Careful

skunk1

In the past year, if you generously believe the realtors’ numbers, a Toronto detached house has grown in value by 10%, while condos have lost 4%. The price gulf between them is now an astonishing $500,000.

In Vancouver, things are even more extreme (as usual). The average Westside house now costs $2,089,700 – a slight improvement – while the average Van condo since 2008 has appreciated by only 1.9%, and is dropping. After inflation, anyone who bought five years ago has lost some serious ground. In the country’s other Big Three market, Montreal, it’s a similar story – overall sales barely unchanged from September of 2012, with the condo market showing considerable weakness.

Meanwhile, the year/year comparisons that boards in the GTA, Vancouver and oversexed Calgary trumpeted earlier this week should be viewed in context. September of 2012 sucked. Bigtime. To keep things in perspective, markets haven’t really recovered to levels last seen in the autumn of 2011.

For example, in Toronto sales tanked last autumn after F murdered the 30-year insured mortgage, dropping 21%. Last month 7,411 properties changed hands – up from the disaster of 5,879 a year ago, but behind the 7,658 of the same month in 2011.

But over this time, prices are up. The average Toronto property, say the realtors, is about 6% more than a year ago. This is interesting, since condos are actually cheaper, and properties selling for slightly over $1 million were $1.25 million two years ago. In fact it’s not uncommon to have seven-figure houses changing hands for 20% discounts to list. So what’s goosing the numbers? Simple: the frenzy surrounding SFHs and semis in the $500,000 to $900,000 range – prime GenX real estate still buyable with 5% down. Poor souls.

None of this is lost on Brad Lamb. The self-crowned Toronto condo king (now also a big presence in Calgary) has been battling back against market forces mounting against him. With numerous developments in the marketing and construction phase, Lamb has a massive stake in preventing a meltdown in the condo market. A master marketer, shrewd businessman and media manipulator, the towering, scary dude has just embarked on what looks like the fight of his life.

BRAD

It’s a two-punch strategy. First, distribute zillions of full-colour, glossy, 16-page booklets to target areas exploding “The Myth of the Toronto Condo Bubble.” The basic premise: there can be no real estate crash (or even a correction) without a recession. “Based on past data, this will likely be at least 9 years from now and possibly as far away as 20 years.”

Of course, that’s bunk. The price of everything goes down when supply outstrips demand, or when it exceeds the ability of the marketplace to buy. Condo overbuilding has been endemic in Toronto, Vancouver and Montreal in the last four years, with unsold units hitting the streets daily. New condo sales have collapsed 40% as a result. Meanwhile personal finances continue to flatline, while fixed mortgage rates have jumped and loans are more difficult to qualify for. The economy’s barely growing, and for the first time in 80 years we should worry more about deflation than inflation. This is a toxic environment for first-time buyers who can suddenly see prices softening.

But Brad’s a fighter. If you doubt that, so to his next Real Estate P.O.W.E.R. Investing Workshop, October 16th. The strategy is to use extreme leverage to accumulate rental condos with marginally positive cash flow (if you fudge a few numbers), then let natural market appreciation make you a millionaire. Except, oops, condo prices are dropping.

So here are some practical tips for those who come here hoping for a cataclysmic market dump of epic proportions. First, it won’t happen. Residential real estate in this nation is overvalued by up to 40%, but the correction will be long and slow. Second, the last kind of property to chase right now is the most popular – those $800,000 semis and weensy bungs that the hipsters are hyperventilating over. Third, if you want an immediate deal, go take advantage of a desperate developer trying to dump inventory. Ask him to throw in a Bimmer. Fourth, if you’ve ever wanted a great house in a top-end hood, this is the best chance in a decade. What used to cost three million is often now merely two. How can you pass that up?

Fifth, really smart people won’t buy anything for three more years. A slow, grinding economy will relentlessly create more real estate value, at the same time  interest rates normalize and liquid portfolios continue to outperform. Lastly, always keep real estate a reasonable part of your net worth. If you need CMHC insurance, then you shouldn’t be buying. If you’re a Boomer with the bulk of your net worth in a house, sell.

Forget what the realtors have said this week. Markets are not recovering, but rapidly segmenting. There‘s absolutely no danger of being priced out if you choose not to buy. The wisest among us will still be liquid and diversified. And be happy you’re not a bald guy with a Bentley. Even kings cry.

165 comments ↓

#1 Josef on 10.04.13 at 8:08 pm

First!!! Oh YEAH BABY!!! Yeah!!

We are not going to start this again. — Garth

#2 Liquid on 10.04.13 at 8:20 pm

A lot of Vancouverites are house rich, but cash poor. I’m debating if I should sell my Vancouver property now while I can still get a good price and increase my liquidity. It’s tough to make a decision though. My feeling is real estate prices will stagnate for the next few years without moving too much up or down, depending on monetary policy. So I don’t think there’s a lot of risk to holding onto a property now if you already have a home, but I also don’t think this is the ideal time to be getting into the market for first time buyers.

#3 Zach on 10.04.13 at 8:22 pm

Garth, you are a writing genius! Your blog is so addictive! I’m trying not to read it and just follow my wife’s plan of upgrading our house, but I cannot help it. I’m checking for new postings every night after 8pm…

#4 George P on 10.04.13 at 8:29 pm

“Besides, banks shouldn’t be obscenely profitable: they’re intermediaries, and in an efficient economy their profits should be quite easily competed away. When bank profits are high, that’s a sign that the bank in question is extracting rents from the economy, rather than helping it to grow.”

http://blogs.reuters.com/felix-salmon/2013/09/29/the-jp-morgan-apologists-of-cnbc/

#5 Matt on 10.04.13 at 8:30 pm

For those in their early 30’s and currently own no physical real estate, to keep real estate a reasonable part of our net worth what exactly are you suggesting considering that I can buy a house without the need for CMHC insurance.

Are you suggesting to go ahead and purchase as long as it fits your rule of 90-age? Or are you suggesting I continue renting but load up on REITS, etc?

#6 timmy on 10.04.13 at 8:31 pm

“Of course, that’s bunk. The price of everything goes down when supply outstrips demand, or when it exceeds the ability of the marketplace to buy”

It has been like this for at least 5 years, yet prices have not declined significantly

#7 T.O. Bubble Boy on 10.04.13 at 8:38 pm

Fourth, if you’ve ever wanted a great house in a top-end hood, this is the best chance in a decade. What used to cost three million is often now merely two. How can you pass that up?

Any examples of this? I don’t see $3M going for $2M… in fact, I see lots of $1.5M places now trying to sell for $2M.

(at least in HAM-ville, also known as North Toronto)

Actually there has been a significant softening above $1.5 million since the Spring of 2012. Research. Additionally, I am unaware of substantial Mainland Chinese investment in North Toronto. Source? — Garth

#8 Sam on 10.04.13 at 8:41 pm

Garth,

Its not going to happen. Go back to politics.
Canadian real estate will market will rewrite economic rules.

#9 TurnerNation on 10.04.13 at 8:42 pm

This blog is like a mullet: business in its top section, party below.

#10 Nemesis on 10.04.13 at 8:51 pm

“What used to cost three million is often now merely two.” – HonGT

Correct. A Strange&VeryMixedPicture.

And now for some “Scentimental” FridayNightThematicZen:

http://youtu.be/wNl9ksUI-bU

#11 Notta Sheeple on 10.04.13 at 8:51 pm

P.O.W.E.R.

(Pimps Overvalue Waning Economic Recovery)

#12 CP on 10.04.13 at 8:52 pm

Re #7

Think he’s referring to Markham/Unionville

#13 shanks on 10.04.13 at 8:58 pm

#1 Josef on 10.04.13 at 8:08 pm
First!!! Oh YEAH BABY!!! Yeah!!

We are not going to start this again. — Garth

———————————————-

when did we ever stop?

#14 Marginal on 10.04.13 at 9:01 pm

Brad Lamb, bald and soon to be sheared.

#15 2CentsCdn on 10.04.13 at 9:03 pm

Dear Brad Lamb and the mythical condo hard-on. We ARE in a recession for crying out loud … Ask your friends and family about their industries. Look at how many commercial buildings are for sale or lease compared to 2 or 3 years ago. Average incomes are DOWN from 5-10 years ago .. and not “adjusted” dollars … present day dollars!) … and how much more is a house? … car gas? … electricity … chicken? … vegetables from 5- 10 years ago? We ARE getting poorer, plain and simple. Like the RE industry … the powers that be are very good at hiding the bad economic facts. Canada is going now where for quite a while. Until our dollar gets back down to the magic 85 cents … we ain’t making or exporting nothing. Some ego maniac bald guy is the least of our problems …… empty condo’s (and the phone ringing off the hook from his creditor’s) is HIS problem. If you’re up to your neck in dept you can actually still get things tidied up. Unless you bought a condo in the last 2 years … then you’re in for negative equity for 5-10 years … stressing out and working your butt off every day …. and being worth less than that guy on Bay St. sleeping on the sidewalk. Maybe he’s a genius and has this all figured out : )

#16 Marginal on 10.04.13 at 9:06 pm

#1 Josef on 10.04.13 at 8:08 pm

#13 shanks on 10.04.13 at 8:58 pm
———————————————–

It’s a Napoleonic thing guy- thing

Truly heroic, although premature.

#17 2CentsCdn on 10.04.13 at 9:08 pm

Ooops! gotta fix one thing …. a little punctuation malfunction can change a meaning 180 degrees sometimes ….. what I meant was … IF you bought a condo in the last 2 years (or next 2 years for that matter) …. you’re in for negative equity for 5-10 years.
thanks and good night ….. and don’t forget to tip your waiter.

#18 Suede on 10.04.13 at 9:08 pm

@ #9 Turner Nation

hahahahahaha

#19 recharts on 10.04.13 at 9:12 pm

I have seen properties sold with up to 20% discount in C9÷C15. AVG price up for these areas because after 6 months they are now selling. This happens for properties above 2mil.
See this
http://www.greaterfool.ca/2013/09/29/trust-3/#comment-263941

#20 A Bald on 10.04.13 at 9:14 pm

Are the Tea-Baggers going to force a default?

#21 Bobby on 10.04.13 at 9:15 pm

I’ve been out looking at condos here in wet Victoria. To quote one realtor, there is simply too much inventory on the market.
Many units are empty and some new developments are still largely unsold. Many listings have been languishing for months and if you ask the right questions, you find out that this is the last of many successive listings. Oh yes, here is the new price.
To quote another realtor, many sellers will have to accept they will have to sell for much less than they paid a number of years ago.
It’s ugly out there, much of it the fault of the real estate industry itself. No real estate doesn’t always go up and it is only worth what someone is willing to pay.
But I have a question, why is it when you are looking at units, that have been dropping in price and languishing for months, the realtor is always expecting an offer the next day. Go figure and time to lowball.

#22 Marginal on 10.04.13 at 9:16 pm

#10 Nemesis on 10.04.13 at 8:51 pm

Awwww, Pepe le Pew, one of my all time favourites, not based on Maurice Chevalier, but always a sweet reminder.

#23 T.O. Bubble Boy on 10.04.13 at 9:26 pm

Actually there has been a significant softening above $1.5 million since the Spring of 2012. Research. Additionally, I am unaware of substantial Mainland Chinese investment in North Toronto. Source? — Garth

There are no sources for HAM, just anecdotal evidence from realtors talking about offshore buyers “winning” bidding wars with all-cash bids on $1M+ homes in the GTA.

As far as the $1.5M market, most listings near this price point in Lawrence Park have been selling in 1 week this year (For Sale sign becomes Sold within 1 week).

I fully expect to see a softening in this market, as there simply can’t be infinite demand for $1.5M-$2M skinny McMansions, but the market keeps surprising me.

#24 Marginal on 10.04.13 at 9:28 pm

#9 TurnerNation on 10.04.13 at 8:42 pm

Wickedly good comment. Well done.

Some days are like diamonds, some days are stone.

Ah, it’s Friday………

#25 Vangrrl on 10.04.13 at 9:29 pm

What a beautiful puppy!!!!!

#26 Observation Post: GTA on 10.04.13 at 9:31 pm

Houses that don’t need CMHC insurance in the Richmond Hill-east Vaughan area seem to be selling but often after a price drop – final tally can be up to 10% off original asking price. This is a sizzling market?

Also, there seem to be an awful lot of new bloated mega-mini-mansions (5 BR etc.) asking for rent well over $3200. What’s that about? Discuss.

#27 Sotiri on 10.04.13 at 9:32 pm

Garth – “Residential real estate in this nation is overvalued by up to 40%, but the correction will be long and slow.”

So there will be a soft landing after all … I am confused.

It won’t feel soft. Just confusing. — Garth

#28 T.O. Bubble Boy on 10.04.13 at 9:34 pm

Here’s an example of a $3M house that is sitting… but has certainly not fallen to $2M: 443 Oriole Paarkway.

http://www.realtor.ca/PropertyDetails.aspx?PropertyID=13270139&PidKey=1661066519

Currently $2,995,000
June 22, 2013: $3,175,000
June 1, 2013: $3,350,000

Aug 29, 2008: $1,225,000
April 12, 2008: $1,390,000
May 31, 2007: $1,290,000

So, this was bought in 2008 for $1.2M (after failing to sell at $1.4M and $1.3M), then re-listed this year for $3.3M (now $3M).

#29 Marco from Van on 10.04.13 at 9:39 pm

Was trying to convince an employee who got a windfall. He paid off his 2 bed condo and went straight out to buy a house in the main st. area of Van. I said take your profit and spread the risk – sell your condo and diversify so you have a near liquid portfolio. His answer was he so renting the condo out (taxed as income at top clip) and holding on as it always goes up.

Another note is the UK… Funny how they are inflating a RE gasbag there with the government initially lending the deposit to those who don’t have enough, and later to guarantee all loans with the banks clam outing to jump on board. Carney have longer guidance on interest rates, and banks no longer take on the risk, creating the same moral hazard as in the US and now more so in Canada.

The construction industry is overheating and while there is artificial under supply (whole planning permission and land allocation system is so antiquated and out of touch) the answer PM had to help people get on the RE ladder was to help people intoore sent as opposed to help reduce prices so they are more in line with the fundamentals of income to debt ratios.

This is a textbook example of missed opportunity to realign the economy with sensible policy.

It is an interesting exercise to watch RE bubbles move across the planet and see how they behave in exactly the same way and in similar cycles.

What is sad is that human intellect in the age of the internet has shrunk to barely muster opinions about big brother or xFactor contenders – what a shame!

#30 PF4RedFlag on 10.04.13 at 9:42 pm

Plenty of retards here

http://forums.redflagdeals.com/urbantowns-bayview-treasurehill-1390109/
They are buying homes as we speak
And even more retards here
http://forums.redflagdeals.com/canadian-real-estate-boom-defying-naysayers-1351104/106/

They are discussing exactly this issue. The current numbers are signs of a good market. They are going into semantics like it is a crash or it is not. Like you care when you just lost 4% in one month.

#31 Marco from Van on 10.04.13 at 9:43 pm

Man the iSpelling sucks… Almost as if designed by SmokingMan. I apologize for that. Meant to say (in particular) the answer the PM had for people to get on the RE ladder was to get into more debt.

Again, shameful and respectful apologies for the eyesore.

#32 bob on 10.04.13 at 9:46 pm

Please direct me to where $3 million houses are selling for $2 millon in Toronto. 80+ showings in the last month have shown me $2 million houses selling (or I should say listing) for $4 million.

You’ve looked at three $4 million houses a day for a month in Toronto? Good trick. There are only 48 listed. — Garth

#33 2CentsCdn on 10.04.13 at 9:47 pm

#26 Observation Post: GTA
“Also, there seem to be an awful lot of new bloated mega-mini-mansions (5 BR etc.) asking for rent well over $3200. What’s that about?”

This happened back in 1990 to 92 as well …. the market tanked … people couldn’t get “their price” and got caught owning two homes …. they refused to face reality so they decided to rent house number one until “the market came back”. The market didn’t come back for 9-10 years …. many of my neighbors got caught in this situation … tried to keep a brave face …. poured every nickel they could earn into two house mortgages, several blew up marriages (stress and no low gruvy factor) and went bankrupt.
It’s all repeating. This happened before …. here in Canada and in dozens of countries around the world. It IS happening!

#34 Yuus bin Haad on 10.04.13 at 9:54 pm

#23 African despots.

#35 www.totalinvestor.com on 10.04.13 at 10:00 pm

Here is a pic of the Real Estate Board holding a press conference

http://oi40.tinypic.com/2lu3ryq.jpg

#36 Uh Oh Canada on 10.04.13 at 10:13 pm

A very symbolic photo. The skunk represents the average renter who may seem lowly but is liquid. Those mortgaged up to the hill is represented by the big dog. Soon the ‘big dogs’ will witness a shift in wealth, when something as simple as mortgage rates hike (has happened before and will happen again), or a recession, or massive job loss occurs.

#37 devore on 10.04.13 at 10:18 pm

#6 timmy

It has been like this for at least 5 years, yet prices have not declined significantly

Really? Do you know what supply and demand is? Where in Canada has supply been outstripping demand for at least the last 5 years? That almost puts us in the territory when people were lining up around the block overnight to buy a red dot on a whiteboard.

#38 In Van on 10.04.13 at 10:44 pm

Scotiabanks says no interest rate hikes till 2016 in paper today; thoughts? Will the “melt” slow down?

Nobody expects the BoC rate to rise soon. Mortgages already have. — Garth

#39 Cici on 10.04.13 at 10:51 pm

Love the photo

@ #5 Matt “Are you suggesting to go ahead and purchase as long as it fits your rule of 90-age? Or are you suggesting I continue renting but load up on REITS, etc?”
_____________________________________________

Before you jump to too many conclusions and/or jump the housing gun, I would suggest checking in on where you are retirement-wise for your age. According to the guidelines I came across last night (which are quite sobering, even if you’ve just had three lovely glasses of red wine and don’t usually cry easily), by age 35 you should have at least your annual salary socked away, and by 45 you should have three times your annual salary in RETIREMENT savings. And I think Garth implied that if you were hovering in at or around $100,000 at age 45, you were smoked meat.

So, unless you’ve got the year’s worth of annual salary stashed away, IN ADDITION to the 20% or more no CMHC-required downpayment, I’d say: proceed with caution.

#40 45north on 10.04.13 at 10:52 pm

2¢CDN: Some ego maniac bald guy is the least of our problems

good point!

#41 Teacher on 10.04.13 at 10:58 pm

Price gulf?

#42 what bubble? on 10.04.13 at 11:04 pm

#31 2CentsCdn
This happened back in 1990 to 92 as well …. the market tanked …
…It’s all repeating. This happened before ….

The situation is fundamentally different; in 1992 prime was somewhere around 10% now it is 1%, in 1992 net government debt was 300 billions, now it is over 600 billions.
In 1992 there was a room for the prime to go lower, now there is no… no room left… government can’t use such tool as lowering prime to stimulate domestic consumption anymore.. the market will tank, no doubt about it… but the entire situation and cause of it will be different… and the world around will be different… and perception of of the tanked market will be different…

#43 risk rewarded on 10.04.13 at 11:08 pm

why it in the sideline live within your means, save money and invest then the market crashed. the people who took the risk in the real estate get bailed out using the savers dollars
leaving your money in the bank is a major risk

#44 Cici on 10.04.13 at 11:46 pm

Weird, where is Smoking Man tonight?
Rattlilng off more pages in his book? I hope the book will be set to the tones of last night’s blog posts. Here’s hoping his “universal conscious consolidator” hones in on that wish.

#45 Cici on 10.04.13 at 11:46 pm

Weird, where is Smoking Man tonight?

Rattlilng off more pages in his book? I hope the book will be set to the tones of last night’s blog posts. Here’s hoping his “universal conscious consolidator” hones in on that wish.

#46 Julia on 10.05.13 at 12:05 am

#24 Marginal on 10.04.13 at 9:28 pm
#9 TurnerNation on 10.04.13 at 8:42 pm

Wickedly good comment. Well done.

Some days are like diamonds, some days are stone.

Ah, it’s Friday………
———————————————
Agreed!! Good one Mr Nation!

#47 2CentsCdn on 10.05.13 at 12:13 am

#42 what bubble?
#31 2CentsCdn
This happened back in 1990 to 92 as well …. the market tanked …
…It’s all repeating. This happened before ….

“The situation is fundamentally different”

I agree …… everything you say is true ….. but all the factors you mention add up to it being WORSE this time. And it was bad back then.

#48 HAWK on 10.05.13 at 12:27 am

At this point most Real Estate is over valued but I believe that a semi-detached house in Mt. Pleasant area for about 775K will hold its ground better than a 4 BR 4WR McMansion in Britannia and Creditview area for $785K.

Because the hot shots will want to live close to downtown and even in a bad economy they still have the heavy cheese flowing in, the guys far out in Peel, Surbubia not so much.

Those two are actual examples of people I know that bought recently. I believe location will trump size when the downturn hits.

#49 CrowdedElevatorfartz on 10.05.13 at 12:30 am

DELETED

#50 Freedom First on 10.05.13 at 1:29 am

Once again I am reminded of a quote from a huge Oscar winning movie: “stupid is as stupid does”. If anyone is so inclined, just check out Brads P.O.W.E.R. investing workshop Garth mentioned. I know one thing is true for sure: “Run Forrest Run”.

Translation: stupid is as stupid does=buy high sell low=the majority=all of the time=no exception.

I agree with Garth, not Brad. Be smart, go with Garth. Over time, you will do far better listening to Garth than listening to Brad. No exception.

#51 catalyst on 10.05.13 at 2:35 am

So if there is a soft landing what will the catalyst be for it to begin. Prime at 3% is here to stay. Demand is still there.

#52 TheRealTruth on 10.05.13 at 2:37 am

The price gulf between SFD and Condos will continue to widen. Here is the explanation that is post here every year so. Even after this, some people remain bewildered and confused.

SFD in Vancouver and Toronto are a limited supply commodity. As the population grows, they become less and less percent of the total housing stock. Eventually, a day will come when they compose 25% of the total housing stock with the rest 75% (condos/townhomes/apartments).

When this happens, as is already, then SFD homes are not meant pricewise for the average earner.

#53 Buy? Curious? on 10.05.13 at 3:39 am

Gawdamn Boomers! Is there nothing they won’t hoard?

Check this movie out it combines everything I hate, old people and Vegas.

http://trailers.apple.com/trailers/independent/lastvegas/#videos-large

#54 Ralph Cramdown on 10.05.13 at 4:06 am

#39 Cici — “According to the guidelines I came across last night (which are quite sobering, even if you’ve just had three lovely glasses of red wine and don’t usually cry easily), by age 35 you should have at least your annual salary socked away, and by 45 you should have three times your annual salary in RETIREMENT savings.”

To be fair, those are Millionaire Next Door guidelines for supersavers (or whatever their term is), right? Not having saved that much doesn’t mean you’re doomed to a life of poverty in retirement, just that you won’t be in the top tier.

#55 Future Expatriate on 10.05.13 at 5:02 am

Now THAT’S a dog with some experience under its belt.

#56 Billy Jim Bob on 10.05.13 at 6:12 am

First time poster; been reading for 6 months with amusement/interest.
Lots of chatter about vncr,Vic & TO but what about RE values in subs of those areas?
I just moved into a 3500 ‘ 4acre semi rural 1hour north of Vic for 567,500; a fixer upper (wet crawl; baseboard heat & original everything from 1983). For about 75k market value will be 725k.
Is tying up 75 percent of my net worth (275k mortgage & 175 RRSP ) at this level so bad?
Yes, I could rent but at 47 with a big dog & lots of toys why would I? My monthly net cash flow is 6k with 15 percent going to savings .
It would cost me 3k to rent & my area (southern Van Isl) will be up 20 percent in 20 years when I want to downsize?
I have never seen the kind of investment returns you quote Garth – my 14 year net avg is 5.4 percent.
If I could get your 7 net then investing my 300k in equity and renting would make much more sense.

#57 PokerCat on 10.05.13 at 7:59 am

#20 A Bald on 10.04.13 at 9:14 pm

“Are the Tea-Baggers going to force a default?”

Unlikely. Thirty or forty inbred hicks in the House cannot trump the will of the people, or the Office of the President.

@ #9 Turner Nation

Thanks for my morning laugh. Gold!

#58 bigrider on 10.05.13 at 8:13 am

69 townhomes at Bayview and Briggs sold out within two hours with a crush of disappointed would be buyers outside arguing. Price range $620 -$750. Treasure Hill the builder (yes Italian). Know them well. Buyers all of Asian descent.

Some RE slow down Garth…LOL. The mania continues unabated.

Housing prices to the MOON !!!!

#59 John on 10.05.13 at 8:46 am

High home prices are a function of monthly payment and low interest rates. Rates are about to jump IMO. USA is bankrupt and Treasuries are worthless. Uncle Sam cannot pay what they already owe. The government shutdown and looming debt ceiling will provide the impetus for further USA credit review and reduction.

America’s lenders want their money back, and will demand higher interest rates to hold their junk bonds. Germany wants to repatriate their gold holdings, China is accumulating gold and selling USD as fast as they can.

The USD is being displaced as THE single reserve currency and being replaced by a basket of other currencies.

Bottom line….Fed cannot control other countries assessment and perception of American economic weakness. Interest costs for America are about to commence a steady climb because buyers of their debt are faced with holding paper that will default or devalue.

America is a heroin addict in denial….there is no recovery without acceptance. Time to taper QE, slash government spending, and end entitlements. Austerity that America imposed on other nations will now be forced on America.

America is not in recovery, not even close. As interest costs rise in America, Canada will follow suit. House prices will not soften, they will plummet.

We are witness to unprecedented levels of government manipulation and intervention in a feeble attempt to inflate structural problems away. Experiment failed.

Minister “No housing bubble” Flaherty would disagree of course. He refuses to acknowledge inflation and takes credit for single handedly steering Canada through the ’07/’08 crisis. Maybe, but that was just the opening act. Now that Bernanke is out of bullets and US national debt has doubled in 5 short years, America is in the toilet and Canada will be flushed right along side.

#60 T.O.RENTER on 10.05.13 at 8:52 am

When it all turns ugly they’ll shrug and say, “You gotta live somewhere anyways.” Like they did in the 90s.
Good luck to the chasers!

#61 dave b on 10.05.13 at 9:18 am

It’s CMHC not CHMC.

#62 jerry on 10.05.13 at 9:22 am

US 10 year treasury yield briefly touched 3% and mortgages stopped dead in the USA. No housing growth , No Taper.

Canadian mortgage rates jumped But house sales increased.

Seems like USA rates will have to stay boringly low (Policy rate) for a long time (forward guidance) in order to successfully deliverage from QE.

But what about Canada? How closely entwined are we to US policy rate “forward guidance” decisions?

#63 T.O. Bubble Boy on 10.05.13 at 9:32 am

Ahhhhhh… weekend means time for the Globe&Mail’s Financial Facelift. This week, a single-income family with 4 kids and zero net worth:
http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/pedalling-as-fast-as-they-can/article14707872/

I wonder if this guy teaches Math? Sex Ed? (clearly neither)

This is where your tax dollars are going — paying for pensions/benefits for poor planners like this.

Gotta love that the “expert” says: Francesca and Terry’s situation is typical for young families”

#64 T.O. Bubble Boy on 10.05.13 at 9:41 am

OF COURSE this 1086 sqft Leslieville rowhouse that was $345k in 2010 should go for $602,000 in a bidding war:
http://www.theglobeandmail.com/life/home-and-garden/real-estate/rival-bids-drive-price-of-leslieville-home-113000-over-asking/article14656966/

(what bubble?)

#65 Smoking Man on 10.05.13 at 9:46 am

#44 Cici on 10.04.13 at 11:46 pm

Weird, where is Smoking Man tonight?

*****

Smoking Man is on the road. What’s a Bentley? Sound like a sex toy. Did Brad do any adult films?

#66 Smoking Man on 10.05.13 at 9:55 am

@ bigrider

Canadians of Asian decent are buying in Markham?
Canadians of Italian decent are building in Markham?

When did this start?

#67 Smoking Man on 10.05.13 at 9:59 am

#179 Marginal on 10.04.13 at 7:19 pm
#172 Smoking Man on 10.04.13 at 6:00 pm

“I can’t stand stupid people and hero worshipping.

My dna is screwed..”
————————————————————–
Don’t worry be happy, the Dunning-Kruger effect has you covered.
……………………………………………….

The Fact that I always call myself insane, crazy, a goof shoots holes threw, your analysis.

But while we are on the topic, lets go.

Shrinkology,psychology are all BS.

This is what they do, a bunch of people who suffer greatly from Dunning-Kruger effect evaluate behavior in an individual. No lab tests, no science, just opinion.

The give it a behavior a Name, a Brand and put it in the DSM. then big pharma makes a very dangerous drug to alter the behavior.

A witch Dr is probably a better person to see if you get the blues.

#68 TurnerNation on 10.05.13 at 10:04 am

So why wasn’t TD offering their market linked GIC, four years ago, when equity markets bottomed…

……..

#66 Sask Girl on 10.03.13 at 12:20 am Hi Garth,

I know you’re not a fan of GIC’s, but I’m wondering what you think of the market growth GIC’s TD offers.

https://www.tdcanadatrust.com/GICs/GICTable.jsp

#69 TurnerNation on 10.05.13 at 10:06 am

Attn. new blog dogs. The following usernames are still available; reserve yours today.

Sun-dried blogster

Stop Scion

Flourides of March

Snivility in Motion

Mullettude

REITa MacNeil

Gee I See ‘er

Economic Intercourse

Sticky Figures

Chancellor Rebalancer

Otto B. VanDelusional

Dip the Drain Operator

Reserved:
Blog Dog Poloz

#70 realestateisascam on 10.05.13 at 11:00 am

There is a lot of dirty and sneaky $%#@ going on in the real estate market. My parents neighbours were not able to sell their modest home in toronto. It sat in the market for 2 months…nothing…so they’ve decided to remove their home from the market so that they can renovate the home and sell it later. Re- list it in the Spring.

So guess what the real estate agent did? She put a SOLD sign! WTF! 3 days later she took the sign out…but the house wasn’t SOLD… disgusting… lies and more lies… makes you wonder about these numbers that the real estate community puts out!

All of the neighbours were spreading the news “Another house sold…gee the market is doing well” WTF!

#71 Shea on 10.05.13 at 11:00 am

Wife told me first assessment came in mail for new home purchased last year. 35K lower than sale price or about 10%. Bubbly rural manitoba?

#72 The Man From Nantucket on 10.05.13 at 11:17 am

#62 T.O. Bubble Boy on 10.05.13 at 9:32 am
……….I wonder if this guy teaches Math? Sex Ed? (clearly neither)

Thanks for this chuckle!

#73 J. Girn on 10.05.13 at 11:23 am

I am never buying real estate unless there is a 40% correction in the GTA. Might not happen, but I do not care. Renting is more cost-effective, as long as you are not too picky where you live and the type of dwelling you have. It is better to be mobile and breaking-even than being in a nice place, but drowning in debt and being a slave to your residence. Not for me.

#74 jess on 10.05.13 at 11:33 am

The Seanad Abolition Referendum has been defeated

http://www.rte.ie/

#75 Alex n Calgary on 10.05.13 at 11:46 am

Hmmm, if you need CMHC you shouldn’t be buying. So in order to save up the measly (to you) 70,000$+ in cash for 20% down on a basic SFH in Calgary, I’ll have to resort too, what, living in a mouldy basement that you always make fun of? I guess rent forever being kicked from rental to rental ever year or Less by greed filled amatuer calgary landlords? Thats the other side of not buying, being gouged and continually being displaced in a difficult rental market, sigh. Keep up the good work as always.

#76 unsold house with sold signs on 10.05.13 at 12:00 pm

RE#69 unsold houses with sold signs?

Yes I’ve seen this countless times where houses had sold signs then removed and a few weeks later the for sale sign is back up. The CONSERVATIVES seem to be allowing the RE industry to CON the public without any over sight. NO other country would allow such criminal behavior.

#77 Bigrider on 10.05.13 at 12:05 pm

DELETED

#78 Raven on 10.05.13 at 12:07 pm

Expansion of Credit

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The only alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion OR a final and total catastrophe of the currency system.

Greed in our system is not being balanced by fear to allow fundamentals to counterbalance. Banks are insured for their lending, purchasers have little or no skin in the game. Seems pretty safe to everyone involved! Although universally agreed that fear is a stronger motivator than greed, when things start to turn they pick up “fear speed”.

The great “Global Experiment” started in 2007 to reduce interest rates in order to stimulate our “free markets” was not required by Canada. We went along with the threatened economies and juiced the machine. Even Keynes “as we are all Keynesians now” stated that temporary stimulus taken from surpluses of previous years to stimulate the bad years was the path to smoothing volatility. Not exactly using surpluses are we?
We always have recessions approximately every six years. Where will our stimulus come from when we are at the lowest rates and easiest credit?

Von Mises, Friedman, Hayak must be turning in their graves! The bail out bubble will be next but only this time it will be on a global basis enacted through non inflationary expansion but global deflationary forces!
Monetization of debt from private books to public will bankrupt future governments, rendering them without the means to intervene. The school of creative destruction or Austrian school of thought will then be the final and definitive test as to how global economies are to rise from their destructive cycles and reemerge stronger and continue to grow…..

#79 Infused with Opiates on 10.05.13 at 12:08 pm

55 BJB – congrats on moving to upper VI – in your case the Cowichan Valley (nice spot). Prices there havent
increased (actually gone done a little) since 2008.

Personally, I wouldnt want that mortage at your age, unless the property was generating revenue. It’s still costing you $2K/mo over a 15 yr amort (finishing at age 62). Throw in the taxes, upkeep on 4 ac and what I feel is an overly optomistic cost and projected return on your
renos. And dont forget the cost of the “toys”.

I also note the 20% projected appreciation over 20
years. Now if you’ve ave’d 5% on your investments, isnt that the better deal? Regardless, with your 15% saving
rate, you wont starve, it’s just a question of preferences
and priorities.

#80 Bigrider on 10.05.13 at 12:13 pm

Too many brick banging, roof rumping, window whacking,kitchen kinky, garage door gang banging, interlock driveway inserting,lawn and landscape laying, house horny freaks in the GTA to ever cause this RE mania to end.

It is different in the GTA ! Factor that into your erroneous forcasts Garth

Come back when you have something of value to add. — Garth

#81 Canuck on 10.05.13 at 12:22 pm

Actually there has been a significant softening above $1.5 million since the Spring of 2012. Research. Additionally, I am unaware of substantial Mainland Chinese investment in North Toronto. Source? — Garth
———————————————————-
With the chaos in Europe money is flowing into the Canadian and Australian dollar, and maybe real estate is being purchased with it.

http://armstrongeconomics.com/2013/10/04/death-of-the-euro/

Further, from these capital flows Switzerland and other parts of the globe are experiencing a housing boom, this may include Canada:

http://armstrongeconomics.com/2013/10/04/real-estate-boom-in-switzerland-singapore-elsewhere/

Anyone have thoughts on this?

#82 young & foolish on 10.05.13 at 12:32 pm

My observation is that many people are listing their places at inflated prices. RE has been in a long upward trend, and most people have come to believe their place is worth a King’s ransom. Failing to sell, the realtors finally convince them to lower their price to realistic current market expectations. Result … noted price drop.

#83 Tony on 10.05.13 at 12:32 pm

Re: #74 Alex n Calgary on 10.05.13 at 11:46 am

The whole idea is to lose as little as possible when buying a house. Albertans can and will walk away from a mortgage and lose “their” house. The rest of the country doesn’t have that privilege except i think Montreal. Number one if you don’t need a mortgage pay all cash for the house and if you need a mortgage make sure you put down at least 20 percent is the rule (25 percent in the past). Of course only a total fool would be buying a house today in Canada and by paying less than 20 percent down the odds are very high in the future anyone buying a house now will lose it for that twofold reason. Wrong time to buy a house and paying an obscene amount for CMHC insurance.

#84 Bigrider on 10.05.13 at 12:35 pm

#79 Garth to Bigrider- “come back when you have something of value to add”

Very well , in the face of what is and what has continued to be , an overwhelming amount of evidence to suggest that the SFH market in the GTA is as strong as ever, with prices continuing to rise, you should re evaluate your ” slow melt” thesis as it threatens to leave potential buyers ,who are in the position to buy ,affordably, in the dust.

How’s that?

Weak as usual. — Garth

#85 detalumis on 10.05.13 at 12:36 pm

#52, only 1 of the 4 actors in this movie you hate without having seen it yet, is a boomer, the bulk of them are not yet 55 but in this country we are old and despised at 50 for men, 40 for women so we get to be that way for more than half of our lives. I hope for your sake that you die-young and stay-pretty.

#86 Fed-up on 10.05.13 at 12:38 pm

Well fellow posters/bloggers, I’m out. I sold my 416 home and moving into a vacant condo that I have downtown. Just couldn’t justify turning down the “stupid money” that my neck of the woods was fetching any longer. Heck I even threw in a ton of my appliances and some furniture. My conscience was even tempted to throw in an Italian motorcycle with a full tank of gas, but I refrained.

I actually feel sorry for these poor (now even more destitute) souls who bought in at the top of this lunacy. They paid at least double what my house worth on a good day, I feel conflicted, I swear. These same people will shop at Walmart, Price Chopper and the Dollar Store to make ends meet, but at the same time committed to 7 figures to put 37 year old bricks and shingles over their head, baffling to say the very least.

This market will correct sharply and it will be a tough one. There is just farrrrrr too much downside in Canada, and that’s an understatement.

Time to invest and rest for a while.

#87 Mike T on 10.05.13 at 1:00 pm

#83 Bigrider on 10.05.13 at 12:35 pm
—-
dude

we have 7500 years of boom bust cycles to reference

NOTHING is different

here is what you should do – go buy as much real estate as you can TODAY (obviously you are going to me insanely rich) then start you own blog telling people how well you are doing

provide numbers, facts, and other hard pieces of evidence to support your claim (like Mr Turner does).

simple eh?

or just continue to provide comedic relief here for the rest of us.

Cheers

#88 Bigrider on 10.05.13 at 1:05 pm

No way you are going to get the lineup for financial planning services that house and condo floggers get for bricks and mortar. Not in this city, no matter how many times you delete my posts

Ever wonder why 70% of people own houses and 1% are wealthy? — Garth

#89 Victoria - the Original on 10.05.13 at 1:16 pm

A friend who works at a food bank in Vancouver said he was amazed as many of the people coming in the last two years are clearly middle class.

Probably have million plus homes but can’t feed their families.

#90 Keith in Calgary on 10.05.13 at 1:18 pm

Well, tomorrow I am off to London, Ontario for a 2 week business trip. It’s been an interesting 3 weeks as I’ve gone to Vancouver, then Kelowna, and now western Ontario……..

I wonder if my perceptions of BC real estate market and the economy (or dare I say lack of one) will replay themselves in Ontariariareeeoooo.

#91 father on 10.05.13 at 1:43 pm

good for you fed-up, is that vacant condo a rental

#92 Old Man on 10.05.13 at 1:44 pm

#85 Fed-up: Good for you as never ever throw in the bike, as miss my old Yamaha, as raced both the Honda and Harley off the lights; left them all in the dust to give them the finger so many years ago. Now talk about inflation, as it only cost me $900 to rule the roads with speed.

#93 Ralph Cramdown on 10.05.13 at 1:52 pm

#77 Raven — “There is no means of avoiding the final collapse of a boom brought about by credit expansion.”

Did you sleep through it? It was pretty obvious to the rest of us.

#94 Canadian Watchdog on 10.05.13 at 1:58 pm

#83 Bigrider

I only have one question for you. How much more money (actual dollar volume transactions) is coming to the market for detached homes compared to last year? Have any idea?

BTW, Treasure Hill started selling that site you mentioned back in April. Not sold in 2 hours.

#95 Sharp RE correction excluded! on 10.05.13 at 1:59 pm

In the above comments at least two opinions indicate that there is a sharp correction (crash) coming.
That is not going to happen for the simple reason that US and all the other countries experiencing asset bubbles will rather face inflation (money printing) than a sharp correction which can not be controlled.
Unfortunately the interest rates will stay low and only some major event that would impact the USD will be able to break the fragile but controlled balance of the global economy.
Since there is no organized and official alternative to USD we will have to leave with this for a long time

In particular for the Canadian RE market the government will not have to intervene just because it will continue to climb. The decline in the condo market that just started (TO, Van,MTL and Ottawa) will continue and the investors and the regular buyers will continue to compete for SFH which are a safer investment.

I wish that the decline of the condo market would put a downward pressure on the SFH market but I don’t think that that is going to happen. The low supply of SFH will continue to feed the insanity.
In the end, considering the high supply of condos and considering that the government will want to detour the buyers toward condos to avoid an epic crash they will make everything in their power to make the SFH unaffordable and force the most of the buyers into buying condos.

#96 Fed-up on 10.05.13 at 2:07 pm

@#90 father on 10.05.13 at 1:43 pm
————————————————————————————————————————
I had it rented out for years but it was vacated in late August. Almost paid off with a small mortgage left to pay off. Will make a cozy home for me and the cockapoo for now.

@#91 Old Man on 10.05.13 at 1:44 pm
——————————————————————————————————————————-

Agreed sir :) So hard to give up super models that don’t talk back ;)

#97 Bigrider on 10.05.13 at 2:07 pm

Mike T at # 83 to Bigrider.

Mike you are really new here so won’t cut into you but I have been posting since this blog started. In any event , you may want to learn a little about sarcasm.

Garth, I do not doubt the response in #87 you give however , in the GTA , the amount of wealth that has been generated among the 1% has been generated predominantly in RE and through ownership of businesses( most usually related to housing)

Now, you will ask for stats and sources etc I’m sure but ask the average Torontonion who has wealth how he got it. You will invariably hear through RE holdings and inheritance of RE holdings within the family . One thing you will never hear is that they did it in the financial markets.

This may of course change moving forward( I’m counting on it) but recency bias the way it is, you can count on more house humping lineups and crickets at the purveyors of financial products , in any form.

#98 Bigrider on 10.05.13 at 2:13 pm

# 93 Canadian watchdog.

No, but I am assuming you do , please enlighten us and then let us know why that matters in the face of what is still a SFH market on fire.

As for the TH hill site , except for a few units put on hold for insiders, the crush of people at theatre on opening day sold them out in a few hours.they have not been for sale since April

#99 Fed-up on 10.05.13 at 2:15 pm

@#94 Sharp RE correction excluded! on 10.05.13 at 1:59 pm
—————————————————————————————————-

As confusing as your post is, you have no mathematical nor historical foundation to support your claims. Now one of the world’s most sparely populated land masses will force its people to move into shoe box sized condos???

I have heard it all.

#100 Old Man on 10.05.13 at 2:27 pm

#91 Old Man – I just worked out the inflation cost for $900.00 in those days oh so long ago, and it comes out to 4.9 months salary for 2013, so if you are making $100K that bike would cost you about $40,833.00 in todays dollars, see what Mr. Turner is telling you all about pension money moving forward in life, as it might never be enough. Think about it all, and get a good investment advisor as a consultant.

#101 R on 10.05.13 at 3:13 pm

http://ericmargolis.com/2013/10/u-s-faces-debt-default/

#102 Babblemaster on 10.05.13 at 3:19 pm

“Fifth, really smart people won’t buy anything for three more years. A slow, grinding economy will relentlessly create more real estate value, at the same time interest rates normalize and liquid portfolios continue to outperform.” – Garth

————————————————————-

Garth, that statement seems to make sense. However, two years ago you were telling people to wait a year. It made sense then as well, but this market isn’t paying attention to what makes sense. Predicting a RE correction has proven to be a fools game. Calling for higher interest rates (normalization) in a few years also doesn’t make sense for the simple reason that people are so financially strapped that they couldn’t handle it. You were the Minister of Finance and understand finances better than most, but admit it, this RE market has confounded even you.

There is no one ‘market’ for real estate. Some are behaving as I expected, others just grow more dangerous. My view of the outcome remains unchanged. — Garth

#103 Waterloo Resident on 10.05.13 at 3:35 pm

Here is how we can have the average house price up to $10 MILLION in 2 years !

Quote: “An economy based on construction is a ponzi scheme.”

Reply Quote: “An economy based on mass immigration which drives said construction is a ponzi scheme.”

My thoughts exactly.
See, we don’t really have an economy, we simply have immigration. It is these immigrants who need places to live, and that is what is creating our job growth here in Canada. Now just imagine if we allow 50 MILLION IMMIGRANTS TO IMMIGRATE ANNUALLY? WOW, just imagine how big our housing and job market will BOOM if that were to happen?

The demand for houses would be so strong that it would be easy to see the average price of a house hit $10 MILLION in just 2 years’ time.

#104 Poorgeoisie on 10.05.13 at 3:36 pm

Can one of the smart people explain why CMHC’s total insurance in force is declining while sales continue. I can see many puny mortgages from years ago being paid off but everything coming on the books recently would probably be the same value as 2 or 3 being paid off. Obviously Genworth and others are getting a bigger share than in years past but last year it looked like the house of cards would collapse if the limit was not raised.
Additionally, last year it looked like the demand for insurance would have to sharply decline in order to stay within the limit. But our good an honest real estate boards are suggesting there has been no sharp decline in demand for housing so I guess all first time buyers are putting down 20%!?
Help me watchdog

#105 Bill Gable on 10.05.13 at 3:41 pm

Well – the Kool-aid vendors in the Vancouver Sun and humping like crazy:

“Days on market: 2 Listing agent: Jonathan Goodwill at Dexter Associates Realty Buyers’ agent: Shawn Anderson and Mike Rampf at RE/MAX Crest Realty Westside The big sell: No sooner had this newly built, contemporary home hit the market when the buyers snapped it up – in just two days. No doubt a location in Vancouver’s exclusive Point Grey neighbourhood was a factor, but so was the high standard of interior finishing”. Only $5.4 million! What a deal!

Point Grey is in the western part of Vancouver and a traffic nightmare. Oh, what’s the use, these people are clueless.

>> Mr. Turner, there seems to be a lot of people that are either too stupid, or too high on the local speciality, to realize they are committing the equivalent of ‘Financial Hari-Kari’.

[email protected] thinks it’s just swell.

The financial illiteracy of the average Canadian is stunning.

You still have to keep hammering, Mr. Turner. People STILL don’t get it, I guess.

#106 Smoking Man on 10.05.13 at 3:53 pm

#85 Fed-up on 10.05.13 at 12:38 pm

Well fellow posters/bloggers, I’m out. I sold my 416 home and moving into a vacant condo that I have downtown. Just couldn’t justify turning down the “stupid money” that my neck of the woods was fetching any longer.
……….

You made a big mistake, rates never going higher, tapper not going to happen. 416 sfh like owning a good mine.

#107 Old Man on 10.05.13 at 3:59 pm

#89 Keith in Calgary – I just hope you were smart enough to book two weeks at the Station Park, as that alone is where all the business action takes place with the city elite – nowhere else!!! Made all my deals there with them all including government cabinet ministers, and the money crowd. It is a cool place with location, and all goes there; need I say more.

#108 Canadian Watchdog on 10.05.13 at 4:02 pm

#97 Bigrider

What your talking about is the public viewing. Most units have already been sold to speculators before it even goes on sale to the public. Here's one example of a speculator trying to unload his unit.

NEW 4BR DETACH HSE – STEELE/MACOWAN OCCUPANCY 2013 金牌VIP

I have this  new house (Treasure Hill home/Glodhawk Garden, Steeles/Macowan) for assignment. The house has four bedrooms with three ensuites and  a two car garage, back onto park, stone on front wall.
asking price: $798,000
closing date: Nov 14, 2013

The reason you don't see a lot of these listings is because builders usually have someone frequently checking MLS, craigslist and Kijiji for sellers promoting their units before occupancy. When they find one of their units online, they usually track the seller and ask them to remove the listing.

This is the shadow market that nobody sees and where the market is going to collapse first. If people expected higher home prices in York Region, then the line in this chart would be moving up, not down.

#109 Casual Observer on 10.05.13 at 4:09 pm

#53 “To be fair, those are Millionaire Next Door guidelines for supersavers (or whatever their term is), right?”

The thing about the Millionaire Next Door net worth guidelines that bothers me, is that they don’t take into account the years where the saver didn’t make an annual income (while attending school or university, or while being a child).

If you use the calculation on say a 28 year old, who only finished their schooling at age 23, the target net worth calculated (10% x AGE x INCOME) is ridiculous.

The saver has only been earning an income for five years and is expected to have 2.8 times their annual income saved already??? I guess it’s possible, but not at all reasonable.

I think that the age figure in the calculation should be modified to “number of years with an annual income”. That would make more sense, since it’s hard to save if you’re not earning an income.

#110 father on 10.05.13 at 4:32 pm

mikey the realturd is calling us garth’s boot lickers and that we please garth by say’n how good he looks on his harley, what a clown, must be a low life realturd but he is correct about how good garth looks on that harley

#111 Victoria Real Estate Update on 10.05.13 at 4:45 pm

@ Canadian Watchdog

I could use your assistance (similar to #103).

I’m trying to find the total amount of taxpayer backed mortgage insurance added each year (or at least in force) from CMHC, Genworth and each of the other private insurers since 2000 (yearly or quarterly).

I’d also like to find the same information for the US since 2000 (total taxpayer backed mortgage insurance added each year) . Fannie Mae and Freddie Mac cover the vast majority of it in the US.

I plan to chart this information. It will show that the total amount of taxpayer backed mortgage insurance (housing market stimulus) that has been added in Canada since 2000 is much more than the total for the US (population adjusted).

This would explain why house prices in the US crashed while house prices in Canada have not, so far.

Did Fannie Mae and Freddie Mac only insure up to a maximum of $429 K?

I’d really appreciate it if you could find this information.

#112 Old Man on 10.05.13 at 5:34 pm

#105 Smoking Man – am worried about you for the big show at Seneca on October 26th, as will be there with Miss Hong Kong on my arm, and surprise as she lives in Canada, and she asked me if you need a date, as has a girlfriend in Toronto, and said no as he is a married man, and that is not in the cards. Well what can I say Daisy Mae, as do have a sense of moral integrity, and had no idea that G.C. won the crown, as her music group of choice was the Grass Roots, and she said make it happen for me, and pulled a few strings, so all is well.

#113 TurnerNation on 10.05.13 at 5:54 pm

Idea for Lamb: Latest Toronto Kando development.

Featuring charming bachelors and doubles; with polished concrete floors. Shared amenity space. Modern glass design.

Stainless steel fixtures! Check out its pics:

http://tinyurl.com/pzt6zea

#114 Victor V on 10.05.13 at 5:57 pm

http://themashcanada.blogspot.ca/2013/10/price-drop-45-prue-avenue-englemount.html

I first posted this 4+1 bedroom, 5 bathroom house on a 50 x 125 foot lot at the beginning of August.

It’s a move right in house with a really happy feel about it.

There a things about it like the floors and the size of the back yard that I don’t love. But I do think this is a good house.

I just thought the price was a little high.

It was listed at $1,850,000.

It never sold and the price has no been dropped…

To $1,779,000.

#115 jess on 10.05.13 at 6:03 pm

IBGYBG

brad lamb or how about the american corporate educator christopher cruise

http://weblogs.baltimoresun.com/business/realestate/blog/2011/02/notable_quotable_on_the_mortgage_mess.html

#116 Toronto_CA on 10.05.13 at 6:06 pm

#108 Casual Observer on 10.05.13 at 4:09 pm

The MND formula also tends to understate what an older person should have at retirement to be considered a super saver. The formula works okay-ish for 40 and 50 year olds who have steady income there whole career and who benefit from rising house price bubbles like we have had here for the last 10 years.

It fails horrendously for 20s and early 30s (overstates what they should have) and then again 60+ year olds (understates a good net worth).

eg, 65 year old man, earning 75k, only should have a net worth of 487,500 to be a super saver?

versus a 25 year old earning 50k first year out of school, who needs a net worth of 125,000…um….yeah no, unless they skipped university. A 25 year old with a $125k+ net worth is a MUCH rarer individual than a 65 year old with $475k (including home equity) but the formula says they are the same type of saver.

I don’t know why anyone references that formula since it so flawed. Rather than looking at net worth, people should look at being diversified, rebalancing, and making sure they spend less than they earn and invest the difference for their entire working career; while minimizing debt for school and home purchases.

#117 Toronto_CA on 10.05.13 at 6:12 pm

Also to add to the above, using current income in the formula rather than an average income over your working career causes problems. If someone is laid off and gets a new job working for minimum wage they are suddenly the prodigal saver.

Trent Hamm at the Simple Dollar (a terrible blog btw) had a modified version of
Target Net Worth = Age-27*Gross Earnings/5
Not perfect, but much better than the original formula.

#118 father on 10.05.13 at 6:40 pm

victor v 1.7 mill not worth it, be smart wait 3 years

#119 bigtown on 10.05.13 at 6:42 pm

Is anyone out there tired and anxious at those credit card bills that show up always month after month and how the interest and debt climbs so fast? Then you are ready for the program…cut up the cards and stop shopping and know you too will feel the PROMISED LAND that the good LORD put in the good book available to whosoever (that’s you) Embrace your FREE SPIRIT and don’t go in debt.

#120 Bottoms_Up on 10.05.13 at 7:01 pm

#18 Ottawa Mike,

No worries my friend, Ottawa Region will take a 15% haircut down the road estimated by 2012. Stay tuned.

I was tracking some 3500sqft 5yr built homes in Stittsville for about the past year. Most homes listed at $500K were down to $450K so that’s about 10% right there minus negotiations. These are the homes taken on by buyers 5-25 format and will likely be had for $400 or less when done.

Patience is all that is needed. You NEED TO pick up your next purchase at the bottom as RE will be at a snails pace for years to come. 2012 will be here before you know it!
++++++++++++++++++++++++++++++++++++
Ottawa Mike, I did mark your post from 4+ years ago and you couldn’t have been more wrong.

#121 MiniMe on 10.05.13 at 7:09 pm

As confusing as your post is, you have no mathematical nor historical foundation to support your claims. Now one of the world’s most sparely populated land masses will force its people to move into shoe box sized condos???

I have heard it all.
go ahead tell us what mathematical and historical foundations tell you about the market

If the market would be so kind to follow the rules it would be impossible to speculate and everything would be so predictable.
Too often common sense opinions tend to be ignored and they sound so crazy to the educated economists that they will simply dismiss them as impossible since they know the rules, rules that have been invalidated so many times by politics, fixing and manipulations.

So yeah..you have history and mathematics, what did they tell you about the so much waited taper ?
What do they tell you about the government shut down? Try your luck and tell us what is going to happen :D

Sure. The shutdown will end this week. And tapering is coming. — Garth

#122 Charles Ponzi on 10.05.13 at 7:11 pm

“Residential real estate in this nation is overvalued by up to 40%, but the correction will be long and slow.”

Long and quick correction may yet happen once this snowball starts rolling. Slow at first…

#123 Chris L. on 10.05.13 at 7:16 pm

3 YEARS! Holy crap.

#124 Infused with Opiates on 10.05.13 at 7:17 pm

108 Casual O/115 Toronto CA – IIRC the term is “prodigous accumulator of wealth” or PAW. I believe the forumla that has been referred to is only the point of inflection, not the definition of a super-saver. Though my own income has increased greatly in the last 20 years, it still varies so much that I just use an average to make sense of it.

The MND, while not an investment advice book, does highlight many traits of millionaires. Many are “dull
normal” business owners who are not required to maintain an image. They have bachelor degrees from public universities, not Ivy league. At the time the book was written, their houses averaged about $300k. They remain married to one spouse. And they minimize realized incomes (nod to Toronto CA).

For me, it remains a great read, and it serves as a pep talk at those times when I question my own circumstances and decisions.

#125 Vancrappy on 10.05.13 at 7:19 pm

How to be a landlord in Metro Vancouver

With so many homeowners relying on income from basement suites as mortgage helpers, we offer some practical advice on how to do it right

Read more: http://www.vancouversun.com/business/landlord+Metro+Vancouver/8998914/story.html#ixzz2gtP7sPWF

http://www.vancouversun.com/business/landlord+Metro+Vancouver/8998914/story.html

#126 Canadian Watchdog on 10.05.13 at 7:34 pm

#110 #103

Gross taxpayer exposure when including securitized consumer credit is still growing on annual basis. The notion that the government is reducing its exposure is a complete lie. All they're doing is shuffling debt around and segregating liabilities off-balance sheets. Taxpayer exposure is as follows:

CMHC Insurance-In-Force

2010__$519,000,000,000
2011__$567,000,000,000
2012__$566,000,000,000
2013__$562,100,000,000 (Q2)

CMHC Guarantees-In-Force (credit cards, auto loans, LOCs, HELOCs, etc.)

2010__$325,802,000,000
2011__$362,308,000,000
2012__$381,557,000,000
2013__$400,000,000,000 (Q2)

Genworth Insurance-In-Force

2010__$248,811,000,000
2011__$265,776,000,000
2012__$301,456,000,000
2013__$299,953,000,000 (Q2)

Total Taxpayer Exposure

2010__$1,093,613,000,000
2011__$1,195,084,000,000
2012__$1,249,013,000,000
2013__$1,262,053,000,000 (Q2)

All I know is that when taxpayer liabilities are 69% of GDP, it only takes one missing A in Canada's AAA credit rating to make insurers scramble for eligible collateral in order to meet their margin requirement. This is why CMHC sent this letter to the Bank of International Settlements, literally begging them to accept sovereign-backed subprime consumer credit as eligible collateral as if it were good as gold.

Sorry Canada, your credit worthiness is only backed by austerity now.

#127 Van guy on 10.05.13 at 7:47 pm

Does the TFSA allow you to hold US equities and other US exchange products? I have an account with TD and I’m told I cannot. A friend of mine has an account at questrade and he has been buying US stocks. I’m confused here, any help here would be greatly appreciated!!

Thanks!

#128 Ogopogo on 10.05.13 at 7:53 pm

I submitted the comment below in respond to an article on the Financial Post about how Canadians are being gouged by our electronic subscriptions, tying it of course to our collective willingness to buy bubblicious real estate. However, it turns out that the comment section is “moderated,” something the FP has been doing with select articles. Can’t risk alienating their advertising overlords now, can they?

This is the article:

http://business.financialpost.com/2013/10/05/wired-to-spend-how-alluring-tech-add-ons-are-hiking-our-expenses/?__lsa=5879-8af1

And my comment:

“Great exposé of our mindlessly consumerist society. It’s sad to see Canada evolving into a nation of debt slaves. It’s no wonder people see nothing wrong with dropping $185/mth on needless subscriptions, never mind the lemmings who are willing to enslave themselves for life buying real estate at historically high and bubbly prices.

A nation of financial illiterates can only benefit those few rational folks who are studiously investing in the very companies that supply the slaves with mindless entertainment.

Oh, I think my preferred shares ETF just had a little orgasm.”

#129 David McGratton on 10.05.13 at 8:05 pm

I have read this blog with interest over the last couple years. I am a former Vancouverite who moved away 10 years ago, and now live in Washington State. As a Canadian who continues to visit Vancouver and other parts of Canada quite regularly, I have to admit, I am shocked, and quite embarrassed by the degree of stupidity that the average Canadian has been demonstrating in recent years when it comes to his/her personal finances. I don’t use the word stupidity lightly. I know couples with small children that together make maybe 70-80K a year buy $900,000 houses simply because everyone else is doing it. I know families who were fortunate enough to buy houses 15 years ago and are now sitting on $700,000 of housing equity because their crappy 70’s-looking houses in decent neighborhoods climbed in value from $150,000 to $800,000, but who are now using that equity to finance assinine and over-the-top standards of living through HELOCs. If I was fortunate enough to have bought a house 15 years ago in Vancouver, Calgary, Toronto or Montreal, I would sell my house now, take the proceeds, invest them conservatively in a diversified equity portfolio, and move to the States. Where I live (which is not Seattle, but is still really nice), one can buy a practical mansion on the water for $550,000. When I suggest this option to my friends (who have 45-75 minutes daily commutes), they look at me as if I’m on crack, and say: “The U.S.?!? Why would I ever want to move there?!?” And we Canadians like to laugh at Americans for being so closed-minded…

#130 father on 10.05.13 at 8:11 pm

hey canadian watchdog what is your opinion of when the housing market will crash and by how much my wife say 2 years

#131 espressobob on 10.05.13 at 8:19 pm

#126 Van Guy

All the US holdings you want! Along with international & emerging markets! Having dealt with the last W-8BEN form I’m not entirely clear on the dividend tax ‘thing’ on this matter, with regard to a TFSA? Hopefully Garth will shed some light on this one? I believe the capital gains are exempt?

#132 T.O. Bubble Boy on 10.05.13 at 8:23 pm

@ #126 Van guy on 10.05.13 at 7:47 pm
Does the TFSA allow you to hold US equities and other US exchange products? I have an account with TD and I’m told I cannot. A friend of mine has an account at questrade and he has been buying US stocks. I’m confused here, any help here would be greatly appreciated!!

Thanks!
————————
Yes – even TD TFSA can do this. They will convert $CDN to $USD at the time you purchase the stock/ETF. You should also have the option to keep the proceeds in the $USD money market if you don’t want to convert back to $CDN.

#133 ripped on 10.05.13 at 8:39 pm

$6.59 for a pound of butter at Safeway

Are you friggen kidding me?

#134 Fed-up on 10.05.13 at 9:05 pm

@#105 Smoking Man on 10.05.13 at 3:53 pm

You made a big mistake, rates never going higher, tapper not going to happen. 416 sfh like owning a good mine.

———————————————————————————–

I wish that I had made more “mistakes” like this in my life. Bought in late ’97 for about 35% of what it sold for. No more $6000, tax bills, expensive home repairs and nose bleed hydro and heat bills.

Mines aren’t doing so good nowadays anyway :p

#135 Fed-up on 10.05.13 at 9:09 pm

@#120 MiniMe on 10.05.13 at 7:09 pm

So yeah..you have history and mathematics, what did they tell you about the so much waited taper ?
What do they tell you about the government shut down? Try your luck and tell us what is going to happen :D
———————————————————————————————

History tells me that mathematics and fundamentals eventually and ALWAYS have a funny way of catching up to you.

Peace out.

#136 Holy Crap Wheres The Tylenol on 10.05.13 at 9:19 pm

Bentleys by the boatload out here in Oakville. My neighbour has one, I could afford one but why would I sink my cash into a four wheeled stays symbol? My daddy always said ” son anything on wheels does not acrue wealth”
Truth be told I did buy a toy but an old Chevy version of a sports car, it is still worth the same amount of money I paid for it eight years ago.
Driving a Bently is like hanging a billboard over your head, I’ve got tons of easily disposable cash on hand come and get it!

#137 FATHER on 10.05.13 at 9:36 pm

here in Vancouver, newly built houses are not selling, rentals are not getting rented and I’ve been seeing rental houses going up for sale. B.C. hydro is increasing rates by 26 % in a couple of months

#138 FATHER on 10.05.13 at 10:13 pm

Garth I do not understand some moron’s thinking your deleting posts just because it takes a little longer sometimes, do they expect you not to have a life ? (waiting for moderation or if it disappears they do get posted as soon as you check them)

#139 Marginal on 10.05.13 at 10:47 pm

#77 Raven on 10.05.13 at 12:07 pm

Benevolent dictatorship would be an ugly answer……

#140 Van guy on 10.05.13 at 11:05 pm

“You need to ask TD about opening a self-directed investment account with TD Direct Investing. (formerly TD Waterhouse)”

Thanks for the response, I have a self directed TD account. But when I try to place an order from my TFSA, I get a message saying its the wrong currency. I always thought that a TFSA was only for Canadian products.

#141 Marginal on 10.05.13 at 11:49 pm

#66 Smoking Man on 10.05.13 at 9:59 am

Sorry…I was also taking into context all of your other posts denigrating various and all not just yourself.

Don’t knock big pharma for serious (non voluntary) chemical imbalances such as schizophrenia. Lost a friend that way. Big problem with such illnesses is the desire to go off meds. Ok when you do this many times and manage to seek hospitalization when things unravel until that final time when for some reason you don’t and suicide is the only way. Tragic. And we see this every day around us with strangers since psychiatric hospitals were closed….the homeless.

Peace….and rest assured I will always have a soft spot for bad boys….

#142 Patience Pays on 10.06.13 at 2:44 am

145 new homes being built in the lower mainland. How is this sustainable?

http://www.buzzbuzzhome.com/city/canada/british-columbia/vancouver

#143 cynically on 10.06.13 at 2:57 am

@128 – right on the button!!!

#144 maxx on 10.06.13 at 8:01 am

#128 David McGratton on 10.05.13 at 8:05 pm

Excellent post.

The boundless arrogance of the notion that “it’s different here” is farce too many Canadians have bought into because our leaders have done fiscal pirouettes on the global stage for the past five years.

It’s not different, and the tsunami of boomers in serious need of cash for retirement or bucket list desires is just beginning to manifest.

A serious dose of humility is just arriving.

There is no economic miracle around the corner. The real economy is beyond sick with unbridled borrowing.

And we’re NOT better than Americans.

#145 Fear Mongering on 10.06.13 at 8:42 am

#136 FATHER – “B.C. hydro is increasing rates by 26 % in a couple of months”
———————————————————
Not even close to true. Quit spreading your uninformed attempts at fear.

http://www.cbc.ca/news/canada/british-columbia/bc-hydro-forecasts-26-rate-increase-by-2016-1.1699221

#146 Smoking Man on 10.06.13 at 9:47 am

#140 Marginal on 10.05.13 at 11:49 pm

Marginal I don’t know why you can’t see
David Dunning and Justin Kruger won the Nobel Prize doing a self portrait. Their peers also suffering from the same condition. Accolades galore.

To be a good shrink one needs only to cross the legs correctly , have a good pen and paper, and an elevated chin, with the right balance of arrogance and concern.

Most Shrinks get into the business not because of a care or curiosity of there fellow man. Growing up they think they are nuts, take the classes to find out why.

Every mass shooting in the USA has been carried out by people under shrink care and taking meds up the Ying Yang. But MSM never mentions that, it was the guns fault.

Back in the winter of 2008 when all hell broke out in the markets, void of adverts where, banks, car companies, airlines.

The only game in town, putting adds on TV was Big Pharma.

Is that bad boy enough for ya…..

#147 Bob on 10.06.13 at 9:56 am

Shunning debt and spending less can be good for one family’s finances. When hundreds of millions do it together, it can starve the global economy. Mostly all Western Countries are reducing household debt.

Except Canadians. Of course, we’re smarter than the rest.

http://www.cnbc.com/id/101089982

#148 Smoking Man on 10.06.13 at 10:07 am

Old Man look forward to meeting you later this month. Trade stories of our youth.

I was arrested once 30 years ago. Have no recollection of the event, back then we all experimented with LSD and other good stuff.

I’m told I was running down Shannon street in Toronto stark naked running away from a flying Tyrannosaurus Rex who’s head was that of a Labrador trying to lick me.

Don’t tell Marginal. He might judge me. :)

#149 Daisy Mae on 10.06.13 at 10:28 am

#132 ripped: “$6.59 for a pound of butter at Safeway.
Are you friggen kidding me?”

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

Just don’t buy. “The cost of everything goes down with supply outstrips demand.” In other words, boycott.

#150 Daisy Mae on 10.06.13 at 10:43 am

#136 FATHER: Not quite.

QUOTE: “The Province has confirmed rate increases over the next three years will total about 17 per cent, keeping BC Hydro rates among the lowest electricity rates in North America.

The prices below went into effect April 1, 2013 and were approved by the British Columbia Utilities Commission (BCUC) Order G-77-12A [PDF, 678 KB] dated June 20, 2012.”

#151 Linda Mulligan on 10.06.13 at 10:51 am

From a recent (past week) flyer – BUY WITH CONFIDENCE – Alberta poised to lead economic growth. The product – Bridgeland Crossings in Calgary, Alberta. One bedroom condos starting at $299,000; 2 bedrooms from $389,900. Incentives to buy include: a coffee a day for a year from seville Luxury Coffee & Pastries; a free pair of trainers/runners; a free turkey; a NEST Learning thermostat; 10 free drop in sessions for cross fit or spin classes at Vita Fitness; $100 per month in free groceries at the Bridgeland Market; monthly CTrain passes for one year; a free new Dynamo Brodie Bike and finally, a free lifetime membership to [email protected] The small print allows the developer to make changes to the incentives without notice & ‘some conditions apply’ to receive any of the incentives. So nothing as rich as a Bimmer for an incentive to buy, but not something I’ve seen previously in the various flyers for new developments in Calgary.

#152 Linda Mulligan on 10.06.13 at 10:53 am

I typed Deville but autocorrect made it seville.

#153 Basil Fawlty on 10.06.13 at 12:11 pm

“And tapering is coming. — Garth”

Tapering may not happen, for the same reason it never came in September. Q?E has bid up the stock market and the price of real estate, In addition, QE is used to purchase US Treasuries, since many foreigners are not purchasing. Rather than tapering, the Fed may have to increase QE, as the economy continues to deteriorate.

What deterioration? You gold guys are blind. — Garth

#154 Mister Obvious on 10.06.13 at 12:58 pm

#150 Linda Mulligan

Thanks for that field report Linda. But I do find it slightly depressing, even on this sunny Vancouver morning, that Bridgeland Crossings’ scrappy list of ‘buying incentives’ will be seen by the innumerate hoards as having actual value.

It reminds me of a ‘continental breakfast’. You get: One piece of cold toast (with enough jam to cover a third), a lukewarm coffee (refill extra), three grapes (not seedless), one granola bar (hard as plywood) and three ounces of orange juice (from concentrate). All served from 9:00 to 9:30 AM. Reminder: checkout is 10:00 AM. Thanks for staying at Bob’s Budget Convention Inn located on the outskirts of most secondary cities.

Like I said, depressing.

#155 jess on 10.06.13 at 1:55 pm

engineer-turned-whistleblower
http://www.theage.com.au/national/going-rogue-20131004-2uzy5.html

#156 Country Girl on 10.06.13 at 2:38 pm

Strong September house sales reported for Waterloo Region:
http://tinyurl.com/lmamm6h

#157 Basil Fawlty on 10.06.13 at 2:47 pm

“What deterioration? You gold guys are blind. — Garth”

Gold has nothing to do with my comments. Median family income continues to fall in the US. In addition, most of the job creation is part time, low paying positions. If unemployment rates were calculated, as they were in 1994, the rate woud be much higher.
Profit warnings were recently reported by Walmart, which means sales are slowing.
Finally, the fact that there was no tapering, indicates that $85B per month is still needed to prop up the ailing US financial system.

None of that indicates a deteriorating national economy. — Garth

#158 father on 10.06.13 at 2:54 pm

provincial gov. of bc is subsidizing hydro rates

#159 Give it a Rest on 10.06.13 at 3:15 pm

#157 father – “provincial gov. of bc is subsidizing hydro rates”
———————————————
They also subsidize:
Ferries.
Infrastructure.
Transit.
Parks.
Etc…
Give it a rest.

#160 Basil Fawlty on 10.06.13 at 3:38 pm

“None of that indicates a deteriorating national economy. — Garth”

Okay, does it indicate anything?

#161 no more psyops on 10.06.13 at 3:48 pm

Smoking man said –
Every mass shooting in the USA has been carried out by people under shrink care and taking meds up the Ying Yang. But MSM never mentions that, it was the guns fault.

======

They always mention it, it’s part of the psyop agenda=
normal folks will need a psychiatric evaluation before they can buy a gun

#162 OttawaMike on 10.06.13 at 4:39 pm

Smoking Man #145
Stick to commenting on the markets. Your analysis of the psychiatric field is only half right.
Yes psychiatry is black magic and Voodoo with no blood tests to prove a diagnosis. Yes anti depressants are hugely over prescribed and likely should only be given to the seriously ill BUT in almost every case where the shooters were suffering a Severe Mental Illness(SMI)
they were delusional and in psychosis due to schizophrenia, bipolar or major depression.

Anti psychotics are the foundation of treatment for psychosis. Individuals on rare occasion become violent while in psychosis because they are not being treated and self medicating with street drugs and alcohol. SMI individuals are at much higher risk of becoming victims of violence than being the perpetrators.

Your information is incorrect and dangerous and I hope if anything comes out of these latest shootings in the US, it is a re-approach to how we treat the mentally ill as a society.

#163 father on 10.06.13 at 4:42 pm

bite me

#164 OttawaMike on 10.06.13 at 4:44 pm

118 Bottoms Up

Funny, I don’t recall writing that 4 years ago but I could have.

The local economy in 613 is probably at its worst since the fed cuts by the Libs around ’94-’95. The housing market however refuses to throw in the towel. Other than the listings piling up, things seem to be chugging along as long as money is cheap.

I’ve given up trying to figure it out..

#165 maxx on 10.06.13 at 6:38 pm

#148 Daisy Mae on 10.06.13 at 10:28 am

“Just don’t buy. “The cost of everything goes down with supply outstrips demand.” In other words, boycott.”

Bravo Daisy Mae. We’ve been doing this for years and found that with many things, after a day or two, we don’t miss them one whit. I have no problem negotiating everything with retailers. No discount? No sample? Crappy service? NO SALE!