Evil

QUIET modified

If there was no CMHC then derelict semis anchored with termite tubes on Toronto’s Danforth wouldn’t cost $900,000. Nor would butt-ugly Vancouver Specials on the East side start at $900,000. There’d be no condo boom with 53,000 new units coming down the pipe in the GTA. No bidding wars. No multiple offers. No auctions. No bully bids.

Once the Canada Housing and Mortgage Corporation did good things. It helped veterans buy tacky little clapboard homes by giving them easy credit and competitive rates. Now it’s largely responsible for the average price of a detached home in two major Canadian cities passing the $1 million mark; for $1.3 trillion in collective mortgage debt; and a homeownership rate of 70%.

Of course, that has come with a record level of household debt and a disproportionate whack of the economy now dependent on constructing, financing and selling homes. As that occurred, personal savings rates fell, retirement assets tumbled into neglect and house horniness raged across the land, especially when interest rates cratered.

How did CMHC do this?

Simple. It took away the one element that acts as a governor on dumb human behaviour: risk. By insuring mortgages loaned out to dubious clients – people with so little money they must finance between 80% and 95% of a real estate purchase – the federal agency (backstopped by taxpayers) wiped out lender risk. The banks, for example. So, they fund virtually anyone. Worse, they give people who lack money for a down payment the cash to proceed. And they offer the same interest rate to children with no credit rating and 5% down as they do to experienced, older, wealthier clients with a 50% down payment.

And why not? When CMHC is there to ensure the lender is repaid if the high-ratio borrower blows up, the regular rules of risk-management no longer apply. And that’s why the federal agency now has almost $600 billion in outstanding insured mortgages, roughly equal to the country’s accumulated national debt, and why the average family cannot afford the average home in many cities. It’s why normally-tolerant Canadians start blaming immigrants for inflated prices, and why real estate risk augments.

Has there ever been a better example of good intentions corrupted?

But maybe this is seriously changing. DDF (dearly-departed F), as you know, chopped allowable 40-year amortizations back to 25, eliminated 0%-down borrowings and raised the bar for virginal loans. Still, prices kept going up.

As I told you last week, when the fact average SFH price in 416 and Van this month passed the $1 million mark (in contrast, the median house price in metro New York City is $549,000) it caused shock and awe in Ottawa. The middle class, in order to maintain its attachment to real estate, is being forced to take on ever-larger dollops of debt, and inordinate personal risk. As families do so – at a time when incomes are dormant – they have to cut back on consumer spending. And, bang, the local Best Buy goes down.

That logic was behind the announcement last Friday to squish the self-employed and the multiple-insured. Come the end of May, CMHC will not allow any more insured loans to be handed out to entrepreneurs or commissioned salesguys unless they can come up with independent, third-party verification of their incomes. Meanwhile the agency will stop insuring second homes, so anyone with a CMHC-insured property won’t be able to get, or co-sign for, another insured mortgage. Anybody already in that situation better make new plans before existing mortgages come up for renewal.

The feds say this only impacts 3% of the lending base, but it’s starting to add up to death by a thousand cuts. For example, when CMHC punted from insurance all properties selling for $1 million or more, it dropped prices in that category by at least 15%. These days there are 7,000 such active listings between Vancouver and the GTA, and sales have been choked.

There’s more to come. That was made clear three days ago:

As a result of changes to CMHC’s mandate to contribute to the stability of the housing market, benefitting all Canadians, while effectively managing and reducing taxpayers’ exposure to risk, CMHC is undertaking a review of its mortgage loan insurance business. This is the first set of changes resulting from this review. (CMHC media release)

Several days ago this pathetic blog brought you a few charts from various sources. They showed Canadian real estate prices are now at the same level, relative to history, where implosion happened in the US. They reminded you people here pay 66% more for a house than Americans do. As you know, we are now judged to have the biggest housing bubble in the world. Rent-to-price and price-to-income ratios are ridiculous. And all that our kids want to do is buy a condo, because real estate always goes up.

CHMC may be an evil agency, but they now get it.

Do you?

202 comments ↓

#1 Halifax Observer on 04.27.14 at 4:55 pm

Veteran Halifax Realtor gives the most honest assessment of the market I have come across

http://www.innovativerealestate.ca/2014/03/nova-scotia-real-estate-market/

He calls out the media and many of his colleagues for their attempts at spinning the stats and putting lipstick on the sick pig that is our bloated housing market.

#2 TurnerNation on 04.27.14 at 5:00 pm

The ole UCC again. Investors Business Daily newspaper still has US markets ‘in a correction’.

#3 Billy on 04.27.14 at 5:02 pm

I read about this earlier today, was wondering if you would comment.

Hopefully we’ll start seeing prices decline in homes under $1 million.

#4 TurnerNation on 04.27.14 at 5:04 pm

For all Leslieville’s 700k semis its inhabitants have tons of weekend time, lining up outside numerous weekend brunch locations on Queen E.

#5 gladiator on 04.27.14 at 5:04 pm

This move might have a tiny effect on the madness out there, if any. Why don’t they lower the limit to the median house price per city/town? A million dollars limit supports about twice as many house buyers than it should: the ones buying houses above the median should not be allowed to use CMHC insurance.

#6 Ole Doberman on 04.27.14 at 5:08 pm

So I just came back from a open house in Calgary in the NW near Varsity.

Average home, nothing special, stinky inside and out, creeky hardwood floors and stairs, worn out carpets, deck needs a complete paint job, and badly unlevel grass in the back – asking price $550K.

Just sick. And for the 15mins I was there about 6 sets of people showed up to see the digs.

When I questioned the RE agent about housing affordability he replied you can thank mayor Nenshi who has cancelled subdivision planning for building new houses and that Calgary RE will go through the roof!

Can anyone relate to this – is he serious?

PS – apparently the mayor lives with his mom out of the basement and feels everyone should live like that.

#7 Killaboy on 04.27.14 at 5:11 pm

Wasn’t Canadian real estate supposed to implode 5 years ago?

#8 Just Sold Vancouver on 04.27.14 at 5:11 pm

G&M says the Vancouver market is balanced, and prices are heading up:
http://www.theglobeandmail.com/life/home-and-garden/real-estate/in-vancouver-lots-of-money-for-not-much-house/article18233684/

Nice to hear that the banks’ butt’s are covered if the market goes south. Looking forward to whatever else CMHC has up it’s sleeve.

The Globe did not say that. The realtors it interviewed did. More balanced journalism. — Garth

#9 Old Man on 04.27.14 at 5:12 pm

What occurred at C.M.H.C. is quite easy to define, as it was hijacked under the rule of Caesar to become a political tool in order to win an election. The traditional mortgage was reformed to move the herd into fueling the GDP to give Caesar the bragging rights to inform the world under his leadership how well Canada was doing.

It was politically motivated to win votes by changing the reality or to make black look white. They won by this deception, but the citizens were sacrificed for power, and the greater fools will suffer in the end. This took an unholy alliance to pull this off as a spider web if you will, and its time to get rid of the spider once and for all to take this country back.

#10 Joe on 04.27.14 at 5:12 pm

I think this is the last moment to sell house and make money in Toronto…..
Is going to be a fever in this City….it will come to the history books…my predictions ….some people will be leaving Toronto…..summer time is a good thing to do it…..
big exodus…….

#11 Ret on 04.27.14 at 5:14 pm

Mortgage renewals too?

Lots of slumlords around McMaster in Hamilton are juggling 3-4 heavily mortgaged student properties.

This could impact RE “investors” huge around colleges and universities if renewals are also subject to the new rules.

Thousands of those mortgaged cottages will also need to be sold or financed at non-CMHC insured rates. This could get very interesting.

#12 NotAGreaterFool on 04.27.14 at 5:23 pm

Death by a 1000 cuts may continue slow momentum/volume in the short/medium term. Prices is what makes individuals emotional. If CMCH wants to curtail prices, it needs to pull more levers and faster. Otherwise, this will continue in the near term especially as Poloz says low rates are the new norm in the future.

#13 Joe on 04.27.14 at 5:24 pm

Let’s face it… how much you can “eat “(how many houses you can buy?)…..Finally this whole greed will be exhausted… Karma will play the role…..
I wish the owners to beg the renters for renters..
I wish them to choke on those CMHC particle boards…..what they call houses….
No mercy and no compassion for them …..let them struggle……

#14 Freedom First on 04.27.14 at 5:25 pm

Evil. Yes. And thank you Garth for pointing out all of the evil deeds that have taken place to goose the Canadian RE market to unsustainable catastrophic levels over the years, and publicly naming all of the responsible accomplices over the years. Death by a thousand cuts, yes, well put, and these recent changes described in your blog today are indeed significant in solidifying the fact that yes, we are so screwed. I have empathy, but only for the innocent taxpayers who will be picking up the tab.

#15 T.J.BONES on 04.27.14 at 5:29 pm

Sir Garth: We can now assume this is why the Elfin Deity, had a massive heart attack? He got wind of the new rules, put in to correct the mess he made! Rest In Peace.

#16 Red Deer Rob on 04.27.14 at 5:40 pm

I’ve spent the past couple days in my old stomping grounds, Vancouver. I love this city and its vibrancy but for young people trying to make a life for themselves here it’s tough.

For one, the good paying jobs are just too far and few between. There’s something along the lines of ten or so colleges and universities here and it seems everyone has some sort of degree. A friend of mine with a UBC degree can’t find work in his field and is biding the time by working for a retailer. He has a condo btw.

How people are keeping up appearances is beyond me. Nice cars are everywhere, malls are busy, food courts and coffee shops full, all day. I suspect many people are loading up on debt like there’s no tomorrow.

There’s also some really rich people here too though. Otherwise Porsche and Mercedes wouldn’t have opened new gigantic dealerships on Terminal Avenue.

Vancouver is a resort city. I’m happy to spend time here and my money as a tourist. But this Vancouver lifestyle is just not sustainable.

#17 KommyKim on 04.27.14 at 5:41 pm

RE: #6 Ole Doberman on 04.27.14 at 5:08 pm
mayor Nenshi who has cancelled subdivision planning for building new houses and that Calgary RE will go through the roof!
Can anyone relate to this – is he serious?

Yes. He is very serious about collecting his commission ASAP and moving on to the next listing.

#18 Old Man on 04.27.14 at 5:46 pm

The Government of Canada and C.M.H.C. can do nothing to stop this train wreck, as they have been putting on the brakes for years to no avail because the herd has gone into a buying frenzy. It is interesting to note how the reformists changed gears shortly after the last election with warnings – did you notice the contradiction? They changed hats on you.

The Laws of Momentum will prevail. My grandfather was a head railroad engine for the CNR during the 1920’s and asked him how many cars did he smash on the line; he said plenty. He could see a mile ahead a car stalled on the crossing and hit the braking system but it was too late. Its too late for this bubble in my opinion.

#19 not 1st on 04.27.14 at 5:46 pm

Why should people who are savvy enough to start a business have to pay the price for the insanity in the mortgage market?

What about the horny 20 years olds with a bank approval and 5% downpayment from mom and pop?

#20 Joe on 04.27.14 at 5:47 pm

Vancouver built by CMHC Canada….big achievment….
Congrats….
Instead of tightening the rules I would do opposite….
Let the ball rolling….we have only one life….
One million or five doesn`t make a difference…
Nothing is anymore relative….let`s all have 5 million houses just by compulsory decision….
really big Canadian Made fun….so WE HAVE SOMETHING TO EXPORT besides oil and gas…..to the World…BE Proud and Enjoy new Canadian Product..CMHC HOUSE

#21 Steven on 04.27.14 at 5:54 pm

Curious if anyone knows how this will affect people who have bought pre-construction condos. If they already have a mortgage elsewhere and have signed on to buy a condo that will be ready in 2 years… Is their mortgage already active now (before the May 30th deadline) or will this make them ineligible for a CMHC mortgage when their condo is ready?

#22 Oracle on 04.27.14 at 5:55 pm

Have a CMHC insured mortgage?

Ask Genworth to give you an insured mortgage on you second home.

Ask Canada Guaranty for an insured mortgage on your third home.

Too many loopholes they left unplugged. Purposely?

Stay tuned for them to adopt CMHC policies. — Garth

#23 DreamingIntechnicolour on 04.27.14 at 5:57 pm

Expect huge uptick in self-owned rental condos

#24 AisA on 04.27.14 at 6:11 pm

ha ha, people done gone be house plugged for lack of a better term that would other wise required censorship.

#25 Pete on 04.27.14 at 6:16 pm

You can almost hear the gears grinding at the CMHC. They are desperately trying to avoid anything that will precipate a housing crash, and at the same time trying to make sure they are not on the hook if it does crash. Good luck with that high-wire act…

#26 Mike Leblond on 04.27.14 at 6:16 pm

You know what they used to say in the U.S. pre-crisis: “If you can fog a mirror, you can get a mortgage”; “If you have a pulse, you can get a mortgage”. Hilarious! And look where it got them. Canada was going down the same road until F saw the light…. but it is too late now to undo the damage. The poor shmucks who took out 40 year mortgages with cashbacks are now unable to sell their homes (everywhere except TO, Van, and parts of AB, that is….)

#27 BCD on 04.27.14 at 6:18 pm

@#16 Red Deer Rob

How people are keeping up appearances is beyond me. Nice cars are everywhere, malls are busy, food courts and coffee shops full, all day. I suspect many people are loading up on debt like there’s no tomorrow.

—————————————–

I am one of those people that other folks think is mortgaged to the hilt. Truth is we have house and two cars almost paid for entirely (in fact the cars are, and both new) and plenty of disposable income…so the person at the mall eating and getting coffee may be similar to me. Don’t kid yourself, there is more money and frugality around then you think. Not everyone is binging on cheap credit.

I always tell people I am visa’d to the max when I buy something, meanwhile I purchase it CASH…if people knew that our family was as well off as we were we’d be out-casted…and we are not rich by any means, we just have some common sense in managing our money AND we work hard.

Vancouver is the epicentre of real money…many of the folks driving the fancy cars and living “the lifestyle” have paid for it all–don’t kid yourself. The dumb ones are the students and young renters that work at pubs and bars and think they are part of the Vancouver lifestyle when in reality they can’t afford it and are only pretending by serving the ones who CAN afford it. It’s a wonderful little myth the rich have set up in that town and it keeps the hot young women and men arriving in droves to be exploited by the rich. I don’t understand that mentality as I am not a pretender but I have met many.

#28 devore on 04.27.14 at 6:19 pm

#21 Steven

No, just like previous mortgage changes, condo pre-construction buyers are fully affected, because they do not yet have a mortgage (existing mortgages are always grandfathered). So when it comes time to close the deal, they are subject to whatever rules there are at that time.

However, most of these buyers already have to put down 20% or more.

#29 Setting the Record Straight on 04.27.14 at 6:23 pm

#212 Shawn on 04.25.14 at 2:44 pm

Interesting suggestion about interest rates.
However you seem to addressing periods where currency was an IOU against gold or silver.

We also need to consider real versus nominal rates of interest.

#30 UVZ on 04.27.14 at 6:24 pm

Garth, One of your most important posts so far. I can’t buy the idea that it took ten years for some to “get it”. Your next post can be on “covered bonds”.

#31 OttawaMike on 04.27.14 at 6:24 pm

And how does Prozac’s announcement of ZIRP play into all of this??

He made no such announcement. — Garth

#32 joblo on 04.27.14 at 6:28 pm

How’s are the tax slaves gonna pay for this imploding mess, higher health care costs and pensions?
UP goes the G.S.T.

#33 WhiteKat on 04.27.14 at 6:32 pm

@T.J.Bones

Perhaps. I also think it had something to do with the fact that 1 million Canadians with a US birthplace (and anyone connected with them financially) recently became second class citizens, and F. was instrumental in that process.

#34 Patient in Richmond on 04.27.14 at 6:38 pm

Chapters in Richmond is closing . Guess people are buying less and less books and magazines these days .

Sad to see it go ….

#35 Realtor on 04.27.14 at 6:42 pm

I thought the last cmhc rule changes would have a bigger Impact (25year Amor) and of course that did
Nothing

Also talk a lot about the amount if down payment
However like I said before the debt service ratio is what
Matters
Low listing price that people are able to carry the monthly cost. Maybe they save nothing but
In order for a crash people need to be forced
To sell quickly for what ever they can get

#36 Nemesis on 04.27.14 at 6:46 pm

#ThroughDreamsDothI… #HerkemerHomolka #StopEatingMySesameCake

SaltyDogz, you’d be amazed at the lengths to which ‘TheEvilIncarnate’ would go to sacrifice a PropertyVirgin on the AlterOfOwnerShip…

Then again, perhaps you wouldn’t?

http://youtu.be/a3J91bPrW9A

[NoteToSaltyCinephiles: TimCurry is, like, so versatile – e.g. for a nice change of pace from Lucifer, try his “Herkemer Homolka” rendition: http://youtu.be/8fbGbPwKbQA ]

#37 jla on 04.27.14 at 6:50 pm

IM glad I live in Central, Alberta. LOTS of work and home prices no where near the cost as everywhere else. I FILL THERE A GOOD BALANCE in Lacombe

#38 Smartalox on 04.27.14 at 6:51 pm

Surely the last date before CMHC makes the change is May 30, not the end of this month!

No matter, the banks are already getting cold feet: friends who were pre-approved signed a no-conditions offer on a 40 year old condo in North Vancouver, only to have their lender balk one week before closing over a minor, easily remedied, building code concern.

Naturally the Realtor and mortgage broker are shocked. In my opinion, the lender was looking for a technicality not to make the loan.

#39 Ben on 04.27.14 at 6:55 pm

“Meanwhile the agency will stop insuring second homes, so anyone with a CMHC-insured property won’t be able to get, or co-sign for, another insured mortgage”

Why was this *ever* allowed. The state has no business underwriting risk on people buying more than one home. That is a luxury – you want to speculate – fine, but don’t get some kid working in BestBuy to spend his taxes on it and the rest on renting it out!

It’s just disgusting what’s been done here with risk management. The state has no business doing any of this and as usual subsidies distort price signals. Also $1MM or less – are you kidding me! Should be $200K tops.

Finally #18 old man has it right. Credit crises are asynchronous. You issue the credit, it looks great (and the bank worker gets their commission). Then you wait. Then it blows up. Mostly people will blame whatever happened near the time for example interest rate hikes or a trade downturn. Would be like blaming a tree near the train that hit the cart.

#40 Rainclouds on 04.27.14 at 6:57 pm

Robert Schiller, Yale Ecomomist, Nobel Laureate and predictor of the 2008 US RE Meltdown.

Real returns on RE over the long Haul VS Investing.

http://www.washingtonpost.com/opinions/catherine-rampell-americans-think-owning-a-home-is-better-for-them-than-it-is/2014/04/21/5e9f4dd2-c979-11e3-93eb-6c0037dde2ad_story.html

Factual data sucks (if you are a pumper)

#41 Vangrrl on 04.27.14 at 7:00 pm

#6:
In Vancouver a house like that would be listed for 800k.

#42 Nat on 04.27.14 at 7:00 pm

Great article. Taxpayers backstopping mortgages is the biggest systemic risk to our economy. Government actions have unintended consequences and where they distort risk assessment by private actors, especially banks, they can tank an economy. Let’s all hope this is not a case of too little too late.

#43 jess on 04.27.14 at 7:02 pm

Notable statements
[edit]In April 2007, he delivered an upbeat assessment of the economy, saying growth was healthy and the housing market was nearing a turnaround. “All the signs I look at” show “the housing market is at or near the bottom,” Paulson said in a speech to a business group in New York. The U.S. economy is “very healthy” and “robust,” Paulson said.[21]

In August 2007, Secretary Paulson explained that U.S. subprime mortgage fallout remained largely contained due to the strongest global economy in decades.[22]

wiki

#44 Retired WI Curmudgeon on 04.27.14 at 7:02 pm

Simple, really. CHMC “taxpayer insurance” should be immediately reduced to $500,000

Surely, young couples with little money could find a starter home for that amount of money in most Canadian areas. Maybe not Vancouver, or the trendy areas in the GTA, but removing the mortgage protection does tend to reduce prices, as does increasing the mortgage interest rates.

If they want “more house” let them qualify for it on their own!!

Yes, a draconian suggestion. So would be a stock market at 50% off. In the latter case nobody would be a hot buyer – except people like me

#45 jc on 04.27.14 at 7:09 pm

Garth,

“Anybody already in that situation better make new plans before existing mortgages come up for renewal.”

What has to happen to trigger a new CMHC policy at the time of renewal? Moving to a new lender? Is a CMHC policy not good for the full length of the mortgage? Isn’t the policy fee paid just once?

Is there some other way this could impact people when they renew?

I can see that anyone with a couple insured mortgages might have a hard time “moving up” to a bigger, more expensive place, but what about if you’re staying put?

so many questions…

#46 Babblemaster on 04.27.14 at 7:10 pm

Of course, I get it. Most people that read this blog get it. We got it four or five years ago when it was obvious that houses were getting way overpriced based on almost any logical barometer. Regardless, houses prices still skyrocketed into the stratosphere. CMHC changes are too little, too late. If these latest changes really impact prices to the negative, the feds will do something else to prop up prices.

#47 darkselling on 04.27.14 at 7:11 pm

Can’t see anything happening on renewals. The CMHC fee has already been paid and that’s for the amortization of the loan. Unless CMHC starts refunding premiums they’re not going to make changes at renewal.

That said, this is one rule change that I’m interested in seeing how it impacts the market.

I bought my home as a second home, rented out the current on that I bought in 07 until the market corrected enough for me to get out with some cash.

I’ve seen quite a few buyers just turn the current house/condo they bought with 5% down to a rental and buy the new home with 5% down. Won’t happen – instead they’ll have to sell. Listings could increase dramatically sending average prices downward. Those renters might become buyers though. It’s not like prices will just plunge, at ever level lower there will be new entrants into the market.

Will be interesting to watch.

#48 Old Man on 04.27.14 at 7:12 pm

#22 Oracle – you missed Street Capital Financial who are approved C.M.H.C. lenders owned by Counsel Corporation. Its all owned and controlled by an old buddy of mine, and remember the days when I walked the stairs of this joint on Yonge street to find this tiny hole of an office. Allen claimed to be an accountant of sorts and I would say here is a deal for you as need a third mortgage on a bakery.

#49 crowdedelevatorfartz on 04.27.14 at 7:14 pm

CMHC…… “No risk” mortgages that create risk for the taxpayers that, ultimately, are on the hook for it…..
When the music finally stops THEN we’ll realize that everyone was thrown off the housing merry-go-round.

#50 Musty Basement Dweller on 04.27.14 at 7:14 pm

Maybe the politicians are letting CMHC take the lead in letting the gas out of the property bag so they can look innocent when things fall apart and so many poor suckers get burned when this mess unravels.

#51 crowdedelevatorfartz on 04.27.14 at 7:17 pm

@#33 Patient.
No. People are ordering their books and magazines from Chapters online for 25% cheaper than the store price, delivered free within days to their door…..
Just say bye bye to “Bricks and Mortor” stores.

#52 Bottoms_Up on 04.27.14 at 7:17 pm

#38 Ben on 04.27.14 at 6:55 pm
———————————
It’s possible they were allowing coverage on a 2nd place to allow mom and pop to co-sign with junior.

#53 X on 04.27.14 at 7:21 pm

10% downpayments is the right thing to do.

If the banks want to lend someone with 5% down, the other 5% to qualify, that is on them to lend out, give the banks a little more risk, and the tax payer a little less.

#54 blase on 04.27.14 at 7:30 pm

Great post today Garth (and two days ago as well, and various generous to provide all that information for free)

The question that you left hanging, like a Flanagan by Harper, is of course what will the next, and the next, set of changes be?

#55 OttawaMike on 04.27.14 at 7:36 pm

He made no such announcement. — Garth
___________________________
This is as close to a ZIRP as we are going to get in this country:

http://www.cbc.ca/news/business/stephen-poloz-says-low-interest-rates-may-be-here-to-stay-1.2621662

#56 Realtor on 04.27.14 at 7:37 pm

These new rules are more of a tightening of
Rules already existing. Nothing here to get excited
About folks keep moving

It’s all about debt service ratio
Not 70% ownership

#57 Daisy Mae on 04.27.14 at 7:39 pm

“CHMC may be an evil agency, but they now get it.”

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

DDF was the cause of this snowball with the stupid amortization rates he implemented. Only to backtrack four times — and getting credit for undoing the mistakes he made. It’s amazing how the media and virtually everyone skirts this fact. But it was too little too late. CHMC is a federal institution and, therefore, controlled by the feds. So who do we blame for this fiasco? The federal government.

#58 Capt. Obvious on 04.27.14 at 7:42 pm

I remember when some voices were worried about Fannie Mae and Freddie Mac just before the great USA meltdown. Our Canadian story has Shakespearean tragedy written all over it.
The US Case-Shiller 20-City home price index is at 2004 levels (though has risen significantly since trough following meltdown). So, a real winning investment for the past decade. There were about 4 years from June 2004 through July 2008 where the index was above its present level, but that’s it. Good times.

#59 Cici on 04.27.14 at 7:43 pm

This would be a good thing if we could actually take it seriously. Subprime 0% mortgages still exist, because the banks are still getting around the CMHC regulations to lend out the 5%.

As long as tax payers are on the hook, the banks are going to keep lending regardless. I suspect many couples will transfer ownership rights so that one spouse will no longer be legally bound to the first CMHC property, thereby enabling him or her to co-sign for the otherwise unenabled kid(s). Same thing goes for the self-employed: the banksters will find ways around the regulations to enable the lending blitz to continue on unthwarted, just like they are still giving out 2.25% mortgages.

Prices will continue to rise, the agents will say “look, despite the new CMHC rules, prices are still rising and homes are still selling, so the market must be balanced.” The suckers will continue to get suckered in thinking that they have to buy now or be priced out forever, then when the whole thing goes Ka-Boom, Harpo and his cons can raise their hands toward God and the Heavens in mock shock and disbelief, while claiming that they did everything possible to contain the disease.

#60 Daisy Mae on 04.27.14 at 7:45 pm

“Come the end of May, CMHC will not allow any more insured loans to be handed out to entrepreneurs or commissioned salesguys unless they can come up with independent, third-party verification of their incomes.”

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

Still correcting their mistakes, eh? The stupidity is unbelievable.

#61 Linda Mulligan on 04.27.14 at 7:49 pm

#6 – First, Mayor Nenshi did not cancel all subdivision activity. Drive around – Mahogany, Seton, Quarry Park, Skyview Ranch, East Village etc. – subdivisions still going strong & new phases coming online every year. What Calgary’s current council (not just the mayor alone) have done is direct more sustainable growth in Calgary.

Here is the problem – in order to open up a subdivision there must be certain infrastructure in place – stuff like sewer, sanitation, water, electrical etc.; roads to drive on with attendant sidewalks, curbs & gutters, catch basins; streetlights. There is only so much budget & time to install all of the above in any given year. Unless & until ALL the necessary infrastructure is in place, a subdivision can not move forward (erect housing). So the new direction is to move forward with development only in subdivisions where all the infrastructure will be in place in any given year. There is also an issue with development overwhelming older infrastructure that was never meant to handle the higher load. Hence some sewer truck upgrades occurring which will eventually allow development to resume in the affected areas.

Note that more could be done if people are willing to pay much more in taxes, but even higher taxes isn’t going to be enough to 1) supply the skilled labour in quantities sufficient to do all the work that needs to be done & 2) create climate conditions sufficient to allow all the work to be done before the next winter arrives, let alone if another major flood event occurs.

#62 45north on 04.27.14 at 7:53 pm

Pete : You can almost hear the gears grinding at the CMHC. They are desperately trying to avoid anything that will precipate a housing crash, and at the same time trying to make sure they are not on the hook if it does crash.

well put Pete. They cannot have it both ways and it looks to me like they will make sure they are not on the hook. Of course it’s not binary – there are millions of shades of gray. I’m reminded of Nortel who hit the wall at 100 mph – it makes a big difference if you hit the wall at 50 mph.

Joe : I think this is the last moment to sell house and make money in Toronto…..

or even get out alive

#63 Daisy Mae on 04.27.14 at 7:54 pm

#9 Old Man: “What occurred at C.M.H.C. is quite easy to define, as it was hijacked under the rule of Caesar to become a political tool in order to win an election….”

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

Good post.

#64 Sheane Wallace on 04.27.14 at 7:59 pm

Exactly.

If not for CMHC the prices would be 40-45 % of the current in Toronto and Vancouver.
CMHC is evil. It is moral hazard.

Let’s not forget that government ‘insures’ also Genworth and other private lenders to a total amount of 1.1 trillion dollars.

It is mind blowing how CMHC could be legal at all.

Could a class action suit declare this ‘insurance’ illegal if unjustified by the CMHC legal mandate (and purpose)?
What if prove of conflict of interest and corruption among CMHS board members and politicians arise?
Could the banks be left holding the bag?

#65 Daisy Mae on 04.27.14 at 8:00 pm

“…so anyone with a CMHC-insured property won’t be able to get, or co-sign for, another insured mortgage. Anybody already in that situation better make new plans before existing mortgages come up for renewal.”

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

It becomes, in a sense, a new loan. And negotiated on that basis. I’ll bet alot of new homeowners don’t understand that.

#66 Sheane Wallace on 04.27.14 at 8:00 pm

proof, darn spell checker again

#67 saskatoon on 04.27.14 at 8:02 pm

“state capitalism” is just a phrase marxist’s invented to obfuscate their own political agenda.

#68 Rainclouds on 04.27.14 at 8:03 pm

CMHC/Harper Govt

Rock, Hard Place

Till this blows up. Then we move forward.

Delaying the inevitable is not leadership…………

#69 Sheane Wallace on 04.27.14 at 8:07 pm

#15 T.J.BONES
………………………………….
Elfin Deity is probably enjoying the Caribbean sun on a private island while healing after the plastic surgery.

Has actually somebody seen the guy in the coffin?
It deeply disturbs me that the cause of death was announced as ‘most likely hart attack’.

Was there an autopsy?

#70 Sheane Wallace on 04.27.14 at 8:10 pm

DELETED

#71 MR GADGET on 04.27.14 at 8:11 pm

http://news.yahoo.com/chinese-manhattan-replace-russians-top-apartment-buyers-113332662–sector.html

#72 Sheane Wallace on 04.27.14 at 8:15 pm

heart attack, darn… I will stop posting.

#73 Grantmi on 04.27.14 at 8:15 pm

Again Joe! Answer the question!!!!!

#175 Grantmi on 04.26.14 at 3:44 pm

#2 Joe on 04.25.14 at 5:51 pm
Buy a second house rent and in ten years you will make money on the sale..

Of course you’re claiming the rental income, and the appreciation increase over the 10 years of your non-principal property on your income taxes… ….. Right, Joe????

#74 Daisy Mae on 04.27.14 at 8:20 pm

#49 Musty Basement Dweller: “Maybe the politicians are letting CMHC take the lead in letting the gas out of the property bag so they can look innocent…”

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

CMHC is a federal agency. Governed by the politicians. They will never appear innocent.

#75 Sheane Wallace on 04.27.14 at 8:22 pm

#69 Sheane Wallace

Garth, please remove that post, it might point to a virus.

#76 Nemesis on 04.27.14 at 8:24 pm

#PopularVancouverPricingStrategems. #FengShui:ABriefHistory. #EmpiricalRebuttals.

@VanGrrl/#40

PishPosh.

It would list at 888,888.*

*FengShui ProximalCemetaryAppraisal optional at additional cost.

http://youtu.be/i-Cc7P7_IBY

Alternatively – in the Empirical if DarkSpirit of, “OhSnap!”:

http://youtu.be/cAgNqNIs8To

#77 -=jwk=- on 04.27.14 at 8:52 pm

@Retired WI Curmudgeon

A 500k limit wont work. Then you have 25k ye kids getting a 500k mortgage. And Everythign is priced at 499,999.

A better option would be to limit your insurable loan to 3.5X your annual income average over the last 3 years.
You can buy more, but you’ll need either cash or a bank backed, uninsured loan

#78 Joe on 04.27.14 at 8:57 pm

I feel some sweat…. coming from Toronto. I am convinced that we would see more and more listing in a very near future…..

#79 Sheane Wallace on 04.27.14 at 8:58 pm

US 10 years treasury yield:
Jan 1, 2014 2.85%
Jan 1, 2013 1.91%
Jan 1, 2012 1.97%
Jan 1, 2011 3.39%
Jan 1, 2010 3.73%
Jan 1, 2009 2.52%
Jan 1, 2008 3.74%
Jan 1, 2007 4.76%
Jan 1, 2006 4.42%
Jan 1, 2005 4.22%
Jan 1, 2004 4.15%
Jan 1, 2003 4.05%
Jan 1, 2002 5.04%
Jan 1, 2001 5.16%
Jan 1, 2000 6.66%
Jan 1, 1999 4.72%
Jan 1, 1998 5.54%
Jan 1, 1997 6.58%
Jan 1, 1996 5.65%
Jan 1, 1995 7.78%
Jan 1, 1994 5.75%
Jan 1, 1993 6.60%
Jan 1, 1992 7.03%
Jan 1, 1991 8.09%
Jan 1, 1990 8.21%
Jan 1, 1989 9.09%
Jan 1, 1988 8.67%
Jan 1, 1987 7.08%
Jan 1, 1986 9.19%
Jan 1, 1985 11.38%
Jan 1, 1984 11.67%
Jan 1, 1983 10.46%
Jan 1, 1982 14.59%
Jan 1, 1981 12.57%
Jan 1, 1980 10.80%

#80 Sheane Wallace on 04.27.14 at 9:03 pm

http://www.theglobeandmail.com/report-on-business/economy/housing/price-gap-between-canada-us-homes-hits-record/article18118369/

All we need is:
1. Stop CMHC
2.Report real inflation so people can demand fair interest rates for their deposits

and this is it.
SFH back to 300 k in Toronto.

Well we still would need to wind down CMHC losses by selling bonds at 10+ % interest rate.

#81 I'm stupid on 04.27.14 at 9:05 pm

This is the truth about people.

When someone has no money and a lot of debt they don’t care because they know they’re screwed. They become fearless and take huge risks. They become desperate and fail.

If anyone is interested watch ESPN 30/30 Broke. It’s about pro athletes that go broke. Notice the common reason, they realize late in their career that they can afford the life style they lived. They then take huge risks to try to make obscene amounts of money to finance they’re current lifestyle indefinitely.

Huge risks taken on by poor people is exactly what’s going on in Canada right now. The outcome is obvious, a lot of broke people living on credit until it dries up.

#82 smart cookie on 04.27.14 at 9:13 pm

So when the condos get ready for occupancy in toronto will the banks not charge a higher interest for a second place as to justify higher risk with no cmhc in the picture ???

#83 Fed-up on 04.27.14 at 9:18 pm

All of these “measures” from F and CMHC came far too late and fall woefully short of what they should be. The deep damage is already done. Trying to slowly close the big, rusty barn doors years after the horses stampeded out, is about the most futile exercise imaginable.

We should never rely on those who dragged us into this mess years ago, to now get us out of it.

#84 Kreditanstalt on 04.27.14 at 9:19 pm

You’re halfway there.

And when this government and its central bank price-fixers are forced to stop counterfeiting money & credit and let interest rates be set by the market, sanity will return. Risk will be respected. And zombie deadbeat borrowers will be…dead.

Why should we innocent, uninvolved taxpayers be forced to insure the borrowings of all and sundry, whom we have never met…?

All “mortgage insurance” should be PRIVATE.

#85 smart cookie on 04.27.14 at 9:22 pm

DELETED

#86 Mr Buyer on 04.27.14 at 9:36 pm

The following is bellyaching with little or no substance and can be safely ignored. It is not directed in anyway at our gracious host but to the wider situation…

CMHC was never the evil agency. CMHC’s political masters subverted CMHC’s mission and employed it as a means to implement an economic policy. This bubble was by design and the requisite sound bites were well worn by our cousins to the south. An entire population placed under huge economic duress by its government’s lack of originality and insight coupled by an apparent complete disregard for the human consequences of these policies. Telling a herd of terrified cows it is their fault for running over a cliff is absurd. Were is the individual to stand against this tidal wave of debt set upon our country? Utterly predictable and to pretend otherwise is disingenuous at best. Now this long tragedy has become a caricature of itself with the party in power having brought such a massive proportion of the population into such peril that said population has a vested interest in preserving the status quo created by its masters. This situation is far reaching in the extreme with workers from every caste and profession in our society invested in the rising value of their house. CMHC is likely one of many institutions that could possibly be subverted to one extent or another before this calamity has run its course. It may well now be that subversion is now being carried out by administrators rather than the politicians that initiated this situation. I seems our massive real estate bubble is taking on a life of its own. I can only throw my hands up at this point. I have been out of my depth for most of this charade with my own assumptions severely impairing my ability to asses the situation for some time now. Surprising is the kindest thing I can say.

#87 Ayn Rand Army on 04.27.14 at 9:40 pm

Could the banks be left holding the bag?

yes and no, yes they will but the CB will bail them out, just like the FED, BOJ, BOE, ECB, PBOC etc… all fiat currencies will continue to print, print, print….

Savers will be robbed. Capital controls will be imposed, bail ins will arise along with bail outs and indefinite low interest rates and QE print print print…

Inflation will destroy all currencies globally. That’s how this ends over the next decade.

So buy PMs and stocks that can weather infationary depression.

It’s going to be epic!

#88 Poorgeoisie on 04.27.14 at 9:40 pm

Realtor,
Debt service ratio is but one factor not THE factor. Another factor is new entrants. Another realtor (or maybe you) posted recently that first timers were getting younger and younger and although anecdotal it makes sense to me. The bulk of the echo (children of baby boomers) generation turned 29 in 2011 (stats can)29 is an important age because it had been the average age for first time buyers (globe and mail a few years back). If I’m not mistaken 2011 was a record volume year for many markets in canada.
Without new entrants the market will fall. Debt service be damned once the developers start unloading their surplus units everyone goes down. The heavily mortgaged kids will continue making payments but they can’t sell. If they can’t sell, they can’t move up. If they can’t move up, the boomers can’t cash out their retirement plan, as much as they wanted to anyway. For boomers with a house paid off, they might wish they sold this year as they would have made some 300% percent from 1985 prices but I think they will be fine with making a paltry 150% and drop their asking. When they drop their asking the hipsters next door are pooched.
Like Garth has said “sales drop first, prices later”

#89 Sheane Wallace on 04.27.14 at 9:43 pm

#83 Kreditanstalt
………………………..
We need laws to protect us from the stupidity of governments, limiting the damage any level of government can inflict on us, including legal thresholds for property taxes. This should be part of new international bill of rights.

I am sorry but I can’t pay for all baby boomers, the fallout of CMHC, ridiculous prices for food, beverages and gas, insane house prices, insane university fees, save for retirement, pay for kids private lessons as education sucks. While getting 0.25-0.5 on GICs.
And with my work outsourced to offshore and illegal foreign workers.

Governments should stay away form markets.

It is an irony that Conservatives were all about smaller government. I guess this concerns our benefits not the gifts to their banker friends.

#90 idontthinkso on 04.27.14 at 9:44 pm

Garth. A bit of fear mongering. Renewals? Seriously. Not a chance. Existing loans will all be grandfathered. The premiums are already paid. Just because the loan comes up for renewal is moot. This will only affect NEW mortgage insurance applications. Remember, when you pay your single premium on an insured mortgage, that premium lasts for the life of the loan and is portable (normally). So those persons who have benefited from the existing policy will continue to do so with their existing portfolio of second third and forth homes. But they cannot do a sixth, and anybody who is at one will not be able to do two. Don’t needlessly scare folks, though. Grandfathered. relax.

#91 omg on 04.27.14 at 9:44 pm

Actual CMHC Risk

I am too lazy to actually do the background analysis BUT

CMHC risk on mortgages is likely limited to those mortgages insured over the past 4 to 5 years.

Mortgages insured before that time would be on houses purchased for much lower cost than the current housing stock prices. And current prices would have to drop appreciably to get to the point where a house bought, say pre-2007, will be underwater.

Furthermore those pre-2007 mortgages would have a bit of the principal amortized so the homeowner would have more equity.

So all $600 billion is not at risk – some smaller subset of it is.

And even for mortgages insured over the past 5 years, sure lots of those are in red-hot TO and YVR (and even Saskatoon and Calgary) but a lot are in areas with much more reasonable prices, where a correction will be much less likely to trigger defaults.

So we’re looking at something way smaller than $600 billion being at risk and that amount is not going to zero. And there will still be some residual value of the homes that default.

When the correction comes CMHC will still be on the hook for a huge number that should never have been but ultimately it will be a fraction of $600B.

#92 Joe 2.0 on 04.27.14 at 9:45 pm

Garth keep banging on the drum.
Your mantra goes against the system.

Like it or not people this is going to play out just like in every other scenario with the same accumulating data.

It’s just a matter if time, and the time is near.

#93 Mr Happy on 04.27.14 at 9:47 pm

…#7 Killaboy on 04.27.14 at 5:11 pm
Wasn’t Canadian real estate supposed to implode 5 years ago?…

Ya….apparently. But I always wonder why we compare our RE to US RE when that country is 10X the size?

All I have heard for 5 years is correction… correction… correction….

Maybe a more realistic term would be “stabilize”?

The time of making big money on RE is over. Too bad, I had a really good run, but I sold all my holdings and now am comfortably retired.

It’s like “Global Warming”….ooops sorry, I meant “Climate Change”

Correction? Nope, but the prices will stabilize now and interest will stay cheap for MANY years to come.

#94 Ayn Rand Army on 04.27.14 at 9:48 pm

WW3 is coming and it’s going to be worse than uno and duo. I think it may even come to war in NA for first time.

If i’m still here i would look into buying some guns and ammo and learn how to shoot. Also good idea to build a fortified bunker with trip wires and infrared cameras.

Of course stock up on canned food and water filters. Have a good stock of women to procreate during and after the deluge since there’ll be no tv or internet porn.

#95 Castaway on 04.27.14 at 9:48 pm

Article on ZeroHedge about Cnd RE. Not a big fan of that blog but intersting read.

http://www.zerohedge.com/news/2014-04-27/canadian-housing-bubble-puts-even-us-shame

#96 Guy Fawkes on 04.27.14 at 9:49 pm

As long as the interest rate is at 1%, which in my opinion could stay that way for say next 20-25 years, nothing will change.

As long as 250,000 immigrants arrive every year and no new housing being built, nothing will change.

As long “invester class” and business class visas are open to elites of the world, where they don’t invest in creating R&D and scientific jobs but merely invest in real estate (paid full in cash) and then charge criminal rental prices to Canadians, nothing will change.

As long as Citizenship is not a requirement to own a residential property in Canada, nothing will change.

Finally, as long as greed, vanity and corruption at all levels of society are the guiding principles of life in this country, instead of reason, humility and pragmatism…nothing will change!

– Guy Fawkes

#97 Sheane Wallace on 04.27.14 at 9:51 pm

#87 omg
…………………
Government insures and is on the hook for 1.1 trillion in mortgages, 600 billions of them for CMHC, the rest from private mortgage lenders like Genworth.

With houses overpriced at least 100 % you can easily see fallout of 100, maybe 200-300 billions.

Popping the bubble will hurt the economy with at least 40-50 billions decline in GDP annually (over 20 % of this economy is housing).

#98 Sheane Wallace on 04.27.14 at 10:02 pm

Zero (or 1 %) interest rates are equivalent to stealing 30-40 billions a year from savers and transferring them to banks and housing sector while assuming additional taxpayers risk for at least another 20-30 billions a year as potential fall out of the mortgage insurance.

Shame on the media for not reporting on this. This is why they call them presstitutes.

Don’t tell me that nobody has seen this coming.
We live in a conformists society.

#99 Mr Buyer on 04.27.14 at 10:04 pm

Consultation with various English usage and grammar texts (my dictionary has disintegrated under the stress of repeatedly looking up the spelling of their [or is it thier]) has led me to the conclusion that “Were is the individual” should actually read “Where is the individual.”

#100 Victor V on 04.27.14 at 10:08 pm

Mississauga mansion sold to same buyer at second auction

http://www.thestar.com/news/gta/2014/04/27/mississauga_mansion_sold_to_same_buyer_at_second_auction.html

A homebuyer got another shot at owning a Mississauga mansion when it went up for auction for the second time Sunday afternoon.

The buyer was initially supposed to purchase the 18,000-square-foot French-inspired home for $6.2 million in an auction in January but finances didn’t come through and the sale didn’t happen, said Aisha Dhalla, a spokeswoman for Ritchies Auctioneers.

Now, the same person is ready to buy the 23-room house on Saxony Ct. for the slightly lower price of $6 million. The buyer could have lost more than $100,000 in deposits if there had been a higher bid.

#101 Keith on 04.27.14 at 10:08 pm

Good luck buying a butt ugly Vancouver special on the east side for 800K. The dirt it sits on, barely.

#102 Ben on 04.27.14 at 10:20 pm

#51 Bottoms up “It’s possible they were allowing coverage on a 2nd place to allow mom and pop to co-sign with junior.”

If this is widespread it demonstrates prices are too high and this should be cracked upon. If it’s a small minority then crack down on it – who cares?

We know it’s the former as parents who know nothing other than endless house price rises tell their kids they “can’t loose” even though by having to use their parents as guarantors because prices are detached from wages the kidz already lost.

#103 Retired WI Curmudgeon on 04.27.14 at 10:28 pm

#76 JWK

I like you idea better than a flat $500K limit.

I would also add conditions such as a minimum down payment percentage, (not gifted, nor borrowed).

CMHC limited to no more than 2 renewal cycles – period!

The idea is to get property PAID for… not as a step to a HELOC. Credit be tighter in the future I fear, but not too tight as to strangle your economy. People need some wiggle room, just not too much.

Best

#104 Aggregator on 04.27.14 at 10:41 pm

Just to clarify for the blog (and correct my previous post): CMHC's insurance cap is $600 billion, of which $559 billion is in force as of Q3 2013. However, the government also uses CMHC's balance sheet to guarantee NHA MBS securities (which gives CMHC the right to say 'that's not our liability', even though they, too, are a government agency), of which amounts to $399 billion as of Q3 2013. Therefore, CMHC and the Government of Canada's total liabilities equates to $958.8 billion dollars, and if you include Genworth's insurance-in-force (90% backed), it amounts $1.24 trillion dollars, about 70% of all residential mortgages in Canada.

Now, here's where everyone gets duped from CMHC and the government's propaganda. When CMHC says second mortgages are only 3% of insurance, this excludes second mortgages securitized and guaranteed under NHA MBS (remember CMHC has the right to say that's not our liability), which has been the fastest growing funding source for mortgages over the last four years — accounting for 34% of all residential mortgages. Chart

So now that MBS guarantees have reach capacity, it's time to pull back (in the public's view) and create another new scheme (out of the public's view), and that new scheme so far appears to be what's called self-securitization. Chart

I won't divugle details about self-securitization, but in short, it's when major banks securitize mortgages as collateral, solely for the purpose of trading back and forth with central banks in the repo market. In a nutshell, a sophisticated ponzi scheme. Hence why TD  joined the Federal Reserve's primary dealer list in February.

The government has turned CMHC into a GIANT SQUID with tentacles all over our housing market. Alas, there is no free market. Everything is controlled. And the possibility of handing over private insurance to the private sector is impossible when the size of outstanding liabilities requires the sovereignty of an entire nation to backed it up.

This vids for you Nemesis. *SunsetSquidFight – 20,000 Leagues

#105 Bottoms_Up on 04.27.14 at 10:42 pm

Sheane Wallace on 04.27.14 at 7:59 pm
—————————————————
Without CMHC Boomers would have half their current assets, banks and shareholder value would be in the dumps, and economic growth would be paltry. And houses would be affordable. What does the future hold? We reap what we sow.

#106 dutch4505 on 04.27.14 at 10:43 pm

Scary watching the CDN side repeating the same stuff we had to go through in 2006. Meanwhile I am half way through reading FREAKONOMICS in which rogue economists explain the hidden side of everything. Unintended Consequences is an other way of saying it. These economists could write a chapter on CMHC. The next 12 months are going to be interesting.

#107 takla on 04.27.14 at 10:55 pm

don’t worry,all you have to do is get thru this next crash with some of your net worth intact and Yellen will unleash qe4 to reinflate the next asset bubble.
Rinse and repeat…Its all about mineing the greater fools…..Im getting tired of this show!

#108 Vancouverbound on 04.27.14 at 10:56 pm

Where the second homes are-quick assess from greater Calgary/Edmonton:
Canmore, Radium, Invermere, Crowsness Pass, Revelstoke, Okanagan, Victoria, Nanaimo, Comox, etc. Easy travel distance via car or air. These places will be hit hard with this new rule. Albertan’s like their ‘cottages’ in beautiful B.C. If I had a second home/condo located there I would be very nervous.

#109 Andrew Woburn on 04.27.14 at 10:57 pm

The Economist writes about HAM:

http://www.economist.com/news/china/21601305-more-middle-classes-are-leaving-search-cleaner-slower-life-yearning-breathe?

#110 20something on 04.27.14 at 11:08 pm

An acquaintance has 4 houses all bought with 5% or less down (his bank allowed him to take 1 year to come up with the 5% down payment apparently). With this new rule, he would now need to pony up the rest of the 20% in order to renegotiate at the end of his term?

#111 Andrew Woburn on 04.27.14 at 11:14 pm

#90 omg on 04.27.14 at 9:44 pm
Actual CMHC Risk

I am too lazy to actually do the background analysis BUT … So all $600 billion is not at risk – some smaller subset of it is.
============================

These figures were extracted from the last CMHC financials. They show the percentage of high and low down payment ratio residential mortgages by dollar balance groupings and the average mortgage balance in each ratio category. Relatively few balances exceed $400K.

High Low
% %
Over $400 13 15
$250-400 32 25
$100-250 46 46
Under $100 9 14
100 100

Avg O/S $180 $153

#112 Valletboy on 04.27.14 at 11:31 pm

Wow !

Good posts latley G,

I’m gonna start my 100 bucks a week ASAP. The 250 im forced to putt in my dbp plan sadly would not come close to the 850000 that may be in my self directed account of etf’s.
btw I have a good bud that owes 280 000 on his 290000 condo and bought a 30k car and 46 k truck and has 30k debt. All bought with 0 down except 5 percent condo money from mom. How does someone like this keep getting financed.
400k debt no savings and 30. It sad when sales men lick there lips at these people instead of actually forcing them to put 25 percent down.
Shame on finance companies!!!
Rant over.

#113 Think Again on 04.27.14 at 11:48 pm

#89 idontthinkso

“Garth. A bit of fear mongering. Renewals? Seriously. Not a chance. Existing loans will all be grandfathered. [……]. Don’t needlessly scare folks, though. Grandfathered. relax.”
———————————-

“Income trusts will not be taxed. Relax.”

– The Dearly Departed F

#114 bdy sktrn on 04.27.14 at 11:50 pm

“butt-ugly Vancouver Specials on the East side go for $800,000”
—————————
take a look around this spring – butt ugly east side specials are now 1.1-1.2+ for any decent area.

800k , that;s so 2012. east side is rocking. we’re cooler than ever – west side is for stuffy suits and absentee ham.

here’s one in a crappy-ish location (49/knight) for just under 1.4m

800k for the garage maybe!

#115 bdy sktrn on 04.28.14 at 12:00 am

There’s also some really rich people here too though. Otherwise Porsche and Mercedes wouldn’t have opened new gigantic dealerships on Terminal Avenue.
——————-

gigantic is right – plus HUGE new mercedes facility being built on broadway near boundary AND a large new service facility at shell rd in richmond.

#116 Andrew Woburn on 04.28.14 at 12:03 am

Interesting but long, two-part read from the Institutional Investor about the risks of needed reforms in China’s financial institutions. One main message is that we can expect to see a higher rates of default starting this year but this will not mean that the whole system is collapsing.

Is China Really Prepared to Shift to Market-Driven Interest Rates?

Rate liberalization is vital to sustaining long-term growth but comes at a big cost — rising defaults and a loosening of Beijing’s control.

http://www.institutionalinvestor.com/Article/3332458/Asset-Management-Macro/Is-China-Really-Prepared-to-Shift-to-Market-Driven-Interest-Rates.html?

China’s Rate Liberalization Stakes: Who Wins, Who Loses?

Shifting to market-set interest rates risks a rising tide of defaults and challenges Beijing’s grip on power.

http://www.institutionalinvestor.com/Article/3332609/Banking-and-Capital-Markets-Emerging-Markets/Chinas-Rate-Liberalization-Stakes-Who-Wins-Who-Loses.html

#117 For those about to flop... on 04.28.14 at 12:03 am

Regarding #93 ,I’m pretty sure that there has been war in North America before!

#118 bdy sktrn on 04.28.14 at 12:10 am

Chapters in Richmond is closing . Guess people are buying less and less books and magazines these days .

———————-
selling anything in english is richmond is a losing proposition – books=no status benz=status

60% and rising of richmond folks are not native canadians.

#119 No Debt on 04.28.14 at 12:21 am

#109 20something on 04.27.14 at 11:08 pm wrote –

“With this new rule, he would now need to pony up the rest of the 20% in order to renegotiate at the end of his term?”

Gonna be interesting watching this play out, isn’t it?

#120 3vallees on 04.28.14 at 12:23 am

Looks like mortgage brokers are slowly falling off the cliff in Ontario. License renewals are dropping.

http://www.fsco.gov.on.ca/en/mortgage/licensing-registration/pages/licensing-activity-statistics.aspx

#121 TJ on 04.28.14 at 12:49 am

The CMHC is an abomination. It has the potential to become a black hole that will suck the entire country down when the taxpayers get handed the bill for the largest housing bubble on the planet. The sacrifices that will have to be made to pay this bill will be devastating to healthcare, education, infrastructure, etc. Meanwhile, all those who profited immensely from the bubble will get away scot-free, spend the rest of their lives living the high life somewhere like the caribbean as Canada crumbles. The whole thing reeks of corruption/bribery/cronyism. If there were any true journalists left they could have a field day with this. When TSHTF I want names.

#122 juno on 04.28.14 at 1:21 am

I think they knew this backin 2008. they just hid it well and hope things would blowover and recover.

As for 3% affected, yeah right, I wonder where they pull those figure out of the hat.

I believe the figures are worst than that. How about one person signing for multiple people. Or one person signing for another person to another to another. All it takes is for one person in that stream to be CMHC insured and BAM the whole stream is INFECTED.

Also how about people who has multiple CMHC loans, because loans were so easy to get.

Just take a self POLL . I know

2couples with 5 houses each highly leveraged

6 people with 2 / 3 homes (highly leverage)

#123 Nemesis on 04.28.14 at 1:31 am

#FromRussiaWithLove. #LateLateTrax. #ForAggregrator,EtAl.

http://youtu.be/BYbtAZjB8QM

#124 Thanks on 04.28.14 at 1:38 am

Garth,

I started reading your words since your survivalist times. I see you forgot those times since you so vehemently condemn such attitudes now. You also forgot your gold bug period since you so openly banish your forgotten brethren now. Not long ago you also changed the “crash discourse” aptly, so to be accepted by us, your followers, without much blinking.

For all of this I want to give you a sincere, not sarcastic thank. It’s because I want to find the positive in all the loss I have been subjected to believing in your words, I am looking at something that I got. In my older age I realized I can still learn something. Something I can teach my un-indebted though poor children: do not listen to self proclaimed idols.

I know you have talent and you will twist this skilfully. It won’t change the truth though. You are an excessively proud person who never put a disclaimer out (not unlike the ones who you point out for not doing it, the realtors).

I came to this country bringing in education worth many many thousands. I had to find my own way without any particular help from this country, facing bigger hurdles than the natives, as if I could afford offering a handicap. After so many years and service to this country, closing fast to the end of my productive age, I realized finally, to my horror, the amount of crap flying around in the “free world”.

I’m going back, broken and revived, the same time. You have it all.

And thanks for all the fish…

#125 supermike on 04.28.14 at 2:05 am

I think the housing fever is going on. As long as the dirty cheap interest rate stays. At least until the election in 2015. The government won’t do anything serious to control the madness. Because there are so many people are deep in debt. They won’t piss off so many voters.

I don’t trust any words from Politicians! Call me stupid or naive. I actually believed them. When Mark Carney and F said many times that the interest rate will go up. I belived they would do something to control this madness. Now Carney is not even in Canada anymore. He is in England! Nothing hasn’t happened. And this week Poloz’s words…

So be realistic people, politicians don’t actually care about anything as long as they can be in power. They care about now not future! They are normally rich with fat pensions. Debt? they don’t care, all Canadians will suffer the Consequences. They only care if they can stay in power for 4 more years.

I think Garth will repeat the same things for another couple of years. However, things won’t change. I might just start trying to figure out if I can take advantage of the cash back mortgage. After staying on the sideline for more than a decade!

This is a mad world. Savers are stupid and get slaughtered! I realized we just can’t fight with those politicians. Because they will do whatever they can to keep good stats without considering consequences!

Balanced portfolio? My accounts increased at least 15% last year. Compared to the inflation of the houses, it is still a joke! Because of the power of leverage!

I might just have to follow the trends! Nowadays, savers really get slaugtered!

#126 Duncan Herbert on 04.28.14 at 2:39 am

10 percent down instead of 5 percent and return to 25 percent for a conventional mortgage . Should have done it 10 years ago.

#127 Dr. Wu on 04.28.14 at 4:02 am

Lie #1, Banks convince people that collateral loans are risky to the lender, they’re not.

Lie #2, Banks want the non existent ‘risk’ to be insured by the government, in spite of the fact that banks sell
insurance

Lie #3 Banks convince people that they are not ‘credit worthy’ enough for these zero risk collateral loans, thus borrowers need to pay extra premiums for the privilege of enriching banks and government

There are many more lies but I’m tired.

#128 Blasé on 04.28.14 at 5:55 am

Aggregator, I don’t know from whence you came, but I like the cut if your jib. Looking forward to more of your (insider?) information.

#129 maxx on 04.28.14 at 6:44 am

“And that’s why the federal agency now has almost $600 billion in outstanding insured mortgages, roughly equal to the country’s accumulated national debt…..”

Small wonder that foreign investment firms are in the process of creating investment vehicles to short Canada.

This economy is rotting from the inside out and getting worse by the day.

The lure of easy land transfer and municipal taxes, as well as the that pumped out by home “improvement” spending has been too hard to resist and showing no indication of slowing down.

Ship of fools……….

#130 Italians love real estate on 04.28.14 at 7:12 am

Italians love CMHC because it helps more people who otherwise couldn’t, buy houses that they have built, thereby making them richer from real estate.

” you know Italians are richer than you think”

#131 maxx on 04.28.14 at 7:23 am

“As a result of changes to CMHC’s mandate to contribute to the stability of the housing market, benefitting all Canadians, while effectively managing and reducing taxpayers’ exposure to risk……”

Benefitting (sic) all Canadians………while effectively managing and reducing taxpayers’ exposure to risk……

Ridiculous.

I’d much rather manage my own risk, thank you very much. Based on its stellar track record, the last party I’d trust to have my interests in mind is CMHC and its attendant support.

Never mistake government for philanthropy, nor think the two overlap. Its job is to keep working widgets working, paying taxes and buying, buying, buying.

#132 Italians love real estate on 04.28.14 at 7:34 am

Career aspiration of the average Italian Canadian.

1) to be a builder
2) to be a real estate age
3) to be a mortgage broker
4) to marry any of the above in that order

#133 Maritime boy on 04.28.14 at 7:37 am

The “death by a thousand cuts” concept is probably true. And I think that “Halifax Observer” (see the first comment) has described one of those cuts. It’s the economy, stupid. Here in the Atlantic area, the economy is a mess. I live in Fredericton, which is normally a growing, desirable, stable place to live. But homes are not selling. In my own little 22 unit townhouse complex, 6 of the units are for sale, and I rarely see anyone checking them out. In a small condo development a short distance away, the developer has been trying for for months to sell the last few units. The price is now $134,900. Granted, these are not luxury units, but for the price they are a steal. Check out the ad: http://www.colpittsrealty.ca/index.php?option=com_ezrealty&view=ezrealty&id=103:4948492-700-cliffe-st-fredericton-nb-e3a-5v2&cid=1:new-home&Itemid=101 . I have a friend who has been trying for a year to sell his single family home, at a very reasonable price. He says that no one ever even comes to check it out. I don’t have any statistics to prove it, but it looks like the real estate market here is very slow. And so is the economy. I suspect there is a link between the two.

#134 Old Man on 04.28.14 at 8:14 am

Caesar must be worried about CMHC as everybody is moving against his political policies with the press trashing him daily. He has been spotted in his office mumbling about pipelines while clicking a pair of steel ball bearings in his hands.

#135 fred bomble on 04.28.14 at 8:25 am

Shakespeare’s 5 best investing tips

http://buzz.money.cnn.com/2014/04/26/shakespeare-investing-tips/?iid=HP_River

1. Read the terms of any deal carefully, especially loans

2. Patience often pays off

3. Don’t spend money you don’t have

4. Don’t put your money under the mattress

5. You can’t take your riches with you

#136 Stickler on 04.28.14 at 8:26 am

If a crappy house costs $800K and you dont make $250K/year and have no chance of doing so, why would you want to live there?

Is it the water? the mountains? The unfriendly people?

I think that if you thought your house would not go up in value many would not buy. Period.

#137 Kris on 04.28.14 at 8:27 am

…(in contrast, the median house price in New York City is $549,000) it caused shock and awe in Ottawa. — Garth
—————————————–

Really? Poloz said rates will be historically low for the foreseeable future – even after the economy ‘starts firing on all cylinders’. That doesn’t sound like shock and awe, at all. Quite the contrary.

Poloz is a civil servant. — Garth

#138 Old Man on 04.28.14 at 8:31 am

Everyone is turning on Caesar, and the time has come to resign, as even his first wave of vote watches in the Ukraine have ratted him out. Caesar do you hear the little voices telling you to hitch up and ride back to Calgary? The Toronto Star reports, ” Canada’s observers in Ukraine accuse Ottawa of stabbing us in the back. ” Yep, that be you Caesar.

#139 Dean Mason on 04.28.14 at 8:40 am

The Canadian government and Bank of Canada is now really considering ultra long 50 year bonds.

The longest issuing Canadian bonds are now 30 years. They will pay peanuts in interest for sure.

If you look around the world there are other countries already that have 40 and 50 year bonds.

Here are some 40 and 50 year ultra long government bonds and their current yields that exist as of April-28-2014.

Austria 50 year 2.632%

Czech Republic 50 year 4.042%

France 50 year 3.076%

Japan 40 year 1.769%

U.K. 50 year 3.375%

#140 George on 04.28.14 at 8:47 am

(in contrast, the median house price in New York City is $549,000)
“New York, NY real estate overview – Trulia.com
http://www.trulia.com/real_estate/New_York-New_York/‎
Summary for New York. Average price per square foot for New York NY was $1,378,”
They must be wee little houses?

Metro area average. Reference: Zillow. — Garth

#141 miketheengineer on 04.28.14 at 8:54 am

CMHC….helped me get into a home 15 years ago…Yeah…Hurray! Woopie!

I bought a home that was 3.5x my income…Yes it was just right…5% down and 25year amort…

I don’t know why CMHC would insure anything greater than the average household income x “4”. So if in GTA average income is say $130k per household, 4 times this amount should be 520k….that is it.

The program was designed to help people get into homes, and out of rental agreements. Allowing 1 million with 5% down, well, just seems to be excessive…don’t you think…?

If I was in charge of CMHC, I would CAP it at 600,000….sorry McMansion owners….

In most cities in Canada, 600k home would be the biggest in town.

#142 crowdedelevatorfartz on 04.28.14 at 9:11 am

@#120 TJ
“When the SHTF I want names”……

Jim Flaherty, Steven Harper, etc.etc.etc.

#143 frank le skank on 04.28.14 at 9:26 am

All of these rule changes are great, but are being done after attaining a 70%+ ownership rate. Although I’m sure there are more suckers out there who will be saved from their own stupidity, the banks have already cashed in on a significant portion of potential RE buyers. In my mind, its equivalent to buying snow tires (during the winter season) after you got into an accident; its still going to be useful, but would have made more sense to be pro-active.

#144 Billy Bob on 04.28.14 at 9:40 am

It appears the years of bubble talk without any action seems to have given people the (perceived) security that housing prices really don’t go down! As a long time bear the last few years have felt like you could pay any price for a home and not have to worry that it would go down.

#145 broadway skytrain on 04.28.14 at 10:27 am

Is it the water? the mountains? The unfriendly people?

——————————
maybe the above plus the fact that we just had our 4th weekend of decent boating/outdoor/golf/etc weather, while the rest of the country is still thawing out.

and you ain;t seen nothin’ yet! forecast temps for inland metro van are 18,23,24,22 for the next 4 days.
game on!

one may say it’s time to get the motorcycle out for the year, but that would be wrong as it never got put away in the first place. how was the winter biking in regina this year?

#146 sciencemonkey on 04.28.14 at 10:29 am

I also agree with #76 jwk, that sounds like a good way to determine max allowable CMHC insured mortgage.

I’ve held forth on this topic before. Houses will not drop below a certain price because investors will buy them up for the purpose of renting them out. The point of CHMC is to allow musty basement dwellers to compete with the investors on price. The problem of course is when the CHMC is subverted for political use, and suddenly the mustys have outbid themselves to the point that every house in the GTA costs $999,999.

#147 sciencemonkey on 04.28.14 at 10:32 am

HAM addendum: Can we at least lower the CHMC limit to $888,889?

#148 Bottoms_Up on 04.28.14 at 10:44 am

#131 Maritime boy on 04.28.14 at 7:37 am
——————————————–
It’s not death by a thousand cuts, it’s murder by a hundred gashes.

HST (+8%)
Gasoline ($1.35/litre now; $1.10/L last year)
Hydro (+50% in 10 years?)
Nat Gas (+40% overnight)
Food (+10% in 1-2 yrs?)
Buying a house (+5-6%/yr)
Property taxes (+2-3%/yr)
daycare (+10%/yr)
etc.

#149 Calgarian on 04.28.14 at 10:46 am

So you are saying “Average Price of a SFH in Van and 416 exceeds now $1M and Feds are concerned” at one spot and “These days there are 7,000 such active listings (exceeding $1M) between Vancouver and the GTA, and sales have been choked.” in another one. Which one is true? Why Feds are concerned if sales are chocked?
In the meantime, this past weekend, second $1M+ property that came on the market in my Calgary neighborhood was sold in 2 days, with no conditions, over asking price. So this CMHC thing does not effect those who buy $1M+ houses it seems like. Maybe they have big room in their credit card accounts to draw down payments?

#150 chickenlittle on 04.28.14 at 10:49 am

This didnt start with CMHC. This started at home with parents controlling and manipulating their childs every move.
Without the freedom to take chances at home or at school (especially at school) a whole generation has grown up afraid of everything. Mom and Dad STILL plan their kids lives by paying for university, then by giving junior a down payment.

There are so many people who have gown up not knowing how to live, and there are more to come.

At daycare its the same thing: dont run, jump, or have any fun. Do what I tell you. At home kids get carted around to sports, dance, music, etc. There is hardly and unplanned time in a kids life anymore. Then when we grow up we must obey the rules of our employer. There is no room for creativity and self expression.No wonder there are so many rules: no one knows how to self govern themselves!

The domestication of the population is now complete.

http://www.chrismercogliano.com/in-defense-of-wildness/

http://otter.covblogs.com/archives/004701.html

#151 DocInWaitingRoom on 04.28.14 at 11:00 am

I dont have numbers but a lot of people work on comissions or are self employed. I know a lot of people having second homes. If this is the beginning, this is the beginning of the end.

If Joe is worried then the time is near

#152 concernedcitizen on 04.28.14 at 11:49 am

20% of Ontarians are civil servants. Is it any wonder the province has tanked? There simply isn’t enough revenue to support the bloated overhead of excessive wages and pensions. The dictatorship of the civil service has dragged this country towards third world status where an elite gorges while everyone else starves.

http://fullcomment.nationalpost.com/2014/04/27/scott-stinson-five-ways-the-ontario-liberals-are-messing-with-the-provinces-economy/

Every aspect of this evil empire are tainted with self interest. It’s not just the CMHC that is evil.

#153 Beltline Renter on 04.28.14 at 11:59 am

Does everyone from Calgary who posts here have a subscription to the Sun newspaper?

There is NO moratorium on suburban greenfield development in Calgary. In fact 95% of the growth of the city over the next 5 years will STILL BE SUBURBAN, so stop with the horseshit Cal Wenzel inspired propaganda.

The reason the price of homes in Calgary is so high is pretty simple – incredible year over year population growth, spiking salaries, availability of “cheap” money, and a house horny population.

Calgary’s median yearly income is most likely over 90K by now as it was pushing up on that in 2011.

There is a market frenzy here no doubt about it, there are kids I work with who at 22 are getting mortgages for 300K without even breaking a sweat. 5% down of course.

And every one of them is buying in the suburbs.

#154 Tony on 04.28.14 at 12:06 pm

Re: #7 Killaboy on 04.27.14 at 5:11 pm

It goes hand in hand with the old adage “tell a big enough lie and everyone will believe it”. There’s still enough clueless morons around who actually can get funding for a house so they can lose it in the future. All the smart people have already sold or are in the process of selling now.

#155 Kris on 04.28.14 at 12:19 pm

#135 Poloz is a civil servant. — Garth
——————————————-

Pardon my ignorance but what does that mean.. That rates will rise despite Poloz? Isn’t that his job, to set rates?

Economic theories, however valid, will not end this party – Only rising rates will. Kiss that hope goodbye, is what Poloz effectively said.

#156 Aggregator on 04.28.14 at 12:23 pm

Remember what I said about home foward markets, developers changing floor plans and quality of materials, the shortage of listings myth (hiding under construction), the conseqences of develoeprs delaying projects past the 4.5 month Tarion guarantee and speculators trying to weasel their way out of contracts? Behold, the big lawsuits have commenced:

North York condo developer faces $30-million lawsuit

The lawsuit, citing misrepresentation and breach of contract, was filed last week and involves owners of some 60 condos in the 464-unit Emerald City Phase I.

It is just the latest evidence that folks who’ve bought preconstruction units from blueprints — years before they are actually built — may be reaching a tipping point, just as tens of thousands more new units are soon to come to completion.

Instead of just griping to friends and in online forums about what can end up being shoddy workmanship, faulty finishes, falling glass and even ceilings lower than promised in developers’ marketing materials, they are fighting back.

EMERALD CITY CLASS ACTION LAUNCHED PDF

TORONTO, April 23, 2014 – A class action for $30 million has been commenced on behalf of the purchasers of the 464 condominium units in Phase I of the Emerald City condominium development. The class action is for misrepresentation and breach of contract, and claims damages equivalent to a reduction in the purchase price of between 10-15% per unit to reflect the fact that important features that were promised by the developers have not been delivered.

#157 dontcallmeshirley on 04.28.14 at 12:24 pm

CMHC’s announced “second home” restriction does not apply to rental properties, only to owner occupied properties.

#158 Old Man on 04.28.14 at 12:37 pm

#120 TJ – that is nothing compared to the energy mess this country needs to face. The National Post threw Caesar under the bus yesterday with a long detailed summary of it all. Caesar has delusions of Canada being a super energy state and has failed; no pipeline east, west, or south while the world marches on. It was a great piece of writing putting all in context – Caesar has accomplished nothing but misery.

#159 fixie guy on 04.28.14 at 12:47 pm

#31 joblo: “How’s are the tax slaves gonna pay for this imploding mess, higher health care costs and pensions?”

My bet is that’s the second half of the Harper equation, dismantle the social safety net like a good corporate lap dog. The plan is actually brilliant, with a simple set of arcane housing policy changes; enrich the financial industry, create social dislocations among the populace to keep them out of your way, wreck the nasty ‘leftist’ entitlements that made us a world destination. Viewed from that perspective other Conservative policies also snap into focus.
That, or they’re historically incompetent. Either way if it walks like a duck…

#160 Condo Minion on 04.28.14 at 12:52 pm

More special Toronto condo misery as buyers move in:

This 26 year old bought a $460,000 condo in suburbia with backing from her parents and discovered it wasn`t what the brochures said.

http://www.thestar.com/business/2014/04/27/north_york_condo_developer_faces_30million_lawsuit.html#

The building is already devalued up to 15% the new owners think. The Toronto Sun, (responsible journalism dept.), did a feature last month about how much great value there was in the units, lowest priced at $357,900.

http://virtual.homes-extra.ca/doc/Toronto-Sun-Homes/0330homes/2014032801/#26

Today a realtor bagholder is selling a unit for only $319,000, plus…`there is $15,000 cash back from builder on closing…`

http://www.realtor.ca/propertyDetails.aspx?propertyId=14341498&PidKey=-1956357395

At least the 26 year old has hired the country`s richest paid lawyer to start her class action suit.

It will be a very interesting year in condos……..

#161 fixie guy on 04.28.14 at 12:53 pm

#139 miketheengineer: “So if in GTA average income is say $130k per household….”

You might want to sit down before clicking:

http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/famil107a-eng.htm

#162 Doug in London on 04.28.14 at 12:59 pm

What the CMHC is doing looks a lot like the sub prime mortgages in the United States last decade. Oh, disregard that above comment, I really should know better. I completely forgot hat it’s different here in Canada.

@supermike, post #123;
How are we savers being slaughtered? I took it upon myself to load up on various dividend paying stocks and ETFs during those times when they were on sale in 2011 and 2012, and last year when REITs, preferred share ETFs, and utility stocks were on sale I loaded up on them, paid for with SAVED money of course. Just like the nuke plants that hum along, night and day, putting out a lot of constant base load power, these investments (as I said, bought when on sale) hum along putting out dividends and distributions and ask for nothing in return except not selling them.

#163 Blacksheep on 04.28.14 at 1:16 pm

“CHMC may be an evil agency, but they now get it. – Garth”
————————————
Sorry Garth, but I see this is a ridiculous statement.

The outcomes were known. We are supposed to believe a canadian government agency playing with half a trillion dollars, did not understand the consequences of their actions?
They were naive before, but now see the error of their ways and are thus bent on correcting the missteps that could finally deflate housing?

How bout H & F and every other western leader / central banker, were just following the plan laid out back in 2005? (earlier?) like good global citizens.

Here is what I’ve learned in the past six years.

The gov. (+ influencers) makes the rules. The gov. (+ Influencers) pulls the levers. The gov. being a sovereign in control, can bail out anyone, any time, for any amount, owed in it’s own $. Unless of course, they do not wish to, which is a whole other discussion.

How many times have you read, don’t fight the fed?

Only one of two things will bring this airborne pig, crashing to earth.

1) 2.5-3 point bounce in lending rates.

2) Unemployment nearing double digits.

Anything else will be financially absorbed, by the indoctrinated masses.

#164 Cici on 04.28.14 at 1:23 pm

Canada sells first 50-year bond to lock in low interest rates: http://business.financialpost.com/2014/04/28/canada-50-year-bonds/

Oh, and here’s the “genius” plan to counter the impending retirement crisis:
http://www.winnipegfreepress.com/opinion/editorials/cpp-hike-a-better-fix-for-retirees-256935171.html

#165 ozy - Is HARPER responsible for naming CMHC Board or who??? on 04.28.14 at 1:28 pm

DDF RIP.

Now, is HARPER responsible for naming CMHC Board or who???

I haven’t heard any resignation rumours… one starts to wonder if is there any character left in Kanata… In Europe, some ministers or talking heads would have already be out…

o, kanata

#166 Mark on 04.28.14 at 1:35 pm

” Houses will not drop below a certain price because investors will buy them up for the purpose of renting them out. “

“Investors” have a plethora of other investment options to consider. Once momentum starts to return to other sectors such as oil and gas, or, heaven forbid, the precious metals — look out below!

#167 Stickler on 04.28.14 at 1:40 pm

@ #143 broadway skytrain on 04.28.14 at 10:27 am

Is it the water? the mountains? The unfriendly people?

——————————
maybe the above plus the fact that we just had our 4th weekend of decent boating/outdoor/golf/etc weather, while the rest of the country is still thawing out.

and you ain;t seen nothin’ yet! forecast temps for inland metro van are 18,23,24,22 for the next 4 days.
game on!

one may say it’s time to get the motorcycle out for the year, but that would be wrong as it never got put away in the first place. how was the winter biking in regina this year?

—————————

yes, it is warmer in the winter then the rest of Canada (but its not warm), and you do get a month longer spring…

…here is a thought, instead of 800K for a crappy house in Vancouver what about 400K for a really nice house in many parts of Canada, 200K for a nice house somewhere south (your choice of destination)

And an extra 200K for well…what ever you want.

Sounds way better to me.

#168 Old Man on 04.28.14 at 2:29 pm

#158 Condo Minion – what is the verdict as watched the developer’s video presentation? I am still laughing, not as much with the TTC pulling up and the camera moves up, but later in the presentation. How many condo buildings display TTC signs in the lobby as if the entrance is inside? Yep, just step down those stairs and wait for the next subway car LOL.

#169 Holy Crap Wheres The Tylenol on 04.28.14 at 2:49 pm

CHMC may be an evil agency, but they now get it.

Run by Dr Evil I surmise. Main employee Fat Bastard.
By the way where is Smoking Mans two bits today. Narry a word?

http://www.youtube.com/watch?v=tg_TnFHK3wI

#170 Realtor # 1 GTA on 04.28.14 at 3:11 pm

Story in the Star about a Lawrence Home that sell for almost 200% of asking price. That not what surprises me,

its the 1000 viewing appointments that they received.

70% ownership ???? who comes up with these stats??

#171 Yo on 04.28.14 at 3:17 pm

I think the feds understand they have a big problem on their hands, the problem is there is a fed election next year and popping the bubble now would probably wipe away their chances of re-election. I would not be surprised after the election, whatever party wins, more tighter rules will come in. Why in the world would CHMC insure house purchase that are nearly a million? That makes no sense at all. If you are buying a million dollar house and don’t even have the basic downpayment, too bad – go save some more.

#172 miketheengineer on 04.28.14 at 3:33 pm

#159 fixie guy

Thanks for the link…not sure where I got the 130k family income from…but I think I just crapped my pants….

Everyone must have a “self employment” qualification to get mortgages in Mississauga…cause no home is less than 400k, and with an income of only 70k, they can’t afford to make the payments on their 600k McMansion.

Or they all work under da table. I said this before, and I will say it again…I don’t understand how the lady who works at Tim Hortons, selling me coffee, can afford to live next to me…I can “barely” do it. I don’t get it…sorry Garth….I just don’t get it.

Garth is right…if the bank was to “actually” check where these guys get their income…I would bet a large double double…that they are all “self employed”.

If this is so, we are all Fuked!

#173 devore on 04.28.14 at 3:45 pm

#38 Ben

Credit crises are asynchronous. You issue the credit, it looks great (and the bank worker gets their commission). Then you wait. Then it blows up. Mostly people will blame whatever happened near the time

Funny how easy it is to misdirect the human brain when it comes to causality. Particularly in areas where you lack the expertise, or even a basic understanding, to connect the dots yourself.

To this day, majority of people blame the stock market crash and greedy bankers for the great depression, but it was the unprecedented manipulation and policies by the newly minted FED that ultimately created the problem. It’s an easy picture to paint. Everyone loved the roaring 20s, the sucky 30s afterwards not so much.

#174 Iso-Classical on 04.28.14 at 3:46 pm

I did, I got it a long time ago thanks to you Mr. Turner. You saved me from a world of hurt and inflexibility.

However, I did quit my job in northern AB for a job in NYC! Don’t be concerned…I always rent fully furnished! haha

Thanks once again! :)

#175 Rexx Rock on 04.28.14 at 3:56 pm

70% home ownership means a strong and balanced economy.Canadians feel confident in purchasing a home so the trend will continue as do price appreciation.There will be a generation that haven”t seen normalized or high interest rates like Japan.High debt is just a way of life in Canada until you pay off your home.

#176 jc on 04.28.14 at 4:12 pm

#155 dontcallmeshirley on 04.28.14 at 12:24 pm

Looks like you are right. Specifics of the Second Home Program here:

http://www.cmhc-schl.gc.ca/en/hoficlincl/moloin/hopr/upload/CMHC_Second_Home.pdf

There’s also an Income Property Program here:

http://www.cmhc-schl.gc.ca/en/hoficlincl/moloin/hopr/upload/CMHC_Income_Property.pdf

It is totally unbelievable that CMHC subsidizes private business. I always assumed it was a loophole that allowed amateur landlords access to insured mortgages. I had no idea there was an explicit product.

#177 Oracle on 04.28.14 at 4:16 pm

#161 Black sheep,

You are one of the few who are awake.

This latest CMHC rule change is a farce.

I called Genworth this morning and they said that you can only have a maximum of 1 insured mortgage after May 30. In addition to this, you can have many insured mortgages through Genworth after May 30 for 2nd, 3rd, etc homes.

Wish I held equity in these private lenders but I don’t have $ give for kickbacks .

#178 Oracle on 04.28.14 at 4:17 pm

Post above should read “1 CMHC insured mortgage”

#179 Oracle on 04.28.14 at 4:22 pm

#155 don’t call me Shirley:

You heard that these new changes don’t apply to rental homes but only to 2nd owner occupied homes insured through multiple mortgages at one lender?

This rule change is indeed a farce. Will not change anything.

#180 charles on 04.28.14 at 4:40 pm

You have often mentioned the non refundable deposit in a sales agreement when a condition of sale is the buyers house selling. Did you mean non refundable period or non refundable if they sell their house and don’t close after their sale.
Keeping those silver spurs shinny?

#181 nomad on 04.28.14 at 5:00 pm

Check this out. 72 offers.
1.2 million isn’t that surprising for a 5 bedroom, which looks nice (from the outside).

http://www.thestar.com/business/2014/04/28/lawrence_park_fixer_upper_gets_72_offers_goes_for_195_per_cent_of_asking.html

#182 notagreaterfool on 04.28.14 at 5:17 pm

BMO’s 2.99 rate is going to 3.29 for a 5 year fix.

#183 Millennial-Falcon on 04.28.14 at 5:28 pm

It’s gona be 27 degrees in Burnaby BC on Thursday, the Harley’s are out and everyone’s pumped, sorry rest of canada, that’s why a east side special is a million. Happy snowmobiling to you guys though!

#184 TakingResponsibility on 04.28.14 at 5:54 pm

Excellent post. People get diverted too easily from getting the correlation. Or, perhaps in total denial about the incredible gov’t intervention and social engineering.

CMHC was NOT established to move ‘renters’ to ‘owners’ – the institution has become a monster far removed from its beginning.

I’m still reeling over Aggregators link that reveals CMHC is buying up million(s) dollar foreclosure(s)! If it wasn’t for the court document…
A real WTF that needs journalistic investigation.

#185 Old Man on 04.28.14 at 6:10 pm

#182 Taking – CMHC does lots of things, as have seen them take entire Townhouse projects back and sell the units directly to the public at bargain prices.

#186 Old Man on 04.28.14 at 6:26 pm

I am not sure how all the inventory will be handled this time when the bubble bursts. In a normal market the bank takes legal possession and sells the home and the bank is paid off out of proceeds by CMHC. Now if there is a deficiency – listen up owners – CMHC will get a judgement for such plus interest against you to pay up or else, as your on the hook for losses.

#187 Mike T. on 04.28.14 at 6:30 pm

‘It’s gona be 27 degrees in Burnaby BC on Thursday, the Harley’s are out and everyone’s pumped, sorry rest of canada, that’s why a east side special is a million. Happy snowmobiling to you guys though!’

petulant and immature

insecure much?

#188 Rob on 04.28.14 at 6:50 pm

#168 Realtor # 1 GTA on 04.28.14 at 3:11 pm
Story in the Star about a Lawrence Home that sell for almost 200% of asking price. That not what surprises me,

its the 1000 viewing appointments that they received.

70% ownership ???? who comes up with these stats??

Me – good point
I asked Garth this many times but never once commented.

#189 Rob on 04.28.14 at 7:05 pm

So CHMC is asking realtors to hide the fact the house is in a foreclosure from the public.
I no longer have any doubt the whole country is a SCAM !!!!!
I AM DONE PAYING MY INCOME TAX FROM NOW ON.
https://www.google.ca/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&cad=rja&uact=8&ved=0CEsQFjAD&url=http%3A%2F%2Fbusiness.financialpost.com%2F2013%2F02%2F27%2Fcmhc-seeking-to-hide-foreclosure-information-from-home-buyers%2F&ei=w91eU56OCsK6yAGf2IDYAw&usg=AFQjCNEJs08kKeATgzL3CiEBTRePlG8VEA&sig2=SJa_FaQ43QyEegS94r2SvQ

Great idea. Tell us how it works out. — Garth

#190 [email protected] on 04.28.14 at 7:18 pm

http://www.thestar.com/business/2014/04/28/lawrence_park_fixer_upper_gets_72_offers_goes_for_195_per_cent_of_asking.html

Garth isn’t this illegal? All parties gained except the buyer?

#191 Rob on 04.28.14 at 7:41 pm

Why are u deleting me.
Are u trying to outdo ddn government at hiding the truth ?

#192 Rob on 04.28.14 at 7:43 pm

Oops,sorry about # 185…didn’t realize…sorry

#193 Bottom Feeder on 04.28.14 at 7:46 pm

Best Buy is not the only one to get it. Rover is next.
Pet Cetera is shutting down 6 stores, putting 100 people out of work. At least there will be more dog food available for those with CMHC mortgages!

#194 BOM on 04.28.14 at 7:53 pm

Read this:

“The Crown corporation has been offering insurance on second homes since 2005. It has been offering insurance to self-employed people without strong income validation since 2007.”

And then read this:

“CMHC says its second home program and its self-employed-without-third-party-income-validation programs combined account for less than 3 per cent of its insurance business volumes in term of the numbers of mortgages insured.”

CHMC has a pool of mortgages insured accumulated over the last 25 years. They have only offered the products they are cancelling for 7 to 9 years but they make up 3% of that pool. Simple math indicates over the last 7 years about 10% of mortgages would have been part of the program they are cancelling otherwise it could never reach 3% of the total pool which was already significant prior to the program starting.

#195 Daisy Mae on 04.28.14 at 8:25 pm

#153 Kris: “#135 Poloz is a civil servant. — Garth”
——————————————-

Pardon my ignorance but what does that mean.. That rates will rise despite Poloz? Isn’t that his job, to set rates?

Economic theories, however valid, will not end this party – Only rising rates will. Kiss that hope goodbye, is what Poloz effectively said.

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

I think it means Poloz is a puppet, a mouthpiece. Harper calls all the shots. And, as Garth can attest, if you challenge Harper you’re out on your ear — doesn’t matter that you’re the only one making any sense. Interest rates won’t rise until after the election. We wouldn’t want to rock the boat, after all….

#196 Rob on 04.28.14 at 8:28 pm

DELETED

#197 Daisy Mae on 04.28.14 at 8:31 pm

#157 Fixie Guy: “The plan is actually brilliant…that, or they’re historically incompetent.”

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

I’d go with the latter. The government made the mistake of misreading the electorate. They thought they were clever. But they were not. As evidenced by the current state of….well, everything.

#198 Daisy Mae on 04.28.14 at 8:44 pm

#161 Blacksheep: “The gov. (+ influencers) makes the rules. The gov. (+ Influencers) pulls the levers….”

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

We seem to forget these goons work for US. We’ve essentially ‘hired’ them to do a job. I hope the electorate corrects this mistake next time ’round. What a pathetic bunch of politicians we have…

#199 killaboy on 04.29.14 at 1:30 am

re: #152 Tony on 04.28.14 at 12:06 pm

Well, I’m starting to believe it’s a lie that the housing market is about to collapse. In 2005 I was living in California and owned a house in Anaheim. I had bought less than three years before and the market value had doubled. It was an open secret that banks were giving loans to anyone that could fog a mirror with no down payment and no proof of income. People would buy houses with the intent to sell in a few months and take a nice profit. It was pretty obvious to me that this was not sustainable, so I sold, moved to Calgary, and bought a nice place with a 50% down payment from the profit I made on the Anaheim house. Flash forward to now. I don’t see the signs of a housing price collapse here like there was in SoCal in 2005. Anyway, I’ll have my mortgage paid of in a couple of years and I don’t plan on moving ever.

#200 Wilbur on 04.29.14 at 11:35 am

Hello Garth,
the doomer and bloomers are out again.
What are your thoughts on Bill H.R. 2847 ?
Do you think it is possible for the US dollar to be devalued as the leading reserve currency?
What are your thoughts?

#201 Wilbur on 04.29.14 at 11:36 am

Sorry meant to write gloomers…

#202 SCIBADUBADEBUMBADO on 04.29.14 at 12:13 pm

#9 Old Man on 04.27.14 at 5:12 pm
Good Post!
I can just see the powers in Ottawa mulling over their choices right now.
1. What is election date.
2. Make sure we don’t implode RE before that date.
3. Make sure we don’t puff up the market any more so it won’t crash before election date.
4. All that matters is Election Date. After that all hell can break loose. Voters will forget what ever happens in the first year of our term.