And now, a reality check or two.
Despite a 20% heave in the price of oil, house sales in Cowtown are down 23% (much better than last month), while days-on-market have doubled and the median price has declined 2%. This is tame, of course, compared to Fort McMoney, but it’s a disaster compared to Calgary one year ago, or the GTA today.
Is there more to come? Probably. The best outcome would seem to be a flatlining market – but even that is awful news for those who swallowed the buy-now-or-buy-never flotsam local realtors were tossing around in 2014.
Fearless housing analyst and CREA Public Enemy #1, Ross Kay, is on it. He tells me that the last 36,000 Calgarians who bought a home in that one-horse city, “have all lost money since the day the offer was written.” Even if they somehow found a buyer and sold immediately in today’s modest dip, they’d be in the hole.
“Worse,” he adds, “by this time tomorrow when April’s sales stats hit, another 4,000 families are set to go negative, taking the number to 40,000. To put this in simple terms, 9% of all owner-occupied homes in Calgary would create a loss if they sold at today’s appraised values.”
And here’s a factoid for all those discussing CMHC insurance on this blog (remember, this is insurance buyers pay to protect the lender, not themselves): there are now 10,000 CMHC-insured properties in Calgary which are underwater, where the mortgaged amount exceeds the appraised value. That is almost double the current number of active listings (5,800). “Luckily Canadians fear foreclosure,” says Kay, “even in Calgary.”
But maybe we should fear CMHC even more.
Did you see the 12-footer house in YVR that sold this week for $1.35 million? Think two-storey garden shed avec granite and a heated bidet. Meanwhile the average detached house in that city is now $1.4 million, and in the East, where all the poor people live, beater houses have just topped seven figures. I yakked yesterday with a psychiatrist who lives on the Westside, whose house has doubled in five years, to $2.7 million. “They’re all crazy,” he said. And he should know.
So houses in Van cost 11 times more than the people who live there earn in a year. Compared to the rent a house generates, the over-valuation by international standards is more than 80%. As you know, there was a near riot a weekend ago as people tried to get their hands on unbuilt micro-condos of 300 square feet in a distant burb for between $100,000 and $200,000. And Twitter lit up recently with a campaign from pouty, entitled local Millennials who want 1982 to come back, called #DontHave1Million.
But here’s the reality check. Don’t worry about YVR. It’s okay. Cheap, even. It’s Winnipeg we should be sweating over.
That, believe it or not, is the official position of Canada Mortgage and Housing, the almost-proud owner of ten thousand underwater houses in Calgary. This is the federal agency which lets children without savings buy properties they can’t afford, permits zero-down financings and has saddled the taxpayers with a liability equal in size to the federal debt. Now, astonishingly, these noobs tell us this: “high house prices do not necessarily imply overvaluation.” In isolation, true enough. And if the average YVR family was making $200,000, then an average house could reasonably change hands for about $800,000 to a million. But, of course, household income is barely above $70,000, family debt is increasing and BC residents have an overall negative savings rate.
The bureaucrats say YVR has the fundamentals to support higher prices, including land supply (a reasonable constraint), income (fail), population (60% less than the GTA while houses cost 40% more. Yeah, right) and interest rates (not unique to YVR, and soon to change). The CMHC conclusion: “Vancouver’s market is at low overall risk for a correction.”
Now, Regina and Winnipeg are way riskier – examples of “overvaluation in a lower priced market.” Izzatso? The average Peg family earns $76,000 – 7% more than in delusional Van – and yet the average Winnipeg house sells for just $277,000 – which is a quarter the price.
OK, so it’s Winnipeg. I get that.
But there are just two reasons why a speculative bubble has coated the left coast (and Toronto) with risk. Cheap money. And, especially, CMHC. The Canadian Moral Hazard Corporation.
203 comments ↓
I’m glad that all online sources support my definition of sub-prime.
http://www.investopedia.com/terms/s/subprime.asp
Everybody else can live in their own made up realities. I’m happy now :D
“Think two-storey garden shed avec granite and a heated bidet. ” – HonGT
Gardens sheds everywhere are offended by that comparison.
#InOtherNews… #What’sCMHCSmoking…
[CityBuzz] – There are more marijuana dispensaries in Vancouver than Tim Hortons locations
…”In a Policy Health Report dated April 21, 2015, it was recommended to Vancouver City Council that retail Marijuana Dealers be regulated to a new standard. This report was fittingly published the day after April 20, or 420, the date of Vancouver’s largest cannabis-focused demonstration.
This year, 420 attracted 20,000 people to the steps of the Vancouver Art Gallery for an open market of paraphernalia, clothing and cannabis in its many forms. From brownies to shatter, rosy eyeballs and mellow vibes rippled through Vancouver’s downtown core.”…
http://www.vancitybuzz.com/2015/04/weed-dispensaries-vancouver-tim-hortons/
Hi Garth,
It cannot be 405% less. 100% less is already free. I guess you meant to say four times cheaper.
This Blog is Groundhog Day going on what eight years?
But the end is nigh?
I would like to see Flaherty’s stated wish to see CMHC privatized come true within 12 months.
Garth: I love your blog as much as I love charts (an odd amount to be sure,) but how could you write that whole post without making a single mention of the other big difference between Winnipeg and Vancouver: Foreign money.
Don’t forget about how municipalities and assessors like MPAC will keep property taxes and property values higher than they should be.
This is what happened in the U.S. when some cities real estate values crashed 70% to 90% like in Florida, Arizona, California, Nevada just to name a few.
I thought CMHC was limit 600 billion and Federal debt is roughly 1 trillion. Are the numbers you’re seeing too?
Federal debt is just north of 600 billion. — Garth
Just finished reading the G & M article on Winterpeg housing prices.
Unbelievable.
We aint seen nothing yet.
I know a couple who placed a bid on a private sale and bid what they offered. Lost the bid. Seller said he was accepting on a specified date. After that date, it is still for sale.
This was a furst for them and I
Northern Alberta Oil towns getting hammered. Prices down 10-20% in one year. One Realtor is telling the truth and the local broker doesn’t like it (read comments).
http://www.bonnyvillenouvelle.ca/article/20150428/BNV0801/304289960/-1/BNV
First ! :)
Watched a documentary on Netflix on the Laplanders. Showed a young women with a reindeer ranch who had to migrate the herd annually over a waterway a mile and a half long. Sometimes the young reindeer get tired after they have passed halfway and turn back. She had to stay behind them and force them forward or they could start a mass exodus (which would end in death).
I wonder who is behind the realty herd ensuring that the market doesn’t retreat. Because once panic sets in, there may be a lot of people trying to swim back…
Higher incomes in Winnipeg than in Van? Innarestin’
Can anyone tell me what the main industry is in Van? Not everyone can have a grow op in the basement.
Awesome.. just awesome
House prices in Vancouver are extremely overvalued compared to rents and incomes. Vancity is assisting that overvaluation with its 2.5% mortgage helper. Indeed 2.5% loans are available in Canada.
The world was blindsided by the boom in shale oil. Now doomers are still saying it’s just a frack-in-the-pan and will fall off a cliff in five years because of high depletion rates. Meanwhile ingenious entrepreneurs just keep on fracking.
There is a test project under way in the Bakken field to recover shale oil with liquid CO2 in place of fracking with water. This tweak to an older technology has already been done in Canada. The implications for places that are short of water like China are obvious as are the potential impact on both the local politics of fracking and on oil supply geopolitics.
“Based on studies from the Montney field in Alberta where Ferus performed CO2 fracks, energized foams provided a 100 percent initial production increase over slickwater jobs, Reynolds said. The cumulative recovery, roughly the first 12 months, also increased by 30 percent and the estimated ultimate recovery rates also increase by 30 percent. The production increases were also accomplished with a 25 percent well completion cost reduction.
According to Reynolds, the process allows completion engineers to reduce the size of fracture job needed to reach previously expected levels of production. The overall frack job can be reduced by roughly 30 to 40 percent and require roughly 50 percent less proppant.”
http://thebakken.com/articles/1104/statoil-ferus-plan-co2-based-bakken-completion-project
However, before you rush off to short Tesla, you also need to read the second article.
“Carbon dioxide, used for years to force crude oil out of old wells, likely will not replace water in fracking anytime soon because of technical challenges and limited infrastructure, says General Electric Co , which is studying the issue under a $10 billion research program.”
That said, I can’t imagine China fretting about some of the apparent obstacles raised in this news story.
http://www.reuters.com/article/2014/04/07/generalelectric-fracking-carbon-idUSL1N0MT1HN20140407
I would put Ottawa on that list as possibly correction city too.
Houses in my neighbourhood in Orleans are sitting like 6 months and only moving after big price decreases.
Of course, if you’re a boomer and you bought the house for $75,000 in 1977, do you really care if you get $375,000 or $450,000.
Probably not….
thats all i hear in yvr. coffee shops , parks , restaurants , work ……everywhere. how much are you up on your house / condo. i get flyers in my mail each day , usually written in english and canto… telling me that they have cash buyers for houses , realtors knocking on my door telling me they have a cash buyer in the car. its insane here. lambo’s everywhere. we are the money washing machine for ‘offshore’. i know garth doesn’t agree but its very very clear here. sure , there are tons of local fools buying places in east van and the burbs for 1-1.5 million but lets not be afraid to say whats really happening in yvr. city has vast amounts of china cash flowing through our r.e. market. i don’t blame them at all…great for them. your allowed to take 10,000 a year out of china. somehow , buying ten or 100 houses for 2 mill still happens. our gov’t is allowing this all to happen. one of the cities largest developers is wanted by the chinese govt for corruption charges. i have lived here for 40 years and i can assure you its not a big myth that offshore money has bought up entire blocks of the cities detached homes and many of them sit vacant , sold to someone else each year and remain vacant. this bubble may not pop if our govt allows this craziness to continue. if it ever does pop , it will because the criminals have decided to move their cash and dump houses, or jinping finds who he’s looking for here .the only ones who will be hurt are the local fools. taking a 50% hit on money laundering isn’t a big deal……its stolen money anyways.
Slow day at work. Procrastinating at taxes. So spent the afternoon on the TREB site plugging average and median house prices, from last month, every month, back to 1996, for my old patch of central Toronto, into Excel, and graphing it.
Average SFH prices have flattened since the start of 2013, median prices (more representative?) have trended down (!) since the spring of 2013, increasingly diverging from the average. Did I actually time something well selling in 2014?
Small sample size, only relevant to those who live in the ‘hood, but a data-based observation, to appease Leo Trollstoy, and to say if Mark looks hard enough he can find examples to support his sales mix conclusions in 416.
Sometimes a picture of 200 data points over time is worth a thousand words.
Now to get those taxes done.
Hmmm. I find that surprising that average family income in Winnipeg is higher than Van.
Even considering the weather in Winnipeg, I’m beginning to think its crazy to live in Van.
Fake pic.
Bears hibernate in winter.
Memo to Garth: the political party that presides over a house-a-geddon will find itself out of power for the next generation. I do not think then that there will ever be a housing market crash in Canada.
Garth
If I was a realtor in winnipeg id be extreemly angry at these clowns at cmhc by that conclusion.
Cmhc must be concluding that van will be bouyed by offshore money.
The 2006 US housing bubble inflated with lax lending standards for about 6 years before beginning to inflate.
Canada’s housing bubble has inflated with lax lending standards for 15 years.
There is no comparison, Canada’s housing bubble is much larger than the 2006 US bubble. It got to be that way because more and more lax lending policy was brought in over the last decade and a half that prevented a price correction from starting.
All countries with housing bubbles go through major price corrections. Canada will not escape this.
House prices in Victoria are already down 12 to 15%, despite emergency interest rates. Prices across the rest of Canada will follow this downward path.
The devastation of being caught by a bear affects every area of one’s life. The one asset strategy is a ticking time bomb. Don’t go there. And if you are there, fix it. Consequences = Reality. I always put my Freedom First.
Yes, I heard the CBC report that CMHC is of the opinion that Canadian housing might be 4% overvalued! Goodness! That’s incredible!
(When I was studying science, if I came up with a number that was incorrect by perhaps an order of magnitude, I could still get marks by showing my detailed working. Has anyone managed to find this for the 4% number? )
Forget the residential in Toronto, too high and risky but commercial properties are undervalued. 1000 sq unit sells for 200k and rent for $1600. Lala owns 2 commercial units but rent the place where he lives. He is a visitor in Canada.
Contrary to what Garth is saying the bubbles are everywhere. The stock market is fully valued and bond prices are so high they have almost no room to get any higher. Contrary to what most common people perceive daily, there is actually too much money sloshing around trying to find a place to park and maybe grow a bit. Hence the ridiculous valuations on housing and all other assets. And we have our governments and central banks to thank for that. I wonder how they will get us out of the mess they themselves created.
If houses in van correct 10-20%, then that brings them back to values from a year and two ago. There will be ample fence sitters and mortgage purgers taking the plunge.
Whether it’s a bear trap remains to be seen.
That CMHC report is a prime example of a useless, incompetent agency staffed (captured) by the very industry in question. It should have been auctioned off ages ago with no taxpayer backing.
Having said that, after discussing divorces with two ex-Microsoft co-workers today, I have a healthy appreciation for the relative amount of financial damage that can be incurred by picking the wrong partner. Losses for each in the 450k range. If my home declines 20% I stand to lose 70k. Not a big deal in comparison.
“I thought CMHC was limit 600 billion and Federal debt is roughly 1 trillion. Are the numbers you’re seeing too?”
CMHC is $600B directly and ~$330B 90% re-insurance of other (subprime) mortgage guarantors, such as Genworth. So a total contingent liability of up to ~$900B, which is roughly 150% of Canada’s federal national debt.
“Don’t forget about how municipalities and assessors like MPAC will keep property taxes and property values higher than they should be.”
Doesn’t really matter terribly. Assessments have never been at ‘fair market value’ because the assessment formula deliberately constrains the assessors and forces them to value at a particular date. And taxes are not dependant on property values, but rather, on one’s individual pro rata share of the overall taxation base. Only delusional people run around waving their assessments at people and claiming that such is evidence of a certain property value.
“I would like to see Flaherty’s stated wish to see CMHC privatized come true within 12 months.”
Impossible, as CMHC itself has negative equity, and anything that diminishes the GoC guarantee of existing debt will cause a detonation of the Canadian mortgage finance marketplace, and hence, house prices.
Just maybe CMHC is correct about the correction in YVR being low risk.
I have been in the construction renovation business for many years on the West Coast.
Vancouver is a city which is beautiful, with relatively low pollution (compared to many cities), and looked at by people all over the world as a place to settle in.
I would venture to guess that the majority of detached home sales in Metro Vancouver are either cash buyers or very high income earners.
True that it is difficult for low income earners to buy in this city.
As I write this comment, I am becoming more and more aware how difficult it is to find rental accommodation in the city, that is clean and affordable.
Shared accommodations with strangers are starting to become a norm.
“The stock market is fully valued and bond prices are so high they have almost no room to get any higher. “
How so? The stock market was once 11,200 against earnings of roughly 200. Today the stock market is only 15,300 against earnings of roughly 1000. So plenty of room to go higher, especially since we know that stocks have been substantially higher in the past.
Bond prices, I tend to agree with you on.
The CMHC conclusion: “Vancouver’s market is at low overall risk for a correction.”
Why despite fundamental indicators of the contrary does chmc deny overvaluationin van?
They wanna say HAM, but can’t ’cause its not PC.
I’m sorry but house prices reflect the wage of the people who live there.The median household income in Vancouver is way over $150,000.Obviously you have to have a good job to afford to live there,unless you bought in years ago.
this is the Reality Canadians will come to realize over the next 5-7 years:
-housing bubble was the key strategy to create the illusion of wealth we have in this junk economy
-your house is not really worth anywhere what u think it is
– CMHC along with tax credits and junk monetary policy have helped create the most indebted nation ever while playing a critical role in ” inequality”
– CMHC is a key element to enable the transfer/ theft of wealth from the masses to the few
-property taxes and utilities and all manner of user fees will continue to explode higher
– the economy was a money illusion all along. Canada’s GDP was grown on gone back of inflated housing and oil
– now both drivers are fine for a long time
-QE is likely this year in Canada and the U.S.
– governments will use every chance to steal from u including sudden unexpected changes and interpretation to extort more money from u
–
big GM layoffs in oshawa. 1000 jobs. Camaro to be made in Michigan. I hope these people can get jobs in industries that don’t include drywall, particle board or pressed cornflakes.
Canada’s sub-prime mortgage market is growing fast. Garth has written about this.
This of course comes at a bad time with the extreme degree of overvaluation of Canada’s housing market. It will result in an even deeper price correction.
“Small sample size, only relevant to those who live in the ‘hood, but a data-based observation, to appease Leo Trollstoy, and to say if Mark looks hard enough he can find examples to support his sales mix conclusions in 416. “
The problem with the people who claim that RE prices have only been going up is that it simply isn’t being matched with the reality of bank credit expansion (flatlining), the state of the economy (declining), or the anecdotal circumstances of significant numbers of people who report that they aren’t able to sell their individual house for anything more than they were able to a year or two ago.
Throw in strong evidence for the shift in the sales mix, and you have a perfectly plausible way to explain why sales averages have risen (a fact which I do not deny), while individual houses have not. It is simply a matter of the sampling of housing transactions being different from today, versus the 2013 peak of the market.
The RE community could easily prove me a fool if they were to release their data for full public scrutiny, rather than only releasing “frankennumbers” as some describe them. The fact that they can’t, to someone who can read between the lines, should really speak volumes of what they’re trying to hide.
On that note, I don’t want to tar all Realtors as being opaque, as the Regina Realtors actually were honest enough to come out last year and admit quite clearly that sales mix shifts were prominent in their city. Of course, its a lot harder to hide falling prices in a relatively small and relatively homogenous city like Regina, compared to a large city like the GTA or GVR.
The rest of the world knows that Canadian real estate is the most overvalued in the world.
Nobody should be surprised that CMHC has come out with a report saying that Canadian real estate isn’t overvalued. Denial of this sort has led to the implementation of lax lending policy that has inflated Canada’s housing bubble for the past 15 years. Why would they change course now?
For the first time in a long time I agree with you Garth.
There is no question the housing prices in that area will drop regardless of oil.
Part of the issue on that on is the price of Oil out that way as far as cost is concerned is among the highest on the curve.
With “fast oil” available, as well as re fracked wells, oil like deepwater and oil sands will be left in the dust.
The capital test simply no longer works. Period. Even if Oil goes back to $100 tomorrow those projects will not see NEW releases in capital as its simply too risky.
Expect to see way more capital going to Frac and oil that comes out of the ground fast and can be turned on and on demand.
Leaves much of Alberta, Sask and Winnipeg out in the cold.
Vancouver and Toronto however will continue to see inflow from foreign buyers and accelerating as the property bubble bursts in China.
So Vancouver has a housing cost factor multiple of 11.
India has an average annual income of $2,500.
Guess what their multiple is?
So who really cares about multiples.
Further, a 1M home in NYC will pay $23,800 per annum in property taxes. Does ANYONE in Toronto pay that amount in residential property tax?
My Harley insurance is more than my house insurance….and I’ve never laid it down.
“Crazy” is what we are on the West Coast…but we’ve been crazy for decades – ever since we went through the ‘leaky condo’ scare – maybe that’s why everyone wants a house!
BTW if you think that ‘leaky condos’ are a thing of the past, think again…now that depreciation reports are being filed, articles like the following remind us of our faulty building codes and lack of maintenance, our persistent greed and our overwhelming naivete.
http://www.vancouversun.com/technology/Leaky+condo+crisis+rears+head+again/9871711/story.html
I’ll never understand why someone would live in a dumpy little house on the west side – as an example on West 13th avenue at Highbury the lots are valued from 2.9 to 4 million dollars. However, the building values range from 4 million (2 storey custom) to $28,600 (1 storey standard – no that’s not a typo). There are other houses valued at $54,000/$58,000/$74,000/ $84,000.
So basically, you could spend more than 3 million dollars and live in a house that is assessed at $28,600.
http://classicevaluebc.bcassessment.ca/Results.aspx
If that’s not crazy, I don’t know what is.
Seeing a whiff of reality in Montreal Garth. Oh la la. Anyone else want to buy a condo for top dollar? Hurry!
The porosity of my brain is overwhelming. No fracking and propant frac sand is necessary. In my usual fashion I will be off topic again.
***********************************
#22 gladiator on 04.30.15 at 7:37 pm
Fake pic.
Bears hibernate in winter.
***************************************
The picture was probably taken in August. The warm wet pavement and the light snow is common in the Rockies. If that is not the case, then the pic I have of my tent collapsed under 4 inches of snow in September is a fake. But I was there.
Speaking of wildlife, Bobcats are living in Kelvin Grove in southwest Calgary, a tony neighbourhood where $1MM gets you 2000 square feet and a 20 minute commute.
Bobcats are predators and not scavengers like Raccoons so you save a bundle on garbage bins trying to foil the critters. No Raccoons in Calgary.
Lots of Cougars in Kelvin Grove as well.
Go to U of G to see Bobcats in Kelvin Grove (a March 14 article on the local CBC news).
Signed,
Your Local Non Fracked Wildlife Expert
GT: ” . . . these noobs tell us this . . . ”
Dictionary.com: ” . . . newbies owe their clueless behaviour to lack of experience and can improve, while the fundamental characteristic of noobs is incorrigible obnoxiousness or stupidity.”
“I would venture to guess that the majority of detached home sales in Metro Vancouver are either cash buyers or very high income earners”
That’s a very incorrect guess. The vast majority of Vancouver detached buyers are Canadian move-up buyers, taking on large mortgages using equity from existing appreciated properties. The low-end being supported by young new buyers and new immigrants taking on loans with very low downpayments.
Ross Kay has a few interesting interviews on Howestreet.com detailling the so-called ‘sales chain’. I suggest you have a listen sometime. I don’t agree 100% with what he says, but the concept is quite valid.
“big GM layoffs in oshawa. 1000 jobs. Camaro to be made in Michigan. I hope these people can get jobs in industries that don’t include drywall, particle board or pressed cornflakes.”
No surprise there. The CAD$ might be weak temporarily, but any economist worth their salt knows that deflation will drive the CAD$ much higher. Canadian industry needs to make the shift towards higher capital intensity and less labour intensity in order to compete. Unfortunately, we have such an anti-engineering, anti-productivity climate in Canada.
“Vancouver and Toronto however will continue to see inflow from foreign buyers and accelerating as the property bubble bursts in China.”
Broke speculators buy property? Since when?
Why focus on CMHC’s insurance in force? House prices aren’t going to zero unless we have a massive radiological event. That family whose mortgage from 20 years ago is still insured probably won’t default.
Of course, it’s hard to see from CMHC’s reports exactly what it is up to, since it talks about portfolio statistics but not about the new business it writes in a year. It might be possible to tease some useful info out of their reports, but they don’t make it easy.
You know who DOES make it easy? Vancity! I looked up that “Down Payment Helper Bundle.” If you can scrape up 2.5%, Vancity will lend you the other 2.5% to get to the “minimum 5% down payment” because it’s for “first-time home buyers who have demonstrated an ability to save.” And what’s the interest rate on the ultra-low interest personal loan?
It’s 0.01%.
That’s right. The blended rate on a Vancity 97.5% LTV mortgage is LOWER than the rate on their 95% product.
But wait… there’s more. This has to be the only product in the history of banking that gets BETTER when you read the fine print: “$750 towards closing costs will be paid at time of mortgage funding.”
DELETED (Anti-Chinese)
Tiny BC with a ton of Alberta condo owners, says the number in tax arrears is “frightening.”
http://www.e-know.ca/news/tax-arrears-property-numbers-frighteningly-higher/
#36 Rexx Rock
“The median household income in Vancouver is way over $150,000.” You mean 71,000.
http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/famil107a-eng.htm
But here’s the reality check. Don’t worry about YVR. It’s okay. Cheap, even. It’s Winnipeg we should be sweating over.
That, believe it or not, is the official position of Canada Mortgage and Housing
___ ___ ___
Our BoC Guv whips out a rate cut (completely unjustified) and a month later expounds that low oil price shocks are a Q1 event (LOL!). Now the CMHA is flogging Van as Canada’s most affordable city!
Is this an election year by chance?
These jokers are 20th century “confidence” peddlars, the equivalent of 19th century snake-oil salesman!
Great post today. Can’t fully agree more. CMHC is a taxpayer funded moral hazard. Their goal should revert back to the original mandate – fund social/rental housing and public housing programs, not add to the unaffordability crisis (especially in YVR). This is an example of the “Good Intentions Paving Co” in action.
@#22 Gladiator
“fake pic. Bears hibernate in winter’
++++++++++++++++++++++++++++++++++++
Ive seen bears out of hibernation on the ski slopes of Whistler in April. They were “bluff charging” skiers that would whiz past them.
The ski patrol eventually closed that run and the bear scurried into the forest.
That picture could be Cypress Mountain in West Vancouver( the richest postal code in Canada). The snow line could be a few meters down the mountain that the cyclist just climbed.
Or it could be a photoshopped fake.
“Why focus on CMHC’s insurance in force? House prices aren’t going to zero unless we have a massive radiological event. That family whose mortgage from 20 years ago is still insured probably won’t default.”
Absolutely true. However, in those cases, the banks have largely shifted such out of the CMHC insured portfolios. Once a HELOC is added to a first mortgage, for example, the original CMHC insurance is no longer in force. CMHC’s rules are such that the originally agreed and insured amortization must be adhered to. With the high popularity of the HELOC products, cash-out refinances, etc., an overwhelming number of borrowers over the past 15-20 years who may have originally been under CMHC insurance are no longer.
How much would it take to bring CMHC down? Well $20B of equity against $900B of guarantees is 45X leverage. Thus overall CMHC portfolio losses averaging just slightly over 2% destroy CMHC’s equity. And much of CMHC’s asset base is, you guessed it, invested in RE which may have some correlation to the guarantees they’ve written.
” It might be possible to tease some useful info out of their reports, but they don’t make it easy.”
Given that we taxpayers are on the hook, its an appalling situation that we have an arm of the government, basically taken over by members of the RE industry, implementing what effectively amounts to government policy in excess of the real elected government itself. Our (federal) politicians have only created ~$600B of national debt, but the unelected CMHC people have created a potential liability of $900B through their activity.
“You know who DOES make it easy? Vancity! I looked up that “Down Payment Helper Bundle.” If you can scrape up 2.5%, Vancity will lend you the other 2.5% to get to the “minimum 5% down payment” because it’s for “first-time home buyers who have demonstrated an ability to save.” And what’s the interest rate on the ultra-low interest personal loan?”
“demonstrated an ability to save”, I’m laughing my butt off right now. Lol.
“Nobody should be surprised that CMHC has come out with a report saying that Canadian real estate isn’t overvalued. Denial of this sort has led to the implementation of lax lending policy that has inflated Canada’s housing bubble for the past 15 years. Why would they change course now?”
They won’t change. But they have about as much credibility as that famous Iraqi “Minister of Information” who was denying the bombs even when they were falling all around him.
H on 04.30.15 at 8:28 pm
…
The capital test simply no longer works. Period. Even if Oil goes back to $100 tomorrow those projects will not see NEW releases in capital as its simply too risky. …
___ ___ ___
Fracking is on it’s way out. The environmental impact is horrific. Just look at Pennsylvania’s experience. New York is balking at it and Canada appears to be waking up to it’s dangers. Quebec and Nova Scotia are particularly at risk.
You hit it out of the park with this post GT, save the one conspicuously absent factor of foreign money skewing the market here. Agree with other posters pointing this out as it’s most definitely a factor in play locally that needs to be addressed and quantified in a meaningful and transparent way going forward.
Better regulatory oversight of the RE industry and data transparency is badly needed in general, including the issue of foreign ownership, the actual percentage of which is currently “unknown”.
“allI hear in coffee shops is how much up”, fliers in english & canto. Ya right, like 20 years ago. Firstly Cantonese “a relatively minor dialect of 100 million is dying in China. They were 90% of Chinese immigrants here. Mandarin is the big dog on the block now. Secondly, who’s left after 40 years on the west side? Remember its not white flight: its “cashin in”. Talking about “how much up” is irrelevant when its more than stupid working class shmucks like us know how to spend in the time we got left. My coffee clutch is down; way down. The ones left at the table talk about how & why& where we’re going & what we’re going to do when we do “cash in”; And relentlessly,steadily one after the other of the boys takes the chips off the table.
Off topic but you decide…
It has been a year since my cord-cutting. I get just 6 FTA HD channels but I have been able to watch super bowl, oscars, hockey games, master-chef, golf, departures, murdoch mystery and many more without paying a single dime to the cable companies. And yes, I also get Global News, if anyone cares!!!
#181 Julia — “In case anyone is interested, this paper provides some analysis on the background of the financial crisis. Available from RMA (Risk Management Association)”
I got partway through it, but didn’t like the direction it was going. It takes the line of blaming Fannie and Freddie for buying bad loans, but even back in 2009 we knew that the private label mortgages were already performing far worse than those of the Government Sponsored Entities:
http://www.calculatedriskblog.com/2009/06/misleading-house-price-data.html
And then I got to Figure 2, “Government-Sponsored Enterprise (GSE) Purchases of Subprime and Alt-A loans* (Cumulative since 1997 $Bn)”
Doing a bar chart of cumulative purchases since year x is in the advanced class of how to lie with statistics. That’s where I stopped reading.
DELETED (anti-Chinese)
You know what?
I think we have a sub-prime CMHC.
Welcome to idiocracy!
Look. A Squirrel ! CMHC deflection at it’s most pathetic
Over in CMHC land anybody with a clue and integrity is quietly soiling themselves. Reform Party /aka Harper govt should be……but we know how they roll.
Pathetic
Mark I have to thank you for your posts. Outside of the bearded oracle himself you provide the most intelligent and useful insights on this blog. You are the anti-smoking man and his ilk, those that revel in idiocy. Keep it up.
If those 36,000 now underwater, 30,000 made a killing on the previous home they owned. Only 6000 were first timers. Nice stats.
#64 Squatter
CMHC – It’s what plants crave!
Let’s face it dogs, we live in world of bull shit.. I always advocate, learn to lie, be the greatest at it. In fact let there be no man better than you.. No offence ladies, perhaps I should have said, no person.
Once you become a master at this long forgot survival skill, you will be able to anticipate that call from Nigeria moments before the phone rings.
But what irratates me the most, when dogs bark at lies.
Grow up.. Get with game.. Honestly is for students, not teachers, and owners, just ask Wynee.
GM’s Oshawa plant to lose 1,000 jobs; company to invest $5.4-billion in U.S.
http://www.theglobeandmail.com/report-on-business/international-business/us-business/gm-to-end-oshawa-camaro-production-nov-20/article24186829/
I used to live in Winnipeg, but I lost my job and spent months looking but no luck. So I left. It’s a nice Prairie city. Lots and lots of old family wealth in Winnipeg.
If you get a chance to go, check out Assiniboine Park, The Forks, Exchange District, Polo Park shopping mall, as well as the great beaches and lakes within an hour radius.
#56 crowdedelevatorfartz
Photoshopped. It’s too lo-rez to be certain, but appears the biker is the add-in. Rest of pic appears legit.
[…] Source: http://www.greaterfool.ca/2015/04/30/reality/ […]
#66 Lead Paint on 04.30.15 at 9:21 pm
I also agree with you Lead Paint.
Mark is a pretty intelligent guy, has some interesting posts.
Here’s a good one about “cashin in”. One of the boys had bought a place in Pt. Grey ( very west side Van.) in the 60″s, & just sold. The sale was classic; Chinese New Year annual buy fest. Client drives by doesn’t get out, says OK; 4.4 million. Couple weeks later my buddy gets a phone call from his lawyer to come in to sign some more papers. Now the lawyer is a little evasive. “oh nothing really” just a release for a covenant on the property, lawyer ‘s jumpy. So my friend demands to read the covenant before he signs a release.It says” If you are a purchaser of property in the boundaries of Pt. Grey you agree not to sell to Chinese, East Indians or N*****s. It was put on before the war & never removed till now.
Can someone Please educate me why market correction depends solely on interest rate hike?
if we have learned anything from history,
what was the interest rate in 2008?
what was the interest rate in the US in 2007 when market crashed?
even a small decline in market can cause havoc as sellers/flippers panic and buyers retrieve.
CMHC is stretching Canadians like this video http://www.liveleak.com/view?i=d55_1430326368
“Despite a 20% heave in the price of oil, house sales in Cowtown are down 23% (much better than last month), while days-on-market have doubled and the median price has declined 2%. This is tame, of course, compared to Fort McMoney, but it’s a disaster compared to Calgary one year ago, or the GTA today.”
Interesting comments, especially days on the market have doubled to sell in Calgary. What happens when you need to sell your house immediately, including loss of job, will settlement, divorce, money issues, debt issues, moving to new location? Sometimes time is not on your side and you “have” to sell quickly and in essence your house will need to go well under appraised value. Unique times in Alberta.
You hit it out of the park with this post GT, save the one conspicuously absent factor of foreign money skewing the market here.
No credible data to support foreign money having any significant impact on the market.
Prices more likely correlated with cheap credit.
Again, glad that all online data sources support my definition of sub-prime.
I’m in good standing when only one or two penniless, delusional, corporate wage slaves disagree xD
RE: CMHC Subprime
Of course CMHC insured loans are subprime. They call it a CMHC ‘insurance premium’ but essentially the borrower is paying a significantly higher interest rate on the difference between the 5% and 20% down payments. For example you pay ~$3000 CMHC fee on a 5% down, $95,000 mortgage which is actually $3000 additional interest on the $15000 you needed to avoid the fee. In reality you paid 20% additional interest (one time) on that $15000. Over 5 years that 20% averages to over 4% per year additional interest. The CMHC borrow is paying about 7% interest (3%+4%) over 5 years on the $15000. That is over double what a prime borrower would pay in interest, and more than most people can get on an unsecured LOC. That is subprime by definition.
Furthermore, we also know subprime lending has to be similar in Canada as percent of the mortgage market as it was in the US at it’s peak. How else could we get to the same bloated home ownership level? If it took massive subprime lending in the US to crack 70% home ownership then it is a good assumption Canada must need similar levels of subprime lending to be at similar home ownership levels. Factor in our houses are higher in value and our incomes are lower and we likely have much more subprime mortgages in Canada than the US did at peak. There is no other way this can happen. The US subprime was not exposed until after prices corrected, so CMHC defaults to date are irrelevant.
#22 Gladiator:
You are probably right that the photo is a fake; however, Grizzlies, unlike Black bears, do occasionaly wake in the depth of winter. I have found tracks in deep snow and around the remains of winter or railroad killed big game.
Nobody should be surprised that CMHC has come out with a report saying that Canadian real estate isn’t overvalued.
Can you blame them? Look at Vancouver and Toronto, real estate prices accounting for property type and sales mix have been irrationally increasing for almost 2 decades now, with no end in sight.
Does anyone know what prices sotheby’s considers “luxury home” in New York, Hong Kong, etc, or is it just a number to meet the real estate industries needs in each city? Also, will these outfits report the highest foreclosure rates when that starts? And what do these investors in luxury homes in Toronto expect as a return if they can’t rent the place? Is someone lying to everyone here?
Hey Garth! Is it true that jingle mail is legal in alberta and nowhere else in the country?
…any economist worth their salt knows that deflation will drive the CAD$ much higher.
And no economist worth their salt has taken the ‘deflation is coming’ position for Canada.
#56 crowdedelevatorfartz on 04.30.15 at 8:59 pm
The mountaineers and hunters that I used to hang with have seen fresh Grizzly tracks in January in the high country.
Just like horny real estate purchasers venturing out in cold weather.
If you are hungry, you head out regardless of the weather.
#44 West Coast on 04.30.15 at 8:34 pm
BTW if you think that ‘leaky condos’ are a thing of the past, think again…now that depreciation reports are being filed, articles like the following remind us of our faulty building codes and lack of maintenance, our persistent greed and our overwhelming naivete.
===================
I spent part of the Eighties working with a developer of typical West Coast 4-storey wood frame condos. We had a full-time engineer on staff whose only job was to ride herd on the contractors to keep construction costs in line and to keep contractor “short-cuts” to a minimum. It was a constant battle and he more than earned every penny we paid him.
Typically the kind of shoddy practices he prevented would never have been found by a casual once-over by a city building inspector. I was not surprised by the leaky condo debacle. Of course there are many ethical developers and contractors who take a long term view of their business reputation, but all too many others are just fast buck artists hiring the lowest bidder. Building codes are like speed limits: not much use if no one is watching. With the kind of buyer frenzy we have seen in the last few years, it would be beyond naive to think that many condo developers worried much about overall construction quality.
Throw in strong evidence for the shift in the sales mix…
Strong non-existent, not-yet-provided, phantom evidence.
Data accounting in shift in sales mix shows Toronto real estate prices are up across the board for almost 2 decades.
Data easily found with Google.
That gdp report from stats can was an ugly read. And now another thousand let go in the Shwa.
Nobody cares. Stop whining. Just take your pay package and buy in van city. Instant millionaire. Who needs a job. Find a ham buyer next year.
Just stay away from the peg we are told. Lost in 4.
And an at issue panel on Cbc about the ndp possibly winning in Alberta.
We live in bizarro land. Markets will push poloz. The jig is up.
At least the hockey is for real tonight. Hiller has something to prove. And it’s not that crebs numbers look different from the archived reports.
Contrary to what Garth is saying the bubbles are everywhere. The stock market is fully valued and bond prices are so high they have almost no room to get any higher.
I agree.
2008-2010 were the good times. Sorry to see them gone.
#66 Lead Paint on 04.30.15 at 9:21 pm
Mark I have to thank you for your posts. Outside of the bearded oracle himself you provide the most intelligent and useful insights on this blog. You are the anti-smoking man and his ilk, those that revel in idiocy. Keep it up.
I enjoy Marks’ posts just as much as SmokingMans’, they both present a certain point of view and useful knowledge. And of course, our friendly host, Garth, has still another point of view and knowledge.
It is a good thing to keep an open mind and consider all possibilities.
“Can someone Please educate me why market correction depends solely on interest rate hike?”
It doesn’t. Policy rates need not rise in order for housing to go down. All that needs to happen is that the housing industry builds more housing units than are demanded by the market at any given time.
There are rational limits to demand. For instance, family size has been steadily dropping. But can it drop much more? As it stands, RE vendors have pushed housing ownership into non-traditional constituencies. Students. Relatively recent immigrants. Even elderly retirement residences are now sold using the condominium model in many cases. Basically put, low interest rates, appreciation and other long-term trends have stretched demand to the extremities.
#14 Bobs ur uncle
“Can anyone tell me what the main industry is in Van?”
————————
Smugness.
Yes Vancouver is more expensive than Winnipeg but it was prior to the bubble. Santa Monica is more expensive than Minnesota. You don’t need foreign money to explain a coastal city with a mild climate is valued higher than a city with extremely cold winters, humid summers and mosquitos the size of humming birds.
Both Winnipeg and Vancouver are up about the same in percentage terms over the past 12 years. That proves foreign money in Vancouver is no more of a factor today than it was 12 years ago prior to the bubble.
DELETED
Can someone Please educate me why market correction depends solely on interest rate hike?
It doesn’t.
Nobody knows what will trigger a downturn.
We usually figure it out in hindsight.
Their is nothing more dangerous than a skilled writer with a relatively sized fan base, who’s potential to lose his mind is great.
I always told you dogs, the sales men that poses the greatest risk to the owners book, is the one that gets paid the most.
Let’s play poker boss.
Boss, you know I’m good, and the slime who will approach you soon only to bitch slap me. we’ll, they have their hands in your back pocket. Don’t you care or don’t you know, or are you in on it.
Might be doing book two ahead of schedule.
All in Boss.
#17 Andrew Woburn
The world was blindsided by the boom in shale oil. Now doomers are still saying it’s just a frack-in-the-pan and will fall off a cliff in five years because of high depletion rates. Meanwhile ingenious entrepreneurs just keep on fracking.
——————————–
Personally I feel that pumping a now soon to be finite resource, water (ask Californian’s) into a hole to fracture rock to retrieve the last of another finite resource oil, only to flood the market is beyond crazy to me.
The depletion is fast for fractured holes simply because the process is nothing more than simply wringing out a sponge. Also the logistics of compressing and or cooling C02 into a liquid to mix with water is just another energy burning complication to deal with. These companies are selling their technology so it all appears good at first glance.
Now for frac’ing in general. The people with boots on the ground are trying to do things more efficiently, and using their whitts to come up with new ideas, build a business, feed their families and keep on keeping on. What they don’t realize is that there is a much more sinister plan behind it all that they are not privy to.
Frac’ing devastates water tables by taking huge amounts of water to mix with chemicals and sand only to pump into the ground and in some case polluting aquifers via leaked well casings on the way down the hole. The fractured rock can also release methane gas which is light and works its way to the surface, sometimes between the fractured rock and surface is drinking water which becomes polluted. Incase you haven’t noticed water is being privatized at an alarming rate, so sadly this huge boom in frac’ing might be more about water than oil
We all know what the value of a limited resource is, especially one that is critical to our very survival. Now check out their prerogative
#84 Ben on 04.30.15 at 10:02 pm
Hey Garth! Is it true that jingle mail is legal in alberta and nowhere else in the country?
*********************************
Nope. I cannot speak for jurisdictions outside of Alberta and it gets complicated. Besides, my legal advice is highly suspect on its face.
Once I sober up and the Flames playoff run is over (in about three weeks) I will offer some handy hints.
Now back to the game.
#79 Leo Trollstoy
Which is why we need “credible data”.
Always amusing when non-locals comment on highly localized phenomena.
The cyclist might find that it is easier to escape the bear by going downhill!
#93 Mister Obvious
#14 Bobs ur uncle
Obfuscation… And weed.
#60 fisheman on 04.30.15 at 9:03 pm
“all I hear in coffee shops is how much up”, fliers in english & canto. Ya right, like 20 years ago. Firstly Cantonese “a relatively minor dialect of 100 million is dying in China. They were 90% of Chinese immigrants here. Mandarin is the big dog on the block now.
=================
To the best of my knowledge, although Cantonese, Mandarin and many other Chinese dialects are as different from each other as European languages, they all use the same pictographic symbols. Although Cantonese and Mandarin may have very different words for, say, “tree”, they use the same symbol which you could think of as a stylized picture of a tree. “Cantonese” ads are totally comprehensible to Mandarin speakers. Apparently this shared script but divergent language situation was a major force driving the development of affordable fax machines.
I lived in Richmond when the surge in immigration from Hong Kong was happening and many Caucasians sold into the wave and left . As you say, it didn’t appear to be “white flight” as much as “take the money and run”. I heard remarkably little anti-Chinese comments in those days but the newcomers were mainly real immigrants, educated and English speaking, who made really good neighbours.
“Is it true that jingle mail is legal in alberta and nowhere else in the country?”
Only on a very narrow cross-section of loans written by provincially regulated institutions and not CMHC insured.
“Also, will these outfits report the highest foreclosure rates when that starts? And what do these investors in luxury homes in Toronto expect as a return if they can’t rent the place”
The very high end probably won’t be all that problematic. After all, there will always be the rich/super-rich, and those individuals, whomever they may be at the time, will always be around to transact in properties. Leverage probably isn’t as significant with that class of property either.
The problem for the RE market and the pumpers is that the ultra high end segment only makes up a very tiny slice of the market. The economic pain, the deflation in Canada will be driven by the sufferings of “Joe Sixpack” who over-leveraged himself into housing. Not the woes of a tiny chunk of the ultra rich.
#108 SWL1976 on 04.30.15 at 8:26 am — “. . . I have always tried to find the truth behind the deception.”
A critical thinker! The world is short of them. This article, particularly the headline show what brain dead, dimwitted bimrons the m$m are, and how untrustworthy the police and other federal govt. agencies have become. And sheeples keep believing their crap.
The following quote from wrh.com is also correct — “Terrorism isn’t a threat to the nation. Government stealing of our business secrets is. So are the police, who murder 55 times as many innocent Americans as the terrorists do!” BTW, ever wonder why the police have turned so violent? This may help explain it a little better, and Joke of the Day.
#91 John in Mtl on 04.30.15 at 10:12 pm
#66 Lead Paint on 04.30.15 at 9:21 pm
Mark I have to thank you for your posts. Outside of the bearded oracle himself you provide the most intelligent and useful insights on this blog. You are the anti-smoking man and his ilk, those that revel in idiocy. Keep it up.
I enjoy Marks’ posts just as much as SmokingMans’, they both present a certain point of view and useful knowledge. And of course, our friendly host, Garth, has still another point of view and knowledge.
It is a good thing to keep an open mind and consider all possibilities.
…..
What the Fk was that, a hedge of some kind..
Nothing more deplorable than a suck up, who is it, Mark the Robot, Garth the bearded gifted writer who’s beard covers his drinking broken blood Vains. Or the insane one, the great one, the one and only Alien.
Make a choice bastard, their can only be one.
Garth,
Why the heck the govt. does not take steps to bring RE in YVR (and Toronto) to the ground?!?!?!
Why oh why?!?
We seem to be near the peak of this frenzy but when I see people around me bidding…I find it very hard to restraint my herd instinct….
Please keep reminding us for few more months until we are over the hump and the downwards slide begins….
– Average salary is 70k in Vancouver? I don’t believe those stats. A couple were each makes 35k? Ridiculous.
– Anyways, there’s a lot of unreported income. And, family wealth.
– Houses will get more expensive in Toronto. Rates won’t be 4% for a long long time, and a 0.5% is nothing.
– People don’t trust the stock market, and even less now that volatility is increasing.
– Wealth abroad will keep buying our condos. Canadian dollar is cheap. Canada is safe. Canada is liked.
#79 Leo Trollstoy — “No credible data to support foreign money having any significant impact on the market.”
Of course not. There’s no data.
This has been posted before, but is always worth another read:
http://www.biv.com/article/2015/4/property-sales-spike-sparks-money-laundering-fears/
Now I don’t know if you’ve been following Vancouver news, but apparently there’s a weed store every few blocks. Ottawa has rather shrilly pointed out that selling weed retail is criminal, but BC is not enforcing the law, and there appears to be nothing Ottawa can do about it, not having its own police force.
Couple that with the BC Attorney General’s attitude to FINRA in the above article (“call Ottawa, it’s got nothing to do with us”) and you can see how there might be a bit of an issue.
http://thefamily.com/wp-content/uploads/2013/12/see-no-evil.jpg
I thought I was losing my mind when I read in the G&M piece this morning that per CMHC, YVR is ok, but overvaluation exists in Regina and Winnipeg ….I was flabbergasted to say the least.
Thanks for addressing such nonsense in today’s post.
#18 TS
the problem is that the guy next door that sold last spring got $450K. That means mine should now be worth that much or more!
Hey, Hogtown has finally joined the global elite….
http://www.thestar.com/business/2015/04/30/why-toronto-is-hottest-city-in-the-world-for-real-estate-for-the-ultra-rich.html
The photo is not literal. It is how every FRED cyclist feels going up a 4% average grade climb.
Steve on 04.30.15 at 7:11 pm
Hi Garth,
It cannot be 405% less. 100% less is already free. I guess you meant to say four times cheaper
===============================================
four times cheaper is also incorrect.
do you mean one quarter of the price?
#79 Leo Trollstoy
Looking solely at the interest rate is missing half the picture. When a caf buyer is thrilled to walk away with a 0% loan, he has merely traded off interest payments into a higher principal.
A CMHC loan comes with an insurance premium, which is effectively the same thing; higher interest built in as a higher borrowed amount (or, rarely, paid up front.
When you need the government to co-sign and guarantee your loan, otherwise you wouldn’t get it or would need to come up with more money, you are a sub prime borrower, and DO pay more than a prime borrower. You can Google and link as many dictionary definitions as you like, it does not change anything.
Present day humanity is deplorable, men, women, walking on there knees, mouths wide open. Please like me, please accept me, I will do anything..
Makes me kind of sick, how did you bastards get here.
I got to meet my partners in Vegas in June, I’m voting for total inhalation of the human race. You pricks just crossed the line, NASA boys got the engine figured out.
I can’t let you people invade other galaxies. You’re leaders, people you elect, are total slaves to an evil force.
This force, It’s pretends to be keeping you safe while piloting your destruction. It has loyal a following who it controls by fear, they are all out to get you, as it kicks sand in the faces of the innocent, pledge to me your loyalty dogs .
Your all doomed humans.
At #80: BS, I completely agree with everything you say. But, one thing… American home ownership rates peaked at 68.7%. Canada is well over the 70% rate now. Yes, you are correct. It is much worse in Canada. Canada’s banks have already been bailed out quietly once before during the U.S. banking crisis, much in part of the American tax payers. Canadians, and the world for that matter, had no clue. All the while, Canadians were fed a banquet of bullshit that the Canadian banking system was somehow superior or more sound. It was complete nonsense, being the Canadian bail out was about 64% higher per capita than the American one. Now, Canadians will often demand it wasn’t a “bail out,” per se, based on technical vernacular. However, I beg to differ, especially when some Canadian banks were given “liquidity infusions” that exceeded the entire value of that bank. BULLSHIT! Even the IMPP labels it as a “bail out.” So there you have it. The Canadian bank bailout was 7% of Canada’s GDP!!! Its utter absurdity. Clearly, Canadian banks were not sound, and behaved deplorably, just as American ones did. The difference is American banks were held accountable to pay back the loans, and they have. Canadian banks? The CMHC was formed, creating a significant moral hazard, offloading responsible lending standards onto the backs of the Canadian tax payer. I am to this day amazed that none, zip, zero, ZILCH of my Canadian friends know this ever happened. Perhaps it is why they still play the “we’re different because our banks are more sound” card. Nothing has changed, other than the liability of these horrific lending standards now being offloaded onto every man, woman, child in Canada, as opposed to those sleazy institutions making the loans. The entire freaking globe sees it now for what it was, including IMF, all the major ratings agencies, top global economists, etc. Please, to my Canadian friends, WAKE UP and realize the Kool-Aid you’ve been drinking already is actually pure piss!
http://www.cbc.ca/news/business/banks-got-114b-from-governments-during-recession-1.1145997
https://www.policyalternatives.ca/newsroom/updates/study-reveals-secret-canadian-bank-bailout
http://www.huffingtonpost.ca/2012/04/30/canada-bank-bailout_n_1466219.html
http://business.financialpost.com/uncategorized/canadas-secret-bank-bailout#__federated=1
http://business.financialpost.com/news/fp-street/did-canadian-banks-receive-a-secret-bailout
http://www.zerohedge.com/news/quantifying-big-five-canadian-banks-114-billion-bailout
http://www.macleans.ca/economy/business/the-real-canadian-bank-bailout/
8 Willy H on 04.30.15 at 9:00 pm
H on 04.30.15 at 8:28 pm
…
The capital test simply no longer works. Period. Even if Oil goes back to $100 tomorrow those projects will not see NEW releases in capital as its simply too risky. …
___ ___ ___
Fracking is on its way out. The environmental impact is horrific. Just look at Pennsylvania’s experience. New York is balking at it and Canada appears to be waking up to it’s dangers. Quebec and Nova Scotia are particularly at risk.
——————————————————————
Provide some links for you Eco-Manic beliefs. You may believe that wishing will make it become true,but fracking is here to stay. CO2 may become the fracking medium, which will conserve or eliminate using fresh water, but the process stay. Many well are currently fracked & capped, waiting for better oil prices.
Great article Garth! Read this ratty blog every night. Thanks for keeping it interesting!
Wow me and my kids saw exactly that scene a few years ago on the road to Radium. A grizzly shot out of the trees and chased a guy on a bike. He broke off the chase when he got behind him and got a smell. I was already planning to try save the guy. Funny thing is when I passed him he was peddling along without a care in the world. He had no idea it had even happened!
Saskatoon house prices are getting pretty ridiculous
“No credible data to support foreign money having any significant impact on the market.”
There’s no data because it’s not tracked, that doesn’t mean it can’t be inferred. Gravity is also a theory not a law but it doesn’t mean you’d jump out of a plane without a parachute.
Sure the banks could be lending the average household with a $70K income enough to buy a $1M house. They won’t do that. Look at other cities. In fact BC household debt levels have risen at a lower rate than AB ones and despite ABs higher household income and higher debt the average home price in Calgary is still half of that in Vancouver.
There is a stream of money coming from outside of Vancouver (how much is from AB, US, elsewhere is up to debate) but it’s almost impossible that it’s coming from Vancouver earned income alone.
Yes, there seems to be a number of houses on the market now in the Peg, and selling less than asking. A friend of mine who tried to sell last year (asked way to much), is trying this Spring asking what she should have asked last year. I see her listing has dropped significantly in price from that. Have watched other prices drop too.
I guess I have missed the boat to cash in and sell my place and rent. But rents here are high, probably due to low vacancy rates.
And yes, as JSS #71 mentioned, Winnipeg has it’s good points.
The greater fools South of the boarders are well aware of what you preach:
http://rt.com/usa/254721-elderly-americans-dying-broke/
@ #106 Smoking Man on 04.30.15 at 11:03 pm
“…What the Fk was that, a hedge of some kind…
Nothing more deplorable than a suck up…”
Naw, not that, but exactly what I said – consider all points of view. Yes, even yours, SmokingMan!
I have no master other than myself.
I said before … the market will deflate not because the interest rate hike but ever growing number of people without job.
you are fun Garth, everytime we get closer to reality (50% slide) something happens and TO is saved…
what’s gonna be next time…. WW3 lol
Now thats a picture i can appreciate
Irish RE is up 16% again.
In 2008 their lust for RE almost bankrupted the Island.
Idiots.
http://list.juwai.com/news/2015/04/New-Juwai-Q4-2014-Global-Property-Index-Report-released?utm_source=ShareLink&utm_medium=copy&utm_campaign=ListJuwaiShareButtons
It’s spreading.
“Residents of Newfoundland and Labrador will pay higher taxes and fees, and the government will spend less and borrow more as the province struggles with an oil-induced economic crisis.
Finance Minister Ross Wiseman unveiled a budget Thursday that would delay major projects and raise numerous fees, and forecasts a deficit of nearly $1.1 billion — a staggering turn of fortune for a province that has raked in billions of dollars over the last decade.
In one of the most austere provincial budgets in recent times, Wiseman also said the province’s economy has been shrinking – and will continue to do so for another four years.
Yet Wiseman refused to equate that decline to a term that scares many politicians.
http://www.cbc.ca/news/canada/newfoundland-labrador/budget-2015-1-1b-deficit-tax-hikes-job-cuts-1.3055668
#94 BS – You are absolutely correct. Prices in Winnipeg have increased about the same percentage-wise as Vancouver and WAY more than they have in Toronto.
I live in Winnipeg and have been watching home prices on MLS in desirable neighborhoods here for the last 4-5 years, contemplating buying, although I still rent. (And very happy doing so). I can tell you for certain that prices here peaked about 3 years ago. Winnipeg is now in a MAJOR buyers market and becoming even more so every month. I now watch really nice houses in the best neighbourhoods in the city just sit on the market for moths at a time. Unbelievable! 3 years ago these same houses would never get past offer date without disappearing off the MLS listing. I don’t care what the “official” numbers are- touted by the local media. It’s all lies. The market here is dead. I wouldn’t say that it is extremely overvalued, but it is DEAD nonetheless.
If other Winnipegers are reading this and thinking of buying a home, make sure you offer at least 10 – 20% below listing price. Nothing is selling for list price anymore. Even better, wait! During the 90s and early 2000s, winnipeg house prices fell for 15 straight years. I’m thinking we’re in that same scenario again.
Cheers
Does anyone enjoy my posts ??
Would of made you boat loads of money during the last 6 years. Enjoy ;)
Hey Garth,
here in Europe I just got pre-approved for a RE loan, the interest rate? 0.9% + 6 month EURIBOR (currently at 0.06%, and heading towards negative).
If you think the madness has nowhere to run, I say there’s still several years on this road.
But there are just two reasons why a speculative bubble has coated the left coast (and Toronto) with risk. Cheap money. And, especially, CMHC.
Memo to Ottawa: when you’re in a hole, stop digging.
…………………..
exactly. Hope they get the memo.
Time for court proceedings for reckless mismanagement of public finances?
Qc gouvernment just announced that they wont follow up federal on income splitting.
@Mark (yesterday #165)
Nope. Every dollar deposited in Canadian banks can only be lent by the bank once. You have a fundamental misunderstanding of how banking works. Mark
You have apparently no clue of how a fractional reserve banking system works do you?
For example if a 10% reserve is required:
$100 deposit in bank A, 90 can be lent and spent ($10 = 10% must be kept by the bank)
$90 deposit in bank B, 81 can be be lent and spent
And so on,
in the end the money supply has increased 10 fold (the formula is actually 100/0.1 = 100)
http://en.wikipedia.org/wiki/Money_creation
https://econjournal.wordpress.com/2008/11/10/how-do-banks-create-money-in-fractional-reserve-banking/
This is why foreign investor money arriving into Canadian RE is so potent, it provides the Canadian banking system the ability to lend so much more. It stimulates credit in a big way.
Canadian gov. supported easy credit for RE is nothing but a money printing scheme, I repeat worse than the FED has ever done, it FED trying to soften a crisis, we are fueling a fire.
BTW I guess your ignorance about banking explain your weird bullishness about the CAD…
Sorry, in previous post I meant the formula is
100/0.1 = 1000
#115 Smoking Man
“…I’m voting for total inhalation of the human race.”
LOL That’s a great visual you paint there Smoky!
A pissed off God leaning over the earth with a rolled up bill up his nose. The ultimate Up Yours.
@Leo Trollstoy
«No credible data to support foreign money having any significant impact on the market.
Prices more likely correlated with cheap credit.»
As explained in earlier post foreign money entering the Canadian banking system has an impact on the availability of money for credit. Fractional reserve banking creates money through credit like multiplying bread.
But event to multiply bread you need at least one bread to start with, that’s what foreign money is used for.
In Winnipeg there are an enormous amount of “luxury” condos going up. There are 3 majors ones on my drive into work, starting at 300K and up from there. None are even close to completion.
There is one Downtown Winnipeg along the lovely Red River which has been under construction for 4 years! Wonder why? Maybe no cash is flowing into same.
What I have also noticed is an abundance of again “luxury” month by month apartments going up. What would a person in retirement do? Sink cash into a condo or rent month by month the exact same thing? The latter me thinks!
Winnipeg is ground zero.
#116 The American
Great selection of links, I posted a few of those awhile back and Gartho first ignored me, then said it didn’t matter to the consumer. Another good source is a book titled “Crushing Debt” by David Trahair, where he exposes the banks’ debt to equity ratios. Now, we know they are backed by the taxpayer, so that likely explains the reckless behaviour. We’re like the US, capitalism for the poor, socialism for the wealthy. Privatize the gains, and spread the losses around like manure.
Looking into my crystal ball but things look a little smokey…
#Surreality,Or… #TwoWongsDoNotMakeA
RightCheng…[SCMP] – Chinese fugitive Ching Mo Yeung is a criminal and fraudster, says Canada’s immigration ministry:
Scathing statement follows revelation Chinese police told Canada to deny citizenship to Vancouver property mogul, now seeking asylum
http://www.scmp.com/news/china/society/article/1783122/chinese-fugitive-ching-mo-yeung-criminal-and-fraudster-says
[TheProvince] – Vancouver developer denies links to Chinese corruption case
…”Electoral finance records show that Ching and his company have over the years contributed thousands of dollars to both the Liberal Party of Canada and the B.C. Liberal Party. In 2008, Mo Yeung International Enterprise Ltd., donated $300 to the winning campaign of Richmond Mayor Malcolm Brodie, financial records show.
A spokesman for the Federal Liberal Party would not comment on whether Ching is a member of the party, citing privacy considerations. But a well-placed Liberal Party source said unproven allegations about Ching have circulated within the party for years, but that they’ve “always been directly refuted by Michael and his lawyer.”
“Michael Ching as far as I know got quite involved around the time of the Trudeau leadership,” the federal Liberal Party source said. “He had supported Raymond Chan before that, but most of his support (of the LPC) was after 2012. From a Liberal perspective, this guy is seemingly quite connected across business and politics in Greater Vancouver.”…
http://www.theprovince.com/news/Vancouver+developer+denies+links+Chinese+corruption+case/11014806/story.html
#NoMoreSharpiesForYou!…
[PentictonHerald] – Suspect in custody after anti-government graffiti spree in downtown Penticton
…”Similar graffiti was applied to the MP’s office, but Albas declined comment because he said he didn’t want to encourage the vandal with any more publicity.
The damage at both sites attracted a steady stream of people who stopped by to view the graffiti and take photos.
Among the slogans scrawled on the CRA building were: “No tax dollars for corrupt politicians,” and, “This is not a democracy.”
The vandal also railed against Bill C-51, the controversial anti-terror legislation currently before Parliament, and wrote the name Michael Sona in an apparent reference to a disgraced Conservative staffer who was sentenced in November 2014 to nine months in jail for his part in a vote-suppression scheme in Ontario.”…
http://www.pentictonherald.ca/article_55fecbb6-ef99-11e4-9bc6-6709d76b2766.html
#134
Money Creation versus Wealth Creation
PBrasseur correctly states that banks create money ands stimulates credit creation.
********************************************
Questions
Does the fractional reserve system of 10 times in the example create new wealth? Did any depositor, borrower or the bank get wealthier simply due to the deposit of money and let’s say its immediate multiplication by 10? (let’s ignore the interest for now and focus on the money creation).
Does the money creation push up prices? If so will it show up in inflation.
Is fractional reserve system and money creation a bad thing or a good thing?
Is the creation and availability of credit a bad thing or a good thing?
#134 Aegal
“Qc gouvernment just announced that they wont follow up federal on income splitting.”
And they will continue to be the highest taxed Province.
#116 The American — “Clearly, Canadian banks were not sound, and behaved deplorably, just as American ones did. The difference is American banks were held accountable to pay back the loans, and they have. Canadian banks? The CMHC was formed, creating a significant moral hazard, offloading responsible lending standards onto the backs of the Canadian tax payer.”
That’s quite the rant. Allow me to clarify a few things. The CMHC existed before the global financial crisis, and didn’t much change in size or scope because of the crisis. Picture CMHC as being equivalent to the American Fannie Mae, Freddie Mac and Ginnie Mae, all rolled into one, with one important exception: CMHC was already owned by, and fully backed by the Canadian government before the crisis, whereas the US GSEs were not explicitly backed by the US government, though bond investors assumed (rightly as it turned out) that the US government would step up if necessary.
During the crisis, to solve liquidity problems, the Canadian government bought mortgages from the Canadian banks which had already been insured by CMHC (i.e. the Canadian government). If those loans were crap, they were already government guaranteed crap.
This is not exactly adhering to Bagehot’s dictum in “Lombard Street” that in a credit crunch, central banks should be willing to lend freely to solvent institutions against good collateral at penalty rates. The collateral was good, the institutions were, as far as we know, solvent, but the transaction took the form of an outright purchase rather than a repo at high rates. A subsidy, if you will.
I’ll agree that our Canadian banks are probably not quite the pillars that we like to think them to be. Just as American politicians stupidly repealed the Glass Steagall Act, turning once safe deposit taking institutions into universal banks with tentacles in investment banking and insurance, so did our Canadian politicians knock over the former “Four Pillars” of the Canadian financial system, which kept banks, trusts, insurance and investment brokerages separate, causing our banks to swallow the trusts and brokerages, and take a run at insurance.
Universal banking is fundamentally broken in that investors expect, and get, returns on equity in the teens, in what is fundamentally a low margin commodity business. High leverage is the only thing that can bridge the gap, and implicit government guarantees square the circle.
But really man, your US banks (and the investment banks which turned themselves into banks overnight to qualify for bailouts) had a whole lot more crap on (and off) their balance sheets than ours did.
#135 pBrasseur
technically, mark is right.
this “dollar” can’t be lent more than once; however, what this dollar CAN do is create credit.
this is the nature of the fractional reserve system.
banks don’t create money (as garth has frequently pointed out) but they CAN create credit.
essentially, this credit “becomes” money–though not directly.
from my perspective, this distinction is basically moot–and is an irrational way to “support” the modern banking system.
purpose: assuage guilt?
being precise with your language will get dude’s like mark and garth on board–preventing usage of logical fallacies to discredit truthful approaches.
Smoking Man: you nailed it.
want to know how corrupt and degraded society has become?
President joko Widowo of Indonesia just shot by firing squad a Australian pastor and an artist , and a Brazilian who was so mentally ill that the priest had to keep reminding him that he was going to be executed on his last night on this good earth.
meanwhile, an Indonesian who made the bombs for the Bali bombing , that killed 14 people and injured hundreds, got off after serving half his sentence.
the Indonesian foreign minister waved his hand… Said the international outcry was a “momentary ripple”.
even Axl Rose was outraged.
The little people are but pawns in elite palace politics. can’t let a few state murders get in the way. Of international trade.
I am sickened and repulsed.
The game is fixed, and Old black joe is still picking cotton for your ribbons and bows.
next media story… Time to move on folks. Nothing to see here. Just a bit old good old fashioned cold blooded state murder. now go back to your slot machines and cooking shows, like good little consumers.
I’m not caring for this game anymore.
I don’t know about Winnipeg, but I read that article in the paper which said there’s nothing to worry about in Vancouver. If you believe that, would you be interested in buying shares in Nortel, Bre-X, or Enron at $100 each?
I’m saddened by the realization that I get more and more of the news on what my governments are up to from the South China Morning Post, and Bloomberg:
http://business.financialpost.com/news/energy/behind-closed-doors-canadas-natural-resource-minister-coaches-top-energy-firms-on-action-plan
“So houses in Van cost 11 times more than the people who live there earn in a year. ”
So what? People that live here aren’t buying them up. The west side is the preserve of offshore Chinese and houses are a snip at $2m when compared to anything they might buy in their blighted homeland.
Now explain the other 95% of the market. — Garth
#116 The American on 04.30.15 at 11:47 pm
——————————————————-
Your jealousy is shining through. Face it, our banks WERE more prudent.
Why did the USA have to enact legislation to make American banks look more Canadian then?
At #145: #145 Ralph Cramdow, I respectfully disagree. The CMHC is nothing like Fannie Mae or Freddie Mac. Why? Well, a number of reasons. But I will focus on one that stands out like a soar thumb… CMHC was willing to “insure” seven figure loans! Fannie Mae and Freddie Mac wouldn’t touch that sh*t with a ten foot pole. Yes, CMHC existed prior to the global financial meltdown, but because it was willing to go this “extra distance,” the damage was already greater in Canada than other places, including the U.S. Canadian government and banks did their absolute best to hide this, and in fact LIED and continue to lie about it. Nobody on Earth (except Canadians) believes this bullshit any longer. Hence, the bail out Canadian banks received, 64% greater per capita than U.S. banks. What part of Canadian Banking Bail Out are people missing? It was clearly for the purposes of keeping solvency. What’s so damn comical about it, is that your government and banks love to tell people it wasn’t a bail out (of course, after hiding it for years, which begs one to question WHY?). Their so-called “reasoning,” is that your banks couldn’t lend money any longer and therefore used these funds as a “liquidity infusion” (infusions that exceeded the entire value of some of your banks), so they could continue lending. What is this mean? It means they where unable to continue operating as a bank should without this money. If they can’t lend, it means they didn’t have any damn money to lend. If they didn’t have money, they were broke.
“You have apparently no clue of how a fractional reserve banking system works do you?”
You obviously don’t, as your ‘example’ demonstrate. Every iteration of your ‘example’ involves additional deposits. Hence, the constraint of loans = deposits is never violated.
Time to get into the real world and understand the rules that real bankers have to live by. Instead of reading the work of people who hate banks and repeating such almost verbatim here.
Waiting for Godot.
https://uk.finance.yahoo.com/news/negative-interest-rates-put-world-181408619.html
“banks don’t create money (as garth has frequently pointed out) but they CAN create credit.”
Actually banks are held to high standards of reserves, and have to answer to examiners who rigorously check that assets not exceed liabilities.
However, individuals are not. When an individual makes a loan to a bank, the individual is actually the one creating the credit out of thin air. By accepting the bank’s promise of repayment, without anything (other than the promise) that might guarantee repayment.
Putting money in a ‘bank’ (ie: lending a bank money) has never seemed rational to me. When someone borrow money from the car dealer, they register a security interest against the car. When someone borrows money on a mortgage, they throw a charge against the property. When someone goes to a pawn shop, they take a physical item to secure the repayment of a loan. But what collateral does someone receive for lending to a ‘bank’? Literally nothing. Because the borrower happens to be a ‘bank’, for some reason, most Canadians suspend financial rationality and do not demand anything beyond the simple word of their counterparty to secure their loan.
#33 Lotus: “Shared accommodations with strangers are starting to become a norm.”
*****************
Vancouver: That was very common in the sixties….
@Saskatoon
«banks don’t create money (as garth has frequently pointed out) but they CAN create credit.»
A single bank can’t but the banking system can. Banks absolutely do create money, in fact that’s how most of the money in the world is created.
BTW this is not a problem in an economy where credit is controlled by a free market. The problem in Canada is that the risk associated to credit has been socialized so much more money is being lent (ie: created) than what a free market would allow.
Again, if you don’t get how money is created read this:
https://econjournal.wordpress.com/2008/11/10/how-do-banks-create-money-in-fractional-reserve-banking/
Banks create Money
Saskatoon said: banks don’t create money (as garth has frequently pointed out) but they CAN create credit.
*******************************************
The most common definition of money is paper cash plus bank deposits.
Bank deposits are a debt of the bank and are created by banks. (Take out a loan and the bank gives it to you by creating a deposit in your account, offset by new debt to the bank. Voila, you and the bank acting together have created new money). There are limits on the process.
As Blacksheep has said and given the proof for many times, banks (together with their customers, yes you) create money all day long.
Contrary to the belief of some people, this is a VERY good thing. The economy needs money and credit to function and banks (together with their customers) create money. Long live the banks.
Why Banks Make high ROEs
Ralph said:
Universal banking is fundamentally broken in that investors expect, and get, returns on equity in the teens, in what is fundamentally a low margin commodity business. High leverage is the only thing that can bridge the gap, and implicit government guarantees square the circle.
****************************************
Even with leverage a commodity business should produce a low ROE. The government guarantee is given to many banks so that does not really explain the high ROE.
What saves the banks is the inconvenience of switching. Once with a credit card you tend to stay. Much of our banking tends to be done with the same bank over and over. It’s a huge pain to move your chequing accounts.
For a variety of reasons, banks do not compete aggressively on price for many of their products despite the commodity nature.
«Now explain the other 95% of the market. — Garth»
Well, when an offshore Chinese spends a million to buy a house in Vancouver that money is eventually deposited in a Canadian bank. About 90% of that will be available for lending, lent and deposited again. Then 90% of that amount will be lent and deposited and so on until the amount can’t be divided.
So that original 1 million $ of fresh deposit allows the Canadian banking system to lend millions more.
Not saying this is the only source, nor the principal source of new deposit used as a base to create money through lending but I’d say it’ far from insignificant.
What a stretch. — Garth
#66 Lead Paint on 04.30.15 at 9:21 pm
Mark I have to thank you for your posts. Outside of the bearded oracle himself you provide the most intelligent and useful insights on this blog.
———————–
bahahah… good one, I love sarcasm. Thanks for the Friday morning lulz.
Now explain the other 95% of the market. — Garth
—————-
Simple, it’s supply and demand. If there’s a demand for expensive housing that isn’t being met, cheaper homes will be reno’d or demolished to meet that demand. That has the effect of reducing the affordable supply thus increasing their price. It’s the circle of life in big cities.
That was funny. — Garth
MANITOBA in the news: “The NDP government has just introduced its worst budget in 15 years.
Granted, there have been some real stinkers in recent years, including the PST hike of 2013. That was brutal as a single tax hike. And the government’s decision to rob Manitobans of the right to vote on that tax increase was unforgivable.
But the 2015 budget is so economically damaging in so many different ways, it is the worst — and scariest — fiscal blueprint the NDP has unveiled since taking office in 1999.
What this budget has confirmed like no other NDP budget has is that Premier Greg Selinger is so ideologically wedded to the idea that government can spend its way into prosperity, that he’s willing to practically bankrupt government to do it.
The NDP is projecting a $421-million deficit this year, the seventh deficit budget in a row. It’s up from last year’s budgeted deficit of $324 million. The books were originally supposed to be balanced by 2014-15. But government has delayed the balancing of the budget again, this time to 2018-19.
The Selinger government is adding another $1.65 billion to government’s ballooning debt, which is expected to rise to a record $20.4 billion this year. The government’s debt as a percentage of the economy has increased every year since 2007 when it stood at 21.6% of GDP. It’s now just over 30%. And the NDP has almost completely drained the so-called rainy day fund down to $115 million. It stood at $864 million in 2008.
How much worse could this get?
Finance Minister Greg Dewar, who will likely go down as the most incompetent finance minister in modern Manitoba history, couldn’t answer even the simplest of questions during a press conference prior to delivering his budget speech Thursday. He insisted the deficit was going down when his own budget clearly shows it’s going up. And he had no idea when, how or under what conditions his government might balance the books one day.
Make no mistake, though, this isn’t a Greg Dewar budget. He doesn’t have the experience or know-how to put a budget together. This is a Greg Selinger budget.
The premier knows he’s going to get annihilated in next year’s election and it appears he’s decided to blow the bank on his way out. Selinger is an old-school socialist politician. He believes government should play a significant role in our lives and that the state can create wealth through deficit financing. He doesn’t see anything wrong with perpetual deficits, high taxes and record levels of debt. In fact, he embraces them. He thinks those are goods things that will bring prosperity to Manitoba one day.
However, the evidence shows his “plan” isn’t working. The economic data clearly demonstrates that Manitoba continues to be a have-not province with one of the weakest per capita GDP numbers in the country.
And it’s getting worse. Statistics Canada reported this week that Manitoba’s economy — as measured by real gross domestic product — increased by a paltry 1.1% in 2014, less than half the national average. That means we have fallen further behind most provinces when it comes to economic growth.
The Selinger government refutes those numbers, saying they have their “own methodology.” They claim Manitoba’s real GDP last year was actually 2.4%. Right.
Statistics Canada, one of the most reputable statistical agencies in the world is wrong on its economic growth data — just like it was supposedly wrong last year on population figures for Manitoba — and Greg Selinger and the NDP are right. Of course they are.
Spending other people’s money to create a stronger economy doesn’t work. It doesn’t create long-term, good-paying jobs and it doesn’t create wealth. It never has worked. And it won’t work for Greg Selinger.
But this beleaguered premier seems committed, with laser-like focus, on doing as much damage as he can before he finally gets thrown out of office. And taxpayers will be left with one hell of a mess when he’s gone.”
#130 John in Winnipeg: good point about making lowball offers or waiting to purchase. Have been watching the market here for some time too.
Re: #139 Winnipeg is ground zero.
Yes the word “luxury” is tacked on to everything, omitting “crappy construction with poor sound proofing, etc”. And smart to rent, then wait if wanting to buy.
But, as I mentioned earlier, rents seem high here in Winnipeg. Would like to know what comparable RENTAL rates are across the country, as a part of the overall conversation about rent versus owning.
107 Cookie on 04.30.15 at 11:11 pm
– Average salary is 70k in Vancouver? I don’t believe those stats. A couple were each makes 35k? Ridiculous.
– Anyways, there’s a lot of unreported income. And, family wealth.
– Houses will get more expensive in Toronto. Rates won’t be 4% for a long long time, and a 0.5% is nothing.
– People don’t trust the stock market, and even less now that volatility is increasing.
– Wealth abroad will keep buying our condos. Canadian dollar is cheap. Canada is safe. Canada is liked.
…………………
So what are you saying? On one hand you’re saying households have way more than $150,000 income so that’s why RE is so high? BUT wealth abroad keeps buying?
Not sure what your point is.
At #151: Bottoms_Up, you asked, “Why did the USA have to enact legislation to make American banks look more Canadian then?” The answer is simple. They didn’t. Your banks weren’t operating as stated to your public in the first place. They still aren’t. Hence your American-tax payer backed bank bail outs. Good luck!
#151 Bottoms_Up on 05.01.15 at 10:19 am
#116 The American on 04.30.15 at 11:47 pm
—————————————————————————-
Yes I’m sure the American is jealous of the coddled and cajoled Canadian banks when just one the large banks in his country could buy out our entire banking sector.
More Canadian delusion.
What a stretch. — Garth
I admit I’m trying out ideas and fishing for other opinions on this
But the fact is that a credit bubble is a financial event, it requires cheap & easy credit AND money. We know why credit is easy (CMHC), we also know why the rates are low (risk aversion), what we don’t often ask is where does the money come from.
IMO it comes mainly from Canadians themselves and the diversion of capital fron other investments towards RE, but just by the number foreign money is a factor as well. I’d be curious to know how much capital was lent based on foreign money arriving in Canada. But this is opaque Canada so we’ll likely never know
http://news.domain.com.au/domain/real-estate-news/tony-abbott-and-joe-hockey-announce-crackdown-on-illegal-foreign-buyers-20150502-1my7ga.html
#158 Shawn Allen
“offset by new debt to the bank”
since reserve ratios here are technically infinite (at least in canada) saying that loans doled out are “offset” is misleading…
this is not what is happening.
#157 pBrasseur
dude…
you may want to consider that it is, in fact, YOU who does not understand the money creation process.
you got hubris, though–i’ll give ya that.
Atlanta Fed forecast of 0.8% for Q2. Not pretty.
No rate increase, perhaps ever. Housing in Canada certainly is overpriced, but the bubble will not be pricked by a rate increase.
#163 Daisy Mae on 05.01.15 at 11:54 am
Spending other people’s money to create a stronger economy doesn’t work
I totally agree. same $hit in this province.
The fiberals here have and continue to drive manufacturing out of Ontario, running massive deficits; busy generating useless investments that pay pennies on the dollar or run in the red (wind farms, cancelled gas plants, scandals etc). But buying votes seems to work effectively for them.
The end result is higher taxes, less services, run down infrastructure and a premier who cries to Ottawa for more transfer payments.
#152 The American — “I respectfully disagree. The CMHC is nothing like Fannie Mae or Freddie Mac. Why? Well, a number of reasons. But I will focus on one that stands out like a soar thumb… CMHC was willing to “insure” seven figure loans!
CMHC is not exactly like the US GSEs. But your original point was that Canadian banks got a huge government bailout. My point is that the Canadian government only bought debt that it had already guaranteed.
Contrast with the US program, officially known as the “Troubled Asset Relief Program” (TARP), but colloquially referred to as “Cash for Trash.”
And no, the Canadian program wasn’t done in secret. It was in the countries major financial dailies at the time. When a government wants to stop potential bank runs, restore confidence in financial markets and unfreeze frozen credit markets, it does not do things in secret, but announces them loudly.
pBrasseur, Shawn, saskatoon,
The fractional reserve convo is a distraction. There is no reserve ratio required in canada.
For the sake of conversation, the 1/10 required in other locals (US) is meaningless as it relates to you and I. The creation of deposits ($) by banks and mortgagors is the relevant topic. Neither the commercial bank, nor the mortgagor gains equity value directly from the new deposit created. The bank will charge some fees that the mortgagor will have to pay.
The new deposit creates credit ($). When the debt is paid off, the credit ($) is destroyed.
It is merely and ledger entry that must balance.
—————————————————-
Shawn,
” Did any depositor, borrower or the bank get wealthier simply due to the deposit of money”
—————————————————
At the moment of the loans inception, no.
But as of the first monthly payment made by the debtor, the bank starts collecting profit via the interest paid (from another source) on the loan made. How much interest is paid over the life of a 20 year mortgage @ 5% ? Lots….Shawn is correct to counsel others to buy the banks.
I believe this part of the banking system is beneficial to the public (other than the need for constant expansion) This is my current understanding, feel free to correct me if you have other valid info.
http://wallstreetonparade.com/2015/04/the-flash-crash-trader-has-strong-defense-witnesses/
What’s Really Behind the Flash Crash Trader Prosecution?
By Pam Martens and Russ Martens: April 30, 2015
http://wallstreetonparade.com/
—————————–
algo to suit
http://www.google.com/patents/US8442885
It came out recently that government figures on income were ‘made up’….and when that factoid was brought up at a press conference the spokesman replied..’they are made up’.
Here’s some helpful facts about Vancouver income….
http://www.vancouversun.com/Pete+McMartin+Vancouver+Lotus+Land+Lowest+Land/10253972/story.html
It shows that your figure of 11 times earnings might relate to some cheap condo in the metro area …like Surrey….but a simgle family detached house in Vancouver costs north of 26 times gross pre tax earnings. Incomes in Vancouver are under $50 thousand by the stats.
In fact I heard Geoff Meggs speaking about the forbidden HAM subject the otjer day and he let let some ‘even an $80 thousand dollar salary would not buy anything in Vancouver’…I have to think he was also talking about the micro condos which cost that much to support.
#147 Steve French on 05.01.15 at 9:49 am
Smoking Man: you nailed it.
want to know how corrupt and degraded society has become?
President joko Widowo of Indonesia just shot by firing squad a Australian pastor and an artist , and a Brazilian who was so mentally ill that the priest had to keep reminding him that he was going to be executed on his last night on this good earth.
meanwhile, an Indonesian who made the bombs for the Bali bombing , that killed 14 people and injured hundreds, got off after serving half his sentence.
the Indonesian foreign minister waved his hand… Said the international outcry was a “momentary ripple”.
even Axl Rose was outraged.
The little people are but pawns in elite palace politics. can’t let a few state murders get in the way. Of international trade.
I am sickened and repulsed.
The game is fixed, and Old black joe is still picking cotton for your ribbons and bows.
next media story… Time to move on folks. Nothing to see here. Just a bit old good old fashioned cold blooded state murder. now go back to your slot machines and cooking shows, like good little consumers.
I’m not caring for this game anymore.
……
Know this dudist priest, there is a much bigger thing happening. The riots where inspired by the murder of that black kid, but the riots, and there will be many more are a result of poverty. Inequality, no hope. Its kind of good thought, the militarization of cops just hit a wall. Now that 6 cops have been arrested. Cops are going to think twice
Rember this Word , Rejectionist. It means nothing to the herd at the moment. But it will be the number 1 topic at the next Bulderberg.
Govts around the world should print a shit load of loot, and just give everyone , 1 million dollars each. Then monopoly can be played some more. And save .001%.
Cause the herd is hungry, armed , and mad as hell.
#164 Winterpeg
But, as I mentioned earlier, rents seem high here in Winnipeg. Would like to know what comparable RENTAL rates are across the country, as a part of the overall conversation about rent versus owning
We’re in KW (ON)- rent a 4 bedroom home for 1550.00 – the owner bought the house for 375,000 – 6 years ago…we’re looking at a new downtown condo -great area 3 bedroom – 1800 month ( inclusive)…most homes in our area rent for 1000- 2500 for high end… nothing on the market here that’s decent for under 350,000
#167 Fed-up on 05.01.15 at 12:38 pm
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I’m not talking jealousy in terms of size, I’m talking jealousy in terms of integrity. Lending standards. Prove me wrong.
ps. I lived the tight lending standards our banks had from 2007-2009, so I am very interested in reading your proof.
#174 Ralph Cramdown on 05.01.15 at 1:30 pm
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You’re right, it wasn’t done in secret, I remember reading about it in the newspapers.
I was in garage sorting garbage this morning and watching some old dude, going thru my recycling bins today and picking beers cans out, he looked up and sad to me something like good beer you drinking, so I sad you want one and guy sad yes, so i had beer with him by my garage at 7am… he went to next blue bin like nothing happened and I back in the house.
Let me tell you he is some interesting character, I think i’ll wait for him next Friday with two holstens.
Banking
saskatoon on 05.01.15 at 1:06 pm
#158 Shawn Allen
“offset by new debt to the bank”
since reserve ratios here are technically infinite (at least in canada) saying that loans doled out are “offset” is misleading…
this is not what is happening.
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The bank creates a deposit (money) on the liability side of their balance sheet. Fully offset by an asset being the loan due from the customer. No immediate change in the wealth of the bank r the customer as Blacksheep agreed above. Customer now has “money” though.
Yes, there are limits. No official cash reserve ratio but the bank has to keep enough around to meet withdrawals. They keep some paper cash and a balance at a central clearing bank.
Another separate limit is a bank has to have around 8% shareholder equity for every dollar of assets. (About 5% is the minimum but they aim for about 8% to appease equity investors and bond rating agencies)
Banks, together with customers create credit and in our system, credit IS money.
We could count ALL available credit card room as “money” if we wanted to. When you buy something with a credit card, the store gets money in its account (yes less small fee). From the store’s perspective all sales are basically “cash”.
A better example, does a store care if you wrote your cheque against an account that you had a deposit in or instead used a cheque from a line of credit? No, it makes absolutely no difference to the store. As long as the cheques clear the store gets a credit to its account. Both turn into money for the store.
Money and all its ins and outs, and its creation is one of the most difficult concepts there is to fully understand. There is a lot of indication that no one really fully understands it. And many people have no clue.
Paper bills as money is now a tiny fraction of the money flow each day.
Bill Bonner recently wrote that cash may become illegal. Don’t believe it? Try getting stopped by police in the U.S. with $15,000 cash in the car. It’s assumed to be drug money. It will be confiscated. Try depositing $15,000 cash at your bank if you don’t operate a cash business.
Try withdrawing say $100,000 cash that you “have” in a bank account.
Cash is obsolete. Electronic Money is just hitting its stride and has a very bright future.
All of this is very good, unless you are a drug dealer.
Is it legal to keep cash in a safe deposit box?
I understand the surprising answer is “no”.
#79 Leo Trollstoy on 04.30.15 at 9:57 pm
You hit it out of the park with this post GT, save the one conspicuously absent factor of foreign money skewing the market here.
No credible data to support foreign money having any significant impact on the market
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You know I’m sick and tired of these “one way” diatribes from the “we are right and you are wrong” people in govt and universities and what not.
There is NO SIGNIFICANT PROOF foreign money is NOT having an impact. PROVE to us that all this money is NOT laundered. Prove it was NOT brought into Canada illegally.
It’s time people were more anti to the “anti-conspiracy theorists”. YOU show us the money for a change and stop saying “there is no this or that” or “there is no proof of what you are saying” without providing any proof of your own…..
Guy I work with has 7 condos. Just bought #8 (for his kid I think) mortgage rate is 2.05% don’t know the term. That’s free money.
Party on Garth.
#175 Blacksheep
i know dude…
that’s why i said:
“since reserve ratios here are technically infinite (at least in canada) saying that loans doled out are “offset” is misleading…”
if interest on debt incurred through infinite fractional reserve banking is good for society…
like you say…
how can this be beneficial if there isn’t nearly enough credit (money) for society to pay back BOTH the interest PLUS the principal?
Vancouver home sells for $2MM above list, and $2.9MM above assessed value! Madness!
http://www.msn.com/en-ca/money/home-buyers-guide/vancouver-home-sells-for-more-than-dollar2-million-above-listed-price/ar-BBiZH6F
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Good start to the Milan expo…Burn.
“Organisers insisted the problems would be ironed out quickly.
But the “No Expo” movement does not look like it is going away.
“Our generation does not want this corporate bullshit,” one militant, who gave her name as Annalisa, told AFP.”
http://www.theguardian.com/world/2015/may/01/milan-expo-violence-overshadows-opening-day
#169 Ralph Cramdown
Interesting article, thanks for the link. This stood out: “Figures from the Foreign Investment Review Board’s annual report released on Thursday show investment in residential real estate almost doubled to $34.7 billion in the 2013-14 financial year, up from $17.2 billion the 12 months prior.”
Firstly, their govn’t has an actual body tasked with tracking the data and reporting it.
Secondly, their foreign $ inflows DOUBLED in the course of one year, and that’s only residential RE!
I wonder what Canada’s chart might look like? Oh, right, our govn’t doesn’t keep track of these insignificant details… Yet.
DELETED (Anti-Chinese) & BANNED
fake floor fumes
New Report Alleges Some Lowe’s Flooring Also Has Formaldehyde Problem
The Consumerist – 10 hours ago
Formaldehyde is frequently used in the manufacture of laminate flooring, but usually in
http://consumerist.com/2015/05/01/new-report-alleges-some-lowes-flooring-also-has-formaldehyde-problem/
Klein’s daughter endorses the commies!
https://www.youtube.com/watch?v=lBvHLKiOevM&feature=youtu.be
bridgegate
Friday, May 1, 2015
Former Deputy Executive Director Of Port Authority And Former Deputy Chief Of Staff In N.J. Governor’s Office Indicted
Ex-Christie Allies Indicted as Bridge Scandal Probe Widens
http://www.bloomberg.com/news/articles/2015-05-01/former-christie-aide-appointee-indicted-in-n-j-bridge-scandal
Three Indictments, One Guilty Plea in Chris Christie’s NJ ‘BridgeGate’ Scandal
Wildstein cooperating with investigation into ‘conspiracy’ to punish Fort Lee mayor; Two other top Christie aides also charged.
It is what it is. The only way it got there is a consequence of people willing to pay what they have been willing to pay and lenders have lent for what they have been willing to lend for thus… it is what it is. That said SHIFT happens… learn to ride the tide or take a face plant in the sand };-)
Not the smart ones that understand supply and demand };-)
A poster several posts ago mentioned that if the Chinese real estate bubble collapses, there will be even more Asian money flooding our shores. And I read an editorial in a Chinese newspaper yesterday, describing the tsunami of money that would rush out of China, in that event.
But what is to prevent the Chinese govt, already cracking down on corruption and repatriating some money already spent in North America, from initiating super tight capital controls?
As a matter of fact, if they are hurting for money, would they not redouble their efforts to sniff out even more money, laundered through real estate, in the U.S and by extension, Canada, too?
CMHC = The Canadian Moral Hazard Corporation. Awesome!
“So houses in Van cost 11 times more than the people who live there earn in a year. ”
So what? People that live here aren’t buying them up. The west side is the preserve of offshore Chinese and houses are a snip at $2m when compared to anything they might buy in their blighted homeland.
Now explain the other 95% of the market. — Garth
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Clearly prices are skewed higher by the demand on the west side. Would be interested in what you know about the ‘other 95%’. If you do you can’t cite a blanket figure of 11x what people earn as an average when the high end distorts the overall number so dramatically. Maybe you could explain the multiples for us when you parse the east side, north shore, Commercial drive and Point Grey. Of course that would be verging on analysis rather than anecdote so I won’t hold my breath.
#31 James: “I have a healthy appreciation for the relative amount of financial damage that can be incurred by picking the wrong partner. Losses for each in the 450k range.”
Wrong conclusion.
Thinking that you can maintain a relationship with the leftovers of a 60 to 80 hour work week + the two hour/day commute to your “dream home” is the issue.
Especially when you need to keep up with Call of Duty in your spare time. And calling it a 450K “loss” further monetizes the relationship.
Careerists should just honestly admit that they need only a maid and a whore. They’ve already got a relationship – with their careers.
Only foreign money explains why homes in the Lower Mainland continue to be sold for MILLIONS over asking …