What pig?

DEBT

Let’s figure this out. The average wage gain in this crusty country in the twelve months was 1.8%. Inflation’s running at 1.2%. So, families are 0.6% to the good, except that the dollar went down 10% which means prices will be steadily rising.

In any case, a 0.6% increase in household income doesn’t stand much of a chance against the 9% that GTA house prices increased in a year, the 14.8% gain in SFH values in 416 (to $888,100), or even the 3.1% swelling in the cost of detached houses in Vancouver ($929,700).

How, you ask, can the price of something 70% of people own experience gains like that when families don’t have any more money?

Easy answer. They borrow it. So consumer and mortgage debt has risen even faster than house values, bloating by 12% in the past year. We now owe $1.4 trillion. Holy crap.

Using borrowed money to support continued real estate appreciation, which begets more appreciation, convincing you that borrowing was a great friggin’ idea, is not new. The Americans did it extremely well in the years leading to, oh, 2006. Lots of debt growth kept house prices advancing until the economy soured and debt levels hit a wall. House prices fell, and folks scrambled to pay off debt. In the course of things, as you might remember, we had a financial crisis.

Here’s a brief reminder. Your debt is in red. Their debt is in blue.

CHART modified

If you believe the red line will continue to go up, then buy a house at today’s prices. If you feel there’s an inevitability in our line looking like theirs, wait. Of course, it will. In the absence of any meaningful wage gains, and with interest rates at their lowest levels, how can there be a different outcome?

Realtors and others whose lives depend on house prices come here daily to say property values in 416 or urban Vancouver, Calgary or Victoria will never revert to the mean. Never decline in a significant fashion. Never experience a US-style average 32% decline. In truth, some hoods will live through any correction pretty much unscathed. Others will be cratered. But a correction there will be. To assert endlessly-rising prices means the economy has to boom, wages and jobs multiple, or the cost of money go to zero. I can’t find anyone expecting that.

Moreover, consider demographics. The unemployment rate nationally for people under 24 is 14%. At the other end the spectrum, over 30% of the population – the Boomers – are moving into retirement mode, and have over 80% of their net worth in residential real estate. As I told you days ago, the latest survey shows that fully half those wrinklies are planning (because they have no choice) on dumping their houses to finance their remaining decades.

So, if the kids can’t afford to buy houses over the next ten years, and the old farts can’t afford not to sell them, wither prices? Aren’t we setting ourselves up for a massive social and financial adjustment?

Yesterday Bank of Montreal moved a little in this direction. While you’d hardly expect a mortgage-spewing bank to be warning people off houses, economists there now consider real estate a ‘risk.’ Especially in Toronto.

“In Canada, accelerating home prices in Toronto (7.1 per cent year-over-year in January) risk straining affordability further,” says economist Sal Guatieri, “causing a correction when interest rates normalize and the market is trying to absorb a record number of newly built condos.”

Recall that RBC tells us that even with a 25% down payment, it now takes 63% of a Toronto family’s pre-tax income to afford a detached house. In Vancouver, astonishingly, the number is 83% of pre-tax income, or more than 100% of what an average household there actually brings in. And, yes, this is with 3% mortgages. Not like in 2007, when they were 7.1%. Just stop and imagine that for a moment, because those days will return again.

Of course, the big news of the day is that a wide majority of new marriages in Canada start off in debt. And 36% of people getting hitched didn’t mention this to their shiny new spouse.

Yep. Screwed.

171 comments ↓

#1 Ontario's Left Coast on 02.10.14 at 6:59 pm

First! Garth, greetings from Leftern Ontario! I hope all is well.

#2 uncleD on 02.10.14 at 7:01 pm

Trying to buy a rural house cash. For sale almost a year and the owners wont even budge on price. What to do. MMMMMM bacon!!

#3 uncleD on 02.10.14 at 7:01 pm

Mmm bacon!!

#4 VancouverGoinUp on 02.10.14 at 7:15 pm

In regards to Spain mentioned the other day
The purchase of properties from 500,000 euros upwards by foreigners will entitle them to a residence permit for two years, but not a working permit, according to clarified sources at the Ministry of Economy.

This clause, one of the most striking of the new laws applicable for entrepreneurs, has been created in order to “avoid embarrassment” to those foreign citizens having to leave the country every ninety days to renew their visas, and according to these sources, it has already been operating successfully in other nations such as Portugal and Ireland

It is high-income investors who nevertheless must pass all mandatory controls the Interior Ministry to check things like the absence of a criminal record.

This residence permit does not include a work permit, or the right to public health or welfare services, the mentioned sources stress.

#5 ben on 02.10.14 at 7:18 pm

What will happen? Here’s what will happen:

* rates will be kept low
* the state will advance borrowing it not only underwrites but actually is the lender
* young people will be encouraged to get into more debt

Sir I don’t want to see a single tear from the boomers. I don’t want to have a hair on their head out of place. Move heaven and earth to see that this is true!!!

God bless the boomers, when they trample upon your face smile and thank them. And remember, vote

#6 ben on 02.10.14 at 7:19 pm

aw garth your crummy site doesn’t escape html…

and remember vote *insert one of many similar parties here*

That is all boomer slaves.

#7 DR on 02.10.14 at 7:22 pm

is that real

#8 BPOE on 02.10.14 at 7:30 pm

There will never be a housing market crash because our immigration and temporary workers systems are designed specifically to avoid it.

There will always be people wanting to come to Canada and there will never be enough housing inventory to accommodate them all.

#9 uncleD on 02.10.14 at 7:36 pm

Dear Garth
What do you think about these market linked GIC products offering returns of up to 9%

Link? — Garth

#10 Fort Mac Flatlander on 02.10.14 at 7:45 pm

Good evening Garth,

I don’t know if Ft. Mac is the first to fall but on the condo side we’ve already seen a 10% pullback over the last year. As you’ve stated trying to perfectly time the market is pointless and every center is regional. In a one industry town what is a good entry point? 5% lower, 10%? And thanks to the responder that mentioned getting a full inspection of the condo building, not just the unit. I’m looking at the concrete condos up the hill, for all the locals. Thanks Garth.

#11 crowdedelevatorfartz on 02.10.14 at 7:56 pm

@#10 BPOE
Please post under your alter ego #5 VancouverGoinUp.
You make more sense……..or is that “cents”?

#12 uncleD on 02.10.14 at 8:04 pm

Link to the 9%
http://www.rbcroyalbank.com/services/gic/marketsmart-or.html?WT.srch=1&AFFCODE=2399&CAMP=30250&gclid=CLLuy8HiwrwCFYkWMgodoisAFA&V_TID=62625&ProspectID=A997FFABCCC54A488D864762FD8FA6CB

The return of 9% is over a three-year term, and not guaranteed. Did you seriously fall for this? — Garth

#13 ILoveCharts on 02.10.14 at 8:05 pm

Need some advice from the blog dogs. Personal acquaintance is extremely risk adverse. Wants a guaranteed return and ability to easily pull money out at any moment. Even bonds may be too risky. Stocks, ETFs, REITs are out of the question. Has $20k in TFSA.

Do I suggest a savings account, GIC or T-bills?

#14 4 AM Sunrise on 02.10.14 at 8:07 pm

Market-linked GIC’s are a joke, especially this one:

http://www.rbcroyalbank.com/products/gic/campaign/marketsmart.html

My Boomer mom was talking the other day about how great her market-linked GIC was – bought in 2009, matures this year, return of 20% over 5 years. I don’t argue with her anymore. I just nod politely. There is no hope. Math doesn’t work on her. I give up. I steered her away from getting into another market-linked GIC. That’s the best I can do. Because the only thing worse than a vanilla GIC is a kinky one with the possibility of cruel and unusual punishment.

(My parents live debt-free and spend maybe 1/3 of their blue-collar pension+CPP+OAS, and bank the rest. That’s why arguments about rates of return don’t work on them. They kind of live like shut-ins…with pride, and by choice. Yeah.)

I am so grateful to my dad for shutting my mom down when she got house-horny and floated the idea of pulling out money from their nut to help me buy a condo. That was 5 years ago, and she never mentioned it again.

#15 sideline sitter on 02.10.14 at 8:10 pm

#10 – you think a temporary worker, who gets paid 60% of what a Canuck does, can afford housing?

Get Real!

#16 Randy Randerson on 02.10.14 at 8:10 pm

@14

Put the money in a safety deposit box if you’re acquaintance is so risk adverse. Otherwise GIC in TFSA. What a wasted gift.

#17 crowdedelevatorfartz on 02.10.14 at 8:11 pm

Pork.
How appropriate.
Reminds me of gov’t employee pension plans……….

#18 Paul on 02.10.14 at 8:12 pm

11 uncleD on 02.10.14 at 7:36 pm

Dear Garth
What do you think about these market linked GIC products offering returns of up to 9%

Link? — Garth

9% over three years = 3% Bait and kind of switch

#19 Paul on 02.10.14 at 8:14 pm

Sorry did not see the updated link

#20 blase on 02.10.14 at 8:15 pm

#14 ILoveCharts

I’m sure the [email protected] can offer him lots of suggestions that will enable him to shrink his money compounded annually. No need to help him/her with that.

#21 Babblemaster on 02.10.14 at 8:17 pm

“And, yes, this is with 3% mortgages. Not like in 2007, when they were 7.1%. Just stop and imagine that for a moment, because those days will return again.” – Garth.

—————————————————–

Oh man, Garth. You keep saying, since they cratered, that interest rates will rise. They haven’t. They won’t. Not for a long, long time. And you know it.

They increased in 2013, of course. Anyone taking a fiver today will double upon renewal. — Garth

#22 not 1st on 02.10.14 at 8:23 pm

#10 BPOE on 02.10.14 at 7:30 pm

“There will never be a housing market crash because our immigration and temporary workers systems are designed specifically to avoid it.”

—-
Umm, all the temporary foreign workers in my city are being hired as nannies or convenience store clerks or house cleaners and they live in boarding houses with 5 or 6 to a suite. They don’t drive cars, spend very little into the economy and 50% of what they make is sent abroad to family members.

I have yet to hear of some rich chinese national immigrating to Canada and setting up their factory or business here.

This is all a myth and you are eating too many forest mushrooms.

#23 Mike T. on 02.10.14 at 8:33 pm

I just want to take some space and let people know that by in large, we have been grossly mis-informed as to the nature of the creature we call the pig.

Pigs are very smart and social animals. They do not in fact enjoy living in their own filth. This idea was brought on and perpetuated by industrial pig farmers who are trying to remain blameless for their poor treatment of this animal.

I could go on and on but instead if anyone is interested in why this is what I think…this is where the info is sourced:

http://www.jeffreymasson.com/books/the-pig-who-sang-to-the-moon.html

Please go ahead and laugh, your ignorance has long ago been forgiven.

Thank you to our host for the space.

#24 ozy - the canadian trend to continue on 02.10.14 at 8:37 pm

ozy – the stupid level of borrowing, Canadian trend to continue, what, is not like we wake up smarter tomorrow!

There’s few more years of fun, maybe 10 actually. Then, lots of debt slaves selling their wives (damn autocorrect, lives) by hour, maybe, to feed the kids

#25 Skybluepink on 02.10.14 at 8:42 pm

Immigration will not stop this bubble from bursting. The US still has more immigration than us and the cities that suffered the most when their bubble burst were cities and states that had the most immigration like NY, California, Florida, Las Vegas and Nevada.

#26 T.O. Bubble Boy on 02.10.14 at 8:46 pm

Recall that RBC tells us that even with a 25% down payment, it now takes 63% of a Toronto family’s pre-tax income to afford a detached house. In Vancouver, astonishingly, the number is 83% of pre-tax income, or more than 100% of what an average household there actually brings in. And, yes, this is with 3% mortgages. Not like in 2007, when they were 7.1%. Just stop and imagine that for a moment, because those days will return again.

You have to wonder how RBC or others can even find data for this “affordability of detached bungalow” calculation anymore, given that virtually every detached bungalow has been torn down and replaced with a McMansion.

#27 David Lee on 02.10.14 at 8:53 pm

Finally…

http://www.theglobeandmail.com/news/politics/tories-new-budget-to-close-program-giving-investors-path-to-citizenship/article16792106/

#28 Victor V on 02.10.14 at 8:58 pm

Goodbye HAM

http://www.theglobeandmail.com/news/politics/tories-new-budget-to-close-program-giving-investors-path-to-citizenship/article16792106/

The Conservative government is scrapping Canada’s decades-old Immigrant Investor Program in the 2014 budget, ending a path to citizenship that has been criticized for allowing foreigners to buy their way into this country without bringing sufficient long-term benefit.

The federal government, which stopped accepting new applications from would-be foreign investors in 2012, has concluded the program is not generating sufficient economic return for Canada, sources say…

Sources say the government believes the immigrant investor class of newcomers pays significantly less taxes over the decades than other economic immigrants, have less proficiency in English or French and are less likely to actually reside in Canada than other arrivals….

In recent years Canada has admitted about 3,000 immigrant investors per year through the program – or about 11,000 including their spouses and dependents.

Largely from China, Taiwan and South Korea, these newcomers’ primary destinations are Ontario and British Columbia.

Federal and provincial immigration department data obtained by Vancouver immigration lawyer Richard Kurland revealed this week that there are about 45,000 wealthy Chinese on the immigrant investor program’s waiting list who are waiting to move to British Columbia alone.

#29 Linda Mulligan on 02.10.14 at 8:58 pm

#19: stop confusing government worker pension plans with MP/MLA pension plans. Also, stop spreading the myth that ‘only’ government or union workers have access to DB pension plans. Every legally working Canadian citizen has a DB pension plan. It is called the CPP. The only way you do not qualify for CPP is 1) only take jobs where the money is paid ‘under the table’ & is therefore not ‘legal’. 2) have never worked in Canada, ever. I’m not sure about the rules regarding foreign nationals who work in Canada, have to check those rules out. Plus rules 1 & 2 can still potentially be circumvented if you marry someone who qualifies for CPP & they die & you get survivor benefits as the spouse.

#30 Madani on Bnn... Canada overvalued on 02.10.14 at 9:00 pm

http://youtu.be/xgYGpwHia2w

#31 the jaguar on 02.10.14 at 9:01 pm

#24, not 1st.

Could not agree more. And there are also a lot of temporary workers on construction sites. When that slows down (numbers released today that appear to support it) they will also be out of the equation. It feels like the calm before the storm right now. But one has a sense that change is on the way.
Garth you are posting earlier these days. I guess limited mobility getting the creative juices flowing.

#32 Andrew Woburn on 02.10.14 at 9:03 pm

#153 MrHulot on 02.10.14 at 12:36 pm

Hey Garth, still think we’re all racists?

I think if these were people from Oregon, not Guangdong, you’d be cool with them. — Garth
===================================

People from Oregon used to complain bitterly about Californians moving in and driving up prices. People in San Francisco are ready to riot over Silicon Valley kiddies driving up their prices. People on Vancouver Island complain about Albertans and Easterners retiring there and driving up prices. It has nothing to do with race and there are few people in Vancouver who are racists anymore, despite what sensitive Eastern liberals may think, because it’s pointless .

Asian immigrants are good for Canada and we will continue to benefit from their industry and international connections. I think what people are afraid of is the kind of investor, wherever they come from, who just uses Canada as a long term piggy bank like the people who bought these properties in London, England.

‘Billionaires Row’: inside Hampstead palaces left empty for decades’

http://www.theguardian.com/money/2014/jan/31/billionaires-row-hampstead-palaces-empty-london-property

#33 Freedom First on 02.10.14 at 9:05 pm

Great post Garth, you nailed it! Nothing but the facts.

Yes Garth, Canadian consumer debt levels are so high at $1.4 that your saying “Holy crap” about Canadians debt levels is being extremely polite to the millions of Canadians who have placed themselves in such a precarious dangerous foolish life ruining gonad crushing certain financial cliff road runner ending divorce causing family breakdown tragedy job loss economy crumbling blaming pointing fingers epic downfall experience. Yep. Screwed.

#34 Freedom First on 02.10.14 at 9:06 pm

oops….$1.4 trillion

#35 gartho the blinddog on 02.10.14 at 9:07 pm

BANNED
[email protected]

#36 Smoking Man on 02.10.14 at 9:07 pm

Anyone spot batman?

#37 raisemyrent on 02.10.14 at 9:11 pm

I usually keep away from politics, but I honestly think that F and the lot will try to keep everything afloat just until the next election. Then they’ll point the finger at the Liberals if they come in, or heroically fix everything if they (Tories) stay… but it will be tough for most of us for the following few years regardless.

#38 TEMPLE on 02.10.14 at 9:17 pm

#19 crowdedelevatorfartz on 02.10.14 at 8:11 pm

Pork.
How appropriate.
Reminds me of gov’t employee pension plans……….

Just curious, but how many times were you rejected by the civil service? Too bad the Public Service doesn’t have a Department of Jealous Tantrums. You would go far…

TEMPLE

#39 Nemesis on 02.10.14 at 9:18 pm

VO: He’s entered a world of OutCasts&Misfits.

Duck: You’re just a little pig in a big city. What can you possibly do? What can anyone do?

VO: Destiny has changed his mission…

http://youtu.be/XoMZtqQq3LQ

[NoteToGT: That leader was a ThematicChallenge? Right? Right? Drats. Destiny’s calling… ere, alas, I must away… back again {with laughs}… another day.]

#40 Brian Ripley on 02.10.14 at 9:26 pm

Equifax reported via CBC News today that Canadian Consumer Debt Zoomed 9% Y/Y in 2013 and mortgage debt clocked in at almost two thirds of the total. I wanted to see if that might be from other than 1) low interest rates 2) attempts to get capital gains in the absence of yield.

I looked at Federal Debt to GDP, Loans to Private Sector, Balance of Trade and Import Prices and what stood out was that 2 of the 3 sectors (Goverment and Trade) are spending less into the economy (spending in one sector is income to another) and so it is the remaining 3rd private sector that is engaged in positive spending (income to the other 2) BUT the private sector spending is happening via leverage not production.

I put together the chart mashups here: http://www.chpc.biz/2/post/2014/02/canadian-consumer.html

#41 nonplused on 02.10.14 at 9:31 pm

I think immigration should be reduced or stopped until our unemployment rate falls to an acceptable level. Some humanitarian refuges only, and maybe fields where we are actually short like health care. Why do we need to cram more people on to EI when we’ve already got so many there already?

Until the economy recovers we don’t need anymore people. I know that’s a bit harsh to someone in Greece who can’t find a job there either, but come on! I can’t support my kids forever!

#42 Realtor #1 GTA on 02.10.14 at 9:36 pm

Garth its different here.
Supply and demand is controlling the market.

Your example a few weeks ago with the 32 offers for the one home is a prime example. It doesn’t matter what they offered the point is 32 people wanted to buy it.

If we really had 70% ownership then sales would be down considerably.

Interest rates will not determine the market.

If you had a 500K mortgage @3%($2103 per month) and then you renewed your mortgage five years later @4% the carrying cost would be the same ([email protected]%=$2111 monthly)
Lets say it was 4.5% it would be= $2238 only a 138$ more on a half a million mortgage.

#43 Jeremy on 02.10.14 at 9:37 pm

Garth, you should have a policy of deleting all “First!” posts. Those useless posts are from immature idiots.

#44 View on 02.10.14 at 9:38 pm

When I was young, people always said, “What happens in the USA always happens later in Canada.” Experience tells me nothing ever stays the same.

#45 NoName on 02.10.14 at 9:39 pm

interesting read

http://www.washingtonpost.com/blogs/worldviews/wp/2014/01/13/40-more-maps-that-explain-the-world/

scroll down to 15
http://www.washingtonpost.com/blogs/worldviews/files/2013/12/housing-bubbles.jpg

#46 Chump on a Stump on 02.10.14 at 9:39 pm

Hi Garth–
Some of the comments on yesterday’s blog entry brought to light the consequences (or lack thereof) of not being able to meet one’s financial obligations. Is it true that declaring bankruptcy in Canada allows an individual to keep most of their property and be on the hook for a small percentage of debt owing? This might be an interesting topic to broach.

I have a friend who declared bankruptcy a few years ago and their student debt got wiped out and they were able to keep all the things that got them into bankruptcy to begin with.

Oh, and thanks for the interesting info on your blog everyday. Your doing a public service!

#47 crowdedelevatorfartz on 02.10.14 at 9:41 pm

@#40 pulsating Temple

Ahahahahahahahahahaahahahah
Good one!
Actually , I prefer to work for a living.
:)

#48 Aggregator on 02.10.14 at 9:47 pm

Household Credit Index By Country – Chart No correlation to HAM here again. Move on.

—-

 #28 Victor V on 02.10.14 at 8:58 pm

Goodbye HAM

lol… Ya right. Now comes the HAMettes and HOOMers.

The Conservatives, however, feel that other, newer economic-immigrant programs are doing a better job of attracting newcomers who will integrate well into Canadian society and build the economic base.

These include the Canadian Experience Class, which fast-tracks residency for temporary foreign workers already in Canada and non-Canadians who have graduated from universities and colleges here.

Not hard to see what's going here. Canada is now in the reuniting families/dynasties business. How's that? Any wealthy foreigner who is already settled in Canada can now hire their spouse/cousin/friends from abroad as a shortage of [insert whatever job CIC requires to qualify for TFWs here], while their child currently or planning on attending university here gets permanent residency pronto. What about grandma and grandpa? They get fast-tracked even faster.

Oh and that language test part. They got apps that give newcomers the most up-to-date answers.

Can't fool me. What the government says and does are two different things. Everything else is meant to divert the public.

#49 tim on 02.10.14 at 9:50 pm

Generally the Canadian economy lags the US by about two years, the US market crashed eight years ago. When the US market crashed, oil prices were at an all time high around $140 per barrel. Oil prices are much lower now and likely will head lower yet. You have been calling for a correction for years now, yet it never seems to happen, and interest rates haven’t increased substantially for many years, and according to the Fed, they won’t revert to the long term average any time soon.

#50 quebec economist on 02.10.14 at 9:58 pm

Please people in finance explain how the risk of DFN. Since 2004 they have exceed the 8% dividend distribution… Like I said I play venture stocks and don’t fully understand this none ETF listing. Is the 8% from original issue price guarenteed, it seems to be the case for Class A shares?

http://www.dividend15.com/fund_info.html

more details…

Dividend  15  has  an  attractive  dividend  history  and  yield.  
The  DFN  Class  A  share  has  exceeded  its  distribution 
objectives since inception in 2004.  DFN shareholders have 
received 109 consecutive monthly distributions for a total of 
$14.40  per  share  (including  five  special  distributions  of 
$0.25 per share, one special distribution of $0.50 per share 
and  one special stock  dividend  of  $1.75  per share).    All 
distributions  have  been  made  in  tax  advantaged  eligible Canadian dividends or capital gains dividends. 
 
November 30, 2012 DFN Annual Total Return     18.04% 
 
June 24, 2013 DFN Annualized Yield                      12.00% 

explain to me the risk please?

#51 hohoho on 02.10.14 at 10:00 pm

> immigration should be reduced or stopped until our unemployment rate falls to an acceptable level.

whether against an immigrant or a foreigner, we are going to be competing in the global economy. improve our productivity and becoming more competitive is the only way.

#52 quebec economist on 02.10.14 at 10:02 pm

ok I reread…

‘initially targeted to be $0.10’

sorry for the hope…but it seems to be worked out over the last 10 years

#53 OttawaMike on 02.10.14 at 10:11 pm

#38 Smoking Man on 02.10.14 at 9:07 pm
—————————-

S&P 30 day chart?

#54 Son of Ponzi on 02.10.14 at 10:20 pm

Caption of a New Yorker cartoon:
“Porky, can you move a little, so I can get the remote”

#55 TurnerNation on 02.10.14 at 10:24 pm

Saw an ad from http://why-pay-rent.ca

Which led to:

“TAKE CONTROL. Owning your own condo is easier than you think.

There are many ways to come up with your down payment. The most obvious way, of course, is Saving. Other options are:
RRSPs
Buy with your partner
Ask your Parents and /or relatives

Investing in real estate can be a good way for them (and you!) to grow their retirement income”

#56 nonplused on 02.10.14 at 10:26 pm

hohoho,

I don’t disagree with you, but some points to consider:

Increasing productivity reduces employment for a given output, so we doubly don’t need new workers right now.

Why can’t we compete in the global market with the people we have? We have a lot of people sitting around.

Once we are competitive again unemployment should go down and we can allow immigration once again to supply the market. For now, all immigration is doing is supplying excess workers to a depressed market and restraining wages. I’m not looking at the humanitarian aspects but that program could be continued.

I used to work downtown, and the cleaning staff was completely foreign. Now I know these are jobs naturalized Canadians don’t really want, but isn’t it better than sitting in your parent’s basement playing video games and collecting EI? Actually, most Canadians would say no I guess. But still, my point is we don’t need more workers until we get the unemployment rate down to an acceptable level, global competition or not. If we can’t compete globally, maybe our population has to decline.

#57 Son of Ponzi on 02.10.14 at 10:29 pm

I think the Harper boys are sensing the anti immigration mood in the country and are closing the most apalling loopholes.

#58 Shawn on 02.10.14 at 10:38 pm

WAITING FOR THE CRASH… THAT MAY NOT COME

Nice Graph, which we have seen before.

But now for another interpretation.

First common sense might tell us that a 12% increase in mortgage debt is too high to be possible. The graph provides the more likely reason. Last year they measured it low and created a dip. This year they measured it correct or high and we see this impossible jump. It’s measurement error, I suspect. Yes mortgage debt is high, but it did not rise 12% last year, I strongly suspect.

Next consider that we have now waited six years for the American house price crash and debt level crash to come to Canada. It may be time to consider if it was different in America, where sub-prime lands and liar loans really were a LOT more prevalent. It now may be time to admit that the two lines on the graph will converge more so by the U.S. line rising than the Canadian line falling.

I mean what else should debt to income do but rise when interest rates hit rock bottom? It’s called supply and demand. Prices of loans fall, demand for them rises. It’s the Americans who out o step with that reality.

I also notice that the graph scale does not start at zero. Instead it starts at 100% of income. That’s a useful trick for making the distance between the two lines look twice as large as the true difference.

I’m just saying there is more than one way to interpret that graph. The popular way to interpret it has failed to materialize for six years now.

#59 45north on 02.10.14 at 10:41 pm

Using borrowed money to support continued real estate appreciation, which begets more appreciation, convincing you that borrowing was a great friggin’ idea, is not new. The Americans did it extremely well in the years leading to, oh, 2006.

Mark Hanson says that stimulus programs have had a profoundly negative effect on American housing. It’s impossible to say what Canadian government might do but there will be a federal budget tomorrow. So let’s wait and see.

ben What will happen? Here’s what will happen:

* rates will be kept low
* the state will not only underwrite mortgages but will actually write them

(corrected text)

no it won’t. I mean that the Federal Government probably has a few special cases where it holds a mortgage on a property. I will stake my vast reputation that there will be nothing in the budget tomorrow that puts the Federal Government into consumer mortgages.

* young people will be encouraged to get into more debt

well that’s rather nebulous. I mean it’s not the sort of thing you could bet on.

#60 They make a nice couple on 02.10.14 at 10:45 pm

That’s a warthog in the picture and a boar on the couch; even so the pig should give him more room. :-)

Alwyn

#61 World According To Garth on 02.10.14 at 10:45 pm

Id be curious to know what that graph would look like minus the 700,000 govt vampires and their $114,000 salaries. 175? 185? Less the wonderful work of the front line workers of course of which I used to be. For all you cherry pickers out there (yesterday) front line workers are less than 10%. Most are useless paper pushers robbing the general public everyday. Yet it’s always the tiny tiny fraction in the news “the MPs!! The senators!!” peanuts compared to the ginormous PIG trough of beaureaucrats.

I see people declining at the grocery store all the time. So many people are broke.

#62 Vamanos Pest on 02.10.14 at 10:51 pm

#42 Realtor #1 GTA

Fair point, but doesn’t the fact that to resell that 500k home at 4.5%, the new buyer is facing carrying costs close to $500 a month higher (my mortgage calculator spit out 2600 and change). With some leeway for rounding, that’s 20-25% high carrying costs.

So, is the next buyer making up the difference with:
-a higher wage (doesn’t seem to be the current trend)
-higher debt levels (the fact that this is not possible is the point of today’s blog)
-cutting back in other spending (possible, but our ability to do this is finite, many Canadians are already ‘house poor’)

Or, will the market simply correct?

#63 James on 02.10.14 at 10:54 pm

“Inflation’s running at 1.2%. So, families are 0.6% to the good”

Uh, no. CPI is not an accurate measure of what average families spend their money on. Food, gasoline, housing. If you use a proper basket of goods you’d see far more than 1.2%.

#64 Axxman on 02.10.14 at 10:55 pm

Let me see – news said Canadians are borrowering more but delinquency rates are down – said another way – people are borrowing to keep their debts current…sorry to restate the obvious Equifax.

#65 Son of Ponzi on 02.10.14 at 10:57 pm

#55 Shawn.
Agree, any graph can be manipulated on the y-axis.
In Economics 101, we used to call it Grafs and Lafs.

#66 David Lee on 02.10.14 at 10:59 pm

I’ve been a reluctant HAM believer for a long time. Reluctant in that I don’t want to believe it, but living in Vancouver, working in Richmond, and having only anecdotal data to go by, there is only one conclusion that I can come to:

1) the Lower Mainland is a washing machine for corrupt money,

2) where there is large amounts of HAM, there is poverty (according to the income data),

3) the people who are already here and who have been buying RE recently (at least since 2008), or who have not cashed out, believe what is happening at the margins (i.e. the most recent pricing sets the market) and believe they must get on the ladder as soon as they can or be priced out,

4) the real estate industry (including mortgage brokers) reinforces getting on board the ladder for their benefit,

5) How else can you explain the average of 83% pretax household income going towards housing,

6) The Lower Mainland is not the most industrious place (and in particular, Vancouver proper), which leads to the practice of “flipping” to make money (aside from drugs, what other legal way is easier?), and

7) The people who believe the hype are enabled with cheap money.

Either way:

a) if the cancellation of the Immigrant Investor Program stops money from being washed in the Lower Mainland, whether it’s from Russia, China or wherever, it’s a good thing and the house of cards as I’ve tried to describe above starts to fall,

OR

b) setting aside a reasonable premium (which is understandably warranted given our local climate, mountains, blah, blah blah), the ridiculous housing prices in the Lower Mainland have nothing or very little to do with hot corrupt money, which means that the pricing is due primarily to cheap money, which means that the greater fools who are already maxed out will run out of steam soon along with the boomers who won’t sell, even if it means eating bugs and cat food.

Hopefully, the end of this program significantly stems the tide of corrupt money flowing into real estate in Canada, and in particular, the Lower Mainland. If not, then it’s been about cheap money all along, and it will all crumble soon given the average +165% debt to income ratio for Canadians (and probably much greater that 165% for greater fools in the Lower Mainland).

#67 World According To Garth on 02.10.14 at 11:00 pm

And by the way………Garth IS a true public servant. Public service used to be just that…..service. Now it’s public lottery at the expense of the working poor public.

#68 Where have all the Vultures gone? on 02.10.14 at 11:00 pm

Someone mentioned this deal last week, we can call it an aberration. It is an aberration because the recent trend in Leaside is 100- 150 thousand over list, this took A quarter million over list:

195 Glenvale Blvd, C11, So far north it’s hard to call it Leaside but I guess it is. Listed – $748,800
Sold: $1,016,000 , on Feb 3 2014. A bungalow 30X125 lot.

136% of list price.

Was it under priced? I don’t think so.

#69 Spaccone on 02.10.14 at 11:13 pm

I think that a good amount of the current crop of men of varying generations just do not have the same incentive and opportunity to get into the move-in-and-move-up-every-decade cycle. Just look at the marriage rate that has dropped steadily and significantly for several decades as well as somewhat extended the age bracket at which people get married.

I believe that the more things change the more they stay the same but I think current men are facing a somewhat different relationship environment and–at the risk of sounding gauche or politically incorrect–female species than the Boomers. Especially with the massive amount of Boomers, past and current immigrants who “cheated” and brought in their spouse/significant-other from the Old World…bypassing the local relationship market…but expect things to continue in the same fashion for their kids.

#70 ILoveCharts on 02.10.14 at 11:20 pm

For us HAM believers, we need to recognize that the investor immigrant program is only one of the ways money is coming into Canada.

Three others to consider:
1) There is a large established population already here and they will keep bringing in money from the mainland.
2) Some folks come over as students (and buy houses and eventually get citizenship through another program such as the Canadian Experience Class.)
3) You can buy a house here without having citizenship.

I’ve got nothing against mainland Chinese. Great people. They are having an impact on our housing prices though and it’s a shame that we continue to avoid having formal and official discussions about that.

#71 Son of Ponzi on 02.10.14 at 11:27 pm

I am hopeful that putting an end to the investor class immigrant will go a long way in helping to correct this over-heated Vancouver market, however, we still need to remember that there are no restrictions on foreign ownership of Canadian real estate. I won’t be cheering until law makers start restricting foreign ownership or taxing it heavily.

#72 Happy Renting on 02.10.14 at 11:44 pm

The Globe did a piece about desperate and shameless couples demanding cash wedding gifts to cover their expenses. These couples were buckling under the pressure of rising expectations for what should be offered at a wedding, and so ended up spending the big day dreading the final bill (sad, when it should be the happiest day of their lives.)

And unlike houses, cars, or frivolous luxury goods, there is absolutely no resale value to wedding services (usually the bulk of the cost) after they’re purchased and used. Zero cents on the dollar for the photo booth or the chocolate fondue fountain or the open bar for your 500 closest friends.

#73 Humpty Dumpty on 02.10.14 at 11:47 pm

Prize winning Swine….

Verb informal- he hogged the limelight/
MONOPOLIZE, take over, dominate, corner, control.

A London, Ont., university is defending its decision to restrict access to a course that teaches Muslims how to proselytize.

The Huron College course — The Muslim Voice: Islamic Preaching, Public Speaking and Worship — was, according to the syllabus, “open to Muslim men and women who offer religious leadership and/or speak publicly about Islam on behalf of their communities.”

The school allowed a non-Muslim to enrol in the course, but then kicked him out because, they said, they didn’t want to open the course to auditors. That student, Moray Watson, is an accountant who says he is an opponent of Islamic extremism and enrolled in the course partly to test the prerequisite in the syllabus.

I’m not allowed to take the course because I’m not a Muslim

“[The school] gets $6.5-million [from the government]. Some of it is mine and I’m not allowed to take the course because I’m not a Muslim,” he said.

http://www.nationalpost.com/m/wp/news/canada/blog.html?b=news.nationalpost.com/2014/02/09/ontario-university-defends-decision-to-kick-non-muslim-out-of-course-that-teaches-islamic-preaching&pubdate=2014-02-09

#74 Ralph Cramdown on 02.11.14 at 12:01 am

#58 Shawn — “Next consider that we have now waited six years for the American house price crash and debt level crash to come to Canada. It may be time to consider if it was different in America, where sub-prime lands and liar loans really were a LOT more prevalent.”

Uh-oh, possible capitulation in aisle 4!

Here’s what I see: At peak, both Canada and the US had (have) similar average household incomes with income distribution not too far apart, and similar home prices and homeownership levels. How could that translate to them having vastly more subprime loans than we do?

As much as the Canadian real estate and finance industries like to self-congratulate, saying that we don’t do those kind of loans, I have very serious doubts. We did 0 down 40s. What is a 25+ year amortization with a five year term if not a teaser rate? Mortgage brokers complain on industry blogs about credit tightening, more income verification and stricter appraisals. Why all that if we were lending conservatively before? They talk about doing more subprime deals today, and even second mortgages.

The fact is, I believe there’s a lot of mortgages carried on banks’ books classified as prime that are actually subprime, whether because income was inflated or falsified, an investment property was declared as a primary residence or the bank didn’t know how many other rentals the borrower had, an electronic appraisal overvalued the property, or the standards were just too generous before Flaherty, the bank regulator and the banks themselves tightened up. If a market rises long enough, it covers up all these sins, but if the music stops or unemployment blips up, the corpses in the loan portfolios start floating to the top.

#75 GBayBoater on 02.11.14 at 12:11 am

#36 Smoking Man on 02.10.14 at 9:07 pm

Yep. Almost there.

Soon Gotham will see the Bat signal in the sky.

#76 4 AM Sunrise on 02.11.14 at 12:12 am

#66 David Lee on 02.10.14 at 10:59 pm

A well-thought out analysis of what may or may not be going on in the BPOE.

And don’t knock bugs; they’re supposed to be the next gourmet trend!

So I notice that houses in Panorama Ridge, downhill from the British Properties in West Vancouver, are selling for $600k-$800k. Rents in the area are $1800/month for a 2-bedroom place. One year ago, those places were selling for $1 million and this one gorgeous 2-bedroom place was renting for $900/month. Can anybody out there explain what the deal is? Is this some kind of reversion to some mean?

#77 800 RMK on 02.11.14 at 12:16 am

Garth, from what I understand mortgage interest in the US is tax deductible. What would you estimate the normalizing factor to make Canadian and US debt levels more comparable given the deductibility of US mortgage interest (and the associated toys bought on LOCs).

I would think such a normalizing factor pushes Canadian debt levels above those of the US prior to the economic meltdown of 08-09.

#78 the Big C on 02.11.14 at 12:17 am

Evictions have nearly tippled in Kitchener-Waterloo these last few months. Why do you think that is?

#79 Rabbit One on 02.11.14 at 12:18 am

> Bank’s market linked GICs

* they are not cashable – ‘absolutely not’ except GIC holder(s)’s death.
Read small letters on GIC contract.
(yes, in this particuar GICs, you likely need to sign the contract)

Other vanilla GICs are possible to cash, (like bonds), based on circumstances.
(Tellers and new bankes’ may say no, but talk to senior bankers or managers. It is possible to cash out fixed GICs, you may lose principal, but get ful interest, just like sale of bonds before maturity)

* It is Purchase day vs: Maturity day market growth, not accumulated growth of the market.
Very different from other typr of market investing.
What if your market linked GIC maturity date is like the day 9/11?

* Banks take lots of margin on this derivative products. It is never a good deal even if you get the most possible return.
(9% over 3Y is less than 3% on compound basis, compare to the linked market growth, you figure)
– you may want to compare the sturcture note deals offered by same banks

* Worst of all, your “income” pays at maturity, not annual, besides it is interest income which is 100% taxable.
You invest $10K, get 9% maximum after 3 years, you are taxed $900 at your marginal tax rate on year 3 in chank.
(compare if you invest in other vehicle like ETFs or funds, or common shares, etc)

Lastly:
* You are helping bank’s mortgage fund, absolutely not cashable, backing 3Y or 5Y fixed term mortgage.
Bank’s business is lending money by depositors’ GICs.

#80 EdmontonGuy on 02.11.14 at 12:18 am

The Conservative government is scrapping Canada’s decades-old Immigrant Investor Program

HA HA in your face Garth !

As I pointed out many times, it was already suspended. — Garth

#81 meslippery on 02.11.14 at 12:30 am

I will agree that now is not the the time to buy real estate.
But if you bought 30 years ago?
Sure it is a good time to sell… then what? House Paid off
Total purchase price $120,000
Got a good house in a small hamlet, .5 acre stones throw
to the lake, 70 mins to downtown Toronto in the middle
of the night. (Forever at other times.)Tiny 1800sq Bug
with finished basement for off spring paying rent
Kids read (Adults in basement) Maybe working together
with the kids is a solution in these new times.

#82 P.Mansfield on 02.11.14 at 12:39 am

>>Inflation’s running at 1.2%.

Um..not in the real world. This is what’s known as the ‘official’ inflation figure, which is based on a basket of goods known not to increase in price very much (such as pocket calculators).

Garbage In – Garbage Out

#83 Bob Rice on 02.11.14 at 12:44 am

@#8 – “There will always be people wanting to come to Canada and there will never be enough housing inventory to accommodate them all.”

Um, not sure if you’re aware of this fact, but the US also receives a few immigrants. Their RE market still crashed. We also received plenty of immigrant in the later 80s and early 90s. Guess what? Our RE crashed at that time.

This argument doesn’t hold water.

#84 Google Trends on 02.11.14 at 12:46 am

http://www.google.com/trends/explore#q=debt%20help&geo=CA&cmpt=geo

#85 omg on 02.11.14 at 12:46 am

#50 Quebec Economist

So I am assuming that since all the underlying equities Dividend 15 owns pay dividends in the 3.5%-4.5% range, that Dividend 15 must be paying back part of the capital as dividend? So you are really getting repayment of your original investment or return of capital appreciation as part of your distribution.

Plus, in their annual report for 2013 the management expense ratio for the last 5 years has been between 1.2% and 2% – not bad compared to a mutual fund, but pretty stiff as compared just a plain jane TSX dividend ETF.

And in an ETF all your capital stays invested earning for you rather than being paid out.

Could be wrong here as I just took a quick look at the Dividend 15 annual report. But seems to make sense given its just a basket of TSX dividend payers.

As uncle Milty said – there is no free lunch.

#86 omg on 02.11.14 at 12:58 am

#58 Shawn – yes you may be right and things may be different in Canada. There is a probability that the housing market in Canada is fairly valued and will continue to chug higher.

BUT RE in Canada has become an investment as opposed to a “place to live”.

So if one looks at it as an investment are you better off from a probable return “point of view” putting your money in Canadian RE or putting it elsewhere?

I see the probable downside risks of Canadian RE much higher than many other investments, so am on the RE sidelines.

(Mind you I have seen 3 nasty Canadian RE corrections over the past 35 years – so maybe I am gun-shy)

#87 mousy on 02.11.14 at 12:59 am

Who is the homely animal beside the pig?

#88 Van guy on 02.11.14 at 1:15 am

“They increased in 2013, of course. Anyone taking a fiver today will double upon renewal. “— Garth

Rates arent going to rise much more. Equities will eventually pullback big and investors will flock to bonds. Do you really think that US stocks can keeping shooting to the moon?

#89 Andrew Woburn on 02.11.14 at 1:17 am

(UK) Rates start to rise on fixed five-year mortgages

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/10623812/Rates-start-to-rise-on-fixed-five-year-mortgages.html

#90 Vancouver GoinUp? on 02.11.14 at 1:26 am

I understand completely. You resent not feeling superior. — Garth
Guess you were talking directly to Flaherty. Stay tuned folks more news coming down the pipe. This does not bode well for Vancouver

http://www.theglobeandmail.com/news/politics/tories-new-budget-to-close-program-giving-investors-path-to-citizenship/article16792106/

#91 Nosty in MadLandVlad on 02.11.14 at 1:30 am

It seems Dad (Nostradamus Jr.) was right all along, when he prophesied the US would bankrupt TROTW, mainly through never-ending wars.

However, currency manipulation may be playing a small part as well. Several western currencies have declined against the US$. The Big Three received nice bailouts after the GFC, but now Toyota is quitting Oz.

As well, Angry Seas / Weather and Heathrow is now only 24 feet above flood levels. The Thames is flooding Egham and another town, Staines which is west of central London. Staines is just 2.5 miles from Heathrow.

Elevation of Staines 18m. (59 feet give or take)
Elevation of Heathrow: 26m. (85.3 feet or so).

These are really interesting times we live in!

#92 James on 02.11.14 at 1:31 am

Garth, dig deeper into your data. The ones who are pushing Toronto SFH prices to this level are the ones making the big bucks with family income of 200k+. Not some college grads. Forget about the condos, it’s so passe.

#93 Andrew Woburn on 02.11.14 at 1:34 am

End of the line for Australia’s car makers

http://www.telegraph.co.uk/finance/newsbysector/industry/10629888/End-of-the-line-for-Australias-car-makers.html

#94 T.O. Bubble Boy on 02.11.14 at 1:37 am

Is there anyway to close some loopholes in Toronto and rid ourselves of a fat, ignorant, crack-smoking temporary worker from the foreign land of Etobicoke?

#95 Vancouver GoinUp? on 02.11.14 at 1:38 am

OUCH! Yeah yeah I know its about jealousy but still worth a read
http://www.scmp.com/news/china/article/1422480/exclusive-how-mainland-millionaires-overwhelmed-canada-visa-scheme

#96 Canaan on 02.11.14 at 1:57 am

Take this from someone with considerable experience in financial compliance, stay away from market-linked GICs unless you know what you are doing. These products are rated high risk and you pay a pretty penny to own them.

#97 I_AM_HAM on 02.11.14 at 2:06 am

You must watch the new immigration policies being changed by the CPC with extreme caution. Harp’r people very sneaky.

They rename new HAM immigrants ‘nouveau riche’ and rename
Canadians ‘nouveau poor’ ;-)

#98 sideline sitter on 02.11.14 at 2:15 am

#42 – I hope you didn’t amortize over 25 years each time?
you’ll want to pay off that mortgage at some point!

#99 Edmonton Dave on 02.11.14 at 2:18 am

Hey Folks, Alberta is definitely slowing down in a bad way, and some houses here are underwater already. A snotty waitress and her husband recently split up, now they can’t sell for what they owe. They can’t even rent it out to cover the mortgage. Low downpayment, slack lending standards, and two starry eyed kids are sure hooped right now. Their credit will be destroyed for years. Sucks to be them.

#100 Watch on 02.11.14 at 2:30 am

Watch out, listings in Vancouver are about to explode with the announcement of the end of the program. She’s going to be a very interesting year, but 2015-2016 will be even funnier. SHTF is a coming

#101 Fed-up on 02.11.14 at 2:43 am

@#47 crowdedelevatorfartz on 02.10.14 at 9:41 pm

Ahhhh yes, good ol’ Temple. Has nothing of substance to offer so he resorts to childish taunting and picking on typing errors with what he believes is his razor sharp wit. Don’t you dare have a single derogatory comment about the public sector. According to Shemple, it is stacked with Canada’s sharpest minds and hardest working individuals who deserve every dime they earn (drain) from the public. He doesn’t have a single fact or argument to offer to support such mindless, self-serving drivel mind you, but it must be so because Hemple simply says so, while using his online thesaurus to post his lame ass attempts to be clever and and oh so sarcastic.

I have some news for you pimple err I mean Temple. Most (mot all) cops, postal, TTC and hydro workers that I’ve met had a solid career at the local Pioneer gas station waiting had they not weaseled their way into a cushy, overpaid, insanely pensioned public sector hobby err I mean job.

Real talk pal.

#102 raisemyrent on 02.11.14 at 4:04 am

#48 Aggregator on 02.10.14 at 9:47 pm

yikes. where to start, ok:

are you implying that HAM makes bubbles here because it makes it in Hong Kong? Surely you are aware of the set of circumstances that have fuelled HK’s bubble, and surely you wouldn’t try to apply them to our entire country. Hint: land size and political changes.

you can’t just hire your relatives and get “fast-tracked”

first, go here and see what you are calling fast:
http://www.cic.gc.ca/english/information/times/index.asp

you need a labour market opinion most of the time, and certifications for trade, etc.

the government is in the business of keeping students around because they used to leave, yes, many asians, I went to school with many, because even with international student tuition premiums (did you know about that?), in most provinces, the government is STILL subsidising their education. Therefore, if they were to leave, they would literally cost us money (plus the spot they used for that degree throughout that time). It’s in our best interest for students to stay here. Surely someone who comes here to study hard (sometimes harder) and wants to stay and work deserves a chance to contribute to society. What is less Canadian than that?
btw foreigners can’t get student loans.

The “grandma and grandpa” programme was suspended for years due to a huge backlog, and they tightened the rules and brought it back with limitations; you have to show T4s for the previous 3 years and sign a commitment for the rest of their lives etc, they also only allow 5,000 applications per year as of Jan 2014 and surprise surprise they’re all gone by now.

the language test is actually a commonwealth english test (that surprised me), and has a listening part, and a writing part (can’t fake an essay). EVERYONE has to take it to become a resident (I know a few people from England that have had to write it lol), and surely you don’t believe that you can be on your phone during the test to get the answers, hehe.
That app is for studying (which I hope is fine), and it is for the CITIZENSHIP test, which is a different monster, and comes a while later, and which I would invite you (and everyone) to try, it’s not as easy as you’d think. Here’s 5 sample questions:
http://www.yourlibrary.ca/citizenship/

I hear that if you get them all right 3 times in a row, you get a BitCoin.

reminds me of that poll they posted on CBC some time ago, where I think 30-40% of people couldn’t choose the correct head of state from Canada out of 3 (sorry I couldn’t find the link)

by the way, when Stats Canada released their latest, most immigrants these days come from India, and punjabi has surpassed Chinese (both). Just saying.
(no link, sorry, heard it on radiocanada “premiére”)

I’m not having a go mate, it just seems like you had your opinions, did minimal research, and then stuck to the same opinions.

p.s. wikipedia to the rescue:
“In 2002, the majority polled thought the prime minister was head of state, only 5% knowing it was the Queen.”
ref. 49 from:
http://en.wikipedia.org/wiki/Debate_on_the_monarchy_in_Canada

#103 Buy? Curious? on 02.11.14 at 4:16 am

A tribute to Canada’s highest grossing film to date.

http://www.youtube.com/watch?v=f8nb2K7BmcE

#104 1% Doomer on 02.11.14 at 4:41 am

@ #42 Realtor #1 GTA

If you had a 500K mortgage @3%($2103 per month) and then you renewed your mortgage five years later @4% the carrying cost would be the same ([email protected]%=$2111 monthly)
Lets say it was 4.5% it would be= $2238 only a 138$ more on a half a million mortgage.

——–

And this is why we are in trouble. Misleading stats from a profession of real estate pumpers. The missing information rom your post is:

Your mortgage amount for the $500k mortgage assumes a 30 year term. Your argued ‘artificially low’ second monthly number in the event of a 4% correction assumes that the person will not renew his 30 year mortgage (ie pay years 6-10), but refinances the whole principal under an all new 30 year mortgage. By this (your) scenario, this person may never pay off the mortgage is they continue getting a new 30year mortgage every time rates go up.

The real monthly payment increase is much larger if you kept the same mortgage, and renewed at an additional 1%

You and your shady and misleading stats manipulation have been BUSTED

#105 Jay on 02.11.14 at 6:47 am

It is amazing the people going “we’re never going to get bitten by high debt levels!”

Reminds me so much of 2005, when Americans were convinced mortgages were going to rise forever.

Eventually, you’re not coming against economics, but personal finance: eventually there is simply no more money to spend.

Let’s see if the hydro company or the grocery store or the bank accepts “my house is worth a lot of money” for payment. I’m guessing that’ll go about as well as you’d expect.

#106 OR Best Offer on 02.11.14 at 8:12 am

A younger co-worker said yesterday he’s going to the bank with this year’s property assessment. It’s gone up again, so he’s going to max out (again) to the 80% you’re allowed to borrow from the supposed equity. Considers it money earned, like a dividend.

#107 Ralph Cramdown on 02.11.14 at 8:43 am

#63 James — “CPI is not an accurate measure of what average families spend their money on. Food, gasoline, housing. If you use a proper basket of goods you’d see far more than 1.2%.”

Did food go up that much? Because gasoline is right where it was a year ago (Canada average price*) and my housing cost, including utilities, went up the Ontario guideline amount of 0.8%.

* – See for yourself at http://www.torontogasprices.com/Retail_Price_Chart.aspx

#108 jess on 02.11.14 at 8:48 am

NDP critic calls for crackdown on ‘ghost’ immigration swindlers
By Jeremy J. Nuttall
Published February 4, 2014 03:00 pm | No comments yet

The federal Opposition Critic for Employment and Social Development says more policing of immigration consultants is needed after a Tyee series on the Temporary Foreign Worker Program exposed abuse of would-be immigrants by such organizations.
http://thetyee.ca/Blogs/TheHook/2014/02/04/Sims-On-Ghost-Consultants/

=

http://www.albertacanada.com/employers.aspx

Oilsands jobs being taken by temp foreign workers, union saysCBC.ca ‎- 3 days ago
The federal government says it is investigating claims that dozens of Canadian oilsands workers in Alberta were laid off and replaced with …

Local

Ironworkers replaced with TFWs still not rehired
Despite promises to rehire Canadians who were replaced by foreign workers last week, Pacer Promec Joint Venture still has not offered the affected workers their jobs back.
http://www.fortmcmurraytoday.com/news

Suncor begins testing automated trucks | Fort McMurray Todaywww.fortmcmurraytoday.com
http://www.fortmcmurraytoday.com/…/suncor-introduces-automatic-trucks Suncor begins testing automated trucks | Fort McMurray Today
Nov 5, 2013 … Suncor —Canada’s largest oilsands companY— is the first mining … of automated trucks have been introduced into Australian iron mines as

#109 jess on 02.11.14 at 8:55 am

dividend washing

Taxpayer Alert describes certain complex highly structured investment products that seek, amongst other things, to transfer franking credits. These products claim to offer investors (the taxpayers) exposure to a portfolio of listed securities and the benefit of franking credits whilst using a derivative instrument to effectively transfer the risk of investing in those securities from investors to the derivative counterparty.

Imputation benefits (including franking credits) may attach to distributions paid by a company. An important principle underlying the imputation system is that imputation benefits should only be available to the true economic owners of the company
http://law.ato.gov.au/atolaw/view.htm?Docid=TPA/TA20123/NAT/ATO/00001

Investopedia explains ‘Cum Dividend’

Cum dividend means “with dividend.” A stock trades cum-dividend up until the ex-dividend date. On or after this point, the stock trades without its dividend rights.

#110 rosie "moving forward" in the knowledge that, "this won't end well" on 02.11.14 at 9:03 am

The point about people bailing on their investments and cashing out is valid. Easy come, easy go.

http://www.canindia.com/2014/02/foreign-investors-are-distorting-the-real-estate-market-in-canadian-cities/#

#111 valleyrenter on 02.11.14 at 9:34 am

#36-SM, first thing I saw was Batman.

#74-Ralph Cramdown, “the corpses in the loan portfolio start floating to the top”-that’s awesome, one could even say this whole RE mess is like a turd that won’t flush.

#112 Shawn on 02.11.14 at 9:41 am

Partial Agreement

Ralph at 74 said:

Here’s what I see: At peak, both Canada and the US had (have) similar average household incomes with income distribution not too far apart, and similar home prices and homeownership levels. How could that translate to them having vastly more subprime loans than we do?

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

As always you make good points. But we know that sub-prime and liar loans and NINJA loans were systemic in the U.S. A lot more separation between the borrower and the funder of the mortgage occurred and still occurs. (much more securitization occurs in the U.S., in Canada ONLY CMHC insure mortgages are securitized, in the U.S. all kinds of garbage was securitised.

As far as five year rates are teaser, yes those could increase. But in the U.S. they had really low negative amortization mortgages. They also has interest-only mortgages. True teaser loans.

In summary, TONS more sub-prime in the U.S.

To be clear I take no particular position on home prices in Canada. If interest rates rise a bit the Canadian debt to income line must come down. But if interest rates remain low the American debt to income line will likely rise.

Son of Ponzi, thanks for the support on the Y axis matter.

#113 Mark on 02.11.14 at 9:43 am

@ #42 Realtor #1 GTA

Wow, that was embarrassing to read. Which brokerage do you work for, so I can know never to do business with them?

#114 Castaway on 02.11.14 at 9:44 am

#85 omg on 02.11.14 at 12:46 am
#50 Quebec Economist

So I am assuming that since all the underlying equities Dividend 15 owns pay dividends in the 3.5%-4.5% range, that Dividend 15 must be paying back part of the capital as dividend? So you are really getting repayment of your original investment or return of capital appreciation as part of your distribution.

Plus, in their annual report for 2013 the management expense ratio for the last 5 years has been between 1.2% and 2% – not bad compared to a mutual fund, but pretty stiff as compared just a plain jane TSX dividend ETF.

And in an ETF all your capital stays invested earning for you rather than being paid out.

Could be wrong here as I just took a quick look at the Dividend 15 annual report. But seems to make sense given its just a basket of TSX dividend payers.

As uncle Milty said – there is no free lunch.

—————————————————————

Quick look at summary page of Prospectus looks like they are also entitled to 20% of gains above a threshhold. Just buy yourself a Cnd dividend ETF. This one looks more like a hedge fund where manager is guaranteed returns and investors foot the bill.

#115 GBayBoater on 02.11.14 at 9:57 am

#106 – OR Best Offer on 02.11.14 at 8:12 am

Given that kind of thinking I don’t think house prices will tank in any significant way until one thing happens. Interest rates have to go up making it impossible for the over extended to pay their bills. And even then, there will be a time lag while credit cards are maxed out and new cards are obtained to pay the minimum monthlys on the old ones. I have seen it happen. And if they have fixed mortgages, it could be years before the three percenters are reset.

Is it coming? Yes. When? Who knows. There are just too many variables.

#116 David W on 02.11.14 at 10:08 am

Garth,
Your post today should be about the federal budget — break it down for the little guy and what it has in store for the wallet of the average Canadian.

Thanks

I do not expect much. — Garth

#117 quebec economist on 02.11.14 at 10:17 am

Thanks #85 and #114

Yeah I know that the firm takes profit. However considering the good returns in the last 10 years I thought it might be ok. I don’t like buying things that I don’t truly understand or that are actively managed. For my dividend I will stick with my BBO etf.

Thanks again!

#118 Buy? Curious? on 02.11.14 at 10:27 am

Hey Garth, are you sure that isn’t a photo of a journalist of a major newspaper advertising to meet other local swingers?

http://www.youtube.com/watch?v=O5v-6_6qat4

Rob Ford 2014 because being fat is not a crime.

#119 Stickler on 02.11.14 at 10:28 am

@ #219 TEMPLE on 02.10.14 at 7:30 pm

#218 Stickler on 02.10.14 at 7:04 pm

No where did I say teaching was easy, or not worthy of professional compensation.

What I said was “your comment that teachers work their asses off for peanuts is pure fiction.”

Right, you didn’t outright state teaching was easy, you just implied it. Your essential (and incorrect) meaning is that teachers are overpaid, i.e., they have it easy. You can quibble all you want over semantics and the definition of “easy”, but the fact is your whinging and jabbing at people who do valuable work for fair (at best) pay simply comes off as jealous and/or misinformed.

TEMPLE
———————————–

I implied no such thing…you inferred it.

Lets look at reality

-> “work their asses off”.

-> “for peanuts”.

Now, anyone can look up what teachers make, working hours, pension, relative job security.

Care to calculate the present value of a teacher’s pension?

“At the five-year rate, an elementary teacher at the Waterloo Region District School Board is earning $66,893 and according to Johnson, that puts teachers at the 75th percentile — meaning only 25 per cent of Canadians earn more than them. At the 10-year rate, a teacher earns $88,759.”

…add to that benefits & pension.

Peanuts!? gimme a break.

#120 Kanatians not ready to stand-up GLOBALIZED home prices on 02.11.14 at 10:43 am

Kanatians not ready to stand-up GLOBALIZED home prices – so I say, repent, accept with humility that HAM drives kids to burbs or to leave major urban centers or pile in tiny no-future condos downtown (ahh, they found a niche).

GARTH IS A DREAMER. SINGLE DETACHED IN TORONTO will reach 1.3 mil from $888,000.00 currently. WAKE up and realize the definite possibility Toronto will raise to Vancouver prices in 3 years.

GOVERNMENTS ARE COMPLICIT – SINCE THE GLOBAL ORDERS ARE SWIFT AND MUST BE COMPLIED WITH PLUS KANATIAN SUBJECT OF THE NEO-GLOBAL-COLONY will have to pay double the head-property tax due to doubling house prices every 5-10 years.

I bet no one will oppose the political trend, kanatians were not even capable of a revolt 200 years ago.

The Upper Canada Rebellion was an insurrection against the oligarchic government of the British colony of Upper Canada (present day Ontario) in December 1837

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

#121 live within your means on 02.11.14 at 10:48 am

I realize this is not a political blog so Garth may not wish to post the following. I do think this should of concern to all Canadians. I know I’ll be sending the 2 links to family & friends.

http://news.nationalpost.com/2014/02/10/fair-elections-acts-change-to-vouching-for-voters-without-id-could-be-unconstitutional-critics-say/

http://fullcomment.nationalpost.com/2014/02/07/andrew-coyne-what-problems-are-the-conservatives-really-trying-to-solve-with-bizarre-fair-elections-act/

#122 Dupcheck on 02.11.14 at 11:03 am

#27 David Lee

Finally… about time they found out the math did not add up with that type of program in place.

Wake up Canada, your youth is falling into pessimism…

#123 Daisy Mae on 02.11.14 at 11:06 am

#12 UncleD: “Earn up to 9% interest per 3-year term
based on market performance†”

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

“Up to” and “based on market performance” should send up red flags.

#124 Ralph Cramdown on 02.11.14 at 11:21 am

#112 Shawn — “[…] But in the U.S. they had really low negative amortization mortgages. They also has interest-only mortgages. True teaser loans.

In summary, TONS more sub-prime in the U.S.”

Do NOT fall for the US national housing bubble mythology. After the bust, there was a rush to blame “others,” the worst of the worst lenders and borrowers, or sometimes Fannie and Freddie. But even at the peak, most homes were either paid off or financed by a prime fixed rate 15- or 30 year loan. Look at prime vs. subprime percentages here http://www.calculatedriskblog.com/2011/05/mortgage-delinquencies-by-loan-type.html and consider that not all subprime was horrible — many borrowers had real jobs to cover their payments, but blemished credit. Prime borrowers who withdrew much of their phantom equity as HELOCS and spent it on toys or just paid stupid-high prices for their houses didn’t want to admit to themselves what fools they’d been, so the rationalizing and finger-pointing began.

I’m not saying there weren’t a lot of really crappy loans written in the US, just that the percentage and the effects are exaggerated by people looking for a scapegoat.

Canada had interest only loans: When CMHC was insuring 0 down 40s, the first ten years were allowed to be interest only. And a few years ago when I inquired about a 20% down prime purchase mortgage, Scotiabank offered to do the whole thing as a non-amortizing HELOC.

This is a great story:
http://www.nytimes.com/2009/05/17/magazine/17foreclosure-t.html?pagewanted=all
And I bet we have enablers just like the mortgage broker in the story right here in Canada. Note how small the numbers look, and that he got a decent two storey in suburban Washington. What would $460,000 buy in a tony suburb of Toronto or Vancouver today?

#125 Shawn on 02.11.14 at 11:32 am

American Debt Levels

Americans should be rushing to borrow more when they can lock in 30 year rates at near record lows. And when their house prices in many areas are still cheap.

They should, they can, and I suspect they will. Watch for an uptick in American mortgage debt to income.

Spoken like a Canadian. Actually the busiest US mortgage activity is with refis, which is intensely rate-sensitive. — Garth

#126 High Plains Drifter on 02.11.14 at 11:51 am

It is different in Alberta. H.A.M. stands for “Hot American Money”. I hear in other parts of the country it can variously stand for Hot Asiatic Money. By the way, H. Clinton is to be a Calgary visiter. Now it is pay to play time on the east side of the Rockies, oh say to 1,800 ft above sea level. I am so glad the P.M. will probably be home from his hilarious, good will tour. Stand by for orders.

#127 TS on 02.11.14 at 12:08 pm

And, yes, this is with 3% mortgages. Not like in 2007, when they were 7.1%. Just stop and imagine that for a moment, because those days will return again.

But it just doesn’t come back 7.1%! that is the reason you may or may not know.

#128 Aggregator on 02.11.14 at 12:09 pm

The other subprime crisis that nobody is talking about:

Canadian banks hit accelerator on U.S. auto loans; Moody’s raises red flag

According to Moody’s, TD’s auto loans represent about 15% of total U.S. loans, while for BMO it’s around 12%.

Plan on buying a new car or truck? Don't. There's going to be a flood of inventory as GM et al stuff dealers with loads of inventory, forcing dealers to liquidate lots at discounted prices over the next year or so.

#129 The chart line is getting weak on 02.11.14 at 12:11 pm

That red line on the chart is definitely losing steam….reminds me of many stocks over the years that corrected 20-30% after a run like that for years.

#130 Bottoms_Up on 02.11.14 at 12:13 pm

#119 Stickler on 02.11.14 at 10:28
——————————————–
You conveniently left out that the starting wage for a teacher is $45,000 – 55,000, after having put in 4 years of post secondary education ($100,000 debt?). In major cities this wage thus puts your child’s teacher in a scuzzy rental in a shady part of town.

They also work extra hours/overtime (for no pay), and for the most part truly care about our children. You also forget that they pay a hefty sum into their pension plans, and that their sick leave benefits have been under attack.

I suppose you think nurses, police and fire-fighters are overpaid too?

A pure race to the bottom, thanks for supporting it.

amhttp://www.theglobeandmail.com/news/national/education/anatomy-of-an-ontario-teachers-paycheque/article6015968/

#131 Smoking Man on 02.11.14 at 12:18 pm

#120 Kanatians not ready to stand-up GLOBALIZED home prices on 02.11.14

I would tend to agree with you, but then there is the variable of the Wynnut. Actually no variable at all. If she wyins Ontario, every man, woman, child and dog is doomed. I Google her, she’s all about school, has no concept of business. Her and her tree hugging followers believe money comes falls from trees, anti business, pro Union far left of the NDP.

She will give what ever teachers and unions demand. I’m starting to think that Who-Dat works in stealth for the tree huggers. Sabotages his own party over and over. Does not know how or refuse to capitalize on the Tree huggers mistakes. No one, even when trying to be that stupid is that stupid.

She doesn’t quite realize with all her illustrious schooling that hard working smoking men and women vote with their feet. Under free trade we can move our business anywhere in North America faster than a rainbow flag can get hoisted at City Hall.

Bottom line, she don’t know that money doesn’t grow on trees, and but has a bottomless apatite for it.

#132 Capt. Obvious on 02.11.14 at 12:43 pm

The awesome part about all this is when the inevitable occurs, people will deny it’s happening, then they’ll recoil with fear when they realize too late they’re losing money on paper, then they’ll try to sell and downsize so they don’t ‘lose’ so much, and off we go. Human nature.
People didn’t believe the late 90s tech boom was over until it was too late too. The same will happen with real estate.

#133 pinstripe on 02.11.14 at 1:04 pm

DO NOT expect anything worthwhile in todays F Budget.

Harpo et al have been successful in destroying most of the middle class, and now F is puffing up to HELP the same people his policies destroyed. Typical smoke and mirrors. In the meantime, hang on to your wallet.

Typical BS — Redford apologizes for $45K Africa trip – but says she’s not willing to pay the costs. So WHY did she take the time to apologize? Yep, she says she is sorry but does it anyway. I hope a lot of Albertans will remember this act come the next election.

I spoke to many politicians about their having a blog. Their immediate response is that a blog will not provide the true message from the people because the blog can be manipulated by the owner, allowing only posts that carry what is favourable to the owner. It is interesting how the masters of manipulation do not trust the power of manipulation.

Are we are in an era that NO ONE, from the pillars of our society, can be TRUSTED?

#134 Realtor #1 GTA on 02.11.14 at 1:09 pm

Vamanos Pest , 1% Doomer

The point is carrying cost!! Even with a 1.5% increase doesn’t matter if you have a 25y or 30y amor rate its about 150$ per month for the 500kmortgage. if rates go up a full percent the carrying cost is the same. It will not cause people who already own out of their home to sell it. Thus driving up supply.

This market is strictly supply and demand

But you are right is should effect resale value, although in the last year the affordability has decrease and prices has stayed static.

#135 Aggregator on 02.11.14 at 1:15 pm

BC Household Debt Per Capita Growth Rates (Quarterly YoY%) – Chart

BC Average Weekly Earnings (Quarterly YoY%) – Chart

BC Employment To Population Ratio (Monthly) – Chart

When you find where all this money to pay for million dollar homes is coming from, you let me know.

#136 Bottoms_Up on 02.11.14 at 1:16 pm

#107 Ralph Cramdown on 02.11.14 at 8:43 am
————————————————-
What CPI does and how they keep inflation numbers artificiallly low is that they DO NOT account for changing product size/quality, and they consider that a consumer will substitute similar products. So if cheese goes up 100% over a decade (which it did, if you look at ‘blackdiamond’ brand only, and consider they use to sell 650g blocks), but they consider that a consumer can buy a different brand (no name) today of 500g for roughly the same price as 10 years ago, voila, inflation is negated.

A horrible practise that really should and needs to be standardized.

#137 Fed-up on 02.11.14 at 1:17 pm

@#129 Bottoms_Up on 02.11.14 at 12:13 pm
———————————————————————-

Since when is a starting salary of $50 k plus full benefits, insane amounts of days off and sick days, along with an unsustainable pension, for 9 months work and off by 3 pm that rockets to over $90 K in a matter of years considered a job that puts someone in the slums?

What world do you live in?

#138 Suede on 02.11.14 at 1:25 pm

BitCoin taking it on the tail side of the coin today.

Side note: Ever notice that the % symbol contains 1 0 0 with the 1 and 0 switched. Maybe that’s why it’s per cent (per hundred).

The More You Know

#139 Bottoms_Up on 02.11.14 at 1:36 pm

#101 Fed-up on 02.11.14 at 2:43 am
——————————————
How do private companies make money–how are they able to pay their workers? Underlying your ‘arguement’ that the public sector is a drain–guess what? They provide services for money, on behalf of the public (and in the vast majority of cases, puts the public good ahead of any profiteering). The private sector also provides services for money, on behalf of the public (but for the most part puts profiteering ahead of the public good).

How do private sector companies make money? By selling and marking up goods and services to the public. Guess what? The public gets something in return for paying for it. So it’s the same regardless of which system you’re looking at — people are paying for goods and services they (or the community) receives.

There are also many, many private sector companies that benefit from contracts received through public sector outsourcing. Again, it’s the public paying for services, but this time the money if funnelled first to the public sector before landing in the private sector.

Sounds like your arguement (whatever it is) doesn’t hold much water….

If you want to talk worker efficiency, there are fabulous and underperforming private sector workers, just as there are fabulous and underperforming public sector workers.

If you want to talk taxes and cost of services, why don’t you talk to someone that has had a premie in the hospital for the first month of their lives…cost to the family is minimal, yet the actual cost for this service could be upwards of a hundred thousand dollars. It makes sense to have a public health care system. I am at peace knowing my tax dollars go to support that family with a premie that needed intensive medical care.

#140 Rabbit One on 02.11.14 at 1:42 pm

>#134

I also pointed out before on claims: at renewal no change (or no big difference) on payment in case of rate increase – “only if you extend your amortization, or refinance”

But I don’t blame you if you are a realtor.
Real estate buyer likes this phrase, this will take of the fear of rate increase, sounds like purchasers are eternally rate increase proof.

I also found banks are still very generous on extending amor. or refinancing on existing mortagees.
Homeline, Line of Credit (Demand loan type) also make it possible to select any amortization at renewal.
(not possible with conventional type)

#141 thoughts on 02.11.14 at 1:46 pm

These are strange times. Most of the women that I know are stay at home moms. The career ones have slowly been pressured to give up the career and also stay home or do small self employed work. The men have either had to step up their game or their incomes have stayed stagnant. Very few people that I know invest in the markets. The majority invest in real estate. There are a number of people who will be putting their new builds on the market this spring, hoping to make a profit. Everyone and their uncle is a real estate developer…. They see themselves as the creme of the crop, living in the best neighbourhoods. Giving others advice. I recently looked at my own situation. Investments are in the positive… not super positive due to the downturn when we originally invested and unfortunately were not diversified enough and jumped in during bad timing… but the money is positive. I earn less… family responsibilities. Spouse earns more… puts more time into work then I do. Definitely in the top percent of income earners… but lots of it stays in the corporation. Living far below our means. Our situation is positive and in theory will get better provided good health continues. The point is there are many many who are not in a good situation. Using cash advance services, home equity lines of credits…. etc. I hear everyday from people that they are tight for cash. Tight for cash on a daily basis not including planning for retirement. We are definitely in a situation of haves and have nots. The divide is greater then ever… but it may not be.. because some who appear to be doing well have taken on more then they can handle. My approach.. use low interest rates to pay off debt and invest the rest. So far has put us in a very favourable situation at a young age.

#142 Bottoms_Up on 02.11.14 at 1:52 pm

#67 World According To Garth on 02.10.14 at 11:00 pm
——————————————————-
Hey McFly, let’s talk your tax issue again.

A newly minted grade 2 teacher, earning $45,000 a year (gross wages), actually gets paid $36,000 (net wages):

http://www.taxtips.ca/taxrates/on.htm

So the public is getting a service, and instead of it costing them $45,000, it costs them $36,000. It’s not that hard to figure out, it’s NET dollars that comes out of the public purse to pay that individual.

#143 Old Man on 02.11.14 at 2:08 pm

#136 Bottoms_Up : There is no inflation? It was bad enough that there were no grocery sales to hoop this week, and my delivery bill came to $131.00 from Metro. I told my guy one T-Bone steak, and said was lucky as just one left for me; almost died $17.31 or $18.00 per lb. Got my haircut done last week with a gal filling in for another, and went from $23.00 to $30.00, so said my tip was included in my payment to get a lecture about the price of gas.

#144 Ralph Cramdown on 02.11.14 at 2:21 pm

#136 Bottoms_Up — “What CPI does and how they keep inflation numbers artificiallly low is that they DO NOT account for changing product size/quality, and they consider that a consumer will substitute similar products.”

You need to look at the big picture. We tend to notice when prices go up or package sizes shrink — I sure do. The person I was originally responding to just threw “gasoline prices” out there and expected everyone to agree that they’ve gone up. Well, they have since I was a kid, but they haven’t in the last year. And since the overall Canadian light vehicle fleet is more fuel efficient this year than it was last year, we’re spending less per km driven.

Even though food prices are going up, Canadians spend less of our budget on food than we used to. Take a look: http://www23.statcan.gc.ca/imdb-bmdi/document/2301_D49_T9_V1-eng.htm
Does this jive with your experience, that elsewhere Canadians overall are spending less on booze, smokes and clothing, more on recreation and schooling? That’s my impression.

Everybody without a fat, indexed pension needs to be concerned with inflation, to the extent that they choose investments that will hold their value or grow in real terms. BCE just upped the dividend by 6%. Complaining that the orange juice cans shrank or that switching to pink salmon from sockeye is an affront? It just seems petty.

#145 X on 02.11.14 at 2:23 pm

#88 Van guy on 02.11.14 at 1:15 am
“They increased in 2013, of course. Anyone taking a fiver today will double upon renewal. “— Garth

Rates arent going to rise much more. Equities will eventually pullback big and investors will flock to bonds. Do you really think that US stocks can keeping shooting to the moon?

Garth, upon reading posts like this, how about one day posting about how you expect rates to rise and why, and some of the influencing factors.

I don’t have to be convinced that rates have no where to go but up, but it appears some do. How soon, I don’t know, but inflation could come into play towards the end of the year with a Cdn dollar below 90c, US recovery will eventually result in the US raising their own lending rate, as well as the related impact of the bond market onlending rates.

#146 bill on 02.11.14 at 2:47 pm

#76 4 AM Sunrise on 02.11.14 at 12:12 am

#66 David Lee on 02.10.14 at 10:59 pm
I agree with you Sunrise.a reasonable analysis.
David : could you elaborate a bit on the ‘ham = poverty?
Thanks.

#147 Bottoms_Up on 02.11.14 at 2:49 pm

#144 Ralph Cramdown on 02.11.14 at 2:21 pm
———————————————–
The miscalculation of the CPI is an affront because it’s upon which wages are negotiated (both private and public sector).

The proof that it’s an affront is that living standards have steadily eroded for decades.

An BCE upping their dividend is proof that they’re screwing the consumer to such an extent that they can reward their shareholders.

#148 Bottoms_Up on 02.11.14 at 2:55 pm

#143 Old Man on 02.11.14 at 2:08 pm
—————————————–
My point exactly, the official line is that there is no inflation, but your grocery, heating, water, electricity, gasoline, propane, oil, clothing, fitness and tax bills are steadily increasing. Not so much with wages.

Funny how Ontario only has the balls to increase the minimum wage after the USA significantly ups theirs. Can’t have the tax farm slaves fleeing to a land with a much lower cost of living and higher minimum wage now can we?

#149 pinstripe on 02.11.14 at 3:01 pm

#139 Bottoms_Up

If you want to talk worker efficiency, there are fabulous and underperforming private sector workers, just as there are fabulous and underperforming public sector workers

—————————————————————-

Yes, that is sortta right, however a clarifier would be appropriate at this time.

In the private sector a poor performer, regardless of position in the organization, is moved out the door as soon as possible, whereas in the public sector a poor performer can look forward to be protected by the organization. It is easier to promote this poor performer to another department than making any attempt to move that poor performer out the door. The public sector system will provide a lot of additional training to improve the performance but ends up being a waste of taxpayer money. These poor performers end up spending their entire career sucking the system. OTOH, an excellent performer in the public sector is punished by assigning more challenging tasks and kept in their current position because someone has to do the job now.

Many taxpayers are becoming aware of the workings within the public sector and are yelling “the BS must STOP now”.

#150 Holy Crap Wheres The Tylenol on 02.11.14 at 3:30 pm

#131 Smoking Man on 02.11.14 at 12:18 pm
#120 Kanatians not ready to stand-up GLOBALIZED home prices on 02.11.14

I would tend to agree with you, but then there is the variable of the Wynnut. Actually no variable at all. If she wyins Ontario, every man, woman, child and dog is doomed. I Google her, she’s all about school, has no concept of business. Her and her tree hugging followers believe money comes falls from trees, anti business, pro Union far left of the NDP.
……………………………………………………………………..

She will give what ever teachers and unions demand. I’m starting to think that Who-Dat works in stealth for the tree huggers. Sabotages his own party over and over. Does not know how or refuse to capitalize on the Tree huggers mistakes. No one, even when trying to be that stupid is that stupid.

She doesn’t quite realize with all her illustrious schooling that hard working smoking men and women vote with their feet. Under free trade we can move our business anywhere in North America faster than a rainbow flag can get hoisted at City Hall.

Bottom line, she don’t know that money doesn’t grow on trees, and but has a bottomless apatite for it.

_____________________________________________

I can’t believe it again Smoking Man made sense, and I understood his message. Well done Smoky.

#151 We dont get ruled again on 02.11.14 at 3:31 pm

Are we are in an era that NO ONE, from the pillars of our society, can be TRUSTED?
—–

No one. It’s like infidelity, when trust has been broken it’s broken forever. When I hear anything from MSM or from the government, if don’t believe it. They have to prove it to me double or triple. All our rulers have sore arms form saluting false flags. We don’t have a government, or a ‘dollar’, we have a counterfeit dollar,
colonial scrip would be better. Canadian Tire money is more legit that what we have

#152 Bottoms_Up on 02.11.14 at 3:37 pm

#137 Fed-up on 02.11.14 at 1:17 pm
—————————————-
You can talk the talk but can you actually look at reality?

$50,000/yr

Monthly NET income [after pension contribution and union dues]: $2900

Monthly bills:
Rent: $1200
Food: $400
utilities: $200
Car lease/gas/insurance/maintenance/parking: $750
Phone/Internet/tv: $200

So this person is left with $150 every month for everything else in life (clothes, furniture, fun, savings, copayments, haircuts, printer ink, toilet paper)….and you’re saying they live high on the hog???????

God help them if they want to save for a vacation, a downpayment or have a family.

#153 Ralph Cramdown on 02.11.14 at 3:40 pm

#147 Bottoms_Up — “The proof that it’s an affront is that living standards have steadily eroded for decades.”

You just tell me which decade you’d prefer living in over today, and I’ll respond with a list of how things sucked back then.

“An BCE upping their dividend is proof that they’re screwing the consumer to such an extent that they can reward their shareholders.”

EXACTLY! Except that when I was growing up, you had to rent your phone from BCE for a few dollars a month (extra for touch tone), and long distance was so expensive that, when I moved away to school, I’d get calls from home either early in the morning or late at night to get the “midnight rate.” Those were the days! BCE now earns most of its income from selling services that didn’t even exist when I was a kid.

BCE’s “churn rate” improved in their last quarter, so, to the extent that they’re screwing their customers, they’re using more lube than the competition.

#154 shawn on 02.11.14 at 4:20 pm

American Debt

Response at 125:

Spoken like a Canadian. Actually the busiest US mortgage activity is with refis, which is intensely rate-sensitive. — Garth

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

Excellent point! Americans not only can lock in an interest rate for 30 years. It can’t rise. But if market interest rates happen to fall they are allowed to break out of the mortgage and refinance at a small fee.

Oh, and mortgage interest is tax deductible!

They are crazy not to mortgage and buy cheap houses at this time.

What a generational opportunity the U.S. house price collapse was for smater Americans who had borrowing capacity!

American mortgage debt to income should be higher than Canadian. I expect them to catch up to us. Not the other way round.

#155 Old Man on 02.11.14 at 4:24 pm

I grew up in a small town from nowhere, but as a small lad knew the value of money at age 9. My parents would give me 50 cents three times a month to hit my bike to the barbershop for a haircut. I went to this tiny barber school instead and paid 20 cents to pocket the difference so by the end of the month had 90 cents hidden away. A movie, drink, and bag of popcorn came in at 45 cents x 2 = 90 cents. This was my date money to ask a young girl to meet me for a movie with our bikes on a Saturday afternoon, as was a man of the world.

#156 Aggregator on 02.11.14 at 4:25 pm

#136 Bottoms_Up

It's worse then that. Take for example the mortgage cost component of CPI (Mortgage Interest Cost Index), that is solely based on..ready? StatsCan's NHPI. That means StatsCan, the BoC and perhaps all the banks' mortgage affordability calculations are based on NEW SFH ONLY. No resales, no condos, no b-lender loans..nada. So if premiums rose in the subprime market, it wouldn't even show up in CPI.

Not too many people knew that.

#144 Ralph Cramdown

There is a pass-through inflation effect that usually takes one to three years for gas/diesel prices to trickle directly into food and various goods. This is because major farmers, wholesalers and other primary manufactures hedge commodities and fuel prices in the futures and forward markets before the goods are made. As their inventory (hedged) depletes, it will be re-stocked at a new market value. In other words, prices today on many everyday items are generally based on market prices from one or three years ago.

For other items with shipping costs, fuel prices are immediate. Take for example Amazon, who is feeling the pinch of shipping costs and now terminating free delivery for online items. BTW, StatsCan doesn't track ecommerce retail prices in its CPI basket, even though ecommerce is growing rapidly at about 6% of total retail sales from 2-3% years ago (my estimates).

How about driver license fees? On top of that if you're fortunate enough to live in Ontario, now you have to get an emissions test, and with the new program that connects directly to a government system, and if they don't meet their quota, they'll just push a button and the next thing you know your dishing a few hundred bucks to replace some sensor somewhere out of reach.

Banking fees, $2.00 at non-client ATMs. That's a 2% tax. How about the days when air was free at the pump? It's a dollar today. Inflation is the king of confiscation because it does it in a small way that nobody notices or cares about.

The pillaging goes on and on, and will continue until people hate the government and disengage from the system. That's how it's always been and always ends. It's not the numbers you'll see changing rapidly, rather the deterioration and quality of society, services and infrastructure around you.

#157 Smoking Man on 02.11.14 at 4:25 pm

#150 Holy Crap Wheres The Tylenol on 02.11.14 at 3:30 pm

Ha the copy paste from word doc on phone to here still messed up a few things, like adding and. Stuff like that.

Posts during day none weekends should be legible. Friday, Saturday nights…. Good luck. Lol

Going to Arizona next week, locking myself in a room to finish this book. No booze, No distractions.

It’s really coming together.

#158 jess on 02.11.14 at 4:32 pm

aroused plethos

…”The North Carolina NAACP, headed by Rev. William Barber II, organized the Mass Moral March along with nearly 150 partner organizations. It turned out to be the largest rally for political and socio-economic rights in the state’s history.

The high turnout, estimated to be as many as 80,000 people, was an indicator of an opposition outraged at a legislature whose right-wing agenda raised taxes for 95% of North Carolinians while lowering them for the wealthiest 5%. It refused federal dollars to expand Medicaid coverage under Obamacare. It enacted a bill to drastically limit women’s access to abortion. And, after the U.S. Supreme Courtstruck down Section Four of the Voting Rights Act of 1965, it passed a new voting bill supposedly to prevent almost non-existent voter fraud. Rev. Barber of the NAACP has called the new voting restrictions “a bill to crucify voting rights.”

http://truth-out.org/news/item/21792-massive-turnout-at-north-carolina-moral-march-puts-right-wing-lawmakers-on-notice
==

#159 Andrew Woburn on 02.11.14 at 4:39 pm

#83 Bob Rice on 02.11.14 at 12:44 am

Um, not sure if you’re aware of this fact, but the US also receives a few immigrants. Their RE market still crashed. We also received plenty of immigrant in the later 80s and early 90s. Guess what? Our RE crashed at that time.
=================================

The immigration argument is seductive until you realize that immigrant demand is already priced into the house market and always has been. Similarly when you look at declining population projections from StatsCan, you take comfort from the thought we can be bailed out by immigration until you realize they already include projected immigration.

#160 mick on 02.11.14 at 4:44 pm

hi garth, thank you for this.

one point of clarification, if i may. what is your source for the following statement?

“over 30% of the population – the Boomers – …have over 80% of their net worth in residential real estate…the latest survey shows that fully half those wrinklies are planning (because they have no choice) on dumping their houses to finance their remaining decades.”

thanks in advance.

#161 rosie "moving forward" in the knowledge that, "this won't end well" on 02.11.14 at 5:08 pm

#157 jess

You seem to be lost. Try this site. More your cup of tea?

http://www.teaparty.org

#162 Smartalox on 02.11.14 at 5:14 pm

@ 4am Sunrise, re: Panorama Ridge pricing:

Prices used to be over $1M and rents were below $900 because few properties were for sale, and rentals so rare that the market was not well defined.

Now more properties are for sale (drives down sale prices) but with few sales, many are seeking renters to cover (maybe a portion of) their mortgage payments, driving rental prices up.

Doesn’t matter; the higher the rents that landlords ask for, the more money they lose from the property sitting empty every month.

#163 frank le skank on 02.11.14 at 5:25 pm

#74 Ralph Cramdown on 02.11.14 at 12:01 am
They talk about doing more subprime deals today, and even second mortgages.

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

Watch CP24 commercials… seems all the jewelers are offering loans to anyone. No income verification, bad credit etc. Ohhhhhhhhhhhhhhh yeaaaaaaaaaaaah!

#164 };-) aka Devil's Advocate on 02.11.14 at 6:00 pm

“Realtors and others whose lives depend on house prices come here daily to say…” – Garth Turner

I can’t help myself, I have to comment.

REALTORS® could care less what house prices do provided it does not adversely affect sales volumes.
That said, none of us (REALTORS®), who understand the dynamics, care to see house prices rise so much it makes housing unaffordable as that would surely ultimately dampen volumes.
The only reason house prices will rise at such unwarranted rates is irrational buyers spooked by a hint of rising prices and a fear that if they don’t buy now they might be priced out forever. When that happens it causes a torrent of likeminded greater fools to skew the supply demand dynamics. The market overshoots itself and then eventually pulls back. We (REALTORS®) like consistency. The MSM, on the other hand, likes drama and amplifies it.

Shift happens, always has, always will.

Capiche?

#165 45north on 02.11.14 at 6:11 pm

Ralph Cramdown If a market rises long enough, it covers up all these sins, but if the music stops or unemployment blips up, the corpses in the loan portfolios start floating to the top.

Mark Hanson says the same thing – as long as prices are going up, defaults are rare, just about all the payments are made.

Or Best Offer A younger co-worker said yesterday he’s going to the bank with this year’s property assessment. It’s gone up again, so he’s going to max out (again) to the 80% you’re allowed to borrow from the supposed equity. Considers it money earned, like a dividend.

pretty funny, he doesn’t think to sell? I mean be home free? Nope he doesn’t. When prices drop 10% he will have to bring a cheque to the table.

thoughts Most of the women that I know are stay at home moms. The career ones have slowly been pressured to give up the career and also stay home or do small self employed work.

there is one young woman the same age as my daughter. She has literally dedicated her life to staying on top of her career.

smoking man but then there is Wynne. If she wins , every man, woman and child in Ontario is doomed.

well we’re doomed to have her as premier. Time’s not on her side.

#166 Realtor # 1 GTA on 02.11.14 at 6:17 pm

# Mark

What’s really embarrassing is being priced out of the market and get excited about jobs loses and foreclosure,
Or any stat like my fav 70% ownership that would indicate that a crash is on its way
Embarrassing is wishing for a crash so you can afford
A home

#167 Grantmi on 02.11.14 at 6:21 pm

good by HAM.

The federal government is eliminating once-and-for-all the much-maligned immigrant investor and entrepreneur streams, refunding applications for 66,000 individuals at a cost of $2 million.

The decision, announced in Tuesday’s budget, will not, however, affect the Quebec investor stream, which has also come under fire for allowing wealthy immigrants to enter the country, invest in the province, then set up shop in British Columbia or Ontario.

http://o.canada.com/news/national/federal-budget-government-dumps-immigrant-investor-entrepreneur-programs/

#168 Happy Renting on 02.11.14 at 7:17 pm

#152 Bottoms_Up on 02.11.14 at 3:37 pm

But the deal gets sweeter because the pay goes up with seniority, there’s union protection, and there’s a great pension at the end. Plus, in Ontario, rules that let you supply teach while retired.

Lots of jobs have unpaid overtime and skimpy sick leave provisions. There’s an oversupply of people wanting teaching jobs because, regardless of how fair you think the compensation is, it’s worse most other places.

#169 Hank Rearden on 02.11.14 at 7:37 pm

The Federal Budget – bread and circuses for the masses. Meanwhile we all get our money stolen, and beg for the crumbs.

#170 Fed-up on 02.12.14 at 1:50 am

@#152 Bottoms_Up on 02.11.14 at 3:37 pm

————————————————————————-

“Reality” is that they will be earning far more than this in a few short years. Reality is that they are free to work summers (July only) and make upwards of an extra $8000 for a whole 19 teaching days. Reality is that I could go on and on with the perks and unrivaled job security once they reach tenure and also point out that it is far worse in the private sector. That’s probably why there are 5000 or more applicants for every 100 jobs offered.

Well maybe every one of these applicants just can’t wait to become teachers because they love to sacrifice their professional lives for our children. Then again, maybe temps will climb to 30 C next week.

#171 None on 02.12.14 at 11:04 am

Hey

#61 World According To Garth on 02.10.14 at 10:45 pm

So did you retire as a civil servant? If so, I can assume you have declined your pension due to the fact that you consider it amoral?