

You could ask the 7 poor families in my 90% owned condo (mine is only one of 4 units allowed to be rented out) who are desperately trying to sell, some with stale listings going as far back as 2011.

The Okanagan is a RE black hole at present, despite what the local orange-sunspray-perma-tan realtors will tell you. There are occasional sales, like anywhere else, but drastically reduced.

You’re much more likely to see such “retro” (read: falling apart) listings like this, sitting unloved, unwanted:

http://www.realtor.ca/propertyDetails.aspx?propertyId=13017551&PidKey=-570211800

#192 Ogopogo on 08.07.13 at 3:37 pm

This post just arrived in my Facebook newsfeed. Like Obama or not, he got it right here:

“We’ll make owning a home a symbol of responsibility, not speculation—a source of security for generations to come, just like it was for my grandparents. I want it to be just like that for all the young people who are here today and their children and their grandchildren.” —President Obama ‪#‎ABetterBargain‬

#193 Big Brother on 08.07.13 at 3:49 pm

#141 John on 08.07.13 at 10:16 am

Smoking Man developing software? That’s a good one!

No its true he is a code smith. VBA master makes all kinds of programs. His latest program is Smoking Man Wham-O-Spellmaster a program to teach you how to spell. Take it from MK-Ultra!

#194 Ballingsford on 08.07.13 at 3:50 pm

What’s the purpose of that truck anyway? Even the trailor hitch is too high to tow anything. Does it transform into a tractor or something?

Anyway, just having one of the best beers on the market, a Groelsh, and contemplating it. Think I might need something stronger such as a fine scotch; like crown royal, to figure this one out.

#195 dave b on 08.07.13 at 3:58 pm

#32 “motivated sellers”, I wonder if we’ll be seeing more of these in the future.

More juicy teardowns….
http://www.realtor.ca/propertyDetails.aspx?propertyId=13214072&PidKey=-417194613

Renovate or re-build
http://www.realtor.ca/propertyDetails.aspx?propertyId=13352912&PidKey=-1671882189

#196 Devore on 08.07.13 at 4:00 pm

#190 Ogopogo

This post just arrived in my Facebook newsfeed. Like Obama or not, he got it right here:

Rhetoric is easy. I’ll believe it when I see it, like hope and change.

#197 Old Man on 08.07.13 at 4:04 pm

#187 Stoopid Idiot – no not trash Margaret Attwood, as her best writings were done at her secret summer home for many years on Pelee Island.

#198 Holy Crap Where's The Tylenol on 08.07.13 at 4:14 pm

#45 neo on 08.06.13 at 9:00 pm

At #8 Canadian house of cards on 08.06.13 at 7:06 pm
Canadians will borrow until they are bankrupt and that situation is well past that. The economy is falling apart as businesses are feeling the pinch of a tapped out consumer. For Lease signs are everywhere as more and more businesses close down. The big box stores are hurting real bad. People don’t have money to spend as all their income is going into the housing bubble. Look out below many will lose their job which is tied to the RE ponzi bubble and then lose their houses right after. Everyone in the RE industry knows housing prices are beyond a bubble but they have to lie or the game is over.

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

I have an idea for you. Drive down the 401 west and try to exit Trafalgar in Milton/Halton Hills. Yesterday it was backed up all the way to Mavis. Why? A new shopping centre opened up. The police actually had to close off that exit at one point. I couldn’t believe the traffic. Whether it is REAL money or credit, there is a ton of it to still spend apparently and plenty of lemmings.

Absolutely true what failure, what crash, what, when and where are these job losses when you see this kind of herd mentality. Drove from Oakville to Georgetown to visit friends and just could not believe the lemmings ready to pour out their cash on stuff. Stuff there I said it! Where is all of this disposable cash coming from? For Gods sake it’s an Outlet Mall! Holy Crap I really need a pair of $100 jeans with some fancy insignia emblazoned in them.

#199 Ballingsford on 08.07.13 at 4:30 pm

Ok, made another error. I blew up the picture and the trailor hitch is fine. I should have had my crown royal scotch earlier.

#200 Blablabla on 08.07.13 at 4:47 pm

Yeah, but count how many people with bags in their hands. Probably in the single digit %.

#201 Mikey the Realtor on 08.07.13 at 4:57 pm

#159 CalgaryFloodboomAndrewABandrewMartin on 08.07.13 at 11:36 am

Andrew, Martin, AB or whatever flavour you want to call yourself in the heat of the moment, you missed out on a great opportunity and now you’re mad like 99% of the people on this blog, as for me, if the RE market crashed I will pick up the phone and will have a 6 figure job in the afternoon.

This Andrew, Martin, AB is what is called the game of life, you get skills and then you create you’re own destiny or we can be like you and blame everyone else for our poor choices that eat us from the inside out.

I’ve been made aware that you made these comments about me on a Calgary realtor’s blog: “Talk about a pathetic loser who has to [edit] in order to get the herd going, the man is truly pathetic… One thing I noticed is that his [edit] have some type of sexual orientation to it, it doesn’t sound like he’s getting any.” Obviously you are no longer welcome here. — Garth

#202 Nimoucha on 08.07.13 at 4:58 pm

#54 prefshares
Irregardless is a word regardless.
#63 Shawn

Well, irregardless of whether it is a word or not, people use it a lot… which as pointed out above … makes it a word… irregardless of your annoyance.
The purpose of words is communication, not kowtowing to the machine and excessive adherence to standard spelling and definitions, am I right SMOKING MAN?
———————
I am annoyed also of the use of “irregardless” in lieu of “regardless”, which means the exact opposite. A neologism (newly coined term) from time to time is okay, if it adds something (i.e. The many “garthicisms”), and if it’s funny even better. But “irregardless” is pure ignorance. Not a crime, but nothing to brag about either.
As to Smoking Man, many times he writes nonsense or uninteresting stuff, sometimes good or even great stuff. There is only one Smoking Man, and that’s fine. But I’ll say this much: if everybody was writing like him, I would have stopped reading the comments section altogether a long time ago!

On a side note, I love the way Devore and Grantmi (and others) quote other comments, with the cool indentation, red vertical line and greyed, typo-different quote. Clean and clear. How do you guys do it?

#203 Oceanside on 08.07.13 at 5:00 pm

#167 Bob on 08.07.13 at 12:42 pm
Garth, can you comment on how the more retirement centric communities like Kelowna/Okanagan or Victoria/Vancouver Island prices will fare if a real estate decline in the future takes place.
_____________________________________________

Prices have come down an average of 9% in the Qualicum Beach/Parksville areas which are both big retirement communities. Sales are doing well because of the falling prices, that being said, most of the sales are in the mid $300’s with high end not doing well at all. Conversely the markets in the Okanagan have tanked and if one looks at the MLS for that area they will see that vendors are holding on to their prices with many homes on the market for 300 to 400 days and more. Many homes on Vancouver Island are being sold by folks in their 70’s and 80’s who want to move to condos or assisted living quarters. Even here though there are vendors holding out for 2009 prices while they “Wait for things to turn around”

The other factor with Island and Okanagan sales is that if one can’t get a decent price for their home in Lethbridge or Saskatoon they can’t afford to move to BC so stay home and go to Yuma or Palm Springs for a month or three in the winter…..

#204 zeeman1 on 08.07.13 at 5:23 pm

Smoking Man.

Pure BS, man.

When was the last time anyone, including yourself, ever bought anything from door to door slaves?

#205 zeeman1 on 08.07.13 at 5:25 pm

#199 Mikey the realtor.

Dude, if you could have a 6 figure job tomorrow why are you a realtor today?

#206 zeeman1 on 08.07.13 at 5:26 pm

#153 Ballingsford.

Clear your browser history to get around the pay firewall on news sites.

Works like a charm.

#207 CalgaryFloodBoom on 08.07.13 at 5:29 pm

Mikey.

Mission Accomplished.

Now if I could only get FirstPlaceBob to give it up and go skiing…

#208 TO and GTA Stats and Sales 2013-08-07 on 08.07.13 at 5:32 pm

TO and GTA Stats and Sales 2013/08/07
http://recharts.blogspot.ca/2013/08/416905-condo-sales-and-stats-2013-08-07.html
http://recharts.blogspot.ca/2013/08/905-sfh-sales-and-stats-2013-08-07.html
http://recharts.blogspot.ca/2013/08/416-sfh-sales-and-stats-2013-08-07.html
http://recharts.blogspot.ca/2013/08/416905-condo-sales-and-stats-2013-08-06.html
http://recharts.blogspot.ca/2013/08/905-sfh-sales-and-stats-2013-08-06.html
http://recharts.blogspot.ca/2013/08/416-sfh-sales-and-stats-2013-08-06.html

#209 Smoking Man on 08.07.13 at 5:56 pm

#202 zeeman1 on 08.07.13 at 5:23 pm

Smoking Man.Pure BS, man.When was the last time anyone, including yourself, ever bought anything from door to door slaves?
…………

Are kidding me… I bought a system, but got a hell of deal. SON 1 sells 25 to 40 system a month, he quit, now he’s going into business with his old owner, just as planned. And if owner didn’t don’t it, I would back him.

#210 torontorocks on 08.07.13 at 6:05 pm

well over here in UK, Carney has reached deep into his bag of tricks and pulled out….*drum roll please – zero interest rate hikes!

#211 TnT on 08.07.13 at 6:26 pm

Wow… 115 Hiltz sold over asking for $480,888 (listed $415,000).

Like that was a surprise. — Garth

#212 45north on 08.07.13 at 6:28 pm

daystar: If CMHC puts monetary limits on what they insure like they just did, banks will be turning away buyers with less than 20% down

yeah that’s clear enough

still within the $600 billion limit, CMHC can reduce its risk by being selective about the rollover

Mk-Ultra: talking about smoking man: VBA master makes all kinds of programs.

yeah in vba, 20 years ago I turned to unix, the die is cast

#213 Agio on 08.07.13 at 7:02 pm

Why do people who post on here continue to think the man who makes up words like “flaccidifying” is talking about folks who have bought and sold RE and made a profit?
Most people can’t afford to do it; not all, most. If they haven’t sold the primary yet, they’ve made dick and could become flaccified in the not so distant future.

#214 CrowdedElevatorfartz on 08.07.13 at 7:21 pm

@#188 Stoopid …….

Hilarious! Im grinning whilst quaffing a brewski.
I drive a mazda. I feel so……adequate.

You dont have to worry about the pipeline to the BC coast.
Its in the Bag.
Our fearless “cheer leader” (sorry ….Premier) is in the back pocket of the highest bidder.

Campbell River, nice spot. I remember MC-ing a wedding reception at the Fanny Bay Inn ( F.B.I.).
THAT was an experience!
The cops and I were the only ones wearing suits……

Keep up the good work.
“Pave paradise and put up a parking lot”
I’ll hand out the parking passes……. :)

#215 daystar on 08.07.13 at 7:51 pm

#200 Mikey the Realtor on 08.07.13 at 4:57 pm

Still denigrating for self worth. You’ve learned nothing.

#216 DM in C on 08.07.13 at 8:15 pm

#200 and final post : Mikey the unemployed

Buh BYE Mikey. Give DA a kiss on your way to exile island.

#217 Doug in London on 08.07.13 at 10:16 pm

Ever since CrowdedElevatorfartz, post #41 mentioned the F650 many comments about the monster F650 petrol guzzling truck have followed. While I’ve never been to Fort Mac (well, not yet) I’ve got him beat for making the trip from Edmonton to Vancouver. Who needs that dinky little F650 when you can make the trip on the Via Transcontinental train, pulled by 2 locomotives, each equipped with a monstrous turbocharged 16 cylinder 4400 horsepower diesel engine. Now that’s impressive!

Oh, and did I mention that the next time I make that trip I’ll pay the fare with dividends I made on those cheap REIT’s and preferred share ETF’s scooped up recently?

#218 Grantmi on 08.08.13 at 12:27 am

On a side note, I love the way Devore and Grantmi (and others) quote other comments, with the cool indentation, red vertical line and greyed, typo-different quote. Clean and clear. How do you guys do it?

It’s called blockquote’s.

. Blah blah.

. ( no space after the /.

#219 daystar on 08.08.13 at 3:32 am

#126 Shawn on 08.07.13 at 9:18 am

I see it now:

http://www.bnn.ca/News/2013/8/6/CMHC-moves-to-take-steam-out-of-housing-market.aspx

I was totally under the impression that CMHC is getting out of the insurance game but really, in a way they are through a ceiling on MBS’s. Not hard to see why, they are nearing their 600 billion limit so I extrapolated but I see your point.