Ugly

UGLY modified

Last week I picked on Paul Etherington, cartel boss of the nation’s biggest real estate board. It was so much fun, let’s do it again. Easy, too, when he writes drivel like this:

“Making regular mortgage payments represents a method of forced savings: as you pay down the principal on your home loan, and your property’s market value appreciates, your home equity builds, setting you on a path to greater financial structure, even if you count poor budgeting or excessive spending among your vices.

“In addition to compelling you to take a disciplined approach toward your financial future, homeownership offers several other benefits that are equally important.  A 2012 study…found that respondents who had recently transitioned to homeownership reported feelings of improved health, pride of ownership and ties to the community.”

See what I mean? Houses always go up, so they’re good investments, and you’ll be okay even if you piss away all your income. Just keep making those loan payments. Hey, and mortgages are healthy, too. So get a big one, kids.

Sadly, our society oozes with people who believe this stuff. And, from time to time, we get a glimpse of the potential mess they’re walking into – not to mention the detritus all their house lust could leave for Canadian taxpayers. Such a glimpse is here, in the latest data from the guys who make 95%-financing possible, CHMC, as flagged by the trade site, Canadian Mortgage Trenda.

The ugly stats tell us this about what the masses are doing lately:

  • In the first six months of this year, CMHC insured 143,151 new mortgages worth $25 billion
  • Of all those borrowers, 88% borrowed more than 85% of the property’s value.
  • The average down payment was just 8%
  • In fact, with 70% of all loans, the average down was less than 10%.
  • The typical loan equaled 92% of the property’s sale value.
  • The average insured mortgage is $231,000.
  • CMHC lending plunged by 13.3% in the first six months of this year compared with 2013.
  • An estimated 80% of all home sales in Canada now have an insured mortgage – meaning the buyer couldn’t muster 20% down.

The federal agency is not telling us how big the mortgages are for those putting the least amount down, but the picture is scary enough. An average down payment of just 8% – when you consider that includes a fat CMHC premium heaped on top of the equity loan plus (quite likely) a repayable RRSP homebuyer’s snatch – shows just how much floating debt most fools are willing to walk into.

So long as real estate values hold or continue to rise (like Mr. Etherington promises), then we might be able to keep the wheels form falling off. But eventually the market will correct, equity levels will decline, and this giant vat of debt will remain. Now there’s a new poll of analysts and housing economists showing more of them are worried. In fact, they think the chances of a “steep fall” in prices have increased in the past twelve months.

The Reuters survey showed most smart guys (“many of whom work for mortgage lenders,” said the company) think house prices will continue to creep higher. But seven in 20 believe the chances of a market meltdown have intensified, particularly in Toronto and Vancouver. Said Queen’s Prof John Andrew: “The risk has increased due to house price increases significantly exceeding income growth and the oversupply of condos in downtown Toronto.”

The big threats are well-known to readers of this pathetic yet spoonable blog: higher mortgage rates, especially when the BoC starts swelling next year, and the expanding sea of debt (shown by the CMHC stats above) being swallowed by people who obviously can’t afford to buy. But the experts don’t expect a massive price tumble, or a US-style houseaggedon.

Maybe they should. After all, the American real estate market peaked in 2005, but didn’t convulse until ’08. It’s simply a myth that these events take place in months, because house prices are massively sticky. Sellers are greedy little things (especially the FSBOs), who would rather sit on the market for nine months, then cancel the listing, than reduce the price 10%. It can take a year or two for a general price decline to ripple through, but once it does then the dominoes start to fall. Listings increase and buyers decrease. It’s already happening in secondary markets across the land.

This does not mean anybody with a house, lots of equity, and other investments should bail in fear. But the vulnerable – house-rich, pensionless Boomers and cashless, horny Millennials – need a reality check.

As for the 143,151 who just bought at peak house levels with 92% financing at rates destined to increase, well, pucker up.

97 comments ↓

#1 Pre-Retiree on 08.31.14 at 5:58 pm

“Would rather sit on the market for nine months”, try 2 years for some houses I have kept following in Ottawa. Prices still not budging, they are the hopeless optimists from my point of view.
As a future pensioner, with money in a corporation too, it is not my worry. Still, for all your efforts, I find myself pretty clueless about investing. But not enough to buy a house in this market. Although I see it all around me.

#2 Julie on 08.31.14 at 6:07 pm

Debt is king these days. So many people are buying into it, it won’t end well! Last week, I got a call from [email protected] I use CIBC Private Banking and this lady has been in charge of my account for the last dozen years. She was calling to let me know that she was dropping me as a client, giving my account instead to a junior. When it comes down to it, she basically said I’m not a good client for her. I have no mortgage, a line of credit I’ve never used and my investments are not managed by [email protected] So, being responsible with money and living within my means makes me an unwanted client! I remember when I was a kid in the 70s, opening my first bank account, being encouraged by the bank to save up my money…those days are gone!

#3 Nemesis on 08.31.14 at 6:11 pm

#Sometimes… #TheProperty’Ladder’… #Doesn’tEndAllThatWell.

http://youtu.be/LL9BSuY6h0M

#4 enthalpy on 08.31.14 at 6:14 pm

Hope everyone is trying to enjoy the long weekend.

#5 Realties.ca » Ugly on 08.31.14 at 6:16 pm

[…] Source: http://www.greaterfool.ca/2014/08/31/ugly/ […]

#6 stephen harper on 08.31.14 at 6:20 pm

first
ps: garth you are still fired
Stephen

#7 Forzudo on 08.31.14 at 6:22 pm

On the plus side, according to the linked report, 73.2% of CMHC loans have a listed GDS ratio of under 30%.

How much that ratio is verified by lenders is a different story…

#8 Babblemaster on 08.31.14 at 6:35 pm

“As for the 143,151 who just bought at peak house levels….” – Garth

————————————————————-

Houses have been at peak levels for at least the last 8 years and they have just continued to peak higher.

#9 Smudgekin on 08.31.14 at 6:36 pm

Someone should be out snagging photos off all the glass towers & cranes in Toronto for the history books.

#10 j shum on 08.31.14 at 6:37 pm

On a similar note, I wonder how many of these use the first time home buyer plan and how many are able to pay it back in time

#11 Sheane Wallace on 08.31.14 at 6:48 pm

Garth, I would like your opinion on CMHC, now.

Simple research shows scary stuff.
1. Most of the people in the board have vested interest in raising house prices – they are real estate/home builder/bankers type of folks.
2. The CHMS has ‘analysts’ – staff on government salary, they ‘monitor’ key markets – one analyst per market like GTA!!! and ‘analys’ something, hopefully the risk.
3. It is not clear what their ‘analysis’ is based on, they could be rolling a dice and making risk analysis based on the outcome.

Adding the clearly deferential finance minister and useless BOC chief it becomes really scary. All of these guys combined probably have less market expertise than an average for fee investor advisor and I know some that are very, very good.

And they play with billions/trillions and our future.

Scary stuff, really scary.

#12 Sheane Wallace on 08.31.14 at 6:49 pm

finance minister with dimentia

#13 John Mounfield on 08.31.14 at 6:53 pm

1. Its going to be carnage when rates go higher and people start to go hmmmmmm?????
2. Who TF let’s kids kiss dogs. Dogs lick their own anus and genitals

#14 Catalyst on 08.31.14 at 6:58 pm

I don’t really know how to feel based on those numbers.

According to the above, the average mortgage is 92% of property sale value while the average insured mortgage is only $231,000. This would put the average house at roughly $251,000. How than are we at average prices of over $550,000?

I am not sure I can make any sense of these figures unless there is a large number of buyers forgoing insurance above $550K mark, but that seems unlikely aswell given the languishing of >$1MM properties.

#15 DreamingInTechniColour on 08.31.14 at 6:59 pm

Very Revealing:

http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2014/08/analyzing-cmhc-borrowers.html

#16 Freedom First on 08.31.14 at 7:01 pm

Paul Etherington is special. He is the Boss. Thanks for writing down everything you are saying Paul Etherington. I really really appreciate it.

Yes, the U.S. market peaked in 2005 and convulsed in 2008. It is wonderful with the internet today that we can draw up all of the quotes from the Banking Bosses, Political Bosses, RE Bosses, Media Bosses, etc. Bosses, the nonsense spouted by these Bosses before, and during their housing collapse in the U.S. is the same nonsensical denying drivel spouted by their Canadian counterparts. Same goes for the Bosses in Europe and Japan. Multi-millions of home buyers led to their financial slaughter like sheep led to the slaughterhouse. It is really unbelievable, and sadly, all true, just as Garth has been warning. Garth also makes it crystal clear there is nothing wrong with owning RE, what is wrong is the financial idiocy of the masses who either ignore prudent financial management or are simply financially ignorant, and worse yet, and probably the most common I believe, the financially brainwashed. Ignore financial prudence if you choose, but their will be consequences. No exception.

#17 Making it Rain on 08.31.14 at 7:17 pm

“2. Who TF let’s kids kiss dogs. Dogs lick their own anus and genitals”

Have you ever shook hands with a stranger? Chances are he didn’t wash his hands after handling his junk.

#18 cecilhenry on 08.31.14 at 7:22 pm

All good arguments.

Hell, I believe them.

Yet up and up go prices, more unaffordable all the time unless you choose debt slavery. A low interest rate doesnt change the cost RBC and CBC commentators!!! Such myopic news reporting. Buy today, pay for 40 years……

And I feel like a fool for believing. But I feel like I’m being taken even worse if I even consider the worthless houses selling for absurd prices. Half a million dollar houses that look like they keep livestock, not people.

Despair is the word.

#19 Rainclouds on 08.31.14 at 7:24 pm

#2 Julie

Not personal. [email protected] is just trying to goose her daily, weekly, monthly quota as imposed by the not so [email protected]

I have a lovely invitation to some sort of “exclusive invitation/ event”. Meet the band, enjoy local artisanal “delights” ,canapes, and no doubt the full court press by the “wealth mgmt” dorks.

While parking my hard earned dough with them for decades, NADA. Now we are best friends ONCE they finally realized my Financial Advisor dude yanked 7 digits from them a year ago ?

Kharma, it’s a bitch….

#20 Soma on 08.31.14 at 7:26 pm

I keep hearing “market will correct” …. a lot on this blog. But realistically – is buying your principle residence the same as “playing the market” ?

If that’s where you have the bulk of your net worth, yes. — Garth

#21 Retired Boomer - WI on 08.31.14 at 7:38 pm

Dear “spoonable Blog” way back in ancient history, say 1975 we bought our first home. Paid 1/3 down to have a ‘manageable’ mortgage payment. Our choice in this clearly. High prices, and crap economy as I recall.

Fast forward past past 6 other owned homes, and a few rentals thrown around before, and in between……

ONLY once did we ever buy a home with less than 20% down. (That was when property plopped in the late 80’s and we had the cash flow to run 2 mortgages until prices recovered a bit). That all sold & paid long ago.

Only ONCE have I ever seen values at these extremes, FL circa 1996-97. Judge for yourselves. Dis the crash of 2008 cause real estate to melt in the U.S. or, did the top-heavy prices, and speculators cause the rest of the economy to hit the dumpster?

Markets are near all time highs, RE in many places ditto.
How are your earnings? How’s that Kia doing. Gaining in value every year like your home, and stocks? Yeah, right.
Kind of thought that. While homes and stocks have historically gained in value, consumables like cars, washers, TV’s do not. (yeah, there are exceptions).
The media mavens spout the usual & customary pablum for the masses. You eat it up (spoonable)

Stocks sometimes suffer nasty set-backs for a few years.

What makes you think a home will not suffer the similar fates of markets & demographics? I can deal with the stocks, they are held in proper proportion.

Can you handle “losing 20%” of your homes value when you owe 90% of it?

Did you sell your stocks in 2008? If you answered “yes” you probably can’t handle the truth.

I just do not get it, but then I never was the sharpest knife in the cutlery drawer.

I like a calm planned out, measured life with many possible contingencies covered. the unexpected will happen!

#22 Craig on 08.31.14 at 7:40 pm

I am 26 years old, have owned up to 3 houses at one point, this year I cashed out and doubled my money. It is now sitting in a portfolio making me easy money and just waiting for the market to crash, it may not be for another year or 5, however what I do know is that most people in my generation can’t afford to put any money what so ever down unless mom and dad help and even if they do buy one they don’t have a clue about what saving money is these days or understand that one day those rates won’t be as rosey, until the correction hits I’ll continue to let my money grow and continue to pay my $400 a month for my bedroom (which is what most pay for taxes and hydro alone these days per month). Good luck gen Y….

#23 Mr. Frugal on 08.31.14 at 7:44 pm

Garth,

This has got to be bad news for the big Canadian banks since they all have substantial exposure to Canadian real estate. We might not face a financial melt down like the U.S. experienced. But what are the chances of the banks suffering heavy losses and taking down the TSX with them?

Zero. — Garth

#24 -=jwk=- on 08.31.14 at 7:46 pm

Great story about moving back from the burbs to the city.

http://www.nytimes.com/2014/08/17/realestate/a-central-park-south-apartment-wins-out.html?_r=0

The story has a MAJOR error however. It states that the couple bought the suburb house 5 years ago for 389, and sold it this year for 345. This is impossible, of course, as real estate always goes up. Sad to see the New York Times miss something as obvious as that.

#25 Jay Currie on 08.31.14 at 7:46 pm

It’s interesting. In my current location you can buy a three bedroom house for 200,000 on a bit of land. It is a pretty, sub two hour drive into Victoria. Not a perfect daily commute but a couple of times a week would be a breeze.

What this actually means is that for the price of a 500 square foot box in Vancouver you can buy a 2500 square foot house and have 100-150K left over.

There are a lot of jobs these days which are 80-90% telecommuting. If you have kids, as I do, why would you even think of the condo option? Or the house in Maple Ridge which is still 550k and has a two hour commute?

There are towns like this one all over Canada. Well worth looking into.

#26 Running on Empty on 08.31.14 at 7:47 pm

Just noticed discounted 10 year mortgages are once again below 4% (about 3.75 %). This is only about 1% more than 5 year discounted mortgage. Seems like this may be a small penalty to pay if we believe rates will be rising. Garth, can you update your article you did on the pros and cons of 10 year mortgages?

Link to 3.75% ten-year? — Garth

#27 Mister Obvious on 08.31.14 at 7:57 pm

#13 John Mounfield

“Who TF let’s kids kiss dogs.”
——————————

It actually the dog that’s at risk.

#28 Roland McFlinter on 08.31.14 at 8:03 pm

Garth & Site Posters,

If you own a fairly large portion of your wealth in your home real estate, would it be wise to buy some physical gold as a hedge if inflation rises with interest rates?

Actually that would be the worst move. Gold’s going nowhere. Buy assets that will actually pay you to own them. — Garth

#29 Setting the Record Straight on 08.31.14 at 8:06 pm

Yesterday
#151 Shawn on 08.31.14 at 12:26 pm
Your Mission, Should you choose to accept it…

Setting the record straight at 133 quotes someone saying:

English language training , capital mobility, and the opening of high levels of immigration all make capital more relatively scarce and labor more abundant.
North American living standards will decline.

**************************************
“It’s hard to see how capital is scarce in a low growth world with record low interest rates.

But if it be true, your mission is clear, save and accumulate some capital and earn money from that.

Favor investing in equities… (include some preferred shares) eschew 2% style fixed income.

In most any future scenario, that will hold you in good stead.

Or, go ahead and be a victim, most will.”

No disagreement from me about what an individual needs to do.

I was trying to point out that in current circumstances Unions will not bring back private prosperity. Capital will move or bring in cheap labour. Unfortunately for workers political correctness in Canada requires that you cannot criticize immigration levels without being labelled a racist.

Government on the other hand can still extract resources from the productive populace and distribute them to the connected corps and the uncivil , so called , servants, unionized or otherwise.

My disagreement with you is that I am concerned the cancerous growth of government could eventually destroy or seize the capital we accumulate in a final feeding frenzy.

#30 Mr. Frugal on 08.31.14 at 8:17 pm

Garth,

I’m missing something here. If Canadian real estate tanks, how will this not negatively impact the Canadian Banks and the TSX? Are things different here?

Real estate will moderate, correct, flatline. It will not tank. People will still pay their bank mortgages, as they suffer a loss of equity. Even if defaults rise, all high-ratio loans are CMHC-insured. Bank mortgage portfolios may stagnate, but they will not shrink. Why would the banks be impacted in any severe way? — Garth

#31 Retired Boomer - WI on 08.31.14 at 8:28 pm

OOPS!! correction… #21

Dates should read 2006-2007 for FL.

usual screw up.

#32 Setting the Record Straight on 08.31.14 at 8:29 pm

Shawn
By the way I am still looking for a discount brokerage that provides access to foreign stock exchanges directly.
Instead of purchasing ADRS I want to purchase on the home exchange.

Any ideas?

#33 Sheane Wallace on 08.31.14 at 8:34 pm

Real estate will moderate, correct, flatline. It will not tank. People will still pay their bank mortgages, as they suffer a loss of equity. Even if defaults rise, all high-ratio loans are CMHC-insured. Bank mortgage portfolios may stagnate, but they will not shrink. Why would the banks be impacted in any severe way? — Garth
—————————
Real estate in Ireland corrected with 50 % and they do not have the equivalent of CHMC.

We have a bigger bubble, it will crash big time,

Worse case it will bankrupt us all or turn the currency into crap.

Extremist, baseless rhetoric. — Garth

#34 I'm stupid on 08.31.14 at 8:34 pm

And when homes do correct, the vast majority of side liners still won’t buy. The only reason Greaterfool gets 6million visitors a year is because the majority want what they can’t have or they’re scared of losing what they do have. A house has become a status symbol, just as it did in the US circa 2005. The question is will you want a home when no one else does? People always run when assets fall, that’s why many fail in life. So in perpetration for the inevitable here are some tips.

Look at what you can afford and what it should cost. Look at historical values based on rents/incomes and property types. Write down that number and when a home fits the cost you calculated buy it. Most won’t because either greed (getting a better deal) or fear will stop them. Do this now when you lust for Realestate because if you don’t the aforementioned will get you too and you’ll be a sideliner forever.

#35 economictsunami on 08.31.14 at 8:45 pm

No one has a firm grip on big picture/ national housing market information; unfortunately too, least of all regulators.

Not that knowledge guarantees good policy decisions.

Makes me wonder about those who don’t hold all of the pieces of the RE puzzle, yet continue to forecast a soft landing.

I read, heard and witnessed many similar comments from US regulators.

Perhaps not the same as in America but it will rhyme…

#36 Dr. Talc on 08.31.14 at 9:06 pm

TREB does not fit the definition of a cartel, but if Garth keep calling it that, some of the Moonies here will believe it, just like they believe in gospel of ‘The Correction.’

Paul is over the top but that’s just salesmanship- Real Estate is historically a good long term investment. It’s not a ‘day trader’ activity. The ‘vultures’ awaiting any kind of 416 ‘correction’ in single family homes may be saddened by the depreciated value of their currency.

http://en.wikipedia.org/wiki/Moonie_%28nickname%29

Average 416 SFD down 16.7% April-August. Twice the seasonal norm. Vultch? — Garth

#37 Nemesis on 08.31.14 at 9:13 pm

#@Mr.Obvious/27. #JustForFun…

http://youtu.be/7RKyrWA2YaM

[NoteToGT: Just between the two of us… Bandit brushes regularly, right?]

#38 RayofLight on 08.31.14 at 9:21 pm

#17-Making it Rain
I would think on average the dog’s mouth is cleaner than most people’s hands. Junk or no Junk

#39 Danyusoff Avyteomann on 08.31.14 at 9:25 pm

I would recommend that Toronto is one of the best cities for young adults and Toronto is one of the safest, cleanest and intellectually superior cities in North America, if not the entire Americas and Europe.

$600,000 for a house in Toronto is cheap. Buy now or get locked out of the market. Toronto is turning into the Canadian version of Manhattan, and houses are scarce supply and demand.

#40 Jackofall on 08.31.14 at 9:26 pm

“Sellers are greedy little things (especially the FSBOs)”

_________________________

A more true statement does not exist.

#41 tintin on 08.31.14 at 9:28 pm

I think to start a weblog about that one day, a meteorit, will clash
the earth! Many years ahead for me, like Garth…

#42 Andrew Woburn on 08.31.14 at 9:34 pm

#13 John Mounfield on 08.31.14 at 6:53 pm
2. Who TF let’s kids kiss dogs. Dogs lick their own anus and genitals
=====================

Hey, it’s all cool. Apparently it builds up the kid’s microbiome. (I’m glad my parents didn’t know that.)

Nice Doggie!!

Microbiomes: You Live in Your Own Germ Cloud, Study Finds

“The findings bring Gilbert back to the so-called hygiene hypothesis about allergies — that people who develop allergies may not have been exposed to enough germs when they were young. It might be that having a large diversity of germs living in and on you, rather than any one specific bacteria, is protective Gilbert says.”

http://www.nbcnews.com/health/health-news/microbiomes-you-live-your-own-germ-cloud-study-finds-n191366

#43 Teulon on 08.31.14 at 9:38 pm

#24 -=JWK=-
Good one!

#44 NostyVlad the Snugglebombed on 08.31.14 at 9:49 pm

#175 Flawed on 08.31.14 at 4:59 pm — “Ecuador is not a very progressive country and trying to install its own digital currency will fail miserably as they lack the expertise and infrastructure required to make it a robust fail proof system.”

Noted, but it only takes one country to start the ball rolling. Most of Ecuador’s debt is owed to China, and with Chinese help, it can be turned into a new dawn for a lot of countries, most of whom are enslaved to the petro-dollar and private-for-profit central bankers.

Remember Harold the sheep in the Monty Python skit, who believed he could fly and encouraged others from his flock to join him in the tree? Didn’t turn out to well for them, but it only took one to start.

Sadaam tried (with false UN permission) to switch to the Euro, and Iraq was crushed so the precedent is there. Who runs with the ball doesn’t matter, it’s in motion now and can’t be stopped. For example, this could be another unintended consequence.

Al Gore is slightly off his ice-free prediction from a few years ago.

#45 young & foolish on 08.31.14 at 9:51 pm

My generation does not seem to be afraid of large debts … period!

“Average 416 SFD down 16.7% April-August”
Wow … are we experiencing a stealth correction?

#46 Son of Ponzi on 08.31.14 at 9:54 pm

2. Who TF let’s kids kiss dogs. Dogs lick their own anus and genitals
————
Licking their own anus is pretty much impossible.
But other dog’s asses, they cannot pass up.

#47 TEMPORARY® Foreign Prime Minister on 08.31.14 at 10:10 pm

“…..A 2012 study…found that respondents who had recently transitioned to homeownership reported feelings of improved health, pride of ownership and ties to the community……..”
=========================

This guy could write script for a new Jimmy Jones commune, with emphasis on the words of cool-aid “…recently transitioned…”.

At today’s housing prices, once reality sets in realizing that the majority of your after-tax income is going toward paying for your next bank CEO’s golden parachute, along with the guillotine of increased interest rates hovering over your neck for the next 30 years, those ‘feelings of improved health’ start to whither rather quickly.

Funny, having gone from OWNING to RENTING, my financial health has improved dramatically, I’m proud to be freed from slavery to the [email protected], and I now have much more leisure time to participate in my community.

Who knew?

#48 45north on 08.31.14 at 10:19 pm

In the first six months of this year, CMHC insured 143,151 new mortgages worth $25 billion

finally we get a look at the real numbers, CMHC is keeping this economy going.

Jay Currie : In my current location you can buy a three bedroom house for 200,000 on a bit of land. It is a pretty, sub two hour drive into Victoria.

two hour drive! into a provincial capital! I suppose you could also buy a house 2 hour drive from Regina (Saskatchewan) or Fredericton (New Brunswick). For example it’s an hour and 4 minutes from Val des Bois to Ottawa. In the case of Val des Bois that’s enough to make a job in the civil service untenable. Untenable. Because when it snows the one hour drive becomes three hours. A young person can do it for a year but if you’re over 50 it means that you cannot get in to work.

There are a lot of jobs these days which are 80-90% telecommuting.

there are but unless you work for the provincial government the jobs also require lots of travel which requires you to get to an airport. If you do work for the provincial government you need to be at work because that is where the decisions are made – decisions such as who gets laid off.

#49 Flawed on 08.31.14 at 10:22 pm

#44 NostyVlad the Snugglebombed on 08.31.14 at 9:49 pm
#175 Flawed on 08.31.14 at 4:59 pm — “Ecuador is not a very progressive country and trying to install its own digital currency will fail miserably as they lack the expertise and infrastructure required to make it a robust fail proof system.”

Noted, but it only takes one country to start the ball rolling. Most of Ecuador’s debt is owed to China, and with Chinese help, it can be turned into a new dawn for a lot of countries, most of whom are enslaved to the petro-dollar and private-for-profit central bankers.

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

1. Bitcoin ball is already rolling
2. Currency is “already digital”. Ecuador going from 97% like western central banks to 100% Digital is not exactly a big deal.
3. They will screw it up.

#50 Shawn on 08.31.14 at 10:23 pm

Buying Foreign stocks

Setting the record straight asks:

Shawn
By the way I am still looking for a discount brokerage that provides access to foreign stock exchanges directly.
Instead of purchasing ADRS I want to purchase on the home exchange.

Any ideas?

**********************************
TD Direct (Waterhouse) has a system but I have never used it…

#51 Smoking Man on 08.31.14 at 10:25 pm

To the blog dog who put me on to this book.

Dueling neurosurgeons.

Thanks…

#52 jim on 08.31.14 at 10:31 pm

Realtor scum# 39

You scheming shills will say anything regardless how idiotic you all sound. I guess when most realtors have high school or less it’s not that weird to hear stupidity from them. The government needs to regulate the industry and halt all CHMC. Then allow the free markets to value risk. Banks would not lend a dime in the biggest housing bubble in the world.

#53 NFN_NLN on 08.31.14 at 10:34 pm

Real estate will moderate, correct, flatline. It will not tank. – Garth

Jesus H., then why bother warning people for the past 6 years.

When the average down is 8%, a 15% correction is a disaster. — Garth

#54 Robert Agnew on 08.31.14 at 10:43 pm

Apparently real estate agents can’t pass up if it means a commission.

#55 Don sanderson on 08.31.14 at 11:02 pm

To #26 Running On Empty

As of August-31-2014 1:25 P.M. a 3.65% 10 year fixed rate mortgage at Rate Hub, http://www.ratehub.ca/best-mortgage-rates/10-year/fixed

Where? — Garth

#56 EvilMagpie on 08.31.14 at 11:05 pm

It feels fantastic to grab a TN visa and head down to the US for work; I’m being paid more in $US than I was in $Cdn. And I feel like I’ve won the 5/6 + Bonus in the 6/49 because that’s how much cheaper houses are down here (not everywhere, obviously, but it isn’t difficult to find a medium-to-large metro area, rife with professional jobs, where they are). Plus, there’s snow on the ground 2 months out of the year instead of 6, and I no longer have to pay for parking at work. Beer, cheese, gas, residential water, everything’s cheaper.

If you’re a young professional, it may be worthwhile to look beyond Toronto, Calgary, and Vancouver. I did, and I’m a lot better off for it. Granted, I can’t nicely rip money out of my RRSP to buy US property, nor does your Canadian credit score mean much here, but 200K for a 20-year-old 3-bed house, half an hour from downtown AND work, is much more palatable than what’s available in the cities I mentioned.

#57 Sheane Wallace on 08.31.14 at 11:07 pm

When the average down is 8%, a 15% correction is a disaster. — Garth

For the people who bought at the top.

For those buying now or recently. For everyone else, it just sucks off their net worth. — Garth

#58 Don Sanderson on 08.31.14 at 11:16 pm

#26 Running on Empty

I found a 3.65% 10 year fixed rate mortgage at rate hub as of August-31-2014, 1:25 P.M, http://www.ratehub.ca/best-mortgage-rates/10-year/fixed.

If this is the same mortgage company rates dropped another 10 basis points.

It is from a company called Hypotheca which is in Quebec. I noticed that only a 10% prepayment for lump sum and monthly is available instead of many competitors have 20% to 25% prepayment options annually.

This is probably why they have a much lower fixed rate.

You want to borrow from Hypotheca? Seriously? — Garth

#59 Snowboid on 08.31.14 at 11:21 pm

“…Sellers are greedy little things (especially the FSBOs)…”

Very true, look at the following site where some listings are from 2011 (or earlier). Not content to see similar condos in their own buildings listed on MLS for 20-25% less, they firmly stick to the belief that prices are still going up!

http://www.okhomeseller.com/Content/Okanagan-BC-real-estate.asp#60KA

#60 Jb on 08.31.14 at 11:46 pm

I’m looking for a house between $2-3 million in Toronto, and I’ve seen a number of houses in this price range just sit on the market at the same price month after month.

I recently spoke to an agent for one of those houses and inquired as to why the sellers don’t lower their prices if they want to sell, and she said “they’re waiting for he market to catch up”.

Rather foolish in my opinion.

#61 Cici on 09.01.14 at 12:16 am

#14 Catalyst

I was thinking the exact same thing as you. The answer might lie in the secondary mortgage market…apparently many households are taking out multiple mortgages from separate lenders.

#62 Spectacle on 09.01.14 at 12:33 am

Re: #44 NostyVlad the Snugglebombed on 08.31.14 at 9:49 pm

Thanks for your above reference to the “Ice Actually Re-Covering ” up over the Arctic !

Stellar reference, Worth the re-read blog dogs!

NostyVlad you consistently provide inspiring material here, Thanks. So important to continually search for factual information, & you save us time doing that.

*****************************
Re Garth: ” As for the 143,151 who just bought at peak house levels with 92% financing at rates destined to increase, well, pucker up.”

Great summary and a solid takeaway from tonight’s blog!

Thanks G , and NostyVlad

Regards all…..

#63 Helen on 09.01.14 at 1:08 am

#39 Danyusoff Avyteomann – you’ve clearly never lived in any other city with over 100,000 people in North America. Try it, it’s a real eye opener.

#64 VU on 09.01.14 at 1:08 am

The first CMHC has a type….

#65 Don Sanderson on 09.01.14 at 2:16 am

Hypotheca’s website is http://www.hypotheca.ca/en/.

#66 Nemesis on 09.01.14 at 3:48 am

#LaborDayHomily… #ForSaltierDogz.

http://youtu.be/mRFtWhM4S1k

#67 Ret on 09.01.14 at 9:17 am

#60
“I’m looking for a house between $2-3 million in Toronto, and I’ve seen a number of houses in this price range just sit on the market at the same price month after month.”

The same thing happens in the student ghetto around McMaster but obviously at lower price points. The same clapped out student houses sit for months on end at $400,000+ and never sell. Rinse and repeat next year.

IMHO, purposely done to mislead buyers as to real selling prices in the area and it costs the RE industry nothing to keep the illusion going. Sellers only pay if some sucker buys.

If there was a $200 monthly listing fee initiated, but only refundable on closing, how many listings would disappear in the first week — 5%,10 %, 20%???

#68 Smoking Man on 09.01.14 at 9:24 am

#57 Sheane Wallace on 08.31.14 at 11:07 pmWhen the average down is 8%, a 15% correction is a disaster. — Garth

For the people who bought at the top.

For those buying now or recently. For everyone else, it just sucks off their net worth. — Garth.

……..

Average prices not really an accurate tool to determine market strength or weakness.

The Teranet data. Paints the best picture..

#69 Anson on 09.01.14 at 9:29 am

….”Your home equity builds, setting you on a path to greater financial structure, even if you count poor budgeting or excessive spending among your vices”….
Translation = “even the dumb, foolish, ill informed and undisciplined can do as well as prudent, discipined people living within their means”
I remember a time when the people who had little or no money, poor budgeting skills and problems with excessive spending were called ” RENTERS ”
…………….Wow! HAVE TIMES CHANGED………..

#70 SWL1976 on 09.01.14 at 9:30 am

As for the 143,151 who just bought at peak house levels with 92% financing at rates destined to increase, well, pucker up.

Cause credit is the currency of slaves, and looks like all the pieces are falling into place

Smoking Man, way to wear your foil hat with pride, although inverted is an interesting technique

For those that cannot see the signs and the writing on the wall, and label everything questionable as a ‘conspiracy theory’ maybe consider this for the louder you laugh and the more noise you make just may show your level of comprehension

Just a quick excerpt for those in a hurry

“If I call you a conspiracy theorist, it matters little whether you have actually claimed that a conspiracy exists or whether you have simply raised an
issue that I would rather avoid… By labeling you, I strategically exclude you from the sphere where public speech, debate, and conflict occur.”

Enjoy the Labour Day long weekend all…

#71 aaron on 09.01.14 at 9:43 am

Average 416 SFD down 16.7% April-August. Twice the seasonal norm. Vultch? — Garth

Right. Has it gone down to 2009, 2010, 2011, 2012, or even 2013 price level yet? Nada. Zilch. Zero. Never.

#72 Nuke on 09.01.14 at 9:45 am

http://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014.html

Have a Great Labour Day

An insightful read. — Garth

#73 Porsche on 09.01.14 at 9:51 am

#56 EvilMagpie

I’m 4 and 2 with TN Visa’s and both my denies were through Toronto.

I miss working in the U.S. so friggen much!

I made twice the amount and the cost of living was half.

Enjoy !!

#74 liquidincalgary on 09.01.14 at 10:26 am

@ #70SWL1976

on conspiracy theories…

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

is ‘press tv’ a reputable website?

was your quoted study ever peer reviewed? by whom??

#75 High Plains Drifter on 09.01.14 at 10:38 am

Since it is Labour Day I should like to point to a famous Canadian who has been the worse enemy of labour the last two generations. Meet Mr. Friend of the Plutocrats, Ralph Klein, starring as Premier of Alberta. Now there was the man to drive down house prices. He even had the basement types waiting for the low, sporting grey hair by the turn around. Cato types, a moment of silence for the greatest.

#76 crowdedelevatorfartz on 09.01.14 at 10:56 am

Flawed is moving to South Amerika?
Do they have bitcoin there?
Whats it called in espanol ? El scammo supremo?
When society fails and currencies are moot as you have predicted enjoy trading bitcoin …… by messenger pidgeon.
FAIL

#77 db on 09.01.14 at 11:22 am

Hello,
WRT notion of Canadian Banks collapsing should housing crash… one should probably define what they mean by collapse. Shares tanking? Most definitely a short term panic correction but not because of housing correction per say but because the truly profitable lending (LOC’s secured and unsecured, credit cards, car etc.) dries up which may result in a reduction in dividend payouts. Banks going bankrupt or getting vulched by foreign buyers? How? Their very first steps would be to massively reduce their workforce (which would cause shares to spike), reduce/eliminate dividends, and sell off lucrative but balance sheet impairing unsecured credit and obviously jack up fees on their least profitable clients. No Canadian bank has terribly excessive leverage (remember Euro banks with 85:1 ratios?) is explicitly/implicitly backed by the government and had the chance to ‘correct’ their balance sheet by borrowing at the lowest rates in history. If housing tanks the banks will be just fine, it will be taxpayers who bear the brunt of the losses. The more likely scenario is banks use the make believe pseudo-banking crisis to push for mergers and banking consolidation under the guise that bigger banks won’t ‘fail’. We may yet have a Finance Minister dumb enough or panicked enough to fall for it.

The worst financial and credit crisis in 80 years happened in 2008/9. No Canadian bank reduced a single dividend payment. While common shares fluctuate in value, bank profitability is far more stable. If you want a steady return from these businesses, with less volatility, buy their preferred shares. — Garth

#78 Unknown Marketer on 09.01.14 at 11:40 am

Sometimes You Find Gems Here ( Garth always has ). But you should all read Nuke’s post. Now that is a good find. And I believe to be bang on. Thanks for that.

Post #72

http://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014.html

Have a Great Labour Day

An insightful read. — Garth

#79 Son of Ponzi on 09.01.14 at 11:47 am

# 60
I recently spoke to an agent for one of those houses and inquired as to why the sellers don’t lower their prices if they want to sell, and she said “they’re waiting for he market to catch up”.
—————
Trying to catch a falling knife. dangerous.

#80 Darth on 09.01.14 at 12:02 pm

#14 Catalyst. These are the figures for insurable mortgages (ie under 1M) but you’re right, it doesn’t really seem to make sense unless the number of houses outside Toronto and Vancouver under 1M far outnumber the ones in Toronto and Vancouver so as to bring the average sale price down into the 200s.

Garth – where are these numbers from? Hopefully not Tim Hudak.

#81 Darth on 09.01.14 at 12:07 pm

#71 aaron

Since 2009, house prices are up what – 50, 60, 70%? Stocks are up 100 – 200% (with no prop tax, insurance, maintenance, etc)? Last time I checked, 100 – 200% is better than 50 – 70%. And if you want to realize your 70% return on real estate, you have to pay the 5.65% commission (5% + hst)… for your royal bank stock, it will cost you $9.95.

#82 Daisy Mae on 09.01.14 at 12:17 pm

“It happened because we reminded the masses that they are the source of growth and prosperity, not us rich guys. We reminded them that when workers have more money, businesses have more customers—and need more employees.”

Read more: http://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014_Page2.html#ixzz3C56AzscL

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

This is so elementary. It amazes me that big business and all levels of government can’t see it. Without us, they’re nothing!

#83 liquidincalgary on 09.01.14 at 12:23 pm

@ #72 Nuke

just read your link. the writer takes an excellent position, one that i agree with.

also, the biggest ‘bang for your buck’ policy would be to raise the Basic Personal Exemption.

agree or disagree, garth?

#84 Retired Boomer - WI on 09.01.14 at 12:28 pm

Happy Labour Day.

Once a proud celebratory day of the working man, it is now a hollowed out reminder of what used to be. 7% of the US work force is represented by unions today. (See the folly of George Meaney and others supporting the Viet nam war back in the 60’s… that’s when the young guys said ‘to hell with you’)

While working mans’ wages have stagnated, and the minimum wage buys much less than 40 years ago, why should anyone celebrate this accomplishment?

US workers are on the road to serfdom in our inverted capitalism of today. Is there a cure?

True the investor class is doing well, and it always seemed in my best interests to emulate them, to do as they did.
Seemed to have worked out pretty well too.

Enjoy the holiday.

#85 liquidincalgary on 09.01.14 at 12:34 pm

@ #75 High Plains Drifter

King Ralph a friend to the plutocrats??

-cut number of public servants
-cut/froze public service wages
-dragged this province, kicking and screaming, to being debt-free (2005)
-and let’s not forget the Ralph-Rubles distributed shortly thereafter

#86 AB Boxster on 09.01.14 at 12:47 pm

TD Canada trust again offering 2.34% on the 2 year fixed until Sept 15.
I’d still rather pay 14% interest on the house I bought in 1990 (for $100,000) than pay 2.34% on the same house that is now ridiculously priced at $350,000.
24 years older and 3.5 times the price.
Totally nuts!

#87 rosie "moving forward" in the knowledge that, "this won't end well" on 09.01.14 at 12:57 pm

Down our way cherry picking season is over. It’s all peachy now.

http://news.nationalpost.com/2014/09/01/canadian-dream-myth-or-reality-tories-rebut-grim-report-on-middle-class-using-same-data/

#88 Ronaldo on 09.01.14 at 1:11 pm

#72 Nuke – excellent link. Thanks.

#89 Flawed on 09.01.14 at 1:11 pm

#76 crowdedelevatorfartz on 09.01.14 at 10:56 am
Flawed is moving to South Amerika?
Do they have bitcoin there?
Whats it called in espanol ? El scammo supremo?
When society fails and currencies are moot as you have predicted enjoy trading bitcoin …… by messenger pidgeon.
FAIL

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

Your right. Cuz the “el Scammo’s” in the Cdn govt provincially, municipally and federally that SCAM 60% of your wealth away for the shittiest services in the western world all while enjoying cloudy, wet 5 degree weather 6 months a year and paying for property tax while teachers are on strike……again…….is so much better

Hasta La Vista suckers…..

#90 aaron on 09.01.14 at 1:12 pm

#81 Darth

Last time I checked people needs to live somewhere and capital gains on are tax free on primary residence. Do you have children? You think moving every few years offers any stability? And what do you think the first thing people will buy when they make enough money in the financial market? There are so many people waiting to pound on the sfh 416 market is not even funny.

#91 Shawn on 09.01.14 at 1:31 pm

Pitchforks Coming for the ultra Rich?

72 and 78 give us the link to a prediction of pitchforks coming for the ultra rich.

Complaints about inequality have been there for decades.

It must be 15 years since I started pointing out that America had massive inequality and poverty and that the poor people all have guns. Did not seem sustainable.

So far no revolution, but it can’t be ruled out.

It may just be awaiting a charismatic leader with a vision.

Rich people should accept higher taxes at the very least. Tea party is hopefully doomed.

Hillary Clinton will be the next President.

#92 Shawn on 09.01.14 at 1:36 pm

Labour Day

A day off. A good day to reflect on how to get to the point of not being reliant on a “job”.

Working because you want to is fine. Working at a job you don’t enjoy because you have to is not so fine.

You have the day off? — Garth

#93 T.O. Bubble Boy on 09.01.14 at 2:23 pm

@ #86 AB Boxster on 09.01.14 at 12:47 pm
TD Canada trust again offering 2.34% on the 2 year fixed until Sept 15.
——————–

Tangerine (formerly ING, or “the orange guy’s shorts”) today announced 3% on high interest savings accounts until November 30th.
https://www.tangerine.ca/en/landing-page/backtoschool/index.html

Are these offers just a stealth way for banks to increase their cash position right before the end of the quarter?

Anyone?

#94 Kenchie on 09.01.14 at 5:00 pm

From Throwing in the Towel.

#146 Ayn Rand Army on 08.31.14 at 10:33 am
#113 Inglorious Investor on 08.30.14 at 3:47 pm

Nailed it!

“The solution to both education and healthcare is they need to be completely privatized, for profit, with competition. That’s how free markets innovate and find effervescence and improve quality and value over time. (just like improvements in technology and telephone switches)”

You sir, are a fool to the highest degree. Keep getting your philosophical advice from a screenwriter and leave the economics to more enlightened folk. Ayn Rand knew nothing of economic theory and essentially made up a philosophy without any self-reflection. An utterly useless human being she was.

#95 SWL1976 on 09.01.14 at 9:56 pm

#72 Nuke on 09.01.14 at 9:45 am

Great artical thanks for the link

#74 liquidincalgary on 09.01.14 at 10:26 am

was your quoted study ever peer reviewed? by whom??

———————————————————-

I can understand and process information for myself thanks

Ever ask the MSM their credentials???

#96 Running on Empty on 09.01.14 at 10:18 pm

from Don Sanderson

It is from a company called Hypotheca which is in Quebec. I noticed that only a 10% prepayment for lump sum and monthly is available instead of many competitors have 20% to 25% prepayment options annually.

This is probably why they have a much lower fixed rate.

You want to borrow from Hypotheca? Seriously? — Garth

OK, if Hypotheca does not cut the mustard, how about that other Quebec financial company; Bank of Montreal. They are offering 4.69%. Yes, it’s still a two percentage points higher than a 5 year, but what are talking about regarding rate hikes?

That is a giant insurance premium to pay for five years. — Garth

#97 Rainmaker on 09.01.14 at 11:32 pm

Garth, you have mentioned preferred shares as a component of an overall balanced portfolio – and I agree. Preferred’s 101 would be a great topic for one of your future blogs…