Worries

dog died

While realtors were telling you earlier this month that house prices in Canada have surged over 8% in a year, this blog was showing you how to get a free BMW. Way easy. Just purchase a condo in a swanky suburban GTA development, buy a can of Axe, pick up the Bimmer and become an epic chick magnet.

Just one problem. The condo’s uncool. The development apparently can’t dump units without giving away $35,000 in wheels (more than 40% of them remain unsold). By any other name, that would be a price cut. In this case, about 7.5%.

So, what gives? Realtors swear sales surged 16% last month in Toronto and 40% in Vancouver. Prices are higher, and the buyers are back! But how does this square with sales of new condos crashing 18% in the last three months, compared with 2012? And we know there are fewer new projects being started in the GTA than at any time since 2009. Meanwhile, developers have sliced their buys of new development land by 50% in Toronto and 30% in Vancouver and Calgary.

Also puzzling is upper end of the market – those thousands and thousands of listings now on the market for more than $1,000,000. There are almost 5,000 of them in Vancouver alone, while Toronto’s MLS map is plastered with angry red dots representing properties that sellers want at least a million for. But what a change. And it’s all unreported.

Most houses don’t sell in days any more. That was so 2012. Now listings last for weeks, and often months. A price reduction of $135,000 on a home listed for $1.7 million is commonplace – a slice of about 8%. In addition, most homes in this range sell for less than listed, typically 95%. So the reduction from the ask to the sell is a little over 12.5%.

But wait. A house listed in the middle of 2013 for $1.7 million would have fetched a premium a year earlier, when over-asking bids were standard fare. So the chop-chop from one year to the next, in practical terms, is closer to 25%. And still the buyers are scarce. Why? Some vanished because F punted seven-figure listings when it comes to mortgage insurance. A buyer now needs at least 25% to cover the downpayment and closing expenses. Others, who actually have a lot of money, have been enjoying 20% returns in the US stock market instead of losses in residential real estate.

Back to condos. The cracks are starting to appear. Now a Deep Throat developer tells a Toronto newspaper he thinks unit prices have effectively fallen by 15%, regardless of what the real estate board is feeding consumers. That’s where the BMW comes in. Plus the free upgrades. The waiving of condo fees for up to two years. The rooms full of gratis furniture. It all adds up to an admission sales are slagging, buyers are getting rarer and the market has reached a point of saturation – well before the next round of mortgage rates has even hits the public agenda.

As I’ve indicated before, layer over this 19,000 unsold units in existing developer inventory, another 53,000 units in production, then add over 10,000 condos on the resale market, and you have the formula for a struggling, weak and declining market. As you will see in the months to come, the real estate cartel did nobody any favours with numbers unreflective of boots on the ground.

So what’s selling? How do those ‘average prices’ keep rising when the top and bottom are slowly unravelling?

Hmm. Houses like this, apparently. Unrenovated. No survey. Twenty-five foot lot. Lane parking. “Sold as is.” Listed for $799,900. Gone in a bidding war for $991,700.

WAR

This is The Zone right now – below the seven-figure mark so CHMC insurance is available for those able to cough up the average 7% deposit, in an area you can almost brag about, and at a time when the bank is still handing out $800,000 mortgages in the 3% range to GenXers it would enjoy putting into long-term bondage.

How does anyone justify paying 119% of the asking price for an unrenovated,  unsurveyed, ‘as is’ house on a lot so narrow you have to go around the block to visit your kids in the backyard? Because real estate always goes up, dipstick. Don’t you read the news?

In summary, unless you need a new car (and even if you do), this ain’t a market smart people buy into. But if you are shopping, why not take advantage of things?

  • Forget the wheels. Tell anyone offering you a major incentive to sign, that you’d just prefer the same amount comes off the price.
  • Ditto for free furniture or reduced monthly overhead. The smartest thing you can do to guard against coming real estate deflation is buy low, with the least amount of debt.
  • If shopping for non-insured, million-plus digs, you have more bargaining power than at any time since 2009. Act like this is bone fide buyer’s market.
  • Offer what you can afford and what you feel is fair, not what’s being asked. Seek out listings that have languished for 60 days or more, or where the price has already been reduced.
  • Always require a home inspection after reaching a deal, then take it to a contractor for an estimate of repairs. Now you have the single most powerful tool for a further price reduction.
  • Give the seller all he or she wants in terms of closing date, deposit amount or the right to haul away their precious crystal doorknobs from the Old Country. All you care about in times like this is reducing price paid and mortgage taken.
  • And never, ever compete for a house. Only in a bidding war is the victor slaughtered.

132 comments ↓

#1 Tomas on 08.19.13 at 8:47 pm

yuuuup

#2 TO and GTA Sales and Stats 2013-08-19 on 08.19.13 at 8:49 pm

TO and GTA Stats and Sales 2013/08/19
http://recharts.blogspot.ca/2013/08/416905-condo-sales-and-stats-2013-08-19.html
http://recharts.blogspot.ca/2013/08/905-sfh-sales-and-stats-2013-08-19.html
http://recharts.blogspot.ca/2013/08/416-sfh-sales-and-stats-2013-08-19.html

#3 blase on 08.19.13 at 8:50 pm

Garth, your chick magnet is going off a cliff

#4 ABP on 08.19.13 at 8:53 pm

So 5-yr fixed mortgage rates up another 20 bps by tomorrow for some lenders. Big banks to follow soon.

#5 Bob on 08.19.13 at 8:54 pm

Redford warns that tough times are ahead for the Provine of Alberta.

http://www.vancouversun.com/news/Premier+Redford+says+well+over+needed+Alberta+flood+damage/8807986/story.html

#6 Mocha on 08.19.13 at 8:55 pm

Thanks for the continuing plugs for all of us home inspectors!

#7 blase on 08.19.13 at 8:56 pm

So Garth, again asking and relevant to today’s post, do you expect CMHC limits to be reduced from the current sub-million$, what will be the new limit, and when do you expect it to come about? Through your back channels, are they even discussing this?

As far as I remember, the Freddie Mac limit was $429,000.

#8 blase on 08.19.13 at 8:57 pm

I meant you are missing a period at the end of the sentence ;)

#9 espressobob on 08.19.13 at 8:57 pm

$991,700 for that dumpy looking thing, Is the younger generation really that stupid? Did I miss somthing?????

#10 Sideline Sitter on 08.19.13 at 8:58 pm

property virgins are extremely annoying… signing paperwork to forever chain them to a bank mortgage.

ugh.

#11 PermaBear on 08.19.13 at 9:01 pm

A mortgage is meant to be paid off. The big question is how long will it take? It’s generally up to you, buttercup.

#12 T.O. Bubble Boy on 08.19.13 at 9:03 pm

And never, ever compete for a house. Only in a bidding war is the victor slaughtered.

But, I’ve found the rarest of all listings! The sub-$300,000 detached house in Toronto!

http://www.realtor.ca/propertyDetails.aspx?propertyId=13536245&PidKey=1192269182

How could you not get in a bidding war for that one? Even 25% over ask puts you well under the price of a crappy condo facing the Gardiner.

#13 Mike on 08.19.13 at 9:03 pm

“And never, ever compete for a house. Only in a bidding war is the victor slaughtered.”

Great line.

#14 samantha fox on 08.19.13 at 9:04 pm

10 years treasuries slowly crippling towards 3 %. Up from 1.5 this very may.

Watch out. High rates are coming. With all the implications.

#15 T.O. Bubble Boy on 08.19.13 at 9:05 pm

or, if you want a bit more of a reno’ed place with a parking spot for your Vespa, spend an extra $30k:
http://www.realtor.ca/propertyDetails.aspx?propertyId=13290093&PidKey=1618367988

#16 Musty Basement Dweller on 08.19.13 at 9:10 pm

From Vancouver. I noticed quite a bit of cocktail party talk this summer about the real estate market correction that any breathing person in Canada should know has already started. I also noticed a couple of people very sheepishly admit, in soft voices that they have recently bought a house or condo. I found it interesting to note that public sentiment towards buying seems to be slowly shifting. I think people are realizing it could be a REALLY DUMB time to buy and aren’t bragging about it as much as in recent years.

#17 Donald Trump on 08.19.13 at 9:10 pm

I find it highly INappropriate that Smoking/Old Mans ‘ spouse was required to fill out the census form reproduced on the pub sign noted in blog photo.

Whats next…Dizzykneeland?

#18 Happity on 08.19.13 at 9:17 pm

Garth, your link to Paulson on dumping gold:

Remember you said don’t fight the fed (the us gov, really)? Well who executes in the markets on behalf of the fed, you know, the plunge protection team?

That’s JP Morgan (and another).

Well JP and Goldman sacks have reversed their multiyear trend of massive gold shorts over the last several months, they are net long now. For example, Jp and hsbc had 90% of all silver shorts. They have been dumping the type of paper you were pumping in exchange for physical precious metals.

Don’t fight the fed Garth, or you might become the greater fool just like Paulson.

#19 Gary on 08.19.13 at 9:19 pm

“in an area you can almost brag about”

Hey! Bite your tongue. I live on that street – there’s plenty to brag about. Like million dollar tear-downs.

#20 Prairieboy43 on 08.19.13 at 9:30 pm

I agree never get in a Bidding War. Wait it out.
I remember Gretzky said ” Go where the puck will be”. He was anticipating where the puck will be so he could feed it to Kurri and shoot the puck into the NET. Man I miss those old oilers.

#21 detalumis on 08.19.13 at 9:35 pm

#9 the house ain’t dumpy, it’s cute. My guess is it is in a walkable area close to the subway, shopping at the end of the street. It’s the sort of area that was common in all cities before we converted most of the country into a mess of strip malls, garages with houses stuck in the back and pedestrian wastelands where seniors drive with dementia rather then hang up their keys. I would say the younger people are just calling us out like in “The Emperor’s New Clothes”. It’s rare, hence valuable.

#22 Smoking Man on 08.19.13 at 9:36 pm

Where do you find these pics, love it
:)

#23 JSS on 08.19.13 at 9:37 pm

Can we go back and talk a bit more about REIT’s?

#24 FB on 08.19.13 at 9:38 pm

TO ABP #4 :
“So 5-yr fixed mortgage rates up another 20 bps by tomorrow for some lenders. Big banks to follow soon.”

Where did you get that info?

Do you have a news link to show us?

#25 canada man on 08.19.13 at 9:41 pm

Bernie Madoff should have got into selling real estate ,he’d still be free ,considering you can make all kind’s of false claim’s about real estate and get away with it.

#26 DaleFromCalgary on 08.19.13 at 9:44 pm

Calgary realtors are thanking God, Allah, or Mother Nature for the great flood. Families or anyone with pets now face a zero vacancy rate. The younger people with families that I know are now renting in Airdrie or Strathmore. Okotoks is even worse because it is close to High River and lots of floodlanders are moving there.

It is easy to criticize young couples for buying now instead of waiting for prices to go down, but if they have kids it is impossible to rent a decent place. Better to buy in South Cranston than to rent in Penbrooke Meadows (where even gang members only go in pairs).

#18 is absolutely correct. JPMC is now one of the largest private physical gold owners, after crashing futures options $500 so they could clear their short positions. Check the Commitment of Traders weekly report and COMEX warehouse reports. Those who held ETFs and paper gold were wiped out. Those who own physical gold free and clear and have possession of it in their own hands are not perturbed. JPMC bought shares in the gold ETF called GLD at bottom and then redeemed them for physical metal. Those who had GLD on margin were forced to sell out to meet their margin calls.

#27 Joke of the Day on 08.19.13 at 9:46 pm

C2686439

$9,750,000: $15,000 gross monthly rent …

#28 Dean Mason on 08.19.13 at 9:47 pm

The U.S. bond market is going to hit a resistance level soon because 2.88% 10 year Treasuries and 3.90% U.S. treasuries are now getting to a point of wrecking the subpar U.S. economic growth.The FED will talk down yields soon and a spread of 3.00% of the U.S. 2 year and 10 year is difficult to remain for long.We are at a 10 U.S. year 2.88% vs. a U.S. 2 year 0.35% which is a 2.53% spread.

Today U.S 30 year fixed rate mortgages are 4.52%,U.S. 15 year fixed rate mortgages are 3.49%.U.S. 30 year Jumbo fixed rate mortgages are 4.68%. If we see this rapid climb in yields continue we will see 5.00% to 5.25% 30 year fixed rate mortgages and 4.25% 15 year fixed rate mortgages.Good luck if you think this is sustainable for years.

We need 300,000 monthly U.S. payrolls mostly full time 77% not the other way around 77% part time that we have now and 200,000 average monthly U.S. payrolls.We need to see this for 24 to 30 months average continuing months and then we can have 5.25% to 5.50% 30 year U.S. fixed mortgage rates and 4.50% U.S. 30 year treasuries,3.85% U.S. treasuries.

It’s been almost 6 years and we are not even close to this.

#29 gogo on 08.19.13 at 9:48 pm

Garth, you will be right, but not yet. I only hope prices correct more than you dare to forecast. cheers

#30 Ann on 08.19.13 at 9:51 pm

Garth
You can’t cure stupid or blame realtors sellers set the asking price and buyers do the biding. I had an offer on a house to present $100,000 more than list I left the buyer to get something from my car and when I returned he had add another $50,000 on to the price. We lost by $40,000 he blamed me for not pushing him higher go figurer.

#31 simpleton on 08.19.13 at 9:51 pm

It seems this crack shack is ‘worth’ 1.4 tons of silver. 1 400 kilos. 200 000 roman denarius. About 2 000 yearly salaries of a roman solder.

#32 Dean Mason on 08.19.13 at 9:51 pm

Correction

I meant to say 3.85% 10 year U.S. Treasuries only if there is on average 300,000 monthly payrolls for 24 to 30 months straight.They must be at least 77% full time and I forgot to mention for all the increased yields,rates I mentioned above at least annual wage increases of 2.50%.

#33 Wally on 08.19.13 at 9:54 pm

Pref stocks hammered again today. Down 10% for the year, about 2 years worth of yields. Anyone holding these puppies needs to mind themselves that they bought them for yield, and forget about this 10% paper loss. That should work, unless they keep falling.

Maybe think about buying some more, as yields rise. Did you buy the right ones? Par value? — Garth

#34 bon ton on 08.19.13 at 10:05 pm

The bond market is in serious trouble.

Fed can influence interest rates for a while. But they can’t determine the interest rates unless they buy all the government bonds which will be the end of the dollar and hyperinflation. Unless somebody decides to implement austerity which will shrink the economy in half and itself trigger extensive money printing in order to service the debt. Unless somebody decides to default on the debt…

The market seems to price the risk on the 10 years bonds close to and soon over 3 per cents at the moment and climbing which proves that CPI of 1 per cent is a lie. If US wants to service increasing debt interest payments they would need to implement some serious austerity.
Which will shrink the economy, make the service of the debt difficult if not impossible and trigger another round of money printing.

The 2 realistic outcomes: default or huge inflation which is another form of default are not pretty.

The days in which both the dollar, bond and stock market go down at the same time will be around for a while, it is a flight out of the dollar that shows its diminishing role as a world reserve currency.

IMF estimated that to solve the states budget issues they would need to double the taxes.

Unless they find greater fools to sponsor them and invest in their bond and stock market. Which it seems is what some people are advocating for.

#35 bon ton on 08.19.13 at 10:09 pm

Pref stocks hammered again today. Down 10% for the year, about 2 years worth of yields. Anyone holding these puppies needs to mind themselves that they bought them for yield, and forget about this 10% paper loss. That should work, unless they keep falling.

Maybe think about buying some more, as yields rise. Did you buy the right ones? Par value? — Garth
———————————————
like the city group stocks down from 500 to 50 dollars since 2008? Sure, the dividend is great….

Prefs are not common equity. No comparison. — Garth

#36 Smoking Man on 08.19.13 at 10:33 pm

Delta, gamma , vega, algebra, the mean,the mode.

Wait who threw the Herd into the soup. Damn it. That’s not in the book

Run you frightened animals, do the cufflinks match the shirt, did you spell right, the rite way.

Does it really matter, you have but an flash bulb of light of life in the grand scheam of things.

What is there to fear. but run my rabbits run. your teacher will be so proud of you.

Obdiance certificates for all the ass kissers.

Creativity , not giving a shit about what anyone thinks is they key to happiness and the password the secrits of universe. Living outside the wall is where you see colour with ray band shades on.

Post your carefully selection of words, motivated by wishfull bias. And the fear of being judged negatavly by other like minded zombies.

Never to smell the esance of a real flower……..ah

This post induced by

Mexican and crazy diamonds in the head phones

Ahhhhhhhhhhhhhhhhhhhhhh life is good

#37 Canadian Watchdog on 08.19.13 at 10:34 pm

Some interesting statistics from CanEquity's top producing cities section. Luckily with the help of historical search engines, I was able to gather stats from earlier years. The following table shows the percentage changes from 2007-2010 to 2010-2013 for average income (household), co-income (single) and average loan size. Table

Pay extra close attention to how single incomes have outpaced household income, at least on paper. I'll follow up with more once I sort the series in a better format.

Remember Canada has no subprimes. (sarc off)

#38 :) :( Ying Yang on 08.19.13 at 11:00 pm

Smoking man WTF are you smoking ?
Wow you are really whacked man.

#39 Renter's Revenge! on 08.19.13 at 11:03 pm

Damned if they do, damned if they don’t, eh #34 bon ton?

Never mind all the real, physical, productive farmland, businesses, people, technology, tools, knowledge and skills the US has. As the long as the nation’s belief-(credit-)based financial system is messed up, it’ll never work out for them!

#40 Piccaso on 08.19.13 at 11:04 pm

#38

You have to admit they were nice garth. We can be old, but still like!!

Cheers

#41 Nosty the Vladiator on 08.19.13 at 11:29 pm

#36 Smoking Man — “Run you frightened animals, do the cufflinks match the shirt, did you spell right, the rite way. Creativity , not giving a shit about what anyone thinks is they key to happiness and the password the secrits of universe. Living outside the wall is where you see colour with ray band shades on.”

Run you frightened animals, and the title of this post is Worries. No worries here SMan, just having a shitload of fun getting my bucket list emptied b4 I break on thru!

As we’re all gonna bite the big one sooner or later, here’s something to help prepare your moving back into the next worlds. It’s a great trip!

Is Sadaam joining us, or still cruising along the boulevards? According to this, he’s Livin’ La Vida Loco. Or maybe it’s me that’s cocoa. Cheers!

#42 ILoveCharts on 08.19.13 at 11:54 pm

We didn’t go through with it. We did not remove subjects. Apparently offers are lining up behind ours. Many greater fools in waiting.

#43 Ralph Cramdown on 08.20.13 at 12:07 am

“New Zealand’s central bank on Tuesday moved to rein in a hot housing market to prevent a potential bubble, imposing its long-threatened limits on low deposit-high value house loans and sending the currency tumbling more than a third of a cent.

Reserve Bank of New Zealand (RBNZ) Governor Graeme Wheeler said from Oct 1 banks would be limited to no more than 10 percent of their total new house lending on mortgages exceeding 80 percent of the value of the property.”

#44 No Debt on 08.20.13 at 12:17 am

I’m snickering the left cheek of my arse off at my neighbours lately.

They’ve got a 3 bdrm 2 story listed in the Hammer. Started out at $169,900 a couple months ago. Down to $149,500. Still, no takers. Maybe it’s the leaking basement.

#45 angela on 08.20.13 at 12:20 am

even george soros bets big against S&P500 ,i would think twice if you dont do as this man says he called the DOT com bubble ,housing bubble,gold bubble ran a 4200% fund with Jim rogers ,he also has an uncanning ability to call everthing at the top of the market
http://www.trunews.com/investing-magnate-soros-bets-big-on-sp-collapse/

PS he is a mega billionare and Garth isnt

#46 Wally on 08.20.13 at 12:33 am

Maybe think about buying some more prefs, as yields rise. Did you buy the right ones? Par value? — Garth

Better than that. I sold half of them about a month ago. As for the ones I have, it’s an ETF of Canadian pref shares, so it’s a mix. I don’t plan on buying more any time soon, since guys like Bill Gross are predicting rising rates. I’ll leave those juicy yields for you Garth.

#47 Oceanside on 08.20.13 at 12:34 am

it’s interesting to hear a lot of people here blaming realtors for high prices….Blame the liquor store employees for the price of Glenlivet? The Harley salesman for the price of 60 year old technology? You have to do your own research and take some responsibility for how you spend your money…………………

#48 Renter_4_ever on 08.20.13 at 1:02 am

Gartho
Seems like from today’s and your some recent posts that you have slowly kind of started accepting that house price will always go up in this stupid place. Best advice I think will be to tell people buy that wait when interest rates comes up instead of trying so hard every day, in making people believe that house is a bad investment. You have to agree that your stock market has also gone down, especially mortgage reits -20% in past 7 months, But houses have gone up here.
I believe you are doing a great job here in warning people that houses will go down but when, nobody knows, even you do not have a clue…
Houses will only go down when interest rates creeps up and all your stats/pictures ideas means nothing because prices keeps on climbing. I do not believe that interest rates will go up here ever, at least in nearest foreseeable future (aka JAPAN), 20 yrs of lowest rates.

Perhaps you should read and absorb the post printed above. Prices have moderated and will continue to do so. Mortgage costs have risen, and will also move higher. And ‘mortgage REITs’ have never been discussed here. — Garth

#49 Renter_4_ever on 08.20.13 at 1:04 am

I am not a realtor but loyal reader of your blog, I know if I had bought in Milton area 2200 -2500 sq ft home in 2009 ( apprx 45000, bran new Mattamy build), I would have made 150000 in price increase only, I chose not to buy and rent instead, and have saved close to that amount in cash, so for me it evens out… but I know there are many people over here who regrets everyday following your advise ( My wife is one of them :), but somehow every passing day makes my belief stronger that these idiotic behavior is not sustainable and will come to an end badly on its own.

#50 Devore on 08.20.13 at 1:09 am

#21 detalumis

the house ain’t dumpy, it’s cute

It’s not cute, it’s a tear down, and will be torn down. No one paying a million for that… thing intends to live in it.

#51 Devore on 08.20.13 at 1:13 am

#26 DaleFromCalgary

Those who held ETFs and paper gold were wiped out. Those who own physical gold free and clear and have possession of it in their own hands are not perturbed.

I wonder how you figure that, since both paper and physical gold trade for the same price.

#52 Carpe Diem on 08.20.13 at 1:23 am

Why is it that all the hot soccer moms in this area shine when they have big purchases.

The husbands seem to shrug and let out some joke about paying that off in the x years.

The women complain when they want some renovation or pool they want and the husband puts up a resistance. Their peers offer advice to stay the course.

Some women are crazy that a mortgage increase of 300K in your forties is worth your dream house (made of OSB) ….

Such a Twilight Zone.

Men have become sheep to their woman. Dogs Unite!

I love my wife.

She tells delusional neighbors or friends they are financial illiterates. She agrees about financial risk management and financial cycles.

I stand equal to my woman .. she is my partner and we talk budgets and openly about each others’ expenses and what is best for the family!

I won’t talk about our neighbors who’s husband had a credit line that kept increasing until we had to come clean.

If you have a shadow fund … awesome … but if you are a idiot and can’t manage it … god luck … or you shall become a man-slave to your wife.

#53 Paul on 08.20.13 at 1:24 am

We are in Paris right now….that’s a steal of a deal!!

#54 stage1dave on 08.20.13 at 1:38 am

I’ve been a bit busy at work the last few months to comment much here, but did want to chime in here with some “Edmonton” observations. FWIW…

Prices have flatlined here over the last year, but the rents are certainly increasing…perhaps a precursor to mortgages becoming harder to obtain for the “fogging the mirror” & “unverified income” crowd? If so, the local LL’s are taking full advantage of it. We’re moving at the end of the month, so the wife & I have become intimately familiar with these increases.

We are still seeing a great deal of homes for rent for prices that couldn’t possibly carry the present mortgage; unless it’s a lo-ball VRM rate or it’s in the last couple years of the 3 percenters.

Couple of observations; check this out:
http://edmonton.kijiji.ca/c-real-estate-house-rental-Brand-new-contemporary-executive-home-for-rent-in-Millcreek-W0QQAdIdZ512517405

Very hi-end build in a desirable neighbourhood…I know; we live just down the block. Great finish inside & out, interesting design. (Although I would have put it on something other than a 30 ft lot!) This place has been going up since Oct (!) when they put the 1940’s bungalow into the basement. After paying 320K for it…anyway, had heard a couple months ago asking was in the 900K range…apparently, renting it out is now a better option? Sign of the times.

Two houses over, a a 1930’s flat-top got levelled to make way for a “semi-detached” 2 story (btw, who in hell invented that term? Things are either “attached” or “detached”…period) 700 sq ft a floor, pretend 2 car garage, (if everybody is driving a Honda) no yard, & until last month, a 650K asking price. Per side…

I almost think I’m back living in Calgary…the constant demolition/re-construction of established neighbourhoods in the name of “revitalizing” them gets somewhat aggravating when it’s YOUR neighbourhood. We’ve had 10 months of constant construction on this block; driving around reveals the same thing going on all over.

I’m at a loss to suggest who may be moving into these places, but feel safe in suggesting their respective credit limits and/or DTI ratio will be substantially higher than what I’d be comfy with.

After seeing the rate bumps the last couple weeks, I’m even more convinced this will all end, well…disastrously!

#55 More Calgary Less Toronto on 08.20.13 at 1:57 am

Correction on your Calgary stats (with this same error published across many media outlets), Calgary -52% not -30%:

“RealNet Canada Inc. said residential land investment in Toronto fell 51% in the first six months of the year compared to the same period in 2012. Sales in Greater Vancouver fell 30% and Calgary 52% for the same period.”

http://www.realnet.ca/news/

#56 Tony on 08.20.13 at 2:22 am

Re: #24 FB on 08.19.13 at 9:38 pm

GIC rates are still at 52 week lows at many Canadian banks and credit unions. American rates will plunge around the middle of this September.

#57 Worries — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate | The Affluent Boomer™ on 08.20.13 at 2:23 am

[…] via Worries — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate. […]

#58 Albert on 08.20.13 at 2:37 am

I’m still homeless….
when will price come down………

damn…

#59 NoName on 08.20.13 at 6:19 am

Germany regulates bitcoin, us regulates tide. “Some weeks ago already the German Federal Financial Supervisory Authority (BaFin) amended a guidance to the definition of “financial instruments“ in the German Banking Code and stated that Bitcoins are financial instruments.”
http://bitcoinmagazine.com/germany-sets-standard-for-bitcoin-regulation/

Fed confiscates 2.9 mil worth of bitcoins…
http://gigaom.com/2013/08/19/feds-seized-2-9m-in-bitcoin-funds-from-mt-gox-court-docs-show/

#60 EK on 08.20.13 at 6:30 am

Garth,

Your comments regarding million dollar plus properties are bang on accurate.

We sold our suburban home about a year and a half ago, and have been looking for a rural property/farm with acreage north or east of the GTA in that price range.

We’ve actually noticed that many properties over 900K simply sit on the market for months and months, and typically undergo several price adjustments. I would definitely say that the market we are shopping in has dramatically slowed, and listings have spiked considerably. We have not found exactly what we want yet, but when we do, we’ll be putting together a very clean offer with cash only, short closing, the key being that we will only offer what we think it’s worth, regardless of selling price.

#61 bigrider on 08.20.13 at 7:10 am

Looks like the equity market is ,and about to, dish out some further pain.

I can also tell you that it will be noticed, talked about and critiqued much more than any “RE correction” in the GTA ,which nobody except the people on this blog believe or have noticed.

#62 bigrider on 08.20.13 at 7:23 am

#46 Angela.

I read the article on George Soros large short position on the S&P.

A 15% drop between now and years end will have a crippling effect on investor psychology way more so than any perceived , or predicted weakening in the value of their homes or RE, whether it happens or not.

No matter how you view the comparison between financial assets and RE, turn, twist or manipulate the story, GTA psychology overwhelming favours RE, at every twist and turn .

#63 dennis on 08.20.13 at 7:52 am

we currently rent a 2 bed/1 washroom apt in the Mississauga Valley Blvd in Mississauga. Across the street we went to an open house on Saturday and looked at an almost exact condo like we rent. We rent for $1500/month with parking. The almost exact condo was selling for $215,000. At an assuming purchase price price of $210,000 we figured out the 5% down plus closing costs with new mortgage rate payments,condo fees, and taxes we were going to spend approx. $320 month more for the condo plus we would have lost out on the approx. $15,000 needed to buy the same apt. that we rent now. Why,why, why would someone be so mentally challenged that they would buy that condo? We will wait till sanity becomes the norm for these unrealistic prices to fall.

#64 T.O. Bubble Boy on 08.20.13 at 7:53 am

@ #56 Tony on 08.20.13 at 2:22 am
Re: #24 FB on 08.19.13 at 9:38 pm

GIC rates are still at 52 week lows at many Canadian banks and credit unions. American rates will plunge around the middle of this September.
—————————

GIC rates are mostly tied to the prime rate, which hasn’t changed (and won’t until the Fed/Bank of Canada move it).

#65 pbrasseur on 08.20.13 at 8:13 am

“The bond market is in serious trouble. ” bon ton #34

No it’s not, it’s just returning to normal, which is a good thing because it means the US economy is really recovering (yields were up event before the FED announced tapering)

With regards to US debt service you should know that the US deficit is already down by quite a bit, this provides a margin.

Obviously in Canada the story is quite different, yield will follow the US but higher yields here spells trouble, a lot of trouble.

#66 jerry on 08.20.13 at 8:18 am

The Fed (US) pillars of guidance (employment-inflation etc) that have served as the benchmark for interest rate increase decisions have not manifested enough to suggest a material change in interest rate hikes. While June typically represents a maturity-cash out date for many bond purchases, the mass exodus has to be at least in part based upon fear-emotion rather than the fundamentals.

Frustrating as bond holders wonder if the train left the station or is another train on its way back in?

#67 housedoc on 08.20.13 at 8:26 am

Hey Dennis #63
Were you away last week?

P/R ratio is lower than 15 = Listen to your mother-in-law. Buy the place.
P/R ratio is between 16 and 20 = Nah, better off renting
P/R ratio exceeds 21 = Your landlord is a munificent god.

#68 D.D. Corkum on 08.20.13 at 8:41 am

#7 blase on 08.19.13 at 8:56 pm

“[…]do you expect CMHC limits to be reduced from the current sub-million[…]?”

—–

Since the million dollar cap is not inflation linked, there really won’t be a need to lower it further. It will naturally diminish over time relative to todays purchasing power.

Year — Present Value (2013 dollars) of $1 million
2020 — $870 thousand
2030 — $714 thousand
2040 — $586 thousand

#69 Big Brother on 08.20.13 at 8:45 am

#146 Smoking Man on 08.19.13 at 8:38 pm
Big Brother nothing is as it seams
Perhaps what you witnessed is the real smoking man, no I wouldn’t do that. Or would I
How is this for an explanation.

I was doing a Google search, looking for Tobacco Road, then Copper head road, came across that clip, copperhead, this kid sounds like me, so said he was son 1
Only my shrink and NSA knows for sure..

MK-Ultra knows that this kid has talent, you therefor can not be his father Luke!
When you run the clip through Final Cut Pro and edit out the background noise you can hear “go Stoysin” and “Hey Ryan” That is who this guy is! Filters are amazing!

#70 MEANWHILE IN EUROPA on 08.20.13 at 9:05 am

@46 Angela and @62 bigrider

I am no investment genius, but Soros is running a HEDGE fund. His put on S&P seems to be that. A HEDGING on all the longs he is on? Apple, JC Penny?

http://www.gurufocus.com/StockBuy.php?GuruName=George+Soros

#71 daystar on 08.20.13 at 10:00 am

#65 pbrasseur on 08.20.13 at 8:13 am

Yields as you point out, unquestionably follow:

http://www.bloomberg.com/quote/GCAN10YR:IND

http://www.bloomberg.com/quote/USGG10YR:IND

Its a mirror image and as you again accurately state, rising yields due to a U.S. economic recovery (and to some extent policy) is bad for Canada. All physical assets are poised to deflate as yields rise, its as simple as that and for what its worth readers, this blog has been right on cue concerning warnings of higher yields as a result of U.S. recovery and the impacts it would have on physical assets. As the U.S. continues to rebound even in the face of higher yields, expect more asset deflation in Canada as a consequence.

#72 CrowdedElevatorfartz on 08.20.13 at 10:15 am

@#54 Paul
“….We are in Paris right now….that’s a steal of a deal!!”
++++++++++++++++++++++++++++++++++++

Paris , North Dakota?

#73 Ray on 08.20.13 at 10:24 am

So with a 15% correction, it brings it down to 860K.

It’s cheaper to service a big mortgage now even with a correction.

#74 LazyJason on 08.20.13 at 10:25 am

Garth,

Do you have a formula (like your Rule of 90) for margin debt? My wife and I have zero debt and a small but growing investment account and plan. I’m thinking of a creditline for about $25-50k to makes use of tax deductible interest.

Cheers!

#75 Canadian Watchdog on 08.20.13 at 11:21 am

Bubbles Bloom Anew in Desert as Buyers Wager on Las Vegas

A five-bedroom house in Las Vegas sold in mid-July for $499,000, double the price it went for three months ago. In Phoenix, a similar house sold this month for $600,000, gaining $273,000 since March.

For those still confused as to who is bidding on these houses while hedge funds and private investors are cashing out, look no further then NAR's Q1 report on international buyers. Link

#76 nubbers on 08.20.13 at 11:26 am

The ‘free’ car presumably allows the developers to hide a drop in price.

The same thing happened in the UK around 2006 – 2007 when prices started to fall. Developers would offer a range of incentives, perhaps worth 7% or more of the purchase price, and then report the gross value (not subtracting the incentives) to the Land Registry. This went on for a while before it was legislated against.

#77 Castaway on 08.20.13 at 11:33 am

#36 Smoking Man. When I first read this blog about a year ago I thought you were a total nutter. Not so sure now. Actually enjoy some of your insight. Keep em coming. Otherwise this blog gets too predictable. Garth posts, people say thanks, others argue quoting stats they fail to realize are manipulated and on it goes.

#78 Nemesis on 08.20.13 at 11:33 am

@DT/#140 {PriorThread}

You had me at BolshevikLove…

Oh, to Polka again with the ShmengeBrothers as the AutumnalMoon silhouettes my shiny new, red Volgograd tractor… festooned with adoring Kulak maidens and their cornucopia of HarvestDelights.

#79 Nemesis on 08.20.13 at 11:41 am

“I’d buy that for a dollar!”…

[CBC] – Concord Pacific land assessment outrages residents: 9 acres of prime [Vancouver] waterfront property assessed at $1

http://www.cbc.ca/news/canada/british-columbia/story/2013/08/20/bc-concord-pacific-land-assessment.html

#80 Mike on 08.20.13 at 11:44 am

Hi Garth,

Can you do a piece on the rising rents in the downtown core? It seems that while buyers are getting more scarce for condos, renters keep flooding in, and the record number of rentals on the market are being easily filled (especially in demand areas: downtown, yorkville, etc.). Would love to hear your thoughts.

Link:
http://www.thestar.com/business/real_estate/2013/08/19/rents_jump_4_per_cent_despite_surge_of_condos_on_market.html

#81 Old Man on 08.20.13 at 12:20 pm

#80 Mike – The problem with renting out a condo vs a controlled apartment building, as your lease on a condo might be month to month, or have an escape clause built in with small print in favour of the vendor.
Now if they sell on the way down you might receive a notice that the property in question has been sold with a date for vacant possession, and off you go, as have seen this before.

#82 bill on 08.20.13 at 12:47 pm

Paris , North Dakota?
Hilton, from the sounds of it….

#83 Mike on 08.20.13 at 12:48 pm

#33 Wally on 08.19.13 at 9:54 pm
Pref stocks hammered again today. Down 10% for the year, about 2 years worth of yields. Anyone holding these puppies needs to mind themselves that they bought them for yield, and forget about this 10% paper loss. That should work, unless they keep falling.

Maybe think about buying some more, as yields rise. Did you buy the right ones? Par value? — Garth
—————————————————-

excuse my stupidity, but what would be the difference for par value shares? How would par value preferred shares be affected compared to other preferred shares?

#84 Nukeit on 08.20.13 at 1:06 pm

Is it possible Canadians get confused when reading about mortgages in the US? Why else would they get excited about locking in at a low rate as long as they can fit in with the maximum payment. The US, they lock in for 30 years good or bad. Canada, after 5 years you have to do it all over again. You can trend the house price rise from the mid 80’s and 17% 30 year mortgages to the historical low rates up until June this year. Since incomes went no where the monthly mortgage payments had to stay relatively the same. However instead of buying more house for the same monthly payment, it looks like home buyers simply bought the same house for more money. What other product can be sold that way? It was a real win for the lucky sod who had locked in at 17% and could now get out with two or three times what he had borrowed. Now the opposite is going to happen and homeowners who mortgaged to the max will be underwater for a very long time as interest rates normalize.

#85 Another pumper? on 08.20.13 at 1:45 pm

http://www.canadianrealestatemagazine.ca/news/item/1741-dont-regret-invest-cautions-property-expert

#86 Ray on 08.20.13 at 1:57 pm

Bad advice. Low rates bring high prices, and vice versa. Buy with the least debt possible, not the lowest payment. Those payments will rise later, and the bebt will remain. — Garth

Disagree. Fact the matter is nobody knows what interest will be in the future. That’s why is always a guessing game and towards the short term (ie 1yr forward looking).

The question is what is the interest rate difference between now and in the future and compare it with the RE price delta. With that model you can judge is it better to buy now or later. For the lamen…are you saving more by buying now or later.

Since the consensus seems to be no crash then price should recover faster after a correction. We may see price recover in 7-9yrs vs 15-17yrs from the 89 RE crash).

If you are worried about monthlys. One can lock in 10yrs at low rates still.

Of course we know where rates are going. Up. And we know what several years of low rates have done to prices. Buying now locks in greater debt. Dumb move. — Garth

#87 Old Man on 08.20.13 at 2:15 pm

Here is another scenario how you can be hooped by renting a condo. You sign a straight one year lease, and with 6 months to go; the condo has been sold, so the new buyers close in 30 days, and you are paying them rent to pay their rent. They are in no rush, as have 5 months to go, so in a few months they serve you notice to vacate as they are taking legal possession, and out you go. Now if the straight lease goes past a year chances are the investor might go month to month on an extension, so you will be thrown under the bus even faster by the new buyers.

#88 Ray on 08.20.13 at 2:20 pm

EDIT

Of course we know where rates are going. Up. And we know what several years of low rates have done to prices. Buying now locks in greater debt. Dumb move. — Garth

Quick to dismiss as usual. Sure rates are going up. But you or even the greatest economist don’t know where it will exactly be in 2,3,5,..10yrs time. Its modeled and not exact science (ie crap shoot).The point is how much will you save in the long run.

10% down $991,700 at 4.3% is will save more compare to 10% down at $860K (ie 15% correction) at 6%.

Is it an investment grade. Definitely no. Lifestyle? Perhaps.

#89 broadway skytrain on 08.20.13 at 2:59 pm

looking at some sfh on the sunshine coast , 300k range, with suite, to rent out , maybe 2200/mo total rent.

if we can cover mtg/tax/ins with the rent , i can do the mtce for nearly free. in 15 yrs we have a paid off house/land in a town we may consider for retirement.

although we have always been debt averse (paid off van house fast, no other debts ever) this is a puny 30k dp. we could easily do this 10 or 20 times (totally destroying the rule of 90!) , and in 15 yrs have 10 or 20 paid off houses. (which will have likely doubled by then, or tripled if they put a road thru squeamish, even if they fall some in the interm) capital gains tax is 50% tax free – what divs do that? – even if there is zero gain, starting with 500k (15 houses) there seems a good chance of owing 4.5M in land in 15 yrs.
or 9M if it doubles

i just can’t see getting so lucky in the mrkt, since i watched the goog ipo with intense interest, but sadly passed.

#90 Smoking Man on 08.20.13 at 3:06 pm

#77 Castaway on 08.20.13 at 11:33 am#36

Smoking Man. When I first read this blog about a year ago I thought you were a total nutter. Not so sure now. Actually enjoy some of your insight. Keep em coming. Otherwise this blog gets too predictable. Garth posts, people say thanks, others argue quoting stats they fail to realize are manipulated and on it goes.

………..

Yes up to 19 Fans now… :) thanks fan…

But sorry to report, I am a bonifide nutter. I truly am insane, what 50ish dude, does what I do, say what I say.
No one, there is something wrong with me.

Glad some of guys can decrypt what I’m trying to say. Be it with my handicap, dyslexia.

It’s Not for everyone…… Years of programming, obedience training, fitting in, believing rule following is the road to salvation, and my god Bragging is a crime punishable by death.

When they encounter a character like smoking man their hard drives blow up, wrench I am the transmission they lash out.

Welcome castaway to the smallest tribe on the Web.

#91 Mister Obvious on 08.20.13 at 3:18 pm

I was looking at some archival material and came across this letter to the editor of the Vancouver Sun dated Aug 31, 1957. It offers a poignant reminder that we have not come all that far in 56 years…

—————————————-
“When times are good, and reasonable prosperity is in evidence, one should do everything possible to reduce debt and all the carrying charges that result from it (not increase debt to the limit of one’s credit rating) and thus be better prepared to face the future and pay for needs without eternally having to pay tolls to others for which no value is received”
—————————————

#92 Donald Trump on 08.20.13 at 3:20 pm

#79 Nemesis on 08.20.13 at 11:41 am

Quite the tax scam…because it shifts the tax burden on the other taxpayers.

Reminds me of those community garden plots in downtown Vancouver…the developers found a loophole that allows them to pay next to nothing till they decide to develop.

#93 Toronto_CA on 08.20.13 at 3:44 pm

Well at last some good news for new home sales in the GTA…oh wait.

http://www.bildgta.ca/media_releases_2013_detail.asp?id=925

More record lows.

“Sales activity in 2013 has been low and we will start to see the effect of that in two to three years.”

Look out below!

#94 calgary renter on 08.20.13 at 3:45 pm

@#89 Ray

I think you’re missing the point about the total amount of debt- if you have a million in cash, would you rather the house be 991K or 860K?

Obviously 860.

You also assume that as the house price decreases the downpayment decreases – you used 10% on both examples but its easier to come up with 86000 than 99000.

#95 Questioning RE in Calgary on 08.20.13 at 3:48 pm

Of course we know where rates are going. Up. And we know what several years of low rates have done to prices. Buying now locks in greater debt. Dumb move. — Garth

Same old story Garth, living in Calgary, even if the price does correct 20% (unlikely) I am still going to wind up with the same monthly payment because of the higher interest rates-and about the same amount of money being lost to the bank in interest. I’ve taken your advice on housing and have accumulated a good amount of money. But Ive been on here too long, five years….if your financial advice was half as good as your writing, I’d be buying a nice place in calgary for 360k, not 500k. Now you’ve softened your views and the melt-not crash, that youre predicting is going to put Calgary back to what, 2010 prices?

This going to make it up or be sensored? I’m betting the latter.

I won’t even censor it. — Garth

#96 LTL_FTC on 08.20.13 at 3:50 pm

#87/#89 Ray –
Maybe look at it another way. The average couple makes average income. They also have an average amount available for a mortgage of (surprise) average amortization length. These facts allow one to determine the average monthly payment on a property. Average people tend to buy the most house they can afford and one can basically plug the price of the home if you know the interest rate. If the interest rates are high, there’s less left over to pay for the house; if interest is low, they can pay more for the house though their outflow may be similar in both cases. So back in the days of 18% interest, the average couple still only had average income and so the price of the home had to come down to compensate. They looked nuts, but when interest fell to earth, they had much less principle hanging over them. The converse happens too – it’s happening now. How can you argue against that general logic?

#97 Sue on 08.20.13 at 4:00 pm

Garth, speaking of worries, a friend just posted this – is it legit?

http://canadiantimes.ca/ct2/index.php/canada/504-conservative-2013-budget-may-allow-banks-to-confiscate-customer-s-deposits

No, of course not. — Garth

#98 Ritchie on 08.20.13 at 4:11 pm

BMO just hiked their 5-year 20bp to 3.79%
http://blogs.wsj.com/canadarealtime/2013/08/20/will-bmo-rate-hike-send-a-chill-through-canadas-housing-market/

#99 jeffnier on 08.20.13 at 4:14 pm

Met an agent last weekend in Toronto. He was talking about a couple that came to him recently and wanted to buy a $2 million house with no money down. Unbelievable. He told them to look elsewhere for an agent.

#100 Ray on 08.20.13 at 4:34 pm

#97 LTL_FTC

I am using Garth’s example. Some couple bid up the price to 991K. Weather that is prudent or not that is another debate.

Mathematically, you can save more by buying at current interest rate or wait for a correction. What I am considering is the interest rate differential. So right now you can lock in 4% for 10yrs.

If you peg the rate at 6% in few years time, how much more are you saving with 2% in spread with a “potential” 15% correction that drops the price to 860k?

My point is you are better off to buy now if you want to save in interest.

I am not saying everyone should jump into RE but if you are comfortable financially and not looking to sell in the next 10yrs then weather there is a correction or not that shouldn’t affect you.

#101 Donald Trump on 08.20.13 at 4:59 pm

#98 Sue on 08.20.13 at 4:00 pm

This gets into very deep and convoluted discussions.

IMHO, they can….it all depends on if they would.

#102 Devore on 08.20.13 at 5:00 pm

http://money.msn.com/business-news/article.aspx?feed=MW&Date=20130820&ID=16823863&industry=IND_BANKING&isub=

Boom! As predicted. That’s a 5.5% increase. Up how much from 6 months ago?

Ray is just pulling numbers out of thin air to make his arguments work. Smaller debt is always better than big debt. You can spin things however you like to convince yourself that up is down.

#103 Smoking Man on 08.20.13 at 5:04 pm

New definition of backlash

SEARS CANADA

#104 Questioning RE in Calgary on 08.20.13 at 5:05 pm

I won’t even censor it. — Garth

Yeah, yeah…my Gartho belittling SENSOR just spiked. Its a reasonable arguement, what if Calgary real estate continues to appreciate the way it has? Im not getting ahead…choked with our landlord, being a real useless piece of sh*t as of late, and moving into another rental when there is apparently little to nothing on the market is about as appealing as prairie oysters. Its making me want to expedite the purchase of our first home…right as Calgary’s housing is at an all time high….perfect. Feel like I’m stuck between renting from a complete douche, moving into a more expensive POS with a potentially bigger douche for a landlord, or buying a $450k house that will need some work.

Thoughts?

#105 Stickler on 08.20.13 at 5:14 pm

Sovereign debt
consumer debt
corporate debt
margin debt

All at or near record highs!

In a rising rate environment too much debt is death.

With a slow growth economy and deflating prices those (cities, companies, people) with cash, or room to borrow will be king.

Those that are over leveraged will be toast. Think about the value of something…not the cost.

If you “dream” about a kitchen, you are all ready gone.

#106 Stickler on 08.20.13 at 5:24 pm

“Using TIC data, in the month of June the international community did something it has not done in years – it sold US Treasurys with passionate zeal and reckless abandon.

In fact, in that one month alone, $57 billion in total Treasury holdings was dumped in order to avoid major and accelerating losses.

And yet there was one entity that was buying, on a virtually matched dollar-for-dollar basis, all that the foreign entities had to sell.

The distribution of June sales among the select largest holders of US paper, and the sole, solitary buyer, is …?

Guess who this Mystery Buyer X is, who boldly bought everything that no other man, woman or child wanted to buy in the month of June.”

…Think the “taper” is coming?

I don’t …but feeling the pain from the sell off of utilities, pipelines, telecom, REITs, preferred shares, EEM stocks…

#107 Tony on 08.20.13 at 5:35 pm

Re: #99 Ritchie on 08.20.13 at 4:11 pm

It doesn’t really matter what they charge because most Canadians will lose “their” house when the whole thing implodes. Next up in the housing market will be two for one sales. Two for the price of one. GIC rates tell the story almost zero demand for new mortgages as many GIC rates are still at 52 week lows at banks trust companies and credit unions.

#108 Mike2 on 08.20.13 at 5:42 pm

“And ‘mortgage REITs’ have never been discussed here. — Garth”

It’d be great if they could be discussed, along with “hybrid” REITs. Seems a lot of funds can’t buy property without leveraging themselves heavily in mortage debt.

IMHO, the confusion explains a lot of the fear around asset-backed REITs, and explains the buying opportunity you’ve talked about.

Seems like you have to be a pro to spot the fine print in a given REIT which says they’re buying with mortgages.

Then don’t do it. — Garth

#109 Stickler on 08.20.13 at 5:44 pm

@ #98 Sue on 08.20.13 at 4:00 pm

Garth, speaking of worries, a friend just posted this – is it legit?

http://canadiantimes.ca/ct2/index.php/canada/504-conservative-2013-budget-may-allow-banks-to-confiscate-customer-s-deposits

No, of course not. — Garth
—————–

For the record -> Canadian banks can take deposits under certain circumstances. That is a fact.

I don’t think there is any reason to worry about it though.

Not they cannot. And never will. — Garth

#110 Tony on 08.20.13 at 5:47 pm

Re: #96 Questioning RE in Calgary on 08.20.13 at 3:48 pm

Move up to Edmonton where condos, townhouses and apartments are still 50 percent cheaper than they were at the peak in the summer of 2007. At the lower end of the resale market you could probably lowball around 30 to 40 percent lower than the asking prices right now.

#111 The Big M on 08.20.13 at 5:50 pm

#108 Tony on 08.20.13 at 5:35 pm

It doesn’t really matter what they charge because most Canadians will lose “their” house when the whole thing implodes.

=========

All of your money is in the market and the market is about to head into free-fall in the Fall.

Housing has remained solid.

Guess all the guessers guessed wrong again.

“Free-fall.” You just made that up, right? — Garth

#112 Canadian Watchdog on 08.20.13 at 5:55 pm

#94 Toronto_CA

That’s probably the worst it’s going to get as July marks the 15th consecutive YoY monthly decline. Last August fell by 64.3% y/y, so this month won’t be much of a decline in percentage terms.

#113 Macrath on 08.20.13 at 6:16 pm

“KER-RUNCH! The Canadian preferred share market got pasted today, with PerpetualDiscounts losing 130bp, FixedResets off 73bp and DeemedRetractibles down 97bp. There doesn’t seem to be much point looking for a pattern in the enormous Performance Highlights table, although it is interesting that FixedResets are prominent among the big losers. Volume was very high.” (prefblog.com)

CPD was $20 in 2007 and has been in the doghouse ever since, is the yield worth it when your saddled with constant losses of precious capital ? Like what would it take for this puppy to see $18 in my lifetime ?

CPD finished higher on the day. It has lost 2.2% this year, and has a yield of 4.56%. If you bought it for yield, stop being a wuss. — Garth

#114 Whatup on 08.20.13 at 6:31 pm

The spike in numbers (Vancouver) could have something to do with Bentall Kennedy buying up Olympic Village condos totalling $41.5 million. Average condo price is $350,000. The media is so irresponsible to not do their homework.

#115 Milla on 08.20.13 at 6:39 pm

You guys try to ran infront of a train. Which is good as you are saving money on tickets. While other who are not that smart actually are sitting on the train in comfort. Well they pay for it. Tell me what is purpose of living? Saving money? Making big buck? It is boring. If you would like to save many stop reproducing. It requires less brain then understanding of how bonds or stock works. Renting is not bad for youngsters. Renting for a mature man or women means to be a pushover. Well I prefer comfort and full control over my life. So, yes I own a condo and pay for it. I am not RE. I am an Engineer.

#116 T.O. Bubble Boy on 08.20.13 at 7:01 pm

@ #99 Ritchie on 08.20.13 at 4:11 pm
BMO just hiked their 5-year 20bp to 3.79%
http://blogs.wsj.com/canadarealtime/2013/08/20/will-bmo-rate-hike-send-a-chill-through-canadas-housing-market/
—————————

Interesting that even the independent/discount mortgage shops are at 3.49% or higher:
http://www.ratesupermarket.ca/mortgages/results/–25-250000-5-CLOSEDFIXED/?amortization_period=25&mortgage_amount=250000&rate_term=5&rate_type=CLOSEDFIXED&deposit_type=amount&deposit=&property_value=250000&current_mortgage_balance=&additional_cash_to_borrow=0&mortgage_type=buy_a_home&payment_type=Monthly&path_from=

RBC and TD are the cheapest big banks @ 3.59% (I’m sure they’ll be up with BMO soon enough).

It was only a few months ago that 2.79% or lower was commonplace (mentioned countless times on this blog, like here: http://www.greaterfool.ca/2013/03/22/race-to-the-bottom/ )

#117 Donald Trump on 08.20.13 at 7:25 pm

Some assh*le from Toronto in a HUMMER:

http://www.liveleak.com/view?i=034_1376610184

Any guesses who?

#118 The Big M on 08.20.13 at 7:26 pm

“Free-fall.” You just made that up, right? — Garth

Borrowed it from one of your real estate predictions.

Speaking of which…..

Give me a reference. You made that up, too. — Garth

#119 Smoking Man on 08.20.13 at 7:30 pm

#114 pinstripe on 08.20.13 at 5:59 pm

So, if you this to be true, profit from it.
But something tells me you’re not sure.

Vladimir no way I’m doing the die test, as I know I’m on borough time already. So funny when my chest tightens up after to many darts, most would be calling 911. I just look around evaluate not a bad spot

Did I ever tell you about Becky :)

#120 Macrath on 08.20.13 at 7:37 pm

I was wondering why the pref market did not appreciate during the time when interest rates were falling to near zero. They are supposed to be like long bonds which appreciated significantly. Maybe this is due to the fact that the market is mostly wussy retail investors who failed to bid the market up.

This year, $17.43 to $15.80 is a 9.8% loss. Over 2 years of yield and heard of wusses has not even begun to panic yet.

If you track preferred values like stocks, you shouldn’t own them. They are yield instruments and will, over time, demonstrate remarkable price stability. — Garth

#121 JimH on 08.20.13 at 7:41 pm

an excellent and thought-provoking discussion of QE, the mirage of hyperinflation, and the dangers of placing too much faith in P/E ratios can be heard here:
http://thewallstreetshuffle.com/podcasts/20130819-Seg5.mp3
enjoy!

#122 CrowdedElevatorfartz on 08.20.13 at 7:58 pm

@#105 Questioning RE in Cowtown
“…Its making me want to expedite the purchase of our first home…right as Calgary’s housing is at an all time high….perfect. Feel like I’m stuck between renting from a complete douche….”
++++++++++++++++++++++++++++++++++++

I remember moving to Calgary in 1980. The boom was just about to end.
Vacancy rates were at an all time low. (4% I think).I had to pay $100 to some scam ‘rental agency” to hand me a list of “available properties” ( For all you non Boomers. The internet didnt exist…..newspaper “for rent” listings would only refer you to the rental agencies…..quite a scam)

Anywho, my first glorious apartment in Calgary was in the basement of a house that was about 65 years old.
The entrance was through the garage passing a car with 4 flat tires, open a door in the floor…., down a flight of stairs into a dank, cobwebbed shithole. No kitchen. A slop sink and filthy toilet in the “common area” that I shared with a hobo flopping in the next 1 room ‘apartment”.
All that for the exorbitant sum of $285/month.
I stayed there for about 6 months and then moved to an apartment…….with an elevator………

#123 jess on 08.20.13 at 8:02 pm

Turkey coming unraveled

http://www.spiegel.de/international/business/erdogan-endangering-economy-with-financial-sector-witch-hunt-a-917370.html

#124 espressobob on 08.20.13 at 8:11 pm

Don’t understand what all the fuss is about with pref’s REIT’s & bonds? Prices fluctuate, whats the big deal?

Investing is what it is, you average in, hold for the long haul, and enjoy those distributions!

Hell, at these prices I only wish!

#125 Macrath on 08.20.13 at 8:26 pm

They are yield instruments and will, over time, demonstrate remarkable price stability. — Garth
—————————————————————–

You are absolutely correct . I have had pref shares in funds since before ETFs were invented and they have been a good stable investment. I presume you are also saying they have a low correlation to other asset classes and are beneficial in a diversified portfolio.

#126 Siva on 08.20.13 at 8:30 pm

@DiPettaMortgage: GTA new home sales in July 2013 down 21%, gap increases between low and high rise http://t.co/DWULztWdyq #bubble

#127 Marginal on 08.20.13 at 8:34 pm

#118 Milla
Good post, but in the interest of full disclosure and given that you are “on the train”, it wouldn’t hurt to part the kimono slightly and confirm whether or not your engineering job is dependant on the construction/real estate industry.
Unfortunately, too many who comment on this blog are not arm’s length and are not brave enough to declare their true purpose.

#128 CrowdedElevatorfartz on 08.20.13 at 8:52 pm

@#118 Milla
“…Renting for a mature man or women means to be a pushover. Well I prefer comfort and full control over my life. So, yes I own a condo and pay for it. I am not RE. I am an Engineer…..”
++++++++++++++++++++++++++++++++++

Sooooo, you have a mortgage on a condo.
Aaaaand, you plan on moving back to Mother Russia.

Let me guess, your a contract worker making “beeeg bucks” in Canada for your engineering skills.

Guess what? When the contract is over. So’s your job.

Welcome to capitalism.

Oh and when you go to sell your condo to move back “home” get ready for a loss.
Thats called “capitalism” too !

#129 Marginal on 08.20.13 at 9:58 pm

@#105 Questioning RE in Cowtown
As noted by #126 CrowdedElevatorFartz, many of us have our own horror/war stories. Hey, Joni Mitchell rented a cheap apartment in Toronto (no heat in the winter) when she first started out, but it turned out ok for her all these years later ;).

There ain’t no crystal ball, no guarantees. If you can’t take the renting anymore and buy a house just before a major downturn (as we did many years ago), then c’est la vie. Good if you like the DIY project you’re thinking of and can imagine living in it for many years (hope your job is not of the Mary Poppins kind). Best of all, the prospective DIY fixer upper should not be the most you can afford. What worked for us is buying a place that we thought we could manage on one salary. It didn’t come to that, but was a good hedging bet and reduced a lot of financial worries at a time when interest rates were 12%.

#130 Milla on 08.20.13 at 10:51 pm

No dear, nothing to do with costruction, and no way going back to mother Russia even if you pay me. Great full time job in Alberta. Mechanical pressure equipment industrial design. Yes by having condo I am able concentrate on my job more. Rented 7 yeas in Toronto . Happy that I have my own place, big difference. Or maybe it is Alberta. Love it here.

#131 Milla on 08.21.13 at 2:37 am

To crowdedelevatorfartz. You know if one wants to be a pessimist one always finds a reason.
To Marginal. I am trying to be objective. It is great to read this blog. Learned a lot. But I would not apply directly and immediately all advises.
Because if you are not getting what you really want one day it will get you. Sure it is silly to dream about things or to have things that one cannot afford. But to proceed with giving away a home and rent just because others do it is kind of naive and spontaneouse. First it will take lots of time, that I cannot afford to spend definitely. My time is my money. Second some new people like a landlord appear on horizon. Bet he will not be the sweetest human being. Cannot afford it again , negative thoughts divert from design. And I am making money to make my and my family life better. Make money for money is against my nature. So I do have my reasons not to follow:)

#132 Jiminy on 08.21.13 at 7:30 pm

Here’s one for the conspiracy deniers to chew on.
http://www.cloudedtitles.com