Missing F

CROOKED HOUSES modified

Crooked semis listed on Shaw Street in Toronto: $688,000 each

________________________________________________________________

Ever wonder why the federal finance minister is such a wuss?

“We do not see the need for major changes at this time,” Joe Owe told a realtors’ convention recently “We will continue to monitor the market and make adjustments, if needed, although none are being actively considered right now.”

And, hey, how could there possibly be a problem? Average single-home prices in 416 and YVR blew through $1 million some time ago, new mortgage debt is piling up at five times the inflation rate, real estate values have detached from the economy, lenders are sucking in buyers with 1.99% quick-reset loans, the subprime market is bloating at an historic rate and buying a median-priced house in Vancouver (even at the cheapest-ever rates) eats 65% of family income.

What would F think?

Two years ago, before his untimely demise, the elfin deity was issuing warnings like this: “My expectation is that banks will engage in prudent lending — not the type of ‘race to the bottom’ practices that led to a mortgage crisis in the United States.” As one political staffer put it (as reported by the Financial Post):

“Flaherty spoke to bank CEOs all the time. I would think he had moral-suasion-type conversations with them on many occasions. And he also intervened in the market dramatically four times. He felt quite strongly that, as finance minister, he did have a fair bit of moral suasion at his disposal that he could use. Much of the time that was done quietly behind closed doors. But it was effective.”

OTTAWA- For national stories- Federal Finance Minister, Jim Flaherty, holds a news briefing for media held in the traditional "lock-up" prior to releasing the 2007 budget.  -Photo by Wayne Cuddington, Ottawa Citizen, CanWest News.  Assign#-82676--Federal Budget 2007

In stark contrast, Oliver says this: “Our long-term objective is to gradually reduce the government’s involvement in the residential mortgages.” And that means, ultimately, privatizing Canada Housing and Mortgage Corporation – if Joe and his party survive the coming federal election.

Now why such a dramatic difference between F and his heir, even as it becomes more evident the housing market is a towering, hulking pillar of risk that could collapse on the Canadian middle class as it did in the States? Simple. Letting people pickle themselves in debt, succumb to their hormones, spend far beyond their means and pull economic activity from the future is a cheap, quick and desperate way to try and rescue an economy in trouble by a government struggling in the polls.

And they’re still at it. This week CMHC made a bombshell announcement which – more than the bank rate cut – is designed to throw Lava Hot Scorpion BBQ Sauce all over the real estate market, especially in YVR. Simply put, CMHC will now count as “income” 100% of the money you received, or might possibly get, from a tenant renting your furnace room or garden shed. Until now only 50% of rental income was added to a mortgage applicant’s total income, which is then used to calculate how much debt can be carried.

What does this mean? Lots, actually.

A couple earning $100,000 between them with $50,000 to put down can qualify for a mortgage of about $420,000. But add in $12,000 a year from a basement suite (based on a rental agreement, not actual cash), and – presto – they qualify for a mortgage of $520,000. That’s seventy thousand more than using only half the potential rental income.

The mortgage guys are eatin’ it up. “The ability to utilize 100% of the rental income to qualify for the mortgage…can certainly make the difference for many homeowners and may move a larger number of homebuyers from condo purchases to a single family home with a mortgage helper,” a broker from Vancouver tells the trade mag Canadian Mortgage Trends – which itself gushes, “CMHC deserves applause for trying to boost the stock of affordable rentals and allowing young homebuyers an alternative to condo living.”

Yes, excellent social policy. Just when prices inflate the most, rates descend the furthest and debt hits new, epic levels, the feds encourage more borrowing and over-spending, making it all worse. Moreover, this throws the door wide open to abuse. The definition of a ‘legal suite’ is hazy, and income from new units (with no rental history) will be accepted at ‘market rates.’

And let’s remember the context in which all of this is happening. Oil’s crashed. The economy has stalled. Jobs are being scrubbed. And the central bank’s rate drop is the ultimate admission of trouble. Is this really the time you want your government loosening up mortgage regs to allow more debt, higher prices and enhanced risk?

“The Vancouver and Toronto housing markets appear to be enjoying a revival of late, in contrast to most other markets in Canada,” economist David Madani warns. “But with labour market conditions set to deteriorate this year and market bond yields expected to climb over the longer-term, they won’t defy gravity for much longer.” The guy is now forecasting a 30% price plop for these two Bubble Republics.

That equals the US crash. Ouch. By the way, homeownership in the States has plunged to 1967 levels. Some people learn lessons. Some people just sell out.

JOE modified

242 comments ↓

#1 Ceryx on 07.28.15 at 5:54 pm

This is such a well-written article. Indeed, Some people just sell out.

#2 Bobs ur uncle on 07.28.15 at 5:55 pm

Maybe someone in the current gov is using immoral suasion with CMHC to have a final pre-election pop in prices?

#3 Bruce MacLean on 07.28.15 at 5:55 pm

There is a building at Finch and Kipling with 3 listings at below $70,000. One, a 3 bedroom two bathroom place is listed at $65,000. Is this merely because you need to wear body armor in the hood, or has the collapse started?
http://realestatebay.ca/listing/40-panorama-crt-toronto-344118.htm#listing

#4 Mike Breen on 07.28.15 at 5:56 pm

There must be some reason they want to do this..the people working in these agencies test the market, follow studies, consult with the Pros. Should we not trust their expertise because they have looked at the metrics?

#5 mitzerboy aka queencity kid on 07.28.15 at 5:59 pm

if you look at both pictures of F and his heir
I know who I would trust with my back in a bar fight.

#6 Butch on 07.28.15 at 5:59 pm

Falling prices in Vancouver/Toronto? Sure, but nowhere near 2009 levels.

Home owners win.

#7 Yahoo on 07.28.15 at 6:01 pm

Wow , more debts !

#8 Oops! I left Joe Oliver and my Realtor locked in the car today. on 07.28.15 at 6:02 pm

They’re not answering their phones. I really hope they’re okay in this heat. It’s been a few hours…..but then again, as Joe told me, “hey, what could go wrong?!”

At least my puppy is safe inside the air-conditioned shopping mall with me :)

#9 Frank on 07.28.15 at 6:02 pm

David Madani warns. … The guy is now forecasting a 30% price plop for these two Bubble Republics.

Sure why not. Your last prediction was the opposite of what happened, may as well double down.

#10 Ken on 07.28.15 at 6:02 pm

If I was the Finance Minister in an election year, I would also do anything to keep the housing market aloft. It’s the only thing propping up this government, because the economic fundamentals certainly aren’t.

Dear Canadians: the day after the election, wear brown pants. The housing market is about to get a touch less of an embrace from the future finance minister.

#11 FitBitKid on 07.28.15 at 6:07 pm

Well, It sucks for people still waiting for a crash to get into real estate market. The party is still on…

#12 Blacksheep on 07.28.15 at 6:07 pm

Dontcall # 251,

“CMHC’s blessing of 100% rental income will encourage a lot of mortgage application fraud. Mortgage brokers and bank mortgage specialists must be licking their chops.”
———————————————————
All the RE bears have to realize the canadian economy is in some pretty deep shit, with manufacturing gone, commodities weak, what’s left?

The system is going to protect the only golden (tarnished?) goose they have left.

#13 Elfin on 07.28.15 at 6:08 pm

Woohoo firsssst!

#14 Mike S on 07.28.15 at 6:08 pm

The change is effective starting September 28th

This can’t really affect the numbers before the elections

So why do it?
If anything it will make some buyers defer the acquisition to after that date

#15 Not a Retard on 07.28.15 at 6:09 pm

Unfuckingbelievable.

#16 FitBitKid on 07.28.15 at 6:18 pm

Something’s will never make sense…

What’s your income ? Everyone mentions their gross pay.

100% rental income does not make sense too…

If Chinese govt can help by buying stocks , I say “WHY NOT US ?”

#17 European on 07.28.15 at 6:19 pm

Lol to the picture.

What does JO have to lose, the conservatives won’t be in power for much longer judging by the economic picture and the polls.

Garth, you have a proven opinion on the US economy. It would be great to know what you think will happen to their economy when Donald Trump wins the election 2016 :)

#18 Mike S on 07.28.15 at 6:23 pm

I wonder

If I engage in some sort of lying to CMHC
say a friend agrees to “lease” my basement for 1K, and in turn I agree to lease his basement for same 1K.

Now we both qualify for a bigger mortgage, right?

If after a while we run in trouble and can’t pay the mortgage who is on the hook?

Is it CMHC? Can CMHC after doing the necessary checks claim that the guaranty does not apply because the lease was not real, and then the bank/credit union will be on the hook?

#19 Drill Baby Drill on 07.28.15 at 6:24 pm

Is it just possible that the bond market will force a yield rise ahead of a September election ?

#20 Smoking Man on 07.28.15 at 6:24 pm

Long on Long Branch……

#21 White Crock BC on 07.28.15 at 6:25 pm

Maybe they’re counting 100% of rental income because so few people declare said income on their taxes…

#22 Former Vancouverite on 07.28.15 at 6:26 pm

Young couples in the lower mainland can only afford houses with basement suite income as it is. The problem is with rates eventually rising they will never afford to get rid of the renter. The money seems good but when you have young kids do you really want to be squished together on the top floor.

#23 JES on 07.28.15 at 6:27 pm

Not much of a comment poster, but I feel I should share the news that the canadian real estate obsession/ disease has now begun to infect pre school age children. My 3 year old nephew was visiting us this morning at our (rented!) 900 sqft bungalow. He ambled up to me, looked me in the eye and pronounced, “auntie, our house is waaay bigger than yours. “. Sigh.

#24 I'm stupid on 07.28.15 at 6:28 pm

We’re in big trouble!

I took the wife’s car for an oil change today. The mechanic shop owner is a friend of mine. As we were taking a guy walks in from a company that gives loans for auto repairs. Naturally I was intrigued, so I asked the guy who would need a loan to get repairs for their car? He said that the a huge number of people are using payday loan places when they don’t have the money to fix their cars so they’re giving them a lower cost option. It blew me away that their are enough people to make this a viable business. We must be near the end!

#25 I'm stupid on 07.28.15 at 6:31 pm

The guy was from loanscanada.ca if anyone is interested

#26 cto on 07.28.15 at 6:33 pm

Does the man in the picture care anything about moral hazzard or is he just following the leader.

#27 Ronaldo on 07.28.15 at 6:34 pm

#6 Butch on 07.28.15 at 5:59 pm

”Falling prices in Vancouver/Toronto? Sure, but nowhere near 2009 levels.

Home owners win.”

So someone who recently bought a teardown in Vancouver for a million with 5% down and the price goes down 10%, they are underwater by 100 grand and are trapped unless they have that kind of money to write a cheque to the bank if they have to sell. And down the road when interest rates double they will be paying twice as much on a house worth half as much. The only winner I see here is for the bank.

#28 Bill Gable on 07.28.15 at 6:38 pm

I found it fascinating that not ONE European we met and chatted with, talked about Real Estate.

It is an obsession here in Vancouver and it is about to destroy a lot of ‘wealth’ – just at the wrong time.

Lots of tea leave reading on when rates go up in the States.

It says a lot that we are cutting – (as the Dollar will get eviscerated) and the US, meanwhile, is raising rates, shows how desperate Ottawa is. The PM will be going into an election with an angry, poorer, electorate.
The NDP just might pull out a Minority.

Interesting times.

*One last Europe note: the Unemployed, educated and highly in debt young demo, all over Europe will be a problem unless more than Germany starts creating good jobs. In Italy, it was apparent there is a feeling that the people are being thrown to the wolves and it was “uneasy”.
Greece? What a mess.
The planes were mostly full – and food and lodging in Europe’s very expensive – if you have to buy our Euros with Canuck Bucks.

#29 Rainmaker on 07.28.15 at 6:41 pm

American Dentist – Walter Palmer Accused of Killing Lion.

http://www.thestar.com/news/world/2015/07/28/american-dentist-accused-of-killing-beloved-zimbabwe-lion-cecil.html

How disgusting is this? How can a person who has the odds stacked 100% in his favour somehow think he is a big tough man killing the lion and then cutting off its head for a trophy.

As someone who grew up in a family that hunted (we used all the meat for food), I find what happened to the lion as pathetic and disgusting. For the record, I gave up hunting many many years go.

I see that Mr Palmer pleaded guilty in the US in 2008 to killing a bear outside of the legal hunting zone.

I hope he is charged by the Zimbabwe justice system – extradited and called to account for his actions to the full extend of the law.

#30 2012 on 07.28.15 at 6:42 pm

30% won’t even get us to 2012 prices… Good call on holding out.

#31 Nagraj on 07.28.15 at 6:43 pm

I loved the previous post, titled “Strong & Free”. It was a hoot from the start: “While everything will turn out okay in the long run (I have no doubt), it now seems certain we’re entering a period of confusion and … volatility.”
Many of the comments that followed were also irresistibly funny, BUT THEN about halfway down the comments section the tone changed, the comments got serious, and ugly partisan too.
NOW “Missing F” looks like a rare, decidedly angry post to me.
The villains presented in “Missing F” are, primarily Lazarus the fed fin min, an irresponsible electioneering gov’t, and less directly so, the banks and RE-crazed public. (Kindly note that like our host I have not mentioned the rat-haired somnambulant doorknob sucker from North of Montana.)

I do sincerely hope that WASHED UP LAWYER, PINSTRIPE, RET IN WI, SMOKING MAN, the Saskatoon guy, JIMMY et alia can lighten the tone. [Which is not to discourage LLEWELYN, NEO, or the coruscatingly impressive RONALDO, all of whose posts are very smart, like it or not.]

Where are the simple joys of maidenhood?

#32 TurnerNation on 07.28.15 at 6:44 pm

Breaking. ..CMHC will consider loose change left behind after one-night stands as income.

#33 TurnerNation on 07.28.15 at 6:46 pm

For rent: outhouse in Long Branch. Within spitting distance.

$500/mo.

#longbranchmillionaire

#34 Oh Come On on 07.28.15 at 6:46 pm

Oh come on…..seriously?

I am so tired of the realtors and over leveraged morons being the only ones right and ‘winning’ in spite of all the rent to own metrics, the past precedents of crashes nationally and internationally, and educated economists consistently predicting crashes.

How is it that the uniformed commentators who say ‘the government will do everything possible to keep the party going’ are actually the RIGHT ones!

Equally frustrating is that balanced portfolios have had zero gains as of yesterday (yes a little pop tonight I am sure). All gains for 2015 have been erased.

I am about ready to through in the towel. This CMHC change just goosed prices by at least 20 to 30%. Who needs interest rate decreases to goose the market!

I don’t understand the herd and masses. If you don’t understand them, you cannot get in front of them, and if you are left on the sidelines, you get trampled in the dust.

I have been trampled for too long. Perhaps I have been dogmatic and its time to do the opposite of what I have been doing (buying instead of renting).

#35 takla on 07.28.15 at 6:52 pm

Word of the current housing deflation is gaining steam.A quick search of Vancouver craigslist will turn up many recent “reduced” and “foreclosure” listings.
Many ,many more in the fraservalley.
No more multible offers from what I see and hear and properties are sitting longer before sales post spring market.

the added cost of conveyanceing ,and tax’s on purchase further erode affordability stretching purchasers ability to service their debt.

Thankfully the pool of greater fools seems to be deflateing along with our economy.

#36 Intuitive Missus on 07.28.15 at 6:54 pm

#21 White Crock.

Touché. That’s the first thing that came to my mind as well. Draw them out then whack them with the tax on the rental income. They won’t know what hit them.

#37 saskatoon on 07.28.15 at 6:56 pm

#34 Oh Come On

hang in there.

just four or so months to go.

nothing bad will happen to housing market before election.

but afterwards…

oh my.

#38 raisemyrent on 07.28.15 at 6:57 pm

#6 Butch on 07.28.15 at 5:59 pm
Falling prices in Vancouver/Toronto? Sure, but nowhere near 2009 levels.

Home owners win.
#30 2012 on 07.28.15 at 6:42 pm
30% won’t even get us to 2012 prices… Good call on holding out.

nice math. all that matters is how much you paid and how much you sell it for, right? WRONG. do a sum of all the monthly payments. you’re wasting money on interest, condo fees and/or taxes, when compared to rent. figure out how much you’ve payed and how much you would get for it. the sweetspot is NOT the purchase price, it usually requires a SIGNIFICANT amount of appreciation for it to make sense to buy, i.e. buying is leveraging, aka gambling.

p.s if what I just type doesn’t make sense, then you’re proving my point.

p.p.s. figure out the interest you’ve paid so far and try to justify it.

#39 Holy Crap Wheres The Tylenol on 07.28.15 at 6:58 pm

#33 TurnerNation on 07.28.15 at 6:46 pm
For rent: outhouse in Long Branch. Within spitting distance.

$500/mo.

#longbranchmillionaire
—————————————–
Don’t tell Smoking Man, better yet tell his wife.

#40 Freedom First on 07.28.15 at 6:59 pm

Yes. I miss F. I think what is happening to Canadians, well, it is difficult to describe on a semi-family rated moist virgin Blog such as this, but if I had to describe it with one sentence, it would be: “Penetration of Canadians is soon to achieve climax.”

#41 TurnerNation on 07.28.15 at 7:02 pm

LOL seen on Facebook. Tag this #Dollarama?

_________________________
Can retail survive in Leslieville?
I was considering opening up shop here and was warned by the bank against having a retail business in the area. When I asked why, I was told that Leslieville is one of the worst retail environments in the city because the citizens are so overleveraged. The only thing that can survive here long term is a food business according to the bank.

_________________________

In the area I call the Eastern Block, just around Greenwood, I have heard some retailers comment that many locals are overburdened by house debt and don’t spend.

_________________________

#42 ShawnG in TO on 07.28.15 at 7:03 pm

the election is too close to call. at this point all parties will say whatever is popular to get into power. what they’ll do after is a different story.

this blog is about the right thing to do (to protect your financial self) but it’s not the popular thing, so no party will do what is suggested here, for now.

when Cnd re bubble bursts it will be worse than 08-09, because we can’t lower our rate by 4% to rescue anything. in another words, our central bank is out of bullets.

#43 james on 07.28.15 at 7:06 pm

Those slanted homes look like something out of New Orleans after Katrina, or maybe an abandoned portion of Detroit or Buffalo. Urk. No thank you.

This latest move by the CMHC is a desperation ploy. If you look at the Board, it is pretty much captured by the real estate industry. I would wager that in a couple of years time there will be a few retirements, before the scale of the problem is fully revealed.

I have a good friend who just bought a place in dunbar. I asked how he could afford it, as his family income (two white collar professionals in the software industry) is far less than my own income. They are renting the basement. Poof. There you go. Not only more financial risk, but with a 2 year old daughter perhaps security risk as well.

#44 seeing it from both sides on 07.28.15 at 7:08 pm

David Madani….Toronto, Vancouver home prices could plunge 30%, says economist who predicted housing crash that never happened

Read more: http://www.nationalpost.com/Toronto+Vancouver+home+prices+could+plunge+says+economist+predicted+housing+crash+that+never/11248598/story.html#ixzz3hEK6PX5q

With an intro like that, his ‘new’ prediction is not going to rattle the masses.

And what of this….guess landlords are not going to be subsidising tenants anymore.
http://www.vancouversun.com/business/affordability/Barbara+Yaffe+Vancouver+rent+increase+tsunami/11246784/story.html

Renters are going to be caught between a rock and a hard place if they need to move. Too expensive to buy or rent.

#45 Victoria Real Estate Update on 07.28.15 at 7:08 pm

. . . Total Mortgage Insurance In Force In Canada. . . . .
. . . . . . . . .(CMHC + Genworth Canada). . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$900 B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .*
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$800 B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$700 B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *. . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$600 B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$500 B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .*. . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$400 B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$300 B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *. . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$200 B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .* . . . . . . . . .
$100 B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .*. . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0. . . . . *. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
——————————————————————————————-
. . . . .1946. . . . . . . . . . . . . . . . . . 90. . . 00 . .09. . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .96. . .05. . .14

(Sources: CMHC, Genworth Canada)

Canada Guaranty contributes a small amount to this total.

The period of time from 1990 to 1999 was stable in terms of house prices relative to rents in both Canada and the US. From 1990 to 1999 that ratio was 100 (indexed) in both countries.

Starting in 2000, bubbles began to form in both countries as a result of the introduction of lax mortgage lending standards.

By 2006, the price to rent ratio (index) soared to 130 in both countries. This indicated that both the US and Canada had major housing bubbles by 2006. That year the US housing bubble began to deflate while lending standards were loosened even more in Canada which resulted in further inflation of our housing bubble (more on this in another post).

By 2013, the price to rent ratio (index) in the US had gone back to its safe, long-term (1990 -1999) level of 100, while in Canada that ratio had skyrocketed to 175.

There is a long history of housing price parity between Canada and the US. This chart shows that the price parity was broken in 2006.

So far in 2015, the BoC has lowered its rate twice. We’ve had emergency level interest rates for 6 years in Canada and this year we’ve seen record-low fixed mortgage rates.

This week even more moves were made with the intention of boosting house prices in Canada, as Garth explained.

In 2011, The Economist noted that Canada’s housing market was (already) more overvalued than the US at its peak.

Since 2011, Canada’s housing bubble has increased in size substantially.

Wolf Richter (Wall Street) knows all about housing bubbles. Quoting:

“Bubbles don’t land softly. They implode. It’s a brutal process. The longer bubbles are maintained, the more brutal their implosion.”

#46 Republic_of_Western_Canada on 07.28.15 at 7:09 pm

#1 Ceryx on 07.28.15 at 5:54 pm

This is such a well-written article. Indeed, Some people just sell out.

It’s bullshit.

First, it’s not ‘the governments’ problem that people get so stoopid to get knocked up and then justify dumb RE purchases on that basis. It’s their own fault. Full stop.

Secondly, rental units are a great way to get relatively cheap decent accommodation for people who don’t want some ridiculous ostentatious oversized place to live.

The mistake is taking market lending risk away from the banks where it rightfully belongs. Kudos to Joe & friends for pursuing privatization of CMHC.

Regulation and gov’t inspection of rental suites to ensure proper condition is however a business that gov’t should be in. And demonstrated rental income stream from a particular spare unit is the only intelligent way to qualify for mortgage money. No rental history? Then tough titties, no extra mortgage.

#47 Daisy Mae on 07.28.15 at 7:11 pm

“And he also intervened in the market dramatically four times.”

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

You betcha! He introduced 40-year amortizations. On Harpers’ advice. Didn’t work…so he reduced them to 35-5% down, then 30-5% down…and finally 25-year amortizations. Back to where we started!

Gosh darn, whata clever guy….

#48 Olga Salanski on 07.28.15 at 7:12 pm

The problem is they kept cutting interest rates from 10% mortgage rates in 1995 to rock bottom 2.5% today.

What do you expect will happen to house, condo prices? They will go up by almost 4 times, 10/2.5=4. Yes, such difficult math to comprehend.

Anyone who liked when interest rates dropped and were cheering for more are just hypocrites.

#49 nonplused on 07.28.15 at 7:13 pm

This is scandalous! Anyone who has ever rented their basement suite to their sister knows with out a doubt that you never see 100% of the rent. First, she doesn’t pay for 2 months. Then she moves out and never pays a penny of back rent. Best you can get is maybe 90% and that’s even while renting an apartment to a stranger. And then you have to fix the mess they left the damage deposit doesn’t cover it and many renters today see it as a licence to wreck stuff.

Oh and that house! Clearly the foundation has failed and wrecked everything on top. It’s a tear down so unless the property is worth the list even after you get the guys with the dump trucks and track hoe to haul it away you don’t touch it. It needs to be torn down. There is no point saving a 50 year old house that is sinking into it’s foundation. The track hoe solution is cheaper than burning it ultimately but it’s one or the other.

#50 bigrider on 07.28.15 at 7:13 pm

Garth, if the political forces that be, want nothing more than to continue to initiate and allow pro housing policies such as the new CMHC policy above , to dominate the landscape, why would you continue to believe that anything will change when it comes to housing prices continuing there ascent.

Seems to be quite similar to ‘fighting the fed” when it comes to maintaining a bearish stance on financial assets. That too has proven to be futile to the bears on equities.

Seems to me that without this ” one trick” economy we have left, that is flipping houses and housing stuff to each other, we would have no other economy at all.

#51 Mike on 07.28.15 at 7:14 pm

Just heard on the news that Edmonton vacancy rates have doubled from 1.2% to 2.4% in the past 12 months. Slumlords like Boardwalk properties are not offering $100/month discounts, which is like an 8% discount.

They also said that vacancy rates up in Fort McMurray are now at 22%! WOW!

#52 takla on 07.28.15 at 7:15 pm

re#29 rainmaker
‘how discusting is this” in your world probably pretty discusting,however in the world of the Zimbabwe guide who sold this hunt to the wealthy dentist it not discusting at all im sure.
In a country with an average national income of under 800.00 per yr and unemployement north of 70 % im sure every dollar generated by trophy hunting is treasured by the local guides to feed their familys.
For the record I Havent given up hunting and will staunchly defend that right weather it for sustenance or throphy..

#53 nonplused on 07.28.15 at 7:19 pm

And to answer the questions:

If you burn it you will probably set the neighbor’s house on fire and might actually kill somebody, and then you still need the guys with the track hoe and dump trucks. Just tear it down.

First offer the house for salvage. People will come get the windows and doors, bricks if there are any, and perhaps the wiring, maybe the flooring and the sinks.

Then get a track hoe.

#54 lee on 07.28.15 at 7:19 pm

This will increase all the inventory in the 750000$ range to just under one Million.

#55 Republic_of_Western_Canada on 07.28.15 at 7:23 pm

#51 Mike on 07.28.15 at 7:14 pm

Just heard on the news that Edmonton vacancy rates have doubled from 1.2% to 2.4% in the past 12 months. Slumlords like Boardwalk properties are not offering $100/month discounts, which is like an 8% discount.

Boardwalk is not necessarily a slumlord, and you can invest in that REIT if you think they’re twisting the balls off the marketplace.

But they do need to be slapped around a bit to get individual managers to permanently drop rents. Instead of just some token ‘renter appreciation’ barbeque.

#56 Chris on 07.28.15 at 7:24 pm

Wow, that picture at the top of this post really says it all, doesn’t it? House with collapsing foundation selling for 2 x $688k!

#57 Karma on 07.28.15 at 7:25 pm

On the bright side, if people claim rental income for their mortgage, they may need to disclose it in their taxes too. I’m sure plenty of “illegal” suites’ income goes unreported, and thus taxes are not collected on it.

And if those people go into more debt just to learn that they have to pay their marginal tax rate on that rental income, then LOL at them.

#58 MSM-Free Zone on 07.28.15 at 7:25 pm

“…..Simply put, CMHC will now count as “income” 100% of the money you received, or might possibly get, from a tenant renting your furnace room or garden shed. Until now only 50% of rental income was added to a mortgage applicant’s total income…….”
_________________________

Never seen a country give so many bullets to its own citizens so they can blow their brains out.

Then again, what would you expect from a Canadian government with the moral compass of an spineless African lion hunter.

#59 Linda on 07.28.15 at 7:29 pm

Garth, for the love of little green apples, be realistic. There is no way Poloz is going to do anything until the election is over & (they hope) Harper & the little C’s are entrenched as the natural rulers of the land for another 5 years. And hey, what have they got to lose by being reckless & letting the whole housing market over inflate? If they win, they can either slip out from the after effects by privatizing CHMC or passing laws to limit exposure in the meltdown to come. If they lose, they can laugh as the ‘winner’ gets to carry the can for the mess they did nothing to prevent. And point fingers & complain loudly how ‘if WE had been elected, the economy would be fine’. Either way, they come out ahead.

#60 waiting on the westcoast on 07.28.15 at 7:32 pm

Every time the market starts cracking, the government funds another way to keep the sheeple party going.

I hope it’s worth it. Harper will end up winning only to oversee a massive decline caused by his need to win the election….

#61 Republic_of_Western_Canada on 07.28.15 at 7:32 pm


#49 nonplused on 07.28.15 at 7:13 pm
[…]
Oh and that house! Clearly the foundation has failed and wrecked everything on top. It’s a tear down so unless the property is worth the list even after you get the guys with the dump trucks and track hoe to haul it away you don’t touch it. It needs to be torn down.

Surprised it’s not been condemned, given the obvious nature of the potential imminent collapse.

In a more civilized part of the country, that collapsing cottage would have been boarded up and razed by now.

http://dailycommercialnews.com/Home/News/2011/4/Penhorwood-Place-Condominium-condemns-housing-complex-in-Fort-McMurray-Alberta-DCN043732W/

#62 waiting on the westcoast on 07.28.15 at 7:32 pm

Oops – I meant finds but funds works well too!

#63 Ronaldo on 07.28.15 at 7:38 pm

#34 Oh Come On –

”Equally frustrating is that balanced portfolios have had zero gains as of yesterday (yes a little pop tonight I am sure). All gains for 2015 have been erased.”

Maybe it’s time to look for alternatives. Here are two that I have had for several years. Check out the 10 year performances. Up 5.6 ytd. MER .87 and .88. Worry free investing. Keep it simple.

http://web.tmxmoney.com/funds-ca-quote.php?qm_symbol=RBF1350

http://web.tmxmoney.com/funds-ca-quote.php?qm_symbol=rbf1280

#64 MSM-Free Zone on 07.28.15 at 7:39 pm

#52 takla on 07.28.15 at 7:15 pm
“…..For the record I Havent given up hunting and will staunchly defend that right weather it for sustenance or throphy……”
_________________________

Perhaps someday, even an Etcha-Sketch might come with spell-check.

#65 New Babblemaster on 07.28.15 at 7:40 pm

Just like I’ve said before, this government will do everything in it’s power to keep the party going. They will come up with new creative ways to keep the prices elevated. Garth, you said they wouldn’t. Now do you believe?

#66 gut check on 07.28.15 at 7:41 pm

Yes, this 100% of rental income from suites is INSANE and clearly, IMO, going to screw the hell out of my city where Property Management companies are as ubiquitous now as nail salons were in the ’90s. Everyone and their aunt is a property manager now.

I refuse REFUSE refuse to have to speculate or invest when it comes to simply finding a place to live. I am deeply angry that this is the case right now. We are talking about a NECESSITY being hoarded jacked up by the few, leaving the rest of us at their mercy.

When the ice storm hit in 1998 a few people ran right out and bought up ALL the generators from our local hardware stores. In response to this they were publicly shamed.

Why isn’t public sentiment turning against those opportunists sucking up housing? Anything affordable and decent is gone before it hits MLS and the rental prices being advertised creep up every single month.

I’m sitting on cash that I will not spend into the insanity.

#67 BS on 07.28.15 at 7:43 pm

Falling prices in Vancouver/Toronto? Sure, but nowhere near 2009 levels.

Correct. Levels will go far lower than 2009 levels. 2003 levels are coming.

#68 gut check on 07.28.15 at 7:43 pm

“By the way, homeownership in the States has plunged to 1967 levels.”

But GT, you keep insisting that everything is awesome in the States. I guess you don’t mean for the *people,* is that it?

Homeownership does not mean wealth, where people remember real estate can collapse. — Garth

#69 VICTORIA TEA PARTY on 07.28.15 at 7:44 pm

YOU CAN FOOL SOME OF THE PEOPLE ALL OF THE TIME…

…or so said the late US president Abraham Lincoln.

I just wonder how many Canadians are “going for it” and investing their doubtful futures in cheap borrowed money for essentially dubious chunks of real estate.
Who cares?

BECAUSE, the other side of the coin is this: Joe Oliver, our ever-vigilant finance minister, may know that urging Canadians to get penny-wise instead of pound foolish may cost the Tories votes at the next election.

So, in essentially privatizing CMHC, he simply sits back and watches the cart rolling away down yonder hill to some oblivious collision with accounting reality at some point he hopes, way AFTER that election!

Remember, please, the recent experience of the former Alberta Tory government leader.

He told voters during his election campaign that Albertans also bore some responsibility for the province’s debt levels. The NDP government was the result. Bad. Very bad, as all Albertans are beginning to figure out. Poor sots. More dross on the way!

Fact is most people don’t like government telling them how to run their personal financial affairs even though they have no clue themselves what the heck they’re doing.

Hence, Abe Lincoln’s comment.

Meanwhile, back in the here and now, the REST of the people, who are soundly retired, mortgage-free and frugal (and there are lots of us) watch this debt spiral and the sure-as-Hell-eventual-result with more than a good dollop of schadenfreude.

It’s like watching an impending train wreck, plane crash, car wreck, or some monumental other human-caused screwup that beckons us to comfy seats as the promising spectacle drews ever nearer.

A majority, of Canadians in other words, is NOT involved in this utter debt-addled madness and never will be.

And Joe KNOWS THAT.

So why upset the apple cart with some truisms that could defeat the Tories?

Makes no sense.

And in thinking of the results of the next federal general election: all of you who believe that a successful Mulcair or Trudeau will implement ANY of those beyond costly subsidized daycare, rolling back the retirement age to 65 and anything else they have cooked up are dreaming.

There isn’t the money and the Tories are partly to blame.

But so are its predecessors as unpaid capital debts (and onerous interest payments) keep getting passed on from generation to generation of Canadians.

So, while new mortgage hunters busily dig their own economic graves the rest of us must urge all political leadership candidates to STOP THE BORROWING CRAZINESS NOW AND TO DEMAND WE ALL LIVE WITHIN OUR MEANS.

We have no option because to pass on such accounting incompetence and fraud to our future generations is unfair and immoral. It is a sin.

#70 Vik on 07.28.15 at 7:47 pm

#3 Bruce MacLean – Here’s the reason why:

http://www.thestar.com/news/crime/2011/05/26/ill_never_buy_a_condo_again_apathy_leads_to_condo_in_crisis.html

http://www.theglobeandmail.com/news/toronto/faulty-towers-the-hidden-dangers-of-low-condo-maintenance-fees/article585103/

#71 SI2K on 07.28.15 at 7:47 pm

All those leanie Shaw houses are built into the former Garrison Creek clay bed. I wish I had a photo of the time someone installed brand new windows in one of them a few years back . . . completely level to gravity but not to the house.

#72 New Babblemaster on 07.28.15 at 7:50 pm

#34 Oh Come On

How can you possibly consider them to be uninformed? I’m someone that has been saying just that for a long time. I said it because it was obvious that Harper wants to create the appearance of “robust” economic activity and damn the consequences. The wealth effect from increasing house prices encourages people to spend more. So it’s an obvious conclusion that he’ll introduce policies to promote housing. How is that being uninformed?

#73 Ret on 07.28.15 at 7:52 pm

The Toronto building and by-law departments don’t see these two houses and shut them down?

Unflipping believable.

#74 Jas on 07.28.15 at 7:56 pm

Garth, just read the following excerpt from your blog post today:

This week CMHC made a bombshell announcement which – more than the bank rate cut – is designed to throw Lava Hot Scorpion BBQ Sauce all over the real estate market, especially in YVR. Simply put, CMHC will now count as “income” 100% of the money you received, or might possibly get, from a tenant renting your furnace room or garden shed……
And let’s remember the context in which all of this is happening. Oil’s crashed. The economy has stalled. Jobs are being scrubbed. And the central bank’s rate drop is the ultimate admission of trouble. Is this really the time you want your government loosening up mortgage regs to allow more debt, higher prices and enhanced risk?

A blind can see that the parts and pieces of system are being manipulated to win the next election.

Sir, I am shaking my head after reading it…And what can be done except to kick these idiots out in Oct election. But what are the alternatives for us?

Oh, I wish the ordinary Joe has the ability to read between the lines….

BUT, sir, WHAT ARE THE ALTERNATIVES for the Canadian public?I feel we have hit the dead end for the time being….

#75 Andrew Woburn on 07.28.15 at 7:57 pm

If things weren’t bad enough already, thieving Texas rustlers are stealing our HAM.

This is really dangerous. What if the Chinese discover you can actually buy a house in North America for less than $3 mil?

“Chinese buyers feed new energy into Texas real estate”

http://www.cnbc.com/2015/07/28/chinese-buyers-feed-new-energy-into-texas-real-estate.html

#76 Millmech on 07.28.15 at 7:59 pm

So I guess CRA can now cross reference with CMHC to make sure everyone declares their rental income.Next they will introduce a deduction for renters so that they can really be sure that they get their pound of flesh(just like the home renovation grant they had for a few years was just to catch under the table contractors.)

#77 Dean on 07.28.15 at 8:07 pm

re #54, one 2-bed room condo I have been following, initial list price: 350K, after couple month on the market, dropped to 288K, after last week rate cut, re-listed at 350K, I think the owner gonna increase the list price to 400K

#78 cynically on 07.28.15 at 8:08 pm

To #17 European – If Trump wins the American presidency the country will become another Canada—Rudderless!

#79 Shawn on 07.28.15 at 8:11 pm

Services that Went Away and Then Came Back

Blaine Ridgecrest on 07.28.15 at 4:13 pm asked:

On the subject of bringing back Mail Delivery, has something like this ever happened before? Some service has become outdated or no longer reasonably feasible and then it’s ended but brought back later through government? A question for the historians! What else could we ask to be brought back? Milk delivery?

******************************************
Yes, many things have gone away and then come back but usually with some changes.

Catalog shopping was almost extinct and then came back via the internet.

Shoppers used to collect “stamps” that could be redeemed for good. I recall Gold bond stamps and Warren Buffett owned Blue Chip Stamps. This pretty well faded out and Canadain Tire Money was one of the few left.

Then it came back first as airline points and then credit card points and then Petro Canada points and then the Airline points started getting offered at stores and pretty soon points collecting was everywhere. Club Z at Zellers was one of the early ones circa 1987.

Amazon is intent to bring back home grocery delivery and that will include milk.

Milk can easily be shipped in vacuum packs like juice boxes. Tetra packs. (Named after the billionaire that invested them)

Walki Talkies, short wave and CB radios are functions that are still around in new forms.

#80 omg the original on 07.28.15 at 8:11 pm

David Madani warns. “But with labour market conditions set to deteriorate this year and market bond yields expected to climb over the longer-term, they won’t defy gravity for much longer.” The guy is now forecasting a 30% price plop
——————————

As cowtown is demonstrating, the health of the labour market has nothing to do with housing prices.

In Canada there will always be that thin sector of the population that can afford to bid up prices.

The only thing that will turn the grotesquely overvalued Canadian market is a meaningful increase in interest rates (like 3-5%). And history shows that kind of interest rate increase will occur over several years. We could be in for a secular bull on interest rates for a couple of decades.

And since house prices are perfectly correlated to interest rates we would see a decrease in real house prices stretching years into the future.

#81 John Foster on 07.28.15 at 8:13 pm

Am I nuts or does Oliver look a bit like Wynne in that pic? On another I got a call from both the PCs and libs asking if they could count on my support. I told each I would vote for them if they tossed Harper/Trudeau. Crickets on the other end of the call….

#82 Jack Bean on 07.28.15 at 8:14 pm

#3 Bruce MacLean on 07.28.15 at 5:55 pm
re:There is a building at Finch and Kipling with 3 listings at below $70,000

You will need to charge the roaches and mice rent to cover the enormous maintenance fees and special assessments. They should just knock this building down.

Folks living in this building want out.. and can’t find a great big dumb fool to take advantage of.

#83 omg the original on 07.28.15 at 8:16 pm

Two years ago………….the elfin deity was issuing warnings like this: “My expectation is that banks will engage in prudent lending — not the type of ‘race to the bottom’ practices that led to a mortgage crisis in the United States.”
—————

Of course that was mid-term of the conservatives mandate.

F would be singing a different tune today with conservative support crumbling.

There is no greater motivation for a politician like the motivation of getting re-elected.

#84 free market economy on 07.28.15 at 8:17 pm

Garth, are you really a closet commie?

I can’t believe you are endorsing a finance minister giving banks “guidance” behind closed doors, out of “moral suasion at his disposal”.

You either believe in free market economy or you might as well chose central economy if you want to manually control the economy. For moral or other reasons.

#85 IHCTD9 on 07.28.15 at 8:18 pm

#18 Mike S on 07.28.15 at 6:23 pm

Is it CMHC? Can CMHC after doing the necessary checks claim that the guaranty does not apply because the lease was not real, and then the bank/credit union will be on the hook?
——————————————————————-

This is a damn good question. Since last year the CMHC has seemed to be making getting an insured mortgage tougher. They cut their coverages of new mortgages big time, now down to only 50%. They increased the cost of the insurance for folks putting less than 10% down by 15%. They are increasing their capital, and it appears they are putting distance between the taxpayer and the RE market. Now this? There may be something else we don’t know yet, assuming this move is not simply an election stunt…

#86 Shawn on 07.28.15 at 8:18 pm

Canada Post ending home delivery

This is a function of faulty math.

I am certain that delivery to my particular house is profitable because I often send for annual reports and such that come via Canada Post with costs like $8.00 a piece at times. I still get a good volume of mail (mostly fan mail, as you can imagine) and so I would be profitable as an incremental customer.

UPS apparently is profitable in part because it has all these routes that it covers and can add an incremental parcel for low incremental cost.

When people confuse average cost with incremental cost they make errors.

Canada post could combine its parcel delivery with its letter delivery and might have a winning combination by keeping home delivery. I suspect the unions are blocking it. For example parcels are delivered by contractors who often come in the evening or weekend when people are, you know, actually home to receive a parcel. Clearly the unions would fight that model.

Why does Canada post not also accept letters to be mailed out at our doors.

Just as demographics and fear creates a lot more shut-ins, Canada Post reduces its service level. Clever?

#87 Washed Up Lawyer on 07.28.15 at 8:22 pm

I have to restrain myself. The injection of comments on hunting tonight just about prompted me to drone on and on like a Conservative candidate out stumping during an election. I would have sullied this blog in my inimitable style.

I will try to stay with tonight’s real estate theme. Having studied “Meditations on Hunting” by Jose Ortega y Gasset and every other hunting book ever printed (especially those by Elmer Keith and the incomparable Jack O’Connor – numerous times), I sat back to contemplate the following statement:

“We went out house hunting.”

I concluded that if you utter this statement, you have it ass backwards. You are the prey, not the predator. It is akin to a group of bull elk stating, “We are going out hunting for a man wearing an Elmer Fudd hat and carrying a rifle.”

#88 gut check on 07.28.15 at 8:24 pm

@ #66 Dean on 07.28.15 at 8:07 pm
re #54, one 2-bed room condo I have been following, initial list price: 350K, after couple month on the market, dropped to 288K, after last week rate cut, re-listed at 350K, I think the owner gonna increase the list price to 400K

——————————-

I’m was seeing this sort of thing, too – although not lately. That’s going to change back though, I think, now that the 100% income from supplemental suites is in play.

I am astonished at the places sitting on the market vacant but I guess whoever has them listed would rather eat the expenses than sell at a reasonable price.

Looking for a place to live these days makes me feel dirty. It’s a world I do not want to venture in to – as if I’m being asked to go into the basement level of a strip joint.

#89 omg the original on 07.28.15 at 8:29 pm

#34 Oh Come On

Equally frustrating is that balanced portfolios have had zero gains as of yesterday…….All gains for 2015 have been erased.
—————————————

Chin-up OCO, if you are in it for the long term, one year performance means NOTHING.

In the equities markets you do not get 7.2% annual returns each and every year……

Some years its 0%, some years -5% then miraculously you get a year of 15, 20 or 25%.

But if you bail out after the zero or negative year you just lock in your underperformance.

Actually I like zero return years – let’s me add to what I have at flat prices knowing they will play catch-up in the future.

#90 gut check on 07.28.15 at 8:30 pm

@ #86 Shawn

….For example parcels are delivered by contractors who often come in the evening or weekend when people are, you know, actually home to receive a parcel. Clearly the unions would fight that model…

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

I beg to differ. I do a heck of a lot of shipping/receiving from my home and have NEVER had Canada Post contractors deliver a parcel outside of normal business hours. None of the parcel delivery services have ever come before 9 or after 5, as a matter of fact.

that being said I wish I could sit down with the Canada Post decision makers and tell them what’s what. The things they are doing to that once efficient organization are mind boggling. I suppose they are positioning it for a privatization.

You should see the questions they ask me as one of their business clients – as if a coupon for a hotel stay would improve my experience with Canada Post. ??? What *would* improve my experience is… well… it’s a long list. I won’t bore you.

#91 Mark on 07.28.15 at 8:31 pm

“Is it CMHC? Can CMHC after doing the necessary checks claim that the guaranty does not apply because the lease was not real, and then the bank/credit union will be on the hook?”

Realistically, no. Absent a deliberate effort on the part of the bank to deceive the CMHC, the CMHC is basically stuck paying out a guarantee if the bank acted in good faith in making the insurance application.

Additionally, if the CMHC starts to reject a significant number of claims, the banks have the option of pulling back from the market and/or charging higher rates as applicable to CMHC insured credit. Thus accelerating the price declines in the market, and causing further claims against the CMHC.

Basically the old Cold War metaphor of nuclear weapons and “mutually assured destruction” (sometimes called “MAD”) applies to the relationship between the banks and the CMHC. The CMHC needs the banks to continue lending, in order to support the value of CMHC’s subprime mortgage guarantees. Likewise, the banks need CMHC to keep paying on defaulted subprime mortgages, in order to keep the banks solvent. Any disruption to this relationship, and both the banks and the CMHC simultaneously collapse. I personally expect nothing less than Herculean efforts on both sides of the equation to keep things going, even though there will be lots of political theatre involved.

#92 Retired Boomer - WI on 07.28.15 at 8:37 pm

Today started off rainy here. Then it got warm and humid.

We had a delightful lunch with our friend, Judy. Judy had been diagnosed with a rather nasty cancer 2 years ago. It seems sometimes, those prayers do go somewhere. Today the PET scan showed nothing – she is cancer free, has gained 27 lbs, looks GREAT, and leaves tomorrow to Montana to see her two new Great grand babies.

Judy is 68 not exactly over the hill, but actually standing on top of it. I give her a ton off credit, a survivor in more ways than just this one.

Her hubby passed a few years ago, she sold her home, found a new boy friend who cherishes her, and frankly doesn’t give a dam what anybody thinks.

She also is fully aware the type of cancer she had will make a re-appearance someday, usually 3 to 5 years hence, and claim her bones at that time. Is it terrible, or just life? I’ll call it “just life.” Too many of my friends have tipped over, after just one heart encounter. Go, Judy!!

Go Judy!! Show ’em how it’s done here in cow country!
See ya in three weeks when you get back home!

Then my bride of 41 years, took the convertible for a tour, stopping at the Ridge for cocktails after 4 pm. Dinner is ready, and a fresh brandy afterwards.

I have to dog sit for the next 5 days. -Me, the cat guy- well, that’s what ‘good neighbors’ do around here.

Real Estate? Oh yeah, not just now. Prices too high, rates too low. It will correct, or crash. You don’t want to buy before either scenario do ya?
See you in 6 months we can talk then. Unless you are homeless, just rent something. If you BUY now, you just might end up homeless, it has been done here… you never hear much about those buyers do ya?

#93 Mark on 07.28.15 at 8:38 pm

“The only thing that will turn the grotesquely overvalued Canadian market is a meaningful increase in interest rates (like 3-5%). And history shows that kind of interest rate increase will occur over several years. We could be in for a secular bull on interest rates for a couple of decades. “

Nope. We’ve seen the past 2 years of falling prices (only masked in Toronto/Vancouver by significant changes to the sales mix), yet interest rates have been falling. Overcapacity, ie: more houses produced than there is demand, tipped the market into decline.

Meaningfully higher policy rates are unlikely for the next 5-10 years with so much slack existing in the economy and worsening as the RE sector decelerates and little else exists to take its place. However, risk premia is likely to expand significantly against residential/consumer loans, on account of diminished credit-worthiness. We’ve already seen some of this explicitly with the banks refusing to cut their “Prime” rate even though the banks have experienced a corresponding drop in funding costs on account of the Bank of Canada’s policy action.

#94 Victoria Real Estate Update on 07.28.15 at 8:38 pm

House prices in Calgary are falling, despite record-low interest rates. Prices will continue to decline in that city and the rate of price decline will increase.

Calgary’s housing market has a history of crashing. We all know what happened in the 1980s.

More recently, from 2007 to early 2009, SFH prices in Calgary fell at a rate of 12.2% per year (for 18 months) until emergency interest rates were brought in.

When you look at this chart, keep in mind that the price of oil was above $100 for a big chunk of the time that prices fell.

. . Calgary Single Family Home Prices. . .
. .Percent Below July 2007 Price Level. . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .0%. . .*. . . . . . . . . . . . . . . . . . . . .
– 2%. . . . . . . . . . . . . . . . . . . . . . . .
– 4%. . . . . . . . . . . . . . . . . . . . . . . .
– 6%. . . . . . . . . . . . . . . . . . . . . . . .
– 8%. . . . . . . . . . . . . . . . . . . . . . . .
-10%. . . . . . . . . . .* . . . . . . . . . . . .
-12%. . . . . . . . . . . . . . . . . . . . . . . .
-14%. . . . . . . . . . . . . . . . . . . . . . . .
-16%. . . . . . . . . . . . . . . . . . . . . . . .
-18%. . . . . . . . . . . . . . . . . . . . *. . .
—————————————————————-
. . . . . .July. . . . .January. . . . January.
. . . . . 2007. . . . . 2008 . . . . . .2009. .

(source: a Calgary realtor‘s site)

Calgary’s last major price decline (07 to 09) wasn’t brought about by climbing interest rates and it won’t take rising rates this time either for prices in that city to go through a major price correction. Calgary’s price decline is well underway and rising 5-year fixed mortgage rates (beginning this fall) will do its part in pushing prices down.

Edmonton faces the same problems.

#95 Obvious Truth on 07.28.15 at 8:45 pm

This is the hgtv Scott McGillivray rule.

#96 TurnerNation on 07.28.15 at 8:47 pm

F always looked like he had lots on his mind. A public screen, private dream. Perhaps trapped.

Wish him the best now.
Most men are moral. All men are mortal.

#97 global buble on 07.28.15 at 8:48 pm

It is naive to believe that an enormous real estate bubble exists isolated.

It is part of a global all-asset bubble – and they pop and burst one after the other.

http://www.businessinsider.com/everythings-starting-to-crash-2015-7

Of course, a well diversified portfolio is the best defense, but even that will have painful dents.

Buckle up… when the balloons start to pop, Yellen goes back to the drawing board.

#98 old gringo on 07.28.15 at 8:48 pm

Canada Post is slowly going broke as does any business that the gov’t tries to run.
Think Potash Sask. It was doing miserable until Canada sold it and it and then it took off.
If the gov’t has anything to do with an airline or business get the hell out ASAP.

#99 Marco Polo on 07.28.15 at 8:49 pm

I’m quite disappointed with the latest CMHC decision. I would have expected our post-housing economic action plan to include boosting exports and spurning innovation, somehow putting us a competitive advantage to the US and South Korea, for example. Sadly, the manufacture of basement apartments will never do this.

Terribly, this rental investment income from young couples is needed to qualify for mortgage debt. This raises the waters of local real estate prices, making the net benefit of purchasing a home with rental suite zero. No addition to equity building.

#100 Shawn on 07.28.15 at 8:54 pm

All’s rude that starts rude?

Mark on 07.28.15 at 8:38 pm

“The only thing that will turn the grotesquely overvalued Canadian market is a meaningful increase in interest rates (like 3-5%). And history shows that kind of interest rate increase will occur over several years. We could be in for a secular bull on interest rates for a couple of decades. “

Mark’s response…

Nope. …

Particularly rude when what follows is an unsubstantiated claim that sales mix has made price decreases look like price increases. No link or source to prove this claim.

I will congratulate Mark for getting the interest rate cut correct. However, the reaction to that proved that constantly being rude and obnoxious negates the mere fact of being right once in a while.

Sorry to pile on, but that is my opinion.

#101 Blobby on 07.28.15 at 8:59 pm

Seems to me Steve has two plans:

1. Prop up property market as much as possible until October. Then if new party gets in, and tries to fix the mess – the public will blame them when it all collapses.

2. If the Tories get back in again.. Sell off the chmc, then rid themselves of blame when it all goes tits up.

Win win situation for Steve. Lose lose for us.

#102 Shawn on 07.28.15 at 9:03 pm

Parcel Delivery

Git Check responded to me:

I beg to differ. I do a heck of a lot of shipping/receiving from my home and have NEVER had Canada Post contractors deliver a parcel outside of normal business hours. None of the parcel delivery services have ever come before 9 or after 5, as a matter of fact.

*************************************
I was thinking of Purolator which I believe is owned by Canada Post.

In any case the point is that letter mail delvery to the house combined with a parcel route might just be a winner.

I have a couple of stickers on my door that authorizes FedEx and Purelator parcels to be left on my step. Works well.

Maybe someone can invest some kind of secure way for a parcel to be left at the doorstep or inserted into your home.

To me that is the issue, how to make secure home deliveries when no one is home.

A little door like on a post office box might work but might now be secure enough.

The parcel guys could have the combination to your door lock if that was combined with security cameras to insure they don’t come in.

Or you have a (heated if needed?) parcel receptacle box on your step and the parcel guys can open it but not your neighbor.

#103 tundra pete on 07.28.15 at 9:04 pm

#29 Rainmaker

Its horrible. However, quite likely, the Zimbabwe govt is more to blame than the brain dead dentist as there is nothing but corruption in some of those countries.

Glad to see social network justice working. I hope his family and kids dont suffer from his stupidity, but let them have at him. Wont take some of those nutbars long to track that moron down.

Please do us all a favour and if you know his address or phone number, post it for all to see!

#104 Shawn on 07.28.15 at 9:06 pm

Fake Shock and Awe?

How many pictures of purportedly over-priced shacks do we need to see? We all know the value is in the land/location not the shack.

(See Mark, it is better to be rude and obnoxious only sometimes.)

#105 TCContrarian on 07.28.15 at 9:06 pm

I think they ‘know’ what’s up ahead – they must. If they didn’t, they wouldn’t be preparing for it:

*******************************************
Minister of Finance underscores the importance of ensuring Canada’s financial system remains strong
August 1, 2014 – Ottawa, Ontario – Department of Finance

Finance Minister Joe Oliver today launched a public consultation on a key element of the Government’s comprehensive risk management framework for Canada’s domestic systemically important banks. The proposed regime is aimed at ensuring:

that taxpayers are protected from having to bail out a systemically important bank in the highly unlikely event of such an institution running into difficulty; and,
that Canada’s financial system remains strong by clarifying that banks’ shareholders and creditors are responsible for bearing losses, thereby giving them stronger incentives to monitor the bank’s risk-taking activities.
Canada’s banking system has been recognized for six consecutive years as the world’s strongest by the World Economic Forum. The proposed measures will make the Canadian financial system even more stable and resilient. They are part of an effort agreed to by Group of 20 (G-20) leaders in response to the recent global financial crisis and have been or will be implemented in other key jurisdictions.

The Government’s comprehensive risk management framework seeks to keep Canada’s financial system strong by reducing the likelihood that an institution would fail. In the highly unlikely event of a bank no longer being viable, the proposed Taxpayer Protection and Bank Recapitalization regime would help ensure bank shareholders and creditors bear losses, rather than taxpayers.

Once the new measures are in place, it will be possible to increase the capital of a major bank that has failed by quickly converting some of its liabilities (such as bonds sold to investors) into regulatory capital (like common stock). This conversion would be accompanied by other actions with the aim of making the bank viable and thereby ensuring Canada’s financial system remains strong and stable.

The proposed regime focuses on a specific range of liabilities and excludes deposits. In addition, insured deposits will continue to be guaranteed by the Canada Deposit Insurance Corporation.

Comments on the attached draft consultation paper can be submitted to the Department of Finance at [email protected] or to the address below. The closing date for comments is September 12.

http://www.fin.gc.ca/n14/14-099-eng.asp

#106 ShawnG in TO on 07.28.15 at 9:10 pm

if CMHC is privatized 2 things could happen:

1 – significant rise in mortgage insurance premium.
— everyone, especially the banks, knows very well RE is over priced. the private CMHC doesn’t want to lose money when the bubble eventually burst. But the result is equivalent to rate rise, ie, those with low down payment will have significantly higher monthly payments. thus cooling off the RE market.

2 – the private CMHC is leveraged, like any insurance company, and thus, may be under capitalized. funny that capital is adequate until the market pops, then the capital is not adequate.
— very possibly still need a government (tax payer) bail-out.

both things could happen: (1) leads to cooling of the market, and then suddenly finds itself in situation (2).

#107 crowdedelevatorfartz on 07.28.15 at 9:13 pm

Ahhhhhh yes.
Another day another 6pm prime time Global tv “news” story.
Renting in Vancouver is expensive and getting worse.
No mention of renting in any of the other municipalities surrounding Vancouver.
Wouldnt want to talk about that.

#108 Internal Auditor on 07.28.15 at 9:16 pm

Initial thoughts….this buys the RE market and banks another a few years before the impact of rising rates puts pressure on the uptick in housing valuations. But that’s speculation/opinion….if rates were to increase by 200-400bps the banks feel their portfolios could withstand any downward pressure (see RBC’s Q2 transcript as they were asked about rising rates and stress testing). Oftentimes they show (in their analyst slides via the Investor Relations tab) the LTV of the mortgage portfolio. I think some of them rely on CREA data to help with the models which churns their LTV numbers. I guess it’s the best source of data but Garth has pointed out issues with real estate boards/organizations data aggregation and parameter processes in the past.

If LTV is between 50%-70% (assumption) then a 20%-30% correction would not impair the mortgage book. What might impair the mortgage book is the slow renewal process where lenders may deem properties to be less valuable than the applicant thinks it’s worth. The next logical question is, could this cause an unwind? It’s self fulfilling like the short term paper market freeze in 07-08.

Friends, live at or below your means and if you decide to rent, invest that difference wisely. If you own, reconsider unnecessary work to your condo/home and invest wisely. The only thing to go “all in” on is diversity.

#109 Victor V on 07.28.15 at 9:18 pm

http://business.financialpost.com/investing/home-capital-group-inc-stock-sinks-ahead-of-key-earnings-call-surprise-director-resignation

Home Capital, one of Canada’s largest alternative lenders, will release earnings on Wednesday and host a conference call with analysts and investors Thursday. The company recently announced a sharp drop in new mortgages and that it had split with a number of brokers. Sources familiar with the company said that the split occurred after an internal audit discovered improperly documented mortgages.

One of the investors that will be listening Thursday is Marc Cohodes, an American short seller who has been positioned against Home Capital since November. Cohodes formerly worked for U.S. hedge fund Copper River Management and was involved in a number of high profile shorts during his career.

“I’m not short Canada’s banks, I’m not short the housing market, I’m short Home Capital Group and I have been for a while,” he said. “There are a lot of questions around what happened with their brokers and I think they handled disclosing that information poorly.”

#110 Smoking Man on 07.28.15 at 9:21 pm

I’m doomed, my alter ego has taken over my thumbs. Smoking Man has found me in a weekend state.

He’s going mad on LinkedIn on my professional identity, how do I stop this bastard from taking me over.

I can’t stop him.

Help…….

#111 Oils Well on 07.28.15 at 9:22 pm

This oil analyst says that we are at a bottom in the price of oil. He believes that US production is going to start dropping quite dramatically due to depletion rates in shale oil. He also says that Middle Eastern producers and Russia have been pumping at breakneck speed to maintain their market share and to show that they can out last their competition – but this is unsustainable.

WTI will be $70-$80 by year end – according to him.

http://video.cnbc.com/gallery/?video=3000401382

#112 Fat Bastard on 07.28.15 at 9:31 pm

#110 Smoking Man on 07.28.15 at 9:21 pm
I’m doomed, my alter ego has taken over my thumbs. Smoking Man has found me in a weekend state.

He’s going mad on LinkedIn on my professional identity, how do I stop this bastard from taking me over.

I can’t stop him.

Help…….

….

I like the green alien. He looks friendly.

#113 Sheane Wallace on 07.28.15 at 9:42 pm

CMHC is a fraud. Joe Owe belongs to jail.

#114 Hogtowner on 07.28.15 at 9:46 pm

On our little crescent in 416 there are about 20 houses, average prices over $600K.

Nice neighbours, quite a few of them younger couples with kids trying to make a start of their real estate dream, lots of little infants and toddlers around the street.

As far as we know, at least 10 of these houses have renters, usually in the basement. Families and their kids live upstairs.

Over the last two months or so, here’s a sample of what we’ve seen:

-repeated visits by police to one basement unit, leading to eviction of the boyfriend of one tenant for aggressive behaviour, cop cars on the street for hours at a time over a week while this all unfolded

-about a half dozen fire truck/police car visits to another basement unit late in the evening, 911 calls where the tenant has some emotional issues and possibly some concern about gas smells (?)

-arguments between one set of tenants and a landlord who shows up to lecture them on the street about who knows what

-arguments by tenants about a few homeowners who let their dogs crap on their lawns, not picking up because it’s only a rental house apparently

-arguments about all the cars using up limited street parking space on weekends

-three apparent evictions, furniture piled onto the street and doors locked, one apparently due to drug smoking in the basement

-lots of extra construction activity fixing, adding things to rental units, often during times when it’s noisy and not permitted by law

-about 10 moving days on the street messing up traffic and the sidewalks

Generally, the amateur landlord couples renting out their basements like this seem and talk like they are seriously stressed and have to do it to survive.

I could not imagine having small children yet renting out part of the same home to unknown dudes from craiglist like this.

Not worth it. A sad rationalization for buying into an inflated market.

If the new CMHC rules go ahead, there will be more of this I imagine.

#115 Investx on 07.28.15 at 9:53 pm

Ready for the higher rates!

Been ready for years.

#116 Smoking Man on 07.28.15 at 9:54 pm

#112 Fat Bastard on 07.28.15 at 9:31 pm
#110 Smoking Man on 07.28.15 at 9:21 pm
I’m doomed, my alter ego has taken over my thumbs. Smoking Man has found me in a weekend state.

He’s going mad on LinkedIn on my professional identity, how do I stop this bastard from taking me over.

I can’t stop him.

Help…….

….

I like the green alien. He looks friendly.
……

Look at him… He’s terrified of me….

#117 drydock on 07.28.15 at 10:02 pm

http://www.thestar.com/news/world/2015/07/28/american-dentist-accused-of-killing-beloved-zimbabwe-lion-cecil.html

……………………………………………………………………….

Low life stinking filth.

#118 roial1 on 07.28.15 at 10:04 pm

96 TurnerNation on 07.28.15 at 8:47 pm

Most men are moral. All men are mortal

And then there are Harper party politicians.
No morals and want to live forever sucking on the tax payer. Spending our money like drunken sailors (or Harper-con selected Senators.)

#119 bullshitallergy on 07.28.15 at 10:05 pm

What is the old saying? People who don’t learn from history are doomed to repeat it?

I distinctly remember the last time housing was a thing back when i was a teenager. Dr Morton Schulman was the guru of inflation and buying the biggest house you could afford because inflation would inflate away the cost of the purchase. Nelson Skalbania was a millionaire real estate promoter, and Peter Puck was something. Alberta was all things to the Canadian economy . . . oil crashed, 2 banks went tits up, and real estate crashed and went sideways for years.

People are such suckers when they think they can get rich quick.

Darn it, I’ve been saving and investing like you told us. Ain’t a gazillionaire like most homeowners, but then I have a lot of money and a lot of income beyond what I am paid for. Sucks to be me.

#120 Smoking Man on 07.28.15 at 10:21 pm

Spent the last four hours in the world famous long branch Gazibo… Drinking and playing gittar with son number 1 from Halifax…

Hope the mosquitoes have an auto pilot..

Cause they ain’t flying home in a straight line..

#121 the Jaguar on 07.28.15 at 10:24 pm

This use of 100% rental income by cmhc is evidence that the government is desperate to keep the housing industry on all four legs, especially since Big Oil is flat on its ass and manufacturing jobs in eastern Canada a non starter. I recall a blog dog of the past suggesting Canada Revenue Agency should insist on the address of people who rent and run it through their data base as a cross check that rental income is being declared by owners of that address. This seems like low hanging fruit from a tax collection perspective, Garth. The number of people not declaring rental income from both legal and illegal suites must be astronomical. Why hasn’t it happened? Or does the CRA pick and choose which areas of tax evasion they want to take an interest in…?
You have the inside scoop Garth. Please enlighten us all.

#122 Leo Trollstoy on 07.28.15 at 10:36 pm

Wow today’s story is a bombshell. Just when I thought it was going to be difficult to goose the real estate market any further…

#123 Joe2.0 on 07.28.15 at 10:45 pm

Another 100billion injected into Chinese market.
Anyone notice the correlation here.
Just add money when markets start to crash aka QE, bailout..
Or prevent trading, not free trading.
The markets are broken and it’s a joke.

#124 Leo Trollstoy on 07.28.15 at 10:45 pm

Particularly rude when what follows is an unsubstantiated claim that sales mix has made price decreases look like price increases. No link or source to prove this claim.

That’s unfortunate.

He is, of course, wrong again. The sales mix has never shown price declines. At least for a very very long time. He’s confusing what he wants to happen with what is actually happening.

And what is happening?

Well, the CAD continues to be systematically weakened against the USD, Canada continues to run a trade deficit and shows that it is an inpotent exporter, deflation is no where to be found, gold and miners are toast, Canadians are gorging on debt and soon to be able to gorge on more debt and real estate prices in YVR and YYZ continue their inexplicable assent to the heights of stupidity.

What would be interesting to see?

Fed hikes in 2015 and an NDP majority at the federal level. These two things will ensure our country is utterly decimated.

Get the popcorn.

#125 BlackDog on 07.28.15 at 10:49 pm

@TurnerNation re:#96 “Wish him the best now. ”

He’s dead. Isn’t it a little late for best wishes?

#126 Leo Trollstoy on 07.28.15 at 10:51 pm

Meaningfully higher policy rates are unlikely for the next 5-10 years with so much slack existing in the economy and worsening as the RE sector decelerates and little else exists to take its place.

There is no meaningful deceleration in the RE sector.

However, risk premia is likely to expand significantly against residential/consumer loans, on account of diminished credit-worthiness.

Completely wrong. There is no risk premia. This is just a bald faced made up sentence.

We’ve already seen some of this explicitly with the banks refusing to cut their “Prime” rate even though the banks have experienced a corresponding drop in funding costs on account of the Bank of Canada’s policy action.

They’ve cut enough. It’s not a 1-to-1 race to the bottom but it’s close enough that it doesn’t matter.

#127 Bottoms_Up on 07.28.15 at 10:52 pm

Love the picture you chose of Joe Owe.

#128 Leo Trollstoy on 07.28.15 at 10:54 pm

#101

As conspiracy theories go, I like this one. Lol

#129 Steve French on 07.28.15 at 10:59 pm

“The entire world is enraged with Walter Palmer, the American dentist who killed Cecil the lion”

http://qz.com/466164/the-entire-world-is-enraged-with-walter-palmer-the-american-dentist-who-killed-cecil-the-lion/

Gaaaahhh….. what a fr—–n id-ot,

This is beyond infuriating….

Especially coming so close after Garth’s weekend doggie story.

Dip this loser in lard and let him loose naked and afraid on the Serengeti plains… let the animals sort out his justice.

I sure hope Walter Palmer was not a Greater Fool blog dog.

#130 Drill Baby Drill on 07.28.15 at 11:01 pm

#111 Oils Well

Your are dead on the money. This over production is not sustainable. Many Saudi oil wells are watering out therefore they are drilling and drilling etc.
Between watering out Saudi wells, Russian wells and US frac wells on a constant tread mill not to mention the obvious upcoming wreck in the middle east get ready to welcome Alta back with open arms.

Never count Alberta out !

#131 Bottoms_Up on 07.28.15 at 11:02 pm

#67 BS on 07.28.15 at 7:43 pm
———————————–
You keep waiting for 15 years ago pricing, and by 2023 you’ll be 2 decades outdated….if 2003 pricing comes back we’ll have lots more to worry about than house prices…..

#132 bdy sktrn on 07.28.15 at 11:08 pm

#45 Victoria Real Estate Update
————————–
wow what an AWESOME chart!
thanks!

it conveys so much meaning at a single glance.

thanks again!

————————————
it looks the only thing more risky than being a 604 owner is being a 604 renter!
,…..
Vancouver apartment buildings hot commodities as rents edge up amid vacancy squeeze

Developers are not constructing enough rental stock to keep up with demand
http://www.vancouversun.com/business/commercial-real-estate/Vancouver+apartment+buildings/11248885/story.html
———–
and this
VANCOUVER — New renters can expect “a rent increase tsunami” as building owners, faced with growing demand and restrained by decades of rent controls, begin hiking rents

#133 BS on 07.28.15 at 11:09 pm

On the bright side, if people claim rental income for their mortgage, they may need to disclose it in their taxes too. I’m sure plenty of “illegal” suites’ income goes unreported, and thus taxes are not collected on it.

If you need CMHC to qualify for your mortgage it means your proportion of interest expense (and other expenses) will exceed the revenue from the suite rental. There is no income to tax. It would be a loss in most cases.

#134 lee on 07.28.15 at 11:12 pm

The CRA is completely toothless. It convicts nobody. Real estate bandits will continue to thrive unabated. What do you think, it has secret police knocking on doors asking to see leases? If it accidentally comes across a scenario that looks suspicious it will simply ask for the unpaid tax. Big risk tax evasion is in this country. That’s why everyone does it.

#135 Jazzy Sunbaked on 07.28.15 at 11:15 pm

99% of all rental suites in SFH’s in Vancouver are technically ‘illegal’….but overlooked….but …so are dope shoppes.

“This is Vancouver Dude”.

A few far flung municipalities…like Delta and ‘The Sewer’ ( Surrey by name but Sewer by reputation) charge as little as $500 p/a on top of your prop tax. The mortgage ghouls forgot to calculate the amount of that 100% as taxable income.

#136 bdy sktrn on 07.28.15 at 11:15 pm

Regulation and gov’t inspection of rental suites to ensure proper condition is however a business that gov’t should be in.
——————————–
right on.

same for used cars. and smartphones. rv’s , bicycles and tricycles too of course. why not small and large appliances. footwear and watches , what the heck.

i say there should be an on-duty govt hazard inspector for each home. Is that burner too hot to touch? is the toilet seat REALLY clean? are the knives all sharp end down?

damn i’m scared to get up from my chair without a CSA man on hand.

#137 BS on 07.28.15 at 11:17 pm

You betcha! He introduced 40-year amortizations. On Harpers’ advice. Didn’t work…so he reduced them to 35-5% down, then 30-5% down…and finally 25-year amortizations. Back to where we started!

My guess is regardless of who takes power in October we go back to the 0% down and 40 year amortizations to try to keep the bubble inflated. That is when 5 year CAD bonds spike up and mortgage rates follow. Canada’s credit rating will be dropped.

It really does not matter what the government does. At best all they can do is kick the can down the road. In the end housing collapses. The longer this goes the further it falls.

#138 NotAGreaterFool on 07.28.15 at 11:18 pm

Can the FEDs be throwing a bone to the power real estate lobby for now but truly be planning on reining this in and thus doing the right thing? Wishful thinking I bet!

There can be no soft landing with the policies and suspect practices. Look out below for the hard crash.

There is a decent chance the Tories may not be in government soon and when the crash arrives, they merely point to the Dippers.

Joe O is my MP. He is worried as evidenced by the numerous polling junk mail (Canada Economic Action plan propaganda, tax credits) I have received. Plus he has no personality. I liked Flaherty with his Irish spirit.

#139 Uh Oh Canada on 07.28.15 at 11:21 pm

Ah, more Realestate blog posts. I prefer the posts about investing, puppies and dogs, and advice about life in general. How about how to live on less per month?

Call me a cheapskates, but I budget on everything except food- (must live like a king in one aspect.) General rule on buying clothes- I don’t spend more than $10 on an article of clothing- EVER. (I buy new too. This doesn’t include big ticket items like winter coats, shoes, etc.). Been doing this for over ten years now for our family. I save a lot on taxes too.

I purchase EVERYTHING I need on sale. If it’s not on sale, I won’t buy it and I’ll simply wait. (This explains why I rent too). Also, I enjoy garage-saling in the rich side of town- I get lots of new stuff for next to nothing.

I’ve managed to live on 2k/month for several years, although that’s gone slightly up due to growing appetites of the kids. Still living on way less than what Garth pays for rent in TO.

Life is good outside of TO and Vancity. (Believe me, I’ve lived in both.).

#140 BS on 07.28.15 at 11:23 pm

You keep waiting for 15 years ago pricing, and by 2023 you’ll be 2 decades outdated….if 2003 pricing comes back we’ll have lots more to worry about than house prices…..

I am not waiting for anything. Just letting you know where prices will be in the future. By 2023 I will retired living in the south of France. Read up on bubbles prices ALWAYS return to the starting point.

#141 Greg on 07.28.15 at 11:28 pm

#102 Shawn check out http://www.homedepot.ca/product/skylink-smart-button-keyless-entry-system/814107

#142 No Canada, No on 07.28.15 at 11:28 pm

Just a small suggestion:
should’ve put the crook from last picture right behind the picture of his success story: Crooked Semis On Sale Each 688k Now or Never

#143 Shawn on 07.28.15 at 11:39 pm

Misleading Chart

bdy sktrn on 07.28.15 at 11:08 pm said:
#45 Victoria Real Estate Update
————————–
wow what an AWESOME chart!
thanks!

it conveys so much meaning at a single glance.

thanks again!

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

Sorry, but I have to disagree. Just about any economic variable will “hockey stick” like that if plotted on a regular arithmetic scale. It’s a function of exponential growth which is what the entire economy has experienced and always will experience.

Long term growth data MUST be plotted on a log scale in order not to mislead. On a log scale a constant 3% growth, for example will be a straight line rather than a hockey stick. The straight line is a better picture of the trend.

Now CMHC may well hockey stick even on a log chart, but we can’t tell from the chart above.

#144 Hickster on 07.28.15 at 11:44 pm

Privatizing the CMHC would be the best decision we could make as a country in the last 70 years. That move alone would correct out housing overnight.

#145 Shawn on 07.28.15 at 11:45 pm

Bank Snitch?

On the bright side, if people claim rental income for their mortgage, they may need to disclose it in their taxes too.

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

Why so, why would their bank want to snitch on them. It’s not the bank’s concern.

Offsetting rental income (if it is stable) and treating it as available for the mortgage makes perfect sense. Get over it. That money (unlike the pay check) can be 100% ear marked for the mortgage payment.

Also when I had rental property in 1989 this offsetting of rental income was allowed by some banks. Though I did avoid CMHC fee by taking out a loan for part of the 25% “down payment” with full knowledge of the bank but the loan was cosigned by a guaranteor so was solid for the bank.

#146 Sao Pablito on 07.28.15 at 11:52 pm

#168 BillyBob on 07.28.15 at 3:42 am

What typically small-minded bs. I’ve been to Rio many, many times – the airline I work for has a daily flight there. Yes, there is crime in the city, particularly in the favelas, mostly drug-related. But Copacabana and Ipanema are no different from touristy areas in any Canadian city, except, the Brazilian city is insanely more beautiful as are the women…”

Ah, the old “it never happened to me, so it must be safe” nonsense. Here, go to this site and review your logical fallacies https://web.cn.edu/kwheeler/fallacies_list.html.

No crime in Copacabana?????Sorry pal, I lived there 5 years and what the other guy wrote was true. All locals inside by 9 pm curfew. Sometimes, nasties stream down from the favelas and rob the “wealthy” tourists on the beach. Google it.

Finally, there are many who would rate Vancouver’s beauty right up there with Rio, especially when you factor in all of the pollution in Rio….I have seen kms long untreated sewage slicks off the Copa beach, dumped directly in from the favelas. Also, spent many days on sail boats around Praia Botafogo and you could almost walk on the garbage….

Suggest you get out of your airline cabin cleaner’s outfit and 2 star airport hotel and head into the town to get some real experience….

#147 BC Guy on 07.28.15 at 11:54 pm

Dropping the prime rate .25% was an attempt to give some relief to Canada’s oil companies. It was a small drop, but it had the desired effect of causing the loonie to fall, which gives Canadian oil companies a small boost because they export and sell in US dollars.

The real estate crash in Canada is coming. I’ve taken Garth’s advice, sold my house, am renting, and sitting on cash/equities. I might consider buying in the winter when the economy is looking really ugly.

The only problem with my strategy is the rental market is extremely tight, many places don’t allow pets, want someone fully employed (not self-employed). So the only place I could find to rent was a semi-crappy apartment with a slumlord, drug dealers and welfare drug takers running rampant, police/ambulance showing up every few days either to arrest or assist with drug overdoses/evictions/go-knows-what. This week the power to the laundry room was shut off because the slumlord didn’t pay BCHydro. I had to haul my laundry to a friggin’ Laundromat!

So Garth’s strategy of renting and investing will work if you’re fully employed and can afford paying $3000/month for a luxury rental. Otherwise, get ready for some ghetto time.

#148 one mill is nothing on 07.28.15 at 11:56 pm

Garth,
Suggestion for a futue column. Describe the last commodity boom of the late seventies and the bust that followed in the early eighties. The parallels are frightening. Same canadian dollar peaking over par, then trending down for years. Substitute the tar sands for Dome Petroleum.
Remember capitalization of interest and all those good as gold publicily traded RE developers. The more debt the better. They all went bankrupt. Same bubble in residential RE followed by the dollar dealers in Calgary and fall of approx 75% in Van. So few even have a concept of how bad it was – and it’s going to happen again if the dollar doesn’t fall to .30 USD. It’s a simple choice – destroy the cdn currency or destroy the cdn economy, and you know where I’m placing my bets.

#149 Fzzzz on 07.29.15 at 12:01 am

A very good article. Thanks Garth

#150 Pesterously on 07.29.15 at 12:01 am

“Letting people pickle themselves in debt, succumb to their hormones, spend far beyond their means and pull economic activity from the future is a cheap, quick and desperate way to try and rescue an economy in trouble by a government struggling in the polls.”

Garth,

Well noted!

This is typical of the populist policies seen in many 3rd world banana republics…….

#151 kommykim on 07.29.15 at 12:17 am

Garth I didn’t believe that the pic of the slanted semi was real until I Google street viewed it (868 Shaw St. Toronto). Yup. It actually is that bad. Apparently there was a creek running under there which they converted to a sewer in the 1800’s. The ground must be eroding out from underneath the house due to the water flow.

#152 A Canadian Abroad on 07.29.15 at 12:26 am

Hanging my head in shame. I truly thought Canada was different, well, it indeed is different. It’s financially dumber than I ever imagined.

#153 one mill is nothing on 07.29.15 at 12:31 am

And the result going into the 2030’s, given unneeded high immigration depressing incomes with a greater proportion of that allocated to taxes and loan servicing of past public and private poor decisions- Canadians become renters in their own country – renters in the broad use of the term, that is, if the country remains independent. After all, when incomes decrease to third world levels and everything of importance’s is foreign own, I doubt they’ll be many “proud canadians” left. Just another case of humanity ruining its own nest.

#154 Kilby on 07.29.15 at 12:47 am

#129 Steve French on 07.28.15 at 10:59 pm
“The entire world is enraged with Walter Palmer, the American dentist who killed Cecil the lion”

http://qz.com/466164/the-entire-world-is-enraged-with-walter-palmer-the-american-dentist-who-killed-cecil-the-lion/

Gaaaahhh….. what a fr—–n id-ot,

Amazing that these morons still exist….Oh well, he took my mind off Joe Oliver. Hopefully karma will catch this dentist big time………

#155 Kilby on 07.29.15 at 12:50 am

#113 Sheane Wallace on 07.28.15 at 9:42 pm
CMHC is a fraud. Joe Owe belongs to jail.

Well said, wonder if he has “escape plans” CMHC is no more than the BOC……Arms length from Dear leader…….

#156 Debtfree on 07.29.15 at 12:59 am

Yes the effen deity was such a prudent guy , 40 , 35 , 30 year nuttin down ams . Canadian hero ? Awesome (everything is now awesome ) . Yikes . What an MLS guy he was .

#157 Spacc on 07.29.15 at 1:00 am

I’m sure there will also be crooked McMansions popping up down the line as well. I’m not knowledgeable on this kind of stuff but between the carpenter ants that show up every year, driveway that has sunk a couple of inches over the years, and what I believe is a subtle stress/fault line through the midsection, my parent’s house–3k sq ft of brick, drywall, and 2x4s in the hills of the GTA–is probably a ticking time bomb.

#158 David on 07.29.15 at 1:02 am

One of the purported benefits of single family home ownership is that one does not have to worry about being the landlord for the 19 year old hairdresser or the 85 year old grandma living in the possibly illegal suite downstairs. But hey CMHC is getting flexible these days.
Joe Owe should explain himself when he offers up some rubbish about privatising CMHC. CMHC’s asset base is exclusively MORTGAGES and collateralised debt obligation debt instruments.One would imagine any sharpie on Bay Street would want a huge risk discount or would tighten future underwriting standards to Greek levels. There was an a saying in the Calgary bars back in the day lotsa hair on that one.This BBQ should have ended long ago.The wealthy Chinese investor in Vancouver housing probably never existed either.

http://davidstockmanscontracorner.com/wall-street-still-didnt-get-the-memo-chinas-done-tops-in/

#159 Ron on 07.29.15 at 1:11 am

Politicians all over the world took the easiest route possible to boost their economies. Every country followed the US and possibly the most destructive financial tool in the history of the world…..Alan Greenspan. Everybody fell under his spell when he proclaimed that with his expert guidance the US was going to enjoy perpetual prosperity. He got the whole world hooked on cheap money and real estate just like a pimp hooks his girls on drugs. Why bother going through the hassle of building factories and creating ongoing manufacturing jobs. That is just so 20th century. We can all now flip real estate to each other and enjoy our status as white collar, audi driving metrosexuals secure in the knowledge that real estate always goes up. In a few years those metrosexuals will be taking public transit to their minimum wage jobs. You cannot have a healthy economy long term when it is based on selling real estate to each other. It is extremely simple but I guess most people in Canada are beyond simple.

#160 TRT on 07.29.15 at 1:12 am

YVR and YYZ.

Foreign $$.

#161 rainclouds on 07.29.15 at 1:20 am

in oregon(where only God or a toothless Bubba can pump your gas)

USA today article FSBO taking off . zillow and ancillary service’s fill the MLS and legal gaps.

Uh oh…….CREA. Big 100 ft technical tsunami headed down smug alley and it’s waay too late to man the barricades.

#162 S.Bby on 07.29.15 at 1:24 am

This article is bullshit. It is only relating to commercial rental apartment buildings, but conveniently ignores all the private rentals of condos and houses and basement suites that are available in the tens of thousands throughout the lower mainland. This is just more scaremongering by the real estate industry. These dudes should also know that rental rates are determined by real wages, not by what a landlord needs to cover their expenses. That’s why cap rates are so low.

http://www.vancouversun.com/business/commercial-real-estate/Vancouver+apartment+buildings/11248885/story.html

#163 Mark on 07.29.15 at 2:33 am

“Particularly rude when what follows is an unsubstantiated claim that sales mix has made price decreases look like price increases. No link or source to prove this claim”

The claim was fully substantiated in previous posts of mine where CIBC research was cited. So nice try, but you’re way off the mark (no pun intended) tonight.

Policy rates are falling precisely because the Canadian economy has spent the better part of the past 2 years slowing on account of both housing price decreases (remember housing = 25% of GDP), and the commodities sector (5% of GDP).

Its blatantly obvious if you open your eyes instead of blindly eating the spoonfed nonsense of the RE cartel that wants to convince the few remaining buyers to pay inflated prices in a market that is obviously in decline.

#164 Mark on 07.29.15 at 2:42 am

“Completely wrong. There is no risk premia. This is just a bald faced made up sentence.”

There’s always risk premia embedded into every loan that goes out. To suggest otherwise exudes a complete lack of knowledge of lending whatsoever.

Risk premia might be abnormally low on certain loans, but that doesn’t mean its non-existent, and the evidence as of late is that such spread is rising on consumer loans. A completely natural function of the market-based pricing of assets according to credit quality.

The rest of your commentary is just plain unadulterated nonsensical ad hominem. Shame on you for wasting peoples’ time with your nonsense. Policy rates are falling because the economy is clearly in a significant state of deceleration, if not recession, and a rapidly decelerating RE industry is front and center as the cause.

“They’ve cut enough. It’s not a 1-to-1 race to the bottom but it’s close enough that it doesn’t matter.”

Hardly. There’s still plenty of room to cut, and the Canadian economy is in such terrible shape at the moment that additional cuts are likely to be required. Lest Canada find itself in significant deflation as RE prices declines accelerate and aggregate demand is correspondingly sapped on account of such. Labour slack is huge at the moment, the output gap is gaping wide, and there’s not even a whiff of consumer price inflation, so the BoC has plenty of room to cut further and should.

#165 Nagraj on 07.29.15 at 4:13 am

#87 WASHED UP LAWYER
I was going to comment on the substance of your post – because when I was a little kid in Austria over half a century ago I had a great-uncle who was a gamekeeper (Foerster).
He had a trophy room which was filled with countless deer antlers, some stag heads, stuffed birds of prey, owls, pheasants, smaller birds, two lovely weasels, two foxes, a peacock for some reason, the piece de resistance was a humongous stuffed impressively tusked boar named Adolf.
He kept a pack of spotted hunting dogs who were quartered in a compound right by the front gate, and every time I walked by they raised an unholy – terrifying – ruckus. Luckily the BOSS DOG, Flora, liked me.
So I was gonna say sumpin bout huntin – but then I thought what IS the SNOB word for hunting, aint it “venery”? And then I thought isn’t “venery” more kinda like “concupiscence”? I looked it up and whaddayaknow there’s 2 veneries; one. the hunting one. derives from venor, and the other sexy one derives from Venus. Which has nothing to do with venerable or venal or venial or venous.
[“You can lead a girl to Vassar but you can’t make her think.”]

– I better quit here – but not before I tell you that elk don’t come in GROUPS. They come in herds or, yes, GANGS.

[In Deutsch a Foerster is such an iconic avatar that he survived his public opposition to the Nazis which would’ve been easier anyway on the Hungarian border where he lived.]

#166 devore on 07.29.15 at 4:24 am

#133 BS

If you need CMHC to qualify for your mortgage it means your proportion of interest expense (and other expenses) will exceed the revenue from the suite rental. There is no income to tax. It would be a loss in most cases.

You’re right. And since all governments run a deficit, that means the average tax payer gets more than he pays in, so let’s just not worry about income tax cheats at all then as well, what’s the difference, right? Income is income, it should all be counted, it’s just all a big make work project for tax attorneys anyways.

#167 Londoner on 07.29.15 at 5:41 am

“Simply put, CMHC will now count as “income” 100% of the money you received, or might possibly get, from a tenant…”

This might be more an admission of existing practices then it is a change in approach. Back in the early 2000’s I worked in retail banking for about a year after just graduating. During this time I was taking mortgage applications in a branch in Toronto. Before they let you talk to customers you need to go through 2 weeks of training where they teach you about lending standards, TDSRs, GDSRs, income verification, how to value assets & liabilities, how to request appraisals, blah, blah. That all goes out the window when you hit the branch. Because once you’re on the front line the only thing that matters is hitting sales targets. If a competing branch a few streets up is getting more mortgage applications then your branch then you need to up your game before the regional manager comes to have a serious chat. Bottom line is that the branch manager would routinely tell us to put in 100% of rental income and claim it as 50% on the mortgage application. Neither the banks own underwriters nor the ones from CMHC would ever question the figures. Even if the debt ratios would hit 42% (that seemed to be the limit back then).

#168 Estrella on 07.29.15 at 5:56 am

http://www.rightrelevance.com/search/articles/hero?article=87227f2755aeaecddf858ef3fc13437dd5162983&query=canada%20economy&taccount=canadaeconomyrr

Canada’s debt doesn’t end at foreclosure. This will be worse than the US.

#169 Londoner on 07.29.15 at 6:22 am

Just to add a bit more detail to my above comment, most of the applications where we did this were for people who were buying multiple pre-built condos and flipping them after closing. The rental amount was made up as there were no tenancy contracts in place yet.

You might find this interesting but the ethnicity of most of the buyers were Persian, Russian and some South Africans. There were very few Chinese buyers – most of the Chinese were actually agents.

#170 dontcallmeshirley on 07.29.15 at 7:13 am

So Garth, now we know the division between the PMO and CMHC is non-existent.

Will you now abandon your mantra that BofC operates independently without PM guidance?

There is supposed to be division, but at present it seems to have been breached. — Garth

#171 Sheane Wallace on 07.29.15 at 7:27 am

the semi shacks on the picture are mind blowing, this is the result of the smart management by our glorious Leader, the senile fin minister and spineless BOC governor along with many behind kissers from his entourage.

Mind-blowing stupidity and outright irresponsibility.

Garth, bravo for the courage to start attacking these idiots.

#172 Sheane Wallace on 07.29.15 at 7:34 am

endless spin and lies.

Now they redefine what recession is.

http://www.cbc.ca/news/business/canada-is-not-in-a-recession-influential-group-of-economists-says-1.3170836

Surprise, surprise, it is a think thanks sponsored by the rich friends of our glorious leader, their role of course is to lie and spin to make us feel better.

Actually they could be correct.
Canada’s economy is not in recession but in depression.

#173 Sheane Wallace on 07.29.15 at 7:34 am

think tank, damn it

#174 BillyBob on 07.29.15 at 7:59 am

No crime in Copacabana?????Sorry pal, I lived there 5 years and what the other guy wrote was true. All locals inside by 9 pm curfew. Sometimes, nasties stream down from the favelas and rob the “wealthy” tourists on the beach. Google it.

Finally, there are many who would rate Vancouver’s beauty right up there with Rio, especially when you factor in all of the pollution in Rio….I have seen kms long untreated sewage slicks off the Copa beach, dumped directly in from the favelas. Also, spent many days on sail boats around Praia Botafogo and you could almost walk on the garbage….

Suggest you get out of your airline cabin cleaner’s outfit and 2 star airport hotel and head into the town to get some real experience….

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

Nice troll attempt, dude. Crew hotel is the Sheraton just up from the beaches and my airline job is sitting in the left seat at the pointy end. Take your straw men somewhere else, please.

I never said there was no crime, there’s tons. But not quite the Armageddon you breathlessly try and portray.
“Locals all locked in after 9pm” LOL. Our many Brazilian crew are laughing at you.

ANY place can be dangerous…if you’re a clueless idiot. Likewise higher-crime locales can be safely navigated with a bit of common sense and local knowledge. Your five years must have been terrifying, I feel kind of bad for you. It’s probably best you live in a safer place.

#175 jean on 07.29.15 at 8:07 am

#11 FitBitKid on 07.28.15 at 6:07 pm
Well, It sucks for people still waiting for a crash to get into real estate market. The party is still on…

******
I moved to Canada two years ago when GBP CAD was at 1.55. Refused to pay stupid prices for Canadian real estate. Left my money in GBP and USD, and have nothing in CAD (moving back to UK in a couple years). So imagine my pain if I had instead bought an overpriced Canadian house for CAD 1 million. Cost to me two years ago would have been GBP 645k for that hypothetical house. Now CAD 1 million is worth only GBP 492k. Loss in GBP over 160k. Worse still if I had converted my savings too.

I wonder if foreigners who bought over the last several years are also doing the math and working out that Canadian real estate is not such a great investment when the currency is crushed. On the other hand, with this new rule and a cheap CAD, maybe you will get a boost of new buyers now who think real estate is “on sale”. I will be staying away.

#176 DR on 07.29.15 at 8:42 am

http://business.financialpost.com/news/economy/jim-flaherty-says-interest-rates-are-heading-higher-regardless-of-central-bank-actions

#177 Llewelyn on 07.29.15 at 8:55 am

If one viewed Canada as a large corporation with many different subsidiaries it would be hard to criticize management for focussing on a subsidiary (housing) that continued to generate revenue for the total corporation during difficult times. However Canada is not a corporation and government is elected to represent the best interests of their current citizens and future generations.

As I have mentioned in several previous posts the percentage of our GDP attributable to the housing sector of our economy cannot be supported by demographic or economic fundamentals. The Government of Canada realized this many years ago and responded by increasing immigration targets and improving access to mortgage funding to keep the sector healthy.

Clearly the hope was that the Canadian economy would continue to expand by 3.0+% per annum and that mortgage and consumer debt would be covered by increases in disposable income. Now that the other over-represented sector (Oil & Gas) in the Canadian economy is on the ropes the Government of Canada is faced with an interesting dilemma.

In order to diversify their economy Canada must become competitive in the global marketplace by making Canadian goods more affordable when compared to their competitors. The most effective means of achieving this objective in the short term is to devalue your currency.

Lowering the overnight rate to reduce the value of your currency and increase the demand for your goods will also stimulate short term demand in the housing sector by lowering mortgage rates. If there were no other factors in play the decision to lower the overnight rate would not only support diversification of the economy but provide additional support to the one sector of the economy still generating substantial taxation revenue.

However there are other important factors in play, most notably the lack of employment outside the public and service related sectors and the lack of any substantial increase in average disposable income. Without employment demand for 180,000 dwelling units being constructed in 2015 will decline and no amount of tinkering with mortgage qualification criteria will generate additional demand.

Another factor that has not been getting the attention it deserves is the substantial decline in average household size. In 1961 the average household size was 3.9 PPH. In 2015 the average household size is only 2.9 PPH. The demand generated by this substantial decline has been consumed and as a result composition of our housing stock will gradually shift away from detached houses. As the composition our housing stock adjusts to demographics the cost of renting will begin to determine the value of homes offered for sale. Speculation will disappear as new, and smaller, households weigh the economic advantages of renting over home ownership.

If Canada does not find a way to stimulation additional employment in the private sector the decline in real estate values could be much worse that even the most pessimistic observers are projecting. Canada has run out of tricks and the time has come for a responsible government to face reality and acknowlege the citizens they were elected to represent.

#178 Richie Rich Calgary on 07.29.15 at 9:19 am

NO ONE IS ALLOWED TO FAIL…. banks are allowing those that can no longer pay a mortgage to just forego for a while. IT’s called a FOR-GO-SURE… lol. These loans just accrue interest charges and the depressed unemployed keep living in the home without the fear of FORECLOSURE. This is the new world order. It is discriminatory policy imo. I’d like to buy a home again but can’t because the prices are artificially high due to policies like this.

#179 Hoser on 07.29.15 at 9:27 am

>>To me that is the issue, how to make secure home deliveries when no one is home.

Canada Post has ‘FlexDelivery’ where you can pick up your package at the post office. Or if you prefer the private sector, PenguinPickup.com is a similar service. (Perishables receiving coming soon.) Or ShipLLama.com will forward packages from the States.
No need to screw around trying to receive packages at home.

#180 Editrix on 07.29.15 at 9:29 am

F was a genius compared to the Mr. Limpet waxwork we have now.

#181 dontcallmeshirley on 07.29.15 at 9:38 am

There is supposed to be division, but at present it seems to have been breached. — Garth

Fantastic — so we are on the same page — gov’t is picking winners in the private sector.

So educate us on how, if at all, we can profit from this.

#182 LL on 07.29.15 at 9:40 am

http://www.tinyhouselumbec.com/?lang=en

Small is beautiful!

Some young people are waking up..They go for tiny house.
I read the story about a 30 years old young man, working 70 hours/week to pay his big mortgage and finally realized it was a crazy life. He quit, bought a tiny house (around 90K), work less and now he is happy!
Of course most municipalites doesn’t want those tiny houses in their municipal lot. Why? Because taxes are too low…Low taxes cannot finance municipal salary of 100k/year!
But at least, some are waking up and don’t want to be a slave all their life!

#183 Daisy Mae on 07.29.15 at 9:49 am

#41 TurnerNation: “In the area I call the Eastern Block, just around Greenwood, I have heard some retailers comment that many locals are overburdened by house debt and don’t spend.”

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

And yet prices for goods/services across the country are about to go up? Good luck with that.

#184 BlackDog on 07.29.15 at 9:49 am

@#154, Re:Cicil the Lion

Just seeing the headlines upset me so much, I can’t even read the articles or watch the videos. Makes me ill.

#185 lola on 07.29.15 at 10:05 am

I don’t mean to pee on everyone’s parade but the picture of that crooked house on sale for $688k is not that shocking. I see what everyone means when you say it is an outrageous price. But then I have to look around here in Vancouver and see that prices for places like that are pretty much double. If it’s a lot that you can build a SFH on and it is in the City proper (so the 416 area code) and if it’s less than a million then that looks cheap by Vancouver standards. I think the high prices have just distorted my perception. Starter homes in Vancouver go for about $1.2 or $1.3 million so a tear down on a good lot for $688k is kind of a good deal.

And I agree with everyone here that economic fundamentals are terrible. But since when has real estate had anything to do with economic fundamentals? We have one of the lowest average incomes of any major city in Canada here in Vancouver but we still have these insane housing prices. Do incomes and jobs and the state of the economy even matter any more? I know we aren’t supposed to talk about it, but isn’t foreign ownership playing a big role in inflating real estate prices beyond what the economic fundamentals support? I wish I were wrong.

Dude. The $688,000 is for half the house. — Garth

#186 Daisy Mae on 07.29.15 at 10:15 am

#58: “Never seen a country give so many bullets to its own citizens so they can blow their brains out.

Then again, what would you expect from a Canadian government with the moral compass of an spineless African lion hunter.”

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

Well said.

#187 Bob Santarossa on 07.29.15 at 10:31 am

The truth will be in this Friday’s May 2015 GDP number and the Friday after July 2015 Jobs number.

If GDP is negative, then expect job losses as the GDP report date leads the Jobs report date by 2 whole months or so.

What will precipitate a YVR and 416 real estate collapse will be large job losses in a sustained and negative GDP economy.

If the GDP numbers continue to be negative (e.g., a 5% cumulative drop from peak), then maybe a 40% drop in real estate value over time will result (real terms, inflation adjusted) which was the economic environment that led to the real estate collapse in 416 from 1989 to 1996.

That took 7 years to transpire. All recessions are different.

The one constant in recessions (e.g., the early 80s and 90s recessions) was that it took job losses of -3.5 to -5%, cumulative drop from peak, to precipitate the real estate crashes that happened – about 4 years worth of job losses.

No fiction, hearsay, what your neighbor, cat, realtor or a foreign visitor thinks, what a real estate doom and gloom economist like Madani says – just the facts.

The fact is that nasty nest egg decimating recessions have always been about large job losses over a sustained and prolonged negative GDP economy.

We may well repeat the early 80s and 90s recessions if you can believe what economists and people like Kevin O’Leary are saying about commodities, the backbone of our GDP, that they will be in decline for at least the next 2 to 4 years.

CMHC actions will not precipitate large job losses, just exacerbate how much of your nest egg you will lose over the long haul.

#188 Daisy Mae on 07.29.15 at 10:34 am

#78: “If Trump wins the American presidency the country will become another Canada—Rudderless!”

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

I think Trump is just a flash in a pan.

#189 jean on 07.29.15 at 10:36 am

3 Bruce MacLean – It is just that building.

http://www.thestar.com/news/crime/2011/05/26/ill_never_buy_a_condo_again_apathy_leads_to_condo_in_crisis.html

#190 Leo Trollstoy on 07.29.15 at 10:44 am

Lest Canada find itself in significant deflation as RE prices declines accelerate and aggregate demand is correspondingly sapped on account of such. Labour slack is huge at the moment, the output gap is gaping wide, and there’s not even a whiff of consumer price inflation

Wrong everywhere.

No accelerating RE decline.

No deflation.

Consumer inflation already here.

USD going higher.

CAD going lower.

Gold stays in the crapper.

Find a job please.

#191 Leo Trollstoy on 07.29.15 at 10:48 am

The claim was fully substantiated in previous posts of mine where CIBC research was cited.

Sorry Google shows CIBC no longer supports sales mix showing anything but RE prices increasing. CIBC has completely backed off that report.

Stop citing incorrect, stale data please.

#192 Shawn on 07.29.15 at 10:49 am

Dude. The $688,000 is for half the house. — Garth

More like, for half the land? It’s a tear down, no?

#193 Daisy Mae on 07.29.15 at 10:53 am

#170: “So Garth, now we know the division between the PMO and CMHC is non-existent.

Will you now abandon your mantra that BofC operates independently without PM guidance?”

There is supposed to be division, but at present it seems to have been breached. — Garth

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

Corrupted…just like all other aspects of government.

#194 Daisy Mae on 07.29.15 at 10:57 am

Can you imagine walking from room to room in a semi — uphill to the bathroom, downhill to the bedroom? You could get dizzy!

#195 Mike T. on 07.29.15 at 11:05 am

the man made rules on Earth will continue to change to serve the few that write them

man made rules can be broken, that makes them stupid

the speed limit is 90 around here (Okanagan)

guess what? I can go 100! or 105! or 85!

try and break the Law of Attraction. you cannot

in this Universe like attracts like, now and forever

maybe you should figure these things out instead of watching the man made rules get re-written over and over

guess what happens to people that watch doomer news? like attracts like….. see how this works?

#196 johnk on 07.29.15 at 11:05 am

688 large bills for half that house is basically the land price. Add in the closing costs, too. Its a demolition job and where I live it can cost another 40-50K to stuff the junk in the landfill. Further bonus – what’s it going to cost to remediate the site? Getting north of 800 grand before driving a nail…then there’s the whole other half that MUST be done.
This one is going to redefine Greater Fool if it sells.

#197 cramar on 07.29.15 at 11:10 am

#139 Uh Oh Canada on 07.28.15 at 11:21 pm
Ah, more Realestate blog posts. I prefer the posts about investing, puppies and dogs, and advice about life in general. How about how to live on less per month?

Call me a cheapskates, but I budget on everything except food- (must live like a king in one aspect.)

—————-

Interesting that your bargain seeking does not extend to food. It is entertaining to see people at the check out with a full cart costing $200 of high-cost processed and manufactured items. Probably the same ones with a high mortgage and complaining that they cannot make ends meet.

I like to eat simple, natural, healthy. Lots of salads. My wife is a bargain-seeking missile. She tries never to buy anything unless on sale, food included. She scans the weekly food fliers and buys what is on sale. Fruits & veggies (I eat a lot) are bought weekly from the store with the best price, but non-perishables are stocked up only when on sale. It is common for her to return with more than one package of reduced meat (50% off) because it is approaching the expiry date. Prime steak, lean ground beef. It’s for the dog! No wonder the dog despises dog food!

I find it fascinating how well one can eat cheaply. Rice, beans, eggs, potatoes, carrots, oatmeal, are all cheap and make great meals when prepared nicely. I’m happy with stir-fried veggies and a can of sardines, while the dog gets the angus.

#198 Hot Albertan Money on 07.29.15 at 11:23 am

A couple earning $100,000 between them with $50,000 to put down can qualify for a mortgage of about $420,000. But add in $12,000 a year from a basement suite (based on a rental agreement, not actual cash), and – presto – they qualify for a mortgage of $520,000. That’s seventy thousand more than using only half the potential rental income.

My head hurts. What’s the math on this? How does $12k bump in “income” give you a $100k bump in the mortgage?

Run any bank mortgage approval calculator. — Garth

#199 rp on 07.29.15 at 11:26 am

“buying a median-priced house in Vancouver (even at the cheapest-ever rates) eats 65% of family income.”

Is that pre-tax income? hope not…..

It is. — Garth

#200 Rational Optimist on 07.29.15 at 11:30 am

I’d be curious what does constitute a “legal suite” for this purpose. Does the buyer need to show the lender a zoning certificate from the city? It doesn’t exist, because they never bothered getting one. Because their real estate agent insisted on a clean offer, with no possibility of due diligence financial, legal or otherwise.

I have no idea how it is out west, but in Ontario there are huge numbers of rental units in subdivided houses (both owner-occupied and not) which are not legally zoned. If CMHC sells insurance on a mortgage to a buyer because that buyer disclosed that he is planning on renting his “basement apartment,” and the tenant dies in a fire in the basement apartment that the municipality never knew about, and the fire department had therefore never inspected, that seems problematic to me.

There’s so many reasons why rent should not be used to qualify a new buyer, unless it is perhaps from a different property and appears on several previous years’ tax return and is net of all expenses. It seems to be that burnout must be pretty high for these people. I know from experience that living with tenants in the same complex or property sucks. I sincerely doubt that most people contemplate how badly it can before opting to let “someone else pay my mortgage.” One really bad tenant experience can wipe out many months’ worth of rent, and probably turn people off from re-renting- meaning they’re left with messed-up debt ratios, less income, payments they can’t afford.

By the way, I question whether the lion story would have attracted the same attention had it been an engineer or a pilot involved. The media is known to be dominated by anti-dentites.

#201 Balmuto on 07.29.15 at 11:39 am

#163 Mark

“The claim was fully substantiated in previous posts of mine where CIBC research was cited.”

Direct quotes from the June 25 CIBC research report:

“But, aided by even lower interest rates, other high-flying housing markets aren’t seeing any sort of landing yet. In fact, the annual rates of house price growth in Vancouver and Toronto have if anything accelerated since the start of the year.”

and

“Examining the rest of the market combined, it appears
that price growth has slowed and is now more or less
in line with the target rate of inflation.”

Vancouver and Toronto still hot. Rest of the market slowing but still seeing modest price increases. That’s the reality that CIBC and everybody else sees, but that you refuse to:

http://research.cibcwm.com/economic_public/download/feature3.pdf

#202 Oceanside on 07.29.15 at 11:39 am

BOC, CMHC, PMO, amazing how an upcoming election can cause these groups to ruin Canadians lives just so a few with low self esteem to stay in power a little longer. The running of the country and democracy are long forgotten with the lust for power and recognition being paramount for these self serving morons…

#203 NoName on 07.29.15 at 11:47 am

4 vids that sums up current situation in Canada, I wish it is this funny, but unfortunately its not.

https://www.youtube.com/watch?v=HPs_hMo5Hyk
#LetsSignSomePaperwork

https://youtu.be/Dt8E_27iyOk?t=2m50s
#DollarStoreNationEnvelopeLickers

https://youtu.be/VvW-861_fEY?t=3m58s
#Fed&ProvElectedGovPerformanceReview

#204 NoName on 07.29.15 at 11:49 am

4th

https://www.youtube.com/watch?v=jDmA2xoIoFU
#MaybeWeShouldSaveDoorToDoor

#205 ShawnG in TO on 07.29.15 at 11:50 am

as much as F did to control mortgages he was relying on too much personal touch, and not enough on process change.

if CMHC original mandate was to help veterans and low income earners, it would do much much good to change back towards that limitation.

imagine instead of 1T$ towards mortgages, it was redirected to our manufacturing and small businesses. we won’t have a jobs or productivity problem.

there isn’t much wrong with low low rates to help with economy, except CMHC is taking all of the risks away from the banks. without it (or less of it) would put the risks back to the banks, and they would’ve dealt with it accordingly.

#206 LL on 07.29.15 at 12:17 pm

Dude. The $688,000 is for half the house. — Garth

The RE market is simply getting more and more RIDICULOUS!

#207 LL on 07.29.15 at 12:26 pm

# 21 – White Crock BC on 07.28.15 at 6:25 pm

Maybe they’re counting 100% of rental income because so few people declare said income on their taxes…

Possible that’s the idea.
Good thinking!

#208 JD on 07.29.15 at 12:31 pm

Falling prices in Vancouver/Richmond? Sure I keep hearing that since 2008.
The Facts:
1. In my hood today prices are 1M and up for the lot only. Liveable to my standards ppty selling in 2 weeks to a month for 1.5-2M
2. I am not savvy investor nor trader to score reasonable % interest.
Assumptions made by “my view opponents” even family members are:
1. If I would have purchased in 2007-2008, one of these lots, which were about 650-700K, and shacks on them are rented for 1500-2500 per month.
2. The 300K DP earning spattering 2% since then, no one was able to provide, upfront or ongoing, secure 5-7% interest for that DP since 2008.
3. If I would sell that purchase today in 1 month – Fact (even I concur), not even claim it as a prime resident and would have paid all taxes plus transaction cost, I would have made way more than keeping the DP and avoiding horrendous risk as preserved in 2008 till present.
4. Even more, I get nailed by the fact if we see the correction in Richmond for 30% instantly, your assessment would see the haircut of 300K, you still in the win-win position cause it brings you back to the purchase price. – Home owners win!!!
Now you all astute ppl tell me how to hold my position that investing is better than owning the RE in my local market?
Thank you

#209 IHCTD9 on 07.29.15 at 12:43 pm

#111 Oils Well on 07.28.15 at 9:22 pm
This oil analyst says that we are at a bottom in the price of oil. He believes that US production is going to start dropping quite dramatically due to depletion rates in shale oil. He also says that Middle Eastern producers and Russia have been pumping at breakneck speed to maintain their market share and to show that they can out last their competition – but this is unsustainable.

WTI will be $70-$80 by year end – according to him.

http://video.cnbc.com/gallery/?video=3000401382
____________________________________________

I’ve been thinking myself that we are only one decision by either OPEC or the USA to cut production from paying 1.50/litre gasoline here in Canada next year (assuming another rate cut here, and two raises down south). Eventually those guys will come to an unspoken price agreement when one of them steps up to cut production – same thing the steel mills do. It only takes one of them to step up – they all want to make money, they all want to pump less out of the ground. Once a smidgen of trust exists once more between them, the production will drop and the price will go up.

#210 Leo Trollstoy on 07.29.15 at 12:48 pm

Vancouver and Toronto still hot. Rest of the market slowing but still seeing modest price increases. That’s the reality that CIBC and everybody else sees, but that you refuse to

I agree. Mark, get a job. Seriously. Try and be a productive member of society instead of trying to mislead financial newbies on a blog. This why you were banned at RFD. Just move on. Please.

#211 shawn on 07.29.15 at 12:59 pm

Large Mortgages with low interest rates at least do get paid down faster?

Ozzie Jurock, on Saturday on Money talks radio show pointed out the mathematical fact that the percentage of the payment going to principle on today’s low interest rate mortgages is a LOT higher than in the old days of 10% interest rates.

This is a true mathematical fact.

He used the example that the same payment at 12% interest that was required on a 100k mortgage might today support a $400k mortgage. AND today’s mortgage comes down faster on a percentage basis. Five years in on a 2.5% mortgage and good little chunk has been paid off whereas at 12% interest the first ten years or so are almost treading water.

This is not to suggest that a $400k mortgage is a good thing, but it is one good aspect of low interest rates.

Anyone care to argue with Ozzie’s math there?

#212 Ronaldo on 07.29.15 at 1:00 pm

#198 Hot Albertan Money

”My head hurts. What’s the math on this? How does $12k bump in “income” give you a $100k bump in the mortgage?”

”Run any bank mortgage approval calculator. — Garth”

To borrow $400m at 5% costs $20m/yr. which is only .20 of their combined annual income. To borrow $520m at 5% costs $26m/yr. or .26 of their combined annual income. Easily affordable without the extra $12m and even more affordable at half those rates as we have today. Also, the price of the home at $470m represents 4.7 times their annual income. Much less than the 20 times family income that it costs to buy the average teardown in Vancouver.

You forgot amortization. — Garth

#213 S.Bby on 07.29.15 at 1:01 pm

Using a basement suite to supplement mortgage payments is risky on several fronts. Who wants strangers living in their basement? Acquaintances of ours had a guy in their suite who turned out to be a psycho with an assault conviction who had done time in the joint. He stopped paying his rent and they had a helluva time getting him out. There was another case in Burnaby where a neighbour complained about an illegal suite and the City of Burnaby shut the suite down and ordered the owner to remove the sink, appliances etc. and when the owner (a realtor, ironically) tried to start it up again the city was back and shut it down again and levied a fine. That’s a few of the perils of illegal basement suites.

#214 dontcallmeshirley on 07.29.15 at 1:06 pm

Today, i’m reminded of these wise words:

“It’s immoral to let a sucker keep his money”

PS. given this edict from CMHC, we can safely conclude mortgage tightening policy is off the table for the forseeable future.

#215 Reasonfirst on 07.29.15 at 1:25 pm

#4 Mike Breen on 07.28.15 at 5:56 pm

“There must be some reason they want to do this..the people working in these agencies test the market, follow studies, consult with the Pros. Should we not trust their expertise because they have looked at the metrics?”

Sarcasm, right?

#216 Bob Santarossa on 07.29.15 at 1:29 pm

#208 JD

30% of $1.5 million and $2.0 million = $450,000 and $600,000, respectively.

= $300,000 down payment gone + $150,000 to $300,000 principal gone and not counting all the interest paid on that principle which is gone.

2014 TD Comfort Portfolio (Mutual Funds) earned me 3% to 7% as of Jan. 2015, based on market value less book value and not counting dividends. Easy to find historical rates of return on their web site.

If a bad recession, like early 80s and 90s, haircut will be 40% not 30% but take solace, it will take 4 years or longer to bleed that value away; then again, not all recessions are the same.

Homeowners win?

#217 Bob Santarossa on 07.29.15 at 1:52 pm

#163 Mark

Read Garth’s 2008 Blog posts preceding the 2009 recession and you will realize that the 2015 “CIBC Reality” and the many and similar economic predictions of that time have gone into the scrap heap of history…so will that report if the 2015 recession results in many job losses.

For every economist that says it will be fine, there is another that says it will not be. The standard joke in academia is that economists have predicted that last 9 out of 6 recessions.

Only time will tell who is correct.

But current and major economic indicators are in decline: GDP negative, job creation negative, EI up, residential/commercial building permits down, wholesale merchandise down, corporate profits down, inflation up, trade balance negative, about $5.5 billion more being invested in offshore securities, about -$5.5 billion less being invested in Canadian securities etc. You need only look at StatsCan The Daily – Indicators to see that.

#218 MF on 07.29.15 at 1:53 pm

#208 JD on 07.29.15 at 12:31 pm

Then you should have done like everyone else your age did when they bought a house in 2008/9.

If you are over 35-40 and didn’t buy on the way up, you missed the boat sorry.

As for the investments. Stocks have been on an absolute tear since 2008/9. People have done really really well. Better than RE for sure.

MF

#219 family beagle on 07.29.15 at 2:00 pm

#175 jean on 07.29.15 at 8:07 am

I moved to Canada two years ago when GBP CAD was at 1.55. Refused to pay stupid prices for Canadian real estate. Left my money in GBP and USD, and have nothing in CAD (moving back to UK in a couple years). So imagine my pain if I had instead bought an overpriced Canadian house for CAD 1 million. Cost to me two years ago would have been GBP 645k for that hypothetical house. Now CAD 1 million is worth only GBP 492k. Loss in GBP over 160k. Worse still if I had converted my savings too.

———–

Yes. Canadian real estate prices are dropping significantly when measured in other currencies. But don’t tell the locals, thanks. Wealth might be parked in assets but it’s made in ratios. It’s not wise to park foreign capital in Canadian assets at this time. Let’s revisit this five to ten years from now when the yokels are purged.

#220 Bob Santarossa on 07.29.15 at 2:02 pm

#163 Mark

As of 2012 here are the sector %’s of GDP:

The Canadian economy in 2012, composed of the industries below, had a relative weighting by value of GDP:[Per Statistics Canada]

12.34 Real estate and rental and leasing
10.86 Manufacturing
7.96 Mining quarrying and oil or gas extraction
7.03 Health care and social assistance
6.90 Public administration
6.55 Finance and insurance
5.41 Wholesale trade
5.41 Retail trade
5.38 Educational services
5.21 Professional scientific and technical services
4.20 Transportation and warehousing
3.31 Information and cultural industries
2.58 Administrative and support, waste management and remediation services
2.46 Utilities
2.10 Accommodation and food services
2.04 Other services (except public administration)
1.59 Agriculture forestry fishing and hunting
0.76 Management of companies and enterprises
0.75 Arts entertainment and recreation

#221 Sideshow Rob on 07.29.15 at 2:20 pm

The Fed passed the buck as expected. No rate hike. The uneducated riff raff on this board (including me) all knew it wasn’t going to happen. It takes a masters in economics to see things that aren’t there. They will educate the common sense right out of you every time.
Per the fed: “economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run”

Rate increase in September. As predicted. — Garth

#222 Victor V on 07.29.15 at 2:20 pm

#170 dontcallmeshirley on 07.29.15 at 7:13 am

So Garth, now we know the division between the PMO and CMHC is non-existent.

Will you now abandon your mantra that BofC operates independently without PM guidance?

There is supposed to be division, but at present it seems to have been breached. — Garth

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

http://www.theglobeandmail.com/report-on-business/rob-commentary/joe-oliver-should-let-the-bank-of-canada-speak-for-itself/article25725481/

The federal government is the sole shareholder of the Bank of Canada, whose governor is accountable to the finance minister and, through him or her, to Parliament.

But the Bank of Canada is also “operationally independent” from the federal government, and this independence is crucial to the bank’s long-term success in maintaining low and stable inflation.

Over many years and across many countries, evidence clearly shows that when elected governments get too involved in the operational details of monetary policy, inflation rises and becomes more volatile.

Mr. Oliver should be talking a lot about the current weakness of the Canadian economy, and also about what he is prepared to do – with fiscal policy – to make the situation better for Canadians. But when he faces questions about monetary policy, he should defer to the bank’s governor. To do anything else is to undermine the bank’s ability to make monetary policy in the best interests of the country.

#223 dontcallmeshirley on 07.29.15 at 2:26 pm

Canadian real estate boom is a political creation. And like Mike Tyson said “…as it is done, only thus can it be undone”

Market forces aren’t going to undo it. It will be a gov’t that does it.

Disagree? Keep in mind there’s lots more bullets in the gov’t gun besides this “suite income” hack.

#224 S.Bby on 07.29.15 at 2:38 pm

I don’t know if this 100% rental income thing will change much because there is probably already a lot of exaggerations going on as far as rent forecasting is concerned. Who can say what a suite will actually rent for? So the mtg applicants embellish the projected rent by adding a few hundreds (or more) a month to the projected rent so whether it’s 50% of projected rent or 100% they are still sticking their necks out. It certainly makes for good press, though.

#225 Retired Boomer - WI on 07.29.15 at 2:42 pm

Just out of curiosity, I looked at ‘rentals’ in the Toronto area (downtown), an area I was most familiar.
Seems one can find a nice looking 2 bed 2 bath with parking and free heat for under $2500 a month.
To avoid the commute was the idea.
Why even buy in a close in area for maybe $700K
when you add the commute costs the rental appears way cheaper.
Maybe my math is bad, but renting a nice pad with stainless, granite is more economical. The freedom of mobility – priceless!

#226 Ronaldo on 07.29.15 at 2:51 pm

”You forgot amortization. — Garth”

That’s correct. I was only considering the interest cost not the amount going towards principle. However, using the RBC calculator and using the higher number of $520m over 25 yrs comes out to around $3000/mo. or .36 of their annual income which is still not unreasonable considering their income. With the additional rent of 12000 added in that works out to .32 of total income. Still very reasonable even at the 5% rate.

#227 Chris in Nanaimo on 07.29.15 at 2:56 pm

Pretty much every new SFH here is being built with a legal suite.

You can’t move on these streets at night for all the cars parked, 3 or 4 per house.

#228 JD on 07.29.15 at 3:05 pm

#216 Bob Santarossa
Thx Bob, not sure I am following you.
30% of $1.5 million and $2.0 million = $450,000 and $600,000, respectively. – So in case purchased in 2008 with DP = 300, today evaluation is 1.5-2M minus 450-600 (30%)=1-1.5M where did you loose, OK I put up for sale and get cash in a month 1M – 650K (purchaise price) -tax and transaction cost = 400K illustrates Loose? This is how my argument get hammered with addition that I lived in the house without anybody having chance to influence whether I go or I stay plus rental cost added to the 400K. I am failing in demonstration that (Mutual Funds) earned 3% to 7% better safer way to go.
I can not explain how you get this: = $300,000 down payment gone + $150,000 to $300,000 principal gone and not counting all the interest paid on that principle which is gone? Please help

#229 Mark in Guelph on 07.29.15 at 3:12 pm

“The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.”

Watch for the screaming CNBC headline “Yellen set to stomp on the Gas!” Stupid.

#230 45north on 07.29.15 at 3:15 pm

crooked semis: it’s a tear-down, that’s all

And let’s remember the context in which all of this is happening. Oil’s crashed. The economy has stalled. Jobs are being scrubbed. And the central bank’s rate drop is the ultimate admission of trouble. Is this really the time you want your government loosening up mortgage regs to allow more debt, higher prices and enhanced risk?

no I really do not want the government loosening up mortgage regulations to allow more debt

Joe Oliver and Stephen Harper have a choice. They can play it straight. They may or may not lose the election but either way they can walk away with their heads held high. By-the-way, where are Justin Trudeau and Brian Mulcair? I mean they can comment and need to do so. They have the position and the opportunity. They choose not to.

Bill Gable: The planes were mostly full – and food and lodging in Europe’s very expensive – if you have to buy our Euros with Canuck Bucks.

we were in Sweden last year. It wasn’t cheap.

Rainmaker: American Dentist – Walter Palmer Accused of Killing Lion.

How disgusting is this?

takla: In a country with an average national income of under $800.00 and unemployement north of 70% I’m sure every dollar generated by trophy hunting is treasured by the local guides to feed their families

that’s what I think

http://www.imdb.com/title/tt0119978/?ref_=nv_sr_6

Victoria Real Estate: in your link “canadian house prices vs american chart” notice that there are actual charts! no asterisks! the x-axis is clearly labeled and doesn’t extend to two lines. If you need help making real charts I’ll help you.

#231 Ogopogo on 07.29.15 at 3:28 pm

#147 BC Guy on 07.28.15 at 11:54 pm

So Garth’s strategy of renting and investing will work if you’re fully employed and can afford paying $3000/month for a luxury rental. Otherwise, get ready for some ghetto time.

I call BS on this thinly-disguised propaganda. I rent a luxury condo for nearly a third of that in downtown Kelowna, Canada’s 3rd most inflated real estate (though falling since 2008).

The comments have recently been flooded by con artists trying to prop up the bubble.

#232 Jerry Demo on 07.29.15 at 3:30 pm

“buying a median-priced house in Vancouver (even at the cheapest-ever rates) eats 65% of family income.”

Is that pre-tax income? hope not…..

It is. — Garth”

I think 65% is low….food inflation, gas, clothes, residential prop taxes, service fee’s, fines, parking, tolls….you name it have gone way up since the last census. Food alone has shot up 30% in the past few months due to the BOC Poloz Clown Crash of the $C.

I’m so glad I’m not a parent with two active and rapidly growing kids. Mine ate like starving refugee’s after sports practices and events. Mine were particularily fond of doubling down on Spaghetti with thick meat sauce AND a couple of thick pork butt steaks with apple sauce at the same meal….and the dessert….and snacks.

The same hamburger that was $2.50 bucks a package is now $8/$9. The Butt Steaks have gone from $7 for a pack of five to $28 for the same ‘Family Pak’ at Superstore.

I can’t imagine how low the protein content of a child’s meal has sunk with the ZIRP induced inflation….but protein is accounted for in IQ points….is this why the new crop all seem so lethargic and whiny?

And let’s not forget the starving seniors who have become the fastest growing demographic at the food bank…..just ahead of students….and working families.

Thanks Poloz….you’ve done what Michelle Obama has been forcing on American school children….starvation induced weight loss….WINNING!

#233 cramar on 07.29.15 at 3:33 pm

The FED will raise rates in Sept.

http://www.marketwatch.com/story/fed-will-raise-rates-in-september-2015-07-29

Of course. — Garth

#234 Frank on 07.29.15 at 3:36 pm

Homeowners win?

You’re talking future maybe. As of right now, yes they are winning.

#235 Holy Crap Wheres The Tylenol on 07.29.15 at 3:43 pm

#120 Smoking Man on 07.28.15 at 10:21 pm

Spent the last four hours in the world famous long branch Gazibo… Drinking and playing gittar with son number 1 from Halifax…

Hope the mosquitoes have an auto pilot..

Cause they ain’t flying home in a straight line..
___________________________________________
You or the mosquitoes?
Level out, If your noticeably ascending, descending, or turning, gently bring her into a level flight altitude. Adjust the flight altitude by pulling the yoke gently. You can correct bank by rotating the yoke left or right to turn in that direction. Look for the altitude indicator. Sometimes called the artificial horizon, it consists of a miniature set of “wings” and a picture of the horizon. The top is blue and the bottom is brown. Make sure you stay level with the horizon using this guide. Maintain a safe speed. Look for the airspeed indicator (usually labeled ASI, Airspeed or Knots) usually located toward the upper left of the instrument panel, and keep an eye on your speed. Do not fly less than 70 knots or if you’re heavy do not less than 180 knots. Keep her in the green zone. If the airspeed is decreasing, gently push the nose down to increase the speed. Do not let the aircraft fly too slowly, especially near the ground you may stall. Start descending, pull back the throttle (to reduce power) until you hear the sound of the engines change – then stop! Keep the airspeed within the green arc. The nose of the aircraft should drop on its own without pushing forward on the yoke. Gear down, if it’s retractable. If the gear is fixed, it’s always down and you don’t need to do anything. Just before you touch down, you’ll need to raise your nose and land on the main wheels first. You need to lift it by typically 5-7 degrees small, and up to 15 degrees heavy. Reduce power to idle by pulling the throttle. Gently apply the brakes by pressing on top of the rudder pedals. Boom your home! Shit I forgot you did have a license once didn’t you! You know I have to get my VFR renewed, when you get to a certain age they screw you over with med tests all the time.

#236 Sheane Wallace on 07.29.15 at 3:46 pm

#205 ShawnG in TO

the banks have no skin in the game. High ratio mortgages are immediately packaged and sold as MBS with nice profit for the bank, backed by us, the taxpayers.

In essence it is safe as a government bond.
So in practical sense most of CMHC mortgages are really government bonds ‘backed’ for some part by ultra crappy ultra-subprime mortgages (up to 30-40 %) and the rest backed by us the taxpayers.

So to recap: CMHC is equivalent to 60-72 billions in new credit (sub-primes), effectively 40-50 billions in government bonds per year which is equivalent to the deficit of that amount.

Now imagine the shape of the economy when with running such huge real deficit (covered through credit expansion) there is no growth but the real GDP is shrinking (with underestimated inflation, keep in mind)
Everything is smoke and mirrors, game of musical chairs. When the music stops you would need to be somewhere else.

There could never be interest rates increases before the currency crashes as we use the opportunity to pile new debt (with ‘incentives’ from the government through the idiots at BOC and CMHC) with interest rates decreases vs. paying the old one.

The CAD is practically doomed as a currency.
Just watch the food prices at the grocery stores.

#237 calgaryPhantom on 07.29.15 at 3:59 pm

I think it is a great opportunity to buy a house in calgary. The oil price slump induced slowdown and historic low rates provides a good entry point.
The oil price will recover. It is more of a supply based issue , than a demand based issue. Soon there will be some sort of production cut and prices will rebound. Or, if USA decides that some other country in middle east needs “democracy”, prices will head higher.
I am finding a good RE agent.

#238 Sheane Wallace on 07.29.15 at 4:00 pm

The BOC governor is practically intentionally stealing from the savers significant part of the purchasing power of their ‘money’ , probably to the tune of 40-50 billions per year, it goes to his friends in the FIRE sector and helps keep above water Dear Leader’s friends in big oil. This is what matters.

Your kids? They better learn to work for less, Poloz actually advised graduates to start volunteering and working without pay.

#239 Holy Crap Wheres The Tylenol on 07.29.15 at 4:28 pm

What a piece of crap that home is. Do the cockroaches come with it for $688K or do you only get a half a cockroach?

#240 Holy Crap Wheres The Tylenol on 07.29.15 at 4:29 pm

Smoking Man move over the real Smoking Man is back. Loved this TV series!

http://www.independent.co.uk/arts-entertainment/tv/news/new-xfiles-season-will-see-the-return-of-the-cigarette-smoking-man-10149455.html

#241 Bob Santarossa on 07.29.15 at 11:12 pm

#228 JD

Basically JD, if 2015 is a bad job loss recession like early 80s and 90s, then real estate drop loss is 40%, not 30% – that drop happened in YVR and 416 in those years.

If you have a $1 million dollar home with a $300K down payment, you will lose $400K in total due to the 40% drop. In which case the $300K down payment is lost plus $100K of principal is lost.

On a $2 million dollar home with a $300K down payment, you will lose $800K in total due to the 40% drop ($300K downpayment lost plus $500k of principal lost).

Again, has to be unemployment rates of 12% as in 1983 and 11.4% as in 1993 (15% and 9.6% in BC for those years) for this to happen and took 4 years for prices to slide in those recessions.

Who knows, not one recession is the same as another but one constant remains, high job losses over 4 years or so to precipitate a 40% drop in price.

Right now you can win big in real estate but also lose big as well.

Garth’s point is you can take the $300K downpayment and invest as I did in Mutual Funds and get 3 to 8% return ($9K to $24K per year in Simple Interest on $300K principal) rather than play high risk real estate and lose that $300K in total and then some. The real estate market come back takes another 4 years, in the mean time you would have made $36K to $96K in interest (over the 4 years) and still have the $300K principal.

I sold just recently in Vancouver because I believe 2015 will be a nasty early 80s/90s style recession. Retired and moving to Italy (in a few days) and will park my dollars in Euro’s in an Italian bank account.

If I am right, I do not have to invest at all (do nothing) and still have my Euro’s appreciate probably 4% to 10% just because of the falling CDN dollar during the recession.

#242 straight six on 07.30.15 at 12:58 pm

YVR rental story..
an eastside house was purchased with a basement suite and long term tenants.
As soon as the new owner took over the tenants magically evaporated.
The suite was actually a stage set with outlets stuck in the walls, looked ok but wasn’t even habitable.
The tenants..
family members of the seller who had left the country.