The shock

leave1

“They’re going up every time we turn around. It’s a shock to clients. Everybody just thinks they’re always going to stay low.” — Paula Roberts, Toronto mortgage broker.

Here are the latest developments in the story that so many realtors, lenders, bankers and homeowners thought would never unfold.

First, TD has joined BeeMo and Royal in hike the cost of its ‘best offer’ five-year, fixed-rate mortgage. The fifth-of-a-point increase will be matched by the other guys by this time next week.

Second, RBC – the largest source of mortgage loans in this delusional nation of granite-lickers and stainless rubbers – has also upped its ‘posted’ five-year rate. This is a big deal. That rate now sits at 5.34%, the first jump in a year and a half. As the other banks follow suit, it means folks wanting home equity loans, variable mortgages or fixed-rate loans with terms shorter than five years will have a tougher time qualifying for them.

Here’s why. For the past three years the feds have required that anyone taking a high-ratio VRM (now the cheapest option) or a loan with a term of one to four years must qualify using the posted rate (now 5.34%) and not the actual loan rate (3% for variable). This is built-in insurance that they can handle the pain when rates inevitably pop, like now. This benchmark rate is also used to determine debt service ratios, so the higher she goes, the more income a borrower must have.

Third, condo developers are already waving the white flag. Even scary Brad Lamb was telling the media on Thursday that the market is probably going to be comatose, “until 2016.” Meanwhile only two new projects were launched in the GTA last month, down 70% from the average over the last four years. As I told you earlier this week, new house sales are now at the lowest level in a decade. You will not want to be a drywaller or a crane operator three years from now.

Fourth, the real estate story has changed in a flash, and leapt from the pathetic pages of this dank, moist site to the bright lights of the MSM. Just look at some of the statements now flying around the media: “Buying the same house will be more expensive this fall than this spring,” says National Bank Financial analyst Peter Routledge . “Housing markets are prone to overreaction in both ways, the upside and the downside. The possibility that you get a vicious cycle goes up as rates go up.”

Vicious cycle? Like when people stop buying houses because they think they’ll go down in value, which makes properties depreciate further? Is that any weirder than people getting house horny because real estate’s rising, which makes more people want it more, boosting prices? Of course not. This guy’s right. Housing is the most emotional of all assets, which makes the housing market inherently unstable when public sentiment shifts. And it is.

By the way, CBC called late Thursday, booking me for fear-and-loathing radio interviews Friday morning in 12 cities. Now you clearly know what kind of serious crap we’re in.

Fifth, if you need any tangible evidence of what damage rising mortgage rates can do to a robust real estate market, look south for a moment. Massive US bank Wells Fargo just announced it’s canning 2,300 jobs in its mortgage division because demand for money has slumped as the cost rises. This comes after US house sales surged 17% in the past year and prices ponied ahead 13%. It’s the best market since 2005, and yet a mortgage increase exactly equal to ours – about 35% – has many buyers halting in their tracks.

Sixth, this is unlikely a blip, but the beginning of rate normalization. Take a look at the chart for Canada 5-year bonds, below. With the US economy in recovery mode the need for massive amounts of government stimulus spending and dirt-cheap rates is lessening. The gradual weaning will take a year or two or more, but the direction is unmistakeable – historic low rates will end. And with them the one, last pillar supporting record high house prices in every Canadian city crumbles.

BOND YIELD

  • If you have a mortgage in place, start budgeting now for higher payments when you renew.
  • If you have extra cash, invest it wisely to make a lump-sum payment against the principal when the term comes up.
  • Ask to convert your monthly-pay to a weekly-pay (the ‘accelerated’ kind) in order to shorten the amortization and reduce interest charges.
  • Talk to [email protected] about early renewal, blend-and-extend or kidnapping her.
  • Consider a variable-rate mortgage because you will stay below five-year rates for at least the next two years. But that advantage will eventually end.
  • Negotiating for a house? Then wave the latest headlines and offer less. The sellers will cave.
  • Waiting until the Spring to list your house? Good luck with that. Get out now.
  • Don’t even think about house-shopping until you have secured a mortgage pre-approval and passed the debt ratio hurdle.
  • But the best advice: wait. We have crossed the river, brother.

148 comments ↓

#1 TO and GTA Sales and Stats 2013-08-22 on 08.22.13 at 9:13 pm

Above $1mil homes are selling now, the speculators are getting out of the market. Check the heat maps to see properties sold under the price of the area after months of sitting on the market. Expect one or two more months of average prices going up for Detached in 416. See the central areas
TO and GTA Stats and Sales 2013/08/22
GTACondos: http://bit.ly/14naSeH
905SFH: http://bit.ly/14naUTW
416SFH: http://bit.ly/14naUU2

#2 gladiator on 08.22.13 at 9:13 pm

Hah! Firsters’ efforts are funny, but the efforts of those who tell them they’re a$$hole$ are even funnier. Only weak ones will hit an easy target. Yesterday, I could have been first purely accidentally and asked about it. Today, I wrote this among the first comments on purpose for dR. wAYNE and dEREK r.
Ok, now off to living my wonderful life. No mo’ accidental “firsts” from me :)
You guys keep bashing the miserables.

#3 Smoking Man on 08.22.13 at 9:17 pm

Square root of 4 + 1

#4 T.O. Bubble Boy on 08.22.13 at 9:18 pm

Garth – how come you’re never invited to F’s exclusive economic retreat?

http://www2.macleans.ca/2013/08/21/flahertys-wakefield-confab/

Maybe it’s because you’d call BS on his “balanced budget in 2015” claim?
http://www.theglobeandmail.com/news/politics/flaherty-says-theres-no-doubt-deficit-will-be-erased-by-2015/article13897657/

Flaherty saying that there is “no doubt” the budget will be balanced in 2015 either means that Harper/Flaherty are doing MAJOR cuts in 2014, or this is a typical un-educated guess (like the “no recession for Canada” call in August 2008). Either way, the Canadian economy is screwed.

#5 snake on 08.22.13 at 9:20 pm

http://www.nydailynews.com/news/national/woman-lost-home-6-30-chance-house-article-1.1432599

#6 T.O. Bubble Boy on 08.22.13 at 9:21 pm

WANTED: HAM buyer with 1.888 million dollars to spend on an 80’s burbs house in Richmond Hill (GTA):
http://www.realtor.ca/PropertyDetails.aspx?PropertyID=13561226&PidKey=-814285055

Aren’t we past putting the 888 on every listing price in Asian-influenced communities???

#7 tigerbaby on 08.22.13 at 9:22 pm

> Not sure what you mean by ‘level the overall playing field’.

observations:
1. Canada has un-sustainably high cost of RE.
2. Canada has seriously fallen behind in R&D due to lack of funding.

I submit this is a sign of sub-optimal allocation of our resources, caused mainly by the CMHC tipping the financing “playing field” completely to one side with its 600B guarantee to the RE sector. The result is imminent acceleration of brain drain due to atrophying of our R&D ecosystem, with

1. many of our best and brightest moving to the US.
2. the few companies that we do have getting crushed by better funded US counterparts and sold for scrap.

I further submit that with a well funded, CMHC style “Canadian Science and Technology Corporation”, we can significantly improve our tech venture capital environment, allowing our R&D to not only survive, but to thrive and be competitive globally.

#8 Nosty the Vladiator on 08.22.13 at 9:22 pm

#178 Donald Trump on 08.22.13 at 5:19 pm and #164 broadway skytrain on 08.22.13 at 3:29 pm — “. . . another communist agenda to wipe out the middle class . . .” — Agenda 21 in a nutshell. Accurate, but what do I know? Not much, I guess.

#168 Holy Crap Wheres The Tylenol on 08.22.13 at 3:39 pm and #175 MIKEF on 08.22.13 at 4:53 pm — Don’t take the m$m as gospel — be careful with their ‘reports’.

Remember it was Ronald Reagan who gave Sadaam chemical WMD to defeat Iran in their seven year war which ended in a tie. Sadaam returned those weapons.

The main reason for dubya’s Iraq invasion was not WMD (Sadaam didn’t have any), it was because Iraq was about to leave the petro-dollar and go either with the Euro or Yuan. China could have bought in a gold-backed Yuan at that time, and that would have interfered with TPTB’s plans.

A scapegoat and an excuse was needed pronto (just after dubya was elected), so 9-11 happened to wager war with Af’stan (which had nothing to do with it), then the carnage in Iraq. Link, another plus one more. The real Axis of Evil.

#9 AK on 08.22.13 at 9:23 pm

#91 Tony Right on 08.22.13 at 7:42 am
“Look out below!! (And stock up on American dollars).”
====================================
Indeed. Nothing like a freshly minted C-Note

#10 miss behavin on 08.22.13 at 9:23 pm

Misleading graph, not starting the Y-axis at zero. Sheesh, c’mon.

Bond yields, dude. — Garth

#11 HockeyNightInAmerica on 08.22.13 at 9:23 pm

This blog is like the boy who called wolf. Truth is, the years have passed and still no real estate correction. When will it occur? Only when job losses are bad or a recession occurs. The world has gone crazy for living on credit. The status quo will buy nice houses, cars and luxury items right up until the day before they lose their job or max out their credit. The global economies have doubly and triply leveraged up to provide growth. One of the sins of economics is growth at all costs. Bernanke has tried to avoid a repeat of the 30’s depression but has recreated the Roaring 20’s bubble. We all know what happened next. A major flaw about people is most of them are blind with their success and think they know it all….

Nice rant, but it’s here. — Garth

#12 Unplugged on 08.22.13 at 9:25 pm

Like I mentioned yesterday – this situation will have far reaching compounding effects throughout all markets across the country. However, the human factor here will be the most painful as thousands line up to start playing the blame game.

#13 CrowdedElevatorfartz on 08.22.13 at 9:26 pm

“…..fear-and-loathing radio interviews….”

Any psychotropic drugs a la Hunter S. Thompson to relax you before the interview Garth?

#14 Trevor on 08.22.13 at 9:27 pm

do i have this right? .. as mortgage rates rise, bond yields rise, and in turn bond prices fall

Not exactly. Bond prices fall and yields rise, affecting mortgage costs. — Garth

#15 dienekes on 08.22.13 at 9:28 pm

Lets see how resilient Saskatoon is now.
Maybe they can focus the synchrotron at F’s head to conjure some quantum, bailout plan.

#16 visorman30 on 08.22.13 at 9:29 pm

It almost feels counterintuitive for Wells Fargo to be laying people off because of the fact the market is the best its been in a long while.

#17 Nemesis on 08.22.13 at 9:30 pm

“We have crossed the river, brother.” – HonGT

In more ways than you could imagine, AuldPol. For what it’s worth… I did try try to talk them out of it, though.

It’s going to be an ‘interesting’ Autumn.

http://youtu.be/2FgDles4xq8

#18 TipsByTopic on 08.22.13 at 9:31 pm

Garth – If interest rates are going up, what will be the impact to REITS?

They’ll get cheap until they’re irresistible. — Garth

#19 what to do on 08.22.13 at 9:33 pm

If I could buy without a mortgage now should I or wait alittle longer.Taking a beating in riets and is the bond funds done bleeding yet?

Sure, sell assets that are temporarily down and buy one at a temporary high. Good strategy. — Garth

#20 NoName on 08.22.13 at 9:37 pm

very interesting read about re in sanfrancisco.

“Housing prices in San Francisco are currently crazy high, but they are not without precedent. By historical standards, the San Francisco real estate market has not hit peak exuberance quite yet. Prices and over-bidding will likely continue to rise, but if history is any guide, they will eventually fall. The question is, when?”

http://goo.gl/sz2xcS

#21 For sale on 08.22.13 at 9:40 pm

My neighbors are laughing at me – listed house 3 times in the past 2 years – now priced way below assessment. Can’t help but feel like an idiot. http://tiny.cc/6kx81w

#22 Smoking Man on 08.22.13 at 9:41 pm

Garth, for your interview, might I suggest having a few smokes, lower the pitch in your voice, fake some raspyness.

We all know your a cool dude, ride a hurley, but darn it man, on radio no visuals,

At your normal pitch the listener who don’t know you will visualize, a thin man, who likes knitting as a hobby and favorite colour is pink.

#23 The shock — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate | The Affluent Boomer™ on 08.22.13 at 9:43 pm

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

#24 Marginal on 08.22.13 at 9:48 pm

#3 Smoking Man on 08.22.13 at 9:17 pm

Good one. No dyscalculia….

#25 Devore on 08.22.13 at 9:52 pm

#7 tigerbaby

You’ve correctly identified misallocation of resources as the root cause, but the solution is not to misallocate in another area, which will only create more problems, but rather to correct the misallocation.

We’re constantly reading whinging on this very blog about how Canada is “giving away” “our” resources (as we had a natural claim to any of it); we’re not giving them away, we’re selling them, and, sadly, Canadians are not buying. If they had any more left over to do so, they too could participate in Canada’s nature resource prosperity.

But the same applies to any other sector of the economy, including R&D and tier 1 capital. Real estate is sucking off so much money, it has to come from somewhere, and it’s coming from discretionary spending and savings/retirement/investments.

There is no free lunch.

#26 Victor V on 08.22.13 at 9:54 pm

PRICE DROP #5- 18 Tranby Avenue – ANNEX

http://themashcanada.blogspot.ca/2013/08/price-drop-5-18-tranby-avenue-annex.html

This house has been listed since September 2012.

It is a 5 bedroom, 3 bathroom house on a 25 x 77.8 foot lot just steps to Avenue Road which to many is very appealling.

What isn’t appealling is the state of this house. It needs a LOT of work.

It was first listed at $1,695,000 which was way too high since the fully done semi at 26 Tranby took 4 months and 4 price drops to finally sell at $1,555,000. And sure, that was a semi, but it was DONE.

This house didn’t sell and the price was dropped at the end of October to $1,625,000.

I thought it was more of a $1,495,000 house, maybe a little lower.

When I posted it in December, I suspected a price drop in the new year to $1,579,000.

It dropped in February to to $1,588,000.

Again, it didn’t sell and the price was dropped in April to $1,518,000.

Still no sale and the price was dropped in June to $1,455,000. That is $50,000 less than I thought it would sell for.

But still no sale and the price has been dropped AGAIN!

This time, the new price is…

$1,428,000.

#27 T on 08.22.13 at 9:55 pm

Wow!

You actually did a whole post on the blog on our discussion today!

Remember, December Rates will be 1.44% for the 5 year. Post that on your fridge.

Followed by an abrupt reverse course by the major banks mortgage rates.

Bank on it.

#28 Victor V on 08.22.13 at 9:57 pm

PRICE DROP – 22 Belmont Street – YORKVILLE

http://themashcanada.blogspot.ca/2013/08/price-drop-22-belmont-street-yorkville.html

I first posted this 2 bedroom, 3 bathroom row house on a 13.12 x 18 foot lot in Yorkville in February 2012.

That was exactly a year after it was first listed!

Yesterday, it became the Toronto Life House of the Week.

A week ago, it was relisted with a new agent at a price drop.

The original price in February 2012 was $1,250,000. It didn’t sell and the price was dropped in March to $1,150,000. Again, it didn’t sell and the price was dropped in October to $1,095,000.

And a new agent was hired.

The new listing price is $1,088,000.

#29 Julia on 08.22.13 at 9:59 pm

Here’s some good advice… Not.
http://www.theglobeandmail.com/life/home-and-garden/real-estate/with-toronto-rents-spiking-condo-ownership-looks-appealing/article13912770/

#30 Derek R on 08.22.13 at 10:00 pm

#2 gladiator on 08.22.13 at 9:13 pm wrote
Today, I wrote this among the first comments on purpose for dR. wAYNE and dEREK r.

Good man! Cheers!

#31 takla on 08.22.13 at 10:04 pm

Garth this is just the next phase of the credit cycle,but i have a feeling it will have a long run,spawning many middle class losers along the way as interest rates climb.The middle class is the economic engine,working ,paying tax’s and consumeing ,thier numbers will take a serious hit ,Is the middle class doomed to the same fate as the do-do bird?

#32 Timing is Everything on 08.22.13 at 10:05 pm

(3% for variable)

2.6% 5year ARM today. Major banks. See a broker if you are a crappy negotiator.
—————————————————-
Waiting until the Spring to list your house? Good luck with that. Get out now. – Garth

We’re waiting for Spring….2030.
—————————————————-
It’s never too late to make a better decision. – TiE

#33 macduff on 08.22.13 at 10:05 pm

An interesting juxtaposition: CBC re-airs the program Jobless Generation, followed by 10 o’oclock news lead by raising interest rates. How can demand of over-priced real estate possibly continue at this pace? Perhaps F is correct in saying that people can’t expect to graduate from college/university and right away go out a buy a house.

#34 Lucky number 888 -recharts special edition for T.O Bubble Boy on 08.22.13 at 10:06 pm

Condos-416
http://recharts.blogspot.ca/2013/08/lucky-number-888-toronto-condo-edition.html
SFH-416
http://recharts.blogspot.ca/2013/08/luky-number-888-toronto-sfh-edition.html

I have not checked the sales :-)) ..but I clearly know what I am going to see… lots of 999

enjoy !

#35 Derek R on 08.22.13 at 10:07 pm

#2 gladiator on 08.22.13 at 9:13 pm wrote
You guys keep bashing the miserables.

Nah. Like I said yesterday, that’s just lame. I don’t want to bash anyone. Being first myself with a useful post is much better.

#36 rosie "moving forward" in the knowledge that, "this won't end well" on 08.22.13 at 10:10 pm

#19 what to do

Sell all your investments and jump on this little cream puff. Cheaper than a condo! http://www.huffingtonpost.ca/2013/08/22/tiny-toronto-house_n_3798397.html

#37 DreamingInTechniColour on 08.22.13 at 10:14 pm

With every interest rate increase, more and more house owners (especially those who have lots of bills and paid far too much for their home) will need a mortgage helper to be able to keep shelling out their monthly mortgage payment – what a great time to be a renter, especially with a 70% home ownership rate in Canada with so many people already relying on/ desperate for extra income from a suite to help keep their heads above water. Economics 101 – unless demand takes off dramatically, simply more supply and competition in the rental market = stable or lower rent prices.

#38 KommyKim on 08.22.13 at 10:14 pm

RE: #4 T.O. Bubble Boy on 08.22.13 at 9:18 pm
Flaherty saying that there is “no doubt” the budget will be balanced in 2015

There will most likely be an election in 2015. No politician can believed about budget forecasts especially those predicted for an election year.

#39 GenXer on 08.22.13 at 10:17 pm

“But the best advice: wait. We have crossed the river, brother.”

Well hallelujah for that!

When I sold my Willowdale SFH this spring and did not buy into another one downtown because of crazy bidding wars 15% – 20% above asking, I fumed and rented a beautiful house from a couple going overseas a year (12 months lease, sadly we must give it back next year), thinking that maybe we’d look in November this year.

Everyone thought (without coming out to say so) that we were nuts and countercultural to give up owning a house on the subway line in the near-burbs to *rent* downtown with a kid and another on the way. But maybe the meme was changing already because we didn’t get questioned quite as closely as we might have two years ago (“why didn’t you keep your Willowdale house rent it out, and rent the downtown house so you’d own *something?*”)

I told my husband that if things cracked this year, as I thought they should, he’d look like a genius by Christmas.

He’s already looking pretty smart :-)

Now, instead of itching to buy we are only thinking what might come up for rent next spring so we can continue this rather carefree and enjoyable lifestyle.

#40 TurnerNation on 08.22.13 at 10:22 pm

#144 yesterday: As this appears ‘a Boomer music blog…before my time but…

Re. Pusherman song – from yesterday’s blog.

There’s an amazing live version of it – no longer on youtube – fast forward to 1:50 and they lay into it, breaking it down into a basic,but heavy walking 4-chord blues. Heavy stuff. Link to download, MP3:

http://www.wikiupload.com/PHZBU9IWUH75LRF

#41 Marginal on 08.22.13 at 10:31 pm

#7 tigerbaby on 08.22.13 at 9:22 pm

Many of our best and brightest have moved to better opportunities, US being closest. Likewise, many of the best and brightest from other countries have moved to Canada for better opportunities.

National boundaries are more fluid now, given the power and influence of multinational corporations.

What can we do as mere individuals? Based on what I can see from close friends…..one friend’s two sons live and work in the US……another friend’s niece moved from Ireland to Paris and now works in Hong Kong (fluent in all three languages ;)

If you really want to stay in Canada, then you have to become politically involved in order to change the system from inside.

Unfortunately, the current govt is not science friendly.

#42 Gg on 08.22.13 at 10:33 pm

It’s the best market since 2005, and yet a mortgage increase exactly equal to ours – about 35% – has many buyers halting in their tracks……

As the recovery in the US is stopped in it tracks.

Actually, no. — Garth

#43 ShowbiZZa on 08.22.13 at 10:41 pm

Went out looking at houses in Toronto last night just to get the search going. Locked in 5yr fixed 3.29%. We are in no rush to buy and have been sitting on the sidelines for years waiting for the right opportunity.

It is pretty sad what 1/2 a mill gets you nowadays. We checked out four houses. 3/4 had visible mold in the basement. It really dawned on me that this is unsustainable. We have reached the top of this 13 year bull run for RE. Greed has made realtors and sellers temporarily insane. Irrational exhuberance is all around us. People will start to see again that RE is cyclical and doesn’t go up continuously forever. Once sentiment changes this could get ugly. Then will F flip flop yet again and increase amortization rates?
As a long time reader I’m going to mark today as the TSN turning point. RE is officially dead… until next time. Brother we have crossed the water.

#44 Nosty the Vladiator on 08.22.13 at 10:56 pm

This memo explains a lot of the current discord on the planet.

#45 DON on 08.22.13 at 10:58 pm

Haven’t seen many sold signs in Victoria BC. The rest of the island is slow slow slow. My realtor in law is no longer working in the business as she needs to spend more time at home with the children and selling real estate (paying the monthly fees) is too expensive.

More and more people working in Alberta and flying back 21 days out and 10 days at home. My sister just moved out to Red Deer to join my BIL. It is a shame they couldn’t make good money in BC. So much for the BC JOBS PLAN, unless it included recruitment for Alberta. Canada needs an enema in it’s governing institutions at all levels. 9 million boomers…most living high on the hog, buying new cars, home equity loans, second houses looking for high rents….geezus.

#46 FATHER on 08.22.13 at 11:00 pm

Garth what will go up BOC rates or bond rates when the U.S. tapering starts?

The Bank of Canada rate is unaffected. — Garth

#47 armpit on 08.22.13 at 11:02 pm

Just today, a young colleague (single mother) announce she just bought a townhouse in Orangeville.

A month earlier, I tried to convince her to wait. But she was house horny and was tired of paying rent.

She just informed me after her offer was accepted, she went to the bank where she thought her mortgage rate had been pre-approved and guaranteed.

Unfortunately, the bank informed her the 90 day hold on the rate had expired and offered her a higher rate.

When she threatened to cancel all her banking with them, they brought her in the office and offered her “extras”. A bonus of $500.00 deposit to her account to cover the interest difference over the term.

Smartly, she thank them and said she needed to think about the offer and is considering in mortgage shopping.

So, its happening!!!!! The small buyer is immediately getting affected by the interest increases and the banks won’t budge on the posted rates .

#48 Marginal on 08.22.13 at 11:07 pm

#33 macduff on 08.22.13 at 10:05 pm

Somehow, for some reason I don’t think F was including his sons when he said that. At least one of his sons had a summer job during university school years with an investment banker……….

#49 Canadian Watchdog on 08.22.13 at 11:08 pm

Alberta government offers to buy homes in flood-prone areas

– Homeowners are being offered a payment equal to their last municipal property-tax assessment. If all those eligible take advantage of the program, the province said, the bill could hit $175-million – an average of about $690,000 per home.

– Property owners are eligible to have their properties purchased by the government whether their homes were damaged in June or not.

“My anticipation is that there will be very, very few people who will not take the 100-per-cent assessment, take their value, and move to another location – because they will be fully aware that if they’ve accessed the [disaster assistance funds] to repair their home now, they won't be eligible in the future,” said Municipal Affairs Minister Doug Griffiths, the lead cabinet minister in the government flood response.

Well Mr. Doug, would those other locations happen to be in areas where new homes are being built? Perhaps one where Cal Wenzel's development is?

As I speculated here months ago; Calgary's flood crisis would be an opportunity for developers and Redford's regime to loot taxpayers; which as it turns out, is exactly what they're doing.

#50 dutch4505 on 08.22.13 at 11:12 pm

some inside information leaked from the BC provincial finance department. in order to reduce the 70 billion provincial debt expect property taxes to increase by 30% by the end of 2014. also getting rid of the tax scam farm class program by the end of 2015. a double whammy if mortgage rates and taxes increase at the same time. welcome to the new world economic order.

#51 observer on 08.22.13 at 11:21 pm

To Defend Garth,

Yeah he’s been ranting about this for years. It should of happened in 2007/2008 but it was government interference and a stealth bail out which kept the party going.

But they just windup the correction even more so for another 5 years. So when this thing unwinds. What out!!

#52 Uwinsome on 08.22.13 at 11:21 pm

A story from the Vancouver Sun:
George Lee, a mortgage broker in Vancouver, said he doesn’t think homeowners — or prospective ones — should panic just yet.

He’s not convinced the hikes are an indication of a steady upward trend.

“It’s like a gas war — as soon as one lender is gonna knock it back down, then you’re going to see people follow,” he said. “There’s really no reason why the fixed rates should be increasing, other than (the banks are) trying to make some money in an environment where they haven’t made much money at all.”

Read more: http://www.vancouversun.com/Mortgage+rate+hikes+squeeze+Metro+Vancouver+homebuyers/8822907/story.html#ixzz2cl6SBTMh

#53 Smoking Man on 08.22.13 at 11:22 pm

Garth hate to break it to you, but you like me here are little monkeys entertaining the slaves.

Why now, why would cbc call you now, that ever cross your mind, they know you, know what you have been saying.

Few months ago, machine got scared, re was not in good shape, Msm started blowing sunshine like a guy in a brothel just released from prison.

It worked, track 6ers started buying like crack heads that won the lottery.

Ops, didn’t expect that, Msm gets there orders from midgets,

Get Garth on now, we got to kill this madness.

Your so used, but hell you can’t help yourself, the taste of vindication so close.

Ha

Try this watch the news wasted, head phones on, scorpions, floyed, moody blues….

It’s amazing..

#54 Marginal on 08.22.13 at 11:27 pm

#48 Canadian Watchdog on 08.22.13 at 11:08 pm

What??? Based on news coverage during the flood, I got the impression that many of the homes closest to the rivers were the homes of wealthy people.

#55 Uwinsome on 08.22.13 at 11:28 pm

Wow, there are so many good quotes in that Vancouver Sun article, I don’t know where to start.

#56 FATHER on 08.22.13 at 11:30 pm

awesome posts garth & thank you for all your advice you are a god send

#57 Smoking Man on 08.22.13 at 11:52 pm

Humans are so stupid, how did I get this label, I must be an alien, wishful bias maybe I’m hoping.

Is there a place on this planet other than area 51 where I can fit in, be part of the most tribe, accepted and liked,

Ah, damn Mexican again, I was looking for a wrench in garage, found a red thing, can remember what it was called, you put in a round disk with photo on it. 3d images

From the 6tees,damn I can’t remember.

Getting old

#58 Smoking Man on 08.23.13 at 12:00 am

#56 FATHER on 08.22.13 at 11:30 pm

awesome posts garth & thank you for all your advice you are a god send

……..
Please tell me this is a joke, cause I’m thinking father, if you are such an ass kisser here, your kids are doomed.

Maybe not, they can go to university, get an obedience certificate, pay 50k to learn to drop to knees when boss man is dateless, you will have such bragging rights, my great start kids..

Look at me, I did that, :)

Track6ers are everywhere

#59 Questions on 08.23.13 at 12:02 am

This is not good. Don’t be wishing for rising mortgage rates just so you can vultch on a crash in Canadian RE. There’s no crash to feast on by comparison to the problems we face as the reaction to “we might, maybe un-ease, ok?” is consistently so violent that mortgage rates, fixed income and emerging all s**t themselves. Band-aid’s gotta come off some time…

#60 Donald Trump on 08.23.13 at 12:03 am

#3 Smoking Man on 08.22.13 at 9:17 pm

Square root of 4 + 1
————————————————-

Not an IQ test…..go play TWISTER with Dr Wayne.

#61 april on 08.23.13 at 12:03 am

#29 Julia. Written by a realtor… what else can one expect….

#62 Mixed Bag on 08.23.13 at 12:06 am

#8 Nosty the Vladiator on 08.22.13 at 9:22 pm

The main reason for dubya’s Iraq invasion was not WMD (Sadaam didn’t have any), it was because Iraq was about to leave the petro-dollar and go either with the Euro or Yuan.

– And the creation of the war in the former Yugoslavia, which delayed the introduction of the Euro by ten years.

#63 Smoking Man on 08.23.13 at 12:07 am

What’s amazing about life

You know they know, but they don’t know you know they know..

You got to be insane to know what I’m talking about.

Baha and ha

#64 Nemesis on 08.23.13 at 12:12 am

#17Addendum…

http://youtu.be/nLC9ErSYSnA

NoteToSmokingMan: re: #22… best laugh of the week [and I really needed one]. I also suspect it’s why we’ll never see TheMachine {his} as a leader illustration… Something to do with a MaryKay performance-bonus promotional Hog… Enough of thinking, where’s the Bordeaux?

#65 FlwleetwoodBoy on 08.23.13 at 12:21 am

#52 #55 This is an amazing article to read just to see what the realtor doesn’t know about what is driving the rate increase. Wow I would hate to be one of his clients. His lack of basics is astonishing.

#66 Oceanside on 08.23.13 at 12:50 am

0 dutch4505 on 08.22.13 at 11:12 pm
some inside information leaked from the BC provincial finance department. in order to reduce the 70 billion provincial debt expect property taxes to increase by 30% by the end of 2014. also getting rid of the tax scam farm class program by the end of 2015. a double whammy if mortgage rates and taxes increase at the same time. welcome to the new world economic order.
++++++++++++++++++++++++++++++++++

Like to hear where this originated from?

#67 VanPerfecto on 08.23.13 at 1:00 am

This will be the Garth litmus test. If house prices continue to rise in Vancouver along with higher interest rates then the myth of offshore money fueling real estate will no longer be a myth

#68 VanPerfecto on 08.23.13 at 1:02 am

What does this mean for credit lines and other debts. Are Canadians going to see higher rates along with higher mortgage rates?

#69 Wally on 08.23.13 at 1:05 am

Mortgage rates are still incredibly low. You can get some perspective from seeing them over time… http://www.ratehub.ca/5-year-fixed-mortgage-rate-history

There’s a name for people who can predict future interest rates … Billionaire.

#70 JunkieMan on 08.23.13 at 1:14 am

http://www.reddit.com/r/AskReddit/comments/1kfoy5/what_is_a_dirty_little_or_big_secret_about_an/

“What is a dirty little (or big) secret” about an industry that you have worked in, that people outside the industry really ought to know?”
One of the most interesting Internet threads Ive ever come across(besides this one) I have been reading it for around 3 hours now. If you got time to kill its informative and entertaining. Also on a side note after reading all these insider stories you wonder how are modern world has not exploded yet.

#71 NeverWrongJustEarly on 08.23.13 at 1:32 am

It would be very interesting to see a chart of total home costs factoring in that when interest rates are low you pay less in financing but typically more in home price. When interest rates are high real estate is cheaper but you pay more in financing. For those on the sidelines a rise in rates needs to be more than offset by a reduction in price. Anybody have a resource that compares the two? I have always believed that another deflationary wave will bring home prices down as well as keeping rates low.

#72 None on 08.23.13 at 1:36 am

Garth,

We’ve gone over this before:
“Ask to convert your monthly-pay to a weekly-pay (the ‘accelerated’ kind) in order to shorten the amortization and reduce interest charges.”

This makes no sense for those people who get paid monthly. For those who get paid monthly this actually increases amortization and interest charges.

#73 Fluoride--Free on 08.23.13 at 1:37 am

In the meantime; All is well in the United Stasi of America.

http://m.us.wsj.com/articles/a/SB10001424127887323980604579027332197868924?mg=reno64-wsj

#74 young & foolish on 08.23.13 at 1:48 am

God loves renters … now they will have so much “stainless and granite” to choose from, it will become the new normal.

Now, about those rents ….

#75 Carpe Diem on 08.23.13 at 1:52 am

#3 Smoking Man on 08.22.13 at 9:17 pm

Square root of 4 + 1

SR of 4 = 2.
So 2+1 =3

That is equal to being the third poster of the day.

#7 tigerbaby

CMHC style “Canadian Science and Technology Corporation”,

Awesome! I like it! But unfortunately you can’t depend on bureaucrats to help you. Look at how successful government has been with fudging in RE and related industries …

There are plenty of programs and smart people working with the governement to help companies grow. With one startup, I had this extremely smart PHD help us grow. He actually was an interim CEO at some point. But he had no clue in the IT industry. But he sure was fun to have around before we sold the company!

My thinking is government should stay away from business aside for business related to infrastructure to ensure they employ people when Keynsian ecomonics is required. Even then I wonder!

I think this whole experiment was to see if a country can bubble up RE and related industries and not crash. We shall see the results in the next few years.

If you have a great idea … ping me …. http://www.kyosystems.com/ksi/index.php/about/contact-us/

#22 Smoking Man

That kills me! My wife heard me business talking a few years back. After I hung up, she asked …. “Who the f$%# was talking? It did not sound like you but some 6+ foot army general.” At home or with friends I have a soft “gay” voice but when I’m at work, I’m an Alpha.

I had this CEO while we transitioned our company to new execs and owners. I was CTO and I had to stick around too long. At his first company meeting, the new CEO, said “Everyone is an actor … blah blah blah for 30 minutes – I phased our early in that talk). I did learn one thing that day … I have a business me and a true me. I think Garth is simply a true person all the time and doesn’t give a crap about being an actor.

#25 Devore

Good point! RE and construction is taking so much of the pie. It’s such a shame and reckless. We have become a country of builders and have lost our direction in terms of being inovators or makers. When is the last time you saw “Made in Canada” ?

And we keep building OSB homes on perfectly good farm land …. such a shame!

#76 MEANWHILE IN EUROPA on 08.23.13 at 1:56 am

And we are on to our next project in Europe. If we could only find some good trades fast. That speak English….loads of opportunity in Europe. Just bring your tool belt and you are ahead of the game here.

http://theceliachusband.blogspot.fr/2013/06/a-transformation.html

#77 jim on 08.23.13 at 2:04 am

#20

I don’t think anyone in San Francisco is exhuberant about housing costs. They are mostly irritated and shocked. The recent experience of the bubble has left a lot of resentment and distrust of the real estate market.

There is a surge of employment activity in Silicon Valley these days, but I don’t think anyone is banking on it to last forever. I can’t say the same thing about certain places in Canada that apparently never conceived of the idea that their industries could slump. (e.g., waterloo)

#78 jim on 08.23.13 at 2:08 am

#41 Marginal

Canada does NOT attract the best and brightest from other countries, particularly in the STEM fields. Outside of academia, all the interesting work is here in the US.

There is no competition when it comes to the talent level and drive in major US centers such as NY and Silicon Valley. People are desperate to work for the big tech firms here, and not just because it is a job.

I’ve worked for big companies in Toronto and Vancouver. There are some smart, driven people there. Overall, it isn’t even close to the talent level in the US overall. It’s simply a bigger market with more opportunity and a larger talent pool.

#79 Kilt on 08.23.13 at 3:12 am

Show a 5 year bond yield plot.

Kilt.

#80 snake on 08.23.13 at 4:58 am

http://globalnews.ca/news/796954/burnaby-grandma-plans-to-buy-new-house-car-after-winning-3-2-million/

#81 The real Kip on 08.23.13 at 5:53 am

“You will not want to be a drywaller or a crane operator three years from now.”

Three years now! Wow, if I get three more years I’ll be happy, and retired.

I was reading the American Operating Engineer magazine for crane operators and they agree with you, the US is in for recovery and long term growth. Their biggest concern, same as here, labour shortage, not enough skilled trades to take their hands out of their pockets and put in a days work for a days pay. Go figure.

#82 Cow Man on 08.23.13 at 6:54 am

Sir Garth:

As long as politicians keep on raising Development Levee Charges the price of housing will keep on rising. At least higher Development Levee Charges keep a floor under house prices. Of course the Politicians who raise the DL Charges already own homes so it just pads their asset values.

http://www.bramptonguardian.com/news-story/4046310-metrolinx-s-big-move-will-increase-the-cost-of-new-homes-developers-say/

#83 2CentsCdn on 08.23.13 at 7:14 am

71 NeverWrongJustEarly
“It would be very interesting to see a chart of total home costs factoring in that when interest rates are low you pay less in financing but typically more in home price. When interest rates are high real estate is cheaper but you pay more in financing. For those on the sidelines a rise in rates needs to be more than offset by a reduction in price”

A more interesting chart would be to see what average home prices were the last 30 years based on mtg. rates and bank/gov’t lending rules at the time. In broad strokes, home prices become based on avg. buyers borrowing everything they are possibly allowed to at the time (at least the buyers the last 20 years). Us “Old schooler’s” had more fear of dept. and were taught to avoid or eliminate it as fast as possible. Paying interest with after tax dollars is dumb … right?

But the crack cocaine that keeps this whole goofy thing going is if a persons monthly mtg. payment is $2,500 ….. they feel richer (and more justified) if they owe on a $700K house at 3% than if they owe on a $400K house at 6% ….. or if they owe on a $250K house at 9%. But if you aren’t selling …. it makes no difference …. it’s $2,500 a month …. you’re day to day broke. And if (and when) your monthly payment goes up (higher renewal interest rates) …. the value of your house goes down. A toilet flush on your net worth.

#84 Sebee on 08.23.13 at 7:19 am

Finally an article we can all enjoy in the Globe.

http://m.theglobeandmail.com/globe-drive/car-life/harley-davidson-you-love-them-or-you-hate-them/article13793138/?service=mobile

Hope Garth doesn’t have a misspelled tattoo somewhere….

#85 Martha Pearce-Smith on 08.23.13 at 8:27 am

Just as an FYI… to me this is just nuts…

~~~~~

http://www.huffingtonpost.ca/2013/08/22/tiny-toronto-house_n_3798397.html

#86 jerry on 08.23.13 at 8:56 am

Do Bond Vigilantes really exist? Bond wars?

#87 Luke on 08.23.13 at 9:03 am

Can you believe this..

http://www.theglobeandmail.com/life/home-and-garden/real-estate/with-toronto-rents-spiking-condo-ownership-looks-appealing/article13912770/

Condo ownership looks appealing… it looks like our news papers turned into comedy instead of reporting news.

It’s like saying, it is beneficial to stand in front of the speeding training because you will get some illumination, for a second or two… but they forget to mention that the impact will hurt like son of a [email protected]#$%^&*(.

Everyone have a great weekend. Cheers.

#88 John on 08.23.13 at 9:38 am

Agree with everything you say Garth except a US recovery…..layoffs at mortgage brokers and major retailers…1 in 6 on food stamps….municipalities that are just as bad as Detroit will soon be forced to declare bankruptcy…1 trillion in student loan debt…Fannie & Freddie holding off disclosing level of defaults….other than some occasional media b.s. how do you justify your insistence that US is remotely recovering?

So don’t believe it and invest accordingly. Good luck with that. — Garth

#89 Holy Crap Wheres The Tylenol on 08.23.13 at 9:50 am

#57 Smoking Man on 08.22.13 at 11:52 pm
Humans are so stupid, how did I get this label, I must be an alien, wishful bias maybe I’m hoping.
Is there a place on this planet other than area 51 where I can fit in, be part of the most tribe, accepted and liked,
Ah, damn Mexican again, I was looking for a wrench in garage, found a red thing, can remember what it was called, you put in a round disk with photo on it. 3d images
From the 6tees,damn I can’t remember.
Getting old

Education for Smoking Man only!

Still have some in the basement from our kids. they are called View-Masters they are special-format stereoscopes that were made in the 1960s for kids en mass. That was back when North America actually had a manufacturing base.

#90 Uwinsome on 08.23.13 at 10:17 am

Higher mortgage rates seem to be affecting the Americans too (like Garth acknowledged).

http://www.cnbc.com/id/100983583

#91 TooBigToFail on 08.23.13 at 10:24 am

Garth…not sure if you read all of the comments but would be interested in you covering the US home sales released today? Does it make you pause that the US economy is not so strong and with bond yields spiking their real estate recovery may turn out to be more of a dead cat bounce? Their unemployment is still high, their GDP is flat and their government debt is spiking to an unsustainable level. Thus, the Fed has to continue with stimulus to de-base currency as the government cannot afford the debt at higher interest rates?

The lower house numbers equate exactly to higher mortgage rates. The Fed will still taper, but in a way that will not further injure a vital sector of the American economy. The recovery is still on track. — Garth

#92 Effect of Rates on 08.23.13 at 10:30 am

This is what happens when rates go up….get ready Toronto

http://finance.yahoo.com/news/us-home-sales-plunge-mortgage-140858412.html

#93 Daniel on 08.23.13 at 10:37 am

Since it now seems like you’re right after 4 or 5 years of writing daily, with all of these factors against housing would you be willing to make a bold, easily verifiable prediction of a percentage drop in housing prices b
over a certain period of time?

Why? — Garth

#94 Old Man on 08.23.13 at 10:55 am

#93 Daniel – this is impossible as too many factors come into play such as area in Canada; particular housing types; which cities; and districts within a city; demographics; economic structures; and employment stats to name but a few.

#95 Old Man on 08.23.13 at 11:14 am

I am going to give my humble interpretation on the caption photo as Mr. Turner is tricky as might have a duel meaning, so which is it? It might be an investor condo owner who sold on the way down and his purchaser needs a vacant possession and the tenant has been given notice to move on. Or a divorce is pending over the financial mess, and the wife has left a message for her deadbeat husband. :) There is a 3rd, as the landlord is not being paid rent, and left a message before he meets Bruno the enforcer!

#96 T on 08.23.13 at 11:14 am

Interesting posts.

So today, nearly 27 years after the peak of mortgage rates hit, followed by a drop straight down to near zero, rates are going up.

Why?

Because they are supposed to.

I did not realize the future was so obvious and the last 27 years of drops, were all oversights, and TODAY is the day its right.

Stars aligned and here we go.

OR

Rates will get ahead of themselves, reverse course, and tank again, like its been doing for 27 years countless times.

#97 John on 08.23.13 at 11:16 am

Garth, you didn’t answer my question…..respectfully….what gives you so much certainty that the US is in recovery?

If US recovery was underway there should be some solid metrics to confirm your theory.

Just like you expect your readers to question the distortion of CREA media hype should the same skepticism not be warranted when reviewing US economic stats?

I think this is a fair question and would genuinely appreciate your response.

#98 Nemesis on 08.23.13 at 11:23 am

“The recovery is still on track.” — Garth

Possibly a poor choice of words.

[CBC] – Train safety inspector positions cut in B.C. Interior: CP Rail purging up to 6,000 workers in the next few years

http://www.cbc.ca/news/canada/british-columbia/story/2013/08/19/bc-rail-safety-inspectors-cut.html

#99 Steven on 08.23.13 at 11:33 am

Housing that costs less is better for the working class because it raises the value of a working man’s pay by cutting his cost of living. Rising house prices raise the cost of living and renders the value of money exchanged for labor worthless.

#100 P.Winterton on 08.23.13 at 11:39 am

>>has many buyers halting in their tracks

As predicted by anyone who realised that the spike in house buying was not sign of a general recovery in the US housing market. And that the US is not actually ‘recovering’, but sliding further into recession.

http://www.zerohedge.com/news/2013-08-23/new-home-sales-crater-lowest-october-biggest-drop-may-2010-median-home-price-6-month

The US is not in recession, nor will that be the case. More zero doomerism. — Garth

#101 The Truth on 08.23.13 at 12:07 pm

It just gets worst by the day for the Canadian economy and the Canadian dollar.

http://www.reuters.com/article/2013/08/22/markets-canada-dollar-bonds-idUSL2N0GN0LU20130822

This adds even more pressure to Canadian bond yields as international investors continue to bail out of Canada.

Yes, the sky is falling – house prices to adjust very soon to new yields!

#102 Babblemaster on 08.23.13 at 12:14 pm

“- Waiting until the Spring to list your house? Good luck with that. Get out now.” – Garth

——————————————————–

Could turn out to be true (I hope it does), but I know a guy that acted on this logic four years ago. It seemed to make sense then as well. Didn’t work for him. He has lost out on big gains.

Not if he invested the proceeds. — Garth

#103 father on 08.23.13 at 12:15 pm

smoking man
I don’t kiss no one’s ass just speak what I feel & that includes my comment on Garth helping me.

#104 JimH on 08.23.13 at 12:19 pm

Seems like a lot of the US gloomer-doomers here have amazingly short attention spans!
Before looking at today’s drop in the numbers for July New Home Sales and pronouncing the death of the US recovery, those with ADD might want to reflect on the July jump in Existing Home Sales.
Americans are no dummies and seem to have learned their lesson well; a jump in mortgage rates has cooled the market for New Home Sales.
Amazing! A completely rational, logical, market-driven and hormone-free response.

#105 Smoking Man on 08.23.13 at 12:24 pm

#94 Daniel on 08.23.13 at 10:37 am
Since it now seems like you’re right after 4 or 5 years of writing daily, with all of these factors against housing would you be willing to make a bold, easily verifiable prediction of a percentage drop in housing prices bover a certain period of time?
Why? — Garth

…………

Excuse me for being the village idiot, but

No one told the track 6ers.
Prices aren’t falling.
Still bidding wars….

Am I the only one with a view master…

#106 Donald Trump on 08.23.13 at 12:31 pm

#8 Nosty the Vladiator on 08.22.13 at 9:22 pm

#178 Donald Trump on 08.22.13 at 5:19 pm and #164 broadway skytrain on 08.22.13 at 3:29 pm — “. . . another communist agenda to wipe out the middle class . . .” — Agenda 21 in a nutshell. Accurate, but what do I know? Not much, I guess.

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

It is not obvious….until you start to peel back the layers.

Older commercial / retail is usually owned by long established companies who usually have very little in financing costs. I have seen it time and time again where new retail space is created and remains vacant.

I like the vibrancy of an older established retail strip, not the cold nouveau hip design of newer ones.

I see no benefit to the average person. We see taxes go up and more new infrastructure costs imposed…new development is simply feeding the black hole.

#107 Yam on 08.23.13 at 12:32 pm

I find it funny sometimes when housing bulls dis-credit the bears just because the exact date of the housing downturn can not be predicted. No one can predict the exact nature of a bubble. Actually, in my opinion, the housing bust happened in 2008/09. Prices in my area in North York tanked at least 20%. But it was just “saved” through gov’t intervention with low “save the world” rates. Look, if you invested in the Nasdaq in the 1990s and sold before it popped in 2000. Fine, you made money, but it was still a bubble. As long as one realizes that with the current housing market, that is fine. But to think there are actual solid fundamentals driving this market, is fantasy. If you buy into this housing market you are essentially shorting global economic growth (hoping for a poor economy to keep rates low). That doesn’t make sense with real estate that should be linked to positive economic growth to grow in value.

#108 rosie "moving forward" in the knowledge that, "this won't end well" on 08.23.13 at 12:33 pm

#94 Daniel

We are at late 2007. Mind you the US had many dangerous mortgage products at this time. It’s much different here. http://oneinabillionblog.files.wordpress.com/2012/10/housing-bubble-graph.gif

#109 jess on 08.23.13 at 12:33 pm

43 ShowbiZZa
…”Greed has made realtors and sellers temporarily insane. Irrational exhuberance is all around us. ”
can one concluded then that those proper nouns are not guilty due to temporary insanity?
==========
all that multitasking technology has altered brain patterns to SEE at superficial levels at the expense of deeper understandings. Look what is happening to children on this planet. Are they not canaries?

chemical weapons > threat to humanity : bombs : bullets ….now that is insanity!

#110 Serge on 08.23.13 at 12:42 pm

Really Great Location In Bathurst Manor. Check picture
http://www.realtor.ca/propertyDetails.aspx?propertyId=13552764&PidKey=-1786465062

Do they even check after submit MLS ?

#111 crazed and a little confused on 08.23.13 at 12:43 pm

hi garth,

I tried to commute my University pension plan to a self direct RRSPed or even a portion. But My company policies states U cannot commute any of it until i either quit or retire and Im 25 years from that happening. I left with about 80 K in RRSp of my own investments mostly doing nothing. the overall return since 1999 is 3.1 % / year barely beating inflation Can I still commute it . who do I talk to?… a real estate lawyer. What shoud i expect in fees? Thanks for the help. still owe you a beer.

i cant control the past ..yeah maybe i should have bought in 2006 but life throws a few wrenches in the way and all you can do is keeping dodging it so it doesnt hit in the face. besides i didnt know about commuting till now

#112 bill on 08.23.13 at 12:47 pm

”and rest under the shade of the trees”

#113 Serge on 08.23.13 at 12:47 pm

Plan for sale! Only $899,000

http://www.realtor.ca/propertyDetails.aspx?propertyId=13527994&PidKey=1031460077

#114 Old Man on 08.23.13 at 1:17 pm

I did my daily survey on the state of the retail economy, and my friend who has owned a top retail variety store for many years is worried, as his sales are down 25%. This is a nice man from Korea, and one day was stuck for cash, so he gave me credit which I paid back the following day. People are going elsewhere to save money, and the small guy is getting hit, so my next stop was at M&M to hoop me two boxes of chicken chunks on sale for a bargain, and asked how was business, and she said good, as the average store grosses about $1 million with two employees tops.

#115 Old Man on 08.23.13 at 1:22 pm

#106 crazed – many universities upon retirement will roll over the capital to an Insurance Company to buy you an annuity, so you are screwed bigtime.

#116 Yam on 08.23.13 at 2:00 pm

Like I said, if you go long and invest in an asset like real estate that relies for a poor economy to go up, but in reality should do well in a good economy. Your scewed long term.

http://www.thestar.com/business/real_estate/2013/08/22/canadian_homebuyers_paying_price_for_us_recovery.html

#117 Nemesis on 08.23.13 at 2:01 pm

#QuoteOfTheDay #CouldBeWorse #LuggageWithAttitude

“Runaway crocodiles are very dangerous. We are very nervous that they may hurt people.” – Zhou Minghui, general manager of Shantou Xiesheng Breeding Co. Ltd.

[Xinhua] – Crocodiles at large amid south China flood

http://news.xinhuanet.com/english/china/2013-08/22/c_132654936.htm

#118 TorontoBull on 08.23.13 at 2:14 pm

@97,
trends change – we had a loooong bond bull market, which may or may not be at the end. Personally, I think as global economy normalizes rates will go up a bit. It seems that the fear of another depression have diminished, and that was one of the reasons why bond yield were so low…

#119 daystar on 08.23.13 at 2:33 pm

Since Bloomberg stopped carrying 5 year bond data:

http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2013/01/bloombergcom-pulls-the-plug-on-5-year-bond-data.html

We’ll try another link. 5 year bonds are floating around a bit today:

http://www.investing.com/rates-bonds/canada-5-year-bond-yield

Interestingly, CMT is telling us there is nothing to fear, that herb behavior won’t change until rates rise 1.5%. Should we believe them?

http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2013/08/higher-rates-dont-mean-panic.html#more

U.S. bond markets dictate what happens for Canadian government bonds and consequently, mortgage rates, we should know that by now. As bond holders sell off outpacing buyers and values drop, yields rise and the converse is also true. We should also know this by now as well.

What we should know then, (correct me if I’m wrong someone, just a student like most of the rest here) is that as rates rise, RE sales will fall but not at first as the virgins rush to secure the last of the cheap rates. In essence, future demand comes rushing forward and it could be like that for the first few months or 1.5% rise in term rates (we are now half way there) so we should see in the markets what we see now (or have seen, a temporary moderate pop in RE sales). Sales actually increase slightly (except for new construction, new condo sales, high end housing as they are more rate sensitive and in Canada, we’ve had supply/demand fundamental negative distortions on top) but this is short term. Once interest rates driven by the bond markets hit 1 – 1.5% or so higher, the market turns frigid. The virgins rushing from the future are plucked while the ones that remain turn frigid, the sellers list early and listings swell while sales plummet and market begins to correct in Canada (U.S. values go sideways), all in the backdrop of eroding affordability. At this point, what happens to bond yields?

That’s the million dollar question right there.

One would think that if a housing correction begins in Canada, that demand for 5 year government bonds would fall and as a consequence, bond values would rise but yields would fall, halting the correction but lets think for a moment. The U.S. decides the fate of yields with government bonds, not Canada and so the U.S. housing market decides the fate of yields regardless of what Canada is going through so its not Canadian housing we should be watching, its American housing all along as the health of the U.S. economy and U.S. government policy determines yields and one of the major themes of this blog all along has been, “the strength of the U.S. recovery”, “Don’t bet against America”, “Buy U.S., sell Canada” for a reason. Remember these themes, long time readers/bloggers?

Canadian government yields are like leafs twisting in the wind at the mercy of U.S. economics. Outside of say, a Canadian currency crisis here and there, its always been so with government bonds regardless of the seemingly endless hoards these last few years who bleated “cheap rates are forever and the new normal”, “Canada is Japan” etc., fools believing their own hype.

How real the U.S. recovery is, matters to home owners in Canada whether we know it or not. The future of U.S. economic recovery, U.S. housing and U.S. government policy is the future of bond yield’s in the U.S. as well as here. It should follow that the future of Q.E. tapering is worth paying attention to, as its not hard to easily predict bond yields will rise into September and if Q.E. is tapered by $15 billion a month as underwriter’s suspect (I think so, housing sales should fall off somewhat as rates rise but values in the U.S. remain solid, lessening demand for government to buy MBS’s in the pace they have been coupled with falling demand as a consequence of higher rates, as well as increases in government tax receipts from spending cuts and income/payroll tax increases lessening demand for Q.E. as a whole), yields will rise quickly but briefly as its a wait see from there in terms of how bond holders and later, the U.S. housing market will react. That is the proverbial moment, as they say, where the rubber meets the road.

Again, in the bond markets, its supply/demand. Bond demand rises past bond sales and bond values rise and yields fall. Bond demand weakens and/or bond holders sell off (out pacing demand before maturity avoiding a further drop in bond values presumably due to government “tapering” of buying some $40 billion in present monthly MBS’s) and yields rise.

My own thoughts are that government through Q.E. has manipulated interest rates since 08′ and they haven’t stopped (although lately, its more psychological through fed minutes than direct). Government will do a wait see in terms of how the housing market will react to the new normal of higher interest rates and should values hold or better yet for them, continue to strengthen in the face of declining sales, rates will flat line or rise upward. U.S. fed could quite likely continue to see rates rise until values show signs of retreat and then rates adjust to supply/demand fundamentals but my guess is they don’t want to risk cooling U.S. housing. All eyes should be on the U.S. housing market next spring where demand exceeds supply and there’s Bernanke, the largest buyer of MBS’s, tapering again to drive up rates at the height of demand.

Potentially. :)

#120 Ray on 08.23.13 at 2:34 pm

#106 Smoking Man

I am with you there. 416 SFH safe.

#121 Old Man on 08.23.13 at 2:35 pm

Caesar has lost his mind as with a political ploy to appease those that are green friendly has just announced which is all BS. Now he will fund a wind project for a Nunavik Mine to generate power with the wind in the Arctic. Methinks that Caesar blows a lot of wind coming out you know where, and this man has to be kicked under the bus quickly. He must be insane! He promises a lot and delivers nothing that makes any sense at all.

#122 Smoking Man on 08.23.13 at 2:42 pm

#104 father on 08.23.13 at 12:15 pm

smoking manI don’t kiss no one’s ass just speak what I feel & that includes my comment on Garth helping me.

………

Sorry father for I have sind….. Note if you read a post after 9pm and I become some what of an asshole usually means I’m out of wine, and doing JD shots.

Brings out the nasty in me.

When I got clocked by the bouncer at barbarellas last year in Ottawa, JD who knows what I did in there…

Lighten up.. Father

#123 Jimmy 5 bellies on 08.23.13 at 3:00 pm

Just moved from Toronto to UK and have $130k (£80k) in the bank. What can I invest in? Don’t know many people here and don’t trust anybody. I don’t mind it all go on the stocks but just don’t know were to start. Uk shares, emerging markets, reits, real estate? Anybody please help seriously stuck. Need some direction/ advise from the blog dogs in UK/ Canada the grand master himself. Thx Jimmy

#124 Nemesis on 08.23.13 at 3:00 pm

#NewNormal

Imelda Marcos, who positively squealed with delight when informed of the property’s “automated shoe carousel”, is rumoured to have requested an immediate viewing…

[WSJ] – Celine Dion Lists 5.7Acre Jupiter Island Florida Compound for $72.5 Million

http://online.wsj.com/article/SB10001424127887324165204579026773698990140.html

#125 TheCatFoodLady on 08.23.13 at 3:01 pm

‘Professionally gutted basement’…? O – kaaaaaaaay. New term for me.

I’ve heartd of mortgages being underwater but they’re already showing this one underground. Guess with the drainage problem solved, underground is more of a concern than under water.

#126 GsAmazon on 08.23.13 at 3:01 pm

#88 Luke on 08.23.13 at 9:03 am
Can you believe this..

http://www.theglobeandmail.com/life/home-and-garden/real-estate/with-toronto-rents-spiking-condo-ownership-looks-appealing/article13912770/

Condo ownership looks appealing… it looks like our news papers turned into comedy instead of reporting news.

Hahaha – when the Onion put up a pay wall I just switched to the G&M!

Looks like a last-ditch effort to hook the poor souls with MILs that still read this “newspaper”….and I sure hope it doesn’t work.

#127 jess on 08.23.13 at 3:47 pm

Vern Krishna: Tax avoidance debate reaches back two centuries
http://business.financialpost.com/2013/08/21/vern-krishna-tax-avoidance-debate-reaches-back-two-centuries/

#128 broadway skytrain on 08.23.13 at 3:50 pm

sebee

yes! excellent article.

i laughed the hardest from “, if you’re not riding a bike that can accelerate from 0 to 100 km/h in three seconds and don’t lean your bike over through the turns until the foot-pegs scrape, you’re not much of a man and should probably get a scooter”

ha!

#129 Guy Smiley on 08.23.13 at 4:25 pm

It will be interesting to see how many more readers/followers you’ll get today with this link on the Globe web and mobile homepages. “Carrick on money: The tipping point for housing arrives”

http://www.theglobeandmail.com/globe-investor/personal-finance/carrick-on-money/carrick-on-money-the-tipping-point-for-housing-arrives/article13932307/

#130 45north on 08.23.13 at 4:42 pm

yam: from your link: Canadian homebuyers are starting to feel the pain of the U.S. recovery — a surge in mortgage rates that has added close to 10 per cent to the monthly costs of carrying a home, just since the spring.

which is what Garth is saying

view master:

http://en.wikipedia.org/wiki/View-Master

#131 Screwed on 08.23.13 at 4:45 pm

The US is not in recession, nor will that be the case. More zero doomerism. — Garth

US “recovery” is bullshit on a turd. 13% higher home prices on $150,000 boxes is still sweet f all when the buyers only bring 5% to the table and the box was once assessed at $250,000 before the crash.

Your touting of a US “recovery” when all their data is pointing to recession sentiment.

Why do most Americans barely hang in there and have just about given up all hope to find good employment? You should talk to actual people or have boots on the ground to make your case. The “recovery” may have benefited a few Americans who never suffered through the crash to begin with. But for the majority it is still a down economy with little prospect of finding good work.

Working 2 part time gigs 29.5 hours (no benefits) at around 8 bucks an hour is not getting that economy off the ground.

Subsequently there is no overspill of increased American economic activity which is why the Canadian economy is finally starting to recede because the days of cheap money policies to keep the system at least above water have come to an end.

Once austerity measures will get announced federally and provincially it is lights out for many Canadians.

I give up. Have a nice funk. — Garth

#132 Victor V on 08.23.13 at 5:02 pm

http://www.canadianbusiness.com/economy/how-the-u-s-recovery-is-driving-up-canadian-mortgage-rates-erica-alini/

Still, what if, at one point between now and the end of QE tapering, Canadian long-term interest rates were to have the same kind of knee-jerk reaction seen in the U.S. over the summer? That’s one of the worst-case scenarios TD uses in its stress tests of the Canadian housing market. A series of 100-basis point spikes in the rate of five-year fixed-term mortgages could turn Canada’s current gradual housing market cooling into a hard-landing, says Gulati.

#133 Musty Basement Dweller on 08.23.13 at 5:07 pm

I guess Carney and Bernanke and other economist goofballs are not feeling too important these days. Seems they have lost control on the interest rate thing and they had no idea it could happen that easily. It doesn’t surprise me that they didn’t see it, their regular news releases say only sweet nothings meaningless statements.

#134 Canadian Watchdog on 08.23.13 at 5:10 pm

#117 Yam

Tal says:

“It’s not that Canadians are going to be defaulting on their mortgages like happened in the U.S. It’s simply that they’ll be spending more money to finance debt and spending less on other things, like a new TV or vacation,” says Benjamin Tal, deputy chief economist at CIBC World Markets.

Apparently Tal didn't think twice before making this statement, nor did he double check his data, because i) spending less would reduce aggregate demand leading to job losses (no income) ii) indebted homeowners have already sacrificed vacations and flat screen TVs. iii) rising household delinquencies on other debts just proves how useless a home's value is for extinguishing personal debts.

Sure, they can keep their homes with no vacations, dining out and all the other precious things in life that matter. As long as lenders keep telling delinquent homeowners their house is worth more then they owe, they're happy, until prices fall and it's not. Then it only makes financial sense to walk away and start again.

We're just not there yet, but we will be.

#135 calgaryPhantom on 08.23.13 at 5:12 pm

Any links to your interview today?

#136 Donald Trump on 08.23.13 at 5:27 pm

As long as those that run the system have an infinite line of credit, all bets are off, the game is rigged.

#137 Observer on 08.23.13 at 5:56 pm

This is retarded!

http://www.cbc.ca/news/business/story/2013/08/22/royal-bank-mortgage-rates.html

Its like saying you can buy NOrtel at 200 buck or risk not being able to buy Nortel.
(or RIM)

Gee now your down payment could buy the whole freakin company!!! Not just 100 shares.

Why can’t they get a real economist like Garth on to tell them if you wait 9 months You can get this for 25% lower and gee you down payment will no longer be 5% down but 30% down.

#138 Observer on 08.23.13 at 6:03 pm

#131 45north on 08.23.13 at 4:42 pm

yam: from your link: Canadian homebuyers are starting to feel the pain of the U.S. recovery — a surge in mortgage rates that has added close to 10 per cent to the monthly costs of carrying a home, just since the spring.

which is what Garth is saying

view master:

http://en.wikipedia.org/wiki/View-Master
==================

10% try doing the math. Its 25 to 30%

#139 angela on 08.23.13 at 6:03 pm

if you need any tangible evidence of what damage rising mortgage rates can do to a robust real estate market, look south for a moment. Massive US bank Wells Fargo just announced it’s canning 2,300 jobs in its mortgage division because demand for money has slumped as the cost rises. ~Garth
so does this mean we can bet against america or should i keep buying america I’m confused where you stand on this issue or maybe you are starting to see whats coming ?

#140 JPG on 08.23.13 at 6:24 pm

I have been holding off the wife’s house horniness for over two years now. It hasn’t been easy. She called me delusional and even had her co-workers intervene and tell me all the great things about buying a house. I persisted. When you talk about a change in people’s stories, you should hear my wife now. She’s finally come around (and she doesn’t even read your blog). I am so proud of her. Even with a baby on the way, she thinks we should keep renting. Thanks Garth!

#141 HAWK on 08.23.13 at 6:26 pm

#137 Agreed…………..”Not till the fat lady sings”,……..will the SHTF.

#142 OttawaMike on 08.23.13 at 6:30 pm

Deal alert:

http://news.nationalpost.com/2013/08/23/one-of-torontos-cheapest-detached-homes-and-likely-also-the-smallest-hits-the-market-at-just-229000/

#143 Screwed on 08.23.13 at 6:45 pm

I give up. Have a nice funk. — Garth

So you’re keeping a bullish stance and outlook on the US economy and housing sector but maintain a bearish outlook for Canada’s real estate? Don’t you think the 2 economies are so intertwined that Canada is poised to gain from an American recovery, therefore supporting Canada’s inflated real estate?

I just can’t figure out whether you’re a true bear or a bull wearing rose colored glasses.

I’m in a funk. You got that right! Reading this blog and the doom about Canada’s real estate is not exactly uplifting and a treatment to get out of the funk. Maybe I should listen to Brad Lamb’s real estate tutorials on my super head phones that keep all the other noises out. Not sure if he has tutorials but you get the drift.

Agree to disagree. Have a good one.

#144 Screwed on 08.23.13 at 6:49 pm

#135 Canadian Watchdog

Banks are raising rates on unsecured LOCs. Client told me his rate increased from 7% to 12% a couple weeks ago. They offered to give him a better rate if were to secure the LOC to his house.

Not just mortgage rates are going up.

#145 House Porn on 08.23.13 at 7:28 pm

“We have crossed the river”

That was fantastic Garth! Gotta light?

#146 Daisy Mae on 08.23.13 at 8:06 pm

#144 Screwed: “So you’re keeping a bullish stance and outlook on the US economy and housing sector but maintain a bearish outlook for Canada’s real estate?”

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

Yes. It’s because Canada is making all the same mistakes the Americans made, albeit a few years later. It’s just now catching up to us. Our Canadian Government didn’t learn a damn thing observing the American experience. The ‘Cons’ can’t lead….they follow….us, into oblivion. Where have you been?

#147 Daisy Mae on 08.23.13 at 8:08 pm

Make that: “leading us into oblivion.”

#148 blacknail on 08.24.13 at 12:28 am

“Massive US bank Wells Fargo just announced it’s canning 2,300 jobs in its mortgage division because demand for money has slumped as the cost rises. This comes after US house sales surged 17% in the past year and prices ponied ahead 13%.”

… Hedge funds bringing their own speculative money to the table have the cash to finance their own foreclosure purchases. This means that there are fewer buyers needing mortgages as former home owners are turned into renters. I’m not sure what this all means, it is just an observation.

And it is wrong. — Garth