The horny ones

CANUCK

When mortgage rates popped in the US two months ago, it didn’t take long for the market to react. Sales plopped by 13% – the biggest dump in three years. And banks were nailed. At least, bank employees.

Bank of America’s throwing 2,100 mortgage workers overboard, and shutting 16 offices by the end of next month. Wells Fargo and Chase seem ready to follow suit. After all, it only makes sense. When mortgage rates jump almost 40%, people stop borrowing and buying.

Except in Canada. Then sales go up.

Yesterday we parsed the numbers from CREA, which told us sales soared 11% last month while prices bloated another 8%. Hours later it was Toronto’s turn, as the continent’s biggest real estate board said so far in September sales romped to a 29% gain.

Howcum? What could explain such a gulf in the behaviour of middle-classers in North York and Boston?

Simple, say the realtors. Consumers are horny again.

Dianne Usher, TREB president, has a classic quote: “The strong growth in sales that we have seen over the past two-and-a-half months indicates that GTA households are approaching home ownership with a renewed sense of confidence.  Prospective home buyers have taken a hard look at their household balance sheets over the past year and have found that, despite stricter lending guidelines, there are affordable property types from which to choose.”

Can you picture that? Families hunkered around the kitchen table taking a hard look at their balance sheet, right after Mom has finished baking bread? Running a few financial forecast scenarios on little Janey’s smartphone. Weighing the cost-benefit of a balanced, diversified liquid portfolio against the likely equity gain or loss of real estate in a rising rate environment.

And who wouldn’t be feeling more confident these days, what with mortgage costs rising, the economy flatlined, personal debt at record levels, zero income growth and house prices inflating?

Of course, Dianne is making it up. We can excuse her. Like all realtors, she eats what she kills, living off commissions.

David Rosenberg? Not so much. The Bay Street economist made some headlines this week telling his clients, “So much for the housing bust.” This was parroted by some Big Eggs from the big banks. “Suffice it to say that next to no one predicted a big mid-year bounce in home sales at the start of 2013, when calls for Canadian housing market calamity were all the rage,” said BMO’s Doug Porter.

The source of the economists’ real estate knowledge: the real estate boards.

Some people ain’t buying it. Ex-realtor, now MLS data auditor Ross Kay is one of them. He helped us blow the whistle on some dodgy numbers last week, and he’s in high anxiety this week. Kay says flatly that MLS data is inflated, and CREA is fibbing. This report will be published on his site in a few hours:

August was the first month to show a year over year increase in sales volumes over the last 13 reporting periods. As expected, looming expiry dates on pre-approved mortgage applications and the continued misreporting of non-audited data, urged already engaged home buyers towards firming purchase agreements before the pre-approval expiry dates passed. Despite that, sales increased only 2.9% for August 2013, on a month-to-month comparison.

Year to date the market remains fully in a full correction phase and continues to show an almost 10 percent (sales) decline versus 2012. Low numbers of available inventory, which continues to drive increases in average sale prices, even as demand has fallen nearly 10%, is placing the market in an increasingly volatile situation, not seen since 1990 in Canada.

Hmmm. Who’s right? The establishment economists interpreting data providing by the housing industry? Or the gadfly former realtor who claims access to raw national MLS numbers, and calls the boards out?

Meanwhile, despite the hoopla that realtors are selling, in markets like Vancouver and Toronto detached house prices are flat year/year. Sales today are lower than two years ago. New housing – singles and condos – has seen a 40% sales collapse in the GTA. Markets like Victoria and Halifax are falling. Montreal is taking on water. Annual sales volumes have tanked in Calgary. Developers in Toronto, Vancouver and Calgary have slashed their buys of development land.

In short, who’s telling the truth?

Can the same bump in mortgage rates really cause a 13% crash in US real estate sales and an 11% jump here? Are the numbers misleading us? Are Canadians on crack? Are Americans wimps? Are we being lied to? Is it different here?

Or will this end badly?

To be continued..

173 comments ↓

#1 Turp on 09.17.13 at 8:16 pm

FIRST !!!!!!!!!!!!

#2 TurnerNation on 09.17.13 at 8:20 pm

Erm about those (high) pension plan returns…

– SEC fines Ontario Teachers’ for shorting violations

2013-09-17 15:03 ET – Street Wire
by Mike Caswell

The U.S. Securities and Exchange Commission has fined the Ontario Teachers’ Pension Plan Board and 22 other organizations for short-selling violations. The SEC claims that the firms sold a number of companies short just before receiving shares in those same companies through offerings. The fines levied by the SEC total $14.4-million, with the Ontario Teachers’ agreeing to pay $224,835. (All figures are in U.S. dollars.)

The sanctions, announced by the SEC on Tuesday, Sept. 17, stem from violations of rules designed to prevent manipulation of a stock ahead a public offering. Generally, the SEC prohibits traders from participating in an offering if they have sold the same stock short within the preceding five days. Such short-selling can reduce the price of the offering, generating profits for the short-seller.

The SEC claims that the board sold short four companies in 2010 and 2011, and shortly afterward participated in public offerings. The first instance the SEC cites occurred on July 12, 2010, when the Ontario Teachers’ shorted a company called BioMimetic Therapeutics Inc. at $10.03. Two days later, the company announced an offering at $8.50. The Ontario Teachers’ received 25,000 shares in that offering, according to the SEC, generating profits of $38,250. Similar events occurred with three other companies: Pebblebrook Hotel Trust, BlackRock Inc. and SS&C Technologies Holdings, the SEC says. The board’s total gains from the shorting were $144,898, according to the order.

http://www.stockwatch.com/News/Item.aspx?bid=Z-C:*SEC-2106344&symbol=*SEC&region=C

#3 Kevin on 09.17.13 at 8:24 pm

Tune in tomorrow…

#4 Aardvark Phartz on 09.17.13 at 8:28 pm

Reminds me of all the science behind smoking and the allegations that it might cause health problems.

Too bad it took them 40 years to reach a consensus that yes smoking cigarettes DO have health consequences. DUH

Go ahead, buy the dam house it will be paid for in 25 years, and may, or may not be worth what you paid for it.

#5 Chickenlittle on 09.17.13 at 8:29 pm

That is a TERRIBLE picture. I hope he doesn’t jump out of the cake at my birthday party.

#6 Ahsan Zaman on 09.17.13 at 8:29 pm

I gave up on Garth and just bought a house. $610k for a semi in the Beaches. Same house was selling for $650+ in the summer. Couldn’t wait anymore. Happy.

#7 Ray Skunk on 09.17.13 at 8:32 pm

Of course, resident RE pumper Susan Pigg is doing her bit over at the Toronto Star.

Some of the commentators are absolutely, positively beyond help.

TorStar corp is hemorrhaging money and would print that the Pope is Jewish if TREB/CREA clicked their fingers and demanded so. Sadly their comment censorship would put the Stasi to shame, so making the masses aware of this is quite the challenge.

#8 Liquid on 09.17.13 at 8:35 pm

Financial institutions will continue to lend if they deem the risk vs potential profit is still in there favour. Unfortunately for tax payers a lot of the borrowing risk has been pushed on the CMHC balance sheet. But who knows how long the easy credit will last. And when it finally ends, how will people adapt to paying the real cost of inflated mortgages? As John Keynes once said, “The market can stay irrational longer than you can stay solvent.”

#9 Doberman on 09.17.13 at 8:36 pm

Well what about this record home sale in Calgary:

http://www.calgaryherald.com/business/Calgary+home+sells+record+million/8594359/story.html

What about it? — Garth

#10 Mortgage man on 09.17.13 at 8:36 pm

Like I said before October and beyond is the true
Test. All 3% rates will expire by the end of this month.
Leaving a few people who were able to roll back.
Stay Calm and carry on

#11 johnny d on 09.17.13 at 8:39 pm

#6 Ahsan Zaman on 09.17.13 at 8:29 pm
I gave up on Garth and just bought a house. $610k for a semi in the Beaches. Same house was selling for $650+ in the summer. Couldn’t wait anymore. Happy.

————————————————————————————

Proof that whether you are for, or against purchasing a house, you can’t think for yourself. That makes Garth right because people acting like sheep seems to be a big underlying theme here.

#12 Notta Sheeple on 09.17.13 at 8:42 pm

“…..Like all realtors, she eats what she kills, living off commissions……”
====================

Priceless.

One of many reasons why I return to this blog every evening.

If only tax returns, root canals, and dog scooping could be so much fun.

#13 Ralph Cramdown on 09.17.13 at 8:43 pm

#7 Ray Skunk — “TorStar corp is hemorrhaging money”

Not so. You may have cancelled your subscription to the paper, but your wife’s still buying Harlequin romances.

http://web.tmxmoney.com/financials.php?qm_page=13425&qm_symbol=TS.B

#14 Form Man on 09.17.13 at 8:44 pm

I am disappointed in Rosenberg . I had always viewed him as sensible and realistic.

#15 Happyjack on 09.17.13 at 8:46 pm

It`s becoming obvious that seniors aren`t being given much respect and are being bombarded with new scams everyday, like the one below.

Alert for Older Men :

Women often receive warnings about protecting themselves at the mall and in dark parking lots, etc. This one caught me totally by surprise. This is the first warning I have seen for older men and I wanted to pass it on in case you haven’t heard about it.

It’s a ‘heads up ‘ for those older men who may be regular customers at Canadian Tire, Home Depot, Costco, or Wal-Mart.

Over the last month I became a victim of a clever scam while out shopping. Simply going out to get supplies has turned out to be quite traumatic.

Don’t be naive enough to think it can’t happen to you.

Here ‘s how the scam works… Two nice looking, college-age girls will come over to your car or truck as you are packing your purchases into your vehicle. They both start wiping your windshield with a cloth and Windex, with their breasts almost falling out of their skimpy T-shirts. (It ‘s impossible not to look). When you thank them and offer them a tip, they say ‘No ‘ but
instead ask for a ride to McDonald’s. You agree and they climb into the vehicle. On the way, they start undressing. Then one of them starts having her way with you, while the other one stealsyour wallet.

I had my wallet stolen June 4th, 9th, 10th, twice on the 15th, again on the 17th, 20th, 24th, and the 28th. Also July 1st, 4th, 8th, twice on the 16th &17th, and very likely again this upcoming weekend. What a horrible way to take advantage of older men.

So please, send this on to all the older men that you know and warn them to be on the lookout for this scam. (The best times are just before lunch and around 4:30 in the afternoon.)

Please warn your older men friends to be vigilant.

PS – Wal-Mart has wallets on sale for $2.99 each. I found even cheaper ones for $.99 at the Dollar Store and bought them out in three of their stores.

PPS – No time for further chatting — off now to Canadian Tire.

Keep Smiling

#16 zee on 09.17.13 at 8:50 pm

garth there are thousands of realtors and one ex realtor says that the numbers are misleading and you believe him…maybe he is providing misleading numbers to you….what i am saying is that with all of the changes and the rates increasing that the cracks should be obvious in the market and that the real estate board could not be able to manipulate the data in its favour.

#17 Blasé on 09.17.13 at 8:51 pm

Keep thinking of the poster who told about flying over Atlanta in ’05 and the developer saying new homes sales were dead, dead, dead. Canadian developers have stopped buying previous land, and that’s your canary. This September is eerily similar to 2008. Market had topped in July but by December was in free fall before The circus Carney stepped in. 5 years this fictional housing market has been perpetrated on gulable gen Yers and HELOCED Xers and bommers. Everyone’s exhausted and can’t remember why they got so excited about their shittily built condo or particle board thingy. They just keep wishing there was a generation Z to get start the boom again. But they have all been killed while walking and texting and listening to robin thicke through their ear buds.

#18 Smoking Man on 09.17.13 at 8:54 pm

Everyone is RE bull now, Gartho scratching his head, Ahsan Zaman buys.

And I have been a RE bull since I been here in patheticland

Remember I told you dogs when you get a good spike a-rue on the curve It’s the first sign then a dip, bounce, batman.

If you dogs search the archives a common call of mine has been 2014. = Ka boom.

Winter is coming, feeling like hibernating :)

Not an official call yet, but depends on the spike. How high and how aggressive it climbs.

Either way F is F-ED it’s his call what to do next. 15 y amortization next?

Ah The Herd ………………………………….

#19 mortgagebrokeron on 09.17.13 at 8:55 pm

my brother sold his house, 425,000 out in the country far far away from gta, buyer went in with 5,000 non refundable deposit and no conditions for financing, well guess who didn’t qualify for financing? and is out 5,000? the purchaser, his real estate agent should be sanctioned for letting his client put in that offer. How many times do you see on tv shows ie property brothers telling the buyer to go in with no conditions? it’s absolutely retarded. Now the buyer is out 5,000 and my brother is on the hook for a rental house plus his own home. This market is gassed out and you will see and hard landing

#20 TS on 09.17.13 at 8:57 pm

Everybody knows who’s right.

I traded up from a $195,000 3 bedroom row home to a $270,000 5 bedroom end unit townhouse in Ottawa in 2010.

I’ve put $35,000 in repairs because it was a POS straight out of the seventies and I could sell it for roughly the same price if I had to get out.

The correction has been going on in most cities for a while now…..

#21 coastal on 09.17.13 at 8:58 pm

If Ross is wrong then why isn’t CREA suing him ? Because he’s right. People trust someone with a 3 month course with their life but won’t believe a used car salesmen’s numbers without busting their bladder. Good on Ross, I hope the MSM picks up on it but their corrupt track record won’t let that happen.

#22 Mr. Reality on 09.17.13 at 8:59 pm

Here’s a question for the blog dogs.

What happens to Alberta real estate when zero natural gas flows south of the border and not a single LNG plant is built yet?

http://business.financialpost.com/2013/09/17/once-an-economic-mainstay-albertas-natural-gas-now-struggling-to-find-markets/?__lsa=9bfc-a9ce

Oil sands and SAGD can only employ so many people.

Mr. R.

#23 Godth on 09.17.13 at 9:00 pm

Of course it will end badly. Has it ever ended otherwise? There’s simply been too much bullshit for too long you see. It’s all like an echo chamber of bullshit in every sphere. Do you think war will be averted? Grow or die, history may not repeat but it sure rhymes. All this denial and delusion will end. We’ve swept so much dirt under the carpet it’s touching the ceiling. Have a good night.

#24 John on 09.17.13 at 9:04 pm

Hi Garth,

Thanks as usual for keeping us informed. One point looks concerning to me. You mentioned several times during past few months that developers stopped buying land in Toronto. Wouldn’t this fact only support high valuations of the real estate down the road? Less land bought today -> fewer houses built in 4-5 years from now -> smaller supply -> higher prices. And we are back to square one…

#25 Doug in London on 09.17.13 at 9:06 pm

It appears Americans are acting rationally to the increase in mortgage rates, and Canadians are not. As I recall has been said many times on this blog before, it will all end badly.

#26 Nemesis on 09.17.13 at 9:11 pm

I’m so Qualitative… that it practically pains me to delve into the Realm’ONumbers [for there be many others here who do that so much better].

That said, every now and again I cannot resist the temptation.

Accordingly, here’s your ExistentialHint by way of practical example:

http://www.icx.ca/propertyDetails.aspx?propertyId=13609142&PidKey=-1794979199

Bailing? Much?

BonusZen: The Original CaptainCanuck

http://en.wikipedia.org/wiki/The_African_Queen_%28film%29#Plot

http://youtu.be/ddCYsZZknig

NoteToSM: Just between the two of us… I’m quite certain that Humphrey went where Howard only wished he could. Ahem.

#27 TnT on 09.17.13 at 9:23 pm

#6 Ahsan Zaman

You jumped the gun, I’m renting upper beaches for over a year watching the prices and can see them coming down with each sale. Glad your happy though :)

#28 Bull on 09.17.13 at 9:27 pm

I just bought a 1200 sq ft two story on a half lot in a desirable ‘hood in ‘Stoon for $330K. We have the hottest economy in Canada and I expect to double my money in five years. Don’t listen to Garth. He’s right on all the numbers, but he wrongly assumes that the RE market in Canada behaves rationally. Bull market for another 20 years!

#29 Joe Calgary on 09.17.13 at 9:35 pm

Annual sales volumes have tanked in Calgary? That’s not what creb says, what gives Garth? Where did you come up with that?

September 15th post. — Garth

#30 Canadian Watchdog on 09.17.13 at 9:36 pm

Canada, presale development default risk: check!

This is an excerpt from a working paper I recently read.

“Apart from defaults in the middle of construction, inferior building quality and incorrect information are also problems of presale properties. In China the poorly-built quality of presale properties derives not only from the use of substandard building materials but also from mismatches between the decoration and what has been promised in the presale promotions (Yang, 2001). Similar problems have also been found in other countries like Singapore, Taiwan, Canada and the U.K. (Cullum, 2005; Gwin and Ong, 2000; Li, 1998; Ong, 1997). In Taiwan, developers can pre-sell uncompleted properties once they obtain the building permit. Presale property buyers will usually have to pay 5% of the house price for a deposit and sign the forward contract afterwards.

Once the construction starts, the buyers have to pay 2-3% of the house price at each construction stage so that a down-payment of at least 40% of the house price is settled before completion of the properties (Chang & Ward, 1993). On the other hand, more than half of the housing complaints in Taiwan come from presale transactions and they account for 65% of the total housing complaints filed (Hua et al., 2001; Li, 1998). The three main types of complaints include poor quality building work (30.6%), shrinkage of housing space (11.9%) and incorrect housing information (21.2%).”

More…

In western countries like the U.S. and Canada, after the deposit is submitted, the developer will ask the buyer to get pre-approval for a mortgage loan to secure the finance of the purchase.  Many mortgage companies will not give final approval of the loan to the buyer unless presales of 50% to as high as 70% of the units of the project have been secured in order to protect themselves from the risk that the project cannot be completed. But the downside is that a number of presale projects have been abandoned as a result of the developers not being able to secure the required presale threshold and hence the financing.  Despite the rules, records have shown that, with the condominium-boom in recent years, many lending companies have been willing to take the risk by relaxing the presale threshold requirement in order to get a competitive edge in lending business in the forward property markets (Tribune, 2005).

So what did F mean when he said he had contingency plans for the presale market? What does F know that the public doesn't yet?

#31 IM in C on 09.17.13 at 9:38 pm

Garth
#7 Ray Skunks description of Susan Pigg could be revisited by you . And I say that as someone who is certainly no fan of her, or the comment moderators who shield her

#32 X on 09.17.13 at 9:40 pm

I would be curious to know the differences in how the US and Canadian RE boards compiles their statistics.

#33 Smoking Man on 09.17.13 at 9:47 pm

What do most people do when they over spend or circumstances change, they cut back.

You know your a business man when you just figure out how to make more loot, screw cutting back.

Proud of son 3 no looking back for him now, energized like an alcoholic lost in the woods who stumbles on to a moonshine operation and they give him the keys to the fridge..

#34 2CentsCdn on 09.17.13 at 9:50 pm

I agree with many posts above …. this can not possibly end well. How this gas bag hasn’t sprung massive leaks yet is beyond me. I just hope that at the end of the day WHEN this all adjusts ….. all the people in dept up their eyeballs don’t go crying to the gov’t for help of some kind. If there’s one thing different now than 1990 it’s that now so many have gotten themselves in a pickle. Back then it seemed like 25% of the population was caught up in the madness ….. now it feels like 85%+. Everyone knows the value of their house (usually inflated). Everyone’s an expert. Now so many people are at risk of being in financial ruin that I fear the lunatics might be able to dictate how the asylum is run…. if left to sink … they can cripple Canada for the next 10+ years. So even us people with some will power and common sense will feel the (stupid and greedy’s) impact. And that pisses me off. Their plane is going down …. but we’re in the plane too. I don’t want the government or anyone else to help them. Eff’em all!

#35 A different View on 09.17.13 at 9:57 pm

I am so tired of numbers.
TREB, Garth, Shadowstats, The Bernack …
It’s enough to make one want to just sit back and enjoy the Fall colours.

#36 Godth on 09.17.13 at 9:59 pm

#28 Bull

smart like bull strong like tractor

I could feel sorry for you but at this point I don’t.

#37 Ben on 09.17.13 at 9:59 pm

Hey Garth – would love to know what you think about the UK situation. For those who don’t know we set up the state to underwrite the first 20% to protect buyers from negative equity, for houses costing up to $900K. Prices in London are going up and sticky elsewhere. It’s nuts!

#38 Donald Trump on 09.17.13 at 10:08 pm

Wal-Mart/Dollar store fans:

More de- facto evidence that these are simply psy-opp/MK -Ukltra (ALL wars are Bankers wars)venues to suck in and brainwash the masses into capitulating to the Neo- Con(Trotskyite ) agenda.

[email protected]

#39 R on 09.17.13 at 10:14 pm

The best thing to do is look around your friends who bought a house recently and see how they are living pay check to pay check despite of decent income.

When things becomes UN -affordable there is only one direction to go

Every body who benefits from real estate are all unreliable source weather it is real estate board, media, Realtor, media or government who uses real estate to boost economy to unsustainable level and expect people not take on too much debt at the same time wants to expand growth on the pillars of debt

#40 young & foolish on 09.17.13 at 10:28 pm

It seems that most people buy because they want to “own” their nest … not because it’s a good financial play.
Money is not everything, and the herd has strength in numbers. It takes a lot of conviction to stand against the crowd.

God loves renters!

#41 Ray Skunk on 09.17.13 at 10:37 pm

#13 Ralph Cramdown

Not so. You may have cancelled your subscription to the paper, but your wife’s still buying Harlequin romances.

http://web.tmxmoney.com/financials.php?qm_page=13425&qm_symbol=TS.B
===============================

Oh really?

http://www.torstar.com/html/whats_new/index.cfm?view=article&wnID=144

“Highlights(sic) for the quarter:”

Total Segmented revenue was $354.9 million in the second quarter of 2013, down $29.0 million (7.5%) from $383.9 million in the second quarter of 2012.

· Total Segmented EBITDA (see “non-IFRS measures”) was $45.1 million in the second quarter of 2013, down $13.2 million from $58.3 million in the second quarter of 2012.

· Net income attributable to equity shareholders was $18.0 million ($0.23 per share) in the second quarter down $14.6 million ($0.18 per share) from $32.6 million ($0.41 per share) last year.

· Adjusted earnings per share (excluding restructuring and other charges, non-cash foreign exchange, gain (loss) on sale of assets and adjustments to contingent consideration) was $0.29 in the second quarter of 2013, down $0.14 from $0.43 in the second quarter of 2012.

· Net debt was $187.6 million at June 30, 2013, up $19.9 million from $167.7 million at March 31, 2013.

#42 FATHER on 09.17.13 at 10:39 pm

if any one want’s to have a good laugh check out whispers from the edge of the rainforest

#43 T.O. Bubble Boy on 09.17.13 at 10:41 pm

Look what qualifies as “news” in the Vancouver Sun:
http://www.vancouversun.com/business/affordability/Photos+Vancouver+homes+rock+bottom+prices+starting/8919348/story.html

Photos: 10 Vancouver homes at rock-bottom prices – starting at $519,000

Check out the city’s 10 cheapest detached homes now listed for sale on the MLS.

(most look like homes out of a Hobbit novel)

#44 2CentsCdn on 09.17.13 at 10:42 pm

#30 Canadian Watchdog

“Despite the rules, records have shown that, with the condominium-boom in recent years, many lending companies have been willing to take the risk by relaxing the presale threshold requirement in order to get a competitive edge in lending business in the forward property markets”

This was one of my (many) fears. And this mixed with CMHC insurance on condo’s might explain why tower after tower are going up even while supply and demand ratio’s are ridiculously out of wack. Developers asses must be mostly covered.

I’m curious …. does anyone know approx what % of condo units would be depending on CMHC insurance? (assuming most can’t flip them as many had planned) Anyone know with a 3-4 year forward contract WHEN would a buyer would go see if he/she qualifies for a mtg? Anyone know how (or at what price) banks appraise a condo bought on a future contract? If it’s at brochure list price at closing date there would already be lots of phantom equity in the deal … making loan to equity ratio’s (falsely) comfortable. Some or all of these things MUST be going on, because developers would not still be building this endless pile of condo’s if they weren’t protected somehow. They are fearless.

Does anyone know if (or how much) CMHC insurance has had to come to the rescue on default deals so far?

#45 Donald Trump on 09.17.13 at 10:44 pm

Canada is the Star Trek Enterprise of the Real Estate Uni- Farce…

Do you think it was a coincidence that an alien farce…an Eastern Canadian…,Billy Shatner..,was the Capo-dung of the gravity defiant quasi Re -Max space ship?

You mean ………you didn’t know Spock and Scotty sold Intergalactic real estate?

Please say YES !!!!!!!!!!!!!!!!!!!!!!!!!!!!!

#46 snake on 09.17.13 at 10:48 pm

http://www.torontorealtyblog.com/archives/renting-is-not-throwing-money-away/9852

#47 Joe Calgary on 09.17.13 at 10:53 pm

Or can anyone clarify it for me? From the chart on Calgary in the sep 15th entry both prices and sales are increasing sharply.

Read the post. Terminal kitties. — Garth

#48 OMG on 09.17.13 at 11:11 pm

WHY DO CANADIANS KEEPING BUYING R.E. WHEN AMERICAN RUN FOR THE HILLS, when rates go up.

EASY – Americans had the fear of GOD put in them over the last 6 years, they have seen first hand that RE can go down and go down fast – so, first whiff of higher interest rates and their rational reaction is to not buy RE because they know prices will come down as interest rates go up.

Most Canadians buying houses these days have never seen a bonafide market CORRECTION – in tier view RE in Canada simply does not go down. You have to go back to the early 1990 to a see mini-correction in Canadian RE and most of the real drop then was localized to Toronto. Go back to the early 1980s for a real RE blood bath, when interest rates were spiked to stop inflation. (Let’s forget about the 08/09 price decrease – that was such a momentary correction and prices recovered within the year.)

So the rational of Canadians to interest rates going up is to jump in before their rate guarantee lapses. Otherwise they think they could be left behind as Canadian RE prices continue to ROCKET UP.

The reports in the media reinforce this behaviour. I have seen several articles the last few weeks about how the Canadian market is BOUNCING back and on track to resume price appreciation in 2014.

Ultimately as the past 6 years have demonstrates to all but the self-delusional, the Canadian RE market defies LOGIC. Its strength in the face of the economic cataclysm of the past 6 years has humbled all those who attempt to forecast what it will do. And it likely will continue to do so.

So do not hold your breath for a RETURN to rational RE prices any time soon. It could happen, but we could just as easily see prices appreciate another 10% next year.

#49 Yuus bin Haad on 09.17.13 at 11:11 pm

Hey, GTA V’s out already and I haven’t finished Leisure Suit Larry yet!

#50 Rexx Rock on 09.17.13 at 11:30 pm

Canadian culture encourages home ownership,prices are secondary.No one wants to rent for 5 to 10 years just to save a little money.We all know renting reflects poverty,or someone who is foolish with their money.

#51 Inglorious Investor on 09.17.13 at 11:30 pm

“Can the same bump in mortgage rates really cause a 13% crash in US real estate sales and an 11% jump here?

Real estate peaked in the US around 2007. Much of the sales activity this past year has been from private equity buying SFH’s with 100% cash. (Likely the only way to show positive cash flow on a SFH.) The actual US consumer still has not fully recovered, or is actually getting worse, so it’s no surprise that RE sales to actual people have not been encouraging. Are they really buying as a long-term investment? I don’t think so. Managing all those disparate units on their own lots for anything other than a quick capital gain makes little sense viz. large, institutional investors. Or maybe some are just laundering money.

(The resurgent US manufacturing sector ––i.e. Manufacturing 2.0–– is not going to be quite like the good old factory days of the 40’s, 50’s, 60’s etc. This will be/is a high-tech, low-labour, lean and mean species of production involving fewer humans and more ‘machines’. So don’t look to manufacturing to save the US factory worker.)

In Canada, RE still has momentum (if waning), so a pop in rates (which are still historically low) could cajole would-be buyers into the market if the expectation is that rates will keep going up. So a short-term pop (maybe even a blow-off) in sales makes sense in Canada.

—————-
“Are the numbers misleading us?”

Of course! Does anyone actually believe anything that comes out of the mainstream media, or for that matter, any organization whose mission it is to sell something to a ‘greater fool’?

——————
“Are Canadians on crack? Are Americans wimps? Are we being lied to? Is it different here?”

Yes. No (just somewhat bruised, shaken and stupid–in the traditional sense). Yes. No, just delayed. Canada does everything the US does. Only retarded.

…and that photo? Very embarrassing.

#52 The Truth on 09.17.13 at 11:39 pm

At what point are the real facts going to come out and at what point will everyone start realizing that the market is actually in decline? Forget the numbers, just go through any neighborhood – the same houses have been languishing on the market for months – people should keep writing to the CBC – the CREA and TREB numbers should be audited – this is ridiculous!

#53 Suede on 09.17.13 at 11:43 pm

As expected, looming expiry dates on pre-approved mortgage applications and the continued misreporting of non-audited data, urged already engaged home buyers towards firming purchase agreements before the pre-approval expiry dates passed.

This is a valid theory and a logical argument, but I haven’t seen any numbers from mortgage brokers indicating that this is the reason why sales were ‘up’

People in Vancouver love houses. Love talking about houses. Love buying houses. Half the people in my section on the floor in the tax farm were cruising MLS.

Not until prime rate moves up, their RRSP’s take a hit or massive unemployment will it bend the trend downward on prices.

People feel rich, cash flow is coming in, payments are being met. RRSP’s look good – Telus, Teck and BCE are all recovered from 2009. When people feel rich, they like houses.

Just fake being rich, especially if you’re single:

http://www.hprodev.com/pimpslips/

Fake ATM receipts

You’re welcome, students.

#54 Freedom First on 09.17.13 at 11:47 pm

The sheep buy everything at record prices while at the same time the wolves are selling. When everything drops like a ton of bricks and becomes a really really good deal, the wolves buy in again. Every time, all the time. No exception. There is no time limit in waiting for a really good deal. (My definition of re-balancing a portfolio).

#55 Jan on 09.17.13 at 11:52 pm

Poor Garth
What part of massive immigration do you not understand LOLOLOLOL

The massive part. It isn’t. — Garth

#56 The Truth on 09.17.13 at 11:56 pm

Btw, in my view, David Rosenberg is a flip-flopper – I don’t believe anything he says. Ross Kay is the man – more people should have balls like him – not afraid to speak the truth!

#57 Albert on 09.18.13 at 12:01 am

Hahaha,
Howcum

#58 Inglorious Investor on 09.18.13 at 12:07 am

#22 Mr. Reality on 09.17.13 at 8:59 pm

For a very long time, the word has been that the US has safeguarded large reserves of domestic oil and gas. (The US geological survey did a heck of job). At the same time, the US used the reserve status of the dollar to suck the energy out of foreign suppliers––in effect, getting the energy for free.

With US military might––and their ability to bully the world––waning (and debts soaring), and with the dollar under long-term threat of losing its most venerated status (and thus the end of US hegemony), releasing all of those pent-up energy supplies (by finally allowing drilling by private companies) is a good way to help keep the American economy going and prop up the dollar while the rest of the world falls into chaos.

I think the future of natural gas is going to be pretty hot for investors. There is already a very large, entrenched market for gas, so it’s not going away. And, in the longer run, nat gas demand will only go up globally. I think uses for nat gas will increase, especially if the price of oil stays high and people are afraid of nuke plants. Also, it seems that nat gas reserves from fracking wells decline much faster than anticipated, making projections for future, cheap supplies overly optimistic. But until things turn around you can enjoy heating bills that are lower than they would otherwise be (customer charges and debt retirement charges not withstanding).

#59 Obvious Truth on 09.18.13 at 12:12 am

All bubbles end the same. This one has exact pattern of US, Ireland, Spain ……

Watch for a final surge in bank stocks as shorts cover. That will signal the turn. That will create the air pocket in these stocks. Will still take some time. Maybe after rsp season.

#60 Cici on 09.18.13 at 12:15 am

Awesome! American RE’s on sale again!!

I’ll go there, thank you :-)
French-speaking boyfriend, I love you–so please come with me and adapt. I promise, with the money we will have saved…well, we could afford to retire one day in France.

#61 Form Man on 09.18.13 at 12:23 am

#44 2centsCdn

Developers can get CMHC insurance on their construction financing……..

#62 dienekes on 09.18.13 at 12:24 am

Talked to landbranch at cityhall in stoon today about upcoming lot draw. Also talked about last lot draw in kensington and evergreen. She told me that the builders in the previous draw were saying no to land, and most of the lots sold to private individuals. If you purchase privately, you must maintain a 4 year residency, enforced by a 50,000.00 dollar lien against the property by the city. So these are not flippers buying them. I believe they are saskatonians upgrading and will eventually throw there old digs on the market.
Anyway, i think it is a telling sign that builders did not buy. Although i think she may not be entirely truthful, what person would by those 10 meter wide Kensington lots? They are crap. Usually one builder will come in and row house the hell out of them.

#63 dienekes on 09.18.13 at 12:26 am

Markets great today, sure beat the hell out of house appreciation (depreciation)
Slaughter tomorrow?

#64 Sideline Sitter on 09.18.13 at 12:31 am

#53 – pimpslips, nice… I used to always look at left-behind ATM receipts and almost all of them were under $100.

Now I’m embarrassed that I have thousands sitting in cash, doing basically nothing…

#65 gloomy Victoria on 09.18.13 at 12:33 am

Here in Greater Victoria, prices are right back at the top in spring 2008.

Meanwhile…

1. 5 year mortgage rates have sunk around 200bps
2. sales have dropped by half
3. what used to sell in days now takes months

Can you imagine how much lower prices would be under equivalent conditions?

Here’s a challenge for you realtors. Try selling a home to someone with a 5% interest rate within 7 days, and see how low that “bidding war” goes! (crickets)

Even the vilified US stock market — GFC and all — has vastly outperformed the typical Victoria resident’s bricks and mortar portfolio.

You know it’s bad when Garth has gone easy on us lately!

#66 gloomy Victoria on 09.18.13 at 12:43 am

Re: Pimp slips #53

Many years ago, around 1999, I had an ATM malfunction on me and generate a real “pimp slip” with a $9,999,999.99 balance! My friend’s gf joked that she’d ditch him for me!

(Don’t worry, I think I still got the 20 bucks from the ATM!)

#67 Donald Trump on 09.18.13 at 12:47 am

This blog does not have a braille edition/ handicapped parking spot.

PS at least no Obfuscated Air Man / Dinosaur Man tag team BS. Bad Karma !

#68 James on 09.18.13 at 1:49 am

Just notice how this MSM http://www.vancouversun.com deceives people, who make comments to an article.

They make your comment visible only from your own computer :-)

From another computer your comments are missing

Try to add a comment and watch from another computer
or clear the cookies on yours, same effect.

You may enjoy your comments, but never realize that nobody else can see it :-)

#69 Jeff on 09.18.13 at 1:53 am

Garth – what happens if in October, or even in 2014, we see another +10% Y/Y… and another in 2015? 100,000 immigrants coming to Toronto… The sheep will keep buying and this may even go on for another 20 years. With what certainty can we say the bubble will ever blow up in the net 20-30 years even?

#70 Angryman127 on 09.18.13 at 2:14 am

Glands? Bad re data? Lying agencies..it’s getting thin isn’t it?

Maybe what makes us different is the new value paradigm introduced by property loving new Canadians and offshore owners; this is a match made in heaven with Canadian banks who make massive profits by increasing debt all the while offseting risk to the political class. Yes our country is in trouble Garth but those punished are and will be long time residents, not cash rich investors. They will keep buying at any price , high prices are just the vig for the opportunity to own guaranteed private property in a stable democracy.

This will play out over 25 years not 5.

#71 Observer on 09.18.13 at 3:58 am

#15 Happyjack on 09.17.13 at 8:46 pm
==================

If you a old fart and you get a threesome with two hotties. Its PRICELESS!!!!

#72 Observer on 09.18.13 at 4:02 am

Sure thing, you can buy at 3%. But what happens after 5 years. What will the rate be then.

If it goes to 7%. You’ll be toast along with many other then you will be forced to sell, along with many others

Supply and demand. Supply goes up demand goes down cause all you suckers would be stuck in the same money pit trap. Then the rats (bankers) will come in to gnaw at you body parts

#73 T.O. Bubble Boy on 09.18.13 at 6:23 am

@ #55 Jan on 09.17.13 at 11:52 pm
Poor Garth
What part of massive immigration do you not understand LOLOLOLOL

The massive part. It isn’t. — Garth
—————————————

Not specifically immigration, but offshore money is still a factor.

If Chinese new home sales are up 15% YOY and prices up 8% YOY (http://www.cnbc.com/id/101042326), then clearly there is still a ton of offshore money being thrown into real estate. If even a fraction of that makes its way to Canada, there is an impact.

(however, notice that there are no stats on re-sales, because these places are probably far more difficult to sell after they are built)

When you can prove something, let us know. — Garth

#74 T.O. Bubble Boy on 09.18.13 at 6:42 am

Some extra stats/notes on the latest run up in the Chinese RE bubble:
http://www.bloomberg.com/news/2013-09-15/no-confidence-in-china-markets-inflates-housing-bubble.html

http://www.ibtimes.com/china-has-priciest-housing-planet-theres-nothing-beijing-can-do-about-it-1333635

Real estate has attracted “the lion’s share” of household investment in China, according to Standard Chartered Plc. It has made up more than 60 percent of household assets since 2008, compared with about 20 percent for cash deposits, Dorris Chen and David Yin, Hong Kong-based analysts at the bank, wrote in a report on July 4. That compares with 48 percent in the U.K., 32 percent in Japan and 26 percent in the U.S., the report said.

Tell me if these quotes sound familiar? They sound like they are straight out of an Al Sinclair “Hot Property” segment on CP24!

“Home prices keep rising, so I’d rather buy a place now than put the money in the stock market,” said Zhou, a 30-year-old information technology engineer at a state-controlled bank in Shanghai, who plans to leave the home empty while the couple live with her parents. Gains in equities “could never outpace the growth of home prices,” he said.

And, an interesting report predicting a crash in high end Vancouver condos (of course) from one Canadian RE observer:
http://www.vancouvercondoreport.ca/Chinas%20Real%20Estate%20Bubble.aspx

#75 Pr on 09.18.13 at 6:50 am

Thank’s for the banker.

http://www.youtube.com/watch?v=vksdBSVAM6g&feature=em-share_video_user

#76 Brian Romanchuk on 09.18.13 at 7:22 am

It is not too surprising that CREA puts a positive spin on numbers. If you went into a Kia dealership, one would expect the salesman to have a positive spin on Kia customer reports.

There is a legitimate problem with interpreting the data. Everyone in the markets is used to using seasonally adjusted data, but the data are too unstable year-to-year. (One year peak sales is in May, the other it is in July.) The only way to get a good read on things is to look at the total sales for the year-to-date, and compare to the same period for the previous year. As Ross Kay notes, this figure is down 10% on the year.

#77 2CentsCdn on 09.18.13 at 7:28 am

#61 Form Man

Developers can get CMHC insurance on their construction financing……..

Is that true? God I hope not. If so we’re Eff’d. But it might explain why the rabid tower building continues in the face of obvious saturation. These are smart shrewd business people …. they would not take risks of this size if they weren’t covered somehow. If CMHC is covering their financing risks AND the purchasers financing risks …. then this whole thing is built on air. Does anyone know what the process would be to pay out a CMHC claim? Who gets the money? and when? Is this stuff under written? (way way too big no?) or does the gov’t just say “we’ll get out the cheque book and look after ya if things go bad”?

#78 TurnerNation on 09.18.13 at 8:12 am

#105 Old Man on 09.17.13

Sounds like life in the GreaterFool Research Room.

What lies behind its mysterious wood-panelled patina….
(Brandy, pass the snifter.)

Artist’s impression thereof:

http://www.bcbusiness.ca/your-business/the-fate-of-private-clubs

#79 John on 09.18.13 at 8:14 am

Garth are you planning on submitting a stink bid on the Trump condo being auctioned off today? CBC reported yesterday that the owner is desperate to unload and is sidestepping MLS because there are 12 other units currently listed and languishing. Trump management refuses to allow Richie Bros. to hold auction on site.
Apart from the obvious rip-off prices that Trump Tower condos sold for it is interesting to note that MLS exposure alone is worth squat when everybody heads for the exits at the same time. Where is Brad Laaaaaamb when these sellers need to unload? Trump Tower is just the tip of the iceberg and representative of what’s coming.

#80 mortgagebrokeron on 09.18.13 at 8:38 am

also just up the road, house flipper came in 8 months ago made purchase for 550,000 put in new stainless steel appliances and a couple cabinets, now asking 850,000, the vinyl on outside of the house fascia is still peeling off and hanging. (crickets)

Also before he listed home for sale he thought he would keep it as a rental started asking $3200/month for rent, (crickets) then 2900/ month (crickets) then 2500/month (crickets) now is asking 1900/month (crickets)…..

this market is whacked, me renting for 1200/ month… in country, low stress, low overhead, going to Jamaica enjoying life. I have a wife and 6month old, life is good now. My friends are stuck at home and can’t afford trips and fun things in life. They are stuck with their mortgage payments and home repairs (that is their fun).

I am not looking down my nose at them, and eventually I will purchase real estate again.

Most of the house flippers I know have stopped doing so, they price of the homes are too high to renovate and then flip.

#81 CrowdedElevatorfartz on 09.18.13 at 8:40 am

@#9 Doberman
Wow ! Somebody with more money than brains ($11.1 million) actually dropped that kind of cash for a ugly montrosity of “boxes with sprayed on stucco”.
And it is in North West Calagry where “it has a view of the city” …..

Bwahahahahahahahahahahahahahahahahahahahahahahaahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahaha
ohohohohoho ho sniffle, snort.

Good one Doberman. I havent had a good laugh in a while.

#82 CrowdedElevatorfartz on 09.18.13 at 8:57 am

@#32 X
“I would be curious to know the differences in how the US and Canadian RE boards compiles their statistics.”
++++++++++++++++++++++++++++++++++++

Its very simple. The U.S. govt actually has people that will “regulate” the industry. While Canadian ‘regulators” have had their teeth, testicles, spines, and any other offensive form of aggresive behaviour subsiquently removed by successive Govts until we now have the present day ‘real estate statistics”.
Believe them at you peril

#83 T.O. Bubble Boy on 09.18.13 at 9:10 am

When you can prove something, let us know. — Garth

Of course no one can prove anything, as the data is kept secret. Everything is anecdotes/speculation.

However, I do know that many of the “winners” for bidding wars on million-dollar North Toronto homes do not live in the houses after the purchase, and most realtors in the prime GTA areas openly discuss their offshore clients.

Irrelevant to the wider market. — Garth

#84 TheCatFoodLady on 09.18.13 at 9:15 am

First – that ‘massive immigration’ works out to, using StatCan’s data, almost 258,000 in 2012, 249,000 in 2011, 280,000 in 2010. Going back a decade or so, the ‘average’, (too early in my day to play with the calculator), is roughly 240,000 every year. About 60% or 145,000 or so are economic immigrants – presumably well enough helled to buy if they choose. Although some may come over & already own. Safe bet that the 11% or so refugee class & much of the 25% family class aren’t putting an RE agent on speed dial within a month or to of coming over.

Data source:
http://www.cic.gc.ca/english/resources/statistics/facts2012/permanent/01.asp

Not all immigrants move to the Big Smoke, Vancouver, Calgary or other big cities. Not all immigrants want to buy right away & even those who would like to face the same negative ‘life events’ anyone born here does. Immigration won’t ‘save’ RE.

Next – just for fun. Let’s say Canadians sit en masse & avidly watch the next earnest utterings by the BoC & Minister of Finance. “Too much debt, folks, start paying down. Don’t take on new debt. Be sensible.” – all that good stuff. To use Garth’s example, the family gathers around the kitchen table with calculators, smart phones & popcorn & looks at their balance sheet. Ugh! Sad panda city. They decide not to update the travertine & Corian – even though it’s so last decade. The second car that needs replacing? Nope. The bus will do for one. And that shouldn’t be too hard because the kids are being cut to one activity each. No more movies – Netflix will do fine along with video on demand once in a while. No restaurants or fast food – with fewer activities, more time to prep meals at home. All the savings will go to pay down consumer debt, put extra payments on the mortgage & they hope eventually, start contributing to TFSAs, RRSPs & maybe RESPs.

Thousands & thousands each year not ‘stimulating the economy’ as debt is paid down. If one were to believe that scenario & multiply it across tens, hundreds of thousands of families, what happens to the economy in general?

Does it contract, casuing job losses in fast food, entertainment venues, organizations running kids’ activities, hair salons, places that offer maincures, pedicures & all that lovely, luxury stuff? Clothing stores? Furniture & building supplies?

Wouldn’t a mjority seriously taking to heart the warnings about consumer & mortgage debt & trying to rectify it drastically slow the economy?

Would it turn into a case of damned if you do, damned if you don’t?

I can’t see that happening, but what it?

#85 Smoking Man on 09.18.13 at 9:18 am

We hear from MSM that the USA is doing great,

Poverty rate jumped 4 present adding 6.6million to below poverty line

Now there are 46,496,000. 00 bellow poverty line.

Is there a slight possibility that, that is reason USA Real Estate is tanking.

All is well, ha…

FOMC at 2 bet accordingly..

http://m.cnsnews.com/news/article/terence-p-jeffrey/census-obama-s-1st-term-real-median-income-down-2627-people-poverty

You can’t fool a Smoking Man

Get used to a steady migration of wealth. The middle class is an endangered species. House lust is a good part of the financial suicidal most people commit. — Garth

#86 chickenlittle on 09.18.13 at 9:28 am

#25 Doug in London:

BINGO! The Americans got spanked last time they did what we are doing and have learned their lesson. We just think we are better than them and it’ll never happen to us. We like to pay more for stuff. It’s the Canadian way.

#87 Get Ready Canada RE on 09.18.13 at 9:32 am

http://finance.yahoo.com/blogs/the-exchange/buyer-market-housing-over-112142379.html

The buyer’s market in the US has been over for months. When you read about it, it’s history. — Garth

#88 Form Man on 09.18.13 at 9:42 am

#77 2cents

True. Developer has to pay a premium to CMHC. The construction bank can draw on the insurance if the developer defaults ( developer gets nothing ). Many developers could not get financing without this. Of course if too many developments go broke at once and there are not enough funds from the premiums to cover all the bad loans, it will be the Canadian taxpayer picking up the tab.

#89 Jack on 09.18.13 at 9:53 am

#ahsan

Couldn’t wait either and took in the plunge.
After a year of studying the fundamentals and wait for the real estate market in Winnipeg to correct I just gave up, took the plunge a year and a half ago and bought a new house in Waverley West. Love the neighborhood! Wife is happy, kids are happy a place where we can finally call our own. No worries about the coming downturn in the real estate market as we plan to live in the house for many, many years. By the way the identical house across the street was just recently sold $50K more than what have cost me just 1 and half year ago. Crazy, crazy market!

Interesting how people justify such actions: (a) we’ll live here forever (it never happens) and (b) we made money already (after commission, you have lost). But I’m glad she’s happy. Just don’t call it an ‘investment.’ — Garth

#90 maxx on 09.18.13 at 10:06 am

#13 Ralph Cramdown on 09.17.13 at 8:43 pm

Check out the ten-year chart on stock price.

We cancelled our subscription decades ago.

As for HR, you can buy trunk loads of them for pennies on the dollar at second-hand and charity shops.

#91 Joe Calgary on 09.18.13 at 10:10 am

Ignoring me and deleting my posts discredits you Garth. I’ve been a follower of your site since it started. If your gonna say sales in Calgary are tanking show me the proof.

I already referenced an independent graphic showing annual sales are running below historic norms. — Garth

#92 Sean on 09.18.13 at 10:19 am

#9 Doberman on 09.17.13 at 8:36 pm
—————-

The architect on that Shaw-Calgary home should be fined… it looks like an elementary school from the side.

#93 Doug in London on 09.18.13 at 11:06 am

I don’t get it. I figure that house sales in Canada would have fallen off a cliff, and instead there would be a raging torrent of money going into stuff that’s cheap now like REITs, preferred shares, utility stocks, and Emerging Markets Funds. Rather than money being borrowed for mortgages, it would be going into margin account borrowing instead to buy those cheap investments before the sale ends.

#94 Canadian Watchdog on 09.18.13 at 11:11 am

#61 Form Man

This should give you sense of how many developer multi-units (construction financed) CMHC is willing to insure across Canada. Link

Most developers are on their own.

#95 Doberman on 09.18.13 at 11:24 am

#9 Doberman on 09.17.13 at 8:36 pm
Well what about this record home sale in Calgary:

http://www.calgaryherald.com/business/Calgary+home+sells+record+million/8594359/story.html

What about it? — Garth
——————————————————–
Just saying records are still being set in real estate, this show can keep going forever. Especially in Calgary.

One property, one buyer. Who cares? — Garth

#96 Stew on 09.18.13 at 11:39 am

Former World Bank Senior Counsel Karen Hudes says, “It’s pretty clear where we’re headed, and that is something called permanent gold backwardation. That’s a fancy word for people losing confidence in paper currency. That means the value of currency in the future is less than today.” How bad is “permanent gold backwardation”? Hudes, who spent 20 years at the World Bank, says, “This is not just a bad event. This is like the meltdown of all meltdowns. What it means is you cannot finance international trade.” Hudes goes on to say, “Just think about what that would mean in terms of the jobless rate. It’s going to make any depression we ever had (the 30’s, 2008) pale in comparison.”

Hudes says even though the credit ratings agencies rate U.S. debt high, they know just the opposite is true. Hudes contends, “This is actually an underhanded move because they know the U.S. dollar is going to lose its status as an international currency.” What would that look like to the man on the street? Hudes predicts, “Prices would change on a daily basis. They would double. The number of families that would be employed would be in the minority . . . there would be lawlessness.” Join Greg Hunter as he goes One-on-One with former World Bank lawyer

#97 Ogopogo on 09.18.13 at 11:40 am

#50 Rexx Rock on 09.17.13 at 11:30 pm
Canadian culture encourages home ownership,prices are secondary.No one wants to rent for 5 to 10 years just to save a little money.We all know renting reflects poverty,or someone who is foolish with their money.

For your sake I hope you mean this ironically (it’s hard to tell). If not, I pity your financial illiteracy and brainwashed enslavement to the Great Canadian Real Estate Cult.

#98 ozy - yes market has cracked but on 09.18.13 at 11:43 am

yes market has cracked but the dip will be minimal in 416 or actual increases in all all all central 416 demand areas

now if u live in as Garth says, 905 or extreme 905 as I say, u do not wanna hear what I have to say ladies…because there is no hope – even for getting out now!!!

just an opinion, don’t start on nightmares now, pls

#99 Ralph Cramdown on 09.18.13 at 11:46 am

#90 maxx — “Check out the ten-year chart on stock price. We cancelled our subscription decades ago.”

Am I on the record as liking Torstar ten years ago? The money isn’t in the flagship birdcage liner, it’s in all those rinkydink papers in the ‘burbs (e.g. the Oakville Beaver) full of real estate and car ads and wrapped around this week’s flyers. And as interest rates rise, their pension situation improves.

#100 Pr on 09.18.13 at 11:50 am

From:
Le journal de montreal
Actualité | Dossier

Une indigestion de condos:

The condo market reached saturation point.
Gifts offered to potential buyers lather stagnant sales…
The condo market has reached a saturation point that developers distribute gifts to potential buyers up to provide a new vehicle to improve their credit and improve their access to the property.

#101 reality bites on 09.18.13 at 11:55 am

ahahaha you know why Calgary sales are down? because nobody is selling! Inventory is LOW. It’s not that prices are down and there are tons of listings on the market. If anything, this low inventory and slow sales are driving prices UP. This is the reality in Calgary. There will not be a downturn here in the foreseeable future

#102 Mister Obvious on 09.18.13 at 11:56 am

I hear the term ‘stability’ a lot these days in reference to the real estate market. What does that mean?

If prices hold while sales are zero, is that stable? Can you sleep better at night knowing the value of your home is unchanged even with no chance of selling?

I know people who have given up trying to sell after many months or even years but maintain their place is still ‘worth’ what they failed to get.

#103 Ozy to # to 89 Jack and #6 Ahsan on 09.18.13 at 11:59 am

Ozy to # to 89 Jack and #6 Ahsan

guys, same here, 1.5 y ago bought in North York best value area 750000 was the price, fully detached, 3 mid-large brd, 3 bath (1 full, 2 half) – since then all sales went for 50k more and did not have luxury upgraded kitchen/baths, new roof, new eaves, and no super huge super private backyard (50 by 130 feet is the lot). Gorgeous neighbors, quiet crescent. The others that sold for more, had no walk out basement to serene garden (ooo, it’s beautiful), thye had no walking distance – we are 700 meters precisely to subway. With some cosmetic upgrades we still did in bedrooms (new paint, new hw floors), is now entirely a brand new house, only built on solid brick&block with quality mechanical systems and no smell, and super central – not a commute nightmare

kids love it, wife won’t admit it, but she’s thrilled, and that translates properly,,,but mostly, me as a MAN, I feel my life was unleashed, from many years of rental SLAVERY.

very little mortgage left too, 5 y locked at 3.09% in spring 2012

don’t believe it, come see it, reply with a message and your email

, soooooooo – I guess Garth shall start collecting emails for a “SUCCESS STORY” edition of the blog.

:)

#104 Louis on 09.18.13 at 12:02 pm

My parents bought their house for 44k$ in 1976. Similar house sold for 450k$ on their street a few months ago. This is a little more than 7% per year inflation. The thing is they were told they were crazy when they bought because the same house sold for 22k$ a year before.

I bought my house for 270k$ in 2004. I tough I was getting a bad deal because similar houses were going for 220k$ the year before. Today similar houses go for more than 500k$.

The math for buying doesn’t make sense on paper right now and it probably never does but Canadians sees their governments (federal, provincial and municipal) spend like drunken sailors. They see the public dept increasing, the public employee pension liability. The only way the government can get out of this mess is inflating the dept and liabilities away, so people take the bet of using maximum leveraging to build wealth.

There will probably be a price correction short term, but long term you can count on inflation.

#105 Ralph Cramdown on 09.18.13 at 12:12 pm

#83 T.O. Bubble Boy — “[M]any of the “winners” for bidding wars on million-dollar North Toronto homes do not live in the houses after the purchase, and most realtors in the prime GTA areas openly discuss their offshore clients.

Irrelevant to the wider market. — Garth”

Garth, it isn’t irrelevant at all.

If hot money flows into high priced neighbourhoods, the market’s average price is disproportionately affected. TREB’s average price for August was reported as “up almost 5.5%” YoY, but their index price was reported up only 3.7%. The lazy piggs in the media only report the average (the index isn’t released mid-month at any rate, because math is hard), and the guy on the street figures his place is going up at 5.5%. That and the story about hot foreign money fuels locals’ buying.

Changing sales mix significantly impacts “average” prices, but boards only point that out or emphasize index prices when there’s bad news to explain away. And the media blathers on. Money quote:

“I think it’s always been hard to buy a first house,” says Dianne Chaput, a real-estate agent in the Beach. “Think about what people did to get a house back in the day.”

No thanks, Dianne. I’ll think about what you’d do to get a listing today.

Until anyone offers statistical evidence the ‘Asian’ guy buying a big house is from Guangdong, and not Markham, it’s irrelevant. — Garth

#106 Randis on 09.18.13 at 12:15 pm

When Dianne Usher says”…Prospective home buyers have taken a hard look at their household balance sheets over the past year and have found that, despite stricter lending guidelines, there are affordable property types from which to choose.” I don’t think she is entirely wrong … She just chose her words and manipulated very carefully … As we all know properties became ridiculously unaffordable so for newbies who wants to buy they can only choose what’s “affordable” for them i.e. 300k bachelor units that is 400 sq ft big … and at its stands right now, there are no shortage of supplies of these shoeboxes and these misled buyers

Of course, we all know how doomed these misled newbies are, and how screwed up our society has become …

I remember one time I heard a reatlor getting all excited with housing affordability and ppl should buy because developers are building smaller and smaller units to keep affordability in check … Go figure

#107 Old Man on 09.18.13 at 12:26 pm

Those that are buying the top of the bubble in Toronto are in serious denial. The expense of buying and selling this ‘asset of debt’ alone should give you a sleepless night, and those expenses are with after tax dollars. The time to buy was in 1998 for Real Estate, and the time to buy the stock market was during the last crash, but this is a distant memory. Real Estate in 1998 was boring, and stocks in the last crash was a frightening prospect – not! Real Estate 2013 is so cool as all are doing it – why? It has become an emotional trigger that you might be left behind, and in a marriage the wife is nagging that all her girlfriends are putting her down, as they all bought, so why rent? Oh they feel so poor without a nice home, or at least a massive trade up with bank money. Do not buy any Real Estate in Toronto now, but sit tight, and save your money for a much better day which will take many years. Cheers!

#108 Frank le skank on 09.18.13 at 12:34 pm

#55 Jan on 09.17.13 at 11:52 pm
What part of massive immigration do you not understand?

I never understood why the bulls use immigration as a reason for continued RE price increases. There are minor fluctuation in the year over year numbers but there’s no upward trend. Can someone explain how immigration is going to save real estate? Or what the argument is?

As per statcan
Canada – Permanent residents
2012 – 257,887
2011 – 248,748
2010 – 280,689
2009 – 252,174
2008 – 248,246

Permanent residents by province or territory and urban area
Toronto permanent immigration
2012 – 77,399
2011 – 77,759
2010 – 92,183
2009 – 82,638
2008 – 86,899

http://www.cic.gc.ca/english/resources/statistics/facts2012/permanent/11.asp

A small percentage of immigrants can afford to buy within the first years of their arrival. Also, if immigration saves real estate, why did it not save Miami? Vegas? Boston or Chicago? The myth of the rich immigrant buyer forcing prices up for native Canadians is just that – a myth. We are the architects of our own misfortune. — Garth

#109 Mike in Surrey on 09.18.13 at 12:43 pm

Average price of a home in Canada now at $382,373 is NOT expensive. More than half of us spent $360,000 on 6 vehicles during our driving life from 16 to 76 years old, including fuel and vehicle insurance, in 2013 dollars of obviously. You probably had auto loans or use line of credit to purchase a vehicle that incurred interest. Put that vehicle interest aside, if there’s 3 person in an average home, that’s $1,080,000 spent on vehicles. Set aside 29% or $313,200 other costs besides the mortgage. We have $766,800 left over, assuming 50% principle and 50% interest over the life of the Mortgage; you have $383,400 for the price of an average home. So an average person should use public transit until it’s cheaper to drive, and rent until it’s cheaper to buy?

#110 TorontoBull on 09.18.13 at 12:47 pm

“The massive part. It isn’t. — Garth”
Annual immigration equal to 1% of total pupulation is not to be ignored – probably the highest proportion in the world! Add to that that immigrants are usually in the 25-44 age category,prime years to buy RE, and immigration becomes a VERY significant influencer in the market.

It’s 0.7% of population – hardly massive, and without it our population would actually shrink. This is not the reason real estate prices are where they are. — Garth

#111 Donald Trump on 09.18.13 at 12:56 pm

Big bumps in local home sales won’t last: bank economist

http://www.news1130.com/2013/09/17/big-bumps-in-local-home-sales-wont-last-bank-economist/

Big increases in Vancouver-area home sales will not be sustained, according to a bank economist.

Craig Wright of the Royal Bank says “activity now is borrowing from the future… that, alongside of a still-strained affordability environment suggest, to us as least, that the housing sector will continue to soften rather than accelerate from this point forward.”

Wright also sees new home construction being limited in the short term by slowing population growth and unoccupied condos in Vancouver.

His forecast for BC calls for growth of 1.5 per cent this year, increasing to 2.7 per cent next year, as exports of natural resources rise and spending on major projects ramps up.

But Wright adds that BC created no net new jobs between the summers of 2012 and 2013, which in turn has kept retail sales “stagnant.”

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

I agree .
Keep using -up virgins far into the future.
Eventually run out of virgins.

#112 Old Man on 09.18.13 at 1:38 pm

Now for you that are getting horny to buy now will give you some words of wisdom that might be renting and are tempted to go all in for your dream home that will become a debt bucket. Let’s say your target price for 2013 is $700,000, and the future buy target is say
5 years from now with a crash element, and a year to year meltdown.

The same home is selling for $550,000 in 2018, but during those 5 years of waiting you and the wife have banked while renting $150,000 in savings, so do the math, as with patience can buy that same home for a net savings of $300,000. This is just a hypothetical, but what a bargain to think about, and this is what is going to happen, and that scenario you can take to the bank.

#113 Son of Ponzi on 09.18.13 at 1:54 pm

When the RE bubble in China finally implodes and as a result also lays waste to large segments of RE in Vancouver and Toronto, we will see the extend of foreign ownership.

#114 Canadian Watchdog on 09.18.13 at 1:55 pm

BREAKING: BlackBerry could cut up to 40% of staff by year’s end.

#115 Not insane in Calgary on 09.18.13 at 1:59 pm

It is not valid to get “horny” for a residence unless you are preparing to do something drastic which screws it up. Women, generally middle aged and older are the ones that turn my crank, assuming that their grey matter is not poisoned with nonsense. My criteria for physically eligible is very low: Below age 65 and above 18, and under 250 lbs, other than that anything is fair game. Woof. However,most of the time after they start speaking all desire vanishes and Viagra will not help because the issue at that point isnt physical, but mental and emotional. Given that Im married I cant do anything anyway and if the grey matter of the female is correct and doesnt dissuade from the physical, they end up just being an annoying distraction from the relevant matter of earning money and improving skillsets.

More relevant: This blog goes on and on about bust in housing. Where? In Ontario maybe? So sales are down in Calgary because it is September and maybe the houses on the market suck for what they are listed at market value. Still, given that rents are the same as mortgages(for now)why would any sane person rent in Calgary unless they want mobility and soon will retire or dont want to deal with the hassle of purchasing a mortgage?

This blog and many others talk about real estate is such a disconnected manner. As if purchasing a place to live is like getting oranges at Superstore. Please. These purchases are generally a once in a lifetime thing unless this talk refers to flipper scum who attempt to profit and drive prices up.

It is unwise to listen to this blog regarding real estate in Calgary because it screws with the unconscious and may inhibit the purchase of an ok house and this may save you money in the long run(If I retire in 2045 should I rent until then?). It isnt about materialism, simply a place that in the end, you own. If you hesitate in Calgary due to the screwy timing you will get screwed.

As much as values in Calgary(and everywhere else besides Texas) are a joke and a ripoff that is the current state of affairs due to the greed and corruption in this world that is more akin to Hell and Insanity than paradise. Stop looking for security here. You will never find it.

Best to find a place that is adequate, appreciate the simple things: Edible food. Drinkable water. No gunfire at night. Fun hobbies. Good health. Those are the things that matter. Best not to take what really matters for granted, both people, times, and things.

#116 Smoking Man on 09.18.13 at 2:04 pm

Ha Smoky hits one out of the park yet again.

NO TAPER!!!!!!! who cares I can’t speel it.

Just made a zillion the selling usdcad
Buying Cad 5y bond.

See my above post.

Cha ching a ling………..

#117 Canadian Watchdog on 09.18.13 at 2:04 pm

As expected, taper is off. They were just kidding.

*MOST FED OFFICIALS SEE FIRST INTEREST-RATE RISE IN 2015
*FOMC DECISIONS ON PURCHASES TO `REMAIN CONTINGENT’ ON OUTLOOK
*FED: `TIGHTENING OF FINANCIAL CONDITIONS’ COULD SLOW GROWTH
*FED: RISE IN MORTGAGE RATES, FISCAL POLICY RESTRAIN GROWTH
*FED REFRAINS FROM QE TAPER, KEEPS MONTHLY BUYING AT $85 BLN

QE4EVA

#118 Old Man on 09.18.13 at 2:30 pm

The FED continues pumping, and see a Red Flag for all the good old boys to make a bit more money by selling into the market before they pull the plug upon the greater fools. It is like the cartel gets a wink and a nod to cash in the chips before we pull the plug on them all, so this to me amounts to a scam for the elite to make some more money. Imao, as when has the FED ever cared about the citizens in this world, and the average working family. This looks like a pump and dump scenario to me, so pay attention to what happens next. :)

#119 nancy on 09.18.13 at 2:39 pm

#114 Son of Ponzi on 09.18.13 at 1:54 pm
When the RE bubble in China finally implodes and as a result also lays waste to large segments of RE in Vancouver and Toronto, we will see the extend of foreign ownership.

Son of Ponzi, I have been a self-professed bear for way too long. But it is even too much of a stretch for me to hold my breath waiting for the RE bubble to implode IN CHINA to affect the decline in Canada. Seeing how long Canada has defied bursting of the RE bubble logic, imagine how long China could hold out with it’s booming economy and mega-watt growth. You are grasping at straws my friend.

#120 Donald Trump on 09.18.13 at 2:42 pm

How about a moat and a wall? And guards? — Garth

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

I think Garth is starting to understand how dire the situation is .

Barbed wire, guard dogs..and “Justin Bieber drives a Kia” should help as well.

#121 Suede on 09.18.13 at 2:48 pm

Hahaha, Fed messes with investors yet again. Twice in 3 months.

Reminds me of “The Champ”

“Head fake ’em with the left and BOOM, flurry to the solar plexes…How’s that, is that ‘taper’ enough for ya!? Ever since i’ve been The Champ”

#122 Kilby on 09.18.13 at 2:48 pm

There will probably be a price correction short term, but long term you can count on inflation.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
As long as there are buyers, our children (28 and 25) with good educations, both working, no personal debt will never be able to buy at these prices, BC lost 9,500 permanent jobs in July and gained 16,500 part time ones (Christy Clark is taking credit for the 16,500) Besides disappearing full time work with decent pay, wage increases have been frozen or have had minimal gains and the “Boomer’s” kids are the biggest cohort and the future buyers…..Prices have to go down a LOT before these people will ever be able to own anything..

#123 Ben on 09.18.13 at 2:58 pm

And No Taper.

#124 Siva on 09.18.13 at 2:59 pm

#120 nancy on 09.18.13 at 2:39 pm

Watch the 60 minutes piece on ghost cities in China. RE in China is imploding as we speak

#125 The Prophet Elijah on 09.18.13 at 3:05 pm

Garth I was in on your conference call yesterday, I thought you said the Fed would taper. Now are you starting to see the massive problems in the US – armageddon is coming.

We said that was the consensus view. It was. — Garth

#126 Max Jones on 09.18.13 at 3:09 pm

OK, the FED will continue to buying $85 billion in bonds for the next couple of months. So should we expect 5 year mortgages to drop back to 2.89%, or will the rates be a little sticky?

#127 Ray13 on 09.18.13 at 3:13 pm

The birthrate continues to exceed the deathrate by a fair margin. I keep hearing this factoid about deaths about deaths and simply isn’t true. And, of course, a good chunk of the several hundred thousand students, temporary workers, illegals and refugees who arrive every year will likely stay here too.

http://www.indexmundi.com/canada/demographics_profile.html

#128 Ray13 on 09.18.13 at 3:14 pm

…deaths exceeding births…is what i meant.

#129 TorontoBull on 09.18.13 at 3:22 pm

proportian of immigration is greatest for the hottest RE markets: Toronto region – 1.3%, Calgary region – 1.3%, Vancouver – 1.2%.
Garth, changes happen at the margin..I think immigration impact on RE may be your blind spot.
btw, comparing Canada to US cities for international immigration is comparing apples to oranges,as the proportion of illigal immigrants in the States is far greater than Canada – and illigal immigrats are less likely to buy RE

#130 mike in kelowna on 09.18.13 at 3:25 pm

Garth, any comments on what Mr. Bernanke had to say this morning and it’s impact on the markets especially the precious metals? Seems the US economy not as strong as you believe. Thanks.

#131 willworkforpickles on 09.18.13 at 3:26 pm

No Taper….and i told you there would be none in the September US Fed announcement . My own summation wasn’t by a lucky guess (or even partially) .

Don’t get too excited. A delay, not a dodge. — Garth

#132 Old Man on 09.18.13 at 3:38 pm

Here is how it works with the elite, as they know the message ahead of time. Gold, Silver, and Oil is going through the roof why? So follow the money and who is cashing in on this scam; not me. There is no why as Mr. Turner was always correct about his assessment, as he was never wrong, so we wait until they pull the plug with this pump and dump nonsense. As someone is cashing in before the real plug will be pulled. I do not like what I am seeing here, as was not informed for me to hoop some green. :(

#133 John on 09.18.13 at 3:50 pm

Fed inaction smacks of desperation….no taper means more drugs for the junkie…Bernanke made a grave error in judgement today….particularly when market was prepared for a first step forward…Bernanke may have chosen to wait until the debt ceiling issue is dealt with, but even so, there is zero chance that a significant economic improvement will materialize before his departure…stagflation on the way

#134 Bob Rice on 09.18.13 at 3:53 pm

QE tapering didn’t happen! Someone here was sooo sure. now what??

Now it comes later. — Garth

#135 Arse on 09.18.13 at 3:56 pm

American economy may be fragile, but the stock market in the biggest economy in the world could continue it’s ascent for a couple of more years.

#136 calgaryPhantom on 09.18.13 at 4:02 pm

Garth,

you should point haters to one of your previous blogs a few days ago where you said Feds won’t risk the economy going down with sudden spike in rates.

You correctly predicted that fixed income stuff will come back up.

#137 VanPerfecto on 09.18.13 at 4:04 pm

It’s becoming pretty clear that there never was a housing bust. Owners 1 Renters 0. You can’t compare America to Canada. Canada is in a class by itself. AMerica can’t handle the pressure of interest rates going up while Canadians have no problem tackling more debt

#138 father on 09.18.13 at 4:14 pm

I got to admit, garth you got very thick skin. I guess if you didn’t you would of never entered politics

#139 gladiator on 09.18.13 at 4:19 pm

No tapering means US economy is not improving.
The patient is in intensive care and needs the IV, otherwise, it dies. Still bullish on America, Garth?

Nothing has changed. — Garth

#140 Musty Basement Dweller on 09.18.13 at 4:22 pm

Oh those central banker bozos are so annoying. Why don’t they stop their diddling.

Are they really saving us or just diddling with timing trying to battle “natural” market forces.

The inflated sense of their importance gets nauseating on a regular basis.

#141 Smoking Man on 09.18.13 at 4:22 pm

#135 Bob Rice on 09.18.13 at 3:53 pm

QE tapering didn’t happen! Someone here was sooo sure. now what??Now it comes later. — Garth

Someone was not the only one that got it wrong, I speculate that 95 present of bay and wall street got it wrong.

And then there’s little old me……

#142 Ralph Cramdown on 09.18.13 at 4:28 pm

#130 TorontoBull — “comparing Canada to US cities for international immigration is comparing apples to oranges,as the proportion of illigal immigrants in the States is far greater than Canada – and illigal immigrats are less likely to buy RE”

Doesn’t matter whether they buy, rent or help pay a legal relative’s mortgage.

#143 Musty Basement Dweller on 09.18.13 at 4:31 pm

I guess interest rates will get a bit lower now.

Hey house hornies looks like a great time to buy and boomers go out and get that new 4 by with your line of credit!!!

Go for it!!! and let us know how it works out.

#144 HAWK on 09.18.13 at 4:31 pm

#55 Jan on 09.17.13 at 11:52 pm

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

With the investor category, not even in place “the massive part” is confined to mostly middle class immigrants, most of whom come from countries with weak currencies.

Nonetheless if people bought property, however overpriced with their own money, the uptick can continue indefinetely, but when its with debt, it will eventually reach a ceiling.

Those who predict a peak may get their timing off by months……..even years…….but eventually its a mathematical certainty.

This then brings the question as to whether its worthwhile to try and harvest a relatively little more upside and risk a large downside or not.

Comes down to the individual.

BTW – In some quarters prices have decreased already by a bit.

#145 daystar on 09.18.13 at 4:33 pm

We said that was the consensus view. It was. — Garth

I was among them, but things change. One of those changes that has brought a delay is stories like this:

http://www.ft.com/cms/s/0/31e6324e-1fa4-11e3-aa36-00144feab7de.html#axzz2fHCwW2sF

When there are individual corporate sellers of bond sales to this degree, how can the U.S. government back off its current $40 to 45 billion a month in treasuries in an environment like this? If they exit this month or next, bond yields would spike as a result of this kind of acute sell pressure. If Verizon would have delayed their bond sale of $49 billion ahead of fed tapering, we would have seen a bond spike in yields, that’s a given.

Its also a given that in that light, most experts would have second guessed themselves between last weeks Verizon bond sale and today.

But I digress. What I want to know is, why is it so necessary to denigrate someone’s opinion if it turns out to be wrong? (or in this case, merely dated) Is this related to inflating one’s self worth because some folks never learned how to accurately assess self worth and the worth of others? If so, should we once again explore why that is and how to fix it? Again? Really? Do we really have to? Really? Again?

#146 Donald Trump on 09.18.13 at 4:42 pm

In next blog topic I will post a link to an interview with Richard Willing. Good geo- political discussion, but near the end he talks about where things economically started to go sideways and flussshhhh around the Nixon administration.

One of his points is one I have hear before.
Ie a retailer sells shirts for $50, and previously bought them off a manufacturer for $25 each

A guy from Asia says he can produce them at $1 each.

However, the invoice in ‘Well Know Global Bank” in Hong Kong says $25 per shirt.

That “$24” enters into some global Financial system and parks the money all over the world. This has been going on since the 1960’s.

I didn’t get if that is really $25, or some bogus accounting…but regardless some $$$ goes missing in the middle …..between production and delivery?

Anyone else heard about it and understand what is going on ?

#147 Adrian on 09.18.13 at 4:50 pm

The American economy — with its heavy interventionism — I’m sorry to say, looks more and more like that of the Soviet Union all the time.

#148 Ralph Cramdown on 09.18.13 at 4:53 pm

#134 John — “Fed inaction smacks of desperation…”

Now let’s see… Inflation is below target. Unemployment is above target. Fiscal policy is currently part of the problem rather than the solution, and House Republicans* are threatening to make it worse. Continued loose monetary policy is not ‘inaction,’ it’s a continuation of the Fed’s best course given conditions and the actions of the other actors.

“stagflation on the way”

This seems a particularly weird prediction. We’ve experiences stagflation precisely once, and at the time, mainstream economic theory didn’t know how to deal with it. We’ve learned.** So why would you think stagflation wouldn’t be quickly stopped in its tracks should it appear?

* It’s interesting to note that Böner could easily pass a bill with most Democrats and a majority of the Republicans, but won’t attempt anything without Tea Party blessing. It isn’t even a “majority of the majority” any more. The wingnuts are driving the bus.

** One of my favourite noms de plume was somebody who posted on Calculated Risk’s board as ‘Volcker the Viking’

#149 HAWK on 09.18.13 at 5:03 pm

#118 Canadian Watchdog on 09.18.13 at 2:04 pm

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

I do remember you called that one ……….good call :-)

Obviously, despite their gains they don’t think the economy is as strong as they’d like it.

#150 T.O. RENTER on 09.18.13 at 5:07 pm

No taper.
GLD up huge!
We don’t think this will last though.

#151 father on 09.18.13 at 5:19 pm

I was looking forward to the fed tapering, I guess interest rates are not moving very much anytime soon. Poor mr. bond market I was getting exited with him going up. So we wait

#152 Ralph Cramdown on 09.18.13 at 5:19 pm

All you doubters about an economic rebound, hear this:

Mop and Pail headline: “Grand Theft Auto scores $800-billion first-day sales” sic sic sic

#153 n1tro on 09.18.13 at 5:30 pm

Fed not tapering anytime soon. Markets are “surprised”. Insiders who understand the true state of the US economy and how full of hot air that make up the feds aren’t surprised in the least. Let the US economy balloon keep going!

#154 Bob Rice on 09.18.13 at 5:34 pm

I am starting to wonder if all the don’t-buy-a-house-til 2020 info spewed here is starting to ring hollow…

We might take the plunge this fall on a home that is a good deal in our opinion and seller is motivated… so we are going to low-ball… if we can get it for what we think we can get it for, even if it goes down some after we buy, it’s a “forever” home IMHO. Not worried about 30+ years down the road…

Someone give me a few very sound (and provable) reasons why we should wait, especially now that the QE is going to continue indefinitely… my feeling is that prices will flatten, not fall… worst case.

#155 Old Man on 09.18.13 at 5:36 pm

#147 Donald Trump – Of course, as the biggest corporations in North America do this in Bermuda with accounting tricks with this and that; not the small guys but the big guys with inventory costing to make black look like white with small profit margins to cheat on taxation. They are all there especially the biggest insurance companies in the world cooking the books, as this is nothing new.

#156 oh boy on 09.18.13 at 5:39 pm

taper? no.. .no taper, you know why? the US Economy is in complete shambles. it’s going to be a LONG LONG Time before rates move up from here. just like the post war period. 30 years of stable low rates.

gold skyrocketing.
oil skyrocketing.
stocks skyrocketing

money printing forever!!

#157 willworkforpickles on 09.18.13 at 5:40 pm

— No Taper….and i told you there would be none in the September US Fed announcement . My own summation wasn’t by a lucky guess (or even partially) .–

” Don’t get too excited. A delay, not a dodge. — Garth”

———————————————————-
Well Garth you may see it in the next round coming in December as i had previously thought and said several weeks back … but i think it will be such a slight easing off then that it will barely cause a ripple anywhere.
The Fed could so easily manipulate the markets with a huge taper , but who knows if they really will.

#158 Poste Haste on 09.18.13 at 5:50 pm

If we took stock of why homes are still marching forward – maybe we ought to look at the cracks around homes. A close friend last year bailed at the last minute to join my wife and I on a weeks cruise around cook’s island – health problems he noted. Now, 1 year later, he has put his house on the market as he now faces financial distress. He cut back on all the perks, no dining out, no weekend getaways – downsized vehicle to no avail. Maybe we should be seeing indicators from sources such as restaurants, clothing stores, vehicle purchases to gauge what is happening. The last shoe to fall is when you remortgaged the credit card debt and have zero equity –

But, on the same token, a new neighbour told me this past summer – how he came from El Salvador, looking for a better life and qualified for a mortgage with just under 3 years working experience in Canada. I won’t guess what he generates in income, but it looks like he struggles like the rest of us. I don’t know what his wife does for a living but they have 2 small children and homes in this neck of the woods go for around $390K – something stinks – and soon we will all smell it!!

#159 gladiator on 09.18.13 at 5:53 pm

@153 Ralph: it’s a mistake. Grand Theft Auto sold 800-Million worth of games. 800 billion would be worth about 6% of the US economy.

#160 calgaryPhantom on 09.18.13 at 5:54 pm

Although i am relieved that bonds got some lift today, i thought the uptick would be sharper than this. Looks like this upward trend in fixed income assets might be temporary. Not because of interest rates, but because of equities. Money will be going from fixed income to equities.

#161 Donald Trump on 09.18.13 at 5:58 pm

How To Be A Vancouverite

http://www.youtube.com/watch?v=pc-tVZq9a4Y#t=205

#162 Old Man on 09.18.13 at 5:59 pm

I was offered this gig years ago in Bermuda, as the owner booked the Presidential suite at the King Eddie in Toronto. Hell he was from North Carolina no older than 37 years old, and was offered a 3 year contract with a big salary to manage all the administration, as was looking for an adventure in life. I asked him one question can I get my money out, and he said no, as would have free food and a room there. I essentially would be cooking his books, as could smell it, so asked him how he got his money out of Bermuda. Now this gets good, as he was taking all American Express checks off the books, and once a week would fly to USA to bank them all in his shell account. I turned down this position, as this job in paradise was not for me. This was a big operation and in Bermuda he had a front man, as one cannot own a hotel unless a resident was a partner to get around the laws of ownership.

#163 Donald Trump on 09.18.13 at 6:28 pm

Can’t trust Politicians
Can’t trust Lawyers
Can’t trust Realtors

Now..can’t even trust this…
http://o.canada.com/2013/09/15/clown-terrorizes-town-in-england/

I tell ya…..the plebs must rise up!

#164 Westcdn on 09.18.13 at 6:51 pm

I was expecting a 10b$ taper of Treasury Bills today. Tomorrow will not be a better time to begin ending QE. The last thing the world needs is more poor quality debt that doesn’t produce meaningful jobs. With cheap money, people are (or should) increase their demand for credit. Who do you think is going to supply this credit? From what I have read, there is a shortage of good collateral for loans, also known as subprime. This issue is mainly in the shadow banking system – the world of derivatives and rehypothecation. Unfortunately, I am still learning about this world so my opinions are weak on this subject. Anyway you slice it, the price to be paid for QE is still pending. Meanwhile, I will thank Lady Luck for the nice bump in the markets, particularly the income shares.

#165 TurnerNation on 09.18.13 at 7:09 pm

Bernanke: Big-Beta Baboons Buying Bonds in Blocks.

#166 CrowdedElevatorfartz on 09.18.13 at 7:49 pm

Bernanke blinked……….

Ahhh remember the good old days of Alan Greenspan.
Gone forever……….sigh

#167 Mr. Monday Night on 09.18.13 at 7:51 pm

I wish I had a better feel for what ‘ending badly’ truly meant. Does this mean that I’m going to be in bidding wars for the few houses that will be sold for reasonable prices, while the majority of the climbing inventory is mostly unreasonably priced listings by people searching for greater fools?

How high will the minimum downpayment have to be raised to save people from themselves?

#168 Old Man on 09.18.13 at 8:01 pm

I just have to tell this story which is out of context, but we all need a laugh in life. I have an underground parking space, so the guy that has been parked beside me for years saw him today, and said do not steal that car or will call the cops. He laughed and in all these years we had a talk, as he is a History professor and is 72 years old. I laughed as said why not retire, as he said soon, and laughed as said all of history has been rigged and is all bs, and he said I know, so this guy has 2 classes a week, and is an expert in US history. I had no idea that a university would hang on after a normal retirement age, but such can take place. We had after all these years a meeting of the minds, and he shook my hand, and said we need to have a coffee together in the near future, as you know a lot.

#169 Cici on 09.18.13 at 8:08 pm

So, Garth is taking the night off? Good for him. Everyone deserves a break once in awhile, and today would be that perfect day.

You may not have been right this time Garth, but you sure as heck should of been. But I’d still like to hear your viewpoint…are we now looking at quantitative easing and slow economic recovery FOREVER?

What a Gasbag!

#170 Doug in London on 09.18.13 at 8:28 pm

Back in May or June Ben Bernanke said: If the economy keeps improving we may eventually start tapering the QE. I didn’t hear the speech today but apparently he said something like: We’re not ready to start tapering yet, but will do so if the economy improves. Now let me see, I was never that good at English but aren’t both statements saying the same thing except for changing the sequence of words? So what exactly was all the panic during the last 3 months for?

#171 Vamanos Pest on 09.18.13 at 8:52 pm

A lot of comments about the taper. From the standpoint of someone who tries to follow Garth’s advise, this is my how it effected me:
-my diversified portfolio got a bump in most asset classes. I’m currently a little overweight stocks (partly strategy, but mostly just because of the strong run up this year) but bonds did well today too (where I might be down ytd)

-an end to QE is still coming (unless some of these comments are implying that QE will NEVER end) so Garth’s analysis to date is unaffected, although the timing is adjusted (if you want someone who calls financial markets AND calls the timing, you’re not looking for advice, you’re looking for a psychic)

-if bonds stay up on this news, and cheap money continues to prevent a correction in Canadian housing, F will step in with a new round of CMHC regulation. Either way, this market is going down. It has been decided (not that I agree with market manipulation, but the existence of CMHC is already market manipulation.)

Fun day to be an investor, as are most days when you are balanced and diversified.

#172 Alberta Guy on 09.19.13 at 12:44 am

Well….now what? Over to F for some more jiggering to squelch the hornies from buying is what.

#173 Yo on 09.19.13 at 10:50 am

Actually, I am not sure why people assume interest rates will go down or stay low because of QE. Bonds Price get bid up/yields go down on mainly the expectations of inflation long term. If inflation expectations goes up, yields go up to ensure in real terms interest rates are positive. No one wants to own bonds when inflation goes up. The problem with the fed not tapering, is it has raised inflation expectations in the market place. They should of tapered as the market was ready for it. In fact, if you looks at the US/CDN credit markets, yields are up. Not down. That is why gold is up 4-5%. Inflation expectations have increased. That being said, lets see how markets are by next week…but for those who hope yields will drop allot because of no taper, that is not going to happen.