The straw man

SWIM modified

A few days ago Vancouver’s version of Brad Lamb, but shorter and hairier, upset the locals. Bob Rennie said house prices are high in that delusional city because it’s a global destination. So get used to it.

This is a familiar theme. Other local house-floggers, like Cam Good (the bogus yellow helo guy), have claimed in the past that people in Vancouver should stop bitching about foreigners buying up real estate, and compete with them. Three years ago he famously said:

“If you suffer from real estate impotence, don’t blame Chinese people. Besides, getting all worked up about it will only make it worse. Have a glass of wine. Relax. Stop feeling sorry for yourself and pick up the phone to call a realtor or a mortgage broker, either of whom will be more than happy to show you how easy it can be to get your real estate groove on. Real estate is the best investment you’ll ever make.”

Without a doubt, untold squads of dank, damp yet horny house seekers have been driven into a buy-now-or-buy-never frenzy by fears of yellow peril. Local realtors and developers have for years used the spectre of massive Chinese investment as a prod to induce otherwise sane people into paying insane prices for houses they can only afford by inviting strangers into the basement. And it continues.

The latest ‘proof’ of the Asian invasion comes from, of all places, the New Yorker magazine, wherein a column on globalized real estate investment mentioned Vancouver as a key destination for offshore moolah. Van writers, xenophobes, moldy basement-dwellers and people with Kits-lust sooo believe this stuff. No matter that the mag used a real estate company survey (duh) as the key source of statistical data, or a meaningless study on energy use suggesting lots of condos are dark.

Vancouver Sun columnist Barbara Yaffe ate it all up. She just wrote this: “Vancouver is one of the world’s new “superstar cities” — on par with London, Paris and Milan. And so, locals seeking a roof over their heads no longer are bidding only against other locals. They are confronting a global marketplace, with all the challenges that implies.”

London, Paris, Vancouver? What kind of bad sushi are they serving on Robson these days?

“I think local realtors are being disingenuous blaming high prices on foreign buyers (and not low interest rated and excessive borrowing) because it suits their needs by making people feel it is inevitable and permanent that they will need to pay more than they can afford for real estate,” writes blog dog Joe. “If enough people buy that argument, it won’t become self-fulfilling, but I think it could practically lead to more people making bad financial decisions in the near term (buying at the peak of the market when interest rates will inevitably rise). That’s worth trying to forestall.”

You bet. Along with the racism that is so evident in this pathetic blog’s comment section from people who blame every poor Asian guy from Surrey or Burnaby for unaffordable houses. This realtor-fed myth that homes cost too much because of Chinese money has governments actually considering controls on real estate ownership – a massively dumb idea. The last thing our stuttering economy needs is less international investment, or to send out an isolationist message.

Besides, Canadians have nobody to blame but themselves when crap houses in East Van sell for a million bucks. Below is an interesting piece of data just published by Straight.com, showing non-resident occupancy levels for various Van hoods. You will quickly note that in the vast majority of the city it’s between 0% and 7.7%. Some invasion.

OCCUPANCY

Vancouver (and to a lesser degree Victoria) have always carried a real estate premium because of geography, climate and the hemming-in by mountains and sea. This started to bloat about the same time housing prices erupted in other centres, like Toronto. We all know why. After the GFC of 2008-9, freaked-out governments brought in emergency interest rates, then experimented with zero-down payments and 40-year mortgages. They gave us new first-time buyer tax incentives, sweetened RRSP home-purchase withdrawals and doubled the cash CMHC threw on the property bonfire. Meanwhile banks loaned indiscriminately, started offering cash-back bribes and financed a condo explosion.

Real estate became a mania, then an obsession. The home ownership rate soared, and mortgage debt along with it. Suddenly everyone piled on, because we all love to buy high and sell low. And when prices had been forced into the realm of fools, we blamed the rich Chinese guys buying houses 99% of Canadians couldn’t afford anyway. It’s called the straw man argument. It’s a fail.

Ironically, of course, the market is turning. Fred sees that. He sold his DT condo, rented a place, got a baby and is now looking for bigger digs.

“The plan was to rent first, then wait for the Garth predicted decline in prices,” he says, “but the latter may be coming sooner than I thought it would.  I am a diligent searcher of the local MLS listings and a year ago, if you tried to search for a house that had a minimum of 5 bdrms and minimum of 3 bathrooms, with a mortgage helper of some sort (we would either rent it, or move one set of boomer parents in to it) in Coquitlam, Port Coquitlam or Port Moody under $600,000K, nothing sane could be found on there.

“Yesterday that same search yielded 9-10 options and a few of them, just by looking at the pics, are actually places that would appeal to us.  Could it be that the plummet is coming even before the rate hikes?  If it is, what Armageddon awaits when the rate hikes do kick in?  Moreover, my good friend has been one of these speculative buyers, who did well with one buy, is drowning with another buy and is about to have a third come online, which he is resolved to renting at a loss, cause flipping it now that the building is done could wreck him.  So when it comes to articles like these, I wonder where this data is coming from and wanted your thoughts.”

And you have them. Vancouver’s been punked.

204 comments ↓

#1 Cecil henry on 05.22.14 at 6:44 pm

RACISM??

AFRICA FOR THE AFRICANS, ASIA FOR THE ASIANS, WHITE COUNTRIES FOR EVERYBODY??

Racism is only racism when it is the people of the country trying to defend their ethnic interests, not when their anti-white ‘leaders’ defend theirs.

Nobody’s flooding Africa with Non-Africans and giving them free health care, affirmative action and special privileges.

Only White Countries are doing it, only White children are affected, and only White politicians are allowing it.

Go away. — Garth

#2 Dean Mason on 05.22.14 at 6:47 pm

Anyone that has more than 25% of their net worth near or at retirement is asking for financial trouble.

Let the real estate delusional people in Vancouver and other high priced real estate regions get burned.

#3 Dean Mason on 05.22.14 at 6:48 pm

Correction to my above last post, anyone that has 25% of their net worth in physical real estate………

#4 captian weed on 05.22.14 at 6:50 pm

CANADIAN REAL ESTATE IS PONZI scheme
GOVT CHEAP MONEY–>BANKERS–>AGENT–>FOOLS->LTTax–>GOVT

cycle of the greater fool

#5 Mark on 05.22.14 at 6:53 pm

If foreign money was actually a factor in RE in Canada, then we would be seeing declining leverage. After all, cash injected to a market has the effect of reducing leverage.

Except that we know that leverage is at all time highs, debt to income is right off the charts, and most of the claims of “HAM” are easily debunked.

Fact is, nearly all Asians and immigrants to Canada arrive with little more money than enough for an apartment down-payment and a modest used car (or a cheap new KIA). Don’t let extremely isolated and statistically irrelevant cases of serious money coming to Canada cloud your judgement of what’s really going on for average immigrants. Most alleged “HAM” in Canada are just Canadians taking on giant mortgages, which is bound to happen since there’s now a lot of people of Asian heritage of house-buying age. They have monster CMHC subprime mortgages just like everyone else. There’s no magic to it, no HAM, except in the mind of xenophobes.

#6 Diane on 05.22.14 at 6:56 pm

As much as I normally agree with you, you can’t say that vacant units aren’t a problem when most of the downtown area is read – that’s an incredibly condo dense area, so represents a LOT of empty units

#7 keith on 05.22.14 at 7:00 pm

If you speak to new Canadians in Vancouver, they will tell you that it is clean, it has good schools, and the government is much more stable than back home – wherever that is. Interestingly they don’t mention high wages, brilliant job prospects or great economic opportunities as the reason to come to Vancouver.

I arrived in this city in 1986. Real estate was a lot more expensive than where I grew up, then rapidly proceeded to divorce itself from local income levels. Today we have median family income @ <70k, with seven figure livable houses on the east side. About half the population rents, and with a dearth of publicly owned housing, the city classifies a studio as "affordable" at over 1400 per month, demonstrating their complete disconnection with working Vancouverites.

The disconnection with working people seems to be an occupational hazard for most Canadian politicians. I spoke to a colleague, newly arrived from Germany. She told me her opinion of Canadian politics is that it is a process of selling out the public by their own elected politicians.

It's not surprising that half the population of Vancouver doesn't hold a ticket in lottery win numbers game of local real estate. The politicians aren't focussed on working people in this city. They're too busy continually upzoning pockets of land to feed the redevelopment beast that crowds the sky with cranes to build more condos – the answer to most land use questions in Vancouver.

Noone has the right data on home ownership in Vancouver, because the politicians don't want you to know. In the end, it doesn't matter who's to blame for the prices – we were going to be sold out anyway. So don't worry if you were sold out to HAM, property speculating boomers, or the redevelopment industry. You were going to be sold out to someone, and the price isn't coming back to "affordable" for 70k annual income ever again. It could fall by 50%, take a hard look at what you'd get for that price.

#8 perplexed on 05.22.14 at 7:03 pm

Apologies Garth, but here we digress.
Before you call me a racist, be aware that I have chosen to live in an East Vancouver Neighborhood which is primarily South Asian and Asian in heritage. It was such when we chose to live here 30 years ago to raise a family.
The newcomers who are purchasing west side properties are definitely having an influence. Can I prove that they are all wealthy mainlanders? No, but if you speak Mandarin and pay with cash, it’s likely.
Even the most successful offspring of my neighbors don’t drive Gelandewagon AMG’s and other similar luxury vehicles. You can observe a steady stream of such traffic exiting the west side along South West Marine Dr. everyday.
This is a recent phenomenon.
A friend of ours is currently involved in the construction of 2 adjacent houses on N.W. Marine Dr. Total cost app. $24 million. (Land and buildings)
Mainlander mom and dad own one. Teenage son the other.
As you have pointed out, residential construction is a large part of the current economy.
Sorry, but I just can’t see how HAM is not having a significant influence in this part of the country.

#9 Rainclouds on 05.22.14 at 7:05 pm

Not intending to be an apologist for the vacuous Yaffe as her “journalism” is hardly insightful or well researched. BUT..direction is likely coming from above.

Editors who are aware of where revenue comes from and don’t want to upset the apple cart . RE is probably paying the freight at the Sun…including Yaffe’s wage.

#10 Doug on 05.22.14 at 7:11 pm

First!

#11 Michael on 05.22.14 at 7:11 pm

Anything that increases demand can have a effect on prices. In Vancouver demand is currently coming from both locals with government backed loans (and/or gifts from parents), and foreign buyers.

And the foreign buying is not insignificant. According to Ian Young, there are over 45,000 Chinese millionaires who are trying to move to BC.

http://www.scmp.com/news/world/article/1423370/exclusive-vancouver-facing-influx-45000-more-rich-chinese

Is he in on the “punking” as well? What about all the Mandarin speakers I bump into at open houses on the west side of Vancouver? Fake buyers hired by realtors?

#12 Bargains everywhere on 05.22.14 at 7:11 pm

‘Vancouver’s been punked’ because they have canceled the Immigrant Investor Program.

#13 Millennial-Falcon on 05.22.14 at 7:14 pm

All I can say is that in my condo complex here in Burnaby the signs and directories are written in two languages and the second one isn’t French, ditto for my local td branch

#14 prairie person on 05.22.14 at 7:22 pm

I’m back on the prairies, outside of Wpg, and the boom in housing prices is astounding. One house in the middle of nowhere, 1.1M. 500,000 area is quite common. Retired folks bldg 3k ft. houses. No kids. The first serious health problem and the house has to be sold. Have to drive five or ten miles for milk and bread. Nuts! Cottages that no longer look like cottages but second city homes. Unless everything glides along, no real dips for the next ten years, some people are going to be facing painful sales. Or, maybe I’ve got it wrong and, somewhere, out there are buyers just waiting to snap up 500k houses in t he country and 250k cottages.
However, I don’t get it. Retire. Sell city house close to services. Build house away from services. No bus service. No taxis.

#15 Rob Ford In Rehab on 05.22.14 at 7:25 pm

Heya Garth!

Like you I am no racist about those Oriental buyers in BC. They work like dogs and deserve whatever success they have , fer sure. Olivia Chow does not understand them at all and that’s why I’m gonna win. 100%, guaranteed.

As for my Escalade in the news, why won’t you people leave me alone!?

That woman, she’s my friend, a taxpayer too. Like I said before, I have plenty to eat at home. But I’m not at home right now, I’m in rehab, sort of. And a guy’s gotta do what a guy’s gotta do. Let’s just call it tit for tat and leave it at that.

I can’t believe “world pride” or whatever is coming to Tronna next month. Doug and me have an idea, to run down Yonge Street buck naked during the parade. Nobody’ll ever be gay again after seeing that.

Could be worth a try…

#16 Tudor on 05.22.14 at 7:26 pm

The NYTimes has an interactive rent vs buy calculator that’s kinda neat. The numbers will be different for Canada because we don’t get tax breaks on mortgages or property taxes, but still interesting:

http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0

#17 John Terleski on 05.22.14 at 7:28 pm

I’m 27 years old, so I’m at the age where a lot of my friends have either recently purchased a home or are absolutely dying to buy one since apparently buying a house right now is the smartest investment ever. I have worked as an analyst in mortgage insurance in the past and from all of the information I have seen both internally and externally, none of this makes any sense to me. It is difficult trying to have a conversation about this with anyone my age without them looking at me as if I’m totally insane. My friends keep saying that interest rates will stay like this for a long time if not forever, so essentially they see this as free money. What I’m wondering is when the rates do rise how do you guys think this will play out? Would the rates only increase by maybe .5% or would it be more of a large jump of 2 or 3%? Also how quickly would the rates continue to rise? Will that all depend on how the initial change in rates affects the market? I’m new to this and I’m curious as to how it will unfold.

#18 Oceanside on 05.22.14 at 7:29 pm

I like Vancouver in small doses but comparing it to London and Paris is wildly imaginative.

Spending the day in Victoria and the traffic gridlock from 2pm on certainly takes away some of the charm it used to have.

#19 Ben on 05.22.14 at 7:31 pm

Thank goodness I don’t live in Vancouver. How can they attract any workers? You’d need to earn a fortune. Forget that.

#20 Dave on 05.22.14 at 7:37 pm

London, Paris, Surrey….that should move some McMansions

#21 TO Renter on 05.22.14 at 7:40 pm

CBC DocZone on “The Condo Game”
http://www.canada.com/onlinetv/documentary/doc-zone/9198167/video.html?o=10

#22 Self B-rated on 05.22.14 at 7:44 pm

Garth, I agree with your argument but I don’t see a straw man. According to Wikipedia (final arbitrator in all but scrabble) a straw man argument involves:

The so-called typical “attacking a straw man” implies an adversarial, polemic, or combative debate, and creates the illusion of having completely refuted or defeated an opponent’s proposition by covertly replacing it with a different proposition (i.e., “stand up a straw man”) and then to refute or defeat that false argument (“knock down a straw man”) instead of the original proposition.
So a straw man argument deliberately distorts an adversaries position and then argues against this false, created opposition view.

#23 devore on 05.22.14 at 7:45 pm

#1 Ben

Thank goodness I don’t live in Vancouver. How can they attract any workers? You’d need to earn a fortune.

They don’t. There have been stories of several high profile would-be hires at UBC that do a 180 once they see how much houses here cost. These are wealthy people used to a certain lifestyle, and they’ll stick with London, Paris and New York instead, thank you very much.

#24 omg on 05.22.14 at 7:48 pm

Garth wrote….”Vancouver (and to a lesser degree Victoria) have always carried a real estate premium because of geography, climate and the hemming-in by mountains and sea.”
————–

Victoria was vastly over priced in the mid 2000s even before emergency interest rates – a nice 3 bedroom bungalow could go for as much as $700k. Compared to other cities at the time this looked silly expensive, now it seems “normal”. How easy it is for the extreme to become normal. BTW houses in Victoria have about flatlined since 2006.

Prices in Victoria were bid up by ugly HPM (Hot Prairie Money). Farmers and retiring civil servants and worst of all oilmen, selling out of the prairies and moving to Victoria.

I just wish they would have the courtesy to talk the same language and eat the same food as us.

#25 Smoking Man on 05.22.14 at 7:50 pm

Rates are going no where but down for the formidable future.

Basement dwellers last Sept cheering a short live spike in fixed rate mortgage where dancing in the street. w

I called batman on bond yields, today anyone who loaded up on bonds, especially 5 year as I suggested made out like a bandent..

We face years of slow growth, boomers trimming spending, kids working for poverty wages.

Rates won’t derail real estate… It will be Job loses.

Stop saying rates are going up, I will remind you all how stupid you are when they drop..

#26 Victoria Real Estate Update on 05.22.14 at 7:51 pm

Victoria’s 2014 spring market has been a bust. Downward price pressure continues to frustrate greedy sellers who thought this spring would be different than in 2013, 2012 and 2011. Victoria’s housing market can be described as a down market or a buyer’s market. In a buyer’s market, buyers have an advantage over sellers in price negotiations because there are too many houses for sale and not enough demand.

Single family home sales in Victoria have been slow, sluggish and weak since 2010. As a result, house prices in Victoria have been declining since 2010. There are many underwater mortgage holders in Victoria.

Downward price pressure has been the name of the game in Victoria since 2010 and that weakness has continued into 2014. For example, 2738 Foul Bay Road is priced $63,000 below assessed value but remains on the market with no buyer. This empty, move-in ready 3 bed, 2 bath, 1,853 sq. ft. house is situated on the boundary that divides East Saanich and Oak Bay. It’s interesting that this house is priced at $459,888. Apparently the seller is unaware that Canada’s Immigrant Investor Program that brought HAM buyers to Canada was axed in February.

Victoria’s housing market continues to be extremely overvalued, despite the fact that prices have declined 10-15% so far. A housing market is considered to be overvalued when house prices in that market climb rapidly and dramatically in comparison to increases in incomes and rents (the two underlying fundamentals that support house prices). Such was the case in Victoria from 2000 to 2010. Without support from incomes and rents, house prices have only one way in which to travel – down.

Victoria’s situation today is no different than many bubbly US housing markets in 2006 (when house prices peaked). In the US, house prices increased rapidly in comparison to
incomes and rents from 2000 to 2006. Inevitably, a major, multi-year price correction followed. This is what Victoria is going through now, but prices have a long way to fall before reaching bottom.

Historically, Canada and the US have had similar house prices (this was true until 2006 when Canada’s housing bubble was blown bigger with more housing market stimulus while prices in the US corrected).

Incomes in Canada and the US are similar so it makes sense that house prices should be approximately the same as well. Inevitably, Canada’s housing market will experience a major, multi-year price correction. Bulls (ridiculously) claim that it won’t happen in Canada because it hasn’t happened yet. I always laugh when I hear that. It wasn’t going to happen in the US, Ireland, Japan, etc. until it did.

Let’s take a look at house prices in Pensacola, Florida. The housing market in Pensacola is not extremely overvalued.

House criteria:
* min. 3 bed, 2 bath
* min. 1800 sq. ft. of above ground primary (main) living space
* 2004 or newer
* attached double garage

In Victoria, a house like this would probably cost $700 K or more.

In Pensacola, the combined value of these 5 houses (that fit the above criteria) is about 715 K.

$ 132 K ( 4 beds, 2 baths, 1,919 sq. ft.)
$ 132 K ( 4 beds, 2.5 baths, 1,888 sq. ft.)
$ 150 K ( 3 beds, 2 baths, 1,901 sq. ft.)
$ 150 K ( 4 beds, 2 baths, 2,167 sq. ft.)
$ 151 K ( 3 beds, 2 baths, 1,901 sq. ft.)

Girls and guys, it’s important that you wait for house prices in Victoria to fall a lot more before you buy. You have a lot to lose by buying now and a lot to gain by holding off from buying and renting for now. Buying a house near the peak of a major housing bubble was a costly mistake for millions of American families and it would be a huge mistake for you as well. Wait for lower prices.

Until next time – Cheers!

#27 BritishImmigrant on 05.22.14 at 7:54 pm

Comparing Vancouver to London is laughable. From my perspective the beauty of Vancouver is cheap rent. In London houses are expensive but so is the rent.

I used to pay $1500 a month for a bedroom in a 4 bed shared house in London. In Vancouver I just rented an entire 4 bed SFH in a desirable part of east van for $2000 a month. I laugh every day when I pass the people who have just paid $900,000 ($4600 a month with 20% down) for a townhouse half the size. People are insane, what is wrong with renting, can’t people do simple maths?

#28 Ryan on 05.22.14 at 7:56 pm

reminder: we are all immigrants.

#29 Mean Gene on 05.22.14 at 7:57 pm

In Vancouver we have a snake oil salesman who dresses like Mr Rogers.

#30 bdy sktrn on 05.22.14 at 7:58 pm

Vancouver’s been punked

————————–

vancouver is hot. neighbour east van bung ask 1.1 sell 1.2 time=3days listed 3hrs showing

record highs. period.

coq/poco/moody are NOT van.

if a house dropped in pickering is the 416 toast?

———————–
hot china money is REAL

plenty/most of asians here who are not HAM
we have known them for 20,40 years as friends and neighbours

they never had a ferrari at 17yrs old.

#31 Joe on 05.22.14 at 7:59 pm

Why is so much complaints about house prices and RE?

What I can see is that consumers and actually RE is driving Canadian Miracle Economy.

Same thing with UK and Australia’s RE….
RE is driving economy in global stagnant economy.
As long as fools will be buying…all are happy…..
When RE goes down so the jobs and economy collapse..

So supports your RE troops….and take mortgage…
buy some shack and convince your neighbour to do the same…..:))))))))))))))))))))

#32 ***NAKED APE*** on 05.22.14 at 8:01 pm

HOLEE COW! I have a picture similar to that but we were dancing in the “sunflower patch” with leaves at least 20″ wide. Bum cheeks and boobs all over the place. It was an “An ADAM & EVE” thingie/moment…; Too funny and I will never forget my MOM actually laughing so hard while she was trying to take pictures of us …..

#33 Setting the Record straight on 05.22.14 at 8:03 pm

@2

Correction to my above last post, anyone that has 25% of their net worth in physical real estate………

*****

anyone? So if you are retiring with a $2m house and $4m in financial assets they are in trouble?

#34 shane on 05.22.14 at 8:04 pm

Garth, you say much sooner how soon?

#35 Mark on 05.22.14 at 8:05 pm

“My friends keep saying that interest rates will stay like this for a long time if not forever, so essentially they see this as free money. What I’m wondering is when the rates do rise how do you guys think this will play out? “

Well one thing that most of the Realtors and RE promoters don’t want people to think of is in terms of spreads. As prices peak, spreads start to expand as the lending community views the collateral as being less worthy. Eventually, spreads can expand significantly against particular asset classes (ie: RE) so as to quell new supply. Currently spreads for RE loans are abnormally low (ie: you can get 2.99% 5-year loans, which are effectively 2.5% after commissions are paid to the mortgage brokers or in-branch employees, while large firms like BCE are paying 3.51% on $1B 5-year term deals!), but eventually they will become much larger as the lender reality of RE defaults start to rear their ugly heads.

Eventually, as with any credit-driven asset class that goes into a bubble, credit will completely disappear but for only the most creditworthy borrowers. CMHC subprime loans will disappear as the CMHC chokes under the weight of $900B of the subprime debt they guaranteed. The economy will only recover meaningfully once business credit takes the lead (ie: firms like BCE are re-financed very low rates). BoC rate drops are quite likely, but retail mortgage borrowers will not benefit.

#36 Setting the Record straight on 05.22.14 at 8:06 pm

@14
However, I don’t get it. Retire. Sell city house close to services. Build house away from services. No bus service. No taxis.

****
i don’t get it. Retire . Sell house in the Peg. Fail to move a thousand kilometres.

#37 waiting on 05.22.14 at 8:06 pm

a former colleague who has had their house listed for almost two years put an offer on another house recently because they had a conditional sale happening. “Oh, that’s not good” I thought, “they’ll probably lose out on the newer place, but at least they don’t have two mortgages.” But then, they did it, decided to buy anyway as they’re “pretty sure” the buyers of their first property will be able to sell their place in order to buy. These are people who’ve had their house on the market for almost two years and they’re thinking someone else will be able to sell overnight.

#38 Setting the Record straight on 05.22.14 at 8:09 pm

@5

When a poster suggests non resident money is influencing house prices, Mr. Turner says ….show me the stats.

Apparently you have all the stats. Please show them to us.

#39 Mark on 05.22.14 at 8:12 pm

“These are people who’ve had their house on the market for almost two years and they’re thinking someone else will be able to sell overnight”

Similar things happened in California 2006-2008. The Realtors even, just like in Canada, deluded that prices were still going up, despite the sales mix changing. Trolls on Internet message boards were abound with the “buy now or be priced out forever” nonsense. The aftermath wasn’t pretty, to say the least!

#40 Cici on 05.22.14 at 8:14 pm

Excellent and insightful analysis Garth.

You’ve said it all before, but you keep saying it better and better each time ;-)

Thanks and good on you!

#41 Smoking Man on 05.22.14 at 8:14 pm

http://m.tickld.com/x/angry-graduate-just-wrote-this-letter-to-his-university-its-hard-not-to-agree-

A letter to university from a graduate with a master’s. Obedience certificate..

#42 Silver on 05.22.14 at 8:15 pm

See;

homeforeclosurebc.com

lots of well priced foreclosures in bc

Silver

#43 Spiltbongwater on 05.22.14 at 8:23 pm

I think Garth is just jelous of people who live in Van. He might have got stung by a few mosquitos today. That is all Toronto is isn’t it? Snow and mosquitos?

#44 LB on 05.22.14 at 8:24 pm

Can someone tell me if you can “grandfather” a 35 year amortization? I know 35 yr terms do not exist, but say you had one before all the changes made to amortizations, when it’s time to renew your mortgage, is that 35 year “grandfathered”? A friend of mine, who works at the bank, claims you can. I’d be curious to know. Personally, I don’t believe you can.

#45 Brian Ripley on 05.22.14 at 8:27 pm

Garth said: ““I think local realtors are being disingenuous blaming high prices on foreign buyers (and not low interest rates and excessive borrowing).”

If the U.S. real estate cycle, which peaked before the Canadian experience is a template, then be prepared for a bumpy landing. I mashed up several charts here:

http://www.chpc.biz/history-readings/us-housing-update1

Notice that existing house sales have plunged & bounced 3 times since 2006 and the mortgage refinance boom of 2010-2013 has crashed. Only the big money is still playing in this market as they are in the stock and high yield market. The retail trade has thinned out while levered hedge funds and the very wealthy pick off the trophies with cash.

#46 Setting the Record straight on 05.22.14 at 8:28 pm

@28

reminder: we are all immigrants.

******
PC balderdash

#47 bdy sktrn on 05.22.14 at 8:29 pm

In Vancouver I just rented an entire 4 bed SFH in a desirable part of east van for $2000 a month
——————————————
2k gets you junk or worse for a whole house –

#48 Smartalox on 05.22.14 at 8:32 pm

@ Perplexed (and others),

It may be hard to believe, foreign purchases of real estate are occurring (and would have occurred) regardless of whether real estate prices are low or high. Foreign purchases of real estate was occurring long before 2006, when mortgage restrictions were lifted.

Since HAM pay cash, it is reasonable to assume that changes to mortgage rules, low mortgage rates, CMHC, and predatory lending practices don’t apply to them.

The inventory of homes may have been reduced somewhat by foreign purchases, but certainly not on the East Side, or in Coquitlam or Port Moody. Like Garth said, the west side houses, you probably couldn’t afford them anyway.

Nope; domestic specuvestors, flippers, low interest rates, lax regulations and CMHC backstopping the banks, made this mess, all that and the people who sold their homes for exorbitant asking prices. Sellers make the market, so if the “Canadians” selling their properties hadn’t sold out, and had not sold at such inflated prices, the market wouldn’t be in the state it’s in.

#49 Steve on 05.22.14 at 8:40 pm

Followed Garth’s advice. Now were out of debt entirely, have 50k invested diversely, and rent. My financial guy told us he can grow it to 85k in five years, and I feel stress free. I can’t see any down side to this, can you? If you own and it makes you sad, pull out now!!

#50 jackman on 05.22.14 at 8:49 pm

I live in Vancouver for work in the condo business. When entire highrises are selling out in an hour after being on the market I guarantee the units are not being gobbled up by local working class. Offshore money. What is happening as a byproduct though is that there are very distinct boundaries forming in the city between ethnic groups who dislike each other very much. It’s a very cold and lonely city whose only beauty lies in the mountains and oceans outside the city limits. A truly ugly collection of citizens make it a miserable place

#51 jess on 05.22.14 at 8:49 pm

Do bankster fines make interest rates go up?

Credit Suisse’s $2.6 billion fine

…”Swiss people, being stuck with part of the bill for all this criminality?”

http://www.taxjustice.net/2014/05/22/seems-credit-suisses-fine-may-tax-deductible/

#52 Ben on 05.22.14 at 8:55 pm

Devore – London has the same problem.

Garth – see the UK local election results today. Starting to unravel, the establishment have no idea how pissed off people are, including high house prices which they pumped up thinking people would fall over themselves!

#53 old news on 05.22.14 at 8:57 pm

#11:

The article from http://www.scmp.com that you cite was back in February this year, before the feds pulled the plug on their ‘immigrant investor’ program, and cancelled the program with over 65,000 applicants in the backlog.

Some of the chinese ‘immigrant investors’ are trying to sue the feds to let their applications be processed anyhow.

I think most of those 65,000 ‘immigrant investors’ who have been left high and dry are going to move their ‘immigration investment’ cash somewhere else after being rejected by Canada.

#54 HogtownIndebted on 05.22.14 at 8:59 pm

#41 Smoking Man

You are such a lazy twit. Did you even bother to read that piece you linked to, down to the bottom where the professor responds and in his rebuttal completely crushes the moron you are trying to validate?

“Education is about responsibility, picking courses and professors that help you, and engaging the world in a dialogue about how we can achieve the highest expressions of what it means to be human. If you failed to realize that and if you failed to take advantage of what was right in front of you, that is not the fault or failing of higher education.”

Smoking Man, you think you can get all you need from the ‘university of google’ because you are a lazy, undisciplined, path-of-least-resistance kind of doofus, like most of your conspiracy-nut fellow travellers.

And you’re not smart or diligent enough to avoid stepping into such stinking fecal piles of steaming contradiction.

#55 Mark on 05.22.14 at 8:59 pm

“When a poster suggests non resident money is influencing house prices, Mr. Turner says ….show me the stats.
Apparently you have all the stats. Please show them to us.

Mortgage debt’s right off the charts. What more do you really need to know? Plot mortgage credit outstanding versus house prices, R^2 = 1. An introduction of foreign money would imply a deleveraging.

There might be “foreign money” coming into the Canadian banking system in the form of deposits and the purchase of GoC debt, but no evidence whatsoever to suggest that there’s any statistically relevant amount of foreign net RE investment.

#56 Andrew Woburn on 05.22.14 at 9:06 pm

I note there are a dozen SFH’s currently on offer West Vancouver for under $1MM, two of them in Eagle Harbour and six in Lion’s Bay which are not shabby neighbourhoods. When I looked in 2012 there was nothing at all under $1.2MM.

#57 old news on 05.22.14 at 9:08 pm

I forgot to mention that on the SCMP website, beside that article is a new commentary from earlier this month:

Vancouver house prices took a record fall, so is the market really ‘steady and stable’?

Has volatile housing market been affected by the cancellation of immigrant investor scheme?

http://www.scmp.com/comment/blogs/article/1506426/vancouver-house-prices-took-record-fall-so-market-really-steady-and

#58 prairie person on 05.22.14 at 9:09 pm

#42
If the letter writer wanted a trade, he should have gone to trade school. He should have apprenticed. Or, if he insisted on going to university, he could have joined a Co-op program and got four terms experience. Co-op students have a high degree of success in finding employment. Did the writer really believe that his degree was going to magically entitle him to a job? Even if he’d gone to trade school, his certificate would not have entitled him to a job. It would just have allowed him to apply for a job. His letter is not amazing or astounding. It sounds like a spoiled brat who thought there was an easy route to success. If he wants to be that prof who worked for MIT and others, he needs to quit whining and figure out a way to get a job beside mailing out job applications from his parents’ house. No one forced him to go to university. No one forced him to take the courses he took. Those were his choices. It may well be that they were bad choices given the employment situation. It may be that he wasn’t a very good student. It may be that he is not prepared to work abroad. I’ve hired or not hired a lot of people. They all had degrees of various kinds. The degree allowed the interview. The personality often meant that was all the degree allowed.

#59 Richard on 05.22.14 at 9:11 pm

#26 victoria real estate update, Thank you. Yours is one of the few posts that provide real value added info. Most pósters on this site are garbage.

#60 Timmy on 05.22.14 at 9:22 pm

Vancouver compared to NY or Milan? Other than hiking and the beach, what’s there to do here? Go to Starbucks and watch all the losers who sit there with their laptops and coffee?

#61 economictsunami on 05.22.14 at 9:24 pm

Gas Prices: Canada, U.S. See Record Gap At The Pump…

“BMO economist Sal Guatieri estimated this week that Canadians are paying about 30 per cent more for gas than Americans at present.
Those rising fuel costs north of the border are straining consumers, Rangasamy writes, helping to explain this week’s lacklustre retail numbers, which showed sales dropping 0.1 per cent in March, despite analysts’ calls for a roughly 0.4 per cent hike.

Retail sales are also being held back by a relatively weak job market. The National Bank report notes that “almost no new private sector or full time jobs were created in the six months to April.”

Wage growth has also slowed considerably in recent months, the report noted. …”

http://www.huffingtonpost.ca/2014/05/22/gas-prices-canada-us-gap_n_5374708.html?utm_hp_ref=canada-business

We have either lousy or lack of data.

It matters very little; the BOC admits their economic models are broken anyway…

#62 Vangrrl on 05.22.14 at 9:28 pm

#27 British Immigrant:
I agree it makes way more sense to rent than own in Van, but when comparing London rents to ours don’t you also have to take into consideration incomes? My brother lives in London and was paying 850 pounds (1200-1300 dollars with conversion a couple years ago?). I thought that was a lot but his housing cost was the same percentage of his income as mine is. Hourly wages and salaries are higher in London, are they not?

#63 Longterm on 05.22.14 at 9:28 pm

Here’s what cheap money has done to London houses – check out London compared to the rest of the UK.

It was expensive when I arrived in 2002 and way more expensive when I left in 2013. I had the same experience in 2005 as the guy in the article but I chose not to buy.

https://uk.finance.yahoo.com/news/what-it-s-really-like-to-be-a-first-time-buyer-in-london-144921870.html

Check out the comments with the article. Substitute ‘Middle East’ for HAM and you see the same arguments, rants and racism as the comments here.

It’s no coincidence that Mark Carney is/was a player in the cheap money that is fuelling both markets and sending prices ballistic.

#64 Freedom First on 05.22.14 at 9:30 pm

Make that #60 Richard The Realturd (not #55)

#65 JSS on 05.22.14 at 9:33 pm

Nice to see bank shares climbing high today.

Rather have the banks pay me (dividends), than me pay them (mortgage).

On a side note, please continue to buy overpriced homes, with long amortizations.

hee hee…

#66 Joe on 05.22.14 at 9:41 pm

“Buying a house in Canada is basically enslavement.You’re purpose in life is to pay the bank and goverment taxes””.
————————————————————————————————————————–Agree completely…..that’s how the system works….
” Canada the best country to live “” I heard that…..so many times…

#67 Smoking Man on 05.22.14 at 9:45 pm

#54 HogtownIndebted on 05.22.14 at 8:59 pmYou are such a lazy twit. Did you even bother to read that piece you linked to, down to the bottom where the professor responds and in his rebuttal completely crushes the moron you are trying to validate?

“Education is about responsibility, picking courses and professors that help you, and engaging the world in a dialogue about how we can achieve the highest expressions of what it means to be human. If you failed to realize that and if you failed to take advantage of what was right in front of you, that is not the fault or failing of higher education.”

Smoking Man, you think you can get all you need from the ‘university of google’ because you are a lazy, undisciplined, path-of-least-resistance kind of doofus, like most of your conspiracy-nut fellow travellers.

And you’re not smart or diligent enough to avoid stepping into such stinking fecal piles of steaming contradiction.
………….

That just about sums me up perfectly, crazy thing is.

Proud as hell of how I turned out.

In life
I don’t read other people’s scripts, I create my own.

Obviously I’ve ruffled a few
feathers, reason you’re so pissed is you’ve never exceeded boundaries, risk less and boarding.

You bought the goods, got ripped off and now you rationalize it.

You’re average, I’m exceptional.

#68 betamax on 05.22.14 at 9:47 pm

#41 Smoking Man — Not all degrees are the same.

According to Forbes, the best Masters are in Computing, Medicine, Engineering, etc, with growing jobs and a mid-career median salary around $100k.

The writer of the linked article admits s/he was in a “public policy program” — in other words, they did a degree in a useless field.

Again according to Forbes, the worst Masters are in Library Science, Biology, Poli Sci, Human Resources, etc.

And what the statistics don’t tell you is that, aside from the type of degree, what really matters is the merit of the individual who gets the degree. In any program, even in ones deemed “the worst” by Forbes, the top few people often manage to get great jobs and great careers afterward, irrespective of the type of degree.

So what if many graduates can’t get a job — many are slackers who partied through university and graduated with mediocre GPA’s. They learned barely enough to pass when taking a course and remember even less at the end of their degree.

You constantly valorize street smarts over book learnin’ — but the fact is they are not mutually exclusive. Someone with street smarts (i.e. native intelligence) can go to university and get a formal education and advanced degrees / accreditation that will open doors for them that would otherwise remain firmly shut. And then they can take advantages of those opportunities and have great careers.

The person who wrote that article is a whiner, full of sound and fury, who won’t take responsibility for their own failings. I wouldn’t hire them to wash my car.

#69 Joe on 05.22.14 at 9:53 pm

They put the carrot —“particle board” to our nose…
and we all chasing it…..ridiculous….

#70 Retired Boomer - WI on 05.22.14 at 9:54 pm

Smoking Man is Handed his ars by Hogtownindebted.

Film at 11…..

#71 Rick on 05.22.14 at 9:55 pm

DELETED

#72 Smoking Man on 05.22.14 at 9:58 pm

People, obedience certificates only get you jobs. That lately blue collar is almost at par. Make you stupid to by million dollar properties.

You need to justify to your
friends and family and teachers that you made it… The paradox is screaming if you could only take off the blinders…

Self employment is the only way to make it.. Slave ownership rocks.

But in this colony we are trained from birth to obey, be responsible, take only careful calculated risks to please our masters and demonstrate how smart we are..

That was for you hog town..

#73 Chickenlittle on 05.22.14 at 9:58 pm

Smoking Man:

Did you read the professors response right underneath?

http://m.tickld.com/x/professor-responds-to-angry-graduate

So the kid buys the lie that life will be perfect if he goes to school…

“This was once a land where every sane person knew how to build a shelter, grow food, and entertain one another. Now we have been rendered permanent children. It’s the architects of forced schooling who are responsible for that.”
― John Taylor Gatto, Dumbing Us Down: The Hidden Curriculum of Compulsory Schooling

So all this kid is doing is getting mad that his adult life has been postponed and this idiot professor is blaming the kid for the lack of opportunity out there.

#74 High Plains Drifter on 05.22.14 at 9:59 pm

I will know what to do when the offshore money piles up high enough. This country needs hard working strivers of glory. The money will have to blunt my fall into decadence.

#75 James on 05.22.14 at 10:01 pm

I always find it interesting to listen to conversations in Vancouver when I have the rare chance to visit.

People are truly obsessed with real estate and the cost of living. Those are likely the most common topics. I rarely hear talk about how satisfied people are in their careers, or with economic opportunities. Half the population seems to be obsessed with housing, the other half with figuring out how to go back to school to afford rents.

#76 Sean on 05.22.14 at 10:02 pm

The local media in Vancouver is almost completely dependent on real estate advertising. It’s not surprising that’s the articles are basically industry advertorials.

#77 For those about to flop... on 05.22.14 at 10:05 pm

I have absolutely no problem with foreigners coming to Canada and buying multi million houses and LIVING in them.Its people who because the government lets them buy entry level real estate and leave it vacant that raises my blood pressure.

#78 Smoking Man on 05.22.14 at 10:12 pm

#59 prairie person on 05.22.14 at 9:09 pm

I Code Smith now cause I’m lazy, started as a Hobbie, then used it to fully automate my office administration of my mfg plant.

In 1997 One person in my office could do 200 invoices a day, parole, manage the inventory and purchase orders.

There was no quick books, or accpack.

I’ve evolved via UOG. Rapid educational process.. Just the facts, and bull shit that’s erelavent at the time.. If it becomes relevant.. Google.

I’m the best in my field…

But what gets me gigs. Obviously my good looks, not my cv. Live samples of brilliant apps I created.

Blowes everyone away..

NSA still can’t Crack my keysme text incrypition app.. So what I can’t spell it..

#79 Scully on 05.22.14 at 10:13 pm

I work in the industry in the moldy city and I can tell you without a doubt this is based on speculation, cheap debt, lax lending rules and herd mentality. It’s not immigrants with suitcases of cash. Lots of mortgages out there people – lots. By the way – Garth, you are so right in your latest predictions of who is buying and what is going on – keep up the good work!

#80 Peter on 05.22.14 at 10:14 pm

The past few days on this blog have inspired me. I’m thinking of creating a petition on http://www.activism.com. This is what I’m thinking of writing as the petition:


We want

1) free and publically accessible and understandable data about the price history of individual articles of real estate

2) abolishment of the “Frankennumber”: regular publishing of raw real estate data concerning the aggregate of unique closed sales in the market

3) transparency in what current potential real estate buyers are bidding for a piece of real estate

Anyone care to modify that or start their own petition? Garth, maybe you should start one?

#81 For those about to flop... on 05.22.14 at 10:27 pm

#27 There are no desirable parts of east Vancouver it’s a shithole .

#82 Holy Crap Wheres The Tylenol on 05.22.14 at 10:27 pm

#41 Smoking Man on 05.22.14 at 8:14 pm

Education is a dialogue between teacher and students, student and student, academy and the world.
Smoking Man read the Profs rebuttal. It prettyuch sums up the whole cynicle rant by the student. Read everything carefully you post, don’t just glance over it!

#83 carlos santana on 05.22.14 at 10:28 pm

Europe is Europe and there has been culture and civilization thousands of years ago. In North America there is no culture whatsoever if you exclude brainwashed shopaholics and sport fans, there is nothing to do except to shop and eat, including at sport events. Consumer’s society vs. the bohemian society in Europe, there could be no comparison at all.
Not to mention about FREE universities and really high quality health care /except UK/

Comparing Vancouver to Milan, London, Paris, this is a really bad taste joke.

#84 Holy Crap Wheres The Tylenol on 05.22.14 at 10:35 pm

#41 Smoking Man on 05.22.14 at 8:14 pm
Further more Smoking Man I don’t know you from Adam but every opertunity you get to spout out a rant about teachers vs students you go all out to prove that the system sucks. We get it already, Holy Shit what teacher screwed you over in the past? Perhaps the system failed you? I don’t mean a failing mark but failed to move you along to a higher level of education. Not agreeing with you or disagreeing but come on man, hell man how long since you left high school? Move on and stop the bashing. Peace brother..,,,,,,

#85 Nemesis on 05.22.14 at 10:36 pm

#TheTaoOfKungFu #DiptychParablesForTumultuousTimes

http://youtu.be/gASY7Lj5GPQ

http://youtu.be/_4sgXl7n3n4

#86 TheCatFoodLady on 05.22.14 at 10:36 pm

#14 – prairie person: there is no logic in what you’re seeing in terms of retirees selling the convenient city or suburban digs to move out to the middle of nowhere. These folks are often realizing a long held dream. Many worked damned hard, struggled to raise families in small, cramped; possibly inconvenient homes – rented or owned.

What they bought was the dream that often kept them going through discouraging periods of their lives. They envisioned a roomy entrance with a sweeping staircase, a big kitchen with a family room, 4 bedrooms for the family with at least 2.5 bathrooms. A big lawn where the kiddies could safely roam in the bucolic countryside. Maybe a man cave for him, sdewing or craft room for her…

That’s an easy dream when you’re running the vacuum with a fussy toddler on your hip, when you’re mowing a pocket handkerchief lawn. You’re young, you have energy & stamina & you have the will & ability to work hard. You can barely contemplate illness other than the odd cold or touch of tummy bug.

That dream often becomes cemented in peoples’ heads without being adjusted for life’s changes. I’ve seen such purchases – the couple are deliriously happy rattling around in an oversized home. Heck it’s so big, they have a separate room for changing their minds!

Within a few years, it all gets to be too much. The energy & stamina start going. The first serious run in with serious illness brings to the fore the realization that the local health care clinic, (25 minutes away if the weather is good), may not cut it. That half acre of lawn is a bitch to mow – even with a ride on. Maintaining the pool takes all the fun out of your daily 10 minute dip.

And so, a sale. Or attempted sale – plenty of younger couples out there buying but not many share that dream anymore. There’s no ‘life’ for them in the boonies; no social scene they want any part of, shopping sucks, schools & health care may not be great, many etceteras.

Sadly, as we change with age, our dreams of home have to adapt as well – like it or not.

#87 sheane wallace on 05.22.14 at 10:38 pm

Smoking Man:
spot-on for # 41
dead wrong on bonds for #25

what you are ‘gaining’ is depreciating sh.t currency that is worth more and more close to nothing.

unless you believe in deflationary fairy tales as well. good luck with that.

Soon we would be running out of ‘Belgiums’ to ‘buy’ treasuries and to hide the fact that instead of tapering we have close to doubled on the bond purchases (something to the tune of 120-130 billions per month) .
Why do you think the interest rates fall down when they ‘taper’, why was purchase needed in first place if stopping them actually reduces the interest rates.

We are in environment where interest rates might need to skyrocket very soon in order to maintain any hope for the preservation of the sh’t currencies.

#88 sheane wallace on 05.22.14 at 10:42 pm

what do you think is one unit of sh.t currency worth? 1 square centimeter of a crapy bungalow in a sh.tty city – Van City or Toronto

#89 Angus on 05.22.14 at 10:45 pm

BREAKING NEWS italy to include cocaine and prostitution in there GDP you cant make this shit up LOL look for your self here http://www.bloomberg.com/news/2014-05-22/cocaine-sales-to-boost-italian-gdp-in-boon-for-budget.html and here http://www.smh.com.au/world/cocaine-sales-prostitution-to-boost-italian-gdp-figures-20140523-zrllr.html
so how long before they accept this in Canada to boost GDP just like empty condos in toronto boost canada’s GDP

#90 eddy on 05.22.14 at 10:48 pm

#51 jess on 05.22.14 at 8:49 pm

Do bankster fines make interest rates go up?

Credit Suisse’s $2.6 billion fine

…”Swiss people, being stuck with part of the bill for all this criminality?”

http://www.taxjustice.net/2014/05/22/seems-credit-suisses-fine-may-tax-deductible/

“tax justice” is a pretty funny name for a site.
There is no justice where there is no logic.
For example-
MVA (market value assessment) is purely fictional.
90% of people don’t even Qualify for a mortgage the size of their assessments. So if you are Incapable of buying it today, why should you pay tax on what MPAC thinks it’s worth? That’s like charging income tax on money you didn’t receive.

#91 sheane wallace on 05.22.14 at 10:51 pm

#68 Angus
……………..
I always tell my wife that by doing certain activities we contribute to the country GDP and now this is close to official!

Wow, the next one is tax on farting, we should not be far from that as well.

#92 Joe2.0 on 05.22.14 at 11:05 pm

Garth I have heard from numerous realtors that if it wasn’t for the offshore buyers the market would suck.

There are loads of offshore clients buying their way into Canada under the radar, properties to either live in or hold as an investment.

There is a lot of this going on, I know builders who complete a complex shoot a video and go overseas selling the entire project, they have been doing this for years.
The inventory never goes public.

They are turnkey operations from construction to supplying immigration lawyers.
These people are skating around our immigrations rules and regulations.
The Golden Rule, he who has the gold makes the rules.
It’s just a fact.

#93 Smoking Man on 05.22.14 at 11:09 pm

Ha I miss spelt the link… I’m getting too good at this…

Google dyslexic smoking man if you want to learn about Denis Rancourt.

#94 351 Cleveland on 05.22.14 at 11:15 pm

Sounds like some of us could use a some basic logic to apply to the question of foreign ownership in Vancouver:

Bottom line is we just don’t know if it’s a significant factor.

On the one hand, the deniers should consider:

Absence of evidence does not equate to evidence of absence.

And on the other, the fearful locals should consider:

The plural of anecdote is not data.

#95 saskatoon on 05.22.14 at 11:28 pm

may be a silly question: but what can the possible spread be between variable and fixed rates?

if one is set in the bond market, and the other by the boc…couldn’t they diverge…dramatically?

what is the farthest apart they have been historically?

in other words, could one go down, say…and the other (most likely the bond market pegged version) rise substantially?

if this is possible…what might be the consequences?

#96 Boombust on 05.22.14 at 11:33 pm

Garth,

The outer Vancouver suburban areas are starting to see a lot of inventory build up, a drop in sales and LOTS of price reductions.

New product is being listed for much lower asking prices.

Yep, I think this is “the turn”.

#97 RayofLight on 05.22.14 at 11:39 pm

Smoking Man:

I think you are confusing everyone else with those who care.
Your insecurities are shining brightly.
Less is more.

#98 Joe on 05.22.14 at 11:46 pm

#89sheane wallace

Sheane is perfectly correct!!!!!!!!!!
This fiat currency is worthless…..
Soon we will have real high interest rate…to defend the buck..
And do not think that it will benefit home owners….
The wages won’t go dramatically up to offset inflation….
The assets will come down 50% , who can afford to pay 10%mortgage in Vancouver , Toronto, Calgary…Edmonton….
There is not other way ….Inflation big time!!!

#99 April on 05.22.14 at 11:55 pm

#94 – You say “…they have been doing this for years” but it’s never stopped the busts from happening, also, why would you believe anything realtors tell you when it’s in their interest to have people believe their spin.

#100 kiLLAbOY49 on 05.23.14 at 12:01 am

Meh. Interest rates aren’t going up anytime soon and house prices aren’t coming down any time soon.

#101 k on 05.23.14 at 12:11 am

Garth You are bright in many ways but you don’t understand the impact of the new rich Chinese on the real estate and cultural mix of Vancouver. 80 % of millionaire, billionaire Chinese want to leave China after stealing from the poor main body of the Chinese population. Most western millionaires are quite happy to stay in Europe or North America. We in Vancouver are being economically invaded….thanks to our Federal Govt. until the Investor immigration plan was shut down 99% Chinese (big surprise) Hey…. who likes to be a minority in your own neighborhood ? Do you think the native Indians in Canada were cheerfull to see the covered wagons amass on the horizon ? Wake up ! Take a ride through west side Vancouver. It’s 70 % Asian. I don’t blame them. They want to escape a polluted mess with huge social problems. We used to live in Paradise. As Don Henley of the Eagles wrote “call a place paradise and kiss it good by ” Cheers K

#102 Tony on 05.23.14 at 12:15 am

Re: #25 Smoking Man on 05.22.14 at 7:50 pm

Agreed, I bought strip bonds knowing full well when Bernanke left the bottom would fall out of interest rates.

#103 Tony on 05.23.14 at 12:18 am

Vancouver house prices are high, but the real problem is a complete lack of understanding what is a “good” property and what is a “bad” property.

Terrible houses sell in Vancouver for insane prices. Which means the buyers are not that bright. The realtors here are also great liars (but it’s your own damn fault if you let a realtor choose a house for you).

You have to know what you want, find it yourself, then if you choose to, use a realtor to come in and deal for you, take half of their commission because they really didn’t do anything other than a contract on your behalf, and hire a good lawyer to do the rest.

If buying a house in Vancouver (sorry I don’t know much about condos or apartments because I simply refuse such investments, because you don’t own jack sh*t) then here is what you should look for.

1. A view

2. At least 3-4 bathrooms with 2 full baths

3. Two story minimum (never buy ranchers)

4. Avoid POOLS!!!

5. Find the house yourself first, don’t let a realtor waste your time with what they “WANT” to sell you, because it won’t be what you “NEED” most of the time.

6. Don’t be afraid to fire your realtor at any point if they are trying to manipulate you or are working against you on a deal (I personally fired at least 8).

7. Hire a professional inspector prior to completing any deal, GO WITH THE INSPECTOR to the house, spend the 4 hours with them! Some sellers will refuse to let you in with the inspector, than you tell them to go take a hike and walk away from the deal. If a seller is being difficult on an inspection (ie. renters, can’t come in, etc) walk away!

8. Be near a transit hub, but not too close as to cause you noise pollution.

9. Take into account at least a 2% increase in rates, and calculate how much your basement would rent for in case you lost your job or something else happened (now you see why I said buy a two story at a minimum!).

10. For the love of you know what, don’t dump 100% of your money into the down-payment, because if you do, you will have no life!

There’s a lot more but then I would be writing a short novel here lol.

#104 straight six on 05.23.14 at 12:45 am

I’ve been sitting on the sidelines for the past 10 yrs hearing rates are going up! rates are going up!
all the while watching rates come down and RE go up. And then there’s the nonsense about the Asian invasian.
Beam me down Scotty,
I want a piece of the action..

Yoo too late! You go now!

#105 Carpe Diem on 05.23.14 at 12:46 am

#7 keith

I live in Vancouver for over 15 years.

Most of the I was single, made lots of cash and lived an awesome pad in Yaletown. I had great parties and lots of fun overall – I don’t regret a second!

Living downtown and going for walks is such a wonderful thing. It shows the worst of a city. I’m sure a cab driver would agree.

Schools in Vancouver are not so hot according to the Fraser Institute. Actually, I think they suck.

After being single for too long, I got hitched up and moved my family in Ottawa.

This town as affordable housing and much more green spaces down the road.

It has major hills 2 hours away and sailing on the Ottawa River (or drive 1.5 hours and you are sailing on a Great Lake for the weekend).

Ottawa has such a nice community feeling. Nice, educated people making more $$$ that in Vancouver. Balanced.

School are top rated.

Vancouver is awesome if you don’t know better.

Carpe Diem

#106 BritishImmigrant on 05.23.14 at 12:46 am

#63

Salaries are without doubt higher in London. I think the other thing about London is there are many people in the finance sector earning a lot of money, way more than any job in Vancouver. That being said many industries are now competing globally (e.g. tech) for good people – especially if you have a niche – so you can earn good money in Vancouver. Rent tracks income though which is why rent is less in Vancouver, where as house prices track… well I am not sure but I don’t really care.

#47
Disagree, our place was on for $2200, they dropped 10% for the right people. 1800sq ft, new floors, new bathroom, new dishwasher/washer/dryer. No granite but that doesn’t bother me. Fill it with nice furniture and it is decent. It is an old place so I would hate to be the landlord having to do the repairs long-term but not my problem.

Even if you go to the west-side, pay $3000 you are still way ahead.

http://vancouver.en.craigslist.ca/van/apa/4457656574.html

#107 Dean Mason on 05.23.14 at 12:52 am

To #33 Setting The Record Straight

Did you ever hear that there is always an exception to every rule?

Most people have all their money in real estate and are in debt with little to no savings, financial assets and investments and if they do they have some financial assets, investments most of it, if not all of it is in 100% taxable RRSP’s and pension plans.

Even those rare cases that someone or a family has a 2 million dollar house and 4 million dollars in financial assets or investments, it is not mostly non-registered money.

Most people have 50%, 60% or even 70%+ of their financial net worth in RRSP’s, LIRA’s, RRIF’s, LIF’s etc. that is 100% taxable not just the income, dividends, capital gains which in RRSP’s etc. are 100% taxable any way but all RRSP, RRIF withdrawals, payments.

If they had 3 to 3.5 million dollars in non-registered accounts and 500,000 to 1 million dollars in RRSP’s then they would be much better prepared to manage and succeed financially regarding the rising cost of living and all the housing related rising property taxes, insurance, repairs and maintenance, H.S.T, utilities etc.

My main point was that the more physical real estate one owns, it would increase your debt load and not just mortgage debt but all debts which in turn will make it more difficult to save and have income producing and growing financial assets, investments.

A minimum 3 to 1 ratio of financial assets, investments to physical real estate in most cases would keep them out of financial trouble by not being trapped into having too little income and financial assets, investments plus having to pay large annual and rising long term costs, taxes, fees etc. in just keeping a house that they could never afford to have and maintain especially in retirement.

#108 Nemesis on 05.23.14 at 1:08 am

#Mischief

http://youtu.be/uRKRJsFmJmA

#109 Vancouver RE agent on 05.23.14 at 1:08 am

According to my stats (Sutton Vancouver) about 7% are foreign (not only Asians). Which leaves the other 93% to locals. So 7% is hardly a price setter. Now that we have established that…I stand on my prediction that RE prices in Van will continue on the rise. I see no flow of hipsters and first time 40 somethings slowing by a bit. Bidding wars are literally for EVERY property (at least detached).

Lets look at some facts shell we;
– Interest rates in Canada are low but will change. THEY WILL GO MUCH LOWER. Sub 1% mortgages are not too far off (0.6% in Japan for example)
– Loose lending standards are here to stay
– inventories are LOW

Another thing that Garth conveniently avoids comparing US to Canada is that in US those few people who work earn like 22K-27K. That is right folks, in US 24K is considered a decent wage for many people. Here in Van with all the hipsters in IT I deal with they earn 85K -125K OUT OF SCHOOL coding iPhone apps ! So all else considered Van RE is UNDERVALUED.


God bless those hipsters and their mortgage applications…

#110 Nemesis on 05.23.14 at 1:30 am

#BonusMischief

http://youtu.be/tu-8W-Sredo

#111 takla on 05.23.14 at 1:54 am

I don’t always agree with SM,hell I admit there are times when I have to reread his post 2-3 times to get his coded messages.
He seems to rise the ire of some,…me ,not so much.
One point he does make continuously about our education system that I agree with is the teaching system truly doesn’t arm our kids with REAL education!
This has to be by design,and I concur and understand his frustration .
On the news today the pundents where discussing the incredibly hi rate of student debt {theres that word again]in the US and Canada,in the billions.Its taping out the next generation of potential home purchaser/consumers,no wonder this economy has stalled and we’re in for the long stagnation.
As housing costs have sky-rocketed so has the cost of {higher??}education…the double edged sword.

#112 bdy sktrn on 05.23.14 at 2:09 am

57 Andrew Woburn on 05.22.14 at 9:06 pm
two of them in Eagle Harbour and six in Lion’s Bay which are not shabby neighbourhoods.
————————-
not exactly central , still seems low though.(lions bay is downright rural, as well as drop dead gorgeous, too) this apperas to be a teardown 50′ lot in central west van for only 889 wow http://beta.realtor.ca/propertyDetails.aspx?PropertyId=14407634

who knew there was ‘slummy’ parts of west van?

those get snapped up fast for 1.2-1.4 here in nearer east van – where everything is within 10 min and there is no godforsaken bridge to cross. more hip than stuffy too.

re the chart of the 80’s bubble vs now…

in the 80’s china was still dirt poor and brutally primitive , asia as well, ex japan. in tokyo in 1990 it was repeated how the gdp of tokyo (city) exceeded that of all China.

the new economic monster has created far more reasons to stash cash in safe world cities than those in japan ever did.
with the chinese seemingly even more in love with vancouver the demand will remain strong.

yesterday i was stuck in richmond for an hour, as i ripped around town on a fast bike (NOT a HD) i was taken aback by the condo building , it was big and EVERYWHERE – there seemed as many or more as in vancouver under const.

offshore/new cdn hot buyers of chinese background DEMAND on thing more than any other, a central location;
richmond
west side
metrotown
and soon to be east van

they will keep coming just like Europeans did for the past 200yrs.

safest bets in cdn RE.

#113 screwed on 05.23.14 at 2:28 am

HAM is real. The Chinese 1% loves Vancouver as much as Seattle, San Francisco or ANYWHERE along the Westcoast.

Their 1% are just as obnoxious and entitled as every other nation’s 1%.

Let them buy up Vancouver. It’s one of the most boring places in the world anyway. There’s still affordable RE further East in the Valley.

If you want real cultural diversity and sophisticated entertainment and dining, I suggest to jump on a plane for London and beyond in Europe.

#114 Kits388 on 05.23.14 at 2:31 am

I have read your blog for at least 4 years. I generally agree with you. Unfortunately, you do not understand the. Vancouver market (at least Van West and West Van). I wish you lived here. You talk like you “know” but you don’t. I will in West Van. There are 4 empty houses on my short street (purchased by HAM). When a house is listed it sells within 1 week … Virtually always to HAM. You make the argument that HAM is not driving the market because people do not have stats to support the argument. Well, you don’t have stats to support your position. Luxury real estate in Vancouver is largely being purchased by foreign investors. Look at all the areas on the Van map where the foreigners own 7% to 24% of homes … Now imagine up to 25% of the homes in your neighbourhood are unoccupied. Do you want me to send you pictures of the empty houses in my hood?

#115 cold condos on 05.23.14 at 2:31 am

Long gone are the 1 days condo presales sellouts,, look at the Olympic Village, it’s been for sale for over 6 yrs and still not sold out, not to mention the other’s surrounding it, the pumpers like Bob Rennies are running outa hot air. Debt will be the death of Vancity real estate.The developers are frantically hoping to get your 10% downpayment and ink on papers, the completion dates will become D days

#116 Evan on 05.23.14 at 3:11 am

I lived in Vancouver (never an owner) but I’ve come to the conclusion after extensive research that I’ll never buy under “normal” market conditions. From an investment perspective, it’s just not worth it. You’d be far better putting your money into cheap stocks in terms of price to value.

http://www.netnethunter.com/buy-cheap-stocks/

Your investment returns come out way ahead and eventually you could live off of the interest. You also never get suckered into buying a hot asset since by definition they’re cheap.

From what I’ve read of your blog I have to agree that prices in Canada have gotten frothy and are due to come down or see a long sideways market. Whether this happens or not is another question, but it seems there’s a strong probability of it working out that way.

Cheers,
Evan

#117 Buy? Curious? on 05.23.14 at 3:31 am

I don’t understand why Canaians get their panties in a knot when it comes to immigration. How far back do the roots go of those who are bitching and complaining? I had a buddy whose parents came from Ireland and he’s a full blown racist. I couldn’t understand it. We don’t talk anymore and he’s afraid to come into Toronto.

I say, you let everyone who wants to come to Canada come in as long as they leave their religions (all religion should be banned and mocked) and their regional politics left behind.

I find immigrants raise the bar, work harder than locals. Their food is better, their parties are better and *ahem* the sex is better!

Karma Sutra, bitches!

Racist Canadians, stop whining and get back to work!

#118 Freedom First on 05.23.14 at 3:36 am

#65 Freedom First

Thanks Garth. You are right. Much appreciated.

#119 tf on 05.23.14 at 4:09 am

In Vancouver, it’s no longer sold as “affordable housing” – now it’s called “achievable housing” – real estate spin indeed!

#120 Londoner on 05.23.14 at 4:24 am

Vancouver is a beautiful city. It has a lot of things (health care, schools, restaurants, shops, etc.) that would attract working residents of “world class” cities. Unfortunately what it doesn’t have is the industries or incomes that make it comparable to places like London.

With regards to interest rates, what direction do you think wages will be going when the BOC starts raising rates? That’s right, they’ll be going up.

Now let’s look at the UK. In last week’s inflation report, Carney said that it wasn’t the role of the Monetary Policy Committee to address rises in house prices. Rather, monetary policy is the “last line of defence” against inflationary pressures in the economy (and recall what factors they consider contributing to inflation). Similarly, Canada is a long way from seeing real inflation as defined by it’s central bank. As a result you’re more likely to see a drop in the overnight rate then a rise.

But don’t take it from me, why not listen to what the BOE says about inflation, interest rates and the UK housing market? See if you can spot any similarities. Full UK inflation report is here:

http://streamstudio.world-television.com/CCUIv3/frameset.aspx?ticket=117-118-14341&target=en-default-&status=ondemand&browser=ie-12-0-0-12-0&stream=flash-video-400

#121 Happy Renting on 05.23.14 at 4:31 am

#88 TheCatFoodLady on 05.22.14 at 10:36 pm

That was very insightful TCFL, thank you. I’ve long suspected the spacious “dream home” is best rented (or saved for a long, annual vacation – housekeeping and gardening services included) versus bought for long-term, full-time residence. Maintenance would get tiresome, and unless you are a total recluse it’s enjoyable and beneficial to be near great services and amenities, not to mention friends and family.

#122 I'm stupid on 05.23.14 at 6:14 am

@5 Mark

Very interesting point, foreign cash must show up somewhere if the market was being flooded with money. Following the money will always lead to the truth. Unfortunately, all I see is debt.

#123 Future Expatriate on 05.23.14 at 6:50 am

Oh yeah. Helps LOADS to be drunk when you house hunt.

#124 saskatoon on 05.23.14 at 6:53 am

#118 Buy? Curious?

immigration has provided a consistent supply of new citizens ready to go into debt.

low rates are one thing…but there needs to be a steady supply of greater fools ready and willing to be suckered by them.

this is why banks, credit card companies, etc., have programs/ads that “target” newcomers…with the debt crosshairs.

population growth is a key factor in rising home prices.

if population aggregate was naturally declining (as it would, without immigration) house prices could never inflate as they have done–for there would simply be far fewer people available to take on massive debt.

this has nothing to do with skin colour, or race, or religion.

canadian newcomers are simply fresh debt bodies–helping to keep the inflation going.

of course, newcomers get jobs, and pay taxes…but this function pales in comparison to their usefulness as new greater fools…

would be interesting to see stats on how quickly (if at all) newcomers take on debt–and at what rate.

#125 AfterTheHouseSold on 05.23.14 at 8:05 am

#88 TheCatFoodLady
“That dream often becomes cemented in peoples’ heads without being adjusted for life’s changes”.

Very astute observation! We have been following four homeowners, all trying to sell their oversized, rural and waterfront properties in central Ontario. All listed for over a year, all with price reductions of $30,000 to $60,000.

#126 Montreal Gary on 05.23.14 at 8:29 am

I am American in Montréal who wanted to buy a house after getting Permanent Residency.

I’m waiting because the market seems a bit too much like when I lived in Tampa, FL in 2006, when prices kept escalating, but I couldn’t figure out who, exactly, could afford all those expensive homes based on the demographics and employment base of Tampa. It’s getting weirdly similar in Montréal: prices keep going up, lots of inventory coming on-line, but employment has been pretty steady (or declining a bit).

The “foreign money/investment” argument exists here, too, as an explanation for increasing prices. I was at “Bassins du Havre” sales office a few months ago when a literal bus full of 50-70 Asian investors pulled up and had a sales presentation in Mandarin by the lead salesperson onsite. Oddly, it doesn’t appear that the development sold a lot since then. (The units I was looking at haven’t moved.) I don’t quite understand why Chinese investors would buy residential real estate in Montréal, but clearly the salesperson pitching the units thought someone might buy.

Another prevalent meme here in Montréal is that the parents of university students will buy condos for their kids because it would be cheaper than renting and is a good investment. I not buying that argument and it’s not clear that university students’ parents are either. I keep reminding people that these “rich parents of McGill students” are rich because they’re good with their money: buying a condo in a distant city so that your kid has someplace to stay for 4-5 years instead of just renting seems insane.

All of these arguments seem to be ex post rationalizations to explain irrational exuberance. Most striking, these “foreign investment” arguments were the same rationalizations for the continuous increases in home prices in Miami, Florida in 2006. The argument there, however, was that it was South American money coming in and buying everything up. Rich people from South America apparently love Miami because it is in the US, but easy to get to from anywhere in South America (and Europe). Plus, it’s Miami – which is pretty awesome. Much like Vancouver, this meme seemed a bit more believable, but still seemed odd. Why are all of these rich people buying condos that they’ll rarely use at such prices? Then the bottom fell out. Miami had one of the hardest housing crashes of any city in the US. Here’s the Case-Shiller Miami Home Price Index. They still haven’t recovered:
http://ca.spindices.com/indices/real-estate/sp-case-shiller-fl-miami-home-price-index

Personally, I expect the prices to drop further then they have already in Montréal and I may buy if an amazing deal appears. Meanwhile, I’m squirrelling away my cash until I have more than 20% and cushion.

#127 Kris on 05.23.14 at 8:41 am

CMHC says house prices to rise further!

http://money.ca.msn.com/investing/news/cbc-news/house-prices-to-increase-as-new-home-builds-slow-cmhc-says-1

The proper headline is ‘Housing starts head lower: CHMC’. — Garth

#128 hahaha -typical Canatian on 05.23.14 at 9:12 am

the non-resident map is based on CENSUS – do you think those people that do not speak English would really fill a gov. survey at all???

made me laugh, isn’t this why Canada is the easy prey for chinese cyber attacks as discussed on the radio last day….. yeah, go believe the census -hahaha

#129 hahaha -typical Canatian on 05.23.14 at 9:14 am

does anyone has stats for ethnical % in Vancouver city?

I think these will pose a better image ;) than Garth is implying

#130 AfterTheHouseSold on 05.23.14 at 9:18 am

#128 Kris
CMHC “as new home builds slow”

Add construction job lay offs to the growing list.

#131 Shawn on 05.23.14 at 9:19 am

Sour Grapes?

Joe at 100…

This fiat currency is worthless…..

***************************************
Spoken like someone who does not have much fiat currency.

It’s not as worthless as the currency of your view of economics.

Those of us who have fiat currency find it faily useful, actually.

Also never confuse wealth that is MEASURED in fiat currency with fiat currency itself. A house is not currency. Neither are stocks.

#132 ozy - unethical agent on 05.23.14 at 9:20 am

#111 Vancouver RE agent on 05.23.14 at 1:08 am

HOW come A LITTLE FISH IN THE OCEAN dare saying ” RE prices in Van will continue on the rise” ??? it’s insane, no on should make predictions that entice other people to actions that might cause them hardship in the future.

Say Mr/Mrs Vancouver-Agent, think those clients will sue you in a few years? And if so, would you as an honest guy – reimburse them?

#133 Jonathan on 05.23.14 at 9:24 am

Hi Garth. I am wondering what you think about these stories today, maybe you might include these in one of your next postings.

1. BMO is saying that demographics will slow the economy a lot but also keep interest rates down. Wonder what that will do to RE? Less demand but still cheap interest, could that mean no change in prices?

https://secure.globeadvisor.com/servlet/ArticleNews/story/gam/20140523/RBRIDEMOGRAPHICSPRINTATL

2. In the Globe today, Tara Perkins says high end real estate is “soaring”.

I notice most of her recent pieces seem to be pro-real estate, but this still is not what I have been reading here.

ww.theglobeandmail.com/report-on-business/economy/housing/sales-of-high-end-real-estate-soaring/article18816902/

Curious about your take on these, thanks.

#134 Boombust on 05.23.14 at 9:24 am

A massive market collapse is happening in under 2 years that will affect all nations.

#135 Jonathan on 05.23.14 at 9:25 am

Oops, sorry if that second story link was broken:

http://www.theglobeandmail.com/report-on-business/economy/housing/sales-of-high-end-real-estate-soaring/article18816902/

#136 Smoking Man on 05.23.14 at 9:34 am

Their you have dogs.

CPI over 2% CAD gaining fast

All the ingredients based on public persecution that the over night gets spiked…

It won’t… Only when the Labour pool shrinks my little dog’s..

#137 Smoking Man on 05.23.14 at 9:38 am

#129 Jonathan on 05.23.14 at 9:24 am

Slow growth, boomers slowing down.. Did I not say that a few days ago.

I’m going to start charging these economists for coming on here and scooping my shtick.

#138 Tripp on 05.23.14 at 9:49 am

Barbara Yaffe, please stop comparing Vancouver with London, Paris, Milan or any other true world class city. It is embarrassing, and anyone who actually visited these places knows it.

#139 :):(Ying Yang on 05.23.14 at 9:57 am

#118 Buy? Curious? on 05.23.14 at 3:31 am
I don’t understand why Canaians get their panties in a knot when it comes to immigration. How far back do the roots go of those who are bitching and complaining? I had a buddy whose parents came from Ireland and he’s a full blown racist. I couldn’t understand it. We don’t talk anymore and he’s afraid to come into Toronto.
I say, you let everyone who wants to come to Canada come in as long as they leave their religions (all religion should be banned and mocked) and their regional politics left behind.
I find immigrants raise the bar, work harder than locals. Their food is better, their parties are better and *ahem* the sex is better!
Karma Sutra, bitches!
Racist Canadians, stop whining and get back to work!

……………………………………………………………………….
As a first gen Canadian my parents came from Hong Kong to start a new life and embrace Canada as their new home. I have grow up with hockey, baseball, camping, and Tim Hortons. My parents said a lot of immigrants come here to not start a new life but to only escape issues in their old country. This is merely a safe haven from which they start bitching while here that Canada should do something about their previous countries problems. Case in point several years ago my father said to a neighbor who did nothing but bitch about Canada owes him this and Canada should get involved in his homelands issues. So my father said why did you come here. Response, “Canada is easy to get into, they give you benefits even if you don’t work and they don’t make us learn their language.” My father said to him you disgust me and people like you are why racists flourish, you are as bad as they are. My father walked away from him and will not speak to him again!
My father said leave your baggage behind and start new but remember your heritage!
Oh yes unless you are a first nations person then we are all immigrants!

#140 :):(Ying Yang on 05.23.14 at 10:03 am

Smoking Man back from Vegas, did you go to Gallaghers Steakhouse? If you are in New York City go to the one in Times Square, its awesome.
P.S. What did the little shack in Long Branch go for my buddies friends offer didn’t go through? He was a little pissed but apparently this place needs some TLC to bring her up to code.

#141 Aggregator on 05.23.14 at 10:09 am

#137 Smoking Man – CPI over 2% CAD gaining fast

The CAD is rising because the Euro is selling off, not because of +2% inflation. The CAD should be declining with higher inflation.

On another note, despite StatsCan blaming higher inflation on Ontario's gas price hike, retail prices rose 6.6% yy in April. Chart And just like that within a few quarters a balanced portfolio's relative performance will go back to 0% and then below par.

Research Japan's market to find out why holding assets like bonds, REITs and preferreds can kill your portfolio's performance over the mid and long term. These assets can move sideways for years. At best, these are low beta trading vehicles.

#142 HD on 05.23.14 at 10:15 am

#88 TheCatFoodLady wrote:

They envisioned a roomy entrance with a sweeping staircase, a big kitchen with a family room, 4 bedrooms for the family with at least 2.5 bathrooms. A big lawn where the kiddies could safely roam in the bucolic countryside. Maybe a man cave for him, sdewing or craft room for her…

That pretty much sums up what a lot of Canadians expect.

I reside in a 575 sq ft apt alone. I used to be in a smaller place and I often find myself thinking: Damn, that’s a lot of space for 1 person if you compare with how some folks live in the rest of world.

Seriously.

I have minimum 3 meals a day, drink wine and craft beer once in a while. What’s not to like?

That will sound corny but we are truly lucky. Honest.

Less if often more and simple is truly fantastic.

We may have lost our way…

Best,

HD

#143 John Prine on 05.23.14 at 10:26 am

CMHC economist Laberge says he sees no catalysts that would result in a hard crash in the market as some have predicted because fundamentals, particularly population, employment and economic growth, low interest rates and the pool of first-time buyers all support the market.
_____________________________________________

No hard crash? If fundamentals support the existing market place how do these clowns factor in all the unemployment, service level wages, $1.45 gas, meat and vegetable prices up, personal debt loads etc…Maybe they use Fort MacMurray as the 50th percentile……I imagine there is a lot of stress in CMHC’s offices these days.

#144 45north on 05.23.14 at 10:31 am

Prairie Person : I’m back on the prairies, outside of Winnipeg, and the boom in housing prices is astounding.

I worked with Wally for 30 years, he lived in Winnipeg and I lived in Ottawa. Finally Wally retired and moved to BC. I stayed in Ottawa. If Wally doesn’t want to stay in Winnipeg then there’s a reason.

CatFoodLady : There’s no ‘life’ for them in the boonies

my brother-in-law lives north of Gananoque somewhere . I don’t see him too often.

Montreal Gary:
talking about buying a house in Montreal:
I’m waiting because the market seems a bit too much like when I lived in Tampa, FL in 2006

you saw the prices go up, you heard the hype and then prices dropped. Here’s my story of an American in Montreal:

http://www.greaterfool.ca/2009/06/30/dominion-of-debt/#comment-34020

#145 jess on 05.23.14 at 10:34 am

The temps and recruiters

shttp://en.wikipedia.org/wiki/Ty_Warner

…”Judge Charles Kocoras heaped praise on the toymaker for his charitable giving, declaring society was better served by letting him go free and giving him two years’ probation instead of sending him to prison. Warner had faced up to five years in prison.”
=
REally check out labour practices ‘raiteros’
http://www.propublica.org/article/taken-for-a-ride-temp-agencies-and-raiteros-in-immigrant-chicago

http://www.huffingtonpost.com/2014/02/13/ty-warner-jail-time_n_4784732.html

#146 Angus on 05.23.14 at 10:35 am

#116 Kits388 on 05.23.14 at 2:31 am
you want Vancouver stats here you go toughguy
http://vancouverpricedrop.wordpress.com/
I think you lie about van house selling as fast as they go on the market

#147 Daisy Mae on 05.23.14 at 10:36 am

#103 K: “Take a ride through west side Vancouver. It’s 70 % Asian….”

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

Ditto for Metrotown in Burnaby, BC. I am constantly amazed at the number of Asians in that mall, when I visit. Asian immigrants far outnumber the Caucasians. When I grew up, there were few — none, all thru school. Vancouver had Chinatown, but that was all.

#148 Daisy Mae on 05.23.14 at 10:46 am

#140 Ying: “Oh yes unless you are a first nations person then we are all immigrants!”

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

I was born in Canada. I am not an immigrant.

#149 Daisy Mae on 05.23.14 at 10:56 am

#140 Ying:

Immigrate – “come into a place and take up residence.”

#150 Calgarian on 05.23.14 at 10:58 am

I lived in Vancouver for almost 5 years. I lived in an area where it used to be a “Jewish” neighborhood (Oakridge). There were quite a few Jewish residents for sure but most of the people who moved there since mid 1990s were Asians. I lived in a 37 unit townhouse complex that was built in 2007 where 35 families were Asians, most of them Hong Kong Chinese. These people were not necessarily non-residents but all were either permanent residents or naturalized Canadian citizens. Other areas of Vancouver West and even parts of Vancouver East were the same. Overall 30-40% of people living in Vancouver are of Asian descent (mostly Chinese), whether they are non-residents, PRs or citizens. In areas like Richmond, 90% of people are of Asian descent. Despite the investor immigrant program being tossed out, still a lot of Chinese are moving to Vancouver through sponsorship by relatives, regular immigration or simply getting work permit related residency through their business. A lot of Chinese are sending their kids to university in Canada so they can become PRs after they graduate and then sponsor their parents.
To say that Chinese money has no or little impact on Vancouver house prices is delusional at best. There is no way those “virgins” or regular residents who average barely $80K for household income are qualifying for a $2M+ mortgage, even with these low interest rates. A $2M mortgage at 2.59% interest rate (if you can get it) over 30 years requires $8,000/month mortgage payment plus another $1k/month for property taxes and there is no way an average citizen would be able to pay that. Chinese money impact on Vancouver RE prices is a fact.

‘Permanent residents or naturalized citizens’ are called “Canadians.” Calling them ‘Chinese’ tells us all we need to know about you. Enjoy Calgary. — Garth

#151 Buy? Curious? on 05.23.14 at 11:02 am

#125 saskatoon on 05.23.14 at 6:53 am

Exactly! That’s what I’m talking about! Do I care who buys my parents’ home? I’d rather have someone show up at their door with a suitcase of money than some whiny pregnent couple with their wedding pictures telling a sob story about how they want to raise their family like my parents raised theirs. Ha! Show me the money! I could care less. Turn it to a grow-op or a church, I don’t care.

#140 :):(Ying Yang on 05.23.14 at 9:57 am

Don’t hate the playa, Hate the game. It’s politicians who stick their heads in the sand in the name of political correctness in true Canadian style. I met a cool guy that swam at my pool and he told me that as soon as he got his degree, he was back to ******istan and had no intention of paying back his student loan. When we got out of the pool, dried ourselves off, I reached into my pocket and threw a handful of confetti in the air! He’ll go back there and make the world a better thanks to our generousity. I feel better just sharing that story.

Ok, please don’t respond to my comments for today. I have to get ready for the weekend.

https://www.youtube.com/watch?v=oUuSvJhZXfQ

#152 Herb on 05.23.14 at 11:05 am

#88 CatFoodLady,

my wife says that you wrote this just for us. Actually, you only confirmed the conclusion we reached after three years of looking for our little paradise.

It would have been great for the short term, but advancing years and decrepitude made other factors, such as ease of maintenance and access to family, shopping and medical care, imperative.

You are an observant and wise lady.

#153 Son of Ponzi on 05.23.14 at 11:34 am

That straw man in the picture is seriously under water.
Must be a home”ower” in Vancouver.

#154 TheCatFoodLady on 05.23.14 at 11:49 am

I have & continue to clean many of these ‘aspirational’ homes. The story is almost always the same. Problem is, they planned the house for themselves as a YOUNG family with kids at home. A house similar to what I described sounds ideal for a family with 3-4 school aged kids. There’s plenty of room inside & out.

By the time they hire me, the ONE child that may have lived in this home as a young adult is long gone. If it’s a two story, our aging couple hardly ever goes upstairs except to sleep & use the bath or shower. 99% of their living is done in the family room off the kitchen – tv watching, any hobbies – all happens there.

It takes several years of increasing help needed – grass cutting, snow blowing, seasonal indoor/outdoor work & an increasing number of expensive house systems that need repair or replacement that gets them to think about selling.

Often, it doesn’t get much past thinking or listing at ridiculous prices. We’re talking about homes 20-30 years old & today’s young families don’t want the more formal style with boxy rooms, older fixtures; central hall plan. They want open layout & gleaming new everything. Potential buyers see wallpaper & run. The older home owners insist on selling ”as is’ but refuse to lower the price until forced to, then bitterly complain they were cheated.

They want top dollar for their aging, out of date & style homes yet shriek like banshees at the costs of renting or even buying a smaller bungalow or condo. If they spent $3,000 on Royal Something china, they want $4,000 or an equal appreciation on their ‘good furniture’. They don’t understand people like me more than happy, (when we’re in the market), to vulch that sort of stuff for literally pennies on the dollar by following online auction sites.

Heck, my parents bought some lovely Inuit art in the mid 60s when we lived in the arctic. Until 10 years ago I could have sold it & really cashed in. Not interested. I don’t have that many pieces & those I have are intricate works of art – far beyond your standard recumbent walrus. But realistically – no market for them. They’re just not ‘in’.

Markets & tastes change – flexibility doesn’t. Or shouldn’t.

Now, I’m puzzled about one thing. Why would foreign investors be willing to sink a ton of money into block buying condo units they’re leaving empty or renting at a loss? Property not lived in/looked after depreciates… in most markets. I’ll admit I know squat about foreign money rules but I can’t fathom the advantage for HAM, especially if places sit empty & deteriorate.

Can anybody give me a condensed version of ‘The Idiots’ Guide to Foreign Investment Rules’ for foreigners putting money into Canada?

TIA

#155 Calgarian on 05.23.14 at 12:02 pm

‘Permanent residents or naturalized citizens’ are called “Canadians.” Calling them ‘Chinese’ tells us all we need to know about you. Enjoy Calgary. — Garth

I am a first generation immigrant/naturalized Canadian myself, I am not an born-raised Canadian. I am not using word Chinese in a racist way plus I said “of Asian/Chinese descent”.
Important part of this discussion is the fact that the origin of the money that is inflating Vancouver RE prices is Chinese (not earned in Canada) as you very well know it. So do not try to create a diversion by trying to label me racist, stick with the subject matter.

#156 Rob Ford In Rehab on 05.23.14 at 12:07 pm

Smoking Man,

RayofLight #99 has it about right. Your insecurities are shining through.

After the intensive non-stop (except for last week and the week before) counselling I have undergone so far I see you for who you are: as a fellow, very badly damaged human being.

I am learning so much about myself here, when I share it with you all you will be blown away, you’ll move to Tronna just so you can vote for me.

Just like me, Smoking Man, you painfully need to seek attention, again and again and again, even for the most ridiculous things. Posting here five times a day, showing up on Kimmel, whatever, it’s all the same stuff. I have learned that, even though it has been painful.

You tell yourself it’s better to ridicule yourself in front of thousands of other people rather than facing your own demons.

But it’s not. Get help, dude. Trust me, I know. 100%, guaranteed! Rehab is amazing!!

There’s still room at the centre for you here and the blackflies are a lot better now. You can even take breaks, like I do, maybe meet some nice babes in distress, if you know what I mean….

Plus, Rama’s just down the road.

Am I the only one here thinking this folks, or isn’t it time to stage an intervention?

#157 RUCHIR on 05.23.14 at 12:14 pm

Cecil henry @ #1
You are rude on so many accounts. Let me remind you of Colonial past of the great empire.
India
Entire South America
Most of South-East Asia
Middle East
All of Africa
Canada and all of North America
Was there any part of the world that Europeans did not colonized? It was brutal suppression of local people and confiscation of their land by force. In contrast, you have tax paying, law abiding immigrants. What’s your beef? You can’t compete?
Just go away, you hypocrite. Or maybe you think you are superior. Do yourself a favor – read history. Sorry, I forgot you never went to school.

#158 Rob Ford In Rehab on 05.23.14 at 12:14 pm

P.S. Smoking Man,

Just take the bus up here. I can loan you my Escalade if you get lucky.

#159 Rob Nelson on 05.23.14 at 12:20 pm

Garth, you blithely write off Andy Yan’s study, and his expertise, with a throwaway line. Yan is not exactly an Asian-bashing dude, and he’s of Asian heritage himself. But he does tend to be bold when talking about the elephant in the room, which, according to you, is the purest figment of Vancouver’s fevered imagination.

Aside from the few studies available, we have only anecdotal information regarding foreign real estate ownership. But this is because Canada, pretty much alone in the world, has chosen not to track the real estate purchases of foreign buyers.

Frankly, we’d like to know what’s actually going on.

#160 SESs on 05.23.14 at 12:48 pm

I have to say Garth, you are a true politician. Never one to offend any group or cause but will try damn hard to fight for the little guy if it means gaining recognition or trying to profit from it. But when it comes to really trying to expose some of the deep rooted issues that create social tension (such as our current housing phenomenon in places like TO and Vancouver) you quickly dismiss valid points or tell people to go away and come up with bogus stuff like the straw man argument.

Maybe you should look a little deeper and try to get some facts as to how foreign investors (HAM in particular) are able to siphon so much money through their elaborate numbered company schemes from places such as Communist China in order to avoid getting their wealth confiscated from the politburo control freaks, to countries like Canada. And once these individuals are granted CDN citizenship they are able to exploit CMHC while buying obscenely overpriced properties all the while pumping the house prices ever higher as well as their ill-gotten gains from their country of origin (e.g. China thru HSBC accounts) and having peace of mind that if anything blows up, they could always ditch their new ‘Canadian’ status and simply hide in their country of origin. This has been going on for well over 20 years, but only recently have the rules begun to change regarding CMHC and the investor immigration programs. Little too late. The damage has been done, the public is fed up and a whole bunch of innocent victims of this huge scam are going to get burnt simply because they needed to put a roof over their heads to raise a family. Nice work Canadian politicians with your Shit Eating Smiles!

“Maybe you should look a little deeper and try to get some facts as to how foreign investors (HAM in particular) are able to siphon so much money through their elaborate numbered company schemes.” Maybe you should show evidence of this. — Garth

#161 Joe on 05.23.14 at 1:00 pm

#158 RUCHIR on 05.23.14 at 12:14 pm
Do not generalize!!!!!!!!!!!!!!!!!!!!!

You should be more specific!!!

Poland, Check, Slovakia, Rumania,…..and a lot of European countries never colonized anything…..!!!!!!!!!!!!!!!

If you want to tell what European countries colonized use the specific names!!!!!!!!!!!

#162 Mark on 05.23.14 at 1:01 pm

“Important part of this discussion is the fact that the origin of the money that is inflating Vancouver RE prices is Chinese “

That’s not a ‘fact’. You made that up. What is inflating Vancouver RE is actually CMHC money. And the willingness of Canadians, some of whom may be of “Asian” descent to borrow it. That’s all that the real statistics say. There is no evidence to support any meaningful amount of “Asian Money” coming to Canada and being invested in residential real estate.

#163 winterpeg on 05.23.14 at 1:13 pm

Re : AB Boxer #147 yesterday:
“The newly uber-rich in these pseudo capitalist countries, are looking for safe havens to store their newly found wealth as well as building a hedge in case these countries turn back into authoritarian basket cases…..No one can blame them…….The fact that this influx of cash wealth is parked in real estate and plays some (perhaps significant) part in driving up real estate prices is the issue.”
I’d agree with this comment.
To add to the HAM discussion, who says the foreign buyers are all making wise decisions, and are not unlike any and other earthlings who get on “buying crazes”, and are at risk of losing a lot of money.
That said, I concur with the Cat food lady # 155 today and ask:
“Can anybody give me a condensed version of ‘The Idiots’ Guide to Foreign Investment Rules’ for foreigners putting money into Canada?”

#164 Bucketshop on 05.23.14 at 1:24 pm

When can we stop referencing “the inevitable rise in rates”. Getting real tired of this ridiculous concept that rates are somehow going back to “historical norms”. People need to take a good look at the broad economy, debt levels, unfunded liabilities and government balance sheets before making such claims. We’ve heard the talking heads proclaiming rates are rising soon! next year!….for the past 6 years now…time to wake up people. Rates are going nowhere in the short to medium term.

Overheated and unsustainable housing prices? Absolutely! But counting on a meaningful rise in rates to be the doomsday trigger is asinine…

#165 bigrider on 05.23.14 at 1:29 pm

Every single open house in my neck of the woods, Richmond Hill, swarmed by Asians. Others such as Persians and Russians as well, but Asians are quite prolific.

I don’t know if they are foreigners or Canadians , just sure that they are Asians.

I also know that the language being spoken among them is usually Mandarin, as I have learned to tell the difference somewhat from Cantonese, but again, can’t tell whether they are foreigners or just Canadians choosing to speak in their native tongue. Same goes with farsi for Persians and Russian being spoken everywhere around here. English is a rarity

A simple observation, that’s all.

#166 saskatoon on 05.23.14 at 1:38 pm

#158 RUCHIR

“Sorry, I forgot you never went to school.”

This isn’t an insult.

#167 Smoking Man on 05.23.14 at 1:39 pm

Ying Yang

Went for 630

What was your buddies bid?

And for you guys that call me insecure. Seriously, do you read some of the wacky crap I write..

How do you get insecure out of that, more like balls of steal..

#168 SESs on 05.23.14 at 1:41 pm

Well,let’s start with media examples:

http://online.wsj.com/news/articles/SB10001424052702303933704577532141805400810

Note: $50k is the limit per year? Wow! where did all that
Beijing money come from??

It was documented from a news letter that I cannot reproduce:

‘Between 1991-2011, it’s estimated that between 16,000-18,000 Chinese officials fled China taking 800 BILLION RMB (roughly $125 BILLION) with them. Bear in mind China’s entire GDP was just 2.1 trillion RMB in 1991.’

But you can verify this statement with a BBC article:

http://www.bbc.com/news/world-asia-pacific-13813688

http://www.alternet.org/news-amp-politics/5-outrageous-revelations-matt-taibbis-takedown-hsbcs-drug-money-laundering

Note: look at item #3. Put 1 & 1 together.

http://www.activistpost.com/2013/09/whistleblower-hsbc-still-laundering.html

http://www.macleans.ca/news/world/to-be-a-politician-is-glorious/

http://thediplomat.com/2013/11/why-chinas-new-rich-want-to-emigrate/

http://www.salon.com/2014/02/09/chinas_wealthy_are_fleeing_to_the_united_states_where_their_money_is_welcomed_with_open_arms_partner/

Note: But since the US made it a bit more difficult to get citizenship, Canada & Australia opened up its arms many years ago.

http://www.usatoday.com/story/money/business/2014/02/09/china-millionaires-leave-country/5228219/

How many more examples do you need? Do you actually think our politicians would ever want to change anything? Why do you think they love rubbing shoulders with them on their diplomatic missions.

#169 Bargains everywhere on 05.23.14 at 1:44 pm

‘Permanent residents or naturalized citizens’ are called “Canadians.” Calling them ‘Chinese’ tells us all we need to know about you. Enjoy Calgary. — Garth
____

Sheesh! Everybody is a racist according to you, Garth. His point was that it is foreign money earned elsewhere (be it Hong Kong or Mars) being imported to Canada and buying real estate that is contributing to increased prices. Difficult for Canadians earning Canadian salaries to compete with that.

#170 happity on 05.23.14 at 1:46 pm

Both the FED and BoC indicated interest rates will not rise until 2015, and only if certain economic conditions improve.

The USA economic renaissance never was, reports are already indicating this and summer will reveal that more debt and money printing cannot solve the problems caused by more debt and money printing. Duh…

So what will central banks do if the economy doesn’t improve?

Where will they turn?

The reason housing prices in Canada will drop over the next while is because the real estate debt market is saturated. In the meantime the price of food and gasoline currently are and will continue to rise.

#171 Mark on 05.23.14 at 1:48 pm

“There is no way those “virgins” or regular residents who average barely $80K for household income are qualifying for a $2M+ mortgage, even with these low interest rates.”

They’re not. But there’s move-up buyers who most certainly do qualify for $2M housing purchases using existing equity — something completely expected after a long bull market in house prices. One thing that can be said of the Chinese, and that is, they have a very strong affinity towards keeping most of their savings in housing, rather than other asset classes. Even within China itself, ownership rates apparently are into the 90% range. So while Vancouver may have some of the most expensive RE in the world, scratch beneath the surface, and there is very little in the stock and bond portfolios of most Vancouver residents. While people elsewhere, I would suggest, tend to be a bit more balanced and thus not susceptible to losing their assets as housing continues to deflate.

#172 Mark on 05.23.14 at 1:52 pm

“Rates are going nowhere in the short to medium term. “

Policy rates, sure, probably going down. But rates against individual types of collateral, whether it be RE, telecom assets, oil wells, etc., change from time to time as those assets go into overcapacity or into a shortage.

As I showed in an earlier post, a residential RE borrower can borrow for roughly 1% less than a telecom (BCE) borrower. 3.51% versus 2.5% (ie: 2.99% + broker commission)

Even within the identical interest rate environment, this could easily reverse itself. For instance, 4% for the residential RE loan, 2.5% for the business loan.

Would going from 3% to 4% be a big deal to the RE market? Absolutely! That’s a 33% escalation in interest expense. As it stands, the market has already slowed dramatically and prices are falling because subprime credit through the CMHC is significantly less available.

#173 Son of Ponzi on 05.23.14 at 2:01 pm

My fortune cookie said:
Never bite the hand of your master.

#174 Lurcher on 05.23.14 at 2:08 pm

HAM to VAN. One way that offshore cash makes it to Van R/E market courtesy of a Canadian bank:

“In September 2010, Ogden received a panicked call in the middle of the night from a client. The client was trying to transfer $500,000 into the country for the deposit on a home, something she needed 10 separate Chinese and Canadian accounts to do. But she was short two Canadian accounts and the money needed to arrive the following day or the real estate deal would collapse. The client asked to transfer the money via two of Ogden’s own accounts. She agreed.”

http://www.vancouversun.com/Judge+slams+CIBC+firing+Vancouver+employee/9550845/story.html

#175 45north on 05.23.14 at 2:12 pm

Calgarian : Important part of this discussion is the fact that the origin of the money that is inflating Vancouver RE prices is Chinese (not earned in Canada) as you very well know it.

“the origin of money” is a good term and what most are trying to say. If the money was earned in the US it is correctly described as American. If it was earned in China, it is Chinese.

#176 Joe on 05.23.14 at 2:27 pm

Today’s news….inflation 2% and Canadian dollar up..

What a joke….I thought that should go another direction…:))))

#177 Joe2.0 on 05.23.14 at 2:33 pm

April re Joe2.0

I have personally shot these videos for clients beginning 20 years ago and personally know developers who have been doing this for years.

My whole point is that the immigration policies are useless, if you have the cash immigration lawyers will remove all obsticalls.

I don’t agree with it but it seems to be rampant.

#178 :):(Ying Yang on 05.23.14 at 2:35 pm

#168 Smoking Man on 05.23.14 at 1:39 pm
Ying Yang
Went for 630
What was your buddies bid?
And for you guys that call me insecure. Seriously, do you read some of the wacky crap I write..
How do you get insecure out of that, more like balls of steal..
………………………………………………………………………..

I can not confirm this 100% but my feedback was he was only going in at $599K, needs quite a bit of work apparently. Did you go to New York New York for the Steak?
BTW Where do you hang there? I’m getting tired of Aria, even Bellagio is boring. MGM too big, way to big! Need a new spot.

#179 Financial Freedom at 40 on 05.23.14 at 2:51 pm

No, we’re not all immigrants per se, but we all come from immigrant stock. Just the dates vary.

Many claim my First Nations ancestors apparently crossed the Bering Straight from Siberia 10s of 1000s of years ago.

The difference I see today is it is not so much movement of people, but movement of money – a different chasing of opportunity going on, with much different societal risks.

#180 Musty Basement Dweller on 05.23.14 at 2:59 pm

Wow I have to admit that seems like more non resident occupancy (or non occupancy) in Vancouver than I thought.

It seems like a significant wild card or factor of some sort, but who knows what. One would think some of those foreign investors or owners can pull out as fast as they came into the game so who knows what it really means overall.

#181 randman on 05.23.14 at 3:06 pm

Summed up very nicely by Karl D

“The reason is simple — the premise for “home appreciation” wasn’t supply and demand, it was the ratcheting effect of ever-lower interest rates that make re-financing and resale possible on a serial basis.

That is, you buy a house and instead of treating it as a depreciating capital good (which it is) you treat it as an appreciating investment — that is, a store of value (which it is not.) You are enabled in this act of self-delusion by government interference in the market rate of interest, pressing that rate downward on an ongoing basis over the space of decades.

As I have previously pointed out what this enables is the following behavior:
•You borrow $100,000 @ 10% interest. The interest payments assuming no principal paydown at all are $10,000 a year.

•The rate of interest falls to 8%. The interest payments are now $8,000 a year. That would be fantastic except you decide to instead borrow another $25,000 because you can do so while still paying only $10,000 in interest!

•The rate of interest falls, in several additional steps, to 4%. You now can have outstanding $250,000 in debt and still pay $10,000 a year in interest.

That, and only that, is what has driven “home price appreciation” over the last 30 years. Note that your house “gained” $150,000 in “value” even though absolutely nothing changed about the house itself.

This pattern resulted in entire industries (specifically, the Real Estate and Finance industries and those associated with both) to run a meme for 30 years that claimed real estate was an “appreciating investment.” That claim was and is false; the increase in valuation had nothing to do with investment at all but rather was a simple function of leverage amplification driven by interest rate distortions.

This same behavior drove the expansion of government and business at all levels, which is why they were and are so addicted to this demonstrably-bankrupt operating model.

The problem is that at best we can have continued low interest rates. In other words, at best housing is now a normally-depreciating capital asset and not an appreciating investment. In addition at best government and business “pull-forward” spending capacity has come to a standstill at the same time.

If rates rise, however, then that ratchet goes into reverse as the interest carrying cost of a given level of debt goes up, and thus the principal that can be carried goes down. This forces reductions in the carried debt across the board — and unwinds (by economic force) that accumulated leverage.

This is all that has been, and is, going on in this regard folks. It’s not complicated but you have yet to hear anyone in TeeVee Land talk about it in these terms, even though all of the CNBS anchors and pump monkeys know damn well that this is exactly what has, and is, happening.

Beware, because when, not if, this realization reaches public consciousness the reaction in the marketplace is likely to be a bit….. interesting.”

http://market-ticker.org/akcs-www?post=229033

#182 Nemesis on 05.23.14 at 3:07 pm

#SomeStrawMenAreMoreFlammableThanOthers

“She kept laughing and said: ‘With this you declare not to launder money,’ and then laughed again.” – Antonio Papaleo, Investigative Journalist, describes his encounter with a Hong Kong Standard Chartered Bank employee

[SCMP] – Hong Kong banks make money laundering easy for criminals, journalist tells court

http://www.scmp.com/news/hong-kong/article/1518089/italian-journalist-says-hong-kong-banks-make-money-laundering-easy

#BonusZen:

http://youtu.be/F0Vj3zLaO4w

#183 Smoking Man on 05.23.14 at 3:08 pm

#179 :):(Ying Yang on 05.23.14 at 2:35 pm

Dude, went to the outback at the place royal.

I can stay at any property in total rewards… AK Ceasars, I can get the penthouse with a buttler, fully commoped..

I love the Flamingo, best party pool in Vegas.. I was dancing up a storm in the pool with hotties 1/2 my age.

I love the old musty smells.. It’s history, the great feel of old Vegas.

#184 Mark on 05.23.14 at 3:16 pm

“Summed up very nicely by Karl D”

I’d just add that, at least in Canada, a large portion of the economy has actually been feeding on RE activity, causing the income of people associated with FIRE to increase dramatically over their true and intrinsic worth.

So this has jacked up not only the income, but the freely available financing has jacked up the pricing.

As RE continues to decelerate in activity, and as prices continue to fall, the whole cycle goes into reverse. Incomes of people associated with FIRE decline. Prices decline. Extremities in one direction are always reflected with extremities in another direction, and this time around, its down. Eventually RE will revert to an all-cash market, probably in the area of 1-2X income, if even, with the utmost in pessimism. Any so-called “HAM”, if it even exists (which evidence is scant) will regret the day they ever put a dime into Canadian RE.

#185 triplenet on 05.23.14 at 4:11 pm

EVERY real estate transaction in Canada must include a report called a FINTRAC.
This report is an absolute requirement.
Read up.
CSIS is watching you.

#186 Old Man on 05.23.14 at 4:13 pm

#184 Smoking Man – I heard that you had a wild night of it somewhere else without your wife, as we know your a Ford Nation groupie. Will you deny being at Hooters Hotel and Casino for a night? Or did you go for the famous Prime Rib at $9.95 instead?

#187 happity on 05.23.14 at 4:35 pm

George Soros had sold out of the stock market and the big banks a while ago.

Anyone preaching the USA economic renaissance and hamming up those assets is probably the greater fool…

Another record today on US markets. — Garth

#188 Bargains everywhere on 05.23.14 at 4:39 pm

I can’t say that I’ve seen any price decreases yet in my neighbourhood and, in fact, most houses here (Willowdale) are still selling quickly for over the asking price. However, what I have noticed in the last couple of weeks is that there has been an increase in the number of new listings coming on the market. This is the most number of listings I’ve seen all spring. It will be interesting to see if it is just a short-term anomaly or if it becomes a trend across the city. More listings might signal (finally!) a softening in the real estate market in Toronto.

#189 Setting the record straight on 05.23.14 at 4:44 pm

“Oh yes unless you are a first nations person then we are all immigrants”

Not true.

Just as its not true of aboriginals who were settlers, it is not true of those born here, nor is it true of the initial Euopean settlers.

#190 Mark on 05.23.14 at 4:52 pm

“Another record today on US markets. ”

Sure, due to P/E multiple expansion, not actual earnings growth.

Meanwhile earnings growth remains strong in Canada. Yet surprisingly the stock market is not. Quite strange, until one considers that the hearts of Canada’s “speculative class” have been captured by RE, not by stocks.

If you do a simple calculation based on dividend yields and the TD e-Series fund distributions last year, the TSX needs to climb roughly 80-90% on a relative basis to match the Dow/S&P500’s valuation. So a lot of room for the TSX to climb on a relative basis.

75% of US companies just beat profit expectations and 52% are ahead of revenue projections. Meanwhile the TSX is leading US markets by a factor of 8-to-1 so far in 2014. — Garth

#191 SESs on 05.23.14 at 5:04 pm

#185

“Eventually RE will revert to an all-cash market, probably in the area of 1-2X income, if even, with the utmost in pessimism. Any so-called “HAM”, if it even exists (which evidence is scant) will regret the day they ever put a dime into Canadian RE.”

No they won’t. You’ll be on the hook to bail-in CMHC backed losses and you’ll then realize how ‘scant’ the evidence of HAM is.

But rest assured. It won’t happen. Not here, as our banking cartel with the help of our CB will make sure this racket will continue to attract capital in this country. It truly is ‘different here’ this time.

#192 devore on 05.23.14 at 5:19 pm

#191 Mark

Sure, due to P/E multiple expansion, not actual earnings growth.

There is correlation, as there always has been, but there is also real growth.

http://www.advisorperspectives.com/dshort/charts/valuation/PE-ratio-overview.html?SP-and-PE10.gif

#193 randman on 05.23.14 at 5:25 pm

Mark

Nice additional comments but reflected in Karl’s last line…

” the reaction in the marketplace is likely to be a bit….. interesting.”

#194 Millenial on 05.23.14 at 5:35 pm

Hey Garth,

The Princess Margaret Home Lottery winners were released on Wednesday. I was just checking out the winners online: http://blog.princessmargaretlotto.com/

The winner of the 50/50 draw (over $2million cash) is Santo Natale. I googled the name and up comes his ReMax website.

I feel defeated today. I blew $50 on that 50/50 draw, to line the pockets of a real estate agent who works in a city I can only dream of owning a home in.

#195 randman on 05.23.14 at 5:44 pm

“Another record today on US markets. — Garth

Sorry Garth you are soon gonna regret these words and others in reference to the U.S. economy

This is not doomer talk this is basic economic law……

I’ll bet you a Timmy’s double double!

How can I regret telling you a fact? — Garth

#196 devore on 05.23.14 at 5:47 pm

Inflation in Canada hits 2.0% for April, mostly on higher energy prices.

https://ca.finance.yahoo.com/news/canada-april-inflation-hits-2-0-percent-first-123444933–business.html

#197 betamax on 05.23.14 at 5:52 pm

Has HAM helped to inflate the Vancouver bubble? Absolutely.

That said, I see a bunch of people at work (no HAM, and they make less than I do) buying vastly overpriced old dumps in crappy neighbourhoods w/ huge mortgages because they’re convinced that they need to buy a house and that prices will go up forever.

The bubble got blown so large here because the local masses dove in with cheap credit and no brains.

#198 Happy Renting on 05.23.14 at 6:13 pm

#195 Millenial on 05.23.14 at 5:35 pm

If you thought that $50 was anything more than an entertainment expense, you defeated yourself.

#199 Detalumis on 05.23.14 at 6:35 pm

#14 The reason retirees move to these areas is because they drink the financial planning Kool-aid. I have one friend that just sold their townhouse in central Toronto to move to some rural spot outside of Collingwood. The planners tell you that everybody lives to 95 and spends most of that time running hand in hand along the sandy beach and playing golf. Never mind that the average age of widowhood hovers at 60 so more than half of couples never have any retirement time together.

My mother-in-law is the same way, she lived out in the country, had a mini stroke that she hid from her doctor so she wouldn’t lose her licence. Instead of moving to the city she picked a small town with no transit and lousy health care so she will certainly become a huge burden.

People just never think about what retirement actually is: a slow decline with increasing disabilities ending in “checking out” of this world.

#200 STM on 05.23.14 at 7:09 pm

‘Permanent residents or naturalized citizens’ are called “Canadians.” Calling them ‘Chinese’ tells us all we need to know about you. Enjoy Calgary. — Garth

Well then apparently the word “Canadian” doesn’t mean anything these days. It doesn’t mean anything about your ethnic background, your language, your culture… nothing. It just means something about some paper you’ve got in your drawer.

Those of us who still use language to make meaningful distinctions have to find some other way to make them.

Stop being tribal. – Garth

#201 Cici on 05.23.14 at 7:29 pm

#6 Diane,

Most of the condo speculators are Canadian, agents or otherwise, and massively overleveraged.

There is some foreign ownership, but it isn’t all Asian.

#202 screwed on 05.23.14 at 8:13 pm

Inflation is no longer a benchmark for the Fed’s policy tools. Don’t imagine Poloz & Co. will be the exception to the current global trend. ECB is trying to beat deflation and scaring savers now to spend the cash or be penalized.

That 2% print today will go back down to 1% by the end of the year. This is largely driven by food and cost of energy. Natgas and fuel way up. Surprised the number only came in at 2%.

#203 bill on 05.23.14 at 9:10 pm

sm sez:
”I love the old musty smells….”
deodorant failure??? need new runners??

#204 Not new on 05.24.14 at 5:41 am

First, I need to tell #195 Millenial I share your grief.

Speaking of Vancouver property bust, I can shared a bit what I can see have happened just the past one or two years in GVRD.

1) I can see some people, very possibly middle-class people who are not willing to talk to “local” ethnic people, very possibly will call Surrey “ghetto” were forced out of Vancouver and moved into the ghetto “Surrey” (I wouldn’t even call Surrey suburb as to Vancouver, as no one would call Scarborough suburb to Toronto). It seems GVRD is going to be more “sprawled out”.
2) I can also see more boomers, who are well-off enough to drive large, classic convertibles around Surrey center, and enjoy their Starbucks. My guess, they might have wisely cropped their profit from their million dollar house, moved to Surrey and keep living large in Surrey.
3) Many basement dudes who have been living in mum & dad or someone’s basements have already moved to North BC or even out of BC, looking for better jobs and better future in herds. Time and time again, I overheard complaints on transit from elderly parents about kids leaving; from young people about getting no jobs, no future in GVRD, while friends have gone got so much better jobs and promotion in jobs. Many young people are either have already gone, or planning to leave GVRD.
2) Since around last winter, those most hung out malls of Burnaby has much less people and the dozens of mall carts are nowhere found. It’s really hard to imagine there were like at least 50 people shopping side by side with you the other day, and then suddenly you can see you can finally move around the mall with only 5-10 people on both sides.
3) I also see new buildings of condos / apartment complexes / highrises one after another nearing completion around the skytrain line, wondering who is going to occupy them. People kept saying ethnic groups speaking a different language bought up all those highrises. However, many of those parents with high hopes to keep their children around by helping with down-payments would be so disappointed as their children were so Canada-educated that could be forced out of GVRD for the dim job market.

There comes the question, we all know many of these close-completion condos were purchased with the financial help by parents for their children, or built for the hipsters who might now already moved out or following their pals to look for jobs not just around the convenient skytrain route in GVRD, so who will then move into these high-end condos and pay the mortgage once these condos are completed by 2015-2016? What will happen once those SFHs landlords lose their mortgage helpers to these new buildings? My guess, many of these elderly people, landlords might need to move in while many of other “sold” condos are still in the hands of realtors. So, where will those elderly-holding SFHs go then?