The inbreds

HERMAN CARTOON modified modified modified

“We can’t live with my parents. They’re still living with their parents!”

________________________________________________

“I’m a blog dog,” she said, “but I’m Italian.”

So, I replied?

“So real estate is kind of inbred with us. But still, I need you to tell me what’s going on this is completely nutso. How long can this last?”

Seems Junior went to offer on a house last night in a Toronto burb near the family home. There were 13 bidders and the scene was chaotic. Cars idling everywhere. Thick with realtors. Tense.

“The asking price for this place – just a plain bungalow – was $649,000,” she said, “and my son was ready for that because the agent told him there would be competition. So he had a good offer – $785,000 with a closing in just two weeks. No conditions. Not even an inspection. And that still wasn’t good enough.”

The property sold for $810,000. She was enraged. “How can this be allowed to happen? Who the hell is doing this to us, so we get thirteen offers on a single house? I want to know who’s responsible for creating this mess.”

You are, I said. At least your child is. And twelve other idiots.

Turns out her son is 25 years old, lives in the basement and is single. What does he need an $800,000 house for, I asked? Why would he want to do that, no matter how much he’s saved?

“Well, where else is he going to invest? Condos are too scary with all of them being built and the window problems. Plus he thought about a duplex or a triplex, but that might not be so good later on when he moves out. So, what else is there?”

Then I asked her why she’d want Junior buried in a mortgage for the juiciest part of his life, instead of being mobile, debt-free, flexible, young and quixotic. “What?” she hissed. “You mean, have him…. rent?” I felt so dirty.

Well there you have it. When 25-year-old studs think they need a bung, an epic mortgage and a horny mom to prove their manhood, we’re all in a little trouble. (I’m not sure that sentence came out quite right.) But these are the days in which we live. This is what 2.6% mortgages, a cultural obsession and rampant financial illiteracy have done. Every day the house lust and borrowing continues, at least in the two remaining property bubbles, we drift closer to a hard landing. When people think the whole range of their investment options is limited to three flavours of real estate (condo, multi-family or detached), wise people run in the opposite direction.

We’re in a mess now, with a severely weakened economy and disintegrating household finances. More and more middle class net worth is being stuffed into a single, over-inflated asset, puffed up with extreme leverage. So just imagine what’s gonna happen three weeks from today when the goofs in Ottawa drop interest rates again. Thirteen hormonal bidders could turn into thirty.

The ‘buy now or buy never’ drums are beating as big lenders drive rates to insane new lows, seeking to suck in as many clients as possible before everything changes in the months ahead. And change it will. US rates will start their ascent in 2015. Our dollar will be clobbered further. The shock waves of oil will spread. And already we have the worst job creation record in 40 years, double-digit youth unemployment, a declining savings rate, record family debt and 25-year-olds turned on by bungalows.

Instead of using history’s cheapest interest rates to trash debt, Canadians are embracing them to borrow more. It’s not how big the mortgage is that matters any more, but the size of the monthly. Scarier, a whole generation of moist millennials and genuinely numbed GenXers has now matured (sort of) in a time of runaway house prices. These little tweets think it’s normal.

So, shame on those who feed the myth. Like Vancity, the Vancouver-based mortgage sausage factory which has refined the art of giving loans to people who don’t deserve them. The latest technique is a ’report’ – which gained massive media attention on Wednesday – claiming the average YVR house will cost $2.1 million by 2030, and take 100% of household income to carry.

The title: “Downsizing the Canadian Dream: Homeownership Realities for Millennials and Beyond.” Now, do you have any doubt who it’s aimed at?

And what does the Vancity report suggest in order to ensure people in our most delusional city can continue to indenture themselves for an entire lifetime to mortgage lenders like, oh, Vancity? Financial institutions should give out mortgages which allow borrowers to add as income the money they can get from renting out bedroms, and to provide 100% financing by making loans for down payments as well as the mortgage, it says. (Vancity will already give you half the down payment, provide a mortgage for someone living in your garage or garden shed and offer financing if you and your swingles club decide to buy a property together.)

The main message here is simple. If you don’t buy now, you’re screwed.

They sure got that backwards.

250 comments ↓

#1 Larry B. on 03.25.15 at 6:38 pm

“Canada last had a positive balance in automotive trade in 2006 and the outlook for reversing our trade deficit on vehicles and parts looks grim, according to a new study by the Automotive Policy Research Centre.”

“In 2014, Canada’s trade deficit on automobiles and parts was $10.3 billion, according to the report titled Whatever Happened to Canada’s Automotive Trade Surplus?”

http://www.cbc.ca/news/business/canada-s-auto-trade-deficit-could-widen-1.3009089

#2 Steve French on 03.25.15 at 6:40 pm

First!

You know you got it, if makes you feel good!

Steve

#3 Steve French on 03.25.15 at 6:41 pm

I meant, “you know you got if, if it makes you feel good” !

https://www.youtube.com/watch?v=tVfoT1r8Ay4

#4 Italians love real estate on 03.25.15 at 6:43 pm

Well Garth, you know I could not possibly resist chiming in tonight. Yes RE is inbred in us as I have been saying for many years now.

Yes, ask an Italian what is I vestment choices are and he/ she will only see house, condo , duplex triplex or commercial unit.

Financial assets…. Don’t waste your time .

#5 LH on 03.25.15 at 6:46 pm

Life, liberty, and property

Urban SFH owners are the new landed class
Sorry 905ers, but only 416 or 705(?) counts

#6 saskatoon on 03.25.15 at 6:47 pm

garth,

says pigg:

“…slumping oil and falling loonie only is going to boost housing prices into 2017.”

http://www.thestar.com/business/2015/03/25/torontos-record-house-prices-to-rise-further-by-2017.html

17% by ’17.

#7 LH on 03.25.15 at 6:48 pm

That should have read 416 and 604 of course. The only places with real marginal demand in Canada. Bonus points for being within walking distance of UBC or U of T st George campus

#8 Varo on 03.25.15 at 6:49 pm

Garth, you meant to say: “…will cost $2.1 million by 2030″…

#9 Italians love real estate on 03.25.15 at 6:51 pm

You might as well tell an Italian mother that saying the rosary during lent is a waste of time because God doesn’t exist. You have a much better chance of convincing her of that then convincing her that a son or daughter should rent.

As for an Italian father, unless you want to get hung by the throat on the vine trellace at the back of house, do not tell him that you are renting .Period

#10 Exurban on 03.25.15 at 6:52 pm

“…claiming the average YVR house will cost $2.1 million by 2030, and take 100% of household income to carry….”

It’s hard to make predictions, especially about the future. But that one is already true. Most houses in Vancouver that you would actually want to live in cost $2 mil or more.

#11 Andrewski on 03.25.15 at 6:53 pm

Wow!

https://www.vancity.com/SharedContent/documents/News/Downsizing_Canadian_Dream_March2015.pdf

#12 Herf on 03.25.15 at 6:53 pm

‘“What?” she hissed. “You mean, have him…. rent?”’

Egad! Get real lady! You and your spoiled dumb-arse son need to be shipped overseas to a place like Syria, Iraq, Sierra Leone, Congo or some other third-world country to experience what real pain and suffering are. At the very least, you should be made to walk naked down the streets of Fort McMurray in winter when it’s -30 or -40 C and all the Tim Horton’s are closed (assuming they ever close up there). (Aaaaaaaagggghhhh!!!!).

#13 Mean Gene on 03.25.15 at 6:55 pm

Minor nitpick, 2013 should read 2030.

REALLY ENJOY your blog, keep up the crusade.

#14 Dave on 03.25.15 at 6:56 pm

It gets worse everyday. The sooner rates increase the better!

#15 nonplused on 03.25.15 at 6:57 pm

“swingles club”, I love it. Swingles should rent though, those relationships are notoriously unstable. Lots of fun, but unstable.

So what would you call the club if there were a married couple involved? I think my wife’s single girlfriend is trying to move in with us.

Good article on the Zero today:

http://www.zerohedge.com/news/2015-03-24/canadian-housing-bubble-has-begun-burst

Nothing Garth hasn’t covered but a good short primer.

Garth, I know you’ve talked about it before but what do you think of the idea that the high level of personal debt Canadians are carrying could mean our housing market is exposed to even bigger downside than the US in 2006? Also, I don’t remember the US loosing so much of its exports in the GFC as we have, dollar wise. Is this a “triple-witching”?

#16 S. Bby on 03.25.15 at 6:58 pm

Vancity was also promoting joint or co-ownership at one point. They really like to prime the pump.

#17 John of C on 03.25.15 at 6:59 pm

Just when you think society couldn’t be more screwed they elevate there game. Sadly they won’t get it until the blood is shed. Stupid has no bounds

#18 James on 03.25.15 at 7:01 pm

Not sure if anyone posted this discussion of Canadian housing in the US media. Seems like the oil price collapse has spurred additional commentary from Americans about the housing market in Canada:

http://www.bloomberg.com/news/videos/2015-03-20/canadian-household-debt-is-concerning-mansharamani

#19 Two-thirds on 03.25.15 at 7:01 pm

So before the upcoming rate drop, what is the cheapest way to load up on USD? Or are EUR a better choice to park some CAD?

Also, my Canadian bonds ETFs are on a tear – should rebalancing after the rate drop to increase US and Int’l equities portion makes sense, or do it now?

The preferred ETFs are still down, but yields are juicy, so my move: hold.

For the REIT ETFs, seems to me the US rate rise will put pressure downwards on them, so perhaps it is time to sell some… what do you think, b-dogs?

Only two more weeks until the fancy car comes out of hybernation in my rented garage… Life is good as a renter!

#20 Fred on 03.25.15 at 7:02 pm

Just curious, with our dollar going down and the USD bound to go up vs CDN, does it make sense to tuck some cash in to a USD account?

#21 Waterloo Resident on 03.25.15 at 7:02 pm

Remember I said my timing system works 90% of the time. Well, today’s crash was one of those ‘10%’ where my system totally fails me.

Yes, I know durable goods orders were unexpectedly down instead of up, but today’s U.S. stock market fall was a lot more than just that, something else really big is brewing and I’m worried as to whether this is the start of a new year-long bear market, it just might be.

If this is the start of a big correction then that means the new recession will start 1.5 to 2 years from today, because a stock market crash typically precedes recessions by 1.5 to 2 years.

House prices always fall in a recession because jobs are lost. What saved housing in Canada in the last recession was interest rates were drastically lowered. Well, that ammo is gone now, we are already at rock-bottom rates so when the next recession comes there will be NOTHING the government can do in terms of interest rates to keep housing from crashing. And since this bubble is HUGE, when this housing bubble pops its going to blow up the Canadian economy, and job losses are going to be MASSIVE. It may take decades to get out of the next recession that hits us, just like Japan.

#22 Mister Obvious on 03.25.15 at 7:02 pm

I expect the Prime Minister’s Office is as aware of this precarious situation as Garth.

You gotta think… with a federal election coming in October as the wheels seem about ready to fall off the economy, it must be pure panic in there.

I’d love to be a fly on the wall.

#23 Mark on 03.25.15 at 7:03 pm

What a pity that Vancity itself can’t be shorted. I guess this is why people, in a deflation, crave and drive up the price of currency — they absolutely crave being paid back 100 cents on the dollar, rather than some fraction thereof. Which is why the CAD$ won’t fall as RE prices continue to fall and interest rates fall. Inflation and currency depreciation is not in the game plan for Canada, and those deluding of a 60 cent or 70 cent dollar to take care of their problems should come back to reality.

#24 Boombust on 03.25.15 at 7:04 pm

Buggar off, Leroy.

#25 VB on 03.25.15 at 7:05 pm

I hope rates go lower Garth but do you really think the BOC is that dumbe to do it again so soon ? REIT’s will scream higher.

#26 Johnny on 03.25.15 at 7:07 pm

Here is what this inbred knows-
Russia is buying 100s of tons of gold. China buying 1000s. Americans and Canadians could care less. Someone’s right, someone’s wrong. The one who is wrong will become a 3rd world for a 50-100 year spin.

#27 Interstellar Old Yeller on 03.25.15 at 7:07 pm

I’m not sure Horny Mom should be allowed to call herself a blog dog. If the main problem she sees with RE overvaluation is that it’s too expensive for her kid to buy a house, she is missing the point of just about every single one of your posts!

(Though I am amused she made you feel dirty. There’s a short story in there, at least.)

#28 April. on 03.25.15 at 7:09 pm

Oooo – you’ll like this, then:

http://bc.ctvnews.ca/vancouver-special-former-grow-op-listed-just-shy-of-1-million-1.2296853

#29 silverfan on 03.25.15 at 7:11 pm

Pushing on a string, the charade will keep on going until the buyers will balk at paying those prices , Thats what happened in the states and houses lost 30% within 3 years on average, in Canada because of the leverage it will be worst so of those Semi tear downs in Toronto can lose 90% of their value , from 1.2 million back to 150,000 as the condemed property that it is..

#30 Oil Is Sticky on 03.25.15 at 7:13 pm

http://www.thestar.com/opinion/commentary/2015/03/25/why-canadas-democracy-rates-a-sad-c-grade-hepburn.html

While I have been saying this for years (and called a nutbar) here is more evidence of our “dictatorship” called Canada.

#31 six_figure_renter on 03.25.15 at 7:13 pm

Beautiful post.

#32 RC on 03.25.15 at 7:14 pm

http://sofard.tumblr.com/post/113616107456/the-decline-of-vancouver

#33 Oil Is Sticky on 03.25.15 at 7:16 pm

#22 Mister Obvious on 03.25.15 at 7:02 pm
I expect the Prime Minister’s Office is as aware of this precarious situation as Garth.

You gotta think… with a federal election coming in October as the wheels seem about ready to fall off the economy, it must be pure panic in there.

I’d love to be a fly on the wall.

——-

A Federal Election?

AHHAHHHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAAHAHAHAHAHAHAHAHAAHAHAHAHAHAHAHAHA

Don’t make us laugh. So we can elect the next dictator…….

We clearly need to fall as a country before it gets better again. People are just too chicken shit to admit how poor our Govt is run. NO OTHER COUNTRY with trillions in FREE resources…..would be taxing the crap out of its own people.

#34 John on 03.25.15 at 7:20 pm

The Japanese real estate bubble exploded in 1989(-/+). Just prior to the big bang clifferooo, the entire estimated worth of Tokyo real estate = the sum total of all USA real estate.. And then, the sun rose out of the sea on the 99 year, Japanese residential mortgage. This heralded the large kaboom event. Real estate blew. Mnt. Fuji didn’t. The Japanese stock market collapsed and never pumped its way back up the stairways to heaven. Then aging players all got lots of wrinkles and so on. We’re next. Yup, well staged homes in the 905 west GTA… now, going in 4-5 days, with multiple bids, last week at least. Folks up north of Newmarket, lined up for days to lock onto a newbee home not even going to be ready until the spring of 2016. Unknown interest rates. Insane. The Builder put up a large (circus) tent and fed the idiots coffee. Not sure if any of the folks lining up were paid to look cocky. We’re nuts. Garth’s right. Nobody escapes.

#35 wishful_thinker on 03.25.15 at 7:23 pm

what really worries me is the lack of courage by our politicians (except Garth, of course) to rein on this mess, to prevent more future victims. I miss F.

#36 TRTh on 03.25.15 at 7:23 pm

Vancouver prices detached from incomes long ago. What makes you think average home prices can’t go to $2.1 million. No new 60 foot detached lots being created in this city. It will become a privilege to live in a detached. In 2030, detached will comprise about 25% of the Rita housing stock.

Also, with regards to part time work. The reason for the rise in this is many people want to work for cash in Surrey and Richmond. Employers are scared of Injuries (WCB) and Taxes (CRA) so they hire these people officially part time but pay them cash as they rally are full timers.

Everyone in The lower mainland knows this. For some reason, statisticians are oblivious.

#37 Paully on 03.25.15 at 7:25 pm

How much money is the Italian Mama giving Junior towards his down payment?

If it is a number larger than ZERO, than she should look squarely in the mirror when she is trying to find someone to blame for the insanity of GTA real estate prices right now!

Parents giving their Bamboccioni money for down-payments are just adding fuel to the fire!

#38 not me on 03.25.15 at 7:25 pm

from yesterday’s replies:

@ #206 Shane &
@ #210 Is Vancity Different &
@ #220 Ponzius Pilatus

I realize the author of this blog disagrees (strongly) and I understand why but anyone living in Vancouver (and surrounding areas) thinking that HAM is not a contributing factor to high RE prices here is delusional.

I noticed that immigration issue is a sensitive topic here. So lets first differentiate between immigrants that have come to this country to make it their home and those that came here for no other reason but to hide their money, source of which btw is often questionable/unexplainable.

When people rant about immigrants they are not referring to those that came here with nothing but a hope for a better life. These people learned English, worked hard, often at shitty jobs or two concurrently, went to schools to educate themselves or got into trades, even started their own business ventures to make their lives better. They assimilated. They have been paying their taxes and contributing to this country and society in many ways. They’ve made this country their new home.

Now the second type of immigrants that most have a gripe with, are those that came here to dump their unimaginable (for locals) amounts of money and as quickly disappeared. They drove (and continue to do so) the RE prices to what they are now because they could. They often own multiple, expensive properties, they don’t work or have businesses here thus don’t contribute tax-wise (other than the initial PTT and annual p-ty taxes they can’t avoid), they don’t bother learning either of the official languages spoken in this country, heck thy are barely even here either because they don’t like it here or because they want their children to learn “their own culture”, etc.

Unfortunately, the locals who feel the irresistible urge to own no matter what, have no other choice but to keep up. Our government, the great enabler, makes it extremely easy: low down payment requirement, CMHC insurance, low rates, long amortization periods, etc. The stupid fall for the trap thinking it’s now or never and no amount of reason or even threat of massive hurt due to overwhelming debt will stop them. Period.

Immigrants are great, in other words, so long as they have less than you? — Garth

#39 zedgt87 on 03.25.15 at 7:26 pm

Hey Garth, new Q1 GDP figures from the fed show near 0% (0.2) gdp growth.

https://www.frbatlanta.org/cqer/researchcq/gdpnow.cfm

I guess you were wrong a few months ago when you said that low oil would stimulate growth in America.

Q1 = winter from hell. Meaningless. — Garth

#40 TRT on 03.25.15 at 7:31 pm

Fred, smart money moved out of loonie currency 6 months ago. Watch for euro to rise against Cdn peso now.

If you’re going to work a salaried 9-5 job for a living, it’s best to get out of this country. You will soon realize why.

#41 Smoking Man on 03.25.15 at 7:31 pm

“You mean, have him…. rent?” I felt so dirty.-Garth

Ha, the Herd…its cultural, The title in tonights post smack on.

Inbreads

Mind you, the second I read it, I thought, another shot at the great Smokey, to my delight , I was spared..

If Poloz cuts next meeting in the middle of the spring market, you are right, it will be nuts. Better to be “patient” wait for the next one.

#42 Bottoms_Up on 03.25.15 at 7:33 pm

Let’s all remember that $800,000 is enough to buy 2 or even 3 houses in most Canadian markets, and can buy 4 houses in most US cities.

#43 BG on 03.25.15 at 7:34 pm

Well done Garth, now I can’t help but picturing this lady as a hot Italian cougar.

#44 Jim on 03.25.15 at 7:35 pm

I always thought there was something odd about the west coast, especially Vancouver.

Even Victoria is strangely weird but it is government town of the newly wed and nearly dead – enough said.

Must be that fresh ocean breeze that flows up the valley, flushing out any remaining brain cells and common sense from the resident inhabitants.

#45 Leo Trollstoy on 03.25.15 at 7:39 pm

Junior is just experiencing what every wannabe homeowner is experiencing in Toronto over the last 2, 5, 10, 15+ years….increasing real estate prices.

Unfortunately the data clearly shows that prices haven’t declined across the Toronto RE sales mix since the 1990s.

#46 Retired Boomer - WI on 03.25.15 at 7:40 pm

Just back from retrieving that old 1956 Decca suitcase stereo will all new parts. $92 later it plays like NEW!

Stocks took a dump and the better half and I stopped for a few cocktails enroute home. So, Italians in TO can’t buy a shitty bung for $800K? My heart bleeds…NOT!! In a couple go years they will be $399K, or less after the work disappears to Buffalo.

Only the idiots bid up crap in a market like this, but idiots are in abundance just now.

I like TO to visit, but would never consider living there or Detroit, or Chicago, or gawd forbid the Peg!

I like living where the drinks & smokes are cheap, the women above average, and the music never stops! I’m retired, so who cares at this junction?

Italian mothers can rattle their beads, but that won’t make real estate anything but an annoying expense those wise enough CAN live without!

#47 Andrew Woburn on 03.25.15 at 7:41 pm

“Why banks should be feeling very, very afraid”

A bit over the top but interesting. The Orange Guy is smiling to himself.

“Google and Apple are at the gates of high finance with a battering ram and the defences have been breached. The tech companies are carving out huge segments of traditional banking business, standing between the banks and their customers by offering apps and mobile payment systems. Consumers are fleeing bank branches faster than the institutions can close them but banks are struggling to build mobile digital banking fast enough to keep the likes of PayPal and Apple Pay at bay.”

http://www.theglobeandmail.com/report-on-business/rob-commentary/rob-insight/why-banks-should-be-feeling-very-very-afraid/article23617115/

#48 Mark on 03.25.15 at 7:42 pm

“I hope rates go lower Garth but do you really think the BOC is that dumbe to do it again so soon ? REIT’s will scream higher.”

Of course they will. Why would such be ‘dumb’? If anything, it was dumb to have kept rates high at 1% over the past few years and left the Canadian economy in the calamitous state that it is in, with the BoC clearly being behind the curve in providing appropriately stimulative policy against the deflationary abyss we are now falling into.

As for REITs, why would they go higher? Major tenants are going bankrupt such as Target, and soon, that historic retail chain that rhymes with “ears”. Consumption is down. Every last tenant in the shopping malls is rapidly gaining bargaining power against the REITs to ask for cheaper lease renewals.

#49 Mountain Man on 03.25.15 at 7:43 pm

Right on, Garth. Tell it like it is. Thirteen idiots in a bidding war on a bungalow in suburban Toronto upping the price to $800k. They only have themselves to blame.

I have no sympathy. I’ve bought Canadian bank stocks so I can profit from fools like these.

#50 Italians love real estate on 03.25.15 at 7:44 pm

#5 LH on 03.25.15 at 6:46 pm
Life, liberty, and property

Urban SFH owners are the new landed class
Sorry 905ers, but only 416 or 705(?) counts

——-
Wow 416 er you should come north on yonge until you get to major hey intersections to see what going on at each of them…lol

You’re leaving money on the table piasano

#51 Italians love real estate on 03.25.15 at 7:45 pm

Hwy not hey

#52 lala on 03.25.15 at 7:46 pm

Someone please enlight me, why would you buy a house and get stuck in this frozen land. It’s a nice place to make some loot and run before you get kids but its not liveable seriously. Prozac time.

#53 DisgustMadeMePost on 03.25.15 at 7:47 pm

12 Herf on 03.25.15 at 6:53 pm

‘“What?” she hissed. “You mean, have him…. rent?”’

Egad! Get real lady! You and your spoiled dumb-arse son need to be shipped overseas to a place like Syria, Iraq, Sierra Leone, Congo or some other third-world country to experience what real pain and suffering are.

Just a point here.. but some of those parents /grandparents DID go through real suffering before they got here. Buying your own real estate was very doable not that long ago. Gonna maybe take generations to get that out of the DNA.

#54 Schlepdog on 03.25.15 at 7:49 pm

That reference to JC and his 12 apps was epic funny Man. Maybe it was the wine that helped me see it?

#55 Andrew Woburn on 03.25.15 at 7:52 pm

This article is too long unless your really into Bitcoin. The the take home message is that because each bitcoin effectively has its own little “VIN number” just like a used car, liens can be registered against them and travel with them just like a used car. You have no idea if the bitcoins you take in payment have claims against them and you won’t until someone comes looking for them.

“Bitcoin’s lien problem”

http://ftalphaville.ft.com/2015/03/24/2122678/bitcoins-lien-problem/

#56 rawdiswar on 03.25.15 at 7:55 pm

Blog-dawgs,

I’d really like to buy a bunch of CPD and keep it in a non-registered account to take advantage of the dividend tax credit. And soon. Are there better options so I’m not just getting Canadian divvy payers? Maybe something with more diversification? There seems to be some real knowledge here in the comments, not just salesmen fluff.

#57 Shared Responsibility on 03.25.15 at 7:55 pm

Maestro Garth, there is a shared responsibility for this mess. Co-responsible are not only all the hordes of greedy canadians without financial literacy who think that speculation in homes equates to smart entrepreneurship without even having the slighests clue about business; also co-responsible are those who have provided all the incentives they can to lure those fools into doing what they cannot help do, that is, our disgraceful politicians and central bankers, those preppie boys who still have the same attitude as in their student days towards the “common folk”. It is hard to judge who is more responsible, it is like the nasty kid teloing his mentally retarded kid to commit a crime; who is more responsible? The fact is, what is being done amounts to a crime, in this case a crime perpetrated on the canadian society at large.

#58 Ray Vasquez on 03.25.15 at 7:55 pm

You want to know where we are going? Look at the amount of people that were renting in the 1920’s, 1930’s, 1940’s.

It was a lot less than today. It was 50% or less home ownership rates.

This was not just in Canada but in the U.S as well. This 20 year unsustainable, artificial rise in Canadian and worldwide housing prices that did not burst yet like Australia are going to be a coming reality.

The game is over and and debt is what will be left and property that is worth much less.

Get ready for it folks!

#59 West Coast on 03.25.15 at 7:57 pm

Well that lady in Garth’s story may be Italian, but I can tell you what people in Greece (who were formerly of a similar mentality regarding real estate) say these days and that’s, “If you want to curse your kids, leave them the house!”
There is nothing like an asset that no one else wants. Of course that could never happen here in Canada.

I didn’t see this link posted by anyone yesterday….certainly looks like we are on our southern neighbour’s radar….

http://business.financialpost.com/2015/03/20/canadas-household-debt-problem-all-the-more-concering-amid-collapsing-oil-prices-expert-says/

What is of most concern to Mansharamani is our private mortgage market, in which individual home owners borrow against their home equity line at 3% ….in order to lend money out to others at a higher percentage. According to Mansharamani, this goes on when interest rates are low and people go in search of yield.
(He didn’t mention anything about boomers using HELOCS for their adult offspring’s down payments….)
Lots of talk of our use of credit, our overwhelming debt, as well as the possibility of oil moving to $35 US ($44CAD). Apparently 70% of employment increase in Canada since 2011 has come from Alberta…

#60 Nagraj on 03.25.15 at 7:58 pm

My son is 27, Harvard grad ’09, married the Harvard sweetheart in ’11. (He always did have “the flat-chested need not apply” tattooed across his forehead; the DIL is Portuguese – when I first met her I banged up the car in the parking lot.) They rented in Boston.
Two years ago my wife died, rather suddenly. Two months later my mother fell, and lingered for eight months.
I gave them $300K, they live mortgage free in a huge new house in Massachusetts. (I’m going to be a grandfather next month.)
IF he’d come out of UofT, rest assured he’d be renting the basement suite at a friend’s house in Hogtown. Probably single, and probably sending out resumes.

The concerns, here, of parents whose graduated kids, saddled with huge debt already and facing horrible employment prospects (not to mention an insane RE mkt) will express themselves politically. The key word is ANGER.

If your bright kids can’t form a family when they’re young adults, what’s your country good for?

#61 The Dude on 03.25.15 at 7:58 pm

Since this blog started there has been no reason to fight the momentum in Toronto and Vancouver. Check the rental rates and vacancies in these two bubble cities and you’ll understand why so many millennials are buying. There is still a shortage of homes in these cities. Added support to the housing market comes in the form of downpayment gifts from millennial parents and mortgages started during the financial crisis currently renewing at even lower interest rates.

#62 Smoking Man on 03.25.15 at 8:01 pm

It’s an audacious miracle, by the grace of God and the universal consciousness consolidator.

I am now a whole person, finally through technology and this amazing discovery, I’m going to kick some serious ass when it comes to word smithing.

The kinetic molecular theory.

Haha, look up dogs.

Everyword perfect. I found this little icon on my phone I pressed it. It said speak, so I spoke.

It typed all the words perfectly.
Just need to figure out commas and periods.

That was manual..

I can’t wait to try this hammered.

“Honey, open the wine, I have another experiments.”

#63 OttawaMike on 03.25.15 at 8:03 pm

DELETED (Anti-Italian)

#64 A Believer on 03.25.15 at 8:03 pm

I remember when “Just renting ” was one word, said apologetically. It seems that hasn’t changed!

#65 Nemesis on 03.25.15 at 8:05 pm

“I’m not sure that sentence came out quite right.” – HonGT

There’s a cure for Oedipal, AuldPol…

https://youtu.be/9ecF-Go9lt8

[Hint: Larry really should have let go when he had the chance…]

#66 Ray Vasquez on 03.25.15 at 8:05 pm

To Dave #14

I hope Canadian real estate prices drop 40% at minimum and stay low for decades like Japan so all the money lost in interest from poor folks who saved their money getting peanuts in interest for years will see some payback for these real estate junkies and real estate speculators.

They are going to keep rates low so share the financial pain for the other Canadians.

#67 BS on 03.25.15 at 8:06 pm

36:

Employers are scared of Injuries (WCB) and Taxes (CRA) so they hire these people officially part time but pay them cash as they rally are full timers.

I think you have it backwards. If an employer was worried about injuries he would want insurance that protects him. WCB (or WorkSafeBC now) is insurance that insures the employer so they do not have to pay injured workers any type of compensation. Without it the employer is directly responsible for any injuries a worker gets on the job. That could be millions if death or serious injury occurs. Current WCB rates are 1% to 3% of wages so not a huge expense.

Also wages paid above board are tax deductible where wages under the table paid as cash are not. There is no advantage for the employer to pay cash. The employer would pay more taxes by doing this as there is no expense deduction off revenue for the wages. The only thing the employer saves is CPP and EI premiums but those would be less than the tax savings. They also risk paying fines and penalties. Makes no sense what you are saying.

#68 Two-Bitz on 03.25.15 at 8:07 pm

10 Reasons Wrinklies should not move to Vancouver Island
1- its damp 9 months of the year, it will kill your bones
2- there are not enough doctors or special care workers to help you.
3- food is nearly double, only the high north is worse.( that includes cat food)
4- your kids are not here.
5- you will have to drive hours to play on an affordable golf course
6- there are not enough shopping malls to loiter in all day.
7- public transport is a joke.
8- private transport is worse ( when time is all that you have left)
9- if you have a problem with races other than caucasian, stay in Saskatchewan. ( lots of bogots here who should have stayed in the ” heartland”
10- we dont like the Conservatives, please stay home.
10-
9-

#69 VB on 03.25.15 at 8:12 pm

#48 Mark

because thats just what REiTs do, rates up REITs down and via versa. Its like a bond only the yield is better. I find they’re also a good hedge in a cruddy stock market. I personally think rates going lower is suicide but hey my REITs will be happy.

#70 Glengarry Glenn Ross on 03.25.15 at 8:12 pm

The latest technique is a ’report’ – which gained massive media attention on Wednesday – claiming the average YVR house will cost $2.1 million by 2030, and take 100% of household income to carry.

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

Al Pacino has been saying it for years..
Oh well….hooah i guess…

#71 Mark on 03.25.15 at 8:13 pm

“Unfortunately the data clearly shows that prices haven’t declined across the Toronto RE sales mix since the 1990s”

That doesn’t make any sense, your sentence, and no data shows such. In fact, the data shows quite the opposite — that there’s been a significant shift towards the higher end of the market in all categories surveyed. Median prices have grown faster than mean prices, which is a sign of a shifting sales mix.

Ever wonder why the Realtors, particularly in Toronto/Vancouver, fight the release of thorough datasets relating to the RE market? Its because they would rather that people not be able to easily ascertain what’s going on, particularly with respect to comparable or identical properties. A Zillow-like system where transactional history is available for everyone to see easily would be a nightmare for the RE boards who are used to pulling the wool over the public’s eyes with their selective release of datasets that are most favourable to whatever position they happen to be trying to sell.

#72 DisgustMadeMePost on 03.25.15 at 8:13 pm

Worked with a professional colleague the other day that I rarely see. She lives in Richmond. She is Chinese Canadian. She got married a couple of years ago and is trying to start a family. I asked her about where she lives. Turns out that her parents gave her money to help buy the place.

It’s not just the Italians at it in this area code.

I agree with Nagraj and Shared Responsibility. This is more about what has been manipulated into the minds of those that most politicians consider “the great unwashed”.

#73 Mark on 03.25.15 at 8:15 pm

“There is still a shortage of homes in these cities”

No there isn’t. True shortages would be characterized by skyrocketing rents. Yet we know that rents are very stable in most of Canada’s major cities, with downwards pressure increasing as the supply onslaught increases.

A true ‘shortage’ would imply that marginal uses are forced to the sidelines. Yet no evidence of this. All of the evidence points exclusively to a domestic bubble in leverage and optimism towards housing as an asset class as the culprit in abnormally high prices.

#74 not me on 03.25.15 at 8:15 pm

@ reply to #38: “Immigrants are great, in other words, so long as they have less than you? — Garth”

Actually I am an immigrant myself and I do appreciate anyone who accomplished something in their life, whether they have less or much more than me. Money is not equivalent to success, in my opinion.

#75 Joseph R. on 03.25.15 at 8:16 pm

#16 S. Bby on 03.25.15 at 6:58 pm
Vancity was also promoting joint or co-ownership at one point. They really like to prime the pump.

Mixer mortgages:

http://www.greaterfool.ca/2014/01/29/trust-me-3/

They still are!

Individuals

• Families should work together and embrace new forms of multi-family living and owning arrangements, such as housing co-operatives, co-housing and co-ownership.
• Reduce your footprint: consider a simple, small or tiny house with multi-functional space and furnishings.
• Consider intergenerational community living.

Source:
“Downsizing the Canadian Dream: Homeownership Realities for Millennials and Beyond.”

#76 Llewelyn on 03.25.15 at 8:22 pm

The recent gambit being circulated by the realty cheerleaders to whet the appetite for single family homes in Toronto is that the Green Belt around Toronto has created a serious shortage. Since the supply is being restricted while the population increases you had better act quick or face the prospect of living in a less desirable form of housing or God forbid renting.

Its just like Bernie Madoff spinning the yarn that investing with him was a limited oppportunity granted to a precious few. If any sane person really believes that paying $800,000 for a modest house represents an investment they deserve the lesson they are about to receive.

I hear there might be a shortage of $1,000,000 Bugattis this year better hurry out and scoop one up before they are all sold.

#77 Fred on 03.25.15 at 8:22 pm

#40 TRD
Ticket booked

#78 Smoking Man on 03.25.15 at 8:26 pm

Breaking , Saudi Arabia attacks Yemen.

Long oil , short USDCAD.

#79 Capt. Obvious on 03.25.15 at 8:27 pm

It’s not how big the mortgage is that matters any more, but the size of the monthly.

This is the main problem of course. Nobody can do math.

#80 Mark on 03.25.15 at 8:29 pm

“because thats just what REiTs do, rates up REITs down and via versa. Its like a bond only the yield is better. I find they’re also a good hedge in a cruddy stock market. I personally think rates going lower is suicide but hey my REITs will be happy.”

Although that correlation has worked well in the past, I believe you’re going to see such increasingly break down going forward. REITs have had a good run, but eventually, over-performing stocks and sectors meet their Waterloo and go into long-term periods of underperformance.

With rents under so much downwards pressure, and much of Canada’s REIT sector (especially RioCan) concentrated in retail, its a stretch to think that REITs will continue their long-term outperformance.

You continue to blow smoke on REITs. — Garth

#81 OttawaMike on 03.25.15 at 8:39 pm

Finally. I make it to the deleted vault. :)

Remember though it is not slandering if it is true. That is the courthouse test.

#82 Italians love real estate on 03.25.15 at 8:44 pm

I keep getting deleted and can’t imagine why ?

I guess a bullish view of RE gets banned

You are reverting to the useless banter of the past, every post repeating the same. I just got tired of you. Snip. — Garth

#83 Washed Up Lawyer on 03.25.15 at 8:46 pm

$2.1 million in 2030 in Vancouver?

Vancouver will not exist in 2030. Tectonic plates and all that. The Big One.

Move to Lillooet or Dawson Crick.

#84 Glengarry Glenn Ross on 03.25.15 at 8:47 pm

#72 DisgustMadeMePost on 03.25.15 at 8:13 pm
Worked with a professional colleague the other day that I rarely see. She lives in Richmond. She is Chinese Canadian. She got married a couple of years ago and is trying to start a family. I asked her about where she lives. Turns out that her parents gave her money to help buy the place.

It’s not just the Italians at it in this area code.

I agree with Nagraj and Shared Responsibility. This is more about what has been manipulated into the minds of those that most politicians consider “the great unwashed”.

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

Good point.
Huge numbers of older chinese-canadians have saved gobs of money in their working lifetimes here ( as they among the best savers in the world ) and are passing it on to their offspring….therefore…..NO CORRECTION IN VANCOUVER ….EVER?

#85 X on 03.25.15 at 8:49 pm

Trying to figure out what the big plan is….lean on BoC to drop rates, so that the economy is propped up more than ever, and hope that is enough to get re elected….then what?

It is like everyone knows the music is going to end, and alot of people are going to have a 20-25 year mortgage hangover. What is the plan to stimulate the economy?

IMO a dollar below 80c doesn’t really do that much more to help our economy….but it could potentially go far lower mid/late 2015…

is the gov’t simply praying for the best outcome? When most Canadians have most of their wealth in a non regulated industry, it is asking for financial trouble. Will all be blamed on lack lending, predatory RE shills, or financial stupidity of the sheeple?

Everyone has their own interest, the RE industry, the gov’t….

#86 Glengarry Glenn Ross on 03.25.15 at 8:50 pm

I mean…….EVER!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

#87 Mark on 03.25.15 at 8:53 pm

“You continue to blow smoke on REITs. — Garth”

Why is it that we can talk about earnings of O&G companies cratering due to the fundamentals in their industry, but when it comes to REITs, they’re some sort of sacred cows to you?

Just what exactly is going to fill the space, and pay the rents formerly paid by the Targets and the soon-to-be-defunct department store that rhymes with “ears”? In a consumer-led deflation, is there really a need for a lot of high-rent retail space? Expectations have to be adjusted, and REIT owners certainly will be significant participants in the weakening economy.

Soon-to-be-vacant Target spaces have been snapped by other retailers. Try to keep up. REITs are solid performers, low correlation to markets, based on rental income in great properties. Buy the majors and enjoy the distributions. — Garth

#88 Smoking Man on 03.25.15 at 8:58 pm

#81 OttawaMike on 03.25.15 at 8:39 pm
Finally. I make it to the deleted vault. :)

Remember though it is not slandering if it is true. That is the courthouse test
………

Let me extend my warm congratulations, you are now in the company of gods you’ve made it.

Welcome to the club.

#89 Apocalypse2015 on 03.25.15 at 8:59 pm

Canada’s real estate and general economy, and the West’s in general, about to be knocked cold in short order by world calamity.

BREAKING NEWS: Saudi attacks Yemen

BREAKING NEWS: Germanwings pilot was LOCKED OUT of the cockpit = IT WAS A TERRORIST ATTACK

BREAKING NEWS: New Russian troop movements on Ukraine borders

2015, 100 years after the depths of WWI, will see sad repeats of very similar events.

Enjoy the relative calm while you can………….

I bet you miss Ebola. — Garth

#90 Joe2.0 on 03.25.15 at 9:05 pm

Generational mortgages next up for Canada.
It kinda makes you warm all over, like being a grand parent.
The sheeple don’t have a chance.

#91 wallflower on 03.25.15 at 9:07 pm

#32 RC on 03.25.15 at 7:14 pm
http://sofard.tumblr.com/post/113616107456/the-decline-of-vancouver
= = = = =
Coal Harbour et al was my experience during the month of October when I lived in Kerrisdale. And it was clear that many areas in Kerrisdale are the same: a store of value for mainlander investment. Beautiful, unlived-in homes. What is most surprising are the low property taxes, as compared with, say Markham. So, if these empty multi-million dollar houses are generating low property taxes… what percentage of empty houses or condos is just fine for the socio-economic health of an urban area? Also, what is the arrears rate for property taxes? Has it been steady or increasing? These are all smart study topics for the long-term health of the region.

#92 Willy H on 03.25.15 at 9:07 pm

With the CAD$ becoming “The Northern Peso” our young bright house-horny progeny are better off heading across the border and participating in a vibrant economy with relatively normal housing prices and a better quality of life than almost anything the gridlocked and soulless GTA has to offer. If housing prices, oil prices, and the CAD$ continue on their present trajectories the young well educated should opt for the green card lottery and take their chances in the USA. There are seveal dozen mid-sized cities in the USA with normal real estate markets and half decent job markets. Canada is fast becoming a dead-end for under 30’s. I can’t think of anything worse than being underemployed in the GTA, GMA or GVA and leveraging away the rest of your life on 1960’s bung in a city with disintegrating infrastructure and an ever declining quality of life! Vancouver may appear a paradise today but all those shimmering condos will be a mess in less than a decade.

#93 Ret on 03.25.15 at 9:09 pm

Hey Mom. Your son got beat out. Money talks, losers walk.

You need to give him more of your money so that he can be a winner in the next bidding war. Take a LOC on your place to help him out. It is a matter of family honor.

(Garth, did we get the name of that bungalow RE agent? I like to arrange a listing appointment soon. Very soon. I don’t want to lose out!)

#94 Get back Loretta on 03.25.15 at 9:11 pm

1995 : Freedom 55 Financial
2015 : Freedom 95 Financial

#95 young & foolish on 03.25.15 at 9:12 pm

Investing in RE will always seem more appealing to the many, as financial assets are frowned upon as being abstract and therefore easily manipulated.
For some people, they need to see what they bought with their own eyes.

That’s why most sheeple have houses and no money. — Garth

#96 JunkieMan on 03.25.15 at 9:14 pm

Smoking man http://en.wikipedia.org/wiki/Operation_Scorched_Earth

Been there done that, no ripples will be felt.

#97 Smoking Man on 03.25.15 at 9:16 pm

At 10:30 when the oil inventory numbers were released it was brutal. Canadian dollar should have been slaughtered.

So my trusty tin foil hat goes into overdrive. Why bastered , there’s an inside play here.

I point my multi twitter window browser at anything middle east.

About an hour ago, boom Saudi Arabia attacks Yemen. I put on a huge, bet, I text my son to go 50 contracts Sell USDCAD.

Then I tell you guys…

He’s up 4k that’s unheard of in overnight light volume.

My conclusion, some big bets knew this attack was coming.

Hence. The reason why oil stayed strong when it should have tanked..

Dr Smoking a man..best tin foil fedora in the universe.

#98 Nemesis on 03.25.15 at 9:24 pm

#WayBackWisdomFromNat&Harry…

https://youtu.be/a3yM-i3lw60

[NoteToGT: If I told you how many clock cycles Titan took to search the sum total of human knowledge to find that… they wouldn’t need the sequestration excuse to shut down my current project.]

#99 45north on 03.25.15 at 9:25 pm

The asking price for this place – just a plain bungalow – was $649,000,” she said, “and my son was ready for that because the agent told him there would be competition. So he had a good offer – $785,000 with a closing in just two weeks. No conditions. Not even an inspection. And that still wasn’t good enough.

so a 25-year-old man made an offer of $785,000! what’s more he made an unconditional offer with no inspection!

Waterloo Resident: House prices always fall in a recession because jobs are lost. What saved housing in Canada in the last recession was interest rates were drastically lowered. Well, that ammo is gone now, we are already at rock-bottom rates so when the next recession comes there will be NOTHING the government can do in terms of interest rates to keep housing from crashing. And since this bubble is HUGE, when this housing bubble pops its going to blow up the Canadian economy, and job losses are going to be MASSIVE.

I don’t see how we can have a soft landing.

Mister Obvious: I expect the Prime Minister’s Office is as aware of this precarious situation as Garth.

You gotta think… with a federal election coming in October as the wheels seem about ready to fall off the economy, it must be pure panic in there.

I’d love to be a fly on the wall.

I’m sure Stephen Harper as the MP for Calgary West is acutely aware. the Government has just crossed out its last budget and so far as not written another one. Harper has got to stand behind Alberta. He’s got to support infrastructure and industry in Alberta. Infrastructure like twinning the highway between Edmonton and Ft McMurray. Industry like enhanced refining capacity in Alberta. He needs to put himself in Alberta’s corner and put himself forward as the underdog fighting for his people and his country.

#100 Bottoms_Up on 03.25.15 at 9:26 pm

#63 OttawaMike on 03.25.15 at 8:03 pm
————————————————-
Garth glad you’re calling out why posts are being banned…hopefully a learning opportunity for these ‘bannees’.

#101 Min in Mission on 03.25.15 at 9:32 pm

Excellent analysis and, of course, a well done ‘turn of phrase’ – as usual.

On a side note, I was shopping for a used pickup truck. Figured to move up to this century.

The dealers are saying that Americans are coming up here to buy whatever is 1/2 decent. A big change from a year, or so, ago.

#102 BS on 03.25.15 at 9:34 pm

87:

Just what exactly is going to fill the space, and pay the rents formerly paid by the Targets and the soon-to-be-defunct department store that rhymes with “ears”?

Sears sold off it’s Vancouver flagship store lease to Nordstroms recently and Target was also trying to sell its leases to new tenants after it closes stores (in which the landlords are disputing because they would prefer to have them back). That does not indicate weakness in the department store retail space when leases are being sold for big profits by the lease holders. Quite the opposite. The problem with Sears and Target is not retail weakness but incompetence running their operations.

http://www.theglobeandmail.com/report-on-business/target-landlords-reach-deal-in-battle-over-sale-of-leases/article22888751/

#103 The real Kip on 03.25.15 at 9:34 pm

BoC will lower rates twice before the federal election for a total of 50 basis points. It’s about nothing now except the election.

#104 Smoking Man on 03.25.15 at 9:35 pm

My last post should have read

Dr Smoking the man..best tin foil fedora in the universe.

Not

Dr Smoking a man..best tin foil fedora in the universe.

That just sounds gay..nothing wrong with that…

My talking text writing button is intoxicated. Or its about to meet, my best freind.. Jack.

#105 Mark on 03.25.15 at 9:38 pm

Another 200 employees gone in Regina:

http://www.leaderpost.com/business/Staples+call+centre+layoff/10919263/story.html

“The Staples customer service call centre at 221 Winnipeg St. N. in Regina is downsizing later this year, which will put about 200 employees out of work, the company confirmed Wednesday.”

Retail implosion appears to be picking up steam.

#106 Bottoms_Up on 03.25.15 at 9:39 pm

#39 zedgt87 on 03.25.15 at 7:26 pm
———————————————
LOL Garth’s right, those stats prove that even if you place 80% of the US economy literally in a deep freezer, it will still grow at 0.2%.

#107 Smoking Man on 03.25.15 at 9:39 pm

#100 Bottoms_Up on 03.25.15 at 9:26 pm
#63 OttawaMike on 03.25.15 at 8:03 pm
————————————————-
Garth glad you’re calling out why posts are being banned…
hopefully a learning opportunity for these ‘bannees’.
…,…..
If your not in tribe “bannees” your nothing.

Damn, shit….am I in a tribe now.

Noooooooo

#108 sideline sitter on 03.25.15 at 9:39 pm

#61… no shortage. Check out Craigslist for YYZ, literally thousands of rentals available downtown, on offer from financial ‘geniuses’

#109 Mark on 03.25.15 at 9:41 pm

If housing prices, oil prices, and the CAD$ continue on their present trajectories the young well educated should opt for the green card lottery and take their chances in the USA.

Bright Canadians generally don’t need green cards. The TN-1 visa works quite well and costs about a hundred bucks at the border with little chance of rejection unless there’s something seriously wrong with the paperwork.

Housing prices continuing to decline means that capital will increasingly be available in the Canadian economy to speculate on other things. Better to be in on the ground floor of a Canadian innovation expansion than at the tail end of the dying US one.

#110 sideline sitter on 03.25.15 at 9:41 pm

#99… Good luck with that. Hard knows he needs Ontario because Alberta is wrapped up.

#111 IM in C on 03.25.15 at 9:52 pm

DELETED (Anti-Muslin)

#112 Mr. Frugal on 03.25.15 at 9:52 pm

#39 zedgt87 on 03.25.15 at 7:26 pm
Hey Garth, new Q1 GDP figures from the fed show near 0% (0.2) gdp growth.

https://www.frbatlanta.org/cqer/researchcq/gdpnow.cfm

I guess you were wrong a few months ago when you said that low oil would stimulate growth in America.

Q1 = winter from hell. Meaningless. — Garth

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

The same thing happened last year! It’s like a license to print money. We get a harsh winter and the numbers for Jan and Feb come in bad. So, everyone trips out and sells good assets in a fire sale. The smart ones scoop up the deals and make off like bandits. With any luck everyone will flip out when the Fed raises rates.

#113 Lobster Man on 03.25.15 at 9:54 pm

I have some personal experience that I want to share with you all.

I live in Vancouver. And during the last couple of months, I have had the experience of receiving a number of repeated phone calls from two separate collection agencies, on behalf of two of the five big banks. They were looking for someone who have the same surname as mine; and my surname is not an uncommon one. But these individuals’ names bear no resemblance to my own name. My phone number is listed. On both occasions, I asked the callers why did they call my number. They told me they have their only their own methods of scanning listed phone numbers and tried to zero in as possible contact numbers with the individuals they were after. And they said because my phone number is listed they are legally permitted to place these calls, even though I am already registered with the Do-Not-Call-List.

Talking about being desperate!

#114 BlackDog on 03.25.15 at 9:54 pm

I Am Dog.

I am Champion. I am Chosen. I am Dog.

Human choose me for two reason: Protection. Safety.

Human give me food and treats for reward,
But deep down, all I need is pat.
Other treats only luxury.

When doorbell ring, I am first to the scene.
I must inspect intruder before Human to make sure not dangerous.

I am Dog. I am Guardian.
If there is one person in whole world,
Dog must protect Human from, it is Mister Mailman.

Every time mail come through door and Human open it, Human sad and depressed.

Human open paper, and read, and sad,
and money go away.

No more treats for Dog.

When me see Mister Mailman, me ROAR with fury.
Stay away, Mr. Mailman!
Never come near us again!
They still come.

Dog try to chase, Dog try to bark.
When me bark, other dogs bark back.
They tell me shut up.

It don’t matter. I care only about Human.
Human is life, Human is treats, Human is pat.
They may be stupid but they are my Human.

I am Dog and I will do my best until my last day.

source: not me, other than some parsing and a smidgeon of editing, but I thought you ‘dawgs’ who also love dogs,
might like it as much as I did.

#115 Franco on 03.25.15 at 9:54 pm

When you rent, you do not get the money back that you paid into it. That is the Italian thinking in a nutshell and I also believe that to be true.

How about mortgage interest, land transfer tax and property tax? What do you get out of that? — Garth

#116 crash callaway on 03.25.15 at 9:56 pm

We are witnessing an inversion of the 1929 crash.
Back then people were jumping off buildings.
Today people are jumping into buildings.
Suicide comes in many flavors.

#117 OttawaMike on 03.25.15 at 10:00 pm

Smoking man

Yup. Oil was up 4% on overflowing storage. You were right. Again.

I was wondering why but couldn’t put it together like you. I did make some VIX bets today though.

Bottoms up

The blog owner was worried about offending the Mamma who is the subject of today’s post.

It was really innocent humour that I got from an Italian this week. I’m surrounded by them in my ‘hood. Best neighbours ever. Except they all fight amongst themselves Calibrese vs Northerners. I’m the neutral German.

#118 Glengarry Glenn Ross on 03.25.15 at 10:06 pm

BTW Garth, are you ready to admit its indeed different here, in Canada I mean?.

#119 Mark on 03.25.15 at 10:09 pm

“When you rent, you do not get the money back that you paid into it. That is the Italian thinking in a nutshell and I also believe that to be true.”

Historically RE returns have not exceeded the cost of financing. Which means, one pays more to own with a mortgage than they would to rent in the long haul. The past 35 years have been atypical with mostly falling interest rates, leading to the allusion of unearned equity. However, realistically, can the past 35 years repeat itself for the next 35 years? Very doubtful.

Very unfortunate that you would tar a certain nationality with irrational thought concerning RE. There are plenty of Italians who rent because RE is simply quite overvalued relative to other investments or the long-term cost of financing. No ethnicity has a monopoly on being smart, nor stupid.

#120 estrella on 03.25.15 at 10:10 pm

Garth you have a competitive blogger who argues that home ownership is the basis for economic inequality (meaning ownership=good > than capital in the long run)

“But his observation that it is homeowners in particular—rather than rentiers generally—who are grabbing a larger share of the pie is important for policy. Mr Piketty used the historical evidence in his book to argue that a global tax of up to 2% a year on individual wealth should be introduced in order to prevent capital concentrating in the hands of the few. But if housing wealth is the biggest source of rising wealth then a more focused approach is called for. Policy-makers should deal with the planning regulations and NIMBYism that inhibit housebuilding and which allow homeowners to capture super-normal returns on their investments:”

On March 20th Matthew Rognlie (pictured), a 26-year-old graduate student at the Massachusetts Institute of Technology, presented a new paper at the Brookings Papers on Economic Activity. Although the paper began its life as a 459-word online blog post comment, several reputable economists regard it as the most serious and substantive critique that Mr Piketty’s work has yet faced.

http://www.economist.com/blogs/freeexchange/2015/03/wealth-inequality?fsrc=scn/tw/te/bl/ed/nimbysinthetwentyfirstcentury

How would you like to have a throw down with this 26 year old? I would pay to watch it…

#121 Drunk Actuary on 03.25.15 at 10:12 pm

When you rent, you do not get the money back that you paid into it. That is the Italian thinking in a nutshell and I also believe that to be true.

How about mortgage interest, land transfer tax and property tax? What do you get out of that? — Garth

You forgot opportunity cost, which is enormous for a 700k something house.

#122 VB on 03.25.15 at 10:13 pm

#80 Mark

REITs are so diverse, there’s all kinds not just retail. If rates go up the REIT share gets cheaper and the yield goes up so you buy the best ones not necessarily the highest yield. IF rates go down well the shares go up. Its not rocket science.

#123 Mark on 03.25.15 at 10:15 pm

“BTW Garth, are you ready to admit its indeed different here, in Canada I mean?.”

Not sure why you’re asking Garth to admit that its “indeed different here, in Canada…”. It isn’t. Its actually playing out remarkably similar in Canada as it did in the USA, with the USA peak reached in 2006 (Canada peak reached in 2013), a 2 or so year interlude with a weakening currency (USD$ weakened 2005-2008), and eventually resolving itself with mass recognition of the declining housing market and panic austerity/buying of USD$ to repay debt.

Realtor tactics in Canada are also similar to those in the USA in the post-peak era with price declines masked, at least temporarily in certain major cities, by shifts in the sales mix circa 2006-2008. And Canada/USA shared the same triggering event for the decline — the big subprime lenders significantly tightening up on credit expansion!

#124 devore on 03.25.15 at 10:18 pm

So he had a good offer – $785,000 with a closing in just two weeks. No conditions. Not even an inspection. And that still wasn’t good enough.”

The property sold for $810,000. She was enraged. “How can this be allowed to happen? Who the hell is doing this to us

Oh I see, $810k is outrageous, but $785k is a-ok.

People are so funny when they get righteously outraged.

#125 BlackDog on 03.25.15 at 10:25 pm

@Glengarry Glenn Ross, #117 re: “BTW Garth, are you ready to admit its indeed different here, in Canada I mean?.”

appreciate the clarification, and yeah, it is different here as well.

#126 Ralph Cramdown on 03.25.15 at 10:31 pm

#89 Apocalypse2015 — “BREAKING NEWS: Saudi attacks Yemen […] Germanwings pilot was LOCKED OUT of the cockpit = IT WAS A TERRORIST […] Ukraine […]”

You sound like a previous poster, “Apocalypse2014”
http://www.greaterfool.ca/2014/07/18/debt-train/#comment-315189

…and another one, “Apocalypse 2013”
http://www.greaterfool.ca/2013/10/15/expert-opinion/#comment-266429

Any relation? And really, try to avoid extrapolating tiny events into the next world war. Here’s what war death numbers look like:
http://www.independent.co.uk/news/uk/graph-of-world-wars-by-number-dead-and-duration-of-conflict-shows-how-war-is-very-much-not-behind-us-9853532.html

Your puny stories, on the other hand, are the size of large football disasters:
http://oddculture.com/historys-top-15-worst-soccer-disasters/3/

#127 No Canada, No on 03.25.15 at 10:31 pm

Boy Canadians are stupid.

But what I am wondering about why nobody did the math. It should be relatively easy to find out the blowout point for this mess. The banks should know that for sure, that have absolutely all the data: how much one gets and how much is needed to keep music playing.

Lets say the dude got 500k mortgage on that 800k house (that just got 20% more expensive)
25 years one:
3% – 2300 (thats where we are)
5% – 2900 (+600$)
6% – 3200 (+1000$)

How hard would it be for 25-30y old guy write 500-1000$ check each month in addition to all the expenses? 3000 is probably what the house going to cost with all the bills and taxes. One more thousands are just to live in this NewYonto, no car, no travel – noting. Maybe timhortonz 2 times/day.
And ooooops, we’re are in 90% tax bracket with 4 thousands after taxes! Average salary in Ontario is less than 1000/week. Ooops, ooops and fucking ooops.

I guess you can get away with it for a year, maybe few years by increasing card debt, then wife’s salary, then HELOC, then parents, then more plastic.

And what if banks starts to worry about declining house price? It’s not going to sit there watching how 800k house becomes 600k, 500k, 300k, 250k (thats where it should be). Bank gonna call the dude and make offers he won’t be able to refuse.

What that dude going to do? Find a better job? Good luck with that, everybody will need a better one when housing tsunami hits. Marry a richer woman? She probably in for couple mil for that nicey mansion in Mississalahoma-city. Parent? They already paid down.

But, but… he can always sell the fucking place with 13 bids, 20% over asking! In fact, 20% is already in the pocket whenever one shall consider selling it.

For how much did you just say I should put it on mls?!! NOOOOoooooo!

#128 juno on 03.25.15 at 10:32 pm

who is at fault. Not the Millineniums, The problem is government interference. (CMHC) Get rid of CMHC , have insurance take the full risk and there you have it problem solved.

1) Better lending standards.
2) Responsible lending because the banks will want to see some skin before making the loan
3) Credit checks and rechecking.

CMHC and the governments low interest to entice the home buyers. At the same time lining the pockets of the big banks with no risk to them. The banks wants to make money, with no risk, why not , sell sell sell, forget credit checks it only slows down the process.

Remember like any ponzi scheme, there isn’t any exit strategy once your in too deep. So like Bernie the Canadien government is going to kick their ponzi scheme further down the road until there is no road left then….. “OMG We never seen that one coming!!!”

#129 Fuzzy Camel on 03.25.15 at 10:33 pm

Well Gartho, I wanted to put my downpayment for my house into Tesla when it was $25/share, that was $50k.
I was talked out of it by friends and family. Tesla peaked recently over $225/share. Close to 1000% ROI. Damn.
So housing isn’t everything. Buying stocks right now isn’t a good idea though, way over priced.

Smoking Man, you have the right idea. Although I’ve lost a lot of money speculating on headlines. USDCAD looks ripe for shorting. It is way above the uptrend line, it should be around $1.13 in a few months if oil goes up. That said, S.Arabia getting into a conflict is a concern. The headlines lead me to believe they are picking off some Iranian backed rebels, so no regional war yet. Oil is up to $50/barrel, maybe the Alberta boys will be back on the job soon. Good call on reading the oil inventories. Is that your strategy? Read the oil numbers, knowing the CAD is a petro currency, and short/buy contracts accordingly?

#130 devore on 03.25.15 at 10:35 pm

It’s not how big the mortgage is that matters any more, but the size of the monthly.

In all honesty, statutory and in-house lending regulations aside, people have always borrowed based on their ability to handle the monthly payment. High interest rates historically kept this amount in check and low relative to incomes.

#131 Indie Chick on 03.25.15 at 10:38 pm

Hey Garth, love your blog. I’m Italian and rent a sweet little house in Toronto. My parents are so disappointed haha but I don’t care. They keep pressuring me to buy a place. I sold my condo a couple of years ago and have enjoyed a nice return on my financial portfolio since then. Thanks for all your advice. Right now my bf and I are enjoying a sweet evening by the beach in Jamaica. Life is good. Yamon :)

#132 Mukadi on 03.25.15 at 10:39 pm

I anticipated this blog posting and prepared a mortgage calculator yesterday.

Guess what? My mortgage amount was exactly $800K. This is what I came up with using very conservative assumptions for the property costs and the opportunity costs over a period of 30years:

Total house cost = $2,2million….

So, the 25year old Italian will have to spend this amount buy the age of 55 and if his 30year old house cannot sell for more than $2.2million (and I doubt!!) he would have wasted his life enriching the banks…

#133 Karma on 03.25.15 at 10:40 pm

#233 Oil Is Sticky on 03.25.15 at 5:51 pm
“#213 Babblemaster on 03.25.15 at 2:11 pm
#207 Oil Is Sticky

———————————-

BC Bud is a 6 billion $ industry. Lot’s of well remunerated people in BC. It’s just not official.

——

And the drug dealers are paying how much income tax towards healthcare, roads and education?”

**Precisely why it needs to be legalized.

Heck, might as well put those new tax revenues towards transit infrastructure funding if the “No” wins.

#134 Leo Trollstoy on 03.25.15 at 10:40 pm

You continue to blow smoke on REITs. — Garth

That’s not the only thing he blows smoke on!

#135 Randy Randerson on 03.25.15 at 10:40 pm

The best way to profit from the upcoming rate drop, therefore the free fall of loonie? Buy yourself some USD using Norbert’s Gambit.

I know I will, going to put $10k into my TFSA later this month to play catch up.

#136 The inbreds | Realties.ca on 03.25.15 at 10:46 pm

[…] Source: http://www.greaterfool.ca/2015/03/25/the-inbreds/ […]

#137 hohoho on 03.25.15 at 10:46 pm

>> The property sold for $810,000. She was enraged. >> “How can this be allowed to happen? Who the hell >> is doing this to us

> … People are so funny when they get righteously outraged.

enraged like those crazy parents in minor hockey … how dare anyone stop junior from scoring what he rightfully deserves??!!!!!

#138 Obvious Truth on 03.25.15 at 10:51 pm

Is there any point in going to school anymore. They clearly neglect to teach math. And if you are a post secondary graduate you can’t get a job anyway.

Just drop out at 16 and buy a few properties leveraged upon each other or become a trader.

Can’t we all just buy 100 homes and put a $2M value on them. They are apparently going to get there anyway. Or lever up 100 to 1. Stocks just go up.

Just hold on long enough and we’ll all be worth 100’s of millions of dollars. It all works. Cause that’s all the math that needs to be done. Presto. Multimillionaire. Maybe even billionaire. Rent shment. Stop holding junior back. Go full Monty. Property and trading account.

This Should work for all nationalities. The azzuri have got your back.

I’m in.

But I’ll need a brio to wash down the mortgage sausage.

#139 Andrew Woburn on 03.25.15 at 10:55 pm

68 Two-Bitz on 03.25.15 at 8:07 pm
10 Reasons Wrinklies should not move to Vancouver Island
=====================

If you’re living in Port Hardy I get it.

If you’re living anywhere from Nanaimo to Victoria we’ve got plenty of affordable shopping, wall-to-wall malls in Nanaimo, doctors, buses, parks, libraries, cinemas. Nanaimo is 20 miles from Vancouver and has less rain and a mediterranean climate to rival Victoria. Must admit though, we’re running a little short on “bogots” around here.

#140 M on 03.25.15 at 11:05 pm

Listen to this fool:

http://www.bnn.ca/Video/player.aspx?vid=511770

..hard landing ? HA! Smoking big hole in the tarmac

#141 billoarski on 03.25.15 at 11:17 pm

“When 25-year-old studs think they need a bung, an epic mortgage and a horny mom to prove their manhood, we’re all in a little trouble.”

Don’t forget the fuzzy dice!

#142 rentin on 03.25.15 at 11:19 pm

So I am going to say it. Everyone is looking for someone to blame for the unaffordable houses. It’s not HAM, it’s not the banks, it’s not the Fed’s Monetary policy.

Yes, you guessed it: CMHC

Makes everyone who has no money think they do, and let’s the banks avoid the RISK of lending to those exact people.

Oh but everyone deserves the opportunity of home ownership you say. No they don’t.

Houses were so much more affordable, when no one could afford them……

#143 Chris on 03.25.15 at 11:25 pm

The thought I have now is “If I love my children maybe I should leave this country?” After the banks and the government habe fooled everyone able and willing to take on debt at their higheat capacity, the economy will fall and then those who are able and willing to get to the greener pasture wherever that might be will do so. No jobs no prospects yet high housing costs and generally high coat for everything. Not to mention high taxes. The brain drain will start again.

#144 roofin it on 03.25.15 at 11:27 pm

Garth,

Would a roofing company called Shingles for Swingles be a marketable name or would that be a bit rash….

Actually, it sounds like a rash. — Garth

#145 Smartalox on 03.25.15 at 11:30 pm

Those multiple-bid situations, particularly for a run-down, un-loved property is typical of a purchase of a group of speculators, looking to flip the property into a monster home. Of course with 10 or more families combining their ‘investments’ (read HELOC advances), to finance such a purchase – in cash, it’s nearly impossible for a single buyer (or an independent couple) to compete with these mini-cartels.

Bidding war? Meh, they’ll just take the increased cost out of the construction budget – or increase the price of the finished spec house.

Of course, this may also have been the reason that ‘Junior’ wanted to buy the house in the first place (No conditions? No Inspection? does anybody really think he’d live in the place?)

Sure, ‘Junior’ might ‘live’ in the property, and papa, aided by Uncles Tony and Uncle Vito, would ‘fix the place up’ so that Junior could (eventually) sell it for a profit, and work his way up the property ladder.

#146 Karma on 03.25.15 at 11:37 pm

Italians love real estate,

Shouldn’t your handle be “Italian-Canadians love real estate”?

The (Real) Italians I knew in London all were renters.

“Italians” and “Italian-Canadians” aren’t the same thing. And if you weren’t born in Italy and spent the majority of your developing life there, you can’t legitimately call yourself “Italian”.

#147 Ralph Cramdown on 03.25.15 at 11:39 pm

#128 juno — “Get rid of CMHC , have insurance take the full risk and there you have it problem solved.
1) Better lending standards.
2) Responsible lending because the banks will want to see some skin before making the loan
3) Credit checks and rechecking.”

I’m not a fan of what CMHC has become. But this theory that banks will always lend responsibly with their own skin in the game has no basis in history. The only acceptable reason for a banker not to lend is because he’s repairing a bad balance sheet, and the cause of bad bank balance sheets is previous bad lending. Canadian banks have not been immune.

#148 natrx on 03.25.15 at 11:40 pm

There should be a reality show based on this:

The scene on bidding night, with the potential buyers outside. Expressions of the one lucky lottery winner while the disappointed rest are shown.

#149 cramar on 03.25.15 at 11:47 pm

It is not just Italian! My wife is Greek and all her family have lived in the east end of the GTA since the 1950s. The second and now the third generation all have big modern detached houses purchased years ago. Home ownership is ingrained in Greek culture, and parents would do anything to help their children do so. Absolutely NO ONE ever rents! That would be as unacceptable as moving to Asia. Also none of them will ever sell except to buy another house. Toronto is a two-tier society. The rich who own houses and the poor who cannot afford one and have to rent.

#150 Fuzzy Camel on 03.25.15 at 11:49 pm

Garth you nailed this one with your final words.
“If I don’t buy now I’m screwed.” Classic words of a bubble. I remember when I was a naive investor starting out. I bought some silver ETF at $25/oz. Well when it hit $35/oz, I thought, oh crap, if I don’t buy now I’m screwed I won’t be able to afford it. Well it went to $47/oz, then dropped off a cliff. The bull takes the stairs, the bear jumps out the window. So I lost some money, the price you pay starting out, and it smarted me up, mistakes hurt but you learn a lot.

If real estate becomes so expensive no one can buy it, who will buy it? In the words of Hyuna, bubble bubble POP!

#151 roofin it on 03.25.15 at 11:51 pm

“Actually, it sounds like a rash. — Garth”

Garth…shhhhh, it was supposed to be an incredibly witty derma-pun…don’t steal my thunda dude!

#152 Entrepreneur on 03.26.15 at 12:00 am

I like the picture: Mom, the science wizard, and the young man listening on how to succeed in life. If it worked for mom and dad it must work for me, mental thinking. Those days are gone.

#68 10 Reasons Wrinklies should not move to Vancouver Island…B.C. Ferries too expensive and cannot leave unless for medical reasons. That is why it is called “The Big Rock.”

#153 Mark on 03.26.15 at 12:10 am

“The only acceptable reason for a banker not to lend is because he’s repairing a bad balance sheet, “

Banks don’t lend at times to certain sectors because of credit-worthiness. For instance, the gold sector, except for the largest of seniors (think: Barrick, etc.) has mostly had no access to credit and must finance its entire business with equity. In such case, it wasn’t an impairment in the banking system that caused the gold mining sector to be credit-starved, but rather a perception that the gold sector was incapable of creating value sufficient to service debt.

Likewise, the banks have reduced their enthusiasm for lending towards the RE sector, particularly the subprime sector, because credit-worthiness is now a big issue. The peak in subprime credit expansion, reached in 2013 just prior to F’s Budget 2013, coincidentally marked the top of Canada’s RE market.

Credit is always cyclical over the long term. Sectors which have been credit-starved for a long time may actually start to get credit. TD, being the smart bank they are, just announced a major expansion into the gold sector by becoming a LBMA member. Ahead of the curve, so to speak. While sectors which have been over-credited, such as RE, in a state of decline, will obviously see less enthusiasm from the lender community as it becomes obvious that RE is unable to create the sort of value required for good lender returns.

#154 gregor knows something on 03.26.15 at 12:11 am

DELETED (Anti-Chinese)

#155 ripple on 03.26.15 at 12:15 am

How about mortgage interest, land transfer tax and property tax? What do you get out of that? — Garth

——

All those cost items, plus some profit are built into the price of rent normally.

Not even close. — Garth

#156 auto-corrector on 03.26.15 at 12:18 am

re: #102 BS:

Sears inherited the leases on some stores when they bought Eatons. The lease at Pacific Centre was a sweet-heart 99 year lease to get Eatons to move into the new space in the early 1970’s. It didn’t hurt that their rival The Bay was across the street from the new location.

Sears closed the Pacific Centre location and sold the lease back to the owners – Cadillac Fairview – who happily paid Sears to vacate the location.

The space is currently being gutted back to bare concrete, re-skinned, and has been re-leased by CF to Nordstroms on the lower floors, Microsoft and other office tenants on the upper floors, and the basement will be an extension of the Pacific Centre mall.

#157 Andrew Woburn on 03.26.15 at 12:33 am

#117 OttawaMike on 03.25.15 at 10:00 pm
Smoking man
Yup. Oil was up 4% on overflowing storage. You were right. Again.
———————–
Don’t believe the general media. They can’t read or analyze and they just repeat garbage. Storage at Cushing is not “overflowing”. Also any Canadian owned oil held in Cushing can be exported.

“Capacity utilization at Cushing is now 77%, a large increase from a recent low of 27% in October 2014. However, utilization reached 91% in March 2011, soon after EIA began surveying storage capacity twice a year, starting in September 2010.”

http://ftalphaville.ft.com/2015/03/25/2124878/dont-panic-about-cushing-yet/

#158 Nosty, etc. on 03.26.15 at 12:40 am

#78 Smoking Man on 03.25.15 at 8:26 pm — “Breaking , Saudi Arabia attacks Yemen.”

Yup, and when SArabia lets Israel use its airspace to bomb Iran, Russia will flatten SArabia. But it’s all in good fun! BTW, these are 4 U — BBC guilty (obviously) and Crimea.

#159 Oil Is Sticky on 03.26.15 at 12:42 am

BC Bud is a 6 billion $ industry. Lot’s of well remunerated people in BC. It’s just not official.

——

And the drug dealers are paying how much income tax towards healthcare, roads and education?”

**Precisely why it needs to be legalized.

Heck, might as well put those new tax revenues towards transit infrastructure funding if the “No” wins.

—–

Yes…..for sure.

Interestingly enough……I met with the Liberal Candidate for a get together tonight. I said I would vote for the first person to put pen to paper and guarantee that “The MP would represent their constituents NOT the mad desire of the dictator party leader – and NOT get “whipped” if they vote on behalf of their constituents”.

He claimed Justin Trudeau would sign off on that…..we will see. I’ll let you know when I have the document in my hands…..

#160 bank executives on 03.26.15 at 12:42 am

It would be interesting to know if Canadian bank executives rent or own their homes.

#161 Oil Is Sticky on 03.26.15 at 12:46 am

#142 rentin on 03.25.15 at 11:19 pm
So I am going to say it. Everyone is looking for someone to blame for the unaffordable houses. It’s not HAM, it’s not the banks, it’s not the Fed’s Monetary policy.

Yes, you guessed it: CMHC

——-

Yes your right…..the fact that BC is KNOWN as the real estate money laundering capital of N.America…..a fact so well known that even Chinese police are in Vancouver hunting down said launderers of money…….means nothing. Also the fact that the cities condo’s and houses sit empty and dark at night. Ahhhh…..that means nothing too. And the 5000 news articles about foreigners buying up HAMcouver? You guessed it. They mean nothing. Not one thing……

#162 barnz0rz on 03.26.15 at 12:50 am

I find it awesome…. I just bought a car recently and I’ve been offered a new credit card with a $10,000 limit (which I have absolutely no interest in obtaining) 3 times in the last 3 days… If consumer credit use is a problem why do banks keep offering it? Oh, yeah, right….

#163 bobdog on 03.26.15 at 12:51 am

I can only hope the NHL goes on strike again so Canadians wake up and realize the hole they are digging. I hear there is a law suite upcoming against the bank of canada and the corrupt puppet regeim we call a government for indebting Canadians. Apparently til the 70s the bank of Canada created money for federal provincial and civil loans at 0%. The Rothschild’s and Goldman Sachs did not like this one bit. Now we borrow from corp banks at interest. Is this true?

#164 Hippy without a cause on 03.26.15 at 1:08 am

Garth
I’m truly surprised that as a financially sopthistcated individual, you haven’t commented about the future CAD exchange rate. Just as British decimated the pound to get out of its WW2 debt overhand, Canada will take the “easy way out” and destroy the relative international value of the CAD to work thru its accumulated mistakes.
As to the crash vs soft landing senarios, it only depends on which of these two paths are chosen:
1) prop up the dollar and deal with the resulting deflational spiral of increased unemployment, crashing RE values and defaulting financial institutions.
2) let the CAD fall to the 20’s/30’s USDCAD to esentially do a reset for all the past accumulated mistakes.
Either way Canadians are going to be a lot poorer in the future.
The american author Toole wote a widely acclaimed novel entitled “A Confederacy of Dunces” and I hope he forgives me for misappropriation and calling Canada – the true confederacy of dunces. Just look at our political leadership at both the federal and provincial levels.

#165 Rabbit One on 03.26.15 at 1:27 am

I still do not understand why banks do not charge premium mortgage rates on CMHC mortgagee.

Yes CMHC mortgage is government backe.
But still, risks are very high compare to non high ratio mortgagee, why still qualified for 2.75% 5Y fixed?

#166 Rabbit One on 03.26.15 at 1:33 am

Lower rates, more debt.

Is it British Coommonwealth phenomenon?

I personally don’t hear this story much other than UK, Australia, NZ -land and Canada.
When interest rates down, citizens pile up more debt.

Goverment wants business to borrow more and invest, because economy (ot its outlook) is bad.

Low rates environment, many other countries citizens historically be more cautious, or hesitant to take on more debt, weren’t they?

Canadian newspaper headlines – Government may reduce rates again, house price on fire – so hard to understand.

#167 Whynot on 03.26.15 at 1:57 am

“Cultural obsession” Indeed. Toronto an Van remind me Of peaked out hype stocks. Everyone keeps the dream alive, scary thing it’s so bloody obvious what will eventually happen next, suckers beware! Harper is the Putin of Re, he will keep it going one way or another till next election, no other option. He has created decades of damage for Canada.

#168 Whynot on 03.26.15 at 2:09 am

Smart resource countries like Norway save on the good fortunes when times are well, not torch the place so a handful can watch the flames and laugh at how stupid everyone is.

#169 Oot of the hoos on 03.26.15 at 4:16 am

I have some data to correct this idea:

#21 Waterloo Resident on 03.25.15 at 7:02 pm
If this is the start of a big correction then that means the new recession will start 1.5 to 2 years from today, because a stock market crash typically precedes recessions by 1.5 to 2 years.

The 1.5 year idea is maybe how long AFTER the recession when economists notice the recession.

Look at the recession data here:
http://globaleconomicanalysis.blogspot.com/2015/03/jobs-and-employment-how-much-recession.html

I think the employment reports and the stock market do not predict recessions (However ECRI uses the stock index to predict recessions). I think they are concurrent to recessions. The big recession started Dec 2007. The stock market decline was Nov 2007 through to March 2009.

Mish thinks USA is about to go into recession. Look at the Atlanta Federal Reserve Bank GDP prediction declines:

http://globaleconomicanalysis.blogspot.com/2015/03/gdp-projections-drop-yet-again-still.html

#170 Italians love real estate on 03.26.15 at 6:46 am

pm
Italians love real estate,

Shouldn’t your handle be “Italian-Canadians love real estate”?

The (Real) Italians I knew in London all were renters.

“Italians” and “Italian-Canadians” aren’t the same thing. And if you weren’t born in Italy and spent the majority of your developing life there, you can’t legitimately call yourself “Italian”.
—-
Yes you are correct and I have addressed this before in that I do mean italian Canadians .
From now on my handle will be italian Canadians love real estate.

#131 indie Chick-
Be careful on this renting thing, you may dis inherit yourself from all your parents properties.

#119 Mark- ” there are plenty of Italians that rent”

Unless you live in Venice Italy , you do not know what you are talking about.

#171 Italians love real estate on 03.26.15 at 6:56 am

real estate on 03.25.15 at 8:44 pm
I keep getting deleted and can’t imagine why ?

I guess a bullish view of RE gets banned

You are reverting to the useless banter of the past, every post repeating the same. I just got tired of you. Snip. — Garth

Ok I will change it up . Got it.

Perhaps the deep ” italian Canadian” cultural obsession with real estate stems from the predominance of them in land development, construction and sales of real estate over the past 60 years or so in this country and the overwhelming success and wealth that the community has achieved in doing so.

Opps hope I don’t get skewed for stereotyping.. Lol

#172 Julia on 03.26.15 at 7:04 am

#128 Juno

Lets not forget that no matter what the Banks tell people how much they can “afford” (read: qualify for), nobody is forced to borrow that much.
A lot of purchasers are stupid when it comes to personal finances. The number of times I have heard: I am so happy I can afford to buy a more expensive house because the Bank approved me for more…Makes me cringe.
People don’t realize how Banks qualify them. Basic expenses/debt carry. NOT lifestyle.

BTW, I am a first generation born Canadian, of European parents. My parents came here with nothing. My grandparents followed. They all bought homes and stayed put. No upsizing. Home ownership was very important. BUT, they also were very frugal: No fancy cars, no credit card balances if they had any cards at all, money in the Bank because you need to be prepared etc…
People today want the house AND the big lifestyle, even if that lifestyle is on credit.

#173 Contrarian Coyote on 03.26.15 at 7:27 am

#95 young & foolish on 03.25.15 at 9:12 pm
Investing in RE will always seem more appealing to the many, as financial assets are frowned upon as being abstract and therefore easily manipulated.
For some people, they need to see what they bought with their own eyes.

That’s why most sheeple have houses and no money. — Garth

This is one concept that’s been the hardest for me to convince my wife. She’s from East Asia where real estate is the be all and end all of measuring wealth. We’re currently renting and holding firm against buying now. So far, so good.

#174 Purvish on 03.26.15 at 7:38 am

Respectfully, the cultural preference for owning real estate is not limited to the italians. Have you spoken to a south asian parent? I am a South Asian, who rents. The blasphemy!! Been told by my mom specifically, that she is ashamed of me…and cannot show her “face” at social events. By the way, I am a CPA,CA with my own tax practice in GTA. Thanks to Mr.Turner and the “blog dogs” here…resonates with my gut feeling that things are out of whack. GT (and many other blog dogs) , of course, are way more eloquent than me when putting their perspective together. Regards

#175 NoName on 03.26.15 at 8:53 am

@#146 Karma
““Italians” and “Italian-Canadians” aren’t the same thing.”
you are correct! Italian-Canadians actualy can play soccer, Italians not so much…
https://youtu.be/9ukFUEI5qz8

#areyouthemanorareyouthemice #alloallo
https://youtu.be/-IyN-luixiU

877924

#176 Dup on 03.26.15 at 9:05 am

What did she say? “What …. to have him rent?”. Renting is perfectly fine if it is in a good area.
What a delusional ignorant she is. Garth do not waste your breath on idiots like her.

You should have another blog for these idiots; where you would recommend them to buy as much real estate as the banks will give them. Get loaded up in debt and be good obedient slaves to the bank and the Government for generations to come. These egoistic type of idiots like her do not deserve any good advice. They only learn by life lessons, not by listening. Their ears have a one way valve to only absorb what they want to listen nothing else….

#177 Holy Crap Wheres The Tylenol on 03.26.15 at 9:12 am

#158 Nosty, etc. on 03.26.15 at 12:40 am

#78 Smoking Man on 03.25.15 at 8:26 pm — “Breaking , Saudi Arabia attacks Yemen.”
Yup, and when SArabia lets Israel use its airspace to bomb Iran, Russia will flatten SArabia. But it’s all in good fun! BTW, these are 4 U — BBC guilty (obviously) and Crimea.
_____________________________________________
This is a minor blip in the scheme of things and not the real War that is coming. Abd Rabbuh Mansur Hadi left Yemen after a coup d’état by the Houthis. Playing president from a new capital and the fact that the whole country has fractured is causing the Saudi Royals to get a little trigger happy. If Yemen goes south then its a choke point for Millions of barrels of Saudi crude flowing out of their ports in the red sea to the Arabian sea and freedom. Not only that but these crazy bastards that threaten to take over Yemen will have a foot hold next door to the Saudi Kingdom. The Saudis want to keep their monarchy going as long as they can. So Nosty you are correct in your assumption that Israel may be allowed to use Saudi air bases to take out Iran.

#178 Ralph Cramdown on 03.26.15 at 9:17 am

#153 Mark — “Banks don’t lend at times to certain sectors because of credit-worthiness. For instance, the gold sector, except for the largest of seniors (think: Barrick, etc.) has mostly had no access to credit and must finance its entire business with equity.”

I wasn’t saying that banks lend to all sectors all the time, but that a bank with a solid balance sheet is always lending to somebody, and convincing itself that that somebody is a good credit.

Canadian banks have recently moved back into condo construction financing, after a few years of severely curtailed lending in that sector. Is it because the fundamentals improved? I don’t think so. Compare:
http://business.financialpost.com/2012/03/23/banks-tighten-condo-lending-amid-bubble-fears/
with:
http://business.financialpost.com/2015/02/25/big-banks-boost-condo-financing-even-as-unsold-units-in-toronto-hit-21-year-high/

As for lending money to a liar standing next to a hole in the ground, Scotiabank’s hitting for the cycle in writedowns:
– blew a foot off mispricing the Silver Wheaton bought deal as lead underwriter
– Wrote an FX swap with Allied Nevada, which has now gone BK
– Suing Cliffs Natural for debt covenant breaches

You’ll never hear a banker at the top of the cycle say “our balance sheet is strong, but asset and collateral values are crazy and net interest margins are too low, so we’re stacking cash, running off our loan book and buying back shares.” Nope, they’ll write residential mortgages at foolish values and spreads, and hope they can make it up by cross-selling credit cards, life insurance and other products, all while their other divisions make other rationalizations.

#179 Renter's Revenge! on 03.26.15 at 9:23 am

“You should have another blog for these idiots; where you would recommend them to buy as much real estate as the banks will give them.” – Dup

That’s an awesome (and deliciously ironic) idea! Bank shareholders depend on people like these for their early and luxurious retirements.

#180 X on 03.26.15 at 9:24 am

#155 ripple on 03.26.15 at 12:15 am

How about mortgage interest, land transfer tax and property tax? What do you get out of that? — Garth

——

All those cost items, plus some profit are built into the price of rent normally.

Not even close. — Garth

Plus the expense and fun of doing repairs!

#181 Holy Crap Wheres The Tylenol on 03.26.15 at 9:25 am

#107 Smoking Man on 03.25.15 at 9:39 pm

#100 Bottoms_Up on 03.25.15 at 9:26 pm
#63 OttawaMike on 03.25.15 at 8:03 pm
————————————————-
Garth glad you’re calling out why posts are being banned…
hopefully a learning opportunity for these ‘bannees’.
…,…..
If your not in tribe “bannees” your nothing.

Damn, shit….am I in a tribe now.

Noooooooo
____________________________________________
Smoking Man you were always part of a tribe. Once a Nectoninonian always a Nectoninonian.

P.S. re your Kinetic Molecular theory. Perhaps the The Universal Gas Constant is related to the Universal Consciousness Consolidator?
https://www.youtube.com/watch?v=_rsqBNhFG1Y

#182 Holy Crap Wheres The Tylenol on 03.26.15 at 9:30 am

The main message here is simple. If you don’t buy now, you’re screwed.

They sure got that backwards.
______________________________________________
According to the Toronto Star, we have another two year run on this dead horse. It does ring true based on the supply and demand statement. We have a finite amount of homes available and an infinite amount of sheeple.

http://www.thestar.com/business/2015/03/25/torontos-record-house-prices-to-rise-further-by-2017.html

#183 Ralph Cramdown on 03.26.15 at 9:48 am

#172 Julia — “Lets not forget that no matter what the Banks tell people how much they can “afford” (read: qualify for), nobody is forced to borrow that much.”

In the UK, before the bust, your banker told you how much he was willing to lend you against a home you were buying, and would refuse to lend you less. Often 110% to 120% of the value of the property, 125% at Northern Rock.

I got this from a London lawyer whose day job was negotiating contracts with bulge bracket banks, so it’s safe to say this wasn’t just a banker negotiation tactic used on the easily intimidated. These loans were presented as an all-or-nothing proposition.

Here in Canada, I’ve heard of strange things happening around the 80% LTV cutoff, e.g. bank will loan at 80% LTV with the borrower paying the CMHC premium, but won’t make a smaller loan at 75% LTV, or will strongly suggest that the borrower borrow more than 80%, to leave herself a cash reserve just in case. Pretty easy to see what’s going on there.

#184 anon on 03.26.15 at 10:04 am

#175 NoName on 03.26.15 at 8:53 am

http://www.cbc.ca/sports/soccer/canada-suffers-humiliating-8-1-defeat-to-end-world-cup-hopes-1.1133876

#185 Julia on 03.26.15 at 10:06 am

#183 Ralph Cramdown

Crazy.

That said, it goes back to being responsible for our own actions doesn’t it? If a bank is pushing you to borrow more, you can say no and go somewhere else. But most won’t.

You can also with the current low rates, if you have self discipline, borrow as much as you can and invest what you don’t need.

But really, just because you are approved for a higher amount, doesn’t mean you have to buy the more expensive house.

#186 Mike in Edm on 03.26.15 at 10:09 am

I was out for dinner with a friend from Calgary last night. He’s a sales rep for industrial equipment maintenance parts. A couple of interesting things I pulled from our conversation:

1) He owns a prime-location condo near the Stampede grounds, tried selling it last September and couldn’t sell it in 4 months so they had to rent it out. Last September seems to be before all the crap hit the fan in Calgary. If he couldn’t sell then, just imagine what it’s like now! He said they had 1 offer, but financing didn’t go through.

2) He sees massive RE and job loss pain already happening and continuing to happen in Calgary. He knows he’s absolutely screwed and will be unable to sell his condo for several years now.

3) Despite all this, he says his sales so far in 2015 are doing awesome, which amazes him. He know how bad Alberta is getting, yet he’s still selling. He thinks it’s maybe because he offers a lower cost product, and his products are ones that anyone with a warehouse can’t do without. He also says that companies continue to sign new leases in new buildings (and thus need new equipment), which really surprises him (and me).

#187 Linda Pearson on 03.26.15 at 10:20 am

#183 Ralph Cramdown on 03.26.15 at 9:48 am

In the UK, before the bust, your banker told you how much he was willing to lend you against a home you were buying, and would refuse to lend you less.
*************************
In 1972, when we bought our first house in the small southwestern Ontario town of Erin, the local banker refused to lend us the money. He said we didn’t have enough of a down payment (we didn’t) and we were fools to stretch our proposed budget that far (we were).

Nevertheless, we eventually found a trust company that would give us a high-ratio mortgage and we bought the house. However, our budget was stretched so thin it’s a wonder we survived that first year – couldn’t even make a single long-distance phone call for lack of funds.

We moved to 8 different houses in the intervening years but never again did we do anything so foolish. Experience taught us to under-buy.

#188 PR on 03.26.15 at 10:24 am

…I want to know who’s responsible for creating this mess.”

Central banks are evil. Remember?

#189 Italian canadians love real estate on 03.26.15 at 10:31 am

#174 Purvish on 03.26.15 at 7:38 am
Respectfully, the cultural preference for owning real estate is not limited to the italians. Have you spoken to a south asian parent? I am a South Asian, who rents. The blasphemy!! Been told by my mom specifically, that she is ashamed of me…and cannot show her “face” at social events. By the way, I am a CPA,CA with my own tax practice in GTA. Thanks to Mr.Turner and the “blog dogs” here…resonates with my gut feeling that things are out of whack. GT (and many other blog dogs) , of course, are way more eloquent than me when putting their perspective together. Regards

—-

I agree with your post Purvish. It does seem to be a cultural bias among south Asians as well.

It’s just that the much larger number of Italian canadians coupled with the overwhelming number of them in the housing and related industries dwarfs out any comparisons to other groups

#190 TP on 03.26.15 at 11:05 am

A good life lesson here….for myopic house horny Canadians!
http://finance.yahoo.com/news/stuck-house-cant-sold-115000767.html

#191 Rai Uno on 03.26.15 at 11:11 am

Tell that “Terrano” to go and learn how to speak a language properly be it English or Italian. Even back where she came from the educated would not understand their “Terrano” slang, never mind their logic in investments. Unfortunately that is what we get to represent in Canada.

#192 not me on 03.26.15 at 11:26 am

@ #189 by TP

from the linked article: “The budget restrictions forced us into neighborhoods that were probably fringe, transition-zone neighborhoods at best”…

with emphasis on the “FORCED” – it reminds me when I was a kid my grandpa would get upset about TV programming running into late night hours, keeping people awake. We, the kids, used to say: but grandpa no one forces you to stay up and watch.

#193 Mike in Toronto on 03.26.15 at 11:29 am

#187 Linda Pearson

In 1999 I finished paying off my student debt and started saving to buy a house. Packed away > $1k/mo for years.

in 2000 I had $10k
in 2001 I had $20k, houses had gone up $40k, would have been easier to buy in 2000
in 2002 I had $30k, houses had gone up $20k would have been cheaper to buy in 2001
in 2003 I had $55k, barely could afford a crappy fixer-upper with pot smoking basement tenants with 25% down. Would have been easier to buy in 2002
by 2006 I sold it because of street noise. The increase in value covered my costs and lost savings.
in 2007 I took a break from the market.
in 2008, the market went nuts, Would have been easier to buy in 2007
by 2010, I was priced out.
in 2015, despite earning 6 figures and the proceeds from a house sale, I can’t afford 25% down on the 2003 crapshack.

The lesson?

“Saving” has been a fool’s errand for mid GenX or beyond. You would have “saved” more money by buying with nothing down at 40 year mortgages rather than trying to make a reasonable downpayment…. and the larger the house, the better I would have done.

Other boomer lessons like “be loyal to your employer”, “get a good education”, “never quit a good job”, “benefits and retirement package” are equally useless.

Sorry to sound negative, the more of these lessons I un-learn, the better. What’s a kid supposed to do these days? Spend their 20’s paying off their $30k student loans and save up $200k for a downpayment before making an offer on a fixer-upper semi “starter” home?

“Moral Hazard” should be the millenial cry. Between the bankruptcy laws and the CMHC, there’s no risk.

#194 tuericentrum on 03.26.15 at 11:32 am

Would you rather rent a home, or rent money from a bank?

#195 Romanians love Real Estate on 03.26.15 at 11:52 am

http://en.m.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate

#196 zedgt87 on 03.26.15 at 11:53 am

Ahhhh blame the weather! LOL! That is the reason for the weak economy your right. Real growth to justify insane financial prices is just around the corner! Low gas prices will cause lift off at some point!

/s

#197 E.Bernays on 03.26.15 at 11:57 am

Here is the actual report if anyone is looking for it:

https://www.vancity.com/SharedContent/documents/News/Downsizing_Canadian_Dream_March2015.pdf

I’m starting to think Van is impervious…and I just sold!

#198 Oceanside on 03.26.15 at 12:13 pm

#68 Two-Bitz on 03.25.15 at 8:07 pm
10 Reasons Wrinklies should not move to Vancouver Island
1- its damp 9 months of the year, it will kill your bones
2- there are not enough doctors or special care workers to help you.
3- food is nearly double, only the high north is worse.( that includes cat food)
++++++++++++++++++++++++++++++++++++

We love being on the Island, quiet, warm, no rain from June to September, no snow, palm trees. Biggest problems (for us) are the ferry fares (kids visiting) and the lack of decent doctors that work more than 3 days a week….Huge problem. Nearly all our neighbours are from Alberta and the other prairie provinces and are always going on about how they can garden in March and love it. Don’t find food that high, just shop smart.

#199 NoName on 03.26.15 at 12:13 pm

@#184 anon

what is Canadians favorite pas time? hockey and paying a mortgage down…
so that explains a loss. ;-)

pay attention around 1min 30sec
https://youtu.be/RoSOGoolFGs

#200 KPop on 03.26.15 at 12:18 pm

And…just this morning our BOC chief nut job ‘Poloz the Inflator’ made another petulant defense of his interest rate cuts….undeniably setting us up for a further ‘low monthly pmt regime’. Hurray….real estate will go up forever.

I’m going to wait until my kids have to borrow 2 million as the papers report…..if people feel secure at 800,000…we’ll feel even better at 2 mil…. I figure.

#201 harden on 03.26.15 at 12:25 pm

“I may never own a piece of this city, at least not in the legal respect. But I do have a home here. I have built another kind of equity. And I will take that with me whenever, wherever, I choose to go.”

http://www.vancourier.com/opinion/building-a-home-minus-the-mortgage-1.1803139

#202 cramar on 03.26.15 at 12:31 pm

Just saw Timothy O’Leary on the Marilyn Denis Show talking about RE. He was giving rules on when it is time to buy and when you should rent. He did say that with young couples house hunting is very emotional. More politically correct than using the “house horny” or “virgins” terminology from this pathetic blog.

http://www.marilyn.ca/AtHome/segments/Daily/March2015/3_26_2015/RightChoiceRealEstate

#203 jess on 03.26.15 at 12:47 pm

Andrew …not so fast

Apple Pay
http://krebsonsecurity.com/2015/03/apple-pay-bridging-online-and-big-box-fraud/
CurrentC
http://www.businessinsider.com/currentc-hacked-2014-10

If interest rates rise would the “investors” find better allocations than REITs for returns?

#204 jess on 03.26.15 at 12:52 pm

“Plaza Bank turned a blind eye while consumers lost tens of millions of dollars as unscrupulous merchants reached into accounts and stole hard-earned money,” said Acting U.S. Attorney Stephanie Yonekura for the Central District of California. “Because of its flagrant failure to protect consumers and the integrity of our banking system, Plaza Bank is now subject to a significant penalty and court oversight to ensure it behaves as a lawful corporate citizen.”

=====================
Operation Choke Point’ Catches Two More Banks

Two Irvine, Calif.-based banks settle with the Justice Department over permitting transactions involving fraudulent merchants.
Katie Kuehner-Hebert
March 13, 2015 | CFO.com | US

http://ww2.cfo.com/fraud/2015/03/operation-choke-point-catches-two-banks/
Settlement is first U.S. criminal case from ‘Operation Choke Point’ probe of fraudulent transactions

====

who are the “grassroots” behind the campaign /the donors are not identified
http://www.bizjournals.com/washington/blog/2014/06/mysterious-group-to-spend-5-million-to-break.html?page=all

#205 Sell now or be priced in forever on 03.26.15 at 12:59 pm

Drama watcher and former GTA resident from the US here. Have been reading this blog religiously for a few years now. Pass the popcorn, please.

May I suggest a term for you Garth? “Ekwity” I loved its use in the 2000-2008 window in the States when the hordes of hornies were bloated with confidence and bursting with how “richer than you think” they were.

Equity. n. the monetary value of a property or business beyond any amounts owed on it in mortgages, claims, liens, etc. Not to be confused with:

Ekwity. n. the amount of equity that many homeowners believe they have achieved in an inflated market.

#206 NoName on 03.26.15 at 1:06 pm

@#194 Romanians love Real Estate

13 out of first 20 countries were former commy countries, where companies after so many years of service would give its employees free apartments for their families to live in.

#207 bdy sktrn on 03.26.15 at 1:17 pm

#201 cramar on 03.26.15 at 12:31 pm
Just saw Timothy O’Leary on the Marilyn Denis Show
———————
Was he tripping out?

#208 Ralph Cramdown on 03.26.15 at 1:26 pm

#199 KPop — “And…just this morning our BOC chief nut job ‘Poloz the Inflator’ made another petulant defense of his interest rate cuts…”

I think if anyone was petulant it was the banks’ bond desks which were caught offside. When they complained about “credibility” I read it as “but you didn’t telegraph your move to us beforehand!”

“Data driven!” shouts Poloz. “No free lunch for you!”

Compare with this from Cassandra Does Tokyo two days ago:
http://nihoncassandra.blogspot.ca/2015/03/yellen-isnt-yellin-anymore.html

When weather forecasters get it wrong, we don’t blame the weather for “missing expectations.” It should be the same with Bay Street economists.

As an aside, Garth spoke earlier about the rude and hurried pace of life in T.O. compared to down east. But that was before the spring selling season got started in earnest.

“If you get home at 6 o’clock, at 6:01 you find out you’re pregnant; at 6:02 you call the bank,” he says, adding that growing families have always driven real estate.

http://www.theglobeandmail.com/life/home-and-garden/real-estate/let-the-deluge-begin-flood-of-new-toronto-home-listings-expected/article23629185/

Wham, bam, thank you RE/MAX!

#209 Smoking Man on 03.26.15 at 1:32 pm

Nosty

Great link, he wins his case against BBC because it had fore knowllage of Building 7 free fall.

#210 Highway61 on 03.26.15 at 1:38 pm

Oil 65$ by April 1st? Calgary saved?

#211 Mark on 03.26.15 at 1:39 pm

“I was out for dinner with a friend from Calgary last night. He’s a sales rep for industrial equipment maintenance parts. A couple of interesting things I pulled from our conversation:”

Your entire post is pretty consistent with everything I’ve seen of the Calgary market (I don’t live there, but I am there quite frequently).

Of course, its inconsistent with the propaganda that the RE vendors are trying to use to move units (unfortunately repeated almost verbatim in a bought and paid-for media), but the RE boards are almost at the height of delusion these days with the public pretty much fully rejecting their claims of rising prices as being nothing but hype and nonsense. Really unfortunate that otherwise reputable newspapers are still claiming price increases in Toronto/Vancouver that simply are not happening.

#212 Mark on 03.26.15 at 1:42 pm

“And…just this morning our BOC chief nut job ‘Poloz the Inflator’ made another petulant defense of his interest rate cuts…””

Calling Poloz an ‘inflator’ is perhaps itself the sign of a nut-job, as inflation has been minimal, practically non-existent under Poloz. If anything, Poloz’s sin is that he has failed to create enough inflation to keep the economy working properly. YoY CPI is only 1% at last count, and the trend is towards negative price growth as consumer demand craters.

#213 cramar on 03.26.15 at 1:44 pm

#192 Mike in Toronto on 03.26.15 at 11:29 am

The lesson?

“Saving” has been a fool’s errand for mid GenX or beyond. You would have “saved” more money by buying with nothing down at 40 year mortgages rather than trying to make a reasonable downpayment…. and the larger the house, the better I would have done.

Other boomer lessons like “be loyal to your employer”, “get a good education”, “never quit a good job”, “benefits and retirement package” are equally useless.

Sorry to sound negative, the more of these lessons I un-learn, the better. What’s a kid supposed to do these days? Spend their 20’s paying off their $30k student loans and save up $200k for a downpayment before making an offer on a fixer-upper semi “starter” home?

“Moral Hazard” should be the millenial cry. Between the bankruptcy laws and the CMHC, there’s no risk.

———

Sounds like you don’t want any more lessons from boomers. The more lessons you unlearn the better? Well then you are destined to go your own way and learn your own painful lessons. But I’ll give you some anyway.

I was faced with realizing circa 1974 that I would never be able to afford a house in the GTA. With house prices rising and mortgage rates well into double digits, my only solution was to get out of Dodge. Sure, I had to take a significant pay cut to do so, but it lead to me buying a house a couple years later. And yes it was a fixer-upper. I am always amazed that Torontonians think the event horizon of the universe lays at the border of the GTA.

Yes you should spend your 20’s paying off your student loans. What is your degree in anyway? Did you choose a career path that was financially beneficial? My son went back to university in his 30s and took on $30k+ in student loans. But that was to get an MBA, which got him a five figure starting salary in the U.S. Now he is a senior partner where he earns more than 98.5% of all Americans. Sorry he is Gen X though, not a Boomer.

My advise to the young today:

– Have the goal of developing wealth, not owning a house
– Have a long-term perspective instead of short term
– Live frugally below your means regardless of income, so you can save and invest a fraction of every pay check
– Don’t go into debt except to buy a house
– If you can buy a house by taking on a reasonable mortgage debt fine, but if not… don’t buy
– Wealth is better than poverty. Always refer the first rule above.

#214 jess on 03.26.15 at 1:54 pm

Operation Decisive Storm has begun

“We will do all we can to protect the legitimate government in Yemen and prevent it from collapsing and facing the dangers of militias,” the Saudi ambassador to Washington, Adel al-Jubeir, said at a press conference late on Wednesday. “The situation in Yemen is dangerous and it is unprecedented for a militia to control air forces and ballistic missiles and heavy weapons.”

Saudi Arabia deployed 100 fighter jets and 150,000 troops for the operation, dubbed Decisive Storm according to TV station al-Arabiya, which is owned by the Saudis. The UAE contributed 30 fighter jets, Kuwait and Bahrain 15 each, Qatar 10 and Jordan six. Egypt is providing naval support, deploying four warships to secure the Gulf of Aden, maritime sources at the Suez canal told Reuters.

http://www.theguardian.com/world/2015/mar/26/gulf-states-yemen-ground-offensive-to-halt-houthi-rebel-advance

#215 sam on 03.26.15 at 1:56 pm

http://www.thestar.com/business/2015/03/25/torontos-record-house-prices-to-rise-further-by-2017.html

#216 Saskatchewanian on 03.26.15 at 1:57 pm

#168 Why not:
Smart resource countries like Norway save on the good fortunes when times are well, not torch the place so a handful can watch the flames and laugh at how stupid everyone is.
********************************************
Good point!

#217 Oil Is Sticky on 03.26.15 at 2:25 pm

#214 Saskatchewanian on 03.26.15 at 1:57 pm
#168 Why not:
Smart resource countries like Norway save on the good fortunes when times are well, not torch the place so a handful can watch the flames and laugh at how stupid everyone is.
********************************************
Good point!

——

No….that’s what the Canadian Govt does……and don’t kid yourself….this is not “some rogue MPs and the PM”. There are people in offices and cubicles who know exactly what they are doing while they are stealing and pissing away tax dollars. All the while collecting great salaries, benefits and pensions.

#218 TurnerNation on 03.26.15 at 2:28 pm

Where are the oil bottom doubters. Nervous nellies.

#219 Getting old on 03.26.15 at 2:51 pm

That’s why most sheeple have houses and no money. — Garth

Garth you are missing the point. Most people will not trust a financial adviser to manage their money. A house you can sell, at least for now. A bad adviser, what can you do with? Besides having regret you hired and idiot that lost your money.

Most people are in awful financial shape, with real estate a contributing factor along with the inability to trust others – which you articulate so well. — Garth

#220 Ralph Cramdown on 03.26.15 at 2:52 pm

#217 TurnerNation — “Where are the oil bottom doubters.”

Eagerly awaiting Obama’s peace deal with Iran.

#221 devore on 03.26.15 at 3:05 pm

#147 Ralph Cramdown

I’m not a fan of what CMHC has become. But this theory that banks will always lend responsibly with their own skin in the game has no basis in history. The only acceptable reason for a banker not to lend is because he’s repairing a bad balance sheet, and the cause of bad bank balance sheets is previous bad lending. Canadian banks have not been immune.</block

#222 devore on 03.26.15 at 3:11 pm

#147 Ralph Cramdown

I’m not a fan of what CMHC has become. But this theory that banks will always lend responsibly with their own skin in the game has no basis in history. The only acceptable reason for a banker not to lend is because he’s repairing a bad balance sheet, and the cause of bad bank balance sheets is previous bad lending. Canadian banks have not been immune.

How do you figure that? There is a reason banks don’t offer high ratio mortgages. They had the same problem in the US: tight fisted banks, until they figured out they could package up and offload the lending risk to investors.

If the borrower is credit worthy, and the collateral solid enough, of course a bank has no reason not to lend, but if you think they would treat a 20 year old kid with 5 months life-time employment record and no money down the same even if the Government of Canada is not co-signing the loan, well, you haven’t been in a bank recently.

If the only acceptable reason to not lend is as you state, why are small business borrowers unable to get any credit that is not backed by their house (and thus CMHC insured)?

#223 devore on 03.26.15 at 3:13 pm

#149 cramar

Toronto is a two-tier society. The rich who own houses and the poor who cannot afford one and have to rent.

Right, because clearly only rich people buy houses in Toronto.

Stick to your Mad Money shtick.

#224 Ralph Cramdown on 03.26.15 at 3:28 pm

#221 devore — “How do you figure that? There is a reason banks don’t offer high ratio mortgages. They had the same problem in the US: tight fisted banks, until they figured out they could package up and offload the lending risk to investors.”

Banks don’t offer uninsured high ratio mortgages because, legally, they can’t. The reason for that regulation is that otherwise they would. Not always and to everyone, but sometimes and to some people.

Yes, banks now would rather lend to homeowners, insured by CMHC. It’s considered triple-A and they don’t have to allocate capital against it.

But if CMHC went away, banks would continue to lend. If they ran out of good risks, they’d lend to bad risks.

It isn’t like all the US banks and investment banks packaged all their toxic mortgage crap and sold it ALL to German pension funds. They kept a lot of it on their own balance sheets (or off, but guaranteed). That’s why there was a sudden financial crisis; nobody knew if these banks were solvent given the toxic crap on their balance sheets. If they’d sold it ALL to Germans and retail investors, there wouldn’t have been a US financial crisis.

Banks are procyclical. They make crappy loans when things are going well. If things keep going well, many of those loans don’t default, but that doesn’t mean they were good loans. When things blow up, all turns to crap, and the banks spend a few years not making good loans while they recapitalize.

#225 rosie "moving forward" in the knowledge that, "this won't end well" on 03.26.15 at 3:35 pm

On bidding wars, the e-bay mentality works.

http://www.washingtonpost.com/blogs/wonkblog/wp/2015/03/10/a-legacy-of-the-housing-bubble-that-wont-go-away-home-bidding-wars/

#226 Holy Crap Wheres The Tylenol on 03.26.15 at 3:41 pm

#208 Smoking Man on 03.26.15 at 1:32 pm
Nosty
Great link, he wins his case against BBC because it had fore knowllage of Building 7 free fall.
_____________________________________________
So it was the BBC and the English that demolished building seven? Aha, inquiring minds want to know!

#227 Holy Crap Wheres The Tylenol on 03.26.15 at 3:45 pm

P.S. Smoking Man don’t forgot to talk to your smartphone! The spelling mistakes are still coming through.
“Knowllage” = A word use by Smoking Men.

“knowledge” =
1. acquaintance with facts, truths, or principles, as from study or investigation; general erudition:
knowledge of many things.
2. familiarity or conversance, as with a particular subject or branch of learning:
A knowledge of accounting was necessary for the job.
3. acquaintance or familiarity gained by sight, experience, or report: a knowledge of human nature.
4. the fact or state of knowing; the perception of fact or truth; clear and certain mental apprehension.
5. awareness, as of a fact or circumstance: He had knowledge of her good fortune.
6. something that is or may be known; information: He sought knowledge of her activities.
7. the body of truths or facts accumulated in the course of time.

#228 Cici on 03.26.15 at 3:45 pm

Breaking news,

New rules are coming in to cool bidding war idiocy in Toronto:

“with interest rates still rock-bottom and bidding wars turning post-war bungalows into million-dollar properties, the Ontario government is bringing in new rules to crack down on unethical real estate agents that try to pump up housing prices with “phantom” offers.”

https://ca.finance.yahoo.com/blogs/balance-sheet/new-ontario-housing-rules-to-take-some-of-the-181354074.html

#229 Mark on 03.26.15 at 3:45 pm

“Banks don’t offer uninsured high ratio mortgages because, legally, they can’t.”

Actually the federally chartered banks, in practice, are insuring loans that with equity far greater than the minimum standard set forth in the Bank Act. This is the only way that $900B out of a ~$1.2T mortgage market was able to fall under CMHC subprime mortgage insurance — at the prudent behest of the banks! Effectively nullifying the regulations set forth in the Bank Act. If the Bank Act 20% requirement were to be repealed tomorrow, absolutely nothing would change at the Canadian federally chartered banks because they’re just that prudent and risk-adverse.

The federally chartered Banks know that housing prices will, sooner or later, fall 50-70% in real terms. They’re prepared, by having so much of their loan book under CMHC subprime insurance. Their provincially regulated counterparts in the credit union sector however….

#230 The real Kip on 03.26.15 at 3:53 pm

I stopped to get my car rustproofed in the way home. The fellow at the Krown dealer is handing real estate business cards worth $10 off my next rustproof job if I call him for a real estate deal.

I guess this is his day job.

#231 Julia on 03.26.15 at 3:57 pm

#227 Cici

“phantom offers”. Realtors deny they exist but I believe we dealt with one.
We bought our Toronto house in 2003. It had been on the market for about 90 days – we understand it had been priced too high and they relisted at a lower price. At that point though, buyers are concerned about a house that doesn’t sell. They were accepting offers anytime.

We bid below asking, with a condition for an inspection.

To which their realtor said: There is nothing wrong with this house, you do not need an inspection and besides, we have another offer on the table, you have to come up on your offer.

Our realtor responded: No. That is my client’s best offer and the inspection condition stays.

The offer was accepted as is.

Now, if the other offer was real, why would they accept ours after we declined to increase and left the inspection condition?

#232 MAYA on 03.26.15 at 3:58 pm

I rent. have a child and am expecting another one. Hubby makes 50, 000 a year and I make 24 thousand net.–after tax.
My monthly rent is 900, 65 for cell phone for two, no land line, no cable, 40 dolalrs for internet. hydro is 70 bucks a motnh in winter. our car is paid off. we moved very close to my work. I walk to work 70 percent of the time. my husband metros. Our eight year old car has only 55000 km milage on it and is in mint condition.

if i buy thesame town house i am renting, our cost just for morgage+ tax+strata+ other expenses would be 1500+.
I feel secure with no debt, haveing education fund maxed for my child and having saving and investing.
It does nto make sense for us to buy ringh now.
BUT:
I am considered a loser in my family. I get”still throwing money away in rent? ” all thie time.
I feel so sad that my worth is measured whether I have a house or not. I struggle to find friends coworkers who think like me. Every owns, talks about their house, or renovation.
I feel so lonely sometimes. Last year I did nto even go to the christmas thing. We just took a vacation.
oh well.

#233 Nagraj on 03.26.15 at 4:01 pm

Poloz spoke in London, Ont., again, and put Mr.Market in his place: WE are NOT obligated to send YOU an email telling YOU what WE are going to do.

I don’t really care about this speech. Feels like 19th century palace politics.

Of greater relevance: job loss will have a different effect on households’ “financial imbalances” as half of working Canadians are living paycheck to paycheck and grossly indebted. The difference being that if Dad loses his job, the family will be: immediately bankrupt.
There’s no “circling the abyss”, these folks will fall right in.

As unemployment will rise dramatically, an (of course unexpected) housing crash is more likely than any kind of “landing”.

#234 Victor V on 03.26.15 at 4:08 pm

https://ca.finance.yahoo.com/blogs/balance-sheet/new-ontario-housing-rules-to-take-some-of-the-181354074.html

Stop me if this sounds familiar: You scour MLS for the semi that will rescue you from a life in a high-rise. Mortgage pre-approval in place, you bid well above asking, because you live in Toronto and that’s how it works. The selling agent comes back and says there’s another stronger bid, and couldn’t you do a bit more? You swallow hard and cough up another $10,000, sealing the deal, and only later wondering if there really was a competing offer in the first place.

It’s tough to know how often this happens, but with interest rates still rock-bottom and bidding wars turning post-war bungalows into million-dollar properties, the Ontario government is bringing in new rules to crack down on unethical real estate agents that try to pump up housing prices with “phantom” offers.

“It’s all in the context of these bidding wars, and the idea is a potential buyer knowing ‘am I in competition, and how many people am I in competition with?’” says Bruce Matthews, deputy registrar of the Real Estate Council ofOntario (RECO), which oversees real estate agents and is responsible for enforcing the new rules.

Matthews says misleading a bidder as to the number or existence of rivals is already against the rules, but that the new standards will essentially force realtors to keep better records that can then be used to confirm that a purchase was above board.

“We’re making it certainly harder to fudge the truth,” he says.

#235 John Prine on 03.26.15 at 4:15 pm

#233 Oil Is Sticky on 03.25.15 at 5:51 pm
“#213 Babblemaster on 03.25.15 at 2:11 pm
#207 Oil Is Sticky

———————————-

BC Bud is a 6 billion $ industry. Lot’s of well remunerated people in BC. It’s just not official.

——

And the drug dealers are paying how much income tax towards healthcare, roads and education?”

Legalizing it would mean so much less cash to the Mercedes,Porsche, Maserati and other dealers of exotic cars in and around vancouver..

#236 Julia on 03.26.15 at 4:31 pm

#233 Victor V

It doesn’t really help buyers though as the only way something happens is if buyers or bidders ask AFTER the fact if there were in fact competing offers and then there could be repercussions against the realtor.

#237 NoName on 03.26.15 at 4:32 pm

@maya

I know how that feels, me every day on this blog, and on top of that having working class aristocrats for friends. Just tell you friend that one day all of them will be real-estate moguls like Donlad Turmp. , and they will secretly wish that they have more tolerance for bad humor.

http://oi61.tinypic.com/20kc9vk.jpg

#238 Ret on 03.26.15 at 4:40 pm

Looks like Kathleen Wynne is going to buy more poverty votes with the energy file.

If I make my cellar dweller kid a renter and put my hydro bill in their name, can I still get the subsidy for those earning under $28,000? Hey, maybe socialism isn’t so bad after all!

#239 Mike on 03.26.15 at 5:04 pm

I read that in the US the Millennials were not interested in real estate after seeing what happened to their parents in the last downturn of the market. Our Canadian Millennials different?

#240 gut check on 03.26.15 at 5:11 pm

#211 Mark on 03.26.15 at 1:42 pm

Calling Poloz an ‘inflator’ is perhaps itself the sign of a nut-job, as inflation has been minimal, practically non-existent under Poloz.
————————————————–

I just love it when people call other people names. It’s the hallmark of a sharp intellect and a rich internal value system, don’t you think?

Poloz has not succeeded I guess, however increasing the money supply is a blatant attempt at inflation. All he’s doing is giving the banks the first chance to gobble up assets before inflation takes hold. So… I guess he’s an “attempted inflator,” just as you are an “attempted economist.”

#241 Bill Gable on 03.26.15 at 5:20 pm

“The Canadian economy may be underperforming, but the same can’t be said of the country’s corporations.

According to a study conducted by economists with CIBC World Markets, the average profit margin of Canadian non-financial corporations hit a record high of 8% during the fourth quarter.”

>> Meanwhile the layoffs in many Industries continue – Interns are taking paying jobs in Media (a disaster for career Media folks) – and benefits have been chopped.

The Shareholders wins and the workers can go to he**.

Lovely.

Capitalism at it’s finest.

http://tinyurl.com/q9gjbod

#242 LL1 on 03.26.15 at 5:33 pm

#231 Maya

You know what? Everyone – in reality (I mean according to their salaries and no mortgage) are able to buy only a mobile home.
I prefer someone living in a paid mobile home (they are free and have fun) or renting any apartment, townhouse etc..then those one (with full of debt and big mortgage) thinking they are rich.
Keep on renting…

#243 jess on 03.26.15 at 5:48 pm

227 Cici on 03.26.15 at 3:45 pm

look back
http://www.thestar.com/news/ontario/2009/02/09/234_million_fraud_trial_tab_called_a_scandal.html

#244 saskatoon on 03.26.15 at 5:51 pm

#240 Bill Gable

i have some encouraging news for you:

this ain’t capitalism.

#245 Leroy Washington on 03.26.15 at 6:04 pm

Canadians.

Are.

Stupid.

#246 devore on 03.26.15 at 6:11 pm

#205 NoName

13 out of first 20 countries were former commy countries, where companies after so many years of service would give its employees free apartments for their families to live in.

Not surprised at all at that list.

When my parents got married, they applied for an apartment, and were eventually given one, after it was built a few years later. Entire neighborhoods of high rises were filled with people like that. Until you got your own place, you’d live with parents or other close family. When the curtain came down and communism fell, all those people became owners overnight. Basically, only students and transient workers would be considered “renters”, even then it was more like dorms than rentals.

It’s totally not a fair comparison.

#247 gold country on 03.26.15 at 6:13 pm

#231 MAYA on 03.26.15 at 3:58 pm
I rent….
BUT:
I am considered a loser in my family. I get”still throwing money away in rent? ” all thie time.
I feel so sad that my worth is measured whether I have a house or not.
……..

Someone can correct me, but I believe half your rent goes directly to tax, and that is far more to keeping our country running than property tax. You are not a loser. You are contributing to this nation far more than a homeowner relative. You are a patriot. God bless renters. We need them now more than ever.
BTW I rent in the city and paid cash for an estate off the rural route. Cheap land out there if you want. Sure my relatives own rinkydink city houses, but hehe, I’m a landbaron. Any property less than 1 acre is for mouse droppings. Go grab a few acres in some prime recreational area and kiss the class envy goodbye. (I own my own mountain made of granite, not some piddly countertops.)

#248 Victor V on 03.26.15 at 6:17 pm

http://www.theglobeandmail.com/news/alberta/alberta-budget-reveals-record-5-billion-deficit-over-next-year/article23645459/

Some budget highlights:

Ending the province’s flat income tax and introducing $1.5-billion in new taxes.

Reducing the dependence on energy royalties to the lowest point in decades.

A $323-million budget cut that will feel much bigger as population grows.

Possible clash with unions over school and hospital cuts that will see 2,000 positions cut.

Record increase in debt as billions committed to build new roads and schools.

While Premier Jim Prentice has kept his promise to not introduce a sales tax, the province will do away with its 10 per cent flat income tax. Over the next three years, it will be phasing in two new brackets for Albertans who make over $100,000.

This is the first time since 1987 that Alberta’s government has raised personal income tax rates.

Gas taxes will also increase for the first time in decades, to 13 cents per litre. The province’s mark-up on alcohol will increase by 10 per cent, the cost of tickets for traffic violations will increase by 35 per cent and a range of new fees will be introduced on everything from court documents to provincial parks.

#249 cramar on 03.26.15 at 7:41 pm

#222 devore

Right, because clearly only rich people buy houses in Toronto.

Stick to your Mad Money shtick.

———————-

Oh, you mean that other guy…CramEr? Sorry, never listen to him.

I mean those who own houses in TO from the past are rich… on paper at least. Those who seek to buy a house NOW, better be rich, since you have to be rich to buy one. Remember the rule of 90?

————–

#231 MAYA on 03.26.15 at 3:58 pm

“I feel secure with no debt, haveing education fund maxed for my child and having saving and investing.”

Then why do you feel so bad when other’s criticize? Because…

“I am considered a loser in my family. I get ‘still throwing money away in rent?’ all the time.”

Answer next time: “Well I also must ‘throw away’ money on food and hydro. The reality of modern existence is that it costs money to eat, live someplace, and keep warm in winter. But we are on the right track because we are slowly prospering and don’t have to worry about being a slave to debt.”

#250 Mike in Toronto on 03.27.15 at 9:05 am

#213 cramar

“My advise to the young today:

– Have the goal of developing wealth, not owning a house
– Have a long-term perspective instead of short term
– Live frugally below your means regardless of income, so you can save and invest a fraction of every pay check
– Don’t go into debt except to buy a house
– If you can buy a house by taking on a reasonable mortgage debt fine, but if not… don’t buy
– Wealth is better than poverty. Always refer the first rule above.”

My advice: I’ve been doing the above for 20 years. Don’t listen to previous generations. I have lots of money and lots of investments, I could exchange them all for a downpayment on a crapshack, but no way. I have to find a different route because with cash and investments comes opportunities to do things differently. Throwing it away to get in a bidding war with a 20 year old isn’t worth it. I don’t have their *time*. I’m better off playing in the commercial real-estate space.

OTOH, for the kids, the lesson of the past 20 years has been to forget saving. You’ve got decades to pay it off, and if things go sour in the next 5 years, that’s what the CMHC or bankruptcy is for. It’s not pleasant, but your savings are worthless anyway. If you’re not going to buy, just go travel or something, before you get into education debt. Life should be fun.

Btw, If you bought a house at my age in 1974, you’re not a boomer, you’d be 80 now. And suggesting that somebody spend their 20s paying off their education is a bit rich coming from a generation for whom a degree stood out in the job market and was paid for with 100% grant money.

18% interest rates are LONG gone. Saving made sense then, makes no sense now. It’s a lesson I unlearned the hard way.

I’m late Gen-X though, don’t listen to me if I’m a previous generation.