The lottery

LOTTO

194 Euclid Avenue is, of course, butt ugly. But to the old Portuguese couple who have lived there for years, it’s a bela casa. No wonder. Listed for $849,000, it just sold for $1,080,000.

The sawed-off bung in Toronto’s lower west side has 1,700 square feet, a basement suite, garage and two bedrooms. It was for sale for a week and got eight young couples excited enough to start a bidding war. But here’s the thing. A new semi not far away just went for $1.2 million, and a townhouse in the hood changed hands for one Kia less than $1 million. So because this sad, tired, little pile of bricks is detached, it jumped into the seven-figure range.

Here’s a picture, courtesy of Toronto Life mag, which makes this comment, “the home proves that $1 million doesn’t buy what it used to.”

No kidding.

toronto-sale-of-the-week-194-euclid-avenue-intro

About the time I was reflecting on the stupidity of man, a CBC reporter wrote me asking for a comment on the latest report card on Canadian real estate, as seen through the eyes of the federal agency known as CMHC. In case you missed this piece of trickery, let me summarize.

But before I do so, be reminded that CMHC is massively invested in the national property market. In fact without it, houses prices would be a fraction of what they are today. By allowing banks to lend to people who basically have no money, without taking risk, this agency has made cheap mortgage rates available to everyone. No matter if a kid wants 95% financing, or a 60-year-old wants just 20%, they get the same rate. Unlike, say insurance – where a smoker pays more because he’s likely to kick sooner – a penniless virgin borrows at the lowest rate because if she defaults, the government will pay the bank back.

Hence, with almost $600 billion invested in residential real estate it helped to inflate, and enabling most of the high-ratio, high-risk mortgages in the nation, CMHC’s hardly an independent or impartial player.

Having said that, I believed the analysts working there had a modicum of pride. I was wrong.

It’s called the House Price Analysis and Assessment framework, which is the agency’s Big Look at the entire Canadian housing market. Yes, it’s the same market which this pathetic blog has been reporting on almost daily with shocking tedium. You will remember the published numbers – sales reductions in more than 60% of the largest cities, price declines erupting in many, and yet three regions (Toronto, Vancouver and Calgary) where people are on drugs.

Most of the world agrees. The International Monetary Fund thinks we’ve flipped. US housing guru/economist Robert Shiller says we are on the same path that ate the American middle class. Even the big Canadian banks are on record as stating we’ve overvalued houses by about 15%.

Evidence abounds that conditions are unstable. Regional markets that popped wildly a few years ago, like Regina, are in tough shape. The second-biggest market in Canada, Montreal, has seen monthly sales declines. There’s a two-year supply of houses for sale in Halifax. Single-family home sales in Edmonton just fell 12%. All of this is happening even while five-year mortgage rates sink to the lowest point ever, down close to 2.5%.

The reason is clear. Incomes are not rising, and consumers have historic levels of debt, which keep bloating. As I showed last week, we’re adding a net new $10 billion a month in mortgage borrowing, and now a stunning 49% of all sales are going to first-time buyers – CMHC’s cannon fodder. (In the US only 29% of sales are to virgins, down from an historic average of 40%.)

Well, the feds say this: “Housing markets in Canada remain broadly consistent with underlying demographic and economic factors such as employment and interest rates. Nevertheless, a modest amount of overvaluation is observed, meaning that house prices are slightly higher than what the underlying factors would suggest.”

On Vancouver: “Low Risk — The level of home prices in Vancouver is supported by local growth in personal disposable income and long-term population growth.”

On Calgary: “Low Risk — Overvaluation in Calgary reflects the combination of strong growth in house prices and modest gains in personal disposable income.”

On Toronto: “Moderate Risk — Overvaluation in Toronto is due to steady price growth that has not quite been matched by growth in personal disposable income.”

There isn’t much doubt this will further stoke the fire, as it is intended to do. The report will be used by realtors to ‘prove’ that if the markets have any risk, it’s ‘slight’ or ‘modest.’ CHMC, which facilitated the creation of real estate values so extreme they suck off the majority of family cash flow, is now officially sanctioning them.

Meanwhile, at 194 Euclid, the wrinklies won the lotto. At least somebody gets the joke.

155 comments ↓

#1 Steve on 11.24.14 at 8:42 pm

Mr Tunrer, you rock. Not only you provide great analysis, but you can also beat Russel Peters while doing so.

P.S. This comment is to prevent some “Firrrrrrrst!” fool

#2 crowdedelevatorfartz on 11.24.14 at 8:43 pm

Apparently Salman Rushdie isnt worried about being fat or the target of a “fatwah”.
He da man.

#3 Mike T. on 11.24.14 at 8:49 pm

Are we going to make fun of people that eat, I don’t know, sausages today?

#4 Mishuko on 11.24.14 at 8:50 pm

Seriously… it’s like ‘oh yea so there is some modest overvaluation but the areas of major concern (Vancouver, Calgary, Toronto) are not showing any overvaluation.

REALLY? Can I have some of the stuff that ‘analyst’ is on? Then again, a lot of these vested interests will say what they want to appease the funder.

Ahem queue the e-cigarette / non flavoured tobacco problem. Here’s a clue, don’t tax ‘tobacco’ and tax ‘nicotine’ instead.

#5 HJD on 11.24.14 at 8:53 pm

Salman Rushde didn’t win a lottery. His accomplishments are a reflection of his intellect, writing talent and courage.

#6 Brown Dirt Cowboy on 11.24.14 at 8:54 pm

… and as if to perfect the comparison, Padma Lakshmi (woman in the picture) divorced Salman Rushdie (the guy in the picture) some few years later. Oh and he is the Vancouver Real Estate of novelists: over-hyped, over-paid and now just over. Meeeeeeooowww!!!

#7 Roman on 11.24.14 at 8:55 pm

Wait – that’s not the end of the story of this butt ugly house.

They’ll demolish, invest another 500k and sell for ummm…
I’d be even afraid to say the number out loud.
1.8 mln?

#8 Yourpicsarehilarious! on 11.24.14 at 8:56 pm

First!

#9 Tripp on 11.24.14 at 8:57 pm

Is that Salman? That’s how a sentence to death looks like?

#10 iceflows on 11.24.14 at 8:57 pm

Seems like the country is determined to go for broke.
What’s worst case scenario? Some foreclosures and tightening CMHC or full out recession from oil crash/RE crash/deflation?

#11 Lowly Renter on 11.24.14 at 8:58 pm

Oh Padma….what were you thinking….

#12 YoMofo!! on 11.24.14 at 9:00 pm

Yeaaaaaahhhhhhh! Furrrrrrrrrrrrrrrrrrst!!!!!!!!!

#13 Shanks on 11.24.14 at 9:00 pm

Thank you penniless home owners who have screwed this entire country. When the shtf, the only “people” who are going to “win” are the big banks, but probably even they will feel it…. I bet their profits will suffer when most people have no money and lose their houses.

#14 Wally Wanker on 11.24.14 at 9:01 pm

And when it all comes crashing down they still get to say “well we did say there was some risk”. How quaint.

#15 Tony Warren on 11.24.14 at 9:01 pm

“On Vancouver: “Low Risk — The level of home prices in Vancouver is supported by local growth in personal disposable income and long-term population growth.””

What a hoot, I did not know that everyone in Vancouver was making the 450 grand a year it takes to buy a 1.4 million dollar home.

#16 the Jaguar on 11.24.14 at 9:01 pm

It’s disturbing that CMHC, whose original mandate was to assist Canadians with financing their homes got so out of control. Yes, they have cut out the rentals and other riskier bits, but they still participate for example in lending money to people who are not residents of Canada, and they will insure just about anything. They are just part of the greater Ponzi scheme that the federal government, developers, builders, banks, and real estate cartel all participate in. If one of them goes down they will take the others along, and so the charade is maintained with desperation, the press bought, whatever it takes. There are a few (like Garth) who can see it for what it is, and are trying to help. When will people wake up and realize this is real life, real money, and in the end real heartbreak. It’s not a television reality show.

#17 Albert on 11.24.14 at 9:02 pm

So WHEN WILL PRICE GO DOWN ????
every year it goes up…

#18 Mr.Hulot on 11.24.14 at 9:03 pm

That guy has been awarded almost every literary prize in the world. So she won the lottery.

#19 Drill Baby Drill on 11.24.14 at 9:03 pm

Dear Pathetic Blog : the wrinklies who just won the lottery will most likely turn right around and purchase a McMansion in Vaughn for $800K and live off of their remaining $200K in retirement with their municipal worker pension of $40K/yr. Still house poor and in real terms not much better off.

#20 j shum on 11.24.14 at 9:06 pm

read you quotes on what the cmhc says. thnxs for the laughs

#21 Andrew Woburn on 11.24.14 at 9:08 pm

“Why a house-price bubble means trouble”

Nothing too surprising here for regular readers of this blog but it is interesting to get a view on the subject from the Financial Times, one of the world’s leading financial journals.

http://www.ft.com/intl/cms/s/0/66189a7a-6f76-11e4-b50f-00144feabdc0.html

#22 Nemesis on 11.24.14 at 9:08 pm

#Seriously… #FatwasAreSoYesterday…

http://youtu.be/saA3gi9h-M4

#23 J-runner on 11.24.14 at 9:09 pm

$1.08M for that? Y`know, I love Canada, but this is getting silly. I own a townhouse free & clear in our nation`s capital that is nicer than that tiny brick house. But I cannot justify upgrading to a larger house in this inflated market: anywhere nicer would be double the price ($600K), and anything comparable in price is a pressed-cornflake sham of a building located way out in the burbs. No thanks; I`ll stay put until I retire and then leave Canada for a country with sane prices and better weather.

#24 Mark on 11.24.14 at 9:15 pm

“So WHEN WILL PRICE GO DOWN ????
every year it goes up…”

Already happening, my friend, already happening throughout most of Canada. Only changes to the sales mix, and quotation of increasingly narrow statistical measures of the market (ie: instead of GTA average pricing, now they seem to be concentrating specifically on “Toronto” and even certain neighbourhoods) have created, at least for the moment, the allusion of price stability.

The same nonsense played out in the USA 2005-2007 before broad-based price declines became un-deniable in 2008. The sales mix shift was quite dramatic there as well as subprime loan issuance crashed, as it has in Canada recently on account of CMHC subprime insurance policy tightening.

#25 Blobby on 11.24.14 at 9:19 pm

Something tells me Mr H probably wouldnt allow them to tell the truth this close to an election..

(which – i predict will happen before March)

#26 Mark on 11.24.14 at 9:20 pm

“Some foreclosures and tightening CMHC or full out recession from oil crash/RE crash/deflation?”

Very strong deflation is the biggest risk. Think of the CAD$ at $1.5 USD$ because none of the consumer class has any money to import anything, and experiences insatiable demand for CAD$ to repay debt. Think of the incremental damage that will do to the remnants of the manufacturing sector.

Mark my words, a program of QE and ZIRP or near-ZIRP for pretty much the next decade is going to be required to resolve Canada’s debt mess.

#27 Terrier on 11.24.14 at 9:22 pm

Some people are so frickin’ brave … I guess you can’t fix stupid.

#28 saskatoon on 11.24.14 at 9:22 pm

from today’s toronto star:

“Should we be worried, too? I don’t think so. Price increases will moderate as interest rates slowly rise, but that’s no cause for panic. Home ownership is about a place to live, so the horizon should be long. While the big gains for condo investors may be over, for those who plan to live and work in Canada’s largest and most desirable city, waiting probably won’t help. If they’re forming households or just tired of paying rent, they might as well pay themselves first. That’s the prime law of personal finance.”

and this juicy tidbit:

“An annual study by the Canadian Association of Accredited Mortgage Professionals (CAAMP) confirms that first-time buyers are thinking along those lines. Far from being naïve, they’re aware of the risk and coming in with hefty down payments (as they historically do) and locking in for longer terms. CAAMP says about eight out of 10 borrowers are opting for fixed, longer-term mortgages, typically five years.”

#29 Sam on 11.24.14 at 9:23 pm

I don’t eat pork or sausages. Does that explain anything? Or does it just ensure we are now well side-tracked from strong topic-related counterpoints?

#30 bobknusa on 11.24.14 at 9:23 pm

194 Euclid also proves Torontonians and probably CDN’s in general from my travels have no taste whatsoever

talk about curb appeal, and I thought what I saw in the hills of Arkansas were crude

#31 TEMPORARY® Foreign Prime Minister on 11.24.14 at 9:25 pm

Latest score:

Canadian Bank Lobbying:………….1
Canadian Consumer:………………..0

Can’t wait for ‘sudden death’ overtime.

#32 Matt on 11.24.14 at 9:25 pm

So when does cmhc stop messing with normal economic market conditions? Will they even pull out or would that be another domino that accelerates the fall?

#33 Market Man on 11.24.14 at 9:26 pm

Million dollar homes are not being bought
With 5% down Becausevthis house sold over
A million No insurance was needed.

This is more about couples putting 65% of
Their income towards mortgage only.

Market comditions look to remain the same for
2015

#34 NoName on 11.24.14 at 9:26 pm

http://i61.tinypic.com/5upgm8.jpg

Why I didn’t think of this one, church condo, repent for your sins daily.

#35 Linda on 11.24.14 at 9:31 pm

#13 – Don’t count on the banks losing. Back when the boom busted in the 80’s in Cowtown & interest rates were as high as 22%, the banks would not re-negotiate the mortgages for homes the occupants could no longer afford to live in (no job, no money, big debt = financially busted). So lots & lots of people walked by declaring bankruptcy or let the bank foreclose on the property. The banks wailed, moaned, beat their breasts, declared they were ‘losing’ money hand over fist (but still would not re-negotiate) yet – surprise! – posted record breaking billion dollar quarterly returns on investment. And yes, that happy event continued all throughout the bust years. How’d that happen? Bet CHMC had something to do with it…..

Plus also read the headline today that Canada’s housing market is ‘moderately’ over valued. So is it the 15% they claim is moderate or is it the as high as 30% that they claim is ‘moderate’ over valuation?

#36 james on 11.24.14 at 9:31 pm

“The level of home prices in Vancouver is supported by local growth in personal disposable income and long-term population growth”

They made this up.

There’s not a shred of evidence that personal disposable income in Vancouver is ‘growing’. There’s plenty of evidence that residents of BC are at negative savings rates.

#37 Obvious Truth on 11.24.14 at 9:36 pm

Just think of the price appreciation if you added a vegetable garden in the front yard!

On another note gartman says oil in the 60’s easy.

Probably means it’s bottomed. But maybe not. Starting to feel like it really is part of a geopolitical battle. Hope it doesn’t mean more war.

#38 gmc on 11.24.14 at 9:43 pm

DELETED

#39 TEMPORARY® Foreign Prime Minister on 11.24.14 at 9:46 pm

#17 Albert on 11.24.14 at 9:02 pm
So WHEN WILL PRICE GO DOWN ????
every year it goes up
=========================

Only when true supply/demand market forces are allowed to prevail, something that the current over-lobbied finance minister has been hand-cuffed from allowing.

No government, regardless of political stripe, would ever allow trillions of voter pyramid home equity evaporate on their watch, particularly within a year before a fixed* federal election date.

*fixed: /fikst/adjective, as in “to predetermine an outcome through nefarious means such as hypocrisy, bait-and-switch, party donation in-and-out-schemes, revenue in-and-out schemes, attack ads, robocalls, (in-)Action Plans, Gazebos, and other outrageous affronts to Canadian democracy.

#40 Timmins on 11.24.14 at 9:49 pm

Albert true story of an immigrate coming to Canada and knowing true hardship and the need to preserve one wealth. I work overseas and got my silver panda when China first released it, it is a token souvenir for me, I waited 1.5 hrs in line to get it, but the many that waited in line, it is serious stuff to get their hands on the metal, 1 billion in china and a n billion in India, plus many more can make a trend , even if you think is t nit right, the masses will prevail, if all of these simple folks thinks there is value in their metal, then the next trend id up…all I am trying to say is, we do not have an honest system, and Garth is basing his fortunes on a honest, law a bidding, protect the people regulators run by bur crate that are supposed to make sure we are safe, this is so far from the truth, that is why I believe most are not cocky like Garth when it comes to investing, we are ALL SACRED Shitless of the system we are forced to play in, all of the gains made since 2008 could all evaporate in one blink of the computer run logarithm financial program to enrich the few, we are toast for sure. Juast wait until the kids start to drop off the keys at the banks, no worries for them but really as a country it will set us all back.
ARE YOU REALLY DIVERSIFIED

#41 45north on 11.24.14 at 9:49 pm

iceflows : What’s worst case scenario? Some foreclosures and tightening CMHC or full out recession from oil crash/RE crash/deflation?

well in the US, the banks turned into zombies, they refused to foreclose because they would have to write down the loss, in Canada they would submit a claim to CMHC

again in the US, thousands of mortgages were bundled into securities which failed to perform when people stopped paying their mortgages, obviously people who held the securities were stiffed. In Canada, I really don’t know the level of securitization – I assume the banks hold the mortgages directly. I assume they would make a claim to CMHC.

in the US, Fannie Mae and Freddie Mac guaranteed the mortgages and the securities. They were both nationalized but still exist. In Canada, CMHC guarantees the mortgages. Worse case scenario, claims overwhelm CMHC. It hasn’t happened yet and CMHC is making a profit. In the last year, CMHC has dropped sales more than $1 million and more to the point it can only insure mortgages totaling $600 billion. This does give them the flexibility to pick only the best risks. Thus CMHC protects itself but at a cost. CMHC rejects the rest so the people rejected don’t buy a house so sales go down. The economy slows.

Politically the worse case scenario , has a political party promising to raise the CMHC limit above $600 billion. Standards are lowered, sales go up and the economy speeds up. Also there is a political backlash against foreclosures. Again taking the US as an example, what happened is the banks claim were not voided but they (the banks) were forced to delay foreclosure and forced to modify the original mortgages. Mark Hanson writes extensively about mortgage mods. From the banks perspective they are worse risks than the original. From the perspective of the borrowers, there is endless forms and bureaucracy ( after all the banks, have limitless legal budgets). In some cases, the borrowers are worse off. There is a net increase in stress.

All of this is available, for free on the internet.

corrections?

#42 David McDonald on 11.24.14 at 9:55 pm

The CMHC website does give a list of qualifications for getting insurance in addition to the minimum 5% down. For instance the monthly cost of housing should not exceed 32% of income. I suppose that as rates gradually rise fewer people will qualify. This will gradually force prices down. The key word is gradually. Garth is right; we won’t see a crash but rather a long painful adjustment.

#43 Happy Renting on 11.24.14 at 9:57 pm

#13 Shanks on 11.24.14 at 9:00 pm

We’ll all feel it a little (at least) when the SHTF, but those with cash (likely “the rich”) will scoop up houses and assets at a discount, with the longer-term effect being regular people will be poorer for selling low, and the rich will be richer for buying low. Though not rich, I’m trying my best to be on the “have cash” side of things.

#44 Happy Renting on 11.24.14 at 10:00 pm

Long before I found Garth’s blog I realized that the freedom $1M could buy me was worth way more than any house… Never mind how much the bidding war “winners” will end up paying when you throw in mortgage interest and maintenance costs.

And as my better half observed: 194 Euclid isn’t even that nice an area.

#45 Sheane Wallace on 11.24.14 at 10:02 pm

Finally, I lived to read it:

In fact without it/CMHC, houses prices would be a fraction of what they are today.

This is what the Ca dollar is worth: less than 1 millionth of that shack.

I would not live there even if they pay me.

#46 bdy sktrn on 11.24.14 at 10:13 pm

Are we going to make fun of people that eat, I don’t know, sausages today?
———————————
i think monday is make fun of people who eat HAM day

#47 Jimmy on 11.24.14 at 10:14 pm

“The level of home prices in Vancouver is supported by local growth in personal disposable income and long-term population growth”

Definitely spoken as the truth! The population growth came from the increase in realtors and the growth in personal disposable income is from the nice commissions they’ve made on the crazy locals trying to outbid each other to get a detached house so they can then turn it around and try to sell for a profit right away like they saw on TV…

#48 Mark on 11.24.14 at 10:22 pm

“CAAMP says about eight out of 10 borrowers are opting for fixed, longer-term mortgages, typically five years.””

Rather hilarious. This CAAMP group thinks that “five years” is “longer-term”? lol, good one. Nearly fell out of my chair when I read that, as though a 5-year mortgage is a “long term” when viewed with respect to a 25-year or even longer amortization.

#49 bigtown on 11.24.14 at 10:25 pm

FYI: All you boomers heading down the 75 South to the Gulf gas is now under $2.50 a gallon.

Read in the Wall Street Journal buying a larger home affects your retirement when you are spending half your income on housing in your senior years.

Researching Rents outside the GTA and it is shocking how much value you get in places like Kingston; London; Kitchener and Hamilton. Toronto is hard on senior and/or the retired for housing costs as the concept of SENIOR HOUSING or rents based on income is an American concept that gets a retrofit when it comes north it ends up as SOCIAL HOUSING.

#50 Mark on 11.24.14 at 10:25 pm

“Politically the worse case scenario , has a political party promising to raise the CMHC limit above $600 billion.”

There’s only so much credit that can be shoved down the throats of borrowers before they are simply exhausted. The reason we’re seeing prices go down right now isn’t so much that interest rates have risen (they haven’t…actually the opposite), but rather, that there’s simply buyer exhaustion. 70%+ of Canadians already own. The pool of potential buyers is just so limited at this point, and as the declines continue, there’s a lot of sellers starting to appear at the margins. Construction workers newly unemployed. Realtors who are seeing the commission streams dry up. All the folks who support them. Etc.

#51 Roy on 11.24.14 at 10:25 pm

1 in 3 kids on Toronto live in poverty
http://globalnews.ca/video/1672815/1-in-3-kids-in-toronto-lives-in-poverty/

The CMHC, banks, realtors, realty boards, homeowners, and our governments must be proud of what they have accomplished with our housing markets

#52 Sheane Wallace on 11.24.14 at 10:27 pm

Garth, this is Salman Rushdie. I would change the picture, somebody might think you are endorsing him.

Of course. She won. — Garth

#53 Mark on 11.24.14 at 10:28 pm

“No government, regardless of political stripe, would ever allow trillions of voter pyramid home equity evaporate on their watch, particularly within a year before a fixed* federal election date.”

You really think that George W. Bush decided that the end of this presidency would be marked by a collapse in the housing market? Governments have far less control over the collapse phase in housing, than they do in the expansion phase. We’re clearly at the cusp of the collapse phase, with the recent price reductions seen.

#54 Sheane Wallace on 11.24.14 at 10:35 pm

#53 Mark

If CMHC just hangs in there for another 3-5 years all the problems would be solved and no price decline will occur.
On the contrary, we might add 2 or 3 more zeroes to the prices.

#55 Mark on 11.24.14 at 10:36 pm

“In Canada, I really don’t know the level of securitization – I assume the banks hold the mortgages directly. I assume they would make a claim to CMHC.”

In Canada, there’s no meaningful amount of securitization that does not also involve CMHC insurance. Unlike in the USA where, at least nominally, there was private sector risk-taking in the MBS / CDO packages that were created.

This is why Canada’s MBS market is unlikely to puke like happened in the USA — the CMHC is standing behind nearly all of it. But there is risk to the value of MBS and to the banks if the federal government starts sabre-rattling about paying out CMHC insurance claims. Hence, the chief risk to the Canadian banking system is not that of widespread mortgage default causing losses, but rather, almost entirely political risk in nature.

#56 45north on 11.24.14 at 10:37 pm

Mark : “So WHEN WILL PRICE GO DOWN ????
every year it goes up…”

Already happening, my friend, already happening throughout most of Canada. Only changes to the sales mix, and quotation of increasingly narrow statistical measures of the market (ie: instead of GTA average pricing, now they seem to be concentrating specifically on “Toronto” and even certain neighbourhoods) have created, at least for the moment, the allusion of price stability.

talking about the real estate boards. “what you are paid for is to help us”

(caution abusive language)
https://www.youtube.com/watch?v=rW7WlT6OJxE

Think of the CAD$ at $1.5 USD$ because none of the consumer class has any money to import anything, and experiences insatiable demand for CAD$ to repay debt.

you mean $1 Canadian = $1.50 US ?

so everything in WalMart goes up 50% ?

the Canadian political system cannot stand such a thing

#57 lee bow on 11.24.14 at 10:38 pm

It’s going to be the same BS again “we assumed default correlations based on 2005 X-Mas eve historical data”. Just we are on the hook this time.

In September, one E. Siddall, the CEO of CMHC, said the following.
“We are actively considering the merits of publishing our stress testing results to gain insights from others and better inform Canadians about CMHC. For now, I am pleased to report that our stress testing confirms that CMHC would survive a 2008-2009 U.S.-type housing and financial crisis, if that were to occur in Canada. Further, our analysis suggests that we have sufficient capital to withstand a severe and prolonged economic recession.”

#58 Nemesis on 11.24.14 at 10:43 pm

“I believed the analysts working there had a modicum of pride.” – Hon.GT

NoS**t, AuldPol! NoS**t.

They truly did…

Nothing to do with mortgages, though… An altogether different acronym, as it were…

And… upon careful reflection – I will concede a somewhat less intractable problem/adversary… “Natch.”

Hence, the analysts’ occasional SpontaneousRiverDancing…

http://youtu.be/eLdRHs6XPL0

“Those were the days my friend…”…

&,Strictly between the two of us, AuldPol… you do realize that the TeaLadies – yes, the TeaLadies were the RealBrains behind that entire operation, right?

http://youtu.be/_VSTjo0i_EE

[BonusZenForKryptophiles: http://www.nytimes.com/2014/11/21/us/another-kryptos-clue-is-offered-in-a-24-year-old-mystery-at-the-cia.html?_r=0%5D

#59 Kris on 11.24.14 at 10:50 pm

DELETED

#60 Smoking Man on 11.24.14 at 10:50 pm

Man have I changed, normally I would say something along the lines of.

Told you bastards SFH in 416 solid gold. LaughingCon where are you.

#61 Marie on 11.24.14 at 10:53 pm

I think you’d be hard pressed to find anyone in the media or government who acts with much pride. Remember…follow the MONEY.

As another comment pointed out the woman is Padma Lakshmi and her then husband Salmon Rushdie. Their estimated net worths are both in the multi millions and not far apart. Given her career I’d say hers has the potential to grow much more then his. Maybe a more picture for a lottery win would’ve been Aaron Spelling’s daughter and her husband. Now there’s a man who can follow the money. Just sayin.

#62 Hmmmm? on 11.24.14 at 10:57 pm

Generally agree with your stuff, but as you yourself have often stated when real estate boards do it, using month to month comparisons is garbage. So saying Edmonton sales crumbled 12% is being just as disingenuous as the realtors who take every month to month gain between February and May as evidence of a booming market. Year over year, Edmonton is up in terms of sales and prices.

Year/year is history. Month/month is trending. — Garth

#63 Cato the Elder on 11.24.14 at 10:58 pm

The middle and lower class does not get the benefit of printing money.

The upper classes and business elites get access to credit first and on the best terms. They get to buy up all the assets, thus bidding the prices up.

This is very simple. And yet, everyone is always discussing the SYMPTOMS of the problem and how to alleviate them. Why don’t we take this a step further back and examine where the symptoms ORIGINATE from?

We need an honest currency again. Gold and silver served this purpose for a long time, and our middle class grew and thrived. Commodity money reflects REAL work in the REAL world. You can’t create it by decree. You must actually LABOUR to create the medium of exchange. This is HONEST MONEY.

A banker can print billions of dollars at the drop of a hat. That is precisely what the US Federal Reserve did when they printed over 15 TRILLION DOLLARS to bailout all their friends post 2008. And how much of that has made it’s way into the average person’s pocket? Almost nothing.

Our entire system of government has been hijacked. People need to wake up and realize this before it’s too late. We have already passed the tipping point. Our system of government is now being used AGAINST US because WE ARE THE ENEMY of this insidious banking cartel. Domestic spying, endless wars, indefinite detention, increasing taxation etc. All so we can be serfs to the banking classes like it was for millennia before the American Revolution.

#64 Porsche on 11.24.14 at 10:59 pm

Did he hit the jackpot or did she? lol

Why do you think I chose it? — Garth

#65 ozy - kids are TOAST on 11.24.14 at 11:00 pm

ANTHER COMMENT:

kids are TOAST, will have to hang a sign their necks: WE WORK for FOOD

because, their salaries in a decade, will only be able to cover food.

All thanks to globalization and unfair competition with outsiders taking over local markets….

good work GRANDPAS!!! good vote, good vigil. Those soldiers wasted their lives in 2 wars for…..absolutely nothing!! Oh, no, wait: sorry, to enrich the already putridly rich folks that own the banks and the GOVT.

what a shame!

WE WORK FOR FOOD :) DON’T LAUGH. IT’S COMING

#66 Freedom First on 11.24.14 at 11:06 pm

Looks like when there is a housing market soft landing (smile) in any country their Bank shares and R.E.I.T’s get hammered.

Our individual R.E.I.T’s and bank shares are very expensive right now. Just look at the run up in share prices of the bank stocks. The ETF’s not so much but still overpriced. This includes Canada being CMHC/taxpayer backed or not.

Thank you everyone for not answering my query about Canadian Bank stocks last week referring to me being underweight in that sector. No answer said a great deal.

I believe that Canadian bank shares and r.e.i.t.’s should be severely underweighted right now. I did just that. It is the 1 advantage that the retail investor has. To sometimes sit on the sidelines in any sector. Over my lifetime, in RE, or any other sector, this has paid off big time. I think the Canadian Gov’t, the RE industry, and the Banks, are $$$$hitting their pants right now. Stinks.

There will be huge deals coming for those who are patient, debt free, liquid, well diversified, overweight in cash, and with several income streams giving good cash flow. The October drop in other sectors gave huge deals. I bought those. As always….my Freedom First.

#67 Brian on 11.24.14 at 11:16 pm

The sad thing is people are content to spend the rest of their adult lives paying off the mortgage. Voluntary slavery. Retirement planning?- what’s that?

It’s terrible for everyone except the one time transfer of wealth like this old couple just got.

#68 Mark on 11.24.14 at 11:16 pm

“The upper classes and business elites get access to credit first and on the best terms. They get to buy up all the assets, thus bidding the prices up.”

Funny you mention that. Was reading on another forum that there has been some fairly dramatic shrinkage in Canadian ownership of some of Canada’s largest index mutual funds, such as TD Canadian Index, and the iShares S&P/TSX60 trust otherwise known as XIU. If Canadas rich people, who own these funds, are using cheap credit to buy stuff, they sure as heck aren’t likely expanding their Canadian stock holdings.

Which is actually a fairly bullish sign — investor enthusiasm for a particular asset class usually is in a severe state of decline at local bottoms. Those two funds alone haven’t seen levels of units outstanding that low in many, many years even prior to the 2008/2009 collapse. If anything, it appears that the investor class of the public is chasing the last remnants of the bubble du jour rather than looking for long-term value.

#69 waiting on the westcoast on 11.24.14 at 11:16 pm

Yeah… But it’s fenced…

#70 There's more than one way to skin a cat on 11.24.14 at 11:20 pm

Assuming the first-time buyers will fall into extreme financial hardship as Mr. Turner seems to imply, the Finance Minister can always come up with a back-up plan e.g. – setting up a state-run «National Happiness Fund» to help the more financially vulnerable tranches of society to better cope with the debt burden through write-offs, reladdering, restructuring, etc….Clearly, there’s more than one way to skin a cat.

#71 Mike S on 11.24.14 at 11:25 pm

Hard to agree

When 5% downpayment people default the government will have to assume the debt. Also diminishing growth (because of the housing de-leveraging) and the necessity to stimulate the economy by deficit spending, almost guaranties downward pressure on the CAD (which still won’t help house prices in CAD terms, let alone real terms)

That said, if the oil were to rebound (it is very hard to predict) some possitive pressure on CAD might be possible

#72 Suburbanguy on 11.24.14 at 11:31 pm

I no longer believe that the Canadian real estate market will correct in any meaningful way. If it were to look grim, the government would just use the current balanced budget to make mortgages deductible or partially deductible. Too much depends upon this mirage of affluency.

I used to believe like Garth that we’d get a meaningful correction but now I think that the any correction we do get will be a result of a monumental catastrophe. Perhaps a hot war. Perhaps a natural disaster of immense magnitude. It could be the financial implosion of Japan which has the possibility of taking down the world economy because of the carry trade. It could be an epidemic. Perhaps a solar flare. Perhaps something as mundane as the break up of Europe which causes financial panic that ricochets around the world.
I don’t know where or when this real estate bubble will end, but when it does, it will be part of a world wide catastrophe and cause unimaginable suffering.
Do you like my cheery prediction tonight?

#73 Mark on 11.24.14 at 11:38 pm

“almost guaranties downward pressure on the CAD “

Debt deflation tends to be currency-positive. Why? Because people are concentrated on paying back debt, and are generally restrained from importing stuff. Domestic production rises. So I would disagree with your claim of ‘downward pressure on the CAD’ — if anything, quite the opposite is likely to occur.

#74 Bottoms_Up on 11.24.14 at 11:43 pm

Garth I can see why you stayed out of politics.

Conservative MP meets with Liberal MP. One registers under a different name and tape records the conversation. The other gets spouse to take covert pictures, ‘just in case’.

http://www.theglobeandmail.com/news/politics/conservative-attempt-to-embarrass-liberal-candidate-ends-up-backfiring-on-tories/article21742151/

#75 Bottoms_Up on 11.24.14 at 11:46 pm

#72 Suburbanguy on 11.24.14 at 11:31 pm
—————————————————-
With a recovering US, it’s difficult to see how there would be a sustained or substantial downturn here. More like the ‘slow melt’ Garth has talked about, years of limited or no price gains, thus losing ground relative to inflation.

Really, the Canadian government’s dream come true.

#76 Observer on 11.24.14 at 11:49 pm

The market can stay irrational longer than you can stay solvent.
John Maynard Keynes

#77 JSS on 11.25.14 at 12:20 am

Has anyone noticed how low the P/E’s are for Canadian banks these days?

#78 Bhutthola on 11.25.14 at 12:31 am

DELETED

#79 Herf on 11.25.14 at 12:33 am

‘On Vancouver: “Low Risk — The level of home prices in Vancouver is supported by local growth in personal disposable income and long-term population growth.”

On Calgary: “Low Risk — Overvaluation in Calgary reflects the combination of strong growth in house prices and modest gains in personal disposable income.”

On Toronto: “Moderate Risk — Overvaluation in Toronto is due to steady price growth that has not quite been matched by growth in personal disposable income.”’

Sounds like Minister’s briefing notes written by one or more of his/her flunky bureaucrats. Guess you’d be familiar with those, Garth.

#80 InvestX on 11.25.14 at 1:25 am

Amazing how rates have remained so low for so long, something even this blog denied could be possible. Japan was ignored. It was different here.

#81 nonplused on 11.25.14 at 1:25 am

Hey Garth, couple of points on todays blog:

1. If I could trade my house, lottery winnings, or my kids inheritance for the tasty looking yummy in today’s photo done deal end of discussion. And I don’t mean the guy. I guess you have to clarify that these days.

2. Calgary has not got rising wages it’s got rising numbers “not in the work force” just like the US. Pay your mortgage with that at $4 gas and $80 oil.

3. Over a mil for a bung like that definitely we’ve all lost our senses. Unless you make $300,000 a year, you shouldn’t be buying something that costs a mil. The top 10% don’t make $300,000 a year on average as we discussed at length.

4. But if I could sell a bung for a $mil and give half to that hubba hubba (the girl) for services rendered it’s a done deal. I’ve paid more for less.

#82 Tony on 11.25.14 at 1:37 am

Re: #62 Hmmmm? on 11.24.14 at 10:57 pm

Real estate in Edmonton is selling at less than what it sold for way back in the summer of 2007. I’m sure when things get sorted out in that city real estate will fall every year in the future.

#83 nonplused on 11.25.14 at 1:40 am

And from yesterday, I don’t get the bacon thing. Bacon makes everything better. Moderation of course, but mmmmmm.

And Garth can ride a Harley and not eat bacon? Something isn’t right. He knows not the likely nature of his demise. (It’s not bacon.) Light up a cigar next time you get of the bike Garth, and grab a whisky too. There is a Rav4 out there with your name on the idiot driver’s forehead.

I ride bikes too. Love it. But people in cars are stupid and I like them much better when I’m tooling around in my Dodge 3500. Nobody cuts me off in the Dodge. The bikes I just think everyone will. Saved my life more than once. And bacon. yum.

#84 Bill Gable on 11.25.14 at 1:43 am

As Bugs Bunny so eloquently said, and I will say it again – “I am surrounded by maroons….”.

Incredible!

What a joke.

#85 Jane24 on 11.25.14 at 3:53 am

I didn’t know that the CHNC would insure people that didn’t even live permanently in Canada. How crazy is that!

Cdn taxpayers subsidising the world! And no one complains! No taxpayers are rioting in the streets! What is it with you people!

Unfortunately the current govt will do all it can to maintain a steady ship until the election. No-one wants the whole mess to collapse on their watch.

Once the Red Prince is in power then see the whole thing collapse.

#86 Lillooet, BC on 11.25.14 at 3:59 am

I don’t agree with your statement “The CMHC allows banks to lend to people who basically have no money, without taking risk”.

Banks and credit unions, at least in my experience, can be reluctant to lend.

Two examples: when I was a young lad in my late 20’s (1980’s) with a 20% downpayment, full time high tech job in Toronto, employed for 3 years, stellar credit rating, no other loans, no car loan, no credit card balance, was REJECTED by a major bank for a mortgage on a $90,000 condo, because I wasn’t making enough salary in their opinion. I was devastated. My big dreams of owning my own place were quashed. I had to wait another six months, save another five thousand, get another 2% raise, wait for interest rates to fall from 12% to 10%, THEN I was approved.

Many years later, now self-employed, wanted to buy a house for $150,000 in small-town BC, 75% cash downpayment, good credit rating, car loan for $10k, $200k in other assets, three previous mortgages paid off long before maturity, never missed a payment, …. was barely approved by credit union, who pored over my assets and financial history for two days, then insisted on mortgage insurance (I paid the premium). Comment was “well, you’re self-employed, so we have to be extra careful.”

So Garth, my experience has been the opposite to what you purport.

#87 Chickenlittle on 11.25.14 at 8:46 am

http://m.theglobeandmail.com/report-on-business/economy/oecd-sees-boc-starting-to-hike-rates-next-spring-steadily-thereafter/article21744666/?service=mobile

I’m surprised no one has posted this yet.
Their power must still be out.

How many times do I have to say rates will start rising in 2015? No matter. Nobody believes me. — Garth

#88 David McKenna on 11.25.14 at 9:03 am

@Albert

So WHEN WILL PRICE GO DOWN ????
every year it goes up…

In Toronto just wait until the following happens:

0. Credit agencies downgrade Ontario and province enters interest rate death spiral
1. Liberals introduce Ontario Pension plan, taking 4% away from middle class incomes, for the first $90k or so.
2. They start cutting civil servants and government spending
3. Ontario starts increasing income tax

#89 Ferguson State Prosecutor on 11.25.14 at 9:21 am

I am pleased to be able to offer my services here to Garth’s blog.

As you know, we successfully resolved a minor issue here yesterday. The grand jury, comprised of 75% white jurors (in this town of 67% black residents)dismissed the indictment request against a white police officer, because we, I mean they, found the black witnesses were not as believable as the white ones.

That’s not racism, but simply an astute and unbiased assessment of credibility.

From now on, posters on this blog please indicate your race in the first line so we can decide whether to read you or to just skip over unreliable testimony.

Thanks for your cooperation.

Oh, …and….HANDS UP!!!

Just kidding – I love saying that :)

#90 Londoner on 11.25.14 at 9:30 am

#86 Lillooet, BC

The days of prudent lending are long gone. I used to work in retail banking for a short time during the early 2000’s. Back then we could get clients with up to 42% TDSR approved for mortgages. All we had to do was tell the underwriter about potential cross sell opportunities. Tied selling was (and still is) illegal but it was all about hitting sales targets. I doubt much has changed since then.

#91 Dan on 11.25.14 at 9:41 am

Question for Mark:

You keep saying CDN equities are under-valued and will rise but how exactly do they flourish in a low rate environment (in seeming contradiction to your statement below)?

Mark my words, a program of QE and ZIRP or near-ZIRP for pretty much the next decade is going to be required to resolve Canada’s debt mess.

I know US equities did indeed flourish between 2010-2013 so I guess I’m asking what the mechanism was that triggered their ascent from the bottom.

#92 Mike in Toronto on 11.25.14 at 9:41 am

“How many times do I have to say rates will start rising in 2015? No matter. Nobody believes me. — Garth”

Question is: has the market factored it in, or are we going to see sharp downward moves in bonds today?

#93 Funny that on 11.25.14 at 9:44 am

Hey Garth,
The guy in the picture looks like you with a lot less hair.

My wife is hotter. — Garth

#94 Mak the investor on 11.25.14 at 10:04 am

As I look at the future through my crystal ball, I see a lot of house owners default on their loans and guess who will pay the price of their folly? All of us taxpayers through CMHC.
So the young virgin home owners will enjoy their shiny new homes for some time. Maybe declare bankrupcy and walk away leaving us to pay off their debt.
So who is the greater fool?
Hope this does not happen.

#95 LP on 11.25.14 at 10:11 am

I keep thinking about yesterday’s post about the projected budget surplus and something has been bothering me a lot. I couldn’t put my finger on it until this morning over coffee while staring out at the yard at all the birds on the feeders.

The “budget” you posted ran to five (I think) 8.5 X 14 inch pages, single sided print. At least, that’s what appeared on my monitor when I clicked on the link. Why then, when the Finance minister tables the budget, does the thing weigh several pounds and stand about 4 inches in height? Even allowing for notes to the budget, that much print must contain a myriad of other line items that we couldn’t see in the link. I used to be a bookkeeper so I understand that there will be sub-sections under many of the line items, so it’s not really possible for us to suggest realistic reductions – or even additions – to the proposed budget.

However, what if we made it a rule that the government’s budget MUST fit on five 8.5 X 14 inch pages with single-sided printing? Maybe not forever, but for the next five years or so, just until the deficit is back to zero or at least a very manageable number.

#96 Rational Optimist on 11.25.14 at 10:13 am

Just the other day, someone lent me Salman Rushdie’s Memoir, “Joseph Anton.” I had read his novels but didn’t know much about his years living under the fatwa. Very good read. He’s a very intelligent- and brave- man; he deserves to enjoy himself after what we went through.

#97 gladiator on 11.25.14 at 10:20 am

AND it eats up 2 BILLION dollars per year.
CMHC, I mean. See yesterday’s post.
Something about insult and injury is due to be mentioned here. Or is it just my impression?

#98 Rentyyc on 11.25.14 at 10:42 am

Were the words record high house prices or record high consumer debt even mentioned in the report? Wouldn’t that be a major risk to any market?! What a sad excuse for analysis. Makes me sick how many people take it at face value.

#99 TheLaughingCon on 11.25.14 at 10:53 am

And in the other news (beside the rates rising in 2015, Ferguson and the booming USA where Q3 GDP was revised upward to 3.9%) we have a forming Central Banks run on the “barbaric” stuff.

First it was Germany – they did try, got a miniscule amount and apparently stopped (or perhaps the silent repatriations continue in order do not sink the ship…)

Then it was Netherlands who asked (politely or not) and got 122.5 tonnes of that stuff.

And now we have France where the leader of the opposition has written an open letter to the “Governeur de la Banque de France” asking for “rapatriement urgent sur le sol français de la totalité de nos réserves d’or se trouvant à l’étranger” and a lot of other conspiracy theory stuff:

For the francophones – http://www.frontnational.com/2014/11/lettre-ouverte-de-marine-le-pen-au-gouverneur-de-la-banque-de-france%E2%80%8F/

And we have “barbaric” referendum in Switzerland this coming Nov. 30!!!

And then one…. diversifies..

Let me see if this posting will make it or not.

PS. As a public announcement this is a warning to well to do readers of this blog with their love for France – avoid travel with AirFrance until this matter is solved – there may be a risk of a sudden engine malfunction on their planes causing a lot of deaths for the FN functionaires or even risk of stray rocket fired by a Russian ship “made in France” (this bilingual french-russian menus are hard to navigate…???)

#100 justeunperdant on 11.25.14 at 10:54 am

Canada is mainly a natural resources driven economy with an housing and automobile bubble. It is difficult to predict the future but if the price of oil keep going down, it is possible Canada will go the way of Nigeria and have to raise interest rate and devalue the currency to attract buyer of Canadian debt. Canada has no manufacturing left and is totally depend on the housing automobile bubble and high revenues generated by high oil price. So yes a raise in interest rate is possible since Canada is not a reference currency like the USD.

http://www.zerohedge.com/news/2014-11-25/nigeria-raises-rates-devalues-defend-collapsing-currency-oil-price-blowback-spreads

#101 Steve French on 11.25.14 at 10:59 am

Sorry Garth, Im a greater fool addict and all, but alas you do fail on this one.

Salman Rushdie is an intellectual giant and one of the most accomplished novelists of the last half century. Midnight’s Children is the best of the best Booker Prize winning novels.

You were a one time Canadian Member of Parliament who now writes a personal finance blog.

Sorry, Salman wins.

One-dimensional people might interpret my choosing the picture as an example of an undeserved win, as the mousey guy catches the babe. I guess that includes you. My intent was the opposite, as she won the lottery. BTW, I have written 17 books. — Garth

#102 Kenchie on 11.25.14 at 10:59 am

“Markets, Lies and Garbage”

http://www.bloombergview.com/articles/2014-11-25/markets-lies-and-garbage

#103 Londoner on 11.25.14 at 11:01 am

#87 Chickenlittle

The OECD has been consistently wrong on their predictions for a global economic recovery (and almost everything else for that matter). And now they’re pressing the ECB for more monetary stimulus. I would take everything they say with a big grain of salt. Think tank my ass.

#104 Happy Renting on 11.25.14 at 11:15 am

#81 nonplused on 11.25.14 at 1:25 am

https://www.seekingarrangement.com

Enjoy!

#105 Londoner on 11.25.14 at 11:16 am

“How many times do I have to say rates will start rising in 2015? No matter. Nobody believes me. — Garth”

Maybe in the US and, as result, maybe for mortgage rates but there’s very little chance that the BoC will raise rates next year. The current forecast for inflation till the end of 2016 is 2% and GDP forecast is ~2.5%. Even if you did see a jump in inflation the BoC will look past it. Remember, the target inflation range is between 1%-3%. The BoC still thinks future inflation will be muted. The edge case for a rate rise is if we see a sustainable and substantial jump in GDP, but that would take a couple of quarters to prove out. The BoC laid it out in it’s monetary policy report.

#106 Daisy Mae on 11.25.14 at 11:24 am

#85 Jane24: “I didn’t know that the CHNC would insure people that didn’t even live permanently in Canada. How crazy is that!

Cdn taxpayers subsidising the world! And no one complains! No taxpayers are rioting in the streets! What is it with you people!”

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

Most Canadians don’t know and/or don’t care how CMHC works….therein lies the problem. Apathy.

#107 Daisy Mae on 11.25.14 at 11:28 am

#85 Jane24: “Unfortunately the current govt will do all it can to maintain a steady ship until the election. No-one wants the whole mess to collapse on their watch.”

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

Hmmm….the cons may win, considering the alternative. After all, they won a ‘majority’ last time with a whoppin’ 38%….

#108 GS on 11.25.14 at 11:29 am

Garth, explain this please…..

I keep reading some economists believe Canada’s RE market is 10-15% over-valued.

YET, in places like Calgary it continually goes up 10% in one year.

AND, I believe that you always say that when the correction comes that it wont be as bad as those doomsters who predict 50%.

If it’s been climbing at 10% a year, at what point does it look more like a big drop?

#109 Daisy Mae on 11.25.14 at 11:35 am

#86 Lillooet: “Banks and credit unions, at least in my experience, can be reluctant to lend.”

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

If they can, they will.

#110 Tony on 11.25.14 at 11:47 am

Re: #99 TheLaughingCon on 11.25.14 at 10:53 am

The 30 year bond in America is back below 3 percent and will probably break below 2 percent in the next 2 years.

#111 Tony on 11.25.14 at 11:55 am

Re: #94 Mak the investor on 11.25.14 at 10:04 am

A lot of Canadians will simply leave the country when the taxpayers are on the hook for an extra one trillion dollars thanks to the stupid millennials. Most will blame it on the banks here but just like in America the true cause was the idiots who bought homes at grossly overvalued prices.

#112 Nuke on 11.25.14 at 11:58 am

I know that house and neighbourhood well. I went to see Interstellar and I think I understood the 5 dimensional universe better than the psyche of a real estate buyer. Had wings and beer with my teammates last night and one of the guys did a fist pump when he saw what a million dollars buys in Toronto. Toronto homeowners believe they are millionaires and investment gurus and their house earns more than they do working. The disconnect is they believe they can sell their place for a million but would never pay that themselves? CHMC confirms that prices are reasonable and all is well.

#113 Grantmi on 11.25.14 at 12:12 pm

Here we go!!!

Lock in now home owners!!

OECD forecasts Bank of Canada will raise key interest rate in May 2015

Read more: http://bit.ly/1trA8YY

#114 matthew gasior on 11.25.14 at 12:18 pm

Yawn…. and the market just keeps going higher and higher. I monitor tosolds.ca and you can’t deny that houses in GTA sell fast and they sell over the asking price. As long as you have huge number of deep pocket immigrants from China and Middle East this will keep happening. All you need is small percentage of rich buyers who will overpay and set the new benchmark. The rest of native Canadians have no choice but to chase and get deep in debt with 5% down payment. There will be no ending to this as long as China doesn’t crash.

#115 saskatoon on 11.25.14 at 12:32 pm

saskatoon market holding strong!

#116 Pre-Retiree on 11.25.14 at 1:07 pm

Rates will be rising in 2015. And that’s not me saying that, it’s the Organization for Economic Co-operation and Development – see The Globe:
http://www.theglobeandmail.com/report-on-business/economy/oecd-sees-boc-starting-to-hike-rates-next-spring-steadily-thereafter/article21744666/

#117 saskatoon on 11.25.14 at 1:07 pm

he’s talking to you, garth @ ~ 1. min:

https://www.youtube.com/watch?v=XDe_t3Qo73A&list=PLOKoTy8yPzZZsZYmlX4yDXAIaSMVVU7Zr

#118 calgaryPhantom on 11.25.14 at 1:15 pm

Hey Garth,
The guy in the picture looks like you with a lot less hair.

My wife is hotter. — Garth

———————————————————————
FYI Garth,

I think you for got to log off.

#119 Doug in London on 11.25.14 at 1:18 pm

To give credit where it’s due, the CMHC admits that housing is “modestly” overvalued. Given how they are so heavily invested in real estate, it’s not hard to connect the dots and see the situation is far worse than they have reported. If interests rates go up and many people can’t make payments the one option is to declare bankruptcy. If a lot of indebted home owners do so and the market is flooded with houses for sale and prices drop, the CMHC (and in turn the taxpayer) will be on the hook. Think of what that will do to that expected budget surplus.

In seeing how the CMHC has transferred risk from the banks to the Federal Government, it’s obvious that Vladimir Putin isn’t the only one who wants to bring back the good old days of the Communist Soviet Union. Down with capitalism and free markets!!!!!

#120 Mike S on 11.25.14 at 1:25 pm

“How many times do I have to say rates will start rising in 2015? No matter. Nobody believes me. — Garth”

Even after the rates will rise in 2015 nobody still going to believe you…

That said, before the officials did warn us about rates rising soon, now they don’t even bother anymore. Can you blame anybody for not expecting it?

#121 Holy Crap Wheres The Tylenol on 11.25.14 at 1:38 pm

Smoking Man have you been a naughty boy?

http://www.globalresearch.ca/military-grade-malware-regin-linked-to-us-and-british-intelligence-agencies-targeting-governments-academics-and-telecoms/5416264

#122 Chickenlittle on 11.25.14 at 1:39 pm

Londoner:

With that article, what do you think will happen now? A housing boom come spring? Maybe that was the intention if the article. OR…..something else.

Darn kids! They’re do crazy j can’t even think straight

#123 Holy Crap Wheres The Tylenol on 11.25.14 at 1:41 pm

#111 Tony on 11.25.14 at 11:55 am

Re: #94 Mak the investor on 11.25.14 at 10:04 am
A lot of Canadians will simply leave the country when the taxpayers are on the hook for an extra one trillion dollars thanks to the stupid millennials. Most will blame it on the banks here but just like in America the true cause was the idiots who bought homes at grossly overvalued prices.
_____________________________________________

Sure and where will they go, but more importantly who will take them?

#124 lookitmewhoopidedee on 11.25.14 at 1:41 pm

llllllaaaaassssstttttttt pppppoooossssttttt!!!!!

#125 Mike S on 11.25.14 at 1:49 pm

“Canadians have no choice but to chase and get deep in debt with 5% down payment. There will be no ending to this as long as China doesn’t crash.”

Already in progress for China …

But in reality foreigners never really had any substantial affect on the Canadian housing marker. it is all local debt, and it definitely seems that it peaked now. It is downward from now (doesn’t matter if rates go up down, foreigners and what not)

#126 Rebs on 11.25.14 at 1:51 pm

I wonder if we called the CMHC insurance what is actually is, ie: “banker’s insurance” instead of mortgage insurance (which insinuates that somehow your mortgage and home is protected), it would change people’s attitudes towards it.
When I first started researching about mortgages, I couldn’t get a straight answer from any website until I hit on some blogs (maybe even this one) that confirmed the “insurance” only protects the bank not the buyer. Other businesses pay for their own insurance and make it a cost of doing business. What other industry makes the customer pay straight up for their own liability insurance?

Banks should decide who they want to lend to, and at what rate, without the security cushion of an insurance pay-out. If this means that someone can’t buy without 20%, then so be it.

#127 Panhead on 11.25.14 at 1:55 pm

#64 Porsche on 11.24.14 at 10:59 pm
Did he hit the jackpot or did she? lol

————————————————–

We hit the jackpot buddy, with this Blog.

#128 Holy Crap Wheres The Tylenol on 11.25.14 at 1:55 pm

DELETED

#129 Non on 11.25.14 at 1:58 pm

#215 RealistvsExtremist on 11.24.14 at 2:59 pm

++++++++++++++++++++++++++++++
Why? Truth hurt about the communist totalitarian country we are turning into? Yes. That does make my head hurt.

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

No, his use of capitalization makes him look like he’s a lunatic. Why does he have to yell so much to make his point?

#130 Toronto_CA on 11.25.14 at 2:00 pm

Boom, the US economy is on a roll.

http://www.cbc.ca/news/business/u-s-gdp-expands-at-3-9-pace-in-third-quarter-1.284931011

Fastest pace in a decade. Garth was right again.

#131 what bubble? on 11.25.14 at 2:32 pm

#122 Chickenlittle – With that article, what do you think will happen now? A housing boom come spring? Maybe that was the intention if the article.
———————————————————–
Exactly. They let that information out with one purpose – to boost the RE market which is drying out.. and then who cares about recommendation of some Organization for Economic Co-operation and Development, who is behind that organization, who even take it seriously.
and again: within the existing economic model there is no practical possibility for the rates to go up – the consequences will be intolerable from economic and social perspective. The most basic mathematical analysis will prove you that and I believe mister Harper and friends has a computer that power enough to do that analysis.

#132 None on 11.25.14 at 2:35 pm

#230 RealistvsExtremist on 11.24.14 at 4:59 pm
……….the OBOZO Medical tax

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

Do you think the US should go the route of a single payer system that we have here?

#133 Herb on 11.25.14 at 2:38 pm

Just watched three cats tap dancing on a hot tin roof. Oh, wait, those were three Conservative Ministers defending the Harper Government’s efforts on behalf of veterans!

#134 happity on 11.25.14 at 2:59 pm

Just exchange real estate with stock market, cmhc with fed reserve, and pretty much you got the same reality.

#135 Kenchie on 11.25.14 at 3:07 pm

“Canada’s Competition Bureau says Uber ‘benefits consumers,’ urges less regulation”

http://business.financialpost.com/2014/11/25/competition-bureau-says-digital-taxi-services-like-uber-benefit-consumers/?__lsa=d600-26ec

#136 Nuke on 11.25.14 at 3:22 pm

DELETED

#137 Retired Boomer - WI on 11.25.14 at 3:35 pm

Markets will always move with demand for the item. Whether it is a home, a stock, a bond, or a blonde.

Prices are determined by supply & demand. If it is a commodity one typically finances (car, home) the price of rented money -interest- affects prices AND demand.

So, WHEN indeed, do you think prices will fall? will they?

#138 dojo on 11.25.14 at 4:17 pm

It really looks like the issue is common to other countries, too. Here in Romania, we ‘hoped’ that, after the crisis hit us hard back in 2009, we’d at least get our real estate back to some more decent values (especially since most people here don’t earn thousands of bucks anyway). Exactly when we thought we’d get back to a more ‘correct’ pricing system, the State issued a program, called ‘first home’ which basically allowed some people to get a mortgage and, instead of the banks taking the risk, the state would take it. So, as you can guess, borrowing kept on happening and prices are still high.

#139 jess on 11.25.14 at 5:22 pm

Imagine if BP was a bank -who would cover the 40b. in damages
===========
From report 2012:
Wall Street Bank Involvement With Physical Commodities (Day One)
Permanent Subcommittee on Investigations
November 20, 2014 09:30AM

http://www.hsgac.senate.gov/subcommittees/investigations/hearings/wall-street-bank-involvement-with-physical-commodities-day-one

#140 Detalumis on 11.25.14 at 5:23 pm

Whatever, 8 young couples, there you go. 8 young couples who DO NOT want to live in Milton, Oshawa, Mississauga, Barrie, Ajax, Cobourg or some scrub farmland bid on a house. So fricking what, a copper and a nurse doing a bit of overtime can hit 250K.

They can save up and afford to buy in central Toronto, a place that is very rare, like hen’s teeth, a place that has something that was everywhere a generation ago – walkability, services at the end of the street and good transit.

Hazel could have built Brooklin-North then all the people who want services right there, where granny and the kids are not prisoners without a car, can have more choices of places to live.

However Hazel built Houston-North instead so that’s why 8 couples are bidding on a house and five years from now there will be 16 couples bidding a house because only 5% of the housing market has the sort of location that a lot of people really, really like.

#141 espressobob on 11.25.14 at 5:40 pm

Either the camera is using a weird lens or 194 Euclid is lopsided? No surprise there.

#142 james on 11.25.14 at 5:41 pm

How many times do I have to say rates will start rising in 2015? No matter. Nobody believes me. — Garth

Maybe because RE hasn’t corrected yet? And even then, will it read 2009 level. Sadly no. Maybe 2014 level.

#143 Smelly Camel on 11.25.14 at 5:49 pm

This is just a giant debt orgy driving up housing prices.
Near 0% interest rate, why not borrow?
This is forced debt creation. And there is good reason to do this. The New World Order will be find most people very receptive to their idea after they put those interest rates up to 21% and banks start bailing in on everyones deposits. Not a husband around could vote against a world government offering to rent them their home instead of foreclosing, I can already hear the wife screeching “just vote for it I don’t want to lose my house”. And there we have it, our future.

#144 Graham on 11.25.14 at 6:05 pm

MUST READ BOOK: The Australian Example.

http://www.worldeconomicsassociation.org/files/Bubble_Economics_Egan_Soos.pdf

#145 Tony on 11.25.14 at 6:10 pm

Re: #137 Retired Boomer – WI on 11.25.14 at 3:35 pm

Not always sometimes things rise on sheer stupidity. Recall the tulip bulb craze of the 16th century. We see the same thing today with the Canadian housing market. Also when you see ponzi’s like todays’ stock market things can rise with zero demand and 100 percent manipulation.

#146 Mike S on 11.25.14 at 6:10 pm

“Sure and where will they go, but more importantly who will take them?”

Good professionals are always in demand south of the border. Even today many STEM professionals choose to relocate because of diminishing opportunities in Canada. Actually the reasons to stay right now, are mainly family related

Throw in more incentives in the form of higher taxes and high income earners will have to move

Sure people in real estate, mortgage, etc sectors are unlikely to move, but we have enough of these as it is

#147 Mike S on 11.25.14 at 6:11 pm

“Maybe because RE hasn’t corrected yet? And even then, will it read 2009 level. Sadly no. Maybe 2014 level.”

No need for the rates to rise in order to have real estate correction, but rising rates will surely aggravate things

#148 chapter 9 on 11.25.14 at 6:39 pm

The boys from OPEC meet this Thursday in Vienna and it is a fairly critical meeting. Cut production to bring the price back up or are we heading to $60 a barrel. The combined cash reserves of just a few of these members is over a trillion bucks and it is all about market share.

#149 Tony on 11.25.14 at 6:41 pm

Re: #123 Holy Crap Wheres The Tylenol on 11.25.14 at 1:41 pm

It depends how much money the people have. The richest ones will just move to offshore tax havens instead of living in Canada and parking money offshore.

#150 Cato the Elder on 11.25.14 at 8:10 pm

Re: #65 Ozy

I believe that’s an accurate assessment of where things are headed.

If it wasn’t for debt, the middle class in Canada would already be gone. For the past 40 years, Canadians, as well as other westerners, have been subsidizing their decreasing standard of living with debt.

http://thecurrentmoment.files.wordpress.com/2011/08/productivity-and-real-wages.jpg

#151 Andres on 11.25.14 at 8:14 pm

Garth, any opinions on why housing prices aren’t diving to match the increase in supply in places such as Halifax? Is it perhaps because people became so accustomed to this rocket ship to the moon they can’t bear to believe it is over and lower their prices? Or perhaps lots of sellers literally can’t lower their prices because they would be selling at a loss and can’t muster up the money to clear the mortgage off title?

#152 Al on 11.25.14 at 10:42 pm

Walmarts in Ontario are turfing out cashiers and replacing them with self check outs. More unemployed with no income to pay mortgages.

#153 Ulsterman on 11.25.14 at 10:55 pm

#36 james on 11.24.14 at 9:31 pm
“The level of home prices in Vancouver is supported by local growth in personal disposable income and long-term population growth”

They made this up.

I’m with you on the made up part. This makes me bloody rage! a) I totally doubt that disposable incomes have grown significantly at all in real terms, b) I don’t care if family income even doubled overnight, we’d still have totally unaffordable P/E ratios on housing in Vancouver.

If anyone knows where one can find the assumptions or evidence used by the authors of this report I’d like to see them.

If median Vancouverfamily income in 2012 was $71,140 (really? this is comically low), how can this analyst justify “local growth in personal disposable income and long-term population growth.”?Aren’t average houses in excess of $1m?

#154 Entrepreneur on 11.25.14 at 11:27 pm

Cato the Elder…Are you familiar with an American politician Ron Paul? I like him and his views. He joined the Libertarian Party which I didn’t know until I googled for info.

#155 Fred Smith on 11.26.14 at 12:14 pm

The disconnect is so obvious. Almost daily you see conflicting stories hitting the news. One day CMHC says “don’t worry be happy” and the next an independent economist or a bank says “something has got to give here”.

I think the overvalue is more like 30% than 15%. At least. Depending on where you are it’s probably a lot higher….cough…VANCOUVER…cough.