Big Dog

DOG FOUND modified

Everybody knows big city houses cost too much. The sane among us realize prices will correct. Thus, the smart action for those wish to own real estate is to wait. But talk like that sure ruins a realtor’s day. So the housing business keeps telling us values will increase. Probably forever.

This week Bank of Canada boss Stevie Poloz played into the bulls’ hands by saying interest rates in Canada will not follow those of the US in lockstep. So, does that mean 3% mortgages are here to stay, as Canada morphs into Japan?

Of course not.

Does it also mean real estate can continue to appreciate even though the economy’s too weak to breed inflation or higher rates?

Decidedly not.

In fact everybody who believes house lust is akin to good dental hygiene should be hoping for the cost of money to rise, because the last thing you’d want is for Toronto become Tokyo. Yikes.

JAPAN PRICES modified

Why does the chart look like this? Because Japan’s a country where the government would really, really, really like to have some inflation. The more the better, because higher prices mean higher demand and economic growth. Sadly, though, the Japanese have been fighting deflation for years – which is why variable rate mortgages are 0.8% and 10-year loans are less than 1.5%. What has this absurdly cheap money done for housing? Look at the chart. Crickets.

Canada is nowhere near this stage yet, of course. But things ain’t going in the right direction. Outside of July (which was not that hot), there have been precious few jobs created in 2014. Of those that came into existence, a whopping 75% are part-time positions. Yup. McJobs. The labour force participation rate is declining, wage growth is less than inflation, and every month household debt increases.

When asked about job growth a day ago, Poloz said: “It’s been pretty weak. It’s been almost all part time so therefore it’s not generating the kind of income you would get from a usual 1 percent employment growth. We know that’s significantly less than we would expect to see in a well-performing economy.”

Simply because consumers are tapped out, mortgage-laden, house-rich and savings-starved, the Big Dog knows it has to be a revival in exports and business activity which will rescue the economy. A cheap dollar helps, since it makes our stuff more competitive. And if Canadian interest rates are to stay lower than those in the US, our buck will decline.

Now do you know why he said rate hikes here would lag those to the south?

A report days ago from Desjardins Economics showed the pickle Poloz is in. Those guys believe economic growth here will languish between 1.5% and 2% until… get this… 2030. That’s in contrast with the 3.5% average growth that rocked the Sixties, Seventies, Eighties and Nineties. Just look at this chart and see the trend – if the Dejardins eggs are right, this could get ugly.

GDP modified

So, what should you expect?

The US central bank, the Fed, will be finished its stimulative bond-buying (“QE”) by Halloween. Then it will start to raise rates, slowly but steadily, about a year from now. Maybe sooner if the American job market continues to smoke. In any case, it’s coming. Bond markets will anticipate that, with yields rising – probably as QE tapers out. So, it’s reasonable to expect five-year fixed mortgages to cost more by Christmas.

Poloz will resist for a few months, hoping the dollar tanks a little more and exports revive. Ultimately the Bank of Canada will also increase its key rate – slowly, carefully, but methodically. The last thing we need in a moribund economy is an 80-cent currency that gooses the cost of imports and sucks off more consumer cash flow. Big Dog will be in a careful balancing act for several years to come.

What are the consequences?

Variable-rate mortgages will stay cheaper longer, but five-year fixed rates are probably the best bet for most people. As for real estate, I hope you absorbed the lesson of yesterday’s post: when money costs less, houses cost more. We are now at peak house levels, even as we turn into a growthless, part-time nation. The only reason values stay aloft is the blind willingness of your horny co-workers and idiot relatives to shoulder even more debt.

But if we’re looking at 15 years of stagnation and even modestly rising interest rates, the outcome should be obvious. Even to them. And certainly to you.

163 comments ↓

#1 bdy sktrn on 08.25.14 at 6:07 pm

…stay aloft is the blind willingness of your horny co-workers and idiot relatives to shoulder even more debt.

—————————
and that is exactly what they are going to do.

#2 Yogi Bear on 08.25.14 at 6:11 pm

Yeah well too bad inflation is going to force Poloz’s hand. Anybody that says inflation is flat in Canada is kidding themselves. The CPI doesn’t mean much to families facing major increases across the board from food to hydro.

#3 Derek R on 08.25.14 at 6:11 pm

Tanking the currency always looks good but it’s short-sighted. If we take the correct measures to help manufacturing, we won’t need a low dollar.

#4 Londoner on 08.25.14 at 6:11 pm

BoC and US Fed will follow the path being set by the BoE. The UK is the first, and currently only, G7 country to enter an inflationary cycle after the GFC.

Can you explain why you think the BoC will raise rates if Canada is entering a period of deflation? What would you do differently from Poloz if you were in his shoes?

#5 Shawn on 08.25.14 at 6:17 pm

So… Sell Canada houses and buy Japan houses?

I would note that Garth is NOT predicting a Japanese style house price melt-down here… Many predicted U.S. stocks would do a JAPAN but it never happened…

This is not Japan.

Japan allows basically no immigration?

#6 CPG on 08.25.14 at 6:25 pm

The following is a chart of the total credit market debt in the United States versus its gross domestic product (over the last 60 years):

http://research.stlouisfed.org/fred2/graph/?g=Irm

#7 Happy Renting on 08.25.14 at 6:29 pm

Until 2030? Scariest thing I’ve read all month.

#8 bdy sktrn on 08.25.14 at 6:29 pm

Japan allows basically no immigration?

—————————
if you marry a japanese girl you can stay, but there is no way in [email protected] you will ever get a passport or citizenship.

#9 Anson on 08.25.14 at 6:34 pm

Right on the money!!
Garth it’s obvious you know how these politicians think, after all you have been on both sides of the fence unlike myself and most of the people who comment on this blog.
So I must ask; Does it not get frustrating reading so many responses regarding the inner workings of politicts from people who think they know but truly have no knowledge or experience on this matter?

#10 Londoner on 08.25.14 at 6:36 pm

“The labour force participation rate is declining, wage growth is less than inflation, and every month household debt increases.”

In her speech on Friday, Yellen said that the behavior of variables that measure the magnitude of the cyclical and structural influences affecting the labour market have changed since the GFC. As a result this may have shifted the lead-lag relationship between a tightening labour market and rising inflation pressures. She also said tightening monetary policy as soon as inflation moves back toward 2 percent might prevent labour markets from recovering fully.

#11 Oceanside on 08.25.14 at 6:37 pm

Well…After renting for 44 months and waiting for the inevitable drop we finally bought a house. Not the best plan really but really tired of looking after other peoples places. We bought $85,000 below the original list price and are glad to be in our own place again….No mortgage and looking forward to planting some trees and a garden that we can watch grow

#12 MisterC on 08.25.14 at 6:39 pm

History sucks…What I found really interesting is comparing the average Toronto house price to the income multiple in relation to interest rates.

It might actually be possible to estimate what an increase in interest rates (to what used to be normal levels) would do to the price of housing: Today’s avg combined income x 1996 multiple = $98,116 x 3.6 = $353,218. That would be a drop of 34% in house prices if rates move from 3% to 7.2%. OUCH

#13 crowdedelevatorfartz on 08.25.14 at 6:40 pm

@#5 Shawn
Sooooooo, what your saying is….. “No HAM in Japan”?

#14 Londoner on 08.25.14 at 6:41 pm

#2 Yogi Bear

You think rising CPI = inflation? You’re not thinking like a central banker!

Inflation = Economic productivity and wage growth

#15 Anson on 08.25.14 at 6:54 pm

Janet Yellen is finally saying that the employment problem in the US may be structural? Ya think?
Draghi over in Europe has been saying this for years.
How can the developed world outsource so many manufacturing jobs and not replace these jobs with new industry and expect it not to be structural?
These problems would of been more obvious a long time ago if we did not have the housing market to cloud rational thinking. We will truly realize the mess we are in when our housing market downturn accelerates.

#16 annemoore on 08.25.14 at 6:58 pm

Carrying costs of these expensive houses – utilities, property taxes, repairs and maintenance- they will be the real shock for the new home owners…

#17 Shane on 08.25.14 at 7:00 pm

Garth, where do you recommend to invest money in canada besides the stock market if canada is going to be stagnet

#18 burnaby604 on 08.25.14 at 7:03 pm

not to worry vancouverites its nothing to worry about here …and hey you will still be able to rent out your basement suite for 1400 a month! last time i checked there is no more land for sfh in van or burnaby! if they make bumpers for chevy/ford in your town you might be SOL ….sorry dare baiiiy

#19 Linda on 08.25.14 at 7:05 pm

First, Japan land is pricey compared to NA land – we could fit Japan in the Newfoundland/Labrador geography with lots left over (NFLD/Labrador over 405,000 sq km; Japan is 364,500 as per Wiki). Despite 30 years of stagnation prices remain astronomical compared to what we pay here. The silver lining of the economic cloud that appears to be on our horizon is that at least if housing costs stall out here then maybe people will be able to afford to buy homes after all, though it is likely they will need 30 or more years to pay for them. However, if we are all of us going to live to 90 or 100 we will have time to pay so hey, maybe this will all work out after all.

#20 Stompie on 08.25.14 at 7:19 pm

So does that mean were unlikely to see house prices in Canada bottom until 2030?

#21 Ronaldo on 08.25.14 at 7:24 pm

An interesting read.

http://opinion.financialpost.com/2012/09/21/is-canada-headed-for-demographic-disaster/

#22 burnaby604 on 08.25.14 at 7:30 pm

a lower dollar is just going hurt the cash strapped minivan driving families more…..they got all their money in the house and with 3 small kids and moms working parttime to come out ahead 100 bux a week after she pays daycare….so steven poloz how is everything going up in price gona help them? the only people that are gona win are the exporters of canadas raw resources while the government collects a few pennies in royalties….this country is run by bafoons especially j baird that guys embarassing….does he get his haircut while sitting on a firetruck?

#23 Property Accountant on 08.25.14 at 7:31 pm

That is a sane prediction, Garth, thanks for a great post again. Based on your projections I just bought lots of U.S dollars, should have done it long time ago, just didn’t have the guts to eat small interest rate differential costs.

Stock markets are beating records (today again, too bad I did not have Tim Hortons in my portfolio) which is another sure sign folks wiser than me, managing millions $$$ do not see interest rates rising anytime soon. And that is comforting…. for those invested in financial assets, not in real estate.

#24 TEMPLE on 08.25.14 at 7:33 pm

First you say this:

A cheap dollar helps, since it makes our stuff more competitive. And if Canadian interest rates are to stay lower than those in the US, our buck will decline.

And then later you say this:

The last thing we need in a moribund economy is an 80-cent currency that gooses the cost of exports and sucks off more consumer cash flow.

Well, our currency has already declined and it is probably just the start. Is there any way to avoid an 80-cent currency when the Bank of Canada seems intent on devaluing the dollar even as we bounce around 90 cents? What props up our dollar in a limp economy with flatlined inflation? And why would we want to anyhow? Seems like getting more foreign investment and jacking up our manufacturing and exports is more important than our consumers getting to buy imported crap at slightly better prices.

TEMPLE

#25 Still Waiting on 08.25.14 at 7:39 pm

How many more years before the RE market in Vancouver starts dropping, really and tangibly? I’ve been waiting 7 years with no end in sight (08/09 was a hesitation). 7, 10, 20 more years? Then will it slow down? Then again, Noah waited 120 years…that sounds about right.

#26 NostyVlad the Snugglebombed on 08.25.14 at 7:39 pm

“Outside of July (which was not that hot), there have been precious few jobs created in 2014. Of those that came into existence, a whopping 75% are part-time positions. Yup. McJobs. The labour force participation rate is declining, wage growth is less than inflation, and every month household debt increases.”

As technology becomes more sophisticated with time marching on ever more quickly, the old economy which we enjoyed from the ’50s on is drawing to a close, with full time workers being replaced by robots, or eliminated altogether. That’s as good as any reason for the withdrawal of money from the system.

First para. is curious — Here and kere.

Essentially, the middle class is being wiped out and joining the poor. There will be a few elites at the top of the money and food chains, the rest will survive on GMO-inspired food banks and handouts. It is a pointless exercise in futility to contemplate buying a home or condo anymore.

New US Home Sales fall again Imagine what happens when 3D homes can be printed out — no need for the construction industry! Plus — Sanctions on Russia are having a major effect on the Eurozone.

#27 Craig on 08.25.14 at 7:45 pm

Garth, noticed last week in the latest pole that Justin Trudeau is now 6 percentage points ahead of Steven Harper. What do you think the odds are that the TFSA limit will be raised to $10,000 effective Jan.1,2015 ?

#28 jshum on 08.25.14 at 7:52 pm

Great. It will take 20 years for prices to correct from that chart. by that time it will be time for my retirement. As I suspected I will never own a house. That is just one dream that will not come true

#29 Millenial on 08.25.14 at 7:59 pm

Hey Garth,
Lotto Max jackpot is up to $50 million dollars. The draw is this Friday night. How many tickets should I buy? I’ve already spent $10.

#30 Blacksheep on 08.25.14 at 8:05 pm

“But if we’re looking at 15 years of stagnation”
—————————————
One may be best off, seeking greener pastures.

#31 DreamingInTechnicolour on 08.25.14 at 8:10 pm

http://www.bnn.ca/News/2014/8/22/Vancouver-housing-data-reveals-Chinese-connection-.aspx

#32 Mr Stats on 08.25.14 at 8:10 pm

Ummm….Canada has 100X the Immigration of Japan. Yes you read that correct. One hundred times!

Migration into japan averages 52,000, compared to 250,000 for Canada. The Japanese population peaked at 130 million and is steadily declining and aging, adding to economic woes. By 2050 there will be about 30 million fewer residents, and 40% of all citizens will be over the age of 65%. As a result the government is actively considering raising immigration to 200,000 annually. — Garth

#33 @Oceanside Post #11 on 08.25.14 at 8:13 pm

Congrats. Don’t let the doomer talk on this blog down your emotions. We are a minority…

Enjoy your TIME.

#34 Mr Stats on 08.25.14 at 8:36 pm

With the above info, also take into account Japan’s Population is DECLINING by almost 1 Million people per year. Canada’s is INCREASING by 400,000 per year.

Cheers.

#35 Burnaby604 on 08.25.14 at 8:51 pm

40,000 people move into the 604 yearly, your gas bag house is safe

Actually BC lost 8,657 people in a year. — Garth

#36 Dr. Talc on 08.25.14 at 8:54 pm

#27 Craig on 08.25.14 at 7:45 pm

Garth, noticed last week in the latest pole that Justin Trudeau is now 6 percentage points ahead of Steven Harper.

One point for each knife…hmm

http://fakeologist.com/2014/08/19/5-or-6-knives-and-a-note/

#37 debtified on 08.25.14 at 9:02 pm

There was a time when real estate prices in Tokyo was the highest in the world; Japan’s economy was #2 and was expected to become #1. Well, we all know what’s going on over there now…

Japan has 4x more people than Canada.
Canada has 36x more land than Japan.
Japanese have enormous savings, Canadians owe $1.63 per $1 they earn.

Japan’s real estate prices are back to the 1983 levels.

Yep! Go figure!

I don’t like ” Big Dog” for Poloz. I propose Blog Dog P.

Thank you, Garth, for all the free information ans education.

#38 gladiator on 08.25.14 at 9:04 pm

Sutton Group’s office building (a detached house) on Finch street in Toronto now has a For Lease sign on its front lawn.
Sign of the times to come?

#39 Tony on 08.25.14 at 9:11 pm

Everyone seems to have heard the same joke about interest rates. The bond markets are telling the true story as interest rates fall.

#40 JSS on 08.25.14 at 9:11 pm

If we were to enter a prolonged period of low interest rates (till 2030?), what will the impact be on insurance stocks like Great West Life, Power Financial, Sunlife etc? Stagnant dividend growth? What about the impact on pension plans?

#41 Bob Rice on 08.25.14 at 9:13 pm

Since we don’t actually manufacture anything we buy in this country, a tanking dollar is gonna bite! Inflation will certainly rise. I think we aren’t alone though. Western industrial economies are in their twilight. France, Japan, Italy, England, Canada… the list grows. We’ve lost our competitive advantage, whatever consumers want can be made a lot more cheaply overseas… It’s pretty bleak. It’s a seemingly slow, steady decline. Death by a thousand cuts.

#42 Yuus bin Haad on 08.25.14 at 9:14 pm

We must once again reacquaint ourselves with the sage words of Peter Lougheed who said (basically): “Do NOT confuse a low dollar with productivity.”

#43 Waterloo Resident on 08.25.14 at 9:29 pm

American rates will rise while Canadian rates will hold at current ‘EMERGENCY LOW’ levels.

So does that mean we will soon be seeing a 60-cent Canadian dollar once again?

#44 DocInWaitingRoom on 08.25.14 at 9:32 pm

Canada nowhere near? Sure I mean we do produce the stanley cup winning maple leafs, a few cars we pay the usa to make, renovations with Mike Holmes, maple syrup, franco-anglais advertisements with subtle French slang that can be sold world wide, and dirty oil producing sands with a pipe no one wants to suck …

Japanese have Panasonic with lithium tech, Sony, Nintendo with Wii, Toyota, Honda, Suzuki and the rest of team Japan soccer.

Maybe we can sell our “fresh” great lakes water?

#45 DocInWaitingRoom on 08.25.14 at 9:33 pm

Sorry…. I forgot Nortel, BreX, Black beryy and the sticky company that our mayor owns

#46 Burnaby604 on 08.25.14 at 9:37 pm

Thx for that Garth….. 604 doesn’t mean BC it means the greater vancouver area or gvrd, But hey your the expert

604’s gasbag is why BC is losing people. — Garth

#47 T.O. Bubble Boy on 08.25.14 at 9:41 pm

@ #37 debtified on 08.25.14 at 9:02 pm

I don’t like ” Big Dog” for Poloz. I propose Blog Dog P.

————————–

More like Puppy Dog Poloz. That Dog has no bite.

#48 Fed-up on 08.25.14 at 9:41 pm

#34 Mr Stats on 08.25.14 at 8:36 pm
With the above info, also take into account Japan’s Population is DECLINING by almost 1 Million people per year. Canada’s is INCREASING by 400,000 per year
____________________________________________________

And at that rate, Canada will match Japan’s overall population density in about 2 000 000 years.

Cheers.

#49 Sheane Wallace on 08.25.14 at 9:41 pm

there would be no meaningful interest rates increase until is too late.

cheers savers

#50 Bob Rice on 08.25.14 at 9:43 pm

#20 – “So does that mean were unlikely to see house prices in Canada bottom until 2030?”

The point is that we will not likely see large gains in real estate again for a long while… 1 Million + is stagnant and it seems like under a mill is slowing to in the GTA. This is contrary to what the real estate industry tells us which is “buy now cause next year it’s gonna be 10% higher, and the year after 20%” Lies..

If you don’t “need” to buy, keep renting… it’s way cheaper

#51 Sheane Wallace on 08.25.14 at 9:45 pm

#24 TEMPLE

we have seen nothing of currency devaluation yet. nothing.

#52 Sheane Wallace on 08.25.14 at 9:47 pm

15 Anson

of course it is structural. The jobs are gone.
there would be ‘slack’ in the labour market forever. The excuse to continue stealing from the savers.

#53 takla on 08.25.14 at 9:48 pm

15 yrs of stagnation,plus continueing stagflation.
15 yrs ago the price of fuel in Vancouver was 75 cents a litre,now 1.45 a litre,damn near double.Price action due to dwindleing supplys/demand.
We can assume that in another 15 yrs it may well double again giving us 3.00 a litre gas.With stagnant job growth and wages just how are people lucky enough to have a job going to get to work @ those prices??
On another front tell me how the enonomy will perform after QE is withdrawn?When the massive stimulas is totally withdrawn and NOT increasing demand ,does the STATES go into recession?depression again?
We’ve got the perfect storm brewing unfortunately and a massive wealth trap prepareing to spring on those holding realestate

#54 bigtown on 08.25.14 at 9:50 pm

What a bunch of worry warts…I mean we make Do-nuts..look Tim Horton’s is getting a hug from the big hunky Whopper. You guys are sissys. And we export hockey players. So they are a tad hesitant about the oil and Leonard Dicrapriado has to give his A-OK but it’s all good. Stop watching Canadian TV until the CRTC gives us HGTV included in our basic cable.

#55 Son of Ponzi on 08.25.14 at 9:50 pm

Migration into japan averages 52,000, compared to 250,000 for Canada. The Japanese population peaked at 130 million and is steadily declining and aging, adding to economic woes. By 2050 there will be about 30 million fewer residents, and 40% of all citizens will be over the age of 65%. As a result the government is actively considering raising immigration to 200,000 annually. — Garth
——————-
Maybe we can send them our HAMs and TFWs.

#56 devore on 08.25.14 at 9:55 pm

#24 TEMPLE

Seems like getting more foreign investment and jacking up our manufacturing and exports is more important than our consumers getting to buy imported crap at slightly better prices.

Whatever is not imported, is priced on the world market, we have to compete with all other buyers around the world. Gasoline, natural gas, wheat, cotton, these are not imported crap. Only thing to get cheaper will be labor.

#57 OttawaMike on 08.25.14 at 9:57 pm

I just stepped in the door after returning from a one week boat buying tour of Norfolk Virginia. My old Ninja 11 made the trip a bit more fun and i scored an excellent diesel powered express cruiser, but I digress.

The boat seller had just moved into a suburban home 20 minutes north of Norfolk, 2500 square feet, 1974 built, double garage, all brick,new Stainless/granite/windows/Ac/furnace..etc. Fully reno’d by the bank since it was a foreclosure and it wouldn’t move as is.

Selling price was a princely sum of $219,000.

For the uninitiated: Chesapeake bay south is home to 2 million inhabitants. Major industries include: national defense staff, high paying engineering jobs in the defense field, fisheries, high tech, biotech and a major seaport.

So in conclusion, yes we are screwed up here in overpriced Snow Mexico.

#58 Nemesis on 08.25.14 at 9:58 pm

#ObligatoryLessonsInComparativeCulturalMorphology… #IndustrialCompetitiveness… #HegemonicDecline… #&CooperativeVentures. #GungHo[1986]MPAA:G

http://youtu.be/9Ty5vIzKFKU

#MoreImportantly… #WhatItMeansToBeHuman.

http://youtu.be/9EBnUERX_cU

#BonusShinto. #Leadership.

http://youtu.be/h9jsnAD4aNw

#59 OttawaMike on 08.25.14 at 10:02 pm

Where’s Smoking Man?

Did he fall in a bottle of whiskey and drown??

#60 Entrepreneur on 08.25.14 at 10:04 pm

And the game goes on. This is pretty hard for the youth that want to move on with their lives. I think a good price decline would help. Take all the “future figures” with a grain of salt. By the time next month or next year another story will arise. Keep saving, keep looking, keep dreaming. This game cannot go on forever as interfernces interupt and the game over. October will be an interesting time.

#61 april on 08.25.14 at 10:04 pm

#26 Nosty….. Not that I know much about 3D printer built homes but curious to know where would the people place their 3D printer built homes if one doesn’t have land? Rent the land?

#62 Porsche928 on 08.25.14 at 10:07 pm

This Chinese kid (new employee) bought a half duplex for 350K in Edmonton. He got 1.9% for 5 years

What lender? — Garth

#63 Not an economist on 08.25.14 at 10:12 pm

“it has to be a revival in exports and business activity which will rescue the economy”

Holy shit you’re still brainwashed by Harpernomics. No, Garth, the only thing that can rescue the economy is lots and lots of full time well paying work for large numbers of Canadians. That’s it. Nothing else will work. Nothing.

Dumbass comment of the day award. — Garth

#64 Shawn on 08.25.14 at 10:13 pm

Moving to Japan…

bdy sktrn at number 8 tells me:

if you marry a japanese girl you can stay, but there is no way in [email protected] you will ever get a passport or citizenship.

*****************************************
Okay, but can you send pictures first? At least I can buy a cheap house there.

Might be a very serious consideration for under-employed single millennial men and such… Unemployment rate in Japan is low I understand.

A young Japanese woman might be interested in her kids getting a Canadian passport…

Go East young man, go faaar east…

Crowded Elevator says:

“No HAM in Japan”?

*********************************
I guess not, Japan is no fan of the Chinese.

But if they have HAW or HJW that is enough…

#65 Nomad on 08.25.14 at 10:16 pm

# 40 JSS

If low rates are here to stay for long than my Industrielle Alliance and Manulife stocks will stagnate.
They’ve stagnated lately, maybe just because of that:
the market anticipated rates to stay low.

When REITs go down for fear of rates going up, I buy REITs. When insurers go down for fear low rates are here to stay, I buy insurers. That way you bet on both sides, which would cancel out, but you buy on sale. This strategy has worked until now.

#66 Landlord on 08.25.14 at 10:16 pm

Not Much optimism here!!! Sure is a lot of fear though! successful people don’t rent basement apartments and wish risk takers ill!!! There sure seems resentful, fearful racists seem to like to vent here! Ham for the most part are highly educated, work hard and smart and buy appreciating assets including Real estate ! Not cop out and rent and whine they can’t afford a house!

#67 Muttley O'Toole on 08.25.14 at 10:28 pm

” Just look at this chart and see the trend – if the Dejardins eggs are right, this could get ugly”

So, it would be fair to say the “Trend is not your friend?”

#68 Andy on 08.25.14 at 10:28 pm

But Garth, you said that Canada would need to follow suit if the Big Bro increases rates . Are you sticking to it?

Of course we will follow, but not immediately (as usual). — Garth

#69 mlorenz on 08.25.14 at 10:29 pm

#32 Mr Stats on 08.25.14 at 8:10 pm

Ummm….Canada has 100X the Immigration of Japan. Yes you read that correct. One hundred times!

Migration into japan averages 52,000, compared to 250,000 for Canada… — Garth

Putting those numbers in some added context: given Japan’s population of around 128M and Canada’s of 35M, that does put Canada’s rate of immigration at around 18 times that of Japan’s, per capita.

And we’re better off for it.

#70 Son of Sam I. Am on 08.25.14 at 10:34 pm

Canada should do a deal with Japan….give them discounts on land and do a reverse takeover of their manufacturing base. Canada becomes a world manufacturing super-power by proxy…the hard-working Japanese have access to land and resources…of course the HAM acronym would then have to be replace by JAM.

Garth, would you like some JAM with your HAM, or do you prefer Green eggs and HAM.

#71 Porsche928 on 08.25.14 at 10:34 pm

What lender? — Garth

Presidents Choice

Your friend fibs. Five-year variable 2.75%, four-year fixed 2.89%. — Garth

#72 Charles Dwayne Thompson on 08.25.14 at 10:36 pm

#26 Jimmy’s Chicken Shack and Bulk Barn Mortgage Depot. 1.9% for 5 years, I can only imagine how perfect that fine print reads… But good on the kid, seriously! I’m just bitter, or maybe I just drank a bitter beer? Not sure which one yet…

#73 NostyVlad the Snugglebombed on 08.25.14 at 10:40 pm

#61 april on 08.25.14 at 10:04 pm — “Rent the land?”

Not a bad idea! If architects and computer boffos introduce good-size trailers, some politico(s) can get a few thousand sheeples to like the idea of living (and renting) in / on a commune-type basis so there is perpetual income coming into one person who owns the land, then I guess all things are possible.

#74 omg on 08.25.14 at 10:45 pm

ECONOMIST’S AND THEIR MODELS KNOW DIDDLY SQUAT

“A report days ago from Desjardins Economics showed the pickle Poloz is in. Those guys believe economic growth here will languish between 1.5% and 2% until… get this… 2030.”
—————————–

Now to be fair to them I did not read the report but if that’s what it said – what a bunch of arrogant CRAP. For economists to actually claim they can forecast out that length let alone 6 months is irresponsible. (I was an economist in the private sector and government for a couple of decades.)

So let’s say we have a look at some economic forecast from just 5 years ago. What you will find is that they are almost all consistently and utterly wrong – some are right, but that is just by pure chance. After all if 100 economists make forecasts a few will get it right by chance.

So the amount of weight to put on IDIOTIC forecasts like that is zero.

#75 Porsche928 on 08.25.14 at 10:46 pm

Your friend fibs. Five-year variable 2.75%, four-year fixed 2.89%. — Garth

…………………………………………………………………..

Last year sometime he said and he’s not my friend.

#76 Bottoms_Up on 08.25.14 at 10:51 pm

#151 Mister Obvious on 08.25.14 at 3:37 pm
———————————————-
You worked your way up from the bottom (as many boomers did), but it appears the problem with today’s economy is that there is no bottom for the kids to start in.

#77 Frustrated Kiwi on 08.25.14 at 10:58 pm

One thing that is interesting to me is that Japan is still not “affordable” according to demographia:
http://www.demographia.com/dhi.pdf
That is, their decline in prices could continue for some time yet. A shorter swifter fall may have been less painful (e.g., Ireland, whose prices I think did move into the “affordable” category at the bottom). I understand that people in Japan were taking out 100 year mortgages at the peak of their boom – pity the people still sitting on those.

#78 Bottoms_Up on 08.25.14 at 11:00 pm

#141 peter stock on 08.25.14 at 2:05 pm
——————————————-
yes Gartho does and has owned a lot of real estate. and, he also has indicated that over the long term, buying can make sense.

Owning is more costly in the short-term, but eventually you do end up owning the asset whereas renters keep renting and only own freedom.

His message is one of caution, wealth balance and diversity….each individual needs to analyze their own situation in order to decide whether buying (or selling) makes sense.

#79 Spectacle on 08.25.14 at 11:03 pm

Very nice job Garth , thnx again !

Regarding : #44 DocInWaitingRoom on 08.25.14 at 9:32 pm
Canada nowhere near? Sure I mean we do produce…….a few cars we pay the usa to make, renovations….maple syrup,……..

Maybe we can sell our “fresh” great lakes water?

My reply; sadly our water rights like sooo much more is being given away /( stolen actually ) . Big thanks to the the UN Agenda-21. Join t
He fight to save Canada & our economy.

Sir NostyVlad, care to link a presentation for us dogs? Your rather exceptional at that!

Regards all

#80 Smoking Man on 08.25.14 at 11:03 pm

#59 OttawaMike on 08.25.14 at 10:02 pm

I’m
In the desert…

Disappointed, Breaking Bad kicked true detective ass.

Mind you, signed a few autographs at the bar.. Was going to go to LA, Hang out with Nick piz…

But hurt my neck jet skiing on the Colorado River…

#81 nonplused on 08.25.14 at 11:06 pm

For anyone who read my post yesterday recapping how automation is currently kick the lower end of the economic ladder in the shins, I have a new thought. (Yes it was a recap, I didn’t site sources but not much of that rant was original.)

I have a newly developed and untested theory that maybe lower rates don’t boost employment any more but instead boost automation. Sounds backwards I know but follow me a bit.

In the old days cheap interest/money/loans meant companies could spend more on capital and equipment. Or those might be the same but still follow me. All the machines they would buy to increase productivity using the cheap money needed somebody to run them. So employment went up.

Fast forward to today, expenditures on capital generally deploy smart machines that require less human intervention. In other words cheap rates accelerate the loss of jobs because spending capital on machines using cheap borrowed funds is cheaper than paying people.

Example: A&W might not buy an automated teller if their cost of capital is 10%. But what about when it’s 3%? Have to run the numbers for sure but all I know for sure is they bought at least a couple of the machines.

Don’t tell Janet.

#82 Nemesis on 08.25.14 at 11:07 pm

#BonusBonusShinto. #SeanConneryExpounds. #RisingSun[1993]-MPAA:R[Language].

http://youtu.be/_yYu3KdRmJM

#ComicRelief. #JAM… #NeverTastedSoGood:

http://youtu.be/DxteuPr28Xw

[NoteToGT: Just between the two of us… Do you think I devoted too much time to AsiaPacific area studies?]

#83 Burnaby604 on 08.25.14 at 11:09 pm

What a joke

#84 Kokuzi on 08.25.14 at 11:20 pm

A couple of things from a Canadian living in Tokyo:
– the Japanese population is decreasing by about 250,000 a year, not one million a year
– approx. 25% of the Japanese population is now over 65, so escalators move very slowly so they can get on and off
– a recent Japan Times article on housing in Japan stated the following: “According to a survey by the internal affairs ministry, the proportion of abandoned houses rose to a record high of 13.5 percent of total houses nationwide as of Oct. 1, 2013, a 0.4 percentage point rise from the previous survey conducted in 2008.”
– recent quote regarding refugees in Japan: “the Immigration Bureau revealed in March that out of the 2,545 asylum seekers who came to Japan in 2012, only 18 — or an abysmally low 0.7 percent — were granted official refugee status. This figure contrasts dramatically with acceptance rates of 53 percent in the United States, 44.6 percent in Canada and 11.7 percent in South Korea in 2011.”

#85 Inglorious Investor on 08.25.14 at 11:23 pm

14 Londoner on 08.25.14 at 6:41 pm

“Inflation = Economic productivity and wage growth”

No, what the central hackers really want/need is currency/DEBT inflation. Everything else is incidental. However, in the US they have an extra, special consideration: keeping the US dollar the world’s reserve currency.

#86 Not an economist on 08.25.14 at 11:24 pm

“Dumbass comment of the day award. — Garth”

Well on one hand it’s nice that you responded to my comment. On the other, you did call me a dumbass.

Feel free to tell me why you disagree. You always see everything from a business point of view, Garth. But any economic/business activity has only one purpose, and that is to capture someone’s spending. You yourself on this blog point out the increasingly low quality jobs, stagnating incomes, and debt overload. If the fundamental problem isn’t that people are tapped out and incomes aren’t bridging the gap, then what is the source of our economic woes? Is it all interest rate this and bond market that, mumbo jumbo? Can an economy really work properly if it doesn’t revolve around large numbers of people earning and spending money? We’ve been continuing to spend money by increasing our debt load. Pray tell how you think the economy can recover without a systematic increase in well paying full time employment.

#87 Inglorious Investor on 08.25.14 at 11:26 pm

# 81 nonplused on 08.25.14 at 11:06 pm

You’re on the right track. People are becoming increasingly redundant.

#88 TEMPLE on 08.25.14 at 11:27 pm

#56 devore on 08.25.14 at 9:55 pm

Gasoline, natural gas, wheat, cotton, these are not imported crap.

That’s true, but other than cotton, it’s all stuff we do or could produce in quantity already. Besides, when our dollar was higher, it didn’t lower prices much anyhow.

I’m not saying there isn’t an inflection point for a lower dollar where it hurts more than helps, but just that I am not convinced it’s 80 cents.

TEMPLE

#89 Professor K on 08.25.14 at 11:30 pm

#18 burnaby604 on 08.25.14 at 7:03 pm

“not to worry vancouverites its nothing to worry about here …and hey you will still be able to rent out your basement suite for 1400 a month! last time i checked there is no more land for sfh in van or burnaby!”

As someone who works in commercial real estate, I can promise you that we say that exact same thing to our clients when we pitch them comm RE opportunities in Van.

But you know what? That doesn’t always matter that land is finite in Metro Vancouver (GVRD’s name has been retired). What matters is mathematics. Banks do math very well. It’s their job. Potential homeowners generally don’t know how to replicate the math that these banks do. Sure, there are some websites like ratehub.ca that simplify things. But most homeowners just look at what they can afford in the moment, rather than what they can afford in the future.

If rates do go up, which is an if still, there is no choice but to see capital destruction in multiple asset classes (stocks, bonds and real estate), as their DCFs get discounted at a higher required rate of return. It may be a slow, gradual increase, but it can also be a violent and tremulous journey too. Strap on for the ride bby604!

PS: $1,400 is on the high range (aka riskiest). Most people estimate it at $800 to $1100 depending on where and how nice the suite is.

#90 Inglorious Investor on 08.25.14 at 11:31 pm

#74 omg on 08.25.14 at 10:45 pm

“For economists to actually claim they can forecast out that length let alone 6 months is irresponsible.”

Don’t be too hard on economists. They are paid to pretend to know a) how the economy works, and b) what the future will be. Not a bad gig, if you ask me. I mean, they are treated like high priests and no one remembers their forecasts anyway.

#91 Professor K on 08.25.14 at 11:43 pm

#31 DreamingInTechnicolour on 08.25.14 at 8:10 pm

“http://www.bnn.ca/News/2014/8/22/Vancouver-housing-data-reveals-Chinese-connection-.aspx”

Sorry, but this guy just counted the last names of buyers on transactions and if it had a Chinese-sounding name on it, he has concluded that they are from the Mainland? That’s ridiculous.

#92 Professor K on 08.26.14 at 12:00 am

#75 Porsche928 on 08.25.14 at 10:46 pm
Your friend fibs. Five-year variable 2.75%, four-year fixed 2.89%. — Garth

…………………………………………………………………..

“Last year sometime he said and he’s not my friend.”

5-year fixed has never gone lower than 2.79%. Don’t you remember Jim Flaherty poo-pooing on banks last year for dropping below 3%. So buddy’s lying, or you misunderstood the time-frame. It’s perhaps a 1-year mortgage.

#93 Musty Basement Dweller on 08.26.14 at 12:09 am

I am sure this is a dumb question but here goes..why do the banks loan money out at such low rates ..to losers who buy houses in todays market..when they could get so many times more return with little effort in their own balanced portfolios?

#94 Professor K on 08.26.14 at 12:11 am

#81 nonplused on 08.25.14 at 11:06 pm

“Example: A&W might not buy an automated teller if their cost of capital is 10%. But what about when it’s 3%? Have to run the numbers for sure but all I know for sure is they bought at least a couple of the machines.”

Indubitably. The only thing in labour economics that matters is the cost of labour v cost of capital in the long-run. A manager, given two options, will always choose the more profitable option (if said manager is rational). In Mumbai, when I went in 2002, they didn’t have machines tearing up the streets to install water pipes, they had 10 people side by side with shovels making the trenches. In Canada, they have some guy in a machine doing the work of those 10 people and doing it faster and better. Why the difference? Because 10 labourers in Mumbai costs $700-1000 a month (at that time), compared to investing and training people to use this machine (which is likely built outside the country and there are probably tariffs making it very expensive).

#95 Bill Gable on 08.26.14 at 12:13 am

Again just some background noise that makes me wonder how things are in Canada, if our major trading partner is going through >

The following are 21 ways to end the phrase “Americans are so broke”…

Americans are so broke that:
1. 76% are living paycheck to paycheck.
2. approx. 67% do not have enough money saved up to cover six months of expenses if an emergency arose.
3. 52% of them cannot even afford the homes that they are living in right now. [Average American Can’t Afford To Own A House – Here’s Why]
4. only 36% of those under the age of 35 currently own a home which is the lowest level that has ever been recorded.
5. 33%+ of them (that’s 77 million people) have an unpaid debt that is “in collections”.
6. 26% have absolutely no emergency savings whatsoever.
7. 25% of part-time workers are living below the poverty line.
8. approx. 25% of new auto loans are now being made by car dealers to customers with subprime credit. [Resurgence of Subprime Auto Debt Spells T-R-O-U-B-L-E]
9. 50% of all college graduates are still relying on their parents financially even after being two years out of school.
10. 20%+ of all children are living in poverty.
11. the wealth of the “typical American household” has fallen by 36% over the past decade. [What Happened to America’s “Middle” Class? Here’s What!]
12. 49 million are dealing with food insecurity.
13. 37+ million are now being served by food pantries and soup kitchens.
14. the number of people on food stamps has increased by about 14 million while Obama has been in the White House.
15. +1 million public school children are sleeping in the streets at this point.
16. they are falling farther behind on their student loan debts more than ever with approximately seven million in default at this point.
17. the U.S. government has had to spend an astounding 3.7 trillion dollars on welfare programs over the past five years.
18. many of them can’t even afford to shop at WalMart and dollar stores anymore which is causing a number of discount chains to downsize or go out of business.
19. they are keeping their vehicles longer than ever – a new all-time high of 11.4 years on average.
20. they are running up record levels of debt – 11.68 trillion dollars right now.
21. Congress is even considering allowing post offices to provide payday loans and check cashing services.

If things are this bad now, during the so-called “economic recovery”, how bad will things get during the next major economic downturn?

Link: http://tinyurl.com/nkjevt2

#96 Helen on 08.26.14 at 12:14 am

#66
My husband & I moved to Vancouver from the US 18 months ago. We CAN afford to buy a 1.5M home but choose not to. We don’t see the value in doubling our living expenses so we can own rundown, outdated house. As successful professionals in our 40’s we don’t want to be stuck with an over-valued home and a 20 year mortgage. If I’m wrong and we missed the boat, oh well. Their are other lovely cities North America that have a better cost of living and aren’t as racist. Yes, an American finds Vancouver racist. That’s pretty bad.

Garth – Their’s a stalled condo development in Colwood on Vancouver Island. Might be interesting to look into?

#97 DG on 08.26.14 at 12:18 am

Hey Garth, what is your opinion on buying ING or Lloyds bank stocks at todays prices. I think Europe has had the crap kicked out of it for a few years and these stocks have nowhere to go but up. I’m 29 and can afford the risk, although ETF’s are a pretty good buy, I’m looking for more of a return.

#98 Andrew Woburn on 08.26.14 at 12:21 am

Do jobs go where people are or do people move to where the work is?

According to celebrity economist, Paul Krugman, people aren’t moving to the Sunbelt because of job offers. They are going there because housing is cheaper. It has absolutely nothing to do with the delusion that redneck, knuckle-dragging, gun-toting, bible thumping southern governors actually know how to create opportunity. It is only a coincidence that Texas real estate prices did not inflate like in so much of the US.

QUOTE
“It turns out, however, that wages in the places within the United States attracting the most migrants are typically lower than in the places those migrants come from, suggesting that the places Americans are leaving actually have higher productivity and more job opportunities than the places they’re going. The average job in greater Houston pays 12 percent less than the average job in greater New York; the average job in greater Atlanta pays 22 percent less.

So why are people moving to these relatively low-wage areas? Because living there is cheaper, basically because of housing.”

http://www.nytimes.com/2014/08/25/opinion/paul-krugman-wrong-way-nation.html?_r=1

On the other hand, here in Canada, business seems to be moving away from downtown according to Advisor.ca.

QUOTE
“More of Canada’s downtown office space is empty as companies move to the suburbs, finds Avison Young.

Plus, country-wide, the vacancy rate rose from 8% to 9.2% in the last 12 months. There are now more than 500-million square feet of free space.

More vacancies were in downtown areas than suburbs. Canada’s downtown markets posted a 7.2% vacancy rate – up 150 bps year-over-year. In contrast, suburban vacancy increased 120 bps to 11.8% as the downtown/suburban vacancy spread narrowed to 460 bps.”

http://www.advisor.ca/news/economic/canadas-changing-commercial-real-estate-market-161241

So are millennials enslaving themselves with downtown prices so they can wind up commuting back to the suburbs?

#99 Garth Stats on 08.26.14 at 12:36 am

Hi Garth

I’m trying to confirm the stats you released August 19th, 2014 (The Smell Test) – I cannot replicate them. I used the below sources for detached houses in Toronto, and calculated an average. It shows me prices increased April to July (I know you used mid August, but does that 1/2 month make that big of a difference?).

Can you please share your methodology / spreadsheet / sources? If the work is done I would love to see it as this impacts some of my current decisions.

http://www.torontorealestateboard.com/market_news/home_price_index/pdf/TREB_MLS_HPI_Public_Tables_0414.pdf

http://www.torontorealestateboard.com/market_news/home_price_index/pdf/TREB_MLS_HPI_Public_Tables_0714.pdf

All numbers from TREB mid-month reports. — Garth

#100 KommyKim on 08.26.14 at 12:46 am

RE: #29 Millenial on 08.25.14 at 7:59 pm
Lotto Max jackpot is up to $50 million dollars. The draw is this Friday night. How many tickets should I buy? I’ve already spent $10.

Pay as much voluntary “stupid” tax as you please.
It prevents me from having to pay.
Thank you.

#101 martin lazi on 08.26.14 at 12:54 am

This week Bank of Canada boss Stevie Poloz played into the bulls’ hands by saying interest rates in Canada will not follow those of the US in lockstep–

keep in mind he is the governor not you !!

#102 raging granny on 08.26.14 at 1:18 am

BOC Wonko Poloz is a mental dwarf……he thinks if he keeps bashing the dollar that his unionized buddies on the export council will keep their jobs…forever…..not so.

“This week Bank of Canada boss Stevie Poloz played into the bulls’ hands by saying interest rates in Canada will not follow those of the US in lockstep.”

But as we see with the auto industry there is no labour efficiencies building in the system because Canadian manufacturers can’t upgrade plant and equipment because they can’t afford the machinery which is all from the EU and USA.

Stepho…you can’t have it both ways……the last few manufacturers left either have to run efficiently…or you can drive taxes towards 100% to save the dinosaurs. Factories ( particularily those in Ontario) are fighting massive increases in fee’s and power costs. This is why so many factories are being shuttered and leaving…they can’t function with high costs and inefficiencies brought on by not allowing them to buy modern equipment.

Stepho……you are the problem. What you learned 40 years ago no longer applies.

#103 Smoking Man on 08.26.14 at 2:04 am

Half way thought the bottle ilistrated on my blog, I search for the meaning of life.

I need to type fast before the wizard goes from my belly to my mind to my fingers typing.

Life is a rip off, no matter how good we are, or how bad. The reward at the end is worms eating you. Some may adopt a religious foundation, a comfort ideal, a self lie.

What ever makes you feel better.. I chose JACK…

It starts off slow.. Then before you know it. A confidence that God himself is afraid to challenge. For an extra dare.. You invest in other make me happy things.

If you talk and write like your looking for a pat on the the head, your a slave.

If you talk and type and actually give no F what others think.

That’s freedom, that’s what I’m taking to Mosses, Ala, God, Jesus on my day.

And if these little shits what to give me greaf, I grew up playing Canadian Hockey.

It won’t end well for them….

#104 Nemesis on 08.26.14 at 2:08 am

#LivingLargeTwice. #35YearsLater… #Kate’sBack. #[email protected]

http://youtu.be/EmO1S1Px5Aw

#HistoricalBonus:

http://youtu.be/YOPR7ek-dzk

#105 Armand R. Dillhole on 08.26.14 at 3:31 am

As a realtor I have a million things to do in a day. Still I added one I posted this.

#54 bigtown on 08.25.14 at 9:50 pm
Now that’s f##cking funny, well done.

Ottawa Mike you got ripped some guy in Texas has bought two aircraft carriers for a buck a piece from there.

As far as Smoking Idiot we can only hope. Actually though what happened was I sold Smoking Dummy, Devil’s Anus, Mark and a couple of Shawns (spelled in various ways) a 400 square foot condo, they split on it and all moved in last weekend. I expect a few of them have yet to figure out they need to connect to the router to get on the internet.

It was a public service, You’re welcome. The smile on their faces when I gave them the keys was awsome (especially since they were keys to the first car I owned). When I locked the door (deadbolt from the outside) they were chasing each other in a circle playing grabass they were so excited.

The mortgage broker and the home inspector I recommended had even broader smiles. It is just such a great feeling to help people. That’s why I created byi’mgone.con.

#106 Son of Ponzi on 08.26.14 at 3:58 am

DELETED

#107 Londoner on 08.26.14 at 4:38 am

#39 Tony

Everyone seems to have heard the same joke about interest rates. The bond markets are telling the true story as interest rates fall.
_____________________________________________

I’m always surprised at the number of people that read what’s written on blogs and take that to mean the truth instead of just an opinion. Then they go around repeating it (sometimes verbatim) as if they know something others don’t.

Anyone saying that rates will increase to X% by YYYY (enter whatever values you want for X and Y) are just making a prediction and sometimes a misinformed one. You won’t know about a rate hike or cut until we are closer to one and, right now, we’re very far away. Making statements like “interest rates can’t stay low forever” doesn’t make you a contrarian. It shows your lack of understanding about central bank intervention and modern economic policy.

Central banks haven’t been saying that rates will return to normal levels (whatever “normal” means) within the forecast period. In fact they have all been saying that rates will stay at subdued levels for a prolonged period of time (potentially after the forecast period). They’re the policy makers. You don’t have to agree with them but you should try and understand what they’re saying and why. Who do you think has been the most accurate leading source of monetary actions since the GFC? Do you think it’s been this blog? There’s nothing wrong with being a contrarian but try to be a well informed one.

#108 Italians love real estate on 08.26.14 at 7:36 am

#66 Landlord on 08.25.14 at 10:16 pm
Not Much optimism here!!! Sure is a lot of fear though! successful people don’t rent basement apartments and wish risk takers ill!!! There sure seems resentful, fearful racists seem to like to vent here! Ham for the most part are highly educated, work hard and smart and buy appreciating assets including Real estate ! Not cop out and rent and whine they can’t afford a house!

Well said landlord ! What part of Italy are you from?

#109 Anson on 08.26.14 at 8:09 am

#81 nonplused
I had the same thought a couple of months ago when I was watching an American news station and they were showing many states over the next three years will be increasing minimum wage by $1 every year.
If a business can anticipate a rise in workers wages I believe a logical stratergy would be to take advantage of todays cheap dollars and tax incentives and spend them on technology(innovation)and elliminate as many future jobs as one can in order to keep costs low.
Increasing minnimum wage in my opinion is going to increase unemployment because many small businesses will have no choice but to cut staff to stay profitable or keep the doors open for that matter.

#110 Anson on 08.26.14 at 8:29 am

I am all for workers making more money however there are many jobs that cannot afford to increase minimum wage. Business is vey adaptive as we have seen over the previous years, for example many so called part time workers are technically working full time hours but as second class citizens with no benefits or security, or even worse are on contract.
Business will find a way around these wage increases but unfortunately it will not bode well for workers.

#111 Anson on 08.26.14 at 8:49 am

Yes I am aware and believe the real reason governments around the world are increasing minnimum wage is to make up for the drastic drop in tax money governments are no longer receiving from high paying manufacturing jobs that are no more.
I personally know many people who used to work in various factorys making anywhere between $17 to $26 an hour doing unskilled labour with benefits and defined pension plans.
It breaks my heart to see so many I know now struggling and only making between $12 to $16 with no benefits or pension.
Many of these ex factory workers are now making only slightly more now in wages than they used to previously pay in taxes.

#112 Robert Agnew on 08.26.14 at 9:06 am

Quantitative easing, the asymmetric war by Islamo fascists, and the corruption of crony Chinese capitalists will result in re emergence of the US empire. Chaos seeks order this will come with a new pragmatic US. The rest of the world is too weak to organize around any other movement. Of course any economic reset will favour the victor the US- as the worlds largest deadbeat they run the system.

#113 Nuke on 08.26.14 at 9:10 am

Bring in a 4 hour workday for the same pay as an 8 hour workday or a 4 day weekend. Ensure starting workers begin with 4 week vacations and full benefits. Also ensure full defined benefit pension plans for all workers. Workers also need to make up the majority of the board of directors and rotate through senior management ranks. Pay raises tied to productivity gains so all growth is captured and kept in the community. This would kick start the economy and ensure a full labour force. Also eliminate the central concentration of resources and control under the current failed capitalist, socialist and communist systems. Canada is the right place to bring the positive changes we need. We have an educated workforce, urban concentration, access to large consumer markets and significant resources. Sure beats 15-20 years of a stagnate economy. If we don’t change Burger King’s and their ilk will be buying out all our Canadian firms.

#114 maxx on 08.26.14 at 9:31 am

McJobs as replacements for decent ones erode consumer confidence-fast.

So, let’s see Mr. P, McJobs, McJobs, McJobs, (playing nicey with the big boys in private industry doesn’t get them to loosen the purse strings much, eh wot? Oh, right, it’s competitiveness!) along with stupidly high price increases on basic necessities which squeezes disposable income to the lowest levels ever seen, retarded low interest rates on money that would certainly be spent in the consumer economy…..all that’s been accomplished here is the creation of an unhappy, angry, and worried citizenry, along with a retail industry which sees profit margins drop continuously.

The exploitation of lust for real estate and unbridled support from all levels of government has resulted in a slowing of the real economy to a shadow of what it could be.

The longer this idiocy goes on, the more people (at all income levels) will adapt and realize how easy it is to be comfortable with spending less.

…and so goes the downward spiral in this highly unbalanced economy.

#115 maxx on 08.26.14 at 9:43 am

….”when money costs less, houses cost more. We are now at peak house levels, even as we turn into a growthless, part-time nation.”

And huge swaths of the home-owning population, cajoled and frightened in buying will be hog-tied to paying whatever tax rates and fees governing elites decide that they MUST pay.

Home ownership is not only about the cost of acquisition. It is, more than ever, about open-ended increases on taxes, fees and energy.

#116 James on 08.26.14 at 9:54 am

How is comparing Canada and Japan RE is relevant? Look at the price chart for Japan where it clearly shows a hockey stick and Canada is nowhere as severe. This is like predicting the Dow will go down to 10,000.

The relevance was the continued impact of cheap money on real estate valuations. You can’t be that thick. — Garth

#117 Funny that on 08.26.14 at 10:04 am

By 2050 there will be about 30 million fewer residents, and 40% of all citizens will be over the age of 65%. As a result the government is actively considering raising immigration to 200,000 annually. — Garth
==============================

and it took how long for them to figure this out

Ever wonder why other, ancient cultures hate us? — Garth

#118 miketheengineer on 08.26.14 at 10:14 am

Garth et al:

Recovery? How many people in Southern Ontario lost their good paying job? Have you gone shopping lately? Did you notice all the price increases on meat and Potatoes? Have you noticed the shrinking package sizes? Oh and Hydro and Gas going up? Inflation…where is that? Just go to your local store and load up on food…then get a bill from 2 years ago…and then see how much the “real” inflation” is.

I don’t know how the poor people do it in this province…..it is going to be a really tough winter for them.

#119 Bottoms_Up on 08.26.14 at 10:26 am

#112 Nuke on 08.26.14 at 9:10 am
————————————-
You should hear about what they’re teaching in business school, suppress wages, destroy unions, these are your enemy.

What about corporate responsibility, paying a living wage with good benefits, so that citizens of your community can lead decent, productive and healthy lives?

The promotion of the fight for the race to the bottom is alive and well.

#120 Bottoms_Up on 08.26.14 at 10:32 am

#93 Musty Basement Dweller on 08.26.14 at 12:09 am
——————————————–
Because:

#1: most of their portfolio is guaranteed by CMHC (backed by taxpayers)

and,

#2: they’re after all the other ways to make money off you (bank account, credit cards, investment accounts, life/home/car/mortgage insurance etc.)

#121 Funny that on 08.26.14 at 10:35 am

#116 Funny that on 08.26.14 at 10:04 am
By 2050 there will be about 30 million fewer residents, and 40% of all citizens will be over the age of 65%. As a result the government is actively considering raising immigration to 200,000 annually. — Garth
==============================

and it took how long for them to figure this out

Ever wonder why other, ancient cultures hate us? — Garth
====================================

really? that’s news to me. why do so many want to live here then?

Japanese immigration to Canada averages just 1,300 people a year, of a home population exceeding 125 million. You are a complete idiot. — Garth

#122 Mister Obvious on 08.26.14 at 10:39 am

…successful people don’t rent basement apartments…
————————

Of course not. They rent huge penthouses in the heart of big cities with pools, saunas and exclusive use elevators. Some other schmuck eats the depreciation.
———————–

And in other news… this morning it looks like Canada is moving toward a burger-based economy.

#123 Bottoms_Up on 08.26.14 at 10:39 am

#62 Porsche928 on 08.25.14 at 10:07 pm
—————————————–

Go to ratehub.ca. There you will find the best rates available. Be weary of weird mortgage clauses though if you don’t recognize the lender! lol

http://www.ratehub.ca/

#124 Retired Boomer - WI on 08.26.14 at 10:45 am

Economic Forecasts = Weather Forecasts
the longer you go out, the lower your accuracy

JOBS = If you manage any company I am invested in, I expect you to get the maximum amount of labor at the lowest input cost. If it can not be accomplished with full time workers, use part time.
Local area costs too high, consider relocating even out of the country, or even out of several countries.

Labor often thinks it is worth more than it really is, why do you think the US and Canada have lost jobs to lower cost providers?

So, when do you “believe” these jobs are coming back?
Would you like some stardust for your unicorn?

#125 Piano_Man87 on 08.26.14 at 10:53 am

Interesting RE graph. I’ve heard in the 1980’s, everyone thought that Japan was going to be running the world in another decade. Then the graph shows once their economy started to flatline in the 1990’s, RE started a very consistent downward trend..

#126 Gone Insane in Calgary on 08.26.14 at 11:03 am

Bad bad general advice.

Wait and see what happens. Province by province advice is better. In B.C. there are rent controls. In Alberta there are none. The other provinces? No idea.

Very very easy to say that the uncertainty of buying is worse than renting. Say your rent is $2000/month. The mortgage is less than that. You make enough to requalify when interest rates go up. http://www.rentfaster.ca to see all the affordably priced properties in Calgary. Remember, the majority offer no pets, so if you have a dog likely it will be given up to a shelter.

But say you decide to rent. Say you will retire if lucky in 2050. In the meantime you are paying $24,000+ a year in rent waiting for the “correction”. Your lease renewal comes up. The landlord has raised the rent to $2500 this time. So you decide to look for another rental. At that time, a year later, now the majority of the rentals are $2500-$3000 for what you are looking for. So you suck it up and rent again at the same place. Two more years go by. Now the landlord wants $2700. So each year you are out $24,000, so far $72,000, still waiting for the beforementioned burst.

What happens if the bubble never bursts in your area? What then? For those that are around 50+ years and closer to retirement with investment strategies, it very may well work. For those working in the same locale and same job for another 30-40 years seems like an unlikely tactic(strategy).

These general posts not examining specific variables are like wearing one size same gender fits all underwear. Its no wonder many people seem to have their panties on backwards.

Renting for a few years until the Alberta boom turns into the usual bust is a reasonable strategy. Who said anything about being a tenant until 2050? Check your panties. — Garth

#127 Mister Obvious on 08.26.14 at 11:26 am

#76 Bottoms_Up

“You worked your way up from the bottom (as many boomers did), but it appears the problem with today’s economy is that there is no bottom for the kids to start in.”
————————-

Interesting. But the vitriol aimed at today’s boomers is usually based on the myth that we were born into privilege. Straight out of the womb and into a cosy, comfortable ride to assured success.

My comments, as a genuine boomer who lived through that era, are intended to show that it was not that way. We were born into an insecure cold war environment full of restrictive attitudes with pecking orders firmly in place.

I accept your comment that there is perhaps less room at the bottom today. But that’s a far cry from saying the boomers walked in on a red carpet.

My advice to young people today: study the humanities on your own time. Get an education in a field where there is demand. Don’t like math? Too bad. Suck it up and try harder. There is still real work to be done and still people (us boomers, in fact) who are willing to pay for it.

#128 Mr. Reality on 08.26.14 at 11:37 am

Ahh Japan the world’s largest LNG consumer. BC is banking on an industry in which two of the largest countries who are buyers (China and Japan) are being riddled with natural gas pipes (China) or posting energy consumption busting GDP numbers (Japan).

I won’t even get into the demographic situation in China. Ok i will, by 2030 their population will be in decline.

Manage the contraction folks, its something our governments are unable to see.

Mr. R.

#129 Funny that on 08.26.14 at 11:43 am

Ever wonder why other, ancient cultures hate us? — Garth
====================================

really? that’s news to me. why do so many want to live here then?

Japanese immigration to Canada averages just 1,300 people a year, of a home population exceeding 125 million. You are a complete idiot. — Garth
=================================
No need for name calling.
But wasn’t your response -Ever wonder why other, ancient cultures hate us? — Garth

So when you refer to other ancient cultures I take that to mean other, as in other than the Japanese.
So back to the question posted before the name calling. Who are all these other cultures that hate us, jerk.

#130 miketheengineer on 08.26.14 at 11:48 am

Garth et al:

Interesting development

Police arrest lawyer accused of failing to return condo deposits

Here is the link

http://www.cp24.com/news/police-arrest-lawyer-accused-of-failing-to-return-condo-deposits-1.1976617

I think we all saw that coming. — Garth

#131 Willy2 on 08.26.14 at 12:05 pm

Still thinking deflation won’t come to Canada ?

No, negative economic growth is not in the cards. But things will suck for a while. — Garth

#132 jess on 08.26.14 at 12:06 pm

location location location? … add the prefix co-
slow and fast lanes

#133 maxx on 08.26.14 at 12:15 pm

What if……the bloom came off of the rose of RE.

What if many became blasé with the specter of taxes, taxes and more taxes, smart meters, fees….accompanied by reduced services and increasing vanity projects to suck even more tax from people.

What if it just wasn’t worth the cost because owning even non-condo RE didn’t save you any money at all, but simply tied up a huge chunk of cash, or worse, ended up costing up to twice the original price after mortgage interest?

A lot of time, money and effort to service the fuzzy feeling of ownership.

#134 CPG on 08.26.14 at 12:26 pm

Burger King’s “tax inversion” merger with Canadian doughnut chain Tim Hortons has sparked calls for a boycott with politicians and customers accusing the American fast food chain of tax-dodging.

http://www.independent.co.uk/news/business/news/burger-king-backlash-over-whopper-tax-inversion-deal-with-tim-hortons-9690984.html

#135 Ask me why I cut the cord on 08.26.14 at 12:38 pm

Sweet deal: just sold THI and made a few dollars!

#136 nonconfidencevote on 08.26.14 at 12:50 pm

Stop the presses. Stop the presses. Canada is allowing one of it’s natural resources to be sold off to a big American company……..

http://www.google.ca/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CCEQqQIwAA&url=http%3A%2F%2Fwww.theglobeandmail.com%2Freport-on-business%2Fburger-king-tim-hortons-ink-merger-deal-for-125-billion%2Farticle20203522%2F&ei=jLr8U7buLqHXiwKYkoHQBQ&usg=AFQjCNE7HlfUc92u_KVY64SLh_wBt5EwNQ&bvm=bv.73612305,d.cGE

The horror….the horror

#137 TurnerNation on 08.26.14 at 12:58 pm

Possible batman on XFN.TO.

#138 Chris L. on 08.26.14 at 1:00 pm

TREB: “Real estate will always be a great investment”

http://www.torontosun.com/2014/08/22/treb-real-estate-will-always-be-a-great-investment

#139 Blacksheep on 08.26.14 at 1:04 pm

The Owner VS Slave mindset.
————————————-
Owner: Retired Boomer # 123,

“JOBS = If you manage any company I am invested in, I expect you to get the maximum amount of labor at the lowest input cost. If it can not be accomplished with full time workers, use part time. Local area costs too high, consider relocating even out of the country, or even out of several countries. Labor often thinks it is worth more than it really is, why do you think the US and Canada have lost jobs to lower cost providers?”

“So, when do you “believe” these jobs are coming back? Would you like some stardust for your unicorn?”
————————————
Slave: Nuke # 112,

“Bring in a 4 hour workday for the same pay as an 8 hour workday or a 4 day weekend. Ensure starting workers begin with 4 week vacations and full benefits. Also ensure full defined benefit pension plans for all workers. Workers also need to make up the majority of the board of directors and rotate through senior management ranks. Pay raises tied to productivity gains so all growth is captured and kept in the community. This would kick start the economy and ensure a full labour force.”
————————————-
Based on 24 years as a contractor, 12 years as an employer, one of these scenarios is reality (even if unpleasant), the other fantasy.

I’ll let you decide which, is which.

#140 A Yank in BC on 08.26.14 at 1:12 pm

#134 CPG

The author confuses legal tax-avoidance with tax-dodging. Tax-avoidance is management doing it’s job to reward shareholders. After all, it is not a company’s job to pay taxes, but rather to avoid them as much as is legally possible.

#141 saskatoon on 08.26.14 at 1:13 pm

will this white-collar lady (if convicted) see the inside of a jail cell?

if so, for how long?

#142 Son of Ponzi on 08.26.14 at 1:18 pm

Looks like they soon will have Buffets at BK and Timmies.

#143 gut check on 08.26.14 at 2:01 pm

#127 Mister Obvious on 08.26.14 at 11:26 am
“But the vitriol aimed at today’s boomers is usually based on the myth that we were born into privilege.”
_______________________________________

Naw, it’s based on the fact that you as a group have the most money and most clout when it comes to avenues for political pressure but that instead of using any of it for your kids or the good of your communities most of you sit on your hands while whining that ” it isn’t fair that I still have responsibilities at MY age!!!”

Oh boo-hoo.

None of you seem to want to help anyone but yourselves. Then again, that’s just based on my observations of the large number of parents, teachers, neighbours, relatives, friends, co-workers, bosses, etc that I personally know who fall into that age group and behave that way. Obviously there are exceptions out there and yes, I’ve known a few.

By and large though it seems the Boomers exemplify the phrase ‘what’s in it for me?’

#144 Spiltbongwater on 08.26.14 at 2:30 pm

I think as long as the developer and lawyer repay the money they stole, it should be ok with everybody. After all, that is how Wallin, Duffy etc operate.

#145 Habs 76-79 on 08.26.14 at 2:39 pm

#100 KommyKim

re: Lottery play (tax)

Yes, many call playing lotteries a stupid tax, but is it? Do you go to a Casino, Church, Bingo, play office sports pools? Each are same sort of stupid tax.

I do not advocate anyone spending money needed to live on at any such activities above including a lottery. But with disposable incomes it’s a pure choice and if playing a lottery gives you a bit of enjoyment, then so what? Your $4-$5 Starbucks or Tim Horten’s coffee is IMO as silly of a tax. Many buy such for a few minutes of pleasure even though brewing your own at home is mere cents per a mug.

Buying a few lottery tickets is for me and I maybe spend oh $100-120 per year of which I win back probably $20-30 or so in small wins, gives me some day dreaming fun. I know that the odds of wining a big jackpot SUCKS! The most I won was a $100 on a scratch ticket, my dad once won about $800 on Lotto Max. I’m not stupid, but for a day or two prior to a draw the ticket in my pocket can at times have me wonder and day dream with what I would do and who I may help out financially if I were to win and yes people do win the big jackpots.

It’s just day dreaming fun a fora few minutes and I’m ok with plopping a few dollars per month on such play.

It’s not a stupid tax, it’s a voluntary choice to play a game just as one would in a casino , bingo hall or horse track. Sure the odds are a better to win good money at these others over a big prize in a lottery but they each still suck in terms of odds.

IMO pissing money away each day buying over priced coffees, or buying work lunch out over making either at home is stupid but many people whom are probably smart enough in life do such, it’s their choice.

#146 devore on 08.26.14 at 2:42 pm

#63 Not an economist

Holy shit you’re still brainwashed by Harpernomics. No, Garth, the only thing that can rescue the economy is lots and lots of full time well paying work for large numbers of Canadians. That’s it. Nothing else will work. Nothing.

What you stated is a truism, empty, populist platitudes.

Pray tell, where will all those full time well paying jobs come from, exactly? Are you creating them, perchance?

#147 devore on 08.26.14 at 2:45 pm

#88 TEMPLE

That’s true, but other than cotton, it’s all stuff we do or could produce in quantity already. Besides, when our dollar was higher, it didn’t lower prices much anyhow.

It doesn’t matter whether we produce it or not, all commodities are sold on the global market, and those are the prices we pay, absent subsidies or nationalization or industry.

I’m not saying there isn’t an inflection point for a lower dollar where it hurts more than helps, but just that I am not convinced it’s 80 cents.

Consumer goods prices are always much quicker to rise than to fall. Once people are paying more for something, clearly they can continue to keep paying it for a while longer?

It’s a balance, an equilibrium, not an inflection point.

#148 devore on 08.26.14 at 2:50 pm

#95 Bill Gable

If things are this bad now, during the so-called “economic recovery”, how bad will things get during the next major economic downturn?

A recovery begins at the bottom.

It’s amusing to read that there is no recovery unless there is a surplus of 6 figure jobs, and people are buying new houses and luxury cars by the fistful.

#149 devore on 08.26.14 at 2:54 pm

#98 Andrew Woburn

It is only a coincidence that Texas real estate prices did not inflate like in so much of the US.

Is it? Is that what they tell you in economist school?

#150 Son of Ponzi on 08.26.14 at 3:15 pm

Interesting:
—————–
But Canada often tops caregivers’ lists as a destination because it’s the only country that offers the privilege of citizenship to domestic workers, more than nine out of 10 of whom in Canada are Filipina women.

“The only thing Canada offers is permanent residency. Why else would a caregiver come here? Without it you’d just go somewhere else,” says Lorina Serafico, a former live-in-caregiver from the Philippines who is now a mortgage broker. She co-leads the Vancouver Committee for Domestic Workers and Caregivers Rights.

#151 Son of Ponzi on 08.26.14 at 3:27 pm

Here’s another fake immigration lawyer talking about non existing wealthy mainland Chinese investors in Vancouver:
————-
Richard Kurland, an immigration lawyer who works with wealthy investors from mainland China, has looked at July real estate figures and suggests they may offer a glimpse at an important shift in Vancouver’s housing market – where the average price of a single detached home has climbed to $1.2-million

Obsessed much? And, is this what you call a ‘fake lawyer’?– Garth

#152 Bill on 08.26.14 at 3:49 pm

#29 Millenial on 08.25.14 at 7:59 pm

Don’t play lottomax. The odds are ridiculous. Lotto 649 is far better. Do you really need 50 million? Wouldn’t 3 million be enough?

Even better play the scratch offs. Personally I like ‘Set for Life’.

#153 Marquis de Sale on 08.26.14 at 3:58 pm

We should have a contest to guess the date of the “correction”. I’ll take September 12, 2014. Must be 10% or greater in Dow. No handwritten facsimiles accepted. No Greater Fool employees or their families may enter.

#154 SOS on 08.26.14 at 4:06 pm

Garth, would you please address the downfalls of renting? I don’t mind buying an affordable, well maintained house in the maritimes where rental units are dirty and hardly cheaper than a mortgage, with shared laundry, old appliances, and signs posted by property management.

#155 OMG on 08.26.14 at 4:19 pm

#59 OttawaMike on 08.25.14 at 10:02 pm

Where’s Smoking Man?

Did he fall in a bottle of whiskey and drown??
………………………………………………………………………….

Apparently so he wiped out he said jet-skiing on the Colorado River. So you know what that means, hes back in Vegas or Laughlin or somewhere chasing his inner writer self. Wow wait till this guy meets God one day, hes got a lot of splainin to do Lucy! Canadian hockey huh, big deal, try MMA Smoky, now that’s a kick ass sport!

#156 SealTeam0 (So secrect I'm not sure I exist) on 08.26.14 at 4:39 pm

That condo scam you wrote about the other day. The lawyer has been suspended and now arrested. Maybe those people will get lucky and get some of their money back yet.

#157 SealTeam0 (So secrect I'm not sure I exist) on 08.26.14 at 4:44 pm

“By and large though it seems the Boomers exemplify the phrase ‘what’s in it for me?’”

My observations are that they have passed it along to their offspring in spades. One big difference though, the offspring want you to bring it to them so they don’t have to get off of the couch. Of course there are exceptions but seeing we’re speaking broadly.

#158 Bloefeld on 08.26.14 at 8:05 pm

Rule one of business. Business is cyclical.

Rule one of real estate. Real estate is a business.

I have lived through some major real estate price corrections in Alberta during the past 40 years. Real estate does not always go up in value. Only morons and real estate agents believe that to be true.

#159 M on 08.26.14 at 9:56 pm

Garth old dog…now you’re silly. You are also sweet. No beard, some titties and shaved legs and I would (almost) marry you :)

The US central bank, the Fed, will be finished its stimulative bond-buying (“QE”) by Halloween.

..you are sooo sweet !

That’s the point :) They can’t :) just like Canada, UK, EU and everybody else. Rates will stay low “forever”.

“forever”= until the market moves in bonds will push the 10 yrs bonds higher. Then is when we really start having fun watching :)

I bet it’ll look like group sex with fat ass pot bellied people :)

#160 SWL1976 on 08.27.14 at 12:53 am

#112 Robert Agnew

Quantitative easing, the asymmetric war by Islamo fascists, and the corruption of crony Chinese capitalists will result in re emergence of the US empire. Chaos seeks order this will come with a new pragmatic US. The rest of the world is too weak to organize around any other movement. Of course any economic reset will favour the victor the US- as the worlds largest deadbeat they run the system.

——————————————————

Well put, I know Garth says don’t bet on the US and I agree, but this economic recovery doesn’t have the steam to pay back their debt. I don’t believe they ever have had any intentions on paying back their debts, its now mathematically impossible, the whole system is a scam by design, currency collapse will provide the catylst for the elite to put the icing on their cake

Youtube search ‘we’ll kill the dollar’ for an interesting spin on this

#161 SWL1976 on 08.27.14 at 9:22 am

ugh night shifts, typo should have read don’t bet against the US

#162 Blobby on 08.27.14 at 2:47 pm

@32 – in addition to garths post:

“Migration into Japan averages 52,000, compared to 250,000 for Canada. ”

.. And Japan is tiny in comparison. BC is itself is 3 times bigger than Japan!

#163 M on 08.27.14 at 8:33 pm

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